-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UDrnnp34SOoxlyzZUu+7I8X/kYrSU4iROBQHXvSvZiPobeF1D67eAhPfOw2i9kMY sEvUPddSbH6sBtv5REwh/g== 0000950123-03-001897.txt : 20030224 0000950123-03-001897.hdr.sgml : 20030224 20030224102350 ACCESSION NUMBER: 0000950123-03-001897 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20030224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UBS AG CENTRAL INDEX KEY: 0001114446 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-46930 FILM NUMBER: 03576851 BUSINESS ADDRESS: STREET 1: BAHNHOFSTRASSE CITY: ZURICH STATE: V8 ZIP: 45 MAIL ADDRESS: STREET 1: BAHNHOFSTRASSE CITY: ZURICH STATE: V8 ZIP: 45 424B2 1 y83795e424b2.txt FILED PURSUANT TO RULE 424B2 Filed Pursuant to Rule 424(b)(2) Registration No. 333-46930 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED MAY 17, 2001) ENHANCED APPRECIATION SECURITIES UBS AG $6,800,000 NOTES LINKED TO A BASKET OF COMMON STOCKS DUE MARCH 3, 2004 Issuer: UBS AG Maturity Date: March 3, 2004 Coupon: We will not pay you interest during the term of the Notes. Basket Stocks: The basket consists of the ten common stocks (each, a "Basket Stock") in the Dow Jones Industrial Average(SM) with the highest indicated annualized dividend yield based on the last ordinary dividend declared and the closing price for each stock on January 31, 2003 (as reported by Bloomberg L.P.). Each Basket Stock is equally weighted and represents 10% of the basket, based on the closing price of each Basket Stock on February 20, 2003 (the "trade date"). The Basket Stocks are set forth below:
BASKET STOCK TICKER SECTOR ------------ ------ ------ Altria Group, Inc. MO Consumer Staples AT&T Corp. T Telecommunications Caterpillar Inc. CAT Industrials E.I. du Pont de Nemours and Company DD Materials Eastman Kodak Company EK Consumer Discretionary General Electric Company GE Industrials General Motors Corporation GM Consumer Discretionary Honeywell International Inc. HON Industrials J.P. Morgan Chase & Co. JPM Financials SBC Communications Inc. SBC Telecommunications
Unless otherwise specified in this prospectus supplement, the Basket Stocks will not be replaced with any other common stocks after January 31, 2003. Payment at Maturity: You will receive a cash payment at maturity that is based on the Stock Return (defined on page S-3) of each Basket Stock, which may be positive or negative. Positive Stock Returns for each Basket Stock will be doubled, subject to a maximum gain of 34% with respect to each Basket Stock at maturity. Therefore, the maximum potential total return for each $1,000 principal amount of the Notes at maturity will also be 34%. The Notes are exposed to the full downside price risk of each Basket Stock and any negative Stock Returns will reduce your cash payment at maturity. For a description of how your payment at maturity will be calculated, see "What are the steps to calculate payment at maturity?" on page S-3 and "Specific Terms of the Notes--Payment at Maturity" on page S-19. YOU MAY LOSE SOME OR ALL OF YOUR INVESTMENT IF THE STOCK RETURN OF ONE OR MORE OF THE BASKET STOCKS IS NEGATIVE. YOU WILL NOT RECEIVE DIVIDEND PAYMENTS ON THE BASKET STOCKS. Listing: The Notes have been approved for listing on the American Stock Exchange under the symbol "EAN.D". Booking Branch: UBS AG, Jersey Branch
SEE "RISK FACTORS" BEGINNING ON PAGE S-6 FOR RISKS RELATED TO AN INVESTMENT IN THE NOTES. 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. The Notes are not deposit liabilities of UBS AG and are not FDIC insured.
Underwriting Proceeds to Price to Public Discount UBS AG Per Note 100% 2% 98% Total $6,800,000 $136,000 $6,664,000
UBS WARBURG UBS PAINEWEBBER INC. Prospectus Supplement dated February 20, 2003 [UBS LOGO] PROSPECTUS SUPPLEMENT SUMMARY The following is a summary of terms of the Notes, as well as a discussion of factors you should consider before purchasing the Notes. The information in this section is qualified in its entirety by the more detailed explanations set forth elsewhere in this prospectus supplement and in the accompanying prospectus. Please note that references to "UBS," "we," "our" and "us" refer only to UBS AG and not to its consolidated subsidiaries. WHAT ARE THE ENHANCED APPRECIATION SECURITIES? The Enhanced Appreciation Securities (the "Notes") are medium-term notes issued by UBS whose return is linked to the performance of the Basket Stocks. The basket consists of the ten common stocks in the Dow Jones Industrial Average with the highest indicated annualized dividend yield based on the last ordinary dividend declared and the closing price for each stock on January 31, 2003 (as reported by Bloomberg L.P.). Each Basket Stock is equally weighted and represents 10% of the basket, based on the closing price of each Basket Stock on February 20, 2003. You will receive a cash payment at maturity that is based on the Stock Return of each Basket Stock, which may be positive or negative. Positive Stock Returns for each Basket Stock will be doubled, subject to a maximum gain of 34% with respect to each Basket Stock at maturity. THEREFORE, THE MAXIMUM POTENTIAL TOTAL RETURN FOR EACH $1,000 PRINCIPAL AMOUNT OF THE NOTES AT MATURITY WILL ALSO BE 34%. The Notes are exposed to the full downside price risk of each Basket Stock and any negative Stock Returns will reduce your cash payment at maturity. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL IF THE STOCK RETURN OF ONE OR MORE OF THE BASKET STOCKS IS NEGATIVE. YOU WILL NOT RECEIVE DIVIDEND PAYMENTS ON THE BASKET STOCKS. For a description of how your payment at maturity will be calculated, see "What are the steps to calculate payment at maturity?" on page S-3 and "Specific Terms of the Notes--Payment at Maturity" on page S-19. SELECTED PURCHASE CONSIDERATIONS + GROWTH POTENTIAL--The Notes provide the potential to enhance equity returns by doubling the positive Stock Returns for each Basket Stock up to a maximum gain of 34%. + DIVERSIFICATION--The Notes provide a degree of diversification within the large capitalization equity portion of your portfolio through exposure to ten common stocks in the Dow Jones Industrial Average. + EXCHANGE LISTING--The Notes have been approved for listing on the American Stock Exchange under the symbol "EAN.D". + MINIMUM INVESTMENT--$1,000. WHAT ARE SOME OF THE RISKS OF THE NOTES? An investment in the Notes involves risks. Some of these risks are summarized here, but we urge you to read the more detailed explanation of risks in "Risk Factors" on page S-6. + YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL--The Notes are exposed to the same downside price risk as each of the Basket Stocks. You may lose some or all of your principal if the Stock Return of one or more of the Basket Stocks is negative. + MAXIMUM POTENTIAL RETURN AT MATURITY--If you hold your Notes to maturity, the maximum potential total return for each Note is 34%. S- 1 + YOUR APPRECIATION POTENTIAL IS LIMITED--The positive Stock Return for any Basket Stock will be doubled subject to a maximum gain of 34%. Therefore, you will not benefit from any positive Stock Return in excess of 17% (that is, one-half of the maximum gain with respect to each Basket Stock). As a result, the maximum potential total return for each $1,000 principal amount of the Notes at maturity will also be 34%. The return on your investment in the Notes may not perform as well as a direct investment in the Basket Stocks. + BASKET STOCK SELECTION IS NOT BASED ON UBS RESEARCH--The basket consists of the ten common stocks in the Dow Jones Industrial Average with the highest indicated annualized dividend yield based on the last ordinary dividend declared and the closing price for each stock on January 31, 2003. Unless otherwise specified in this prospectus supplement, the Basket Stocks will not be replaced with any other common stocks after January 31, 2003. The selection of Basket Stocks is not based on research reports published by UBS or one or more of its affiliates. Such research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. + NO INTEREST OR DIVIDEND PAYMENTS--You will not receive any interest payments on the Notes and you will not receive nor be entitled to receive any dividend payments or other distributions on the Basket Stocks. + LITTLE OR NO SECONDARY MARKET LIQUIDITY--There may be little or no secondary market for the Notes. While the Notes have been approved for listing on the American Stock Exchange, there can be no assurance that a liquid market for the Notes will develop. While UBS Warburg LLC and other affiliates of UBS intend to make a market in the Notes, they are not required to do so and may stop those market making activities at any time. You should be willing to hold the Notes to maturity. THE NOTES MAY BE A SUITABLE INVESTMENT FOR YOU IF: + You believe that most of the Basket Stocks will appreciate over the term of the Notes and that such appreciation is unlikely to exceed the 34% maximum potential total return on the Notes at maturity. + You are prepared to hold the Notes until maturity. THE NOTES MAY NOT BE A SUITABLE INVESTMENT FOR YOU IF: + You are not willing to accept the risks of owning equity securities in general and the Basket Stocks in particular. + You believe that most of the Basket Stocks are not likely to appreciate over the term of the Notes. + You believe that most of the Basket Stocks will appreciate over the term of the Notes and that such appreciation will be in an amount greater than the 34% maximum potential total return on the Notes at maturity. + You have concentrated holdings in the Basket Stocks. + You seek an investment for which there will be an active secondary market. + You are not prepared to hold the Notes until maturity. + You seek an investment that provides current interest or dividend income. + You prefer the lower risk and therefore accept the potentially lower returns of fixed income investments with comparable maturities and credit ratings that bear interest at a prevailing market rate. S- 2 WHAT ARE THE TAX CONSEQUENCES OF THE NOTES? + THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF YOUR INVESTMENT IN THE NOTES ARE UNCERTAIN. Some of these tax consequences are summarized below, but we urge you to read the more detailed discussion in "Supplemental Tax Considerations--Supplemental U.S. Tax Considerations" on page S-32. Pursuant to the terms of the Notes, UBS and you agree, in the absence of an administrative or judicial ruling to the contrary, to characterize the Notes as a pre-paid forward contract with respect to the Basket Stocks. If the Notes are so treated, you will generally recognize capital gain or loss upon the sale or maturity of your Notes in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Notes. Such gain or loss will generally be long-term capital gain or loss if you held your Notes for more than one year. IN THE OPINION OF OUR COUNSEL, SULLIVAN & CROMWELL LLP, IT IS REASONABLE TO TREAT YOUR NOTES AS DESCRIBED ABOVE, BUT IT WOULD ALSO BE REASONABLE TO TREAT THE NOTES AS SUBJECT TO THE SPECIAL RULES GOVERNING CONTINGENT DEBT INSTRUMENTS. BECAUSE OF THIS UNCERTAINTY, WE URGE YOU TO CONSULT YOUR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF YOUR INVESTMENT IN THE NOTES. WHAT ARE THE STEPS TO CALCULATE PAYMENT AT MATURITY? Set forth below is an explanation of the steps necessary to calculate the payment at maturity on the Notes. STEP 1: CALCULATE THE STOCK RETURN FOR EACH BASKET STOCK. The "Stock Return" is the difference between the closing price for such Basket Stock on the trade date and on the final valuation date, expressed as a percentage of the Initial Stock Price and calculated as follows: Final Stock Price - Initial Stock Price Stock Return = --------------------------------------- Initial Stock Price
