Understanding our fees, charges and other compensation

Transcription

1 Understanding our fees, charges and other compensation Important information about: How we are paid by you Payments we may receive from How your Financial Advisor is compensated Potential conflicts of interest resulting from our compensation structures

2 Table of Contents About our fees, charges and other compensation...1 Sources of revenue to the firm...2 Financial Advisor compensation...4 Compensation and fees for brokerage products and services...5 Annuities and insurance...5 Banking products...7 Individual securities, options and precious metals...10 Investment company products...12 Structured products...15 Alternative investments...16 Brokerage account and administrative fees...19 Available advisory programs and services...21 UBS Trust Company of Puerto Rico...24 Conflicts of interest...28 Related documents and web pages referenced in this guide Title Conducting business with UBS Account information and disclosures Revenue sharing Understanding variable annuities Variable annuity compensation Commission schedules Understanding mutual fund share classes and fees Understanding unit investment trusts Variable annuities revenue sharing Best execution of equity securities Order routing disclosure Web address ubs.com/workingwithus ubs.com/accountdisclosures ubs.com/mutualfundrevenuesharing ubs.com/vadisclosure ubs.com/vacompensation ubs.com/commissions ubs.com/mutualfunddisclosure ubs.com/uitdisclosure ubs.com/va-revenuesharing ubs.com/bestexecution ubs.com/orderroutingdisclosure

3 About our fees, charges and other compensation Our goal is to make sure that our clients are informed about the many investment products and services that we offer, which is why we have published this overview of our fees and how we generate revenue. Topics that are covered in this overview include: Sources of revenue to the firm Compensation and fees for many of our products and services Financial Advisor compensation Conflicts of interest Brokerage and advisory services As a UBS client, you benefit from the broad scope of services and resources of a leading global financial services firm, whether we serve you as a broker-dealer, investment adviser or both. While there are similarities between the brokerage and advisory services we provide, there are important differences, including the pricing structures for these services. For detailed information regarding the distinctions between brokerage and advisory services, please visit our website at ubs.com/workingwithus. This information is also available in the disclosure materials we provide to you when you open your accounts at UBS, or in the "Agreements and Disclosures" booklet, which can be found at ubs.com/accountdisclosures. Brokerage relationships generate transaction-based compensation. In brokerage relationships: Investors pay for the products and services they receive, such as buying and selling stocks, bonds, mutual funds, annuity contracts and other investment products, as well as trading and exercising options Compensation to UBS may include commissions, transaction fees, sales charges or expenses that are embedded in the purchase price Advisory relationships have fee-based compensation. In advisory relationships: Clients pay a set fee, flat fee or a fee based on a percentage of the assets in the relationship according to an investment advisory program agreement Pricing of products and services Clients may purchase many of our products and services in either transaction-based or fee-based accounts, or a combination of both. The costs associated with our services vary based on each client s wealth management preferences and needs. Factors that may affect pricing. It may be difficult to compare transaction-based and fee-based relationships solely on the basis of price. You may pay more or less in a fee-based program than you might otherwise pay if you purchased the services separately. The costs of a brokerage relationship or an advisory relationship vary depending upon a number of factors, including: Your product and service preferences Size and value of your account Mix of products you hold Frequency with which you trade Administrative or management fees associated with the products or services you purchase Please consider the costs and services associated with each structure carefully and speak with your Financial Advisor about which approach is most appropriate for you. Important information for Qualified Retirement Plan Fiduciaries This document, in conjunction with other documents and disclosures we make available to you, is intended to meet the disclosure requirements of the U.S. Department of Labor's regulations under ERISA Section 408(b)(2). If you are a retirement plan fiduciary and have questions or need additional information, please contact your Financial Advisor. If you select a brokerage relationship with UBS, we will not act as an ERISA fiduciary to your plan. If you select an investment advisory relationship with UBS, we will act as a registered investment adviser under the Investment Advisers Act and may, depending on the advisory program and the services we provide, act as an ERISA fiduciary. When we act as an ERISA fiduciary, we disclose this in our agreement with you. The applicable Form ADV disclosure can be obtained on request from your Financial Advisor or at ubs.com/accountdisclosures. 1

4 Sources of revenue to the firm Our firm earns revenue from our clients and, for some products and services, from, including product vendors, underwriters and investment managers whose products and services are purchased by clients and from our affiliates. Revenue received from clients In general, our firm receives revenue from clients in the following ways: Commissions charged to clients in connection with the purchase or sale of investment products Markups (increases) and markdowns (reductions) on the price of equities and fixed-income products, where the firm acts as principal in purchasing or selling securities from UBS s inventory Asset-based fees or flat fees for our investment advisory programs and services Interest on margin and loan accounts Account administration fees, such as account maintenance fees Sales loads, commissions or fees for various financial products, such as mutual funds, alternative investment funds, unit investment trusts (UITs), insurance and annuities Revenue received from clients is debited from accounts unless stated or agreed to otherwise. Revenue from In addition to revenue that we receive from clients, UBS earns revenue from in the following ways: Issuers or underwriters of new issue securities may pay us fees and/or offer underwriting discounts or share fees with us in certain cases Mutual fund and insurance companies pay us for selling their products, and may also pay us for marketing support, known as revenue sharing, which is based on our total sales of and/or total client assets in their products Mutual fund companies pay recordkeeping and account servicing fees for processing accounts held at UBS Insurance and annuity companies compensate us for the costs of establishing and maintaining their products in our distribution system For some alternative investment funds that are managed by third-party investment advisers, we receive fees for distribution, shareholder services or solicitation services, or a combination of the three Third parties with whom we offer co-branded programs, such as the UBS Donor Advised Fund, pay referral fees Underwriters of securities compensate us for trading activities we provide on their behalf Third-party UITs pay volume-based fees for the sale of their products to our clients, and UITs sponsored by UBS affiliates pay us fees as part of their operating expenses Companies that issue investment products (mutual funds, UITs, exchange traded funds (ETFs), etc.), insurance companies, investment advisers and other pay for educational programs and seminars for employees and clients Additional information regarding revenue sharing for mutual funds and for insurance and annuities can be found at ubs.com/mutualfundrevenuesharing and ubs.com/vadisclosure. Additional information for Qualified Retirement Plan Fiduciaries Marketing and training support provided to UBS by certain product providers We receive marketing and training support payments, conference subsidies and other types of financial and non-financial compensation and incentives from product providers and other vendors to support the sale of their products to our clients, including our ERISA plan clients. Historically, the aggregate value of this marketing and training support in any year has represented less than half of one basis point (0.005%) of our total customer assets. Product provider financial support may be given specifically for retirement product marketing and training. At no cost to us, certain program providers offer UBS Financial Advisors investment reports and plan feature and expense tools that can be used with plan sponsor clients. In 2012, for instance, several of our program providers contributed to a retirement training conference for UBS Financial Advisors. The amounts that these providers contributed ranged from $22,500 to $40,000 per provider and were not dependent on or related to the level of assets invested by any client in the products of the particular program provider. For more information, contact your Financial Advisor. 2

5 Affiliate-related revenue When you conduct business with us, our affiliates, such as UBS Global Asset Management, UBS Bank USA, UBS Financial Services Incorporated of Puerto Rico, UBS Trust Company of Puerto Rico and its division UBS Asset Managers of Puerto Rico, and UBS Investment Bank, may earn compensation through: The purchase of securities underwritten by a UBS affiliate Buying securities directly from or selling securities directly to UBS or one of our affiliates, which is known as principal trading Management or other fees in conjunction with mutual funds structured or managed by one of our affiliates Investing in a separately managed account managed by UBS or an affiliated investment manager Holding a loan extended by, or maintaining credit with, one of our affiliates Deposit or investment of free credit balances into accounts with affiliated entities Trading and hedging activities related to structured products and ETNs Collecting licensing fees from mutual fund, ETF, ETN, structured product and other product providers for indexes or strategies owned by a UBS affiliate Our affiliates typically pay us for referring clients to them. Likewise, we typically pay our affiliates for referring certain clients and business opportunities to our Financial Advisors. Referral payments can be based on a percentage of the revenue received or as otherwise agreed between the affiliates. Depending on the type of referral, payments can be made over several years. These payments will not result in additional charges to clients. 3

