UBS has filed a registration statement (including a prospectus, as supplemented
by an index supplement and a product supplement for the Notes) with the Securities and Exchange Commission (the “SEC”),
for the offering to which this document relates. Before you invest, you should read these documents and any other documents related
to the Notes that UBS has filed with the SEC for more complete information about UBS and this offering. You
may obtain these documents for free from the SEC website at www.sec.gov. Our Central Index Key,
or CIK, on the SEC website is 0001114446.
You may access these documents on the SEC website at www.sec.gov
as follows:
References to "UBS", "we", "our" and "us" refer only to UBS AG and not to its
consolidated subsidiaries. In this document, "Trigger Callable Contingent Yield Notes" or the "Notes" refer to the Notes that are offered hereby. Also, references to the
"accompanying product supplement" or "Market-Linked Securities product supplement" mean the UBS product supplement, dated October 31, 2018, references to the "index supplement"
mean the UBS index supplement, dated October 31, 2018 and references to the "accompanying prospectus" mean the UBS prospectus, titled "Debt Securities and Warrants", dated October 31, 2018.
This document, together with the documents listed above, contains the
terms of the Notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including
all other prior pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other
educational materials of ours. You should carefully consider, among other things, the matters set forth in “Key Risks”
herein and in “Risk Factors” beginning on page PS-9 of the accompanying product supplement, as the Notes involve risks not associated with
conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors before deciding
to invest in the Notes.
If there is any inconsistency between
the terms of the Notes described in the accompanying prospectus, the accompanying product supplement , the index supplement and
this document, the following hierarchy will govern: first, this document; second, the accompanying product supplement; third, the
index supplement; and last, the accompanying prospectus.
UBS reserves the right to change the terms of, or reject any offer to
purchase, the Notes prior to their issuance. In the event of any changes to the terms of the Notes, UBS will notify you and you
will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case
UBS may reject your offer to purchase.
Preliminary
Terms
Issuer
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UBS AG London Branch
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Principal Amount
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$1,000.00 per Note
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Term
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Approximately 36 months, unless called earlier. In the event that we make any change to the expected trade
date and settlement date, the calculation agent may adjust the coupon observation dates (including the final valuation date), the
trigger observation date, as well as the related coupon payment dates (including the maturity date) to ensure that the stated term
of the Notes remains the same.
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Underlying
Indices
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The Russell 2000®
Index and the S&P 500® Index.
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Contingent Coupon & Contingent Coupon Rate
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If the closing level of each underlying index is equal to or greater
than its coupon barrier on any coupon observation date (including the final valuation date), UBS will pay you the contingent
coupon applicable to such coupon observation date.
If the closing level
of any underlying index is less than its coupon barrier on any coupon observation date (including the final valuation date), the
contingent coupon applicable to such coupon observation date will not accrue or be payable and UBS will not make any payment to
you on the relevant coupon payment date.
The
contingent coupon will be a fixed amount payable in arrears in equal installments based on a per annum rate (the
“contingent coupon rate”) and will be set on the trade date. The table below sets forth the minimum contingent
coupon amount that would be applicable to each coupon observation date on which the closing level of each underlying index is
equal to or greater than its coupon barrier. The actual contingent coupon rate and contingent coupon will be set on the trade
date.
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Contingent Coupon Rate
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At least 11.00%
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Contingent Coupon
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At least $55.00
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Contingent coupons on the Notes are not guaranteed. UBS will not pay you the contingent coupon for any coupon observation date on which the closing level of any underlying index is less than its coupon barrier.
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Trigger Event
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A trigger event is deemed to have occurred if the closing level of
any underlying index is less than its downside threshold on the trigger observation date.
In this case, you will be exposed to the underlying index return of the least performing underlying index and,
in extreme situations, you could lose all of your initial investment.
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Trigger Observation
Date(s)(1)
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The final valuation date.
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Issuer Call Feature
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UBS may elect to call the Notes in whole, but not in part,
on any coupon observation date, regardless of the closing levels of the underlying
indices on such coupon observation date.
If UBS elects to call the Notes, UBS will pay you on the coupon payment
date corresponding to such coupon observation date (the “call settlement date”) a cash payment per Note equal to the
principal amount plus any contingent coupon otherwise due (the “call settlement amount”), and no further payments will
be made on the Notes. Before UBS elects to call the Notes on a coupon observation date, UBS will deliver written notice to the
trustee.
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Payment at Maturity (per Note)
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If UBS does not elect to call the Notes and a trigger event does not
occur, UBS will pay you a cash payment equal to:
Principal Amount of $1,000
If UBS does not call the Notes and a trigger event occurs, UBS
will pay you a cash payment that is less than the principal amount, if anything, equal to:
$1,000 x (1 + Underlying Index Return of the Least Performing
Underlying Index)
In such a case, you will suffer a percentage loss on your initial investment equal to the underlying index return
of the least performing underlying index, regardless of the underlying index return of any other underlying index and, in extreme
situations, you could lose all of your initial investment.
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Underlying Index Return
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With respect to each underlying index, the quotient, expressed as a percentage,
of the following formula:
Final Level – Initial Level
Initial Level
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Least Performing Underlying Index
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The underlying index with the lowest underlying index return as compared
to any other underlying index.
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Downside
Threshold(2)
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A specified level of each underlying index that is less than its respective
initial level, equal to a percentage of its initial level, as specified on the cover hereof.
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Coupon Barrier(2)
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A specified level of each underlying index that is less than its respective
initial level, equal to a percentage of its initial level, as specified on the cover hereof.
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Initial Level(2)
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The
closing level of each underlying index on the trade date.
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Final Level(2)
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The closing level of each underlying index on the final valuation date.
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(1)
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Subject to the market disruption event provisions set forth in the
accompanying product supplement.
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(2)
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As determined by the calculation agent and as may be adjusted as described under “General Terms
of the Securities — Discontinuance of or Adjustment to an Underlying Index; Alteration of Method of Calculation”, as described
in the accompanying product supplement.
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Investment
Timeline
Trade Date
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The initial level of each underlying index is observed, and the terms of the Notes are set.
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¯
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Coupon Observation Dates (Semi-annual)
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If the closing level of each underlying index is equal to or greater
than its coupon barrier on any coupon observation date (including the final valuation date), UBS will pay you the contingent
coupon applicable to such coupon observation date.
If the closing level of any underlying index is less than its coupon
barrier on any coupon observation date (including the final valuation date), the contingent coupon applicable to such coupon
observation date will not accrue or be payable and UBS will not make any payment to you on the relevant coupon payment date.
UBS may elect to call the Notes in whole, but not in part, on any coupon
observation date, regardless of the closing levels of the underlying indices on such coupon observation date.
If UBS elects to call the Notes, UBS will pay you on the call settlement
date a cash payment per Note equal to the principal amount plus any contingent coupon otherwise due, and no further payments will
be made on the Notes. Before UBS elects to call the Notes, UBS will
deliver written notice to the trustee by the applicable coupon observation date. If UBS does not elect to call the Notes, investors
will have the potential for downside market risk at maturity.
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Maturity Date
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The final level of each underlying index is observed on the final valuation
date (which is also the trigger observation date) and the underlying return of each underlying index is calculated.
If UBS does not elect to call the Notes and a trigger event does
not occur, UBS will pay you a cash payment equal to:
Principal Amount of $1,000
If UBS does not call the Notes and a trigger event occurs, UBS
will pay you a cash payment that is less than the principal amount, if anything, equal to:
$1,000 x (1 + Underlying Index Return of the Least Performing
Underlying Index)
In such a case, you will suffer a percentage loss on your initial investment equal to the underlying index return
of the least performing underlying index, regardless of the underlying index return of any other underlying index and, in extreme
situations, you could lose all of your initial investment.
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Investing in the Notes involves significant risks.
You may lose a significant portion or all of your initial investment. Any payment on the Notes, including any repayment of principal,
is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations, you may not receive any amounts owed
to you under the Notes and you could lose all of your initial investment. You will lose a significant portion or all of your initial
investment if UBS does not elect to call the Notes and a trigger event occurs. You may receive few or no contingent coupons during
the term of the Notes. You will be exposed to the market risk of each underlying index on each coupon observation date and on the
final valuation date and any decline in the level of one underlying index may negatively affect your return and will not be offset
or mitigated by a lesser decline or any potential increase in the level of any other underlying index. UBS may elect to call the
Notes at its discretion on any coupon observation date regardless of the performance of the underlying indices. If UBS does not
elect to call the Notes and a trigger event occurs, you will lose a significant portion or all of your initial investment at maturity.
