Preferred Securities Overview & Preferences€¦ · preferred stock valuations have had a tendency to move toward ... years earlier, when yield premiums troughed in September 2016

Preferred Securities Overview & Preferences

CIO – Global Wealth Management –– 10 July 2019 Monthly Frank Sileo, CFA, Senior Fixed Income Strategist

The enclosed list is not a template for the construction of your personal portfolio. You should discuss investment decisions with your

Financial Advisor.

ab

This report has been prepared by UBS Financial Services Inc. (UBS FS). Analyst certification and required disclosuresbegin on page 18.

Will preferreds stay cool this summer? At the midway point of 2019, the preferred securities sector has generated impressive year-to-date gains of more than 11%, driven largely by declining interest rates. And it appears that rate risk may have diminished further with the Federal Reserve's latest signalling. Following its 19 June meeting, the Fed alluded to an increase in market uncertainties, and Fed projections for the federal funds rate now show that eight of 17 members forecast at least one rate cut in 2019. At CIO we expect the Fed to cut rates by 50 basis points on 31 July unless we see unusual-ly strong economic data. And while we still expect rates to rise over the next year, we lowered our 12-month forecast for the 10-year Treasury yield to 2.4% from 2.8%.

A more benign rate environment should help support preferred stocks into the summer months. However, in summers past, preferred stock valuations have had a tendency to move toward the "tight side" during the third quarter. Yield premiums can help the sector absorb credit or rate volatility. However, over the past three years, preferred sector yield premiums hit the lows for the year in July through September. And in each of the past three years, fourth-quarter performance was the year's worst. Specifically, the USD 25 par preferred sector saw yield spreads reach 52-week lows in September 2018 followed by a loss of 4.4% in the fourth quarter. There was a similar pattern two years earlier, when yield premiums troughed in September 2016 and then a 4.2% loss followed in the fourth quarter. In 2017, yield spreads hit the lows in July, which preceded marginal monthly gains of 0.5% or less for the remainder of the year (and a fourth-quarter gain of just 0.4%).

So far, however, overall valuation seems fair. Price appreciation has been tempered and not excessive. ETF inflows, which can occasionally amplify performance, have picked up but not to extremes. Therefore, against a backdrop of plunging Treasury yields, we have actually seen some widening in yield spreads. This may buffer near-term volatility.

In the months ahead, if yield premiums tighten toward histori-cally lower levels, preferreds may see a pullback if yields then suddenly and rapidly rise to meaningfully higher levels due to higher interest rates or rising credit spreads (i.e., risk aversion). But so far preferred sector valuation is beginning the third quar-ter at reasonable levels.

We continue to favor fixed-rate preferreds with above-average coupons and F2Fs with longer-term call dates. Specifically, our preference is for those F2Fs with at least four years of call pro-tection, high reset spreads, and strong prospectus language regarding coupon calculation in the absence of Libor.

.

__________________________________

Preferred valuations appear reasonable Yield spread over Treasuries in basis points

150

200

250

300

350

400

450

USD25 par preferreds

Source: Bloomberg, ICE BAML, UBS, as of 5 July 2019 Based on adjusted-yield of Core Plus Fixed Rate Preferred Index

Steady ETF inflows have been supportive Asset flows in USD mn

-750

-550

-350

-150

50

250

450

650

Jul-17 Nov-17 Mar-18 Jul-18 Nov-18 Mar-19 Jul-19

Source: Bloomberg, ICE BAML, UBS, as of 9 July 2019

Preferred Securities Overview and Preferences

CIO GWM 10 July 2019 2

List Changes

Attractive ListAttractive ListAttractive ListAttractive List Identifer:Identifer:Identifer:Identifer: Action:Action:Action:Action: From:From:From:From: Rationale:Rationale:Rationale:Rationale:

Goldman Sachs L + 67bps; 4.0% floor GS pr D move Neutral Current yield / intermediate duration

Goldman Sachs L + 75bps; 4.0% floor GS pr C move Neutral Current yield / intermediate duration

Morgan Stanley L + 75bps; 4.0% floor MS pr A move Neutral Current yield / intermediate duration

Goldman Sachs 5.30% fixed to call; then

L+383.4bps38148BAC2 move Neutral

YTC valuation / reset spread / call

date

Morgan Stanley 5.85% fixed to call; then

L+349.1MS pr K move Neutral

YTC valuation / reset spread / call

date

Public Storage 5.4% perpetual PSA pr B move NeutralQuality / yield / high coupon vs issuer

complex

Digital Realty Trust 5.85% perpetual DLR pr K new ----Call date / yield / high coupon vs

issuer complex

Public Storage 5.60% perpetual PSA pr H new ----Quality / Call date / yield / high

coupon vs issuer complex

Nextera Energy Capital 5.65% due

3/1/2079NEE pr N new ----

Quality / Call date / yield / high

coupon vs issuer complex

Neutral ListNeutral ListNeutral ListNeutral List Identifer:Identifer:Identifer:Identifer: Action:Action:Action:Action: From:From:From:From: Rationale:Rationale:Rationale:Rationale:

Ebay Inc. 6.00% 2/1/56 EBAYL move Attractive Weaker valuation / low yield-to-call

DTE Energy 6.00% 12/15/2076 DTY move Attractive Weaker valuation / low yield-to-call

Southern Co. 6.25% 10/15/2075 SOJA move Attractive Weaker valuation / low yield-to-call

Bank of America Corp. 6.20% perpetual BAC pr C move Attractive Weaker valuation / low yield-to-call

J.P. Morgan Chase & Co. 6.10% perpetual JPM pr G move Attractive Weaker valuation / low yield-to-call

J.P. Morgan Chase & Co. 6.15% perpetual JPM pr H move Attractive Weaker valuation / low yield-to-call

American Express 5.2% fixed to call; then

L+ 342.8bps025816BJ7 move Attractive

Preference for longer call protection

/ higher reset spread

Capital One Financial 5.55% fixed to call

date; thereafter L+380bps14040HBH7 move Attractive

Preference for longer call protection

/ higher reset spread

Public Storage 5.15% perpetual PSA pr F new ---- Favor higher coupons

PS Business Parks, Inc. 5.25% perpetual PSB pr X new ---- Favor higher coupons

Unattractive ListUnattractive ListUnattractive ListUnattractive List Identifer:Identifer:Identifer:Identifer: Action:Action:Action:Action: From:From:From:From: Rationale:Rationale:Rationale:Rationale:

Digital Realty Trust 5.25% perpetual DLR pr J new ---- Low coupon

Public Storage 5.05% perpetual PSA pr G new ---- Low coupon

PS Business Parks, Inc. 5.20% perpetual PSB pr Y new ---- Low coupon

Refinanceable L istRef inanceable L istRef inanceable L istRef inanceable L ist Identifer:Identifer:Identifer:Identifer: Action:Action:Action:Action: From:From:From:From: Rationale:Rationale:Rationale:Rationale:

Aegon 6.500% perpetual AED removed ---- Called and redeemed

ING Groep NV 6.375% perpetual ISF removed ---- Called and redeemed

Public Storage 6.00% perpetual PSA pr Z removed ---- Called and redeemed

Source: UBS



Top Picks - Highlighted preferreds

Security NameSecurity NameSecurity NameSecurity Name Symbol/Symbol/Symbol/Symbol/ Last Last Last Last NextNextNextNext YTWYTWYTWYTW YTM / CYYTM / CYYTM / CYYTM / CY YTCYTCYTCYTC EffEffEffEff

CUSIPCUSIPCUSIPCUSIP PricePricePricePrice Call DateCall DateCall DateCall Date (%)(%)(%)(%)1111

