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 Assets ” herein for more information on the underlying assets. You should also review carefully the
“Key Risks” section herein for risks related to an investment in the Notes.
Preliminary
Terms
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Issuer:
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UBS AG London Branch
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Principal Amount:
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$10 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 Assets:
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The Dow Jones Industrial Average® and the Russell 2000® Index
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Contingent Coupon and Contingent Coupon Rate:
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If the closing level of each underlying asset is
equal to or greater than its coupon barrier on any observation date (including the final valuation date), UBS will pay you
the contingent coupon applicable to such observation date on the related coupon payment date.
If the closing level of any underlying asset is
less than its 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 periodic 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 each Note that would be applicable
to each observation date on which the closing level of each underlying asset is greater than or equal to its coupon barrier. The
actual contingent coupon rate and contingent coupon will be set on the trade date.
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Contingent Coupon Rate
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9.00% to 9.85%
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Contingent Coupon
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$0.2250 to $0.2463
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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 any underlying asset is less than its coupon barrier.
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Automatic Call Feature:
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UBS will automatically call the Notes if the closing
level of each underlying asset on any observation date (quarterly, beginning after 6 months) prior to the final valuation date
is equal to or greater than its 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. 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 of each underlying asset is equal to or greater than its downside threshold, UBS will pay you a cash payment
equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call
and the final level of any underlying asset is less than its downside threshold, UBS will pay you a cash payment that is less
than the principal amount, if anything, equal to:
$10 x (1+ Underlying Return of the Least Performing
Underlying Asset)
In such a case, you will suffer a percentage loss
on your initial investment equal to the underlying return of the least performing underlying asset regardless of the underlying
return of any other underlying asset and, in extreme situations, you could lose all of your initial investment.
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Least Performing Underlying Asset:
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The underlying asset with the lowest underlying return as compared to the other underlying asset(s)
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Underlying Return:
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For each underlying asset, 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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For each underlying asset, a specified level of the underlying asset that is less than its initial level, equal to a percentage of its initial level, as indicated on the cover hereof.
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Coupon Barrier:(1)
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For each underlying asset, a specified level of the underlying asset that is less than its initial level, equal to a percentage of its initial level, as indicated on the cover hereof.
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Initial Level:(1)
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The closing level of each underlying asset on the trade date.
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Final Level:(1)
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The closing level of each 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 as described under “General
Terms of the Securities — Discontinuance of or Adjustments to an Underlying Index; Alteration of Method of Calculation”
in the accompanying product supplement.
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Investment
Timeline
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Trade Date
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The initial level of each underlying asset is observed and the final terms of the Notes are set.
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¯
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Observation Dates (Quarterly, callable after 6 months)
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If the closing level of each underlying asset is equal
to or greater than its 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 each underlying asset on any observation date (quarterly, beginning after 6 months) prior to the final valuation
date is equal to or greater than its initial level.
If the Notes are subject to an automatic call, UBS
will pay you a cash payment per Note equal to $10 plus the contingent coupon otherwise due on such date.
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¯
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Maturity Date
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The final level of each underlying asset is observed
on the final valuation date.
If the Notes are not subject to an automatic call
and the final level of each underlying asset is equal to or greater than its downside threshold, UBS will pay you a cash payment
per Note equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call
and the final level of any underlying asset is less than its downside threshold, UBS will pay you a cash payment per Note that
is less than the principal amount, if anything, equal to:
$10 x (1+ Underlying Return of the Least Performing
Underlying Asset)
In such a case, you will suffer a percentage loss
on your initial investment equal to the underlying return of the least performing underlying asset regardless of the underlying
return of any other underlying asset 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 of any underlying asset is less than its downside threshold, you will lose a percentage of your principal
amount equal to the underlying return of the least performing underlying asset and, in extreme situations, you could lose all of
your initial investment. You will be exposed to the market risk of each underlying asset on each observation date and on the final
valuation date and any decline in the level of one underlying asset may negatively affect your return and will not be offset or
mitigated by a lesser decline or any potential increase in the level of any other underlying asset.
Observation
Dates(1) and Coupon Payment Dates(1)(2)(3)
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Observation Dates
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Coupon Payment Dates
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September 8, 2020*
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September 10, 2020*
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December 7, 2020*
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December 9, 2020
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March 5, 2021
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March 9, 2021
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June 7, 2021
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June 9, 2021
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September 7, 2021
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September 9, 2021
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December 6, 2021
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December 8, 2021
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March 7, 2022
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March 9, 2022
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June 6, 2022
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June 8, 2022
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September 6, 2022
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September 8, 2022
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December 5, 2022
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December 7, 2022
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March 6, 2023
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March 8, 2023
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Final Valuation Date
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Maturity Date
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*
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The Notes are not callable until the first potential call settlement date, which is December 9,
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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Two 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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(3)
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If you are able to sell the Notes in the secondary market on an observation date, the purchaser
of the Notes will be deemed to be the record holder on the applicable record date and therefore you will not be entitled to any
payment attributable to that observation date.
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Key
Risks
An investment in the Notes involves significant
risks. Investing in the Notes is not equivalent to a hypothetical investment in the least performing underlying asset or its underlying
constituents. Some of the 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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·
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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 of any underlying asset
is less than its downside threshold, you will lose a percentage of your principal amount
equal to the underlying return of the least performing underlying asset and, in extreme
situations, you could lose all of your initial investment.
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·
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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 level of each underlying asset is equal to or greater than its
downside threshold. All payments on the Notes are subject to the creditworthiness of
UBS.
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·
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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 each underlying asset is equal to or greater than its coupon
barrier. If the closing level of any underlying asset is less than its coupon barrier
on any observation date, UBS will not pay you the contingent coupon applicable to such
observation date. If the closing level of any underlying asset is less than its 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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·
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Your potential return on the
Notes is limited to the contingent coupons and you will not participate in any appreciation
of any underlying asset or underlying constituents — The return potential of
the Notes is limited to the pre-specified contingent coupon rate, regardless of any appreciation
of any underlying asset. In addition, your return on the Notes will vary based on the
number of observation dates, if any, on 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 least performing underlying asset even though you cannot
participate in any appreciation of any underlying asset or underlying constituents. As
a result, the return on an investment in the Notes could be less than the return on a
hypothetical direct investment in any or all of the underlying assets or underlying constituents.
