UBS AG $• linked to the common stock of Applied Materials, Inc.
due on or about June 15, 2023
UBS AG Trigger Autocallable Contingent Yield Notes (the “Notes”)
are unsubordinated, unsecured debt securities issued by UBS AG (“UBS” or the “issuer”) linked to the common
stock of Applied Materials, Inc. (the “underlying asset”). UBS will pay a contingent coupon on a coupon payment date
only if the closing level of the underlying asset on the applicable observation date (including the final valuation date) is equal
to or greater than the coupon barrier. Otherwise, no contingent coupon will be paid for the relevant coupon payment date. UBS will
automatically call the Notes early if the closing level of the underlying asset on any observation date (quarterly, beginning after
6 months) prior to the final valuation date is equal to or greater than the initial level. If the Notes are subject to an automatic
call, UBS will pay on the applicable coupon payment date following such observation date (the “call settlement date”)
a cash payment per Note equal to your principal amount plus the contingent coupon otherwise due, and no further payments will be
owed to you under the Notes. If the Notes are not subject to an automatic call and the closing level of the underlying asset on
the final valuation date (the “final level”) is equal to or greater than the downside threshold, UBS will pay you a
cash payment per Note equal to the principal amount. If, however, the Notes are not subject to an automatic call and the final
level is less than the downside threshold, UBS will pay you a cash payment per Note that is less than the principal amount, if
anything, resulting in a percentage loss on your initial investment equal to the percentage decline in the underlying asset from
the trade date to the final valuation date (the “underlying return”) and, in extreme situations, you could lose all
of your initial investment. Investing in the Notes involves significant risks. You may lose a significant portion or all of
your initial investment and may not receive any contingent coupon during the term of the Notes. Generally, a higher contingent
coupon rate on a Note is associated with a greater risk of loss and a greater risk that you will not receive contingent coupons
over the term of the Notes. The contingent repayment of principal applies only at maturity. Any payment on the Notes, including
any repayment of principal, is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations you may
not receive any amounts owed to you under the Notes and you could lose all of your initial investment.
The estimated initial value of the Notes as of the trade date
is expected to be between $903.30 and $933.30. The range of the estimated initial value of the Notes was determined 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 Notes, see “Key Risks — Fair value considerations” and “—
Limited or no secondary market and secondary market price considerations” on pages 6 and 7 herein.
The Notes are not bank deposits and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency.
(1) Notwithstanding the underwriting discount received by one or more
third-party dealers from UBS Securities LLC described below, certain registered investment advisers or fee-based advisory accounts
unaffiliated from UBS may purchase Notes from a third-party dealer at a purchase price of at least $975.00 per principal amount
of the Notes, and such third-party dealer, with respect to such sales, may forgo some or all of the underwriting discount.
(2) Our affiliate, UBS Securities LLC, will receive an underwriting
discount of $25.00 for each Note sold in this offering. UBS Securities LLC intends to re-allow the full amount of this discount
to one or more third-party dealers. Certain of such other third-party dealers may resell the Notes to other securities dealers
at the issue price to the public less an underwriting discount up to the underwriting discount indicated in the above table.
Additional
Information about UBS and the Notes
UBS has filed a registration statement (including a prospectus, as supplemented
by a product supplement for the Notes) with the Securities and Exchange Commission (the “SEC”), for the Notes to which
this document relates. Before you invest, you should read these documents and any other documents related to the Notes that UBS
has filed with the SEC for more complete information about UBS and the Notes. You may obtain these documents for free from the
SEC website at www.sec.gov. Our Central Index Key, or CIK, on the SEC website is 0001114446.
You may access these documents on the SEC website at www.sec.gov
as follows:
References to “UBS”, “we”,
“our” and “us” refer only to UBS AG and not to its consolidated subsidiaries. In this document,
“Trigger Autocallable Contingent Yield Notes” or the “Notes” refer to the Notes that are offered
hereby. Also, references to the “accompanying product supplement” mean the UBS product supplement, dated October
31, 2018, and references to the “accompanying prospectus” mean the UBS prospectus, titled “Debt Securities
and Warrants”, dated October 31, 2018.
This document, together with the documents listed above, contains the terms of the Notes and supersedes all other prior or contemporaneous
oral statements as well as any other written materials including all other prior pricing terms, correspondence, trade ideas,
structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider,
among other things, the matters set forth in “Key Risks” beginning on page 5 and in “Risk Factors”
beginning on page PS-9 in the accompanying product supplement, as the Notes involve risks not associated with conventional
debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors before deciding to invest
in the Notes.
If there is any inconsistency between the terms of the Notes described in the accompanying prospectus, the accompanying product
supplement and this document, the following hierarchy will govern: first, this document; second, the accompanying product
supplement; and last, the accompanying prospectus.
UBS reserves the right to change the terms of, or reject any offer to
purchase, the Notes prior to their issuance. In the event of any changes to the terms of the Notes, UBS will notify you and you
will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case
UBS may reject your offer to purchase.
Investor
Suitability
The Notes may be suitable for you if:
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You fully understand the risks inherent in an investment in the Notes, including the risk of loss of a significant portion
or all of your initial investment.
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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 asset.
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You are willing to receive no contingent coupons and believe the closing level of the underlying asset will be equal to or
greater than the coupon barrier on the specified observation dates and that the final level will be equal to or greater than the
downside threshold on the final valuation date.
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You understand and accept that you will not participate in any appreciation of the underlying asset and that your potential
return is limited to any contingent coupons.
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You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations
in the level of the underlying asset.
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You are willing to invest in the Notes based on the downside threshold
and coupon barrier indicated on the cover hereof and if the contingent coupon rate was set equal to the bottom of the range indicated
on the cover hereof (the actual contingent coupon rate will be set on the trade date).
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You do not seek guaranteed current income from your investment and are willing to forgo any dividends paid on the underlying
asset.
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You are willing to invest in Notes that may be subject to an automatic call and you are otherwise willing to hold such Notes
to maturity and you accept that there may be little or no secondary market for the Notes.
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You understand and accept the single equity risk associated with the Notes and understand and are willing to accept the risks
associated with the underlying asset.
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You are willing to assume the credit risk of UBS for all payments under the Notes, 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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You understand that the estimated initial value of the Notes 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 Notes, the price (not including their
customary bid-ask spreads) will temporarily exceed the internal pricing model price.
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The Notes may not be suitable for you if:
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You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of a significant portion
or 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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You cannot tolerate a loss of all or a significant portion of your investment or you are not willing to make an investment
that may have the same downside market risk as an investment in the underlying asset.
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You believe that the level of the underlying asset will decline during the term of the Notes and that the closing level is
likely to be less than the coupon barrier on the specified observation dates or less than the downside threshold on the final valuation
date.
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You seek an investment that participates in the appreciation of the underlying asset or that has unlimited return potential.
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You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside
fluctuations of the underlying asset.
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You are unwilling to invest in the Notes based on the downside threshold
or coupon barrier indicated on the cover hereof or if the contingent coupon rate was set equal to the bottom of the range indicated
on the cover hereof (the actual contingent coupon rate will be set on the trade date).
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You seek guaranteed current income from your investment or are unwilling to forgo any dividends paid on the underlying
asset.
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You do not understand or accept the single equity risk associated with the Notes or do not understand or are unwilling to accept
the risks associated with the underlying asset.
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You are unable or unwilling to invest in Notes that may be subject to an automatic call, you are otherwise unable or unwilling
to hold the Notes to maturity or you seek an investment for which there will be an active secondary market.
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You are not willing to assume the credit risk of UBS for all payments under the Notes, including any repayment of principal.
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The suitability considerations identified above are not exhaustive.
