Friday, 11.01.2019

Automotive industry
Given a polish

With jubilant highs and sorry lows, the automotive industry has endured a rollercoaster of emotions in recent months. Although the prospects of autonomous technology, digital networking and innovative engines have been a ray of light for the industry, economic uncertainty and trade conflicts are providing a much gloomier picture. There has been a prevailing sense of concern over the past year and prices have hit rock bottom¹. It is, however, still unclear whether the sector will experience a change in direction in 2019. At the upcoming Detroit Motor Show, automotive groups will be revealing what they have to offer under the hoods of their vehicles. The ETT on the STOXX™ Europe 600 Automobiles & Parts NR Index (symbol: ETAUT) provides investors with the opportunity to participate in the sector in a diversified manner and without having to pay any fees.² A viable alternative is also presented in the form of the new IC Kick-In GOAL (symbol: KCZTDU) on BMW, Daimler and VW. The product has a buffer of 40% as well as an annual coupon of 10%.

In order to make an impression with those in attendance, the manufacturers polished their cars at the beginning of the year and will present the highlights of their product ranges at various trade fairs. Traditionally, the North American International Auto Show (NAIAS) announces the start of the year for the automotive industry – and has done so since 1907. However, this is the last time the Detroit show will take place in January. From 2020 onwards, the NAIAS will be a summer event held in July. The trade fair opens its gates on January 14 this year, with numerous innovations at which guests can marvel. The organizers expect more than 30 new models to make their debut, with the American automotive groups taking center stage. Ford will enter the race with, among other vehicles, the 700-horsepower Shelby GT500 and Fiat-Chrysler will showcase a new Ram Heavy Duty pickup with LED lights. But it’s not just the US brands that want to impress the domestic audience; European manufacturers will also be showing what they have to offer in Detroit. For example, Volkswagen will unveil the US Passat as its latest sedan model.

Opportunities: The car world is facing upheaval. This presents risks (billion-dollar investments) as well as opportunities (product innovations). Should you feel that there will be a change in direction in 2019 – the STOXX™ Europe 600 Automobiles & Parts Index fell by 28% last year– you can implement a long strategy with the ETT (symbol: ETAUT).¹ The product offers full participation, taking into account the net distributions of the 16 members. This is a factor not to be underestimated, as the dividend yield of the index stands at 2.5%. There is no annual fee.² With the new IC Kick- In GOAL (symbol: KCZTDU), investments can be made in the index heavyweights BMW, Daimler and VW with an “airbag”. The product has a comfortable risk buffer of 40% and an attractive annual coupon of 10%.

Risks: The aforementioned products do not have capital protection. Should the underlying assets deliver a negative performance, the ETT will incur commensurate losses. If the underlying assets for the Worst of Kick-In GOALS equal or fall below the respective kick-in level (barrier) and the issuer callable feature does not apply, the amount repaid on maturity may be in cash, reflecting the worst performance of the three shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Automobiles & Parts NR Index vs. STOXX™ Europe 600 NR Index
(five years, for illustrative purposes only, figures in %)¹

“Nothing gained, nothing lost” – this figure of speech holds true for the five-year trend of the STOXX™ Europe 600 Automobiles & Parts Index. Meanwhile, the broad STOXX™ Europe 600 Index rose by 20%.

BMW vs. Daimler vs. Volkswagen VZ
(five years, for illustrative purposes only, figures in %)¹

The shares of BMW, Daimler and Volkswagen are showing clear signs of slowing down in the five-year chart. Over the past two years, the shares in the three German automotive companies have at least moved sideways.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

ETT on STOXX™ Europe 600 Automobiles & Parts NR Index

10.00% p.a. IC Worst of Kick-In GOAL on BMW / Daimler / Volkswagen

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Market overview

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Biotech sector
Wave of acquisitions set to continue

The new year began with a bang on Wall Street, as pharmaceutical giant Bristol-Myers Squib submitted a USD 74 billion takeover bid for the Celgene biotech group on January 3. And just a few days later, Eli Lilly added to the wave of takeovers in the sector. The American company is courting Loxo Oncology with an USD 8 billion cash offer. In the wake of both deals, the kick-in GOAL (symbol: KCFZDU) on Celgene, Amgen and Johnson & Johnson also experienced a lively start to the year.¹ Notwithstanding the gains, the product offers the prospect of a minimum return of 10.4% p.a. Even with the current worst performer (Celgene), this attractive opportunity comes with a barrier of 37.5%.

