0000950123-01-507202.txt : 20011019
0000950123-01-507202.hdr.sgml : 20011019
ACCESSION NUMBER: 0000950123-01-507202
CONFORMED SUBMISSION TYPE: 424B2
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011015
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: UBS AG
CENTRAL INDEX KEY: 0001114446
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 424B2
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-46930
FILM NUMBER: 1758829
BUSINESS ADDRESS:
STREET 1: BAHNHOFSTRASSE 45
CITY: ZURICH SWITZERLAND
STATE: V8
ZIP: 00000
MAIL ADDRESS:
STREET 1: BAHNHOFSTRASSE 45
STREET 2: ZURICH SWITZERLAND
424B2
1
y53935pse424b2.txt
PROSPECTUS SUPPLEMENT
Filed pursuant to Rule 424(b)(2)
Registration No. 333-46930
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 17, 2001)
[UBS AG LOGO]
$4,500,000 BULS(SM)
(BULLISH UNDERLYING LINKED SECURITIES)
LINKED TO THE S&P 500 INDEX(R) DUE OCTOBER 17, 2006
SUMMARY OF TERMS
ISSUER: UBS AG
INDEX: S&P 500 Index(R)
UPSIDE PARTICIPATION: 70% of Index Performance.
DOWNSIDE PARTICIPATION: At maturity, the BULS are protected against an Index decline
of up to 25%. For each 1% decline at maturity beyond 25%,
the BULS lose 1.333%. YOU WILL LOSE SOME OF YOUR INVESTMENT
IF THE INDEX DECLINES BY MORE THAN 25%.
INDEX PERFORMANCE: The performance of the Index will be calculated based on the
difference between the closing level of the Index on the
trade date and the closing level of the Index three business
days before maturity.
MATURITY DATE: October 17, 2006
COUPON: No coupon will be paid on the BULS.
LISTING: BULS have been approved for listing on the American Stock
Exchange under the symbol "BUL.E."
BOOKING BRANCH: UBS AG, Jersey Branch.
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR RISKS RELATED TO AN INVESTMENT IN
THE BULS.
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT UBS AG
-------------------------------------------------------------------------------------------------------
Per BULS.................................................... 100% 3.5% 96.50%
-------------------------------------------------------------------------------------------------------
Total....................................................... $4,500,000 $157,500 $4,342,500
-------------------------------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by UBS AG. The BULS are not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the BULS.
The BULS are not deposit liabilities of UBS AG and are not insured by the U.S.
Federal Deposit Insurance Corporation or any other governmental agency of the
United States, Switzerland or any other jurisdiction.
UBS AG may use this prospectus supplement and accompanying prospectus in the
initial sale of any BULS. In addition, UBS AG, UBS Warburg LLC, UBS PaineWebber
Inc. or any other affiliate of UBS AG may use this prospectus supplement and
accompanying prospectus in a market-making transaction for any BULS after its
initial sale. Unless UBS AG or its agent informs the purchaser otherwise in the
confirmation of sale, this prospectus supplement and accompanying prospectus are
being used in a market-making transaction.
UBS WARBURG UBS PAINEWEBBER INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 11, 2001.
TABLE OF CONTENTS
--------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary............ S-1
Risk Factors............................. S-4
You may lose some of your principal.... S-4
Changes that affect the Index or the
S&P Constituent Stocks could affect
the amount payable on the BULS and
their market value................... S-4
You may not have an active trading
market in the BULS--Sales in the
secondary market may result in
significant losses................... S-4
Gain on your BULS could be treated as
ordinary interest income............. S-5
Your BULS do not pay periodic interest
or dividends......................... S-5
Your return on the BULS will not
reflect the return on the S&P
Constituent Stocks................... S-5
BULS are not exchange-traded funds
(ETFs)............................... S-5
If the Index changes, the market value
of the BULS is unlikely to change in
the same manner...................... S-6
Trading and other transactions by UBS
AG or its affiliates may adversely
affect the value of the BULS......... S-6
UBS AG's business activities may create
conflicts of interest between you and
us................................... S-6
You have no shareholder rights in the
S&P Constituent Stocks or rights to
receive any stock.................... S-7
UBS AG and its affiliates have no
affiliation with S&P and are not
responsible for its public disclosure
of information....................... S-7
There are potential conflicts of
interest between you and the
calculation agent.................... S-7
We can postpone the maturity date if a
market disruption event occurs....... S-7
The S&P 500 Index........................ S-8
Specific Terms of the BULS............... S-11
Use of Proceeds and Hedging.............. S-16
Supplemental Tax Considerations.......... S-16
ERISA Considerations..................... S-18
Supplemental Plan of Distribution........ S-19
PROSPECTUS
Prospectus Summary....................... 3
Cautionary Note Regarding Forward-Looking
Information............................ 7
Where You Can Find More Information...... 8
Incorporation of Information About UBS... 8
Presentation of Financial Information.... 9
Limitations on Enforcement of U.S. Laws
Against UBS AG, Its Management and
Others................................. 10
Capitalization of UBS.................... 10
UBS...................................... 11
Use of Proceeds.......................... 13
Description of Notes We May Offer........ 14
Considerations Relating to Indexed
Notes.................................. 51
Considerations Relating to Notes
Denominated or Payable In or Linked to
a Non-U.S. Dollar Currency............. 54
U.S. Tax Considerations.................. 57
Tax Considerations Under The Laws of
Switzerland............................ 68
ERISA Considerations..................... 69
Plan of Distribution..................... 70
Validity of the Notes.................... 72
Experts.................................. 72
Prospectus Supplement Summary
The following is a summary of the terms of the BULS, as well as considerations
relating to purchasing BULS. All of the information set forth in this section is
qualified in its entirety by the more detailed explanations set forth elsewhere
in this prospectus supplement and the accompanying prospectus.
SUMMARY OF TERMS
Each BULS is a five-year medium-term debt security issued by UBS AG in minimum
denominations of $1,000 and integral multiples of $1,000. BULS bear no interest
but their repayment at maturity is linked to the performance of the S&P 500
Index (the "Index"). BULS pay 70% of any appreciation in the Index and protect
principal against up to a 25% decline in the value of the Index. For each 1%
decline beyond 25% (e.g., from -25% to -26%) the BULS lose 1.333%. BECAUSE THE
INVESTMENT IS EXPOSED TO DECLINES OF GREATER THAN 25% IN THE VALUE OF THE INDEX
YOU COULD LOSE SOME OF YOUR INVESTMENT. See "Specific Terms of the BULS--Payment
at Maturity."
The graph below represents the hypothetical return profile at maturity of owning
the BULS, assuming that the BULS pay at maturity 70% of any appreciation in the
Index and a range of performance of the Index from -100% to 100%.
