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UBS AG — Capital/Financing Update 2012
Mar 30, 2012
35612_prs_2012-03-30_0c1e6e6b-404d-4c30-a186-75f6f55fed25.zip
Capital/Financing Update
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Filed Pursuant to Rule 424(b)(2) Registration Statement No. 333-178960
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities Offered | Maximum Aggregate Offering Price | Amount of Registration Fee (1) |
|---|---|---|
| Trigger Autocallable Optimization Securities linked to the iShares ® MSCI Emerging Markets Index Fund due March 31, 2017 | $2,472,850.00 | $283.39 |
| Trigger Autocallable Optimization Securities linked to the iShares ® Russell 2000 ® Index Fund due March 31, 2017 | $16,212,510.00 | $1,857.95 |
| Trigger Autocallable Optimization Securities linked to the SPDR ® S&P ® Metals & Mining ETF due March 31, 2017 | $2,826,500.00 | $323.92 |
(1) Calculated in accordance with Rule 457(r) of the Securities Act of 1933.
PRICING SUPPLEMENT (To Prospectus dated January 11, 2012 and Product Supplement dated January 17, 2012)
UBS AG Trigger Autocallable Optimization Securities
UBS AG $2,472,850.00 Securities linked to the iShares ® MSCI Emerging Markets Index Fund due March 31, 2017
UBS AG $16,212,510.00 Securities linked to the iShares ® Russell 2000 ® Index Fund due March 31, 2017
UBS AG $2,826,500.00 Securities linked to the SPDR ® S&P ® Metals & Mining ETF due March 31, 2017
Investment Description
UBS AG Trigger Autocallable Optimization Securities (the Securities) are unsubordinated, unsecured debt securities issued by UBS AG (UBS or the Issuer) linked to the shares of a specific exchange traded fund (the underlying equity). The Securities are designed for investors who believe that the price of the underlying equity will remain flat or increase during the term of the Securities. If the underlying equity closes at or above the initial price on any observation date (quarterly, beginning after one year), UBS will automatically call the Securities and pay you a call price equal to the principal amount per Security plus a call return. The call return increases the longer the Securities are outstanding. If by maturity the Securities have not been called, UBS will either repay the full principal amount or, if the underlying equity closes below the trigger price on the final valuation date, UBS will repay less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the decline in the price of the underlying equity from the trade date to the final valuation date. Investing in the Securities involves significant risks. The Securities do not pay interest. You may lose some or all of your principal amount. The contingent repayment of principal only applies if you hold the Securities to maturity. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of the Issuer. If UBS were to default on its payment obligations you may not receive any amounts owed to you under the Securities and you could lose your entire investment.
Features
q Call Return UBS will automatically call the Securities for a call price equal to the principal amount plus a call return if the closing price of the underlying equity on any observation date (quarterly, beginning after one year) is equal to or greater than the initial price. The call return increases the longer the Securities are outstanding. If the Securities are not called, investors will have the potential for downside equity market risk at maturity.
q Contingent Repayment of Principal Amount at Maturity If by maturity the Securities have not been called and the price of the underlying equity does not close below the trigger price on the final valuation date, UBS will pay you the principal amount per Security at maturity. If the price of the underlying equity closes below the trigger price on the final valuation date, UBS will repay less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the decline in the price of the underlying equity from the trade date to the final valuation date. The contingent repayment of principal only applies if you hold the Securities until maturity. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of UBS.
Key Dates
| Trade Date* | March 28, 2012 |
|---|---|
| Settlement Date* | March 30, 2012 |
| Observation Dates** | Quarterly, after 1 year (see page 4) |
| Final Valuation Date** | March 27, 2017 |
| Maturity Date** | March 31, 2017 |
- We expect to deliver each offering of the Securities against payment on or about the second business day following the trade date. Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Securities on the trade date will be required, by virtue of the fact that each Security initially will settle in two business days (T+2), to specify alternative settlement arrangements to prevent a failed settlement.
** Subject to postponement in the event of a market disruption event, as described in the TAOS product supplement.
NOTICE TO INVESTORS: THE SECURITIES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. THE ISSUER IS NOT NECESSARILY OBLIGATED TO REPAY THE FULL PRINCIPAL AMOUNT OF THE SECURITIES AT MATURITY, AND THE SECURITIES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING EQUITY. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING A DEBT OBLIGATION OF UBS. YOU SHOULD NOT PURCHASE THE SECURITIES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE SECURITIES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER KEY RISKS BEGINNING ON PAGE 5 AND UNDER RISK FACTORS BEGINNING ON PAGE PS-15 OF THE TRIGGER AUTOCALLABLE OPTIMIZATION SECURITIES PRODUCT SUPPLEMENT BEFORE PURCHASING ANY SECURITIES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY EFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR SECURITIES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE SECURITIES.
Security Offerings
These terms relate to three separate Securities we are offering. Each of the three Securities is linked to the shares of a different exchange traded fund and each of the three Securities has a different call return rate, initial price and trigger price. Each of the Securities are offered at a minimum investment of 100 Securities at $10.00 per Security (representing a $1,000 investment) and integral multiples of $10.00 in excess thereof. The performance of each Security will not depend on the performance of any other Security.
| Underlying Equities — iShares ® MSCI Emerging Markets Index Fund | EEM | Call Return Rate — 9.50% per annum* | Initial Price — $ 42.69 | Trigger Price — $27.75, which is 65% of the Initial Price | 9026M0507 | US9026M05072 |
|---|---|---|---|---|---|---|
| iShares ® Russell 2000 ® Index Fund | IWM | 10.33% per annum* | $ 83.30 | $45.82, which is 55% of the Initial Price | 9026M0523 | US9026M05239 |
| SPDR ® S&P ® Metals & Mining ETF | XME | 11.73% per annum* | $ 49.00 | $22.05, which is 45% of the Initial Price | 9026M0515 | US9026M05155 |
- If the Securities are called, your call return will vary depending on the observation date on which the Securities are called.
See Additional Information about UBS and the Securities on page 2. The Securities will have the terms set forth in the Trigger Autocallable Optimization Securities (TAOS) product supplement relating to the Securities, dated January 17, 2012, the accompanying prospectus and this pricing supplement.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these Securities or passed upon the adequacy or accuracy of this pricing supplement, or the accompanying product supplement or prospectus. Any representation to the contrary is a criminal offense. The Securities are not deposit liabilities of UBS and are not FDIC insured.
| Offering of Securities | Issue Price to Public — Total | Per Security | Underwriting Discount — Total | Per Security | Proceeds to UBS — Total | Per Security |
|---|---|---|---|---|---|---|
| iShares ® MSCI Emerging Markets Index Fund | $2,472,850.00 | $10.00 | $61,821.25 | $0.25 | $2,411,028.75 | $9.75 |
| iShares ® Russell 2000 ® Index Fund | $16,212,510.00 | $10.00 | $405,312.75 | $0.25 | $15,807,197.25 | $9.75 |
| SPDR ® S&P ® Metals & Mining ETF | $2,826,500.00 | $10.00 | $70,662.50 | $0.25 | $2,755,837.50 | $9.75 |
| UBS Financial Services Inc. |
|---|
| Pricing Supplement dated March 28, 2012 |
Additional Information about UBS and the Securities
UBS has filed a registration statement (including a prospectus, as supplemented by a product supplement for the securities we may offer, including the Securities) with the Securities and Exchange Commission, or SEC, for the offerings to which this pricing supplement relates. Before you invest, you should read these documents and any other documents relating to the Securities that UBS has filed with the SEC for more complete information about UBS and these offerings. You may obtain these documents for free from the SEC website at www.sec.gov. Our Central Index Key, or CIK, on the SEC website is 0001114446. Alternatively, UBS will arrange to send you these documents if you so request by calling toll-free 877-387-2275.