6 Financial Advisor compensation We generally pay our Financial Advisors a portion of the revenue we receive according to a schedule (that is adjusted from time to time by UBS) based on the revenues they generate. This portion is known as the payout rate. A Financial Advisor's payout rate may be reduced when fees are discounted beyond levels set by the firm from time to time. In addition, Financial Advisors may not receive compensation on relationships with assets below minimums set by the firm from time to time. Financial Advisors may also be eligible for bonuses based on a combination of factors, including their annual revenues, length of service with UBS, product mix and net new assets under management from both current and new clients. Financial Advisors working in the UBS Investment Center are paid a salary, which is not affected by the products and services a client purchases or sells. Bonuses for our Investment Center Financial Advisors are determined based on a number of factors, including client satisfaction. Financial Advisors may also receive various forms of noncash compensation from product providers who sell or issue mutual funds, annuities, insurance, UITs and other securities, including: Payment of expenses related to the training and educational efforts of our Financial Advisors Meals and entertainment of reasonable and customary value, and gifts up to $100 per vendor per year If UBS receives non-cash compensation worth $50 or more that is attributable to a particular retirement plan client, it will be reported to that client for Form 5500 Schedule C reporting purposes. While this summary broadly outlines how we currently compensate the majority of our Financial Advisors, some Financial Advisors may be compensated differently, and we may adjust our compensation policies periodically. 4

7 Compensation and fees for brokerage products and services The tables that follow offer an overview of the compensation UBS receives for the wide variety of products and services that our clients typically purchase in a brokerage account with UBS. Some of these fees are charged by UBS, while others are charged by third parties, such as mutual fund and insurance companies. The table contains specific fees or ranges depending on the product. The amount you pay may be affected by such factors as your account or portfolio size, your mix of assets and liabilities, and your level of trading. If you believe that a product or service we may provide to you is not covered in this guide, please contact your Financial Advisor. Annuities and insurance Description Fees and charges paid by clients Compensation received from Fixed, immediate and fixed indexed annuities Fixed annuities are contracts issued by insurance companies that guarantee a fixed interest rate for a specified period of time. Immediate annuities are contracts issued by insurance companies that are purchased by the client with a single investment on which income payments begin within one year of the contract date. Fixed indexed annuities are contracts used by insurance companies where the returns are based upon the performance of an equity market index, such as the S&P 500. The principal investment is protected from losses in the equity market, while gains add to the annuity's returns. With fixed, immediate and fixed indexed annuities, the client s investment is paid directly to the issuing insurance company. to the annuity contract. Clients make an initial investment and, depending on the terms of the annuity, may also pay additional annual fees, including premium taxes, and fees for optional features. If the annuity is surrendered before a designated period of time, the client may have to pay the insurance company a surrender fee specified in the contract (the amount is reduced over time). All amounts payable to the insurance company are disclosed in the contract. UBS receives commissions in connection with group annuity sales but these are paid by the insurance company, not the client (see explanation in the column to the right). UBS receives commissions for the sale of an annuity from the insurance company issuing the annuity. No part of the commission paid to UBS is paid by the client. Insurance companies pay UBS: A commission in the first year, and Trailing (ongoing) commissions, if any, for each year you own the contract. The first year commission can be up to 5.00% of the client s investment and trailing commissions up to 1.00% annually of the total value of the annuity assets. The combination of the first year and trailing commissions will differ based on the chosen share class, the commission option selected by the Financial Advisor, the size of the contract and the age of the client. The greater the first year commission, the lesser the trailing commissions and vice versa. 5

8 Description Fees and charges paid by clients Compensation received from Variable annuities Variable annuities are contracts issued by insurance companies into which the buyer makes a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments beginning immediately or at some future date. The client pays the investment in variable annuities directly to the issuing insurance company. The insurer allocates purchase payments to a range of investment options, which may be mutual funds, or directly into the separate account of the insurance company that manages the portfolios. The value of the account during accumulation and the income payments after annuitization vary, depending on the performance of the investment options chosen. to the variable annuity contract and prospects. For more information, refer to our Understanding variable annuities brochure at ubs.com/vadisclosure or go to ubs.com/vacompensation. Clients make an initial investment and, depending on the terms and share class of the annuity, may pay additional annual fees, including mortality risk and expense charges, administrative fees, investment management fees, premium taxes and fees for optional features. If the annuity is surrendered before a designated period of time, the client may have to pay the insurance company a surrender fee specified in the contract (the amount is reduced over time). All amounts payable to the insurance company are disclosed in the contract and prospectus. UBS receives commissions in connection with annuity sales but these are paid by the insurance company, not the client, (see explanation in the column to the right). UBS receives commissions for the sale of an annuity from the insurance company issuing the annuity. No part of the commission paid to UBS is paid by the client. Insurance companies pay UBS: A commission in the first year, and Trailing commissions, if any, for each year you own the contract. The first-year commission can be up to 6.00% of the variable annuity premium and trailing commissions up to 1.40% annually of the total value of the variable annuity assets. The combination of the first-year and trailing commissions will differ based on the share class selected and the commission option selected by the Financial Advisor, the size of the contract and the age of the client. The greater the first-year commission, the lesser the trailing commissions and vice versa. The insurance company pays UBS revenue sharing on certain variable assets inside of variable annuity contracts. UBS receives 0.20% (20 bps) on the initial premium in year one and up to 0.10% (10 bps) annually for ongoing assets. Group annuities Group annuities are contracts issued by insurance companies to businesses or other eligible organizations, often as funding vehicles for qualified and nonqualified retirement plans. The insurer allocates purchase payments to a range of investment options, which may be mutual funds, or directly into the separate account of the insurance company that manages the portfolios. With group annuities, the client s investment is paid directly to the issuing insurance company. Clients pay the insurance company the amount to fund the Group Annuity. The Group Annuity contract the client signs with the insurance company contains the terms of the group annuity which may include a variable asset charge payable to the insurance company to offset recordkeeping costs. UBS receives commissions in connection with group annuity sales but these are paid by the insurance company, not the client (see explanation in the column to the right). UBS receives commissions for the sale of an annuity from the insurance company issuing the annuity. No part of the commission is paid to UBS by the client. Insurance companies pay UBS: A commission in the first year, and Trailing commissions, if any, for each year you own the contract. The first-year commissions can be up to 2.00% of the group annuity investment and trailing commissions from 0.25% to 1.00% annually of the total value of the group annuity assets. The combination of the first year and trailing commissions will differ based on the share class selected and the commission option selected. The greater the first-year commission, the lesser the trailing commissions and vice versa. to the insurance contract. 6

9 Description Fees and charges paid by clients Compensation received from Disability, life and long-term care insurance Insurance companies issue disability, life and long-term care insurance contracts to cover the risks of disability, loss of life or the need for long-term care. Contracts may be fixed or variable. If the life insurance policy is variable, its value and death benefit fluctuate with the value of an underlying securities portfolio. to the insurance contract. The amount of the premium that clients pay depends on a variety of factors, including the level of coverage, the client's age and the optional riders selected, i.e., provisions that may be added to an insurance policy to increase or limit the benefits that the policy otherwise provides. Depending on the life insurance contract, clients may have to pay a surrender charge, which is based on a variety of factors, including the number of years a policy has been in force, its cash value and death benefits. UBS receives a commission based on the policy structure, and it is calculated as a percentage of the premiums that clients pay. Financial Advisors may receive a percentage of the commission based on their payout rate. Financial Advisors may also receive a trailing commission each year that the client owns the investment. Banking products Description Fees and charges paid by clients Compensation received from Credit lines Variable or fixed-rate credit lines, which are issued by UBS Bank USA, a UBS affiliate, are loans that may not be used to purchase, trade or carry securities. These loans are secured by securities pledged by clients and/or a third party. to the Credit Line Agreement with UBS Bank USA. Clients repay the principal balance and interest on outstanding balances to UBS Bank USA. For variable-rate loans, clients may repay the principal at any time without prepayment fees. For fixed-rate loans, clients may be subject to prepayment fees (as described in the loan documents) if the loan is repaid before the end of the fixed-rate contract. Interest rates are stated in the Credit Line Agreement with UBS Bank USA. UBS pays Financial Advisors a portion of the interest spread. Margin loans Margin loans use securities in client accounts as collateral and may be used to purchase, trade or carry securities. to the Statement of Credit Practices and the Margin Agreement, which are in the Agreements and Disclosures brochure at ubs.com/accountdisclosures. Clients repay the principal balance and interest on outstanding balances to UBS, and they may repay the principal at any time without prepayment fees. The interest rates for margin loans are disclosed in our Statement of Credit Practices, which is contained in our "Agreements and Disclosures" brochure available at ubs.com/accountdisclosures. If you have a margin account with us, as permitted by law, we may use certain securities in your account for, among other things, settling short sales and lending securities for short sales. We also may be compensated in connection to these transactions. 7