Coupon Observation Dates(1) and Coupon Payment Dates(1)(2)
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Coupon Observation Dates
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Coupon Payment Dates/Call Settlement
Dates (if called)
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December 21, 2020
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December 24, 2020
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June 21, 2021
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June 24, 2021
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December 20, 2021
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December 23, 2021
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June 20, 2022
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June 23, 2022
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December 19, 2022
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December 22, 2022
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Final Valuation Date
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Maturity Date
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(1)
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Subject to the market disruption event provisions set forth in the accompanying product supplement.
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(2)
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Three business days following each coupon observation date, except
that the coupon payment date for the final valuation date is the maturity date.
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Key Risks
An investment in the
Notes involves significant risks. Investing in the Notes is not equivalent to investing in the underlying indices. Some of
the key risks that apply to the Notes are summarized below, but we urge you to read the more detailed explanation of risks
relating to the Notes in the “Risk Factors” section of the accompanying product supplement. We also urge you to
consult your investment, legal, tax, accounting and other advisors before you invest in the Notes.
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Risk
of loss at maturity — The Notes differ from ordinary debt securities in that
UBS will not necessarily repay the principal amount of the Notes at maturity. If UBS
does not elect to call the Notes, UBS will repay you the principal amount of your Notes
in cash only if a trigger event does not occur and will only make such payment at maturity.
If UBS does not elect to call the Notes and a trigger event occurs, you will lose a percentage
of your principal amount equal to the underlying index return of the least performing
underlying index and, in extreme situations, you could lose all of your initial investment.
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The
stated payout from the issuer applies only if you hold your Notes to maturity —
You should be willing to hold your Notes to maturity. If you are able to sell your Notes
prior to maturity in the secondary market, you may have to sell them at a loss relative
to your initial investment even if the level of each underlying index at such time is
equal to or greater than its downside threshold.
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You
may not receive any contingent coupons with respect to your Notes — UBS will
not necessarily make periodic coupon payments on the Notes. If the closing level of any
underlying index is less than its respective coupon barrier on a coupon observation date,
UBS will not pay you the contingent coupon applicable to such coupon observation date.
This will be the case even if the closing levels of the other underlying indices are
equal to or greater than their respective coupon barriers on that coupon observation
date. If the closing level of any underlying index is less than its coupon barrier on
each coupon observation date, UBS will not pay you any contingent coupons during the
term of, and you will not receive a positive return on, your Notes. Generally, this non-payment
of the contingent coupons coincides with a period of greater risk of principal loss on
your Notes.
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Your
potential return on the Notes is limited to any contingent coupons, you will not participate
in any appreciation of any underlying index and you will not have the same rights as
holders of any underlying constituents — The return potential of the Notes
is limited to the pre-specified contingent coupon rate, regardless of the appreciation
of the underlying indices. In addition, your return on the Notes will vary based on the
number of coupon observation dates, if any, on which the requirements of the contingent
coupon have been met prior to maturity or an issuer call. Because UBS may elect to call
the Notes as early as the first potential call settlement date, the total return on the
Notes could be less than if the Notes remained outstanding until maturity. Further, if
UBS elects to call the Notes, you will not receive any contingent coupons or any other
payment in respect of any coupon payment date after the call settlement date, and your
return on the Notes could be less than if the Notes remained outstanding until maturity.
If UBS does not elect to call the Notes, you may be subject to the decline of the least
performing underlying index even though you cannot participate in any appreciation in
the level of any underlying index. As a result, the return on an investment in the Notes
could be less than the return on a hypothetical investment in the underlying indices
or a direct investment in any or all of the underlying constituents. In addition, as
an owner of the Notes, you will not have voting rights or any other rights of a holder
of any underlying constituents.
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A
higher contingent coupon rate or lower downside thresholds or coupon barriers may reflect
greater expected volatility of each of the underlying indices, and greater expected volatility
generally indicates an increased risk of loss at maturity — The economic terms
for the Notes, including the contingent coupon rate, coupon barriers and downside thresholds,
are based, in part, on the expected volatility of each underlying index at the time the
terms of the Notes are set. “Volatility” refers to the frequency and magnitude
of changes in the level of each underlying index. The greater the expected volatility
of each of the underlying indices as of the trade date, the greater the expectation is
as of that date that the closing level of an underlying index could be less than its
coupon barrier on the coupon observation dates and that the final level of an underlying
index could be less than its respective downside threshold on the trigger observation
date and, as a consequence, indicates an increased risk of not receiving a contingent
coupon and an increased risk of loss, respectively. All things being equal, this greater
expected volatility will generally be reflected in a higher contingent coupon rate than
the yield payable on our conventional debt securities with a similar maturity or on otherwise
comparable securities, and/or lower downside thresholds and/or coupon barriers than those
terms on otherwise comparable securities. Therefore, a relatively higher contingent coupon
rate may indicate an increased risk of loss. Further, relatively lower downside thresholds
and/or coupon barriers may not necessarily indicate that the Notes have a greater likelihood
of a return of principal at maturity and/or paying contingent coupons. You should be
willing to accept the downside market risk of the least performing underlying index and
the potential to lose a significant portion or all of your initial investment.
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UBS
may elect to call the Notes and the Notes are subject to reinvestment risk —
UBS may elect to call the Notes at its discretion on any coupon observation date prior
to the maturity date. If UBS elects to call your Notes early, you will no longer have
the opportunity to receive any contingent coupons after the applicable call settlement
date. The first call settlement date occurs after approximately six months and therefore
you may not have the opportunity to receive any contingent coupons after approximately
six months. In the event UBS elects to call the Notes, there is no guarantee that you
would be able to reinvest the proceeds at a comparable return and/or with a comparable
contingent coupon rate for a similar level of risk. Further, UBS’ right to call
the Notes may also adversely impact your ability to sell your Notes in the secondary
market.
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It is more likely that UBS will elect to call the Notes prior to
maturity when the expected contingent coupons payable on the Notes are greater than the interest that would be payable on other
instruments issued by UBS of comparable maturity, terms and credit rating trading in the market. The greater likelihood of UBS
calling the Notes in that environment increases the risk that you will not be able to reinvest the proceeds from the called Notes
in an equivalent investment with a similar contingent coupon rate. To the extent you are able to reinvest such proceeds in an investment
comparable to the Notes, you may incur transaction costs such as dealer discounts and/or fees and hedging costs built into the
price of the new notes. UBS is less likely to call the Notes prior to maturity when the expected contingent coupons payable on
the Notes are less than the interest that would be payable on other comparable instruments issued by UBS, which includes when the
level of any of the underlying indices is less than its coupon barrier. Therefore, the Notes are more likely to remain outstanding
when the expected amount payable on the Notes is less than what would be payable on other comparable instruments and when your
risk of not receiving a contingent coupon is relatively higher.
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An
investment in Notes with contingent coupon and issuer call features may be more sensitive
to interest rate risk than an investment in securities without such features —
Because of the issuer call and contingent coupon features of the Notes, you will bear
greater exposure to fluctuations in interest rates than if you purchased securities without
such features. In particular, you may be negatively affected if prevailing interest rates
begin to rise, and the contingent coupon rate on the Notes may be less than the amount
of interest you could earn on other investments with a similar level of risk available
at such time. In addition, if you tried to sell your Notes at such time, the value of
your Notes in any secondary market transaction would also be adversely affected. Conversely,
in the event that prevailing interest rates are low relative to the contingent coupon
rate and UBS elects to call the Notes, there is no guarantee that you will be able to
reinvest the proceeds from an investment in the Notes at a comparable rate of return
for a similar level of risk.
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You
are exposed to the market risk of each underlying index — Your return on the
Notes is not linked to a basket consisting of the underlying indices. Rather, it will
be contingent upon the performance of each underlying index. Unlike an instrument with
a return linked to a basket of indices, in which risk is mitigated and diversified among
all of the components of the basket, you will be exposed equally to the risks related
to each underlying index. Poor performance by any one of the underlying indices over
the term of the Notes will negatively affect your return and will not be offset or mitigated
by a positive performance by any other underlying index. For instance, you may receive
a negative return equal to the underlying index return of the least performing underlying
index if the closing level of one underlying index is less than its downside threshold
on the trigger observation date, even if the underlying index return of another underlying
index is positive or has not declined as much. Accordingly, your investment is subject
to the market risk of each underlying index.
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Because
the Notes are linked to the least performing underlying index, you are exposed to a greater
risk of no contingent coupons and losing a significant portion or all of your initial
investment at maturity than if the Notes were linked to a single underlying index —
The risk that you will not receive any contingent coupons and lose a significant portion
or all of your initial investment in the Notes is greater if you invest in the Notes
than the risk of investing in substantially similar securities that are linked to the
performance of only one underlying index. With more underlying indices, it is more likely
that the closing level or final level of an underlying index will be less than its coupon
barrier or downside threshold on any coupon observation date or the final valuation date
(which is also the trigger observation date), respectively, than if the Notes were linked
to a single underlying index.
