424B3 1 d826296d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-234705

 

PROSPECTUS

 

 

 

 

LOGO

UBS AG

Offers to Exchange

All Outstanding Notes of the Series Specified Below

Final Expiration Date: 5:00 p.m., New York City Time, May 1, 2020, unless extended

 

 

We are offering to exchange any and all validly tendered (and not validly withdrawn) and accepted notes of the eight (8) series of UBS AG Exchange Traded Access Securities (the “ETNs”) described in the below table, which are part of a series of UBS AG debt securities entitled “Medium-Term Notes, Series A” (collectively, the “Series A ETNs”) co-obligated by UBS AG and UBS Switzerland AG, for the applicable corresponding ETNs which are part of a series of UBS AG debt securities entitled “Medium-Term Notes, Series B” (collectively, the “Series B ETNs”) issued by UBS AG, as sole obligor, as described herein, on a 1-for-1 basis.

 

Aggregate
Number of
Securities
Outstanding

as of

December 2,
2019(1)

  Title of Series A ETNs  

CUSIP

No. of

Series A
ETNs

  Ticker
Symbols
of Series A
ETNs(2)
  Title of Series B ETNs Being
Offered
 

CUSIP

No. of
Series B
ETNs

  Ticker
Symbols
of Series B
ETNs(3)

 

17,900,000   ETRACS Alerian MLP Index ETN due July 18, 2042   90267B682   AMU   ETRACS Alerian MLP Index ETN, Series B due July 18, 2042   90274D374   AMUB
13,100,000   2xLeveraged Long ETRACS linked to the Wells Fargo Business Development Company Index due May 24, 2041   90267B765   BDCL   2xLeveraged Long ETRACS Wells Fargo Business Development Company Index ETN Series B due May 24, 2041   90274D424   LBDC
4,355,000   ETRACS linked to the Wells Fargo Business Development Company Index due April 26, 2041   902641588   BDCS   ETRACS Wells Fargo Business Development Company Index ETN Series B due April 26, 2041   90274D416   BDCZ
17,000,000   ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN due December 10, 2043   90270L842   CEFL   ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN Series B due December 10, 2043   90269A468   CEFZ
2,938,680   ETRACS linked to the Bloomberg Commodity Index Total Return due October 31, 2039   902641679   DJCI   ETRACS Bloomberg Commodity Index Total Return ETN Series B due October 31, 2039   90269A450   DJCB
46,850,000   ETRACS linked to the Alerian MLP Infrastructure Index due April 2, 2040   902641646   MLPI   ETRACS Alerian MLP Infrastructure Index ETN Series B due April 2, 2040   90274D382   MLPB
30,240,000   ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN due October 16, 2042   90269A302   MORL   ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B due October 16, 2042   90274D432   MRRL
4,728,590   ETRACS linked to the UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return due April 5, 2038   902641778   UCI   ETRACS UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return ETN Series B due April 5, 2038   90274D390   UCIB

 

(1) 

We have registered an amount of Series B ETNs that is more than the number of Series A ETNs currently outstanding to account for potential additional Series A ETN issuances prior to the Final Expiration Date (as defined herein) of the exchange offers.

(2)

Each series of Series A ETNs is currently listed on NYSE Arca.

(3)

Each series of Series B ETNs is currently listed on NYSE Arca.

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In exchange for each Series A ETN that is validly tendered prior to 5:00 p.m., New York City time, on an Applicable Exchange Date (as defined below) (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date) and not validly withdrawn prior to 5:00 p.m., New York City time, on such Applicable Exchange Date, holders will receive one Series B ETN ($25.00 stated principal amount) as set forth in the corresponding row in the table above (the “Exchange Consideration”).

Tenders of Series A ETNs in connection with any of the exchange offers may be withdrawn at any time prior to 5:00 p.m., New York City time, on the next Applicable Exchange Date immediately following the date on which such Series A ETNs are validly tendered. Following each Applicable Exchange Date, Series A ETNs that were tendered in the preceding Exchange Period (as defined below) may not be validly withdrawn unless UBS AG is otherwise required by law to permit withdrawal.

The economic terms of each Series B ETN issued in exchange for a Series A ETN are intended to be identical, except UBS Switzerland AG is a co-obligor of the Series A ETNs but is not a co-obligor of the Series B ETNs. The Series B ETNs therefore do not benefit from any co-obligation of UBS Switzerland AG (the “UBS Switzerland Co-obligation”). On any Business Day, the accrued coupon amount on any series of coupon paying Series A ETNs will equal the accrued coupon amount on the corresponding series of Series B ETN. Holders of any series of coupon paying Series A ETNs on the applicable coupon record date will receive the coupon payment payable on such series of Series A ETNs on the applicable coupon payment date, even if such holder has exchanged such series of Series A ETNs prior to the applicable coupon payment date. Holders that exchange their coupon paying Series A ETNs into a corresponding Series B ETN will receive coupon payments payable on such Series B ETN if they held such Series B ETN on the applicable coupon record date. The exchange offers will expire at 5:00 p.m., New York City time, on May 1, 2020, unless extended (the “Final Expiration Date”). You may withdraw tendered Series A ETNs at any time prior to 5:00 p.m., New York City time, on the next Applicable Exchange Date immediately following the date on which you validly tendered your Series A ETNs.

The consummation of each exchange offer is subject to, and conditional upon, the satisfaction or waiver, where permitted, of the conditions discussed under “The Exchange Offers—Conditions to the Exchange Offers.” We may, at our option and sole discretion, waive any such conditions, except the condition that the registration statement of which this prospectus forms a part has been declared effective by the U.S. Securities and Exchange Commission (the “SEC”). All conditions to the exchange offers must be satisfied or, where permitted, waived, at or by each Applicable Exchange Date.

Subject to applicable law, each exchange offer is being made independently of the other exchange offers. In the event that any of the conditions to the exchange offers, as discussed under “The Exchange Offers—Conditions to the Exchange Offers,” are not satisfied prior to an Applicable Exchange Date, we reserve the right to terminate or withdraw each exchange offer independently of the other exchange offers, as described in this prospectus. We reserve the right to amend each exchange offer independently of the other exchange offers at any time and from time to time, as described in this prospectus.

We plan to issue the Series B ETNs promptly on or about the second business day following each Applicable Exchange Date (each such day, a “Settlement Date”).

THIS PROSPECTUS SETS FORTH DETAILS COMMON TO EACH OF THE EXCHANGE OFFERS AND TO ALL SERIES OF SERIES B ETNS. ADDITIONAL DETAILS RELEVANT TO EACH SERIES B ETN ARE SET FORTH IN THE ANNEXES ATTACHED HERETO.

An investment in these Securities involves risks. Prior to participating in any of the exchange offers and investing in the Series B ETNs, please see the section entitled “Risk Factorsbeginning on page 18 of this prospectus for a discussion of the risks that you should consider. An additional discussion of the risk factors specific to each series of Series B ETNs is set forth in Annexes A—H to this prospectus, as applicable. Additionally, for a discussion of important business and financial risks relating to UBS, please see “Risk Factors” in Part I, Item 3D of our Annual Report on Form 20-F for the fiscal year ended December 31, 2018, which is incorporated in this prospectus by reference (and in any of our annual or quarterly reports for a subsequent fiscal period that are so incorporated).

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

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None of UBS AG, the exchange agent, the information agent, or the trustee under the indentures governing the Series B ETNs or the dealer manager makes any recommendation as to whether holders of Series A ETNs should exchange their Series A ETNs in the exchange offers.

The communication of this prospectus and any other document or materials relating to the issue of the Series B ETNs offered hereby is not being made, and such documents and/or materials have not been approved, by an authorized person for the purposes of Section 21 of the United Kingdom’s Financial Services and Markets Act 2000 (as amended, the “FSMA”). Accordingly, such documents and materials are not being distributed to, and must not be directed at, the general public in the United Kingdom. The communication of such documents and/or materials is only being made to those persons in the United Kingdom who have professional experience in matters relating to investments and who fall within the definition of investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”)), or who fall within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “Relevant Persons”). In the United Kingdom, this prospectus and the Series B ETNs offered hereby are only available to, and any investment or investment activity to which this prospectus and any other document or materials relating to the issue of the Series B ETNs offered hereby relates, will be engaged in only with, Relevant Persons. Any person in the United Kingdom that is not a Relevant Person should not act or rely on this prospectus or any of its contents.

This prospectus and any other document or materials relating to the issue of the Series B ETNs offered hereby is not a prospectus for the purposes of the Prospectus Regulation. The expression “Prospectus Regulation” means Regulation (EU) 2017/1129.

PROHIBITION OF SALES TO EEA RETAIL INVESTORS—The Series B ETNs are not intended to be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of the following: (i) a retail client as defined in point (11) of Article 4(1) of Directive (EU) 2014/65/EU (as amended, “MiFID II”), (ii) a customer within the meaning of Directive (EU) 2016/97 (the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (iii) a person that is not a qualified investor as defined in the Prospectus Regulation. Consequently, no key information document required by Regulation (EU) No. 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Series B ETNs and otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the securities or otherwise making them available to a retail investor in the EEA may be unlawful under the PRIIPs Regulation.

The dealer manager for the exchange offers for the Series A ETNs is:

UBS Securities LLC

The date of this prospectus is December 9, 2019


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ANNEXES

 

 

 

Annex A ETRACS Alerian MLP Index ETN Series B due July  18, 2042 (“AMUB”)

     A  

Annex B 2xLeveraged Long ETRACS Wells Fargo Business Development Company Index ETN Series B due May 24, 2041 (“LBDC”)

     B  

Annex C ETRACS Wells Fargo Business Development Company Index ETN Series B due April 26, 2041 (“BDCZ”)

     C  

Annex D ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN Series B due December 10, 2043 (“CEFZ”)

     D  

Annex E ETRACS Bloomberg Commodity Index Total Return ETN Series B due October 31, 2039 (“DJCB”)

     E  

Annex F ETRACS Alerian MLP Infrastructure Index ETN Series B due April 2, 2040 (“MLPB”)

     F  

Annex G ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B due October 16, 2042 (“MRRL”)

     G  

Annex H ETRACS UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return ETN Series B due April 25, 2038 (“UCIB”)

     H  
 

 

 

 

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ABOUT THIS PROSPECTUS

References in this prospectus to “UBS AG,” the “Company,” “we,” “us,” and “our” refer to UBS AG on a parent only basis. When we refer to “UBS AG consolidated” we mean UBS AG and its consolidated subsidiaries. When we refer to “UBS” or “Group,” we mean UBS Group AG and its consolidated subsidiaries. Certain disclosures contained herein are presented for UBS Group AG and its consolidated subsidiaries. The information presented does not differ materially from UBS AG and its consolidated subsidiaries.

No person is authorized to give any information or to make any representations other than those contained or incorporated by reference in this prospectus. We and the dealer manager take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is not an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction where it is unlawful. The delivery of this prospectus will not, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information contained or incorporated by reference is correct as of any time subsequent to the date of such information. Our business, financial condition, results of operations and prospects may have changed since those dates.

This prospectus is part of a registration statement that we have filed with the SEC. Prior to making any decision with respect to the exchange offers, you should read this prospectus (including the Annexes hereto, as applicable) and any prospectus supplement, together with the documents incorporated by reference herein, the registration statement, the exhibits thereto and the additional information described under the heading “Where You Can Find More Information.”

References in this prospectus to “$” and “dollars” are to the currency of the United States. The financial information presented in this prospectus has been prepared in accordance with generally accepted accounting principles in the United States.

This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. We will provide you without charge upon your request, a copy of any documents that we incorporate by reference, other than exhibits to those documents that are not specifically incorporated by reference into those documents. You may request a copy of this prospectus and any of the documents incorporated by reference into this prospectus or other information concerning UBS AG, without charge, by written or telephonic request directed to:

UBS AG

Investor Relations

Bahnhofstrasse 45

P.O. Box

CH-8098 Zurich

Switzerland

Phone: +41-44-234 41 00

Fax: +41-44-234 34 15

E-mail: investorrelations@ubs.com

Internet: www.ubs.com/investors

To receive timely delivery of the documents prior to the Final Expiration Date, you should make your request no later than April 17, 2020.

 

 

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus (including the Annexes attached hereto), any prospectus supplements, and the documents incorporated by reference herein contain statements that constitute “forward-looking statements,” including but not limited to management’s outlook for UBS’s financial performance and statements relating to the anticipated effect of transactions and strategic initiatives on UBS’s business and future development. While these forward-looking statements represent UBS’s judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS’s expectations. These factors include, but are not limited to: (1) the degree to which UBS is successful in the ongoing execution of its strategic plans, including its cost reduction and efficiency initiatives and its ability to manage its levels of risk-weighted assets (RWA) and leverage ratio denominator (LRD), including to counteract regulatory-driven increases, liquidity coverage ratio and other financial resources, and the degree to which UBS is successful in implementing changes to its businesses to meet changing market, regulatory and other conditions; (2) the continuing low or negative interest rate environment in Switzerland and other jurisdictions, developments in the macroeconomic climate and in the markets in which UBS operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, and currency exchange rates, and the effects of economic conditions, market developments, and geopolitical tensions on the financial position or creditworthiness of UBS’s clients and counterparties as well as on client sentiment and levels of activity; (3) changes in the availability of capital and funding, including any changes in UBS’s credit spreads and ratings, as well as availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC); (4) changes in or the implementation of financial legislation and regulation in Switzerland, the US, the UK, the European Union and other financial centers that have imposed, or resulted in, or may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, liquidity and funding requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration, constraints on transfers of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or would have on UBS’s business activities; (5) the degree to which UBS is successful in implementing further changes to its legal structure to improve its resolvability and meet related regulatory requirements and the potential need to make further changes to the legal structure or booking model of UBS Group in response to legal and regulatory requirements, to proposals in Switzerland and other jurisdictions for mandatory structural reform of banks or systemically important institutions or to other external developments, and the extent to which such changes will have the intended effects; (6) UBS’s ability to maintain and improve its systems and controls for the detection and prevention of money laundering and compliance with sanctions to meet evolving regulatory requirements and expectations, in particular in the US; (7) the uncertainty arising from the timing and nature of the UK’s exit from the EU; (8) changes in UBS’s competitive position, including whether differences in regulatory capital and other requirements among the major financial centers will adversely affect UBS’s ability to compete in certain lines of business; (9) changes in the standards of conduct applicable to UBS’s businesses that may result from new regulation or new enforcement of existing standards, including recently enacted and proposed measures to impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (10) the liability to which UBS may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims and regulatory investigations, including the potential for disqualification from certain businesses, potentially large fines or monetary penalties, or the loss of licenses or privileges as a result of regulatory or other governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the operational risk component of our RWA as well as the amount of capital available for return to shareholders; (11) the effects on UBS’s cross-border banking business of tax or regulatory developments and of possible changes in UBS’s policies and practices relating to this business; (12) UBS’s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses, which may be affected by competitive factors; (13) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the valuation of goodwill, the recognition of deferred tax assets and other matters; (14) UBS’s ability to implement new technologies and business methods, including digital services and technologies and ability to successfully compete with both existing and new financial service providers, some of which may not be regulated to the same extent; (15) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (16) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyber-attacks, and systems failures; (17) restrictions on the ability of UBS Group AG to make payments or distributions, including due to restrictions on the ability of its subsidiaries to make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA or the regulators of UBS’s operations in other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (18) the degree to which changes in regulation, capital or legal structure, financial results or other factors, may affect UBS’s ability to maintain its stated capital return objective; and (19) the effect that these or other factors or unanticipated events may have on our reputation and the additional consequences that this may have on our business and performance. The sequence in which the factors above are presented is not indicative of their likelihood of occurrence or the potential magnitude of their consequences. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS’s Annual Report on Form 20-F for the year ended December 31, 2018.

UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

 

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WHERE YOU CAN FIND MORE INFORMATION

UBS AG files periodic reports and other information with the SEC. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information about UBS AG and other issuers like UBS AG that file electronically with the SEC.

We have filed a registration statement under the Securities Act of 1933 on Form F-4 with the SEC covering the securities. For further information about the securities and UBS, you should review the registration statement, its exhibits and the documents incorporated by reference into this prospectus. This prospectus summarizes material provisions of the contracts and other documents that we refer you to. Since this prospectus may not contain all the information that you may find important, you should review the full text of these documents. We have included copies of these documents as exhibits to the registration statement.

 

 

 

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INCORPORATION OF CERTAIN INFORMATION ABOUT UBS AG

The SEC allows us to “incorporate by reference” into this prospectus the information that we file with them, which means that:

 

   

The incorporated documents are considered part of this prospectus.

 

   

We can disclose important information to you by referring you to those documents.

 

   

Information that we file with the SEC from time to time will automatically be considered to update and supersede the information in this prospectus.

We incorporate by reference in this prospectus:

 

   

UBS AG’s Annual Report on Form 20-F for the year ended December 31, 2018, which UBS AG filed with the SEC on March 15, 2019 (“Annual Report 2018”); and

 

   

UBS AG’s Reports of Foreign Issuer on Form 6-K, which UBS AG filed with the SEC on January 22, 2019 (only first report filed on such date), February 20, 2019, February 25, 2019, March 13, 2019, March 15, 2019 (only first , second and sixth reports filed on such date), March 19, 2019, March 26, 2019, March 27, 2019, April 1, 2019 (first, second and third reports filed on such date), April 10, 2019 (first and second reports filed on such date), April 17, 2019 , April 25, 2019 (only first report filed on such date), April 30, 2019 (first and second reports filed on such date), May 1, 2019, May 8, 2019, May 14, 2019, May 15, 2019, June 17, 2019, June 18, 2019, June 26, 2019, June 28, 2019, July 3, 2019, July 8, 2019, July 17, 2019, July 23, 2019 (only first report filed on such date), July 26, 2019 (only first and third reports filed on such date), August 2, 2019, August 21, 2019, August 29, 2019, September 18, 2019 , October 22, 2019 (only first report filed on such date), October 25, 2019 (first and second report filed on such date) and October 29, 2019 (first and second report filed on such date).

All subsequent reports that we file on Form 20-F under the Securities Exchange Act of 1934 prior to the termination of this offering will also be deemed to be incorporated by reference into this prospectus. We may also incorporate any other Form 6-K that we submit to the SEC on or after the date of this prospectus and prior to the termination of this offering if the Form 6-K filing specifically states that it is incorporated by reference into the registration statement of which this prospectus forms a part.

Any statement in this prospectus contained in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement in this prospectus or in any later filed document modifies or supersedes that statement. Any statement that is modified or superseded in this manner will no longer be a part of this prospectus, except as modified or superseded.

You (including any beneficial owner) may request a copy, at no cost, of any or all of the documents that are incorporated by reference into this prospectus, excluding exhibits (other than those that we specifically incorporate by reference into the documents that you request) by contacting us, orally or in writing, at the following address:

UBS AG

Investor Relations

Bahnhofstrasse 45

P.O. Box

CH-8098 Zurich

Switzerland

Phone: +41-44-234 41 00

Fax: +41-44-234 34 15

E-mail: investorrelations@ubs.com

Internet: www.ubs.com/investors

 

 

 

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Summary

This summary provides an overview of selected information. Because this is only a summary, it may not contain all of the information that may be important to you in understanding the exchange offers. You should carefully read this entire prospectus, including the section entitled “Risk Factors,” as well as the information incorporated by reference in this prospectus. See the sections of this prospectus entitled “Where You Can Find More Information” and “Incorporation of Certain Information About UBS AG.”

UBS

Overview

UBS provides financial advice and solutions to private, institutional and corporate clients worldwide, as well as private clients in Switzerland. The operational structure of the Group is comprised of the Corporate Center and the business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. UBS’s strategy is centered on its leading global wealth management business and its premier universal bank in Switzerland, which are enhanced by Asset Management and the Investment Bank. UBS focuses on businesses that, in its opinion, have a strong competitive position in their targeted markets, are capital efficient, and have an attractive long-term structural growth or profitability outlook.

On September 30, 2019, the UBS AG consolidated common equity tier 1 capital ratio1 was 13.3%, invested assets stood at $3,422 billion and equity attributable to UBS AG shareholders was $54,613 million. On the same date, UBS AG consolidated employed 47,180 people2.

For further information about UBS, including more detailed descriptions of the Business Groups and Corporate Center, see “Where You Can Find More Information.”

Business Overview

UBS operates as a group with the business divisions (Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank) and a Corporate Center. Each of the business divisions and the Corporate Center are described below. A description of the Group’s strategy can be found under “Our strategy” in the “Our strategy, business model and environment” section of the Annual Report 2018. A description of the businesses, strategies, clients, organizational structures, products and services of the business divisions and the Corporate Center can also be found in the “Our strategy, business model and environment” section of the Annual Report 2018.

Global Wealth Management

On February 1, 2018, Wealth Management and Wealth Management Americas were combined into the unified business division Global Wealth Management. Global Wealth Management provides comprehensive advice and tailored financial services to wealthy private clients around the world. Its clients benefit from the full spectrum of resources that UBS as a global firm can offer, including investment management, wealth planning, banking and lending and corporate finance advice. Global Wealth Management’s model gives clients access to a wide range of products from the world’s leading third-party institutions that complement its own products.

 

1 

All figures based on the Swiss systemically relevant bank framework as of January 1, 2020. Refer to the “Capital Management” section of the Annual Report 2018, and the other UBS reports incorporated herein, for more information.

2 

Full-time equivalents.



 

 

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Personal & Corporate Banking

Personal & Corporate Banking provides comprehensive financial products and services to private, corporate and institutional clients in Switzerland and is among the leading players in the private and corporate loan market in Switzerland, with a well-collateralized and conservatively managed lending portfolio. Its business is central to UBS’s universal bank delivery model in Switzerland. Personal & Corporate Banking works with the wealth management, investment bank and asset management businesses to ensure that clients receive the best products and solutions for their specific financial needs. Personal & Corporate Banking is also an important source of growth for other business divisions in Switzerland through client referrals. In addition, Personal & Corporate Banking manages a substantial part of UBS’s Swiss infrastructure and banking products platform, both of which are leveraged across the Group.

Asset Management

Asset Management provides investment management products and services, platform solutions and advisory support to institutions, wholesale intermediaries and wealth management clients around the world, with an onshore presence in 23 countries. Asset Management’s global investment capabilities include all major traditional and alternative asset classes.

Investment Bank

The Investment Bank is present in over 33 countries, with principal offices in all major financial centers, providing investment advice, financial solutions and capital markets access. It serves corporate, institutional and wealth management clients across the globe and partners with UBS’s wealth management, personal and corporate banking and asset management businesses. The business division is organized into Corporate Client Solutions, Investor Client Services, and Research and UBS Evidence Lab Innovations.

Corporate Center

Corporate Center is comprised of Services, Group Asset and Liability Management (“Group ALM”) and Non-core and Legacy Portfolio. Services consists of the Group Chief Operating Officer area (Group Corporate Services, Group Human Resources, Group Operations, Group Sourcing and Group Technology), Group Finance (excluding Group ALM), Group Legal, Group Risk Control, Group Communications and Branding, Group Compliance, Regulatory and Governance, and UBS in society. Group ALM manages the structural risks of UBS’s balance sheet, including interest rate risk in the banking book, currency risk and collateral risk, as well as the risks associated with the Group’s liquidity and funding portfolios. Group ALM also seeks to optimize the Group’s financial performance by matching assets and liabilities within the context of the Group’s liquidity, funding and capital targets and constraints. Group ALM serves all business divisions and other Corporate Center units through three main risk management areas, and its risk management is fully integrated into the Group’s risk governance framework. Non-core and Legacy Portfolio manages legacy positions from businesses exited by the Investment Bank, and is overseen by a committee chaired by the Group Chief Risk Officer.

Corporate Information

The legal and commercial name of the company is UBS AG. The company was incorporated under the name SBC AG on February 28, 1978, for an unlimited duration and entered in the Commercial Register of Canton Basel-City on that day. On December 8, 1997, the company changed its name to UBS AG. The company in its present form was created on June 29, 1998, by the merger of Union Bank of Switzerland (founded 1862) and Swiss Bank Corporation (founded 1872). UBS AG is entered in the Commercial Registers of Canton Zurich and Canton Basel-City. The registration number is CHE-101.329.561.



 

 

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UBS AG is incorporated and domiciled in Switzerland and operates under art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a corporation limited by shares.

According to article 2 of the articles of association of UBS AG dated April 26, 2018 (“Articles of Association”), the purpose of UBS AG is the operation of a bank. Its scope of operations extends to all types of banking, financial, advisory, trading and service activities in Switzerland and abroad. UBS AG may establish branches and representative offices as well as banks, finance companies and other enterprises of any kind in Switzerland and abroad, hold equity interests in these companies, and conduct their management. UBS AG is authorized to acquire, mortgage and sell real estate and building rights in Switzerland and abroad. UBS AG may borrow and invest money on the capital markets. UBS AG is part of the group of companies controlled by the group parent company UBS Group AG. It may promote the interests of the group parent company or other group companies. It may provide loans, guarantees and other kinds of financing and security for group companies.

The addresses and telephone numbers of UBS AG’s two registered offices and principal places of business are: Bahnhofstrasse 45, CH-8001 Zurich, Switzerland, telephone +41 44 234 1111; and Aeschenvorstadt 1, CH-4051 Basel, Switzerland, telephone +41 61 288 5050.

Measures to Modify Legal Structure

Since 2014, UBS has undertaken a series of measures to improve the resolvability of the Group in response to too big to fail requirements in Switzerland and recovery and resolution regulation in other countries in which the Group operates.

In December 2014, UBS Group AG became the holding company of the UBS Group.

In June 2015, UBS AG transferred its Personal & Corporate Banking and Wealth Management businesses booked in Switzerland to UBS Switzerland AG, a banking subsidiary of UBS AG in Switzerland and we implemented a more self-sufficient business and operating model for UBS Limited, our investment banking subsidiary in the U.K. Also in 2015, we established UBS Business Solutions AG as a direct subsidiary of UBS Group AG to act as the Group service company and transferred the ownership of the majority of our existing service subsidiaries outside the U.S. to UBS Business Solutions AG. As of January 1, 2017, UBS completed the transfer of the shared service employees in the U.S. to the U.S. service company, UBS Business Solutions US LLC, a subsidiary of UBS AG. In the second quarter of 2017, UBS transferred shared services functions in Switzerland from UBS AG to UBS Business Solutions AG. UBS expects to complete the transfer of shared services functions in the U.K. in the fourth quarter of 2017.

As of July 1, 2016, UBS Americas Holding LLC was designated as an intermediate holding company for UBS’s U.S. subsidiaries as required under the enhanced prudential standards regulations pursuant to the Dodd-Frank Act. UBS Americas Holding LLC holds all of UBS’s U.S. subsidiaries and is subject to U.S. capital requirements, governance requirements and other prudential regulation.

In addition, UBS transferred the majority of the operating subsidiaries of Asset Management to UBS Asset Management AG during 2016. Furthermore, UBS merged its Wealth Management subsidiaries in Italy, Luxembourg (including its branches in Austria, Denmark and Sweden), the Netherlands and Spain into UBS Europe SE, to establish UBS’s new European legal entity which is headquartered in Frankfurt, Germany.

UBS established UBS Group Funding (Switzerland) AG in 2016 as a wholly owned direct subsidiary of UBS Group AG to issue loss-absorbing additional tier 1 (AT1) capital instruments and total loss-absorbing capacity (TLAC)-eligible senior unsecured debt, which are guaranteed by UBS Group AG. In the first half of 2017, UBS transferred then outstanding TLAC-eligible senior unsecured debt to UBS Group Funding (Switzerland) AG as the issuer.

Effective March 1, 2019, UBS Limited was merged into UBS Europe SE. Following this merger, UBS Europe SE is subject to direct supervision by the European Central Bank and is considered a significant regulated subsidiary.

UBS continues to consider further changes to the Group’s legal structure in response to regulatory requirements and other external developments, including the anticipated exit of the United Kingdom from the European Union. Such changes may include further consolidation of operating subsidiaries in the EU and adjustments to the booking entity or location of products and services.



 

 

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For more information, refer to the “Our evolution” section of the Annual Report 2018, which is incorporated by reference into this prospectus, and to discussions of further updates contained in any subsequent report UBS files with or submits to the SEC on or after the date of this prospectus and prior to the termination of this offering that is incorporated by reference into this prospectus or the registration statement of which this prospectus forms a part, as described above under “Incorporation of Certain Information About UBS AG.”

Questions and Answers about the Exchange Offers

 

Q:

Why is UBS making the exchange offers?

 

  A:

UBS is conducting the exchange offers in order to reduce the intercompany exposures of UBS Switzerland AG to UBS AG in line with regulatory recovery and resolution guidance. UBS AG is offering holders of the Series A ETNs the ability to exchange their Series A ETNs on a 1-for-1 basis for the corresponding series of Series B ETNs (as designated in the table below) that do not have the UBS Switzerland Co- obligation, but are otherwise intended to have the same economic terms as the corresponding Series A ETNs for which they are being exchanged.

 

Q:

What will I receive if I tender my Series A ETNs in the exchange offers?

 

  A:

Subject to the conditions described in this prospectus, each Series A ETN of an applicable series that is validly tendered prior to 5:00 p.m., New York City time, on an Applicable Exchange Date (and in any event not later than 5:00 p.m. on the Final Expiration Date), and not validly withdrawn prior to 5:00 p.m., New York City time, on such Applicable Exchange Date, will be eligible to receive a Series B ETN of the corresponding series (as designated in the table below) on a 1-for-1 basis. The Series B ETNs are intended to have the same economic terms as the corresponding Series A ETNs for which they are being exchanged, except for the lack of UBS Switzerland Co-obligation.

Specifically, in exchange for each $25.00 stated principal amount of Series A ETNs (i.e. 1 Series A ETN security) of any series that is validly tendered prior to 5:00 p.m., New York City time, on an Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date), and not validly withdrawn prior to 5:00 p.m., New York City time, on such Applicable Exchange Date, holders will receive the Exchange Consideration of $25.00 stated principal amount of Series B ETNs (i.e., Series B ETN security) of the corresponding series (as designated in the table below).

The Series B ETNs will be issued under and governed by the terms of our indenture (the “Series B Indenture”), dated as of June 12, 2015, between UBS AG and U.S. Bank Trust, National Association, as trustee (the “Trustee”), described under “Description of the Series B ETNs.”

The Series B ETNs will be issued in denominations of $25.00 stated principal amount per security. See “Description of the Series B ETNs—Form, exchange and transfer of Series B ETNs.”

Any holder of Series A ETNs located or resident in any Member State of the EEA which is a retail investor will not be able to participate in the exchange offers. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II, (ii) a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (iii) a person that is not a qualified investor as defined in the Prospectus Regulation.

Each series of coupon paying Series A ETNs has the same economic terms, including the same coupon record date and coupon payment date, as the applicable Series B ETNs for which it is being exchanged. Accordingly, on any business day, the accrued coupon amounts on each corresponding pair of Series A ETNs and Series B ETNs are identical. Holders will receive payment for accrued but unpaid coupon payments (where applicable) on either the Series A ETNs or the Series B ETNs for which they are exchanged, depending on which securities such holder holds on the applicable coupon record date.



 

 

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Title of Series of Series A ETN to be Exchanged

(collectively, the “Series A ETNs”)

       

Title of Series of Series B ETN to be received in
exchange for corresponding Series A ETN validly
tendered in the Exchange Offer

(collectively, the “Series B ETNs”)

ETRACS Alerian MLP Index ETN due

July 18, 2042 (Ticker: AMU)

 

g

   ETRACS Alerian MLP Index ETN Series B due July 18, 2042 (Ticker: (AMUB)

2xLeveraged Long ETRACS linked to the Wells

Fargo Business Development Company Index due

May 24, 2041 (Ticker: BDCL)

 

g

   2xLeveraged Long ETRACS Wells Fargo Business Development Company Index ETN Series B due May 24, 2041 (Ticker: LBDC)

ETRACS linked to the Wells Fargo Business

Development Company Index due April 26, 2041

(Ticker: BDCS)

 

g

   ETRACS Wells Fargo Business Development Company Index ETN Series B due April 26, 2041 (Ticker: BDCZ)

ETRACS Monthly Pay 2xLeveraged Closed-End

Fund ETN due December 10, 2043 (Ticker: CEFL)

 

g

   ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN Series B due December 10, 2043 (Ticker: CEFZ)

ETRACS linked to the Bloomberg Commodity

Index Total Return due October 31, 2039

(Ticker: DJCI)

 

g

   ETRACS Bloomberg Commodity Index Total Return ETN Series B due October 31, 2039 (Ticker: DJCB)

ETRACS linked to the Alerian MLP Infrastructure

Index ETN April 2, 2040 (Ticker: MLPI)

 

g

   ETRACS Alerian MLP Infrastructure Index ETN Series B due April 2, 2040 (Ticker: MLPB)

ETRACS Monthly Pay 2xLeveraged Mortgage

REIT ETN due October 16, 2042

(Ticker: MORL)

 

g

   ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B due October 16, 2042 (Ticker: MRRL)

ETRACS linked to the UBS Bloomberg Constant

Maturity Commodity Index (CMCI) Total Return

ETN due April 5, 2038 (Ticker: UCI)

 

g

   ETRACS UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return ETN Series B due April 5, 2038 (Ticker: UCIB)

 

Q:

What are the consequences of not participating in the exchange offers?

 

  A:

If you do not exchange your Series A ETNs for Series B ETNs of the corresponding series (as designated in the table above) in the exchange offers, you will not receive the Exchange Consideration and you will continue to hold your Series A ETNs.

Immediately following the Final Expiration Date, we intend to suspend sales of Series A ETNs from inventory. Any suspension of sales of Series A ETNs from inventory may affect the liquidity of the market for Series A ETNs, potentially leading to insufficient supply and may cause the market price of the Series A ETNs to increase or decrease. See “Risk Factors—Risks Relating to the Exchange Offers—UBS expect to suspend sales of Series A ETNs from inventory immediately following the Final Expiration Date” beginning on page 18 of this prospectus.

Within several months following the Final Expiration Date, we expect to exercise our contractual call right to redeem all remaining, unexchanged Series A ETNs, pursuant to the terms of each series of Series A ETN. Following the redemption of all remaining unexchanged Series A ETNs of a given series, no further securities of that series will remain outstanding and such series will cease to be listed on NYSE Arca. In addition, we retain the right under the terms of each series of Series A ETNs to delist the Series A ETNs from NYSE Arca at any time, including prior to exercising our contractual call right as described above.

Over the course of the exchange offers, as settlements occur on the applicable Settlement Dates, we expect that increasingly fewer securities of the Series A ETNs will remain outstanding. This will likely result in a less liquid market for the remaining unexchanged Series A ETNs.



 

 

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Q:

Are any further actions proposed following completion of the exchange offers?

 

  A:

We expect to take the following actions following completion of the exchange offers:

 

   

Suspend further sales of Series A ETNs from inventory;

 

   

Exercise our contractual call right to redeem all remaining, unexchanged Series A ETNs pursuant to the terms of each series of Series A ETNs; and

 

   

Prior to or following exercise of our contractual call right with respect to unexchanged Series A ETNs, potentially delist the Series A ETNs from NYSE Arca.

 

Q:

How do the Series A ETNs differ from the Series B ETNs to be issued in the exchange offers?

 

  A:

The Series A ETNs were issued prior to June 12, 2015 and are part of a series of UBS AG debt securities entitled “Medium-Term Notes, Series A.” UBS Switzerland AG is a co-obligor of such debt securities. The Series B ETNs are part of a separate series of UBS AG debt securities entitled “Medium-Term Notes, Series B,” and were issued after June 12, 2015. As a result, UBS Switzerland AG is not a co-obligor of the Series B ETNs and has no liability with respect to the Series B ETNs. Unlike the Series A ETNs, if UBS AG fails to perform and observe every covenant of the Series B Indenture to be performed by UBS AG with respect to the Series B ETNs, holders of the Series B ETNs will have recourse only against UBS AG, and not against UBS Switzerland AG.

The Series B ETNs are intended to have the same economic terms as the applicable Series A ETNs for which they are being exchanged, except for the lack of the UBS Switzerland Co-obligation.

 

Q:

What is the ranking of the Series B ETNs?

 

  A:

The Series B ETNs will be senior unsecured debt obligations of UBS AG and will rank equally with all other unsecured and unsubordinated indebtedness of UBS AG issued from time to time.

 

Q:

What are the conditions to the exchange offers?

 

  A:

The consummation of each exchange offer is subject to, and conditional upon, the satisfaction or, where permitted, waiver of the conditions discussed under “The Exchange Offers—Conditions to the Exchange Offers.” We may, at our option and sole discretion, waive any such conditions except the condition that the registration statement of which this prospectus forms a part has been declared effective by the SEC. All conditions to the exchange offers must be satisfied or, where permitted, waived, at or by each Applicable Exchange Date. For information about other conditions to our obligations to complete the exchange offers, see “The Exchange Offers—Conditions to the Exchange Offers.”

 

Q:

Will UBS AG accept all tenders of Series A ETNs?

 

  A:

Subject to the satisfaction or, where permitted, the waiver of the conditions to the exchange offers, we will accept for exchange any and all Series A ETNs that (i) have been validly tendered in the exchange offers before by 5:00 p.m., New York City time, on Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date) and (ii) have not been validly withdrawn by 5:00 p.m., New York City time, on the next Applicable Exchange Date immediately following the date on which a holder validly tendered its Series A ETNs, provided that any holder of Series A ETNs located or resident in any Member State of the EEA which is a retail investor will not be able to participate in the exchange offers. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II, (ii) a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (iii) a person that is not a qualified investor as defined in the Prospectus Regulation.



 

 

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Q:

What will UBS AG do with the Series A ETNs accepted for exchange in the exchange offers?

 

  A:

The Series A ETNs tendered in connection with the exchange offers and accepted for exchange will eventually be cancelled.

 

Q:

When will UBS AG issue Series B ETNs?

 

  A:

Assuming the conditions to the exchange offers are satisfied (including that the registration statement of which this prospectus forms a part has been declared effective) or, where permitted, waived, UBS AG will issue the Series B ETNs in book-entry form promptly on or about the second business day following each Applicable Exchange Date (each such day, a “Settlement Date”). The Settlement Date applicable to each holder of Series A ETNs will be determined by reference to the date upon which such holder validly tenders its Series A ETNs, as set forth below:

 

Exchange Date    Settlement Date

For Series A ETNs validly tendered on or after the date hereof but prior to 5:00 p.m., New York City time, on January 15, 2020 (the “First Exchange Date”)

 

(the “First Exchange Period”)

  

January 17, 2020

 

(the “First Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the First Exchange Date but prior to 5:00 p.m., New York City time, on January 30, 2020 (the “Second Exchange Date”)

 

(the “Second Exchange Period”)

  

February 3, 2020

 

(the “Second Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Second Exchange Date but prior to 5:00 p.m., New York City time, on February 13, 2020 (the “Third Exchange Date”)

 

(the “Third Exchange Period”)

  

February 18, 2020

 

(the “Third Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Third Exchange Date but prior to 5:00 p.m., New York City time, on March 3, 2020 (the “Fourth Exchange Date”)

 

(the “Fourth Exchange Period”)

  

March 5, 2020

 

(the “Fourth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Fourth Exchange Date but prior to 5:00 p.m., New York City time, on March 17, 2020 (the “Fifth Exchange Date”)

 

(the “Fifth Exchange Period”)

  

March 19, 2020

 

(the “Fifth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Fifth Exchange Date but prior to 5:00 p.m., New York City time, on March 31, 2020 (the “Sixth Exchange Date”)

 

(the “Sixth Exchange Period”)

  

April 2, 2020

 

(the “Sixth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Sixth Exchange Date but prior to 5:00 p.m., New York City time, on April 16, 2020 (the “Seventh Exchange Date”)

 

(the “Seventh Exchange Period”)

  

April 20, 2020

 

(the “Seventh Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Seventh Exchange Date but prior to 5:00 p.m., New York City time, on the Final Expiration Date

 

(the “Final Exchange Period”)

  

May 5, 2020

 

(the “Final Settlement Date”)



 

 

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The First Exchange Period, Second Exchange Period, Third Exchange Period, Fourth Exchange Period, Fifth Exchange Period, Sixth Exchange Period, Seventh Exchange Period and the Final Exchange Period are each referred to herein as an “Exchange Period” and together as the “Exchange Periods.