Whether or not the Notes are a suitable investment for you will depend on your individual circumstances and you should reach an
investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the
suitability of an investment in the Notes in light of your particular circumstances. You should review “Information About
the Underlying Asset” herein for more information on the underlying asset. You should also review carefully the “Key
Risks” section herein for risks related to an investment in the Notes.
Preliminary
Terms
Issuer
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UBS AG London Branch
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Principal Amount
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$1,000 per Note
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Term
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Approximately
3 years, unless subject to an automatic call. In the event that we make any change to the expected trade date and settlement
date, the calculation agent may adjust the observation dates and coupon payment dates, as well as the final valuation date
and maturity date to ensure that the stated term of the Notes remains the same.
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Underlying
Asset
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The common stock of Applied Materials, Inc.
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Contingent Coupon & Contingent Coupon Rate
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If the closing level of the underlying asset is equal to or greater
than the coupon barrier on any observation date (including the final valuation date), UBS will pay you the contingent coupon
applicable to such observation date.
If the closing level of the underlying asset is less than the coupon
barrier on any observation date (including the final valuation date), the contingent coupon applicable to such observation
date will not accrue or be payable and UBS will not make any payment to you on the relevant coupon payment date.
The contingent coupon will be a fixed amount based upon equal quarterly
installments at a per annum rate (the “contingent coupon rate”) and will be set on the trade date. The table below
sets forth the range of the contingent coupon rate and contingent coupon for the Notes that would be applicable to each observation
date on which the closing level of the underlying asset is equal to or greater than the coupon barrier. The actual contingent coupon
rate and contingent coupon will be set on the trade date.
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Contingent
Coupon Rate
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10.50% -12.50%
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Contingent
Coupon
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$26.25 - $31.25
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Contingent coupons on the Notes are not guaranteed. UBS will not pay you the
contingent coupon for any observation date on which the closing level of the underlying asset is less than the coupon barrier.
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Coupon Barrier(1)
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A specified level of the underlying asset that is less than the initial
level, equal to a percentage of the initial level, as specified on the cover hereof.
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Automatic Call Feature
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UBS will automatically call the Notes if the closing
level of the underlying asset on any observation date (quarterly, beginning after 6 months) prior to the final
valuation date is equal to or greater than the initial level.
If the Notes are subject to an automatic call, UBS will
pay you on the corresponding coupon payment date (which will be the “call settlement date”) a cash
payment per Note equal to your principal amount plus the contingent coupon otherwise due on such date (the “call settlement amount”). Following an
automatic call, no further payments will be made on the Notes.
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Payment at Maturity (per Note)
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If the Notes are not subject to an automatic call and the final level
is equal to or greater than the downside threshold, UBS will pay you a cash payment equal to:
Principal Amount of $1,000
If the Notes are not subject to an automatic call and the final level
is less than the downside threshold, UBS will pay you a cash payment that is less than the principal amount, if anything, equal
to:
$1,000 ´
(1 + Underlying Return)
In such a case, you will suffer a percentage loss on your initial investment
equal to the underlying return and, in extreme situations, you could lose all of your initial investment.
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Underlying Return
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The quotient, expressed as a percentage, of the following formula:
Final Level – Initial Level
Initial Level
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Downside Threshold(1)
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A specified level of the underlying asset that is less
than the initial level, equal to a percentage of the initial level, as specified on the cover hereof.
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Initial Level(1)
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The closing level of the underlying asset on the trade date.
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Final Level(1)
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The closing level of the underlying asset on the final valuation date.
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(1)
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As determined by the calculation
agent and as may be adjusted in the case of certain adjustment events as described under “General Terms of the Securities
— Antidilution Adjustments for Securities Linked to an Underlying Equity or Equity Basket Asset” and “Reorganization
Events for Securities Linked to an Underlying Equity or Equity Basket Asset” in the accompanying product supplement.
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Investment
Timeline
Trade Date
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The initial level of the underlying asset is observed and the final
terms of the Notes are set.
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Observation Dates
(Quarterly, callable after 6 months)
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If the closing level is equal to or greater than the coupon barrier on
any observation date (including the final valuation date), UBS will pay you a contingent coupon on the applicable coupon payment
date.
The Notes will be subject to an automatic call if the
closing level of the underlying asset on any observation date (quarterly, beginning after 6 months) prior to the final
valuation date is equal to or greater than the initial level.
If the Notes are subject to an automatic call UBS will pay you a cash payment
per Note equal to your principal amount plus the contingent coupon otherwise due on such date. Following an automatic call, no
further payments will be made on the Notes.
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Maturity Date
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The final level is observed on the final valuation date and the underlying
return of the underlying asset is calculated.
If the Notes are not subject to an automatic call and the final level
is equal to or greater than the downside threshold, UBS will pay you a cash payment per Note equal to:
Principal Amount of $1,000
If the Notes are not subject to an automatic call and the final level
is less than the downside threshold, UBS will pay you a cash payment per Note that is less than the principal amount, if anything,
equal to:
$1,000 ´
(1 + Underlying Return)
In such a case, you will suffer a percentage loss on your initial investment
equal to the underlying return and, in extreme situations, you could lose all of your initial investment.
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Investing in the Notes involves significant risks. You
may lose a significant portion or all of your initial investment. Any payment on the Notes, including any repayment of
principal, is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations, you may not receive
any amounts owed to you under the Notes and you could lose all of your initial investment.
If the Notes are not subject to an automatic call, you may lose a significant
portion or all of your initial investment. Specifically, if the Notes are not subject to an automatic call and the final level
is less than the downside threshold, you will lose a percentage of your principal amount equal to the underlying return and, in
extreme situations, you could lose all of your initial investment.
Observation
Dates(1) and Coupon Payment Dates(1)(2)
Observation Dates
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Coupon
Payment Dates
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September 14, 2020*
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September 17, 2020*
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December 14, 2020*
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December 17, 2020
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March 12, 2021
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March 17, 2021
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June 14, 2021
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June 17, 2021
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September 13, 2021
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September 16, 2021
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December 13, 2021
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December 16, 2021
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March 14, 2022
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March 17, 2022
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June 13, 2022
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June 16, 2022
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September 12, 2022
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September 15, 2022
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December 12, 2022
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December 15, 2022
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March 13, 2023
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March 16, 2023
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Final Valuation Date
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Maturity Date
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The Notes are not callable until the first potential call settlement
date, which is December 17, 2020.
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(1)
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Subject to the market disruption event provisions set forth in the
accompanying product supplement.
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(2)
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Three business days following each observation date, except that the
coupon payment date for the final valuation date is the maturity date.
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Key Risks
An investment in the Notes involves significant
risks. Investing in the Notes is not equivalent to investing in the underlying asset. Some of the key risks that apply to the Notes are summarized below, but we urge you to read the more detailed explanation of risks relating to
the Notes in the “Risk Factors” section of the accompanying product supplement. We also urge you to consult your
investment, legal, tax, accounting and other advisors before you invest in the Notes.
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Risk
of loss at maturity — The Notes differ from ordinary debt securities in that
UBS will not necessarily make periodic coupon payments or repay the principal amount
of the Notes at maturity. If the Notes are not subject to an automatic call and the final
level is less than the downside threshold, you will lose a percentage of your principal
amount equal to the underlying return and, in extreme situations, you could lose all
of your initial investment.
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The
contingent repayment of principal applies only at maturity — You should be
willing to hold your Notes to maturity. If you are able to sell your Notes prior to an
automatic call or maturity in the secondary market, you may have to sell them at a loss
relative to your initial investment even if the then-current level of the underlying
asset at that time is equal to or greater than the downside threshold. All payments on
the Notes are subject to the creditworthiness of UBS.
