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The information in this
preliminary pricing supplement is not complete and may be changed. We may not sell these Securities until the pricing supplement and the
accompanying prospectus (collectively, the “Offering Documents”) are delivered in final form. The Offering Documents are not
an offer to sell these Securities and we are not soliciting offers to buy these Securities in any state where the offer or sale is not
permitted.
|
Subject to Completion PRELIMINARY PRICING SUPPLEMENT Dated May 31, 2022 Filed Pursuant to Rule 424(b)(2) Registration Statement No. 333-263376 (To Prospectus dated May 27, 2022) |
UBS AG $•
Buffer Absolute Return Securities
Linked to the Relevant Nearby Wheat Futures
Contract due on or about June 7, 2024
Investment
Description
UBS AG Buffer Absolute Return Securities (the “Securities”) are unsubordinated,
unsecured debt obligations issued by UBS AG (“UBS” or the “issuer”) linked to the performance of the relevant
nearby wheat futures contract (the “underlying asset”). The amount you receive at maturity will be based on the direction
and percentage change in the official settlement price of the underlying asset from the trade date to the final valuation date (the “underlying
return”) and whether the official settlement price of the underlying asset on the final valuation date (the “final price”)
is less than the official settlement price of the underlying asset on the trade date (the “initial price”) and the downside
threshold, which is a level of the underlying asset equal to a percentage of the initial price as specified below. If the final price
is equal to or greater than the initial price, at maturity, UBS will pay you a cash payment per Security equal to the principal amount
and you will not receive a positive return on your investment. If the final price is less than the initial price and equal to or greater
than the downside threshold, at maturity, UBS will pay you a cash payment per Security equal to the principal amount plus a return equal
to the absolute value of the underlying return (the “contingent absolute return”). If, however, the final price is less than
the downside threshold, at maturity, you will not receive the contingent absolute return and, instead, UBS will pay you a cash payment
per Security that is less than the principal amount, resulting in a percentage loss on your initial investment equal to the percentage
that the final price is less than the initial price in excess of the buffer and, in extreme situations, you could lose almost all of your
initial investment. Investing in the Securities involves significant risks. The
Securities do not pay interest. You may lose some or almost all of your initial investment. The contingent absolute return and contingent
repayment of principal applies only if you hold the Securities to maturity. Any payment on the Securities, including any repayment of
principal, is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations you may not receive any amounts
owed to you under the Securities and you could lose all of your initial investment.
Features
| q | Repayment of Principal if the Final Price is Equal To or Greater Than the Initial Price: If the final price is equal to or greater than the initial price, at maturity, UBS will pay you a cash payment per Security equal to the principal amount and you will not receive a positive return on your investment. |
| q | Buffered Downside Market Exposure with Contingent Absolute Return at Maturity: If the final price is less than the initial price and equal to or greater than the downside threshold, at maturity, UBS will pay you a cash payment per Security equal to the principal amount plus a return equal to the contingent absolute return. If, however, the final price is less than the downside threshold, at maturity, you will not receive the contingent absolute return and, instead, UBS will pay you a cash payment per Security that is less than the principal amount, resulting in a percentage loss on your initial investment equal to the percentage that the final price is less than the initial price in excess of the buffer and, in extreme situations, you could lose almost all of your initial investment. The contingent absolute return and contingent repayment of principal applies only if you hold the Securities to maturity. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of UBS. |
Key
Dates*
| Trade Date** | May 31, 2022 |
| Settlement Date** | June 7, 2022 |
| Final Valuation Date | May 31, 2024 |
| Maturity Date | June 7, 2024 |
| * | Expected. See page 2 for additional details. |
| ** | We expect to deliver the Securities against payment on the fifth business day following the trade date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), trades in the secondary market generally are required to settle in two business days (T+2), unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Securities in the secondary market on any date prior to two business days before delivery of the Securities will be required, by virtue of the fact that each Security initially will settle in five business days (T+5), to specify alternative settlement arrangements to prevent a failed settlement of the secondary market trade. |
Notice to investors: the Securities are significantly
riskier than conventional debt instruments. The issuer is not necessarily obligated to repay the principal amount of the Securities at
maturity, and the Securities may have downside market risk similar to that of the underlying asset, subject to the buffer. This market
risk is in addition to the credit risk inherent in purchasing a debt obligation of UBS. You should not purchase the Securities if you
do not understand or are not comfortable with the significant risks involved in investing in the Securities.
You should carefully consider the risks described
under “Key Risks” beginning on page 3 and under “Considerations Relating to Indexed Securities” beginning on page
52 of the accompanying prospectus before purchasing any Securities. Events relating to any of those risks, or other risks and uncertainties,
could adversely affect the market value of, and the return on your Securities. You may lose some or almost all of your initial investment
in the Securities. The Securities will not be listed or displayed on any securities exchange or any electronic communications network.
Security
Offering
The final terms of the Securities will be set on the trade
date.
| Underlying Asset | Bloomberg Ticker | Initial Price | Downside Threshold | Buffer | CUSIP | ISIN |
| Relevant Nearby Wheat Futures Contract | W 1 | $• | 70.00% of the Initial Price | 30.00% | 90279FFA4 | US90279FFA49 |
The estimated initial value of the Securities as of
the trade date is expected to be between $925.10 and $955.10. The range of the estimated initial value of the Securities was determined
on the date hereof by reference to UBS’ internal pricing models, inclusive of the internal funding rate. For more information about
secondary market offers and the estimated initial value of the Securities, see “Key Risks — Estimated Value Considerations”
and “Key Risks — Risks Relating to Liquidity and Secondary Market Price Considerations” beginning on page 6 herein.
See “Additional Information about UBS and
the Securities” on page ii. The Securities will have the terms specified in the accompanying prospectus dated May 27, 2022 and
this document.
Neither the Securities and Exchange Commission nor
any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this document or
the accompanying prospectus. Any representation to the contrary is a criminal offense.
The Securities are not bank deposits and are not insured
by the Federal Deposit Insurance Corporation or any other governmental agency.
| Offering of Securities | Issue Price to Public(1) | Underwriting Compensation(1)(2) | Proceeds to UBS AG(2) | |||
| Total | Per Security | Total | Per Security | Total | Per Security | |
| Securities linked to the Relevant Nearby Wheat Futures Contract | $• | $1,000.00 | $• | $2.50 | $• | $997.50 |
| (1) | Notwithstanding the underwriting discount received by one or more third-party dealers from UBS Securities LLC described below, certain registered investment advisers or fee-based advisory accounts unaffiliated from UBS may purchase Securities from a third-party dealer at a purchase price of at least $997.50 per Security, and such third-party dealer, with respect to such sales, may forgo some or all of the underwriting discount. |
| (2) | Our affiliate, UBS Securities LLC, will receive an underwriting discount of $2.50 per Security sold in this offering. UBS Securities LLC intends to either re-allow the full amount of this discount to one or more third-party dealers or to offer the Securities directly to investors at the issue price to the public. UBS Securities LLC may also pay another unaffiliated dealer a marketing fee of $2.50 per Security with respect to some or all of the Securities in connection with its marketing efforts. The marketing fee will be deducted from amounts remitted to UBS. Certain of such third-party dealers may resell the Securities to other securities dealers at the issue price to the public less an underwriting discount of up to the underwriting discount indicated in the above table. |
| UBS Securities LLC | UBS Investment Bank |
Additional
Information about UBS and the Securities
UBS has filed a registration statement (including a prospectus
for various securities we may offer, including the Securities), with the Securities and Exchange Commission (the “SEC”), for
the Securities to which this document relates. You should read that document and any other documents relating to the Securities that UBS
has filed with the SEC for more complete information about UBS and this offering. You may obtain that document without cost by visiting
EDGAR on the SEC website at www.sec.gov. Our Central Index Key, or CIK, on the SEC website is 0001114446.
You may access these documents on the SEC website at www.sec.gov as follows:
References to “UBS,” “we,” “our”
and “us” refer only to UBS AG and not to its consolidated subsidiaries and references to “Securities” refer to
the Buffer Absolute Return Securities that are offered hereby, unless the context otherwise requires. Also, references to the “accompanying
prospectus” mean the UBS prospectus titled “Debt Securities and Warrants”, dated May 27, 2022.
This document, together with the document listed above, contains
the terms of the Securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials including
all other prior pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational
materials of ours. You should carefully consider, among other things, the matters set forth in “Key Risks” herein and under
“Considerations Relating to Indexed Securities” beginning on page 52 of the accompanying prospectus, as the Securities involve
risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors
concerning an investment in the Securities.
If there is any inconsistency between the terms of the Securities
described in the accompanying prospectus and this document, the terms in this document will govern.
UBS reserves the right to change the terms of, or reject
any offer to purchase, the Securities prior to their issuance. In the event of any changes to the terms of the Securities, UBS will notify
you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which
case UBS may reject your offer to purchase.
