-----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, CBhbgk3/0tBX4j+P9+E5e27NhE2eI5nYGQ4Fi/Zfb0ILLT9ozKM+gdPvRmVSrS0X ih+TGoeif9HUeT1q3wheWQ== 0000950123-03-001898.txt : 20030224 0000950123-03-001898.hdr.sgml : 20030224 20030224102405 ACCESSION NUMBER: 0000950123-03-001898 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: 03576852 BUSINESS ADDRESS: STREET 1: BAHNHOFSTRASSE CITY: ZURICH STATE: V8 ZIP: 45 MAIL ADDRESS: STREET 1: BAHNHOFSTRASSE CITY: ZURICH STATE: V8 ZIP: 45 424B2 1 y83796e424b2.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) PRINCIPAL PROTECTED NOTES UBS AG $12,660,000 NOTES LINKED TO THE S&P 500(R) INDEX DUE SEPTEMBER 8, 2010 Issuer: UBS AG Maturity Date: September 8, 2010 Trade Date: February 20, 2003 No Interest Payments: We will not pay you interest during the term of the Notes. Underlying Index: The return on the Notes is linked to the performance of the S&P 500(R) Index (the "Index"). Payment at Maturity: At maturity, you will receive in cash a minimum payment of 100% of the principal amount of your Notes, plus a cash payment equal to the amount of any Additional Payment. Additional Payment: The Additional Payment for each $1,000 principal amount of the Notes will be the greater of:
-- $1,000 X Participation Rate X Average Index Level ( ---------------------- - 1) Initial Index Level or -- zero.
Participation Rate: 100% Initial Index Level: The Initial Index Level is 837.10, the closing level of the Index on February 20, 2003. Average Index Level: The average of the Monthly Index Levels over the 90-month term of the Notes, beginning with the Monthly Index Level for March 2003. Monthly Index Level: The Monthly Index Level for any month, beginning with the Monthly Index Level for March 2003, will be the official closing level of the Index on the last trading day of that month. Listing: The Notes have been approved for listing on the American Stock Exchange under the symbol "PPV.K". Booking Branch: UBS AG, Jersey Branch
SEE "RISK FACTORS" BEGINNING ON PAGE S-7 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 Notes or passed upon the accuracy or adequacy of this prospectus supplement and the 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% 5% 95% Total $12,660,000 $633,000 $12,027,000
----------------------- * We or one of our affiliates will pay an additional fee to a broker-dealer in connection with this offering. See "Supplemental Plan of Distribution" on page S-30. UBS WARBURG 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 to UBS AG only and not to UBS AG's consolidated subsidiaries. WHAT ARE THE NOTES? The Notes are medium-term notes issued by UBS offering principal protection. The return on the Notes is linked to the performance of the S&P 500(R) Index (the "Index"). At maturity, you will receive in cash a minimum payment of 100% of the principal amount of your Notes, plus a cash payment equal to the amount of any Additional Payment. The Additional Payment for each $1,000 principal amount of the Notes will be equal to the greater of: -- $1,000 X Participation Average Index Level Rate X ( -------------------- - 1 ) Initial Index Level or -- zero.
The Initial Index Level is 837.10. The Average Index Level will equal the average of the Monthly Index Levels over the 90-month term of the Notes, beginning with the Monthly Index Level for March 2003. The Monthly Index Level for any month will be the closing level on the last trading day of that month. Your Additional Payment, if any, depends on whether, and the amount by which, the Average Index Level exceeds the Initial Index Level. If the Average Index Level is at or below the Initial Index Level, your Additional Payment at maturity will equal zero. The Participation Rate is 100%. SEE "--HYPOTHETICAL EXAMPLES OF HOW THE NOTES MAY PERFORM AT MATURITY" ON PAGE S-2, "VALUATION OF THE NOTES" ON PAGE S-18 AND "SPECIFIC TERMS OF THE NOTES" ON PAGE S-19. SELECTED PURCHASE CONSIDERATIONS + GROWTH POTENTIAL--The Notes provide the ability to participate in potential increases in the value of the Index. Whether you receive an Additional Payment on your Notes at maturity depends on whether, and the amount by which, the Average Index Level exceeds the Initial Index Level. + PRINCIPAL PROTECTION--At maturity, you will receive a minimum payment of 100% of the principal amount of your Notes, regardless of the performance of the Index. + EXCHANGE LISTING--The Notes have been approved for listing on the American Stock Exchange under the symbol "PPV.K". + MINIMUM INVESTMENT--$1,000 principal amount per Note. SELECTED RISK CONSIDERATIONS An investment in the Notes involves risks. Selected risks are summarized here, but we urge you to read the more detailed explanation of risks in "Risk Factors" beginning on page S-7. + NO INTEREST PAYMENTS--You will not receive any periodic interest payments on the Notes and you will not receive any dividend payments or other distribution on any securities included in the Index. + NO PRINCIPAL PROTECTION UNLESS YOU HOLD THE NOTES TO MATURITY--You will receive at least the minimum payment of 100% of the principal amount of your Notes if you hold your Notes to S- 1 maturity. If you sell your Notes in the secondary market prior to maturity, you may have to do so at a discount from the principal amount and, as a result, you may suffer losses. You should be willing to hold your Notes to maturity. + THERE MAY BE LITTLE OR NO SECONDARY MARKET FOR THE NOTES--There may be little or no secondary market for the Notes. Although the Notes have been approved for listing on the American Stock Exchange, it is not possible to predict whether a secondary market will develop for the Notes. UBS Warburg LLC currently intends to make a market in the Notes, although it is not required to do so and may stop making a market at any time. If you sell your Notes prior to maturity, you may have to sell them at a substantial discount. THE NOTES MAY BE A SUITABLE INVESTMENT FOR YOU IF: + You are willing to hold the Notes to maturity. + You seek an investment that, when held to maturity, offers principal protection and the ability to participate in possible increases in the Index, as reflected in the Average Index Level. + You are prepared to accept the risk that the potential return on your investment in the Notes may be less than an investment whose return is based solely on the level of the Index at maturity. + You do not seek current income from this investment. THE NOTES MAY NOT BE A SUITABLE INVESTMENT FOR YOU IF: + You expect that there will be numerous instances of low Monthly Index Levels, irrespective of whether you believe the level of the Index will increase over the term of the Notes. + You seek current income from your investments. + You are unable or unwilling to hold the Notes until maturity. + You seek an investment for which there will be an active secondary market. WHAT ARE THE TAX CONSEQUENCES OF THE NOTES? + In the opinion of our counsel, Sullivan & Cromwell LLP, you will generally be required to pay taxes on ordinary income from the Notes over their term based upon an estimated yield of the Notes, even though you will not receive any payments from us until maturity. You will be subject to this treatment because the Notes will be treated as a single debt instrument subject to special rules governing contingent payment obligations for United States federal income tax purposes. We have determined that the estimated yield for the Notes is 3.91%. The estimated yield is provided solely in order for you to calculate the amount of taxes that you will owe each year as a result of owning the Notes. It is neither a prediction nor a guarantee of what the actual Additional Payment will be, or that the actual Additional Payment will even exceed zero. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING WHETHER A PURCHASE OF THE NOTES IS ADVISABLE IN LIGHT OF THE TAX TREATMENT OF THE NOTES AND THE HOLDER'S PARTICULAR TAX SITUATION. For a more complete discussion of the United States federal income tax consequences of your investment in the Notes, please see the discussion under "Supplemental Tax Considerations--Supplemental U.S. Tax Considerations" on page S-26. HYPOTHETICAL EXAMPLES OF HOW THE NOTES MAY PERFORM AT MATURITY The following examples demonstrate the amount payable at maturity on the Notes under three hypothetical scenarios. The amount payable at maturity will depend on the Participation Rate and the performance of the Index as reflected in the Average Index Level, which is the average of the Monthly Index Levels over the 90-month term of the Notes. The Monthly Index Level for any month will be S- 2 the closing level of the Index on the last trading day of that month. The values used in the examples are hypothetical. The examples on pages S-4, S-5 and S-6 are based on the following assumptions: Participation Rate: 100% Initial Index Level: 837.10 Principal Amount per Note: $1,000 No market disruption event occurs during the terms of the Notes.