(%)(%)(%)(%)2222 (%)(%)(%)(%) DurDurDurDur

3333

Attractive $1000 par f ixed-to-floating couponAttractive $1000 par f ixed-to-floating couponAttractive $1000 par f ixed-to-floating couponAttractive $1000 par f ixed-to-floating coupon (Not NRA eligible, pays qualified dividend)

060505EH3 $108.60 9/5/2024 4.40% 5.60% 4.40% 4.6

060505EN0 $108.60 3/17/2025 4.30% 5.60% 4.30% 5.0

172967KM2 $110.10 8/15/2026 4.60% 6.00% 4.60% 5.9

38148BAC2 $104.60 11/10/2026 4.50% 5.60% 4.50% 6.3

Attractive $25 par f ixed-rate coupon Attractive $25 par f ixed-rate coupon Attractive $25 par f ixed-rate coupon Attractive $25 par f ixed-rate coupon

BHFAL $26.00 9/15/2023 5.30% 6.00% 5.30% 8.6

DLR K $26.10 3/13/2024 4.80% 5.60% 4.80% 8.6

BHFAP $26.70 3/25/2024 5.00% 6.20% 5.00% 7.5

NEE N $26.10 6/15/2024 4.80% 5.40% 4.80% 10.0

Digital Realty Trust 5.85% perpetual**

Brighthouse Financial Inc 6.60% perpetual++++

Nextera Energy Capital 5.65% due 3/1/2079*

Bank of America 6.25% fixed to call date;

thereafter 3mo LIBOR+370.5bps

Bank of America 6.10% fixed to call date

then 3m LIBOR+389.8bps

Citigroup 6.25% fixed to call date; thereafter

3mo LIBOR+451.7bps

Goldman Sachs Group, Inc. 5.30% fixed to

call date; thereafter 3mo LIBOR+383.4bps

Brighthouse Financial Inc 6.25% 9/15/2058*

Source: Bloomberg, UBS, as of 9 July 2019

*NRA-eligible, pays fully taxable interest income. **Not NRA-eligible, pays fully taxable interest income. ++++ Not NRA eligible, pays qualified dividend income 1YTW = "yield to worst" is the lowest estimated yield among possible redemption date scenarios. 2YTM calculation for F2Fs uses assumed LIBOR rates based on the forward curve through Bloomberg analytics. CY for fixed rate coupon is current yield. 3Duration is calculated using Bloomberg analytics.



Floor coupon floaters Floating-rate preferreds with coupon floors and low reset spreads could trade with low "fixed" coupons, since the combination of low reset spread and coupon floor could create a high hurdle for the coupon to begin floating. There-fore, the floater may behave more like a low coupon fixed-rate preferred, with those low coupons comprising the only compensation for both credit and interest rate risk. So they could have high sensitivity to interest rates and to credit spreads. Still, their "quirkiness" could provide diversification benefits from a portfolio management standpoint. Secu r ity NameSecu r ity NameSecu r ity NameSecu r ity Name Symbo l/Symbo l/Symbo l/Symbo l/ F ir st F ir st F ir st F ir st Reset Reset Reset Reset (a) Calcu lated (a) Calcu lated (a) Calcu lated (a) Calcu lated (b ) Coupon (b ) Coupon (b ) Coupon (b ) Coupon (a) - (b )(a) - (b )(a) - (b )(a) - (b ) Last Last Last Last D iscoun t D iscoun t D iscoun t D iscoun t Cu r r en t Cu r r en t Cu r r en t Cu r r en t EffEf fEf fEf f

CUSIPCUSIPCUSIPCUSIP Call DateCall DateCall DateCall Date Sp r eadSp r eadSp r eadSp r ead Coupon (%)Coupon (%)Coupon (%)Coupon (%) F loo r (%)F loo r (%)F loo r (%)F loo r (%) D iffer enceD iffer enceD iffer enceD iffer ence P r iceP r iceP r iceP r ice to Parto Parto Parto Par YieldYieldYieldYield Du rDu rDu rDu r

$25 p ar$25 p ar$25 p ar$25 p ar

Aegon 3mo LIBOR+87.5bps;4% floor AEB 12/15/2010 87.5 3.22 4.00 (0.78) 22.70 -9% 4.40 6.2

Bank of America 3mo LIBOR + 35bps; 4% floor BAC pr E 11/15/2011 35 2.69 4.00 (1.31) 22.50 -10% 4.40 7.2

Bank of America 3mo LIBOR + 50bps; 4% floor BML pr L 5/21/2012 50 2.84 4.00 (1.16) 21.70 -13% 4.60 7.7

Bank of America 3mo LIBOR + 65bps; 3% floor BML pr H 11/28/2009 65 2.99 3.00 (0.01) 19.50 -22% 4.10 4.5

Bank of America 3mo LIBOR + 75bps; 3% floor BML pr G 11/28/2009 75 3.09 3.00 0.09 19.90 -20% 4.10 4.2

Bank of America 3mo LIBOR + 75bps; 4% floor BML pr J 11/28/2010 75 3.09 4.00 (0.91) 22.10 -12% 4.50 6.8

Goldman Sachs 3mo LIBOR + 67bps; 4.0% floor GS pr D 5/24/2011 67 3.01 4.00 (0.99) 20.60 -18% 4.80 7.5

Goldman Sachs 3mo LIBOR + 75bps; 3.75% floor GS pr A 4/25/2010 75 3.09 3.75 (0.66) 19.80 -21% 4.70 6.6

Goldman Sachs 3mo LIBOR + 75bps; 4.0% floor GS pr C 10/31/2010 75 3.09 4.00 (0.91) 20.70 -17% 4.80 7.3

MetLife, Inc. 3mo LIBOR+100bps; 4% floor MET pr A 9/15/2010 100 3.34 4.00 (0.66) 23.60 -6% 4.20 5.1

Morgan Stanley 3mo LIBOR+70bps; 4% floor MS pr A 7/15/2011 70 3.04 4.00 (0.96) 20.90 -16% 4.80 7.5

SunTrust Banks 3mo LIBOR +53bps; 4% floor STI pr A 9/15/2011 53 2.87 4.00 (1.13) 22.90 -8% 4.40 6.7

US Bancorp 3mo LIBOR+60bps; 3.5% floor USB pr H 4/15/2011 60 2.94 3.50 (0.56) 20.00 -20% 4.40 6.6

Aver ageAver ageAver ageAver age 4.484.484.484.48

$1000 par$1000 par$1000 par$1000 par

US Bancorp 3mo LIBOR+102bps; 3.5% floor 902973866 4/15/2011 102 3.36 3.50 (0.14) 79.81 -20% 4.50 5.0

Goldman Sachs 3mo LIBOR + 77bps; 4.0% floor 381427AA1 6/1/2012 76.75 3.11 4.00 (0.89) 81.00 -19% 4.90 7.3

Goldman Sachs 3mo LIBOR + 77bps; 4.0% floor 38144QAA7 9/1/2012 77 3.11 4.00 (0.89) 80.20 -20% 5.00 7.2

Aver ageAver ageAver ageAver age 4.804.804.804.80

Source: Bloomberg, UBS, as of 09 July 2019



Attractive list

Issuer CUSIP Maturity

Security NameSecurity NameSecurity NameSecurity Name Symbol/Symbol/Symbol/Symbol/ Last Last Last Last NextNextNextNext YTCYTCYTCYTC YTMYTMYTMYTM YTM (f)YTM (f)YTM (f)YTM (f) CYCYCYCY IssuerIssuerIssuerIssuer

CUSIPCUSIPCUSIPCUSIP PricePricePricePrice Call DateCall DateCall DateCall Date (%)(%)(%)(%) (%)(%)(%)(%)1111 (%)(%)(%)(%)2222 (%)(%)(%)(%) RiskRiskRiskRisk

Subordinated notes Subordinated notes Subordinated notes Subordinated notes (NRA3 eligible, pays fully-taxable interest income)

