-----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, EAvWUBB7t5Z05jTpC9uwxETXVagmRwjnyM3hH6LxthRwfg2anZimngGmnF0Tqf6E dQYFwInT8SRfVarjHzUk6A== 0000950123-05-011547.txt : 20050927 0000950123-05-011547.hdr.sgml : 20050927 20050927155437 ACCESSION NUMBER: 0000950123-05-011547 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20050927 DATE AS OF CHANGE: 20050927 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: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-64844 FILM NUMBER: 051105446 BUSINESS ADDRESS: STREET 1: BAHNHOFSTRASSE 45 STREET 2: P O BOX CH 8098 CITY: ZURICH STATE: V8 ZIP: - BUSINESS PHONE: 41-1-234-4100 MAIL ADDRESS: STREET 1: BAHNHOFSTRASSE 45 STREET 2: P O BOX CH 8098 CITY: ZURICH STATE: V8 ZIP: - 424B3 1 y13084e424b3.txt 424(B)(3) FILED PURSUANT TO RULE 424(B)(2) REGISTRATION NO. 333-64844 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED FEBRUARY 27, 2003) PRINCIPAL-PROTECTED FX AND GOLD LINKED SECURITIES UBS AG $25,859,000 100% PRINCIPAL PROTECTED NOTES LINKED TO A CURRENCY AND GOLD BASKET DUE SEPTEMBER 27, 2007 Issuer: UBS AG Maturity Date: September 27, 2007 (investment term of two years) Coupon: We will not pay you interest during the term of the Notes. Currency Basket: The basket (the "Basket") will be composed of five spot rates (the "Basket Rates"). The Basket Rates, their weightings in the Basket and the initial value of each Basket Rate as of approximately 2:02 p.m. New York City time, September 23, 2005 (the "trade date") are as follows:
SPOT RATE AS OF BASKET RATES WEIGHT 9/23/05 - ------------------------------------------------------------------------------- AUD/USD spot rate..................... 20% ..............0.7580 NZD/USD spot rate..................... 20% ..............0.6870 USD/CAD spot rate..................... 20% ..............1.1700 USD/NOK spot rate..................... 20% ..............6.4735 XAU/USD spot rate..................... 20% ..............464.00
The AUD/USD spot rate expresses the amount in U.S. dollars that can be exchanged for one Australian dollar. The NZD/USD spot rate expresses the amount in U.S. dollars that can be exchanged for one New Zealand dollar. The USD/CAD spot rate expresses the amount in Canadian dollars that can be exchanged for one U.S. dollar. The USD/NOK spot rate expresses the amount in Norwegian krone that can be exchanged for one U.S. dollar. The XAU/USD spot rate expresses the amount in U.S. dollars that can be exchanged for one troy ounce of 0.995 gold. Payment at Maturity: You will receive a payment at maturity that is based on the Final Basket Value relative to the Initial Basket Value: + IF THE BASKET RETURN (AS DEFINED BELOW) IS POSITIVE, you will receive 100% of your principal amount, plus an additional amount equal to the product of the Basket Return and your principal amount. This occurs if, over the term of the Notes, the underlying currencies and gold have appreciated in the aggregate against the U.S. dollar. + If the Basket Return is less than or equal to zero, you will receive 100% of your principal amount. THE BASKET RETURN REFLECTS THE CHANGE IN THE VALUE OF THE BASKET OVER THE TERM OF THE NOTES. YOU WILL RECEIVE A PAYMENT AT MATURITY IN EXCESS OF THE PRINCIPAL AMOUNT OF YOUR NOTES ONLY IF THE BASKET RETURN IS POSITIVE AS OF SEPTEMBER 25, 2007 (THE "FINAL VALUATION DATE"). For a description of how your payment at maturity will be calculated, see "How will your payment at maturity be calculated?" on page S-5 and "Specific Terms of the Notes-- Payment at Maturity" on page S-20. Basket Return: Final Basket Value - Initial Basket Value --------------------------------------- Initial Basket Value Initial Basket Value: 100 Final Basket Value: The Final Basket Value will be calculated as follows: 100 x (1 + (0.20 x AUD Spot Rate Return) + (0.20 x NZD Spot Rate Return) + (0.20 x CAD Spot Rate Return) + (0.20 x NOK Spot Rate Return) + (0.20 x XAU Spot Rate Return)) Booking Branch: UBS AG, Jersey Branch Calculation Agent: UBS Securities LLC CUSIP Number: 90261KLS7
SEE "RISK FACTORS" BEGINNING ON PAGE S-9 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.
Price to Underwriting Proceeds to Public Discount UBS AG Per Note................. 100% 1.25% 98.75% Total.................... $25,859,000 $323,237.50 $25,535,762.50
UBS INVESTMENT BANK UBS FINANCIAL SERVICES INC. Prospectus Supplement dated September 23, 2005 [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 PRINCIPAL-PROTECTED SECURITIES? The Principal-Protected Securities (the "Notes") are medium-term notes issued by UBS whose return is linked to a basket (the "Basket"), offering 100% principal protection and 100% participation in any appreciation in the Basket between September 23, 2005 (the trade date) and September 25, 2007 (the final valuation date) (the "term of the Notes"). The return on the Notes is linked to the performance of the Basket, which in turn is based on the performance of five spot rates (the "Basket Rates"). The Basket Rates and their relative weightings are set forth below:
BASKET RATES WEIGHT - ------------------------------------------------------------ AUD/USD spot rate................................. 20% NZD/USD spot rate................................. 20% USD/CAD spot rate................................. 20% USD/NOK spot rate................................. 20% XAU/USD spot rate................................. 20%
The AUD/USD spot rate expresses the amount in U.S. dollars that can be exchanged for one Australian dollar. The initial value of the AUD/USD spot rate (the "Initial AUD/USD Spot Rate") is 0.7580. The NZK/USD spot rate expresses the amount in U.S. dollars that can be exchanged for one New Zealand dollar. The initial value of the NZD/USD spot rate (the "Initial NZD/USD Spot Rate") is 0.6870. The USD/CAD spot rate expresses the amount in Canadian dollars that can be exchanged for one U.S. dollar. The initial value of the USD/CAD spot rate (the "Initial USD/CAD Spot Rate") is 1.1700. The USD/NOK spot rate expresses the amount in Norwegian krone that can be exchanged for one U.S. dollar. The initial value of the USD/NOK spot rate (the "Initial USD/NOK Spot Rate") is 6.4735. The XAU/USD spot rate expresses the amount in U.S. dollars that can be exchanged for one troy ounce of 0.995 gold. The initial value of the XAU/USD spot rate (the "Initial XAU/USD Spot Rate") is 464.00. The Initial AUD/USD Spot Rate, the Initial NZD/USD Spot Rate, the Initial USD/CAD Spot Rate, the Initial USD/NOK Spot Rate, and the Initial XAU/USD Spot Rate represent the value of each spot rate as reported by Bloomberg L.P. at approximately 2:02 p.m. New York City time on the trade date. You will receive a payment at maturity that is based on the Basket Return, which measures the change in the value of the Basket over the term of the Notes, as described below: + If the Basket Return is positive, you will receive 100% of your principal amount, plus an additional amount equal to the product of the Basket Return and your principal amount. + If the Basket Return is less than or equal to the zero, you will receive 100% of your principal amount. The Initial Basket Value is 100 and the Final Basket Value will be calculated as follows: 100 x (1 + (0.20 x AUD Spot Rate Return) + (0.20 x NZD Spot Rate Return) + (0.20 x CAD Spot Rate Return) + (0.20 x NOK Spot Rate Return) + (0.20 x XAU Spot Rate Return)) S- 1 The return on each Basket Rate will be based on the appreciation or depreciation in the value of such Basket Rate over the term of the Notes. For further information concerning the calculation of the return of each Basket Rate and of the payment at maturity, see "How will your payment at maturity be calculated?" on page S-5 and "Specific Terms of the Notes--Payment at Maturity" on page S-20. The "Basket Return" measures the change in the values of the Basket Rates over the term of the Notes and is expressed as follows: Final Basket Value - Initial Basket Value Basket Return = ------------------------------------------- Initial Basket Value
We will not pay you interest during the term of the Notes. For a description of how your payment at maturity will be calculated, see "How will your payment at maturity be calculated?" on page S-5 and "Specific Terms of the Notes--Payment at Maturity" on page S-20. SELECTED PURCHASE CONSIDERATIONS + GROWTH POTENTIAL--The Notes, if held to maturity, provide the opportunity to participate in possible increases in the value of the Basket as expressed by changes in the Basket Rates. You will receive 100% of any positive Basket Return at maturity. If you sell the Notes prior to maturity, you will be exposed to fluctuations in the values of the Basket Rates without the benefit of principal protection. + PRINCIPAL PROTECTION--At maturity, you will receive at least 100% of your principal amount, or $1,000 per $1,000 principal amount of the Notes, even if the Basket Return is zero or negative. + U.S. DOLLAR DENOMINATED--The Notes trade and are settled in the U.S. market in U.S. dollars. 