Investor
Suitability
The Securities may be suitable for you if:
| ¨ | You fully understand the risks inherent in an investment in the Securities, including the risk of loss of some or almost all of your initial investment. |
| ¨ | You can tolerate a loss of some or almost all of your initial investment and are willing to make an investment that may have downside market risk similar to that of an investment in the underlying asset. |
| ¨ | You believe that the official settlement price of the underlying asset will decline over the term of the Securities to a final price that is equal to or greater than the downside threshold. |
| ¨ | You understand and accept that your potential return on the Securities from any negative underlying return through the absolute return feature is limited by the downside threshold. |
| ¨ | You are willing to invest in the Securities based on the downside threshold (and corresponding buffer) specified on the cover hereof. |
| ¨ | You can tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the fluctuations in the price of the underlying asset. |
| ¨ | You do not seek current income from your investment. |
| ¨ | You understand and are willing to accept the risks associated with an investment in commodity futures contracts generally and in the relevant nearby relevant nearby wheat futures contract specifically. |
| ¨ | You are willing to hold the Securities to maturity and accept that there may be little or no secondary market for the Securities. |
| ¨ | You are willing to assume the credit risk of UBS for all payments under the Securities, and understand that if UBS defaults on its obligations you may not receive any amounts due to you including any repayment of principal. |
| ¨ | You understand that the estimated initial value of the Securities determined by our internal pricing models is lower than the issue price and that should UBS Securities LLC or any affiliate make secondary markets for the Securities, the price (not including their customary bid-ask spreads) will temporarily exceed the internal pricing model price. |
The Securities may not be suitable for you if:
| ¨ | You do not fully understand the risks inherent in an investment in the Securities, including the risk of loss of some or almost all of your initial investment. |
| ¨ | You require an investment designed to provide a full return of principal at maturity. |
| ¨ | You cannot tolerate a loss of some or almost all of your initial investment or are unwilling to make an investment that may have downside market risk similar to that of an investment in the underlying asset. |
| ¨ | You believe that the official settlement price of the underlying asset will increase over the term of the Securities, or decline over the term of the Securities to a final price that is less than the downside threshold. |
| ¨ | You seek an investment that participates in any increase in the final price of the underlying asset, or benefits from the full decline in the final price of the underlying asset. |
| ¨ | You seek an investment that benefits from the full depreciation in the price of the underlying asset. |
| ¨ | You are unwilling to invest in the Securities based on the downside threshold (and corresponding buffer) specified on the cover hereof. |
| ¨ | You cannot tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the fluctuations in the price of the underlying asset. |
| ¨ | You do not understand or are not willing to accept the risks associated with an investment in commodity futures contracts generally or in the relevant nearby wheat futures contract specifically. |
| ¨ | You seek current income from your investment. |
| ¨ | You are unable or unwilling to hold the Securities to maturity or you seek an investment for which there will be an active secondary market. |
| ¨ | You are not willing to assume the credit risk of UBS for all payments under the Securities, including any repayment of principal. |
The suitability considerations identified above are not
exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual circumstances. You are urged
to consult your investment, legal, tax, accounting and other advisors and carefully consider the suitability of an investment in the Securities
in light of your particular circumstances. You should review “Information About the Underlying Asset” herein for more information
on the underlying asset. You should also review carefully the “Key Risks” section herein and “Considerations Relating
to Indexed Securities” section of the accompanying prospectus for risks related to an investment in the Securities.
Preliminary
Terms
| Issuer | UBS AG, London Branch |
| Principal Amount | $1,000 per Security |
| Term | Approximately 24 months. In the event that we make any change to the expected trade date and settlement date, the calculation agent may adjust the final valuation date and maturity date to ensure that the stated term of the Securities remains the same. |
| Underlying Asset | The Securities are linked to the official settlement price per barrel, stated in U.S. dollars, of the first nearby month futures contract for wheat as traded on the Chicago Board of Trade (“CBOT”) (Bloomberg Ticker: W 1 ), provided that if the trade date or the final valuation date falls on or after the trading day prior to the first notice date for delivery of wheat under such futures contract, or on or after the trading day prior to the last trading day of such futures contract, then the second nearby month futures contract will be used with respect to such date. |
| Buffer | 30.00% |
| Payment at Maturity (per Security) |
If the final price is equal to or greater than the initial price, UBS will pay you an amount in cash equal to: |
| Principal Amount of $1,000 | |
|
If the final price is less than the initial price and $1,000 × (1 + Contingent Absolute Return) In this scenario, your potential return on the Securities |
|
| If the final price is less than the downside threshold, UBS will pay you an amount in cash that is less than your principal amount, equal to: | |
|
$1,000 × [1 + (Underlying Return + Buffer)] In this scenario, you will suffer a percentage loss |
|
| Underlying Return |
The quotient, expressed as a percentage, of the following Final Price − Initial Price In no event will the underlying return |
| Contingent Absolute Return | The absolute value of the underlying return. For example, if the underlying return is -5%, the contingent absolute return will equal 5%. |
| Initial Price(1) | The official settlement price of the underlying asset on the trade date. |
| Final Price(1) | The official settlement price of the underlying asset on the final valuation date. |
| Downside Threshold(1) | A specified price of the underlying asset that is less than the initial price, equal to a percentage of the initial price, as specified on the cover hereof. |
(1) As determined by the calculation agent and as may
be adjusted in the case of certain adjustment events as described herein under “Market Disruption Events” and “Permanent
Disruption Events; Alternative Method of Calculation”.
Investment
Timeline
| Trade Date | The initial price is observed and the final terms of the Securities are set. | |
| ¯ | ||
| Maturity Date |
The final price is observed on the final valuation date and If the final price is equal to or greater than the initial Principal Amount of $1,000 If the final price is less than the initial price and $1,000 × (1 + Contingent Absolute Return) In this scenario, your potential return on the Securities If the final price is less than the downside threshold, $1,000 × [1 + (Underlying Return + Buffer)] In this scenario, you will suffer a percentage loss |
Investing in the Securities involves significant risks.
You may lose some or almost all of your initial investment. Specifically, if the final price is less than the downside threshold, you
will not receive the contingent absolute return and, instead, you will lose a percentage of your principal amount equal to the percentage
that the final price is less than the initial price in excess of the buffer and, in extreme situations, you could lose almost all of your
initial investment. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of UBS. If
UBS were to default on its payment obligations, you may not receive any amounts owed to you under the Securities and you could lose all
of your initial investment.
Key
Risks
An investment in the Securities involves significant risks.
Some of the key risks that apply to the Securities are summarized here, but we urge you to read the additional explanation of risks relating
to the Securities generally in “Considerations Relating to Indexed Securities” section of the accompanying prospectus. We
also urge you to consult your investment, legal, tax, accounting and other advisors concerning an investment in the Securities.
Risks Relating to Return Characteristics
| ¨ | Risk of loss at maturity — The Securities differ from ordinary debt securities in that UBS will not necessarily repay the principal amount of the Securities. If the final level is less than the downside threshold, you will lose a percentage of your principal amount equal to the percentage that the final price is less than the initial price in excess of the buffer and, in extreme situations, you could lose almost all of your initial investment. |
| ¨ | The stated payout by the issuer applies only at maturity — You should be willing to hold your Securities to maturity. The stated payout by the issuer is available only if you hold your Securities to maturity. If you are able to sell your Securities prior to maturity in the secondary market, you may have to sell them at a loss relative to your initial investment even if the then-current price of the underlying asset is less than the initial price and equal to or greater than the downside threshold. |
| ¨ | The contingent absolute return applies only at maturity — At maturity, the Securities provide inverse exposure to the negative underlying return through the contingent absolute return feature only if the final price is less than the initial price and equal to or greater than the downside threshold. You can receive the full benefit of the absolute return feature from UBS only if you hold your Securities to maturity. |
| ¨ | You will receive a positive return at maturity only if the final price is less than the initial price and equal to or greater than the downside threshold, the absolute return feature is limited by the downside threshold, and the return on the Securities may change significantly despite only a small change in the final price — You will receive a positive return at maturity and benefit from the absolute return feature only if the final price is less than the initial price and equal to or greater than the downside threshold. If the final price is equal to or greater than the initial price, you will receive no positive return on the Securities. Further, even if the final price is less than the initial price, your return potential on the Securities from the absolute return feature is limited by the downside threshold. If, however, the final price is less than the downside threshold, you will not benefit from the contingent absolute return and, instead, you will lose a percentage of your principal amount equal to the percentage that the final level is less than the initial level in excess of the buffer and, in extreme situations, you could lose almost all of your initial investment. This means that while a final price that is less than the initial price but greater than or equal to the downside threshold will result in a positive return equal to the contingent absolute return, any additional decrease in the final price of the underlying asset to less than the downside threshold will instead result in a loss of some or almost all of your initial investment. |
| ¨ | No interest payments — UBS will not pay any interest with respect to the Securities. |
| ¨ | A lower downside threshold may reflect greater expected volatility of the underlying asset, and greater expected volatility generally indicates an increased risk of loss at maturity — “Volatility” refers to the frequency and magnitude of changes in the price of the underlying asset. The greater the expected volatility of the underlying asset as of the trade date, the greater the expectation is as of the final valuation date the final price of the underlying asset could be less than the downside threshold, and as a consequence, indicates an increased risk of loss. All things being equal, this greater expected volatility will generally be reflected in a lower downside threshold than that of an otherwise comparable security. Therefore, a relatively lower downside threshold may not necessarily indicate that the Securities have a greater likelihood of paying a return equal to the contingent absolute return. You should be willing to accept the downside market risk of the underlying asset and the potential to lose some or almost all of your initial investment. |