10 Description Fees and charges paid by clients Compensation received from If you are engaged in short selling a security, you may incur a charge due to certain borrowing costs for that particular security. Financial Advisors do not receive any portion or credit for margin interest charges or revenues. Mortgage loans Mortgage loans are loans that may be used to purchase a home, refinance an existing mortgage or for other purposes. These loans are secured by residential real property. Clients repay the principal amount borrowed to UBS Bank USA or UBS AG, Tampa branch, as applicable, plus interest. These loans generally have origination fees, application fees and/or closing costs, which are disclosed before the loan is made. UBS pays Financial Advisors a percentage of the mortgage loan. Standby letters of credit Standby letters of credit are documents that guarantee the payment of your obligations to a third party for a specified period and up to a specified amount. to the letter of credit application and agreement. Clients repay the amount drawn under the letter of credit to UBS. Clients pay an issuance fee and an annual credit fee based on the stated dollar amount of the standby letter of credit. UBS generally pays Financial Advisors a portion of the annual credit fee. International Deposit Account Program (IDA) (Used to sweep free credit balances in non-u.s. accounts) A sweep program for individuals not residing in the United States, or entities not organized in the United States, whereby free cash balances in eligible security accounts are automatically deposited into a demand deposit account at UBS AG, New York branch, from which these balances are further swept daily into an interest-bearing deposit account at UBS AG, Cayman Islands branch. Clients are not charged an additional fee for this service. UBS receives a monthly fee from UBS AG, which is calculated based on the daily balance held by UBS AG in an interest-bearing deposit account established through the IDA program. to the UBS International Deposit Account Sweep Program Disclosure in the "Agreements and Disclosures" brochure at ubs.com/accountdisclosures. 8

11 Description Fees and charges paid by clients Compensation received from Sweep programs for domestic accounts A sweep program for domestic accounts is a service whereby free cash balances in eligible securities accounts are automatically deposited into interest-bearing bank deposit accounts, or invested in money market mutual funds or other sweep options, based on your eligibility and your sweep election. For more information, please refer to the UBS Deposit Account Sweep Program disclosure in the Agreements and Disclosures brochure and to the specific money fund disclosures, which are at ubs.com/accountdisclosures. Clients are not charged an additional fee for this service. UBS Bank USA Sweep Programs UBS Bank USA pays a monthly fee of $1.10 to UBS Financial Services Inc. for each UBS securities account that sweeps into a UBS Bank USA deposit account established through this program. Depending on the type of account, UBS Financial Services Inc. may earn interest on cash balances in client accounts at the prevailing market rates through overnight investments, only until the cash balances are either invested by clients or swept according to client sweep elections. Money Market Mutual Fund Sweep Programs Qualified plan clients sweep into the Retirement Money Fund, a UBS proprietary money market fund. Qualified plan clients with a Business Services Account BSA may sweep into either the UBS RMA Money Fund or UBS RMA Government Fund. UBS Financial Services Inc. and/or its affiliates receive investment management, distribution and service fees of up to 0.51% on investments in the money market funds offered as sweep options. UBS Global Asset Management receives up to 0.08% for investment management fees. The fund transfer agent pays UBS or our affiliates $0.95 per month per open account at the fund for certain transfer agent-related services. More details regarding transfer agent-related services can be found in the Statement of Additional Information. Other account types that are not qualified plan accounts may sweep to other eligible money market funds. Please reference the prospectus for a particular fund for full details. Puerto Rico Sweep Programs Eligible non-retirement funds may be swept into the Puerto Rico Short-Term Investment Fund, Inc., in which case UBS Trust Company of Puerto Rico will receive investment management and services fees. Retirement plan assets use the above described Money Market Mutual Fund Sweep Programs. UBS Visa Signature credit cards UBS Visa Signature credit cards, issued by UBS Bank USA, a UBS affiliate, provide a rewards program, exclusive Visa Signature benefits and access to cash at ATMs and banks worldwide without the fees. Clients repay the principal balance and interest on outstanding balances to UBS Bank USA, and they may repay the principal at any time without prepayment fees. 9

12 Description Fees and charges paid by clients Compensation received from to the Cardmember Agreement. Clients may pay UBS Bank USA additional fees such as an annual fee for the Preferred Card, balance transfer fee, cash advance fee, foreign transaction fee, and late payment and returned payment fees. UBS does not pay a portion of the interest to Financial Advisors. Individual securities, options and precious metals* Description Fees and charges paid by clients Compensation received from Equity securities Equity securities include common stock and American Depositary Receipts (ADRs). Clients pay a commission* based on the quantity of shares purchased or sold and their corresponding stock prices. For preferred securities, the maximum sales charge is 2.00% for purchases and 1.00% for sales. Equity syndicate offerings Equity syndicate offerings include initial and secondary offerings of common stock, exchange traded funds (ETFs) and closed-end funds. to the prospectus. Clients pay the initial offering price and are not charged a commission. UBS receives a fee/selling concession from the underwriter(s) involved in the offering, based on sales volume. The fee/selling concession is built into the offering price of the syndicate, paid by the client. The fee/selling concession is negotiated between the issuer and the underwriter(s) and is disclosed in the prospectus. Municipal securities Municipal securities are bonds issued by states, cities, counties and other governmental entities to raise money, typically for general governmental needs or special projects. For more information please refer to the offering document. For new issues, clients pay the initial offering price that is approved by the issuer after a bid by, or consultation with, the underwriter. For principal trades in secondary municipal bonds, clients pay a price that includes a markup or markdown, the amount depending primarily on the bond type and duration. For agency trades, the client pays a fully disclosed commission according to a commission schedule.* Municipal variable rate demand obligations (VRDOs) Municipal VRDOs are debt instruments with long maturities (i.e., usually 30 years) that feature multiple interest rate modes and For new issues purchased from UBS (obtained via a provider), clients pay the initial offering price that is approved by the issuer after a bid by, or consultation with, the provider. * More information on commissions is available at ubs.com/commissions. For new issues, UBS receives an underwriting discount from the issuer that is bringing the security to market, or a share of the underwriting discount from a provider, such as another broker-dealer. This fee is built into the initial offering price paid by the client and generally it is disclosed in the final offering document. The provider receives a selling fee directly from the issuer who is bringing the security to market and shares a portion of the selling fee with UBS. The selling fee is built into the initial offering price paid 10

