Master Limited Partnerships
ETRACS 1xMonthly Short Alerian MLP Infrastructure Total Return Index
The ETRACS 1xMonthly Short Alerian MLP Infrastructure Total Return Index is designed to provide a short exposure to the MLP Infrastructure market by tracking the inverse performance of the Alerian MLP Infrastructure Total Return Index (the "Index"), plus a fixed income return based on a hypothetical 91-day Treasury Bill portfolio, less investor fees. The Index, comprised of 25 energy infrastructure Master Limited Partnerships, is a liquid, midstream-focused subset of the Alerian MLP Index (NYSE: AMZ). The Index, whose constituents generally earn the majority of their cash flow from the transportation and storage of energy commodities, provides investors with a benchmark for the infrastructure component of this emerging asset class. The Index is calculated using a capped, float-adjusted, capitalization-weighted methodology that results in greater diversification versus a pure market capitalization-weighted index.
The Index was created in March 2008 and has no performance history prior to that date.
||ETRACS 1xMonthly Short Alerian MLP Infrastructure Total Return Index
||Alerian MLP Infrastructure Total Return Index
|Initial Trade Date
||September 28, 2010
||October 1, 2040
|Fee Amount (%)*
||0.85% per annum accrued on a daily basis
* As of December 31, 2010. See 'Risk considerations & Benefits' as well as the 'Important legal information specific to ETRACS ETNs' link below for more information.
||20 Day Volume Average
|High (52 week)
|Low (52 week)
||Daily Indicative Value
|Indicative Intra-Month Leverage Factor
Updated on: May 21, 2013
|Alerian MLP Infrastructure
Total Return Index
|Alerian MLP Index
|S&P 500® Index
|S&P 500 Utilities® Index
|Dow Jones-UBS Commodity IndexSM
Historical results for the period from March 20, 2008 through December 31, 2010.
Source: Alerian, Standard & Poor's, and Dow Jones.
Historical information presented is as of December 31, 2010 and is furnished as a matter of information only. Historical performance of the Index is not an indication of future performance. Future performance of the Index may differ significantly from and historical performance, either positively or negatively.
The ETRACS ETNs are subject to investor fees. As a result, the return on the ETNs will always be lower than the total return on a direct investment in the Index or the Index constituents."
Top 10 Constituent weightings
|Enterprise Products Partners LP
|Kinder Morgan Energy Partners LP
|Magellan Midstream Partners LP
|ONEOK Partners LP
|Plains All American Pipeline LP
|Energy Transfer Partners LP
|Enbridge Energy Partners LP
| NuStar Energy LP
|Buckeye Partners LP
|Regency Energy Partners LP
Source: Alerian; as of September 23, 2010.
The graph above illustrates the historical returns of the Index from March 20, 2008 through December 31, 2010 in comparison with other benchmark indices.
Historical performance of the Index is not an indication of future performance. Future performance of the Index may differ significantly from historical performance, either positively or negatively.
The ETRACS ETNs are subject to investor fees. As a result, the return on the ETNs will always be lower than the total return on a direct investment in the Index or the Index constituents.
Key benefits & Selected risk considerations
- Short exposure to a portfolio of energy infrastructure MLPs through a single investment.
- Tax administration – gain or loss on the ETN is reported on Form 1099, and therefore the administrative burden associated with K-1 forms is eliminated.
Selected risk considerations
An investment in the ETRACS ETNs 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 S-18 in the prospectus supplement for the ETRACS ETNs (the "ETRACS Prospectus"). Capitalized terms used below but not defined herein shall have the meanings attributed to them in the ETRACS Prospectus.
- Inverse Exposure to the Index — Because your investment in the ETRACS ETNs is linked to the monthly inverse performance of the Index, any increase in the level of the Index would result in a decrease in the amount you will be paid at maturity, call, acceleration or upon early redemption.
- Payment based on VWAP Level — The payment on the ETRACS ETNs at maturity, call, acceleration or upon early redemption, will be based on the VWAP Level of the Index and not on the closing level of the Index, as specified in the ETRACS Prospectus. The VWAP Level of the Index will most likely differ from the closing level of the Index.