Brighthouse Financial IncBrighthouse Financial IncBrighthouse Financial IncBrighthouse Financial Inc

Brighthouse Financial Inc 6.25% 9/15/2058 BHFAL $25.99 9/15/2023 5.30 6.00 n/a 6.00 Medium

Hartford FinancialHartford FinancialHartford FinancialHartford Financial

HGH $28.37 4/15/2022 2.70 6.70 6.70 6.90 Medium

Nextera Energy CapitalNextera Energy CapitalNextera Energy CapitalNextera Energy Capital

newnewnewnew Nextera Energy Capital 5.65% due 3/1/2079 NEE pr N $26.08 6/15/2024 4.80 5.40 n/a 5.40 Medium

Unum GroupUnum GroupUnum GroupUnum Group

Unum Group 6.25% 6/15/2058 UNMA $26.39 6/15/2023 4.70 5.90 n/a 5.90 Medium

Floating-rate or Fixed-to-floating rate, perpetual preferredsFloating-rate or Fixed-to-floating rate, perpetual preferredsFloating-rate or Fixed-to-floating rate, perpetual preferredsFloating-rate or Fixed-to-floating rate, perpetual preferreds (Not NRA3 eligible, pays qualified dividend income)

$1000 par$1000 par$1000 par$1000 par

Bank of America CorpBank of America CorpBank of America CorpBank of America Corp

060505EH3 $108.55 9/5/2024 4.40 5.60 5.50 5.80 Medium

060505EL4 $110.70 10/23/2024 4.20 5.90 5.80 5.90 Medium

060505EN0 $108.63 3/17/2025 4.40 5.70 5.60 5.60 Medium

060505EU4 $112.25 3/10/2026 4.20 6.00 5.90 5.60 Medium

Citigroup Inc.Citigroup Inc.Citigroup Inc.Citigroup Inc.

172967KM2 $110.07 8/15/2026 4.50 6.10 6.00 5.70 Medium

Goldman Sachs Group Inc/TheGoldman Sachs Group Inc/TheGoldman Sachs Group Inc/TheGoldman Sachs Group Inc/The

changechangechangechange 38148BAC2 $104.63 11/10/2026 4.50 5.60 5.60 5.10 Medium

PNC Financial ServicesPNC Financial ServicesPNC Financial ServicesPNC Financial Services

693475AK1 $106.62 8/1/2021 3.40 5.80 5.60 6.30 Medium

Wells FargoWells FargoWells FargoWells Fargo

949746RN3 $108.93 6/15/2025 4.10 5.70 5.60 5.40 Low

Floating-rate or Fixed-to-floating rate, perpetual preferreds Floating-rate or Fixed-to-floating rate, perpetual preferreds Floating-rate or Fixed-to-floating rate, perpetual preferreds Floating-rate or Fixed-to-floating rate, perpetual preferreds (Not NRA3 eligible, pays qualified dividend income)

$25 par$25 par$25 par$25 par

KeyCorpKeyCorpKeyCorpKeyCorp

KEY pr I $27.96 12/15/2026 4.30 5.50 5.40 5.50 Medium

Citigroup 6.25% fixed to call date; thereafter 3mo

LIBOR+451.7bps

KeyCorp 6.125% fixed to call date; thereafter 3mo LIBOR

+389.2bps

Hartford Financial 7.875% fixed to call date; then 3mo

LIBOR+559.6bps; matures 4/15/2042

Bank of America 6.30% fixed to call date; thereafter 3mo

LIBOR+455.3bps

Goldman Sachs Group, Inc. 5.30% fixed to call date;


Wells Fargo & Co. 5.875% fixed to call date; thereafter

3mo LIBOR+399bps


LIBOR+370.5bps


LIBOR+417.4bps

PNC Financial Services 6.75% fixed to call date; thereafter

3mo LIBOR+367.8bps

Bank of America 6.10% fixed to call date thereafter 3mo

LIBOR+389.8bps

Preferred securities on the Attractive List are those that we view favorably based on (1) fundamental credit quality, (2) valuation and (3) structure (security characteristics). To mitigate rate and spread volatility we favor preferreds that pay high fixed coupons. When it comes to fixed-to-floating rate preferreds, we favor those with call protection, high coupons, high back-end spreads, and consider floating-rate calculation in the absence of LIBOR.* The preferreds on this list are issued by companies that we consider to be "core issuers" within the preferred sector that have investment grade senior debt ratings. Note: the credit rating agencies typically notch the rating of preferred securities lower than that of the issuer rating. Therefore, these core issuers may have non-investment grade rated preferreds.



Attractive list





Morgan StanleyMorgan StanleyMorgan StanleyMorgan Stanley

MS pr F $27.76 1/15/2024 4.20 5.80 5.70 6.20 Medium

MS pr I $27.21 10/15/2024 4.50 5.60 5.50 5.90 Medium

MS pr E $28.28 10/15/2023 3.80 6.00 5.90 6.30 Medium

changechangechangechange MS pr K $26.80 4/15/2027 4.70 5.40 5.40 5.40 Medium

PNC Financial ServicesPNC Financial ServicesPNC Financial ServicesPNC Financial Services

PNC pr P $27.14 5/1/2022 3.40 5.90 5.80 5.60 Medium

State Street CorpState Street CorpState Street CorpState Street Corp

STT pr G $26.71 3/15/2026 4.20 5.40 5.30 5.00 Low


WFC pr R $28.57 3/15/2024 3.40 5.40 5.20 5.80 Low

Fixed rate, perpetual preferreds Fixed rate, perpetual preferreds Fixed rate, perpetual preferreds Fixed rate, perpetual preferreds (Not NRA3 eligible, pays qualified dividend income)


Bank of America Corp. 6.00% perpetual BAC pr B $26.93 5/16/2023 4.00 5.60 n/a 5.60 Medium

Brighthouse Financial IncBrighthouse Financial IncBrighthouse Financial IncBrighthouse Financial Inc

Brighthouse Financial Inc 6.60% perpetual BHFAP $26.77 3/25/2024 5.00 6.20 n/a 6.20 Medium

Capital One Financial CoCapital One Financial CoCapital One Financial CoCapital One Financial Co

Capital One Financial 6.00% perpetual COF pr H $26.50 12/1/2021 3.60 5.70 n/a 5.70 Medium

Hartford FinancialHartford FinancialHartford FinancialHartford Financial

Hartford Financial 6.00% perpetual HIG pr G $27.30 11/15/2023 3.80 5.50 n/a 5.50 Medium

JP Morgan Chase & Co.JP Morgan Chase & Co.JP Morgan Chase & Co.JP Morgan Chase & Co.