In addition, as an owner of the Notes, you will not have voting rights or any other rights
of a holder of the underlying constituents.
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·
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A higher contingent coupon
rate or lower downside thresholds or coupon barriers may reflect greater expected volatility
of the underlying assets, and greater expected volatility generally indicates an increased
risk of loss at maturity — The economic terms for the Notes, including the
contingent coupon rate, coupon barriers and downside thresholds, are based, in part,
on the expected volatility of each underlying asset at the time the terms of the Notes
are set. “Volatility” refers to the frequency and magnitude of changes in
the level of each underlying asset. The greater the expected volatility of each underlying
asset as of the trade date, the greater the expectation is as of that date that the closing
level of each underlying asset could be less than its coupon barrier on any observation
date and that the final level of each underlying asset could be less than its 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 lower downside
thresholds and/or coupon barriers than those terms on otherwise comparable securities.
Therefore, a relatively higher contingent coupon rate may indicate an increased risk
of loss. Further, relatively lower downside threshold(s) and/or coupon barrier(s) may
not necessarily indicate that the Notes have a greater likelihood of a return of principal
at maturity and/or paying contingent coupons. You should be willing to accept the downside
market risk of the least performing underlying asset and the potential to lose a significant
portion or all of your initial investment.
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·
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Reinvestment risk —
The Notes will be subject to an automatic call if the closing level of each underlying
asset is equal to or greater than its 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 an underlying asset and the shorter time remaining for
the level of any such underlying asset to recover. Such periods generally coincide with
a period of greater risk of principal loss on your Notes.
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·
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You are exposed to the market
risk of each underlying asset — Your return on the Notes is not linked to a
basket consisting of the underlying assets. Rather, it will be contingent upon the performance
of each individual underlying asset. Unlike an instrument with a return linked to a basket
of indices, common stocks or other underlying securities, in which risk is mitigated
and diversified among all of the components of the basket, you will be exposed equally
to the risks related to each underlying asset. Poor performance by any underlying asset
over the term of the Notes will negatively affect your return and will not be offset
or mitigated by a positive performance by any other underlying asset. For instance, you
may receive a negative return equal to the underlying return of the least performing
underlying asset if the closing level of one underlying asset is less than its downside
threshold on the final valuation date, even if the underlying return of any other underlying
asset is positive or has not declined as much. Accordingly, your investment is subject
to the market risk of each underlying asset.
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·
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Because the Notes are linked
to the least performing underlying asset, you are exposed to a greater risk of no contingent
coupons and losing a significant portion or all of your initial investment at maturity
than if the Notes were linked to only one underlying asset — The risk that
you will not receive any contingent coupons and lose a significant portion or all of
your initial investment in the Notes is greater if you invest in the Notes than the risk
of investing in substantially similar securities that are linked to the performance of
only one underlying asset. With more underlying assets, it is more likely that the closing
level of any underlying asset will be less than its coupon barrier on any observation
date or decline to a closing level that is less than its downside threshold than if the
Notes were linked to only one underlying asset.
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In addition, the lower the correlation is
between the performance of a pair of underlying assets, the more likely it is that one of the underlying assets will decline in
value to a closing level or final level, as applicable, that is less than its coupon barrier or downside threshold on any observation
date or on a final valuation date, respectively. Although the correlation of the underlying assets’ performance may change
over the term of the Notes, the economic terms of the Notes, including the contingent coupon rate, downside threshold and coupon
barrier are determined, in part, based on the correlation of the underlying assets’ performance calculated using our internal
models at the time when the terms of the Notes are finalized. All things being equal, a higher contingent coupon rate and lower
downside threshold and coupon barrier is generally associated with lower correlation of the underlying assets. Therefore, if the
performance of a pair of underlying assets is not correlated to each other or is negatively correlated, the risk that you will
not receive any contingent coupons or that the final level of any underlying asset is less than its downside threshold will occur
is even greater despite a lower downside threshold and coupon barrier. Therefore, it is more likely that you will not receive any
contingent coupons and that you will lose a significant portion or all of your initial investment at maturity.
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·
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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 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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·
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Market risk — The
return on the Notes, which may be negative, is directly linked to the performance of
the underlying assets and indirectly linked to the value of the underlying constituents.
The level of the underlying assets can rise or fall sharply due to factors specific to
the underlying assets and its underlying constituents and their issuers (each, an “underlying
constituent issuer”), such as stock price volatility, earnings and financial conditions,
corporate, industry and regulatory developments, management changes and decisions and
other events, as well as general market factors, such as general stock market or commodity
market 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 constituent issuers and, therefore, the underlying
assets. You, as an investor in the Notes, should conduct your own investigation into
the underlying assets and underlying constituents.
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·
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Fair value considerations.
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o
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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 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 levels and volatility of the underlying
assets and underlying constituents, the correlation of the underlying assets, any expected
dividends of the underlying constituents, if applicable, prevailing interest rates, the
term of the Notes and our internal funding rate. Our internal funding rate is typically
lower than the rate we would pay to issue conventional fixed or floating rate debt securities
of a similar term. The underwriting discount, hedging costs, issuance costs, projected
profits and the difference in rates will reduce the economic value of the Notes to you.
Due to these factors, the estimated initial value of the Notes as of the trade date will
be less than the issue price you pay for the Notes.
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o
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The
estimated initial value is a theoretical price; the actual price that you may be able
to sell your Notes in any secondary market (if any) at any time after the trade date
may differ from the estimated initial value — The value of your Notes at any
time will vary based on many factors, including the factors described above and in “—Market
risk” above and is impossible to predict. Furthermore, the pricing models that
we use are proprietary and rely in part on certain assumptions about future events, which
may prove to be incorrect. As a result, after the trade date, if you attempt to sell
the Notes in the secondary market, the actual value you would receive may differ, perhaps
materially, from the estimated initial value of the Notes determined by reference to
our internal pricing models. The estimated initial value of the Notes does not represent
a minimum or maximum price at which we or any of our affiliates would be willing to purchase
your Notes in any secondary market at any time.
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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 Notes as of the trade date — We may determine
the economic terms of the Notes, as well as hedge our obligations, at least in part,
prior to the trade date. In addition, there may be ongoing costs to us to maintain and/or
adjust any hedges and such hedges are often imperfect. Therefore, our actual profits
(or potentially, losses) in issuing the Notes cannot be determined as of the trade date
and any such differential between the estimated initial value and the issue price of
the Notes as of the trade date does not reflect our actual profits. Ultimately, our actual
profits will be known only at the maturity of the Notes.
