The investor suitability considerations identified
above are not exhaustive. Whether or not the Securities 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 Securities in light of your particular circumstances. You should review
“Information About the Underlying Asset” herein for more information on the underlying asset. You should also review
“Key Risks” herein and the more detailed “Risk Factors” in the accompanying product supplement for risks
related to an investment in the Securities.
Preliminary
Terms
Issuer
|
UBS AG London Branch
|
Principal Amount
|
$10 per Security (subject to a minimum investment of 100 Securities)
|
Term
|
Approximately 2 years. In the event that we make any change to the expected trade date and settlement date, the calculation agent may adjust the final valuation date and maturity date to ensure that the stated term of the Securities remains the same.
|
Underlying
Asset
|
S&P 500® Index
|
Maximum
Gain
|
15.00% to 17.00%. The actual maximum gain will be set on the trade date.
|
Maximum Payment at Maturity per Security
|
$11.50 to $11.70. The actual maximum payment at maturity per Security will be set on the trade date.
|
Upside Gearing
|
2.0
|
Buffer
|
10%
|
Payment at Maturity (per Security)
|
If the underlying return is positive, UBS will pay you an amount in cash equal to:
|
|
$10 × (1 + the lesser of (a) Underlying Return × Upside Gearing and (b) Maximum Gain)
|
|
If the underlying return is zero or negative and the final level is equal to or greater than the downside threshold, UBS will pay you an amount in cash equal to:
|
|
Principal Amount of $10
|
|
If the underlying return is negative and the final level is less than the downside threshold, UBS will pay you an amount in cash that is less than your principal amount equal to:
|
|
$10 × [1 + (Underlying Return + Buffer)]
|
|
In this scenario, you will suffer a percentage loss on your initial investment equal to the percentage that the final level is less than the initial level in excess of the buffer and, in extreme situations, you could lose almost all of your initial investment.
|
Underlying Return
|
The quotient, expressed as a percentage, of the
following formula:
Final Level – Initial Level
Initial Level
|
Initial Level(1)
|
The closing level of the underlying asset on the trade date.
|
Final Level(1)
|
The closing level of the underlying asset on the final valuation date.
|
Downside Threshold(1)
|
A specified level of the underlying asset that is less than the initial level, equal to a percentage of the initial level, as indicated on the cover hereof.
|
(1) 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”, as described in the accompanying product supplement.
Investment
Timeline
Trade Date
|
|
The initial level is observed and the final terms of the Securities are set.
|
¯
|
|
|
Maturity Date
|
|
The final level is observed on the final valuation
date and the underlying return is calculated.
If the underlying return is positive, UBS will
pay you an amount in cash per Security equal to:
$10 × (1 + the lesser of (a) Underlying
Return × Upside Gearing and (b)
Maximum Gain)
If the underlying return is zero or negative and
the final level is equal to or greater than the downside threshold, UBS will pay you an amount in cash per Security equal to:
Principal Amount of $10
If the underlying return is negative and the final
level is less than the downside threshold, UBS will pay you an amount in cash per Security that is less than your principal
amount, if anything, equal to:
$10 × [1 + (Underlying Return + Buffer)]
In this scenario, you will suffer a percentage
loss on your initial investment equal to the percentage that the final level is less than the initial level in excess of the buffer
and, in extreme situations, you could lose almost all of your initial investment.
|
Investing in the Securities involves significant
risks. You may lose some or almost all of your initial investment. Any payment on the Securities, including any repayment of principal,
is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations, you may not receive any amounts owed
to you under the Securities and you could lose all of your initial investment.
Key
Risks
An investment in the Securities involves significant
risks. Some of the key risks that apply to the Securities are summarized here, but we urge you to read the more detailed explanation
of risks relating to the Securities generally 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 Securities.
|
¨
|
Risk of loss at maturity — The Securities differ from ordinary debt securities in
that UBS will not necessarily repay the principal amount of the Securities. If the underlying return is negative and the final
level is less than the downside threshold, you will lose a percentage of your principal amount equal to the percentage that the
final level is less than the initial level in excess of the buffer and, in extreme situations, you could lose almost all of your
initial investment.
|
|
¨
|
The stated payout from the issuer applies only at maturity — You should be willing
to hold your Securities to maturity. The stated payout by the issuer is available only if you hold your Securities to maturity.
If you are able to sell your Securities prior to maturity in the secondary market, you may have to sell them at a loss relative
to your initial investment even if the then-current level of the underlying asset is equal to or greater than the downside threshold.
|
|
¨
|
The upside gearing applies only at maturity — You should be willing to hold your Securities
to maturity. If you are able to sell your Securities prior to maturity in the secondary market, the price you receive will likely
not reflect the full economic value of the upside gearing, and the percentage return you realize may be less than the then-current
underlying return multiplied by the upside gearing, even if such return is positive and does not exceed the maximum gain. You can
receive the full benefit of the upside gearing, subject to the maximum gain, only if you hold your Securities to maturity.
