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May 2020
Pricing Supplement
Dated May 22, 2020
Registration Statement No. 333-225551
Filed pursuant to Rule 424(b)(2)
(To Prospectus dated October 31, 2018
and Product Supplement dated October 31, 2018)
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Structured Investments
Opportunities in U.S. Equities
Contingent Income Auto-Callable Securities due November
26, 2021
$6,565,870 Based on the Performance of the Common
Stock of Netflix, Inc.
Contingent Income Auto-Callable Securities (the “securities”) offer the opportunity for investors to earn a
contingent payment with respect to each determination date on which the closing price of the underlying equity is equal to or
greater than 70.00% of the initial price, which we refer to as the downside threshold level. In addition, if the closing price of
the underlying equity is equal to or greater than the call threshold level on any determination date (other than the final
determination date), the securities will be redeemed early for an amount per security equal to the stated principal amount plus the
applicable contingent payment. However, if on any determination date (other than the final determination date) the closing price of
the underlying equity is less than the call threshold level, the securities will not be redeemed early and if that closing price is
less than the downside threshold level, you will not receive any contingent payment for that period. As a result, investors must be
willing to accept the risk of not receiving any contingent payments. Furthermore, UBS has elected to deliver cash in lieu of shares
and investors will receive less than the stated principal amount, if anything, if the securities are not redeemed early and the
closing price of the underlying equity is less than the downside threshold level on the final determination date. In this case, you
will be exposed to the decline in the closing price of the underlying equity over the term of the securities and, in extreme
situations, you could lose all of your initial investment. Accordingly, the securities do not guarantee any return of principal
at maturity. Investors will not participate in any appreciation of the underlying equity and must be willing to accept the risk of
not receiving any contingent payments over the term of the securities. The securities are unsubordinated, unsecured debt obligations
issued by UBS AG, and all payments on the securities are subject to the credit risk of UBS AG.
SUMMARY TERMS
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Issuer:
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UBS AG London Branch
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Underlying equity:
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Common Stock of Netflix, Inc. (Bloomberg Ticker: “nflx uw”)
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Aggregate principal amount:
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$6,565,870
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Stated principal amount:
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$10.00 per security
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Issue price:
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$10.00 per security (see “Commissions and issue price” below)
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Pricing date:
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May 22, 2020
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Original issue date:
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May 28, 2020 (3 business days after the
pricing date). Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally
are required to settle in two business days (T+2), unless the parties to a trade expressly agree otherwise. Accordingly,
purchasers who wish to trade the securities in the secondary market on any date prior to two business days before delivery of
the securities will be required, by virtue of the fact that each security initially will settle in three business days (T+3), to
specify alternative settlement arrangements to prevent a failed settlement of the secondary market trade.
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Maturity date:
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November 26, 2021, subject to postponement
for certain market disruption events and as described under “General Terms of the Securities — Market Disruption
Events” and “— Payment Dates — Maturity Date” in the accompanying product supplement.
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Early redemption:
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If, on any determination date (other than
the final determination date), the closing price of the underlying equity is equal to or greater than the call threshold level,
the securities will be redeemed early and we will pay the early redemption amount on the first contingent payment date
immediately following the related determination date.
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Early redemption amount:
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The early redemption amount will be an
amount equal to (i) the stated principal amount plus (ii) the contingent payment with respect to the related determination
date.
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Contingent payment:
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§
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If, on any determination date, the
closing price or the final price is equal to or greater than the downside threshold level, we will pay a contingent payment of
$0.1396 (equivalent to approximately 16.75% per annum of the stated principal amount) per security on the related contingent
payment date.
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§
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If, on any determination date, the
closing price or the final price is less than the downside threshold level, no contingent payment will be made with respect to
that determination date.
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Determination dates:
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June 22, 2020, July
22, 2020, August 24, 2020, September 22, 2020, October 22, 2020, November 23, 2020, December 22, 2020, January 22, 2021,
February 22, 2021, March 22, 2021, April 22, 2021, May 24, 2021, June 22, 2021, July 22, 2021, August 23, 2021, September 22,
2021, October 22, 2021 and November 22, 2021, subject to postponement for non-trading days and certain market disruption events
(as described under “General Terms of the Securities — Valuation Dates”, “— Final Valuation
Date” and “— Market Disruption Events” in the accompanying product supplement). We also refer to
November 22, 2021 as the final determination date. References in the accompanying product supplement to one or more
“valuation dates” shall mean the determination dates for purposes of the market disruption event provisions in the
accompanying product supplement.
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Contingent payment dates:
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With respect to each determination date
other than the final determination date, the third business day after the related determination date. The payment of the
contingent payment, if any, with respect to the final determination date will be made on the maturity date.
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Payment at maturity:
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§
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If the final price is equal to or greater than the
downside threshold
level:
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(i) the stated principal amount plus
(ii) the contingent payment with respect to the final determination date
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§
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If the final price is less than the downside threshold
level:
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the cash value
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UBS has elected to deliver to you cash
in lieu of shares, and your payment at maturity for each security will be the cash value. If the final price is less than the
downside threshold level, investors will lose a significant portion and may lose all of their initial investment.
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Exchange ratio:
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The quotient of the stated principal
amount divided by the initial price.
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Cash value:
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The exchange ratio multiplied by the
final price.
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Call threshold level:
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$429.32, which is equal to 100.00% of the
initial price (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).
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Downside threshold level:
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$300.52, which is equal to 70.00% of the
initial price (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).
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Initial price:
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$429.32, which is equal to the closing
price of the underlying equity on the pricing date (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).
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Final price:
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The closing price of the underlying equity on the final
determination date.
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CUSIP / ISIN:
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90281J778 / US90281J7789
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Listing:
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The securities will not be listed or displayed on any securities
exchange or any electronic communications network.
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Calculation Agent:
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UBS Securities LLC
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Commissions and issue price:
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Price to Public(1)
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Fees and Commissions(1)
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Proceeds to Issuer
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Per security
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100.00%
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1.00%(a)
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98.50%
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+ 0.50%(b)
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1.50%
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Total
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$6,565,870.00
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$98,488.05
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$6,467,381.95
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(1)
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UBS Securities LLC has agreed to purchase
from UBS AG the securities at the price to public less a fee of $0.15 per $10.00 stated principal amount of securities. UBS
Securities LLC has agreed to resell all of the securities to Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth
Management”) at an underwriting discount which reflects:
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(a)
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a fixed sales commission of $0.10 per $10.00
stated principal amount of securities that Morgan Stanley Wealth Management sells and
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(b)
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a fixed structuring fee of $0.05 per $10.00 stated
principal amount of securities that Morgan Stanley Wealth Management sells,
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each payable to Morgan Stanley Wealth
Management. See “Supplemental information regarding plan of distribution (conflicts of interest); secondary markets (if
any)”.