where the "Initial Stock Price" is the closing price of each Basket Stock on the trade date and the "Final Stock Price" is the closing price of each Basket Stock on the final valuation date. STEP 2: CALCULATE THE STOCK COMPONENT RETURN FOR EACH BASKET STOCK. The "Stock Component Return" is based on the Stock Return of each Basket Stock, which may be positive or negative. If a Stock Return is positive, it will be doubled in order to calculate the Stock Component Return, subject to a maximum Stock Component Return of 34%. If a Stock Return is zero or negative, the Stock Component Return will be equal to the Stock Return. 1) If the Stock Return is positive: Stock Component Return = (Stock Return X 2), subject to a maximum Stock Component Return of 34% 2) If the Stock Return is zero or negative: Stock Component Return = Stock Return STEP 3: CALCULATE THE WEIGHTED STOCK COMPONENT RETURN FOR EACH BASKET STOCK. The "Weighted Stock Component Return" will equal the Stock Component Return for each Basket Stock multiplied by 10%. Each Weighted Stock Component Return will be rounded to two decimal places. Weighted Stock Component Return = (Stock Component Return X 0.10) S- 3 STEP 4: CALCULATE THE SUM OF THE WEIGHTED STOCK COMPONENT RETURNS. This is the percentage total return on each $1,000 principal amount of the Notes. STEP 5: CALCULATE THE CASH PAYMENT AT MATURITY. Payment at maturity = principal amount of the Note + (principal amount of the Note X sum of the Weighted Stock Component Returns). HYPOTHETICAL EXAMPLES OF HOW THE NOTES MAY PERFORM AT MATURITY The examples on page S-5 are based on the following assumptions: Principal amount of each Note............................... $1,000 Maximum gain on each Basket Stock (referred to as the "Maximum Stock Component Return")......................... 34%* Maximum return on each Note................................. $1,340
- ------------ * The Stock Return for each Basket Stock is therefore limited to 17%, which, when doubled, equals the Maximum Stock Component Return of 34%. S- 4
EXAMPLE #2 -- STOCK RETURNS FOR EACH BASKET STOCK ARE 17% OR GREATER, THEREBY REACHING THE MAXIMUM EXAMPLE #1 -- STOCK RETURNS FOR EACH BASKET STOCK STOCK COMPONENT RETURN OF 34%. EACH NOTE PAYS RANGE FROM -17% TO 17%. EACH NOTE PAYS $1,101 $1,340 AT MATURITY, A 34% RETURN ON INVESTMENT, AT MATURITY, A 10.10% RETURN ON INVESTMENT. WHICH IS THE MAXIMUM RETURN ON EACH NOTE. WEIGHTED WEIGHTED STOCK STOCK STOCK STOCK STOCK COMPONENT COMPONENT STOCK COMPONENT COMPONENT STOCK RETURN RETURN RETURN STOCK RETURN RETURN RETURN Stock 1 6% 12% 1.20% Stock 1 17% 34% 3.40% Stock 2 5% 10% 1.00% Stock 2 17% 34% 3.40% Stock 3 7% 14% 1.40% Stock 3 17% 34% 3.40% Stock 4 10% 20% 2.00% Stock 4 18% 34% 3.40% Stock 5 -6% -6% -0.60% Stock 5 18% 34% 3.40% Stock 6 12% 24% 2.40% Stock 6 18% 34% 3.40% Stock 7 17% 34% 3.40% Stock 7 19% 34% 3.40% Stock 8 8% 16% 1.60% Stock 8 19% 34% 3.40% Stock 9 -6% -6% -0.60% Stock 9 19% 34% 3.40% Stock 10 -17% -17% -1.70% Stock 10 19% 34% 3.40% ------ ------ Sum of the Weighted Stock Component Sum of the Weighted Stock Returns: 10.10% Component Returns: 34.00% PAYMENT AT MATURITY PER NOTE: PAYMENT AT MATURITY PER NOTE: $1,000 + ($1,000 X 10.10%) = $1,101.00 $1,000 + ($1,000 X 34.00%) = $1,340.00 RETURN ON NOTE: 10.10% RETURN ON NOTE: 34.00% EXAMPLE #3 -- STOCK RETURNS FOR EACH BASKET STOCK RANGE FROM -40% TO 40%. NEGATIVE STOCK COMPONENT RETURNS OUTWEIGH POSITIVE STOCK COMPONENT RETURNS. EACH NOTE PAYS $964 AT MATURITY, A -3.60% RETURN ON INVESTMENT. WEIGHTED STOCK STOCK STOCK COMPONENT COMPONENT STOCK RETURN RETURN RETURN Stock 1 40% 34% 3.40% Stock 2 8% 16% 1.60% Stock 3 -40% -40% -4.00% Stock 4 -16% -16% -1.60% Stock 5 8% 16% 1.60% Stock 6 6% 12% 1.20% Stock 7 -16% -16% -1.60% Stock 8 -24% -24% -2.40% Stock 9 Stock 9 6% 12% 1.20% Stock 10 Stock 10 -30% -30% -3.00% ------ Sum of the Weighted Stock Component Returns: -3.60% PAYMENT AT MATURITY PER NOTE: $1,000 + ($1,000 X (-3.60%)) = $964.00 RETURN ON NOTE: -3.60%
Note: The percentages and amounts listed in the above examples have been rounded for ease of analysis. S- 5 - -------------------------------------------------------------------------------- RISK FACTORS The return on the Notes is linked to the performance of the Basket Stocks. Investing in the Notes is NOT equivalent to investing directly in the Basket Stocks. This section describes the most significant risks relating to the Notes. 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 NOTES. THE NOTES ARE EXPOSED TO THE FULL DOWNSIDE RISK OF THE BASKET STOCKS AND YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL The Notes differ from ordinary debt securities in that we may not pay you 100% of your principal amount at maturity if the Stock Return on any Basket Stock is negative. As your cash payment at maturity is based on the Stock Return of each Basket Stock, each negative Stock Return will reduce your cash payment at maturity. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL IF THE STOCK RETURN ON ONE OR MORE OF THE BASKET STOCKS IS NEGATIVE. See "What are the steps to calculate payment at maturity?" on page S-3. THE MAXIMUM GAIN WITH RESPECT TO EACH BASKET STOCK IS 34%; THEREFORE, YOUR MAXIMUM RETURN ON THE NOTES AT MATURITY IS ALSO 34% The maximum gain with respect to each Basket Stock is 34%. Therefore, the maximum potential total return for each $1,000 principal amount of the Notes at maturity will also be 34%. Since the maximum gain with respect to each Basket Stock is 34%, you will not benefit from any positive Stock Return in excess of 17% (that is, one-half of the maximum gain with respect to each Basket Stock). THE MARKET VALUE OF THE NOTES MAY BE INFLUENCED BY UNPREDICTABLE FACTORS The market value of your Notes may fluctuate between the date you purchase them and the final valuation date when the calculation agent will determine your payment at maturity. Therefore, you may sustain a significant loss if you sell the Notes in the secondary market. Several factors, many of which are beyond our control, will influence the market value of the Notes. We expect that generally the market price of the Basket Stocks on any day will affect the market value of the Notes more than any other single factor. Other factors that may influence the market value of the Notes include: + the volatility of the market price of the Basket Stocks (i.e., the frequency and magnitude of changes in the level of the market price of the Basket Stocks) + the dividend rate paid on the Basket Stocks (while not paid to holders of the Notes, dividend payments on the Basket Stocks may influence the market price of the Basket Stocks and the market value of options on the Basket Stocks and therefore affect the market value of the Notes) + interest rates in the market + the time remaining to the maturity of the Notes + the creditworthiness of UBS + supply and demand for the Notes, including inventory positions with UBS Warburg LLC or any other market maker + economic, financial, political, regulatory, or judicial events that affect any of the Basket Stocks or that affect stock markets generally. UBS AND ITS AFFILIATES HAVE NO AFFILIATION WITH THE ISSUERS OF THE BASKET STOCKS AND ARE NOT RESPONSIBLE FOR THEIR PUBLIC DISCLOSURE OF INFORMATION We and our affiliates are not affiliated with the issuers of the Basket Stocks in any way and we have no ability to control or predict their actions or have the ability to control the public disclosure of any events or circumstances affecting the issuers of the Basket Stocks. THE ISSUERS OF THE BASKET STOCKS ARE S- 6 RISK FACTORS - -------------------------------------------------------------------------------- NOT INVOLVED IN THE OFFER OF THE NOTES IN ANY WAY AND HAVE NO OBLIGATION TO CONSIDER YOUR INTEREST AS AN OWNER OF THE NOTES IN TAKING ANY ACTIONS THAT MIGHT AFFECT THE MARKET VALUE OF YOUR NOTES OR YOUR PAYMENT AT MATURITY. The Notes are unsecured debt obligations of UBS only and are not obligations of the issuers of the Basket Stocks. None of the money you pay for the Notes will go to the issuers of the Basket Stocks. This prospectus supplement relates only to the Notes and does not relate to the Basket Stocks. We have derived all information about the issuers of the Basket Stocks in this prospectus supplement from publicly available documents without independent verification. We have not participated in the preparation of any of those documents or made any "due diligence" investigation or any inquiry of any issuer of the Basket Stocks in connection with the offering of the Notes. We do not make any representation that the publicly available documents or any other publicly available information about the issuers of the Basket Stocks are accurate or complete. Furthermore, we do not know whether the issuers of the Basket Stocks have disclosed all events occurring before the date of this prospectus supplement--including events that could affect the accuracy or completeness of the publicly available documents referred to above, the trading price of the Basket Stocks and, therefore, the Final Stock Price for each Basket Stock that the calculation agent will use to determine the payment we will make to you at maturity. Subsequent disclosure of any events of this kind or the disclosure of or failure to disclose material future events concerning any issuer of the Basket Stocks could affect your payment at maturity and, therefore, the market value of the Notes. WE HAVE NO OBLIGATION TO DISCLOSE INFORMATION ABOUT THE ISSUERS OF THE BASKET STOCKS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT We or any of our affiliates may currently or from time to time engage in business with one or more of the issuers of the Basket Stocks, including making loans to or equity investments in the issuers of the Basket Stocks or providing advisory services to the issuers of the Basket Stocks, including merger and acquisition advisory services. In the course of that business, we or any of our affiliates may acquire non-public information about one or more issuers of the Basket Stocks. If we or any of our affiliates do acquire non-public information about one or more issuers of the Basket Stocks, we are not obligated to disclose such non-public information to you. AS AN INVESTOR IN THE NOTES, YOU SHOULD UNDERTAKE SUCH INDEPENDENT INVESTIGATION OF EACH ISSUER OF THE BASKET STOCKS AS IN YOUR JUDGMENT IS APPROPRIATE TO MAKE AN INFORMED DECISION WITH RESPECT TO AN INVESTMENT IN THE NOTES. THERE MAY NOT BE AN ACTIVE TRADING MARKET IN THE NOTES--SALES IN THE SECONDARY MARKET MAY RESULT IN SIGNIFICANT LOSSES You should be willing to hold your Notes until maturity. There may be little or no secondary market for the Notes. While the Notes have been approved for listing on the American Stock Exchange, there can be no assurance that a liquid market for the Notes will develop. UBS Warburg LLC and other affiliates of UBS currently intend to make a market for the Notes, although they are not required to do so. UBS Warburg LLC