|
|
¨
|
Your potential return on the Securities is limited to the maximum gain — The return
potential of the Securities is limited to the maximum gain. Therefore, you will not benefit from any positive underlying return
in excess of an amount that, when multiplied by the upside gearing, exceeds the maximum gain and your return on the Securities
may be less than it would be in a hypothetical direct investment in the underlying asset.
|
|
¨
|
No interest payments — UBS will not pay any interest with respect to the Securities.
|
|
¨
|
Credit risk of UBS — The Securities 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 Securities,
including any repayment of principal at maturity, 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 Securities. If UBS were to default
on its obligations, you may not receive any amounts owed to you under the terms of the Securities and you could lose all of your
initial investment.
|
|
¨
|
Greater expected volatility generally indicates an increased risk of loss at maturity —
“Volatility" refers to the frequency and magnitude of changes in the level of the underlying asset. The greater
the expected volatility of the underlying asset as of the trade date, the greater the expectation is as of that date that the final
level of the underlying asset could be less than the downside threshold and, as a consequence, indicates an increased risk of loss.
However, the underlying asset's volatility can change significantly over the term of the Securities, and a relatively lower downside
threshold may not necessarily indicate that the Securities have a greater likelihood of a return of principal at maturity. You
should be willing to accept the downside market risk of the underlying asset and the potential to lose some or almost all of your
initial investment.
|
|
¨
|
Market risk — The return on the Securities, which may be negative, is directly linked
to the performance of the underlying asset and indirectly linked to the performance of the underlying equity constituents, and
will depend on whether, and the extent to which, the underlying return is positive or negative. The level of the underlying asset
can rise or fall sharply due to factors specific to the underlying equity constituents, 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 market volatility and levels, interest rates and economic and political conditions.
Recently, the coronavirus infection has caused volatility in the global financial markets and a slowdown in the global economy.
Coronavirus or any other communicable disease or infection may adversely affect the underlying equity constituents and, therefore,
the underlying asset.
|
|
¨
|
Fair value considerations.
|
|
o
|
The issue price you pay for the Securities will exceed their estimated initial value —
The issue price you pay for the Securities 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 Securities 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 Securities incorporate certain variables, including the level and volatility of the underlying asset and underlying equity
constituents, any expected dividends on the underlying equity constituents, prevailing interest rates, the term of the Securities
and our internal funding rate. Our internal funding rate is typically lower than the rate we would pay to issue conventional fixed
or floating rate debt securities of a similar term. The underwriting discount, hedging costs, issuance costs, projected profits
and the difference in rates will reduce the economic value of the Securities to you. Due to these factors, the estimated initial
value of the Securities as of the trade date will be less than the issue price you pay for the Securities.
|
|
o
|
The estimated initial value is a theoretical price; the actual price that you may be able to
sell your Securities in any secondary market (if any) at any time after the trade date may differ from the estimated initial value
— The value of your Securities at any time will vary based on many factors, including the factors described above and in
“— 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 Securities in the secondary market, the actual value you would receive may differ, perhaps materially,
from the estimated initial value of the Securities determined by reference to our internal pricing models. The estimated initial
value of the Securities does not represent a minimum or maximum price at which we or any of our affiliates would be willing to
purchase your Securities in any secondary market at any time.
|
|
o
|
Our actual profits may be greater or less than the differential between the estimated initial
value and the issue price of the Securities as of the trade date — We may determine the economic terms of the Securities,
as well as hedge our obligations, at least in part, prior to pricing the Securities on 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 Securities cannot be determined as of the trade date and any such differential between the
estimated initial value and the issue price of the Securities as of the trade date does not reflect our actual profits. Ultimately,
our actual profits will be known only at the maturity of the Securities.
|
|
¨
|
Limited or no secondary market and secondary market price considerations.
|
|
o
|
There may be little or no secondary market for the Securities — The Securities will
not be listed or displayed on any securities exchange or any electronic communications network. UBS Securities LLC and its affiliates
intend, but are not required, to make a market for the Securities and may stop making a market at any time. If you are able to
sell your Securities prior to maturity, you may have to sell them at a substantial loss. Furthermore, there can be no assurance
that a secondary market for the Securities will develop. The estimated initial value of the Securities does not represent a minimum
or maximum price at which we or any of our affiliates would be willing to purchase your Securities in any secondary market at any
time.
|
|
o
|
The price at which UBS Securities LLC and its affiliates may offer to buy the Securities in
the secondary market (if any) may be greater than UBS’ valuation of the Securities at that time, greater than any other secondary
market prices provided by unaffiliated dealers (if any) and, depending on your broker, greater than the valuation provided on your
customer account statements — For a limited period of time following the issuance of the Securities, UBS Securities LLC
or its affiliates may offer to buy or sell such Securities at a price that exceeds (i) our valuation of the Securities at that
time based on our internal pricing models, (ii) any secondary market prices provided by unaffiliated dealers (if any) and (iii)
depending on your broker, the valuation provided on customer account statements. The price that UBS Securities LLC may initially
offer to buy such Securities following issuance will exceed the valuations indicated by our internal pricing models due to the
inclusion for a limited period of time of the aggregate value of the underwriting discount, hedging costs, issuance costs and theoretical
projected trading profit. The portion of such amounts included in our price will decline to zero on a straight line basis over
a period ending no later than the date specified under “Supplemental Plan of Distribution (Conflicts of Interest); Secondary
Markets (if any).” Thereafter, if UBS Securities LLC or an affiliate makes secondary markets in the Securities, it will do
so at prices that reflect our estimated value determined by reference to our internal pricing models at that time. The temporary
positive differential relative to our internal pricing models arises from requests from and arrangements made by UBS Securities
LLC with the selling agents of structured debt securities such as the Securities. As described above, UBS Securities LLC and its
affiliates intend, but are not required, to make a market for the Securities and may stop making a market at any time. The price
at which UBS Securities LLC or an affiliate may make secondary markets at any time (if at all) will also reflect its then current
bid-ask spread for similar sized trades of structured debt securities. UBS 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.