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·
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Limited or no secondary market and secondary market price considerations.
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o
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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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o
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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 statement — For a limited period of time following the issuance of
the Notes, UBS Securities LLC or its affiliates may offer to buy or sell such Notes at
a price that exceeds (i) our valuation of the Notes at that time based on our internal
pricing models, (ii) any secondary market prices provided by unaffiliated dealers (if
any) and (iii) depending on your broker, the valuation provided on customer account statements.
The price that UBS Securities LLC may initially offer to buy such Notes following issuance
will exceed the valuations indicated by our internal pricing models due to the inclusion
for a limited period of time of the aggregate value of the underwriting discount, hedging
costs, issuance costs and theoretical projected trading profit. The portion of such amounts
included in our price will decline to zero on a straight line basis over a period ending
no later than the date specified under “Supplemental Plan of Distribution (Conflicts
of Interest); Secondary Markets (if any)”. Thereafter, if UBS Securities LLC or
an affiliate makes secondary markets in the Notes, it will do so at prices that reflect
our estimated value determined by reference to our internal pricing models at that time.
The temporary positive differential relative to our internal pricing models arises from
requests from and arrangements made by UBS Securities LLC with the selling agents of
structured debt securities such as the Notes. As described above, UBS Securities LLC
and its affiliates intend, but are not required, to make a market for the Notes and may
stop making a market at any time. The price at which UBS Securities LLC or an affiliate
may make secondary markets at any time (if at all) will also reflect its then current
bid-ask spread for similar sized trades of structured debt securities. UBS Financial
Services Inc. and UBS Securities LLC reflect this temporary positive differential on
their customer statements. Investors should inquire as to the valuation provided on customer
account statements provided by unaffiliated dealers.
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Economic
and market factors affecting the terms and market price of Notes prior to maturity —
Because structured notes, including the Notes, can be thought of as having a debt component
and a derivative component, factors that influence the values of debt instruments and
options and other derivatives will also affect the terms and features of the Notes at
issuance and the market price of the Notes prior to maturity. These factors include the
levels of the underlying assets and their underlying constituents; the volatility of
the underlying assets and their underlying constituents; the correlation of the underlying
assets; the dividend rate paid on the underlying constituents, if applicable; the time
remaining to the maturity of the Notes; interest rates in the markets; geopolitical conditions
and economic, financial, political, force majeure and regulatory or judicial events;
whether each of the underlying assets is currently or has been less than its coupon barrier;
the availability of comparable instruments; the creditworthiness of UBS; the then current
bid-ask spread for the Notes and the factors discussed under “— Potential
conflict of interest” below. These and other factors are unpredictable and interrelated
and may offset or magnify each other.
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Impact
of fees and the use of internal funding rates rather than secondary market credit spreads
on secondary market prices — All other things being equal, the use of the internal
funding rates described above under “— Fair value considerations” as
well as the inclusion in the issue price of the underwriting discount, hedging costs,
issuance costs and any projected profits are, subject to the temporary mitigating effect
of UBS Securities LLC’s and its affiliates’ market making premium, expected
to reduce the price at which you may be able to sell the Notes in any secondary market.
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·
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There can be no assurance that
the investment view implicit in the Notes will be successful — It is impossible
to predict whether and the extent to which the levels of the underlying assets will rise
or fall and there can be no assurance that the closing level of each underlying asset
will be equal to or greater than its coupon barrier on any observation date, or, if the
Notes are not subject to an automatic call, that the final level of each underlying asset
will be equal to or greater than its downside threshold. The level of each underlying
asset will be influenced by complex and interrelated political, economic, financial and
other factors that affect the underlying constituent issuers. You should be willing to
accept the downside risks associated with the relevant markets tracked by each such underlying
asset in general and the underlying assets and its underlying constituents in particular,
and the risk of losing a significant portion or all of your initial investment.
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·
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The Notes are subject to small-capitalization
stock risks — The Notes are subject to risks associated with small-capitalization
companies because the Russell 2000® Index is comprised of stocks of companies
that may be considered small-capitalization companies. These companies often have greater
stock price volatility, lower trading volume and less liquidity than large-capitalization
companies and therefore the underlying asset may be more volatile than an index in which
a greater percentage of the underlying constituents are issued by large-capitalization
companies. Stock prices of small-capitalization companies are also more vulnerable than
those of large-capitalization companies to adverse business and economic developments,
and the stocks of small-capitalization companies may be thinly traded. In addition, small-capitalization
companies are typically less stable financially than large-capitalization companies and
may depend on a small number of key personnel, making them more vulnerable to loss of
personnel. Small-capitalization companies are often given less analyst coverage and may
be in early, and less predictable, periods of their corporate existences. Such companies
tend to have smaller revenues, less diverse product lines, smaller shares of their product
or service markets, fewer financial resources and less competitive strengths than large-capitalization
companies and are more susceptible to adverse developments related to their products.
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·
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UBS cannot control actions
by the index sponsors and the index sponsors have no obligation to consider your interests
— UBS and its affiliates are not affiliated with the index sponsors and have
no ability to control or predict their actions, including any errors in or discontinuation
of public disclosure regarding methods or policies relating to the calculation of the
underlying assets. The index sponsors are not involved in the Notes offering in any way
and have no obligation to consider your interest as an owner of the Notes in taking any
actions that might affect the market value of, and any amount payable on, your Notes.
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The underlying assets reflect
price return, not total return — The return on your Notes is based on the performance
of the underlying assets, which reflect the changes in the market prices of the underlying
constituents. They are not, however, linked to a “total return” index or
strategy, which, in addition to reflecting those price returns, would also reflect dividends
paid on the underlying constituents. The return on your Notes will not include such a
total return feature or dividend component.
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·
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Changes affecting the underlying
assets could have an adverse effect on the value of, and any amount payable on, the Notes
— The policies of each index sponsor as specified under “Information
About the Underlying Assets” (together, the "index sponsors"), concerning
additions, deletions and substitutions of the underlying constituents and the manner
in which the index sponsor takes account of certain changes affecting those underlying
constituents may adversely affect the levels of the underlying assets. The policies of
the index sponsors with respect to the calculation of the underlying assets could also
adversely affect the levels of the underlying assets. The index sponsors may discontinue
or suspend calculation or dissemination of the underlying assets. Any such actions could
have an adverse effect on the market value of, and any amount payable on, the Notes.
