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 Indices” herein for more information on the underlying indices. You should also review carefully the
“Key Risks” herein for risks related to an investment in the Notes.
Preliminary
Terms
Issuer
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UBS AG London Branch
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Principal Amount
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$1,000.00 per Note
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Term
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Approximately 24 months, unless called earlier. In the event that we make any change to the expected trade date and settlement date, the calculation agent may adjust the coupon observation dates (including the final valuation date), the trigger observation date, as well as the related coupon payment dates (including the maturity date) to ensure that the stated term of the Notes remains the same.
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Underlying
Indices
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The Dow Jones Industrial Average®, the Russell 2000® Index and the S&P 500® Index.
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Contingent Coupon & Contingent Coupon Rate
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If the closing level of each underlying index is
equal to or greater than its coupon barrier on any coupon observation date (including the final valuation date), UBS will pay
you the contingent coupon applicable to such coupon observation date.
If the closing level of any underlying index is
less than its coupon barrier on any coupon observation date (including the final valuation date), the contingent coupon applicable
to such coupon 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 payable
in arrears in equal installments based on a per annum rate (the “contingent coupon rate”) and will be set on the trade
date. The table below sets forth the minimum contingent coupon amount that would be applicable to each coupon observation date
on which the closing level of each underlying index is equal to or greater than its coupon barrier. The actual contingent coupon
will be set on the trade date.
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Contingent Coupon Rate
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At least 8.00%
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Contingent Coupon
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At least $20.00
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Contingent coupons on the Notes are not guaranteed. UBS will not pay you the contingent coupon for any coupon observation date on which the closing level of any underlying index is less than its coupon barrier.
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Trigger Event
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A trigger event is deemed to have occurred if the closing level of any
underlying index is less than its downside threshold on the trigger observation date.
In this case, you will be exposed to the underlying index return
of the least performing underlying index and, in extreme situations, you could lose all of your initial investment.
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Trigger Observation Date(s)(1)
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The final valuation date.
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Issuer Call
Feature
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UBS may elect to call the Notes in whole, but not
in part, on any coupon observation date (quarterly, other than the final valuation date), regardless of the closing levels of the
underlying indices on such coupon observation date.
If UBS elects to call the Notes, UBS will pay you
on the coupon payment date corresponding to such coupon observation date (the “call settlement date”) a cash payment
per Note equal to the principal amount plus any contingent coupon otherwise due (the “call settlement amount”), and
no further payments will be made on the Notes. Before UBS elects to call the Notes on a coupon observation date, UBS will deliver
written notice to the trustee.
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Payment at Maturity (per Note)
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If UBS does not elect to call the Notes and a trigger
event does not occur, UBS will pay you a cash payment equal to:
Principal Amount of $1,000
If UBS does not call the Notes and a trigger event
occurs, UBS will pay you a cash payment that is less than the principal amount, if anything, equal to:
$1,000 x (1 + Underlying Index Return of the Least
Performing Underlying Index)
In such a case, you will suffer a percentage
loss on your initial investment equal to the underlying index return of the least performing underlying index, regardless of the
underlying index return of any other underlying index and, in extreme situations, you could lose all of your initial investment.
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Underlying Index Return
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With respect to each underlying index, the quotient,
expressed as a percentage, of the following formula:
Final Level – Initial Level
Initial Level
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Least Performing Underlying Index
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The underlying index with the lowest underlying index return as compared to any other underlying index.
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Downside Threshold(2)
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A specified level of each underlying index that is less than its respective initial level, equal to a percentage of its initial level, as specified on the cover hereof.
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Coupon Barrier (2)
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A specified level of each underlying index that is less than its respective initial level, equal to a percentage of its initial level, as specified on the cover hereof.
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Initial Level(2)
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The closing level of each underlying index on the trade date.
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Final Level(2)
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The closing level of each underlying index on the final valuation date.
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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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As determined by the calculation agent and as may be adjusted as described under “General
Terms of the Securities — Discontinuance of or Adjustment to an Underlying Index; Alteration of Method of Calculation”,
as described in the accompanying product supplement.
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Investment
Timeline
Trade Date
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The initial level of each underlying index is observed, and the terms of the Notes are set.
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¯
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Coupon Observation Dates (Quarterly)
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If the closing level of each underlying index is
equal to or greater than its coupon barrier on any coupon observation date (including the final valuation date), UBS will pay
you the contingent coupon applicable to such coupon observation date.
If the closing level of any underlying index is
less than its coupon barrier on any coupon observation date (including the final valuation date), the contingent coupon applicable
to such coupon observation date will not accrue or be payable and UBS will not make any payment to you on the relevant coupon payment
date.
UBS may elect to call the Notes in whole, but not
in part, on any coupon observation date (quarterly, other than the final valuation date), regardless of the closing levels of the
underlying indices on such coupon observation date.
If UBS elects to call the Notes, UBS will pay you
on the call settlement date a cash payment per Note equal to the principal amount plus any contingent coupon otherwise due, and
no further payments will be made on the Notes. Before UBS elects to call the Notes, UBS will deliver written notice to the trustee
by the applicable coupon observation date. If UBS does not elect to call the Notes, investors will have the potential for downside
market risk at maturity.
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¯
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Maturity Date
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The final level of each underlying index is observed
on the final valuation date (which is also the trigger observation date) and the underlying return of each underlying index is
calculated.
If UBS does not elect to call the Notes and a trigger
event does not occur, UBS will pay you a cash payment per Note equal to:
Principal Amount of $1,000
If UBS does not call the Notes and a trigger event
occurs, UBS will pay you a cash payment per Note that is less than the principal amount, if anything, equal to:
$1,000 x (1 + Underlying Index Return of the Least
Performing Underlying Index)
In such a case, you will suffer a percentage
loss on your initial investment equal to the underlying index return of the least performing underlying index, regardless of the
underlying index return of any other underlying index 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.