[RETURN PROFITS GRAPH]
S&P 500 INDEX LEVEL BULS
------------------- ----
100 70.00
99 69.00
98 69.00
98 68.00
97 68.00
96 67.00
95 67.00
94 66.00
93 65.00
93 65.00
92 64.00
91 64.00
90 63.00
89 62.00
88 62.00
88 61.00
87 61.00
86 60.00
85 60.00
84 59.00
83 58.00
83 58.00
82 57.00
81 57.00
80 56.00
79 55.00
78 55.00
78 54.00
77 54.00
76 53.00
75 53.00
74 52.00
73 51.00
73 51.00
72 50.00
71 50.00
70 49.00
69 48.00
68 48.00
68 47.00
67 47.00
66 46.00
65 46.00
64 45.00
63 44.00
63 44.00
62 43.00
61 43.00
60 42.00
59 41.00
58 41.00
58 40.00
57 40.00
56 39.00
55 39.00
54 38.00
53 37.00
53 37.00
52 36.00
51 36.00
50 35.00
49 34.00
48 34.00
48 33.00
47 33.00
46 32.00
45 32.00
44 31.00
43 30.00
43 30.00
42 29.00
41 29.00
40 28.00
39 27.00
38 27.00
38 26.00
37 26.00
36 25.00
35 25.00
34 24.00
33 23.00
33 23.00
32 22.00
31 22.00
30 21.00
29 20.00
28 20.00
28 19.00
27 19.00
26 18.00
25 18.00
24 17.00
23 16.00
23 16.00
22 15.00
21 15.00
20 14.00
19 13.00
18 13.00
18 12.00
17 12.00
16 11.00
15 11.00
14 10.00
13 9.00
13 9.00
12 8.00
11 8.00
10 7.00
9 6.00
8 6.00
8 5.00
7 5.00
6 4.00
5 3.00
4 3.00
3 2.00
2 2.00
2 1.00
1 1.00
0 0.00
-1 0.00
-2 0.00
-3 0.00
-3 0.00
-4 0.00
-5 0.00
-6 0.00
-7 0.00
-8 0.00
-8 0.00
-9 0.00
-10 0.00
-11 0.00
-12 0.00
-13 0.00
-13 0.00
-14 0.00
-15 0.00
-16 0.00
-17 0.00
-18 0.00
-18 0.00
-19 0.00
-20 0.00
-21 0.00
-22 0.00
-23 0.00
-23 0.00
-24 0.00
-25 0.00
-26 -1.00
-27 -2.00
-28 -3.00
-28 -4.00
-29 -6.00
-30 -7.00
-31 -8.00
-32 -9.00
-33 -10.00
-33 -11.00
-34 -12.00
-35 -13.00
-36 -14.00
-37 -16.00
-38 -17.00
-38 -18.00
-39 -19.00
-40 -20.00
-41 -21.00
-42 -22.00
-43 -23.00
-43 -24.00
-44 -26.00
-45 -27.00
-46 -28.00
-47 -29.00
-48 -30.00
-48 -31.00
-49 -32.00
-50 -33.00
-51 -34.00
-52 -36.00
-53 -37.00
-53 -38.00
-54 -39.00
-55 -40.00
-56 -41.00
-57 -42.00
-58 -43.00
-58 -44.00
-59 -46.00
-60 -47.00
-61 -48.00
-62 -49.00
-63 -50.00
-63 -51.00
-64 -52.00
-65 -53.00
-66 -54.00
-67 -56.00
-68 -57.00
-68 -58.00
-69 -59.00
-70 -60.00
-71 -61.00
-72 -62.00
-73 -63.00
-73 -64.00
-74 -66.00
-75 -67.00
-76 -68.00
-77 -69.00
-78 -70.00
-78 -71.00
-79 -72.00
-80 -73.00
-81 -74.00
-82 -76.00
-83 -77.00
-83 -78.00
-84 -79.00
-85 -80.00
-86 -81.00
-87 -82.00
-88 -83.00
-88 -84.00
-89 -86.00
-90 -87.00
-91 -88.00
-92 -89.00
-93 -90.00
-93 -91.00
-94 -92.00
-95 -93.00
-96 -94.00
-97 -96.00
-98 -97.00
-98 -98.00
-99 -99.00
-100 -100.00
The Index has been highly volatile at times. The World Trade Center disaster,
the events underlying it and related uncertainties have resulted in greater
volatility, which may continue in the near term and over the term of the BULS.
Before investing in the BULS, you should consult publicly available sources for
the levels and trading pattern of the Index. We cannot predict whether the Index
will rise or fall.
WHO SHOULD AND SHOULD NOT CONSIDER PURCHASING BULS?
Investors who are willing to accept the risk of owning equities in general
should consider purchasing BULS.
S- 1
Investors who anticipate that the value of the Index will not increase by the
determination date should not purchase BULS. Also, investors who seek more
traditional bond returns from money market, government or corporate bonds should
not purchase BULS.
SELECTED PURCHASE CONSIDERATIONS
- PARTIAL EQUITY RETURNS WITH LIMITED DOWNSIDE PROTECTION. At maturity, BULS
pay 70% of any appreciation in the Index and provide full downside protection
of principal for up to a 25% decline in the Index. For every 1% decline in the
Index beyond 25% (e.g., from -25% to -26%) BULS lose 1.333%. YOU MAY LOSE SOME
OF YOUR INVESTMENT IN THE BULS.
- EXCHANGE LISTING. BULS have been approved for listing on the American Stock
Exchange under the symbol "BUL.E." However, there can be no guarantee of
liquidity in the secondary market.
- U.S. SETTLEMENT. The BULS are traded and settled in the U.S. market.
SELECTED RISK CONSIDERATIONS
An investment in BULS involves significant risks. Some of these risks are
summarized here, but we urge you to read the more detailed explanation of risks
in the "Risk Factors" section of this Prospectus Supplement, beginning on page
S-4.
- PROTECTION OF YOUR ORIGINAL INVESTMENT IS LIMITED TO A 25% DECLINE IN THE
INDEX. BULS offer only limited protection of principal and BULS investors are
exposed to significant loss if the Index declines by more than 25%. For every
1% decline in the Index beyond 25%, you will lose 1.333%.
- STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. ("S&P"), DOES
NOT INCLUDE DIVIDENDS PAID ON THE SECURITIES IN THE INDEX (THE "S&P
CONSTITUENT STOCKS") IN CALCULATING THE INDEX.
- BULS DO NOT PAY DIVIDENDS OR COUPONS.
- BULS ARE NOT EXCHANGE-TRADED FUNDS (ETFS). The value of the BULS will not
rise or fall one-for-one with the Index. BULS are not expected to trade with
the same volume or liquidity as certain exchange-traded funds.
- BULS MAY NOT BE LIQUID. There may be little or no secondary market for the
BULS. While the BULS have been approved for listing on the American Stock
Exchange and UBS Warburg LLC and other affiliates of UBS AG intend to make a
market in the BULS, they are not required to do so. UBS Warburg LLC or any
other affiliate of UBS AG may stop making a market in the BULS at any time. If
you need to liquidate BULS prior to maturity, you may have to sell the BULS at
a substantial discount from the initial price. Therefore, you should be
willing to hold your BULS until maturity.