or any other affiliate of UBS may stop any such market making activities at any time. If you sell your Notes before maturity, you may have to do so at a discount from the issue price, and, as a result, you may suffer substantial losses. OWNING THE NOTES IS NOT THE SAME AS OWNING THE BASKET STOCKS The return on your Notes will not reflect the return you would realize if you actually owned the Basket Stocks and held such investment for a similar period. You will not receive dividends or other distributions that may be paid by an issuer of any Basket Stock. S- 7 RISK FACTORS - -------------------------------------------------------------------------------- The maximum potential total return on the Notes is 34% at maturity. If the Stock Return for each Basket Stock exceeds the maximum potential total return on the Notes of 34%, your return on the Notes at maturity will be less than the return on a direct investment in the Basket Stocks without taking into account taxes and other costs related to such a direct investment. Even if the market price of the Basket Stocks increases above their respective initial stock prices during the term of the Notes, the market value of the Notes may not increase by the same amount. It is also possible for the market price of the Basket Stocks to increase while the market value of the Notes declines. The historical performance of the Basket Stocks should not be taken as an indication of the future performance of the Basket Stocks. As a result, it is impossible to predict whether the market price of the Basket Stocks will rise or fall and the amount of your payment on the Notes at maturity. SIGNIFICANT ASPECTS OF THE TAX TREATMENT OF THE NOTES ARE UNCERTAIN Significant aspects of the tax treatment of the Notes are uncertain. We do not plan to request a ruling from the Internal Revenue Service or from any Swiss authorities regarding the tax treatment of the Notes, and the Internal Revenue Service or a court may not agree with the tax treatment described in this prospectus supplement. Please read carefully the section entitled "What are the tax consequences of the Notes?" in the summary section on page S-3, "Supplemental Tax Considerations" on page S-32, 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 your own tax situation. THE SELECTION OF BASKET STOCKS IS NOT BASED ON UBS RESEARCH The Basket Stocks included in the basket are not based on UBS research. Rather, the Basket Stocks consist of the ten common stocks in the Dow Jones Industrial Average with the highest indicated annualized dividend yield based on the last ordinary dividend declared and the closing price for each stock on January 31, 2003. Unless otherwise specified in this prospectus supplement, the Basket Stocks will not be replaced with any other common stocks after January 31, 2003. We or one or more of our affiliates may, at present or in the future, publish research reports on one or more of the Basket 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 Notes. Any of these activities may affect the market prices of the Basket Stocks and, therefore, the market value of the Notes. YOU WILL NOT RECEIVE INTEREST PAYMENTS ON THE NOTES OR DIVIDEND PAYMENTS ON THE BASKET STOCKS You will not receive any periodic interest payments on the Notes and you will not receive any dividend payments or other distributions on the Basket Stocks. YOU HAVE NO SHAREHOLDER RIGHTS IN THE BASKET STOCKS OR THE RIGHT TO RECEIVE ANY BASKET STOCKS As a holder of the Notes, you will not have voting rights, rights to receive dividends or other distributions, or any other rights that holders of the Basket Stocks may have. Moreover, your payment at maturity will be in cash and you will have no right to receive delivery of any Basket Stocks. S- 8 RISK FACTORS - -------------------------------------------------------------------------------- TRADING AND OTHER TRANSACTIONS BY UBS OR ITS AFFILIATES IN THE BASKET STOCKS OR FUTURES, OPTIONS, OR OTHER DERIVATIVE INSTRUMENTS ON THE BASKET STOCKS MAY IMPAIR THE MARKET VALUE OF THE NOTES As described in "Use of Proceeds and Hedging" on page S-30, we or one or more affiliates may hedge our obligations under the Notes by purchasing the Basket Stocks or futures or options on any Basket Stock or other derivative instruments with returns linked or related to changes in the performance of any Basket Stock, and we may adjust these hedges by, among other things, purchasing or selling Basket Stocks, futures, options or other derivative instruments at any time. Although they are not expected to, any of these hedging activities may adversely affect the market price of the relevant Basket Stocks and, therefore, the market value of the Notes and the amount payable on the Notes at maturity. It is possible that we or one or more of our affiliates could receive substantial returns from these hedging activities while the market value of the Notes declines. We or one or more of our affiliates may also engage in trading in the Basket Stocks and other investments relating to the Basket 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 market prices of the Basket Stocks and, therefore, the market value of the Notes. 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 performance of any Basket Stock. By introducing competing products into the marketplace in this manner, we or one or more of our affiliates could adversely affect the market value of the Notes and the amount payable on the Notes at maturity. The indenture governing the Notes 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 of the Basket Stocks acquired by us or our affiliates. Neither we nor any of our affiliates will pledge or otherwise hold Basket Stocks for the benefit of holders of the Notes in order to enable the holders to exchange their Notes for Basket Stocks under any circumstances. Consequently, in the event of a bankruptcy, insolvency or liquidation involving us, any Basket 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 Notes. OUR BUSINESS ACTIVITIES MAY CREATE CONFLICTS OF INTEREST As noted above, UBS and its affiliates expect to engage in trading activities related to the Basket Stocks that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders' interest in the Notes and the interests UBS and its affiliates will have in their proprietary accounts, in facilitating transactions, including block trades and options and other derivatives transactions for their customers and in accounts under their management. These trading activities, if they influence the market value of any of the Basket Stocks, could be adverse to such holders' interests as beneficial owners of the Notes. UBS and its affiliates may, at present or in the future, engage in business with the issuers of the Basket Stocks, including making loans to or providing advisory services to those companies. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between the obligations of UBS or another affiliate of UBS and the interests of holders of the Notes as beneficial owners of the Notes. Any of these activities by UBS, UBS Warburg LLC or other affiliates may affect the market price of the Basket Stocks and, therefore, the market value of the Notes. S- 9 RISK FACTORS - -------------------------------------------------------------------------------- YOU HAVE LIMITED ANTIDILUTION PROTECTION UBS Warburg LLC, as calculation agent for the Notes, will, in its sole discretion, adjust the Initial Stock Price and/or the number of shares per Basket Stock for certain events affecting the Basket Stocks, such as stock splits and stock dividends, and certain other actions involving the Basket Stocks. However, the calculation agent is not required to make an adjustment for every corporate event that can affect the Basket Stocks. For example, the calculation agent is not required to make any adjustments if the issuer of a Basket Stock or anyone else makes a partial tender offer or a partial exchange offer for that Basket Stock. Consequently, this could affect the calculation of the Stock Return for any affected Basket Stock and the market value of the Notes and the amount payable at maturity. You should refer to "Specific Terms of the Notes--Role of Calculation Agent" on page S-29 for a description of the items that the calculation agent is responsible to determine. 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, decide the amount, if any, of your payment at maturity on the Notes. We may change the calculation agent after the original issue date without notice. For a fuller description of the calculation agent's role, see "Specific Terms of the Notes--Role of Calculation Agent" on page S-29. 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 a Basket Stock has occurred or is continuing on a day when the calculation agent will determine the closing price of such Basket Stock. This determination may, 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 the market value of the Notes, the calculation agent may have a conflict of interest if it needs to make any such decision. THE CALCULATION AGENT CAN POSTPONE THE MATURITY DATE IF A MARKET DISRUPTION EVENT OCCURS ON THE FINAL VALUATION DATE If the calculation agent determines that, on the final valuation date, a market disruption event has occurred or is continuing with respect to any Basket Stock, the final valuation date for such affected Basket Stock will be postponed until the first business day on which no market disruption event occurs or is continuing. If such a postponement occurs, then the calculation agent will instead use the closing price of each of the affected Basket Stocks on the first business day after that day on which no market disruption event occurs or is continuing for such Basket Stock. In no event, however, will the final valuation date for any Basket Stock be postponed by more than ten business days. As a result, the maturity date for the Notes could also be postponed, although not by more than ten business days. If the final valuation date for any Basket Stock is postponed to the last possible day, but a market disruption event occurs or is continuing with respect to such Basket Stock on that day, that day will nevertheless be the final valuation date for such Basket Stock. If the closing price of any of the Basket Stocks is not available on the last possible final valuation date either because of a market disruption event or for any other reason, the calculation agent will make a good faith estimate in its sole discretion of the closing price of such Basket Stocks that would have prevailed in the absence of the market disruption event or such other reason. See "Specific Terms of the Notes--Market Disruption Event" on page S-20. S- 10 - -------------------------------------------------------------------------------- THE CONTENTS AND VALUATION OF THE BASKET OF BASKET STOCKS The basket consists of the ten common stocks in the Dow Jones Industrial Average with the highest indicated annualized dividend yield based on the last ordinary dividend declared and the closing price for each stock on January 31, 2003 (as reported by Bloomberg L.P.). Unless otherwise specified in this prospectus supplement, the Basket Stocks will not be replaced with any other common stocks after January 31, 2003. Each Basket Stock is equally weighted and represents 10% of the basket, based on the closing price of each Basket Stock on the trade date.