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In addition, the lower the correlation is between
a pair of underlying indices, the greater the likelihood that one underlying index will decline to a closing level or final level
that is less than its coupon barrier or downside threshold, as applicable. Although
the correlation of the underlying indices’ performance may change over the term of the Notes, the economic terms of the Notes,
including the contingent coupon rate, downside thresholds and coupon barriers are determined, in part, based on the correlation
of the underlying indices’ performance calculated using our internal models at the time when the terms of the Notes are finalized.
All things being equal, a higher contingent coupon rate and lower downside thresholds and coupon barriers are generally associated
with lower correlation of the underlying indices. Therefore, if the performance of a pair of underlying indices is not correlated
to each other or is negatively correlated, the risk that you will not receive any contingent coupons or a trigger event will occur
is even greater despite a lower downside threshold and coupon barrier. With three underlying indices, it is more likely that the
performance of one pair of underlying indices will not be correlated, or will be negatively correlated. Therefore, it is more likely
that you will not receive any contingent coupons and that you will lose a significant portion or all of your initial investment
at maturity.
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Any
payment on the Notes is subject to the creditworthiness of UBS — The Notes
are unsubordinated unsecured debt obligations of UBS and are not, either directly or
indirectly, an obligation of any third party. Any payment to be made on the Notes, including
any repayment of principal, depends on the ability of UBS to satisfy its obligations
as they come due. As a result, UBS’ actual and perceived creditworthiness may affect
the market value of the Notes. If UBS were to default on its obligations, you may not
receive any amounts owed to you under the terms of the Notes and you could lose all of
your initial investment.
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Market
risk — The return on the Notes, which may be negative, is directly linked to
the performance of the underlying indices and indirectly linked to the performance of
the underlying constituents. The levels of the underlying indices can rise or fall sharply
due to factors specific to each underlying index or its underlying constituents, such
as stock or commodity price volatility, earnings, financial conditions, corporate, industry
and regulatory developments, management changes and decisions and other events, as well
as general market factors, such as general stock market or commodity market levels, interest
rates and economic and political conditions. Recently, the coronavirus infection has
caused volatility in the global financial markets and a slowdown in the global
economy. Coronavirus or any other communicable disease or infection may adversely affect
the underlying constituents and, therefore, the underlying indices.
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Fair value considerations.
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The
issue price you pay for the Notes will exceed their estimated initial value —
The issue price you pay for the Notes will exceed their estimated initial value as of
the trade date due to the inclusion in the issue price of the applicable underwriting
commissions and fees, hedging costs, issuance and other costs and projected profits.
As of the close of the relevant markets on the trade date, we will determine the estimated
initial value of the Notes by reference to our internal pricing models and the estimated
initial value of the Notes will be set forth in the final pricing supplement. The pricing
models used to determine the estimated initial value of the Notes incorporate certain
variables, including the levels of the underlying indices and underlying constituents,
the volatility of the underlying indices and underlying constituents, the correlation
of the underlying indices, any dividends paid on the underlying constituents, prevailing
interest rates, the term of the Notes and our internal funding rate. Our internal funding
rate is typically lower than the rate we would pay to issue conventional fixed or floating
rate debt securities of a similar term. The applicable underwriting commissions and fees,
hedging costs, issuance and other costs, projected profits and the difference in rates
will reduce the economic value of the Notes to you. Due to these factors, the estimated
initial value of the Notes as of the trade date will be less than the issue price you
pay for the Notes.
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The
estimated initial value is a theoretical price; the actual price that you may be able
to sell your Notes in any secondary market (if any) at any time after the trade date
may differ from the estimated initial value — The value of your Notes at any
time will vary based on many factors, including the factors described above and in “—Market
risk” above and is impossible to predict. Furthermore, the pricing models that
we use are proprietary and rely in part on certain assumptions about future events, which
may prove to be incorrect. As a result, after the trade date, if you attempt to sell
the Notes in the secondary market, the actual value you would receive may differ, perhaps
materially, from the estimated initial value of the Notes determined by reference to
our internal pricing models. The estimated initial value of the Notes does not represent
a minimum or maximum price at which we or any of our affiliates would be willing to purchase
your Notes in any secondary market at any time.
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Our
actual profits may be greater or less than the differential between the estimated initial
value and the issue price of the Notes as of the trade date — We may determine
the economic terms of the Notes, as well as hedge our obligations, at least in part,
prior to the trade date. In addition, there may be ongoing costs to us to maintain and/or
adjust any hedges and such hedges are often imperfect. Therefore, our actual profits
(or potentially, losses) in issuing the Notes cannot be determined as of the trade date
and any such differential between the estimated initial value and the issue price of
the Notes as of the trade date does not reflect our actual profits. Ultimately, our actual
profits will be known only at the maturity of the Notes.
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Limited or no secondary market and secondary market price considerations.
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There
may be little or no secondary market for the Notes — The Notes will not be
listed or displayed on any securities exchange or any electronic communications network.
UBS Securities LLC and its affiliates intend, but are not required, to make a market
for the Notes and may stop making a market at any time. If you are able to sell your
Notes prior to maturity you may have to sell them at a substantial loss. Furthermore,
there can be no assurance that a secondary market for the Notes will develop. The estimated
initial value of the Notes does not represent a minimum or maximum price at which we
or any of our affiliates would be willing to purchase your Notes in any secondary market
at any time.
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The
price at which UBS Securities LLC and its affiliates may offer to buy the Notes in the
secondary market (if any) may be greater than UBS’ valuation of the Notes at that
time, greater than any other secondary market prices provided by unaffiliated dealers
(if any) and, depending on your broker, greater than the valuation provided on your customer
account statements — For a limited period of time following the issuance of
the Notes, UBS Securities LLC or its affiliates may offer to buy or sell such Notes at
a price that exceeds (i) our valuation of the Notes at that time based on our internal
pricing models, (ii) any secondary market prices provided by unaffiliated dealers (if
any) and (iii) depending on your broker, the valuation provided on customer account statements.
The price that UBS Securities LLC may initially offer to buy such Notes following issuance
will exceed the valuations indicated by our internal pricing models due to the inclusion
for a limited period of time of the aggregate value of the applicable underwriting commissions
and fees, hedging costs, issuance costs and theoretical projected trading profit. The
portion of such amounts included in our price will decline to zero on a straight line
basis over a period ending no later than the date specified under “Supplemental
Plan of Distribution (Conflicts of Interest); Secondary Markets (if any).” Thereafter,
if UBS Securities LLC or an affiliate makes secondary markets in the Notes, it will do
so at prices that reflect our estimated value determined by reference to our internal
pricing models at that time. The temporary positive differential relative to our internal
pricing models arises from requests from and arrangements made by UBS Securities LLC
with the selling agents of structured debt securities such as the Notes. As described
above, UBS Securities LLC and its affiliates intend, but are not required, to make a
market for the Notes and may stop making a market at any time. The price at which UBS
Securities LLC or an affiliate may make secondary markets at any time (if at all) will
also reflect its then current bid-ask spread for similar sized trades of structured debt
securities. UBS Securities LLC reflects this temporary positive differential on its customer
statements. Investors should inquire as to the valuation provided on customer account
statements provided by unaffiliated dealers.
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Economic
and market factors affecting the terms and market price of Notes prior to maturity —
Because structured notes, including the Notes, can be thought of as having a debt component
and a derivative component, factors that influence the values of debt instruments and
options and other derivatives will also affect the terms and features of the Notes at
issuance and the market price of the Notes prior to maturity. These factors include the
levels of each underlying index and the underlying constituents; the volatility of each
underlying index and the underlying constituents; the correlation of the underlying indices,
any dividends paid on the underlying constituents; the time remaining to the maturity
of the Notes; interest rates in the markets; geopolitical conditions and economic, financial,
political, force majeure and regulatory or judicial events; the creditworthiness of UBS;
the then current bid-ask spread for the Notes and the factors discussed under “—
Potential conflict of interest” below. These and other factors are unpredictable
and interrelated and may offset or magnify each other.
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Impact
of fees and the use of internal funding rates rather than secondary market credit spreads
on secondary market prices — All other things being equal, the use of the internal
funding rates described above under “— Fair value considerations” as
well as the inclusion in the issue price of the applicable underwriting commissions and
fees, hedging costs, issuance and other costs and any projected profits are, subject
to the temporary mitigating effect of UBS Securities LLC’s and its affiliates’
market making premium, expected to reduce the price at which you may be able to sell
the Notes in any secondary market.