You may access these documents on the SEC website at www.sec.gov as follows:
¨ TAOS product supplement dated January 17, 2012:
http://www.sec.gov/Archives/edgar/data/1114446/000119312512013091/d281716d424b2.htm
¨ Prospectus dated January 11, 2012:
http://www.sec.gov/Archives/edgar/data/1114446/000119312512008669/d279364d424b3.htm
References to UBS, we, our and us refer only to UBS AG and not to its consolidated subsidiaries. In this document, Trigger Autocallable Optimization Securities or the Securities refer to three different Securities that are offered hereby. Also, references to the TAOS product supplement mean the UBS product supplement, dated January 17, 2012, and references to accompanying prospectus mean the UBS prospectus titled, Debt Securities and Warrants, dated January 11, 2012.
This pricing supplement, together with the documents listed above, contains the terms of the Securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials including pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in Key Risks beginning on page 5 and in Risk Factors in the accompanying product supplement, as the Securities involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before deciding to invest in the Securities.
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Investor Suitability
The Securities may be suitable for you if:
¨ You fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial investment.
¨ You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the same downside market risk as an investment in the underlying equity.
¨ You believe the underlying equity will close at or above the initial price on one of the specified observation dates.
¨ You understand and accept that you will not participate in any appreciation in the price of the underlying equity and that your potential return is limited to the applicable call return.
¨ You can tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside price fluctuations of the underlying equity.
¨ You are willing to invest in the Securities based on the applicable call return rate indicated on the cover hereof.
¨ You do not seek current income from this investment and are willing to forgo dividends paid on the underlying equity.
¨ You are willing to invest in securities that may be called early and you are otherwise willing to hold such securities to maturity, a term of approximately 5 years, and accept that there may be little or no secondary market for the Securities.
¨ You are willing to assume the credit risk of UBS for all payments under the Securities, and understand that if UBS defaults on its obligations you may not receive any amounts due to you, including any repayment of principal.
The Securities may not be suitable for you if:
¨ You do not fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial investment.
¨ You cannot tolerate a loss of all or a substantial portion of your investment and are unwilling to make an investment that may have the same downside market risk as an investment in the underlying equity.
¨ You require an investment designed to provide a full return of principal at maturity.
¨ You believe that the price of the underlying equity will decline during the term of the Securities and is likely to close below the trigger price on the final valuation date.
¨ You seek an investment that participates in the full appreciation in the price of the underlying equity or that has unlimited return potential.
¨ You cannot tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside price fluctuations of the underlying equity.
¨ You are unwilling to invest in the Securities based on the applicable call return rate indicated on the cover hereof.
¨ You seek current income from this investment or prefer to receive the dividends paid on the underlying equity.
¨ You are unable or unwilling to hold securities that may be called early, or you are otherwise unable or unwilling to hold such securities to maturity, a term of approximately 5 years, or you seek an investment for which there will be an active secondary market.
¨ You are not willing to assume the credit risk of UBS for all payments under the Securities, including any repayment of principal.
The suitability considerations identified above are not exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Securities in light of your particular circumstances. You should also review carefully the Key Risks beginning on page 5 of this pricing supplement for risks related to an investment in the Securities.
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Final Terms for Each Offering of the Securities
| Issuer | UBS AG, London Branch |
|---|---|
| Principal Amount | $10.00 per Security (subject to a minimum investment of 100 Securities) |
| Term | Approximately 5 years, unless called earlier. |
| Underlying Equities | The shares of a specific exchange traded fund, as indicated on the first page of this pricing supplement. |
| Call Feature | The Securities will be called if the closing price of the underlying equity on any observation date (quarterly, beginning after one year) is equal to |
| or greater than the initial price. If the Securities are called, UBS will pay you on the applicable call settlement date a cash payment per Security equal to the call price for the applicable observation date. | |
| Call Settlement Dates | Two business days following each observation date, except that the call settlement date for the final valuation date is the maturity |
| date. | |
| Call Return | The call return increases the longer the Securities are outstanding and is based upon a rate of (i) 9.50% per annum for Securities linked to the |
| iShares ® MSCI Emerging Markets Index Fund, (ii) 10.33% per annum for Securities linked to the | |
| iShares ® Russell 2000 ® Index Fund. and (iii) 11.73% per annum for Securities linked to the | |
| SPDR ® S&P ® Metals & Mining ETF. | |
| Call Price | The call price equals the principal amount per Security plus the applicable call return. |
The table below reflects a call return rate of 9.50% per annum for Securities linked to the iShares ® MSCI Emerging Markets Index Fund.
| Observation Date (1) | Call Settlement Date | Call Price (per Security) | |
|---|---|---|---|
| April 1, 2013 | April 3, 2013 | 9.5000% | $ 10.9500 |
| June 26, 2013 | June 28, 2013 | 11.8750% | $ 11.1875 |
| September 26, 2013 | September 30, 2013 | 14.2500% | $ 11.4250 |
| December 27, 2013 | December 31, 2013 | 16.6250% | $ 11.6625 |
| March 27, 2014 | March 31, 2014 | 19.0000% | $ 11.9000 |
| June 26, 2014 | June 30, 2014 | 21.3750% | $ 12.1375 |
| September 26, 2014 | September 30, 2014 | 23.7500% | $ 12.3750 |
| December 29, 2014 | December 31, 2014 | 26.1250% | $ 12.6125 |
| March 27, 2015 | March 31, 2015 | 28.5000% | $ 12.8500 |
| June 26, 2015 | June 30, 2015 | 30.8750% | $ 13.0875 |
| September 28, 2015 | September 30, 2015 | 33.2500% | $ 13.3250 |
| December 29, 2015 | December 31, 2015 | 35.6250% | $ 13.5625 |
| March 29, 2016 | March 31, 2016 | 38.0000% | $ 13.8000 |
| June 28, 2016 | June 30, 2016 | 40.3750% | $ 14.0375 |
| September 28, 2016 | September 30, 2016 | 42.7500% | $ 14.2750 |
| December 28, 2016 | December 30, 2016 | 45.1250% | $ 14.5125 |
| March 27, 2017 | March 31, 2017 | 47.5000% | $14.7500 |
The table below reflects a call return rate of 10.33% per annum for Securities linked to the iShares ® Russell 2000 ® Index Fund.