You will lose a significant portion or all of
your initial investment if UBS does not elect to call the Notes and a trigger event occurs. You may receive few or no contingent
coupons during the term of the Notes. You will be exposed to the market risk of each underlying index on each coupon observation
date and on the final valuation date and any decline in the level of one underlying index 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 index. UBS may
elect to call the Notes at its discretion on any coupon observation date (quarterly, other than the final valuation date) regardless
of the performance of the underlying indices. If UBS does not elect to call the Notes and a trigger event occurs, you will lose
a significant portion or all of your initial investment at maturity.
Coupon Observation Dates(1) and Coupon Payment Dates(1)(2)
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Coupon Observation Dates
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Coupon Payment Dates/Call Settlement Dates (if called)
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September 25, 2020
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September 30, 2020
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December 28, 2020
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December 31, 2020
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March 25, 2021
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March 30, 2021
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June 25, 2021
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June 30, 2021
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September 27, 2021
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September 30, 2021
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December 27, 2021
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December 30, 2021
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March 25, 2022
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March 30, 2022
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Final Valuation Date
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Maturity Date
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(1)
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Subject to the market disruption event provisions set forth in the accompanying
product supplement.
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(2)
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Three business days following each coupon observation date, except that
the coupon payment date for the final valuation date is the maturity date.
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Key
Risks
An investment in the Notes involves significant risks.
Investing in the Notes is not equivalent to investing in the underlying indices. Some of the key risks that apply to the Notes
are summarized below, but we urge you to read the more detailed explanation of risks relating to the Notes in the “Risk Factors”
section of the accompanying product supplement. We also urge you to consult your investment, legal, tax, accounting and other advisors
with respect to an investment 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 repay the principal amount of the Notes at maturity. If UBS does not elect to call the Notes, UBS will
repay you the principal amount of your Notes in cash only if a trigger event does not occur and will only make such payment at
maturity. If UBS does not elect to call the Notes and a trigger event occurs, you will lose a percentage of your principal amount
equal to the underlying index return of the least performing underlying index and, in extreme situations, you could lose all of
your initial investment.
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¨
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The stated payout from the issuer applies only if you hold your Notes to maturity — You
should be willing to hold your Notes to maturity. If you are able to sell your Notes prior to 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 index at such time
is equal to or greater than its downside threshold.
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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. If the closing level of any underlying index is less than its respective
coupon barrier on a coupon observation date, UBS will not pay you the contingent coupon applicable to such coupon observation date.
This will be the case even if the closing levels of the other underlying indices are equal to or greater than their respective
coupon barriers on that coupon observation date. If the closing level of any underlying index is less than its coupon barrier on
each coupon observation date, 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 coupons 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 any contingent coupons, you will not participate
in any appreciation of any underlying index and you will not have the same rights as holders of any underlying constituents —
The return potential of the Notes is limited to the pre-specified contingent coupon rate, regardless of the appreciation of
the underlying indices. In addition, your return on the Notes will vary based on the number of coupon observation dates, if any,
on which the requirements of the contingent coupon have been met prior to maturity or an issuer call. Because UBS may elect to
call the Notes 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. Further, if UBS elects to call the Notes, you will not receive any contingent coupons or any
other payment in respect of any coupon payment date after the call settlement date, and your return on the Notes could be less
than if the Notes remained outstanding until maturity. If UBS does not elect to call the Notes, you may be subject to the decline
of the least performing underlying index even though you cannot participate in any appreciation in the level of any underlying
index. As a result, the return on an investment in the Notes could be less than the return on a hypothetical investment in the
underlying indices or a direct investment in any or all of the underlying constituents. In addition, as an owner of the Notes,
you will not have voting rights or any other rights of a holder of any 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 each of the underlying indices, 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 index 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 index. The greater
the expected volatility of each of the underlying indices as of the trade date, the greater the expectation is as of that date
that the closing level of an underlying index could be less than its coupon barrier on the coupon observation dates and that the
final level of an underlying index could be less than its respective downside threshold on the trigger observation 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 thresholds and/or coupon barriers 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 index and the potential to lose a significant
portion or all of your initial investment.
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¨
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UBS may elect to call the Notes and the Notes are subject to reinvestment risk — UBS
may elect to call the Notes at its discretion on any coupon observation date (quarterly, other than the final valuation date) prior
to the maturity date. If UBS elects to call your Notes early, you will no longer have the opportunity to receive any contingent
coupons after the applicable call settlement date. The first call settlement date occurs after approximately three months and therefore
you may not have the opportunity to receive any contingent coupons after approximately three months. In the event UBS elects to
call the Notes, 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. Further, UBS’ right to call the Notes may also adversely impact your
ability to sell your Notes in the secondary market.
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It is more likely that UBS will elect to call
the Notes prior to maturity when the expected contingent coupons payable on the Notes are greater than the interest that would
be payable on other instruments issued by UBS of comparable maturity, terms and credit rating trading in the market. The greater
likelihood of UBS calling the Notes in that environment increases the risk that you will not be able to reinvest the proceeds from
the called Notes in an equivalent investment with a similar contingent coupon rate. 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 notes. UBS is less likely to call the Notes prior to maturity when the expected contingent coupons payable
on the Notes are less than the interest that would be payable on other comparable instruments issued by UBS, which includes when
the level of any of the underlying indices is less than its coupon barrier. Therefore, the Notes are more likely to remain outstanding
when the expected amount payable on the Notes is less than what would be payable on other comparable instruments and when your
risk of not receiving a contingent coupon is relatively higher.
