The suitability considerations
identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual
circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other
advisors have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You
should review “Information About the Underlying Asset” herein for more information on the underlying asset. You should
also review carefully the “Key Risks” section herein for risks related to an investment in the Notes.
Final Terms for Each Offering of the Notes
Issuer
|
UBS AG London Branch
|
Principal Amount
|
$10 per Note
|
Term
|
Approximately 60 months, unless subject to an automatic call.
|
Underlying
Asset
|
The common stock of a specific company, as indicated on the cover hereof.
|
Contingent Coupon & Contingent Coupon Rate
|
If the closing level of the underlying asset is equal to or greater than the
coupon barrier on any observation date (including the final valuation date), UBS will pay you the contingent coupon
applicable to such observation date.
If the closing level of the underlying asset is less than the coupon barrier
on any observation date (including the final valuation date), the contingent coupon applicable to such 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 is a fixed amount based upon equal monthly installments at
a per annum rate (the “contingent coupon rate”). The table below sets forth the contingent coupon rate and
contingent coupon for each Note that would be applicable to each observation date on which the closing level of the underlying
asset is equal to or greater than the coupon barrier.
|
|
Contingent Coupon Rate
|
Contingent Coupon
|
Berkshire Hathaway Inc.
|
7.50%
|
$0.0625
|
Merck & Co., Inc.
|
8.00%
|
$0.0667
|
PepsiCo, Inc.
|
8.00%
|
$0.0667
|
|
Contingent coupons on the Notes are not guaranteed. UBS will not pay you the contingent coupon for any observation
date on which the closing level of the underlying asset is less than the coupon barrier.
|
Coupon Barrier(1)
|
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.
|
Automatic Call Feature
|
UBS will automatically call the Notes if the closing level of the underlying
asset on any observation date (monthly, beginning after 12 months) 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
corresponding coupon payment date (which will be the “call settlement date”) a cash payment per Note equal to your
principal amount plus the contingent coupon otherwise due on such date (the “call settlement amount”). Following an
automatic call, no further payments will be made on the Notes.
|
Payment at Maturity (per Note)
|
If the Notes are not subject to an automatic call and the final level is
equal to or greater than the downside threshold, UBS will pay you a cash payment equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call and the final level is less
than the downside threshold, UBS will pay you a cash payment that is less than the principal amount, if anything, equal
to:
$10 ´ (1 + Underlying Return)
In such a case, you will suffer a percentage loss on your initial
investment equal to the underlying return and, in extreme situations, you could lose all of your initial investment.
|
Underlying Return
|
The quotient, expressed as a percentage, of the following formula:
Final Level – Initial Level
Initial Level
|
Downside Threshold(1)
|
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.
|
Initial Level(1)
|
The closing level of
the underlying asset on the trade date, as indicated on the cover hereof.
|
Final Level(1)
|
The closing level of
the underlying asset on the final valuation date.
|
(1) As determined by the
calculation agent and as may be adjusted in the case of certain adjustment events as described under “General Terms of the
Securities — Antidilution Adjustments for Securities Linked to an Underlying Equity or Equity Basket Asset” and
“Reorganization Events for Securities Linked to an Underlying Equity or Equity Basket Asset” in the accompanying product
supplement.
Investment
Timeline
Trade Date
|
|
The initial level of the underlying asset is observed and the final terms of the Notes are set.
|
|
¯
|
|
|
|
Observation Dates
(Monthly, callable after 12 months)
|
|
If the closing level is equal to or greater than the coupon barrier on any
observation date (including the final valuation date), UBS will pay you a contingent coupon on the applicable coupon payment
date.
The Notes will be subject to an automatic call if the closing level of the
underlying asset on any observation date (monthly, beginning after 12 months) 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 a cash payment
per Note equal to your principal amount plus the contingent coupon otherwise due on such date. Following an automatic call, no
further payments will be made on the Notes.
|
|
¯
|
|
|
|
Maturity Date
|
|
The final level is observed on the final valuation date and the underlying
return of the underlying asset is calculated.
