Call Returns/Call Prices for Each Offering of the Securities
Securities linked to
the common stock
of Caterpillar Inc.
Securities linked to
the common stock
of Citigroup Inc.
Securities linked to
the common stock
of Southwestern Energy Company
Observation Dates
Call Settlement Dates
Call Return (numbers below assume a rate of 10.50%*
per annum)
Call Price
(per $10)
Call Return (numbers below assume a rate of 12.00%*
per annum)
Call Price
(per $10)
Call Return (numbers below assume a rate of 11.625%*
per annum)
Call Price
(per $10)
November 23, 2012
November 27, 2012
2.625%
$10.2625
3.00%
$10.30
2.906%
$10.2906
February 25, 2013
February 27, 2013
5.250%
$10.5250
6.00%
$10.60
5.813%
$10.5813
May 23, 2013
May 28, 2013
7.875%
$10.7875
9.00%
$10.90
8.719%
$10.8719
August 26, 2013
(Final Valuation Date)
August 30 2013
(Maturity Date)
10.500%
$11.0500
12.00%
$11.20
11.625%
$11.1625
See footnote 2 under "Key Dates" on the cover
*
The actual Call Return rate for each Security will be set on the
Trade Date and will be between 9.00% and 12.00% per annum for
Securities linked to the common stock of Caterpillar Inc., between
10.00% and 14.00% per annum for Securities linked to the common stock
of Citigroup Inc. and between 10.00% and 13.25% per annum for
Securities linked to the common stock of Southwestern Energy Company.
If the actual Call Return rate for any Security as determined on the
Trade Date is less than the applicable assumed Call Return rate
specified above, your return upon an automatic call will be less than
the applicable return shown above.
What Are the Tax Consequences of the Securities?
You should review carefully the section entitled "Material U.S.
Federal Income Tax Consequences" in the accompanying product
supplement no. UBS-3-II. The following discussion, when read in
combination with that section, constitutes the full opinion of our
special tax counsel, Davis Polk & Wardwell LLP, regarding the
material U.S. federal income tax consequences of owning and disposing
of Securities.
Based on current market conditions, in the opinion of our special tax
counsel it is reasonable to treat the Securities as "open
transactions" that are not debt instruments for U.S. federal income
tax purposes. Assuming this treatment is respected, the gain or loss
on your Securities should be treated as short-term capital gain or
loss unless you hold your Securities for more than a year, in which
case the gain or loss should be long-term capital gain or loss,
whether or not you are an initial purchaser of Securities at the
issue price. However, the Internal Revenue Service (the "IRS") or a
court may not respect this treatment of the Securities, in which case
the timing and character of any income or loss on the Securities
could be significantly and adversely affected. In addition, in 2007
Treasury and the IRS released a notice requesting comments on the
U.S. federal income tax treatment of "prepaid forward contracts" and
similar instruments, which might include the Securities. The notice
focuses in particular on whether to require holders of these
instruments to accrue income over the term of their investment. It
also asks for comments on a number of related topics, including the
character of income or loss with respect to these instruments; the
relevance of factors such as the nature of the underlying property to
which the instruments are linked; the degree, if any, to which income
(including any mandated accruals) realized by Non-U.S. Holders should
be subject to withholding tax; and whether these instruments are or
should be subject to the "constructive ownership" regime, which very
generally can operate to recharacterize certain long-term capital
gain as ordinary income and impose an interest charge. While the
notice requests comments on appropriate transition rules and
effective dates, any Treasury regulations or other guidance
promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the
Securities, possibly with retroactive effect. Both U.S. and Non-U.S.
Holders should consult their tax advisers regarding the U.S. federal
income tax consequences of an investment in the Securities, including
possible alternative treatments and the issues presented by
this notice.
Non-U.S. Holders Additional Tax Consideration
Non-U.S. Holders should note that recently proposed Treasury
regulations, if finalized in their current form, could impose a
withholding tax at a rate of 30% (subject to reduction under an
applicable income tax treaty) on amounts attributable to U.S.-source
dividends (including, potentially, adjustments to account for
extraordinary dividends) that are paid or "deemed paid" after
December 31, 2012 under certain financial instruments, if certain
other conditions are met. While significant aspects of the
application of these proposed regulations to the Securities are
uncertain, if these proposed regulations were finalized in their
current form, we (or other withholding agents) might determine that
withholding is required with respect to Securities held by a Non-U.S.
Holder or that the Non-U.S. Holder must provide information to
establish that withholding is not required. Non-U.S. Holders should
consult their tax advisers regarding the potential application of
these proposed regulations. If withholding is so required, we will
not be required to pay any additional amounts with respect to amounts
so withheld.