UBS has filed a registration statement (including a prospectus, as
supplemented by a product supplement for the Notes) with the Securities and Exchange Commission (the “SEC”) for the
Notes 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 the Notes. 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. Alternatively, UBS will
arrange to send you these documents if you so request by calling toll-free 1-877-387-2275.
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”
beginning on page 5 and in “Risk Factors” in the Airbag Autocallable Yield Notes 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.
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.
Final Terms for Each Offering of the Notes
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Issuer
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UBS AG, London Branch
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Term
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Approximately 12 months, unless subject to an automatic call.
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Underlying Asset
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The common stock of a specific company, as indicated on the cover hereof.
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Automatic Call Feature
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UBS will automatically call the Notes if the closing level of the underlying asset on any observation date prior to the final
valuation date is equal to or greater than the initial level. If the Notes are subject to an automatic call, UBS will pay you
on the coupon payment date following such observation date (the “call settlement date”) a cash payment per Note equal
to the principal amount plus the coupon otherwise due on such date. Following an automatic call, no further payments will be owed to you under the Notes.
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Coupon Payments
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UBS will pay interest on the principal amount of the Notes in periodic
installments on each coupon payment date (including the maturity date) regardless of the performance of the underlying asset, unless
the Notes have been subject to an automatic call.
The coupon is a fixed amount based upon equal installments at the coupon
rate, which is a per annum rate. The table below sets forth the coupon rate, coupon for each Note that would be paid on each coupon
payment date and the total coupon payable; the actual total coupon payable will be based on the duration of the Notes.
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Alaska Air Group, Inc.
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Bank of America Corporation
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Halliburton Company
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Coupon Rate
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8.25% per annum
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6.40% per annum
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7.20% per annum
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Coupon
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$6.8750
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$5.3333
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$6.000
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Total Coupon Payable
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8.25%
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6.40%
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7.20%
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Conversion Level
(1)
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A specified level of the underlying asset that is less than the initial level, equal to a percentage of the initial level as specified on the cover hereof.
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Share
Delivery
Amount
(per Note)
(1)
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A number of shares of the underlying asset, as specified on the cover
hereof, equal to the quotient of (i) the principal amount divided by (ii) the conversion level.
Any fractional share included in the share delivery amount will be
paid in cash at an amount equal to the product of the fractional share and the final level.
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Payment at Maturity
(per Note)
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If the Notes are not subject to an automatic call and the final
level is equal to or greater than the conversion level
, UBS will pay you a cash payment per Note equal to:
Principal Amount of $1,000
If the Notes are not subject to an automatic call and the final
level is less than the conversion level
, UBS will deliver to you a number of shares of the underlying asset per Note equal
to:
Share Delivery Amount
In such a case, you will receive the share delivery amount, which
is expected to be worth less than the principal amount and, in extreme situations, you could lose all of your initial investment.
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Initial Level
(1)
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The closing level of the underlying asset on the trade date, as specified on the cover hereof.
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Final Level
(1)
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The closing level of the underlying asset on the final valuation date.
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(1)
As determined by the calculation agent and as may be adjusted
in the case of certain antidilution and reorganization events as described under “General Terms of the Notes — Antidilution
Adjustments” and “— Reorganization Events” in the Airbag Autocallable Yield Notes product supplement.
Trade Date:
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The initial level is observed and the final terms of the Notes are set.
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Coupon Payment Dates (if not previously subject to an automatic call):
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UBS pays the applicable coupon.
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Observation Dates (prior to the final valuation date):
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UBS will automatically call the Notes if the closing level is greater than
or equal to the initial level.
If the Notes are subject to an automatic call, UBS will pay you on the call
settlement date a cash payment per Note equal to the principal amount plus the coupon otherwise due.
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Maturity Date:
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The final level is observed on the final valuation date.
If the Notes are not subject to an automatic call and the final level
is equal to or greater than the conversion level,
UBS will pay you a cash payment per Note equal to:
Principal Amount of $1,000
If the Notes are not subject to an automatic call and the final level
is less than the conversion level,
UBS will deliver to you a number of shares of the underlying asset per Note equal to:
Share Delivery Amount
In such a case, you will receive the share delivery amount, which
is expected to be worth less than your principal amount and, in extreme situations, you could lose all of your initial investment.
Any fractional share included in the share delivery amount will be
paid in cash at an amount equal to the product of the fractional share and the final level.
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Investing in the Notes involves significant risks. In exchange
for receiving a coupon on the Notes, you are accepting the risk of receiving, at maturity, a number of shares of the underlying
asset converted at the conversion level, which is expected to be worth less than your principal amount and, in extreme situations,
you could lose all of your initial investment. Any payment or delivery 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.
If the Notes are not subject to an automatic call, you may lose some or all of your initial investment. Specifically, if the Notes
are not subject to an automatic call and the final level is less than the conversion level, UBS will deliver to you a number of
shares of the underlying asset per Note equal to the share delivery amount, which is expected to be worth less than your principal
amount and, in extreme situations, you could lose all of your initial investment.
Observation Dates
(1)
and Coupon Payment Dates
(1)
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Observation Dates
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Coupon Payment Dates
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February 14, 2018
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March 14, 2018
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April 12, 2018
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April 16, 2018*
(1)
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May 16, 2018
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June 14, 2018
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July 12, 2018
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July 16, 2018*
(1)
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August 15, 2018
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September 14, 2018
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October 12, 2018
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October 16, 2018*
(1)
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November 15, 2018
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December 14, 2018
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Final Valuation Date**
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Maturity Date
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* Also the corresponding call settlement
date for the applicable observation date.
** The final valuation date is not an
observation date for purposes of determining an automatic call.
(1)
Subject to the market disruption event
provisions set forth in the Airbag Autocallable Yield Notes product supplement.