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 the "Risk Factors" section of this prospectus supplement beginning on page S-9 and the "Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency" section of the accompanying prospectus beginning on page 61. + NO INTEREST PAYMENTS--You will not receive any periodic interest payments on the Notes. + THE AMOUNT YOU RECEIVE AT MATURITY MAY RESULT IN A YIELD THAT IS LESS THAN THE YIELD ON A STANDARD DEBT SECURITY OF COMPARABLE MATURITY--The amount you receive at maturity may result in a yield that is less than the return you could earn on other investments. For example, your yield may be lower than the yield you would earn if you bought a standard United States dollar-denominated senior non-callable debt security of UBS with the same stated maturity date. + PRINCIPAL PROTECTION ONLY IF YOU HOLD THE NOTES TO MATURITY--If you sell your Notes in the secondary market prior to maturity, you may have to sell them at a discount and you will not have the benefit of principal protection from any decline in the value of the Basket as expressed by changes in the Basket Rates. You should be willing to hold your Notes to maturity. S- 2 + THERE MAY BE LITTLE OR NO SECONDARY MARKET FOR THE NOTES--We do not intend to list the Notes on any stock exchange and there can be no assurances that a secondary market for the Notes will develop. UBS Securities LLC and other affiliates of UBS currently intend to make a market in the Notes, although they are not required to do so and may stop making a market at any time. THE NOTES MAY BE A SUITABLE INVESTMENT FOR YOU IF: + You believe that the values of the Basket Rates will increase over the term of the Notes. + You seek an investment that offers principal protection when the Notes are held to maturity. + You are willing to hold the Notes to maturity. + You seek an investment with a return linked to the Basket Rates. + You do not seek current income from this investment. THE NOTES MAY NOT BE A SUITABLE INVESTMENT FOR YOU IF: + You seek current income from your investment. + You prefer the lower risk, and therefore accept the potentially lower returns, of fixed income investments with comparable maturities and credit ratings. + You seek an investment for which there will be an active secondary market. + You are unable or unwilling to hold the Notes until maturity. WHAT ARE THE AUSTRALIAN DOLLAR, THE NEW ZEALAND DOLLAR, THE CANADIAN DOLLAR AND THE NORWEGIAN KRONE? The Australian dollar is the official currency of the Commonwealth of Australia. The New Zealand dollar is the official currency of New Zealand. The Canadian dollar is the official currency of Canada. The Norwegian krone is the official currency of the Kingdom of Norway. We have obtained all information in this prospectus supplement relating to the Australian dollar, the New Zealand dollar, the Canadian dollar and the Norwegian krone from public sources, without independent verification. WHAT DOES THE BASKET RETURN REFLECT? The Basket is composed of the Basket Rates, each of which is given equal weight in determining the value of the Basket. The Basket Return reflects the change in the value of the Basket Rates over the term of the Notes. In order to calculate the Final Basket Value, the calculation agent on the final valuation date will determine the difference between the final spot rate and the initial spot rate for each of the Basket Rates, aggregating the currency return for each of the Basket Rates (whether positive or negative) to obtain the Final Basket Value as described in greater detail below. See "How will your payment at maturity be calculated?" on page S-5. 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-28. S- 3 In the opinion of our counsel, Sullivan & Cromwell LLP, the Notes will be treated as a single debt instrument subject to special rules governing contingent debt instruments for United States federal income tax purposes. Under these rules, you will generally be required to pay taxes on ordinary income from the Notes over their term based upon a comparable yield of the Notes, even though you will not receive any payments from us until maturity. Your cost basis in your Notes will be increased by the amount you are required to include in income. We have determined that the comparable yield is equal to 4.40% per annum, compounded semiannually. This comparable yield is neither a prediction nor a guarantee of what the actual payment at maturity will be, or that the actual payment at maturity will even exceed the principal amount of your Notes. For a more complete discussion of the United States federal income tax consequences of your investment in the Notes, including tax consequences applicable to non-United States persons and persons who purchase the Notes in the secondary market, please see the discussion under "Supplemental Tax Considerations--Supplemental U.S. Tax Considerations" on page S-28. S- 4 HOW WILL YOUR PAYMENT AT MATURITY BE CALCULATED? Your payment at maturity will depend on the Final Basket Value relative to the Initial Basket Value. + If the Final Basket Value is less than or equal to the Initial Basket Value of 100, you will receive $1,000 for each $1,000 principal amount of your Notes. Even if the Final Basket Value is substantially less than the Initial Basket Value, you will receive this amount at maturity. + If the Final Basket Value is greater than the Initial Basket Value, the following steps are necessary to calculate your payment at maturity: STEP 1: CALCULATE THE SPOT RATE RETURN FOR EACH OF THE BASKET RATES. The AUD Spot Rate Return is the difference between the AUD/USD spot rate on the final valuation date (the "Final AUD/USD Spot Rate") relative to the Initial AUD/USD Spot Rate of 0.7580, expressed as a percentage calculated as follows: Final AUD/USD Spot Rate - Initial AUD/USD Spot Rate AUD Spot Rate Return = ----------------------------------------------------- Initial AUD/USD Spot Rate
The NZD Spot Rate Return is the difference between the NZD/USD spot rate on the final valuation date (the "Final NZD/USD Spot Rate") relative to the Initial NZD/USD Spot Rate of 0.6870, expressed as a percentage calculated as follows: Final NZD/USD Spot Rate - Initial NZD/USD Spot Rate NZD Spot Rate Return = ----------------------------------------------------- Initial NZD/USD Spot Rate
The CAD Spot Rate Return is the difference between the USD/CAD spot rate on the final valuation date (the "Final USD/CAD Spot Rate") relative to the Initial USD/CAD Spot Rate of 1.1700, expressed as a percentage calculated as follows: Initial USD/CAD Spot Rate - Final USD/CAD Spot Rate CAD Spot Rate Return = ----------------------------------------------------- Final USD/CAD Spot Rate
An increase in the value of the Canadian dollar relative to the U.S. dollar is expressed as a decrease in the USD/CAD spot rate. The NOK Spot Rate Return is the difference between the USD/NOK spot rate on the final valuation date (the "Final USD/NOK Spot Rate") relative to the Initial USD/NOK Spot Rate of 6.4735, expressed as a percentage calculated as follows: Initial USD/NOK Spot Rate - Final USD/NOK Spot Rate NOK Spot Rate Return = ----------------------------------------------------- Final USD/NOK Spot Rate
An increase in the value of the Norwegian krone relative to the U.S. dollar is expressed as a decrease in the USD/NOK spot rate. The XAU/USD Spot Rate Return is the difference between the XAU/USD spot rate on the final valuation date (the "Final XAU/USD Spot Rate") relative to the Initial XAU/USD Spot Rate of 464.00, expressed as a percentage calculated as follows: Final XAU/USD Spot Rate - Initial XAU/USD Spot Rate XAU/USD Spot Rate Return = --------------------------------------------------- Initial XAU/USD Spot Rate
S- 5 STEP 2: CALCULATE THE FINAL BASKET VALUE. The Final Basket Value will be calculated as follows: 100 x (1 + (0.20 x AUD Spot Rate Return) + (0.20 x NZD Spot Rate Return) + (0.20 x CAD Spot Rate Return) + (0.20 x NOK Spot Rate Return) + (0.20 x XAU Spot Rate Return)) STEP 3: CALCULATE THE BASKET RETURN Final Basket Value - Initial Basket Value Basket Return = ------------------------------------------- Initial Basket Value
STEP 4: CALCULATE THE ADJUSTED PAYOUT PERCENTAGE Adjusted Payout Percentage = 100% + Basket Return STEP 5: CALCULATE THE PAYMENT AT MATURITY. Payment at maturity = Adjusted Payout Percentage x principal amount of your Notes HOW DO THE NOTES PERFORM AT MATURITY? HYPOTHETICAL EXAMPLES ASSUMPTIONS: Initial Investment Level: $1,000 Initial Basket Value: 100 Participation Rate: 100% Principal Protection: 100% Investment Term: Two years
BREAKEVEN OUTCOME: EXAMPLE 1--THE FINAL BASKET VALUE IS 75 ON THE FINAL VALUATION DATE, BELOW THE INITIAL BASKET VALUE OF 100 If the Final Basket Value is less than the Initial Basket Value of 100, 100% of your investment is protected. Your total payment at maturity would therefore be $1,000.00, which includes: + Principal Amount $1,000.00 + Minimum Payout (100% of principal amount) x100% --------- PAYMENT AT MATURITY: $1,000.00 (100% of $1,000, the minimum ========= payment on the Notes) LOSS...................... $0.00
EXAMPLE 2--THE FINAL BASKET VALUE IS 100 ON THE FINAL VALUATION DATE, EQUAL TO THE INITIAL BASKET VALUE Since the Final Basket Value is equal to the Initial Basket Value, you will receive 100% of your principal amount. S- 6 Your total payment at maturity would therefore be $1,000.00, which includes: + Principal Amount $1,000.00 + Minimum Payout (100% of principal amount). x100% --------- PAYMENT AT MATURITY: $1,000.00 (100% of $1,000, the minimum ========= payment on the Notes) LOSS $0.00
GAIN OUTCOMES: EXAMPLE 3--THE FINAL BASKET VALUE IS 103 ON THE FINAL VALUATION DATE, A 3% INCREASE FROM THE INITIAL BASKET VALUE OF 100 Since the Final Basket Value is above the Initial Basket Value of 100, you will receive 100% of your principal amount, plus an additional payment equal to 3% of your principal amount. 103 - 100 Basket Return: ----------- = 3% 100
Adjusted Payout Percentage: 100% + 3% = 103% Your total payment at maturity would therefore be $1,030.00 (a 3% total return on investment), which includes: + Principal Amount $1,000.00 + Adjusted Payout Percentage x103% --------- PAYMENT AT MATURITY: $1,030.00 (103% of $1,000) ========= INCOME $30.00
EXAMPLE 4--THE FINAL BASKET VALUE IS 111 ON THE FINAL VALUATION DATE, AN 11% INCREASE FROM THE INITIAL BASKET VALUE OF 100 Since the Final Basket Value is greater than the Initial Basket Value of 100, you will receive 100% of your principal amount, plus an additional payment equal to 11% of your principal amount. 111 - 100 Basket Return: ----------- = 11% 100
Adjusted Payout Percentage: 100% + 11% = 111% Your total payment at maturity would therefore be $1,110.00 (an 11% total return on investment) which includes: + Principal Amount $1,000.00 + Adjusted Payout Percentage x111% --------- PAYMENT AT MATURITY: $1,110.00 (111% of $1,000) ========= INCOME $110.00
S- 7 HYPOTHETICAL PERFORMANCE AT MATURITY
