ETRACS Monthly Pay 2xLeveraged Preferred Stock ETN

  • Current Indicative Value
  • 10/29/2020 | 08:00 pm
  • USD 17.60
  • Current Spot Price USD 17.60
  • 10/29/2020 | 04:00 pm

Key Considerations




Selected risk considerations:

An investment in the ETNs involves risks. Selected risks are summarized here, but we urge you to read the more detailed explanation of risks described in the ""Risk Factors"" section of the prospectus supplement for the ETNs (the ""ETRACS Prospectus""). Capitalized terms used below (and elsewhere in this document) but not defined herein shall have the meanings attributed to them in the ETRACS Prospectus.

  • You may lose all or a substantial portion of your investment - The ETNs do not guarantee any return on your initial investment. The ETNs are fully exposed to two times any monthly decline in the level of the Index. If the compounded leveraged monthly return of the Index is insufficient to offset the negative effect of the Accrued Fees and the Redemption Fee Amount, if applicable (less any Coupon Amounts and/or any Stub Reference Distribution Amount, as applicable, you may be entitled to receive), or if the compounded leveraged monthly return of the Index is negative, you may lose all or a substantial portion of your investment at maturity, call, acceleration or upon early redemption.
  • Correlation and compounding risk - A number of factors may affect the ETNs’s ability to achieve a high degree of correlation with the performance of the Index, and there can be no guarantee that the ETN will achieve a high degree of correlation. Because the Current Principal Amount is reset monthly, you will be exposed to compounding of monthly returns. As a result, the performance of the ETN for periods greater than one month is likely to be either greater than or less than the Index performance times the leverage factor of two, before accounting for Accrued Fees, and the Redemption Fee Amount, if applicable. In particular, significant adverse monthly performances of your ETN may not be offset by subsequent beneficial monthly performances of equal magnitude.
  • Leverage risk - The ETNs are two times leveraged long with respect to the Index, which means that you will benefit two times from any beneficial, but will be exposed to two times any adverse, monthly performance of the Index, before the combined negative effect of the Accrued Tracking Fee, the Accrued Financing Charges and Redemption Fee Amount, if any. However, the leverage of the ETN may be greater or less than 2.0 during the periods between Monthly Reset Dates and/or Loss Rebalancing Reset Dates, as applicable.
  • Market risk - The return on the ETN, which may be positive or negative, is linked to the compounded leveraged monthly return on the Index. The return on the Index is measured by the Index Closing Level, which, in turn, is affected by a variety of market and economic factors, interest rates in the markets and economic, financial, political, regulatory, judicial or other events that affect the markets generally.
  • Credit of issuer — The ETNs are senior unsecured debt obligations of the issuer, UBS, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on the ETNs, including any payment at maturity, call, acceleration or upon early redemption, depends on the ability of UBS to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of UBS will affect the market value, if any, of the ETNs prior to maturity, call, acceleration or early redemption. In addition, in the event UBS were to default on its obligations, you may not receive any amounts owed to you under the terms of the ETNs. The ETNs do not benefit from any co-obligation of UBS Switzerland AG.
  • The Index Constituent Securities are exclusively ETFs and the value of an ETF may not accurately track the value of the securities in which such ETF invests — The ETNs are linked to the performance of the Index, which is currently comprised of two ETFs. While an ETF 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 ETF from correlating exactly with changes in the level of such underlying index. The value of an ETF will reflect transaction costs and fees that the ETF constituents do not have. Accordingly, the performance of the ETF may not be equal to the performance of the ETF constituents during the term of the ETNs.
  • Potential over-concentration in preferred stock – the ETNs are linked to ETFs that invest exclusively in preferred stock. An investment in the ETNs will increase your portfolio’s exposure to this asset class.
  • The Index Constituent Securities are ETFs that incur additional management fees to the ETF’s advisors – The Index Constituent Securities are ETFs and each of the ETFs incur management and other fees that have historically averaged approximately 0.5% per annum of the value of their securities. Because the Securities are 2x leveraged, the value of the Securities will reflect ETF fees that are approximately two times the amount of the ETF fees you would otherwise pay if an investment was made directly in the ETFs. In addition to the ETF fees, the Current Principal Amount on your Securities will be reduced by the Accrued Fees. As a result, the fees incurred by investors in the Securities are substantially higher than if an unleveraged investment was made directly in the ETFs or in underlying preferred securities.
  • You are not guaranteed a coupon payment - You will not receive a coupon payment on a Coupon Payment Date if the Index Constituent Securities do not pay any cash distributions and the Reference Distribution Amount, calculated as of the corresponding Coupon Valuation Date, is zero. Similarly, the Stub Reference Distribution Amount (including as part of the Cash Settlement Amount, Redemption Amount, Call Settlement Amount or Acceleration Amount, as applicable) may be zero if the Index Constituent Securities do not pay any cash distributions during the applicable period.