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The
Notes are subject to small-capitalization stock risks — The Notes are subject
to risks associated with small-capitalization companies because the Russell 2000®
Index is comprised of stocks of companies that may be considered small-capitalization
companies. These companies often have greater stock price volatility, lower trading volume
and less liquidity than large-capitalization companies and therefore the underlying index
may be more volatile than an index in which a greater percentage of the constituent stocks
are issued by large-capitalization companies. Stock prices of small-capitalization companies
are also more vulnerable than those of large-capitalization companies to adverse business
and economic developments, and the stocks of small-capitalization companies may be thinly
traded. In addition, small-capitalization companies are typically less stable financially
than large-capitalization companies and may depend on a small number of key personnel,
making them more vulnerable to loss of personnel. Small-capitalization companies are
often given less analyst coverage and may be in early, and less predictable, periods
of their corporate existences. Such companies tend to have smaller revenues, less diverse
product lines, smaller shares of their product or service markets, fewer financial resources
and less competitive strengths than large-capitalization companies and are more susceptible
to adverse developments related to their products.
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¨
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There
can be no assurance that the investment view implicit in the Notes will be successful
— It is impossible to predict whether and the extent to which the levels of
the underlying indices will rise or fall. There can be no assurance that the closing
level of each underlying index will be equal to or greater than its coupon barrier on
each coupon observation date, or, if UBS does not elect to call the Notes, that a trigger
event will not occur. The levels of the underlying indices will be influenced by complex
and interrelated political, economic, financial and other factors that affect the issuers
of each underlying constituent (each an "underlying constituent issuer"). You should
be willing to accept the risks associated with the relevant markets tracked by each such
underlying index in general and each index's underlying constituents in particular, and
the risk of losing a significant portion or all of your initial investment.
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¨
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The
underlying indices reflect price return, not total return — The return on your
Notes is based on the performance of the underlying indices, which reflect the changes
in the market prices of the underlying constituents. It is not, however, linked to a
“total return” index or strategy, which, in addition to reflecting those
price returns, would also reflect any dividends paid on the underlying constituents.
The return on your Notes will not include such a total return feature or dividend component.
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¨
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Changes
that affect an underlying index could have an adverse effect on the market value of,
and return on, your Notes — The policies of each index sponsor as specified
under “Information About the Underlying Indices” (together, the "index
sponsors"), concerning additions, deletions and substitutions of the underlying
constituents and the manner in which the index sponsor takes account of certain changes
affecting those underlying constituents may adversely affect the levels of the underlying
indices. The policies of the index sponsors with respect to the calculation of the underlying
indices could also adversely affect the levels of the underlying indices. Furthermore,
the index sponsors may discontinue or suspend calculation or dissemination of the underlying
indices. Any such actions could have an adverse effect on the market value of, and return
on, the Notes.
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¨
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UBS
cannot control actions by the index sponsors and the index sponsors have no obligation
to consider your interests — UBS and its affiliates are not affiliated with
the index sponsors and have no ability to control or predict their actions, including
any errors in or discontinuation of public disclosure regarding methods or policies relating
to the calculation of the underlying indices. The index sponsors are not involved in
the Notes offering in any way and has no obligation to consider your interest as an owner
of the Notes in taking any actions that might affect the market value of, and return
on, your Notes.
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¨
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Potential
UBS impact on price — Trading or transactions by UBS or its affiliates in an
underlying index or any underlying constituent, as applicable, listed and/or over-the-counter
options, futures, exchange-traded funds or other instruments with returns linked to the
performance of the underlying index or any underlying constituent, may adversely affect
the levels of the underlying indices and, therefore, the market value of, and return
on, the Notes. Further, UBS is less likely to call the Notes when the closing level of
any underlying index is trading less than its coupon barrier, and, therefore, any hedging
activities that adversely affect the level of an underlying index may also diminish the
probability of UBS calling the Notes.
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Potential
conflict of interest — UBS and its affiliates may engage in business with the
underlying constituent issuers or trading activities related to one or more underlying
index or any underlying constituents, which may present a conflict between the interests
of UBS and you, as a holder of the Notes. Moreover, UBS may elect to call the Notes pursuant
to the issuer call feature. If UBS so elects, the decision may be based on factors contrary
to those favorable to a holder of the Notes, such as, but not limited to, those described
above under “— UBS may elect to call the Notes and the Notes are subject
to reinvestment risk” and “— An investment in Notes with contingent
coupon and issuer call features may be more sensitive to interest rate risk than an investment
in securities without such features”. There are also potential conflicts of interest
between you and the calculation agent, which will be an affiliate of UBS. The calculation
agent will determine whether the contingent coupon is payable to you on any coupon payment
date and the payment at maturity of the Notes, if any, based on observed closing levels
of the underlying indices. The calculation agent can postpone the determination of the
initial level, closing level or final level of any underlying index (and therefore the
related coupon payment date or maturity date, as applicable) if a market disruption event
occurs and is continuing on the trade date, any coupon observation date, any trigger
observation date or final valuation date, respectively. As UBS determines the economic
terms of the Notes, including the contingent coupon rate, downside thresholds and coupon
barriers, and such terms include the applicable underwriting commissions and fees, hedging
costs, issuance and other costs and projected profits, the Notes represent a package
of economic terms. There are other potential conflicts of interest insofar as an investor
could potentially get better economic terms if that investor entered into exchange-traded
and/or OTC derivatives or other instruments with third parties, assuming that such instruments
were available and the investor had the ability to assemble and enter into such instruments.
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Additionally, UBS and its affiliates act in various capacities with respect to the Notes, including as a principal, agent
or dealer in connection with the sale of the Notes. Such affiliates, and any other third-party dealers, may derive
compensation from the distribution of the Notes and any such compensation may serve as an incentive to sell these Notes
instead of other investments. Furthermore, given that UBS Securities LLC and its affiliates temporarily maintain a market
making premium, it may have the effect of discouraging UBS Securities LLC and its affiliates from recommending sale of your
Notes in the secondary market.
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Potentially
inconsistent research, opinions or recommendations by UBS — UBS and its affiliates
publish research from time to time on financial markets and other matters that may influence
the value of the Notes, or express opinions or provide recommendations that are inconsistent
with purchasing or holding the Notes. Any research, opinions or recommendations expressed
by UBS or its affiliates may not be consistent with each other and may be modified from
time to time without notice. Investors should make their own independent investigation
of the merits of investing in the Notes and the underlying indices to which the Notes
are linked.
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The
Notes are not bank deposits — An investment in the Notes carries risks which
are very different from the risk profile of a bank deposit placed with UBS or its affiliates.
The Notes have different yield and/or return, liquidity and risk profiles and would not
benefit from any protection provided to deposits.
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¨
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If
UBS experiences financial difficulties, FINMA has the power to open restructuring or
liquidation proceedings in respect of, and/or impose protective measures in relation
to, UBS, which proceedings or measures may have a material adverse effect on the terms
and market value of the Notes and/or the ability of UBS to make payments thereunder —
The Swiss Financial Market Supervisory Authority (“FINMA”) has broad statutory
powers to take measures and actions in relation to UBS if (i) it concludes that there
is justified concern that UBS is over-indebted or has serious liquidity problems or (ii)
UBS fails to fulfill the applicable capital adequacy requirements (whether on a standalone
or consolidated basis) after expiry of a deadline set by FINMA. If one of these pre-requisites
is met, FINMA is authorized to open restructuring proceedings or liquidation (bankruptcy)
proceedings in respect of, and/or impose protective measures in relation to, UBS. The
Swiss Banking Act grants significant discretion to FINMA in connection with the aforementioned
proceedings and measures. In particular, a broad variety of protective measures may be
imposed by FINMA, including a bank moratorium or a maturity postponement, which measures
may be ordered by FINMA either on a stand-alone basis or in connection with restructuring
or liquidation proceedings. The resolution regime of the Swiss Banking Act is further
detailed in the FINMA Banking Insolvency Ordinance (“BIO-FINMA”). In a restructuring
proceeding, FINMA, as resolution authority, is competent to approve the resolution plan.