| Observation Date (1) | Call Settlement Date | Call Price (per Security) | |
|---|---|---|---|
| April 1, 2013 | April 3, 2013 | 10.3300% | $ 11.0330 |
| June 26, 2013 | June 28, 2013 | 12.9125% | $ 11.2913 |
| September 26, 2013 | September 30, 2013 | 15.4950% | $ 11.5495 |
| December 27, 2013 | December 31, 2013 | 18.0775% | $ 11.8078 |
| March 27, 2014 | March 31, 2014 | 20.6600% | $ 12.0660 |
| June 26, 2014 | June 30, 2014 | 23.2425% | $ 12.3243 |
| September 26, 2014 | September 30, 2014 | 25.8250% | $ 12.5825 |
| December 29, 2014 | December 31, 2014 | 28.4075% | $ 12.8408 |
| March 27, 2015 | March 31, 2015 | 30.9900% | $ 13.0990 |
| June 26, 2015 | June 30, 2015 | 33.5725% | $ 13.3573 |
| September 28, 2015 | September 30, 2015 | 36.1550% | $ 13.6155 |
| December 29, 2015 | December 31, 2015 | 38.7375% | $ 13.8738 |
| March 29, 2016 | March 31, 2016 | 41.3200% | $ 14.1320 |
| June 28, 2016 | June 30, 2016 | 43.9025% | $ 14.3903 |
| September 28, 2016 | September 30, 2016 | 46.4850% | $ 14.6485 |
| December 28, 2016 | December 30, 2016 | 49.0675% | $ 14.9068 |
| March 27, 2017 | March 31, 2017 | 51.6500% | $15.1650 |
The table below reflects a call return rate of 11.73% per annum for Securities linked to the SPDR ® S&P ® Metals & Mining ETF.
| Observation Date (1) | Call Settlement Date | Call Price (per Security) | |
|---|---|---|---|
| April 1, 2013 | April 3, 2013 | 11.7300% | $ 11.1730 |
| June 26, 2013 | June 28, 2013 | 14.6625% | $ 11.4663 |
| September 26, 2013 | September 30, 2013 | 17.5950% | $ 11.7595 |
| December 27, 2013 | December 31, 2013 | 20.5275% | $ 12.0528 |
| March 27, 2014 | March 31, 2014 | 23.4600% | $ 12.3460 |
| June 26, 2014 | June 30, 2014 | 26.3925% | $ 12.6393 |
| September 26, 2014 | September 30, 2014 | 29.3250% | $ 12.9325 |
| December 29, 2014 | December 31, 2014 | 32.2575% | $ 13.2258 |
| March 27, 2015 | March 31, 2015 | 35.1900% | $ 13.5190 |
| June 26, 2015 | June 30, 2015 | 38.1225% | $ 13.8123 |
| September 28, 2015 | September 30, 2015 | 41.0550% | $ 14.1055 |
| December 29, 2015 | December 31, 2015 | 43.9875% | $ 14.3988 |
| March 29, 2016 | March 31, 2016 | 46.9200% | $ 14.6920 |
| June 28, 2016 | June 30, 2016 | 49.8525% | $ 14.9853 |
| September 28, 2016 | September 30, 2016 | 52.7850% | $ 15.2785 |
| December 28, 2016 | December 30, 2016 | 55.7175% | $ 15.5718 |
| March 27, 2017 | March 31, 2017 | 58.6500% | $15.8650 |
| Payment at Maturity (per Security) | If the Securities have not been called and the final price is equal to or greater than the trigger
price , at maturity we will pay you an amount in cash equal to the principal amount: $10.00. If the Securities have not been called and the final
price is less than the trigger price , at maturity we will pay you an amount in cash that is less than the principal amount, if anything, resulting in a loss that is proportionate to the decline of the underlying equity, for an amount equal
to: $10.00 + ($10.00 × underlying return). |
| --- | --- |
| Underlying Return | Final Price Initial Price |
| | Initial Price |
| Trigger Price | A percentage of the initial price, as specified on the first page of this pricing supplement (as may be adjusted in the case of , as specified on the
first page of this pricing supplement certain adjustment events as described under General Terms of the Securities Antidilution Adjustments in the TAOS product supplement). |
| Initial Price | The closing price of the underlying equity on the trade date, as specified on the first page of this pricing supplement (as may be adjusted in the case
of certain adjustment events as described under General Terms of the Securities Antidilution Adjustments in the TAOS product supplement). |
| Final Price | The closing price of the underlying equity on the final valuation date. |
Investment Timeline
INVESTING IN THE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE SECURITIES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF UBS. IF UBS WERE TO DEFAULT ON ITS PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE SECURITIES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
(1) Subject to the market disruption event provisions set forth in the TAOS product supplement beginning on page PS-32.
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Key Risks
An investment in any offering of the Securities involves significant risks. Investing in each of the Securities is not equivalent to investing in each of the underlying equities. These risks are explained in more detail in the Risk Factors section of the TAOS product supplement. We also urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the Securities.
¨ Risk of loss at maturity The Securities differ from ordinary debt securities in that the issuer will not necessarily pay the full principal amount of the Securities. If the Securities are not called, UBS will repay you the principal amount of your Securities in cash only if the final price of the underlying equity is greater than or equal to the trigger price and will only make such payment at maturity. If the Securities are not called and the final price is less than the trigger price, you will lose some or all of your initial investment in an amount proportionate to the decline in the price of the underlying equity.
¨ The contingent repayment of principal applies only at maturity You should be willing to hold your Securities to maturity. If you are able to sell your Securities prior to maturity in the secondary market, you may have to sell them at a loss relative to your initial investment even if the price of the underlying equity is above the trigger price.
¨ Your potential return on the Securities is limited to the call return The return potential of the Securities is limited to the call return regardless of the appreciation of the underlying equity. In addition, because the call return increases the longer the Securities have been outstanding, the call price payable on earlier observation dates is less than the call price payable on later observation dates. The earlier a Security is called, the lower your return will be. If the Securities are not called, you will not participate in any appreciation in the price of the underlying equity even though you will be subject to the risk of a decline in the price of the underlying equity.
¨ Higher call return rates are generally associated with a greater risk of loss Greater expected volatility with respect to the underlying equity reflects a higher expectation as of the trade date that the price of such equity could close below its trigger price on the final valuation date of the Securities. This greater expected risk will generally be reflected in a higher call return rate for that Security. However, while the call return rate is set on the trade date, an equitys volatility can change significantly over the term of the Securities. The price of the underlying equity for your Securities could fall sharply, which could result in a significant loss of principal.
¨ No interest payments UBS will not pay any interest with respect to the Securities.
¨ Reinvestment risk If your Securities are called early, the term of the Securities will be reduced and you will not receive any payment on the Securities after the applicable call settlement date. There is no guarantee that you would be able to reinvest the proceeds from an automatic call of the Securities at a comparable rate of return for a similar level of risk. To the extent you are able to reinvest such proceeds in an investment comparable to the Securities, you may incur transaction costs such as dealer discounts and hedging costs built into the price of the new securities. Because the Securities may be called as early as 1 year after issuance, you should be prepared in the event the Securities are called early.
¨ Credit risk of UBS The Securities are unsubordinated, 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 Securities, including payments in respect of an automatic call or any repayment of principal, depends on the ability of UBS to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of UBS may affect the market value of the Securities and, 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 and you could lose your entire initial investment.
¨ Market risk The price of the underlying equity can rise or fall sharply due to factors specific to that underlying equity or the securities constituting the assets of the underlying equity. These factors may include price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events, as well as general market factors, such as general market volatility and levels, interest rates and economic and political conditions. We urge you to review financial and other information filed periodically by the underlying equity with the SEC.
