Lawsuit Filed According to Art. 105 MerA

• Lawsuit filed with the Commercial Court of Zurich
• Value of the CS share
• Participation possible at any time

We would like to inform you that, as announced, we have filed a review lawsuit with the Commercial Court of Zurich. The countless hours we spent conducting research, having constructive exchanges with colleagues and shareholders, and finalizing the lawsuit have paid off. We are very grateful for your support and the many inputs we have received. We will continue to keep you thoroughly updated on the developments. For the moment, we will not publish the lawsuit for tactical reasons. Those who still would like a look at it can contact us. To give you an idea of the direction it might be heading, we would like to discuss some key arguments below.

Basis

The basis for the lawsuit is Art. 7 Para. 1 in conjunction with Art. 105 Para. 1 MerA. According to Art. 7 Para. 1 MerA, shareholders of the transferring company (Credit Suisse) are entitled to share or membership rights in the acquiring company (UBS), which correspond to their previous share or membership rights, taking into account the assets of the companies involved, the distribution of voting rights, and all other relevant circumstances. The court called upon can review this exchange ratio at its discretion for its fairness and establish a new, universally binding exchange ratio (Art. 105 Para. 1 MerA). In our view, this fairness is not given.

Arguments about the value of the CS share

Basically, banks on the capital market are valued relative to their net carrying value, i.e., the book value of their equity. We have used various arguments to substantiate that the CHF 0.76 per share was far too low:

• Book value end of 2022
  In April 2023 CS published its annual report for the 2022 financial year. This contains the "key metrics," i.e., the most important financial key figures of Credit Suisse Group AG, including information on the shares of Credit Suisse Group AG ("share information"). In this section, Credit Suisse Group AG gives the share value ("book value per share") as CHF 11.45 per share.
  
• Book value Q1/2023
  CS published its figures for the first quarter of 2023 in April 2023. This document also presents the "key metrics," i.e., the most important financial key figures of CS, including "share information." Here, CS states that the share value ("book value per share") was CHF 13.70 per share at the end of the first quarter of 2023.
  
• Stock market price
  At the time of the transaction, the stock exchange price of the CS share was CHF 1.86 and was thus 2.45x higher than the price UBS paid for a CS share (CHF 0.76 in UBS shares). Normally, a premium is paid when a company is taken over. This premium is usually between 10 and 30%. Moreover, skeptical investors no longer had to fear a CS insolvency. For these reasons alone, the price per CS share at the time of the takeover by UBS should have included a premium.
  
• Saudi National Bank Investment
  According to consistent media reports, the Saudi National Bank tried to increase its existing stake in CS (then 9.9%) to 40% parallel to the negotiations between UBS and CS. The Saudi National Bank would have paid CHF 5 billion for 30.1% of CS shares. This stake would have given the Saudi National Bank control over CS. FINMA is said not to have approved the planned investment. The reasons why the investment is said not to have been approved are irrelevant in this case. What is relevant is only that this investment would have been based on a valuation of CS of CHF 16.61 billion (CHF 5 billion. / 0.301). This valuation corresponds to a CS share price of at least CHF 4.15.
  
• Presentation by UBS
  UBS valued the CS share at CHF 11.15 before the merger in a presentation. The value determined by UBS is striking in that it largely corresponds to the book value stated by CS and reviewed by PWC.
  
• SEC Filing by UBS & Extraordinary Merger Gain
  According to the FORM F-4 filing to the SEC on June 9, 2023, UBS assumes a "fair value of net assets acquired" of USD 38.24 billion, with a purchase price of USD 3.41 billion:

  

  
  Compared to the values listed here, the purchase price of CHF 3 billion seems plucked out of thin air. The purchase price effectively paid certainly does not constitute a basis for an appropriate compensation payment to CS shareholders. Instead, the values reported to the SEC coincide with those in the 2022 CS annual report, the 1/2023 CS quarterly report, and the UBS presentation. The value reported by UBS to the SEC (USD 38.24 billion) primarily deviates from the value reported by CS for Q1 2023 (CHD 54 billion) because UBS has made various value adjustments and provisions. With 3,947,368,421 outstanding CS shares, UBS values the CS share at USD 9.69 to the SEC. This value also has nothing to do with the CHF 0.76 per CS share that UBS actually paid. The merger culminated in UBS reporting an extraordinary profit of USD 35 billion for Q2 2023, which corresponds to the "merger badwill" of USD 34.777 billion registered with the SEC.
  
