Product Disclosure Statement

Transcription

1 Product Disclosure Statement UBS Fixed IncomePlus PDS dated 13 February 2008 Issued by UBS AG, Australia Branch ABN , AFSL

2 Important notice This document is a Product Disclosure Statement ( PDS ) dated 13 February 2008 and relates to the issue of Fixed IncomePlus ( FIP or Investment ). UBS AG, Australia Branch (ABN ) (AFSL No ) is the issuer of this PDS and the FIPs. The FIPs are cash settled warrants with a physical equities delivery option and include a principal protection mechanism. Applications Applications must be made on the Application Form accompanying this PDS. Your decision to invest The information in this PDS is general information only and does not take into account your own investment objectives, financial situation or particular needs. Accordingly, you should consider whether the information in this PDS is appropriate in light of your investment objectives, financial situation and particular needs and obtain independent financial and taxation advice before you invest. Investment is not a deposit with UBS The FIPs are not a deposit with UBS or any of its related bodies corporate and are subject to investment risk, including possible delays in repayment and loss of income or principal invested. Neither UBS nor any of its related bodies corporate guarantee the performance of the FIPs, the repayment of capital from the FIPs or any particular rate of return. Offering restrictions The offer to which this PDS relates is available to persons receiving this PDS (electronically or otherwise) in Australia. The distribution of this PDS in jurisdictions outside Australia may be restricted by law and any person who resides outside Australia into whose possession this PDS comes (including nominees, trustees or custodians) should seek advice on and observe those restrictions. Each FIP is not a security under the US Securities Act 1933 (as amended) and has not been, and will not be, registered under the US Securities Act 1933 (as amended) and may not be offered or sold in the United States or to, or for the account of, or benefit of, US persons. Accordingly neither this PDS nor the Application Form may be sent to persons in the United States or otherwise distributed in the United States. Updating of information in this PDS This PDS is current as at 13 February Information in this PDS may change from time to time. Where those changes are not materially adverse to Investors, UBS may update the information by posting a notice on its website at UBS will, on request, provide Investors with a free paper copy of that updated information to Investors who contact UBS on Delivery Securities and Reference Assets References in this PDS to a component of the Delivery Securities or Reference Assets are included solely for the purposes of identification of the securities to be delivered to the Investor on exercise of the FIPs and performance of the Net Asset Value to calculate Coupons or Cash Settlement Amounts to which the FIPs relate, respectively. The issuer of assets which comprise the Delivery Securities or are referenced within the Reference Assets have not authorised, been involved in the preparation of, or caused the issue of this PDS. Information in this PDS in respect of the assets or investments to which the Reference Assets provide exposure has been prepared by UBS from publicly available information only and has not been independently verified. To the extent permitted by law, UBS does not accept any liability or responsibility for, and makes no representation or warranty, express or implied, as to the accuracy or completeness of such information. Investors should make their own enquiries. Variation of Offer times UBS reserves the right to vary the dates and times of the offer, including the discretion to extend or reduce the length of the Initial Offer Period and the General Offer Period. However, in exercising its discretion UBS will act reasonably and will not leave the Initial Offer Period open for an unreasonable length of time. No representations other than in this PDS Investors should also note that no person is authorised by UBS to give any information to Investors or to make any representation not contained in this PDS. Nothing contained in this PDS is to be relied on as implying that there has been no change in the affairs of UBS or the Nominee since the date of this PDS. No representation as to future performance of the FIPs is made in this PDS or in any offer or invitation to subscribe for, sell or issue the FIPs. UBS to make application for admission to trading status on the ASX UBS proposes to make an application to the ASX within 7 days of the date of this PDS for the taking of such action as is necessary to enable the FIPs to be admitted to trading status on the ASX. Admission of the FIPs to trading status on the ASX is at the absolute discretion of the ASX. If the ASX admits the FIPs to trading status, this is not to be taken in any way as an indication of the merits of UBS or of the FIPs. Irrespective of whether the ASX admits the FIPs to trading status on the ASX, the ASX has not authorised or caused the issue of this PDS and is not in any way a party to or concerned in authorising or causing the issue of this PDS or the making of offers or invitations with respect to the FIPs. The ASX takes no responsibility for the contents of this PDS. The ASX makes no representation as to whether this PDS or the FIPs comply with the Corporations Act or the ASX Market Rules. To the extent permitted by the ASIC Act 2001, the Trade Practices Act 1974 or any other relevant law, the ASX will be under no liability for any claim whatsoever, including for any financial or consequential loss or damage suffered by Investors or any other person, whether that claim arises wholly or substantially out of reliance on any information contained in this PDS or any error in or omission from this PDS. Cooling off: There is no cooling off period when you acquire the FIPs issued under this PDS. Interpretation: Capitalised terms used in this PDS are defined in Part 11.