The resolution plan may, among other things, provide for (a) the transfer of all or a
portion of UBS’ assets, debts, other liabilities and contracts (which may or may
not include the contractual relationship between UBS and the holders of Notes) to another
entity, (b) a stay (for a maximum of two business days) on the termination of contracts
to which UBS is a party, and/or the exercise of (w) rights to terminate, (x) netting
rights, (y) rights to enforce or dispose of collateral or (z) rights to transfer claims,
liabilities or collateral under contracts to which UBS is a party, (c) the conversion
of UBS’ debt and/or other obligations, including its obligations under the Notes,
into equity (a “debt-to-equity” swap), and/or (d) the partial or full write-off
of obligations owed by UBS (a “write-off”), including its obligations under
the Notes. The BIO-FINMA provides that a debt-to-equity swap and/or a write-off of debt
and other obligations (including the Notes) may only take place after (i) all debt instruments
issued by UBS
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qualifying as additional tier 1 capital or tier 2 capital have been converted into equity or written-off, as
applicable, and (ii) the existing equity of UBS has been fully cancelled. While the BIO-FINMA does not expressly address the
order in which a write-off of debt instruments other than debt instruments qualifying as additional tier 1 capital or tier 2
capital should occur, it states that debt-to-equity swaps should occur in the following order: first, all subordinated claims
not qualifying as regulatory capital; second, all other claims not excluded by law from a debt-to-equity swap (other than
deposits); and third, deposits (in excess of the amount privileged by law). However, given the broad discretion granted to
FINMA as the resolution authority, any restructuring plan in respect of UBS could provide that the claims under or in
connection with the Notes will be partially or fully converted into equity or written-off, while preserving other obligations
of UBS that rank pari passu with, or even junior to, UBS’ obligations under the Notes. Consequently, holders of Notes
may lose all or some of their investment in the Notes. In the case of restructuring proceedings with respect to a
systemically important Swiss bank (such as UBS), the creditors whose claims are affected by the restructuring plan will not
have a right to vote on, reject, or seek the suspension of the restructuring plan. In addition, if a restructuring plan has
been approved by FINMA, the rights of a creditor to seek judicial review of the restructuring plan (e.g., on the grounds that
the plan would unduly prejudice the rights of holders of Notes or otherwise be in violation of the Swiss Banking Act) are
very limited. In particular, a court may not suspend the implementation of the restructuring plan. Furthermore, even if a
creditor successfully challenges the restructuring plan, the court can only require the relevant creditor to be
compensated ex post and there is currently no guidance as to on what basis such compensation would be calculated or how it
would be funded.
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Uncertain
tax treatment — Significant aspects of the tax treatment of the Notes are uncertain.
You should consult your tax advisor about your tax situation. See “What Are the
Tax Consequences of the Notes?” herein and “Material U.S. Federal Income
Tax Consequences”, including the section “— Securities Treated as Prepaid
Derivatives or Prepaid Forwards with Associated Contingent Coupons”, in the accompanying
product supplement.
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Hypothetical
Examples of How the Notes Might Perform
The below examples are based on hypothetical
terms. The actual terms will be set on the trade date and will be indicated on the cover of the final pricing supplement.
The examples below illustrate the payment upon a call or at
maturity for a $1,000.00 Note on a hypothetical offering of the Notes, with the following assumptions (amounts may have been rounded
for ease of reference):
Principal Amount:
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$1,000.00
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Term:
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Approximately 36 months
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Contingent Coupon Rate:
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5.00% per annum (or 2.50% semi-annually)
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Contingent Coupon:
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$25.00 semi-annually
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Coupon Observation Dates:
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Semi-annually
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Trigger Observation Date:
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Final Valuation Date
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Initial Level:
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Underlying Index A:
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3,000
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Underlying Index B:
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1,500
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Coupon Barrier:
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Underlying Index A:
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2,100 (which is equal to 70% of its Initial Level)
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Underlying Index B:
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1,050 (which is equal to 70% of its Initial Level)
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Downside Threshold:
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Underlying Index A:
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2,100 (which is equal to 70% of its Initial Level)
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Underlying Index B:
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1,050 (which is equal to 70% of its Initial Level)
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Example 1 — On the first Coupon Observation Date,
UBS calls the Notes.
Date
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Closing Level
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Payment (per Note)
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First Coupon Observation Date
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Underlying Index A: 2,500 (equal to or greater than Coupon Barrier)
Underlying Index B: 1,100 (equal to or greater than Coupon Barrier)
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$1,025.00 (Call Settlement Amount)
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Total Payment:
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$1,025.00 (2.50% total return)
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Because UBS elects to call the Notes on the first coupon observation
date and the closing level of each underlying index is equal to or greater than its coupon barrier on such coupon observation
date, UBS will pay on the call settlement date a total of $1,025.00 per Note (reflecting your principal amount plus the applicable
contingent coupon), a 2.50% total return on the Notes. You will not receive any further payments on the Notes.
Example 2 — On the fourth Coupon Observation Date, UBS calls the Notes.
Date
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Closing
Level
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Payment
(per Note)
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First
through Third Coupon Observation Date
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Underlying Index A: Various (all equal to or greater
than Coupon Barrier)
Underlying Index B: Various (all equal to or greater
than Coupon Barrier)
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$75.00
(Aggregate Contingent Coupons)
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Fourth Coupon Observation Date
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Underlying Index A: 2,200 (equal to or greater than
Coupon Barrier)
Underlying Index B: 750 (less than Coupon Barrier)
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$1,000.00 (Call Settlement Amount)
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Total Payment:
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$1,075.00 (7.50% total return)
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Because UBS elects to call the Notes on the fourth coupon observation
date and the closing level of an underlying index is less than its coupon barrier on such coupon observation date, UBS will pay
on the call settlement date a total of $1,000.00 per Note (reflecting your principal amount). When added to the contingent coupons
of $75.00 received in respect of the prior coupon observation dates, you will have received a total of $1,075.00, a 7.50% total
return on the Notes. You will not receive any further payments on the Notes.
Example 3 — UBS does NOT call the Notes and a Trigger
Event does not occur.
Date
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Closing
Level
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Payment
(per Note)
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First Coupon Observation Date
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Underlying Index A: 2,300 (equal to or greater than
Coupon Barrier)
Underlying Index B: 1,070 (equal to or greater than
Coupon Barrier)
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$25.00 (Contingent Coupon)
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Second through Fifth Coupon Observation Dates
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Underlying Index A: Various (all equal to or greater than Coupon Barrier)
Underlying Index B: Various (all less than
Coupon Barrier)
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$0.00
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Final Valuation Date
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Underlying Index A: 2,885 (equal to or greater than
Coupon Barrier and Downside Threshold)
Underlying Index B: 1,200 (equal to or greater than
Coupon Barrier and Downside Threshold)
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$1,025.00 (Payment at Maturity)
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Total Payment:
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$1,050.00 (5.00% total return)
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Because UBS does not elect to call the Notes and the final level of each underlying index is equal to or greater than
its downside threshold, a trigger event has not occurred. At maturity, because the final level of each underlying index is also
equal to or greater than its coupon barrier, UBS will pay a total of $1,025.00 per Note (reflecting your principal amount plus the applicable contingent coupon).
When added to the contingent coupon of $25.00 received in respect of the prior coupon observation dates, UBS will have paid a total
of $1,050.00, a 5.00% total return on the Notes.
Example 4 — UBS does NOT call the Notes and a Trigger
Event occurs.
Date
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Closing
Level
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Payment
(per Note)
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First Coupon Observation Date
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Underlying Index A: 2,300 (equal to or greater than
Coupon Barrier)
Underlying Index B: 1,080 (equal to or greater than
Coupon Barrier)
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$25.00 (Contingent Coupon)
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Second through Fifth Coupon Observation Dates
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Underlying Index A: Various (all less than Coupon Barrier)
Underlying Index B: Various (all equal to or greater
than Coupon Barrier)
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$0.00
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Final Valuation Date
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Underlying Index A: 2,900 (equal to or greater than Coupon Barrier and Downside Threshold)
Underlying Index B: 600 (less than Coupon Barrier
and Downside Threshold)
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$1,000.00 × [1 + Underlying Index Return of the Least Performing
Underlying Index] =
$1,000.00 × [1 + (-60%)] =
$1,000.00 × 40%=
$400.00 (Payment at Maturity)
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Total Payment:
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$425.00 (57.50% loss)
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Because UBS does not elect to call the Notes and the
final level of Underlying Index B is less than its downside threshold, a trigger event occurs. Additionally, because the final
level of an underlying index is less than its coupon barrier you will not receive any contingent coupon with respect to the final
valuation date. Therefore, at maturity, you will be exposed to the negative return of the least performing underlying index and
UBS will pay you $400.00 per Note. When added to the contingent coupon of $25.00 received in respect of the prior coupon observation
dates, UBS will have paid you $425.00 per Note for a loss on the Notes of 57.50%.
We
make no representation or warranty as to which of the underlying indices will be the least performing underlying index for the
purposes of calculating your actual payment at maturity.
Investing in the Notes involves significant risks. The Notes
differ from ordinary debt securities in that UBS is not necessarily obligated to repay the full amount of your initial investment.
If the UBS does not elect to call the Notes, you may lose a significant portion or all of your investment. Specifically, if UBS
does not elect to call the Notes and a trigger event occurs, you will lose a percentage of your principal amount equal to the underlying
index return of the least performing underlying index and, in extreme situations, you could lose all of your initial investment.