The First Exchange Date, Second Exchange Date, Third Exchange Date, Fourth Exchange Date, Fifth Exchange Date, Sixth Exchange Date, Seventh Exchange Date and the Final Expiration Date are each referred to herein as an “Applicable Exchange Date.

 

Q:

When will the exchange offers expire?

 

  A:

Each exchange offer will expire at 5:00 p.m., New York City time, on May 1, 2020, unless we, in our sole discretion, extend the applicable exchange offer, in which case the Final Expiration Date will be the latest date and time to which the exchange offer is extended. See “The Exchange Offers—Final Expiration Date; Extensions; Amendments.”

 

Q:

Can I withdraw after I tender my Series A ETNs?

 

  A:

Tenders of Series A ETNs in connection with any of the exchange offers may be withdrawn at any time prior to 5:00 p.m., New York City time, on the next Applicable Exchange Date immediately following the date on which such Series A ETNs are validly tendered.

Following each Applicable Exchange Date, Series A ETNs that were tendered in the preceding Exchange Period may not be validly withdrawn unless UBS AG is otherwise required by law to permit withdrawal. In the event of termination of an exchange offer, the Series A ETNs tendered pursuant to such exchange offer will be promptly returned to the tendering holders. See “The Exchange Offers—Withdrawal of Tenders.”

For example, Series A ETNs validly tendered in the First Exchange Period may be withdrawn at any time prior to 5:00 p.m., New York City time, on the First Exchange Date. Following the First Exchange Date, any Series A ETNs validly tendered in the First Exchange Period but not withdrawn prior to 5:00 p.m., New York City time, on the First Exchange Date may no longer be validly withdrawn, unless UBS AG is otherwise required by law to permit such withdrawal. Similarly, Series A ETNs validly tendered in the Second Exchange Period may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Second Exchange Date. Following the Second Exchange Date, any Series A ETNs validly tendered in the Second Exchange Period but not withdrawn prior to 5:00 p.m., New York City time, on the Second Exchange Date may no longer be validly withdrawn, unless UBS AG is otherwise required by law to permit such withdrawal.

 

Q:

Can I sell my Series A ETNs in the secondary market after I tender them for exchange?

 

  A:

No. Once you have validly tendered your Series A ETNs you will not be able to trade those securities in the secondary market. In order to transact in such Series A ETNs you would first need to contact your broker and validly withdraw your tender.

 

Q:

How do I exchange my Series A ETNs if I am a beneficial owner of Series A ETNs held in book entry form by a custodian bank, depositary, broker, trust company or other nominee? Do I need to act or will someone act on my behalf?

 

  A:

Currently, all of the Series A ETNs are held in book-entry form and can only be tendered by following the procedures described under “The Exchange Offers—Procedures for Tendering Series A ETNs—Series A ETNs Held with DTC by a DTC Participant.” However, any beneficial owner of Series A ETNs who wishes to participate in the exchange offer should contact the registered holder, broker, dealer, commercial bank, trust company or other nominee promptly and instruct it to tender on the owner’s behalf. You should keep in mind that your intermediary may require you to take action with respect to the exchange offers a number of days before the Applicable Exchange Date, in order for such entity to tender Series A ETNs on your behalf on or prior to 5:00 p.m., New York City time, on the Applicable Exchange Date, in accordance with the terms of the exchange offers.



 

 

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Beneficial owners wishing to participate in the exchange offers should contact their broker, dealer, commercial bank, trust company or other nominee as soon as possible in order to determine the times by which such owner must take action in order to participate in the exchange offers.

 

Q:

Will I have to pay any fees or commissions if I tender my Series A ETNs for exchange in the exchange offers?

 

  A:

You will not be required to pay any fees or commissions to UBS AG, the exchange agent or the information agent in connection with the exchange offers. If your Series A ETNs are held through a broker, dealer, commercial bank, trust company or other nominee that tenders your Series A ETNs on your behalf, your broker or other nominee may charge you a commission for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.

 

Q:

What are the tax implications of tendering my Series A ETNs for exchange in the exchange offers?

 

  A:

UBS AG has been advised by its tax counsel, Sullivan & Cromwell LLP, that holders that exchange their Series A ETNs for Series B ETNs in the exchange offers should not recognize a gain or loss for U.S. federal income tax purposes as a result of the exchange. Holders should review the tax discussion beginning on page 51 under the heading “Material U.S. Federal Income Tax Considerations.” UBS AG is not providing tax advice to holders of Series A ETNs that participate in the exchange offers and you should consult with your tax advisor regarding the tax treatment of the exchange.

 

Q:

Will the Series B ETNs be listed on an exchange?

 

  A:

The Series B ETNs are listed on NYSE Arca under the symbols set forth in the table below. There can be no assurance that an active secondary market will develop or continue over time; if it does, we expect that investors will purchase and sell the Series B ETNs primarily in this secondary market.

 

Title of Series B ETNs    Symbol  

ETRACS Alerian MLP Index ETN Series B due July 18, 2042

     “AMUB”  

2xLeveraged Long ETRACS Wells Fargo Business Development Company Index

ETN Series B due May 24, 2041

     “LBDC”  

ETRACS Wells Fargo Business Development Company Index ETN Series B due

April 26, 2041

     “BDCZ”  

ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN Series B due

December 10, 2043

     “CEFZ”  

ETRACS Bloomberg Commodity Index Total Return ETN Series B due

October 31, 2039

     “DJCB”  

ETRACS Alerian MLP Infrastructure Index ETN Series B due April 2, 2040

     “MLPB”  

ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B due

October 16, 2042

     “MRRL”  

ETRACS UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total

Return ETN Series B due April 5, 2038

     “UCIB”  


 

 

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Q:

Is any recommendation being made with respect to the exchange offers?

 

  A:

None of UBS AG, the dealer manager, the exchange agent, the information agent or the trustee under the Series A Indenture (defined below) or the Series B Indenture, or any other person, makes any recommendation in connection with the exchange offers as to whether any holder of Series A ETNs should tender or refrain from tendering all or any portion of that holder’s Series A ETNs, and no one has been authorized by any of them to make such a recommendation.

 

Q:

To whom should I direct any questions?

 

  A:

Questions concerning the terms of the exchange offers, tender procedures and requests for additional copies of this prospectus and the letter of instruction should be directed to the information agent and the exchange agent:

D.F. King & Co., Inc.

48 Wall Street

New York, NY 10005

Bank and Brokers Call Collect: (212) 269-5550

All Others, Please Call Toll-Free: (800) 591-8269

ubs@dfking.com

Amendments and Supplements

We may be required to amend or supplement this prospectus at any time to add, update or change the information contained herein. You should read this prospectus, the applicable Annex(es) hereto, and any prospectus supplement, together with the documents incorporated by reference herein, the registration statement, the exhibits thereto and the additional information described under the heading “Where You Can Find More Information.”

No Appraisal or Dissenter Rights

Holders of the Series A ETNs do not have any appraisal rights or dissenters’ rights under New York law, the law governing the indenture dated as of November 21, 2000, between UBS AG and U.S. Bank Trust National Association, as trustee (as amended and supplemented, including by the Fifth Supplemental Indenture to the Debt Indenture, dated as of June 12, 2015, among UBS AG, UBS Switzerland AG and U.S. Bank Trust National Association, as trustee) (the “Series A Indenture”) and the Series A ETNs, or under the terms of the Series A Indenture in connection with the exchange offers. See “The Exchange Offers—Absence of Dissenters’ Rights.”

Risk Factors

Tendering your Series A ETNs in the exchange offers and investing in the Series B ETNs involves risks that a potential investor should carefully evaluate prior to participating in the exchange offers and making such an investment in the Series B ETNs. See “Risk Factors” beginning on page 18 of this prospectus.

In addition, each series of Series B ETNs is subject to risks specific to that series, including risk factors based primarily on the underlying Index to which it is linked and the payment terms of such securities. The risk factors specific to each series of Series B ETNs are set forth in Annexes A—H hereto, as applicable.



 

 

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THE EXCHANGE OFFERS

 

Offeror

UBS AG

 

The Exchange Offers

Upon the terms and subject to the conditions set forth in this prospectus and the related letter of instruction, UBS AG is offering to exchange any and all of each series of outstanding Series A ETNs listed on the front cover of this prospectus for the applicable corresponding series of Series B ETNs. The Series B ETNs are intended to have the same economic terms as the applicable Series A ETNs for which they are being exchanged, except for the lack of the UBS Switzerland Co-obligation. See “The Exchange Offers—Terms of the Exchange Offers.”

 

Exchange Offers Independent of One Another

Subject to applicable law, each exchange offer is being made independently of the other exchange offers. In the event that any of the conditions to the exchange offers (described below) are not satisfied prior to an Applicable Exchange Date, we reserve the right to terminate or withdraw each exchange offer independently of the other exchange offers, as described in this prospectus. We reserve the right to amend each exchange offer independently of the other exchange offers at any time and from time to time, as described in this prospectus.

 

Procedures for Participation in the Exchange Offers

If you wish to participate in an exchange offer you must cause the book-entry transfer of your Series A ETNs to the exchange agent’s account at DTC, and the exchange agent must receive a confirmation of book-entry transfer by way of an agent’s message transmitted pursuant to DTC’s Automated Tender Offer Program (“ATOP”), by which each tendering holder will agree to be bound by the letter of instruction.

 

  You should contact your broker, dealer, commercial bank, trust company or other nominee if you wish to tender your Series A ETNs in the exchange offers. See “The Exchange Offers—Procedures for Tendering Series A ETNs.”

 

No Guaranteed Delivery Procedures

No guaranteed delivery procedures are available in connection with the exchange offers. You must tender your Series A ETNs by the Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date) in order to participate in the exchange offers.

 

Exchange Consideration

In exchange for each $25.00 stated principal amount of Series A ETNs (i.e. 1 Series A ETN security), respectively, that is validly tendered prior to 5:00 p.m., New York City time, on an Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date) and not validly withdrawn prior to 5:00 p.m., New York City time, on such Applicable Exchange Date, holders will receive $25.00 stated principal amount of the corresponding Series B ETNs (i.e. 1 Series B ETN security) (the “Exchange Consideration”).

 

 

Any holder of the Series A ETNs located or resident in any Member State of the EEA which is a retail investor will not be able to participate in the exchange offers. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II, (ii) a customer within the meaning of the Insurance Distribution Directive, where that customer would not



 

 

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qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (iii) a person that is not a qualified investor as defined in the Prospectus Regulation.

 

Settlement and Issue of Series B ETNs

Assuming the conditions to the exchange offers are satisfied (including that the registration statement of which this prospectus forms a part has been declared effective) or, where permitted, waived, UBS AG will issue the Series B ETNs in book-entry form promptly on or about the second business day following each Applicable Exchange Date (each such day, a “Settlement Date”). The Settlement Date applicable to each holder of Series A ETNs will be determined by reference to the date upon which such holder validly tenders its Series A ETNs, as set forth below:

 

Exchange Date    Settlement Date

For Series A ETNs validly tendered on or after the date hereof but prior to 5:00 p.m., New York City time, on January 15, 2020 (the “First Exchange Date”)

 

(the “First Exchange Period”)

  

January 17, 2020

 

(the “First Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the First Exchange Date but prior to 5:00 p.m., New York City time, on January 30, 2020 (the “Second Exchange Date”)

 

(the “Second Exchange Period”)

  

February 3, 2020

 

(the “Second Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Second Exchange Date but prior to 5:00 p.m., New York City time, on February 13, 2020 (the “Third Exchange Date”)

 

(the “Third Exchange Period”)

  

February 18, 2020

 

(the “Third Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Third Exchange Date but prior to 5:00 p.m., New York City time, on March 3, 2020 (the “Fourth Exchange Date”)

 

(the “Fourth Exchange Period”)

  

March 5, 2020

 

(the “Fourth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Fourth Exchange Date but prior to 5:00 p.m., New York City time, on March 17, 2020 (the “Fifth Exchange Date”)

 

(the “Fifth Exchange Period”)

  

March 19, 2020

 

(the “Fifth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Fifth Exchange Date but prior to 5:00 p.m., New York City time, on March 31, 2020 (the “Sixth Exchange Date”)

 

(the “Sixth Exchange Period”)

  

April 2, 2020

 

(the “Sixth Settlement Date”)



 

 

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Exchange Date    Settlement Date

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Sixth Exchange Date but prior to 5:00 p.m., New York City time, on April 16, 2020 (the “Seventh Exchange Date”)

 

(the “Seventh Exchange Period”)

  

April 20, 2020

 

(the “Seventh Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Seventh Exchange Date but prior to 5:00 p.m., New York City time, on the Final Expiration Date

 

(the “Final Exchange Period”)

  

May 5, 2020

 

(the “Final Settlement Date”)

 

  See “The Exchange Offers—Acceptance of Series A ETNs for Exchange; Series B ETNs.”

 

Final Expiration Date

Each of the exchange offers will expire at 5:00 p.m., New York City time, on May 1, 2020, or a later date and time to which UBS AG extends it with respect to one or more series of Series A ETNs.

 

Withdrawal and Revocation

Tenders of Series A ETNs in connection with any of the exchange offers may be withdrawn at any time prior to 5:00 p.m., New York City time, on the next Applicable Exchange Date immediately following the date on which such Series A ETNs are validly tendered. Following each Applicable Exchange Date, Series A ETNs that were tendered in the preceding Exchange Period may not be validly withdrawn unless UBS AG is otherwise required by law to permit withdrawal. In the event of termination of an exchange offer, the Series A ETNs tendered pursuant to that exchange offer will be promptly returned to the tendering holders.

 

  For example, Series A ETNs validly tendered in the First Exchange Period may be withdrawn at any time prior to 5:00 p.m., New York City time, on the First Exchange Date. Following the First Exchange Date, any Series A ETNs validly tendered in the First Exchange Period but not withdrawn prior to 5:00 p.m., New York City time, on the First Exchange Date may no longer be validly withdrawn, unless UBS AG is otherwise required by law to permit such withdrawal. Similarly, Series A ETNs validly tendered in the Second Exchange Period may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Second Exchange Date. Following the Second Exchange Date, any Series A ETNs validly tendered in the Second Exchange Period but not withdrawn prior to 5:00 p.m., New York City time, on the Second Exchange Date may not be validly withdrawn, unless UBS AG is otherwise required by law to permit such withdrawal.

 

  Your broker, dealer, commercial bank, trust company or other nominee may establish its own earlier deadlines and procedures for withdrawing your tender.

 

  See “The Exchange Offers—Withdrawal of Tenders.”

 

Conditions

The consummation of each exchange offer is subject to, and conditional upon, the satisfaction or waiver of the conditions discussed under “The



 

 

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Exchange Offers—Conditions to the Exchange Offers,” including, among other things, the registration statement of which this prospectus forms a part having been declared effective by the SEC. We may, at our option and sole discretion, waive any such conditions, except the condition that the registration statement of which this prospectus forms a part has been declared effective by the SEC. All conditions to the exchange offers must be satisfied or, where permitted, waived, at or by each Applicable Exchange Date.

 

  For information about other conditions to our obligations to complete the exchange offers, see “The Exchange Offers—Conditions to the Exchange Offers.”

 

Acceptance of Series A ETNs and Delivery of Series B ETNs

Subject to the satisfaction or, where permitted, waiver of the conditions to the exchange offers, UBS AG will accept for exchange any and all Series A ETNs that are validly tendered prior to 5:00 p.m., New York City time, on an Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date) and not validly withdrawn prior to such Applicable Exchange Date; provided that any holder of Series A ETNs located or resident in any Member State of the EEA which is a retail investor will not be able to participate in the exchange offers. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II, (ii) a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (iii) a person that is not a qualified investor as defined in the Prospectus Regulation.

 

  The Series B ETNs issued pursuant to the exchange offers will be issued and delivered through the facilities of DTC promptly on the applicable Settlement Date. We will return to you any Series A ETNs that are not accepted for exchange for any reason without expense to you promptly after the Applicable Exchange Date. See “The Exchange Offers—Acceptance of Series A ETNs for Exchange; Series B ETNs.”

 

U.S. Federal Income Tax Considerations

Holders should consider certain U.S. federal income tax consequences of the exchange offers; please consult your tax advisor about the tax consequences to you of the exchange. See “Material U.S. Federal Income Tax Considerations.”

 

Consequences of Not Exchanging Series A ETNs for Series B ETNs

If you do not exchange your Series A ETNs for Series B ETNs of the corresponding series in the exchange offers, you will not receive the Exchange Consideration and you will continue to hold your Series A ETNs.

 

  Immediately following the Final Expiration Date, we intend to suspend sales of Series A ETNs from inventory. Any suspension of sales of Series A ETNs from inventory may affect the liquidity of the market for Series A ETNs, potentially leading to insufficient supply and may cause the market price of the Series A ETNs to increase or decrease. See “Risk Factors—Risks Relating to the Exchange Offers—UBS expects to suspend sales of Series A ETNs from inventory immediately following the Final Expiration Date” beginning on page 18 of this prospectus.


 

 

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  Within several months following the Final Expiration Date, we expect to exercise our contractual call right to redeem all remaining unexchanged Series A ETNs pursuant to the terms of each series of Series A ETNs. Following the redemption of all remaining unexchanged Series A ETNs of a given series, no further securities of that series will remain outstanding and such series will be cease to be listed on NYSE Arca. In addition, we retain the right under the terms of each series of Series A ETNs to delist the Series A ETNs from NYSE Arca at any time, including prior to exercising our contractual call right as described above.

 

  Over the course of the exchange offers, as settlements occur on the applicable Settlement Dates, we expect that increasingly fewer securities of the Series A ETNs will remain outstanding. This will likely result in a less liquid market for the remaining unexchanged Series A ETNs.

 

Use of Proceeds

We will not receive any cash proceeds from the exchange offers.

 

Exchange Agent, Information Agent and Dealer Manager

D.F. King & Co., Inc. is serving as the exchange agent and information agent for the exchange offers for the Series B ETNs (as the “exchange agent” and the “information agent”).

 

  UBS Securities LLC is serving as the dealer manager for the exchange offers. The address and telephone number of the dealer manager is set forth on the back page of this prospectus.

 

  We have other business relationships with the dealer manager, as described in “The Exchange Offers—Dealer Manager.”

 

No Recommendation

None of UBS AG, the dealer manager, the information agent, the exchange agent or the trustee under the Series A Indenture or the Series B Indenture makes any recommendation in connection with the exchange offers as to whether any holder of Series A ETNs should tender or refrain from tendering all or any portion of that holder’s Series A ETNs and no one has been authorized by any of them to make such a recommendation.

 

Risk Factors

For risks related to the exchange offers and investing in the Series B ETNs, please read the section entitled “Risk Factors” beginning on page 18 of this prospectus.

 

  In addition, the risk factors specific to each series of Series B ETNs are set forth in Annexes A—H hereto, as applicable.

 

Further Information

Questions concerning the terms of the exchange offers, tender procedures and requests for additional copies of this prospectus and the letter of instruction should be directed to the information agent and the exchange agent at the address and telephone number set forth on the back cover of this prospectus.

We may be required to amend or supplement this prospectus at any time to add, update or change the information contained in this prospectus. You should read this prospectus and any amendment or supplement hereto, together with the documents incorporated by reference herein and the additional information described under “Where You Can Find More Information.”



 

 

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THE SERIES B ETNS

The following summary contains basic information about the various series of Series B ETNs. It does not contain all of the information that may be important to you. For a more complete description of the terms of the Series B ETNs, see “Description of the Series B ETNs” and refer to Annexes A – H of this Prospectus for the applicable series of Series B ETNs (as set forth in the below table)

 

Issuer

UBS AG.

 

Securities Offered

We are offering up to a total of 172,826,500(1) Series B ETNs of the following series:

 

Title of Series B ETNs   

Terms of Series B
ETNs

(Annex)

 
24,000,000 ETRACS Alerian MLP Index ETN Series B due July 18, 2042 (Ticker: AMUB)   

 

Annex A

 

15,050,000 2xLeveraged Long ETRACS Wells Fargo Business Development Company Index ETN Series B due May 24, 2041 (Ticker: LBDC)   

 

Annex B

 

5,360,000 ETRACS Wells Fargo Business Development Company Index ETN Series B due April 26, 2041 (Ticker: BDCZ)   

 

Annex C

 

19,450,000 ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN Series B due December 10, 2043 (Ticker: CEFZ)   

 

Annex D

 

3,440,000 ETRACS Bloomberg Commodity Index Total Return ETN Series B due October 31, 2039 (Ticker: DJCB)   

 

Annex E

 

68,250,000 ETRACS Alerian MLP Infrastructure Index ETN Series B due April 2, 2040 (Ticker: MLPB)   

 

Annex F

 

30,246,500 ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B due October 16, 2042 (Ticker: MRRL)   

 

Annex G

 

7,030,000 ETRACS UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return ETN Series B due April 5, 2038 (Ticker: UCIB)   

 

Annex H

 

 

(1) 

The amount of Series B ETNs being offered in the exchange offers exceeds the number of Series A ETNs currently outstanding to account for potential additional Series A ETN issuances prior to the Final Expiration Date of the exchange offer.



 

 

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Denominations

UBS AG will issue the Series B ETNs in a stated principal amount of $25.00 per security.

 

Listing

The Series B ETNs are listed on NYSE Arca. There can be no assurance that an active secondary market will develop or continue over time; if it does, we expect that investors will purchase and sell the Series B ETNs primarily in this secondary market.

 

Form and Settlement

The Series B ETNs will be issued only in registered, book-entry form. There will be one or more Global Notes deposited with a common depositary for DTC for each series of Series B ETNs.

 

Further Issues

We may from time to time, without notice to, or the consent of, the holders of any Series B ETNs, create and issue further securities ranking equally and ratably with such series in all respects, or in all respects except for the payment of unpaid coupon amounts, if applicable, accruing prior to the issue date or except for the first coupon payment following the issue date of those further securities, if applicable. Any further securities will have the same terms as to status, redemption or otherwise as, and will be fungible for United States federal income tax purposes with, the Series B ETNs of the applicable series.

 

Governing Law

The Series B ETNs will be governed by the laws of the State of New York.

 

Trustee

The trustee for the Series B ETNs will be U.S. Bank Trust National Association.


 

 

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RISK FACTORS

Tendering your Series A ETNs in the exchange offers and investing in the Series B ETNs involves a high degree of risk, including but not limited to the risks described below. In addition, you should carefully consider, among other things, the matters discussed under “Risk Factors” in our Annual Report 2018 on Form 20-F for the fiscal year ended December 31, 2018, the risk factors specific to each series of Series B ETNs set forth in Annexes A—H hereto, as applicable, as well as the other information incorporated by reference in this prospectus. The risks and uncertainties described below, in our Annual Report 2018 and in Annexes A—H are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition and results of operations could suffer. As a result, the trading price of the Series B ETNs could decline, perhaps significantly, and you could lose all or part of your investment. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

Risks Relating to the Exchange Offers

Our board of directors has not made a recommendation as to whether you should tender your Series A ETNs in exchange for Series B ETNs in the exchange offers, and we have not obtained a third-party determination that the exchange offers are fair to holders of our Series A ETNs.

Our board of directors has not made, and will not make, any recommendation as to whether holders of Series A ETNs should tender their Series A ETNs in exchange for Series B ETNs pursuant to the exchange offers. We have not retained, and do not intend to retain, any unaffiliated representative to act solely on behalf of the holders of the Series A ETNs for purposes of negotiating the terms of these exchange offers, or preparing a report or making any recommendation concerning the fairness of these exchange offers. Therefore, if you tender your Series A ETNs, you may not receive more than or as much value as if you chose to keep them. Holders of Series A ETNs must make their own independent decisions regarding their participation in the exchange offers.

Upon consummation of the exchange offers, holders who exchange Series A ETNs will lose their rights under such Series A ETNs.

If you tender Series A ETNs and your Series A ETNs are accepted for exchange pursuant to the exchange offers, you will lose all of your rights as a holder of the exchanged Series A ETNs, including, without limitation, your right to future coupon and principal payments with respect to the exchanged Series A ETNs. If you are the holder of record of Series A ETNs on any coupon record date prior to the relevant Settlement Date for your tendered Series A ETNs, you will be entitled to the coupon amount payable on such Series A ETNs on the applicable coupon payment date.

In particular, the Series A Indenture under which the Series A ETNs were issued contained a co-obligation by UBS Switzerland AG for the benefit of the holders of the Series A ETNs. The Series B Indenture under which the Series B ETNs will be issued does not contain such co-obligation and no UBS Switzerland co-obligation will be provided with respect to the Series B ETNs. See “—Risks Relating to the Series B ETNs—The Series B ETNs are part of a series of debt securities entitled “Medium-Term Notes, Series B” and do not benefit from the co-obligation of UBS Switzerland AG” above for more information.

UBS expects to suspend sales of Series A ETNs from inventory immediately following the Final Expiration Date.

Immediately following the Final Expiration Date, UBS expects to suspend sales of Series A ETNs from inventory. Any suspension of sales of Series A ETNs from inventory may affect the liquidity of the market for Series A ETNs, potentially leading to insufficient supply and may cause the market price of the Series A ETNs to increase. Such an increase could represent a premium over the intraday indicative value of the Series A ETNs. In the event that UBS

 

 

 

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exercises its contractual call right, you will not receive any premium upon such redemption. Conversely, suspension of sales of Series A ETNs may also result in a significant reduction in the number of outstanding Series A ETNs if investors subsequently exercise their early redemption rights under the terms of the Series A ETNs. If the total number of outstanding Series A ETNs of a particular series falls to a level that is close to or below the minimum redemption amount, you may not be able to purchase enough Series A ETNs to meet the minimum size requirement in order to exercise your early redemption right. The unavailability of the early redemption right could result in the Series A ETNs trading in the secondary market at discounted prices below their intraday indicative value. Having to sell your Series A ETNs at a discounted market price below their intraday indicative value could lead to significant losses or the loss of your entire investment.

The liquidity of any trading market that currently exists for the Series A ETNs may be adversely affected by the exchange offers, and holders of Series A ETNs who fail to participate in the exchange offers may find it more difficult to sell their Series A ETNs after the exchange offers are completed.

To the extent that Series A ETNs are tendered and accepted for exchange pursuant to the exchange offers, the trading markets for the remaining Series A ETNs will become more limited or may cease to exist altogether. The market price for unexchanged Series A ETNs may be adversely affected and may not track the intraday indicative value of the applicable series of Series A ETNs. The reduced aggregate principal amount of Series A ETNs outstanding may also make the trading prices of the remaining Series A ETNs more volatile. In addition, within several months following the Final Expiration Date, we expect to exercise our contractual call right to redeem all remaining unexchanged Series A ETNs pursuant to the terms of each series of Series A ETNs. Following the redemption of all remaining unexchanged Series A ETNs of a given series, no further securities of that series will remain outstanding and such series will cease to be listed on NYSE Arca.

The exchange offers may be terminated, cancelled or delayed.

The consummation of each exchange offer is subject to, and conditional upon, the satisfaction or waiver of the conditions discussed under “The Exchange Offers—Conditions to the Exchange Offers,” including, among other things, the registration statement on Form F-4 of which this prospectus forms a part having been declared effective.

We may, at our option and in our sole discretion, waive any such conditions, except the condition that the registration statement of which this prospectus forms a part has been declared effective by the SEC. Even if the exchange offers are completed, the exchange offers may not be completed on the schedule described in this prospectus. Accordingly, holders participating in the exchange offers may have to wait longer than expected to receive their Series B ETNs during which time those holders of the Series A ETNs will not be able to effect transfers of their Series A ETNs tendered for exchange.

The conditions to the exchange offers must be satisfied or, where permitted, waived at or by each Applicable Exchange Date (except for the condition that the registration statement on Form F-4 of which the prospectus forms a part has been declared effective by the SEC, which may not be waived). It is possible that the conditions to the exchange offers may be satisfied on one Applicable Exchange Date but not on a later Applicable Exchange Date.

In addition, subject to applicable law, we reserve the right to terminate, withdraw or amend each exchange offer independently of the other exchange offers at any time and from time to time, including after the First Settlement Date but prior to the Final Expiration Date, as described elsewhere in this prospectus.

You may not receive Series B ETNs in the exchange offers if the applicable procedures for the exchange offers are not followed.

We will issue the Series B ETNs in exchange for your Series A ETNs only if you tender your Series A ETNs and deliver properly completed documentation for the applicable exchange offer. You should contact your broker, dealer, commercial bank, trust company or other nominee if you wish to tender your Series A ETNs in the exchange offers.

 

 

 

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DTC participants must electronically transmit their acceptance of the exchange offer through DTC’s ATOP procedures and deliver any other required documents to the exchange agent before expiration of the exchange offers. See “The Exchange Offers—Procedures for Tendering Series A ETNs” for a description of the procedures to be followed to tender your Series A ETNs.

You should allow sufficient time to ensure delivery of the necessary documents. None of UBS AG, the exchange agent, the information agent, the dealer manager or any other person is under any duty to give notification of defects or irregularities with respect to the tenders of the Series A ETNs for exchange.

Failure to complete any of the exchange offers successfully could negatively affect the prices of the applicable Series A ETNs.

Several conditions must be satisfied or waived in order to complete each of the exchange offers. The conditions to any of the exchange offers may not be satisfied, and if not satisfied or waived, to the extent that the conditions may be waived, such exchange offers may not occur or may be delayed. If the exchange offers are not completed or are delayed, the respective market prices of any or all of the series of Series A ETNs in such exchange offer may decline to the extent that the respective current market prices reflect an assumption that such exchange offers has been or will be completed.

Risks Relating to the Series B ETNs

The Series B ETNs are “indexed securities.” We use the term “indexed securities” to mean debt securities whose value is linked to an underlying index, including equity, commodity and credit indexed securities and equity, commodity, currency and credit linked securities. Indexed securities may present a high level of risk, and those who invest in some indexed securities may lose their entire investment. In addition, the treatment of indexed securities for U.S. federal income tax purposes is often unclear due to the absence of any authority specifically addressing the issues presented by an particular indexed security. Thus, if you propose to invest in the Series B ETNs, you should independently evaluate the federal income tax consequences of purchasing an indexed security that apply in your particular circumstances. You should also read the sections titled “Material U.S. Federal Income Tax Consequences” in each Annex applicable to your series of Series B ETNs, for a discussion of U.S. tax matters.

We may engage in hedging activities that could adversely affect the Series B ETNs.

In order to hedge an exposure on a particular series of Series B ETN, we may, directly or through our affiliates, enter into transactions involving the securities, commodities or currencies or other instruments or measures that underlie the index for that security, or involving derivative instruments, such as swaps, options or futures, on the index or any of its component items. By engaging in transactions of this kind, we could adversely affect the value of a series of Series B ETNs. It is possible that we could achieve substantial returns from our hedging transactions while the value of such Series B ETN may decline.

Information about indices may not be indicative of future performance.

Historical information about the indices that underlie each series of Series B ETNs is included in the applicable Annex(es) hereto. Such information is furnished as a matter of information only, and you should not regard the information as indicative of the range of, or trends in, fluctuations in the relevant indices that may occur in the future.

We may have conflicts of interest regarding a series of Series B ETNs.

UBS Securities LLC and our other affiliates may have conflicts of interest with respect to one or more series of Series B ETNs. UBS Securities LLC and our other affiliates may engage in trading, including trading for hedging purposes,

 

 

 

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for their own accounts or for other accounts under their management, in Series B ETNs and in the securities, commodities or currencies or other instruments or measures on which those Series B ETNs are based or in other derivative instruments related to the underlying index or its component items. These trading activities could adversely affect the value of the Series B ETNs. We and our affiliates may also issue or underwrite securities or derivative instruments that are linked to the same index as one or more series of Series B ETNs. By introducing competing products into the marketplace in this manner, we could adversely affect the value of the Series B ETNs.

UBS Securities LLC or another of our affiliates may serve as calculation agent for one or more series of Series B ETNs and may have considerable discretion in calculating the amounts payable in respect of those securities. To the extent that UBS Securities LLC or another of our affiliates calculates or compiles a particular index, it may also have considerable discretion in performing the calculation or compilation of the index. Exercising discretion in this manner could adversely affect the value of the Series B ETNs based on the index or the rate of return on the security.

Credit of UBS AG.

The Series B ETNs are senior unsecured debt obligations of the issuer, UBS AG, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on the Series B ETNs, including any payment at maturity or call, or upon early redemption or acceleration (if applicable), depends on the ability of UBS AG to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of UBS AG will affect the market value, if any, of the Series B ETNs prior to maturity or call, or upon early redemption or acceleration (if applicable). In addition, in the event UBS AG were to default on its obligations, you may not receive any amounts owed to you under the terms of the Series B ETNs and you could lose your entire investment.

Changes in our credit rating may affect the market value of the Series B ETNs.

Our credit ratings are an assessment of our ability to pay our obligations, including those on the Series B ETNs. Consequently, actual or anticipated changes in our credit ratings may affect the market value of the Series B ETNs. Any decline in our credit rating is likely to adversely affect the market value of the Series B ETNs. However, because the return on the Series B ETNs is dependent upon certain factors in addition to our ability to pay our obligations on the Series B ETNs, an improvement in our credit ratings will not reduce the other investment risks related to the Series B ETNs. Therefore, an improvement in our credit ratings may or may not have a positive effect on the market value of the Series B ETNs.

The Series B ETNs are part of a series of debt securities entitled “Medium-Term Notes, Series B” and do not benefit from the co-obligation of UBS Switzerland AG.

UBS AG Exchange Traded Access Securities (E-TRACS) issued prior June 12, 2015 are part of a series of UBS AG debt securities entitled “Medium-Term Notes, Series A” (the “Series A MTN Program”). UBS Switzerland AG is a co-obligor of such debt securities. However, the Series B ETNs are part of a separate series of UBS AG debt securities entitled “Medium-Term Notes, Series B,” and were issued after June 12, 2015. As a result, UBS Switzerland AG is not a co-obligor of the Series B ETNs and has no liability with respect to the Series B ETNs. If UBS AG fails to perform and observe every covenant of the indenture to be performed or observed by UBS AG with respect to the Series B ETNs, holders of the Series B ETNs will have recourse only against UBS AG, and not against UBS Switzerland AG.

Difference between the Series B ETNs and bank deposits.

An investment in the Series B ETNs may give rise to higher yields than a bank deposit placed with UBS AG or with any other investment firm in the UBS Group (a “UBS Bank Deposit”). However, an investment in the Series B ETNs carries risks which are very different from the risk profile of a UBS Bank Deposit. The Series B ETNs are expected to have greater liquidity than a UBS Bank Deposit since UBS Bank Deposits are generally not transferable. However, the

 

 

 

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Series B ETNs may have no established trading market when issued, and one may never develop. Investments in the Series B ETNs do not benefit from the protection provided pursuant to Directive 2014/49/EU of the European Parliament and of the Council of the European Union on deposit guarantee schemes or any national implementing measure implementing this Directive in any jurisdiction. Therefore, if we become insolvent or default on our obligations, investors investing in such Series B ETNs in the worst case scenario could lose their entire investment. Further, if UBS AG experiences financial difficulties, the Swiss Financial Market Supervisory Authority has the power to open resolution or liquidation proceedings or impose protective measures in relation to UBS Group AG, UBS AG or UBS Switzerland AG, and holders of the Series B ETNs may be subject to write-down or conversion into equity on any application of the general bail-in tool and non-viability loss absorption, which may result in such holders losing some or all of their investment.

There may not be an active trading market in the Series B ETNs; sales in the secondary market may result in significant losses.

Each series of Series B ETNs is listed on NYSE Arca. However, we are not required to maintain any listing of the Series B ETNs on NYSE Arca or any other exchange. Certain affiliates of UBS AG may engage in limited purchase and resale transactions in the Series B ETNs of any series, although they are not required to do so and may stop at any time. No assurance can be given that a secondary market for the Series B ETNs will develop or continue over time, however if an active secondary market develops and continues, we expect that investors will purchase and sell the Series B ETNs primarily in this secondary market. Even if an active secondary market for the Series B ETNs of a particular series develops or continues, it may not provide significant liquidity or trade at prices advantageous to you. As a result, if you sell your Series B ETNs in the secondary market, you may have to do so at a discount from the issue price or the intraday indicative value of the Series B ETNs and you may suffer significant losses.

We and our affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding the Series B ETNs. Any such research, opinions or recommendations could affect the level of the assets underlying the index, the index or the market value of the Series B ETNs.

UBS AG and its affiliates publish research from time to time on stocks or commodities and other matters that may influence the value of the Series B ETNs, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Series B ETNs. UBS AG and its affiliates may have published research or other opinions that call into question the investment view implicit in an investment in the Series B ETNs. Any research, opinions or recommendations expressed by UBS AG or its affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should make their own independent investigation of the merits of investing in the Series B ETNs and the indices to which the Series B ETNs are linked.

Our offering of the Series B ETNs does not constitute a recommendation of the underlying index or the assets underlying the index.

You should not take our offering of the Series B ETNs as an expression of our views about how the index to which the series of Series B ETNs is linked will perform in the future or as a recommendation to invest in the relevant index or the assets underlying such index, including through an investment in the Series B ETNs. As we are part of a global financial institution, our affiliates may have, and often do have, positions (including short positions) that conflict with an investment in the Series B ETNs, including positions in constituent securities included in the relevant index. You should undertake an independent determination of whether an investment in the Series B ETNs is suitable for you in light of your specific investment objectives, risk tolerance and financial resources.

The business activities of UBS AG or its affiliates may create conflicts of interest.

We and our affiliates play a variety of roles in connection with the issuance of the Series B ETNs, including acting as Security Calculation Agent in connection with certain series of the Series B ETNs and as Dealer Manager in

 

 

 

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connection with the exchange offers. As noted above, UBS AG and its affiliates expect to engage in trading activities related to the indices and the assets underlying the indices to which the Series B ETNs are linked, that are not for the account of holders of the Series B ETNs or on their behalf. These trading activities may present a conflict between the holders’ interest in the Series B ETNs and the interests UBS AG and its affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the level of the relevant index, could have an adverse impact on the market value of the Series B ETNs.

If UBS AG experiences financial difficulties, FINMA has the power to open restructuring or liquidation proceedings in respect of, and/or impose protective measures in relation to, UBS AG, which proceedings or measures may have a material adverse effect on the terms and market value of the Series B ETNs and/or the ability of UBS AG to make payments thereunder.

FINMA has broad statutory powers to take measures and actions in relation to UBS AG if (i) it concludes that there is justified concern that UBS AG is over-indebted or has serious liquidity problems or (ii) UBS AG fails to fulfil the applicable capital adequacy requirements (whether on a standalone or consolidated basis) after expiry of a deadline set by FINMA. If one of these pre-requisites is met, FINMA is authorized to open restructuring proceedings or liquidation (bankruptcy) proceedings in respect of, and/or impose protective measures in relation to, UBS AG. The Swiss Banking Act grants significant discretion to FINMA in connection with the aforementioned proceedings and measures. In particular, a broad variety of protective measures may be imposed by FINMA, including a bank moratorium or a maturity postponement, which measures may be ordered by FINMA either on a stand-alone basis or in connection with restructuring or liquidation proceedings. The resolution regime of the Swiss Banking Act is further detailed in the FINMA Banking Insolvency Ordinance (“BIO-FINMA”). In a restructuring proceeding, FINMA, as resolution authority, is competent to approve the resolution plan. The resolution plan may, among other things, provide for (a) the transfer of all or a portion of UBS AG’s assets, debts, other liabilities and contracts (which may or may not include the contractual relationship between UBS AG and the holders of Series B ETNs) to another entity, (b) a stay (for a maximum of two business days) on the termination of contracts to which UBS AG is a party, and/or the exercise of (w) rights to terminate, (x) netting rights, (y) rights to enforce or dispose of collateral or (z) rights to transfer claims, liabilities or collateral under contracts to which UBS AG is a party, (c) the conversion of UBS AG’s debt and/or other obligations, including its obligations under the Series B ETNs, into equity (a “debt-to-equity” swap), and/or (d) the partial or full write-off of obligations owed by UBS AG (a “write-off”), including its obligations under the Series B ETNs. The BIO-FINMA provides that a debt-to-equity swap and/or a write-off of debt and other obligations (including the Series B ETNs) may only take place after (i) all debt instruments issued by UBS AG qualifying as additional tier 1 capital or tier 2 capital have been converted into equity or written-off, as applicable, and (ii) the existing equity of UBS AG has been fully cancelled. While the BIO-FINMA does not expressly address the order in which a write-off of debt instruments other than debt instruments qualifying as additional tier 1 capital or tier 2 capital should occur, it states that debt-to-equity swaps should occur in the following order: first, all subordinated claims not qualifying as regulatory capital, second, all other claims not excluded by law from a debt-to-equity swap (other than deposits), and third, deposits (in excess of the amount privileged by law). However, given the broad discretion granted to FINMA as the resolution authority, any restructuring plan in respect of UBS AG could provide that the claims under or in connection with the Series B ETNs will be partially or fully converted into equity or written-off, while preserving other obligations of UBS AG that rank pari passu with, or even junior to, UBS AG’s obligations under the Series B ETNs. Consequently, holders of Series B ETNs may lose all or some of their investment in the Series B ETNs. In the case of restructuring proceedings with respect to a systemically important Swiss bank (such as UBS AG), the creditors whose claims are affected by the restructuring plan will not have a right to vote on, reject, or seek the suspension of the restructuring plan. In addition, if a restructuring plan has been approved by FINMA, the rights of a creditor to seek judicial review of the restructuring plan (e.g., on the grounds that the plan would unduly prejudice the rights of holders of Series B ETNs or otherwise be in violation of the Swiss Banking Act) are very limited. In particular, a court may not suspend the implementation of the restructuring plan. Furthermore, even if a creditor successfully challenges the restructuring plan, the court can only require the relevant creditor to be compensated ex post and there is currently no guidance as to on what basis such compensation would be calculated and how it would be funded.

