As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-62448;
333-62448-01; 333-62448-02;
333-62448-03; 333-62448-04;
333-63390
PROSPECTUS
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[UBS AG LOGO]
$500,000,000
UBS Preferred Funding Trust II
7.247% Noncumulative Trust Preferred Securities
representing a corresponding amount of
7.247% Noncumulative Company Preferred Securities
of
UBS Preferred Funding Company LLC II
guaranteed on a subordinated basis by
UBS AG
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- - Each trust preferred security represents a corresponding amount of the
company preferred securities and related rights under the UBS AG subordinated
guarantee. Dividends and redemption and liquidation payments paid by UBS
Preferred Funding Company on the company preferred securities will pass
through UBS Preferred Funding Trust to you as distributions and redemption
and liquidation payments on the trust preferred securities.
- - The company preferred securities will pay semi-annual distributions on June
26 and December 26 of each year, commencing on 26 December 2001, at a fixed
rate per annum equal to 7.247% through the dividend payment date in June 2011
and thereafter will pay quarterly distributions on March 26, June 26,
September 26 and December 26 of each year at a variable rate per annum equal
to 2.30% above three-month LIBOR. The company preferred securities are
perpetual securities and do not have a maturity date. UBS Preferred Funding
Company may redeem the company preferred securities on or after the dividend
payment date in June 2011.
- - The company preferred securities provide holders with rights to distributions
and redemption and liquidation payments that are similar to those of the most
senior ranking noncumulative perpetual preferred shares issued directly by
UBS AG that have financial terms equivalent to those of the company preferred
securities.
- - UBS AG will guarantee, on a subordinated basis, dividend, redemption and
liquidation payment obligations under the company preferred securities.
- - The trust preferred securities and the company preferred securities were
initially issued on 26 June 2001.
- - We have applied to list the trust preferred securities on the Luxembourg
Stock Exchange in accordance with its rules.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR RISKS RELATED TO AN INVESTMENT IN
THE TRUST PREFERRED SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
UBS AG, UBS Warburg LLC, UBS PaineWebber Inc. or any other affiliate controlled
by UBS AG may use this prospectus in a market-making transaction involving the
trust preferred securities. This prospectus is being used in a market-making
transaction.
UBS Warburg
The date of this prospectus is 21 January 2002
TABLE OF CONTENTS
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<Table>
Certain Terms........................... 2
Prospectus Summary...................... 3
Ratio of Earnings to Fixed Charges...... 11
Risk Factors............................ 12
Cautionary Note Regarding Forward-
Looking Information................... 16
Where You Can Find More Information..... 17
Incorporation of Information About
UBS................................... 17
Presentation of Financial Information... 18
Limitations on Enforcement of U.S. Laws
Against UBS AG, Its Management and
Others................................ 19
Capitalization of UBS................... 19
Summary Financial Information of UBS.... 20
UBS..................................... 21
UBS Preferred Funding Trust II.......... 23
UBS Preferred Funding Company LLC II.... 24
Use of Proceeds......................... 30
Description of Trust Preferred
Securities............................ 31
Description of Company Preferred
Securities............................ 38
Book-Entry Issuance of Trust Preferred
Securities............................ 52
Description of UBS AG Subordinated
Guarantee............................. 57
Description of Subordinated Notes of
UBS AG................................ 62
Certain U.S. Tax Considerations......... 65
Certain Tax Considerations Under the
Laws of Switzerland................... 71
Certain ERISA Considerations............ 73
Validity of the Securities.............. 75
Experts................................. 75
General Information..................... 76
</Table>
CERTAIN TERMS
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In this prospectus:
- when we refer to "UBS AG," we mean UBS AG on a parent only basis.
- when we refer to "UBS" or "UBS Group," we mean UBS AG and its
consolidated subsidiaries.
- when we refer to the "trust preferred securities," we mean the 7.247%
Noncumulative Trust Preferred Securities issued by UBS Preferred Funding
Trust.
- when we refer to the "company preferred securities," we mean the 7.247%
Noncumulative Company Preferred Securities issued by UBS Preferred
Funding Company to UBS Preferred Funding Trust in connection with the
offering of the trust preferred securities by UBS Preferred Funding
Trust.
- when we refer to "UBS Preferred Funding Trust," we mean UBS Preferred
Funding Trust II.
- when we refer to "UBS Preferred Funding Company," we mean UBS Preferred
Funding Company LLC II.
- when we refer to "USD," we mean United States dollars.
- when we refer to "CHF," we mean Swiss francs.
Prospectus Summary
THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT
TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION. YOU SHOULD
PAY SPECIAL ATTENTION TO THE "RISK FACTORS" SECTION TO DETERMINE WHETHER AN
INVESTMENT IN THE TRUST PREFERRED SECURITIES IS APPROPRIATE FOR YOU.
INTRODUCTION
The trust preferred securities will provide you with rights to distributions and
redemption and liquidation payments that are similar to those to which you would
be entitled if you had purchased the most senior ranking noncumulative perpetual
preferred shares issued directly by UBS AG that have financial terms equivalent
to those of the company preferred securities. The diagram to the right outlines
the relationship among investors in the trust preferred securities, UBS
Preferred Funding Trust, UBS Preferred Funding Company and UBS AG following the
completion of the offering.
UBS Preferred Funding Trust will pass through to you any dividends, redemption
payments or liquidation payments that it receives from UBS Preferred Funding
Company on the company preferred securities.
UBS AG will guarantee, on a subordinated basis, dividend, redemption and
liquidation payment obligations under the company preferred securities.
UBS Preferred Funding Company will receive payments under the subordinated notes
issued by the Cayman Islands branch of UBS AG and will pay dividends on the
company preferred securities that are similar to dividends that would be paid on
the most senior ranking noncumulative perpetual preferred shares issued directly
by UBS AG that have equivalent financial terms.
The capital raised in this offering will qualify as consolidated Tier 1 capital
for UBS under the relevant regulatory capital guidelines of the Swiss Federal
Banking Commission.
[Flowchart describing above flow of funds and securities]
3
Parties to the Offering
For a more complete description of UBS AG, UBS Preferred Funding Trust and UBS
Preferred Funding Company, see "UBS," "UBS Preferred Funding Trust II," "UBS
Preferred Funding Company LLC II," "Use of Proceeds" and "Capitalization of UBS
AG."
UBS AG
UBS is a global, integrated investment services firm and the leading bank in
Switzerland. UBS's business is managed through three main business groups and
its Corporate Center. The business groups are: UBS Switzerland, UBS Warburg and
UBS Asset Management. UBS's clients include international corporations, small
and medium-sized businesses in Switzerland, governments and other public bodies,
financial institutions, market participants and individuals. UBS AG's ordinary
shares are listed on the New York Stock Exchange under the symbol UBS.N, on the
Zurich Stock Exchange under the symbol UBSNZn.S and on the Tokyo Stock Exchange
under the symbol UBS.T.
The principal executive offices of UBS AG are located at Bahnhofstrasse 45,
Zurich, Switzerland and Aeschenvorstadt 1, Basel, Switzerland. Its telephone
numbers are 011-41-1-234-11-11 and 011-41-61-288-20-20.
UBS PREFERRED FUNDING TRUST II
UBS Preferred Funding Trust II is a Delaware statutory business trust. UBS
Preferred Funding Trust exists for the purpose of issuing the trust preferred
securities representing a corresponding amount of the company preferred
securities, together with related rights under the UBS AG subordinated
guarantee. UBS Preferred Funding Trust will pass the dividends it receives on
the company preferred securities through to you as distributions on the trust
preferred securities. UBS Preferred Funding Trust cannot engage in other
activities. The company preferred securities and the related rights under the
UBS AG subordinated guarantee will be the only assets of UBS Preferred Funding
Trust. UBS AG, Stamford branch, will pay all expenses and liabilities of UBS
Preferred Funding Trust.
UBS Preferred Funding Trust will be treated as a grantor trust for United States
federal income tax purposes. As a result, you will be treated as a beneficial
owner of interests in the company preferred securities and the related rights
under the UBS AG subordinated guarantee for United States federal income tax
purposes.
The principal executive offices of UBS Preferred Funding Trust are located at
c/o Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890. Its telephone number is 302-651-1118.
UBS PREFERRED FUNDING COMPANY LLC II
UBS Preferred Funding Company LLC II is a Delaware limited liability company.
UBS Preferred Funding Company exists for the purposes of acquiring and holding
the subordinated notes issued by the Cayman Islands branch of UBS AG, or other
eligible investments, and issuing the company common securities and the company
preferred securities. UBS AG purchased all of the company common securities,
which represent 100% of the voting rights in UBS Preferred Funding Company,
subject to your limited right to elect additional directors as described below.
UBS Preferred Funding Company will apply the cash generated by the subordinated
notes and other eligible investments, if any, to pay dividends to UBS Preferred
Funding Trust, as holder of the company preferred securities, and UBS AG, as
holder of the company common securities. UBS Preferred Funding Company will be
treated as a partnership for United States federal income tax purposes.
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UBS Preferred Funding Company will be managed by a board of directors having not
less than three and not more than five members. If the aggregate of unpaid
dividends equals or exceeds an amount equal to three semi-annual dividend
payments or six quarterly dividend payments, you and the other holders of trust
preferred securities will have the right to elect two additional directors.
The principal executive offices of UBS Preferred Funding Company are located at
The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
Its telephone number is 302-658-7581.
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The Offering
For a more complete description of the trust preferred securities, the company
preferred securities, the UBS AG subordinated guarantee and the subordinated
notes, see "Description of Trust Preferred Securities," "Description of Company
Preferred Securities," "Book-Entry Issuance of Trust Preferred Securities,"
"Description of UBS AG Subordinated Guarantee" and "Description of Subordinated
Notes of UBS AG."
SECURITIES OFFERED
Each trust preferred security represents a corresponding amount of the company
preferred securities and related rights under the UBS AG subordinated guarantee.
The trust preferred securities were issued in denominations of USD1,000
liquidation amount and whole-number multiples of USD1,000, and the company
preferred securities were issued in denominations of USD1,000 liquidation
preference and whole-number multiples of USD1,000. The aggregate liquidation
amount of the trust preferred securities is USD500,000,000 and the aggregate
liquidation preference of the company preferred securities is USD500,000,000.
DIVIDENDS
UBS Preferred Funding Trust will pass through the dividends it receives on the
company preferred securities as distributions on the trust preferred securities.
UBS Preferred Funding Company will pay dividends on the company preferred
securities from the date of their initial issuance on a noncumulative basis.
These dividends will be payable on the liquidation preference of the company
preferred securities:
- semi-annually in arrears on the first business day on or after June 26 and
December 26 of each year at a fixed rate per annum equal to 7.247%,
beginning 26 December 2001 and ending 26 June 2011, calculated on the basis
of a 360-day year consisting of twelve 30-day months, and
- thereafter quarterly in arrears on the first business day on or after March
26, June 26, September 26, and December 26 of each year at a variable rate
per annum equal to 2.30% above three-month LIBOR, calculated on the basis
of the actual number of days elapsed in a 360-day year.
UBS Preferred Funding Company's obligation to pay dividends is subject to
provisions that generally require UBS Preferred Funding Company to pay full or
proportional dividends on the company preferred securities when UBS AG pays
dividends on UBS AG ordinary shares or on other securities of UBS AG that rank
equally with or junior to the UBS AG subordinated guarantee of the company
preferred securities. As described below, UBS Preferred Funding Company will be
required to pay dividends on the company preferred securities in some
circumstances, will be prohibited from paying dividends on the company preferred
securities in other circumstances, and, when not required to pay or prohibited
from paying dividends, will have discretion as to whether to pay dividends on
the company preferred securities.
The following text outlines the criteria for determining whether and the extent
to which UBS Preferred Funding Company will be required to pay dividends on the
company preferred securities or will be prohibited from paying dividends on the
company preferred securities:
Is there a capital limitation on UBS AG? Unless the Swiss Federal Banking
Commission expressly permits otherwise, if on a dividend payment date UBS AG is
not in compliance with the Swiss Federal Banking Commission's minimum capital
adequacy requirements applicable to UBS AG, or would not be in compliance
because of a payment of dividends on the company preferred securities, UBS
Preferred Funding Company will not pay dividends on the company preferred
securities under any circumstances. For a discussion of UBS's capital resources
relative to applicable guidelines, see Item 5 of UBS AG's Annual Report on Form
20-F for the year ended 31 December 2000, which is incorporated by reference
into this prospectus. We refer to this restriction as a capital limitation.
6
Are dividends mandatory? Unless there is a capital limitation, the payment of
full dividends by UBS Preferred Funding Company on the company preferred
securities will be mandatory during the one-year period beginning on and
including each date on which:
- UBS AG declares or pays a dividend or makes any other payment or
distribution on any shares or other securities that, in a liquidation of
UBS AG, rank junior to the UBS AG subordinated guarantee of the company
preferred securities; or
- UBS AG or any of its subsidiaries redeems, repurchases (except for its
trading account) or otherwise acquires any shares or other securities that,
in a liquidation of UBS AG, rank equally with or junior to the UBS AG
subordinated guarantee of the company preferred securities.
The payment of proportional dividends by UBS Preferred Funding Company on the
company preferred securities will be mandatory on any date, whether or not a
regularly scheduled dividend payment date, on which UBS AG or any of its
subsidiaries pays a dividend or makes any other payment or distribution on any
shares or other securities that, in a liquidation of UBS AG, rank equally with
the UBS AG subordinated guarantee of the company preferred securities if, on the
dividend payment dates leading up to the payment or distribution on the equally
ranking securities, dividends were paid on the company preferred securities in a
lower percentage than are being paid on the equally ranking securities.
Unless there is a capital limitation, UBS Preferred Funding Company will be
required to pay dividends that are mandatory whether or not:
- UBS AG delivers a notice limiting dividends,
- UBS AG has available distributable profits, or
- interest is paid on the subordinated notes or other eligible investments.
Does UBS AG have available distributable profits? Available distributable
profits are the pro rata proportion (from among all shares and other securities
issued by UBS AG that rank equally with the UBS AG subordinated guarantee of the
company preferred securities) of profits that may be distributed in accordance
with Swiss law. Currently, distributable profits include the total of current
profit, profit brought forward and freely available reserves as reflected in the
most recent audited unconsolidated balance sheet and statement of appropriation
of retained earnings of UBS AG.
Unless required to pay mandatory dividends, UBS Preferred Funding Company will
not pay dividends on the company preferred securities in excess of UBS AG's
available distributable profits.
When are dividends discretionary? The payment of dividends by UBS Preferred
Funding Company on the company preferred securities is discretionary if the
capital limitation does not apply, dividends are not mandatory as described
above, and UBS AG has sufficient available distributable profits. In that case,
UBS Preferred Funding Company will pay dividends on the company preferred
securities at the specified rate unless, on or before the tenth business day
immediately preceding a dividend payment date, UBS AG gives notice to UBS
Preferred Funding Company that UBS Preferred Funding Company must pay no
dividends or less than full dividends, in which case dividends will be due and
payable only in the amount specified in the notice. UBS AG may deliver such a
notice in its sole discretion and for any reason, except that such a notice
shall have no effect where dividends are mandatory as described above.
When does the dividend preference shift from the company preferred securities to
the company common securities? The company preferred securities ordinarily will
rank senior to the company common securities as to the payment of dividends.
However, the dividend preference of the company preferred securities may, at UBS
AG's option, shift to the company common securities on dividend payment dates to
the extent that no mandatory dividend payment amount is then required to be paid
on the company preferred securities. If UBS AG does this, the corresponding
interest payments or other income received by UBS Preferred Funding Company on
the subordinated notes or its other eligible
7
investments may be returned as dividends to UBS AG as holder of the company
common securities before any dividends are paid on the company preferred
securities.
WITHHOLDING TAXES
Generally, UBS Preferred Funding Company will pay additional amounts on full or
proportional mandatory dividends otherwise due and payable so that the net
amount received by you will not be reduced by the withholding of certain taxes
or other government charges.
However, UBS Preferred Funding Company will not pay any additional amounts if
the taxes or governmental charges are withheld because you:
- are connected, other than as a holder of trust preferred securities, to
Switzerland or the Cayman Islands if it is the jurisdiction that requires
the withholding of the taxes or charges, or
- have not filed an appropriate declaration stating that you are not a
resident of and do not have a connection with Switzerland or the Cayman
Islands if it is the jurisdiction that requires the withholding of the
taxes or charges, or a similar claim for exemption, if we have given you
the opportunity to do so.
REDEMPTION
UBS Preferred Funding Company may redeem the company preferred securities, in
whole or in part, on any dividend payment date on or after the dividend payment
date regularly scheduled to occur in June 2011. In that case, you will receive a
redemption price equal to unpaid mandatory dividends, other unpaid definitive
dividends (for example, discretionary dividends that became due and payable
because UBS AG did not deliver a notice to pay no dividends), current accrued
dividends (whether or not declared) and the liquidation preference of your
company preferred securities.
UBS Preferred Funding Company may not redeem the company preferred securities
before the dividend payment date regularly scheduled to occur in June 2011,
unless an event occurs that results in an adverse consequence for the tax or
capital treatment of the company preferred securities, or for the investment
company status of UBS Preferred Funding Company or UBS Preferred Funding Trust.
If the circumstance giving rise to redemption arises out of a change in tax law
that results in the imposition of tax on UBS Preferred Funding Trust or UBS
Preferred Funding Company or the imposition of withholding tax on payment of
dividends on the company preferred securities, distributions on the trust
preferred securities or interest on the subordinated notes, then you will
receive a redemption price as described above. If the redemption arises from the
other special events, including adverse tax consequences not arising out of a
change in tax law, you will receive a redemption price equal to unpaid mandatory
dividends, other unpaid definitive dividends, current accrued dividends (whether
or not declared) and a make whole amount equal to the greater of the liquidation
preference and the sum of the net present value of scheduled dividends and the
liquidation preference through June 2011.
UBS Preferred Funding Trust will pass through the redemption payments it
receives on the company preferred securities to redeem a corresponding amount of
the trust preferred securities.
Any redemption of the company preferred securities must comply with applicable
regulatory requirements, including the prior approval of the Swiss Federal
Banking Commission if then required under applicable guidelines or policies of
the Swiss Federal Banking Commission. The Swiss Federal Banking Commission in
its discretion may impose conditions on its approval of any proposed redemption
of the company preferred securities.
You may not require redemption of the company preferred securities at any time.
LIQUIDATION
If UBS AG is liquidated, UBS Preferred Funding Company will be liquidated. So
long as the company preferred securities are outstanding, UBS AG will not cause
UBS Preferred Funding Company to liquidate unless UBS AG is also liquidating.
8
If UBS Preferred Funding Company is liquidated, you will be entitled to receive
an amount equal to unpaid mandatory dividends, other unpaid definitive
dividends, current accrued dividends (whether or not declared) and the
liquidation preference of your company preferred securities. However, any
liquidating distributions that you receive will be substantially the same as,
but not greater than, those to which you would be entitled if you had purchased
the most senior ranking noncumulative perpetual preferred shares issued directly
by UBS AG that have financial terms equivalent to those of the company preferred
securities.
BOOK-ENTRY ISSUANCE OF THE TRUST PREFERRED SECURITIES
UBS Preferred Funding Trust will initially issue the trust preferred securities
only in book-entry form through The Depository Trust Company.
You may withdraw the company preferred securities represented by your trust
preferred securities from UBS Preferred Funding Trust and hold the company
preferred securities directly. If you hold the company preferred securities
directly, you must hold the company preferred securities in certificated form.
If you hold the company preferred securities directly, then you may exercise
directly the associated rights under the UBS AG subordinated guarantee, and any
rights under the limited liability company agreement of UBS Preferred Funding
Company in respect of the company preferred securities, including any rights to
elect additional directors of UBS Preferred Funding Company.
THE UBS AG SUBORDINATED GUARANTEE
UBS AG will unconditionally guarantee, on a subordinated basis, the payment by
UBS Preferred Funding Company of any mandatory dividends on the company
preferred securities or dividends that have become definitive because UBS AG has
sufficient available distributable profits to pay out dividends and has not
delivered to UBS Preferred Funding Company an instruction not to pay dividends.
UBS AG will also unconditionally guarantee, on a subordinated basis, the
redemption price payable with respect to any company preferred securities called
for redemption by UBS Preferred Funding Company and the payment by UBS Preferred
Funding Company on its liquidation of an amount sufficient to provide you with
the distributions described under "Liquidation" above.
THE SUBORDINATED NOTES
The subordinated notes are undated and will have an aggregate principal amount
of USD500,000,000. The subordinated notes will be general unsecured debt
obligations of UBS AG and the Cayman Islands branch of UBS AG and, in
liquidation of UBS AG, will rank subordinate and junior to all indebtedness of
UBS AG except for indebtedness that by its terms expressly ranks equally with
the subordinated notes. Interest payable under the subordinated notes will be
calculated at the same rate and payable on the same dates as dividends payable
under the company preferred securities. UBS AG will not pay interest on the
subordinated notes if UBS AG is not solvent.
USE OF PROCEEDS
- UBS Preferred Funding Trust will use the proceeds from the offering of the
trust preferred securities to purchase the company preferred securities
from UBS Preferred Funding Company.
- UBS Preferred Funding Company will use the proceeds from the offering of
the company preferred securities to purchase the subordinated notes issued
by the Cayman Islands branch of UBS AG.
- UBS AG will use the proceeds from the issuance of the subordinated notes
for general corporate purposes, including paying certain expenses relating
to the offering.
9
Some of the sales of securities under this prospectus may be market-making
transactions--that is, transactions in which UBS AG, UBS Warburg LLC, UBS
PaineWebber Inc. or one of UBS AG's other affiliates, resells securities that
the seller, or one of its affiliates, has previously bought from another party.
Only the entity that carries out a particular market-making transaction will
receive any of the proceeds from the resale of the securities. In general, we
expect that the entity that resells any particular securities will retain the
proceeds of its market-making resales and will not pay the proceeds to UBS
Preferred Funding Trust, to UBS Preferred Funding Company or, when the resales
are not made by UBS AG, to UBS AG.
RISK FACTORS
You should carefully consider the information under "Risk Factors," together
with the other information contained in this prospectus, before purchasing any
trust preferred securities.
RATINGS
Moody's Investors Service, Inc. has rated the trust preferred securities aa3,
Standard & Poor's Rating Services has rated the trust preferred securities AA-
and Fitch Inc. has rated the trust preferred securities AA+. Each of these
ratings reflects only the view of the applicable rating agency at the time the
rating was issued, and any explanation of the significance of a rating may be
obtained only from the rating agency. A credit rating is not a recommendation to
buy, sell or hold securities and there is no assurance that a credit rating will
remain in effect for any given period of time or that a rating will not be
lowered, suspended or withdrawn entirely by the applicable rating agency, if in
that rating agency's judgment, circumstances so warrant.
Moody's has announced its intention to modify, in the near future, its
methodology for rating securities such as the trust preferred securities, and
has indicated that a new rating scale will be applied to securities like the
trust preferred securities after that modification. Moody's has indicated that
some securities of this type may be assigned a lower rating on its new scale
than they had been assigned on the existing scale, depending on the structure
and terms of the securities. Accordingly, after Moody's adopts its new rating
scale, the trust preferred securities would be assigned a new rating symbol, and
the rating may be lower than the current rating, even if there has been no
deterioration in the creditworthiness of UBS AG.
LISTING
Application has been made to list the trust preferred securities on the
Luxembourg Stock Exchange in accordance with its rules.
GOVERNING LAW
The constituent documents of UBS Preferred Funding Trust and UBS Preferred
Funding Company, the trust preferred securities and the company preferred
securities are governed by the laws of the State of Delaware, United States of
America. The subordinated notes and the UBS AG subordinated guarantee are
governed by the laws of the State of New York, United States of America.
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Ratio of Earnings to Fixed Charges
The following table sets forth UBS AG's ratio of earnings to fixed charges, for
the periods indicated. Ratios of earnings to combined fixed charges and
preferred stock dividends requirements are not presented as there were no
preferred share dividends in any of the periods indicated.
<Table>
<Caption>
FOR THE YEAR ENDED 31.3.01 31.12.00 31.12.99 31.12.98 31.12.97
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International Accounting Standards
("IAS")(1),(2).......................... 1.17 1.23 1.25 1.11 0.95
U.S. Generally Accepted Accounting
Principles ("GAAP")(1),(3).............. 1.15 1.14 0.80
</Table>
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1. The ratio is provided using both IAS and U.S. GAAP values, as the ratio is
materially different between the two accounting standards. No U.S. GAAP
information is provided for 31 December 1997 or 31 March 2001 as a U.S. GAAP
reconciliation was not required for either period.