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The estimated initial value of the securities
as of the pricing date is $9.775. The estimated initial value of the securities was determined as of the close of the relevant
markets on the date hereof by reference to UBS’ internal pricing models, inclusive of the internal funding rate. For more
information about secondary market offers and the estimated initial value of the securities, see “Risk Factors — Fair
value considerations” and “— Limited or no secondary market and secondary market price considerations”
beginning on page 11 of this document.
The securities involve risks not associated with an investment in
ordinary debt securities. See “Risk Factors” beginning on page 10.
Neither the Securities and Exchange
Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of
this document, the accompanying product supplement or the accompanying prospectus. Any representation to the contrary is a criminal
offense.
The securities are not bank deposits and
are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
You should read this document together with
the accompanying product supplement and the accompanying prospectus, each of which can be accessed via the hyperlinks below, before
you decide to invest.
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Contingent Income Auto-Callable Securities due November 26, 2021
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$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
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Additional Information about UBS and the
Securities
UBS AG (“UBS”) has filed a
registration statement (including a prospectus as supplemented by a product supplement) with the Securities and Exchange Commission
(the “SEC”) for the securities to which this document relates. Before you invest, you should read these documents and
any other documents relating to this offering that UBS has filed with the SEC for more complete information about UBS and this
offering. You may obtain these documents for free from the SEC website at www.sec.gov. Our Central Index Key, or CIK, on the SEC web
site is 0001114446.
You may access these documents on the SEC website at
www.sec.gov as follows:
References to “UBS,”
“we,” “our” and “us” refer only to UBS AG and not to its consolidated subsidiaries. In this
document, the “securities” refers to the Contingent Income Auto-Callable Securities that are offered hereby. Also,
references to the “accompanying prospectus” mean the UBS prospectus titled “Debt Securities and Warrants,”
dated October 31, 2018, and references to the “accompanying product supplement” mean the UBS product supplement titled
“Market-Linked Securities Product Supplement”, dated October 31, 2018.
You should rely only on the information
incorporated by reference or provided in this document, the accompanying product supplement or the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this document, the accompanying product supplement or the
accompanying prospectus is accurate as of any date other than the date on the front of the document.
UBS reserves the right to change the terms
of, or reject any offer to purchase, the securities prior to their issuance. In the event of any changes to the terms of the
securities, 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.
In the event of any discrepancies between
this document, the accompanying product supplement and the accompanying prospectus, the following hierarchy will govern: first, this
document; second, the accompanying product supplement; and finally, the accompanying prospectus.
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Contingent Income Auto-Callable Securities due November 26, 2021
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$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
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Investment Summary
The Contingent Income Auto-Callable
Securities due November 26, 2021 based on the performance of the common stock of Netflix, Inc., which we refer to as the securities,
provide an opportunity for investors to earn a contingent payment, which is an amount equal to $0.1396 (equivalent to approximately
16.75% per annum of the stated principal amount) per security, with respect to each determination date on which the closing price or
the final price, as applicable, is equal to or greater than 70.00% of the initial price, which we refer to as the downside threshold
level. The contingent payment, if any, will be payable on the relevant contingent payment date, which is the third business day
after the related determination date, except that the contingent payment date for the final determination date will be the maturity
date. It is possible that the closing price of the underlying equity could remain less than the downside threshold level for
extended periods of time or even throughout the term of the securities so that you may receive few or no contingent
payments.
If the closing price is equal to or greater
than the call threshold level on any of the determination dates other than the final determination date, the securities will be
automatically redeemed for an early redemption amount equal to (i) the stated principal amount plus (ii) the contingent payment
otherwise payable with respect to the related determination date. If the securities have not previously been redeemed early and the
final price is equal to or greater than the downside threshold level, the payment at maturity will also be the sum of (i) the stated
principal amount and (ii) the contingent payment otherwise payable with respect to the final determination date. If, however, the
securities are not redeemed early and the final price is less than the downside threshold level, investors will be exposed to the
decline in the closing price of the underlying equity, as compared to the initial price, on a 1 to 1 basis and investors will be
entitled to receive the cash value, which will be equal to the exchange ratio multiplied by the final price. The cash value on the
final determination date will be less than 70.00% of the stated principal amount of the securities and could be zero. Investors
in the securities must be willing to accept the risk of losing a significant portion and, in extreme situations, all of their
initial investment and also the risk of not receiving any contingent payments. In addition, investors will not participate in any
appreciation of the underlying equity.
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Contingent Income Auto-Callable Securities due November 26, 2021
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$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
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Key Investment Rationale
The securities offer the opportunity for
investors to earn a contingent payment equal to $0.1396 (equivalent to approximately 16.75% per annum of the stated principal
amount) per security, with respect to each determination date on which the closing price or the final price is equal to or greater
than 70.00% of the initial price, which we refer to as the downside threshold level. The securities may be redeemed early for an
early redemption amount equal to (i) the stated principal amount per security plus (ii) the applicable contingent payment and the
payment at maturity will vary depending on the final price, as follows:
Scenario 1
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On any determination date
other than the final determination date, the closing price is equal to or greater than the call threshold
level.
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§
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The securities will be
automatically redeemed early for an early redemption amount equal to (i) the stated principal amount plus (ii) the
contingent payment with respect to the related determination date.
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§
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Investors will not participate in
any appreciation of the underlying equity from the initial price.
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Scenario 2
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The securities are not
automatically redeemed early and the final price is equal to or greater than the downside threshold level.
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§
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The payment due at maturity will be
(i) the stated principal amount plus (ii) the contingent payment with respect to the final determination date.
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§
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Investors will not participate in
any appreciation of the underlying equity from the initial price.
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Scenario 3
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The securities are not
automatically redeemed early and the final price is less than the downside threshold level.
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§
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The payment due at maturity will be
the cash value.
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§
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Investors will lose a
significant portion and may lose all of their initial investment in this scenario.
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Investing in the securities involves
significant risks. You may lose a significant portion and, in extreme situations all of your initial investment. Any payment on the
securities, 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 securities and you could lose all of your initial investment.