TOTAL AMOUNT HYPOTHETICAL % CHANGE FROM PAYMENT AT PAYABLE AT TOTAL RATE OF FINAL BASKET THE INITIAL MATURITY IN % OF MATURITY PER RETURN ON VALUE BASKET VALUE PRINCIPAL AMOUNT NOTE NOTES 90..... -10.00% 100% $1,000.00 0.00% 91..... -9.00% 100% $1,000.00 0.00% 92..... -8.00% 100% $1,000.00 0.00% 93..... -7.00% 100% $1,000.00 0.00% 94..... -6.00% 100% $1,000.00 0.00% 95..... -5.00% 100% $1,000.00 0.00% 96..... -4.00% 100% $1,000.00 0.00% 97..... -3.00% 100% $1,000.00 0.00% 98..... -2.00% 100% $1,000.00 0.00% 99..... -1.00% 100% $1,000.00 0.00% 100.... 0.00% 100% $1,000.00 0.00% 101.... 1.00% 101% $1,010.00 1.00% 102.... 2.00% 102% $1,020.00 2.00% 103.... 3.00% 103% $1,030.00 3.00% 104.... 4.00% 104% $1,040.00 4.00% 105.... 5.00% 105% $1,050.00 5.00% 106.... 6.00% 106% $1,060.00 6.00% 107.... 7.00% 107% $1,070.00 7.00% 108.... 8.00% 108% $1,080.00 8.00% 109.... 9.00% 109% $1,090.00 9.00% 110.... 10.00% 110% $1,100.00 10.00% 111.... 11.00% 111% $1,110.00 11.00% 112.... 12.00% 112% $1,120.00 12.00% 113.... 13.00% 113% $1,130.00 13.00% 114.... 14.00% 114% $1,140.00 14.00% 115.... 15.00% 115% $1,150.00 15.00% 116.... 16.00% 116% $1,160.00 16.00% 117.... 17.00% 117% $1,170.00 17.00% 118.... 18.00% 118% $1,180.00 18.00% 119.... 19.00% 119% $1,190.00 19.00% 120.... 20.00% 120% $1,200.00 20.00%
S- 8 - -------------------------------------------------------------------------------- RISK FACTORS The return on the Notes is linked to the performance of the Basket Rates over the term of the Notes. 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 YOUR 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 will not be entitled to principal protection or any minimum total return on the portion of your Notes sold. You therefore should be willing to hold your Notes to maturity. OWNING THE NOTES IS NOT THE SAME AS OWNING AUSTRALIAN DOLLARS, NEW ZEALAND DOLLARS, CANADIAN DOLLARS, NORWEGIAN KRONE AND GOLD The return on your Notes may not reflect the return you would realize if you actually purchased Australian dollars, New Zealand dollars, Canadian dollars, Norwegian krone and gold and converted them into U.S. dollars on the final valuation date. The AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/NOK spot rate and the XAU/USD spot rate are calculated by reference to the value of the Australian dollar, New Zealand dollar, Canadian dollar, Norwegian krone and gold, respectively, relative to the U.S. dollar without taking into consideration the value of these components relative to other currencies or in other markets. YOU MUST RELY ON YOUR OWN EVALUATION OF THE MERITS OF AN INVESTMENT LINKED TO THE BASKET RATES In the ordinary course of our and their businesses, we or one or more of our affiliates from time to time express views on expected movements in foreign currency exchange rates, including the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/NOK spot rate, and the prices of precious metals, including the XAU/USD spot rate. These views are sometimes communicated to clients who participate in foreign exchange markets and the gold bullion market. However, these views, depending upon world-wide economic, political and other developments, may vary over differing time-horizons and are subject to change. Moreover, other professionals who deal in foreign currencies and precious metals may at any time have significantly different views from our views or those of our affiliates. For reasons such as these, we believe that most investors in foreign exchange markets and precious metals markets derive information concerning those markets from multiple sources. In connection with your purchase of the Notes, you should investigate the foreign exchange markets and the precious metals markets and not rely on views which may be expressed by us or our affiliates in the ordinary course of our or their businesses with respect to future exchange rate movements. THE BASKET IS COMPOSED OF THE BASKET RATES; ANY POSITIVE RETURN IN ONE BASKET RATE MAY BE OFFSET BY A NEGATIVE RETURN IN ANOTHER BASKET RATE The Notes are linked to the performance of the Basket, which is composed of the five Basket Rates. Each of the Basket Rates is given equal weight in determining the value of the Basket. Accordingly, the performance of the Basket will be based on the aggregate appreciation or depreciation of the Basket Rates taken as a whole. Therefore, a positive return in one Basket Rate may be offset, in whole or in part, by a negative return of a lesser, equal or greater magnitude in another Basket Rate, resulting in S- 9 RISK FACTORS - -------------------------------------------------------------------------------- an aggregate Basket Return equal to or less than zero. For example, a 10% AUD Spot Rate Return would be completely offset by the combination of a -3% NZD Spot Rate Return, a -3% CAD Spot Rate Return, a -2% NOK Spot Rate Return, and a -2% XAU Spot Rate Return, resulting in a Basket Return of zero and a payment at maturity to you of only your principal amount. YOU SHOULD MAKE SUCH INVESTIGATION AS YOU DEEM APPROPRIATE AS TO THE MERITS OF AN INVESTMENT LINKED TO THE BASKET RATES. NEITHER THE OFFERING OF THE NOTES NOR ANY VIEWS WHICH MAY FROM TIME TO TIME BE EXPRESSED BY US OR OUR AFFILIATES IN THE ORDINARY COURSE OF OUR OR THEIR BUSINESSES WITH RESPECT TO FUTURE MOVEMENTS IN FOREIGN EXCHANGE MARKETS OR PRECIOUS METALS MARKETS CONSTITUTES A RECOMMENDATION AS TO THE MERITS OF AN INVESTMENT IN THE NOTES 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. Several factors, many of which are beyond our control, will influence the market value of the Notes. WE EXPECT THAT GENERALLY THE AUD/USD SPOT RATE, THE NZD/USD SPOT RATE, THE USD/CAD SPOT RATE, THE USD/NOK SPOT RATE AND THE XAU/USD SPOT RATE 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: + supply and demand for the Notes, including inventory positions held by UBS Securities LLC, UBS Financial Services Inc. or any other market maker + Australian dollar, New Zealand dollar, Canadian dollar, Norwegian krone, and U.S. dollar interest rates + the time remaining to the final valuation date + the creditworthiness of UBS + volatility of the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/ NOK spot rate and the XAU/USD spot rate. THE AUD/USD SPOT RATE, THE NZD/USD SPOT RATE, THE USD/CAD SPOT RATE, THE USD/NOK SPOT RATE AND THE XAU/USD SPOT RATE WILL BE INFLUENCED BY UNPREDICTABLE FACTORS WHICH INTERRELATE IN COMPLEX WAYS The AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, and the USD/NOK spot rate are a result of the supply of, and demand for, each currency, and in the case of the XAU/USD spot rate, gold, and changes in the foreign exchange rate and the price of gold as reflected in the XAU/ USD spot rate may result from the interactions of many factors, including economic, financial, social and political conditions in Australia, New Zealand, Canada, Norway and the United States, and in the case of gold, the factors described in the following risk factor. These conditions include, for example, the overall growth and performance of the economies of the United States and Australia, New Zealand, Canada and Norway, the relative strength of, and confidence in, the U.S. dollar (the currency in which the price of gold is generally quoted), the trade and current account balance between the United States and Australia, New Zealand, Canada and Norway, market interventions by the Federal Reserve Board or the respective central banks of Australia, New Zealand, Canada and Norway, inflation and expected rates of future inflation, interest rate levels and gold borrowing and lending rates, the performance of the stock markets in the U.S. and Australia, New Zealand, Canada and Norway, the stability of the government of the United States and the governments of Australia, New Zealand, Canada and Norway and their respective banking systems, the structure of and confidence in the global monetary system, wars in which the United States or Australia, New Zealand, Canada and S- 10 RISK FACTORS - -------------------------------------------------------------------------------- Norway are directly or indirectly involved or that occur anywhere in the world, major natural disasters in the United States or Australia, New Zealand, Canada and Norway, and other foreseeable and unforeseeable global or regional economic, financial, political, judicial or other events. Certain relevant information relating to Australia, New Zealand, Canada and Norway may not be as well known or as rapidly or thoroughly reported in the United States as comparable to United States developments. Prospective purchasers of the Notes should be aware of the possible lack of availability of important information that can affect the value of the Basket Rates and must be prepared to make special efforts to obtain such information on a timely basis. It is not possible to predict the aggregate effect of all or any combination of these factors. Your Notes are likely to trade differently from the market price of the Basket Rates, and changes in the market price of the Basket Rates are not likely to result in comparable changes in the market value of your Notes. THE MARKET PRICE OF GOLD WILL AFFECT THE MARKET VALUE OF THE NOTES We expect generally that the market value of the Notes will depend partially on the market price of gold. Gold prices are subject to volatile price movements over short periods of time and are affected by numerous factors. In addition to the macroeconomic and other factors described in the preceding risk factor, gold prices may also be affected by industry factors such as: + industrial and jewelry demand; + lending, sales and purchases of gold by the official sector, including central banks and other governmental agencies and multilateral institutions which hold gold; + levels of gold production and production costs; + actions by or involving gold mining companies; and + short-term changes in supply and demand because of trading activities in the gold market. THE LIQUIDITY, TRADING VALUE AND AMOUNTS PAYABLE UNDER THE NOTES COULD BE AFFECTED BY THE ACTIONS OF THE GOVERNMENTS OF THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, AND NORWAY Exchange rates of most economically developed nations, including those of Australia, New Zealand, Canada and Norway, are "floating," meaning they are permitted to fluctuate in value relative to the U.S. dollar. However, governments of other nations, from time to time, do not allow their currencies to float