Explanatory Note

Relating to a potential adjustment of the conversion price for the 9% mandatory convertible notes due 2010 (MCN)

The 9% mandatory convertible notes due 2010 (MCN) contain standard market provisions for the adjustment of the conversion price if a dilutive event occurs between issuance of the MCNs and their maturity. A capital increase would qualify as a dilutive event and thus would cause the following adjustments to the conversion price:

  • First, if the issue price of the new shares is below 95% of the market price, the conversion price would have to be adjusted for the value of the subscription rights granted to shareholders. As a result, both the minimum and the maximum conversion price would be adjusted downwards, which would result in a higher number of shares to be issued to the MCN holders upon conversion.

  • Second, any capital increase resulting in proceeds in excess of CHF 5 billion occurring before 10 December 2008 at an issue price per share below the minimum conversion price (currently CHF 51.48 per UBS share) would additionally trigger a reduction of the maximum conversion price. In no case will the reduced maximum conversion price fall below the then prevailing minimum conversion price. If new shares are issued at an offering price of below approximately CHF 44, the conversion price would be fixed at the level of the minimum conversion price, and the maximum conversion price would fall away. Thus, conversion of the MCNs would always occur based on the adjusted minimum conversion price, regardless of the share price prevailing at conversion of the MCNs.



Revised version of 1 April 2008