The securities will not pay a
contingent payment on a contingent payment date (including the maturity date) if the closing price is less than the downside
threshold level on the related determination date. The securities will not be subject to an early redemption if the closing price is
less than the call threshold level on a determination date. If the securities are not redeemed early, you will lose a significant
portion and, in extreme situations, all of your initial investment at maturity if the final price is less than the downside
threshold level.
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Contingent Income Auto-Callable Securities due November 26, 2021
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$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
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Investor Suitability
The securities may be suitable for you if:
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§
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You fully understand the risks of an investment in the securities, including the risk of loss of all
of your initial investment.
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§
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You can tolerate a loss of a significant portion or all of your initial investment and are willing
to make an investment that may have the same downside market risk as an investment in the underlying equity.
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§
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You believe that the closing price of the underlying equity will be equal to or greater than the
downside threshold level on the specified determination dates (including the final determination date).
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§
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You understand and accept that you will not participate in any appreciation in the price of the
underlying equity and that any potential positive return is limited to the contingent payments specified herein.
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§
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You can tolerate fluctuations in the price of the securities prior to maturity that may be similar
to or exceed the downside price fluctuations of the underlying equity.
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§
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You are willing to invest in the securities based on the contingent payment, the downside threshold
level and the call threshold level specified on the cover hereof.
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§
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You are willing to forgo any dividends paid on the underlying equity and you do not seek guaranteed
current income from this investment.
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§
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You are willing to invest in securities that may be redeemed prior to the maturity date and you are
otherwise willing to hold such securities to maturity, a term of approximately 18 months, and accept that there may be little or no
secondary market.
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§
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You are willing to assume the credit risk of UBS for all payments under the securities, and
understand that if UBS defaults on its obligations you may not receive any amounts due to you including any repayment of
principal.
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§
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You understand that the estimated initial value of the securities determined by our internal pricing
models is lower than the issue price and that should UBS Securities LLC or any affiliate make secondary markets for the securities,
the price (not including their customary bid-ask spreads) will temporarily exceed the internal pricing model
price.
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The securities may not be suitable for
you if:
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§
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You do not fully understand the risks of an investment in the securities, including the risk of loss
of all of your initial investment.
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You require an investment designed to provide a full return of principal at
maturity.
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§
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You cannot tolerate a loss of a significant portion or all of your initial investment, or you are
not willing to make an investment that may have the same downside market risk as an investment in the underlying
equity.
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§
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You believe that the price of the underlying equity will decline during the term of the securities
and is likely to be less than the downside threshold level on the determination dates (including the final determination
date).
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§
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You seek an investment that participates in the full appreciation in the price of the underlying
equity or that has unlimited return potential.
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§
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You cannot tolerate fluctuations in the price of the securities prior to maturity that may be
similar to or exceed the downside price fluctuations of the underlying equity.
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§
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You are unwilling to invest in the securities based on the contingent payment, the downside
threshold level or the call threshold level specified on the cover hereof.
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§
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You prefer to receive any dividends paid on the underlying equity or you seek guaranteed current
income from this investment.
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§
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You are unable or unwilling to hold securities that may be redeemed prior to the maturity date, or
you are otherwise unable or unwilling to hold such securities to maturity, a term of approximately 18 months, or you seek an
investment for which there will be an active secondary market.
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§
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You are not willing to assume the credit risk of UBS for all payments under the securities,
including any repayment of principal.
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Contingent Income Auto-Callable Securities due November 26, 2021
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$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
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How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the closing price and (2) the final price.
Diagram #1: Determination Dates Other Than
the Final Determination Date
Diagram #2: Payment at Maturity if No Early
Redemption Occurs
For more information about the payout upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” beginning on the following page.
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Contingent Income Auto-Callable Securities due November 26, 2021
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$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
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Hypothetical Examples
The below examples are based on the
following terms and are purely hypothetical (the actual terms of your security are specified on the cover hereof; amounts may have
been rounded for ease of analysis):
Hypothetical Initial Price:
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$450.00
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Hypothetical Call Threshold Level:
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$450.00, which is equal to 100.00% of the hypothetical initial price
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Hypothetical Downside Threshold Level:
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$315.00, which is 70.00% of the hypothetical initial price
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Hypothetical Exchange Ratio*:
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The quotient of the stated principal amount divided by the hypothetical initial price
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Hypothetical Contingent Payment:
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$0.1396 (equivalent to approximately 16.75% per annum of the stated principal amount) per security
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Stated Principal Amount:
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$10.00 per security
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*
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UBS has elected to pay the cash value if the final price is less than
the downside threshold level.
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In Examples 1 and 2 the closing price of the
underlying equity fluctuates over the term of the securities and the closing price of the underlying equity is equal to or greater
than the hypothetical call threshold level of $450.00 on one of the determination dates (other than the final determination date).
Because the closing price is equal to or greater than the call threshold level on one of the determination dates (other than the
final determination date), the securities are redeemed early following the relevant determination date. In Examples 3 and 4, the
closing price on each of the determination dates (other than the final determination date) is less than the call threshold level,
and, consequently, the securities are not redeemed early, and remain outstanding until maturity.
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Example 1
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Example 2
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Determination
Dates
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Hypothetical
Closing Price
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Contingent
Payment
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Early
Redemption Amount*
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Hypothetical
Closing Price
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Contingent
Payment
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Early
Redemption
Amount
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#1
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$473.00
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—*
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$10.1396
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$396.00
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$0.1396
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N/A
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#2
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N/A
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N/A
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N/A
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$299.25
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$0
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N/A
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#3
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N/A
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N/A
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N/A
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$540.00
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—*
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$10.1396
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#4 - #17
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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Final
Determination
Date
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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Payment at
Maturity
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N/A
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N/A
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*
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The early redemption amount includes the unpaid contingent payment with respect to the determination
date on which the closing price is equal to or greater than the call threshold level and the securities are redeemed early as a
result.
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▪
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In Example 1, the securities are redeemed early following the first determination date as the
closing price on the first determination date is equal to or greater than the call threshold level. You receive the early redemption
amount, calculated as follows:
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Stated Principal Amount + Contingent Payment
= $10.00 + $0.1396 = $10.1396
In this example, the early redemption
feature limits the term of your investment to approximately 1 month and you may not be able to reinvest at comparable terms or
returns. If the securities are redeemed early, you will stop receiving contingent payments. Your total return per security in this
example is $10.1396 (a 1.396% total return on the securities).
