UBS has filed a registration statement (including a prospectus,
as supplemented by an index supplement and a product supplement for the Notes) with the Securities and Exchange Commission (the
“SEC”) for the offering to which this document relates. Before you invest, you should read these documents and any
other documents related to the Notes that UBS has filed with the SEC for more complete information about UBS and this offering.
You may obtain these documents for free from the SEC website at www.sec.gov. Our Central Index Key, or CIK, on the SEC website
is 0001114446. Alternatively, UBS will arrange to send you these documents if you so request by calling toll-free 1-877-387-2275.
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. In this document, “Trigger Autocallable
Contingent Yield Notes” or the “Notes” refer to the Notes that are offered hereby. Also, references to the “TACYN
product supplement” mean the UBS product supplement, dated May 2, 2016, references to the “index supplement”
mean the UBS index supplement, dated April 29, 2016 and references to “accompanying prospectus” mean the UBS prospectus,
titled “Debt Securities and Warrants,” dated April 29, 2016.
This document, together with the documents listed above, contains the terms of the Notes 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” beginning on page 5 and in “Risk Factors”
in the accompanying product supplement, as the Notes involve risks not associated with conventional debt securities. We urge you
to consult your investment, legal, tax, accounting and other advisors before deciding to invest in the Notes.
UBS reserves the right to change the terms of, or reject any offer to
purchase, the Notes prior to their issuance. In the event of any changes to the terms of the Notes, 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.
Issuer
|
UBS AG, London Branch
|
Principal Amount
|
$10 per Note
|
Term
|
Approximately 36 months,
subject to an automatic call. In the event that we make any change to the expected trade date and settlement date, the
calculation agent may adjust the observation dates and coupon payment dates, as well as the final valuation date and maturity date
to ensure that the stated term of the Notes remains the same.
|
Underlying Assets
|
The MSCI
®
Emerging Markets Index
SM
and
the EURO STOXX 50
®
Index.
|
Contingent Coupon & Contingent Coupon Rate
|
If the closing level of each underlying asset is equal to or greater
than its coupon barrier on any observation date (including the final valuation date),
UBS will pay you the contingent coupon
applicable to such observation date.
If the closing level of any underlying asset is less than
its coupon barrier on any observation date (including the final valuation date),
the contingent coupon applicable to such observation
date will not accrue or be payable and UBS will not make any payment to you on the relevant coupon payment date.
The contingent coupon will be a fixed amount based upon equal periodic installments at the contingent coupon rate,
which is a per annum rate and will be set on the trade date. The table below sets forth the range of the contingent coupon rate
and contingent coupon for each Note that would be applicable to each observation date on which the closing level of each underlying
asset is equal to or greater than its coupon barrier. The actual contingent coupon rate will be determined on the trade date.
|
|
Contingent Coupon Rate
|
Between 6.75% and 7.75%
|
|
Contingent Coupon
|
Between $0.1688 and $0.1938
|
|
Contingent
coupons on the Notes are not guaranteed. UBS will not pay you the contingent coupon for any observation date on which the
closing level of any underlying asset is less than its respective coupon barrier.
|
Automatic Call Feature
|
UBS will automatically call the Notes if the closing level
of each underlying asset on any observation date (quarterly, beginning after six months) prior to the final valuation date
is equal to or greater than its initial level.
If the Notes are subject to an automatic call, UBS will pay you on the
corresponding coupon payment date (which will be the “call settlement date”) a cash payment per Note equal to your
principal amount plus the contingent coupon otherwise due on such date. Following an automatic call, no further payments will be
made on the Notes.
|
Payment at Maturity (per Note)
|
If the Notes are not subject to an automatic call and
the final level of each underlying asset is equal to or greater than its downside threshold,
UBS will pay you a
cash payment equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call and
the final level of any underlying asset is less than its downside threshold,
UBS will pay you a cash payment that
is less than the principal amount, if anything, equal to:
$10
´
(1 + Underlying Return of the Least Performing Underlying Asset)
In such a case, you will suffer a percentage loss on
your initial investment equal to the underlying return of the least performing underlying asset, regardless of the
underlying return of any other underlying asset.
|
Least Performing Underlying Asset
|
The underlying asset with the lowest underlying return as compared to the other underlying assets.
|
Underlying Return
|
The quotient, expressed as a percentage of the following formula:
Final Level – Initial Level
Initial Level
|
Downside Threshold
(1)
|
A specified level of each underlying asset that is less
than the initial level of each underlying asset, based on a percentage of the initial level as indicated on the cover hereof
and as determined by the calculation agent.
|
Coupon Barrier
(1)
|
A specified level of each underlying asset that is less than the initial level of each underlying asset, based on a percentage of the initial level as indicated on the cover hereof and as determined by the calculation agent.
|
Initial Level
(1)
|
The closing level of each underlying asset on the trade date, as determined by the calculation agent.
|
Final Level
(1)
|
The closing level of each underlying asset on the final valuation date, as determined by the calculation agent.
|
(1)
As may be adjusted as described under “General
Terms of the Notes — Discontinuance of or Adjustment to an Underlying Index; Alteration of Method of Calculation”,
as described in the TACYN product supplement.
Trade date
|
|
The initial level is observed and the final terms of the Notes are
set.
|
|
¯
|
|
|
|
Quarterly
(callable after six months)
|
|
If the closing level of each underlying asset is equal to or
greater than its coupon barrier on any observation date (including the final valuation date), UBS will pay you the contingent coupon
applicable to such observation date.
The Notes will be subject to an automatic call if the closing
level of each underlying asset on any observation date (quarterly, beginning after six months) prior to the final valuation date
is equal to or greater than its initial level.
If the Notes are subject to an automatic call UBS will pay you a cash payment per Note equal to your principal
amount plus the contingent coupon otherwise due on such date. Following an automatic call, no further payments will be made on
the Notes.
|
|
¯
|
|
|
|
Maturity date
|
|
The final level of each underlying asset is observed on
the final valuation date.
If the Notes are not subject to an automatic call and
the final level of each underlying asset is equal to or greater than its downside threshold,
UBS will pay you a
cash payment per Note equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call and
the final level of any underlying asset is less than its downside threshold,
UBS will pay you a cash payment per
Note that is less than the principal amount, if anything, equal to:
$10
´
(1 + Underlying Return of the Least
Performing Underlying Asset)
In such a case, you will suffer a percentage loss on your initial investment
equal to the underlying return of the least performing underlying asset, regardless of the underlying return of any
other underlying asset.
|
|
Investing in the Notes involves significant risks. You
may lose a significant portion all of your initial investment. Any payment on the Notes, including any repayment of principal,
is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations, you may not receive any amounts owed
to you under the Notes and you could lose all of your initial investment.
If the Notes are not subject to an automatic call, you may
lose a significant portion or all of your initial investment. Specifically, if the Notes are not subject to an automatic call and
the final level of any underlying asset is less than its downside threshold, you will lose a percentage of your principal amount
equal to the underlying return of the least performing underlying asset and, in extreme situations, you could lose all of your
initial investment. You will be exposed to the market risk of each underlying asset on each observation date and on the final valuation
date and any decline in the level of one underlying asset may negatively affect your return and will not be offset or mitigated
by a lesser decline or any potential increase in the levels of the other underlying assets.