2. The deficiency in the coverage of fixed charges by earnings before fixed
charges at 31 December 1997 was CHF 851 million.
3. The deficiency in the coverage of fixed charges by earnings before fixed
charges at 31 December 1998 was CHF 5,319 million.
11
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Risk Factors
You should carefully consider the following information, together with the other
information contained in this prospectus, before purchasing any trust preferred
securities in this offering.
YOU MAY NOT RECEIVE DIVIDENDS IF UBS AG'S FINANCIAL CONDITION WERE TO
DETERIORATE.
If UBS AG's financial condition were to deteriorate, UBS Preferred Funding
Company and the holders of trust preferred securities could suffer direct and
materially adverse consequences, including elimination or reduction of
noncumulative dividends on the company preferred securities (and consequently
elimination or reduction of the pass through of such dividends as distributions
on the trust preferred securities) and, if UBS AG were liquidated (whether
voluntarily or involuntarily), loss by the holders of trust preferred securities
of their entire investment.
YOU MAY NOT RECEIVE DIVIDENDS BECAUSE UBS PREFERRED FUNDING COMPANY WILL BE
PROHIBITED FROM PAYING DIVIDENDS ON THE COMPANY PREFERRED SECURITIES UNDER
CERTAIN CIRCUMSTANCES AND WILL HAVE DISCRETION AS TO WHETHER TO PAY DIVIDENDS ON
THE COMPANY PREFERRED SECURITIES IN OTHER CIRCUMSTANCES.
If on a dividend payment date UBS AG is not in compliance with the Swiss Federal
Banking Commission's capital adequacy requirements applicable to UBS AG, UBS
Preferred Funding Company will not pay dividends under any circumstances
(including whether or not funds subsequently become available), even if a full
or proportional dividend is otherwise mandatory. For a discussion of UBS's
capital resources relative to applicable guidelines, see Item 5 of UBS AG's
Annual Report on Form 20-F for the year ended 31 December 2000, which is
incorporated by reference into this prospectus. UBS Preferred Funding Company
will not pay dividends exceeding UBS AG's available distributable profits,
except for mandatory dividends. Except when payment of full or proportional
dividends is mandatory or dividends are prohibited by a capital limitation or
prohibited or restricted because UBS AG does not have available distributable
profits, dividends on the company preferred securities are payable at the
discretion of UBS AG and noncumulative. If discretionary dividends on the
company preferred securities for any dividend period are not paid, UBS Preferred
Funding Trust, as holder of company preferred securities (and, accordingly,
investors in the trust preferred securities), will not be entitled to receive
dividends whether or not funds are or subsequently become available.
YOU SHOULD NOT RELY UPON RECEIVING DIVIDENDS THAT ARE NOT MANDATORY BECAUSE UBS
AG MAY ELECT TO SHIFT THE DIVIDEND PREFERENCE FROM THE COMPANY PREFERRED
SECURITIES TO THE COMPANY COMMON SECURITIES EXCEPT TO THE EXTENT OF FULL OR
PROPORTIONAL MANDATORY DIVIDENDS.
UBS Preferred Funding Company's Amended and Restated Limited Liability Company
Agreement, which we sometimes refer to as its LLC Agreement, will provide that,
except to the extent of full or proportional mandatory dividends, the dividend
preference of the company preferred securities may at UBS AG's option shift to
the company common securities on any dividend payment date. As a result, the
corresponding interest payment received by UBS Preferred Funding Company on the
subordinated notes or other eligible investments may be returned as dividends to
UBS AG, as holder of company common securities, before any dividends are paid on
the company preferred securities.
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RISK FACTORS
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UBS AG IS NOT OBLIGATED TO MAKE PAYMENTS UNDER THE UBS AG SUBORDINATED GUARANTEE
UNLESS IT FIRST MAKES OTHER REQUIRED PAYMENTS.
UBS AG's obligations under the UBS AG subordinated guarantee are unsecured and
rank subordinate and junior in right of payment to all of UBS AG's other
liabilities, except for liabilities that rank equally with the UBS AG
subordinated guarantee. This means that if UBS AG fails to pay any liability
that is senior to the UBS AG subordinated guarantee, it may not make payments on
the UBS AG subordinated guarantee. As of 31 March 2001, UBS AG had CHF 597
billion of other debt obligations that are senior to UBS AG's obligations under
the UBS AG subordinated guarantee.
Also, if UBS AG is bankrupt or liquidates or dissolves, UBS AG or its trustee
will use assets of UBS AG to satisfy all liabilities ranking senior to the UBS
AG subordinated guarantee before making payments on the UBS AG subordinated
guarantee. Parity obligations will share equally in payment with the UBS AG
subordinated guarantee if UBS AG does not have sufficient funds to make full
payments on all of them. The entitlement of the holders of company preferred
securities under the UBS AG subordinated guarantee in a liquidation of UBS AG
will be substantially the same as, and no greater than, the claim such holders
would have been entitled to if they had purchased the most senior ranking
noncumulative perpetual preferred shares issued directly by UBS AG that have
financial terms equivalent to those of the company preferred securities.
UBS PREFERRED FUNDING TRUST MAY REDEEM THE TRUST PREFERRED SECURITIES IF CERTAIN
ADVERSE CONSEQUENCES OCCUR AS A RESULT OF THE APPLICATION OF SWISS OR U.S.
REGULATIONS OR TAX OR INVESTMENT COMPANY LAW AND CERTAIN CONDITIONS ARE
SATISFIED.
If certain consequences occur, which are more fully described below in this
prospectus, as a result of application of Swiss or U.S. regulations or tax or
investment company law and certain other conditions that are more fully
described below are satisfied, UBS Preferred Funding Company could redeem the
company preferred securities before the dividend payment date in June 2011. If
the company preferred securities are redeemed, UBS Preferred Funding Trust will
redeem the trust preferred securities. The redemption price is described below
under "Description of Company Preferred Securities--Redemption." You may be
unable to reinvest the proceeds of a redemption at a yield comparable to the
yield you are receiving on the trust preferred securities.
YOU COULD SUFFER ADVERSE TAX AND LIQUIDITY CONSEQUENCES IF UBS AG LIQUIDATES UBS
PREFERRED FUNDING TRUST AND DISTRIBUTES THE COMPANY PREFERRED SECURITIES TO YOU.
UBS AG has the right to liquidate UBS Preferred Funding Trust in some
circumstances. If UBS AG exercises this right, the company preferred securities
will be distributed to you in an amount corresponding to the amount of trust
preferred securities you hold. If the company trust preferred securities are
distributed to you:
- - you will receive reports of your income in respect of the company preferred
securities on Schedule K-1,
- - the company preferred securities will be in definitive certificated form and
will not be eligible for trading through DTC, Euroclear or Clearstream,
- - the trading value of the company preferred securities you receive may be
lower than the trading value of the trust preferred securities, and, as a
result, you may receive a lower return upon the sale of the company preferred
securities, and
- - you may incur an additional tax liability in excess of what you originally
contemplated. Under current U.S. federal income tax law, a distribution of
company preferred securities to you on the dissolution of UBS Preferred
Funding Trust should not be a taxable event to you. However, if UBS Preferred
Funding Trust is characterized for U.S. federal income tax purposes as an
association taxable as a corporation at the time it is dissolved or if there
is a change in law, the distribution of company preferred securities may be a
taxable event to you.
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13
RISK FACTORS
- --------------------------------------------------------------------------------
YOU MAY NOT RECEIVE DISTRIBUTIONS OR REDEMPTION PAYMENTS IF THE SWISS FEDERAL
BANKING COMMISSION RESTRICTS THE OPERATIONS OF UBS PREFERRED FUNDING COMPANY.
The Swiss Federal Banking Commission could make determinations in the future
with respect to UBS AG that could adversely affect UBS Preferred Funding
Company's ability to make distributions to the holders of company preferred
securities or to redeem the company preferred securities. For example, the Swiss
Federal Banking Commission could impose regulatory capital requirements that
cause, or otherwise request or instruct UBS AG to cause, UBS Preferred Funding
Company not to pay dividends on or redeem the company preferred securities at
times when UBS Preferred Funding Company otherwise is entitled to do so.
BECAUSE YOU HAVE LIMITED VOTING RIGHTS AND UBS AG IS INVOLVED IN VIRTUALLY EVERY
ASPECT OF UBS PREFERRED FUNDING COMPANY'S EXISTENCE, YOU COULD SUFFER ADVERSE
CONSEQUENCES FROM UBS PREFERRED FUNDING COMPANY ACTING CONTRARY TO YOUR
INTERESTS.
The company preferred securities will be non-voting, expect in the limited cases
described under "Description of Company Preferred Securities--Voting Rights."
UBS AG is involved in virtually every aspect of UBS Preferred Funding Company's
existence. UBS AG will be the sole holder of the company common securities. As
holder of all outstanding company common securities, UBS AG will have the right
to elect all directors of UBS Preferred Funding Company except for the situation
where the holders of company preferred securities have the right to elect two
directors as described under "Description of Company Preferred
Securities--Voting Rights." The initial (and UBS Preferred Funding Company
anticipates that all future) directors of UBS Preferred Funding Company will
also be directors or employees of UBS AG or its affiliates. Conflicts of
interest may arise between the discharge by such individuals of their duties as
directors of UBS Preferred Funding Company, on the one hand, and as directors or
employees of UBS AG and its affiliates, on the other hand.
Decisions with respect to enforcement of the subordinated notes issued by the
Cayman Islands Branch of UBS AG and actions to be taken by UBS Preferred Funding
Company upon a default by UBS AG under them will be made by the board of
directors of UBS Preferred Funding Company by majority vote. There can be no
assurance that, under any circumstances, enforcement action will be taken by UBS
Preferred Funding Company with respect to a default under the subordinated
notes. However, UBS AG's failure to perform its obligations under the
subordinated notes will not relieve it of its obligations under the UBS AG
subordinated guarantee. See "Description of UBS AG Subordinated Guarantee."
UBS AG and its affiliates may have interests which are different from those of
UBS Preferred Funding Company. As a result, conflicts of interest may arise with
respect to transactions, including UBS Preferred Funding Company's
administration of the subordinated notes.
UBS Preferred Funding Company and UBS AG intend that any agreements and
transactions between UBS Preferred Funding Company, on the one hand, and UBS AG
or its affiliates, on the other hand, be established in good faith and, to the
extent deemed advisable by UBS AG, reflect arm's-length terms for such types of
transactions. The LLC Agreement of UBS Preferred Funding Company requires that
certain actions of UBS Preferred Funding Company be approved by the holders of
company preferred securities; this requirement is also intended to ensure fair
dealings between UBS Preferred Funding Company and UBS AG and its affiliates.
However, there can be no assurance that such agreements or transactions will be
on terms as favorable to UBS Preferred Funding Company as those that could have
been obtained from unaffiliated third parties.
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14
RISK FACTORS
- --------------------------------------------------------------------------------
WE CANNOT GIVE YOU ANY ASSURANCE AS TO THE MARKET PRICES FOR THE TRUST PREFERRED
SECURITIES OR THE COMPANY PREFERRED SECURITIES.
We cannot give you any assurance as to the market prices for the trust preferred
securities or the company preferred securities because there is no prior market
for these securities. In addition, because the trust preferred securities are
deeply subordinated securities and payment of dividends on the company preferred
securities may be limited by the capital limitation or by lack of sufficient
available distributable profits, the market prices of the trust preferred
securities or company preferred securities, as applicable, may be more volatile
than other securities not having such provisions.
Although the underwriters of the trust preferred securities have informed UBS
Preferred Funding Company and UBS AG that they intend to make a market in the
trust preferred securities, the underwriters are not obligated to do so, and any
such market-making activity will be subject to the limits imposed by applicable
law and may be interrupted or discontinued at any time.
YOU WILL NOT BE ENTITLED TO RECOVER CERTAIN MISSED PAYMENTS BECAUSE OF THE
NONCUMULATIVE NATURE OF DIVIDENDS ON THE COMPANY PREFERRED SECURITIES AND
RELATED DISTRIBUTIONS ON THE TRUST PREFERRED SECURITIES.
If UBS Preferred Funding Company does not make a payment or only makes a partial
payment on a dividend payment date as a result of a capital limitation, a lack
of available distributable profits or a properly delivered "no dividend
instruction," you will not be entitled to recover that missed payment.
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15
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Cautionary Note Regarding Forward-Looking Information
This prospectus contains or incorporates statements that constitute
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward-looking information to encourage companies
to provide prospective information about themselves without fear of litigation
so long as the information is identified as forward-looking and is accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in the
information. The words "anticipate," "believe," "expect," "estimate," "intend,"
"plan," "should," "could," "may" and other similar expressions are used in
connection with forward-looking statements. In this prospectus, forward-looking
statements may, without limitation, relate to:
- - The implementation of strategic initiatives, such as the implementation of
the European wealth management strategy and a new business model for the UBS
Capital business unit.
- - The development of revenues overall and within specific business areas.
- - The development of operating expenses.
- - The anticipated level of capital expenditures and associated depreciation
expense.
- - The expected impact of the risks that affect UBS's business, including the
risk of loss resulting from the default of an obligor or counterparty.
- - Expected credit losses based upon UBS's credit review.
- - Other statements relating to UBS's future business development and economic
performance.
There can be no assurance that forward-looking statements will approximate
actual experience. Several important factors exist that could cause UBS's actual
results to differ materially from expected results as described in the
forward-looking statements. Such factors include:
- - General economic conditions, including prevailing interest rates and
performance of financial markets, which may affect demand for products and
services.
- - Changes in UBS's expenses associated with acquisitions and dispositions.
- - UBS's and Paine Webber Group Inc.'s ability to achieve anticipated cost
savings and efficiencies from their merger, to integrate their sales and
distribution channels in a timely manner and to retain their key employees.
- - General competitive factors, locally, nationally, regionally and globally.
- - Industry consolidation and competition.
- - Changes affecting the banking industry generally and UBS's banking operations
specifically, including asset quality.
- - Developments in technology.
- - Credit ratings and the financial position of obligors and counterparties.
- - UBS's ability to control risk in its businesses.
- - Changes in federal tax laws, which could adversely affect the tax advantages
of certain of UBS's products and subject it to increased taxation.
- - Changes in currency exchange rates, including the exchange rate for the Swiss
franc into U.S. dollars.
You should also consider other risks and uncertainties discussed in the
documents that are incorporated by reference into this prospectus.
UBS is not under any obligation to (and expressly disclaims any such obligation
to) update or alter its forward-looking statements, whether as a result of new
information, future events or otherwise.
- --------------------------------------------------------------------------------
16
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Where You Can Find More Information
UBS AG files periodic reports and other information with the Securities and
Exchange Commission. You may read and copy any document that UBS AG files with
the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of its public reference room. The SEC also
maintains an internet site at http://www.sec.gov that contains reports, proxy
and information statements, and other information about issuers like UBS AG that
file electronically with the SEC. You may also inspect UBS AG's SEC reports and
other information at the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005 and at the American Stock Exchange LLC, 86 Trinity Place,
New York, New York 10006. Copies of these documents will, so long as any trust
preferred securities are outstanding, be available for inspection during usual
business hours at the specified office of the Luxembourg Paying Agent.
We have filed a registration statement under the Securities Act of 1933 with the
SEC covering the trust preferred securities, the company preferred securities
and the UBS AG subordinated guarantee. For further information on the trust
preferred securities, the company preferred securities, the UBS AG subordinated
guarantee, UBS Preferred Funding Trust, UBS Preferred Funding Company and UBS,
you should review our registration statement, its exhibits and the documents
incorporated by reference into this prospectus. This prospectus summarizes
material provisions of the contracts and other documents that we refer you to.
Since this prospectus may not contain all the information that you may find
important, you should review the full text of these documents. We have included
copies of these documents as exhibits to our registration statement. Copies of
these documents will, so long as any trust preferred securities are outstanding,
be available for inspection during usual business hours at the specified office
of the Luxembourg Paying Agent.
Incorporation of Information About UBS
The SEC allows us to "incorporate by reference" into this prospectus the
information that UBS AG files with them, which means that:
-- The incorporated documents are considered part of this prospectus;
-- We can disclose important information to you by referring you to those
documents; and
-- Information that we file with the SEC will automatically be considered
to update and supersede the information in this prospectus.
We incorporate by reference into this prospectus:
-- UBS AG's Annual Report on Form 20-F for the year ended 31 December
2000, which UBS AG filed with the SEC on 15 March 2001;
-- the reports on Form 6-K submitted with the SEC dated 8 May 2001, 15
May 2001, 15 May 2001, 1 June 2001, 11 July 2001, 16 July 2001, 18
July 2001, 26 July 2001, 16 August 2001, 27 September 2001, 1 October
2001, 3 October 2001, 7 November 2001, 9 November 2001, 13 November
2001, 17 December 2001 and 18 December 2001.
All subsequent reports that we file on Form 20-F under the Securities Exchange
Act of 1934 prior to the termination of this offering will also be deemed to be
incorporated by reference into this prospectus. We may also incorporate any
other Form 6-K that we submit to the SEC after the date of this prospectus and
prior to the termination of this offering if the Form 6-K filing specifically
states that it is incorporated by reference into this prospectus.
Any statement contained in a document incorporated or deemed to be incorporated
by reference into this prospectus will be deemed to be modified or superseded
for purposes of this prospectus to the extent that it is modified or superseded
by a statement that is in this prospectus or in any later filed document that is
or is deemed to be incorporated by reference. Any statement that is modified or
- --------------------------------------------------------------------------------
17
superseded in this manner will no longer be a part of this prospectus, except as
modified or superseded.
You may request a copy, at no cost, of any or all of the filings that are
incorporated by reference into this prospectus, excluding exhibits (other than
those that we specifically incorporate by reference into the documents that you
request) by contacting us, orally or in writing, at the following address:
UBS AG
Investor Relations G41B
P.O. Box
CH-8098 Zurich
Phone: 011-41-1-234 41 00
Fax: 011-44-1-234 34 15
E-mail: SH-investorrelations@ubs.com
Internet: www.ubs.com/investor-relations
You may also obtain a copy of any documents that we incorporate by reference in
this prospectus, at no cost, at the office of the Luxembourg Paying Agent.
Presentation of Financial Information
UBS's financial statements, which are incorporated by reference into this
prospectus, have been prepared in accordance with International Accounting
Standards and are denominated in Swiss francs, or "CHF," the legal tender of
Switzerland.
The tables below set forth, for the periods and dates indicated, information
concerning the noon buying rate for the Swiss franc, expressed in United States
dollars or "USD," per one Swiss franc. The "noon buying rate" is the rate in New
York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York.
<Table>
<Caption>
AVERAGE RATE(1)
YEAR ENDED 31 DECEMBER HIGH LOW (USD PER 1 CHF) AT PERIOD END
- --------------------------------------------------------------------------------------------------------
1996............................................ 0.8641 0.7399 0.8090 0.7468
1997............................................ 0.7446 0.6510 0.6890 0.6845
1998............................................ 0.7731 0.6485 0.6894 0.7281
1999............................................ 0.7361 0.6244 0.6605 0.6277
2000............................................ 0.6441 0.5479 0.5912 0.6172
</Table>
(1) The average of the noon buying rates on the last business day of each full
month during the relevant period.
- --------------------------------------------------------------------------------
18
<Table>
<Caption>
AVERAGE RATE
MONTH HIGH LOW (USD PER 1 CHF) AT PERIOD END
- -------------------------------------------------------------------------------------------------
November 2000.............................. 0.5759 0.5529 0.5625 0.5759
December 2000.............................. 0.6172 0.5785 0.5933 0.6172
January 2001............................... 0.6240 0.6031 0.6133 0.6088
February 2001.............................. 0.6124 0.5910 0.5993 0.5975
March 2001................................. 0.6073 0.5760 0.5914 0.5760
April 2001................................. 0.5908 0.5755 0.5837 0.5765
May 2001................................... 0.5795 0.5565 0.5705 0.5565
June 2001.................................. 0.5666 0.5541 0.5600 0.5565
July 2001.................................. 0.5833 0.5497 0.5692 0.5785
August 2001................................ 0.6092 0.5826 0.5950 0.5989
</Table>
Limitations on Enforcement of U.S. Laws against UBS AG,
its Management and Others
UBS AG is a Swiss bank. Many of its directors and executive officers, including
all of the persons who signed the registration statement of which this
prospectus is a part, and certain experts named in this prospectus, are resident
outside the United States, and all or a substantial portion of our assets and
the assets of such persons are located outside the United States. As a result,
it may be difficult for you to serve legal process on UBS AG or its management
or have any of them appear in a U.S. court. We have been advised by Bar &
Karrer, Swiss counsel to UBS AG, that there is doubt as to enforceability in
Switzerland, in original actions or in actions for enforcement of judgment of
U.S. courts, of liabilities based solely on the federal securities laws of the
United States.
Capitalization of UBS
The following table sets forth the consolidated capitalization of UBS in
accordance with International Accounting Standards and translated into U.S.
dollars.
<Table>
<Caption>
AS OF NOVEMBER 30, 2001 CHF USD
- -------------------------------------------------------------------------------
(IN MILLIONS)
Debt
Debt issued(1)............................................ 175,200 105,778
------- -------
Total Debt................................................ 175,200 105,778
Minority Interest(2)........................................ 4,067 2,455
Shareholders' Equity........................................ 44,264 26,725
------- -------
Total capitalization........................................ 223,530 134,958
======= =======
</Table>
- ------------
(1) Includes Money Market Paper and Medium Term Notes as per Balance Sheet
position.
(2) Includes Trust-preferred securities.
(3) There has been no material change in the capitalization table since November
30, 2001.
Swiss franc (CHF) amounts have been translated into U.S. dollars (USD) at the
rate of CHF 1 = USD 0.603755.
- --------------------------------------------------------------------------------
19
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Summary Financial Information
The following summary of audited consolidated financial information of UBS AG as
of and for the years ended 31 December 2000 and 1999 was derived from, and is
qualified in its entirety by reference to, the financial statements and other
information and data contained in UBS AG's Annual Report on Form 20-F for the
year ended 31 December 2000 and should be read in conjunction with those
financial statements and other information and data. The summary of unaudited
consolidated financial information for the six-month period ended 30 June 2001
was derived from and is qualified in its entirety by reference to the financial
statements and other information and data contained in UBS AG's Form 6-K, which
was filed with the SEC on 16 August 2001. See "Where You Can Find More
Information--Incorporation of Information about UBS" in this prospectus.
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
30 JUNE 31 DECEMBER
2001 2000 1999
- ------------------------------------------------------------------------------------------------
(UNAUDITED) (AUDITED)
(DOLLAR AMOUNTS IN CHF MILLIONS)
INCOME STATEMENT DATA
Operating income........................................ 9,881 36,402 28,425
Operating expenses...................................... 8,024 26,203 20,532
Operating profit before tax............................. 1,857 10,199 7,893
Net profit.............................................. 1,385 7,792 6,153
BALANCE SHEET DATA
Total assets............................................ 1,232,492 1,087,552 896,556
Shareholders' equity.................................... 44,193 44,833 30,608
</Table>
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20
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UBS
UBS is one of the world's leading financial firms. It combines financial
strength with a reputation for innovation and a global culture that embraces
change.
Based on assets under management, UBS is the world's largest provider of private
banking services and one of the largest asset managers globally. In the
investment banking and securities businesses, UBS is among the select bracket of
major global houses. In Switzerland, UBS is the clear market leader in retail
and corporate banking.
UBS is managed through three Business Groups and its Corporate Center. UBS's
Business Groups are:
- - UBS Switzerland
- - UBS Asset Management
- - UBS Warburg
Each of the Business Groups benefits from its place in the UBS Group, with
products from wholesale businesses distributed through the retail businesses,
and the combined resources and expertise of all UBS's businesses available to
its clients.
The Business Groups and UBS's Corporate Center are summarized below. Further
information about UBS, including more detailed descriptions of the Business
Groups and Corporate Center, is contained in UBS's Annual Report on Form 20-F
for the year ended 31 December 2000 (the "Form 20-F"), which is incorporated by
reference into this prospectus.
