Highlighted ETFs Highlighted ETFs | 17 December 2018

Chief Investment Office Americas, Wealth Management David Perlman, ETF Strategist Americas, david.perlman@ubs.com

• This report highlights ETFs that, in our opinion, provide broad representation to or best target UBS CIO's global research recommendations. • In selecting ETFs, we analyze multiple factors including the underlying index methodology, performance, tracking error, liquidity and expenses, and the overall fit with research's recommendations. • Our quarterly report, A guide to investing with ETFs, published on 20 November 2018, includes factsheets for each highlighted ETF.

Additions: In this month's House View, we introduced an allocation to long- term US Treasuries that is meant to protect against equity downside risk. Therefore, we are adding the iShares 20+ Year Treasury Bond ETF (TLT) and the Vanguard Extended Duration Treasury ETF (EDV). TLT tracks an index of US Treasury bonds with remaining maturities of 20 years or more. EDV tracks an index of US Treasury STRIPS, which are zero-coupon bonds, with maturities between 20 and 30 years. EDV is a new addition to coverage and a profile is on p. 35 of this report.

We are also adding the iShares MSCI Global Impact ETF (SDG) to the list. Many of our long-term themes are around social and environmental challenges. SDG tracks an index of companies that seek to address at least one of the world's social and environmental challenges as defined by the United Nations Sustainable Development Goals.

Deletions: There were no removals since the last publication of this report.

This report has been prepared by UBS Financial Services Inc. (UBS FS). Analyst certification and required disclosures begin on page 36. Highlighted ETFs

Table of contents

Report overview 3

WMR research views 4

Broad US equities 5

US dividends 9

US sectors 10

International developed market equities 14

Emerging market equities 15

Taxable fixed income 17

Municipal bond 21

Commodities and currency 21

Longer-term investment themes 22

Shorter-term investment themes 25

Selection criteria 27

ETF advantages and disadvantages 28

ETF snapshot and risk-return characteristics 29

Standardized performance 32

Prospectus links 34

Profile for new addition to coverage 35

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 2 Highlighted ETFs

Report overview Fig. 1: ETF coverage universe This report highlights ETFs that, in our opinion, Coverage universe includes 334 ETFs, which account provide broad representation to or best target UBS for 84% of US-listed ETF assets CIO's global research recommendations. It includes traditional ETFs, which track indices that select and weight securities based on market cap. These include ETFs tracking indices such as the S&P 500 Index, MSCI EAFE Index, and Bloomberg Barclays US Aggregate Bond Index. The report also includes ETFs that seek to outperform traditional benchmark indices as well as ETFs focused on investment themes favored by CIO. The ETFs included in this report are part of UBS's coverage of ETFs, which is a subset of the broader universe of ETFs eligible for sale at UBS (Fig 1). This report can serve as a resource for discussing and analyzing ETFs. It includes information on the underlying index methodologies and investment strategy guidelines. It will also include risk-return statistics to help evaluate the performance of the investment. This list is only one potential input that can be used in selecting ETFs. It is not a comprehensive list and there can be other ETFs not included that also meet an investor's objective. Additionally, how the ETF's fit within the broader portfolio should be considered. Any changes to the ETFs listed in this report are detailed on the cover of the report. A brief rationale for the addition/removal of an ETF will be provided. Additions/removals from the list do not necessarily mean that an ETF is appropriate/no longer appropriate for a specific client situation. For additional information on the ETFs included in this report, see our most recent ETF Quarterly report, published 20 November 2018. Select risk-return statistics are available on pages 29-31. Standardized Source: UBS. performance as of the most recent quarter end begins on p. 32 and links to the prospectus are available within this report on p. 34.

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 3 Highlighted ETFs

For additional information on UBS CIO's market Fixed income outlook and recommendations as well as an We are underweight US government bonds. Following explanation of CIO's asset class views, refer to the UBS the recent fall of the US 10-year Treasury yield below report. House View: January 2019 2.9%, we closed our overweight position and expect the yield to rise to 3.1% in six months. However, we US equity did introduce an overweight to longer-term US While we are neutral on US equities, we still have an Treasuries as a hedge to our equity overweight. overweight in global equities. US economic activity is Longer-term Treasuries should provide more downside solid, driven by healthy business and consumer protection than the 10-year Treasury. We are neutral sentiment, favorable access to capital, and a strong mortgage-backed securities and TIPS. job market. After the recent market declines, we We are neutral on US investment-grade corporates. believe valuations look appealing and see scope for While total yields of about 4% provide decent carry, valuation expansion. Within US equities, we favor the spread advantage over high grade is small. We see value over growth stocks. Relative valuations for value value in short maturities (1-3 years) given their stocks are at their lowest level relative to growth attractive yield relative to their short duration. stocks since 2006 and value stocks tend to outperform when economic growth is solid and/or We are neutral on US high yield bonds as we see accelerating, which is what we expect over the next limited potential for spread tightening at this stage of several quarters. We are neutral across the size the cycle. The trailing 12-month default rate was segments. We have a six month S&P 500 target of 1.1% in November and we expect it to move 2875 with positive and negative scenarios of 3125 gradually to 2.5% over the next 12 months. and 2325, respectively. We are overweight senior loans as a carve-out Within US sectors, we have a moderate bias for exposure within an investor's high yield bond cyclicals over defensives and are overweight energy allocation. We expect loans to benefit from rising and financials. We are underweight consumer staples, short-term rates and continued low default rates. industrials, and utilities. Within cyclicals, we prefer We are neutral on preferreds but current pricing may sectors that are cheap, have sector-specific drivers, prove an opportunity to invest in favorable preferred and have less direct exposure to trade tensions. Within structures offering attractive yield. Within preferreds, defensives, we avoid sectors with more challenging we favor fixed-to-floating rate preferreds, which can fundamentals (consumer staples) or above-average help mitigate interest rate risk. We favor those with relative valuations (consumer staples and utilities). near-dated calls as well as those with high reset International equity spreads. Within international developed equities, we are From a tactical standpoint we prefer investment grade neutral on the Eurozone. While economic data in the municipal bonds over high yield municipal bonds. We region has weakened, we expect data to improve in still believe a strategic allocation to municipal high 1Q19. Weak spots in emerging markets and yield bonds within a well-diversified fixed income uncertainty around trade may pressure Eurozone portfolio makes sense, but we suggest that investors corporate profits. We are neutral on Japan and favor investment grade bonds. currently recommend not hedging the Yen exposure. Within international fixed income, we are overweight We are neutral on the United Kingdom. Although UK in EM sovereign bonds in USD. EM fundamentals and equities are among the cheapest equity markets in our the attractive yield of around 7% support the coverage universe, uncertainties about the outlook for position. Risks include a further escalation in trade Brexit and commodities keep us neutral. tensions, a sharper-than-expected slowdown in China, We are overweight emerging market (EM) equities. and idiosyncratic risks leading to a worsening EM equities have stabilized recently and we see the sentiment in emerging markets. We are neutral on EM valuation and earnings momentum as more attractive debt denominated in local currencies. than their developed market counterparts. Risks in the

short-term include China hard-landing risk, US dollar strength and geopolitics.

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 4 Highlighted ETFs

List of ETFs by asset category • The index captures over 99% of the US investible equity market capitalization This list highlights ETFs that, in our opinion, provide broad representation to or best target UBS CIO Schwab Fundamental U.S. Broad Market Index WMR's global research recommendations. There will ETF (FNDB, Smart beta, p. 29) be ETFs for each of the market segments in our House • Seeks to track the performance of the Russell View asset allocation models as well as for many of RAFI US Index the investment themes recommended by UBS CIO. • The index re-weights companies included in To help with the selection process, the type of ETF will the Russell 3000 based on an average of the be denoted based on the below classification. following fundamental measures of size: adjusted sales, retained operating cash flow, Tracks indices that provide broad exposure and dividends plus buybacks Traditional and typically select and weight securities • The index weightings are determined annually based on market cap but implemented across the year on a Seeks to outperform traditional quarterly basis benchmarks by tracking indices that rely on Smart beta • Weighting companies based on fundamental criteria other than market cap to select measures of size tends to result in a tilt and/or weight securities towards value and against momentum Active Actively managed Thematic Targets exposure to a specific theme US equity: large cap Track indices that do not fit cleanly into Other CIO asset class view: neutral traditional, smart beta, or thematic buckets Vanguard Mega Cap ETF (MGC, Traditional, p. 36) The page numbers listed refer to the profile included • Seeks to track the performance of the CRSP in our most recent ETF Quarterly report published 20 US Mega Cap Index November 2018. • The index includes US large-cap stocks that Equity ETFs are weighted based on market cap • The index targets the top 70% of the US Equity ETFs are subject to the risks of investing in investible equity market capitalization equities. The value of the equities held by the ETFs Vanguard S&P 500 ETF (VOO, Traditional, p. 35) could decline, resulting in a decline in the ETF's value. There are also risks around liquidity of the underlying • Seeks to track the performance of the S&P equity markets. ETFs tracking less liquid equity 500 Index markets may be subject to larger fluctuations in price. • The index includes 500 US large-cap For ETFs tracking international markets, currency companies selected by an index committee movements can have an impact on performance. and weighted based on market cap There are also ETF specific risks such as tracking error, • To be included in the index, companies must trading costs, and premiums/discounts, which we have positive as-reported earnings over the discuss on page 29. most recent quarter and the most recent four quarters summed together US equity: all cap • The index captures roughly 80% of the US CIO asset class view: neutral investible equity market capitalization Vanguard Total Stock Market ETF (VTI, iShares Edge MSCI Multifactor USA ETF (LRGF, Traditional, p. 27) Smart beta, p. 45) • Seeks to track the performance of the CRSP • Seeks to track the performance of the MSCI US Total Market Index USA Diversified Multiple-Factor Index • The index includes US large-, mid-, and small- • The index runs an optimization that selects cap stocks that are weighted based on large- and mid-cap stocks from the MSCI USA market cap Index with high exposure to value, quality,

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 5 Highlighted ETFs

momentum, and low size while maintaining a VictoryShares US 500 Volatility Wtd ETF (CFA, level of risk similar to the MSCI USA Index Smart beta, p. 46) • The optimization includes a number of • Seeks to track the performance of the CEMP constraints including limiting turnover and US Large Cap 500 Volatility Weighted Index how far the weight of stocks and sectors can • The index includes 500 of the largest US deviate from the MSCI USA Index stocks that have net positive earnings for four • Excluding low volatility may lead to higher consecutive quarters upside capture in stronger equity markets • Stocks are weighted based on their volatility relative to other multifactor strategies with a over the last 180 trading days compared to more defensive mix of factors the aggregate mean in order to evenly JPMorgan Diversified Return U.S. Equity ETF distribute risk among all constituents (JPUS, Smart beta, p. 42) • The risk-weighting better diversifies single stock risk but also introduces a tilt towards • Seeks to track the performance of the JP smaller companies Morgan Diversified Factor US Equity Index • Starting with the Russell 1000, the index US equity: large cap growth selects stocks based on an equally weighted composite score to the following factors: CIO asset class view: underweight value, price momentum, and quality iShares S&P 500 Growth ETF (IVW, Traditional, p. • The index seeks to more evenly distribute risk 80) among sectors by weighting sectors based on the inverse of sector volatility over the past • Seeks to track the performance of the S&P three years 500 Growth Index • The index follows a modified, equal • The index utilizes three growth and three weighting methodology value factors to assign 33% of the S&P 500 • Even though the low volatility factor isn’t to growth, 33% to value, and 34% that are targeted, the sector weighting methodology neither pure growth nor value can introduce a low volatility tilt and lead to • The index includes stocks categorized as outperformance in weaker equity markets growth and a proportional share of those • Unlike many other multifactor strategies, the exhibiting both growth and value sector or stock weights in the cap-weighted characteristics parent index (the Russell 1000 in this case) do • Stocks are modified market cap-weighted not factor into the index weighting process Vanguard Mega Cap Growth ETF (MGK, ProShares Large Cap Core Plus (CSM, Smart beta, Traditional, p. 81) p. 44) • Seeks to track the performance of the CRSP • Seeks to track the performance of the Credit US Mega Cap Growth Index Suisse 130/30 Large Cap Index • The index utilizes six growth and five value • The index includes 500 of the largest US factors to classify stocks from the CRSP US stocks and scores them based on the Mega Cap Index as growth or value following factors: value, growth, momentum, • The index includes the stocks classified as profitability, and technical growth • An optimization is run based on expected • Stocks that fall in the middle third of the alpha scores to determine long/short positions average growth-value rank may be partially while maintaining a target beta of 1.0 vs. the held in both the value and growth index S&P 500 • Stocks are modified market cap-weighted • The index will be 130% long and 30% short and is rebalanced monthly Invesco S&P 500 Pure Growth ETF (RPG, Smart • The maximum overweight/underweight is +/- beta, p. 82) 0.40% to the float-adjusted market cap • Seeks to track the performance of the S&P weight and the short exposure is 500 Pure Growth Index implemented through derivatives UBS Chief Investment Office Americas, Wealth Management 17 December 2018 6 Highlighted ETFs

• The index includes the top quarter of stocks • Stocks included are weighted based on their from the S&P 500 Index with the strongest style attractiveness growth characteristics • Sector weights are constrained to match the • Stocks included are weighted based on their sector weights in the MSCI USA Index, which style attractiveness can lower exposure to the value factor versus • The methodology results in a stronger growth an unconstrained approach but also helps to tilt than more traditional growth indices and limit unintended sector bets does not constrain sector weights, which can • The methodology results in a stronger value lead to higher volatility tilt than more traditional value indices, which • The stronger growth tilt should be beneficial comes with higher volatility when growth outperforms but detract from • The stronger value tilt should be beneficial returns when growth lags when value outperforms but detract from returns when value lags US equity: large cap value Invesco S&P 500 Pure Value ETF (RPV, Smart beta, CIO asset class view: overweight p. 89) iShares S&P 500 Value ETF (IVE, Traditional, p. 85) • Seeks to track the performance of the S&P • Seeks to track the performance of the S&P 500 Pure Value Index • 500 Value Index The index includes the top quarter of stocks • The index utilizes three growth and three from the S&P 500 Index with the strongest value factors to assign 33% of the S&P 500 value characteristics • to growth, 33% to value, and 34% that are Stocks included are weighted based on their neither pure growth nor value style attractiveness and sector exposures are • The index includes stocks categorized as value not constrained • and a proportional share of those exhibiting The methodology results in a stronger value both growth and value characteristics tilt than more traditional value indices and • Stocks are modified market cap-weighted does not constrain sector weights, which contributes to its higher volatility Vanguard Mega Cap Value ETF (MGV, • The stronger value tilt should be beneficial Traditional, p. 88) when value outperforms but detract from returns when value lags • Seeks to track the performance of the CRSP US Mega Cap Value Index US equity: mid cap • The index utilizes six growth and five value factors to classify stocks from the CRSP US CIO asset class view: neutral Mega Cap Index as growth or value iShares Core S&P Mid-Cap ETF (IJH, Traditional, p. • The index includes the stocks classified as 60) value • Stocks that fall in the middle third of the • Seeks to track the performance of the S&P average growth-value rank may be partially MidCap 400 Index held in both the value and growth index • The index includes 400 US mid-cap stocks • Stocks are modified market cap-weighted that are selected by an index committee and weighted based on market cap iShares Edge MSCI USA Value Factor ETF (VLUE, • To be included in the index, companies must Smart beta, p. 87) have positive as-reported earnings over the most recent quarter and the most recent four • Seeks to track the performance of the MSCI quarters summed together USA Enhanced Value Index • The index includes a fixed number of large- Vanguard Mid-Cap ETF (VO, Traditional, p. 62) and mid-cap stocks with the strongest value • Seeks to track the performance of the CRSP characteristics within each sector US Mid Cap Index