3 Table of Contents Table Of Contents INVESTMENT OVERVIEW 2 PART 1: KEY FEATURES 5 PART 2: BENEFITS 11 PART 3 RISKS 12 PART 4: REFERENCE ASSETS 16 PART 5: COUPON PAYMENTS AND PRINCIPAL PROTECTION MECHANISM 18 PART 6: FEES AND OTHER COSTS 25 PART 7: TAXATION SUMMARY 30 PART 8: DESCRIPTION OF UBS AND NOMINEE 32 PART 9: TERMS OF ISSUE 33 PART 10: ADDITIONAL INFORMATION 42 PART 11: GLOSSARY 46 PART 12: INSTRUCTIONS FOR THE APPLICATION FORM 52 PART 13: APPLICATION FORM 54 PART 14: INSTRUCTIONS FOR THE EARLY EXIT FORM 59 PART 15: EARLY EXIT FORM 61 1

4 Investment Overview Feature Product Summary Issuer details UBS AG, Australia Branch (ABN ) (AFSL No ) Level 16, Chifley Tower 2 Chifley Square, Sydney NSW 2000 Phone: Website: What is the investment? The UBS Fixed IncomePlus investment ( FIP ) is an investment which: provides exposure to a range of fixed income investments; is expected to be quoted on the ASX; and provides a principal protection mechanism for $1.00 per FIP at the end of a resetting period of 4 years. Please refer to Part 1.8. The FIPs provide exposure to the performance of Reference Assets comprising: a floating rate Cash Investment held by UBS; and the UBS Fixed IncomePlus Index. The exposure to the Cash Investment and the Index is notional only and Investors do not have any interest in the Reference Assets. FIPs are cash settled. Alternatively, at the option of an Investor, FIPs may be settled by the physical delivery of equity securities at Maturity or on Early Exit. Please refer to Part Investment aims Application for admission to trading status on ASX FIPs are designed to have the ability to generate higher returns than cash, fixed income managed funds and bond products, and are designed to be held for at least three years. UBS will make an application to the ASX within 7 days of the date of this PDS for the taking of such action as is necessary to enable the FIPs to be admitted to trading status on the ASX. If the FIPs are not admitted to trading status by the ASX on or before the Initial Issue Date (which is expected to be 4 April 2008): no FIPs will be issued in respect of any Applications received; and any Application Amount received by UBS in respect of Applications will be returned to the Applicant without interest. Expected ASX code FIPSS1 Initial Offer Period 13 February to 28 March 2008 General Offer Period Initial Issue Date and expected commencement of trading on ASX Initial Issue Price, Issue Price and Principal Protected Amount 29 March 2008 to Maturity Date 4 April 2008 The Principal Protected Amount and the Initial Issue Price is $1.00 per FIP. During the General Offer Period, the Issue Price is the Net Asset Value of the FIP on the date of issue of the FIP. For information on when Principal Protection applies refer to Part 1.8. Minimum Application Amount $20,000 2

5 Investment Overview Feature Issue Size Product Summary Up to 200 million FIPs. UBS may proceed with the offer if less than that amount is received, and UBS reserves the right (with ASX consent) to increase the Issue Size. Final Maturity Date 4 October 2021, subject to Maturity occurring earlier if a Maturity Trigger applies - please refer to Part Financial Adviser Fee and Approved Distributor Fee Index Participation Fee Performance Fee Worked examples of Fees and Costs Coupons A Financial Adviser placement fee of between zero and $0.025 (including GST) for each $1.00 of the Application Amount (i.e. a fee of up to 2.5% of the Application Amount) and an Approved Distributor Fee of between zero and $0.008 (including GST) for each $1.00 of the Application Amount (i.e. a fee of up to 0.8% of the Application Amount). For Applications received during the Initial Offer Period all of the Application Amount will be applied to the issue of FIPs at the Initial Issue Price and these fees will result in the Net Asset Value of the FIPs being reduced by the amount of these fees. This means that the Net Asset Value for the purposes of calculating Coupons and any payment of a Cash Settlement Amount due to an Investor by reference to Net Asset Value is lowered by the amount of these fees. For Applications received after the Initial Offer Period these fees will be paid out of the Application Amount before the balance is applied to the issue of FIPs at an Issue Price equal to the then Net Asset Value. The payment of fees will reduce the number of FIPs that would otherwise be issued to you by UBS. This means that the aggregate Principal Protected Amount for your FIPs calculated at $1.00 per FIP will be less than the total Application Amount paid by you. The Financial Adviser Fee and Approved Distributor Fee may be waived in part or whole by your Financial Adviser and or Approved Distributor, which will result in additional FIPs equal to the amount of fees waived being issued to you. An Index Participation Fee of 0.40% per annum of the daily Reference Asset Value of each FIP multiplied by the Index Participation Level (i.e. a fee of 2.00% per annum) will accrue daily from the Issue Date and be paid to UBS on each Coupon Determination Date (including the Maturity Date) by reducing the Net Asset Value of the FIPs. This means that this fee reduces the Coupon Amount which would otherwise be payable, and/or Cash Settlement Amount payment for your FIPs, by the amount of this fee. A performance fee equal to 10% of any excess of the Reference Asset Value over a benchmark of the UBS Bank Bill Index % per annum, subject to a High Water Mark, calculated on each Coupon Determination Date and paid to UBS on each Coupon Determination Date by reducing the Net Asset Value of the FIPs. This means that this fee also reduces the Coupon Amount which would otherwise be payable, and/or the Cash Settlement Amount payment for your FIPs, by the amount of this fee. Refer to Part 6 for further information including worked examples of all fees that apply to the FIPs. The FIPs are expected to pay semi-annual coupons equal to 100% of any excess of the Net Asset Value over the Coupon Threshold Amount. The Coupon Threshold Amount is $1.00 per FIP, the same as the Principal Protected Amount, for each Coupon Determination Date except for the first one (refer to Part 1.6). The Coupon is payable within 15 Business Days of the Coupon Determination Date. No Coupons are paid in respect of a Coupon Determination Date if the Net Asset Value on that date is less than the Coupon Threshold Amount, and no further Coupons are paid for the remainder of the Term if a Principal Protection Trigger has occurred. For further explanation please refer to Part