You will be exposed to the market risk of each underlying index on each coupon observation dates and on the final
valuation date and any decline in the level of one underlying index may negatively affect your return and will not be offset or
mitigated by a lesser decline or any potential increase in the level of any other underlying index. UBS may elect to call the Notes
at its discretion on any coupon observation date regardless of the performance of the underlying indices. Any payment on the Notes,
including any repayment of principal, is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations,
you may not receive any amounts owed to you under the Notes and you could lose all of your initial investment.
Information About the Underlying Indices
All disclosures contained in this document regarding each
underlying index for the Notes are derived from publicly available information. UBS has not conducted any independent review or
due diligence of any publicly available information with respect to any underlying index. You should make your own investigation
into each underlying index.
Included on the following pages is a brief description of each underlying
index. This information has been obtained from publicly available sources. Set forth below is a graph that illustrates the past
performance for each underlying index. The information given below is for the period indicated. We obtained the past performance
information set forth below from Bloomberg Professional® service (“Bloomberg”) without independent verification.
You should not take the historical levels of the underlying indices as an indication of future performance.
Russell 2000® Index
We have derived all information regarding the Russell 2000®
Index (“RTY”) contained in this document, including, without limitation, its make-up, method of calculation and changes
in its components, from publicly available information. Such information reflects the policies of, and is subject to change by
the Frank Russell Company (the “index sponsor” or “FTSE Russell”).
RTY is published by FTSE Russell, but FTSE Russell has no obligation to
continue to publish RTY, and may discontinue publication of RTY at any time. RTY is determined, comprised and calculated by FTSE
Russell without regard to the Notes.
As discussed more fully in the index supplement under the heading “Underlying Indices and Underlying Index Publishers
- Russell 2000® Index,” RTY measures the composite price performance of the smallest 2,000 companies included in
the Russell 3000® Index. The Russell 3000® Index is composed of the 3,000 largest United States companies by market
capitalization and represents approximately 98% of the market capitalization of the United States equity market. RTY's value
is calculated by adding the market values of the index's component stocks and then dividing the derived total market capitalization
by the “adjusted” capitalization of RTY on the base date of December 31, 1986.
Information from outside sources is not incorporated by reference in, and should not be considered part of,
this document or any document incorporated herein by reference. UBS has not conducted any independent review or due diligence of
any publicly available information with respect to RTY.
Historical Information
The graph below illustrates the performance of RTY
from January 1, 2010 through May 29, 2020, based on the daily closing levels as reported by Bloomberg, without independent verification.
UBS has not conducted any independent review or due diligence of publicly available information obtained from Bloomberg. The closing
level of RTY on May 29, 2020 was 1,394.035 (its “hypothetical initial level”). The dotted line represents its hypothetical
downside threshold and its hypothetical coupon barrier of 975.825, which is equal to 70.00% of its hypothetical initial level.
Its actual initial level, downside threshold and coupon barrier will be determined on the trade date. Past performance of
RTY is not indicative of the future performance of RTY during the term of the Notes.
S&P 500® Index
We have derived all information regarding the S&P 500®
Index (“SPX”) contained in this document, including, without limitation, its make-up, method of calculation and changes
in its components, from publicly available information. Such information reflects the policies of, and is subject to change by
S&P Dow Jones Indices LLC (its “index sponsor” or “S&P Dow Jones”).
SPX is published by S&P Dow Jones, but S&P Dow Jones has no obligation
to continue to publish SPX, and may discontinue publication of SPX at any time. SPX is determined, comprised and calculated by
S&P Dow Jones without regard to the Notes.
As discussed more fully in the index supplement under
the heading “Underlying Indices and Underlying Index Publishers — S&P 500® Index”, SPX is
intended to provide an indication of the pattern of common stock price movement. The calculation of the value of SPX is based on
the relative value of the aggregate market value of the common stock of 500 companies as of a particular time compared to the aggregate
average market value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943.
Eleven main groups of companies comprise SPX, with the percentage weight
of each group in the index as a whole as of May 29, 2020 as follows: Information Technology (26.2%), Health Care (15.2%), Communication
Services (11.0%), Consumer Discretionary (10.5%), Financials (10.4%), Industrials (8.0%), Consumer Staples (7.1%), Utilities (3.2%),
Energy (2.9%), Real Estate (2.8%) and Materials (2.5%). As of September 28, 2018, the index sponsor broadened the current Telecommunication
Services Sector and renamed it Communication Services. The renamed Sector includes the existing telecommunication companies, as
well as companies selected from the Consumer Discretionary Sector previously classified under the Media Industry Group and the
Internet & Direct Marketing Retail Sub-Industry, along with select companies previously classified in the Information Technology
Sector. These sector changes were effective for SPX as of the open of business on September 24, 2018 to coincide with the September
2018 quarterly rebalancing. Effective February 10, 2019, company additions to the SPX should have an unadjusted company market
capitalization of $8.2 billion or more (an increase from the previous requirement of an unadjusted company market capitalization
of $6.1 billion or more) and a security level float-adjusted market capitalization that is at least $4.1 billion.
Information from outside sources is not incorporated by reference in, and
should not be considered part of, this document or any document incorporated herein by reference. UBS has not conducted any independent
review or due diligence of any publicly available information with respect to SPX.
Historical Information
The graph below illustrates the performance of SPX
from January 1, 2010 through May 29, 2020, based on the daily closing levels as reported by Bloomberg, without independent verification.
UBS has not conducted any independent review or due diligence of publicly available information obtained from Bloomberg. The closing
level of SPX on May 29, 2020 was 3,044.31 (its “hypothetical initial level”). The dotted line represents its hypothetical
downside threshold and its hypothetical coupon barrier of 2,131.02, which is equal to 70.00% of its hypothetical initial level.
Its actual initial level, downside threshold and coupon barrier will be determined on the trade date. Past performance of
SPX is not indicative of the future performance of SPX during the term of the Notes.
Correlation of the Underlying Indices
The graph below illustrates the daily performance of the Russell
2000® Index and the S&P 500® Index from January 1, 2010 through May 29, 2020. For comparison
purposes, each underlying index has been normalized to have a closing level of 100.00 on January 1, 2010 by dividing the closing
level of that underlying index on each trading day by the closing level of that underlying index on January 1, 2010 and multiplying
by 100.00. We obtained the closing levels used to determine the normalized closing levels set forth below from Bloomberg, without
independent verification.
The closer the relationship of the daily returns of the underlying indices over a given period, the more positively
correlated those underlying indices are. The lower (or more negative) the correlation among the underlying indices, the less likely
it is that those underlying indices will move in the same direction and therefore, the greater the potential for the closing level
or final level of one of those underlying indices to be less than its coupon barrier or downside threshold on a coupon observation
date or the trigger observation date, respectively. This is because the less positively correlated the underlying indices are,
the greater the likelihood that at least one of the underlying indices will decrease in value. However, even if the underlying
indices have a higher positive correlation, the closing level or final level of one or more of the underlying indices might be
less than its coupon barrier or downside threshold on a coupon observation date or the trigger observation date, respectively,
as the underlying indices may decrease in value together. Although the correlation of the underlying indices’ performance
may change over the term of the Notes, the correlations referenced in setting the terms of the Notes are calculated using UBS’
internal models at the time when the terms of the Notes are set and are not derived from the daily returns of the underlying indices
over the period set forth below. A higher contingent coupon rate is generally associated with lower correlation of the underlying
indices, which reflects a greater potential for missed contingent coupons and for a loss on your investment at maturity. See “Key
Risks — A higher contingent coupon rate or lower downside thresholds or coupon barriers may reflect greater expected volatility
of each of the underlying indices, and greater expected volatility generally indicates an increased risk of loss at maturity”,
“— You are exposed to the market risk of each underlying index” and “— Because the Notes are linked
to the least performing underlying index, you are exposed to a greater risk of no contingent coupons and losing a significant portion
or all of your initial investment at maturity than if the Notes were linked to a single underlying index” herein.
Past performance of the underlying indices is not indicative of the future
performance of the underlying indices.
What Are the Tax Consequences of the Notes?
The U.S. federal income tax
consequences of your investment in the Notes are uncertain. There are no statutory provisions, regulations, published rulings
or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are
substantially the same as the Notes. Some of these tax consequences are summarized below, but we urge you to read the more
detailed discussion in “Material U.S. Federal Income Tax Consequences”, including the section “ —
Securities Treated as Prepaid Derivatives or Prepaid Forwards with Associated Contingent Coupons” of the accompanying
product supplement and to discuss the tax consequences of your particular situation with your tax advisor. This discussion is
based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed U.S.
Treasury Department (the “Treasury”) regulations, rulings and decisions, in each case, as available and in effect
as of the date hereof, all of which are subject to change, possibly with retroactive effect. Tax consequences under state,
local and non-U.S. laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the “IRS”)
has been sought as to the U.S. federal income tax consequences of your investment in the Notes, and the following discussion
is not binding on the IRS.