 

 

 

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USE OF PROCEEDS

We will not receive any proceeds from the exchanges of the Series B ETNs for the Series A ETNs pursuant to the exchange offers. In exchange for issuing the Series B ETNs we will receive the tendered Series A ETNs. The Series A ETNs surrendered in connection with the exchange offers will be cancelled.

 

 

 

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THE EXCHANGE OFFERS

Purpose of the Exchange Offers

UBS is conducting the exchange offers in order to reduce the intercompany exposures of UBS Switzerland AG to UBS AG in line with regulatory recovery and resolution guidance. UBS AG is offering holders of the Series A ETNs the ability to exchange their Series A ETNs on a 1-for-1 basis for the corresponding series of Series B ETNs (as designated in the table below) that do not have the UBS Switzerland Co-obligation, but are otherwise intended to have the same economic terms as the corresponding Series A ETNs for which they are being exchanged.

Terms of the Exchange Offers

In the exchange offers, we are offering in exchange for a holder’s outstanding Series A ETNs the following Series B ETNs on a 1-for-1 basis:

 

Aggregate Number
of Securities
Outstanding as of
December 2, 2019(1)
  Title of Series A ETNs  

CUSIP

No. of
Series A
ETNs

    Ticker
Symbols of
Series A
ETNs
    Title of Series B ETNs
Being Offered
 

CUSIP

No. of
Series B
ETNs
Being
Offered

    Ticker
Symbols of
Series B
ETNs
Being
Offered
 

17,900,000

  ETRACS Alerian MLP Index ETN due July 18, 2042     90267B682       AMU     ETRACS Alerian MLP Index ETN, Series B due July 18, 2042     90274D374       AMUB  

13,100,000

  2xLeveraged Long ETRACS linked to the Wells Fargo Business Development Company Index due May 24, 2041     90267B765       BDCL     2xLeveraged Long ETRACS Wells Fargo Business Development Company Index ETN Series B due May 24, 2041     90274D424       LBDC  

4,355,000

  ETRACS linked to the Wells Fargo Business Development Company Index due April 26, 2041     902641588       BDCS     ETRACS Wells Fargo Business Development Company Index ETN Series B due April 26, 2041     90274D416       BDCZ  

17,000,000

  ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN due December 10, 2043     90270L842       CEFL     ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN Series B due December 10, 2043     90269A468       CEFZ  

2,938,680

  ETRACS linked to the Bloomberg Commodity Index Total Return due October 31, 2039     902641679       DJCI     ETRACS Bloomberg Commodity Index Total Return ETN Series B due October 31, 2039     90269A450       DJCB  

46,850,000

  ETRACS linked to the Alerian MLP Infrastructure Index due April 2, 2040     902641646       MLPI     ETRACS Alerian MLP Infrastructure Index ETN Series B due April 2, 2040     90274D382       MLPB  

30,240,000

  ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN due October 16, 2042     90269A302       MORL     ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B due October 16, 2042     90274D432       MRRL  

4,728,590

  ETRACS linked to the UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return due April 5, 2038     902641778       UCI     ETRACS UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return ETN Series B due April 5, 2038     90274D390       UCIB  
(1)

We have registered an amount of Series B ETNs that is more than the number of Series A ETNs currently outstanding to account for potential additional Series A ETN issuances prior to the Final Expiration Date of the exchange offers.

 

 

 

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Specifically, in exchange for each $25.00 stated principal amount of Series A ETNs (i.e. 1 Series A ETN security) of any series that is validly tendered prior to 5:00 p.m., New York City time, on an Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date), and not validly withdrawn prior to 5:00 p.m., New York City time, on such Applicable Expiration Date, holders will receive the Exchange Consideration of $25.00 stated principal amount of Series B ETNs (i.e. 1 Series B ETN security) of the corresponding series.

Subject to applicable law, each exchange offer is being made independently of the other exchange offers. In the event that any of the conditions to the exchange offers (as described below) are not satisfied prior to an Applicable Exchange Date, we reserve the right to terminate or withdraw each exchange offer independently of the other exchange offers, as described in this prospectus. We reserve the right to amend each exchange offer independently of the other exchange offers at any time and from time to time, as described in this prospectus.

Any holder of Series A ETNs located or resident in any Member State of the EEA which is a retail investor will not be able to participate in the applicable exchange offer. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II, (ii) a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (iii) a person that is not a qualified investor as defined in the Prospectus Regulation.

The economic terms, including the coupon record dates and coupon payment dates (where applicable), of each series of Series B ETNs to be issued by UBS AG in the exchange offers will be the same as those of the corresponding series of Series A ETNs to be exchanged, except for the lack of the UBS Switzerland Co-obligation. Accordingly, on any Business Day, the accrued coupon amount on each corresponding pair of Series A ETNs and Series B ETNs are identical. Holders will receive payment for accrued but unpaid coupon payments (where applicable) on either the Series A ETNs or the Series B ETNs for which they are exchanged, depending on which securities such holder holds on the applicable coupon record date.

Each series of Series B ETNs is a new series of debt securities that will be issued under our Series B Indenture. The terms of the Series B ETNs will include those expressly set forth in such notes, the Series B Indenture and those made part of the Series B Indenture by reference to the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).

The consummation of each exchange offer is subject to, and conditional upon, the satisfaction or, where permitted, waiver of the conditions discussed under “—Conditions to the Exchange Offers.” We may, at our option and sole discretion, waive any such conditions, except the condition that the registration statement of which this prospectus forms a part has been declared effective by the SEC. All conditions to the exchange offers must be satisfied or, where permitted, waived, at or by each Applicable Exchange Date. For information about other conditions to our obligations to complete the exchange offers, see “—Conditions to the Exchange Offers.”

Conditions to the Exchange Offers

The consummation of each exchange offer is subject to, and conditional upon, the satisfaction or, where permitted, waiver of the following conditions: (a) the registration statement of which this prospectus forms a part having been declared effective by the SEC and (b) the following statements being true:

(1) In our reasonable judgment, no action or event has occurred or been threatened (including a default under an agreement, indenture or other instrument or obligation to which we or one of our affiliates is a party or by which we or one of our affiliates is bound), no action is pending, no action has been taken, and no statute, rule, regulation, judgment, order, stay, decree or injunction has been promulgated, enacted, entered, enforced or deemed applicable to the exchange offers or the exchange of Series A ETNs for Series B ETNs of the corresponding series under an exchange offer, by or before any court or governmental, regulatory or administrative agency, authority or tribunal, which either:

 

   

challenges the exchange offers or the exchange of Series A ETNs for Series B ETNs of the corresponding series under an exchange offer or might, directly or indirectly, prohibit, prevent, restrict or delay consummation of, or might otherwise adversely affect in any material manner, the exchange offers or the exchange of Series A ETNs for Series B ETNs of the corresponding series under an exchange offer; or

 

 

 

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in our reasonable judgment, could materially affect the business, condition (financial or otherwise), income, operations, properties, assets, liabilities or prospects of UBS AG and its subsidiaries, taken as a whole, or materially impair the contemplated benefits to UBS AG of the exchange offers or the exchange of Series A ETNs for Series B ETNs of the corresponding series under an exchange offer, or might be material to holders of Series A ETNs in deciding whether to accept the exchange offers;

(2) None of the following has occurred:

 

   

any general suspension of or limitation on trading in securities on any United States national securities exchange or in the over-the-counter market (whether or not mandatory);

 

   

a declaration of a banking moratorium or any suspension of payments in respect of banks by federal or state authorities in the United States (whether or not mandatory);

 

   

any material adverse change in the United States’ securities or financial markets generally; or

 

   

in the case of any of the foregoing existing at the time of the commencement of the exchange offers, a material acceleration or worsening thereof; and

(3) The trustee under the Indenture has not objected in any respect to, or taken any action that could in our reasonable judgment adversely affect the consummation of, any of the exchange offers or the exchange of Series A ETNs for Series B ETNs of the corresponding series under an exchange offer, nor has the trustee taken any action that challenges the validity or effectiveness of the procedures used by us in making the exchange offers or the exchange of the Series A ETNs for Series B ETNs of the corresponding series under an exchange offer.

All of these conditions are for our sole benefit and, except as set forth below, may be waived by us, in whole or in part in our sole discretion. Any determination made by us concerning these events, developments or circumstances shall be conclusive and binding, subject to the rights of the holders of the Series A ETNs to challenge such determination in a court of competent jurisdiction. We may, at our option and in our sole discretion, waive any such conditions except for the condition that the registration statement of which this prospectus forms a part has been declared effective by the SEC. All conditions to the exchange offers must be satisfied or, where permitted, waived, at or by each Applicable Exchange Date.

If any of these conditions is not satisfied with respect to any or all series of the Series A ETNs, we may, at any time before the Applicable Exchange Date:

(1) terminate any one or more of the exchange offers and promptly return all tendered Series A ETNs of such series to the holders thereof (whether or not we terminate the other exchange offers);

(2) modify, extend or otherwise amend any one or more of the exchange offers and retain all tendered Series A ETNs of such series until the next Applicable Exchange Date, subject, however, to the withdrawal rights of holders (see “—Withdrawal of Tenders” and “—Final Expiration Date; Extensions; Amendments”); or

(3) waive the unsatisfied conditions, except for the condition that the registration statement of which this prospectus forms a part has been declared effective by the SEC, with respect to any one or more of the exchange offers and accept all Series A ETNs tendered and not previously validly withdrawn with respect to any or all series of Series A ETNs.

Final Expiration Date; Extensions; Amendments

The Final Expiration Date for the exchange offers shall be 5:00 p.m., New York City time, on May 1, 2020, subject to our right to extend that date and time with respect to one or more series of Series A ETNs in our sole discretion, in which case the Final Expiration Date shall be the latest date and time to which we have extended the exchange offer of the applicable series.

Subject to applicable law, we expressly reserve the right, in our sole discretion, with respect to the exchange offers for each series of Series A ETNs to:

 

  (1)

delay accepting any validly tendered Series A ETNs,

 

 

 

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  (2)

extend any of the exchange offers, or

 

  (3)

terminate or amend any of the exchange offers, by giving oral or written notice of such delay, extension, termination or amendment to the exchange agent.

If we exercise any such right, we will give written notice thereof to the exchange agent and will make a public announcement thereof as promptly as practicable. Disclosure of material changes in the terms of the exchange offers will be disseminated promptly in accordance with Rule 13e-4(e)(3) under the Exchange Act. Without limiting the manner in which we may choose to make a public announcement of any delay, extension, amendment or termination of any of the exchange offers, we will not be obligated to publish, advertise or otherwise communicate any such public announcement, other than by making a timely press release to any appropriate news agency.

The minimum period during which the exchange offers will remain open following material changes in the terms of the exchange offers or in the information concerning the exchange offers will depend upon the facts and circumstances of such change, including the relative materiality of the changes.

We may choose to extend any of the exchange offers, in our sole discretion, by giving notice of such extension at any time on or prior to 5:00 p.m., New York City time, on the business day immediately following the previously scheduled Final Expiration Date.

If the terms of the exchange offers are amended in a manner determined by us to constitute a material change adversely affecting any holder of the Series A ETNs, we will promptly disclose any such amendment in a manner reasonably calculated to inform holders of the Series A ETNs of such amendment, and will extend the relevant exchange offers as well as extend the withdrawal deadline, or if the Final Expiration Date has passed, provide additional withdrawal rights, for a time period that we deem appropriate, depending upon the significance of the amendment and the manner of disclosure to the holders of the Series A ETNs, if the exchange offers would otherwise expire during such time period.

Subject to applicable law, each exchange offer is being made independently of the other exchange offers. In the event that any of the conditions to the exchange offers (as described above) are not satisfied prior to an Applicable Exchange Date, we reserve the right to terminate or withdraw each exchange offer independently of the other exchange offers, as described in this prospectus. We reserve the right to amend each exchange offer independently of the other exchange offers at any time and from time to time, as described in this prospectus.

Effect of Tender

Any tender of a Series A ETN by a holder that is not validly withdrawn prior to 5:00 p.m., New York City time, on the next Applicable Exchange Date immediately following the date on which such Series A ETNs are validly tendered, will constitute a binding agreement between that holder and UBS AG, upon the terms and subject to the conditions of the relevant exchange offer and the letter of instruction, which agreement will be governed by, and construed in accordance with, the laws of the State of New York. The acceptance of the exchange offers by a tendering holder of Series A ETNs will constitute the agreement by a tendering holder to deliver good and marketable title to the tendered Series A ETNs, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind.

Absence of Dissenters’ Rights

Holders of the Series A ETNs do not have any appraisal rights or dissenters’ rights under New York law, the law governing the Series A Indenture and the Series A ETNs, or under the terms of the Series A Indenture in connection with the exchange offers.

Acceptance of Series A ETNs for Exchange; Series B ETNs

Assuming the conditions to the exchange offers are satisfied or, where permitted, waived, we will issue Series B ETNs in book-entry form in connection with the exchange offers promptly on each Settlement Date, as applicable based on the date on which such Series A ETNs are tendered (in exchange for Series A ETNs that are properly tendered (and not validly withdrawn) before the Applicable Exchange Date, and accepted for exchange). The Settlement Date applicable

 

 

 

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to each holder of Series A ETNs will be determined by reference to the date upon which such holder validly tenders its Series A ETNs, as set forth below:

 

Exchange Date    Settlement Date

For Series A ETNs validly tendered on or after the date hereof but prior to 5:00 p.m., New York City time, on January 15, 2020 (the “First Exchange Date”)

 

(the “First Exchange Period”)

  

January 17, 2020

 

(the “First Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the First Exchange Date but prior to 5:00 p.m., New York City time, on January 30, 2020 (the “Second Exchange Date”)

 

(the “Second Exchange Period”)

  

February 3, 2020

 

(the “Second Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Second Exchange Date but prior to 5:00 p.m., New York City time, on February 13, 2020 (the “Third Exchange Date”)

 

(the “Third Exchange Period”)

  

February 18, 2020

 

(the “Third Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Third Exchange Date but prior to 5:00 p.m., New York City time, on March 3, 2020 (the “Fourth Exchange Date”)

 

(the “Fourth Exchange Period”)

  

March 5, 2020

 

(the “Fourth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Fourth Exchange Date but prior to 5:00 p.m., New York City time, on March 17, 2020 (the “Fifth Exchange Date”)

 

(the “Fifth Exchange Period”)

  

March 19, 2020

 

(the “Fifth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Fifth Exchange Date but prior to 5:00 p.m., New York City time, on March 31, 2020 (the “Sixth Exchange Date”)

 

(the “Sixth Exchange Period”)

  

April 2, 2020

 

(the “Sixth Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Sixth Exchange Date but prior to 5:00 p.m., New York City time, on April 16, 2020 (the “Seventh Exchange Date”)

 

(the “Seventh Exchange Period”)

  

April 20, 2020

 

(the “Seventh Settlement Date”)

For Series A ETNs validly tendered at or after 5:00 p.m., New York City time, on the Seventh Exchange Date but prior to 5:00 p.m., New York City time, on the Final Expiration Date

 

(the “Final Exchange Period”)

  

May 5, 2020

 

(the “Final Settlement Date”)

The First Exchange Period, Second Exchange Period, Third Exchange Period, Fourth Exchange Period, Fifth Exchange Period, Sixth Exchange Period, Seventh Exchange Period and the Final Exchange Period are each referred to herein as an “Exchange Period” and together as the “Exchange Periods.

The First Exchange Date, Second Exchange Date, Third Exchange Date, Fourth Exchange Date, Fifth Exchange Date, Sixth Exchange Date, Seventh Exchange Date and the Final Expiration Date are each referred to herein as an “Applicable Exchange Date.

We will be deemed to have accepted validly tendered Series A ETNs if and when we have given oral or written notice thereof to the exchange agent. Subject to the terms and conditions of the exchange offers, delivery of Series B ETNs in

 

 

 

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connection with the exchange of Series A ETNs accepted by us will be made by the exchange agent on the applicable Settlement Date upon receipt of such notice. The exchange agent will act as agent for participating holders of the Series A ETNs for the purpose of receiving Series A ETNs from, and transmitting Series B ETNs to, such holders. If any tendered Series A ETNs are not accepted for any reason set forth in the terms and conditions of the exchange offers or if Series A ETNs are withdrawn prior to 5:00 p.m., New York City time, on the Applicable Exchange Date, such unaccepted or withdrawn Series A ETNs will be returned without expense to the tendering holder promptly after such Applicable Exchange Date.

Procedures for Tendering Series A ETNs

If you hold Series A ETNs and wish to have those notes exchanged for Series B ETNs in the exchange offer, you must validly tender (or cause the valid tender of) your Series A ETNs using the ATOP procedures described in this prospectus and in the accompanying letter of instruction.

The procedures by which you may tender or cause to be tendered Series A ETNs will depend upon the manner in which you hold the Series A ETNs, as described below.

Series A ETNs Held with DTC by a DTC Participant

Pursuant to authority granted by DTC, if you are a DTC participant that has Series A ETNs credited to your DTC account and thereby held of record by DTC’s nominee, you may directly tender your Series A ETNs as if you were the record holder. Accordingly, references herein to record holders include DTC participants with Series A ETNs credited to their accounts. Within two business days after the date of this prospectus, the exchange agent for the Series A ETNs, D.F. King & Co., Inc., as the exchange agent, will establish accounts with respect to the Series A ETNs at DTC for purposes of the exchange offers.

Any DTC participant may tender Series A ETNs by effecting a book-entry transfer of the Series A ETNs to be tendered in the exchange offers into the account of the exchange agent at DTC and electronically transmitting its acceptance of the exchange offers through DTC’s ATOP procedures for transfer, and delivering any other required documents to the exchange agent, before the Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date).

If ATOP procedures are followed, DTC will verify each acceptance transmitted to it, execute a book-entry delivery to the exchange agent’s account at DTC and send an agent’s message to the exchange agent. An “agent’s message” is a message, transmitted by DTC to and received by the exchange agent and forming part of a book-entry confirmation, which states that DTC has received an express acknowledgement from a DTC participant tendering Series A ETNs that the participant has received and agrees to be bound by the terms of the letter of instruction and that UBS AG may enforce the agreement against the participant. DTC participants following this procedure should allow sufficient time for completion of the ATOP procedures prior to 5:00 p.m., New York City time, on the Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date). If the ATOP procedures are not completed prior to 5:00 p.m., New York City time, on the Applicable Exchange Date immediately following the date on which the Series A ETNs are tendered, then those Series A ETNs will not be accepted for exchange in the preceding Exchange Period and will instead be deemed tendered in the next Exchange Period and the issue of corresponding series of Series B ETNs will occur on the Settlement Date referable to such next Exchange Period. If the ATOP procedures are not completed prior to 5:00 p.m., New York City time, on the Final Expiration Date, the Series A ETNs will not be accepted for exchange and will be returned without expense to the tendering holder promptly after the Applicable Exchange Date.

Series A ETNs Held Through a Nominee by a Beneficial Owner

Currently, all of the Series A ETNs are held in book-entry form and can only be tendered by following the procedures described under “—Series A ETNs Held with DTC by a DTC Participant.” However, any beneficial owner whose

 

 

 

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Series A ETNs are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct it to tender on the owner’s behalf if it wishes to participate in the exchange offers. You should keep in mind that your intermediary may require you to take action with respect to the exchange offers a number of days before an Applicable Exchange Date, in order for such entity to tender Series A ETNs on your behalf on or prior to 5:00 p.m., New York City time, on the Applicable Exchange Date, in accordance with the terms of the exchange offers.

Beneficial owners should be aware that their broker, dealer, commercial bank, trust company or other nominee may establish its own earlier deadlines for participation in the exchange offers. Accordingly, beneficial owners wishing to participate in the exchange offers should contact their broker, dealer, commercial bank, trust company or other nominee as soon as possible in order to determine the times by which such owner must take action in order to participate in the exchange offers.

Letter of Instruction

Subject to and effective upon the acceptance for exchange and issuance of Series B ETNs in exchange for Series A ETNs tendered, by agreeing to the terms of the letter of instruction pursuant to an agent’s message a tendering holder of Series A ETNs:

 

   

irrevocably sells, assigns and transfers to or upon the order of UBS AG all right, title and interest in and to, and all claims in respect of or arising or having arisen as a result of the holder’s status as a holder of, the Series A ETNs tendered thereby;

 

   

represents and warrants that the Series A ETNs tendered were owned as of the date of tender, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind;

 

   

irrevocably constitutes and appoints the exchange agent the true and lawful agent and attorney-in-fact of the holder with respect to any tendered Series A ETNs (with full knowledge that the exchange agent also acts as the agent of UBS AG), with full powers of substitution and revocation (such power of attorney being deemed to be an irrevocable power coupled with an interest) to cause the Series A ETNs tendered to be assigned, transferred and exchanged in the exchange offers;

 

   

will, upon request, execute and deliver any additional documents deemed by the exchange agent or UBS AG to be necessary or desirable to complete the sale, assignment and transfer of the Series A ETNs tendered;

 

   

the undersigned acknowledges that none of UBS AG, the dealer manager, the exchange agent, the information agent or the trustee under the Series A Indenture or the Series B Indenture, or any person acting on behalf of any of the foregoing, has made any statement, representation, or warranty, express or implied, to it with respect to UBS AG or the offer or sale of any Series B ETNs, other than the information included in the Prospectus (as supplemented to the Applicable Exchange Date applicable to each holder);

 

   

acknowledges that it (a) is not resident and/or located in any Member State of the EEA, or if resident and located in any Member State of the EEA, it is not a retail investor; for these purposes, “retail investor” means a person who is one (or more) of: (1) a retail client as defined in point (11) of Article 4(1) of MiFID II, (2) a customer within the meaning of Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (3) a person that is not a qualified investor as defined in the Prospectus Regulation; and (b) is acting for its own account, or, if it is acting as agent, each principal it is acting for is not a retail investor;

 

   

acknowledges it is either (i) a person outside the United Kingdom; (ii) an investment professional falling within Article 19(5) of the Order; or (iii) a high net worth entity or other person, in each case falling within Article 49(2)(a) to (d) of the Order and it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the exchange offers in, from or otherwise involving the United Kingdom; and

 

 

 

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will be deemed to have represented and warranted that either (i) no portion of the assets used by it to acquire or hold the Series B ETNs constitutes assets of any (a) employee benefit plan that is subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (b) plan, individual retirement account or other arrangement that is subject to Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), (c) plan subject to provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of Title I of ERISA or Section 4975 of the Code (collectively, “Similar Laws”), or (d) entity which is deemed to hold the assets of any of the foregoing types of plans, accounts or arrangements or (ii) the acquisition and holding of the Series B ETNs by such purchaser or transferee will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a similar violation under any applicable other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions.

Withdrawal of Tenders

Tenders of Series A ETNs in connection with any of the exchange offers may be withdrawn at any time prior to 5:00 p.m., New York City time, on the next Applicable Exchange Date immediately following the date on which such Series A ETNs are validly tendered. Following each Applicable Exchange Date, Series A ETNs that were tendered in the preceding Exchange Period may not be validly withdrawn unless UBS AG is otherwise required by law to permit such withdrawal.

For example, Series A ETNs validly tendered in the First Exchange Period may be withdrawn at any time prior to 5:00 p.m., New York City time, on the First Exchange Date. Following the First Exchange Date, any Series A ETNs tendered in the First Exchange Period but not withdrawn prior to 5:00 p.m., New York City time, on the First Exchange Date may no longer be validly withdrawn, unless UBS AG is otherwise required by law to permit such withdrawal. Similarly, Series A ETNs tendered in the Second Exchange Period may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Second Exchange Date. Following the Second Exchange Date, any Series A ETNs tendered in the Second Exchange Period but not withdrawn prior to 5:00 p.m., New York City time, on the Second Exchange Date may no longer be validly withdrawn, unless UBS AG is otherwise required by law to permit such withdrawal.

Beneficial owners desiring to withdraw Series A ETNs previously tendered through the ATOP procedures should contact the DTC participant through which they hold their Series A ETNs. In order to withdraw Series A ETNs previously tendered, a DTC participant may, prior to 5:00 p.m., New York City time, on the Applicable Exchange Date (and in any event not later than 5:00 p.m., New York City time, on the Final Expiration Date), withdraw its instruction previously transmitted through ATOP by complying with DTC’s procedures for withdrawal of tenders. A withdrawal may be effected by a properly submitted “Request Message” through ATOP, which must:

 

   

contain the name and number of the DTC participant whose name appears on the security position listing as the owner of such tendered Series A ETNs;

 

   

contain a description of the series of Series A ETNs to be withdrawn, and the number of securities of each series of Series A ETNs subject to the withdrawal request; and

 

   

be signed by such DTC participant in the same manner as the participant’s name is listed in the applicable agent’s message.

A DTC participant may withdraw a tender only if the withdrawal complies with the provisions described in this section.

Withdrawals of tenders of Series A ETNs may not be rescinded and any Series A ETNs withdrawn will thereafter be deemed not validly tendered for purposes of the exchange offers. Properly withdrawn Series A ETNs, however, may be re-tendered by following the procedures described above at any time prior to 5:00 p.m., New York City time, on the Final Expiration Date of the applicable exchange offer.

 

 

 

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Miscellaneous

All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Series A ETNs in connection with the exchange offers will be determined by us, in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any or all tenders not in proper form or the acceptance for exchange of which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in the tender of any Series A ETNs in the exchange offers, and our interpretation of the terms and conditions of the exchange offers (including the instructions in the letter of instruction) will be final and binding on all parties. None of UBS AG, its subsidiaries, the exchange agent, the information agent, the dealer manager, the trustee under the Series A Indenture, or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

Tenders of Series A ETNs involving any irregularities will not be deemed to have been made until such irregularities have been cured or waived (which waiver may be made by us, in whole or in part, in our sole discretion, except that we may not waive the condition that the registration statement of which this prospectus forms a part be declared effective by the SEC). Series A ETNs received by the exchange agent in connection with any exchange offer that are not validly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the participant who delivered such Series A ETNs by crediting an account maintained at DTC, as applicable, designated by such participant, in either case promptly after the Applicable Exchange Date immediately following the date on which such Series A ETNs were tendered, or the withdrawal or termination of the applicable exchange offer.

We may also in the future seek to acquire untendered Series A ETNs in open-market or privately negotiated transactions, through subsequent exchange offers or otherwise. The terms of any of those purchases or offers could differ from the terms of these exchange offers. Within several months following the Final Expiration Date, we expect to exercise our contractual call right to redeem all remaining unexchanged Series A ETNs pursuant to the terms of each series of Series A ETNs. Following the redemption of all remaining unexchanged Series A ETNs of a given series, no further securities of that series will remain outstanding and such series will cease to be listed on NYSE Arca.

Exchange Agent

D.F. King & Co., Inc., the exchange agent, has been appointed as the exchange agent for the exchange offers for the Series A ETNs. D.F. King & Co., Inc., may contact holders of Series A ETNs by mail, telephone, facsimile transmission, personal interviews and otherwise may request broker dealers and the other nominee holders to forward materials relating to the exchange offers to beneficial holders. All correspondence in connection with the exchange offers for the Series A ETNs should be sent or delivered by each holder of Series A ETNs, or a beneficial owner’s custodian bank, depositary, broker, trust company or other nominee, to D.F. King & Co., Inc. at the address and telephone number set forth on the back cover page of this prospectus.

We will pay the exchange agent’s reasonable and customary fees for its services and will reimburse the exchange agent for their reasonable, out-of-pocket expenses in connection therewith.

Information Agent

D.F. King & Co., Inc. has been appointed as the information agent for the exchange offers for the Series A ETNs, and will receive customary compensation for its services.

Questions concerning tender procedures and requests for additional copies of this prospectus or the letter of instruction should be directed to the information agent at the addresses and telephone numbers set forth on the back cover page of this prospectus.

Dealer Manager

UBS Securities LLC is acting as dealer manager in connection with the exchange offers for the Series A ETNs. The dealer manager may contact holders of Series A ETNs by mail, telephone, facsimile transmission, personal interviews and otherwise may request broker dealers and the other nominee holders to forward materials relating to the exchange offers to beneficial holders. Questions regarding the terms of the exchange offers may be directed to the dealer

 

 

 

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manager at its address and telephone numbers listed on the back cover page of this prospectus. At any given time, the dealer manager may trade the Series A ETNs or other of our securities for their own accounts or for the accounts of their customers and, accordingly, may hold a long or short position in the Series A ETNs. The dealer manager and its respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

Other Fees and Expenses

The expenses of soliciting tenders with respect to the Series A ETNs will be borne by us. The principal solicitations are being made by mail; however, additional solicitations may be made by facsimile transmission, telephone or in person by the dealer manager, as well as by officers and other employees of UBS AG and its affiliates.

Tendering holders of Series A ETNs will not be required to pay any fee or commission to the dealer manager. However, if a tendering holder handles the transaction through its broker, dealer, commercial bank, trust company or other institution, that holder may be required to pay brokerage fees or commissions.

 

 

 

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DESCRIPTION OF THE DIFFERENCES BETWEEN THE SERIES B ETNS AND THE SERIES A ETNS

The following is a summary of the material terms of the Series B ETNs and the Series A ETNs that differ. This summary does not purport to be complete and is qualified in its entirety by reference to the Series B Indenture and the Series A Indenture, which govern the Series B ETNs and the Series A ETNs, respectively. Copies of those indentures are filed as exhibits to the registration statement of which this prospectus forms a part and are also available from the information agent upon request.

The Series B ETNs are intended to have the same economic terms as the applicable Series A ETNs for which they are being exchanged, except for the lack of the UBS Switzerland Co-obligation.

The Series A ETNs were issued prior to June 12, 2015 and are part of a series of UBS AG debt securities entitled “Medium-Term Notes, Series A.” The Series A ETNs were issued under and are governed by the Series A Indenture. UBS Switzerland AG is a co-obligor of the Series A ETNs. As a result, if UBS AG fails to perform and observe every covenant of the Series A Indenture to be performed or observed by UBS AG with respect to the Series A ETNs, holders of the Series A ETNs have recourse against both UBS AG and UBS Switzerland AG.

The Series B ETNs are part of a separate series of UBS AG debt securities entitled “Medium-Term Notes, Series B,” and were issued after June 12, 2015. The Series B ETNs were issued under and are governed by the Series B Indenture. As a result, UBS Switzerland AG is not a co-obligor of the Series B ETNs and has no liability with respect to the Series B ETNs. If UBS AG fails to perform and observe every covenant of the Series B Indenture to be performed or observed by UBS AG with respect to the Series B ETNs, holders of the Series B ETNs have recourse only against UBS AG, and not against UBS Switzerland AG.

 

 

 

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DESCRIPTION OF THE SERIES B ETNS

For purposes of this section entitled “Description of the Series B ETNs” references to UBS, “we,” “our” and “us” refer only to UBS AG and not to its consolidated subsidiaries. In particular, the Series B ETNs are obligations solely of UBS AG, and not any of its subsidiaries, including, without limitation, UBS Switzerland AG. Also, in this section, references to “holders” and “you” mean those who own Series B ETNs registered in their own names on the books that we or the trustee maintain for this purpose, and not those who own beneficial interests in Series B ETNs registered in street name or in Series B ETNs issued in book-entry form through one or more depositaries. Owners of beneficial interests in the Series B ETNs should read the section below entitled “Legal Ownership and Book-Entry Issuance.” The following is a summary of the material provisions of the Series B Indenture. Because this is a summary, it may not contain all the information that is important to you. You should read the Series B Indenture in its entirety. See “Where You Can Find More Information.”

The specific terms of each series of Series B ETNs are described in the sections entitled “Specific Terms of the Securities” in each of the corresponding Annexes A – H hereto, as applicable. The specific terms of each series of Series B ETNs described in the applicable Annexes to this Prospectus modify or supplement those described below and, if the terms described there are inconsistent with the terms described here, the terms described there are controlling. Holders should read the Annex relevant to their series of Series B ETNs.

 

Title of Series B ETNs  

Terms of Series B ETNs

(Annex)

ETRACS Alerian MLP Index ETN Series B due July 18, 2042 (Ticker: AMUB)

  Annex A

2xLeveraged Long ETRACS Wells Fargo Business Development Company Index ETN Series B due May 24, 2041 (Ticker: LBDC)

  Annex B

ETRACS Wells Fargo Business Development Company Index ETN Series B due April 26, 2041 (Ticker: BDCZ)

  Annex C

ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN Series B due December 10, 2043 (Ticker: CEFZ)

  Annex D

ETRACS Bloomberg Commodity Index Total Return ETN Series B due October 31, 2039 (Ticker: DJCB)

  Annex E

ETRACS Alerian MLP Infrastructure Index ETN Series B due April 2, 2040 (Ticker: MLPB)

  Annex F

ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B due October 16, 2042 (Ticker: MRRL)

  Annex G

ETRACS UBS Bloomberg Constant Maturity Commodity Index (CMCI) Total Return ETN Series B due April 5, 2038 (Ticker: UCIB)

  Annex H

The Series B Indenture

As required by U.S. federal law for publicly offered bonds and notes, the Series B ETNs are governed by a document called an indenture. The Series B Indenture is a contract between us and U.S. Bank Trust National Association, which acts as trustee.

The trustee has two main roles:

 

   

First, the trustee can enforce your rights against us if we default. There are limitations on the extent to which the trustee acts on your behalf, which we describe below under “—Default, remedies and waiver of default.”

 

   

Second, the trustee performs administrative duties for us, such as sending you interest payments and notices.

See “—Our relationship with the Trustee” below for more information about the trustee.

 

 

 

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We may issue many series of Series B ETNs under the Series B Indenture

We may issue as many distinct series of Series B ETNs under the Series B Indenture as we wish. This section summarizes terms of the Series B ETNs that apply generally to all series. The provisions of the Series B Indenture allow us not only to issue Series B ETNs with terms different from those of Series B ETNs previously issued under the Series B Indenture, but also to “reopen” a previous issue of a series of Series B ETNs and issue additional Series B ETNs of that series. Most of the financial and other specific terms of your series, will be described in the Annex(es) applicable to your series of Series B ETNs, which accompany this prospectus. Those terms may vary from the terms described here.

We may issue Series B ETNs separately or together with other Series B ETNs.

As you read this section, please remember that the specific terms of your Series B ETNs as described in the annex(es) applicable to your series of Series B ETNs will supplement and, if applicable, may modify or replace the general terms described in this section. If there are any differences between the Annex(es) applicable to your series of Series B ETNs and this prospectus, the specific terms set forth in the relevant Annex(es) will control. Thus, the statements we make in this section may not apply to your series of Series B ETNs.

When we refer to a series of debt securities, we mean a series issued under the Series B Indenture. When we refer to the applicable Annex(es), we mean the Annex(es) to this prospectus describing the specific terms of the applicable series of Series B ETNs that you will receive in exchange for the corresponding series of Series A ETNs in the exchange offer. The terms used in the Annex(es) applicable to your series of Series B ETNs will have the meanings described in this prospectus, unless otherwise specified.

The Series B ETNs we issue to you will be part of the series of debt securities referred to as our “medium-term notes, Series B.” The Series B notes are a single distinct series under the Series B Indenture, and we may issue Series B notes in such amounts, at such times and on such terms as we wish. The Series B notes will differ from one another, and from any other series, in their terms, but all of the Series B notes together will constitute a single series for all purposes under the Series B Indenture pursuant to which they will be issued.

Amounts that we may issue

The Series B Indenture does not limit the aggregate amount of debt securities that we may issue or the number of series or the aggregate amount of any particular series. We have already issued Series B notes, many of which are currently outstanding. We intend to issue additional Series B notes, and may issue additional Series B notes at any time, without your consent and without notifying you. We may also issue debt securities and other securities at any time without your consent and without notifying you.

The Series B Indenture and the debt securities do not limit our ability to incur other indebtedness or to issue other securities. Also, we are not subject to financial or similar restrictions by the terms of the debt securities.

Principal Amount, Stated Maturity and Maturity

The principal amount of a Series B ETN means the principal amount payable at its stated maturity, unless that amount is not determinable, in which case the principal amount of a Series B ETN is its face amount.

The term “stated maturity” with respect to any Series B ETN means the day on which the principal amount of your Series B ETN is scheduled to become due. The principal may become due sooner, by reason of redemption or acceleration after a default or otherwise in accordance with the terms of the Series B ETN. The day on which the principal actually becomes due, whether at the stated maturity or earlier, is called the “maturity” of the principal.

We also use the terms “stated maturity” and “maturity” to refer to the days when other payments become due. For example, we may refer to a regular interest payment date when an installment of interest is scheduled to become due as the “stated maturity” of that installment.

 

 

 

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When we refer to the “stated maturity” or the “maturity” of a Series B ETN without specifying a particular payment, we mean the stated maturity or maturity, as the case may be, of the principal.

This section is only a summary

The Series B Indenture and its associated documents, including your series of Series B ETNs, contain the full legal text governing the matters described in this section and the Annex(es) applicable to your series of Series B ETNs. We have filed a copy of the Series B Indenture with the SEC as an exhibit to our registration statement. See “Where You Can Find More Information” above for information on how to obtain a copy.

This section and the Annex(es) applicable to your series of Series B ETNs summarize all the material terms of the Series B Indenture and your series of Series B ETNs. They do not, however, describe every aspect of the Series B Indenture and your series of Series B ETNs. For example, in this section and the Annex(es) applicable to your series of Series B ETNs, we use terms that have been given special meaning in the Series B Indenture, but we describe the meaning of only the more important of those terms.

Governing law

The Series B Indenture is, and the Series B ETNs will be, governed by New York law.

Redemption and Repayment

Your Series B ETNs will not be entitled to the benefit of any sinking fund—that is, we will not deposit money on a regular basis into any separate custodial account to repay your Series B ETNs. In addition, we will not be entitled to redeem your Series B ETN before its stated maturity (except for certain tax reasons, as described below) unless the Annex(es) applicable to your series of Series B ETNs specifies a redemption date or redemption commencement date. You will not be entitled to require us to buy your Series B ETN from you, before its stated maturity, unless the Annex(es) applicable to your series of Series B ETNs specifies one or more repayment dates.

If the Annex(es) applicable to your series of Series B ETNs specifies one or more redemption dates, a redemption commencement date or a repayment date, it will also specify one or more redemption prices or repayment prices, which may be expressed as a percentage of the principal amount of your Series B ETN. It may also specify one or more redemption periods during which the redemption prices relating to a redemption of Series B ETNs during those periods will apply.

If the Annex(es) applicable to your series of Series B ETNs specifies one or more redemption dates, your Series B ETN will be redeemable at our option on any of those dates. If the Annex(es) applicable to your series of Series B ETNs specifies a redemption commencement date, your Series B ETN will be redeemable at our option at any time on or after that date. If we redeem your Series B ETN, we will do so at the specified redemption price. If different prices are specified for different redemption periods, the price we pay will be the price that applies to the redemption period during which your Series B ETN is redeemed.

If the Annex(es) applicable to your series of Series B ETNs specifies a repayment date, your Series B ETN will be repayable at your option on the specified repayment date at the specified repayment price, together with interest accrued to the repayment date. If we exercise an option to redeem any series B ETN, we will give the trustee and the holders written notice of the principal amount of the Series B ETN to be redeemed, not less than 5 business days nor more than 60 days before the applicable redemption date unless otherwise specified in the Annex(es) applicable to your series of Series B ETNs. We will give the notice in the manner described below in “—Notices.”