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You
may not receive any contingent coupons with respect to your Notes — UBS will
not necessarily make periodic coupon payments on the Notes. UBS will pay a contingent
coupon for each observation date on which the closing level of the underlying asset is
equal to or greater than the coupon barrier. If the closing level of the underlying asset
is less than the coupon barrier on any observation date, UBS will not pay you the contingent
coupon applicable to such observation date. If the closing level of the underlying asset
is less than the coupon barrier on each of the observation dates, UBS will not pay you
any contingent coupons during the term of, and you will not receive a positive return
on, your Notes. Generally, this non-payment of the contingent coupon coincides with a
period of greater risk of principal loss on your Notes.
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Your
potential return on the Notes is limited to any contingent coupons and you will not participate
in any appreciation of the underlying asset — The return potential of the Notes
is limited to the pre-specified contingent coupon rate, regardless of any appreciation
of the underlying asset. In addition, your return on the Notes will vary based on the
number of observation dates, if any, in which the requirements of the contingent coupon
have been met prior to maturity or an automatic call. Further, if the Notes are subject
to an automatic call, you will not receive any contingent coupons or any other payment
in respect of any observation dates after the applicable call settlement date. Because
the Notes may be subject to an automatic call as early as the first potential call settlement
date, the total return on the Notes could be less than if the Notes remained outstanding
until maturity. Furthermore, if the Notes are not subject to an automatic call, you may
be subject to the decline of the underlying asset even though you cannot participate
in any appreciation of the underlying asset. As a result, the return on an investment
in the Notes could be less than the return on a direct investment in the underlying asset.
In addition, as an owner of the Notes, you will not have voting rights or any other rights
of a holder of the underlying asset.
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A
higher contingent coupon rate or lower downside threshold or coupon barrier may reflect
greater expected volatility of the underlying asset, and greater expected volatility
generally indicates an increased risk of loss at maturity — The economic terms
for the Notes, including the contingent coupon rate, coupon barrier and downside threshold,
are based, in part, on the expected volatility of the underlying asset at the time the
terms of the Notes are set. “Volatility” refers to the frequency and magnitude
of changes in the level of the underlying asset. The greater the expected volatility
of the underlying asset as of the trade date, the greater the expectation is as of that
date that the closing level of the underlying asset could be less than the coupon barrier
on any observation date and that the final level of the underlying asset could be less
than the downside threshold on the final valuation date and, as a consequence, indicates
an increased risk of not receiving a contingent coupon and an increased risk of loss,
respectively. All things being equal, this greater expected volatility will generally
be reflected in a higher contingent coupon rate than the yield payable on our conventional
debt securities with a similar maturity or on otherwise comparable securities, and/or
a lower downside threshold and/or coupon barrier than those terms on otherwise comparable
securities. Therefore, a relatively higher contingent coupon rate may indicate an increased
risk of loss. Further, a relatively lower downside threshold and/or coupon barrier may
not necessarily indicate that the Notes have a greater likelihood of a return of principal
at maturity and/or paying contingent coupons. You should be willing to accept the downside
market risk of the underlying asset and the potential to lose a significant portion or
all of your initial investment.
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Reinvestment
risk — The Notes will be subject to an automatic call if the closing level
of the underlying asset is equal to or greater than the initial level on certain observation
dates prior to the final valuation date, as set forth under “Observation Dates
and Coupon Payment Dates” above. Because the Notes could be subject to an automatic
call, the term of your investment may be limited. In the event that the Notes are subject
to an automatic call, there is no guarantee that you would be able to reinvest the proceeds
at a comparable return and/or with a comparable contingent coupon rate for a similar
level of risk. In addition, to the extent you are able to reinvest such proceeds in an
investment comparable to the Notes, you may incur transaction costs such as dealer discounts
and hedging costs built into the price of the new securities. Generally, however, the
longer the Notes remain outstanding, the less likely the Notes will be subject to an
automatic call due to the decline in the level of the underlying asset and the shorter
time remaining for the level of the underlying asset to recover. Such periods generally
coincide with a period of greater risk of principal loss on your Notes.
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Credit
risk of UBS — The Notes are unsubordinated, unsecured debt obligations of UBS
and are not, either directly or indirectly, an obligation of any third party. Any payment
to be made on the Notes, including any repayment of principal, depends on the ability
of UBS to satisfy its obligations as they come due. As a result, UBS’ actual and
perceived creditworthiness of UBS may affect the market value of the Notes. If UBS were
to default on its obligations, you may not receive any amounts owed to you under the
terms of the Notes and you could lose all of your initial investment.
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Single
equity risk — The level of the underlying asset can rise or fall sharply due
to factors specific to that underlying asset and the issuer of such underlying asset
(the "underlying asset issuer"), such as stock price volatility, earnings,
financial conditions, corporate, industry and regulatory developments, management changes
and decisions and other events, as well as general market factors, such as general market
volatility and levels, interest rates and economic and political conditions. Recently,
the coronavirus infection has caused volatility in the global financial markets and a
slowdown in the global economy. Coronavirus or any other communicable disease or infection
may adversely affect the underlying asset issuer and, therefore, the underlying asset.
You, as an investor in the Notes, should make your own investigation into the underlying
asset issuer and the underlying asset for your Notes. For additional information regarding
the underlying asset issuer, please see "Information about the Underlying Asset"
in this document and the underlying asset issuer's SEC filings referred to in that section.
We urge you to review financial and other information filed periodically by the applicable
underlying asset issuer with the SEC.
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Fair value considerations.
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The
issue price you pay for the Notes will exceed their estimated initial value —
The issue price you pay for the Notes will exceed their estimated initial value as of
the trade date due to the inclusion in the issue price of the underwriting discount,
hedging costs, issuance and other costs and projected profits. As of the close of the
relevant markets on the trade date, we will determine the estimated initial value of
the Notes by reference to our internal pricing models and it will be set forth in the
final pricing supplement. The pricing models used to determine the estimated initial
value of the Notes incorporate certain variables, including the level and volatility
of the underlying asset, any expected dividends on the underlying asset, prevailing interest
rates, the term of the Notes and our internal funding rate. Our internal funding rate
is typically lower than the rate we would pay to issue conventional fixed or floating
rate debt securities of a similar term. The underwriting discount, hedging costs, issuance
and other costs, projected profits and the difference in rates will reduce the economic
value of the Notes to you. Due to these factors, the estimated initial value of the Notes
as of the trade date will be less than the issue price you pay for the Notes.
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The
estimated initial value is a theoretical price; the actual price that you may be able
to sell your Notes in any secondary market (if any) at any time after the trade date
may differ from the estimated initial value — The value of your Notes at any
time will vary based on many factors, including the factors described above and in “—Single
equity risk” above and is impossible to predict. Furthermore, the pricing models
that we use are proprietary and rely in part on certain assumptions about future events,
which may prove to be incorrect. As a result, after the trade date, if you attempt to
sell the Notes in the secondary market, the actual value you would receive may differ,
perhaps materially, from the estimated initial value of the Notes determined by reference
to our internal pricing models. The estimated initial value of the Notes does not represent
a minimum or maximum price at which we or any of our affiliates would be willing to purchase
your Notes in any secondary market at any time.
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Our
actual profits may be greater or less than the differential between the estimated initial
value and the issue price of the Notes as of the trade date — We may determine
the economic terms of the Notes, as well as hedge our obligations, at least in part,
prior to the trade date. In addition, there may be ongoing costs to us to maintain and/or
adjust any hedges and such hedges are often imperfect. Therefore, our actual profits
(or potentially, losses) in issuing the Notes cannot be determined as of the trade date
and any such differential between the estimated initial value and the issue price of
the Notes as of the trade date does not reflect our actual profits. Ultimately, our actual
profits will be known only at the maturity of the Notes.
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Limited or no secondary market and secondary market price considerations.
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There
may be little or no secondary market for the Notes — The Notes will not be
listed or displayed on any securities exchange or any electronic communications network.
