AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19 , 2002
PRE-EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION NO. 333-64844
POST-EFFECTIVE AMENDMENT NO. 4 (AS AMENDED) TO REGISTRATION STATEMENT NO.
333-46930
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM F-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
<Table>
UBS AG UBS PREFERRED FUNDING TRUST IV UBS PREFERRED FUNDING COMPANY IV
(EXACT NAME OF REGISTRANT UBS PREFERRED FUNDING TRUST V UBS PREFERRED FUNDING COMPANY V
AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT (EXACT NAME OF REGISTRANT
AS SPECIFIED IN ITS CHARTER) AS SPECIFIED IN ITS CHARTER)
</Table>
<Table>
SWITZERLAND 98-0186363 DELAWARE APPLIED FOR DELAWARE APPLIED FOR
(STATE OR OTHER (I.R.S. EMPLOYER (STATE OR OTHER (I.R.S. EMPLOYER (STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.) JURISDICTION OF IDENTIFICATION NO.) JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR INCORPORATION OR INCORPORATION OR
ORGANIZATION) ORGANIZATION) ORGANIZATION)
</Table>
<Table>
THE CORPORATION TRUST COMPANY
BAHNHOFSTRASSE 45, ZURICH, C/O WILMINGTON TRUST COMPANY CORPORATION TRUST CENTER
SWITZERLAND, 011-41-1-234 11 11 AND 1100 NORTH MARKET STREET 1209 ORANGE STREET
AESCHENVORSTADT 1, BASEL, WILMINGTON, DELAWARE 19890 WILMINGTON, DELAWARE 19801
SWITZERLAND, 011-41-61-288 20 20 302-651-1118 302-658-7581
(ADDRESS AND TELEPHONE NUMBER OF (ADDRESS AND TELEPHONE NUMBER OF (ADDRESS AND TELEPHONE NUMBER OF
REGISTRANT'S PRINCIPAL EXECUTIVE REGISTRANT'S PRINCIPAL EXECUTIVE REGISTRANT'S PRINCIPAL EXECUTIVE
OFFICES) OFFICES) OFFICES)
</Table>
------------------------
ROBERT C. DINERSTEIN, ESQ.
UBS AG
299 PARK AVENUE - NEW YORK, NEW YORK 10171 - TELEPHONE: 212-821-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPY TO:
REBECCA J. SIMMONS, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET - NEW YORK, NY 10004-2498 - 212-558-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED (1)(2)(3) PER UNIT PRICE(5)(6) FEE(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Debt Securities of UBS AG........... 100%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Warrants of UBS AG.................. 100%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Trust Preferred Securities of UBS
Preferred Funding Trust IV and UBS
Preferred Funding Trust V........... 100%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Company Preferred Securities of UBS
Preferred Funding Company IV and UBS
Preferred Funding Company V......... (4) (4) (4) (4)
- ---------------------------------------------------------------------------------------------------------------------------------
Subordinated Guarantees of UBS AG
with respect to the Noncumulative
Company Preferred Securities........ (4) (4) (4) (4)
- ---------------------------------------------------------------------------------------------------------------------------------
Total............................... $4,000,000,000 100% $4,000,000,000 $368,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) An indeterminate aggregate principal amount or number of the securities is
being registered to be issued from time to time at indeterminate prices,
with an aggregate initial offering price not to exceed $4,000,000,000
(exclusive of accrued dividends) or its equivalent in one or more other
currencies, currency units or composite currencies.
(2) This registration statement also covers an undeterminable amount of the
registered securities that may be reoffered and resold on an ongoing basis
after their initial sale in market-making transactions by UBS AG and its
affiliates.
(3) Pursuant to Rule 429 under the Securities Act, the securities covered by the
prospectuses filed as part of this Registration Statement include
$529,508,000 aggregate principal amount or offering price of UBS AG's debt
securities that were previously registered and have not yet been issued and
sold. These securities were registered by UBS AG on a registration statement
on Form F-1, as amended on Form F-3, under the Securities Act (File No.
333-46930) (the "Existing Shelf Registration Statement"). A filing fee of
$190,385 associated with the securities described above was previously paid
in connection with such registration statement.
(4) No separate consideration (separate from the consideration received for the
related trust preferred securities) will be received for the company
preferred securities or the related subordinated guarantees of UBS AG.
Pursuant to Rule 457(n) under the Securities Act, no separate fee is payable
with respect to these securities.
(5) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
(6) Separate consideration may not be received for registered securities that
are issuable on exercise, conversion or exchange of other securities.
Pursuant to Rule 429 under the Securities Act, the prospectuses included in
this Registration Statement relate to the unsold debt securities having an
aggregate principal amount of $529,508,000 that were previously registered by
UBS AG under the Existing Shelf Registration Statement. This Registration
Statement constitutes Pre-Effective Amendment No. 2 to UBS AG's registration
statement on Form F-3, as amended, under the Securities Act (File No. 333-64844)
(the "Additional Shelf Registration Statement") and Post-Effective Amendment No.
4 (as amended) to the Existing Shelf Registration Statement. Such post-effective
amendment shall hereafter become effective in accordance with Section 8(c) of
the Securities Act concurrently with the effectiveness of this Registration
Statement.
Upon effectiveness of the above-mentioned post and pre-effective amendments,
all of the securities that may be offered pursuant to the prospectuses contained
in this Registration Statement may be offered as debt securities, warrants or
trust preferred securities.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXPLANATORY NOTE
This registration statement contains two prospectuses relating to both of the
following:
- - the offering (on a delayed or continuous basis) of newly issued (a) debt
securities and warrants of UBS AG and (b) trust preferred securities by the
UBS Preferred Funding Trusts representing related company preferred securities
by the related UBS Preferred Funding Companies guaranteed on a subordinated
basis by UBS AG, all at an aggregate initial offering price of up to
$4,529,508,000; and
- - market-making transactions that may occur on a delayed or continuous basis in
such debt securities, warrants and trust preferred securities described above,
after they are initially offered and sold.
When a prospectus is delivered to an investor in the initial offering described
above, the investor will be informed of that fact in the confirmation of sale.
When a prospectus is delivered to an investor who is not so informed, it is
delivered in a market-making transaction.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PROSPECTUS PRELIMINARY PROSPECTUS DATED DECEMBER 19, 2002
- --------------------------------------------------------------------------------
[UBS AG LOGO]
UBS AG
$4,529,508,000
DEBT SECURITIES AND
WARRANTS
- --------------------------------------------------------------------------------
UBS AG from time to time may offer to sell debt securities and warrants. The
total amount of these securities will have an initial aggregate offering price
of up to $4,529,508,000, or the equivalent amount in other currencies.
UBS AG may offer and sell these securities to or through one or more
underwriters, dealers and agents, including the firms named below, or directly
to purchasers, on a delayed or continuous basis.
This prospectus describes some of the general terms that may apply to these
securities and the general manner in which they may be offered. The specific
terms of any securities to be offered, and the specific manner in which they may
be offered, will be described in a supplement to this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The securities are not deposit liabilities of UBS AG and are not insured by the
United States Federal Deposit Insurance Corporation or any other governmental
agency of the United States, Switzerland or any other jurisdiction.
UBS AG may use this prospectus in the initial sale of the securities. In
addition, UBS AG, UBS Warburg LLC, UBS PaineWebber Inc. or any other affiliate
of UBS AG may use this prospectus in a market-making transaction involving the
securities after their initial sale. Unless UBS AG or its agent informs the
purchaser otherwise in the confirmation of sale, this prospectus is being used
in a market-making transaction.
UBS WARBURG UBS PAINEWEBBER INC.
THE DATE OF THIS PROSPECTUS IS DECEMBER 19, 2002
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
Introduction........................... 3
Cautionary Note Regarding Forward-
Looking Information.................. 5
Incorporation of Information About UBS
AG................................... 7
Where You Can Find More Information.... 7
Presentation of Financial
Information.......................... 8
Limitations on Enforcement of U.S. Laws
Against UBS AG, Its Management and
Others............................... 9
Capitalization of UBS.................. 9
UBS.................................... 10
Use of Proceeds........................ 12
Description of Debt Securities We May
Offer................................ 13
Description of Warrants We May Offer... 35
Legal Ownership and Book-Entry
Issuance............................. 52
Considerations Relating to Indexed
Securities........................... 58
Considerations Relating to Securities
Denominated or Payable in or Linked
to a Non-U.S. Dollar Currency........ 61
U.S. Tax Considerations................ 64
Tax Considerations Under the Laws of
Switzerland.......................... 75
ERISA Considerations................... 77
Plan of Distribution................... 78
Validity of the Securities............. 81
Experts................................ 81
</Table>
CERTAIN TERMS
- --------------------------------------------------------------------------------
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 "USD," we mean United States dollars.
- when we refer to "CHF," we mean Swiss francs.
Introduction
THE SECURITIES WE ARE OFFERING
We may offer debt securities and warrants from time to time. When we use the
term "securities" in this prospectus, we mean any of the securities we may offer
with this prospectus, unless we say otherwise. This prospectus, including the
following summary, describes the general terms that may apply to the securities;
the specific terms of any particular securities that we may offer will be
described in a separate supplement to this prospectus. If there are differences
between this prospectus and your prospectus supplement, your prospectus
supplement will control.
DEBT SECURITIES
For any particular debt securities we offer, the applicable prospectus
supplement will describe the specific designation, the aggregate principal or
face amount and the purchase price; the stated maturity; the redemption terms,
if any; the rate or manner of calculating the rate and payment dates for
interest, if any; the amount, or manner of calculating the amount, payable at
maturity and whether that amount may be paid by delivering cash, securities or
other property; the terms on which the debt securities may be convertible into
or exercisable or exchangeable for common stock or other securities of issuers
other than UBS AG, if any; whether the obligations of UBS AG under the debt
securities are secured by any form of collateral or credit support and, if so,
its nature and terms; and any other specific terms. The debt securities will
rank equally in right of payment with all other unsubordinated debt obligations
of UBS AG.
The debt securities are not deposit liabilities of UBS AG and are not insured by
the United States Federal Deposit Insurance Corporation or any other
governmental agency of the United States, Switzerland or any other jurisdiction.
WARRANTS
We may offer two types of warrants:
- - warrants to purchase our debt securities; and
- - warrants to purchase or sell, or whose cash value is determined by reference
to the performance, level or value of, one or more of the following:
- securities of one or more issuers other than UBS AG;
- one or more currencies;
- one or more commodities;
- any other financial, economic or other measure or instrument, including
the occurrence or non-occurrence of any event or circumstance; and
- one or more indices or baskets of the items described above.
For any particular warrants we offer, the applicable prospectus supplement will
describe the underlying property; the expiration date; the exercise price or the
manner of determining the exercise price; the amount and kind, or the manner of
determining the amount and kind, of property to be delivered by you or us upon
exercise; and any other specific terms. We may issue the warrants under a
warrant indenture between us and a trustee that will be named in the applicable
prospectus supplement, or under warrant agreements between us and one or more
warrant agents that will be named in the applicable prospectus supplement.
FORM OF SECURITIES
We will issue the securities in book-entry form through one or more
depositaries, such as The Depository Trust Company, Euroclear or Clearstream,
named in the applicable prospectus supplement.
3
Each sale of a security in book-entry form will settle in immediately available
funds through the depositary, unless otherwise stated. In most cases, we will
issue the securities only in registered form, without coupons, although we may
issue the securities in bearer form if so specified in the applicable prospectus
supplement.
PAYMENT CURRENCIES
Amounts payable in respect of the securities, including the purchase price, will
be payable in U.S. dollars, unless the applicable prospectus supplement says
otherwise.
LISTING
If any securities are to be listed or quoted on a securities exchange or
quotation system, the applicable prospectus supplement will say so.
USE OF PROCEEDS
We intend to use the net proceeds from the sales of securities to provide
additional funds for our operations and for other general corporate purposes.
PLAN OF DISTRIBUTION
The securities will be offered in connection with their initial issuance or in
market-making transactions by us or our affiliates after initial issuance.
When we issue new securities, we may offer them for sale to or through
underwriters, dealers and agents, including our affiliates, or directly to
purchasers. The applicable prospectus supplement will include any required
information about the firms we use and the discounts or commissions we may pay
them for their services.
Our affiliates that we refer to above may include UBS AG itself, UBS Warburg LLC
and UBS PaineWebber Inc.
BRANCHES
We expect the securities will be booked through our Jersey branch, our London
branch, or such other branch as is specified in the applicable prospectus
supplement.
4
- --------------------------------------------------------------------------------
Cautionary Note Regarding Forward-Looking Statements
This prospectus contains or incorporates statements that constitute
"forward-looking statements" within the meaning of Section 21E of the United
States Securities Exchange Act of 1934, as amended. 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 and the incorporated documents, forward-looking
statements may, without limitation, relate to:
- - The implementation of strategic initiatives, such as the implementation of the
European wealth management strategy and our plans to continue to expand our
corporate finance business.
- - The development of revenues overall and within specific business areas
including the possibility of future losses in UBS Capital in 2002.
- - 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. Those factors include:
- - General economic conditions, including prevailing interest rates and
performance of financial markets, which may affect demand for products and
services and the value of our assets.
- - Changes in UBS's expenses associated with acquisitions and dispositions.
- - 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 accounting standards applicable to UBS, as more fully described
below.
- --------------------------------------------------------------------------------
5
- - Changes in investor confidence in the future performance of financial markets,
affecting the level of transactions they undertake, and hence the levels of
transaction based fees UBS earns.
- - Changes in the market value of securities held by UBS's clients, affecting the
level of asset based fees UBS can earn on the services it provides.
- - Changes in tax laws in the countries in which UBS operates, 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.
- --------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
Incorporation of Information About UBS AG
The SEC allows us to "incorporate by reference" into this prospectus the
information that we file 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 in this prospectus
- - UBS AG's Annual Report on Form 20-F for the year ended December 31, 2001,
which UBS AG filed with the SEC on March 14, 2002;
- - UBS AG's submissions on Form 6-K, which UBS AG filed with the SEC on February
14, February 25, March 6, April 29, May 9, May 14, May 16, August 13,
September 20, October 8, October 23, 2002 and November 12, 2002.
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 in this prospectus 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 a
statement in this prospectus or in any later filed document modifies or
supercedes that statement. Any statement that is modified or 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 documents 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
Switzerland
Phone: 011-41-1-234 41 00
Fax: 011-41-1-234 34 15
E-mail: SH-investorrelations@ubs.com
Internet: www.ubs.com/investor-relations
- --------------------------------------------------------------------------------
Where You Can Find More Information
UBS AG files periodic reports and other information with the United States
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
- --------------------------------------------------------------------------------
7
WHERE YOU CAN FIND MORE INFORMATION
- --------------------------------------------------------------------------------
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.
We have filed a registration statement under the Securities Act of 1933 on Form
F-3 with the SEC covering the securities. For further information about the
securities 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.
- --------------------------------------------------------------------------------
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. On December 18, 2002 the noon
buying rate was 0.6995 USD per 1 CHF.
<Table>
<Caption>
AVERAGE RATE(1)
YEAR ENDED DECEMBER 31 HIGH LOW (USD PER 1 CHF) AT PERIOD END
- -------------------------------------------------------------------------------------------------
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
2001..................................... 0.6331 0.5495 0.5910 0.6024
</Table>
<Table>
<Caption>
AVERAGE RATE(1)
QUARTER ENDED HIGH LOW (USD PER 1 CHF) AT PERIOD END
- -------------------------------------------------------------------------------------------------
March 31, 2002........................... 0.6089 0.5817 0.5879 0.5945
June 30, 2002............................ 0.6718 0.5974 0.6414 0.6702
September 30, 2002....................... 0.6951 0.6513 0.6740 0.6776
</Table>
<Table>
<Caption>
MONTH HIGH LOW
- -------------------------------------------------------------
June 2002.................................. 0.6718 0.6381
July 2002.................................. 0.6951 0.6639
August 2002................................ 0.6801 0.6513
September 2002............................. 0.6789 0.6578
October 2002............................... 0.6760 0.6605
November 2002.............................. 0.6928 0.6714
</Table>
- ------------
(1) The average of the noon buying rates on the last business day of each full
month during the relevant period.
- --------------------------------------------------------------------------------
8
- --------------------------------------------------------------------------------
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
the majority 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 those 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 UBS internal
counsel, that there is doubt as to the enforceability in Switzerland, in
original actions or in actions for enforcement of judgments 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>
ACTUAL
AS OF OCTOBER 31, 2002 (UNAUDITED) CHF USD
- -------------------------------------------------------------------------------
(IN MILLIONS)
Debt
Debt issued(1)............................................ 130,439 88,236
------- -------
Total Debt................................................ 130,439 88,236
Minority Interest(2)........................................ 3,807 2,575
Shareholders' Equity........................................ 40,955 27,704
------- -------
Total capitalization........................................ 175,201 118,515
======= =======
</Table>
- ---------------
(1) Includes Money Market Paper and Medium Term Notes as per Balance Sheet
position.
(2) Includes Trust Preferred Securities.
Swiss franc (CHF) amounts have been translated into U.S. dollars (USD) at the
rate of CHF 1 = USD 0.6764536.
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
UBS
OVERVIEW
The UBS Group 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.
UBS's global businesses include: UBS Warburg, a premier investment banking and
securities firm; UBS PaineWebber, one of the top US wealth managers; UBS Global
Asset Management, one of the largest asset managers globally; and UBS Wealth
Management & Business Banking, the world's largest private bank, by invested
assets. In Switzerland, UBS is the market leader in private, retail and
commercial banking.
At 31 December 2001, UBS employed approximately 70,000 people. With headquarters
in Zurich, Switzerland and Basel, Switzerland, UBS operates in over 50 countries
and from all major international centers.
UBS is managed through four Business Groups and its Corporate Center, each of
which is 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 US
Securities and Exchange Commission Form 20-F for the year ended 31 December 2001
(the "Form 20-F"), which is incorporated by reference into this information
memorandum.
USB WEALTH MANAGEMENT & BUSINESS BANKING
UBS Wealth Management & Business Banking includes the world's leading private
banking business, with CHF 682 billion of invested assets at 31 December 2001.
The Private Banking business unit provides a comprehensive range of products and
services individually tailored for wealthy clients, through offices around the
world.
UBS Wealth Management & Business Banking also provides a complete set of banking
and securities services for some four million individual and corporate clients
in Switzerland through the Business Banking Switzerland business unit. Its CHF
182 billion of outstanding loans at 31 December 2001 give it around a quarter of
the Swiss lending market.
UBS GLOBAL ASSET MANAGEMENT
UBS Global Asset Management is a leading institutional asset manager and mutual
fund provider, with invested assets of CHF 672 billion at 31 December 2001,
offering a broad range of asset management services and products for
institutional and individual clients across the world.
UBS WARBURG
USB Warburg operates globally as a client-driven securities and investment
banking firm. UBS Warburg provides innovative products, top-quality research and
advice, and comprehensive access to the world's capital markets, for both its
own corporate and institutional clients and for the other parts of the UBS
Group. It also includes the Group's Private Equity business.
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10
UBS
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UBS PAINEWEBBER
USB PaineWebber, one of the top US wealth managers, became part of UBS Group in
November 2000. Its distribution network of approximately 8,900 financial
advisors manages over CHF 782 billion of invested assets at 31 December 2001.
CORPORATE CENTRE
Our portfolio of businesses is planned and managed for the long-term
maximization of shareholder value. The role of the Corporate Centre is to ensure
that the Business Groups operate as a coherent and effective whole, in alignment
with UBS's overall corporate goals.
CORPORATE INFORMATION
The legal and commercial name of the company is UBS AG. The company was formed
on 29 June 1998, by the merger of Union Bank of Switzerland (founded 1862) and
Swiss Bank Corporation (founded 1872).
UBS AG is incorporated and domiciled in Switzerland and operates under Swiss
Company Law and Swiss Federal Banking Law as an Aktiengesellschaft, a
corporation that has issued shares of common stock to investors.
The address and telephone number of our two registered offices and principal
places of business are: Bahnhofstrasse 45, CH-8098 Zurich, Switzerland,
telephone +41-1-234 11 11; and Aeschenvorstadt 1, CH-4051 Basel, Switzerland,
telephone +41-61-288 20 20.
UBS AG shares are listed on the SWX Swiss Exchange and traded through virt-x (a
collaboration between the TP Group LDC and the SWX Swiss Exchange). They are
also listed on the New York Stock Exchange and on the Tokyo Stock Exchange.
The Company was incorporated under the name of SBC AG on 28 February 1978 for an
unlimited duration and entered in the Commercial Register of Canton Basle-City
on 28 February 1978. On 8 December 1997 the Company changed its name to UBS AG.
UBS AG is entered in the Commercial Registers of Canton Zurich and Canton
Basle-City. The registration number is CH-270.3.004.646-4.
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Use of Proceeds
We intend to use the proceeds from the sale of the securities to provide
additional funds for our operations and for general corporate purposes outside
of Switzerland. We will receive the net proceeds from sales of the securities
made in connection with their original issuance and in connection with any
market-making resales that UBS AG itself undertakes. We do not expect to receive
any proceeds from resales of the securities by UBS Warburg LLC, UBS PaineWebber
Inc. or any of our other affiliates in market-making transactions. We expect our
affiliates to retain the proceeds of their market-making resales and not to pay
the proceeds to us.
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Description of Debt Securities We May Offer
Please note that in this section entitled "Description of Debt Securities We May
Offer," references to UBS, we, our and us refer only to UBS AG and not to its
consolidated subsidiaries. Also, in this section, references to "holders" mean
those who own debt securities registered in their own names on the books that we
or the trustee maintain for this purpose, and not those who own beneficial
interests in debt securities registered in street name or in debt securities
issued in book-entry form through one or more depositaries. Owners of beneficial
interests in the debt securities should read the section below entitled "Legal
Ownership and Book-Entry Issuance."
THE DEBT INDENTURE
As required by U.S. federal law for publicly offered bonds and notes, the debt
securities are governed by a document called an indenture. The debt indenture is
a contract between us and U.S. Bank Trust National Association, which acts as
trustee. The trustee has two main roles:
- First, the trustee can enforce your rights against us if we default.
There are limitations on the extent to which the trustee acts on your
behalf, which we describe below under "Default, Remedies and Waiver of
Default."
- Second, the trustee performs administrative duties for us, such as
sending you interest payments and notices.
See "--Our Relationship with the Trustee" below for more information about the
trustee.
WE MAY ISSUE MANY SERIES OF DEBT SECURITIES UNDER THE INDENTURE
We may issue as many distinct series of debt securities under the debt indenture
as we wish. This section summarizes terms of the debt securities that apply
generally to all series. The provisions of the debt indenture allow us not only
to issue debt securities with terms different from those of debt securities
previously issued under the debt indenture, but also to "reopen" a previous
issue of a series of debt securities and issue additional debt securities of
that series. Most of the financial and other specific terms of your series will
be described in the prospectus supplement to be attached to the front of this
prospectus. Those terms may vary from the terms described here.
We may issue debt securities separately or together with other debt securities
or with our warrants.
As you read this section, please remember that the specific terms of your debt
security as described in your prospectus supplement will supplement and, if
applicable, may modify or replace the general terms described in this section.
If there are any differences between your prospectus supplement and this
prospectus, your prospectus supplement will control. Thus, the statements we
make in this section may not apply to your debt security.
When we refer to a series of debt securities, we mean a series issued under the
debt indenture. When we refer to your prospectus supplement, we mean the
prospectus supplement describing the specific terms of the debt security you
purchase. The terms used in your prospectus supplement will have the meanings
described in this prospectus, unless otherwise specified.
Unless we indicate otherwise in your prospectus supplement, the debt securities
we issue to you will be part of the series of debt securities referred to as our
"medium-term notes, Series A." The Series A notes are a single distinct series
under our indenture, and we may issue Series A notes in such amounts, at such
times and on such terms as we wish. We have authorized the issuance of Series A
notes having an aggregate initial offering price of up to $4,529,508,000, or an
equivalent amount in any other currency or currency unit. The Series A notes
will differ from one another, and from any
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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other series, in their terms, but all of the Series A notes together will
constitute a single series for all purposes under the indenture pursuant to
which they will be issued.
AMOUNTS THAT WE MAY ISSUE
The debt indenture does not limit the aggregate amount of debt securities that
we may issue, nor does it limit the number of series or the aggregate amount of
any particular series. We may issue debt securities and other securities in
amounts that exceed the total amount specified on the cover of this prospectus
at any time without your consent and without notifying you.
The debt indenture and the debt securities do not limit our ability to incur
other indebtedness or to issue other securities. Also, we are not subject to
financial or similar restrictions by the terms of the debt securities.
HOW THE DEBT SECURITIES RANK AGAINST OTHER DEBT
The debt securities will not be secured by any property or assets of UBS or its
subsidiaries. Thus, by owning a debt security, you will be one of our unsecured
creditors.
The debt securities will not be subordinated to any of our other debt
obligations. This means that, in a bankruptcy or liquidation proceeding against
us, the debt securities would rank equally in right of payment with all other
unsecured and unsubordinated debt of UBS, except for debts required to be
preferred by law. The debt securities are not deposit liabilities of UBS and are
not insured by the United States Federal Deposit Insurance Corporation or any
other governmental agency of the United States, Switzerland or any other
jurisdiction.
THIS SECTION IS ONLY A SUMMARY
The debt indenture and its associated documents, including your debt security,
contain the full legal text governing the matters described in this section and
your prospectus supplement. We have filed a copy of the debt indenture with the
SEC as an exhibit to our registration statement. See "Where You Can Find More
Information" above for information on how to obtain a copy.
This section and your prospectus supplement summarize all the material terms of
the debt indenture and your debt security. They do not, however, describe every
aspect of the debt indenture and your debt security. For example, in this
section and your prospectus supplement, we use terms that have been given
special meaning in the debt indenture, but we describe the meaning of only the
more important of those terms.
PRINCIPAL AMOUNT, STATED MATURITY AND MATURITY
The principal amount of a debt security means the principal amount payable at
its stated maturity, unless that amount is not determinable, in which case the
principal amount of a debt security is its face amount.
The term "stated maturity" with respect to any debt security means the day on
which the principal amount of your debt security is scheduled to become due. The
principal may become due sooner, by reason of redemption or acceleration after a
default or otherwise in accordance with the terms of the debt security. The day
on which the principal actually becomes due, whether at the stated maturity or
earlier, is called the maturity of the principal.
We also use the terms "stated maturity" and "maturity" to refer to the days when
other payments become due. For example, we may refer to a regular interest
payment date when an installment of interest is scheduled to become due as the
"stated maturity" of that installment.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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When we refer to the "stated maturity" or the "maturity" of a debt security
without specifying a particular payment, we mean the stated maturity or
maturity, as the case may be, of the principal.
GOVERNING LAW
The debt indenture and the debt securities will be governed by New York law.
CURRENCY OF DEBT SECURITIES
Amounts that become due and payable on your debt security in cash will be
payable in a currency, composite currency, basket of currencies or currency unit
or units specified in your prospectus supplement. We refer to this currency,
composite currency, basket of currencies or currency unit or units as a
"specified currency." The specified currency for your debt security will be U.S.
dollars, unless your prospectus supplement states otherwise. Some debt
securities may have different specified currencies for principal and interest.
You will have to pay for your debt securities by delivering the requisite amount
of the specified currency for the principal to UBS Warburg LLC, UBS PaineWebber
Inc. or another firm that we name in your prospectus supplement, unless other
arrangements have been made between you and us or you and that firm. We will
make payments on your debt securities in the specified currency, except as
described below in "--Payment Mechanics for Debt Securities." See
"Considerations Relating to Securities Denominated or Payable in or Linked to a
Non-U.S. Dollar Currency" below for more information about risks of investing in
this kind of debt securities.
TYPES OF DEBT SECURITIES
We may issue any of the following three types of debt securities:
FIXED RATED DEBT SECURITIES
A debt security of this type will bear interest at a fixed rate described in the
applicable prospectus supplement. This type includes zero coupon debt
securities, which bear no interest and are instead issued at a price lower than
the principal amount. See "--Original Issue Discount Debt Securities" below for
more information about zero coupon and other original issue discount debt
securities.
Each fixed rate debt security, except any zero coupon debt security, will bear
interest from its original issue date or from the most recent date to which
interest on the debt security has been paid or made available for payment.
Interest will accrue on the principal of a fixed rate debt security at the fixed
yearly rate stated in the applicable prospectus supplement, until the principal
is paid or made available for payment or the security has been converted or
exchanged. Each payment of interest due on an interest payment date or the date
of maturity will include interest accrued from and including the last date to
which interest has been paid, or made available for payment, or from the issue
date if none has been paid or made available for payment, to but excluding the
interest payment date or the date of maturity. We will compute interest on fixed
rate debt securities on the basis of a 360-day year of twelve 30-day months. We
will pay interest on each interest payment date and at maturity as described
below under "--Payment Mechanics for Debt Securities."
FLOATING RATE DEBT SECURITIES
INTEREST RATE FORMULAS. A debt security of this type will bear interest at
rates that are determined by reference to an interest rate formula. In some
cases, the rates may also be adjusted by adding or subtracting a spread or
multiplying by a spread multiplier and may be subject to a minimum rate or a
maximum rate. If your debt security is a floating rate debt security, the
formula and any adjustments that apply to the interest rate will be specified in
your prospectus supplement.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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Each floating rate debt security will bear interest from its original issue date
or from the most recent date to which interest on the debt security has been
paid or made available for payment. Interest will accrue on the principal of a
floating rate debt security at the yearly rate determined according to the
interest rate formula stated in the applicable prospectus supplement, until the
principal is paid or made available for payment. We will pay interest on each
interest payment date and at maturity as described below under "--Payment
Mechanics for Debt Securities."
CALCULATION OF INTEREST. Calculations relating to floating rate debt securities
will be made by the calculation agent, an institution that we appoint as our
agent for this purpose. That institution may include any affiliate of ours, such
as UBS Warburg LLC. The prospectus supplement for a particular floating rate
debt security will name the institution that we have appointed to act as the
calculation agent for that debt security as of its original issue date. We may
appoint a different institution to serve as calculation agent from time to time
after the original issue date of the debt security without your consent and
without notifying you of the change.
For each floating rate debt security, the calculation agent will determine, on
the corresponding interest calculation or determination date, as described in
the applicable prospectus supplement, the interest rate that takes effect on
each interest reset date. In addition, the calculation agent will calculate the
amount of interest that has accrued during each interest period--i.e., the
period from and including the original issue date, or the last date to which
interest has been paid or made available for payment, to but excluding the
payment date. For each interest period, the calculation agent will calculate the
amount of accrued interest by multiplying the face or other specified amount of
the floating rate debt security by an accrued interest factor for the interest
period. This factor will equal the sum of the interest factors calculated for
each day during the interest period. The interest factor for each day will be
expressed as a decimal and will be calculated by dividing the interest rate,
also expressed as a decimal, applicable to that day by 360 or by the actual
number of days in the year, as specified in the applicable prospectus
supplement.
Upon the request of the holder of any floating rate debt security, the
calculation agent will provide the interest rate then in effect for that debt
security--and, if determined, the interest rate that will become effective on
the next interest reset date. The calculation agent's determination of any
interest rate, and its calculation of the amount of interest for any interest
period, will be final and binding in the absence of manifest error.
All percentages resulting from any calculation relating to a debt security will
be rounded upward or downward, as appropriate, to the next higher or lower one
hundred-thousandth of a percentage point, e.g., 9.876541% (or .09876541) being
rounded down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being
rounded up to 9.87655% (or .0987655). All amounts used in or resulting from any
calculation relating to a floating rate debt security will be rounded upward or
downward, as appropriate, to the nearest cent, in the case of U.S. dollars, or
to the nearest corresponding hundredth of a unit, in the case of a currency
other than U.S. dollars, with one-half cent or one-half of a corresponding
hundredth of a unit or more being rounded upward.
In determining the base rate that applies to a floating rate debt security
during a particular interest period, the calculation agent may obtain rate
quotes from various banks or dealers active in the relevant market, as described
in the applicable prospectus supplement. Those reference banks and dealers may
include the calculation agent itself and its affiliates, as well as any
underwriter, dealer or agent participating in the distribution of the relevant
floating rate debt securities and its affiliates, and they may include UBS AG or
its affiliates.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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INDEXED DEBT SECURITIES
A debt security of this type provides that the principal amount payable at its
maturity, and/or the amount of interest payable on an interest payment date,
will be determined by reference to:
- securities of one or more issuers;
- one or more currencies;
- one or more commodities;
- any other financial, economic or other measure or instrument, including
the occurrence or non-occurrence of any event or circumstance; and/or
- one or more indices or baskets of the items described above.
If you are a holder of an indexed debt security, you may receive an amount at
maturity that is greater than or less than the face amount of your debt security
depending upon the value of the applicable index at maturity. The value of the
applicable index will fluctuate over time.
An indexed debt security may provide either for cash settlement or for physical
settlement by delivery of the underlying property or another property of the
type listed above. An indexed debt security may also provide that the form of
settlement may be determined at our option or at the holder's option. Some
indexed debt securities may be convertible, exercisable or exchangeable, at our
option or the holder's option, into or for securities of an issuer other than
UBS AG.
If you purchase an indexed debt security, your prospectus supplement will
include information about the relevant index, about how amounts that are to
become payable will be determined by reference to the price or value of that
index and about the terms on which the security may be settled physically or in
cash. The prospectus supplement will also identify the calculation agent that
will calculate the amounts payable with respect to the indexed debt security and
may exercise significant discretion in doing so. The calculation agent may be
UBS Warburg LLC or another of our affiliates. See "Considerations Relating to
Indexed Securities" for more information about risks of investing in debt
securities of this type.
ORIGINAL ISSUE DISCOUNT DEBT SECURITIES
A fixed rate debt security, a floating rate debt security or an indexed debt
security may be an original issue discount debt security. A debt security of
this type is issued at a price lower than its principal amount and provides
that, upon redemption or acceleration of its maturity, an amount less than its
principal amount will be payable. An original issue discount debt security may
be a zero coupon debt security. A debt security issued at a discount to its
principal may, for U.S. federal income tax purposes, be considered an original
issue discount debt security, regardless of the amount payable upon redemption
or acceleration of maturity. See "U.S. Tax Considerations--Taxation of Debt
Securities--Original Issue Discount" below for a brief description of the U.S.
federal income tax consequences of owning an original issue discount debt
security.