|
|
o
|
Economic and market factors affecting the terms and market price of Securities prior to maturity
— Because structured notes, including the Securities, 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 Securities at issuance and the market price of the Securities prior to maturity. These factors include the level of the
underlying asset and the underlying equity constituents; the volatility of the underlying asset and the underlying equity constituents;
any dividends paid on the underlying equity constituents; the time remaining to the maturity of the Securities; interest rates
in the markets; geopolitical conditions and economic, financial, political, force majeure and regulatory or judicial events; the
availability of comparable instruments; the creditworthiness of UBS; the then current bid-ask spread for the Securities. These
and other factors are unpredictable and interrelated and may offset or magnify each other.
|
|
o
|
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 Securities in any
secondary market.
|
|
¨
|
Owning the Securities is not the same as owning the underlying equity constituents —
The return on your Securities may not reflect the return you would realize if you actually owned the underlying equity constituents.
For instance, you will not benefit from any positive underlying return in excess of an amount that, when multiplied by the upside
gearing, exceeds the maximum gain. Furthermore, you will not receive or be entitled to receive any dividend payments or other distributions
during the term of the Securities, and any such dividends or distributions will not be factored into the calculation of the payment
at maturity on your Securities. In addition, as an owner of the Securities, you will not have voting rights or any other rights
that a holder of the underlying equity constituents may have.
|
|
¨
|
There can be no assurance that the investment view implicit in the Securities will be successful
— It is impossible to predict whether and the extent to which the level of the underlying asset will rise or fall and there
can be no assurance that the final level of the underlying asset will be equal to or greater than the initial level or downside
threshold. The final level of the underlying asset will be influenced by complex and interrelated political, economic, financial
and other factors that affect the respective issuers of the underlying equity constituents (each, an “underlying constituent
issuer”). You should be willing to accept the risks of owning equities in general and the underlying equity constituents
in particular, and the risk of losing some or almost all of your initial investment.
|
|
¨
|
The underlying asset reflects price return, not total return — The return on your
Securities is based on the performance of the underlying asset, which reflects the changes in the market prices of the underlying
equity constituents. It is not, however, linked to a “total return” index or strategy, which, in addition to reflecting
those price returns, would also reflect any dividends paid on the underlying equity constituents. The return on your Securities
will not include such a total return feature or any dividend component.
|
|
¨
|
Changes affecting the underlying asset could have an adverse effect on the market value of,
and any amount payable on, the Securities — The policies of the sponsor of the underlying asset as specified under “Information
About the Underlying Asset” (the “index sponsor”), concerning additions, deletions and substitutions of the underlying
equity constituents and the manner in which the index sponsor takes account of certain changes affecting those underlying equity
constituents may adversely affect the level of the underlying asset. The policies of the index sponsor with respect to the calculation
of the underlying asset could also adversely affect the level of the underlying asset. The index sponsor may discontinue or suspend
calculation or dissemination of the underlying asset. Any such actions could have an adverse effect on the market value of, and
any amount payable on, the Securities.
|
|
¨
|
UBS cannot control actions by the index sponsor and the index sponsor has no obligation to consider
your interests — UBS and its affiliates are not affiliated with the index sponsor and have no ability to control or predict
its actions, including any errors in, or discontinuation of, public disclosure regarding methods or policies relating to the calculation
of the underlying asset. The index sponsor is not involved in the Securities offering in any way and has no obligation to consider
your interest as an owner of the Securities in taking any actions that might affect the market value of, and any amount payable
on, your Securities.
|
|
¨
|
Potential UBS impact on price — Trading or transactions by UBS or its affiliates in
the underlying equity constituents, listed and/or over-the-counter options, futures or other instruments with returns linked to
the performance of the underlying asset or any underlying equity constituent may adversely affect the performance of the underlying
asset or applicable underlying equity constituent and, therefore, the market value of, and any amount payable on, the Securities.
|
|
¨
|
Potential conflict of interest — UBS and its affiliates may engage in business with
any underlying constituent issuer, which may present a conflict between the obligations of UBS and you, as a holder of the Securities.