CONSIDERATIONS RELATING TO U.S. TAXATION
In the opinion of our counsel, Sullivan & Cromwell, it would be reasonable that
you and we treat your BULS as a pre-paid cash settled forward contract with
respect to the S&P Constituent Stocks. The terms of your BULS (as set forth in
the BULS) require you and us (in the absence of an administrative or judicial
ruling to the contrary) to treat your BULS for all tax purposes in accordance
with such characterization. If each BULS is so treated, you will generally
recognize capital gain or loss upon the maturity of your BULS (or upon your
sale, exchange or other disposition of your BULS prior to its maturity) equal to
the difference between the amount realized and the amount you paid for your
BULS. Such gain or loss generally will be long-term capital gain or loss if you
held your BULS more than one year.
S- 2
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF YOUR INVESTMENT IN BULS
(INCLUDING THE TIMING AND CHARACTER OF ANY INCLUSION IN YOUR INCOME IN RESPECT
OF BULS) ARE UNCERTAIN. IN PARTICULAR, IF THE REQUIRED TREATMENT OF BULS AS A
PRE-PAID FORWARD CONTRACT IS DECLARED INVALID BY AN ADMINISTRATIVE OR JUDICIAL
RULING, ANY GAIN YOU RECOGNIZE ON YOUR BULS COULD CONCEIVABLY BE TREATED AS
ORDINARY INTEREST INCOME AND YOU COULD BE REQUIRED TO ACCRUE INTEREST INCOME
WITH RESPECT TO YOUR BULS OVER THE TERM OF YOUR BULS. BECAUSE OF THIS
UNCERTAINTY, WE URGE YOU TO CONSULT YOUR TAX ADVISER AS TO THE TAX CONSEQUENCES
OF YOUR INVESTMENT IN BULS.
For a more complete discussion of the United States federal income tax
consequences of your investment in BULS, including tax consequences applicable
to non-United States persons, please see the discussion under "Supplemental Tax
Considerations--Supplemental U.S. Tax Considerations" on page S-16.
S- 3
--------------------------------------------------------------------------------
Risk Factors
The BULS are not secured debt and are riskier than ordinary unsecured debt
securities. The return on the BULS is linked to the performance of the Index and
you may lose some or all of the amount you invest in the BULS. This section
describes the most significant risks relating to the BULS. WE URGE YOU TO READ
THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH THE OTHER INFORMATION
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, BEFORE INVESTING
IN THE BULS.
YOU MAY LOSE SOME OF YOUR PRINCIPAL
The BULS combine features of equity and debt. The terms of the BULS differ from
those of ordinary debt securities in that we will NOT pay you a fixed amount at
maturity or interest during the BULS term. Instead, at maturity, BULS pay in
cash an amount based on the performance of the Index, subject to limited
downside protection for declines of up to 25% in the value of the Index. BULS
are exposed to declines in the value of the Index of more than 25%. For each 1%
decline in the Index beyond 25% (e.g., from -25% to -26%), the BULS lose 1.333%.
ACCORDINGLY, YOU CAN LOSE SOME OF THE AMOUNT THAT YOU INVEST IN THE BULS. See
"Specific Terms of the BULS--Payment at Maturity" on page S-11.
CHANGES THAT AFFECT THE INDEX OR THE S&P CONSTITUENT STOCKS COULD AFFECT THE
AMOUNT PAYABLE ON THE BULS AND THEIR MARKET VALUE
The policies of S&P concerning the calculation of the Index, additions,
deletions or substitutions of the S&P Constituent Stocks and the manner in which
changes affecting the S&P Constituent Stocks or the issuers of the S&P
Constituent Stocks, such as stock dividends, reorganizations or mergers, are
reflected in the Index, could affect the Index and, therefore, could affect the
amount payable on the BULS at maturity, and the market value of the BULS prior
to that date. The amount payable on the BULS and their market value could also
be affected if S&P changes these policies, for example by changing the manner in
which it calculates the Index, or if S&P discontinues or suspends calculation or
publication of the Index, in which case it may become difficult to determine the
market value of the BULS. If events such as these occur, or if the Index level
is not available on the determination date because of a market disruption event
or for any other reason, the calculation agent--which initially will be UBS
Warburg LLC, an affiliate of the Issuer--may determine the final Index level or
fair market value of the BULS--and thus the amount payable at maturity--in a
manner it considers appropriate, in its sole discretion.
YOU MAY NOT HAVE AN ACTIVE TRADING MARKET IN THE BULS--SALES IN THE SECONDARY
MARKET MAY RESULT IN SIGNIFICANT LOSSES
You should be willing to hold your BULS until maturity. There may be little or
no secondary market for the BULS. Although BULS have been approved for listing
on the American Stock Exchange, it is not possible to predict whether a
secondary market will develop for the BULS. UBS Warburg LLC and other affiliates
of UBS AG currently intend to make a market for the BULS but they are NOT
required to do so. UBS Warburg LLC or any other affiliate of UBS AG may stop
making a market in the BULS at any time.
Even if a secondary market for the BULS develops, it may not provide significant
liquidity or trade at prices advantageous to you. If you need to sell your BULS
prior to maturity, you may have to do so at a substantial discount from the
initial price, and as a result you may suffer substantial losses.
The value of the BULS may move up or down between the date you purchase them and
the determination date when the calculation agent determines the amount to be
paid to you at maturity.
S- 4
RISK FACTORS
--------------------------------------------------------------------------------
Therefore, you may sustain a significant loss if you sell the BULS in the
secondary market during that time. Several factors, many of which are beyond our
control, will influence the value of the BULS. The following factors may
influence the value of the BULS:
- the frequency and magnitude of changes in the Index (volatility). The Index
has been highly volatile at times. It is impossible to predict whether the
Index will rise or fall;
- the dividend rate paid on the S&P Constituent Stocks (while not paid to
holders of the BULS, dividend payments, if any, on the S&P Constituent Stocks
may have an influence on the market value of the Index and therefore on the
BULS);
- economic, financial, political and regulatory or judicial events that affect
stock markets generally and the Index;
- interest rates in the market;
- the time remaining to the maturity of the BULS; and
- the creditworthiness of UBS AG.
These factors, among others, may influence the price received upon any sale of
the BULS prior to the maturity date.
GAIN ON YOUR BULS COULD BE TREATED AS ORDINARY INTEREST INCOME
You should consider the tax consequences of investing in the BULS. Significant
aspects of the tax treatment of the BULS are uncertain. The Internal Revenue
Service or a court may not agree with the tax treatment described in this
prospectus supplement. Specifically, the Internal Revenue Service could assert
that the BULS should be treated for United States federal income tax purposes
not as pre-paid cash-settled forward contracts with respect to the S&P
Constituent Stocks but rather as contingent debt instruments which are subject
to special tax rules. Under these rules, any gain you recognize from the sale,
exchange or from the final payment at maturity of your BULS would be treated as
ordinary interest income and you would be required to accrue interest income
with respect to your BULS over the term of your BULS.
Please read carefully the section entitled "Considerations Relating to U.S.
Taxation" in the summary section above, "Supplemental Tax Considerations" below,
and the sections "U.S. Tax Considerations" and "Tax Considerations Under the
Laws of Switzerland" in the accompanying prospectus. YOU SHOULD CONSULT YOUR TAX
ADVISOR ABOUT THE TAX CONSEQUENCES OF YOUR INVESTMENT IN BULS.
YOUR BULS DO NOT PAY PERIODIC INTEREST OR DIVIDENDS
You will not receive any periodic interest or dividend payments on your BULS.