- ------------------------------------------------------------------------------------ INITIAL SHARE BASKET STOCKS % OF THE NOTES PRICE* - ------------------------------------------------------------------------------------ Altria Group, Inc. ........................... 10% $37.02 AT&T Corp. ................................... 10% $18.25 Caterpillar Inc. ............................. 10% $46.30 E.I. du Pont de Nemours and Company........... 10% $36.87 Eastman Kodak Company......................... 10% $30.38 General Electric Company...................... 10% $23.35 General Motors Corporation.................... 10% $33.62 Honeywell International Inc. ................. 10% $23.85 J.P. Morgan Chase & Co. ...................... 10% $22.69 SBC Communications Inc. ...................... 10% $21.30
- ------------ * Source: Bloomberg L.P., as of February 20, 2003 DOW JONES & COMPANY, INC. ("DOW JONES") WILL NOT HAVE ANY LIABILITY IN CONNECTION WITH THE NOTES. SPECIFICALLY, DOW JONES DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AND DOW JONES DISCLAIMS ANY WARRANTY ABOUT: THE RESULTS TO BE OBTAINED BY THE NOTES, THE OWNER OF THE NOTES OR ANY OTHER PERSON IN CONNECTION WITH THE USE OF THE DOW JONES INDUSTRIAL AVERAGE ("DJIA") AND THE DATA INCLUDED IN THE DJIA; THE ACCURACY OR COMPLETENESS OF THE DJIA OR ITS DATA; THE MERCHANTABILITY AND THE FITNESS FOR A PARTICULAR PURPOSE OR USE OF THE DJIA OR ITS DATA; DOW JONES WILL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS IN THE DJIA OR ITS DATA; AND UNDER NO CIRCUMSTANCES WILL DOW JONES BE LIABLE FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF DOW JONES KNOWS THAT THEY MIGHT OCCUR. S- 11 - -------------------------------------------------------------------------------- HISTORICAL PERFORMANCE OF THE BASKET STOCKS Provided below is a brief description of the issuer of each Basket Stock obtained from publicly available information, as well as a table that sets forth the quarterly high, low, and closing prices for each of the Basket Stocks. The information given below is for the four calendar quarters in each of 2000, 2001 and 2002. We obtained the trading price information set forth below from Bloomberg, L.P. without independent verification. YOU SHOULD NOT TAKE THE HISTORICAL PRICES OF THE BASKET STOCKS AS AN INDICATION OF FUTURE PERFORMANCE. ALTRIA GROUP, INC. According to publicly available documents, Altria Group, Inc. ("Altria") is a holding company whose principal wholly-owned subsidiaries, Philip Morris Incorporated, Philip Morris International Inc., Kraft Foods, Inc., and Miller Brewing Company, are engaged in the manufacture and sale of various consumer products. Another wholly-owned subsidiary of Altria, Philip Morris Capital Corporation, engages in various financing and investment activities. Altria's headquarters are located in New York, New York and its common stock is traded on the New York Stock Exchange under the symbol "MO". Information filed with the SEC by Altria under the Securities Exchange Act of 1934 (the "Exchange Act") can be located by reference to its SEC file number: 1-08940 or its CIK Code: 764180. Altria's closing stock price on February 20, 2003 was $37.02.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $24.50 $18.94 $20.75 6/30/00........................ $28.56 $20.69 $26.56 9/30/00........................ $34.00 $23.63 $29.44 12/31/00....................... $45.25 $29.63 $44.00 3/31/01........................ $51.75 $40.13 $47.45 6/30/01........................ $53.00 $44.51 $50.75 9/30/01........................ $49.00 $43.16 $48.29 12/31/01....................... $51.31 $44.93 $45.85 3/31/02........................ $53.94 $46.09 $52.67 6/30/02........................ $57.72 $42.87 $43.68 9/30/02........................ $51.85 $37.86 $38.80 12/31/02....................... $43.08 $36.17 $40.53
AT&T CORP. According to publicly available documents, AT&T Corp. ("AT&T") is among the world's communications leaders, providing voice, data and video communications services to large and small businesses, consumers and government entities. AT&T and its subsidiaries furnish domestic and international long distance, regional, and local communications services, cable (broadband) television and Internet communications services. AT&T also provides directory and calling card services to support its communications business. AT&T's primary lines of business are AT&T Business Services; AT&T Consumer Services; and AT&T Broadband Services. AT&T's headquarters are located in Bedminster, New Jersey and its common stock is traded on the New York Stock Exchange under the symbol "T". Information filed with the SEC by AT&T under the Exchange Act can be located by S- 12 HISTORICAL PERFORMANCE OF THE BASKET STOCKS - -------------------------------------------------------------------------------- reference to its SEC file number: 1-01105 or its CIK Code: 5907. AT&T's closing stock price on February 20, 2003 was $18.25.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $96.04 $71.45 $89.67 6/30/00........................ $92.35 $50.65 $50.65 9/30/00........................ $54.74 $43.99 $46.18 12/31/00....................... $47.37 $26.97 $27.47 3/31/01........................ $39.97 $29.06 $33.92 6/30/01........................ $36.96 $31.89 $35.03 9/30/01........................ $43.98 $34.04 $39.57 12/31/01....................... $40.99 $30.84 $37.19 3/31/02........................ $39.18 $29.07 $32.19 6/30/02........................ $32.48 $19.38 $21.94 9/30/02........................ $26.08 $17.82 $24.62 12/31/02....................... $29.32 $22.04 $26.11
CATERPILLAR INC. According to publicly available documents, Caterpillar Inc. ("Caterpillar") operates in three principal lines of business: (i) Machinery--design, manufacture, and marketing of construction, mining, agricultural, and forestry machinery--track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, mining shovels, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, telescopic handlers, skid steer loaders, and related parts; (ii) Engines--design, manufacture, and marketing of engines for Caterpillar Machinery, electric power generation systems; on-highway vehicles and locomotives; marine, petroleum, construction, industrial, agricultural, and other applications; and related parts; and (iii) Financial Products--financing to customers and dealers for the purchase and lease of Caterpillar and noncompetitive related equipment, as well as some financing for Caterpillar sales to dealers. Caterpillar's headquarters are located in Peoria, Illinois and its common stock is traded on the New York Stock Exchange under the symbol "CAT". Information filed with the SEC by Caterpillar under the Exchange Act can be located by reference to its SEC file number: 1-00768 or its CIK Code: 18230. Caterpillar's closing stock price on February 20, 2003 was $46.30.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $53.31 $33.81 $39.44 6/30/00........................ $43.44 $33.88 $33.88 9/30/00........................ $39.25 $31.00 $31.00 12/31/00....................... $47.75 $29.81 $47.31 3/31/01........................ $48.69 $40.09 $44.38 6/30/01........................ $56.20 $42.16 $50.05 9/30/01........................ $55.23 $41.70 $44.80 12/31/01....................... $53.19 $43.98 $52.25 3/31/02........................ $59.79 $47.43 $56.85 6/30/02........................ $59.49 $47.55 $48.95 9/30/02........................ $48.24 $36.86 $37.22 12/31/02....................... $49.90 $33.86 $45.72
E.I. DU PONT DE NEMOURS AND COMPANY According to publicly available documents, E.I. du Pont de Nemours and Company ("DuPont") was founded in 1802 and was incorporated in Delaware in 1915. DuPont is a world leader in science and technology in a range of disciplines including high-performance materials, synthetic fibers, electronics, specialty chemicals, agriculture and biotechnology. The company operates globally through some 22 S- 13 HISTORICAL PERFORMANCE OF THE BASKET STOCKS - -------------------------------------------------------------------------------- strategic business units. Within the strategic business units, a wide range of products are manufactured for distribution and sale to many different markets, including the transportation, textile, construction, motor vehicle, agricultural, home furnishings, medical, packaging, electronics and the nutrition and health markets. DuPont's headquarters are located in Wilmington, Delaware and its common stock is traded on the New York Stock Exchange under the symbol "DD". Information filed with the SEC by DuPont under the Exchange Act can be located by reference to its SEC file number: 1-815 or its CIK Code: 30554. DuPont's closing stock price on February 20, 2003 was $36.87.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $71.63 $45.94 $52.94 6/30/00........................ $62.00 $43.75 $43.75 9/30/00........................ $50.25 $38.50 $40.88 12/31/00....................... $49.31 $40.06 $48.31 3/31/01........................ $49.25 $40.70 $40.70 6/30/01........................ $49.70 $40.25 $48.24 9/30/01........................ $48.12 $33.61 $37.52 12/31/01....................... $45.65 $37.25 $42.51 3/31/02........................ $49.09 $40.30 $47.15 6/30/02........................ $48.10 $42.91 $44.40 9/30/02........................ $45.12 $36.07 $36.07 12/31/02....................... $44.65 $36.12 $42.40