There are also potential conflicts of interest between you and the calculation agent, which will be an affiliate of UBS. The calculation
agent can postpone the determination of the terms of the Securities on the trade date and the final level on the final valuation
date, if a market disruption event occurs and is continuing on that day. As UBS determines the economic terms of the Securities,
including the maximum gain, upside gearing, downside threshold and buffer, and such terms include the underwriting discount, hedging
costs, issuance costs and projected profits, the Securities represent a package of economic terms. There are other potential conflicts
of interest insofar as an investor could potentially get better economic terms if that investor entered into exchange-traded and/or
OTC derivatives or other instruments with third parties, assuming that such instruments were available and the investor had the
ability to assemble and enter into such instruments.
|
|
¨
|
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 Securities,
or express opinions or provide recommendations that are inconsistent with purchasing or holding the Securities. 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 Securities and the
underlying asset.
|
|
¨
|
The Securities are not bank deposits — An investment in the Securities carries risks
which are very different from the risk profile of a bank deposit placed with UBS or its affiliates. The Securities have different
yield, and/or return, liquidity and risk profiles and would not benefit from any protection provided to deposits.
|
|
¨
|
If UBS experiences financial difficulties, FINMA has the power to open restructuring or liquidation
proceedings in respect of, and/or impose protective measures in relation to, UBS, which proceedings or measures may have a material
adverse effect on the terms and market value of the Securities and/or the ability of UBS to make payments thereunder —
The Swiss Financial Market Supervisory Authority (“FINMA”) has broad statutory powers to take measures and actions
in relation to UBS if (i) it concludes that there is justified concern that UBS is over-indebted or has serious liquidity problems
or (ii) UBS fails to fulfill the applicable capital adequacy requirements (whether on a standalone or consolidated basis) after
expiry of a deadline set by FINMA. If one of these pre-requisites is met, FINMA is authorized to open restructuring proceedings
or liquidation (bankruptcy) proceedings in respect of, and/or impose protective measures in relation to, UBS. The Swiss Banking
Act grants significant discretion to FINMA in connection with the aforementioned proceedings and measures. In particular, a broad
variety of protective measures may be imposed by FINMA, including a bank moratorium or a maturity postponement, which measures
may be ordered by FINMA either on a stand-alone basis or in connection with restructuring or liquidation proceedings. The resolution
regime of the Swiss Banking Act is further detailed in the FINMA Banking Insolvency Ordinance (“BIO-FINMA”). In a restructuring
proceeding, FINMA, as resolution authority, is competent to approve the resolution plan. The resolution plan may, among other things,
provide for (a) the transfer of all or a portion of UBS’ assets, debts, other liabilities and contracts (which may or may
not include the contractual relationship between UBS and the holders of Securities) to another entity, (b) a stay (for a maximum
of two business days) on the termination of contracts to which UBS is a party, and/or the exercise of (w) rights to terminate,
(x) netting rights, (y) rights to enforce or dispose of collateral or (z) rights to transfer claims, liabilities or collateral
under contracts to which UBS is a party, (c) the conversion of UBS’ debt and/or other obligations, including its obligations
under the Securities, into equity (a “debt-to-equity” swap), and/or (d) the partial or full write-off of obligations
owed by UBS (a “write-off”), including its obligations under the Securities. The BIO-FINMA provides that a debt-to-equity
swap and/or a write-off of debt and other obligations (including the Securities) may only take place after (i) all debt instruments
issued by UBS qualifying as additional tier 1 capital or tier 2 capital have been converted into equity or written-off, as applicable,
and (ii) the existing equity of UBS has been fully cancelled. While the BIO-FINMA does not expressly address the order in which
a write-off of debt instruments other than debt instruments qualifying as additional tier 1 capital or tier 2 capital should occur,
it states that debt-to-equity swaps should occur in the following order: first, all subordinated claims not qualifying as regulatory
capital; second, all other claims not excluded by law from a debt-to-equity swap (other than deposits); and third, deposits (in
excess of the amount privileged by law). However, given the broad discretion granted to FINMA as the resolution authority, any
restructuring plan in respect of UBS could provide that the claims under or in connection with the Securities will be partially
or fully converted into equity or written-off, while preserving other obligations of UBS that rank pari passu with, or even junior
to, UBS’ obligations under the Securities. Consequently, holders of Securities may lose all or some of their investment in
the Securities. In the case of restructuring proceedings with respect to a systemically important Swiss bank (such as UBS), the
creditors whose claims are affected by the restructuring plan will not have a right to vote on, reject, or seek the suspension
of the restructuring plan. In addition, if a restructuring plan has been approved by FINMA, the rights of a creditor to seek judicial
review of the restructuring plan (e.g., on the grounds that the plan would unduly prejudice the rights of holders of Securities
or 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.
|
|
¨
|
Dealer incentives — UBS and its affiliates act in various capacities with respect
to the Securities. We and our affiliates may act as a principal, agent or dealer in connection with the sale of the Securities.
