UBS - Fixed IncomePlus PDS · Product Disclosure Statement UBS – Fixed IncomePlus PDS dated 13 February 2008 Issued by UBS AG, Australia Branch ABN 47 088 129 613, AFSL 231087

Product Disclosure Statement

UBS – Fixed IncomePlus PDS dated 13 February 2008

Issued by UBS AG, Australia Branch ABN 47 088 129 613, AFSL 231087

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 47 088 129 613) (AFSL No. 231087) 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 2008. 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 www.ubs.com/keyinvest. UBS will, on request, provide Investors with a free paper copy of that updated information to Investors who contact UBS on 02 9324 2840. 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.

Table of Contents

1

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

Table Of Contents

Investment Overview

2

Feature Product Summary

Issuer details UBS AG, Australia Branch (ABN 47 088 129 613) (AFSL No. 231087) Level 16, Chifley Tower 2 Chifley Square, Sydney NSW 2000 Phone: 02 9324 2840 Website: www.ubs.com/keyinvest

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 1.14.

Investment aims 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.

Application for admission to trading status on ASX

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 29 March 2008 to Maturity Date

Initial Issue Date and expected commencement of trading on ASX

4 April 2008

Initial Issue Price, Issue Price and Principal Protected Amount

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

Investment Overview

3


Issue Size 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 1.13.

Financial Adviser Fee and Approved Distributor Fee

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.

Index Participation Fee 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.

Performance Fee A performance fee equal to 10% of any excess of the Reference Asset Value over a benchmark of the UBS Bank Bill Index + 2.00% 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.

Worked examples of Fees and Costs

Refer to Part 6 for further information including worked examples of all fees that apply to the FIPs.

Coupons 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 1.6.

Investment Overview

4


Settlement 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 1.14.

Part 1: Key Features

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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.

1.2. 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 4.2.

1.3. 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%

Short Term

Interest Rates

25%

Long Term

Interest Rates

25%

Interest Rate

Differentials

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.

3. Interest Rate Differentials: Provides exposure to 30 day interest rate differentials

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 4.

1.4. 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).


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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

Highest observed return

Lowest observed return

3 months 4.60% (actual)*

16.74% (actual)*

- 5.71% (actual)*

1 year 18.42% per annum

43.39% per annum

4.39% per annum

3 years 19.91% per annum

31.86% per annum

9.23% per annum

5 years 21.69% per annum

25.90% 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.

1.6. 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.

Coupon =Coupon

Threshold Amount

Net Asset Value

–Coupon =Coupon

Threshold Amount

Net Asset Value

–

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).


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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.

1.8. 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


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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.

1.9. 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).

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)

3.50

3.5 year wholesale fixed interest rate per annum (I)

6.50%

Accrued fees (per FIP) (f) $0.005

Based on the above information the Principal Protection Trigger would be equal to $0.8314 per FIP. The formula for this calculation is:

( PPA / ( 1 + I ) t ) + f( 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.

1.10. 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


9

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.

1.11. 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.

1.12. 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).

1.13. 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

Cash Settlement Amount per FIP

Date on which FIPs Mature

13.5 years from Initial Issue Date

Principal Protected Amount per FIP (with any excess over the Principal Protected Amount being payable as a Coupon)

4 October 2021

Maturity Triggers:

Circumstance where Maturity occurs earlier because of a Maturity Trigger

Cash Settlement Amount per FIP

Date on which FIPs Mature

If on a Coupon Determination Date on or after the 10th 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”)

Principal Protected Amount per FIP (with any excess over the Principal Protected Amount being payable as a Coupon)

On the Coupon Determination Date on which this circumstance applies

If the Principal Protection Trigger occurs at any time

Principal Protected Amount per FIP

On the then current 4 Year Principal Protection Date, current at the time when the Principal Protection Trigger occurs

1.14. 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


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settlement instructions received. If no settlement instructions have been received, you will automatically receive the Cash Settlement Amount in cash.

1.15. 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.

1.16. 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.

1.17. Where can Investors obtain additional information?

The following information can be obtained during the Term by contacting UBS on 02 9324 2840 and will be disclosed on www.ubs.com/keyinvest and updated at least every 7 days:

• the Net Asset Value;

• the rate of interest applying to the Cash Investment; and

• the Index Level.

Part 2: Benefits

11

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’.

2.5 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.

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.

Part 3: Risks

12

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 1.12.

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

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

Part 3: Risks

13

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, non-publication 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,

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

Part 3: Risks

14

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.

3.10 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.

3.11 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.

3.12 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.

3.13 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

Part 3: Risks

15

action advisable in the public interest or to protect Investors.

3.14 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.

Part 4: Reference Assets

16

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 02 9324 2840 and will be disclosed on its website at www.ubs.com/keyinvest 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.

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.

Diversified

Credit

25%

Short Term

Interest Rates

25%

Long Term

Interest Rates

25%

Interest Rate

Differentials

25%

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.

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

Medium term performance

or

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.

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:

Long term interest rates


or

3. 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

Part 4: Reference Assets

17

currency futures contracts being acquired, and the three lowest implied interest rate currency futures contracts being sold at the beginning of each rolling 30 day period. 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:

General level of economic activity within constituent

economies


or

4. Diversified Credit: This investment offers exposure to returns generated through exposure to a long / short diversified credit portfolio of 250 investment grade credits selected from recognised European and United States investment grade credit indices (to ensure liquidity). The investment has a maximum six month credit exposure, after which the credit portfolio is reselected in accordance with the quantitative criteria which take into account published credit ratings and price volatility.

The investment seeks credit exposure to 190 of the highest quality investment grade credits, whilst seeking protection against losses from default for the 60 lowest quality investment grade credits, as measured by credit rating and price volatility at the time of selection. This means that the strategy has the ability to benefit from the out performance of higher quality credits and also underperformance of lower quality credits.

This investment strategy assumes exposures in response to economic conditions, with the ratio of exposure between long and short positions ranging between 4:1 and 1:1 by taking a larger individual exposure to each of the higher quality credits. This means the investment can take on more exposure to the higher quality credits relative to the lower quality credits over time.

From a credit risk perspective, this would mean that in a scenario where exposure to high quality credit was at its greatest level, each FIP would have effective maximum credit exposure for any credit equal to 1.60% of the Principal Protected Amount, after taking into account the enhanced Index participation.

4.3 Investment methodology

Each of the four investments that make up the Index are quantitative in nature and are implemented by UBS. This means that the investments are designed to operate according to empirical analytics and inputs and not subjective assessments made by UBS.

This style of investment avoids risks associated with investment manager underperformance and changes to investment methodology and risk parameters (“style drift“) and also ensures a consistent approach to each investment.

Guide to symbols:

Expected trend is generally rising

Expected trend is generally low performance or negative medium term performance

Expected trend is generally falling at a steeper incline

No change generally expected

Part 5: Coupon Payments and Principal Protection Mechanism

18

5.1 How are Coupons calculated?

This Part provides worked examples of the Coupon calculations described in Part 1.6.

On each Coupon Payment Date the FIPs will pay semi-annual Coupons equal to 100% of any amount by which the Net Asset Value per FIP exceeds the Coupon Threshold Amount, calculated as at the Coupon Determination Date for that Coupon Payment Date.

Coupon =Coupon

Threshold Amount

Net Asset Value

–Coupon =Coupon

Threshold Amount

Net Asset Value

–

5.1.1 Detailed Coupon calculation example (When a Coupon is payable)

Assume that on a Coupon Determination Date:

• an Investor holds 100,000 FIPs;

• the Coupon Period is 180 days (“Days in Coupon Period“);

• the Net Asset Value on the last Coupon Determination Date was $1.00 per FIP (“Opening Net Asset Value”);

• the Coupon Threshold Amount is $1.00 per FIP;

• The Cash Investment earned interest at a rate of 6.00% per annum for the entire Coupon Period (“Cash Rate”);

• a Performance Fee was payable in the previous Coupon Period;

• the following values applied at the start of the Coupon Period:

Cash Investment value (“Opening Cash Value”): $1.00 Index value (“Opening Index Value”): 100.00; and

• the Financial Adviser Fee and Approved Distributor Fee have already been settled.

Step One: Calculate the value of the Cash Investment on the Coupon Determination Date

The value of the Cash Investment (“Closing Cash Value”) would be calculated using a simple interest formula as follows:

= Opening Cash Value + (Opening Cash Value x Cash Rate x Days in Coupon Period /365)

= $1.00 + ($1.00 x 6.00% x 180 / 365)

= $1.03 per FIP

Step Two: Calculate the Index performance and the value of the Index on the Coupon Determination Date

The Index performance is calculated as the aggregate performance of each of the four investments comprised in the Index as described in Part 4.2 divided by 4 (“Index Performance”). This performance is calculated as, with reference to each of the four investments comprised in the Index:

= (Short term interest rate performance + Long term interest rate performance + Interest rate differential performance + Diversified credit performance) / 4

where reference to performance is a reference to the performance of each underlying investment strategy described in Part 4.2.

Assuming the following performance figures for each of the four investments comprised in the Index during the Coupon Period, the Index Performance is calculated as:

= (1.75% + 2.25% -1.76% + 2.52%) / 4

= 1.19%

Given the assumed Opening Index Value of 100.00, the Index Value on the Coupon Determination Date (“Closing Index Value”) is therefore:

= Opening Index Value + (Opening Index Value x Index Performance)

= 100 + (100 x 1.19%)

= 101.19

Step Three: Calculate the Net Asset Value as at the Coupon Determination Date

Net Asset Value on the Coupon Determination Date is calculated as:

= Reference Asset Value– Ongoing Fees


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where:

• Reference Asset Value is calculated as:

= Opening Net Asset Value + Cash Investment Performance + Index Participation

• Cash Investment Performance is calculated as:

= Closing Cash Value Opening Cash Value

= $1.03 - $1.00

= $0.03 per FIP;

and:

• Index Participation is calculated as:

= ((Closing Index Value Opening Index Value) divided by 100),x the Index Participation Level

= ((101.19 – 100) / 100) x 5.00

= $0.06 per FIP;

and:

Ongoing Fees are calculated as follows:

Ongoing Fees include the Index Participation Fee and the Performance Fee.

• Assuming an average daily Reference Asset Value of $1.00 per FIP for each day of the Coupon Period, the Index Participation Fee is calculated at a rate of 0.40% as:

= average daily Reference Asset Value x (rate of Index Participation Fee x Index Participation Level) x Days in Coupon Period / 365

= $1.00 x 0.40% x 5 x 180 / 365

= $0.01 per FIP.

Assuming a UBS Bank Bill Index return of 6.00% per annum (or 3.00% for the Coupon Period), the Performance Fee will apply to returns in excess of 8% (6.00% being the UBS Bank Bill Index return + 2.00%), so the Performance Fee benchmark is calculated as:

= (UBS Bank Bill Index return + 2%) x Days in Coupon Period/365

= (6.00% + 2.00%) x 365

180

= 8.00% x 365

180 = 3.95%.

Based on the assumed Opening Net Asset Value of $1.00 this means that the Performance Fee applies to Net Asset Value in excess of $1.0395 per FIP for the Coupon Period. A Performance Fee was payable in the previous Coupon Period so no High Water Mark adjustment is required in this instance.

The Net Asset Value before the Performance Fee in this example is calculated as:

= Opening Net Asset Value + Cash Investment Performance + Index Participation − Index Participation Fee

= $1.00 + $0.03 + $0.06 - $0.01

= $1.08 per FIP

The Performance Fee is therefore:

= 10% x (Reference Asset Value per FIP – Index Participation Fee - Performance Fee benchmark)

= 10% x ($1.08 - $1.0395)

= $0.004 per FIP.

The Net Asset Value taking all required fees into account is therefore equal to:

= $1.00 + $0.03 + $0.06 - $0.01 - $0.004

= $1.076 per FIP.

The Reference Asset Value is the Net Asset Value before taking all required fees into account. In this example the Reference Asset Value is therefore calculated as:

= $1.00 + $0.03 + $0.06

= $1.09 per FIP.

Step Four: Calculate the Coupon Payment Amount

The difference between the Net Asset Value and the Coupon Threshold Amount is the Coupon Payment Amount for this Coupon Period per FIP. In the above example this is equal to:

= $1.076 - $1.00

= $0.076 per FIP.

An Investor holding 100,000 FIPs would therefore receive a Coupon Payment Amount of $7,600.00.


20

Following the payment of the Coupon, the Net Asset Value would reduce from $1.076 to $1.00 per FIP.

5.1.2 Detailed Coupon calculation example (When a Coupon is not payable)


• an Investor holds 100,000 FIPs;

• the Coupon Period is 180 days (“Days in Coupon Period“);

• the Net Asset Value on the last Coupon Determination Date was $1.00 per FIP (“Opening Net Asset Value”);

• the Coupon Threshold Amount is $1.00 per FIP;

• The Cash Investment earned interest at a rate of 6.00% per annum for the entire Coupon Period (“Cash Rate”);

• a Performance Fee was payable in the previous Coupon Period;

• the following values applied at the start of the Coupon Period:

Cash Investment value (“Opening Cash Value”): $1.00 Index value (“Opening Index Value”): 100.00, and

• the Financial Adviser Fee and Approved Distributor Fee have already been settled.

Step One: Calculate the value of the Cash Investment on the Coupon Determination Date

The value of the Cash Investment (“Closing Cash Value”) would be calculated using a simple interest formula as follows:

= Opening Cash Value + (Opening Cash Value x Cash Rate x Days in Coupon Period /365)

= $1.00 + ($1.00 x 6.00% x 180 / 365)

= $1.03 per FIP

Step Two: Calculate the Index performance and the value of the Index on the Coupon Determination Date

The Index performance is calculated with reference to each of the four investments comprised in the Index, as:

= (Short term interest rate performance

+ Long term interest rate performance + Interest rate differential performance + Diversified credit performance) / 4

where reference to performance is a reference to the performance of each underlying investment strategy described in Part 4.2.

Assuming the following performance figures for each of the four investments comprised in the Index during the Coupon Period, the Index Performance is calculated as:

= (-1.75% -2.25% + 1.76% -2.52%) / 4

= -1.19%.

Given the assumed Opening Index Value of 100.00, the Index Value on the Coupon Determination Date (“Closing Index Value”) is therefore:

= Opening Index Value + (Opening Index Value x Index Performance)

= 100 + (100 x -1.19%)

= 98.81.

Step Three: Calculate the Net Asset Value as at the Coupon Determination Date

Net Asset Value on the Coupon Determination Date is calculated, as explained at Step Three of Part 5.1.1 above, as:

= Opening Net Asset Value + Cash Investment Performance + Index Participation – Ongoing Fees;

where:

• Cash Investment Performance is calculated as:

= Closing Cash Value Opening Cash Value

= $1.03 - $1.00

= $0.03 per FIP;

and:

• Index Participation is calculated as:

= ((Closing Index Value Opening Index Value) divided by 100) x the Index Participation Level

= ((98.81 – 100) / 100) x 5.00

= - $0.06 per FIP;


21

and:

Ongoing Fees are calculated as follows:

Ongoing Fees include the Index Participation Fee and the Performance Fee. If the Ongoing Fees reduce the Net Asset Value to below the Coupon Threshold Amount then no Coupon will be paid. In this example below, after calculating the Index Participation Fee the Net Asset Value is below the Coupon Threshold Amount, therefore no Coupon will be paid and it is not necessary to proceed to calculate the Performance Fee as well.

Assuming an average daily Reference Asset Value of $1.00 per FIP for each day of the Coupon Period, the Index Participation Fee is calculated at a rate of 0.40% as:

= average daily Reference Asset Value x (rate of Index Participation Fee x Index Participation Level) x Days in Coupon Period / 365

= $1.00 x 0.40% x 5 x 180 / 365

= $0.01 per FIP.