An investment in the Notes involves significant risks. 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 generally in the “Risk Factors” section of the Airbag Autocallable Yield Notes 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 the UBS will not necessarily repay the principal amount of the Notes at maturity. If the
Notes are not subject to an automatic call and the final level is less than the conversion level, UBS will deliver to you the share
delivery amount at maturity for each Note that you own, which is expected to be worth less than your principal amount and could
be worthless. If you receive the share delivery amount, then, as of the final valuation date, the percentage decline in the value
of the share delivery amount will be at a proportionately higher percentage relative to any percentage decline in the level of
the underlying asset below the conversion level from the trade date to the final valuation date. Therefore, the further the final
level has declined from the conversion level, the closer your loss of principal will be to the decline of the underlying asset
from the initial level and, in extreme situations, you could lose all of your initial investment. For example, if the conversion
level is 80% of the initial level and the final level is 70% of the initial level, you will lose 12.50% of your initial investment
(based on the value of the share delivery amount on the final valuation date), which is greater than the 10% additional decline
of the underlying asset from the conversion level, but less than the 30% total decline from the initial level. Additionally, in
the event that the final level is less than the conversion level, any decline in the level of the underlying asset during the period
between the final valuation date and the maturity date will cause your return on the Notes to be less than the return you would
have received had UBS instead paid you an amount in cash equal to the share delivery amount.
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¨
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A higher coupon rate or lower conversion level may
reflect greater expected volatility of the underlying asset, and greater expected volatility generally indicates an increased risk
of loss at maturity
— The economic terms for the Notes, including the coupon rate and conversion level, are based, in
part, on the expected volatility of the underlying asset at the time the terms of the Notes are set. “Volatility” refers
to the frequency and magnitude of changes in the level of the underlying asset. The greater the expected volatility of the underlying
asset as of the trade date, the greater the expectation is as of that date that the final level of the underlying asset could be
less than the conversion level on the final valuation date and, as a consequence, indicates an increased risk of loss. All things
being equal, this greater expected volatility will generally be reflected in a higher coupon rate than the yield payable on our
conventional debt securities with a similar maturity or on otherwise comparable securities, and/or a lower conversion level than
that on otherwise comparable securities. Therefore, a relatively higher coupon rate may indicate an increased risk of loss. Further,
a relatively lower conversion level may not necessarily indicate that the Notes have a greater likelihood of a return of principal
at maturity. You should be willing to accept the downside market risk of the underlying asset and the potential to lose some or,
in extreme situations, all of your initial investment at maturity.
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¨
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The contingent repayment of principal applies only
if you hold the Notes to maturity
— You should be willing to hold your Notes to maturity. If you are able to sell your
Notes prior to an automatic call or maturity in the secondary market, you may have to sell them at a loss relative to your initial
investment even if the level of the underlying asset at such time is equal to or greater than the conversion level.
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¨
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Your potential return on the Notes is limited to
the coupon and you will not receive dividend payments on any underlying asset or have the same rights as holders of the underlying
asset or have the same rights as holders of the underlying asset —
Your return on the Notes is limited to the coupons
paid and you will not participate in any appreciation of the underlying asset, even though you will be exposed to the downside
market risk of the underlying asset if the final level is less than the conversion level. If the Notes are subject to an automatic
call, you will not receive any coupons or any other payment in respect of any coupon payment dates after the applicable call settlement
date. Because the Notes may be subject to an automatic call 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, you will not receive or be entitled
to receive any dividend payments or other distributions on the underlying asset during the term of the Notes, and any such dividends
or distributions will not be factored into the calculation of the payment at maturity on your Notes. In addition, as an owner of
the Notes, you will not have voting rights or any other rights that a holder of the underlying asset.
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¨
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The Notes may be subject to an automatic call early
and are subject to reinvestment risk —
The Notes will be subject to an automatic call if the closing level of the underlying
asset is equal to or greater than the initial level on any observation date prior to the final valuation date. In the event that
the Notes are subject to an automatic call, the term of your investment may be limited and 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. In
addition, to the extent you are able to reinvest such proceeds in an investment comparable to the Notes, you may incur transaction
costs and the original issue price for such an investment is likely to include certain built-in costs such as dealer discounts
and hedging costs. Conversely, the Notes will not be subject to an automatic call when the closing level of the underlying asset
is less than the initial level on any observation date. Generally the longer the Notes are outstanding, the less likely it is that
they will be automatically called (as compared to at the trade date) due to the decline in the level of the underlying asset and
the shorter time remaining for the level of the underlying asset to recover. Such periods generally coincide with a period of greater
risk of principal loss on your Notes.
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¨
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Credit risk 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 or
delivery to be made on the Notes, including payments in respect of an automatic call or any repayment of principal, depends on
the ability of UBS to satisfy its obligations as they come due. As a result, UBS’s actual and perceived creditworthiness
of UBS may affect the market value of the Notes. If UBS were to default on its obligations, you may not receive any payment or
delivery owed to you under the terms of the Notes and you could lose all of your initial investment.
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¨
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Single equity risk
— The return on the
Notes, which may be negative, is directly linked to the performance of the underlying asset. The level of the underlying asset
can rise or fall sharply due to factors specific to that underlying asset and the issuer of such underlying asset (the “underlying
asset issuer”), such as stock 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 market volatility and levels,
interest rates and economic and political conditions. You, as an investor in the Notes, should make your own investigation into
the underlying asset issuer and the underlying asset for your Notes. For additional information regarding the underlying asset
issuer, please see “Information about the Underlying Assets” in this document and the underlying asset issuer’s
SEC filings referred to in those sections.
We urge you to review financial and other information filed periodically by the underlying
asset issuer with the SEC.
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¨
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Fair value considerations
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¨
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The issue price you pay for the Notes exceeds their estimated initial value
— The issue
price you pay for the Notes exceeds their estimated initial value as of the trade date due to the inclusion in the issue price
of the underwriting discount, hedging costs, issuance costs and projected profits. As of the close of the relevant markets on the
trade date, we have determined the estimated initial value of the Notes by reference to our internal pricing models and it is set
forth in this pricing supplement. The pricing models used to determine the estimated initial value of the Notes incorporate certain
variables, including the price, volatility and any expected dividends on the underlying asset, 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 underwriting discount, hedging costs, issuance 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 is less than the issue price you pay for the Notes.
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¨
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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 “—Single
equity 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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¨
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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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¨
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Limited or no secondary market and
secondary market price considerations.