| ¨ | Owning the Securities is not the same as purchasing or taking a short position in the relevant nearby wheat futures contract or certain other related contracts directly — The return on your Securities will not reflect the return you would realize if you had actually purchased or took a short position in the underlying asset or wheat directly, or any other exchange-traded or over-the-counter instruments based on wheat. For instance, you will not benefit from any decline in the official settlement price of the underlying asset below the downside threshold. Furthermore, you will not have any rights that holders of such assets or instruments have. Even if the price of the underlying asset moves favorably during the term of the Securities, the market value of the Securities may not increase, and it is also possible for the price of the underlying asset to move favorably while the market value of the Securities declines. |
Risks Relating to Characteristics
of the Underlying Asset
| ¨ | Market risk — The official settlement price of the underlying asset can rise or fall sharply as a result of the supply of, and the demand for, the underlying asset and for the exchange traded futures contracts for the purchase or delivery of wheat. Changes in the official settlement price result over time from the interaction of many factors directly or indirectly affecting economic and political conditions such as the expected volatility of the official settlement price of the underlying asset, and of the prices of exchange-traded futures contracts for the purchase or delivery of wheat and a variety of economic, financial, political, regulatory, or judicial events. These factors may result in the official settlement price for the underlying asset declining substantially to a final price that is less than the downside threshold. Recently, the coronavirus infection has caused volatility in the global financial markets and a slowdown in the global economy. Coronavirus or any other communicable disease or infection may adversely affect the underlying asset. You, as an investor in the Securities, should make your own investigation into the underlying asset, the commodity markets generally and the merits of an investment linked to the underlying asset. |
| Generally, market prices of commodities tend to be highly volatile and may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships, governmental programs and policies, national and international monetary, trade, political and economic events, wars and acts of terror, changes in interest and exchange rates, speculation and trading activities in commodities and related contracts, weather, and agricultural, trade, fiscal and exchange control policies. The commodities markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators and government regulation and intervention. Many commodities are also highly cyclical. These factors, some of which are specific to the nature of a specific commodity, may affect the official settlement price of the underlying asset in varying ways. This, in turn, may adversely affect the market value of, and return on, the Securities. It is not possible to predict the aggregate effect of all or any combination of these factors. |
| ¨ | The Securities are subject to certain risks specific to agriculture-related commodities — Wheat is an agricultural product commodity. Consequently, in addition to factors affecting commodities generally that are described above and in the accompanying prospectus, the Securities may be subject to a number of additional factors specific to agricultural commodities that might cause price volatility. These may include, among others: |
| ¨ | weather conditions, including floods, drought and freezing conditions; |
| ¨ | changes in government policies; |
| ¨ | changes in global demand for food; |
| ¨ | disruptions in the supply chain or in the production or supply of other agricultural products, including related to geopolitical events or disputes; |
| ¨ | changes in ethanol demand (in the case of corn); |
| ¨ | planting decisions; and |
| ¨ | changes in demand for agricultural products both with end users and as inputs into various industries. |
| These and other factors interrelate in complex ways, and the effect of one factor on the official settlement price of wheat, and the market value of, and return on, the Securities may offset or enhance the effect of another factor. |
| ¨ | Prices of commodities and commodity futures contracts are highly volatile and may change unpredictably — Commodity prices are highly volatile and, in many sectors, have experienced unprecedented historical volatility. Commodity prices are affected by numerous factors including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated or unrealized); weather; agriculture; trade; fiscal, monetary and exchange control programs; domestic and foreign political and economic events and policies; disease; pestilence; technological developments; changes in interest rates, whether through governmental action or market movements; monetary and other governmental policies, action and inaction; macroeconomic or geopolitical and military events, including political instability; and natural or nuclear disasters. Those events tend to affect prices worldwide, regardless of the location of the event. Market expectations about these events and speculative activity also cause prices to fluctuate. These factors may adversely affect the performance of the underlying asset and, as a result, the market value of, and return on, the Securities. |
| ¨ | Changes in supply and demand in the market for wheat’s futures contracts may adversely affect the market value of, and return on, the Securities — The Securities are linked to the performance of futures contracts on the underlying physical commodity. Futures contracts are legally binding agreements for the buying or selling of a certain commodity at a fixed price for physical settlement on a future date. Commodity futures contract prices are subject to similar types of pricing volatility patterns as may affect the specific commodities underlying the futures contracts, as well as additional trading volatility factors that may impact futures markets generally. Moreover, changes in the supply and demand for commodities, and futures contracts for the purchase and delivery of particular commodities, may lead to differentiated pricing patterns in the market for futures contracts over time. For example, a futures contract scheduled to expire in the first nearby month may experience more severe pricing pressure or greater price volatility than the corresponding futures contract scheduled to expire in a later month. Because the official settlement price of the underlying asset will be determined by reference to the futures contract in respect of the first nearby month (except as provided elsewhere herein), the market value of, and return on, the Securities may be less than would otherwise be the case if the official settlement price of the underlying asset had been determined by reference to the corresponding futures contract scheduled to expire in a more favorable month for pricing. |
| ¨ | The Securities are not regulated by the Commodity Futures Trading Commission (the “CFTC”) — An investment in the Securities does not constitute either an investment in commodities directly, futures contracts, options on futures contracts, or commodity options and therefore you will not benefit from the regulatory protections attendant to CFTC regulated products. This means that the Securities are not traded on a regulated exchange and issued by a clearinghouse. See “— Risks Relating to Liquidity and Secondary Market Price Considerations — There may be little or no secondary market for the Securities” below. In addition, the proceeds UBS receives from the sale of the Securities will not be used to purchase or sell any commodity futures contracts, options on futures contracts or options on commodities for your benefit. Therefore, an investment in the Securities does not constitute a collective investment vehicle that trades in these instruments. An investment in a collective investment vehicle that invests in these instruments often is subject to regulation as a commodity pool and its operator may be required to be registered with, and regulated by, the CFTC as a commodity pool operator. |
| ¨ | There can be no assurance that the investment view implicit in the Securities will be successful — It is impossible to predict whether and the extent to which the price of the underlying asset will rise or fall and there can be no assurance that the final price will be equal to or greater than the downside threshold. The final price will be influenced by complex and interrelated political, economic, financial and other factors that affect the underlying asset. You should be willing to accept the risks of owning commodity future contracts in general and the underlying asset in particular. |
| ¨ | The historical performance of the underlying asset should not be taken as an indication of the future performance of the underlying asset during the term of the Securities — The historical performance of the underlying asset should not be taken as an indication of the future performance of the underlying asset. It is impossible to predict whether the official settlement price of the underlying asset will rise or fall and, therefore, the payment at maturity. The official settlement price of the underlying asset will be influenced by complex and interrelated political, economic, financial and other factors as described in the preceding risk factor |
| ¨ | Legal and regulatory risks — Legal and regulatory changes could adversely affect the official settlement price of the underlying asset. In addition, many governmental agencies and regulatory organizations are authorized to take extraordinary actions in the event of market emergencies. It is not possible to predict the effect of any future legal or regulatory action relating to the official settlement price of the underlying asset, but any such action could cause unexpected volatility and instability in the commodities markets generally with a substantial and adverse effect on the performance of the underlying asset specifically and, consequently, on the value of, and any amounts payable on, the Securities. |
| ¨ | Changes in law or regulations relating to commodity futures contracts could adversely affect the market value of, and return on, the Securities — Futures contracts and options on futures contracts are subject to extensive regulations and the regulation of commodity transactions in the U.S. and U.K. is subject to ongoing modification by government and judicial action. Any future regulatory change is impossible to predict, but may have the effect of making the markets for commodities, commodity futures contracts, options on futures contracts and other related derivatives more volatile and over time potentially less liquid, which could adversely affect the market value of, and return on, the Securities. |
| ¨ | The Securities offer exposure to futures contracts and not direct exposure to physical commodities — The Securities will reflect a return based, in part, on the performance of wheat futures contracts and do not provide exposure to wheat spot prices. The price of a commodity futures contract reflects the expected value of the commodity upon delivery in the future, whereas the spot price of a commodity reflects the immediate delivery value of such commodity. A variety of factors can lead to a disparity between the expected future price of a commodity and the spot price at a given point in time, such as the cost of storing the commodity for the term of the futures contract, interest charges incurred to finance the purchase of the commodity and expectations concerning supply and demand for a commodity. The price movement of a futures contract is typically correlated with the movements of the spot price of the reference commodity, but the correlation is generally imperfect and price moves in the spot market may not be reflected in the futures market (and vice versa). Accordingly, the Securities may underperform a similar investment that is linked to commodity spot prices for the underlying asset. |
| ¨ | Suspension or disruptions of market trading in commodities and related futures may adversely affect the value of, and return on, the Securities — The commodity and commodity futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators and government regulation and intervention. In addition, U.S. futures exchanges and some non-U.S. exchanges have regulations that limit the amount of fluctuation in some futures contract prices that may occur during a single business day. These limits are generally referred to as “daily price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price”. Once the limit price has been reached in a particular contract, no trades may be made at a price beyond the limit, or trading may be limited for a set period of time. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at potentially disadvantageous times or prices. These circumstances could adversely affect the official settlement price of the underlying asset, and therefore, the market value of, and return on, the Securities. |
Estimated Value Considerations.