Even if the Index has appreciated, the return you earn on your BULS may be less
than you would have earned by investing in a debt security that bears interest
at a prevailing market rate.
YOUR RETURN ON THE BULS WILL NOT REFLECT THE RETURN ON THE S&P CONSTITUENT
STOCKS
S&P calculates the Index by reference to the prices of the S&P Constituent
Stocks without taking account of the value of dividends paid on such stocks. As
a result, the return on the BULS will not reflect the return you would realize
if you actually owned the S&P Constituent Stocks and received the dividends paid
on such stocks.
BULS ARE NOT EXCHANGE-TRADED FUNDS (ETFS)
BULS are not exchange-traded funds (ETFs). The value of the BULS may not rise or
fall one-for-one with the value of the Index. BULS are not expected to trade
with the same volume or liquidity as certain exchange-traded funds (ETFs).
S- 5
RISK FACTORS
--------------------------------------------------------------------------------
IF THE INDEX CHANGES, THE MARKET VALUE OF THE BULS IS UNLIKELY TO CHANGE IN THE
SAME MANNER
The market value of your BULS is not likely to change in proportion to changes
in the Index. Even if the theoretical value of the BULS increases over the
initial BULS value of $1,000, the market value of the BULS may not increase at
all or may not increase by the same magnitude. It is also possible for the Index
to increase while the market price of the BULS declines.
TRADING AND OTHER TRANSACTIONS BY UBS AG OR ITS AFFILIATES MAY ADVERSELY AFFECT
THE VALUE OF THE BULS
As described below under "Use of Proceeds and Hedging," we or one or more of our
affiliates may hedge our obligations under the BULS by purchasing one or more of
the S&P Constituent Stocks, options or futures on the Index or the S&P
Constituent Stocks or other derivative instruments with returns linked to or
related to changes in the Index or the S&P Constituent Stocks, and may adjust
these hedges by, among other things, purchasing or selling any of the foregoing
at any time and from time to time including on or around the dates on which the
initial Index level and the final Index level are determined. Although they are
not expected to, any of these hedging activities may adversely affect the value
of the Index directly, or indirectly by affecting the price of the S&P
Constituent Stocks, and, therefore, the value of the BULS. It is possible that
we or one or more of our affiliates could receive substantial returns from these
hedging activities while the value of the BULS may decline.
We or one or more of our affiliates may also engage in trading in one or more of
the S&P Constituent Stocks or instruments linked to the Index or S&P Constituent
Stocks on a regular basis as part of our general broker-dealer and other
businesses, for proprietary accounts, for other accounts under management or to
facilitate transactions for customers, including block transactions. Any of
these activities could adversely affect the value of the Index directly, or
indirectly by affecting the price of the S&P Constituent Stocks and, therefore,
the value of the BULS. We or one or more of our affiliates may also issue or
underwrite other securities or financial or derivative instruments with returns
linked or related to changes in the Index or one or more of the S&P Constituent
Stocks. By introducing competing products into the marketplace in this manner,
we or one or more of our affiliates could adversely affect the value of the
BULS.
The indenture governing the BULS does not contain any restriction on our ability
or the ability of any of our affiliates to sell, pledge or otherwise convey all
or any portion of any S&P Constituent Stocks acquired by us or our affiliates.
Neither we nor any of our affiliates will pledge or otherwise hold any S&P
Constituent Stocks for the benefit of holders of the BULS in order to enable us
to pay holders the amounts due to them at maturity. Consequently, in the event
of a bankruptcy, insolvency or liquidation involving us, any S&P Constituent
Stocks that we own will be subject to the claims of our creditors generally and
will not be available specifically for the benefit of the holders of the BULS.
UBS AG'S BUSINESS ACTIVITIES MAY CREATE CONFLICTS OF INTEREST BETWEEN YOU AND US
We and one or more of our affiliates may, at present or in the future, engage in
trading activities related to the Index and the S&P Constituent Stocks that are
not for the account of holders of the BULS or on their behalf. These activities
may present a conflict between our or our affiliates' obligations and your
interests as a holder of the BULS. Moreover, we or one or more of our affiliates
have published, and may in the future publish, research reports on the equity
markets generally or on one or more of the issuers of the S&P Constituent
Stocks. This research is modified from time to time without notice and may
express opinions or provide recommendations that are inconsistent with
purchasing or holding the BULS. Any of these activities, if they influence the
Index, could be adverse to such holders' interests as beneficial owners of the
BULS.
S- 6
RISK FACTORS
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YOU HAVE NO SHAREHOLDER RIGHTS IN THE S&P CONSTITUENT STOCKS OR RIGHTS TO
RECEIVE ANY STOCK
As an owner of BULS, you will not have voting rights or rights to receive
dividends or other distributions or any other rights that holders of the S&P
Constituent Stocks would have. Moreover, your BULS will be paid in cash, and you
will have no right to receive delivery of any S&P Constituent Stocks.
UBS AG AND ITS AFFILIATES HAVE NO AFFILIATION WITH S&P AND ARE NOT RESPONSIBLE
FOR ITS PUBLIC DISCLOSURE OF INFORMATION
UBS AG and its affiliates are not affiliated with S&P in any way (except for
licensing arrangements discussed below in "The S&P 500 Index") and have no
ability to control or predict its actions, including any errors in or
discontinuation of disclosure regarding its methods or policies relating to the
calculation of the Index. S&P is not involved in the offer of the BULS in any
way and has no obligation to consider your interest as an owner of BULS in
taking any actions that might affect the value of your BULS.
Neither we nor any of our affiliates assumes any responsibility for the adequacy
or accuracy of the information about the Index or S&P contained in this
prospectus supplement. YOU, AS AN INVESTOR IN THE BULS, SHOULD MAKE YOUR OWN
INVESTIGATION INTO THE INDEX AND S&P.
THERE ARE POTENTIAL CONFLICTS OF INTEREST BETWEEN YOU AND THE CALCULATION AGENT
Our affiliate, UBS Warburg LLC, will serve as the calculation agent. UBS Warburg
LLC will, among other things, determine the amount, if any, paid out to you on
the BULS at maturity. For a fuller description of the calculation agent's role,
see "Specific Terms of the BULS--Role of Calculation Agent." The calculation
agent will exercise its judgment when performing its functions. For example, the
calculation agent may have to determine whether a market disruption event
affecting the Index has occurred at the time of calculation. This determination
will, in turn, depend on the calculation agent's judgment whether the event has
materially interfered with our ability to unwind our hedge positions. Since
these determinations by the calculation agent may affect our payout to you, the
calculation agent may have a conflict of interest as it makes them.
WE CAN POSTPONE THE MATURITY DATE IF A MARKET DISRUPTION EVENT OCCURS
If the calculation agent determines that, on the determination date, a market
disruption event has occurred or is continuing, the determination date will be
postponed until the first business day on which no market disruption event
occurs or is continuing. If such a delay occurs, then the calculation agent will
instead use the closing Index level on the first business day after that day on
which no market disruption event occurs or is continuing, but the delay will
never be more than five days. As a result, the maturity date for the BULS will
also be postponed, although not by more than five business days. If the
determination date is postponed to the last possible day, but a market
disruption event occurs or is continuing on that day, that day will nevertheless
be the determination date. If the Index level is not available on the last
possible determination date either because of a market disruption event or for
any other reason, the calculation agent will make a good faith estimate of the
final Index level based on its assessment, made in its sole discretion, of the
value of the Index at that time. See "Specific Terms of the BULS--Market
Disruption Event."