If the Notes are not subject to an automatic call and the final level is
equal to or greater than the downside threshold, UBS will pay you a cash payment per Note equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call and the final level is less
than the downside threshold, UBS will pay you a cash payment per Note that is less than the principal amount, if anything,
equal to:
$10 ´ (1 + Underlying Return)
In such a case, you will suffer a percentage loss on your initial
investment equal to the underlying return and, in extreme situations, you could lose all of your initial investment.
|
|
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.
If the Notes are not subject to an
automatic call, you may lose a significant portion 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 downside threshold, you will lose a percentage of your principal amount equal
to the underlying return and, in extreme situations, you could lose all of your initial investment.
Observation Dates(1) and Coupon Payment Dates(1)(2)(3)
Observation Dates
|
Coupon
Payment Dates
|
Observation Dates
|
Coupon
Payment Dates
|
Observation Dates
|
Coupon
Payment Dates
|
June 22, 2020*
|
June 24, 2020*
|
February 22, 2022
|
February 24, 2022
|
October 23, 2023
|
October 25, 2023
|
July 22, 2020*
|
July 24, 2020*
|
March 22, 2022
|
March 24, 2022
|
November 22, 2023
|
November 27, 2023
|
August 24, 2020*
|
August 26, 2020*
|
April 22, 2022
|
April 26, 2022
|
December 22, 2023
|
December 28, 2023
|
September 22, 2020*
|
September 24, 2020*
|
May 23, 2022
|
May 25, 2022
|
January 22, 2024
|
January 24, 2024
|
October 22, 2020*
|
October 26, 2020*
|
June 22, 2022
|
June 24, 2022
|
February 22, 2024
|
February 26, 2024
|
November 23, 2020*
|
November 25, 2020*
|
July 22, 2022
|
July 26, 2022
|
March 22, 2024
|
March 26, 2024
|
December 22, 2020*
|
December 24, 2020*
|
August 22, 2022
|
August 24, 2022
|
April 22, 2024
|
April 24, 2024
|
January 22, 2021*
|
January 26, 2021*
|
September 22, 2022
|
September 26, 2022
|
May 22, 2024
|
May 24, 2024
|
February 22, 2021*
|
February 24, 2021*
|
October 24, 2022
|
October 26, 2022
|
June 24, 2024
|
June 26, 2024
|
March 22, 2021*
|
March 24, 2021*
|
November 22, 2022
|
November 25, 2022
|
July 22, 2024
|
July 24, 2024
|
April 22, 2021*
|
April 26, 2021*
|
December 22, 2022
|
December 28, 2022
|
August 22, 2024
|
August 27, 2024
|
May 24, 2021*
|
May 26, 2021
|
January 23, 2023
|
January 25, 2023
|
September 23, 2024
|
September 25, 2024
|
June 22, 2021
|
June 24, 2021
|
February 22, 2023
|
February 24, 2023
|
October 22, 2024
|
October 24, 2024
|
July 22, 2021
|
July 26, 2021
|
March 22, 2023
|
March 24, 2023
|
November 22, 2024
|
November 26, 2024
|
August 23, 2021
|
August 25, 2021
|
April 24, 2023
|
April 26, 2023
|
December 23, 2024
|
December 27, 2024
|
September 22, 2021
|
September 24, 2021
|
May 22, 2023
|
May 24, 2023
|
January 22, 2025
|
January 24, 2025
|
October 22, 2021
|
October 26, 2021
|
June 22, 2023
|
June 26, 2023
|
February 24, 2025
|
February 26, 2025
|
November 22, 2021
|
November 24, 2021
|
July 24, 2023
|
July 26, 2023
|
March 24, 2025
|
March 26, 2025
|
December 22, 2021
|
December 24, 2021
|
August 22, 2023
|
August 24, 2023
|
April 22, 2025
|
April 24, 2025
|
January 24, 2022
|
January 26, 2022
|
September 22, 2023
|
September 26, 2023
|
Final Valuation Date
|
Maturity Date
|
* The Notes are
not callable until the first potential call settlement date, which is May 26, 2021.