6 Investment Overview Feature Settlement Product Summary At Maturity or on Early Exit or on Early Maturity Investors are entitled to receive the Cash Settlement Amount for their FIPs in cash. In the case of Maturity or Early Exit only, Investors may at any time make an election to instead receive the Cash Settlement Amount in the form of the Delivery Securities (and any rounding amount in cash) by lodging an Exercise Notice with UBS and by paying to UBS the Exercise Price of $0.01 per FIP. Refer to Part 1.14 for further information. The Cash Settlement Amount has Principal Protection on Maturity (which includes the 4 Year Principal Protection Date). Principal Protection is not available if Investors sell their FIPs, if Investors exit their investment on a date which is not the Maturity Date, or if Early Maturity occurs. However, the FIPs are designed such that Investors have the ability to exit the investment on any Early Exit Date, and can specify an election to only do so automatically on the next Early Exit Date on which the Net Asset Value is equal to or greater than the Principal Protected Amount. If an Investor so elects, they may have an opportunity to effectively exit at an earlier date than the 4 Year Principal Protection Date or Maturity Date but still exit for an amount equal to or greater than the Principal Protected Amount. For further explanation please refer to Parts 1.8, 1.9, 1.10, 1.12, 1.13 and

7 Part 1: Key Features 1.1. What are FIPs? The FIPs offer a pure fixed income investment exposure with the potential for semi-annual Coupons and Principal Protection equal to $1.00 per FIP What is the investment exposure? Each FIP provides exposure to the combined performance of the following notional Reference Assets: a floating rate Cash Investment held by UBS earning a wholesale rate of interest published by UBS from time to time, as described in Part 4.1; and the UBS Fixed IncomePlus Index, as described in Parts 1.3 and What is the Index? The UBS Fixed IncomePlus Index is a proprietary UBS index which tracks the performance of an equally weighted and diversified portfolio of four UBS fixed income investments. The Index component is designed to offer Investors a medium term, low turnover exposure to four complementary, and lowly correlated, fixed income markets. Diversified Credit 25% Interest Rate Differentials 25% Short Term Interest Rates 25% Long Term Interest Rates 25% 1. Short Term Interest Rates: Provides exposure to 90 day interest rates in United States, Europe, Japan, Great Britain and Switzerland. 2. Long Term Interest Rates: Provides exposure to a benchmark European 10 year interest rate market. between Australian Dollars, Swiss Francs, Euro, British Pounds, Japanese Yen, and United States Dollar markets. 4. Diversified Credit: Provides exposure to a diversified long / short investment grade credit portfolio. Each investment is operated by UBS and is run independently of one another. Each investment is operated by UBS on a quantitative basis. The Index Participation Level is described in Part 1.4 below. For more detailed information about the Index please refer to Part What is the Cash Investment exposure and Index Participation Level of the FIPs? The FIPs have been constructed in order to enable participation in the Index on an unfunded basis. This means that no physical cash investment in the Index is required to generate potential returns from the Index when using the FIPs structure. Under the FIPs structure: Investors are entitled to 100% of returns based on the performance of the Cash Investment for the full amount of their investment in FIPs, subject to fees and costs; and in addition, Investors are entitled to 100% of returns based on the Index performance on an enhanced basis described below, subject to fees and costs; and other than the deduction of fees and costs as disclosed in this PDS there are no borrowing, debt or interest costs incurred in order to provide any level of Index participation. The FIPs provide an Index Participation Level of 5.00 times the Principal Protected Amount. This means that the FIPs will have enhanced participation in respect of both rises and falls in the Index. If, for example, the Index rises or falls by 0.75% per annum, then (subject to the impact of fees and costs and performance of the Cash Investment) the FIPs will be affected by that move by 5.00 times (or 3.75% per annum increase or decrease in the Index). 3. Interest Rate Differentials: Provides exposure to 30 day interest rate differentials 5

8 Part 1: Key Features 1.5. Historic Reference Asset Performance Although the Index in the form constructed for FIPs is only recently available, the four underlying investment strategies have been run by UBS for a significant time in the form in which they are to be applied for FIPs. To assist potential investors understanding of the performance characteristics of the Reference Assets, an illustrative table which reconstructs what the historic performance of the Reference Assets would have been during the period 31 December 1997 to 31 December 2007 is set out below. This information is provided after taking into account the Index Participation Level and after all Ongoing Fees, as they apply for FIPs. Index performance has been measured on rolling investment periods of the specified duration, commencing each calendar month and ending on or before the 10 year period covered by this data. Rolling investment periods Average return 3 months 4.60% (actual)* 1 year 18.42% per annum 3 years 19.91% per annum 5 years 21.69% per annum Highest observed return 16.74% (actual)* 43.39% per annum 31.86% per annum 25.90% per annum Lowest observed return % (actual)* 4.39% per annum 9.23% per annum 15.18% per annum * These percentages are stated as the actual return over the three month period and are not annualised. Past performance is not a reliable indicator of future performance. This is not a forecast and actual performance may differ materially. This information should not be used as a basis for assessing the amount of future returns. Coupon = Net Asset Value Coupon Threshold Amount The Coupon Threshold Amount will be $0.983 per FIP for the first Coupon Determination Date, and $1.00 per FIP for each subsequent Coupon Determination Date. The lower threshold has been set for the first Coupon Determination Date to partially offset the impact of payment of the Approved Distributor Fee and the Financial Adviser Fee, for issues of FIPs before the first Coupon Determination Date. The Net Asset Value per FIP is calculated as the value of the Cash Investment per FIP plus the value of the Index per FIP after taking into account the Index Participation Level, less Ongoing Fees per FIP. Each Coupon Amount payable in respect of a Coupon Period reduces the Net Asset Value per FIP by the amount of the Coupon Amount per FIP. The Net Asset Value per FIP for Applications received during the Initial Offer Period will also be reduced by any Financial Adviser Fee and Distributor Fees paid per FIP issued. Refer to Part 5 for worked examples. No Coupon is payable for a Coupon Period if the Net Asset Value on the relevant Coupon Determination Date is equal to or less than the Coupon Threshold Amount. No further Coupons will be payable on the FIPs at all for the remainder of the Term, if a Principal Protection Trigger occurs (refer to Part 1.9 and Part 5) How are Coupons calculated? The FIPs are expected to pay semi-annual Coupons equal to 100% of the amount by which the Net Asset Value per FIP exceeds the Coupon Threshold Amount, calculated as at the Coupon Determination Date for that Coupon Period. The Coupon Amount for a Coupon Period will be paid within 15 Business Days of the Coupon Determination Date for that Coupon Period. 6