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¨
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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 underwriting discount, 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
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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 Financial Services Inc. and UBS
Securities LLC reflect this temporary positive differential on their 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 price of the underlying asset;
the volatility of the underlying asset; any dividends paid on the underlying asset, if applicable; 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 underwriting discount, hedging
costs, issuance 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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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 level of the
underlying asset will rise or fall and there can be no assurance that the closing level of the underlying asset will be equal to
or greater than the initial level on any observation date prior to the final valuation date, or, if the Notes are not subject to
an automatic call, that the final level of the underlying asset will be equal to or greater than the conversion level. The final
level of the underlying asset will be influenced by complex and interrelated political, economic, financial and other factors that
affect the underlying asset issuer. You should be willing to accept the risks of owning equities in general and the underlying
asset in particular, and the risk of losing some or all of your initial investment.
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There is no affiliation between the underlying asset
issuer and UBS, and UBS is not responsible for any disclosure by such issuer
— We are not affiliated with the underlying
asset issuer. However, we and our affiliates may currently, or from time to time in the future engage in business with the underlying
asset issuer. However, we are not responsible for such underlying asset issuer’s public disclosure of information, whether
contained in SEC filings or otherwise. You, as an investor in the Notes, should conduct your own investigation into the underlying
asset and the underlying asset issuer for your Notes. The underlying asset issuer is not involved in the Notes offered hereby in
any way and has no obligation of any sort with respect to your Notes. The underlying asset issuer has no obligation to take your
interests into consideration for any reason, including when taking any corporate actions that might affect the value of your Notes.
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The calculation agent can make antidilution and
reorganization adjustments that affect the payment to you at maturity
— For antidilution and reorganization events affecting
the underlying asset, the calculation agent may make adjustments to the initial level, share delivery amount, conversion level
and/or final level, as applicable, and any other term of the Notes. However, the calculation agent will not make an adjustment
in response to every corporate event that could affect the underlying asset. If an event occurs that does not require the calculation
agent to make an adjustment, the market value of the Notes and the payment at maturity may be materially and adversely affected.
In addition, all determinations and calculations concerning any such adjustments will be made by the calculation agent. You should
be aware that the calculation agent may make any such adjustment, determination or calculation in a manner that differs from that
discussed in the Airbag Autocallable Yield Notes product supplement or this document as necessary to achieve an equitable result.
Following certain reorganization events relating to the underlying asset issuer where such issuer is not the surviving entity,
the amount of cash or shares you receive at maturity may be based on the equity security of a successor issuer to the underlying
asset issuer in combination with any cash or any other assets distributed to holders of the underlying asset in such reorganization
event. If the underlying asset issuer becomes subject to (i) a reorganization event whereby the underlying asset is exchanged solely
for cash, (ii) a merger or consolidation with UBS or any of its affiliates or (iii) the underlying asset is delisted or otherwise
suspended from trading, the amount of cash or shares you receive at maturity may be based on a substitute security. If any underlying
asset is replaced or substituted by a security issued by a non-U.S. company that is traded on a non-U.S. exchange, we will pay,
in lieu of delivery of any such security, an amount in cash (payable in U.S. dollars) equal to the value thereof, as determined
by the calculation agent. The occurrence of any antidilution or reorganization event and the consequent adjustments may materially
and adversely affect the value of the Notes and your payment at maturity, if any. For more information, see the sections “General
Terms of the Notes — Antidilution Adjustments” and “— Reorganization Events” in the Airbag Autocallable
Yield Notes product supplement.
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Potential UBS impact on the market price of the
underlying asset
— Trading or transactions by UBS and/or its affiliates in the underlying asset, listed and/or over-the-counter
options, futures, exchange-traded funds or other instruments with returns linked to the performance of the underlying asset may
adversely affect the market price of the underlying asset and, therefore, the market value of the Notes and the payment at maturity.
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Potential conflict of interest
— UBS and
its affiliates may engage in business with the underlying asset issuer, which may present a conflict between the obligations of
UBS and you, as a holder of the Notes. There are also potential conflicts of interest between you and the calculation agent, which
will be an affiliate of UBS and which will make potentially subjective judgments. The calculation agent will determine whether
the Notes are subject to an automatic call and if not, the payment at maturity of the Notes, if any, based on observed levels of
the underlying asset. The calculation agent can postpone the determination of the initial level, closing level and the final level
of the underlying asset on the trade date, any observation date or final valuation date, respectively. As UBS determines the economic
terms of the Notes, including the coupon rate and conversion level, and such terms include the underwriting discount, hedging costs,
issuance 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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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 asset 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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Under certain circumstances, the Swiss Financial
Market Supervisory Authority (“FINMA”) has the power to take actions that may adversely affect the Notes
—
Pursuant to article 25 et seq. of the Swiss Banking Act, FINMA has broad statutory powers to take measures and actions in relation
to UBS if it (i) is overindebted, (ii) has serious liquidity problems or (iii) fails to fulfill the applicable capital adequacy
provisions after expiration of a deadline set by FINMA. If one of these prerequisites is met, the Swiss Banking Act grants significant
discretion to FINMA to open restructuring proceedings or liquidation (bankruptcy) proceedings in respect of, and/or impose protective
measures in relation to, UBS. 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. In a restructuring proceeding, the resolution plan may, among other things, (a) provide for the transfer
of UBS’s assets or a portion thereof, together with debts and other liabilities, and contracts of UBS, to another entity,
(b) provide for the conversion of UBS’s debt and/or other obligations, including its obligations under the Notes, into equity
and/or (c) potentially provide for haircuts on obligations of UBS, including its obligations under the Notes. Although no precedent
exists, if one or more measures under the revised regime were imposed, such 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.
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Dealer incentives
— UBS and its affiliates
act in various capacities with respect to the Notes. We and our affiliates may act as a principal, agent or dealer in connection
with the sale of the Notes. Such affiliates, including the sales representatives, will derive compensation from the distribution
of the Notes and such compensation may serve as an incentive to sell these Notes instead of other investments. We will pay total
underwriting compensation in an amount equal to the underwriting discount indicated on the cover hereof per Note to any of our
affiliates acting as agents or dealers in connection with the distribution of the Notes. 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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Uncertain tax treatment
— Significant
aspects of the tax treatment of the Notes are uncertain. You should read the section below entitled “What are the Tax Consequences
of the Notes?” and the section entitled “Supplemental U.S. Tax Considerations” in the Airbag Autocallable Yield
Notes product supplement and consult your tax advisor about your tax situation.
|
Hypothetical Examples of How the Notes Might Perform and Return Table
|
The below examples and hypothetical
return at maturity table are based on hypothetical terms. The actual terms are indicated on the cover hereof.