Such affiliates, including the sales representatives, will derive compensation from the distribution of the Securities and such
compensation may serve as an incentive to sell these Securities instead of other investments. We will pay a total underwriting
compensation in an amount equal to the underwriting discount listed on the cover hereof per Security to any of our affiliates acting
as agents or dealers in connection with the distribution of the Securities. Given that UBS Securities LLC and its affiliates temporarily
maintain a market making premium, it may have the effect of discouraging UBS Securities LLC and its affiliates from recommending
sale of your Securities in the secondary market.
|
|
¨
|
Uncertain tax treatment — Significant aspects of the tax treatment of the Securities
are uncertain. You should consult your tax advisor about your tax situation. See “What Are the Tax Consequences of the Securities?”
herein and “Material U.S. Federal Income Tax Consequences”, including the section “— Securities Treated
as Prepaid Derivatives or Prepaid Forwards”, in the accompanying product supplement.
|
Hypothetical
Examples and Return Table of the Securities at Maturity
The below examples and table 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 and table below illustrate the Payment
at Maturity for a $10 Security on a hypothetical offering of the Securities, with the following assumptions (amounts may have been
rounded for ease of analysis):
Term:
|
Approximately 2 years
|
Initial Level:
|
3,000
|
Downside Threshold:
|
2,700 (90% of the Initial Level)
|
Upside Gearing:
|
2.00
|
Buffer:
|
10.00%
|
Maximum Gain:
|
15.00%
|
Range of Underlying Return:
|
-100% to 40%
|
Example 1: The Underlying Return is 5%.
Because the underlying return is positive and, when
multiplied by the upside gearing, is less than the maximum gain, the payment at maturity per Security will be calculated as follows:
$10 × (1 + the lesser of (a) 5.00% × 2.00 and (b) 15.00%)
|
=$10 x (1 + 10.00%)
|
= $11.00 per Security (a 10.00% total return).
|
Example 2: The Underlying Return is 15%.
Because the underlying return is positive and, when
multiplied by the upside gearing, is greater than the maximum gain, the payment at maturity will be calculated as follows:
$10 × (1 + the lesser of (a) 15.00% × 2.00 and (b) 15.00%)
|
=$10 x (1 + 15.00%)
|
= $11.50 per Security (a 15.00% total return).
|
Example 3: The Underlying Return is -5% and the
Final Level is equal to or greater than the Downside Threshold.
Because the underlying return is negative and the
final level is equal to or greater than the downside threshold, the payment at maturity per Security will be equal to the principal
amount of $10 (a 0.00% total return).
Example 4: The Underlying Return is -60% and
the Final Level is less than the Downside Threshold.
Because the underlying return is negative and the final
level is less than the downside threshold, the payment at maturity per Security will be less than the principal amount, calculated
as follows:
$10 × [1 + (-60.00% + 10.00%)]
|
= $10 × 0.50
|
= $5.00 per Security (a 50.00% loss).
|
In this scenario, you will suffer a percentage
loss on your initial investment in an amount that is equal to the percentage that the final level is less than the initial level
in excess of the buffer and, in extreme situations, you could lose almost all of your initial investment.
Underlying Asset
|
Payment and Return at Maturity
|
Final Level
|
Underlying Return(1)
|
Payment at Maturity
|
Security Total Return at Maturity
|
4,200.00
|
40.00%
|
$11.50
|
15.00%
|
3,900.00
|
30.00%
|
$11.50
|
15.00%
|
3,600.00
|
20.00%
|
$11.50
|
15.00%
|
3,300.00
|
10.00%
|
$11.50
|
15.00%
|
3,225.00
|
7.50%
|
$11.50
|
15.00%
|
3,150.00
|
5.00%
|
$11.00
|
10.00%
|
3,075.00
|
2.50%
|
$10.50
|
5.00%
|
3,000.00
|
0.00%
|
$10.00
|
0.00%
|
2,850.00
|
-5.00%
|
$10.00
|
0.00%
|
2,700.00
|
-10.00%
|
$10.00
|
0.00%
|
2,550.00
|
-15.00%
|
$9.50
|
-5.00%
|
2,400.00
|
-20.00%
|
$9.00
|
-10.00%
|
2,100.00
|
-30.00%
|
$8.00
|
-20.00%
|
1,800.00
|
-40.00%
|
$7.00
|
-30.00%
|
1,500.00
|
-50.00%
|
$6.00
|
-40.00%
|
1,200.00
|
-60.00%
|
$5.00
|
-50.00%
|
900.00
|
-70.00%
|
$4.00
|
-60.00%
|
600.00
|
-80.00%
|
$3.00
|
-70.00%
|
300.00
|
-90.00%
|
$2.00
|
-80.00%
|
0.00
|
-100.00%
|
$1.00
|
-90.00%
|
|
(1)
|
The underlying return excludes any cash dividend payments.
|
Information
About the Underlying Asset
All disclosures contained in this document regarding
the underlying asset are derived from publicly available information. UBS has not conducted any independent review or due diligence
of any publicly available information with respect to the underlying asset. You should make your own investigation into the
underlying asset.
Included on the following pages is a brief description
of the underlying asset. This information has been obtained from publicly available sources. Set forth below is a graph that illustrates
the past performance for the underlying asset. The information given below is for the period indicated. We obtained the past performance
information set forth below from Bloomberg Professional® service (“Bloomberg”) without independent verification.
You should not take the historical levels of the underlying asset as an indication of future performance.
S&P 500® Index
We have derived all information regarding the S&P
500® Index (“SPX”) 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 S&P Dow Jones Indices LLC (the “index sponsor” or “S&P Dow Jones”).