INFORMATION IN YOUR PROSPECTUS SUPPLEMENT
Your prospectus supplement will describe the specific terms of your debt
security, which will include some or all of the following:
- any limit on the total principal amount of the debt securities of the
same series;
- the stated maturity;
- the specified currency or currencies for principal and interest, if not
U.S. dollars;
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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- the price at which we originally issue your debt security, expressed as a
percentage of the principal amount, and the original issue date;
- whether your debt security is a fixed rate debt security, a floating rate
debt security or an indexed debt security;
- if your debt security is a fixed rate debt security, the yearly rate at
which your debt security will bear interest, if any, and the interest
payment dates;
- if your debt security is a floating rate debt security, the interest rate
basis; any applicable index currency or maturity, spread or spread
multiplier or initial, maximum or minimum rate; the interest reset,
determination, calculation and payment dates; the day count used to
calculate interest payments for any period; and the calculation agent;
- if your debt security is an indexed debt security, the principal amount,
if any, we will pay you at maturity, the amount of interest, if any, we
will pay you on an interest payment date or the formula we will use to
calculate these amounts, if any, and the terms on which your debt
security will be exchangeable for or payable in cash, securities or other
property;
- if your debt security may be converted into or exercised or exchanged for
debt or equity securities of one or more third parties, the terms on
which conversion, exercise or exchange may occur, including whether
conversion, exercise or exchange is mandatory, at the option of the
holder or at our option, the period during which conversion, exercise or
exchange may occur, the initial conversion, exercise or exchange price or
rate and the circumstances or manner in which the amount of securities
issuable upon conversion, exercise or exchange may be adjusted;
- if your debt security is also an original issue discount debt security,
the yield to maturity;
- if applicable, the circumstances under which your debt security may be
redeemed at our option or repaid at the holder's option before the stated
maturity, including any redemption commencement date, repayment date(s),
redemption price(s) and redemption period(s);
- the authorized denominations, if other than $1,000 and integral multiples
of $1,000;
- the depositary for your debt security, if other than DTC, and any
circumstances under which the holder may request securities in non-global
form, if we choose not to issue your debt security in book-entry form
only;
- if your debt security will be issued in bearer form, any special
provisions relating to bearer securities;
- if applicable, the circumstances under which we will pay additional
amounts on any debt securities held by a person who is not a United
States person for tax purposes and under which we can redeem the debt
securities if we have to pay additional amounts;
- the names and duties of any co-trustees, depositaries, authenticating
agents, paying agents, transfer agents or registrars for your debt
security; and
- any other terms of your debt security, which could be different from
those described in this prospectus.
If you purchase your debt security--or any of our other securities we describe
in this prospectus--in a market-making transaction, you will receive information
about the price you pay and your trade and settlement dates in a separate
confirmation of sale. A market-making transaction is one in which we, UBS
Warburg LLC, UBS PaineWebber Inc. or another of our affiliates resells a
security that it has
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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previously acquired from another holder. A market-making transaction in a
particular security occurs after the original issuance and sale of the security.
EXTENSION OF MATURITY
If specified in the applicable prospectus supplement, we will have the option to
extend the stated maturity of your debt security for one or more periods of
whole years up to but not beyond the final maturity date specified in the
prospectus supplement. We call a debt security whose maturity we may extend an
extendible debt security. We call the period of time as to which we may extend
the maturity the extension period. The following procedures will apply to
extendible debt securities, unless otherwise indicated in the applicable
prospectus supplement.
We may extend the maturity of an extendible debt security by notifying the
paying agent between 45 and 60 days before the stated maturity then in effect.
The stated maturity may be the original stated maturity, as described in the
prospectus supplement, or a maturity that we previously extended by following
these procedures. If we notify the paying agent that we will extend the
maturity, the paying agent will send a notice to each holder by first class
mail, postage prepaid, or by other means agreed upon between us and the paying
agent, at least 30 days before the stated maturity then in effect. The notice
sent by the paying agent will provide the following information:
- our election to extend the maturity of the extendible debt security.
- the extended maturity date or, if the maturity date had previously been
extended, the new extended maturity date.
- the interest rate that will apply during the extension period or, in the
case of a floating rate debt security, the spread and/or spread
multiplier, if any, applicable during the extension period.
- the provisions, if any, for redemption and repayment during the extension
period.
Once the paying agent has mailed the notice to each holder, the extension of the
maturity date will take place automatically. All of the terms of the debt
security will be the same as the terms of the debt security as originally
issued, except those terms that are described in the notice sent by the paying
agent to each holder and except as described in the following paragraph.
Not later than 10:00 a.m., New York City time, on the twentieth calendar day
before the maturity date then in effect for an extendible debt security or, if
that day is not a business day, on the next succeeding business day, we may
revoke the interest rate set forth in the extension notice sent by the paying
agent to each holder and establish a higher interest rate for the extension
period. If we elect to establish a higher interest rate, the paying agent will
send a notice to each holder by first class mail, postage prepaid, or by other
means agreed between us and the paying agent, of the higher interest rate in the
case of a floating rate debt security, the higher spread and/or spread
multiplier, if any. The notice of the higher rate cannot be revoked. All
extendible debt securities as to which the maturity date has been extended will
bear the higher rate for the extension period, whether or not tendered for
repayment.
If we elect to extend the maturity date of an extendible debt security, each
holder may elect repayment of all or part of its debt security on the maturity
date then in effect at a price equal to the principal amount plus any accrued
and unpaid interest to that date. To elect repayment, a holder must give notice
to the paying agent between 25 and 35 days before the maturity date in effect.
The notice must consist of either:
- the debt security along with the completed form entitled "Option to Elect
Repayment," which will be attached to your debt security.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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- a telegram, facsimile transmission or letter from a member of a national
securities exchange, the National Association of Securities Dealers, Inc.
or a commercial bank or trust company in the United States setting forth
the name of the holder, the principal amount of the debt security, the
principal amount of the debt security to be repaid, the certificate
number or a description of the tenor and terms of the debt security, a
statement that the option to elect repayment is being elected and a
guarantee that the debt security, together with the completed form
entitled "Option to Elect Repayment" will be received by the paying agent
no later than the fifth business day after the date of the telegram,
facsimile transmission or letter. The telegram, facsimile transmission or
letter will become effective upon receipt, by that fifth business day, of
the debt security and complete form.
The holder may revoke the election of repayment by sending to the paying agent
written notice by 3:00 p.m., New York City time, on the twentieth day before the
maturity date then in effect or, if that day is not a business day, on the next
succeeding business day.
If an extendible debt security is represented by a global debt security, the
depositary or its nominee, as the holder, will be the only person that can
exercise the right to elect repayment or revoke such an election. Any indirect
owners who own beneficial interests in the global debt security and wish to make
such an election must give proper and timely instructions to the banks or
brokers through which they hold their interests, requesting that they notify the
depositary to make a repayment election or revoke such an election on their
behalf. Different firms have different deadlines for accepting instructions from
their customers, and you should take care to act promptly enough to ensure that
your request is given effect by the depositary before the applicable deadline
for exercise.
REDEMPTION AND REPAYMENT
Unless otherwise indicated in your prospectus supplement, your debt security
will not be entitled to the benefit of any sinking fund--that is, we will not
deposit money on a regular basis into any separate custodial account to repay
your debt securities. In addition, we will not be entitled to redeem your debt
security before its stated maturity (except for certain tax reasons, as
described below) unless your prospectus supplement specifies a redemption date
or redemption commencement date. You will not be entitled to require us to buy
your debt security from you, before its stated maturity, unless your prospectus
supplement specifies one or more repayment dates.
If your prospectus supplement specifies one or more redemption dates, a
redemption commencement date or a repayment date, it will also specify one or
more redemption prices or repayment prices, which may be expressed as a
percentage of the principal amount of your debt security. It may also specify
one or more redemption periods during which the redemption prices relating to a
redemption of debt securities during those periods will apply.
If your prospectus supplement specifies one or more redemption dates, your debt
security will be redeemable at our option on any of those dates. If your
prospectus supplement specifies a redemption commencement date, your debt
security will be redeemable at our option at any time on or after that date. If
we redeem your debt security, we will do so at the specified redemption price.
If different prices are specified for different redemption periods, the price we
pay will be the price that applies to the redemption period during which your
debt security is redeemed.
If your prospectus supplement specifies a repayment date, your debt security
will be repayable at your option on the specified repayment date at the
specified repayment price, together with interest accrued to the repayment date.
If we exercise an option to redeem any debt security, we will give the trustee
and the holders written notice of the principal amount of the debt security to
be redeemed, not less than 10 days nor more
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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than 60 days before the applicable redemption date. We will give the notice in
the manner described below in "--Notices."
If a debt security represented by a global debt security is subject to repayment
at the holder's option, the depositary or its nominee, as the holder, will be
the only person that can exercise the right to repayment. Any indirect holders
who own beneficial interests in the global debt security and wish to exercise a
repayment right must give proper and timely instructions to the banks or brokers
through which they hold their interests, requesting that they notify the
depositary to exercise the repayment right on their behalf. Different firms have
different deadlines for accepting instructions from their customers, and you
should take care to act promptly enough to ensure that your request is given
effect by the depositary before the applicable deadline for exercise.
Street name and other indirect holders should contact their banks or brokers for
information about how to exercise a repayment right in a timely manner.
We or our affiliates may purchase debt securities from investors who are willing
to sell from time to time, either in the open market at prevailing prices or in
private transactions at negotiated prices. Debt securities that we or they
purchase may, at our discretion, be held, resold or cancelled.
OPTIONAL TAX REDEMPTION
In addition to the situations described above under "--Redemption and
Repayment," we also have the option to redeem the debt securities in two
situations described below, unless otherwise indicated in your prospectus
supplement. The redemption price for the debt securities, other than original
issue discount debt securities, will be equal to the principal amount of the
debt securities being redeemed plus accrued interest and any additional amounts
due on the date fixed for redemption. The redemption price for original issue
discount debt securities will be specified in the prospectus supplement for such
debt securities. Furthermore, we must give you between 10 and 60 days' notice
before redeeming the debt securities.
- The first situation is where, as a result of a change in, execution of or
amendment to any laws or treaties or the official application or
interpretation of any laws or treaties, we would be required to pay
additional amounts as described below under "--Payment of Additional
Amounts."
This applies only in the case of changes, executions, amendments,
applications or interpretations that occur on or after the date specified
in the prospectus supplement for the applicable debt securities and in a
relevant jurisdiction, as defined in "--Payment of Additional Amounts"
below. If UBS is succeeded by another entity, the applicable jurisdiction
will be the jurisdiction in which the successor entity is organized, and
the applicable date will be the date the entity became a successor.
We would not have the option to redeem in this case if we could have
avoided the payment of additional amounts or the deduction or withholding
by using reasonable measures available to us.
- The second situation is where a person located outside of a relevant
jurisdiction into which UBS is merged or to whom it has conveyed,
transferred or leased its property is required to pay an additional
amount. We would have the option to redeem the debt securities even if we
are required to pay additional amounts immediately after the merger,
conveyance, transfer or lease. We are not required to use reasonable
measures to avoid the obligation to pay additional amounts in this
situation.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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PAYMENT OF ADDITIONAL AMOUNTS
A relevant jurisdiction may require UBS to withhold amounts from payments on the
principal or interest on a debt security for taxes or any other governmental
charges. If the relevant jurisdiction requires a withholding of this type, UBS
may be required to pay you an additional amount so that the net amount you
receive will be the amount specified in the debt security to which you are
entitled.
By relevant jurisdiction, we mean Switzerland or a jurisdiction in which the UBS
branch through which debt securities are issued is located. UBS will NOT have to
pay additional amounts in respect of taxes or other governmental charges that
are required to be deducted or withheld by any paying agent from a payment on a
debt security, if such payment can be made without such deduction or withholding
by any other paying agent, or in respect of taxes or other governmental charges
that would not have been imposed but for
- the existence of any present or former connection between you and the
relevant jurisdiction, other than the mere holding of the debt security
and the receipt of payments on it;
- your status as an individual resident of a member state of the European
Union;
- a failure to comply with any reasonable certification, documentation,
information or other reporting requirement concerning your nationality,
residence, identity or connection with the relevant jurisdiction, if such
compliance is required as a precondition to relief or exemption from such
taxes or other governmental charges (including, without limitation, a
certification that you are not resident in the relevant jurisdiction or
are not an individual resident of a member state of the European Union);
or
- a change in law that becomes effective more than 30 days after a payment
on the debt security becomes due and payable or on which the payment is
duly provided for, whichever occurs later.
These provisions will also apply to any taxes or governmental charges imposed by
any jurisdiction in which a successor to UBS is organized. The prospectus
supplement relating to the debt security may describe additional circumstances
in which UBS would not be required to pay additional amounts.
MERGERS AND SIMILAR TRANSACTIONS
We are generally permitted to merge or consolidate with another firm. We are
also permitted to sell our assets substantially as an entirety to another firm.
With regard to any series of debt securities, we may not take any of these
actions, however, unless all the following conditions are met:
- If the successor firm in the transaction is not UBS, the successor firm
must be organized as a corporation, partnership or trust and must
expressly assume our obligations under the debt securities of that series
and the debt indenture. The successor firm may be organized under the
laws of any jurisdiction, whether in Switzerland or elsewhere.
- Immediately after the transaction, no default under the debt securities
of that series has occurred and is continuing. For this purpose, "default
under the debt securities of that series" means an event of default with
respect to that series or any event that would be an event of default
with respect to that series if the requirements for giving us default
notice and for our default having to continue for a specific period of
time were disregarded. We describe these matters below under "--Default,
Remedies and Waiver of Default."
If the conditions described above are satisfied with respect to the debt
securities of any series, we will not need to obtain the approval of the holders
of those debt securities in order to merge or consolidate or to sell our assets.
Also, these conditions will apply only if we wish to merge or consolidate with
another firm or sell our assets substantially as an entirety to another firm. We
will not need to satisfy
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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these conditions if we enter into other types of transactions, including any
transaction in which we acquire the stock or assets of another firm, any
transaction that involves a change of control of UBS but in which we do not
merge or consolidate and any transaction in which we sell less than
substantially all our assets.
Also, if we merge, consolidate or sell our assets substantially as an entirety
and the successor firm is a non-Swiss entity, neither we nor any successor would
have any obligation to compensate you for any resulting adverse tax consequences
to the debt securities.
DEFEASANCE AND COVENANT DEFEASANCE
Unless we say otherwise in the applicable prospectus supplement, the provisions
for full defeasance and covenant defeasance described below apply to each debt
security. In general, we expect these provisions to apply to each debt security
that has a specified currency of U.S. dollars and is not a floating rate or
indexed debt security.
FULL DEFEASANCE
If there is a change in U.S. federal tax law, as described below, we can legally
release ourselves from all payment and other obligations on your debt security.
This is called full defeasance. To do so, each of the following must occur:
- We must deposit in trust for the benefit of all holders of those debt
securities a combination of money and U.S. government or U.S. government
agency notes or bonds that will generate enough cash to make interest,
principal and any other payments on those debt securities on their
various due dates.
- There must be a change in current U.S. federal tax law or an Internal
Revenue Service ruling that lets us make the above deposit without
causing the holders to be taxed on those debt securities any differently
than if we did not make the deposit and just repaid the debt securities
ourselves. Under current federal tax law, the deposit and our legal
release from your debt securities would be treated as though we took back
your debt security and gave you your share of the cash and notes or bonds
deposited in trust. In that event, you could recognize gain or loss on
your debt security.
- We must deliver to the trustee a legal opinion of our counsel confirming
the tax law change described above.
If we ever fully defease your debt security, you would have to rely solely on
the trust deposit for payments on your debt security. You could not look to us
for payment in the event of any shortfall.
COVENANT DEFEASANCE
Under current U.S. federal tax law, we can make the same type of deposit
described above and be released from any restrictive covenants relating to your
debt security that may be described in your prospectus supplement. This is
called covenant defeasance. In that event, you would lose the protection of
those restrictive covenants. In order to achieve covenant defeasance for any
debt securities, we must do both of the following:
- We must deposit in trust for the benefit of all holders of those debt
securities a combination of money and U.S. government or U.S. government
agency notes or bonds that will generate enough cash to make interest,
principal and any other payments on those debt securities on their
various due dates.
- We must deliver to the trustee a legal opinion of our counsel confirming
that under U.S. federal income tax law as then in effect we may make the
above deposit without causing you to be
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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taxed on those debt securities any differently than if we did not make
the deposit and just repaid those debt securities ourselves.
If we accomplish covenant defeasance with regard to your debt security, the
following provisions of the debt indenture and your debt security would no
longer apply:
- - Any covenants that your prospectus supplement may state are applicable to your
debt security; and
- - The events of default resulting from a breach of covenants, described below in
the fourth bullet point under "--Default, Remedies and Waiver of
Default--Events of Default."
If we accomplish covenant defeasance on your debt security, you can still look
to us for repayment of your debt security in the event of any shortfall in the
trust deposit. You should note, however, that if one of the remaining events of
default occurred, such as our bankruptcy, and your debt security became
immediately due and payable, there may be a shortfall. Depending on the event
causing the default you may not be able to obtain payment of the shortfall.
DEFAULT, REMEDIES AND WAIVER OF DEFAULT
You will have special rights if an event of default with respect to your debt
security occurs and is not cured, as described in this subsection.
EVENTS OF DEFAULT
Unless your prospectus supplement says otherwise, when we refer to an event of
default with respect to any series of debt securities, we mean any of the
following occurs:
- We do not pay the principal or any premium (including delivering any
security or other property deliverable) on any debt securities of that
series at its stated maturity;
- We do not pay interest on any debt securities of that series within 30
days after it becomes due and payable;
- We do not deposit a sinking fund payment with regard to any debt
securities of that series on its due date, but only if the payment is
required in the applicable prospectus supplement;
- We remain in breach of any covenant we make in the debt indenture for the
benefit of the debt securities of that series, for 60 days after we
receive a notice of default stating that we are in breach and requiring
us to remedy the breach. The notice must be sent by the trustee or the
holders of not less than 10% in principal amount of the relevant series
of debt securities;
- We file for bankruptcy or certain other bankruptcy, insolvency or
reorganization events relating to UBS occur; or
- If the applicable prospectus supplement states that any additional event
of default applies to your series, that event of default occurs.
REMEDIES IF AN EVENT OF DEFAULT OCCURS
If an event of default has occurred with respect to any series of debt
securities and has not been cured or waived, the trustee or the holders of not
less than 25% in principal amount of all debt securities of that series may
declare the entire principal amount of the debt securities of that series to be
due immediately. If an event of default occurs because of bankruptcy, insolvency
or reorganization events relating to UBS, the entire principal amount of the
debt securities of that series will be automatically accelerated, without any
action by the trustee or any holder.
Each of the situations described above is called an acceleration of the maturity
of the affected series of debt securities. If the maturity of any series is
accelerated and a judgment for payment has not yet
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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been obtained, the holders of a majority in principal amount of the debt
securities of that series may cancel the acceleration for the entire series.
If an event of default occurs, the trustee will have special duties. The trustee
will be obligated to use those of its rights and powers under the debt
indenture, and to use the same degree of care and skill in doing so, that a
prudent person would use in that situation in conducting his or her own affairs.
Except as described in the prior paragraph, the trustee is not required to take
any action under the debt indenture at the request of any holders unless the
holders offer the trustee reasonable protection from expenses and liability.
This is called an indemnity. If the trustee is provided with an indemnity
reasonably satisfactory to it, the holders of a majority in principal amount of
all debt securities of the relevant series may direct the time, method and place
of conducting any lawsuit or other formal legal action seeking any remedy
available to the trustee. These majority holders may also direct the trustee in
performing any other action under the debt indenture with respect to the debt
securities of that series.
Before you bypass the trustee and bring your own lawsuit or other formal legal
action or take other steps to enforce your rights or protect your interests
relating to any debt security, all of the following must occur:
- The holder of your debt security must give the trustee written notice
that an event of default has occurred, and the event of default must not
have been cured or waived.
- The holders of not less than 25% in principal amount of all debt
securities of your series must make a written request that the trustee
take action because of the default, and they or other holders must offer
to the trustee indemnity reasonably satisfactory to the trustee against
the cost and other liabilities of taking that action.
- The trustee must not have taken action for 60 days after the above steps
have been taken.
- During those 60 days, the holders of a majority in principal amount of
the debt securities of your series must not have given the trustee
directions that are inconsistent with the written request of the holders
of not less than 25% in principal amount of all debt securities of your
series.
You are, however, entitled at any time to bring a lawsuit for the payment of
money due on your debt security on or after its due date.
WAIVER OF DEFAULT
The holders of not less than a majority in principal amount of the debt
securities of any series may waive a default for all debt securities of that
series. If this happens, the default will be treated as if it has not occurred.
No one can waive a payment default on your debt security, however, without the
approval of the particular holder of that debt security.
WE WILL GIVE THE TRUSTEE INFORMATION ABOUT DEFAULTS ANNUALLY
We will furnish to the trustee every year a written statement of two of our
officers certifying that to their knowledge we are in compliance with the debt
indenture and the debt securities, or else specifying any default under the debt
indenture.
Book-entry and other indirect holders should consult their banks or brokers for
information on how to give notice or direction to or make a request of the
trustee and how to declare or cancel an acceleration of the maturity of the debt
securities. Book-entry and other indirect owners are described below under
"Legal Ownership and Book-Entry Issuance."
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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MODIFICATION AND WAIVER OF COVENANTS
There are three types of changes we can make to the debt indenture and the debt
securities of any series.
CHANGES REQUIRING EACH HOLDER'S APPROVAL
First, there are changes that cannot be made without the approval of each holder
of a debt security affected by the change. Here is a list of those types of
changes:
- change the stated maturity for any principal or interest payment on a
debt security;
- reduce the principal amount, the amount payable on acceleration of the
maturity after a default, the interest rate or the redemption price for a
debt security;
- permit redemption of a debt security if not previously permitted;
- impair any right a holder may have to require repayment of his or her
debt security;
- impair any right that a holder of an indexed or any other debt security
may have to exchange or convert the debt security for or into securities
or other property;
- change the currency of any payment on a debt security other than as
permitted by the debt security;
- change the place of payment on a debt security, if it is in non-global
form;
- impair a holder's right to sue for payment of any amount due on his or
her debt security;
- reduce the percentage in principal amount of the debt securities of any
one or more affected series, taken separately or together, as applicable,
the approval of whose holders is needed to change the debt indenture or
those debt securities;
- reduce the percentage in principal amount of the debt securities of any
one or more affected series, taken separately or together, as applicable,
the consent of whose holders is needed to waive our compliance with the
debt indenture or to waive defaults; and
- change the provisions of the debt indenture dealing with modification and
waiver in any other respect, except to increase any required percentage
referred to above or to add to the provisions that cannot be changed or
waived without approval.
CHANGES NOT REQUIRING APPROVAL OF HOLDERS
The second type of change does not require any approval by holders of the debt
securities of an affected series. This type of change is limited to
clarifications and changes that would not adversely affect the debt securities
of that series in any material respect. We also do not need any approval to make
changes that affect only debt securities to be issued under the debt indenture
after the changes take effect.
We may also make changes or obtain waivers that do not adversely affect a
particular debt security, even if they affect other debt securities. In those
cases, we do not need to obtain the approval of the holder of the unaffected
debt security; we need only obtain any required approvals from the holders of
the affected debt securities.
CHANGES REQUIRING MAJORITY APPROVAL
Any other change to the debt indenture and the debt securities would require the
following approval:
- If the change affects only the debt securities of a particular series, it
must be approved by the holders of a majority in principal amount of the
debt securities of that series.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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- If the change affects the debt securities of more than one series of debt
securities issued under the debt indenture, it must be approved by the
holders of a majority in principal amount of all series affected by the
change, with the debt securities of all the affected series voting
together as one class for this purpose.
In each case, the required approval must be given by written consent.
The same majority approval would be required for us to obtain a waiver of any of
our covenants in the debt indenture. If the holders approve a waiver of a
covenant, we will not have to comply with that covenant. The holders, however,
cannot approve a waiver of any provision in a particular debt security, or in
the debt indenture as it affects that debt security, that we cannot change
without the approval of the holder of that debt security as described above
under "--Changes Requiring Each Holder's Approval," unless that holder approves
the waiver.
Book-entry and other indirect holders should consult their banks or brokers for
information on how approval may be granted or denied if we seek to change the
debt indenture or the debt securities or request a waiver.
SPECIAL RULES FOR ACTION BY HOLDERS
When holders take any action under the debt indenture, such as giving a notice
of default, declaring an acceleration, approving any change or waiver or giving
the trustee an instruction, we will apply the following rules.
ONLY OUTSTANDING DEBT SECURITIES ARE ELIGIBLE
Only holders of outstanding debt securities of the applicable series will be
eligible to participate in any action by holders of debt securities of that
series. Also, we will count only outstanding debt securities in determining
whether the various percentage requirements for taking action have been met. For
these purposes, a debt security will not be "outstanding":
- if it has been surrendered for cancellation;
- if we have deposited or set aside, in trust for its holder, money for its
payment or redemption;
- if we have fully defeased it as described above under "--Defeasance and
Covenant Defeasance--Full Defeasance"; or
- if we or one of our affiliates, such as UBS Warburg LLC or UBS
PaineWebber Inc., is the beneficial owner.
In some situations, we may follow special rules in calculating the principal
amount of a debt security that is to be treated as outstanding for the purposes
described above. This may happen, for example, if the principal amount is
payable in a non-U.S. dollar currency, increases over time or is not to be fixed
until maturity. For any debt security of the kind described below, we will
decide how much principal amount to attribute to the debt security as follows:
- For an original issue discount debt security, we will use the principal
amount that would be due and payable on the action date if the maturity
of the debt security were accelerated to that date because of a default.
- For a debt security whose principal amount is not known, we will use any
amount that we indicate in the prospectus supplement for that debt
security. The principal amount of a debt security may not be known, for
example, because it is based on an index that changes from time to time
and the principal amount is not to be determined until a later date.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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- For debt securities with a principal amount denominated in one or more
non-U.S. dollar currencies or currency units, we will use the U.S. dollar
equivalent, which we will determine.
DETERMINING RECORD DATES FOR ACTION BY HOLDERS
We will generally be entitled to set any day as a record date for the purpose of
determining the holders that are entitled to take action under the debt
indenture. In limited circumstances, only the trustee will be entitled to set a
record date for action by holders. If we or the trustee set a record date for an
approval or other action to be taken by holders, that vote or action may be
taken only by persons or entities who are holders on the record date and must be
taken during the period that we specify for this purpose, or that the trustee
specifies if it sets the record date. We or the trustee, as applicable, may
shorten or lengthen this period from time to time. This period, however, may not
extend beyond the 180th day after the record date for the action. In addition,
record dates for any global debt security may be set in accordance with
procedures established by the depositary from time to time. Accordingly, record
dates for global debt securities may differ from those for other debt
securities.
FORM, EXCHANGE AND TRANSFER OF DEBT SECURITIES
We will issue each debt security in global--i.e., book-entry--form only, unless
we specify otherwise in the applicable prospectus supplement. Debt securities in
book-entry form will be represented by a global security registered in the name
of a depositary, which will be the holder of all the debt securities represented
by the global security. Those who own beneficial interests in a global debt
security will do so through participants in the depositary's securities
clearance system, and the rights of these indirect owners will be governed
solely by the applicable procedures of the depositary and its participants. We
describe book-entry securities below under "Legal Ownership and Book-Entry
Issuance." Unless we specify otherwise in the applicable prospectus supplement,
The Depository Trust Company, New York, New York, known as DTC, will be the
depositary for all debt securities in global form.
In addition, we will generally issue each debt security in registered form,
without coupons, unless we specify otherwise in the applicable prospectus
supplement. If we issue a debt security in bearer form, the applicable
prospectus supplement will describe the provisions that would apply to that
security.
If a debt security is issued as a global debt security, only the
depositary--e.g., DTC, Euroclear and Clearstream--will be entitled to transfer
and exchange the debt security or exercise any other rights of a holder as
described in this subsection, since the depositary will be the sole holder of
the debt security.
If any debt securities cease to be issued in global form, then unless we
indicate otherwise in your prospectus supplement, they will be issued:
- only in fully registered form;
- without interest coupons; and
- in denominations of $1,000 and multiples of $1,000.
Holders may exchange their debt securities for debt securities of smaller
denominations (subject to the limit above) or combined into fewer debt
securities of larger denominations, as long as the total principal amount is not
changed. You may not exchange your debt securities for securities of a different
series or having different terms, unless your prospectus supplement says you
may.
Holders may exchange or transfer their debt securities at the office of the
trustee. They may also replace lost, stolen, destroyed or mutilated debt
securities at that office. We have appointed the trustee to act as our agent for
registering debt securities in the names of holders and transferring and
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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replacing debt securities. We may appoint another entity to perform these
functions or perform them ourselves.
Holders will not be required to pay a service charge to transfer or exchange
their debt securities, but they may be required to pay for any tax or other
governmental charge associated with the exchange or transfer. The transfer or
exchange, and any replacement, will be made only if our transfer agent is
satisfied with the holder's proof of legal ownership. The transfer agent may
require an indemnity before replacing any debt securities.
If we have designated additional transfer agents for your debt security, they
will be named in your prospectus supplement. We may appoint additional transfer
agents or cancel the appointment of any particular transfer agent. We may also
approve a change in the office through which any transfer agent acts.
If the debt securities of any series are redeemable and we redeem less than all
those debt securities, we may block the transfer or exchange of those debt
securities during the period beginning 15 days before the day we mail the notice
of redemption and ending on the day of that mailing or during any other period
specified in the applicable prospectus supplement, in order to freeze the list
of holders who will receive the mailing. We may also refuse to register
transfers of or exchange any debt security selected for redemption, except that
we will continue to permit transfers and exchanges of the unredeemed portion of
any debt security being partially redeemed.
The rules for exchange described above apply to exchanges of debt securities for
other debt securities of the same series and kind. If a debt security is
convertible, exercisable or exchangeable into or for a different kind of
security, such as one that we have not issued, or for other property, the rules
governing that type of conversion, exercise or exchange will be described in the
applicable prospectus supplement.
PAYMENT MECHANICS FOR DEBT SECURITIES
WHO RECEIVES PAYMENTS?
If interest is due on a debt security on an interest payment date, we will pay
the interest to the person in whose name the debt security is registered at the
close of business on the regular record date described below relating to the
interest payment date. If interest is due at maturity but on a day that is not
an interest payment date, we will pay the interest to the person entitled to
receive the principal of the debt security. If principal or another amount
besides interest is due on a debt security at maturity, we will pay the amount
to the holder of the debt security against surrender of the debt security at a
proper place of payment (or, in the case of a global debt security, in
accordance with the applicable policies of the depositary).
PAYMENT DATES AND REGULAR RECORD DATES FOR INTEREST
Unless we specify otherwise in the applicable prospectus supplement, interest on
any fixed rate debt security will be payable semiannually each May 15 and
November 15 and at maturity, and the regular record date relating to an interest
payment date for any fixed rate debt security will be the May 1 or November 1
next preceding that interest payment date. The regular record date relating to
an interest payment date for any floating rate debt security will be the 15th
calendar day before that interest payment date. These record dates will apply
whether or not a particular record date is a business day. For the purpose of
determining the holder at the close of business on a regular record date when
business is not being conducted, the close of business will mean 5:00 P.M., New
York City time, on that day.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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The term "business day" means, for any debt security, a day that meets all the
following applicable requirements:
- - for all debt securities, is a Monday, Tuesday, Wednesday, Thursday or Friday
that is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close and
that satisfies any other criteria specified in your prospectus supplement;
- - if the debt security is a floating rate debt security whose interest rate is
based on LIBOR, is also a day on which dealings in the relevant index currency
specified in the applicable prospectus supplement are transacted in the London
interbank market;
- - if the debt security has a specified currency other than U.S. dollars or
euros, is also a day on which banking institutions are not authorized or
obligated by law, regulation or executive order to close in the principal
financial center of the country issuing the specified currency;
- - if the debt security either is a floating rate debt security whose interest
rate is based on EURIBOR or has a specified currency of euros, is also a day
on which the Trans-European Automated Real-time Gross settlement Express
Transfer (TARGET) System, or any successor system, is open for business;
- - if the debt security is held through Euroclear, is also not a day on which
banking institutions in Brussels, Belgium are generally authorized or
obligated by law, regulation or executive order to close; and
- - if the debt security is held through Clearstream, is also not a day on which
banking institutions in Luxembourg are generally authorized or obligated by
law, regulation or executive order to close.
HOW WE WILL MAKE PAYMENTS DUE IN U.S. DOLLARS
We will follow the practices described in this subsection when paying amounts
due in U.S. dollars. Payments of amounts due in other currencies will be made as
described in the next subsection.
PAYMENTS ON GLOBAL DEBT SECURITIES. We will make payments on a global debt
security in accordance with the applicable policies of the depositary as in
effect from time to time. Under those policies, we will pay directly to the
depositary, or its nominee, and not to any indirect owners who own beneficial
interests in the global debt security. An indirect owner's right to receive
those payments will be governed by the rules and practices of the depositary and
its participants, as described under "Legal Ownership and Book-Entry
Issuance--What Is a Global Security?".
PAYMENTS ON NON-GLOBAL DEBT SECURITIES. We will make payments on a debt
security in non-global, registered form as follows. We will pay interest that is
due on an interest payment date by check mailed on the interest payment date to
the holder at his or her address shown on the trustee's records as of the close
of business on the regular record date. We will make all other payments by check
at the paying agent described below, against surrender of the debt security. All
payments by check will be made in next-day funds--that is, in funds that become
available on the day after the check is cashed.
Alternatively, if a non-global debt security has a face amount of at least
$1,000,000 and the holder asks us to do so, we will pay any amount that becomes
due on the debt security by wire transfer of immediately available funds to an
account at a bank in New York City, on the due date. To request wire payment,
the holder must give the paying agent appropriate wire transfer instructions at
least five business days before the requested wire payment is due. In the case
of any interest payment due on an interest payment date, the instructions must
be given by the person who is the holder on the relevant regular record date. In
the case of any other payment, payment will be made only after the debt security
is surrendered to the paying agent. Any wire instructions, once properly given,
will remain in effect unless and until new instructions are given in the manner
described above.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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Book-entry and other indirect owners should consult their banks or brokers for
information on how they will receive payments on their debt securities.
HOW WE WILL MAKE PAYMENTS DUE IN OTHER CURRENCIES
We will follow the practices described in this subsection when paying amounts
that are due in a specified currency other than U.S. dollars.
PAYMENTS ON GLOBAL DEBT SECURITIES. We will make payments on a global debt
security in accordance with the applicable policies of the depositary as in
effect from time to time. We understand that these policies, as currently in
effect at DTC, are as follows:
Unless otherwise indicated in your prospectus supplement, if you are an indirect
owner of global debt securities denominated in a specified currency other than
U.S. dollars and if you have the right to elect to receive payments in that
other currency and you do make that election, you must notify the participant
through which your interest in the global debt security is held of your
election:
- on or before the applicable regular record date, in the case of a payment
of interest, or
- on or before the 16th day prior to stated maturity, or any redemption or
repayment date, in the case of payment of principal or any premium.
You may elect to receive all or only a portion of any interest, principal or
premium payment in a specified currency other than U.S. dollars.
Your participant must, in turn, notify DTC of your election on or before the
third DTC business day after that regular record date, in the case of a payment
of interest, and on or before the 12th DTC business day prior to stated
maturity, or on the redemption or repayment date if your debt security is
redeemed or repaid earlier, in the case of a payment of principal or any
premium.
DTC, in turn, will notify the paying agent of your election in accordance with
DTC's procedures.
If complete instructions are received by the participant and forwarded by the
participant to DTC, and by DTC to the paying agent, on or before the dates noted
above, the paying agent, in accordance with DTC's instructions, will make the
payments to you or your participant by wire transfer of immediately available
funds to an account maintained by you or your participant with a bank located in
the country issuing the specified currency or in another jurisdiction acceptable
to us and the paying agent.