J.P. Morgan Chase & Co. 6.00% perpetual JPM pr C $27.25 3/1/2024 4.00 5.60 n/a 5.50 Low

KKR & Co. LPKKR & Co. LPKKR & Co. LPKKR & Co. LP

KKR & Co. 6.50% perpetual KKR pr B $26.70 9/15/2021 3.40 6.10 n/a 6.10 Medium

MLP / LLC Preferreds MLP / LLC Preferreds MLP / LLC Preferreds MLP / LLC Preferreds (K-1 LP, Not NRA3 eligible, Pay-fully taxable dividend income)Apollo Global Management, LLCApollo Global Management, LLCApollo Global Management, LLCApollo Global Management, LLC

Apollo Global Management 6.375% perpetual APO pr A $25.86 3/15/2022 5.20 6.20 n/a 6.20 Medium

Apollo Global Management 6.375% perpetual APO pr B $25.99 3/15/2023 5.30 6.20 n/a 6.10 Medium

Morgan Stanley 7.125% fixed to call date; thereafter 3mo

LIBOR+432bps

PNC Financial Services 6.125% fixed to call date;


Wells Fargo 6.625% fixed to 3/2024; thereafter 3mo

LIBOR+369bps


LIBOR+349.1bps


LIBOR+394bps


LIBOR+370.8bps

State Street Corp 5.35% fixed to call date; thereafter 3mo

LIBOR+370.9bps



Attractive list





REIT Preferred Securities REIT Preferred Securities REIT Preferred Securities REIT Preferred Securities (Not NRA3 eligible, Pay-fully taxable dividend income)

Digital RealtyDigital RealtyDigital RealtyDigital Realty

newnewnewnew Digital Realty Trust 5.85% perpetual DLR pr K $26.06 3/13/2024 4.80 5.60 n/a 5.60 Medium

Public StoragePublic StoragePublic StoragePublic Storage

newnewnewnew Public Storage 5.60% perpetual PSA pr H $26.34 3/11/2024 4.30 5.30 n/a 5.30 Low

Callable currently or within 2 yearsCallable currently or within 2 yearsCallable currently or within 2 yearsCallable currently or within 2 years

Senior notes Senior notes Senior notes Senior notes (NRA3 eligible, pays fully-taxable interest income)

Entergy CorpEntergy CorpEntergy CorpEntergy Corp

Entergy New Orleans 5.50% 4/1/2066 ENO $26.11 4/1/2021 2.90 5.20 n/a 5.30 Medium


$1000 par$1000 par$1000 par$1000 par

Bank of New York Mellon CorpBank of New York Mellon CorpBank of New York Mellon CorpBank of New York Mellon Corp

064058AD2 $101.15 6/20/2020 3.50 5.70 5.50 4.90 Low


172967HZ7 $100.63 11/15/2019 3.50 6.40 6.20 5.80 Medium

172967JK8 $101.05 3/27/2020 4.10 6.30 6.10 5.80 Medium

172967JZ5 $102.05 8/15/2020 3.90 6.30 6.10 5.80 Medium

172967KD2 $102.73 11/15/2020 3.90 6.60 6.40 6.00 Medium


38148BAB4 $100.62 5/10/2020 4.40 6.20 6.00 5.30 Medium


46625HKK5 $101.22 5/1/2020 3.60 6.10 5.80 5.20 Low


617474AA9 $101.24 7/15/2020 4.10 6.10 5.90 5.50 Medium

Bank of New York Mellon 4.95% fixed to call date; then

3mo LIBOR+342bps


LIBOR+447.8bps


LIBOR+381bps


LIBOR+409.5bps

J.P. Morgan Chase & Co. 5.30% fixed to call date;

thereafter 3mo LIBOR+380bps


LIBOR+409.3bps




LIBOR+405.9bps



Attractive list






857477AQ6 $101.91 9/15/2020 3.50 5.80 5.60 5.10 Low

Suntrust BankSuntrust BankSuntrust BankSuntrust Bank

867914BJ1 $100.88 12/15/2019 3.10 6.20 5.90 5.60 Medium



changechangechangechange Goldman Sachs 3mo LIBOR + 67bps; 4.0% floor GS pr D $20.62 Anytime n/a 4.00 n/a 4.80 Medium

changechangechangechange Goldman Sachs 3mo LIBOR + 75bps; 4.0% floor GS pr C $20.70 Anytime n/a 4.00 n/a 4.80 Medium


changechangechangechange Morgan Stanley 3mo LIBOR+70bps; 4% floor MS pr A $20.91 Anytime n/a 4.00 n/a 4.80 Medium



Capital One Financial 6.20% perpetual COF pr F $25.96 12/1/2020 3.80 6.00 n/a 6.00 Medium


Citigroup 6.30% perpetual C pr S $26.42 2/12/2021 3.20 6.00 n/a 6.00 Medium

Huntington BancsharesHuntington BancsharesHuntington BancsharesHuntington Bancshares

Huntington Bancshares 6.25% perpetual HBANO $26.10 4/15/2021 3.60 6.00 n/a 6.00 Medium


Wells Fargo & Co. 6.00% perpetual WFC pr V $26.14 12/15/2020 3.00 5.80 n/a 5.70 Low



changechangechangechange Public Storage 5.40% perpetual PSA pr B $25.76 1/20/2021 3.40 5.30 n/a 5.20 Low

Source: Bloomberg, UBS. Note: All financial information is as of 7/9/191

2

3

* See LIBOR phase-out could cause coupon conundrum, 24 Sept 2018

State Street Corp 5.25% fixed to call date; thereafter 3mo

LIBOR+359.7bps

NRA eligible pertains to the dividend tax treatment of the security for non resident alien accounts. Those preferreds labeled as "not

NRA eligible" may be subject to dividend withholding tax of up to 30%, which may be eligible for reduction under specific country

tax treaties.

For fixed-to-float coupon preferreds, the YTM(f) calculation uses assumed LIBOR rates based on the forward curve.

For fixed-to-float coupon preferreds, the YTM calculation uses a constant rate based on current LIBOR.

Suntrust Bank 5.625% fixed to call date; thereafter 3mo

LIBOR+386bps



Unattractive list




Allstate CorpAllstate CorpAllstate CorpAllstate Corp

020002BB6 $105.63 8/15/2023 4.20 5.10 n/a 5.40 Medium

ALL pr B $26.01 1/15/2023 3.80 5.20 n/a 4.90 Medium

Nextera Energy Nextera Energy Nextera Energy Nextera Energy

65339KAV2 $95.18 12/1/2027 5.50 5.00 n/a 5.00 Medium

Prudential Financial IncPrudential Financial IncPrudential Financial IncPrudential Financial Inc

744320AL6 $107.65 9/15/2022 3.30 5.80 n/a 5.50 Medium

744320AM4 $107.25 6/15/2023 3.60 5.60 n/a 5.20 Medium

744320AN2 $103.91 3/15/2024 4.20 5.10 n/a 5.00 Medium

744320AV4 $105.39 5/15/2025 4.30 5.00 n/a 5.10 Medium

744320AW2 $100.69 9/15/2027 4.40 4.60 n/a 4.50 Medium

744320BF8 $108.68 9/15/2028 4.50 4.80 4.80 5.20 Medium

Southern Co Southern Co Southern Co Southern Co

Southern Co / Georgia Power 5.00% 10/1/2077 GPJA $25.68 10/1/2022 4.10 4.90 n/a 4.90 Medium


$1000 par$1000 par$1000 par$1000 par


060505ED2 $101.58 6/1/2023 4.70 5.40 5.20 5.10 Medium

060505FL3 $105.00 3/15/2028 5.20 5.20 5.20 5.60 Medium

Bank of New York Mellon CorpBank of New York Mellon CorpBank of New York Mellon CorpBank of New York Mellon Corp

064058AB6 $98.47 6/20/2023 4.80 4.80 4.70 4.60 Low

Prudential Financial Inc. 5.70% fixed to call date; then

3mo LIBOR+266.5bps; matures 9/15/2048


LIBOR+313.5bps

Allstate Corp. 5.10% fixed to call date; thereafter 3mo


Allstate Corp. 5.75% fixed to call date; thereafter 3mo



3mo LIBOR+392bps; matures 6/15/2043





Nextera Energy Capital 4.80% fixed to call date; then 3mo







LIBOR+293.1bps

Bank of New York Mellon 4.50% fixed to call date; then

3mo LIBOR+246

We may deem these preferred securities to be Unattractive for valuation reasons, or because of their structure. In general, preferreds are listed here because (1) they have low fixed-rate coupons and therefore would exhibit greater interest rate or credit spread sensitivity, or (2) they are fixed-to-floating rate coupons with a low back-end spread or a possibly weak floating-rate coupon calculation in the absence of LIBOR.* The preferreds on this list are from "core issuers" that have investment grade senior debt ratings, therefore, fundamental credit drivers are not a consideration unless specified. Note: credit rating agencies notch the ratings of preferred securities lower than that of the issuer rating. Threfore, core issuers may have non-investment grade rated preferreds.