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 7 Highlighted ETFs

• The index includes US mid-cap stocks that are • The index represents all members of the S&P weighted based on market cap TMI Index excluding the current constituents • The index targets stocks that fall into the of the S&P 500 Index 70% to 85% range of the US investible • The index includes US mid-, small-, and equity market capitalization micro-cap stocks that are selected by an index committee and weighted based on market John Hancock Multifactor Mid Cap ETF (JHMM, cap Smart beta, p. 65) Schwab Fundamental U.S. Small Company Index • The ETF is sub-advised by Dimensional Fund ETF (FNDA, Smart beta, p. 68) Advisors and seeks to track the performance of the John Hancock Dimensional Mid Cap • Seeks to track the performance of the Russell Index RAFI US Small Company Index • The index includes US mid-cap stocks and tilts • The index re-weights companies based on an the market cap weights based on factor average of the following fundamental multipliers measures of size: adjusted sales, retained • The factors targeted are size, relative price, operating cash flow, and dividends plus and profitability buybacks • Though not targeted, momentum is factored • Companies raking below the 87.5 percentile into the index rebalancing process to limit the in cumulative fundamental weight are weight of low momentum securities included • Relative to other multifactor strategies, the • The index weightings are determined annually tracking error versus traditional benchmarks but implemented across the year on a tends to be lower, which may be appealing quarterly basis for more benchmark sensitive investors • Weighting companies based on fundamental measures of size tends to result in a tilt WisdomTree U.S. MidCap Earnings Fund (EZM, towards value and against momentum Smart beta, p. 63) • Seeks to track the performance of the US equity: small cap WisdomTree U.S. MidCap Earnings Index CIO asset class view: neutral • The index includes mid-cap US stocks that have generated positive cumulative earnings iShares Core S&P Small-Cap ETF (IJR, Traditional, over their most recent four fiscal quarters p. 71) prior to the index measurement date • Seeks to track the performance of the S&P • Companies are weighted based on the SmallCap 600 Index proportionate share of aggregate earnings • The index includes 600 US small-cap stocks and the index is reconstituted annually that are selected by an index committee and • Weighting companies based on fundamental weighted based on market cap measures of size tends to result in a tilt • To be included in the index, companies must towards value and against momentum have positive as-reported earnings over the • The positive earnings screen and weighting most recent quarter and the most recent four based on earnings also results in a tilt towards quarters summed together quality Vanguard Small-Cap ETF (VB, Traditional, p. 70) US equity: smid cap • Seeks to track the performance of the CRSP CIO asset class view: neutral US Small Cap Index • The index includes US small-cap stocks that Vanguard Extended Market ETF (VXF, Traditional, are weighted based on market cap p. 66) • The index targets stocks that fall into the • Seeks to track the performance of the S&P 85% to 98.5% range of the US investible Completion Index equity market capitalization

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 8 Highlighted ETFs

WisdomTree U.S. SmallCap Earnings Fund (EES, • An optimization determines the stocks Smart beta, p. 72) included and the weightings • The optimization seeks to maximize exposure • Seeks to track the performance of the to high ESG ratings while keeping risk-return WisdomTree U.S. SmallCap Earnings Index characteristics similar to the MSCI USA Index • The index includes small-cap US stocks that • There predicted tracking error vs. the MSCI have generated positive cumulative earnings USA Index is 1.80% over their most recent four fiscal quarters prior to the index measurement date US dividend: dividend growth • Companies are weighted based on the proportionate share of aggregate earnings CIO view: dividends are likely to become a higher and the index is reconstituted annually component of equity market total return as stocks are • Weighting companies based on fundamental no longer significantly undervalued measures of size tends to result in a tilt ProShares S&P 500 Dividend Aristocrats ETF towards value and against momentum (NOBL, Smart beta, p. 165) • The positive earnings screen and weighting • based on earnings also results in a tilt towards Seeks to track the performance of the S&P quality 500 Dividend Aristocrats Index • The index includes S&P 500 companies that US equity: ESG have increased dividends every year for at least 25 consecutive years iShares MSCI KLD 400 Social ETF (DSI, Thematic, • Stocks included are equally weighted p. 30) SPDR S&P Dividend ETF (SDY, Smart beta, p. 159) • Seeks to track the performance of the MSCI KLD Social 400 Index • Seeks to track the performance of the S&P • The index includes large-, mid-, and small-cap High Yield Dividend Aristocrats Index stocks excluding alcohol, gambling, tobacco, • The index includes companies from the S&P military weapons, civilian firearms, nuclear Composite 1500 Index that have increased power, genetically modified foods, and adult dividends every year for at least 20 years entertainment companies • Stocks included are weighted based on • Companies must meet minimum ESG rating annual dividend yield subject to a cap of 4% and controversy assessment scores in order to Vanguard Dividend Appreciation ETF (VIG, Smart be included in the index and to remain in the beta, p. 158) index • Stocks included are modified market cap- • Seeks to track the performance of the weighted with sector weights constrained to NASDAQ US Dividend Achievers Select Index +/- 25% vs. the MSCI USA • The index includes stocks that have increased dividends for at least 10 consecutive years iShares MSCI USA ESG Select ETF (SUSA, • Additional proprietary screens are applied to Thematic, p. 53) exclude stocks that might have low potential • Seeks to track the performance of the MSCI for increasing dividends USA ESG Select Index • Stocks included are weighted based on • The index includes large- and mid-cap stocks market-cap with individual companies capped excluding tobacco companies as wells as at 4% companies whose primary revenue is derived WisdomTree U.S. Quality Dividend Growth Fund from alcohol, gambling, nuclear power, (DGRW, Smart beta, p. 156) conventional and controversial weapons, and civilian firearms • Seeks to track the performance of the • Companies must meet minimum controversy WisdomTree U.S. Quality Dividend Growth assessment scores in order to be included in Index the index and to remain in the index • The index includes 300 stocks from the WisdomTree U.S. Dividend Index with the

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 9 Highlighted ETFs

best combined rank of long-term earnings achieve an overall beta similar to the starting growth expectations and three-year historical universe averages for return on equity and return on • The quality factor is based on their proprietary assets model that scores companies around • The index is weighted based on the management expertise, profitability, and cash aggregate cash dividends paid by each flow component with individual companies capped • An optimization determines the stocks at 5% and sectors at 20% included and the weightings • Unlike other ETFs targeting dividend growth, Schwab U.S. Dividend Equity ETF (SCHD, Smart there are no historical dividend growth beta, p. 161) requirements, which leads to quicker inclusion of new dividend payers • Seeks to track the performance of the Dow Jones U.S. Dividend 100 Index US dividend: dividend yield • To be eligible for inclusion, stocks must have CIO view: dividends are likely to become a higher paid dividends for a minimum of 10 component of equity market total return as stocks are consecutive years and be in the top half of no longer significantly undervalued eligible securities based on dividend yield • Stocks are scored based on cash flow to total ALPS Sector Dividend Dogs ETF (SDOG, Smart debt, return on equity, dividend yield, and beta, p. 166) five-year dividend growth rate with the top • Seeks to track the performance of the S- 100 selected for inclusion Network Sector Dividend Dogs Index • Stocks included are weighted based on • The index includes the five highest yielding market cap with individual companies capped S&P 500 stocks in each of the sectors, at 4.5% excluding real estate US sectors: communication services • Sectors and stocks within each sector are equally weighted CIO sector view: neutral Vanguard High Dividend Yield ETF (VYM, Smart Communication Services Select Sector SPDR (XLC, beta, p. 155) Traditional, p. 104) • Seeks to track the performance of the FTSE • Seeks to track the performance of the High Dividend Yield Index Communication Services Select Sector Index • The index includes the top 50% of companies • The index includes constituents of the S&P in the FTSE USA Index by market cap with the 500 Index that are classified as highest forecasted 12-month forward communication services dividend yield • Stocks included are weighted based on a • Stocks included are weighted based on modified market cap methodology market cap Vanguard Communication Services ETF (VOX, US dividend: quality yield Traditional, p. 103) • CIO view: dividends are likely to become a higher Seeks to track the performance of the MSCI component of equity market total return as stocks are US Investable Market Communication Services no longer significantly undervalued 25/50 Transition Index • The index includes large-, mid-, and small-cap FlexShares Quality Dividend Index Fund (QDF, stocks within the communication services Smart beta, p. 157) sector • Seeks to track the performance of the • Stocks included are weighted based on a Northern Trust Quality Dividend Index modified market cap methodology • The index seeks to maximize exposure to the quality factor, realize a dividend yield above US sectors: consumer discretionary the cap-weighted starting universe, and CIO sector view: neutral UBS Chief Investment Office Americas, Wealth Management 17 December 2018 10 Highlighted ETFs

Consumer Discretionary Select Sector SPDR (XLY, • Seeks to track the performance of the Energy Traditional, p. 106) Select Sector Index • The index includes constituents of the S&P • Seeks to track the performance of the 500 Index that are classified as energy Consumer Discretionary Select Sector Index • Stocks included are weighted based on a • The index includes constituents of the S&P modified market cap methodology 500 Index that are classified as consumer discretionary Vanguard Energy ETF (VDE, Traditional, p. 113) • Stocks included are weighted based on a • Seeks to track the performance of the MSCI modified market cap methodology US Investable Market Energy 25/50 Index Vanguard Consumer Discretionary ETF (VCR, • The index includes large-, mid-, and small-cap Traditional, p. 105) stocks within the energy sector • Stocks included are weighted based on a • Seeks to track the performance of the MSCI modified market cap methodology US Investable Market Consumer Discretionary 25/50 Index • The index includes large-, mid-, and small-cap US sectors: financials stocks within the consumer discretionary CIO sector view: overweight sector Financials Select Sector SPDR (XLF, Traditional, p. • Stocks included are weighted based on a modified market cap methodology 121) • Seeks to track the performance of the US sectors: consumer staples Financials Select Sector Index • The index includes constituents of the S&P CIO sector view: underweight 500 Index that are classified as financials Consumer Staples Select Sector SPDR (XLP, • Stocks included are weighted based on a Traditional, p. 112) modified market cap methodology • Seeks to track the performance of the Vanguard Financials ETF (VFH, Traditional, p. 120) Consumer Staples Select Sector Index • Seeks to track the performance of the MSCI • The index includes constituents of the S&P US Investable Market Financials 25/50 Index 500 Index that are classified as consumer • staples The index includes large-, mid-, and small-cap stocks within the financials sector • Stocks included are weighted based on a • modified market cap methodology Stocks included are weighted based on a modified market cap methodology Vanguard Consumer Staples ETF (VDC, Traditional, p. 111) US sectors: healthcare • Seeks to track the performance of the MSCI CIO sector view: neutral US Investable Market Consumer Staples 25/50 Index Health Care Select Sector SPDR (XLV, Traditional, • The index includes large-, mid-, and small-cap p. 127) stocks within the consumer staples sector • Seeks to track the performance of the Health • Stocks included are weighted based on a Care Select Sector Index modified market cap methodology • The index includes constituents of the S&P 500 Index that are classified as healthcare US sectors: energy • Stocks included are weighted based on a CIO sector view: overweight modified market cap methodology Energy Select Sector SPDR (XLE, Traditional, p. Vanguard Health Care ETF (VHT, Traditional, p. 114) 126)

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 11 Highlighted ETFs

• Seeks to track the performance of the MSCI • The index includes constituents of the S&P US Investable Market Health Care 25/50 Index 500 Index that are classified as materials • The index includes large-, mid-, and small-cap • Stocks included are weighted based on a stocks within the healthcare sector modified market cap methodology • Stocks included are weighted based on a Vanguard Materials ETF (VAW, Traditional, p. modified market cap methodology 144) US sectors: industrials • Seeks to track the performance of the MSCI US Investable Market Materials 25/50 Index CIO sector view: underweight • The index includes large-, mid-, and small-cap Industrials Select Sector SPDR (XLI, Traditional, p. stocks within the materials sector 136) • Stocks included are weighted based on a modified market cap methodology • Seeks to track the performance of the Industrials Select Sector Index US sectors: real estate • The index includes constituents of the S&P 500 Index that are classified as industrials CIO sector view: neutral • Stocks included are weighted based on a Real Estate Select Sector SPDR (XLRE, Traditional, modified market cap methodology p. 149) Vanguard Industrials ETF (VIS, Traditional, p. 135) • Seeks to track the performance of the real • Seeks to track the performance of the MSCI Estate Select Sector Index US Investable Market Industrials 25/50 Index • The index includes constituents of the S&P • The index includes large-, mid-, and small-cap 500 Index that are classified as real estate, stocks within the industrials sector which includes real estate management and • Stocks included are weighted based on a development companies and REITs, excluding modified market cap methodology mortgage REITs • Stocks included are weighted based on a US sectors: information technology modified market cap methodology CIO sector view: neutral Vanguard REIT ETF (VNQ, Traditional, p. 146) Vanguard Information Technology ETF (VGT, • Seeks to track the performance of the MSCI Traditional, p. 137) US REIT Index • The index includes large-, mid-, and small-cap • Seeks to track the performance of the MSCI REITs weighted based on market cap US Investable Market Information Technology • Mortgage REITs, hybrid REITs, and Specialized 25/50 Index REITs that do not generate the majority of • The index includes large-, mid-, and small-cap their revenue and income from real estate stocks within the information technology rental and related leasing operations are sector excluded • Stocks included are weighted based on a modified market cap methodology US sectors: utilities US sectors: materials CIO sector view: underweight CIO sector view: neutral Utilities Select Sector SPDR (XLU, Traditional, p. 151) Materials Select Sector SPDR (XLB, Traditional, p. 145) • Seeks to track the performance of the Utilities Select Sector Index • Seeks to track the performance of the • The index includes constituents of the S&P Materials Select Sector Index 500 Index that are classified as utilities

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 12 Highlighted ETFs

• Stocks included are weighted based on a seismic-information services and platform modified market cap methodology construction • Stocks included are market cap-weighted Vanguard Utilities ETF (VPU, Traditional, p. 150) VanEck Vectors Oil Services ETF (OIH, Traditional, • Seeks to track the performance of the MSCI p. 258) US Investable Market Utilities 25/50 Index • The index includes large-, mid-, and small-cap • Seeks to track the performance of the Market stocks within the utilities sector Vectors US Listed Oil Services 25 Index • Stocks included are weighted based on a • The index includes companies 25 US-listed modified market cap methodology companies derive at least 50% of their revenues from oil services to the upstream oil US industry sector, which includes companies engaged primarily in oil equipment, oil services, or oil CIO subsector view: Within energy, we favor drilling exploration & production and equipment & services. • The index employs a modified market cap- Within financials, we favor banks and diversified weighting methodology with individual financials. Within the technology sector we favor companies capped at 20% software & services. iShares U.S. Oil & Gas Exploration & Production iShares U.S. Financial Services ETF (IYG, ETF (IEO, Traditional, p. 118) Traditional, p. 125) • Seeks to track the performance of the Dow • Seeks to track the performance of the Dow Jones U.S. Select Exploration & Production Jones U.S. Financial Services Index Index • The index includes large-, mid-, and small-cap • The index includes large-, mid-, and small-cap banks, asset managers, consumer finance, companies engaged in the exploration, specialty finance, investment services, and drilling, production, refining, and supply of oil mortgage finance companies and gas products • Stocks included are weighted based on • Stocks included are market cap-weighted market cap iShares North American Tech-Software ETF (IGV, Invesco KBW Bank ETF (KBWB, Traditional, p. Traditional, p. 143) 123) • Seeks to track the performance of the S&P • Seeks to track the performance of the KBW North American Technology-Software Index Nasdaq Bank Index • The index includes large-, mid-, and small-cap • The index includes approximately 24 large-, stocks classified as application software, mid-, and small-cap stocks that do business as systems software, or home entertainment banks or thrifts software • Stocks included are modified market cap- • Stocks included are modified market cap- weighted with a single security cap of 8.0% weighted with a single security cap of 8.5% • The index methodology results in more balanced exposure between major and MLPs regional banks than peers CIO asset class view: We continue to have a iShares U.S. Oil Equipment & Services ETF (IEZ, constructive outlook for the MLP sector and expect Traditional, p. 115) them to provide attractive returns over the long term. • Seeks to track the performance of the Dow For the below ETFs, AMLP and MLPA provide a pure Jones U.S. Select Equipment & Services Index play on MLPs, however the funds are subject to • The index includes large-, mid-, and small-cap corporate taxes. AMLP is the more liquid of the two companies engaged in supplying equipment with higher secondary market trading volume while and services to oil fields and offshore MLPA has the lower management fee. EMLP does not platforms, such as drilling, exploration have the fund level tax, but is limited to 25% in MLPs. Therefore, it also includes other energy infrastructure UBS Chief Investment Office Americas, Wealth Management 17 December 2018 13 Highlighted ETFs