Term:
|
Approximately 12 months (callable quarterly)
|
Principal Amount:
|
$1,000 per Note
|
Coupon Rate*:
|
6.00% per annum (or $5.00 per monthly period)
|
Total Coupon Payable*:
|
6.00% (or $60.00 per Note)
|
Initial Level:
|
$100.00 per share
|
Conversion Level:
|
$90.00 (which is 90.00% of the Initial Level)
|
Share Delivery Amount**:
|
11.1111 shares per Note (principal amount per Note/conversion level)
|
Dividend Yield on the Underlying Asset***:
|
1%
|
|
*
|
Coupon payment will be paid in arrears in equal installments during the term of the Notes on an unadjusted basis, unless
previously subject to an automatic call. The total coupons paid will be based on the duration of the Notes.
|
|
**
|
Equal to the quotient of (i) the principal amount divided by (ii) the conversion level, which
is expected to be worth less than your principal amount and, in extreme situations, you could lose all of your initial investment.
If you receive the share delivery amount at maturity, any fractional share included in the share delivery amount will be paid in
cash at an amount equal to the product of the fractional share and the final level.
|
|
***
|
Hypothetical dividend yield holders of the underlying asset might receive over the term of the
Notes. The assumed dividend yield represents a hypothetical dividend return that may vary from the actual dividend yield for the
underlying asset. Regardless, investors in the Notes will not receive any dividends paid on the underlying asset.
|
Example 1 — The Closing
Level of the Underlying Asset is equal to or greater than the Initial Level on the first Observation Date.
|
|
Closing Level at First Observation Date:
|
$100.00
|
(equal to or greater than
Initial Level, Notes are called)
|
Payment on Call Date:
|
$1,005.00
|
|
Coupons Previously Paid:
|
$ 10.00
|
|
Total:
|
$1,015.00
|
|
Total Return on the Notes:
|
1.50
|
%
|
|
|
Because the Notes are subject to
an automatic call following the first observation date (which is approximately 3 months after the trade date), UBS will pay on
the call settlement date a cash payment equal to the principal amount plus the coupon for the corresponding coupon payment date.
When added to the coupon payments of $10.00 received in respect of prior coupon payment dates, UBS will have paid you a total of
$1,015.00 per Note for a 1.50% total return on the Notes. No further amount will be owed to you under the Notes.
Example 2 — The
Closing Level of the Underlying Asset is equal to or greater than the Initial Level on the third Observation Date.
Closing Level at First Observation Date:
|
$90.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Second Observation Date:
|
$95.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Third Observation Date:
|
$100.00 (equal to or greater than Initial Level, Notes are called)
|
Payment on Call Date:
|
$1,005.00
|
|
Coupons Previously Paid:
|
$ 40.00
|
|
Total:
|
$1,045.00
|
|
Total Return on the Notes:
|
4.50
|
%
|
Because the Notes are subject to
an automatic call following the third observation date (which is approximately 9 months after the trade date), UBS will pay on
the call settlement date a cash payment equal to the principal amount plus the coupon for the corresponding coupon payment date.
When added to the coupon payments of $40.00 received in respect of prior coupon payment dates, UBS will have paid you a total of
$1,045.00 per Note for a 4.50% total return on the Notes. No further amount will be owed to you under the Notes.
Example 3 — Notes are NOT
subject to an automatic call and the Final Level is equal to or greater than the Conversion Level.
Closing Level at First Observation Date:
|
$96.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Second Observation Date:
|
$92.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Third Observation Date:
|
$90.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Final Valuation Date:
|
$91.00 (less than Initial Level; equal to or greater than Conversion Level)
|
Payment at Maturity:
|
$1,005.00
|
|
Coupons Previously Paid:
|
$ 55.00
|
|
Total:
|
$1,060.00
|
|
Total Return on the Notes:
|
6.00
|
%
|
Because the Notes are not subject
to an automatic call and the final level of the underlying asset is equal to or greater than the conversion level, at maturity
UBS will pay you a total of $1,005.00 per Note in cash, reflecting your principal amount plus the coupon for the corresponding
coupon payment date. When added to the coupon payments of $55.00 received in respect of prior coupon payment dates, UBS will have
paid you a total of $1,060.00 per Note for a 6.00% total return on the Notes.
Example 4 — Notes
are NOT subject to an automatic call and the Final Level is less than the Conversion Level.
Closing Level at First Observation Date:
|
$98.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Second Observation Date:
|
$96.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Third Observation Date:
|
$92.00 (less than Initial Level, Notes NOT called)
|
Closing Level at Final Valuation Date and Maturity Date:
|
$36.00 (less than Initial Level and Conversion Level)
|
Payment at Maturity:
|
|
|
Share Delivery Amount:
|
$400.00
|
* = $36.00 x 11.1111 shares
|
Coupon Paid at Maturity:
|
+ $ 5.00
|
|
Total Payment at Maturity:
|
$405.00
|
|
Coupons Previously Paid:
|
+ $ 55.00
|
|
Total:
|
$460.00
|
|
Total Return on the Notes:
|
-54.00
|
%
|
Because the Notes are not subject
to an automatic call and the final level of the underlying asset is less than the conversion level, at maturity UBS will deliver
the share delivery amount of 11 shares of the underlying asset, and an amount in cash equal to the product of the fractional share
and the final level. When added to the coupon payments of $55.00 received in respect of the prior coupon payment dates, the value
of the share delivery amount and coupons received from UBS would be worth a total of $460.00 per Note for a loss on the Notes of
54.00% as of the final valuation date. The value of the shares when received at maturity, and the total return on the Notes at
that time, will depend on the closing level of the underlying asset on the maturity date.
* Represents the cash
value of the share delivery amount on the final valuation date. Because the Notes are physically settled, the actual value received
and the total return on the Notes at maturity depends on the level of the underlying asset on the maturity date.
Investors should note that, in
the event that the final level is less than the conversion level, any decline in the level of the underlying asset during the period
between the final valuation date and the maturity date will cause your return on the Notes to be less than the return you would
have received had we instead paid you an amount in cash equal to the share delivery amount.
Investing in the Notes involves
significant risks. In exchange for receiving a coupon on the Notes, you are accepting the risk of receiving, at maturity, a number
of shares of the underlying asset converted at the conversion level, which is expected to be worth less than your principal amount
and, in extreme situations, you could lose all of your initial investment.