| ¨ | The issue price you pay for the Securities will exceed their estimated initial value — The issue price you pay for the Securities will exceed their estimated initial value as of the trade date due to the inclusion in the issue price of the underwriting compensation, 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 Securities by reference to our internal pricing models and it will be set forth in the final pricing supplement. The pricing models used to determine the estimated initial value of the Securities incorporate certain variables, including the price and volatility of the underlying asset, global supply and demand in the commodity markets generally and in the underlying asset specifically, prevailing interest rates, the term of the Securities and our internal funding rate. Our internal funding rate is typically lower than the rate we would pay to issue conventional fixed or floating rate debt securities of a similar term. The underwriting compensation, hedging costs, issuance and other costs, projected profits and the difference in rates will reduce the economic value of the Securities to you. Due to these factors, the estimated initial value of the Securities as of the trade date will be less than the issue price you pay for the Securities. |
| ¨ | The estimated initial value is a theoretical price; the actual price that you may be able to sell your Securities in any secondary market (if any) at any time after the trade date may differ from the estimated initial value — The value of your Securities at any time will vary based on many factors, including the factors described above and in “— Market risk” above and is impossible to predict. Furthermore, the pricing models that we use are proprietary and rely in part on certain assumptions about future events, which may prove to be incorrect. As a result, after the trade date, if you attempt to sell the Securities in the secondary market, the actual value you would receive may differ, perhaps materially, from the estimated initial value of the Securities determined by reference to our internal pricing models. The estimated initial value of the Securities does not represent a minimum or maximum price at which we or any of our affiliates would be willing to purchase your Securities in any secondary market at any time. |
| ¨ | Our actual profits may be greater or less than the differential between the estimated initial value and the issue price of the Securities as of the trade date — We may determine the economic terms of the Securities, as well as hedge our obligations, at least in part, prior to pricing the Securities on the trade date. In addition, there may be ongoing costs to us to maintain and/or adjust any hedges and such hedges are often imperfect. Therefore, our actual profits (or potentially, losses) in issuing the Securities cannot be determined as of the trade date and any such differential between the estimated initial value and the issue price of the Securities as of the trade date does not reflect our actual profits. Ultimately, our actual profits will be known only at the maturity of the Securities. |
Risks Relating to Liquidity and
Secondary Market Price Considerations
| ¨ | There may be little or no secondary market for the Securities — The Securities will not be listed or displayed on any securities exchange or any electronic communications network. UBS Securities LLC and its affiliates intend, but are not required, to make a market for the Securities and may stop making a market at any time. If you are able to sell your Securities prior to maturity, you may have to sell them at a substantial loss. Furthermore, there can be no assurance that a secondary market for the Securities will develop. The estimated initial value of the Securities does not represent a minimum or maximum price at which we or any of our affiliates would be willing to purchase your Securities in any secondary market at any time. |
| ¨ | The price at which UBS Securities LLC and its affiliates may offer to buy the Securities in the secondary market (if any) may be greater than UBS’ valuation of the Securities at that time, greater than any other secondary market prices provided by unaffiliated dealers (if any) and, depending on your broker, greater than the valuation provided on your customer account statements — For a limited period of time following the issuance of the Securities, UBS Securities LLC or its affiliates may offer to buy or sell such Securities at a price that exceeds (i) our valuation of the Securities at that time based on our internal pricing models, (ii) any secondary market prices provided by unaffiliated dealers (if any) and (iii) depending on your broker, the valuation provided on customer account statements. The price that UBS Securities LLC may initially offer to buy such Securities following issuance will exceed the valuations indicated by our internal pricing models due to the inclusion for a limited period of time of the aggregate value of the underwriting compensation, hedging costs, issuance and other costs and theoretical projected trading profit. The portion of such amounts included in our price will decline to zero on a straight line basis over a period ending no later than the date specified under “Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any).” Thereafter, if UBS Securities LLC or an affiliate makes secondary markets in the Securities, it will do so at prices that reflect our estimated value determined by reference to our internal pricing models at that time. The temporary positive differential relative to our internal pricing models arises from requests from and arrangements made by UBS Securities LLC with the selling agents of structured debt securities such as the Securities. As described above, UBS Securities LLC and its affiliates intend, but are not required, to make a market for the Securities and may stop making a market at any time. The price at which UBS Securities LLC or an affiliate may make secondary markets at any time (if at all) will also reflect its then current bid-ask spread for similar sized trades of structured debt securities. UBS 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. |
| ¨ | Economic and market factors affecting the terms and market price of Securities prior to maturity — Because structured notes, including the Securities, can be thought of as having a debt component and a derivative component, factors that influence the values of debt instruments and options and other derivatives will also affect the terms and features of the Securities at issuance and the market price of the Securities prior to maturity. We expect that generally the official settlement price of the underlying asset on any day will affect the market value of the Securities more than any other single factor. Other factors that may influence the market value of the Securities include, but are not limited to: the expected volatility of the price of wheat, and of the prices of exchange-traded futures contracts for the purchase or delivery of wheat, including the underlying asset; the global supply and demand of the commodity markets generally and the underlying asset specifically, the time remaining to the maturity of the Securities; interest rates in the markets; geopolitical conditions and economic, financial, political, force majeure and regulatory or judicial events; the availability of comparable instruments; the creditworthiness of UBS; the then current bid-ask spread for the Securities. These and other factors interrelate in complex ways, and the effect of one factor on the official settlement price of wheat, and the market value of, and return on, the Securities may offset or enhance the effect of another factor. |
| ¨ | 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 “— Estimated Value Considerations” as well as the inclusion in the issue price of the underwriting compensation, hedging costs, issuance and other costs and any projected profits are, subject to the temporary mitigating effect of UBS Securities LLC’s and its affiliates’ market making premium, expected to reduce the price at which you may be able to sell the Securities in any secondary market. |
Risks Relating to Hedging Activities and Conflicts of
Interest
| ¨ | Potential UBS impact on price — Trading or transactions by UBS or its affiliates in the underlying asset or wheat, listed and/or over-the-counter options, futures or other instruments with returns linked to the performance of the underlying asset or wheat may adversely affect the market price of the underlying asset and, therefore, the market value of, and any amount payable on, the Securities. |
| ¨ | Potential conflicts of interest — UBS and its affiliates may engage in business related to the underlying asset, which may present a conflict between the obligations of UBS and you, as a holder of the Securities. There are also potential conflicts of interest between you and the calculation agent, which will be an affiliate of UBS. The calculation agent will determine the payment at maturity of the Securities based on the final price of the underlying asset. The calculation agent can postpone the determination of the terms of the Securities if a market disruption event occurs and is continuing on the trade date or the final valuation date. As UBS determines the economic terms of the Securities, including the downside threshold (and corresponding buffer) and such terms include the underwriting compensation, hedging costs, issuance and other costs and projected profits, the Securities represent a package of economic terms. There are other potential conflicts of interest insofar as an investor could potentially get better economic terms if that investor entered into exchange-traded and/or OTC derivatives or other instruments with third parties, assuming that such instruments were available and the investor had the ability to assemble and enter into such instruments. |
| Additionally, UBS and its affiliates act in various capacities with respect to the Securities, including as a principal, agent or dealer in connection with the sale of the Securities. Such affiliates, and any other third-party dealers, will derive compensation from the distribution of the Securities and such compensation may serve as an incentive to sell these Securities instead of other investments. Furthermore, given that UBS Securities LLC and its affiliates temporarily maintain a market making premium, it may have the effect of discouraging UBS Securities LLC and its affiliates from recommending sale of your Securities in the secondary market. |
| ¨ | Potentially inconsistent research, opinions or recommendations by UBS — UBS and its affiliates publish research from time to time on financial markets and other matters that may influence the value of, and return on, the Securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Securities. Any research, opinions or recommendations expressed by UBS or its affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should make their own independent investigation of the merits of investing in the Securities and the underlying asset. |
Risks Relating to General Credit Characteristics
| ¨ | Credit risk of UBS — The Securities are unsubordinated, unsecured debt obligations of UBS and are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the Securities, including any repayment of principal, depends on the ability of UBS to satisfy its obligations as they come due. As a result, UBS’ actual and perceived creditworthiness may affect the market value of the Securities. If UBS were to default on its obligations, you may not receive any amounts owed to you under the terms of the Securities and you could lose all of your initial investment. |