investments. For a more in depth overview of MLP CIO asset class view: neutral fund structures and taxation, see our report, MLP iShares Core MSCI EAFE ETF (IEFA, Traditional, p. Investment Alternatives: One size does not fit all, 176) published 7 March 2018. • Seeks to track the performance of the MSCI Alerian MLP ETF (AMLP, Other, p. 152) EAFE IMI Index • Seeks to track the performance of the Alerian • The index includes large-, mid-, and small-cap MLP Infrastructure Index stocks from developed markets excluding the • The index includes publicly traded US and Canada partnerships or limited liability companies that • Stocks included are market cap-weighted earn the majority of their cash flow from • The index captures roughly 99% of the midstream activities involving energy investable market cap by country commodities Vanguard FTSE Developed Markets ETF (VEA, • These include gathering and processing, Traditional, p. 175) liquefaction, midstream services, pipeline transportation, rail terminaling, and storage • Seeks to track the performance of the FTSE • Index constituents included are modified Developed All Cap ex US Index market cap-weighted with a single security • The index includes large-, mid-, and small-cap cap of 10.0% stocks from developed markets excluding the US First Trust North American Energy Infrastructure • Stocks included are market cap-weighted Fund (EMLP, Active, p. 154) • The index captures roughly 98% of the • Actively managed ETF that provides exposure world's investable market cap by country to energy infrastructure Goldman Sachs ActiveBeta International Equity • Primarily invests in MLPs, MLP affiliates, ETF (GSIE, Smart beta, p. 181) Canadian income trusts and their successor companies, pipeline companies, utilities, and • Seeks to track the performance of the other companies that derive at least 50% of Goldman Sachs ActiveBeta Emerging Markets their revenues from operating and providing Equity Index services in support of infrastructure assets • The starting universe is the MSCI Emerging • The amount that can be invested in MLPs is Markets Index, which includes large- and mid- limited to 25% cap emerging market stocks • The ETF is team managed by Energy Income • The index seeks to equally weight exposure to Partners, LLC four factor sub-indices: value, momentum, quality, and low volatility Global X MLP ETF (MLPA, Other, p. 153) • Relative to other multifactor strategies, the tracking error versus traditional benchmarks • Seeks to track the performance of the tends to be lower, which may be appealing Solactive MLP Infrastructure Index for more benchmark sensitive investors • Includes 20-30 midstream-focused MLPs that own and operate assets used in energy Hartford Multifactor Developed Markets (ex-US) logistics ETF (RODM, Smart beta, p. 182) • Energy logistics includes, but is not limited to, • Seeks to track the performance of the pipelines, storage facilities, and other assets Hartford Risk-Optimized Multifactor used in transporting, storing, gathering, and Developed Markets (ex-US) Index processing natural gas, natural gas liquids, • The index runs an optimization that selects crude oil, or refined products large- and mid-cap international developed • Index constituents included are modified market stocks with attractive factor market cap-weighted with a single security characteristics cap of 10.0% • The value factor receives a 50% weight, International developed markets momentum a 30% weight, and quality 20%

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 14 Highlighted ETFs

• The index seeks a 15% reduction in volatility Int'l developed markets: ESG and the optimization has a number of constraints including limiting turnover and iShares MSCI EAFE ESG Optimized ETF (ESGD, how far the weight of countries and sectors Thematic, p. 186) can deviate from the initial cap-weighted • Seeks to track the performance of the MSCI universe EAFE ESG Focus Index • The higher weightings to value and • The index aims to maximize exposure to momentum may lead to higher upside positive environmental, social, and capture in stronger equity markets relative to governance factors while exhibiting risk and other multifactor strategies with a more return characteristics similar to the MSCI EAFE defensive mix of factors Index iShares Edge MSCI Multifactor Intl ETF (INTF, • Tobacco and controversial weapons Smart beta, p. 183) companies as well as companies involved in severe business controversies are excluded • Seeks to track the performance of the MSCI • To accomplish its objective, the index runs an World ex USA Diversified Multiple-Factor optimization subject to certain constraints, Index including a predicted tracking error constraint • The index runs an optimization that selects of 0.5% and active sector and country large- and mid-cap stocks from the MSCI weights of +/- 5% vs. the MSCI EAFE Index World ex USA Index with high exposure to value, quality, momentum, and low size while Emerging markets maintaining a level of risk similar to the MSCI World ex USA CIO asset class view: overweight • The optimization includes a number of iShares Core MSCI EM ETF (IEMG, Traditional, p. constraints including limiting turnover and 194) how far the weight of countries, sectors, and stocks can deviate from the MSCI World ex • Seeks to track the performance of the MSCI USA Index Emerging Markets Investable Market Index • Excluding low volatility may lead to higher • The index includes large-, mid-, and small-cap upside capture in stronger equity markets stocks from emerging markets weighted relative to other multifactor strategies with a based on market cap more defensive mix of factors • China A-shares were added to the index this year during the May and August index Schwab Fundamental International Large reviews though the initial weight was small Company Index ETF (FNDF, Smart beta, p. 180) • The index captures roughly 99% of the • Seeks to track the performance of the Russell investable market cap by country RAFI Developed ex-U.S. Large Company Index Vanguard FTSE Emerging Markets ETF (VWO, • The index re-weights international developed Traditional, p. 193) market companies based on an average of the following fundamental measures of size: • Seeks to track the performance of the FTSE adjusted sales, retained operating cash flow, Emerging Markets All Cap China A Inclusion and dividends plus buybacks Index • Companies raking above the 87.5 percentile • The index includes large-, mid-, and small-cap in cumulative fundamental weight are stocks from emerging markets weighted included based on market cap • The index weightings are determined annually • The index includes China A-shares in a weight but implemented across the year on a that is based on the aggregate approved QFII quarterly basis and RQFII quotas available to international • Weighting companies based on fundamental investors measures of size tends to result in a tilt • The A-shares exposure is significantly higher towards value and against momentum than the amount included in the MSCI EM Index

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 15 Highlighted ETFs

Goldman Sachs ActiveBeta Emerging Markets • To accomplish its objective, the index runs an Equity ETF (GEM, Smart beta, p. 196) optimization subject to certain constraints, including a predicted tracking error constraint • Seeks to track the performance of the of 1.0% and active sector and country Goldman Sachs ActiveBeta Emerging Markets weights of +/- 5% vs. the MSCI EM Index Equity Index • The starting universe is the MSCI Emerging Emerging market: countries Markets Index, which includes large- and mid- cap emerging market stocks CIO asset class view: We are overweight China, South • The index seeks to equally weight exposure to Korea, and Indonesia. four factor sub-indices: value, momentum, iShares MSCI China ETF (MCHI, Traditional, p. quality, and low volatility 212) • Relative to other multifactor strategies, the • tracking error versus traditional benchmarks Seeks to track the performance of the MSCI tends to be lower, which may be appealing China Index • for more benchmark sensitive investors The index includes large- and mid-cap stocks and covers roughly 85% of the China equity iShares Edge MSCI Multifactor Emerging Markets universe that includes China H shares, B ETF (EMGF, Smart beta, p. 197) shares, Red chips, P chips and foreign listings • Seeks to track the performance of the MSCI as well as A-shares • Emerging Market Diversified Multiple-Factor The index is market cap-weighted Index SPDR S&P China ETF (GXC, Traditional, p. 211) • The index runs an optimization that selects • large- and mid-cap stocks from the MSCI Seeks to track the performance of the S&P Emerging Markets Index with high exposure China BMI Index to value, quality, momentum, and low size • The index includes large-, mid-, and small-cap while maintaining a level of risk similar to the stocks universe that includes China H shares, MSCI EM Index B shares, Red chips, P chips and foreign • The optimization includes a number of listings constraints including limiting turnover and • The index is market cap-weighted how far the weight of countries, sectors, and iShares MSCI South Korea ETF (EWY, Traditional, stocks can deviate from the MSCI EM Index p. 224) • Excluding low volatility may lead to higher • upside capture in stronger equity markets Seeks to track the performance of the MSCI relative to other multifactor strategies with a South Korea Index more defensive mix of factors • The index includes large- and mid-cap stocks in South Korea Emerging markets: ESG • The index is market cap-weighted iShares MSCI EM ESG Optimized ETF (ESGE, iShares MSCI Indonesia ETF (EIDO, Traditional, p. Thematic, p. 200) 217) • Seeks to track the performance of the MSCI • Seeks to track the performance of the MSCI EM ESG Focus Index Indonesia Investable Market Index • The index aims to maximize exposure to • The index includes large-, mid-, and small-cap positive environmental, social, and stocks in Indonesia weighted based on governance factors while exhibiting risk and market cap return characteristics similar to the MSCI EM • The index captures roughly 99% of the Index investable market cap by country • Tobacco and controversial weapons companies as well as companies involved in Fixed income ETFs severe business controversies are excluded Fixed income ETFs are subject to the risks of investing in fixed income securities. The value of the bonds held

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 16 Highlighted ETFs

by the ETFs could decline, resulting in a decline in the • Up to 20% of the portfolio can be invested in ETF's value. ETFs tracking less liquid fixed income debt rated below investment grade and there markets may be subject to larger fluctuations in price. is a 20% limit on non-agency RMBS, CMBS, Credit risk and interest rate risk are also key risk and ABS factors that can influence the risk-return • The interest rate risk is managed to be similar characteristics of bond portfolios. ETF specific risks to that of the Bloomberg Barclays U.S. such as tracking error, trading costs, and Aggregate Bond Index premiums/discounts, are discussed on page 29. • The ETF is team managed internally at Fidelity

Broad fixed income PIMCO Active Bond Exchange-Traded Fund CIO asset class view: We are underweight fixed (BOND, Active, p. 274) income relative to equities • Actively managed ETF that invests broadly in iShares Core Total US Bond Market ETF (IUSB, fixed income securities of any credit quality • Traditional, p. 271) It may invest up to 30% of its assets in high yield securities, 15% in securities • Seeks to track the performance of the denominated in foreign currencies, 15% in Bloomberg Barclays U.S. Universal Index securities and instruments tied to EM, and up • The index provides exposure to the USD to 10% in preferred, convertible, or other denominated taxable bond market and equity related securities includes both investment grade rated and • The average portfolio duration will typically high yield rated debt vary between two years to eight years • The index includes government and • The ETF is team managed at PIMCO government related debt, corporate debt as well as mortgage pass-through securities, SPDR DoubleLine Total Return Tactical ETF (TOTL, emerging market bonds, commercial Active, p. 276) mortgage-backed securities, and other types • Actively managed ETF that invests broadly in of taxable bonds fixed income securities of any credit quality • Bonds included are market cap-weighted • At least 20% of its net assets will be invested Vanguard Total Bond Market ETF (BND, in mortgage-backed securities Traditional, p. 272) • It may invest up to 20% of its assets in non- agency RMBS, CMBS, and ABS, up to 25% in • Seeks to track the performance of the high yield corporate securities, up to 25% in Bloomberg Barclays U.S. Aggregate Float emerging markets debt, and up to 15% in Adjusted Index securities denominated in foreign currencies • The index provides exposure to the US • The total debt rated below investment grade investment grade rated taxable fixed income will typically not exceed 40% and the average markets effective duration will typically be no less than • The index includes fixed-rate government, one year and no more than eight years agency, and corporate debt as well as • The ETF is team managed by DoubleLine mortgage pass-through securities and asset Capital LP backed securities • Bonds included are float-adjusted market cap- Broad fixed income: Ultra short weighted duration Fidelity Total Bond ETF (FBND, Active, p. 275) CIO asset class view: Short duration investments can • Actively managed ETF that invests broadly in be part of the liquidity portion of a portfolio. These fixed income securities of any credit quality strategies generally take on more interest rate and • Uses the Bloomberg Barclays U.S. Universal credit risk than money market funds in order to Bond Index as a guide in allocating assets generate higher returns. across the investment grade, high yield, and iShares Short Maturity Bond ETF (NEAR, Active, emerging market asset classes p. 279)

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 17 Highlighted ETFs

• Actively managed ETF that primarily invests • Seeks to track the performance of the broadly in investment grade rated fixed Bloomberg Barclays U.S. Treasury STRIPS 20- income securities 30 Year Equal Par Bond Index • At least 80% of securities have to be rated • The index includes zero-coupon U.S. Treasury investment grade securities with maturities ranging from 20 to • The fund's effective duration will typically be 30 years one year or less and it seeks a weighted • Bonds included are weighted based on average maturity of less than three years market cap • The ETF is team managed at BlackRock Mortgage backed securities PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT, Active, p. 278) CIO asset class view: neutral • Actively managed ETF that primarily invests Vanguard Mortgage-Backed Securities ETF broadly in investment grade rated fixed (VMBS, Traditional, p. 293) income securities • Seeks to track the Bloomberg Barclays U.S. • The average portfolio duration will typically MBS Float-Adjusted Index not exceed one year • The index includes US agency mortgage- • MINT will not use futures, options, or swaps backed pass through securities issued by but can use forward contracts GNMA, FNMA, and FHLMC • The ETF is managed by Jerome Schneider at • To be included in the index, pool aggregates PIMCO must have at least USD 250mn currently outstanding and a weighted average maturity US government of at least one year CIO asset class view: While we are underweight US • Bonds included are float-adjusted market cap- government bonds, we added an overweight position weighted in longer-duration Treasuries to provide downside protection. Investment grade credit iShares Core US Treasury Bond ETF (GOVT, CIO asset class view: neutral Traditional, p. 280) iShares iBoxx $ Investment Grade Corporate • Seeks to track the performance of the ICE Bond ETF (LQD, Traditional, p. 296) U.S. Treasury Core Bond Index • Seeks to track the Markit iBoxx UDS Liquid • The index includes US Treasury securities that Investment Grade Index are fixed rate, US dollar denominated, and • The index Includes investment grade rated have a remaining maturity of greater than corporate debt that has at least three years one year and less than or equal to thirty years remaining to maturity, is fixed-rate, USD • Bonds included are weighted based on dollar denominated and meets other liquidity market cap criteria iShares 20+ Year Treasury Bond ETF (TLT, • The index is modified market cap-weighted Traditional, p. 286) with an issuer cap of 3% • Seeks to track the performance of the ICE SPDR Portfolio Intermediate Term Corporate U.S. Treasury 20+ Year Bond Index Bond ETF (SPIB, Traditional, p. 302) • The index includes US Treasury securities that • Seeks to track the performance of the are fixed rate, US dollar denominated, and Bloomberg Barclays Intermediate US have a remaining maturity of greater than Corporate Index twenty years • The index includes investment grade rated • Bonds included are weighted based on corporate bonds with maturities between one market cap and 10-years that are USD denominated and Vanguard Extended Duration Treasury ETF (EDV, pay a fixed rate • Traditional) Bonds included are market cap-weighted UBS Chief Investment Office Americas, Wealth Management 17 December 2018 18 Highlighted ETFs

SPDR Portfolio Short Term Corporate Bond ETF • Actively managed ETF that provides exposure (SPSB, Traditional, p. 298) to high yield bonds and can invest up to 40% in senior loans • Seeks to track the performance of the • Long positions can total up to 130% of the Bloomberg Barclays U.S. 1-3 Year Corporate fund's net assets Index • The fund is able to short US Treasuries and/or • The index includes investment grade rated corporate debt with up to 30% of net assets corporate bonds with maturities between one • and three-years that are USD denominated The net long exposure will not exceed 100% • and pay a fixed rate Relative to pure play high yield strategies, the • Bonds included are market cap-weighted allocation to loans helps to lower both credit and interest rate risk High yield credit • The ETF is team managed internally at First Trust CIO asset class view: neutral We note HYG and HYLB track indices that are Senior loans substantially similar. HYG is the more liquid of the two CIO asset class view: We are overweight senior loans with higher secondary market trading volume while as a carve-out exposure within an investor's high yield HYLB has the lower management fee. Shorter-term, bond allocation. more tactical traders may favor the higher trading volume while longer-term investors may favor the Invesco Senior Loan ETF (BKLN, Traditional, p. lower expense ratio. 315) iShares iBoxx $ High Yield Corporate Bond ETF • Seeks to track the performance of the (HYG, Traditional, p. 307) S&P/LSTA U.S. Leveraged Loan 100 Index • • Seeks to track the performance of the Markit The index includes 100 of the largest senior iBoxx USD Liquid High Yield Index loans weighted based on modified market cap methodology with a 2% cap on • Includes fixed rate high yield bonds with at individual loans least one year remaining to maturity that • meet the liquidity screens To be eligible for inclusion, loans must be senior secured, have a minimum initial term • Eligible bonds must have 15 years or less time of 1-year, a minimum initial spread of LIBOR + to maturity at issuance 125 basis points and be USD denominated • Bonds included are modified market cap- • Up to 20% of BKLN's assets can be invested weighted with an issuer cap of 3% in non-senior loan investments, such as high Xtrackers USD High Yield Corporate Bond ETF yield bonds (HYLB, Traditional, p. 306) First Trust Senior Loan Fund (FTSL, Active, p. 313) • Seeks to track the performance of the Solactive USD High Yield Corporates Total • Actively managed ETF that provides exposure Market Index to senior loans • Includes fixed rate high yield bonds with at • At least 80% of the fund's net assets must be least one year remaining to maturity that invested in senior loans meet the liquidity screens • The fund can invest up to 20% in non-senior • Eligible bonds must have 15 years or less time loan debt securities, warrants, equity to maturity at issuance securities, and securities of other investment • Bonds included are modified market cap- companies weighted with an issuer cap of 3% • The ETF is team managed internally at First Trust First Trust Tactical High Yield ETF (HYLS, Active, p. 309) SPDR Blackstone/GSO Senior Loan ETF (SRLN, Active, p. 314)

