UBS AG - Capital/Financing Update 2016

The information in this preliminary pricing supplement is not complete and may be changed. We may not sell these Notes until the pricing supplement, the Trigger Autocallable Notes product supplement and the accompanying prospectus (collectively, the “Offering Documents”) are delivered in final form. The Offering Documents are not an offer to sell these Notes and we are not soliciting offers to buy these Notes in any state where the offer or sale is not permitted.

Subject to Completion PRELIMINARY PRICING SUPPLEMENT Dated December 13, 2016 Filed Pursuant to Rule 424(b)(2) Registration Statement No. 333-204908 (To Prospectus dated April 29, 2016, and Product Supplement dated September 30, 2016)

UBS AG $• Step Down Trigger Autocallable Notes

Linked to the shares of the SPDR ® S&P ® Bank ETF due on or about December 31, 2021

Investment Description

UBS AG Step Down Trigger Autocallable Notes (the “Notes”) are unsubordinated, unsecured debt securities issued by UBS AG (“UBS” or the “issuer”) linked to the shares of the SPDR ® S&P ® Bank ETF (the “underlying asset”). UBS will automatically call the Notes (an “automatic call”) if the closing level of the underlying asset on any observation date, including the final valuation date, is equal to or greater than the call threshold level. If the Notes are subject to an automatic call, UBS will pay on the applicable call settlement date following such observation date a cash payment per Note equal to the “call price”, which is your principal amount plus a call return based on the call return rate, and no further payments will be owed to you under the Notes. The call return increases the longer the Notes are outstanding. If, however, the Notes are not subject to an automatic call, then the closing level of the underlying asset on the final valuation date (the “final level”) is less than the downside threshold. In this scenario, UBS will pay you a cash payment per Note that is less than the principal amount, if anything, resulting in a percentage loss on your initial investment equal to the percentage decline in the underlying asset from the trade date to the final valuation date (the “underlying return”) and, in extreme situations, you could lose all of your initial investment. Investing in the Notes involves significant risks. You may lose a significant portion or all of your initial investment. Generally, higher call return rates are associated with a greater risk of loss and a greater risk that the Notes will not be subject to an automatic call. 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.

Features

q Automatic Call Feature with Step Down Call Threshold Levels — UBS will automatically call the Notes if the closing level of the underlying asset on any observation date, including the final valuation date, is equal to or greater than the call threshold level, which is higher for observation dates prior to the final valuation date. If the Notes are subject to an automatic call, UBS will pay on the applicable call settlement date a cash payment per Note equal to the call price for the relevant observation date. The call return increases the longer the Notes are outstanding. Following an automatic call, no further payments will be owed to you under the Notes.

q Contingent Repayment of Principal at Maturity with Potential for Full Downside Market Exposure — If by maturity the Notes have not been subject to an automatic call, the final level of the underlying asset will be less than the downside threshold and UBS will pay you a cash payment per Note that is less than the principal amount, if anything, resulting in a percentage loss on your investment equal to the underlying return. The contingent repayment of principal applies only if you hold the Notes to maturity. Any payment on the Notes, including any repayment of principal, is subject to the creditworthiness of UBS.

Key Dates*

Trade Date**	December 28, 2016
Settlement Date**	December 30, 2016
Observation Dates	Annually (see page 2)
Final Valuation Date	December 27, 2021
Maturity Date	December 31, 2021

Expected. See page 2 for additional details.

** We expect to deliver each offering of the Notes against payment on or about the second business day following the trade date. Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to a trade expressly agree otherwise.

Notice to investors: the Notes are significantly riskier than conventional debt instruments. The issuer is not necessarily obligated to repay the principal amount of the Notes at maturity, and the Notes may have the same downside market risk as the underlying asset. This market risk is in addition to the credit risk inherent in purchasing a debt obligation of UBS. You should not purchase the Notes if you do not understand or are not comfortable with the significant risks involved in investing in the Notes.

You should carefully consider the risks described under “Key Risks” beginning on page 4 and under “Risk Factors” beginning on page PS-20 of the Trigger Autocallable Notes (“TAN”) product supplement before purchasing any Notes. Events relating to any of those risks, or other risks and uncertainties, could adversely affect the market value of, and the return on, your Notes. You may lose a significant portion or all of your initial investment in the Notes. The Notes will not be listed or displayed on any securities exchange or any electronic communications network.

Note Offering

These preliminary terms relate to Notes linked to the shares of the SPDR ® S&P ® Bank ETF. The initial level, call return rate, downside threshold and call threshold level for the Notes will be determined on the trade date. The Notes are offered at a minimum investment of 100 Notes at $10 per Note (representing a $1,000 investment), and integral multiples of $10 in excess thereof.

Underlying Asset	Bloomberg Ticker	Call Return Rate*	Initial Level	Downside Threshold	Call Threshold Levels	CUSIP	ISIN
SPDR ® S&P ® Bank ETF	KBE	7.20%-8.20% per annum	$•	70% of the Initial Level	See Page 2	90280M277	US90280M2778

The call return is based on the call return rate (to be determined on the trade date) and will vary depending on the call settlement date on which the Notes are called.

The estimated initial value of the Notes as of the trade date is expected to be between $9.331 and $9.631 for Notes linked to the shares of the SPDR ® S&P ® Bank ETF. The range of the estimated initial value of the Notes 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 Notes, see “Key Risks — Fair value considerations” and “ — Limited or no secondary market and secondary market price considerations” on pages 5 and 6 herein.