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Potential UBS impact on the
underlying assets — Trading or transactions by UBS or its affiliates in the
underlying assets or any underlying constituent, listed and/or over-the-counter options,
futures, exchange-traded funds or other instruments with returns linked to the performance
of the underlying assets or any underlying constituent, may adversely affect the levels
of the underlying assets and, therefore, the market value of, and any amount payable
on, the Notes.
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Potential conflict of interest
— UBS and its affiliates may engage in business with an underlying asset issuer
or any underlying constituent 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 assets. The calculation agent can postpone the determination
of the initial level, closing level or final level of any underlying asset (and therefore
the settlement date, the related coupon payment date or the maturity date, as applicable),
on the trade date, any observation date or the final valuation date, respectively, if
a market disruption event occurs and is continuing on such date. As UBS determines the
economic terms of the Notes, including the contingent coupon rate, downside threshold
and coupon barrier, and such terms include the underwriting discount, hedging costs,
issuance costs and projected profits, the Notes represent a package of economic terms.
There are other potential conflicts of interest insofar as an investor could potentially
get better economic terms if that investor entered into exchange-traded and/or OTC derivatives
or other instruments with third parties, assuming that such instruments were available
and the investor had the ability to assemble and enter into such instruments.
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Potentially inconsistent research,
opinions or recommendations by UBS — UBS and its affiliates publish research
from time to time on financial markets and other matters that may influence the value
of 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 assets to which the Notes
are linked.
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The Notes are not bank deposits
— An investment in the Notes carries risks which are very different from the
risk profile of a bank deposit placed with UBS or its affiliates. The Notes have different
yield and/or return, liquidity and risk profiles and would not benefit from any protection
provided to deposits.
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If UBS experiences financial
difficulties, FINMA has the power to open restructuring or liquidation proceedings in
respect of, and/or impose protective measures in relation to, UBS, which proceedings
or measures may have a material adverse effect on the terms and market value of the Notes
and/or the ability of UBS to make payments thereunder — The Swiss Financial
Market Supervisory Authority (“FINMA”) has broad statutory powers to take
measures and actions in relation to UBS if (i) it concludes that there is justified concern
that UBS is over-indebted or has serious liquidity problems or (ii) UBS fails to fulfill
the applicable capital adequacy requirements (whether on a standalone or consolidated
basis) after expiry of a deadline set by FINMA. If one of these pre-requisites is met,
FINMA is authorized to open restructuring proceedings or liquidation (bankruptcy) proceedings
in respect of, and/or impose protective measures in relation to, UBS. The Swiss Banking
Act grants significant discretion to FINMA in connection with the aforementioned proceedings
and measures. In particular, a broad variety of protective measures may be imposed by
FINMA, including a bank moratorium or a maturity postponement, which measures may be
ordered by FINMA either on a stand-alone basis or in connection with restructuring or
liquidation proceedings. The resolution regime of the Swiss Banking Act is further detailed
in the FINMA Banking Insolvency Ordinance (“BIO-FINMA”). In a restructuring
proceeding, FINMA, as resolution authority, is competent to approve the resolution plan.
The resolution plan may, among other things, provide for (a) the transfer of all or a
portion of UBS’ assets, debts, other liabilities and contracts (which may or may
not include the contractual relationship between UBS and the holders of Notes) to another
entity, (b) a stay (for a maximum of two business days) on the termination of contracts
to which UBS is a party, and/or the exercise of (w) rights to terminate, (x) netting
rights, (y) rights to enforce or dispose of collateral or (z) rights to transfer claims,
liabilities or collateral under contracts to which UBS is a party, (c) the conversion
of UBS’ debt and/or other obligations, including its obligations under the Notes,
into equity (a “debt-to-equity” swap), and/or (d) the partial or full write-off
of obligations owed by UBS (a “write-off”), including its obligations under
the Notes. The BIO-FINMA provides that a debt-to-equity swap and/or a write-off of debt
and other obligations (including the Notes) may only take place after (i) all debt instruments
issued by UBS qualifying as additional tier 1 capital or tier 2 capital have been converted
into equity or written-off, as applicable, and (ii) the existing equity of UBS has been
fully cancelled. While the BIO-FINMA does not expressly address the order in which a
write-off of debt instruments other than debt instruments qualifying as additional tier
1 capital or tier 2 capital should occur, it states that debt-to-equity swaps should
occur in the following order: first, all subordinated claims not qualifying as regulatory
capital; second, all other claims not excluded by law from a debt-to-equity swap (other
than deposits); and third, deposits (in excess of the amount privileged by law). However,
given the broad discretion granted to FINMA as the resolution authority, any restructuring
plan in respect of UBS could provide that the claims under or in connection with the
Notes will be partially or fully converted into equity or written-off, while preserving
other obligations of UBS that rank pari passu with, or even junior to, UBS’ obligations
under the Notes. Consequently, holders of Notes may lose all or some of their investment
in the Notes. In the case of restructuring proceedings with respect to a systemically
important Swiss bank (such as UBS), the creditors whose claims are affected by the restructuring
plan will not have a right to vote on, reject, or seek the suspension of the restructuring
plan. In addition, if a restructuring plan has been approved by FINMA, the rights of
a creditor to seek judicial review of the restructuring plan (e.g., on the grounds that
the plan would unduly prejudice the rights of holders of Notes or otherwise be in violation
of the Swiss Banking Act) are very limited. In particular, a court may not suspend the
implementation of the restructuring plan. Furthermore, even if a creditor successfully
challenges the restructuring plan, the court can only require the relevant creditor to
be compensated ex post and there is currently no guidance as to on what basis such compensation
would be calculated or how it would be funded.
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Dealer incentives —
UBS and its affiliates act in various capacities with respect to the Notes. We and our
affiliates may act as a principal, agent or dealer in connection with the sale of the
Notes. Such affiliates, including the sales representatives, will derive compensation
from the distribution of the Notes and such compensation may serve as an incentive to
sell these Notes instead of other investments. We will pay total underwriting compensation
in an amount equal to the underwriting discount listed on the cover hereof per Note to
any of our affiliates acting as agents or dealers in connection with the distribution
of the Notes. Given that UBS Securities LLC and its affiliates temporarily maintain a
market making premium, it may have the effect of discouraging UBS Securities LLC and
its affiliates from recommending sale of your Notes in the secondary market.