The Net Asset Value taking all required fees into account is therefore calculated as:

= Opening Net Asset Value + Cash Investment Performance + Index Participation − Index Participation Fee

= $1.00 + $0.03 - $0.06 - $0.01

= $0.96 per FIP.

Step Four: Calculate the Coupon Payment Amount

The difference between the Net Asset Value and the Coupon Threshold Amount is the Coupon Payment Amount for the Coupon Period per FIP.

In the above example the Net Asset Value per FIP is below the Coupon Threshold Amount and therefore no Coupon is payable for this Coupon Period.

The opening Net Asset Value for the subsequent Coupon Period will remain at $0.96 per FIP.

5.1.3 Summary Table

To illustrate the relationship between the Cash Investment and the Index, the following table shows within the blue box the changes to the Net Asset Value using various combinations of Cash Investment and Index performance

calculated utilising the methodology and assumptions set out in the examples in Parts

5.1.1 and 5.1.2 and taking into account all fees and costs.

Cash Investment performance (pa) Index perf.* 3.00% 5.00% 7.00% 9.00%

2.00% 9.83% 10.72% 11.61% 12.50% 1.00% 5.33% 6.22% 7.11% 8.00% 0.00% 0.48% 1.47% 2.45% 3.44%

-1.00% -4.52% -3.53% -2.55% -1.56%

-2.00% -9.52% -8.53% -7.55% -6.56%

* Index Performance (for a Coupon Period) ranging from 2.00% (actual return over the Coupon Period) to -2.00% (actual return over the Coupon Period).

The areas shown in white within the blue box represent positive Net Asset Value growth during the Coupon Period (as a percentage of the Principal Protected Amount), and the grey areas within the blue box represent negative Net Asset Value growth for the Coupon Period. For combinations of Cash Investment performance and Index performance that result in a negative Net Asset Value (a grey box), no Coupon would be payable and the Net Asset Value would have fallen by this percentage during the Coupon Period.


22

5.2 Illustration of Principal Protection

This Part illustrates the impact of three different scenarios on Coupon Payments and Principal Protection. For the purposes of these examples, the adjusted Coupon Threshold Amount of $0.983 per FIP which applies only for the first Coupon Determination Date (instead of the Coupon Threshold Amount of $1.00 per FIP which applies on all other Coupon Determination Dates) has not been separately shown from the $1.00 Principal Protected Amount in the graphs below, as for illustrative purposes in the graphs the difference between $1.00 and $0.983 is not material.

5.2.1 Example One - where Net Asset Value greater than Coupon Threshold Amount on first Coupon Determination Date

In this example, assume that the Net Asset Value on the first Coupon Determination Date is greater than the Coupon Threshold Amount and the Principal Protected Amount. The following graph illustrates how the Coupon and the Principal Protection apply in this circumstance.

• The difference between the Net Asset Value and the Coupon Threshold Amount is paid as a Coupon (A). The Net Asset Value will reduce immediately following the payment of the Coupon to an amount equal to the Principal Protected Amount.

• Since the Net Asset Value was greater than the Principal Protected Amount on the Coupon Determination Date, the initial 4 Year Principal Protection Date (B) is reset to four years after that Coupon Determination Date, so that the 4 Year Principal Protection Date is extended by six months (C).

• The illustrative Principal Protection Trigger Level is adjusted to reflect the reset 4 Year Principal Protection Date (from D to E).

• For Investors who lodged an Early Exit Form but elected to redeem their FIPs with effect only when the Net Asset Value per FIP was next equal to or greater than the Principal Protected Amount on an Early Exit Date, the redemption of their FIPs would have been processed for the first Early Exit Date on which the Net Asset Value at that time was above the Principal Protected Amount (i.e. in the periods F and G shown in the graph, depending on when they lodged their Early Exit Form). Investors may lodge an Early Exit Form at any time.

• If an Investor does not wish to potentially be subject to an extended reset 4 Year Principal Protection Date but wishes to redeem their FIPs for not less than the Principal Protection Amount, they may elect Early Exit for an Early Exit Date on which the Net Asset Value per FIP next exceeds the Principal Protected Amount, before the 4 Year Principal Protection Date is potentially reset on the next Coupon Determination Date.

Coupon Threshold Amount

G.

$1.00

B. Initial maximum 4 year principal protection term

C. Reset maximum 4 year principal protection term

4 years 4.5 years

D. Principal Protection Trigger

E. Reset Principal Protection Trigger Level

F. G.

A. Coupon Amount

C. Period to reset 4 Year Principal Protection Date

6 months (1st Coupon

Determination Date)

Value

D. Initial Principal Protection Trigger Level F.

Net Asset Value

Principal Protected Amount / Coupon Threshold Amount

Initial Issue Date

B. Period to initial 4 Year Principal Protection Date


23

Example Two - where Net Asset Value less than Principal Protected Amount on the first Coupon Determination Date

In this example, assume that the Net Asset Value is less than the Principal Protected Amount and the Coupon Threshold Amount on the first Coupon Determination Date. Assume that on the next Coupon Determination Date the Net Asset Value is greater than the Principal Protected Amount. The following graph illustrates how the Coupon payments and the Principal Protection apply in these circumstances.

• The Net Asset Value is below the Principal Protected Amount and the Coupon Threshold Amount on the first Coupon Determination Date (A). Since the Net Asset Value is below the Coupon Threshold Amount no Coupon is payable. In addition, since the Net Asset Value is less than the Principal Protected Amount the result is that the initial Principal Protection Trigger Level (E) remains unchanged, reflecting the maximum four year term (B), which now expires in 3.5 years from the first Coupon Determination Date.

• On the next Coupon Determination Date in this example (the “12 months” date shown in the graph), the Net Asset Value is above the Principal Protected Amount. The difference between the Net Asset Value and the Principal Protected Amount is paid as a Coupon (C). The Net Asset Value will reduce following the payment of the Coupon to an amount again equal to the Principal Protected Amount.

• The initial 4 Year Principal Protection Date (B), which was to expire in 3 years, is reset to four years after that Coupon Determination Date, so that the 4 Year Principal Protection date is extended by 12 months (D). This extension is due to the Net Asset Value being greater than the Principal Protected Amount on the Coupon Determination Date which is 12 months after the Initial Issue Date.

• The illustrative Principal Protection Trigger Level is adjusted to reflect the reset 4 Year Principal Protection Date (i.e. from E to F).

• For Investors who lodged an Early Exit Form but elected to redeem their FIPs with effect only when the Net Asset Value per FIP was next equal to or greater than the Principal Protected Amount on an Early Exit Date, the redemption of their FIPs would have been processed for the first Early Exit Date on which the Net Asset Value at that time was above the Principal Protected Amount (i.e. in the periods F and G shown in the graph). Investors may lodge an Early Exit Form at any time.

• If an Investor does not wish to potentially be subject to an extended reset 4 Year Principal Protection Date but wishes to redeem their FIPs for not less than the Principal Protected Amount, they may elect Early Exit for an Early Exit Date on which the Net Asset Value per FIP next exceeds the Principal Protected Amount, before the 4 Year Principal Protection Date is potentially reset on the next Coupon Determination Date.

Net Asset Value

$1.00 A. No Coupon

B. Initial maximum 4 year principal protection

D. Reset maximum 4 year principal protection

4 years 5 years

C. Coupon Amount

E. Principal Protection Trigger G. F.

B. Period to initial 4 Year Principal Protection

D. Period to reset 4 Year Principal Protection


Determination Date)

Value

G. F.

Principal Protected Amount / Coupon Threshold Amount

12 months (2nd Coupon

Determination Date)

F. Reset Principal Protection Trigger Level

E. Initial Principal Protection Trigger Level

Initial Issue Date

Coupon Threshold Amount


24

Example Three - where Net Asset Value less than Principal Protected Amount and Principal Protection Trigger occurs

In this example, assume that the Net Asset Value is less than the Principal Protected Amount and the Coupon Threshold Amount on the first Coupon Determination Date. Subsequent to this, assume that a Principal Protection Trigger occurs. The following graph illustrates how the Coupon payments and the Principal Protection apply in these circumstances.

• The Net Asset Value is below the Principal Protected Amount and the Coupon Threshold Amount on the first Coupon Determination Date. Since the Net Asset Value is below the Coupon Threshold Amount (A) no Coupon is payable (B). In addition, since the Net Asset Value is below the Principal Protected Amount (C) the result is that the initial Principal Protection Trigger Level (D) remains unchanged, reflecting the maximum four year Principal Protection term (E), which now expires in 3.5 years.

• The Net Asset Value continues to fall and the Principal Protection Trigger occurs when the Net Asset Value is equal to or less than the Principal Protection Trigger Level (F).

• The FIP will pay no further Coupons for the rest of the Term and Investors will receive the Principal Protected Amount on the 4 Year Principal Protection Date (G), when the FIPs will also terminate.

• For Investors who lodged an Early Exit Form but elected to redeem their FIPs with effect only when the Net Asset Value per FIP was next equal to or greater than the Principal Protected Amount on an Early Exit Date, the redemption of their FIPs would have been processed for the first Early Exit Date on which the Net Asset Value at that time was above the Principal Protected Amount (ie within the period H shown in the graph). Investors may lodge an Early Exit Form at any time.

• Notwithstanding the occurrence of the Principal Protection Trigger, Investors can still elect Early Exit so as to terminate their FIPs before the 4 Year Principal Protection Date, for an amount equal to the Net Asset Value on the relevant Early Exit Date (which may be less than the Principal Protected Amount).

$1.00

4 years

Value

B. Principal Protection Trigger

D.

E.

F. Principal Protection Trigger breached

D. Initial Principal Protection Trigger LevelH.

Net Asset Value

C. Principal Protected Amount / Coupon Threshold Amount

E. Period to initial 4 Year Principal Protection Date


Determination Date)

B. No Coupon

G.

A. Coupon Threshold Amount

Initial Issue Date

Part 6: Fees and Other Costs

25

This table shows fees and other costs that may be charged in relation to the FIPs. Information about the taxation consequences of the FIPs is set out in Part 7. You should read all of the information about fees and charges, as it is important to understand their impact on your investment in FIPs.

Type of fee or cost Amount How and when paid

Financial Adviser Fee and Approved Distributor Fee

A placement fee paid to your Financial Adviser

A fee of up to $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).

The Financial Adviser Fee may be waived in part or whole by your Financial Adviser which will be effected by issuing additional FIPs to you equal to the amount waived, whether your application is received in the Initial Offer Period or the General Offer Period.

For Applications received during the Initial Offer Period these fees will reduce the Net Asset Value of the FIPs by the amount of these fees. This means that the Net Asset Value for the purposes of calculating Coupons and any payment of the Cash Settlement Amount by reference to the Net Asset Value, is lower by the fee amount.

For Applications received during the General Offer Period, these fees will be directly paid by you out of the Application Amount for your FIPS on the Issue Date. This will reduce the total Issue Price of FIPs issued to you by UBS, to an amount lower than your Application Amount by an amount equal to the fee amount.

A placement fee paid to Approved Distributors

A fee of up to $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).

The Approved Distributor Fee may be waived in part or whole by an Approved Distributor, which will be effected by issuing additional FIPs to you equal to the amount waived, whether your application is received in the Initial Offer Period or the General Offer Period.

For Applications received during the Initial Offer Period these fees will reduce the Net Asset Value for the purposes of calculating Coupons and any payment of the Cash Settlement Amount by reference to the Net Asset Value, by the fee amount.

For Applications received during the General Offer Period, these fees will be directly paid by you out of the Application Amount for your FIPs on the Issue Date. This will reduce the total Issue Price of FIPs issued to you by UBS, to an amount lower than your Application Amount by an amount equal to the fee amount.

Withdrawal and Early Maturity fee

The fee should you wish to sell your FIPs prior to Maturity or if an Early Maturity Event occurs

Nil. However, the sale price or Early Maturity Amount will be subject to market conditions, and for Early Maturity, break costs including the costs of the earlier than otherwise termination of hedging positions of UBS in respect of the FIPs.

Any break costs will be taken into account in the calculation of the Early Maturity Amount.

Part 6: Fees and Other Costs

26

Type of fee or cost Amount How and when paid

Ongoing Fees

Index Participation Fee An Index Participation Fee of 0.40% per annum of the average daily Reference Asset Value of each FIP during a Coupon Period multiplied by the Index Participation Level, (i.e. a total fee of 2.00% per annum of the Reference Asset Value).

Accrues daily and is payable to UBS on each Coupon Determination Date. The payment of the fee reduces the Net Asset Value of the FIPs. This means that this fee reduces the Coupon Amount which would otherwise be payable, by the amount of this fee.

Performance Fee A performance fee equal to 10% of any excess of the Reference Asset Value over the benchmark, subject to a High Water Mark. The benchmark rate of return is UBS Bank Bill Index + 2.00% per annum.

The UBS Bank Bill Index is a monitor of the Australian money market. It was created to serve as a performance benchmark representing a passively managed short term money market portfolio.

Calculated on each Coupon Determination Date and is payable to UBS on each Coupon Determination Date. The payment of the fee reduces the Net Asset Value of the FIPs. This means that this fee reduces the Coupon Amount which would otherwise be payable, by the amount of this fee.

Part 6 Fees and Other Costs

27

6.1 Worked examples of fees

6.1.1 Financial Advisor Fee and Approved Distributor Fee (Initial Offer Period)

Assume that it is the Initial Offer Period and that:

• An Investor has an Application Amount of $100,000; and

• A Financial Advisor Fee and Approved Distributor Fee totalling 3.30% (inc. GST) has been negotiated.

In this example, an amount representing the Financial Advisor and Approved Distributor Fees of $3,300 (i.e. 3.30% of an Application Amount of $100,000) is indirectly payable to the Financial Advisor and Approved Distributor by reducing the Net Asset Value of the FIPs.

From an Application Amount of $100,000 the Investor will receive a total of 100,000 FIPs at the Initial Issue Price of $1.00 and with a Net Asset Value of $0.967 per FIP. The Net Asset Value per FIP is calculated as follows:

= Principal Protected Amount – (Advisor and Distributor Fees x Principal Protected Amount)

= $1.00 – (3.30% x $1.00)

= $0.967 per FIP.

The Principal Protected Amount is always equal to $1.00 per FIP, irrespective of what price the FIPs are issued at.

Summary of Worked Example 6.1.1

Net Asset Value per FIP $0.967

Advisor and Distributor Fees 3.30%

Application Amount $100,000

Fees payable to Advisor and Distributor, by reduced Net Asset Value

$3,300

Number of FIPs Issued to Investor

100,000

Issue Price per FIP $1.00

Total Net Asset Value of all 100,000 FIPs issued to Investor

$96,700

Total Issue Price of all 100,000 FIPs issued to Investor

$100,000

Principal Protected Amount $1.00 per FIP

6.1.2 Financial Advisor Fee and Approved Distributor Fee (General Offer Period)

Assume that it is the General Offer Period and that:

• The Net Asset Value of each FIP is $1.00;

• An Investor has an Application Amount of $100,000;

• A Financial Advisor Fee and Approved Distributor Fee totalling 3.30% (inc. GST) has been negotiated; and

• The Issue Price, being Net Asset Value per FIP at the date of issue, is $1.00.

In this example, an amount representing the Financial Advisor and Approved Distributor Fees of $3,300 (i.e. 3.30% of an Application Amount of $100,000) is directly payable to the Financial Advisor and Approved Distributor by reducing the number of FIPs issued to the Investor.

From an Application Amount of $100,000 the Investor will receive a total of 96,700 FIPs. The number of FIPs to be issued to the Investor is calculated as follows:

= (Application Amount – Advisor and Distributor Fees) / Net Asset Value

= ($100,000 - $3,300) / $1.00

= 96,700 FIPs issued.