UBS Securities LLC and its affiliates intend, but are not required, to make a market
for the Notes and may stop making a market at any time. If you are able to sell your
Notes prior to maturity, you may have to sell them at a substantial loss. Furthermore,
there can be no assurance that a secondary market for the Notes will develop. The estimated
initial value of the Notes does not represent a minimum or maximum price at which we
or any of our affiliates would be willing to purchase your Notes in any secondary market
at any time.
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The
price at which UBS Securities LLC and its affiliates may offer to buy the Notes in the
secondary market (if any) may be greater than UBS’ valuation of the Notes at that
time, greater than any other secondary market prices provided by unaffiliated dealers
(if any) and, depending on your broker, greater than the valuation provided on your customer
account statements — For a limited period of time following the issuance of
the Notes, UBS Securities LLC or its affiliates may offer to buy or sell such Notes at
a price that exceeds (i) our valuation of the Notes at that time based on our internal
pricing models, (ii) any secondary market prices provided by unaffiliated dealers (if
any) and (iii) depending on your broker, the valuation provided on customer account statements.
The price that UBS Securities LLC may initially offer to buy such Notes following issuance
will exceed the valuations indicated by our internal pricing models due to the inclusion
for a limited period of time of the aggregate value of the underwriting discount, hedging
costs, issuance costs and theoretical projected trading profit. The portion of such amounts
included in our price will decline to zero on a straight line basis over a period ending
no later than the date specified under “Supplemental Plan of Distribution (Conflicts
of Interest); Secondary Markets (if any)”. Thereafter, if UBS Securities LLC or
an affiliate makes secondary markets in the Notes, it will do so at prices that reflect
our estimated value determined by reference to our internal pricing models at that time.
The temporary positive differential relative to our internal pricing models arises from
requests from and arrangements made by UBS Securities LLC with the selling agents of
structured debt securities such as the Notes. As described above, UBS Securities LLC
and its affiliates intend, but are not required, to make a market for the Notes and may
stop making a market at any time. The price at which UBS Securities LLC or an affiliate
may make secondary markets at any time (if at all) will also reflect its then current
bid-ask spread for similar sized trades of structured debt securities. UBS Securities
LLC reflects this temporary positive differential on its customer statements. Investors
should inquire as to the valuation provided on customer account statements provided by
unaffiliated dealers.
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Economic
and market factors affecting the terms and market price of Notes prior to maturity —
Because structured notes, including the Notes, can be thought of as having a debt component
and a derivative component, factors that influence the values of debt instruments and
options and other derivatives will also affect the terms and features of the Notes at
issuance and the market price of the Notes prior to maturity. These factors include the
level of the underlying asset; the volatility of the underlying asset; any dividends
paid on the underlying asset; the time remaining to the maturity of the Notes; interest
rates in the markets; geopolitical conditions and economic, financial, political, force
majeure and regulatory or judicial events; whether the underlying asset is currently
or has been less than the coupon barrier; the availability of comparable instruments;
and the creditworthiness of UBS; the then current bid-ask spread for the Notes and the
factors discussed under “— Potential conflict of interest” below. These
and other factors are unpredictable and interrelated and may offset or magnify each other.
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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 Notes in any secondary
market.
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There
can be no assurance that the investment view implicit in the Notes will be successful
— It is impossible to predict whether and the extent to which the level of
the underlying asset will rise or fall and there can be no assurance that the closing
level of the underlying asset will be equal to or greater than the coupon barrier on
any observation date, or, if the Notes are not subject to an automatic call, that the
final level will be equal to or greater than the downside threshold. The level of the
underlying asset will be influenced by complex and interrelated political, economic,
financial and other factors that affect the underlying asset issuer. You should be willing
to accept the downside risks of owning equities in general and the underlying asset in
particular, and the risk of losing a significant portion or all of your initial investment.
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There
is no affiliation between the underlying asset issuer and UBS, and UBS is not responsible
for any disclosure by such issuer — We are not affiliated with the underlying
asset issuer. However, we and our affiliates may currently, or from time to time in the
future engage in business with the underlying asset issuer. However, we are not affiliated
with the underlying asset issuer and are not responsible for such issuer’s public
disclosure of information, whether contained in SEC filings or otherwise. You, as an
investor in the Notes, should conduct your own investigation into the underlying asset
and the underlying asset issuer for your Notes. The underlying asset issuer is not involved
in the Notes offered hereby in any way and has no obligation of any sort with respect
to your Notes. The underlying asset issuer has no obligation to take your interests into
consideration for any reason, including when taking any corporate actions that might
affect the market value of, and any amounts payable on, your Notes.
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The
calculation agent can make antidilution and reorganization adjustments that affect the
market value of, and any amounts payable on, the Notes — For antidilution and
reorganization events affecting the underlying asset, the calculation agent may make
adjustments to the initial level, coupon barrier, downside threshold and/or final level,
as applicable, and any other term of the Notes. However, the calculation agent will not
make an adjustment in response to every corporate event that could affect the underlying
asset. If an event occurs that does not require the calculation agent to make an adjustment,
the market value of, and any amounts payable on, the Notes may be materially and adversely
affected. In addition, all determinations and calculations concerning any such adjustments
will be made by the calculation agent. You should be aware that the calculation agent
may make any such adjustment, determination or calculation in a manner that differs from
that discussed in the accompanying product supplement or this document as necessary to
achieve an equitable result. Following certain reorganization events relating to the
underlying asset issuer where such issuer is not the surviving entity, the determination
as to whether the contingent coupon is payable to you on any coupon payment date, whether
the Notes are subject to an automatic call or the amount you receive at maturity may
be based on the equity security of a successor to the underlying asset issuer in combination
with any cash or any other assets distributed to holders of the underlying asset in such
reorganization event. If the underlying asset issuer becomes subject to (i) a reorganization
event whereby the underlying asset is exchanged solely for cash, (ii) a merger or consolidation
with UBS or any of its affiliates, or (iii) the underlying asset is delisted or otherwise
suspended from trading, the determination as to whether the contingent coupon is payable
to you on any coupon payment date, whether the Notes are subject to an automatic call
or the amount you receive at maturity may be based on a substitute security. The occurrence
of any antidilution or reorganization event and the consequent adjustments may materially
and adversely affect the value of the Notes and any payment of any contingent coupons
or at maturity. For more information, see the sections “General Terms of the Securities
— Antidilution Adjustments for Securities Linked to an Underlying Equity or Equity
Basket Asset” and “— Reorganization Events for Securities Linked to
an Underlying Equity or Equity Basket Asset” in the accompanying product supplement.
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Potential
UBS impact on the underlying asset — Trading or transactions by UBS or its
affiliates in the underlying asset, listed and/or over-the-counter options, futures,
exchange-traded funds or other instruments with returns linked to the performance of
the underlying asset, may adversely affect the market price of that underlying asset
on any observation date (including the final valuation date) and, therefore, the market
value of the Notes and any payment of any contingent coupons or at maturity.
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Potential
conflict of interest — UBS and its affiliates may engage in business with the
underlying asset issuer, which may present a conflict between the obligations of UBS
and you, as a holder of the Notes. There are also potential conflicts of interest between
you and the calculation agent, which will be an affiliate of UBS and which will make
potentially subjective judgments. The calculation agent will determine whether the contingent
coupon is payable to you on any coupon payment date, whether the Notes are subject to
an automatic call and the payment at maturity of the Notes, if any, based on observed
levels of the underlying asset. The calculation agent can postpone the determination
of the terms of the Notes on the trade date, any observation date or final valuation
date, respectively. As UBS determines the economic terms of the Notes, including the
contingent coupon rate, downside threshold and coupon barrier, and such terms include
the underwriting discount, hedging costs, issuance and other costs and projected profits,
the Notes represent a package of economic terms. There are other potential conflicts
of interest insofar as an investor could potentially get better economic terms if that
investor entered into exchange-traded and/or OTC derivatives or other instruments with
third parties, assuming that such instruments were available and the investor had the
ability to assemble and enter into such instruments.