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Uncertain tax treatment —
Significant aspects of the tax treatment of the Notes are uncertain. You should consult
your tax advisor about your tax situation. See “What Are the Tax Consequences of
the Notes?” herein and “Material U.S. Federal Income Tax Consequences”,
including the section “— Securities Treated as Prepaid Derivatives or Prepaid
Forwards with Associated Contingent Coupons”, in the accompanying product supplement.
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Hypothetical
Examples of How the Notes Might Perform
The below examples are based on hypothetical terms.
The actual terms will be set on the trade date and will be indicated on the cover of the final pricing supplement. The examples
below illustrate the payment upon a call or at maturity for a $10 Note on a hypothetical offering of the Notes, with the following
assumptions (amounts may have been rounded for ease of reference):
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Principal Amount:
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$10
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Term:
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Approximately 3 years
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Contingent Coupon Rate:
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6.00% per annum (or 1.50% per quarter)
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Contingent Coupon:
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$0.15 per quarter
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Observation Dates:
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Quarterly (callable after 6 months)
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Initial Level:
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Underlying Asset A
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21,100.00
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Underlying Asset B
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1,300.000
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Downside Threshold:
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Underlying Asset A
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14,770.00 (which is 70.00% of its initial level)
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Underlying Asset B
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910.000 (which is 70.00% of its initial level)
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Coupon Barrier:
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Underlying Asset A
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14,770.00 (which is 70.00% of its initial level)
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Underlying Asset B
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910.000 (which is 70.00% of its initial level)
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Example 1 — The Closing Level of each Underlying
Asset is equal to or greater than its Initial Level on the Observation Date corresponding to the first potential Call Settlement
Date
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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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Underlying Asset A: 23,300.00 (equal to or greater
than Initial Level and Coupon Barrier)
Underlying Asset B: 1,500.000 (equal to or greater
than Initial Level and Coupon Barrier)
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$0.15 (Contingent Coupon – Not Callable)
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Second Observation Date
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Underlying Asset A: 22,200.00 (equal to or greater
than Initial Level and Coupon Barrier)
Underlying Asset B: 1,400.000 (equal to or greater
than Initial Level and Coupon Barrier)
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$10.15 (Call Settlement Amount)
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Total Payment:
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$10.30 (a 3.00% total return)
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Because the Notes are subject to an automatic call
on the first potential call settlement date (which is approximately 6 months after the trade date and is the first observation
date on which the Notes are callable), UBS will pay you on the call settlement date a total of $10.15 per Note, reflecting your
principal amount plus the applicable contingent coupon. When added to the contingent coupon of $0.15 received in respect of the
prior observation date, UBS will have paid you a total of $10.30 per Note, for a 3.00% total return on the Notes. No further amount
will be owed to you under the Notes.
Example 2 — Notes are NOT subject to an Automatic
Call and the Final Level of each Underlying Asset is equal to or greater than its Downside Threshold and Coupon Barrier
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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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Underlying Asset A: 24,000.00 (equal to or greater
than Initial Level and Coupon Barrier)
Underlying Asset B: 1,450.000 (equal to or greater
than Initial Level and Coupon Barrier)
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$0.15 (Contingent Coupon – Not Callable)
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Second Observation Date through Eleventh Observation Date
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Underlying Asset A: Various (all less than Initial
Level and Coupon Barrier)
Underlying Asset B: Various (all equal to or greater
than Initial Level and Coupon Barrier)
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$0.00
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Final Valuation Date
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Underlying Asset A: 14,800.00 (equal to or greater
than Downside Threshold and Coupon Barrier)
Underlying Asset B: 920.000 (equal to or greater than
Downside Threshold and Coupon Barrier)
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$10.15 (Payment at Maturity)
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Total Payment:
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$10.30 (a 3.00% total return)
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Because the Notes are not subject to an automatic
call and the final level of each underlying asset is equal to or greater than its downside threshold and coupon barrier, at maturity,
UBS will pay you a total of $10.15 per Note, reflecting your principal amount plus the applicable contingent coupon. When added
to the contingent coupon of $0.15 received in respect of the prior observation dates, UBS will have paid you a total of $10.30
per Note, for a 3.00% total return on the Notes.
Example 3 — Notes are NOT subject to an Automatic
Call and the Final Level of an Underlying Asset is less than its Downside Threshold
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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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Underlying Asset A: 14,900.00 (equal to or greater
than Coupon Barrier; less than Initial Level)
Underlying Asset B: 1,100.000 (equal to or greater
than Coupon Barrier; less than Initial Level)
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$0.15 (Contingent Coupon)
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Second Observation Date through Eleventh Observation Date
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Underlying Asset A: Various (all less than Initial
Level and Coupon Barrier)
Underlying Asset B: Various (all equal to or greater
than Initial Level and Coupon Barrier)
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$0.00
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Final Valuation Date
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Underlying Asset A: 8,440.00 (less than Downside Threshold
and Coupon Barrier)
Underlying Asset B: 1,600.000 (equal to or greater
than Initial Level)
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$10.00 × [1 + Underlying Return of the Least Performing Underlying
Asset] =
$10.00 × [1+(-60.00)%] =
$10.00 × 0.40 =
$4.00 (Payment at Maturity)
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Total Payment:
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$4.15 (a 58.50% loss)
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Because the Notes are not subject to an automatic
call and the final level of Underlying Asset A is less than its Downside Threshold, at maturity UBS will pay you $4.00 per Note.
When added to the contingent coupon of $0.15 received in respect of prior observation dates, UBS will have paid you $4.15 per Note
for a loss on the Notes of 58.50%.
We make no representation or warranty as to which
of the underlying assets will be the least performing underlying asset for the purposes of calculating your actual payment at maturity.
Investing in the Notes involves significant risks.
The Notes differ from ordinary debt securities in that UBS is not necessarily obligated to repay the full amount of your initial
investment. If the 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 of any underlying asset is less than its Downside
Threshold, you will lose a percentage of your principal amount equal to the underlying return of the least performing underlying
asset and, in extreme situations, you could lose all of your initial investment.