U.S. Tax Treatment. Pursuant to the terms of the Notes,
UBS and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial ruling to
the contrary, to characterize the Notes as prepaid derivative contracts with respect to the underlying indices. If your Notes
are so treated, any contingent coupon that is paid by UBS (including on the maturity date or call settlement date) should be included
in your income as ordinary income in accordance with your regular method of accounting for U.S. federal income tax purposes.
In addition, excluding amounts attributable to any contingent
coupon, you should generally recognize gain or loss upon the taxable disposition of your Notes in an amount equal to the
difference between the amount you receive at such time (other than amounts or proceeds attributable to a contingent coupon or any
amount attributable to any accrued but unpaid contingent coupon) and the amount you paid for your Notes. Such gain or loss should
generally be long-term capital gain or loss if you have held your Notes for more than one year (otherwise, such gain or loss should
be short-term capital gain or loss if held for one year or less). The deductibility of capital losses is subject to limitations.
Although uncertain, it is possible that proceeds received from the taxable disposition of your Notes prior to a coupon payment
date, but that could be attributed to an expected contingent coupon, could be treated as ordinary income. You should consult your
tax advisor regarding this risk.
Based on certain factual representations made by us, our
counsel, Cadwalader, Wickersham & Taft LLP, is of the opinion that it would be reasonable to treat your Notes in the manner
described above. However, because there is no authority that specifically addresses the tax treatment of the Notes, it is possible
that your Notes could alternatively be treated for tax purposes as a single contingent payment debt instrument, or pursuant to
some other characterization, such that the timing and character of your income from the Notes could differ materially and adversely
from the treatment described above, as described further under “Material U.S. Federal Income Tax Consequences — Securities
Treated as Prepaid Derivatives or Prepaid Forwards with Associated Contingent Coupons” in the accompanying product supplement
unless and until such time as the IRS and the Treasury determine that some other treatment is more appropriate.
Notice 2008-2. In 2007, 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 Notes. Notice 2008-2 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 and the relevance of factors such as the
nature of the underlying property to which the instruments are linked. 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 Notes, possibly with retroactive
effect. U.S. holders should consult their tax advisors regarding the U.S. federal income tax consequences of an investment in
the Notes, including possible alternative treatments and the issues presented by this notice. Non-U.S. holders should consult
their tax advisors regarding the U.S. federal income tax consequences of investing in the Notes, including the possible
application of 30% U.S. withholding tax in respect of the contingent coupons.
Medicare Tax on Net Investment Income. U.S. holders
that are individuals, estates or certain trusts are subject to an additional 3.8% tax on all or a portion of their “net
investment income,” which may include any income or gain realized with respect to the Notes, to the extent of their net
investment income that when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried
individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), or $125,000 for a married
individual filing a separate return or the dollar amount at which the highest tax bracket begins for an estate or trust. The
3.8% Medicare tax is determined in a different manner than the income tax. U.S. holders should consult their tax advisors as to
the consequences of the 3.8% Medicare tax.
Specified Foreign Financial Assets. Certain
U.S. holders that own “specified foreign financial assets” in excess of an applicable threshold may be subject to reporting
obligations with respect to such assets with their tax returns, especially if such assets are held outside the custody of a U.S.
financial institution. U.S. holders are urged to consult their tax advisors as to the application of this legislation to their
ownership of the Notes.
Non-U.S. Holders. The U.S.
federal income tax treatment of the contingent coupons is unclear. Subject to Section 871(m) of the Code and FATCA, as
discussed below, our counsel is of the opinion that contingent coupons paid to a non-U.S. holder that provides us (and/or the
applicable withholding agent) with a fully completed and validly executed applicable IRS Form W-8 should not be subject to
U.S. withholding tax and we do not intend to withhold any tax on contingent coupons. However, it is possible that the IRS
could assert that such payments are subject to U.S. withholding tax, or that another withholding agent may otherwise
determine that withholding is required, in which case the other withholding agent may withhold up to 30% on such payments
(subject to reduction or elimination of such withholding tax pursuant to an applicable income tax treaty). We will not pay
any additional amounts in respect of such withholding. Subject to Section 897 of the Code and Section 871(m) of the Code,
discussed below, gain realized from the taxable disposition of a Note generally should not be subject to U.S. tax unless (i)
such gain is effectively connected with a trade or business conducted by the non-U.S. holder in the U.S., (ii) the non-U.S.
holder is a non-resident alien individual and is present in the U.S. for 183 days or more during the taxable year of such
taxable disposition and certain other conditions are satisfied or (iii) the non-U.S. holder has certain other present or
former connections with the U.S.
Section 897. We will not attempt to ascertain
whether any underlying constituent issuer would be treated as a “United States real property holding corporation”
(“USRPHC”) within the meaning of Section 897 of the Code. We also have not attempted to determine whether the
Notes should be treated as “United States real property interests” (“USRPI”) as defined in Section
897 of the Code. If any such entity and the Notes were so treated, certain adverse U.S. federal income tax consequences could
possibly apply, including subjecting any gain to a non-U.S. holder in respect of a Note upon a taxable disposition of the
Note to the U.S. federal income tax on a net basis, and the proceeds from such a taxable disposition to a 15% withholding
tax. Non-U.S. holders should consult their tax advisors regarding the potential treatment of any such entity as a USRPHC and the
Notes as USRPI.
Section 871(m). A 30% withholding tax (which may be reduced by an
applicable income tax treaty) is imposed under Section 871(m) of the Code on certain “dividend equivalents” paid or
deemed paid to a non-U.S. holder with respect to a “specified equity-linked instrument” that references one or more dividend-paying U.S. equity securities or indices
containing U.S. equity securities. The withholding tax can apply even if the instrument does not provide for payments that reference
dividends. Treasury regulations provide that the withholding tax applies to all dividend equivalents paid or deemed paid on specified
equity-linked instruments that have a delta of one (“delta-one specified equity-linked instruments”) issued after
2016 and to all dividend equivalents paid or deemed paid on all other specified equity-linked instruments issued after 2018. However,
the IRS has issued guidance that states that the Treasury and the IRS intend to amend the effective dates of the Treasury regulations
to provide that withholding on dividend equivalents paid or deemed paid will not apply to specified equity-linked instruments
that are not delta-one specified equity-linked instruments and are issued before January 1, 2023.
Based on our determination that the Notes are not “delta-one”
with respect to any underlying index or any underlying constituents, our counsel is of the opinion that the Notes should not
be delta-one specified equity-linked instruments and thus should not be subject to withholding on dividend equivalents. Our determination
is not binding on the IRS, and the IRS may disagree with this determination. Furthermore, the application of Section 871(m) of
the Code will depend on our determinations made upon issuance of the Notes. If withholding is required, we will not make payments
of any additional amounts.
Nevertheless, after issuance, it is possible that your Notes could be deemed to be reissued for tax purposes
upon the occurrence of certain events affecting an underlying index, an underlying constituent or your Notes, and following such
occurrence your Notes could be treated as delta -one specified equity-linked instruments that are subject to withholding on dividend
equivalents. It is also possible that withholding tax or other tax under Section 871(m) of the Code could apply to the Notes under
these rules if a non-U.S. holder enters, or has entered, into certain other transactions in respect of an underlying index, an
underlying constituent or the Notes. A non-U.S. holder that enters, or has entered, into other transactions in respect of an underlying
index, an underlying constituent or the Notes should consult its tax advisor regarding the application of Section 871(m) of the
Code to its Notes in the context of its other transactions.
Because of the uncertainty regarding the application of
the 30% withholding tax on dividend equivalents to the Notes, you are urged to consult your tax advisor regarding the potential
application of Section 871(m) of the Code and the 30% withholding tax to an investment in the Notes.
Foreign Account Tax Compliance Act. The Foreign Account
Tax Compliance Act (“FATCA”) was enacted on March 18, 2010, and imposes a 30% U.S. withholding tax on “withholdable
payments” (i.e., certain U.S.-source payments, including interest (and original issue discount), dividends, other fixed or
determinable annual or periodical gain, profits, and income, and on the gross proceeds from a disposition of property of a type
which can produce U.S.-source interest or dividends) and “passthru payments” (i.e., certain payments attributable to
withholdable payments) made to certain foreign financial institutions (and certain of their affiliates) unless the payee foreign
financial institution agrees (or is required), among other things, to disclose the identity of any U.S. individual with an account
of the institution (or the relevant affiliate) and to annually report certain information about such account. FATCA also requires
withholding agents making withholdable payments to certain foreign entities that do not disclose the name, address, and taxpayer
identification number of any substantial U.S. owners (or do not certify that they do not have any substantial U.S. owners) to withhold
tax at a rate of 30%. Under certain circumstances, a holder may be eligible for refunds or credits of such taxes.