Together with Celgene, Bristol-Myers Squib will soon be launching a series of blockbusters on the market. Specifically, six new drugs with a sales potential of more than USD 15 billion are to be launched in the near future. One of the key aspects in the planned merger is cancer immunotherapy. Celgene boosted its expertise in this field of treatment last year with the USD 9 billion acquisition of Juno Therapeutics (source: Thomson Reuters media report, January 3, 2019).

Opportunities: Should the share prices of Amgen, Celgene and Johnson
& Johnson remain more or less stable over the next seven months, a minimum annual yield of 10.4% can be achieved with the Kick-In GOAL (symbol: KCFZDU). This will require that none of the three underlyings touch or fall below the barrier before the maturity date in August. In contrast to when the shares were issued, Celgene currently has the weakest price performance. Nevertheless, the Nasdaq 100™ member still has a safety buffer of 37.5%.

Risks: Kick-In GOALs do not have capital protection. If one of the underlyings equals or falls below the respective kick-in level (barrier) during the term, the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the three shares from the strike price (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Amgen vs. Celgene vs. Johnson & Johnson
(five years, for illustrative purposes only, figures in %)¹

6.50% p.a. Kick-In GOAL on Amgen / Celgene / Johnson & Johnson

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Friday, 21.12.2018

Investment idea 2019 I
Dividend stocks

On 6 December UBS published its much-respected report “Year Ahead”. Suitably for the current situation on the financial markets, the 2019 outlook is entitled “Turning Points”. In the 76-page publication the experts at the world’s leading wealth manager take a close look at what might happen in the new year. They also, as usual, make specific recommendations. You can find “Year Ahead” at ubs.com/cio. As far as equities as an asset class are concerned, European utilities are among the favorites of UBS CIO GWM – see page 3. They also think dividend stocks are promising. With the Open End PERLES (symbol: SWDIV) on the Dow Jones Switzerland Select Dividend 15 Index™ investors can gain exposure to high-yielding shares in the domestic market at a single stroke. This tracker certificate has been on the market for over seven years, whereas the Open End PERLES (symbol QIXEUU) on the QIX Dividenden Europa Index was launched in mid-2017.

The Chief Investment Office of UBS Global Wealth Management (CIO GWM) expects global economic growth to weaken from 3.8% in the year now ending to 3.6% in 2019. Corporate earnings will also rise more slowly. CIO GWM feels that the prices of many financial assets already reflect the uncertain prospects. UBS Wealth Management is therefore going in 2019 overweight in global equities. Given the advanced stage of the market cycle, though, they recommend diversification and hedging. “Investors should hold on to their positions in global equities, but be braced for market volatility,” is how Mark Haefele, Chief Investment Officer at CIO GWM, summarizes the outlook. (Source: UBS, press release, 06.12.2018)

Opportunities: With Open End PERLES investors can implement the dividend strategy in Switzerland (Symbol: SWDIV) and/or across Europe (symbol: QIXEUU). The products track the Dow Jones Switzerland Select Dividend 15 Index™ and QIX Dividenden Europe Index at a ratio of 10:1 and 100:1 respectively. In line with the investment theme, investors also benefit from the distributions made by the constituents in the underlying. Any dividend payments are reflected in the index calculation.

Risks: Open End PERLES do not have capital protection. Losses will be made if the underlying index declines. The currency risk must also be taken into account, as the trading currency of some index constituents may differ from the trading currency of the certificate shown. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Dow Jones Switzerland Select Dividend 15 Index™ vs. SMI™ Index (5 years, for illustrative purposes only, figures in %)

The Dow Jones Switzerland Select Dividend 15 Index™ hit an all-time high in January 2018. Although it was unable to stay at this level, it has beaten the SMI™ over five years.

QIX Dividenden Europa Index vs. Intel vs. STOXX™ Europe 600 Index (from 3 May 2017, for illustrative purposes only, figures in %)

The QIX Dividenden Europa Index has fallen in a weak market environment since launch. However, the rule-based strategy did slightly better than the STOXX™ Europe 600.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Open End PERLES on Dow Jones Switzerland Select Dividend 15 Index™

Open End PERLES on QIX Dividenden Europa Index (EUR)

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Market overview

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Investment idea 2019 II
European Utilities