S- 7
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THE S&P 500 INDEX
We have obtained all information regarding the Index contained in this
Prospectus Supplement, including its make-up, method of calculation and changes
in its components, from publicly available information. That information
reflects the policies of, and is subject to change by S&P. S&P has no obligation
to continue to publish, and may discontinue publication of, the Index. The
consequences of S&P discontinuing publication of the Index are described in
"Risk Factors--Changes that affect the Index or the S&P Constituent Stocks could
affect the amount payable on the BULS and their market value." We do not assume
any responsibility for the accuracy or completeness of such information.
The Index is intended to provide an indication of the pattern of common stock
price movement. The calculation of the value of the Index, discussed below in
further detail, is based on the relative value of the aggregate market value of
the common stocks of 500 companies as of a particular time compared to the
aggregate average market value of the common stocks of 500 similar companies
during the base period of the years 1941 through 1943. As of August 31, 2001,
422 companies or 84.4% of the Index traded on the New York Stock Exchange
("NYSE"), 76 companies or 15.2% of the Index traded on The Nasdaq Stock Market,
and 2 companies or 0.4% of the Index traded on the American Stock Exchange. S&P
chooses companies for inclusion in the Index with the aim of achieving a
distribution by broad industry groupings that approximates the distribution of
these groupings in the common stock population of its Stock Guide Data Base of
over 7,500 U.S. equities, which S&P uses as an assumed model for the composition
of the total market. Relevant criteria employed by S&P include the viability of
the particular company, the extent to which that company represents the industry
group to which it is assigned, the extent to which the market price of that
company's common stock is generally responsive to changes in the affairs of the
respective industry and the market value and trading activity of the common
stock of that company. Ten main groups of companies comprise the Index with the
number of companies currently included in each group indicated in parentheses:
Consumer Discretionary (86), Consumer Staples (35), Energy (26), Financials
(70), Health Care (42), Industrials (70), Information Technology (78), Materials
(40), Telecommunication Services (14), and Utilities (39). S&P may from time to
time, in its sole discretion, add companies to, or delete companies from, the
Index to achieve the objectives stated above.
S&P calculates the Index by reference to the prices of the S&P Constituent
Stocks without taking account of the value of dividends paid on such stocks. As
a result, the return on the BULS will not reflect the return you would realize
if you actually owned the S&P Constituent Stocks and received the dividends paid
on such stocks.
COMPUTATION OF THE INDEX
S&P currently computes the Index as of a particular time as follows:
- the product of the market price per share and the number of then outstanding
shares of each component stock is determined as of that time (referred to as
the "market value" of that stock);
- the market values of all component stocks as of that time are aggregated;
- the mean average of the market values as of each week in the base period of
the years 1941 through 1943 of the common stock of each company in a group of
500 substantially similar companies is determined;
- the mean average market values of all these common stocks over the base period
are aggregated (the aggregate amount being referred to as the "base value");
- the current aggregate market value of all component stocks is divided by the
base value; and
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THE S&P 500 INDEX
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- the resulting quotient, expressed in decimals, is multiplied by ten.
While S&P currently employs the above methodology to calculate the Index, no
assurance can be given that S&P will not modify or change this methodology in a
manner that may affect the amount payable at maturity to beneficial owners of
the BULS.
S&P adjusts the foregoing formula to offset the effects of changes in the market
value of a component stock that are determined by S&P to be arbitrary or not due
to true market fluctuations. These changes may result from causes such as:
- the issuance of stock dividends;
- the granting to shareholders of rights to purchase additional shares of stock;
- the purchase of shares by employees pursuant to employee benefit plans;
- consolidations and acquisitions;
- the granting to shareholders of rights to purchase other securities of the
issuer;
- the substitution by S&P of particular component stocks in the Index; or
- other reasons.
In these cases, S&P first recalculates the aggregate market value of all
component stocks, after taking account of the new market price per share of the
particular component stock or the new number of outstanding shares of that stock
or both, as the case may be, and then determines the new base value in
accordance with the following formula:
New Market Value
Old Base Value x ---------------- = New Base Value
Old Market Value
The result is that the base value is adjusted in proportion to any change in the
aggregate market value of all component stocks resulting from the causes
referred to above to the extent necessary to negate the effects of these causes
upon the Index.
Neither UBS AG nor any of its affiliates accepts any responsibility for the
calculation, maintenance or publication of, or for any error, omission or
disruption in, the Index or any successor Index. S&P does not guarantee the
accuracy or the completeness of the Index or any data included in the Index. S&P
assumes no liability for any errors, omissions or disruption in the calculation
and dissemination of the Index. S&P disclaims all responsibility for any errors
or omissions in the calculation and dissemination of the Index or the manner in
which the Index is applied in determining the amount payable at maturity.
HISTORICAL CLOSING LEVELS OF THE INDEX
Since its inception, the Index has experienced significant fluctuations. Any
historical upward or downward trend in the value of the Index during any period
shown below is not an indication that the value of the Index is more or less
likely to increase or decrease at any time during the term of the BULS. The
historical Index levels do not give an indication of future performance of the
Index. UBS AG cannot make any assurance that the future performance of the Index
or the S&P Constituent Stocks will result in holders of the BULS receiving an
amount greater than the outstanding face amount of their BULS on the maturity
date.
The table below sets forth the high, the low and the last closing levels of the
Index for each of the four calendar quarters in 1998, 1999 and 2000, for the
first, second and third calendar quarters of 2001, and partial data for the
fourth calendar quarter of 2001 through October 11, 2001. The closing levels
listed in the table below were obtained from Bloomberg Financial Services,
without independent verification.
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THE S&P 500 INDEX
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QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE
-------------- ------------- ---------------
-----------------------------------------------------------
3/31/98 1,105.65 927.69 1,101.75
6/30/98 1,138.49 1,077.01 1,133.84
9/30/98 1,186.75 957.28 1,017.01
12/31/98 1,241.81 959.44 1,229.23
3/31/99 1,316.55 1,212.19 1,286.37
6/30/99 1,372.71 1,281.41 1,372.71
9/30/99 1,418.78 1,268.37 1,282.71
12/31/99 1,469.25 1,247.41 1,469.25
3/31/00 1,527.46 1,333.36 1,498.58
6/30/00 1,516.35 1,356.56 1,454.60
9/30/00 1,520.77 1,419.89 1,436.51
12/31/00 1,436.28 1,264.74 1,320.28
3/31/01 1,373.73 1,117.58 1,160.33
6/30/01 1,312.83 1,103.25 1,224.42
9/30/01 1,236.72 965.80 1,040.94
10/11/01 1,097.43 1,038.55 1,097.43
Following the World Trade Center disaster, trading on U.S. stock markets was
suspended from the morning of September 11, 2001 through the opening on
September 17, 2001. Since reopening, those markets, and the Index, have been
highly volatile. The World Trade Center disaster, the events underlying it and
related uncertainties may result in the stock markets generally, and the Index,
exhibiting greater volatility than in earlier periods, both in the near term and
over the term of the BULS. Before investing in the BULS, you should consult
publicly available sources for the levels and trading pattern of the Index.