If a Series B ETN represented by a global debt security is subject to repayment at the holder’s option, the depositary or its nominee, as the holder, will be the only person that can exercise the right to repayment. Any indirect holders who own beneficial interests in the global debt security and wish to exercise a repayment right must give proper and timely instructions to the banks or brokers through which they hold their interests, requesting that they notify the depositary to exercise the repayment right on their behalf. Different firms have different deadlines for accepting instructions from

 

 

 

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their customers, and you should take care to act promptly enough to ensure that your request is given effect by the depositary before the applicable deadline for exercise.

Street name and other indirect holders should contact their banks or brokers for information about how to exercise a repayment right in a timely manner.

We or our affiliates may purchase Series B ETNs from investors who are willing to sell from time to time, either in the open market at prevailing prices or in private transactions at negotiated prices. Series B ETNs that we or they purchase may, at our discretion, be held, resold or cancelled.

Optional Tax Redemption

In addition to the situations described above under “—Redemption and Repayment,” we also have the option to redeem the Series B ETNs in two situations described below, unless otherwise indicated in the Annex(es) applicable to your series of Series B ETNs. The redemption price for the Series B ETNs will be equal to the principal amount of the Series B ETNs being redeemed plus accrued interest and any additional amounts due on the date fixed for redemption. Furthermore, we must give you between 10 and 60 days’ notice before redeeming the Series B ETNs unless otherwise specified in the Annex(es) applicable to your series of Series B ETNs.

 

   

The first situation is where, as a result of a change in, execution of or amendment to any laws or treaties or the official application or interpretation of any laws or treaties, we would be required to pay additional amounts as described below under “—Payment of Additional Amounts.”

This applies only in the case of changes, executions, amendments, applications or interpretations that occur on or after the date specified in the Annex(es) applicable to your series of Series B ETNs and in a relevant jurisdiction, as defined in “—Payment of Additional Amounts” below. If UBS is succeeded by another entity, the applicable jurisdiction will be the jurisdiction in which the successor entity is organized, and the applicable date will be the date the entity became a successor.

We would not have the option to redeem in this case if we could have avoided the payment of additional amounts or the deduction or withholding by using reasonable measures available to us.

 

   

The second situation is where a person located outside of a relevant jurisdiction into which UBS is merged or to whom it has conveyed, transferred or leased its property is required to pay an additional amount. We would have the option to redeem the Series B ETNs even if we are required to pay additional amounts immediately after the merger, conveyance, transfer or lease. We are not required to use reasonable measures to avoid the obligation to pay additional amounts in this situation.

Payment of Additional Amounts

A relevant jurisdiction may require UBS to withhold amounts from payments on the principal or interest on a Series B ETN for taxes or any other governmental charges. If the relevant jurisdiction requires a withholding of this type, UBS may be required to pay you an additional amount so that the net amount you receive will be the amount specified in the debt security to which you are entitled.

By relevant jurisdiction, we mean Switzerland or a jurisdiction in which the UBS branch through which the Series B ETNs are issued is located. UBS will not have to pay additional amounts in respect of taxes or other governmental charges that are required to be deducted or withheld by any paying agent from a payment on a Series B ETN, if such payment can be made without such deduction or withholding by any other paying agent, or in respect of taxes or other governmental charges that would not have been imposed but for

 

   

the existence of any present or former connection between you and the relevant jurisdiction, other than the mere holding of the Series B ETN and the receipt of payments on it;

 

   

any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, duty, assessment or governmental charge;

 

 

 

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a failure to comply with any reasonable certification, documentation, information or other reporting requirement concerning your nationality, residence, identity or connection with the relevant jurisdiction, if such compliance is required as a precondition to relief or exemption from such taxes or other governmental charges (including, without limitation, a certification that you are not resident in the relevant jurisdiction or are not an individual resident of a member state of the European Union);

 

   

any taxes which would not have been imposed but for your presentation, or a presentation on your behalf, of a Series B ETN payment on a date more than 15 days after the date on which such payment on the Series B ETN becomes due and payable or on which the payment is duly provided for, whichever occurs later; or

 

   

any combination of the items listed above.

In addition, no additional amounts will be required to be paid on account of any deduction or withholding imposed or required pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Internal Revenue Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Internal Revenue Code.

These provisions will also apply to any taxes or governmental charges imposed by any jurisdiction in which a successor to UBS is organized. The Annex(es) applicable to your series of Series B ETNs may describe additional circumstances in which UBS would not be required to pay additional amounts.

Mergers and similar transactions

We are generally permitted to merge or consolidate with another firm. We are also permitted to sell our assets substantially as an entirety to another firm. With regard to any series of Series B ETNs, we may not take any of these actions, however, unless all the following conditions are met:

 

   

If the successor firm in the transaction is not UBS, the successor firm must be organized as a corporation, partnership or trust and must expressly assume our obligations under the debt securities of that series and the Series B Indenture. The successor firm must be organized under the laws of Switzerland.

 

   

Immediately after the transaction, no default under the Series B ETNs of that series has occurred and is continuing. For this purpose, “default under the debt securities of that series” means an event of default with respect to that series or any event that would be an event of default with respect to that series if the requirements for giving us default notice and for our default having to continue for a specific period of time were disregarded. We describe these matters below under “—Default, remedies and waiver of default.”

If the conditions described above are satisfied with respect to the Series B ETNs of any series, we will not need to obtain the approval of the holders of those Series B ETNs in order to merge or consolidate or to sell our assets. Also, these conditions will apply only if we wish to merge or consolidate with another firm or sell our assets substantially as an entirety to another firm. We will not need to satisfy these conditions if we enter into other types of transactions, including any transaction in which we acquire the stock or assets of another firm, any transaction that involves a change of control of UBS but in which we do not merge or consolidate and any transaction in which we sell less than substantially all our assets.

Also, if we merge, consolidate or sell our assets substantially as an entirety and the successor firm is a non-Swiss entity, neither we nor any successor would have any obligation to compensate you for any resulting adverse tax consequences to the Series B ETNs.

Default, remedies and waiver of default

You will have special rights if an event of default with respect to your series of Series B ETNs occurs and is not cured, as described in this subsection.

 

 

 

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Events of default

Unless the Annex(es) applicable to your series of Series B ETNs says otherwise, when we refer to an event of default with respect to any series of Series B ETNs, we mean any of the following:

 

   

We do not pay the principal or any premium (including delivering any security or other property deliverable) on any Series B ETN of that series at its maturity;

 

   

We do not pay interest on any Series B ETNs of that series within 30 days after it becomes due and payable;

 

   

We do not deposit a sinking fund payment with regard to any Series B ETNs of that series on its due date, but only if the payment is required in the Annex applicable to that series of Series B ETNs;

 

   

We remain in breach of any other covenant we make in the Series B Indenture for the benefit of the Series B ETNs of that series, for 60 days after we receive a notice of default stating that we are in breach and requiring us to remedy the breach. The notice must be sent by the trustee or the holders of not less than 10% in principal amount of the relevant series of Series B ETNs then outstanding;

 

   

We file for bankruptcy or certain other bankruptcy, insolvency or reorganization events relating to UBS occur; or

 

   

If the Annex(es) applicable to your series of Series B ETNs states that any additional event of default applies to your series, that event of default occurs.

Remedies if an event of default occurs

If an event of default has occurred with respect to any series of Series B ETNs and has not been cured or waived, the trustee or the holders of not less than 25% in principal amount of all Series B ETNs of that series then outstanding may declare the entire principal amount of the Series B ETNs of that series to be due immediately. If an event of default occurs because of bankruptcy, insolvency or reorganization events relating to UBS, the entire principal amount of the Series B ETNs of that series will be automatically accelerated, without any action by the trustee or any holder.

Each of the situations described above is called an acceleration of the maturity of the affected series of Series B ETNs. If the maturity of any series is accelerated and a judgment for payment has not yet been obtained, the holders of a majority in principal amount of the Series B ETNs of that series may cancel the acceleration for the entire series.

If an event of default occurs, the trustee will have special duties. The trustee will be obligated to use those of its rights and powers under the Series B Indenture, and to use the same degree of care and skill in doing so, that a prudent person would use in that situation in conducting his or her own affairs.

Except as described in the prior paragraph, the trustee is not required to take any action under the Series B Indenture at the request of any holders unless the holders offer the trustee reasonable protection from expenses and liability. This is called an indemnity. If the trustee is provided with an indemnity reasonably satisfactory to it, the holders of a majority in principal amount of all Series B ETNs of the relevant series may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee with respect to that series. These majority holders may also direct the trustee in performing any other action under the Series B Indenture with respect to the Series B ETNs of that series.

Before you bypass the trustee and bring your own lawsuit or other formal legal action or take other steps to enforce your rights or protect your interests relating to any Series B ETN, all of the following must occur:

 

   

The holder of your Series B ETN must give the trustee written notice that an event of default has occurred, and the event of default must not have been cured or waived.

 

   

The holders of not less than 25% in principal amount of all Series B ETNs of your series must make a written request that the trustee take action because of the default, and they or other holders must offer to the trustee indemnity reasonably satisfactory to the trustee against the cost and other liabilities of taking that action.

 

 

 

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The trustee must not have taken action for 60 days after the above steps have been taken.

 

   

During those 60 days, the holders of a majority in principal amount of the Series B ETNs of your series must not have given the trustee directions that are inconsistent with the written request of the holders of not less than 25% in principal amount of all Series B ETNs of your series.

You are, however, entitled at any time to bring a lawsuit for the payment of money due on your Series B ETN on or after its due date.

Waiver of default

The holders of not less than a majority in principal amount of the Series B ETNs of any series may waive a default for all Series B ETNs of that series. If this happens, the default will be treated as if it has not occurred. No one can waive a payment default on your Series B ETN, however, without the approval of the particular holder of that Series B ETN.

We will give the trustee information about defaults annually

We will furnish to the trustee every year a written statement of two of our officers certifying that to their knowledge we are in compliance with the Series B Indenture and the Series B ETNs, or else specifying any default under the Series B ETNs.

Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the trustee and how to declare or cancel an acceleration of the maturity of the Series B ETNs. Book-entry and other indirect owners are described below under “Legal Ownership and Book Entry Issuance.”

Modification and waiver of covenants

There are three types of changes we can make to the Series B Indenture and the Series B ETNs of any series.

Changes requiring each holder’s approval

First, there are changes that cannot be made without the approval of each holder of a Series B ETN affected by the change. Here is a list of those types of changes:

 

   

change the stated maturity for any principal or interest payment on a Series B ETN;

 

   

reduce the principal amount, the amount payable on acceleration of the maturity after a default, the interest rate or the redemption price for a Series B ETN;

 

   

permit redemption of a Series B ETN if not previously permitted;

 

   

impair any right a holder may have to require repayment of his or her Series B ETN;

 

   

impair any right that a holder of an indexed or any other Series B ETN may have to exchange or convert the Series B ETN for or into securities or other property;

 

   

change the currency of any payment on a Series B ETN other than as permitted by the Series B ETN;

 

   

change the place of payment on a Series B ETN, if it is in non-global form;

 

   

impair a holder’s right to sue for payment of any amount due on his or her Series B ETN;

 

   

reduce the percentage in principal amount of the Series B ETNs of any one or more affected series, taken separately or together, as applicable, the approval of whose holders is needed to change the Series B Indenture or those Series B ETNs;

 

   

reduce the percentage in principal amount of the Series B ETNs of any one or more affected series, taken separately or together, as applicable, the consent of whose holders is needed to waive our compliance with the Series B Indenture or to waive defaults; and

 

 

 

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change the provisions of the Series B Indenture dealing with modification and waiver in any other respect, except to increase any required percentage referred to above or to add to the provisions that cannot be changed or waived without approval of the holder of each affected Series B ETN.

Changes not requiring approval of holders

The second type of change does not require any approval by holders of the Series B ETNs of an affected series. This type of change is limited to clarifications and changes that would not adversely affect the Series B ETNs of that series in any material respect. We also do not need any approval to make changes that affect only Series B ETNs to be issued under the Series B Indenture after the changes take effect.

We may also make changes or obtain waivers that do not adversely affect a particular Series B ETN, even if they affect other Series B ETNs. In those cases, we do not need to obtain the approval of the holder of the unaffected Series B ETN; we need only obtain any required approvals from the holders of the affected debt Series B ETNs.

Changes requiring majority approval

Any other change to the Series B Indenture and the Series B ETNs would require the following approval:

 

   

If the change affects only the Series B ETNs of a particular series, it must be approved by the holders of 6623% in principal amount of the Series B ETNs of that series.

 

   

If the change affects the Series B ETNs of more than one series of Series B ETNs issued under the Series B Indenture, it must be approved by the holders of 6623% in principal amount of all series affected by the change, with the Series B ETNs of all the affected series voting together as one class for this purpose (and of any affected series that by its terms is entitled to vote separately as a series, as described below).

 

   

In each case, the required approval must be given by written consent.

Majority approval would be required for us to obtain a waiver of any of our covenants in the Series B Indenture. Our covenants include the promises we make about merging, which we describe above under “—Mergers and similar transactions.” If the holders approve a waiver of a covenant, we will not have to comply with that covenant. The holders, however, cannot approve a waiver of any provision in a particular Series B ETN, or in the Series B Indenture as it affects that Series B ETN, that we cannot change without the approval of the holder of that Series B ETN as described above under “—Changes requiring each holder’s approval,” unless that holder approves the waiver.

Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to change the Series B Indenture or the Series B ETNs or request a waiver.

Special rules for action by holders

When holders take any action under the Series B Indenture, such as giving a notice of default, declaring an acceleration, approving any change or waiver or giving the trustee an instruction, we will apply the following rules.

Only outstanding Series B ETNs are eligible

Only holders of outstanding Series B ETNs of the applicable series will be eligible to participate in any action by holders of Series B ETNs of that series. Also, we will count only outstanding Series B ETNs in determining whether the various percentage requirements for taking action have been met. For these purposes, a Series B ETN will not be “outstanding”:

 

   

if it has been surrendered for cancellation;

 

   

if we have deposited or set aside, in trust for its holder, money for its payment or redemption; or

 

 

 

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if we or one of our affiliates, such as UBS Securities LLC or UBS Financial Services Inc., is the beneficial owner.

Determining record dates for action by holders

We will generally be entitled to set any day as a record date for the purpose of determining the holders that are entitled to take action under the Series B Indenture. In certain limited circumstances, only the trustee will be entitled to set a record date for action by holders. If we or the trustee set a record date for an approval or other action to be taken by holders, that vote or action may be taken only by persons or entities who are holders on the record date and must be taken during the period that we specify for this purpose, or that the trustee specifies if it sets the record date. We or the trustee, as applicable, may shorten or lengthen this period from time to time. This period, however, may not extend beyond the 180th day after the record date for the action. In addition, record dates for any global debt security may be set in accordance with procedures established by the depositary from time to time. Accordingly, record dates for global Series B ETNs may differ from those for other debt securities.

Form, exchange and transfer of Series B ETNs

We will issue each Series B ETN in global—i.e., book-entry—form only, unless we specify otherwise in the Annex(es) applicable to your series of Series B ETNs. Series B ETNs in book-entry form will be represented by a global security registered in the name of a depositary, which will be the holder of all the Series B ETNs represented by the global security. Those who own beneficial interests in a global Series B ETN will do so through participants in the depositary’s securities clearance system, and the rights of these indirect owners will be governed solely by the applicable procedures of the depositary and its participants. We describe book-entry securities below under “Legal Ownership and Book Entry Issuance.” Unless we specify otherwise in the Annex(es) applicable to your series of Series B ETNs, The Depository Trust Company, New York, New York, known as DTC, will be the depositary for all Series B ETNs in global form.

In addition, we will generally issue each Series B ETN in registered form, without coupons, unless we specify otherwise in the Annex(es) applicable to your series of Series B ETNs. If we issue a Series B ETN in bearer form, the Annex(es) applicable to your series of Series B ETNs will describe the provisions that would apply to that security.

If a Series B ETN is issued as a global Series B ETN, only the depositary—e.g., DTC—will be entitled to transfer and exchange the Series B ETN or exercise any other rights of a holder as described in this subsection, since the depositary will be the sole holder of the Series B ETN.

If any Series B ETNs cease to be issued in global form, then unless we indicate otherwise in the Annex(es) applicable to your series of Series B ETNs, they will be issued:

 

   

only in fully registered form;

 

   

without interest coupons; and

 

   

in denominations of $25.00 stated principal amount per security.

Holders may exchange their Series B ETNs for Series B ETNs of smaller denominations (subject to the limit above) or combined into fewer Series B ETNs of larger denominations, as long as the total principal amount is not changed. You may not exchange your Series B ETNs for securities of a different series or having different terms, unless the Annex(es) applicable to your series of Series B ETNs says you may.

Holders may exchange or transfer their Series B ETNs at the office of the trustee. They may also replace lost, stolen, destroyed or mutilated Series B ETNs at that office. We have appointed the trustee to act as our agent for registering Series B ETNs in the names of holders and transferring and replacing Series B ETNs. We may appoint another entity to perform these functions or perform them ourselves.

Holders will not be required to pay a service charge to transfer or exchange their Series B ETNs, but they may be required to pay for any tax or other governmental charge associated with the exchange or transfer. The transfer or

 

 

 

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exchange, and any replacement, will be made only if our transfer agent is satisfied with the holder’s proof of legal ownership. The transfer agent may require an indemnity before replacing any Series B ETNs.

If we have designated additional transfer agents for your Series B ETNs, they will be named in the Annex(es) applicable to your series of Series B ETNs. We may appoint additional transfer agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.

If the Series B ETNs of any series are redeemable and we redeem less than all those Series B ETNs, we may block the transfer or exchange of those Series B ETNs during the period beginning 15 days before the day we mail the notice of redemption and ending on the day of that mailing or during any other period specified in the Annex(es) applicable to your series of Series B ETNs, in order to freeze the list of holders who will receive the mailing. We may also refuse to register transfers of or exchange any Series B ETN selected for redemption, except that we will continue to permit transfers and exchanges of the unredeemed portion of any Series B ETN being partially redeemed.

The rules for exchange described above apply to exchanges of Series B ETNs for other Series B ETNs of the same series and kind. If a Series B ETN is convertible, exercisable or exchangeable into or for a different kind of security, such as one that we have not issued, or for other property, the rules governing that type of conversion, exercise or exchange will be described in the Annex(es) applicable to your series of Series B ETNs.

Payment mechanics for Series B ETNs

Who receives payments

If interest is due on a Series B ETN on an interest payment date, we will pay the interest to the person in whose name the Series B ETN is registered at the close of business on the regular record date described below relating to the interest payment date. If interest is due at maturity but on a day that is not an interest payment date, we will pay the interest to the person entitled to receive the principal of the Series B ETN. If principal or another amount besides interest is due on a Series B ETN at maturity, we will pay the amount to the holder of the Series B ETN against surrender of the Series B ETN at a proper place of payment (or, in the case of a global Series B ETN, in accordance with the applicable policies of the depositary).

Business Days

The term “business day” means, for any Series B ETN, a day that is a Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in New York City generally are authorized or obligated by law, regulation or executive order to close and that satisfies any other criteria specified in the Annex(es) applicable to your series of Series B ETNs.

How will we make payments due in U.S. dollars

We will follow the practices described in this subsection when paying amounts due in U.S. dollars. Payments of amounts due in other currencies will be made as described in the next subsection.

Payments on Global Series B ETNs. We will make payments on a global Series B ETN in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, we will pay directly to the depositary, or its nominee, and not to any indirect owners who own beneficial interests in the Series B ETN. An indirect owner’s right to receive those payments will be governed by the rules and practices of the depositary and its participants, as described under “Legal Ownership and Book Entry Issuance—What is a Global Security?”

Payments on Non-Global Series B ETNs. We will make payments on a Series B ETN in non-global, registered form as follows. We will pay interest that is due on an interest payment date by check mailed on the interest payment date to the holder at his or her address shown on the trustee’s records as of the close of business on the regular record date. We will make all other payments by check at the paying agent described below, against surrender of the Series B ETN. All payments by check will be made in next-day funds—that is, in funds that become available on the day after the check is cashed.

 

 

 

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Alternatively, if a non-global Series B ETN has a face amount of at least $1,000,000 and the holder asks us to do so, we will pay any amount that becomes due on the Series B ETN by wire transfer of immediately available funds to an account at a bank in New York City, on the due date. To request wire payment, the holder must give the paying agent appropriate wire transfer instructions at least five business days before the requested wire payment is due. In the case of any interest payment due on an interest payment date, the instructions must be given by the person who is the holder on the relevant regular record date. In the case of any other payment, payment will be made only after the Series B ETN is surrendered to the paying agent. Any wire instructions, once properly given, will remain in effect unless and until new instructions are given in the manner described above.

Book-entry and other indirect owners should consult their banks or brokers for information on how they will receive payments on their Series B ETNs.

Payment when offices are closed

If any payment is due on a Series B ETN on a day that is not a business day, we will make the payment on the next day that is a business day. Unless specified otherwise in the Annex(es) applicable to your series of Series B ETNs, payments postponed to the next business day in this situation will be treated under the Series B Indenture as if they were made on the original due date. Postponement of this kind will not result in a default under any Series B ETN or the Series B Indenture, and no interest will accrue on the postponed amount from the original due date to the next day that is a business day.

Paying agent

We may appoint one or more financial institutions to act as our paying agents, at whose designated offices Series B ETNs in non-global entry form may be surrendered for payment at their maturity. We call each of those offices a paying agent. We may add, replace or terminate paying agents from time to time. We may also choose to act as our own paying agent. Initially, we have appointed the trustee, at its corporate trust office in New York City, as the paying agent. We must notify the trustee of changes in the paying agents.

Settlement mechanics

The settlement mechanics applicable to Series B ETNs calling for physical settlement will be described in the Annex(es) applicable to your series of Series B ETNs.

Unclaimed payments

Regardless of who acts as paying agent, all money paid by us to a paying agent that remains unclaimed at the end of two years after the amount is due to a holder will be repaid to us. After that two-year period, the holder may look only to us for payment and not to the trustee, any other paying agent or anyone else.

Notices

Notices to be given to holders of a global Series B ETN will be given only to the depositary, in accordance with its applicable policies as in effect from time to time. Notices to be given to holders of Series B ETNs not in global form will be sent by mail to the respective addresses of the holders as they appear in the trustee’s records, and will be deemed given when mailed. Neither the failure to give any notice to a particular holder, nor any defect in a notice given to a particular holder, will affect the sufficiency of any notice given to another holder.

Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive notices.

 

 

 

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Our relationship with the trustee

U.S. Bank Trust National Association has provided commercial banking and other services for us and our affiliates in the past and may do so in the future. Among other things, U.S. Bank Trust National Association holds Series B ETNs issued by us and serves as trustee or agent with regard to other obligations of UBS or its subsidiaries.

U.S. Bank Trust National Association is serving as the trustee for the Series B ETNs and the warrants issued under our warrant indenture. Consequently, if an actual or potential event of default occurs with respect to any of these securities, the trustee may be considered to have a conflicting interest for purposes of the Trust Indenture Act of 1939. In that case, the trustee may be required to resign under one or more of the indentures, and we would be required to appoint a successor trustee. For this purpose, a “potential” event of default means an event that would be an event of default if the requirements for giving us default notice or for the default having to exist for a specific period of time were disregarded.

U.S. Bank Trust National Association’s address is 100 Wall Street, Suite 1600, New York, NY 10005.

 

 

 

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LEGAL OWNERSHIP AND BOOK ENTRY ISSUANCE

In this section, we describe special considerations that will apply to registered securities issued in global—i.e., book-entry—form. First we describe the difference between legal ownership and indirect ownership of registered securities. Then we describe special provisions that apply to global securities.

Who is the Legal Owner of a Registered Security?

Each Series B ETN in registered form will be represented by one or more global securities representing the entire issuance of securities. We refer to those who have securities registered in their own names, on the books that we or the trustee, warrant agent or other agent maintain for this purpose, as the “holders” of those securities. These persons are the legal holders of the securities. We refer to those who, indirectly through others, own beneficial interests in securities that are not registered in their own names as indirect owners of those securities. As we discuss below, indirect owners are not legal holders, and investors in securities issued in book-entry form or in street name will be indirect owners.

Book-Entry Owners

We will issue each security in book-entry form only. This means securities will be represented by one or more global securities registered in the name of a financial institution that holds them as depositary on behalf of other financial institutions that participate in the depositary’s book-entry system. These participating institutions, in turn, hold beneficial interests in the securities on behalf of themselves or their customers.

Under the Series B Indenture, only the person in whose name a security is registered is recognized as the holder of that security. Consequently, for securities issued in global form, we will recognize only the depositary as the holder of the securities and we will make all payments on the securities, including deliveries of any property other than cash, to the depositary. The depositary passes along the payments it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so under the terms of the securities.

As a result, investors will not own securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest through a participant. As long as the securities are issued in global form, investors will be indirect owners, and not holders, of the securities.

Street Name Owners

In the future we may terminate a global security or issue securities initially in non-global form. In these cases, investors may choose to hold their securities in their own names or in street name. Securities held by an investor in street name would be registered in the name of a bank, broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest in those securities through an account he or she maintains at that institution.

For securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the securities are registered as the holders of those securities and we will make all payments on those securities, including deliveries of any property other than cash, to them. These institutions pass along the payments they receive to their customers who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do so. Investors who hold securities in street name will be indirect owners, not holders, of those securities.

Legal Holders

Our obligations, as well as the obligations of the Trustee under the Series B Indenture and the obligations, if any, of any other third parties employed by us or the Trustee under the Series B Indenture, run only to the holders of the

 

 

 

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securities. We do not have obligations to investors who hold indirect interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an indirect owner of a security or has no choice because we are issuing the securities only in global form.

For example, once we make a payment or give a notice to the holder, we have no further responsibility for that payment or notice even if that holder is required, under agreements with depositary participants or customers or by law, to pass it along to the indirect owners but does not do so. Similarly, if we want to obtain the approval of the holders for any purpose—for example, to amend the Series B Indenture for a series of debt securities or to relieve us of the consequences of a default or of our obligation to comply with a particular provision of the Series B Indenture—we would seek the approval only from the holders, and not the indirect owners, of the relevant securities. Whether and how the holders contact the indirect owners is up to the holders.

When we refer to “you” in this section, we mean those who invest in the securities being offered by this prospectus, whether they are the holders or only indirect owners of those securities. When we refer to “your securities” in this section, we mean the Series B ETNs in which you will hold a direct or indirect interest.

Special Considerations for Indirect Owners

If you hold securities through a bank, broker or other financial institution, either in book-entry form or in street name, you should check with your own institution to find out:

 

   

how it handles securities payments and notices;

 

   

whether it imposes fees or charges;

 

   

how it would handle a request for the holders’ consent, if ever required;

 

   

whether and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted in the future;

 

   

how it would exercise rights under the securities if there were a default or other event triggering the need for holders to act to protect their interests; and

 

   

if the securities are in book-entry form, how the depositary’s rules and procedures will affect these matters.

What is a Global Security

We will issue each security in book-entry form only. Each security issued in book-entry form will be represented by a global security that we deposit with and register in the name of one or more financial institutions or clearing systems, or their nominees, which we select. A financial institution or clearing system that we select for any security for this purpose is called the “depositary” for that security. A security will usually have only one depositary but it may have more.

The depositary for each series of securities will be The Depository Trust Company, New York, New York, which is known as “DTC.”

A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. We describe those situations below under “—Special Situations When a Global Security Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all securities represented by a global security, and investors will be permitted to own only indirect interests in a global security. Indirect interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that does. Thus, an investor whose security is represented by a global security will not be a holder of the security, but only an indirect owner of an interest in the global security.

The Series B ETNs will be issued in global form only and will be represented by a global security at all times unless and until the global security is terminated. We describe the situations in which this can occur below under “—Special Situations When a Global Security Will Be Terminated.” If termination occurs, we may issue the securities through another book-entry clearing system or decide that the securities may no longer be held through any book-entry clearing system.

 

 

 

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Special Considerations for Global Securities

As an indirect owner, an investor’s rights relating to a global security will be governed by the account rules of the depositary and those of the investor’s financial institution or other intermediary through which it holds its interest, as well as general laws relating to securities transfers. We do not recognize this type of investor or any intermediary as a holder of securities and instead deal only with the depositary that holds the global security.

The Series B ETNs are issued only in the form of a global security. Investors should therefore be aware of the following:

 

   

An investor cannot require the securities to be registered in his or her own name, and cannot obtain non-global certificates for his or her interest in the securities, except in the special situations we describe below.

 

   

An investor will be an indirect holder and must look to his or her own bank or broker for payments on the securities and protection of his or her legal rights relating to the securities, as we describe above under “—Who Is the Legal Owner of a Registered Security?”

 

   

An investor may not be able to sell interests in the securities to some insurance companies and other institutions that are required by law to own their securities in non-book-entry form.

 

   

An investor may not be able to pledge his or her interest in a global security in circumstances where certificates representing the securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective.

 

   

The depositary’s policies will govern payments, deliveries, transfers, exchanges, notices and other matters relating to an investor’s interest in a global security, and those policies may change from time to time. We and the Trustee will have no responsibility for any aspect of the depositary’s policies, actions or records of ownership interests in a global security. We and the Trustee also do not supervise the depositary in any way.

 

   

The depositary will require that those who purchase and sell interests in a global security within its book-entry system use immediately available funds and your broker or bank may require you to do so as well.

 

   

Financial institutions that participate in the depositary’s book-entry system and through which an investor holds its interest in the global securities, directly or indirectly, may also have their own policies affecting payments, deliveries, transfers, exchanges, notices and other matters relating to the securities, and those policies may change from time to time.

Special Situations When a Global Security Will Be Terminated

In a few special situations described below, a global security will be terminated and interests in it will be exchanged for certificates in non-global form representing the securities it represented. After that exchange, the choice of whether to hold the securities directly or in street name will be up to the investor. Investors must consult their own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders. We have described the rights of holders and street name investors above under “—Who Is the Legal Owner of a Registered Security?”

The special situations for termination of a global security are as follows:

 

   

if the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security and we do not appoint another institution to act as depositary within 60 days; or

 

   

if an event of default under the Series B Indenture has occurred with regard to the Series B ETNs and has not been cured or waived.

If a global security is terminated, only the depositary, and not we or the Trustee is responsible for deciding the names of the institutions in whose names the securities represented by the global security will be registered and, therefore, who will be the holders of those securities.

 

 

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

We believe, and intend to take the position, that the exchange of Series A ETNs for Series B ETNs should not be treated as a disposition of the Series A ETNs for U.S. federal income tax purposes and you should accordingly not recognize gain or loss for U.S. federal income tax purposes in connection with such an exchange. If this treatment is respected for tax purposes, your tax basis and holding period in the Series B ETNs will be the same as your tax basis and holding period in the Series A ETNs, and you will be subject to U.S. tax in respect of the Series B ETNs in the same manner as in respect of the Series A ETNs.

It is possible that the Internal Revenue Service (“IRS”) could successfully assert that the exchange of Series A ETNs for Series B ETNs should be treated as a taxable disposition of the Series A ETNs for U.S. federal income tax purposes, in which case you would generally recognize gain or loss for U.S. federal income tax purposes in connection with the exchange.

In addition, as discussed in the offering documents for certain of the Series A ETNs, a non-U.S. holder (as defined in the Annexes hereto) of certain Series A ETNs will generally be subject to the Section 871(m) withholding tax unless the holder acquired the Series A ETN before January 1, 2017 (a “grandfathered ETN”). Because we believe that an exchange of Series A ETNs for Series B ETNs should not be treated as a disposition of the Series A ETNs for tax purposes, we believe that a non-U.S. holder of a grandfathered ETN should likewise be grandfathered from the Section 871(m) tax in respect of Series B ETNs that it receives in exchange for a grandfathered ETN. However, as discussed above, it is possible that the IRS could successfully assert that the exchange of Series A ETNs for Series B ETNs should be treated as a taxable disposition of the Series A ETNs for U.S. federal income tax purposes, in which case a non-U.S. holder that exchanges a grandfathered ETN for a Series B ETN would no longer be exempt from the Section 871(m) tax. In addition, even if a non-U.S. holder should be treated as grandfathered from the Section 871(m) tax in respect of a Series B ETN that it receives in exchange for a grandfathered ETN, it is possible that a withholding agent will be unable to identify which Series B ETNs are exempt from the Section 871(m) withholding tax (because it may be unable to identify the holder’s acquisition date for the corresponding Series A ETN), in which case the withholding agent may impose the Section 871(m) tax in respect of all Series B ETNs that are held by a non-U.S. holder. The non-U.S. holder could then claim a refund of the withholding tax, although the procedures to do so may be cumbersome.

Holders of the Series A ETNs that participate in the exchange should consult their tax advisors regarding the U.S. federal income tax treatment of the exchange as well as the tax consequences to them under any state, local or non-U.S. tax jurisdiction.

 

 

 

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NOTICES TO CERTAIN NON-U.S. HOLDERS

General

No action has been or will be taken in any jurisdiction that would permit a public offering of the Series B ETNs or the possession, circulation or distribution of this prospectus or any material relating to us, the Series A ETNs or the Series B ETNs in any jurisdiction where action for that purpose is required. Accordingly, the Series B ETNs offered in the exchange offers may not be offered, sold or exchanged, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the exchange offers may be distributed or published, in or from any such country or jurisdiction, except in compliance with any applicable rules or regulations of any such country or jurisdiction.

This prospectus does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell either Series A ETNs or Series B ETNs in any jurisdiction in which, or to or from any person to or from whom it is unlawful to make such offer or solicitation under applicable securities laws or otherwise. The distribution of this prospectus in certain jurisdictions may be restricted by law. Persons into whose possession this prospectus comes are required by us, the dealer manager and the exchange agent to inform themselves about, and to observe, any such restrictions. In those jurisdictions where the securities, blue sky or other laws require the exchange offers to be made by a licensed broker or dealer and the dealer manager or any of its affiliates is a licensed broker or dealer in any such jurisdiction, such exchange offers shall be deemed to be made by such dealer manager or such affiliate (as the case may be) on our behalf in such jurisdiction.

The Series B ETNs will be issued in denominations of $25.00 stated principal amount per security.

 

 

 

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VALIDITY OF NOTES

The Series B ETNs are being passed upon for UBS AG by Sullivan & Cromwell LLP, New York, New York as to matters of New York law and by Homburger AG as to matters of Swiss law.

 

 

EXPERTS

Ernst & Young Ltd, independent registered public accounting firm, has audited UBS’s consolidated financial statements included in UBS’s Annual Report on Form 20-F for the year ended December 31, 2018, and the effectiveness of UBS’s internal control over financial reporting as of December 31, 2018, as set forth in their reports, which are incorporated by reference herein. UBS’s financial statements are incorporated by reference in reliance on Ernst & Young Ltd’s reports, given on their authority as experts in accounting and auditing.

 

 

 

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Annex A

ETRACS Alerian MLP Index ETN Series B due July 18, 2042 (“AMUB”)

(CUSIP: 90274D374)

 

A


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LOGO

ETRACS Alerian MLP Index ETN Series B* due July 18, 2042

The ETRACS Alerian MLP Index ETN Series B due July 18, 2042 (the “Securities”) are senior unsecured debt securities issued by UBS that provide exposure to potential price appreciation in the Alerian MLP Index (the “Index”), subject to an Accrued Tracking Fee (as described below) based on a Quarterly Tracking Fee of 0.20% (equivalent to 0.80% per annum). Investing in the Securities involves significant risks. You will receive a cash payment at maturity or upon exercise by UBS of its call right, based on the performance of the Index less the Accrued Tracking Fee, as described herein. You will receive a cash payment upon early redemption based on the performance of the Index less the Accrued Tracking Fee and the Redemption Fee Amount, as described herein. The Securities may pay a quarterly coupon during their term. For any Securities it sells, UBS Securities LLC may charge purchasers a creation fee, which may vary over time at UBS’s discretion. If the creation fee is applicable, the return on your investment in the Securities will be reduced by the creation fee.

The Securities do not guarantee any return of your initial investment. You will lose some or all of your principal at maturity, early redemption or upon exercise by UBS of its call right if the level of the Index as measured by the VWAP Level (calculated as described herein) declines or does not increase by an amount sufficient to offset the Accrued Tracking Fee and the Redemption Fee Amount, if applicable. Any payment on the Securities at maturity or upon early redemption or upon exercise by UBS of its call right, is subject to the creditworthiness of UBS and is not guaranteed by any third party. In addition, the actual and perceived creditworthiness of UBS will affect the market value, if any, of the Securities.

The Securities are intended for sophisticated investors as part of an overall diversified portfolio and should be purchased only by knowledgeable investors who understand the potential consequences of investing in the Index. Investors should actively and continuously monitor their investment in the Securities. Although the Securities are listed on NYSE Arca, there is no guarantee that a liquid market will develop, continue or be maintained.

General Considerations for the Securities

 

  Ø  

The Securities are senior Series B unsecured debt securities issued by UBS, maturing on July 18, 2042.

 

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The Securities do not guarantee any return of principal and, although they may pay a quarterly coupon payment, there is no guaranteed fixed coupon or interest amount during their term.

 

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The Accrued Tracking Fee based on a Quarterly Tracking Fee of 0.20% (equivalent to 0.80% per annum) will diminish the value of the Securities by reducing the amount of any quarterly coupon payment, cash payment at maturity or upon exercise by UBS of its call right or upon early redemption, as described herein, and any such payments may be zero.

 

  Ø  

You will receive a cash payment at maturity or upon exercise by UBS of its call right with respect to the Securities based on the performance of the Index at the end of the applicable measurement period and reduced by the Accrued Tracking Fee, as described herein, and any such payments may be zero.

 

  Ø  

You may exercise your right to early redemption with a minimum redemption amount of 50,000 Securities if you comply with the required procedures described herein. You will receive a cash payment upon early redemption based on the performance of the Index on the Redemption Measurement Date, less the Redemption Fee Amount and the Accrued Tracking Fee, as described herein.

See “Risk Factors” beginning on page A-18 for a description of risks related to an investment in the Securities.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Annex or the accompanying prospectus. Any representation to the contrary is a criminal offense.

The Securities are not deposit liabilities of UBS AG and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency in the United States, Switzerland or any other jurisdiction. An investment in the Securities carries risks that are very different from the risk profile of a bank deposit placed with UBS or its affiliates. The Securities have different yield, liquidity and risk profiles and will not benefit from any protection provided to deposits.