¨ Owning the Securities is not the same as owning the underlying equity The return on your Securities is unlikely to reflect the return you would realize if you actually owned the underlying equity. For instance, you will not receive or be entitled to receive any dividend payments or other distributions on the underlying equity during the term of your Securities. As an owner of the Securities, you will not have voting rights or any other rights that holders of the underlying equity may have. Furthermore, the underlying equity may appreciate substantially during the term of the Securities and you will not participate in such appreciation.
¨ No assurance that the investment view implicit in the Securities will be successful It is impossible to predict whether the price of the underlying equity will rise or fall. The closing price of the underlying equity will be influenced by complex and interrelated political, economic, financial and other factors that affect the underlying equity. You should be willing to accept the downside risks of owning equities in general and the underlying equity in particular, and to assume the risk that, if the Securities are not automatically called, you will not receive any positive return on your Securities and you may lose some or all of your initial investment.
¨ The calculation agent can make adjustments that affect the payment to you at maturity For certain corporate events affecting the underlying equity, the calculation agent may make adjustments to the initial price or trigger price. However, the calculation agent will not make an adjustment in response to all events that could affect the underlying equity. If an event occurs that does not require the calculation agent to make an adjustment, the value of the Securities may be materially and adversely affected. In addition, all determinations and calculations concerning any such adjustments will be made by the calculation agent. You should be aware that the calculation agent may make any such adjustment, determination or calculation in a manner that differs from that discussed in the product supplement as necessary to achieve an equitable result. Following a delisting or discontinuance of the underlying equity, the amount you receive at maturity may be based on a share of another exchange traded fund. The occurrence of these events and the
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consequent adjustments may materially and adversely affect the value of the Securities. For more information, see the section General Terms of the Securities Antidilution Adjustments and General Terms of the Securities Delisting, Discontinuance or Modification of an ETF in the product supplement. Regardless of any of the events discussed above, any payment on the Securities is subject to the creditworthiness of UBS.
¨ The value of the underlying equity may not completely track the value of the securities in which such exchange traded fund invests Although the trading characteristics and valuations of the underlying equity will usually mirror the characteristics and valuations of the securities in which such exchange traded fund invests, its value may not completely track the value of such securities. The value of the underlying equity will reflect transaction costs and fees that the securities in which that exchange traded fund invests do not have. In addition, although the underlying equity may be currently listed for trading on an exchange, there is no assurance that an active trading market will continue for such underlying equity or that there will be liquidity in the trading market.
¨ Fluctuation of NAV The net asset value (the NAV) of an exchange traded fund may fluctuate with changes in the market value of such exchange traded funds securities holdings. The market prices of the underlying equity may fluctuate in accordance with changes in NAV and supply and demand on the applicable stock exchanges. In addition, the market price of the underlying equity may differ from its NAV per share; the underlying equity may trade at, above or below its NAV per share.
¨ Failure of the underlying equity to track the level of the underlying index While the underlying equity is designed and intended to track the level of a specific index (an underlying index), various factors, including fees and other transaction costs, will prevent the underlying equity from correlating exactly with changes in the level of such underlying index. Accordingly, the performance of the underlying equity will not be equal to the performance of its underlying index during the term of the Securities.
¨ There are risks associated with currency exchange rates The iShares ® MSCI Emerging Markets Index Fund (EEM Fund) invests in securities that are traded and quoted in foreign currencies on non-U.S. markets. Therefore, holders of the Securities linked to the EEM Fund will be exposed to currency exchange rate risk with respect to the currencies in which such securities trade. The values of the currencies of the countries in which the EEM Fund may invest may be subject to a high degree of fluctuation due to changes in interest rates, the effects of monetary policies issued by the United States, foreign governments, central banks or supranational entities, the imposition of currency controls or other national or global political or economic developments. An investors net exposure will depend on the extent to which the relevant non-U.S. currencies strengthen or weaken against the U.S. dollar and the relative weight of each non-U.S. security in the portfolio of EEM Fund. If, taking into account such weighting, the U.S. dollar strengthens against the relevant non-U.S. currencies, the value of securities in which the EEM Fund invests will be adversely affected and the value of the Securities may decrease.
¨ There are risks associated with non-U.S. securities The Securities linked to the EEM Fund are subject to risks associated with non-U.S. securities markets. An investment in securities linked directly or indirectly to the value of securities issued by non-U.S. companies involves particular risks. Generally, non-U.S. securities markets may be more volatile than U.S. securities markets, and market developments may affect non-U.S. markets differently from U.S. securities markets. Direct or indirect government intervention to stabilize these non-U.S. markets, as well as cross shareholdings in non-U.S. companies, may affect trading prices and volumes in those markets. There is generally less publicly available information about non-U.S. companies than about those U.S. companies that are subject to the reporting requirements of the SEC, and non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies. Securities prices in non-U.S. countries are subject to political, economic, financial and social factors that may be unique to the particular country. These factors, which could negatively affect the non-U.S. securities markets, include the possibility of recent or future changes in the non-U.S. governments economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other non-U.S. laws or restrictions applicable to non-U.S. companies or investments in non-U.S. equity securities and the possibility of fluctuations in the rate of exchange between currencies. Moreover, certain aspects of a particular non-U.S. economy may differ favorably or unfavorably from the U.S. economy in important respects, such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency. Finally, it will likely be more costly and difficult to enforce the laws or regulations of a non-U.S. country or exchange.
¨ There are risks associated with emerging markets The Securities linked to the EEM Fund are subject to emerging markets risk. Investments in securities linked directly or indirectly to emerging market equity securities involve many risks, including, but not limited to: economic, social, political, financial and military conditions in the emerging market; regulation by national, provincial, and local governments; less liquidity and smaller market capitalizations than exist in the case of many large U.S. companies; different accounting and disclosure standards; and political uncertainties. Securities of emerging market companies may be more volatile and may be affected by market developments differently than U.S. companies. Government interventions to stabilize securities markets and cross-shareholdings may affect prices and volume of trading of the securities of emerging market companies. Economic, social, political, financial and military factors could, in turn, negatively affect such companies value. These factors could include changes in the emerging market governments economic and fiscal policies, possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to the emerging market companies or investments in their securities, and the possibility of fluctuations in the rate of exchange between currencies. Moreover, emerging market economies may differ favorably or unfavorably from the U.S. economy in a variety of ways, including growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency. You should carefully consider the risks related to emerging markets, to which the Securities are susceptible, before making a decision to invest in the Securities.
¨ There are risks associated with small-capitalization stocks The Securities linked to iShares ® Russell 2000 ® Index Fund (IWM Fund) are subject to risks associated with small-capitalization companies. The IWM Fund may invest in companies that may be considered small-capitalization companies. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies and therefore the respective funds share price may be more volatile than that of funds that invest a larger percentage of their assets in stocks issued by large-capitalization companies. Stock prices of small-capitalization companies are also more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of
6
small-capitalization companies may be thinly traded, making it difficult for the relevant fund to buy and sell them. In addition, small-capitalization companies are typically less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Small-capitalization companies are often given less analyst coverage and may be in early, and less predictable, periods of their corporate existences. Such companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse developments related to their products.