Unattractive list




Citigroup IncCitigroup IncCitigroup IncCitigroup Inc

172967GR6 $101.20 5/15/2023 4.90 5.70 5.50 5.30 Medium

172967HQ7 $104.50 5/15/2024 5.20 5.70 5.50 6.00 Medium

172967JM4 $105.12 5/15/2025 4.90 5.90 5.80 5.70 Medium

172967GD7 $104.02 1/30/2023 4.60 6.10 n/a 5.70 Medium

172967GF2 $103.73 2/15/2023 4.70 6.20 n/a 5.70 Medium

Edison InternationalEdison InternationalEdison InternationalEdison International

842400FU2 $99.25 2/1/2022 6.50 6.60 6.40 6.30 Medium

Fifth Third BancorpFifth Third BancorpFifth Third BancorpFifth Third Bancorp

316773CR9 $98.85 9/30/2019 9.00 5.60 5.30 4.90 Medium

316773CM0 $99.37 6/30/2023 5.20 5.40 5.20 5.10 Medium


38148BAD0 $96.24 11/10/2022 6.20 5.40 5.20 5.20 Medium


48128BAD3 $97.07 11/1/2022 5.50 5.00 4.90 4.80 Low

MetLife, IncMetLife, IncMetLife, IncMetLife, Inc

59156RBT4 $106.53 3/15/2028 4.90 5.20 5.10 5.50 Medium


857477BA0 $101.53 12/15/2023 5.20 5.00 4.80 5.50 Low


Citigroup IncCitigroup IncCitigroup IncCitigroup Inc

C pr J $27.83 9/30/2023 4.20 5.80 n/a 6.40 Medium

C pr K $27.73 11/15/2023 4.40 6.00 n/a 6.20 Medium

Edison Int'l (So Cal Ed) 6.25% fixed to call date; then 3mo

L+420bps


LIBOR+406.8bps


LIBOR+423bps

MetLife, Inc. 5.875% fixed to call date; thereafter 3mo

LIBOR+295.9bps


LIBOR+346.6bps


LIBOR+390.5bps

Fifth Third Bancorp 5.10% fixed to call date; thereafter

3mo LIBOR+303.3bps

J.P. Morgan Chase & Co. 4.625% fixed to call date; then

3mo LIBOR+258bps


LIBOR+342.3bps

Fifth Third Bancorp 4.900% fixed to call date; thereafter

3mo LIBOR+312.9bps


LIBOR+404bps


LIBOR+413bps



State Street Corp 5.625% fixed to call date; thereafter

3mo LIBOR+253.9bps



Unattractive list





SCE pr H $24.57 3/15/2024 6.30 5.50 n/a 5.80 Medium

SCE pr J $24.24 9/15/2025 6.10 5.60 n/a 5.50 Medium

SCE pr K $24.31 3/15/2026 6.00 6.10 n/a 5.60 Medium



Capital One Financial 5.20% perpetual COF pr G $25.35 12/1/2021 4.80 5.20 n/a 5.10 Medium


Edison Int'l (SCE Trust II) 5.10% perpetual SCE pr G $23.04 Anytime n/a 5.60 n/a 5.50 Medium

Edison Int'l (SCE Trust VI) 5.00% perpetual SCE pr L $22.85 6/26/2022 8.40 5.50 n/a 5.50 Medium

Southern CompanySouthern CompanySouthern CompanySouthern Company

Southern Co / Alabama Power 5.00% perpetual ALP pr Q $25.98 10/1/2022 3.70 4.80 n/a 4.80 Medium

US BancorpUS BancorpUS BancorpUS Bancorp

US Bancorp 5.15% perpetual USB pr O $25.29 Anytime -7.80 5.10 n/a 5.10 Low

Wells Fargo Corp.Wells Fargo Corp.Wells Fargo Corp.Wells Fargo Corp.

Wells Fargo & Co. 5.20% perpetual WFC pr N $25.04 Anytime 5.50 5.20 n/a 5.20 Low

Wells Fargo & Co. 5.125% perpetual WFC pr O $25.14 Anytime 2.20 5.10 n/a 5.10 Low

Wells Fargo & Co. 5.25% perpetual WFC pr P $25.16 Anytime -0.70 5.20 n/a 5.20 Low


Digital Realty TrustDigital Realty TrustDigital Realty TrustDigital Realty Trust

newnewnewnew Digital Realty Trust 5.25% perpetual DLR pr J $25.08 8/7/2022 5.20 5.20 n/a 5.20 Medium

PS Business Parks IncPS Business Parks IncPS Business Parks IncPS Business Parks Inc

PS Business Parks, Inc. 5.20% perpetual PSB pr W $25.04 10/20/2021 5.20 5.20 n/a 5.20 Medium

newnewnewnew PS Business Parks, Inc. 5.20% perpetual PSB pr Y $24.94 12/7/2022 5.30 5.20 n/a 5.20 Medium


Public Storage 5.125% perpetual PSA pr C $25.24 5/17/2021 4.60 5.10 n/a 5.10 Low

Public Storage 4.95% perpetual PSA pr D $24.89 7/20/2021 5.30 5.00 n/a 5.00 Low

Public Storage 4.90% perpetual PSA pr E $24.91 10/14/2021 5.10 4.90 n/a 4.90 Low

newnewnewnew Public Storage 5.05% perpetual PSA pr G $25.21 8/9/2022 4.80 5.00 n/a 5.00 Low


1

2

3

* See LIBOR phase-out could cause coupon conundrum, 24 Sept 2018

Edison Int'l (SCE Trust V) 5.45% fixed to call date; then

3mo L+379bps

Edison Int'l (SCE Trust IV) 5.375% fixed to call date; then

3mo L+313bps

Edison Int'l (SCE Trust III) 5.75% fixed to call date; then

3mo L+299bps

NRA eligible pertains to the dividend tax treatment of the security for non resident alien accounts. Those preferreds labeled as

"not NRA eligible" may be subject to dividend withholding tax of up to 30%, which may be eligible for reduction under specific

country tax treaties.

For fixed-to-float coupon preferreds, the YTM calculation uses a constant rate based on current LIBOR. For fixed-to-float coupon preferreds, the YTM(f) calculation uses assumed LIBOR rates based on the forward curve.



Refinanceable list

Security NameSecurity NameSecurity NameSecurity Name Symbol/Symbol/Symbol/Symbol/ Last Last Last Last CallableCallableCallableCallable YTCYTCYTCYTC YTMYTMYTMYTM DistanceDistanceDistanceDistance CYCYCYCY IssuerIssuerIssuerIssuer

CUSIPCUSIPCUSIPCUSIP PricePricePricePrice SinceSinceSinceSince (%)(%)(%)(%) (%)(%)(%)(%)1111 to B-E to B-E to B-E to B-E 4444 (%)(%)(%)(%) RiskRiskRiskRisk

Enhanced Trust Preferred Securities affected by the Dodd-Frank Act (NRAEnhanced Trust Preferred Securities affected by the Dodd-Frank Act (NRAEnhanced Trust Preferred Securities affected by the Dodd-Frank Act (NRAEnhanced Trust Preferred Securities affected by the Dodd-Frank Act (NRA3333 eligible, pays fully-taxable interest income) eligible, pays fully-taxable interest income) eligible, pays fully-taxable interest income) eligible, pays fully-taxable interest income)Bank of America CorpBank of America CorpBank of America CorpBank of America Corp

Bank of America ICONs 6.450% 12/15/66 MER pr K $26.49 10/18/2018 -68.70 6.10 10.6 6.10 Medium

Traditional Trust Preferred Securities not affected by the Dodd-Frank Act (NRATraditional Trust Preferred Securities not affected by the Dodd-Frank Act (NRATraditional Trust Preferred Securities not affected by the Dodd-Frank Act (NRATraditional Trust Preferred Securities not affected by the Dodd-Frank Act (NRA3333 eligible, pays fully-taxable interest income) eligible, pays fully-taxable interest income) eligible, pays fully-taxable interest income) eligible, pays fully-taxable interest income)Citigroup Inc.Citigroup Inc.Citigroup Inc.Citigroup Inc.