The Principal Protected Amount is always equal to $1.00 per FIP, irrespective of what price the FIPs are issued at.


Net Asset Value per FIP $1.00

Advisor and Distributor Fees 3.30%

Application Amount $100,000

Fees payable to Advisor and Distributor, by deduction from Application Amount

$3,300

Number of FIPs issued to Investor

96,700

Issue Price per FIP (i.e. Net Asset Value)

$1.00

Total Net Asset Value of all 96,700 FIPs issued to Investor

$96,700

Total Issue Price of all 96,700 FIPs issued to Investor

$96,700

Principal Protected Amount $1.00 per FIP


28

6.1.3 Where the Financial Advisor Fee and Approved Distributor Fee is waived

If the Financial Adviser and Approved Distributor chooses to waive the whole Financial Adviser Fee and the Approved Distributor Fee, no Financial Adviser Fee or Approved Distributor Fee (as applicable) is payable and the Investor will be issued with the number of FIPs which is equal to their total Application Amount divided by the Issue Price per FIP. The Issue Price is $1.00 for the Initial Offer Period, and for the General Offer Period is equal to the Net Asset Value per FIP.

If only one of these fees is waived, or if the amount of the fees is only waived in part, the Investor will receive additional FIPs up to the value of the amount of the fees which were waived.

6.1.4 Index Participation Fee

Assume that:

• The average daily Reference Asset Value of each FIP is $1.00 for the Coupon Period; and

• There are 180 days in the Coupon Period.

In this example, the amount of the Index Participation Fee is $0.01 per FIP calculated as Index Participation Fee per FIP:

= average daily Reference Asset Value x (Index Participation Fee percentage x Index Participation Level) x days in Coupon Period / 365

= $1.00 x 0.40% x 5.00 x (180/365)

= $0.01 per FIP.

The fee is indirectly payable to UBS by reducing the Net Asset Value of the FIPs on the Coupon Determination Date.

6.1.5 Performance Fee


• The Reference Asset Value of each FIP is $1.07 after allowing for payment of the Index Participation Fee;

• The UBS Bank Bill Index return is 6.00% per annum; and


To calculate the amount of the Performance Fee, first calculate the amount of any excess of

the Reference Asset Value over the Performance Fee benchmark of the UBS Bank Bill Index plus 2.00% per annum, subject to a High Water Mark (refer to Part 6.1.6).

In this example, the Reference Asset Value of $1.07 means there is a total return on the FIPs after the Index Participation Fee of 7.00% for the Coupon Period, and the Performance Fee benchmark is calculated as:

= UBS Bank Bill Index return + 2.00% per annum x (days in Coupon Period/365)

= (6.00% + 2.00%) x (180/365)

= 3.95%.

This means that the benchmark above which the Performance Fee applies is $1.0395 per FIP.

A 10.00% Performance Fee can then be calculated as applying to returns in excess of the Performance Fee benchmark, calculated as:

= 10% x (Reference Asset Value per FIP – Index Participation Fee - Performance Fee benchmark

= 10% x (1.07 – 1.0395)

= $0.003 per FIP.

Therefore, a Performance Fee of $0.003 per FIP is indirectly payable to UBS by reducing the Net Asset Value of the FIP on the Coupon Determination Date.


UBS Bank Bill Index return 6.00% pa

Performance Fee benchmark 3.95%, or $1.0395 per FIP

Returns in excess of Performance Fee benchmark

3.05%

Performance Fee payable to UBS on Coupon Determination Date

$0.003 per FIP

6.1.6 Application of High Water Mark


• The Reference Asset Value per FIP is $1.03;



29


In this example, the Reference Asset Value of $1.03 per FIP means there is a total return on the FIPs of 3.00% for the Coupon Period, and the Performance Fee benchmark is calculated as:


= (6.00% + 2.00%) x (180/365)

= 3.95%.

This means that:

• No Performance Fee applies for this Coupon Period since the total return on the FIPs of 3.00% per FIP was less than the Performance Fee benchmark of 3.95%; and

• In the next Coupon Period a Performance Fee will only be applicable if the total return is greater than the Performance Fee benchmark plus the High Water Mark.

The High Water Mark is the shortfall of the Coupon return for all previous Coupon Periods below the Performance Fee benchmark applicable in each relevant Coupon Period (except to the extent that the shortfall has already been made good by being exceeded in a subsequent Coupon Period). In this example the High Water Mark will be 0.95% and, assuming there are no prior shortfalls to take into account, is calculated for the subsequent Coupon Period as:

= Performance Fee benchmark for previous Coupon Period - total Coupon return for previous Coupon Period

= 3.95% - 3.00%

= 0.95%.

Assume now that on the next Coupon Determination Date:

• The Reference Asset Value is $1.07 after allowing for payment of the Index Participation Fee;



In this example, the Reference Asset Value of $1.07 for this subsequent Coupon Period means

that is a total return on the FIPs after the Index Participation Fee of 7.00% for the Coupon Period, and the Performance Fee benchmark is calculated as Performance Fee benchmark is:


= (6.00% + 2.00%) x (180/365)

= 3.95%.

A 10.00% Performance Fee will apply to returns in excess of the performance benchmark as increased by the High Water Mark calculated in the previous Coupon Period:

= 10% x (Reference Asset Value – Index Participation Fee - Performance Fee benchmark – High Water Mark)

= 10% x (1.07 – 1.0395 – 0.0095)

= $0.002 per FIP.

Therefore a Performance Fee of $0.002 per FIP is indirectly payable to UBS by reducing the Net Asset Value of the FIP on the Coupon Determination Date.

6.1.7 Reduction of Reference Asset Value, Net Asset Value and Coupon Amounts

The Index Participation Fee and the Performance Fee are described as being “notionally” and “indirectly” paid to UBS because the fees and costs are not paid from the Issue Price or by an Investor making further payments to UBS during the Term of the FIPs. Instead the amount of these fees reduce the Net Asset Value and Reference Asset Value on a daily basis and therefore the amount of Coupons (if any) paid to Investors.

Part 7: Taxation Summary

30

Taxation summary This summary has been prepared by KPMG for the purposes of inclusion in this PDS and any opinions expressed in this Part 7 are those of KPMG. This summary outlines the main Australian income tax, Goods and Services Tax (“GST”) and stamp duty implications for Investors who acquire the FIPs otherwise than in the course of carrying on a business of investing in financial instruments and who acquire the FIPs during the Initial Offer Period or the General Offer Period as a result of an application made under this PDS or by way of an on market purchase on the ASX.

This summary has been prepared, and included in this PDS, to provide Investors with general information only and does not take into account the objectives, financial situation or needs of any specific Investor. It is not intended to take the place of professional advice and Investors should not make specific investment decisions in reliance on the information contained in this summary. Before acting or relying on any information, an Investor should consider whether it is appropriate for their circumstances having regard to their objectives, financial situation and needs.

KPMG's Tax practice is not licensed to provide financial product advice under the Corporations Act and taxation is only one of the matters that must be considered when making a decision on a financial product. You should consider taking advice from an Australian Financial Services Licence holder before making any decision on a financial product.

The advice in this communication is not intended or written by KPMG in Australia to market or otherwise encourage the promotion of the FIPs and represents KPMG’s response to a UBS request for advice in respect of the same.

This summary is based on current taxation law as at the date of this PDS. The tax law is frequently being changed, both prospectively and retrospectively. A number of key tax reform measures have been implemented, a number of other key reforms have been deferred and the status of some key reforms remains unclear at this stage.

All legislative references in this summary are to provisions of the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 (together, the Tax Act).

Disposal or redemption of the FIP

Cash settlement As each FIP is a “traditional security” for income tax purposes, any gain or loss arising from the disposal or redemption of each FIP will be included in assessable income or allowed as a deduction at the time of disposal or redemption. As each FIP is principal protected when held to Maturity, Investors who acquire the FIPs during the Initial Offer Period and hold to Maturity will receive the Cash Settlement Amount and no gain or loss should arise to Investors for income tax purposes.

Where a FIP matures or is disposed of or redeemed prior to Maturity for an amount greater than the Issue Price or the price at which they are acquired on the ASX (where an investor acquires FIPs on market instead of under an application made under this PDS), a gain will arise which will be included in the Investor’s assessable income under the traditional securities provisions at the time of disposal or redemption.

Whilst a FIP is also an asset for capital gains tax (“CGT”) purposes, any capital gain arising will be reduced by the amount already included in assessable income under the traditional securities provisions. As such, the CGT provisions will have no practical application, as the capital gain should be fully reduced by the amount included in assessable income. Importantly, individuals and complying superannuation fund Investors will not be entitled to the CGT discount in respect of any gain on disposal or redemption of the FIPs.

Where a FIP matures or is disposed of or redeemed prior to Maturity for less than the Issue Price or the price at which they are acquired on the ASX (where an Investor acquires FIPs on market instead of under an application made under this PDS), a loss will be realised at the time of disposal or redemption for income tax purposes, which should be deductible to the Investor. Again, the CGT provisions will have no practical application.

Gains or losses on FIPs acquired by an Investor under the Coupon reinvestment option will be treated as set out above.

Physical settlement Where an Investor elects to receive the Delivery Securities at Maturity by paying the Exercise Price, the Investor will be provided with the Delivery Securities and a rounding amount equal to the Cash Settlement Amount. No gain or loss should arise on delivery of the Delivery

Part 7: Taxation Summary

31

Securities. Instead, the cost base of the Delivery Securities will include the sum of the Cash Settlement Amount of the FIPs and the Exercise Price reduced by any rounding amount received.

Where the Delivery Securities are subsequently disposed of by the Investor, a capital gain or loss may arise (provided the Investor holds the Delivery Securities on capital account). The net gain or loss should broadly equal the capital proceeds less the cost base of the Delivery Securities. Individuals and complying superannuation fund Investors may be entitled to the CGT discount in respect of any gain when the Delivery Securities are disposed of, provided they have held the Delivery Securities for more than 12 months after Maturity.

Coupons Coupons payable by UBS to Investors to whom this tax summary applies, including Coupons that are reinvested in additional FIPs at the election of the Investor, will ordinarily be included in the assessable income of an Investor in the income year in which the Coupon Determination Date occurs.

Where the Coupons are paid to non-resident Investors or Australian resident Investors carrying on business in a country outside Australia through a permanent establishment, Australian interest withholding tax will apply in respect of the Coupons (unless an exemption from interest withholding tax is available under the relevant double tax treaty).

Pay As You Go (“PAYG”) withholding Where an Investor does not quote their Tax File Number (“TFN”) or claim an exemption, UBS is required to withhold tax from the Coupons at the highest marginal tax rate, plus the Medicare levy. PAYG withholding amounts are forwarded by UBS to the Australian Taxation Office and Investors will be entitled to a credit or refund for PAYG withholding amounts on lodgement of their income tax return for the year in which the withholding occurred.

The collection of an Investor’s TFN is authorised and its use is strictly regulated by the tax laws and the Privacy Act.

Business taxpayers may quote an ABN instead of a TFN.

Taxation of financial arrangements On 20 September 2007, Taxation Laws Amendment (Taxation of Financial Arrangements) Bill 2007 (“TOFA”) was introduced into Parliament. However, this Bill

subsequently lapsed in October 2007 as a result of the Federal election and there is currently some uncertainty regarding the timing for its re-introduction.

Under the Bill, the new rules were to have compulsory application to transactions entered into for income years commencing on or after 1 July 2009, unless a taxpayer elected to apply the rules to income years commencing on or after 1 July 2008. Further, individuals, financial entities that have annual turnover of less than $20 million and all other entities with an annual turnover of less than $100 million were not automatically subject to the new rules. Instead, such taxpayers had the ability to elect for the regime to apply.

Under the Bill, taxpayers to whom the regime applied were given the option of electing to bring all pre-existing financial arrangements within the TOFA regime. Accordingly, if the Bill is re-introduced in the same form and subsequently enacted, it could be possible for the taxation treatment of the FIPs to change in the future for certain taxpayers as a result of choices that they make.

GST The issue of the FIPs and redemption of the FIPs (whether by Cash Settlement or Physical Settlement) will not be subject to GST.

GST is also not payable on Coupons received or reinvested in additional FIPs.

However, GST may be imposed on expenses incurred by Investors in relation to the issue, disposal or redemption of the FIPs (such as legal or accounting advice). Those Investors who are registered or required to be registered for GST should seek advice about whether they are entitled to input tax credits in respect of the GST on those expenses.

Stamp duty No stamp duty will be payable on the acquisition or disposal of the FIPs on the basis that the FIPs are listed for quotation on the ASX. In addition, no stamp duty will be payable if an Investor elects Physical Settlement in respect of the transfer of the Delivery Securities (comprising a basket of ordinary fully paid shares selected from the largest 10 issuers of shares by market capitalisation listed on the ASX).

If stamp duty, GST or other Taxes become payable by UBS in connection with the FIP or any transaction contemplated by the Terms, then UBS can, under the Terms, require an Investor to pay such stamp duty, GST or Taxes.

Part 8: Description of UBS and Nominee

32

The information in this Part 8 is intended to be a brief summary only of UBS and the Nominee. Investors must make their own assessment of the ability of UBS and the Nominee to meet their obligations in relation to the FIPs.

8.1 UBS AG, Australia Branch UBS AG was formed on 29 July 1998 from the merger of Swiss Bank Corporation and Union Bank of Switzerland. UBS is the leading global wealth manager, a top tier investment bank and asset manager. It is also the market leader in Swiss retail and commercial banking.

Securities in UBS AG are listed on the New York, Swiss and Tokyo Stock Exchanges.

UBS AG established its Australian Branch on 1 January 2004. UBS AG, Australia Branch is a foreign Authorised Deposit-Taking Institution under section 9 of the Banking Act 1959 (Cth). It is therefore regulated by the Australian Prudential Regulation Authority. UBS also holds an Australian financial services licence number 231087.

It is important to note that FIPs are not a deposit with UBS AG and and that your investment will not be covered by the depositor protection provisions set out in Division 2 of Part II of the Banking Act 1959 (Cth), as these provisions do not apply to foreign Authorised Deposit-Taking Institutions.

UBS will provide a copy, free of charge, of any of the following documents to any person who requests such copies during the life of this PDS, by contacting UBS on 02 9324 2840:

• the latest available annual financial report of UBS; and

• the latest available half-yearly financial report of UBS.

UBS’ latest available annual and half-yearly financial reports can also be downloaded from www.ubs.com

Rating Agencies

UBS is rated by Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. Current ratings are available from various sources including the ASX, brokers and UBS.

The rating agencies do not independently verify information provided to them by UBS, and therefore, the rating agencies make no representation or warranty with respect to the accuracy of their ratings. The rating agencies have not been involved in the preparation, or authorised the issue of, this PDS.

Investors should note that credit ratings assigned by the rating agencies address only

credit risk, which is only one element of any investment decision. Ratings are not recommendations to buy, hold or sell the FIPs. By publishing a rating, the rating agencies are not inducing or advising Investors to take any action with respect to the FIPs or any other security. Ratings and rating reports should not be construed as investment advice, personalised or other advice. Accordingly, each Investor should conduct their own evaluation of the FIPs and consult with their investment advisers.

Ratings are subject to change or withdrawal at any time, and such change or withdrawal is within each rating agency’s sole discretion.

8.2 NOMINEE The Nominee (UBS Nominees Pty Ltd (ABN 32 001 450 522) (AFSL No 231088)) is the trustee of the Nominee Assets for the Investor. The Nominee is a wholly owned subsidiary of UBS. Its principal activities are to act as a custodian.