¨ Securities linked to the SPDR ® S&P ® Metals & Mining ETF (XME Fund) are subject to risks associated with the metals and mining industry All or substantially all of the equity securities held by the XME Fund are issued by companies whose primary lines of business are directly associated with the metals and mining industry. As a result, the value of the Securities may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting this industry than a different investment linked to securities of a more broadly diversified group of issuers. The metals and mining industry can be significantly affected by international political and economic developments, energy conservation, the success of exploration projects, commodity prices and tax and other government regulations. Companies involved in the metals and mining industry may benefit from government subsidies or certain trade protections. If those subsidies or trade protections are reduced or removed, the profits of such companies may be affected, potentially drastically. In addition, competitive pressures and the cyclical nature of the metal and mining industry may have a significant effect on the financial condition of these companies. These companies are also subject to risks of changes in exchange rates, terrorist attacks, depletion of resources and reduced demand as a result of increases in energy efficiency, substitution and energy conservation. Such companies are subject to extensive federal, state and local environmental laws and regulations regarding air emissions and the disposal of hazardous materials and may be at risk for environmental damage claims. These factors could cause a downturn in the metals and mining industry and could cause the value of the equity securities held by the XME Fund and the price of the XME Fund to decline during the term of the Securities.
¨ There may be little or no secondary market The Securities will not be listed or displayed on any securities exchange or any electronic communications network. There can be no assurance that a secondary market for the Securities will develop. UBS Securities LLC and other affiliates of UBS may make a market in each offering of the Securities, although they are not required to do so and may stop making a market at any time. If you are able to sell your Securities prior to maturity, you may have to sell them at a substantial loss.
¨ Price of Securities prior to maturity The market price of the Securities will be influenced by many unpredictable and interrelated factors, including the price of the underlying equity; the volatility of the underlying equity; the dividend rate paid on the underlying equity; the time remaining to the maturity of the Securities; interest rates in the markets; geopolitical conditions and economic, financial, political and regulatory or judicial events; and the creditworthiness of UBS.
¨ Impact of fees on secondary market prices Generally, the price of the Securities in the secondary market is likely to be lower than the initial price to public since the initial price to public included, and the secondary market prices are likely to exclude, commissions, hedging costs or other compensation paid with respect to the Securities.
¨ Potential UBS impact on price Trading or transactions by UBS or its affiliates in the underlying equity and/or over-the-counter options, futures or other instruments with returns linked to the performance of the underlying equity may adversely affect the performance and, therefore, the market value of the Securities.
¨ Potential conflict of interest UBS and its affiliates may engage in business with the issuer of the underlying equity, which may present a conflict between the obligations of UBS and you, as a holder of the Securities. There are also potential conflicts of interest between you and the calculation agent, which will be an affiliate of UBS.
¨ Potentially inconsistent research, opinions or recommendations by UBS UBS and its affiliates publish research from time to time on financial markets and other matters that may influence the value of the Securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Securities. Any research, opinions or recommendations expressed by UBS 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 Securities and the underlying equity to which the Securities are linked.
¨ Dealer incentives UBS and its affiliates act in various capacities with respect to the Securities. We and our affiliates may act as a principal, agent or dealer in connection with the sale of the Securities. Such affiliates, including the sales representatives, will derive compensation from the distribution of the Securities and such compensation may serve as an incentive to sell these Securities instead of other investments. We will pay total underwriting compensation of $0.25 per Security to any of our affiliates acting as agents or dealers in connection with the distribution of the Securities.
¨ Uncertain tax treatment Significant aspects of the tax treatment of the Securities are uncertain. You should consult your own tax advisor about your tax situation.
7
Hypothetical Examples
The examples below illustrate the payment upon a call or at maturity for a $10.00 Security on a hypothetical offering of the Securities, with the following assumptions (the actual terms for each Security are specified on the first page of this pricing supplement; amounts have been rounded for ease of reference):
| Principal Amount: | $10.00 |
|---|---|
| Term: | 5 years |
| Initial Price: | $60.00 |
| Call Return Rate: | 10.50% per annum (or 2.625% per quarterly period) |
| Observation Dates: | Quarterly, beginning after 1 year |
| Trigger Price: | $39.00 (which is 65% of the Initial Price) |
Example 1 Securities are Called on the First Observation Date
| Closing Price at first Observation Date: | $65.00 (at or above Initial Price, Securities are called) |
|---|---|
| Call Price (per Security): | $11.05 |
Since the Securities are called on the first observation date (which is approximately one year after the trade date), UBS will pay you on the call settlement date a total call price of $11.05 per $10.00 principal amount (10.50% return on the Securities).
Example 2 Securities are Called on the Final Valuation Date
| Closing Price at first Observation Date: | $55.00 (below Initial Price, Securities NOT called) |
|---|---|
| Closing Price at second Observation Date: | $50.00 (below Initial Price, Securities NOT called) |
| Closing Price at third Observation Date: | $45.00 (below Initial Price, Securities NOT called) |
| Closing Price at fourth to sixteenth Observation Date: | Various (each below Initial Price, Securities NOT called) |
| Closing Price at Final Valuation Date: | $65.00 (at or above Initial Price, Securities are called) |
| Call Price (per Security): | $15.25 |
Since the Securities are called on the final valuation date, UBS will pay you on the call settlement date (which coincides with the maturity date in this example) a total call price of $15.25 per $10.00 principal amount (52.50% return on the Securities).
Example 3 Securities are NOT Called and the Final Price is above the Trigger Price
| Closing Price at first Observation Date: | $55.00 (below Initial Price, Securities NOT called) |
|---|---|
| Closing Price at second Observation Date: | $50.00 (below Initial Price, Securities NOT called) |
| Closing Price at third Observation Date: | $45.00 (below Initial Price, Securities NOT called) |
| Closing Price at fourth to sixteenth Observation Date: | Various (each below Initial Price, Securities NOT called) |
| Closing Price at Final Valuation Date: | $40.00 (below Initial Price, but above Trigger Price, Securities NOT called) |
| Settlement Amount (per Security): | $10.00 |
Since the Securities are not called and the final price is above or equal to the trigger price, at maturity UBS will pay you a total of $10.00 per $10.00 principal amount (a zero percent return on the Securities).
Example 4 Securities are NOT Called and the Final Price is below the Trigger Price
| Closing Price at first Observation Date: | $55.00 (below Initial Price, Securities NOT called) |
|---|---|
| Closing Price at second Observation Date: | $50.00 (below Initial Price, Securities NOT called) |
| Closing Price at third Observation Date: | $35.00 (below Initial Price and Trigger Price, Securities NOT called) |
| Closing Price at fourth to sixteenth Observation Date: | Various (each below Initial Price, Securities NOT called) |
| Closing Price at Final Valuation Date: | $24.00 (below Initial Price and Trigger Price, Securities NOT called) |
| Settlement Amount (per Security): | $10.00 + ($10 × Underlying Return) |
| $10.00 + ($10 × -60%) | |
| $10.00 $6.00 | |
| $4.00 |
Since the Securities are not called and the final price is below the trigger price, at maturity UBS will pay you a total of $4.00 per $10.00 principal amount (a 60% loss on the Securities).