freely in response to economic forces. Governments, including those of the United States, Australia, New Zealand, Canada, and Norway, use a variety of techniques, such as intervention by their central bank or imposition of regulatory controls or taxes, to affect the exchange rates of their respective currencies. Governments may also issue a new currency to replace an existing currency or alter the exchange rate or relative exchange characteristics by devaluation or revaluation of a currency. Thus, a special risk in purchasing the Notes is that their liquidity, trading value and amounts payable could be affected by the actions of sovereign governments which could change or interfere with theretofore freely determined currency valuation, fluctuations in response to other market forces and the movement of currencies across borders. There will be no adjustment or change in the terms of the Notes in the event that exchange rates should become fixed, or in the event of any devaluation or revaluation or imposition of exchange or other regulatory controls or taxes, or in the event of the issuance of a replacement currency or in the event of other developments affecting the Australian dollar, the New Zealand dollar, the Canadian dollar, the Norwegian krone, the U.S. dollar or any other currency. S- 11 RISK FACTORS - -------------------------------------------------------------------------------- EVEN THOUGH THE AUSTRALIAN DOLLAR, THE NEW ZEALAND DOLLAR, THE CANADIAN DOLLAR, THE NORWEGIAN KRONE, THE U.S. DOLLAR AND GOLD ARE TRADED AROUND-THE-CLOCK, IF A SECONDARY MARKET DEVELOPS, THE NOTES MAY TRADE ONLY DURING REGULAR TRADING HOURS IN THE UNITED STATES The interbank market for the Australian dollar, New Zealand dollar, Canadian dollar, Norwegian krone and U.S. dollar is a global, around-the-clock market. Therefore, the hours of trading for the Notes may not conform to the hours during which the Australian dollar, the New Zealand dollar, the Canadian dollar, the Norwegian krone and the U.S. dollar are traded. To the extent that U.S. markets are closed while markets for the Australian dollar, the New Zealand dollar, the Canadian dollar, the Norwegian krone and the U.S. dollar remain open, significant price and rate movements may take place in the underlying foreign exchange markets that will not be reflected immediately in the price of the Notes. In addition, gold is traded in a global, around-the-clock market. There is no systematic reporting of last-sale information for foreign currencies or gold bullion. Reasonable current bid and offer information is available in certain brokers' offices, in bank foreign currency and gold bullion trading offices, and to others who wish to subscribe for this information, but this information will not necessarily reflect the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate and the USD/NOK spot rate relevant for determining the value of the Notes. The absence of last-sale information and the limited availability of quotations to individual investors make it difficult for many investors to obtain timely, accurate data about the state of the underlying foreign exchange and gold bullion markets. YOU MAY NOT HAVE AN ACTIVE TRADING MARKET IN THE NOTES There may be little or no secondary market for the Notes. We do not intend to list the Notes on any U.S. stock exchange and it is not possible to predict whether a secondary market will develop for the Notes. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. UBS Securities LLC, UBS Financial Services Inc. and other affiliates of UBS currently intend to act as market makers for the Notes, but they are NOT required to do so. If UBS Securities LLC, UBS Financial Services Inc. or any other affiliate makes a market in the Notes, it may stop doing so at any time. HISTORICAL PERFORMANCE OF THE AUD/USD SPOT RATE, THE NZD/USD SPOT RATE, THE USD/CAD SPOT RATE, THE USD/NOK SPOT RATE AND THE XAU/USD SPOT RATE SHOULD NOT BE TAKEN AS AN INDICATION OF THE FUTURE PERFORMANCE OF THE BASKET RATES DURING THE TERM OF THE NOTES It is impossible to predict whether any of the AUD/USD spot rate, the NZD/USD spot rate, the USD/ CAD spot rate, the USD/NOK spot rate or the XAU/USD spot rate will rise or fall. The AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/NOK spot rate and the XAU/ USD spot rate will be influenced by complex and interrelated political, economic, financial and other factors. See "The AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/ NOK spot rate and the XAU/USD spot rate will be influenced by unpredictable factors which interrelate in complex ways" and "The market price of gold will affect the market value of the Notes" above. TRADING BY UBS OR ITS AFFILIATES IN THE FOREIGN EXCHANGE AND CURRENCY DERIVATIVE MARKETS AND THE GOLD MARKETS MAY IMPAIR THE VALUE OF THE NOTES We and our affiliates are active participants in the interbank foreign exchange and currency derivative markets and the London gold bullion market as dealers, proprietary traders and agents for our S- 12 RISK FACTORS - -------------------------------------------------------------------------------- customers, and therefore at any given time we may be in foreign exchange or currency derivative transactions or gold bullion market transactions. In addition, as described below under "Use of Proceeds and Hedging" on page S-26, we or one or more of our affiliates may hedge our foreign currency exposure and gold exposure from the Notes by entering into foreign exchange and currency and gold derivative transactions, such as options or futures on gold or exchange-traded funds. Our trading and hedging activities may affect the AUD/USD spot rate, the NZD/USD spot rate, the USD/ CAD spot rate, the USD/NOK spot rate and the XAU/USD spot rate, and make it less likely that you will receive a return on your investment in the Notes. It is possible that UBS or its affiliates could receive substantial returns from these hedging activities while the market value of the Notes declines. UBS or its affiliates may also engage in trading in instruments linked to the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/NOK spot rate and the XAU/USD spot rate 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. In addition, in its capacity as a market-making member of the London Bullion Market Association, UBS quotes prices for the buying and selling of gold for spot and forward delivery on a daily basis. Any of these activities could adversely affect the XAU/USD spot rate and, therefore, the market value of the Notes. UBS or its affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/NOK spot rate and the XAU/USD spot rate. By introducing competing products into the marketplace in this manner, UBS or its affiliates could adversely 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 Australian dollar, New Zealand dollar, Canadian dollar, Norwegian krone, the U.S. dollar and gold 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 options and other derivatives transactions, for their customers, and in accounts under their management. These trading activities, if they influence the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/ NOK spot rate and the XAU/USD spot rate, could be adverse to the interests of the holders of the Notes. We or one or more of our affiliates have published and may in the future publish research on foreign exchange markets, exchange rates, the future price of gold and other matters that may have an influence on currency exchange rates and the price of gold. 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. UBS and its affiliates may also discontinue providing any such research at any time, without notice. YOU WILL NOT RECEIVE INTEREST PAYMENTS ON THE NOTES THERE ARE POTENTIAL CONFLICTS OF INTEREST BETWEEN YOU AND THE CALCULATION AGENT Our affiliate, UBS Securities LLC, will serve as the calculation agent. UBS Securities 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-25. The calculation agent will exercise its judgment when performing its functions. For example, the calculation agent will determine the Final Basket Level on the final valuation date or whether a market disruption S- 13 RISK FACTORS - -------------------------------------------------------------------------------- event with respect to the XAU/USD spot rate has occurred or is continuing on the final valuation date. Since this determination by the calculation agent will affect the payment at maturity on the Notes, the calculation agent may have a conflict of interest. THERE ARE POTENTIAL CONFLICTS OF INTEREST BETWEEN YOU AND UBS IN ITS CAPACITY AS A MARKET-MAKING MEMBER OF THE LONDON BULLION MARKET ASSOCIATION. In its capacity as a market-making member of the London Bullion Market Association ("LBMA"), UBS quotes prices for buying and selling of gold for spot and forward delivery on a daily basis. As described below, if a market disruption event occurs or is continuing on the final valuation date, the calculation agent will determine the ending price based on quotations provided by at least three major gold bullion dealers that are members of the LBMA. Accordingly, in determining the ending price, the calculation agent may rely in part on a quotation provided by UBS in its capacity as a market-making member of the LBMA. This may present a conflict between our obligations as a market-making member of the LBMA and your interests as a holder of the Notes. THE CALCULATION AGENT CAN POSTPONE THE MATURITY DATE IF A MARKET DISRUPTION EVENT WITH RESPECT TO THE XAU/USD SPOT RATE OCCURS ON THE FINAL VALUATION DATE If the calculation agent determines that a market disruption event has occurred or is continuing on the final valuation date with respect to the XAU/USD spot rate, the calculation agent will determine the ending price of the XAU/USD spot rate based on quotations provided by at least three major gold bullion dealers that are members of the London Bullion Market Association, which we refer to as "gold reference dealers." If the calculation agent is unable to determine the ending price on the basis of quotations provided by gold reference dealers, the calculation agent will use the ending price on the next Gold Trading Day on which no market disruption event occurs or is continuing. In no event, however, will the final valuation date with respect to the XAU/USD spot rate be postponed by more than five business days. As a result, the maturity date for the Notes could also be postponed, although not by more than five business days. If the final valuation date with respect to the XAU/USD spot rate 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. If the ending price is not available on the last possible final valuation date either because of a market disruption event with respect to the XAU/ USD spot rate or for any other reason, the calculation agent will make a good faith estimate based on its assessment, made in its sole discretion, of the ending price that would have prevailed in the absence of such market disruption event or such other reason. See "Specific Terms of the Notes--Market Disruption Event" on page S-22. SIGNIFICANT ASPECTS OF THE TAX TREATMENT OF THE NOTES ARE UNCERTAIN Significant aspects of the tax treatment of the Notes are uncertain. 