13 Description Fees and charges paid by clients Compensation received from associated tender features, including an option to tender securities at par on seven days' notice or, in some cases, on one day's notice. to the offering document. by the client, and generally it is disclosed in the final offering document. For certain secondary VRDO transactions where a UBS affiliate acts as a remarketing agent for an issuer (i.e., a broker-dealer responsible for reselling to new investors VRDOs and other tender option bonds that have been offered for purchase by their owners) the affiliate receives a remarketing fee from the issuer. For other secondary VRDO transactions, our provider acts as remarketing agent, and is subsequently paid a remarketing fee. This provider may, but is not required to, share a portion of that fee with UBS. Options Options, which include puts and calls, are securities transactions tied to the stocks, commodities, currencies or indexes that give the holder the right to buy or sell within a specified timeframe for a defined price. Clients pay a commission* to buy or sell an option based on the number of contracts and the principal amount of the trade. Precious metals Precious metals, such as gold, silver, platinum and palladium, are commodities and, with the exception of certain coins, are not legal tender. Clients pay a commission* to buy or sell based on the quantity and type of precious metal purchased and the corresponding price of the metal. Metals held in storage at a depository designated by UBS will incur applicable storage fees that are charged to the client. Please contact your Financial Advisor for more information regarding these storage fee charges. Taxable fixed income Taxable fixed income securities include: Corporate bonds U.S. Treasuries Federal agency bonds Mortgage-backed securities Zero-coupon bonds High-yield and emerging market securities Convertible securities For new issues, clients pay the initial offering price set by the issuer in consultation with the underwriters. The initial offering price is stated in the offering document. For secondary bonds and CDs, clients pay a sales charge, i.e., markup or markdown, or commission* depending on the type of security and its duration. UBS receives a fee from the underwriter(s) who bring the security to market. This fee is built into the initial offering price paid by the client. The fee is stated in the offering document. * More information on commissions is available at ubs.com/commissions. 11

14 Description Fees and charges paid by clients Compensation received from Certificates of deposit (CDs) Preferred securities Commercial paper Foreign exchange spot and forward transactions to the offering document. On foreign exchange spot, i.e., immediate delivery and future transactions, clients pay a sales charge of up to 1.00%, depending on the size of the transaction. For preferred securities, the maximum sales charge is 2.00% for purchases and 1.00% for sales. For U.S. Treasury bills, notes and bonds, and government agency securities, as well as Treasury auction transactions, an additional $35 fee may be charged for transactions under $100,000 in face value. Investment company products Description Fees and charges paid by clients Compensation received from Mutual funds Mutual funds are open-end investment vehicles designed to invest in a group of assets in accordance with stated investment objectives. Many mutual funds offer several classes of shares that represent an interest in the same portfolio of securities. The principal difference between the classes is that the mutual fund will charge you different fees and expenses depending on the class you choose. to the fund prospectus and Understanding mutual fund share classes and fees at ubs.com/mutualfunddisclosure. Mutual fund share classes may have an upfront sales charge or a contingent deferred sales charge (CDSC), also known as a surrender charge or back-end sales charge. Sales charges are paid to UBS for services provided that result in the sale of a mutual fund. We generally pay part of this fee to your Financial Advisor. Upfront sales charge Upfront sales charges can range from 0.50% to 5.75% and are described in the prospectus. Many mutual funds allow for a reduction of the upfront sales charge based upon, among other things, the amount of your total investments in the particular mutual fund family, as well as the type of account in which the assets are invested (i.e., advisory). Requirements for a reduction of upfront sales charges are detailed in the prospectus. Back-end sales charge CDSC fees, which are most frequently 1.00% for B shares and 5.00% for C shares, can be reduced or eliminated based on how long you hold the shares. This can be accomplished under certain circumstances, which are described in the prospectus. 12b-1 fees Many mutual funds pay a 12b-1 fee to UBS, directly from the fund s assets. In turn, we generally pay part of this fee to your Financial Advisor. The exact amount varies among funds and share classes but is disclosed in the applicable fund prospectus. The typical ranges of 12b-1 fees in mutual funds we sell are as follows: A shares: 0.01% to 0.75% (most frequently 0.25%) B shares: 0.24% to 1.00% (most frequently 1.00%) C shares: 0.25% to 1.00% (most frequently 1.00%) R shares: 0.05% to 1.00% (most frequently 0.50%) Networking/omnibus fees We request that all mutual fund companies on the UBS platform pay networking or omnibus fees, which are determined on a per-account or percentage-ofassets basis for recordkeeping services performed for the fund by UBS, i.e., a consolidated trade executed once per day in order to save costs. These fees are not paid to Financial Advisors. These networking and omnibus fees generally are paid from investor assets in mutual funds, but in some cases may be subsidized in part by affiliates or the distributor of the mutual funds. These fees are generally calculated by applying our standard 12

15 Description Fees and charges paid by clients Compensation received from No load and institutional fund charge Our clients may purchase certain "no load" and "institutional" mutual funds at a charge of $75 per transaction. Redemption Fee Mutual funds may charge clients a redemption fee, typically between 1.00% and 2.00% of shares redeemed shortly after purchase. UBS does not receive this compensation. Details can be found in the fund prospectus. Proprietary UBS Mutual Funds The UBS Fund will charge investment management fees and other fund expenses detailed in the fund prospectus for services provided to the fund by UBS affiliates. These fees and expenses will reduce the net asset value of the fund and will be paid to the UBS affiliate performing the services. networking rate of $13 to each mutual fund position that exceeds $500 and is held at UBS Financial Services Inc., and up to $20 for each omnibus position. Revenue sharing We request that all mutual fund companies on the UBS platform pay UBS revenue based on our overall sales and/or assets, known as revenue sharing. This compensation is not paid to Financial Advisors. Distribution support or revenue sharing is individually negotiated with each mutual fund company and generally ranges: Up to 0.15% (paid quarterly) on all purchases of mutual fund shares (excluding purchases through fee-based programs). Up to 0.20% per year (paid quarterly) of the asset value of all equity and fixed-income mutual fund shares held at UBS Financial Services Inc. This revenue sharing information is current as of the date of this brochure and can be changed at any time. For updates, visit ubs.com/mutualfundrevenuesharing. UBS Class Y shares Our affiliate, UBS Global Asset Management (US) Inc., may pay out of its own resources for the sales of Class Y shares in certain Global Asset Management funds. We pay a portion of these payments to the Financial Advisor who originates the sale. These payments, detailed in the fund s prospectus, may create a financial incentive for our Advisors to recommend Class Y shares of these UBS proprietary funds over non-proprietary products. Finder s fees For large purchases, Financial Advisors may also receive Dealer Concessions or finder's fees as described in the fund's prospectus or Statement of Additional Information from certain mutual fund companies. Such fees generally range from 0.25% to 1.00% of the purchase amount of a particular mutual fund. These finder's fees generally offset other fees payable to UBS Financial Services Inc. by the client purchasing the particular mutual fund. Offshore funds UBS generally receives fees for offshore mutual funds, which are generally calculated as a percentage of the management fee charged by the applicable fund. 13

16 Description Fees and charges paid by clients Compensation received from These fees may represent an amount ranging from 0% to 65% of the fund s management fee. The fee UBS receives includes compensation for all services provided by UBS to the fund. Closed-ended funds A type of investment company with a fixed number of shares that is listed on an exchange. For more information on initial offerings, please refer to the offering document. For initial offerings, clients pay the initial offering price and are not charged a commission. For secondary market transactions, clients pay a commission* based on the quantity of shares purchased or sold and their corresponding fund prices. For an initial offering, UBS receives a fee/selling concession from the underwriter(s) involved in the offering, which is built into the offering price of the fund paid by the client. The fee/selling concession is determined after negotiation between the issuer and the underwriter(s) and is disclosed in the prospectus. The Fund Sponsor may also pay UBS a portion of the operating expenses of the fund. Exchange traded funds (ETFs) An ETF is an interest in a pooled investment fund that can be bought and sold in the open market. These funds typically hold portfolios of securities that correspond to the price and yield performance of a particular broad market index or basket of securities for a particular industry, sector or geographic region, minus annual fees and expenses. Clients typically pay a commission* in connection with the purchase or sale of an ETF. For investments linked to the performance of an index, fees generally include licensing fees for use of the index, which may be paid to UBS for indexes owned or sponsored by UBS. to the fund prospectus. Unit investment trusts (UITs) UITs are investment companies that purchase a fixed, unmanaged portfolio of securities and subsequently sell shares in the trust to investors. to the fund prospectus and Understanding unit investment trusts at ubs.com/uitdisclosure. Clients typically pay the UIT sponsor either an upfront sales charge or a combination of upfront and deferred sales charges as disclosed in the prospectus. Sales charges, which range between 2.95% and 4.95% of assets invested, may also be reduced under other circumstances as described in the prospectus. UBS receives a portion of the sales charge from the UIT Sponsor as described in the column to the right. Sales charges on UITs usually decrease as a client s investment increases, based on a breakpoint schedule, i.e., the size of a new investment in the UIT may qualify a client for a reduced sales charge. * More information on commissions is available at ubs.com/commissions. UBS receives a portion of the sales charge from the company sponsoring the UIT, based on certain factors, including the UIT s policies on breakpoints, discounting and sales charges. The portion of the sales charge received by UBS is based on a schedule, which can be found in the prospectus. Most UIT sponsors make additional payments to the firms that sell their UITs, typically calculated as a percentage of sales volume. The UIT's prospectus contains detailed descriptions of these additional payment programs. 14