The macro-economic picture for 2019 has both light and shade. One sector that is relatively insensitive to a possible global slowdown and the ongoing trade disputes is utilities. In a chaotic year on the markets in 2018 European power companies as measured by the STOXX™ Europe 600 Utilities Index clearly outperformed the broad market.¹ UBS CIO GWM is still positive on the sector: the analysts regard valuations as attractive compared to other non-cyclical sectors such as consumer goods and healthcare. (Source: UBS CIO GWM, European Utilities, 17.12.2018) Investors can literally “electrify” their portfolio with an ETT (symbol: ETUTI) on the STOXX™ Europe 600 Utilities Net Return Index. The product currently has no ongoing management fee and also offers an attractive dividend yield.²

There are good reasons why European utilities have done well: according to UBS CIO GWM they have been driven by companies where the profit prospects benefit from rising wholesale electricity prices. In 2018, tariffs were up 20-40% in Europe. The analysts name EDF, RWE and Fortum as specific beneficiaries of this trend. (Source: UBS CIO GWM, European Utilities, 17.12.2018) When it comes to profits, Iberdrola may also score well in this regard. Operating profit was up 34% in Q3, ahead of market expectations. The Spanish utility boosted revenue by 24%. With an weighting of just under 13%, Iberdrola is currently the heavyweight in the STOXX™ Europe 600 Utilities Index. (Source: STOXX™ Index factsheet, 31.10.2018) The experts at UBS CIO GWM see political and regulatory risks for the sector in 2019, such as Brexit and potential government intervention in the sector in Italy. But the profit outlook for utilities is positive, with an estimated growth rate of 6%. (Source: UBS CIO GWM, European Utilities, 17.12.2018)

Opportunities: All the sector companies mentioned so far are constituents of the STOXX™ Europe 600 Utilities NR Index. Recently the 28 stocks in the index have moved up against a weak market environment.¹ With the ETT (symbol: ETUTI) it is possible to back a continuation of the positive price performance in this “energetic” sector. As the underlying in this case is a net return variant, dividends are reinvested in the index. The current distribution yield is an above-average 4.6%.

Risks: This product does not have capital protection. Should the underlying assets deliver a negative performance, the ETT will incur commensurate losses. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Utilities Index vs. STOXX™ Europe 600 Index (5 years, for illustrative purposes only, figures in %)

ETT on STOXX™ Europe 600 Utilities Net Return Index

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Friday, 14.12.2018

Fintech
The change goes on

Equities have fallen right of favor as an asset class in 2018. With little time left to the end of the year, negative numbers predominate all round the world. But there are exceptions. Despite all concerns about a crisis, for example, digitalization moves relentlessly on in all sorts of areas in life and business. Including, and especially, in financial services. So the Solactive FinTech 20 Total Return Index is on the winning side in 2018. Although the innovative benchmark has corrected from its all-time high in early October, it is 8% up since the end of last year in US dollars.¹ UBS passively replicates the Solactive FinTech 20 Total Return Index with an Open End PERLES. This allows investors to invest in the megatrend in a diversified manner with no maturity limitation. The participation product is available in Swiss francs (symbol: FINTE), US dollars (symbol: FINTEU) and euro (symbol: FINTEE).

UBS CIO GWM defines fintech as innovations that make banking and financial services easier. The megatrend also appears in the recent publication “Year Ahead 2019” from the world’s leading wealth manager. In this outlook the CIO GWM ranks fintech as one of the most promising longer term investments (LTI). In the current environment in particular, with growth harder to find, experts see such long-term investments as attractive. The LTIs are thematic ideas based on structural trends like population growth, aging and urbanization. CIO GWM believes such themes can guide investors through the current turbulence on the markets and into the future. It sees several driving factors in favor of fintech. Along with rising urbanization, millennials are driving up demand for digital financial solutions.

Opportunities: UBS opened the Open End PERLES on the dynamic benchmark back in May 2015. Investors can implement this long-term investment idea without any maturity limitation and in the three index currencies: Swiss francs (symbol: FINTE), US dollars (symbol: FINTEU) and euro (symbol: FINTEE). The management fee is a consistent 0.75% p.a. Any net dividends paid by index companies are reinvested in the underlying stock.

Risks: Open End PERLES do not have capital protection. Losses will be made if the underlying index declines. The currency risk must also be taken into account, as the trading currency of the PERLES shown may differ from the currencies of the index members. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Solactive FinTech 20 TR Index (USD) vs. MSCI™ World Index (from 30 March 2015, for illustrative purposes only, figures in%)¹

The fintech segment has not been able to avoid the correction on the stock market. The sector index has outperformed the global equity market both since launch in March 2015 and in the current year.