 

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The principal terms of the Securities are as follows:

 

Issuer:    UBS AG (London Branch)
Series:    Medium-Term Notes, Series B*
Initial Trade Date:    October 8, 2015
Initial Settlement Date:    October 14, 2015
Initial Term:    Approximately 26.75 years, ending on the Maturity Date, subject to your right to require UBS to redeem your Securities on any Redemption Date or the UBS Call Right, each as described below.
Maturity Date:    July 18, 2042, subject to adjustment.
Stated Principal Amount:    $25.00 per Security.
Underlying Index:    The Alerian MLP Index measures the composite performance of energy infrastructure master limited partnerships (“MLPs”), and is calculated by S&P Dow Jones Indices using a capped, float-adjusted, capitalization-weighted methodology. We refer to the MLPs included in the Index as the “Index constituents.” The Index constituents earn the majority of their cash flow from qualifying activities involving energy commodities, which include gathering and processing, liquefaction, pipeline transportation, rail terminaling, and storage. For a detailed description of the Index, see “Alerian MLP Index” beginning on page A-30.
   The payment you receive on your Securities at maturity, early redemption or upon exercise by UBS of its call right will depend on the performance of the Index, as measured by the VWAP Level (calculated by the VWAP Calculation Agent as described herein), and not by the closing level of the Index.
Coupon Amount:    For each Security you hold on the applicable Coupon Record Date you may receive on each Coupon Payment Date an amount in cash equal to the Coupon Amount, if any. As further described in “Specific Terms of the Securities — Coupon Payment” beginning on page A-39, the Coupon Amount will equal the sum of the cash distributions that a hypothetical holder of Index constituents would have been entitled to receive in respect of the Index constituents during the relevant period, reduced by the Accrued Tracking Fee. The final Coupon Amount will be included in the Cash Settlement Amount.
Coupon Payment Date:    The 15th Index Business Day following each Coupon Valuation Date, commencing on December 8, 2015, subject to adjustment. The final Coupon Payment Date will be the Maturity Date.
Quarterly Tracking Fee:    The Accrued Tracking Fee is based on the Quarterly Tracking Fee, which is, as of any date of determination, an amount per Security equal to the product of (i) 0.20% (equivalent to 0.80% per annum) and (ii) the Current Indicative Value as of the immediately preceding Index Business Day.
Current Indicative Value:    The “Current Indicative Value” as determined by the Security Calculation Agent means, as of any date of determination, an amount per Security equal to the product of (i) the Stated Principal Amount multiplied by (ii) a fraction, the numerator of which is equal to the VWAP Level as of such date and the denominator of which is equal to the Initial VWAP Level. As of December 2, 2019, the Current Indicative Value was $12.5851, however, the Current Indicative Value on the date that you acquire your Securities may be higher or lower.
Payment at Maturity; Cash Settlement Amount:    For each Security, unless earlier redeemed or called, you will receive at maturity a cash payment equal to (a) the product of (i) the Stated Principal Amount and (ii) the Index Performance Ratio as of the last Index Business Day in the Final Measurement Period, plus (b) the final Coupon Amount, minus (c) the Accrued Tracking Fee as of the last Index Business Day in the Final Measurement Period, plus (d) the Stub Reference Distribution Amount as of the last Index Business Day in the Final Measurement Period, if any. We refer to this cash payment as the “Cash Settlement Amount.” If the amount so calculated is equal to or less than zero, the payment at maturity will be zero.
Early Redemption; Redemption Amount:    Subject to your compliance with the procedures described under “Specific Terms of the Securities — Early Redemption at the Option of the Holders” and “Specific Terms of the Securities — Redemption Procedures” upon early redemption, you will receive per Security a cash payment on the relevant Redemption Date equal to (a) the product of (i) the Stated Principal Amount and (ii) the Index Performance Ratio as of the Redemption Measurement Date, plus (b) the Coupon Amount with respect to the Coupon Valuation Date immediately preceding the Redemption Measurement Date if on the Redemption Measurement Date the Coupon Ex-Date with respect to such Coupon Amount has not yet occurred, plus (c) the Adjusted Coupon Amount, if any, minus (d) the Accrued Tracking Fee as of the Redemption Measurement Date, minus (e) the Redemption Fee Amount. We refer to this cash payment as the “Redemption Amount.” UBS has determined to offer all holders of the Securities the option, upon

 

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* 

UBS AG Exchange Traded Access Securities (ETRACS) issued prior to June 12, 2015 are part of a series of UBS AG debt securities entitled “Medium-Term Notes, Series A,” and UBS Switzerland AG is a co-obligor of such debt securities. The Securities offered hereby are part of a series of UBS AG debt securities entitled “Medium Term Notes, Series B,” which do not benefit from the co-obligation of UBS Switzerland AG. The Securities are intended to have the same economic terms as the Series A ETRACS entitled “UBS AG Exchange Traded Access Securities (ETRACS) Alerian MLP Index ETN due July 18, 2042” (the “Series A AMU ETRACS”), except for the lack of the co-obligation of UBS Switzerland AG.


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early redemption and solely for purposes of determining the Redemption Amount, but not for any other purpose, to elect that the Index Performance Ratio (which is used to determine the Redemption Amount) be calculated using the Index Closing Level on the Redemption Valuation Date instead of the Final VWAP Level. If the redeeming holder so elects, the Index Performance Ratio will be calculated, for purposes of determining the Redemption Amount, as:

 

Index Closing Level on the Redemption Measurement Date

Initial VWAP Level

 

The “Index Closing Level” is the closing level of the Index as reported on the NYSE and Bloomberg; provided, however, that if the closing level of the Index as reported on the NYSE (or any successor) differs from the closing level of the Index as reported on Bloomberg (or any successor), then the Index Closing Level will be the closing level of the Index as calculated by the Index Calculation Agent.

Redemption Fee Amount:    0.125% of the Current Indicative Value
UBS Call Right:    On any Business Day through and including the Maturity Date (the “Call Settlement Date”), UBS may at its option redeem all, but not less than all, issued and outstanding Securities. To exercise its Call Right, UBS must provide notice to the holders of the Securities not less than eighteen calendar days prior to the Call Settlement Date. Upon early redemption in the event UBS exercises this right, you will receive a cash payment equal to the Call Settlement Amount, which will be calculated as described herein and paid on the Call Settlement Date. If the amount so calculated is equal to or less than zero, the payment upon exercise of the Call Right will be zero.
Call Settlement Amount:    In the event UBS exercises its Call Right, you will receive per Security a cash payment on the relevant Call Settlement Date equal to (a) the product of (i) the Stated Principal Amount and (ii) the Index Performance Ratio as of the last Index Business Day in the Call Measurement Period, plus (b) the Coupon Amount with respect to the Coupon Valuation Date immediately preceding the Call Valuation Date if on the last Index Business Day in the Call Measurement Period the Coupon Ex-Date with respect to such Coupon Amount has not yet occurred, plus (c) the Adjusted Coupon Amount, if any, minus (d) the Accrued Tracking Fee as of the last Index Business Day in the Call Measurement Period, plus (e) the Stub Reference Distribution Amount as of the last Index Business Day in the Call Measurement Period, if any. We refer to this cash payment as the “Call Settlement Amount.”
Index Performance Ratio:   

On any Index Business Day:

 

Final VWAP Level

Initial VWAP Level

Index Closing Level    The “Index Closing Level” is the closing level of the Index as reported on the NYSE and Bloomberg; provided, however, that if the closing level of the Index as reported on the NYSE (or any successor) differs from the closing level of the Index as reported on Bloomberg (or any successor), then the Index Closing Level will be the closing level of the Index as calculated by the Index Calculation Agent.
Initial VWAP Level:    396.997, the VWAP Level on July 17, 2012, as determined by the VWAP Calculation Agent.
Final VWAP Level:    As determined by the VWAP Calculation Agent, the arithmetic mean of the VWAP Levels measured on each Index Business Day during the Final Measurement Period or the Call Measurement Period, or on any Redemption Measurement Date, as applicable.
VWAP Level:    On any Index Business Day, as calculated by the VWAP Calculation Agent, (1) the sum of the products of (i) the VWAP of each Index constituent as of such date and (ii) the published unit weighting of that Index constituent as of such date, divided by (2) the Index Divisor as of such date. As of October 7, 2015, the VWAP Level was 340.761..
VWAP:    With respect to each Index constituent, as of any date of determination, the volume-weighted average price of one unit of such Index constituent as determined by the VWAP Calculation Agent based on the Primary Exchange for each Index constituent.
VWAP Calculation Agent:    New York Stock Exchange (“NYSE”)
Index Divisor:    As of any date of determination, the divisor used by the Index Calculation Agent to calculate the level of the Index, as further described under “Alerian MLP Index — Index Equations.”
Security Calculation Agent:    UBS Securities LLC
Index Calculation Agent:    S&P Dow Jones Indices (“S&P”)
Calculation Date:    July 9, 2042, unless such day is not an Index Business Day, in which case the Calculation Date will be the next Index Business Day, subject to adjustment.
Listing:    The Securities are listed on NYSE Arca under the symbol “AMUB.” There can be no assurance that an active secondary market will develop or continue; if it does, we expect that investors will purchase and sell the Securities primarily in this secondary market.

 

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Indicative Value:    The term “indicative value” refers to the value at a given time and date equal to (i) the Stated Principal Amount multiplied by the Index Performance Ratio calculated using the levels of the Index instead of VWAP Levels as of such time, less (ii) the Accrued Tracking Fee as of such time and date assuming such time and date is the Redemption Measurement Date, plus (iii) assuming such time and date is the Redemption Measurement Date, the Coupon Amount with respect to the Coupon Valuation Date if on such Redemption Measurement Date the Coupon Ex-Date with respect to such Coupon Amount has not yet occurred, plus (iv) the Adjusted Coupon Amount, if any, as of such time and date.
Indicative Value Symbol of the Securities:   

The closing indicative value of the Securities and the intraday indicative value of the Securities will be published on each Index Business Day under the ticker symbols:

 

AMUBIV <INDEX> (Bloomberg); ^AMUB-IV (Yahoo! Finance)

Intraday Indicative Value of the Index:    On each Index Business Day, NYSE Arca, or a successor Index Calculation Agent, will calculate and publish the “intraday indicative value of the Index” every 15 seconds during normal trading hours on Bloomberg under the ticker symbol “AMZ.”
Accrued Tracking Fee:   

(1) The Accrued Tracking Fee with respect to the first Coupon Valuation Date is an amount equal to the Quarterly Tracking Fee calculated as of the first Coupon Valuation Date. (For the avoidance of doubt, the calculation of the Accrued Tracking Fee with respect to the first Coupon Valuation Date will be for a full quarter beginning from and excluding August 17, 2015.)

 

(2) The Accrued Tracking Fee with respect to any Coupon Valuation Date other than the first and last Coupon Valuation Dates is an amount equal to the Quarterly Tracking Fee calculated as of such Coupon Valuation Date, plus the Tracking Fee Shortfall as of the immediately preceding Coupon Valuation Date, if any.

 

(3) The Accrued Tracking Fee with respect to the last Coupon Valuation Date is an amount equal to (a) the product of (i) the Quarterly Tracking Fee as of such Coupon Valuation Date and (ii) a fraction, the numerator of which is the total number of calendar days from and excluding the immediately preceding Coupon Valuation Date to and including such Coupon Valuation Date, and the denominator of which is 90, plus (b) the Tracking Fee Shortfall as of the immediately preceding Coupon Valuation Date, if any.

 

(4) The Accrued Tracking Fee as of the last Index Business Day in the Final Measurement Period is an amount equal to (a) the product of (i) the Quarterly Tracking Fee calculated as of the last Index Business Day in the Final Measurement Period and (ii) a fraction, the numerator of which is the total number of calendar days from and excluding the Calculation Date to and including the last Index Business Day in the Final Measurement Period, and the denominator of which is 90, plus (b) the Tracking Fee Shortfall as of the last Coupon Valuation Date, if any.

 

(5) The Accrued Tracking Fee as of the last Index Business Day in the Call Measurement Period is an amount equal to (a) a product of (i) the Quarterly Tracking Fee calculated as of the last Index Business Day in such Call Measurement Period and (ii) a fraction, the numerator of which is the total number of calendar days from and excluding the Call Valuation Date to and including the last Index Business Day in such Call Measurement Period, and the denominator of which is 90, plus (b) the Adjusted Tracking Fee Shortfall, if any.

Reference Distribution Amount:    The Reference Distribution Amount means (i) as of the first Coupon Valuation Date, an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to any Index constituent for those cash distributions whose “ex-dividend date” occurs during the period from and excluding August 17, 2015 to and including the first Coupon Valuation Date; and (ii) as of any other Coupon Valuation Date, an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to any Index constituent for those cash distributions whose “ex-dividend date” occurs during the period from and excluding the immediately preceding Coupon Valuation Date to and including such Coupon Valuation Date. Notwithstanding the foregoing, with respect to a cash distribution for an Index constituent which is scheduled to be paid prior to the applicable Coupon Ex-Date, if, and only if, the issuer of such Index constituent fails to pay the distribution to holders of such Index constituent by the scheduled payment date for such distribution, such distribution will be assumed to be zero for the purposes of calculating the applicable Reference Distribution Amount.
Tracking Fee Shortfall:    To the extent the Reference Distribution Amount on any Coupon Valuation Date is less than the Accrued Tracking Fee on the corresponding Coupon Valuation Date, there will be no Coupon Amount payment made on the corresponding Coupon Payment Date, and an amount equal to the difference between the Accrued Tracking Fee and the Reference Distribution Amount (the “Tracking Fee Shortfall”) will be included in the Accrued Tracking Fee for the next Coupon Valuation Date. This process will be repeated to the extent necessary until the Reference Distribution Amount for a Coupon Valuation Date is greater than the Accrued Tracking Fee for the corresponding Coupon Valuation Date.

 

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Stub Reference Distribution Amount:    The “Stub Reference Distribution Amount” means, as of the last Index Business Day in the Final Measurement Period or the Call Measurement Period, as applicable, an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to any Index constituent, for those cash distributions whose “ex-dividend date” occurs during the period from and excluding the first Index Business Day in the Final Measurement Period or the Call Measurement Period, as applicable, to and including the last Index Business Day in the Final Measurement Period or the Call Measurement Period, as applicable, provided, that for the purpose of calculating the Stub Reference Distribution Amount, the Reference Holder will be deemed to hold 4/5 ths, 3/5 ths, 2/5 ths and 1/5 th of the shares of each Index constituent it would otherwise hold on the second, third, fourth and fifth Index Business Day, respectively, in such Final Measurement Period or the Call Measurement Period.
Reference Holder:    The “Reference Holder” is, as of any date of determination, a hypothetical holder of a number of units of each Index constituent equal to (i) the published unit weighting of that Index constituent as of that date, divided by (ii) the product of (a) the Index Divisor as of that date, and (b) the Initial VWAP Level divided by 25.
Adjusted Coupon Amount:    With respect to any Redemption Measurement Date or Call Valuation Date, as applicable, a coupon payment, if any, in an amount in cash equal to the excess, if any, of the Adjusted Reference Distribution Amount, calculated as of such Redemption Measurement Date or Call Valuation Date, as applicable, over the Adjusted Tracking Fee, calculated as of such Redemption Measurement Date or Call Valuation Date.
Adjusted Reference Distribution Amount:    As of any Redemption Measurement Date or the Call Valuation Date, as applicable, an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to any Index constituent for those cash distributions whose “ex-dividend date” occurs during the period from and excluding the immediately preceding Coupon Valuation Date (or if the Redemption Measurement Date occurs prior to the first Coupon Valuation Date, the period from and excluding August 17, 2015) to and including such Redemption Measurement Date or Call Valuation Date.
Adjusted Tracking Fee:    As of any Redemption Measurement Date occurring prior to the first Coupon Valuation Date, an amount equal to the product of (i) the Quarterly Tracking Fee as of such Redemption Measurement Date and (ii) a fraction, the numerator of which is the total number of calendar days from and excluding August 17, 2015 to and including such Redemption Measurement Date, and the denominator of which is 90.
   As of any Redemption Measurement Date, or the Call Valuation Date, as applicable, occurring on or after the first Coupon Valuation Date, an amount equal to (a) the Tracking Fee Shortfall as of the immediately preceding Coupon Valuation Date plus (b) the product of (i) the Quarterly Tracking Fee as of such Redemption Measurement Date or Call Valuation Date and (ii) a fraction, the numerator of which is the total number of calendar days from and excluding the immediately preceding Coupon Valuation Date to and including such Redemption Measurement Date or Call Valuation Date, and the denominator of which is 90.
Adjusted Tracking Fee Shortfall:    To the extent that the Adjusted Reference Distribution Amount, calculated on any Redemption Measurement Date or Call Valuation Date, as applicable, is less than the Adjusted Tracking Fee, calculated on such Redemption Measurement Date or Call Valuation Date, the difference between the Adjusted Tracking Fee and the Adjusted Reference Distribution Amount.
Related Definitions:   

See “Specific Terms of the Securities — Coupon Payment” beginning on page A-39 for the definitions of “Coupon Record Date,” “Coupon Ex-Date,” “Coupon Valuation Date,” “record date” and “ex-dividend date.”

 

See “Specific Terms of the Securities — Cash Settlement Amount at Maturity” beginning on page A-41 for the definitions of “Final Measurement Period,” “Index Business Day,” “Exchange Business Day,” “Primary Exchange” and “Related Exchange.”

 

See “Specific Terms of the Securities — Early Redemption at the Option of the Holders” beginning on page A-44 for the definitions of “Redemption Notice Date,” “Redemption Date” and “Redemption Measurement Date.”

 

See “Specific Terms of the Securities — UBS Call Right” beginning on page A-47 for the definitions of “Call Measurement Period” and “Call Valuation Date.”

CUSIP Number:    90274D374
ISIN Number:    US90274D3742

PROHIBITION OF SALES TO EEA RETAIL INVESTORS — The Securities are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance Mediation Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the “Prospectus

 

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Regulation”). Consequently no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Securities or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Securities or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.


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The UBS AG Exchange Traded Access Securities (ETRACS) being offered as described in this Annex and the accompanying prospectus constitute one offering in a series of offerings of ETRACS exchange-traded notes. We are offering and may continue to offer from time to time ETRACS linked to different underlying indices and with the same or different terms and conditions, relative to those set forth in this Annex.

This Annex contains the specific financial and other terms that apply to the securities being offered herein. Terms that apply generally to all our Medium-Term Notes, Series B, are described under “Description of the Series B ETNs” in the accompanying prospectus. The terms described here (i.e., in this Annex) modify or supplement those described in the accompanying prospectus and, if the terms described here are inconsistent with those described there, the terms described here are controlling. The contents of any website referred to in this Annex are not incorporated by reference in this Annex or the accompanying prospectus.

We have not authorized anyone to provide you with information other than the information incorporated by reference or provided in this Annex or the accompanying prospectus. We are not making an offer of these Securities in any state where the offer is not permitted. You should not assume that the information in this Annex is accurate as of any date other than the date on the front of the document.

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Summary      A-1  
Hypothetical Examples      A-9  
Risk Factors      A-18  
Alerian MLP Index      A-30  
Valuation of the Index and the Securities      A-37  
Specific Terms of the Securities      A-39  
Use of Proceeds      A-56  
Material U.S. Federal Income Tax Consequences      A-57  
Benefit Plan Investor Considerations      A-65  
Notice of Early Redemption      A-A-1  
Broker’s Confirmation of Redemption      A-B-1  

 

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Summary

The following is a summary of terms of the Securities, as well as a discussion of factors you should consider before acquiring the Securities. The information in this section is qualified in its entirety by the more detailed explanations set forth elsewhere in this Annex and in the accompanying prospectus. Please note that references to “UBS,” “we,” “our” and “us” refer only to UBS AG and not to its consolidated subsidiaries.

We may, without your consent, create and issue additional securities having the same terms and conditions as the Securities. We may consolidate the additional securities to form a single class with the outstanding Securities. In addition, we may suspend sales of the Securities for any reason, which could affect the liquidity of the market for the Securities.

This section summarizes the following aspects of the Securities:

- What are the Securities and how do they work?

- How do you redeem your Securities?

- What are some of the risks of the Securities?

- Is this the right investment for you?

- Who calculates and publishes the Index?

- Who calculates and publishes the VWAP Level?

- What are the tax consequences?

What are the Securities and how do they work?

The Securities are senior unsecured medium-term notes issued by UBS with a return linked to the performance of the Alerian MLP Index (the “Index”), reduced by the Accrued Tracking Fee. The Securities may pay a quarterly coupon during their term.

The Underlying Index

The Index measures the composite performance of energy infrastructure MLPs, and is calculated by S&P using a capped, float-adjusted, capitalization-weighted methodology. The Index constituents earn the majority of their cash flow from qualifying midstream activities involving energy commodities. The following Energy MLP Classification Standard (EMCS(SM)) activities are considered qualifying activities for purposes of the Index: gathering and processing, liquefaction, pipeline transportation, rail terminaling, and storage. For a detailed description of the Index, see “Alerian MLP Index” beginning on page A-30.

The payment you receive on your Securities at maturity, early redemption or upon exercise by UBS of its call right will depend on the performance of the Index, as measured by the VWAP Level (calculated by the VWAP Calculation Agent as described herein), and not by the closing level of the Index.

Payment at Maturity

The Securities do not guarantee any return of principal at, or prior to, maturity or call, or upon early redemption. Instead, you will receive a cash payment based on the performance of the Index, reduced by the Accrued Tracking Fee.

At maturity, you will receive a cash payment equal to:

(a) the product of

(i) the Stated Principal Amount and



 

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(ii) the Index Performance Ratio as of the last Index Business Day in the Final Measurement Period, plus

(b) the final Coupon Amount, minus

(c) the Accrued Tracking Fee as of the last Index Business Day in the Final Measurement Period, plus

(d) the Stub Reference Distribution Amount as of the last Index Business Day in the Final Measurement Period, if any.

We refer to this cash payment as the “Cash Settlement Amount.” If the amount calculated above is equal to or less than zero, the payment at maturity will be zero.

You may lose some or all of your investment at maturity. The Securities are fully exposed to any decline in the level of the Index. The negative effect of the Accrued Tracking Fee will reduce your final payment. If the level of the Index (as measured by the Final VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS”) does not increase by an amount sufficient to offset the negative effect of the Accrued Tracking Fee (less any Coupon Amounts, Stub Reference Distribution Amount and/ or Adjusted Coupon Amount, as applicable, you may be entitled to receive), or if the Final VWAP Level is less than the VWAP Level at the time you acquired your Series A AMU ETRACS, you may lose some or all of your investment at maturity. The Accrued Tracking Fee also takes into account the performance of the Index, as measured by the VWAP Level, as described herein.

See “Specific Terms of the Securities — Cash Settlement Amount at Maturity” beginning on page A-41.

Coupon Payments

The Securities may pay a quarterly coupon during their term. Any coupon payments will be reduced by the Accrued Tracking Fee. For each Security you hold on the applicable Coupon Record Date, you will receive on each Coupon Payment Date an amount in cash equal to the excess, if any, of the Reference Distribution Amount, calculated as of the corresponding Coupon Valuation Date, over the Accrued Tracking Fee, calculated as of the corresponding Coupon Valuation Date (the “Coupon Amount”). To the extent the Reference Distribution Amount on a Coupon Valuation Date is less than or equal to the Accrued Tracking Fee on the corresponding Coupon Valuation Date, there will be no Coupon Amount payment made on the corresponding Coupon Payment Date, and a Tracking Fee Shortfall, as described herein, will be included in the Accrued Tracking Fee for the next Coupon Valuation Date. This process will be repeated to the extent necessary until the Reference Distribution Amount for a Coupon Valuation Date is greater than the Accrued Tracking Fee for the corresponding Coupon Valuation Date. If there is a Tracking Fee Shortfall as of the last Coupon Valuation Date, that amount will be taken into account in determining the Cash Settlement Amount.

Unlike ordinary debt securities, the Securities do not guarantee any coupon payment.

See “Specific Terms of the Securities — Coupon Payment” beginning on page A-39.

UBS Call Right

On any Business Day through and including the Maturity Date (the “Call Settlement Date”), UBS may at its option redeem all, but not less than all, issued and outstanding Securities. To exercise its Call Right, UBS must provide notice to the holders of the Securities not less than eighteen calendar days prior to the Call Settlement Date specified by UBS. In the event UBS exercises this right, you will receive a cash payment on the relevant Call Settlement Date equal to the Call Settlement Amount. See “Specific Terms of the Securities — Cash Settlement Amount at Maturity” beginning on page A-41.



 

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How do you redeem your Securities?

Early Redemption

You may elect to require UBS to redeem your Securities, in whole or in part, on any Business Day prior to the Maturity Date through and including the final Redemption Date, subject to a minimum redemption amount of at least 50,000 Securities. If you redeem your Securities, you will receive a cash payment equal to the Redemption Amount, as defined below.

You must comply with the redemption procedures described below in order to redeem your Securities. To satisfy the minimum redemption amount, your broker or other financial intermediary may bundle your Securities for redemption with those of other investors to reach this minimum amount of 50,000 Securities. We may from time to time in our sole discretion reduce this minimum requirement in whole or in part. Any such reduction will be applied on a consistent basis for all holders of the Securities at the time the reduction becomes effective.

Upon early redemption, you will receive per Security a cash payment on the relevant Redemption Date equal to the Redemption Amount, calculated as described under “Specific Terms of the Securities — Early Redemption at the Option of the Holders” beginning on page A-44.

You may lose some or all of your investment upon early redemption. The combined negative effect of the Accrued Tracking Fee and the Redemption Fee Amount will reduce your final Redemption Amount. If the level of the Index (as measured by the Final VWAP Level compared to the VWAP Level at the time you acquired your Series A AMU ETRACS) does not increase by an amount sufficient to offset the combined negative effect of the Accrued Tracking Fee and the Redemption Fee Amount (less any Coupon Amounts, any Stub Reference Distribution Amount, as applicable, and/or any Adjusted Coupon Amount you may be entitled to receive), or if the Final VWAP Level is less than the VWAP Level at the time you acquired your Series A AMU ETRACS, you may lose some or all of your investment upon early redemption.

Redemption Procedures

To redeem your Securities prior to the Maturity Date, you must instruct your broker to deliver a Redemption Notice to UBS by e-mail no later than 12:00 noon, New York City time, on the applicable Redemption Notice Date and you and your broker must follow the procedures described herein. If you fail to comply with these procedures, your notice will be deemed ineffective. See “Specific Terms of the Securities — Redemption Procedures” beginning on page A-46, and “Description of the Series B ETNs — Redemption and Repayment” in the accompanying prospectus.

What are some of the risks of the Securities?

An investment in the Securities involves risks. Selected risks are summarized here, but we urge you to read the more detailed explanation of risks described under “Risk Factors” beginning on page A-18.

 

Ø  

You may lose some or all of your investment — The Securities do not guarantee any return on your initial investment and are fully exposed to any decline in the level of the Index, as measured by the VWAP Level. The combined negative effect of the Accrued Tracking Fee and the Redemption Fee Amount, if applicable, will reduce your final payment. If the increase in the level of the Index (as measured by the Final VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS), is insufficient to offset the combined negative effect of the Accrued Tracking Fee and the Redemption Fee Amount, if applicable (less any Coupon Amounts, Stub Reference Distribution Amount and/or Adjusted Coupon Amount, as applicable, you may be entitled to receive), or if the Final VWAP Level is less than the VWAP Level at the time you acquired your Series A AMU ETRACS, you may lose some or all of your investment at maturity or call, or upon early redemption. In addition, Coupon Amounts, if any, will be reduced by the Accrued Tracking Fee.



 

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Ø  

The payment on the Securities is linked to the VWAP Level, not to the closing level of the Index and not to the published intraday indicative value of the Securities — Your payment at maturity or call, or upon early redemption, is linked to the performance of the VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS. The Accrued Tracking Fee also takes into account the performance of the Index, as measured by the VWAP Level. Although the VWAP Level is intended to track the performance of the Index, the calculation of the VWAP Level is different from the calculation of the official closing level of the Index. Therefore, the payment at maturity or call, or upon early redemption of your Securities, may be different from the payment you would receive if such payment were determined by reference to the official closing level of the Index.

 

Ø  

Market risk — The return on the Securities, which may be positive or negative, is linked to the return on the Index as measured by the Index Performance Ratio, and which, in turn, is affected by a variety of market and economic factors, interest rates in the markets and economic, financial, political, regulatory, judicial or other events that affect the markets generally.

 

Ø  

Credit of issuer — The Securities are senior unsecured debt obligations of the issuer, UBS, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on the Securities, including any payment at maturity, call or upon early redemption, depends on the ability of UBS to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of UBS will affect the market value, if any, of the Securities prior to maturity, call or early redemption. In addition, in the event UBS were to default on its obligations, you may not receive any amounts owed to you under the terms of the Securities. Unlike the series of UBS AG debt securities entitled “Medium-Term Notes, Series A,” the Securities do not benefit from any co-obligation of UBS Switzerland AG.

 

Ø  

Potential over-concentration in a particular industry — There is only one industry — energy — related to the Index constituents. An investment in the Securities will increase your portfolio’s exposure to fluctuations in the energy industry.

 

Ø  

You are not guaranteed a coupon payment — You will not receive a coupon payment on a Coupon Payment Date if the Reference Distribution Amount is less than or equal to the Accrued Tracking Fee. Similarly, you will not receive a Coupon Payment on a Redemption Date or the Call Settlement Date if the Adjusted Reference Distribution Amount is less than the Adjusted Tracking Fee, and in the case of a redemption, the Redemption Fee Amount. Because the amount of any Coupon Amount is uncertain and could be zero, you should not expect to receive regular periodic coupon payments.

 

Ø  

A trading market for the Securities may not develop — Although the Securities are listed on NYSE Arca, a trading market for the Securities may not develop. Certain affiliates of UBS may engage in limited purchase and resale transactions in the Securities, although they are not required to and may stop at any time. We are not required to maintain any listing of the Securities on NYSE Arca or any other exchange. We may issue and sell additional Securities from time to time and we may suspend or cease sales of the Securities at any time, at our discretion. Therefore, the liquidity of the Securities may be limited. In addition, it is possible that holders of Series A AMU ETRACS exchange less than all of their Series A AMU ETRACS for Securities in the registered exchange offer (the “Registered Exchange Offer”) to which this Annex relates. To the extent that holders of Series A AMU ETRACS do not exchange their Series A ETRACS for Securities in the Registered Exchange Offer, the liquidity of the Securities may be limited.

 

Ø  

Requirements upon early redemption — You must satisfy the requirements described herein for your redemption request to be considered, including the minimum redemption amount of at least 50,000 Securities, unless we determine otherwise or your broker or other financial intermediary bundles your Securities for redemption with those of other investors to reach this minimum requirement. In addition, the payment you receive upon early redemption will be reduced by the Redemption Fee Amount.



 

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Ø  

Your redemption election is irrevocable — You will not know the Redemption Amount at the time you elect to request that we redeem your Securities, nor will you know at the time of such request whether the Redemption Amount would be greater if the Index Performance Ratio were calculated using the Final VWAP Level or using the Index Closing Level. You will not be able to rescind your election to redeem your Securities, or, if applicable, your election to have the Index Performance Ratio calculated using the Index Closing Level instead of the Final VWAP Level, after your redemption notice is received by UBS or after you indicate to UBS which alternative you elect to calculate the Index Performance Ratio, respectively. Accordingly, you will be exposed to market risk in the event market conditions change after UBS receives your offer and the Redemption Amount is determined on the Redemption Measurement Date.

 

Ø  

Uncertain tax treatment — Significant aspects of the tax treatment of the Securities are uncertain. You should consult your own tax advisor about your own tax situation.

 

Ø  

UBS call right — UBS may elect to redeem all outstanding Securities on any Business Day, as described under “Specific Terms of the Securities — UBS Call Right” beginning on page A-47. If UBS exercises its Call Right, the Call Settlement Amount may be less than your initial investment in the Securities. In addition, you may have to invest your proceeds in an investment that may have a lower rate of return than the Securities.

Is this the right investment for you?

The Securities may be a suitable investment for you if:

 

Ø  

You are willing to accept the risk that you may lose some or all of your investment.

 

Ø  

You seek an investment with a return linked to the performance of the Index, which will provide exposure to energy MLPs, and Coupon Amounts which are dependent on distributions made with respect to the Index constituents.

 

Ø  

You believe the level of the Index, as measured by the VWAP Level, will increase during the term of the Securities by an amount sufficient to offset the Accrued Tracking Fee and any Redemption Fee Amount, less any Coupon Amounts, any Stub Reference Distribution Amount and/or any Adjusted Coupon Amount.

 

Ø  

You are willing to hold securities that have a long-term maturity.

 

Ø  

You are willing to hold securities that may be redeemed early by UBS, pursuant to the UBS Call Right.

 

Ø  

You are willing to receive a lower amount of distributions than you would if you owned interests in the Index constituents directly.

 

Ø  

You are willing to accept the risk of fluctuations in the energy industry, in general, and the risks inherent in a concentrated investment in energy MLPs, in particular.

 

Ø  

You are willing to accept the risk that the price at which you are able to sell the Securities may be significantly less than the amount you invested.

 

Ø  

You seek the potential for current income from your investment.

 

Ø  

You are not seeking an investment for which there will be an active secondary market.

 

Ø  

You are comfortable with the creditworthiness of UBS, as issuer of the Securities.

The Securities may not be a suitable investment for you if:

 

Ø  

You are not willing to accept the risk that you may lose some or all of your investment.



 

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Ø  

You do not seek an investment with a return linked to the performance of the Index, which will provide exposure to energy MLPs, and Coupon Amounts which are dependent on distributions made with respect to the Index constituents.

 

Ø  

You believe that the level of the Index, as measured by the VWAP Level, will decline during the term of the Securities or the level of the Index, as measured by the VWAP Level, will not increase by an amount sufficient to offset the Accrued Tracking Fee and any Redemption Fee Amount, less any Coupon Amounts, any Stub Reference Distribution Amount and/or any Adjusted Coupon Amount you may be entitled to receive.

 

Ø  

You are not willing to hold securities that have a long-term maturity.

 

Ø  

You are not willing to hold securities that may be redeemed early by UBS, pursuant to the UBS Call Right.

 

Ø  

You are not willing to be exposed to the risk of fluctuations in the energy industry, in general, and the risks inherent in a concentrated investment in energy MLPs, in particular.

 

Ø  

You are not willing to accept the risk that the price at which you are able to sell the Securities may be significantly less than the amount you invested.

 

Ø  

You prefer the lower risk and therefore accept the potentially lower returns of fixed-income investments with comparable maturities and credit ratings.

 

Ø  

You seek a regularly scheduled fixed interest payment on your investment.

 

Ø  

You seek an investment for which there will be an active secondary market.

 

Ø  

You are not comfortable with the creditworthiness of UBS, as issuer of the Securities.

Who calculates and publishes the Index?

The level of the Index is calculated by S&P and disseminated by the NYSE approximately every fifteen seconds (assuming the level of the Index has changed within such fifteen-second interval) from 9:30 a.m. to 5:30 p.m., New York City time, and a daily Index level is published at approximately 4:00 p.m., New York City time, on each Exchange Business Day. Index information, including the Index level, is available from NYSE and Bloomberg L.P. (“Bloomberg”) under the symbol “AMZ.” Index levels can also be obtained from the official website of Alerian, www.alerian.com. The historical performance of the Index is not indicative of the future performance of the Index or the level of the Index on the Final Valuation Date or applicable Redemption Measurement Date or Call Valuation Date, as the case may be.

Who calculates and publishes the VWAP Level?

The VWAP Level, which is calculated based on the information published by S&P as described in the paragraph above, is published and disseminated by the NYSE.

What are the tax consequences of owning the Securities?

The United States federal income tax consequences of your investment in the Securities are uncertain. Some of these tax consequences are summarized below, but we urge you to read the more detailed discussion below under “Material U.S. Federal Income Tax Consequences”.

Pursuant to the terms of the Securities, you and we agree, in the absence of a statutory, regulatory, administrative or judicial ruling to the contrary, to characterize the Securities as a pre-paid forward contract with respect to the Index. In addition, you and we agree, in the absence of a statutory, regulatory, administrative or judicial ruling to the contrary, to treat the Coupon Amount (including amounts received upon the sale, redemption or maturity of the Securities in respect of accrued but unpaid



 

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Coupon Amounts) and the Stub Reference Distribution Amount, if any, as amounts that should be included in ordinary income of a U.S. holder (as defined below under “Material U.S. Federal Income Tax Consequences”) for tax purposes at the time such amounts accrue or are received, in accordance with the holder’s regular method of tax accounting for tax purposes. You will be required to treat the Coupon Amounts and the Stub Reference Distribution Amount, if any, in such a manner despite the fact that (a) all or a portion of such distributions may be attributable to (i) partnership distributions that are attributable to allocations of long-term capital gain that in the case of a direct investor would be subject to tax at long-term capital gains rates, and (ii) partnership distributions that exceed the partnership’s income, in which case a direct holder of the partnership interest would generally currently exclude such excess from income, and (b) there may be other possible treatments of such amounts that would be more advantageous to holders of Securities.

If the Securities are so treated (and subject to the discussion below regarding the application of Section 1260 of the Internal Revenue Code of 1986, as amended (the “Code”)), a U.S. holder should generally recognize capital gain or loss upon the sale, redemption or maturity of its Securities in an amount equal to the difference between the amount realized (other than any amount attributable to accrued but unpaid Coupon Amounts and the Stub Reference Distribution Amount, if any, which will be treated as ordinary income) and the holder’s basis in the Securities. Such gain or loss should generally be long-term capital gain or loss if the holder’s holding period in the Securities exceeds one year.

In the opinion of our counsel, Sullivan & Cromwell LLP, the Securities should be treated in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Securities, it is possible that the Securities could be treated for tax purposes in an alternative manner described below under “Material U.S. Federal Income Tax Consequences — U.S. Holders — Alternative Treatments”.

It is likely that your ownership of the Securities will be treated as a “constructive ownership transaction” that is subject to the constructive ownership rules of Section 1260 of the Code. Under Section 1260 of the Code, special tax rules apply to an investor that enters into a “constructive ownership transaction” with respect to an equity interest in a “pass-thru entity.” For this purpose, a constructive ownership transaction includes entering into a forward contract with respect to a pass-thru entity and a partnership is considered to be a pass-thru entity. It is, however, not entirely clear how Section 1260 of the Code applies in the case of an index that is primarily comprised of pass-thru entities like the Index. Although the matter is not free from doubt, it is likely that Section 1260 of the Code should apply to the portion of your return on the Securities that is determined by reference to the Index Constituent Securities that are pass-thru entities (the “Pass-Thru Index Constituents”). If your Securities are subject to these rules, then any long-term capital gain that you realize upon the sale, redemption or maturity of your Securities would be recharacterized as ordinary income (and you would be subject to an interest charge on the deferred tax liability with respect to such capital gain) to the extent that such capital gain exceeds the amount of long-term capital gain that you would have realized had you purchased an actual interest in the Pass-Thru Index Constituents (in an amount equal to the notional amount of the Index that is represented by the Securities) on the date that you purchased the Series A AMU ETRACS that you exchanged for your Securities and sold your interest in the Pass-Thru Index Constituents on the date of the sale or maturity of the Securities (the “Excess Gain Amount”). If your Securities are subject to Section 1260 of the Code, the Excess Gain Amount will be presumed to be equal to all of the gain that you recognized in respect of the Securities (in which case all of such gain would be recharacterized as ordinary income that is subject to an interest charge) unless you provide clear and convincing evidence to the contrary.

You should review the discussion of Section 1260 under the heading “Material U.S. Federal Income Tax Consequences — U.S. Holders” and are urged to consult your own tax advisor regarding the application of these rules to the Securities.



 

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Non-U.S. holders of Securities should review the discussion below under “Material U.S. Federal Income Tax Considerations — Non-U.S. Holders” for a summary of the tax consequences to them of holding the Securities, including a discussion of withholding taxes that will be imposed on distributions to them in respect of the Securities.

Holders are urged to consult their tax advisors concerning the significance and the potential impact of the above considerations.

Conflicts of Interest

UBS Securities LLC and UBS Financial Services Inc. are affiliates of UBS and, as such, each has a “conflict of interest” in this offering within the meaning of the Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. Consequently, the offering is being conducted in compliance with the provisions of Rule 5121. UBS Securities LLC and UBS Financial Services Inc. are not permitted to sell Securities in this offering to an account over which they exercise discretionary authority without the prior specific written approval of the account holder.



 

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Hypothetical Examples

Hypothetical Coupon Amount Calculation

The following table illustrates the hypothetical Coupon Amount payable on each quarterly Coupon Payment Date over a hypothetical period of five (5) quarters. Each of the hypothetical Coupon Amounts set forth below is for illustrative purposes only and may not be the actual Coupon Amount payable to a purchaser of the Securities on any Coupon Payment Date. The actual Coupon Amount payable on any Coupon Payment Date will be determined by reference to the Reference Distribution Amount calculated as of the corresponding Coupon Valuation Date and the Accrued Tracking Fee (including any Tracking Fee Shortfall) calculated as of the corresponding Coupon Valuation Date and may be substantially different from any amounts set forth below. The numbers appearing in the following table and examples have been rounded for ease of analysis.

 

Quarter

   Current
Indicative
Value
   Reference
Distribution
Amount as
of the
applicable
Coupon
Valuation
Date
   Accrued
Tracking Fee
(
excluding
Tracking Fee
Shortfall accrued
from Previous
Quarter) as of
the applicable
Coupon
Valuation Date*
   Accrued
Tracking Fee
(
including
Tracking Fee
Shortfall accrued
from Previous
Quarter) as of
the applicable
Coupon
Valuation Date*
   Coupon
Amount
   Tracking Fee
Shortfall for
the Following
Quarter
Quarter 1        25.15        0.4764        0.0503        0.4764        0.4261        0
Quarter 2        24.50        0.3256        0.0490        0.0490        0.2766        0
Quarter 3        25.75        0.0000        0.0515        0.0515        0.0000        0.0515
Quarter 4        25.00        0.0165        0.0500        0.1015        0.0000        0.0850
Quarter 5        26.05        0.5076        0.0521        0.1371        0.3705        0

 

*

Assuming that the total number of calendar days in each quarter is 90.