See “Additional Information about UBS and the Notes” on page ii. The Notes will have the terms set forth in the TAN product supplement relating to the Notes, dated September 30, 2016, the accompanying prospectus and this document.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these Notes or passed upon the adequacy or accuracy of this document, the TAN product supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

The Notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Offering of Notes	Issue Price to Public — Total	Per Note	Underwriting Discount — Total	Per Note	Proceeds to UBS AG — Total	Per Note
Notes linked to the shares of the SPDR ® S&P ® Bank ETF	$•	$10.00	$•	$0.25	$•	$9.75

UBS Financial Services Inc. UBS Investment Bank

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Additional Information about UBS and the Notes

UBS has filed a registration statement (including a prospectus, as supplemented by 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. When you read the product supplement, please note that the Notes offered hereby are linked to the performance of a single underlying asset, and not to the performance of the “least performing underlying asset” among two or more underlying assets as described in the product supplement. 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:

¨ TAN product supplement dated September 30, 2016: http://www.sec.gov/Archives/edgar/data/1114446/000091412116001493/ub35939637-424b2.htm

¨ Prospectus dated April 29, 2016: http://www.sec.gov/Archives/edgar/data/1114446/000119312516569341/d161008d424b3.htm

References to “UBS”, “we”, “our” and “us” refer only to UBS AG and not to its consolidated subsidiaries. In this document, “Step Down Trigger Autocallable Notes” or the “Notes” refer to the Notes that are offered hereby. Also, references to the “TAN product supplement” mean the UBS product supplement, dated September 30, 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 preliminary or indicative 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 4 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.

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Investor Suitability

The Notes may be suitable for you if:

¨ You fully understand the risks inherent in an investment in the Notes, including the risk of loss of a significant portion or all of your initial investment.

¨ You can tolerate a loss of a significant portion or all of your initial investment and are willing to make an investment that may have the same downside market risk as an investment in the underlying asset.

¨ You believe that the closing level of the underlying asset will be equal to or greater than the call threshold level on one of the specified observation dates, including the final valuation date, and you believe that the level of the underlying asset will appreciate over the term of the Notes by a percentage that is less than the call return rate.

¨ You understand and accept that the call threshold level of the underlying asset is greater on the observation dates prior to the final valuation date.

¨ You understand and accept that you will not participate in any appreciation of the underlying asset, that your potential return is limited to the call return and would be willing to invest if the call return rate was set equal to the bottom of the range indicated on the cover hereof (the actual call return rate will be determined on the trade date).

¨ You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations in the level of the underlying asset.

¨ You would be willing to invest in the Notes based on the call threshold levels (which are higher prior to the final valuation date) and downside threshold indicated herein.

¨ You do not seek guaranteed current income from your investment and are willing to forgo any dividends paid on the underlying asset.

¨ You are willing to invest in Notes that may be subject to an automatic call and you are otherwise willing to hold such Notes to maturity and you accept that there may be little or no secondary market for the Notes.

¨ You understand and are willing to accept the risks associated with the underlying asset.

¨ You are willing to assume the credit risk of UBS for all payments under the Notes, 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 Notes 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 Notes, the price (not including their customary bid-ask spreads) will temporarily exceed the internal pricing model price.

The Notes may not be suitable for you if:

¨ You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of a significant portion or 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 all or a significant portion of your investment and you are not willing to make an investment that may have the same downside market risk as an investment in the underlying asset.

¨ You believe that the level of the underlying asset will decline during the term of the Notes and is likely to be less than the call threshold level on the specified observation dates and the downside threshold on the final valuation date.

¨ You believe that the final level of the underlying asset will be less than the downside threshold on the final valuation date.

¨ You seek an investment that participates in the full appreciation in the level of the underlying asset or that has unlimited return potential, or you would be unwilling to invest if the call return rate was set equal to the bottom of the range indicated on the cover hereof (the actual call return rate will be determined on the trade date).

¨ You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the underlying asset.

¨ You would be unwilling to invest in the Notes based on the call threshold levels (which are higher prior to the final valuation date) and downside threshold indicated herein.

¨ You seek guaranteed current income from this investment or prefer to receive the dividends paid on the underlying asset.

¨ You are unable or unwilling to invest in Notes that may be subject to an automatic call, you are otherwise unable or unwilling to hold the Notes to maturity or you seek an investment for which there will be an active secondary market for the Notes.

¨ You do not understand or are unwilling to accept the risks associated with the underlying asset.

¨ You are not willing to assume the credit risk of UBS for all payments under the Notes, including any repayment of principal.

The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should review “SPDR ® S&P ® Bank ETF” herein for more information on the underlying asset. You should also review carefully the “Key Risks” section herein for risks related to an investment in the Notes.

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Indicative Terms

Issuer	UBS AG, London Branch
Principal Amount	$10 per Note
Term	Approximately 5 years, 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, 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 shares of the SPDR ® S&P ® Bank ETF.
Automatic Call Feature	UBS will automatically call the Notes if the closing level
of the underlying asset on any observation date, including the final valuation date, is equal to or greater than the call threshold
level. If the Notes are subject to an automatic call, UBS will pay
on the call settlement date a cash payment per Note equal to the call price for the relevant observation date. Following an automatic
call, no further payments will be made on the Notes.
Call Settlement Date	Two business days following the relevant observation date,
except that the call settlement date for the final valuation date is the maturity date, subject to postponement in the event
of a market disruption event as described under “General Terms of the Notes — Market Disruption Events” in
the TAN product supplement.
Call Return Rate	The call return rate will be between 7.20% and 8.20% per annum for Notes linked to the shares of the SPDR ® S&P ® Bank ETF (the actual call return rate will be determined on the trade date) .
Call Return	The call return increases the longer the Notes are
outstanding and is based upon the call return rate of between 7.20% and 8.20% per annum (the actual call return rate will be determined on the trade date).
Call Price	The call price equals the principal amount per Note plus the applicable call return.
The table
below assumes a call return rate of 7.20% per annum. The actual call return rate will be determined on the trade date.