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Additionally, UBS and its affiliates act in various capacities with respect to the Notes, including as a principal,
agent or dealer in connection with the sale of the Notes. Such affiliates, and any other third-party dealers, will derive compensation from the distribution of the Notes and such compensation may serve as an incentive to
sell these Notes instead of other investments. Furthermore, given that UBS Securities LLC and its affiliates temporarily maintain a market making premium, it may have the effect of discouraging UBS Securities LLC and its
affiliates from recommending sale of your Notes in the secondary market.
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Potentially
inconsistent research, opinions or recommendations by UBS — UBS and its affiliates
publish research from time to time on financial markets and other matters that may influence
the value of, and any amounts payable on, the Notes, or express opinions or provide recommendations
that are inconsistent with purchasing or holding the Notes. Any research, opinions or
recommendations expressed by UBS or its affiliates may not be consistent with each other
and may be modified from time to time without notice. Investors should make their own
independent investigation of the merits of investing in the Notes and the underlying
asset to which the Notes are linked.
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The
Notes are not bank deposits — An investment in the Notes carries risks which
are very different from the risk profile of a bank deposit placed with UBS or its affiliates.
The Notes have different yield and/or return, liquidity and risk profiles and would not
benefit from any protection provided to deposits.
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If
UBS experiences financial difficulties, FINMA has the power to open restructuring or
liquidation proceedings in respect of, and/or impose protective measures in relation
to, UBS, which proceedings or measures may have a material adverse effect on the terms
and market value of the Notes and/or the ability of UBS to make payments thereunder —
The Swiss Financial Market Supervisory Authority (“FINMA”) has broad statutory
powers to take measures and actions in relation to UBS if (i) it concludes that there
is justified concern that UBS is over-indebted or has serious liquidity problems or (ii)
UBS fails to fulfill the applicable capital adequacy requirements (whether on a standalone
or consolidated basis) after expiry of a deadline set by FINMA. If one of these pre-requisites
is met, FINMA is authorized to open restructuring proceedings or liquidation (bankruptcy)
proceedings in respect of, and/or impose protective measures in relation to, UBS. The
Swiss Banking Act grants significant discretion to FINMA in connection with the aforementioned
proceedings and measures. In particular, a broad variety of protective measures may be
imposed by FINMA, including a bank moratorium or a maturity postponement, which measures
may be ordered by FINMA either on a stand-alone basis or in connection with restructuring
or liquidation proceedings. The resolution regime of the Swiss Banking Act is further
detailed in the FINMA Banking Insolvency Ordinance (“BIO-FINMA”). In a restructuring
proceeding, FINMA, as resolution authority, is competent to approve the resolution plan.
The resolution plan may, among other things, provide for (a) the transfer of all or a
portion of UBS’ assets, debts, other liabilities and contracts (which may or may
not include the contractual relationship between UBS and the holders of Notes) to another
entity, (b) a stay (for a maximum of two business days) on the termination of contracts
to which UBS is a party, and/or the exercise of (w) rights to terminate, (x) netting
rights, (y) rights to enforce or dispose of collateral or (z) rights to transfer claims,
liabilities or collateral under contracts to which UBS is a party, (c) the conversion
of UBS’ debt and/or other obligations, including its obligations under the Notes,
into equity (a “debt-to-equity” swap), and/or (d) the partial or full write-off
of obligations owed by UBS (a “write-off”), including its obligations under
the Notes. The BIO-FINMA provides that a debt-to-equity swap and/or a write-off of debt
and other obligations (including the Notes) may only take place after (i) all debt instruments
issued by UBS qualifying as additional tier 1 capital or tier 2 capital have been converted
into equity or written-off, as applicable, and (ii) the existing equity of UBS has been
fully cancelled. While the BIO-FINMA does not expressly address the order in which a
write-off of debt instruments other than debt instruments qualifying as additional tier
1 capital or tier 2 capital should occur, it states that debt-to-equity swaps should
occur in the following order: first, all subordinated claims not qualifying as regulatory
capital; second, all other claims not excluded by law from a debt-to-equity swap (other
than deposits); and third, deposits (in excess of the amount privileged by law). However,
given the broad discretion granted to FINMA as the resolution authority, any restructuring
plan in respect of UBS could provide that the claims under or in connection with the
Notes will be partially or fully converted into equity or written-off, while preserving
other obligations of UBS that rank pari passu with, or even junior to, UBS’
obligations under the Notes. Consequently, holders of Notes may lose all or some of their
investment in the Notes. In the case of restructuring proceedings with respect to a systemically
important Swiss bank (such as UBS), the creditors whose claims are affected by the restructuring
plan will not have a right to vote on, reject, or seek the suspension of the restructuring
plan. In addition, if a restructuring plan has been approved by FINMA, the rights of
a creditor to seek judicial review of the restructuring plan (e.g., on the grounds that
the plan would unduly prejudice the rights of holders of Notes or otherwise be in violation
of the Swiss Banking Act) are very limited. In particular, a court may not suspend the
implementation of the restructuring plan. Furthermore, even if a creditor successfully
challenges the restructuring plan, the court can only require the relevant creditor to
be compensated ex post and there is currently no guidance as to on what basis
such compensation would be calculated or how it would be funded.
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Uncertain
tax treatment — Significant aspects of the tax treatment of the Notes are uncertain.
You should consult your tax advisor about your tax situation. See “What Are the
Tax Consequences of the Notes?” herein and “Material U.S. Federal Income
Tax Consequences”, including the section “— Securities Treated as Prepaid
Derivatives or Prepaid Forwards with Associated Contingent Coupons”, in the accompanying
product supplement.
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Hypothetical
Examples of How the Notes Might Perform
The below examples are based on hypothetical terms. The actual terms will be set on the trade date and will be indicated on the cover of the applicable pricing supplement.
The examples below illustrate the payment upon a call or at maturity for each Note on a hypothetical offering of the Notes, with the following assumptions (amounts may have been rounded for ease of reference):
Principal Amount:
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$1,000.00
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Term:
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Approximately 3 years
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Initial Level:
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$60.00
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Contingent Coupon Rate:
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10.50% per annum (or 2.625% per quarter)
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Contingent Coupon:
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$26.25 per quarter
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Observation Dates:
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Quarterly (callable after 6
months)
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Downside Threshold:
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$36.00 (which is 60.00% of the Initial Level)
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Coupon Barrier:
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$36.00 (which is 60.00% of the Initial Level)
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Example 1 — The Closing Level of the Underlying
Asset is equal to or greater than the Initial Level on the Observation Date corresponding to the first potential Call
Settlement Date.
Date
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Closing Level
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Payment (per Note)
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First Observation Date
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$62.00 (equal to or greater
than Initial Level)
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$26.25 (Contingent Coupon – Not Callable)
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Second Observation Date
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$65.00 (equal to or greater than Initial Level)
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$1,026.25 (Call Settlement Amount)
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Total Payment:
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$1,052.50 (a 5.25% total return)
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Because the Notes are subject to an automatic call following the second
observation date (which is approximately 6 months after the trade date and is the first observation date on which they are callable),
UBS will pay you on the call settlement date a total of $1,026.25 per Note, reflecting your principal amount plus the applicable
contingent coupon. When added to the contingent coupon of $26.25 received in respect of the prior observation date, UBS will have
paid you a total of $1,052.50 per Note for a 5.25% total return on the Notes. No further amount will be owed to you under the Notes.
Example 2 — The Notes are NOT Subject to an Automatic Call and
the Final Level of the Underlying Asset is equal to or greater than the Downside Threshold and Coupon Barrier.