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
▪
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In Example 2, the securities are redeemed early following the third determination date as the
closing price on the third determination date is equal to or greater than the call threshold level. As the closing price on the
first determination date is equal to or greater than the downside threshold level, you receive the contingent payment of $0.1396
with respect to such determination date. Following the third determination date, you receive an early redemption amount of $10.1396,
which includes the contingent payment with respect to the third determination date.
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In this example, the early redemption
feature limits the term of your investment to approximately 3 months and you may not be able to reinvest at comparable terms or
returns. If the securities are redeemed early, you will stop receiving contingent payments. Further, although the underlying equity
has appreciated by 20% from its initial price on the third determination date, you only receive $10.1396 per security and do not
benefit from such appreciation. When added to the contingent payment of $0.1396 received in respect of the prior determination
dates, UBS will have paid you a total of $10.2792 per security for a 2.792% total return on the securities.
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Example 3
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Example 4
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Determination
Dates
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Hypothetical
Closing Price
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Contingent
Payment
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Early
Redemption
Amount
|
Hypothetical
Closing Price
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Contingent
Payment
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Early
Redemption
Amount
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#1
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$252.00
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$0
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N/A
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$220.50
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$0
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N/A
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#2
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$262.50
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$0
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N/A
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$231.00
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$0
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N/A
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#3
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$304.50
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$0
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N/A
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$304.50
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$0
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N/A
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#4 - #17
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Various
(all below Downside Threshold Level)
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$0
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N/A
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Various
(all below Downside Threshold Level)
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$0
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N/A
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Final
Determination
Date
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$180.00
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—*
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N/A
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$405.00
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—*
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N/A
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Payment at
Maturity
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$4.00
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$10.1396
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|
*
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The final contingent payment, if any, will be paid at maturity.
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Examples 3 and 4 illustrate the payment at
maturity per security based on the final price.
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▪
|
In Example 3, the closing price of the underlying equity remains less than the downside
threshold level throughout the term of the securities. As a result, you do not receive any contingent payments during the term of
the securities and, at maturity, you are fully exposed to the decline in the closing price of the underlying equity. As the final
price is less than the downside threshold level, investors will receive the cash value at maturity, calculated as follows:
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Cash Value = Exchange Ratio x Final Price
$4.00 = ($10.00 / $450.00) x $180.00
In this example, your payment at maturity is significantly
less than the stated principal amount. Your total return per security in this example is $4.00 (a 60.00% loss on the
securities).
|
▪
|
In Example 4, the closing price of the underlying equity is less than the downside threshold on
each determination date prior to the final determination date and, as a result, you do not receive any contingent payments during
the term of the securities. On the final determination date, the closing price of the underlying equity decreases from the initial
price to the final price. Although the final price is less than the initial price, because the final price is equal to or greater
than the downside threshold level, you receive the stated principal amount plus a contingent payment with respect to the final
determination date. Your payment at maturity is calculated as follows:
|
$10.00 + $0.1396 = $10.1396
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
In this example, although the final price represents a
10.00% decline from the initial price, you receive the stated principal amount per security plus the contingent payment, equal
to a total payment of $10.1396 per security at maturity. Your total return per security in this example is $10.1396 (a 1.396% total
return on the securities).
Investing in the securities involves
significant risks. The securities differ from ordinary debt securities in that UBS is not necessarily obligated to repay the full
amount of your initial investment. If the securities are not redeemed early, you may lose a significant portion or all of your
initial investment. Specifically, if the securities are not redeemed early and the final price is less than the downside threshold
level, UBS has elected to deliver to you the cash value, which will be worth significantly less than your stated principal amount
resulting in a loss of a significant portion or all of your initial investment.
The securities will not pay a contingent
payment if the closing price is less than its downside threshold level on any determination date. The securities will not be subject
to an early redemption if the closing price is less than the call threshold level on any determination date.
Any payment to be made on the
securities, including any repayment of principal, depends on the ability of UBS to satisfy its obligations as they come due. If UBS
were to default on its payment obligations you may not receive any amounts owed to you under the securities and you could lose all
of your initial investment.
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
Risk Factors
The following is a non-exhaustive list of
certain key risk factors for investors in the securities. For further discussion of these and other risks, you should read the
section entitled “Risk Factors” in the accompanying product supplement. We urge to consult your investment, legal, tax,
accounting and other advisors before you invest in the securities.
|
§
|
The securities do not guarantee the return of any principal and your investment in the securities
may result in a loss. The terms of the securities differ from those of ordinary debt securities in that the securities do not
guarantee the payment of regular interest or the return of any of the stated principal amount at maturity. Instead, if the
securities have not been redeemed early and if the final price is less than the downside threshold level, you will be exposed to the
decline in the closing price of the underlying equity, as compared to the initial price, on a 1 to 1 basis and you will receive for
each security that you hold at maturity the cash value, which is equal to the exchange ratio multiplied by the final price. The cash
value of those shares on the final determination date will be less than 70.00% of the stated principal amount and could be
zero.
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§
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The contingent payment, if any, is based solely on the closing prices of the underlying equity on
the specified determination dates. Whether the contingent payment will be made with respect to a determination date will be
based on the closing price or the final price, as applicable, of the underlying equity on such date. As a result, you will not know
whether you will receive the contingent payment until the related determination date. Moreover, because the contingent payment is
based solely on the closing price on a specific determination date or the final price, if that closing price or final price is less
than the downside threshold level, you will not receive any contingent payment with respect to that determination date, even if the
closing price of the underlying equity was higher on other days during the term of the securities.
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§
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You will not receive any contingent payment for any monthly period where the closing price of the
underlying equity on the determination date is less than the downside threshold level. A contingent payment will be made with
respect to a period only if the closing price is equal to or greater than the downside threshold level. If the closing price remains
less than the downside threshold level on each determination date over the term of the securities, you will not receive any
contingent payment.
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§
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Higher contingent payments are generally associated with a greater risk of loss. Greater
expected volatility with respect to the underlying equity reflects a higher expectation as of the pricing date that the closing
price of such stock may be less than its downside threshold level on the final determination date of the securities. This greater
expected risk will generally be reflected in a higher contingent payment rate for that security. “Volatility” refers to
the frequency and magnitude of changes in the price of the underlying equity. However, while the contingent payment rate is set on
the pricing date, a stock’s volatility can change significantly over the term of the securities. The closing price of the
underlying equity for your securities could fall sharply, which could result in the loss of all or a substantial portion of your
initial investment.