The Nominee is not an Authorised Deposit-Taking Institution under the Banking Act 1959 (Cth). The obligations of the Nominee do not represents deposits or other liabilities of UBS AG, and UBS AG does not stand behind, support or guarantee the Nominee in any way.

Part 9: Terms of Issue

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These Terms form the terms and conditions on which an Investor pays the Application Amount to UBS and UBS issues the FIPs to the Investor. Capitalised words used in the Terms are defined in Part 11 of this PDS. A reference to a clause in this Part 9 is to a clause of these Terms.

1 Applications, acceptance and issue

1.1 Applications

An Application for the FIPs must be made on an Application Form and in the manner described in the PDS.

1.2 Acceptance

If UBS accepts an Application and the Applicant pays the Application Amount in cleared funds to UBS on or before the end of the Term then UBS must issue the FIPs to the Applicant on the Issue Date. The number of FIPs to be issued to an Applicant is equal to:

For Applications received during the Initial Offer Period:

(a) the Application Amount plus the amount of any Financial Adviser Fee or Approved Distributor Fee payable to the Financial Adviser or Approved Distributor that has been waived by the Applicant’s Financial Adviser or Approved Distributor.

divided by

(b) the Initial Issue Price per FIP.

For Applications received during the General Offer Period:

(a) the Application Amount less the amount of any Financial Adviser Fee or Approved Distributor Fee payable to the Financial Adviser or Approved Distributor.

divided by

(b) the Issue Price per FIP.

FIPs will only be issued under this clause in integral numbers. UBS may retain any amounts remaining following the determination of the integral number of FIPs to be issued to an Applicant.

1.3 Investor bound by Terms

By completing and signing the Application Form and lodging it with UBS, the Investor agrees to be bound by these Terms.

1.4 Issue Date

Following acceptance of the Application the date on which the FIPs will be issued to an Applicant will be the Issue Date.

2 Nature of the FIPs

2.1 Rights of Investor

Each FIP:

(a) confers on the Investor the right, but not the obligation, to give an Exercise Notice or Early Exit Form to UBS in accordance with clause 5.3 electing Physical Settlement or Cash Settlement;

(b) confers on the Investor the right, but not the obligation, to give an Early Exit Form to UBS in accordance with clause 5.2 electing an Early Exit;

(c) on exercise of the right to Physical Settlement conferred by clause 2.1(a), requires UBS to procure that the Investor is in a position to be registered as the holder of the Delivery Securities (subject to adjustment) in accordance with these Terms;

(d) requires UBS to pay any Coupons to the Investor in accordance with these Terms;

(e) where Cash Settlement applies, requires UBS to pay the Cash Settlement Amount to the Investor in respect of Cash Settlement in accordance with these Terms;

(f) confers no right or interest in respect of the Delivery Securities or Reference Assets; and

(g) gives the Investor an interest in a Beneficial Fraction of the Nominee Assets in accordance with the Nominee Deed.

2.2 Beneficial Fraction in Nominee Assets

(a) Each FIP entitles the Investor to an interest in the Beneficial Fraction of the Nominee Assets, the legal title to which will be held on trust for the Investor by the Nominee in accordance with the terms of the Nominee Deed.

(b) The Investor acknowledges that pursuant to the terms of the Nominee Deed, UBS has the right to retain any dividends or other distributions in respect of the Nominee Assets.

(c) Under the Nominee Deed, at Maturity or on Early Exit the Investor is entitled to be transferred the Beneficial Fractions in


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relation to the Investor’s FIPs if Physical Settlement applies. The Investor is entitled to receive the net disposal proceeds (or an amount paid in satisfaction) of the Investor’s Beneficial Fractions if Cash Settlement applies to the Investor’s FIPs.

(d) In consideration for the Investor’s rights in relation to the Nominee Assets and the Investor’s right to receive Cash Settlement or Physical Settlement for each FIP, the Investor pays UBS the Application Amount.

2.3 Accretions do not accrue

Accretions conferred in respect of the Delivery Securities do not fall within the description of the Delivery Securities.

3 Register of holders, certificates and transfers

3.1 Register

UBS must arrange for the establishment and maintenance (at its own cost) of the Register in accordance with the provisions of the Corporations Act and in accordance with the requirements of the ASX Market Rules and the ASTC Settlement Rules.

3.2 No certificates

UBS need not issue a certificate evidencing the title of the Investor to the FIPs but must comply with the ASX Market Rules and the ASTC Settlement Rules concerning the issue of notices in relation to the FIPs.

3.3 Transfer

A FIP may be transferred if and only if the transfer is made in accordance with the Corporations Act, and if required, in the form prescribed by or under the ASX Market Rules and the ASTC Settlement Rules.

3.4 Registration of transfer of FIPs

UBS:

(a) must deal with, certify and register a transfer of a FIP which complies with clause 3.3 in accordance with the Corporations Act, the ASX Market Rules and the ASTC Settlement Rules; and

(b) may refuse to register such a transfer where such refusal is permitted by, and in accordance with, any procedures prescribed by the ASX Market Rules and/or the ASTC Settlement Rules.

3.5 Investor entitled to copy of Terms and Nominee Deed

Where an Investor gives notice to UBS requesting an up-to-date copy of these Terms (incorporating any amendments) or the Nominee Deed which is accompanied by a fee of $10, UBS must, within 10 Business Days of receipt of that notice and payment, supply a copy of these Terms (incorporating any amendments) or the Nominee Deed (as applicable) to the Investor.

3.6 Copy of Terms and Nominee Deed available

UBS must keep available for inspection at its offices a copy of these Terms (incorporating any amendments) and the Nominee Deed and an Investor or any member of the public have the same right to inspect these Terms (incorporating any amendments) and the Nominee Deed as they have to inspect the Register.

4 Coupon

4.1 Coupon Amount

Except where a Principal Protection Trigger has occurred, the Coupon Amount for a Coupon Period is calculated on the Coupon Determination Date at the end of the Coupon Period, as the increase (if any) of the current Net Asset Value on that Coupon Determination Date above the Coupon Threshold Amount. The Net Asset Value is determined on each Coupon Determination Date in accordance with Part 5 of the PDS.

Subject to clause 4.2, the Coupon Amount per FIP is payable to the Investor within 15 Business Days of the relevant Coupon Determination Date.

The Investor acknowledges that the Coupon Amount may, in certain circumstances, be zero, and that Coupons cease to be payable at all for the remainder of the Term if a Principal Protection Trigger has occurred. In these circumstances, the Investor acknowledges that UBS will not, and has no obligation to, pay any Coupon Amount.

4.2 Reinvestment of Coupon An Investor may in respect of all of their FIPs in a valid Application Form, or in writing to the Registry in such terms as the Registry in its discretion may accept, specify that Coupon Amounts payable to it in respect of FIPs must be reinvested in FIPs. An Investor that validly makes such election is entitled to receive on the relevant Coupon Payment Date an integral number of FIPs equal to the Coupon Amount divided by the Issue Price per FIP. UBS may retain any amounts remaining following the


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determination of the number of FIPs to be issued to the Investor. Any such election to reinvest the Coupon Amount in FIPs must be received at least 15 Business Days before the Coupon Determination Date on which the reinvestment option is to be applied.

5 Maturity or Early Exit

5.1 Notice at Maturity

Except for Maturity arising because of the 10 Year Maturity Trigger, on or before the day which is 20 Business Days before the Maturity Date, UBS must give to the Investor:

(a) a Maturity Notice setting out:

(i) the number of FIPs held by the Investor on the Business Day before the date of the Maturity Notice; and

(ii) the Maturity Date; and

(iii) the consequences of a failure to give a valid Exercise Notice;and

(iv) the last date and time on which a valid Exercise Notice may be given, being the Closing Time on the Maturity Date; and

(b) a blank Exercise Notice.

Immediately following a Coupon Determination Date on which the 10 Year Maturity Trigger occurs, UBS must give to the Investor:

(a) a Maturity Notice setting out:

(i) the number of FIPs held by the Investor on that Coupon Determination Date; and

(ii) the Maturity Date; and

(iii) the consequences of a failure to give a valid Exercise Notice; and

(iv) the last date and time on which a valid Exercise Notice may be given, being the Closing Time on the date which is 3 Business Days before the Settlement Date applicable for that Maturity Date; and

(b) a blank Exercise Notice.

The form of blank Exercise Notice is also available at any time from www.ubs.com/keyinvest or by contacting UBS on 02 9324 2840, and can be lodged with UBS

at any time, together with the Exercise Price if Physical Settlement is elected. The Exercise Price is only to be required to be paid to UBS within 20 Business Days of the Maturity Date.

5.2 Early Exit An Investor may for some or all of their FIPs, in respect of minimum holdings of 20,000 FIPs or for the balance of their remaining holding of FIPs, at any time deliver a validly completed Early Exit Form and specify that either:

(a) they elect to redeem their FIPs for the Net Asset Value per FIP on the next Early Exit Date; or

(b) they elect to redeem their FIPs for the Net Asset Value per FIP only on the next Early Exit Date on which the Net Asset Value per FIP is equal to or greater than the Principal Protected Amount.

5.3 Physical or Cash Settlement

An Investor may in respect of some or all of their FIPs deliver in respect of the Maturity Date a validly completed Exercise Notice to UBS and specify that either Physical Settlement or Cash Settlement will apply. If an Investor elects Physical Settlement for some or all of their FIPs they must pay UBS an Exercise Price of $0.01 per FIP at the time of delivering their validly completed Exercise Note to UBS. An Investor will be deemed to have elected Cash Settlement if:

(a) the Exercise Notice for any FIPs does not specify either Physical Settlement or Cash Settlement; or

(b) the Investor does not deliver a valid Exercise Notice to UBS for any FIPs.

An Investor may give an Exercise Notice at any time. An Exercise Notice may be withdrawn and a new Exercise Notice may be submitted at any time up to the deadline for lodgment of Exercise Notices in respect of the relevant Maturity Date.

In the case of an Early Exit, an Investor may in respect of some or all of their FIPs specify in a validly completed Early Exit Form that either Physical Settlement or Cash Settlement will apply. If an Investor elects Physical Settlement for some or all of their FIPs they must pay UBS an Exercise Price of $0.01 per FIP at the time of delivering their validly completed Early Exit Form to UBS. The Investor will be deemed to have elected Cash Settlement if the Early Exit Form


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does not specify either Physical Settlement or Cash Settlement.

5.4 Validity of Notice and Form

UBS will be entitled to treat an Exercise Notice or an Early Exit Form as invalid unless:

(a) it is of the view that it has been duly completed; and

(b) in the case of a Maturity Date other than a Maturity Date which is the result of a 10 Year Maturity Trigger, it is received by UBS by Closing Time on the Maturity Date;

(c) in the case of a Maturity Date which is the result of a 10 Year Maturity Trigger, it is received by UBS by Closing Time on the day which is at least 3 Business Days before the Settlement Date applicable for that Maturity Date;

(d) in the case of any Early Exit Form it is received by UBS by Closing Time on the Wednesday before the Early Exit Date, or on the next Business Day if that Wednesday is a public holiday, or two Business Days prior to a Coupon Determination Date where the Early Exit Date is a Coupon Determination Date; and

(e) in the case of an Early Exit Form, it specifies which of the elections in clause 5.3 is being elected; and

(f) the person who gives the Exercise Notice or Early Exit Form is either:

(i) the Investor; or

(ii) a person who claims to be entitled to be registered as the holder of the FIPs and in those circumstances, such person giving the Exercise Notice or Early Exit Form becomes the registered holder of the FIPs on or before 5 Business Days following the Maturity Date or Early Exit Dates (as applicable) and the Exercise Notice or Early Exit Form becomes effective immediately on that person becoming so registered.

5.5 Physical Settlement of Delivery Securities

If an Investor elects that Physical Settlement will apply on Maturity or on an Early Exit, UBS agrees to, on or before the Settlement Date applicable for that Maturity Date or Early Exit Date (as applicable):

(a) transfer to the Investor the unencumbered title to the Delivery Securities. The Delivery Securities transferred to the Investor must be free from any Encumbrance and must include all rights, including dividend rights, or the benefit of all rights, attached or accruing to them on and from the Maturity Date or Early Exit Date (as applicable); and

(b) pay the Investor the rounding amount (if any) pursuant to clause 5.7.

5.6 Physical Settlement

On delivery of the Delivery Securities to the Investor in accordance with clause 5.5 and payment of the rounding amount (if any) pursuant to clause 5.7, UBS’ obligations to the Investor in respect of the FIPs are satisfied and discharged, and the Investor’s interest in the Nominee Assets is extinguished.

5.7 Delivery of a whole number of Delivery Securities

At the end of the Term, an Investor that elects Physical Settlement will only be entitled to receive an integral number of Delivery Securities. Fractions of a Delivery Security cannot be delivered. The aggregate number of Delivery Securities will be rounded down to the nearest whole Delivery Security. If the excess of the total otherwise payable by UBS to the Investor over the value of such Delivery Securities to be delivered is more than $5 then UBS will cause to be paid to the Investor an amount equal to the difference. If the excess is $5 or less then no payment is required to be made to the Investor in respect of the excess.

5.8 Cash Settlement

If an Investor elects (or is deemed to have elected) that Cash Settlement will apply on Maturity or on an Early Exit, UBS agrees to, on or prior to the Settlement Date applicable for that Maturity Date or Early Exit Date (as applicable), pay the relevant Cash Settlement Amount to the Investor which amount will include the proceeds of sale of the Investor’s interest in the Nominee Assets (or an amount paid in satisfaction of the Investor’s interest in the Nominee Assets).

5.9 Satisfaction of Cash Settlement obligations

On Cash Settlement of the FIPs in accordance with clause 5.8, UBS’ obligations to the Investor in respect of the FIPs are satisfied and discharged, and the Investor’s interest in the Nominee Assets is extinguished.


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5.10 Liquidated Damages Amount

(a) If UBS fails to perform its obligations under clauses 5.5 or 5.8, an Investor may give a default notice in respect of the relevant FIPs.

(b) If the Investor gives a default notice, UBS must within 10 Business Days of receipt of the default notice pay to the Investor the Liquidated Damages Amount.

(c) On payment of the Liquidated Damages Amount:

(i) the Investor’s interest in the Nominee Assets will be extinguished; and

(ii) UBS will have no further obligations to the Investor in respect of the Investor’s FIPs.

5.11 Substitution of component of Delivery Securities

UBS may in its reasonable opinion determine that it is not possible or efficient to obtain or transfer any Delivery Securities to the Investor on or prior to the Settlement Date applicable for that Maturity Date or Early Exit Date. In this case, Maturity or Early Exit of the FIPs will continue to take place in accordance with clause 5 except that UBS may replace any of the Delivery Securities with any other security or securities quoted and trading on ASX which is issued by any of the top 100 ASX listed companies by market capitalisation and deliver that substituted security or securities in accordance with these Terms as if the definition of the "Delivery Securities" was amended to permit inclusion of that substituted security.

5.12 Principal Protection

UBS must each Business Day during the Term determine whether Net Asset Value on that day equals or is below the Principal Protection Trigger Level. If so, UBS must within one Business Day notify Investors of the occurrence of the Principal Protection Trigger.

6 Early Maturity

6.1 Early Maturity by UBS

(a) UBS may at any time (in its sole and absolute discretion) determine that an Early Maturity Event has occurred.

(b) Where UBS has determined an event as an Early Maturity Event, UBS may, subject to the consent of ASX, determine that there will be Early Maturity in which case UBS may specify a date as the Early Maturity Date.

(c) No Coupon Amount is payable to the Investor in respect of any Coupon Determination Date before which an Early Maturity Event is determined under clause 6.1(a).