Any payment or delivery 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.
Hypothetical Return
at Maturity
The table below illustrates the payment
at maturity if the Notes are not subject to an automatic call and based on the assumptions above (the actual terms for each Note
are indicated on the cover hereof; amounts have been rounded for ease of reference).
Underlying Asset
|
The Hypothetical Final Level is
Equal to or Greater Than the
Hypothetical Conversion Level
|
The
Hypothetical Final Level
is Less Than the Hypothetical
Conversion Level
|
Hypothetical Final Level
|
Underlying Asset Level Return
|
Total Return on the Underlying Asset at
Maturity
(1 )
|
Total Payment at Maturity + Coupon
Payments
|
Total Return on the Notes at Maturity
|
Total Payment at Maturity + Coupon Payments
(2)
|
Total Return on the Notes as of the Final Valuation Date
|
$140.00
|
40.00%
|
41.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$135.00
|
35.00%
|
36.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$130.00
|
30.00%
|
31.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$125.00
|
25.00%
|
26.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$120.00
|
20.00%
|
21.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$115.00
|
15.00%
|
16.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$110.00
|
10.00%
|
11.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$105.00
|
5.00%
|
6.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$100.00
|
0.00%
|
1.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$95.00
|
-5.00%
|
-4.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$90.00
|
-10.00%
|
-9.00%
|
$1,060.00
|
6.00%
|
n/a
|
n/a
|
$85.00
|
-15.00%
|
-14.00%
|
n/a
|
n/a
|
$1,004.44
|
0.44%
|
$80.00
|
-20.00%
|
-19.00%
|
n/a
|
n/a
|
$948.89
|
-5.11%
|
$75.00
|
-25.00%
|
-24.00%
|
n/a
|
n/a
|
$893.33
|
-10.67%
|
$70.00
|
-30.00%
|
-29.00%
|
n/a
|
n/a
|
$837.78
|
-16.22%
|
$60.00
|
-40.00%
|
-39.00%
|
n/a
|
n/a
|
$726.67
|
-27.33%
|
$50.00
|
-50.00%
|
-49.00%
|
n/a
|
n/a
|
$615.56
|
-38.44%
|
$40.00
|
-60.00%
|
-59.00%
|
n/a
|
n/a
|
$504.44
|
-49.56%
|
$30.00
|
-70.00%
|
-69.00%
|
n/a
|
n/a
|
$393.33
|
-60.67%
|
$20.00
|
-80.00%
|
-79.00%
|
n/a
|
n/a
|
$282.22
|
-71.78%
|
$10.00
|
-90.00%
|
-89.00%
|
n/a
|
n/a
|
$171.11
|
-82.89%
|
$0.00
|
-100.00%
|
-99.00%
|
n/a
|
n/a
|
$60.00
|
-94.00%
|
|
|
|
|
|
|
|
|
|
(1)
|
The total return on the underlying asset at maturity includes a hypothetical 1% cash dividend payment.
|
|
(2)
|
Payment consists of the share delivery amount plus hypothetical coupon payments of 6.00% per annum.
If you receive the share delivery amount at maturity, any fractional share included in the share delivery amount will be paid in
cash at an amount equal to the product of the fractional share and the final level. The actual value received and the total return
on the Notes at maturity will depend on the level of the underlying asset on the maturity date.
|
|
|
|
Information about the Underlying Asset
|
All disclosures contained in this document regarding the underlying asset
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 the underlying asset.
You should make your own investigation into each underlying
asset.
Included on the following pages is a brief description of the underlying
asset issuer. This information has been obtained from publicly available sources. Set forth below are tables that provide the quarterly
high and low closing levels for each underlying asset. The information given below is for the specified periods. We obtained the
closing level information set forth below from the Bloomberg Professional
®
service (“Bloomberg”) without
independent verification. You should not take the historical levels of the underlying asset as an indication of future performance.
The underlying asset is registered under the Securities Act of 1933, the
Exchange Act and/or the Investment Company Act of 1940, each as amended. Companies with securities registered with the SEC are
required to file financial and other information specified by the SEC periodically. Information filed by the underlying asset issuer
with the SEC can be reviewed electronically through a website maintained by the SEC. The address of the SEC’s website is
http://www.sec.gov. Information filed with the SEC by the issuer of each underlying asset can be located by reference to its SEC
file number provided below. In addition, information filed with the SEC can be inspected and copied at the Public Reference Section
of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of this material can also be obtained from the Public
Reference Section, at prescribed rates.
Alaska Air Group, Inc.
According to publicly available information, Alaska Air Group, Inc. (“Alaska
Group”) operates Alaska Airlines, Inc. (“Alaska”), Virgin America Inc. (“Virgin”) and Horizon Air
Industries, Inc. (“Horizon”), together with its partner regional airlines, serves a range of destinations including
in the United States, Mexico, Canada, Costa Rica and Cuba. Alaska Group operates in three operating segments: Mainline, which includes
Alaska's and Virgin’s scheduled air transportation for passengers and cargo throughout the U.S., and in parts of Canada,
Mexico, Costa Rica and Cuba; Regional, which includes Horizon's and other third-party carriers’ scheduled air transportation
for passengers across a shorter distance network within the U.S. under capacity purchase agreements (“CPA”); and Horizon,
which includes the capacity sold to Alaska under CPA. Information filed by Alaska Group with the SEC can be located by reference
to its SEC file number: 001-08957, or its CIK Code: 0000766421. Alaska Group’s website is alaskaair.com. Alaska Group’s
common stock is listed on the New York Stock Exchange under the ticker symbol “ALK.”
Information from outside sources is not incorporated by reference in, and
should not be considered part of, this document or any accompanying prospectus. UBS has not conducted any independent review or
due diligence of any publicly available information with respect to the underlying asset.
Historical Information
The following table sets forth the quarterly closing high and quarterly
closing low levels for Alaska Group’s common stock, based on daily closing levels on the primary exchange for Alaska Group,
as reported by Bloomberg. We obtained the closing levels below from Bloomberg, without independent verification. The closing levels
may be adjusted by Bloomberg for corporate actions such as stock splits, public offerings, mergers and acquisitions, spin-offs,
extraordinary dividends, delistings and bankruptcy. UBS has not undertaken an independent review or due diligence of any publicly
available information obtained from Bloomberg. Alaska Group’s closing level on January 12, 2018 was $73.52.