|
(1)
|
Subject to the market disruption event provisions set forth in the accompanying product
supplement.
|
|
(2)
|
If you are able to sell the Notes in the secondary market on an observation date, the purchaser of
the Notes will be deemed to be the record holder on the applicable record date and, therefore, you will not be entitled to any
payment attributable to that observation date.
|
|
(3)
|
Two business days following each observation date, except that the coupon payment date for the
final valuation date is the maturity date.
|
Key Risks
An investment in the Notes involves
significant risks. Investing in the Notes is not equivalent to investing in the underlying asset. 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.
|
¨
|
Risk of loss at maturity — The Notes differ from ordinary debt securities in that UBS
will not necessarily make periodic coupon payments or 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 downside threshold, you will lose a percentage of your principal
amount equal to the underlying return and, in extreme situations, you could lose all of your initial investment.
|
|
¨
|
The contingent repayment of principal applies only at 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 then-current level of the underlying asset at
that time is equal to or greater than the downside threshold. All payments on the Notes are subject to the creditworthiness of
UBS.
|
|
¨
|
You may not receive any contingent coupons with respect to your Notes — UBS will not
necessarily make periodic coupon payments on the Notes. UBS will pay a contingent coupon for each observation date on which the
closing level of the underlying asset is equal to or greater than the coupon barrier. If the closing level of the underlying asset
is less than the coupon barrier on any observation date, UBS will not pay you the contingent coupon applicable to such observation
date. If the closing level of the underlying asset is less than the coupon barrier on each of the observation dates, 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 coupon coincides with a period of greater risk of principal loss on your Notes.
|
|
¨
|
Your potential return on the Notes is limited to any contingent coupons and you will not
participate in any appreciation of the underlying asset — The return potential of the Notes is limited to the
pre-specified contingent coupon rate, regardless of any appreciation of the underlying asset. In addition, your return on the Notes
will vary based on the number of observation dates, if any, in which the requirements of the contingent coupon have been met prior
to maturity or an automatic call. Further, if the Notes are subject to an automatic call, you will not receive any contingent
coupons or any other payment in respect of any observation 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. Furthermore, if the Notes are not subject to an automatic call, you may be subject
to the decline of the underlying asset even though you cannot participate in any appreciation of the underlying asset. As a result,
the return on an investment in the Notes could be less than the return on a direct investment in the underlying asset. In addition,
as an owner of the Notes, you will not have voting rights or any other rights of a holder of the underlying asset.
|
|
¨
|
A higher contingent coupon rate or lower downside threshold or coupon barrier 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 contingent coupon rate, coupon barrier and downside threshold,
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 closing
level of the underlying asset could be less than the coupon barrier on any observation date and that the final level of the
underlying asset could be less than the downside threshold on the final valuation 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 a lower downside threshold and/or coupon barrier than those
terms on otherwise comparable securities. Therefore, a relatively higher contingent coupon rate may indicate an increased risk of
loss. Further, a relatively lower downside threshold and/or coupon barrier 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 underlying asset and the potential to lose a significant portion or all of your initial
investment.
|
|
¨
|
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 certain observation dates prior to the final valuation
date, as set forth under “Observation Dates and Coupon Payment Dates” above. Because the Notes could be subject to an
automatic call, the term of your investment may be limited. In the event that the Notes are subject to an automatic call, 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. In addition, 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 hedging costs built into the price of the new securities.
Generally, however, the longer the Notes remain outstanding, the less likely the Notes will be subject to an automatic call 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.
|
|
¨
|
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 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 of UBS 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.
|
|
¨
|
Single equity risk — 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. 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 asset
issuer and, therefore, the underlying asset. 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 Asset" in this document and the underlying asset issuer's SEC filings
referred to in that section. We urge you to review financial and other information filed periodically by the applicable
underlying asset issuer with the SEC.
|
|
¨
|
Fair value considerations.
|
|
¨
|
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 level and volatility of the underlying asset, 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.
|
|
¨
|
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.
|
|
¨
|
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.