UBS SWITZERLAND has the world's largest private banking business, based on
assets under management, with CHF 681 billion in client assets at 31 December
2000. UBS Private Banking provides a comprehensive range of products and
services tailored specifically for wealthy clients from Switzerland and around
the world. UBS Switzerland also provides a complete set of banking and
securities services from some four million individual and corporate clients in
Switzerland.
UBS ASSET MANAGEMENT is a leading institutional asset manager and mutual fund
provider based on assets under management, with client assets of CHF 496 billion
at 31 December 2000. It offers a broad range of asset management services and
products to institutional and retail clients across the world. Its key
institutional brands include Brinson Partners and Brinson Advisors in the U.S.
and Phillips & Drew in the U.K.
UBS WARBURG operates globally as a client-driven securities, investment banking
and wealth management firm. For both its own corporate and institutional clients
and the other parts of the UBS Group, UBS Warburg provides product innovation,
high quality research and advice and broad access to the world's capital
markets. UBS PaineWebber Inc., the fourth largest private client firm in the
U.S., joined UBS Warburg in November 2000. Its 8,900 financial advisors provide
a full range of wealth management services to over 2 million affluent households
in the United States, with assets of CHF 794 billion at 31 December 2000.
CORPORATE CENTER coordinates the activities of the Business Groups, with the
goal of making the whole worth more than the sum of the parts. Its functions
include finance and accounting; risk management and control; communications and
marketing; compliance; legal; and treasury management.
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21
UBS
- --------------------------------------------------------------------------------
UBS was formed on 29 June 1998, by the merger of two of Switzerland's leading
financial services groups, Union Bank of Switzerland (founded 1860) and Swiss
Bank Corporation (founded 1854). UBS is incorporated and domiciled in
Switzerland and is a publicly-owned company, with its shares listed on the
Zurich, New York and Tokyo stock exchanges.
UBS employs approximately 71,000 people, 42% in Switzerland and 40% in the U.S.
With headquarters in Zurich, Switzerland and Basel, Switzerland, UBS has a
presence in major financial centers worldwide and a total of approximately 1500
offices in over 50 countries. The addresses and telephone numbers of its
headquarters are Bahnhofstrasse 45, Zurich, Switzerland, telephone 011 41-1-234
11 11; and Aeschenvorstadt 1, Basel, Switzerland, telephone 011 41-61-288 20 20.
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22
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UBS Preferred Funding Trust II
UBS Preferred Funding Trust II is a statutory business trust that UBS AG created
under the Delaware Business Trust Act, as amended, on 22 May 2001 pursuant to an
initial trust agreement entered into by UBS AG and by the filing of a
certificate of trust with the Secretary of State of the State of Delaware. The
initial trust agreement was amended and restated as the Amended and Restated
Trust Agreement between UBS Preferred Funding Company, as grantor, and
Wilmington Trust Company, as trustee. We have qualified the Amended and Restated
Trust Agreement as an indenture under the Trust Indenture Act of 1939, as
amended. UBS Preferred Funding Trust II will be treated as a grantor trust for
U.S. federal income tax purposes, meaning that investors in trust preferred
securities will generally be treated as if they owned their proportionate shares
of the company preferred securities owned by UBS Preferred Funding Trust II.
UBS AG formed UBS Preferred Funding Trust II for the purpose of:
- issuing the trust preferred securities,
- investing the proceeds of the trust preferred securities in the company
preferred securities, which benefit from the related UBS AG subordinated
guarantee, and
- engaging in any related or incidental activities.
The only assets of UBS Preferred Funding Trust II will be the company preferred
securities and the related rights of UBS Preferred Funding Trust II under the
UBS AG subordinated guarantee. The Amended and Restated Trust Agreement does not
permit UBS Preferred Funding Trust II to acquire any other assets, issue any
other equity securities or any debt securities, or engage in any other
activities. All expenses and liabilities of UBS Preferred Funding Trust II will
be paid by the Stamford branch of UBS AG, except that if the trustee of UBS
Preferred Funding Trust II incurs fees, charges or expenses at the request of a
holder of trust preferred securities or other person for which UBS Preferred
Funding Trust II is not otherwise liable under the Amended and Restated Trust
Agreement, that holder or other person will be liable for such fees, charges and
expenses.
The total pro forma capitalization of UBS Preferred Funding Trust II, as
adjusted to give effect to the offering of the trust preferred securities (based
on proceeds of USD500,000,000 before deduction of expenses) and the use of the
proceeds from the offering, is USD500,000,000. The authorized and issued capital
of UBS Preferred Funding Trust II consists of trust preferred securities having
an aggregate liquidation amount of USD500,000,000, issuable in denominations of
USD1,000 liquidation amount per trust preferred security and integral multiples
of USD1,000.
The Amended and Restated Trust Agreement provides that, to the fullest extent
permitted by law, without the need for any other action of any person, including
the trustee or any other holder of trust preferred securities, each holder of
trust preferred securities will be entitled to enforce, in the name of UBS
Preferred Funding Trust II, the rights of UBS Preferred Funding Trust II under
the company preferred securities and the UBS AG subordinated guarantee
represented by the trust preferred securities held by such holder. A holder of
trust preferred securities may at any time upon written notice withdraw and hold
directly the underlying company preferred securities represented by such trust
preferred securities, in which case such holder will be entitled to directly
enforce its rights under the UBS AG subordinated guarantee.
The principal executive offices of UBS Preferred Funding Trust II are located at
c/o Wilmington Trust Company, 1100 North Market Street, Wilmington, DE 19890.
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23
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UBS Preferred Funding Company LLC II
INTRODUCTION
UBS Preferred Funding Company LLC II is a limited liability company that UBS AG
formed under the Delaware Limited Liability Company Act, as amended, on 22 May
2001 pursuant to an initial limited liability company agreement entered into by
UBS AG and by filing a certificate of formation with the Secretary of State of
the State of Delaware. The initial limited liability agreement was amended and
restated as the Amended and Restated Limited Liability Company Agreement, which
we sometimes refer to as the LLC Agreement. UBS Preferred Funding Company LLC II
will be treated as a partnership for U.S. federal income tax purposes.
UBS AG formed UBS Preferred Funding Company for the purpose of:
- issuing the company common securities to UBS AG,
- issuing the company preferred securities, initially to UBS Preferred
Funding Trust,
- investing the proceeds of the company common securities and the company
preferred securities in (1) initially, subordinated notes issued by the
Cayman Islands branch of UBS AG with an aggregate principal amount of
USD500,000,000 and (2) other securities issued by UBS AG acting through
a branch, agency or other office located outside of the United States or
by a non-U.S. branch of a non-U.S. subsidiary of UBS AG (together,
"eligible investments"), and
- engaging in any related or incidental activities.
The total pro forma capitalization of UBS Preferred Funding Company LLC II, as
adjusted to give effect to the offering of the company preferred securities
(based on proceeds of USD500,000,000 before deduction of expenses), is
USD505,002,000. The authorized and issued capital of UBS Preferred Funding
Company LLC II consists of company common securities representing
securityholders' equity of USD5,002,000 and company preferred securities with an
aggregate liquidation preference of USD500,000,000, issuable in denominations of
USD1,000 liquidation preference per company preferred security and integral
multiples of USD1,000. UBS Preferred Funding Company LLC II will have no
outstanding debt after giving effect to the initial offering and the use of the
proceeds from the initial offering.
UBS Preferred Funding Company LLC II will apply the income generated by the
subordinated notes and other eligible investments to pay dividends to UBS
Preferred Funding Trust, as holder of company preferred securities, and UBS AG,
as holder of the company common securities. UBS Preferred Funding Trust will
then pass the dividends it receives on the company preferred securities through
to the holders of trust preferred securities as distributions on the trust
preferred securities.
UBS AG purchased all of the company common securities for USD5,002,000. UBS
intends to treat the company preferred securities as Tier 1 capital for purposes
of the relevant regulatory capital guidelines of the Swiss Federal Banking
Commission. UBS AG has agreed with UBS Preferred Funding Company LLC II in the
LLC Agreement that, as long as any company preferred securities are outstanding,
UBS AG will continue to own, directly or indirectly, 100% of the outstanding
company common securities. UBS Preferred Funding Company LLC II has also
covenanted to maintain "UBS" as part of its name for as long as any trust
preferred securities of UBS Preferred Funding Trust remain outstanding unless,
because of a merger or other business combination involving UBS AG or a change
by UBS AG of its own name, inclusion of "UBS" as part of UBS Preferred Funding
Company LLC II's name is no longer appropriate.
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UBS PREFERRED FUNDING COMPANY LLC II
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UBS AG has also agreed in the LLC Agreement that it will from time to time
either (i) contribute (or cause others, including the Stamford branch of UBS AG,
to contribute) to UBS Preferred Funding Company LLC II such additional funds as
are necessary in order to enable UBS Preferred Funding Company to pay its
operating expenses on or before any date when any such operating expenses are
due or (ii) directly pay UBS Preferred Funding Company's LLC II's operating
expenses then due and payable and not otherwise paid. "Operating expenses"
generally means all expenses and obligations of UBS Preferred Funding Company
LLC II, but does not include any payments on the company preferred securities or
company common securities.
The principal executive offices of UBS Preferred Funding Company LLC II are
located at The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801.
ACTIVITIES OF UBS PREFERRED FUNDING COMPANY
GENERAL
UBS Preferred Funding Company's principal business objective is to acquire and
hold eligible investments, which include:
- initially, subordinated notes issued by the Cayman Islands branch of UBS
AG with an aggregate principal amount of USD500,000,000, and
- other securities issued by UBS AG acting through a branch, agency or
other office located outside of the United States or by a non-U.S.
branch of a non-U.S. subsidiary of UBS AG.
UBS Preferred Funding Company will apply the net income generated by the
subordinated notes and other eligible investments to pay dividends to UBS
Preferred Funding Trust, as holder of company preferred securities, and UBS AG,
as holder of the company common securities. UBS Preferred Funding Trust will
then pass through the dividends it receives on the company preferred securities
to the holders of trust preferred securities as distributions on the trust
preferred securities. Although UBS Preferred Funding Company may (with the
consent of the holders of two-thirds (based on the aggregate liquidation
preference) of the company preferred securities and company parity preferred
securities, voting together as a single class) issue additional preferred
securities as described under "Description of Company Preferred Securities," UBS
Preferred Funding Company has no present intention to do so.
DIVIDENDS
UBS Preferred Funding Company currently expects to pay an aggregate amount of
dividends with respect to its outstanding company common securities and company
preferred securities equal to approximately 100% of the interest and other
income it receives on the subordinated notes and any other eligible investments.
The LLC Agreement of UBS Preferred Funding Company:
- precludes UBS Preferred Funding Company from incurring any indebtedness
for borrowed money (and UBS Preferred Funding Company does not
anticipate having any material liabilities), and
- requires approval of holders of at least 66 2/3% of the outstanding
company preferred securities and any outstanding company parity
preferred securities (based on the aggregate liquidation preference),
voting together as a single class, before dividends on the company
preferred securities can be paid out of any source other than interest
income received on the subordinated notes or interest or dividend income
received on other eligible investments.
Under the Delaware Limited Liability Company Act, UBS Preferred Funding Company
may not pay dividends or other distributions on company common securities or
company preferred securities--even if such payments are "mandatory"--if, after
making the distributions, UBS Preferred Funding
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25
UBS PREFERRED FUNDING COMPANY LLC II
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Company's liabilities would exceed the fair value of its assets. However, UBS
Preferred Funding Company does not expect to have any material liabilities, so
UBS Preferred Funding Company does not anticipate that this restriction will
affect its ability to pay dividends on the company preferred securities.
Dividends on the company preferred securities will in any event be required to
be paid up to the mandatory dividend payment amount on any mandatory dividend
payment date, unless there is a capital limitation on such date. See
"Description of Company Preferred Securities--Dividends--Mandatory Dividends."
INVESTMENT POLICIES
UBS Preferred Funding Company's initial investment policies were established
pursuant to the LLC Agreement. Under its investment policies, UBS Preferred
Funding Company may not hold or invest in any securities other than eligible
investments as described above under "--Introduction."
The investment policies require that:
- the terms of any eligible investments other than the subordinated notes
purchased by UBS Preferred Funding Company be established in good faith
and, to the extent deemed advisable by UBS AG, reflect arm's-length
terms at the time of purchase, and the purchase by UBS Preferred Funding
Company of such eligible investments be approved by the affirmative vote
of a majority of its entire board of directors, and
- UBS Preferred Funding Company maintain its assets in a manner that will
not require UBS Preferred Funding Company to be registered as an
investment company under the Investment Company Act of 1940.
The investment policies of UBS Preferred Funding Company may be amended only by
the affirmative vote of holders of at least 66 2/3% of the outstanding company
preferred securities and any outstanding company parity preferred securities
(based on the aggregate liquidation preference), voting together as a single
class. Although UBS AG and UBS Preferred Funding Company do not anticipate that
UBS Preferred Funding Company will sell the subordinated notes (and no market
for them is expected to develop), were UBS Preferred Funding Company to do so,
UBS Preferred Funding Company would be required to invest the proceeds of the
sale in accordance with UBS Preferred Funding Company's investment policies as
they exist at the time of such sale.
ADMINISTRATION AGREEMENT
Before issuing the company preferred securities, UBS Preferred Funding Company
entered into an administration agreement with the Stamford branch of UBS AG,
under which the Stamford branch provides (or causes others to provide)
accounting, legal, tax and other support services to UBS Preferred Funding
Company, assists UBS Preferred Funding Company in complying with pertinent U.S.
and Swiss local, state and federal laws, and provides administrative, record
keeping and secretarial services to UBS Preferred Funding Company. Under the
administration agreement, UBS Preferred Funding Company has agreed to reimburse
the provider of these services for the value of services provided by such
provider to UBS Preferred Funding Company on an arm's-length basis.
UBS Preferred Funding Company maintains company records that are separate from
those of UBS AG or any of its affiliates. None of the officers, employees or
directors of UBS Preferred Funding Company has any direct or indirect pecuniary
interest in any security to be acquired or disposed of by UBS Preferred Funding
Company or in any transaction in which UBS Preferred Funding Company has an
interest.
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UBS PREFERRED FUNDING COMPANY LLC II
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MANAGEMENT OF UBS PREFERRED FUNDING COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The LLC Agreement of UBS Preferred Funding Company provides that its board of
directors will at all times include not less than three and not more than five
members. The board of directors includes three members. The directors are
designated as "managers" of UBS Preferred Funding Company within the meaning of
the Delaware Limited Liability Company Act. The directors will serve until their
successors are duly elected and qualified. UBS Preferred Funding Company has no
present intention to alter the number of directors comprising the board of
directors.
UBS Preferred Funding Company has three officers. The directors and executive
officers of UBS Preferred Funding Company initially are:
<Table>
<Caption>
NAME POSITION AND OFFICES HELD
- -------------------------------------------------------------
Robert Mills Managing Director and President
Per Dyrvik Director and Treasurer
Robert Dinerstein Director and Secretary
</Table>
Each of the initial directors and officers of UBS Preferred Funding Company is
an individual who is an officer or employee of UBS AG or its affiliates. UBS
Preferred Funding Company currently anticipates that all officers of UBS
Preferred Funding Company will also be officers or employees of UBS AG or its
affiliates.
ADDITIONAL DIRECTORS
If at any time through 26 June 2011 the aggregate of unpaid dividends on the
company preferred securities or any company parity preferred securities equals
or exceeds an amount equal to three semi-annual dividend payments, or at any
time after 26 June 2011 the aggregate of unpaid dividends equals or exceeds an
amount equal to six quarterly dividend payments, the holders of company
preferred securities and any company parity preferred securities, voting
together as a single class, will have the exclusive right to elect two
additional directors. Holders of a majority (based on the aggregate liquidation
preference) of company preferred securities and company parity preferred
securities may exercise this right by written consent or at a meeting of such
holders called for such purpose. The LLC Agreement of UBS Preferred Funding
Company provides that this meeting may be called at the request of any holder of
company preferred securities or company parity preferred securities. This right
will continue either until all unpaid dividends have been paid in full or until
full dividends have been paid on the company preferred securities for two
consecutive dividend periods before 26 June 2011, or for four consecutive
dividend periods after 26 June 2011. While this right continues, any vacancy in
the office of the additional directors may be filled only by the holders of
company preferred securities and company parity preferred securities voting as
described above.
INDEMNIFICATION AND INSURANCE FOR DIRECTORS
The LLC Agreement of UBS Preferred Funding Company provides that:
- its directors have no personal liability to UBS Preferred Funding
Company or the holders of company common securities or company preferred
securities for monetary damages (i) for voting not to take enforcement
action with respect to the subordinated notes or any other eligible
investments owned by UBS Preferred Funding Company, or (ii) at any time
for breach of any such director's fiduciary duty, if any, except for
such director's gross negligence or willful misconduct,
- UBS Preferred Funding Company will indemnify any director or officer for
any liability and related expenses, including reasonable counsel's fees,
arising out of such director's or officer's status as a director or
officer of UBS Preferred Funding Company, except for liability
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27
UBS PREFERRED FUNDING COMPANY LLC II
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determined by a court of competent jurisdiction to have arisen out of
such director's or officer's gross negligence or willful misconduct,
- the right to indemnification is a contract right and the LLC Agreement
sets forth certain procedural and evidentiary standards applicable to
the enforcement of a claim under the LLC Agreement of UBS Preferred
Funding Company, and
- UBS Preferred Funding Company may purchase and maintain insurance to
protect any director or officer against any liability asserted against,
or incurred by, him or her, arising out of his or her status as a
director or officer.
COMMON SECURITIES OF UBS PREFERRED FUNDING COMPANY
Holders of company common securities will receive dividends out of interest
payments received by UBS Preferred Funding Company on the subordinated notes and
other eligible investments, if any, not required to be applied to fund dividends
with respect to the company preferred securities or expenses of UBS Preferred
Funding Company. However, as long as the company preferred securities or the
company parity preferred securities are outstanding, no dividends or other
distributions (including redemptions and purchases) may be made with respect to
company common securities unless full dividends on all series of the company
preferred securities have been paid (except as otherwise described under
"Description of Company Preferred Securities--Ranking and Liquidation
Preference"). See "Description of Company Preferred Securities--Dividends."
Subject to the rights, if any, of the holders of company preferred securities
(to the limited extent described herein) and any other series of the company
parity preferred securities, all voting rights are vested in the company common
securities. Holders of company common securities are entitled to vote in
proportion to the stated amounts represented by their company common securities.
All issued and outstanding shares of company common securities are held by UBS
AG.
If UBS Preferred Funding Company dissolves, liquidates or winds up (whether
voluntary or involuntary) after all debts and liabilities of UBS Preferred
Funding Company have been satisfied and there have been paid or set aside for
the holders of company preferred securities the full preferential amounts to
which such holders are entitled, the holders of the company common securities
will be entitled to share equally and ratably in any assets remaining.
PREFERRED SECURITIES OF UBS PREFERRED FUNDING COMPANY
Subject to limitations prescribed by Delaware law and UBS Preferred Funding
Company's LLC Agreement, the board of directors of UBS Preferred Funding Company
or, if then constituted, a duly authorized committee of the board of directors
is authorized to issue (with the consent of the holders of two-thirds (based on
the aggregate liquidation preference) of the company preferred securities and
company parity preferred securities, voting together as a single class), from
the authorized but unissued capital shares of UBS Preferred Funding Company,
additional series of preferred securities of the UBS Preferred Funding Company
ranking on a parity with the company preferred securities in such series as the
board of directors (or committee) may determine and to establish, from time to
time, the number or amount by aggregate liquidation preference of shares (if
applicable) of such series to be included in any such series and to fix the
designation and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the securities of any such series, and such other
subjects or matters as may be fixed by resolution of the board of directors.
However, UBS Preferred Funding Company's LLC Agreement precludes:
- the issuance of any other classes or series of equity securities that
are senior to the company preferred securities, either as to dividends
or as to rights upon dissolution, liquidation or
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28
UBS PREFERRED FUNDING COMPANY LLC II
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winding up of UBS Preferred Funding Company, without the approval of
each holder of company preferred securities, and
- the issuance of any company parity preferred securities without the
approval of 66 2/3% of the holders of company preferred securities and
unless the UBS AG subordinated guarantee is amended so that such
additional company parity preferred securities benefit from the UBS AG
subordinated guarantee in substantially the same manner as the company
preferred securities without any adverse effect on the holders of
company preferred securities. See "Description of Company Preferred
Securities--Voting Rights."
No additional payments will be required pursuant to the Delaware Limited
Liability Company Act for the company parity preferred securities to represent
limited liability company interests in UBS Preferred Funding Company upon
issuance against full payment of the purchase price for the company parity
preferred securities. The specific terms of a particular series of the company
parity preferred securities will be described in the certificate of designation
(as defined in UBS Preferred Funding Company's LLC Agreement) to be incorporated
into UBS Preferred Funding Company's LLC Agreement relating to that series,
except in the case of shares of the company preferred securities where the terms
thereof are set forth in UBS Preferred Funding Company's LLC Agreement.
LEGAL PROCEEDINGS
UBS Preferred Funding Company is not the subject of any litigation. None of UBS
Preferred Funding Company, UBS AG or any of its affiliates is currently involved
in nor, to UBS Preferred Funding Company's knowledge, currently threatened with
any litigation with respect to the subordinated notes or any aspect of UBS
Preferred Funding Company's operations.
- --------------------------------------------------------------------------------
29
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Use of Proceeds
UBS Preferred Funding Trust used the proceeds of USD500,000,000 from the sale of
the trust preferred securities to purchase the company preferred securities.
UBS Preferred Funding Company used the proceeds of USD505,002,000 from the sale
of the company preferred securities to UBS Preferred Funding Trust and the
company common securities to UBS AG to acquire the subordinated notes issued by
the Cayman Islands branch of UBS AG and to pay certain expenses related to the
offering. See "UBS Preferred Funding Company LLC II--Activities of UBS Preferred
Funding Company."
UBS AG used the proceeds from the sale of the subordinated notes issued by its
Cayman Island branch for general corporate purposes.
All of the sales of securities under this prospectus will be market-making
transactions--that is, transactions in which UBS AG, UBS Warburg LLC, UBS
PaineWebber Inc., or one of UBS AG's other affiliates, resells securities that
the seller, or one of its affiliates, has previously bought from another party.
Only the entity that carries out a particular market-making transaction will
receive any of the proceeds from the resale of the securities. In general, we
expect that the entity that resells any particular securities will retain the
proceeds of its market-making resales and will not pay the proceeds to UBS
Preferred Funding Trust, to UBS Preferred Funding Company or, when the resales
are not made by UBS AG, to UBS AG.
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30
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Description of Trust Preferred Securities
UBS Preferred Funding Trust issued the trust preferred securities under the
terms of its Amended and Restated Trust Agreement. We have qualified the Amended
and Restated Trust Agreement as an indenture under the Trust Indenture Act. The
terms of the trust preferred securities include both those stated in the Amended
and Restated Trust Agreement and the Delaware Business Trust Act and those made
part of the Amended and Restated Trust Agreement by the Trust Indenture Act. The
following summary of the material terms and provisions of the trust preferred
securities is not complete and is subject to, and qualified in its entirety by
reference to, the Amended and Restated Trust Agreement, the Delaware Business
Trust Act and the Trust Indenture Act. We have filed a copy of the Amended and
Restated Trust Agreement as an exhibit to the registration statement of which
this prospectus is a part.
GENERAL
The trust preferred securities are certificates of beneficial interest in the
assets of UBS Preferred Funding Trust, the terms of which are set forth in the
Amended and Restated Trust Agreement.
The trust preferred securities were issued in denominations of USD1,000
liquidation amount and whole-number multiples of USD1,000. The aggregate
liquidation amount of the trust preferred securities offered by this prospectus
is USD500,000,000. Each trust preferred security represents a corresponding
amount of the company preferred securities, together with related rights under
the UBS AG subordinated guarantee.
The trustee of UBS Preferred Funding Trust will hold the company preferred
securities and the related rights under the UBS AG subordinated guarantee
deposited in UBS Preferred Funding Trust for the benefit of the holders of trust
preferred securities. The Amended and Restated Trust Agreement provides that, to
the fullest extent permitted by law, without the need for any other action of
any person, including the trustee or any other holder of trust preferred
securities, each holder of trust preferred securities will be entitled to
enforce, in the name of UBS Preferred Funding Trust, the rights of UBS Preferred
Funding Trust under the company preferred securities and the related rights
under the UBS AG subordinated guarantee represented by the trust preferred
securities held by such holder. The trust preferred securities may be exchanged
for the underlying company preferred securities as described under "--Withdrawal
of the Company Preferred Securities."