S- 3 EXAMPLE 1 In this example, we assume that the Average Index Level over the term of the Notes is higher than the Initial Index Level. Based on the Monthly Index Levels set forth in the table below, the Average Index Level is 1,548.22. The cash payment at maturity for each Note will equal $1,849.50, consisting of $1,000 of principal plus an Additional Payment of $849.50 (as calculated below). Values in the examples are hypothetical.
- ---------------------------------------------------------------------------------------------------------------------- YEAR 2003 2004 2005 2006 2007 2008 - ---------------------------------------------------------------------------------------------------------------------- MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX LEVEL LEVEL LEVEL LEVEL LEVEL LEVEL - ---------------------------------------------------------------------------------------------------------------------- JANUARY 1,023.0 1,212.7 1,379.9 1,450.3 1,899.2 FEBRUARY 1,031.7 1,223.0 1,391.7 1,494.6 1,903.0 MARCH 940.0 1,040.5 1,233.4 1,403.5 1,590.8 1,906.8 APRIL 948.0 1,049.3 1,243.8 1,415.4 1,670.0 1,910.6 MAY 956.0 1,058.3 1,289.6 1,427.5 1,724.5 1,914.4 JUNE 964.2 1,067.3 1,300.6 1,439.6 1,798.2 1,918.2 JULY 972.4 1,076.3 1,311.6 1,451.8 1,801.8 1,922.1 AUGUST 980.6 1,085.5 1,322.8 1,464.2 1,805.4 1,925.9 SEPTEMBER 989.0 1,094.7 1,334.0 1,476.6 1,890.2 1,929.8 OCTOBER 997.4 1,104.0 1,345.3 1,489.2 1,940.2 1,933.6 NOVEMBER 1,005.9 1,192.3 1,356.8 1,501.8 1,891.6 1,937.5 DECEMBER 1,014.4 1,202.4 1,368.3 1,514.6 1,895.4 1,941.4 - ---------------------------------------------------------------------------------------------------------------------- - ----------- --------------------------------- YEAR 2009 2010 - ----------- --------------------------------- MONTHLY INDEX MONTHLY INDEX LEVEL LEVEL - ----------- --------------------------------- JANUARY 1,945.3 1,992.5 FEBRUARY 1,949.1 1,996.4 MARCH 1,953.0 2,000.4 APRIL 1,957.0 2,004.4 MAY 1,960.9 2,008.4 JUNE 1,964.8 2,012.5 JULY 1,968.7 2,016.5 AUGUST 1,972.7 2,020.5 SEPTEMBER 1,976.6 OCTOBER 1,980.6 NOVEMBER 1,984.5 DECEMBER 1,988.5 - --------------------------------------------------------------
AVERAGE INDEX LEVEL* = 1,548.22 (THE AVERAGE OF THE MONTHLY INDEX LEVELS OVER THE 90-MONTH TERM OF THE NOTES LISTED ABOVE) CALCULATIONS: CALCULATION OF PAYMENT AT MATURITY PER $1,000 PRINCIPAL AMOUNT OF THE NOTES: At maturity, you will receive a cash payment equal to: 1. $1,000 PLUS 2. ADDITIONAL PAYMENT, which is the greater of zero or the amount calculated below: Principal Participation Average Index Level 1,548.22 Amount X Rate X ( -------------------- - 1 ) = $1,000 X 100% X ( ------- - 1 ) = $849.50 Initial Index Level 837.10
The Additional Payment per Note is therefore equal to $849.50 THE INVESTOR WOULD RECEIVE $1,849.50 AT MATURITY (A 84.95% TOTAL RETURN ON A HYPOTHETICAL INVESTMENT IN THE NOTES). * Calculated based on the average of the assumed Monthly Index Levels over the 90-month term of the Notes. The actual Monthly Index Level for any month will equal the closing level of the S&P 500 Index on the last trading day of that month. S- 4 EXAMPLE 2 In this example, we assume that the Average Index Level over the term of the Notes is lower than the Initial Index Level. Based on the Monthly Index Levels set forth in the table below, the Average Index Level is 824.87. The cash payment at maturity for each Note will only be $1,000 because the Additional Payment is zero (as calculated below). Values in the examples are hypothetical.
- ---------------------------------------------------------------------------------------------------------------------- YEAR 2003 2004 2005 2006 2007 2008 - ---------------------------------------------------------------------------------------------------------------------- MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX LEVEL LEVEL LEVEL LEVEL LEVEL LEVEL - ---------------------------------------------------------------------------------------------------------------------- January 912.2 879.9 848.7 818.7 789.7 February 909.4 877.2 846.2 816.2 787.3 March 940.0 906.7 874.6 843.6 813.8 784.9 April 937.2 904.0 872.0 841.1 811.3 782.6 May 934.4 901.3 869.4 838.6 808.9 780.2 June 931.6 898.6 866.8 836.1 806.5 777.9 July 928.8 895.9 864.2 833.6 804.0 775.6 August 926.0 893.2 861.6 831.1 801.6 773.2 September 923.2 890.5 859.0 828.6 799.2 770.9 October 920.4 887.8 856.4 826.1 796.8 768.6 November 917.7 885.2 853.8 823.6 794.4 766.3 December 914.9 882.5 851.3 821.1 792.0 764.0 - ---------------------------------------------------------------------------------------------------------------------- - ----------- --------------------------------- YEAR 2009 2010 - ----------- --------------------------------- MONTHLY INDEX MONTHLY INDEX LEVEL LEVEL - ----------- --------------------------------- January 761.7 734.7 February 759.4 732.5 March 757.1 730.3 April 754.9 728.1 May 752.6 726.0 June 750.4 723.8 July 748.1 721.6 August 745.9 719.4 September 743.6 October 741.4 November 739.2 December 736.9 - -------------------------------------------------------------------------------
AVERAGE INDEX LEVEL* = 824.87 (THE AVERAGE OF THE MONTHLY INDEX LEVELS OVER THE 90-MONTH TERM OF THE NOTES LISTED ABOVE) CALCULATIONS: CALCULATION OF PAYMENT AT MATURITY PER $1,000 PRINCIPAL AMOUNT OF THE NOTES: At maturity, you will receive a cash payment equal to: 1. $1,000 PLUS 2. ADDITIONAL PAYMENT, which is the greater of zero or the amount calculated below: Principal Participation Average Index Level 824.87 Amount X Rate X ( ------------------- - 1 ) = $1,000 X 100% X ( ------- - 1 ) = -$14.61 Initial Index Level 837.10
The Additional Payment per Note is therefore equal to zero. BECAUSE THE ADDITIONAL PAYMENT IS ZERO, THE INVESTOR WOULD RECEIVE ONLY $1,000 AT MATURITY (A 0% TOTAL RETURN ON A HYPOTHETICAL INVESTMENT IN THE NOTES). * Calculated based on the assumed average of the Monthly Index Levels over the 90-month term of the Notes. The actual Monthly Index Level for any month will equal the closing level of the S&P 500 Index on the last trading day of that month. S- 5 EXAMPLE 3 In this example, we assume that the Average Index Level over the term of the Notes is lower than the Initial Index Level (despite the fact that the Monthly Index Levels were above the Initial Index Level early in the investment period). Based on the Monthly Index Levels set forth in the table below, the Average Index Level is 821.16. The cash payment at maturity for each Note will only be $1,000 because the Additional Payment is zero (as calculated below). Values in the examples are hypothetical.