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¨
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An investment in Notes with contingent coupon and issuer call features may be more sensitive
to interest rate risk than an investment in securities without such features – Because of the issuer call and contingent
coupon features of the Notes, you will bear greater exposure to fluctuations in interest rates than if you purchased securities
without such features. In particular, you may be negatively affected if prevailing interest rates begin to rise, and the contingent
coupon rate on the Notes may be less than the amount of interest you could earn on other investments with a similar level of risk
available at such time. In addition, if you tried to sell your Notes at such time, the value of your Notes in any secondary market
transaction would also be adversely affected. Conversely, in the event that prevailing interest rates are low relative to the contingent
coupon rate and UBS elects to call the Notes, there is no guarantee that you will be able to reinvest the proceeds from an investment
in the Notes at a comparable rate of return for a similar level of risk.
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¨
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You are exposed to the market risk of each underlying index — Your return on the Notes
is not linked to a basket consisting of the underlying indices. Rather, it will be contingent upon the performance of each underlying
index. Unlike an instrument with a return linked to a basket of indices, 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 index. Poor performance by any
one of the underlying indices 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 index. For instance, you may receive a negative return equal to the underlying
index return of the least performing underlying index if the closing level of one underlying index is less than its downside threshold
on the trigger observation date, even if the underlying index return of another underlying index is positive or has not declined
as much. Accordingly, your investment is subject to the market risk of each underlying index.
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¨
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Because the Notes are linked to the least performing underlying index, 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 a single underlying index or fewer underlying indices— 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 a single underlying index or fewer
underlying indices. With more underlying indices, it is more likely that the closing level or final level of an underlying index
will be less than its coupon barrier or downside threshold on any coupon observation date or the final valuation date (which is
also the trigger observation date), respectively, than if the Notes were linked to a single underlying index or fewer underlying
indices.
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In addition, the lower the correlation is between
a pair of underlying indices, the greater the likelihood that one underlying index will decline to a closing level or final level
that is less than its coupon barrier or downside threshold, as applicable. Although the correlation of the underlying indices’
performance may change over the term of the Notes, the economic terms of the Notes, including the contingent coupon rate, downside
thresholds and coupon barriers are determined, in part, based on the correlation of the underlying indices’ 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 thresholds and coupon barriers are generally associated with lower correlation of the underlying indices.
Therefore, if the performance of a pair of underlying indices is not correlated to each other or is negatively correlated, the
risk that you will not receive any contingent coupons or a trigger event 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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Any payment on the Notes is subject to the creditworthiness 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 indices and indirectly linked to the performance of the underlying constituents. The levels of
the underlying indices can rise or fall sharply due to factors specific to each underlying index or its underlying constituents,
such as stock or commodity price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management
changes and decisions and other events, as well as general market factors, such as general stock market or commodity market 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 indices.
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¨
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Fair value considerations.
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The issue price you pay for the Notes will exceed their estimated initial value — The
issue price you pay for the Notes will exceed their estimated initial value as of the trade date due to the inclusion in the issue
price of the underwriting discount, hedging costs, issuance and other costs and projected profits. As of the close of the relevant
markets on the trade date, we will determine the estimated initial value of the Notes by reference to our internal pricing models
and it will be set forth in the final pricing supplement. The pricing models used to determine the estimated initial value of the
Notes incorporate certain variables, including the levels of the underlying indices and underlying constituents, the volatility
of the underlying indices and underlying constituents, the correlation of the underlying indices, any dividends paid on the underlying
constituents, prevailing interest rates, the term of the Notes and our internal funding rate. Our internal funding rate is typically
lower than the rate we would pay to issue conventional fixed or floating rate debt securities of a similar term. The underwriting
discount, hedging costs, issuance and other costs, projected profits and the difference in rates will reduce the economic value
of the Notes to you. Due to these factors, the estimated initial value of the Notes as of the trade date will be less than the
issue price you pay for the Notes.
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¨
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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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¨
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Our actual profits may be greater or less than the differential between the estimated initial
value and the issue price of the Notes as of the trade date — We may determine the economic terms of the Notes, as well
as hedge our obligations, at least in part, prior to the trade date. In addition, there may be ongoing costs to us to maintain
and/or adjust any hedges and such hedges are often imperfect. Therefore, our actual profits (or potentially, losses) in issuing
the Notes cannot be determined as of the trade date and any such differential between the estimated initial value and the issue
price of the Notes as of the trade date does not reflect our actual profits. Ultimately, our actual profits will be known only
at the maturity of the Notes.
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Limited or no secondary market and secondary market price considerations.
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There may be little or no secondary market for the Notes — The Notes will not be listed
or displayed on any securities exchange or any electronic communications network. UBS Securities LLC and its affiliates intend,
but are not required, to make a market for the Notes and may stop making a market at any time. If you are able to sell your Notes
prior to maturity you may have to sell them at a substantial loss. Furthermore, there can be no assurance that a secondary market
for the Notes will develop. The estimated initial value of the Notes does not represent a minimum or maximum price at which we
or any of our affiliates would be willing to purchase your Notes in any secondary market at any time.
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The price at which UBS Securities LLC and its affiliates may offer to buy the Notes in the secondary
market (if any) may be greater than UBS’ valuation of the Notes at that time, greater than any other secondary market prices
provided by unaffiliated dealers (if any) and, depending on your broker, greater than the valuation provided on your customer account
statements — For a limited period of time following the issuance of the Notes, UBS Securities LLC or its affiliates may
offer to buy or sell such Notes at a price that exceeds (i) our valuation of the Notes at that time based on our internal pricing
models, (ii) any secondary market prices provided by unaffiliated dealers (if any) and (iii) depending on your broker, the valuation
provided on customer account statements. The price that UBS Securities LLC may initially offer to buy such Notes following issuance
will exceed the valuations indicated by our internal pricing models due to the inclusion for a limited period of time of the aggregate
value of the underwriting discount, hedging costs, issuance costs and theoretical projected trading profit. The portion of such
amounts included in our price will decline to zero on a straight line basis over a period ending no later than the date specified
under “Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any).” Thereafter, if UBS Securities
LLC or an affiliate makes secondary markets in the Notes, it will do so at prices that reflect our estimated value determined by
reference to our internal pricing models at that time. The temporary positive differential relative to our internal pricing models
arises from requests from and arrangements made by UBS Securities LLC with the selling agents of structured debt securities such
as the Notes. As described above, UBS Securities LLC and its affiliates intend, but are not required, to make a market for the
Notes and may stop making a market at any time. The price at which UBS Securities LLC or an affiliate may make secondary markets
at any time (if at all) will also reflect its then current bid-ask spread for similar sized trades of structured debt securities.