The BULS are not sponsored, endorsed, sold or promoted by S&P. S&P makes no
representation or warranty, express or implied, to the owners of the BULS or any
member of the public regarding the advisability of investing in securities
generally or in the BULS particularly, or the ability of the Index to track
general stock market performance. S&P's only relationship to UBS AG is the
licensing of certain trademarks and trade names of S&P and of the Index which is
determined, composed and calculated by S&P without regard to the Issuer or the
BULS. S&P has no obligation to take the needs of the Issuer or the owners of the
BULS into consideration in determining, composing or calculating the Index. S&P
is not responsible for and has not participated in the determination of the
timing of, prices at, or quantities of the BULS to be issued or in the
determination or calculation of the equation by which the BULS are to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the BULS.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500(R)
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER, OWNERS OF THE BULS, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
S- 10
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Specific Terms of the BULS
Please note that 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 BULS 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 BULS registered in street name or in BULS issued in
book-entry form through The Depository Trust Company or another depositary.
Owners of beneficial interests in the BULS should read the section entitled
"Legal Ownership of Notes" in the accompanying prospectus.
The BULS are part of a series of debt securities entitled "Medium Term Notes,
Series A" that we may issue under the indenture from time to time. The indenture
is described in "Description of Notes We May Offer" in the accompanying
prospectus. This prospectus supplement summarizes specific financial and other
terms that apply to the BULS. Terms that apply generally to all Series A
medium-term notes are described in "Description of Notes We May Offer" in the
accompanying prospectus. The terms described here supplement those described in
the accompanying prospectus and, if the terms described here are inconsistent
with those described there, the terms described here are controlling.
The trade date for the BULS is October 11, 2001. The settlement date for the
BULS will be October 16, 2001.
Please note that the information about the trade date, settlement date, price to
public and net proceeds to UBS AG in this prospectus supplement relates only to
the initial sale of the BULS. If you have purchased BULS in a market-making
transaction after the initial sale, information about the price and date of sale
to you will be provided in a separate confirmation of sale.
We describe the terms of the BULS in more detail below.
PAYMENT AT MATURITY
Payment at maturity for a BULS is different from ordinary debt securities
because it does not provide a guaranteed return of the original principal
invested. Instead, at maturity, BULS pay in cash an amount based on the
performance of the Index from the closing level on the trade date to the closing
level on the determination date (found on Bloomberg page ). At
maturity BULS pay 70% of any appreciation of the Index. The calculation agent
will determine any appreciation in the Index as follows:
Closing Index level on the determination date
Appreciation of the Index = --------------------------------------------- - 1
Closing Index level on the trade date
At maturity, BULS protect principal against up to a 25% decline in the value of
the Index. For each 1% decline in the value of the Index beyond 25% (e.g., from
-25% to -26%) the BULS lose 1.333%.
You may lose some of your investment if the Index declines by more than 25%.
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SPECIFIC TERMS OF THE BULS
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The sensitivity analysis below represents the hypothetical returns of the BULS,
assuming that the BULS pay at maturity 70% of any appreciation in the Index, an
initial Index level of 1,097.43, and a performance range of the Index from -100%
to 100%. The results are rounded to simplify your analysis.
S&P 500 INDEX % CHANGE BULS BULS TOTAL BULS BULS %
LEVEL IN THE INDEX PRINCIPAL GAINS VALUE RETURN
2,200 100% $1,000 $703 $1,703 70%
2,100 91% $1,000 $639 $1,639 64%
2,000 82% $1,000 $576 $1,576 58%
1,900 73% $1,000 $512 $1,512 51%
1,800 64% $1,000 $448 $1,448 45%
1,700 55% $1,000 $384 $1,384 38%
1,600 46% $1,000 $321 $1,321 32%
1,500 37% $1,000 $257 $1,257 26%
1,400 28% $1,000 $193 $1,193 19%
1,300 18% $1,000 $129 $1,129 13%
1,200 9% $1,000 $ 65 $1,065 7%
1,097.43 0% $1,000 $ 0 $1,000 0%
1,000 -9% $1,000 $ 0 $1,000 0%
900 -18% $1,000 $ 0 $1,000 0%
800 -27% $ 972 $ 0 $ 972 -3%
700 -36% $ 850 $ 0 $ 850 -15%
600 -45% $ 729 $ 0 $ 729 -27%
500 -54% $ 607 $ 0 $ 607 -39%
400 -64% $ 486 $ 0 $ 486 -51%
300 -73% $ 364 $ 0 $ 364 -64%
200 -82% $ 243 $ 0 $ 243 -76%
100 -91% $ 121 $ 0 $ 121 -88%
0 -100% $ 0 $ 0 $ 0 -100%
The initial Index level of 1,097.43 is the closing level on October 11, 2001.
The World Trade Center disaster, the events underlying it and related
uncertainties have resulted in greater volatility, which may continue in the
near term and over the term of the BULS. Before investing in the BULS, you
should consult publicly available sources for the levels and trading pattern of
the Index.
For factors influencing the value of the BULS prior to maturity, see "Risk
Factors--You may not have an active trading market in the BULS--Sales in the
secondary market may result in significant losses."
MATURITY DATE
The maturity date will be October 17, 2006 unless that day is not a business
day, in which case the maturity date will be the next following business day. If
the third business day before this applicable day is not the determination date
referred to below, however, then the maturity date will be the third business
day following the determination date, although the maturity date will never be
later than the third business day after October 19, 2006 or, if October 19, 2006
is not a business day, later than the
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SPECIFIC TERMS OF THE BULS
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fourth business day after October 19, 2006. The calculation agent may postpone
the determination date--and therefore the maturity date--if a market disruption
event occurs or is continuing on a day that would otherwise be the determination
date.
DETERMINATION DATE
The determination date will be the third business day prior to October 17, 2006,
unless the calculation agent determines that a market disruption event occurs or
is continuing on that day. In that event, the determination date will be the
first following business day on which the calculation agent determines that a
market disruption event does not occur and is not continuing. In no event,
however, will the determination date be later than October 19, 2006 or, if
October 19, 2006 is not a business day, later than the first business day after
October 19, 2006.
DENOMINATION
We will offer the BULS in denominations of $1,000 and integral multiples
thereof.
NO INTEREST
We will not make any interest payments to the holders of the BULS.
MARKET DISRUPTION EVENT
Any of the following will be a market disruption event if, in the opinion of the
calculation agent, such event materially affects the Index:
- the suspension or material limitation of the trading of a material number of
securities included in the Index;
- the suspension or material limitation of the trading of securities on one or
more stock exchanges on which securities included in the Index are quoted;
- the suspension or material limitation of the trading of (a) options or futures
relating to the Index on any options or futures exchanges or (b) options or
futures generally; or
- the imposition of any exchange controls in respect of any currencies involved
in determining the amount payable at maturity.