Past performance
of the underlying asset is not indicative of the future performance of the underlying asset.
Quarter Begin
|
Quarter End
|
Quarterly Closing High
|
Quarterly Closing Low
|
Quarterly Close
|
1/1/2014
|
3/31/2014
|
$46.66
|
$36.59
|
$46.66
|
4/1/2014
|
6/30/2014
|
$50.04
|
$44.68
|
$47.53
|
7/1/2014
|
9/30/2014
|
$49.78
|
$42.72
|
$43.54
|
10/1/2014
|
12/31/2014
|
$59.77
|
$41.58
|
$59.76
|
1/1/2015
|
3/31/2015
|
$71.07
|
$58.77
|
$66.18
|
4/1/2015
|
6/30/2015
|
$68.30
|
$60.65
|
$64.43
|
7/1/2015
|
9/30/2015
|
$82.09
|
$64.30
|
$79.45
|
10/1/2015
|
12/31/2015
|
$86.33
|
$73.45
|
$80.51
|
1/1/2016
|
3/31/2016
|
$82.35
|
$63.06
|
$82.02
|
4/1/2016
|
6/30/2016
|
$82.38
|
$55.66
|
$58.29
|
7/1/2016
|
9/30/2016
|
$71.32
|
$58.54
|
$65.86
|
10/1/2016
|
12/31/2016
|
$91.56
|
$67.09
|
$88.73
|
1/1/2017
|
3/31/2017
|
$100.24
|
$86.98
|
$92.22
|
4/1/2017
|
6/30/2017
|
$92.37
|
$82.19
|
$89.76
|
7/3/2017
|
9/30/2017
|
$94.63
|
$72.24
|
$76.27
|
10/1/2017
|
12/31/2017
|
$81.52
|
$61.68
|
$73.51
|
1/1/2018
|
1/12/2018*
|
$75.01
|
$71.29
|
$73.52
|
* The table above only includes data through
this date. Accordingly, the “Quarterly Closing High,” “Quarterly Closing Low” and “Quarterly Close”
data indicated are for this shortened period only and do not reflect complete data for this calendar quarter.
The graph below illustrates the performance of Alaska Group’s common
stock from January 2, 2008 through January 12, 2018, based on information from Bloomberg. The dotted line represents the conversion
level of $64.70, which is equal to 88.00% of the initial level.
Past performance of the underlying asset is not indicative
of the future performance of the underlying asset.
Bank of America Corporation
According to publicly available information, Bank of America Corporation
(“Bank of America”) is a bank holding company and a financial holding company. Through Bank of America’s banking
subsidiaries and various nonbanking subsidiaries throughout the United States and in international markets, it provides banking
and nonbanking financial services and products through four operating segments: Consumer Banking, Global Wealth & Investment
Management, Global Banking and Global Markets, with the remaining operations recorded in All Other. The Consumer Banking segment
offers credit, banking and investment products and services to consumers and small businesses. The Global Wealth & Investment
Management segment consists of two primary businesses: Merrill Lynch Global Wealth Management, an advisory business providing investment
management, brokerage, banking and retirement products, and U.S. Trust, Bank of America Private Wealth Management, which provides
wealth management services targeted to high net worth and ultra high net worth clients and wealth, wealth structuring, investment
management, trust and banking services. Global Banking includes Global Corporate Banking, Global Commercial Banking, Business Banking
and Global Investment Banking and provides a range of lending-related products and services, integrated working capital management
and treasury services, and underwriting and advisory services. Global Markets offers sales and trading services, including research,
to institutional clients across fixed-income, credit, currency, commodity and equity businesses. The All Other segment includes
asset-liability management activities, equity investments, the non-U.S. consumer credit card business, non-core mortgage loans
and servicing activities, the net impact of periodic revisions to the mortgage servicing rights (MSR) valuation model for both
core and non-core MSRs, other liquidating businesses, residual expense allocations and other. Information filed by Bank of America
with the SEC can be located by reference to its SEC file number: 001-06523, or its CIK Code: 0000070858. Bank of America’s
website is bankofamerica.com. Bank of America’s common stock is listed on the New York Stock Exchange under the ticker symbol
“BAC.”
Information from outside sources is not incorporated by reference in, and
should not be considered part of, this document or any accompanying prospectus. UBS has not conducted any independent review or
due diligence of any publicly available information with respect to the underlying asset.
Historical Information
The following table sets forth the quarterly closing high and quarterly
closing low levels for Bank of America’s common stock, based on daily closing levels on the primary exchange for Bank of
America, as reported by Bloomberg. We obtained the closing levels below from Bloomberg, without independent verification. The closing
levels may be adjusted by Bloomberg for corporate actions such as stock splits, public offerings, mergers and acquisitions, spin-offs,
extraordinary dividends, delistings and bankruptcy. UBS has not undertaken an independent review or due diligence of any publicly
available information obtained from Bloomberg. Bank of America’s closing level on January 12, 2018 was $31.19.
Past
performance of the underlying asset is not indicative of the future performance of the underlying asset.
Quarter Begin
|
Quarter End
|
Quarterly Closing High
|
Quarterly Closing Low
|
Quarterly Close
|
1/1/2014
|
3/31/2014
|
$17.92
|
$16.10
|
$17.20
|
4/1/2014
|
6/30/2014
|
$17.34
|
$14.51
|
$15.37
|
7/1/2014
|
9/30/2014
|
$17.18
|
$14.98
|
$17.05
|
10/1/2014
|
12/31/2014
|
$18.13
|
$15.76
|
$17.89
|
1/1/2015
|
3/31/2015
|
$17.90
|
$15.15
|
$15.39
|
4/1/2015
|
6/30/2015
|
$17.67
|
$15.41
|
$17.02
|
7/1/2015
|
9/30/2015
|
$18.45
|
$15.26
|
$15.58
|
10/1/2015
|
12/31/2015
|
$17.95
|
$15.38
|
$16.83
|
1/1/2016
|
3/31/2016
|
$16.43
|
$11.16
|
$13.52
|
4/1/2016
|
6/30/2016
|
$15.11
|
$12.18
|
$13.27
|
7/1/2016
|
9/30/2016
|
$16.19
|
$12.74
|
$15.65
|
10/1/2016
|
12/31/2016
|
$23.16
|
$15.63
|
$22.10
|
1/1/2017
|
3/31/2017
|
$25.50
|
$22.05
|
$23.59
|
4/1/2017
|
6/30/2017
|
$24.32
|
$22.23
|
$24.26
|
7/3/2017
|
9/30/2017
|
$25.45
|
$22.89
|
$25.34
|
10/1/2017
|
12/31/2017
|
$29.88
|
$25.45
|
$29.52
|
1/1/2018
|
1/12/2018*
|
$31.19
|
$29.80
|
$31.19
|
* The table above only includes data through
this date. Accordingly, the “Quarterly Closing High,” “Quarterly Closing Low” and “Quarterly Close”
data indicated are for this shortened period only and do not reflect complete data for this calendar quarter.