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 19 Highlighted ETFs

• Actively managed ETF that provides exposure First Trust Preferred Securities and Income ETF to senior loans (FPE, Active, p. 318) • At least 80% of the fund's net assets must be • Actively managed ETF that invests primarily in invested in senior loans preferred securities and income-producing • The portfolio will typically hold 50% to 75% debt securities of its net assets in senior loans that are • Preferred securities includes those listed on an eligible for inclusion in the Markit iBoxx USD exchange as well as those that traded over- Liquid Leveraged Loan Index and/or the the-counter S&P/LSTA U.S. Leveraged Loan 100 Index • At least 60% of net assets will be in securities • The ETF is team managed by GSO / rated investment grade at the time of Blackstone purchase • The fund focuses on fixed-to-floating rate and Preferreds variable rate preferreds, which are typically CIO asset class view: We are neutral on preferreds but less interest rate sensitive than traditional current pricing may prove an opportunity to invest in fixed rate, perpetual preferreds favorable preferred structures offering attractive yield. • The ETF is team managed by Stonebridge Within preferreds, we favor fixed-to-floating rate Advisors preferreds, which can help mitigate interest rate risk. We favor those with near-dated calls as well as those Emerging market debt with high reset spreads. CIO asset class view: We are overweight USD iShares U.S. Preferred Stock ETF (PFF, Traditional, denominated EM debt and neutral on local currency p. 316) EM debt. • Seeks to track the performance of the S&P iShares J.P. Morgan USD Emerging Markets Bond U.S. Preferred Stock Index ETF (EMB, Traditional, p. 339) • The index includes preferred stocks traded on • Seeks to track the performance of the J.P. the major US exchanges that meet liquidity Morgan EMBI Global Core Index thresholds • Provides exposure to USD denominated • In addition to fixed rate preferreds, the index bonds issued by sovereign and quasi- includes floating- and variable-rate preferreds sovereign entities with at least two years as well preferreds with a conversion feature remaining until maturity and trust preferreds • Bonds included are weighted based on • Preferreds are weighted based on market cap market cap with individual issuers capped at 10% Invesco Emerging Markets Sovereign Debt ETF Invesco Variable Rate Preferred ETF (VRP, (PCY, Smart beta, p. 340) Traditional, p. 319) • Seeks to track the performance of the DB • Seeks to track the performance of the Wells Emerging Market USD Liquid Balanced Index Fargo Hybrid and Preferred Securities Floating • The index includes USD denominated and Variable Rate Index emerging market bonds issued by sovereign • The index includes floating or variable rate entities preferred securities issued by US-based or • Within each country, among the bonds with foreign issuers at least three years remaining to maturity, 1-3 • Fixed-to-floating rate and variable rate bonds with the highest outperformance preferreds are typically less interest rate potential are selected for inclusion sensitive than traditional fixed rate, perpetual • The countries included are equally weighted preferreds and the bonds within each country are • Bonds included are weighted based on equally weighted as well market cap

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 20 Highlighted ETFs

• The bond selection process tends to result in • Seeks to track the performance of the a longer duration bias relative to a traditional Bloomberg Barclays AMT-Free Intermediate cap-weighted approach Continuous Municipal Index • The index includes investment grade rated VanEck Vectors J.P. Morgan EM Local Currency municipal bonds that are not subject to AMT Bond ETF (EMLC, Traditional, p. 341) and that have maturities between six- and 17 • Seeks to track the performance of the J.P. years • Morgan GBI-EMG Core Index Taxable municipal bonds are excluded • Provides exposure to emerging market bonds • Bonds included are weighted based on denominated in local currencies with country market cap exposures capped at 10% and a floor of 3% Invesco National AMT-Free Municipal Bond ETF • Bonds included are weighted based on a (PZA, Traditional, p. 331) modified market cap methodology • Seeks to track the performance of the ICE Municipal bonds BofAML National Long-Term Core Plus Municipal Securities Index CIO asset class view: From a tactical standpoint we • The index includes investment grade rated prefer investment grade municipal bonds over high municipal bonds that are not subject to AMT yield municipal bonds. We still believe a strategic and have at least 15 years remaining to allocation to municipal high yield bonds within a well- maturity diversified fixed income portfolio makes sense, but we • Taxable municipal bonds, single- and multi- suggest that investors favor investment grade bonds. family housing, and tobacco bonds are Vanguard Tax-Exempt Bond ETF (VTEB, excluded Traditional, p. 324) • Bonds included are weighted based on market cap • Seeks to track the performance of the S&P National AMT-Free Municipal Bond Index VanEck Vectors High-Yield Municipal (HYD, • The index includes investment grade rated Traditional, p. 333) municipal bonds that are not subject to AMT • Seeks to track the performance of the • Taxable, housing, tobacco, and non-rated Bloomberg Barclays Municipal Custom High municipal bonds are excluded Yield Composite Index • Bonds included are weighted based on • The index targets a 75% weight to market cap noninvestment grade municipal bonds and a First Trust Managed Municipal ETF (FMB, Active, 25% weight to triple-B rated bonds p. 326) • Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana • Actively managed ETF that provides exposure Islands are each individually capped at 4% to municipal bonds though the exposure to each is significantly • It typically invests at least 65% of its net lower than the caps assets in municipal bonds investment grade • Bonds included are weighted based on rated investment grade at the time of market cap purchase • It can also invest up to 35% in municipal Commodity ETFs bonds rated below investment grade at the time of purchase Commodity ETFs are subject to the risks of investing in • The ETF is team managed internally at First commodities. The value of the commodities held by Trust the ETFs could decline, resulting in a decline in the ETF's value. Many commodity ETFs gain exposure VanEck Vectors Intermediate Municipal Index ETF through the futures market. Commodity ETFs (ITM, Traditional, p. 330) investing in commodity futures are not designed to track spot price movements and the shape of the futures curve will impact the return of the ETF. The

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 21 Highlighted ETFs

various ETF structures within commodity ETFs has • Issues a K-1 implications on both taxation and tax reporting. ETF specific risks such as tracking error, trading costs, and Longer-term investment themes premiums/discounts, are discussed on page 29. Longer-term investment themes are multi-business Broad commodities cycle in nature while shorter-term investment themes are targeted to the current business cycle. CIO asset class view: As long as global economic activity doesn't slow down materially, we still see Broad thematic higher commodity prices. We expect broadly diversified commodity indices to rise about 10% over iShares MSCI Global Impact ETF (SDG, Thematic, the next 6-12 months, supported by energy and base p. 257) metals. • Seeks to track the performance of the MSCI Invesco DB Commodity Index Tracking Fund ACWI Sustainable Impact Index (DBC, Smart beta, p. 342) • The index includes large- and mid-cap companies that seek to address at least one • Seeks to track the performance of the DBIQ of the world's social and environmental Optimum Yield Diversified Commodity Index challenges as defined by the United Nations Excess Return plus the interest income from Sustainable Development Goals the fund's holdings of primarily US Treasury • Companies must drive at least 50% of sales securities and money market income from one or more of the 11 sustainable • Includes 14 commodities drawn from energy, impact categories and meet minimum ESG precious metals, industrial metals, and standards to be included agriculture • Stocks are weighted based on dollar sales • The commodities are weighted broadly in line exposure to the social and environmental with historical production levels, which results themes with sectors capped at 20% and in an overweight to energy commodities issuers at 4% • For each commodity, the index selects the futures contract within the next 13 months Automation and robotics with the highest implied roll yield A fourth industrial revolution is underway, which we • Issues a K-1 believe will transform the future of manufacturing.

United States Commodity ETF (USCI, Smart beta, Robo-Stox Global Robotics and Automation p. 344) Index ETF (ROBO, Thematic, p. 268) • • Seeks to track the performance of the Seeks to track the performance of the ROBO- SummerHaven Dynamic Commodity Index STOX Global Robotics and Automation Index Total Return • The index includes companies that are • From a universe of 27 possible commodities, involved in robotics- and/or automation- the seven with the greatest backwardation (or related products and/or services as least contango) are selected determined by the index provider • • From the remaining 20 commodities, the The index targets 40% in purer plays seven with the highest 12-month price (bellwether stocks) and 60% in stocks which momentum are selected, subject to a have a distinct segment of their business diversification requirement that at least one involved in robotics- or automation-related contract from each of the six sectors is business that the index provider believers will included drive higher revenues as the businesses • The commodities are equally weighted and expand (non-bellwether stocks) • within each commodity, the futures contract Bellwether stocks will have approximately with the greatest backwardation (or least double the weight of the non-bellwether contango) is selected for inclusion stocks • Unlike most other broad commodity ETFs, Medical devices there are no static sector tilts

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 22 Highlighted ETFs

The medical devices industry has matured but We identify five enabling technologies that should opportunities exist for increased penetration in offer solid long-term growth amid irreversible emerging markets where affordability is on the rise. technological disruption. iShares U.S. Medical Devices ETF (IHI, Traditional, ETFMG Prime Cyber Security ETF (HACK, p. 130) Thematic, p. 260) • Seeks to track the performance of the Dow • Seeks to track the performance of the Prime Jones U.S. Select Medical Equipment Index Cyber Defense Index • The index includes large-, mid-, and small-cap • The index includes companies that are direct companies engaged in the manufacturing service providers for cyber security and and distribution of medical devices such as companies whose business model is defined MRI scanners, prosthetics, pacemakers, X-ray by its role in providing cyber security services machines, and other non-disposable medical • The weight to cyber security infrastructure devices providers versus service providers is based on • Stocks included are market cap-weighted market cap • Companies within these two classifications SPDR S&P Health Care Equipment ETF (XHE, are modified equally weighted Smart beta, p. 131) First Trust Cloud Computing ETF (SKYY, • Seeks to track the performance of the S&P Thematic, p. 259) Health Care Equipment Select Industry Index • The index includes large-, mid-, and small-cap • Seeks to track the performance of the ISE companies in the health care equipment and Cloud Computing Index health care supplies subsectors • The index includes companies engaged in • Stocks included are modified equally business activity supporting or utilizing the weighted cloud computing space • While equal weighting better diversifies single • Stocks are classified as pure play, non-pure stock risk than market cap weighting, the tilt play, and technology conglomerates and towards relative smaller companies also tends stocks within each classification are equally to increase volatility weighted • The total weight to technology Digital data conglomerates is capped at 10% Companies that both enable digital data and invest in Invesco NASDAQ Internet ETF (PNQI, Thematic, p. its infrastructure will likely continue strong earnings growth over the coming years. 141) • First Trust Cloud Computing ETF (SKYY, Seeks to track the performance of the Thematic, p. 259) NASDAQ Internet Index • The index includes companies engaged in • Seeks to track the performance of the ISE internet-related business that include, but are Cloud Computing Index not limited to, internet software, internet • The index includes companies engaged in access providers, internet search engines, web business activity supporting or utilizing the hosting, web design, and internet retail cloud computing space commerce • Stocks are classified as pure play, non-pure • The index uses a modified market cap- play, and technology conglomerates and weighting with a single security cap of 8% stocks within each classification are equally and no more than five securities at the cap weighted Fintech • The total weight to technology conglomerates is capped at 10% The global fintech industry is at an inflection point and set to drive a major digital transformation in the Enabling technologies financial services industry. Global X FInTech ETF (FINX, Thematic, p. 269)

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 23 Highlighted ETFs

• Seeks to track the performance of the Indxx gas emissions and fossil fuel reserves) subject Global FinTech Thematic Index to certain constraints, including a predicted • Stocks listed in developed markets that derive tracking error constraint of 0.3% and active significant revenues from the following sector and country weights of +/- 2% vs. the industries are eligible for inclusion: P2P and MSCI ACWI Index Marketplace Lending, Mobile Payments, Renewables Crowd-funding, Blockchain and Alternative Currencies, Enterprise Solutions, and Personal Increasing demand from population growth and Finance Software, Automated Wealth urbanization will benefit renewable energy as lower Management and Trading costs drive competitiveness with fossil fuels. • The top pure-play companies by market cap VanEck Vectors Global Alternative Energy ETF are included in the index with a cap of 100 (GEX, Thematic, p. 264) companies and floor of 20 • • The index employs a modified market cap- Seeks to track the performance of the Ardour weighting methodology with individual Global Index Extra Liquid names capped at 6% and a floor of 0.3% • The index includes 30 of the most liquid companies that derive at least 50% of gross Agricultural yield revenues in one of the following five main The world faces a growing food production crisis as business segments: alternative energy the global population increases. Companies that help resources, distributed generation, energy to boost agricultural yields stand to benefit. efficiency, enabling technologies, and environmental technologies VanEck Vectors Agribusiness ETF (MOO, • The index is float-adjusted market cap- Thematic, p. 263) weighted • Seeks to track the performance of the Market Energy efficiency Vectors Global Agribusiness Index • The index includes companies that generate Stricter regulations and corporate competition to at least 50% of their revenues from agri- improve product efficiency are driving demand for chemicals and fertilizers, seeds and traits, energy-efficiency solutions. farm/irrigation equipment, farm machinery, Invesco Cleantech ETF (PZD, Thematic, p. 270) agricultural products, aquaculture and fishing, • livestock, plantations, and trading of Seeks to track the performance of the agricultural products Cleantech Index • • The index employs a modified market cap- The index includes companies from a broad weighting methodology with individual range of industries such as alternative energy, companies capped at 8% energy efficiency, air & water purification, eco-friendly agriculture/nutrition, clean Clean air and carbon reduction manufacturing, and others Rising populations and urbanization are fueling the • To be included, companies must pass need for clean-air technologies. Solution providers proprietary qualitative and quantitative targeting emissions reductions stand to benefit. screens • The index employs a modified equally iShares MSCI ACWI Low Carbon Target ETF weighted approach (CRBN, Thematic, p. 256) Water scarcity • Seeks to track the performance of the MSCI ACWI Low Carbon Target Index Water scarcity is one of the biggest risks to mankind. • The index aims to reflect lower carbon If limited water resources can be better harnessed, the exposure than that of the broad market while benefits could be enormous. exhibiting risk and return characteristics Invesco S&P Global Water Index ETF (CGW, similar to the MSCI ACWI Index Thematic, p. 267) • The index runs an optimization that seeks to minimize the carbon exposure (greenhouse

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 24 Highlighted ETFs

• Seeks to track the performance of the S&P positions by looking at three different ratios Global Water Index of female executives and board members • Includes roughly 25 water utilities and within a company infrastructure companies and 25 water • Within each sector, the top 10% of equipment and materials companies companies by market cap based on each of • Companies are selected based on a the three ratios are eligible for inclusion proprietary scoring metric that defines the • From the remaining universe, a company relative exposure to the global water industry must have at least one female in one of the • Uses a modified market cap methodology following positions: CEO, chairperson, or with a single stock cap of 10% member of the board of directors • Companies included are market cap-weighted Shorter-term investment themes Sustainable value creation in EM Rewarding experiences Incorporating environmental, social, and corporate We believe the trend toward experience spending will governance considerations into EM equity investment support demand for travel, dining out, home decisions may provide a competitive edge. improvement, and internet gaming. iShares MSCI EM ESG Optimized ETF (ESGE, Invesco Dynamic Leisure and Entertainment ETF Thematic, p. 200) (PEJ, Smart beta, p. 109) Bullets for ESGE are on p. 16 of this report • Seeks to track the Dynamic Leisure & Entertainment Intellidex Index Beyond benchmark fixed income investing • The index focuses on companies involved in By diversifying fixed-income exposure investors can leisure and entertainment including, but not avoid the shortcomings of heavily government- limited to, resorts and casinos, hotels, weighted taxable fixed-income benchmarks. restaurants, media, and airlines • The index selects 30 stocks based on rankings Fidelity Total Bond ETF (FBND, Active, p. 275) on five categories: price momentum, earnings momentum, quality, management action, and PIMCO Active Bond Exchange-Traded Fund value (BOND, Active, p. 274) • Of the 30 stocks, 8 will be from relatively SPDR DoubleLine Total Return Tactical ETF (TOTL, larger companies receiving a weight of 40% Active, p. 276) (roughly 5% in each stock) and 22 will be Bullets for FBND, BOND, and TOTL are on p. 17 of this from relatively smaller companies receiving a report weight of 60% (roughly 2.73% in each stock) • The index is rebalanced and reconstituted US senior loans quarterly and has high turnover, which can lead to significant changes in the composition Senior loans offer attractive floating-rate coupons both at the stock and industry level in short with low correlation to other asset classes and lower periods of time volatility than high-yield bonds. We note that senior loans are primarily issued by below investment grade Investing with a gender lens rated companies and have low secondary-market Evidence suggests that gender-diverse companies are liquidity. Therefore, they may not be appropriate for more profitable and tend to outperform their less- all investors. diverse peers. First Trust Senior Loan Fund (FTSL, Active, p. 313) SPDR SSGA Gender Diversity Index ETF (SHE, Invesco Senior Loan ETF (BKLN, Traditional, p. Thematic, p. 55) 315) • Seeks to track the SSGA Gender Diversity SPDR Blackstone/GSO Senior Loan ETF (SRLN, Index Active, p. 314) • The index includes large-cap US stocks that exhibit gender diversity in senior leadership

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 25 Highlighted ETFs

Bullets for FTSL, BKLN, and SRLN are on p. 19-20 of this report

Yield for the short end Short-end corporate bonds offer attractive current yields without taking on excessive credit or interest rate-risk.