The funds of UBS Preferred Funding Trust available for distribution to the
holders of trust preferred securities will be limited to payments received from
UBS Preferred Funding Company as dividends, redemption payments and liquidation
payments on the company preferred securities and to payments received from UBS
AG pursuant to the UBS AG subordinated guarantee of those payments. See
"Description of Company Preferred Securities." UBS Preferred Funding Trust will
distribute such payments, upon their receipt, to the holders of trust preferred
securities on a pro rata basis. If UBS Preferred Funding Company does not pay
any semi-annual or quarterly dividend on the company preferred securities when
it is required to and UBS AG does not perform its obligations under the UBS AG
subordinated guarantee, UBS Preferred Funding Trust will not have sufficient
funds to make the related semi-annual or quarterly distribution payment on the
trust preferred securities.
We have applied to list the trust preferred securities on the Luxembourg Stock
Exchange in accordance with its rules.
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31
DESCRIPTION OF TRUST PREFERRED SECURITIES
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Each trust preferred security represents a corresponding amount of the company
preferred securities, together with the related rights under the UBS AG
subordinated guarantee. UBS Preferred Funding Trust will make semi-annual or
quarterly distributions or other mandatory distributions on the trust preferred
securities concurrently with, and in the same amount as, the semi-annual or
quarterly dividends or special dividends on the company preferred securities.
See "Description of Company Preferred Securities--Dividends." Accordingly, to
the extent that dividends are paid on the company preferred securities,
distributions on the trust preferred securities will accrue from the date of
original issue and be paid on the liquidation amount of the trust preferred
securities as follows:
- semi-annually in arrears on the dividend payment dates regularly
scheduled to occur in June and December of each year, commencing 26
December 2001, for each dividend period through the dividend period
ending on the dividend payment date in June 2011, at a fixed rate per
annum equal to 7.247% (calculated on the basis of a 360-day year
consisting of twelve 30-day months), and
- thereafter, quarterly in arrears on the dividend payment dates regularly
scheduled to occur in March, June, September and December of each year,
at a floating rate per annum equal to 2.30% above three-month LIBOR
(calculated on the basis of the actual number of days elapsed in a
360-day year).
For details on the calculation and payment of dividends see "Description of
Company Preferred Securities--Dividends." Whenever, and to the extent, UBS
Preferred Funding Trust receives any cash payments representing a semi-annual
dividend, quarterly dividend, special dividend or redemption payment on the
company preferred securities, UBS Preferred Funding Trust will distribute such
amounts to the holders of trust preferred securities in proportion to their
liquidation amounts. Each semi-annual, quarterly or special distribution on the
trust preferred securities will be payable to holders of record as they appear
on the securities register of UBS Preferred Funding Trust on the corresponding
record date. The record dates for the trust preferred securities will be the
fifteenth day (whether or not a business day) prior to the relevant semi-annual,
quarterly or other distribution date.
If any distribution would be payable on a day that is not a business day, that
distribution will instead be made on the next business day. No interest or other
payment will be due as a result of any such delay.
If dividends are not payable on company preferred securities on any dividend
payment date for the reasons described in "Description of Company Preferred
Securities--Dividends," then the holders of trust preferred securities will not
be entitled to receive a distribution on that date.
For so long as the trust preferred securities are listed on the Luxembourg Stock
Exchange, notice of a distribution of the trust preferred securities, the
distribution period, the interest rate and the amount of the distribution will
be provided to the Luxembourg Stock Exchange prior to or on the relevant
dividend payment date. The information will also be available during usual
business hours at the specified office of the paying agent in Luxembourg and
will also be published in a newspaper of general circulation in Luxembourg
(which is expected to the Luxembourger Wort).
REDEMPTION
The trust preferred securities can be redeemed only upon redemption of the
company preferred securities.
If UBS Preferred Funding Company redeems the company preferred securities in
accordance with its LLC Agreement as described under "Description of Company
Preferred Securities--Redemption," then UBS Preferred Funding Company must give
the trustee at least 30 days' prior notice before doing so. The
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32
DESCRIPTION OF TRUST PREFERRED SECURITIES
- --------------------------------------------------------------------------------
trustee will mail the notice of redemption not less than 25 days prior to the
date fixed for redemption of the company preferred securities to the holders of
trust preferred securities as provided under "--Notices."
On the date of redemption of the company preferred securities, so long as UBS
Preferred Funding Company or UBS AG has deposited with Wilmington Trust Company,
the paying agent, on behalf of UBS Preferred Funding Trust the aggregate amount
payable upon redemption of all the company preferred securities held by UBS
Preferred Funding Trust to be redeemed, the paying agent on behalf of UBS
Preferred Funding Trust will irrevocably deposit with The Depository Trust
Company ("DTC") funds sufficient to pay the redemption price and give DTC
irrevocable instructions to pay the redemption price to the holders of trust
preferred securities to be redeemed. See "Book-Entry Issuance of Trust Preferred
Securities." Once the paying agent has received this deposit, all rights of the
holders of trust preferred securities called for redemption will end, except
their right to receive the redemption price, without interest. If any date fixed
for redemption of the trust preferred securities is not a business day, then the
redemption price will instead be paid on the next business day, except that if
that business day falls in the next calendar year, the redemption price will be
paid on the preceding business day. No interest or other payment will be due as
a result of any such adjustment.
If only some of the outstanding trust preferred securities are to be redeemed,
the trust preferred securities to be redeemed will be selected in accordance
with DTC's procedures. See "Book-Entry Issuance of Trust Preferred
Securities--DTC's Procedures for Notices, Voting and Payments." If the trust
preferred securities do not remain registered in the name of DTC or its nominee
and only some of the outstanding trust preferred securities are to be redeemed,
the trust preferred securities will be redeemed proportionately or selected for
redemption pursuant to the rules of any securities exchange on which the trust
preferred securities are listed at that time. UBS Preferred Funding Company will
promptly notify the registrar and transfer agent for the trust preferred
securities, in writing, of the trust preferred securities selected for
redemption. In addition, for so long as the rules of the Luxembourg Stock
Exchange so require, notice will be given to the Luxembourg Stock Exchange of
trust preferred securities selected for redemption and published in a daily
newspaper of general circulation in Luxembourg (which is expected to be the
Luxemburger Wort).
WITHDRAWAL OF THE COMPANY PREFERRED SECURITIES
Any beneficial owner of the trust preferred securities may withdraw all, but not
less than all, of the company preferred securities represented by such trust
preferred securities by providing a written notice to the trustee, with evidence
of beneficial ownership in form satisfactory to the trustee and providing to UBS
Preferred Funding Company such documents or information as UBS Preferred Funding
Company may request for tax reporting purposes. The holder's notice will also be
deemed to be such beneficial owner's agreement to be subject to the terms of UBS
Preferred Funding Company's LLC Agreement applicable to the rights of the
holders of company preferred securities.
Within a reasonable period after such a request has been properly made, the
trustee must instruct DTC to reduce the trust preferred securities represented
by the global certificate by the corresponding amount of the company preferred
securities to be so withdrawn by the withdrawing owner. UBS Preferred Funding
Company will issue to the withdrawing owner a certificate representing the
amount of the company preferred securities withdrawn, and the trustee will
reduce the amount of the trust preferred securities represented by the global
certificate accordingly. The company preferred securities will be issued only in
certificated fully-registered form and will not be eligible to be held through
DTC, Euroclear or Clearstream. Under U.S. tax reporting rules, holders of
company preferred securities will thereafter receive an annual Form K-1 instead
of the Form 1099 that holders of trust preferred securities will receive. See
"Certain U.S. Tax Considerations--Information Reporting and Backup Withholding
Tax."
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33
DESCRIPTION OF TRUST PREFERRED SECURITIES
- --------------------------------------------------------------------------------
Any holder of company preferred securities may redeposit withdrawn company
preferred securities by delivering to the trustee the certificates for the
company preferred securities to be deposited, which are (i) if required by the
trustee, properly endorsed or accompanied by a properly executed instrument of
transfer or endorsement in form satisfactory to the trustee and in compliance
with the terms of UBS Preferred Funding Company's LLC Agreement and (ii)
accompanied by all such certifications as may be required by the trustee in its
sole discretion and in accordance with the provisions of the Amended and
Restated Trust Agreement. Within a reasonable period after such deposit is
properly made, the trustee will instruct DTC to increase the amount of the trust
preferred securities represented by the global certificate accordingly.
VOTING RIGHTS
If at any time the holders of company preferred securities are entitled to vote
under UBS Preferred Funding Company's LLC Agreement, the trustee will:
- notify the holders of trust preferred securities of such right,
- request specific direction from each holder of trust preferred
securities as to the vote with respect to the company preferred
securities represented by such trust preferred securities, and
- vote the relevant company preferred securities only in accordance with
such specific direction.
Upon receiving notice of any meeting at which the holders of company preferred
securities are entitled to vote, the trustee will, as soon as practicable, mail
to the holders of trust preferred securities a notice as provided under
"--Notices." UBS Preferred Funding Company will provide the form of notice to
the trustee to be forwarded to the holders of trust preferred securities. The
notice will contain:
- all the information that is contained in the notice announcing the
meeting of the company preferred securities,
- a statement that the holders of trust preferred securities will be
entitled, subject to any applicable provision of law, to direct the
trustee specifically as to the exercise of the voting rights pertaining
to the number of the company preferred securities represented by their
respective trust preferred securities, and
- a brief description of the manner in which the holders may give such
specific directions.
If the trust receives a written direction from a holder of trust preferred
securities, the trustee will vote, or cause to be voted, the amount of the
company preferred securities represented by such trust preferred securities in
accordance with the instructions set forth in the direction. If the trustee does
not receive specific instructions from the holder of any trust preferred
securities, the trustee will abstain from voting the company preferred
securities represented by those trust preferred securities.
UBS Preferred Funding Company and the trustee may, without the consent of the
holders of the trust preferred securities, enter into one or more agreements
supplemental to the Amended and Restated Trust Agreement, in form satisfactory
to the trustee, for any of the following purposes:
- to evidence the succession of another partnership, corporation or other
entity to UBS Preferred Funding Company and the assumption by any such
successor of the covenants of UBS Preferred Funding Company under the
Amended and Restated Trust Agreement,
- to add to the covenants of UBS Preferred Funding Company for the benefit
of the holders of the trust preferred securities, or to surrender any
right or power herein conferred upon UBS Preferred Funding Company,
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34
DESCRIPTION OF TRUST PREFERRED SECURITIES
- --------------------------------------------------------------------------------
- to correct or supplement any provision of the Trust Agreement which may
be defective or inconsistent with any other provision therein,
- to make any other provisions with respect to matters or questions
arising under the Amended and Restated Trust Agreement, provided that
any such action does not materially adversely affect the interests of
the holders of the trust preferred securities, or
- to cure any ambiguity or correct any mistake.
Any other amendment or agreement supplemental to the Amended and Restated Trust
Agreement must be in writing and approved by holders of 66 2/3% of the then
outstanding trust preferred securities.
TRANSFER AND ISSUE OF DEFINITIVE TRUST PREFERRED SECURITIES
TRANSFER, ISSUE AND DELIVERY
If trust preferred securities are issued in definitive form ("definitive trust
preferred securities") in the limited circumstances described in "Book-Entry
Issuance of Trust Preferred Securities--Termination of and Changes to Depositary
Arrangements," those trust preferred securities may be transferred in any
whole-number multiples of USD1,000 by surrendering the definitive trust
preferred securities certificates together with the form of transfer endorsed on
it, duly completed and executed at the office of the transfer agent. The initial
transfer agent will be Wilmington Trust Company. If only part of a definitive
trust preferred securities certificate is transferred, a new definitive trust
preferred securities certificate representing the securities that are not
transferred will be issued to the transferor within three business days after
the transfer agent receives the certificate. The new certificate representing
the trust preferred securities that were not transferred will be delivered to
the transferor by uninsured mail at the risk of the transferor, to the address
of the transferor that appears in the records of UBS Preferred Funding Trust.
The new certificate representing the trust preferred securities that were
transferred will be sent to the transferee within three business days after the
trustee receives the certificate transferred, by uninsured mail at the risk of
the holder entitled to the trust preferred securities represented by the
certificate, to the address specified in the form of transfer.
FORMALITIES FREE OF CHARGE
Registration of transfers of definitive trust preferred securities will be made
without charge by UBS Preferred Funding Trust, but the transferor must pay any
tax or other governmental charges that may be imposed in relation to the
transfer, together with any indemnity that UBS Preferred Funding Trust, UBS AG
or the transfer agent may require.
CLOSED PERIODS
No holder may require the transfer of the trust preferred securities to be
registered during the period of 15 days ending on the due date for any payment
of principal on the trust preferred securities.
UBS Preferred Funding Trust will not be required to register, or cause others to
register, the transfer of trust preferred securities after such trust preferred
securities have been called for redemption.
REGULATIONS CONCERNING TRANSFER AND REGISTRATION
All transfers of definitive trust preferred securities and entries must be made
as provided in the agency agreement relating to the trust preferred securities.
The provisions of this agreement that govern transfers may be changed by UBS
Preferred Funding Trust with the prior written approval of the trustee.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
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REGISTRAR AND TRANSFER AGENT
Wilmington Trust Company will act as registrar and transfer agent for the trust
preferred securities. As long as the trust preferred securities are listed on
the Luxembourg Stock Exchange, UBS Preferred Funding Trust will also maintain a
transfer agent in Luxembourg. The initial Luxembourg transfer agent will be BNP
Paribas.
PAYMENTS AND PAYING AGENT
As long as the trust preferred securities are in book-entry form, payments of
interest and principal on the trust preferred securities will be made to DTC,
which will credit the relevant accounts at DTC on the scheduled payment dates.
The payments of interest and principal will be distributed to participants,
indirect participants and beneficial owners of the trust preferred securities as
described under "Book-Entry Issuance of Trust Preferred Securities--DTC's
Procedures for Notices, Voting and Payments."
If definitive trust preferred securities are issued in the limited circumstances
described above, payments of interest and principal on the trust preferred
securities will be made by check mailed to the address of the holder entitled to
receive the payment, as the address appears in UBS Preferred Funding Trust's
register. Payments of principal on the trust preferred securities will be made
upon surrender of such trust preferred securities at the specified office of the
paying agent.
UBS Preferred Funding Trust will maintain a paying agent with respect to the
trust preferred securities which will initially be Wilmington Trust Company. The
paying agent will be permitted to resign as paying agent upon 30 days' written
notice to the trustee. If Wilmington Trust Company resigns as paying agent, the
trustee will appoint another bank or trust company to act as paying agent. As
long as the trust preferred securities are listed on the Luxembourg Stock
Exchange, UBS Preferred Funding Trust will also maintain a paying agent in
Luxembourg. The initial Luxembourg paying agent will be BNP Paribas.
TERMINATION OF AMENDED AND RESTATED TRUST AGREEMENT
The Amended and Restated Trust Agreement will terminate upon the earliest to
occur of the redemption of all of the trust preferred securities, the delivery
of a final distribution of the company preferred securities to the holders of
trust preferred securities, withdrawal of all the company preferred securities
from UBS Preferred Funding Trust (as described under "--Withdrawal of the
Company Preferred Securities") or dissolution of UBS Preferred Funding Trust as
described in the following paragraph.
UBS Preferred Funding Company may instruct the trustee to dissolve UBS Preferred
Funding Trust and distribute the company preferred securities on a pro rata
basis to the holders of trust preferred securities in the case of either a Tax
Event as to UBS Preferred Funding Trust or an Investment Company Act Event as to
UBS Preferred Funding Trust, as each is defined under "Description of Company
Preferred Securities--Redemption."
Any company preferred securities held in definitive fully registered form will
not be eligible to be held through DTC, Euroclear or Clearstream.
EXPENSES OF UBS PREFERRED FUNDING TRUST
All charges or expenses of UBS Preferred Funding Trust, including the charges
and expenses of the trustee, will be paid by the Stamford branch of UBS AG,
except that, if the trustee incurs fees, charges or expenses, for which it is
not otherwise liable under the Amended and Restated Trust Agreement, at the
request of a holder of trust preferred securities or other person, such holder
or other person will be liable for such fees, charges and expenses.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
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RESIGNATION AND REMOVAL OF THE TRUSTEE
UBS Preferred Funding Trust will at all times have a trustee that is a bank that
has its principal place of business in the State of Delaware and a combined
capital and surplus of USD50,000,000. If the trustee ceases to be eligible, it
must resign.
The trustee may resign as trustee under the Amended and Restated Trust Agreement
at any time by giving notice of its resignation to UBS Preferred Funding
Company. The trustee may be removed by UBS Preferred Funding Company at any time
by notice of such removal delivered to the trustee. Any resignation or removal
of the trustee will take effect upon the appointment of a qualified successor
trustee and the successor's acceptance of such appointment.
If the trustee shall resign or be removed, UBS Preferred Funding Company shall,
within 45 days after the delivery of the notice of resignation or removal, as
the case may be, appoint a successor trustee, which shall be a bank or trust
company, or an affiliate of a bank or trust company, having its principal office
in the State of Delaware and having a combined capital and surplus of at least
USD50,000,000.
INFORMATION CONCERNING THE TRUSTEE
Wilmington Trust Company is the trustee. The trustee is required to perform only
those duties that are specifically set forth in the Amended and Restated Trust
Agreement, except when a default has occurred and is continuing with respect to
the trust preferred securities. After a default, the trustee must exercise the
same degree of care a prudent person would exercise under the circumstances in
the conduct of his or her own affairs. Subject to these requirements, the
trustee is under no obligation to exercise any of the powers vested in it by the
Amended and Restated Trust Agreement at the request of any holder of trust
preferred securities, unless the holder offers the trustee reasonable indemnity
against the costs, expenses and liabilities that might be incurred by exercising
those powers.
NOTICES
Notices to the holders of trust preferred securities will be given by delivery
of the relevant notice to DTC, Euroclear, Clearstream and any other relevant
securities clearing system for communication by each of them to entitled
participants, and, as long as the trust preferred securities are listed on one
or more stock exchanges and the rules of such stock exchange(s) so require,
notices will also be published in the manner that the rules of such stock
exchange(s) may require. In addition, notices will be published in one English
language daily newspaper of general circulation in London (which is expected to
be the Financial Times) and, for as long as the rules of the Luxembourg Stock
Exchange so require, in a daily newspaper of general circulation in Luxembourg
(which is expected to be the Luxemburger Wort).
If the trust preferred securities are no longer held in the name of DTC or its
nominee, notice to the holders of trust preferred securities will also be mailed
by first-class mail, postage prepaid, to the holders' addresses appearing in the
records of UBS Preferred Funding Trust.
GOVERNING LAW
The Trust Agreement and the trust preferred securities are governed by the laws
of the State of Delaware.
NATURE OF THE TRADING MARKET
We have applied to list the trust preferred securities on the Luxembourg Stock
Exchange in accordance with its rules. The trust preferred securities are a new
issue of securities with no principal established foreign trading market outside
of the United States or an established public trading market in the United
States.
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Description of Company Preferred Securities
UBS Preferred Funding Company issued the company preferred securities under the
terms of its Amended and Restated Limited Liability Company Agreement. The
following summary of the material terms and provisions of the company preferred
securities is not complete and is subject to and qualified in its entirety by
reference to the LLC Agreement of UBS Preferred Funding Company and the Delaware
Limited Liability Company Act. We have filed a copy of the LLC Agreement of UBS
Preferred Funding Company as an exhibit to the registration statement of which
this prospectus is a part.
GENERAL
The company preferred securities are preferred limited liability company
interests in UBS Preferred Funding Company, the terms of which are set forth in
UBS Preferred Funding Company's LLC Agreement.
The company preferred securities are intended to provide holders with rights to
distributions and redemption and liquidation payments that are similar to those
to which holders would be entitled if they had purchased the most senior ranking
noncumulative perpetual preferred shares issued directly by UBS AG that have
financial terms equivalent to those of the company preferred securities.
The company preferred securities will be validly issued, and no additional
payments will be required for such securities to represent limited liability
company interests in UBS Preferred Funding Company. Holders of company preferred
securities will have no preemptive rights with respect to any other securities
of UBS Preferred Funding Company. The company preferred securities will not be
convertible into company common securities or any other interests in UBS
Preferred Funding Company and will not be subject to any sinking fund or other
obligation of UBS Preferred Funding Company for their repurchase or retirement.
The company preferred securities are issued in certificated form only in
denominations of USD1,000 liquidation preference and whole-number multiples of
USD1,000. The aggregate liquidation preference of the company preferred
securities offered pursuant to this prospectus is USD500,000,000.
UBS Preferred Funding Company has the power to create and issue additional
preferred limited liability company interests (i) that are junior to the company
preferred securities as to payment of dividends and payments of amounts upon
dissolution, liquidation or winding up of UBS Preferred Funding Company
("company junior securities") or (ii) that are on a parity with the company
preferred securities as to those payments ("company parity preferred
securities"). As long as any company preferred securities remain outstanding, no
company parity preferred securities may be issued unless the holders of at least
66 2/3% of the outstanding company preferred securities and company parity
preferred securities, if any (based on the aggregate liquidation preference),
voting together as a single class, approve or unless the UBS AG subordinated
guarantee is amended so that such company parity preferred securities benefit
from the UBS AG subordinated guarantee in the same manner as the company
preferred securities without any adverse effect on the holders of company
preferred securities. See "--Voting Rights."
The LLC Agreement of UBS Preferred Funding Company precludes UBS Preferred
Funding Company from issuing, without the consent of each holder of company
preferred securities, any company parity preferred securities or any other
classes or series of equity securities that are senior to the company preferred
securities as to dividend rights or rights upon dissolution, liquidation or
winding up of UBS Preferred Funding Company.
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38
DESCRIPTION OF COMPANY PREFERRED SECURITIES
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DIVIDENDS
GENERAL
Dividends on the company preferred securities will be payable from the date of
initial issuance on a noncumulative basis, semi-annually in arrears on June 26
and December 26 of each year through June 2011 and thereafter quarterly in
arrears on March 26, June 26, September 26, and December 26 of each year (each a
"dividend payment date") for the dividend period then ending, but only if UBS
Preferred Funding Company has legally available funds for such purpose and
satisfies the other qualifications described below. Each period from and
including a dividend payment date or the date of initial issuance, as
applicable, to but not including the next dividend payment date is a "dividend
period."
Dividends will be payable on the liquidation preference:
- for each dividend period through the dividend period ending on the
dividend payment date in June 2011, at a fixed rate per annum equal to
7.247% (calculated on the basis of a year of twelve 30-day months), and
- for each dividend period ending after June 2011, at a floating rate per
annum equal to 2.30% above three-month LIBOR (calculated on the basis of
the actual number of days elapsed in a 360-day year).
Dividends will be mandatorily due and payable on a dividend payment date with
respect to the related dividend period and special dividends will be mandatorily
due and payable on other dates in the circumstances described under "--Mandatory
Dividends," except that dividends will never be mandatorily due and payable or
be paid when the capital limitation (described below under "--Capital
Limitation") applies. If dividends are neither mandatorily due and payable on a
dividend payment date nor prohibited by application of the capital limitation,
then:
- payment of dividends on the company preferred securities will be limited
by UBS AG's available distributable profits (see "--Distributable Profits
Limitation"), and
- if UBS AG delivers, on or before the tenth business day immediately
preceding the dividend payment date, an instruction (a "no dividend
instruction") to UBS Preferred Funding Company not to pay dividends on
that dividend payment date or to pay less than full dividends on that
dividend payment date, dividends payable on the related dividend payment
date will be limited as provided in the no dividend instruction (see
"--No Dividend Instruction").
If any dividends will be payable on the company preferred securities on a day
that is not a business day, those dividends will instead be paid on the next
business day. No interest or other payment will be due as a result of any such
adjustment.