If the foregoing steps are not properly completed, we expect DTC to inform the
paying agent that payment is to be made in U.S. dollars. In that case, we or our
agent will convert the payment to U.S. dollars in the manner described below
under "--Conversion to U.S. Dollars." We expect that we or our agent will then
make the payment in U.S. dollars to DTC, and that DTC in turn will pass it along
to its participants.
Book-entry and other indirect holders of a global debt security denominated in a
currency other than U.S. dollars should consult their banks or brokers for
information on how to request payment in the specified currency.
PAYMENTS ON NON-GLOBAL DEBT SECURITIES. Except as described in the second to
last paragraph under this heading, we will make payments on debt securities in
non-global form in the applicable specified currency. We will make these
payments by wire transfer of immediately available funds to any account that is
maintained in the applicable specified currency at a bank designated by the
holder and is acceptable to us and the trustee. To designate an account for wire
payment, the holder must give the paying agent appropriate wire instructions at
least five business days before the requested wire payment is due. In the case
of any interest payment due on an interest payment date, the instructions must
be given by the person who is the holder on the regular record date. In the case
of any other
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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payment, the payment will be made only after the debt security is surrendered to
the paying agent. Any instructions, once properly given, will remain in effect
unless and until new instructions are properly given in the manner described
above.
If a holder fails to give instructions as described above, we will notify the
holder at the address in the trustee's records and will make the payment within
five business days after the holder provides appropriate instructions. Any late
payment made in these circumstances will be treated under the debt indenture as
if made on the due date, and no interest will accrue on the late payment from
the due date to the date paid.
Although a payment on a debt security in non-global form may be due in a
specified currency other than U.S. dollars, we will make the payment in U.S.
dollars if the holder asks us to do so. To request U.S. dollar payment, the
holder must provide appropriate written notice to the trustee at least five
business days before the next due date for which payment in U.S. dollars is
requested. In the case of any interest payment due on an interest payment date,
the request must be made by the person who is the holder on the regular record
date. Any request, once properly made, will remain in effect unless and until
revoked by notice properly given in the manner described above.
Indirect owners of a non-global debt security with a specified currency other
than U.S. dollars should contact their banks or brokers for information about
how to receive payments in the specified currency or in U.S. dollars.
CONVERSION TO U.S. DOLLARS. When we are asked by a holder to make payments in
U.S. dollars of an amount due in another currency, either on a global debt
security or a non-global debt security as described above, we will determine the
U.S. dollar amount the holder receives as follows. The exchange rate agent
described below will request currency bid quotations expressed in U.S. dollars
from three or, if three are not available, then two, recognized foreign exchange
dealers in New York City, any of which may be the exchange rate agent, which may
be UBS Warburg LLC, an affiliate of UBS, as of 11:00 A.M., New York City time,
on the second business day before the payment date. Currency bid quotations will
be requested on an aggregate basis, for all holders of debt securities
requesting U.S. dollar payments of amounts due on the same date in the same
specified currency. The U.S. dollar amount the holder receives will be based on
the highest acceptable currency bid quotation received by the exchange rate
agent. If the exchange rate agent determines that at least two acceptable
currency bid quotations are not available on that second business day, the
payment will be made in the specified currency.
To be acceptable, a quotation must be given as of 11:00 A.M., New York City
time, on the second business day before the due date and the quoting dealer must
commit to execute a contract at the quotation in the total amount due in that
currency on all series of debt securities. If some but not all of the relevant
debt securities are LIBOR debt securities or EURIBOR debt securities, the second
preceding business day will be determined for this purpose as if none of those
debt securities were LIBOR debt securities or EURIBOR debt securities.
A holder that requests payment in U.S. dollars will bear all associated currency
exchange costs, which will be deducted from the payment.
WHEN THE SPECIFIED CURRENCY IS NOT AVAILABLE. If we are obligated to make any
payment in a specified currency other than U.S. dollars, and the specified
currency or any successor currency is not available to us or cannot be paid to
you due to circumstances beyond our control--such as the imposition of exchange
controls or a disruption in the currency markets--we will be entitled to satisfy
our obligation to make the payment in that specified currency by making the
payment in U.S. dollars, on the basis specified in the applicable prospectus
supplement.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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For a specified currency other than U.S. dollars, the exchange rate will be the
noon buying rate for cable transfers of the specified currency in New York City
as quoted by the Federal Reserve Bank of New York on the then-most recent day on
which that bank has quoted that rate.
The foregoing will apply to any debt security, whether in global or non-global
form, and to any payment, including a payment at maturity. Any payment made
under the circumstances and in a manner described above will not result in a
default under any debt security or the debt indenture.
THE EURO. The euro may be a specified currency for some debt securities. On
January 1, 1999, the euro became the legal currency for the 11 member states
participating in the European Economic and Monetary Union. During a transition
period from January 1, 1999 to December 31, 2001 and for a maximum of six months
thereafter, the former national currencies of these 11 member states will
continue to be legal tender in their country of issue, at rates irrevocably
fixed on December 31, 1998.
EXCHANGE RATE AGENT. If we issue a debt security in a specified currency other
than U.S. dollars, we will appoint a financial institution to act as the
exchange rate agent and will name the institution initially appointed when the
debt security is originally issued in the applicable prospectus supplement. We
may select UBS Warburg LLC or another of our affiliates to perform this role. We
may change the exchange rate agent from time to time after the original issue
date of the debt security without your consent and without notifying you of the
change.
All determinations made by the exchange rate agent will be at its sole
discretion unless we state in your prospectus supplement that any determination
is subject to our approval. In the absence of manifest error, those
determinations will be conclusive for all purposes and binding on you and us,
without any liability on the part of the exchange rate agent.
PAYMENT WHEN OFFICES ARE CLOSED
If any payment is due on a debt security on a day that is not a business day, we
will make the payment on the next day that is a business day. Payments postponed
to the next business day in this situation will be treated under the debt
indenture as if they were made on the original due date. Postponement of this
kind will not result in a default under any debt security or the debt indenture,
and no interest will accrue on the postponed amount from the original due date
to the next day that is a business day. The term business day has a special
meaning, which we describe above under "--Payment and Record Dates for
Interest."
PAYING AGENT
We may appoint one or more financial institutions to act as our paying agents,
at whose designated offices debt securities in non-global entry form may be
surrendered for payment at their maturity. We call each of those offices a
paying agent. We may add, replace or terminate paying agents from time to time.
We may also choose to act as our own paying agent. Initially, we have appointed
the trustee, at its corporate trust office in New York City, as the paying
agent. We must notify the trustee of changes in the paying agents.
SETTLEMENT MECHANICS
The settlement mechanics applicable to debt securities calling for physical
settlement will be described in the applicable prospectus supplement.
UNCLAIMED PAYMENTS
Regardless of who acts as paying agent, all money paid by us to a paying agent
that remains unclaimed at the end of two years after the amount is due to a
holder will be repaid to us. After that two-year period, the holder may look
only to us for payment and not to the trustee, any other paying agent or anyone
else.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
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NOTICES
Notices to be given to holders of a global debt security will be given only to
the depositary, in accordance with its applicable policies as in effect from
time to time. Notices to be given to holders of debt securities not in global
form will be sent by mail to the respective addresses of the holders as they
appear in the trustee's records, and will be deemed given when mailed. Neither
the failure to give any notice to a particular holder, nor any defect in a
notice given to a particular holder, will affect the sufficiency of any notice
given to another holder.
Book-entry and other indirect holders should consult their banks or brokers for
information on how they will receive notices.
OUR RELATIONSHIP WITH THE TRUSTEE
U.S. Bank Trust National Association has provided commercial banking and other
services for us and our affiliates in the past and may do so in the future.
Among other things, U.S. Bank Trust National Association provides us with a line
of credit, holds debt securities issued by us and serves as trustee or agent
with regard to other obligations of UBS or its subsidiaries.
U.S. Bank Trust National Association is initially serving as the trustee for the
debt securities. Consequently, if an actual or potential event of default occurs
with respect to any of these securities, the trustee may be considered to have a
conflicting interest for purposes of the Trust Indenture Act of 1939. In that
case, the trustee may be required to resign under the debt indenture, and we
would be required to appoint a successor trustee. For this purpose, a
"potential" event of default means an event that would be an event of default if
the requirements for giving us default notice or for the default having to exist
for a specific period of time were disregarded.
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Description of Warrants We May Offer
Please note that in this section entitled "Description of Warrants We May
Offer," references to UBS AG, we, our and us refer only to UBS AG and not to its
consolidated subsidiaries. Also, in this section, references to "holders" mean
those who own warrants registered in their own names, on the books that we or
the trustee or warrant agent, as applicable, maintain for this purpose, and not
those who own beneficial interests in warrants registered in street name or in
warrants issued in book-entry form through one or more depositaries. Owners of
beneficial interests in the warrants should read the section below entitled
"Legal Ownership and Book-Entry Issuance."
WE MAY ISSUE MANY SERIES OF WARRANTS
We may issue warrants that are debt warrants or universal warrants. We may offer
warrants separately or together with other warrants or with our debt securities.
We may issue warrants in such amounts or in as many distinct series as we wish.
We will issue each series of warrants under either a warrant indenture, to be
entered into before the first issuance of warrants under such indenture, between
UBS and a trustee to be named in the prospectus supplement applicable to the
first series of warrants to be issued pursuant to such an indenture, or a
warrant agreement, to be entered into before the first issuance of warrants
under such warrant agreement, between UBS and a warrant agent to be named in the
prospectus supplement applicable to the first series of warrants to be issued
pursuant to such a warrant agreement. This section summarizes terms of the
warrant indenture and warrant agreements and terms of the warrants that apply
generally to all series of warrants. Most of the financial and other specific
terms of your warrant will be described in the prospectus supplement to be
attached to the front of this prospectus. Those terms may vary from the terms
described here.
As you read this section, please remember that the specific terms of your
warrant as described in your prospectus supplement will supplement and, if
applicable, may modify or replace the general terms described in this section.
If there are differences between your prospectus supplement and this prospectus,
your prospectus supplement will control. Thus, the statements we make in this
section may not apply to your warrant.
When we refer to a series of warrants, we mean all warrants issued as part of
the same series under the applicable warrant indenture or warrant agreement.
When we refer to your prospectus supplement, we mean the prospectus supplement
describing the specific terms of the warrant you purchase. The terms used in
your prospectus supplement will have the meanings described in this prospectus,
unless otherwise specified.
TYPES OF WARRANTS
We may issue any of the following types of warrants:
DEBT WARRANTS
We may issue warrants for the purchase of our debt securities on terms to be
determined at the time of sale. We refer to this type of warrant as a "debt
warrant."
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DESCRIPTION OF WARRANTS WE MAY OFFER
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UNIVERSAL WARRANTS
We may also issue warrants, on terms to be determined at the time of sale, for
the purchase or sale of, or whose cash value is determined by reference to the
performance, level or value of, one or more of the following:
- securities of one or more issuers other than UBS AG;
- one or more currencies;
- one or more commodities;
- any other financial, economic or other measure or instrument, including
the occurrence or non-occurrence of any event or circumstance; and
- one or more indices or baskets of the items described above.
We refer to this type of warrant as a "universal warrant." We refer to each
property described above as a "warrant property."
We may satisfy our obligations, if any, and the holder of a universal warrant
may satisfy its obligations, if any, with respect to any universal warrants by
delivering:
- the warrant property;
- the cash value of the warrant property; or
- the cash value of the warrants determined by reference to the
performance, level or value of the warrant property.
The applicable prospectus supplement will describe what we may deliver to
satisfy our obligations, if any, and what the holder of a universal warrant may
deliver to satisfy its obligations, if any, with respect to any universal
warrants.
INFORMATION IN YOUR PROSPECTUS SUPPLEMENT
ALL WARRANTS
Your prospectus supplement will describe the specific terms of your warrant,
which will include some or all of the following:
- the specific designation and aggregate number of, and the price at which
we will issue, the warrants;
- the currency with which the warrants may be purchased;
- the indenture or warrant agreement under which we will issue the
warrants;
- the date on which the right to exercise the warrants will begin and the
date on which that right will expire or, if you may not continuously
exercise the warrants throughout that period, the specific date or dates
on which you may exercise the warrants;
- whether the warrants will be issued in fully registered form or bearer
form, in global or non-global form or in any combination of these forms;
- the identities of the trustee or warrant agent, any depositaries and any
paying, transfer, calculation or other agents for the warrants;
- any securities exchange or quotation system on which the warrants or any
securities deliverable upon exercise of the warrants may be listed;
- whether the warrants are to be sold separately or with other securities;
and
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DESCRIPTION OF WARRANTS WE MAY OFFER
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- any other terms of the warrants.
If we issue warrants together with any other warrants or any debt securities,
the applicable prospectus supplement will specify whether the warrants will be
separable from the other securities before the warrants' expiration date.
No holder of a warrant will have any rights of a holder of the warrant property
purchasable under the warrant.
An investment in a warrant may involve special risks, including risks associated
with indexed securities and currency-related risks if the warrant or the warrant
property is linked to an index or is payable in or otherwise linked to a
non-U.S. dollar currency. We describe some of these risks below under
"Considerations Relating to Indexed Securities" and "Considerations Relating to
Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency."
We and our affiliates may resell warrants in market-making transactions after
their initial issuance. We discuss these transactions above under "Description
of Debt Securities We May Offer--Information in Your Prospectus Supplement."
DEBT WARRANTS
If you purchase debt warrants, your prospectus supplement may contain, where
applicable, the following additional information about your warrants:
- the designation, aggregate principal amount, currency and terms of the
debt securities that may be purchased upon exercise of the debt warrants;
- the exercise price and whether the exercise price may be paid in cash, by
the exchange of any debt warrants or other securities or both and the
method of exercising the debt warrants; and
- the designation, terms and amount of debt securities, if any, to be
issued together with each of the debt warrants and the date, if any,
after which the debt warrants and debt securities will be separately
transferable.
UNIVERSAL WARRANTS
If you purchase universal warrants, your prospectus supplement may contain,
where applicable, the following additional information about your warrants:
- whether the universal warrants are put warrants or call warrants,
including in either case warrants that may be settled by means of net
cash settlement or cashless exercise, or any other type of warrants;
- the money or warrant property, and the amount or method for determining
the amount of money or warrant property, payable or deliverable upon
exercise of each universal warrant;
- the price at which and the currency with which the warrant property may
be purchased or sold upon the exercise of each universal warrant, or the
method of determining that price;
- whether the exercise price may be paid in cash, by the exchange of any
universal warrants or other securities or both, and the method of
exercising the universal warrants; and
- whether the exercise of the universal warrants is to be settled in cash
or by delivery of the warrant property or both and whether settlement
will occur on a net basis or a gross basis.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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THIS SECTION IS ONLY A SUMMARY
The warrant indenture or warrant agreement and its associated documents,
including your warrant, contain the full legal text of the matters described in
this section and your prospectus supplement. We have filed a copy of the form of
warrant indenture with the SEC as an exhibit to our registration statement. See
"Where You Can Find More Information" above for information on how to obtain a
copy of it. We will describe the warrant agreement under which we issue any
warrants in the applicable prospectus supplement, and we will file that
agreement with the SEC as an exhibit to an amendment to the registration
statement of which this prospectus is a part or as an exhibit to a Form 6-K and
incorporated herein by reference. See "Where You Can Find More Information"
above for information on how to obtain a copy of a warrant agreement when it is
filed.
This section and your prospectus supplement summarize all the material terms of
the warrant indenture or warrant agreement and your warrant. They do not,
however, describe every aspect of the warrant indenture or warrant agreement and
your warrant. For example, in this section and in your prospectus supplement, we
use terms that have been given special meaning in the warrant indenture or
warrant agreement, but we describe the meaning for only the more important of
those terms.
THE WARRANT INDENTURE
We may issue universal warrants under the warrant indenture. Warrants of this
kind will not be secured by any property or assets of UBS or its subsidiaries.
Thus, by owning a warrant issued under the warrant indenture, you hold one of
our unsecured obligations.
The warrants issued under the warrant indenture will be contractual obligations
of UBS and will rank equally with all of our other unsecured contractual
obligations and unsecured and unsubordinated debt. The warrant indenture does
not limit our ability to incur additional contractual obligations or debt.
The warrant indenture is a contract between us and a trustee. The trustee has
two main roles:
- First, the trustee can enforce your rights against us if we default.
There are limitations on the extent to which the trustee acts on your
behalf, which we describe later under "--Default, Remedies and Waiver of
Default."
- Second, the trustee performs administrative duties for us, such as
sending you payments and notices.
The trustee for the warrant indenture will be named in the prospectus supplement
applicable to the first series of warrants to be issued pursuant to such an
indenture.
WE MAY ISSUE MANY SERIES OF WARRANTS UNDER THE WARRANT INDENTURE
We may issue as many distinct series of warrants under the warrant indenture as
we wish. This section summarizes terms of the warrants that apply generally to
all series issued under the warrant indenture. The provisions of the warrant
indenture allow us not only to issue warrants with terms different from those of
warrants previously issued under the warrant indenture, but also to "reopen" a
previous issue of a series of warrants and issue additional warrants of that
series.
AMOUNTS THAT WE MAY ISSUE
The warrant indenture does not limit the aggregate number of warrants that we
may issue or the number of series or the aggregate amount of any particular
series. We may issue warrants and other securities in amounts that exceed the
total amount specified on the cover of this prospectus at any time without your
consent and without notifying you.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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The warrant indenture and the warrants do not limit our ability to incur other
contractual obligations or indebtedness or to issue other securities. Also, the
terms of the warrants do not impose financial or similar restrictions on us.
EXPIRATION DATE AND PAYMENT OR SETTLEMENT DATE
The term "expiration date" with respect to any warrant means the date on which
the right to exercise the warrant expires. The term "payment or settlement date"
with respect to any warrant means the date when any money or warrant property
with respect to that warrant becomes payable or deliverable upon exercise or
redemption of that warrant in accordance with its terms.
GOVERNING LAW
The warrant indenture and the warrants issued under it will be governed by New
York law.
CURRENCY OF WARRANTS
Amounts that become due and payable on your warrant will be payable in a
currency, composite currency, basket of currencies or currency unit or units
specified in your prospectus supplement. We refer to this currency, composite
currency, basket of currencies or currency unit or units as a "specified
currency." The specified currency for your warrant will be U.S. dollars, unless
your prospectus supplement states otherwise. You will have to pay for your
warrant by delivering the requisite amount of the specified currency to UBS
Warburg LLC, UBS PaineWebber Inc. or another firm that we name in your
prospectus supplement, unless other arrangements have been made between you and
us or you and that firm. We will make payments on your warrants in the specified
currency, except as described below in "--Payment Mechanics for Warrants." See
"Considerations Relating to Securities Denominated or Payable in or Linked to a
Non-U.S. Dollar Currency" below for more information about risks of investing in
warrants of this kind.
REDEMPTION
We will not be entitled to redeem your warrant before its expiration date unless
your prospectus supplement specifies a redemption commencement date.
If your prospectus supplement specifies a redemption commencement date, it will
also specify one or more redemption prices. It may also specify one or more
redemption periods during which the redemption prices relating to a redemption
of warrants during those periods will apply.
If your prospectus supplement specifies a redemption commencement date, your
warrant will be redeemable at our option at any time on or after that date or at
a specified time or times. If we redeem your warrant, we will do so at the
specified redemption price. If different prices are specified for different
redemption periods, the price we pay will be the price that applies to the
redemption period during which your warrant is redeemed.
If we exercise an option to redeem any warrant, we will give to the trustee and
holders written notice of the redemption price of the warrant to be redeemed,
not less than 10 days nor more than 60 days before the applicable redemption
date or within any other period before the applicable redemption date specified
in the applicable prospectus supplement. We will give the notice in the manner
described below in "--Notices."
We or our affiliates may purchase warrants from investors who are willing to
sell from time to time, either in the open market at prevailing prices or in
private transactions at negotiated prices. Warrants that we or they purchase
may, at our discretion, be held, resold or cancelled.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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MERGERS AND SIMILAR TRANSACTIONS
We are generally permitted to merge or consolidate with another corporation or
other entity. We are also permitted to sell our assets substantially as an
entirety to another corporation or other entity. With regard to any series of
warrants, however, we may not take any of these actions unless all the following
conditions are met:
- If the successor entity in the transaction is not UBS, the successor
entity must be organized as a corporation, partnership or trust and must
expressly assume our obligations under the warrants of that series and
the warrant indenture. The successor entity may be organized under the
laws of any jurisdiction, whether in Switzerland or elsewhere.
- Immediately after the transaction, no default under the warrants of that
series has occurred and is continuing. For this purpose, "default under
the warrants of that series" means an event of default with respect to
that series or any event that would be an event of default with respect
to that series if the requirements for giving us default notice and for
our default having to continue for a specific period of time were
disregarded. We describe these matters below under "--Default, Remedies
and Waiver of Default."
If the conditions described above are satisfied with respect to the warrants of
any series, we will not need to obtain the approval of the holder of those
warrants in order to merge or consolidate or to sell our assets. Also, these
conditions will apply only if we wish to merge or consolidate with another
entity or sell our assets substantially as an entirety to another entity. We
will not need to satisfy these conditions if we enter into other types of
transactions, including any transaction in which we acquire the stock or assets
of another entity, any transaction that involves a change of control of UBS but
in which we do not merge or consolidate and any transaction in which we sell
less than substantially all our assets.
Also, if we merge, consolidate or sell our assets substantially as an entirety
and the successor is a non-Swiss entity, neither we nor any successor would have
any obligation to compensate you for any resulting adverse tax consequences
relating to your warrants.
DEFAULT, REMEDIES AND WAIVER OF DEFAULT
You will have special rights if an event of default with respect to your warrant
occurs and is continuing, as described in this subsection.
EVENTS OF DEFAULT. Unless your prospectus supplement says otherwise, when we
refer to an event of default with respect to any series of warrants issued under
the warrant indenture, we mean that, upon satisfaction by the holder of the
warrant of all conditions precedent to our relevant obligation or covenant to be
satisfied by the holder, any of the following occurs:
- We do not pay any money or deliver any warrant property with respect to
that warrant on the payment or settlement date in accordance with the
terms of that warrant;
- We remain in breach of any covenant we make in the warrant indenture for
the benefit of the holder of that warrant for 60 days after we receive a
notice of default stating that we are in breach and requiring us to
remedy the breach. The notice must be sent by the trustee or the holders
of at least 10% in number of the relevant series of warrants;
- We file for bankruptcy or certain other bankruptcy, insolvency or
reorganization events relating to UBS occur.
- If the applicable prospectus supplement states that any additional event
of default applies to the series, that event of default occurs.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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If we do not pay any money or deliver any warrant property when due with respect
to a particular warrant of a series, as described in the first bullet point
above, that failure to make a payment or delivery will not constitute an event
of default with respect to any other warrant of the same series or any other
series.
REMEDIES IF AN EVENT OF DEFAULT OCCURS. If an event of default occurs with
respect to any series of warrants issued under the warrant indenture, the
trustee will have special duties. In that situation, the trustee will be
obligated to use those of its rights and powers under the warrant indenture, and
to use the same degree of care and skill in doing so, that a prudent person
would use in that situation in conducting his or her own affairs.
Except as described in the prior paragraph, the trustee is not required to take
any action under the warrant indenture at the request of any holders unless the
holders offer the trustee reasonable protection from expenses and liability.
This is called an indemnity. If the trustee is provided with an indemnity
reasonably satisfactory to it, the holders of a majority in number of all
warrants of the relevant series may direct the time, method and place of
conducting any lawsuit or other formal legal action seeking any remedy available
to the trustee. These majority holders may also direct the trustee in performing
any other action under the warrant indenture with respect to the warrants of
that series.
Before you bypass the trustee and bring your own lawsuit or other formal legal
action or take other steps to enforce your rights or protect your interests
relating to any warrant issued under the warrant indenture, all of the following
must occur:
- The holder of your warrant must give the trustee written notice that an
event of default has occurred, and the event of default must not have
been cured or waived.
- The holders of not less than 25% in number of all warrants of your series
must make a written request that the trustee take action because of the
default, and they or other holders must offer to the trustee indemnity
reasonably satisfactory to the trustee against the cost and other
liabilities of taking that action.
- The trustee must not have taken action for 60 days after the above steps
have been taken.
- During those 60 days, the holders of a majority in number of the warrants
of your series must not have given the trustee directions that are
inconsistent with the written request of the holders of not less than 25%
in number of the warrants of your series.
You are, however, entitled at any time to bring a lawsuit for the payment of any
money or delivery of any warrant property due on your warrant on or after its
payment or settlement date.
WAIVER OF DEFAULT. The holders of not less than a majority in number of the
warrants of any series may waive a default for all warrants of that series. If
this happens, the default will be treated as if it has not occurred. No one can
waive a default in payment of any money or delivery of any warrant property due
on any warrant, however, without the approval of the particular holder of that
warrant.
WE WILL GIVE THE TRUSTEE INFORMATION ABOUT DEFAULTS ANNUALLY. We will furnish
to the trustee every year a written statement of two of our officers certifying
that to their knowledge we are in compliance with the warrant indenture and the
warrants issued under it, or else specifying any default under the indenture.
Book-entry and other indirect owners should consult their banks or brokers for
information on how to give notice or direction to or make a request of the
trustee. Book-entry and other indirect owners are described below under "Legal
Ownership and Book-Entry Issuance."
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DESCRIPTION OF WARRANTS WE MAY OFFER
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MODIFICATION AND WAIVER OF COVENANTS
There are three types of changes we can make to the warrant indenture and the
warrants of any series issued under the warrant indenture.
CHANGES REQUIRING EACH HOLDER'S APPROVAL. First, there are changes that cannot
be made without the approval of each holder of a warrant affected by the change.
Here is a list of those types of changes:
- change the exercise price of the warrant;
- change the terms of any warrant with respect to the payment or settlement
date of the warrant;
- reduce the amount of money payable or reduce the amount or change the
kind of warrant property deliverable upon the exercise of the warrant or
any premium payable upon redemption of the warrant;
- change the currency of any payment on a warrant;
- change the place of payment on a warrant;
- permit redemption of a warrant if not previously permitted;
- impair a holder's right to exercise its warrant, or sue for payment of
any money payable or delivery of any warrant property deliverable with
respect to its warrant on or after the payment or settlement date or, in
the case of redemption, the redemption date;
- if any warrant provides that the holder may require us to repurchase the
warrant, impair the holder's right to require repurchase of the warrant;
- reduce the percentage in number of the warrants of any one or more
affected series, taken separately or together, as applicable, the
approval of whose holders is needed to change the indenture or those
warrants;
- reduce the percentage in number of the warrants of any one or more
affected series, taken separately or together, as applicable, the consent
of whose holders is needed to waive our compliance with the indenture or
to waive defaults; and
- change the provisions of the indenture dealing with modification and
waiver in any other respect, except to increase any required percentage
referred to above or to add to the provisions that cannot be changed or
waived without approval of the holder of each affected warrant.
CHANGES NOT REQUIRING APPROVAL OF HOLDERS. The second type of change does not
require any approval by holders of the warrants of an affected series. These
changes are limited to clarifications and changes that would not adversely
affect the warrants of that series in any material respect. Nor do we need any
approval to make changes that affect only warrants to be issued under the
warrant indenture after the changes take effect.
We may also make changes or obtain waivers that do not adversely affect a
particular warrant, even if they affect other warrants. In those cases, we do
not need to obtain the approval of the holder of that warrant; we need only
obtain any required approvals from the holders of the affected warrants.
CHANGES REQUIRING MAJORITY APPROVAL. Any other change to the warrant indenture
and the warrants issued under the warrant indenture would require the following
approval:
- If the change affects only the warrants of a particular series, it must
be approved by the holders of a majority in number of the warrants of
that series.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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- If the change affects the warrants of more than one series issued under
the warrant indenture, it must be approved by the holders of a majority
in number of all series affected by the change, with the warrants of all
the affected series voting together as one class for this purpose.
In each case, the required approval must be given by written consent.
The same majority approval would be required for us to obtain a waiver of any of
our covenants in the warrant indenture. If the holders approve a waiver of a
covenant, we will not have to comply with that covenant. The holders, however,
cannot approve a waiver of any provision in a particular warrant, or in the
warrant indenture as it affects that warrant, that we cannot change without the
approval of the holder of that warrant as described above in "--Changes
Requiring Each Holder's Approval," unless that holder approves the waiver.
Book-entry and other indirect owners should consult their banks or brokers for
information on how approval may be granted or denied if we seek to change the
warrant indenture or any warrants or request a waiver.
SPECIAL RULES FOR ACTION BY HOLDERS
When holders take any action under the warrant indenture, such as giving a
notice of default, approving any change or waiver or giving the trustee an
instruction, we will apply the following rules.
ONLY OUTSTANDING WARRANTS ARE ELIGIBLE. Only holders of outstanding warrants of
the applicable series will be eligible to participate in any action by holders
of warrants of that series. Also, we will count only outstanding warrants in
determining whether the various percentage requirements for taking action have
been met. For these purposes, a warrant will not be "outstanding":
- if it has been surrendered for cancellation;
- if it has been called for redemption;
- if we have deposited or set aside, in trust for its holder, money or
warrant property for its payment or settlement; or
- if we or one of our affiliates, such as UBS Warburg LLC or UBS
PaineWebber Inc., is the beneficial owner.
DETERMINING RECORD DATES FOR ACTION BY HOLDERS. We will generally be entitled
to set any day as a record date for the purpose of determining the holders that
are entitled to take action under the warrant indenture. In certain limited
circumstances, only the trustee will be entitled to set a record date for action
by holders. If we or the trustee set a record date for an approval or other
action to be taken by holders, that vote or action may be taken only by persons
or entities who are holders on the record date and must be taken during the
period that we specify for this purpose, or that the trustee specifies if it
sets the record date. We or the trustee, as applicable, may shorten or lengthen
this period from time to time. This period, however, may not extend beyond the
180th day after the record date for the action. In addition, record dates for
any global warrant may be set in accordance with procedures established by the
depositary from time to time. Accordingly, record dates for global warrants may
differ from those for other warrants.
NOTICES
Notices to be given to holders of a global warrant will be given only to the
depositary, in accordance with its applicable policies as in effect from time to
time. Notices to be given to holders of warrants not in global form will be sent
by mail to the respective addresses of the holders as they appear in the
trustee's records, and will be deemed given when mailed. Neither the failure to
give any notice to a
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DESCRIPTION OF WARRANTS WE MAY OFFER
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particular holder, nor any defect in a notice given to a particular holder, will
affect the sufficiency of any notice given to another holder.
Book-entry and other indirect owners should consult their banks or brokers for
information on how they will receive notices.
THE WARRANT AGREEMENTS
We may issue debt warrants and some universal warrants in one or more series and
under one or more warrant agreements, each to be entered into between us and a
bank, trust company or other financial institution as warrant agent. We may add,
replace or terminate warrant agents from time to time. We may also choose to act
as our own warrant agent. We will describe the warrant agreement under which we
issue any warrants in the applicable prospectus supplement, and we will file
that agreement with the SEC as an exhibit to an amendment to the registration
statement of which this prospectus is a part or as an exhibit to a Form 6-K and
incorporated herein by reference. See "Where You Can Find More Information"
above for information on how to obtain a copy of a warrant agreement when it is
filed.
We may also issue universal warrants under the warrant indenture. For these
warrants, the applicable provisions of the warrant indenture described above
would apply instead of the provisions described in this section.
ENFORCEMENT OF RIGHTS
The warrant agent under a warrant agreement will act solely as our agent in
connection with the warrants issued under that agreement. The warrant agent will
not assume any obligation or relationship of agency or trust for or with any
holders of those warrants. Any holder of warrants may, without the consent of
any other person, enforce by appropriate legal action, on its own behalf, its
right to exercise those warrants in accordance with their terms. No holder of
any warrant will be entitled to any rights of a holder of the debt securities or
any other warrant property purchasable upon exercise of the warrant, including
any right to receive payments on those debt securities or other warrant property
or to enforce any covenants or rights in the relevant indenture or any other
agreement.
WARRANT AGREEMENT WILL NOT BE QUALIFIED UNDER TRUST INDENTURE ACT
No warrant agreement will be qualified as an indenture, and no warrant agent
will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have
the protection of the Trust Indenture Act with respect to their warrants.
MODIFICATION AND WAIVER OF COVENANTS
There are three types of changes we can make to the warrants of any series and
the related warrant agreement.
CHANGES REQUIRING EACH HOLDER'S APPROVAL. We may not amend any particular
warrant or a warrant agreement with respect to any particular warrant unless we
obtain the consent of the holder of that warrant, if the amendment would:
- change the exercise price of the warrant;
- change the kind or reduce the amount of the warrant property or other
consideration receivable upon exercise, cancellation or expiration of the
warrant, except as permitted by the antidilution or other adjustment
provisions of the warrant;
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DESCRIPTION OF WARRANTS WE MAY OFFER
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- shorten, advance or defer the period of time during which the holder may
exercise the warrant or otherwise impair the holder's right to exercise
the warrant; or
- reduce the percentage of outstanding, unexpired warrants of any series or
class the consent of whose holders is required to amend the series or
class, or the applicable warrant agreement with regard to that series or
class, as described below.
CHANGES NOT REQUIRING APPROVAL OF HOLDERS. We and the applicable warrant agent
may amend any warrant or warrant agreement without the consent of any holder:
- to cure any ambiguity;
- to cure, correct or supplement any defective or inconsistent provision;
or
- to make any other change that we believe is necessary or desirable and
will not adversely affect the interests of the affected holders in any
material respect.
We do not need any approval to make changes that affect only warrants to be
issued after the changes take effect. We may also make changes that do not
adversely affect a particular warrant in any material respect, even if they
adversely affect other warrants in a material respect. In those cases, we do not
need to obtain the approval of the holder of the unaffected warrant; we need
only obtain any required approvals from the holders of the affected warrants.
CHANGES REQUIRING MAJORITY APPROVAL. Any other change to a particular warrant
agreement and the warrants issued under that agreement would require the
following approval:
- If the change affects only the warrants of a particular series issued
under that agreement, the change must be approved by the holders of a
majority of the outstanding, unexpired warrants of that series.
- If the change affects the warrants of more than one series issued under
that agreement, the change must be approved by the holders of a majority
of all outstanding, unexpired warrants of all series affected by the
change, with the warrants of all the affected series voting together as
one class for this purpose.
In each case, the required approval must be given in writing.
MERGERS AND SIMILAR TRANSACTIONS ARE PERMITTED; NO RESTRICTIVE COVENANTS OR
EVENTS OF DEFAULT
The warrant agreements and any warrants issued under the warrant agreements will
not restrict our ability to merge or consolidate with, or sell our assets to,
another corporation or other entity or to engage in any other transactions. If
at any time we merge or consolidate with, or sell our assets substantially as an
entirety to, another corporation or other entity, the successor entity will
succeed to and assume our obligations under the warrants and warrant agreements.
We will then be relieved of any further obligation under the warrants and
warrant agreements.