For the purpose of this definition, (i) a limitation on the number of hours or
days of trading will not constitute a market disruption event if it results from
an announced change in the regular business hours of any exchange, and (ii) a
limitation on trading imposed by reason of the movements in price exceeding the
levels permitted by any relevant exchange will constitute a market disruption
event.
If a market disruption event occurs or is continuing on a day that would
otherwise be a determination date, then the calculation agent will instead use
the closing price on the first business day after that day on which no market
disruption event occurs or is continuing. In no event, however, will the
determination date be postponed by more than five business days.
If the determination date is postponed to the last possible day, but a market
disruption event occurs or is continuing on that day, that day will nevertheless
be the determination date.
DEFAULT AMOUNT ON ACCELERATION
If an event of default under the indenture occurs with respect to UBS and the
maturity of the BULS is accelerated, we will pay the default amount in respect
of the principal of the BULS at maturity. We describe the default amount below
under "--Default Amount."
For the purpose of determining whether the holders of our Series A medium-term
notes, of which the BULS are a part, are entitled to take any action under the
indenture, we will treat the outstanding principal amount of the BULS as the
outstanding principal amount of that note. Although the terms of
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SPECIFIC TERMS OF THE BULS
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the BULS may differ from those of the other Series A medium-term notes, holders
of specified percentages in principal amount of all Series A medium-term notes,
together in some cases with other series of our debt securities, will be able to
take action affecting all the Series A medium-term notes, including the BULS.
This action may involve changing some of the terms that apply to the Series A
medium-term notes, accelerating the maturity of the Series A medium-term notes
after a default or waiving some of our obligations under the indenture. We
discuss these matters in the attached prospectus under "Description of Notes We
May Offer--Default, Remedies and Waiver of Default" and "--Modification and
Waiver of Covenants."
DEFAULT AMOUNT
The default amount (as set forth in the BULS) for the BULS on any day will be an
amount, in the specified currency for the principal of the BULS, equal to the
cost of having a qualified financial institution, of the kind and selected as
described below, expressly assume all our payment and other obligations with
respect to the BULS as of that day and as if no default or acceleration had
occurred, or to undertake other obligations providing substantially equivalent
economic value to you with respect to the BULS. That cost will equal:
- the lowest amount that a qualified financial institution would charge to
effect this assumption or undertaking, plus
- the reasonable expenses, including reasonable attorneys' fees, incurred by the
holders of the BULS in preparing any documentation necessary for this
assumption or undertaking.
During the default quotation period for the BULS, which we describe below, the
holders of the BULS and/or we may request a qualified financial institution to
provide a quotation of the amount it would charge to effect this assumption or
undertaking. If either party obtains a quotation, it must notify the other party
in writing of the quotation. The amount referred to in the first bullet point
above will equal the lowest--or, if there is only one, the only--quotation
obtained, and as to which notice is so given, during the default quotation
period. With respect to any quotation, however, the party not obtaining the
quotation may object, on reasonable and significant grounds, to the assumption
or undertaking by the qualified financial institution providing the quotation
and notify the other party in writing of those grounds within two business days
after the last day of the default quotation period, in which case that quotation
will be disregarded in determining the default amount.
DEFAULT QUOTATION PERIOD
The default quotation period is the period beginning on the day the default
amount first becomes due and ending on the third business day after that day,
unless:
- no quotation of the kind referred to above is obtained or
- every quotation of that kind obtained is objected to within five business days
after the due date as described above.
If either of these two events occurs, the default quotation period will continue
until the third business day after the first business day on which prompt notice
of a quotation is given as described above. If that quotation is objected to as
described above within five business days after that first business day,
however, the default quotation period will continue as described in the prior
sentence and this sentence.
In any event, if the default quotation period and the subsequent two business
day objection period have not ended before the determination date, then the
default amount will equal the principal amount of the BULS.
QUALIFIED FINANCIAL INSTITUTIONS
For the purpose of determining the default amount at any time, a qualified
financial institution must be a financial institution organized under the laws
of any jurisdiction in the United States of America,
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SPECIFIC TERMS OF THE BULS
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Europe or Japan, which at that time has outstanding debt obligations with a
stated maturity of one year or less from the date of issue and rated either:
- A-1 or higher by Standard & Poor's Ratings Group or any successor, or any
other comparable rating then used by that rating agency, or
- P-1 or higher by Moody's Investors Service, Inc. or any successor, or any
other comparable rating then used by that rating agency.
REDEMPTION PRICE UPON OPTIONAL TAX REDEMPTION
We have the right to redeem the BULS in the circumstances described under
"Description of Notes We May Offer--Optional Tax Redemption" in the accompanying
prospectus. In this case, the redemption price of the BULS will be determined by
the calculation agent in a manner reasonably calculated to preserve your and our
relative economic position.
MANNER OF PAYMENT
Any payment on the BULS at maturity will be made to accounts designated by you
and approved by us, or at the office of the trustee in New York City, but only
when the BULS are surrendered to the trustee at that office. We also may make
any payment in accordance with the applicable procedures of the depositary.
BUSINESS DAY
When we refer to a business day with respect to the BULS, we mean a day that is
a business day of the kind described in the attached prospectus but that is not
a day on which the principal securities market (or markets) on which the S&P
Constituent Stocks trade is authorized by law or executive order to close.
MODIFIED BUSINESS DAY
As described in the attached prospectus, any payment on the BULS that would
otherwise be due on a day that is not a business day may instead be paid on the
next day that is a business day, with the same effect as if paid on the original
due date, except as described under "Maturity Date" and "Determination Date"
above. For the BULS, however, the term business day has a different meaning than
it does for other Series A medium-term notes.
ROLE OF CALCULATION AGENT
The calculation agent in its sole discretion will make all determinations
regarding the final BULS value, the final Index level, market disruption events,
business days, the default amount, the redemption price upon optional tax
redemption and the amount payable in respect of your BULS. Absent manifest
error, all determinations of the calculation agent will be final and binding on
you and us, without any liability on the part of the calculation agent.
Please note that the firm named as the calculation agent in this prospectus
supplement is the firm serving in that role as of the original issue date of the
BULS. We may change the calculation agent after the original issue date without
notice.
BOOKING BRANCH
The BULS will be booked through UBS AG, Jersey Branch.
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Use of Proceeds and Hedging
We will use the net proceeds we receive from the sale of the BULS for the
purposes we describe in the attached prospectus under "Use of Proceeds." We or
our affiliates may also use those proceeds in transactions intended to hedge our
obligations under the BULS as described below.
In anticipation of the sale of the BULS, we or our affiliates expect to enter
into hedging transactions involving purchases of S&P Constituent Stocks and
listed or over-the-counter options on the S&P Constituent Stocks prior to and on
the trade date. From time to time, we or our affiliates may enter into
additional hedging transactions or unwind those we have entered into. In this
regard, we or our affiliates may:
- acquire or dispose of S&P Constituent Stocks or other securities of the S&P
Constituent Stock Issuers,
- take or dispose of positions in listed or over-the-counter options or other
instruments based on the value of the Index or on one or more of the S&P
Constituent Stocks,
- take or dispose of positions in listed or over-the-counter options or other
instruments based on the value of other similar market indices,
- or a combination of the three.