SPDR Portfolio Short Term Corporate Bond ETF (SPSB, Traditional, p. 298) Bullets for SPSB are on p. 18 of this report

Commodity producers

Commodity producers tend to outperform in a maturing economic cycle. FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR, Thematic, p. 266) • Seeks to track the Morningstar Global Upstream Natural Resources Index • The index invests globally in upstream natural resource companies • It targets 30% energy, 30% agriculture, 30% metals, 5% water, and 5% timber • The 120 largest stocks are included (30 each for energy, metals, and agriculture, 15 each for timber and water) • Companies included are modified, market cap weighted with the US capped at 40%, EM at 20%, and individual securities at 5% VanEck Vectors Natural Resources ETF (HAP, Thematic, p. 265) • Seeks to track the VanEck Natural Resources • The index invests globally in natural resource companies that derive at least 50% of revenues from the natural resource segment (at least 25% for water) • It targets 41% energy, 31% agriculture, 13% base/industrial metals, 7% precious metals, 4% forest products, and 4% alternatives (water and alternative energy) • Companies included are modified, market cap weighted

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 26 Highlighted ETFs

Selection criteria • Bid-ask spread – Difference between the highest price someone is willing to pay for a In selecting ETFs for inclusion, we analyze multiple security and the lowest price someone is factors described below. willing to sell the security Fit with CIO recommendations: Views from CIO on Performance: While historical returns and risk positioning both across and within asset classes are a statistics are important, past performance may not be factor in selecting ETFs for inclusion into the report. indicative of future results. In addition to historical total returns versus a benchmark, additional risk- Index methodology: The main components of the return metrics analyzed include: methodology evaluated are: how the eligible universe is defined, how securities are selected from the • Standard deviations – Statistical measurement eligible universe, and how securities are weighted of dispersion about an average which depicts within the index. These components ultimately drive how widely returns varied of a certain period the exposure provided by the index and thus the ETF. of time Index rebalancing and reconstitution frequency are • Beta – Measure of systematic risk with respect additional factors to consider. to a benchmark. A beta of 1.0 has tended to experience up and down movements of Tracking difference: The ultimate goal of an index- roughly the same magnitude of the specified linked ETF is to track the underlying index it is benchmark designed to replicate. Therefore, tracking difference, • Sharpe ratio – Risk-adjusted return measure which refers the difference in return between an ETF's that uses the standard deviation and excess net asset value and underlying index, is important as it return over the risk-free rate to determine is the primary measure of manager performance. reward per unit of risk Index replication methodology: ETFs may fully • Information ratio – Risk-adjusted return replicate the underlying index, which involves measure that is a special version of the investing in all of the securities in the underlying index Sharpe Ratio in that the benchmark doesn't in substantially the same weights as the index. have to be the risk free rate Alternatively, ETFs may use a representative sampling • Tracking error – Measures the standard process to track the underlying index, which involves deviation of the excess returns versus a using optimization techniques to invest in a subset of benchmark the index that approximates the key risk and return • Upside capture – Measures the performance characteristics of the index. In general, ETFs that rely in up markets relative to the benchmark. It is more heavily on optimization are at risk of higher calculated by taking the security's upside tracking difference relative to peers that more fully capture return divided by the benchmark's replicate the underlying index. upside capture return. Investment strategy and process: Actively • Downside capture – Measures the managed ETFs do not track underlying indices. performance in down markets relative to the Therefore, for active ETFs, the investment strategy benchmark. It is calculated by taking the guidelines, investment process, and manager track security's downside capture return divided by record are analyzed. the benchmark's downside capture return. • Max drawdown – Measures the peak to Costs & liquidity trough decline during a specified time period • Expense ratio - The percentage of fund assets, • Batting average – Measures the number of net of reimbursements, used to pay for instances that the investment outperforms a operating expenses and management fees, benchmark including 12b-1 fees, administrative fees, and Portfolio exposure: This includes asset class, all other asset-based costs incurred by the geographic/sector/industry breakdowns as well as fund, except brokerage costs. other metrics such as size-style characteristics, • Assets invested in the strategy and average holdings concentration, and credit quality/duration. daily trading volumes The purity of the exposure provided to the investment • Turnover – Measure of trading activity within strategy is an important consideration as well. a fund UBS Chief Investment Office Americas, Wealth Management 17 December 2018 27 Highlighted ETFs

Advantages & Disadvantages of ETFs performance highlights the value of including passive investments within portfolios. Advantages Fig. 5 Active managers versus benchmark Diversification and transparency: ETFs enable Percentage of active funds that outperformed investors to obtain diversified exposure to various benchmarks over the past 3-, 5-, 10-, and 15-years market classes in a low cost, liquid manner. Most ETFs 3-Yr 5-Yr 10-Yr 15-Yr 3-Yr 5-Yr 10-Yr 15-Yr disclose their holdings on a daily basis and NAVs are U.S. Equity 17.9 19.9 14.1 16.2 U.S. Fixed Income Large-cap 21.4 23.5 10.9 7.6 Short Gov't 38.5 41.4 30.3 11.8 available throughout the trading day. Mid-cap 16.7 18.3 7.3 4.9 Intermediate Gov't 26.1 30.4 20.5 10.0 Small-cap 6.4 7.1 6.6 2.3 Long Gov't 0.0 1.7 5.0 1.9 Intl. Equity 23.2 26.0 23.3 10.6 High Yield 7.2 5.7 2.5 1.8 Liquidity: ETFs trade throughout the day on major Small-cap 32.5 28.1 36.7 25.8 Global Fixed Income 31.2 41.7 42.3 31.4 exchanges. In addition to secondary market EM 26.1 13.8 13.8 5.6 EM Fixed Income 30.4 5.1 22.7 21.4 Global Equity 24.6 24.6 20.2 18.5 General Municipal 48.2 60.8 40.0 18.9 transactions, shares can be created or redeemed throughout the day by APs providing a second level of Source: S&P Indices Versus Active Funds U.S. Scorecard for mid-year 2018, UBS. liquidity. Therefore, investors can execute trades well in excess of a fund's size or average trading volume. Disadvantages For better execution on these types of trades, Tracking error: A primary risk with all index-linked investors should reach out to internal trading desks or ETFs is tracking error. Tracking error refers to the the ETF provider to facilitate the process. difference in performance between an ETF's net asset Tax efficiency: The in-kind redemption process helps value and the return of its underlying index. Factors to minimize capital gains distributions as low cost impacting tracking error include, but are not limited basis holdings can be delivered out of the ETF through to, not holding all of the index constituents in redemptions, as opposed to being sold by the fund. substantially the same weights, transaction costs, Losses recognized from portfolio turnover can also be expense ratios, and other operational challenges such used to offset gains, which is not unique to ETFs. Tax as implementing index rebalances or reconstitutions. efficiency will vary by ETF and market segment. Trading costs: These costs include commissions, bid- Low cost: The average and weighted average ask spreads, and potentially premiums/discounts. expense ratio on all US-listed ETFs is 0.52% and Smaller ETFs and those investing in less liquid markets 0.21%, respectively. This compares favorably to other may exhibit wider spreads and premiums/discounts investment products. Securities lending can also be increasing the costs of obtaining exposure. used to further reduce fund expenses. For traditional ETFs, foregoing opportunity to Flexibility: Since ETFs are traded on an exchange, outperform: By investing in ETFs tracking traditional investors can use various types of orders such as limit benchmark indices, investors are foregoing the orders and stop-limit orders. ETFs can also be sold opportunity to outperform. Notably, there are ETFs short, purchased on margin, and many have listed tracking indices where the indices themselves are options available, which increase the strategies that attempting to outperform traditional benchmarks. can be implemented through ETFs. For smart beta and actively managed ETFs, risk of Fig. 4 ETF versus open-end mutual fund expenses underperformance: These ETFs seek to improve Weighted average expense ratios in % upon the returns and/or risks of traditional market cap-weighted benchmarks. There is the risk that these Active MF Index MF Active MF Index MF ETFs fail to outperform. ETF (I class) (I class) (A class) (A class) US equity 0.13 0.67 0.05 0.85 0.60 Increasing complexity: As the ETF market continues International equity 0.30 0.79 0.09 1.00 0.81 to expand, the complexity of the products increases. Taxable bond 0.20 0.50 0.05 0.84 0.67 Extra due diligence and research is required to ensure that the ETF selected provides the desired exposure. Source: Morningstar Direct, UBS, as of 18 May 2018. Based on Morningstar classifications. I and A class refer to mutual fund share Premiums/discounts: The creation/redemption class. process generally keeps market prices in line with Active management underperformance: While the NAVs. However, in more extreme environments, performance of active managers relative to their premiums/discounts can increase in magnitude benchmark can be volatile in the short term, the resulting in returns that meaningfully deviate from the longer-term track record of active manager NAV returns. UBS Chief Investment Office Americas, Wealth Management 17 December 2018 28 Highlighted ETFs

14 December 2018 138 Assets ADTV # of Expense Actively Smart Market Price Total Returns (%) Volatility (%) Ticker (USD Mil) (1,000/shrs) Securities Ratio (%) Managed Beta 1-Yr 3-Yr* 5-Yr* 10-Yr* 1-Yr 3-Yr* 5-Yr* 10-Yr* US equity: all cap Vanguard Total Stock Market ETF VTI 97,045 3,578 3,642 0.04 No No -0.6 10.8 9.6 14.0 12.1 9.8 10.2 13.6 Schwab Fundamental U.S. Broad Market Index ETF FNDB 255 26 1,556 0.25 No Yes -2.5 9.9 8.2 - 11.1 9.6 10.0 - US equity: large cap Vanguard Mega Cap ETF MGC 1,432 66 264 0.07 No No 0.6 11.4 10.4 13.8 12.2 9.4 10.1 13.1 Vanguard S&P 500 ETF VOO 97,082 3,406 517 0.04 No No -0.1 10.9 10.1 - 12.0 9.4 10.0 13.2 iShares Edge MSCI Multifactor USA ETF LRGF 1,134 331 157 0.20 No Yes -5.8 9.5 - - 11.1 10.0 - - JPMorgan Diversified Return U.S. Equity ETF JPUS 570 41 485 0.19 No Yes -1.6 10.4 - - 10.2 8.5 - - ProShares Large Cap Core Plus CSM 753 36 328 0.45 No Yes -3.0 10.8 10.0 - 11.3 9.5 10.1 - VictoryShares US 500 Volatility Wtd ETF CFA 616 72 503 0.35 No Yes -4.1 10.4 - - 11.7 10.0 - - US equity: large cap growth iShares S&P 500 Growth ETF IVW 20,413 1,125 306 0.18 No No 3.9 12.3 12.1 15.3 13.9 10.5 10.9 12.8 Vanguard Mega Cap Growth Index ETF MGK 3,652 210 121 0.07 No No 1.1 11.7 11.3 15.5 14.7 11.2 11.6 13.4 Invesco S&P 500 Pure Growth ETF RPG 2,132 210 122 0.35 No Yes -0.3 9.5 9.6 17.4 15.7 11.9 11.7 15.3 US equity: large cap value iShares S&P 500 Value ETF IVE 14,719 1,563 384 0.18 No No -4.6 8.9 7.5 11.8 10.9 9.6 10.0 14.4 Vanguard Mega Cap Value Index ETF MGV 2,167 113 152 0.07 No No 0.1 11.1 9.6 12.2 11.2 9.1 9.7 13.6 Invesco S&P 500 Pure Value ETF RPV 858 131 110 0.35 No Yes -6.8 9.2 6.5 16.7 10.7 12.1 12.2 21.4 iShares Edge MSCI USA Value Factor ETF VLUE 3,568 579 155 0.15 No Yes -5.7 10.2 8.1 - 10.5 10.8 10.8 - US equity: mid cap iShares Core S&P Mid-Cap ETF IJH 43,793 1,819 404 0.07 No No -5.8 9.5 7.7 14.7 13.3 11.9 11.5 15.4 Vanguard Mid Cap ETF VO 22,305 559 368 0.05 No No -3.8 8.6 8.0 15.0 11.9 10.7 10.7 14.9 John Hancock Multifactor Mid Cap ETF JHMM 700 234 704 0.45 No Yes -4.7 9.1 - - 12.3 10.9 - - WisdomTree MidCap Earnings Fund EZM 1,018 91 559 0.38 No Yes -7.2 9.0 6.5 15.9 13.0 12.2 12.1 16.8 US equity: smid cap Vanguard Extended Market Index ETF VXF 6,031 414 3,305 0.08 No No -3.8 9.8 7.1 14.8 14.0 12.8 12.6 16.5 Schwab Fundamental U.S. Small Company Index ETF FNDA 2,959 401 883 0.25 No Yes -6.1 9.1 6.5 - 13.0 13.0 12.8 - US equity: small cap iShares Core S&P Small-Cap ETF IJR 39,114 4,533 606 0.07 No No -2.7 11.4 8.1 14.8 15.6 14.7 14.1 17.7 Vanguard Small Cap ETF VB 21,947 701 1,415 0.05 No No -3.3 9.9 7.2 14.8 14.2 12.8 12.6 17.4 WisdomTree SmallCap Earnings Fund EES 646 83 811 0.38 No Yes -4.5 11.4 6.4 15.8 13.5 15.6 15.1 20.1 US equity: ESG iShares MSCI USA ESG Select ETF SUSA 814 33 124 0.25 No No -0.7 10.9 9.5 13.0 11.7 9.9 10.3 13.4 iShares MSCI KLD 400 Social ETF DSI 1,201 72 404 0.25 No No 0.3 10.3 9.3 13.2 12.8 10.0 10.4 13.3 US equity: dividend growth ProShares S&P 500 Dividend Aristocrats ETF NOBL 3,640 571 54 0.35 No Yes 1.9 10.9 10.1 - 11.6 9.3 9.8 - SPDR S&P Dividend ETF SDY 15,931 633 112 0.35 No Yes 2.5 12.7 10.4 13.5 10.2 9.1 9.5 13.6 Vanguard Dividend Appreciation ETF VIG 29,806 1,107 186 0.08 No Yes 2.9 11.8 9.3 12.4 12.1 8.9 9.8 11.9 WisdomTree U.S. Quality Dividend Growth Fund DGRW 2,360 294 280 0.28 No Yes -1.3 11.9 10.4 - 12.2 9.8 10.5 - US equity: dividend yield ALPS Sector Dividend Dogs ETF SDOG 2,042 164 50 0.40 No Yes -5.6 10.2 8.4 - 10.7 10.6 10.8 - Vanguard High Dividend Yield ETF VYM 21,876 1,227 406 0.08 No Yes -1.7 10.4 9.4 13.0 10.3 8.3 9.3 13.2 US equity: quality yield Schwab U.S. Dividend Equity ETF™ SCHD 7,807 1,037 102 0.07 No Yes -1.1 11.4 9.7 - 12.2 9.0 9.8 - FlexShares Quality Dividend Index Fund QDF 1,666 122 140 0.37 No Yes -3.4 9.7 8.6 - 10.7 9.5 9.8 - US sectors: communication services Communication Services Select Sector SPDR XLC 3,177 3,725 27 0.13 No No ------Vanguard Communication Services ETF VOX 1,426 295 111 0.10 No No -12.4 1.2 2.5 9.3 10.9 11.4 11.2 13.3 US sectors: consumer discretionary Consumer Discretionary Select Sector SPDR Fund XLY 12,764 8,180 66 0.13 No No 5.8 10.8 11.3 19.0 16.6 12.2 12.8 16.2 Vanguard Consumer Discretionary ETF VCR 2,656 111 331 0.10 No No 2.2 10.0 9.9 19.1 16.3 12.2 12.6 16.6 US sectors: consumer staples Consumer Staples Select Sector SPDR Fund XLP 10,265 19,767 34 0.13 No No -1.1 5.7 8.0 12.0 12.0 9.9 10.4 10.8 Vanguard Consumer Staples ETF VDC 4,414 176 95 0.10 No No -0.8 5.8 8.0 12.4 11.2 9.4 10.0 10.7 US sectors: energy Energy Select Sector SPDR Fund XLE 14,416 18,283 31 0.13 No No -7.8 3.7 -3.6 4.9 21.1 18.5 18.5 19.9 Vanguard Energy ETF VDE 3,419 303 142 0.10 No No -9.2 2.8 -4.7 4.2 21.7 19.7 19.5 20.5 US sectors: financials Financial Select Sector SPDR Fund XLF 24,187 72,427 68 0.13 No No -11.0 10.3 9.1 11.4 12.4 14.9 13.6 21.5 Vanguard Financials ETF VFH 6,578 817 419 0.10 No No -10.9 10.4 9.1 11.6 11.6 14.5 13.1 19.9 US sectors: healthcare Health Care Select Sector SPDR Fund XLV 19,615 11,914 63 0.13 No No 8.6 9.6 12.2 15.5 15.6 12.5 12.3 13.0 Vanguard Health Care ETF VHT 8,729 280 392 0.10 No No 8.8 10.0 12.5 16.2 15.6 13.2 12.9 13.4 US sectors: industrials