SPX is published by S&P Dow Jones, but S&P
Dow Jones has no obligation to continue to publish SPX, and may discontinue publication of SPX at any time. SPX is determined,
comprised and calculated by S&P Dow Jones without regard to the Securities.
As discussed more fully in the index supplement under
the heading “Underlying Indices and Underlying Index Publishers — S&P 500® Index”, SPX is intended to
provide an indication of the pattern of common stock price movement. The calculation of the value of SPX is based on the relative
value of the aggregate market value of the common stock of 500 companies as of a particular time compared to the aggregate average
market value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943.
Eleven main groups of companies comprise SPX, with
the percentage weight of each group in the index as a whole as of May 29, 2020 as follows: Information Technology (26.2%), Health
Care (15.2%), Communication Services (11.0%), Consumer Discretionary (10.5%), Financials (10.4%), Industrials (8.0%), Consumer
Staples (7.1%), Utilities (3.2%), Energy (2.9%), Real Estate (2.8%) and Materials (2.5%). The weightings for each sector are rounded
to the nearest tenth of a percent and, therefore, may not equal 100%. As of September 28, 2018, the index sponsor broadened the
current Telecommunication Services Sector and renamed it Communication Services. The renamed Sector includes the existing telecommunication
companies, as well as companies selected from the Consumer Discretionary Sector previously classified under the Media Industry
Group and the Internet & Direct Marketing Retail Sub-Industry, along with select companies previously classified in the Information
Technology Sector. Effective February 20, 2019, company additions to the SPX should have an unadjusted company market capitalization
of $8.2 billion or more (an increase from the previous requirement of an unadjusted company market capitalization of $6.1 billion
or more) and a security level float-adjusted market capitalization that is at least $4.1 billion.
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 SPX.
Historical Information
The graph below illustrates the performance of SPX
from January 1, 2010 through May 29, 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 SPX on May 29, 2020 was 3,044.31 (the “hypothetical initial level”). The dotted line represents the hypothetical
downside threshold of 2,739.88, which is equal to 90.00% of the hypothetical initial level. The actual initial level and downside
threshold will be determined 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 Securities.
What
Are the Tax Consequences of the Securities?
The U.S. federal income tax consequences of your
investment in the Securities are uncertain. There are no statutory provisions, regulations, published rulings or judicial decisions
addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as
the Securities. Some of these tax consequences are summarized below, but we urge you to read the more detailed discussion in “Material
U.S. Federal Income Tax Consequences”, including the section “— Securities Treated as Prepaid Derivatives or
Prepaid Forwards”, 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 U.S. Internal Revenue Code of 1986, as amended (the “Code”),
final, temporary and proposed U.S. Treasury Department (the “Treasury”) regulations, rulings and decisions, in each
case, as available and in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Tax
consequences under state, local and non-U.S. laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the
“IRS”) has been sought as to the U.S. federal income tax consequences of your investment in the Securities, and the
following discussion is not binding on the IRS.
U.S. Tax Treatment. Pursuant to the terms of
the Securities, UBS and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial
ruling to the contrary, to characterize your Securities as prepaid derivative contracts with respect to the underlying asset. If
your Securities are so treated, you should generally recognize gain or loss upon the taxable disposition of your Securities in
an amount equal to the difference between the amount you receive at such time and the amount you paid for your Securities. Such
gain or loss should generally be long-term capital gain or loss if you have held your Securities for more than one year (otherwise
such gain or loss should be short-term capital gain or loss if held for one year or less). The deductibility of capital losses
is subject to limitations.
Based on certain factual representations received
from us, our counsel, Cadwalader, Wickersham & Taft LLP, is of the opinion that it would be reasonable to treat your Securities
in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Securities,
it is possible that your Securities could alternatively be treated for tax purposes as a single contingent payment debt instrument,
or pursuant to some other characterization, such that the timing and character of your income from the Securities could differ
materially and adversely from the treatment described above, as described further under “Material U.S. Federal Income Tax
Consequences”, including the section “— Securities Treated as Prepaid Derivatives or Prepaid Forwards”,
in the accompanying product supplement.
Except to the extent otherwise required by law, UBS
intends to treat your Securities for U.S. federal income tax purposes in accordance with the treatment described above and under
“Material U.S. Federal Income Tax Consequences”, including the section “— Securities Treated as Prepaid
Derivatives or Prepaid Forwards”, in the accompanying product supplement, unless and until such time as the Treasury and
the IRS determine that some other treatment is more appropriate.
Notice 2008-2. In 2007, the IRS released a
notice that may affect the taxation of holders of the Securities. According to Notice 2008-2, the IRS and the Treasury are actively
considering whether the holder of an instrument similar to the Securities should be required to accrue ordinary income on a current
basis, and they are seeking taxpayer comments on the subject. It is not possible to determine what guidance they will ultimately
issue, if any. It is possible, however, that under such guidance, holders of the Securities will ultimately be required to accrue
income currently 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 the potential impact, of the above considerations.