9 Part 1: Key Features 1.7. How can I liquidate my Investment? There are several options available for Investors wishing to liquidate their holding in the FIPs prior to the Maturity Date. 1 Sell on the ASX An Investor may sell their investment in FIPs at any time on the ASX. UBS will arrange for a daily buy price to be quoted on the ASX. 2 Early Exit An Investor may complete and lodge an Early Exit Form and elect to redeem at the prevailing Net Asset Value on the next Early Exit Date. Alternatively, when electing an Early Exit, an Investor may choose to redeem with effect only when the Net Asset Value per FIP is next equal to or greater than the Principal Protected Amount on an Early Exit Date. An Investor can elect either of these alternatives within the Early Exit option, at any time during the Term and regardless of whether or not a Principal Protection Trigger has occurred. For the Early Exit option at 2 above, Investors will automatically receive the Net Asset Value in cash. Alternatively, Investors can elect to exercise the call option to receive the Net Asset Value in the form of Delivery Securities (plus any rounding amount in cash) by paying the Exercise Price of $0.01 per FIP to UBS and making this election in the Early Exit Form. An Investor can elect Early Exit in respect of minimum holdings of 20,000 FIPs or (if less) for the balance of their remaining holding of FIPs. Early Exit Forms will be processed each Friday during the Term which is a Business Day, and also on each Coupon Determination Date. Early Exit Forms received by UBS before Closing Time each Wednesday will be processed on the Friday of that week (if it is a Business Day), or otherwise on the next Business Day after that Friday. Early Exit Forms received by UBS before Closing Time on the day which is two Business Days prior to a Coupon Determination Date will be processed on that Coupon Determination Date Principal Protection mechanism The Principal Protection mechanism is designed to offer Investors a Principal Protected exit option within a timeframe which is never longer than 4 years, and in any event on the Maturity Date. On the Initial Issue Date, the period until Principal Protection is next available will be four years from that date. This is the initial 4 Year Principal Protection Date. On each six monthly Coupon Determination Date following the Initial Issue Date, provided the Net Asset Value per FIP is equal to or above the Principal Protected Amount per FIP, the then current 4 Year Principal Protection Date will be reset to reflect a new 4 Year Principal Protection Date. This new 4 Year Principal Protection Date will be the date which is 4 years after that Coupon Determination Date. Conversely, if the Net Asset Value is below the Principal Protected Amount on a six monthly Coupon Determination Date, the then current 4 Year Principal Protection Date will remain unchanged until such time as the Net Asset Value is above the Principal Protected Amount on a subsequent Coupon Determination Date. If a 4 Year Principal Protection Trigger occurs, Maturity will occur on the then current 4 Year Principal Protection Date, and the 4 Year Principal Protection Date can no longer be reset. If the Net Asset Value is always below the Principal Protected Amount on each six monthly Coupon Determination Date up to and including the then current 4 Year Principal Protection Date, then the FIPs will mature on that 4 Year Principal Protection Date as a result of a Principal Protection Trigger occurring. The most important considerations regarding timing of availability of Principal Protection for Investors are: 1. All Investors will have the ability to exit their Investment in FIPs at a Net Asset Value at least equal to the Principal Protected Amount before the 4 Year Principal Protection Date is reset to a later date. This is because a reset of the 4 Year Principal Protection Date can only ever occur on a Coupon Determination Date when the Net 7