UBS Securities LLC reflects this temporary positive differential on its customer statements. Investors should inquire as to the
valuation provided on customer account statements provided by unaffiliated dealers.
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Economic and market factors affecting the terms and market price of Notes prior to maturity
— Because structured notes, including the Notes, can be thought of as having a debt component and a derivative component,
factors that influence the values of debt instruments and options and other derivatives will also affect the terms and features
of the Notes at issuance and the market price of the Notes prior to maturity. These factors include the levels of each underlying
index and the underlying constituents; the volatility of each underlying index and the underlying constituents; the correlation
of the underlying indices; any dividends paid on the underlying constituents; 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; the creditworthiness of UBS; the then current bid-ask spread for the Notes and the factors discussed under “—
Potential conflict of interest” below. These and other factors are unpredictable and interrelated and may offset or magnify
each other.
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Impact of fees and the use of internal funding rates rather than secondary market credit spreads
on secondary market prices — All other things being equal, the use of the internal funding rates described above under
“— Fair value considerations” as well as the inclusion in the issue price of the underwriting discount, hedging
costs, issuance and other costs and any projected profits are, subject to the temporary mitigating effect of UBS Securities LLC’s
and its affiliates’ market making premium, expected to reduce the price at which you may be able to sell the Notes in any
secondary market.
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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 underlying
constituents 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 index 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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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 indices will rise or fall.
There can be no assurance that the closing level of each underlying index will be equal to or greater than its coupon barrier on
each coupon observation date, or, if UBS does not elect to call the Notes, that a trigger event will not occur. The levels of the
underlying indices will be influenced by complex and interrelated political, economic, financial and other factors that affect
the issuers of each underlying constituent (each an “underlying constituent issuer”). You should be willing to accept
the risks associated with the relevant markets tracked by each such underlying index in general and each index's underlying constituents
in particular, and the risk of losing a significant portion or all of your initial investment.
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The underlying indices reflect price return, not total return — The return on your
Notes is based on the performance of the underlying indices, which reflect the changes in the market prices of the underlying 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 constituents. The return on your Notes will not include such a total return
feature or dividend component.
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Changes that affect an underlying index will affect the market value of, and any amounts payable
on, your Notes — The policies of each index sponsor as specified under “Information About the Underlying Indices”
(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 indices. The policies of the index sponsors with respect to the calculation of the underlying indices
could also adversely affect the levels of the underlying indices. The index sponsors may discontinue or suspend calculation or
dissemination of the underlying indices. Any such actions could have an adverse effect on the market value of, and any amounts
payable on, the Notes.
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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 indices. The index sponsors are not involved in the Notes offering in any way and has 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 amounts
payable on, your Notes.
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Potential UBS impact on price — Trading or transactions by UBS or its affiliates in
an underlying index or any underlying constituent, as applicable, listed and/or over-the-counter options, futures, exchange-traded
funds or other instruments with returns linked to the performance of the underlying index or any underlying constituent, may adversely
affect the levels of the underlying indices and, therefore, the market value of the Notes. Further, UBS is less likely to call
the Notes when the closing level of any underlying index is trading less than its coupon barrier, and, therefore, any hedging activities
that adversely affect the level of an underlying index may also diminish the probability of UBS calling the Notes.
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Potential conflict of interest — UBS and its affiliates may engage in business with
the underlying constituent issuers or trading activities related to one or more underlying index or any underlying constituents,
which may present a conflict between the interests of UBS and you, as a holder of the Notes. Moreover, UBS may elect to call the
Notes pursuant to the issuer call feature. If UBS so elects, the decision may be based on factors contrary to those favorable to
a holder of the Notes, such as, but not limited to, those described above under “— UBS may elect to call the Notes
and the Notes are subject to reinvestment risk” and “— An investment in Notes with contingent coupon and
issuer call features may be more sensitive to interest rate risk than an investment in securities without such features”.
There are also potential conflicts of interest between you and the calculation agent, which will be an affiliate of UBS. The calculation
agent will determine whether the contingent coupon is payable to you on any coupon payment date and the payment at maturity of
the Notes, if any, based on observed closing levels of the underlying indices. The calculation agent can postpone the determination
of the initial level, closing level or final level of any underlying index (and therefore the related coupon payment date or maturity
date, as applicable) if a market disruption event occurs and is continuing on the trade date, any coupon observation date, any
trigger observation date or final valuation date, respectively. As UBS determines the economic terms of the Notes, including the
contingent coupon rate, downside thresholds and coupon barriers, and such terms include the underwriting discount, hedging costs,
issuance and other costs and projected profits, the Notes represent a package of economic terms. There are other potential conflicts
of interest insofar as an investor could potentially get better economic terms if that investor entered into exchange-traded and/or
OTC derivatives or other instruments with third parties, assuming that such instruments were available and the investor had the
ability to assemble and enter into such instruments. Additionally, UBS and its affiliates act in various capacities with respect
to the Notes, including as a principal, agent or dealer in connection with the sale of the Notes. Such affiliates, and any other
third-party dealers, will derive compensation from the distribution of the Notes and such compensation may serve as an incentive
to sell these Notes instead of other investments. Furthermore, given that UBS Securities LLC and its affiliates temporarily maintain
a market making premium, it may have the effect of discouraging UBS Securities LLC and its affiliates from recommending sale of
your Notes in the secondary market.