Source: Morningstar Direct, UBS CIO WMR. Note: Number of securities only includes long positions. UBS Chief Investment Office Americas, Wealth Management 17 December 2018 29 Highlighted ETFs

14 December 2018 138 Assets ADTV # of Expense Actively Smart Market Price Total Returns (%) Volatility (%) Ticker (USD Mil) (1,000/shrs) Securities Ratio (%) Managed Beta 1-Yr 3-Yr* 5-Yr* 10-Yr* 1-Yr 3-Yr* 5-Yr* 10-Yr* Industrial Select Sector SPDR Fund XLI 10,574 16,943 71 0.13 No No -8.2 10.5 8.3 14.1 17.3 13.2 12.7 17.5 Vanguard Industrials ETF VIS 3,332 156 356 0.10 No No -9.1 9.6 7.5 13.8 16.8 13.3 12.9 18.0 US sectors: information technology Vanguard Information Technology ETF VGT 18,580 756 339 0.10 No No 6.3 18.2 16.7 18.9 17.0 14.4 13.9 15.9 US sectors: materials Materials Select Sector SPDR Fund XLB 3,977 9,395 25 0.13 No No -11.4 7.9 5.2 10.8 14.0 14.1 15.1 19.4 Vanguard Materials ETF VAW 2,187 139 120 0.10 No No -13.8 8.3 4.7 11.7 14.7 14.7 15.3 19.6 US sectors: real estate Real Estate Select Sector SPDR XLRE 2,808 4,184 33 0.13 No No 3.6 7.3 - - 12.1 12.1 - - Vanguard Real Estate ETF VNQ 30,742 6,585 193 0.12 No No 0.1 5.8 9.2 13.8 13.4 12.6 13.3 21.3 US sectors: utilities Utilities Select Sector SPDR Fund XLU 8,761 21,092 30 0.13 No No 6.3 14.4 12.5 11.2 10.9 12.0 12.5 12.5 Vanguard Utilities ETF VPU 3,263 198 72 0.10 No No 7.4 15.5 12.7 11.7 11.0 11.6 12.3 12.4 US industry iShares North American Tech-Software ETF IGV 1,862 558 65 0.47 No No 14.1 20.5 18.3 19.5 18.0 15.2 14.9 16.8 Invesco KBW Bank ETF KBWB 710 427 25 0.35 No No -14.4 8.9 7.6 - 14.6 19.9 17.7 - iShares U.S. Financial Services ETF IYG 1,514 137 123 0.43 No No -9.2 10.8 9.0 11.2 12.7 16.8 15.5 22.3 iShares U.S. Oil Equipment & Services ETF IEZ 165 144 42 0.43 No No -31.3 -13.4 -17.2 -0.5 32.1 29.8 28.6 29.7 VanEck Vectors Oil Services ETF OIH 1,029 8,855 26 0.35 No No -34.3 -15.5 -18.2 - 32.3 29.4 28.3 - iShares U.S. Oil & Gas Exploration & Production ETF IEO 371 151 70 0.43 No No -7.3 2.2 -5.7 5.0 25.9 26.0 24.2 25.6 MLPs Alerian MLP ETF AMLP 8,724 17,511 25 0.85 No No -5.6 6.7 -4.1 - 20.9 17.7 17.1 - First Trust North American Energy Infrastructure Fund EMLP 2,263 699 59 0.95 Yes No -3.3 10.8 4.3 - 11.3 10.4 11.6 - Global X MLP ETF MLPA 812 814 21 0.45 No No -7.2 6.9 -5.0 - 21.0 18.2 17.7 - International developed markets iShares Core MSCI EAFE ETF IEFA 53,115 11,077 2,529 0.08 No No -11.2 4.5 2.3 - 12.1 11.2 11.5 - Vanguard FTSE Developed Markets ETF VEA 65,988 16,334 3,948 0.07 No No -11.6 4.7 2.2 6.9 12.3 10.8 11.3 16.8 Goldman Sachs ActiveBeta International Equity ETF GSIE 1,069 285 828 0.25 No Yes -9.8 5.1 - - 11.9 10.7 - - Hartford Multifactor Developed Markets (ex-US) ETF RODM 1,248 621 510 0.29 No Yes -6.8 7.0 - - 10.1 9.8 - - iShares Edge MSCI Multifactor Intl ETF INTF 1,029 465 231 0.30 No Yes -12.5 3.6 - - 13.2 11.5 - - Schwab Fundamental International Large Company Index ETF FNDF 3,626 871 885 0.25 No Yes -11.1 5.9 1.8 - 12.4 11.2 12.0 - International developed markets: ESG iShares MSCI EAFE ESG Optimized ETF ESGD 453 62 472 0.20 No No -10.6 - - - 12.0 - - - Emerging markets iShares Core MSCI Emerging Market ETF IEMG 49,332 19,686 1,874 0.14 No No -11.2 9.8 1.9 - 16.1 14.6 14.9 - Vanguard FTSE Emerging Markets ETF VWO 55,684 19,312 4,073 0.14 No No -10.5 9.1 1.8 7.6 16.0 14.5 15.0 19.9 Goldman Sachs ActiveBeta Emerging Markets Equity ETF GEM 1,589 197 424 0.45 No Yes -10.5 9.5 - - 15.6 14.2 - - iShares Edge MSCI Multifactor Emerging Markets ETF EMGF 283 73 210 0.45 No Yes -15.5 8.5 - - 15.3 - - - Emerging markets: ESG iShares MSCI EM ESG Optimized ETF ESGE 426 105 322 0.25 No No -11.2 - - - 16.4 - - - Emerging markets: countries iShares MSCI China ETF MCHI 3,717 6,954 309 0.62 No No -14.0 9.8 4.8 - 21.9 18.9 20.0 - SPDR S&P China ETF GXC 944 94 368 0.59 No No -13.8 9.4 5.0 9.2 21.8 18.6 20.0 21.8 iShares MSCI South Korea Capped ETF EWY 3,917 4,085 120 0.62 No No -19.4 7.7 0.6 9.6 20.1 18.1 17.2 24.3 iShares MSCI Indonesia ETF EIDO 516 1,407 80 0.62 No No -7.5 10.0 4.0 - 20.6 16.4 18.8 - Broad fixed income iShares Core Total USD Bond Market ETF IUSB 2,577 230 7,057 0.06 No No -1.1 2.1 - - 2.2 2.6 - - Vanguard Total Bond Market ETF BND 36,103 2,475 17,374 0.05 No No -1.0 1.7 2.2 3.5 2.4 2.8 2.9 3.1 Fidelity Total Bond ETF FBND 459 70 892 0.36 Yes No -1.1 2.9 - - 2.0 3.0 - - PIMCO Total Return Active ETF BOND 1,987 129 714 0.76 Yes No -0.8 2.3 2.9 - 2.2 2.6 2.9 - SPDR DoubleLine Total Return Tactical ETF TOTL 2,970 464 726 0.55 Yes No -0.1 2.0 - - 1.8 2.1 - - Broad fixed income: ultra short duration iShares Short Maturity Bond Fund NEAR 5,797 1,117 442 0.25 Yes No 1.6 1.5 1.2 - 0.2 0.2 0.2 - PIMCO Enhanced Short Maturity Active Exchange-Traded Fund MINT 12,092 1,206 891 0.42 Yes No 1.7 1.9 1.3 - 0.2 0.3 0.3 - US government iShares Core US Treasury Bond ETF GOVT 6,815 1,691 115 0.15 No No -0.6 0.8 1.6 - 2.9 3.2 3.1 - iShares 20+ Year Treasury Bond ETF TLT 7,322 9,163 33 0.15 No No -4.8 1.5 5.5 3.6 8.6 9.6 10.4 13.5 Vanguard Extended Duration Treasury Index ETF EDV 591 93 82 0.07 No No -7.2 1.9 8.1 4.0 11.3 13.5 15.5 21.5 Mortgage backed securities Vanguard Mortgage-Backed Securities ETF VMBS 7,336 600 2,842 0.07 No No -0.2 1.2 2.2 - 2.2 2.0 2.0 - Investment grade credit iShares iBoxx $ Investment Grade Corporate Bond ETF LQD 30,517 8,996 1,954 0.15 No No -4.0 2.9 3.2 5.9 3.8 4.5 4.4 6.2 SPDR Portfolio Intermediate Term Corporate Bond ETF SPIB 4,046 1,099 3,881 0.07 No No -1.1 2.2 2.3 - 1.7 2.3 2.3 - SPDR Portfolio Short Term Corporate Bond ETF SPSB 4,675 1,137 1,157 0.07 No No 1.0 1.5 1.3 - 0.7 0.8 0.8 -

Source: Morningstar Direct, UBS CIO WMR. Note: Number of securities only includes long positions. UBS Chief Investment Office Americas, Wealth Management 17 December 2018 30 Highlighted ETFs

14 December 2018 138 Assets ADTV # of Expense Actively Smart Market Price Total Returns (%) Volatility (%) Ticker (USD Mil) (1,000/shrs) Securities Ratio (%) Managed Beta 1-Yr 3-Yr* 5-Yr* 10-Yr* 1-Yr 3-Yr* 5-Yr* 10-Yr* High yield credit iShares iBoxx $ High Yield Corporate Bond ETF HYG 13,102 21,801 976 0.49 No No 0.5 7.3 3.2 9.5 2.8 4.2 4.9 8.0 Xtrackers USD High Yield Corporate Bond ETF HYLB 1,979 543 1,048 0.20 No No 0.5 - - - 2.8 - - - First Trust Tactical High Yield ETF HYLS 1,258 252 293 1.10 Yes No 0.6 5.5 3.3 - 2.3 2.9 3.7 - Senior loans First Trust Senior Loan Fund FTSL 1,717 310 240 0.88 Yes No 0.6 3.4 2.5 - 1.5 2.0 2.0 - Invesco Senior Loan ETF BKLN 5,954 8,348 145 0.65 No No 1.0 4.6 1.9 - 1.9 2.6 2.6 - SPDR Blackstone/GSO Senior Loan ETF SRLN 2,715 938 288 0.70 Yes No 1.1 3.9 2.3 - 1.6 1.9 2.3 - Preferreds iShares U.S. Preferred Stock ETF PFF 14,135 3,458 301 0.46 No No -4.6 2.7 4.5 9.8 4.4 4.4 4.3 15.4 First Trust Preferred Securities and Income ETF FPE 3,198 1,050 229 0.85 Yes No -3.7 5.0 6.2 - 2.9 4.0 3.7 - Invesco Variable Rate Preferred ETF VRP 1,585 615 210 0.50 No No -5.2 3.9 - - 3.2 4.8 - - Emerging market debt iShares J.P. Morgan USD Emerging Markets Bond ETF EMB 14,783 3,788 424 0.40 No No -5.5 4.5 4.0 7.9 5.7 6.0 5.7 7.5 Invesco Emerging Markets Sovereign Debt ETF PCY 3,642 1,555 110 0.50 No Yes -6.4 3.7 4.5 8.5 6.2 6.9 6.5 8.4 VanEck Vectors J.P. Morgan EM Local Currency Bond ETF EMLC 4,506 2,217 298 0.30 No No -7.7 4.4 -2.2 - 11.6 11.1 10.6 - Municipal bonds Vanguard Tax-Exempt Bond Index ETF VTEB 3,818 1,005 4,185 0.09 No No 0.4 2.0 - - 2.5 3.2 - - First Trust Managed Municipal ETF FMB 473 73 544 0.50 Yes No 0.6 3.0 - - 2.5 3.6 - - VanEck Vectors Intermediate Municipal Index ETF ITM 1,635 247 2,739 0.24 No No 0.0 1.9 3.6 5.5 3.5 4.3 4.0 4.9 Invesco National AMT-Free Municipal Bond ETF PZA 1,520 343 379 0.28 No No -0.5 2.4 5.0 6.7 3.2 3.7 3.5 5.2 VanEck Vectors High-Yield Municipal Index ETF HYD 2,350 475 1,805 0.35 No No 1.8 4.4 6.3 - 3.0 4.6 4.2 - Broad commodities Invesco DB Commodity Index Tracking Fund DBC 2,039 2,200 22 0.85 No Yes -2.5 4.8 -9.5 -3.3 14.6 13.2 15.2 16.8 United States Commodity Index Fund, LP USCI 498 60 43 1.04 No Yes -4.4 -1.3 -7.1 - 11.1 8.7 10.0 - Longer-term investment themes iShares MSCI Global Impact ETF SDG 38 3 127 0.49 No No -4.9 - - - 12.7 - - - Robo-Stox Global Robotics and Automation Index ETF ROBO 1,401 392 95 0.95 No No -15.5 12.9 6.0 - 19.4 16.3 15.2 - First Trust Cloud Computing ETF SKYY 1,707 331 30 0.60 No No 9.5 19.1 15.2 - 13.9 13.2 13.3 - Invesco NASDAQ Internet ETF PNQI 505 44 96 0.60 No No 0.9 13.2 12.3 24.1 19.3 16.2 16.7 19.0 ETFMG Prime Cyber Security ETF HACK 1,500 324 56 0.64 No No 12.6 11.8 - - 16.8 16.3 - - Global X FinTech Thematic ETF FINX 303 206 39 0.68 No No 4.7 - - - 22.3 - - - VanEck Vectors Agribusiness Index ETF MOO 740 97 64 0.54 No No -0.6 10.2 4.7 10.5 10.0 9.2 11.1 17.4 iShares MSCI ACWI Low Carbon Target ETF CRBN 500 12 1,310 0.20 No No -5.9 7.9 - - 11.6 9.7 - - VanEck Vectors Global Alternative Energy ETF GEX 86 5 31 0.63 No No -4.0 5.3 2.7 0.4 15.6 13.6 16.5 24.2 Invesco Cleantech ETF PZD 148 12 52 0.67 No No -8.6 11.0 5.8 9.4 15.2 13.2 14.5 19.2 Invesco S&P Global Water Index ETF CGW 534 41 54 0.61 No No -6.9 7.1 6.0 11.1 12.0 10.4 10.9 14.3 iShares U.S. Medical Devices ETF IHI 2,929 208 60 0.43 No No 18.4 19.8 18.8 19.1 18.0 14.0 13.5 15.4 SPDR S&P Health Care Equipment ETF XHE 596 131 74 0.35 No Yes 13.5 19.5 16.8 - 20.6 16.2 15.4 - Shorter-term investment themes iShares MSCI EM ESG Optimized ETF ESGE 426 105 322 0.25 No No -11.2 - - - 16.4 - - - Invesco Dynamic Leisure and Entertainment ETF PEJ 120 8 31 0.63 No Yes -2.0 5.5 5.9 18.3 14.2 13.0 13.2 18.2 SPDR SSGA Gender Diversity Index ETF SHE 347 13 171 0.20 No No 0.7 - - - 11.3 - - - Fidelity Total Bond ETF FBND 459 70 892 0.36 Yes No -1.1 2.9 - - 2.0 3.0 - - PIMCO Total Return Active ETF BOND 1,987 129 714 0.76 Yes No -0.8 2.3 2.9 - 2.2 2.6 2.9 - SPDR DoubleLine Total Return Tactical ETF TOTL 2,970 464 726 0.55 Yes No -0.1 2.0 - - 1.8 2.1 - - First Trust Senior Loan Fund FTSL 1,717 310 240 0.88 Yes No 0.6 3.4 2.5 - 1.5 2.0 2.0 - Invesco Senior Loan ETF BKLN 5,954 8,348 145 0.65 No No 1.0 4.6 1.9 - 1.9 2.6 2.6 - SPDR Blackstone/GSO Senior Loan ETF SRLN 2,715 938 288 0.70 Yes No 1.1 3.9 2.3 - 1.6 1.9 2.3 - SPDR Portfolio Short Term Corporate Bond ETF SPSB 4,675 1,137 1,157 0.07 No No 1.0 1.5 1.3 - 0.7 0.8 0.8 - VanEck Vectors Natural Resources ETF HAP 83 9 299 0.50 No No -5.4 10.9 0.8 6.0 12.2 11.8 14.0 18.0 FlexShares Morningstar Global Upstream Natural Resources Index Fund GUNR 5,224 528 156 0.46 No No -3.1 13.8 1.0 - 13.3 14.4 15.8 -