The warrant agreements and any warrants issued under the warrant agreements will
not include any restrictions on our ability to put liens on our assets,
including our interests in our subsidiaries, nor will they restrict our ability
to sell our assets. The warrant agreements and any warrants issued under the
warrant agreements also will not provide for any events of default or remedies
upon the occurrence of any events of default.
GOVERNING LAW
Each warrant agreement and any warrants issued under the warrant agreement will
be governed by New York law.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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FORM, EXCHANGE AND TRANSFER OF WARRANTS
We will issue each warrant in global--i.e., book-entry--form only, unless we say
otherwise in the applicable prospectus supplement. Warrants in book-entry form
will be represented by a global security registered in the name of a depositary,
which will be the holder of all the warrants represented by the global security.
Those who own beneficial interests in a global warrant will do so through
participants in the depositary's system, and the rights of these indirect owners
will be governed solely by the applicable procedures of the depositary and its
participants. We describe book-entry securities below under "Legal Ownership and
Book-Entry Issuance." Unless we specify otherwise in the applicable prospectus
supplement, The Depository Trust Company, New York, New York, known as DTC, will
be the depositary for all warrants in global form.
If a warrant is issued as a registered global warrant, only the
depositary--e.g., DTC, Euroclear and Clearstream--will be entitled to transfer
and exchange the warrant as described in this subsection, since the depositary
will be the sole holder of the warrant.
In addition, we will issue each warrant in registered form, unless we say
otherwise in the applicable prospectus supplement. If we issue a warrant in
bearer form, the applicable prospectus supplement will describe the provisions
that would apply to that security.
If any warrants cease to be issued in registered global form, then unless we
indicate otherwise in your prospectus supplement, they will be issued:
- only in fully registered form; and
- in denominations of 100 warrants and any multiple of 100 warrants.
Holders may exchange their warrants for warrants of smaller denominations or
combined into fewer warrants of larger denominations, as long as the total
number of warrants is not changed.
Holders of non-global warrants may exchange or transfer their warrants at the
office of the trustee or warrant agent, as applicable. They may also replace
lost, stolen, destroyed or mutilated warrants at that office. We have appointed
the trustee or warrant agent, as applicable, to act as our agent for registering
warrants in the names of holders and transferring and replacing warrants. We may
appoint another entity to perform these functions or perform them ourselves.
Holders will not be required to pay a service charge to transfer or exchange
their warrants, but they may be required to pay for any tax or other
governmental charge associated with the transfer or exchange. The transfer or
exchange, and any replacement, will be made only if our transfer agent is
satisfied with the holder's proof of legal ownership. The transfer agent may
require an indemnity before replacing any warrants.
If we have the right to redeem, accelerate or settle any warrants before their
expiration, and we exercise our right as to less than all those warrants, we may
block the transfer or exchange of those warrants during the period beginning 15
days before the day we mail the notice of exercise and ending on the day of that
mailing or during any other period specified in the applicable prospectus
supplement, in order to freeze the list of holders who will receive the mailing.
We may also refuse to register transfers of or exchange any warrant selected for
early settlement, except that we will continue to permit transfers and exchanges
of the unsettled portion of any warrant being partially settled.
If we have designated additional transfer agents for your warrant, they will be
named in your prospectus supplement. We may appoint additional transfer agents
or cancel the appointment of any particular transfer agent. We may also approve
a change in the office through which any transfer agent acts.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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The rules for exchange described above apply to exchange of warrants for other
warrants of the same series and kind. If a warrant is exercisable for a
different kind of security, such as one that we have not issued, or for other
property, the rules governing that type of exercise will be described in the
applicable prospectus supplement.
PAYMENT MECHANICS FOR WARRANTS
WHO RECEIVES PAYMENT?
If money is due on a warrant at its payment or settlement date, we will pay the
amount to the holder of the warrant against surrender of the warrant at a proper
place of payment or, in the case of a global warrant, in accordance with the
applicable policies of the depositary.
HOW WE WILL MAKE PAYMENTS DUE IN U.S. DOLLARS
We will follow the practices described in this subsection when paying amounts
due in U.S. dollars. Payments of amounts due in other currencies will be made as
described in the next subsection.
PAYMENTS ON GLOBAL WARRANTS. We will make payments on a global warrant in
accordance with the applicable policies of the depositary as in effect from time
to time. Under those policies, we will pay directly to the depositary, or its
nominee, and not to any indirect owners who own beneficial interests in the
global warrant. An indirect owner's right to receive those payments will be
governed by the rules and practices of the depositary and its participants, as
described in the section entitled "Legal Ownership and Book-Entry Issuance--What
Is a Global Security?".
PAYMENTS ON NON-GLOBAL WARRANTS. We will make payments on a warrant in
non-global, registered form as follows. We will make all payments by check at
the paying agent described below, against surrender of the warrant. All payments
by check will be made in next-day funds--that is, in funds that become available
on the day after the check is cashed.
Alternatively, if a non-global warrant has an original issue price of at least
$1,000,000 and the holder asks us to do so, we will pay any amount that becomes
due on the warrant by wire transfer of immediately available funds to an account
at a bank in New York City, on the payment or settlement date. To request wire
payment, the holder must give the paying agent appropriate wire transfer
instructions at least five business days before the requested wire payment is
due. Payment will be made only after the warrant is surrendered to the paying
agent.
Book-entry and other indirect owners should consult their banks or brokers for
information on how they will receive payments on their warrants.
HOW WE WILL MAKE PAYMENTS DUE IN OTHER CURRENCIES
We will follow the practices described in this subsection when paying amounts
that are due in a specified currency other than U.S. dollars.
PAYMENTS ON GLOBAL WARRANTS. We will make payments on a global warrant in
accordance with the applicable policies of the depositary as in effect from time
to time. We understand that these policies, as currently in effect at DTC, are
as follows:
Unless otherwise indicated in your prospectus supplement, if you are an indirect
owner of global warrants denominated in a specified currency other than U.S.
dollars and if you have the right to elect to receive payments in that other
currency and do make that election, you must notify the participant through
which your interest in the global warrant is held of your election on or before
the 16th day before the payment or settlement date. Your participant must, in
turn, notify DTC of your election on or before the 12th DTC business day before
the payment or settlement date.
DTC, in turn, will notify the paying agent of your election in accordance with
DTC's procedures.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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If complete instructions are received by the participant and forwarded by the
participant to DTC, and by DTC to the paying agent, on or before the dates noted
above, the paying agent, in accordance with DTC's instructions, will make the
payment to you or your participant by wire transfer of immediately available
funds to an account maintained by you or your participant with a bank located in
the country issuing the specified currency or in another jurisdiction acceptable
to us and the paying agent.
If the foregoing steps are not properly completed, we expect DTC to inform the
paying agent that payment is to be made in U.S. dollars. In that case, we or our
agent will convert the payment to U.S. dollars in the manner described below
under "--Conversion to U.S. Dollars." We expect that we or our agent will then
make the payment in U.S. dollars to DTC, and that DTC in turn will pass it along
to its participants.
Book-entry and other indirect owners of a global warrant denominated in a
currency other than U.S. dollars should consult their banks or brokers for
information on how to request payment in the specified currency.
PAYMENTS ON NON-GLOBAL WARRANTS. Except as described in the second to last
paragraph under this heading, we will make payments on warrants in non-global
form in the applicable specified currency. We will make these payments by wire
transfer of immediately available funds to any account that is maintained in the
applicable specified currency at a bank designated by the holder and is
acceptable to us and the trustee. To designate an account for wire payment, the
holder must give the paying agent appropriate wire instructions at least five
business days before the requested wire payment is due. The payment will be made
only after the warrant is surrendered to the paying agent.
If a holder fails to give instructions as described above, we will notify the
holder at the address in the records of the trustee or warrant agent, as
applicable, and will make the payment within five business days after the holder
provides appropriate instructions. Any late payment made in these circumstances
will be treated under the warrant indenture or warrant agreement, as applicable,
as if made on the payment or settlement date, and no interest will accrue on the
late payment from the payment or settlement date to the date paid.
Although a payment on a warrant in non-global form may be due in a specified
currency other than U.S. dollars, we will make the payment in U.S. dollars if
the holder asks us to do so. To request U.S. dollar payment, the holder must
provide appropriate written notice to the trustee or warrant agent, as
applicable, at least five business days before the payment or settlement date
for which payment in U.S. dollars is requested.
Indirect owners of a non-global warrant with a specified currency other than
U.S. dollars should contact their banks or brokers for information about how to
receive payments in the specified currency or in U.S. dollars.
CONVERSION TO U.S. DOLLARS. When we are asked by a holder to make payments in
U.S. dollars of an amount due in another currency, either on a global warrant or
a non-global warrant as described above, we will determine the U.S. dollar
amount the holder receives as follows. The exchange rate agent described below
will request currency bid quotations expressed in U.S. dollars from three or, if
three are not available, then two, recognized foreign exchange dealers in New
York City, any of which may be the exchange rate agent, an affiliate of UBS, as
of 11:00 A.M., New York City time, on the second business day before the payment
date. Currency bid quotations will be requested on an aggregate basis, for all
holders of warrants requesting U.S. dollar payments of amounts due on the same
date in the same specified currency. The U.S. dollar amount the holder receives
will be based on the highest acceptable currency bid quotation received by the
exchange rate agent. If the exchange rate agent determines that at least two
acceptable currency bid quotations are not available on that second business
day, the payment will be made in the specified currency.
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DESCRIPTION OF WARRANTS WE MAY OFFER
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To be acceptable, a quotation must be given as of 11:00 A.M., New York City
time, on the second business day before the due date and the quoting dealer must
commit to execute a contract at the quotation in the total amount due in that
currency on all series of warrants. If some but not all of the relevant warrants
are LIBOR warrants or EURIBOR warrants, the second preceding business day will
be determined for this purpose as if none of those warrants were LIBOR warrants
or EURIBOR warrants.
A holder that requests payment in U.S. dollars will bear all associated currency
exchange costs, which will be deducted from the payment.
WHEN THE SPECIFIED CURRENCY IS NOT AVAILABLE. If we are obligated to make any
payment in a specified currency other than U.S. dollars, and the specified
currency or any successor currency is not available to us due to circumstances
beyond our control--such as the imposition of exchange controls or a disruption
in the currency markets--we will be entitled to satisfy our obligation to make
the payment in that specified currency by making the payment in U.S. dollars, on
the basis specified in the applicable prospectus supplement.
For a specified currency other than U.S. dollars, the exchange rate will be the
noon buying rate for cable transfers of the specified currency in New York City
as quoted by the Federal Reserve Bank of New York on the then-most recent day on
which that bank has quoted that rate.
The foregoing will apply to any warrant, whether in global or non-global form,
and to any payment, including a payment at the payment or settlement date. Any
payment made under the circumstances and in a manner described above will not
result in a default under any warrant or the indenture.
THE EURO. The euro may be a specified currency for some warrants. On January 1,
1999, the euro became the legal currency for the 11 member states participating
in the European Economic and Monetary Union. During a transition period from
January 1, 1999 to December 31, 2001 and for a maximum of six months after
December 31, 2001, the former national currencies of these 11 member states will
continue to be legal tender in their country of issue, at rates irrevocably
fixed on December 31, 1998.
EXCHANGE RATE AGENT. If we issue a warrant in a specified currency other than
U.S. dollars, we will appoint a financial institution to act as the exchange
rate agent and will name the institution initially appointed when the warrant is
originally issued in the applicable prospectus supplement. We may select UBS
Warburg LLC or another of our affiliates to perform this role. We may change the
exchange rate agent from time to time after the original issue date of the
warrant without your consent and without notifying you of the change.
All determinations made by the exchange rate agent will be in its sole
discretion unless we state in the applicable prospectus supplement that any
determination requires our approval. In the absence of manifest error, those
determinations will be conclusive for all purposes and binding on you and us,
without any liability on the part of the exchange rate agent.
PAYMENT WHEN OFFICES ARE CLOSED
If any payment or delivery of warrant property is due on a warrant on a day that
is not a business day, we will make the payment or delivery on the next day that
is a business day. Payments or deliveries postponed to the next business day in
this situation will be treated under the indenture as if they were made on the
original payment or settlement date. Postponement of this kind will not result
in a default under any warrant or the indenture, and no interest will accrue on
the postponed amount from the original payment or settlement date to the next
day that is a business day.
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The term "business day" means, for any warrant, a day that meets all the
following applicable requirements:
- for all warrants, is a Monday, Tuesday, Wednesday, Thursday or Friday
that is not a day on which banking institutions in New York City
generally are authorized or obligated by law, regulation or executive
order to close and that satisfies any other criteria specified in your
prospectus supplement;
- if the warrant has a specified currency other than U.S. dollars or euros,
is also a day on which banking institutions are not authorized or
obligated by law, regulation or executive order to close in the principal
financial center of the country issuing the specified currency;
- if the warrant is held through Euroclear, is also not a day on which
banking institutions in Brussels, Belgium are generally authorized or
obligated by law, regulation or executive order to close; and
- if the warrant is held through Clearstream, is also not a day on which
banking institutions in Luxembourg are generally authorized or obligated
by law, regulation or executive order to close.
PAYING AGENT
We may appoint one or more financial institutions to act as our paying agents,
at whose designated offices warrants in non-global form may be surrendered for
payment at their payment or settlement date. We call each of those offices a
paying agent. We may add, replace or terminate paying agents from time to time.
We may also choose to act as our own paying agent. Initially, we have appointed
the trustee, at its corporate trust office in New York City, as the paying agent
for warrants issued under the indenture. We must notify the trustee of changes
in the paying agents for warrants issued under the indenture.
UNCLAIMED PAYMENTS
Regardless of who acts as paying agent, all money paid or warrant property
delivered by us to a paying agent that remains unclaimed at the end of two years
after the amount is due to a holder will be repaid or redelivered to us. After
that two-year period, the holder may look only to us for payment of any money or
delivery of any warrant property, and not to the trustee or warrant agent, as
applicable, any other paying agent or anyone else.
PAYMENT OF ADDITIONAL AMOUNTS
A relevant jurisdiction may require UBS to withhold amounts from payments on a
warrant for taxes or any other governmental charges. If the relevant
jurisdiction requires a withholding of this type, UBS may be required to pay you
an additional amount so that the net amount you receive will be the amount
specified in the warrant to which you are entitled.
By relevant jurisdiction, we mean Switzerland or a jurisdiction in which the UBS
branch through which warrants are issued is located. UBS will NOT have to pay
additional amounts in respect of taxes or other governmental charges that are
required to be deducted or withheld by any paying agent from a payment on a
warrant, if such payment can be made without such deduction or withholding by
any other paying agent, or in respect of taxes or other governmental charges
that would not have been imposed but for
- the existence of any present or former connection between you and the
relevant jurisdiction, other than the mere holding of the warrant and the
receipt of payments on it;
- your status as an individual resident of a member state of the European
Union;
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DESCRIPTION OF WARRANTS WE MAY OFFER
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- a failure to comply with any reasonable certification, documentation,
information or other reporting requirement concerning your nationality,
residence, identity or connection with the relevant jurisdiction, if such
compliance is required as a precondition to relief or exemption from such
taxes or other governmental charges (including, without limitation, a
certification that you are not resident in the relevant jurisdiction or
are not an individual resident of a member state of the European Union);
or
- a change in law that becomes effective more than 30 days after a payment
on the warrant becomes due and payable or on which the payment is duly
provided for, whichever occurs later.
These provisions will also apply to any taxes or governmental charges imposed by
any jurisdiction in which a successor to UBS is organized. The prospectus
supplement relating to the warrant may describe additional circumstances in
which UBS would not be required to pay additional amounts.
CALCULATION AGENT
Calculations relating to warrants will be made by the calculation agent, an
institution that we appoint as our agent for this purpose. That institution may
include any affiliate of ours, such as UBS Warburg LLC. The prospectus
supplement for a particular warrant will name the institution that we have
appointed to act as the calculation agent for that warrant as of its original
issue date. We may appoint a different institution to serve as calculation agent
from time to time after the original issue date of the warrant without your
consent and without notifying you of the change.
The calculation agent's determination of any amount of money payable or warrant
property deliverable with respect to a warrant will be final and binding in the
absence of manifest error.
All percentages resulting from any calculation relating to a warrant will be
rounded upward or downward, as appropriate, to the next higher or lower one
hundred-thousandth of a percentage point, e.g., 9.876541% (or .09876541) being
rounded down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being
rounded up to 9.87655% (or .0987655). All amounts used in or resulting from any
calculation relating to a warrant will be rounded upward or downward, as
appropriate, to the nearest cent, in the case of U.S. dollars, or to the nearest
corresponding hundredth of a unit, in the case of a currency other than U.S.
dollars, with one-half cent or one-half of a corresponding hundredth of a unit
or more being rounded upward.
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Legal Ownership and Book-Entry Issuance
In this section, we describe special considerations that will apply to
registered securities issued in global--i.e., book-entry--form. First we
describe the difference between legal ownership and indirect ownership of
registered securities. Then we describe special provisions that apply to global
securities.
WHO IS THE LEGAL OWNER OF A REGISTERED SECURITY?
Each debt security or warrant in registered form will be represented either by a
certificate issued in definitive form to a particular investor or by one or more
global securities representing the entire issuance of securities. We refer to
those who have securities registered in their own names, on the books that we or
the trustee, warrant agent or other agent maintain for this purpose, as the
"holders" of those securities. These persons are the legal holders of the
securities. We refer to those who, indirectly through others, own beneficial
interests in securities that are not registered in their own names as indirect
owners of those securities. As we discuss below, indirect owners are not legal
holders, and investors in securities issued in book-entry form or in street name
will be indirect owners.
BOOK-ENTRY OWNERS
We will issue each security in book-entry form only. This means securities will
be represented by one or more global securities registered in the name of a
financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositary's book-entry system. These
participating institutions, in turn, hold beneficial interests in the securities
on behalf of themselves or their customers.
Under each indenture or warrant agreement, only the person in whose name a
security is registered is recognized as the holder of that security.
Consequently, for securities issued in global form, we will recognize only the
depositary as the holder of the securities and we will make all payments on the
securities, including deliveries of any property other than cash, to the
depositary. The depositary passes along the payments it receives to its
participants, which in turn pass the payments along to their customers who are
the beneficial owners. The depositary and its participants do so under
agreements they have made with one another or with their customers; they are not
obligated to do so under the terms of the securities.
As a result, investors will not own securities directly. Instead, they will own
beneficial interests in a global security, through a bank, broker or other
financial institution that participates in the depositary's book-entry system or
holds an interest through a participant. As long as the securities are issued in
global form, investors will be indirect owners, and not holders, of the
securities.
STREET NAME OWNERS
In the future we may terminate a global security or issue securities initially
in non-global form. In these cases, investors may choose to hold their
securities in their own names or in street name. Securities held by an investor
in street name would be registered in the name of a bank, broker or other
financial institution that the investor chooses, and the investor would hold
only a beneficial interest in those securities through an account he or she
maintains at that institution.
For securities held in street name, we will recognize only the intermediary
banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities and we will make all payments
on those securities, including deliveries of any property other than cash, to
them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their
customer agreements or because they are legally
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LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE
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required to do so. Investors who hold securities in street name will be indirect
owners, not holders, of those securities.
LEGAL HOLDERS
Our obligations, as well as the obligations of the trustee and the obligations,
if any, of any warrant agents and any other third parties employed by us, the
trustee or any of those agents, run only to the holders of the securities. We do
not have obligations to investors who hold indirect interests in global
securities, in street name or by any other indirect means. This will be the case
whether an investor chooses to be an indirect owner of a security or has no
choice because we are issuing the securities only in global form.
For example, once we make a payment or give a notice to the holder, we have no
further responsibility for that payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect owners but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose--for example, to
amend the indenture for a series of debt securities or warrants or the warrant
agreement for a series of warrants or to relieve us of the consequences of a
default or of our obligation to comply with a particular provision of the
indenture--we would seek the approval only from the holders, and not the
indirect owners, of the relevant securities. Whether and how the holders contact
the indirect owners is up to the holders.
When we refer to "you" in this prospectus, we mean those who invest in the
securities being offered by this prospectus, whether they are the holders or
only indirect owners of those securities. When we refer to "your securities" in
this prospectus, we mean the securities in which you will hold a direct or
indirect interest.
SPECIAL CONSIDERATIONS FOR INDIRECT OWNERS
If you hold securities through a bank, broker or other financial institution,
either in book-entry form or in street name, you should check with your own
institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- whether and how you can instruct it to exercise any rights to purchase or
sell warrant property under a warrant or to exchange or convert a
security for or into other property;
- how it would handle a request for the holders' consent, if ever required;
- whether and how you can instruct it to send you securities registered in
your own name so you can be a holder, if that is permitted in the future;
- how it would exercise rights under the securities if there were a default
or other event triggering the need for holders to act to protect their
interests; and
- if the securities are in book-entry form, how the depositary's rules and
procedures will affect these matters.
WHAT IS A GLOBAL SECURITY?
We will issue each security in book-entry form only. Each security issued in
book-entry form will be represented by a global security that we deposit with
and register in the name of one or more financial institutions or clearing
systems, or their nominees, which we select. A financial institution or clearing
system that we select for any security for this purpose is called the
"depositary" for that security. A security will usually have only one depositary
but it may have more.
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LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE
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Each series of securities will have one or more of the following as the
depositaries:
- The Depository Trust Company, New York, New York, which is known as
"DTC";
- a financial institution holding the securities on behalf of Morgan
Guaranty Trust Company of New York, acting out of its Brussels, Belgium,
office, as operator of the Euroclear system, which is known as
"Euroclear";
- a financial institution holding the securities on behalf of Clearstream
Banking, societe anonyme, Luxembourg, which is known as "Clearstream";
and
- any other clearing system or financial institution named in the
applicable prospectus supplement. The depositaries named above may also
be participants in one another's systems. Thus, for example, if DTC is
the depositary for a global security, investors may hold beneficial
interests in that security through Euroclear or Clearstream, as DTC
participants.
The depositary or depositaries for your securities will be named in your
prospectus supplement; if none is named, the depositary will be DTC.
A global security may represent one or any other number of individual
securities. Generally, all securities represented by the same global security
will have the same terms. We may, however, issue a global security that
represents multiple securities of the same kind, such as debt securities, that
have different terms and are issued at different times. We call this kind of
global security a master global security. Your prospectus supplement will not
indicate whether your securities are represented by a master global security.
A global security may not be transferred to or registered in the name of anyone
other than the depositary or its nominee, unless special termination situations
arise. We describe those situations below under "--Holder's Option to Obtain a
Non-Global Security; Special Situations When a Global Security Will Be
Terminated." As a result of these arrangements, the depositary, or its nominee,
will be the sole registered owner and holder of all securities represented by a
global security, and investors will be permitted to own only indirect interests
in a global security. Indirect interests must be held by means of an account
with a broker, bank or other financial institution that in turn has an account
with the depositary or with another institution that does. Thus, an investor
whose security is represented by a global security will not be a holder of the
security, but only an indirect owner of an interest in the global security.
If the prospectus supplement for a particular security indicates that the
security will be issued in global form only, then the security will be
represented by a global security at all times unless and until the global
security is terminated. We describe the situations in which this can occur below
under "--Holder's Option to Obtain a Non-Global Security; Special Situations
When a Global Security Will Be Terminated." If termination occurs, we may issue
the securities through another book-entry clearing system or decide that the
securities may no longer be held through any book-entry clearing system.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES
As an indirect owner, an investor's rights relating to a global security will be
governed by the account rules of the depositary and those of the investor's
financial institution or other intermediary through which it holds its interest
(such as Euroclear or Clearstream, if DTC is the depositary), as well as general
laws relating to securities transfers. We do not recognize this type of investor
or any intermediary as a holder of securities and instead deal only with the
depositary that holds the global security.
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If securities are issued only in the form of a global security, an investor
should be aware of the following:
- An investor cannot require the securities to be registered in his or her
own name, and cannot obtain non-global certificates for his or her
interest in the securities, except in the special situations we describe
below.
- An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the securities and protection of his or
her legal rights relating to the securities, as we describe above under
"--Who Is the Legal Owner of a Registered Security?"
- An investor may not be able to sell interests in the securities to some
insurance companies and other institutions that are required by law to
own their securities in non-book-entry form.
- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the securities
must be delivered to the lender or other beneficiary of the pledge in
order for the pledge to be effective.
- The depositary's policies will govern payments, deliveries, transfers,
exchanges, notices and other matters relating to an investor's interest
in a global security, and those policies may change from time to time.
We, the trustee and any warrant agents will have no responsibility for
any aspect of the depositary's policies, actions or records of ownership
interests in a global security. We, the trustee and any warrant agents
also do not supervise the depositary in any way.
- The depositary will require that those who purchase and sell interests in
a global security within its book-entry system use immediately available
funds and your broker or bank may require you to do so as well.
- Financial institutions that participate in the depositary's book-entry
system and through which an investor holds its interest in the global
securities, directly or indirectly, may also have their own policies
affecting payments, deliveries, transfers, exchanges, notices and other
matters relating to the securities, and those policies may change from
time to time. For example, if you hold an interest in a global security
through Euroclear or Clearstream, when DTC is the depositary, Euroclear
or Clearstream, as applicable, will require those who purchase and sell
interests in that security through them to use immediately available
funds and comply with other policies and procedures, including deadlines
for giving instructions as to transactions that are to be effected on a
particular day. There may be more than one financial intermediary in the
chain of ownership for an investor. We do not monitor and are not
responsible for the policies or actions or records of ownership interests
of any of those intermediaries.
HOLDER'S OPTION TO OBTAIN A NON-GLOBAL SECURITY; SPECIAL SITUATIONS WHEN A
GLOBAL SECURITY WILL BE TERMINATED
If we issue any series of securities in book-entry form but we choose to give
the beneficial owners of that series the right to obtain non-global securities,
any beneficial owner entitled to obtain non-global securities may do so by
following the applicable procedures of the depositary, any transfer agent or
registrar for that series and that owner's bank, broker or other financial
institution through which that owner holds its beneficial interest in the
securities. If you are entitled to request a non-global certificate and wish to
do so, you will need to allow sufficient lead time to enable us or our agent to
prepare the requested certificate.
In addition, in a few special situations described below, a global security will
be terminated and interests in it will be exchanged for certificates in
non-global form representing the securities it
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LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE
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represented. After that exchange, the choice of whether to hold the securities
directly or in street name will be up to the investor. Investors must consult
their own banks or brokers to find out how to have their interests in a global
security transferred on termination to their own names, so that they will be
holders. We have described the rights of holders and street name investors above
under "--Who Is the Legal Owner of a Registered Security?".
The special situations for termination of a global security are as follows:
- if the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security and we do
not appoint another institution to act as depositary within 60 days;
- if we notify the trustee or warrant agent, as applicable, that we wish to
terminate that global security; or
- in the case of a global security representing debt securities or warrants
issued under an indenture, if an event of default has occurred with
regard to these debt securities or warrants and has not been cured or
waived.
If a global security is terminated, only the depositary, and not we, the trustee
for any debt securities or warrants or the warrant agent for any warrants, is
responsible for deciding the names of the institutions in whose names the
securities represented by the global security will be registered and, therefore,
who will be the holders of those securities.
CONSIDERATIONS RELATING TO EUROCLEAR AND CLEARSTREAM
Euroclear and Clearstream are securities clearance systems in Europe. Both
systems clear and settle securities transactions between their participants
through electronic, book-entry delivery of securities against payment.
Euroclear and Clearstream may be depositaries for a global security. In
addition, if DTC is the depositary for a global security, Euroclear and
Clearstream may hold interests in the global security as participants in DTC.
As long as any global security is held by Euroclear or Clearstream as
depositary, you may hold an interest in the global security only through an
organization that participates, directly or indirectly, in Euroclear or
Clearstream. If Euroclear or Clearstream is the depositary for a global security
and there is no depositary in the United States, you will not be able to hold
interests in that global security through any securities clearance system in the
United States.
Payments, deliveries, transfers, exchanges, notices and other matters relating
to the securities made through Euroclear or Clearstream must comply with the
rules and procedures of those systems. Those systems could change their rules
and procedures at any time. We have no control over those systems or their
participants and we take no responsibility for their activities. Transactions
between participants in Euroclear or Clearstream, on one hand, and participants
in DTC, on the other hand, when DTC is the depositary, would also be subject to
DTC's rules and procedures.
SPECIAL TIMING CONSIDERATIONS FOR TRANSACTIONS IN EUROCLEAR AND CLEARSTREAM
Investors will be able to make and receive through Euroclear and Clearstream
payments, deliveries, transfers, exchanges, notices and other transactions
involving any securities held through those systems only on days when those
systems are open for business. Those systems may not be open for business on
days when banks, brokers and other institutions are open for business in the
United States.
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LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE
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In addition, because of time-zone differences, U.S. investors who hold their
interests in the securities through these systems and wish to transfer their
interests, or to receive or make a payment or delivery or exercise any other
right with respect to their interests, on a particular day may find that the
transaction will not be effected until the next business day in Luxembourg or
Brussels, as applicable. Thus, investors who wish to exercise rights that expire
on a particular day may need to act before the expiration date. In addition,
investors who hold their interests through both DTC and Euroclear or Clearstream
may need to make special arrangements to finance any purchases or sales of their
interests between the U.S. and European clearing systems, and those transactions
may settle later than would be the case for transactions within one clearing
system.
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Considerations Relating to Indexed Securities
We use the term "indexed securities" to mean debt securities and warrants whose
value is linked to an underlying property or index, including equity and credit
indexed securities and credit linked securities. Indexed securities may present
a high level of risk, and those who invest in some indexed securities may lose
their entire investment. In addition, the treatment of indexed securities for
U.S. federal income tax purposes is often unclear due to the absence of any
authority specifically addressing the issues presented by any particular indexed
security. Thus, if you propose to invest in indexed securities, you should
independently evaluate the federal income tax consequences of purchasing an
indexed security that apply in your particular circumstances. You should also
read "U.S. Tax Considerations" for a discussion of U.S. tax matters.
INVESTORS IN INDEXED SECURITIES COULD LOSE THEIR INVESTMENT
The amount of principal and/or interest payable on an indexed debt security and
the cash value or physical settlement value of a physically settled debt
security and the cash value or physical settlement value of an indexed warrant
will be determined by reference to the price, value or level of one or more
securities, currencies, commodities or other properties, any other financial,
economic or other measure or instrument, including the occurrence or
non-occurrence of any event or circumstance, and/or one or more indices or
baskets of any of these items. We refer to each of these as an "index." The
direction and magnitude of the change in the price, value or level of the
relevant index will determine the amount of principal and/or interest payable on
an indexed debt security and the cash value or physical settlement value of a
physically settled debt security and the cash value or physical settlement value
of an indexed warrant. The terms of a particular indexed debt security may or
may not include a guaranteed return of a percentage of the face amount at
maturity or a minimum interest rate. An indexed warrant generally will not
provide for any guaranteed minimum settlement value. Thus, if you purchase an
indexed security, you may lose all or a portion of the principal or other amount
you invest and may receive no interest on your investment.
THE ISSUER OF A SECURITY OR CURRENCY THAT SERVES AS AN INDEX COULD TAKE ACTIONS
THAT MAY ADVERSELY AFFECT AN INDEXED SECURITY
The issuer of a security that serves as an index or part of an index for an
indexed security will have no involvement in the offer and sale of the indexed
security and no obligations to the holder of the indexed security. The issuer
may take actions, such as a merger or sale of assets, without regard to the
interests of the holder. Any of these actions could adversely affect the value
of a security indexed to that security or to an index of which that security is
a component.
If the index for an indexed security includes a non-U.S. dollar currency or
other asset denominated in a non-U.S. dollar currency, the government that
issues that currency will also have no involvement in the offer and sale of the
indexed security and no obligations to the holder of the indexed security. That
government may take actions that could adversely affect the value of the
security. See "Considerations Relating to Securities Denominated or Payable in
or Linked to a Non-U.S. Dollar Currency--Government Policy Can Adversely Affect
Currency Exchange Rates and an Investment in a Non-U.S. Dollar Security" below
for more information about these kinds of government actions.
AN INDEXED SECURITY MAY BE LINKED TO A VOLATILE INDEX, WHICH COULD HURT YOUR
INVESTMENT
Some indices are highly volatile, which means that their value may change
significantly, up or down, over a short period of time. The amount of principal
or interest that can be expected to become payable on an indexed debt security
or the expected settlement value of an indexed warrant may vary
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CONSIDERATIONS RELATING TO INDEXED SECURITIES
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substantially from time to time. Because the amounts payable with respect to an
indexed security are generally calculated based on the value or level of the
relevant index on a specified date or over a limited period of time, volatility
in the index increases the risk that the return on the indexed security may be
adversely affected by a fluctuation in the level of the relevant index.
The volatility of an index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets. Any of these events or activities could adversely affect the
value of an indexed security.
AN INDEX TO WHICH A SECURITY IS LINKED COULD BE CHANGED OR BECOME UNAVAILABLE
Some indices compiled by us or our affiliates or third parties may consist of or
refer to several or many different securities, commodities or currencies or
other instruments or measures. The compiler of such an index typically reserves
the right to alter the composition of the index and the manner in which the
value or level of the index is calculated. An alteration may result in a
decrease in the value of or return on an indexed security that is linked to the
index. The indices for our indexed securities may include published indices of
this kind or customized indices developed by us or our affiliates in connection
with particular issues of indexed securities.
A published index may become unavailable, or a customized index may become
impossible to calculate in the normal manner, due to events such as war, natural
disasters, cessation of publication of the index or a suspension or disruption
of trading in one or more securities, commodities or currencies or other
instruments or measures on which the index is based. If an index becomes
unavailable or impossible to calculate in the normal manner, the terms of a
particular indexed security may allow us to delay determining the amount payable
as principal or interest on a debt security or the settlement value of an
indexed warrant, or we may use an alternative method to determine the value of
the unavailable index. Alternative methods of valuation are generally intended
to produce a value similar to the value resulting from reference to the relevant
index. However, it is unlikely that any alternative method of valuation we use
will produce a value identical to the value that the actual index would produce.
If we use an alternative method of valuation for a security linked to an index
of this kind, the value of the security, or the rate of return on it, may be
lower than it otherwise would be.
Some indexed securities are linked to indices that are not commonly used or that
have been developed only recently. The lack of a trading history may make it
difficult to anticipate the volatility or other risks associated with an indexed
security of this kind. In addition, trading in these indices or their underlying
stocks, commodities or currencies or other instruments or measures, or options
or futures contracts on these stocks, commodities or currencies or other
instruments or measures, may be limited, which could increase their volatility
and decrease the value of the related indexed securities or their rates of
return.
WE MAY ENGAGE IN HEDGING ACTIVITIES THAT COULD ADVERSELY AFFECT AN INDEXED
SECURITY
In order to hedge an exposure on a particular indexed security, we may, directly
or through our affiliates, enter into transactions involving the securities,
commodities or currencies or other instruments or measures that underlie the
index for that security, or involving derivative instruments, such as swaps,
options or futures, on the index or any of its component items. By engaging in
transactions of this kind, we could adversely affect the value of an indexed
security. It is possible that we could achieve substantial returns from our
hedging transactions while the value of the indexed security may decline.