We or our affiliates may acquire a long or short position in securities similar
to the BULS from time to time and may, in our or their sole discretion, hold or
resell those securities.
We or our affiliates may close out our or their hedge on or before the
determination date. That step may involve sales or purchases of one or more of
the S&P Constituent Stocks, listed or over-the-counter options on one or more of
the S&P Constituent Stocks or listed or over-the-counter options or other
instruments based on indices designed to track the performance of the Index or
other components of the U.S. equity market.
The hedging activity discussed above may adversely affect the market value of
the BULS from time to time. See "Risk Factors" above for a discussion of these
adverse effects.
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Supplemental Tax Considerations
The following is a general description of certain United States and Swiss tax
considerations relating to the BULS. It does not purport to be a complete
analysis of all tax considerations relating to the BULS. Prospective purchasers
of BULS should consult their tax advisers as to the consequences under the tax
laws of the country of which they are resident for tax purposes and the tax laws
of Switzerland and the United States of acquiring, holding and disposing of BULS
and receiving payments of principal and/or other amounts under the BULS. This
summary is based upon the law as in effect on the date of this prospectus
supplement and is subject to any change in law that may take effect after such
date.
SUPPLEMENTAL U.S. TAX CONSIDERATIONS
The discussion below supplements the discussion under "U.S. Tax Considerations"
in the attached prospectus and is subject to the limitations and exceptions set
forth therein. Except as otherwise noted under "Non-United States Holders"
below, this discussion is only applicable to you if you are a United States
holder (as defined in the accompanying prospectus).
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SUPPLEMENTAL TAX CONSIDERATIONS
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NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW THE
BULS SHOULD BE TREATED FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. AS A
RESULT, THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF YOUR INVESTMENT IN
BULS ARE UNCERTAIN. ACCORDINGLY, WE URGE YOU TO CONSULT YOUR TAX ADVISER AS TO
THE TAX CONSEQUENCES OF HAVING AGREED TO THE REQUIRED TAX TREATMENT OF YOUR BULS
DESCRIBED BELOW AND AS TO THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS TO
YOUR INVESTMENT IN YOUR BULS.
In the opinion of our counsel, Sullivan & Cromwell, it would be reasonable to
treat your BULS as a pre-paid cash-settled forward contract with respect to the
S&P Constituent Stocks and the terms of your BULS require you and us (in the
absence of an administrative or judicial ruling to the contrary) to treat your
BULS for all tax purposes in accordance with such characterization. If your BULS
are so treated, you would recognize capital gain or loss upon the maturity of
your BULS (or upon your sale, exchange or other disposition of your BULS prior
to its maturity) in an amount equal to the difference between the amount
realized at such time and your tax basis in the BULS. In general, your tax basis
in your BULS would be equal to the price you paid for it. 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.
Alternative Treatment. In the opinion of our counsel, Sullivan & Cromwell, it
would also be reasonable to treat your BULS as a single debt instrument subject
to the special tax rules governing contingent debt instruments. If your BULS is
so treated, you would be required to accrue interest income over the term of
your BULS based upon the yield at which we would issue a non-contingent
fixed-rate debt instrument with other terms and conditions similar to your BULS
(the "comparable yield"). You would recognize gain or loss upon the sale,
redemption or maturity of your BULS in an amount equal to the difference, if
any, between the amount you receive at such time and your adjusted basis in your
BULS. In general, your adjusted basis in your BULS would be equal to the amount
you paid for your BULS, increased by the amount of interest you previously
accrued with respect to your BULS. Any gain you recognize upon the sale,
redemption or maturity of your BULS would be ordinary income and any loss
recognized by you at such time would be ordinary loss to the extent of interest
you included in income in the current or previous taxable years in respect of
your BULS, and thereafter, would be capital loss.
If your BULS is treated as a contingent debt instrument and you purchase your
BULS in the secondary market at a price that is at a discount from, or in excess
of, the adjusted issue price of your BULS, such excess or discount would not be
subject to the generally applicable market discount or amortizable bond premium
rules described in the accompanying prospectus but rather would be subject to
special rules set forth in Treasury Regulations governing contingent debt
instruments. Accordingly, if you purchase your BULS in the secondary market, you
should consult your tax adviser as to the possible application of such rules to
you.
Because of the absence of authority regarding the appropriate tax
characterization of your BULS, it is possible that the Internal Revenue Service
could seek to characterize your BULS in a manner that results in tax
consequences to you that are different from those described above. For example,
the Internal Revenue Service could characterize your BULS in part as a
"non-equity option" that is subject to special "mark-to-market" rules under
Section 1256 of the Internal Revenue Code. You should consult your tax adviser
as to the tax consequences of such characterization and any possible alternative
characterizations of your BULS for U.S. federal income tax purposes.
Non-United States Holders. If you are not a United States holder, you will not
be subject to United States withholding tax with respect to payments on your
BULS but you will be subject to generally applicable information reporting and
backup withholding requirements with respect to payments on
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SUPPLEMENTAL TAX CONSIDERATIONS
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your BULS unless you comply with certain certification and identification
requirements as to your foreign status.
SUPPLEMENTAL TAX CONSIDERATIONS UNDER THE LAWS OF SWITZERLAND
TAX ON PRINCIPAL
Under present Swiss law, repayment of principal of the BULS by us is not subject
to Swiss withholding tax (Swiss Anticipatory Tax), and payments to holders of
the BULS who are non-residents of Switzerland and who during the taxable year
have not engaged in trade or business through a permanent establishment within
Switzerland will not be subject to any Swiss Federal, Cantonal or Municipal
income tax.
GAINS ON SALE OR REDEMPTION
Under present Swiss Law, a holder of BULS who is a non-resident of Switzerland
and who during the taxable year has not engaged in trade or business through a
permanent establishment within Switzerland will not be subject to any Swiss
Federal, Cantonal or Municipal income or other tax on gains realized during the
year on the sale or redemption of a BULS.
STAMP, ISSUE AND OTHER TAXES
There is no tax liability in Switzerland in connection with the issue and
redemption of the BULS. However, BULS sold through a bank or other dealer
resident in Switzerland or Liechtenstein are subject to Turnover Tax.
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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 benefit 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 BULS 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 BULS 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 BULS on behalf of a Plan should consult with counsel regarding the
applicability of the prohibited transaction rules and the applicable exemptions
thereto.
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Supplemental Plan of Distribution
UBS AG has agreed to sell to UBS Warburg LLC and UBS PaineWebber Inc., and UBS
Warburg LLC and UBS PaineWebber Inc. have agreed to purchase from UBS AG, the
aggregate principal amount of the BULS specified on the front cover of this
prospectus supplement. UBS Warburg LLC and UBS PaineWebber Inc. intend to resell
the offered BULS at the original issue price applicable to the offered BULS to
be resold. In the future, we or one or more of our affiliates may repurchase and
resell the offered BULS in market-making transactions, with resales being made
at prices related to prevailing market prices at the time of resale or at
negotiated prices. For more information about the plan of distribution and
possible market-making activities, see "Plan of Distribution" in the attached
prospectus.
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