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-28 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. S- 14 - -------------------------------------------------------------------------------- OPERATION OF THE GOLD BULLION MARKET The following discussion of the operation of the gold bullion market is based on publicly available information and is provided for informational purposes only. You should make your own investigation into the gold bullion market in determining whether the Notes are a suitable investment for you. The London gold bullion market is the principal global clearing center for over-the-counter gold bullion transactions, including transactions in spot, forward and options contracts, together with exchange-traded futures and options and other derivatives. The principal representative body of the London gold bullion market is the London Bullion Market Association ("LBMA"), whose membership represents all sectors of the gold bullion market. The LBMA currently comprises 60 members, of which 9 are market-making members, plus a number of associate members around the world. UBS is currently a market-making member of the LBMA. Twice daily during London trading hours there is a "fixing" which provides reference gold prices for that day's trading. Formal participation in the London fixing is traditionally limited to five market-making members of the LBMA. These members meet each London business day at 10:30 a.m., to determine the London A.M. Fixing Price, and at 3:00 p.m., to determine the London P.M. Fixing Price via telephone. The five members of the fixing are currently the Bank of Nova Scotia-- ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA, NA and Societe Generale. The fixing chairmanship rotates annually amongst these members. Clients place orders with the dealing rooms of fixing members, who net all orders before communicating their interest to their representative at the fixing. Orders may be changed at any time during these proceedings. The gold price is adjusted to reflect whether there are more buyers or sellers at a given price until supply and demand are balanced, at which time the price is declared fixed. All fixing orders are then fulfilled at this price, which is communicated to the market through various media. In addition to the London bullion market, over-the-counter trading in gold occurs globally, on a twenty-four hour basis on the basis of the XAU/USD spot rate. LBMA fixing prices are influenced by trades settled using the XAU/USD spot rate in over-the-counter trades conducted in markets other than the London bullion market, and the LBMA fixing prices influence the quotes based on the XAU/USD spot rate. Generally, the quoted XAU/USD spot rate tends to converge toward the LBMA fixing price after the fixing price has been published. UBS intends to use the XAU/USD spot rate as reported by Bloomberg L.P. for purposes of calculating the Basket. HISTORICAL GOLD PRICES The market for gold bullion is global and gold prices are subject to volatile price movements over short periods of time and are affected by numerous factors, including macroeconomic factors such as the structure of and confidence in the global monetary system; expectations of the future rate of inflation; the relative strength of, and confidence in, the U.S. dollar, the currency in which the price of gold is generally quoted; interest rates; gold borrowing and lending rates; and global or regional economic, financial, political, regulatory, judicial or other events. In addition, gold prices may be affected by industry factors such as industrial and jewelry demand; lending, sales and purchases of gold by the official sector, including central banks and other governmental agencies and multilateral institutions which hold gold; levels of gold production and production costs; and short-term changes in supply and demand because of trading activities in the gold market. It is not possible to predict the aggregate effect of all or any combination of these factors. See "Risk Factors" beginning on page S-9. S- 15 - -------------------------------------------------------------------------------- 5-YEAR HISTORICAL BASKET LEVEL The currencies underlying the Basket Rates are traded by all major foreign exchange traders around the world, and gold bullion is also traded globally, as described under "Operation of the Gold Bullion Market" beginning on p. S-15. The following table and graph set forth the hypothetical historical month-end values of the Basket from September 2000 through September 23, 2005, based upon the historical AUD/USD spot rate, NZD/USD spot rate, USD/CAD spot rate, USD/NOK spot rate and XAU/USD spot rate, the participation rate of 100% and an Initial Basket Value of 100 on September 23, 2005. As of approximately 2:02 p.m. New York City time on September 23, 2005, the AUD/USD spot rate was 0.7580, the NZD/USD spot rate was 0.6870, the USD/CAD spot rate was 1.1700, the NOK/USD spot rate was 6.4735, and the XAU/USD spot rate was 464.00. We obtained the trading price information for the Basket Rates from Bloomberg L.P., without independent verification. The hypothetical historical performance of the Basket should not be taken as an indication of future performance. HISTORICAL MONTH END VALUES OF THE BASKET (PERFORMANCE GRAPH) S- 16 HISTORICAL BASKET LEVEL - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------ DATE MONTH END BASKET VALUE - ------------------------------------------------------------------------------------------ Sep-00...................................................... 67.85 - ------------------------------------------------------------------------------------------ Oct-00...................................................... 65.89 - ------------------------------------------------------------------------------------------ Nov-00...................................................... 66.78 - ------------------------------------------------------------------------------------------ Dec-00...................................................... 69.71 - ------------------------------------------------------------------------------------------ Jan-01...................................................... 69.28 - ------------------------------------------------------------------------------------------ Feb-01...................................................... 67.70 - ------------------------------------------------------------------------------------------ Mar-01...................................................... 64.62 - ------------------------------------------------------------------------------------------ Apr-01...................................................... 66.41 - ------------------------------------------------------------------------------------------ May-01...................................................... 65.77 - ------------------------------------------------------------------------------------------ Jun-01...................................................... 66.38 - ------------------------------------------------------------------------------------------ Jul-01...................................................... 66.45 - ------------------------------------------------------------------------------------------ Aug-01...................................................... 68.35 - ------------------------------------------------------------------------------------------ Sep-01...................................................... 66.85 - ------------------------------------------------------------------------------------------ Oct-01...................................................... 66.59 - ------------------------------------------------------------------------------------------ Nov-01...................................................... 67.12 - ------------------------------------------------------------------------------------------ Dec-01...................................................... 66.73 - ------------------------------------------------------------------------------------------ Jan-02...................................................... 66.60 - ------------------------------------------------------------------------------------------ Feb-02...................................................... 67.92 - ------------------------------------------------------------------------------------------ Mar-02...................................................... 69.24 - ------------------------------------------------------------------------------------------ Apr-02...................................................... 70.84 - ------------------------------------------------------------------------------------------ May-02...................................................... 74.59 - ------------------------------------------------------------------------------------------ Jun-02...................................................... 75.29 - ------------------------------------------------------------------------------------------ Jul-02...................................................... 