| Observation Date (1)(2) | Call Settlement
Date (1)(2) | Call Return | Call Price (per Note) |
| --- | --- | --- | --- |
| December 29, 2017 | January 3, 2018 | 7.20% | $10.72 |
| December 28, 2018 | January 2, 2019 | 14.40% | $11.44 |
| December 30, 2019 | January 2, 2020 | 21.60% | $12.16 |
| December 28, 2020 | December 30, 2020 | 28.80% | $12.88 |
| December 27, 2021 | December 31, 2021* | 36.00% | $13.60 |

This is also the final valuation date.

** This is also the maturity date.

(1) 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 call settlement dates, as well as the final valuation date and maturity date to ensure that the stated term of the Securities remains the same.

(2) Subject to the market disruption event provisions set forth under “General Terms of the Notes — Market Disruption Events” in the TAN product supplement.

| Payment at Maturity (per Note) | If the Notes are not subject to an automatic call, then
the final level of the underlying asset will be less than the downside threshold and UBS will pay you a cash payment
that is less than the principal amount, if anything, equal to: $10 x (1 + Underlying Return) In this scenario, you will suffer a percentage loss
on your initial investment equal to the underlying return. |
| --- | --- |
| Underlying Return | The quotient, expressed as a percentage of the following
formula: Final Level – Initial Level Initial Level |
| Call Threshold Level | · For each observation date prior to the final valuation date: $•, equal to the initial level · For the final valuation date: $•,
which is 70% of the initial level and equal to the downside threshold |
| Downside Threshold | A specified level of the underlying asset that is less than the initial level of the 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 | The closing level of the underlying asset on the trade date, as determined by the calculation agent. |
| Final Level | The closing level of the underlying asset on the final valuation date, as determined by the calculation agent. |

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Investment Timeline

| Trade Date | The initial level of the underlying asset is observed, the call
return rate is set and the call threshold levels and downside threshold for the underlying asset are determined. |
| --- | --- |
| ¯ | |
| Observation Dates | The Notes will be subject to an automatic call if the closing
level of the underlying asset on any observation date, including the final valuation date, is equal to or greater than the call
threshold level. If the Notes are subject to an automatic call, UBS will pay
on the call settlement date a cash payment per Note equal to the call price for the relevant observation date. Following an automatic
call, no further payments will be made on the Notes. |
| ¯ | |
| Maturity Date | If the Notes are not subject to an automatic call and the
final level is equal to or greater than the downside threshold, UBS will pay you a cash payment per Note that is less than
the principal amount, if anything, equal to: $10 x (1 + Underlying Return) In this scenario, you will suffer a percentage loss on your
initial investment equal to the underlying return. |

Investing in the Notes involves significant risks. You may lose a significant portion or all of your initial investment. Any payment on the Notes, including any repayment of principal, is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations, you may not receive any amounts owed to you under the Notes and you could lose all of your initial investment.

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 is less than the downside threshold, you will lose a percentage of your principal amount equal to the underlying return and, in extreme situations, you could lose all of your initial investment.

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Key Risks

An investment in the offering of the Notes involves significant risks. Investing in the Notes is not equivalent to investing in the underlying asset. 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 TAN 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 repay the principal amount of the Notes at maturity. If the Notes are not subject to an automatic call and the final level is less than the downside threshold, you will lose a percentage of your principal amount equal to the underlying return 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 the underlying asset is equal to or greater than the downside threshold and call threshold level. All payments on the Notes are subject to the creditworthiness of UBS.

¨ No interest payments — UBS will not pay any interest with respect to the Notes.

¨ Your potential return on the Notes is limited to the call return and you will not participate in any appreciation of the underlying asset — The return potential of the Notes is limited to the pre-specified call return resulting from an automatic call regardless of any appreciation of the underlying asset. Investors will not participate in any appreciation in the final level of the underlying asset from the initial level. The Notes will only be subject to an automatic call if the closing level or the final level, as applicable, of the underlying asset is equal to or greater than the call threshold level, which is higher for observation dates prior to the final valuation date. In addition, because the call return increases the longer the Notes have been outstanding, the call price payable with respect to earlier observation dates is less than the call price payable with respect to later observation dates. The earlier a Note is subject to an automatic call, the lower your return will be. 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 will be subject to the decline in the level of the underlying asset even though you cannot participate in any appreciation in the level of the underlying asset. As a result, the return on an investment in the Notes could be less than the return on a direct investment in the underlying asset. In addition, as an owner of the Notes, you will not have voting rights or any other rights of a holder of the underlying asset.