8
Information about the Underlying Equities
All disclosures contained in this pricing supplement regarding each underlying equity are derived from publicly available information. Neither UBS nor any of its affiliates assumes any responsibilities for the adequacy or accuracy of information about any underlying equity contained in this pricing supplement. You should make your own investigation into each underlying equity.
Included on the following pages is a brief description of each underlying equity. This information has been obtained from publicly available sources. Set forth below is a table that provides the quarterly high and low closing prices for each underlying equity. The information given below is for the four calendar quarters in each of 2008, 2009, 2010 and 2011. Partial data is provided for the first calendar quarter of 2012. We obtained the closing price information set forth below from the Bloomberg Professional service (Bloomberg) without independent verification. You should not take the historical prices of each underlying equity as an indication of future performance.
Each of the underlying equities are registered under the Securities Exchange Act of 1934 (the Exchange Act). Companies with securities registered under the Exchange Act are required to file financial and other information specified by the SEC periodically. Information filed by each underlying equity with the SEC can be reviewed electronically through a website maintained by the SEC. The address of the SECs website is http://www.sec.gov. Information filed with the SEC by each underlying equity issuer under the Exchange Act can be located by reference to its SEC file number provided below. In addition, information filed with the SEC can be inspected and copied at the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of this material can also be obtained from the Public Reference Section, at prescribed rates.
9
iShares ® MSCI Emerging Markets Index Fund
We have derived all information regarding the iShares ® MSCI Emerging Markets Index Fund (EEM Fund) contained in this pricing supplement from publicly available information. Such information reflects the policies of, and is subject to changes by BlackRock Fund Advisors (BFA), the investment manager of the EEM Fund. We make no representations or warranty as to the accuracy or completeness of the information derived from these public sources.
The EEM Fund is one of the one hundred and forty-five separate investment portfolios that constitute the iShares Trust. The EEM Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the MSCI Emerging Markets ® Index. The reference asset will at all times invest at least 90% of its assets in the securities of the MSCI Emerging Markets ® Index and American depositary receipts based on securities of the MSCI Emerging Markets ® Index. The EEM Fund also may invest its other assets in securities not in the MSCI Emerging Markets ® Index, futures contracts, options on futures contracts, options and swaps related to the MSCI Emerging Markets ® Index, as well as cash and cash equivalents, including shares of money market funds affiliated with BFA or its affiliates.
BFA uses a representative sampling strategy to manage the EEM Fund. Representative sampling is an indexing strategy that involves investing in a representative sample of the securities included in the MSCI Emerging Markets ® Index that collectively has an investment profile similar to the MSCI Emerging Markets ® Index. The securities selected are expected to have, in the aggregate, investment characteristics (based on market capitalization and industry weightings), fundamental characteristics (such as return variability and yield), and liquidity measures similar to those of the MSCI Emerging Markets ® Index. The EEM Fund may or may not hold all of the securities that are included in the MSCI Emerging Markets ® Index.
The MSCI Emerging Markets ® Index was developed by Morgan Stanley Capital International Inc. (MSCI) and is calculated, maintained and published by MSCI. MSCI is under no obligation to continue to publish, and may discontinue or suspend the publication of the MSCI Emerging Markets ® Index at any time. The MSCI Emerging Markets ® Index has been developed by MSCI as an equity benchmark for international stock performance, and is designed to measure equity market performance in the global emerging markets.
As of March 28, 2012, ordinary operating expenses of the EEM Fund are expected to accrue at an annual rate of 0.67% of the EEM Funds daily net asset value. Expenses of the EEM Fund reduce the net value of the assets held by the EEM Fund and, therefore, reduce the value of the shares of the EEM Fund.
As of December 31, 2011, the EEM Fund held stocks from the following 22 emerging markets (and the United States): Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Luxembourg, Malaysia, Mexico, Peru, the Philippines, Poland, the Russian Federation, South Africa, South Korea, Taiwan, Thailand and Turkey. As of December 31, 2011, the EEM Funds three largest industry concentrations were financials, energy and materials.
Information filed by the iShares Inc. with the SEC under the Securities Exchange Act and the Investment Company Act can be found by reference to its SEC file number: 033-97598 and 811-09102. The EEM Funds website is http://us.ishares.com/product_info/fund/overview/EEM.htm. Shares of the EEM Fund are listed on the NYSE Arca under ticker symbol EEM. Information from outside sources is not incorporated by reference in, and should not be considered part of, this pricing supplement or any accompanying prospectus. We make no representation or warranty as to the accuracy or completeness of the information contained in outside sources.
10
Historical Information
The following table sets forth the quarterly high and low closing prices for the EEM Fund, based on the daily closing prices on the primary exchange for the EEM Fund. We obtained the closing prices below based on daily closing prices as reported on Bloomberg, without independent verification. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg. The closing price of the EEM Fund on March 28, 2012 was $42.69. Past performance of the EEM Fund is not indicative of the future performance of the EEM Fund .
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Quarterly Close |
|---|---|---|---|---|
| 1/2/2008 | 3/31/2008 | $50.37 | $42.17 | $44.79 |
| 4/1/2008 | 6/30/2008 | $51.70 | $44.43 | $45.19 |
| 7/1/2008 | 9/30/2008 | $44.43 | $31.33 | $34.53 |
| 10/1/2008 | 12/31/2008 | $33.90 | $18.22 | $24.97 |
| 1/2/2009 | 3/31/2009 | $27.09 | $19.94 | $24.81 |
| 4/1/2009 | 6/30/2009 | $34.64 | $25.65 | $32.23 |
| 7/1/2009 | 9/30/2009 | $39.29 | $30.75 | $38.91 |
| 10/1/2009 | 12/31/2009 | $42.07 | $37.56 | $41.50 |
| 1/4/2010 | 3/31/2010 | $43.22 | $36.83 | $42.12 |
| 4/1/2010 | 6/30/2010 | $43.98 | $36.16 | $37.32 |
| 7/1/2010 | 9/30/2010 | $44.77 | $37.59 | $44.77 |
| 10/1/2010 | 12/31/2010 | $48.58 | $44.77 | $47.62 |
| 1/3/2011 | 3/31/2011 | $48.69 | $44.63 | $48.69 |
| 4/1/2011 | 6/30/2011 | $50.21 | $45.50 | $47.60 |
| 7/1/2011 | 9/30/2011 | $48.46 | $34.95 | $35.07 |
| 10/3/2011 | 12/30/2011 | $42.80 | $34.36 | $37.94 |
| 1/3/2012* | 3/28/2012* | $44.76 | $38.23 | $42.69 |
- As of the date of this pricing supplement, available information for the first calendar quarter of 2012 includes data for the period from January 3, 2012 through March 28, 2012. Accordingly, the Quarterly High, Quarterly Low and Quarterly Close data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2012.
The graph below illustrates the performance of the EEM Fund from August 27, 2003 through March 28, 2012, based on information from Bloomberg. The dotted line represents the trigger price of $27.75, which is equal to 65% of the closing price on March 28, 2012. Past performance of the EEM Fund is not indicative of the future performance of the EEM Fund.
11
iShares ® Russell 2000 ® Index Fund
We have derived all information regarding the iShares ® Russell 2000 ® Index Fund (IWM Fund) contained in this pricing supplement from publicly available information. Such information reflects the policies of, and is subject to changes by BlackRock Fund Advisors (BFA), the investment manager of the IWM Fund. We make no representations or warranty as to the accuracy or completeness of the information derived from these public sources.