| ¨ | The Securities are not bank deposits — An investment in the Securities carries risks which are very different from the risk profile of a bank deposit placed with UBS or its affiliates. The Securities have different yield and/or return, liquidity and risk profiles and would not benefit from any protection provided to deposits. |
| ¨ | If UBS experiences financial difficulties, FINMA has the power to open restructuring or liquidation proceedings in respect of, and/or impose protective measures in relation to, UBS, which proceedings or measures may have a material adverse effect on the terms and market value of the Securities and/or the ability of UBS to make payments thereunder — The Swiss Financial Market Supervisory Authority (“FINMA”) has broad statutory powers to take measures and actions in relation to UBS if (i) it concludes that there is justified concern that UBS is over-indebted or has serious liquidity problems or (ii) UBS fails to fulfill the applicable capital adequacy requirements (whether on a standalone or consolidated basis) after expiry of a deadline set by FINMA. If one of these pre-requisites is met, FINMA is authorized to open restructuring proceedings or liquidation (bankruptcy) proceedings in respect of, and/or impose protective measures in relation to, UBS. The Swiss Banking Act grants significant discretion to FINMA in connection with the aforementioned proceedings and measures. In particular, a broad variety of protective measures may be imposed by FINMA, including a bank moratorium or a maturity postponement, which measures may be ordered by FINMA either on a stand-alone basis or in connection with restructuring or liquidation proceedings. The resolution regime of the Swiss Banking Act is further detailed in Ordinance of 30 August 2012 of FINMA on the Insolvency of Banks and Securities Dealers, as amended (the “Swiss Banking Insolvency Ordinance”). In restructuring proceedings, FINMA, as resolution authority, is competent to approve the resolution plan. The resolution plan may, among other things, provide for (a) the transfer of all or a portion of UBS’ assets, debts, other liabilities and contracts (which may or may not include the contractual relationship between UBS and the holders of Securities) to another entity, (b) a stay (for a maximum of two business days) on the termination of contracts to which UBS is a party, and/or the exercise of (w) rights to terminate, (x) netting rights, (y) rights to enforce or dispose of collateral or (z) rights to transfer claims, liabilities or collateral under contracts to which UBS is a party, (c) the conversion of UBS’ debt and/or other obligations, including its obligations under the Securities, into equity (a “debt-to-equity” swap), and/or (d) the partial or full write-off of obligations owed by UBS (a “write-off”), including its obligations under the Securities. The Swiss Banking Insolvency Ordinance provides that a debt-to-equity swap and/or a write-off of debt and other obligations (including the Securities) may take place only 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 Swiss Banking Insolvency Ordinance does not expressly address the order in which a write-off of debt instruments other than debt instruments qualifying as additional tier 1 capital or tier 2 capital should occur, it states that debt-to-equity swaps should occur in the following order: first, all subordinated claims not qualifying as regulatory capital; second, all other claims not excluded by law from a debt-to-equity swap (other than deposits); and third, deposits (in excess of the amount privileged by law). However, given the broad discretion granted to FINMA as the resolution authority, any restructuring plan in respect of UBS could provide that the claims under or in connection with the Securities will be partially or fully converted into equity or written-off, while preserving other obligations of UBS that rank pari passu with, or even junior to, UBS’ obligations under the Securities. Consequently, the exercise of any such powers by FINMA or any suggestion of any such exercise could materially adversely affect the rights of holders of the Securities, the price or value of their investment in the Securities and/or the ability of UBS to satisfy its obligations under the Securities and could lead to holders losing some or all of their investment in the Securities. In the case of restructuring proceedings with respect to a systemically important Swiss bank (such as UBS), the creditors whose claims are affected by the restructuring plan will not have a right to vote on, reject, or seek the suspension of the restructuring plan. In addition, if a restructuring plan has been approved by FINMA, the rights of a creditor to seek judicial review of the restructuring plan (e.g., on the grounds that the plan would unduly prejudice the rights of holders of Securities or otherwise be in violation of the Swiss Banking Act) are very limited. In particular, a court may not suspend the implementation of the restructuring plan. Furthermore, even if a creditor successfully challenges the restructuring plan, the court can only require the relevant creditor to be compensated ex post and there is currently no guidance as to on what basis such compensation would be calculated or how it would be funded. |
Risks Relating to U.S. Federal
Income Taxation
| ¨ | Uncertain tax treatment — Significant aspects of the tax treatment of the Securities are uncertain. You should consult your tax advisor about your tax situation. See “What are the Tax Consequences of the Securities” herein. |
Hypothetical
Examples and Return Table of the Securities at Maturity
The below examples and table are based on hypothetical
terms. The actual terms will be set on the trade date and will be indicated on the cover of the final pricing supplement.
The examples and table below illustrate the Payment at Maturity
for a $1,000 Security on a hypothetical offering of the Securities, with the following assumptions (amounts may have been rounded for
ease of analysis):
| Term: | Approximately 24 months |
| Initial Price: | ¢1,000.00 |
| Downside Threshold: | ¢700.00 (70.00% of the Initial Price) |
| Buffer: | 30.00% |
| Range of Underlying Return: | -110% to 40% |
Example 1: The Final Price is ¢1,050.00, which is equal to or greater
than the Initial Price
Because the final price is equal to or greater than the initial
price, the payment at maturity per Security will be equal to the principal amount of $1,000 (0.00% total return).
Example 2: The Final Price is ¢800.00, which is less than the Initial
Price and equal to or greater than the Downside Threshold.
Because the final price is less than the initial price and equal to or greater than
the downside threshold, the payment at maturity per Security will be calculated as follows:
$1,000 × (1 + Contingent Absolute Return)
= $1,000 × (1 + |−20.00%|)
= $1,200.00 per Security (20.00% total return).
In this scenario, your potential return on the Securities
is limited by the downside threshold and in no event will your payment at maturity exceed $1,300.00 per Security.
Example 3: The Final Price is ¢500.00, which is less than the Downside
Threshold.
Because the final price is less than the downside threshold,
you will not receive the contingent absolute return and the payment at maturity per Security will be less than the principal amount, calculated
as follows:
$1,000 × [1 + (Underlying Return + Buffer)]
= $1,000 × [1 + (−50.00%
+ 30.00%)]
= $1,000 × 0.80
= $800.00 per Security (20.00% loss).
In this scenario, you will suffer a percentage loss on your initial investment
equal to the percentage that the final price is less than the initial price in excess of the buffer and, in extreme situations, you could
lose almost all of your initial investment.
Example 4: The Final Price is -¢100.00, which is less than the Downside Threshold.
Because the final price is less than the downside threshold, you will not receive
the contingent absolute return and the payment at maturity per Security will be less than the principal amount, calculated as follows:
$1,000 × [1 + (Underlying Return + Buffer)]
= $1,000 × [1 + (-110.00% + 30.00%)];
however, in no event will the underlying return be less than −100.00%
= $1,000 × [1 + (−100.00% + 30.00%)]
= $1,000 × 0.30
= $300.00 per Security (70.00% loss).
In this scenario, you will suffer a percentage loss on your initial investment
equal to the percentage that the final price is less than the initial price in excess of the buffer and, in extreme situations, you could
lose almost all of your initial investment.
| Underlying Asset | Payment and Return at Maturity | ||
| Final Price | Underlying Return | Payment at Maturity | Security Total Return at Maturity |
| ¢1,400.00 | 40.00% | $1,000.00 | 0.00% |
| ¢1,300.00 | 30.00% | $1,000.00 | 0.00% |
| ¢1,200.00 | 20.00% | $1,000.00 | 0.00% |
| ¢1,100.00 | 10.00% | $1,000.00 | 0.00% |
| ¢1,050.00 | 5.00% | $1,000.00 | 0.00% |
| ¢1,000.00 | 0.00% | $1,000.00 | 0.00% |
| ¢950.00 | -5.00% | $1,050.00 | 5.00% |
| ¢900.00 | -10.00% | $1,100.00 | 10.00% |
| ¢850.00 | -15.00% | $1,150.00 | 15.00% |
| ¢800.00 | -20.00% | $1,200.00 | 20.00% |
| ¢750.00 | -25.00% | $1,250.00 | 25.00% |
| ¢700.00 | -30.00% | $1,300.00 | 30.00% |
| ¢600.00 | -40.00% | $900.00 | -10.00% |
| ¢500.00 | -50.00% | $800.00 | -20.00% |
| ¢400.00 | -60.00% | $700.00 | -30.00% |
| ¢300.00 | -70.00% | $600.00 | -40.00% |
| ¢200.00 | -80.00% | $500.00 | -50.00% |
| ¢100.00 | -90.00% | $400.00 | -60.00% |
| ¢0.00 | -100.00% | $300.00 | -70.00% |
| -¢100.00 | -100.00% | $300.00 | -70.00% |
Information
About the Underlying Asset
All disclosures contained in this document regarding the
underlying asset are derived from publicly available information. UBS has not conducted any independent review or due diligence of any
publicly available information with respect to the underlying asset. You should make your own investigation into the underlying asset.
Included below is a brief description of the underlying asset.
This information has been obtained from publicly available sources. Set forth below is a graph that illustrates the past performance of
the underlying asset. We obtained the past performance information set forth below from Bloomberg Professional® service
(“Bloomberg”) without independent verification. You should not take the historical prices of the underlying asset as an indication
of future performance.
Wheat
According to publicly available information, wheat futures
contracts represent an agreement to buy or sell 5,000 bushels of deliverable-grade wheat within a specified expiration month in the future
at an official settlement price specified at the time of entering into the contract.
In this document, when we refer to the official settlement
price of wheat, we mean the official U.S. settlement price of wheat (expressed in U.S. cents per bushel) for the relevant first nearby
wheat futures contract, as traded on the Chicago Board of Trade (“CBOT”) and displayed on Bloomberg under the symbol “W
1” . The CBOT determines the official settlement price for wheat futures contracts on each trading day as of 1:15
p.m., Central time. The daily settlement price of the nearest-to-expiration wheat futures contract is the volume-weighted average price
of all trades in that contract that are executed between 1:14:00 and 1:15:00 p.m., Central time. If the trade date or final valuation
date, due to a disruption event or otherwise, falls on or after the trading day prior to the first notice date for delivery of CBOT-traded
wheat under such futures contract, or on or after the trading day prior to the last trading day of such futures contract, then the second
nearby month futures contract will be used with respect to such date.