LIBOR, with respect to a determination date (as defined below), means the rate
(expressed as a percentage per annum) for deposits in U.S. dollars for a
three-month period commencing on the second London banking day (as defined
below) immediately following that determination date that appears on Telerate
Page 3750 (as defined below) as of 11:00 a.m. (London time) on that
determination date. If such rate does not appear on Telerate Page 3750, LIBOR
will be determined on the basis of the rates which deposits in U.S. dollars for
a three-month period commencing on the second London banking day immediately
following that determination date and in a principal amount of not less than
USD1,000,000 are offered to prime banks in the London interbank market by four
major banks in the London interbank market selected by the calculation agent (as
defined below), after consultation with UBS Preferred Funding Company, at
approximately 11:00 a.m., London time, on that determination date.
The calculation agent will request the principal London office of each of such
banks to provide a quotation at its rate. If at least two such quotations are
provided, LIBOR with respect to that determination date will be the arithmetic
mean of such quotations. If fewer than two quotations are
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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provided, LIBOR with respect to that determination date will be the arithmetic
mean of the rates quoted by three major money center banks in New York City
selected by the calculation agent, after consultation with UBS Preferred Funding
Company, at approximately 11:00 a.m., New York City time, on that determination
date for loans in U.S. dollars to leading European banks for a three-month
period commencing on the second London banking day immediately following that
determination date and in a principal amount of not less than USD1,000,000.
However, if the banks selected by the calculation agent to provide quotations
are not quoting as described in this paragraph, LIBOR for the applicable period
will be the same as LIBOR as determined on the previous determination date.
As used in this prospectus:
"business day" means a day on which (i) the Trans-European Automated
Real-Time Gross Settlement Express Transfer System ("TARGET") is operating,
and (ii) banks are open for business and carrying out transactions in U.S.
dollars in London, Luxembourg, and Wilmington, Delaware.
"calculation agent" means the London branch of UBS AG.
"determination date" for a dividend period or interest period (as
applicable) means two London banking days preceding the first day of that
dividend period or interest period (as applicable).
"London banking day" means a day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Bridge/Telerate Service (or such other page as may replace Page 3750) on
that service or such other service or services as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits.
All percentages resulting from any calculations on the company preferred
securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward).
MANDATORY DIVIDENDS
UBS Preferred Funding Company will be required to pay dividends on the company
preferred securities in three circumstances, as follows:
(i) If UBS AG declares or pays dividends or makes any other payment or
distribution on any UBS AG junior obligations, and provided that the
capital limitation does not apply, then UBS Preferred Funding Company
will be required to pay full dividends on the company preferred
securities during the one-year period beginning on and including the
earlier of the date on which such dividend was declared or the date on
which such dividend or other payment was made.
(ii) If UBS AG or any of its subsidiaries redeems, repurchases or
otherwise acquires any UBS AG parity securities or UBS AG junior
obligations for any consideration, except by conversion into or
exchange for shares of UBS AG or UBS AG junior obligations and except
as described below (and provided that the capital limitation does not
apply), then UBS Preferred Funding Company will be required to pay
dividends on the company preferred securities during the one-year
period beginning on and including the date on which such redemption,
repurchase or other acquisition occurred.
(iii) If (x) UBS AG or any of its subsidiaries pays any dividends or makes
any other payment or distribution on any UBS AG parity securities on
any date and (y) during the relevant period
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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(as defined below) ending on and including that date there occurred a
dividend payment date as to which UBS Preferred Funding Company paid no
dividends or less than full dividends on the company preferred
securities, and provided that the capital limitation does not apply,
then on that date UBS Preferred Funding Company will be required to pay
a special dividend on the company preferred securities. The special
dividend will be payable on that date whether or not that date is
otherwise a dividend payment date and, if it is a dividend payment date,
will be in addition to any other dividends required to be paid on that
dividend payment date. The special dividend will be in an amount that,
when taken together with dividends previously paid on the company
preferred securities during the relevant period, represents the same
proportion of full dividends on the company preferred securities for all
dividend payment dates during the relevant period that the dividend on
UBS AG parity securities paid during that relevant period bears to full
dividends on such UBS AG parity securities for that relevant period.
Notwithstanding paragraph (ii) above, UBS Preferred Funding Company will not be
required to pay dividends solely as a result of:
- repurchases, redemptions or other acquisitions of UBS AG parity
securities or UBS AG junior obligations in connection with any
employment contract, benefit plan or other similar arrangement with or
for the benefit of any one or more employees, officers, directors or
consultants, in connection with a dividend reinvestment or shareholder
share purchase plan or in connection with the issuance of UBS AG parity
securities or UBS AG junior obligations (or securities convertible into
or exercisable for such UBS AG parity securities or UBS AG junior
obligations) as consideration in an acquisition transaction,
- market-making in the UBS AG parity securities or UBS AG junior
obligations as part of the securities business of UBS AG or any of its
subsidiaries,
- the purchase of fractional interests in UBS AG parity securities or UBS
AG junior obligations pursuant to the conversion or exchange provisions
of such UBS AG parity securities or UBS AG junior obligations or the
security being converted or exchanged,
- any declaration of a dividend in connection with any shareholder's
rights plan, or the issuance of rights, shares or other property under
any shareholder's rights plan, or the redemption or repurchase of rights
pursuant to any such plan, or
- any dividend in the form of shares, warrants, options or other rights
where the dividend shares or the shares issuable upon exercise of such
warrants, options or other rights are the same shares as that on which
the dividend is being paid or ranks equally with or junior to such
shares.
Any dividend payment date or other date on which dividends on the company
preferred securities are required to be paid as described in clause (i), (ii) or
(iii) of the second paragraph above is a "mandatory dividend payment date." The
amount of dividends required to be paid on any mandatory dividend payment date
(after giving effect to the capital limitation, if applicable) is called the
"mandatory dividend payment amount." If a dividend payment date or other date is
a mandatory dividend payment date, UBS Preferred Funding Company will be
required to pay the mandatory dividend payment amount as dividends on that date
whether or not there are available distributable profits and whether or not
interest is paid on the subordinated notes.
For purposes of this prospectus:
"UBS AG junior obligations" means (i) ordinary shares of UBS AG, (ii) each
class of preferred or preference shares or similar securities of UBS AG
that ranks junior to the most senior ranking
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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preferred or preference shares or similar securities of UBS AG, and (iii)
any indebtedness, guarantee or support agreement or similar undertaking of
UBS AG in respect of any subsidiary securities that rank junior to the UBS
AG subordinated guarantee.
"UBS AG parity securities" means (i) each class of preferred or preference
shares or similar securities of UBS AG that ranks equally with the most
senior ranking preferred or preference shares or similar securities of UBS
AG and (ii) any securities issued by any subsidiaries of UBS AG and
entitled to the benefit of any guarantee or support agreement or similar
undertaking of UBS AG that ranks equally with the UBS AG subordinated
guarantee. UBS AG parity securities include the USD1,500,000,000 8.622%
Noncumulative Trust Preferred Securities of UBS Preferred Funding Trust I
initially issued in October 2000 and representing a corresponding amount of
8.622% Noncumulative Company Preferred Securities of UBS Preferred Funding
Company LLC I, guaranteed on a subordinated basis by UBS AG. UBS AG parity
securities also include the USD300,000,000 7.25% Noncumulative Trust
Preferred Securities of UBS Preferred Funding Trust III issued in June 2001
and representing a corresponding amount of 7.25% Noncumulative Company
Preferred Securities of UBS Preferred Funding Company LLC III, guaranteed
on a subordinated basis by UBS AG.
"relevant period" means (i) in the case of UBS AG parity securities that
pay dividends less frequently than semi-annually, one year and (ii) in the
case of UBS AG parity securities that pay dividends semi-annually or more
frequently than semi-annually, six months (in each case ending on or
including the date on which the related dividend on a parity security is
paid but not including the corresponding day in the month that is twelve or
six months prior thereto).
CAPITAL LIMITATION
The prohibition on the payment of dividends on the company preferred securities
as described below is called the "capital limitation."
Unless the Swiss Federal Banking Commission expressly permits otherwise, UBS
Preferred Funding Company will not pay dividends on the company preferred
securities on any dividend payment date (whether or not it is a mandatory
dividend payment date) if on such date UBS AG is not in compliance, or because
of a distribution by UBS AG or any of its subsidiaries of profits of UBS AG
(including a payment of dividends on the company preferred securities) would not
be in compliance, with the Swiss Federal Banking Commission's minimum capital
adequacy requirements applicable to UBS AG as then in effect.
For purposes of complying with the Swiss Federal Banking Commission's capital
minimum adequacy requirements, bank capital is divided into three main
categories:
- Core (or Tier 1) capital,
- Supplementary (or Tier 2) capital, and
- Additional (or Tier 3) capital.
Tier 1 capital primarily includes paid-in share capital, reserves (defined to
include retained earnings) and capital participations of minority shareholders
in fully consolidated subsidiaries, and is reduced by, among other items, the
bank's holdings of its own shares. Tier 1 capital is supplemented, for capital
adequacy purposes, by Tier 2 capital, which consists of, among other things, two
categories of subordinated debt instruments that may be issued by a bank, and by
Tier 3 capital, which consists of certain subordinated debt obligations. The use
of Tier 2 and Tier 3 capital in complying with capital ratio requirements is,
however, subject to limitations.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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Under Swiss law, a bank must maintain a minimum capital ratio of 8%, calculated
by dividing adjusted core and supplementary capital by aggregate risk-weighted
assets. This standard must be met on both a consolidated and an unconsolidated
basis. UBS is required to file a statement of its required and existing capital
resources, together with its annual statement of condition and interim balance
sheet, with both the Swiss Federal Banking Commission and the Swiss National
Bank.
For a discussion of UBS's capital resources relative to applicable guidelines,
see Item 5 of UBS AG's Annual Report on Form 20-F for the year ended 31 December
2000, which is incorporated by reference into this prospectus.
DISTRIBUTABLE PROFITS LIMITATION
The limitation or prohibition on the payment of dividends on the company
preferred securities as described below is called the "distributable profits
limitation." The distributable profits limitation will not limit or prohibit
payment of mandatory dividends on a mandatory dividend payment date. The effect
of the distributable profits limitation is to limit the amount of non-mandatory
dividends that UBS Preferred Funding Company may pay on the company preferred
securities to the amount of dividends that UBS AG would have been legally able
to pay on such securities had they been issued directly by UBS AG as
non-cumulative preference shares of UBS AG.
On or before the dividend payment date in June of each year, UBS AG will deliver
a certificate to UBS Preferred Funding Company (a "distributable profits
limitation certificate") specifying:
- the distributable profits (as defined below) of UBS AG for the financial
year ending on the preceding 31 December, and
- the available distributable profits (as defined below) for payment of
dividends on the company preferred securities on the dividend payment
dates in the then current year.
Unless UBS Preferred Funding Company is required to pay mandatory dividends:
- the aggregate amount of dividends on the company preferred securities
that UBS Preferred Funding Company may pay on the dividend payment date
in June of the current year may not exceed the lesser of full dividends
and the available distributable profits set forth in such distributable
profits limitation certificate, and
- the aggregate amount of dividends on the company preferred securities
that UBS Preferred Funding Company may pay on any subsequent dividend
payment date in the current year (or in March of the following year in
the case of dividend payment dates occurring after June 2011) may not
exceed the lesser of full dividends and the remaining amount of such
available distributable profits (after giving effect to the payment of
dividends pursuant to this bullet point or the bullet point immediately
above).
For purposes of this prospectus:
"distributable profits" means, for any financial year of UBS AG, profit
that may be distributed in accordance with Swiss law then applicable.
Currently, for any financial year of UBS AG, distributable profits are
equal to profit brought forward, plus profit for the period, minus
appropriation to general statutory reserve, plus other reserves, each as
shown in the audited unconsolidated balance sheet and statement of
appropriation of retained earnings of UBS AG and as determined in
accordance with accounting standards applicable under Swiss law. The
"appropriation to general statutory reserve" is equal to up to 5% of annual
profit to the extent the general reserves of UBS AG do not equal 20% of the
paid-in share capital plus 10% of the amount distributed as a dividend from
profit for the period in excess of 5% of the par value of the UBS common
shares. UBS AG's distributable profits for 2000 were approximately CHF 16
billion.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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"available distributable profits" means, for any financial year of UBS AG:
- if there are no UBS AG parity securities outstanding, distributable
profits for the immediately preceding financial year of UBS AG, and
- if there are UBS AG parity securities outstanding, then an amount
determined as the product of:
(x) distributable profits for the immediately preceding financial year
of UBS AG, and
(y) a ratio (I) the numerator of which is the aggregate amount of full
dividends on the company preferred securities to be paid on the
dividend payment dates that occur during the then current financial
year (but excluding dividends paid in March of the current year and
including dividends to be paid in March of the following year, in
the case of calculations occurring after 26 June 2011) and (II) the
denominator of which is equal to the amount determined pursuant to
clause (I) plus the aggregate amount of full dividends on the UBS
AG parity securities to be paid on dividend payment dates which
occur during the then current financial year.
NO DIVIDEND INSTRUCTION
Except for the mandatory dividend payment amounts required to be paid on
mandatory dividend payment dates:
- dividends on the company preferred securities will not be payable on a
dividend payment date if, on or before the tenth business day
immediately preceding such dividend payment date, UBS AG delivers a no
dividend instruction to UBS Preferred Funding Company instructing it not
to pay dividends on that dividend payment date, and
- if, on or before the tenth business day immediately preceding such
dividend payment date, UBS AG delivers a no dividend instruction to UBS
Preferred Funding Company limiting but not prohibiting the payment of
dividends on such dividend payment date, dividends on the company
preferred securities will be payable on that dividend payment date only
to the extent permitted by such no dividend instruction.
If a no dividend instruction is given, then UBS Preferred Funding Company must
promptly give notice to the holders of company preferred securities in the
manner described under "--Notices" of the fact that it has received a no
dividend instruction and the amount of dividends, if any, that will be paid on
the related dividend payment date.
ADDITIONAL AMOUNTS
If UBS Preferred Funding Company or UBS Preferred Funding Trust is required to
withhold any taxes, duties or other governmental charges with respect to any
dividend payment on the trust preferred securities or the company preferred
securities, UBS Preferred Funding Company will be required to pay, as additional
amounts included in the dividend payment (and UBS AG will be required to include
in any related payment made by it under the UBS AG subordinated guarantee), an
amount sufficient that the net amount received by the holder of company
preferred securities or trust preferred securities, as applicable, after the
withholding, will not be less than the dividend payment amount. However, UBS
Preferred Funding Company will not be required to pay any such additional
amounts to the extent that the taxes, duties or other governmental charges are
imposed or levied by Switzerland or the Cayman Islands because the holder or
beneficial owner of trust preferred securities or company preferred securities:
- has some connection with Switzerland or the Cayman Islands, as
applicable, other than being a holder or beneficial owner of those trust
preferred securities or company preferred securities, or
- has not made a declaration of non-residence in, or other lack of
connection with, Switzerland or the Cayman Islands, as applicable, or
any similar claim for exemption, if UBS Preferred Funding Company has
given the beneficial owner of those trust preferred securities or
company
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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preferred securities or its nominee at least 60 days' prior notice of an
opportunity to make the declaration or claim.
RANKING AND LIQUIDATION PREFERENCE
The company preferred securities ordinarily will rank senior to the company
common securities as to the payment of dividends. However, UBS AG has the right
to shift the dividend preference of the company preferred securities to the
company common securities on any dividend payment date to the extent that the
mandatory dividend payment amount then required to be paid as dividends on the
company preferred securities (if any) is less than full dividends on the company
preferred securities. If UBS AG shifts the dividend preference to the company
common securities, the interest payment received by UBS Preferred Funding
Company on the subordinated notes will be returned as dividends to UBS AG, as
the holder of company common securities, before any dividends are paid on the
company preferred securities.
As long as any company preferred securities are outstanding, UBS AG will agree
in UBS Preferred Funding Company's LLC Agreement that it will take no voluntary
action to cause UBS Preferred Funding Company to dissolve or liquidate unless
UBS AG also liquidates. UBS Preferred Funding Company's LLC Agreement provides
that UBS Preferred Funding Company will be liquidated if UBS AG is liquidated.
If UBS Preferred Funding Company dissolves, liquidates or winds up, then after
the claims of any creditors of UBS Preferred Funding Company are satisfied, the
holders of company preferred securities will be entitled to receive, before any
distribution of assets is made to the holders of company common securities or
any other class of shares ranking junior to the company preferred securities
upon liquidation, liquidating distributions in respect of the company preferred
securities in the amount of:
- the liquidation preference of the company preferred securities, plus
- an amount equal to unpaid dividends, if any, on the company preferred
securities with respect to the current dividend period accrued on a
daily basis to the date of liquidation, plus
- an amount equal to unpaid definitive dividends for any prior dividend
period, without interest and without accumulation of unpaid
nondefinitive dividends for any prior dividend period.
For purposes of this prospectus:
"definitive dividends" means, as to a dividend payment date and related
dividend period, dividends that are due and payable because (i) they are not
limited by the capital limitation and (ii) either (x) they are mandatory
dividends or (y) a no dividend instruction was not delivered and they are
not limited by the distributable profit limitation.
"nondefinitive dividends" means, as to a dividend payment date and related
dividend period, dividends that are not definitive dividends.
If UBS AG is liquidated, whether voluntarily or involuntarily, (i) UBS Preferred
Funding Company will be liquidated and (ii) under the UBS AG Subordinated
Guarantee Agreement, the holders of company preferred securities (whether
through UBS Preferred Funding Trust or as direct holders who have withdrawn
their company preferred securities from UBS Preferred Funding Trust) will have a
claim entitling them to substantially the same liquidating distributions in the
liquidation of UBS AG that they would have been entitled to if they had
purchased preferred shares of UBS AG having an aggregate liquidation preference
equal to the aggregate liquidation preference of the company preferred
securities and bearing dividends at the rate of dividends applicable to the
company preferred securities. The UBS AG Subordinated Guarantee Agreement and
UBS Preferred Funding Company's LLC Agreement, taken together, provide that the
holders of company preferred securities may not receive liquidating
distributions in a liquidation of UBS Preferred Funding Company and payments
under the UBS AG
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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subordinated guarantee that, taken together, exceed the liquidating
distributions to which they would have been entitled had they instead owned
preferred shares of UBS AG with equivalent terms as described above.
VOTING RIGHTS
Except as expressly required by applicable law, or except as indicated below,
the holders of company preferred securities will not be entitled to vote. If the
holders of company preferred securities are entitled to vote as indicated below,
each USD1,000 liquidation preference of the company preferred securities will be
entitled to one vote on matters on which the holders of company preferred
securities are entitled to vote.
If at any time through 26 June 2011 the aggregate of unpaid dividends equals or
exceeds an amount equal to three semi-annual dividend payments, or at any time
after 26 June 2011 the aggregate of unpaid dividends equals or exceeds an amount
equal to six quarterly dividend payments, the holders of company preferred
securities and any company parity preferred securities, voting together as a
single class, will have the exclusive right to elect two additional directors of
their choosing. Holders of a majority (based on the aggregate liquidation
preference) of the company preferred securities and any company parity preferred
securities may exercise this right by written consent or at a meeting of such
holders called for such purpose. This right will continue either until all
unpaid dividends have been paid in full or until full dividends have been paid
on the company preferred securities for two consecutive dividend periods before
26 June 2011, or for four consecutive dividend periods after 26 June 2011. While
this right continues, any vacancy in the office of the additional directors may
be filled only by the holders of company preferred securities and company parity
preferred securities voting as described above.
UBS Preferred Funding Company's LLC Agreement provides that a meeting will be
called at the request of holders of 25% (based on the aggregate liquidation
preference) of the company preferred securities and any company parity preferred
securities.
As long as any company preferred securities are outstanding, UBS Preferred
Funding Company may not, without the consent or vote of holders of at least
66 2/3% of the outstanding company preferred securities and company parity
preferred securities, if any (based on the aggregate liquidation preference),
voting together as a single class:
- change or remove any provision of UBS Preferred Funding Company's LLC
Agreement (including the terms of the company preferred securities),
issue any company parity preferred securities, redeem or repurchase any
company common securities, or consent to a change in the booking
location of the issuance of the subordinated notes to a branch or other
office of UBS AG other than the Cayman Islands branch of UBS AG, in each
case, if such action would materially and adversely affect the rights,
preferences, powers or privileges of the company preferred securities
and such company parity preferred securities,
- to the fullest extent permitted by law, liquidate, dissolve or terminate
UBS Preferred Funding Company without the concurrent liquidation of UBS
AG,
- amend or modify UBS Preferred Funding Company's investment policies, or
- merge, convert, consolidate, reorganize or effect any other business
combination involving UBS Preferred Funding Company, unless the
resulting entity will have no class or series of equity securities
either authorized or outstanding that ranks ahead of the company
preferred securities as to dividends or as to the distribution of assets
upon liquidation, dissolution or winding up, except the same number of
shares of such equity securities with the same preferences, conversion
or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications or terms or conditions
or redemption as the shares of equity
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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securities of UBS Preferred Funding Company that are authorized and
outstanding immediately prior to such transaction, and each holder of
company preferred securities immediately prior to such transaction shall
receive securities with the same preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications or terms or conditions or redemption
of the resulting entity as the company preferred securities held by such
holder immediately prior to the transaction.
As long as any company preferred securities are outstanding, UBS Preferred
Funding Company may not, without the consent of the holders of each outstanding
company preferred security, authorize, create or increase the authorized amount
of, or issue any class or series of, any equity securities of UBS Preferred
Funding Company, or any warrants, options or other rights convertible or
exchangeable into any class or series of any equity securities of UBS Preferred
Funding Company, ranking prior to the company preferred securities, either as to
dividend rights or rights on dissolution, liquidation or winding up of UBS
Preferred Funding Company.
Notwithstanding any of the foregoing, without consent of any holder of company
preferred securities, UBS AG may amend or supplement the UBS AG Subordinated
Guarantee Agreement to correct or supplement any provision in the UBS AG
Subordinated Guarantee Agreement which may be defective or inconsistent with any
other provision therein, or to make any other provisions with respect to matters
or questions arising under the UBS AG Subordinated Guarantee Agreement, so long
as any such action shall not materially adversely affect the interests of the
holders of company preferred securities. See "Description of UBS AG Subordinated
Guarantee--Amendments."
Notwithstanding the foregoing, without the consent of any holder of company
preferred securities, UBS AG may amend or supplement the UBS Preferred Funding
Company's LLC Agreement:
- to correct or supplement any provision in the UBS Preferred Funding
Company's LLC Agreement which may be defective or inconsistent with any
other provision therein, or to make any other provisions with respect to
matters or questions arising under the UBS Preferred Funding Company's
LLC Agreement, so long as any such action shall not materially adversely
affect the interests of the holders of company preferred securities, or
- to cure any ambiguity or correct any mistake.
REDEMPTION
The company preferred securities may not be redeemed before the dividend payment
date scheduled to occur in June 2011 unless a Tax Event, an Investment Company
Act Event or a Capital Event occurs, in which case UBS Preferred Funding Company
may redeem the company preferred securities in whole (but not in part) at any
time on not less than 30 nor more than 60 days' notice. On or after the dividend
payment date regularly scheduled to occur in June 2011, UBS Preferred Funding
Company may redeem the company preferred securities on any dividend payment date
for cash, in whole or in part, on not less than 30 nor more than 60 days'
notice.
The redemption price for such redemptions on or after the regularly scheduled
dividend payment date in June 2011 will be:
- 100% of the liquidation preference of the company preferred securities
being redeemed, plus
- an amount equal to unpaid dividends, if any, on the company preferred
securities with respect to the current dividend period (whether or not
declared) accrued on a daily basis to the date fixed for redemption, plus
- an amount equal to unpaid definitive dividends for any prior dividend
period, without interest and without accumulation of unpaid nondefinitive
dividends for any prior dividend period.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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UBS Preferred Funding Company will also have the right to redeem the company
preferred securities in whole (but not in part) at any time prior to the
dividend payment date regularly scheduled to occur in June 2011, upon the
occurrence of a Tax Event, an Investment Company Act Event or a Capital Event.