¨ A higher call return rate or lower downside threshold or call threshold level may reflect greater expected volatility of the underlying asset, and greater expected volatility generally indicates an increased risk of loss at maturity — The economic terms for the Notes, including the call return rate, call threshold level and downside threshold, are based, in part, on the expected volatility of the 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 the underlying asset. The greater the expected volatility of the underlying asset as of the trade date, the greater the expectation is as of that date that the closing level or the final level, as applicable, of the underlying asset could be less than the call threshold level on any observation date and that the final level of the underlying asset could be less than the downside threshold on the final valuation date and, as a consequence, indicates an increased risk of the Notes not being subject to an automatic call and an increased risk of loss, respectively. All things being equal, this greater expected volatility will generally be reflected in a higher call return rate than the yield payable on our conventional debt securities with a similar maturity or on otherwise comparable securities, and/or a lower downside threshold and/or call threshold level than those terms on otherwise comparable securities. Therefore, a relatively higher call return rate may indicate an increased risk of loss. Further, a relatively lower downside threshold and/or call threshold level may not necessarily indicate that the Notes have a greater likelihood of a return of principal at maturity and/or paying the call return. You should be willing to accept the downside market risk of the 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 the underlying asset is equal to or greater than the call threshold level on any observation date as set forth under “Indicative Terms — Observation Dates” above. Because the Notes could be subject to an automatic call as early as the first potential call settlement date, 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 call return 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 the underlying asset and the shorter time remaining for the level of the underlying asset to recover. Such periods generally coincide with a period of greater risk of principal loss on your Notes.

¨ 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 level of the underlying asset can rise or fall sharply due to factors specific to the underlying asset or its underlying equity constituents, the issuer of the underlying asset (the "underlying asset issuer") and the issuers of the underlying equity constituents (the “underlying constituent issuers”) such as price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events, as well as general market factors, such as general stock market volatility and levels, interest rates and economic and political conditions. You, as an investor in the Notes, should make your own investigation into the underlying asset issuer and the underlying asset for your Notes. For additional information regarding the underlying asset issuer, please see "Information about the Underlying Asset" in this preliminary pricing supplement and the underlying asset issuer's SEC filings referred to in that section. We urge you to review financial and other information filed periodically by the underlying asset issuer with the SEC.

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¨ Fair value considerations.

¨ 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 level and volatility of the underlying asset and underlying equity constituents, expected dividends on the underlying asset and 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.

¨ 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.

¨ 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.

¨ 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.

¨ 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.

¨ 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 the underlying asset and the underlying equity constituents; the volatility of the underlying asset and the underlying equity constituents; the dividend rate paid on the underlying asset and 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 the underlying asset is currently or has been less than the call threshold level; the composition of the underlying asset; 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.

¨ 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

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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 risks associated with the banking sector — The Notes are linked to the SPDR ® S&P ® Bank ETF (“KBE Fund”) and are subject to risks associated with the banking sector because the KBE Fund seeks to track the performance of a specific index ("the target index"), which is comprised of the stocks of companies representing the banking sector of the S&P Banks Select Industry Index. All or substantially all of the underlying equity constituents tracked by the KBE Fund are issued by companies whose primary lines of business are directly associated with the banking sector, which means the KBE Fund will be more affected by the performance of the banking sector versus a fund that is more diversified. The performance of bank stocks may be affected by extensive governmental regulation which may limit both the amounts and types of loans and other financial commitments they can make, and the interest rates and fees they can charge and the amount of capital they must maintain. Profitability is largely dependent on the availability and cost of capital funds, and can fluctuate significantly when interest rates change. Credit losses resulting from financial difficulties of borrowers can negatively impact the sector. Banks may also be subject to severe price competition. The regional banking industry is highly competitive and failure to maintain or increase market share may result in lost market share.

¨ 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 level of the underlying asset will rise or fall and there can be no assurance that the closing level or the final level, as applicable, of the underlying asset will be equal to or greater than the call threshold level on any observation date, or, if the Notes are not subject to an automatic call, that the final level of the underlying asset will be equal to or greater than the downside threshold. The level of the underlying asset will be influenced by complex and interrelated political, economic, financial and other factors that affect the underlying constituent issuers. You should be willing to accept the downside risks of owning equities in general and the underlying asset in particular, and the risk of losing a significant portion or all of your initial investment.

¨ The underlying asset is an exchange traded fund and its value may not completely track the value of its underlying equity constituents — Although the trading characteristics and valuations of an exchange traded fund (an “ETF”) such as the underlying asset will usually mirror the characteristics and valuations of the underlying equity constituents, its value may not completely track the value of its underlying equity constituents. The value of the underlying asset will reflect transaction costs and fees that the underlying equity constituents do not have. In addition, although the underlying asset may be currently listed for trading on an exchange, there is no assurance that an active trading market will continue for such underlying asset or that there will be liquidity in the trading market.

¨ Fluctuation of NAV — The net asset value (the “NAV”) of the underlying asset may fluctuate with changes in the market value of the underlying equity constituents. The market prices of the underlying asset may fluctuate in accordance with changes in NAV and supply and demand on the applicable stock exchanges. Furthermore, the underlying equity constituents may be unavailable in the secondary market during periods of market volatility, which may make it difficult for market participants to accurately calculate the intraday NAV per share of the underlying asset and may adversely affect the liquidity and prices of the underlying asset, perhaps significantly. For any of these reasons, the market price of the underlying asset may differ from its NAV per share and the underlying asset may trade at, above or below its NAV per share.

¨ Failure of the underlying asset to track the level of its target index — While the underlying asset is designed and intended to track the level of a specific index, various factors, including fees and other transaction costs, will prevent the underlying asset from correlating exactly with changes in the level of such target index. Accordingly, the performance of the underlying asset will not be equal to the performance of its target index during the term of the Notes.

¨ The underlying asset utilizes a passive indexing investment approach — The underlying asset is not managed according to traditional methods of “active” investment management, which involve the buying and selling of securities based on economic, financial and market analysis and investment judgment. Instead, the underlying asset, utilizing a “passive” or indexing investment approach, attempts to approximate the investment performance of the target index by investing in a portfolio of stocks that generally replicate such target index. Therefore, unless a specific stock is removed from the target index, the underlying asset generally would not sell a stock because the stock’s issuer was in financial trouble. In addition, the underlying asset is subject to the risk that the investment strategy of the underlying asset’s investment adviser may not produce the intended results.