The wheat futures contract is traded on the CBOT and additional
information about the wheat futures contract may be available on the CBOT’s website.
We are not incorporating by reference the website or any
material it includes in this document or any document incorporated herein by reference. UBS has not conducted any independent review or
due diligence of any publicly available information with respect to the underlying asset.
Historical Information
The graph below illustrates the performance of the underlying asset from
January 1, 2012 through May 27, 2022, based on the daily official settlement prices 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 official
settlement price of the underlying asset on May 27, 2022 was ¢1,157.50 (the “hypothetical initial price”). The dotted
line represents the hypothetical downside threshold of ¢810.25, which is equal to 70.00% of the hypothetical initial price. The actual
initial price and downside threshold for the underlying asset will be set on the trade date. Past performance of the underlying
asset is not indicative of the future performance of the underlying asset.
What
Are the Tax Consequences of the Securities?
The U.S. federal income tax consequences of your investment
in the Securities are uncertain. There are no statutory provisions, regulations, published rulings or judicial decisions addressing the
characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as the Securities. Some
of these tax consequences are summarized below, but we urge you to discuss the tax consequences of your particular situation with your
tax advisor. This discussion is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final, temporary
and proposed U.S. Department of the Treasury (the “Treasury”) regulations, rulings and decisions, in each case, as available
and in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Tax consequences under state,
local and non-U.S. laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the “IRS”) has been sought
as to the U.S. federal income tax consequences of your investment in the Securities, and the following discussion is not binding on the
IRS. This discussion replaces the U.S. federal income tax discussions in the accompanying prospectus
General. This discussion, other than the section below
entitled “Non-U.S. Holders”, applies to you only if you are a U.S. Holder, the original investor in the Securities and you
hold your Securities as capital assets within the meaning of Section 1221 of the Code for tax purposes. This section does not apply to
you if you are a member of a class of holders subject to special rules, such as:
| • | a dealer in securities or currencies; |
| • | a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings; |
| • | a financial institution or a bank; |
| • | a regulated investment company or a real estate investment trust or a common trust fund; |
| • | a life insurance company; |
| • | a tax-exempt organization or an investor holding the securities in a tax-advantaged account (such as an “individual retirement account” or “Roth IRA”), as defined in Section 408 of the Code or 408A of the Code, respectively; |
| • | taxpayers subject to special tax accounting rules under Section 451(b) of the Code; |
| • | a person that owns Securities as part of a hedging transaction, straddle, synthetic security, conversion transaction, or other integrated transaction, or enters into a “constructive sale” with respect to the Securities or a “wash sale” with respect to the Securities or the underlying asset; or |
| • | a U.S. holder (as defined below) whose functional currency for tax purposes is not the U.S. dollar. |
You are a U.S. holder if you are a beneficial owner of a
Security and you are: (i) a citizen or resident of the U.S., (ii) a domestic corporation, (iii) an estate whose income is subject to U.S.
federal income tax regardless of its source, or (iv) a trust if a U.S. court can exercise primary supervision over the trust’s administration
and one or more U.S. persons are authorized to control all substantial decisions of the trust.
An individual may, subject to certain exceptions, be deemed
to be a resident of the U.S. by reason of being present in the U.S. for at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar year (counting for such purposes all of the days present in
the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding
year).
If a partnership, or any entity treated as a partnership
for U.S. federal income tax purposes, holds the Securities, the U.S. federal income tax treatment of a partner will generally depend on
the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the Securities should consult its
tax advisor with regard to the U.S. federal income tax treatment of an investment in the Securities.
U.S. Tax Treatment. Pursuant to the terms of the Securities,
UBS and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial ruling to the contrary,
to characterize your Securities as pre-paid derivative contracts with respect to the underlying asset. If your Securities are so treated,
you should generally recognize gain or loss upon the taxable disposition of your Securities, in an amount equal to the difference between
the amount you receive at such time and the amount you paid for your Securities. Such gain or loss should generally be long-term capital
gain or loss if you have held your Securities for more than one year (otherwise such gain or loss should be short-term capital gain or
loss if held for one year or less). The deductibility of capital losses is subject to limitations.
Based on certain factual representations received from
us, our special U.S. tax counsel, Cadwalader, Wickersham & Taft LLP, is of the opinion that it would be reasonable to treat your Securities
in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Securities,
it is possible that your Securities could alternatively be treated for tax purposes as a single contingent payment debt instrument, or
pursuant to some other characterization (including possible alternative treatment under Section 1256 of the Code), such that the timing
and character of your income from the Securities could differ materially and adversely from the treatment described above.
Alternative Treatments. The IRS, for example, might
assert that Section 1256 of the Code should apply to your Securities. If Section 1256 of the Code were to apply to your Securities, gain
or loss recognized with respect to your Securities (or a portion of your Securities) would be treated as 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to your holding period in the Securities. You would also be required to mark
your Securities (or a portion of your Securities) to market at the end of each year (i.e., recognize income as if the Securities or the
relevant portion of the Securities had been sold for fair market value). The IRS might also assert that a rollover of the underlying asset
could be treated as a taxable deemed exchange of the Securities for a “new” Security, in which case a U.S. Holder would recognize
gain or loss (which may be short-term capital gain or loss and such loss may be subject to the “wash sale” rules) equal to
the difference between the fair market value of the Security and the U.S. Holder’s tax basis in the Security at the time of the
rollover of the underlying asset, and the U.S. Holder would begin a new holding period for the Security on the day following such rollover
and take a new fair market value tax basis in the Security. Lastly, the IRS may assert that the Securities should be recharacterized for
U.S. federal income tax purposes as instruments giving rise to current ordinary income (even before receipt of any cash).
Notice 2008-2. In 2007, the IRS released a notice
that may affect the taxation of holders of the Securities. According to Notice 2008-2, the IRS and the Treasury are actively considering
whether the holder of an instrument similar to the Securities should be required to accrue ordinary income on a current basis. It is not
possible to determine what guidance they will ultimately issue, if any. It is possible, however, that under such guidance, holders of
the Securities will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The IRS and the
Treasury are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated
as ordinary or capital and whether non-U.S. holders of such instruments should be subject to withholding tax on any deemed income accruals.
Both U.S. and non-U.S. holders are urged to consult their tax advisors concerning the significance and potential impact, of the above
considerations.
Except to the extent otherwise required by law, UBS intends
to treat your Securities for U.S. federal income tax purposes in accordance with the treatment described above unless and until such time
as the IRS and the Treasury determine that some other treatment is more appropriate.
Medicare Tax on Net Investment Income. U.S. holders
that are individuals, estates, and certain trusts are subject to an additional 3.8% tax on all or a portion of their “net investment
income,” which may include any income or gain realized with respect to the Securities, to the extent of their net investment income
that when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer
filing a joint return (or a surviving spouse), $125,000 for a married individual filing a separate return or the dollar amount at which
the highest tax bracket begins for an estate or trust. The 3.8% Medicare tax is determined in a different manner than the income tax.
U.S. holders should consult their tax advisors as to the consequences of the 3.8% Medicare tax.
Specified Foreign Financial Assets. U.S. holders may
be subject to reporting obligations with respect to their Securities if they do not hold their Securities in an account maintained by
a financial institution and the aggregate value of their Securities and certain other “specified foreign financial assets”
(applying certain attribution rules) exceeds an applicable threshold. Significant penalties can apply if a U.S. holder is required to
disclose its Securities and fails to do so.
Treasury Regulations Requiring Disclosure of Reportable
Transactions. Treasury regulations require U.S. taxpayers to report certain transactions (“reportable
transactions”) on IRS Form 8886. An investment in the Securities or a sale of the Securities generally should not be treated as
a reportable transaction under current law. In particular, the IRS issued Notices 2015-73 and 2015-74 (the “Notices”), which
require participants in certain “basket option contracts” and “basket contracts” or transactions substantially
similar thereto, to disclose their participation in such transactions pursuant to Treasury Regulations Section 1.6011-4. The Notices should
not apply to securities such as your Securities. However, it is possible that future legislation, regulations, administrative rulings
or notices could cause your investment in the Securities or a sale of the Securities to be treated as a reportable transaction. Accordingly,
you should consult with your tax advisor regarding any tax filing and reporting obligations that may apply in connection with acquiring,
owning and disposing of Securities.
Backup Withholding and Information Reporting. The
proceeds received from a taxable disposition of the Securities will be subject to information reporting unless you are an “exempt
recipient” and may also be subject to backup withholding at the rate specified in the Code if you fail to provide certain identifying
information (such as an accurate taxpayer number, if you are a U.S. holder) or meet certain other conditions. If you are a non-U.S. holder
and you provide a properly executed and fully completed applicable IRS Form W-8, you will generally establish an exemption from backup
withholding.
Amounts withheld under the backup withholding rules are not
additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the required information is
furnished to the IRS.
Non-U.S. Holders. Subject to FATCA, discussed below,
if you are a non-U.S. holder you should generally not be subject to U.S. withholding tax with respect to payments on your Securities or
to generally applicable information reporting and backup withholding requirements with respect to payments on your Securities if you comply
with certain certification and identification requirements as to your non-U.S. status (by providing us (and/or the applicable withholding
agent) with a fully completed and duly executed applicable IRS Form W-8). Gain realized from the taxable disposition of a Security generally
should not be subject to U.S. tax unless (i) such gain is effectively connected with a trade or business conducted by the non-U.S. holder
in the U.S., (ii) the non-U.S. holder is a non-resident alien individual and is present in the U.S. for 183 days or more during the taxable
year of such taxable disposition and certain other conditions are satisfied or (iii) the non-U.S. holder has certain other present or
former connections with the U.S.
