Coupon Payment Dates
Coupons will be payable in arrears in twelve equal monthly
installments on the Coupon Payment Dates listed below (unless earlier
called):
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November 16, 2015 |
May 16, 2016 |
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December 15, 2015 |
June 15, 2016 |
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January 15, 2016* |
July 15, 2016* |
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February 16, 2016 |
August 15, 2016 |
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March 15, 2016 |
September 15, 2016 |
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April 15, 2016* |
October 17, 2016* (the Maturity Date) |
* Corresponding Call Settlement Dates for the applicable quarterly
Observation Dates
Each Coupon Payment Date is subject to postponement in the event of a
market disruption event and as described under "General Terms of
Notes Postponement of a Payment Date" in the accompanying product
supplement no. UBS-1a-I. Each Coupon Payment will be payable to the
holders of record of the Notes at the close of business on the date
that is one business day prior to the applicable Coupon Payment Date.
What Are the Tax Consequences of the Notes?
You should review carefully the section entitled "Material U.S.
Federal Income Tax Consequences" in the accompanying product
supplement no. UBS-1a-I. The following discussion, when read in
combination with that section, constitutes the full opinion of our
special tax counsel, Davis Polk & Wardwell LLP, regarding the
material U.S. federal income tax consequences of owning and disposing
of Notes.
Based on current market conditions, in the opinion of our special tax
counsel it is reasonable to treat the Notes as units each comprising
a Put Option and a debt component for U.S. federal income tax
purposes. We will determine the portion of each Coupon Payment that
we will allocate to interest on the debt component and to Put
Premium, respectively, and will provide that allocation in the
pricing supplement for the Notes. By purchasing the Notes, you agree
to treat the Notes for U.S. federal income tax purposes consistently
with the treatment and allocation as described above. We will follow
this approach in determining our information reporting
responsibilities, if any. If the Notes had priced on October 6, 2015
and assuming the Coupon Rates provided below, for each Note offering,
we would have allocated as interest on the debt component and as Put
Premium the following amounts:
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Underlying Stock |
Coupon Rate per Annum |
Interest on Debt Component per Annum |
Put Premium Component per Annum |
Common stock of Ciena Corporation |
7.85% per annum |
1.17% per annum |
6.68% per annum |
Common stock of D.R. Horton, Inc. |
7.10% per annum |
1.17% per annum |
5.93% per annum |
Common stock of Macy's Inc. |
7.75% per annum |
1.17% per annum |
6.58% per annum |
Common stock of Royal Caribbean Cruises Ltd. |
6.93% per annum |
1.17% per annum |
5.76% per annum |
The actual Coupon Rate and allocation that we will determine for each
Note offering will be finalized on the Trade Date and provided in the
pricing supplement, may differ from the applicable hypothetical
Coupon Rate and allocation, and will depend upon a variety of
factors, including actual market conditions and our borrowing costs
for debt instruments of comparable maturities on the Trade Date.
Assuming the treatment and allocation described above are
respected, (a) interest on the debt component will be taxed as
ordinary income, while the Put Premium will not be taken into account
prior to maturity, sale or automatic call, and (b) assuming that you
are an initial purchaser of Notes purchasing the Notes at the Issue
Price for cash, (i) if at maturity or upon automatic call the Notes
are settled in cash, you will recognize short-term capital gain in an
amount equal to the total Put Premium received and (ii) if at
maturity you receive the Underlying Stock, you generally will not
recognize gain or loss with respect to the Put Premium or the
Underlying Stock received; instead, the total Put Premium will reduce
your basis in the Underlying Stock.
There are, however, other reasonable treatments that the IRS or a
court may adopt for the Notes, in which case the timing and character
of your income or loss could be materially and adversely affected. In
addition, in 2007 Treasury and the IRS released a notice requesting
comments on the U.S. federal income tax treatment of "prepaid forward
contracts" and similar instruments. The notice focuses on a number of
issues, the most relevant of which for investors in the Notes are the
character of income or loss (including whether the Put Premium might
be currently included as ordinary income) and the degree, if any, to
which income realized by non-U.S. investors should be subject to
withholding tax. While it is not clear whether the Notes would be
viewed as similar to the typical prepaid forward contract described
in the notice, it is possible that any Treasury regulations or other
guidance promulgated after consideration of these issues could
materially and adversely affect the tax consequences of an investment
in the Notes, possibly with retroactive effect.
Withholding under legislation commonly referred to as "FATCA" will
apply to amounts treated as interest or other "fixed or determinable
annual or periodical" income for U.S. federal income tax purposes
paid with respect to the Notes.