Temenos vs. MarketAxess vs. Thomson Reuters vs. Intel (five years, for illustrative purposes only, figures in %)¹

Temenos has weakened considerably from its all-time high. Even so, the banking software specialist has still beaten both MarketAxess and Thomson Reuters over five years.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Open End PERLES on Solactive FinTech 20 Total Return Index (CHF)

Open End PERLES on Solactive FinTech 20 Total Return Index (USD)

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Market overview

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Airlines
A turbulent year

Numerous flight cancellations and delays and a sharp rise in aviation fuel prices have caused problems for airlines in 2018. Industry stocks in Europe in particular have fallen heavily in value. Lufthansa and Air France-KLM have stabilized recently, while US competitor Delta Air Lines continues its 2018 uptrend. The three carriers allow attractive conditions as underlying for a Callable Kick-In GOAL (Symbol: KCKLDU): the product offers a positive minimum return of 16.4% p.a. at maturity. The current worst performer, Lufthansa, has a safety buffer of just under 28%.

Growth in the airline industry remains intact. The group, which includes SWISS, transported around 10.6 million passengers in November, 6.1% more than in the same month the previous year. Between January and November 132.4 million passengers boarded Lufthansa aircraft, a growth rate of 10.3% year on year. (source: Lufthansa press release, 11 December 2018) Air France-KLM has not been able to keep up. Its passenger numbers rose 2% to 78.8 million in the first eleven months. However, the French had not increased capacity as much as their German competitor. (source: Air France-KLM press release, 10 December 2018) Delta Air Lines moved a hefty 177.2 million people around the world between January and November 2018. It was not so much the growth rate as the outlook that went down poorly with the stock market: Delta is expecting revenue per passenger mile to rise 3-5% in the current (fourth) quarter. This forecast is at the lower end of previous expectations. (Source: Thomson Reuters media report, 4 December 2018)

Opportunities: With the Callable Kick-In GOAL (symbol: KCKLDU) investors are counting on the three airline stocks being able to maintain their current “altitude” until final maturity. If this calculation proves correct, the product will pay a return of 16.4% p.a. in September 2020. While Air France-KLM has been largely steady since the product was launched, Lufthansa is well below the initial fixing. There remains just under 28% before the worst performer touches the barrier. The issuer is entitled to terminate the product early for the first time on 19 September 2019, and subsequently every three months thereafter. If it uses the callable function, holders get the full nominal back plus the pro rata coupon.

Risks: This product does not have capital protection. If the underlyings touch or fall below the respective kick-in level (barrier) and the callable feature does not apply, the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the three index shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Air France-KLM vs. Delta Air Lines vs. Deutsche Lufthansa (five years, for illustrative purposes only, figures in %)¹

11.00% p.a. Callable Kick-In GOAL on Air France-KLM / Delta Air Lines / Lufthansa

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Friday, 07.12.2018

The pharma industry
A healthy performance

In recent weeks and months, observers of the stock market will have noticed a certain change in investors’ preferred shares. Technology shares, which had been favorites among investors for a long time, have had to make way, as sectors considered defensive gained in popularity. This especially applies to the healthcare industry – the STOXX™ Europe 600 Health Care Net Return (NR) Index rose by 1.9% in November. With an ETT (symbol: ETHEA), investors can add this benchmark with strong momentum to their portfolios in an efficient and cost-effective manner. The Pharmaceutical powerhouses Bayer, GlaxoSmithKline and Novartis form the basis for an Early Redemption (ER) Kick-In GOAL (symbol: KCOCDU). The product is currently showing a positive minimum return of 12.3% p.a. This opportunity comes with a solid safety buffer of 26.5% – even with the current worst performer Bayer.

In view of the hectic stock market environment, the recent rotation in preferred sectors is not without warrant. The healthcare industry can certainly also offer operational momentum. A good example here is Novartis: Since Vasant Narasimhan assumed the position of CEO in February; he has set about repositioning the Basel-based group. The Harvard graduate is focusing on specialized, patient-oriented drugs and new treatment approaches, with the aim of developing platforms for cell therapy, gene therapy and radioligand therapy. Novartis strengthened the latter area in October with the USD 2.1 billion acquisition of Endocyte. The US biotech company is developing a type of nuclear medicine therapy for the treatment of prostate cancer. Narasimhan believes that the drug, which is due to be launched in 2021, will generate peak sales of more than one billion US dollars. New products, such as the heart medication Entresto or Cosentyx for psoriasis, have recently provided a boost to Novartis› business, as the Group recorded currency-adjusted sales growth of 6% in the third quarter of 2018.