Medicare Tax on Net Investment Income. U.S.
holders that are individuals, estates or certain trusts are subject to an additional 3.8% tax on all or a portion of their “net
investment income,” which may include any income or gain realized with respect to the Securities, to the extent of their
net investment income that when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual,
$250,000 for a married taxpayer filing a joint return (or a surviving spouse), $125,000 for a married individual filing a separate
return or the dollar amount at which the highest tax bracket begins for an estate or trust. The 3.8% Medicare tax is determined
in a different manner than the income tax. U.S. holders should consult their tax advisors as to the consequences of the 3.8% Medicare
tax.
Specified Foreign Financial Assets. Certain
U.S. holders that own “specified foreign financial assets” in excess of an applicable threshold may be subject to reporting
obligations with respect to such assets with their tax returns, especially if such assets are held outside the custody of a U.S.
financial institution. U.S. holders are urged to consult their tax advisors as to the application of this legislation to their
ownership of the Securities.
Non-U.S. Holders. Subject to Section 871(m)
of the Code and “FATCA”, discussed below, if you are a non-U.S. holder you should generally not be subject to U.S.
withholding tax with respect to payments on your Securities or to generally applicable information reporting and backup withholding
requirements with respect to payments on your Securities if you comply with certain certification and identification requirements
as to your non-U.S. status (by providing us (and/or the applicable withholding agent) with a fully completed and duly executed
applicable IRS Form W-8). Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below, gain realized from
the taxable disposition of a Security generally should not be subject to U.S. tax unless (i) such gain is effectively connected
with a trade or business conducted by the non-U.S. holder in the U.S., (ii) the non-U.S. holder is a non-resident alien individual
and is present in the U.S. for 183 days or more during the taxable year of such taxable disposition and certain other conditions
are satisfied or (iii) the non-U.S. holder has certain other present or former connections with the U.S.
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 Securities should be treated
as “United States real property interests” (“USRPI”) as defined in Section 897 of the Code. If any underlying
constituent issuer and the Securities were so treated, certain adverse U.S. federal income tax consequences could possibly apply,
including subjecting any gain to a non-U.S. holder in respect of a Security upon a taxable disposition of the Security to the U.S.
federal income tax on a net basis, and the proceeds from such a taxable disposition to a 15% withholding tax. Non-U.S. holders
should consult their tax advisors regarding the potential treatment of an underlying constituent issuer as a USRPHC and the Securities
as USRPI.
Section 871(m). A 30% withholding tax (which
may be reduced by an applicable income tax treaty) is imposed under Section 871(m) of the Code on certain “dividend equivalents”
paid or deemed paid to a non-U.S. holder with respect to a “specified equity-linked instrument” that references one
or more dividend-paying U.S. equity securities 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 Securities are
not “delta-one” with respect to the underlying asset or any underlying equity constituent, our counsel is of the opinion
that the Securities should not be delta-one specified equity-linked instruments and thus should not be subject to withholding on
dividend equivalents. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Furthermore,
the application of Section 871(m) of the Code will depend on our determinations made upon issuance of the Securities. If withholding
is required, we will not make payments of any additional amounts.
Nevertheless, after issuance, it is possible that
your Securities could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting the underlying
asset, the underlying equity constituents or your Securities, and following such occurrence your Securities could be treated as
delta-one specified equity-linked instruments that are subject to withholding on dividend equivalents. It is also possible that
withholding tax or other tax under Section 871(m) of the Code could apply to the Securities under these rules if you enter, or
have entered, into certain other transactions in respect of the underlying asset, the underlying equity constituents or the Securities.
If you enter, or have entered, into other transactions in respect of the underlying asset, the underlying equity constituents or
the Securities, you should consult your tax advisor regarding the application of Section 871(m) of the Code to your Securities
in the context of your other transactions.
Because of the uncertainty regarding the application
of the 30% withholding tax on dividend equivalents to the Securities, you are urged to consult your tax advisor regarding the potential
application of Section 871(m) of the Code and the 30% withholding tax to an investment in the Securities.
Foreign Account Tax Compliance Act. 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 Securities 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 Securities purchased after the bill was
enacted to accrue interest income over the term of the Securities despite the fact that there will be no interest payments over
the term of the Securities.
Furthermore, in 2013, the House Ways and Means Committee
released in draft form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this
legislation generally would have been to require instruments such as the Securities to be marked to market on an annual basis with
all gains and losses to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar
or identical bills will be enacted in the future, or whether any such bill would affect the tax treatment of your Securities. You
are urged to consult your tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your
Securities.
Both U.S. and non-U.S. holders are urged to consult
their tax advisors concerning the application of U.S. federal income tax laws to their particular situation, as well as any tax
consequences of the purchase, beneficial ownership and disposition of the Securities arising under the laws of any state, local,
non-U.S. or other taxing jurisdiction.