6.2 Early Maturity mechanism

(a) If UBS determines (with the consent of the ASX) that there will be Early Maturity following an Early Maturity Event, the Early Maturity will take place as follows:

(i) UBS will before the Early Maturity Date, give each Investor an Early Maturity Notice notifying the Investor that Early Maturity will occur on the Early Maturity Date in accordance with this clause 6.2; and

(ii) all (and not less than all) the FIPs will be terminated by UBS on the Early Maturity Date, by payment from UBS to each Investor of the Early Maturity Amount in relation to the FIPs held by the Investor at Closing Time on the Early Maturity Date.

(b) A termination of the FIPs pursuant to this clause 6.2 will terminate all agreements between UBS and the Investor in relation to the FIPs. In addition, the Investor's interest in the Nominee Assets will be extinguished upon termination of the Investor's FIPs.

(c) The Investor acknowledges that no Physical Settlement option is available on Early Maturity, and that Principal Protection does not apply.

7 Adjustment Events

If an Adjustment Event occurs, is proposed to occur or likely to occur in respect of the Reference Assets or Delivery Securities or a component of the Reference Assets or Delivery Securities or the FIPs on or before the Maturity Date, UBS may, with the consent of the ASX, elect in its absolute discretion to do any one or more of the following:

(a) substitute part or all of the affected Reference Assets or Delivery Securities with any other reasonably similar asset; and/or

(b) substitute the Delivery Securities with any other security quoted and trading on the ASX; and/or


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(c) adjust or amend any variable, formula, amount, rate or calculation (including the method of calculating the Net Asset Value) that are set out or used in these Terms (including the PDS); and/or

(d) adjust, amend or substitute the Reference Asset or the definition of Reference Assets or the Delivery Securities; and/or

(e) amend or vary any of these Terms and/or the terms referred to in the PDS; and/or

(f) determine to suspend any of the necessary calculations referred to in these Terms or the PDS as appropriate until reliable values can be obtained; and/or

(g) take any other action or make any other adjustment that in the reasonable opinion of UBS is appropriate to put both UBS and the Investors in substantially the same economic position as UBS and the Investors would have been in had the Adjustment Event not occurred.

UBS will notify Investors by announcement made through the ASX company announcement platform of any adjustment that it proposes to make under this clause before the adjustment occurs or as soon as reasonably practicable after the adjustment occurs and in any event within 10 days of declaring the Adjustment Event.

If any event occurs which constitutes both an Adjustment Event and an Early Maturity Event for which UBS does not elect to make an adjustment in accordance with this clause 7, UBS may in its sole and absolute discretion, subject to the consent of ASX, treat that event as an Early Maturity Event.

8 UBS’ obligations are unsecured

UBS’ obligations under these Terms including the payment of the Cash Settlement Amount and (on Physical Settlement) the delivery of the Delivery Securities are direct, unconditional and unsecured obligations of UBS and these obligations rank equally with UBS’ existing unsecured debt.

9 Taxes

The Investor must pay and account for any transfer or similar duties or taxes, and any stamp duties, GST or other Taxes (if any) chargeable or payable in connection with any supply or transaction effected pursuant to or contemplated by these Terms, and shall indemnify and keep indemnified UBS against

any liability arising as a result of the Investor’s failure to do so.

10 Investor’s representations and warranties

By completing the Application Form and submitting it to UBS, the Investor represents and warrants to UBS (as a continuing representation and warranty) that:

(a) (if a corporation) it is duly incorporated and validly existing under the laws of its jurisdiction of incorporation;

(b) it has the power to execute and deliver the Application Form and to be bound by these Terms;

(c) the Application, holding of any investment or interest in the Nominee Assets and payment of the Cash Settlement Amount or delivery of the Delivery Securities to the Investor in accordance with these Terms do not violate any existing law or regulation which is applicable to the Investor;

(d) all authorisations required in order for it to make an Application, hold any investment and receive payment of the Cash Settlement Amount or to take delivery of the Delivery Securities have been obtained or effected and are in full force and effect;

(e) the Investor understands that nothing in these Terms or any marketing material associated with these Terms can be considered investment or financial product advice or a recommendation to acquire the Delivery Securities and that the Investor should seek its own independent advice; and

(f) the Investor acknowledges that the taxation section in this PDS ("Part 7 Taxation Summary ") is necessarily general in nature and does not take into account the specific taxation circumstances of each individual Investor. The Investor acknowledges that it has sought its own independent advice on the taxation implications relevant to their own circumstances before making an investment decision.

11 Set off rights

UBS may (in addition to any general or banker's lien, right of set off, right to combine accounts or any other right to which it may be entitled), without notice to the Investor or any other person, set off any obligation of the Investor to make payment to UBS under these Terms


39

against UBS’ liability to the Investor in respect of an Investment.

12 Notices

The parties agree that every notice or other communication of any nature whatsoever that is required to be given, served or made under or arising from these Terms:

(a) must be in writing in order to be valid;

(b) where the party is a corporation must be executed on behalf of the party giving, serving or making the same by any attorney, director, secretary or solicitor of that party;

(c) will be deemed to have been duly given, served or made in relation to a party:

(i) if it is delivered to the address of that party set out in this PDS (in the case of UBS) or the Application Form or Register (in the case of the Investor) or sent by facsimile to the number notified in writing by that party to the other party from time to time; or

(ii) in respect of all notices to the Investor, will be deemed to be validly given by announcement made through the ASX company announcement platform; and

(d) will be deemed to be given, served or made:

(i) (in the case of facsimile) on receipt of a transmission report confirming successful transmission at the conclusion of the transmission; and

(ii) (in the case of delivery by hand) on delivery, provided that if any notice is given, served or made outside of normal business hours it will not be deemed to be given, served or made until the commencement of business on the next Business Day; and

(iii) (in the case of announcement made through the ASX company announcement platform) on the date of publication.

13 Amendment of Terms

UBS may from time to time by notice sent to the Investors amend these Terms provided that:

(a) the terms of the amendment are authorised by the resolution of Investors passed in accordance with the terms of the Nominee Deed; or

(b) subject to the consent of ASX, the amendment is necessary or desirable in the reasonable opinion of UBS to comply with any statutory or other legal requirement or any requirement of ASX; or

(c) subject to the consent of ASX, the amendment does not materially prejudice the interests of Investors; or

(d) subject to the consent of ASX, the amendment is necessary or desirable in the reasonable opinion of UBS as a result of an Adjustment Event.

UBS must notify ASX of any amendment to these Terms made under this clause 13.

14 General provisions

14.1 Currency

All amounts payable under these Terms will be paid in Australian dollars.

14.2 No merger

UBS' rights under these Terms are additional to and do not merge with or affect and are not affected by any mortgage, charge or other encumbrance held by UBS or any other obligation of the Investor to UBS, despite any rule of law or equity or any other statutory provision to the contrary.

14.3 Rounding

Any price, number, currency amount or percentage calculated by UBS will be rounded to such number of decimal places and in such a manner as UBS determines is appropriate acting in its sole and absolute discretion.

14.4 Certification

Any document or thing required to be certified by the Investor or UBS must be certified by the Investor (if an individual) or a director, secretary or authorised officer of the Investor (if a corporation) or UBS, as the case requires, or in any other manner that UBS may approve.

14.5 Execution by attorneys

Each attorney executing the Application Form that binds the Investor to these Terms states that he, she or it has no notice of revocation or suspension of the power of attorney under


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which the attorney executes the Application Form.

14.6 Power of attorney

The Investor irrevocably appoints UBS and its nominees and any of their directors, secretaries and managers from time to time jointly and severally as attorney of the Investor to do (either in the name of the Investor or the attorney) all acts and things that the Investor is obliged to do under these Terms or which, in the opinion of UBS, are necessary or desirable in connection with the Delivery Securities or the protection of UBS’ interests or the exercise of the rights, powers and remedies of UBS.

14.7 Invalid or unenforceable provisions

lf any provision of these Terms (or any portion thereof) is invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of these Terms will not be affected or impaired.

14.8 Waiver and exercise of rights

A failure to exercise or enforce, or a delay in exercising or enforcing, or the partial exercise or enforcement of, any right, remedy, power or privilege under these Terms by UBS shall not in any way preclude or operate as a waiver of any further exercise or enforcement thereof or the exercise or enforcement of any other right, remedy, power or privilege under these Terms or provided by law.

14.9 Assignment and transfer of interests

UBS may transfer its rights and obligations under these Terms at any time by giving notice to the Investor.

14.10 Discretions and calculations

Any determination or calculation made by UBS will be in its sole and absolute discretion, acting in good faith and in a commercially reasonable manner, and will be conclusive and binding on all parties, except in the case of manifest error.

UBS may subsequently correct any error in calculations by notifying the correction to Investors in accordance with clause 12. If a correction is so notified within 5 Business Days of the original publication, the revised calculation shall be applied as if it had been made correctly in the first instance.

14.11 Recording conversations

The Investor acknowledges that conversations between the Investor and UBS or the Nominee (or any officer of UBS or the Nominee) may be tape-recorded. The Investor consents to the recording and its use (or any transcript of the

recording) in any proceedings that may be commenced in relation to these Terms.

14.12 Calculations and references to dates and times

Unless the contrary intention appears, calculations or determinations which are to be made on or by reference to a particular day or time are to be made on or by reference to the day or time in Sydney.

14.13 Payments by UBS

All amounts payable by UBS under these Terms will be paid to the Investor’s nominated account. lf the Investor has not provided UBS with details of their nominated account, payment will be made by UBS drawing a cheque made payable to the Investor which will be sent to the address provided by the Investor on its Application Form, or as recorded on the Register if different from the Application Form, and on doing so UBS is discharged of its obligations under these Terms.

14.14 Governing law and jurisdiction

These Terms are governed by the laws of New South Wales. The Investor irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales and waives, without limitation, any claim or objection based on absence of jurisdiction or inconvenient forum.

14.15 Time is of the essence

Time is of the essence in respect of the obligations of the Investor to pay money under these Terms.

14.16 Interpretation

In these Terms, the following rules of interpretation apply unless the contrary intention appears or the context requires otherwise:

(a) the singular includes the plural and vice versa;

(b) a reference to a gender includes all genders;

(c) a reference to any instrument or document (including these Terms) is a reference to that instrument or document (including any schedules and annexures) as amended consolidated, supplemented, novated or replaced;

(d) a reference to a party means a party to these Terms and in the case of UBS includes any affiliate of UBS;

(e) a reference to a person (including a party) includes an individual, company,


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other body corporate, association, partnership, firm, joint venture, trust or government agency, and it also includes the person's successors, permitted assigns, substitutes, executors and administrators;

(f) a reference to a law is a reference to that law as amended, consolidated, supplemented or replaced and it includes a reference to any regulation, rule, statutory instrument, by-law or other subordinate legislation made under that law, or any legislation, treaty, judgment, rule of common law or equity or rule of any applicable stock exchange;

(g) where a word or phrase is defined, its other grammatical forms have a corresponding meaning;

(h) headings are for convenience only and do not affect interpretation;

(i) if a payment or other act must (but for this clause 14.16) be made or done on a day that is not a Business Day, then it must be made or done on the next Business Day;

(j) if a period occurs from, after or before a day or the day of an act or event, it excludes that day;

(k) these Terms may not be constructed adversely to a party only because that party was responsible for preparing them;

(l) any term not defined in the 'Glossary' section and which is defined elsewhere in this PDS has the same meaning as in this PDS unless the context otherwise requires; and

(m) $ or AUD is a reference to the lawful currency in Australia, unless otherwise defined.

Part 10: Additional Information

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10.1 Clearing House Electronic Subregister System (“CHESS”)

The FIPs will be CHESS Approved Products in accordance with the ASX Market Rules and the ASTC Settlement Rules. In addition to the CHESS subregister, an electronic Issuer Sponsored Subregister will be maintained. These two subregisters together will provide UBS' principal register of holdings.

Under CHESS, on issue of the FIPs, instead of certificates, Investors will be provided with a Holding Statement (similar to a bank statement) which sets out the number of FIPs issued (or subsequently transferred) to each Investor. The Holding Statement will also advise the Investor of the HIN in the case of a CHESS holding or the security holder reference number in the case of an Issuer Sponsored Subregister holding. A Holding Statement will be provided to Investors after the end of any month during which there has been a change in the balance of the holding.

An Applicant will need to be either a participant in CHESS or be sponsored by a participant in CHESS in order to hold the FIPs on the CHESS subregister. FIPs not held on the CHESS subregister will be entered onto UBS Issuer Sponsored Subregister.

10.2 Broker

UBS Securities as broker to the issue will receive a discount, commission or fee from UBS in respect of FIPs placed by UBS Securities. UBS may pay fees to ASX market participants, licensed financial services providers or their representatives whose stamp appears on Application Forms for which FIPs are subsequently issued.

10.3 Complaints

If you have a complaint about the service provided to you by UBS, or any of its representatives in respect of the FIPs, you should take the following steps.

(a) Contact the UBS representative with whom you have been dealing and tell that person about your complaint.

(b) If your complaint is not satisfactorily resolved within 3 Business Days, please contact our “regional manager” in your State or put your complaint in writing and send it to us at the following address:

The Complaints Officer c/- Legal & Compliance Department UBS Level 16, Chifley Tower

2 Chifley Square Sydney NSW 2000

We will try to resolve your complaint quickly and fairly.

(c) If you still do not get a satisfactory outcome, you have the right to complain to:

Financial Industry Complaints Service Limited PO Box 579, Collins Street West Melbourne VIC 8007 Telephone: 1300 78 08 08 Fax: 03 9621 2291 Email: [email protected]

(d) ASIC also has a free call info line on 1300 300 630 which you may use to make a complaint and obtain information about your rights.

If you require further information including a copy of our internal complaint policy, please contact one of the persons mentioned in (a) or (b) above.

10.4 Consents

None of the parties referred to below have authorised or caused the issue of this PDS, nor make or purport to make any statement in this PDS (or any statement on which a statement in this PDS is based) other than as specified below.

Mallesons Stephen Jaques has given its consent to the statements naming it as solicitors to UBS in this PDS in the form and context in which those statements are included.

Computershare Investor Services Pty Limited has given its consent to the statements naming it as Registrar in this PDS in the form and context in which those statements are included.

KPMG has given its consent to the inclusion of, and takes responsibility for, the taxation summary in Part 7 of this PDS and to the statements naming it as tax adviser to UBS in the form and context in which those statements are included.

UBS Nominees Pty Ltd and UBS Securities (Australia) Limited have given their consent to the statements naming them as nominee and broker respectively in this PDS in the form and context in which those statements are included.

10.6 Labour Standards and Environmental, Social and Ethical Considerations

UBS does not take into account labour standards or environmental, social or ethical considerations in selecting, retaining or realising investment in connection with the FIPs. Applicants should make their own enquiries as to whether labour standards or environmental,


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social or ethical considerations are taken into account by the issuers of the assets that comprise the Reference Assets and Delivery Securities.

10.7 Summary of Nominee Deed

10.7.1 Nominee Deed

This summary of the terms of the Nominee Deed does not purport to be a comprehensive summary of all the terms of the Nominee Deed but highlights particular provisions that UBS wishes to encourage prospective investors to consider in detail and discuss with their professional advisers. Clause references are to clauses in the Nominee Deed.

10.7.2 Structure

UBS and the Nominee are parties to the Nominee Deed. The Nominee Deed establishes and sets out the terms of the trust pursuant to which Investors hold a beneficial interest in the Nominee Assets during the Term of the FIPs. UBS will arrange for the Nominee Assets to be transferred to the Nominee to be held in accordance with the Nominee Deed.

Only the securities referred to in the definition of “Beneficial Fraction” (or substitute securities) are held under this trust. The assets comprised in the Reference Assets are not held under this trust (or any other trust) for the benefit of Investors.