Observation Dates
(1)
and Coupon Payment Dates
(1)(2)(3)
|
Observation Dates
|
Coupon Payment Dates
|
Observation Dates
|
Coupon Payment Dates
|
Observation Dates
|
Coupon Payment Dates
|
January 29, 2018*
|
January 31, 2018*
|
January 28, 2019
|
January 30, 2019
|
January 27, 2020
|
January 29, 2020
|
April 27, 2018*
|
May 1, 2018
|
April 29, 2019
|
May 1, 2019
|
April 27, 2020
|
April 29, 2020
|
July 27, 2018
|
July 31, 2018
|
July 29, 2019
|
July 31, 2019
|
July 27, 2020
|
July 29, 2020
|
October 29, 2018
|
October 31, 2018
|
October 28, 2019
|
October 30, 2019
|
October 27, 2020**
|
October 30, 2020***
|
|
*
|
The Notes are not callable until the first potential call settlement date, which is May 1,
2018.
|
|
**
|
This is also the final valuation date.
|
|
***
|
This is also the maturity date.
|
|
(1)
|
Subject to the market disruption event provisions set forth in the TACYN product supplement.
|
|
(2)
|
If you are able to sell the Notes in the secondary market on an observation date, the purchaser
of the Notes will be deemed to be the record holder on the applicable record date and therefore you will not be entitled to
any payment attributable to that observation date.
|
|
(3)
|
Two business days following each observation date, except that the coupon payment date for the final valuation date is
the maturity date.
|
An investment in the offering of the Notes involves significant
risks. Investing in the Notes is not equivalent to a hypothetical investment in the least performing underlying asset or its underlying
equity constituents. Some of the risks that apply to the Notes are summarized below, but we urge you to read the more detailed
explanation of risks relating to the Notes in the “Risk Factors” section of the TACYN product supplement. We also urge
you to consult your investment, legal, tax, accounting and other advisors before you invest in the Notes.
|
¨
|
Risk of loss at maturity
— The Notes differ from ordinary debt securities in that UBS will not necessarily make
periodic coupon payments or repay the principal amount of the Notes at maturity. If the Notes are not subject to an automatic call
and the final level of any underlying asset is less than its downside threshold, you will lose a percentage of your principal amount
equal to the underlying return of the least performing underlying asset and, in extreme situations, you could lose all of your
initial investment.
|
|
¨
|
The contingent repayment of principal applies only at maturity —
You should be willing to hold your Notes to maturity.
If you are able to sell your Notes prior to an automatic call or maturity in the secondary market, you may have to sell them at
a loss relative to your initial investment even if the level of each underlying asset is equal to or greater than its downside
threshold. All payments on the Notes are subject to the creditworthiness of UBS.
|
|
¨
|
You may not receive any contingent coupons with respect to your Notes —
UBS will not necessarily make periodic
coupon payments on the Notes. UBS will pay a contingent coupon for each observation date on which the closing level of each underlying
asset is equal to or greater than its coupon barrier. If the closing level of any underlying asset is less than its coupon barrier
on any observation date, UBS will not pay you the contingent coupon applicable to such observation date. If the closing level of
any underlying asset is less than its coupon barrier on each of the observation dates, UBS will not pay you any contingent coupons
during the term of, and you will not receive a positive return on, your Notes. Generally, this non-payment of the contingent coupon
coincides with a period of greater risk of principal loss on your Notes.
|
|
¨
|
Your potential return on the Notes is limited to the contingent coupons and you will not participate in any appreciation
of any underlying asset or underlying equity constituent —
The return potential of the Notes is limited to the pre-specified
contingent coupon rate, regardless of any appreciation of any underlying asset. In addition, your return on the Notes will vary
based on the number of observation dates, if any, on which the requirements of the contingent coupon have been met prior to maturity
or an automatic call. Further, if the Notes are subject to an automatic call, you will not receive any contingent coupons or any
other payment in respect of any observation dates after the applicable call settlement date. Because the Notes may be subject to
an automatic call as early as the first potential call settlement date, the total return on the Notes could be less than if the
Notes remained outstanding until maturity. Furthermore, if the Notes are not subject to an automatic call, you may be subject to
the decline of the least performing underlying asset even though you cannot participate in any appreciation of any underlying asset.
As a result, the return on an investment in the Notes could be less than the return on a hypothetical direct investment in any
or all of the underlying assets or underlying equity constituents. In addition, as an owner of the Notes, you will not have voting
rights or any other rights of a holder of any underlying equity constituent.
|
|
¨
|
A higher contingent coupon rate or lower downside thresholds or coupon barriers may reflect greater expected volatility
of each underlying asset, and greater expected volatility generally indicates an increased risk of loss at maturity —
The
economic terms for the Notes, including the contingent coupon rate, coupon barriers and downside thresholds, are based, in part,
on the expected volatility of each underlying asset at the time the terms of the Notes are set. “Volatility” refers
to the frequency and magnitude of changes in the level of each underlying asset. The greater the expected volatility of each underlying
asset as of the trade date, the greater the expectation is as of that date that the closing level of each underlying asset could
be less than its coupon barrier on any observation date and that the final level of each underlying asset could be less than its
downside threshold on the final valuation date and, as a consequence, indicates an increased risk of not receiving a contingent
coupon and an increased risk of loss, respectively. All things being equal, this greater expected volatility will generally be
reflected in a higher contingent coupon rate than the yield payable on our conventional debt securities with a similar maturity
or on otherwise comparable securities, and/or lower downside thresholds and/or coupon barriers than those terms on otherwise comparable
securities. Therefore, a relatively higher contingent coupon rate may indicate an increased risk of loss. Further, relatively lower
downside thresholds and/or coupon barriers may not necessarily indicate that the Notes have a greater likelihood of a return of
principal at maturity and/or paying contingent coupons. You should be willing to accept the downside market risk of the least performing
underlying asset and the potential to lose a significant portion or all of your initial investment.
|
|
¨
|
Reinvestment risk —
The Notes will be subject to an automatic call if the closing level of each underlying asset
is equal to or greater than its initial level on certain observation dates prior to the final valuation date as set forth under
“Observation Dates and Coupon Payment Dates” above. Because the Notes could be subject to an automatic call, the term
of your investment may be limited. In the event that the Notes are subject to an automatic call, there is no guarantee that you
would be able to reinvest the proceeds at a comparable return and/or with a comparable contingent coupon rate for a similar level
of risk. In addition, to the extent you are able to reinvest such proceeds in an investment comparable to the Notes, you may incur
transaction costs such as dealer discounts and hedging costs built into the price of the new securities. Generally, however, the
longer the Notes remain outstanding, the less likely the Notes will be subject to an automatic call due to the decline in the level
of an underlying asset and the shorter time remaining for the level of any such underlying asset to recover. Such periods generally
coincide with a period of greater risk of principal loss on your Notes.
|
|
¨
|
You are exposed to the market risk of each underlying asset —
Your return on the Notes is not linked to a basket
consisting of the underlying assets. Rather, it will be contingent upon the performance of each individual underlying asset. Unlike
an instrument with a return linked to a basket of indices, common stocks or other underlying securities, in which risk is mitigated
and diversified among all of the components of the basket, you will be exposed equally to the risks related to each underlying
asset. Poor performance by any underlying asset over the term of the Notes will negatively affect your return and will not be offset
or mitigated by a positive performance by any or all of the other underlying assets. For instance, you may receive a negative return
equal to the underlying return of the least performing underlying asset if the closing level of one underlying asset is less than
its downside threshold on the final valuation date, even if the underlying returns of the
other underlying assets are positive or have not declined as much. Accordingly, your investment is subject to the market risk of
each underlying asset.
|
|
¨
|
Because the Notes are linked to the least performing underlying asset, you are exposed to a greater risk of no contingent
coupons and losing a significant portion or all of your initial investment at maturity than if the Notes were linked to fewer underlying
assets
— The risk that you will not receive any contingent coupons and lose a significant portion or all of your initial
investment in the Notes is greater if you invest in the Notes than the risk of investing in substantially similar securities that
are linked to the performance
|
|
|
of only one underlying asset. With more underlying assets, it is more likely that the closing level
of any underlying asset will be less than its coupon barrier on any observation date or decline to a closing level that is less
than its downside threshold than if the Notes were linked to fewer underlying assets.