Citigroup Capital XIII floater; 3mo L+637bps 10/30/40 C pr N $27.91 10/30/2015 -96.70 8.80 13.0 8.00 Medium

Senior notes Senior notes Senior notes Senior notes (NRA3 eligible, pays fully-taxable interest income)

MFA Financial IncMFA Financial IncMFA Financial IncMFA Financial Inc

MFA Financial Inc 8.00% 4/15/42 MFO $26.24 4/15/2017 -80.40 7.70 5.0 7.60 Medium

United States Cellular CorpUnited States Cellular CorpUnited States Cellular CorpUnited States Cellular Corp

United States Cellular Corp 6.95% 5/15/60 UZA $25.42 5/15/2016 -10.70 6.90 2.2 6.80 Medium


PPL CorpPPL CorpPPL CorpPPL Corp

PPL Capital Funding Inc. 5.90% 4/30/2073 PPX $25.53 4/30/2018 -7.20 5.80 1.9 5.80 Medium

Prudential Financial IncPrudential Financial IncPrudential Financial IncPrudential Financial Inc

Prudential Financial Inc. 5.70% 3/15/53 PRH $25.57 3/15/2018 -20.70 5.60 3.5 5.60 Medium


$1000 par$1000 par$1000 par$1000 par


partial call 38148BAA6 $100.16 5/10/2019 2.90 6.20 0.3 6.40 Medium 6/12/2019


partial call 46625HHA1 $100.63 4/30/2018 3.50 5.80 1.2 6.00 Low 9/27/2018


949746PM7 $100.79 3/15/2018 1.10 6.10 1.5 6.10 Low


Allstate CorpAllstate CorpAllstate CorpAllstate Corp

Allstate Corp. 6.625% perpetual ALL pr D $27.17 4/15/2019 -91.90 6.10 14.9 6.10 Medium

Allstate Corp. 6.625% perpetual ALL pr E $25.55 4/15/2019 -2.80 6.50 3.8 6.50 Medium

BB&T CorpBB&T CorpBB&T CorpBB&T Corp

BB&T Corp. 5.85% perpetual BBT pr D $25.35 6/1/2017 -0.10 5.80 1.1 5.80 Low

BB&T Corp. 5.625% perpetual BBT pr E $25.37 8/1/2017 -0.50 5.60 1.2 5.50 Low


featuredfeaturedfeaturedfeatured Bank of America Corp. 6.625% perpetual BAC pr W $25.41 9/9/2019 -0.10 6.60 1.2 6.50 Medium



J.P. Morgan Chase & Co. 7.90% fixed to call date;

thereafter 3mo LIBOR+347bps

Wells Fargo & Co. 7.98% fixed to call date; thereafter 3mo

LIBOR+377bps

We deem these currently-callable, preferreds to be Refinanceable, with an "even money" likelihood of being called at anytime. Traditional relative value measures such as YTC or option adjusted spread (OAS) are not applicable since they can result in large, negative values (distorted by annualization). The distance to "break-even" (measured in months) is more meaningful and is a function of the price of the preferred, relative to the amount and frequency of the dividend. Although it's a rough estimate,generally speaking, the lower the distance to break-even, the more fair or cheaper the pricing, and current holders may opt to "clip the coupon." We highlight "featured" refinanceables as those with low or negative distance to B-E. NOTE: small changes in current pricing may produce large changes in distance to break-even and thus meaningfully alter the value proposition.



Refinanceable list





Capital One Financial 6.00% perpetual COF pr P $25.52 9/1/2017 -12.50 5.90 2.2 5.90 Medium

Capital One Financial 6.25% perpetual COF pr C $25.47 9/1/2019 -2.50 6.20 1.8 6.10 Medium

Goldman Sachs Group IncGoldman Sachs Group IncGoldman Sachs Group IncGoldman Sachs Group Inc

called Goldman Sachs Group, Inc. 6.20% perpetual GS pr B $25.35 10/31/2010 2.60 2.60 0.1 6.10 Medium


J.P. Morgan Chase & Co. 6.30% perpetual JPM pr E $25.76 9/1/2019 -10.20 6.20 3.4 6.10 Low


Morgan Stanley 6.625% perpetual MS pr G $25.53 7/15/2019 -2.20 6.50 3.5 6.50 Medium

Regions Financial CorpRegions Financial CorpRegions Financial CorpRegions Financial Corp

Regions Financial Corp. 6.375% perpetual RF pr A $25.56 12/15/2017 -3.50 6.30 2.9 6.20 Medium


Wells Fargo & Co. 6.00% perpetual WFC pr T $25.49 9/15/2019 -2.70 5.90 2.6 5.90 Low

Fixed Rate Non-U.S. QDI PreferredsFixed Rate Non-U.S. QDI PreferredsFixed Rate Non-U.S. QDI PreferredsFixed Rate Non-U.S. QDI Preferreds (NRA3 eligible, Not DRD eligible, pays qualified dividend income (for individuals))

Aegon NVAegon NVAegon NVAegon NV

Aegon 6.375% perpetual AEH $25.90 6/15/2015 -34.80 6.20 5.5 6.20 Medium

Deutsche Bank AGDeutsche Bank AGDeutsche Bank AGDeutsche Bank AG

Deutsche Bank Contingent Capital Trust II 6.55% DXB $24.40 5/23/2017 n/a 6.80 -6.1 6.70 Medium

Deutsche Bank Contingent Capital Trust V 8.05% DKT $25.04 6/30/2018 8.40 8.10 -0.3 8.00 Medium

HSBC Holdings PLCHSBC Holdings PLCHSBC Holdings PLCHSBC Holdings PLC

HSBC Holdings plc 6.20% perpetual HSBC pr A $26.42 12/16/2010 -62.00 5.90 9.8 5.90 Medium

ING Groep NVING Groep NVING Groep NVING Groep NV

ING Groep NV 6.125% perpetual ISG $26.09 1/15/2011 -10.40 5.90 8.1 5.90 Medium


Ashford Hospitality TrustAshford Hospitality TrustAshford Hospitality TrustAshford Hospitality Trust

partial call Ashford Hospitality Trust 8.45% perpetual AHT pr D $23.50 7/18/2012 n/a 9.00 -8.8 9.00 Medium 11/8/2017

Digital Realty TrustDigital Realty TrustDigital Realty TrustDigital Realty Trust

Digital Realty Trust Inc. 5.875% perpetual DLR pr G $25.28 4/9/2018 -6.70 5.80 1.4 5.80 Medium

Kimco Realty CorpKimco Realty CorpKimco Realty CorpKimco Realty Corp

Kimco Realty Corp. 6.00% perpetual KIM pr I $25.25 3/20/2017 -10.10 5.90 1.8 5.90 Medium

Kimco Realty 5.50% perpetual KIM pr J $25.08 7/25/2017 -0.60 5.50 0.4 5.50 Medium

featuredfeaturedfeaturedfeatured Kimco Realty 5.6250% perpetual KIM pr K $25.04 12/7/2017 2.10 5.60 0.0 5.60 Medium

PS Business ParksPS Business ParksPS Business ParksPS Business Parks

PS Business Parks, Inc. 5.75% perpetual PSB pr U $25.75 9/14/2017 -30.40 5.60 5.0 5.60 Medium

featuredfeaturedfeaturedfeatured PS Business Parks, Inc. 5.70% perpetual PSB pr V $25.57 3/14/2018 -21.80 5.60 3.9 5.60 Medium



Refinanceable list





featuredfeaturedfeaturedfeatured Public Storage 5.6250% perpetual PSA pr U $25.49 6/15/2017 -18.30 5.50 3.3 5.50 Low

Public Storage 5.375% perpetual PSA pr V $25.18 9/20/2017 -2.00 5.40 0.7 5.30 Low

SITE Centers (fka DDR) Corp. SITE Centers (fka DDR) Corp. SITE Centers (fka DDR) Corp. SITE Centers (fka DDR) Corp.