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§
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Early redemption risk. The term of your investment in the securities may be limited to as
short as approximately one month by the early redemption feature of the securities. If the securities are redeemed early, you will
receive no more contingent payments and may be forced to invest in a lower interest rate environment and may not be able to reinvest
the proceeds from an investment in the securities at a comparable return for a similar level of risk.
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§
|
The securities are subject to the credit risk of UBS AG, and any actual or anticipated changes to
our credit ratings or credit spreads may adversely affect the market value of the securities. Investors are dependent on UBS
AG’s ability to pay all amounts due on the securities, and therefore investors are subject to our credit risk and to changes
in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase in the
credit spreads charged by the market for taking our credit risk is likely to affect adversely the market value of the securities. If
we were to default on our payment obligations, you may not receive any amounts owed to you under the securities and you could lose a
significant portion or all of your initial investment.
|
|
§
|
Single equity risk. The closing price of the underlying equity can rise or fall sharply due
to factors specific to that underlying equity and the issuer of such underlying equity (the “underlying equity 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 stock 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 equity issuer. You, as an investor in the securities, should make your own investigation into the underlying equity
issuer and the underlying equity for your securities. For additional information regarding the underlying equity, please see
“Information about the Underlying Equity” below and the underlying equity issuer’s SEC filings referred to in this
section. We urge you to review financial and other information filed periodically by the underlying equity issuer with the
SEC.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
§
|
Fair value considerations.
|
|
o
|
The issue price you pay for the securities exceeds their estimated initial value. The issue
price you pay for the securities exceeds their estimated initial value as of the pricing date due to the inclusion in the issue
price of the underwriting discount, hedging costs, issuance costs, projected profits and a fee paid to an unaffiliated broker-dealer
providing an electronic platform for this offering. As of the close of the relevant markets on the pricing date, we have determined
the estimated initial value of the securities by reference to our internal pricing models and the estimated initial value of the
securities is set forth in this pricing supplement. The pricing models used to determine the estimated initial value of the
securities incorporate certain variables, including the price, volatility and any dividends paid on the underlying equity,
prevailing interest rates, the term of the securities 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 and other costs, projected profits and the difference in rates will reduce the economic value of
the securities to you. Due to these factors, the estimated initial value of the securities as of the pricing date is less than the
issue price you pay for the securities.
|
|
o
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The estimated initial value is a theoretical price and the actual price that you may be able to
sell your securities in any secondary market (if any) at any time after the pricing date may differ from the estimated initial
value. The value of your securities 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
pricing date, if you attempt to sell the securities in the secondary market, the actual value you would receive may differ, perhaps
materially, from the estimated initial value of the securities determined by reference to our internal pricing models. The estimated
initial value of the securities does not represent a minimum or maximum price at which we or any of our affiliates would be willing
to purchase your securities in any secondary market at any time.
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o
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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 securities as of the pricing date. We may determine the economic terms of the securities, as
well as hedge our obligations, at least in part, prior to the pricing 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 securities cannot be determined as of the pricing date and any such differential between the estimated initial value and
the issue price of the securities as of the pricing date does not reflect our actual profits. Ultimately, our actual profits will be
known only at the maturity of the securities.
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§
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Limited or no secondary market and secondary market price considerations.
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|
o
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There may be little or no secondary market for the securities. The securities 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 securities and may stop making a market at any time. If you are able to sell
your securities 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 securities will develop. The estimated initial value of the securities does not represent a minimum or
maximum price at which we or any of our affiliates would be willing to purchase your securities in any secondary market at any
time.
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|
o
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The price at which UBS Securities LLC and its affiliates may offer to buy the securities in the
secondary market (if any) may be greater than UBS’ valuation of the securities 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 securities, UBS Securities LLC or its
affiliates may offer to buy or sell such securities at a price that exceeds (i) our valuation of the securities 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 securities 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 information regarding plan of distribution (conflicts of interest);
secondary markets (if any).” Thereafter, if UBS Securities LLC or an affiliate makes secondary markets in the securities, 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 securities. As described above, UBS Securities LLC
and its affiliates are not required to make a market for the securities and may stop making a market at any time. The price at which
UBS Securities LLC or an affiliate may make secondary markets at any time (if at all) will also reflect its then current bid-ask
spread for similar sized trades of structured debt securities. UBS Securities LLC reflects this temporary positive differential on
its customer statements. Investors should inquire as to the valuation provided on customer account statements provided by
unaffiliated dealers.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
o
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Price of securities prior to maturity. The market price of the securities will be influenced
by many unpredictable and interrelated factors, including the price of the underlying equity; the volatility of the underlying
equity; the dividend rate paid on the underlying equity; the time remaining to the maturity of the securities; interest rates in the
markets; geopolitical conditions and economic, financial, political, force majeure and regulatory or judicial events; the
creditworthiness of UBS and the then current bid-ask spread for the securities.
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|
o
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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 and other costs and any projected profits are, subject to the temporary mitigating effect of UBS Securities
LLC’s and its affiliates’ market making premium, expected to reduce the price at which you may be able to sell the
securities in any secondary market.
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§
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Investors will not participate in any appreciation in the closing price of the underlying equity
and will not have the same rights as holders of the underlying equity. Investors will not participate in any appreciation in the
closing price of the underlying equity from the initial price, and the return on the securities will be limited to the contingent
payment that is paid with respect to each determination date on which the closing price or the final price is equal to or greater
than the downside threshold level. It is possible that the closing price of the underlying equity could be less than the downside
threshold level on most or all of the determination dates so that you will receive few or no contingent payments. If you do not earn
sufficient contingent payments over the term of the securities, the overall return on the securities may be less than the amount
that would be paid on a conventional debt security of the issuer of comparable maturity. Investors in the securities will not have
voting rights or rights to receive dividends or other distributions or any other rights with respect to the underlying
equity.
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§
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There can be no assurance that the investment view implicit in the securities will be
successful. It is impossible to predict whether the closing price of the underlying equity will rise or fall. The closing price
of the underlying equity will be influenced by complex and interrelated political, economic, financial and other factors that affect
the underlying equity. You should be willing to accept the downside risks of owning equities in general and the underlying equity in
particular, and to assume the risk that, if the securities are not redeemed early, you may lose a significant portion or all of your
initial investment.