The redemption price for a redemption arising out of a Tax Event resulting from
a Change in Tax Law (as defined below) and relating to the:
- imposition of tax on UBS Preferred Funding Trust or UBS Funding Company,
or
- the imposition of withholding tax on UBS Preferred Funding Company's
payment of dividends on the company preferred securities, on UBS
Preferred Funding Trust's payment of dividends on the trust preferred
securities, on UBS AG's payment of interest on the subordinated notes or
on UBS AG's payment under the subordinated guarantee
(which are the events described in clauses (A), (B) and (C) of the definition of
"Tax Event") will be the redemption price described above for optional
redemptions. Otherwise, the redemption price for such redemptions will be:
- the Make Whole Amount (as defined below), plus
- an amount equal to unpaid dividends, if any, on the company preferred
securities with respect to the current dividend period (whether or not
declared) accrued on a daily basis to the date fixed for redemption,
plus
- an amount equal to unpaid definitive dividends for any prior dividend
period, without interest and without accumulation of unpaid
nondefinitive dividends for any prior dividend period.
UBS Preferred Funding Company will have until the dividend payment date
regularly scheduled to occur in June 2011 after the occurrence of a Tax Event,
an Investment Company Act Event or a Capital Event to exercise its right to
redeem the company preferred securities.
Any redemption of the company preferred securities must comply with applicable
regulatory requirements, including the prior approval of the Swiss Federal
Banking Commission if then required under applicable guidelines or policies of
the Swiss Federal Banking Commission. The Swiss Federal Banking Commission in
its discretion may impose conditions on its approval of any proposed redemption
of the company preferred securities. If dividends on any company preferred
securities are unpaid, no company preferred securities may be redeemed unless
all outstanding company preferred securities are redeemed, and UBS Preferred
Funding Company may not purchase or otherwise acquire any company preferred
securities, except pursuant to a purchase or exchange offer made on the same
terms to the holders of all outstanding company preferred securities.
The company preferred securities will not be subject to any sinking fund or
mandatory redemption and will not be convertible into any other securities of
UBS Preferred Funding Company or any securities of UBS AG.
As long as any company preferred securities are outstanding, other company
parity preferred securities may not be redeemed or repurchased unless UBS
Preferred Funding Company concurrently redeems an approximately equal proportion
of the aggregate liquidation preference of the outstanding company preferred
securities or each rating agency then rating the company preferred securities
informs UBS Preferred Funding Company in writing that the redemption or
repurchase of such company parity preferred securities would not result in a
reduction or withdrawal of the rating then assigned by that rating agency to the
company preferred securities.
If fewer than all outstanding company preferred securities are to be redeemed,
the amount of the company preferred securities to be redeemed will be determined
by the board of directors of UBS Preferred Funding Company, and the securities
to be redeemed will be determined by lot or pro rata as
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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the board of directors in its sole discretion determines to be equitable. UBS
Preferred Funding Company will promptly notify the registrar and transfer agent
for the company preferred securities in writing of the securities selected for
redemption and, in the case of any partial redemption, the liquidation
preference to be redeemed.
Any company preferred securities redeemed will be canceled. There will be no
prescription period in respect of uncollected dividends on the company preferred
securities.
As used in this prospectus:
"Administrative action" means any judicial decision, official
administrative pronouncement, published or private ruling, regulatory
procedure, notice or announcement (including any notice or announcement of
intent to adopt such procedures or regulations) by any legislative body,
court, governmental authority or regulatory body having appropriate
jurisdiction.
"Capital Event" means the determination by UBS AG after consultation with
the Swiss Federal Banking Commission that the company preferred securities
cannot be included in calculating the Tier 1 capital of UBS AG on a
consolidated basis.
"Change in Tax Law" means the receipt by UBS AG of an opinion of a
nationally recognized law firm or other tax advisor (which may be an
accounting firm) in Switzerland, the United States or the Cayman Islands,
as appropriate, experienced in such matters to the effect that an event of
the type described in clause (A), (B) or (C) of the definition of "Tax
Event" has occurred or will occur as a result of (i) any amendment to,
clarification of, or change (including any announced prospective change)
in, the laws or treaties (or any regulations under any laws or treaties) of
the United States, Switzerland or the Cayman Islands or any political
subdivision or taxing authority of or in the United States, Switzerland or
the Cayman Islands affecting taxation or (ii) any administrative action or
any amendment to, clarification of, or change in the official position of
or UBS AG interpretation of any administrative action or any interpretation
or pronouncement that provides for a position with respect to any
administrative action that differs from the previously generally accepted
position, in each case, by any legislative body, court, governmental
authority or regulatory body, regardless of the manner in which such
amendment, clarification, change, interpretation or pronouncement is made
known, which amendment, clarification, change or administrative action is
effective or which interpretation or pronouncement is announced on or after
the date of issuance of the company preferred securities.
"Investment Company Act Event" means the receipt by UBS AG of an opinion of
a nationally recognized law firm in the United States experienced in such
matters to the effect that there is more than an insubstantial risk that
UBS Preferred Funding Company or UBS Preferred Funding Trust is an
"investment company" within the meaning of the Investment Company Act of
1940.
"Make Whole Amount" as applied to a redemption of the company preferred
securities means the greater of (i) 100% of the liquidation preference of
the company preferred securities and (ii) as determined by a quotation
agent (as defined below), the sum of the present value of the liquidation
preference of the company preferred securities together with the present
values of scheduled payments of dividends accrued from the date of
redemption to the dividend payment date in June 2011 (the "remaining
life"), in each case discounted to the date of redemption on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
adjusted treasury rate.
For purposes of determining the Make Whole Amount:
"adjusted treasury rate" means, with respect to any redemption date, the
treasury rate plus .75.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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"comparable treasury issue" means with respect to any redemption date
the United States Treasury security selected by the quotation agent as
having a maturity comparable to the remaining life that would be
utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining life. If no United States
Treasury security has a maturity that is within a period from three
months before to three months after the interest payment date and
dividend payment date in June 2011, the two most closely corresponding
United States Treasury securities will be used as the comparable
treasury issue, and the treasury rate will be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month
using such securities.
"comparable treasury price" means (A) the average of five reference
treasury dealer quotations for such redemption date, after excluding the
highest and lowest of such reference treasury dealer quotations, or (B)
if the quotation agent obtains fewer than five such reference treasury
dealer quotations, the average of all such quotations.
"quotation agent" means UBS Warburg LLC and its successors, except that
if UBS Warburg LLC ceases to be a primary U.S. Government securities
dealer in New York City (a "primary treasury dealer"), UBS Preferred
Funding Company will designate another primary treasury dealer.
"reference treasury dealer" means (i) the quotation agent and (ii) any
other primary treasury dealer selected by the quotation agent after
consultation with UBS Preferred Funding Company.
"reference treasury dealer quotations" means, with respect to each
reference treasury dealer and any redemption date, the average, as
determined by the quotation agent, of the bid and asked prices for the
comparable treasury issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the quotation agent by such
reference treasury dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
"treasury rate" means (i) the yield, under the heading which represents
the average for the week immediately prior to the redemption date,
appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by
the Federal Reserve and which establishes yields on actively traded
United States Treasury securities adjusted to constant maturity under
the caption "Treasury Constant Maturities," for the maturity
corresponding to the remaining life (or, if no maturity is within three
months before or after the remaining life, yields for the two published
maturities most closely corresponding to the remaining life will be
determined and the treasury rate will be interpolated or extrapolated
from such yields on a straight-line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not
contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the comparable treasury issue,
calculated using a price for the comparable treasury issue (expressed as
a percentage of its principal amount) equal to the comparable treasury
price for such redemption date. The treasury rate will be calculated on
the third business day preceding the redemption date.
"Tax Event" means the receipt by UBS AG of an opinion of a nationally recognized
law firm or other tax advisor (which may be an accounting firm) in Switzerland
or the United States, as appropriate, experienced in such matters to the effect
that there is more than an insubstantial risk that (A) UBS Preferred Funding
Company or UBS Preferred Funding Trust is or will be subject to more than a de
minimis amount of additional taxes, duties or other governmental charges, (B)
UBS AG is or will be required to pay any additional amounts in respect of any
taxes, duties or other governmental charges
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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with respect to payments of interest or principal on the subordinated notes and
with respect to any payments on the trust preferred securities, (C) UBS
Preferred Funding Company is or will be required to pay any additional amounts
in respect of any taxes, duties or other governmental charges with respect to
payments of dividends on the company preferred securities or UBS Preferred
Funding Trust is or will be required to pay any additional amounts in respect of
any taxes, duties or other governmental charges with respect to distributions on
the trust preferred securities, or (D) the treatment of any of UBS Preferred
Funding Company's items of income, gain, loss, deduction or expense, or the
treatment of any item of income, gain, loss, deduction or expense of UBS AG
related to the subordinated notes or its ownership of UBS Preferred Funding
Company, in each case as reflected on the tax returns (including estimated
returns) filed (or to be filed) by UBS Preferred Funding Company or UBS AG, will
not be respected by a taxing authority, as a result of which UBS Preferred
Funding Company or UBS AG is or will be subject to more than a de minimis amount
of additional taxes, duties or other governmental charges or civil liabilities,
the effect of which cannot be avoided by UBS Preferred Funding Company or UBS AG
taking reasonable measures available to it without any adverse effect on or
material cost to UBS AG or UBS Preferred Funding Company (as determined by UBS
AG in its sole discretion).
REGISTRAR AND TRANSFER AGENT
Wilmington Trust Company, or any other entity that UBS AG designates, will act
as registrar and transfer agent for the company preferred securities.
Registration of transfers of the company preferred securities will be effected
without charge by or on behalf of UBS Preferred Funding Company, but upon
payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. UBS Preferred Funding Company will not
be required to register or cause to be registered the transfer of the company
preferred securities after such company preferred securities have been called
for redemption.
The LLC Agreement of UBS Preferred Funding Company provides that, in the event
of a partial redemption of the company preferred securities that would result in
a delisting of the trust preferred securities from any securities exchange on
which the trust preferred securities are then listed, UBS Preferred Funding
Company will redeem the company preferred securities in whole.
NOTICES
Notices to the holders of company preferred securities will be mailed by
first-class mail, postage prepaid, to the holders' addresses appearing in UBS
Preferred Funding Company's records.
GOVERNING LAW
The LLC Agreement of UBS Preferred Funding Company and the company preferred
securities are governed by the laws of the State of Delaware.
NATURE OF THE TRADING MARKET
The company preferred securities are not listed on any national exchange or
traded in any established market.
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Book-Entry Issuance of Trust Preferred Securities
The trust preferred securities were initially issued to investors only in
book-entry form. The total aggregate amount of the trust preferred securities
are represented by a permanent global security in fully registered form (a
"global certificate") and deposited with a custodian for, and registered in the
name of The Depository Trust Company ("DTC") or its nominee. The global
certificate was initially deposited with Wilmington Trust Company, as the
custodian for DTC, and registered in the name of Cede & Co., as the nominee of
DTC.
Except as described below, the global certificate may be transferred, in whole
and not in part, only to another nominee of DTC or a successor of DTC or its
nominee. Beneficial interests in the global certificate may not be exchanged for
the trust preferred securities in certificated form except in the limited
circumstances described below.
Persons that acquire beneficial ownership interests in the global certificate
will hold their interests through either (i) DTC in the United States or (ii)
Clearstream Banking or Euroclear System in Europe if such persons are
participants in those systems, or indirectly through organizations that are
participants in those systems. Clearstream and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities accounts
in Clearstream's and Euroclear's names on the books of their respective
depositaries, which in turn will hold those positions in customers' securities
accounts in the depositaries' names on the books of DTC. Unless and until
certificated securities are issued, the only "holder" of trust preferred
securities will be Cede & Co., as nominee of DTC, or the nominee of a successor
depositary. Beneficial owners will be permitted to exercise their rights only
indirectly through DTC, Clearstream, Euroclear and their participants.
WITHDRAWAL OF THE COMPANY PREFERRED SECURITIES REPRESENTED BY THE TRUST
PREFERRED SECURITIES
Any beneficial owner of the trust preferred securities may withdraw and hold
directly a corresponding amount of the company preferred securities as described
under "Description of Trust Preferred Securities--Withdrawal of the Company
Preferred Securities." Within a reasonable period after such request has been
properly made, the trustee of UBS Preferred Funding Trust will instruct DTC to
reduce the number of trust preferred securities represented by the global
certificate by the amount of the company preferred securities to be so withdrawn
by the withdrawing owner.
The company preferred securities that are withdrawn will be issued only in
definitive, fully-registered form and will not be eligible to be held through
DTC, Euroclear or Clearstream, and the holders of such company preferred
securities will receive an annual Form K-1 instead of the Form 1099 that is
received by the holders of trust preferred securities. See "Certain U.S. Tax
Considerations--Information Reporting and Backup Withholding Tax."
Any holder of company preferred securities may redeposit the company preferred
securities as described under "Description of Trust Preferred
Securities--Withdrawal of the Company Preferred Securities." Within a reasonable
period after such deposit is properly made, the trustee of UBS Preferred Funding
Trust will instruct DTC to increase the number of trust preferred securities
represented by the global certificate accordingly.
THE DEPOSITORY TRUST COMPANY
The Depository Trust Company, or DTC, is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934.
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BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among its participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in its participants' accounts, eliminating the
need for physical movement of securities certificates. Participants in DTC
include Clearstream and Euroclear, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations.
DTC is owned by a number of its participants and by the New York Stock Exchange,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to DTC is also available to others, such as securities
brokers and dealers, banks and trust companies, that clear through or maintain a
custodial relationship with a DTC participant, either directly or indirectly.
The rules applicable to DTC and its participants are on file with the SEC.
CLEARSTREAM BANKING
Clearstream Banking, societe anonyme, or Clearstream, is incorporated under the
laws of Luxembourg as a professional depositary. Clearstream holds securities
for its participating organizations and facilitates the clearance and settlement
of securities transactions between its participants through electronic
book-entry changes in accounts of its participants, eliminating the need for
physical movement of certificates. Transactions may be settled in Clearstream in
any of 28 currencies, including U.S. dollars.
Clearstream provides to its participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream interfaces with
domestic markets in several countries. As a professional depositary, Clearstream
is subject to regulation by the Luxembourg Monetary Institute. Clearstream
participants are recognized financial institutions around the world, including
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to Clearstream is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Clearstream
participant, either directly or indirectly.
EUROCLEAR SYSTEM
Euroclear was created in 1968 to hold securities for its participants and to
clear and settle transactions between its participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. The Euroclear System is owned by Euroclear
Clearance System Public Limited Company (ECS plc) and operated through a license
agreement by Euroclear Bank S.A./N.V., a bank incorporated under the laws of the
Kingdom of Belgium (the "Euroclear Operator").
The Euroclear Operator holds securities and book-entry interests in securities
for participating organizations and facilitates the clearance and settlement of
securities transactions between Euroclear participants, and between Euroclear
participants and participants of certain other securities intermediaries through
electronic book-entry changes in accounts of such participants or other
securities intermediaries.
The Euroclear Operator provides Euroclear participants, among other things, with
safekeeping, administration, clearance and settlement, securities lending and
borrowing, and related services.
Non-participants of Euroclear may hold and transfer book-entry interests in the
securities through accounts with a direct participant of Euroclear or any other
securities intermediary that holds a book-entry interest in the securities
through one or more securities intermediaries standing between such other
securities intermediary and the Euroclear Operator.
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BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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Securities clearance accounts and cash accounts with the Euroclear Operator are
governed by the Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System, collectively, the Euroclear Terms
and Conditions, and applicable Belgian law. The Euroclear Terms and Conditions
govern transfers of securities and cash within Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Euroclear Terms and
Conditions only on behalf of Euroclear participants, and has no record of or
relationship with persons holding through Euroclear participants.
PARTICIPANTS AND BENEFICIAL OWNERS
Purchases of the trust preferred securities within the DTC system must be made
by or through DTC participants, which will receive a credit for the trust
preferred securities on DTC's records and on the records of Clearstream or
Euroclear, if applicable. The ownership interest of each actual purchaser of the
trust preferred securities, which is that of a beneficial owner of an interest
in a global certificate, is in turn to be recorded on the DTC participants' and
indirect participants' records.
Beneficial owners of interests in a global certificate will not receive written
confirmation from DTC of their purchases, but beneficial owners of an interest
in a global certificate are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the DTC participants or indirect participants through which the beneficial
owners of an interest in a global certificate purchased their ownership
interests in the trust preferred securities. Transfers of ownership interests in
the trust preferred securities will be accomplished by entries made on the books
of DTC participants and indirect participants acting on behalf of beneficial
owners of an interest in a global certificate. Beneficial owners of interests in
a global certificate will not receive certificates representing their ownership
interests in the trust preferred securities, unless use of the book-entry system
for the trust preferred securities is discontinued.
TRANSFERS AMONG DTC, CLEARSTREAM AND EUROCLEAR
Transfers between DTC participants will occur in accordance with the rules of
DTC. Transfers between Clearstream and Euroclear participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Clearstream or
Euroclear participants, on the other, will be effected in DTC in accordance with
the rules of DTC on behalf of the relevant European international clearing
system by the relevant European depositary. However, those cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines, European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
relevant European depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Clearstream and Euroclear participants may not deliver
instructions directly to the European depositaries.
Because of time zone differences, credits of the trust preferred securities
received in Clearstream or Euroclear as a result of a transaction with a person
that does not hold the trust preferred securities through Clearstream or
Euroclear will be made during subsequent securities settlement processing and
dated the business day following the DTC settlement date. Those credits or any
transactions in those securities settled during that processing will be reported
to the relevant Euroclear or Clearstream
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BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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participants on that business day. Cash received in Clearstream or Euroclear as
a result of sales of the trust preferred securities by or through a Clearstream
or Euroclear participant to a DTC participant will be received with value on the
DTC settlement date, but will be available in the relevant Clearstream or
Euroclear cash account only as of the business day following settlement in DTC.
LIMITATIONS ON RESPONSIBILITIES OF DTC, CLEARSTREAM AND EUROCLEAR
DTC, Clearstream and Euroclear have no knowledge of the actual beneficial owners
of interests in a global certificate representing the trust preferred
securities. DTC's records reflect only the identity of the DTC participants,
including Clearstream and Euroclear, to whose accounts those trust preferred
securities are credited, which may or may not be the beneficial owners of
interests in a global certificate. Similarly, the records of Clearstream and
Euroclear reflect only the identity of the Clearstream or Euroclear participants
to whose accounts those trust preferred securities are credited, which also may
or may not be the beneficial owners of interests in a global certificate. DTC,
Clearstream and Euroclear participants and indirect participants will remain
responsible for keeping account of their holdings on behalf of their customers.
DTC'S PROCEDURES FOR NOTICES, VOTING AND PAYMENTS
So long as DTC, or its nominee, is the registered owner or holder of a global
certificate, DTC or that nominee, as the case may be, will be considered the
sole owner or holder of trust preferred securities represented by the global
certificate for all purposes under the Amended and Restated Trust Agreement. No
beneficial owner of an interest in a global certificate will be able to transfer
that interest except in accordance with DTC's applicable procedures, in addition
to those provided for under the Amended and Restated Trust Agreement.
DTC has advised UBS AG, as provider of the UBS AG subordinated guarantee, that
it will take any action permitted to be taken by a holder of trust preferred
securities, including the presentation of the trust preferred securities for
exchange as described below, only at the direction of one or more of its
participants to whose account the DTC interests in the global certificates are
credited and only in respect of that portion of the aggregate liquidation amount
of the trust preferred securities as to which that participant or participants
has or have given the direction.
Conveyance of notices and other communications by DTC to its participants, by
those participants to its indirect participants, and by participants and
indirect participants to beneficial owners of interests in a global certificate
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
The trustee will send redemption notices in respect of the trust preferred
securities held in book-entry form to Cede & Co., and will also give those
notices in the manner indicated under "Description of Trust Preferred
Securities--Notices." If less than all the trust preferred securities are being
redeemed, DTC will determine the amount of the interest of each DTC participant
to be redeemed in accordance with its procedures.
Although voting with respect to the trust preferred securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to the trust preferred securities. Under its usual
procedures, DTC will mail an Omnibus Proxy to UBS Preferred Funding Trust as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights of those participants to whose accounts the trust
preferred securities are allocated on the record date identified in a listing
attached to the Omnibus Proxy.
Distributions on the trust preferred securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit its
participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on that payment date. Payments by DTC's
participants and indirect participants to beneficial owners of interests in a
global certificate will be
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55
BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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governed by standing instructions and customary practices. Such payments will be
the responsibility of those participants and indirect participants and not of
DTC, UBS Preferred Funding Trust or UBS AG, as the guarantor, subject to any
statutory or regulatory requirements that may be in effect from time to time.
Payment of any dividends or other amounts to DTC is the responsibility of UBS
Preferred Funding Trust, disbursement of such payments to participants is the
responsibility of DTC, and disbursement of those payments to the beneficial
owner of an interest in a global certificate is the responsibility of
participants and indirect participants.
Except as described in this prospectus, a beneficial owner of an interest in a
global certificate will not be entitled to receive physical delivery of the
trust preferred securities. Accordingly, each beneficial owner of an interest in
a global certificate must rely on the procedures of DTC to exercise any rights
under the trust preferred securities.
The global certificate for the trust preferred securities was deposited with
Cede & Co., as DTC's nominee, on 26 June 2001.
TERMINATION OF AND CHANGES TO DEPOSITARY ARRANGEMENTS
A global certificate is exchangeable for the trust preferred securities in
registered certificated form if DTC:
- notifies UBS Preferred Funding Trust that it is unwilling or unable to
continue as depositary for the global certificates and UBS Preferred
Funding Trust does not appoint a successor depositary, or
- has ceased to be a clearing agency registered under the Securities
Exchange Act of 1934.
Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of interests in the global certificates among
participants, none is under any obligation to perform or continue to perform
those procedures, and those procedures may be discontinued at any time. Neither
UBS AG nor UBS Preferred Funding Trust will have any responsibility for the
performance by DTC, Clearstream, Euroclear or their participants or indirect
participants under the rules and procedures governing them. DTC, Clearstream or
Euroclear may discontinue providing its services as securities depositary with
respect to the trust preferred securities at any time by giving notice to UBS
Preferred Funding Trust. Under those circumstances, definitive trust preferred
security certificates would be delivered as described under "Description of
Trust Preferred Securities--Transfer and Issue of Definitive Trust Preferred
Securities."
LIMITATIONS ON RIGHTS RESULTING FROM BOOK-ENTRY FORM
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. These laws may impair
the ability to transfer beneficial interests in the global trust preferred
securities as represented by a global certificate.
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56
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Description of UBS AG Subordinated Guarantee
UBS AG and Wilmington Trust Company, as guarantee trustee, have executed the UBS
AG Subordinated Guarantee Agreement. We will qualify the UBS AG Subordinated
Guarantee Agreement as an indenture under the Trust Indenture Act. The terms of
the UBS AG subordinated guarantee will include both those stated in the UBS AG
Subordinated Guarantee Agreement and those made part of the UBS AG Subordinated
Guarantee Agreement by the Trust Indenture Act. The following summary of the
material terms and provisions of the UBS AG subordinated guarantee is not
complete and is subject to, and qualified in its entirety by reference to, the
UBS AG Subordinated Guarantee Agreement and the Trust Indenture Act. We have
filed a copy of the UBS AG Subordinated Guarantee Agreement as an exhibit to the
registration statement of which this prospectus is a part.
GUARANTEED OBLIGATIONS
In the UBS AG Subordinated Guarantee Agreement, UBS AG unconditionally
guarantees, on a subordinated basis, the payment by UBS Preferred Funding
Company of the following, without duplication:
- any dividends on the company preferred securities that are due and
payable on any mandatory dividend payment date in an amount equal to the
mandatory dividend payment;
- any discretionary dividends on the company preferred securities that
become definitive because UBS AG does not deliver a no dividend
instruction;
- the redemption price payable with respect to any company preferred
securities called for redemption by UBS Preferred Funding Company;
- the liquidating distribution on each company preferred security payable
upon liquidation of UBS Preferred Funding Company; and
- any additional amounts payable by UBS Preferred Funding Company as
described under "Description of Company Preferred Securities--Additional
Amounts."
Subject to the subordination provisions described below, UBS AG will be
obligated to make such payments as and when due, regardless of any defense,
right of set-off or counterclaim that UBS Preferred Funding Company may have or
assert, other than the defense of payment, and whether or not UBS Preferred
Funding Company has legally available funds for the guaranteed payments. UBS
AG's obligations under the UBS AG Subordinated Guarantee Agreement are several
and independent of the obligations of UBS Preferred Funding Company with respect
to the company preferred securities.