10 Part 1: Key Features Asset Value is equal to or above the Principal Protected Amount. This means that Investors can have elected and received an Early Exit for at least the Principal Protected Amount by submitting an Early Exit Form which makes that election with effect on an Early Exit Date which is on or before that Coupon Determination Date (refer to Part 1.7). If they have not so elected, they may have to wait until the later reset 4 Year Principal Protection Date for Principal Protection to be available. 2. For all Investors, if a Principal Protection Trigger occurs the longest any Investor needs to wait to receive the Principal Protected Amount is the time from the Principal Protection Trigger to the then current 4 Year Principal Protection Date, which will also be the Maturity Date. Principal Protection is not available if an Early Maturity Event occurs (refer to Part 1.15), or if an Investor elects an Early Exit without electing that this exit election only applies for at least the Principal Protected Amount (refer to part 1.7), or if an Investor sells on the ASX What is the Principal Protection Trigger? The Principal Protection Trigger occurs if the Net Asset Value is at or below a single minimum benchmark ( Principal Protection Trigger Level ) of 103% of the then present value of a notional fixed rate cash investment held by UBS, which is determined each Business Day during the Term to be sufficient to grow to the Principal Protected Amount by the then current 4 Year Principal Protection Date. If the Net Asset Value falls to, or below, the Principal Protection Trigger Level, then the Principal Protection Trigger has occurred and: the FIPs will cease to have any exposure to the Reference Assets; the FIPs will not pay any further Coupons; the 4 Year Principal Protection Date will no longer reset; and Investors will become entitled to the Principal Protected Amount of $1.00 per FIP on the then current 4 Year Principal Protection Date and the FIPs will mature on that date. Investors may elect to receive the Principal Protected Amount in Delivery Securities plus any rounding amount in cash (see Part 1.14). 8 UBS will calculate the current Net Asset Value each Business Day after the Initial Issue Date to determine if a Principal Protection Trigger has occurred. Worked example Assumptions Principal Protected Amount (PPA) $1.00 Assumed term to the next 4 Year Principal Protection Date in years (t) 3.5 year wholesale fixed interest rate per annum (I) % Accrued fees (per FIP) (f) $0.005 Based on the above information the Principal Protection Trigger would be equal to $ per FIP. The formula for this calculation is: ( PPA / ( 1 + I ) t ) + f On the 4 Year Principal Protection Date, Investors will be entitled to receive $1.00 per FIP (refer to Part 1.8). Notification of Principal Protection Trigger breach If the Principal Protection Trigger occurs, UBS will notify Investors immediately and no later than 1 Business Day later, by publication of an announcement through the ASX company announcement platform What is the Principal Protected Amount? The Principal Protected Amount is equal to $1.00 per FIP. It is important to understand that if you acquire the FIPs at a price which is greater than $1.00, then you will still only be protected to an amount equal to $1.00 per FIP. This may occur if you acquire FIPs during the General Offer Period, for example if you are issued FIPs at a price of $1.02 per FIP, then $0.02 per FIP (or $1.02 $1.00) will not be Principal Protected. The position will be similar if you acquire FIPs for more than $1.00, on the ASX. For Investors who acquire FIPs during the General Offer Period any Financial Adviser Fee and Approved Distributor Fee will be paid from your Application Amount. This will reduce the number of FIPs issued to you. The portion of

11 Part 1: Key Features your Application Amount which is applied to pay these fee amounts is not repayable to you on exit of your investment in FIPs, and will not be Principal Protected Coupon reinvestment option You may choose to have any applicable Coupons reinvested. This will result in additional FIPs being issued to you for an aggregate issue price equal to the Coupon Amounts less any rounding amounts. The price of each FIP issued on reinvestment of Coupons will be the Net Asset Value per FIP determined as at the Issue Date, which is the relevant Coupon Payment Date. To utilise the Coupon reinvestment option Investors should elect this feature on the Application Form or in writing via the Registry. Coupon reinvestment will be effected from the next Coupon Payment Date if notification is received by UBS at least 15 Business Days before the relevant Coupon Determination Date When do FIPs expire? FIPs are due to Mature on the Final Maturity Date. If a Maturity Trigger occurs, the FIPs will Mature earlier. The FIPs may also terminate early if Early Maturity occurs (as described in Part 1.14) or, for a particular Investor, if the Investor elects Early Exit (as described in Part 1.7) What are the Maturity Triggers? FIPs will Mature before the Final Maturity Date if a Maturity Trigger occurs. The Final Maturity Date, the Maturity Triggers, the Cash Settlement Amount payable in each case and the date on which Maturity will arise as a result are as follows: Final Maturity Date: Circumstances where Maturity occurs 13.5 years from Initial Issue Date Cash Settlement Amount per FIP Principal Protected Amount per FIP (with any excess over the Principal Protected Amount being payable as a Coupon) Date on which FIPs Mature 4 October Maturity Triggers: Circumstance where Maturity occurs earlier because of a Maturity Trigger If on a Coupon Determination Date on or after the 10 th anniversary of the Initial Issue Date the Net Asset Value per FIP is equal to or greater than the Principal Protected Amount per FIP ( 10 Year Maturity Trigger ) If the Principal Protection Trigger occurs at any time Cash Settlement Amount per FIP Principal Protected Amount per FIP (with any excess over the Principal Protected Amount being payable as a Coupon) Principal Protected Amount per FIP Date on which FIPs Mature On the Coupon Determination Date on which this circumstance applies On the then current 4 Year Principal Protection Date, current at the time when the Principal Protection Trigger occurs What happens at Maturity? At Maturity, in addition to any Coupon for the final Coupon Period, you will automatically receive the Cash Settlement Amount in cash on or before the Settlement Date applicable for that Maturity Date. Alternatively, you may at any time elect to receive at Maturity the Delivery Securities (a basket of ordinary fully paid shares selected from the largest 10 issuers of shares by market capitalisation listed on the ASX, subject to replacement as described in Part 3.9) and any rounding amount in cash, equal in value to the Cash Settlement Amount at Maturity, by lodging an Exercise Notice with UBS and by paying the Exercise Price of $0.01 per FIP to UBS. If you elect to receive the Delivery Securities these will be physically settled to your account on or before the Settlement Date applicable for that Maturity Date. Except for Maturity arising because of the 10 Year Maturity Trigger, UBS will inform FIP holders by mail at least 20 Business Days prior to the Maturity Date and will at that time request settlement instructions. If a 10 Year Maturity Trigger occurs, UBS will inform FIP holders by mail immediately following the Coupon Determination Date on which the 10 Year Maturity Trigger occurred and will at that time request settlement instructions. Any settlement instructions previously lodged with UBS will be given effect to, subject to any replacement