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§
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Potential conflicts of interest. We and our affiliates may engage in business related to the
underlying equity, which may present a conflict between our obligations as issuer and you, as a holder of the securities. There are
also potential conflicts of interest between you and the calculation agent, which will be an affiliate of UBS. The calculation agent
will determine the initial price and the final price and whether the closing price of the underlying equity on any determination
date is equal to or greater than the call threshold level (other than on the final determination date) or is less than the downside
threshold level. Determinations made by the calculation agent, including with respect to the occurrence or non-occurrence of market
disruption events, may affect the payout to you at maturity or whether the securities are redeemed early. As UBS determines the
economic terms of the securities, including the contingent payment, call threshold level and downside threshold level, and such
terms include the underwriting discount, hedging costs, issuance and other costs and projected profits, the securities 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.
Furthermore, given that UBS Securities LLC and its affiliates temporarily maintain a market making premium, it may have the effect
of discouraging UBS Securities LLC and its affiliates from recommending sale of your securities in the secondary
market.
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|
|
In addition, we or
one of our affiliates may enter into swap agreements or related hedging activities with the dealer or its affiliates in connection
with the securities, which could cause the economic interests of UBS, the dealer or our or their respective affiliates to be adverse
to your interests as an investor in the securities. If the dealer or any of its affiliates conduct hedging activities for us or our
affiliate in connection with the securities and earns profits in connection with such hedging activities, such profit will be in
addition to the underwriting compensation it receives for the sale of the securities to you. You should be aware that the potential
to receive compensation both for hedging activities and sales may create a further incentive for the dealer to sell the securities
to you.
|
|
§
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No affiliation with the underlying equity issuer. The underlying equity issuer is not an
affiliate of ours, is not involved with the offering in any way, and has no obligation to consider your interests in taking any
corporate actions that might affect the value of the securities. We have not made any due diligence inquiry with respect to the
underlying equity in connection with the offering.
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§
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We may engage in business with or involving the underlying equity issuer without regard to your
interests. We or our affiliates may presently or from time to time engage in business with the underlying equity issuer without
regard to your interests and thus may acquire non-public information about the underlying equity. Neither we nor any of our
affiliates undertakes to disclose any such information to you. In addition, we or our affiliates from time to time have published
and in the future may publish research reports with respect to the underlying equity, which may or may not recommend that investors
buy or hold the underlying equity.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
§
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Potential UBS impact on an underlying equity. Trading or transactions by UBS or its
affiliates in the underlying equity, listed and/or over the counter options, futures, exchange-traded funds or other instruments
with return linked to the performance of the underlying equity, may adversely affect the market price(s) or level(s) of that
underlying equity on any determination date or on the final determination date and, therefore, the market value of the securities
and any payout to you of any contingent payments or at maturity.
|
|
§
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The antidilution protection of the underlying equity is limited and may be discretionary. The
calculation agent may make adjustments to the initial price, exchange ratio, downside threshold level, call threshold level, and/or
final price or any other term of the securities, for certain corporate events affecting the underlying equity. However, the
calculation agent will not make an adjustment in response to all events that could affect the underlying equity. If an event occurs
that does not require the calculation agent to make an adjustment, the value of, and any amounts payable on, the securities may be
materially and adversely affected. You should also be aware that the calculation agent may make adjustments in response to events
that are not described in the accompanying product supplement to account for any diluting or concentrative effect, but the
calculation agent is under no obligation to do so or to consider your interests as a holder of the securities in making these
determinations.
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§
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Hedging and trading activities by the calculation agent and its affiliates could potentially
affect the value of, and any amounts payable on, the securities. The hedging or trading activities of the issuer’s
affiliates and of any other hedging counterparty with respect to the securities on or prior to the pricing date and prior to
maturity could adversely affect the value of, and any amounts payable on, the securities. These hedging or trading activities on or
prior to the pricing date could potentially affect the initial price and, as a result, the downside threshold level. Additionally,
these hedging or trading activities during the term of the securities could potentially affect the price of the underlying equity on
the determination dates and, accordingly, whether the securities are redeemed early and, if the securities are not called prior to
maturity, the payout to you at maturity. It is possible that these hedging or trading activities could result in substantial returns
for us or our affiliates while the value of the securities declines.
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§
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The securities are not bank deposits. An investment in the securities carries risks which
are very different from the risk profile of a bank deposit placed with UBS or its affiliates. The securities 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 securities 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 securities) 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 securities, 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 securities. The BIO-FINMA provides that a
debt-to-equity swap and/or a write-off of debt and other obligations (including the securities) 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
securities 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 securities. Consequently, holders of securities may lose all or some
of their investment in the securities. 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 securities or
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
|
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.
|
|
§
|
Uncertain tax treatment. Significant aspects of the tax treatment of the securities are
uncertain. You should consult your tax advisor about your tax situation. See “Tax Considerations” 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.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
Information about the Underlying Equity
Netflix, Inc.
According to publicly available information,
Netflix, Inc. (“Netflix”) is an internet television network offering TV shows and movies, including original series,
documentaries and feature films. Information filed by Netflix with the SEC can be located by reference to its SEC file number:
001-35727, or its CIK Code: 0001065280. Netflix’s common stock is listed on the Nasdaq Global Select Market under the ticker
symbol “NFLX.”
Information as of market close on May 22, 2020:
Bloomberg Ticker Symbol:
|
nflx uw <Equity>
|
52 Week High (on May 15, 2020):
|
$454.19
|
Current Stock Price:
|
$429.32
|
52 Week Low (on September 24, 2019):
|
$254.59
|
52 Weeks Ago (on May 22, 2019):
|
$359.73
|
|
|
All disclosures contained in this document
regarding the underlying equity 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 equity. You should make your own investigation
into the underlying equity.
The underlying equity is registered under
the Exchange Act. Companies with securities registered under the Exchange Act are required to file financial and other information
specified by the SEC periodically. Information filed by the underlying equity 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 underlying equity issuer under the Exchange Act 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.
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
Historical Information
The table below sets forth the published
high and low closing prices, as well as end-of-quarter closing price, of the underlying equity for the specified period. The closing
price of the underlying equity on May 22, 2020 was $429.32. The associated graph shows the closing prices of the underlying equity
for each day from January 1, 2010 to May 22, 2020. The dotted lines represent the downside threshold level of $300.52 and the call
threshold level of $429.32, which are equal to 70.00% and 100.00%, respectively, of the initial price. We obtained the information
in the table below from Bloomberg Professional® service (“Bloomberg”), without independent verification.