|
In addition, the lower the correlation
is between the performance of a pair of underlying assets, the more likely it is that one of the underlying assets will decline
in value to a closing level or final level, as applicable, that is less than its coupon barrier or downside threshold on any observation
date or on a final valuation date, respectively. Although the correlation of the underlying assets’ performance may change
over the term of the Notes, the economic terms of the Notes, including the contingent coupon rate, downside threshold and coupon
barrier are determined, in part, based on the correlation of the underlying assets’ performance calculated using our internal
models at the time when the terms of the Notes are finalized. All things being equal, a higher contingent coupon rate and lower
downside threshold and coupon barrier is generally associated with lower correlation of the underlying assets. Therefore, if the
performance of a pair of underlying assets is not correlated to each other or is negatively correlated, the risk that you will
not receive any contingent coupons or that the final level of any underlying asset is less than its downside threshold will occur
is even greater despite a lower downside threshold and coupon barrier. Therefore, it is more likely that you will not receive any
contingent coupons and that you will lose a significant portion or all of your initial investment at maturity.
|
¨
|
Credit risk of UBS —
The Notes are unsubordinated, unsecured debt obligations of UBS and are not, either directly
or indirectly, an obligation of any third party. Any payment to be made on the Notes, including any repayment of principal, depends
on the ability of UBS to satisfy its obligations as they come due. As a result, UBS’ actual and perceived creditworthiness
may affect the market value of the Notes. If UBS were to default on its obligations, you may not receive any amounts owed to you
under the terms of the Notes and you could lose all of your initial investment.
|
|
¨
|
Market risk
— The return on the Notes, which may be negative, is directly linked to the performance of the underlying
assets and indirectly linked to the value of the underlying equity constituents. The levels of the underlying assets can rise or
fall sharply due to factors specific to each underlying asset or its underlying equity constituents, such as stock or commodity
price volatility, earnings and financial conditions, corporate, industry and regulatory developments, management changes and decisions
and other events, as well as general market factors, such as general stock market levels and volatility, interest rates and economic
and political conditions.
|
|
¨
|
Fair value considerations.
|
|
o
|
The issue price you pay for the Notes will exceed their estimated initial value
— The issue price you pay for
the Notes will exceed their estimated initial value as of the trade date due to the inclusion in the issue price of the underwriting
discount, hedging costs, issuance costs and projected profits. As of the close of the relevant markets on the trade date, we will
determine the estimated initial value of the Notes by reference to our internal pricing models and the estimated initial value
of the Notes will be set forth in the applicable pricing supplement. The pricing models used to determine the estimated initial
value of the Notes incorporate certain variables, including the levels of the underlying assets, the volatility of the underlying
assets, the correlation among the underlying assets, the dividend rate paid on the underlying equity constituents, prevailing
interest rates, the term of the Notes and our internal funding rate. Our internal funding
rate is typically lower than the rate we would pay to issue conventional fixed or floating rate debt securities of a similar term.
The underwriting discount, hedging costs, issuance costs, projected profits and the difference in rates will reduce the economic
value of the Notes to you. Due to these factors, the estimated initial value of the Notes as of the trade date will be less than
the issue price you pay for the Notes.
|
|
o
|
The estimated initial value is a theoretical price; the actual price that you may be able to sell your Notes in any secondary
market (if any) at any time after the trade date may differ from the estimated initial value
— The value of your Notes
at any time will vary based on many factors, including the factors described above and in “— Market risk” above
and is impossible to predict. Furthermore, the pricing models that we use are proprietary and rely in part on certain assumptions
about future events, which may prove to be incorrect. As a result, after the trade date, if you attempt to sell the Notes in the
secondary market, the actual value you would receive may differ, perhaps materially, from the estimated initial value of the Notes
determined by reference to our internal pricing models. The estimated initial value of the Notes does not represent a minimum or
maximum price at which we or any of our affiliates would be willing to purchase your Notes in any secondary market at any time.
|
|
o
|
Our actual profits may be greater or less than the differential between the estimated initial value and the issue price
of the Notes as of the trade date —
We may determine the economic terms of the Notes, as well as hedge our obligations,
at least in part, prior to the trade date. In addition, there may be ongoing costs to us to maintain and/or adjust any hedges and
such hedges are often imperfect. Therefore, our actual profits (or potentially, losses) in issuing the Notes cannot be determined
as of the trade date and any such differential between the estimated initial value and the issue price of the Notes as of the trade
date does not reflect our actual profits. Ultimately, our actual profits will be known only at the maturity of the Notes.
|
|
¨
|
Limited or no secondary market and secondary market price considerations.
|
|
o
|
There may be little or no secondary market for the Notes
— The Notes will not be listed or displayed on any
securities exchange or any electronic communications network. UBS Securities LLC and its affiliates intend, but are not
required, to make a market for the Notes and may stop making a market at any time. If you are able to sell your Notes prior
to maturity, you may have to sell them at a substantial loss. Furthermore, there can be no assurance that a secondary market
for the Notes will develop. The
estimated initial value of the Notes does not represent a minimum or maximum price at which we or any of our affiliates would
be willing to purchase your Notes in any secondary market at any time.
|
|
o
|
The price at which UBS Securities LLC and its affiliates may offer to buy the Notes in the secondary market (if any) may
be greater than UBS’ valuation of the Notes at that time, greater than any other secondary market prices provided by unaffiliated
dealers (if any) and, depending on your broker, greater than the valuation provided on your customer account statements —
For a limited period of time following the issuance of the Notes, UBS Securities LLC or its affiliates may offer to buy or
sell such Notes at a price that exceeds (i) our valuation of the Notes at that time based on our internal pricing models, (ii)
any secondary market prices provided by unaffiliated dealers (if any) and (iii) depending on your broker, the valuation provided
on customer account statements. The price that UBS Securities LLC may initially offer to buy such Notes following issuance will
exceed the valuations indicated by our internal pricing models due to the inclusion for a limited period of time of the aggregate
value of the underwriting discount, hedging costs, issuance costs and theoretical projected trading profit. The portion of such
amounts included in our price will decline to zero on a straight line basis over a period ending no later than the date specified
under “Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any).” Thereafter, if UBS Securities
LLC or an affiliate makes secondary markets in the Notes, it will do so at prices that reflect our estimated value determined by
reference to our internal pricing models at that time. The temporary positive differential relative to our internal pricing models
arises from requests from and arrangements made by UBS Securities LLC with the selling agents of structured debt securities such
as the Notes. As described above, UBS Securities LLC and its affiliates intend, but are not required, to make a market for the
Notes and may stop making a market at any time. The price at which UBS Securities LLC or an affiliate may make secondary markets
at any time (if at all) will also reflect its then current bid-ask spread for similar sized trades of structured debt securities.
UBS Financial Services Inc. and UBS Securities LLC reflect this temporary positive differential on their customer statements. Investors
should inquire as to the valuation provided on customer account statements provided by unaffiliated dealers.
|
|
o
|
Economic and market factors affecting the terms and market price of Notes prior to maturity —
Because structured
notes, including the Notes, can be thought of as having a debt component and a derivative component, factors that influence the
values of debt instruments and options and other derivatives will also affect the terms and features of the Notes at issuance and
the market price of the Notes prior to maturity. These factors include the level of each underlying asset and the underlying equity
constituents; the volatility of each underlying asset and the underlying equity constituents; the correlation among the underlying
assets; the dividend rate paid on the underlying equity constituents; the time remaining to the maturity of the Notes; interest
rates in the markets; geopolitical conditions and economic, financial, political, force majeure and regulatory or judicial events;
whether each underlying asset is currently or has been less than its coupon barrier;
the availability of comparable instruments; the creditworthiness of UBS; the then current bid-ask spread for the Notes and the
factors discussed under “— Potential conflict of interest” below. These and other factors are unpredictable and
interrelated and may offset or magnify each other.