- ---------------------------------------------------------------------------------------------------------------------- YEAR 2003 2004 2005 2006 2007 2008 - ---------------------------------------------------------------------------------------------------------------------- MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX MONTHLY INDEX LEVEL LEVEL LEVEL LEVEL LEVEL LEVEL - ---------------------------------------------------------------------------------------------------------------------- January 988.1 1,028.1 857.6 715.4 612.4 February 993.0 1,012.7 844.7 704.6 619.2 March 940.0 998.0 997.5 832.1 694.1 626.0 April 944.7 1,003.0 982.6 819.6 683.6 632.9 May 949.4 1,008.0 967.8 807.3 673.4 639.8 June 954.2 1,013.0 953.3 795.2 663.3 646.9 July 958.9 1,018.1 939.0 783.3 653.3 654.0 August 963.7 1,023.2 924.9 771.5 643.5 661.2 September 968.6 1,028.3 911.0 759.9 633.9 668.5 October 973.4 1,033.4 897.4 748.5 624.4 675.8 November 978.3 1,038.6 883.9 737.3 615.0 683.3 December 983.2 1,043.8 870.7 726.2 605.8 690.8 - ---------------------------------------------------------------------------------------------------------------------- - ----------- --------------------------------- YEAR 2009 2010 - ----------- --------------------------------- MONTHLY INDEX MONTHLY INDEX LEVEL LEVEL - ----------- --------------------------------- January 698.4 796.3 February 706.1 805.1 March 713.8 814.0 April 721.7 822.9 May 729.6 832.0 June 737.6 841.1 July 745.7 850.4 August 754.0 859.7 September 762.2 October 770.6 November 779.1 December 787.7 - ------------------------------------------------------------------------------------------------
AVERAGE INDEX LEVEL* = 821.16 (THE AVERAGE OF THE MONTHLY INDEX LEVELS OVER THE 90-MONTH TERM OF THE NOTES LISTED ABOVE) CALCULATIONS: CALCULATION OF PAYMENT AT MATURITY PER $1,000 PRINCIPAL AMOUNT OF THE NOTES: At maturity, you will receive a cash payment equal to: 1. $1,000 PLUS 2. ADDITIONAL PAYMENT, which is the greater of zero or the amount calculated below: Principal Participation Average Index Level 821.16 Amount X Rate X ( ------------------- - 1 ) = $1,000 X 100% X ( ------- - 1 ) = -$19.04 Initial Index Level 837.10
The Additional Payment per Note is therefore equal to zero. BECAUSE THE ADDITIONAL PAYMENT IS ZERO, THE INVESTOR WOULD RECEIVE ONLY $1,000 AT MATURITY (A 0% TOTAL RETURN ON A HYPOTHETICAL INVESTMENT IN THE NOTES). * Calculated based on the assumed average of the Monthly Index Levels over the 90-month term of the Notes. The actual Monthly Index Level for any month will equal the closing level of the S&P 500 Index on the last trading day of that month. S- 6 - -------------------------------------------------------------------------------- RISK FACTORS The return on the Notes is linked to the performance of the S&P 500(R) Index (the "Index"). Investing in the Notes is not equivalent to investing directly in the Index. 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 INTENDED TO BE HELD TO MATURITY. YOUR PRINCIPAL IS PROTECTED ONLY IF YOU HOLD THE NOTES TO MATURITY You will receive at least the minimum payment of 100% of the principal amount of your Notes, if you hold your Notes to maturity. If you sell your Notes in the secondary market prior to maturity, you may have to do so at a discount from the principal amount and, as a result, you may suffer losses. You should be willing to hold your Notes to maturity. THE PAYMENT AT MATURITY MAY BE LIMITED TO REPAYMENT OF YOUR PRINCIPAL EVEN IF THE VALUE OF THE INDEX RISES SUBSTANTIALLY OVER THE TERM OF THE NOTES The Average Index Level will equal the average of the Monthly Index Levels over the 90-month term of the Notes, beginning with the Monthly Index Level for March 2003. The Monthly Index Level for any month will equal the closing level of the Index on the last trading day of that month. Therefore, if one or more Monthly Index Levels are sufficiently low or there are sufficiently numerous instances of low Monthly Index Levels to cause the Average Index Level to be at or lower than the Initial Index Level, your payment at maturity will be limited to repayment of the principal amount of your Notes, even if the value of the Index rises over the term of the Notes. THE MONTHLY INDEX LEVEL FOR ANY MONTH EQUALS THE CLOSING LEVEL OF THE INDEX ON THE LAST TRADING DAY OF THAT MONTH The Monthly Index Level for any month equals the official closing level of the Index on the last trading day of that month. Any positive performance of the Index during a month that is offset by a decline in the level of the Index by the last trading day of the month will not be captured in the calculation of the Monthly Index Level and the payment due at maturity. THE RETURN ON YOUR NOTES WILL DIFFER FROM A RETURN ON AN INVESTMENT DIRECTLY LINKED TO THE LEVEL OF THE INDEX AT MATURITY Because your return will be linked to the Average Index Level over the 90-month term of the Notes and not to the level of the Index at maturity, the return on your Notes will likely be different from that of an investment directly linked to the level of the Index at maturity. In particular, you may earn no Additional Payment on the Notes even if the level of the Index rises over the term of the Notes, if the Average Index Level is at or below the Initial Index Level. CHANGES TO THE INDEX WILL AFFECT THE MARKET VALUE OF THE NOTES AND YOUR PAYMENT AT MATURITY Standard & Poor's, a division of The McGraw-Hill Companies, Inc., ("S&P"), is responsible for calculating and maintaining the Index. S&P can add, delete or substitute the securities included in the Index or make other methodological changes that could change the value of the Index. Any of these actions could therefore affect the market value of the Notes and the amount payable with respect to the Notes at maturity. In addition, if S&P discontinues or suspends calculation or publication of the S- 7 RISK FACTORS - -------------------------------------------------------------------------------- Index it may become difficult to determine the market value of the Notes, the Monthly Index Levels and the Average Index Level or the amount payable at maturity. If any of these events occurs, the calculation agent, in its sole discretion, will either select a successor index for the calculation of the Monthly Index Level, or if the calculation agent determines that a successor index is unavailable, it will, in its sole discretion, determine the Monthly Index Level by reference to a group of stocks or one or more indices and a computation methodology that the calculation agent determines will as closely as reasonably possible replicate the Index. In any case, the market value of the Notes and your payment at maturity could be adversely affected. See "Description of the S&P 500 Index" on page S-12, "Specific Terms of the Notes--Discontinuance of or Adjustments to the Index; Alteration of Method of Calculation" on page S-22 and, in the accompanying prospectus, "Considerations Relating to Indexed 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. Although the Notes have been approved for listing on the American Stock Exchange, it is not possible to predict whether a secondary market will develop for the Notes. UBS Warburg LLC intends to make a market for the Notes, although it is not required to do so. If UBS Warburg LLC does make a market in the Notes, it may stop doing so at any time. If you sell your Notes before maturity, you may have to do so at a substantial discount from the issue price, and as a result you may suffer substantial losses. THE MARKET VALUE OF THE NOTES MAY BE INFLUENCED BY UNPREDICTABLE FACTORS The market value of the Notes may fluctuate between the date you purchase them and the final valuation date when the calculation agent determines the amount to be paid to you 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 MONTHLY INDEX LEVELS AND PREVAILING INTEREST RATES IN THE MARKET WILL AFFECT THE MARKET VALUE OF THE NOTES MORE THAN ANY OTHER FACTOR. Other factors that may influence the market value of the Notes include: + the volatility of the Index (i.e., the frequency and magnitude of changes in the level of the Index); + the dividend rate paid on securities included in the Index (while not paid to holders of the Notes, dividend payments on securities included in the Index may influence the market price of securities included in the Index and the market value of options on securities included in the Index and therefore affect the market value of the Notes); + supply and demand for the Notes, including inventory positions of UBS Warburg LLC or any other market maker; + economic, financial, political and regulatory or judicial events that affect stock markets generally, which also may affect the market price of securities included in the Index; + our perceived creditworthiness; and + the