The closing prices may be adjusted by Bloomberg for corporate actions such as stock splits, public offerings, mergers and
acquisitions, spin-offs, delistings and bankruptcy. UBS has not undertaken an independent review or due diligence of any publicly
available information obtained from Bloomberg. The historical performance of the underlying equity should not be taken as an
indication of its future performance, and no assurance can be given as to the price of the underlying equity at any time, including
the determination dates.
Netflix, Inc.
|
High
|
Low
|
Period End
|
2016
|
|
|
|
First Quarter
|
$117.68
|
$82.79
|
$102.23
|
Second Quarter
|
$111.51
|
$85.33
|
$91.48
|
Third Quarter
|
$100.09
|
$85.84
|
$98.55
|
Fourth Quarter
|
$128.35
|
$99.50
|
$123.80
|
2017
|
|
|
|
First Quarter
|
$148.06
|
$127.49
|
$147.81
|
Second Quarter
|
$165.88
|
$139.76
|
$149.41
|
Third Quarter
|
$189.08
|
$146.17
|
$181.35
|
Fourth Quarter
|
$202.68
|
$177.01
|
$191.96
|
2018
|
|
|
|
First Quarter
|
$331.44
|
$201.07
|
$295.35
|
Second Quarter
|
$416.76
|
$280.29
|
$391.43
|
Third Quarter
|
$418.97
|
$316.78
|
$374.13
|
Fourth Quarter
|
$381.43
|
$233.88
|
$267.66
|
2019
|
|
|
|
First Quarter
|
$377.87
|
$267.66
|
$356.56
|
Second Quarter
|
$385.03
|
$336.63
|
$367.32
|
Third Quarter
|
$381.72
|
$254.59
|
$267.62
|
Fourth Quarter
|
$336.90
|
$266.69
|
$323.57
|
2020
|
|
|
|
First Quarter
|
$387.78
|
$298.84
|
$375.50
|
Second Quarter (through May 22, 2020)
|
$454.19
|
$361.76
|
$429.32
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
This document relates only to the
securities offered hereby and does not relate to the underlying equity or other securities linked to the underlying equity. We have
derived all disclosures contained in this document regarding the underlying equity from the publicly available documents described
in the preceding paragraphs. In connection with the offering of the securities, neither we nor the agent has participated in the
preparation of such documents or made any due diligence inquiry with respect to the underlying equity.
Neither the issuer nor any of its affiliates makes any
representation to you as to the performance of the underlying equity.
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
Additional Information about the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Provisions:
|
|
Record date:
|
The record date for each contingent payment date shall
be the date one business day prior to such scheduled contingent payment date.
|
Trustee:
|
U.S. Bank Trust National Association
|
Calculation agent:
|
UBS Securities LLC
|
Tax considerations:
|
The U.S. federal income tax
consequences of your investment in the securities 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 securities. 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”, in the accompanying
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, 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 Securities, and the following discussion is not binding
on the IRS.
|
|
U.S. Tax Treatment.
Pursuant to the terms of the securities, 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 securities as prepaid derivative contracts
with respect to the underlying equity. If your securities are so treated, any contingent payment that is paid by UBS (including
on the maturity date or upon early redemption) 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 payment, you should generally recognize capital gain or loss upon the taxable disposition of your
securities in an amount equal to the difference between the amount you receive at such time (other than amounts or proceeds
attributable to a contingent payment or any amount attributable to any accrued but unpaid contingent payment) and the amount you
paid for your securities. Such gain or loss should generally be long-term capital gain or loss if you have held your securities
for more than one year (otherwise such gain or loss should be short-term capital gain or loss). The deductibility of capital
losses is subject to limitations. Although uncertain, it is possible that proceeds received from the sale or exchange of your
securities prior to a contingent payment date, but that could be attributed to an expected contingent payment, 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 securities in the manner described above. However, because there is no authority that specifically
addresses the tax treatment of the securities, it is possible that your securities 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 securities 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.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
Except to the extent
otherwise required by law, UBS intends to treat your securities for U.S. federal income tax purposes in accordance with the
treatment described above and 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.
|
|
Notice 2008-2. In 2007,
the IRS released a notice that may affect the taxation of holders of the securities. According to Notice 2008-2, the IRS and the
Treasury are actively considering whether the holder of an instrument such as the securities 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 securities will ultimately be required to accrue income currently in
excess of any receipt of contingent payments 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
securities, 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. Certain U.S. holders that own “specified foreign financial assets” in excess of an applicable threshold
may be subject to reporting obligations with respect to such assets with their tax returns, especially if such assets are held
outside the custody of a U.S. financial institution. U.S. holders are urged to consult their tax advisors as to the application
of this legislation to their ownership of the securities.
|
|
Non-U.S. Holders. The U.S.
federal income tax treatment of the contingent payments is unclear. Subject to Section 871(m) of the Code and FATCA, as
discussed below, our counsel is of the opinion that contingent payments 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 payments. 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 we or the other withholding agent may withhold up to 30% on such payments (subject to
reduction or elimination of such withholding tax pursuant to an applicable income tax treaty). We will not pay any additional
amounts in respect of such withholding. Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below, gain
realized from the taxable disposition of a security 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.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
Section 897.
We will not attempt to ascertain whether the underlying equity 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 securities should be treated as “United States real property interests” (“USRPI”)
as defined in Section 897 of the Code. If the underlying equity issuer and the securities 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
security upon a taxable disposition of the security 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 equity issuer as a USRPHC and the securities 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 securities are not “delta-one” with respect to the underlying equity, our counsel is of the opinion that the
securities 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 securities. If withholding
is required, we will not make payments of any additional amounts.
|
|
Nevertheless, after issuance, it
is possible that your securities could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting
the underlying equity or your securities, and following such occurrence your securities 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 securities under these rules if you enter, or have entered, into
certain other transactions in respect of the underlying equity or the securities. If you enter, or have entered, into other
transactions in respect of the underlying equity or the securities, you should consult your tax advisor regarding the
application of Section 871(m) of the Code to your securities in the context of your other transactions.
|
|
Because of the uncertainty
regarding the application of the 30% withholding tax on dividend equivalents to the securities, 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 securities.