EASTMAN KODAK COMPANY According to publicly available documents, Eastman Kodak Company ("Kodak") is engaged primarily in developing, manufacturing and marketing traditional and digital imaging products, services and solutions for consumers, professionals, healthcare providers, the entertainment industry and other commercial customers. According to Kodak, it is a major participant in "infoimaging" -- a $225 billion industry composed of devices (digital cameras and personal data assistants (PDAs)), infrastructure (online networks and delivery systems for images) and services and media (software, film and paper enabling people to access, analyze and print images). Kodak harnesses its technology, market reach and a host of industry partnerships to provide innovative products and services for customers who need the information-rich content that images contain. Kodak headquarters are located in Rochester, New York and its common stock is traded on the New York Stock Exchange under the symbol "EK". Information filed with the SEC by Kodak under the Exchange Act can be located by reference to its SEC file number: 1-00087 or its CIK Code: 31235. Kodak's closing stock price on February 20, 2003 was $30.38.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $64.56 $54.00 $54.31 6/30/00........................ $63.38 $53.56 $59.50 9/30/00........................ $65.44 $40.88 $40.88 12/31/00....................... $47.88 $36.44 $39.38 3/31/01........................ $46.12 $38.50 $39.89 6/30/01........................ $49.21 $38.35 $46.68 9/30/01........................ $46.80 $31.17 $32.53 12/31/01....................... $35.49 $24.65 $29.43 3/31/02........................ $33.49 $26.12 $31.17 6/30/02........................ $35.25 $28.69 $29.17 9/30/02........................ $31.58 $26.63 $27.24 12/31/02....................... $38.22 $25.86 $35.04
S- 14 HISTORICAL PERFORMANCE OF THE BASKET STOCKS - -------------------------------------------------------------------------------- GENERAL ELECTRIC COMPANY According to publicly available documents, General Electric Company ("GE") is one of the largest and most diversified industrial corporations in the world. GE has engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity since its incorporation in 1892. GE's products include major appliances; lighting products; industrial automation products; medical diagnostic imaging equipment; motors; electrical distribution and control equipment; locomotives; power generation and delivery products; nuclear power support services and fuel assemblies; commercial and military aircraft jet engines; and engineered materials, such as plastics, silicones and superabrasive industrial diamonds. GE's services include product services; electrical product supply houses; electrical apparatus installation, engineering, repair and rebuilding services; and computer-related information services. Through its affiliate, the National Broadcasting Company, Inc., GE delivers network television services, operates television stations, and provides cable, Internet and multimedia programming and distribution services. Through another affiliate, General Electric Capital Services, Inc., GE offers a broad array of financial and other services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, specialty insurance and reinsurance, and satellite communications. GE's headquarters are located in Fairfield, Connecticut and its common stock is traded on the New York Stock Exchange under the symbol "GE". Information filed with the SEC by GE under the Exchange Act can be located by reference to its SEC file number: 1-35 or its CIK Code: 40545. GE's closing stock price on February 20, 2003 was $23.35.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $54.33 $41.71 $51.88 6/30/00........................ $55.33 $48.58 $53.00 9/30/00........................ $60.00 $49.94 $57.81 12/31/00....................... $59.75 $47.44 $47.94 3/31/01........................ $48.06 $37.70 $41.86 6/30/01........................ $53.40 $39.60 $48.75 9/30/01........................ $50.20 $30.37 $37.20 12/31/01....................... $41.55 $36.34 $40.08 3/31/02........................ $41.55 $35.00 $37.45 6/30/02........................ $37.30 $28.90 $29.05 9/30/02........................ $32.89 $24.47 $24.65 12/31/02....................... $27.20 $22.00 $24.35
GENERAL MOTORS CORPORATION According to publicly available documents, General Motors Corporation ("GM") presents separate supplemental consolidating statements of income and other financial information for the following businesses: (1) Automotive, Communications Services, and Other Operations and (2) Financing and Insurance Operations. GM participates in the automotive industry through the activities of its automotive business operating segment, General Motors Automotive. GM's communications services relate to its Hughes Electronics Corporation subsidiary which includes digital entertainment, information and communications services, and satellite-based private business networks. GM's other operations includes the design, manufacturing and marketing of locomotives and heavy-duty transmissions, the elimination of intersegment transactions, certain non-segment specific revenues and expenditures, and certain corporate activities. GM's Financing and Insurance Operations primarily relate to General Motors Acceptance Corporation (GMAC). GMAC provides a broad range of financial services, including consumer vehicle financing, full-service leasing and fleet leasing, dealer financing, car and truck extended service contracts, residential and commercial mortgage services, commercial, vehicle, and homeowners' insurance, and asset-based lending. GM's headquarters are S- 15 HISTORICAL PERFORMANCE OF THE BASKET STOCKS - -------------------------------------------------------------------------------- located in Detroit, Michigan and its common stock is traded on the New York Stock Exchange under the symbol "GM". Information filed with the SEC by GM under the Exchange Act can be located by reference to its SEC file number: 1-00143 or its CIK Code: 40730. GM's closing stock price on February 20, 2003 was $33.62.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $87.00 $71.56 $82.81 6/30/00........................ $93.63 $58.06 $58.06 9/30/00........................ $75.75 $56.94 $65.00 12/31/00....................... $67.13 $48.81 $50.94 3/31/01........................ $58.95 $51.52 $51.85 6/30/01........................ $64.82 $50.93 $64.35 9/30/01........................ $67.04 $40.10 $42.90 12/31/01....................... $52.78 $40.81 $48.60 3/31/02........................ $61.41 $48.13 $60.45 6/30/02........................ $68.02 $51.50 $53.45 9/30/02........................ $51.69 $38.16 $38.90 12/31/02....................... $40.64 $31.01 $36.86
HONEYWELL INTERNATIONAL INC. According to publicly available documents, Honeywell International Inc. ("Honeywell") is a diversified technology and manufacturing company, serving customers worldwide with aerospace products and services, control technologies for buildings, homes and industry, automotive products, specialty chemicals, fibers, plastics and electronic and advanced materials. Honeywell's headquarters are located in Morristown, New Jersey and its common stock is traded on the New York Stock Exchange under the symbol "HON". Information filed with the SEC by Honeywell under the Exchange Act can be located by reference to its SEC file number: 1-08974 or its CIK Code: 773840. Honeywell's closing stock price on February 20, 2003 was $23.85.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $59.88 $41.81 $52.69 6/30/00........................ $57.81 $33.25 $33.69 9/30/00........................ $40.88 $33.00 $35.63 12/31/00....................... $55.19 $33.69 $47.31 3/31/01........................ $49.42 $35.93 $40.80 6/30/01........................ $53.50 $34.90 $34.90 9/30/01........................ $38.95 $23.59 $26.40 12/31/01....................... $34.50 $25.65 $33.82 3/31/02........................ $40.37 $29.11 $38.27 6/30/02........................ $40.76 $34.85 $35.23 9/30/02........................ $36.50 $21.66 $21.66 12/31/02....................... $27.08 $19.20 $24.00
J.P. MORGAN CHASE & CO. According to publicly available documents, J.P. Morgan Chase & Co. ("JPMorgan") is a financial holding company incorporated under Delaware law in 1968. JPMorgan is a global financial services firm with operations in over 50 countries. Its principal bank subsidiaries are JPMorgan Chase Bank, a New York banking corporation headquartered in New York City, and Chase Manhattan Bank USA, National Association, headquartered in Delaware. JPMorgan's principal nonbank subsidiary is its investment bank, J.P. Morgan Securities Inc. JPMorgan's headquarters are located in New York, New York and its common stock is traded on the New York Stock Exchange under the symbol "JPM". Information filed with the SEC by JPMorgan under the Exchange Act can be located by reference to its S- 16 HISTORICAL PERFORMANCE OF THE BASKET STOCKS - -------------------------------------------------------------------------------- SEC file number: 1-5805 or its CIK Code: 19617. JPMorgan's closing stock price on February 20, 2003 was $22.69.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $65.67 $46.54 $58.13 6/30/00........................ $61.67 $45.44 $46.06 9/30/00........................ $57.81 $44.63 $46.19 12/31/00....................... $47.44 $36.88 $45.44 3/31/01........................ $55.98 $38.91 $44.90 6/30/01........................ $50.60 $40.39 $44.47 9/30/01........................ $45.80 $30.82 $34.15 12/31/01....................... $40.38 $32.44 $36.35 3/31/02........................ $39.14 $28.19 $35.65 6/30/02........................ $38.37 $31.49 $33.92 9/30/02........................ $32.59 $18.34 $18.99 12/31/02....................... $25.22 $15.45 $24.00
SBC COMMUNICATIONS INC. According to publicly available documents, SBC Communications Inc. ("SBC") ranks among the largest providers of telecommunications services in the United States and the world. Through its subsidiaries, SBC provides communications services and products in the United States and has investments in more than 25 countries. SBC offers its services and products to businesses and consumers, as well as other providers of telecommunications services. The services and products that SBC offers vary by market, and include: local exchange services, wireless communications, long distance services, Internet services, telecommunications equipment, messaging, paging, and directory advertising and publishing. SBC's headquarters are located in San Antonio, Texas and its common stock is traded on the New York Stock Exchange under the symbol "SBC". Information filed with the SEC by SBC under the Exchange Act can be located by reference to its SEC file number: 1-08610 or its CIK Code: 732717. SBC's closing stock price on February 20, 2003 was $21.30.