You will be exposed to the market risk of each
underlying asset on each observation date and on the final valuation date and any decline in the level of one underlying asset
may negatively affect your return and will not be offset or mitigated by a lesser decline or any potential increase in the level
of any other underlying asset. 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 Assets
Dow Jones Industrial Average®
We have derived all information regarding the Dow
Jones Industrial Average® (“INDU”) contained in this document, including, without limitation, its composition,
methods of calculation and changes in its components from publicly available information. Such information reflects the policies
of, and is subject to change by S&P Dow Jones Indices LLC (the “index sponsor” or "S&P Dow Jones Indices")
and/or its affiliates.
INDU is published by S&P Dow Jones, but S&P
Dow Jones has no obligation to continue to publish INDU, and may discontinue publication of INDU at any time. INDU is determined,
comprised and calculated by S&P Dow Jones without regard to the Notes.
As discussed more fully in the index supplement under
the heading “Underlying Indices and Underlying Index Publishers — Dow Jones Industrial Average®”,
INDU is a price-weighted index composed of 30 common stocks selected at the discretion of the Averages Committee. The Averages
Committee is comprised of composed of three representatives of S&P Dow Jones Indices and two representatives of The Wall Street
Journal. The Averages Committee selects the index components as the largest and leading stocks of the sectors that are representative
of the U.S. equity market. INDU does not include producers of goods and services in the transportation and utilities industries.
The Averages Committee may revise index policy covering rules for selecting companies, treatment of dividends, share counts or
other matters.
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 INDU.
Historical Information
The graph below illustrates the performance of INDU
for the period 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 INDU on June 1, 2020 was 25,475.02 (its “hypothetical initial level”). The dotted line represents
its hypothetical downside threshold and its hypothetical coupon barrier of 17,832.51, which is equal to 70.00% of its 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.
Russell 2000® Index
We have derived all information regarding the Russell
2000® Index (“RTY”) contained in this document, including, without limitation, its make-up, method of
calculation and changes in its components, from publicly available information. Such information reflects the policies of, and
is subject to change by the Frank Russell Company (the “index sponsor” or “FTSE Russell”).
RTY is published by FTSE Russell, but FTSE Russell
has no obligation to continue to publish RTY, and may discontinue publication of RTY at any time. RTY is determined, comprised
and calculated by FTSE Russell without regard to the Notes.
As discussed more fully in the index supplement under
the heading “Underlying Indices and Underlying Index Publishers – Russell 2000® Index,” RTY measures
the composite price performance of the smallest 2,000 companies included in the Russell 3000® Index. The Russell
3000® Index is composed of the 3,000 largest United States companies by market capitalization and represents approximately
98% of the market capitalization of the United States equity market. RTY’s value is calculated by adding the market values
of the underlying constituents and then dividing the derived total market capitalization by the “adjusted” capitalization
of RTY on the base date of December 31, 1986.
Information from outside sources is not incorporated
by reference in, and should not be considered part of, this document or any document incorporated herein by reference. UBS has
not conducted any independent review or due diligence of any publicly available information with respect to RTY.
Historical Information
The graph below illustrates the performance of RTY
for the period 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 RTY on June 1, 2020 was 1,405.372 (its “hypothetical initial level”). The dotted line represents
its hypothetical downside threshold and its hypothetical coupon barrier of 983.760, which is equal to 70.00% of its 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.
Correlation
of the Underlying Assets
The graph below illustrates the daily performance
of the underlying assets from January 1, 2010 through June 1, 2020. For comparison purposes, each underlying asset has been normalized
to have a closing level of 100 on January 1, 2010 by dividing the closing level of that underlying asset on each trading day by
the closing level of that underlying asset on January 1, 2010 and multiplying by 100. We obtained the closing levels used to determine
the normalized closing levels set forth below from Bloomberg, without independent verification.
The closer the relationship of the daily returns of
the underlying assets over a given period, the more positively correlated those underlying assets are. The lower (or more negative)
the correlation of the underlying assets, the less likely it is that those underlying assets will move in the same direction and
therefore, the greater the potential for one of those underlying assets to close below its coupon barrier or downside threshold
on an observation date or on the final valuation date, respectively. This is because the less positively correlated the underlying
assets are, the greater the likelihood that at least one of the underlying assets will decrease in value. However, even if the
underlying assets have a higher positive correlation, one or more of the underlying assets might close below its coupon barrier
or downside threshold on an observation date or the final valuation date, respectively, as the underlying assets may decrease in
value together. Although the correlation of the underlying assets’ performance may change over the term of the Notes, the
correlations referenced in setting the terms of the Notes are calculated using UBS’ internal models at the time when the
terms of the Notes are set and are not derived from the daily returns of the underlying assets over the period set forth below.
A higher contingent coupon rate is generally associated with lower correlation of the underlying assets, which reflects a greater
potential for missed contingent coupons and for a loss on your investment at maturity. See “Key Risks — A higher contingent
coupon rate or lower downside thresholds or coupon barriers may reflect greater expected volatility of each underlying asset, and
greater expected volatility generally indicates an increased risk of loss at maturity”, “— You are exposed to
the market risk of each underlying asset” and “— Because the Notes are linked to the least performing underlying
asset, you are exposed to a greater risk of no contingent coupons and losing a significant portion or all of your initial investment
at maturity than if the Notes were linked to only one underlying asset” herein.
Past performance of the underlying assets is not indicative
of the future performance of the underlying assets.
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”, 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
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 assets. If your
Notes are so treated, any contingent coupon that is paid by UBS (including on the maturity date or upon an automatic call) 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 determining our information reporting obligations, if any, we intend to treat the contingent coupons as ordinary income.
In addition, excluding amounts or proceeds attributable
to any contingent coupons, you should generally recognize gain or loss upon the taxable disposition of your Notes in an amount
equal to the difference between the amount you receive at such time (other than amounts or proceeds attributable to a contingent
coupon or any amount attributable to any accrued but unpaid contingent coupons) and the amount you paid for your Notes. Such gain
or loss should generally be long-term capital gain or loss if you have held your Notes for more than one year (otherwise such gain
or loss should be short-term capital gain or loss if held for one year or less). The deductibility of capital losses is subject
to limitations. Although uncertain, it is possible that proceeds received from the taxable disposition of your Notes prior to a
coupon payment date, but that could be attributed to an expected contingent coupon, could be treated as ordinary income. You should
consult your tax advisor regarding this risk.