Source: Morningstar Direct, UBS CIO WMR. Note: Number of securities only includes long positions. UBS Chief Investment Office Americas, Wealth Management 17 December 2018 31 Highlighted ETFs

Standardized Performance ETF market price and NAV total returns in % as of 30 September 2018

1-year 3-year 5-year 10-year Since inception Issuer Ticker Price NAV Price NAV Price NAV Price NAV Price NAV Vanguard VTI 17.64 17.63 17.09 17.07 13.43 13.44 12.09 12.09 7.66 7.46 Charles Schwab FNDB 15.11 15.15 15.77 15.70 12.01 12.02 - - 11.94 11.97 Vanguard MGC 18.69 18.69 17.86 17.82 14.13 14.13 11.92 11.91 8.75 9.05 Vanguard VOO 17.88 17.85 17.28 17.26 13.88 13.90 - - 15.13 15.30 BlackRock LRGF 14.18 14.10 15.24 15.22 - - - - 11.21 10.64 J.P. Morgan JPUS 13.69 13.66 15.22 15.01 - - - - 15.20 15.67 ProShares CSM 16.96 16.80 17.81 17.64 14.40 14.38 - - 16.25 16.30 Victory Capital CFA 14.88 14.91 16.12 16.09 - - - - 11.09 11.08 BlackRock IVW 25.03 24.95 19.69 19.66 16.34 16.35 13.79 13.85 5.70 5.70 Invesco RPG 20.68 20.61 16.44 16.42 14.27 14.27 15.23 15.41 11.10 11.10 Vanguard MGK 23.97 23.93 19.78 19.76 15.98 15.99 13.66 13.65 10.54 10.83 BlackRock IVE 9.92 9.89 13.97 13.94 10.70 10.70 9.45 9.46 5.94 5.94 Vanguard MGV 14.22 14.21 16.11 16.10 12.53 12.55 10.34 10.33 7.16 7.40 Invesco RPV 13.70 13.75 15.05 15.05 11.49 11.50 13.70 13.64 9.04 9.05 BlackRock VLUE 16.15 16.12 16.27 16.34 12.58 12.59 - - 13.57 13.19 BlackRock IJH 14.20 14.13 15.59 15.60 11.81 11.82 12.41 12.39 9.73 9.73 Vanguard VO 13.45 13.42 13.78 13.78 11.66 11.66 12.43 12.42 9.90 9.90 John Hancock JHMM 14.11 14.22 15.06 14.93 - - - - 15.72 15.63 WisdomTree EZM 12.48 12.49 14.62 14.55 10.95 10.93 13.94 13.73 9.60 9.61 Vanguard VXF 16.15 16.10 16.18 16.16 11.40 11.41 12.42 12.41 10.05 10.05 Charles Schwab FNDA 13.69 13.88 15.87 15.89 11.26 11.28 - - 11.72 11.80 BlackRock IJR 19.05 19.11 19.45 19.40 13.31 13.30 12.82 12.81 10.78 10.78 Vanguard VB 16.75 16.70 16.37 16.33 11.47 11.48 12.22 12.37 9.81 9.81 WisdomTree EES 15.46 15.41 19.04 18.93 11.36 11.36 13.70 13.68 9.11 9.13 BlackRock SUSA 15.97 16.10 16.64 16.70 12.67 12.68 10.68 10.70 8.26 8.27 BlackRock DSI 16.67 16.57 16.31 16.31 12.74 12.72 10.65 11.32 8.11 8.11 ProShares NOBL 14.83 14.81 15.18 15.19 - - - - 12.60 13.03 SSgA SDY 12.69 12.69 16.11 16.10 12.37 12.37 11.43 11.65 9.15 9.15 Vanguard VIG 19.06 19.05 16.89 16.89 12.05 12.06 11.14 11.16 8.84 8.84 WisdomTree DGRW 18.58 18.54 18.17 18.12 14.21 14.20 - - 13.66 13.68 ALPS SDOG 7.77 7.75 14.53 14.53 11.23 11.26 - - 13.90 13.86 Vanguard VYM 10.70 10.67 15.07 15.07 12.03 12.04 10.97 10.98 8.03 8.03 Charles Schwab SCHD 16.34 16.25 17.11 17.08 12.68 12.68 - - 14.63 14.68 Northern Trust QDF 14.55 14.55 15.64 15.57 12.39 12.35 - - 14.38 14.77 SSgA XLY 31.69 31.63 18.11 18.10 15.73 15.74 17.22 17.15 9.31 9.52 Vanguard VCR 27.41 27.38 16.88 16.89 14.45 14.46 16.82 16.78 10.42 10.42 SSgA XLP 2.71 2.68 7.35 7.32 9.08 9.08 9.90 9.96 5.98 6.07 Vanguard VDC 3.80 3.82 7.60 7.61 9.14 9.16 10.34 10.36 9.54 9.54 SSgA XLE 13.66 13.70 10.53 10.51 0.86 0.87 4.11 4.02 8.16 8.09 Vanguard VDE 15.20 15.22 10.46 10.44 0.33 0.32 3.50 3.41 7.51 7.51 SSgA XLF 8.49 8.58 16.56 16.56 13.30 13.29 7.45 7.34 3.92 4.22 Vanguard VFH 8.14 8.15 16.62 16.58 13.33 13.33 7.99 7.99 4.35 4.35 SSgA XLV 18.18 18.08 14.59 14.54 15.18 15.17 14.20 14.05 8.71 8.71 Vanguard VHT 20.05 19.99 15.32 15.30 15.78 15.76 14.73 14.76 10.55 10.54 SSgA XLI 12.46 12.43 18.62 18.59 13.29 13.29 12.18 12.22 8.27 8.42 Vanguard VIS 11.80 11.83 17.96 17.98 12.69 12.70 11.87 11.90 9.97 9.99 Vanguard VGT 34.70 34.59 28.07 28.00 21.86 21.86 17.14 17.13 10.83 10.83 SSgA XLB 3.87 3.84 15.47 15.44 8.77 8.77 8.10 8.20 7.75 7.78 Vanguard VAW 3.70 3.68 16.58 16.59 8.94 8.94 9.11 9.09 8.94 8.94 Vanguard VNQ 1.91 1.94 7.00 7.01 8.67 8.68 7.47 7.50 8.43 8.43 SSgA XLRE 4.87 4.85 ------6.45 6.72 Vanguard VOX -2.55 -2.57 6.65 6.64 5.39 5.39 8.66 8.63 7.29 7.24 SSgA XLC------6.65-6.78 SSgA XLU 2.78 2.83 10.44 10.45 10.88 10.90 8.78 8.83 6.68 6.82 Vanguard VPU 4.20 4.26 11.77 11.77 11.28 11.28 9.45 9.45 9.72 9.73 BlackRock IGV 40.19 40.22 29.84 29.82 22.26 22.28 16.92 16.97 8.83 8.83

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 32 Highlighted ETFs

1-year 3-year 5-year 10-year Since inception Issuer Ticker Price NAV Price NAV Price NAV Price NAV Price NAV BlackRock IYG 12.82 12.77 17.66 17.61 14.01 14.02 7.51 7.62 4.17 4.17 ALPS AMLP 2.82 2.50 3.09 3.09 -2.36 -2.38 - - 2.82 2.80 First Trust EMLP -1.54 -1.58 6.54 6.53 4.40 4.41 - - 6.48 6.33 Global X MLPA 0.55 0.45 3.67 3.76 -3.18 -3.19 - - -0.25 -0.12 BlackRock IEFA 2.79 3.11 9.62 9.88 4.97 5.04 - - 7.57 7.54 Vanguard VEA 2.64 2.74 9.79 9.83 4.83 4.85 5.40 5.53 1.72 1.77 Hartford Funds RODM 4.32 4.83 11.65 11.08 - - - - 6.85 6.87 BlackRock INTF 3.29 3.59 10.64 10.33 - - - - 5.60 5.76 Goldman Sachs GSIE 4.31 4.65 ------8.64 8.55 Charles Schwab FNDF 2.61 3.07 10.53 10.74 4.57 4.75 - - 5.34 5.54 BlackRock ESGD 2.62 3.02 ------12.64 14.59 BlackRock IEMG -1.64 -0.86 11.65 11.89 3.52 3.55 - - 2.99 3.05 Vanguard VWO -3.57 -3.10 10.10 10.08 3.11 2.98 4.60 4.71 6.28 6.23 Goldman Sachs GEM -0.06 0.35 11.47 11.28 - - - - 12.30 11.38 BlackRock EMGF -5.53 -4.44 ------11.38 11.29 BlackRock MCHI -3.39 -2.59 12.92 13.17 7.35 7.32 - - 4.11 4.23 SSgA GXC -3.67 -2.61 14.38 14.70 7.62 7.68 8.58 8.79 7.34 7.47 BlackRock EWY 1.81 2.03 14.30 13.98 3.99 3.89 6.98 7.20 7.87 7.87 BlackRock EIDO -12.23 -11.62 10.76 11.07 0.99 0.67 -N/A -N/A 2.04 1.14 BlackRock IUSB -1.14 -1.12 1.90 1.91 - - - - 1.99 2.05 Vanguard BND -1.33 -1.27 1.25 1.26 2.10 2.09 3.59 3.69 3.74 3.75 SSgA TOTL -1.06 -0.59 1.56 1.67 - - - - 1.46 1.51 Fidelity FBND -0.63 -0.71 3.02 2.82 - - - - 2.01 2.12 PIMCO BOND -0.91 -0.59 2.28 2.23 2.75 2.76 - - 3.67 3.70 BlackRock NEAR 1.76 1.79 1.51 1.51 1.25 1.24 - - 1.23 1.24 PIMCO MINT 1.87 1.84 1.87 1.86 1.33 1.32 - - 1.33 1.32 BlackRock GOVT -1.76 -1.76 0.12 0.12 1.22 1.24 - - 0.98 0.92 BlackRock TLT -3.55 -3.58 0.76 0.78 4.70 4.70 5.34 5.35 6.02 6.03 Vanguard EDV -4.03 -3.99 1.14 1.24 6.89 6.93 6.78 6.88 7.21 6.85 Vanguard VMBS -0.94 -1.02 0.83 0.86 1.90 1.88 - - 2.38 2.39 BlackRock LQD -1.97 -1.94 3.01 3.05 3.68 3.68 6.70 6.44 5.18 5.19 SSgA SPIB -0.67 -0.75 2.12 2.15 2.52 2.55 - - 4.16 4.41 BlackRock HYG 2.46 2.55 6.74 6.84 4.30 4.29 7.59 7.34 5.31 5.47 DWS HYLB 2.57 2.56 ------4.89 5.39 First Trust HYLS 3.04 3.03 5.39 5.39 4.65 4.72 - - 4.93 4.98 First Trust FTSL 3.77 3.67 3.69 3.70 3.29 3.34 - - 3.06 3.07 Invesco BKLN 3.96 4.18 4.32 4.28 2.77 2.80 - - 3.14 3.26 SSgA SRLN 4.31 4.39 3.92 4.14 3.00 3.03 - - 2.79 2.83 BlackRock PFF 1.12 1.04 4.47 4.53 5.70 5.74 9.81 10.10 4.13 4.15 First Trust FPE 0.53 0.56 6.51 6.57 7.07 7.00 - - 4.83 4.90 Invesco VRP 0.05 0.21 5.86 6.08 - - - - 4.87 4.97 BlackRock EMB -3.21 -2.99 5.25 5.40 4.46 4.56 6.66 6.79 5.59 5.70 Invesco PCY -5.16 -4.79 4.48 4.54 4.73 4.84 7.45 7.32 5.94 6.06 VanEck EMLC -9.11 -9.25 3.84 3.79 -2.28 -2.31 - - -0.21 -0.01 Vanguard VTEB -0.12 -0.07 2.07 2.11 - - - - 2.12 2.18 First Trust FMB 0.66 0.87 3.42 3.44 - - - - 3.76 3.83 VanEck ITM -0.82 -0.57 1.81 2.02 3.25 3.24 4.52 4.70 3.93 3.99 Invesco PZA 0.16 0.24 2.89 2.89 5.05 4.97 5.42 5.62 4.00 4.11 VanEck HYD 3.82 4.02 5.09 5.15 6.20 6.20 - - 7.40 7.70 Invesco DBC 16.69 16.60 5.85 5.89 -6.95 -7.01 -6.00 -5.93 -1.91 -1.79 US Commodity Funds USCI 6.07 5.96 0.52 0.46 -5.37 -5.44 - - -2.01 -1.92 BlackRock SDG 3.35 3.84 ------10.29 9.91 Exchange Traded Concepts ROBO 8.22 8.77 23.68 23.94 - - - - 10.89 11.19 First Trust SKYY 35.76 35.80 26.93 26.88 18.51 18.54 - - 15.52 15.53 Invesco PNQI 22.36 22.40 24.93 24.89 16.95 16.95 21.75 21.55 18.10 18.26 ETF Managers Group HACK 33.34 33.14 17.18 17.09 - - - - 13.20 13.29 Global X FINX 38.64 38.91 ------37.74 37.11 VanEck MOO 13.01 13.24 15.20 15.18 7.50 7.58 7.74 7.68 5.95 5.96 BlackRock CRBN 9.08 9.55 13.23 13.17 - - - - 8.26 8.17 VanEck GEX -1.91 -1.83 6.86 6.92 2.98 2.96 -5.44 -5.47 -5.18 -5.10 Invesco PZD 5.95 5.83 19.18 18.93 9.42 9.22 6.23 5.87 5.51 5.45 BlackRock IEZ 2.10 2.07 1.33 1.35 -9.03 -9.01 -2.48 -2.50 -1.88 -1.88 VanEck OIH -0.68 -0.83 -0.71 -0.70 -9.97 -9.98 - - -4.24 -4.35

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 33 Highlighted ETFs

1-year 3-year 5-year 10-year Since inception Issuer Ticker Price NAV Price NAV Price NAV Price NAV Price NAV BlackRock IEO 30.54 30.61 12.30 12.28 0.69 0.68 4.07 4.04 4.11 4.11 Invesco CGW 3.09 3.48 11.57 11.65 8.11 8.13 8.49 8.35 5.32 5.30 BlackRock IHI 36.55 36.55 27.71 27.68 22.64 22.63 15.30 15.28 13.50 13.50 SSgA XHE 40.94 41.12 30.05 29.91 23.05 22.97 - - 19.61 19.60 Invesco PEJ 14.76 14.79 10.54 10.54 9.13 9.16 15.32 15.26 10.02 10.06 Fidelity FBND -0.63 -0.71 3.02 2.82 - - - - 2.01 2.12 PIMCO BOND -0.91 -0.59 2.28 2.23 2.75 2.76 - - 3.67 3.70 SSgA TOTL -1.06 -0.59 1.56 1.67 - - - - 1.46 1.51 First Trust FTSL 3.77 3.67 3.69 3.70 3.29 3.34 - - 3.06 3.07 Invesco BKLN3.964.184.324.282.772.80- - 3.143.26 SSgA SRLN4.314.393.924.143.003.03- - 2.792.83 SSgA SPSB0.570.641.481.451.301.35- - 1.601.76 SSgA SHE 16.80 16.69 ------16.38 15.90 BlackRock ESGE -2.05 -0.99 ------10.55 14.89 Northern Trust GUNR 11.44 11.73 17.00 17.15 3.19 3.23 - - 2.75 1.90 VanEck HAP 8.72 9.06 14.58 14.70 3.22 3.16 3.49 3.58 1.32 1.32

All performance figures were obtained from Morningstar Direct, and are current as of the most recent month end. You may obtain a prospectus and performance data for the ETFs current to the most recent month end by clicking on the llinks below. Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. See appendix for definitions on select Morningstar Direct statistics.