|
|
o
|
Impact of fees and the use of internal funding rates rather than secondary market credit spreads on secondary market prices
— All other things being equal, the use of the internal funding rates described above under “—Fair value
considerations” as well as the inclusion in the issue price of the underwriting discount, hedging costs, issuance costs and
any projected profits are, subject to the temporary mitigating effect of UBS Securities LLC’s and its affiliates’ market
making premium, expected to reduce the price at which you may be able to sell the Notes in any secondary market.
|
|
¨
|
The Notes are subject to currency exchange risk—
Because the prices
of the underlying equity constituents are converted into U.S. dollars by the index sponsor for the purposes of calculating the
level of the MSCI
®
Emerging Markets Index
SM
, you will be exposed to currency exchange rate risk with
respect to each of the currencies in which such underlying equity constituents trade. Your net exposure will depend on the extent
to which those currencies strengthen or weaken against the U.S. dollar and the relative weight of such underlying equity constituents
denominated in each of those currencies. If, taking into account the relevant weighting, the U.S. dollar strengthens against those
currencies, the level of the MSCI
®
Emerging Markets Index
SM
will be adversely affected and consequently
the payment at maturity of the Notes, if any, may be reduced.
|
|
¨
|
Emerging markets risk—
The Notes are linked to the MSCI
®
Emerging Markets Index
SM
and are subject to emerging markets risk. Investments in securities linked directly or indirectly
to emerging market equity securities involve many risks, including, but not limited to: economic, social, political, financial
and military conditions in the emerging market; regulation by national, provincial, and local governments; less liquidity and smaller
market capitalizations than exist in the case of many large U.S. companies; different accounting and disclosure standards; and
political uncertainties. Securities of emerging market companies may be more volatile and may be affected by market developments
differently than U.S. companies. Government interventions to stabilize securities markets and cross-shareholdings may affect prices
and volume of trading of the securities of emerging market companies. Economic, social, political, financial and military factors
could, in turn, negatively affect such companies’ value. These factors could include changes in the emerging market government’s
economic and fiscal policies, possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable
to the emerging market companies or investments in their securities, and the possibility of fluctuations in the rate of exchange
between currencies. Moreover, emerging market economies may differ favorably or unfavorably from the U.S. economy in a variety
of ways, including growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency. You
should carefully consider the risks related to emerging markets, to which the Notes are susceptible, before making a decision to
invest in the Notes.
|
|
¨
|
Non-U.S. securities markets risks —
In addition to the emerging markets
risk of the MSCI
®
Emerging Markets Index
SM
, the underlying equity constituents of the EURO STOXX 50
®
Index are issued by non-U.S. companies and are traded on various non-U.S. exchanges. These stocks may be more volatile and may
be subject to different political, market, economic, exchange rate, regulatory and other risks. The underlying equity constituents
of the EURO STOXX 50
®
Index are issued by companies located within the Eurozone. The Eurozone has undergone severe
financial stress, and the political, legal and regulatory ramifications are impossible to predict. Changes within the Eurozone
could have a material adverse effect on the performance of the EURO STOXX 50
®
Index and, consequently, on the value
of the Notes.
|
|
¨
|
There can be no assurance that the investment view implicit in the Notes will be successful —
It is
impossible to predict whether and the extent to which the levels of the underlying assets will rise or fall and there can be
no assurance that the closing level of each underlying asset will be equal to or greater than its coupon barrier on any
observation date, or, if the Notes are not subject to an automatic call, that the final level of each underlying asset will
be equal to or greater than its downside threshold. The levels of the underlying assets will be influenced by complex and
interrelated political, economic, financial and other factors that affect the issuers of the underlying equity
constituents (the “underlying constituent issuers”). You should be willing to accept the risks associated with
the relevant markets tracked by each such underlying asset in general and its underlying equity constituents in particular,
and the risk of losing a significant portion or all of your initial investment.
|
|
¨
|
The underlying assets reflect price return, not total return
— The return on your Notes is based on the performance
of the underlying assets, which reflect the changes in the market prices of the underlying equity constituents. It is not, however,
linked to a “total return” index or strategy, which, in addition to reflecting those price returns, would also reflect
dividends paid on the underlying equity constituents. The return on your Notes will not include such a total return feature or
dividend component.
|
|
¨
|
Changes affecting the underlying assets could have an adverse effect
on the value of the Notes
— The policies of each index sponsor as specified under “Information About the Underlying
Assets” (together, the "index sponsors"), concerning additions, deletions and substitutions of the underlying
equity constituents and the manner in which the index sponsor takes account of certain changes affecting those underlying equity
constituents may adversely affect the levels of the underlying assets. The policies of the index sponsors with respect to the calculation
of the underlying assets could also adversely affect the levels of the underlying assets. The index sponsors may discontinue or
suspend calculation or dissemination of the underlying assets. Any such actions could have an adverse effect on the value of the
Notes.
|
|
¨
|
UBS cannot control actions by the index sponsors and the index sponsors have no obligation to consider your interests
— UBS and its affiliates are not affiliated with the index sponsors and have no ability to control or predict their actions,
including any errors in or discontinuation of public disclosure regarding methods or policies relating to the calculation of the
underlying assets. The index sponsors are not involved in the Notes offering in any way and has no obligation to consider your
interest as an owner of the Notes in taking any actions that might affect the market value of your Notes.
|
|
¨
|
Potential UBS impact on an underlying asset or any underlying equity constituent
— Trading or transactions by
UBS or its affiliates in an underlying asset or any underlying equity constituent, listed and/or over-the-counter options, futures,
exchange-traded funds or other instruments with returns linked to the performance of that underlying asset or any underlying constituent,
may adversely affect the market price(s) or level(s) of that underlying asset on any observation date or the final valuation date
and, therefore, the market value of the Notes and any payout to you of any contingent coupons or at maturity.
|
|
¨
|
Potential conflict of interest —
UBS and its affiliates
may engage in business with any underlying constituent issuer, which may present a conflict between the obligations of UBS and
you, as a holder of the Notes. There are also potential conflicts of interest between you and the calculation agent, which will
be an affiliate of UBS and which will make potentially subjective judgments. The calculation agent will determine whether the contingent
coupon is payable to you on any coupon payment date, whether the Notes are subject to an automatic call and the payment at maturity
of the Notes, if any, based on observed levels of the underlying assets. The calculation agent can postpone the determination of
the initial level, closing level or final level of any underlying asset (and therefore the related coupon payment date or maturity
date, as applicable), on the trade date, any observation date or the final valuation date, respectively.
|
|
¨
|
Potentially inconsistent research, opinions or recommendations by UBS —
UBS and its affiliates publish research
from time to time on financial markets and other matters that may influence the value of the Notes, or express opinions or provide
recommendations that are inconsistent with purchasing or holding the Notes. Any research, opinions or recommendations expressed
by UBS or its affiliates may not be consistent with each other and may be modified from time to time without notice. Investors
should make their own independent investigation of the merits of investing in the Notes and the underlying assets to which the
Notes are linked.
|
|
¨
|
Under certain circumstances, the Swiss Financial Market Supervisory Authority (“FINMA”) has the power to take
actions that may adversely affect the Notes —
Pursuant to article 25 et seq. of the Swiss Banking Act, FINMA has broad
statutory powers to take measures and actions in relation to UBS if it (i) is overindebted, (ii) has serious liquidity problems
or (iii) fails to fulfill the applicable capital adequacy provisions after expiration of a deadline set by FINMA. If one of these
prerequisites is met, the Swiss Banking Act grants significant discretion to FINMA to open restructuring proceedings or liquidation
(bankruptcy) proceedings in respect of, and/or impose protective measures in relation to, UBS. 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. In a restructuring proceeding,
the resolution plan may, among other things, (a) provide for the transfer of UBS’ assets or a portion thereof, together with
debts and other liabilities, and contracts of UBS, to another entity, (b) provide for the conversion of UBS’ debt and/or
other obligations, including its obligations under the Notes, into equity and/or (c) potentially provide for haircuts on obligations
of UBS, including its obligations under the Notes. Although no precedent exists, if one or more measures under the revised regime
were imposed, such measures may have a material adverse effect on the terms and market value of the Notes and/or the ability of
UBS to make payments thereunder.
|
|
¨
|
Dealer incentives —
UBS and its affiliates act in various capacities with respect to the Notes. We and our affiliates
may act as a principal, agent or dealer in connection with the sale of the Notes. Such affiliates, including the sales representatives,
will derive compensation from the distribution of the Notes and such compensation may serve as an incentive to sell these Notes
instead of other investments. We will total underwriting compensation in an amount equal to the underwriting discount listed on
the cover hereof per Note to any of our affiliates acting as agents or dealers in connection with the distribution of the Notes.