time remaining to the maturity of the Notes. For these reasons, the Notes may trade at prices below their initial issue price and investors selling the Notes in the secondary market prior to maturity could receive substantially less than the amount of their original investments. S- 8 RISK FACTORS - -------------------------------------------------------------------------------- IF THE MONTHLY INDEX LEVEL CHANGES, THE MARKET VALUE OF YOUR NOTES MAY NOT CHANGE IN THE SAME MANNER The frequency and magnitude of changes in the Monthly Index Levels and the level of the Index may influence the value of your Notes. However, your Notes may trade quite differently from the Monthly Index Levels and the performance of the Index. Changes in the Monthly Index Levels and the level of the Index may not result in a comparable change in the market value of your Notes. HISTORICAL LEVELS OF THE INDEX SHOULD NOT BE TAKEN AS AN INDICATION OF THE FUTURE PERFORMANCE OF THE INDEX The trading prices of the securities included in the Index will determine the level of the Index. As a result, it is impossible to predict whether the level of the Index will rise or fall. Historical performance of the Index should not be taken as an indication of the future performance of the Index. Trading prices of the securities included in the Index will be influenced by complex and interrelated political, economic, financial and other factors. YOU WILL BE REQUIRED TO PAY TAXES ON THE NOTES EACH YEAR You generally will be required to pay taxes on imputed ordinary income from the Notes over their term based upon an estimated yield for the Notes, even though you will not receive any payments from us until maturity. The estimated yield is determined solely to calculate the amounts you will be taxed on prior to maturity and is neither a prediction nor a guarantee of what the actual yield will be. In addition, any gain you may recognize upon the sale or maturity of the Notes will be taxed as ordinary interest income. If you purchase the Notes at a time other than the original issuance date, the tax consequences to you may be different. For further information, you should refer to "Supplemental Tax Considerations" on page S-26. YOU WILL NOT RECEIVE INTEREST PAYMENTS ON YOUR NOTES OWNING THE NOTES IS NOT THE SAME AS OWNING THE SECURITIES INCLUDED IN THE INDEX The return on your Notes will not reflect the return you would realize if you actually owned the securities included in the Index and received dividends paid on those securities because your return will be linked to the closing level of the Index on the last trading day of each month over the term of the Notes, and not to the level of the Index at maturity. The level of the Index is calculated without taking into consideration the value of dividends paid on the securities included in the Index. As a holder of the Notes, you will not have voting rights, rights to receive dividends or other distributions, or any other rights with respect to any securities included in the Index. Moreover, your payment at maturity will be in cash, and you will have no right to receive delivery of any security included in the Index. TRADING AND OTHER TRANSACTIONS BY UBS OR ITS AFFILIATES MAY ADVERSELY AFFECT THE MARKET VALUE OF THE NOTES As described below under "Use of Proceeds and Hedging" on page S-24, we or one or more affiliates may hedge our obligations under the Notes by purchasing securities included in or linked to the Index, options or futures on the Index, and other derivative instruments with returns linked to or related to changes in the level of the Index, and/or other instruments that we or our affiliates deem appropriate in connection with any such hedging. We may adjust these hedges by, among other things, purchasing or selling any of the foregoing at any time and from time to time including on or around the dates on S- 9 RISK FACTORS - -------------------------------------------------------------------------------- which the Monthly Index Levels are determined. Although they are not expected to, any of these hedging activities may adversely affect the level of the Index, and therefore, the Monthly Index Levels or the market value of the Notes and the return, if any, payable at maturity of the Notes. It is possible that we or our affiliates could receive substantial returns from these hedging activities while the market value of the Notes may decline. We or our affiliates may also engage in trading securities included in and other investments related to the Index 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 securities included in the Index or the level of the Index, and therefore, the Monthly Index Levels or the market value of the Notes and the Additional Payment, if any, payable at maturity 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 the performance of the securities included in the Index or the performance of the Index itself. 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 Additional Payment, if any, payable at maturity of the Notes. UBS Warburg LLC also currently intends to make a secondary market in the Notes. As a market maker, trading of the Notes by UBS Warburg LLC may cause it to be long or short the Notes in its inventory. The supply and demand for the Notes, including inventory positions of UBS Warburg LLC and any other market makers, may affect the market value 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 Index and the securities included in the Index that are not for the account of the holders of the Notes or on their behalf. These trading activities may present a conflict between the holders' interests 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 level the Index, could be adverse to the interests of the holders of the Notes. UBS and its affiliates may, at present or in the future, engage in business with the issuers of securities included in the Index, including making loans 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 its affiliates and the interests of holders of the Notes. Moreover, UBS and UBS Warburg LLC have published and in the future expect to publish research reports with respect to some or all of the issuers of the securities included in the Index. 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 by UBS, UBS Warburg LLC or other affiliates may affect the market price of the securities included in the Index and, therefore, the level of the Index and the market value of the Notes. UBS AND ITS AFFILIATES HAVE NO AFFILIATION WITH S&P AND ARE NOT RESPONSIBLE FOR THEIR PUBLIC DISCLOSURE OF INFORMATION We and our affiliates are not affiliated with S&P in any way (except for licensing arrangements discussed below in "Description of the S&P 500 Index" on page S-12) and have no ability to control or predict its actions, including any errors in or discontinuation of disclosure regarding its methods or policies relating to the calculation of the Index. If S&P discontinues or suspends the calculation of the Index, it may become difficult to determine the market value of the Notes or the amount payable at S- 10 RISK FACTORS - -------------------------------------------------------------------------------- maturity. The calculation agent may designate a successor index selected in its sole discretion. If the calculation agent determines in its sole discretion that no successor index comparable to the Index exists, the amount you receive at maturity will be determined by the calculation agent in its sole discretion. See "Specific Terms of the Notes--Market Disruption Event" on Page S-20. S&P is not involved in the offer of the Notes in any way and has 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. We have derived the information about S&P and the Index in this prospectus supplement from publicly available information. Neither we nor any of our affiliates assume any responsibility for the adequacy or accuracy of the information about the Index or S&P contained in this prospectus supplement or any public disclosure by S&P or the issuers of the securities included in the Index. YOU, AS AN INVESTOR IN THE NOTES, SHOULD MAKE YOUR OWN INVESTIGATION INTO THE INDEX AND S&P. THERE ARE POTENTIAL CONFLICTS OF INTEREST BETWEEN YOU AND THE CALCULATION AGENT Our affiliate, UBS Warburg LLC, will serve as the calculation agent. UBS Warburg LLC will, among other things, calculate the Monthly Index Levels and the Average Index Level and will determine the amount to be paid to you at maturity. For a fuller description of the calculation agent's role, see "Specific Terms of the Notes--Role of Calculation Agent" on page S-23. The calculation agent will exercise its judgment when performing its functions. For example, the calculation agent may have to determine whether a market disruption event affecting the Index has occurred at the time of a calculation. This determination may, in turn, depend on the calculation agent's judgment of 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 and the amount to be paid to you at maturity, the calculation agent may have a conflict of interest if it needs to make any such decision. 