SITE Centers (fka DDR) Corp. 6.250% perpetual SITC pr K $25.66 4/9/2018 -31.30 6.10 4.8 6.10 Medium

SL Green Realty CorpSL Green Realty CorpSL Green Realty CorpSL Green Realty Corp

SL Green Realty Corp. 6.50% perpetual SLG pr I $26.02 8/10/2017 -47.80 6.20 7.3 6.20 Medium

Vornado Realty TrustVornado Realty TrustVornado Realty TrustVornado Realty Trust

Vornado Realty Trust 5.70% perpetual VNO pr K $25.13 7/18/2017 0.30 5.70 0.4 5.70 Medium

Vornado Realty Trust 5.40% perpetual VNO pr L $25.10 1/25/2018 0.50 5.40 0.2 5.40 Medium


2

3

4 Distance to Break-Even (measured in months) is a function of the price of the preferred, relative to the amount and frequency of

the dividend.

For fixed-to-float coupon preferreds, the YTM (f) calculation uses assumed LIBOR rates based on the forward curve.For fixed-to-floatcoupon preferreds, the YTM calculation uses a constant rate based on current LIBOR.

NRA eligible pertains to the dividend tax treatment of the security for non resident alien accounts. Those preferreds labeled as

"not NRA eligible" may be subject to dividend withholding tax of up to 30%, which may be eligible for reduction under specific

country tax treaties.



Appendix

Description / Definition

Symbol / CUSIP The preferred security’s trading symbol if applicable. Otherwise, cusip is displayed.

Next Call Date

Strip Price

YTC

YTM

CY

Eff / Mod Duration

Ratings Composite

NRA Eligible

QDI

DRD

The next date that the issuer has the option to redeem the security. Once a preferred security’s first call

date has passed, the issuer can redeem the security at anytime within 30 days notice.

Terms and Abbreviations

(Current Yield). CY is the security’s current yield as calculated by the annual dividend divided by the strip

price.

Duration is calculated as the weighted average maturity of a security’s total cash flows and is used a

measure of the security’s price sensitivity to changes in yields. Effective duration takes into account how

the preferred’s embedded call option will affect the security’s future cash flows. Modified duration is

computed via the yield to worst calculation.

"NRA-eligible" means non-US holders are not subject to additional withholding and NOT NRA-eligible

means non-US holders are subject to additional withholding (unless relevant IRS forms are filed).

Dividends-received deduction. Indicates that the security is eligible for the dividends-received

deduction to U.S. corporations. This allows 70% of the dividends received from the preferred stock to

be excluded from the corporation's taxes. This tax benefit does not have an expiration date.

Qualified dividend income. Indicates that the security pays dividend income that qualifies for the reduced

dividend tax rates to individuals.

The strip price removes the accrued dividend from a preferred’s exchange-traded price to get a better

reflection of the underlying value of the security.

(Yield to Call). The YTC is the internal rate of return that equates the security’s strip price with the sum of

its total discounted cash flows to the next call date.

(Yield to Maturity). YTM is the internal rate of return that equates the security’s strip price with the sum of

its total discounted cash flows to the maturity date. In the case of perpetual preferreds, Bloomberg

analytics defaults to a maturity of 12/31/49. For fixed-to-float, adjustable-rate coupon preferreds, the YTM

calculation uses a constant rate based on current LIBOR.

The average of the preferred security's existing credit ratings by Moody’s, S&P, Fitch and DBRS. NR = not

rated.



Appendix

WMR Issuer Risk Rating Definitions

The UBS CIO issuer credit risk rating reflects the opinion of the relevant UBS CIO analyst regarding an issuer's riskof a near- to intermediate-term dividend deferral on preferred securities, and/or issuer payment default on debtobligations.

Low Risk: The issuer is considered to be in solid financial condition with strong credit fundamentals and lowlikelihood of a near- to intermediate-term dividend deferral, and/or issuer payment default. The issuer's securitiesare of generally high quality.

Medium Risk: The issuer is considered to be in adequate financial condition with satisfactory credit fundamentalsrelative to the near- to- intermediate-term dividend deferral, and / or issuer payment default. The issuer's securitiesare of medium to weaker credit quality and may have higher volatility than those of Low Risk issuers. Theseinstruments should therefore only be held by risk tolerant investors.

High Risk: The issuer is considered to be in weak financial condition with deteriorating credit fundamentals or thestate of the issuer's financial condition and credit fundamentals may be uncertain due to volatile market conditions.Sector considerations may be a dominating factor. There is a relatively higher likelihood of a near- to intermediate-term dividend deferral, and / or issuer payment default. The issuer's securities are speculative.

Note: Distinctions in the credit quality of individual security instruments may vary based on the maturity of theinstrument, as well as the relative priority within an issuer's capital structure. These distinctions will be discussed inour future credit reports, as applicable. In regions outside the United States, the UBS CIO office will map thesedistinctions to security-level risk flags.

List definitionsAttractive: Preferred securities on the Attractive List are those that we view favorably based on (1) fundamentalcredit quality, (2) valuation and (3) structure (security characteristics).

Neutral: We believe that issuers of preferreds on the Neutral List are likely to meet the coupon payment but we donot deem the preferreds to fit the definition of our Attractive or Unattractive Lists.

Unattractive: We may deem the preferred securities on the Unattractive List to be Unattractive for fundamentalreasons, for valuation reasons, or because of their structure. In the case of fundamental drivers, we have concernsthat the credit profile may deteriorate. Sector considerations may also be a factor. In the case of valuation, webelieve that price/yield levels do not adequately compensate investors for the risks.

Refinanceable: Currently callable, premium preferreds can not be analyzed with traditional relative valuecalculations such as YTC or OAS, and can not be placed on our Attractive, Neutral or Unattractive lists.

Issuer Type definitionsCore: Issuers that have investment grade senior debt ratings. Note: the credit rating agencies typically notch therating of preferred securities lower than that of the issuer rating (or senior debt rating) to reflect the subordinationof preferreds in an issuer's capital structure. Therefore, Core issuers may have non-investment grade ratedpreferreds.

High Yield: Issuers we deem to be "high yield issuers," even if they are not actually rated by the credit ratingagencies are those that may have non-rated or high yield rated senior debt.



Appendix

Statement of Risk

Fixed income - Bond market returns are difficult to forecast because of fluctuations in the economy, investor psychology,geopolitical conditions and other important variables. Corporate bonds are subject to a number of risks, including creditrisk, interest rate risk, liquidity risk, and event risk. Though historical default rates are low on investment grade corporatebonds, perceived adverse changes in the credit quality of an issuer may negatively affect the market value of securities. Asinterest rates rise, the value of a fixed coupon security will likely decline. Bonds are subject to market value fluctuations,given changes in the level of risk-free interest rates. Not all bonds can be sold quickly or easily on the open market.Prospective investors should consult their tax advisors concerning the federal, state, local, and non-U.S. tax consequencesof owning any securities referenced in this report.