Given that UBS Securities LLC and its affiliates temporarily maintain a market making premium, it may have the effect of discouraging
UBS Securities LLC and its affiliates from recommending sale of your Notes in the secondary market.
|
|
¨
|
Uncertain tax treatment —
Significant aspects of the tax treatment of the Notes are uncertain. You should consult
your tax advisor about your tax situation.
|
Hypothetical Examples of How the Notes Might Perform
|
The below examples are based on hypothetical terms. The
actual terms will be set on the trade date and will be indicated on the cover of the applicable pricing supplement.
The examples below illustrate the payment upon a call or at
maturity for a $10 Note on a hypothetical offering of the Notes, with the following assumptions (amounts may have been rounded for ease of reference):
Principal Amount:
|
$10
|
Term:
|
Approximately 36 months
|
Contingent Coupon Rate:
|
6.50% per annum (or 1.688% per quarter)
|
Contingent Coupon:
|
$0.1688 per quarter
|
Observation Dates:
|
Quarterly (callable after six months)
|
Initial Level:
|
|
Underlying Asset A:
|
1,100
|
Underlying Asset B:
|
3,600
|
Coupon Barrier:
|
|
Underlying Asset A:
|
770 (which is 70% of the Initial Level)
|
Underlying Asset B:
|
2,520 (which is 70% of the Initial Level)
|
Downside Threshold:
|
|
Underlying Asset A:
|
770 (which is 70% of the Initial Level)
|
Underlying Asset B:
|
2,520 (which is 70% of the Initial Level)
|
Example 1 — The Closing Level of each Underlying Asset is equal to or greater than its Initial Level on the Observation
Date corresponding to the first Potential Call Settlement Date.
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
Underlying
Asset A: 1,100 (
equal to or greater than
Initial Level)
Underlying
Asset B: 3,600 (
equal to or greater than
Initial Level)
|
|
$0.1625 (Contingent Coupon ‒ Not Callable)
|
Second Observation Date
|
|
Underlying
Asset A: 1,175 (
equal to or greater than
Initial Level)
Underlying
Asset B: 3,700 (
equal to or greater than
Initial Level)
|
|
$10.1625 (Settlement Amount)
|
|
|
Total Payment
|
|
$10.3250 (3.250% total return)
|
Because the Notes are subject to an automatic call
on the first potential call settlement date (which is approximately six months after the trade date), UBS will pay on the call
settlement date a total of $10.1625 per Note (reflecting your principal amount plus the applicable contingent coupon). When added
to the contingent coupon of $0.1625 received in respect of the prior observation date, you will have received a total of $10.3250,
a 3.250% total return on the Notes. You will not receive any further payments on the Notes.
Example 2 — The Notes are NOT subject to an Automatic Call and
the Final Level of each Underlying Asset is equal to or greater than its Downside Threshold.
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
Underlying
Asset A: 875 (
equal to or greater than
Coupon Barrier;
less than
Initial Level)
Underlying
Asset B: 2,570 (
equal to or greater than
Coupon Barrier;
less than
Initial Level)
|
|
$0.1625 (Contingent Coupon)
|
Second Observation Date
|
|
Underlying
Asset A: 750 (
less than
Coupon Barrier)
Underlying Asset B: 2,100 (
less than
Coupon Barrier)
|
|
$0
|
Third through
Eleventh Observation Dates
|
|
Underlying
Asset A: Various (all
equal to or greater
than
Coupon Barrier;
less than
Initial Level)
Underlying
Asset B: Various (all
less than
Coupon Barrier)
|
|
$0
|
Final Valuation Date
|
|
Underlying Asset A: 880 (
equal
to or greater than
Coupon Barrier
and Downside Threshold)
Underlying
Asset B: 2,750 (
equal to or greater than
Coupon Barrier and Downside Threshold)
|
|
$10.1625 (Payment at Maturity)
|
|
|
Total Payment
|
|
$10.3250 (3.250% total return)
|
Because the Notes are not subject to an automatic
call and the final level of each underlying asset is equal to or greater than its downside threshold, at maturity, UBS will pay
a total of $10.1625 per Note (reflecting your principal amount plus the applicable contingent coupon). When added to the contingent
coupon of $0.1625 received in respect of the prior observation dates, UBS will have paid a total of $10.3250, a 3.250% total return
on the Notes.
Example 3 — The Notes are NOT
subject to an Automatic Call and the Final Level of an Underlying Asset is less than its Downside Threshold.
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
Underlying Asset A: 800 (
equal to or greater than
Coupon Barrier;
less than
Initial Level)
Underlying Asset B: 2,550 (
equal to or greater than
Coupon Barrier;
less than
Initial Level)
|
|
$0.1625 (Contingent Coupon)
|
Second Observation Date
|
|
Underlying Asset A: 810 (
equal to or greater than
Coupon Barrier;
less than
Initial Level)
Underlying Asset B: 3,700 (
equal to or greater than
Initial Level and Coupon Barrier)
|
|
$0.1625 (Contingent Coupon)
|
Third through Eleventh Observation Dates
|
|
Underlying Asset A: Various (all
equal to or greater
than
Coupon Barrier;
less than
Initial Level)
Underlying Asset B: Various (all
less
than
Coupon Barrier)
|
|
$0
|
Final Valuation Date
|
|
Underlying Asset A: 1,125 (
equal to or greater than
Initial Level and Coupon Barrier)
Underlying Asset B: 1,440 (
less than
Coupon
Barrier and Downside Threshold)
|
|
$10 × (1 + Underlying Return of the Least
Performing Underlying Asset)
= $10 × [1 + (-60%)]
= $10 × 0.40
= $4 (Payment at Maturity)
|
|
|
Total Payment
|
|
$4.3250 (56.750% loss)
|
Because the Notes are not subject to an automatic
call and the final level of Underlying Asset B is less than its downside threshold, you will be exposed to the underlying return
of the least performing underlying asset and at maturity UBS will pay you $4.00 per Note. When added to the contingent coupons
of $0.3250 received in respect of prior observation dates, UBS will have paid you $4.3250 per Note for a loss on the Notes of 56.750%.
We make no representation or warranty as to which of the
underlying assets will be the least performing underlying asset for the purposes of calculating your actual payment at maturity.
Investing in the Notes involves significant risks. The
Notes differ from ordinary debt securities in that UBS is not necessarily obligated to repay the full amount of your initial investment.
If the Notes are not subject to an automatic call, you may lose a significant portion or all of your initial investment. Specifically,
if the Notes are not subject to an automatic call and the final level of any underlying asset is less than its downside threshold,
you will lose a percentage of your principal amount equal to the underlying return of the least performing underlying asset and,
in extreme situations, you could lose all of your initial investment.
You will be exposed to the market risk of each underlying
asset on each observation date and on the final valuation date and any decline in the level of one underlying asset may negatively
affect your return and will not be offset or mitigated by a lesser decline or any potential increase in the levels of the other
underlying assets. Any payment on the Notes, including any payments in respect of an automatic call, contingent coupon or any repayment
of principal, is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations, you may not receive
any amounts owed to you under the Notes and you could lose all of your initial investment.