Opportunities: In spite of this, the STOXX™ Europe 600 Health Care Index is about to break out to the upside of the overriding downward trend. With the ETT (symbol: ETHEA), both a short-term trading strategy and a permanent buy-and-hold approach can be pursued – the product replicates the underlying assets completely. There are thus no management fees for this product.² For the ER Kick-In GOAL (symbol: KCOCDU), a stable performance from Bayer, GSK and Novartis would be enough to realize the positive minimum return of 12.3% p.a. Although the product is listed well below the issue price almost two months after the initial setting of the price, the barrier is still 26.5% – even for Bayer, currently the weakest share among the trio. Due to the integrated Early Redemption function, there is also the opportunity for early redemption plus the accrued coupon with this Kick-In GOAL.

Risks: The aforementioned products do not have capital protection. Should the underlying assets deliver a negative performance; the ETT will incur commensurate losses. If one of the underlyings in a Worst of Kick-In GOAL touches or falls below the respective kick-in level (barrier) and the early redemption feature does not apply, repayment at maturity may be in cash, reflecting the weakest performance of the trio from strike (but no more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Health Care Net Return Index vs. STOXX™ Europe 600 Net Return Index 5 years¹

By mid-year, the STOXX™ Europe 600 Health Care Index had lost its lead over the market. The sector has, however, been outperforming the STOXX™ Europe 600 Index once again recently.

Bayer vs. GlaxoSmithKline vs. Novartis
(5 years; for illustrative purposes only; figures in %) ¹

Most recently, Novartis shares outperformed those of both competitors in a five-year comparison. While Bayer is only just below the break-even point, GlaxoSmithKline has been on a downward spiral since June 2017.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

ETT on STOXX™ Europe 600 Health Care EUR Net Return Index

7.50% p.a. Early Redemption Kick-In GOAL on Bayer / GlaxoSmithKline / Novartis

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Market overview

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

US technology
The battle for supremacy

The battle for the crown of stock market heavyweight is in full swing. Amazon, Microsoft and Apple have recently been trading the position of most valuable company. The company sitting in fourth place –Alphabet – also has a good chance of stealing this crown. In terms of operations, Microsoft in particular is currently making positive headlines, as the veteran of the computer industry once again exceeded analysts› expectations in the past quarter. With positive growth of around 30% in 2018, the Microsoft share has also performed much more dynamically than its arch-rival Apple.¹ The Early Redemption (ER) Worst of Kick-In GOAL (symbol: KCTKDU) on Alphabet, Apple and Microsoft does not need any share price gains for a return to be delivered. The product issued at the beginning of November is currently offering a potential maximum return of 10.6% p.a. which is partly protected by a risk buffer of more than 30%.

For a long time, Microsoft was regarded as a “digital dinosaur” threatened with extinction. However, the CEO Satya Nadella, who has been in office since 2014, shook the dust off the company founded in 1975 and managed to turn the tide by focusing on the cloud. With its “Azure” cloud solution, the group has now risen to number two behind Amazon and even ahead of the Alphabet subsidiary Google. In the first quarter of the 2018/19 financial year alone, Azure has recorded growth of 76%. The group has also enjoyed success on the stock market. On November 28, Microsoft held the position as the world’s most valuable listed company for the first time since 2000 and at the same time dethroned Apple. Although the iPhone manufacturer is also doing well operationally, concerns have recently arisen on the stock market. Reports from suppliers suggest that sales of the current generation of iPhones are below expectations (source: Handelsblatt media report, December 1, 2018).

Opportunities: Even though the upward trend of tech shares has faltered somewhat recently, the industry giants Alphabet, Apple and Microsoft are still clearly up in comparison with the end of 2017.¹ Should the trio take their foot off the gas again, this would present no problems to the ER Worst of Kick-In GOAL (symbol: KCTKDU). The coupon of 9.50% will be paid out regardless of the performance of the shares. Currently, the maximum return is even higher, as the kick-in GOAL is listed below par. In order to achieve this maximum return, the barrier for the underlying assets must remain intact. Apple currently has the lowest buffer, standing at 31.8%. Should the three shares be at or above their starting price on one of the quarterly observation days (first date: November 7, 2019) the product will mature ahead of schedule due to the ER function.

Risks: ER Kick-In GOALs do not have capital protection. If the underlyings equal or fall below the respective kick-in level (barrier) and the early redemption feature does not apply, the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the three shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Alphabet Inc. A vs. Apple vs. Microsoft (5 years)¹

9.50% p.a. ER Worst of Kick-In GOAL on Alphabet / Apple / Micorosoft

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.