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CONSIDERATIONS RELATING TO INDEXED SECURITIES
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INFORMATION ABOUT INDICES MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE
If we issue an indexed security, we may include historical information about the
relevant index in the applicable prospectus supplement. Any information about
indices that we may provide will be furnished as a matter of information only,
and you should not regard the information as indicative of the range of, or
trends in, fluctuations in the relevant index that may occur in the future.
WE MAY HAVE CONFLICTS OF INTEREST REGARDING AN INDEXED SECURITY
UBS Warburg LLC, UBS PaineWebber Inc. and our other affiliates may have
conflicts of interest with respect to some indexed securities. UBS Warburg LLC,
UBS PaineWebber Inc. and our other affiliates may engage in trading, including
trading for hedging purposes, for their proprietary accounts or for other
accounts under their management, in indexed securities and in the securities,
commodities or currencies or other instruments or measures on which the index is
based or in other derivative instruments related to the index or its component
items. These trading activities could adversely affect the value of indexed
securities. We and our affiliates may also issue or underwrite securities or
derivative instruments that are linked to the same index as one or more indexed
securities. By introducing competing products into the marketplace in this
manner, we could adversely affect the value of an indexed security.
UBS Warburg LLC, UBS PaineWebber Inc. or another of our affiliates may serve as
calculation agent for the indexed securities and may have considerable
discretion in calculating the amounts payable in respect of the securities. To
the extent that UBS Warburg LLC, UBS PaineWebber Inc. or another of our
affiliates calculates or compiles a particular index, it may also have
considerable discretion in performing the calculation or compilation of the
index. Exercising discretion in this manner could adversely affect the value of
an indexed security based on the index or the rate of return on the security.
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Considerations Relating to Securities Denominated or Payable in or Linked to a
Non-U.S. Dollar Currency
If you intend to invest in a non-U.S. dollar security--e.g., a security whose
principal and/or interest is payable in a currency other than U.S. dollars or
that may be settled by delivery of or reference to a non-U.S. dollar currency or
property denominated in or otherwise linked to a non-U.S. dollar currency--you
should consult your own financial and legal advisors as to the currency risks
entailed by your investment. Securities of this kind may not be an appropriate
investment for investors who are unsophisticated with respect to non-U.S. dollar
currency transactions.
The information in this prospectus is directed primarily to investors who are
U.S. residents. Investors who are not U.S. residents should consult their own
financial and legal advisors about currency-related risks particular to their
investment.
AN INVESTMENT IN A NON-U.S. DOLLAR SECURITY INVOLVES CURRENCY-RELATED RISKS
An investment in a non-U.S. dollar security entails significant risks that are
not associated with a similar investment in a security that is payable solely in
U.S. dollars and where settlement value is not otherwise based on a non-U.S.
dollar currency. These risks include the possibility of significant changes in
rates of exchange between the U.S. dollar and the various non-U.S. dollar
currencies or composite currencies and the possibility of the imposition or
modification of foreign exchange controls or other conditions by either the
United States or non-U.S. governments. These risks generally depend on factors
over which we have no control, such as economic and political events and the
supply of and demand for the relevant currencies in the global markets.
CHANGES IN CURRENCY EXCHANGE RATES CAN BE VOLATILE AND UNPREDICTABLE
Rates of exchange between the U.S. dollar and many other currencies have been
highly volatile, and this volatility may continue and perhaps spread to other
currencies in the future. Fluctuations in currency exchange rates could
adversely affect an investment in a security denominated in, or where value is
otherwise linked to, a specified currency other than U.S. dollars. Depreciation
of the specified currency against the U.S. dollar could result in a decrease in
the U.S. dollar-equivalent value of payments on the security, including the
principal payable at maturity or settlement value payable upon exercise. That in
turn could cause the market value of the security to fall. Depreciation of the
specified currency against the U.S. dollar could result in a loss to the
investor on a U.S. dollar basis.
GOVERNMENT POLICY CAN ADVERSELY AFFECT CURRENCY EXCHANGE RATES AND AN INVESTMENT
IN A NON-U.S. DOLLAR SECURITY
Currency exchange rates can either float or be fixed by sovereign governments.
From time to time, governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rate of their currencies. Governments may also issue a new
currency to replace an existing currency or alter the exchange rate or exchange
characteristics by devaluation or revaluation of a currency. Thus, a special
risk in purchasing non-U.S. dollar securities is that their yields or payouts
could be significantly and unpredictably affected by governmental actions. Even
in the absence of governmental action directly affecting currency exchange
rates, political or economic developments in the country issuing the specified
currency for a non-U.S. dollar security or elsewhere could lead to significant
and sudden changes in the exchange rate between the U.S. dollar and the
specified currency. These changes could affect the value of the security as
participants in the global currency markets move to buy or sell the specified
currency or U.S. dollars in reaction to these developments.
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CONSIDERATIONS RELATING TO SECURITIES DENOMINATED OR PAYABLE IN OR LINKED TO A
NON-U.S. DOLLAR CURRENCY
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Governments have imposed from time to time and may in the future impose exchange
controls or other conditions, including taxes, with respect to the exchange or
transfer of a specified currency that could affect exchange rates as well as the
availability of a specified currency for a security at its maturity or on any
other payment date. In addition, the ability of a holder to move currency freely
out of the country in which payment in the currency is received or to convert
the currency at a freely determined market rate could be limited by governmental
actions.
NON-U.S. DOLLAR SECURITIES MAY PERMIT US TO MAKE PAYMENTS IN U.S. DOLLARS OR
DELAY PAYMENT IF WE ARE UNABLE TO OBTAIN THE SPECIFIED CURRENCY
Securities payable in a currency other than U.S. dollars may provide that, if
the other currency is subject to convertibility, transferability, market
disruption or other conditions affecting its availability at or about the time
when a payment on the securities comes due because of circumstances beyond our
control, we will be entitled to make the payment in U.S. dollars or delay making
the payment. These circumstances could include the imposition of exchange
controls or our inability to obtain the other currency because of a disruption
in the currency markets. If we made payment in U.S. dollars, the exchange rate
we would use would be determined in the manner described above under
"Description of Debt Securities We May Offer--Payment Mechanics for Debt
Securities--How We Will Make Payments Due in Other Currencies--When the
Specified Currency Is Not Available" and "Description of Warrants We May
Offer--Payment Mechanics for Warrants--How We Will Make Payments Due in Other
Currencies--When the Specified Currency Is Not Available." A determination of
this kind may be based on limited information and would involve significant
discretion on the part of our foreign exchange agent. As a result, the value of
the payment in U.S. dollars an investor would receive on the payment date may be
less than the value of the payment the investor would have received in the other
currency if it had been available, or may be zero. In addition, a government may
impose extraordinary taxes on transfers of a currency. If that happens, we will
be entitled to deduct these taxes from any payment on notes payable in that
currency.
WE WILL NOT ADJUST NON-U.S. DOLLAR SECURITIES TO COMPENSATE FOR CHANGES IN
CURRENCY EXCHANGE RATES
Except as described above, we will not make any adjustment or change in the
terms of a non-U.S. dollar security in the event of any change in exchange rates
for the relevant currency, whether in the event of any devaluation, revaluation
or imposition of exchange or other regulatory controls or taxes or in the event
of other developments affecting that currency, the U.S. dollar or any other
currency. Consequently, investors in non-U.S. dollar securities will bear the
risk that their investment may be adversely affected by these types of events.
IN A LAWSUIT FOR PAYMENT ON A NON-U.S. DOLLAR SECURITY, AN INVESTOR MAY BEAR
CURRENCY EXCHANGE RISK
Our securities will be governed by New York law. Under Section 27 of the New
York Judiciary Law, a state court in the State of New York rendering a judgment
on a security denominated in a currency other than U.S. dollars would be
required to render the judgment in the specified currency; however, the judgment
would be converted into U.S. dollars at the exchange rate prevailing on the date
of entry of the judgment. Consequently, in a lawsuit for payment on a security
denominated in a currency other than U.S. dollars, investors would bear currency
exchange risk until judgment is entered, which could be a long time.
In courts outside of New York, investors may not be able to obtain judgment in a
specified currency other than U.S. dollars. For example, a judgment for money in
an action based on a non-U.S. dollar security in many other U.S. federal or
state courts ordinarily would be enforced in the United States only in U.S.
dollars. The date used to determine the rate of conversion of the currency in
which any
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CONSIDERATIONS RELATING TO SECURITIES DENOMINATED OR PAYABLE IN OR LINKED TO A
NON-U.S. DOLLAR CURRENCY
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particular security is denominated into U.S. dollars will depend upon various
factors, including which court renders the judgment.
INFORMATION ABOUT EXCHANGE RATES MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE
If we issue a non-U.S. dollar security, we may include in the applicable
prospectus supplement currency disclosure that provides information about
historical exchange rates for the relevant non-U.S. dollar currency or
currencies. Any information about exchange rates that we may provide will be
furnished as a matter of information only, and you should not regard the
information as indicative of the range of, or trends in, fluctuations in
currency exchange rates that may occur in the future. That rate will likely
differ from the exchange rate used under the terms that apply to a particular
security.
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U.S. Tax Considerations
Unless as otherwise stated in the applicable prospectus supplement, this section
describes the material United States federal income tax consequences to United
States holders, as defined below, of owning the debt securities. It is the
opinion of Sullivan & Cromwell, United States tax counsel to UBS. It applies to
you only if you hold your securities as capital assets for tax purposes. This
section does not apply to you if you are a member of a class of holders subject
to special rules, such as:
- - a dealer in securities or currencies;
- - a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;
- - a bank;
- - a life insurance company;
- - a tax-exempt organization;
- - a person that owns debt securities that are a hedge or that are hedged
against interest rate or currency risks;
- - a person that owns debt securities as part of a straddle or conversion
transaction for tax purposes;
- - a person whose functional currency for tax purposes is not the U.S. dollar;
or
- - except as otherwise noted under "Backup Withholding and Information
Reporting," a person that is not a United States holder, as defined below.
This section deals only with debt securities that are due to mature 30 years or
less from the date on which they are issued. The United States federal income
tax consequences of owning debt securities that are due to mature more than 30
years from their date of issue and the tax consequences of owning warrants will
be discussed in an applicable prospectus supplement. This section is based on
the Internal Revenue Code of 1986, as amended, its legislative history, existing
and proposed regulations under the Internal Revenue Code, and published rulings
and court decisions, all as currently in effect. These laws are subject to
change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning these
debt securities in your particular circumstances under the Internal Revenue Code
and the laws of any other taxing jurisdiction.
You are a United States holder if you are a beneficial owner of a debt security
and you are:
- - a citizen or resident of the United States;
- - a domestic corporation;
- - an estate whose income is subject to United States federal income tax
regardless of its source; or
- - a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are authorized
to control all substantial decisions of the trust.
TAXATION OF DEBT SECURITIES
This subsection describes the material United States federal income tax
consequences of owning, selling and disposing of the debt securities we are
offering.
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U.S. TAX CONSIDERATIONS
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PAYMENTS OF INTEREST
Except as described below in the case of interest on a discount debt security
that is not qualified stated interest, each as defined below under "Original
Issue Discount--General," you will be taxed on any interest on your debt
security, whether payable in U.S. dollars or a foreign currency, including a
composite currency or basket of currencies other than U.S. dollars, as ordinary
income at the time you receive the interest or it accrues, depending on your
method of accounting for tax purposes. Interest we pay on the debt securities
and original issue discount, if any, accrued with respect to the debt securities
(as described below under "--Original Issue Discount") constitutes income from
sources outside the United States, but, with certain exceptions, will be
"passive" or "financial services income," which is treated separately from other
types of income for purposes of computing the foreign tax credit limitation.
CASH BASIS TAXPAYERS. If you are a taxpayer that uses the cash receipts and
disbursements method of accounting for tax purposes and you receive an interest
payment that is denominated in, or determined by reference to, a foreign
currency, you must recognize income equal to the U.S. dollar value of the
interest payment, based on the exchange rate in effect on the date of receipt,
regardless of whether you actually convert the payment into U.S. dollars.
ACCRUAL BASIS TAXPAYERS. If you are a taxpayer who uses an accrual method of
accounting for tax purposes, you may determine the amount of income that you
recognize with respect to an interest payment denominated in, or determined by
reference to, a foreign currency by using one of two methods. Under the first
method, you will determine the amount of income accrued based on the average
exchange rate in effect during the interest accrual period or, with respect to
an accrual period that spans two taxable years, that part of the period within
the taxable year.
If you elect the second method, you would determine the amount of income accrued
on the basis of the exchange rate in effect on the last day of the accrual
period or, in the case of an accrual period that spans two taxable years, the
exchange rate in effect on the last day of the part of the period within the
taxable year. Additionally, under this second method, if you receive a payment
of interest within five business days of the last day of your accrual period or
taxable year, you may instead translate the interest accrued into U.S. dollars
at the exchange rate in effect on the day that you actually receive the interest
payment. If you elect the second method, it will apply to all debt instruments
that you hold at the beginning of the first taxable year to which the election
applies and to all debt instruments that you subsequently acquire. You may not
revoke this election without the consent of the Internal Revenue Service.
When you actually receive an interest payment, including a payment attributable
to accrued but unpaid interest upon the sale or retirement of your debt
security, denominated in, or determined by reference to, a foreign currency for
which you accrued an amount of income, you will recognize ordinary income or
loss measured by the difference, if any, between the exchange rate that you used
to accrue interest income and the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars. However, you may not treat this ordinary income gain or loss as an
adjustment to the interest income you receive.
ORIGINAL ISSUE DISCOUNT
GENERAL. If you own a debt security, other than a short-term debt security with
a term of one year or less, it will be treated as a discount debt security
issued at an original issue discount if the amount by which the debt security's
stated redemption price at maturity exceeds its issue price is more than a de
minimis amount. Generally, a debt security's issue price will be the first price
at which a substantial amount of debt securities included in the issue of which
the debt security is a part is sold to persons other than bond houses, brokers,
or similar persons or organizations acting in the capacity of underwriters,
placement agents, or wholesalers. A debt security's stated redemption price at
maturity is
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U.S. TAX CONSIDERATIONS
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the total of all payments provided by the debt security that are not payments of
qualified stated interest. Generally, an interest payment on a debt security is
qualified stated interest if it is one of a series of stated interest payments
on a debt security that are unconditionally payable at least annually at a
single fixed rate, with certain exceptions for lower rates paid during some
periods, applied to the outstanding principal amount of the debt security. There
are special rules for variable rate debt securities that are discussed under
"--Variable Rate Debt Securities."
In general, your debt security is not a discount debt security if the amount by
which its stated redemption price at maturity exceeds its issue price is less
than the de minimis amount of 1/4 of 1% of its stated redemption price at
maturity multiplied by the number of complete years to its maturity. Your debt
security will have de minimis original issue discount if the amount of the
excess is less than the de minimis amount. If your debt security has de minimis
original issue discount, you must include the de minimis amount in income as
stated principal payments are made on the debt security, unless you make the
election described below under "--Election to Treat All Interest as Original
Issue Discount." You can determine the includible amount with respect to each
such payment by multiplying the total amount of your debt security's de minimis
original issue discount by a fraction equal to:
- - the amount of the principal payment made
divided by
- - the stated principal amount of the debt security.
Generally, if your discount debt security matures more than one year from its
date of issue, you must include original issue discount in income before you
receive cash attributable to that income. The amount of OID that you must
include in income is calculated using a constant-yield method, and generally you
will include increasingly greater amounts of OID in income over the life of your
debt security. More specifically, you can calculate the amount of accrued OID
that you must include in income by adding the daily portions of OID with respect
to your discount debt security for each day during the taxable year or portion
of the taxable year that you hold your discount debt security. You can determine
the daily portion by allocating to each day in any accrual period a pro rata
portion of the OID allocable to that accrual period. You may select an accrual
period of any length with respect to your debt security and you may vary the
length of each accrual period over the term of your debt security. However, no
accrual period may be longer than one year and each scheduled payment of
interest or principal on the debt security must occur on either the first or
final day of an accrual period.
You can determine the amount of OID allocable to an accrual period by:
- - multiplying your discount debt security's adjusted issue price at the
beginning of the accrual period by your debt security's yield to maturity;
and then
- - subtracting from this figure the sum of the payments of qualified stated
interest on your debt security allocable to the accrual period.
You must determine the debt security's yield to maturity on the basis of
compounding at the close of each accrual period and adjusting for the length of
each accrual period. Further, you can determine your discount debt security's
adjusted issue price at the beginning of any accrual period by:
- - adding your debt security's issue price and any accrued OID for each prior
accrual period; and then
- - subtracting any payments previously made on your debt security that were not
qualified stated interest payments.
If an interval between payments of qualified stated interest on your debt
security contains more than one accrual period, then, when you determine the
amount of OID allocable to an accrual period, you
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U.S. TAX CONSIDERATIONS
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must allocate the amount of qualified stated interest payable at the end of the
interval, including any qualified stated interest that is payable on the first
day of the accrual period immediately following the interval, pro rata to each
accrual period in the interval based on their relative lengths. In addition, you
must increase the adjusted issue price at the beginning of each accrual period
in the interval by the amount of any qualified stated interest that has accrued
prior to the first day of the accrual period but that is not payable until the
end of the interval. You may compute the amount of OID allocable to an initial
short accrual period by using any reasonable method if all other accrual
periods, other than a final short accrual period, are of equal length.
The amount of OID allocable to the final accrual period is equal to the
difference between:
- - the amount payable at the maturity of your debt security, other than any
payment of qualified stated interest; and
- - your debt security's adjusted issue price as of the beginning of the final
accrual period.
ACQUISITION PREMIUM. If you purchase your debt security for an amount that is
less than or equal to the sum of all amounts, other than qualified stated
interest, payable on your debt security after the purchase date but is greater
than the amount of your debt security's adjusted issue price, as determined
above under "General," the excess is acquisition premium. If you do not make the
election described below under "Election to Treat All Interest as Original Issue
Discount," then you must reduce the daily portions of OID by an amount equal to:
- - the excess of your adjusted basis in the debt security immediately after
purchase over the adjusted issue price of the debt security
divided by
- - the excess of the sum of all amounts payable (other than qualified stated
interest) on the debt security after the purchase date over the debt
security's adjusted issue price.
PRE-ISSUANCE ACCRUED INTEREST. An election may be made to decrease the issue
price of your debt security by the amount of pre-issuance accrued interest if:
- - a portion of the initial purchase price of your debt security is attributable
to pre-issuance accrued interest;
- - the first stated interest payment on your debt security is to be made within
one year of your debt security's issue date; and
- - the payment will equal or exceed the amount of pre-issuance accrued interest.
If this election is made, a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on your debt security.
DEBT SECURITIES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION. Your
debt security is subject to a contingency if it provides for an alternative
payment schedule or schedules applicable upon the occurrence of a contingency or
contingencies, other than a remote or incidental contingency, whether such
contingency relates to payments of interest or of principal. In such a case, you
must determine the yield and maturity of your debt security by assuming that the
payments will be made according to the payment schedule most likely to occur if:
- - the timing and amounts of the payments that comprise each payment schedule
are known as of the issue date; and
- - one of such schedules is significantly more likely than not to occur.
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U.S. TAX CONSIDERATIONS
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If there is no single payment schedule that is significantly more likely than
not to occur, other than because of a mandatory sinking fund, you must include
income on your debt security in accordance with the general rules that govern
contingent payment obligations. These rules will be discussed in the applicable
prospectus supplement.
Notwithstanding the general rules for determining yield and maturity, if your
debt security is subject to contingencies, and either you or we have an
unconditional option or options that, if exercised, would require payments to be
made on the debt security under an alternative payment schedule or schedules,
then:
- - in the case of an option or options of ours, we will be deemed to exercise or
not exercise an option or combination of options in the manner that minimizes
the yield on your debt security and,
- - in the case of an option or options that you hold, you will be deemed to
exercise or not exercise an option or combination of options in the manner
that maximizes the yield on your debt security.
If both you and we hold options described in the preceding sentence, those rules
will apply to each option in the order in which they may be exercised. You may
determine the yield on your debt security for the purposes of those calculations
by using any date on which your debt security may be redeemed or repurchased as
the maturity date and the amount payable on the date that you chose in
accordance with the terms of your debt security as the principal amount payable
at maturity.
If a contingency, including the exercise of an option, actually occurs or does
not occur contrary to an assumption made according to the above rules then,
except to the extent that a portion of your debt security is repaid as a result
of this change in circumstances and solely to determine the amount and accrual
of OID, you must redetermine the yield and maturity of your note by treating
your debt security as having been retired and reissued on the date of the change
in circumstances for an amount equal to your debt security's adjusted issue
price on that date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. You may elect to
include in gross income all interest that accrues on your debt security using
the constant-yield method described above under "General," with the
modifications described below. For purposes of this election, interest will
include stated interest, OID, de minimis original issue discount, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium, described below under "Debt Securities Purchased at a
Premium," or acquisition premium.
If you make this election for your debt security, then, when you apply the
constant-yield method:
- - the issue price of your debt security will equal your cost;
- - the issue date of your debt security will be the date you acquired it; and
- - no payments on your debt security will be treated as payments of qualified
stated interest.
Generally, this election will apply only to the debt security for which you make
it; however, if the debt security for which this election is made has
amortizable bond premium, you will be deemed to have made an election to apply
amortizable bond premium against interest for all debt instruments with
amortizable bond premium, other than debt instruments the interest on which is
excludible from gross income, that you hold as of the beginning of the taxable
year to which the election applies or any taxable year thereafter. Additionally,
if you make this election for a market discount debt security, you will be
treated as having made the election discussed below under "Market Discount" to
include market discount in income currently over the life of all debt
instruments that you currently hold or later acquire. You may not revoke any
election to apply the constant-yield method to all interest on a debt security
or the deemed elections with respect to amortizable bond premium or market
discount debt securities without the consent of the Internal Revenue Service.
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U.S. TAX CONSIDERATIONS
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VARIABLE RATE DEBT SECURITIES. Your debt security will be a variable rate debt
security if:
- - your debt security's issue price does not exceed the total noncontingent
principal payments by more than the lesser of:
1. .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue
date, or
2. 15 percent of the total noncontingent principal payments; and
- - your debt security provides for stated interest, compounded or paid at least
annually, only at:
1. one or more qualified floating rates,
2. a single fixed rate and one or more qualified floating rates,
3. a single objective rate, or
4. a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
Your debt security will have a variable rate that is a qualified floating rate
if:
- - variations in the value of the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the
currency in which your debt security is denominated; or
- - the rate is equal to such a rate multiplied by either:
1. a fixed multiple that is greater than 0.65 but not more than 1.35, or
2. a fixed multiple that is greater than 0.65 but not more than 1.35,
increased or decreased by a fixed rate; and
- - the value of the rate on any date during the term of your debt security is
set no earlier than three months prior to the first day on which that value
is in effect and no later than one year following that first day.
If your debt security provides for two or more qualified floating rates that are
within 0.25 percentage points of each other on the issue date or can reasonably
be expected to have approximately the same values throughout the term of the
debt security, the qualified floating rates together constitute a single
qualified floating rate.
Your debt security will not have a qualified floating rate, however, if the rate
is subject to certain restrictions (including caps, floors, governors, or other
similar restrictions) unless such restrictions are fixed throughout the term of
the debt security or are not reasonably expected to significantly affect the
yield on the debt security.
Your debt security will have a variable rate that is a single objective rate if:
- - the rate is not a qualified floating rate;
- - the rate is determined using a single, fixed formula that is based on
objective financial or economic information that is not within the control of
or unique to the circumstances of the issuer or a related party; and
- - the value of the rate on any date during the term of your debt security is
set no earlier than three months prior to the first day on which that value
is in effect and no later than one year following that first day.
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U.S. TAX CONSIDERATIONS
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Your debt security will not have a variable rate that is an objective rate,
however, if it is reasonably expected that the average value of the rate during
the first half of your debt security's term will be either significantly less
than or significantly greater than the average value of the rate during the
final half of your debt security's term.
An objective rate as described above is a qualified inverse floating rate if:
- - the rate is equal to a fixed rate minus a qualified floating rate; and
- - the variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds.
Your debt security will also have a single qualified floating rate or an
objective rate if interest on your debt security is stated at a fixed rate for
an initial period of one year or less followed by either a qualified floating
rate or an objective rate for a subsequent period, and either:
- - the fixed rate and the qualified floating rate or objective rate have values
on the issue date of the note that do not differ by more than 0.25 percentage
points; or
- - the value of the qualified floating rate or objective rate is intended to
approximate the fixed rate.
In general, if your variable rate debt security provides for stated interest at
a single qualified floating rate or objective rate (or one of those rates after
a single fixed rate for an initial period), all stated interest on your debt
security is qualified stated interest. In this case, the amount of OID, if any,
is determined by using, for a qualified floating rate or qualified inverse
floating rate, the value as of the issue date of the qualified floating rate or
qualified inverse floating rate, or, for any other objective rate, a fixed rate
that reflects the yield reasonably expected for your debt security.
If your variable rate debt security does not provide for stated interest at a
single qualified floating rate or a single objective rate, and also does not
provide for interest payable at a fixed rate other than a single fixed rate for
an initial period, you generally must determine the interest and OID accruals on
your debt security by:
- - determining a fixed rate substitute for each variable rate provided under
your variable rate debt security;
- - constructing the equivalent fixed rate debt instrument (using the fixed rate
substitute described above);
- - determining the amount of qualified stated interest and OID with respect to
the equivalent fixed rate debt instrument; and
- - adjusting for actual variable rates during the applicable accrual period.
When you determine the fixed rate substitute for each variable rate provided
under the variable rate note, you generally will use the value of each variable
rate as of the issue date or, for an objective rate that is not a qualified
inverse floating rate, a rate that reflects the reasonably expected yield on
your debt security.
If your variable rate debt security provides for stated interest either at one
or more qualified floating rates or at a qualified inverse floating rate, and
also provides for stated interest at a single fixed rate other than a single
fixed rate for an initial period, you generally must determine interest and OID
accruals by using the method described in the previous paragraph. However, your
variable rate debt security will be treated, for purposes of the first three
steps of the determination, as if your debt security had provided for a
qualified floating rate, or a qualified inverse floating rate, rather than the
fixed rate. The qualified floating rate, or qualified inverse floating rate,
that replaces the fixed rate must be such that the fair market value of your
variable rate debt security as of the issue date approximates
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U.S. TAX CONSIDERATIONS
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the fair market value of an otherwise identical debt instrument that provides
for the qualified floating rate, or qualified inverse floating rate, rather than
the fixed rate.
SHORT-TERM DEBT SECURITIES. In general, if you are an individual or other cash
basis United States holder of a short-term debt security, you are not required
to accrue OID, as specially defined below for the purposes of this paragraph,
for United States federal income tax purposes unless you elect to do so.
However, you may be required to include any stated interest in income as you
receive it. If you are an accrual basis taxpayer, a taxpayer in a special class,
including, but not limited to, a regulated investment company, common trust
fund, or a certain type of pass-through entity, or a cash basis taxpayer who so
elects, you will be required to accrue OID on short-term debt securities on
either a straight-line basis or under the constant-yield method, based on daily
compounding. If you are not required and do not elect to include OID in income
currently, any gain you realize on the sale or retirement of your short-term
debt security will be ordinary income to the extent of the accrued OID, which
will be determined on a straight-line basis unless you make an election to
accrue the OID under the constant-yield method, through the date of sale or
retirement. However, if you are not required and do not elect to accrue OID on
your short-term debt securities, you will be required to defer deductions for
interest on borrowings allocable to your short-term debt securities in an amount
not exceeding the deferred income until the deferred income is realized.
When you determine the amount of OID subject to these rules, you must include
all interest payments on your short-term debt security, including stated
interest, in your short-term debt security's stated redemption price at
maturity.
FOREIGN CURRENCY DISCOUNT DEBT SECURITIES. If your discount debt security is
denominated in, or determined by reference to, a foreign currency, you must
determine OID for any accrual period on your discount debt security in the
foreign currency and then translate the amount of OID into U.S. dollars in the
same manner as stated interest accrued by an accrual basis United States holder,
as described under "--Payments of Interest." You may recognize ordinary income
or loss when you receive an amount attributable to OID in connection with a
payment of interest or the sale or retirement of your debt security.
MARKET DISCOUNT
You will be treated as if you purchased your debt security, other than a
short-term debt security, at a market discount, and your debt security will be a
market discount note if:
- - in the case of an initial purchaser, you purchase your debt security for less
than its issue price as determined above under "--Original Issue
Discount--General"; and
- - in the case of all purchasers, the debt security's stated redemption price at
maturity or, in the case of a discount debt security, the debt security's
revised issue price, exceeds the price you paid for your debt security by at
least 1/4 of 1% of your debt security's stated redemption price at maturity
or revised issue price, respectively, multiplied by the number of complete
years to the debt security's maturity. To determine the revised issue price
of your debt security for these purposes, you generally add any OID that has
accrued on your debt security to its issue price.
If your debt security's stated redemption price at maturity or, in the case of a
discount debt security, its revised issue price, exceeds the price you paid for
the debt security by less than 1/4 of 1% multiplied by the number of complete
years to the debt security's maturity, the excess constitutes de minimis market
discount, and the rules discussed below are not applicable to you.
You must treat any gain you recognize on the maturity or disposition of your
market discount debt security as ordinary income to the extent of the accrued
market discount on your debt security. Alternatively, you may elect to include
market discount in income currently over the life of your debt
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U.S. TAX CONSIDERATIONS
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security. If you make this election, it will apply to all debt instruments with
market discount that you acquire on or after the first day of the first taxable
year to which the election applies. You may not revoke this election without the
consent of the Internal Revenue Service. If you own a market discount debt
security and do not make this election, you will generally be required to defer
deductions for interest on borrowings allocable to your debt security in an
amount not exceeding the accrued market discount on your debt security until the
maturity or disposition of your debt security.
You will accrue market discount on your market discount debt security on a
straight-line basis unless you elect to accrue market discount using a
constant-yield method. If you make this election, it will apply only to the debt
security with respect to which it is made and you may not revoke it.
DEBT SECURITIES PURCHASED AT A PREMIUM
If you purchase your debt security for an amount in excess of its principal
amount, you may elect to treat the excess as amortizable bond premium. If you
make this election, you will reduce the amount required to be included in your
income each year with respect to interest on your debt security by the amount of
amortizable bond premium allocable to that year, based on your debt security's
yield to maturity. If your debt security is denominated in, or determined by
reference to, a foreign currency, you will compute your amortizable bond premium
in units of the foreign currency and your amortizable bond premium will reduce
your interest income in units of the foreign currency. Gain or loss recognized
that is attributable to changes in exchange rates between the time your
amortized bond premium offsets interest income and the time of the acquisition
of your debt security is generally taxable as ordinary income or loss. If you
make an election to amortize bond premium, it will apply to all debt
instruments, other than debt instruments the interest on which is excludible
from gross income, that you hold at the beginning of the first taxable year to
which the election applies or thereafter acquire, and you may not revoke it
without the consent of the Internal Revenue Service. See also "--Original Issue
Discount--Election to Treat All Interest as Original Issue Discount."
PURCHASE, SALE AND RETIREMENT OF THE DEBT SECURITIES
Your tax basis in your debt security will generally be the U.S. dollar cost, as
defined below, of your debt security, adjusted by:
- - adding any OID or market discount, de minimis original issue discount and de
minimis market discount; and then
- - subtracting any payments on your debt security that are not qualified stated
interest payments and any amortizable bond premium applied to reduce the
interest on your debt security.
If you purchase your debt security with foreign currency, the U.S. dollar cost
of your debt security will generally be the U.S. dollar value of the purchase
price on the date of purchase. However, if you are a cash basis taxpayer, or an
accrual basis taxpayer if you so elect, and your debt security is traded on an
established securities market, as defined in the applicable Treasury
regulations, the U.S. dollar cost of your debt security will be the U.S. dollar
value of the purchase price on the settlement date of your purchase.
You will generally recognize gain or loss on the sale or retirement of your debt
security equal to the difference between the amount you realize on the sale or
retirement and your tax basis in your debt security. If your debt security is
sold or retired for an amount in foreign currency, the amount you realize will
be the U.S. dollar value of such amount on:
- - the date payment is received, if you are a cash basis taxpayer and the debt
securities are not traded on an established securities market, as defined in
the applicable Treasury regulations;
- - the date of disposition, if you are an accrual basis taxpayer; or
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72
U.S. TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
- - the settlement date for the sale, if you are a cash basis taxpayer, or an
accrual basis United States holder that so elects, and the debt securities are
traded on an established securities market, as defined in the applicable
Treasury regulations.
You will recognize capital gain or loss when you sell or retire your debt
security, except to the extent:
- - described above under "-- Original Issue Discount -- Short-Term Debt
Securities" or "-- Market Discount,"
- - attributable to accrued but unpaid interest,
- - the rules governing contingent payment obligations apply, or
- - attributable to changes in exchange rates as described below.
Capital gain of a noncorporate United States holder is generally taxed at a
maximum rate of 20% where the property is held more than one year, and 18% where
the property is held for more than five years.
You must treat any portion of the gain or loss that you recognize on the sale or
retirement of a debt security as ordinary income or loss to the extent
attributable to changes in exchange rates. However, you only take exchange gain
or loss into account to the extent of the total gain or loss you realize on the
transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
If you receive foreign currency as interest on your debt security or on the sale
or retirement of your debt security, your tax basis in the foreign currency will
equal its U.S. dollar value when the interest is received or at the time of the
sale or retirement. If you purchase foreign currency, you generally will have a
tax basis equal to the U.S. dollar value of the foreign currency on the date of
your purchase. If you sell or dispose of a foreign currency, including if you
use it to purchase debt securities or exchange it for U.S. dollars, any gain or
loss recognized generally will be ordinary income or loss.
INDEXED AND OTHER DEBT SECURITIES
The applicable prospectus supplement will discuss any special United States
federal income tax rules with respect to contingent foreign currency debt
securities, debt securities the payments on which are determined by reference to
the value of any index or stock and other debt securities that are subject to
the rules governing contingent payment obligations which are not subject to the
rules governing variable rate debt securities.
BACKUP WITHHOLDING AND INFORMATION REPORTING
If you are a noncorporate United States holder, information reporting
requirements, on Internal Revenue Service Form 1099, generally will apply to:
- - payments of principal and interest on a debt security within the United
States, including payments made by wire transfer from outside the United
States to an account you maintain in the United States, and
- - the payment of the proceeds from the sale of a debt security effected at a
United States office of a broker.
Additionally, backup withholding will apply to such payments 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
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73
U.S. TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
- - in certain circumstances, fails to comply with applicable certification
requirements.
In general, payment of the proceeds from the sale of debt securities effected at
a foreign office of a broker will not be subject to information reporting or
backup withholding. However, a sale 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 you provide certification as to your non-United
States status or you otherwise establish an exemption.
In addition, payment of the proceeds from the sale of debt 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 you provide certification as to your non-United
States status 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.
TAXATION OF WARRANTS
U.S. tax considerations with respect to warrants will be discussed in an
applicable prospectus supplement.
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74
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Tax Considerations Under the Laws of Switzerland
The tax information set forth below is based on the opinion of Ernst & Young,
Ltd., Switzerland, dated 12 December 2002, and has been approved by them for its
accuracy. It may be supplemented by and is otherwise subject to the applicable
prospectus supplement relating to a particular offering of securities.