17 Description Fees and charges paid by clients Compensation received from The UIT s prospectus contains specific breakpoint and sales charge amounts, terms and policies. UIT sponsors may also pay UBS for marketing, promotion and related expenses to increase sales or to defray costs associated with sales, such as the costs of UIT trading systems, which vary from sponsor to sponsor. These payments are made by the UIT sponsor and not out of UIT assets. None of these amounts are paid to the Financial Advisor or his or her branch office. Structured Products Description Fees and charges paid by clients Compensation received from Structured products Structured products are unsecured obligations with a return at maturity that is linked to the performance of an underlying asset. Structured products include debt securities, obligations or certificates of deposit (CDs) issued by our affiliates and non-affiliated, with returns linked to such underlying assets as equities, commodities, foreign exchange, interest rates, credit indexes or hedge funds. to the offering document. For new issues, clients pay the initial offering price, which is set by the issuer. Clients are not charged additional sales charges or commissions. The offering price is listed in the offering document. For secondary issues, clients pay a sales charge that is embedded in the price of the security that is purchased or sold, i.e., markup or markdown, the amount of which is based on the market value of the product. For new issues, UBS receives a fee (sometimes called a selling concession) directly from the issuer for bringing the security to market. The selling concession is stated in the offering document. Some structured products may also include ongoing embedded fees charged by the issuer that may or may not be shared with UBS. If the embedded fees are shared by the issuer, the amount is detailed in the offering document. For certain structured products linked to hedge funds and funds of funds, UBS or its affiliate may receive a portion of the management fees charged by those funds as compensation. The amount is stated in the offering document. UBS or its affiliate may also receive compensation from issuing structured products and from trading and hedging activities related to structured products. This amount is unknown per security/product. UBS or its affiliate will typically hedge products on a portfolio basis and not on a security by security basis. Therefore, compensation from hedging activities is calculated on an aggregate basis. For investments linked to the performance of an index, fees generally include licensing fees for use of the index, which may be paid to UBS for indexes owned or sponsored by UBS. Exchange traded notes (ETNs) ETNs are debt securities that are designed to track the return of a specific market index or asset, minus investor fees. Clients typically pay a commission* in connection with the purchase or sale of an ETN. UBS or its affiliates may receive compensation from issuing ETNs and from trading and hedging activities related to ETNs. Compensation from issuing ETNs is disclosed in the prospectus. * More information on commissions is available at ubs.com/commissions. 15

18 Description Fees and charges paid by clients Compensation received from to the fund prospectus. In some instances, UBS receives a fee (sometimes called a selling concession) directly from the issuer for bringing the security to market and may participate in the ongoing investor fee charged by the issuer. These fees are disclosed in the prospectus. For investments linked to the performance of an index, fees generally include licensing fees for use of the index, which may be paid to UBS for indexes owned or sponsored by UBS. Auction rate securities (ARS) Auction rate certificates (ARCs) and Auction Preferred Stocks (APS) are floating rate securities with long or perpetual maturities that are repriced periodically through a series of Dutch Auctions, i.e., an auction system in which the price is gradually lowered until it meets a responsive bid. A client who sells ARS outside of a settlement offer or a non-failed auction (i.e., an ordinary secondary market sale) may pay a commission,* which will be disclosed on the confirmation. A portion of the annual broker-dealer fee is paid to your Financial Advisor. A UBS affiliate may receive an annual broker-dealer fee for operating the auction process. UBS does not offer new issue ARS. to the offering document. Alternative investments Description Fees and charges paid by clients Compensation received from Alternative investments Alternative investments include, but are not limited to, the following: For more information, please refer to the Private Placement Memorandum and Investor Application. Your fees for investing in alternative investments are based on various factors, such as whether the investment is proprietary to UBS or non-proprietary, and/or product type. Placement fees Most of these investments carry a placement fee. The placement fees are in addition to the amount you invest and vary by product type. Generally, the placement fee is 2.00% of the investment for hedge funds, funds of funds and private equity funds. Placement fees are subject to waiver in limited circumstances. You can find details about this waiver in your Investor Application. Proprietary UBS alternative investments When you invest in a UBS alternative investment managed by us or one of our * More information on commissions is available at ubs.com/commissions. Proprietary UBS alternative investments UBS Financial Advisors receive a portion of the management and administrative fees we receive for managing our proprietary funds. We have an agreement with one of our affiliates whereby we share the profits generated by certain funds we transferred to our affiliate and funds which they develop specifically for our wealth management platform. Non-proprietary alternative investments As compensation for our distribution services, UBS receives a Marketing and Distribution Fee that is paid from the Fund Manager s Management Fee. The conflict of interest section of the Private Placement Memorandum for the fund will describe whether UBS receives a Marketing Fee from the Fund. 16

19 Description Fees and charges paid by clients Compensation received from affiliates, the Management and/or Administration Fees charged by the fund will be paid to us or to our affiliates as managers and administrators of the fund. These funds will charge the client an Administration Fee for services that include but are not limited to administration, accounting, reporting and processing. The Fee is generally up to 1.00% or 100 basis points (bps) of the capital contribution based on the following investment breakpoints: 1.00% (100 bps): for investments of up to $3 million 0.75% (75 bps): for investments from $3 million up to $10 million 0.50% (50 bps): for investments of $10 million and above Affiliated Funds, will generally charge clients a Management Fee of 1.00% to 1.75% of the amount invested. The actual fee charged to the client by the fund can be found in the Private Placement Memorandum for the fund. UBS Managed Futures Funds typically charge clients a Management/Administration Fee of approximately 7.00%, which comprises of both the Management Fee and all trading and operating expenses of the fund s investment activities. UBS Financial Services Inc. and your Financial Advisor will receive a portion of this fee. Certain income that is generated by the fund such as dividend or interest may offset the expenses of the fund. Non-proprietary alternative investments Clients pay the Fund Manager a Management/ Administration Fee that generally ranges between 1.00% and 2.00% of the investment. UBS may receive up to 50% of this fee from the Fund Manager. Managed Futures Funds typically charge clients a Management/Administration Fee of 4.00% to 9.50%, which comprises both the Management Fee and all trading and operating expenses of the fund s investment activities. The actual fee charged by the fund can be found in the Private Placement Memorandum. UBS may receive up to 50% of the Management/Adminstration Fee. In limited circumstances, the Fund Manager may pay UBS a percentage of the Fund Manager s Incentive Fee which may be up to 2.00% of this fee. UBS generally receives an Incentive Fee when the fund exceeds a certain performance level. This fee may vary from year to year based on the underlying fund s annual performance. An Incentive Fee, if charged by the Fund Manager, is generally between 5.00% and 20.00% of profits of the client s investment made for a given year and is disclosed in the Private Placement Memorandum for the fund. Financial Advisors may receive a portion of these fees. UBS also may continue to receive a portion of the Management Fee from third-party funds that it no longer distributes or that were purchased by investors before they became UBS clients, as long as our clients are invested in that fund (or its successor). Your Financial Advisor may receive a portion of these fees. The fund transfer document states whether or not we receive this fee. The compensation that your Financial Advisor receives can vary from one fund to another and is generally higher for proprietary funds. 17