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. THE CALCULATION AGENT CAN POSTPONE THE CALCULATION OF ANY MONTHLY INDEX LEVEL AND THE MATURITY DATE IF A MARKET DISRUPTION EVENT OCCURS If the calculation agent determines that, on a day that would otherwise be the last trading day of the month used to calculate a Monthly Index Level, a market disruption event has occurred or is continuing, the calculation agent will instead use the closing level of the Index on the first trading day on which no market disruption event occurs or is continuing. In no event, however, will the determination of the Monthly Index Level be postponed by more than ten business days. As a result, the maturity date for the Notes could also be postponed for up to ten business days. If the determination of the Monthly Index Level 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 day used by the calculation agent. If the closing level of the Index is not available on such day either because of a market disruption event or for any other reason, the calculation agent will make a good faith estimate of the closing level of the Index that would have prevailed in the absence of the market disruption event or such other reason on that day, based on an assessment made in its sole discretion. See "Specific Terms of the Notes--Market Disruption Event" on page S-20. S- 11 - -------------------------------------------------------------------------------- DESCRIPTION OF THE S&P 500 INDEX We have derived all information regarding the S&P 500 Index (the "Index") contained in this prospectus supplement, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information. Such information reflects the policies of, and is subject to change by Standard & Poor's, a division of McGraw-Hill, Inc. ("S&P"). We do not assume any responsibility for the accuracy or completeness of such information. S&P has no obligation to continue to publish the Index, and may discontinue publication of the Index. The Index is intended to provide an indication of the pattern of common stock price movement. The calculation of the value of the Index, discussed below in further detail, is based on the relative value of the aggregate market value of the common stocks of 500 companies as of a particular time (the "S&P Constituent Stocks") compared to the aggregate average market value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943. As of January 31, 2003, 424 companies or 85.5% of the Index traded on the New York Stock Exchange ("NYSE"), 74 companies or 14.3% of the Index traded on The Nasdaq Stock Market, and two companies or 0.2% of the Index traded on the American Stock Exchange. As of January 31, 2003, the Index represented approximately 79% of the market value of S&P's internal database of over 7399 equities. S&P chooses companies for inclusion in the Index with the aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of its database of over 7399 equities, which S&P uses as an assumed model for the composition of the total market. Relevant criteria employed by S&P include the viability of the particular company, the extent which that company represents the industry group to which it is assigned, the extent to which the market price of that company's common stock is generally responsive to changes in the affairs of the respective industry and the market value and trading activity of the common stock of that company. Ten main groups of companies comprise the Index with the number of companies currently included in each group indicated in parentheses: Consumer Discretionary (88), Consumer Staples (34), Energy (23), Financials (81), Health Care (48), Industrials (67), Information Technology (76), Materials (34), Telecommunication Services (12), and Utilities (37) and Industrial Composite (372). S&P may from time to time, in its sole discretion, add companies to or delete companies from the Index to achieve the objectives stated above. S&P calculates the Index by reference to the prices of the S&P Constituent Stocks without taking account of the value of dividends paid on such stocks. As a result, the return on the Notes will not reflect the return you would realize if you actually owned the S&P Constituent Stocks and received the dividends paid on such stocks. COMPUTATION OF THE INDEX S&P currently computes the Index as of a particular time as follows: -- the product of the market price per share and the number of then outstanding shares of each component stock is determined as of that time (referred to as the "market value" of that stock); -- the market values of all component stocks as of that time are aggregated; S- 12 DESCRIPTION OF THE S&P 500 INDEX - -------------------------------------------------------------------------------- -- the mean average of the market values as of each week in the base period of the years 1941 through 1943 of the common stock of each company in a group of 500 substantially similar companies is determined; -- the mean average market values of all these common stocks over the base period are aggregated (the aggregate amount being referred to as the "base value"); -- the current aggregate market value of all component stocks is divided by the base value; and -- the resulting quotient, expressed in decimals, is multiplied by ten. While S&P currently employs the above methodology to calculate the Index, no assurance can be given that S&P will not modify or change this methodology in a manner that may affect the amount payable at maturity to beneficial owners of the Notes. S&P adjusts the foregoing formula to offset the effects of changes in the market value of a component stock that are determined by S&P to be arbitrary or not due to true market fluctuations. These changes may result from causes such as: -- the issuance of stock dividends; -- the granting to shareholders of rights to purchase additional shares of stock; -- the purchase of shares by employees pursuant to employee benefit plans; -- consolidations and acquisitions; -- the granting to shareholders of rights to purchase other securities of the issuer; -- the substitution by S&P of particular component stocks in the Index; or -- other reasons. In these cases, S&P first recalculates the aggregate market value of all component stocks, after taking account of the new market price per share of the particular component stock or the new number of outstanding shares of that stock or both, as the case may be, and then determines the new base value in accordance with the following formula: New Market Value Old Base Value x ---------------- = New Base Value Old Market Value
The result is that the base value is adjusted in proportion to any change in the aggregate market value of all component stocks resulting from the causes referred to above to the extent necessary to negate the effects of these causes upon the Index. Neither UBS nor any of its affiliates accepts any responsibility for the calculation, maintenance or publication of, or for any error, omission or disruption in, the Index or any successor index. S&P does not guarantee the accuracy or the completeness of the Index or any data included in the Index. S&P assumes no liability for any errors, omissions or disruption in the calculation and dissemination of the Index. S&P disclaims all responsibility for any errors or omissions in the calculation and dissemination of the Index or the manner in which the Index is applied in determining the amount payable at maturity. HISTORICAL CLOSING LEVELS OF THE S&P 500 INDEX Since its inception, the Index has experienced significant fluctuations. Any historical upward or downward trend in the value of the Index during any period shown below is not an indication that the value of the Index is more or less likely to increase or decrease at any time during the term of the S- 13 DESCRIPTION OF THE S&P 500 INDEX - -------------------------------------------------------------------------------- Notes. The historical Index levels do not give an indication of future performance of the Index. UBS cannot make any assurance that the future performance of the Index or the S&P Constituent Stocks will result in holders of the Notes receiving an amount greater than the outstanding face amount of their Notes on the maturity date. The closing level of the Index as of February 20, 2003 was 837.10. The table below sets forth the closing levels of the Index for each calendar month from February 1985 to January 2003. The closing levels listed in the table below were obtained from Bloomberg L.P., without independent verification.