Pursuant to final and temporary Treasury regulations and other IRS guidance,
the withholding and reporting requirements under FATCA will generally apply to certain “withholdable payments”, will
not apply to gross proceeds on a sale or disposition, and will apply to certain foreign passthru payments only to the extent that
such payments are made after the date that is two years after final regulations defining the term “foreign passthru payment”
are published. If withholding is required, we (or the applicable paying agent) will not be required to pay additional amounts with
respect to the amounts so withheld. Foreign financial institutions and non-financial foreign entities located in jurisdictions
that have an intergovernmental agreement with the U.S. governing FATCA may be subject to different rules.
Investors should consult their tax advisors about the application of FATCA,
in particular if they may be classified as financial institutions (or if they hold their Notes through a foreign entity) under
the FATCA rules.
Proposed Legislation. In 2007, legislation was introduced
in Congress that, if it had been enacted, would have required holders of Notes purchased after the bill was enacted to accrue interest
income over the term of the Notes despite the fact that there may be no interest payments over the term of the Notes.
Furthermore, in 2013, the House Ways and Means Committee released
in draft form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this legislation
generally would have been to require instruments such as the Notes to be marked to market on an annual basis with all gains and
losses to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar or identical
bills will be enacted in the future, or whether any such bill would affect the tax treatment of your Notes. You are urged to consult
your tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your Notes.
Both U.S. and non-U.S. holders are urged to consult their tax advisors concerning the application of U.S.
federal income tax laws to their particular situations, as well as any tax consequences of the purchase, beneficial ownership and
disposition of the Notes arising under the laws of any state, local, non-U.S. or other taxing jurisdiction.
Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
We will agree to
sell to UBS Securities LLC and UBS Securities LLC will agree to purchase, all of the Notes at the issue price to the public.
Our affiliate, UBS Securities LLC, will agree to resell all of the Notes to one or more unaffiliated third-party dealers and
will pay such third-party dealer(s) a structuring fee of $2.50 per Note with respect to some or all of the Notes. This amount
will be deducted from amounts remitted to UBS. All sales of the Notes will be made to certain fee-based advisory accounts for
which an unaffiliated third-party is an advisor. Additionally, we or one of our affiliates will pay a fee to an unaffiliated
broker-dealer for providing certain electronic platform services with respect to this offering.
Conflicts of Interest
— UBS Securities LLC is an affiliate of UBS and, as such, has a “conflict of interest” in this offering
within the meaning of Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition, UBS will receive
the net proceeds (excluding the applicable commissions and fees) from the initial public offering of the Notes, thus creating
an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, the offering is being conducted in compliance
with the provisions of FINRA Rule 5121. UBS Securities LLC is not permitted to sell Notes in this offering to an account over
which it exercises discretionary authority without the prior specific written approval of the account holder.
UBS Securities LLC
and its affiliates may offer to buy or sell the Notes in the secondary market (if any) at prices greater than UBS’ internal
valuation — The value of the Notes at any time will vary based on many factors that cannot be predicted. However, the
price (not including UBS Securities LLC’s or any affiliate’s customary bid-ask spreads) at which UBS Securities LLC
or any affiliate would offer to buy or sell the Notes immediately after the trade date in the secondary market is expected to
exceed the estimated initial value of the Notes as determined by reference to our internal pricing models. The amount of the excess
will decline to zero on a straight line basis over a period ending no later than 6 months after the trade date, provided that
UBS Securities LLC may shorten the period based on various factors, including the magnitude of purchases and other negotiated
provisions with selling agents. Notwithstanding the foregoing, UBS Securities LLC and its affiliates intend, but are not required
to make a market for the Notes and may stop making a market at any time. For more information about secondary market offers and
the estimated initial value of the Notes, see “Key Risks — Fair value considerations” and “— Limited
or no secondary market and secondary market price considerations” of this document.
Prohibition of Sales
to EEA Retail Investors — The Notes are not intended to be offered, sold or otherwise made available to and should not
be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these
purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1)
of Directive 2014/65/EU, as amended (“MiFID II”); (ii) a customer within the meaning of Directive 2002/92/EC, as amended,
where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii)
not a qualified investor as defined in Directive 2003/71/EC, as amended. Consequently no key information document required by
Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”), for offering or selling the Notes or otherwise
making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise
making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
You should rely only on the information incorporated by reference or provided in this preliminary pricing
supplement, the accompanying product supplement, the index supplement or the accompanying prospectus. We have not authorized anyone
to provide you with different information. We are not making an offer of these Notes in any state where the offer is not permitted.
You should not assume that the information in this preliminary pricing supplement is accurate as of any date other than the date
on the front of the document.
TABLE OF CONTENTS
Preliminary Pricing Supplement
Investment Description
|
i
|
Features
|
i
|
Key Dates
|
i
|
Note Offering
|
i
|
Additional Information about UBS and the Notes
|
ii
|
Investor Suitability
|
1
|
Preliminary Terms
|
2
|
Investment Timeline
|
3
|
Coupon
Observation Dates and Coupon Payment Dates
|
4
|
Key Risks
|
5
|
Hypothetical Examples of How the Notes Might Perform
|
10
|
Information About the Underlying Indices
|
12
|
Correlation
of the Underlying Indices
|
14
|
What Are the Tax Consequences of the Notes?
|
15
|
Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
|
17
|
Product Supplement
Product Supplement Summary
|
PS-1
|
Specific Terms
of Each Security Will Be Described in the Applicable Supplements
|
PS-1
|
The Securities
are Part of a Series
|
PS-1
|
Denomination
|
PS-2
|
Coupons
|
PS-2
|
Early Redemption
|
PS-3
|
Payment at
Maturity for the Securities
|
PS-3
|
Defined Terms
Relating to Payment on the Securities
|
PS-4
|
Valuation Dates
|
PS-5
|
Valuation Periods
|
PS-6
|
Payment Dates
|
PS-6
|
Closing Level
|
PS-7
|
Intraday Level
|
PS-7
|
What are the Tax Consequences of the Securities?
|
PS-8
|
Risk Factors
|
PS-9
|
General Terms of the Securities
|
PS-29
|
Use of Proceeds and Hedging
|
PS-52
|
Material U.S. Federal Income Tax Consequences
|
PS-53
|
Certain ERISA Considerations
|
PS-75
|
Supplemental Plan of Distribution (Conflicts of Interest)
|
PS-76
|
Index Supplement
|
|
Index
Supplement Summary
|
IS-1
|
Underlying Indices And Underlying Index
Publishers
|
IS-2
|
Dow Jones Industrial Average™
|
IS-2
|
NASDAQ-100 Index®
|
IS-4
|
Russell 2000® Index
|
IS-10
|
S&P 500® Index
|
IS-15
|
Commodity Indices
|
IS-20
|
Bloomberg Commodity
IndexSM
|
IS-20
|
UBS Bloomberg Constant Maturity Commodity
Index Excess Return
|
IS-27
|
Non-U.S. Indices
|
IS-32
|
EURO STOXX 50® Index
|
IS-32
|
FTSE™ 100 Index
|
IS-38
|
Hang Seng China Enterprises Index
|
IS-41
|
MSCI Indexes
|
IS-45
|
MSCI
EAFE® Index
|
IS-45
|
MSCI® Emerging Markets IndexSM
|
IS-45
|
MSCI® Europe Index
|
IS-45
|
Prospectus
Introduction
|
1
|
Cautionary Note Regarding Forward-Looking Statements
|
3
|
Incorporation of Information About UBS AG
|
5
|
Where You Can Find More Information
|
6
|
Presentation of Financial Information
|
7
|
Limitations on Enforcement of U.S. Laws Against UBS, Its Management and Others
|
7
|
UBS
|
8
|
Swiss Regulatory Powers
|
11
|
Use of Proceeds
|
12
|
Description of Debt Securities We May Offer
|
13
|
Description of Warrants We May Offer
|
33
|
Legal Ownership and Book-Entry Issuance
|
48
|
Considerations Relating to Indexed Securities
|
53
|
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency
|
56
|
U.S. Tax Considerations
|
59
|
Tax Considerations Under the Laws of Switzerland
|
70
|
Benefit Plan Investor Considerations
|
72
|
Plan of Distribution
|
74
|
Conflicts of Interest
|
75
|
Validity of the Securities
|
76
|
Experts
|
76
|
$•
UBS AG
Trigger Callable Contingent Yield Notes
due on or about
June 22, 2023
Preliminary Pricing Supplement dated June 1, 2020
(To Product Supplement dated October 31, 2018,
Index Supplement dated October 31, 2018
and Prospectus dated October 31, 2018)
UBS Investment Bank
UBS Securities LLC
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