The IWM Fund is one of the one hundred and forty-five separate investment portfolios that constitute the iShares Trust. The IWM Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses of the Russell 2000 ® Index (the Russell 2000). The Russell 2000 measures the performance of the small-capitalization sector of the U.S. equity market and is provided by Russell Investment Group, an organization that is independent of the IWM Fund and BFA. The Russell Investment Group is under no obligation to continue to publish, and may discontinue or suspend the publication of the Russell 2000 at any time.
The Russell 2000 is a float-adjusted capitalization-weighted index of equity securities issued by the approximately 2,000 smallest issuers in the Russell 3000 Index. The IWM Fund invests in a representative sample of securities included in the Russell 2000 that collectively has an investment profile similar to the Index. The securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability and yield), and liquidity measures similar to those of the Russell 2000. Due to the use of representative sampling, the IWM Fund may or may not hold all of the securities that are included in the Russell 2000.
As of March 28, 2012, ordinary operating expenses of the IWM Fund are expected to accrue at an annual rate of 0.26% of the IWM Funds daily net asset value. Expenses of the IWM Fund reduce the net asset value of the assets held by the IWM Fund and, therefore, reduce the value of the shares of the IWM Fund.
Information filed by iShares Trust with the SEC under the Securities Exchange Act and the Investment Company Act can be found by reference to its SEC file number: 333-92935 and 811-09729. IWM Funds website is http://us.ishares.com/product_info/fund/ overview/IWM.htm. Shares of the IWM Fund are listed on the NYSE Arca under ticker symbol IWM. Information from outside sources is not incorporated by reference in, and should not be considered part of, this pricing supplement or any accompanying prospectus. We make no representation or warranty as to the accuracy or completeness of the information contained in outside sources.
12
Historical Information
The following table sets forth the quarterly high and low closing prices for the IWM Fund, based on the daily closing prices on the primary exchange for the IWM Fund. We obtained the closing prices below based on daily closing prices as reported on Bloomberg, without independent verification. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg. The closing price of the IWM Fund on March 28, 2012 was $83.30. Past performance of the IWM Fund is not indicative of the future performance of the IWM Fund.
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Quarterly Close |
|---|---|---|---|---|
| 1/2/2008 | 3/31/2008 | $75.12 | $64.30 | $68.51 |
| 4/1/2008 | 6/30/2008 | $76.17 | $68.47 | $69.03 |
| 7/1/2008 | 9/30/2008 | $75.20 | $65.50 | $68.39 |
| 10/1/2008 | 12/31/2008 | $67.02 | $38.58 | $49.27 |
| 1/2/2009 | 3/31/2009 | $51.27 | $34.36 | $41.94 |
| 4/1/2009 | 6/30/2009 | $53.19 | $42.82 | $50.96 |
| 7/1/2009 | 9/30/2009 | $62.02 | $47.87 | $60.23 |
| 10/1/2009 | 12/31/2009 | $63.36 | $56.22 | $62.26 |
| 1/4/2010 | 3/31/2010 | $69.25 | $58.68 | $67.81 |
| 4/1/2010 | 6/30/2010 | $74.14 | $61.08 | $61.08 |
| 7/1/2010 | 9/30/2010 | $67.67 | $59.04 | $67.47 |
| 10/1/2010 | 12/31/2010 | $79.22 | $66.94 | $78.23 |
| 1/3/2011 | 3/31/2011 | $84.17 | $77.18 | $84.17 |
| 4/1/2011 | 6/30/2011 | $86.37 | $77.77 | $82.80 |
| 7/1/2011 | 9/30/2011 | $85.65 | $64.25 | $64.25 |
| 10/3/2011 | 12/30/2011 | $76.45 | $60.97 | $73.69 |
| 1/3/2012* | 3/28/2012* | $84.41 | $74.56 | $83.30 |
- As of the date of this pricing supplement, available information for the first calendar quarter of 2012 includes data for the period from January 3, 2012 through March 28, 2012. Accordingly, the Quarterly High, Quarterly Low and Quarterly Close data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2012.
The graph below illustrates the performance of the IWM Fund from June 14, 2002 through March 28, 2012, based on information from Bloomberg. The dotted line represents the trigger price of $45.82, which is equal to 55% of the closing price on March 28, 2012. Past performance of the IWM Fund is not indicative of the future performance of the IWM Fund.
13
SPDR ® S&P ® Metals & Mining ETF
We have derived all information regarding the SPDR ® S&P ® Metals & Mining ETF (XME Fund) contained in this pricing supplement from publicly available information. Such information reflects the policies of, and is subject to changes by SSgA Funds Management, Inc. (SSFM), the investment manager of the XME Fund. We make no representations or warranty as to the accuracy or completeness of the information derived from these public sources.
The XME Fund is an exchange-traded fund of SPDR ® Series Trust, which is a registered investment company that consists of numerous separate investment portfolios. The XME Fund seeks to replicate as closely as possible, before fees and expenses, the total return of the S&P ® Metals & Mining Select Industry Index (the underlying index). The underlying index is an equal-weighted index that is designed to measure the performance of the metals and mining sub-industry portion of the S&P ® Total Market Index, a benchmark that measures the performance of the U.S. equity market.
Under normal market conditions, the XME Fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the underlying index. In addition, the XME Fund may invest in equity securities that are not included in the underlying index, cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds (including money market funds advised by SSFM).
As of March 28, 2012, ordinary operating expenses of the XME Fund are expected to accrue at an annual rate of 0.35% of the XME Funds daily net asset value. Expenses of the XME Fund reduce the net value of the assets held by the XME Fund and, therefore, reduce the value of the shares of XME Fund.
Information filed by SPDR ® Series Trust with the SEC under the Securities Exchange Act and the Investment Company Act can be found by reference to its SEC file numbers: 333-57793 and 811-08839. The XME Funds website is: https://www.spdrs.com/product/fund.seam?ticker=XME. Shares of the XME Fund are listed on NYSE Arca under ticker symbol XME. Information from outside sources is not incorporated by reference in, and should not be considered part of, this pricing supplement or any accompanying prospectus. We make no representation or warranty as to the accuracy or completeness of the information contained in outside sources.
14
Historical Information
The following table sets forth the quarterly high and low closing prices for the XME Fund, based on the daily closing prices on the primary exchange for the XME Fund. We obtained the closing prices below based on daily closing prices as reported on Bloomberg, without independent verification. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg. The closing price of the XME Fund on March 28, 2012 was $49.00. Past performance of the XME Fund is not indicative of the future performance of the XME Fund .