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Potentially inconsistent research, opinions or recommendations by UBS — UBS and its
affiliates publish research from time to time on financial markets and other matters that may influence the value of 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
indices to which the Notes are linked.
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The Notes are not bank deposits — An investment in the Notes carries risks which are
very different from the risk profile of a bank deposit placed with UBS or its affiliates. The Notes have different yield and/or
return, liquidity and risk profiles and would not benefit from any protection provided to deposits.
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If UBS experiences financial difficulties, FINMA has the power to open restructuring or liquidation
proceedings in respect of, and/or impose protective measures in relation to, UBS, which proceedings or measures may have a material
adverse effect on the terms and market value of the Notes and/or the ability of UBS to make payments thereunder — The
Swiss Financial Market Supervisory Authority (“FINMA”) has broad statutory powers to take measures and actions in relation
to UBS if (i) it concludes that there is justified concern that UBS is over-indebted or has serious liquidity problems or (ii)
UBS fails to fulfill the applicable capital adequacy requirements (whether on a standalone or consolidated basis) after expiry
of a deadline set by FINMA. If one of these pre-requisites is met, FINMA is authorized to open restructuring proceedings or liquidation
(bankruptcy) proceedings in respect of, and/or impose protective measures in relation to, UBS. The Swiss Banking Act grants significant
discretion to FINMA in connection with the aforementioned proceedings and measures. In particular, a broad variety of protective
measures may be imposed by FINMA, including a bank moratorium or a maturity postponement, which measures may be ordered by FINMA
either on a stand-alone basis or in connection with restructuring or liquidation proceedings. The resolution regime of the Swiss
Banking Act is further detailed in the FINMA Banking Insolvency Ordinance (“BIO-FINMA”). In a restructuring proceeding,
FINMA, as resolution authority, is competent to approve the resolution plan. The resolution plan may, among other things, provide
for (a) the transfer of all or a portion of UBS’ assets, debts, other liabilities and contracts (which may or may not include
the contractual relationship between UBS and the holders of Notes) to another entity, (b) a stay (for a maximum of two business
days) on the termination of contracts to which UBS is a party, and/or the exercise of (w) rights to terminate, (x) netting rights,
(y) rights to enforce or dispose of collateral or (z) rights to transfer claims, liabilities or collateral under contracts to which
UBS is a party, (c) the conversion of UBS’ debt and/or other obligations, including its obligations under the Notes, into
equity (a “debt-to-equity” swap), and/or (d) the partial or full write-off of obligations owed by UBS (a “write-off”),
including its obligations under the Notes. The BIO-FINMA provides that a debt-to-equity swap and/or a write-off of debt and other
obligations (including the Notes) may only take place after (i) all debt instruments issued by UBS qualifying as additional tier
1 capital or tier 2 capital have been converted into equity or written-off, as applicable, and (ii) the existing equity of UBS
has been fully cancelled. While the BIO-FINMA does not expressly address the order in which a write-off of debt instruments other
than debt instruments qualifying as additional tier 1 capital or tier 2 capital should occur, it states that debt-to-equity swaps
should occur in the following order: first, all subordinated claims not qualifying as regulatory capital; second, all other claims
not excluded by law from a debt-to-equity swap (other than deposits); and third, deposits (in excess of the amount privileged by
law). However, given the broad discretion granted to FINMA as the resolution authority, any restructuring plan in respect of UBS
could provide that the claims under or in connection with the Notes will be partially or fully converted into equity or written-off,
while preserving other obligations of UBS that rank pari passu with, or even junior to, UBS’ obligations under the Notes.
Consequently, holders of Notes may lose all or some of their investment in the Notes. In the case of restructuring proceedings
with respect to a systemically important Swiss bank (such as UBS), the creditors whose claims are affected by the restructuring
plan will not have a right to vote on, reject, or seek the suspension of the restructuring plan. In addition, if a restructuring
plan has been approved by FINMA, the rights of a creditor to seek judicial review of the restructuring plan (e.g., on the grounds
that the plan would unduly prejudice the rights of holders of Notes or otherwise be in violation of the Swiss Banking Act) are
very limited. In particular, a court may not suspend the implementation of the restructuring plan. Furthermore, even if a creditor
successfully challenges the restructuring plan, the court can only require the relevant creditor to be compensated ex post and
there is currently no guidance as to on what basis such compensation would be calculated or how it would be funded.
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Uncertain tax treatment — Significant aspects of the tax treatment of the Notes are
uncertain. You should consult your tax advisor about your tax situation. See “What Are the Tax Consequences of the Notes?”
herein and “Material U.S. Federal Income Tax Consequences”, including the section “— Securities Treated
as Prepaid Derivatives or Prepaid Forwards with Associated Contingent Coupons”, in the accompanying product supplement.
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Hypothetical
Examples of How the Notes Might Perform
The below examples are based on hypothetical
terms. The actual terms will be set on the trade date and will be indicated on the cover of the final pricing supplement.
The examples below illustrate the payment upon a call
or at maturity for a $1,000.00 Note on a hypothetical offering of the Notes, with the following assumptions (amounts may have been
rounded for ease of reference):
Principal Amount:
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$1,000.00
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Term:
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Approximately 24 months
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Contingent Coupon Rate:
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5.00% per annum (or 1.25% per quarter)
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Contingent Coupon:
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$12.50 per quarter
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Coupon Observation Dates:
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Quarterly
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Trigger Observation Date:
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Final Valuation Date
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Initial Level:
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Underlying Index A:
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22,000
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Underlying Index B:
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1,200
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Underlying Index C:
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2,600
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Coupon Barrier:
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Underlying Index A:
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14,300 (which is equal to 65% of its Initial Level)
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Underlying Index B:
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780 (which is equal to 65% of its Initial Level)
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Underlying Index C:
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1,690 (which is equal to 65% of its Initial Level)
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Downside Threshold:
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Underlying Index A:
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14,300 (which is equal to 65% of its Initial Level)
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Underlying Index B:
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780 (which is equal to 65% of its Initial Level)
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Underlying Index C:
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1,690 (which is equal to 65% of its Initial Level)
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Example 1 — On the first potential Call
Settlement Date, UBS calls the Notes.