Date
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Closing Level
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Payment (per Note)
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First Observation Date
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$40.00 (equal
to or greater than Coupon Barrier; less than Initial Level)
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$26.25 (Contingent Coupon)
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Second to Eleventh Observation Date
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Various (all less than
Coupon Barrier)
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$0
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Final Valuation Date
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$45.00 (equal to or greater
than Downside Threshold and Coupon Barrier)
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$1,026.25 (Payment at Maturity)
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Total Payment:
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$1,052.50 (a 5.25% total return)
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Because the Notes are not subject to an automatic call and the final
level of the underlying asset is equal to or greater than the downside threshold and coupon barrier, at maturity, UBS will pay
you a total of $1,026.25 per Note, reflecting your principal amount plus the applicable contingent coupon. When added to the contingent
coupon of $26.25 received in respect of the prior observation dates, UBS will have paid you a total of $1,052.50 per Note for a
5.25% total return on the Notes.
Example 3 — The Notes are NOT Subject to an Automatic Call and
the Final Level of the Underlying Asset is less than the Downside Threshold and Coupon Barrier.
Date
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Closing Level
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Payment (per Note)
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First Observation Date
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$50.00 (equal
to or greater than Coupon Barrier; less than Initial Level)
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$26.25 (Contingent Coupon)
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Second Observation Date
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$55.00 (equal to or greater
than Coupon Barrier; less than Initial Level)
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$26.25 (Contingent Coupon)
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Third to Eleventh Observation Dates
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Various (all less than
Coupon Barrier)
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$0
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Final Valuation Date
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$30.00 (less than Downside
Threshold and Coupon Barrier)
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$1,000 x (1 + Underlying Return) =
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$1,000 × [1 + (-50%)] =
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$1,000 x 0.50 =
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$500.00 (Payment at Maturity)
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Total Payment:
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$552.50 (a 44.75% loss)
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Because the Notes are not subject to an automatic call and the final
level of the underlying asset is less than the downside threshold and coupon barrier, at maturity, UBS will pay you $500.00 per
Note. When added to the contingent coupons of $52.50 received in respect of the prior observation dates, UBS will have paid you
$552.50 per Note for a loss on the Notes of 44.75%.
Investing in the Notes involves significant risks. The Notes differ
from ordinary debt securities in that UBS is not necessarily obligated to repay the full amount of your initial investment. If
the Notes are not subject to an automatic call, you may lose a significant portion or all of your initial investment. Specifically,
if the Notes are not subject to an automatic call and the final level is less than the downside threshold, you will lose a percentage
of your principal amount equal to the underlying return and, in extreme situations, you could lose all of your initial investment.
Any payment on the Notes, including any payments in respect of an automatic
call, contingent coupon or any repayment of principal, is subject to the creditworthiness of UBS. If UBS were to default on its
payment obligations, you may not receive any amounts owed to you under the Notes and you could lose all of your initial investment.
Information
about the Underlying Asset
All disclosures contained in this document regarding the underlying asset are derived from publicly available information. UBS has not conducted any independent review or due diligence of
any publicly available information with respect to the underlying asset. You should make your own investigation into the underlying
asset.
Included below is a brief description of the underlying
asset issuer for the Notes. This information has been obtained from publicly available sources. Set forth below is a graph that
illustrates the past performance for the underlying asset for the specified period. We obtained the past performance information
set forth below from the Bloomberg Professional® service (“Bloomberg”) without independent verification.
You should not take the historical prices of the underlying asset as an indication of future performance.
The underlying asset is registered under the Securities Act of 1933, the
Securities Exchange Act of 1934 and/or the Investment Company Act of 1940, each as amended. Companies with securities registered
with the SEC are required to file financial and other information specified by the SEC periodically. Information filed by the underlying
asset issuer with the SEC can be reviewed electronically through a website maintained by the SEC. The address of the SEC’s
website is http://www.sec.gov. Information filed with the SEC by the underlying asset issuer can be located by reference to its
SEC file number provided below. In addition, information filed with the SEC can be inspected and copied at the Public Reference
Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of this material can also be obtained from the
Public Reference Section, at prescribed rates.
Applied Materials, Inc.
According to publicly available information, Applied Materials, Inc.
(“Applied Materials”) provides manufacturing equipment, services and software to the semiconductor, display and related
industries. Information filed by Applied Materials with the SEC can be located by reference to its SEC file number: 000-06920,
or its CIK Code: 0000006951. Applied Materials’ website is appliedmaterials.com. Applied Materials’ common stock is
listed on the Nasdaq Global Select Market under the ticker symbol “AMAT.”
Information from outside sources is not incorporated by reference
in, and should not be considered part of, this document or any document incorporated herein by reference. UBS has not conducted
any independent review or due diligence of any publicly available information with respect to the underlying asset.
Historical Information
The graph below illustrates the performance of Applied Materials‘
common stock from January 1, 2010 through June 1, 2020, based on the daily closing levels as reported by Bloomberg, without independent
verification. UBS has not conducted any independent review or due diligence of publicly available information obtained from Bloomberg.
The closing level of Applied Materials’ common stock on June 1, 2020 was $55.685 (the “hypothetical initial level”).
The dotted line represents the hypothetical coupon barrier and the hypothetical downside threshold of $33.411 which is equal to
60.00% of the hypothetical initial level. The actual initial level, coupon barrier and downside threshold will be set on the trade
date. Past performance of the underlying asset is not indicative of the future performance of the underlying asset during
the term of the Notes.
What Are the Tax Consequences of the Notes?
The U.S. federal income tax consequences of your
investment in the Notes are uncertain. There are no statutory provisions, regulations, published rulings or judicial
decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are
substantially the same as the Notes. Some of these tax consequences are summarized below, but we urge you to read the more
detailed discussion in “Material U.S. Federal Income Tax Consequences”, including the section “—
Securities Treated as Prepaid Derivatives or Prepaid Forwards with Associated Contingent Coupons”, of the accompanying
product supplement and to discuss the tax consequences of your particular situation with your tax advisor. This discussion is
based upon the Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed U.S.
Treasury Department (the “Treasury”) regulations, rulings and decisions, in each case, as available and in
effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Tax consequences under
state, local and non-U.S. laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the
“IRS”) has been sought as to the U.S. federal income tax consequences of your investment in the Notes, and the
following discussion is not binding on the IRS.
U.S. Tax Treatment. Pursuant to the terms of the
Notes, UBS and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial
ruling to the contrary, to characterize the Notes as prepaid derivative contracts with respect to the underlying asset. If
your Notes are so treated, any contingent coupon that is paid by UBS (including on the maturity date or call settlement date)
should be included in your income as ordinary income in accordance with your regular method of accounting for U.S. federal
income tax purposes.
In addition, excluding amounts attributable to any contingent coupon, you
should generally recognize capital gain or loss upon the taxable disposition of your Notes in an amount equal to the difference
between the amount you receive at such time (other than amounts or proceeds attributable to a contingent coupon or any amount attributable
to any accrued but unpaid contingent coupon) and the amount you paid for your Notes. Such gain or loss should generally be long-term
capital gain or loss if you have held your Notes for more than one year (otherwise such gain or loss should be short-term capital
gain or loss if held for one year or less). The deductibility of capital losses is subject to limitations. Although uncertain,
it is possible that proceeds received from the sale or exchange of your Notes prior to a coupon payment date, but that could be
attributed to an expected contingent coupon, could be treated as ordinary income. You should consult your tax advisor regarding
this risk.
Based on certain factual representations received from us, our counsel, Cadwalader, Wickersham & Taft
LLP, is of the opinion that it would be reasonable to treat your Notes in the manner described above. However, because there is
no authority that specifically addresses the tax treatment of the Notes, it is possible that your Notes could alternatively be
treated for tax purposes as a single contingent payment debt instrument, or pursuant to some other characterization, such that
the timing and character of your income from the Notes could differ materially and adversely from the treatment described above,
as described further under “Material U.S. Federal Income Tax Consequences”, including the section “— Securities
Treated as Prepaid Derivatives or Prepaid Forwards with Associated Contingent Coupons” in the accompanying product supplement
unless and until such time as the IRS and the Treasury Department determine that some other treatment is more appropriate.