DEBT SECURITIES
The following is a summary of Swiss tax consequences related to the acquisition,
ownership and the disposition of unsecured debt securities and 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 unsecured debt securities. The tax treatment for each
debt-holder depends on the particular situation; therefore, prospective
investors are advised to consult with their professional tax advisors as to the
respective tax consequences of the purchase, ownership and disposition of
unsecured debt securities.
We have summarized below the principal tax consequences under the laws of
Switzerland for non-Swiss investors (i.e., for investors not resident in
Switzerland for Swiss tax purposes) of owning unsecured debt securities issued
by a non Swiss-branch of UBS AG.
This summary does not address the tax treatment of holders of the debt
securities subject to special tax rules.
Finally it is assumed that the issuer of the unsecured debt securities is not
resident in Switzerland for Swiss tax purposes.
SWISS INCOME AND CAPITAL TAX
Holders of unsecured debt 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 unsecured debt securities are attributable
or to which or to whom the unsecured debt securities belong, will not be subject
to any Swiss Federal, Cantonal or Municipal corporate or individual income and
capital tax or capital gains tax on the holding and disposition of the unsecured
debt securities. Furthermore, there will be no inheritance or gift tax imposed
in Switzerland on the unsecured debt securities if the holder is an individual
who is not domiciled in Switzerland.
ISSUANCE STAMP TAX
Under the condition that UBS AG will book the unsecured debt securities in its
Jersey branch, London branch or any other branch not resident in Switzerland and
under the condition that UBS AG does not plan to use the proceeds of the sale of
the unsecured debt securities in Switzerland, the issuance of the unsecured debt
securities will not be a taxable event for Swiss issuance stamp tax purposes.
WITHHOLDING TAX
Under the condition that UBS AG will book the unsecured debt securities in its
Jersey branch, London branch or any other branch not resident in Switzerland and
under the condition that UBS AG does not plan to use the proceeds of the sale of
the unsecured debt securities in Switzerland, the payment of interest on and the
redemption of unsecured debt securities is not subject to Swiss withholding tax
(Swiss Anticipatory Tax).
SECURITIES TURNOVER TAX
In case the duration of the unsecured debt securities is less than one year, a
sale or purchase of unsecured debt securities is out of scope of Swiss turnover
tax.
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75
TAX CONSIDERATIONS UNDER THE LAWS OF SWITZERLAND
- --------------------------------------------------------------------------------
In case the duration of the unsecured debt securities is more than one year, a
sale or purchase of such unsecured debt securities is subject to Swiss turnover
tax if carried out through a registered Swiss securities dealer. The Swiss
securities dealer is required to impose half of the turnover tax of 0.3 % on
every contractual partner that is not a domestic securities dealer unless the
counterparties qualify for a special exemption from Swiss turnover tax (such as
foreign investment funds, foreign pension institutions etc.).
However, no securities turnover tax will be imposed on transactions that are not
carried out through a registered Swiss securities dealer.
WARRANTS
Tax considerations under the laws of Switzerland with respect to warrants will
be discussed in an applicable prospectus supplement.
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76
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ERISA Considerations
We, UBS Warburg LLC, UBS PaineWebber Inc. and other of our affiliates may each
be considered a "party in interest" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or a "disqualified
person" (within the meaning of Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code")) with respect to an employee benefits plan that is
subject to ERISA and/or an individual retirement account or Keogh plan that is
subject to the Code ("Plan"). The purchase of debt securities by a Plan with
respect to which UBS Warburg LLC, UBS PaineWebber Inc. or any of our affiliates
acts as a fiduciary as defined in Section 3(21) of ERISA and/or Section 4975 of
the Code ("Fiduciary") would constitute a prohibited transaction under ERISA or
the Code unless acquired pursuant to and in accordance with an applicable
exemption. The purchase of debt securities by a Plan with respect to which UBS
Warburg LLC, UBS PaineWebber Inc. or any of our affiliates does not act as a
Fiduciary but for which any of the above entities does provide services could
also be prohibited, but one or more exemptions may be applicable. Any person
proposing to acquire any debt security on behalf of a Plan should consult with
counsel regarding the applicability of the prohibited transaction rules and the
applicable exemptions thereto. The foregoing summary may be supplemented by and
is otherwise subject to the applicable prospectus supplement.
ERISA considerations with respect to warrants will be discussed in an applicable
prospectus supplement.
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77
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Plan of Distribution
PLAN OF DISTRIBUTION FOR THE INITIAL OFFER AND SALE OF SECURITIES.
We plan to issue the securities under a distribution agreement with UBS Warburg
LLC and UBS PaineWebber Inc., as the agents. We have filed a copy of the form of
distribution agreement with the SEC as an exhibit to our registration statement.
See "Where You Can Find More Information" above for information on how to obtain
a copy of it. We will describe the distribution agreement under which we issue
any securities in the applicable prospectus supplement, and we will file that
agreement with the SEC as an exhibit to an amendment to the registration
statement of which this prospectus is a part or as an exhibit to a Form 6-K and
incorporated herein by reference. See "Where You Can Find More Information"
above for information on how to obtain a copy of a distribution agreement when
it is filed. Subject to certain conditions, the agents would agree to use their
reasonable efforts to solicit purchases of the securities. We would have the
right to accept offers to purchase securities and may reject any proposed
purchase of the securities. The agents may also reject any offer to purchase
securities. We would pay the agents a commission on any securities sold through
the agents. The commission would range from 0.100% to an estimated maximum of
2.0% of the principal amount of the securities, depending on the stated maturity
of the securities.
We may also sell securities to the agents who will purchase the securities as
principal for their own accounts. In that case, the agents will purchase the
securities at a price equal to the issue price specified in the applicable
prospectus supplement, less a discount. The discount will equal the applicable
commission on an agency sale of securities with the same stated maturity.
The agents may resell any securities they purchase as principal to other brokers
or dealers at a discount, which may include all or part of the discount the
agents received from us. If all the securities are not sold at the initial
offering price, the agents may change the offering price and the other selling
terms.
We may also sell securities directly to investors. We will not pay commissions
on securities we sell directly.
The agents, whether acting as agent or principal, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933. We have agreed
to indemnify the agents against certain liabilities, including liabilities under
the Securities Act.
If the agents sell securities to dealers who resell to investors and the agents
pay the dealers all or part of the discount or commission they receive from us,
those dealers may also be deemed to be "underwriters" within the meaning of the
Securities Act.
In connection with an offering, the agents may purchase and sell securities in
the open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short
sales involve the sale by an agent of a greater number of securities than they
are required to purchase in an offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the securities while an offering is in progress.
The agents may also impose a penalty bid. This occurs when a particular agent
repays to the agents a portion of the discount received by it because the agents
have repurchased securities sold by or for the account of that agent in
stabilizing or short-covering transactions.
These activities by the agents may stabilize, maintain or otherwise affect the
market price of the securities. As a result, the price of the securities may be
higher than the price that otherwise might
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78
PLAN OF DISTRIBUTION
- --------------------------------------------------------------------------------
exist in the open market. If these activities are commenced, they may be
discontinued by the agents at any time. These transactions may be effected on an
exchange or automated quotation system, if the securities are listed on that
exchange or admitted for trading on that automated quotation system, or in the
over-the-counter market or otherwise.
The purchase price of the securities will be required to be paid in immediately
available funds in New York City, unless otherwise indicated in your prospectus
supplement.
We may appoint agents other than or in addition to UBS Warburg LLC and UBS
PaineWebber Inc. with respect to the securities. Any other agents will be named
in the applicable prospectus supplements and those agents will enter into the
distribution agreement referred to above. The other agents may be affiliates or
customers of UBS and may engage in transactions with and perform services for
UBS in the ordinary course of business. UBS Warburg LLC and UBS PaineWebber Inc.
may resell securities to or through another of our affiliates, as selling
agents.
The securities are a new issue of securities, and there will be no established
trading market for any security before its original issue date. We may or may
not list the securities on a securities exchange or quotation system. We have
been advised by UBS Warburg LLC and UBS PaineWebber Inc. that they intend to
make a market in the securities. However, neither UBS Warburg LLC, UBS
PaineWebber Inc. nor any of our other affiliates nor any other agent named in
your prospectus supplement that makes a market is obligated to do so and any of
them may stop doing so at any time without notice. No assurance can be given as
to the liquidity or trading market for the securities.
UBS Warburg LLC and UBS PaineWebber Inc. are affiliates of UBS. Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc. imposes
certain requirements when an NASD member such as UBS Warburg LLC or UBS
PaineWebber Inc. distributes an affiliated company's debt securities. UBS
Warburg LLC and UBS PaineWebber Inc. have advised UBS that this offering will
comply with the applicable requirements of Rule 2720.
UBS Warburg LLC and UBS PaineWebber Inc. will not confirm initial sales to
accounts over which it exercises discretionary authority without the prior
written approval of the customer.
MARKET-MAKING RESALES BY AFFILIATES
This prospectus may be used by UBS, UBS Warburg LLC, UBS PaineWebber Inc. or any
other affiliate of UBS in connection with offers and sales of the securities in
market-making transactions. In a market-making transaction, each of UBS, UBS
Warburg LLC, UBS PaineWebber Inc. or any other affiliate of UBS may resell a
security it acquires from other holders, after the original offering and sale of
the security. Resales of this kind may occur in the open market or may be
privately negotiated at prevailing market prices at the time of resale or at
related or negotiated prices. In these transactions, UBS, UBS Warburg LLC, UBS
PaineWebber Inc. or any other affiliate of UBS may act as principal or agent,
including as agent for the counterparty in a transaction in which it acts as
principal, or as agent for both counterparties in a transaction in which it does
not act as principal. UBS, UBS Warburg LLC, UBS PaineWebber Inc. or any other
affiliate of UBS may receive compensation in the form of discounts and
commissions, including from both counterparties in some cases.
UBS does not expect to receive any proceeds from market-making transactions
other than those it undertakes on its own. UBS does not expect that UBS Warburg
LLC, UBS PaineWebber Inc. or any other affiliate that engages in these
transactions will pay any proceeds from its market-making resales to UBS.
Information about the trade and settlement dates, as well as the purchase price,
for a market-making transaction will be provided to the purchaser in a separate
confirmation of sale.
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79
PLAN OF DISTRIBUTION
- --------------------------------------------------------------------------------
Unless UBS or an agent informs you in your confirmation of sale that your
security is being purchased in its original offering and sale, you may assume
that you are purchasing your security in a market-making transaction.
MATTERS RELATING TO INITIAL OFFERING AND MARKET-MAKING RESALES
UBS Warburg LLC and UBS PaineWebber Inc. do not expect the amount of securities
held, as a result of market-making resales, by accounts over which it exercises
discretionary authority to exceed, at any time, five percent of the aggregate
initial offering price (that is, $231,242,500) of all of the securities. In
compliance with NASD guidelines, the maximum commission or discount to be
received by any NASD member or independent broker dealer may not exceed 8% of
the aggregate principal amount of the securities offered pursuant to this
prospectus; however, it is anticipated that the maximum commission or discount
to be received in any particular offering of securities will be significantly
less than this amount.
In this prospectus, the term "this offering" means the initial offering of the
securities made in connection with their original issuance. This term does not
refer to any subsequent resales of securities in market-making transactions.
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80
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Validity of the Securities
In connection with particular offerings of the securities in the future, and if
stated in the applicable prospectus supplements, the validity of those
securities may be passed upon for UBS AG by Sullivan & Cromwell as to matters of
New York law and by Bar & Karrer as to matters of Swiss law, and for any
underwriters or agents by Sullivan & Cromwell or other counsel named in the
applicable prospectus supplement.
- --------------------------------------------------------------------------------
Experts
The consolidated balance sheets of UBS AG at 31 December 2001 and 2000 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
2001 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 statements of financial condition of Paine Webber
Group Inc. at 31 December 1999 and the related consolidated statements of
income, cash flows and changes in shareholders' equity for 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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81
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PROSPECTUS PRELIMINARY PROSPECTUS DATED DECEMBER 19, 2002
- --------------------------------------------------------------------------------
[UBS AG LOGO]
$4,529,508,000
UBS PREFERRED FUNDING TRUST IV
UBS PREFERRED FUNDING TRUST V
NONCUMULATIVE TRUST PREFERRED SECURITIES
REPRESENTING A CORRESPONDING AMOUNT OF
NONCUMULATIVE COMPANY PREFERRED SECURITIES
OF
UBS PREFERRED FUNDING COMPANY LLC IV
UBS PREFERRED FUNDING COMPANY LLC V
GUARANTEED ON A SUBORDINATED BASIS BY
UBS AG
- --------------------------------------------------------------------------------
UBS Preferred Funding Trust IV and UBS Preferred Funding Trust V (each, a "UBS
Preferred Funding Trust" and all together, the "UBS Preferred Funding Trusts")
from time to time may severally offer to sell trust preferred securities
representing a corresponding amount of related company preferred securities and
related rights under subordinated guarantees by UBS AG. The total amount of
these trust preferred securities will have an initial aggregate offering price
of up to $4,529,508,000, or the equivalent amount in other currencies, currency
units or composite currencies, although UBS AG may increase this amount in the
future.
(continued on next page)
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.
The trust preferred securities will not be deposit liabilities of UBS AG and
will not be insured by the United States Federal Deposit Insurance Corporation
or any other governmental agency of the United States, Switzerland or any other
jurisdiction.
UBS AG may offer and sell the trust preferred securities to or through one or
more underwriters, dealers and agents, including the firms named below, or
directly to purchasers, on a delayed or continued basis.
This prospectus may be used in the initial sale of the trust preferred
securities. In addition, 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 after the initial sale.
These transactions may be executed at negotiated prices that are related to
market prices at the time of purchase or sale, or at other prices. UBS AG and
its affiliates may act as principal or agent in these transactions. Unless UBS
AG or its agent informs you otherwise in the confirmation of sale, this
prospectus is being used in a market making transaction.
UBS WARBURG UBS PAINEWEBBER INC.
THE DATE OF THIS PROSPECTUS IS DECEMBER 19, 2002
(continued from previous page)
UBS Preferred Funding Company LLC IV and UBS Preferred Funding Company LLC V
(each, a "UBS Preferred Funding Company" and all together, the "UBS Preferred
Funding Companies") will issue company preferred securities. Any company
preferred securities which may be issued by a UBS Preferred Funding Company will
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 such company preferred securities.
Each UBS Preferred Funding Trust will use the proceeds from the sale of its
trust preferred securities to purchase company preferred securities (the
"related company preferred securities") from a UBS Preferred Funding Company
(the "related UBS Preferred Funding Company"). The related UBS Preferred Funding
Company will use the proceeds from the sale of the related company preferred
securities to the UBS Preferred Funding Trust (the "related UBS Preferred
Funding Trust") and from the sale of company common securities to UBS AG to
acquire subordinated notes (the "related subordinated notes") issued by the
Cayman Islands branch of UBS AG. The trust preferred securities, the related
company preferred securities and the related subordinated notes that will be
issued in any particular offering will have corresponding terms. Dividends and
redemption and liquidation payments paid by the related UBS Preferred Funding
Company on the related company preferred securities will pass through the
related UBS Preferred Funding Trust to you as distributions and redemption and
liquidation payments on your trust preferred securities.
UBS AG will guarantee, on a subordinated basis, dividend, redemption and
liquidation payment obligations under any company preferred securities.
This prospectus describes the general terms that may apply to any trust
preferred securities and the corresponding company preferred securities and the
general manner in which trust preferred securities may be offered. The specific
terms of any trust preferred securities to be offered, and the specific manner
in which they may be offered and the terms of any related company preferred
securities, will be described in the applicable supplement to this prospectus.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
Introduction........................... 1
Cautionary Note Regarding Forward-
Looking Information.................. 2
Incorporation of Information About UBS
AG................................... 4
Where You Can Find More Information.... 4
Presentation of Financial
Information.......................... 5
Limitations on Enforcement of U.S. Laws
Against UBS AG, Its Management and
Others............................... 6
Capitalization of UBS.................. 6
UBS.................................... 7
The UBS Preferred Funding Trusts....... 9
The UBS Preferred Funding Companies.... 10
Use of Proceeds........................ 16
Description of Trust Preferred
Securities........................... 17
Description of Company Preferred
Securities........................... 24
Book-Entry Issuance of Trust Preferred
Securities........................... 38
Description of UBS AG Subordinated
Guarantees........................... 43
Description of Subordinated Notes of
UBS AG............................... 48
U.S. Tax Consideration................. 51
Tax Consideration under the Laws of
Switzerland.......................... 57
ERISA Considerations................... 59
Plan of Distribution................... 61
Validity of the Securities............. 61
Experts................................ 61
</Table>
CERTAIN TERMS
- --------------------------------------------------------------------------------
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 "USD," we mean United States dollars.
- when we refer to "CHF," we mean Swiss francs.
Introduction
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 related company preferred securities. The diagram to the right
outlines the relationship among investors in trust preferred securities, the
relevant UBS Preferred Funding Trust, the related UBS Preferred Funding Company
and UBS AG following the completion of an offering.
Each UBS Preferred Funding Trust will pass through to you any dividends,
redemption payments or liquidation payments that it receives from the related
UBS Preferred Funding Company on related company preferred securities.
UBS AG will guarantee, on a subordinated basis, dividend, redemption and
liquidation payment obligations under any company preferred securities.
The UBS Preferred Funding Companies will receive payments under related
subordinated notes issued by the Cayman Islands branch of UBS AG and will pay
dividends on their 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 any offering will qualify as consolidated Tier 1 capital
for UBS under the relevant regulatory capital guidelines of the Swiss Federal
Banking Commission.
LOGO
CHART DESCRIBING THE ABOVE FLOW OF FUNDS BETWEEN THE UBS AG, THE UBS PREFERRED
FUNDING COMPANIES AND UBS PREFERRED FUNDING TRUST AND RELATIONSHIP BETWEEN THE
ABOVE SECURITIES]
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1
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Cautionary Note Regarding Forward-Looking Statements
This prospectus contains or incorporates statements that constitute
"forward-looking statements" within the meaning of Section 21E of the United
States Securities Exchange Act of 1934, as amended. 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 and the incorporated documents, forward-looking
statements may, without limitation, relate to:
- - The implementation of strategic initiatives, such as the implementation of the
European wealth management strategy and our plans to continue to expand our
corporate finance business.
- - The development of revenues overall and within specific business areas
including the possibility of future losses in UBS Capital in 2002.
- - 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. Those factors include:
- - General economic conditions, including prevailing interest rates and
performance of financial markets, which may affect demand for products and
services and the value of our assets.
- - Changes in UBS's expenses associated with acquisitions and dispositions.
- - 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 accounting standards applicable to UBS, as more fully described
below.
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2
- - Changes in investor confidence in the future performance of financial markets,
affecting the level of transactions they undertake, and hence the levels of
transaction based fees UBS earns.
- - Changes in the market value of securities held by UBS's clients, affecting the
level of asset based fees UBS can earn on the services it provides.
- - Changes in tax laws in the countries in which UBS operates, 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.
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3
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Incorporation of Information About UBS AG
The SEC allows us to "incorporate by reference" into this prospectus the
information that we file 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 in this prospectus
- - UBS AG's Annual Report on Form 20-F for the year ended December 31, 2001,
which UBS AG filed with the SEC on March 14, 2002;
- - UBS AG's submissions on Form 6-K, which UBS AG filed with the SEC on February
14, February 25, March 6, April 29, May 9, May 14, May 16, August 13,
September 20, October 8, October 23, 2002 and November 12, 2002.
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 in this prospectus 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 a
statement in this prospectus or in any later filed document modifies or
supercedes that statement. Any statement that is modified or 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 documents 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
Switzerland
Phone: 011-41-1-234 41 00
Fax: 011-41-1-234 34 15
E-mail: SH-investorrelations@ubs.com
Internet: www.ubs.com/investor-relations
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Where You Can Find More Information
UBS AG files periodic reports and other information with the United States
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
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4
WHERE YOU CAN FIND MORE INFORMATION
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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.
We have filed a registration statement under the Securities Act of 1933 on Form
F-3 with the SEC covering the securities. For further information about the
securities 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.
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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. On December 18, 2002 the noon
buying rate was 0.6995 USD per 1 CHF.
<Table>
<Caption>
AVERAGE RATE(1)
YEAR ENDED DECEMBER 31 HIGH LOW (USD PER 1 CHF) AT PERIOD END
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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
2001..................................... 0.6331 0.5495 0.5910 0.6024
</Table>
<Table>
<Caption>
AVERAGE RATE(1)
QUARTER ENDED HIGH LOW (USD PER 1 CHF) AT PERIOD END
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March 31, 2002........................... 0.6089 0.5817 0.5879 0.5945
June 30, 2002............................ 0.6718 0.5974 0.6414 0.6702
September 30, 2002....................... 0.6951 0.6513 0.6740 0.6776
</Table>
<Table>
<Caption>
MONTH HIGH LOW
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June 2002.................................. 0.6718 0.6381
July 2002.................................. 0.6951 0.6639
August 2002................................ 0.6801 0.6513
September 2002............................. 0.6789 0.6578
October 2002............................... 0.6760 0.6605
November 2002.............................. 0.6928 0.6714
</Table>
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(1) The average of the noon buying rates on the last business day of each full
month during the relevant period.
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5
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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
the majority 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 those 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 UBS internal
counsel, that there is doubt as to the enforceability in Switzerland, in
original actions or in actions for enforcement of judgments of U.S. courts, of
liabilities based solely on the federal securities laws of the United States.
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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>
ACTUAL
AS OF OCTOBER 30, 2002 (UNAUDITED) CHF USD
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(IN MILLIONS)
Debt
Debt issued(1)............................................ 130,439 88,236
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Total Debt................................................ 130,439 88,236
Minority Interest(2)........................................ 3,807 2,575
Shareholders' Equity........................................ 40,955 27,704
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Total capitalization........................................ 175,201 118,515
======= =======
</Table>
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(1) Includes Money Market Paper and Medium Term Notes as per Balance Sheet
position.
(2) Includes Trust Preferred Securities.
Swiss franc (CHF) amounts have been translated into U.S. dollars (USD) at the
rate of CHF 1 = USD 0.6764536.
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UBS
OVERVIEW
The UBS Group 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.
UBS's global businesses include: UBS Warburg, a premier investment banking and
securities firm; UBS PaineWebber, one of the top US wealth managers; UBS Global
Asset Management, one of the largest asset managers globally; and UBS Wealth
Management & Business Banking, the world's largest private bank, by invested
assets. In Switzerland, UBS is the market leader in private, retail and
commercial banking.
At 31 December 2001, UBS employed approximately 70,000 people. With headquarters
in Zurich, Switzerland and Basel, Switzerland, UBS operates in over 50 countries
and from all major international centers.
UBS is managed through four Business Groups and its Corporate Center, each of
which is 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 US
Securities and Exchange Commission Form 20-F for the year ended 31 December 2001
(the "Form 20-F"), which is incorporated by reference into this information
memorandum.
USB WEALTH MANAGEMENT & BUSINESS BANKING
UBS Wealth Management & Business Banking includes the world's leading private
banking business, with CHF 682 billion of invested assets at 31 December 2001.
The Private Banking business unit provides a comprehensive range of products and
services individually tailored for wealthy clients, through offices around the
world.
UBS Wealth Management & Business Banking also provides a complete set of banking
and securities services for some four million individual and corporate clients
in Switzerland through the Business Banking Switzerland business unit. Its CHF
182 billion of outstanding loans at 31 December 2001 give it around a quarter of
the Swiss lending market.
UBS GLOBAL ASSET MANAGEMENT
UBS Global Asset Management is a leading institutional asset manager and mutual
fund provider, with invested assets of CHF 672 billion at 31 December 2001,
offering a broad range of asset management services and products for
institutional and individual clients across the world.
UBS WARBURG
USB Warburg operates globally as a client-driven securities and investment
banking firm. UBS Warburg provides innovative products, top-quality research and
advice, and comprehensive access to the world's capital markets, for both its
own corporate and institutional clients and for the other parts of the UBS
Group. It also includes the Group's Private Equity business.
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UBS
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UBS PAINEWEBBER
USB PaineWebber, one of the top US wealth managers, became part of UBS Group in
November 2000. Its distribution network of approximately 8,900 financial
advisors manages over CHF 782 billion of invested assets at 31 December 2001.
CORPORATE CENTRE
Our portfolio of businesses is planned and managed for the long-term
maximization of shareholder value. The role of the Corporate Centre is to ensure
that the Business Groups operate as a coherent and effective whole, in alignment
with UBS's overall corporate goals.
CORPORATE INFORMATION
The legal and commercial name of the company is UBS AG. The company was formed
on 29 June 1998, by the merger of Union Bank of Switzerland (founded 1862) and
Swiss Bank Corporation (founded 1872).
UBS AG is incorporated and domiciled in Switzerland and operates under Swiss
Company Law and Swiss Federal Banking Law as an Aktiengesellschaft, a
corporation that has issued shares of common stock to investors.
The address and telephone number of our two registered offices and principal
places of business are: Bahnhofstrasse 45, CH-8098 Zurich, Switzerland,
telephone +41-1-234 11 11; and Aeschenvorstadt 1, CH-4051 Basel, Switzerland,
telephone +41-61-288 20 20.
UBS AG shares are listed on the SWX Swiss Exchange and traded through virt-x (a
collaboration between the TP Group LDC and the SWX Swiss Exchange). They are
also listed on the New York Stock Exchange and on the Tokyo Stock Exchange.
The Company was incorporated under the name of SBC AG on 28 February 1978 for an
unlimited duration and entered in the Commercial Register of Canton Basle-City
on 28 February 1978. On 8 December 1997 the Company changed its name to UBS AG.
UBS AG is entered in the Commercial Registers of Canton Zurich and Canton
Basle-City. The registration number is CH-270.3.004.646-4.
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The UBS Preferred Funding Trusts
Each UBS Preferred Funding Trust is a statutory trust that UBS AG created under
the Delaware Statutory Trust Act 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. Before trust preferred securities are issued,
the trust agreement for the relevant Issuer Trust will be amended and restated
in its entirety substantially in the form filed with our SEC registration
statement, as trustee. We will qualify the Amended and Restated Trust Agreements
as indentures under the Trust Indenture Act of 1939, as amended. Each UBS
Preferred Funding Trust 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 related
company preferred securities owned by the relevant UBS Preferred Funding Trust.
UBS AG formed each UBS Preferred Funding Trust for the exclusive purpose of:
- issuing trust preferred securities,
- investing the proceeds of such trust preferred securities in related
company preferred securities, which benefit from a related UBS AG
subordinated guarantee, and
- engaging in any necessary or incidental activities.
The only assets of each UBS Preferred Funding Trust will be company preferred
securities and the related rights of the relevant UBS Preferred Funding Trust
under the related UBS AG subordinated guarantee. The Amended and Restated Trust
Agreements will not permit any UBS Preferred Funding Trust 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 each UBS Preferred Funding
Trust will be paid by the Stamford branch of UBS AG, except that if the trustee
of any UBS Preferred Funding Trust incurs fees, charges or expenses at the
request of a holder of its trust preferred securities or other person for which
such UBS Preferred Funding Trust is not otherwise liable under its 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 each UBS Preferred Funding Trust, as
adjusted to give effect to a particular offering of trust preferred securities
and the use of the proceeds from such offering, will be set forth in the
applicable prospectus supplement.
The Amended and Restated Trust Agreements will provide that, to the fullest
extent permitted by law, without the need for any other action of any person,
including the trustees or any other holder of trust preferred securities, each
holder of trust preferred securities will be entitled to enforce, in the name of
the relevant UBS Preferred Funding Trust, the rights of such UBS Preferred
Funding Trust under the related company preferred securities and the related 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 related company preferred securities
represented by such trust preferred securities, in which case such holder will
be entitled to directly enforce its rights under the related UBS AG subordinated
guarantee.
The principal executive offices of each UBS Preferred Funding Trust is located
at c/o Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890.
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The UBS Preferred Funding Companies
INTRODUCTION
Each UBS Preferred Funding Company is a limited liability company that UBS AG
formed under the Delaware Limited Liability Company Act 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.
We will continue each UBS Preferred Funding Company pursuant to Amended and
Restated Limited Liability Company Agreements, which we sometimes refer to as
the LLC Agreements. Each UBS Preferred Funding Company will be treated as a
partnership for U.S. federal income tax purposes.
UBS AG formed each UBS Preferred Funding Company for the exclusive purpose of:
- issuing its company common securities to UBS AG,
- issuing its company preferred securities, initially to the related UBS
Preferred Funding Trust,
- investing the proceeds of the company common securities and the company
preferred securities in (1) initially, related subordinated notes issued
by the Cayman Islands branch of UBS AG with an aggregate principal amount
which, for each UBS Preferred Funding Company, will be set forth in the
applicable prospectus supplement 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 each UBS Preferred Funding Company, as
adjusted to give effect to the offering of its company preferred securities will
be set forth in the applicable prospectus supplement.
Each UBS Preferred Funding Company will apply the income generated by the
related subordinated notes and other eligible investments to pay dividends to
the related UBS Preferred Funding Trust, as holder of its company preferred
securities, and UBS AG, as holder of its company common securities. The related
UBS Preferred Funding Trust will then pass the dividends it receives on the
company preferred securities through to the holders of its trust preferred
securities as distributions on its trust preferred securities.
UBS AG will purchase all of the company common securities of each UBS Preferred
Funding Company for an amount which will be set forth in the applicable
prospectus supplement. We intend to treat the company preferred securities as
Tier 1 capital for purposes of the relevant regulatory capital guidelines of the
Swiss Federal Banking Commission. We will agree with each UBS Preferred Funding
Company 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 of each such UBS Preferred Funding
Company. Each UBS Preferred Funding Company will also covenant to maintain "UBS"
as part of its name for as long as any trust preferred securities of the related
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 any UBS Preferred Funding Company's name is
no longer appropriate.
We will also agree in the LLC Agreements that it will from time to time either
(i) contribute (or cause others, including the Stamford branch of UBS AG, to
contribute) to each UBS Preferred Funding Company such additional funds as are
necessary in order to enable such UBS Preferred Funding Company to pay its
operating expenses on or before any date when any such operating expenses are
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THE UBS PREFERRED FUNDING COMPANIES
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due or (ii) directly pay such UBS Preferred Funding Company's operating expenses
then due and payable and not otherwise paid. "Operating expenses" generally
means all expenses and obligations of the relevant UBS Preferred Funding
Company, but does not include any payments on its company preferred securities
or company common securities.
The principal executive offices of each UBS Preferred Funding Company is located
at The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
ACTIVITIES OF THE UBS PREFERRED FUNDING COMPANIES
GENERAL
Each UBS Preferred Funding Company's principal business objective is to acquire
and hold eligible investments, which will include:
- initially, subordinated notes issued by the Cayman Islands branch of UBS
AG with an aggregate principal amount as set forth in the applicable
prospectus supplement, and
- other securities issued by us 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 ours.
Each UBS Preferred Funding Company will apply the net income generated by the
subordinated notes and other eligible investments to pay dividends to the
related UBS Preferred Funding Trust, as holder of company preferred securities,
and us, as holder of the company common securities. The related UBS Preferred
Funding Trust will then pass through the dividends it receives on the related
company preferred securities to the holders of its trust preferred securities as
distributions on its trust preferred securities. Each UBS Preferred Funding
Company may (with the consent of the holders of two-thirds (based on the
aggregate liquidation preference) of its 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."
DIVIDENDS
We currently expect each UBS Preferred Funding Company 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 each UBS Preferred Funding Company will:
- preclude each UBS Preferred Funding Company from incurring any
indebtedness for borrowed money, and
- require the approval of the holders of at least 66 2/3% of each UBS
Preferred Funding Company's 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 its 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 its other eligible
investments.
Under the Delaware Limited Liability Company Act, no UBS Preferred Funding
Company may pay dividends or other distributions on its company common
securities or company preferred securities--even if such payments are
"mandatory"--if, after making the distributions, such UBS Preferred Funding
Company's liabilities would exceed the fair value of its assets. However, no UBS
Preferred Funding Company is expected to have any material liabilities, so this
restriction is unlikely to affect the ability of any UBS preferred funding
company to pay dividends on its company preferred securities.
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THE UBS PREFERRED FUNDING COMPANIES
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Dividends on 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
Each UBS Preferred Funding Company's initial investment policies will be
established pursuant to its respective LLC Agreement. Under these investment
policies, no UBS Preferred Funding Company may hold or invest in any securities
other than eligible investments as described above under "--Introduction."
The investment policies will require that:
- the terms of any eligible investments other than subordinated notes
purchased by any 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 any UBS Preferred
Funding Company of such eligible investments be approved by the
affirmative vote of a majority of its entire board of directors, and
- each UBS Preferred Funding Company maintain its assets in a manner that
will not require such UBS Preferred Funding Company to be registered as
an investment company under the Investment Company Act of 1940.
The investment policies of any UBS Preferred Funding Company may be amended only
by the affirmative vote of the holders of at least 66 2/3% of its outstanding
company preferred securities and any of its outstanding company parity preferred
securities (based on the aggregate liquidation preference), voting together as a
single class. Although we do not anticipate that any UBS Preferred Funding
Company will sell subordinated notes (and no market for them is expected to
develop), were any UBS Preferred Funding Company to do so, such UBS Preferred
Funding Company would be required to invest the proceeds of the sale in
accordance with such UBS Preferred Funding Company's investment policies as they
exist at the time of such sale.
ADMINISTRATION AGREEMENTS
Before issuing company preferred securities, each UBS Preferred Funding Company
will enter into an administration agreement with the Stamford branch of UBS AG,
under which the Stamford branch will provide (or causes others to provide)
accounting, legal, tax and other support services to each UBS Preferred Funding
Company, assists each such 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 each such UBS
Preferred Funding Company. Under the administration agreement, each UBS
Preferred Funding Company will agree to reimburse the provider of these services
for the value of services provided by such provider to such UBS Preferred
Funding Company on an arm's-length basis.
Each UBS Preferred Funding Company will maintain company records that are
separate from those of UBS AG or any of its affiliates. None of the officers,
employees or directors of any UBS Preferred Funding Company will have any direct
or indirect pecuniary interest in any security to be acquired or disposed of by
such UBS Preferred Funding Company or in any transaction in which such UBS
Preferred Funding Company has an interest.
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THE UBS PREFERRED FUNDING COMPANIES
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MANAGEMENT OF THE UBS PREFERRED FUNDING COMPANIES
DIRECTORS AND EXECUTIVE OFFICERS
The initial LLC Agreement of each 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 will have three members. The
directors will be designated as "managers" of the 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.
Each UBS Preferred Funding Company will have three officers. The names of the
initial directors and executive officers of each UBS Preferred Funding Company
will be set forth in the applicable prospectus supplement.
It is anticipated all of the officers of each UBS Preferred Funding Company will
also be officers or employees of UBS AG or its affiliates.