• Write-off of AT1 Bonds
  With a decree of 19 March 2023, i.e., simultaneously with the signing of the merger contract, FINMA instructed CS to write off all AT1 instruments. The write-off amount amounts to a total of around CHF 16 billion. Compared to Friday, 17 March 2023, CS was therefore CHF 16 billion less in debt. For this reason alone, CS was worth significantly more on 19 March 2023 than two days prior (stock market price: CHF 1.86).
  
• Guarantees from the Federal Government
  The stock market price on Friday (17 March 2023) also does not take into account the far-reaching guarantees from the Federal Government that existed at that time. In particular, UBS only bears the first 5 billion of the loss on certain CS assets; the Federal Government bears the further 9 billion.
  
• "Morningstar" Rating
  The analysts at Morningstar, one of the world's largest financial information and analysis houses, increased the "fair value" of the UBS share by 22% to CHF 27.50 immediately after the transaction was completed on 12 June 2023. By taking over, UBS has therefore gained value - much more than the CHF 3 billion it paid.
  
• Risks disappeared
  The low share price of CHF 1.86 was significantly due to the uncertainties associated with a possible insolvency of CS. These uncertainties had disappeared with the signing of the merger agreement - and it is only this specific point in time on March 19, 2023 that matters - they had disappeared. For this reason too, the (market) value of CS and its shares at the conclusion of the merger agreement was significantly higher than the previous Friday. The fact that the alleged risks did not exist at the time of the merger agreement or at least factually disappeared, is also evident from the early repayment of the liquidity assistance granted by the SNB and the early termination of the guarantee contract of CHF 9 billion concluded with the Swiss Federal Government. UBS paid interest to the Swiss Federal Government for the funds or guarantees provided. With the termination of the guarantee contract, UBS therefore assumes that the risk of having to claim these guarantees i.e., suffering a loss of more than CHF 5 billion from the merger, is less than the modest 0.4% interest that UBS pays the Swiss Federal Government annually as a "maintenance fee". For this reason too, the (market) value of CS and its shares at the conclusion of the merger agreement on March 19, 2023, was significantly higher than the previous Friday.
  

Next steps

The lawsuit consists of a total of 33 pages and deals with many other relevant aspects. The further course is now in the hands of the court. You can join us at any time. Those who could not or did not want to be part of other offers due to costs, conviction, or other reasons, and who did not file a lawsuit of their own, are always welcome at notrecht.com. If you know people in your circle of friends and acquaintances who are or were CS shareholders, please make them aware of our registration form on notrecht.com so they can also stay informed. There are no costs involved. In our view, anyone who purchased CS shares during regular trading hours at the latest on Friday (17 March 2023) and held them on 19 March 2023 is entitled to a potential adjustment. In other words: Anyone who sold CS shares before 19 March 2023 will not receive any adjustment, even if the outcome is positive. Anyone who sold CS shares on 20 March 2023 (or at a later date) should benefit from an adjustment.

Possible settlement discussions

As already mentioned in a previous newsletter: Should it turn out - unexpectedly - in the course of the proceedings that an out-of-court settlement is possible, we will inform the public via the website and e-mail and sketch the procedure. You would be given the opportunity to spontaneously join the settlement. You must assume that in this case you would have to send us all documents related to your CS shares at short notice and issue us corresponding powers of attorney. You should keep these ready electronically. We do not expect - as of today - that UBS will strive for an out-of-court settlement. What is clear: There is no reason to send us documents already today. Please do not do this (yet).

Administrative

In recent days, we have received countless messages and emails asking whether the lawsuit will actually be filed. Answering these has unnecessarily consumed many resources. You may and should always assume that we proceed as announced and that this is also the case even if we do not confirm it anew every day. Importantly, you should not contact us regularly in the future to ask what the current state of affairs is. If something relevant arises, you will be informed immediately. But if you have specific concerns, please contact us and we will respond to you.

What costs will I incur?

None. We bear the expenses ourselves. If you want to contribute to the costs and thus voluntarily support us - and if you are a CS shareholder, also yourself - you can do so by transferring money to the following account:

Contract Vault GmbH
Gotthardstrasse 26
6300 Zug
IBAN: CH9109000000615606971
At Postfinance

Please indicate notrecht.com and your email address as the purpose of payment.

Credit card payment via the following link is also possible:

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You can enter or transfer any amount. We would like to emphasize once again that participation is not mandatory.

For comparison: A commercial offer requires a kind of "participation fee" of about 10-12 cents per share. We will not ask you for such an amount, promised.