Except to the extent otherwise required by law, UBS intends to treat
your Notes for U.S. federal income tax purposes in accordance with the treatment described above and under “Material U.S.
Federal Income Tax Consequences” in the accompanying product supplement unless and until such time as the IRS and the Treasury
determine that some other treatment is more appropriate.
Notice 2008-2. In 2007, the IRS released a notice that may affect
the taxation of holders of the Notes. According to Notice 2008-2, the IRS and the Treasury are actively considering whether the
holder of an instrument such as the Notes should be required to accrue ordinary income on a current basis. It is not possible to
determine what guidance they will ultimately issue, if any. It is possible, however, that under such guidance, holders of the Notes
will ultimately be required to accrue income currently in excess of any receipt of contingent coupons and this could be applied
on a retroactive basis. The IRS and the Treasury are also considering other relevant issues, including whether additional gain
or loss from such instruments should be treated as ordinary or capital, whether non-U.S. holders of such instruments should be
subject to withholding tax on any deemed income accruals, and whether the special “constructive ownership rules” of
Section 1260 of the Code should be applied to such instruments. Both U.S. and non-U.S. holders are urged to consult their tax advisors
concerning the significance and potential impact of the above considerations.
Medicare Tax on Net Investment Income. U.S. holders
that are individuals, estates or certain trusts are subject to an additional 3.8% tax on all or a portion of their “net
investment income,” which may include any income or gain realized with respect to the Notes, to the extent of their net
investment income that when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual,
$250,000 for a married taxpayer filing a joint return (or a surviving spouse), $125,000 for a married individual filing a separate
return or the dollar amount at which the highest tax bracket begins for an estate or trust. The 3.8% Medicare tax is determined
in a different manner than the income tax. U.S. holders should consult their tax advisors as to the consequences of the 3.8% Medicare
tax.
Specified Foreign Financial Assets. U.S. holders may be subject
to reporting obligations with respect to their Notes if they do not hold their Notes in an account maintained by a financial institution
and the aggregate value of their Notes and certain other “specified foreign financial assets” (applying certain attribution
rules) exceeds an applicable threshold. Significant penalties can apply if a U.S. holder is required to disclose its Notes and
fails to do so.
Non-U.S. Holders. The U.S. federal income tax
treatment of the contingent coupons is unclear. Subject to Section 871(m) of the Code and FATCA, as discussed below, our
counsel is of the opinion that contingent coupons paid to a non-U.S. holder that provides us (and/or the applicable
withholding agent) with a fully completed and validly executed applicable IRS Form W-8 should not be subject to U.S.
withholding tax and we do not intend to withhold any tax on contingent coupons. However, it is possible that the IRS could
assert that such payments are subject to U.S. withholding tax, or that another withholding agent may otherwise determine that
withholding is required, in which case such other withholding agent may withhold up to 30% on such payments (subject to
reduction or elimination of such withholding tax pursuant to an applicable income tax treaty). We will not pay any additional
amounts in respect of such withholding. Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below,
gain realized from the taxable disposition of the Notes generally should not be subject to U.S. tax unless (i) such gain is
effectively connected with a trade or business conducted by the non-U.S. holder in the U.S., (ii) the non-U.S. holder is a
non-resident alien individual and is present in the U.S. for 183 days or more during the taxable year of such taxable
disposition and certain other conditions are satisfied or (iii) the non-U.S. holder has certain other present or former
connections with the U.S.
Section 897. We will not attempt to ascertain whether the underlying
asset issuer would be treated as a “United States real property holding corporation” (“USRPHC”) within
the meaning of Section 897 of the Code. We also have not attempted to determine whether the Notes should be treated as “United
States real property interests” (“USRPI”) as defined in Section 897 of the Code. If the underlying asset issuer
and the Notes were so treated, certain adverse U.S. federal income tax consequences could possibly apply, including subjecting
any gain to a non-U.S. holder in respect of a Note upon a taxable disposition of the Note to the U.S. federal income tax on a net
basis, and the proceeds from such a taxable disposition to a 15% withholding tax. Non-U.S. holders should consult their tax advisors
regarding the potential treatment of the underlying asset issuer for their Notes as a USRPHC and the Notes as USRPI.
Section 871(m). A 30% withholding tax (which may be reduced by
an applicable income tax treaty) is imposed under Section 871(m) of the Code on certain “dividend equivalents” paid
or deemed paid to a non-U.S. holder with respect to a “specified equity-linked instrument” that references one or more
dividend-paying U.S. equity securities. The withholding tax can apply even if the instrument does not provide for payments that
reference dividends. Treasury regulations provide that the withholding tax applies to all dividend equivalents paid or deemed
paid on specified equity-linked instruments that have a delta of one (“delta-one specified equity-linked instruments”)
issued after 2016 and to all dividend equivalents paid or deemed paid on all other specified equity-linked instruments issued
after 2018. However, the IRS has issued guidance that states that the Treasury and the IRS intend to amend the effective dates of the
Treasury regulations to provide that withholding on dividend equivalents paid or deemed paid will not apply to specified equity-linked
instruments that are not delta-one specified equity-linked instruments and are issued before January 1, 2023.
Based on our determination that the Notes are not “delta-one”
with respect to the underlying asset, our counsel is of the opinion that the Notes should not be delta-one specified equity-linked
instruments and thus should not be subject to withholding on dividend equivalents. Our determination is not binding on the IRS,
and the IRS may disagree with this determination. Furthermore, the application of Section 871(m) of the Code will depend on our
determinations made upon issuance of the Notes. If withholding is required, we will not make payments of any additional amounts.
Nevertheless, after issuance, it is possible that your Notes could be deemed
to be reissued for tax purposes upon the occurrence of certain events affecting the underlying asset or your Notes, and following
such occurrence your Notes could be treated as delta-one specified equity-linked instruments that are subject to withholding on
dividend equivalents. It is also possible that withholding tax or other tax under Section 871(m) of the Code could apply to the
Notes under these rules if you enter, or have entered, into certain other transactions in respect of the underlying asset or the
Notes. If you enter, or have entered, into other transactions in respect of the underlying asset or the Notes should consult your
tax advisor regarding the application of Section 871(m) of the Code to your Notes in the context of your other transactions.
Because of the uncertainty regarding the application of
the 30% withholding tax on dividend equivalents to the Notes, you are urged to consult your tax advisor regarding the potential
application of Section 871(m) of the Code and the 30% withholding tax to an investment in the Notes.
Foreign Account Tax Compliance Act. The
Foreign Account Tax Compliance Act (“FATCA”) was enacted on March 18, 2010, and imposes a 30% U.S. withholding
tax on “withholdable payments” (i.e., certain U.S.-source payments, including interest (and original issue discount),
dividends, other fixed or determinable annual or periodical gain, profits, and income, and on the gross proceeds from a
disposition of property of a type which can produce U.S.-source interest or dividends) and “passthru payments”
(i.e., certain payments attributable to withholdable payments) made to certain foreign financial institutions (and certain of
their affiliates) unless the payee foreign financial institution agrees (or is required), among other things, to disclose
the identity of any U.S. individual with an account of the institution (or the relevant affiliate) and to annually report
certain information about such account. FATCA also requires withholding agents making withholdable payments to certain
foreign entities that do not disclose the name, address, and taxpayer identification number of any substantial U.S. owners
(or do not certify that they do not have any substantial U.S. owners) to withhold tax at a rate of 30%. Under certain
circumstances, a holder may be eligible for refunds or credits of such taxes.