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 Securities 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 Securities 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 the Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition, UBS will
receive the net proceeds (excluding the underwriting discount) from the initial public offering of the Securities, 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 Securities
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 Securities in the secondary market (if any) at prices greater than UBS’ internal valuation —
The value of the Securities at any time will vary based on many factors that cannot be predicted. However, the price (not including
UBS Securities LLC’s or any affiliate’s customary bid-ask spreads) at which UBS Securities LLC or any affiliate would
offer to buy or sell the Securities immediately after the trade date in the secondary market is expected to exceed the estimated
initial value of the Securities as determined by reference to our internal pricing models. The amount of the excess will decline
to zero on a straight line basis over a period ending no later than 6 months after the trade date, provided that UBS Securities
LLC may shorten the period based on various factors, including the magnitude of purchases and other negotiated provisions with
selling agents. Notwithstanding the foregoing, UBS Securities LLC and its affiliates intend, but are not required, to make a market
for the Securities and may stop making a market at any time. For more information about secondary market offers and the estimated
initial value of the Securities, see “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 Securities are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as
amended (“MiFID II”); (ii) a customer within the meaning of Directive 2002/92/EC, as amended, where that customer would
not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as
defined in Directive 2003/71/EC, as amended. Consequently no key information document required by Regulation (EU) No 1286/2014,
as amended (the “PRIIPs Regulation”), for offering or selling the Securities or otherwise making them available to
retail investors in the EEA has been prepared and therefore offering or selling the Securities or otherwise making them available
to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
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 Securities in any state where the offer is not permitted. You should not assume that the information in this preliminary
pricing supplement is accurate as of any date other than the date on the front of the document.
TABLE OF CONTENTS
|
|
|
|
Preliminary Pricing Supplement
|
|
Investment Description
|
i
|
Features
|
i
|
Key Dates
|
i
|
Security Offering
|
i
|
Additional Information about UBS and the Securities
|
ii
|
Investor Suitability
|
1
|
Preliminary Terms
|
2
|
Investment Timeline
|
2
|
Key Risks
|
3
|
Hypothetical Examples and Return Table of the Securities at Maturity
|
7
|
Information About the Underlying Asset
|
9
|
What Are the Tax Consequences of the Securities?
|
11
|
Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
|
13
|
Product Supplement
|
|
Product Supplement Summary
|
PS-1
|
Specific Terms of Each Security Will Be Described in the Applicable Supplements
|
PS-1
|
The Securities are Part of a Series
|
PS-1
|
Denomination
|
PS-2
|
Coupons
|
PS-2
|
Early Redemption
|
PS-3
|
Payment at Maturity for the Securities
|
PS-3
|
Defined Terms Relating to Payment on the Securities
|
PS-4
|
Valuation Dates
|
PS-5
|
Valuation Periods
|
PS-6
|
Payment Dates
|
PS-6
|
Closing Level
|
PS-7
|
Intraday Level
|
PS-7
|
What are the Tax Consequences of the Securities?
|
PS-8
|
Risk Factors
|
PS-9
|
General Terms of the Securities
|
PS-29
|
Use of Proceeds and Hedging
|
PS-52
|
Material U.S. Federal Income Tax Consequences
|
PS-53
|
Certain ERISA Considerations
|
PS-75
|
Supplemental Plan of Distribution (Conflicts of Interest)
|
PS-76
|
Index Supplement
|
|
Index Supplement Summary
|
IS-1
|
Underlying Indices And Underlying Index Publishers
|
IS-2
|
Dow Jones Industrial AverageTM
|
IS-2
|
NASDAQ-100 Index®
|
IS-4
|
Russell 2000® Index
|
IS-10
|
S&P 500® Index
|
IS-15
|
Commodity Indices
|
IS-20
|
Bloomberg Commodity IndexSM
|
IS-20
|
UBS Bloomberg Constant Maturity Commodity Index
|
|
Excess Return
|
IS-27
|
Non-U.S. Indices
|
IS-32
|
EURO STOXX 50® Index
|
IS-32
|
FTSETM 100 Index
|
IS-38
|
Hang Seng China Enterprises Index
|
IS-41
|
MSCI Indexes
|
IS-45
|
MSCI-EAFE® Index
|
IS-45
|
MSCI® Emerging Markets IndexSM
|
IS-45
|
MSCI® Europe Index
|
IS-45
|
Prospectus
|
|
Introduction
|
1
|
Cautionary Note Regarding Forward-Looking Statements
|
3
|
Incorporation of Information About UBS AG
|
4
|
Where You Can Find More Information
|
5
|
Presentation of Financial Information
|
6
|
Limitations on Enforcement of U.S. Laws Against UBS, Its
|
|
Management and Others
|
6
|
UBS
|
7
|
Swiss Regulatory Powers
|
10
|
Use of Proceeds
|
11
|
Description of Debt Securities We May Offer
|
12
|
Description of Warrants We May Offer
|
32
|
Legal Ownership and Book-Entry Issuance
|
47
|
Considerations Relating to Indexed Securities
|
52
|
Considerations Relating to Securities Denominated or Payable
|
|
in or Linked to a Non-U.S. Dollar Currency
|
55
|
U.S. Tax Considerations
|
58
|
Tax Considerations Under the Laws of Switzerland
|
69
|
Benefit Plan Investor Considerations
|
71
|
Plan of Distribution
|
73
|
Conflicts of Interest
|
75
|
Validity of the Securities
|
76
|
Experts
|
76
|
$•
UBS AG Capped Buffer GEARS due on or about June 16, 2022
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.