The graph below illustrates the performance of Bank of America’s
common stock from January 2, 2008 through January 12, 2018, based on information from Bloomberg. The dotted line represents the
conversion level of $28.07, which is equal to 90.00% of the initial level.
Past performance of the underlying asset is not
indicative of the future performance of the underlying asset.
Halliburton Company
According to publicly available information, Halliburton Company (“Halliburton”)
is a provider of services and products to the energy industry throughout the lifecycle of the reservoir, from locating hydrocarbons
and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production
throughout the life of the field. Halliburton serves national, and independent oil and natural gas companies worldwide and operates
under two segments: the Completion and Production segment and the Drilling and Evaluation segment. The Completion and Production
segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift, and completion products
and services. The segment consists of Production Enhancement, Cementing, Completion Tools, Production Solutions, Pipeline &
Process Services, Multi-Chem, and Artificial Lift. The Drilling and Evaluation segment provides field and reservoir modeling, drilling,
evaluation and precise wellbore placement solutions that enable customers to model, measure, drill, and optimize their well construction
activities. The segment consists of Baroid, Sperry Drilling, Wireline and Perforating, Drill Bits and Services, Landmark Software
and Services, Testing and Subsea, and Consulting and Project Management. The business operations of Halliburton’s divisions
are organized in four primary geographic regions: North America, Latin America, Europe/Africa/CIS and Middle East/Asia. Information
filed by Halliburton with the SEC can be located by reference to its SEC file number: 001-03492, or its CIK Code: 0000045012. Halliburton’s
website is halliburton.com. Halliburton’s common stock is listed on the New York Stock Exchange under the ticker symbol “HAL.”
Information from outside sources is not incorporated by reference in, and
should not be considered part of, this document or any accompanying prospectus. UBS has not conducted any independent review or
due diligence of any publicly available information with respect to the underlying asset.
Historical Information
The following table sets forth the quarterly closing high and quarterly
closing low levels for Halliburton’s common stock, based on daily closing levels on the primary exchange for Halliburton,
as reported by Bloomberg. We obtained the closing levels below from Bloomberg, without independent verification. The closing levels
may be adjusted by Bloomberg for corporate actions such as stock splits, public offerings, mergers and acquisitions, spin-offs,
extraordinary dividends, delistings and bankruptcy. UBS has not undertaken an independent review or due diligence of any publicly
available information obtained from Bloomberg. Halliburton’s closing level on January 12, 2018 was $53.14.
Past performance
of the underlying asset is not indicative of the future performance of the underlying asset.
Quarter Begin
|
Quarter End
|
Quarterly Closing High
|
Quarterly Closing Low
|
Quarterly Close
|
1/1/2014
|
3/31/2014
|
$59.46
|
$48.20
|
$58.89
|
4/1/2014
|
6/30/2014
|
$71.01
|
$57.36
|
$71.01
|
7/1/2014
|
9/30/2014
|
$74.02
|
$63.66
|
$64.51
|
10/1/2014
|
12/31/2014
|
$62.47
|
$37.82
|
$39.33
|
1/1/2015
|
3/31/2015
|
$44.87
|
$37.33
|
$43.88
|
4/1/2015
|
6/30/2015
|
$49.21
|
$42.69
|
$43.07
|
7/1/2015
|
9/30/2015
|
$43.29
|
$33.47
|
$35.35
|
10/1/2015
|
12/31/2015
|
$40.41
|
$33.44
|
$34.04
|
1/1/2016
|
3/31/2016
|
$36.38
|
$28.48
|
$35.72
|
4/1/2016
|
6/30/2016
|
$46.29
|
$34.00
|
$45.29
|
7/1/2016
|
9/30/2016
|
$46.85
|
$40.95
|
$44.88
|
10/1/2016
|
12/31/2016
|
$55.07
|
$44.59
|
$54.09
|
1/1/2017
|
3/31/2017
|
$58.21
|
$47.78
|
$49.21
|
4/1/2017
|
6/30/2017
|
$50.15
|
$41.50
|
$42.71
|
7/3/2017
|
9/30/2017
|
$46.03
|
$38.66
|
$46.03
|
10/1/2017
|
12/31/2017
|
$48.87
|
$41.02
|
$48.87
|
1/1/2018
|
1/12/2018*
|
$53.33
|
$49.61
|
$53.14
|
* The table above only includes data through
this date. Accordingly, the “Quarterly Closing High,” “Quarterly Closing Low” and “Quarterly Close”
data indicated are for this shortened period only and do not reflect complete data for this calendar quarter.
The graph below illustrates the performance of Halliburton’s common
stock from January 2, 2008 through January 12, 2018, based on information from Bloomberg. The dotted line represents the conversion
level of $47.83, which is equal to 90.00% of the initial level.
Past performance of the underlying asset is not indicative
of the future performance of the underlying asset.
What are the Tax Consequences of the Notes?
|
The U.S. federal income tax consequences of your investment in the Notes
are uncertain. Some of these tax consequences are summarized below, but we urge you to read the more detailed discussion in “Supplemental
U.S. Tax Considerations” of the Airbag Autocallable Yield Notes product supplement and to discuss the tax consequences of
your particular situation with your tax advisor. This discussion is based upon the 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, possible 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 Securities,
and the following discussion is not binding on the IRS.
U.S. Tax Consequences.