12 Part 1: Key Features settlement instructions received. If no settlement instructions have been received, you will automatically receive the Cash Settlement Amount in cash Adjustment Events and Early Maturity by UBS Circumstances may arise where UBS may (in its absolute discretion), but subject to ASX consent, determine to substitute or adjust calculations or amend the terms of the FIPs as a result of an Adjustment Event as described in Part 3.5, or determine that there will be Early Maturity as described in Part 3.4. If Early Maturity occurs, your Investment will not be Principal Protected and you will receive the Early Maturity Amount which may be less than the amount you invested. Investors are not entitled to any Physical Settlement option upon Early Maturity What are the taxation implications of this investment? KPMG has provided a taxation summary (set out in Part 7). The taxation summary includes taxation information about: Disposal or termination of the FIPs; Coupons; Issue of FIPs pursuant to a reinvestment of Coupons; TFN / ABN withholding; Goods and Services Tax; and Stamp duty. Taxation implications are highly dependent on your personal circumstances. You should seek your own independent advice on the taxation implications of the FIPs Where can Investors obtain additional information? The following information can be obtained during the Term by contacting UBS on and will be disclosed on and updated at least every 7 days: the Net Asset Value; the rate of interest applying to the Cash Investment; and the Index Level. 10

13 Part 2: Benefits 2.1 Efficient structure The FIPs have been constructed in order to enable participation in the Index on an unfunded basis (ie without requiring a physical cash investment in the Index). 2.2 Diversified fixed income exposure Through the Index, the FIPs offer: a diversified exposure to a range of global fixed income markets and sectors; and the potential to generate higher returns than traditional cash, fixed income managed funds and bond products. The FIPs may be effective in diversifying portfolios which currently have exposure primarily to Australian equities, global equities, commodities, traditional fixed income investments and/or hedge funds. 2.3 An all-weather Index The Index has been designed to perform in a range of market conditions. In addition, each investment that is referenced by the Index has been selected in part to offer low levels of correlation with the other investments which are referenced by the Index. This may reduce medium term volatility and improve overall Index performance, compared to an investment which is based on exposure to a single asset class. 2.4 Index transparency Each investment to which the Index is referenced is quantitatively managed and as such UBS has no discretion to actively manage the portfolio or take unilateral investment decisions. This avoids risks associated with poor investment manager judgments and may provide additional portfolio diversification for portfolios which possess inherent manager risk. 2.6 Resetting Principal Protection mechanism The FIPs offer Principal Protection equal to the Principal Protected Amount if held on Maturity (which includes the 4 Year Principal Protection Date). Please refer to Parts 1.8 and 5 for more information. 2.7 No deleverage events Unlike some principal protection mechanisms, there are no deleverage triggers. This means that the FIPs offer 100% exposure to the Reference Assets at all times unless a Principal Protection Trigger occurs, in which case there will cease to be any exposure to the Reference Assets, no further Coupons will be paid, and the Term will end on the then current 4 Year Principal Protection Date. 2.8 Liquidity UBS will apply for the FIPs to be quoted on ASX, so that Investors have the flexibility of being able to buy and sell the FIPs on the ASX. UBS will arrange for buy prices for FIPs to be quoted on the ASX to assist in a market being made for FIPs. UBS will also process Early Exits if an Investor so elects - this enables an Investor to redeem their FIPs at any time. 2.9 Coupon reinvestment available Investors have the ability to elect to reinvest any Coupons received through the issuance of additional FIPs. 2.5 Daily applications UBS intends to make the FIPs available for subscription at any time up to the Maturity Date unless a Principal Protection Trigger has occurred. UBS reserves the right to stop accepting applications for FIPs at any time. 11

14 Part 3: Risks An investment in the FIPs, like any investment, is subject to risk. Before investing in the FIPs you should consider whether the investment is suitable for you and appropriate in light of your particular investment needs, objectives and financial circumstances. You are advised to take independent legal, tax and financial advice. 3.1 Factors affecting the value of the FIPs It is impossible to predict the performance of the FIPs. The performance of the FIPs will be influenced by a variety of factors including local, regional and global interest rates, and general economic factors impacting financial markets and fixed income markets in particular. The FIPs may become significantly less valuable during the Term and the Coupons may, in certain circumstances, be zero. The Term may expire earlier than the Final Maturity Date, as described in Part As a result of the enhanced Index participation through the Index Participation Level, and the nature of the investments to which the Index is referenced, FIPs may display a higher level of short term volatility than other fixed income investments. Due to this short term volatility FIPs are designed to be held for at least three years. UBS gives no assurance as to the performance or volatility of the Net Asset Value or Coupon Amounts. Investors should form their own view as to the likely performance of the FIPs. Principal Protection Triggers A Principal Protection Trigger occurs on any day on which the Net Asset Value equals or falls below the Principal Protection Trigger Level. The result of a Principal Protection Trigger is that the FIPs cease to have any exposure to the Reference Assets. This means that: you will receive no further Coupons; the FIPs will only have Principal Protection on the then current 4 Year Principal Protection Date, which will also be the Maturity Date for the FIPs; and the Net Asset Value of FIPs on any day will be calculated as the present value of the notional fixed rate cash investment held by UBS as described in Part 1.9. The risk of a Principal Protection Trigger occurring increases where one or both of the 12 following occur: The Index generates significant negative returns for an extended period of time; and/or Australian interest rates fall significantly. 3.2 Principal Protection Principal Protection of the Principal Protected Amount is only available on Maturity, including on the 4 Year Principal Protection Date. Principal Protection is dependent on the ability of UBS to meet its obligations. See Part 3.8. If you sell the FIPs on the ASX, or exit the FIPs prior to the Maturity Date (including the 4 Year Principal Protection Date) or Early Maturity occurs (see Part 3.4), you will not receive the benefit of Principal Protection. If you acquire or are issued the FIPs for an amount greater than the Principal Protected Amount of $1.00 per FIP, you will still only be protected for the amount of $1.00 per FIP. For example, if you acquire the FIPs at a price of $1.02 per FIP and then a Principal Protection Trigger occurs you will only be protected to an amount of $1.00 per FIP. You should be aware that the amount receivable on Maturity (including the 4 Year Principal Protection Date) - $1.00 per FIP - is unlikely to have the same real value as it would on the date of the investment due to the effect of inflation and the time value of money over the Term. 3.3 Historic Reference Asset Performance It is important to remember that past performance is not a reliable indicator of future performance. 3.4 Early Maturity UBS may nominate any of the following events as an Early Maturity Event: a Tax Event (as defined in Part 11); a change in law, a Force Majeure Event or any other event which UBS determines in good faith results in the performance of its obligations, in whole or in part, having become or will become, in the circumstances beyond its reasonable control, impossible, unlawful, illegal or otherwise prohibited or in breach of any applicable law, or

