Annual General Meeting 2006

Item 5: Capital Reduction, Share Buyback Program, Par Value Repayment and Share Split

5.1. Cancellation of Shares Repurchased under the 2005 / 2006 Share Buyback Program

A. Motion
The Board of Directors proposes that the 37,100,000 shares repurchased under the buyback program that was authorized by the 2005 Annual General Meeting be cancelled and that, as a result, the share capital of UBS AG be reduced by CHF 29,680,000.00.

Article 4 para. 1 of the Articles of Association shall be amended accordingly.

B. Explanations
The Annual General Meeting on 21 April 2005 authorized the Board of Directors to buy back a maximum of CHF 5 billion worth of UBS shares via a second trading line on virt-x, in order to subsequently cancel them. As of 7 March 2006, 37,100,000 shares, with an overall market value of CHF 4,026,420,553, had been repurchased. The average purchase price was CHF 108.53 per share (rounded). The value of the shares repurchased under the program was less than the maximum value authorized by the Annual General Meeting.

The Board of Directors now proposes that the Annual General Meeting approve the cancellation of the 37,100,000 repurchased shares and that the share capital in Article 4 para. 1 of the Articles of Association be reduced accordingly.

Ernst & Young Ltd. as Statutory Auditors have confirmed in a special audit report prepared for the Annual General Meeting that, as of 31 December 2005, the claims of creditors would be covered and the liquidity of the Bank assured even with the proposed reduction in capital.

5.2. Approval of a New Share Buyback Program for 2006 / 2007

A. Motion
The Board of Directors proposes approval of the following resolution:

“The Board of Directors is hereby authorized to buy back a maximum amount of CHF 5 billion in UBS shares via a second trading line on virt-x. These shares are to be cancelled definitively and are thus not subject to the 10% threshold for UBS’s ‘own shares’ within the meaning of Article 659 of the Swiss Code of Obligations. The necessary amendment of the Articles of Association (reduction of share capital) shall be submitted to the Annual General Meeting in 2007 for approval.”

B. Explanations
In order to ensure the most efficient capital management, the future repurchasing of shares for cancellation is advisable, to the extent that the capitalization of the Bank so permits. The Board of Directors thus proposes that the Annual General Meeting authorize the repurchase of a maximum value of CHF 5 billion in UBS shares. This new buyback program for 2006 / 2007 was announced on 14 February 2006.

The Board of Directors has again decided to proceed in two stages, with the shareholders voting on the general issue at the first Annual General Meeting and deciding on the definitive cancellation of the shares at the following Annual General Meeting. The benefit of this procedure is that by obtaining shareholders’ approval for the future cancellation of the repurchased shares, these shares no longer fall under the statutory limit of Swiss Company Law which prohibits companies from holding more than 10% of their own shares. The proposed procedure thus provides the Company with greater flexibility, which is in the interests of efficient capital management and of the ongoing trading activities of the Bank.

Ernst & Young Ltd. as Statutory Auditors have confirmed in a special audit report prepared for the Board of Directors that, from today’s point of view, the claims of creditors would be covered and the liquidity of the bank assured even with this proposed additional reduction in capital.

5.3. One-time Payout in the Form of a Par Value Repayment

A. Motion
The Board of Directors proposes that, in addition to the distribution of a dividend, a par value repayment in the amount of CHF 0.60 per issued share be made for the year 2005.

Article 4 para. 1 and Article 4a of the Articles of Association shall be amended accordingly.

B. Explanations
As a result of the sale of UBS AG’s private banks and GAM (SBC Wealth Management Group) to Julius Bär in 2005, UBS AG made an extraordinary post-tax profit of approximately CHF 3.7 billion. By means of a unique tax-favored payout, UBS shareholders will further share these profits, in addition to the already increased dividend of CHF 3.20 pursuant to Agenda Item 2. The Board of Directors therefore proposes that a repayment of CHF 0.60 per share be made to shareholders by means of a reduction in the par value from CHF 0.80 to CHF 0.20 for all registered shares. This payout will not be subject to the 35% federal withholding tax and private individuals in Switzerland will not be subject to the Swiss personal income tax. Subject to the approval by the shareholders and the entry of the capital reduction and the par value repayment in the Commercial Register, the payout will be made on 12 July 2006, to those shareholders in possession of UBS shares on 7 July 2006.