Information About the Underlying Assets
|
MSCI
®
Emerging Markets Index
SM
We have derived all information contained herein regarding the MSCI
®
Emerging Markets Index
SM
including, without limitation, its make-up, method of calculation and changes in its components
from publicly available information. Such information reflects the policies of, and is subject to change by MSCI Inc., which we
refer to as “MSCI”. UBS has not conducted any independent review or due diligence of any publicly available information
with respect to the MSCI
®
Emerging Markets Index
SM
.
The MSCI
®
Emerging Markets Index
SM
(the “MSCI
Index”) is a stock index calculated, published and disseminated daily by MSCI, through numerous data vendors, on the MSCI
website and in real time on Bloomberg Financial Markets and Reuters Limited. The MSCI Index is a free float adjusted market capitalization
index designed to measure equity market performance in the global emerging markets and is one of the MSCI Global Investable Market
Indices.
As of September 29, 2017, the constituents of the MSCI Index were derived
from the constituents of MSCI’s standard single country indexes representing 24 emerging market countries. The five largest
emerging market countries included and their relative weightings as of September 29, 2017 are: China (29.55%), South Korea (14.97%),
Taiwan (11.51%), India (8.41%) and Brazil (7.56%). Other countries account for 28.01% of the MSCI Index and include Brazil, Chile,
China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines,
Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
As of September 29, 2017, the companies included in the MSCI Index were
divided into ten global industry classification Sectors, each having a relative weight within the MSCI Index as follows: Information
Technology (27.59%), Financials (23.4%), Consumer Discretionary (10.29%), Materials (7.22%), Energy (6.79%), Consumer Staples (6.48),
Industrials (5.4%), Telecommunication Services (5.09%), Real Estate (2.88%), Utilities (2.57%) and Health Care (2.28%).
The MSCI Index is considered a “standard” index, which means
it consists of all eligible large-capitalization and mid-capitalization stocks, as determined by MSCI, in the relevant market.
The MSCI Index has a base date of December 31, 1987.
Information from outside sources is not incorporated by reference in, and
should not be considered part of, this document or any accompanying prospectus. UBS has not conducted any independent review or
due diligence of any publicly available information with respect to the MSCI
®
Emerging Markets Index
SM
.
Historical Information
The following table sets forth the quarterly high and low closing levels for
the MSCI
®
Emerging Markets Index
SM
, based on the daily closing levels as reported by Bloomberg Professional
®
service (“Bloomberg”), without independent verification. UBS has not conducted any independent review or due diligence
of publicly available information obtained from Bloomberg. The closing level of the MSCI
®
Emerging Markets Index
SM
on October 17, 2017 was 1,125.66 (the “hypothetical initial level” for the MSCI
®
Emerging Markets Index
SM
).
The actual initial level will be the closing level of the MSCI
®
Emerging Markets Index
SM
on the trade
date.
Past performance of the MSCI
®
Emerging Markets Index
SM
is not indicative of the future performance
of the MSCI
®
Emerging Markets Index
SM
.
Quarter Begin
|
Quarter End
|
Quarterly Closing High
|
Quarterly Closing Low
|
Quarterly Close
|
1/2/2013
|
3/28/2013
|
1,082.68
|
1,015.47
|
1,034.90
|
4/1/2013
|
6/28/2013
|
1,061.09
|
883.34
|
940.33
|
7/1/2013
|
9/30/2013
|
1,022.54
|
905.96
|
987.46
|
10/1/2013
|
12/31/2013
|
1,044.66
|
979.88
|
1,002.69
|
1/2/2014
|
3/31/2014
|
994.65
|
916.56
|
994.65
|
4/1/2014
|
6/30/2014
|
1,057.59
|
993.12
|
1,050.78
|
7/1/2014
|
9/30/2014
|
1,100.98
|
1,005.33
|
1,005.33
|
10/1/2014
|
12/31/2014
|
1,016.07
|
909.98
|
956.31
|
1/2/2015
|
3/31/2015
|
993.82
|
934.73
|
974.57
|
4/1/2015
|
6/30/2015
|
1,067.01
|
959.42
|
972.25
|
7/1/2015
|
9/30/2015
|
971.91
|
771.77
|
792.05
|
10/1/2015
|
12/31/2015
|
868.56
|
771.22
|
794.14
|
1/4/2016
|
3/31/2016
|
836.80
|
688.52
|
836.80
|
4/1/2016
|
6/30/2016
|
853.69
|
781.84
|
834.10
|
7/1/2016
|
9/30/2016
|
927.29
|
819.19
|
903.46
|
10/3/2016
|
12/30/2016
|
918.68
|
838.96
|
862.27
|
1/3/2017
|
3/31/2017
|
973.08
|
868.44
|
958.37
|
4/3/2017
|
6/30/2017
|
1,019.11
|
952.92
|
1,010.80
|
7/3/2017
|
9/29/2017
|
1,112.92
|
1,002.48
|
1,081.72
|
10/2/2017
|
10/17/2017*
|
1,131.82
|
1,082.97
|
1,125.66
|
|
*
|
The above table only includes data through this date. Accordingly, the “Quarterly Closing
High,” “Quarterly Closing Low” and
“Quarterly Close” data indicated are for this shortened period only and do not
reflect complete data for this calendar quarter.
|
The graph below
illustrates the performance of the MSCI
®
Emerging Markets Index
SM
from January 3, 2007 through October
17, 2017, based on information from Bloomberg. The dotted line represents the hypothetical downside threshold and the hypothetical
coupon barrier of 787.96, which is equal to 70% of the hypothetical initial level. The actual downside threshold and coupon barrier
will be determined on the trade date.
Past performance of the MSCI
®
Emerging Markets Index
SM
is
not indicative of the future performance of the MSCI
®
Emerging Markets Index
SM
.
EURO STOXX 50
®
Index
We have derived all information regarding the EURO STOXX 50
®
Index contained in this document, including without limitation, its make-up, method of calculation and changes in its components
from publicly available information. Such information reflects the policies of, and is subject to change by STOXX Limited, (the
“index sponsor” of the EURO STOXX 50
®
Index).
STOXX Limited has no obligation to continue to publish the EURO
STOXX 50
®
Index, and may discontinue publication of the EURO STOXX 50
®
Index at any time. The EURO
STOXX 50
®
Index is determined, comprised and calculated by STOXX Limited without regard to the Notes.
The EURO STOXX 50
®
Index covers 50 stocks of
market sector leaders mainly from 11 Eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
the Netherlands, Portugal and Spain. The EURO STOXX 50
®
Index captures a selection of the largest stocks among the
19 EURO STOXX regional Supersector indices. The largest stocks within those indices are added to the selection list until coverage
is approximately 60% of the free float market capitalization of the corresponding EURO STOXX Total Market Index (the “EURO
STOXX TMI”) Supersector Index and from that selection list the 50 stocks are selected. The EURO STOXX 50
®
Index universe is defined as all components of the 19 EURO STOXX Regional Supersector indices. The EURO STOXX Supersector indices
represent the Eurozone portion of the STOXX 600 Supersector indices, which contain the 600 largest stocks traded on the major exchanges
of 18 European countries. Each component’s weight is capped at 10% of the EURO STOXX 50
®
Index’s total
free-float market capitalization.
Information from outside sources is not incorporated by reference
in, and should not be considered part of, this document or any accompanying prospectus. UBS has not conducted any independent review
or due diligence of any publicly available information with respect to the EURO STOXX 50
®
Index.
