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|  An example of how we use knowledge and innovation to support client relationship in the case of a company planning to raise equity capital at a time when its management believe that its share price is undervalued. UBS Warburg’s Market Index-Linked Equity Securities (or MILES) were devised to meet that specific need.
Structured as a three-year mandatory convertible note, the instrument is linked to a benchmark index – the Swiss SMI Total Return Index (SMIC) in the case of the issue for Zurich Financial Services launched in early 2001. At maturity or earlier at the issuer or holder’s option, the note is converted into stock at a rate that depends on how the share price has performed relative to the benchmark index. The greater the outperformance over the SMI, the less dilution the issuer will suffer on conversion of the notes into stock. For their part, investors receive a 1% annual outperformance premium on the initial index level, plus an additional 3% bonus in shares on mandatory conversion. Closing after only three days of marketing and several times oversubscribed, the Zurich Financial Services issue repeated the success of the first MILES transaction for Allianz at the end of 2000. |
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