DATE MONTHLY INDEX LEVEL ---- ------------------- 2/28/85 181.18 3/29/85 180.66 4/30/85 179.83 5/31/85 189.55 6/28/85 191.85 7/31/85 190.92 8/30/85 188.63 9/30/85 182.08 10/31/85 189.82 11/29/85 202.17 12/31/85 211.28 1/31/86 211.78 2/28/86 226.92 3/31/86 238.90 4/30/86 235.52 5/30/86 247.35 6/30/86 250.84 7/31/86 236.12 8/29/86 252.93 9/30/86 231.32 10/31/86 243.98 11/28/86 249.22 12/31/86 242.17 1/30/87 274.08 2/27/87 284.20 3/31/87 291.70 4/30/87 288.36 5/29/87 290.10 6/30/87 304.00 7/31/87 318.66 8/31/87 329.80 9/30/87 321.83 10/30/87 251.79 11/30/87 230.30 12/31/87 247.08 1/29/88 257.07 2/29/88 267.82 3/31/88 258.89 4/29/88 261.33 5/31/88 262.16 6/30/88 273.50
DATE MONTHLY INDEX LEVEL ---- ------------------- 7/29/88 272.02 8/31/88 261.52 9/30/88 271.91 10/31/88 278.97 11/30/88 273.70 12/30/88 277.72 1/31/89 297.47 2/28/89 288.86 3/31/89 294.87 4/28/89 309.64 5/31/89 320.52 6/30/89 317.98 7/31/89 346.08 8/31/89 351.45 9/29/89 349.15 10/31/89 340.36 11/30/89 345.99 12/29/89 353.40 1/31/90 329.08 2/28/90 331.89 3/30/90 339.94 4/30/90 330.80 5/31/90 361.23 6/29/90 358.02 7/31/90 356.15 8/31/90 322.56 9/28/90 306.05 10/31/90 304.00 11/30/90 322.22 12/31/90 330.22 1/31/91 343.93 2/28/91 367.07 3/29/91 375.22 4/30/91 375.34 5/31/91 389.83 6/28/91 371.16 7/31/91 387.81 8/30/91 395.43 9/30/91 387.86 10/31/91 392.45 11/29/91 375.22
DATE MONTHLY INDEX LEVEL ---- ------------------- 12/31/91 417.09 1/31/92 408.79 2/28/92 412.70 3/31/92 403.69 4/30/92 414.95 5/29/92 415.35 6/30/92 408.14 7/31/92 424.22 8/31/92 414.03 9/30/92 417.80 10/30/92 418.68 11/30/92 431.35 12/31/92 435.71 1/29/93 438.78 2/26/93 443.38 3/31/93 451.67 4/30/93 440.19 5/31/93 450.19 6/30/93 450.53 7/30/93 448.13 8/31/93 463.56 9/30/93 458.93 10/29/93 467.83 11/30/93 461.79 12/31/93 466.45 1/31/94 481.61 2/28/94 467.14 3/31/94 445.77 4/29/94 450.91 5/31/94 456.51 6/30/94 444.27 7/29/94 458.26 8/31/94 475.50 9/30/94 462.71 10/31/94 472.35 11/30/94 453.69 12/30/94 459.27 1/31/95 470.42 2/28/95 487.39 3/31/95 500.71 4/28/95 514.71
S- 14 DESCRIPTION OF THE S&P 500 INDEX - --------------------------------------------------------------------------------
DATE MONTHLY INDEX LEVEL ---- ------------------- 5/31/95 533.40 6/30/95 544.75 7/31/95 562.06 8/31/95 561.88 9/29/95 584.41 10/31/95 581.50 11/30/95 605.37 12/29/95 615.93 1/31/96 636.02 2/29/96 640.43 3/29/96 645.50 4/30/96 654.17 5/31/96 669.12 6/28/96 670.63 7/31/96 639.95 8/30/96 651.99 9/30/96 687.31 10/31/96 705.27 11/29/96 757.02 12/31/96 740.74 1/31/97 786.16 2/28/97 790.82 3/31/97 757.12 4/30/97 801.34 5/30/97 848.28 6/30/97 885.14 7/31/97 954.29 8/29/97 899.47 9/30/97 947.28 10/31/97 914.62 11/28/97 955.40
DATE MONTHLY INDEX LEVEL ---- ------------------- 12/31/97 970.43 1/30/98 980.28 2/27/98 1,049.34 3/31/98 1,101.75 4/30/98 1,111.75 5/29/98 1,090.82 6/30/98 1,133.84 7/31/98 1,120.67 8/31/98 957.28 9/30/98 1,017.01 10/30/98 1,098.67 11/30/98 1,163.63 12/31/98 1,229.23 1/29/99 1,279.64 2/26/99 1,238.33 3/31/99 1,286.37 4/30/99 1,335.18 5/31/99 1,301.84 6/30/99 1,762.71 7/30/99 1,328.72 8/31/99 1,320.41 9/30/99 1,282.71 10/29/99 1,362.93 11/30/99 1,388.91 12/31/99 1,469.25 1/31/00 1,394.46 2/29/00 1,366.42 3/31/00 1,498.58 4/28/00 1,452.43 5/31/00 1,420.60 6/30/00 1,454.60
DATE MONTHLY INDEX LEVEL ---- ------------------- 7/31/00 1,430.83 8/31/00 1,517.68 9/29/00 1,436.51 10/31/00 1,429.40 11/30/00 1,314.95 12/29/00 1,320.28 1/31/01 1,366.01 2/28/01 1,239.94 3/30/01 1,160.33 4/30/01 1,249.46 5/31/01 1,255.82 6/29/01 1,224.42 7/31/01 1,211.23 8/31/01 1,133.58 9/28/01 1,040.94 10/31/01 1,059.78 11/30/01 1,139.45 12/31/01 1,148.08 1/31/02 1,130.20 2/28/02 1,106.73 3/29/02 1,147.39 4/30/02 1,076.92 5/31/02 1,067.14 6/28/02 989.82 7/31/02 911.62 8/30/02 916.07 9/30/02 815.28 10/31/02 885.76 11/29/02 936.31 12/31/02 879.82 1/31/03 855.70
- --------------- Source: Bloomberg L.P. S- 15 DESCRIPTION OF THE S&P 500 INDEX - -------------------------------------------------------------------------------- The following graph sets forth the performance of the Index from February 1985 through January 31, 2003. [PERFORMANCE GRAPH] - --------------- Source: Bloomberg L.P. LICENSE AGREEMENT S&P and UBS have entered into a non-exclusive license agreement providing for the license to UBS, and certain of its affiliated or subsidiary companies, in exchange for a fee, of the right to use the Index, which is owned and published by S&P, in connection with securities, including the Notes. The license agreement between S&P and UBS provides that the following language must be set forth in this prospectus supplement: The Notes are not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the owners of the Notes or any member of the public regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the Index to track general stock market performance. S&P's only relationship to us is the licensing of certain trademarks and trade names of S&P and of the Index, which is determined, composed and calculated by S&P without regard to us or the Notes. S&P has no obligation to take our needs or the needs of owners of the Notes into consideration in determining, composing or calculating the Index. S&P is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the Notes are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Notes. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY UBS, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED S- 16 DESCRIPTION OF THE S&P 500 INDEX - -------------------------------------------------------------------------------- THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by UBS. The Notes are not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in the Notes. S- 17 - -------------------------------------------------------------------------------- VALUATION OF THE NOTES AT MATURITY. At maturity, you will receive in cash a minimum payment of 100% of the principal amount of your Notes, plus a cash payment equal to the amount of any Additional Payment. The Additional Payment for each $1,000 principal amount of the Notes will be equal to the greater of: -- $1,000 X Participation ( Average Index Level ) Rate X -------------------- - 1 Initial Index Level or -- zero.