Historical Information
The following table sets forth the quarterly high and low
closing levels for the EURO STOXX 50
®
Index, based on the daily closing levels as reported by Bloomberg,
without independent verification. UBS has not conducted any independent review or due diligence of publicly available
information obtained from Bloomberg. The closing level of the EURO STOXX 50
®
Index on October 17, 2017 was
3,607.77 (the “hypothetical initial level” for the EURO STOXX 50
®
Index). The actual initial level
will be the closing level of the EURO STOXX 50
®
Index on the trade date.
Past performance of the EURO
STOXX 50
®
Index is not indicative of the future performance of the EURO STOXX 50
®
Index.
Quarter Begin
|
Quarter End
|
Quarterly Closing High
|
Quarterly Closing Low
|
Quarterly Close
|
1/2/2013
|
3/28/2013
|
2,749.27
|
2,570.52
|
2,624.02
|
4/1/2013
|
6/28/2013
|
2,835.87
|
2,511.83
|
2,602.59
|
7/1/2013
|
9/30/2013
|
2,936.20
|
2,570.76
|
2,893.15
|
10/1/2013
|
12/31/2013
|
3,111.37
|
2,902.12
|
3,109.00
|
1/2/2014
|
3/31/2014
|
3,172.43
|
2,962.49
|
3,161.60
|
4/1/2014
|
6/30/2014
|
3,314.80
|
3,091.52
|
3,228.24
|
7/1/2014
|
9/30/2014
|
3,289.75
|
3,006.83
|
3,225.93
|
10/1/2014
|
12/31/2014
|
3,277.38
|
2,874.65
|
3,146.43
|
1/2/2015
|
3/31/2015
|
3,731.35
|
3,007.91
|
3,697.38
|
4/1/2015
|
6/30/2015
|
3,828.78
|
3,424.30
|
3,424.30
|
7/1/2015
|
9/30/2015
|
3,686.58
|
3,019.34
|
3,100.67
|
10/1/2015
|
12/31/2015
|
3,506.45
|
3,069.05
|
3,267.52
|
1/4/2016
|
3/31/2016
|
3,178.01
|
2,680.35
|
3,004.93
|
4/1/2016
|
6/30/2016
|
3,151.69
|
2,697.44
|
2,864.74
|
7/1/2016
|
9/30/2016
|
3,091.66
|
2,761.37
|
3,002.24
|
10/3/2016
|
12/30/2016
|
3,290.52
|
2,954.53
|
3,290.52
|
1/3/2017
|
3/31/2017
|
3,500.93
|
3,230.68
|
3,500.93
|
4/3/2017
|
6/30/2017
|
3,658.79
|
3,409.78
|
3,441.88
|
7/3/2017
|
9/29/2017
|
3,594.85
|
3,388.22
|
3,594.85
|
10/2/2017
|
10/17/2017*
|
3,613.54
|
3,594.91
|
3,607.77
|
|
*
|
The above table only includes data through this date. Accordingly, the “Quarterly Closing
High,” “Quarterly Closing Low” and “Quarterly Close” data indicated are for this shortened
period only and do not reflect complete data for this
calendar quarter.
|
The graph below illustrates the performance of the EURO
STOXX 50
®
Index from January 3, 2007 through October 17, 2017, based on information from Bloomberg. The dotted
line represents the hypothetical downside threshold and the hypothetical coupon barrier of 2,525.44, which is equal to 70% of
the hypothetical initial level. The actual downside threshold and coupon barrier will be determined on the trade date.
Past
performance of the EURO STOXX 50
®
Index is not indicative of the future performance of the EURO STOXX
50
®
Index.
Correlation of the Underlying Assets
|
The graph below illustrates the daily performance of the MSCI
®
Emerging Markets Index
SM
and the EURO STOXX 50
®
Index from January 3, 2007 through October 17, 2017.
For comparison purposes, each underlying asset has been normalized to have a closing level of 100 on January 3, 2007 by dividing
the closing level of that underlying asset on each trading day by the closing level of that underlying asset on January 3, 2007
and multiplying by 100. We obtained the closing levels used to determine the normalized closing levels set forth below from Bloomberg,
without independent verification.
The closer the relationship of the daily returns of the underlying
assets over a given period, the more positively correlated those underlying assets are. The lower (or more negative) the correlation
among the underlying assets, the less likely it is that those underlying assets will move in the same direction and therefore,
the greater the potential for one of those underlying assets to close below its coupon barrier or downside threshold on an observation
date or on the final valuation date, respectively. This is because the less positively correlated the underlying assets are, the
greater the likelihood that at least one of the underlying assets will decrease in value. However, even if the underlying assets
have a higher positive correlation, one or more of the underlying assets might close below its coupon barrier or downside threshold
on an observation date or the final valuation date, respectively, as the underlying assets may decrease in value together. Although
the correlation of the underlying assets’ performance may change over the term of the Notes, the correlations referenced
in setting the terms of the Notes are calculated using UBS’ internal models at the time when the terms of the Notes are set
and are not derived from the daily returns of the underlying assets over the period set forth below. A higher contingent coupon
rate is generally associated with lower correlation of the underlying assets, which reflects a greater potential for missed contingent
coupons and for a loss on your investment at maturity. See “Key Risks — A higher contingent coupon rate or lower downside
thresholds or coupon barriers may reflect greater expected volatility of each underlying asset, and greater expected volatility
generally indicates an increased risk of loss at maturity”, “— You are exposed to the market risk of each underlying
asset” and “— Because the Notes are linked to the least performing underlying asset, you are exposed to a greater
risk of no contingent coupons and losing a significant portion or all of your initial investment at maturity than if the Notes
were linked to fewer underlying assets” herein.
Past performance of the underlying assets is not indicative
of the future performance of the underlying assets.
What are the Tax Consequences of the Notes?
|
The United States federal income tax consequences of your
investment in the Notes are uncertain. Some of these tax consequences are summarized below, but we urge you to read the more detailed
discussion in “Supplemental U.S. Tax Considerations” of the TACYN product supplement and to discuss the tax consequences
of your particular situation with your tax advisor.
U.S. Tax Treatment.
Pursuant to the terms of the Notes,
UBS and you agree, in the absence of an administrative or judicial ruling to the contrary, to characterize the Notes as a pre-paid
derivative contract with respect to the underlying assets. If your Notes are so treated, any contingent coupon that is paid by
UBS (including on the maturity date or upon an automatic call) should be included in your income as ordinary income in accordance
with your regular method of accounting for U.S. federal income tax purposes.
In addition, excluding amounts attributable to any contingent
coupon, you should generally recognize capital gain or loss upon the sale, exchange, automatic call, or redemption on maturity
of your Notes in an amount equal to the difference between the amount you receive at such time (other than amounts or proceeds
attributable to a contingent coupon or any amount attributable to any accrued but unpaid contingent coupon) and the amount you
paid for your Notes. Such gain or loss should generally be long-term capital gain or loss if you have held your Notes for more
than one year (otherwise such gain or loss would be short-term capital gain or loss if held for one year or less). The deductibility
of capital losses is subject to limitations. Although uncertain, it is possible that proceeds received from the sale or exchange
of your Notes prior to a coupon observation date, but that could be attributed to an expected contingent coupon, could be treated
as ordinary income. You should consult your tax advisor regarding this risk.
In the opinion of our counsel, Cadwalader, Wickersham &
Taft LLP, it would be reasonable to treat your Notes in the manner described above. However, because there is no authority that
specifically addresses the tax treatment of the Notes, it is possible that your Notes could alternatively be treated for tax purposes
as a single contingent payment debt instrument, or pursuant to some other characterization, such that the timing and character
of your income from the Notes could differ materially from the treatment described above, as described further under “Supplemental
U.S. Tax Considerations — Alternative Treatments” of the TACYN product supplement, as described in such product supplement.
The risk that the Notes may be recharacterized for United States federal income tax purposes as instruments giving rise to current
ordinary income (possibly in excess of any contingent coupon and even before receipt of any cash) and short-term capital gain or
loss (even if held for more than one year), is higher than with other index-linked securities that do not guarantee full repayment
of principal.
