ETRACS Oil Futures Contango ETN
The ETRACS Oil Futures Contango ETN is designed to capitalize on oil markets in a state of contango, as evidenced by an upward sloping futures curve, while minimizing the exposure to absolute changes in oil futures prices. The ETRACS Oil Futures Contango ETN is linked to the performance of the ISE Oil Futures Spread™ Index (the "Index") which through an allocation to various oil sub-indices, effectively provides short exposure in front month oil futures contracts and long exposure in mid-term oil futures contracts.
||ETRACS Oil Futures Contango ETN
||ISE Oil Futures Spread™ Index
|Initial Trade Date
||June 15, 2011
||June 14, 2040
|Annual Tracking Fee (%)*
||0.85% accrued on a daily basis
* As of June 15, 2011. 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
|Updated on: June 18, 2013
Key benefits & Selected risk considerations
- Access to an innovative long-short strategy designed to capitalize on a potential contango market environment without necessarily taking a directional view on oil prices.
- Capture the negative roll associated with the steepness in the short end of the oil futures curve.
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 in the "Risk Factors" section of the prospectus supplement for the ETRACS ETNs (the "ETRACS Prospectus"). Capitalized terms used below (and elsewhere in this document) but not defined herein shall have the meanings attributed to them in the ETRACS Prospectus.
- You may lose some or all of your investment — The ETNs are exposed to any compounded daily decline in the Index Closing Level over the term of the ETNs, as measured on the applicable Valuation Date or the Final Valuation Date, in each case caused by any daily decrease in the level of the Medium-Term Sub-Indices and daily increase in the level of the Short-Term Sub-Indices. Because the negative effect of the Fee Amount, and the Redemption Fee Amount, if applicable, reduces your final payment, the combination of one-and-a-half times the long performance of the Oil Medium-Term Sub-Indices, and the short, or inverse, return of the Oil Short-Term Sub-Index (a long to short ratio of 1.5:1), as reflected in the Index Closing Level over the term of the ETNs, will need to be sufficient, together with the Financing Payment, to offset the negative effect of the Fee Amount, and any Redemption Fee Amount, in order for you to receive a payment at maturity equal to your initial investment in the ETNs. If the level of the Index is not sufficient to offset the negative effect of the Fee Amount, and any Redemption Fee Amount, over the relevant period, you will lose some or all of your investment at maturity, call, acceleration or upon early redemption.
- The Sub-Indices may not always correlate in a manner that will result in an increase in the level of the relevant Index — The ETNs are linked to the level of the Index which, in turn, measures the return from taking a one-and-a-half times long position in aggregate of the Oil Medium-Term Sub-Indices and taking, through a long position in the ISE Short Front Month Oil Futures™ Index, a short, or inverse, position in the Oil Short-Term Sub-Index (a long to short ratio of 1.5:1), rebalanced monthly before the Sub-Indices' roll process to maintain the 1.5:1 ratio. We expect the value of the ETNs to increase as the level of the Index increases, which will be, generally, in any one of the following three situations: (i) the levels of the Medium-Term Sub-Indices increase while the levels of the Short-Term Sub-Indices decrease; (ii) both the levels of the Medium-Term Sub-Indices and the levels of the Short-Term Sub-Indices increase, and the increase of the Medium-Term Sub-Indices is more than that of the Short-Term Sub-Indices; or (iii) both the levels of the Medium-Term Sub-Indices and the levels of the Short-Term Sub-Indices decrease, and the decrease in the Short-Term Sub-Indices is more than that of the Medium-Term Sub-Indices. There can be no assurance, however, that the Sub-Indices will always correlate in a manner that results in an increase in the level of the Index, causing an increase in the value of the ETNs; the Sub-Indices may correlate in a manner that results in a decrease in the level of the relevant Index, causing a decrease in the value of the ETNs. See "The level of the relevant Index, and therefore the value of the ETNs, may not increase when the levels of the relevant Medium-Term Sub-Indices increase or the levels of the relevant Short-Term Sub-Indices decrease" in the ETRACS Prospectus.
- Market risk — The return on the ETNs, which may be positive or negative, is directly linked to the level of the Index, which, in turn, measures the return from taking an unequal (1.5:1 long to short) position in the relevant Sub-Indices. The performance of each of the Medium-Term Sub-Indices and Short-Term Sub-Indices is based on the price of one or more Light Sweet Crude Oil (WTI) futures contracts. The price of Light Sweet Crude Oil (WTI) is affected by a variety of factors and may change unpredictably, affecting the value of Light Sweet Crude Oil (WTI) futures contracts, and consequently, the levels of each of the Medium-Term Sub-Indices and Short-Term Sub-Indices, the Index and the value of your ETNs in unforeseeable ways.
- Credit of UBS — The ETNs are senior unsecured debt securities 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 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 ETNs prior to maturity, call, acceleration 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 ETNs.
- Potential over-concentration in a particular commodity — There is only one commodity — Light Sweet Crude Oil (WTI) — underlying the futures contracts included in the Index. Trading in Light Sweet Crude Oil (WTI) futures contracts is speculative and can be extremely volatile. The market price of Light Sweet Crude Oil (WTI) may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships; weather; agriculture; trade; fiscal, monetary and exchange control programs; domestic and foreign political and economic events and policies; disease; technological developments and changes in interest rates. An investment in the ETNs will increase your portfolio's exposure to fluctuations in the oil market.
- A trading market for the ETNs may not develop — Although each series of the ETNs has been approved for listing on NYSE Arca, subject to official notice of issuance, a trading market for the ETNs may not develop. Certain affiliates of UBS may engage in limited purchase and resale transactions in the ETNs, although they are not required to and may stop at any time. We are not required to maintain any listing of any series of the ETNs on NYSE Arca or any other exchange. In addition, we are not obliged to, and may not, sell the full aggregate principal amount of any series of the ETNs shown on the cover of the prospectus supplement. We may suspend or cease sales of any series of the ETNs at any time, at our discretion. Therefore, the liquidity of any series of the ETNs may be limited.
- Limited performance history — The return on the ETNs is linked to the performance of the Index which was launched on June 14, 2011. As a result, the Index has a limited performance history, and it is uncertain how the Index will perform in the future.
- No interest payments from the ETNs — You will not receive any interest payments on the ETNs.
- No redemption prior to June 27, 2011 — You may elect to redeem your ETNs on or after June 27, 2011. Accordingly, your ability to liquidate the ETNs may be limited prior to that date.
- Minimum redemption amount — You must elect to redeem at least 50,000 ETNs of the same series for UBS to repurchase your ETNs, unless we determine otherwise or your broker or other financial intermediary bundles your ETNs for redemption with those of other investors to reach this minimum requirement and there can be no assurance that they can or will do so. Therefore, the liquidity of the ETNs may be limited.
- Your redemption election is irrevocable — You will not be able to rescind your election to redeem your ETNs after your redemption notice is received by UBS. 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 applicable Valuation Date.
- Potential automatic acceleration — In the event the indicative value of the ETNs (i) equals $5.00 or less on any Index Business Day or (ii) decreases in value at least 60% as compared to the closing indicative value on the previous Index Business Day, the ETNs of that series will be automatically accelerated and mandatorily redeemed by UBS and you will receive a cash payment equal to the Acceleration Amount.
- Uncertain tax treatment — Significant aspects of the tax treatment of the 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 ETNs on any Trading Day on or after June 18, 2012 as described under "Specific Terms of the Securities — UBS's Call Right" in the ETRACS prospectus. If UBS exercises its Call Right, the Call Settlement Amount may be less than your initial investment in the ETNs of that series.
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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