- --------------------------------------------------------------------------------- QUARTER ENDING QUARTERLY HIGH QUARTERLY LOW QUARTERLY CLOSE - --------------------------------------------------------------------------------- 3/31/00........................ $47.00 $35.44 $42.13 6/30/00........................ $50.00 $41.06 $44.00 9/30/00........................ $49.88 $39.31 $49.88 12/31/00....................... $58.50 $44.06 $47.75 3/31/01........................ $52.38 $40.12 $44.63 6/30/01........................ $44.90 $38.70 $40.06 9/30/01........................ $47.34 $40.00 $47.12 12/31/01....................... $47.00 $37.38 $39.17 3/31/02........................ $40.17 $34.49 $37.44 6/30/02........................ $38.15 $29.50 $30.50 9/30/02........................ $31.70 $20.10 $20.10 12/31/02....................... $28.73 $20.18 $27.11
S- 17 - -------------------------------------------------------------------------------- VALUATION OF THE NOTES AT MATURITY. Your cash payment at maturity is based on the Stock Return of each Basket Stock, which may be positive or negative. Positive Stock Returns for each Basket Stock will be doubled, subject to a maximum gain of 34%. Therefore, the maximum potential total return for each $1,000 principal amount of the Notes at maturity will also be 34%. The Notes are exposed to the full downside price risk of each Basket Stock and any negative Stock Returns will reduce your cash payment at maturity. You may lose some or all of your principal if the Stock Return of one or more of the Basket Stocks is negative. For a description of how your payment at maturity will be calculated, see "Specific Terms of the Notes--Payment at Maturity" on page S-19. PRIOR TO MATURITY. The market value of the Notes will be affected by a number of interrelated factors including, but not limited to, supply and demand with respect to the Notes, the market price of the Basket Stocks, the volatility of the Basket Stocks, the level of interest rates and other economic conditions, as well as the perceived creditworthiness of UBS. You should understand that the market value of the Notes is driven by a range of interrelated factors and that while the market price of the Basket Stocks is an important variable it cannot be used as the only measures to approximate the value of this investment. You should not use any single variable to approximate the value of this investment. S- 18 - -------------------------------------------------------------------------------- SPECIFIC TERMS OF THE NOTES In this section, references to "holders" mean those who own the Notes 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 the Notes registered in street name or in the Notes issued in book-entry form through The Depository Trust Company or another depositary. Owners of beneficial interests in the Notes should read the section entitled "Description of Notes We May Offer--Legal Ownership of Notes" in the accompanying prospectus. The Notes 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. This prospectus supplement summarizes specific financial and other terms that apply to the Notes. Terms that apply generally to all Medium Term Notes, Series A are described in "Description of Notes We May Offer" in the accompanying prospectus. The terms described here (i.e., in this prospectus supplement) 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. Please note that the information about the price to public and net proceeds to UBS on the front cover relates only to the initial sale of the Notes. If you have purchased the Notes 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 Notes in more detail below. COUPON We will not pay you interest during the term of the Notes. DENOMINATION We will offer the Notes in denominations of $1,000 and integral multiples thereof. PAYMENT AT MATURITY You will receive a cash payment at maturity that is based on the Stock Return of each Basket Stock, which may be positive or negative. Positive Stock Returns for each Basket Stock will be doubled, subject to a maximum gain of 34%. Therefore, the maximum potential total return for each $1,000 principal amount of the Notes at maturity will also be 34%. The Notes are exposed to the full downside price risk of each Basket Stock and any negative Stock Returns will reduce your cash payment at maturity. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL IF THE STOCK RETURN OF ONE OR MORE OF THE BASKET STOCKS IS NEGATIVE. For each $1,000 principal amount of the Notes, we will pay you in cash an amount equal to the sum of (i) $1,000 and (ii) the sum of the Weighted Stock Component Returns multiplied by $1,000. The "Stock Return" is the difference between the closing price for each Basket Stock on the trade date and on the final valuation date, expressed as a percentage of the Initial Stock Price and calculated as follows: Final Stock Price - Initial Stock Price Stock Return = --------------------------------------- Initial Stock Price
S- 19 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- where the "Initial Stock Price" is the closing price of each Basket Stock on February 20, 2003 (the "trade date") and the "Final Stock Price" is the closing price of each Basket Stock on the final valuation date. The "Stock Component Return" is based on the Stock Return of each Basket Stock, which may be positive or negative. If a Stock Return is positive, it will be doubled in order to calculate the Stock Component Return, subject to a maximum Stock Component Return of 34%. If a Stock Return is zero or negative, the Stock Component Return will be equal to the Stock Return. The "Weighted Stock Component Return" will equal the Stock Component Return for each Basket Stock multiplied by 10%. Each Weighted Stock Component Return will be rounded to two decimal places. Weighted Stock Component Return = (Stock Component Return X 0.10) The payment at maturity for each Note will be calculated as follows: Payment at maturity = principal amount of the Note + (principal amount of the Note X sum of the Weighted Stock Component Returns) MATURITY DATE The maturity date will be March 3, 2004 unless that day is not a business day, in which case the maturity date will be the next following business day. If the fifth business day before this applicable day does not qualify as the final valuation date referred to below for all Basket Stocks, then the maturity date will be the fifth business day following the latest final valuation date for any Basket Stock. The calculation agent may postpone the final valuation date for any Basket Stock--and therefore the maturity date--if a market disruption event occurs or is continuing on a day that would otherwise be the final valuation date for any Basket Stock. We describe market disruption events under "--Market Disruption Event" below. FINAL VALUATION DATE The final valuation date for any Basket Stock will be the fifth business day prior to March 3, 2004, unless the calculation agent determines that a market disruption event occurs or is continuing on that day for any Basket Stock. In that event, the final valuation date for such Basket Stock(s) 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 for the affected Basket Stock(s). For all the other Basket Stocks, the final valuation date will be the fifth business day prior to March 3, 2004. All determinations made by the calculation agent pursuant to this provision will be conclusive and binding on the holders of the Notes and UBS. The holders of the Notes will not be entitled to any compensation from UBS for any loss suffered as a result of the occurrence of a market disruption event or any resulting delay in payment or any change in the price of any Basket Stock after the final valuation date. In no event, however, will the final valuation date for the Notes be postponed by more than ten business days. MARKET DISRUPTION EVENT As described above, the closing price of the Basket Stocks on the final valuation date will determine the amount holders receive at maturity of the Notes. If the final valuation date for any Basket Stock 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 final valuation date for that Basket Stock. If the market price of any Basket Stock is not available on the last possible final valuation date either because of a market disruption event or for any other reason, the calculation agent will make a good faith estimate of the closing price for such affected Basket Stocks that would S- 20 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- have prevailed in the absence of the market disruption event or such other reason on the last possible final valuation date. Any of the following will be a market disruption event: + a suspension, absence or material limitation of trading in any Basket Stock on its primary market, in each case for more than two hours or during the one-half hour before the close of trading in that market, as determined by the calculation agent in its sole discretion + a suspension, absence or material limitation of trading in option or futures contracts relating to any Basket Stock in the primary market for those contracts for more than two hours of trading or during the one-half hour before the close of trading in that market, as determined by the calculation agent in its sole discretion or + in any other event, if the calculation agent determines in its sole discretion that the event materially interferes with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of a hedge with respect to the Notes that we or our affiliates have effected or may effect as described below under "Use of Proceeds and Hedging" on page S-30. The following events will not be market disruption events: + a limitation on the hours or numbers of days of trading, but only if the limitation results from an announced change in the regular business hours of the relevant market or + a decision to permanently discontinue trading in the option or futures contracts relating to any Basket Stock. For this purpose, an "absence of trading" in the primary securities market on which such Basket Stock or any option or futures contracts related to any Basket Stock is traded will not include any time when that market is itself closed for trading under ordinary circumstances. In contrast, a suspension or limitation of trading in a Basket Stock or in option or futures contracts related to a Basket Stock, if available, in the primary market for those contracts, by reason of any of: + a price change exceeding limits set by that market, + an imbalance of orders relating to those contracts, or + a disparity in bid and ask quotes relating to those contracts are among the factors that may constitute a suspension or material limitation of trading in that Basket Stock or in those option or futures contracts in that primary market. DELISTING OR SUSPENSION OF TRADING OF THE BASKET STOCKS If any Basket Stock is delisted or trading of any Basket Stock is suspended and a major U.S. exchange or market lists or approves for trading successor securities, the calculation agent may determine in its sole discretion that such successor securities are comparable to such Basket Stock (a "successor share") and adjust the basket by replacing such Basket Stock with such successor share. If the successor shares that the calculation agent determines to be comparable to the Basket Stocks are not listed or approved for trading on a major U.S. exchange or market at maturity, the calculation agent may determine, in its sole discretion, the value of such successor shares. In both of the cases described above, the calculation agent will, in its sole discretion, determine the Stock Return for any affected Basket Stock by determining the Final Stock Price for any applicable successor shares on the final valuation date and the relevant number of shares of the successor Basket Stock. S- 21 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- If any Basket Stock is delisted or trading of any Basket Stock is suspended, and the calculation agent determines in its sole discretion that no successor shares for such Basket Stock exist, the calculation agent may determine, in its sole discretion, the Final Stock Price for such Basket Stock. ANTIDILUTION ADJUSTMENTS The amount payable at maturity of the Notes will be based on the closing price of each of the Basket Stocks on the final valuation date. The calculation agent will adjust the Initial Stock Price and/or the number of shares per Basket Stock, if an event described below occurs and the calculation agent determines that such event has a diluting or concentrative effect on the theoretical value of such Basket Stock. Below you will find examples of how certain corporate actions and other events may lead to adjustments to the number of shares per Basket Stock. In each case where the number of shares per Basket Stock changes, the Initial Stock Price will generally also change. The initial number of shares for each Basket Stock for purposes of these adjustments is calculated as follows: $1,000 X 10% Initial number of shares per Basket Stock = -------------------- Initial Stock Price
If applicable, the Initial Stock Price will be adjusted by the calculation agent by multiplying the prior Initial Stock Price by a fraction whose numerator is the prior number of shares per Basket Stock and whose denominator is the new number of shares per Basket Stock. Prior number of shares per Adjusted = Prior X Basket Stock Initial Stock Price Initial Stock Price -------------------------- New number of shares per Basket Stock
The adjustments described below do not cover all events that could affect the value of the Notes. We describe the risks relating to dilution under "Risk Factors--You have limited antidilution protection" on page S-10. HOW ADJUSTMENTS WILL BE MADE If one of the events described below occurs and the calculation agent determines that the event has a diluting or concentrative effect on the theoretical value of any Basket Stock, the calculation agent will calculate a corresponding adjustment to the Initial Stock Price and the number of shares per Basket Stock as the calculation agent determines to be appropriate to account for that diluting or concentrative effect. For example, if an adjustment is required because of a two-for-one stock split, then the number of shares per Basket Stock will be adjusted to double the prior number of shares per Basket Stock, and, as a result, the Initial Stock Price will be reduced proportionately. The calculation agent will also determine the effective date of that adjustment and the substitution in the basket of any Basket Stock, if applicable, in the event of consolidation or merger. Upon making any such adjustment, the calculation agent will give notice as soon as practicable to the trustee, stating the adjustment to the Initial Stock Price and the number of shares per Basket Stock. If more than one event requiring adjustment occurs, the calculation agent will make such an adjustment for each event in the order in which the events occur, and on a cumulative basis. Thus, for each Basket Stock having adjusted the Initial Stock Price and the number of shares per Basket Stock for the first event, the calculation agent will adjust the Initial Stock Price and the number of shares per Basket Stock for the second event, applying the required adjustment to the Initial Stock Price and the S- 22 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- number of shares per Basket Stock as already adjusted for the first event, and so on for any subsequent events. For any dilution event described below, the calculation agent will not be required to adjust the Initial Stock Price or the number of shares per Basket Stock unless the adjustment would result in a change to the Initial Stock Price or the number of shares per Basket Stock of at least 0.1% in the Initial Stock Price or the number of shares per Basket Stock that would apply without the adjustment. The Initial Stock Price and the number of shares per Basket Stock resulting from any adjustment will be rounded up or down, as appropriate, to, in the case of the Initial Stock Price, the nearest cent, and, in the case of the number of shares per Basket Stock, the nearest thousandth, with one-half cent and five hundred-thousandths, respectively, being rounded upward. If an event requiring antidilution adjustment occurs, the calculation agent will make any adjustments with a view to offsetting, to the extent practical, any change in your economic position relative to the Notes, that results solely from that event. The calculation agent may, in its sole discretion, modify any antidilution adjustments as necessary to ensure an equitable result. In its sole discretion, the calculation agent will make all determinations with respect to antidilution adjustments, including any determination as to whether an event requiring adjustment has occurred, as to the nature of the adjustment required and as to how it will be made. In the absence of manifest error, those determinations will be conclusive for all purposes and will be binding on you and us, without any liability on the part of the calculation agent. The calculation agent will provide information about any adjustments it makes upon your written request. The following events are those that may require an antidilution adjustment: + a subdivision, consolidation or reclassification of any Basket Stock or a free distribution or dividend of any Basket Stock to existing holders of