Notice 2008-2.
In addition, in 2007 the U.S. Treasury
Department and the Internal Revenue Service (“IRS”) released a notice requesting comments on the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments, which might include the Notes. Notice 2008-2
focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It
also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments
and the relevance of factors such as the nature of the underlying property to which the instruments are linked. While the notice
requests comments on appropriate transition rules and effective dates, any U.S. Treasury Department regulations or other guidance
promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in
the Notes, possibly with retroactive effect. You should consult your tax advisor regarding the U.S. federal income tax consequences
of an investment in the Notes, including possible alternative treatments and the issues presented by this notice. Non-US holders
should consult their tax advisors regarding the U.S. federal income tax consequences of investing in the Notes, including the
possible application of 30% U.S. withholding tax in respect to the contingent coupons.
Section 1297.
We will not attempt to ascertain whether any
underlying asset issuer would be treated as a passive foreign investment company (“PFIC”) within the meaning of Section
1297 of the Internal Revenue Code of 1986, as amended (the “Code”). If any such entity were so treated, certain adverse
U.S. federal income tax consequences might apply upon the sale, exchange, automatic call, redemption or maturity of a Note. You
should refer to information filed with the SEC or the equivalent governmental authority by such entities and consult your tax advisor
regarding the possible consequences to you if any such entity is or becomes a PFIC.
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 Notes, to the extent of their net investment
income that when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for
a married taxpayer filing a joint return (or a surviving spouse), or $125,000 for a married individual filing a separate return.
The 3.8% Medicare tax is determined in a different manner than the income tax. U.S. holders should consult their tax advisors with
respect to their consequences with respect to the 3.8% Medicare tax.
Specified Foreign Financial Assets.
Certain U.S. holders
that own “specified foreign financial assets” in excess of an applicable threshold may be subject to reporting obligations
with respect to such assets with their tax returns, especially if such assets are held outside the custody of a U.S. financial
institution. You are urged to consult your tax advisor as to the application of this legislation to your ownership of the Notes.
Non-U.S. Holders.
The U.S. federal income tax
treatment of the contingent coupons is unclear. Subject to Section 871(m) of the Code and FATCA, as discussed below, our
counsel of the opinion that contingent coupons paid to a non-U.S. holder that provides us (and/or the applicable withholding
agent) with a fully completed and validly executed applicable IRS Form W-8 should not be subject to U.S. withholding tax and
we do not intend to withhold any tax on contingent coupons. However, it is possible that the IRS could assert that such
payments are subject to U.S. withholding tax, or that another withholding agent may otherwise determine that withholding is
required, in which case the other withholding agent may withhold up to 30% on such payments (subject to reduction or
elimination of such withholding tax pursuant to an applicable income tax treaty). We will not pay any additional amounts in
respect of such withholding. Subject to Section 897 and Section 871(m) of the Code, discussed below, gain from the sale,
exchange, automatic call, redemption or maturity of a Note generally should not be subject to U.S. tax unless such gain is
effectively connected with a trade or business conducted by the non-U.S. holder in the U.S. or unless 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 sale,
exchange or settlement and certain other conditions are satisfied, or has certain other present or former connections with
the U.S.
Section 897
.
We will not attempt to ascertain
whether any underlying constituent issuers would be treated as a “United States real property holding corporation”
(“USRPHC”) within the meaning of Section 897 of the Code. We also have not attempted to determine whether the Notes
should be treated as “United States real property interests” as defined in Section 897 of the Code. If an underlying
asset issuer and the Notes were so treated, certain adverse U.S. federal income tax consequences could possibly apply, including
subjecting any gain to a non-U.S. holder in respect of a Note
upon a sale, exchange, automatic call or other taxable disposition
of the Note to the U.S. federal income tax on a net basis, and the proceeds from such a taxable disposition to a 15% withholding
tax. Non-U.S. holders should consult their tax advisors regarding the potential treatment of the underlying asset issuer for their
Notes as a USRPHC and the Notes as United States real property interests.
Section 871(m)
. A
30% withholding tax (which may be reduced by an applicable income tax treaty) is imposed under Section 871(m) of the Code on certain
“dividend equivalents” paid or deemed paid to a non-U.S. holder with respect to a “specified equity-linked instrument”
that references one or more dividend-paying U.S. equity securities or indices containing U.S. equity securities. The withholding
tax can apply even if the instrument does not provide for payments that reference dividends. Treasury regulations provide
that the withholding tax applies to all dividend equivalents paid or deemed paid on specified equity-linked instruments that have
a delta of one (“delta one specified equity-linked instruments”) issued after 2016 and to all dividend equivalents
paid or deemed paid on all other specified equity-linked instruments issued after 2018.
Based on our determination that the Notes are not “delta-one”
with respect to any underlying asset or any U.S. underlying equity constituent, our counsel is of the opinion that the Notes
should not be delta one specified equity-linked instruments and thus should not be subject to withholding on dividend equivalents.
Our determination is not binding on the IRS, and the IRS may disagree with this determination. Furthermore, the application of
Section 871(m) of the Code will depend on our determinations made upon issuance of the Notes. If withholding is required, we will
not make payments of any additional amounts.
Nevertheless, after issuance, it is possible that your Notes
could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting the underlying assets, underlying
equity constituents or your Notes, and following such occurrence your Notes could be treated as delta one specified equity-linked
instruments that are subject to withholding on dividend equivalents. It is also possible that withholding tax or other tax under
Section 871(m) of the Code could apply to the Notes under these rules if a non-U.S. holder enters, or has entered, into certain
other transactions in respect of the underlying assets, underlying equity constituents or the Notes. A non-U.S. holder that enters,
or has entered, into other transactions in respect of the underlying assets, underlying equity constituents or the Notes should
consult its tax advisor regarding the application of Section 871(m) of the Code to its Notes in the context of its other transactions.
Because of the uncertainty regarding the application of the
30% withholding tax on dividend equivalents to the Notes, you are urged to consult your tax advisor regarding the potential application
of Section 871(m) of the Code and the 30% withholding tax to an investment in the Notes.
Foreign Account Tax Compliance Act.
The Foreign Account
Tax Compliance Act (“FATCA”) was enacted on March 18, 2010, and imposes a 30% U.S. withholding tax on “withholdable
payments” (i.e., certain U.S.-source payments, including interest (and OID), 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 United States 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” made on or after July 1, 2014, certain gross proceeds on a sale or disposition occurring after
December 31, 2018, and certain foreign passthru payments made after December 31, 2018 (or, if later, the date that 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 United States governing FATCA may be subject to different rules.
Investors should consult their own advisors about the application
of FATCA, in particular if they may be classified as financial institutions (or if they hold their Notes through a foreign entity)
under the FATCA rules.
Proposed Legislation.
In 2007, legislation was introduced
in Congress that, if enacted, would have required holders of Notes purchased after the bill was enacted to accrue interest income
over the term of the Notes despite the fact that there may be no interest payments over the entire term of the Notes. It is not
possible to predict whether a similar or identical bill will be enacted in the future, or whether any such bill would affect the
tax treatment of your Notes.
Furthermore, in 2013, the House Ways and Means Committee
released in draft form certain proposed legislation relating to financial instruments. If enacted, the effect of this
legislation generally would have been to require instruments such as the Notes to be marked to market on an annual basis with
all gains and losses to be treated as ordinary, subject to certain exceptions. You are urged to consult your tax advisor
regarding the draft legislation and its possible impact on you.
Prospective purchasers
of the Notes are urged to consult their tax advisors concerning the application of U.S. federal income tax laws to their particular
situations, as well as any tax consequences of the purchase, beneficial ownership and disposition of the Notes arising under the
laws of any state, local, non-U.S. or other taxing jurisdiction (including those of the jurisdictions of the underlying constituent
issuers).