20 Special considerations for alternative investments Directed Brokerage. For a select group of alternative investment funds we offer on a limited basis, UBS may not receive the compensation described above but instead may receive commission from trades placed on behalf of the funds. This directed brokerage practice may result in us receiving substantially more compensation than we would ordinarily receive and may create a financial incentive for your Financial Advisor to recommend those funds. Due diligence. Alternative investment funds placed by UBS Financial Services Inc. are subject to initial due diligence and may be subject to ongoing due diligence. The level of diligence performed may vary based on a number of factors: a fund subject to limited distribution may undergo an appropriate level of diligence that nevertheless may exclude elements common to more widely distributed funds for which we conduct in-depth due diligence. A fund closed to new investment may be subject to no ongoing diligence at all, and a fund that you have transferred from another broker-dealer may never have been subject to any diligence by UBS Financial Services Inc., although UBS Financial Services Inc. and your Financial Advisor may continue to receive ongoing payments from the managers of these transferred funds. 18

21 Brokerage account and administrative fees Fees are subject to change at any time, and we reserve the right to implement new fees and charges for additional features in the future. Unless otherwise stated in your account documentation, we will automatically deduct fees and charges from your account. Fees and charges normally associated with account maintenance are listed below. Feebased accounts may be exempt from several of the fees listed below. For an explanation of situations where fees may be waived or capped and for examples of how annual fees can be impacted by different types of marketing relationships, please refer to the Fees and Charges section in the "Agreements and Disclosures Addendum" at ubs.com/accountdisclosures. If you have any questions about the fees, please contact your Financial Advisor. Account Fee Notes and Definitions Annual Service Fee Resource Management Account (RMA) $150 International Resource Management Account (IRMA) $175 IRA Resource Management Account (IRA-RMA) [first IRA-RMA only] IRA Resource Management Account (IRA-RMA) [additional IRA-RMAs] $150 The annual service fee for an IRA-RMA is $150 only if there are no other billable RMA or Business Services Account BSA for Sole Proprietorship accounts in the Marketing Relationship. $75 The annual service fee for an IRA-RMA is $75 if it is in a Marketing Relationship with a billable RMA or Business Services Account BSA for Sole Proprietorship accounts, or if it is in the same Marketing Relationship with another IRA-RMA that is paying a $150 annual service fee. Individual Retirement Account (IRA) $75 We charge a $75 annual fee for the first three IRAs if there is a billable RMA, Business Services Account BSA for Sole Proprietorship accounts or an IRA-RMA in the Marketing Relationship. If there is not, the $75 fee will apply to each IRA. Coverdell Education Savings Account (CESA) $75 403(b)(7) Custodial Account $75 Qualified Plan Fee $50 Business Services Account BSA $150 Business Services Account BSA Qualified Plans $150 Basic Investment Account $75 This account is no longer available. Other Fees Maintenance Fee $95 We charge this fee if your eligible assets in a Marketing Relationship do not maintain certain minimum required levels. Account Transfer Fee $95 Processing and Handling Fee (per transaction) $

22 Account Fee Notes and Definitions Transaction Fee (per transaction) at a rate adjusted twice per year and rounded by UBS to the next penny Varies This fee, which is displayed on trade confirmations, covers the transaction fees UBS is required to pay to self-regulatory organizations. Annual Physical Security Safekeeping (per security per Account) $75 This is a fee for storing stock certificates or other physical securities on your behalf. Restricted Legend Removal Fee (per security) $125 This fee covers costs associated with the legal transfer from restricted to common stock. Bounced Check Fee $15 This fee is charged if a check drawn on your account is returned for insufficient funds. Returned Check Deposit Fee (per check) $25 This fee is charged when a check deposited to your account is returned for insufficient funds. Special Check Handling Fee $10 This fee is charged when we pay a check that exceeds your Withdrawal Limit. Bill Payment, Automatic Payment, or Electronic Funds Transfer Returned-Item Fee (per item) $15 Stop Bill Payment / Transfer Fee (per stop payment) $15 Federal Fund Wire Transfer Fee (applies to U.S. Dollar wire transfers) $25 This fee is charged for outgoing U.S. Dollar wire transfers. RMA, IRA, IRA-RMA and Business Services Account BSA (Sole Proprietorships only) accounts residing within the same Marketing Relationship with a primary billable account receive a total of three free outgoing U.S. Dollar wire transfers per year. Foreign Currency Wire Transfer Fee $45 Starting January 1, 2013, this fee is charged for all outgoing foreign currency wire transfers. It is not included in the three free Federal Fund Wire transfer per year offer described above. Check Stop Payment Fee (per check) $12 Check Stop Payment Fee (series of 3 or more) $25 Check Copy Fee (per item) $2.50 Overnight Delivery of Wallet Style Check-Order Fee $15 Voluntary Corporate Action Fees $30 This fee is charged when account owners decide how they would like their assets to be handled when corporations take certain actions, such as voluntary tender offers. Support Services and Processing Fee $75 This fee applies to purchases or sales of no-load mutual funds and institutional mutual fund share classes in brokerage accounts, regardless of the amount of the transaction. American Depositary Receipts (ADR)/Global Depositary Receipts (GDR) Service Fee Varies If you own these types of securities, this fee may be charged by the third-party depository bank that holds the underlying assets and manages all registration and recordkeeping for the securities. UBS does not retain any portion of this fee. 20

23 Available advisory programs and services A description of each of our investment advisory programs and required minimum investment is provided below. Please note that if you have more than one advisory account, you may be able to link these accounts (if eligible) so that the total of your eligible assets is considered when determining the appropriate fee schedule. For details, please contact your Financial Advisor. For each of the programs described below, your Financial Advisor receives a portion of the fee that you pay UBS based on his or her payout rate. Financial Advisors in certain programs also receive fees in connection with mutual fund assets in client accounts. In addition to the program fees you pay us, commingled investment vehicles, including ETFs, mutual funds and UITs, carry built-in operating expenses. The applicable Form ADV disclosure (available at ubs.com/accountdisclosures) provides detailed information regarding each of these programs, our fees, our personnel, our other business activities and financial industry affiliations, and conflicts between our interests and your interests. The fees you pay will be the amount agreed between you and UBS. The Form ADV Disclosure and UBS Advisory Relationship Agreement and Program Application include all the information regarding compensation we receive directly from you and the indirect compensation we may receive from in these programs. If you would like a copy of the Agreement, Application and/or our ADV disclosure document, please contact your Financial Advisor. ACCESS SM ACCESS allows clients to select professional investment management organizations that will assume all day-to-day investment decisions for their assets. For a minimum investment of $100,000 (though some managers may have higher minimums), ACCESS offers a broad spectrum of respected investment management organizations that have undergone and met the standard of our Manager Research Group s due diligence process. We will provide you with the applicable Form ADV disclosure for each investment management organization you select, which provides detailed information regarding the investment management organization, fees, personnel, other business activities and conflicts between their interests and your interests. DC Advisory (DCA) DCA is a program designed to provide advisory services to defined contribution retirement plans. The ongoing advice of your DCA Financial Advisor is one of the key components and services provided. Institutional Consulting The UBS Institutional Consulting Program provides investment policy assistance, asset allocation studies and analysis, investment search and identification, and portfolio evaluation for institutional and high net worth clients. In addition, retirement plan consulting services are available for pension plans. Managed Accounts Consulting (MAC) MAC offers clients (i.e., high net worth individuals, small pension plans, foundations, etc.) the ability to establish a discretionary relationship directly with an investment management organization, while UBS provides professional investment consulting services, such as custody, trading and execution services, as well as performance reporting for accounts that are custodied at UBS. The minimum investment is $100,000 or the Manager's minimum, whichever is greater. The applicable Form ADV disclosure for each management organization you select provides detailed information regarding the management organization, fees, personnel, other business activities and conflicts between their interests and your interests. PACE (Personalized Asset Consulting and Evaluation) Multi Advisor The PACE Multi Advisor program offers access to a broad array of mutual funds with diverse investment management approaches. The minimum investment is $5,000. PACE (Personalized Asset Consulting and Evaluation) Select Advisors The PACE Select Advisors program offers clients the opportunity to participate in style-specific, no-load funds that are managed by investment subadvisors carefully chosen by UBS Global Asset Management, the advisor on the portfolios. The minimum investment is $10,000. Portfolio Management Program (PMP) PMP places specially trained Financial Advisors in the role of investment manager, providing discretionary feebased investment management. The minimum investment is $50,