72.66 - ------------------------------------------------------------------------------------------ Aug-02...................................................... 73.85 - ------------------------------------------------------------------------------------------ Sep-02...................................................... 74.14 - ------------------------------------------------------------------------------------------ Oct-02...................................................... 74.91 - ------------------------------------------------------------------------------------------ Nov-02...................................................... 75.64 - ------------------------------------------------------------------------------------------ Dec-02...................................................... 78.64 - ------------------------------------------------------------------------------------------ Jan-03...................................................... 81.35 - ------------------------------------------------------------------------------------------ Feb-03...................................................... 81.27 - ------------------------------------------------------------------------------------------ Mar-03...................................................... 80.40 - ------------------------------------------------------------------------------------------ Apr-03...................................................... 82.35 - ------------------------------------------------------------------------------------------ May-03...................................................... 86.21 - ------------------------------------------------------------------------------------------ Jun-03...................................................... 85.16 - ------------------------------------------------------------------------------------------
S- 17 HISTORICAL BASKET LEVEL - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------ DATE MONTH END BASKET VALUE - ------------------------------------------------------------------------------------------ Jul-03...................................................... 83.74 - ------------------------------------------------------------------------------------------ Aug-03...................................................... 84.22 - ------------------------------------------------------------------------------------------ Sep-03...................................................... 87.56 - ------------------------------------------------------------------------------------------ Oct-03...................................................... 89.07 - ------------------------------------------------------------------------------------------ Nov-03...................................................... 91.89 - ------------------------------------------------------------------------------------------ Dec-03...................................................... 94.30 - ------------------------------------------------------------------------------------------ Jan-04...................................................... 93.26 - ------------------------------------------------------------------------------------------ Feb-04...................................................... 93.54 - ------------------------------------------------------------------------------------------ Mar-04...................................................... 94.86 - ------------------------------------------------------------------------------------------ Apr-04...................................................... 89.80 - ------------------------------------------------------------------------------------------ May-04...................................................... 90.70 - ------------------------------------------------------------------------------------------ Jun-04...................................................... 90.22 - ------------------------------------------------------------------------------------------ Jul-04...................................................... 89.96 - ------------------------------------------------------------------------------------------ Aug-04...................................................... 92.00 - ------------------------------------------------------------------------------------------ Sep-04...................................................... 94.82 - ------------------------------------------------------------------------------------------ Oct-04...................................................... 97.70 - ------------------------------------------------------------------------------------------ Nov-04...................................................... 101.41 - ------------------------------------------------------------------------------------------ Dec-04...................................................... 101.16 - ------------------------------------------------------------------------------------------ Jan-05...................................................... 98.57 - ------------------------------------------------------------------------------------------ Feb-05...................................................... 100.60 - ------------------------------------------------------------------------------------------ Mar-05...................................................... 99.33 - ------------------------------------------------------------------------------------------ Apr-05...................................................... 99.75 - ------------------------------------------------------------------------------------------ May-05...................................................... 97.15 - ------------------------------------------------------------------------------------------ Jun-05...................................................... 98.11 - ------------------------------------------------------------------------------------------ Jul-05...................................................... 97.38 - ------------------------------------------------------------------------------------------ Aug-05...................................................... 98.99 - ------------------------------------------------------------------------------------------ September 23, 2005.......................................... 100.00 - ------------------------------------------------------------------------------------------
S- 18 - -------------------------------------------------------------------------------- VALUE OF THE NOTES AT MATURITY. Your payment at maturity is based on the change in the value of the Basket Rates over the term of the Notes: + If the Basket Return is positive, you will receive 100% of your principal amount, plus an additional amount equal to the product of the Basket Return and your principal amount. + If the Basket Value is less than or equal to zero, you will receive 100% of your principal amount, or $1,000 for each $1,000 principal amount of your Notes. For a description of how your payment at maturity will be calculated, see "How will your payment at maturity be calculated?" on page S-5 and "Specific Terms of the Notes--Payment at Maturity" on page S-20. PRIOR TO MATURITY. You should understand that the market value of the Notes will be affected by several factors, many of which are beyond our control. We expect that generally the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate, the USD/NOK spot rate and the XAU/USD spot rate 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 supply and demand for the Notes, the level of interest rates and other economic conditions, as well as the perceived creditworthiness of UBS. See "Risk Factors" beginning on page S-9 for a discussion of the factors that may influence the market value of the Notes prior to maturity. S- 19 - -------------------------------------------------------------------------------- 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 "Legal Ownership and Book-Entry Issuance" 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 Debt Securities 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 the public and the net proceeds to UBS on the front cover of this prospectus supplement 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. PAYMENT AT MATURITY Your payment at maturity will depend on the Basket Return as calculated on the final valuation date: If the Basket Return is positive, you will receive 100% of your principal amount, plus an additional amount equal to the product of the Basket Return and your principal amount. + If the Basket Return is less than or equal to zero, you will receive $1,000 for each $1,000 principal amount of your Notes. Even if the Basket Return is substantially less than zero, you will receive this amount at maturity. + If the Basket Value is greater than 100, the following steps are necessary to calculate your payment at maturity: STEP 1: Calculate the Spot Rate Return for each of the Basket Rates. The AUD Spot Rate Return is the difference between the AUD/USD spot rate on the final valuation date (the "Final AUD/USD Spot Rate") relative to the Initial AUD/USD Spot Rate of 0.7580, expressed as a percentage calculated as follows: Final AUD/USD Spot Rate - Initial AUD/USD Spot Rate AUD Spot Rate Return = --------------------------------------------------- Initial AUD/USD Spot Rate
The NZD Spot Rate Return is the difference between the NZD/USD spot rate on the final valuation date (the "Final NZD/USD Spot Rate") relative to the Initial NZD/USD Spot Rate of 0.6870, expressed as a percentage calculated as follows: Final NZD/USD Spot Rate - Initial NZD/USD Spot Rate NZD Spot Rate Return = --------------------------------------------------- Initial NZD/USD Spot Rate
S- 20 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- The CAD Spot Rate Return is the difference between the USD/CAD spot rate on the final valuation date (the "Final USD/CAD Spot Rate") relative to the Initial USD/CAD Spot Rate of 1.1700, expressed as a percentage calculated as follows: Initial USD/CAD Spot Rate - Final USD/CAD Spot Rate CAD Spot Rate Return = --------------------------------------------------- Final USD/CAD Spot Rate