Date
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Closing Level
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Payment (per
Note)
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First Coupon Observation Date
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Underlying Index A: 14,500 (equal to or greater than Coupon Barrier)
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$1,012.50 (Call Settlement Amount)
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Underlying Index B: 1,300 (equal to or greater than Coupon Barrier)
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Underlying Index C: 2,500 (equal to or greater than Coupon Barrier)
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Total Payment:
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$1,012.50 (1.25% total return)
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Because UBS elects to call the Notes after the first
coupon observation date, UBS will pay on the call settlement date a total of $1,012.50 per Note (reflecting your principal amount
plus the applicable contingent coupon), for a 1.25% total return on the Notes. You will not receive any further payments on the
Notes.
Example 2 — On the fifth potential Call
Settlement Date, UBS calls the Notes.
Date
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Closing Level
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Payment (per
Note)
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First through Fourth Coupon Observation Date
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Underlying Index A: Various (all equal to or greater than Coupon Barrier)
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$50.00 (Aggregate Contingent Coupons)
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Underlying Index B: Various (all equal to or greater than Coupon Barrier)
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Underlying Index C: Various (all equal to or greater than Coupon Barrier)
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Fifth Coupon Observation Date
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Underlying Index A: 14,350 (equal to or greater than Coupon Barrier)
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$1,012.50 (Call Settlement Amount)
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Underlying Index B: 1,150 (equal to or greater than Coupon Barrier)
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Underlying Index C: 2,200 (equal to or greater than Coupon Barrier)
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Total Payment:
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$1,062.50 (6.25% total return)
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Because UBS elects to call the Notes after the fifth
coupon observation date, UBS will pay on the call settlement date a total of $1,012.50 per Note (reflecting your principal amount
plus the applicable contingent coupon). When added to the contingent coupons of $50.00 received in respect of the prior coupon
observation dates, you will have received a total of $1,062.50, a 6.25% total return on the Notes. You will not receive any further
payments on the Notes.
Example 3 — UBS does NOT call the Notes
and a Trigger Event does not occur.
Date
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Closing Level
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Payment (per
Note)
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First Coupon Observation Date
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Underlying Index A: 14,300 (equal to or greater than Coupon Barrier)
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$12.50 (Contingent Coupon)
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Underlying Index B: 1,070 (equal to or greater than Coupon Barrier)
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Underlying Index C: 2,100 (equal to or greater than Coupon Barrier)
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Second through Seventh Coupon Observation Dates
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Underlying Index A: Various (all equal to or greater than
Coupon Barrier)
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$0.00
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Underlying Index B: Various (all equal to or greater than
Coupon Barrier)
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Underlying Index C: Various (all less than
Coupon Barrier)
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Final Valuation Date
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Underlying Index A: 16,885 (equal to or greater than Coupon Barrier and Downside Threshold)
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$1,012.50 (Payment at Maturity)
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Underlying Index B: 1,000 (equal to or greater than Coupon Barrier and Downside Threshold)
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Underlying Index C: 2,050 (equal to or greater than Coupon Barrier and Downside Threshold)
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Total Payment:
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$1,025.00 (2.50% total return)
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Because UBS does not elect to call the Notes and the
final level of each underlying index is equal to or greater than its downside threshold, a trigger event has not occurred. At maturity,
UBS will pay a total of $1,012.50 per Note (reflecting your principal amount plus the applicable contingent coupon). When added
to the contingent coupon of $12.50 received in respect of the prior coupon observation dates, UBS will have paid a total of $1,025.00,
a 2.50% total return on the Notes.
Example 4 — UBS does NOT call the Notes
and a Trigger Event occurs.
Date
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Closing Level
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Payment (per
Note)
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First Coupon Observation Date
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Underlying Index A: 17,000 (equal to or greater than Coupon Barrier)
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$12.50 (Contingent Coupon)
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Underlying Index B: 1,080 (equal to or greater than Coupon Barrier)
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Underlying Index C: 2,000 (equal to or greater than Coupon Barrier)
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Second through Seventh Coupon Observation Dates
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Underlying Index A: Various (all equal to or greater than
Coupon Barrier)
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$0.00
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Underlying Index B: Various (all equal to or greater than
Coupon Barrier)
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Underlying Index C: Various (all less than
Coupon Barrier)
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Final Valuation Date
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Underlying Index A: 19,900 (equal to or greater than Coupon Barrier and Downside Threshold)
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$1,000.00 × [1 + Underlying Index Return of the Least Performing Underlying
Index] =
$1,000.00 × [1 + (-60%)] =
$1,000.00 × 40%=
$400.00 (Payment at Maturity)
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Underlying Index B: 480 (less than Coupon Barrier and Downside Threshold)
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Underlying Index C: 1,900 (equal to or greater than Coupon Barrier and Downside Threshold)
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Total Payment:
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$412.50 (58.75% loss)
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Because UBS does not elect to call the Notes and the
final level of Underlying Index B is less than its downside threshold, a trigger event occurs. Therefore, at maturity, you will
be exposed to the negative return of the least performing underlying index and UBS will pay you $400.00 per Note. When added to
the contingent coupon of $12.50 received in respect of the prior coupon observation dates, UBS will have paid you $412.50 per Note
for a loss on the Notes of 58.75%.
We make no representation or warranty as to which
of the underlying indices will be the least performing underlying index 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 UBS does not elect to call the Notes, you may lose a significant portion or all of your investment. Specifically,
if UBS does not elect to call the Notes and a trigger event occurs, you will lose a percentage of your principal amount equal to
the underlying index return of the least performing underlying index, and in extreme situations, you could lose all of your initial
investment.