15 Part 3: Risks any actual or proposed event that may reasonably be expected to lead to any of the above events. Upon the occurrence of an Early Maturity Event, with the consent of ASX, UBS may determine to terminate the FIPs on the Early Maturity Date and pay to the Investor the fair value for each FIP as determined by UBS (taking into account any costs of UBS including the costs of earlier termination of hedging positions in respect of FIPs). Principal Protection will not apply if there is an Early Maturity Event, and the amount received by an Investor on the Early Maturity Date may be less than the Principal Protected Amount. 3.5 Adjustment Events Under the Terms, UBS has broad discretions to deal with Adjustment Events (as defined in Part 11), subject to ASX consent, that occur in relation to the Reference Assets or Delivery Securities. Adjustment Events include the following events: corporate events in respect of the assets that comprise the Reference Assets or Delivery Securities such as capital reductions, liquidator's distributions, share buy-backs, bonus issues, rights issues, schemes of arrangement, and other similar or like events; the liquidation, winding up, termination or proposed or actual de-listing of the issuer of any of the assets that comprise the Reference Assets or Delivery Securities; the suspension, discontinuation, nonpublication or material change to the method of calculating, composition or constitution of any relevant index, or other material modification of any index, including the Index; Force Majeure Events or any other event which UBS determines, in good faith, results in the performance of UBS obligations having become or will become, beyond its reasonable control, impossible, unlawful, illegal or otherwise prohibited; a Hedging Disruption or any termination or adjustments to UBS' hedging arrangements in respect of the Reference Assets or Delivery Securities, or an event resulting in a material limitation of the ability of UBS to maintain a secondary market in FIPs, 13 occurs; suspension of, or a material limitation imposed on, trading in futures contracts or other derivative trading relating to the Index or to investments the subject of the Index or to securities generally on the ASX; any event which involves the actual or proposed delisting, withdrawal of admission to trading status or suspension of the FIPs (except in the case where that withdrawal or suspension is caused by UBS) or which causes the FIPs to cease to be CHESS Approved Securities; any other event which may reasonably be expected to result in any of the above events; or any other event occurs which UBS reasonably declares to be an Adjustment Event including any political or administrative pronouncement or action by any government, government department or semi-governmental person charged with administration of any laws in any jurisdiction or any moratorium on debt servicing or material changes to local, regional or global interest rates. On the occurrence of an Adjustment Event, UBS may, subject to ASX consent, at its discretion (amongst other things) substitute any of the investments which are referenced by the Index, or adjust calculations in connection with the Net Asset Value or Index or amend the Terms. For example, if any of the four investments which are the subject of the Index was unable to be executed, UBS may replace the investment with another investment that displays similar risk / return and portfolio attributes. On declaring an Adjustment Event, UBS will notify Investors of the Adjustment Event through the ASX company announcements platform as soon as reasonably practicable and in any extent within 10 days of declaring the Adjustment Event. An Adjustment Event does not give an Investor a right to terminate the FIPs prior to the Maturity Date. 3.6 Amendments to the Terms UBS may from time to time amend the Terms of the FIPs in accordance with clause 13 of the Terms. This includes circumstances where the amendment does not, in the opinion of UBS, materially adversely affect, or prejudice, the