ADDITIONAL DIRECTORS
If at any time the aggregate of unpaid dividends on the company preferred
securities or any company parity preferred securities of any UBS Preferred
Funding Company equals or exceeds an amount equal to a certain number of
regularly scheduled dividend payments specified in the applicable proposed
supplement dividend scheduled dividend payments, the holders of its 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 its 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 each UBS Preferred Funding
Company provides that this meeting may be called at the request of any holder of
its 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 its company preferred securities for the
number of consecutive dividend periods specified in the applicable prospectus
supplement periods. 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 each UBS Preferred Funding Company will provide that:
- its directors have no personal liability to the UBS Preferred Funding
Company or the holders of its 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 the 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,
- the 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 the UBS Preferred Funding Company, except for liability
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
will set forth certain procedural and evidentiary standards applicable to
the enforcement of a claim under the LLC Agreement of the UBS Preferred
Funding Company, and
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THE UBS PREFERRED FUNDING COMPANIES
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- the 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 THE UBS PREFERRED FUNDING COMPANIES
Holders of company common securities of a UBS Preferred Funding Company will
receive dividends out of interest payments received by such UBS Preferred
Funding Company on the subordinated notes and its other eligible investments, if
any, not required to be applied to fund dividends with respect to its company
preferred securities or expenses of such UBS Preferred Funding Company. However,
as long as any company preferred securities or company parity preferred
securities of such UBS Preferred Funding Company are outstanding, no dividends
or other distributions (including redemptions and purchases) may be made with
respect to its company common securities unless full dividends on all series of
its 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 company parity
preferred securities, all voting rights will be vested in the company common
securities. Holders of company common securities will be 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 will be held
by us.
If any UBS Preferred Funding Company dissolves, liquidates or winds up (whether
voluntary or involuntary) after all debts and liabilities of such UBS Preferred
Funding Company have been satisfied and there have been paid or set aside for
the holders of its company preferred securities the full preferential amounts to
which such holders are entitled, the holders of its company common securities
will be entitled to share equally and ratably in any assets remaining.
PREFERRED SECURITIES OF THE UBS PREFERRED FUNDING COMPANIES
Subject to limitations prescribed by Delaware law and each UBS Preferred Funding
Company's LLC Agreement, the board of directors of each 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 its company preferred
securities and company parity preferred securities, voting together as a single
class), from the authorized but unissued capital shares of the UBS Preferred
Funding Company, additional series of preferred securities of the UBS Preferred
Funding Company ranking on a parity with its 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, each UBS Preferred Funding Company's LLC Agreement will
preclude:
- the issuance of any other classes or series of equity securities that are
senior to its company preferred securities, either as to dividends or as
to rights upon dissolution, liquidation or winding up of the UBS
Preferred Funding Company, without the approval of each holder of its
company preferred securities, and
- the issuance of any company parity preferred securities without the
approval of 66 2/3% of the holders of its company preferred securities
and unless the related UBS AG subordinated
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THE UBS PREFERRED FUNDING COMPANIES
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guarantee is amended so that such additional company parity preferred
securities benefit from the related UBS AG subordinated guarantee in
substantially the same manner as its company preferred securities without
any adverse effect on the holders of its 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 any company parity preferred securities to represent
limited liability company interests in any UBS Preferred Funding Company upon
issuance against full payment of the purchase price for such company parity
preferred securities. The specific terms of a particular series of company
parity preferred securities will be described in the certificate of designation
(as defined in each UBS Preferred Funding Company's LLC Agreement) to be
incorporated into each UBS Preferred Funding Company's LLC Agreement relating to
that series, except in the case of shares of company preferred securities where
the terms thereof will be set forth in each UBS Preferred Funding Company's LLC
Agreement.
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Use of Proceeds
Each UBS Preferred Funding Trust will use the proceeds from the sale of its
trust preferred securities to purchase the related company preferred securities
from the related UBS Preferred Funding Company.
The related UBS Preferred Funding Company will use the proceeds from the sale of
its company preferred securities to the related UBS Preferred Funding Trust and
from the sale of its company common securities to UBS AG to acquire the related
subordinated notes issued by the Cayman Islands branch of UBS AG and to pay
certain expenses related to the particular offering. See "The UBS Preferred
Funding Companies--Activities of the UBS Preferred Funding Companies."
Unless the applicable prospectus supplement states otherwise, UBS AG will use
the proceeds from the sale of subordinated notes issued by its Cayman Islands
branch for general corporate purposes.
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Description of Trust Preferred Securities
Each UBS Preferred Funding Trust will issue its trust preferred securities under
the terms of its Amended and Restated Trust Agreement. We will qualify the
Amended and Restated Trust Agreements as indentures under the Trust Indenture
Act. The terms of any trust preferred securities will include both those stated
in the relevant Amended and Restated Trust Agreement and the Delaware Statutory
Trust Act and those made part of the relevant 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 relevant Amended
and Restated Trust Agreements, the Delaware Statutory Trust Act and the Trust
Indenture Act. We have filed a copy of a form of Amended and Restated Trust
Agreement as an exhibit to the registration statement of which this prospectus
is a part.
GENERAL
Any trust preferred securities will be certificates of beneficial interest in
the assets of the relevant UBS Preferred Funding Trust, the terms of which are
set forth in the Amended and Restated Trust Agreement of such UBS Preferred
Funding Trust.
Unless otherwise specified in the applicable prospectus supplement, any trust
preferred securities will be issued in denominations of USD25 in the case of an
offering of trust preferred securities to retail investors or USD1000 in the
case of an offering of trust preferred securities to institutional investors,
liquidation amount and whole-number multiples of USD25 or USD1000, as the case
may be. The aggregate liquidation amount of the trust preferred securities to be
offered will be specified in the applicable prospectus supplement. Each trust
preferred security will represent a corresponding amount of related company
preferred securities, together with related rights under a UBS AG subordinated
guarantee.
The trustee of each UBS Preferred Funding Trust will hold the related company
preferred securities and the related rights under the relevant UBS AG
subordinated guarantee deposited in each such UBS Preferred Funding Trust for
the benefit of the holders of the trust preferred securities. Each 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 the relevant UBS
Preferred Funding Trust, the rights of such UBS Preferred Funding Trust under
the related company preferred securities and the related rights under the
relevant UBS AG subordinated guarantee represented by the trust preferred
securities held by such holder. Trust preferred securities may be exchanged for
the related company preferred securities as described under "--Withdrawal of
Company Preferred Securities."
The funds of any UBS Preferred Funding Trust available for distribution to the
holders of its trust preferred securities will be limited to payments received
from the related UBS Preferred Funding Company as dividends, redemption payments
and liquidation payments on the related company preferred securities and to
payments received from UBS AG pursuant to the related UBS AG subordinated
guarantee of those payments. See "Description of Company Preferred Securities."
Each UBS Preferred Funding Trust will distribute such payments, upon their
receipt, to the holders of its trust preferred securities on a pro rata basis.
If any UBS Preferred Funding Company does not pay any regularly scheduled
dividend on its company preferred securities when it is required to and UBS AG
does not perform its obligations under the related UBS AG subordinated
guarantee, the related UBS Preferred Funding Trust will not have sufficient
funds to make the related regularly scheduled distribution payment on its trust
preferred securities.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
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The trust preferred securities may be listed on one or more securities exchanges
(including the New York Stock Exchange and the Luxembourg Stock Exchange), as
specified in the applicable prospectus supplement.
DISTRIBUTIONS
Each trust preferred security will represent a corresponding amount of related
company preferred securities, together with the related rights under the
relevant UBS AG subordinated guarantee. Each UBS Preferred Funding Trust will
make regularly scheduled distributions or other mandatory distributions on its
trust preferred securities concurrently with, and in the same amount as, the
regularly scheduled dividends or special dividends on the related company
preferred securities. See "Description of Company Preferred
Securities--Dividends." Accordingly, to the extent that dividends are paid on
the related company preferred securities, distributions on trust preferred
securities will accrue from the date of original issue and be paid on the
liquidation amount of the relevant trust preferred securities in arrears on the
dividend payment dates regularly scheduled to occur on the dates and at the rate
specified in the applicable prospectus supplement.
For details on the calculation and payment of dividends, see "Description of
Company Preferred Securities--Dividends" and the applicable prospectus
supplement. Whenever, and to the extent, any UBS Preferred Funding Trust
receives any cash payments representing a regularly scheduled dividend, special
dividend or redemption payment on the related company preferred securities, such
UBS Preferred Funding Trust will distribute such amounts to the holders of its
trust preferred securities in proportion to their liquidation amounts. Each
regularly scheduled or special distribution on any trust preferred securities
will be payable to holders of record as they appear on the securities register
of the relevant UBS Preferred Funding Trust on the corresponding record date.
The record dates for trust preferred securities will be the fifteenth day
(whether or not a business day) prior to the relevant regularly scheduled 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 the related 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.
REDEMPTION
Trust preferred securities will be redeemable only upon redemption of the
related company preferred securities.
If any UBS Preferred Funding Company redeems its company preferred securities in
accordance with its LLC Agreement as described under "Description of Company
Preferred Securities--Redemption," then such UBS Preferred Funding Company must
give the trustee of the related UBS Preferred Funding Trust at least 30 days'
prior notice before doing so. The trustee will mail the notice of redemption not
less than 25 days prior to the date fixed for redemption of the related company
preferred securities to the holders of its trust preferred securities as
provided under "--Notices."
On the date of redemption of any company preferred securities, so long as the
relevant UBS Preferred Funding Company or UBS AG has deposited with Wilmington
Trust Company, the paying agent, on behalf of the related UBS Preferred Funding
Trust the aggregate amount payable upon redemption of all its company preferred
securities held by such UBS Preferred Funding Trust to be redeemed, the paying
agent on behalf of such UBS Preferred Funding Trust will irrevocably deposit
with The
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18
DESCRIPTION OF TRUST PREFERRED SECURITIES
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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 the 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 the 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 any 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 of a UBS Preferred
Funding Trust 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 any trust preferred securities do not remain registered in the
name of DTC or its nominee and only some of the outstanding trust preferred
securities of a UBS Preferred Funding Trust 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 such trust preferred
securities are listed at that time. Each UBS Preferred Funding Company will
promptly notify the registrar and transfer agent for its trust preferred
securities, in writing, of the trust preferred securities selected for
redemption. In addition, for so long as the rules of any securities exchange on
which the relevant trust preferred securities are listed so require, notice will
be given to such securities exchange of trust preferred securities selected for
redemption and published as required by such securities exchange. If any trust
preferred securities are listed on the Luxembourg Stock exchange, for as long as
the rules of the Luxembourg Stock Exchange so require, notice will be given to
the Luxembourg Stock Exchange of any such 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 COMPANY PREFERRED SECURITIES
Any beneficial owner of trust preferred securities will be able to withdraw all,
but not less than all, of the related 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 the related UBS Preferred Funding Company such documents or
information as such 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 the relevant UBS Preferred Funding
Company's LLC Agreement applicable to the rights of the holders of its company
preferred securities.
Within a reasonable period after such a request has been properly made, any
trustee must instruct DTC to reduce the amount of trust preferred securities
represented by the relevant global certificate by the corresponding amount of
related company preferred securities to be so withdrawn by the withdrawing
owner. The related UBS Preferred Funding Company will issue to the withdrawing
owner a certificate representing the amount of related company preferred
securities withdrawn, and the trustee will reduce the amount of trust preferred
securities represented by the relevant global certificate accordingly. 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
current 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 "U.S. Tax
Considerations--Information Reporting and Backup Withholding Tax."
Any holder of company preferred securities may redeposit withdrawn company
preferred securities by delivering to the relevant trustee the certificates for
the company preferred securities to be deposited,
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DESCRIPTION OF TRUST PREFERRED SECURITIES
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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 the relevant 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 relevant 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 related trust preferred securities represented
by the relevant global certificate accordingly.
VOTING RIGHTS
If at any time the holders of any company preferred securities are entitled to
vote under any UBS Preferred Funding Company's LLC Agreement, the trustee will:
- notify the holders of the related trust preferred securities of such
right,
- request specific direction from each holder of the related 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 any company
preferred securities are entitled to vote, the relevant trustee will, as soon as
practicable, mail to the holders of the related trust preferred securities a
notice as provided under "--Notices." Each UBS Preferred Funding Company will
provide the form of notice to the trustee of the related UBS Preferred Funding
Trust to be forwarded to the holders of the related trust preferred securities.
The notice will contain:
- all the information that is contained in the notice announcing the
meeting of the holders of the company preferred securities,
- a statement that the holders of the related 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 related 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 any UBS Preferred Funding Trust receives a written direction from a holder of
its trust preferred securities, its trustee will vote, or cause to be voted, the
amount of related 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
related company preferred securities represented by those trust preferred
securities.
Any UBS Preferred Funding Company and the trustee of the related UBS Preferred
Funding Trust may, without the consent of the holders of the trust preferred
securities of the related UBS Preferred Funding Trust, enter into one or more
agreements supplemental to the relevant 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 such UBS Preferred Funding Company and the assumption by any
such successor of the covenants of such UBS Preferred Funding Company
under the relevant Amended and Restated Trust Agreement,
- to add to the covenants of such UBS Preferred Funding Company for the
benefit of the holders of related trust preferred securities, or to
surrender any right or power herein conferred upon such UBS Preferred
Funding Company,
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DESCRIPTION OF TRUST PREFERRED SECURITIES
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- to correct or supplement any provision of the relevant Amended and
Restated 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 relevant Amended and Restated Trust Agreement, provided that
any such action does not materially adversely affect the interests of the
holders of trust preferred securities, or
- to cure any ambiguity or correct any mistake.
Any other amendment or agreement supplemental to any Amended and Restated Trust
Agreement must be in writing and approved by the holders of 66 2/3% of the then
outstanding trust preferred securities of the relevant UBS Preferred Funding
Trust.
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 USD25, or USD1000, as the case may be, or in such
other denominations as may be specified in the applicable prospectus supplement,
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 for all trust preferred
securities will be the 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 the relevant 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 relevant 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 any 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 the relevant UBS Preferred Funding
Trust, UBS AG or the transfer agent may require.
CLOSED PERIODS
No holder may require the transfer of any trust preferred securities to be
registered during the period of 15 days ending on the due date for any payment
of principal on such trust preferred securities.
No UBS Preferred Funding Trust will be required to register, or cause others to
register, the transfer of any 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 such trust preferred securities.
The provisions of these agreements that govern transfers may be changed by each
UBS Preferred Funding Trust with the prior written approval of its 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 all 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 as
specified in the applicable prospectus supplement.
PAYMENTS AND PAYING AGENT
As long as trust preferred securities are in book-entry form, payments of
interest and principal on such 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 such 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 such 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 the relevant UBS Preferred
Funding Trust's register.
Each UBS Preferred Funding Trust will maintain a paying agent with respect to
its trust preferred securities which will initially be the Wilmington Trust
Company. The paying agent will be permitted to resign as paying agent upon 30
days' written notice to the relevant trustee. If Wilmington Trust Company
resigns as paying agent, the relevant 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 as specified in the applicable prospectus supplement.
TERMINATION OF THE AMENDED AND RESTATED TRUST AGREEMENTS
The Amended and Restated Trust Agreement of each UBS Preferred Funding Trust
will terminate upon the earliest to occur of the redemption of all of the trust
preferred securities of such UBS Preferred Funding Trust, the delivery of a
final distribution of the related company preferred securities to the holders of
its trust preferred securities, withdrawal of all related company preferred
securities from the UBS Preferred Funding Trust (as described under
"--Withdrawal of Company Preferred Securities") or dissolution of the UBS
Preferred Funding Trust as described in the following paragraph.
Each UBS Preferred Funding Company may instruct the trustee of the related UBS
Preferred Funding Trust to dissolve such UBS Preferred Funding Trust and to
distribute its company preferred securities on a pro rata basis to the holders
of trust preferred securities of such UBS Preferred Funding Trust in the case of
either a Tax Event as to the related UBS Preferred Funding Trust or an
Investment Company Act Event as to the related 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 THE UBS PREFERRED FUNDING TRUSTS
All charges or expenses of each UBS Preferred Funding Trust, including the
charges and expenses of the relevant trustees, will be paid by the Stamford
branch of UBS AG, except that, if a trustee incurs fees, charges or expenses,
for which it is not otherwise liable under the relevant 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 TRUSTEE
Each 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 a trustee ceases to be eligible, it
must resign.
The trustee of any UBS Preferred Funding Company may resign as trustee under the
relevant Amended and Restated Trust Agreement at any time by giving notice of
its resignation to the related UBS Preferred Funding Company. Each trustee may
be removed by the related UBS Preferred Funding Company at any time by notice of
such removal delivered to the relevant trustee. Any resignation or removal of a
trustee will take effect upon the appointment of a qualified successor trustee
and the successor's acceptance of such appointment.
If the trustee of any UBS Preferred Funding Trust shall resign or be removed,
the related 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 of each UBS Preferred Funding Trust. The
trustee is required to perform only those duties that are specifically set forth
in the relevant Amended and Restated Trust Agreement, except when a default has
occurred and is continuing with respect to the relevant 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 relevant Amended
and Restated Trust Agreement at the request of any holder of relevant 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 of any UBS
Preferred Funding Trust 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, if any
trust preferred securities are listed on the Luxembourg Stock Exchange 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 any trust preferred securities are no longer held in the name of DTC or its
nominee, notice to the holders of such trust preferred securities will also be
mailed by first-class mail, postage prepaid, to the holders' addresses appearing
in the records of the relevant UBS Preferred Funding Trust.
GOVERNING LAW
Unless stated otherwise in the applicable prospectus supplement, the Amended and
Restated Trust Agreements and any trust preferred securities will be governed by
the laws of the State of Delaware.
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Description of Company Preferred Securities
Each UBS Preferred Funding Company will issue its 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 each UBS Preferred Funding Company
and the Delaware Limited Liability Company Act. We have filed a copy of a form
of the LLC Agreement applicable for each UBS Preferred Funding Company as an
exhibit to the registration statement of which this prospectus is a part.
GENERAL
The company preferred securities will be preferred limited liability company
interests in a UBS Preferred Funding Company, the terms of which will be set
forth in the applicable 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 their 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 the relevant UBS Preferred Funding Company. Holders of
company preferred securities will have no preemptive rights with respect to any
other securities of the relevant UBS Preferred Funding Company. The company
preferred securities will not be convertible into company common securities or
any other interests in the relevant UBS Preferred Funding Company and will not
be subject to any sinking fund or other obligation of the relevant UBS Preferred
Funding Company for their repurchase or retirement.
Unless otherwise specified in the applicable prospectus supplement, the company
preferred securities will be issued in certificated form only in denominations
of USD25 in the case of an offering of trust preferred securities to retail
investors and USD1000 in the case of an offering of trust preferred securities
to institutional investors, liquidation preference and whole-number multiples of
USD25 or USD1000, as the case may be. The aggregate liquidation preference of
all company preferred securities offered will be specified in the applicable
pricing supplement.
Each UBS Preferred Funding Company has the power to create and issue additional
preferred limited liability company interests (i) that are junior to its company
preferred securities as to payment of dividends and payments of amounts upon
dissolution, liquidation or winding up of such UBS Preferred Funding Company
("company junior securities") or (ii) that are on a parity with its company
preferred securities as to those payments ("company parity preferred
securities"). As long as any company preferred securities of a UBS Preferred
Funding Company remain outstanding, no company parity preferred securities may
be issued by such UBS Preferred Funding Company 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 related UBS AG
subordinated guarantee is amended so that such company parity preferred
securities benefit from the related 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 each UBS Preferred Funding Company will preclude each UBS
Preferred Funding Company from issuing, without the consent of each holder of
its company preferred
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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securities, any company parity preferred securities or any other classes or
series of equity securities that are senior to its company preferred securities
as to dividend rights or rights upon dissolution, liquidation or winding up of
such UBS Preferred Funding Company.
DIVIDENDS
GENERAL
Dividends on company preferred securities will be payable from the date of
initial issuance on a noncumulative basis, regularly on the dates specified in
the applicable prospectus supplement (each a "dividend payment date") for the
dividend period ending on each such dividend payment date and commencing on the
date specified in the applicable prospectus supplement, but only if the relevant
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, at a fixed or floating rate, as specified in the applicable prospectus
supplement.
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 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 a dividend payment date, an instruction (a "no dividend
instruction") to a 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 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.
To the extent relevant to any issuance of trust preferred securities, LIBOR
shall have the meaning as specified in the applicable prospectus supplement.
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
Each UBS Preferred Funding Company will be required to pay dividends on its
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 each UBS Preferred Funding
Company will be required to pay full dividends on its company
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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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 each UBS Preferred Funding Company will be required to
pay dividends on its 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 (as defined below) ending
on and including that date there occurred a dividend payment date as
to which any UBS Preferred Funding Company paid no dividends or less
than full dividends on its company preferred securities, and provided
that the capital limitation does not apply, then on that date such
UBS Preferred Funding Company will be required to pay a special
dividend on its 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
relevant company preferred securities during the relevant period,
represents the same proportion of full dividends on such 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, no UBS Preferred Funding Company will 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.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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Any dividend payment date or other date on which dividends on any company
preferred securities are required to be paid as described in clause (i), (ii) or
(iii) 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, each 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 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, the USD 500,000,000 7.247% Noncumulative Trust Preferred Securities of UBS
Preferred Funding Trust II issued in June 2001 and representing a corresponding
amount of 7.247% Noncumulative Company Preferred Securities of UBS Preferred
Funding Company II, guaranteed on a subordinate basis by UBS AG, and the USD
300,000,000 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 III, guaranteed on a subordinate 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 company preferred securities as
described below is called the "capital limitation."
Unless the Swiss Federal Banking Commission expressly permits otherwise, no UBS
Preferred Funding Company will pay dividends on its 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 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.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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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.
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
2001, which is incorporated by reference into this prospectus.
DISTRIBUTABLE PROFITS LIMITATION
The limitation or prohibition on the payment of dividends on 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 any UBS Preferred Funding Company may pay on its 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.
Except as otherwise stated in the applicable prospectus supplement, on or before
the first dividend payment date of each year, UBS AG will deliver a certificate
to each 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 company preferred securities on the dividend payment dates
in the then current year.
Unless a UBS Preferred Funding Company is required to pay mandatory dividends:
- the aggregate amount of dividends on company preferred securities that
such UBS Preferred Funding Company may pay on the first dividend payment
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 company preferred securities that
such UBS Preferred Funding Company may pay on any subsequent dividend
payment date in the current year may not exceed the lesser of full
dividends and the remaining amount of such available distributable
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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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 2001 were approximately CHF billion.
"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 (not including dividends paid in any preceding dividend payment
date during of the current year and including dividends to be paid in
the corresponding dividend payment date of the following year) 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 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 the relevant 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 a UBS
Preferred Funding Company limiting but not prohibiting the payment of
dividends on such dividend payment date, dividends on such UBS Preferred
Funding Company's 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 to a UBS Preferred Funding Company, then
such UBS Preferred Funding Company must promptly give notice to the holders of
its 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.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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ADDITIONAL AMOUNTS
If any 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 its trust preferred securities or company preferred
securities, the relevant 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 such company preferred securities or trust preferred securities,
as applicable, after the withholding, will not be less than the dividend payment
amount. However, no UBS Preferred Funding Company will 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 any 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 the relevant UBS Preferred Funding
Company has given the beneficial owner of those trust preferred
securities or company 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 of any UBS Preferred Funding Company ordinarily
will rank senior to its company common securities as to the payment of
dividends. However, UBS AG has the right to shift the dividend preference of
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 a UBS Preferred Funding Company on the related subordinated notes
will be returned as dividends to UBS AG, as the holder of its company common
securities, before any dividends are paid on its company preferred securities.
As long as any company preferred securities of a UBS Preferred Funding Company
are outstanding, UBS AG will agree in such UBS Preferred Funding Company's LLC
Agreement that it will take no voluntary action to cause the UBS Preferred
Funding Company to dissolve or liquidate unless UBS AG also liquidates. Each UBS
Preferred Funding Company's LLC Agreement will provide that the UBS Preferred
Funding Company will be liquidated if UBS AG is liquidated.
If any UBS Preferred Funding Company dissolves, liquidates or winds up, then
after the claims of any creditors of such UBS Preferred Funding Company are
satisfied, the holders of its company preferred securities will be entitled to
receive, before any distribution of assets is made to the holders of its company
common securities or any other class of shares ranking junior to the company
preferred securities upon liquidation, liquidating distributions in respect of
such 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
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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- 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) each UBS
Preferred Funding Company will be liquidated and (ii) under each UBS AG
Subordinated Guarantee Agreement, the holders of related company preferred
securities (whether through a UBS Preferred Funding Trust or as direct holders
who have withdrawn their company preferred securities from a 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 their
company preferred securities and bearing dividends at the rate of dividends
applicable to such company preferred securities. Each UBS AG Subordinated
Guarantee Agreement and the related 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 the
relevant 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
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. Unless
otherwise specified in the applicable prospectus supplement, if the holders of
company preferred securities of any UBS Preferred Funding Company are entitled
to vote as indicated below, each USD25 or USD1000, as the case may be,
liquidation preference of company preferred securities will be entitled to one
vote on matters on which the holders of such company preferred securities are
entitled to vote. If at any time the aggregate of unpaid dividends for any UBS
Preferred Funding Company equals or exceeds the number of regularly scheduled
dividend payments, specified in the applicable prospectus supplement, the
holders of company preferred securities and any company parity preferred
securities of such UBS Preferred Funding Company, 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 company preferred securities and any company parity preferred securities of
such UBS Preferred Funding Company 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 relevant company preferred securities for four consecutive
dividend periods. 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.
Each UBS Preferred Funding Company's LLC Agreement will provide that a meeting
will be called at the request of holders of 25% (based on the aggregate
liquidation preference) of its company preferred securities and any company
parity preferred securities.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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As long as any of its company preferred securities are outstanding, no UBS
Preferred Funding Company may, without the consent or vote of holders of at
least 66 2/3% of its 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 such UBS Preferred Funding Company's
LLC Agreement (including the terms of its 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 related 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 its company preferred securities and
such company parity preferred securities,
- to the fullest extent permitted by law, liquidate, dissolve or terminate
such UBS Preferred Funding Company without the concurrent liquidation of
UBS AG,
- amend or modify such UBS Preferred Funding Company's investment policies,
or
- merge, convert, consolidate, reorganize or effect any other business
combination involving such 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 its 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 securities of such UBS Preferred Funding Company that
are authorized and outstanding immediately prior to such transaction, and
each holder of its 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 of its company preferred securities are outstanding, no UBS
Preferred Funding Company will be permitted, 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 such UBS Preferred Funding Company, or any warrants, options or other rights
convertible or exchangeable into any class or series of any equity securities of
such UBS Preferred Funding Company, ranking prior to its company preferred
securities, either as to dividend rights or rights on dissolution, liquidation
or winding up of such UBS Preferred Funding Company.
Notwithstanding any of the foregoing, without consent of any holder of company
preferred securities, UBS AG will be permitted to amend or supplement the UBS AG
Subordinated Guarantee Agreements to correct or supplement any provision in the
UBS AG Subordinated Guarantee Agreements 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
Agreements, so long as any such action shall not materially adversely affect the
interests of the holders of the related company preferred securities. See
"Description of UBS AG Subordinated Guarantees--Amendments."
Notwithstanding the foregoing, without the consent of any holder of company
preferred securities, UBS AG will be permitted to amend or supplement any UBS
Preferred Funding Company's LLC Agreement:
- to correct or supplement any provision in a UBS Preferred Funding
Company's LLC Agreement which may be defective or inconsistent with any
other provision therein, or to make any other
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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provisions with respect to matters or questions arising under a 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 of such UBS Preferred Funding Company, or
- to cure any ambiguity or correct any mistake.
REDEMPTION
No company preferred securities will be redeemable before the date specified in
the applicable prospectus supplement unless a Tax Event, an Investment Company
Act Event or a Capital Event occurs, in which case each UBS Preferred Funding
Company may redeem its 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
date specified in the applicable prospectus supplement, any UBS Preferred
Funding Company will be permitted to redeem its company preferred securities for
cash, in whole or in part, on not less than 30 nor more than 60 days' notice.
Unless otherwise stated in the applicable prospectus supplement, the redemption
price for such optional redemptions on or after the date specified in the
applicable prospectus supplement and for redemptions arising from a Tax Event,
an Investment Company Act Event or a Capital Event 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.
The applicable prospectus supplement may provide that 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 and that the
redemption price for all other redemptions arising out of a Tax Event resulting
from a Change in Tax Law 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.
To the extent provided for in the applicable prospectus supplement, UBS
Preferred Funding Company will have until the dividend payment date specified in
the applicable prospectus supplement after the occurrence of a Tax Event, an
Investment Company Act Event or a Capital Event to exercise its rights to redeem
the company preferred securities.
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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Any redemption of company preferred securities will have to 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 company preferred securities. If dividends on any company
preferred securities of a UBS Preferred Funding Company are unpaid, no company
preferred securities of such UBS Preferred Funding Company may be redeemed
unless all its outstanding company preferred securities are redeemed, and no UBS
Preferred Funding Company may purchase or otherwise acquire any of its company
preferred securities, except pursuant to a purchase or exchange offer made on
the same terms to the holders of all of its outstanding company preferred
securities.
Company preferred securities will not be subject to any sinking fund or
mandatory redemption and will not be convertible into any other securities of
the relevant UBS Preferred Funding Company or any securities of UBS AG.
"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 descried 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 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.
"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 specified in the applicable prospectus supplement (the "remaining
life"), in each case discounted to the date of redemption on a semi-annual basis
(assuming a 360-day 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.
As long as any company preferred securities of a UBS Preferred Funding Company
are outstanding, other company parity preferred securities of such UBS Preferred
Funding Company may not be redeemed or repurchased unless such UBS Preferred
Funding Company concurrently redeems an approximately equal proportion of the
aggregate liquidation preference of its outstanding company preferred securities
or each rating agency then rating its company preferred securities informs such
UBS Preferred Funding Company in writing that the redemption or repurchase of
such company parity
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34
DESCRIPTION OF COMPANY PREFERRED SECURITIES
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preferred securities would not result in a reduction or withdrawal of the rating
then assigned by that rating agency to its company preferred securities.
If fewer than all outstanding company preferred securities of a UBS Preferred
Funding Company are to be redeemed, the amount of the company preferred
securities of such UBS Preferred Funding Company to be redeemed will be
determined by the board of directors of such UBS Preferred Funding Company, and
the securities to be redeemed will be determined by lot or pro rata as the board
of directors in its sole discretion determines to be equitable. The relevant UBS
Preferred Funding Company will promptly notify the registrar and transfer agent
for its 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 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, with respect to any UBS Preferred Funding Company,
the determination by UBS AG after consultation with the Swiss Federal
Banking Commission that its company preferred securities cannot be included
in calculating the Tier 1 capital of UBS AG on a consolidated basis.
"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 specified in the applicable
prospectus supplement, 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 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 principal
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DESCRIPTION OF COMPANY PREFERRED SECURITIES
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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 established 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.
"Investment Company Act Event" means, with respect to any UBS Preferred
Funding Company, 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 such UBS
Preferred Funding Company or the related UBS Preferred Funding Trust is an
"investment company" within the meaning of the Investment Company Act of
1940.
"Tax Event" means, with respect to any UBS Preferred Funding Company, 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) such UBS Preferred
Funding Company or the related 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 with respect to payments of interest or principal on the related
subordinated notes and with respect to any payments on the related trust
preferred securities, (C) such 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 its
company preferred securities or the related 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 its
trust preferred securities, or (D) the treatment of any of such 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 related subordinated notes or its
ownership of such UBS Preferred Funding Company, in each case as reflected
on the tax returns (including estimated returns) filed (or to be filed) by
such UBS Preferred Funding Company or UBS AG, will not be respected by a
taxing authority, as a result of which such 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 such 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 such UBS
Preferred Funding Company (as determined by UBS AG in its sole discretion).
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36
DESCRIPTION OF COMPANY PREFERRED SECURITIES
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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 company preferred securities will be effected
without charge by or on behalf of the relevant 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. No UBS Preferred Funding Company will
be required to register or cause to be registered the transfer of its company
preferred securities after such company preferred securities have been called
for redemption.
The LLC Agreement of each UBS Preferred Funding Company will provide that, in
the event of a partial redemption of its company preferred securities that would
result in a delisting of the related trust preferred securities from any
securities exchange on which such trust preferred securities are then listed,
such UBS Preferred Funding Company will redeem its 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 the
relevant UBS Preferred Funding Company's records.
GOVERNING LAW
The LLC Agreement of each 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 will not be listed on any national exchange or
traded in any established market.
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37
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Book-Entry Issuance of Trust Preferred Securities
The trust preferred securities will initially be issued to investors only in
book-entry form. The total aggregate amount of trust preferred securities of
each UBS Preferred Funding Trust will be represented by permanent global
securities in fully registered form (each, a "global certificate") and deposited
with a custodian for, and registered in the name of The Depository Trust Company
("DTC") or its nominee. Exceot as provided in the applicable prospectus
supplement, the global certificates will initially be 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 certificates 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 certificates may not be exchanged
for trust preferred securities in certificated form except in the limited
circumstances described below.
Persons that acquire beneficial ownership interests in any 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 any 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 RELATED COMPANY PREFERRED SECURITIES REPRESENTED BY TRUST
PREFERRED SECURITIES
Any beneficial owner of trust preferred securities may withdraw and hold
directly a corresponding amount of related company preferred securities as
described under "Description of Trust Preferred Securities--Withdrawal of
Company Preferred Securities." Within a reasonable period after such request has
been properly made, the trustee of the relevant UBS Preferred Funding Trust will
instruct DTC to reduce the number of trust preferred securities represented by
the relevant global certificate by the amount of related company preferred
securities to be so withdrawn by the withdrawing owner.
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 under current law 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 "U.S. Tax
Considerations--Information Reporting and Backup Withholding Tax."
Any holder of company preferred securities may redeposit its company preferred
securities as described under "Description of Trust Preferred
Securities--Withdrawal of Company Preferred Securities." Within a reasonable
period after such deposit is properly made, the trustee of the relevant UBS
Preferred Funding Trust will instruct DTC to increase the number of trust
preferred securities represented by the relevant 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
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BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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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.
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.
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39
BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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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 Euroclear Operator.
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 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 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 relevant trust preferred securities. Transfers of ownership
interests in 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 relevant trust preferred securities, unless use
of the book-entry system for such 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.
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BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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Because of time zone differences, credits of trust preferred securities received
in Clearstream or Euroclear as a result of a transaction with a person that does
not hold 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 participants on that business day. Cash received in
Clearstream or Euroclear as a result of sales of 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 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 relevant 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 relevant Amended and
Restated Trust Agreement.
DTC has advised UBS AG, as provider of the UBS AG subordinated guarantees, that
it will take any action permitted to be taken by a holder of relevant trust
preferred securities, including the presentation of 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 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 relevant trustee will send redemption notices in respect of 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 of any UBS
Preferred Funding Trust 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 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 such trust preferred securities. Under its usual
procedures, DTC will mail an Omnibus Proxy to the relevant UBS Preferred Funding
Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede
& Co.'s
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41
BOOK-ENTRY ISSUANCE OF TRUST PREFERRED SECURITIES
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consenting or voting rights of those participants to whose accounts such trust
preferred securities are allocated on the record date identified in a listing
attached to the Omnibus Proxy.