Therefore, at maturity, we will pay you in cash a minimum payment of 100% of the principal amount of each Note, even if the Average Index Level is below the Initial Index Level. Any Additional Payment on your Notes will depend on whether, and the amount by which, the Average Index Level exceeds the Initial Index Level. The Participation Rate is 100%. The principal protection feature of your Note is not affected by the amount of any Additional Payment at maturity. 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 several factors, many of which are beyond our control. We expect that generally the Monthly Index Levels and prevailing interest rates will affect the market value of the Notes more than any other factor. Other factors that may influence the market value of the Notes include supply and demand, the volatility of the Index and other economic conditions, as well as the perceived creditworthiness of UBS. See "Risk Factors" on page S-7 for a discussion of the factors that may influence the market value of the Notes prior to maturity. S- 18 - -------------------------------------------------------------------------------- SPECIFIC TERMS OF THE NOTES In this section, references to "holders" means 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 titled "Description of Notes We May Offer--Legal Ownership of Notes" in the accompanying prospectus. The Notes are part of a series of debt securities titled "Medium Term Notes, Series A" that we may issue from time to time under the indenture. 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 any 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. UNDERLYING INDEX The return on the Notes is linked to the performance of the S&P 500(R) Index (the "Index"). NO INTEREST PAYMENTS We will not pay you any 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 At maturity, you will receive in cash a minimum payment of 100% of the principal amount of your Notes, plus a cash payment equal to the amount of any Additional Payment. The Additional Payment for each $1,000 principal amount of the Notes will be equal to the greater of: -- $1,000 X Participation ( Average Index Level ) Rate X -------------------- - 1 Initial Index Level or -- zero.
The Initial Index Level is 837.10. The Average Index Level will equal the average of the Monthly Index Levels over the 90-month term of the Notes, beginning with the Monthly Index Level for March 2003. The Monthly Index Level for any month will be the official closing level of the Index on the last trading day of that month. Your Additional Payment, if any, depends on whether, and the amount by which, the Average Index Level exceeds the Initial Index Level. If the Average Index Level is at or S- 19 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- below the Initial Index Level, your Additional Payment at Maturity will equal zero. The Participation Rate is 100%. MATURITY DATE The maturity date will be September 8, 2010 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, then the maturity date will be the fifth business day following the final valuation date. The calculation agent may postpone the final valuation date--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. We describe market disruption events under "--Market Disruption Event" below. FINAL VALUATION DATE The final valuation date will be the fifth business day prior to the maturity date, unless the calculation agent determines that a market disruption event occurs or is continuing on that day. In that event, the final valuation date will be the first following business day on which the calculation agent determines that a market disruption event does not occur and is not continuing. In no event, however, will the final valuation date be postponed more than ten business days, as described below under "--Market Disruption Event." MARKET DISRUPTION EVENT As described above, we will calculate the amount you receive at maturity based on the average of all the Monthly Index Levels. The Monthly Index Level for any month will equal the closing level of the Index on the last trading day of that month. If a market disruption event occurs or is continuing on such day, then the calculation agent will instead use the closing level of the Index on the first trading day on which no market disruption event occurs or is continuing. In no event, however, will the determination of the Monthly Index Level be postponed by more than ten business days. If the calculation date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day, that day will nevertheless be the day used by the calculation agent. If the closing level of the Index is not available on such day either because of a market disruption event or for any other reason, the calculation agent will make a good faith estimate of the closing level of the Index that would have prevailed in the absence of the market disruption event or such other reason on that day. Any of the following will be a market disruption event with respect to the Index: + a suspension, absence or material limitation of trading in a material number of securities included in the Index 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 futures or options contracts or other securities relating to the Index 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; + the Index is not published, as determined by the calculation agent in its sole discretion; or + in any other event, 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." S- 20 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- The following events will not be market disruption events with respect to the Index: + 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; and + a decision to permanently discontinue trading in the futures or options contracts relating to the Index. For this purpose, an "absence of trading" in the primary securities market on which futures or options contracts related to the Index are traded will not include any time when that market is itself closed for trading under ordinary circumstances. 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 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 "--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 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. S- 21 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- 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, that 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. DISCONTINUANCE OF OR ADJUSTMENTS TO THE INDEX; ALTERATION OF METHOD OF CALCULATION If S&P discontinues publication of the Index and they or any other person or entity publish a substitute index that the calculation agent determines is comparable to the Index and approves as a successor index then the calculation agent will determine the Monthly Index Levels, the Average Index Level and the amount payable at maturity by reference to such successor index. If the calculation agent determines that the publication of the Index is discontinued and that there is no successor index on any date when the level of the Index is required to be determined, the calculation agent will instead make the necessary determination by reference to a group of stocks or one or more indices and a computation methodology that the calculation agent determines will as closely as reasonably possible replicate the Index. If the calculation agent determines that the securities included in the Index or the method of calculation has been changed at any time in any respect that causes the Index not to fairly represent the level of the Index had such changes not been made or that otherwise affects the calculation of the level of the Index, then the calculation agent may make adjustments in the Index or the method of calculating the Index that it believes are appropriate to ensure that the Monthly Index Levels and the Average Index Level used to determine the amount payable on the maturity date are equitable. All determinations and adjustments to be made by the calculation agent with respect to the Monthly Index Levels or otherwise relating to the level of the Index may be made by the calculation agent in its sole discretion. S- 22 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- 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. 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. TRADING DAY When we refer to a trading day with respect to the Notes, we mean a day, as determined by the calculation agent, on which trading is generally conducted on the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the Chicago Mercantile Exchange, the Chicago Board of Options Exchange and in the over-the-counter market for equity securities in the United States, and on which a market disruption event has not occurred. 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. ROLE OF CALCULATION AGENT The calculation agent will make all determinations regarding the payment on the Notes at maturity, the calculation of the Monthly Index Levels, the Average Index Level and the amount of any Additional Payment, market disruption events, maturity date, final valuation date, business days, trading days, the default amount (only in the case of a market disruption event) and any other amount payable in respect of your Notes, and what actions to take in the event S&P discontinues publication of the Index or changes the method of calculating or valuing the Index in a material respect. 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. As of the original issue date, the calculation agent is UBS Warburg LLC. We may change the calculation agent after the original issue date without notice. BOOKING BRANCH The Notes will be booked through UBS AG, Jersey Branch. S- 23 - -------------------------------------------------------------------------------- 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 securities included in or linked to the Index, options and futures on the Index, and other derivative instruments with returns linked to or related to changes in the level of the Index prior to and on the trade date. From time to time, we or our affiliates may enter into additional hedging transactions or unwind those we have entered into. In this regard, we or our affiliates may: + acquire or dispose of securities included in the Index; + take or dispose of positions in listed or over-the-counter options or other instruments based on the level of the Index; + take or dispose of positions in listed or over-the-counter options or other instruments based on the levels of other similar market indices; or + any combination of the above three. 