The Nominee is a wholly owned subsidiary of UBS, and has a limited range of discretions, choices and responsibilities beyond those required by the ASX Market Rules, the ASX Listing Rules and the ASTC Settlement Rules.

10.7.3 Beneficiaries (clause 2)

The beneficial interest in the Nominee Assets is held solely by the Investors and UBS. These interests are held as follows:

• Investors hold the beneficial interest in the entirety of the Nominee Assets (including the right to distributions of capital) except for the beneficial interest held by UBS.

• UBS holds the beneficial interest in all distributions of income (in whatever form).

• Each Investor holds a Beneficial Fraction in the Nominee Assets for each FIP held by that Investor.

10.7.4 Income Distributions (clause 3)

The Nominee will pay to UBS the cash amount of any income distributions (in whatever form). The Nominee will not participate in any plan conducted by the issuer of the Nominee Assets

for the reinvestment of such income distributions.

10.7.5 Entitlements (clause 4)

Investors are not entitled to receive notice of meetings of the issuer of the Nominee Assets, attend, speak or vote at any meetings of members of the issuer of the Nominee Assets, or require the Nominee to do any of the foregoing.

The Nominee must not cast any vote in respect of the shares comprised in the Nominee Assets.

10.7.6 The Trust (clause 5)

The Nominee may administer the Nominee Assets such that Beneficial Fractions for a particular Investor from time to time may be aggregated.

No Encumbrance may be created or permitted to subsist in respect of the Nominee Assets.

Each accretion to the Nominee Assets forms part of the Nominee Assets.

No person may control the transfer or disposal of Nominee Assets (other than the Investor and the Nominee in accordance with the Nominee Deed) except in circumstances which include for the purposes of complying with UBS’ obligations in relation to the FIPs.

The provisions of the Nominee Deed must not be amended for any purpose referred to in the paragraph above, nor amended in a manner which adversely affects the rights of the Investor to receive Physical Settlement or Cash Settlement.

10.7.7 Transfer on Maturity, Early Exit and Early Maturity (clause 6)

Where an Investor elects (or is deemed to have elected) to receive Cash Settlement on Maturity (including on the 4 Year Principal Protection Date) or on an Early Exit Date under this PDS, the Nominee will dispose of the Investor’s Beneficial Fractions and pay the disposal proceeds to the Investor (less all fees, costs, charges, liabilities, Tax and expenses incurred). The Nominee’s obligations are satisfied if UBS pays more than the disposal proceeds to that Investor.

Where UBS specifies an Early Maturity Date under this PDS, the Nominee will dispose of the Investor’s Beneficial Fractions of the Nominee Assets and pay the disposal proceeds to the Investor (less all fees, costs, charges, liabilities, Tax and expenses incurred). The Nominee’s obligations are satisfied if UBS pays more than the disposal proceeds to that Investor.


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10.7.8 Consequences of Disposal Events (clause 7)

If a Disposal Event occurs and the Nominee is obliged to sell some or all of the Nominee Assets, the Nominee must sell the relevant Nominee Assets in accordance with that obligation. The proceeds of any sale in these circumstances must be applied by the Nominee to acquire substitute Nominee Assets.

The Investors have no right to challenge the validity of such a disposal. A certificate given by the Nominee that a Disposal Event has occurred will be sufficient evidence of the Nominee’s right to sell the Nominee Assets.

10.7.9 Takeover bid for Nominee Assets and schemes of arrangement (clauses 8 and 9)

In the event that a person announces an intention to make a takeover bid, or in the event of an announcement to enter into a scheme of arrangement or quasi-scheme of arrangement or merger is made, in relation to the Nominee Assets the Nominee must not accept offers under a takeover bid, and has no other obligation to Investors concerning such offers. In this event, the Nominee must (with the consent of the ASX and if directed to do so by UBS) dispose of the Nominee Assets and apply the proceeds of sale in acquiring substitute Nominee Assets.

If Nominee Assets are compulsorily acquired following completion of offers under a takeover bid the proceeds of the compulsory acquisition (including the proceeds of sale of any non-cash consideration) must be applied in acquiring substitute Nominee Assets.

If Nominee Assets are subject to a scheme of arrangement or quasi-scheme of arrangement or merger, the Nominee must apply any proceeds in acquiring substitute Nominee Assets.

10.7.10 Buy-backs (clause 10)

If a share buy-back offer is made for the Nominee Assets the Nominee shall not accept the offer and shall have no obligation to Investors or any other person.

10.7.11 Bonus Issues (clause 11)

If the issuer of the Nominee Assets makes a bonus issue to its shareholders, the securities issued will be accretions and will form part of the Nominee Assets.

10.7.12 Rights Issues (clause 12)

If the issuer of the Nominee Assets makes a rights issue in relation to its shares, the Nominee may take (and will not be liable for) any

Reasonable Action but it has no obligation to deal with any such rights.

10.7.13 Subdivision or consolidation (clause 13)

If there is a consolidation or subdivision of Nominee Assets, the replacement shares will constitute the Nominee Assets.

10.7.14 Reduction or distribution of capital (clause 14)

If the issuer of the Nominee Assets undertakes a capital reduction or otherwise makes a cash payment in respect of the Nominee Assets (including any cash payment remaining after the acquisition of new securities pursuant to a scheme of arrangement, quasi-scheme of arrangement or merger) the Nominee must apply those proceeds towards acquiring substitute Nominee Assets.

10.7.15 Other events (clause 15)

If the issuer of the Nominee Assets or a third party takes any other action in respect of the capital of the issuer of the Nominee Assets, UBS may with the consent of ASX take (and will not be liable for) any Reasonable Action.

10.7.16 Substitution of Trust Assets (clause 16)

Where the Nominee is required under the Nominee Deed to acquire substitute Nominee Assets, each Investor is deemed to hold the same Beneficial Fraction in the substitute Nominee Assets for each FIP held, as that Investor previously held in the Nominee Assets.

10.7.17 Powers and duties (clause 17)

The Nominee has limited powers, duties, rights and discretions.

The Nominee has specific powers of sale in the circumstances described in this summary, and has general powers to administer the Nominee Assets, including powers to maintain bank accounts, and to give acknowledgements and undertakings to the ASX and ASTC.

The Nominee also has the power to borrow, grant security, give indemnities and make payments.

10.8 Privacy Policy

Should you apply for the FIPs by lodging an Application Form with your Financial Adviser, you acknowledge and agree that:

(a) UBS and your Financial Adviser collect your personal information for the purpose of processing your Application for the FIPs, issuing the FIPs, dealing with your investment and complying with relevant


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laws. If you do not provide the personal information UBS or your Financial Adviser requires, your Application may not be processed; and

(b) UBS or your Financial Adviser may be required to disclose all or some of your personal information to:

(i) related bodies corporate that might not be governed by Australian laws for the purpose of account maintenance and administration;

(ii) share registries, custodians and certain software providers related to the operational management and settlement of the FIPs;

(iii) other third parties for the purpose of account maintenance and administration, marketing research or acquiring any interest in any part of the business of your Financial Adviser; and

(iv) regulatory authorities such as ASIC or the ASX.

All personal information collected from you will be collected, used and stored by UBS in accordance with the UBS Privacy Policy, a copy of which can be made available to you on request. To obtain a copy, please contact UBS on 02 9324 2840.

All personal information collected from you will be collected, used and stored by your Financial Adviser. Please contact your Financial Adviser for a copy of its privacy policy.

UBS or your Financial Adviser and/or its associates may wish to communicate with you in the future about other investment opportunities which may be of interest to you. If you do not wish to be contacted for these purposes, please indicate so on the Application Form or contact UBS or your Financial Adviser (as appropriate).

10.9 Financial Services Guide

The financial services guides of UBS and the Nominee, which contain information about the services provided by UBS and the Nominee, are available from www.ubs.com/keyinvest or by contacting UBS on 02 9324 2840. You should read the financial services guide of UBS and the Nominee before investing in the FIPs.

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In this PDS and the Terms unless the context otherwise requires:

4 Year Principal Protection Date means the date from time to time at which the Principal Protected Amount would be payable to an Investor if a Principal Protection Trigger was to occur, being the latest of the following dates from time to time:

(a) on or after the Initial Issue Date, the fourth anniversary of the Initial Issue Date; and

(b) after a Coupon Determination Date on which the Net Asset Value per FIP is equal to or greater than the Principal Protected Amount per FIP, the date which is the fourth anniversary of that date.

For the avoidance of doubt, paragraph (b) above can be applied on a number of different Coupon Determination Dates, in which case the relevant date is the latest date.

10 Year Maturity Trigger means the Maturity Trigger which is so defined in Part 1.13.

ABN means Australian Business Number.

Accretion means all rights, accretions and entitlements attaching to the Delivery Securities after the Issue Date including all voting rights, all distributions payable in respect of the Delivery Securities (but excluding dividends or other income during the Term) or shares, notes or other financial products exercisable, declared, paid or issued in respect of the Delivery Securities.

Adjustment Event means in respect of either the Reference Assets or Delivery Securities or any component of the Reference Assets or the Delivery Securities or FIPs ("the Relevant Asset"), any of the following events, subject to ASX consent:

(a) where the Relevant Asset is a futures contract, option or spot contract, a share, security or a financial product or basket of any of these:

(i) the actual or proposed adoption of any procedure, event or action which is or which is likely to result in any cash return of capital, pro-rata cash distribution, capital reduction, liquidator's distributions, share buy-back, bonus issue, rights issue, scheme of arrangement, compromise, merger, demerger,

reconstruction, compulsory acquisition, redemption, cancellation, replacement, modification, subdivision or consolidation, takeover bid, special dividend, non cash dividend, share split or any other similar or like event;

(ii) any event which is or which results in the actual or proposed administration, liquidation, winding up or termination of the issuer of the Relevant Asset or other similar or like event (however described);

(iii) any event which is or which results in the actual or proposed de-listing of the Relevant Asset or the actual or proposed removal from quotation of the Relevant Asset or the actual or proposed suspension from trading of the Relevant Asset;

(b) where the Relevant Asset is an index including the Index:

(i) the Relevant Asset is suspended or discontinued or ceases to be published for a period of two hours or more;

(ii) the Relevant Asset is not calculated and announced by the issuer, provider or sponsor of the Relevant Asset, but is calculated and announced by a successor to the issuer, provider or sponsor;

(iii) the Relevant Asset is replaced by a successor index using the same or a substantially similar formula for and method of calculation;

(iv) the index provider or sponsor or any successor makes a material change in the formula for or the method of calculating or composition or constitution of the Relevant Asset or in any way materially modifies that Relevant Asset; or

(c) any actual or proposed event that may reasonably (in UBS' opinion) be expected to lead to any of the events referred to in paragraphs (a) or (b) above occurring;

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(d) where any Force Majeure Event occurs, or any other event occurs which UBS determines in good faith results in the performance of its obligations having become or will become, in the circumstances beyond its reasonable control, impossible, unlawful, illegal or otherwise prohibited;

(e) a Hedging Disruption or any termination of UBS' hedging arrangements or the adjustment or change of UBS' hedging arrangements in respect of the FIPs occurs, or an event resulting in a material limitation of the ability of UBS to arrange for a buy price for FIPs to be quoted on the ASX;

(f) 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;

(g) 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;

(h) any other event which may reasonably be expected to result in any of the above events; or

(i) any other event which UBS reasonably declares to be an Adjustment Event including (without limitation) 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.

Applicant means a person who lodges a completed Application Form with UBS including a person who arranges for a Financial Adviser to lodge an Application Form on their behalf.

Application means an offer by an Applicant to UBS to acquire FIPs.

Application Amount means, for an Investor, the “Total Investment Amount Payable” specified by the Investor in an Application Form and received in immediately available funds by UBS.

Application Form means the application form attached to or accompanying this PDS.

Approved Distributor means such dealer group(s) or distributor(s) approved by UBS.

Approved Distributor Fee means a fee of up to $0.008 per $1 of an Applicant’s Application Amount, payable to UBS on the Issue Date and then paid by UBS out of its own funds to an Approved Distributor in respect of an Application accepted by UBS.

ASIC means the Australian Securities and Investments Commission.

ASTC means ASX Settlement and Transfer Corporation Pty Limited (ABN 49 008 504 532).

ASTC Settlement Rules means the settlement rules of ASTC as amended or substituted from time to time.

ASX means ASX Limited (ABN 98 008 624 691) or the securities market conducted by ASX Limited, as the context requires.

ASX Listing Rules means the listing rules of ASX as waived, amended or substituted from time to time.

ASX Market Rules means the market rules of ASX as waived, amended or substituted from time to time.

ATO means Australian Tax Office.

Beneficial Fraction means the proportion of the Nominee Assets to which an Investor is beneficially entitled under the Nominee Deed for each FIP held by that Investor, and is the fraction the numerator of which is 1 and the denominator of which is the total number of FIPs on issue at the relevant time.

Business Day means a Trading Day on which commercial banks are open for general business in Sydney.

Cash Investment means the notional cash investment which earns wholesale market rates of return as described in Part 4.1

Cash Settlement means a payment on or before the Settlement Date in accordance with clause 5.8 of the Terms.

Cash Settlement Amount means for each FIP held by an Investor:

(a) in respect of an Early Exit Date, the Net Asset Value per FIP;

(b) in respect of the Early Maturity Date, the Early Maturity Amount per FIP; and

(c) in respect of the Maturity Date, the Principal Protected Amount per FIP.

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CHESS means the Clearing House Electronic Sub-register System operated by ASTC.

CHESS Approved Product means a CS Approved Product as defined in the ASX Market Rules.

Closing Time means 4.30 pm Sydney time or such other time as UBS determines.

Corporations Act means the Corporations Act 2001 (Cth).

Coupon means in relation to each Investor and a Coupon Period, the Coupon Amount per FIP payable in accordance with clause 4 of the Terms.

Coupon Amount means, for a Coupon Period, the Coupon Amount per FIP calculated by UBS for that Coupon Period in accordance with clause 4 of the Terms.

Coupon Determination Date means 4 April and 4 October of each year during the Term, and (if different) the last day of the Term.

Coupon Payment Date, for a Coupon Amount, means the date which is no later than 15 Business Days after the Coupon Determination Date for that Coupon Amount.

Coupon Period means each period from and excluding one Coupon Determination Date, to and including the following Coupon Determination Date. The first Coupon Period starts on and includes the Initial Issue Date.

Coupon Threshold Amount means:

(a) for the first Coupon Determination Date, $0.983 per FIP; and

(b) for each subsequent Coupon Determination Date, the Principal Protected Amount per FIP.

Delivery Securities means a basket of ordinary fully paid shares selected from the largest 10 issuers of shares by market capitalisation listed on the ASX, the quantity of which is determined by the volume weighted average price of UBS purchasing the shares in the market within the first five Business Days after the Termination Date and is determined as follows:

BA

where:

“A” means the relevant Cash Settlement Amount multiplied by the number of FIPs held by the Investor; and

“B” means in respect of the Delivery Securities the volume weighted average price of UBS purchasing the shares in the market within the

first five Business Days after the Termination Date,

except where the shares are:

(a) substituted in accordance with clause 7 of the Terms if an Adjustment Event occurs; or

(b) substituted in accordance with clause 5.11 of the Terms.

Where an asset (whether an asset identified above or a subsequently substituted security) is substituted under clause 5.11 or 7 of the Terms, the “Delivery Securities” will be the replacement security.

Disposal Event means an event the occurrence of which gives rise to a legal obligation upon the Nominee to dispose of the Nominee Assets, other than compulsory loan acquisition pursuant to a takeover scheme or takeover announcement, a disposal or cancellation under a scheme of arrangement or merger in the nature of a scheme of arrangement, or a disposal pursuant to a reduction of capital, capital distribution or redemption in respect of the Nominee Assets.