- You may lose some or all of your principal — The ETRACS ETNs are exposed to any monthly increase in the level of the Index. If the compounded monthly inverse return of the Index is insufficient to offset the combined negative effect of the Accrued Stock Borrow Fees and the Fee Amount, and the Redemption Fee Amount, if applicable, over the relevant period, you will lose some or all of your investment at maturity, call, acceleration or upon early redemption.
- Correlation and compounding risk — There can be no guarantee that the ETRACS ETNs will achieve a high degree of correlation with the performance of the Index. Because the Current Principal Amount is reset monthly, you will be exposed to compounding of monthly returns. As a result, the performance of the ETRACS ETNs for periods greater than one month is likely to be either greater than or less than the Index performance, before accounting for the Accrued Stock Borrow Fees, the Fee Amount and the Accrued Financing Payment, and the Redemption Fee Amount, if applicable. In particular, significant negative monthly performances of your ETRACS ETNs may not be offset by subsequent positive monthly performances of equal magnitude.
- Market risk — The return on the ETRACS ETNs, which may be positive or negative, is directly linked to the inverse performance of the Index, which is based on the return on the Index, 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. In addition, because the Index is a total return index, distributions by the Index constituents will cause the level of the Index to increase, which will have a negative effect on the ETRACS ETNs.
- Limited performance history — The return on the ETRACS ETNs is linked to the performance of the Index, which was introduced in March 2008. As a result, the Index has a limited performance history, and it is uncertain how the index will perform. Limited historical information will be available for you to consider in making an independent investigation of the Index performance, which may make it more difficult for you to make an informed decision with respect to an investment in the ETRACS ETNs than if the Index had a longer performance history.
- Credit of UBS — The ETRACS ETNs are senior unsecured debt obligations of the issuer, UBS, and are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the ETRACS ETNs, including any payment at maturity, call, acceleration 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 ETRACS ETNs prior to maturity 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 ETRACS ETNs.
- Potential over-concentration in a particular industry — There is only one industry – energy – relating to the MLP's included in the Index. An investment in the ETRACS ETNs will increase your portfolio's exposure to fluctuations in the energy industry.
- A trading market for the ETRACS ETNs may not develop — Although the ETRACS ETNs are listed on NYSE Arca, a trading market for the ETRACS ETNs may not develop. Certain affiliates of UBS may engage in limited purchase and resale transactions in the ETRACS ETNs, although they are not required to and may stop at any time. We are not required to maintain any listing of the ETRACS ETNs on NYSE Arca or any other exchange. Therefore, the liquidity of the ETRACS ETNs may be limited.
- No interest payments from the ETRACS ETNs — You will not receive any interest payments on the ETRACS ETNs.
- The ETRACS ETNs are designed as a trading product and should not be used as a buy and hold investment.
- Minimum Redemption Amount — You must elect to redeem at least 50,000 ETRACS ETNs for UBS to repurchase your ETRACS ETNs, unless we determine otherwise or your broker or other financial intermediary bundles your ETRACS ETNs for redemption with those of other investors to reach this minimum requirement. Therefore, the liquidity of the ETRACS ETNs may be limited.
- Potential automatic acceleration — In the event the indicative value of the ETRACS ETNs is equal to $5.00 or less on any Index Business Day or the intraday index value on any Index Business Day increases 60% from the most recent Monthly Initial Closing Level, the ETRACS ETNs will be automatically accelerated and mandatorily redeemed by UBS and you will receive a cash payment equal to the Closing Indicative Security Value, as determined on the last Index Business Day in the Acceleration Measurement Period.
- Uncertain tax treatment — Significant aspects of the tax treatment of the ETRACS ETNs are uncertain. You should consult your own tax advisor about your own tax situation.
- UBS's Call Right — UBS may elect to redeem all outstanding ETRACS ETNs at any time after October 3, 2011 as described under "Specific Terms of the Securities — UBS's Call Right" beginning on page S-47 of the ETRACS Prospectus. If UBS exercises its Call Right, the Closing Indicative Security Value may be less than the principal amount of your ETRACS ETNs.
UBS has filed a registration statement (including a prospectus, as supplemented by a prospectus supplement for each offering of the ETRACS ETNs) with the Securities and Exchange Commission (the "SEC") for the offerings to which this communication relates. Before you invest, you should read these documents and any other documents that UBS has filed with the SEC for more complete information about UBS and the offerings to which this communication relates. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, you can request the prospectus and any applicable prospectus supplement by calling toll-free (+1-877-387 2275).
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