¨ There is no affiliation between the underlying asset issuer or any underlying constituent issuer and UBS, and UBS is not responsible for any disclosure by such issuers — We and our affiliates may currently, or from time to time in the future engage in business with the underlying asset issuer or any underlying constituent issuer. However, we are not affiliated with the underlying asset issuer or any underlying constituent issuer and are not responsible for such issuers’ public disclosure of information, whether contained in SEC filings or otherwise. You, as an investor in the Notes, should conduct your own investigation into the underlying asset and the underlying asset issuer and each underlying constituent. Neither the underlying asset issuer nor any underlying constituent issuer is involved in the Notes offered hereby in any way and has no obligation of any sort with respect to your Notes. The underlying asset issuer and any underlying constituent issuers have no obligation to take your interests into consideration for any reason, including when taking any corporate actions that might affect the value of your Notes.

¨ Potential UBS impact on the underlying asset or any underlying constituent — Trading or transactions by UBS or its affiliates in the underlying asset or any underlying equity constituents, listed and/or over-the-counter options, futures, exchange-traded funds or other instruments with returns linked to the performance of the underlying asset or any underlying equity constituents, may adversely affect the market price(s) or level(s) of the underlying asset on any observation date, including the final valuation date and, therefore, the market value of the Notes, any payout pursuant to an automatic call or at maturity.

¨ Potential conflict of interest — UBS and its affiliates may engage in business with the underlying asset 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 Notes are subject to an automatic call and the payment at maturity of the Notes, if any, based on observed levels of the underlying asset. The calculation agent can postpone the determination of the initial level, closing level or final level of any underlying asset (and therefore the related settlement date, call settlement date or maturity date, as applicable), on the trade date or any observation date, including the final valuation date, respectively. As UBS determines the economic terms of the Notes, including the call return rate, call threshold levels and downside threshold, and such terms include hedging costs, issuance costs and projected profits, the Notes represent a package of economic terms. There are other potential conflicts of interest insofar as an investor could potentially

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get better economic terms if that investor entered into exchange-traded and/or OTC derivatives or other instruments with third parties, assuming that such instruments were available and the investor had the ability to assemble and enter into such instruments.

¨ Potentially inconsistent research, opinions or recommendations by UBS — UBS and its affiliates publish research from time to time on financial markets and other matters that may influence the value of the 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 asset 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 pay 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.

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Hypothetical Examples of How the Notes Might Perform

The below examples are based on hypothetical terms. The actual terms will be set on the trade date and will be indicated on the cover of the 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 5 years
Call return rate:	7.20% per annum
Observation Dates:	Annually
Initial Level:	$40.00
Call Threshold:	• For each observation date prior to the final valuation date: $40.00 (which is 100% of the Initial Level)
	• For the final valuation date: $28.00 (which is 70% of the Initial Level)
Downside Threshold:	$28.00 (which is 70% of the Initial Level)

Example 1 — The Closing Level of the underlying asset is equal to or greater than the Call Threshold Level on the Observation Date corresponding to the first Potential Call Settlement Date.

Date	Closing Level	Payment (per Note)
First Observation Date	$41.00 ( equal to or greater than Call Threshold Level)	$10.72 (Settlement Amount)
	Total Payment	$10.72 (7.20% total return)

Because the Notes are subject to an automatic call on the first potential call settlement date (which is approximately one year after the trade date), UBS will pay on the call settlement date a total of $10.72 per Note (reflecting your principal amount plus the applicable call return), a 7.20% total return on the Notes. You will not receive any further payments on the Notes.

Example 2 — The Closing Level of the underlying asset is equal to or greater than the Call Threshold Level on the Observation Date corresponding to the third Potential Call Settlement Date.

Date	Closing Level	Payment (per Note)
First Observation Date	$30.00 ( less than Call
Threshold Level)	$0
Second Observation Date	$32.00 ( less than Call
Threshold Level)	$0
Third Observation Date	$40.00 ( equal to or greater than Call
Threshold Level)	$12.16 (Settlement Amount)
	Total Payment	$12.16 (21.60% total return)

Because the Notes are subject to an automatic call on the third potential call settlement date (which is approximately three years after the trade date), UBS will pay on the call settlement date a total of $12.16 per Note (reflecting your principal amount plus the applicable call return), a 21.60% total return on the Notes. You will not receive any further payments on the Notes.

Example 3 — The Final Level of the underlying asset is equal to or greater than the Call Threshold Level on the Final Valuation Date.

| Date | Closing
Level | Payment (per
Note) |
| --- | --- | --- |
| First Observation Date | $36.00 ( less than Call
Threshold Level) | $0 |
| Second Observation Date | $35.00 ( less than Call
Threshold Level) | $0 |
| Third Observation Date | $34.00 ( less than Call
Threshold Level) | $0 |
| Fourth Observation Date | $33.00 ( less than Call
Threshold Level) | $0 |
| Final Valuation Date | $30.00 ( equal to or greater than Call
Threshold Level) | $13.60 (Settlement Amount) |
| | Total Payment | $13.60 (36.00% total return) |

Because the Notes are subject to an automatic call on the final valuation date (which is approximately five years after the trade date), UBS will pay on the call settlement date a total of $13.60 per Note (reflecting your principal amount plus the applicable call return), a 36.00% total return on the Notes. You will not receive any further payments on the Notes.