Hypothetical Payment at Maturity or Call, or Upon Early Redemption

For additional information and key terms related to the Coupon Amount, please see “Specific Terms of the Securities — Coupon Payment.”

Hypothetical Payment at Maturity or Call, or Upon Early Redemption — Examples

The following examples illustrate how the Securities would perform at maturity or call, or upon early redemption, in hypothetical circumstances. We have included examples in which the VWAP Level increases at a constant rate of 1% per year through maturity (Example 1), as well as examples in which the VWAP Level decreases at a constant rate of 1% per year through maturity (Example 2). In addition, Example 3 shows the VWAP Level increasing by 1% per year for the first 15 years and then decreasing by 1% per year for the next 15 years, whereas Example 4 shows the reverse scenario of the VWAP Level decreasing by 1% per year for the first 15 years, and then increasing by 1% per year for the next 15 years. Although, for illustrative purposes only, the examples below show hypothetical performance of the Securities over a period of 30 years, the Securities mature on July 18, 2042 and accordingly there is a remaining term of only approximately 22.75 years from the date of this Annex. For ease of analysis and presentation, the following examples assume that the term of the Securities is 30 years, no Coupon Amount was paid during the term of the Securities, the Reference Distribution Amount for each applicable period is zero, no Stub Reference Distribution Amount will be paid at maturity or call and no Adjusted Coupon Amount will be paid upon call or early redemption. These examples highlight the impact of the Accrued Tracking Fee on the payment at maturity or call, or upon early redemption, under different circumstances. Because the Accrued Tracking Fee takes into account the performance of the Index, as measured by the VWAP Level, the absolute level of the Accrued Tracking Fee is dependent on

 

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Hypothetical Examples

 

 

the path taken by the VWAP Level to arrive at its ending level. The figures in these examples have been rounded for convenience. The Cash Settlement Amount figures for year 30 are as of the hypothetical Calculation Date, and given the indicated assumptions, a holder will receive payment at maturity or call, or upon early redemption, in the indicated amount, according to the indicated formula.

Example 1 — VWAP Level increases at a constant rate of 1% per year through maturity.

Assumptions:

 

Annualized Tracking Fee:    0.80% per annum
Stated Principal Amount:    $25.00
Initial VWAP Level:    380.00

 

Year End

   VWAP
Level
     Current
Indicative
Value
     Annualized
Tracking
Fee for the
Applicable
Year
     Accrued
Tracking
Fee
     Cash
Settlement
Amount/
Call
Settlement
Amount
     Redemption
Amount
 

A

   B      C      D      E      F      G  
            Principal x
(B/Initial
VWAP
Level)
     C x
Annualized
Tracking
Fee
     Cumulative
Total of
D*
     C – E      F -
Redemption
Fee Amount
 
1      383.80      $ 25.25      $ 0.2020      $ 0.2020      $ 25.05      $ 25.02  
2      387.64      $ 25.50      $ 0.2040      $ 0.4060      $ 25.10      $ 25.07  
3      391.51      $ 25.76      $ 0.2061      $ 0.6121      $ 25.15      $ 25.11  
4      395.43      $ 26.02      $ 0.2081      $ 0.8202      $ 25.19      $ 25.16  
5      399.38      $ 26.28      $ 0.2102      $ 1.0304      $ 25.24      $ 25.21  
6      403.38      $ 26.54      $ 0.2123      $ 1.2427      $ 25.30      $ 25.26  
7      407.41      $ 26.80      $ 0.2144      $ 1.4571      $ 25.35      $ 25.31  
8      411.49      $ 27.07      $ 0.2166      $ 1.6737      $ 25.40      $ 25.37  
9      415.60      $ 27.34      $ 0.2187      $ 1.8924      $ 25.45      $ 25.42  
10      419.76      $ 27.62      $ 0.2209      $ 2.1134      $ 25.50      $ 25.47  
11      423.95      $ 27.89      $ 0.2231      $ 2.3365      $ 25.56      $ 25.52  
12      428.19      $ 28.17      $ 0.2254      $ 2.5619      $ 25.61      $ 25.58  
13      432.48      $ 28.45      $ 0.2276      $ 2.7895      $ 25.66      $ 25.63  
14      436.80      $ 28.74      $ 0.2299      $ 3.0194      $ 25.72      $ 25.69  
15      441.17      $ 29.02      $ 0.2322      $ 3.2516      $ 25.77      $ 25.74  
16      445.58      $ 29.31      $ 0.2345      $ 3.4861      $ 25.83      $ 25.80  
17      450.04      $ 29.61      $ 0.2369      $ 3.7229      $ 25.88      $ 25.85  
18      454.54      $ 29.90      $ 0.2392      $ 3.9622      $ 25.94      $ 25.91  
19      459.08      $ 30.20      $ 0.2416      $ 4.2038      $ 26.00      $ 25.97  
20      463.67      $ 30.50      $ 0.2440      $ 4.4478      $ 26.06      $ 26.02  
21      468.31      $ 30.81      $ 0.2465      $ 4.6943      $ 26.12      $ 26.08  
22      472.99      $ 31.12      $ 0.2489      $ 4.9433      $ 26.17      $ 26.14  
23      477.72      $ 31.43      $ 0.2514      $ 5.1947      $ 26.23      $ 26.20  
24      482.50      $ 31.74      $ 0.2539      $ 5.4486      $ 26.29      $ 26.26  
25      487.32      $ 32.06      $ 0.2565      $ 5.7051      $ 26.36      $ 26.32  
26      492.20      $ 32.38      $ 0.2591      $ 5.9642      $ 26.42      $ 26.38  
27      497.12      $ 32.71      $ 0.2616      $ 6.2258      $ 26.48      $ 26.45  
28      502.09      $ 33.03      $ 0.2643      $ 6.4901      $ 26.54      $ 26.51  
29      507.11      $ 33.36      $ 0.2669      $ 6.7570      $ 26.61      $ 26.57  
30      512.18      $ 33.70      $ 0.2696      $ 7.0265      $ 26.67      $ 26.64  

 

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Table of Contents

Hypothetical Examples

 

 

*

Because the Reference Distribution Amount for each year is zero, for each year the Tracking Fee Shortfall is increased by the annualized Tracking Fee for that year, and the Accrued Tracking Fee for each year is the sum of the annualized Tracking Fee for that year, plus the Tracking Fee Shortfall as of the end of the previous year (i.e., the sum of the annualized Tracking Fees for all previous years).

 

Cumulative VWAP Return    34.78%
Annual VWAP Return    1.00%
Annual Return on Securities**    0.21%

 

**

Assumes that the Securities were redeemed.

 

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Table of Contents

Hypothetical Examples

 

 

Example 2 — VWAP Level decreases at a constant rate of 1% per year through maturity.

Assumptions:

 

Annualized Tracking Fee:    0.80% per annum
Stated Principal Amount:    $25.00
Initial VWAP Level:    380.00

 

Year End

   VWAP Level      Current
Indicative
Value
     Annualized
Tracking
Fee for the
Applicable
Year
     Accrued
Tracking
Fee
     Cash
Settlement
Amount/Call
Settlement
Amount
     Redemption
Amount
 

A

   B      C      D      E      F      G  
            Principal x
(B/Initial
VWAP
Level)
     C x
Annualized
Tracking
Fee
     Cumulative
Total of
D*
     C – E      F -
Redemption
Fee Amount
 
1      376.20      $ 24.75      $ 0.1980      $ 0.1980      $ 24.55      $ 24.52  
2      372.44      $ 24.50      $ 0.1960      $ 0.3940      $ 24.11      $ 24.08  
3      368.71      $ 24.26      $ 0.1941      $ 0.5881      $ 23.67      $ 23.64  
4      365.03      $ 24.01      $ 0.1921      $ 0.7802      $ 23.23      $ 23.21  
5      361.38      $ 23.77      $ 0.1902      $ 0.9704      $ 22.80      $ 22.78  
6      357.76      $ 23.54      $ 0.1883      $ 1.1587      $ 22.38      $ 22.35  
7      354.18      $ 23.30      $ 0.1864      $ 1.3451      $ 21.96      $ 21.93  
8      350.64      $ 23.07      $ 0.1845      $ 1.5297      $ 21.54      $ 21.51  
9      347.14      $ 22.84      $ 0.1827      $ 1.7124      $ 21.13      $ 21.10  
10      343.67      $ 22.61      $ 0.1809      $ 1.8932      $ 20.72      $ 20.69  
11      340.23      $ 22.38      $ 0.1791      $ 2.0723      $ 20.31      $ 20.29  
12      336.83      $ 22.16      $ 0.1773      $ 2.2496      $ 19.91      $ 19.89  
13      333.46      $ 21.94      $ 0.1755      $ 2.4251      $ 19.51      $ 19.49  
14      330.12      $ 21.72      $ 0.1737      $ 2.5988      $ 19.12      $ 19.10  
15      326.82      $ 21.50      $ 0.1720      $ 2.7708      $ 18.73      $ 18.71  
16      323.55      $ 21.29      $ 0.1703      $ 2.9411      $ 18.35      $ 18.32  
17      320.32      $ 21.07      $ 0.1686      $ 3.1097      $ 17.96      $ 17.94  
18      317.12      $ 20.86      $ 0.1669      $ 3.2766      $ 17.59      $ 17.56  
19      313.94      $ 20.65      $ 0.1652      $ 3.4419      $ 17.21      $ 17.19  
20      310.80      $ 20.45      $ 0.1636      $ 3.6054      $ 16.84      $ 16.82  
21      307.70      $ 20.24      $ 0.1619      $ 3.7674      $ 16.48      $ 16.46  
22      304.62      $ 20.04      $ 0.1603      $ 3.9277      $ 16.11      $ 16.09  
23      301.57      $ 19.84      $ 0.1587      $ 4.0864      $ 15.75      $ 15.73  
24      298.56      $ 19.64      $ 0.1571      $ 4.2436      $ 15.40      $ 15.38  
25      295.57      $ 19.45      $ 0.1556      $ 4.3991      $ 15.05      $ 15.03  
26      292.62      $ 19.25      $ 0.1540      $ 4.5531      $ 14.70      $ 14.68  
27      289.69      $ 19.06      $ 0.1525      $ 4.7056      $ 14.35      $ 14.34  
28      286.79      $ 18.87      $ 0.1509      $ 4.8566      $ 14.01      $ 13.99  
29      283.93      $ 18.68      $ 0.1494      $ 5.0060      $ 13.67      $ 13.66  
30      281.09      $ 18.49      $ 0.1479      $ 5.1539      $ 13.34      $ 13.32  

 

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Hypothetical Examples

 

 

*

Because the Reference Distribution Amount for each year is zero, for each year the Tracking Fee Shortfall is increased by the annualized Tracking Fee for that year, and the Accrued Tracking Fee for each year is the sum of the annualized Tracking Fee for that year, plus the Tracking Fee Shortfall as of the end of the previous year (i.e., the sum of the annualized Tracking Fees for all previous years).

 

Cumulative VWAP Return    -26.03%
Annual VWAP Return    -1.00%
Annual Return on Securities    -2.08%

 

**

Assumes that the Securities were redeemed.

 

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Table of Contents

Hypothetical Examples

 

 

Example 3 — VWAP Level increases by 1% per year for the first 15 years and then decreases by 1% per year for the next 15 years.

Assumptions:

 

Annualized Tracking Fee:    0.80% per annum
Stated Principal Amount:    $25.00
Initial VWAP Level:    380.00

 

Year End

   VWAP Level      Current
Indicative
Value
     Annualized
Tracking
Fee for the
Applicable
Year
     Accrued
Tracking
Fee
     Cash
Settlement
Amount/Call
Settlement
Amount
     Redemption
Amount
 

A

   B      C      D      E      F      G  
            Principal x
(B/Initial
VWAP
Level)
     C x
Annualized
Tracking
Fee
     Cumulative
Total of
D*
     C – E      F -
Redemption
Fee Amount
 
1      383.80      $ 25.25      $ 0.2020      $ 0.2020      $ 25.05      $ 25.02  
2      387.64      $ 25.50      $ 0.2040      $ 0.4060      $ 25.10      $ 25.07  
3      391.51      $ 25.76      $ 0.2061      $ 0.6121      $ 25.15      $ 25.11  
4      395.43      $ 26.02      $ 0.2081      $ 0.8202      $ 25.19      $ 25.16  
5      399.38      $ 26.28      $ 0.2102      $ 1.0304      $ 25.24      $ 25.21  
6      403.38      $ 26.54      $ 0.2123      $ 1.2427      $ 25.30      $ 25.26  
7      407.41      $ 26.80      $ 0.2144      $ 1.4571      $ 25.35      $ 25.31  
8      411.49      $ 27.07      $ 0.2166      $ 1.6737      $ 25.40      $ 25.37  
9      415.60      $ 27.34      $ 0.2187      $ 1.8924      $ 25.45      $ 25.42  
10      419.76      $ 27.62      $ 0.2209      $ 2.1134      $ 25.50      $ 25.47  
11      423.95      $ 27.89      $ 0.2231      $ 2.3365      $ 25.56      $ 25.52  
12      428.19      $ 28.17      $ 0.2254      $ 2.5619      $ 25.61      $ 25.58  
13      432.48      $ 28.45      $ 0.2276      $ 2.7895      $ 25.66      $ 25.63  
14      436.80      $ 28.74      $ 0.2299      $ 3.0194      $ 25.72      $ 25.69  
15      441.17      $ 29.02      $ 0.2322      $ 3.2516      $ 25.77      $ 25.74  
16      436.76      $ 28.73      $ 0.2299      $ 3.4814      $ 25.25      $ 25.22  
17      432.39      $ 28.45      $ 0.2276      $ 3.7090      $ 24.74      $ 24.71  
18      428.07      $ 28.16      $ 0.2253      $ 3.9343      $ 24.23      $ 24.20  
19      423.78      $ 27.88      $ 0.2230      $ 4.1574      $ 23.72      $ 23.69  
20      419.55      $ 27.60      $ 0.2208      $ 4.3782      $ 23.22      $ 23.19  
21      415.35      $ 27.33      $ 0.2186      $ 4.5968      $ 22.73      $ 22.70  
22      411.20      $ 27.05      $ 0.2164      $ 4.8132      $ 22.24      $ 22.21  
23      407.09      $ 26.78      $ 0.2143      $ 5.0275      $ 21.75      $ 21.73  
24      403.01      $ 26.51      $ 0.2121      $ 5.2396      $ 21.27      $ 21.25  
25      398.98      $ 26.25      $ 0.2100      $ 5.4496      $ 20.80      $ 20.77  
26      394.99      $ 25.99      $ 0.2079      $ 5.6575      $ 20.33      $ 20.30  
27      391.04      $ 25.73      $ 0.2058      $ 5.8633      $ 19.86      $ 19.84  
28      387.13      $ 25.47      $ 0.2038      $ 6.0670      $ 19.40      $ 19.38  
29      383.26      $ 25.21      $ 0.2017      $ 6.2687      $ 18.95      $ 18.92  
30      379.43      $ 24.96      $ 0.1997      $ 6.4684      $ 18.49      $ 18.47  

 

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Hypothetical Examples

 

 

*

Because the Reference Distribution Amount for each year is zero, for each year the Tracking Fee Shortfall is increased by the annualized Tracking Fee for that year, and the Accrued Tracking Fee for each year is the sum of the annualized Tracking Fee for that year, plus the Tracking Fee Shortfall as of the end of the previous year (i.e., the sum of the annualized Tracking Fees for all previous years).

 

Cumulative VWAP Return    -0.15%
Annual VWAP Return    -0.01%
Annual Return on Securities    -1.00%

 

**

Assumes that the Securities were redeemed.

 

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Table of Contents

Hypothetical Examples

 

 

Example 4 — VWAP Level decreases by 1% per year for the first 15 years, and then increases by 1% per year for the next 15 years.

Assumptions:

 

Annualized Tracking Fee:    0.80% per annum
Stated Principal Amount:    $25.00
Initial VWAP Level:    380.00

 

Year End

   VWAP Level      Current
Indicative
Value
     Annualized
Tracking
Fee for the
Applicable
Year
     Accrued
Tracking
Fee
     Cash
Settlement
Amount/Call
Settlement
Amount
     Redemption
Amount
 

A

   B      C      D      E      F      G  
            Principal x
(B/Initial
VWAP
Level)
     C x
Annualized
Tracking
Fee
     Cumulative
Total of
D*
     C – E      F -
Redemption
Fee Amount
 
1      376.20      $ 24.75      $ 0.1980      $ 0.1980      $ 24.55      $ 24.52  
2      372.44      $ 24.50      $ 0.1960      $ 0.3940      $ 24.11      $ 24.08  
3      368.71      $ 24.26      $ 0.1941      $ 0.5881      $ 23.67      $ 23.64  
4      365.03      $ 24.01      $ 0.1921      $ 0.7802      $ 23.23      $ 23.21  
5      361.38      $ 23.77      $ 0.1902      $ 0.9704      $ 22.80      $ 22.78  
6      357.76      $ 23.54      $ 0.1883      $ 1.1587      $ 22.38      $ 22.35  
7      354.18      $ 23.30      $ 0.1864      $ 1.3451      $ 21.96      $ 21.93  
8      350.64      $ 23.07      $ 0.1845      $ 1.5297      $ 21.54      $ 21.51  
9      347.14      $ 22.84      $ 0.1827      $ 1.7124      $ 21.13      $ 21.10  
10      343.67      $ 22.61      $ 0.1809      $ 1.8932      $ 20.72      $ 20.69  
11      340.23      $ 22.38      $ 0.1791      $ 2.0723      $ 20.31      $ 20.29  
12      336.83      $ 22.16      $ 0.1773      $ 2.2496      $ 19.91      $ 19.89  
13      333.46      $ 21.94      $ 0.1755      $ 2.4251      $ 19.51      $ 19.49  
14      330.12      $ 21.72      $ 0.1737      $ 2.5988      $ 19.12      $ 19.10  
15      326.82      $ 21.50      $ 0.1720      $ 2.7708      $ 18.73      $ 18.71  
16      330.09      $ 21.72      $ 0.1737      $ 2.9446      $ 18.77      $ 18.75  
17      333.39      $ 21.93      $ 0.1755      $ 3.1200      $ 18.81      $ 18.79  
18      336.73      $ 22.15      $ 0.1772      $ 3.2973      $ 18.86      $ 18.83  
19      340.09      $ 22.37      $ 0.1790      $ 3.4763      $ 18.90      $ 18.87  
20      343.49      $ 22.60      $ 0.1808      $ 3.6571      $ 18.94      $ 18.92  
21      346.93      $ 22.82      $ 0.1826      $ 3.8396      $ 18.98      $ 18.96  
22      350.40      $ 23.05      $ 0.1844      $ 4.0241      $ 19.03      $ 19.00  
23      353.90      $ 23.28      $ 0.1863      $ 4.2103      $ 19.07      $ 19.05  
24      357.44      $ 23.52      $ 0.1881      $ 4.3985      $ 19.12      $ 19.09  
25      361.02      $ 23.75      $ 0.1900      $ 4.5885      $ 19.16      $ 19.14  
26      364.63      $ 23.99      $ 0.1919      $ 4.7804      $ 19.21      $ 19.18  
27      368.27      $ 24.23      $ 0.1938      $ 4.9742      $ 19.25      $ 19.23  
28      371.95      $ 24.47      $ 0.1958      $ 5.1700      $ 19.30      $ 19.28  
29      375.67      $ 24.72      $ 0.1977      $ 5.3677      $ 19.35      $ 19.32  
30      379.43      $ 24.96      $ 0.1997      $ 5.5674      $ 19.40      $ 19.37  

 

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Table of Contents

Hypothetical Examples

 

 

*

Because the Reference Distribution Amount for each year is zero, for each year the Tracking Fee Shortfall is increased by the annualized Tracking Fee for that year, and the Accrued Tracking Fee for each year is the sum of the annualized Tracking Fee for that year, plus the Tracking Fee Shortfall as of the end of the previous year (i.e., the sum of the annualized Tracking Fees for all previous years).

 

Cumulative VWAP Return    -0.15%
Annual VWAP Return    -0.01%
Annual Return on Securities    -0.85%

 

**

Assumes that the Securities were redeemed.

You may receive Coupon Amounts during the term of the Securities, a Stub Reference Distribution Amount at maturity or call, or an Adjusted Coupon Amount upon call or early redemption. The hypothetical returns displayed in all of the examples above do not reflect any Coupon Amounts you may be entitled to receive during the term of the Securities, any Stub Reference Distribution Amount you may be entitled to receive at maturity or call, or any Adjusted Coupon Amount you may be entitled to receive upon call or early redemption. If any Coupon Amounts were paid during the term of the Securities, any Stub Reference Distribution Amount was paid upon maturity or call, or any Adjusted Coupon Amount were payable upon call or early redemption, the hypothetical Cash Settlement Amounts, Call Settlement Amounts or Redemption Amounts displayed above would have been higher (as a portion of the Accrued Tracking Fee would have been offset in calculating the Coupon Amounts or Adjusted Coupon Amount and/or the Cash Settlement Amounts or Call Settlement Amounts would have been increased by the Stub Reference Distribution Amount).

We cannot predict the actual VWAP Level on any Index Business Day or the market value of your Securities, nor can we predict the relationship between the VWAP Level and the market value of your Securities at any time prior to the Maturity Date. The actual amount that a holder of the Securities will receive at maturity or call, or upon early redemption, as the case may be, and the rate of return on the Securities will depend on the actual Final VWAP Level, the Accrued Tracking Fee and any Redemption Fee Amount and whether any Coupon Amount was paid during the term of the Securities, any Stub Reference Distribution Amount is payable at maturity or call or any Adjusted Coupon Amount is payable upon call or early redemption. Moreover, the assumptions on which the hypothetical returns are based are purely for illustrative purposes. Consequently, the amount, in cash, to be paid in respect of your Securities, if any, on the Maturity Date, Call Settlement Date or the relevant Redemption Date, as applicable, may be very different from the information reflected in the tables above. The hypothetical examples above are provided for purposes of information only.

The hypothetical examples are not indicative of the future performance of the Index, as measured by the VWAP Level, on any Index Business Day, the Final VWAP Level, or what the value of your Securities may be. Fluctuations in the hypothetical examples may be greater or less than fluctuations experienced by the holders of the Securities. The performance data shown above is for illustrative purposes only and does not represent the actual future performance of the Securities.

 

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Table of Contents

              

 

 

Risk Factors

Your investment in the Securities involves significant risks. The Securities are not secured debt and are riskier than ordinary unsecured debt securities. Unlike ordinary debt securities, the return on the Securities is linked to the VWAP Level, which is intended to track performance of the Index. As described in more detail below, the trading price of the Securities may vary considerably before the Maturity Date, due to, among other things, fluctuations in the energy market to which the MLPs that constitute the Index are tied and other events that are difficult to predict and beyond our control. Investing in the Securities is not equivalent to investing directly in the Index constituents or the Index itself. This section describes the most significant risks relating to an investment in the Securities. We urge you to read the following information about these risks as well as the risks described under “Risks Relating to Series B ETNs” in the accompanying prospectus, together with the other information in this Annex and the accompanying prospectus, before investing in the Securities.

The Securities do not guarantee any payment at maturity or call, or early redemption, nor do they pay interest or guarantee payment of any Coupon Amount. You may lose all or a significant portion of your investment in the Securities.

The Securities do not guarantee a minimum payment or payment of the Stated Principal Amount at maturity or call, or early redemption, and you may receive less, and possibly significantly less, than the amount you originally invested. The cash payment (if any) that you receive on your Securities at maturity or call or early redemption will be based primarily on any increase or decrease in the level of the Index, and will be reduced by the Accrued Tracking Fee and, if applicable, the Redemption Fee Amount. Any Coupon Amount will be reduced by the Accrued Tracking Fee, which includes any applicable Tracking Fee Shortfall. In addition, the terms of the Securities differ from those of ordinary debt securities in that the Securities neither pay interest nor guarantee payment of any Coupon Amount. As a result, you may lose all or a significant amount of your investment in the Securities if the level of the Index decreases or does not increase by an amount sufficient, together with the Coupon Amounts, to offset those fees. Furthermore, even if the level of the Index increases, your return on the Securities may not be enough to compensate you for any loss in value due to inflation and other factors relating to the value of money over time.

The payment on the Securities is linked to the VWAP Level, not to the closing level of the Index and not to the published intraday indicative value of the Securities.

The Securities are fully exposed to any decline in the level of the Index, as measured by the VWAP Level. Your payment at maturity or call, or upon early redemption, is linked to the performance of the VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS. The Accrued Tracking Fee also takes into account the performance of the Index, as measured by the VWAP Level, and the absolute level of the Accrued Tracking Fee is dependent on the path taken by the VWAP Level to arrive at its ending level on any date of determination. Although the VWAP Level is intended to track the performance of the Index, the calculation of the VWAP Level is different from the calculation of the official closing level of the Index. Therefore, the payment at maturity or call, or upon early redemption of your Securities, may be different from the payment you would receive if such payment were determined by reference to the official closing level of the Index. Because the VWAP Level will not necessarily correlate with the closing levels or intraday indicative values of the Index, the payment at maturity or call, or upon redemption, will not be the same as investing in a debt security with a payment at maturity or call, or upon redemption, linked to the performance of the Index as measured using closing levels or intraday indicative values. In particular, the official Index closing level may vary significantly, on a cumulative basis over the term of the Securities, from the VWAP Level. Please see “Alerian MLP Index” below for information relating to the historical performance of the Index. Historical performance is not necessarily indicative of future performance.

 

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Table of Contents

Risk Factors

 

 

In addition, the intraday indicative value of the Securities calculated and published by the NYSE will be based on the intraday indicative values of the Index instead of the VWAP Levels of the Index. Because the intraday indicative value of the Securities may vary significantly from the VWAP Levels and the Final VWAP Level, the payment at maturity or call, or upon early redemption of your Securities, may be significantly different than the payment you would receive if such payment is determined by reference to the intraday indicative value of the Securities.

You are not guaranteed any coupon payments.

The Accrued Fees will reduce the positive effect of any distributions by the Index constituents, as reflected in any Coupon Amounts that you may receive. You will not receive a coupon payment on a Coupon Payment Date if the Reference Distribution Amount, calculated as of the corresponding Coupon Valuation Date, is less than or equal to the Accrued Tracking Fee, calculated as of the corresponding Coupon Valuation Date. The resulting Tracking Fee Shortfall, which is the difference between the Accrued Tracking Fee and the Reference Distribution Amount, will be included in the Accrued Tracking Fee for the next Coupon Valuation Date. This process will be repeated to the extent necessary until the Reference Distribution Amount for a Coupon Valuation Date is greater than the Accrued Tracking Fee for the corresponding Coupon Valuation Date. The Tracking Fee Shortfall as of the final Coupon Valuation Date, if any, will be included in the calculation of the Accrued Tracking Fee as of the last Index Business Day in the Final Measurement Period.

Similarly, you will not receive a coupon payment on a Redemption Date or Call Settlement Date if the Adjusted Reference Distribution Amount, calculated as of the Redemption Measurement Date or Call Valuation Date, as applicable, is less than the Adjusted Tracking Fee and Redemption Fee Amount, calculated as of the Redemption Measurement Date, or the Adjusted Tracking Fee calculated as of the Call Valuation Date. The resulting Adjusted Tracking Fee Shortfall, which is the difference between the Adjusted Tracking Fee and the Adjusted Reference Distribution Amount, will be included in the calculation of the Redemption Amount or the Accrued Tracking Fee as of the last Index Business Day in the Call Measurement Period, as applicable.

The Final VWAP Level may be less than the VWAP Level on the Maturity Date, Redemption Date or Call Settlement Date, or at other times during the term of the Securities.

The VWAP Level on the Maturity Date, a Redemption Date or Call Settlement Date, or at other times during the term of the Securities, including dates near the Final Measurement Period, the Redemption Measurement Date or the Call Measurement Period, as applicable, could be higher than the Final VWAP Level, because the Final VWAP Level is calculated based on the VWAP Levels measured on each Index Business Day in the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date, as applicable. This difference could be particularly large if there is a significant increase in the VWAP Level after the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date, as applicable, or if there is a significant decrease in the VWAP Level around the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date, as applicable. Significant volatility in the VWAP Levels during the term of the Securities may make this more likely. Your payment will not reflect any subsequent increase in the VWAP Level following the relevant valuation period or date.

 

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Even if the Final VWAP Level is greater than the VWAP Level at the time you acquired your Series A AMU ETRACS, you may receive less than your initial investment in the Series A AMU ETRACS due to the Accrued Tracking Fee and/ or the Redemption Fee Amount.

If any distributions that a Reference Holder would be entitled to receive from the Index constituents are not sufficient to cover the Quarterly Tracking Fee (equivalent to 0.80% per annum multiplied by the applicable Current Indicative Value), the amount of the Accrued Tracking Fee (including the Tracking Fee Shortfall or the Adjusted Tracking Fee Shortfall, as applicable) will reduce the payment, if any, you will receive at maturity or call, or upon early redemption. In addition, if you redeem your Securities prior to maturity, you will be charged a Redemption Fee Amount equal to 0.125% of the applicable Cash Settlement Amount. If the Final VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS, decreases or even if the Final VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS, increases, but does not increase sufficiently during the relevant period to offset the negative effect of any Accrued Tracking Fee and/or any applicable Redemption Fee Amount, you will receive less than the amount of your initial investment in the Series A AMU ETRACS at maturity or call, or upon early redemption of your Securities. The Initial VWAP Level of 396.997 was determined by the VWAP Calculation Agent as of July 17, 2012, several years before the Initial Trade Date of the Securities.

There are restrictions on the minimum number of Securities you may redeem and on the procedures and timing for early redemption.

You must redeem at least 50,000 Securities at one time in order to exercise your right to redeem your Securities on any Redemption Date, unless your broker or other financial intermediary bundles your Securities for redemption with those of other investors to reach this minimum requirement. You may only redeem your Securities on a Redemption Date if we receive a notice of redemption from your broker by no later than 12:00 noon, New York City time, and a confirmation of redemption by no later than 5:00 p.m., New York City time, on the applicable Redemption Notice Date. If we do not receive your notice of redemption by 12:00 noon, New York City time, or the confirmation of redemption by 5:00 p.m., New York City time, on the applicable Redemption Notice Date, your notice will not be effective and we will not redeem your Securities on the applicable Redemption Date. Your notice of redemption will not be effective until we confirm receipt. In addition, we may request a medallion signature guarantee or such assurances of delivery as we may deem necessary in our sole discretion. See “Specific Terms of the Securities — Early Redemption at the Option of the Holders” beginning on page A-44 for more information.

You will not know the Redemption Amount, including whether the Redemption Amount would be greater if the Index Performance Ratio were calculated using the Final VWAP Level or using the Index Closing Level, at the time you elect to request that we redeem your Securities.

You will not know the Redemption Amount you will receive at the time you elect to request that we redeem your Securities, nor will you know at the time of such request whether the Redemption Amount would be greater if the Index Performance Ratio were calculated using the Final VWAP Level or using the Index Closing Level. Your notice to us to redeem your Securities, including any election to have the Index Performance Ratio calculated using the Index Closing Level instead of the Final VWAP Level, is irrevocable and must be received by us no later than 12:00 noon, New York City time, on the applicable Redemption Notice Date and a completed and signed confirmation of such redemption must be received by us no later than 5:00 p.m., New York City time, on the same date. The Redemption Notice Date is the Index Business Day on which such notice and confirmation are received by us. You will not know the

 

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Redemption Amount until after the Redemption Measurement Date, which is the Index Business Day following the Redemption Notice Date, and we will pay you the Redemption Amount, if any, on the Redemption Date, which is the third Business Day following the Redemption Measurement Date. As a result, you will be exposed to market risk in the event the market fluctuates after we confirm the validity of your notice of election to exercise your rights to have us redeem your Securities, and prior to the relevant Redemption Measurement Date.

Owning the Securities is not the same as owning interests in the Index constituents or a security directly linked to the performance of the Index.

The return on your Securities will not reflect the return you would have realized if you had actually owned interests in the Index constituents or a security directly linked to the performance of the Index measured using any method other than average VWAP Levels, and held such investment for a similar period. Any return on your Securities includes the negative effect of the Accrued Tracking Fee and any Redemption Fee Amount, which are costs the Index constituents do not have. Furthermore, if the level of the Index or the VWAP Level increases during the term of the Securities, the market value of the Securities may not increase by the same amount or may even decline, due to the amount of the Quarterly Tracking Fee and any Tracking Fee Shortfall, any lack of liquidity, the actual or perceived credit of UBS and other potential factors. The Internal Revenue Service could possibly assert, however, that you should be treated as owning such Index constituents for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences — Alternative Treatments” beginning on page A-60.

You have no interests in any of the Index constituents underlying the Index or rights to receive any equity securities.

Investing in the Securities will not make you a holder of any interest in an Index constituent. Neither you nor any other holder or owner of the Securities will have any voting rights, any right to receive distributions or any other rights with respect to the Index constituents. The Cash Settlement Amount, Call Settlement Amount or Redemption Amount, if any, will be paid in U.S. dollars, and you will have no right to receive delivery of any interests in the Index constituents. The return on your Securities may not reflect the return you would realize if you actually owned any of the Index constituents. The value of a Security will reflect transaction costs and fees that the Index constituents do not have.

The market value of the Securities may be influenced by many unpredictable factors.

The market value of your Securities may fluctuate between the date you purchase them and the Final Valuation Date when the Security Calculation Agent will determine your payment at maturity (or the relevant measurement date or period if the Securities are subject to a call or early redemption). Therefore, you may sustain a significant loss if you sell the Securities in the secondary market. Several factors, many of which are beyond our control, will influence the market value of the Securities. We expect that, generally, the level of the Index will affect the market value of the Securities more than any other factor. Other factors that may influence the market value of the Securities include:

 

  Ø  

the volatility of the Index (i.e., the frequency and magnitude of changes in the level or VWAP Level of the Index) and of options or other financial instruments relating to the Index;

 

  Ø  

the market prices of the Index constituents;

 

  Ø  

the dividend or distribution rate paid by the Index constituents;

 

  Ø  

the time remaining to the maturity of the Securities;

 

  Ø  

supply and demand for the Securities, including to the extent affected by inventory positions with UBS or any market maker or additional issues and sales of the Securities and any suspensions or limit on such activity;

 

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  Ø  

the amount of the Accrued Tracking Fee and whether there is any Tracking Fee Shortfall; interest rates;

 

  Ø  

economic, financial, political, regulatory, geographical, agricultural, judicial or other events that affect the level of the Index or the market prices of the Index constituents, or that affect markets generally;

 

  Ø  

supply and demand in the listed and over-the-counter derivative markets;

 

  Ø  

supply and demand as well as hedging activities in the equity-linked structured product markets; and

 

  Ø  

the actual and perceived creditworthiness of UBS.

These factors interrelate in complex ways, and the effect of one factor on the market value of your Securities may offset or enhance the effect of another factor.

The liquidity of the market for the Securities may vary materially over time, and may be limited if you do not hold at least 50,000 Securities.

We began selling the Securities in 2015 and may continue to issue, offer and sell Securities from time to time , through UBS Securities LLC, our affiliate, as agent, to investors and dealers acting as principals. We are also offering the Securities to holders of Series A AMU ETRACS on a 1-for-1 basis in the Registered Exchange Offer on the terms set forth in the prospectus accompanying this Annex. The number of Securities outstanding or held by persons other than our affiliates could be reduced at any time due to early redemptions of the Securities. We may suspend, slow or cease sales of the Securities at any time, at our discretion. Accordingly, the liquidity of the market for the Securities could vary materially over the term of the Securities. There may not be sufficient liquidity to enable you to sell your Securities readily, and you may suffer substantial losses and/or sell your Securities at prices substantially less than the issue price, including being unable to sell them at all or only for a price of zero in the secondary market. While you may elect to redeem your Securities prior to maturity, early redemption is subject to the conditions and procedures described elsewhere in this Annex, including the condition that you must redeem at least 50,000 Securities at one time in order to exercise your right to redeem your Securities on any Redemption Date. Furthermore, on any Business Day through and including the Maturity Date, we may elect to redeem all, but not less than all, issued and outstanding Securities.

We may issue and sell additional Securities at any time but we are under no obligation to do so, and we may limit or restrict such sales, and we may stop and subsequently resume selling additional Securities at any time.

In our sole discretion, we may decide to issue and sell additional Securities from time to time at a price that is higher or lower than the stated principal amount or the price at which you acquired your Securities, based on the indicative value of the Securities at that time. The price of the Securities in any subsequent sale may differ substantially (higher or lower) from the price paid in connection with any other issuance of such Securities. Sales of the Securities will be made at market prices prevailing at the time of sale, at prices related to market prices or at negotiated prices. Additionally, any Securities held by us or an affiliate in inventory may be resold at prevailing market prices or lent to market participants who may have made short sales of the Securities. However, we are under no obligation to issue or sell additional Securities at any time, and if we do sell additional Securities, we may limit or restrict such sales, and we may stop and subsequently resume selling additional Securities at any time. Any of these actions could materially and adversely affect the trading price and liquidity of such Securities in the secondary market. Furthermore, unless we indicate otherwise, if we suspend selling additional Securities, we reserve the right to resume selling additional Securities at any time, which might result in the reduction or elimination of any premium in the trading price.

 

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The Securities may trade at a substantial premium to or discount from the intraday indicative value.

The market value of the Securities is influenced by many unpredictable factors, some of which may cause the price at which the Securities can be sold in the secondary market to vary substantially from the intraday indicative value that is calculated and disseminated throughout trading hours. For example, as discussed above, if UBS were to slow or suspend sales of the Securities for any reason, the liquidity of the market for the Securities could be affected, potentially leading to insufficient supply, causing the market price of the Securities to increase. Such an increase could represent a premium over the intraday indicative value of the Securities. Before trading in the secondary market, you should compare the intraday indicative value of the Securities with the then-prevailing trading price of the Securities. Furthermore, unless UBS indicates otherwise, if UBS were to suspend selling additional Securities, it would reserve the right to resume selling additional Securities at any time, which might result in the reduction or elimination of any premium in the market price over the intraday indicative value.

Conversely, suspension of additional issuances of the Securities can also result in a significant reduction in the number of outstanding Securities if investors subsequently exercise their early redemption right. If the total number of outstanding Securities has fallen to a level that is close to or below the minimum redemption amount, you may not be able to purchase enough Securities to meet the minimum size requirement in order to exercise your early redemption right. The unavailability of the redemption right could result in the Securities trading in the secondary market at discounted prices below the intraday indicative value. Having to sell your Securities at a discounted market price below the intraday indicative value of the Securities could lead to significant losses or the loss of your entire investment. Prior to making an investment in the Securities, you should take into account whether or not the market price is tracking the intraday indicative value of the Securities. However, even if the market price of the Securities is tracking the intraday value of the Securities, there is no guarantee that it will continue to do so in the future.

S&P may, in its sole discretion, discontinue the public disclosure of the intraday indicative value of the Index and the end-of-day closing value of the Index.

The Securities are listed on NYSE Arca. S&P, the Index Calculation Agent, is not under any obligation to continue to calculate the intraday indicative value of the Index and end-of-day official closing value of the Index or required to calculate similar values for any successor index. If S&P discontinues such public disclosure, we may not be able to provide the intraday indicative values related to the Index required to maintain any listing of the Securities on the NYSE Arca. If the Securities are not listed, the liquidity of the market for the Securities may be materially and adversely affected and you may sustain significant losses if you sell your Securities in the secondary market. We are not required to maintain any listing of the Securities on NYSE Arca or any other exchange.

The Index Sponsor (as defined below) and S&P may adjust the Index in a way that affects the VWAP Level, and neither the Index Sponsor nor S&P has any obligation to consider your interests.

S&P is responsible for calculating and publishing the Index in consultation with the Index Sponsor. The Index Sponsor can add, delete or substitute the equity securities underlying the Index constituents or make other methodological changes that could change the VWAP Level. You should realize that the changing of equity securities included in the Index may affect the Index, as a newly added equity security may perform significantly better or worse than the equity security or securities it replaces. Additionally, S&P may alter, discontinue or suspend calculation or dissemination of the Index. Any of these actions could adversely affect the value of the Securities. Neither the Index Sponsor nor S&P has any obligation to consider your interests in calculating or revising the Index. See “Alerian MLP Index.”