|
|
¨
|
Limited or no secondary market and secondary market price considerations.
|
|
¨
|
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.
|
|
¨
|
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 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 level of the underlying asset;
the volatility of the underlying asset; any dividends paid on the underlying asset; 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; whether the underlying asset is currently or has been less than the coupon barrier; the availability of comparable
instruments; and 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.
|
|
¨
|
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.
|
|
¨
|
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 coupon barrier on any observation date, or, if the Notes
are not subject to an automatic call, that the final level will be equal to or greater than the downside threshold. The 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 downside risks of owning equities in general and the underlying asset
in particular, and the risk of losing a significant portion or all of your initial investment.
|
|
¨
|
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
affiliated with the underlying asset issuer and are not responsible for such 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 market
value of, and any amounts payable on, your Notes.
|
|
¨
|
The calculation agent can make antidilution and reorganization adjustments that affect the market
value of the Notes and any payment to you at maturity — For antidilution and reorganization events affecting the
underlying asset, the calculation agent may make adjustments to the initial level, coupon barrier, downside threshold 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
accompanying 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 determination as to whether the
contingent coupon is payable to you on any coupon payment date, whether the Notes are subject to an automatic call or the amount you
receive at maturity may be based on the equity security of a successor 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
determination as to whether the contingent coupon is payable to you on any coupon payment date, whether the Notes are subject to an
automatic call or the amount you receive at maturity may be based on a substitute security. The occurrence of any antidilution or
reorganization event and the consequent adjustments may materially and adversely affect the value of the Notes and any payment of
any contingent coupons or at maturity. For more information, see the sections “General Terms of the Securities —
Antidilution Adjustments for Securities Linked to an Underlying Equity or Equity Basket Asset” and “—
Reorganization Events for Securities Linked to an Underlying Equity or Equity Basket Asset” in the accompanying product
supplement.
|
|
¨
|
Potential UBS impact on the underlying asset — Trading or transactions by UBS 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 that underlying asset on any
observation date (including the final valuation date) and, therefore, the market value of the Notes and any payment of any
contingent coupons or at maturity.
|
|
¨
|
Potential conflict of interest — UBS and its affiliates may engage in business with an
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 contingent coupon is payable to you on any coupon
payment date, whether the Notes are subject to an automatic call and 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 terms of the Notes on the trade date,
any observation date or final valuation date, respectively. As UBS determines the economic terms of the Notes, including the
contingent coupon rate, downside threshold and coupon barrier, 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, and any
amounts payable on, 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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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 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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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 listed 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 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 are indicated on the cover hereof.
The examples below illustrate the payment
upon a call or at maturity for a $10 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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$10.00
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Term:
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Approximately 60 months
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Initial Level:
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$50.00
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Contingent Coupon Rate:
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6.00% per annum (or 0.50% per month)
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Contingent Coupon:
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$0.05 per month
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Observation Dates:
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Monthly (callable after 12 months)
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Downside Threshold:
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$42.50 (which is 85.00% of the Initial Level)
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Coupon Barrier:
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$42.50 (which is 85.00% of the Initial Level)
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Example 1 — The Closing Level of
the Underlying Asset is equal to or greater than the Initial Level on the Observation Date corresponding to the first Potential Call
Settlement Date.
Date
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Closing Level
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Payment (per Note)
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First Observation Date
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$60.00 (equal to or greater than Initial Level)
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$0.05 (Contingent Coupon – Not Callable)
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Second to Eleventh Observation Dates
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Various (all less than Initial Level and Coupon Barrier)
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$0
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Twelfth Observation Date
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$55.00 (equal to or greater than Initial Level)
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$10.05 (Call Settlement Amount)
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Total Payment:
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$10.10 (a 1.00% total return)
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Because the Notes are subject to an
automatic call following the twelfth observation date (which is approximately 12 months after the trade date and is the first
observation date on which they are callable), UBS will pay you on the call settlement date a total of $10.05 per Note, reflecting
your principal amount plus the applicable contingent coupon. When added to the contingent coupon of $0.05 received in respect of the
prior observation dates, UBS will have paid you a total of $10.10 per Note, for a 1.00% total return on the Notes. No further amount
will be owed to you under the Notes.