Early Exit means, for an Investor, the termination of FIPs prior to the Maturity Date as a result of an election by an Investor to redeem FIPs in accordance with clause 5.2 of the Terms.

Early Exit Date means each:

(a) Friday during the Term which falls on a Business Day; and

(b) Coupon Determination Date.

Early Exit Form means an early exit form lodged by an Investor requesting an Early Exit in the form attached to or accompanying this PDS.

Early Maturity means the termination of the FIPs prior to the Maturity Date as a consequence of an Early Maturity Event in accordance with clause 6 of the Terms which may only occur if the ASX consents.

Early Maturity Amount means in respect of an Early Maturity, the fair value of the FIPs as at the Early Maturity Date determined by UBS in its sole and absolute discretion in a commercially reasonable manner (taking into account any costs of UBS (including terminating any hedging positions) in respect of the Early Maturity).

Early Maturity Date means a date specified by UBS in an Early Maturity Notice as the date on which the FIPs will be terminated early following an Early Maturity Event.

Early Maturity Event means:

(a) a Tax Event;

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(b) 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;

(c) any actual or proposed event that may reasonably be expected to lead to any of the events referred to in (b) above.

Early Maturity Notice means a notice issued by UBS in accordance with clause 6.2 of the Terms.

Encumbrance means an interest or power:

(a) reserved in or over any interest in any asset including, without limitation, any retention of title; or

(b) created or otherwise arising in or over any interest in any asset under a bill of sale, mortgage, charge, lien, pledge, trust or power,

by way of security for the payment of debt or any other monetary obligation or the performance of any other obligation and whether existing or agreed to be granted or created.

Exercise Notice means the form of exercise notice as notified by UBS to an Investor under clause 5.1 of the Terms, or such other form of exercise notice available on application to UBS from time to time.

Exercise Price means $0.01 per FIP.

Final Maturity Date means the date which is 13 years and six months after the Initial Issue Date, being 4 October 2021.

Financial Adviser means such financial adviser(s) approved by UBS.

Financial Advisor Fee means a fee of up to $0.025 per $1 of an Applicant’s Application Amount, payable to UBS on the Issue Date and then paid by UBS out of its own funds to a Financial Adviser in respect of a Application accepted by UBS.

FIPs means a call option in respect of the Delivery Securities conferred on the Investor and issued under the Terms.

Force Majeure Event means an event or circumstance beyond the reasonable control of a party that prevents one or more parties from performing their obligations under the Terms.

General Offer Period means the period specified as such in the Investment Overview.

GST means any goods and services tax, a tax levied by the Australian federal government.

Hedging Disruption means a situation where on or prior to the Maturity Date or any other relevant date, UBS is unable, after using commercially reasonably efforts, to: (i) acquire, establish, re-establish, substitute, maintain, unwind or dispose of any transaction(s) or asset(s) it deems necessary to hedge the risk of entering into and performing its obligations with respect to the Terms, or (ii) realise, recover or remit the proceeds of any such transaction(s) or asset(s).

High Water Mark has the meaning given to it in Part 6.1.6.

HIN means an Investor’s holder identification number.

Holding Statement has the meaning given in the ASTC Settlement Rules.

Index or UBS Fixed IncomePlus Index means the index of notional investments described in Part 1.3 and Part 4.2.

Index Participation Fee means the fee described as such in Part 6.

Index Participation Level means the participation level of 5 times the Principal Protected Amount described in Part 1.4.

Initial Fees means any Financial Advisor Fee and/or any Approved Distributor Fee paid.

Initial Issue Date means 4 April 2008, or such other date as UBS specifies on which the FIPs are first issued to an Investor by entry into the Register in accordance with clause 3.1 of the Terms.

Initial Issue Price means $1.00 per FIP.

Initial Offer Close Date means the last date of the Initial Offer Period.

Initial Offer Period means the period specified as such in the Investment Overview or such other period as determined by UBS.

Investor means the person whose name is entered into the Register from time to time as the holder of the FIPs.

Issue Date means the date on which the FIPs are issued to an Investor by entry into the Register in accordance with clause 3.1 of the Terms.

Issue Price in respect of a FIP is the Net Asset Value of the FIP on the date of Issue of the FIP, except for FIPs offered during the Initial Offer Period which are issued at the Initial Issue Price.

Issuer Sponsored Subregister has the meaning given in the ASTC Settlement Rules.

Liquidated Damages Amount means 1.1 times:

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(a) in the case of Physical Settlement the arithmetic average of the daily volume weighted average price of the Delivery Securities (in AUD) on the 5 Trading Days following the Termination Date, excluding special, late, overseas sales and option exercises; and

(b) in the case of Cash Settlement, the Cash Settlement Amount.

Maturity means maturity of the FIPs which occurs on the Final Maturity Date or earlier if a Maturity Trigger occurs, and which results in Cash Settlement (or if elected by the Investor, Physical Settlement) of the FIPs.

Maturity Date means the date on which Maturity occurs.

Maturity Notice means a notice issued by UBS in accordance with clause 5.1 of the Terms.

Maturity Trigger means the occurrence of any of the circumstances described as such in Part 1.13, which results in Maturity occurring before the Final Maturity Date.

Net Asset Value means, for a FIP:

(a) on any day prior to the occurrence of a Principal Protection Trigger, the amount calculated by UBS as the Reference Asset Value per FIP less:

(i) Ongoing Fees per FIP accrued to that date; and

(ii) any reduction applicable for payment of Financial Adviser Fees and/or Approved Distributor Fees as described in Part 6; and

(b) on any day on or after the occurrence of a Principal Protection Trigger, the present value of the 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 (as described in Part 1.9).

After payment of a Coupon Amount, the Net Asset Value for a FIP is correspondingly reduced by the amount of the Coupon Amount.

Nominee means UBS Nominees Pty Ltd (ABN 32 001 450 522) (AFSL No. 231088).

Nominee Assets means 100 shares in National Australia Bank Limited, as substituted in accordance with the Nominee Deed.

Nominee Deed means the deed poll executed by UBS and the Nominee on or about the date of this PDS.

Ongoing Fees means the Index Participation Fee and the Performance Fee.

Performance Fee means the fee described as such in Part 6.

Physical Settlement means the transfer to the Investor or the Investor’s nominee of the Delivery Securities in accordance with clause 5.3 of the Terms.

Part means a part of this PDS.

Principal Protected Amount means, in respect of each FIP, $1.00.

Principal Protection means the right to receive the Principal Protected Amount per FIP as set out in the Terms.

Principal Protection Trigger means where the Net Asset Value is the same as or less than the Principal Protection Trigger Level.

Principal Protection Trigger Level means an amount equal to 103% of the 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.

Product Disclosure Statement or PDS means this product disclosure statement issued by UBS dated 13 February 2008.

Reasonable Action means action taken by UBS or by the Nominee which is taken after consultation with UBS and which is lawful, practicable, does not create a risk of liability for UBS or the Nominee unacceptable to it and is otherwise reasonable.

Reference Assets means the Cash Investment and the UBS Fixed IncomePlus Index.

Reference Asset Value means, for a FIP on any day, the amount calculated by UBS as the value of the Reference Assets per FIP, as described in Part 5.1.

Register means the registers and/or subregisters of Investors to be kept pursuant to the Terms.

Registrar means Computershare Investor Services Pty Ltd (ACN 078 279 277) or any other competent registrar appointed by UBS with the consent of the Nominee.

Settlement Date means in relation to a FIP terminated on:

(a) a Termination Date other than an Early Maturity Date, the day that is 10 Business Days after (or such other time as reasonably determined by UBS) the Termination Date; and

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(b) an Early Maturity Date, the day that is 10 Business Days after (or such other time as reasonably determined by UBS) the later of:

(i) that Early Maturity Date; or

(ii) the Business Day on which the Early Maturity Amount is determined (which will be no more than 5 Business Days after the Early Maturity Date).

Tax or Taxes means any income tax, capital gains tax, goods and services tax, withholding tax, stamp, financial institutions, registration and other duties, bank accounts debits tax and other related taxes, levies, imposts, deductions, interest, penalties, fines, expenses and charges payable by any person on, as a consequence of, or in connection with, the purchase, sale or transfer of, or the completion of the purchase and sale of the Delivery Securities or investment in FIPs.

Tax Event means, in respect of the FIPs, either:

(a) any change in;

(b) the making of;

(c) any change in the official interpretation of; or

(d) any change in compliance with,

any law with respect to Tax, which occurs after the Initial Issue Date, and in the reasonable opinion of UBS is reasonably likely to have a materially adverse effect for Investors in respect of the FIPs.

Term means the period from (but excluding) the Initial Issue Date to (and including) the Final Maturity Date or earlier Maturity Date or Early Maturity Date (if any), or in respect of particular FIPs any earlier redemption on an Early Exit Date.

Termination Date means (as applicable):

(a) in respect of particular FIPs, any Early Exit Date on which those FIPs are redeemed under the Early Exit option;

(b) the Final Maturity Date; or

(c) any other Maturity Date or an Early Maturity Date,

whichever occurs first.

Terms or Terms of Issue means the terms and conditions of the FIPs, as set out in Part 9, pursuant to which the Investor agrees to acquire the FIPs.

TFN means tax file number.

Trading Day means a day when ASX is open for business in Sydney or Melbourne.

UBS means UBS AG, Australia Branch (ABN 47 088 129 613) (AFSL No. 231087).

UBS Bank Bill Index means the index so described in Part 6.

UBS Fixed Income Plus Index or Index means the index of notional investments described in Part 1.3 and Part 4.2.

UBS Securities means UBS Securities (Australia) Limited (ABN 62 008 586 481) (AFSL No. 231 098).

Part 12: Instructions for the Application Form

52

ALL APPLICATIONS MUST BE MADE VIA A FINANCIAL ADVISER

12.1 Preliminary steps

• It is important that you read the PDS to ensure you understand the Terms and risks involved in investing in the FIPs. This document does not take into account the financial situation and particular needs of each Investor, and nothing in the PDS is a recommendation by UBS or any other person concerning the FIPs, the Reference Assets or Delivery Securities.

• Investors should seek independent financial and taxation advice before making a decision whether to acquire the FIPs.

Contact your Financial Adviser. For general queries, please contact UBS on 02 9324 2840.

12.2 Application process

• Complete the Application Form and any other supporting documentation required by your Financial Adviser.

• Give it to your Financial Adviser. For Applications made during the Initial Offer Period, ensure that you allow enough time for your Financial Adviser to forward your Application to UBS prior to the Closing Time on the Initial Offer Close Date.

• Ensure that UBS receives the total Application Amount (prior to the Closing Time on the Initial Offer Close Date for Applications made during the Initial Offer Period).

• If UBS accepts your Application, the FIPs will be issued to you on the Issue Date.

12.3 Instructions for completing the Application Form

Please complete the Application Form in accordance with the following instructions.

A APPLICANT DETAILS

Write the full name you wish to appear on the register of the FIPs. CHESS participants should complete their name identically to that presently registered in the CHESS system.

If the Applicant is an individual, insert the date of birth, occupation and residential address under (1) of the form. If the Applicant is a company, insert the full company name and ABN/ACN/ARBN under (2) of the form and provide the details of the directors required under (1) of the form. If the Applicant is a superannuation fund, insert the full name of the superannuation fund and the ABN/ACN/ARBN under (2) of the form and provide the details of the trustees required in (1) of the form and the names of the beneficiaries under (3) of the form. If the Applicant is a trust with an individual (corporate) trustee, insert the full name of the trust under (2) of the form, provide the details of the trustee (directors of the trustee) required in (1) of the form and the names of the beneficiaries under (3) of the form.

B CONTACT DETAILS FOR NOTICES

Please enter your postal address and email address for all correspondence. All communication to you from UBS and the Registrar will be sent to the person(s) shown.

C TELEPHONE DETAILS

Please insert your telephone number(s), area code and contact name in case we need to contact you in relation to your Application.

D BANK ACCOUNT DETAILS

Enter your bank account details here if you wish to have any cash payments deposited directly to your account. The bank account should be in the same name as the Applicant (s). The bank account must be held with a bank, building society or credit union within Australia. Third party bank accounts will not be accepted. If this is left blank, a cheque for any cash payments will be sent to the address provided.

E DETAILS OF THE INVESTMENT TO BE ACQUIRED

(i) $1.00 is the Initial Issue Price per FIP during the Initial Offer Period and the Issue Price will be the Net Asset Value during the General Offer Period.

(ii) Insert the total Australian dollar amount you wish to invest. The minimum investment is $20,000 and thereafter in multiples of $1000.

Part 12: Instructions for the Application Form

53

F COUPON REINVESTMENT

Please indicate by ticking the appropriate box whether you would like any Coupon Amount reinvested by way of issue of further FIPs or whether you do not want to have any Coupon Amount reinvested.

G APPLICANTS CHESS DETAILS

If you are a CHESS participant (or sponsored by a CHESS participant) and you wish to hold the FIPs allotted to you under this Application on the CHESS subregister, insert your CHESS Holder Identification Number (HIN) here. Otherwise, leave this section blank and on allotment, you will be sponsored by UBS and allocated a security holder reference number (“SRN”).

H TAX FILE NUMBER(S) OR ACN/ABN/ABRN OR EXEMPTION CODE

Insert the Tax File Number (“TFN”), ACN/ABN/ARBN or exemption code for each Applicant. It is not compulsory to provide your TFN. However, if you do not supply your TFN, this may result in withholding tax being deducted from any distribution payments. Collection of TFNs is authorised by taxation laws.

I FINANCIAL ADVISER DETAILS

Insert the details of your Financial Adviser here. All applications must have a Financial Adviser. Failure to complete this section will result in the Application being rejected.

J PAYMENT DETAILS

Payment for the FIPs should be made directly to your Financial Adviser. Payment can be made by cheque.

• Please complete the details for your cheque in this section. Make sure your cheque is payable to “UBS AG, Australia Branch” in Australian currency and cross it “Not Negotiable”. Your cheque must be drawn on an Australian bank. Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your Application being rejected.

• Pin (do not staple) the cheque or bank draft to your Application Form and send it to your Financial Adviser.

SIGNATURE AND ACKNOWLEDGEMENT

Each Applicant must read this section and sign the Application Form.

Where the Application Form is executed by a company, it must be executed either in accordance with section 127 of the Corporations Act or under a power of attorney. Section 127 of the Corporations Act allows a company to execute a document with or without using a common seal if the document is signed by two directors, a director and company secretary or (if applicable) the sole director who is also the sole company secretary.

If the Application Form is signed under a power of attorney, the attorney by signing certifies that it has not received notice of revocation of that power of attorney. A certified copy of the power of attorney must be lodged with the Application Form.

You acknowledge by executing the Application Form that you agree to be bound by the Terms set out in the PDS.

LODGING THE FORM

Application Forms and accompanying documents should be forwarded to your Financial Adviser.

An Application for the FIPs can only be made by completing and lodging the Application Form attached to this PDS with your Financial Adviser. Application Forms must not be distributed (whether electronically or otherwise) by any person to any other person unless accompanied by or attached to a complete and unaltered copy of this PDS. A free copy of the non-electronic PDS is available from UBS upon request.

The Financial Adviser should forward the Application Form and payment to UBS. In order for an Application to be accepted in respect of the Initial Offer Period it is necessary that the Application Form and payment be received by UBS before the Closing Time on the Initial Offer Close Date.