any Basket Stock by way of bonus, capitalization or similar issue + a distribution or dividend to existing holders of any Basket Stock of: + shares of such Basket Stock, + other share capital or securities granting the right to payment of dividends equally or proportionately with such payments to holders of such Basket Stock, or + any other type of securities, rights or warrants in any case for payment (in cash or otherwise) at less than the prevailing market price as determined by the calculation agent + the declaration by any issuer of any Basket Stock of an extraordinary or special dividend or other distribution whether in cash or shares of such Basket Stock or other assets + a repurchase by an issuer of any Basket Stock of such Basket Stock whether out of profits or capital and whether the consideration for such repurchase is cash, securities or otherwise + a consolidation or merger of an issuer of a Basket Stock with another company + any other similar event that may have a diluting or concentrative effect on the theoretical value of any Basket Stock. STOCK SPLITS A stock split is an increase in the number of a corporation's outstanding shares of stock without any change in its stockholders' equity. Each outstanding share is worth less as a result of a stock split. S- 23 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- If any Basket Stock is subject to a stock split, then the calculation agent will adjust the number of shares per Basket Stock to equal the sum of the prior number of shares per Basket Stock--i.e., the number of shares per Basket Stock before that adjustment--plus the product of (1) the number of new shares issued in the stock split with respect to one share of such Basket Stock and (2) the prior number of shares per Basket Stock. The Initial Stock Price will also be adjusted as discussed above. REVERSE STOCK SPLITS A reverse stock split is a decrease in the number of a corporation's outstanding shares of stock without any change in its stockholders' equity. Each outstanding share is worth more as a result of a reverse stock split. If any Basket Stock is subject to a reverse stock split, then the calculation agent will adjust the number of shares per Basket Stock to equal the product of the prior number of shares per Basket Stock and (1) the number of shares of such Basket Stock outstanding immediately after the reverse stock split becomes effective divided by (2) the number of shares of such Basket Stock outstanding immediately before the reverse stock split becomes effective. The Initial Stock Price will also be adjusted as discussed above. STOCK DIVIDENDS In a stock dividend, a corporation issues additional shares of its stock to all holders of its outstanding stock in proportion to the shares they own. Each outstanding share is worth less as a result of a stock dividend. If the Basket Stock is subject to a stock dividend payable in shares of such Basket Stock then the calculation agent will adjust the number of shares per Basket Stock to equal the sum of the prior number of shares per Basket Stock plus the product of (1) the number of shares issued in the stock dividend with respect to one share of such Basket Stock and (2) the prior number of shares per Basket Stock. The Initial Stock Price will also be adjusted as discussed above. OTHER DIVIDENDS AND DISTRIBUTIONS The number of shares per Basket Stock will not be adjusted to reflect dividends or other distributions paid with respect to any Basket Stock, other than: + stock dividends described above, + issuances of transferable rights and warrants with respect to any Basket Stock described in "--Transferable Rights and Warrants" below, + distributions that are spin-off events described in "--Reorganization Events" below, and + extraordinary dividends described below. A dividend or other distribution with respect to any Basket Stock will be deemed to be an extraordinary dividend if its per share value exceeds that of the immediately preceding non-extraordinary dividend, if any, for such Basket Stock by an amount equal to at least 10% of the closing price of that Basket Stock on the business day before the ex-dividend date. The ex-dividend date for any dividend or other distribution is the first day on which the Basket Stock trades without the right to receive that dividend or distribution. If an extraordinary dividend occurs, the calculation agent will adjust the number of shares per Basket Stock to equal the product of (1) the prior number of shares per Basket Stock and (2) a fraction, the numerator of which is the closing price of the Basket Stock on the business day before the ex-dividend S- 24 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- date and the denominator of which is the amount by which that closing price exceeds the extraordinary dividend amount. The Initial Stock Price will also be adjusted as discussed above. The extraordinary dividend amount with respect to an extraordinary dividend for any Basket Stock equals: + for an extraordinary dividend that is paid in lieu of a regular quarterly dividend, the amount of the extraordinary dividend per share of such Basket Stock minus the amount per share of the immediately preceding dividend, if any, that was not an extraordinary dividend for such Basket Stock, or + for an extraordinary dividend that is not paid in lieu of a regular quarterly dividend, the amount per share of the extraordinary dividend. To the extent an extraordinary dividend is not paid in cash, the value of the non-cash component will be determined by the calculation agent in its sole discretion. A distribution on any Basket Stock that is a dividend payable on such Basket Stock that is also an extraordinary dividend, or an issuance of rights or warrants with respect to the Basket Stocks that is also an extraordinary dividend will result in an adjustment to the number of shares per Basket Stock only as described in "--Stock Dividends" above, or "--Transferable Rights and Warrants" or "--Reorganization Events" below, as the case may be, and not as described here. TRANSFERABLE RIGHTS AND WARRANTS If the issuer of any Basket Stock issues transferable rights or warrants to all holders of such Basket Stock to subscribe for or purchase such Basket Stock at an exercise price per share that is less than the closing price of such Basket Stock on the business day before the ex-dividend date for issuance, then the number of shares per Basket Stock will be adjusted by multiplying the prior number of shares per Basket Stock by the following fraction: + the numerator will be the number of shares of such Basket Stock outstanding at the close of business on the day before that ex-dividend date plus the number of additional shares of such Basket Stock offered for subscription or purchase under those transferable rights or warrants, and + the denominator will be the number of shares of such Basket Stock outstanding at the close of business on the day before that ex-dividend date plus the product of (1) the total number of additional shares of such Basket Stock offered for subscription or purchase under the transferable rights or warrants and (2) the exercise price of those transferable rights or warrants divided by the closing price on the business day before that ex-dividend date. The Initial Stock Price will also be adjusted as discussed above. REORGANIZATION EVENTS Each of the following, determined by the calculation agent in its sole discretion, may be a reorganization event with respect to a particular Basket Stock: + the Basket Stock is reclassified or changed, + the issuer of the Basket Stock has been subject to a merger, consolidation or other combination and either is not the surviving entity or is the surviving entity but all of its outstanding Basket Stock is exchanged for or converted into other property, + a statutory share exchange involving the outstanding Basket Stock and the securities of another entity occurs, other than as part of an event described above, S- 25 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- + the issuer of the Basket Stock sells or otherwise transfers its property and assets as an entity or substantially as an entirety to another entity, + the issuer of the Basket Stock effects a spin-off--that is, issues to all holders of its Basket Stock the equity securities of another issuer, other than as part of an event described above, + the issuer of the Basket Stock is liquidated, dissolved or wound up or is subject to a proceeding under any applicable bankruptcy, insolvency or other similar law, or + another entity completes a tender or exchange offer for all the outstanding Basket Stock. ADJUSTMENTS FOR REORGANIZATION EVENTS If a reorganization event occurs, then the calculation agent may adjust the relevant number of shares so as to consist of the amount and type of property or properties--whether it be cash, securities, other property or a combination--that is equal to the number of shares a holder of a Basket Stock would hold after the reorganization event has occurred. We refer to this new property as the distribution property. For the purpose of making an adjustment required by an reorganization event, the calculation agent will determine the value of each type of distribution property in its sole discretion. For any distribution property consisting of a security, the calculation agent will use the closing price of the security on the relevant exchange notice date. The calculation agent may value other types of property in any manner it determines, in its sole discretion, to be appropriate. If a holder of the applicable Basket Stock may elect to receive different types or combinations of types of distribution property in the reorganization event, the distribution property will consist of the types and amounts of each type distributed to a holder that makes no election, as determined by the calculation agent in its sole discretion. If a reorganization event occurs and the calculation agent adjusts the number of shares to consist of distribution property distributed in the event as described above, the calculation agent will make further antidilution adjustments for later events that affect the distribution property, or any component of the distribution property, comprising the new number of shares. The calculation agent will do so to the same extent that it would make adjustments if the applicable Basket Stock were outstanding and were affected by the same kinds of events. If a subsequent reorganization event affects only a particular component of the number of shares, the required adjustment will be made with respect to that component, as if it alone were the number of shares. For example, if an issuer of a Basket Stock merges into another company and each share of the relevant Basket Stock is converted into the right to receive two common shares of the surviving company and a specified amount of cash, the number of shares per Basket Stock will be adjusted to consist of two common shares of the surviving company and the specified amount of cash. The calculation agent will adjust the common share component of the new number of shares to reflect any later stock split or other event, including any later reorganization event, that affects the common shares of the surviving company, to the extent described in this section entitled "--Antidilution Adjustments" as if the common shares were the particular Basket Stock. In that event, the cash component will not be adjusted but will continue to be a component of the number of shares (with no interest adjustment). Consequently, the final particular Basket Stock value will include the final value of the two shares of the surviving company and the cash. In this prospectus supplement, references to the calculation agent adjusting the number of shares with respect to a dilution event means that the calculation agent will adjust the number of shares in the manner described in this subsection if the dilution event is a reorganization event. If a reorganization event occurs, the distribution property distributed in the event will be substituted for the relevant Basket Stock as described above. Consequently, in this prospectus supplement, references to a Basket S- 26 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- Stock means any distribution property that is distributed in a reorganization event and comprises the adjusted number of shares with respect to that stock. Similarly, references to an issuer of a Basket Stock means any successor entity in a reorganization event with respect to that issuer. REDEMPTION PRICE UPON OPTIONAL TAX REDEMPTION We have the right to redeem the Notes in the circumstances described under "Description of Notes We May Offer--Optional Tax Redemption" in the accompanying prospectus. If we exercise this right, the redemption price of the Notes will be determined by the calculation agent in a manner reasonably calculated to preserve your and our relative economic position. DEFAULT AMOUNT ON ACCELERATION If an event of default occurs and the maturity of the Notes is accelerated, we will pay the default amount in respect of the principal of the Notes 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 Notes are a part, are entitled to take any action under the indenture, we will treat the outstanding principal amount of the Notes as the outstanding principal amount of that Note. Although the terms of the Notes 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 Notes. 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 "Description of Notes We May Offer--Modification and Waiver of Covenants." DEFAULT AMOUNT The default amount for the Notes on any day will be an amount, in U.S. Dollars for the principal of the Notes, 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 Notes 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 Notes. 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 Notes in preparing any documentation necessary for this assumption or undertaking. During the default quotation period for the Notes, which we describe below, the holders of the Notes 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 S- 27 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- 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 final valuation date, then the default amount will equal the principal amount of the Notes. 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, 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. MANNER OF PAYMENT AND DELIVERY Any payment on or delivery of the Notes 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 Notes are surrendered to the trustee at that office. We also may make any payment or delivery in accordance with the applicable procedures of the depositary. BUSINESS DAY When we refer to a business day with respect to the Notes, we mean a day that is a business day of the kind described in the attached prospectus. MODIFIED BUSINESS DAY As described in the attached prospectus, any payment on the Notes 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 "--Final Valuation Date" above. S- 28 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- ROLE OF CALCULATION AGENT Our affiliate, UBS Warburg LLC, will serve as the calculation agent. Please note that we may change the calculation agent after the original issue date of the Notes without notice. The calculation agent will make all determinations regarding the value of the Notes at maturity, the closing price or other value of each Basket Stock or any other property, the Stock Return for each Basket Stock, antidilution adjustments, market disruption events, maturity date, final valuation date, business days, the default amount and the amount payable in respect of your Notes. 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. BOOKING BRANCH The Notes will be booked through UBS AG, Jersey Branch. S- 29 - -------------------------------------------------------------------------------- USE OF PROCEEDS AND HEDGING We will use the net proceeds we receive from the sale of the Notes 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 Notes as described below. In anticipation of the sale of the Notes, we or our affiliates expect to enter into hedging transactions involving purchases of the Basket Stocks and/or listed and/or over-the-counter options or futures on the Basket Stocks prior to and/or 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 long or short positions in the Basket Stocks, + acquire or dispose of long or short positions in listed or over-the-counter options or futures or other instruments based on the Basket Stocks or on the prices of other similar stocks, or + any combination of the above two. We or our affiliates may acquire a long or short position in securities similar to the Notes 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 final valuation date. That step may involve sales or purchases of the Basket Stocks, listed or over-the-counter options or futures on the Basket Stocks or listed or over-the-counter options, futures, exchange-traded funds or other instruments based on indices designed to track the performance of the Basket Stocks or other components of the U.S. equity market. The hedging activity discussed above may adversely affect the market value of the Notes from time to time. See "Risk Factors" on page S-6 for a discussion of these adverse effects. S- 30 - -------------------------------------------------------------------------------- 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.