Distributions on 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 governed by standing instructions and customary
practices. Such payments will be the responsibility of those participants and
indirect participants and not of DTC, the relevant 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 the relevant 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 its trust preferred securities.
TERMINATION OF AND CHANGES TO DEPOSITARY ARRANGEMENTS
A global certificate is exchangeable for trust preferred securities in
registered certificated form if DTC:
- notifies the relevant UBS Preferred Funding Trust that it is unwilling or
unable to continue as depositary for the global certificates and such 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 any 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 any trust preferred securities at any time by giving notice to the
relevant UBS Preferred Funding Trust. Under those circumstances, definitive
trust preferred security certificates with respect to such trust preferred
securities 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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42
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Description of UBS AG Subordinated Guarantees
At or prior to the issuance of any trust preferred securities and the related
company preferred securities, UBS AG and Wilmington Trust Company, as guarantee
trustee, will execute the related UBS AG Subordinated Guarantee Agreements. We
will qualify the UBS AG Subordinated Guarantee Agreements as indentures under
the Trust Indenture Act. The terms of the UBS AG subordinated guarantees will
include both those stated in the UBS AG Subordinated Guarantee Agreements and
those made part of the UBS AG Subordinated Guarantee Agreements by the Trust
Indenture Act. The following summary of the material terms and provisions of the
UBS AG subordinated guarantees is not complete and is subject to, and qualified
in its entirety by reference to, the UBS AG Subordinated Guarantee Agreements
and the Trust Indenture Act. We have filed a copy of a form of UBS AG
Subordinated Guarantee Agreement as an exhibit to the registration statement of
which this prospectus is a part.
GUARANTEED OBLIGATIONS
In each UBS AG Subordinated Guarantee Agreement, UBS AG will unconditionally
guarantee, on a subordinated basis, the payment by the related UBS Preferred
Funding Company of the following, without duplication:
- any dividends on the related 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 related company preferred securities
that become definitive because UBS AG does not deliver a no dividend
instruction;
- the redemption price payable with respect to any related company
preferred securities called for redemption by the relevant UBS Preferred
Funding Company;
- the liquidating distribution on each related company preferred security
payable upon liquidation of the relevant UBS Preferred Funding Company;
and
- any additional amounts payable by the relevant 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 the relevant UBS Preferred Funding Company
may have or assert, other than the defense of payment, and whether or not the
relevant UBS Preferred Funding Company has legally available funds for the
guaranteed payments. UBS AG's obligations under the UBS AG Subordinated
Guarantee Agreements are several and independent of the obligations of each
relevant UBS Preferred Funding Company with respect to its company preferred
securities.
See "Description of Company Preferred Securities--Dividends" for a description
of circumstances when dividend on 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 any UBS Preferred Funding Company.
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DESCRIPTION OF UBS AG SUBORDINATED GUARANTEES
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SUBORDINATION
Each UBS AG subordinated guarantee will be 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 relevant
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 guarantees
are collectively called "UBS AG senior liabilities."
Payments under the UBS AG subordinated guarantees (other than payments upon a
winding-up or dissolution, by bankruptcy or otherwise, in Switzerland of UBS AG
as provided below) will be 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) each UBS
Preferred Funding Company will be liquidated and (ii) under the UBS AG
Subordinated Guarantee Agreements, the holders of related company preferred
securities (whether through a UBS Preferred Funding Trust or as direct holders
who have withdrawn their related company preferred securities from a 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 their related company preferred securities and bearing dividends at the rate
of dividends applicable to their related company preferred securities. Each UBS
AG Subordinated Guarantee Agreement and each related UBS Preferred Funding
Company's LLC Agreement, taken together, will provide that the holders of
company preferred securities of the relevant UBS Preferred Funding Company will
not receive liquidating distributions in a liquidation of such UBS Preferred
Funding Company and payments under the related 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 will be irrevocable. UBS AG will not
be permitted to 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
guarantees.
The obligations of UBS AG in respect of the UBS AG subordinated guarantees will
be, 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 a UBS AG subordinated guarantee
will be used to absorb losses of UBS AG.
If a capital loss (as defined below) occurs, the board of directors of UBS AG
will be 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
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DESCRIPTION OF UBS AG SUBORDINATED GUARANTEES
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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 any UBS AG Subordinated Guarantee Agreement.
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 will 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 and the applicable prospectus supplement:
"assets" means the consolidated gross assets of UBS AG.
A "capital loss" will be 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.
"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 guarantees
will be able to 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 guarantees and each beneficiary of the
UBS AG subordinated guarantees will, by virtue of being a beneficiary of the UBS
AG subordinated guarantees, 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 guarantees 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
any 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 the relevant 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
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DESCRIPTION OF UBS AG SUBORDINATED GUARANTEES
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by each UBS Preferred Funding Company as described above under "Description of
Company Preferred Securities--Additional Amounts."
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 relevant guarantee trustee, on behalf of the holders of the related company
preferred securities, may enforce each UBS AG subordinated guarantee directly
against UBS AG if UBS AG defaults under such UBS AG subordinated guarantee. Each
UBS AG Subordinated Guarantee Agreement will provide that, to the fullest extent
permitted by law, without the need for any other action of any person, including
the relevant guarantee trustee or any other holder of related trust preferred
securities or related company preferred securities, each holder of related trust
preferred securities or related company preferred securities will be entitled to
enforce the rights of the holders of such company preferred securities under the
related 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 THE UBS PREFERRED FUNDING COMPANIES
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
guarantees 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 guarantees unless the UBS AG subordinated
guarantees are amended to give the holders of related company preferred
securities and the related trust preferred securities the same rights and
entitlements as are contained in or attached to the other guarantees so that the
UBS AG subordinated guarantees rank 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 guarantees do 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 guarantees that if any amount
required to be paid under the UBS AG subordinated guarantees in respect of any
dividends on related trust preferred securities or related 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 will not be permitted to assign its obligations under the UBS AG
subordinated guarantees, except in the case of merger, consolidation or sale of
substantially all of its assets where UBS AG is not the surviving entity.
TERMINATION
Each UBS AG subordinated guarantee will terminate on the earlier of:
- the payment of the redemption price for all related company preferred
securities or purchase and cancellation of all related company preferred
securities, and
- full payment of the liquidating distribution on all related company
preferred securities.
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DESCRIPTION OF UBS AG SUBORDINATED GUARANTEES
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However, each 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 related company preferred securities or the related UBS
AG subordinated guarantee.
AMENDMENTS
Any changes to the provisions of a UBS AG subordinated guarantee that establish
the amount and timing of the payments under that UBS AG subordinated guarantee
must be approved by each holder of related company preferred securities. Any
other provision of a 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 related company preferred securities.
Notwithstanding the foregoing, without the consent of any holder of related
company preferred securities, UBS AG may amend or supplement each 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 such UBS AG
Subordinated Guarantee Agreement,
- to add to the covenants of UBS AG for the benefit of the holders of
related company preferred securities, or to surrender any right or power
conferred upon UBS AG under such UBS AG Subordinated Guarantee Agreement,
- to correct or supplement any provision in such 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 such UBS AG Subordinated Guarantee
Agreement, so long as any such action shall not materially adversely
affect the interests of the holders of related company preferred
securities, or
- to cure any ambiguity or correct any mistake.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
Wilmington Trust Company will be the guarantee trustee. The guarantee trustee
will be required to perform only those duties that are specifically set forth in
the UBS AG subordinated guarantees, except when a default has occurred and is
continuing with respect to any UBS AG subordinated guarantee. After a default,
the guarantee trustee will be required to 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 any UBS AG
subordinated guarantee at the request of any holder of related company preferred
securities or any holder of related 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 guarantees will be governed by and 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
Each UBS Preferred Funding Company will apply the proceeds of its 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 will have an aggregate principal
amount of up to $4,529,508,000. Interest on the subordinated notes will be
payable from the date of initial issuance on the dates specified in the
applicable prospectus supplement--which dates will correspond to the dividend
payment dates of the related company preferred securities--(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") for each interest period, at a fixed or
floating rate specified in the applicable prospectus supplement.
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 related 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 or after the date specified in the applicable prospectus supplement,
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 date specified in the applicable prospectus supplement, in
whole but not in part, if a Tax Event, an Investment Company Act Event or
a Capital Event occurs at a redemption price equal to 100% of their
principal amount plus interest accrued but unpaid to the date fixed for
redemption.
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 any
subordinated notes, the Cayman Islands branch will pay such additional amounts
as shall be required so that the amount received by each UBS Preferred Funding
Company under the related subordinated notes shall not be reduced as a result of
any such additional taxes, duties or other governmental charges.
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DESCRIPTION OF SUBORDINATED NOTES OF UBS AG
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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 any 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 Guarantees--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 SUBORDINATED NOTES
Any consent, notice or other action (including any enforcement action) given or
taken by or on behalf of a UBS Preferred Funding Company with respect to related
subordinated notes may be given or taken at the discretion of a majority of the
entire board of directors of such UBS Preferred Funding Company.
TRANSFER OF SUBORDINATED NOTES
The subordinated notes held by a UBS Preferred Funding Company will be
represented by a single definitive note registered in the name of such UBS
Preferred Funding Company. Each UBS Preferred Funding Company's LLC Agreement
provides that any UBS Preferred Funding Company may sell its subordinated notes
only upon the affirmative vote of both a majority of the board of directors of
such UBS Preferred Funding Company and the holders of two-thirds (based on the
aggregate liquidation preference) of its company preferred securities and other
company parity preferred securities (if any), voting together as a single class.
Although each UBS Preferred Funding Company will be permitted to sell its
subordinated notes subject to the requirements of the Securities Act of 1933 and
other applicable laws and the foregoing requirements, neither UBS AG nor any UBS
Preferred Funding Company anticipates that any UBS Preferred Funding Company
will sell its subordinated notes and there is no expectation that a market will
develop or exist for any subordinated notes. Unless otherwise specified in the
applicable prospectus supplement, any 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 USD25 or USD1000, as the case may be.
EVENTS OF DEFAULT
No subordinated notes will 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 any subordinated
notes, the related 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 related subordinated notes that was
deferred because the dividends on its
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DESCRIPTION OF SUBORDINATED NOTES OF UBS AG
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company preferred securities on the corresponding dividend payment date would
have constituted nondefinitive dividends. A "default" under any 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 SUBORDINATED NOTES
Any subordinated notes will be able to be modified or amended only by the
written agreement of the Cayman Islands branch of UBS AG and the related UBS
Preferred Funding Company. However, each UBS Preferred Funding Company's LLC
Agreement will provide that no UBS Preferred Funding Company may agree to any
such modification or amendment for so long as any of its 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
its 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 its 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 such UBS Preferred Funding Company
and (b) such 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 its company preferred securities).
GOVERNING LAW
The subordinated notes will be governed by the laws of the State of New York.
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50
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U.S. Tax Considerations
In the opinion of Sullivan & Cromwell, the following, unless otherwise stated in
the applicable prospectus supplement relevant to the trust preferred securities
being offered thereby, 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 THE UBS PREFERRED FUNDING TRUSTS AND THE UBS PREFERRED FUNDING
COMPANIES
Under current law, and assuming compliance with the terms of each Amended and
Restated Trust Agreement in the form attached as an exhibit hereto, each 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
related company preferred securities held by the applicable UBS Preferred
Funding Trust.
Under current law, each 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 the applicable UBS
Preferred Funding Company.
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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 applicable Amended and Restated LLC Agreement in the form attached as
an exhibit hereto, upon the declaration, or deemed declaration, of dividends on
the company preferred securities, a like amount of the applicable UBS Preferred
Funding Company's ordinary income will be allocated to the holders of company
preferred securities. Regardless of when dividends on the related 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 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 applicable Amended and Restated Trust
Agreement in the form attached as an exhibit hereto, each UBS Preferred Funding
Trust will distribute, until the date and otherwise in the manner specified in
the applicable prospectus supplement, 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
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 related 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 the applicable 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 each 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 the
applicable 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,
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52
U.S. TAX CONSIDERATIONS
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at the election of that United States Holder, for deduction in computing the
United States Holder's taxable income.
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 the applicable 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 EACH UBS
PREFERRED FUNDING TRUST
Under certain circumstances, the company preferred securities may be distributed
to trust preferred securityholders in exchange for their trust preferred
securities and in liquidation of the applicable UBS Preferred Funding Trust.
Unless the liquidation of the applicable UBS Preferred Funding Trust occurs as a
result of that 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 the applicable UBS Preferred Funding Trust were to
occur because that UBS Preferred Funding Trust is subject to United States
federal income taxes, the distribution of the company preferred securities to
United States Holders by the applicable 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 the applicable UBS Preferred Funding
Trust, under current law, 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
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U.S. TAX CONSIDERATIONS
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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.
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.
Each 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, Each 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 the applicable 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, under current law 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
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54
U.S. TAX CONSIDERATIONS
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office of a 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.
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
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55
U.S. TAX CONSIDERATIONS
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- 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.
Under current law, 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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Tax Considerations Under the Laws of Switzerland
GENERAL
The tax information set forth below is based on the opinion of Ernst & Young,
Ltd., Switzerland, dated 12 December 2002, and has been approved by them for its
accuracy. It may be supplemented by and is otherwise subject to the applicable
prospectus supplement relating to a particular offering of securities. 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, and is subject to
anything stated to the contrary in the applicable prospectus supplement relevant
to the trust preferred securities offered thereby.
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.
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TAX CONSIDERATIONS UNDER THE LAWS OF SWITZERLAND
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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.
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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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.
The following summary of certain ERISA considerations relevant to investing in
the trust preferred securities is subject to anything set forth in the
applicable prospectus supplement relating to a particular offering of trust
preferred securities.
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 each 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;
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ERISA CONSIDERATIONS
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- 90-1, for transactions involving insurance company separate accounts;
and
- 84-14, for transactions determined by independent qualified asset
managers.
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 the applicable 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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Plan of Distribution
We may sell any trust preferred securities in a public offering to or through
one or more underwriters, dealers and agents. The names of the underwriters,
dealers or agents involved in any particular offering of trust preferred
securities, the liquidation amount of the trust preferred securities to be
purchased by such underwriters, dealers or agents, any applicable commissions or
discounts and detailed description of any underwriting arrangement will be set
forth in the applicable prospectus supplement.
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Validity of the Securities
Unless otherwise provided in the applicable prospectus supplement, certain
matters of Delaware law relating to the validity of any trust preferred
securities and related company preferred securities will be passed upon by
Richards, Layton & Finger, P.A., special Delaware counsel to UBS AG, the UBS
Preferred Funding Trusts and the UBS Preferred Funding Companies. Unless
otherwise provided in the applicable prospectus supplement, the validity of the
subordinated notes and the UBS AG Subordinated Guarantee Agreements will be
passed upon for UBS AG, the UBS Preferred Funding Trusts and the UBS Preferred
Funding Companies by Sullivan & Cromwell. Sullivan & Cromwell will rely upon the
opinions of Richards, Layton & Finger P.A., as to matters of Delaware law and
the opinions of Bar & Karrer, Swiss counsel to UBS AG, as to matters of Swiss
law. Certain matters relating to United States federal income tax considerations
will be passed upon for UBS AG, the UBS Preferred Funding Trusts and the UBS
Preferred Funding Companies by Sullivan & Cromwell.
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Experts
The consolidated balance sheet of UBS AG at 31 December 2001 and 2000 and the
related consolidated statement of income, cash flows and changes in
shareholder's equity for each of the three years in the period ended 31 December
2001 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 the related consolidated statements of income, cash flows and
changes in shareholders' equity for 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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61
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Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 8. INDEMNIFICATION OF DIRECTORS AND OFFICERS
UBS AG
Under Swiss law, directors and senior officers acting in violation of their
statutory duties -- whether dealing with bona fide third parties or performing
any other acts on behalf of the corporation -- may become liable to the
corporation, its shareholders and (in bankruptcy) its creditors for damages. The
directors' liability is joint and several but only to the extent the damage is
attributable to each director based on willful or negligent violation of duty.
If the board of directors lawfully delegated the power to carry out day-to-day
management to a different corporate body, e.g., the executive board, the board
of directors is not vicariously liable for the acts of the members of the
executive board. Instead, the directors can be held liable for their failure to
properly select, instruct or supervise the executive board members. If directors
and officers enter into a transaction on behalf of the corporation with bona
fide third parties in violation of their statutory duties, the transaction is
nevertheless valid as long as it is not excluded by the corporation's business
purpose.
Under Swiss law, a corporation may indemnify a director or officer of the
corporation against losses and expenses (unless arising from his gross
negligence or willful misconduct), including attorney's fees, judgments, fines
and settlement amounts actually and reasonably incurred in a civil or criminal
action, suit or proceeding by reason of having been the representative of or
serving at the request of the corporation.
Because UBS AG is a Swiss company headquartered in Switzerland, many of the
directors and officers of UBS AG are residents of Switzerland and not the U.S.
As a result, U.S. investors may find it difficult in a lawsuit based on the
civil liability provisions of the U.S. federal securities laws to:
- effect service within the U.S. upon UBS AG and the directors and officers
of UBS AG located outside the U.S.,
- enforce in U.S. courts or outside the U.S. judgments obtained against
those persons in U.S. courts,
- enforce in U.S. courts judgments obtained against those persons in courts
in jurisdictions outside the U.S., and
- enforce against those persons in Switzerland, whether in original actions
or in actions for the enforcement of judgments of U.S. courts, civil
liabilities based solely upon the U.S. federal securities laws.
Neither the UBS AG articles of association nor Swiss statutory law contain
provisions regarding the indemnification of directors and officers.
According to general principles of Swiss employment law, an employer may, under
certain circumstances, be required to indemnify an employee against losses and
expenses incurred by him in the execution of his duties under the employment
agreement, unless the losses and expenses arise from the employee's gross
negligence or willful misconduct.
UBS AG maintains directors' and officers' insurance for its directors and
officers.
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PART II
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UBS PREFERRED FUNDING TRUSTS
The Amended and Restated Trust Agreements for the UBS Preferred Funding Trusts
will provide that, to the fullest extent permitted by applicable law, the
applicable UBS Preferred Funding Company of UBS AG will, jointly and severally,
indemnify and defend the trustee, the registrar and any paying agent and their
directors, officers, employees and agents against, and hold each of them
harmless from, any liability, costs and expenses (including reasonable
attorneys' fees) that may arise out of or in connection with its acting as the
trustee or the registrar, transfer agent or paying agent, respectively, under
the respective Amended and Restated Trust Agreements and the trust preferred
securities, except for any liability arising out of gross negligence, bad faith
or willful misconduct on the part of any such person or persons.
UBS PREFERRED FUNDING COMPANIES
The Amended and Restated LLC Agreements for the UBS Preferred Funding Companies
will provide that, to the fullest extent permitted by applicable law, each
director and officer shall be entitled to indemnification from the applicable
UBS Preferred Funding Company for any loss, damages, claim or expense (including
reasonable attorney's fee) incurred by such director or officer by reason of any
act or omission performed or omitted by such director or officer in good faith
on behalf of the applicable UBS Preferred Funding Company and in a manner
reasonably believed to be within the scope of authority conferred on such
Director or Officer by the respective Agreements, except with respect to any act
or omission determined by a court of competent jurisdiction to have constituted
gross negligence or willful misconduct or such director or officer; provided,
however, that any such indemnity shall be provided out of and to the extent of
the assets of the UBS Preferred Funding Companies only, and no holder of company
preferred securities, company common securities, company party preferred
securities or company junior securities shall have any personal liability on
account thereof. The UBS Preferred Funding Companies will be permitted to
purchase and maintain insurance to protect any director or officer against
liability asserted against him or her, or incurred by him or her, arising out of
his or her status as such.
Without limiting the foregoing, the directors of the UBS Preferred Funding
Companies shall have no personal liability to the UBS Preferred Funding
Companies or any holder of company preferred securities, company common
securities, company parity preferred securities or company junior securities for
monetary damages:
- For not voting to take enforcement action with respect to the
subordinated notes or other eligible investments owned by the UBS
Preferred Funding Companies, if any, prior to the occurrence of a
bankruptcy event, or
- At any time for breach of any such director's fiduciary duty (if any)
except for such director's gross negligence or willful misconduct.
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PART II
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ITEM 9. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------
1.1 Form of Distribution Agreement for debt securities and
warrants
1.2 Form of Underwriting Agreement for trust preferred
securities
3.1 Articles of Association for UBS AG
3.2 Organization Regulations of UBS AG (incorporated by
reference to Exhibit 1.2 of UBS AG's annual report on Form
20-F dated March 14, 2002)
3.3 Certificate of Trust of UBS Preferred Funding Trust IV
3.4 Certificate of Trust of UBS Preferred Funding Trust V
3.5 Trust Agreement of UBS Preferred Funding Trust IV
3.6 Trust Agreement of UBS Preferred Funding Trust V
3.7 Certificate of Formation for UBS Preferred Funding Company
LLC IV
3.8 Certificate of Formation for UBS Preferred Funding Company
LLC V
3.9 Limited Liability Company Agreement of UBS Preferred Funding
Company IV
3.10 Limited Liability Company Agreement of UBS Preferred Funding
Company V
4.1 Debt Indenture, dated as of November 21, 2000, between UBS
AG and U.S. Bank Trust National Association, as debt
trustee, including form of debt securities*
4.2 Form of Warrant Agreement for debt warrants, including form
of debt warrant
4.3 Form of Warrant Agreement for universal warrants, including
form of universal warrant
4.4 Form of Warrant Indenture, including form of put warrant and
form of call warrant*
4.5 Form of Amended and Restated Trust Agreement of UBS
Preferred Funding Trust IV
4.6 Form of Amended and Restated Trust Agreement of UBS
Preferred Funding Trust V
4.7 Form of Amended and Restated Limited Liability Company
Agreement of UBS Preferred Funding Company LLC IV
4.8 Form of Amended and Restated Limited Liability Company
Agreement of UBS Preferred Funding Company LLC V
4.9 Form of UBS AG Subordinated Guarantee Agreement for UBS
Preferred Funding Company LLC IV
4.10 Form of UBS AG Subordinated Guarantee Agreement for UBS
Preferred Funding Company LLC V
4.11 Form of Subordinated Notes of UBS AG for UBS Preferred
Funding Company LLC IV
4.12 Form of Subordinated Notes of UBS AG for UBS Preferred
Funding Company LLC V
5.1 Opinion of Sullivan & Cromwell as to the validity of the
debt securities, the warrants and the UBS AG subordinated
guarantees (New York law)
5.2 Opinion of Richards, Layton & Finger, P.A. as to the
validity of the trust preferred securities and the company
preferred securities
5.3 Opinion of Bar & Karrer as to the validity of the debt
securities, the warrants and the UBS AG subordinated
guarantee and certain other matters (Swiss law)
8.1 Opinion of Sullivan & Cromwell as to United States federal
tax matters
8.2 Opinion of Ernst & Young Ltd. as to Swiss tax matters
12.1 Statement regarding ratio of earnings to fixed charges
(incorporated by reference to Exhibit 12.1 of UBS AG's
report on Form 6-K dated November 12, 2002)
23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Richards, Layton & Finger (included in Exhibit
5.2)
23.3 Consent of Bar & Karrer (included in Exhibit 5.3)
23.4 Consent of Sullivan & Cromwell (included in Exhibit 8.1)
23.5 Consent of Ernst & Young Ltd.
23.6 Consent of Ernst & Young Ltd.
23.7 Consent of Ernst & Young LLP
24.1 Power of Attorney for UBS AG
</Table>
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PART II
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<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------
24.2 Power of Attorney for UBS Preferred Funding Company IV and
UBS Preferred Funding
Company V
25.1 Statement of Eligibility of Debt Trustee*
25.2 Statement of Eligibility of Trustee for UBS Preferred
Funding Trust IV
25.3 Statement of Eligibility of Trustee for UBS Preferred
Funding Trust V
</Table>
- ------------
* Previously filed.
ITEM 10. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
UBS AG, UBS Preferred Funding Trust IV, UBS Preferred Funding Company IV, UBS
Preferred Funding Trust V and UBS Preferred Funding Company V hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the
- --------------------------------------------------------------------------------
II- 4
PART II
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securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering;
(4) To file a post-effective amendment to the registration statement to
include any financial statements required by Item 8.A. of Form 20-F at
the start of any delayed offering or throughout a continuous offering.
Financial statements and information otherwise required by Section
10(a)(3) of the Act need not be furnished, provided, that the
registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (4)
and other information necessary to ensure that all other information in
the prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, a post-effective amendment
need not be filed to include financial statements and information
required by Section 10(a)(3) of the Act or Rule 3-19 of Regulation S-X
if such financial statements and information are contained in periodic
reports filed with or furnished to the Commission pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(5) For purposes of determining any liability under the Securities Act of
1933, each filing of UBS AG's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act will be deemed to
be part of this registration statement as of the time it was declared
effective;
(7) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus will be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering
thereof; and
(8) To file an application for the purpose of determining the eligibility
of the warrant trustee to act under subsection (a) of Section 310 of
the Trust Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Act.
- --------------------------------------------------------------------------------
II- 5
PART II
- --------------------------------------------------------------------------------
Signatures
Pursuant to the requirements of the Securities Act of 1933, UBS AG certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form F-3 and has duly caused this registration statement or
amendment thereto to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, in the State of New York, on December 19,
2002.
UBS AG
By: /s/ ROBERT B. MILLS
------------------------------------
Name: Robert B. Mills
Title: Chief Financial
Officer -- Americas and
Regional Chief Operating
Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement or amendment thereto has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
NAME TITLE DATE
- -----------------------------------------------------------------------------------------------------
* President of Group Executive December 19, 2002
- ------------------------------------------------ Board (principal executive
Peter A. Wuffli officer)
* Group Controller (principal December 19, 2002
- ------------------------------------------------ accounting officer and principal
Hugo Schaub financial officer)
* Chairman and Member of Board of December 19, 2002
- ------------------------------------------------ Directors
Marcel Ospel
* Vice Chairman and Member of December 19, 2002
- ------------------------------------------------ Board of Directors
Alberto Togni
* Vice Chairman and Member of December 19, 2002
- ------------------------------------------------ Board of Directors
Johannes Antonie de Gier
* Vice Chairman and Member of December 19, 2002
- ------------------------------------------------ Board of Directors
Peter Bockli
* Member of Board of Directors December 19, 2002
- ------------------------------------------------
Ernesto Bertarelli
* Member of Board of Directors December 19, 2002
- ------------------------------------------------
Sir Peter Davis
* Member of Board of Directors December 19, 2002
- ------------------------------------------------
Rolf A. Meyer
</Table>
- --------------------------------------------------------------------------------
II- 6
PART II
- --------------------------------------------------------------------------------
<Table>
<Caption>
NAME TITLE DATE
- -----------------------------------------------------------------------------------------------------
* Member of Board of Directors December 19, 2002
- ------------------------------------------------
Hans Peter Ming
* Member of Board of Directors December 19, 2002
- ------------------------------------------------
Lawrence Allen Weinbach
</Table>
*By: /s/ ROBERT B. MILLS
------------------------------
Robert B. Mills, as
attorney-in-fact
Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the
Authorized Representative has duly caused this registration statement or
amendment thereto to be signed on its behalf by the undersigned, solely in his
capacity as the duly authorized representative of UBS AG in the United States,
in the City of New York, State of New York, on December 19, 2002.
UBS AG
By: /s/ ROBERT B. MILLS
------------------------------------
Name: Robert B. Mills
Title: Senior Managing Director
- --------------------------------------------------------------------------------
II- 7
PART II
- --------------------------------------------------------------------------------
Signatures
Pursuant to the requirements of the Securities Act of 1933, UBS Preferred
Funding Trust IV certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form F-3 and has duly caused this
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on December 19, 2002.
UBS Preferred Funding Trust IV
By: UBS Preferred Funding Company LLC
IV
By: /s/ ROBERT B. MILLS
------------------------------------
Name: Robert Mills
Title: President and Managing
Director
Pursuant to the requirements of the Securities Act of 1933, this amendment has
been signed by the following persons in the capacities and on the dates
indicated.
<Table>
<Caption>
NAME TITLE DATE
- ------------------------------------------------------------------------------------
UBS Preferred Funding Company LLC IV
By: /s/ ROBERT B. MILLS Grantor December 19, 2002
------------------------------------------
Name: Robert Mills
Title: President and Managing Director
</Table>
- --------------------------------------------------------------------------------
II- 8
PART II
- --------------------------------------------------------------------------------
Signatures
Pursuant to the requirements of the Securities Act of 1933, UBS Preferred
Funding Company LLC IV certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form F-3 and has duly caused this
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on December 19, 2002.
UBS Preferred Funding Company LLC IV
By: /s/ ROBERT B. MILLS
------------------------------------
Name: Robert Mills
Title: President and Managing
Director
Pursuant to the requirements of the Securities Act of 1933, this amendment has
been signed by the following persons in the capacities and on the dates
indicated.
<Table>
<Caption>
NAME TITLE DATE
- -----------------------------------------------------------------------------------------------------
/s/ ROBERT B. MILLS President and Managing Director December 19, 2002
- ------------------------------------------------
Robert Mills
* Treasurer and Director December 19, 2002
- ------------------------------------------------
Per Dyrvik
* Secretary and Director December 19, 2002
- ------------------------------------------------
Robert Dinerstein
/s/ ROBERT B. MILLS December 19, 2002
- ------------------------------------------------
*By Robert Mills as attorney-in-fact
</Table>
- --------------------------------------------------------------------------------
II- 9
PART II
- --------------------------------------------------------------------------------
Signatures
Pursuant to the requirements of the Securities Act of 1933, UBS Preferred
Funding Trust V certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form F-3 and has duly caused this
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on December 19, 2002.
UBS Preferred Funding Trust V
By: UBS Preferred Funding Company LLC V
By: /s/ ROBERT B. MILLS
-------------------------------------
Name: Robert Mills
Title: President and Managing
Director
Pursuant to the requirements of the Securities Act of 1933, this amendment has
been signed by the following persons in the capacities and on the dates
indicated.
<Table>
<Caption>
NAME TITLE DATE
- ------------------------------------------------------------------------------------
UBS Preferred Funding Company LLC V
By: /s/ ROBERT B. MILLS Grantor December 19, 2002
------------------------------------------
Name: Robert Mills
Title: President and Managing Director
</Table>
- --------------------------------------------------------------------------------
II- 10
PART II
- --------------------------------------------------------------------------------
Signatures
Pursuant to the requirements of the Securities Act of 1933, UBS Preferred
Funding Company LLC V certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form F-3 and has duly caused this
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on December 19, 2002.
UBS Preferred Funding Company LLC V
By: /s/ ROBERT B. MILLS
------------------------------------
Name: Robert Mills
Title: President and Managing
Director
Pursuant to the requirements of the Securities Act of 1933, this amendment has
been signed by the following persons in the capacities and on the dates
indicated.
<Table>
<Caption>
NAME TITLE DATE
- -----------------------------------------------------------------------------------------------------
/s/ ROBERT B. MILLS President and Managing Director December 19, 2002
- ------------------------------------------------
Robert Mills
* Treasurer and Director December 19, 2002
- ------------------------------------------------
Per Dyrvik
* Secretary and Director December 19, 2002
- ------------------------------------------------
Robert Dinerstein
/s/ ROBERT B. MILLS December 19, 2002
- ------------------------------------------------
*By Robert Mills as attorney-in-fact
</Table>
- --------------------------------------------------------------------------------
II- 11
- --------------------------------------------------------------------------------
Index to Exhibits
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------
1.1 Form of Distribution Agreement for debt securities and
warrants
1.2 Form of Underwriting Agreement for trust preferred
securities
3.1 Articles of Association for UBS AG
3.2 Organization Regulations of UBS AG (incorporated by
reference to Exhibit 1.2 of UBS AG's annual report on Form
20-F dated March 14, 2002)
3.3 Certificate of Trust of UBS Preferred Funding Trust IV
3.4 Certificate of Trust of UBS Preferred Funding Trust V
3.5 Trust Agreement of UBS Preferred Funding Trust IV
3.6 Trust Agreement of UBS Preferred Funding Trust V
3.7 Certificate of Formation for UBS Preferred Funding Company
LLC IV
3.8 Certificate of Formation for UBS Preferred Funding Company
LLC V
3.9 Limited Liability Company Agreement of UBS Preferred Funding
Company IV
3.10 Limited Liability Company Agreement of UBS Preferred Funding
Company V
4.1 Debt Indenture, dated as of November 21, 2000, between UBS
AG and U.S. Bank Trust National Association, as debt
trustee, including form of debt securities*
4.2 Form of Warrant Agreement for debt warrants, including form
of debt warrant
4.3 Form of Warrant Agreement for universal warrants, including
form of universal warrant
4.4 Form of Warrant Indenture, including form of put warrant and
form of call warrant*
4.5 Form of Amended and Restated Trust Agreement of UBS
Preferred Funding Trust IV
4.6 Form of Amended and Restated Trust Agreement of UBS
Preferred Funding Trust V
4.7 Form of Amended and Restated Limited Liability Company
Agreement of UBS Preferred Funding Company LLC IV
4.8 Form of Amended and Restated Limited Liability Company
Agreement of UBS Preferred Funding Company LLC V
4.9 Form of UBS AG Subordinated Guarantee Agreement for UBS
Preferred Funding Company LLC IV
4.10 Form of UBS AG Subordinated Guarantee Agreement for UBS
Preferred Funding Company LLC V
4.11 Form of Subordinated Notes of UBS AG for UBS Preferred
Funding Company LLC IV
4.12 Form of Subordinated Notes of UBS AG for UBS Preferred
Funding Company LLC V
5.1 Opinion of Sullivan & Cromwell as to the validity of the
debt securities, the warrants and the UBS AG subordinated
guarantees (New York law)
5.2 Opinion of Richards, Layton & Finger, P.A. as to the
validity of the trust preferred securities and the company
preferred securities
5.3 Opinion of Bar & Karrer as to the validity of the debt
securities, the warrants and the UBS AG subordinated
guarantee and certain other matters (Swiss law)
8.1 Opinion of Sullivan & Cromwell as to United States federal
tax matters
8.2 Opinion of Ernst & Young Ltd. as to Swiss tax matters
12.1 Statement regarding ratio of earnings to fixed charges
(incorporated by reference to Exhibit 12.1 of UBS AG's
report on Form 6-K dated November 12, 2002)
23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Richards, Layton & Finger (included in Exhibit
5.2)
23.3 Consent of Bar & Karrer (included in Exhibit 5.3)
23.4 Consent of Sullivan & Cromwell (included in Exhibit 8.1)
23.5 Consent of Ernst & Young Ltd.
</Table>
- --------------------------------------------------------------------------------
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------
23.6 Consent of Ernst & Young Ltd.
23.7 Consent of Ernst & Young LLP
24.1 Power of Attorney for UBS AG
24.2 Power of Attorney for UBS Preferred Funding Company IV and
UBS Preferred Funding
Company V
25.1 Statement of Eligibility of Debt Trustee*
25.2 Statement of Eligibility of Trustee for UBS Preferred
Funding Trust IV
25.3 Statement of Eligibility of Trustee for UBS Preferred
Funding Trust V
</Table>
- ------------
* Previously filed.
- --------------------------------------------------------------------------------