5.4. Share Split

A. Motion
The Board of Directors proposes that upon completion of the capital reduction and the par value repayment, the par value of the shares then issued be split at a 2 for 1 ratio and that the number of shares be increased accordingly.

Article 4 para. 1 and Article 4a of the Articles of Association shall be amended accordingly.

B. Explanations
Following the proposed 2:1 split, the UBS share will have a par value of CHF 0.10 and a market value more in line with that of its global peer group. A lower market value will enhance the tradability and liquidity of the shares.

5.5. Amendments to the Articles of Association

5.5.1. Amendments to Art. 4 para. 1 and Art. 4a of the Articles of Association

A. Motion
To the extent that the Annual General Meeting approves the proposals of the Board of Directors set forth in Agenda Items 5.1, 5.3, and 5.4, the Board of Directors proposes that Article 4 para. 1 and Article 4a of the Articles of Association be amended as follows:

Article 4 para. 1
The share capital of the Corporation is CHF 210,306,504.40 (two hundred and ten million, three hundred and six thousand, five hundred and four Swiss francs and forty centimes), divided into 2,103,065,044 registered shares with a par value of CHF 0.10 each. The share capital is fully paid up.

Article 4a
Employee stock ownership plan of Paine Webber Group Inc., New York (“PaineWebber”)

The share capital will be increased, under exclusion of shareholders’ pre-emptive rights, by a maximum of CHF 364,700.20, corresponding to a maximum of 3,647,002 registered shares of CHF 0.10 par value each (which must be fully paid up) through the exercise of option rights granted to the employees of PaineWebber, which were rolled over according to the merger agreement of 12 July 2000. The subscription ratio, time limits and further details were determined by PaineWebber and taken over by UBS AG. The purchase of shares through the exercise of option rights as well as any subsequent transfer of the shares are subject to the registration restrictions set out in Article 5 of these Articles of Association.


B. Explanations
The amended Article 4 para. 1 and Article 4a of the Articles of Association are the result of the proposals set forth in Agenda Items 5.1, 5.3, and 5.4, namely:

In the event that the shareholders should reject certain of the proposals set forth in Agenda Items 5.1, 5.3, or 5.4, Article 4 para.1 and Article 4a of the Articles of Association will be amended accordingly. Should all the proposals of the Board of Directors set forth in Agenda Items 5.1, 5.3, and 5.4 be approved, then the amendments to the Articles of Association resolved in Agenda Item 5.5 will only be entered into the Commercial Register after the completion of the reduction in capital and par value payout pursuant to Agenda Item 5.1 and 5.3 (i.e. after the two month waiting period required by law).

5.5.2. Reduction of the Threshold Value for Agenda Item Requests (Article 12 para. 1 of the Articles of Association)

A. Motion

To the extent that the Annual General Meeting approves the Board of Directors’ proposal set forth in Agenda Item 5.3, the Board of Directors proposes that Article 12 para. 1 of the Articles of Association be amended as follows:

Article 12 para. 1 Shareholders representing shares with an aggregate par value of CHF 62,500 may submit proposals for matters to be placed on the agenda for consideration by the Annual General Meeting, provided that their proposals are submitted in writing within the deadline published by the Corporation and include the actual motion(s) to be put forward.

B. Explanations
To the extent that the Annual General Meeting approves the par value payout as proposed by the Board of Directors in Agenda Item 5.3, the threshold value for the submission of agenda item requests should be reduced as well. The reduction shall be proportional to the reduction in share capital, so that 312,500 registered shares (625,000 registered shares after the share split) continue to be entitled to demand the inclusion of an item on the agenda. Through this measure, the Board of Directors seeks to ensure that the rights of shareholders are not reduced as a result of the par value reduction.

The amended Article 12 para. 1 of the Articles of Association will only be entered into the Commercial Register together with the approved par value payout set forth in Agenda Item 5.3.