Based on certain factual representations received
from us, our counsel, Cadwalader, Wickersham & Taft LLP, is of the opinion that it would be reasonable to treat your Notes
in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Notes,
it is possible that your Notes could alternatively be treated for tax purposes as a single contingent payment debt instrument,
or pursuant to some other characterization, such that the timing and character of your income from the Notes could differ materially
and adversely from the treatment described above, as described further under “Material U.S. Federal Income Tax Consequences”,
including the section “— Securities Treated as Prepaid Derivatives or Prepaid Forwards with Associated Contingent Coupons”,
in the accompanying product supplement unless and until such time as the IRS and the Treasury determine that some other treatment
is more appropriate.
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.
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 — 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.
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 the discussions below with respect to Section 871(m) of the Code and
FATCA, discussed below, our counsel is of the opinion that contingent coupons paid to a non-U.S. holder that provides us (and/or
the applicable withholding agent) with a fully completed and validly executed applicable IRS Form W-8 should not be subject to
U.S. withholding tax and we do not intend to withhold any tax on contingent coupons. However, it is possible that the IRS could
assert that such payments are subject to U.S. withholding tax, or that another withholding agent may otherwise determine that withholding
is required, in which case the other withholding agent may withhold up to 30% on such payments (subject to reduction or elimination
of such withholding tax pursuant to an applicable income tax treaty). We will not pay any additional amounts in respect of such
withholding. Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below, gain realized from the taxable
disposition of a Note generally should not be subject to U.S. tax unless (i) such gain is effectively connected with a trade or
business conducted by the non-U.S. holder in the U.S., (ii) the non-U.S. holder is a non-resident alien individual and is present
in the U.S. for 183 days or more during the taxable year of such taxable disposition and certain other conditions are satisfied
or (iii) the non-U.S. holder has certain other present or former connections with the U.S.
Section 897. We will not attempt to ascertain
whether any underlying constituent issuer would be treated as a “United States real property holding corporation” (“USRPHC”)
within the meaning of Section 897 of the Code. We also have not attempted to determine whether the Notes should be treated as “United
States real property interests” ("USRPI") as defined in Section 897 of the Code. If any such entity and the Notes
were so treated, certain adverse U.S. federal income tax consequences could possibly apply, including subjecting any gain to a
non-U.S. holder in respect of a Note upon a taxable disposition of a Note to U.S. federal income tax on a net basis, and the proceeds
from such a taxable disposition could be subject to a 15% withholding tax. Non-U.S. holders should consult their tax advisors regarding
the potential treatment of any underlying constituent 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 or indices containing U.S. equity securities. The withholding tax can apply even
if the instrument does not provide for payments that reference dividends. Treasury regulations provide that the withholding tax
applies to all dividend equivalents paid or deemed paid on specified equity-linked instruments that have a delta of one (“delta-one
specified equity-linked instruments”) issued after 2016 and to all dividend equivalents paid or deemed paid on all other
specified equity-linked instruments issued after 2018. However, the IRS has issued guidance that states that the Treasury and the
IRS intend to amend the effective dates of the Treasury regulations to provide that withholding on dividend equivalents paid or
deemed paid will not apply to specified equity-linked instruments that are not delta-one specified equity-linked instruments and
are issued before January 1, 2023.
Based on our determination that the Notes are not
“delta-one” with respect to any underlying asset or any U.S. underlying constituents, our counsel is of the opinion
that the Notes should not be delta-one specified equity-linked instruments and thus should not be subject to withholding on dividend
equivalents. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Furthermore, the application
of Section 871(m) of the Code will depend on our determinations made upon issuance of the Notes. If withholding is required, we
will not make payments of any additional amounts.
Nevertheless, after issuance, it is possible that
your Notes could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting an underlying asset,
the underlying constituents or your Notes, and following such occurrence your Notes could be treated as delta-one specified equity-linked
instruments that are subject to withholding on dividend equivalents. It is also possible that withholding tax or other tax under
Section 871(m) of the Code could apply to the Notes under these rules if a non-U.S. holder enters, or has entered, into certain
other transactions in respect of an underlying asset, the underlying constituents or the Notes. A non-U.S. holder that enters,
or has entered, into other transactions in respect of an underlying asset, the underlying constituents or the Notes should consult
its tax advisor regarding the application of Section 871(m) of the Code to its Notes in the context of its other transactions.
Because of the uncertainty regarding the application
of the 30% withholding tax on dividend equivalents to the Notes, you are urged to consult your tax advisor regarding the potential
application of Section 871(m) of the Code and the 30% withholding tax to an investment in the Notes.
Foreign Account Tax Compliance Act. The Foreign
Account Tax Compliance Act (“FATCA”) was enacted on March 18, 2010, and imposes a 30% U.S. withholding tax on “withholdable
payments” (i.e., certain U.S.-source payments, including interest (and original issue discount), dividends, other fixed or
determinable annual or periodical gain, profits, and income, and on the gross proceeds from a disposition of property of a type
which can produce U.S.-source interest or dividends) and “passthru payments” (i.e., certain payments attributable to
withholdable payments) made to certain foreign financial institutions (and certain of their affiliates) unless the payee foreign
financial institution agrees (or is required), among other things, to disclose the identity of any U.S. individual with an account
of the institution (or the relevant affiliate) and to annually report certain information about such account. FATCA also requires
withholding agents making withholdable payments to certain foreign entities that do not disclose the name, address, and taxpayer
identification number of any substantial U.S. owners (or do not certify that they do not have any substantial U.S. owners) to withhold
tax at a rate of 30%. Under certain circumstances, a holder may be eligible for refunds or credits of such taxes.
Pursuant to final and temporary Treasury regulations
and other IRS guidance, the withholding and reporting requirements under FATCA will generally apply to certain “withholdable
payments”, will not apply to gross proceeds on a sale or disposition, and will apply to certain foreign passthru payments
only to the extent that such payments are made after the date that is two years after final regulations defining the term “foreign
passthru payment” are published. If withholding is required, we (or the applicable paying agent) will not be required to
pay additional amounts with respect to the amounts so withheld. Foreign financial institutions and non-financial foreign entities
located in jurisdictions that have an intergovernmental agreement with the U.S. governing FATCA may be subject to different rules.
Investors should consult their tax advisors about
the application of FATCA, in particular if they may be classified as financial institutions (or if they hold their Notes through
a foreign entity) under the FATCA rules.