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Example 4 — The Notes are NOT subject to an Automatic Call and the Final Level of the underlying asset is less than the downside threshold.

| Date | Closing
Level | Payment (per
Note) |
| --- | --- | --- |
| First Observation Date | $36.00 ( less than Call
Threshold Level) | $0 |
| Second Observation Date | $32.00 ( less than Call
Threshold Level) | $0 |
| Third Observation Date | $28.00 ( less than Call
Threshold Level) | $0 |
| Fourth Observation Date | $21.00 ( less than Call
Threshold Level) | $0 |
| Final Valuation Date | $16.00 ( less than Call
Threshold Level and Downside Threshold) | $10 x (1 + Underlying Return) = $10 x [$1 + (-60%)] = $10 x 0.40 = $4 (Payment at Maturity) |
| | Total Payment | $4.00 (60.00% loss) |

Because the Notes are not subject to an automatic call and the final level of the underlying asset is less than the downside threshold, you will be exposed to the underlying return and at maturity UBS will pay you $4.00 per Note, a loss on the Notes of 60.00%.

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 is less than the downside threshold, you will lose a percentage of your principal amount equal to the underlying return and, in extreme situations, you could lose all of your initial investment.

Any payment on the Notes, including any payments in respect of an automatic call 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.

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SPDR ® S&P ® Bank ETF

We have derived all information contained herein regarding the SPDR ® S&P ® Bank ETF (the "KBE Fund") from publicly available information. Such information reflects the policies of, and is subject to change by, SSGA Funds Management, Inc. (“SSGA FM” or the “Adviser”), the investment adviser to the KBE Fund. UBS has not undertaken an independent review or due diligence of any publicly available information regarding the KBE Fund.

The KBE Fund is designed to generally correspond to the total return performance, before fees and expenses, of the S&P Banks Select Industry Index (the “target index”). The KBE Fund employs a sampling strategy, which means that the KBE Fund is not required to purchase all of the securities represented in the target index. Instead, the KBE Fund may purchase a subset of the securities in the target index in an effort to hold a portfolio of securities with generally the same risk and return characteristics of the target index. The quantity of holdings in the KBE Fund will be based on a number of factors, including asset size of the KBE Fund. The Adviser may invest the KBE Fund's assets in a subset of securities in the target index or may invest the KBE Fund's assets in substantially all of the securities represented in the target index in approximately the same proportions as the target index.

Under normal market conditions, the KBE Fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the target index. The KBE Fund will provide shareholders with at least 60 days' notice prior to any material change in this 80% investment policy. In addition, the KBE Fund may invest in equity securities that are not included in the target index, cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds (including money market funds advised by the Adviser).

The target index is a modified equal- weighted index that seeks to reflect the performance of publicly traded U.S.-based companies that do business as banks or thrifts, and is currently comprised of common stocks of national money centers and regional banks or thrifts listed on the NYSE or another U.S. national securities exchange, or NASDAQ®/National Market System ("NMS"). The target index represents the banks industry group of the S&P Total Market Index (“S&P TMI”). The target index is one of 25 of the S&P Select Industry Indices (the “Select Industry Indices”), each designed to measure the performance of a narrow sub-industry or group of sub-industries determined based on the Global Industry Classification Standards (“GICS”). Membership in the Select Industry Indices is based on the GICS classification, as well as liquidity and market cap requirements. Existing index constituents are removed at the quarterly rebalancing effective date if either their float-adjusted market capitalization falls below $1 billion or their float-adjusted liquidity ratio falls below 50%. The market capitalization threshold and the liquidity threshold are each reviewed from time to time based on market conditions. Rebalancing occurs on the third Friday of the quarter ending month. The S&P TMI tracks all eligible U.S. common equities listed on the NYSE, NYSE Arca, NYSE MKT, NASDAQ Global Select Market, NASDAQ Select Market, and NASDAQ Capital Market. The target index is a modified equal weighted index.

The target index is sponsored by S&P Dow Jones Indices LLC (the “Index Provider”), which is not affiliated with the KBE Fund or the Adviser. The Index Provider determines the composition of the target index, relative weightings of the securities in the target index and publishes information regarding the market value of the target index.

As of September 30, 2016, operating expenses of the KBE Fund are expected to accrue at an annual rate of 0.35% of the KBE Fund's daily net asset value. Expenses of the KBE Fund reduce the net value of the assets held by the KBE Fund and, therefore, reduce the value of each unit of the KBE Fund.

As of September 30, 2016, the KBE Fund's top holdings were Fifth Third Bancorp (2.58%), Comerica Incorporated (2.57%), First Republic Bank (2.56%), Zions Bancorporation (2.55%), SunTrust Banks Inc. (2.54%), Regions Financial Corporation (2.52%), PNC Financial Services Group Inc. (2.52%), Citigroup Inc. (2.52%), Signature Bank (2.51%) and Huntington Bancshares Incorporated (2.51%).

In making your investment decision you should review the prospectus related to the KBE Fund, dated October 31, 2016, filed by SPDR Series Fund ("the KBE Fund Prospectus") available at:

http://www.sec.gov/Archives/edgar/data/1064642/000119312516751756/d258279d485bpos.htm

In addition, the KBE Fund Prospectus is available on the KBE Fund's website as indicated below. In making your investment decision you should pay particular attention to the sections of the KBE Fund Prospectus entitled "Principal Risks of Investing in the Fund" and "Additional Risk Information." UBS has not undertaken an independent review or due diligence of any publicly available information regarding the KBE Fund Prospectus, and such information is not incorporated by reference in, and should not be considered part of, these Terms or any accompanying prospectus.