See "Description of Company Preferred Securities--Dividends" for a description
of circumstances when dividend on the company preferred securities are
mandatory, "Description of Company Preferred Securities--Redemption" for a
description of the company preferred securities' redemption provisions, and
"Description of Company Preferred Securities--Ranking and Liquidation
Preference" for a description of the liquidation claim to which the holders are
entitled in a liquidation of UBS Preferred Funding Company.
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57
DESCRIPTION OF UBS AG SUBORDINATED GUARANTEE
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SUBORDINATION
The UBS AG subordinated guarantee is a general and unsecured obligation of UBS
AG and, in liquidation of UBS AG, will rank, both as to payment and in
liquidation:
- - subordinate and junior to all deposits and other liabilities (including those
in respect of bonds, notes and debentures of UBS AG) that do not expressly
rank equally with the obligations of UBS AG under the UBS AG Subordinated
Guarantee Agreement, and
- - senior to the ordinary shares of UBS AG and any other securities or shares of
UBS AG expressed to rank junior to the most senior preference shares of UBS
AG (if any) from time to time outstanding.
The foregoing liabilities that rank senior to the UBS AG subordinated guarantee
are collectively called "UBS AG senior liabilities."
Payments under the UBS AG subordinated guarantee (other than payments upon a
winding-up or dissolution, by bankruptcy or otherwise, in Switzerland of UBS AG
as provided below) are conditional upon UBS AG not being in default in the
payment of UBS AG senior liabilities and being solvent at the time of payment. A
report as to the insolvency of UBS AG by two persons, each being a managing
director, director or other authorized officer or agent of UBS AG or employees
of the independent accountants of UBS AG will, in the absence of manifest error
be treated and accepted by UBS AG, the holders of company preferred securities
and all other interested parties as correct and sufficient evidence thereof.
If UBS AG is liquidated, whether voluntarily or involuntarily, (i) UBS Preferred
Funding Company will be liquidated and (ii) under the UBS AG Subordinated
Guarantee Agreement, the holders of company preferred securities (whether
through UBS Preferred Funding Trust or as direct holders who have withdrawn
their company preferred securities from UBS Preferred Funding Trust) will have a
claim entitling them to substantially the same liquidating distributions in the
liquidation of UBS AG that they would have been entitled to if they had
purchased preferred shares of UBS AG having an aggregate liquidation preference
equal to the aggregate liquidation preference of the company preferred
securities and bearing dividends at the rate of dividends applicable to the
company preferred securities. The UBS AG Subordinated Guarantee Agreement and
UBS Preferred Funding Company's LLC Agreement, taken together, will provide that
the holders of company preferred securities will not receive liquidating
distributions in a liquidation of UBS Preferred Funding Company and payments
under the UBS AG subordinated guarantee that, taken together, exceed the
liquidating distributions to which they would have been entitled had they
instead owned non-cumulative perpetual preferred shares of UBS AG with
equivalent terms as described above.
The subordination provisions set out above are irrevocable. UBS AG may not
create or permit to exist any charge or other security interest over its assets
to secure its obligations in respect of the UBS AG subordinated guarantee.
The obligations of UBS AG in respect of the UBS AG subordinated guarantee are,
prior to the winding up or dissolution of UBS AG, conditional upon UBS AG being
solvent immediately before and after payment by the Cayman Islands branch. If
this condition is not satisfied, any amounts that might otherwise have been
allocated in or towards payment in respect of the UBS AG subordinated guarantee
may be used to absorb losses of UBS AG.
If a capital loss (as defined below) occurs, the board of directors of UBS AG is
required by Article 725 paragraph 1 of the Swiss Code of Obligations to call a
general meeting of the shareholders of UBS AG and propose at such meeting
measures for a financial reorganization of UBS AG. Holders of trust preferred
securities and company preferred securities will not have any right to attend or
take any action at any such meeting because they are not shareholders of UBS AG.
Neither the calling of such a meeting nor the proposal of such financial
organization will itself affect the obligations of UBS AG under the UBS AG
Subordinated Guarantee Agreement.
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58
DESCRIPTION OF UBS AG SUBORDINATED GUARANTEE
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If at any time UBS AG's unconsolidated unsubordinated liabilities exceed its
unconsolidated total assets (valued at the higher of their going-concern and
their liquidation value), as calculated based on the most recent unconsolidated
interim balance sheet of UBS AG, the board of directors of UBS AG is required by
Article 725 paragraph 2 of the Swiss Code of Obligations to notify the competent
court of such excess, unless unsubordinated creditors of UBS AG agree to
subordinate their claims to the extent that such unsubordinated liabilities
exceed such assets. Upon any such notification, such court must declare the
bankruptcy of UBS AG in accordance with Article 725a paragraph 1 of the Swiss
Code of Obligations and Article 35 paragraph 2 of the Swiss Banking Law. In the
past, however, the Swiss Federal Banking Commission has usually exercised the
broad discretion granted to it under Swiss banking law before the occurrence of
such an excess when it has perceived the interests of creditors of a Swiss bank
to be at risk. In such cases, the Swiss Federal Banking Commission has generally
withdrawn the banking license of the affected bank, which has then been required
to go into liquidation (pursuant to Article 23 quinquies of the Swiss Banking
Law).
As used in this prospectus:
"assets" means the consolidated gross assets of UBS AG.
A "capital loss" is deemed to occur if UBS AG's assets are less than the
sum of (i) its liabilities and (ii) one-half of its share capital and
statutory reserves, each as shown on and as calculated based on the latest
published annual unconsolidated balance sheet of UBS AG. The sum of UBS
AG's unconsolidated share capital and statutory reserves at 31 December
2000 was CHF 22.5 million.
"liabilities" means the consolidated gross liabilities of UBS AG, all as
shown by the latest published audited consolidated balance sheet of UBS AG
as adjusted for contingencies and for subsequent events, all valued in such
manner as UBS AG or any liquidator (as the case may be) may determine and
calculated in accordance with IAS.
"solvent" means (i) UBS AG is able to pay its debts as they fall due and
(ii) UBS AG's assets exceed its liabilities (other than its liabilities to
persons who are not senior creditors).
Subject to applicable law, no beneficiary of the UBS AG subordinated guarantee
may exercise, claim or plead any right of set-off, compensation or retention in
respect of any amount owed to it by UBS AG arising under or in connection with
the UBS AG subordinated guarantee and each beneficiary of the UBS AG
subordinated guarantee shall, by virtue of being a beneficiary of the UBS AG
subordinated guarantee, be deemed to have waived all such rights to set-off,
compensation or retention.
ADDITIONAL AMOUNTS
UBS AG will make all payments under the UBS AG subordinated guarantee without
withholding or deducting for, or on account of, any present or future tax,
duties, assessments or governmental charges imposed or levied by Switzerland or
the jurisdiction of residence of the issuer of any subordinated notes held by
UBS Preferred Funding Company or from which any payment on such notes is made or
any authority of any of those jurisdictions that has the power to tax, unless
UBS AG is required by law to withhold or deduct the present or future tax,
duties, assessments or governmental charges. If UBS AG is required to withhold
or deduct any portion of a payment, UBS AG will pay additional amounts in order
to cause the net amounts received by the holders of trust preferred securities
and company preferred securities to be the same as the holders would have
received in the absence of the withholding or deduction, subject to the same
limitations or additional amounts payable by UBS Preferred Funding Company as
described above under "Description of Company Preferred Securities--Additional
Amounts."
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59
DESCRIPTION OF UBS AG SUBORDINATED GUARANTEE
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If payment of the amounts described above cannot be made by reason of any
limitation referred to above, those amounts will be payable in proportion to the
amounts that would have been payable but for that limitation.
OTHER PROVISIONS
The guarantee trustee, on behalf of the holders of company preferred securities,
may enforce the UBS AG subordinated guarantee directly against UBS AG if UBS AG
defaults under the UBS AG subordinated guarantee. The UBS AG Subordinated
Guarantee Agreement provides that, to the fullest extent permitted by law,
without the need for any other action of any person, including the guarantee
trustee or any other holder of the trust preferred securities or company
preferred securities, each holder of trust preferred securities or company
preferred securities will be entitled to enforce the rights of the holders of
the company preferred securities under the UBS AG Subordinated Guarantee
Agreement represented by the trust preferred securities or company preferred
securities held by such holder.
CERTAIN COVENANTS OF UBS AG AND UBS PREFERRED FUNDING COMPANY
ISSUANCE AND GUARANTEE OF PREFERENCE SHARES
UBS AG will not issue any preferred or preference shares with liquidation rights
effectively ranking senior to its obligations under the UBS AG subordinated
guarantee or give any guarantee in respect of any of its preferred shares or
preferred shares issued by any of its subsidiaries if the guarantee would rank
senior to the UBS AG subordinated guarantee unless the UBS AG subordinated
guarantee is amended to give the holders of company preferred securities and the
trust preferred securities the same rights and entitlements as are contained in
or attached to the other guarantees so that the UBS AG subordinated guarantee
ranks equally with those guarantees and, from a financial point of view,
effectively, with those preferred shares. Except to the extent described above,
the UBS AG subordinated guarantee does not limit the incurrence or issuance of
other secured or unsecured debt or other obligations of UBS.
PAYMENT OF DIVIDENDS
UBS AG will agree in the UBS AG subordinated guarantee that if any amount
required to be paid under the UBS AG subordinated guarantee in respect of any
dividends on the trust preferred securities or company preferred securities
payable in respect of the most recent dividend period has not been paid, UBS AG
will pay that amount before paying any dividend or other payment on any UBS AG
junior obligations, except dividends in the form of the ordinary shares.
NO ASSIGNMENT
UBS AG may not assign its obligations under the UBS AG subordinated guarantee,
except in the case of merger, consolidation or sale of substantially all of its
assets where UBS AG is not the surviving entity.
TERMINATION
The UBS AG subordinated guarantee will terminate on the earlier of:
- the payment of the redemption price for all company preferred securities
or purchase and cancellation of all company preferred securities, and
- full payment of the liquidating distribution on all company preferred
securities.
However, the UBS AG subordinated guarantee will continue to be effective or will
be reinstated, as the case may be, if the holder is required to return any
payment made under the company preferred securities or the UBS AG subordinated
guarantee.
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60
DESCRIPTION OF UBS AG SUBORDINATED GUARANTEE
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AMENDMENTS
Any changes to the provisions of the UBS AG subordinated guarantee that
establish the amount and timing of the payments under the UBS AG subordinated
guarantee must be approved by each holder of company preferred securities. Any
other provision of the UBS AG subordinated guarantee may be modified only with
the prior approval of the holders of not less than two-thirds (based on the
aggregate liquidation preference) of the company preferred securities.
Notwithstanding the foregoing, without the consent of any holder of company
preferred securities, UBS AG may amend or supplement the UBS AG Subordinated
Guarantee Agreement:
- to evidence the succession of another entity to UBS AG and the
assumption by any such successor of the covenants of UBS AG in the UBS
AG Subordinated Guarantee Agreement,
- to add to the covenants of UBS AG for the benefit of the holders of
company preferred securities, or to surrender any right or power
conferred upon UBS AG under the UBS AG Subordinated Guarantee Agreement,
- to correct or supplement any provision in the UBS AG Subordinated
Guarantee Agreement which may be defective or inconsistent with any
other provision therein, or to make any other provisions with respect to
matters or questions arising under the UBS AG Subordinated Guarantee
Agreement, so long as any such action shall not materially adversely
affect the interests of the holders of company preferred securities, or
- to cure any ambiguity or correct any mistake.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
Wilmington Trust Company is the guarantee trustee. The guarantee trustee is
required to perform only those duties that are specifically set forth in the UBS
AG subordinated guarantee, except when a default has occurred and is continuing
with respect to the UBS AG subordinated guarantee. After a default, the
guarantee trustee must exercise the same degree of care a prudent person would
exercise under the circumstances in the conduct of his or her own affairs.
Subject to these requirements, the guarantee trustee is under no obligation to
exercise any of the powers vested in it by the UBS AG subordinated guarantee at
the request of any holder of company preferred securities or any holder of trust
preferred securities, as the case may be, unless the holder offers the guarantee
trustee reasonable indemnity against the costs, expenses and liabilities that
might be incurred by exercising those powers.
GOVERNING LAW
The UBS AG subordinated guarantee is governed by and will be construed in
accordance with the laws of the State of New York.
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Description of Subordinated Notes of UBS AG
The following summary of the material terms and provisions of the subordinated
notes is not complete and is subject to, and qualified in its entirety by
reference to, the terms and provisions of the subordinated notes. We have filed
a copy of the form of subordinated note as an exhibit to the registration
statement of which this prospectus is a part.
GENERAL
UBS Preferred Funding Company applied the proceeds of the company preferred
securities and company common securities to purchase from the Cayman Islands
branch of UBS AG newly issued subordinated notes of the Cayman Islands branch.
The subordinated notes are undated perpetual obligations of UBS AG, acting
through the Cayman Islands branch, and have an aggregate principal amount of
USD500,000,000. Interest on the subordinated notes will be payable from the date
of initial issuance, semi-annually in arrears on June 26 and December 26 of each
year through June 2011 and thereafter quarterly in arrears on March 26, June 26,
September 26 and December 26 of each year (or, if any such day is not a business
day, the next business day, but without any additional interest or other payment
in respect of such delay) (each an "interest payment date" and the period from
and including an interest payment date, or the date of initial issuance, as
applicable, to but not including the next interest payment date, an "interest
period") as follows:
- for each interest period through the interest period ending on the
interest payment date in June 2011, at a fixed rate per annum equal to
7.247% (calculated on the basis of a 360-day year consisting of twelve
30-day months), and
- for each interest period ending after June 2011, at a floating rate per
annum equal to 2.30% above three-month LIBOR (calculated on the basis of
the actual number of days elapsed in a 360-day year).
The calculation of LIBOR is described under "Description of Company Preferred
Securities--Dividends." Interest due on an interest payment date will be
deferrable at the option of UBS AG's Cayman Islands branch to the extent that
dividends on the company preferred securities due on the corresponding dividend
payment date would constitute nondefinitive dividends. Interest deferred in this
manner will not itself bear interest.
REDEMPTION
The subordinated notes will be redeemable with the consent of the Swiss Federal
Banking Commission and at the option of the Cayman Islands branch of UBS AG:
- on the interest payment date in June 2011 or any interest payment date
occurring after that date, in whole or in part, at a redemption price
equal to 100% of their principal amount plus interest accrued but unpaid
to the date fixed for redemption,
- prior to the interest payment date in June 2011, in whole but not in
part, if a Tax Event resulting from a Change in Tax Law (and relating to
an event described in clauses (A), (B) or (C) of the definition of "Tax
Event") occurs at a redemption price equal to 100% of their principal
amount plus interest accrued but unpaid to the date fixed for
redemption, or
- prior to the interest payment date in June 2011, in whole but not in
part, if a Tax Event not resulting from a Change in Tax Law relating to
an event described in clause (A), (B) or (C) of the definition of "Tax
Event", an Investment Company Act Event or a Capital Event occurs at a
redemption price equal to interest accrued but unpaid to the date fixed
for redemption plus a make whole amount calculated in substantially the
same manner as the Make Whole Amount applicable to the company preferred
securities.
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DESCRIPTION OF SUBORDINATED NOTES OF UBS AG
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ADDITIONAL AMOUNTS
If the Cayman Islands branch of UBS AG is required to withhold any taxes, duties
or other governmental charges with respect to any payment in respect of the
subordinated notes, the Cayman Islands branch will pay such additional amounts
as shall be required so that the amount received by UBS Preferred Funding
Company under the subordinated notes shall not be reduced as a result of any
such additional taxes, duties or other governmental charges.
SUBORDINATION
The subordinated notes are a general and unsecured obligation of UBS AG and, in
liquidation of UBS AG, will rank, both as to payment and in liquidation:
- subordinate and junior to UBS AG senior liabilities, as defined under
"Description of UBS AG Subordinated Guarantee--Subordination," and
- senior to the ordinary shares of UBS AG and any other securities or
shares of UBS AG expressed to rank junior to the most senior preference
shares of UBS AG (if any) from time to time outstanding.
Payments under the subordinated notes (other than payments upon a winding-up or
dissolution, by bankruptcy or otherwise, in Switzerland of UBS AG) are
conditional upon UBS AG not being in default in the payment of UBS AG senior
liabilities, and being solvent, as defined under "Description of UBS AG
Subordinated Guarantee--Subordination," at the time of payment. A report as to
the insolvency of UBS AG by two persons, each being a managing director,
director or other authorized officer or agent of UBS AG or employees of the
independent accountants of UBS AG will, in the absence of manifest error be
treated and accepted by UBS AG, the holders of the company preferred securities
and all other interested parties as correct and sufficient evidence thereof.
ENFORCEMENT OF THE SUBORDINATED NOTES
Any consent, notice or other action (including any enforcement action) given or
taken by or on behalf of UBS Preferred Funding Company with respect to the
subordinated notes may be given or taken at the discretion of a majority of the
entire board of directors of UBS Preferred Funding Company.
TRANSFER OF THE SUBORDINATED NOTES
The subordinated notes are represented by a single definitive note registered in
the name of UBS Preferred Funding Company. UBS Preferred Funding Company's LLC
Agreement provides that UBS Preferred Funding Company may sell the subordinated
notes only upon the affirmative vote of both a majority of the board of
directors of UBS Preferred Funding Company and the holders of two-thirds (based
on the aggregate liquidation preference) of the company preferred securities and
other company parity preferred securities (if any), voting together as a single
class.
Although UBS Preferred Funding Company may sell the subordinated notes subject
to the requirements of the Securities Act of 1933 and other applicable laws and
the foregoing requirements, UBS AG and UBS Preferred Funding Company do not
anticipate that UBS Preferred Funding Company will sell the subordinated notes
and there is no expectation that a market will develop or exist for the
subordinated notes. The subordinated notes, by their terms, will provide that
they may be sold in whole and not in part and may not be divided into
denominations of less than USD1,000.
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DESCRIPTION OF SUBORDINATED NOTES OF UBS AG
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EVENTS OF DEFAULT
The subordinated notes do not provide for acceleration if the Cayman Islands
branch of UBS AG fails to make a payment when due. If the Cayman Islands branch
fails to make a payment when due of an installment of interest on the
subordinated notes, UBS Preferred Funding Company will be entitled to seek to
enforce payment only of the defaulted installment but not in respect of any
failure to pay interest due under the subordinated notes that was deferred
because the dividends on the company preferred securities on the corresponding
dividend payment date would have constituted nondefinitive dividends. A
"default" under the subordinated notes will occur if the Cayman Islands branch
fails to make a payment when due of an installment of principal or interest.
MODIFICATION AND AMENDMENT OF THE SUBORDINATED NOTES
The subordinated notes may be modified or amended only by the written agreement
of the Cayman Islands branch of UBS AG and UBS Preferred Funding Company.
However, UBS Preferred Funding Company's LLC Agreement will provide that UBS
Preferred Funding Company may not agree to any such modification or amendment
for so long as any company preferred securities or other company parity
preferred securities, if any, are outstanding unless holders of two-thirds
(based on the aggregate liquidation preference) of the company preferred
securities and other company parity preferred securities, if any, voting as a
class, consent to such modification or amendment (except that such consent of
the holders of company preferred securities and any other company parity
preferred securities shall not be required if (a) the proposed amendment or
modification would not materially and adversely affect the rights, preferences,
powers or privileges of UBS Preferred Funding Company and (b) UBS Preferred
Funding Company has received a letter from each of Moody's Investors Service,
Inc. and Standard & Poor's Ratings Services to the effect that such amendment
will not result in a downgrading of its respective rating then assigned to the
company preferred securities).
GOVERNING LAW
The subordinated notes are governed by the laws of the State of New York.
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Certain U.S. Tax Considerations
In the opinion of Sullivan & Cromwell, the following accurately describes the
material United States federal income tax (and, where specifically noted, United
States federal estate tax) consequences of the purchase of the trust preferred
securities and the ownership and disposition of the trust preferred securities
and the company preferred securities.
YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISORS AS TO THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST
PREFERRED SECURITIES OR THE COMPANY PREFERRED SECURITIES, AS WELL AS THE EFFECT
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS IN LIGHT OF YOUR PARTICULAR
CIRCUMSTANCES.
This discussion addresses only the tax consequences to a person that acquires
the trust preferred securities on their original issue at their original
offering price and that holds the trust preferred securities, and any company
preferred securities received in exchange for the trust preferred securities, as
capital assets. It does not address all tax consequences that may be applicable
to a beneficial owner of the trust preferred securities or company preferred
securities nor does it address the tax consequences to:
- persons that may be subject to special treatment under United States
federal income tax law, such as tax exempt entities, certain insurance
companies, broker-dealers, traders in securities that elect to mark to
market, persons liable for alternative minimum tax or persons that
actually or constructively own 10% or more of the voting stock of UBS
AG,
- persons that will hold the trust preferred securities or the company
preferred securities as part of a larger transaction, such as a
"straddle" or a "hedging" or "conversion" transaction, or
- persons whose functional currency is not the United States dollar.
This discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, Internal Revenue Service rulings and pronouncements and
judicial decisions as of the date hereof, all of which are subject to change,
possibly with retroactive effect.
CLASSIFICATION OF UBS PREFERRED FUNDING TRUST AND UBS PREFERRED FUNDING COMPANY
Under current law, and assuming compliance with the terms of the Amended and
Restated Trust Agreement, UBS Preferred Funding Trust will be treated as a
grantor trust and not as a partnership or an association taxable as a
corporation for United States federal income tax purposes. As a result, each
beneficial owner of the trust preferred securities will be considered the
beneficial owner of a pro rata portion of the company preferred securities held
by UBS Preferred Funding Trust.
Under current law, UBS Preferred Funding Company will be treated as a
partnership for United States federal income tax purposes. A partnership is not
a taxable entity and incurs no United States federal income tax liability.
Instead, each partner is required to take into account its allocable share of
items of income, gain, loss and deduction of the partnership in computing its
United States federal income tax liability, regardless of whether distributions
are made to the partner. These items generally will be treated as if realized by
the partner directly from the same source realized by UBS Preferred Funding
Company.
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CERTAIN U.S. TAX CONSIDERATIONS
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UNITED STATES HOLDERS
You are a "United States Holder" if you are a beneficial owner of the trust
preferred securities or company preferred securities and you are:
- an individual citizen or resident of the United States,
- a corporation organized in or under the laws of the United States or any
state thereof or the District of Columbia,
- an estate, and your income is subject to United States federal income
tax regardless of source, or
- a trust, if
- a United States court is able to exercise primary supervision over
your administration, and
- one or more United States persons who are authorized to control all
substantial decisions of the trust.
INCOME FROM THE TRUST PREFERRED SECURITIES
Under the LLC Agreement, upon the declaration, or deemed declaration, of
dividends on the company preferred securities, a like amount of UBS Preferred
Funding Company's ordinary income will be allocated to the holders of company
preferred securities. Regardless of when dividends on the trust preferred
securities are actually paid, income allocated to the holders of company
preferred securities will be includable as ordinary income by a United States
Holder for its taxable year that includes 31 December of the calendar year in
which the income is allocated, except that if the United States Holder disposes
of its entire holding of the trust preferred securities and the company
preferred securities (if any), the amount allocated for the calendar year of
that disposition will be includable for the United States Holder's taxable year
that includes the date of that disposition.
Assuming compliance with the terms of the Amended and Restated Trust Agreement,
UBS Preferred Funding Trust will distribute, until June 2011 on a semi-annual
basis and quarterly thereafter, an amount of cash equal to all of the income
that is allocated to it as a holder of company preferred securities. As a
consequence, a United States Holder will not recognize income in respect of the
trust preferred securities without receiving the corresponding cash
distribution, unless the United States Holder sells or otherwise disposes of
those trust preferred securities between the declaration date of dividends on
the company preferred securities and the corresponding record date for dividends
on the trust preferred securities. In the case of a sale between those dates, a
United States Holder will recognize ordinary income in an amount equal to the
dividends on the company preferred securities, which would increase the United
States Holder's basis in the trust preferred securities and reduce the gain, or
increase the loss, recognized on the sale or other disposition.