The U.S. federal income tax consequences
of your investment in the Notes are complex and uncertain. By purchasing a Note, you and UBS hereby agree (in the absence of an
administrative determination or judicial ruling to the contrary) to characterize a Note for all tax purposes as an investment unit
consisting of a non-contingent debt instrument and a put option contract in respect of the underlying asset. The terms of the Notes
require (in the absence of an administrative determination or judicial ruling to the contrary) that you treat your Notes for U.S.
federal income tax purposes as consisting of two components:
Debt component
— We intend to treat the debt component as
having a term of one year or less. Amounts treated as interest on the debt component would be subject to the general rules governing
interest payments on short-term notes and would be required to be accrued by accrual-basis taxpayers (and cash-basis taxpayers
who elect to accrue interest currently) on either the straight-line method, or, if elected, the constant yield method, compounded
daily. Cash-basis taxpayers who do not elect to accrue interest currently would include interest in income upon receipt of such
interest.
Put option component
— The put option component would generally
not be taxed until the taxable disposition of the Notes. At such time, the put option component either would be taxed as a short-term
capital gain if the principal amount is repaid in cash or would reduce the basis of any shares of the underlying asset if you receive
the share delivery amount.
With respect to coupon payments you receive, you agree to treat such payments
as consisting of interest on the debt component and a payment with respect to the put option as follows:
Underlying Asset
|
Coupon Rate
|
Interest on Debt Component
|
Put Option Component
|
Common stock of Alaska Air Group, Inc.
|
8.25% per annum
|
1.44% per annum
|
6.81% per annum
|
Common stock of Bank of America Corporation
|
6.40% per annum
|
1.33% per annum
|
5.07% per annum
|
Common stock of Halliburton Company
|
7.20% per annum
|
1.36% per annum
|
5.84% per annum
|
This discussion does not address the U.S. federal income tax consequences
to you of holding or disposing of any shares of the underlying asset that you may receive in connection with your investment in
the Notes. If you receive the share delivery amount, certain adverse U.S. federal income (and other) tax consequences might apply
to you. You should refer to information filed with the SEC or another governmental authority by the underlying asset issuer and
consult your tax advisor regarding possible tax consequences to you of acquiring, holding or otherwise disposing of the underlying
asset.
In the opinion
of our counsel, Cadwalader, Wickersham & Taft LLP, based on certain factual representations received from us, it would be reasonable
to treat your Notes as described above. However, in light of the uncertainty as to the U.S. federal income tax treatment, it is
possible that your Notes could be treated 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 from the treatment described above. The
risk that the Notes may be recharacterized for U.S. federal income tax purposes as instruments giving rise to current ordinary
income (possibly before receipt of any cash) is higher than with other equity-linked securities that do not guarantee full repayment
of principal. Because of this uncertainty, we urge you to consult your tax advisor as to the tax consequences of your investment
in the Notes. Please read the discussion in
“
Supplemental
U.S. Tax Considerations” in the Airbag Autocallable Yield Notes product supplement for a more detailed description of the
tax treatment of your Notes.
Notice 2008-2
. In 2007, the IRS has released a notice that may
affect the taxation of holders of the Notes. According to Notice 2008-2, the IRS and the Treasury Department are actively considering
the appropriate tax treatment of holders of certain types of structured notes. Legislation has also been proposed in Congress that
would require the holders of certain prepaid forward contracts to accrue income during the term of the transaction. It is not clear
whether the Notice applies to instruments such as the Notes. Furthermore, it is not possible to determine what guidance or legislation
will ultimately result, if any, and whether such guidance or legislation will affect the tax treatment of the Notes. Except to
the extent otherwise required by law, UBS intends to treat your Notes for U.S. federal income tax purposes in accordance with the
treatment described above and under “Supplemental U.S. Tax Considerations” in the Airbag Autocallable Yield Notes product
supplement unless and until such time as some other treatment is more appropriate.
Medicare Tax on Net Investment Income.
U.S. holders that are individuals,
estates, and 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. The
3.8% Medicare
tax is determined in a different manner than the income tax. U.S. holders should consult their tax advisors with respect to their
consequences with respect to 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.
You are urged to consult your tax advisor as to the application of this legislation to your ownership of the Notes.
Non-U.S. Holders
. If you are a non U.S. holder, subject to Section
871(m) of the Code and “FATCA,” discussed below, you should generally not be subject to U.S. withholding tax with respect
to payments on your Notes or to generally applicable information reporting and backup withholding requirements with respect to
payments on your Notes if you comply with certain certification and identification requirements as to your non U.S. status (by
providing us (and/or the applicable withholding agent) with a fully completed and validly executed applicable IRS Form W-8). Subject
to Section 897 and Section 871(m), discussed below, gain from the sale or exchange of a Note or cash settlement upon automatic
call or at maturity 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., or (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.
If the Notes are physically settled by delivery to you of a number of
shares of the underlying asset equal to the share delivery amount, you may suffer adverse U.S. federal income tax consequences
if you hold such underlying asset. You may be subject to U.S. withholding tax on U.S.-source dividends in respect of such underlying
asset that you hold. Other adverse tax consequences are possible. You should carefully review the potential tax consequences to
“non-U.S. holders” that are set forth in the prospectus for the underlying asset.
Section 897
. We will not attempt to ascertain whether
the underlying asset 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 the underlying
asset issuer or 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 the underlying asset issuer for their Notes as a USRPHC or 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. 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.
Based on our determination that the Notes are not “delta-one”
with respect to the underlying asset, 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 the underlying asset 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 you enter, or have entered, into certain other transactions in respect of the underlying asset or
the Notes. If you enter, or have entered, into other transactions in respect of the underlying asset or the Notes, you should consult
your tax advisor regarding the application of Section 871(m) of the Code to your Notes in the context of your 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 OID), 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” made
on or after July 1, 2014, certain gross proceeds on a sale or disposition occurring after December 31, 2018, and certain foreign
passthru payments made after December 31, 2018 (or, if later, the date that 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 own advisor 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 proposed in Congress that,
if enacted, would have required accrual of income on certain prepaid forward contracts prior to maturity.
Furthermore, in 2013, the House Ways and Means Committee released in draft form
certain proposed legislation relating to financial instruments. If enacted, the effect of this legislation generally would have
been to require instruments such as the put option component of 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. You are urged to consult your tax advisor regarding the draft
legislation and its possible impact on you.
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.
You are urged to consult your tax advisor concerning the application of U.S.
federal income tax laws to your particular situation, 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.