Pursuant to final and temporary Treasury regulations and other IRS guidance,
the withholding and reporting requirements under FATCA will generally apply to certain “withholdable payments”, will
not apply to gross proceeds on a sale or disposition, and will apply to certain foreign passthru payments only to the extent that
such payments are made after the date that is two years after final regulations defining the term “foreign passthru payment”
are published. If withholding is required, we (or the applicable paying agent) will not be required to pay additional amounts with
respect to the amounts so withheld. Foreign financial institutions and non-financial foreign entities located in jurisdictions
that have an intergovernmental agreement with the U.S. governing FATCA may be subject to different rules.
Investors should consult their tax advisors about the application of FATCA,
in particular if they may be classified as financial institutions (or if they hold their Notes through a foreign entity) under
the FATCA rules.
Proposed Legislation. In 2007, legislation
was introduced in Congress that, if it had been enacted, would have required holders of Notes purchased after the bill was
enacted to accrue interest income over the term of the Notes despite the fact that there may not be interest payments over
the entire term of the Notes.
Furthermore, in 2013, the House Ways and Means Committee released in draft
form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this legislation generally
would have been to require instruments such as the Notes to be marked to market on an annual basis with all gains and losses to
be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar or identical bills will
be enacted in the future, or whether any such bill would affect the tax treatment of your Notes. You are urged to consult your
tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your Notes.
Both U.S. and non-U.S. holders are urged to consult their tax advisors
concerning the application of U.S. federal income tax laws to their particular situations, as well as any tax consequences of the
purchase, beneficial ownership and disposition of the Notes arising under the laws of any state, local, non-U.S. or other taxing
jurisdiction.
Supplemental
Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
We will agree to sell to UBS Securities LLC, and UBS Securities LLC
will agree to purchase, all of the Notes at the issue price to the public less the underwriting discount indicated on the cover
hereof. UBS Securities LLC intends to resell the Notes to one or more third-party dealers at a discount from the issue price to
public equal to the underwriting discount indicated on the cover hereof. Certain of such other third-party dealers may resell the
Notes to other securities dealers at the issue price to the public less an underwriting discount up to the underwriting discount
indicated on the cover hereof. Certain unaffiliated registered investment advisers or fee-based advisory accounts may purchase
Notes from a third-party dealer at a purchase price of at least $975.00 per principal amount of the Notes, and such third-party
dealer, with respect to such sales, may forgo some or all of the underwriting discount. Additionally, we or one of our affiliates
will pay a fee to an unaffiliated broker-dealer for providing certain electronic platform services with respect to this offering.
Conflicts of Interest — UBS
Securities LLC is an affiliate of UBS and, as such, has a “conflict of interest” in this offering within the meaning
of Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition, UBS will receive the net proceeds
(excluding the underwriting discount) from the initial public offering of the Notes, thus creating an additional conflict of interest
within the meaning of FINRA Rule 5121. Consequently, the offering is being conducted in compliance with the provisions of FINRA
Rule 5121. UBS Securities LLC is not permitted to sell Notes in this offering to an account over which it exercises discretionary
authority without the prior specific written approval of the account holder.
UBS Securities LLC and its affiliates
may offer to buy or sell the Notes in the secondary market (if any) at prices greater than UBS’ internal valuation —
The value of the Notes at any time will vary based on many factors that cannot be predicted. However, the price (not including
UBS Securities LLC’s or any affiliate’s customary bid-ask spreads) at which UBS Securities LLC or any affiliate would
offer to buy or sell the Notes immediately after the trade date in the secondary market is expected to exceed the estimated initial
value of the Notes as determined by reference to our internal pricing models. The amount of the excess will decline to zero on
a straight line basis over a period ending no later than 6 months after the trade date, provided that UBS Securities LLC may shorten
the period based on various factors, including the magnitude of purchases and other negotiated provisions with selling agents.
Notwithstanding the foregoing, UBS Securities LLC and its affiliates are not required to make a market for the Notes and may stop
making a market at any time. For more information about secondary market offers and the estimated initial value of the Notes,
see “Key Risks — Fair value considerations” and “Key Risks — Limited or no secondary market and
secondary market price considerations” herein.
Prohibition of Sales to EEA Retail
Investors — The Notes are not intended to be offered, sold or otherwise made available to and should not be offered,
sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes,
a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive
2014/65/EU, as amended (“MiFID II”); (ii) a customer within the meaning of Directive 2002/92/EC, as amended, where
that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a
qualified investor as defined in Directive 2003/71/EC, as amended. Consequently no key information document required by Regulation
(EU) No 1286/2014, as amended (the “PRIIPs Regulation”), for offering or selling the Notes or otherwise making them
available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them
available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
You should rely only on the information incorporated by reference or provided in
this preliminary pricing supplement, 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 Notes in any state where the offer is not permitted. You should not assume that the information in this preliminary pricing supplement is accurate
as of any date other than the date on the front of the document.
TABLE OF CONTENTS
Preliminary Pricing Supplement
Investment Description
|
i
|
Features
|
i
|
Key Dates
|
i
|
Note Offering
|
i
|
Additional Information about UBS and the Notes
|
ii
|
Investor Suitability
|
1
|
Preliminary Terms
|
2
|
Investment Timeline
|
3
|
Observation Dates and Coupon Payment Dates
|
4
|
Key Risks
|
5
|
Hypothetical Examples of How the Notes Might Perform
|
9
|
Information about the Underlying Asset
|
11
|
What Are the Tax Consequences of the Notes?
|
12
|
Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
|
15
|
Product Supplement
Product Supplement Summary
|
PS-1
|
Specific Terms of Each Security Will Be Described in the Applicable Supplements
|
PS-1
|
The Securities are Part of a Series
|
PS-1
|
Denomination
|
PS-2
|
Coupons
|
PS-2
|
Early Redemption
|
PS-3
|
Payment at Maturity for the Securities
|
PS-3
|
Defined Terms Relating to Payment on the Securities
|
PS-4
|
Valuation Dates
|
PS-5
|
Valuation Periods
|
PS-6
|
Payment Dates
|
PS-6
|
Closing Level
|
PS-7
|
Intraday Level
|
PS-7
|
What are the Tax Consequences of the Securities?
|
PS-8
|
Risk Factors
|
PS-9
|
General Terms of the Securities
|
PS-29
|
Use of Proceeds and Hedging
|
PS-52
|
Material U.S. Federal Income Tax Consequences
|
PS-53
|
Certain ERISA Considerations
|
PS-75
|
Supplemental Plan of Distribution (Conflicts
of Interest)
|
PS-76
|
Prospectus
Introduction
|
1
|
Cautionary Note Regarding Forward-Looking Statements
|
3
|
Incorporation of Information About UBS AG
|
4
|
Where You Can Find More Information
|
5
|
Presentation of Financial Information
|
6
|
Limitations on Enforcement of U.S. Laws Against UBS, Its Management and Others
|
6
|
UBS
|
7
|
Swiss Regulatory Powers
|
10
|
Use of Proceeds
|
11
|
Description of Debt Securities We May Offer
|
12
|
Description of Warrants We May Offer
|
32
|
Legal Ownership and Book-Entry Issuance
|
47
|
Considerations Relating to Indexed Securities
|
52
|
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency
|
55
|
U.S. Tax Considerations
|
58
|
Tax Considerations Under the Laws of Switzerland
|
69
|
Benefit Plan Investor Considerations
|
71
|
Plan of Distribution
|
73
|
Conflicts of Interest
|
75
|
Validity of the Securities
|
76
|
Experts
|
76
|
$•
UBS AG
Trigger Autocallable Contingent Yield Notes
due on or about
June 15, 2023
Preliminary Pricing Supplement dated
June 2, 2020
(To Product Supplement dated October 31, 2018
and Prospectus dated October 31, 2018)
UBS Investment Bank
UBS Securities LLC
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