Issuer Web-site ALPS http://www.alpsfunds.com/ BlackRock https://www.ishares.com/us/index Charles Schwab http://www.schwab.com/public/schwab/investing/accounts_products/investment/etfs/schwab_etfs DWS https://dws.com/US/EN/Product-Finder ETF Managers Group http://www.etfmg.com/partners/ Exchange Traded Concepts https://www.exchangetradedconcepts.com/funds/ Fidelity https://www.fidelity.com/etfs/overview First Trust https://www.ftportfolios.com/ Global X http://www.globalxfunds.com/ Goldman Sachs https://www.gsam.com/content/gsam/us/en/individual/products/etf-fund-finder.html Hartford Funds https://www.hartfordfunds.com/products/ETFhub.html Invesco https://www.invesco.com/portal/site/us/financial-professional/etfs/ J.P. Morgan https://am.jpmorgan.com/us/en/asset-management/gim/adv/products/etfs John Hancock https://etf.jhinvestments.com/etf/our-etfs.html Northern Trust https://www.flexshares.com/exchange-traded-funds PIMCO http://www.pimcoetfs.com/Funds/Pages/default.aspx?WT.svl=nav ProShares http://www.proshares.com/ SSgA https://www.spdrs.com/ US Commodity Funds http://www.unitedstatescommodityfunds.com/ VanEck http://www.vaneck.com/ Vanguard https://investor.vanguard.com/corporate-portal/ Victory Capital https://www.vcm.com/investment-professionals/victoryshares-etfs WisdomTree https://www.wisdomtree.com/etfs

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 34 Highlighted ETFs

Vanguard Extended Duration Trs ETF EDV U.S. Treasury

Snapshot Time Period: 12/15/2013 to 12/14/2018 Ticker EDV 160.00 INAV ticker EDVIV 140.00 Advisor Vanguard Group Inc Fund Legal Structure Open Ended Investment Company 120.00 Actively Managed No 100.00 Options Available No

Tax Form 1099 80.00 2014 2015 2016 2017 2018 Pricing Data

Price ($) 109.64 Vanguard Extended Duration Trs ETF Price Vanguard Extended Duration Trs ETF NAV Assets (USD millions) 591 Portfolio Statistics 3-Month Average Daily Volume (shares) 92,576 # of Holdings 82 Expense Ratio (%) 0.07 Top 10 Holdings (%) 18.7 30-Day SEC Yield (%) 3.2 Inception Date 12/6/2007 SEC Yield Date 12/14/2018 Dividend History Average Effective Duration 24.0 Maturity 1-3 Yr (%) 0.0 Annual Dividend 2017 3.24 Maturity 3-5 Yr (%) 0.0 Maturity 5-7 Yr (%) 0.0 Annual Dividend 2016 3.37 Maturity 7-10 Yr (%) 0.0 Annual Dividend 2015 3.55 Maturity 10-15 Yr (%) 0.0 Annual Dividend 2014 3.50 Maturity 15-20 Yr (%) 0.8 Maturity 20-30 Yr (%) 99.2 Annual Dividend 2013 3.24 Maturity 30+ Yr (%) 0.0 Trailing Returns Top 10 Holdings (%) As of Date: 9/30/2018 Portfolio Date: 11/30/2018 Since Weight 1 Yr 3 Yr 5 Yr 10 Yr Incept U.S. Treasury Security Stripped Interest Security 0% 2.1 Vanguard Extended Duration Trs ETF (Mkt) -4.0 1.1 6.9 6.8 7.2 U.S. Treasury Security Stripped Interest Security 0% 2.0 Vanguard Extended Duration Trs ETF (NAV) -4.0 1.2 6.9 6.9 6.9 U.S. Treasury Bond Stripped Principal Payment 0% 2.0 3-Year Risk Stats* U.S. Treasury Security Stripped Interest Security 0% 1.9 U.S. Treasury Bond Stripped Principal Payment 0% 1.9 Time Period: 10/1/2015 to 9/30/2018 U.S. Treasury Bond Stripped Principal Payment 0% 1.9 Annualized Volatility (%) 13.2 U.S. Treasury Bond Stripped Principal Payment 0% 1.9 U.S. Treasury Bond Stripped Principal Payment 0% 1.8 Max Drawdown (%) -20.1 U.S. Treasury Bond Stripped Principal Payment 0% 1.7 Sharpe Ratio 0.09 U.S. Treasury Security Stripped Interest Security 0% 1.7 Description The Vanguard Extended Duration Treasury ETF (EDV) seeks to track the performance of the Bloomberg Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. The index includes zero-coupon U.S. Treasury securities with maturities ranging from 20-30-years. The index is market capitalization-weighted and is rebalanced monthly. To track its index, EDV may utilize optimization techniques to invest in a subset of the full index that approximates the key characteristics of the index.

All performance figures were obtained from Morningstar Direct, and are current as of the most recent month end. You may obtain a prospectus and performance data for Vanguard ETFs current to the most recent month end by clicking on the following link: https://advisors.vanguard.com/VGApp/iip/site/ advisorsec/home. Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. See appendix for definitions on select Morningstar Direct statistics. *Risk statistics were calculated using monthly NAV return data.

Source: Morningstar Direct

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 35 Highlighted ETFs

Appendix

Statement of Risk Exchange Traded Funds (ETFs) - For purposes of this report, ETFs include index-linked funds regulated under the Investment Company Act of 1940 that trade on US securities exchanges under exemptive relief from the Securities and Exchange Commission. The shares of all of the ETF issuers discussed in this Report are listed on U.S. securities exchanges. The ETFs are either open-end, registered investment companies (including UITs) operating under an exemptive order from the SEC, or collective investment vehicles, formed as grantor trusts, limited partnerships or similar structures that offer pass-through tax treatment to investors. The different structures provide different rights for investors. For example, ETFs registered under the Investment Company Act of 1940 must stand ready at all times to redeem shares (albeit only in creation unit size) whereas those ETFs that are not subject to registration under the Investment Company Act of 1940 may suspend redemptions at any time. We refer to ETFs registered with the SEC under the Investment Company Act of 1940 as “’40 Act ETFs” and to nonregistered ETFs as “33 Act ETFs.” Most of the ETFs discussed in this Report track an index of financial instruments or provide exposure to a single commodity type. ETFs are subject to the same risks as the underlying securities and commissions may be charged on every trade, if applicable. This definition does not imply that ETFs are endorsed by the Securities and Exchange Commission. Any discussion contained herein regarding future performance is not intended to guarantee future performance or to suggest that past performance will reoccur. Moreover, target returns are not intended to be projections but to provide a range within which price levels may move assuming current market conditions as well as the other assumptions mentioned in the Report are met. Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. ETFs are sold by prospectus, which contains details about ETFs, including investment objectives, risks, charges and expenses. Clients should read the prospectus and consider this information carefully before investing. US-registered, open-ended index-linked funds are redeemable only in Creation Unit size aggregations through an Authorized Participant, and may not be individually redeemed. Many ETFs are redeemable only on an "in-kind" basis. The public trading price of a redeemable lot of ETFs may be different from their net asset value, and ETFs could trade at a premium or discount to the net asset value. UBS AG or its affiliates act as authorized participant for many of the ETFS discussed in this Report. In addition, UBS is a regular issuer of traded financial instruments and privately-issued financial products that may be linked to the ETFs mentioned in this Report. UBS regularly trades in ETFs. Through these and other activities, UBS may engage in transactions involving ETFs that are inconsistent with the strategies in this Report. Clients may obtain more information about the ETFs cited in this report, including copies of prospectuses or summary, from their UBS FS financial advisor or by referencing the corresponding link following each ETF ticker in each fact sheet. Commodities Disclosure: An allocation to commodities may not be appropriate for all investors. The information presented here is provided for general informational purposes only and is not intended to suggest a particular course of action for investors. Prior to considering an investment, investors should be mindful of the different types of risks associated with the different investment types of commodities listed and also that the risks of investing indirectly may be different than the risks of a direct investment.

Required Disclosures

Analyst Certification

Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report. For a complete set of required disclosures relating to the companies that are the subject of this report, please mail a request to UBS CIO Global Wealth Management Business Management, 1285 Avenue of the Americas, 20th Floor, Avenue of the Americas, New York, NY 10019. Disclosures (17 December 2018)

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 36 Highlighted ETFs

Appendix

ALPS Sector Dividend Dogs ETF 1, Consumer Discretionary Select Sector SPDR. Fund 1, Consumer Staples Select Sector SPDR. Fund 1, Energy Select Sector SPDR. Fund 1, 4, Financial Select Sector SPDR. Fund 1, 3, First Trust ISE Cloud Computing Index Fund 1, First Trust North American Energy Infrastructure Fund 1, First Trust Preferred Securities and Income ETF 1, FlexShares Quality Dividend Index Fund 1, Global X MLP ETF 1, Guggenheim S&P 500. Equal Weight ETF 1, Guggenheim S&P 500.Pure Growth ETF 1, Guggenheim S&P 500.Pure Value ETF 1, Health Care Select Sector SPDR. Fund 1, Industrial Select Sector SPDR. Fund 1, iShares 20+ Year Treasury Bond ETF 1, 4, iShares Core MSCI EAFE ETF 2, iShares Core MSCI Emerging Market ETF 1, 2, iShares Core S&P Mid-Cap ETF 1, 2, iShares Core S&P Small-Cap ETF 1, iShares iBoxx $ High Yield Corporate Bond ETF 1, 3, iShares iBoxx $ Investment Grade Corporate Bond ETF 1, iShares J.P. Morgan USD Emerging Markets Bond ETF 1, 2, 3, iShares MSCI China ETF 1, 2, iShares MSCI Indonesia ETF 1, iShares MSCI KLD 400 Social ETF 1, iShares MSCI South Korea Capped ETF 1, iShares MSCI Thailand Capped ETF 1, iShares MSCI USA ESG Select ETF 1, iShares S&P 500 Growth ETF 1, iShares S&P 500 Value ETF 1, iShares U.S. Financial Services ETF 1, iShares U.S. Medical Devices ETF 1, iShares U.S. Oil Equipment & Services ETF 1, iShares U.S. Preferred Stock ETF 1, Market Vectors Agribusiness Index ETF 1, Market Vectors Global Alternative Energy ETF 1, Market Vectors High-Yield Municipal Index ETF 1, Market Vectors Natural Resources ETF 1, Materials Select Sector SPDR. Fund 1, PIMCO Enhanced Short Maturity Exchange-Traded Fund 1, 2, PIMCO Total Return ETF 1, 2, PowerShares Cleantech Portfolio 1, PowerShares DB Commodity Index Tracking Trust 1, PowerShares Dynamic Leisure & Entertainment Portfolio 1, PowerShares Emerging Markets Sovereign Debt Portfolio 1, PowerShares KBW Bank Portfolio 1, PowerShares NASDAQ Internet Portfolio 1, PowerShares National AMT-Free Municipal Bond Portfolio 1, PowerShares Senior Loan Portfolio 1, Schwab U.S. Dividend Equity ETF. 1, SPDR. Blackstone/GSO Senior Loan ETF 1, SPDR Portfolio Intermediate Term Corporate Bond ETF 1, SPDR Portfolio Short Term Corporate Bond ETF 1, SPDR S&P China ETF 1, 2, SPDR S&P Dividend ETF 1, SPDR S&P Health Care Equipment ETF 1, SPDR SSGA Gender Diversity Index ETF 1, United States Commodity Index Fund, LP 1, Utilities Select Sector SPDR. Fund 1, Vanguard Consumer Discretionary ETF 1, Vanguard Consumer Staples ETF 1, Vanguard Energy ETF 1, Vanguard Extended Duration Treasury Index ETF 1, Vanguard Extended Market Index ETF 1, Vanguard Financials ETF 1, Vanguard FTSE Developed Markets ETF 1, Vanguard FTSE Emerging Markets ETF 1, Vanguard Health Care ETF 1, Vanguard High Dividend Yield Index ETF 1, Vanguard Industrials ETF 1, Vanguard Information Technology ETF 1, Vanguard Intermediate-Term Corporate Bond ETF 1, Vanguard Materials ETF 1, Vanguard Mega Cap ETF 1, Vanguard Mortgage- Backed Securities ETF 1, Vanguard S&P 500 ETF 1, Vanguard Telecommunication Services ETF 1, Vanguard Total Stock Market ETF 1, 5, 6; Vanguard Utilities ETF 1, WisdomTree MidCap Earnings Fund 1, WisdomTree SmallCap Earnings Fund 1, WisdomTree Total Earnings Fund 1, 1. UBS Securities LLC makes a market in the securities and/or ADRs of this company. 2. Within the past 12 months, UBS Securities LLC and/or its affiliates have received compensation for products and services other than investment banking services from this company/entity. 3. UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of last month's end (or the prior month's end if this report is dated less than 10 working days after the most recent month's end). 4. UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company's common equity securities as of last month's end (or the prior month's end if this report is dated less than 10 days after the most recent month's end). 5. The equity analyst covering this company, a member of his or her team, or one of their household members has a long common stock position in this company. 6. David Perlman, or one of his/her household members has a long common stock position in Vanguard Total Stock Market ETF.

UBS Chief Investment Office Americas, Wealth Management 17 December 2018 37 Highlighted ETFs

Appendix

Disclaimer

In certain countries UBS AG is referred to as UBS SA. This publication is for our clients’ information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation and needs of any specific recipient. We recommend that recipients take financial and/or tax advice as to the implications of investing in any of the products mentioned herein. We do not provide tax advice. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Other than disclosures relating to UBS AG, its subsidiaries and affiliates, all information expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. All information and opinions are current only as of the date of this report, and are subject to change without notice. This publication is not intended to be a complete statement or summary of the securities, markets or developments referred to in the report. Opinions may differ or be contrary to those expressed by other business areas or groups of UBS AG, its subsidiaries and affiliates. Research publications from Chief Investment Office Global Wealth Management (CIO GWM), formerly known as CIO Americas, Wealth Management, are written by UBS Global Wealth Management, a Business Division of UBS AG (UBS) or an affiliate thereof (collectively, UBS). UBS Investment Research is written by UBS Investment Bank. Except for economic forecasts, the research process of CIO GWM is independent of UBS Investment Research. As a consequence research methodologies applied and assumptions made by CIO GWM and UBS Investment Research may differ, for example, in terms of investment horizon, model assumptions, and valuation methods. Therefore investment recommendations independently provided by the two UBS research organizations can be different. The analyst(s) responsible for the preparation of this report may interact with trading desk personnel, sales personnel and other constituencies for the purpose of gathering, synthesizing and interpreting market information. The compensation of the analyst(s) who prepared this report is determined exclusively by research management and senior management (not including investment banking). Analyst compensation is not based on investment banking, sales and trading or principal trading revenues, however, compensation may relate to the revenues of UBS as a whole, of which investment banking, sales and trading and principal trading are a part. 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All transactions by a US person in the securities mentioned in this report should be effected through a US-registered broker dealer affiliated with UBS, and not through a non-US affiliate. The contents of this report have not been and will not be approved by any securities or investment authority in the United States or elsewhere. UBS Financial Services Inc. is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the "Municipal Advisor Rule") and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule. Version as per April 2018. UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS. UBS accepts no liability whatsoever for any redistribution of this document or its contents by third parties. © UBS 2018. 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UBS Chief Investment Office Americas, Wealth Management 17 December 2018 38