 

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Changes that affect the composition, methodology, policies and calculation of the Index will affect the amount payable on and the market value of the Securities.

The amount payable on the Securities and their market value could be affected if the Index Sponsor, in its sole discretion, discontinues or suspends calculation of the Index in which case it may become difficult to determine the market value of the Securities. If events such as these occur, or if the VWAP Level or the Final VWAP Level are not available because of a market disruption event or for any other reason, the VWAP Calculation Agent — which will initially be the NYSE — will make a good faith estimate in its sole discretion of the Final VWAP Level that would have prevailed in the absence of the market disruption event. If the VWAP Calculation Agent determines that the publication of the Index is discontinued and that there is no successor index on the date when the Final VWAP Level is required to be determined, the VWAP Calculation Agent will instead make a good faith estimate in its sole discretion of the Final VWAP Level by reference to a group of master limited partnerships that each earn the majority of their EBITDA from transportation, storage, processing or production of energy commodities, or indices, and a computation methodology that the VWAP Calculation Agent determines will as closely as reasonably possible replicate the Index.

In addition, changes by the Index Sponsor of its policies relating to the Index, the calculation of the Index or to Index constituents could affect the level of the Index and, therefore, the value of your Securities. The Index Sponsor could also change its methodology concerning constituents that qualify for inclusion in the Index and how it calculates the Index, which could adversely affect the value of your Securities. The Index Sponsor has no obligation to consider your interests in calculating or revising the Index.

There are uncertainties regarding the Index because of its limited performance history.

The Index was launched on June 1, 2006, and therefore has a limited history. S&P has calculated the returns that hypothetically might have been generated had the Index been created in the past, but those calculations are subject to many limitations. Unlike historical performance, such calculations do not reflect actual trading, liquidity constraints, fees, and other costs. In addition, the models used to calculate these hypothetical returns are based on certain data, assumptions and estimates. Different models or models using different data, assumptions or estimates might result in materially different hypothetical performance.

Estimated historical and historical levels of the Index should not be taken as an indication of future performance during the term of the Securities.

The actual performance of the Index over the term of the Securities, as well as the amount payable at maturity or call, or upon early redemption, may bear little relation to the historical performance of the Index or the past estimated historical performance of the Index. The performance of the Index constituents will determine the VWAP Level on any date of determination or at other times during the term of the Securities. As a result, it is impossible to predict whether the VWAP Level will rise or fall.

Trading and other transactions by UBS or its affiliates in the Index constituents, futures, options, exchange-traded funds or other derivative products on such Index constituents or the Index may impair the market value of the Securities.

UBS or its affiliates may hedge their obligations under the Securities by purchasing the Index constituents, futures or options on the Index constituents or the Index, or exchange-traded funds or other derivative instruments with returns linked or related to changes in the performance of the Index constituents or the Index, and they may adjust these hedges by, among other things, purchasing or selling the Index constituents, futures, options, or exchange-traded funds or other derivative instruments with

 

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returns linked or related to changes in the performance of the Index constituents or the Index at any time. Although they are not expected to, any of these hedging activities may adversely affect the market price of such Index constituents and/or the VWAP Level of the Index and, therefore, the market value of the Securities. It is possible that UBS or its affiliates could receive substantial returns from these hedging activities while the market value of the Securities declines.

UBS or its affiliates may also engage in trading in the Index constituents and other investments relating to the Index constituents or the Index on a regular basis as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions for customers, including block transactions. Any of these activities could adversely affect the market price of the Index constituents and the VWAP Level of the Index and, therefore, the market value of the Securities. UBS or its affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the performance of any Index constituents or the Index. By introducing competing products into the marketplace in this manner, UBS or its affiliates could adversely affect the market value of the Securities.

Any of these activities therefore could adversely affect the payment at maturity or call or upon early redemption of the Securities.

UBS and its affiliates have no affiliation with the Index Sponsor and are not responsible for their public disclosure of information.

We and our affiliates are not affiliated with the Index Sponsor (except for licensing arrangements discussed under “Alerian MLP Index — License Agreement”) and have no ability to control or predict its actions, including any errors in or discontinuation of public disclosure regarding methods or policies relating to the calculation of the Index. If the Index Sponsor discontinues or suspends the calculation of the Index, it may become difficult to determine the market value of the Securities and the payment at maturity. The Security Calculation Agent may designate a successor index in its sole discretion. If the Security Calculation Agent determines in its sole discretion that no successor index comparable to the Index exists, the payment you receive at maturity, redemption or call will be determined by the Security Calculation Agent in its sole discretion. See “Specific Terms of the Securities — Market Disruption Event” beginning on page A-50 and “Specific Terms of the Securities — Security Calculation Agent” on page A-49. The Index Sponsor is not involved in the offer of the Securities in any way and has no obligation to consider your interest as an owner of the Securities in taking any actions that might affect the market value of your Securities.

We have derived the information about the Index Sponsor and the Index from publicly available information, without independent verification. Neither we nor any of our affiliates assume any responsibility for the adequacy or accuracy of the information about the Index Sponsor or the Index contained in this Annex. You, as an investor in the Securities, should make your own independent investigation into the Index Sponsor and the Index.

An Index constituent may be replaced upon the occurrence of certain adverse events.

An exchange may replace or delist an Index constituent. Procedures have been established by the Index Sponsor to address such events, which may include, among other things, a market disruption event (as it pertains to the Index) or the replacement or delisting of an Index constituent. There can be no assurance, however, that a market disruption event (as it pertains to the Index), the replacement or delisting of an Index constituent, or any other force majeure event will not have an adverse or distortive effect on the value of the Index or VWAP Level or the manner in which it is calculated and, therefore, may have an adverse impact on the value of the Securities. An Index constituent MLP may also be removed from the Index, as described under “Alerian MLP Index — Index Rebalancings.”

 

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There are potential conflicts of interest between you and the Security Calculation Agent.

Our affiliate, UBS Securities LLC, will serve as the Security Calculation Agent. UBS Securities LLC will, among other things, decide the amount of the return paid out to you on the Securities at maturity or call, or upon early redemption. For a fuller description of the Security Calculation Agent’s role, see “Specific Terms of the Securities — Security Calculation Agent” on page A-49. The Security Calculation Agent will exercise its judgment when performing its functions. For example, the Security Calculation Agent may have to determine whether a market disruption event affecting the Index constituents or the Index has occurred or is continuing on a day during the Call Measurement Period or the Final Measurement Period, or on the Redemption Measurement Date. This determination may, in turn, depend on the Security Calculation Agent’s judgment whether the event has materially interfered with our ability to unwind our hedge positions. Since these determinations by the Security Calculation Agent may affect the market value of the Securities, the Security Calculation Agent may have a conflict of interest if it needs to make any such decision.

The Security Calculation Agent can postpone the determination of the Final VWAP Level and thus the applicable Redemption Date, the Call Settlement Date or the Maturity Date if a market disruption event occurs during the applicable measurement period.

The determination of the Final VWAP Level may be postponed if the Security Calculation Agent determines that a market disruption event has occurred or is continuing during the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date. If such a postponement occurs, then the Security Calculation Agent will instead use the VWAP Level of the Index on the first Index Business Day after that day on which no market disruption event occurs or is continuing. In no event, however, will the Final Measurement Period, the Call Measurement Period or Redemption Measurement Date for the Securities be postponed by more than three (3) Index Business Days. As a result, the applicable Redemption Date, the Call Settlement Date or the Maturity Date for the Securities could also be postponed, although not by more than three (3) Index Business Days. If the Final Measurement Period, the Call Measurement Period, or Redemption Measurement Date is postponed to the last possible day, but a market disruption event occurs or is continuing on such last possible day, that day will nevertheless be the final day in the Final Measurement Period or the Call Measurement Period, or will be the Redemption Measurement Date. If a market disruption event is occurring on the last possible day in the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date, then the VWAP Calculation Agent will make a good faith estimate in its sole discretion of the VWAP Level of the Index that would have prevailed in the absence of the market disruption event. See “Specific Terms of the Securities — Market Disruption Event.”

The Index constituents are concentrated in the energy industry.

As of the date of this Annex, most of the Index constituents represent MLPs that have been issued by companies engaged in the energy industry, including the oil and gas sector. In addition, many of the MLPs included in the Index are smaller, non-diversified businesses that are exposed to the risks associated with such businesses, including the lack of capital funding to sustain or grow businesses and potential competition from larger, better financed and more diversified businesses. In addition the MLPs in the energy industry are significantly affected by a number of factors including:

 

  Ø  

worldwide and domestic supplies of, and demand for, crude oil, natural gas, natural gas liquids, hydrocarbon products and refined products;

 

  Ø  

changes in tax or other laws affecting master limited partnerships generally;

 

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  Ø  

regulatory changes affecting pipeline fees and other regulatory fees in the energy sector;

 

  Ø  

changes in the relative prices of competing energy products;

 

  Ø  

the impact of environmental laws and regulations and technological changes affecting the cost of producing and processing, and the demand for, energy products;

 

  Ø  

decreased supply of hydrocarbon products available to be processed due to fewer discoveries of new hydrocarbon reserves, short- or long-term supply disruptions or otherwise;

 

  Ø  

risks of regulatory actions and/or litigation, including as a result of leaks, explosions or other accidents relating to energy products;

 

  Ø  

uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or further acts of terrorism in the United States, or elsewhere; and

 

  Ø  

general economic and geopolitical conditions in the United States and worldwide.

These or other factors or the absence of such factors could cause a downturn in the energy industry generally or regionally and could cause the value of some or all of the Index constituents to decline during the term of the Securities.

Energy MLP market risks may affect the trading value of the Securities and the amount you will receive at maturity.

We expect that the Index and the VWAP Level will fluctuate in accordance with changes in the financial condition of the Index constituents and certain other factors. The financial condition of the Index constituents may become impaired or the general condition of the energy MLP market may deteriorate, either of which may cause a decrease in the level of the Index or the VWAP Level and thus in the value of the Securities. Securities are susceptible to general market fluctuations and to volatile increases and decreases in value, as market confidence in and perceptions regarding the Index constituents change. Investor perceptions of the Index constituents are based on various and unpredictable factors, including expectations regarding government, economic, monetary, tax and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic, and banking crises. The level of the Index and the VWAP Level are expected to fluctuate until the Maturity Date.

Index calculation disruption events may require an adjustment to the calculation of the Index.

At any time during the term of the Securities, the intraday and daily calculations of the VWAP Level may be adjusted in the event that the VWAP Calculation Agent determines that any of the following Index calculation disruption events exist: the termination or suspension of, or material limitation or disruption in, the trading of any of the Index constituents. Any such Index calculation disruption events may have an adverse impact on the level of the Index or VWAP Level or the manner in which each is calculated and, therefore, may have an adverse effect on the market value of the Securities. See “Specific Terms of the Securities — Market Disruption Event.”

UBS may redeem the Securities prior to the Maturity Date.

On any Business Day through and including the Maturity Date, UBS may elect to redeem all, but not less than all, the outstanding Securities upon not less than eighteen calendar days’ prior notice. If UBS elects to redeem your Securities pursuant to the UBS Call Right, you may not be able to reinvest at comparable terms or returns.

 

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The tax consequences of owning Securities are uncertain and may be less favorable than a direct investment in the Index Constituent Securities.

Absent a change in law or an administrative or judicial ruling to the contrary, pursuant to the terms of the Securities, you agree to treat the Securities for all U.S. federal income tax purposes as a pre-paid forward contract with respect to the Index. This agreed treatment may have timing and character consequences that result in a U.S. holder (as defined below under “Material U.S. Federal Income Tax Consequences”) owing more U.S. federal income tax than it would have owed if the holder had instead made a direct investment in the Index Constituent Securities. In particular, the terms of the Securities will require a U.S. holder to treat the Coupon Amount and the Stub Reference Distribution Amount as ordinary income, despite the fact that (a) all or a portion of such distributions may be attributable to (i) partnership distributions that are attributable to allocations of long-term capital gain that in the case of a direct investor would be subject to tax at long-term capital gains rates and (ii) partnership distributions that exceed the partnership’s income, in which case a direct holder of the partnership interest would generally be able to currently exclude such excess from income, and (b) there may be other possible treatments of such amounts that would be more advantageous to holders of Securities.

Furthermore, it is likely that your ownership of the Securities will be treated as a “constructive ownership transaction” that is subject to the constructive ownership rules of Section 1260 of the Code. Under Section 1260 of the Code, special tax rules apply to an investor that enters into a “constructive ownership transaction” with respect to an equity interest in a “pass-thru entity.” For this purpose, a constructive ownership transaction includes entering into a forward contract with respect to a pass-thru entity and a partnership is considered to be a pass-thru entity. It is, however, not entirely clear how Section 1260 of the Code applies in the case of an index that primarily consists of pass-thru entities like the Index. Although the matter is not free from doubt, it is likely that Section 1260 of the Code should apply to the portion of your return on the Securities that is determined by reference to the Index Constituent Securities that are pass-thru entities (the “Pass-Thru Index Constituents”). If your Securities are subject to these rules, then any long-term capital gain that you realize upon the sale, redemption or maturity of your Securities would be recharacterized as ordinary income (and you would be subject to an interest charge on the deferred tax liability with respect to such capital gain) to the extent that such capital gain exceeds the amount of long-term capital gain that you would have realized had you purchased an actual interest in the Pass-Thru Index Constituents (in an amount equal to the notional amount of the Index that is represented by the Securities) on the date that you purchased the Series A AMU ETNs that you exchanged for your Securities and sold your interest in the Pass-Thru Index Constituents on the date of the sale or maturity of the Securities (the “Excess Gain Amount”). If your Securities are subject to Section 1260 of the Code, the Excess Gain Amount will be presumed to be equal to all of the gain that you recognized in respect of the Securities (in which case all of such gain would be recharacterized as ordinary income that is subject to an interest charge) unless you provide clear and convincing evidence to the contrary.

It is also possible that the IRS could treat your Securities as representing ownership of the Index Constituent Securities for U.S. federal income tax purposes, in which case you may be subject to other adverse tax consequences described under “Material U.S. Federal Income Tax Consequences” below.

In addition, the U.S. federal income tax treatment of the Securities is uncertain and the IRS could assert that the Securities should be taxed in a manner that is different than described in this Annex. Furthermore, members of Congress have periodically made proposals to reform or otherwise modify the U.S. federal income tax treatment of financial instruments such as the Securities. For example, in 2017, legislation was proposed that, if enacted, would generally require U.S. holders of instruments such as the Securities to annually recognize gain or loss with respect to such instruments on a “mark-to-market”

 

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basis and to treat any such gain or loss as ordinary income or loss. It is not possible to predict whether any such legislation will be enacted in the future, or whether any such legislation would affect the tax treatment of your Securities.

For a discussion of the U.S. federal income tax treatment applicable to your Securities as well as other potential alternative characterizations for your Securities, please see the discussion under “Material U.S. Federal Income Tax Consequences” below. You should consult your tax advisor regarding the tax treatment of the Securities.

Non-U.S. Holders of the Securities Will Be Subject to Adverse U.S. Federal Income Tax Consequences.

As discussed in more detail under “Material U.S. Federal Income Tax Considerations — Non-U.S. Holders” below, we intend to take the position that non-U.S. holders of Securities will generally be subject to withholding tax with respect to each Coupon Amount and Stub Reference Distribution Amount that it receives with respect to the Securities.

There are alternative treatments of the Securities that could result in other adverse U.S. federal income tax consequences for non-U.S. holders (including the potential need to file U.S. tax returns).

For a further discussion of the U.S. federal income tax considerations that may be relevant to non-U.S. holders of the Securities, please see the discussion below under “Material U.S. Federal Income Tax Consequences — Non-U.S. Holders.” Prospective non-U.S. holders should consult their tax advisors prior to investing in the Securities.

 

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Alerian MLP Index

We have derived all information contained in this Annex regarding the Alerian MLP Index, including, without limitation, its make-up, performance, method of calculation and changes in its constituents, from publicly available sources. Such information reflects the policies of and is subject to change by GKD Index Partners, LLC (“Alerian” or the “Index Sponsor”), an affiliate of SteelPath Capital, and S&P. We make no representation or warranty as to the accuracy or completeness of such information. The Alerian MLP Index is calculated, maintained and published by S&P in consultation with the Index Sponsor. Neither the Index Sponsor nor S&P has any obligation to continue to publish, and may discontinue the publication of, Alerian MLP Index.

The Alerian MLP Index (the “Index”) is a price-only index calculated on a real-time basis beginning when the first traded price of any of the Index constituents is received by S&P. Prices are delivered to the New York Stock Exchange (“NYSE”) every 15 seconds and subsequently published to data vendors under the ticker symbol “AMZ.”

The Securities are linked to the performance, measured by reference to its VWAP Level, of the Alerian MLP Index.

Introduction

The Index measures the composite performance of energy infrastructure MLPs, and is calculated by S&P using a capped, float-adjusted, capitalization-weighted methodology. The Index constituents earn the majority of their cash flow from qualifying activities involving energy commodities, which include the following Energy MLP Classification Standard (EMCS(SM)) activities: gathering and processing, liquefaction, pipeline transportation, rail terminaling, and storage. As of December 2, 2019, there were 32 Index constituents.

The Index is disseminated real-time on a price-return basis through ticker AMZ. Index values, yields, constituents, and announcements regarding rebalancings can be found at www.alerian.com. Information contained in the Alerian website is not incorporated by reference in, and should not be considered a part of, this Annex or of the accompanying prospectus. We make no representation or warranty as to the accuracy or completeness of information contained on the website of Alerian.

Documents Used to Calculate the Index

The following documents are used to calculate the units outstanding and investable weight factors of the constituents of the Index (AMZ):

 

Ø  

Constituent press releases

 

Ø  

Annual reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (10-K, 20-F)

 

Ø  

Quarterly reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (10-Q, 6-K)

 

Ø  

Certain registration statements pursuant to Rules 415 and 462 of the Securities Act of 1933 (S-1, S-3)

 

Ø  

Prospectuses and prospectus supplements pursuant to Rule 424(b)

 

Ø  

Proxy statements pursuant to Section 14(a) of the Securities Exchange Act of 1934 (DEF 14A)

 

Ø  

Current reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (8-K, 6-K)

The following documents are not used in the aforementioned calculations:

 

Ø  

Schedules (13D, 13G) pursuant to the Securities Exchange Act of 1934

 

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Ø  

Forms pursuant to Section 16(a) of the Securities Exchange Act of 1934

 

Ø  

Certain registration statements pursuant to the Securities Act of 1933 (S-8)

Units Outstanding

Units included in the calculation of units outstanding include, but are not limited to, common units, subordinated units, special class units and paid-in-kind units. Units excluded from the calculation of units outstanding are general partner (“GP”) units, management incentive units, and tradable, non-common units.

The number of units outstanding generally reflects that which is represented by the latest annual or quarterly report, unless otherwise indicated by a press release or Securities and Exchange Commission document filed pursuant to a transaction. The following is a non-exhaustive list of qualifying transactions and the point at which they are reflected in a constituent’s units outstanding. (The word “reflected” here means for Index share calculation and constituent selection purposes only. Changes to units outstanding and IWFs (as defined below), as it relates to calculating the Index, only occur after market close on rebalancing dates, stock dividends and splits excepted.)

 

Qualifying Transaction

  

Reflected in Units Outstanding

Follow-on public equity offerings    Time of pricing
Over-allotment option exercises    Earlier of time of press release or current report
Private investments in public equity (“PIPEs”)*    Time of closing
Unit repurchases    Earlier of time of press release or current report
At-the-market (“ATM”) equity offerings    As reported in periodic reports, prospectuses, or proxies

 

*

Unregistered common units: Unless a lock-up period has been specified, common units issued in a “private investment in public equity” transaction are considered to be freely tradable upon the earlier of (a) the effectiveness date of the accompanying SEC registration statement or (b) 180 days after the transaction closes pursuant to SEC Rule 144.

Investable Weight Factors

A constituent’s investable weight factor (“IWF”) has two (2) components:

 

Ø  

Numerator

 

Ø  

Units outstanding

The numerator is equal to the number of tradable units and is calculated as follows:

Units outstanding, minus non-common units, minus unregistered common units, minus insider-owned common units.

Insider-owned common units: For the purposes of this calculation, insider-owned common units are those which are included in “Security Ownership of Certain Beneficial Owners and Management” of a constituent’s latest annual report or proxy. This number is frequently expressed as, or is similar to, “All directors and named executive officers as a group,” plus common units owned by GPs and/or persons or entities with board representation. Though insiders file Forms (4) and Schedules (13) to indicate changes to their ownership position between annual reports and proxies, they are not factored into the calculation. Other documents (e.g., press releases, 8-Ks, and prospectus supplements) indicating changes to ownership by a GP are factored into the calculation immediately.

 

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The IWF is then calculated as follows:

Numerator/Units outstanding

Constituent Criteria

A company or partnership must meet the following criteria in order to be eligible for addition to the Index. (A constituent is removed on the immediately upcoming quarterly rebalancing date if it fails to meet all of these criteria.)

 

Ø  

Be a publicly traded partnership or limited liability company (“LLC”).

 

Ø  

Earn the majority of its cash flow from qualifying activities involving energy commodities. (The following Energy MLP Classification Standard (EMCS(SM)) activities are considered qualifying, and can be found at alerian.com: gathering and processing, liquefaction, pipeline transportation, rail terminaling, and storage. Majority of cash flow is calculated on a trailing-four-quarter basis using a company’s reported business segments. Exceptions may be made on a case-by-case basis to accelerate the eligibility or ineligibility of companies that have been transformed by a recent acquisition. Cash flow from a partnership’s GP interest or incentive distribution rights in another publicly traded partnership or LLC is zeroed for the purposes of this determination.)

 

Ø  

Have a market capitalization of at least $75 million.

Publicly traded preferred units and institutional shares are not eligible for Index inclusion. A non-constituent will only be added to the Index during the (a) quarterly rebalancing process if it meets all criteria, or (b) special rebalancing process if it (i) is acquiring the constituent that is being removed, and (ii) meets all criteria. Constituents will only be removed from the Index for failing to meet criteria during the quarterly rebalancing process.

These criteria are reviewed regularly to ensure consistency with industry trends.

Index Equations

The Index is calculated by S&P Dow Jones Indices as follows:

 

Ø  

[Initial Divisor] = [Index Market Capitalization on December 29, 1995] / 100

 

Ø  

[Index Value] = [Index Market Capitalization] / Divisor

 

Ø  

[Post-Rebalance Divisor] = [Post-Rebalance Index Market Capitalization] / [Pre-Rebalance Index Value]

Index Rebalancings

Index rebalancings fall into two groups: quarterly rebalancings and special rebalancings. Quarterly rebalancings occur on the third Friday of each March, June, September, and December, and are effective at the open of the next trading day. In the event that the major U.S. exchanges are closed on the third Friday of March, June, September, or December, the rebalancing will take place after market close on the immediately preceding trading day. Data relating to constituent eligibility, additions, and deletions are compiled and analyzed as of 4:00 p.m., Eastern Standard Time, on the last trading day of February, May, August, and November. The Index shares of each constituent are then calculated according to the capping system described below, and assigned after market close on the quarterly rebalancing date. Since Index shares are assigned based on prices on the last trading day of February, May, August, and November, the weight of each constituent on the quarterly rebalancing date may differ from its target weight due to market movements.

 

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After market close on the last trading day of February, May, August, and November, the post-rebalancing constituents are weighted and ranked by market capitalization. If the weight of the largest constituent exceeds 10%, it is assigned a weight of 10% and its excess weight is proportionately distributed to the remaining constituents. After this distribution, if the weight of the next largest constituent exceeds 10%, it is assigned a weight of 10% and its excess weight is proportionately distributed to the remaining constituents. This process is repeated until none of the remaining constituents has a weight that exceeds 10%.

Special rebalancings are triggered by corporate actions and will be implemented as practically as possible on a case-by-case basis. Generally, in a merger between two or more Index constituents, the special rebalancing will take place one trading day after the constituent’s issuance of a press release indicating all needed merger votes have passed. If the stock is delisted before market open on the first trading day after all needed merger votes have passed, the delisted security will trade at the conversion price, including any cash consideration. Only the units outstanding and IWFs of the surviving constituents in a merger will be updated to reflect the latest information available. Data are analyzed as of 4:00 p.m., Eastern Standard Time, two (2) trading days prior to the last required merger vote. Index shares are then calculated to the weighting scheme above and assigned after market close on the rebalancing date.

Treatment of Distributions

The Index is a price-return index that does not account for cash distributions. The total-return index accounts for cash distributions by reinvesting them across the index after market close on the ex-dividend date.

Base Date

The base date for the Index is December 29, 1995, with a base value of 100.

Announcements

Constituent changes related to quarterly rebalancings will be announced at 8:30 a.m. Eastern Standard Time on the second Friday of March, June, September, and December. Constituent changes related to special rebalancings resulting from mergers will be announced at 8:30 a.m. Eastern Standard Time on the last trading day prior to the last required merger vote. Constituent changes related to special rebalancings resulting from other types of delistings will be handled on a case-by-case basis. Index methodology changes, if any, will be announced after market close on the last trading day of the month. Announcements can be found on the Index Sponsor’s website, www.alerian.com.

Holiday Schedule

The Index is calculated when U.S. equity markets are open.

Index Governance

An independent advisory board of energy infrastructure and MLP executives, legal partners, and senior financial professionals reviews all methodology modifications and constituent changes to ensure that they are made objectively and without bias. The board is comprised of a minimum of five (5) members, all of whom must be independent. The CEO of Alerian presents to the board on a quarterly basis, on the third Thursday of each January, April, July, and October. Information regarding methodology modifications and constituent changes is considered to be material and can have an impact on the market. Consequently, all board discussions are confidential. Alerian believes that this process leads to unmatched independence and attention to detail in MLP and energy infrastructure indexing.

 

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Data Integrity

Alerian uses various quality assurance tools to monitor and maintain the accuracy of its data. While Alerian makes efforts to ensure data integrity, there is no guarantee against error. Adjustments to incorrect data will be handled on a case-by-case basis depending on the significance of the error and the feasibility of correction. Incorrect intraday ticks of the Index resulting from data errors will not be corrected.

License Agreement

We have entered into a license agreement with the Index Sponsor providing for the license to us, in exchange for a fee, of the right to use the Index, which is owned by the Index Sponsor, in connection with certain securities, including the Securities.

Alerian MLP Index, Alerian MLP Total Return Index and AMZ are trademarks of GKD Index Partners, LLC d/b/a Alerian, and their use is granted under a license from GKD Index Partners, LLC d/b/a Alerian.

All disclosures contained in this Annex regarding the Index, including its make-up, method of calculation and changes in its constituents, are derived from publicly available information prepared by the Index Sponsor in consultation with Alerian. None of us, our affiliates or the trustee assumes any responsibility for the accuracy or completeness of such information.

Historical and Estimated Historical Performance

The level of the Index is deemed to have been 100.00 on December 29, 1995, which is referred to as the “Index commencement date.” The Index Sponsor began calculating the Index on June 1, 2006. Therefore, the historical information for the period from the Index commencement date until June 1, 2006 is hypothetical and is provided as an illustration of how the Index would have performed during the period had the Index Sponsor begun calculating the Index on the Index commencement date using the methodology it currently uses. This data does not reflect actual performance, nor was a contemporaneous investment model run of the Index. Only historical information for the period from and after June 1, 2006 is based on the actual performance of the Index.

Any historical and estimated historical upward or downward trend in value of the Index during any period shown below is not an indication that the value of the Index is more or less likely to increase or decrease at any time during the term of the Securities. The historical or estimated historical Index price returns or total returns do not give an indication of future performance of the Index. UBS cannot make any assurance that the future performance of the Index or the Index constituents will result in holders of the Securities receiving a positive return on their investment.

 

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The table below shows the estimated historical and historical performance of the Index from December 29, 1995 through December 2, 2019.

The tables below are based on the price return and total return of the Index, not VWAP levels.

Estimated Historical and Historical Results for the

period December 29, 1995 through December 2, 2019

 

     Price Return      Total Return  

Year

   Ending
Level
     Annual
Return
     Ending
Level
     Annual
Return
 
1995      100.00           100.00     
1995      108.14        8.14%        116.60        16.60%  
1997      126.80        17.26%        147.15        26.20%  
1998      114.72        -9.53%        142.76        -2.99%  
1999      98.64        -14.01%        131.60        -7.82%  
2000      131.08        32.88%        191.75        45.71%  
2001      176.27        34.47%        275.61        43.73%  
2002      158.64        -10.00%        266.35        -3.36%  
2003      214.26        35.06%        384.99        44.54%  
2004      234.67        9.53%        449.17        16.67%  
2005      237.41        1.17%        477.56        6.32%  
2006      282.93        19.17%        602.06        26.07%  
2007      301.13        6.43%        678.64        12.72%  
2008      176.29        -41.46%        428.12        -36.92%  
2009      285.39        61.88%        755.26        76.41%  
2010      363.55        27.39%        1026.04        35.85%  
2011      389.93        7.26%        1168.41        13.88%  
2012      385.09        -1.24%        1224.48        4.80%  
2013      463.80        20.44%        1562.21        27.58%  
2014      459.40        -0.95%        1637.25        4.80%  
2015      289.76        -36.92%        1103.67        -32.59%  
2016      316.10        9.09%        1305.71        18.31%  
2017      275.10        -12.97%        1220.58        -6.52%  
2018      222.76        -19.03%        1069.00        -12.42%  
2019 (through 12/02/2019)      199.27        -10.54%        1040.19        -2.70%  

 

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Estimated Historical or Historical Performance

Is Not Indicative of Future Results.

The table below shows the estimated historical and historical performance of the total return of the Index from December 29, 1995 through December 2, 2019 in comparison with the total returns of the Alerian MLP Infrastructure Index, the S&P 500® Index, the S&P 500® Utilities Index and the Bloomberg Commodity IndexSM. The data in the table below consists of estimated historical data for the period from December 29, 1995 until June 1, 2006 and actual historical data which is limited to the period from June 1, 2006 through December 2, 2019.

 

    

Index*

    

Alerian MLP
Infrastructure
Index

    

S&P 500®
Index

    

S&P 500®
Utilities
Index

    

Bloomberg
Commodity
IndexSM

 
Total Return      940.19%        1893.86%        696.28%        547.87%        26.11%  
Annualized Return      10.28%        13.31%        9.05%        8.12%        0.97%  

Estimated historical and historical results for the period from December 29, 1995 through December 2, 2019.

 

*

The data for the Index for the period prior to its inception on June 1, 2006 is estimated and is derived by using the Index’s calculation methodology with historical prices.

Historical information presented is as of December 2, 2019 and is furnished as a matter of information only. Estimated historical and historical performance of the Index is not an indication of future performance. Future performance of the Index may differ significantly from estimated historical and historical performance, either positively or negatively.

The graph below illustrates the pro forma and historical performance of the Index from December 29, 1995 to December 2, 2019. The graph below is based on the total returns of the Index, the Alerian MLP Infrastructure Index, the S&P 500® Index, the S&P 500® Utilities Index and the Bloomberg Commodity IndexSM, not VWAP levels.

 

LOGO

 

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Valuation of the Index and the Securities

The VWAP Level, which is used to calculate the payment on the Securities at maturity or call or upon early redemption, is calculated by the VWAP Calculation Agent, which is the NYSE. The calculation of the VWAP Level is different from the calculation of the closing level of the Index and the intraday indicative value of the Securities. Please see “Risk Factors — The payment on the Securities is linked to the VWAP Level, not to the closing level of the Index and not to the published intraday indicative value of the Securities” for more information.

Intraday Index Values

On each Index Business Day, S&P, or a successor Index Calculation Agent, will calculate and publish the intraday indicative value of the Index every 15 seconds during normal trading hours on Bloomberg under the ticker symbol “AMZ.” The actual Index closing level may vary, and on a cumulative basis over the term of the Securities may vary significantly, from the intraday indicative value of the Index. In addition, the intraday indicative value of the Index does not necessarily track the VWAP Level used to determine your payment at maturity or call, or upon early redemption. Consequently, the return on the Securities will not be the same as investing in a debt security with a payment at maturity or upon redemption linked to the performance of the Index measured by closing levels or intraday indicative values.

S&P is not affiliated with UBS and does not approve, endorse, review or recommend the Index or the Securities. The information used in the calculation of the intraday indicative value of the Index will be derived from sources S&P deems reliable, but S&P and its affiliates do not guarantee the correctness or completeness of the intraday indicative value or other information furnished in connection with the Securities or the calculation of the Index. S&P makes no warranty, express or implied, as to results to be obtained by UBS, UBS’ customers, holders of the Securities, or any other person or entity from the use of the intraday indicative value of the Index or any data included therein. S&P makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose with respect to the intraday indicative value of the Index or any data included therein. S&P, its employees, subcontractors, agents, suppliers and vendors shall have no liability or responsibility, contingent or otherwise, for any injury or damages, whether caused by the negligence of S&P, its employees, subcontractors, agents, suppliers or vendors or otherwise, arising in connection with the indicative value of the Index or the Securities, and shall not be liable for any lost profits, losses, punitive, incidental or consequential damages. S&P shall not be responsible for or have any liability for any injuries or damages caused by errors, inaccuracies, omissions or any other failure in, or delays or interruptions of, the indicative value, from whatever cause. S&P is not responsible for the selection of or use of the Index or the Securities, the accuracy and adequacy of the Index or information used by UBS and the resultant output thereof.

The intraday indicative calculation of the level of the Index will be provided for reference purposes only. Published calculations of the level of the Index from S&P may occasionally be subject to delay or postponement. Any such delays or postponements will affect the current level of the Index and therefore the value of the Securities in the secondary market. The intraday indicative value of the Index published every 15 seconds will be based on the intraday prices of the Index constituents.

Intraday Security Values

An intraday “indicative value” meant to approximate the expected trading value of the Securities in a liquid market will be calculated by the NYSE and published by Bloomberg (based in part on information provided by S&P) or a successor via the facilities on the Consolidated Tape Association under the symbol “AMUBIV.” In connection with your Securities, we use the term “indicative value” to refer to

 

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the value at a given time and date equal to (i) Stated Principal Amount multiplied by the Index Performance Ratio calculated using the levels of the Index instead of VWAP Levels as of such time, less (ii) the Accrued Tracking Fee as of such time and date assuming such time and date is the Redemption Measurement Date, plus (iii) assuming such time and date is the Redemption Measurement Date, the Coupon Amount with respect to the Coupon Valuation Date if on such Redemption Measurement Date the Coupon Ex-Date with respect to such Coupon Amount has not yet occurred, plus (iv) the Adjusted Coupon Amount, if any, as of such time and date.

The intraday indicative value calculation will be provided for reference purposes only. It is not intended as a price or quotation, or as an offer or solicitation for the purchase, sale, or termination of your Securities, nor will it reflect hedging or other transactional costs, credit considerations, market liquidity or bid-offer spreads. The levels of the Index provided by S&P will not necessarily reflect the depth and liquidity of the Index constituents. For this reason and others, the actual trading price of the Securities may be different from their indicative value.

The calculation of the intraday indicative value shall not constitute a recommendation or solicitation to conclude a transaction at the level stated, and should not be treated as giving investment advice.

The publishing of the intraday indicative value of the Securities by Bloomberg may occasionally be subject to delay or postponement. The actual trading price of the Securities may be different from their intraday indicative value. The intraday indicative value of the Securities published at least every 15 seconds during the NYSE Arca’s Core Trading Session, which is currently from 9:30 a.m. to 4:00 p.m., New York City time, will be based on the intraday indicative values of the Index, and may not be equal to the payment at maturity or call, or upon early redemption.

These intraday indicative value calculations will be prepared as of a particular time and date and will therefore not reflect subsequent changes in market values or prices or in any other factors relevant to their determination.

 

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Specific Terms of the Securities

In this section, references to “holders” mean those who own the Securities registered in their own names, on the books that we or the trustee maintains for this purpose, and not those who own beneficial interests in the Securities registered in street name or in the Securities issued in book-entry form through The Depository Trust Company (“DTC”) or another depositary. Owners of beneficial interests in the Securities should read the section entitled “Legal Ownership and Book-Entry Issuance” in the accompanying prospectus.

The Securities are part of a series of UBS AG debt securities entitled “Medium-Term Notes, Series B” that we may issue, from time to time, under the indenture more particularly described in the accompanying prospectus. This Annex summarizes specific financial and other terms that apply to the Securities. Terms that apply generally to all Medium-Term Notes, Series B are described in “Description of the Series B ETNs” in the accompanying prospectus. The terms described here (i.e., in this Annex) supplement those described in the accompanying prospectus and, if the terms described here are inconsistent with those described there, the terms described here are controlling.

The Securities are part of a single series of senior debt securities issued under our indenture, dated as of June 12, 2015, between us and U.S. Bank Trust National Association, as trustee.

We describe the terms of the Securities in more detail below. The Stated Principal Amount of each Security is $25.00.

The Securities do not guarantee any return of principal at, or prior to, maturity or call, or upon early redemption. Instead, at maturity, you will receive a cash payment the amount of which will vary depending on the performance of the VWAP Level calculated in accordance with the formula set forth below and will be reduced by the Accrued Tracking Fee as of the last Index Business Day in the Final Measurement Period. We refer to this cash payment as the “Cash Settlement Amount.” If the amount so calculated is equal to or less than zero, the Cash Settlement Amount will be zero and you will not receive a cash payment.

If you exercise your right to have us redeem your Securities, subject to compliance with the redemption procedures, for each Security you will receive a cash payment on the Redemption Date equal to the Redemption Amount as described below under “— Early Redemption at the Option of the Holders.”

The Securities may pay a cash coupon during their term.

Coupon Payment

For each Security you hold on the applicable Coupon Record Date, on each Coupon Payment Date you will receive an amount in cash equal to the excess, if any, of the Reference Distribution Amount, calculated as of the corresponding Coupon Valuation Date, over the Accrued Tracking Fee, calculated as of the corresponding Coupon Valuation Date (the “Coupon Amount”).

To the extent the Reference Distribution Amount on any Coupon Valuation Date is equal to or less than the Accrued Tracking Fee on the corresponding Coupon Valuation Date, there will be no Coupon Amount payment made on the corresponding Coupon Payment Date, and an amount equal to the difference between the Accrued Tracking Fee and the Reference Distribution Amount (the “Tracking Fee Shortfall”) will be included in the Accrued Tracking Fee for the next Coupon Valuation Date. This process will be repeated to the extent necessary until the Reference Distribution Amount for a Coupon Valuation Date is greater than the Accrued Tracking Fee for the corresponding Coupon Valuation Date. The final Coupon Amount, if any, will be included in the Cash Settlement Amount.

 

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The “Coupon Payment Date” means the fifteenth (15th) Index Business Day following each Coupon Valuation Date, provided that the final Coupon Payment Date will be the Maturity Date, subject to adjustment as described herein. The first Coupon Payment Date will be December 8, 2015.

The “Coupon Record Date” means the ninth (9th) Index Business Day following each Coupon Valuation Date.

The “Coupon Ex-Date,” with respect to a Coupon Amount, means the first (1st) Exchange Business Day on which the Securities trade without the right to receive such Coupon Amount. Under current NYSE Arca practice, the Coupon Ex-Date will generally be the second (2nd) Exchange Business Day prior to the applicable Coupon Record Date.

The “Coupon Valuation Date” means the fifteenth (15th) of February, May, August and November of each calendar year during the term of the Securities or if such date is not an Index Business Day, then the first Index Business Day following such date, provided that the final Coupon Valuation Date will be the Calculation Date, subject to adjustment as described herein. The first Coupon Valuation Date will be November 16, 2015.

The “Reference Distribution Amount” means (i) as of the first Coupon Valuation Date, an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to any Index constituent, for those cash distributions whose “ex-dividend date” occurs during the period from and excluding August 17, 2015 to and including the first Coupon Valuation Date; and (ii) as of any other Coupon Valuation Date, an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to any Index constituent for those cash distributions whose “ex-dividend date” occurs during the period from and excluding the immediately preceding Coupon Valuation Date to and including such Coupon Valuation Date.

Notwithstanding the foregoing, with respect to cash distributions for an Index constituent which are scheduled to be paid prior to the applicable Coupon Ex-Date, if, and only if, the issuer of such Index constituent fails to pay the distribution to holders of such Index constituent by the scheduled payment date for such distribution, such distribution will be assumed to be zero for the purposes of calculating the applicable Reference Distribution Amount.