An increase in the value of the Canadian dollar relative to the U.S. dollar is expressed as a decrease in the USD/CAD spot rate. The NOK Spot Rate Return is the difference between the USD/NOK spot rate on the final valuation date (the "Final USD/NOK Spot Rate") relative to the Initial USD/NOK Spot Rate of 6.4735, expressed as a percentage calculated as follows: Initial USD/NOK Spot Rate - Final USD/NOK Spot Rate NOK Spot Rate Return = --------------------------------------------------- Final USD/ NOK Spot Rate
An increase in the value of the Norwegian krone relative to the U.S. dollar is expressed as a decrease in the USD/NOK spot rate. The XAU/USD Spot Rate Return is the difference between the XAU/USD spot rate on the final valuation date (the "Final XAU/USD Spot Rate") relative to the Initial XAU/USD Spot Rate of 464.00, expressed as a percentage calculated as follows: Final XAU/USD Spot Rate - Initial XAU/USD Spot Rate XAU/USD Spot Rate Return = --------------------------------------------------- Initial XAU/USD Spot Rate
STEP 2: Calculate the Final Basket Value. The Final Basket Value is calculated as follows: 100 X (1 + (0.20 X AUD Spot Rate Return) + (0.20 X NZD Spot Rate Return) + (0.20 X CAD Spot Rate Return) + (0.20 X NOK Spot Rate Return) + (0.20 X XAU Spot Rate Return)) STEP 3: Calculate the Basket Return. The Basket Return is the difference between Final Basket Value on the final valuation date relative to the Initial Basket Value of 100, expressed as a percentage, calculated as follows: Final Basket Value - Initial Basket Value Basket Return = ----------------------------------------- Initial Basket Value
STEP 4: Calculate the Adjusted Payout Percentage on the Notes. Adjusted Payout Percentage = 100% + Basket Return STEP 5: Calculate the payment at maturity. Payment at maturity = Adjusted Payout Percentage X principal amount of your Notes For purposes of this section, the following terms shall have the meanings set forth below: The "Initial Basket Value" is 100. The "Final Basket Value" will be determined by the calculation agent and will be calculated as follows: 100 X (1 + (0.20 X AUD Spot Rate Return) + (0.20 X NZD Spot Rate Return) + (0.20 X CAD Spot Rate Return) + (0.20 X NOK Spot Rate Return) + (0.20 X XAU Spot Rate Return)) S- 21 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- The calculation agent will determine the AUD Spot Rate Return, the NZD Spot Rate Return, the CAD Spot Rate Return and the NOK Spot Rate Return based on the value of the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate and the USD/NOK spot rate in the interbank market as reported by Bloomberg L.P. at approximately 10:00 a.m., New York City time, on the final valuation date. However, if any of the AUD/USD spot rate, the NZD/USD spot rate, the USD/CAD spot rate or the USD/NOK spot rate is not so quoted by Bloomberg L.P., then such exchange rate will be calculated on the basis of the arithmetic mean of the applicable spot quotations received by the calculation agent at approximately 10:00 a.m., New York City time, on such date for the purchase or sale by the Reference Dealers of the Reference Amount for settlement two Business Days later. If fewer than two Reference Dealers provide such spot quotations, then such exchange rate will be calculated on the basis of the arithmetic mean of the applicable spot quotations received by the calculation agent at approximately 10:00 a.m., New York City time, on such date from three leading commercial banks in New York (selected in the sole discretion of the calculation agent), for the sale by such banks of the Reference Amount for settlement two Business Days later. If these spot quotations are available from fewer than three banks, then the calculation agent, in its sole discretion, shall determine which spot rate is available and reasonable to be used. If no spot quotation is available, then such exchange rate will be the rate the calculation agent, in its sole discretion, determines to be fair and reasonable under the circumstances at approximately 10:00 a.m., New York City time, on such date. MARKET DISRUPTION EVENT The calculation agent will determine the XAU Spot Rate Return based on the XAU/USD spot rate as reported by Bloomberg L.P. at approximately 10:00 a.m., New York City time, on the final valuation date. If a market disruption event occurs or is continuing on the final valuation date with respect to the XAU/USD spot rate, however, the calculation agent will determine the ending price based on quotations provided by at least three major gold bullion dealers that are members of the London Bullion Market Association, which we refer to as "gold reference dealers." If the calculation agent is unable to determine the ending price on the basis of quotations provided by gold reference dealers, then the calculation agent will use the ending price on the next Gold Trading Day on which no market disruption event occurs or is continuing. In no event, however, will the final valuation date be postponed by more than five business days. If the final valuation date with respect to the XAU/USD spot rate 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 with respect to the XAU/USD spot rate. If it is not possible to determine the ending price at that time, either because of a market disruption event or for any other reason, the calculation agent will make a good faith estimate of the ending price that would have prevailed in the absence of the market disruption event. Any of the following will be a market disruption event: + a suspension, absence or material limitation of trading in gold bullion on the London Gold Market, as determined by the calculation agent in its sole discretion; + a suspension, absence or material limitation of trading in gold futures or option contracts in the primary market for those instruments, as determined by the calculation agent in its sole discretion; + the failure of the London Gold Market to announce or publish the London P.M. Fixing Price prior to or on the final valuation date, or a temporary or permanent discontinuance or unavailability of the London P.M. Fixing Price; and + any other event that the calculation agent determines in its sole discretion materially interferes with the ability of UBS or the ability of any of its affiliates to unwind all or a material portion of a hedge with respect to the Notes that UBS or any of its affiliates have effected or may effect as described below under "Use of Proceeds and Hedging" on page S-26. S- 22 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- 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 gold options or futures contracts. For this purpose, an "absence of trading" in the primary markets on which gold option or futures contracts are traded will not include any time when that market is itself closed for trading under ordinary circumstances. In the event that the calculation agent chooses to postpone the final valuation date because of a market disruption event with respect to the XAU/USD spot rate, the final valuation date for purposes of determining the AUD Spot Rate Return, the NZD Spot Rate Return, the CAD Spot Rate Return and the NOK Spot Rate Return will continue to be the final valuation date described herein without regard to the postponement of the final valuation date with respect to the XAU/USD spot rate. "Reference Dealers" as used herein, means Citibank, N.A., Deutsche Bank A.G. and JP Morgan Chase Bank, or their successors. "Reference Amount" equals 1,000,000 Australian dollars or Norwegian krone, and with respect to determining the USD/CAD spot rate, 1,000,000 U.S. dollars. "London Gold Market" means the market in London on which the members of the London Bullion Market Association, or its successors ("LBMA"), quote prices for the buying and selling of gold. "Gold" means gold bars or unallocated gold complying with the rules of the LBMA relating to good delivery and fineness from time to time in effect. "Gold Trading Day" means any day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London and New York. MATURITY DATE The maturity date will be September 27, 2007 unless that day is not a business day, in which case the maturity date will be the next following business day. FINAL VALUATION DATE The final valuation date will be September 25, 2007. REDEMPTION PRICE UPON OPTIONAL TAX REDEMPTION We have the right to redeem the Notes in the circumstances described under "Description of Debt Securities 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 S- 23 SPECIFIC TERMS OF THE NOTES - -------------------------------------------------------------------------------- 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 Debt Securities We May Offer--Default, Remedies and Waiver of Default" and "Description of Debt Securities 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 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 days' objection period have not ended before the final valuation date, then the default amount will equal the principal amount of the Notes. S- 24 SPECIFIC TERMS 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 any day that is a business day of the kind described in "Description of Debt Securities We May Offer--Payment Mechanics for Debt Securities" in the attached prospectus. MODIFIED BUSINESS DAY As described in "Description of Debt Securities We May Offer--Payment Mechanics for Debt Securities" 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 Our affiliate, UBS Securities LLC, will serve as the calculation agent. 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, business days, the default amount, the Basket Return, the Initial Basket Value, the Final Basket Value (and any intermediate calculations necessary to arrive at the Basket Return or the Final Basket Value), the occurrence of a market disruption event with respect to any Basket Rate, 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. You will not be entitled to any compensation from us for any loss suffered as a result of any of the above determinations by the calculation agent. BOOKING BRANCH The Notes will be booked through UBS AG, Jersey Branch. S- 25 - -------------------------------------------------------------------------------- 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 accompanying 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 spot, forward and option transactions. We reserve the right to leave any position unhedged, partially hedged or fully hedged, and to adjust the hedge from time to time in any manner we see fit. We or our affiliates may close out our or their hedge on or before the final valuation date. That step may involve spot, forward and option sales or purchases. The hedging activity discussed above may adversely affect the market value of the Notes from time to time. See "Risk Factors" on page S-9 for a discussion of these adverse effects. S- 26 - -------------------------------------------------------------------------------- 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 JUNE 30, 2005 (UNAUDITED) CHF USD - ------------------------------------------------------------------------------- (IN MILLIONS) Debt Debt issued(1)............................................ 235,828 183,988 ------- ------- Total Debt................................................ 235,828 183,988 Minority Interest(2)........................................ 7,418 5,787 Shareholders' Equity........................................ 38,002 29,648 ------- ------- Total capitalization........................................ 281,248 219,423 ======= =======