Part 13: Application Form

54

APPLICATIONS IN RESPECT OF THE INITIAL OFFER PERIOD CLOSE AT 4:30 PM AEST ON 28 MARCH 2008

THIS FORM IS TO BE USED IF YOU WISH TO INVEST IN UBS Fixed IncomePlus investment (“FIP” or “Investment”) under the Terms set out in the Product Disclosure Statement dated 13 February 2008. THIS FORM SHOULD BE FORWARDED TO YOUR FINANCIAL ADVISER. You may apply with a minimum investment amount of $20,000 and multiples of $1,000 thereafter. For Applications in respect of the Initial Offer Period UBS must receive this Application Form and your total investment amount by 4:30 pm Sydney time on 28 March 2008. Please refer to page 52 of the PDS for instructions on how to fill out this form and complete the details as required below. I/we hereby apply for the following Investment to be issued by UBS to me/us as set out in this Application Form below pursuant to the PDS dated 13 February 2008. OFFICE USE ONLY

Application Number IRN

A APPLICANT DETAILS

1) Applicant 1 / Trustee / Director Name

First Name Middle Name Last Name

Date of Birth Occupation

Residential Address (number and street; suburb, city or town; state; and postcode – Please note that PO Box is not accepted)

Applicant 2 / Trustee / Director Name

First Name Middle Name Last Name

Date of Birth Occupation

Residential Address (number and street; suburb, city or town; state; and postcode – Please note that PO Box is not accepted)


55

2) Company / trust name

Name

ABN / ACN / ARBN

3) Names of Trust / Superannuation Fund Beneficiaries

B CONTACT DETAILS FOR NOTICES

Number and Street

Suburb, City or Town State Postcode

Email Address

Please tick box if you wish to receive confirmation of receipt of Application via email

C TELEPHONE DETAILS

Daytime Number (include area code)

Contact Name

D BANK ACCOUNT DETAILS (for direct credit of funds to your account)

I/We request that payments due to me/us by UBS be deposited directly into the following account. I/We acknowledge that these instructions supersede and have priority over all previous instructions, but will only apply in respect of the Investment issued pursuant to the PDS dated 13 February 2008. Unless advised in writing or otherwise, I/we acknowledge that all future payments due to me/us will be paid into the nominated account.

Third party bank accounts will not be accepted. Bank accounts must be in the same name as the Applicant(s).

Bank / Financial Institution Name BSB Account Number

Account Name Name of Branch / Suburb

Type of account (Note: do NOT use your credit card number)


56

E DETAILS OF THE INVESTMENT TO BE ACQUIRED

Investment Total Investment Amount Payable

(minimum $20,000, thereafter in multiples of $1,000)

Fixed IncomePlus $A

F COUPON REINVESTMENT

Yes, please reinvest my Coupons by way of issue of further FIPs

No, please do not reinvest my Coupons.

G APPLICANTS CHESS DETAILS (if applicable)

Holder Identification Number (HIN)

H TAX FILE NUMBER(S) OR ACN/ABN/ARBN OR EXEMPTION CODE

First Applicant Joint Applicant 2 Joint Applicant 3

TFN/ACN/ABN/ARBN/EXEMPTION CODE type - if not an individual, please mark the appropriate box

Company Partnership Trust Super Fund

I FINANCIAL ADVISER DETAILS (this must be completed)

Full Name / Company Name of Financial Adviser

Adviser code (if you have been issued one, otherwise leave blank)

Application Reference Number (Registry use only)

Number and Street


Adviser stamp Financial Advisor Rebate Approved Distributor Rebate

ADVISOR USE ONLY

% of Fee

% of Fee


57

J PAYMENT DETAILS

Details to make a payment to UBS

Cheque Please make cheques payable to UBS AG, Australia Branch and crossed Not Negotiable

Drawer

BSB Cheque Number Cheque Amount

$

INVESTOR DECLARATION By lodging this Application Form and making payment for FIPs I/We whose full names(s) and address appear above acknowledge and confirm my/our Application for the number of FIPs on this Application Form to be issued in accordance with the Terms set out in the PDS dated 13 February 2008 issued by UBS AG, Australia Branch (ABN 47 088 129 613) (AFSL 231 087). Capitalised words defined in the PDS have the same meaning in this Application Form. I/we acknowledge that in making our Application:

• I/We am/are at least 18 years of age (if applying as an individual);

• All information provided as part of this Application is true and correct;

• I/We have read and understood the PDS to which this Application Form is attached including the Terms, and have agreed to accept the FIPs on the Terms set out in the PDS and make all the representations and warranties contained in the Terms;

• I/We declare that my/our Application is not being made in my/our capacity as the trustees of any estate (other than a complying superannuation fund or other excluded trust as defined in Section 102UC of the Income Tax Assessment Act 1936);

• I/We acknowledge that UBS will hold any Application Amounts on trust prior to the issue of the FIPs to me/us and any interest earned on such monies will be for the benefit of UBS;

• I/We irrevocably appoint UBS Nominees Pty Ltd (ABN 32 001 450 522) (AFSL 231088) or its nominee as my/our nominee on the terms of the Nominee Deed in respect of each Beneficial Fraction to which my/our Application relates;

• I/We agree to receive financial service guides and supplemental financial services guides from UBS or its related entities (including the Nominee) by having them made available via www.ubs.com/keyinvest or such other Internet website notified to me/us;

• I/We acknowledge that UBS does not guarantee any particular rate of return on the FIPs, or their future performance;

• Where bank account details have not been provided to enable direct credit of funds to my/our account, I/we acknowledge that I/we will receive any cash payments by cheque. I/we acknowledge that UBS may impose a charge reflecting the cost of processing cheque payments, provided UBS gives prior notice to me/us of its intention to impose such a charge. Neither UBS nor the Registrar will be responsible for any delays in crediting funds to my/our nominated account as a result of transaction procedures or errors by any financial institution;

• I am/we are not bankrupt or insolvent (as the case may be) and am/are able to pay my/our debts as and when they become due and that no step has been taken to make me/us bankrupt or commence winding up proceedings, appoint a controller or administrator, seize or take possession of any of my/our assets or make an arrangement, compromise or composition with any of my/our creditors;

• If I am/we are acting as trustee in relation to the holding of the FIPs, I/we represent and warrant that I/we have all the power, authority and discretion vested as trustee to apply for and hold the FIPs;

• I/we will not offer, sell, re-sell or deliver, directly or indirectly, any FIPs so purchased in any overseas jurisdiction or to any foreign persons, or for the account or benefit of any such foreign person, or to others for the offering, sale or re-sale or delivery in any overseas jurisdiction or to any such foreign persons where that offer, sale, resale or delivery would be in breach of any Australian or foreign law;

• I/we acknowledge that I/we have read and understood the declarations set out above in this Application Form, and by returning the Application Form together with my/our payment for the Application Amount, I/we agree to be bound by them and make the declarations contained therein. I/we agree to indemnify UBS and any of its related bodies corporate against any loss, liability, damage, claim, cost or expense incurred as a result, directly or indirectly, of any such declaration set out in this Application Form proving to be untrue or incorrect;

• I/we have read and understood the Privacy Policy in Part 10.8 of the PDS and agree that information about me/us written on this form will not be collected, used or disclosed for any purpose other than for the purposes stated in the PDS. Where I/we have provided information about any other individual, I/we will make that individual aware of the provisions of the privacy statement;

• I/We agree that UBS may disclose personal information about me/us to my/our Financial Adviser or Approved Distributor or other adviser and that once UBS provides information to my/our Financial Adviser, Approved Distributor or other adviser, UBS can no longer control the ways in which that information is used and I/we agree that UBS is not liable for any loss, expense, damage, or claim directly or indirectly connected with any disclosure of information by UBS to my/our Financial Adviser or Approved Distributor or other adviser, except to the extent required by law.

UBS or an Approved Distributor and/or its associates may wish to communicate with you in the future about other investment opportunities that may be of interest. Please tick this box if you do NOT wish to be contacted for this purpose.

No thanks, I/we prefer NOT to be contacted about investment opportunities in the future.


58

FIPs are not deposits with UBS.

I/We acknowledge an investment in the FIPs is not a deposit with or other liability of UBS or any of its related bodies corporate and is subject to investment risk, including possible delays in repayment and loss of income or principal invested and that neither UBS nor any of its related bodies corporate guarantee the performance from the FIPs, the repayment of capital from the FIPs or any particular rate of return.

DATED: ______________________________

SIGNED, SEALED AND DELIVERED by:

(Individual Applicant)

First Applicant’s Signature Second Applicant’s Signature (if applicable)

First Applicant’s Name Second Applicant’s Name (if applicable)

(Company Applicant)

Executed by (insert name of company) in accordance with section 127 of the Corporations Act:

Director / Secretary

Director

(Power of Attorney)

Executed by and on behalf of (insert name of company) by its attorney in the presence of:

Attorney Signature

Attorney Name

Witness Signature Witness Name

LODGEMENT INSTRUCTIONS

This Application Form and accompanying documents should be forwarded to your Financial Adviser.

An Application for the FIPs can only be made by completing and lodging this Application Form with your Financial Adviser.

Part 14: Instructions for the Early Exit Form

59

14.1 Redemptions via Early Exit Form

Investors may elect to redeem their FIPs by completing the Early Exit Form in the Product Disclosure Statement and submitting it directly to UBS.

Contact your Financial Adviser for further information or alternatively, for general queries, please contact UBS on 02 9324 2840.

14.2 Instructions for completing the Early Exit Form

A ELECT WHEN TO EXECUTE REDEMPTION

Investors have the option of choosing to execute the redemption of their FIPs either immediately on the next Early Exit Date following lodgement of the Early Exit Form with UBS or 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 lodges an Early Exit Form with UBS, they will receive the Cash Settlement Amount for the FIPs equal to the Net Asset Value. If immediate redemption is requested to take effect on the next Early Exit Date, this amount may or may not be above the Principal Protected Amount, depending on the Net Asset Value on the applicable Early Exit Date. If redemption is requested on the next Early Exit date on which the Net Asset Value is equal to or greater than the Principal Protected Amount, the Cash Settlement Amount will be at least equal to the Principal Protected Amount.

When completing the Early Exit Form, Investors are required to select one of the two options by marking the appropriate box.

B ELECT CHOICE OF SETTLEMENT

Investors have the option of receiving their settlement proceeds in cash or Delivery Securities.

If an Investor chooses cash, they will receive cash consideration for the FIPs via direct credit of funds to their nominated account (or by cheque if no account is nominated).

If an Investor chooses Delivery Securities, they will receive consideration in the form of a basket of fully paid ordinary shares selected from the largest 10 issuers of shares (by market capitalisation) listed on the ASX, the quantity of which is determined by the volume weighted average price of UBS purchasing the shares in the market, plus any cash rounding amount.

When completing the Early Exit Form, Investors are required to select one of these two options by marking the appropriate box.

C DETAILS OF SECURITY HOLDER

Investors are required to complete all sections of Part C of the Early Exit Form including:

(i) Quantity of FIPs to be redeemed (for a minimum of 20,000 FIPs or (if less) for the balance of your remaining holding of FIPs);

(ii) Full registered name(s) of Investment holder(s) (should be identical to the name(s) used on the Application Form);

(iii) Full registered address of Investment holder(s);

(iv) Investment holder(s) HIN; and

(v) Signature of Investment holder(s).

D SIGNATURE AND ACKNOWLEDGEMENT

If an Investor wishes to elect Early Exit you must read this section and sign the Early Exit Form.

Where the Early Exit Form is executed by a company, it must be executed either in accordance with section 127 of the Corporations Act or under a power of attorney. Section 127 of the Corporations Act allows a company to execute a document with or without using a common seal if the document is signed by two directors, a director and company secretary or (if applicable) the sole director who is also the sole company secretary.

If the Early Exit Form is signed under a power of attorney, the attorney by signing certifies that it has not received notice of revocation of that power of attorney. A certified copy of the power of attorney must be lodged with the Early Exit Form.

E LODGING THE FORM

Early Exit Forms and accompanying documents should be forwarded to your Financial Adviser, or otherwise please contact UBS.

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

Part 14: Instructions for the Early Exit Form

60

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.

Part 15: Early Exit Form

61

THIS FORM IS TO BE USED IF YOU WISH TO REDEEM YOUR INVESTMENT IN UBS Fixed IncomePlus investment under the Terms set out in the Product Disclosure Statement dated 13 February 2008. THIS FORM SHOULD BE FORWARDED TO YOUR FINANCIAL ADVISOR or otherwise please contact UBS

Only the following amount of FIPs

All FIPs held by me

C. Details of Investment holder (please complete all sections of the form below)

Cash Settlement

Delivery Securities through Physical Settlement

If you elect Physical Settlement, you must pay $0.01 per FIP at the time of delivery of this form.

B. Elect choice of settlement (place a tick in one of the boxes below)

On the next Early Exit Date (at the current Net Asset Value)

Only on the next Early Exit Date on which the Net Asset Value is equal to or greater than the Principal Protected Amount

Surname Given name(s)/Company name

HIN / SRN 6. Investment holder(s) Holder Identifier Number

Title

4. Full registered name(s) of Investment holder(s)

3. Quantity of Investment

UBS Fixed IncomePlus 2. Description of Investment

UBS AG, Australia Branch 1. Details of Issuer

5. Full registered address of Investment holder(s)

Number and Street


Please refer to page 59 of the PDS for instructions for the Early Exit Form

A. Elect when to execute redemption (place a tick in one of the boxes below)

Please redeem the following investment in FIPs

(Insert amount in words) (Insert amount in numbers)

Part 15: Early Exit Form

62

D. Signature(s) of Investment holder(s)

Director Director / Secretary

Executed by (insert name of company) in accordance with section 127 of the Corporations Act:

(Company Applicant)

Second Investment holder(s) Name (if applicable)

First Investment holder(s) Name

Second Investment holder(s) Signature (if applicable)

First Investment holder(s) Signature

Witness Name

Witness Signature

Attorney Name

Attorney Signature

Executed by and on behalf of (insert name of company) by its attorney in the presence of:

(Power of Attorney)

I/We the registered Investment holder(s) hereby apply for the following FIPs issued by UBS pursuant to the PDS dated 13 February 2008 to be redeemed for the above consideration, subject to the conditions on which I/We held those Investments at the time of signing this Early Exit Form.

SIGNED, SEALED AND DELIVERED BY:

WARRANT-ISSUER

UBS AG, Australia Branch

Level 16 Level 16

Chifley Tower 8 Exhibition Street 2 Chifley Square MELBOURNE VIC 3000

SYDNEY NSW 2000

BROKER

UBS Securities Australia Ltd Level 16 Level 16

Chifley Tower 8 Exhibition Street

2 Chifley Square MELBOURNE VIC 3000

SYDNEY NSW 2000

NOMINEE

UBS Nominees Pty Ltd

Level 16 Level 16

Chifley Tower 8 Exhibition Street

2 Chifley Square MELBOURNE VIC 3000 SYDNEY NSW 2000

REGISTRAR

Computershare Investor Services Pty Limited

Level 3

60 Carrington Street SYDNEY NSW 2000

WARRANT-ISSUER'S SOLICITOR

Mallesons Stephen Jaques

Level 61 Governor Phillip Tower

1 Farrer Place

SYDNEY NSW 2000

WARRANT-ISSUER'S TAX ADVISERS

KPMG

10 Shelley Street

Sydney NSW 200

Directory

UBS AG, Australia Branch

ABN 47 088 129 613

Australian Financial Services Licence No. 231087

Level 16 Level 16 ChifleyTower 8 Exhibition Street 2 Chifley Square Melbourne VIC 3000 Sydney NSW 2000

INVESTOR ENQUIRY LINE 02 9324 2840

Documents

UBS - Fixed IncomePlus PDS · Product Disclosure Statement UBS – Fixed IncomePlus PDS dated 13 February 2008 Issued by UBS AG, Australia Branch ABN 47 088 129 613, AFSL 231087