|
|
Foreign Account Tax Compliance
Act. Legislation commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”) generally imposes a
withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to certain
financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the U.S. and the non-U.S. entity’s jurisdiction may modify these requirements. This
legislation generally applies to certain financial instruments that are treated as paying U.S.-source interest or other
U.S.-source “fixed or determinable annual or periodical” income (“FDAP income”). Withholding (if
applicable) applies to payments of U.S.-source FDAP income but, pursuant to certain Treasury regulations and IRS guidance, does
not apply to payments of gross proceeds on the disposition (including upon retirement) of financial instruments. As the
treatment of the securities is unclear, it is possible that any contingent payment with respect to the securities could be
subject to the FATCA rules. If withholding applies to the securities, we will not be required to pay any additional amounts with
respect to amounts withheld. Both U.S. and non-U.S. holders should consult their tax advisors regarding the potential
application of FATCA to the securities.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
Proposed
Legislation. In 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of
securities similar to the securities purchased after the bill was enacted to accrue interest income over the term of such
securities despite the fact that there may be no interest payments over the term of such securities.
|
|
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 securities 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 securities. You are urged to consult your tax advisor regarding the possible changes in law and their possible impact on
the tax treatment of your securities.
|
|
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 securities arising
under the laws of any state, local, non-U.S. or other taxing jurisdiction.
|
Use of proceeds and hedging:
|
We will use the net proceeds we
receive from the sale of the securities for the purposes we describe in the accompanying prospectus under “Use of Proceeds
and Hedging.” We and/or our affiliates may also use those proceeds in transactions intended to hedge our obligations under
the securities as described below.
|
|
In connection with the sale of the
securities, we and/or our affiliates may enter into hedging transactions involving the execution of long-term or short-term
interest rate swaps, futures and option transactions or purchases and sales of securities before, on and after the pricing date
of the securities. From time to time, we and/or our affiliates may enter into additional hedging transactions or unwind those we
have entered into. In addition, we or one of our affiliates may enter into swap agreements or related hedging activities with
the dealer or its affiliates.
|
|
We and/or our affiliates may
acquire a long or short position in securities similar to the securities from time to time and may, in our or their sole
discretion, hold or resell those securities.
|
|
The hedging activity discussed
above may adversely affect the market value of the securities from time to time and payment on the securities, including any
payment at maturity. See “Risk Factors” beginning on page 10 of this document for a discussion of these adverse
effects.
|
Supplemental information regarding plan of distribution (conflicts of interest); secondary markets (if any):
|
Pursuant to the terms of a
distribution agreement, UBS has agreed to sell to UBS Securities LLC, and UBS Securities LLC has agreed to purchase from UBS,
the stated principal amount of the securities specified on the front cover of this document at the price to public less a fee of
$0.15 per $10.00 stated principal amount of securities. UBS Securities LLC has agreed to resell all of the securities to Morgan
Stanley Wealth Management with an underwriting discount of $0.15 reflecting a fixed structuring fee of $0.05 and a fixed sales
commission of $0.10 per $10.00 stated principal amount of securities that Morgan Stanley Wealth Management sells.
|
|
UBS, UBS Securities LLC or any
other affiliate of UBS may use this document, the accompanying product supplement and the accompanying prospectus in a
market-making transaction for any securities after their initial sale. In connection with the offering, UBS, UBS Securities LLC,
any other affiliate of UBS or any other securities dealers may distribute this document, the accompanying product supplement and
the accompanying prospectus electronically. Unless UBS or its agent informs the purchaser otherwise in the confirmation of sale,
this document, the accompanying product supplement and the accompanying prospectus are being used in a market-making
transaction.
|
|
Conflicts of Interest
— UBS Securities LLC is an affiliate of UBS and, as such, has a “conflict of interest” in this offering
within the meaning of Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition, UBS will
receive the net proceeds (excluding the underwriting discount) from the initial public offering of the securities and, thus
creates an additional conflict of interest within the meaning of FINRA Rule 5121. UBS Securities LLC is not permitted to sell
securities in this offering to an account over which it exercises discretionary authority without the prior specific written
approval of the account holder.
|
|
Contingent Income Auto-Callable Securities due November 26, 2021
|
$6,565,870 Based on the Performance of the Common Stock of Netflix, Inc.
|
|
UBS Securities LLC
and its affiliates may offer to buy or sell the securities in the secondary market (if any) at prices greater than UBS’
internal valuation — The value of the securities 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 securities immediately after the pricing date in the secondary
market is expected to exceed the estimated initial value of the securities as determined by reference to our internal pricing
models. The amount of the excess will decline to zero on a straight line basis over a period ending no later than 6 weeks after
the pricing 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 are not required to make a market for the securities and may stop making a market at any time. For more information
about secondary market offers and the estimated initial value of the securities, see “Risk Factors — Fair value
considerations” and “— Limited or no secondary market and secondary market price considerations”
beginning on page 11 of this document.
|
Prohibition of sales to EEA retail investors:
|
The securities 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 securities or otherwise making them available to retail
investors in the EEA has been prepared and therefore offering or selling the securities or otherwise making them available to
any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
|
Validity of the securities:
|
In the opinion of Cadwalader,
Wickersham & Taft LLP, as special counsel to the issuer, when the securities offered by this pricing supplement have been
executed and issued by the issuer and authenticated by the trustee pursuant to the indenture and delivered, paid for and sold as
contemplated herein, the securities will be valid and binding obligations of the issuer, enforceable against the issuer in
accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium,
receivership or other laws relating to or affecting creditors’ rights generally, and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in equity). This opinion is given as of the date hereof
and is limited to the laws of the State of New York. Insofar as this opinion involves matters governed by Swiss law, Cadwalader,
Wickersham & Taft LLP has assumed, without independent inquiry or investigation, the validity of the matters opined on by
Homburger AG, Swiss legal counsel for the issuer, in its opinion dated October 28, 2019 filed on that date with the Securities
and Exchange Commission as an exhibit to a Current Report on Form 6-K and incorporated by reference into the issuer’s
registration statement on Form F-3 (the “Registration Statement”). In addition, this opinion is subject to customary
assumptions about the trustee’s authorization, execution and delivery of the indenture and, with respect to the
securities, authentication of the securities and the genuineness of signatures and certain factual matters, all as stated in the
opinion of Cadwalader, Wickersham & Taft LLP dated October 29, 2018 filed on that date with the Securities and Exchange
Commission as Exhibit 5.4 to the Registration Statement.
|
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