The “Reference Holder” is, as of any date of determination, a hypothetical holder of a number of units of each Index constituent equal to (i) the published unit weighting of that Index constituent as of that date, divided by (ii) the product of (a) the Index Divisor as of that date, and (b) the Initial VWAP Level divided by 25.

“record date” means, with respect to a distribution on an Index constituent, the date on which a holder of the Index constituent must be registered as a unitholder of such Index constituent in order to be entitled to receive such distribution.

“ex-dividend date” means, with respect to a distribution on an Index constituent, the first Business Day on which transactions in such Index constituent trade on the Primary Exchange without the right to receive such distribution.

The “Quarterly Tracking Fee” means, as of any date of determination, an amount per Security equal to the product of (i) 0.20% (equivalent to 0.80% per annum) and (ii) the Current Indicative Value as of the immediately preceding Index Business Day.

 

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The “Current Indicative Value,” as determined by the Security Calculation Agent, means, as of any date of determination, an amount per Security equal to the product of (i) the Stated Principal Amount multiplied by (ii) a fraction, the numerator of which is equal to the VWAP Level (as defined under “— Cash Settlement Amount at Maturity”) as of such date and the denominator of which is equal to the Initial VWAP Level. As of December 2, 2019, the Current Indicative Value was $12.5851, however the Current Indicative Value on the date that you acquire your Securities may be higher or lower.

The “Accrued Tracking Fee” is:

 

(1)

with respect to the first Coupon Valuation Date, an amount equal to the Quarterly Tracking Fee calculated as of the first Coupon Valuation Date (for the avoidance of doubt, the calculation of the Accrued Tracking Fee with respect to the first Coupon Valuation Date will be for a full quarter beginning from and excluding August 17, 2015);

 

(2)

with respect to any Coupon Valuation Date, other than the first and last Coupon Valuation Dates, an amount equal to the Quarterly Tracking Fee as of such Coupon Valuation Date, plus the Tracking Fee Shortfall as of the immediately preceding Coupon Valuation Date, if any; and

 

(3)

with respect to the last Coupon Valuation Date, an amount equal to

 

  (a)

the product of

 

  (i)

the Quarterly Tracking Fee as of such Coupon Valuation Date and

 

  (ii)

a fraction, the numerator of which is the total number of calendar days from and excluding the immediately preceding Coupon Valuation Date to and including such Coupon Valuation Date, and the denominator of which is 90, plus

 

  (b)

the Tracking Fee Shortfall as of the immediately preceding Coupon Valuation Date. If there is a Tracking Fee Shortfall on the last Coupon Valuation Date, it will be taken into account in determining the Cash Settlement Amount, as described below.

The calculation of the Accrued Tracking Fee also takes into account the performance of the Index, as measured by the VWAP Level.

Cash Settlement Amount at Maturity

The “Maturity Date” is July 18, 2042, which will be the third Business Day following the last Index Business Day in the Final Measurement Period, subject to adjustment as described below under “— Market Disruption Event.”

For each Security, unless earlier called or redeemed, you will receive at maturity a cash payment equal to

 

(a)

the product of

 

  (i)

the Stated Principal Amount and

 

  (ii)

the Index Performance Ratio as of the last Index Business Day in the Final Measurement Period, plus

 

(b)

the final Coupon Amount, minus

 

(c)

the Accrued Tracking Fee as of the last Index Business Day in the Final Measurement Period, plus

 

(d)

the Stub Reference Distribution Amount as of the last Index Business Day in the Final Measurement Period, if any.

 

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We refer to this cash payment as the “Cash Settlement Amount.” If the amount calculated above is equal to or less than zero, the payment at maturity will be zero.

You may lose some or all of your investment at maturity. The negative effect of the Accrued Tracking Fee will reduce your final payment. If the level of the Index increases (as measured by the Final VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS), such increase may be insufficient to offset the negative effect of the Accrued Tracking Fee (less any Coupon Amounts, Stub Reference Distribution Amount and/ or Adjusted Coupon Amount, as applicable, you may be entitled to receive), or if the Final VWAP Level is less than the VWAP Level at the time you acquired your Series A AMU ETRACS, you may lose some or all of your investment at maturity.

The “Stated Principal Amount” of each Security is $25.00.

The “Index Performance Ratio” on any Index Business Day is calculated as follows:

  Final VWAP Level  

Initial VWAP Level

The “VWAP” with respect to each Index constituent, as of any date of determination, is the volume-weighted average price of one unit of such Index constituent as determined by the VWAP Calculation Agent based on the Primary Exchange for each Index constituent. For information about how the VWAP will be calculated to the extent a Disrupted Day exists with respect to an Index constituent, please see “— Market Disruption Event.”

The “Initial VWAP Level” is 396.997, the VWAP Level on July 17, 2012, as determined by the VWAP Calculation Agent. See “— VWAP Calculation Agent” below.

The “Final VWAP Level,” as determined by the VWAP Calculation Agent, will be the arithmetic mean of the VWAP Levels measured on each Index Business Day during the Final Measurement Period or the Call Measurement Period or on any applicable Redemption Measurement Date, as applicable.

The “VWAP Level,” as determined by the VWAP Calculation Agent as of any Index Business Day, is equal to (1) the sum of the products of (i) the VWAP of each Index constituent as of such date and (ii) the published unit weighting of that Index constituent as of such date divided by (2) the Index Divisor as of such date, or expressed as a formula, as follows:

 

VWAP Level =   n
  S(VWAPi,t*Wi,t)
 

i=1

  Index Divisort

where:

n is the number of Index constituents;

VWAPi,t is the VWAP of Index constituent i as of Index Business Day t;

Wi, t is the published unit weighting of Index constituent i as of Index Business Day t; and

Index Divisor t is the Index Divisor as of Index Business Day t.

As of October 7, 2015, the VWAP Level was 340.761.

 

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The “Index Divisor,” as of any date of determination, is the divisor used by the Index Calculation Agent to calculate the level of the Index, as further described under “Alerian MLP Index — Index Equations” on page A-32.

The “Accrued Tracking Fee” as of the last Index Business Day in the Final Measurement Period is an amount equal to

 

(a)

the product of

 

  (i)

the Quarterly Tracking Fee calculated as of the last Index Business Day in the Final Measurement Period and

 

  (ii)

a fraction, the numerator of which is the total number of calendar days from and excluding the Calculation Date to and including the last Index Business Day in the Final Measurement Period, and the denominator of which is 90, plus

 

(b)

the Tracking Fee Shortfall as of the last Coupon Valuation Date, if any.

The Accrued Tracking Fee also takes into account the performance of the Index, as measured by the VWAP Level.

The “Final Measurement Period” means the five (5) Index Business Days from and including the Calculation Date, subject to adjustment as described under “— Market Disruption Event.”

The “Stub Reference Distribution Amount” means, as of the last Index Business Day in the Final Measurement Period or the Call Measurement Period, as applicable, an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to any Index constituent, for those cash distributions whose “ex-dividend date” occurs during the period from and excluding the first Index Business Day in the Final Measurement Period or the Call Measurement Period, as applicable, to and including the last Index Business Day in the Final Measurement Period or the Call Measurement Period, as applicable, provided, that for the purpose of calculating the Stub Reference Distribution Amount, the Reference Holder will be deemed to hold 4/5 ths, 3/5 ths, 2/5 ths and 1/5 th of the shares of each Index constituent it would otherwise hold on the second, third, fourth and fifth Index Business Day, respectively, in such Final Measurement Period or the Call Measurement Period.

The “Index Calculation Agent” means the entity that calculates and publishes the level of the Index, which is currently S&P.

The “Calculation Date” means July 9, 2042, unless such day is not an Index Business Day, in which case the Calculation Date will be the next Index Business Day, subject to adjustments.

“Index Business Day” means any day on which the Primary Exchange and each Related Exchange are scheduled to be open for trading.

“Exchange Business Day” means any day on which the Primary Exchange or market for trading of the Securities is scheduled to be open for trading.

“Primary Exchange” means, with respect to each Index constituent or each constituent underlying a successor index, the primary exchange or market of trading such Index constituent or such constituent underlying a successor index.

 

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“Related Exchange” means, with respect to each Index constituent or each constituent underlying a successor index, each exchange or quotation system where trading has a material effect (as determined by the Security Calculation Agent) on the overall market for futures or options contracts relating to such Index constituent or such constituent underlying a successor index.

Early Redemption at the Option of the Holders

Subject to your compliance with the procedures described below and the potential postponements and adjustments as described under “— Market Disruption Event,” you may submit a request to have us redeem your Securities on any Business Day no later than 12:00 noon, New York City time, and a confirmation of redemption by no later than 5:00 p.m., New York City time, on the applicable Redemption Notice Date, provided that you request that we redeem a minimum of 50,000 Securities. For any applicable redemption request, the “Redemption Notice Date” will be the date that the applicable Redemption Notice and Redemption Confirmation are delivered. If such Redemption Notice or Redemption Confirmation is delivered on a day that is not an Index Business Day, then the Redemption Notice Date shall be the next Index Business Day. To satisfy the minimum redemption amount, your broker or other financial intermediary may bundle your Securities for redemption with those of other investors to reach this minimum amount of 50,000 Securities. We may from time to time in our sole discretion reduce, in part or in whole, the minimum redemption amount of 50,000 Securities. Any such reduction will be applied on a consistent basis for all holders of the Securities at the time the reduction becomes effective.

The Securities will be redeemed and the holders will receive payment for their Securities on the third Business Day following the applicable Redemption Measurement Date (the “Redemption Date”). The first Redemption Date will be October 15, 2015. If a Market Disruption Event is continuing or occurs on the applicable scheduled Redemption Measurement Date with respect to any of the Index constituents, such Redemption Measurement Date may be postponed as described under “— Market Disruption Event.”

The applicable “Redemption Measurement Date” means the Index Business Day following the applicable Redemption Notice Date, subject to adjustments as described under “— Market Disruption Event.”

If you exercise your right to have us redeem your Securities, subject to your compliance with the procedures described under “— Redemption Procedures,” for each applicable Security you will receive a cash payment on the relevant Redemption Date equal to

 

(a)

the product of

 

  (i)

the Stated Principal Amount and

 

  (ii)

the Index Performance Ratio as of the Redemption Measurement Date, plus

 

(b)

the Coupon Amount with respect to the Coupon Valuation Date immediately preceding the Redemption Measurement Date if on the Redemption Measurement Date the Coupon Ex-Date with respect to such Coupon Amount has not yet occurred, plus

 

(c)

the Adjusted Coupon Amount, if any, minus

 

(d)

the Adjusted Tracking Fee Shortfall, if any, minus

 

(e)

the Redemption Fee Amount.

We refer to this cash payment as the “Redemption Amount.” We have determined to offer all holders of the Securities the option, upon early redemption and solely for purposes of determining the Redemption

 

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Amount, but not for any other purpose, to elect that the Index Performance Ratio (which is used to calculate the Redemption Amount) be calculated using the Index Closing Level on the Redemption Measurement Date instead of the Final VWAP Level. If the redeeming holder so elects, the Index Performance Ratio will be calculated, for purposes of determining the Redemption Amount, as:

Index Closing Level on the Redemption Measurement Date

Initial VWAP Level

The “Index Closing Level” is the closing level of the Index as reported on the NYSE and Bloomberg; provided, however, that if the closing level of the Index as reported on the NYSE (or any successor) differs from the closing level of the Index as reported on Bloomberg (or any successor), then the Index Closing Level will be the closing level of the Index as calculated by the Index Calculation Agent.

If the amount calculated above is equal to or less than zero, the payment upon early redemption will be zero.

We will inform you of such Redemption Amount on the first Business Day following the applicable Redemption Measurement Date.

You may lose some or all of your investment upon early redemption. The combined negative effect of the Accrued Tracking Fee and the Redemption Fee Amount will reduce your final Redemption Amount. If the level of the Index (as measured by the Final VWAP Level as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS) does not increase by an amount sufficient to offset the combined negative effect of the Accrued Tracking Fee and the Redemption Fee Amount (less any Coupon Amounts, any Stub Reference Distribution Amount, as applicable, and/or any Adjusted Coupon Amount you may be entitled to receive), or if the Final VWAP Level is less than the VWAP Level at the time you acquired your Series A AMU ETRACS, you may lose some or all of your investment upon early redemption.

The “Adjusted Coupon Amount,” with respect to any Redemption Measurement Date, is an amount in cash equal to the difference between the Adjusted Reference Distribution Amount, calculated as of such Redemption Measurement Date, and the Adjusted Tracking Fee, calculated as of such Redemption Measurement Date. To the extent the Adjusted Reference Distribution Amount is less than the Adjusted Tracking Fee, the Redemption Amount will not include an Adjusted Coupon Amount, and the Adjusted Tracking Fee Shortfall will be included in the calculation of Redemption Amount.

The “Adjusted Reference Distribution Amount,” as of any Redemption Measurement Date, is an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to an Index constituent, for those cash distributions whose “ex-dividend date” occurs during the period from and excluding the immediately preceding Coupon Valuation Date (or if the Redemption Measurement Date occurs prior to the first Coupon Valuation Date, the period from and excluding the immediately preceding Coupon Valuation Date) to and including such Redemption Measurement Date.

The “Adjusted Tracking Fee” is:

 

(1)

as of any Redemption Measurement Date occurring prior to the first Coupon Valuation Date, an amount equal to the product of

 

  (i)

the Quarterly Tracking Fee as of such Redemption Measurement Date and

 

  (ii)

a fraction, the numerator of which is the total number of calendar days from and excluding August 17, 2015 to and including such Redemption Measurement Date, and the denominator of which is 90; and

 

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(2)

as of any Redemption Measurement Date occurring on or after the first Coupon Valuation Date, an amount equal to

 

  (a)

the Tracking Fee Shortfall as of the immediately preceding Coupon Valuation Date plus

 

  (b)

the product of

 

  (i)

the Quarterly Tracking Fee as of such Redemption Measurement Date and

 

  (ii)

a fraction, the numerator of which is the total number of calendar days from and excluding August 17, 2015 to and including such Redemption Measurement Date, and the denominator of which is 90.

The “Adjusted Tracking Fee Shortfall,” as of any Redemption Measurement Date, is the difference between the Adjusted Tracking Fee and the Adjusted Reference Distribution Amount, to the extent that the Adjusted Reference Distribution Amount, calculated as of such Redemption Measurement Date, is less than the Adjusted Tracking Fee, calculated as of such Redemption Measurement Date.

The “Redemption Fee Amount” means an amount equal to 0.125% of the Current Indicative Value.

Some of the defined terms used in this section have different applications when used in determining the Call Settlement Amount. For the definitions of the terms relevant to a call, please refer to “— UBS Call Right.”

We discuss redemption in the accompanying prospectus under “Description of the Series B ETNs — Redemption and Repayment.”

The Redemption Amount is meant to induce arbitrageurs to counteract any trading of the Securities at a premium or discount to their indicative value, though there can be no assurance that arbitrageurs will employ the repurchase feature in this manner.

Redemption Procedures

To redeem your Securities, you must instruct your broker or other person through whom you hold your Securities to take the following steps through normal clearing system channels:

 

Ø  

deliver a notice of redemption, which we refer to as a “Redemption Notice,” which is attached to this Annex as Attachment A, to UBS via e-mail no later than 12:00 noon, New York City time, on the applicable Redemption Notice Date. If we receive your Redemption Notice by the time specified in the preceding sentence, we will respond by sending you a form of confirmation of redemption which is attached to this Annex as Attachment B;

 

Ø  

deliver the signed confirmation of redemption, which we refer to as the “Redemption Confirmation,” to us via facsimile in the specified form by 5:00 p.m., New York City time on the same day. We or our affiliate must acknowledge receipt in order for your Redemption Confirmation to be effective;

 

Ø  

instruct your DTC custodian to book a delivery vs. payment trade with respect to your Securities on the applicable Redemption Measurement Date at a price equal to the Redemption Amount; and

 

Ø  

cause your DTC custodian to deliver the trade as booked for settlement via DTC at or prior to 12:00 noon, New York City time, on the applicable Redemption Date.

Different brokerage firms may have different deadlines for accepting instructions from their customers. Accordingly, as a beneficial owner of the Securities, you should consult the brokerage firm through

 

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which you own your interest for the relevant deadline. If your broker delivers your notice of redemption after 12:00 noon, New York City time, or your confirmation of redemption after 5:00 p.m., New York City time, on the applicable Redemption Notice Date, your notice will not be effective, you will not be able to redeem your Securities until the following Redemption Date and your broker will need to complete all the required steps if you should wish to redeem your Securities on any subsequent Redemption Date. In addition, UBS may request a medallion signature guarantee or such assurances of delivery as it may deem necessary in its sole discretion. All instructions given to participants from beneficial owners of Securities relating to the right to redeem their Securities will be irrevocable.

UBS Call Right

We have the right to redeem all, but not less than all, of the Securities upon not less than eighteen calendar days’ prior notice to the holders of the Securities, such redemption to occur on any Business Day that we may specify through and including the Maturity Date (the “Call Settlement Date”). Upon early redemption in the event we exercise this right, you will receive a cash payment equal to

 

(a)

the product of

 

  (i)

the Stated Principal Amount and

 

  (ii)

the Index Performance Ratio as of the last Index Business Day in the Call Measurement Period, plus

 

(b)

the Coupon Amount with respect to the Coupon Valuation Date immediately preceding the Call Valuation Date if on the last Index Business Day in the Call Measurement Period the Coupon Ex-Date with respect to such Coupon Amount has not yet occurred, plus

 

(c)

the Adjusted Coupon Amount, if any, minus

 

(d)

the Accrued Tracking Fee as of the last Index Business Day in the Call Measurement Period, plus

 

(e)

the Stub Reference Distribution Amount as of the last Index Business Day in the Call Measurement Period, if any.

We refer to this cash payment as the “Call Settlement Amount.”

If the amount calculated above is equal to or less than zero, the payment upon early redemption will be zero.

If UBS issues a call notice on any calendar day, the “Call Valuation Date” will be the last Business Day of the week in which the call notice is issued, generally Friday, subject to a minimum five (5) calendar day period commencing on the date of the issuance of the call notice and ending on the related Call Valuation Date. If UBS issues a call notice on a Friday, the related Call Valuation Date will fall on the following Friday. The Call Settlement Date will be the third Business Day following the last Index Business Day in the Call Measurement Period.

We will inform you of such Call Settlement Amount on the first Business Day following the last Index Business Day in the Call Measurement Period.

The holders will receive payment for their Securities on the third Business Day following the last Index Business Day in the Call Measurement Period (the “Call Settlement Date”). If a Market Disruption Event is continuing or occurs on the scheduled Call Valuation Date with respect to any of the Index constituents, such Call Valuation Date may be postponed as described under “— Market Disruption Event.”

 

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The “Call Measurement Period” means the five (5) Index Business Days from and including the Call Valuation Date, subject to adjustments as described under “— Market Disruption Event.”

You may lose some or all of your investment upon a call. The negative effect of the Accrued Tracking Fee will reduce your final payment. If the increase in the Final VWAP Level, as compared to the VWAP Level at the time you acquired your Series A AMU ETRACS, is insufficient to offset the negative effect of the Accrued Tracking Fee (less any Coupon Amounts, any Stub Reference Distribution Amount and/or any Adjusted Coupon Amount you may be entitled to receive), or if the Final VWAP Level is less than the VWAP Level at the time you acquired your Series A AMU ETRACS, you may lose some or all of your investment upon a call.

The Accrued Tracking Fee as of the last Index Business Day in the Call Measurement Period is an amount equal to

 

(a)

the product of

 

  (i)

the Quarterly Tracking Fee calculated as of the last Index Business Day in such Call Measurement Period, and

 

  (ii)

a fraction, the numerator of which is the total number of calendar days from and excluding the Call Valuation Date to and including the last Index Business Day in such Call Measurement Period, and the denominator of which is 90, plus

 

(b)

the Adjusted Tracking Fee Shortfall (as defined below), if any.

The Accrued Tracking Fee also takes into account the performance of the Index, as measured by the VWAP Level.

The “Adjusted Coupon Amount,” with respect to the Call Valuation Date, is an amount in cash equal to the difference between the Adjusted Reference Distribution Amount (as defined below), calculated as of the Call Valuation Date, and the Adjusted Tracking Fee (as defined in the preceding paragraph), calculated as of such Call Valuation Date. To the extent the Adjusted Reference Distribution Amount is less than the Adjusted Tracking Fee, the Call Settlement Amount will not include an Adjusted Coupon Amount, and the Adjusted Tracking Fee Shortfall (as defined below) will be included in the calculation of the Accrued Tracking Fee as of the last Index Business Day in the Call Measurement Period.

The “Adjusted Reference Distribution Amount,” as of the Call Valuation Date, is an amount equal to the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index constituents held by such Reference Holder on the “record date” with respect to an Index constituent, for those cash distributions whose “ex-dividend date” occurs during the period from and excluding the immediately preceding Coupon Valuation Date to and including the Call Valuation Date.

The “Adjusted Tracking Fee” is:

as of the Call Valuation Date, an amount equal to

 

(a)

the Tracking Fee Shortfall as of the immediately preceding Coupon Valuation Date, plus

 

(b)

the product of

 

  (i)

the Quarterly Tracking Fee as of such Call Valuation Date and

 

  (ii)

a fraction, the numerator of which is the total number of calendar days from and excluding the immediately preceding Coupon Valuation Date to and including such Call Valuation Date, and the denominator of which is 90.

 

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The “Adjusted Tracking Fee Shortfall,” as of the Call Valuation Date, is the difference between the Adjusted Tracking Fee and the Adjusted Reference Distribution Amount, to the extent that the Adjusted Reference Distribution Amount, calculated as of such Call Valuation Date, is less than the Adjusted Tracking Fee, calculated as of such Call Valuation Date.

Some of the defined terms used in this section have different applications when used in determining the Redemption Amount. For the definition of the terms relevant to early redemption, please refer to “— Early Redemption at the Option of the Holders” beginning on page A-44.

Security Calculation Agent

UBS Securities LLC will act as the Security Calculation Agent. The Security Calculation Agent will determine, among other things, the Current Indicative Value, Index Performance Ratio, the Coupon Amount, the Adjusted Coupon Amount, if any, the Reference Distribution Amount, the Stub Reference Distribution Amount, if any, the Adjusted Reference Distribution Amount, the Accrued Tracking Fee (including the Quarterly Tracking Fee, any Tracking Fee Shortfall and any Adjusted Tracking Fee Shortfall), the Adjusted Tracking Fee, the Redemption Fee Amount, the Cash Settlement Amount, if any, that we will pay you at maturity, the Final Measurement Period, the Coupon Payment Dates, the Coupon Valuation Dates, the Coupon Ex-Dates, the Coupon Record Dates, the Redemption Amount, if any, that we will pay you upon redemption, if applicable, the Call Settlement Date, the Call Valuation Date, the Call Measurement Period and the Call Settlement Amount, if any, that we will pay you in the event that UBS calls the Securities, and whether any day is a Business Day, Exchange Business Day or Index Business Day. The Security Calculation Agent will also be responsible for determining whether a Market Disruption Event has occurred, whether the Index has been discontinued and whether there has been a material change in the Index. All determinations made by the Security Calculation Agent will be at the sole discretion of the Security Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on you and on us. The holder of the Securities shall not be entitled to any compensation from us for any loss suffered as a result of any determinations or calculations made by the Security Calculation Agent. We may appoint a different Security Calculation Agent from time to time after the date hereof without your consent and without notifying you.

The Security Calculation Agent will provide written notice to the trustee at its New York office, on which notice the trustee may conclusively rely, of the amount to be paid at maturity or call, or upon early redemption, or on a Coupon Payment Date on or prior to 12:00 p.m., New York City time, on the Business Day immediately preceding the Maturity Date, any Redemption Date, any Call Settlement Date or any Coupon Payment Date, as applicable.

All dollar amounts related to determination of the Coupon Amount, the Adjusted Coupon Amount, if any, the Reference Distribution Amount, the Stub Reference Distribution Amount, if any, the Adjusted Reference Distribution Amount, the Accrued Tracking Fee (including the Quarterly Tracking Fee, any Tracking Fee Shortfall and any Adjusted Tracking Fee Shortfall), the Adjusted Tracking Fee, the Redemption Amount and Redemption Fee Amount, if any, per security, the Call Settlement Amount, if any, per security, and the Cash Settlement Amount, if any, per security, will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of Securities per holder will be rounded to the nearest cent, with one-half cent rounded upward.

VWAP Calculation Agent

The NYSE will on each day that is not a Disrupted Day (as defined below) act as the VWAP Calculation Agent. The VWAP Calculation Agent will determine the VWAP of any Index constituent, the VWAP

 

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Level and the Final VWAP Level on any Index Business Day on which such VWAP, VWAP Level and Final VWAP Level are to be determined during the term of the Securities. The VWAP Calculation Agent determined the Initial VWAP Level of 396.997 as of July 17, 2012. All determinations made by the VWAP Calculation Agent will be at the sole discretion of the VWAP Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on you and on us. We may appoint a different VWAP Calculation Agent from time to time without your consent and without notifying you.

All calculations with respect to the VWAP of any Index constituent, any VWAP Level and the Final VWAP Level will be rounded to the nearest thousandth, with five ten-thousandths rounded upward (e.g., .8765 would be rounded to .877).

Market Disruption Event

To the extent a Disrupted Day (as defined below) exists with respect to an Index constituent on an Averaging Date (as defined below) or on a Redemption Measurement Date, the VWAP and published unit weighting with respect to such Index constituent (and only with respect to such Index constituent) for such Averaging Date or Redemption Measurement Date will be determined by the Security Calculation Agent or one of its affiliates on the first succeeding Index Business Day that is not a Disrupted Day (the “Deferred Averaging Date”) with respect to such Index constituent irrespective of whether pursuant to such determination, the Deferred Averaging Date would fall on a date originally scheduled to be an Averaging Date. If the postponement described in the preceding sentence results in the VWAP of a particular Index constituent being calculated on a day originally scheduled to be an Averaging Date, for purposes of determining the VWAP Levels on the Index Business Days during the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date, as applicable, the Security Calculation Agent or one of its affiliates, as the case may be, will apply the VWAP and the published unit weighting with respect to such Index constituent for such Deferred Averaging Date to the calculation of the VWAP Level (i) on the date(s) of the original disruption with respect to such Index constituent and (ii) such Averaging Date. For example, if the Final Measurement Period or the Call Measurement Period, as applicable, for purposes of calculating the Cash Settlement Amount or Call Settlement Amount, respectively, is based on the arithmetic mean of the VWAP Levels on June 6, 2016, June 7, 2016, June 8, 2016, June 9, 2016 and June 10, 2016 and there is a Market Disruption Event for an Index constituent on June 6, 2016, but no other Market Disruption Event during the Final Measurement Period or the Call Measurement Period, as applicable, then the VWAP for such disrupted Index constituent on June 7, 2016 will be used more than once to calculate the Cash Settlement Amount or Call Settlement Amount, respectively, and such Cash Settlement Amount or Call Settlement Amount, as applicable, will be determined based on the arithmetic mean of the VWAP for such disrupted Index constituent on June 7, 2016, June 7, 2016, June 8, 2016, June 9, 2016 and June 10, 2016.

If the Redemption Measurement Date for purposes of calculating a Redemption Amount is based on the VWAP Level on June 6, 2016 and there is a Market Disruption Event for an Index constituent on June 6, 2016, then the VWAP for such disrupted Index constituent on June 7, 2016 will be used to calculate the Redemption Amount.

In no event, however, will any postponement pursuant to the two immediately preceding paragraphs result in the final Averaging Date or the Redemption Measurement Date, as applicable, with respect to any Index constituent occurring more than three (3) Index Business Days following the day originally scheduled to be such final Averaging Date or Redemption Measurement Date. If the third Index Business Day following the date originally scheduled to be the final Averaging Date, or the Redemption Measurement Date, as applicable, is not an Index Business Day or is a Disrupted Day with respect to such Index constituent, the Security Calculation Agent or one of its affiliates will determine the VWAP

 

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and unit weighting with respect to any Index constituent required to be determined for the purpose of calculating the applicable VWAP Level based on its good faith estimate of the VWAP and unit weighting of each such Index constituent that would have prevailed on the Primary Exchange on such third Index Business Day but for such suspension or limitation.

An “Averaging Date” means each of the Index Business Days during the Final Measurement Period or the Call Measurement Period, as applicable, subject to adjustment as described herein.

A “Disrupted Day” with respect to any Index constituent is any Index Business Day on which the Primary Exchange or any Related Exchange fails to open for trading during its regular trading session or on which a Market Disruption Event has occurred and is continuing, and, in both cases, the occurrence of which is determined by the Security Calculation Agent to have a material effect on the VWAP Level.

With respect to an Index constituent, a “Market Disruption Event” means:

 

(a)

the occurrence or existence of a condition specified below:

 

  (i)

any suspension, absence or limitation of trading on the Primary Exchange for trading in the Index constituent, whether by reason of movements in price exceeding limits permitted by the Primary Exchange or otherwise;

 

  (ii)

any suspension, absence or limitation of trading on the Related Exchange for trading in futures or options contracts related to the Index constituent, whether by reason of movements in price exceeding limits permitted by such Related Exchange or otherwise, or

 

  (iii)

any event (other than an event described in (b) below) that disrupts or impairs (as determined by the Security Calculation Agent) the ability of market participants in general (A) to effect transactions in, or obtain market values for, the relevant Index constituent or (B) to effect transactions in, or obtain market values for, futures or options contracts relating to the relevant Index constituent; or

 

(b)

the closure on any Index Business Day of the Primary Exchange or any Related Exchange prior to its Scheduled Closing Time unless such earlier closing time is announced by the Primary Exchange or such Related Exchange at least one hour prior to the earlier of (i) the actual closing time for the regular trading session on the Primary Exchange or such Related Exchange on such Index Business Day and (ii) the submission deadline for orders to be entered into the Primary Exchange or such Related Exchange system for execution at the close of trading on such Index Business Day;

in each case determined by the Security Calculation Agent in its sole discretion; and

 

(c)

a determination by the Security Calculation Agent in its sole discretion that the event described above materially interfered with our ability or the ability of any of our affiliates to adjust or unwind all or a material portion of any hedge with respect to the Securities.

For purposes of the above definition:

 

(a)

a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the Primary Exchange or Related Exchange, and

 

(b)

for purposes of clause (a) above, limitations pursuant to the rules of any Primary Exchange or Related Exchange similar to NYSE Rule 80B or Nasdaq Rule 4120 (or any applicable rule or regulation enacted or promulgated by any other self-regulatory organization or any government agency of scope similar to NYSE Rule 80B or Nasdaq Rule 4120 as determined by the Security Calculation Agent) on trading during significant market fluctuations will constitute a suspension, absence or material limitation of trading.

 

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“Scheduled Closing Time” means, with respect to the Primary Exchange or the Related Exchange, on any Index Business Day, the scheduled weekday closing time of the Primary Exchange or such Related Exchange on such Index Business Day, without regard to after hours or any other trading outside of the regular trading session hours.

Redemption Price Upon Optional Tax Redemption

We have the right to redeem the Securities in the circumstances described under “Description of the Series B ETNs — Optional Tax Redemption” in the accompanying prospectus. If we exercise this right, the redemption price of the Securities will be determined by the Security Calculation Agent in a manner reasonably calculated to preserve your and our relative economic position.

Default Amount on Acceleration

If an event of default occurs and the maturity of the Securities is accelerated, we will pay the default amount in respect of the principal of the Securities at maturity. We describe the default amount below under “— Default Amount.” In addition to the default amount described below, we will also pay the Coupon Amount per Security, if any, with respect to the final Coupon Payment Date, as described above under “— Coupon Payment,” calculated as if the date of acceleration was the last Index Business Day in the Final Measurement Period and the four (4) Index Business Days immediately preceding the date of acceleration were the corresponding Index Business Days in the accelerated Final Measurement Period, with the fourth Index Business Day immediately preceding the date of acceleration being the accelerated Calculation Date and the accelerated final Coupon Valuation Date, and the Index Business Day immediately preceding the date of acceleration being the relevant final Coupon Valuation Date.

For the purpose of determining whether the holders of our Medium-Term Notes, Series B, of which the Securities are a part, are entitled to take any action under the indenture, we will treat the outstanding principal amount of the Medium-Term Notes, Series B, as constituting the outstanding principal amount of the Securities. Although the terms of the Securities may differ from those of the other Medium-Term Notes, Series B, holders of specified percentages in Stated Principal Amount of all Medium-Term Notes, Series B, together in some cases with other series of our debt securities, will be able to take action affecting all the Medium-Term Notes, Series B, including the Securities. This action may involve changing some of the terms that apply to the Medium-Term Notes, Series B, accelerating the maturity of the “Medium-Term Notes, Series B” after a default or waiving some of our obligations under the indenture. We discuss these matters in the accompanying prospectus under “Description of the Series B ETNs — Default, Remedies and Waiver of Default” and “Description of Series B ETNs — Modification and Waiver of Covenants.”

Default Amount

The default amount for the Securities on any day will be an amount in U.S. dollars for the principal of the Securities, as determined by the Security Calculation Agent in its sole discretion, equal to the cost of having a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations with respect to the Securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent economic value to you with respect to the Securities. That cost will equal:

 

Ø  

the lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus

 

Ø  

the reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the Securities in preparing any documentation necessary for this assumption or undertaking.

 

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During the default quotation period for the Securities, which we describe below, the holders of the Securities and/or we may request a qualified financial institution to provide a quotation of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest — or, if there is only one, the only — quotation obtained, and as to which notice is so given, during the default quotation period. With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the qualified financial institution providing the quotation and notify the other party in writing of those grounds within two (2) Business Days after the last day of the default quotation period, in which case that quotation will be disregarded in determining the default amount.

Default Quotation Period

The default quotation period is the period beginning on the day the default amount first becomes due and ending on the third (3rd) Business Day after that day, unless:

 

Ø  

no quotation of the kind referred to above is obtained, or

 

Ø  

every quotation of that kind obtained is objected to within five (5) Business Days after the due date as described above.

If either of these two events occurs, the default quotation period will continue until the third (3rd) Business Day after the first Business Day on which prompt notice of a quotation is given as described above. If that quotation is objected to as described above within five (5) Business Days after that first Business Day, however, the default quotation period will continue as described in the prior sentence and this sentence.

In any event, if the default quotation period and the subsequent two (2) Business Day objection period have not ended before the Calculation Date, then the default amount will equal the Stated Principal Amount of the Securities.

Qualified Financial Institutions

For the purpose of determining the default amount at any time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United States of America, Europe or Japan, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date of issue and is rated either:

 

Ø  

A-1 or higher by S&P or any successor, or any other comparable rating then used by that rating agency, or

 

Ø  

P-1 or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency.

Discontinuance of or Adjustments to the Index; Alteration of Method of Calculation

If S&P discontinues publication of or otherwise fails to publish the Index, or S&P does not make the Index constituents, their unit weighting and/or the Index Divisor available to the VWAP Calculation Agent, and the Index Sponsor, S&P or another entity publishes a successor or substitute index that the Security Calculation Agent determines to be comparable to the discontinued Index and for which the Index constituents, their unit weighting, and/or the Index Divisor are available to the VWAP Calculation Agent (such index being referred to herein as a “successor index”), then the VWAP Level for such successor index will be determined by the VWAP Calculation Agent by reference to the sum of the

 

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products of the VWAPs of the components underlying such successor index on the Primary Exchanges and each such component’s respective weighting within the successor index (which sum will be adjusted by any index divisor used by such successor index) on the dates and at the times as of which the VWAP Levels for such successor index are to be determined.

Upon any selection by the Security Calculation Agent of a successor Index, the Security Calculation Agent will cause written notice thereof to be furnished to the trustee, to us and to the holders of the Securities.

If S&P discontinues publication of the Index or does not make the Index constituents, their unit weightings and/or Index Divisor available to the VWAP Calculation Agent prior to, and such discontinuation or unavailability is continuing on the Calculation Date or any Index Business Day during the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date, as applicable, or any other relevant date on which the VWAP Level is to be determined and the Security Calculation Agent determines that no successor index is available at such time, or the Security Calculation Agent has previously selected a successor index and publication of such successor index is discontinued prior to, and such discontinuation is continuing on the Calculation Date or any Index Business Day during the Final Measurement Period or the Call Measurement Period, or on the Redemption Measurement Date, as applicable, or any other relevant date on which the VWAP Level is to be determined, then the Security Calculation Agent will determine the relevant VWAP Levels using the VWAP and published unit weighting of each Index constituent included in the Index or successor index, as applicable, immediately prior to such discontinuation or unavailability, as adjusted for certain corporate actions as described under “Alerian MLP Index — Index Rebalancings.” In such event, the Security Calculation Agent will cause notice thereof to be furnished to the trustee, to us and to the holders of the Securities.

Notwithstanding these alternative arrangements, discontinuation of the publication of the Index or successor index, as applicable, may adversely affect the value of the Securities.

If at any time the method of calculating the Index or a successor index, or the value thereof, is changed in a material respect, or if the Index or a successor index is in any other way modified so that the VWAP Level of the Index or such successor index does not, in the opinion of the Security Calculation Agent, fairly represent the VWAP Level of the Index or such successor index had such changes or modifications not been made, then the Security Calculation Agent will make such calculations and adjustments as, in the good faith judgment of the Security Calculation Agent, may be necessary in order to arrive at a VWAP level of an index comparable to the Index or such successor index, as the case may be, as if such changes or modifications had not been made, and the Security Calculation Agent will calculate the VWAP Levels for the Index or such successor index with reference to the Index or such successor index, as adjusted. The Security Calculation Agent will accordingly calculate the Final VWAP Level, the Current Indicative Value, the Index Performance Ratio, the Coupon Amount, the Adjusted Coupon Amount, if any, the Reference Distribution Amount, the Stub Reference Distribution Amount, if any, the Adjusted Reference Distribution Amount, the Accrued Tracking Fee (including the Quarterly Tracking Fee, any Tracking Fee Shortfall and any Adjusted Tracking Fee Shortfall), the Adjusted Tracking Fee, the Redemption Fee Amount, if any, the Cash Settlement Amount, if any, that we will pay you at maturity, the Redemption Amount, if any, upon early redemption, if applicable, and the Call Settlement Amount, if any, that we will pay you in the event UBS calls the Securities, based on the relevant VWAP Levels calculated by the VWAP Calculation Agent, as adjusted. Accordingly, if the method of calculating the Index or a successor index is modified so that the level of the Index or such successor index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Index), which, in turn, causes the VWAP Level of the Index or such successor index to be a fraction of what it

 

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would have been if there had been no such modification, then the Security Calculation Agent will make such calculations and adjustments in order to arrive at a VWAP Level for the Index or such successor index as if it had not been modified (e.g., as if such split had not occurred).

Manner of Payment and Delivery

Any payment on or delivery of the Securities at maturity or call, or upon early redemption will be made to accounts designated by you and approved by us, or at the corporate trust office of the trustee in New York City, but only when the Securities are surrendered to the trustee at that office. We also may make any payment or delivery in accordance with the applicable procedures of the depositary.

Business Day

When we refer to a Business Day with respect to the Securities, we mean a day that is a Business Day of the kind described in “Description of the Series B ETNs — Payment Mechanics for Debt Securities” in the accompanying prospectus.

Modified Business Day

As described in “Description of Series B ETNs — Payment Mechanics for Debt Securities” in the accompanying prospectus, any payment on the Securities that would otherwise be due on a day that is not a Business Day may instead be paid on the next day that is a Business Day, with the same effect as if paid on the original due date, except as described under “— Cash Settlement Amount at Maturity,” “— UBS Call Right” and “— Early Redemption at the Option of the Holders” above.

Reissuances or Reopened Issues

We may, at our sole discretion, “reopen” or reissue the Securities. We initially issued the Securities in 2015 and we will issue additional Securities to holders of Series A AMU ETRACS on a 1-for-1 basis in the Registered Exchange Offer on the terms set forth in the prospectus accompanying this Annex. We may issue additional Securities at any time, without your consent and without notifying you. The Securities do not limit our ability to incur other indebtedness or to issue other securities. Also, we are not subject to financial or similar restrictions by the terms of the Securities. For more information, please refer to “Description of the Series B ETNs — Amounts That We May Issue” in the accompanying prospectus.

These further issuances, if any, will be consolidated to form a single class with the originally issued Securities and will have the same CUSIP number and will trade interchangeably