  • Potential acceleration - In the event the intraday indicative value of the ETNs is equal to $2.00 or less on any Index Business Day (the Indicative Value Optional Acceleration Trigger) the ETNs may be accelerated and redeemed by UBS, at its option, and you will receive a cash payment equal to the Acceleration Amount as determined during the Acceleration Valuation Period. The Acceleration Amount you receive on the Acceleration Settlement Date may be significantly less than $2.00 per Security and may be zero if the level of the Index continues to decrease during trading on one or more Index Business Days during the Acceleration Valuation Period as measured by the Index Performance Ratio on one or more Index Business Days during the Acceleration Valuation Period. In addition, if the Securities are accelerated and redeemed by UBS, at its option, you will not benefit from any subsequent increase in the Index Closing Level after the end of the Acceleration Valuation Period, even if such increase occurs prior to the Acceleration Settlement Date. If the ETNs undergo a split or reverse split, the Indicative Value Optional Acceleration Trigger will be adjusted (i.e. it will not remain at $2.00).
  • Decreases in the Current Principal Amount may result in a reduction in the Coupon Amount even if the gross cash distributions on the Index Constituent Securities remain constant or increase over time - As described in the ETRACS prospectus, the Coupon Amount is determined based on the gross cash distributions that a Reference Holder would have been entitled to receive in respect of the Index Constituent Securities held by such Reference Holder on the record date with respect to any Index Constituent Security, and the number of Index Constituent Securities held by the Reference Holder depends in part on the Current Principal Amount. If the Current Principal Amount decreases, the Reference Holder is deemed to hold fewer units of each Index Constituent Security. The Current Principal Amount is reset on every Monthly Reset Date, and is also reset on any Loss Rebalancing Reset Date, in each case, with the intent of resetting the then-current leverage to approximately 2.0 based on the Index Performance Ratio. As a result, decreases in the Current Principal Amount may result in a reduction in the Coupon Amount even if the gross cash distributions on the Index Constituent Securities increase over time.
  • A trading market for the ETNs may not develop - Although the ETNs have been approved for listing, subject to official notice of issuance, on NYSE Arca, a trading market for the ETNs may not develop. Certain affiliates of UBS may engage in limited purchase and resale transactions in the ETNs, although they are not required to and may stop at any time. We are not required to maintain any listing of the ETNs on NYSE Arca or any other exchange. In addition, we are not obliged to, and may not, sell the full aggregate principal amount of the ETNs set forth on the cover of this prospectus. We may issue and sell additional ETNs from time to time and we may suspend or cease sales of the ETNs at any time, at our discretion. Therefore, the liquidity of the ETNs may be limited.
  • Requirements upon early redemption - You must satisfy the requirements described herein for your redemption request to be considered, including the minimum redemption amount of at least 50,000 ETNs, unless we determine otherwise or your broker or other financial intermediary bundles your ETNs for redemption with those of other investors to reach this minimum requirement. In addition, the payment you receive upon early redemption will be reduced by the Redemption Fee Amount. While UBS reserves the right to waive the minimum redemption amount or the Redemption Fee Amount from time to time in its sole discretion, there can be no assurance that UBS will choose to waive any redemption requirements or fees or that any holder of the ETNs will benefit from UBS’s election to do so. Therefore, the liquidity of the ETNs may be limited.
  • Limited performance history - The return on the ETNs is linked to the performance of the Index, which was launched on August 31, 2018. As a result, the Index has a limited performance history, and the future performance of the Index is uncertain. Estimated historical data prior to August 31, 2018 has been simulated by applying the Index’s calculation methodology to historical levels of the Index Constituent Securities included in the Index. No future performance of the Index can be predicted based on the estimated historical or the historical returns described in this prospectus supplement.
  • Your redemption election is irrevocable - You will not know the Redemption Amount at the time you elect to request to redeem your Securities and you will not be able to rescind your election to redeem your ETNs after your redemption notice is received by UBS. Accordingly, you will be exposed to market risk in the event market conditions change after UBS receives your offer and the Redemption Amount is determined on the Redemption Valuation Date.
  • Uncertain tax treatment - Significant aspects of the tax treatment of the ETNs are uncertain. You should consult your own tax advisor about your own tax situation.
  • UBS’s Call Right - UBS may elect to redeem all outstanding ETNs at any time on or after September 30, 2019, as described under “Specific Terms of the Securities — UBS’s Call Right” in the ETRACS prospectus. If UBS exercises its Call Right, the Call Settlement Amount may be less than your initial investment in the ETNs. Alternatively, if the ETNs have increased in value, you may have to invest your proceeds in a lower-return investment.