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 advisor about the application
of FATCA, in particular if they may be classified as financial institutions (or if they hold their Securities through a foreign entity)
under the FATCA rules.
Proposed Legislation. In 2007, legislation was introduced
in Congress that, if it had been enacted, would have required holders of Securities purchased after the bill was enacted to accrue interest
income over the term of the Securities despite the fact that there will be no interest payments over the term of the Securities.
Furthermore, in 2013, the House Ways and Means Committee
released in draft form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this legislation
generally would have been to require instruments such as the Securities to be marked to market on an annual basis with all gains and losses
to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar or identical
bills will be enacted in the future, or whether any such bill would affect the tax treatment of your Securities. You are urged to consult
your tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your Securities.
Both U.S. and non-U.S. holders are urged to consult their
tax advisors concerning the application of U.S. federal income tax laws to their particular situation, as well as any tax consequences
of the purchase, beneficial ownership and disposition of the Securities arising under the laws of any state, local, non-U.S. or other
taxing jurisdiction.
Market
Disruption Events
With respect to the underlying asset, the calculation agent
will determine the official settlement price on the relevant date(s) of determination. If the calculation agent determines that a market
disruption event has occurred or is continuing with respect to the underlying asset, the affected date may be postponed by up to ten trading
days. If such a postponement occurs, the calculation agent will determine the official settlement price by reference to the official settlement
price on the first trading day following such date on which no market disruption event occurs or is continuing. If however, the affected
date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day, the calculation agent will
nevertheless determine the official settlement price on such day. In such an event, the calculation agent will estimate the official settlement
price for the underlying asset that would have prevailed in the absence of the market disruption event.
The calculation agent may also postpone the determination
of the initial price of the underlying asset in accordance with the above if it determines that a market disruption event has occurred
or is continuing with respect to the underlying asset on the trade date. If the determination of the initial price of the underlying asset
is postponed, the calculation agent may also postpone the settlement date, final valuation date and maturity date to ensure that the stated
term of the Securities remains the same.
If the calculation agent postpones the final valuation date
(and therefore the determination of the final price), the calculation agent may also adjust the maturity date to maintain the same number
of business days as existed prior to such postponement.
Notwithstanding the occurrence of one or more market disruption
events with respect to the underlying asset, the calculation agent may waive its right to postpone the relevant date if it determines
that the applicable market disruption event has not or is not likely to materially impair its ability to determine the official settlement
price of the underlying asset.
Any of the following will be a “market disruption event”,
as determined by the calculation agent:
| ¨ | the failure of Bloomberg to announce or publish the official settlement price for the underlying asset or the temporary discontinuance or unavailability of Bloomberg as a price source for such purpose; |
| ¨ | the official settlement price is not published for the underlying asset by its relevant exchange; |
| ¨ | a material suspension, absence or limitation of trading in the underlying asset on its relevant exchange, or in options contracts relating to the underlying asset in the primary market for those contracts (as determined by the calculation agent, the “related exchange”); |
| ¨ | the underlying asset or options contracts relating to the underlying asset do not trade on what was, on the trade date, the relevant exchange for the underlying asset or the relevant exchange or related exchange, as applicable, for those contracts; |
| ¨ | the relevant exchange for the underlying asset or the related exchange or quotation system, if any, for options contracts relating to the underlying asset or contract fails to open for trading during its regular trading session; |
| ¨ | any event that materially disrupts or impairs, as determined by the calculation agent, the ability of market participants to effect transactions in, or obtain market values for the underlying asset on its relevant exchange or effect transactions in, or obtain market values for options contracts related to the underlying asset on its related exchange (including, but not limited to, limitations, suspensions or disruptions of trading of one or more options contracts on the underlying asset by reason of movements exceeding “limit up” or “limit down” levels permitted by the relevant exchange or related exchange, as applicable); or |
| ¨ | any other event, if the calculation agent determines that the event materially interferes with our ability or the ability of any of our affiliates to establish, maintain or unwind all or a material portion of a hedge with respect to the Securities. |
The following events will not be market disruption events:
| ¨ | a limitation on the hours or numbers of days of trading in the underlying asset in its primary market, but only if the limitation results from an announced change in the regular business hours of the relevant exchange; or |
| ¨ | a decision to permanently discontinue trading in the options contracts related to the underlying asset. |
For this purpose, an “absence of trading” on
the relevant exchange for options contracts related to the underlying asset, if available, will not include any time when that market
is itself closed for trading under ordinary circumstances.
In contrast, a suspension or limitation of trading in the
underlying asset, options contracts related to the underlying asset, if available, by reason of any of:
| ¨ | a price change exceeding limits set by the relevant exchange or related exchange, as applicable, |
| ¨ | an imbalance of orders, or |
| ¨ | a disparity in bid and ask quotes, |
will constitute a suspension or material limitation of trading.
“Relevant exchange” means, with respect to the
underlying asset, the exchange specified for the underlying asset herein under “Information About the Underlying Asset” or
any successor thereto, and with respect to any successor commodity future (as defined under “Permanent Disruption Events; Alternative
Method of Calculation” herein), the primary exchange or market of trading related to such successor commodity future, as determined
by the calculation agent.
Permanent
Disruption Events; Alternative Method of Calculation
Any of the following may be a “permanent disruption
event” (and, together with a market disruption event a “disruption event”), as determined by the calculation agent:
| ¨ | the permanent discontinuation or disappearance of trading in the underlying asset or the physical delivery of the commodity underlying the underlying asset; |
| ¨ | the permanent discontinuation or disappearance of option contracts relating to the underlying asset; |
| ¨ | the permanent discontinuance or unavailability of Bloomberg as a price source for such purpose; or |
| ¨ | the disappearance or permanent discontinuance or unavailability of the official settlement price, notwithstanding the availability of Bloomberg or the status of trading in the underlying asset or the option contracts relating to the underlying asset. |
If a permanent disruption event occurs, the calculation agent
may replace the underlying asset with another commodity futures contract that the calculation agent determines to be comparable to the
permanently disrupted underlying asset (a “successor commodity future”), and the official settlement price on the final valuation
date will be determined by reference to the official settlement prices of such successor commodity future at the close of trading on such
relevant exchange on such date as determined by the calculation agent. To the extent necessary, the calculation agent will adjust those
terms as necessary to ensure cross-comparability of the permanently disrupted underlying asset and the successor commodity future.
Upon any selection by the calculation agent of a successor
commodity future, the calculation agent will cause written notice thereof to be promptly furnished to the trustee, to UBS and to the holders
of the Securities.
If there is a permanent disruption event with respect to
the underlying asset or successor commodity future (in each case, an “underlying commodity”) prior to, and such discontinuation
is continuing on, the final valuation date and the calculation agent determines that no successor commodity future is available at such
time, then the calculation agent will determine the official settlement price on such date for the underlying commodity; provided that,
if the calculation agent determines that no successor commodity future exists for the discontinued underlying asset, the official settlement
price on the affected date for the underlying asset will be the settlement price as determined by the calculation agent on the date following
the affected date. Notwithstanding these alternative arrangements, discontinuation of trading on the relevant exchange in the underlying
asset may adversely affect the market value of, and return on, the Securities.
Any of the following may be considered an “alternative
method of calculation” with respect to the underlying commodity, as determined by the calculation agent:
| ¨ | the occurrence since the trade date of a material change in the formula for or the method of calculating the relevant official settlement price of the underlying commodity; |
| ¨ | the occurrence since the trade date of a material change in the content, composition or constitution of the underlying commodity; or |
| ¨ | a modification in the reporting of the official settlement price for the underlying commodity such that it does not, in the opinion of the calculation agent, fairly represent the value of the underlying commodity. |
If the calculation agent determines there is an alternative
method of calculation for the underlying asset or successor commodity future, the calculation agent will, at the close of business in
New York City on the applicable date for the underlying commodity, make such calculations and adjustments as may be necessary in order
to arrive at a value for the underlying commodity. The calculation agent shall cause written notice of such calculations and adjustments
to be furnished to the holders of the Securities.
Additional
Terms of the Securities
Redemption Price Upon Optional Tax Redemption
We have the right to redeem your Securities in the circumstances
described under “Description of Debt Securities We May Offer — Optional Tax Redemption” in the accompanying prospectus.
If we exercise this right with respect to your Securities, the redemption price of the Securities will be determined by the calculation
agent in a manner reasonably calculated to preserve your and our relative economic position.
Default Amount on Acceleration
If an event of default occurs and the maturity of your Securities
is accelerated, we will pay the default amount in respect of the principal of your Securities at maturity. We describe the default amount
below under “— Default Amount”.