The KBE Fund's website is https://www.spdrs.com/product/fund.seam?ticker=KBE. Shares of the KBE Fund are listed on the NYSE Arca under ticker symbol "KBE".

Information filed by the KBE Fund with the SEC under the Securities Act of 1933, the Investment Company Act of 1940 and/or the Securities Exchange Act of 1934, as applicable, can be found by reference to its SEC file number: 333-57793 and 811-08839.

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 SPDR ® S&P ® Bank ETF.

Historical Information

The following table sets forth the quarterly high and low closing levels for the SPDR ® S&P ® Bank ETF, 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 SPDR ® S&P ® Bank ETF on December 12, 2016 was $43.40. The actual initial level will be the closing level of the SPDR ® S&P ® Bank ETF on the trade date. Past performance of the SPDR ® S&P ® Bank ETF is not indicative of the future performance of the SPDR ® S&P ® Bank ETF.

Quarter Begin	Quarter End	Quarterly Closing High	Quarterly Closing Low	Quarterly Close
1/3/2012	3/30/2012	$24.44	$20.29	$23.85
4/2/2012	6/29/2012	$24.10	$20.25	$22.04
7/2/2012	9/28/2012	$24.63	$21.12	$23.48
10/1/2012	12/31/2012	$24.40	$22.29	$23.83
1/2/2013	3/28/2013	$27.23	$24.57	$26.92
4/1/2013	6/28/2013	$28.84	$25.47	$28.72

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Quarter Begin	Quarter End	Quarterly Closing High	Quarterly Closing Low	Quarterly Close
7/1/2013	9/30/2013	$31.98	$29.09	$30.03
10/1/2013	12/31/2013	$33.18	$29.54	$33.17
1/2/2014	3/31/2014	$34.67	$30.78	$34.04
4/1/2014	6/30/2014	$34.50	$31.03	$33.42
7/1/2014	9/30/2014	$33.87	$31.24	$31.91
10/1/2014	12/31/2014	$33.92	$30.05	$33.55
1/2/2015	3/31/2015	$34.15	$29.99	$33.51
4/1/2015	6/30/2015	$37.20	$33.44	$36.26
7/1/2015	9/30/2015	$37.06	$31.61	$33.24
10/1/2015	12/31/2015	$36.59	$32.93	$33.82
1/4/2016	3/31/2016	$33.05	$26.52	$30.37
4/1/2016	6/30/2016	$33.64	$28.19	$30.48
7/1/2016	9/30/2016	$34.23	$29.27	$33.38
10/3/2016*	12/12/2016*	$44.11	$33.21	$43.40

As of the date of this document, available information for the fourth calendar quarter of 2016 includes data for the period from October 3, 2016 through December 12, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the fourth calendar quarter of 2016.

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The graph below illustrates the performance of the SPDR ® S&P ® Bank ETF from January 3, 2006 through December 12, 2016, based on information from Bloomberg. The dotted green line represents a hypothetical call threshold level of $43.40 applicable for the call observation dates from and excluding the trade date to and including the call observation date prior to the final valuation date and the dotted blue line represents a hypothetical call threshold level, for the final valuation date, and a hypothetical downside threshold of $30.38, which are equal to 100% and 70%, respectively, of the closing level on December 12, 2016. The actual call threshold levels and downside threshold will be determined on the trade date. Past performance of the SPDR ® S&P ® Bank ETF is not indicative of the future performance of the SPDR ® S&P ® Bank ETF.

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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 TAN product supplement, particularly in respect of the “constructive ownership” rules under Section 1260 of the Internal Revenue Code of 1986, as amended, as described in the TAN product supplement, and to discuss the tax consequences of your particular situation with your tax advisor.

No statutory, judicial or administrative authority directly discusses how your Notes should be treated for U.S. federal income tax purposes. 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, you should generally recognize gain or loss upon the sale, exchange, automatic call, redemption or maturity of your Notes in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Notes. Subject to the constructive ownership rules, discussed below, such gain or loss should generally be long-term gain or loss if you have held your Notes for more than one year (otherwise such gain or loss would be short-term gain or loss if held for one year or less). The deductibility of losses is subject to limitations.

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 (including possible treatment as a "constructive ownership" transaction under Section 1260 of the Code), 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 TAN 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 (even before receipt of any cash) and short-term gain or loss (even if held for more than one year), is higher than with other equity-linked securities that do not guarantee full repayment of principal.

Because the underlying asset would be treated as a “pass-thru entity” for purposes of Section 1260, it is possible that the Notes could be treated as a constructive ownership transaction under Section 1260. If the Notes were treated as a constructive ownership transaction certain adverse U.S. federal income tax consequences could apply (i.e., all or a portion of any long-term gain that you recognize upon the sale, exchange, automatic call, redemption or maturity of your Notes could be recharacterized as ordinary income and you could be subject to an interest charge on deferred tax liability with respect to such recharacterized gain). We urge you to read the discussion concerning the possible treatment of the Notes as a constructive ownership transaction under “Supplemental U.S. Tax Considerations - Alternative Treatments” of the TAN product supplement.

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 own 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.

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 payments is unclear. Subject to Section 871(m) of the Code and FATCA, as 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 Notes or to generally applicable information reporting and backup withholding requirements with respect to payments on your Notes if you comply with certain certification and identification requirements as to your non-U.S. status, including providing us (and/or the applicable withholding agent) with a fully completed and validly executed applicable IRS Form W-8. Subject to Section 897, 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 the underlying asset issuer would be treated as a “United States real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code. We also have not attempted to determine whether the Notes should be treated as “United States real property interests” as defined in Section 897 of the Code. If an underlying constituent 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 any underlying constituent issuer for their Notes as a USRPHC and the Notes as United States real property interests.