You will be exposed to the market risk of each
underlying index on each coupon observation dates and on the final valuation date and any decline in the level of one underlying
index 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 index. UBS may elect to call the Notes at its discretion on any coupon observation date (quarterly,
other than the final valuation date) regardless of the performance of the underlying indices. 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.
Information
About the Underlying Indices
All disclosures contained in this document regarding
each underlying index for the Notes are derived from publicly available information. UBS has not conducted any independent review
or due diligence of any publicly available information with respect to any underlying index. You should make your own investigation
into each underlying index.
Included on the following pages is a brief description
of each underlying index. This information has been obtained from publicly available sources. Set forth below is a graph that illustrates
the past performance for each underlying index. 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 indices as an indication of future performance.
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").
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
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 16,558.76, which is equal to 65.00% of its hypothetical initial level.
Its actual initial level, downside threshold and coupon barrier will be determined on the trade date. Past performance of
INDU is not indicative of the future performance of INDU 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
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 913.492, which is equal to 65.00% of its hypothetical initial level.
Its actual initial level, downside threshold and coupon barrier will be determined on the trade date. Past performance of
RTY is not indicative of the future performance of RTY during the term of the Notes.
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 (its “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 Notes.
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%). 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. These sector changes were effective for SPX as of the open of business on September
24, 2018 to coincide with the September 2018 quarterly rebalancing. Effective February 10, 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 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 SPX on June 1, 2020 was 3,055.73 (its “hypothetical initial level”). The dotted line represents its hypothetical
downside threshold and its hypothetical coupon barrier of 1,986.22, which is equal to 65.00% of its hypothetical initial level.
Its actual initial level, downside threshold and coupon barrier will be determined on the trade date. Past performance of
SPX is not indicative of the future performance of SPX during the term of the Notes.
Correlation
of the Underlying Indices
The graph below illustrates the daily performance
of the Dow Jones Industrial Average®, the Russell 2000® Index and the S&P 500®
Index from January 1, 2010 through June 1, 2020. For comparison purposes, each underlying index has been normalized to have a closing
level of 100.00 on January 1, 2010 by dividing the closing level of that underlying index on each trading day by the closing level
of that underlying index on January 1, 2010 and multiplying by 100.00. 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 indices over a given period, the more positively correlated those underlying indices are. The lower (or more negative)
the correlation among the underlying indices, the less likely it is that those underlying indices will move in the same direction
and therefore, the greater the potential for the closing level or final level of one of those underlying indices to be less than
its coupon barrier or downside threshold on a coupon observation date or the trigger observation date, respectively. This is because
the less positively correlated the underlying indices are, the greater the likelihood that at least one of the underlying indices
will decrease in value. However, even if the underlying indices have a higher positive correlation, the closing level or final
level of one or more of the underlying indices might be less than its coupon barrier or downside threshold on a coupon observation
date or the trigger observation date, respectively, as the underlying indices may decrease in value together. Although the correlation
of the underlying indices’ 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 indices over the period set forth below. A higher contingent coupon rate is generally
associated with lower correlation of the underlying indices, 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 of the underlying indices, and greater expected volatility generally
indicates an increased risk of loss at maturity”, “— You are exposed to the market risk of each underlying index”
and “— Because the Notes are linked to the least performing underlying index, 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 a single underlying index or fewer underlying indices” herein.
Past performance of the underlying indices is not
indicative of the future performance of the underlying indices.
What
Are the Tax Consequences of the Notes?
The U.S. federal income tax consequences of your
investment in the Notes are uncertain. There are no statutory provisions, regulations, published rulings or judicial decisions
addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as
the Notes. Some of these tax consequences are summarized below, but we urge you to read the more detailed discussion in “Material
U.S. Federal Income Tax Consequences”, including the section “ — Securities Treated as Prepaid Derivatives or
Prepaid Forwards with Associated Contingent Coupons” of the accompanying product supplement and to discuss the tax consequences
of your particular situation with your tax advisor. This discussion is based upon the Internal Revenue Code of 1986, as amended
(the “Code”), final, temporary and proposed U.S. Treasury Department (the “Treasury”) regulations, rulings
and decisions, in each case, as available and in effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect. Tax consequences under state, local and non-U.S. laws are not addressed herein. No ruling from the U.S. Internal
Revenue Service (the “IRS”) has been sought as to the U.S. federal income tax consequences of your investment in the
Notes, and the following discussion is not binding on the IRS.
U.S. Tax Treatment. Pursuant to the terms of
the Notes, UBS and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial
ruling to the contrary, to characterize the Notes as prepaid derivative contracts with respect to the underlying indices. If your
Notes are so treated, any contingent coupon that is paid by UBS (including on the maturity date or call settlement date) should
be included in your income as ordinary income in accordance with your regular method of accounting for U.S. federal income tax
purposes.
In addition, excluding amounts attributable to any
contingent coupon, you should generally recognize capital gain or loss upon the taxable disposition of your Notes in an amount
equal to the difference between the amount you receive at such time (other than amounts or proceeds attributable to a contingent
coupon or any amount attributable to any accrued but unpaid contingent coupon) and the amount you paid for your Notes. Such gain
or loss should generally be long-term capital gain or loss if you have held your Notes for more than one year (otherwise, such
gain or loss should be short-term capital gain or loss if held for one year or less). The deductibility of capital losses is subject
to limitations. Although uncertain, it is possible that proceeds received from the taxable disposition of your Notes prior to a
coupon payment date, but that could be attributed to an expected contingent coupon, could be treated as ordinary income. You should
consult your tax advisor regarding this risk.