A United States Holder's allocated share of UBS Preferred Funding Company's
income from the subordinated notes will be foreign source income for purposes of
determining the limitation on any allowable foreign tax credit. The overall
limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For this purpose, a United States
Holder's allocated share of UBS Preferred Funding Company's income from the
subordinated notes generally will constitute "passive income" or, in the case of
certain United States Holders, "financial services income." If, with respect to
any distribution to a United States Holder, additional amounts are paid by UBS
Preferred Funding Company as a result of withholding taxes imposed on the
distribution, those additional amounts will be taxable to the United States
Holder as foreign source income. However, withholding taxes in the amount of
those additional amounts will generally be treated as foreign income taxes
eligible for credit against that United States Holder's United States federal
income tax liability, subject to generally applicable limitations and conditions
or, at the election of that United States Holder, for deduction in computing the
United States Holder's taxable income.
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CERTAIN U.S. TAX CONSIDERATIONS
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No portion of the income derived by a United States Holder from the trust
preferred securities will be eligible for the dividends-received deduction
generally available to United States corporations in respect of dividends
received from other United States corporations.
UBS AG believes that it is not a "passive foreign investment company" (sometimes
known as a "PFIC") for United States federal income tax purposes, but this
conclusion is a factual determination made annually and thus may be subject to
change. A United States Holder might be subject to special rules with respect to
certain amounts earned by UBS Preferred Funding Company with respect to the
initial subordinated notes if UBS AG were treated as a PFIC for United States
federal income tax purposes.
RECEIPT OF THE COMPANY PREFERRED SECURITIES UPON LIQUIDATION OF UBS PREFERRED
FUNDING TRUST
Under certain circumstances, the company preferred securities may be distributed
to the trust preferred securityholders in exchange for their trust preferred
securities and in liquidation of UBS Preferred Funding Trust. Unless the
liquidation of UBS Preferred Funding Trust occurs as a result of UBS Preferred
Funding Trust being subject to United States federal income taxes, such a
distribution to a United States Holder would be treated, for United States
federal income tax purposes, as a non-taxable event. Each United States Holder
would receive an aggregate tax basis in the company preferred securities equal
to the United States Holder's aggregate tax basis in its trust preferred
securities and the United States Holder's holding period in the company
preferred securities received would include the period during which the trust
preferred securities were held by the United States Holder. If, however, the
liquidation of UBS Preferred Funding Trust were to occur because UBS Preferred
Funding Trust is subject to United States federal income taxes, the distribution
of the company preferred securities to United States Holders by UBS Preferred
Funding Trust would likely be a taxable event to each United States Holder, and
a United States Holder would recognize gain or loss as if the United States
Holder had exchanged its trust preferred securities for the company preferred
securities it received. The gain or loss would be equal to the difference
between the United States Holder's aggregate tax basis in its trust preferred
securities surrendered in the exchange and the aggregate fair market value of
the company preferred securities received in the exchange.
If the company preferred securities are distributed to the holders of trust
preferred securities in liquidation of UBS Preferred Funding Trust, U.S. tax
information will be provided to beneficial owners of the company preferred
securities and to the Internal Revenue Service on Schedule K-1, rather than in
the manner described below under "--Information Reporting and Backup Withholding
Tax."
DISPOSITION OF THE TRUST PREFERRED SECURITIES OR THE COMPANY PREFERRED
SECURITIES
A United States Holder will recognize gain or loss on a sale, exchange or other
taxable disposition of the trust preferred securities or the company preferred
securities in an amount equal to the difference between the United States
Holder's adjusted tax basis and the amount realized on the disposition. A United
States Holder's adjusted tax basis in the trust preferred securities generally
will equal the amount paid for the trust preferred securities, increased by the
amount of income allocated to the United States holder and reduced by the amount
of any cash, and the fair market value of any other property, distributed to the
United States Holder. Any gain or loss so recognized generally will be capital
gain or loss, will be long-term capital gain or loss if the United States
Holder's holding period is more than one year and will be U.S. source income or
loss for purposes of determining the limitation on any allowable foreign tax
credit. Capital gain of a non-corporate United States Holder is generally taxed
at a maximum rate of 20% where the property is held for more than one year, and
18% where the property is held for more than five years.
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CERTAIN U.S. TAX CONSIDERATIONS
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The trust preferred securities may trade at a price that does not fully reflect
the value of income that may have been allocated to a United States Holder with
respect to the United States Holder's trust preferred securities. A United
States Holder that disposes of the trust preferred securities between the
declaration date of dividends on the company preferred securities and the
corresponding record date for dividends on the trust preferred securities will
be required to include as ordinary income an amount equal to dividends on the
company preferred securities and to add the amount of that income to its
adjusted tax basis in the trust preferred securities. Accordingly, such a United
States Holder will recognize a capital loss to the extent that the selling price
is less than the United States Holder's adjusted tax basis. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
NON-UNITED STATES HOLDERS
You are a "Non-United States Holder" if you are a beneficial owner of the trust
preferred securities or the company preferred securities and you are for United
States federal income tax purposes:
- a nonresident alien individual,
- a foreign corporation,
- a foreign partnership, or
- an estate or trust in either case that is not subject to United States
federal income tax on a net income basis on income or gain from the trust
preferred securities or company preferred securities.
UBS Preferred Funding Company intends to operate so that it will not be engaged
in a trade or business within the United States for United States federal income
tax purposes. Moreover, UBS Preferred Funding Company intends to invest in
securities the income from which will be either generally exempt from United
States federal withholding tax or exempt from United States federal withholding
tax to the extent allocable to a Non-United States Holder.
A Non-United States Holder will not be subject to United States federal income
or withholding tax on any allocated share of UBS Preferred Funding Company's
income or gain, or any gain realized on the sale or exchange of the trust
preferred securities or company preferred securities, unless, in the case of
gains, the Non-United States Holder is an individual who was present in the
United States for 183 days or more in the taxable year in which the gain is
realized and certain other conditions are met. A Non-United States Holder will
not be subject to backup withholding provided certain certification requirements
are satisfied as described under "--Information Reporting and Backup Withholding
Tax."
The treatment of the trust preferred securities and the company preferred
securities for United States federal estate tax purposes is unclear. If you are
an individual Non-United States Holder, you should consult your tax advisor
about the possibility that the trust preferred securities or the company
preferred securities will be includable in your gross estate for purposes of the
United States federal estate tax.
INFORMATION REPORTING AND BACKUP WITHHOLDING
If you are a United States Holder, the amount of income paid or accrued on the
trust preferred securities will generally be reported to you on Internal Revenue
Service Form 1099. In addition, information reporting will generally apply to
the payment of proceeds to a noncorporate United States Holder from the
disposition of the trust preferred securities effected at a United States office
of a
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CERTAIN U.S. TAX CONSIDERATIONS
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broker. Additionally, backup withholding may apply to such amount of income or
payment of proceeds if you are a noncorporate United States Holder that:
- fails to provide an accurate taxpayer identification number,
- is notified by the Internal Revenue Service that you have failed to
report all interest and dividends required to be shown on your federal
income tax returns, or
- in certain circumstances, fails to comply with applicable certification
requirements.
If you are a Non-United States Holder, you are generally exempt from backup
withholding and information reporting requirements with respect to:
- payments made on the trust preferred securities outside the United States
by a non-U.S. payor, and
- other payments made on the trust preferred securities and the payment of
the proceeds from the disposition of the trust preferred securities
effected at a United States office of a broker, as long as the income
associated with such payments is otherwise exempt from United States
federal income tax, and:
- the payor or broker does not have actual knowledge or reason to
know that you are a United States person and you have furnished the
payor or broker:
- an Internal Revenue Service Form W-8BEN or an acceptable
substitute form upon which you certify, under penalties of
perjury, that you are a non-United States person, or
- other documentation upon which it may rely to treat the
payments as made to a non-United States person in accordance
with U.S. Treasury regulations, or
- you otherwise establish an exemption.
Payment of the proceeds from the disposition of the trust preferred securities
effected at a foreign office of a broker generally will not be subject to
information reporting or backup withholding. However, a disposition of the trust
preferred securities effected at a foreign office of a broker will be subject to
information reporting and backup withholding if:
- the proceeds are transferred to an account maintained by you in the
United States,
- the payment of proceeds or the confirmation of the sale is mailed to you
at a United States address, or
- the sale has some other specified connection with the United States as
provided in U.S. Treasury regulations,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above are
met or you otherwise establish an exemption.
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CERTAIN U.S. TAX CONSIDERATIONS
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In addition, a disposition of the trust preferred securities effected at a
foreign office of a broker will be subject to information reporting if the
broker is:
- a United States person,
- a controlled foreign corporation for United States tax purposes,
- a foreign person 50% or more of whose gross income is effectively
connected with the conduct of a United States trade or business for a
specified three-year period, or
- a foreign partnership, if at any time during its tax year:
- one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership, or
- such foreign partnership is engaged in the conduct of a United States
trade or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above are
met or you otherwise establish an exemption. Backup withholding will apply if
the sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.
You generally may obtain a refund of any amounts withheld under the backup
withholding rules that exceed your income tax liability by filing a refund claim
with the United States Internal Revenue Service.
U.S. tax information will be provided to beneficial owners of the company
preferred securities and to the Internal Revenue Service on Schedule K-1, rather
than in the manner described above.
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Certain Tax Considerations Under the Laws of Switzerland
GENERAL
The tax information set forth below is based on the opinion of ATAG Ernst &
Young AG, Switzerland, dated 6 June 2001, and has been approved by them for its
accuracy. The following is a summary of the material Swiss tax consequences
related to the acquisition, ownership and disposition of the trust preferred
securities. The summary is based on legislation as of the date of this
prospectus and does not aim to be a comprehensive description of all the tax
considerations that may be relevant to a decision to invest in the trust
preferred securities. The tax treatment for each shareholder depends on the
particular situation of the shareholder and prospective investors are therefore
advised to consult with their professional tax advisors as to the respective tax
consequences of the purchase, ownership and disposition of the trust preferred
securities.
Furthermore, this summary does not address the tax treatment of the holders of
trust preferred securities subject to special tax rules.
HOLDERS WHO ARE NOT RESIDENTS OR DOMICILIARIES OF SWITZERLAND AND HAVE NO
PERMANENT ESTABLISHMENT OR REPRESENTATIVE IN SWITZERLAND
Holders of trust preferred securities who are not residents or domiciliaries of
Switzerland and have no permanent establishment or permanent representative in
Switzerland to which or to whom the shares are attributable or to which or to
whom the trust preferred securities belong, will not be subject to Swiss
corporate or individual income and capital tax or capital gains tax on the
holding and disposition of the trust preferred securities. Furthermore, there
will be no inheritance or gift tax imposed in Switzerland on the trust preferred
securities if the holder is an individual who is not domiciled in Switzerland.
ISSUANCE STAMP TAX
The issuance of the trust preferred securities will not be a taxable event for
Swiss issuance stamp tax purposes.
SECURITIES TURNOVER TAX
On the sale or purchase of the trust preferred securities through a registered
Swiss securities dealer a turnover tax of 0.15% will be imposed on each party.
No turnover tax will be imposed on transactions that are not through a
registered Swiss securities dealer.
HOLDERS WHO ARE RESIDENTS OR DOMICILIARIES OF SWITZERLAND OR HAVE A PERMANENT
ESTABLISHMENT OR REPRESENTATIVE IN SWITZERLAND
The following summary of the treatment of the holders of trust preferred
securities who are residents or domiciliaries of, or who have a permanent
establishment or residence in Switzerland, is based upon the conclusion that for
Swiss tax purposes the trust preferred securities are shareholder's equity
rather than debt.
WITHHOLDING TAX
No Swiss withholding tax is levied on dividend payments on the trust preferred
securities.
DIVIDENDS
Dividends received by a Swiss resident company or by an individual on the trust
preferred securities are subject to Swiss income tax.
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CERTAIN TAX CONSIDERATIONS UNDER THE LAWS OF SWITZERLAND
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Dividends received by a Swiss resident company qualify for the participation
exemption, if the recipient of the dividend owns at least 20% of the shares of
the distributing corporation or if the recipient holds shares with a market
value of at least CHF 2 million. Moreover, an investment in the trust preferred
securities may qualify as a participation for determining the holder privilege.
CAPITAL GAINS
Capital gains or losses realized by legal entities on the disposal or exchange
of the trust preferred securities are treated as ordinary income or expense. The
basis for determining the gain or loss is the tax value, which is generally the
book value.
As a result of a recent change of the Federal Tax Law, a corporation that
controls a participation of 20% or more in another corporation may claim the
participation relief for capital gains.
Nonbusiness capital gains realized by individuals are not taxed in Switzerland.
Individuals are only taxed on capital gains if they qualify as professional
securities dealers, or if the trust preferred securities are attributable to a
business carried on in Switzerland.
REDEMPTION OF CAPITAL
The amount distributed to individual shareholders in excess of the nominal share
capital is regarded as a dividend, which is subject to Swiss income tax.
For the trust preferred securities attributed to a business in Switzerland or a
legal entity, the principles of taxation of capital gains apply.
INHERITANCE AND GIFT TAXES
Almost all cantons levy separate inheritance and gift taxes. No inheritance or
gift taxes are imposed on the federal level. Inheritance and gift taxes are only
imposed on individuals. No corporate inheritance or gift tax is levied. The tax
is due on the transfer of the trust preferred securities by way of gift or upon
the death of a holder, provided the holder is domiciled in Switzerland. The tax
is based on the fair market value of the trust preferred securities.
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Certain ERISA Considerations
If you are a fiduciary of a pension, profit-sharing or other employee benefit
plan subject to the Employee Retirement Income Security Act ("ERISA"), you
should review the fiduciary standards of ERISA and the plan's particular
circumstances before deciding to invest in the trust preferred securities. You
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and whether the investment would be
consistent with the terms of the plan and the other agreements which apply to
plan investments.
A fiduciary of a plan subject to ERISA, as well as a person investing on behalf
of an individual retirement account or a pension or profit-sharing plan for one
or more self-employed persons, should also consider whether an investment in the
trust preferred securities could result in a prohibited transaction. ERISA and
the Internal Revenue Code of 1986, as amended, prohibit plans and individual
retirement accounts from engaging in certain transactions involving plan assets
with persons who are parties in interest under ERISA or disqualified persons
under the Internal Revenue Code of 1986, as amended, with respect to the plan or
individual retirement account. A violation of these rules may result in a
substantial excise tax under the Internal Revenue Code of 1986, as amended, and
other liabilities under ERISA. Employee benefit plans that are governmental
plans, foreign plans or church plans generally are not subject to the prohibited
transaction rules or the fiduciary standards of ERISA.
The assets of UBS Preferred Funding Trust would be treated as plan assets for
purposes of the prohibited transaction rules under a U.S. Department of Labor
regulation if plans and individual retirement accounts purchase trust preferred
securities, unless an exception under the regulation applies. The regulation
provides an exception if the trust preferred securities are considered to be
publicly-offered securities. The underwriters expect that the trust preferred
securities will be publicly-offered securities under the regulation because:
- the underwriters expect that the trust preferred securities will be
purchased initially by at least 100 persons who are independent of us
and each other,
- the trust preferred securities can be transferred freely,
- the trust preferred securities are being sold through this prospectus
which is part of an effective registration statement filed with the SEC,
and
- the trust preferred securities will be timely registered with the SEC
under the Securities Exchange Act of 1934.
If we are a party in interest or a disqualified person with respect to a plan or
individual retirement account that buys the trust preferred securities, either
directly or because we own banking or other subsidiaries, the sale could be
treated as a prohibited transaction unless an administrative exemption issued by
the Department of Labor applies. The Department of Labor has issued class
exemptions that may apply to exempt transactions resulting from the purchase or
holding of the trust preferred securities. Among those class exemptions are
Prohibited Transaction Exemption:
- 96-23, for transactions determined by in-house asset managers;
- 95-60, for transactions involving insurance company general accounts;
- 91-38, for transactions involving bank collective investment funds;
- 90-1, for transactions involving insurance company separate accounts;
and
- 84-14, for transactions determined by independent qualified asset
managers.
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CERTAIN ERISA CONSIDERATIONS
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These rules are very complicated and the penalties that may be imposed upon
persons involved in prohibited transactions can be substantial. This makes it
very important that fiduciaries or other persons considering purchasing the
trust preferred securities on behalf of a benefit plan investor consult with
their lawyer regarding what could happen if the assets of UBS Preferred Funding
Trust were deemed to be plan assets and if the investor can use one of the above
class exemptions or another applicable exemption.
A purchaser or holder of trust preferred securities or any interest therein will
be deemed to have represented by its purchase and holding thereof that it either
(a) is not an employee benefit plan and is not purchasing such securities on
behalf of or with plan assets of any employee benefit plan or (b) is eligible
for the exemptive relief available under Prohibited Transaction Exemption 96-23,
95-60, 91-38, 90-1 or 84-14 or another applicable exemption with respect to such
holding.
Before relying on any of these exemptions, a purchaser must conclude that the
exemption provides the necessary relief for all potential prohibited
transactions arising from the purchase of and from holding the trust preferred
securities. Neither the underwriters, UBS AG nor any of their respective
affiliates, agents or representatives have or can represent that these
exemptions apply with respect to any purchase of trust preferred securities by
any holder.
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Validity of the Securities
Certain matters of Delaware law relating to the validity of the trust preferred
securities and the company preferred securities were passed upon by Richards,
Layton & Finger, P.A., special Delaware counsel to UBS AG, UBS Preferred Funding
Trust and UBS Preferred Funding Company. The validity of the subordinated notes
and the UBS AG Subordinated Guarantee Agreement was passed upon for UBS AG, UBS
Preferred Funding Trust and UBS Preferred Funding Company by Sullivan &
Cromwell. Sullivan & Cromwell relied upon the opinion of Richards, Layton &
Finger, P.A., as to matters of Delaware law and the opinion of Bar & Karrer,
Swiss counsel to UBS AG, as to matters of Swiss law. Certain matters relating to
United States federal income tax considerations were passed upon for UBS AG, UBS
Preferred Funding Trust and UBS Preferred Funding Company by Sullivan &
Cromwell.
Experts
The consolidated balance sheets of UBS at 31 December 2000 and 1999 and the
related consolidated statements of income, cash flows and changes in
shareholders' equity for each of the three years in the period ended 31 December
2000 incorporated by reference into this prospectus have been audited by Ernst &
Young Ltd., independent auditors as set forth in their report thereon
incorporated by reference into this prospectus, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing. The consolidated balance sheets of Paine Webber Group Inc. at 31
December 1999 and 1998 and the related consolidated statements of income, cash
flows and changes in shareholders' equity for each of the three years in the
period ended 31 December 1999 incorporated by reference into this prospectus
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon incorporated by reference into this prospectus and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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General Information
LISTING
We have applied to list the trust preferred securities on the Luxembourg Stock
Exchange in accordance with its rules.
CLEARING SYSTEMS
The trust preferred securities have been accepted for clearance by Clearstream
and Euroclear. The Common Code for the trust preferred securities is 13178488
and the International Security Identification Number (ISIN) for the trust
preferred securities is US90262WAA18.
AUTHORIZATION
The transactions constituting the formation of UBS Preferred Funding Company
were authorized by a resolution of the board of directors of UBS AG passed on 16
May 2001 and the issue of the company preferred securities was authorized by UBS
Preferred Funding Company as of 22 May 2001.
DOCUMENTS
As long as any trust preferred securities are outstanding, copies of UBS
Preferred Funding Company's LLC Agreement, the Amended and Restated Trust
Agreement of UBS Preferred Funding Trust and the UBS AG subordinated guarantee
will be available for inspection during usual business hours at the specified
office of the paying agent in Luxembourg.
As long as any trust preferred securities are outstanding, a copy of the English
translation of the statutes and by-laws of UBS AG will be available for
inspection at the specified office of the paying agent in Luxembourg.
Copies of the latest annual report of UBS Preferred Funding Company and copies
in the English language of the latest annual report on a consolidated and an
unconsolidated basis and the published consolidated semi-annual financial
statements of UBS AG will be available at the specified office of the paying
agent in Luxembourg, so long as any trust preferred securities are outstanding.
Neither UBS Preferred Funding Trust nor UBS Preferred Funding Company currently
publish interim financial statements. UBS Preferred Funding Trust and UBS
Preferred Funding Company do not intend to publish non-consolidated financial
statements. UBS Preferred Funding Trust will make available in Luxembourg any
separate financial information about it made publicly available in the United
States, Switzerland or elsewhere.
MATERIAL ADVERSE CHANGE
Except as disclosed in this prospectus, there has been no material adverse
change in the financial position of UBS AG since 31 December 2000 and in the
financial position of UBS Preferred Funding Trust or UBS Preferred Funding
Company since 22 May 2001.
INFORMATION IN PROSPECTUS
UBS AG, UBS Preferred Funding Company and UBS Preferred Funding Trust, to the
best of their knowledge, confirm respectively that this prospectus contains all
information with respect to UBS AG and its consolidated subsidiaries, UBS
Preferred Funding Company, UBS Preferred Funding Trust, the company preferred
securities and the trust preferred securities which is material in the context
of the issue and offering of the trust preferred securities, that all the
information contained herein is true and
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GENERAL INFORMATION
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accurate in all material respects and is not misleading in any material respect,
that the opinions and intentions expressed herein are honestly held and that
there are no other facts the omission of which would make this prospectus as a
whole or any of such information or the expression of any such opinions or
intentions misleading in any material respect. UBS Preferred Funding Trust
accepts responsibility accordingly. Each investor contemplating purchasing the
trust preferred securities is required to make its own independent investigation
of the financial condition, general affairs and property and its own appraisal
of the credit worthiness of UBS AG and its consolidated subsidiaries, UBS
Preferred Funding Company and UBS Preferred Funding Trust.
No person has been authorized to give any information or to make any
representation other than those contained in this prospectus, and, if given or
made, such information or representation must not be relied upon as having been
authorized by UBS AG, UBS Preferred Funding Company and UBS Preferred Funding
Trust. This prospectus does not constitute an offer to sell or the solicitation
of an offer to buy any securities other than the securities to which it relates.
Neither the delivery of this prospectus nor any sale hereunder shall create,
under any circumstances, any implication that there has been no change in the
affairs of UBS AG, UBS Preferred Funding Company or UBS Preferred Funding Trust
since the date hereof or that the information contained herein is correct as of
any time subsequent to its date.
LITIGATION
None of UBS Preferred Funding Trust, UBS Preferred Funding Company or UBS AG are
involved in any litigation or arbitration proceedings relating to claims or
amounts that are material in the context of the issue of the trust preferred
securities nor, so far as UBS Preferred Funding Trust, UBS Preferred Funding
Company or UBS AG are aware, is any such litigation or arbitration pending or
threatened.
GOVERNING LAW
The LLC Agreement of UBS Preferred Funding Company, the company preferred
securities, the Amended and Restated Trust Agreement and the trust preferred
securities are governed by the laws of the State of Delaware without regard to
any conflicts of laws principles that would require the application of the laws
of a jurisdiction other than the State of Delaware. The subordinated notes and
the UBS AG Subordinated Guarantee Agreement are governed by the laws of the
State of New York.
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<Table>
UBS AG
Bahnhofstrasse 45
Zurich, Switzerland
and
Aeschenvorstadt 1
Basel, Switzerland
UBS PREFERRED FUNDING COMPANY LLC II UBS PREFERRED FUNDING TRUST II
The Corporation Trust Company c/o Wilmington Trust Company
1209 Orange Street 1100 North Market Street
Wilmington, Delaware 19801 Wilmington, Delaware 19890
</Table>
<Table>
LEGAL ADVISORS TO UBS AG
As to U.S. federal and New As to Delaware law: As to Swiss law: As to Swiss tax law:
York law: Richards, Layton & Finger Bar & Karrer ATAG Ernst & Young AG
Sullivan & Cromwell One Rodney Square Seefeldstrasse 19 Bleicherweg 21
125 Broad Street P.O. Box 551 CH-8024, Zurich CH-8022, Zurich
New York, New York Wilmington, DE 19899 Switzerland Switzerland
10004-2498 U.S.A.
U.S.A.
</Table>
LEGAL ADVISORS TO THE UNDERWRITERS
As to U.S. federal and New York law:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
U.S.A.
AUDITORS TO UBS AG
ATAG Ernst & Young AG
Aeschengraben 9
Postfach 2149
CH-4002, Basel
Switzerland
TRUSTEE, PAYING, REGISTRAR AND TRANSFER AGENT
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
LUXEMBOURG PAYING, REGISTRAR, TRANSFER AND LISTING AGENT
BNP Paribas Luxembourg
10 A, Boulevard Royal
L-2093 Luxembourg
Luxembourg
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