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 instruments based on indices designed to track the performance of the Index or other components of the U.S. equity market. The hedging activity discussed above may adversely affect the market value of the Notes from time to time. See "Risk Factors" on page S-7 for a discussion of these adverse effects. S- 24 - -------------------------------------------------------------------------------- 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- 25 - -------------------------------------------------------------------------------- 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 Sullivan & Cromwell LLP, the Notes will be treated as a single debt instrument subject to special rules governing contingent payment obligations for United States federal income tax purposes. Under those rules, the amount of interest you are required to take into account for each accrual period will be determined by constructing a projected payment schedule for the Notes, and applying the rules similar to those for accruing original issue discount on a hypothetical noncontingent debt instrument with that projected payment schedule. This method is applied by first determining the yield at which we would issue a noncontingent fixed rate debt instrument with terms and conditions similar to the Notes (the "comparable yield") and then determining a payment schedule as of the issue date that would produce the comparable yield. These rules will generally have the effect of requiring you to include amounts in respect of the Notes prior to your receipt of cash attributable to that income. We have determined that the comparable yield is equal to 3.91% per annum, compounded semiannually, with a projected payment at maturity of $1,337.00 based on an investment of $1,000. Based upon this comparable yield, if you are an initial holder that holds the Note until maturity and you pay your taxes on a calendar year basis, you would be generally required to pay taxes on the following amounts of ordinary income from the Note each year: $33.09 in 2003, $40.79 in 2004, $42.40 in 2005, $44.08 in 2006, $45.82 in 2007, $47.63 in 2008, $49.50 in 2009, and $33.70 in 2010. However, in 2010, the amount of ordinary income that you would be required to pay taxes on from owning each Note may be greater or less than $33.70, depending upon the payment at maturity you receive. Also, if the payment at maturity was less than $1,303.30 you would have a net ordinary loss in 2010. You are required to use the comparable yield and projected payment schedule set forth above in determining your interest accruals in respect of the Notes, unless you timely disclose and justify on your federal income tax return the use of a different comparable yield and projected payment schedule. The comparable yield and projected payment schedule are not provided to you for any purpose other than the determination of your interest accruals in respect of the Notes, and we make no representations regarding the amount of contingent payments with respect of the Notes. If you purchase the Notes for an amount that differs from the Notes' adjusted issue price at the time of the purchase, you must determine the extent to which the difference between the price you paid for the Notes and its adjusted issue price is attributable to a change in expectations as to the projected S- 26 SUPPLEMENTAL TAX CONSIDERATIONS - -------------------------------------------------------------------------------- payment schedule, a change in interest rates, or both, and allocate the difference accordingly. If the Notes are listed on the American Stock Exchange, you may (but are not required to) allocate the difference pro rata to interest accruals over the remaining term of the Notes to the extent that the yield on the Notes, determined after taking into account amounts allocated to interest, is not less than the U.S. federal short-term rate. This rate is determined monthly by the U.S. Secretary of Treasury and is intended to approximate the average yield on short-term U.S. government obligations. The adjusted issue price of the Notes will equal the Notes' original issue price plus any interest deemed to be accrued on the Notes (under the rules governing contingent payment obligations) as of the time you purchased the Notes. If the adjusted issue price of the Notes is greater than the price you paid for the Notes, you must make positive adjustments increasing the amount of interest that you would otherwise accrue and include in income each year and the amount of ordinary income (or decreasing the amount of ordinary loss) recognized upon maturity by the amounts allocated to each of interest and projected payment schedule. If the adjusted issue price of the Notes is less than the price you paid for the Notes, you must make negative adjustments, decreasing the amount of interest that you must include in income each year and the amount of ordinary income (or increasing the amount of ordinary loss) recognized upon maturity by the amounts allocated to each of interest and projected payment schedule. Adjustments allocated to the interest amount are not made until the date the daily portion of interest accrues. Because any Form 1099-OID that you receive will not reflect the effects of positive or negative adjustments resulting from your purchase of the Notes at a price other than the adjusted issue price determined for tax purposes, you are urged to consult with your tax advisor as to whether and how adjustments should be made to the amounts reported on any Form 1099-OID. You will recognize gain or loss upon the sale or maturity of the Notes in an amount equal to the difference, if any, between the amount of cash you receive at such time and your adjusted basis in the Notes. In general, your adjusted basis in the Notes will equal the amount you paid for the Notes, increased by the amount of interest you previously accrued with respect to the Notes (in accordance with the comparable yield and the projected payment schedule for the Notes) and increased or decreased by the amount of any positive or negative adjustment, respectively, that you are required to make if you purchased the Notes at a price other than the adjusted issue price determined for tax purposes. Any gain you recognize upon the sale or maturity of the Notes will be ordinary interest income. Any loss you recognize at such time will be ordinary loss to the extent of interest you included as income in the current or previous taxable years in respect of the Notes, and thereafter, capital loss. 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 AND INTEREST Under present Swiss law, payment of interest, if any, on and repayment of principal of the Notes by us are 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. S- 27 SUPPLEMENTAL TAX CONSIDERATIONS - -------------------------------------------------------------------------------- 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 For residents of Switzerland, for tax purposes, there is no annual interest taxation. At maturity, the amount exceeding the principal amount will be taxed as follows: the portion representing interest shall be treated as income and the portion representing a premium shall be treated as a capital gain. S- 28 - -------------------------------------------------------------------------------- ERISA CONSIDERATIONS We, UBS Warburg LLC, 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, 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, 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- 29 - -------------------------------------------------------------------------------- SUPPLEMENTAL PLAN OF DISTRIBUTION UBS has agreed to sell to UBS Warburg LLC and UBS Warburg LLC has agreed to purchase from UBS, the aggregate principal amount of the Notes specified on the front cover of this prospectus supplement. UBS Warburg LLC intends to resell the offered Notes at the original issue price applicable to the offered Notes to be resold. UBS Warburg LLC may resell Notes to securities dealers at a discount of up to 5.00% from the original issue price applicable to the offered Notes. We or one of our affiliates will pay First Trust Portfolios L.P. a fee of up to 1.75% of the aggregate principal amount of the Notes specified on the front cover of this prospectus supplement for making introductions in connection with this offering. 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. Unless stated otherwise in the confirmation of sale delivered by UBS or its agent, this prospectus supplement and accompanying prospectus are being used in a market-making transaction. In connection with this offering, UBS, UBS Warburg LLC, any other affiliate of UBS or any other securities dealers may distribute this prospectus supplement and accompanying prospectus electronically. S- 30 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-7 Description of the S&P 500 Index...... S-12 Valuation of the Notes................ S-18 Specific Terms of the Notes........... S-19 Use of Proceeds and Hedging........... S-24 Capitalization of UBS................. S-25 Supplemental Tax Considerations....... S-26 ERISA Considerations.................. S-29 Supplemental Plan of Distribution..... S-30 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] Principal Protected Notes UBS AG $12,660,000 NOTES LINKED TO THE S&P 500(R) INDEX DUE SEPTEMBER 8, 2010 PROSPECTUS SUPPLEMENT FEBRUARY 20, 2003 (TO PROSPECTUS DATED MAY 17, 2001) UBS WARBURG -----END PRIVACY-ENHANCED MESSAGE-----