Based on certain factual representations made
by 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
— 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 requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments,
which might include the Notes. Notice 2008-2 focuses in particular on whether to require holders of these instruments to accrue
income over the term of their investment. It also asks for comments on a number of related topics, including the character of income
or loss with respect to these instruments and the relevance of factors such as the nature of the underlying property to which the
instruments are linked. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of
an investment in the Notes, possibly with retroactive effect. You should consult your tax advisor regarding the U.S. federal income
tax consequences of an investment in the Notes, including possible alternative treatments and the issues presented by this notice.
Non-U.S. holders should consult their tax advisors regarding the U.S. federal income tax consequences of investing in the Notes,
including the possible application of 30% U.S. withholding tax in respect of the contingent coupons.
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), or $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 Notes.
Non-U.S. Holders. The U.S. federal income tax
treatment of the contingent coupons is unclear. Subject to Section 871(m) of the Code and FATCA, as discussed below, our counsel
is of the opinion that contingent coupons paid to a non-U.S. holder that provides us (and/or the applicable withholding agent)
with a fully completed and validly executed applicable IRS Form W-8 should not be subject to U.S. withholding tax and we do not
intend to withhold any tax on contingent coupons. However, it is possible that the IRS could assert that such payments are subject
to U.S. withholding tax, or that another withholding agent may otherwise determine that withholding is required, in which case
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 the Note to the U.S. federal income tax on a net basis, and
the proceeds from such a taxable disposition to a 15% withholding tax. Non-U.S. holders should consult their tax advisors regarding
the potential treatment of any such entity 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 index 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 index,
an underlying constituent 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 index, an underlying constituent or the Notes. A non-U.S. holder that enters, or
has entered, into other transactions in respect of an underlying index, an underlying constituent 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 intends to resell the Notes to one or more third-party dealers at a discount from the issue
price to public equal to the underwriting discount indicated on the cover hereof. Certain of such third-party dealers may resell
the Notes to other securities dealers at the issue price to the public less an underwriting discount up to the underwriting discount
indicated on the cover hereof. Certain unaffiliated registered investment advisers or fee-based advisory accounts may purchase
Notes from a third-party dealer at a purchase price of at least $982.50 per principal amount of the Notes, and such third-party
dealers, with respect to such sales, may forgo some or all of the underwriting discount. Additionally, we or one of our affiliates
may pay a fee to an unaffiliated broker-dealer for providing certain electronic platform services with respect to this offering.
Conflicts of Interest — UBS Securities
LLC is an affiliate of UBS and, as such, has a “conflict of interest” in this offering within the meaning of Financial
Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition, UBS will receive the net proceeds (excluding
the underwriting discount) from the initial public offering of the Notes, thus creating an additional conflict of interest within
the meaning of FINRA Rule 5121. Consequently, the offering is being conducted in compliance with the provisions of FINRA Rule 5121.
UBS Securities LLC is not permitted to sell Notes in this offering to an account over which it exercises discretionary authority
without the prior specific written approval of the account holder.
UBS Securities LLC and its affiliates may offer
to buy or sell the Notes in the secondary market (if any) at prices greater than UBS’ internal valuation — The
value of the Notes at any time will vary based on many factors that cannot be predicted. However, the price (not including UBS
Securities LLC’s or any affiliate’s customary bid-ask spreads) at which UBS Securities LLC or any affiliate would offer
to buy or sell the Notes immediately after the trade date in the secondary market is expected to exceed the estimated initial value
of the Notes as determined by reference to our internal pricing models. The amount of the excess will decline to zero on a straight
line basis over a period ending no later than 6 months after the trade date, provided that UBS Securities LLC may shorten the period
based on various factors, including the magnitude of purchases and other negotiated provisions with selling agents. Notwithstanding
the foregoing, UBS Securities LLC and its affiliates intend, but are not required to make a market for the Notes and may stop making
a market at any time. For more information about secondary market offers and the estimated initial value of the Notes, see “Key
Risks — Fair value considerations” and “— Limited or no secondary market and secondary market price considerations”
of this document.
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.
TABLE OF CONTENTS
|
|
|
|
Preliminary Pricing Supplement
|
|
Investment Description
|
i
|
Features
|
i
|
Key Dates
|
i
|
Note Offering
|
i
|
Additional Information about UBS and the Notes
|
ii
|
Investor Suitability
|
1
|
Preliminary Terms
|
2
|
Investment Timeline
|
3
|
Coupon Observation Dates(1) and Coupon Payment Dates(1)(2)
|
4
|
Key Risks
|
5
|
Hypothetical Examples of How the Notes Might Perform
|
9
|
Information About the Underlying Indices
|
11
|
Correlation of the Underlying Indices
|
14
|
What Are the Tax Consequences of the Notes?
|
15
|
Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
|
17
|
|
|
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
|
5
|
Where You Can Find More Information
|
6
|
Presentation of Financial Information
|
7
|
Limitations on Enforcement of U.S. Laws Against UBS, Its Management and Others
|
7
|
UBS
|
8
|
Swiss Regulatory Powers
|
11
|
Use of Proceeds
|
12
|
Description of Debt Securities We May Offer
|
13
|
Description of Warrants We May Offer
|
33
|
Legal Ownership and Book-Entry Issuance
|
48
|
Considerations Relating to Indexed Securities
|
53
|
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency
|
56
|
U.S. Tax Considerations
|
59
|
Tax Considerations Under the Laws of Switzerland
|
70
|
Benefit Plan Investor Considerations
|
72
|
Plan of Distribution
|
74
|
Conflicts of Interest
|
75
|
Validity of the Securities
|
76
|
Experts
|
76
|
|
|
$•
UBS AG
Trigger Callable Contingent Yield Notes
due on or about June 30, 2022
Preliminary Pricing Supplement dated June 3, 2020
(To Product Supplement dated October 31, 2018,
Index Supplement dated October 31, 2018
and Prospectus dated October 31, 2018)
UBS Investment Bank
UBS Securities LLC
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