AS OF DECEMBER 31, 2002 (UNAUDITED) CHF USD - ------------------------------------------------------------------------------- (IN MILLIONS) Debt Debt issued(1)............................................ 129,410 93,546 ------- ------- Total Debt................................................ 129,410 93,546 Minority Interest(2)........................................ 3,529 2,551 Shareholders' Equity........................................ 38,991 28,185 ------- ------- Total capitalization........................................ 171,930 124,282 ======= =======
- --------------- (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 0.722862. S- 31 - -------------------------------------------------------------------------------- SUPPLEMENTAL TAX CONSIDERATIONS The following is a general description of certain United States federal and Swiss tax considerations relating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to the Notes. Prospective purchasers of the Notes 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 the Notes and receiving payments of interest, principal and/or other amounts under the Notes. 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). In the opinion of our counsel, Sullivan & Cromwell LLP, it would be reasonable to treat the Notes as a pre-paid cash-settled forward contract with respect to the Basket Stocks and the terms of the Notes require you and us (in the absence of an administrative or judicial ruling to the contrary) to treat the Notes for all tax purposes in accordance with such characterization. If the Notes are so treated, you will recognize capital gain or loss upon the sale or maturity of your Notes (which will be long-term capital gain or loss if you hold your Notes for more than one year) in an amount equal to the difference between the amount you receive at such time and your tax basis in the Notes. In general, your tax basis in your Notes will be equal to the price you paid for it. Alternative Treatments. In the opinion of our counsel, Sullivan & Cromwell LLP, it would also be reasonable to treat the Notes as a single debt instrument subject to the special tax rules governing contingent debt instruments. If the Notes are so treated, you would be required to accrue interest income over the term of your Notes based upon the yield at which we would issue a non-contingent fixed-rate debt instrument with other terms and conditions similar to your Notes (the "comparable yield"). You would recognize gain or loss upon the sale or maturity of your Notes in an amount equal to the difference, if any, between the amount you receive at such time and your adjusted basis in your Notes. In general, your adjusted basis in your Notes would be equal to the amount you paid for your Notes, increased by the amount of interest you previously accrued with respect to your Notes. Any gain you recognize upon the sale, redemption or maturity of your Notes 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 Notes, and thereafter, would be capital loss. If the Notes are treated as a contingent debt instrument and you purchase your Notes in the secondary market at a price that is at a discount from, or in excess of, the adjusted issue price of the Notes, 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 Notes 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 Notes, it is possible that the Internal Revenue Service could seek to characterize your Notes in a manner that results in tax consequences to you that are different from those described above. For example, the S- 32 SUPPLEMENTAL TAX CONSIDERATIONS - -------------------------------------------------------------------------------- Internal Revenue Service could characterize your Notes 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 Notes for U.S. federal income tax purposes. Wash Sale Rules. If you sell shares of a Basket Stock within 30 days of purchasing the Notes, your purchase of the Notes should not cause you to be subject to any limitation under the "wash sale" rules with respect to the recognition of loss, if any, upon your sale of such shares except with respect to the portion of the Notes tied to the performance of the Basket Stock. For example, if you sell shares of a single Basket Stock at a loss for an aggregate sales price of $1,000 and you purchase a Note with a principal amount of $1,000 within 30 days of such sale, your purchase of the Note should only cause you to be subject to the "wash sale" rules with respect to 10% of the loss you recognized upon your sale of the Basket Stock. 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 Notes but you will be subject to generally applicable information reporting and backup withholding requirements with respect to payments on your Notes 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 Notes by us is not subject to Swiss withholding tax (Swiss Anticipatory Tax), and payments to holders of the Notes 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 the Notes 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 Note. STAMP, ISSUE AND OTHER TAXES There is no tax liability in Switzerland in connection with the issue and redemption of the Notes. However, the Notes sold through a bank or other dealer resident in Switzerland or Liechtenstein are subject to Turnover Tax. RESIDENTS OF SWITZERLAND If you are a Swiss resident investor and hold the Notes in your private property, you may treat any gain or loss realized upon the sale, redemption or repayment of the Notes as a tax-free capital gain or a non-deductible loss, respectively, provided, however, that you may have to report any element of adjustment for stock dividends or extraordinary dividends on the underlying stocks included in the payment received from us at maturity as taxable investment income. If you are qualified as a professional dealer of securities for Swiss income tax purposes, you will have to include in taxable income capital gains and may deduct capital losses realized upon the sale, redemption or repayment of the Notes. If you are a Swiss resident investor holding the Notes in your business property or a foreign resident investor who holds the Notes through a permanent establishment within Switzerland, you must include income received and gains or losses realized in respect of the Notes in your taxable net income. S- 33 - -------------------------------------------------------------------------------- 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 that is subject to the Code ("Plan"). The purchase of the Notes 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 the Notes 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 Notes on behalf of a Plan should consult with counsel regarding the applicability of the prohibited transaction rules and the applicable exemptions thereto. Upon purchasing the Notes, a Plan will be deemed to have represented that the acquisition, holding and, to the extent relevant, disposition of the Notes is eligible for relief under Prohibited Transaction Class Exemption ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60 or PTCE 96-23. The discussion above supplements the discussion under "ERISA Considerations" in the attached prospectus. S- 34 - -------------------------------------------------------------------------------- SUPPLEMENTAL PLAN OF DISTRIBUTION UBS 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, the aggregate principal amount of the Notes specified on the front cover of this prospectus supplement. UBS Warburg LLC and UBS PaineWebber Inc. intend to resell the offered Notes at the original issue price applicable to the offered Notes to be resold. UBS Warburg LLC and UBS PaineWebber Inc. may resell Notes to securities dealers at a discount of up to 1.5% from the original issue price applicable to the offered Notes. In the future, we or our affiliates may repurchase and resell the offered Notes in market-making transactions. For more information about the plan of distribution and possible market-making activities, see "Plan of Distribution" in the attached prospectus. UBS may use this prospectus supplement and accompanying prospectus in the initial sale of any Notes. In addition, UBS, UBS Warburg LLC, or any other affiliate of UBS may use this prospectus supplement and accompanying prospectus in a market-making transaction for any Notes after its initial sale. In connection with this offering, UBS, UBS Warburg LLC, UBS PaineWebber Inc., any other affiliate of UBS or any other securities dealers may distribute this prospectus supplement and accompanying prospectus electronically. Unless UBS 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. S- 35 You should rely only on the information incorporated by reference or provided in this prospectus supplement or the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus supplement is accurate as of any date other than the date on the front of the document. TABLE OF CONTENTS - --------------------------------------------- PROSPECTUS SUPPLEMENT Prospectus Supplement Summary......... S-1 Risk Factors.......................... S-6 The Contents and Valuation of the Basket of Basket Stocks............. S-11 Historical Performance of the Basket Stocks.............................. S-12 Valuation of the Notes................ S-18 Specific Terms of the Notes........... S-19 Use of Proceeds and Hedging........... S-30 Capitalization of UBS................. S-31 Supplemental Tax Considerations....... S-32 ERISA Considerations.................. S-34 Supplemental Plan of Distribution..... S-35 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
[UBS AG LOGO] Enhanced Appreciation Securities UBS AG $6,800,000 NOTES LINKED TO A BASKET OF COMMON STOCKS DUE MARCH 3, 2004 PROSPECTUS SUPPLEMENT FEBRUARY 20, 2003 (TO PROSPECTUS DATED MAY 17, 2001) UBS WARBURG UBS PAINEWEBBER INC. -----END PRIVACY-ENHANCED MESSAGE-----