24 UBS Managed Portfolio Advised by Richard Bernstein Advisors LLC This is a discretionary program that offers clients diversified exchange traded fund (ETF) portfolios, using UBS s Portfolio Strategy Group s investment management capabilities and Richard Bernstein Advisors market insight and asset allocation guidance. The minimum investment is $50,000. UBS Managed Portfolio of Funds (MPF) MPF is a centrally managed, discretionary mutual fund and ETF program. The portfolios are managed by UBS s Portfolio Strategy Group. The minimum investment is $5,000 or $50,000 depending on the strategy selected. UBS Managed Portfolio of Global Selections (MPGS) MPGS is a centrally managed, discretionary program that offers a diversified portfolio of U.S. core equities with a global selection of ETFs for exposure to other asset classes, including international equity and fixed income. The portfolios are managed by UBS s Portfolio Strategy Group. The minimum investment is $250,000. Global Selections of ETFs This centrally managed, discretionary program offers clients a diversified portfolio of global investments through ETFs. The portfolios are managed by UBS s Portfolio Strategy Group. The minimum investment is $50,000. UBS Managed Portfolio Selections The UBS Managed Portfolio Selections are centrally managed discretionary portfolios in which UBS s Portfolio Strategy Group, depending on the strategy selected, invests in single equity securities and ETFs. The minimum investment is $100,000. UBS Managed Portfolio of ESG (Environmental, Social and Governance Investments) ESG is a centrally managed, discretionary mutual fund and ETF program. The portfolios are managed by UBS s Portfolio Strategy Group. The minimum investment is $100,000. UBS Strategic Advisor This nondiscretionary, fee-based program offers clients the ability to receive ongoing advice from their UBS Financial Advisor and implement recommendations without paying commissions on individual transactions. The minimum investment is $50,000. UBS Strategic Wealth Portfolio (SWP) Through UBS Strategic Wealth Portfolio, Financial Advisors help clients build portfolios using a combination of investment managers, mutual funds and ETFs all within a single account. The minimum investment is $375,000. Certain strategies may require a higher minimum investment. We will provide you with the applicable Form ADV Disclosure for each investment management organization you select, which provides detailed information regarding the investment management organization, fees, personnel, other business activities and conflicts between their interests and your interests. Financial Planning Services Brokerage Financial plans provided free of charge are a service incidental to our brokerage relationship, terminate when we deliver the plan, and do not include ongoing planning advice or reporting. Advisory Financial planning services are provided for a fee and through a financial planning services agreement that defines the terms and scope of engagement. Corporations may enter into an agreement with UBS to provide financial planning services for their employees. Important information for Qualified Plan Fiduciaries For the additional information required to be disclosed under the Department of Labor's ERISA Section 408(b)(2) regulations for the advisory programs and services described above, please refer to our Form ADV disclosure at ubs.com/accountdisclosures for the particular advisory program or service and to our contract with you. Specifically: Review Item 4 of the Form ADV "Services, Fees & Compensation" for a description of the services we provide under the particular program or service, and the direct and indirect compensation we expect to receive in connection with that program or service Review Item 11 of the Form ADV "Code of Ethics, Participation or Interest in Client Transactions and Personal Trading" for a description of additional indirect compensation we may receive Review Item 14 "Client Referrals & Other Compensation" for a description of how we are compensated for referrals from affiliates and We will act as a registered investment adviser under the Investment Advisers Act of 1940 with respect to any of the above advisory programs that you select 22

25 Our status as an ERISA fiduciary is disclosed in your program agreement Your advisory fee, which may vary from the maximum advisory fee described in the Form ADV for the particular program or service, is disclosed in your program application or in a notice to you that confirms your fee and your enrollment in our advisory programs If you have selected a program that includes management by an investment manager unaffiliated with us, please see the manager s respective Form ADV and/or separate ERISA Section 408(b)(2) disclosure document for information regarding the manager s specific services and indirect compensation. We will provide you with the applicable Form ADV for each manager you select in the ACCESS and Strategic Wealth Portfolio Programs. Managers in the Managed Accounts Consulting Program will enter into an individualized contract with you and will provide the Form ADV directly. 23

26 UBS Trust Company of Puerto Rico UBS Trust Company of Puerto Rico provides the following services to qualified retirement plans: I. Trustee & Balance Forward Recordkeeping Services for Puerto Rico Qualified Defined Contribution Plans II. Trustee Services Only for Puerto Rico Qualified Defined Contribution & Defined Benefit Plans III. Balance Forward Recordkeeping Services Only for Puerto Rico Qualified Defined Contribution Plans IV. Trustee & Daily Valuation Recordkeeping Services for Puerto Rico or U.S. Qualified Defined Contribution Plans V. Investment Consulting Services What the Trust Company does As a directed (non-discretionary) trustee, the Trust Company will comply with the provisions of the plan, protects and invests plan assets as directed by the employer as the named fiduciary of the plan, and performs trust account and reporting. The Trust Company, through a contract with a third-party administrator, also performs balance-forward recordkeeping, daily valuation recordkeeping and related administrative duties, including: Monitoring participant transactions, Processing plan distributions, Performing annual, semi-annual, quarterly or daily valuation of plan assets, and Preparing applicable federal and local forms as required by U.S. and Puerto Rico regulations. Fees and charges paid by clients In addition to the Ancillary Fees and Government Filing Fees listed in the table that follows, clients pay the following fees and charges for the specified services. These fees and charges are established as agreed upon by the Trust Company and the client. I. Trustee & Balance Forward Recordkeeping Services for Puerto Rico Qualified Defined Contribution Plans For plans without salary deferrals that have assets in a UBS account, clients pay an Annual Administration Fee of up to $900, plus up to $20 for each plan participant. A portion of this fee is paid to a third-party plan administrator as follows: Up to $450 Up to $20 for each plan participant For plans with salary deferrals that have assets in a UBS account, clients pay an Annual Administration Fee of up to $5,000, plus up to $25 for each plan participant. A portion of this fee is paid to a third-party plan administrator as follows: Up to $1,900 Up to $20 for each plan participant For plan assets that are held outside UBS, clients pay an Annual Administration Fee of up to $3,000. Of this amount, up to $1,800 is paid to a third-party plan administrator. II. Trustee Services Only for Puerto Rico Qualified Defined Contribution & Defined Benefit Plans Clients pay an Annual Trustee Fee of up to 0.60% (60 basis points) of the total plan assets or a flat fee of up to $11,500. III. Balance Forward Recordkeeping Services Only for Puerto Rico Qualified Defined Contribution Plans Clients pay a Recordkeeping Fee of up to $