Preferred securities - Prospective investors should consult their tax advisors concerning the federal, state, local, andnon-U.S. tax consequences of owning preferred stocks. Preferred stocks are subject to market value fluctuations, givenchanges in the level of interest rates. For example, if interest rates rise, the value of these securities could decline. Ifpreferred stocks are sold prior to maturity, price and yield may vary. Adverse changes in the credit quality of the issuer maynegatively affect the market value of the securities. Most preferred securities may be redeemed at par after five years. Ifthis occurs, holders of the securities may be faced with a reinvestment decision at lower future rates. Preferred stocks arealso subject to other risks, including illiquidity and certain special redemption provisions.

Required Disclosures

Analyst Certification

Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that withrespect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflecthis 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 researchreport.

For a complete set of required disclosures relating to the companies that are the subject of this report, please mail arequest to UBS CIO Global Wealth Management Business Management, 1285 Avenue of the Americas, 20th Floor,Avenue of the Americas, New York, NY 10019.

Disclosures (10 July 2019)Aegon NV 1, 2, Allstate 1, 2, 3, 5, 7, 8, 9, American Express 1, 2, 7, 8, 9, Apollo Global Management 1, 2, 3, 5, 7, 10,11, Ashford Hospitality Trust Inc 1, 2, 3, 4, 5, 6, 7, Bank of America 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, Bank of NYMellon 1, 2, 3, 4, 5, 7, 8, 9, 11, Barclays 1, 2, 3, 4, 5, 6, 8, 9, 13, BB&T Corp. 1, 2, 7, 8, 9, 11, Capital One Financial 1,2, 11, 15, Chimera Investment Corp 1, 2, 3, 4, 5, 7, 10, Citigroup 1, 2, 3, 4, 5, 7, 8, 9, 11, 12, 14, 23; Deutsche Bank1, 2, 3, 4, 8, 9, 10, 12, 16, Digital Realty Trust Inc. 2, 10, DTE Energy 1, 2, eBay 1, 2, 7, 8, 9, Edison International 1, 2,Entergy 1, 2, 8, 9, Fifth Third Bancorp 1, 2, 7, 8, 9, 11, GasLog Partners LP 1, 2, 3, 4, 5, 6, 7, Goldman Sachs 1, 2, 3, 7,8, 9, 10, 11, Hartford Financial Services 1, 2, 7, 8, 9, 10, 11, 15, HSBC Holdings (UK) 1, 2, 8, 9, 10, 12, 17, HuntingtonBancshares Inc. 1, 2, 3, 4, 5, 8, 9, ING Groep 1, 2, 3, 4, 5, 8, 9, JPMorgan 1, 2, 3, 4, 5, 7, 8, 9, 11, 12, 18, KeyCorp 1,2, 3, 4, 5, 6, Kimco Realty Corp. 1, 2, 3, 4, 8, 9, KKR and Co 1, 2, 3, 4, 5, 6, 7, 11, 15, Merrill Lynch 8, 9, MetLife 1, 2,3, 5, 7, 8, 9, 11, MFA Financial Inc 1, 2, 7, 10, Morgan Stanley 1, 2, 7, 8, 9, 10, 11, 12, NextEra Energy Inc. 1, 2, 3, 4,5, 19, PNC Financial Svcs 1, 2, 7, 8, 9, 11, PPL Corp. 1, 2, 3, 5, 7, 11, Prudential Financial Inc. 1, 2, 3, 4, 5, 7, 8, 9, 11,20, PS Business Parks 2, 10, Public Storage 1, 2, 3, 4, 5, 6, 7, RBS Group 2, 3, 4, 5, 6, Regions Financial Corp. (New) 1,2, 3, 4, 5, 6, 7, 8, 9, SL Green Realty Corp. 2, 3, 5, Southern Company 1, 2, 3, 4, 5, 7, 8, 9, State Street 1, 2, 3, 4, 5,7, 11, SunTrust Banks Inc. 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 21, U.S. Bancorp 1, 2, 3, 4, 5, 7, 8, 9, 10, Vornado Realty Trust1, 2, 10, Wells Fargo 1, 2, 3, 5, 7, 8, 9, 10, 11, 22,

1. Within the past 12 months, UBS Securities LLC and/or its affiliates have received compensation for products andservices other than investment banking services from this company/entity.2. UBS Securities LLC makes a market in the securities and/or ADRs of this company.



Appendix

3. Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment bankingservices from this company/entity or one of its affiliates.4. UBS AG, its affiliates or subsidiaries has acted as manager/co-manager in the underwriting or placement of securitiesof this company/entity or one of its affiliates within the past 12 months.5. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investmentbanking services are being, or have been, provided.6. UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking servicesfrom this company/entity within the next three months.7. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investmentbanking securities-related services are being, or have been, provided.8. This company/entity is, or within the past 12 months has been, a client of UBS Financial Services Inc, and non-investment banking securities-related services are being, or have been, provided.9. Within the past 12 months, UBS Financial Services Inc has received compensation for products and services otherthan investment banking services from this company.10. UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company's common equitysecurities as of last month's end (or the prior month's end if this report is dated less than 10 days after the most recentmonth's end).11. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securitiesservices are being, or have been, provided.12. UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of lastmonth's end (or the prior month's end if this report is dated less than 10 working days after the most recent month'send).13. UBS has been granted conditional leniency or conditional immunity from antitrust authorities in certain jurisdictionsin connection with potential antitrust or competition law violations related to certain benchmark submissions. Forfurther information, please see the disclosures in UBS's current quarterly report.14. The fixed income analyst covering this company, a member of his or her team, or one of their household membershas a long common stock position in this company.15. An employee of UBS AG is an officer, director, or advisory board member of this company.16. UBS AG London branch or affiliates acts as liquidity provider or market maker in the financial instruments of thiscompany.17. UBS Securities Hong Kong Limited is a market maker in the Hong Kong-listed securities of this company.18. UBS AG, its affiliates or subsidiaries owns a net long position exceeding 0.5% of the total issued share capital ofthis company.19. UBS Financial Services Inc., its affiliates or subsidiaries owns a net long position exceeding 0.5% of the total issuedshare capital of this company.20. UBS AG London Branch acts as broker to this company.21. UBS Financial Services Inc. its affiliates or subsidiaries owns a net long position exceeding 0.5% of the total issuedshare capital of this company.22. The equity analyst covering this company, a member of his or her team, or one of their household members has along common stock position in this company.23. Frank Sileo, or one of his/her household members has a long common stock position in Citigroup.

Preferred Securities Ratings Definitions

Rating Definition

AttractivePreferred securities on the Attractive List are those that we view favorably based on (1) fundamentalcredit quality, (2) valuation and (3) structure (security characteristics).

NeutralWe believe that issuers of preferreds on the Neutral List are likely to meet the coupon payment but wedo not deem the preferreds to fit the definition of our Attractive or Unattractive Lists.

Unattractive

We may deem these preferred securities to be Unattractive for fundamental reasons, for valuationreasons, or because of their structure. In the case of fundamental drivers, we have concerns that thecredit profile may deteriorate. Sector considerations may also be a factor. In the case of valuation, webelieve that price/yield levels do not adequately compensate investors for the risks.



Appendix

Disclaimer

UBS Chief Investment Office's ("CIO") investment views are prepared and published by the Global Wealth Managementbusiness of UBS Switzerland AG (regulated by FINMA in Switzerland) or its affiliates ("UBS").The investment views have been prepared in accordance with legal requirements designed to promote the independenceof investment research.Instrument/issuer-specific investment research – Risk information:This publication is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sellany investment or other specific product. The analysis contained herein does not constitute a personal recommendation ortake into account the particular investment objectives, investment strategies, financial situation and needs of any specificrecipient. It is based on numerous assumptions. Different assumptions could result in materially different results. 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Preferred Securities Overview & Preferences€¦ · preferred stock valuations have had a tendency to move toward ... years earlier, when yield premiums troughed in September 2016