Example 2 — The Notes are NOT
Subject to an Automatic Call and the Final Level of the Underlying Asset is equal to or greater than the Downside Threshold and
Coupon Barrier.
Date
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Closing Level
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Payment (per Note)
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First Observation Date
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$45.00 (equal to or greater than Coupon Barrier; less than Initial Level)
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$0.05 (Contingent Coupon)
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Second to Fifty-Ninth Observation Dates
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Various (all less than Coupon Barrier)
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$0
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Final Valuation Date
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$48.00 (equal to or greater than Downside Threshold and Coupon Barrier)
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$10.05 (Payment at Maturity)
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Total Payment:
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$10.10 (a 1.00% total return)
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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 downside threshold and coupon barrier, at
maturity, UBS will pay you a total of $10.05 per Note, reflecting your principal amount plus the applicable contingent coupon. When
added to the contingent coupon of $0.05 received in respect of the prior observation dates, UBS will have paid you a total of $10.10
per Note, for a 1.00% total return on the Notes.
Example 3 — The Notes are NOT Subject to
an Automatic Call and the Final Level of the Underlying Asset is less than the Downside Threshold and Coupon Barrier.
Date
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Closing Level
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Payment (per Note)
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First Observation Date
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$47.00 (equal to or greater than Coupon Barrier; less than Initial Level)
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$0.05 (Contingent Coupon)
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Second to Fifty-Ninth Observation Dates
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Various (all less than Coupon Barrier)
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$0
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Final Valuation Date
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$20.00 (less than Downside Threshold and Coupon Barrier)
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$10 x (1 + Underlying Return) =
$10 × [1 + (-60%)] =
$10 x 0.40 =
$4 (Payment at Maturity)
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Total Payment:
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$4.05 (a 59.50% loss)
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Because the Notes are not subject to an
automatic call and the final level of the underlying asset is less than the downside threshold, at maturity, UBS will pay you $4.00
per Note. When added to the contingent coupon of $0.05 received in respect of the prior observation dates, UBS will have paid you
$4.05 per Note for a loss on the Notes of 59.50%.
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 Notes are not subject to an automatic call, you may lose a significant portion 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 downside
threshold, you will lose a percentage of your principal amount equal to the underlying return and, in extreme situations, you could
lose all of your initial investment.
Any payment on the Notes, including any
payments in respect of an automatic call, contingent coupon or 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 Asset
All disclosures contained in this document
regarding the underlying asset for each offering of 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 for any offering
of the Notes. You should make your own investigation into the underlying asset for your Notes.
Included on the following pages is a brief
description of the underlying asset issuer for each offering of the Notes. This information has been obtained from publicly
available sources. Set forth below is a graph that illustrates the past performance for the underlying asset for the specified
period. We obtained the past performance information set forth below from the Bloomberg Professional® service
(“Bloomberg”) without independent verification. You should not take the historical prices of the underlying asset as an
indication of future performance.
The underlying asset for each offering of
the Notes is registered under the Securities Act of 1933, the Securities Exchange Act of 1934 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 for each offering of the Notes 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 underlying asset issuer 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.
Berkshire Hathaway Inc.
According
to publicly available information, Berkshire Hathaway Inc. ("Berkshire") is a holding company owning subsidiaries engaged
in a number of business activities, including insurance businesses conducted on both a primary basis and a reinsurance basis, a
freight rail transportation business and a group of utility and energy generation and distribution businesses. Information filed by
Berkshire with the SEC can be located by reference to its SEC file number: 001-14905 or its CIK Code: 0001067983. The Class B common
stock of Berkshire is listed on the New York Stock Exchange under the ticker Symbol "BRK/B".
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 the underlying asset.
Historical Information
The
graph below illustrates the performance of Berkshire’s Class B common stock from January 1, 2010 through May 22, 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 Berkshire’s Class B common
stock on May 22, 2020 was $174.93. The dotted line represents the coupon barrier and the downside threshold of $131.20, which is
equal to 75.00% of the initial level. Past performance of the underlying asset is not indicative of the future performance
of the underlying asset during the term of the Notes.