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Quarterly Close |
|---|---|---|---|---|
| 1/2/2008 | 3/31/2008 | $77.53 | $57.85 | $70.01 |
| 4/1/2008 | 6/30/2008 | $94.24 | $71.36 | $94.24 |
| 7/1/2008 | 9/30/2008 | $92.77 | $43.99 | $47.08 |
| 10/1/2008 | 12/31/2008 | $44.44 | $17.37 | $27.79 |
| 1/2/2009 | 3/31/2009 | $32.49 | $20.79 | $25.14 |
| 4/1/2009 | 6/30/2009 | $43.00 | $26.36 | $37.01 |
| 7/1/2009 | 9/30/2009 | $49.62 | $32.87 | $45.64 |
| 10/1/2009 | 12/31/2009 | $53.55 | $42.35 | $51.61 |
| 1/4/2010 | 3/31/2010 | $58.73 | $45.48 | $56.81 |
| 4/1/2010 | 6/30/2010 | $59.95 | $45.69 | $45.69 |
| 7/1/2010 | 9/30/2010 | $53.81 | $44.73 | $53.48 |
| 10/1/2010 | 12/31/2010 | $69.01 | $53.09 | $68.78 |
| 1/3/2011 | 3/31/2011 | $74.28 | $65.53 | $74.28 |
| 4/1/2011 | 6/30/2011 | $76.48 | $62.77 | $69.41 |
| 7/1/2011 | 9/30/2011 | $71.80 | $44.82 | $44.82 |
| 10/3/2011 | 12/30/2011 | $58.99 | $41.88 | $48.99 |
| 1/3/2012* | 3/28/2012* | $56.78 | $48.69 | $49.00 |
- As of the date of this pricing supplement, available information for the first calendar quarter of 2012 includes data for the period from January 3, 2012 through March 28, 2012. Accordingly, the Quarterly High, Quarterly Low and Quarterly Close data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2012.
The graph below illustrates the performance of the XME Fund from June 22, 2006 through March 28, 2012, based on information from Bloomberg. The dotted line represents the trigger price of $22.05, which is equal to 45% of the closing price on March 28, 2012. Past performance of the XME Fund is not indicative of the future performance of the XME Fund .
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What are the Tax Consequences of 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 in Supplemental U.S. Tax Considerations beginning on page PS-47 of the TAOS product supplement and to discuss the tax consequences of your particular situation with your tax advisor.
Pursuant to the terms of the Securities, UBS and you agree, in the absence of a statutory, regulatory, administrative or judicial ruling to the contrary, to characterize the Securities as a pre-paid derivative contract with respect to the underlying equity. If your Securities are so treated, you should generally recognize capital gain or loss upon the sale, automatic call, redemption or maturity of your Securities in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Securities. Such gain or loss should generally be long term capital gain or loss if you have held your Securities for more than one year.
Unless otherwise specified in this pricing supplement, in the opinion of our counsel, Cadwalader, Wickersham & Taft LLP, it would be reasonable to treat your Securities in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Securities, it is possible that your Securities could alternatively be treated for tax purposes in the manner described under Supplemental U.S. Tax Considerations Alternative Treatments beginning on page PS-49 of the TAOS product supplement including possible treatment as a constructive ownership transaction subject to the constructive ownership rules of Section 1260 of the Code, as described in such product supplement. The risk that the Securities may be recharacterized for United States federal income tax purposes as instruments giving rise to current ordinary income (even before receipt of any cash) and short-term capital gain or loss (even if held for more than one year), is higher than with other equity-linked securities that similarly do not guarantee full repayment of principal.
In 2007, the Internal Revenue Service released a notice that may affect the taxation of holders of the Securities. According to the notice, the Internal Revenue Service and the Treasury Department are actively considering whether the holder of an instrument such as the Securities should be required to accrue ordinary income on a current basis. It is not possible to determine what guidance they will ultimately issue, if any. It is possible, however, that under such guidance, holders of the Securities will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The Internal Revenue Service and the Treasury Department are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders of such instruments should be subject to withholding tax on any deemed income accruals, and whether the special constructive ownership rules of Section 1260 of the Internal Revenue Code should be applied to such instruments. Holders are urged to consult their tax advisors concerning the significance, and the potential impact, of the above considerations. Except to the extent otherwise required by law, UBS intends to treat your Securities for United States federal income tax purposes in accordance with the treatment described above and under Supplemental U.S. Tax Considerations beginning on page PS-47 of the TAOS product supplement unless and until such time as the Treasury Department and Internal Revenue Service determine that some other treatment is more appropriate.
Moreover, in 2007, legislation was introduced in Congress that, if enacted, would have required holders of Securities purchased after the bill was enacted to accrue interest income over the term of the Securities despite the fact that there will be no interest payments over the term of the Securities. It is not possible to predict whether a similar or identical bill will be enacted in the future, or whether any such bill would affect the tax treatment of your Securities.
Beginning in 2013, U.S. holders that are individuals, estates, and certain trusts will be subject to an additional 3.8% tax on all or a portion of their net investment income, which may include any gain realized with respect to the Securities, to the extent of their net investment income that when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), or $125,000 for a married individual filing a separate return. U.S. holders should consult their tax advisors with respect to their consequences with respect to the 3.8% Medicare tax.
Specified Foreign Financial Assets . Under recently enacted legislation, individuals that own specified foreign financial assets in excess of an applicable threshold may be required to file information with respect to such assets with their tax returns, especially if such assets are held outside the custody of a U.S. financial institution. You are urged to consult your tax advisor as to the application of this legislation to your ownership of the Securities.
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Supplemental Plan of Distribution (Conflicts of Interest)
We have agreed to sell to UBS Financial Services Inc. and certain of its affiliates, together the Agents, and the Agents have agreed to purchase, all of the Securities at the issue price less the underwriting discount indicated on the cover of this pricing supplement, the document filed pursuant to Rule 424(b) containing the final pricing terms of the Securities.
We or one of our affiliates may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Securities and UBS or its affiliates may earn additional income as a result of payments pursuant to the swap or related hedge transactions.
Conflicts of Interest Each of UBS Securities LLC and UBS Financial Services Inc. is an affiliate of UBS and, as such, has a conflict of interest in this offering within the meaning of FINRA Rule 5121. In addition, UBS will receive the net proceeds (excluding the underwriting discount) from the initial public offering of the Securities, thus creating an additional conflict of interest within the meaning of Rule 5121. Consequently, the offering is being conducted in compliance with the provisions of Rule 5121. Neither UBS Securities LLC nor UBS Financial Services Inc. is permitted to sell Securities in this offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.
Structured Product Categorization
To help investors identify appropriate Structured Products (Structured Products), UBS organizes its Structured Products into four categories: Protection Strategies, Optimization Strategies, Performance Strategies and Leverage Strategies. The Securities are classified by UBS as an Optimization Strategy for this purpose. The description below is intended to describe generally the four categories of Structured Products and the types of principal repayment features that may be offered on those products. This description should not be relied upon as a description of any particular Structured Product.
¨ Protection Strategies are structured to complement and provide the potential to outperform traditional fixed income instruments. These Structured Products are generally designed for investors with low to moderate risk tolerances.
¨ Optimization Strategies provide the opportunity to enhance market returns or yields and can be structured with full downside market exposure or with buffered or contingent downside market exposure. These structured products are generally designed for investors who can tolerate downside market risk.
¨ Performance Strategies provide efficient access to markets and can be structured with full downside market exposure or with buffered or contingent downside market exposure. These structured products are generally designed for investors who can tolerate downside market risk.
¨ Leverage Strategies provide leveraged exposure to the performance of an underlying asset. These Structured Products are generally designed for investors with high risk tolerances.
In order to benefit from any type of principal repayment feature, investors must hold the Securities to maturity.
Classification of Structured Products into categories is for informational purposes only and is not intended to guarantee particular results or performance.
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