- --------------- (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 0.78018. S- 27 - -------------------------------------------------------------------------------- SUPPLEMENTAL TAX CONSIDERATIONS The following is a general description of certain Swiss and United States 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 advisors 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 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 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 the comparable yield for the Notes is equal to 4.40% per annum, compounded semiannually, with a projected payment at maturity of $1,090.94 based on an investment of $1,000. Based upon this comparable yield, if you are an initial holder that holds a Note until maturity and you pay your taxes on a calendar year basis, you would generally be required to pay taxes on the following amounts of ordinary income from the Note each year: $11.12 in 2005, $44.98 in 2006, and $34.84 in 2007. However, if the amount you receive at maturity is greater than $1,090.94, you would be required to make a positive adjustment and increase the amount of ordinary income that you recognize in 2007 by an amount that is equal to such excess. Conversely, if the amount you receive at maturity is less than $1,090.94, you would be required to make a negative adjustment and decrease the amount of ordinary income that you recognize in 2007 by an amount that is equal to such difference. If the amount you receive at maturity is less than $1,056.10, then you would recognize a net ordinary loss in 2007 in an amount equal to such difference. 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 to 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 payment schedule, a change in interest rates, or both, and allocate the difference accordingly. The adjusted issue price of the Notes will equal the Notes' original issue price plus any interest deemed to S- 28 SUPPLEMENTAL TAX CONSIDERATIONS --(CONTINUED) - -------------------------------------------------------------------------------- be accrued on the Notes (under the rules governing contingent payment obligations) as of the time you purchase the Notes. If you purchase the Notes for an amount that is less than the adjusted issue price of the Notes, you must (a) make positive adjustments increasing the amount of interest that you would otherwise accrue and include in income each year to the extent of amounts allocated to a change in interest rates under the preceding paragraph and (b) make positive adjustments increasing the amount of ordinary income (or decreasing the amount of ordinary loss) that you would otherwise recognize upon the maturity of the Notes to the extent of amounts allocated to a change in expectations as to the projected payment schedule under the preceding paragraph. If you purchase the Notes for an amount that is greater than the adjusted issue price of the Notes, you must (a) make negative adjustments decreasing the amount of interest that you would otherwise accrue and include in income each year to the extent of amounts allocated to a change in interest rates under the preceding paragraph and (b) make negative adjustments decreasing the amount of ordinary income (or increasing the amount of ordinary loss) that you would otherwise recognize upon the maturity of the Notes to the extent of amounts allocated to a change in expectations as to the projected payment schedule under the preceding paragraph. 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 for the Notes) and increased or decreased by the amount of any positive or negative adjustment that you are required to make with respect to your Notes under the rules set forth above. Any gain you recognize upon the sale or maturity of the Notes will generally be ordinary interest income. Any loss you recognize at such time will generally 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. You will generally only be able to use such ordinary loss to offset your income in the taxable year in which you recognize the ordinary loss and will generally not be able to carry such ordinary loss forward or back to offset income in other taxable years. The deductibility of capital losses is subject to limitations. 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 buy you may 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 S- 29 SUPPLEMENTAL TAX CONSIDERATIONS --(CONTINUED) - -------------------------------------------------------------------------------- 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 hold Notes as a private individual and are a resident for tax purposes in Switzerland, you should consult with your own tax advisor. We expect that your investments will be treated, for Swiss income tax purposes, as an investment in short-term bonds with a variable, predominantly one-time return. If you are a private investor and hold your Notes until maturity, we expect that you will be taxed upon any proceeds from the repayment in excess of the principal amount initially invested. If you sell your notes to a third party prior to maturity, we expect that you will be taxed upon the difference between the sale proceeds and your initially invested amount. S- 30 - -------------------------------------------------------------------------------- ERISA CONSIDERATIONS We, UBS Securities LLC, UBS Financial Services 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, Keogh plan or other plan or account that is subject to Section 4975 of the Code ("Plan"). The purchase of the Notes by a Plan with respect to which UBS Securities LLC, UBS Financial Services 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 Securities LLC, UBS Financial Services 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- 31 - -------------------------------------------------------------------------------- SUPPLEMENTAL PLAN OF DISTRIBUTION UBS has agreed to sell to UBS Securities LLC and UBS Financial Services Inc., and UBS Securities LLC and UBS Financial Services Inc. have agreed to purchase from UBS, the aggregate principal amount of the Notes specified on the front cover of this prospectus supplement. The Notes will be issued pursuant to a distribution agreement substantially in the form attached as an exhibit to the registration statement of which the accompanying prospectus forms a part. UBS Securities LLC and UBS Financial Services Inc. intend to resell the offered Notes at the original issue price applicable to the offered Notes to be resold. UBS Securities LLC and UBS Financial Services Inc. may resell Notes to securities dealers at a discount of up to 1% 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 Securities LLC, UBS Financial Services Inc., 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 Securities LLC, UBS Financial Services 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- 32 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-9 Operation of the Gold Bullion Market.. S-15 5-Year Historical Basket Level........ S-16 Value of the Notes.................... S-19 Specific Terms of the Notes........... S-20 Use of Proceeds and Hedging........... S-26 Capitalization of UBS................. S-27 Supplemental Tax Considerations....... S-28 ERISA Considerations.................. S-31 Supplemental Plan of Distribution..... S-32 PROSPECTUS Introduction.......................... 3 Cautionary Note Regarding Forward- Looking Information................. 5 Incorporation of Information About UBS AG.................................. 7 Where You Can Find More Information... 7 Presentation of Financial Information......................... 8 Limitations on Enforcement of U.S. Laws Against UBS AG, Its Management and Others.......................... 9 Capitalization of UBS................. 9 UBS................................... 10 Use of Proceeds....................... 12 Description of Debt Securities We May Offer............................... 13 Description of Warrants We May Offer.. 35 Legal Ownership and Book-Entry Issuance............................ 52 Considerations Relating to Indexed Securities.......................... 58 Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency....... 61 U.S. Tax Considerations............... 64 Tax Considerations Under the Laws of Switzerland......................... 75 ERISA Considerations.................. 77 Plan of Distribution.................. 78 Validity of the Securities............ 81 Experts............................... 81
[UBS LOGO] PRINCIPAL-PROTECTED FX AND GOLD LINKED SECURITIES UBS AG $25,859,000 100% PRINCIPAL PROTECTED NOTES LINKED TO A CURRENCY AND GOLD BASKET DUE SEPTEMBER 27, 2007 PROSPECTUS SUPPLEMENT SEPTEMBER 23, 2005 (TO PROSPECTUS DATED FEBRUARY 27, 2003) UBS INVESTMENT BANK UBS FINANCIAL SERVICES INC. -----END PRIVACY-ENHANCED MESSAGE-----