Proposed Legislation. In 2007, legislation
was introduced in Congress that, if it had been enacted, would have required holders of Notes purchased after the bill was enacted
to accrue interest income over the term of the Notes despite the fact that there may be no interest payments over the term of the
Notes.
Furthermore, in 2013, the House Ways and Means Committee
released in draft form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this
legislation generally would have been to require instruments such as the Notes to be marked to market on an annual basis with all
gains and losses to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar
or identical bills will be enacted in the future, or whether any such bill would affect the tax treatment of your Notes. You are
urged to consult your tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your
Notes.
Both U.S. and non-U.S. holders are urged to consult
their tax advisors concerning the application of U.S. federal income tax laws to their particular situations, as well as any tax
consequences of the purchase, beneficial ownership and disposition of the Notes arising under the laws of any state, local, non-U.S.
or other taxing jurisdiction.
Supplemental
Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
We will agree to sell to UBS Securities LLC and UBS
Securities LLC will agree to purchase, all of the Notes at the issue price to the public less the underwriting discount indicated
on the cover hereof. UBS Securities LLC will agree to resell all of the Notes to UBS Financial Services Inc. at a discount from
the issue price to the public equal to the underwriting discount indicated on the cover hereof.
Conflicts of Interest — Each
of UBS Securities LLC and UBS Financial Services Inc. is an affiliate of UBS and, as such, has a “conflict of interest”
in this offering within the meaning of Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition,
UBS will receive the net proceeds (excluding the underwriting discount) from the initial public offering of the Notes, thus creating
an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, the offering is being conducted in compliance
with the provisions of FINRA Rule 5121. Neither UBS Securities LLC nor UBS Financial Services Inc. is permitted to sell Notes
in this offering to an account over which it exercises discretionary authority without the prior specific written approval of
the account holder.
UBS Securities LLC and its affiliates
may offer to buy or sell the Notes in the secondary market (if any) at prices greater than UBS’ internal valuation —
The value of the Notes at any time will vary based on many factors that cannot be predicted. However, the price (not including
UBS Securities LLC’s or any affiliate’s customary bid-ask spreads) at which UBS Securities LLC or any affiliate would
offer to buy or sell the Notes immediately after the trade date in the secondary market is expected to exceed the estimated initial
value of the Notes as determined by reference to our internal pricing models. The amount of the excess will decline to zero on
a straight line basis over a period ending no later than 7 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 “— 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, the index supplement or the
accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of
these Notes in any state where the offer is not permitted. You should not assume that the information in this preliminary pricing
supplement is accurate as of any date other than the date on the front of the document.
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TABLE OF CONTENTS
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Preliminary Pricing Supplement
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Investment Description
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i
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Features
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i
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Key Dates
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i
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Note Offering
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i
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Additional Information about UBS and the Notes
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ii
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Investor Suitability
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1
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Preliminary Terms
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2
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Investment Timeline
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3
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Observation Dates and Coupon Payment Dates
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4
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Key Risks
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5
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Hypothetical Examples of How the Notes Might Perform
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9
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Information About the Underlying Assets
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11
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Correlation of the Underlying Assets
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13
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What Are the Tax Consequences of the Notes?
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14
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Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
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16
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Product Supplement
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Product Supplement Summary
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PS-1
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Specific Terms of Each Security Will Be Described in the Applicable Supplements
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PS-1
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The Securities are Part of a Series
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PS-1
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Denomination
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PS-2
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Coupons
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PS-2
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Early Redemption
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PS-3
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Payment at Maturity for the Securities
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PS-3
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Defined Terms Relating to Payment on the Securities
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PS-4
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Valuation Dates
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PS-5
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Valuation Periods
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PS-6
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Payment Dates
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PS-6
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Closing Level
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PS-7
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Intraday Level
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PS-7
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What are the Tax Consequences of the Securities?
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PS-8
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Risk Factors
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PS-9
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General Terms of the Securities
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PS-29
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Use of Proceeds and Hedging
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PS-52
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Material U.S. Federal Income Tax Consequences
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PS-53
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Certain ERISA Considerations
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PS-75
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Supplemental Plan of Distribution (Conflicts of Interest)
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PS-76
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Index Supplement
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Index Supplement Summary
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IS-1
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Underlying Indices And Underlying Index Publishers
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IS-2
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Dow Jones Industrial AverageTM
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IS-2
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NASDAQ-100 Index®
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IS-4
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Russell 2000® Index
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IS-10
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S&P 500® Index
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IS-15
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Commodity Indices
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IS-20
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Bloomberg Commodity IndexSM
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IS-20
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UBS Bloomberg Constant Maturity Commodity Index
Excess Return
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IS-27
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Non-U.S. Indices
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IS-32
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EURO STOXX 50® Index
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IS-32
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FTSETM 100 Index
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IS-38
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Hang Seng China Enterprises Index
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IS-41
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MSCI Indexes
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IS-45
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MSCI-EAFE® Index
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IS-45
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MSCI® Emerging Markets IndexSM
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IS-45
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MSCI® Europe Index
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IS-45
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Prospectus
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Introduction
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1
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Cautionary Note Regarding Forward-Looking Statements
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3
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Incorporation of Information About UBS AG
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5
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Where You Can Find More Information
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6
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Presentation of Financial Information
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7
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Limitations on Enforcement of U.S. Laws Against UBS, Its Management and Others
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7
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UBS
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8
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Swiss Regulatory Powers
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11
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Use of Proceeds
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12
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Description of Debt Securities We May Offer
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13
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Description of Warrants We May Offer
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33
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Legal Ownership and Book-Entry Issuance
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48
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Considerations Relating to Indexed Securities
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53
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Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency
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56
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U.S. Tax Considerations
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59
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Tax Considerations Under the Laws of Switzerland
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70
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Benefit Plan Investor Considerations
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72
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Plan of Distribution
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74
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Conflicts of Interest
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75
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Validity of the Securities
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76
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Experts
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76
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$• UBS AG
Trigger Autocallable Contingent
Yield Notes due on or about
June 8, 2023
Preliminary Pricing Supplement dated June 2, 2020
(To Product Supplement dated October 31, 2018,
Index Supplement dated October 31, 2018
and Prospectus dated October 31, 2018)
UBS Investment Bank
UBS Financial Services Inc.