27 IV. Trustee & Daily Valuation Recordkeeping Services for Puerto Rico or U.S. Qualified Defined Contribution Plans Clients may pay a one-time Trust Set-up Fee of $500 (or up to $1,500 for plans with multiple locations) and a onetime Recordkeeping Set-up Fee of $1,000. In addition, clients pay: An Annual Administration Fee of up to $3,000. Of this amount, $1,750 to $2,250 is paid to a third-party plan administrator A Participant Fee of up to $50 for each plan participant depending on the plan type, size and number of plan participants. Of this amount, up to $35 per participant is paid to a third-party plan administrator A Trustee Fee of up to 0.75% (75 basis points) of the total plan assets or a flat fee of up to $2,000. Up to 0.30% (30 basis points) of this fee is paid to a third-party plan administrator A bundled fee of up to $10,000, which includes the one-time Trust and Recordkeeping Set-up Fees, the Annual Administration Fee, the Participant Fee and the Trustee Fee, depending on the plan type, size and number of plan participants. This bundled fee is in lieu of the fees listed above For plans that offer the employer's company stock as an investment alternative, the Trust Company pays a thirdparty plan administrator an additional fee of up to $1,500 per year for the administration of the stock fund. The total fee charged to a client may be discounted up to 25% based on the average participant account balance. Ancillary Fees and Government Filing Fees Clients may pay additional fees for the Trust Company services as indicated below. Please note: the Ancillary Fees are charged by the Trust Company and paid to the third-party plan administrator for the Trustee & Balance Forward Recordkeeping Services-PR QDC Plans and the Balance Forward Recordkeeping Services Only-PR QDC Plans. Fee I. Trustee & Balance Forward Recordkeeping Services PR QDC Plans II. Trustee Services Only PR QDC/QDB Plans III. Balance Forward Recordkeeping Services Only PR QDC Plans IV: Trustee & Daily Valuation Recordkeeping Services PR/US QDC Plans Ancillary Fees $150 to prepare the prior year valuations $75 per hour for analysis and consulting services $125 to prepare Form 5500/SF $175 to prepare Form OE $50 for electronic filing $50 to liquidate participants' holdings $350 to amend the plan (in some instances, only $150 is paid to a third-party plan administrator) $50 to qualify a plan $500 to terminate a plan* (in some instances, only $200 of this amount is paid to a third-party plan administrator) $100 for PR Treasury Department and IRS notifications* $25 to file for extensions $100 for technical computation of special plans $25 for a summary plan description * An additional charge ranging from $40 to $150 per hour may apply if extra time and/or special work are required. 25

28 Fee I. Trustee & Balance Forward Recordkeeping Services PR QDC Plans II. Trustee Services Only PR QDC/QDB Plans III. Balance Forward Recordkeeping Services Only PR QDC Plans IV: Trustee & Daily Valuation Recordkeeping Services PR/US QDC Plans $25 for employer ID number requests (Form SS-4) Up to $50 for distributions other than periodic distributions Up to $18.75 for periodic distributions Up to $30 for payment by wire transfer Up to $750 to prepare Form OE Up to $15 to prepare Form 480.7C Informative Tax Return $350 to amend a plan $500 to terminate a plan $30 to locate a missing participant $20 to stop payment $10 for a copy of a cashed check $10 per copy of the 480.7C Informative Tax Return Up to $100 for loan originations; of this amount, up to $50 is paid to a third-party plan administrator Up to $75 for loan maintenance; of this amount, $25 is paid to a third-party plan administrator Up to $800 per package for additional ADP/ACP $50 per transmission for multiple location reporting; charged when the transmission exceeds 52 transmissions per year, and the entire amount is paid to a third-party plan administrator Up to $150 per hour for special compliance and administration calculations; the entire amount is paid to a third-party plan administrator A fee to transfer out a plan equivalent to 25% of all fees charged by the third-party plan administrator in the last full year in which the termination of the agreement is effective $1,000 to prepare a non-standard prototype document Up to $55 for distributions other than periodic distributions; of this amount, $35 is paid to a third-party plan administrator $25 for each payment by wire transfer 26

29 Fee I. Trustee & Balance Forward Recordkeeping Services PR QDC Plans II. Trustee Services Only PR QDC/QDB Plans III. Balance Forward Recordkeeping Services Only PR QDC Plans IV: Trustee & Daily Valuation Recordkeeping Services PR/US QDC Plans $5 for each periodic distribution; of this amount, $4 is paid to a third-party plan administrator Out-of-pocket expenses (e.g., postage, messenger services, etc.) Government Filing Fees (charged by the Puerto Rico Department of Treasury and collected by the Trust Company) $800 to qualify a plan $350 to amend a plan $500 to terminate a plan Investment Consulting Services The UBS Consulting Services division of the Trust Company provides investment consulting services to institutional clients including qualified retirement plans where the amount of investment assets is generally $10 million or more. The services include: Investment policy assistance and monitoring Asset allocation studies and analysis Investment alternative and investment manager searches Portfolio evaluation and review Special services for participant-directed employee benefit plans Investment education for plan participants Other consulting services requested by the client Fees and charges paid by the client. Clients pay an Investment Consulting Fee in an amount agreed upon between the client and UBS Consulting Services (a division of the Trust Company). This fee is confirmed in the Consulting Services Agreement completed by the client. The Trust Company has an agreement with its affiliate, UBS Financial Services Incorporated of Puerto Rico (UBSFS-PR), whereby UBSFS-PR may solicit clients for, or refer clients to, the Consulting Services division of the Trust Company. As compensation, UBSFS-PR is paid a solicitation fee of up to 25% of the fees the Trust Company receives from the client. UBSFS-PR may, in turn, pay one or more of its Financial Advisors the entire solicitation fee or a portion of the Investment Consulting Fee based on the Financial Advisor's payout rate. For qualified retirement plans where the third-party plan administrator is the firm, Benefit Plans Administrators (BPA), you can access a plan-specific fee disclosure of other direct and/or indirect compensation received by BPA and the Trust Company's affiliate. Simply go to select the Employer Accounts tab, click Retirement Account, log into your plan sponsor website where indicated, and view the disclosure at the Resource Center tab. 27

30 Conflicts of interest Conflicts of interest may arise as a consequence of the firm s interests and our relationships with multiple clients, other financial services firms and vendors with whom we conduct business. Examples of conflicts of interest that may arise as a result of our compensation structures are described below. This is not intended to be an all inclusive list, and any questions that you have should be directed to your Financial Advisor. Financial Advisor compensation You should be aware that Financial Advisors may have an incentive to recommend products and services for which they receive higher compensation. For example: The percentage of firm revenues that Financial Advisors receive from investment advisory programs is higher than the percentage of firm revenues they receive from many other products and services. In general, Financial Advisors earn more for products sold in initial offerings than for those purchased and sold in secondary offerings. Compensation to Financial Advisors varies between proprietary and non-proprietary products and product type. Financial Advisors may receive higher compensation from the sale of proprietary products. Revenue sharing When UBS receives revenue sharing compensation or distribution support from distributors or advisers of mutual funds, annuity products, UITs and other products we sell, it presents a conflict of interest between our interests and those of our clients. Although these payments are not shared with Financial Advisors, they can create incentives to promote those products for which we receive revenue-sharing payments. For more information go to ubs.com/mutualfundrevenuesharing and ubs.com/va-revenuesharing. Trading and execution practices When executing your order in certain types of securities, including debt, we are permitted to trade with you for our own account or for an affiliate or another client, and may earn a profit on those trades. When we or an affiliate act as principal in buying a security from or selling a security to you, we earn compensation on the transaction by charging you a markup or markdown from the price of the security and collecting a spread for our affiliate s role. This spread is our compensation for taking market risk and making a market in the security. We have adopted policies and procedures that limit transactions for our proprietary accounts and the accounts of our employees. These policies and procedures are designed to prevent, among other things, improper or abusive conduct when there may be a potential conflict with interests of clients. For additional information on our best execution and order entry procedures, go to ubs.com/bestexecution and ubs.com/orderroutingdisclosure. Conflicts between our asset management and distribution businesses Your Financial Advisor may offer to sell you a nonproprietary hedge fund, managed futures fund or other investments that a UBS fund of funds or a UBS portfolio manager has redeemed in the portfolios they manage. The decisions by portfolio managers regarding the purchase and sale of securities in the portfolios are made independently from our assessment of the products approved for our distribution platform. There is no obligation that any of the UBS funds of funds or UBS portfolio manager (or any other client or affiliate of the firm) either invest in or hold any investment vehicle that your Financial Advisor may offer to you. 28

31 UBS Financial Services Inc. ubs.com/fs UBS The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. Member SIPC. UBS Financial Services Inc. is a subsidiary of UBS AG.