Merck & Co., Inc.
According
to publicly available information, Merck & Co., Inc. (“Merck”) is a health care company that develops, manufactures
and markets pharmaceutical products, vaccines, biologic therapies and animal health products. Information filed by Merck with the
SEC can be located by reference to its SEC file number: 001-06571, or its CIK Code: 0000310158. Merck’s website is merck.com.
Merck’s common stock is listed on the New York Stock Exchange under the ticker symbol “MRK.”
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 the underlying asset.
Historical Information
The
graph below illustrates the performance of Merck’s common stock from January 1, 2010 through May 22, 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 Merck’s common stock on May 22, 2020
was $76.37. The dotted line represents the coupon barrier and the downside threshold of $50.29, which is equal to 65.85% of the
initial level. Past performance of the underlying asset is not indicative of the future performance of the underlying
asset during the term of the Notes.
PepsiCo, Inc.
According
to publicly available information, PepsiCo, Inc. (“Pepsi”) is a global food and beverage company that makes, markets,
distributes and sells beverages, foods and snacks. Information filed by Pepsi with the SEC can be located by reference to its SEC
file number: 001-01183, or its CIK Code: 0000077476. Pepsi’s website is pepsico.com. Pepsi’s common stock is listed on
the New York Stock Exchange under the ticker symbol “PEP.”
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 the underlying asset.
Historical Information
The graph below illustrates the performance of Pepsi’s common stock from January 1, 2010 to May 22, 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 Pepsi’s common stock on May 22, 2020
was $130.48. The dotted line represents the coupon barrier and the downside threshold of $92.64, which is equal to 71.00% of the
initial level. Past performance of the underlying asset is not indicative of the future performance of the underlying
asset during the term of the Notes.
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 asset. 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 capital 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 received from 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”, including the section “—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.
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
“Material U.S. Federal Income Tax Consequences” 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 that may affect the taxation of holders of the Notes. According to Notice 2008-2, the IRS and the Treasury are
actively considering whether the holder of an instrument such as the Notes should be required to accrue ordinary income on a current
basis. It is not possible to determine what guidance they will ultimately issue, if any. It is possible, however, that under such
guidance, holders of the Notes will ultimately be required to accrue income currently in excess of any receipt of contingent coupons
and this could be applied on a retroactive basis. The IRS and the Treasury are also considering other relevant issues, including
whether additional gain or loss from such instruments should be treated as ordinary or capital, whether non-U.S. holders of such
instruments should be subject to withholding tax on any deemed income accruals, and whether the special “constructive
ownership rules” of Section 1260 of the Code should be applied to such instruments. Both U.S. and non-U.S. holders are urged
to consult their tax advisors concerning the significance and potential impact of the above considerations.
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), $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.
U.S. holders may be subject to reporting obligations with respect to their Notes if they do not hold their Notes in an account
maintained by a financial institution and the aggregate value of their Notes and certain other “specified foreign financial
assets” (applying certain attribution rules) exceeds an applicable threshold. Significant penalties can apply if a U.S. holder
is required to disclose its Notes and fails to do so.
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 such 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 the Notes
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 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 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 the underlying asset issuer for their Notes 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. 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 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 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 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 not be interest payments over the
entire 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 have agreed to sell to UBS Securities LLC
and UBS Securities LLC has agreed to purchase, all of the Notes at the issue price to the public less the underwriting discount
indicated on the cover hereof. UBS Securities LLC has agreed to resell all of the Notes to UBS Financial Services Inc. at a discount
from the issue price to the public equal to the underwriting discount indicated on the cover hereof.
Conflicts of Interest — Each of
UBS Securities LLC and UBS Financial Services Inc. 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 underwriting discount) 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. Neither UBS Securities LLC nor UBS Financial Services Inc. is 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 9 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 “Key Risks — Limited or no secondary market and secondary
market price considerations” herein.
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.