For the purpose of determining whether the holders of our
Medium-Term Notes, Series B, of which the Securities are a part, are entitled to take any action under the indenture (which is described
in the accompanying prospectus), we will treat the outstanding principal amount of the Securities as the outstanding principal amount
of the series of Securities constituted by that Security. Although the terms of the Securities may differ from those of the other Medium-Term
Notes, Series B holders of specified percentages in principal amount of all Medium-Term Notes, Series B together in some cases with other
series of our debt securities, will be able to take action affecting all the Medium-Term Notes, Series B including the Securities. This
action may involve changing some of the terms that apply to the Medium-Term Notes, Series B accelerating the maturity of the Medium-Term
Notes, Series B after a default or waiving some of our obligations under the indenture. We discuss these matters in the accompanying prospectus
under “Description of Debt Securities We May Offer — Default, Remedies and Waiver of Default” and “— Modification
and Waiver of Covenants”.
Default Amount
The default amount for your Securities on any day will be
an amount, in U.S. dollars for the principal of your Securities, equal to the cost of having a qualified financial institution, of the
kind and selected as described below, expressly assume all of our payment and other obligations with respect to your Securities as of
that day and as if no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent economic
value to you with respect to your Securities. That cost will equal: (i) the lowest amount that a qualified financial institution would
charge to effect this assumption or undertaking; plus (ii) the reasonable expenses, including reasonable attorneys’ fees, incurred
by the holders of your Securities in preparing any documentation necessary for this assumption or undertaking.
During the default quotation period for your Securities,
which we describe below, the holders of your Securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the other
party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest — or, if there is
only one, the only — quotation obtained, and as to which notice is so given, during the default quotation period. With respect to
any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds, to the assumption or
undertaking by the qualified financial institution providing the quotation and notify the other party in writing of those grounds within
two business days after the last day of the default quotation period, in which case that quotation will be disregarded in determining
the default amount
Default Quotation Period
The default quotation period is the period beginning on the
day the default amount first becomes due and ending on the third business day after that day, unless: (i) no quotation of the kind referred
to above is obtained; or (ii) every quotation of that kind obtained is objected to within five business days after the due date as described
above.
If either of these two events occurs, the default quotation
period will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day, however, the default
quotation period will continue as described in the prior sentence and this sentence.
Qualified Financial Institutions
For the purpose of determining the default amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United States
of America, Europe or Japan, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either: (i) A-1 or higher by S&P Global, LLC, or any successor, or any other comparable rating then used by that
rating agency; or (ii) P-1 or higher by Moody’s Investors Service, Inc. or any successor, or any other comparable rating then used
by that rating agency.
Manner of Payment
Any payment on your Securities at maturity will be made to
accounts designated by you or the holder of your Securities and approved by us, or at the office of the trustee in New York City, but
only when your Securities are surrendered to the trustee at that office. We may also make any payment in accordance with the applicable
procedures of the depositary.
Business Day
A “business day” is any day that is a day on
which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York City or London,
as determined by the calculation agent.
Trading Day
A “trading day” is a day on which trading is
generally conducted on the primary exchange(s) or market(s) on which the underlying asset is listed or admitted for trading, as determined
by the calculation agent.
Role of Calculation Agent
Our affiliate, UBS Securities LLC, will serve as the calculation
agent. We may change the calculation agent after the settlement date of your Securities without notice. The calculation agent will make
all determinations regarding the payment at maturity, disruption events, business days, trading days, the default amount, the official
settlement price, underlying return, initial price, downside threshold, final price and all other determinations with respect to the Securities,
in its sole discretion. Absent manifest error, all determinations of the calculation agent will be final and binding on you and us, without
any liability on the part of the calculation agent. You will not be entitled to any compensation from us for any loss suffered as a result
of any determinations by the calculation agent.
Supplemental
Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)
We will agree to sell to UBS Securities LLC and UBS Securities LLC will agree to
purchase, all of the Securities at the issue price to the public less the underwriting discount indicated on the cover hereof. UBS Securities
LLC intends to either resell the Securities to one or more third-party dealers at a discount from the issue price to the public equal
to the underwriting discount indicated on the cover hereof or to offer the Securities directly to investors at the issue price to the
public. UBS Securities LLC may also pay another unaffiliated dealer a marketing fee of $2.50 per Security with respect to some or all
of the Securities in connection with its marketing efforts. The marketing fee will be deducted from amounts remitted to UBS. Certain of
such third-party dealers may resell the Securities to other securities dealers at the issue price to the public less an underwriting discount
of up to the underwriting discount indicated on the cover hereof. Certain unaffiliated registered investment advisers or fee-based advisory
accounts may purchase Securities from a third-party dealer at a purchase price of at least $997.50 per Security, and such third-party
dealer, with respect to such sales, may forgo some or all of the underwriting discount. Additionally, we or one of our affiliates 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 compensation) from the initial public offering of the Securities,
thus creating an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, the offering is being conducted
in compliance with the provisions of FINRA Rule 5121. UBS Securities LLC is not permitted to sell Securities in this offering to an account
over which it exercises discretionary authority without the prior specific written approval of the account holder.
UBS Securities LLC and its affiliates may offer to buy
or sell the Securities in the secondary market (if any) at prices greater than UBS’ internal valuation — The value of
the Securities at any time will vary based on many factors that cannot be predicted. However, the price (not including UBS Securities
LLC’s or any affiliates’ customary bid-ask spreads) at which UBS Securities LLC or any affiliate would offer to buy or sell
the Securities immediately after the trade date in the secondary market is expected to exceed the estimated initial value of the Securities
as determined by reference to our internal pricing models. The amount of the excess will decline to zero on a straight line basis over
a period ending no later than 6 months after the trade date, provided that UBS Securities LLC may shorten the period based on various
factors, including the magnitude of purchases and other negotiated provisions with selling agents. Notwithstanding the foregoing, UBS
Securities LLC and its affiliates intend, but are not required, to make a market for the Securities and may stop making a market at any
time. For more information about secondary market offers and the estimated initial value of the Securities, see “Key Risks —
Estimated Value Considerations” and “— Risks Relating to Liquidity and Secondary Market Price Considerations”
herein.
Prohibition of Sales to EEA & UK Retail Investors
— The Securities are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a
person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID
II”); (ii) a customer within the meaning of Directive 2002/92/EC, as amended, where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC, as
amended. Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the “EU PRIIPs Regulation”)
for offering or selling the Securities or otherwise making them available to retail investors in the EEA has been prepared and therefore
offering or selling the Securities or otherwise making them available to any retail investor in the EEA may be unlawful under the EU PRIIPs
Regulation.
The Securities are not intended to be offered, sold or otherwise
made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom (the “UK”).
For these purposes, a retail investor in the UK means a person who is one (or more) of: (i) a retail client as defined in point (8) of
Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018, subject
to amendments made by the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 (SI 2018/1403), as may be amended or
superseded from time to time (the “EUWA”); (ii) a customer within the meaning of the provisions of the Financial Services
and Markets Act 2000 (the “FSMA”) and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where
that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it
forms part of UK domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of the Prospectus Regulation
as it forms part of domestic law by virtue of the EUWA (“UK Prospectus Regulation”). Consequently, no key information document
required by the PRIIPs Regulation as it forms part of UK domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for
offering or selling the Securities or otherwise making them available to retail investors in the UK has been prepared and therefore offering
or selling the Securities or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.
You
should rely only on the information incorporated by reference or provided in this preliminary pricing supplement or the accompanying prospectus.
We have not authorized anyone to provide you with different information. We are not making an offer of these Securities in any state where
the offer is not permitted. You should not assume that the information in this preliminary pricing supplement is accurate as of any date
other than the date on the front of the document.
TABLE OF CONTENTS
Preliminary Pricing Supplement
| Investment Description | i |
| Features | i |
| Key Dates | i |
| Security Offering | i |
| Additional Information about UBS and the Securities | ii |
| Investor Suitability | 1 |
| Preliminary Terms | 2 |
| Investment Timeline | 2 |
| Key Risks | 3 |
| Hypothetical Examples and Return Table of the Securities at Maturity | 8 |
| Information About the Underlying Asset | 10 |
| What Are the Tax Consequences of the Securities? | 11 |
| Market Disruption Events | 14 |
| Permanent Disruption Events; Alternative Method of Calculation |
15 |
| Additional Terms of the Securities | 16 |
| Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any) |
17 |
Prospectus
| Introduction | 1 |
| Cautionary Note Regarding Forward-Looking Statements | 3 |
| Incorporation of Information About UBS AG | 4 |
| Where You Can Find More Information | 5 |
| Presentation of Financial Information | 6 |
| Limitations on Enforcement of U.S. Laws Against UBS, Its Management and Others | 6 |
| UBS | 6 |
| Swiss Regulatory Powers | 9 |
| Use of Proceeds | 10 |
| Description of Debt Securities We May Offer | 10 |
| Description of Warrants We May Offer | 31 |
| Legal Ownership and Book-Entry Issuance | 47 |
| Considerations Relating to Indexed Securities | 52 |
| Considerations Relating to Floating Rate Securities | 55 |
| Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency | 57 |
| U.S. Tax Considerations | 59 |
| Tax Considerations Under the Laws of Switzerland | 70 |
| Benefit Plan Investor Considerations | 72 |
| Plan of Distribution | 73 |
| Validity of the Securities | 76 |
| Experts | 76 |
$•
UBS AG Buffer Absolute Return Securities
due on or about June 7, 2024
Preliminary Pricing Supplement dated May 31, 2022
(To Prospectus dated May 27, 2022)
UBS Investment Bank
UBS Securities LLC
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