16 Part 3: Risks interests of the Investor, or when the amendment is necessary or desirable in the reasonable opinion of UBS as a result of an Adjustment Event. UBS will give the Investor notice of any amendment to the Terms and the Investor is bound by any such amendment at the time the Investor is given such notice. 3.7 Exercise of discretions by UBS Investors should note that certain provisions of the Terms confer discretions on UBS which could affect the value of the FIPs. These include the powers to nominate Early Maturity Events, make adjustments in response to Adjustment Events or make amendments to the Terms of the FIPs in certain circumstances. Investors do not have the power to direct UBS concerning the exercise of any discretion. However, in relation to many of these discretions, UBS may only exercise those discretions with the consent of ASX. Any decision made by UBS may have an unforeseen adverse impact on the financial return of the FIPs. 3.8 UBS s obligations The value of the FIPs depends on, among other things, the ability of UBS to fulfil its obligations under the Terms to pay the Cash Settlement Amount, to pay any Coupons and to deliver the Delivery Securities on Physical Settlement. Investors will be relying on the creditworthiness of UBS and will not have any right against the relevant investments comprised in the Reference Assets. Investors must make their own assessment of the ability of UBS and the Nominee to meet their obligations. See Part 8 for information about UBS and the Nominee. The capacity of UBS to settle all outstanding FIPs is not guaranteed by the ASX, the National Guarantee Fund or the Australian Clearing House Pty Limited or any other body. The obligations of UBS are not deposit liabilities of UBS, and they are not guaranteed by UBS or any other party. They are unsecured contractual obligations of UBS which will rank equally with UBS s other unsecured debt other than liabilities mandatorily preferred by law. UBS has no fiduciary obligations to Investors. 3.9 Substituted Delivery Securities UBS may in its reasonable opinion determine that it is not possible or efficient to obtain or transfer the intended Delivery Securities (i.e. a basket of fully paid ordinary shares selected from the largest 10 issuers of shares (by market capitalisation) listed on the ASX), and it may substitute all or some components of the Delivery Securities for any other shares quoted and trading on the ASX in the top 100 ASX listed companies by market capitalisation and deliver that substituted asset instead as a component of the Delivery Securities. See clause 5.11 of the Terms Change of Law and Tax Risk The expected tax implications of entering into or at Maturity of the FIPs may change as a result of changes in laws including taxation laws and interpretation of them. Changes to laws or their interpretation could also have a negative impact on the return to Investors. All Investors should seek independent advice as to the possible impact of these matters in light of their own personal circumstances Non-provision of TFN / ABN Quotation of a TFN or ABN is not compulsory. However, where an Investor does not provide a TFN or ABN or proof of an exemption and a Coupon is paid, UBS will be required to withhold an amount and forward it to the ATO Application for admission to trading status and possible illiquidity of trading market Investors should be aware that the FIPs have not been admitted to trading status by the ASX as at the date of this PDS. An application will be made to the ASX for the FIPs to be admitted to trading status on the ASX. The FIPs will not be issued to Applicants if such approval is not obtained. If the FIPs are admitted and quoted on the ASX, there is no firm indication as to how the FIPs will trade on the ASX or whether the market will be liquid or illiquid. However, while not guaranteeing liquidity, UBS will arrange for buy prices to be quoted on the ASX Suspension of trading in the FIPs If the FIPs are admitted and quoted on the ASX, trading of the FIPs on the ASX may be halted or suspended by ASX. This may occur whenever ASX deems such action appropriate in the interests of maintaining a fair and orderly market in the FIPs or otherwise deems such 14

17 Part 3: Risks action advisable in the public interest or to protect Investors Potential Conflicts of Interest UBS and its related bodies corporate may buy and sell the FIPs, Delivery Securities and other financial products relating to any of them or the Reference Assets, either as principal or agent. In addition, UBS and its related bodies corporate may advise entities or governments which are the issuer of those assets in relation to activities unconnected with the issue of the FIPs. 15

18 Part 4: Reference Assets 4.1 Cash Investment The floating rate Cash Investment will accrue interest daily at a wholesale floating rate of interest. The rate of interest applying to the Cash Investment can be obtained by contacting UBS on and will be disclosed on its website at and updated at least every 7 days. The rate of interest will reflect the Australian market interest rate available to UBS AG for short term borrowing, which varies from time to time as impacted by factors including credit conditions and UBS AG s rating from time to time. Interest will accrue on a notional principal amount equal to the net asset value of the Cash Investment on the Initial Issue Date, and thereafter on the net asset value as at each Coupon Payment Date, subject to fees and costs. 1. Short Term Interest Rates: This investment offers exposure to 90 day interest rate markets in United States, Europe, Japan, Great Britain and Switzerland. Percentage allocations to each short term interest rate market will be United States 45%, Euro 30%, Japan 15%, Britain 5% and Switzerland 5%. For each interest rate market, the investment will assume interest rate positions designed to take advantage of progressive movements in short term interest rates over time. The general relationship which is expected for this investment component of the Index between market conditions and investment performance over the medium term is summarised below: Short term interest rates or Medium term performance 4.2 The Index The UBS Fixed IncomePlus Index is a UBS proprietary index which tracks the performance of an equally weighted portfolio of four historically lowly correlated fixed income investments. 2. Long Term Interest Rates: This investment offers exposure to long term interest rates. The investment achieves this through exposure to the Eurex 10 year Bund interest rate market, which is a benchmark European interest rate market. Diversified Credit 25% Short Term Interest Rates 25% The investment will assume positions designed to take advantage of movements in long term interest rates over short, medium and longer term time horizons. The general relationship which is expected for this investment component of the Index between market conditions and investment performance over the medium term is summarised below: Interest Rate Differentials 25% Long Term Interest Rates 25% Long term interest rates or Medium term performance Each underlying investment strategy is intended to deliver a medium term, low turnover investment methodology. The investment strategies are designed to provide a broad based, strategic exposure to a variety of complementary and lowly correlated fixed income markets. This provides diversification at the Index level. The Index is designed to exploit sources of fixed income returns over time through efficient, medium term exposure to fixed income markets Interest Rate Differentials: This investment provides exposure to 30 day interest rate differentials between Australian Dollars, Swiss Francs, Euro, British Pounds, Japanese Yen and United States Dollars. The investment strategy provides exposure to rolling 30 day interest rate differential positions, with the three highest implied interest rate