Section 871(m) . Section 871(m) of the Code requires withholding (up to 30%, depending on whether a treaty applies) on certain financial instruments to the extent that the payments or deemed payments on the financial instruments are contingent upon or determined by reference to U.S.-source dividends. Under U.S. Treasury Department regulations, certain payments or deemed payments to non-U.S. holders with respect to certain equity-linked instruments (“specified ELIs”) that reference U.S. stocks (including the underlying asset), may be treated as dividend equivalents (“dividend equivalents”) that are subject to U.S.

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withholding tax at a rate of 30% (or lower treaty rate). Under these regulations, withholding may be required even in the absence of any actual dividend related payment or adjustment made pursuant to the terms of the instrument. Withholding under these regulations generally will not apply to specified ELIs entered into before January 1, 2017. Accordingly, non-U.S. holders of the Notes should not be subject to tax under Section 871(m). However, it is possible that such withholding tax could apply to the Notes under these rules if the non-U.S. holder enters into certain subsequent transactions in respect of the underlying asset. If withholding is required, we (or the applicable paying agent) would be entitled to withhold such taxes without being required to pay any additional amounts with respect to amounts so withheld. Non-U.S. holders should consult with their tax advisors regarding the application of Section 871(m) and the regulations thereunder in respect of their acquisition and ownership of 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). In addition, withholding tax under FATCA would not be imposed on withholdable payments solely because the relevant obligation is treated as giving rise to a dividend equivalent (pursuant to Section 871(m) and the regulations thereunder) where such obligation is executed on or before the date that is six months after the date on which obligations of its type are first treated as giving rise to dividend equivalents. If, however, 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 advisor 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 will 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 be 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 own 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.

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Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)

We will agree to sell to UBS Securities LLC and UBS Securities LLC will agree to purchase, all of the Notes at the issue price to the public less the underwriting discount indicated on the cover of the final pricing supplement, the document that will be filed pursuant to Rule 424(b) containing the final pricing terms of the Notes. UBS Securities LLC will agree to resell all of the Notes to UBS Financial Services Inc. at a discount from the issue price to the public equal to the underwriting discount indicated on the cover of the final pricing supplement.

Conflicts of Interest — Each of UBS Securities LLC and UBS Financial Services Inc. is an affiliate of UBS and, as such, has a “conflict of interest” in this offering within the meaning of Financial Industry Regulatory Authority, Inc. (“FINRA)” Rule 5121. In addition, UBS will receive the net proceeds (excluding the underwriting discount) from the initial public offering of the Notes, thus creating an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, the offering is being conducted in compliance with the provisions of FINRA Rule 5121. Neither UBS Securities LLC nor UBS Financial Services Inc. is permitted to sell Notes in this offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.

UBS Securities LLC and its affiliates may offer to buy or sell the Notes in the secondary market (if any) at prices greater than UBS’ internal valuation — The value of the Notes at any time will vary based on many factors that cannot be predicted. However, the price (not including UBS Securities LLC’s or any affiliate’s customary bid-ask spreads) at which UBS Securities LLC or any affiliate would offer to buy or sell the Notes immediately after the trade date in the secondary market is expected to exceed the estimated initial value of the Notes as determined by reference to our internal pricing models. The amount of the excess will decline to zero on a straight line basis over a period ending no later than 8 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 are not required to make a market for the Notes and may stop making a market at any time. For more information about secondary market offers and the estimated initial value of the Notes, see “Key Risks — Fair value considerations” and “Key Risks — Limited or no secondary market and secondary market price considerations” herein.

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You should rely only on the information incorporated by reference or provided in this preliminary pricing supplement, the TAN product 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
Note Offering	i
Additional Information about UBS and the Notes	ii
Investor Suitability	1
Indicative Terms	2
Investment Timeline	3
Key Risks	4
Hypothetical Examples of How the Notes Might Perform	8
SPDR ® S&P ® Bank ETF	10
What are the Tax Consequences of the Notes?	13
Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)	15

Product Supplement

Product Supplement Summary	PS-1
Hypothetical
Examples of How the Notes Perform	PS-14
Risk Factors	PS-20
General Terms of the Notes	PS-39
Use of Proceeds and Hedging	PS-60
Supplemental U.S. Tax Considerations	PS-61
Certain ERISA Considerations	PS-69
Supplemental Plan of Distribution (Conflict of Interest)	PS-70

Prospectus

Introduction	1
Cautionary Note Regarding Forward-Looking Statements	3
Incorporation of Information About UBS AG	5
Where You Can Find More Information	6
Presentation of Financial Information	7
Limitations on Enforcement of U.S. Laws Against UBS, Its Management and Others	7
UBS	8
Swiss Regulatory Powers	11
Use of Proceeds	12
Description of Debt Securities We May Offer	13
Description of Warrants We May Offer	33
Legal Ownership and Book-Entry Issuance	48
Considerations Relating to Indexed Securities	53
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency	56
U.S. Tax Considerations	59
Tax Considerations Under the Laws of Switzerland	70
Benefit Plan Investor Considerations	72
Plan of Distribution	74
Conflicts of Interest	75
Validity of the Securities	76
Experts	76

| ● |
| --- |
| $• UBS AG Step Down Trigger Autocallable Notes due on or about December 31, 2021 |
| Preliminary Pricing
Supplement dated December 13, 2016 (To Product Supplement
dated September 30, 2016 and Prospectus dated April 29, 2016) |
| UBS Investment Bank UBS Financial Services Inc. |

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