Capital structure

Capital

Under Swiss company law, shareholders have to approve in a shareholders’ meeting any increase in the total number of issued shares, which may be an ordinary share capital increase or the creation of conditional or authorized capital. At year-end 2005, the ordinary share capital was CHF 870,906,017.60.

At the Annual General Meeting (AGM) on 21 April 2005, shareholders gave the Board of Directors a mandate to continue a repurchase program during 2005/2006 for a maximum amount of CHF 5 billion. At the AGM on 19 April 2006, shareholders will be asked to approve the cancellation of 37,100,000 shares repurchased under this program and to reduce the ordinary share capital accordingly.

Conditional and authorized share capital

At year-end 2005, conditional share capital totaled CHF 1,458,800.80, corresponding to a maximum of 1,823,501 shares. The conditional capital was created in 2000 in connection with the acquisition of Paine Webber Group Inc. to cover option rights granted by the PaineWebber Group to its employees. The subscription ratio, time limits and further details of these options were determined by PaineWebber before the merger and were assumed by UBS. Options under these plans are exercisable at any time between their vesting and the expiry date. Shareholders’ pre-emptive rights are excluded. During 2005, options with respect to 1,709,439 shares were exercised under these plans, and 72 options expired without being exercised.

UBS has currently no further approval from shareholders to issue new shares under conditional or authorized capital. However, at the 2006 AGM, shareholders will also be asked to approve conditional capital in the amount of 75,000,000 UBS shares to be used for employee option grants limited to a period of three years. For details see the Capital Management & UBS Share section on pages 88–96 of this Handbook.

Changes of shareholders’ equity

Equity attributable to UBS shareholders for the Group amounted to CHF 44.3 billion on 31 December 2005. For all details on changes in shareholders equity over the last three years, please refer to pages 76–77 of the Financial Report 2005.

Shares, participation and bonus certificates, capital securities

UBS shares are issued as Global Registered Shares. Each share has a par value of CHF 0.80 and carries one vote. Voting rights may, however, only be exercised if the holder expressly declares having acquired these shares in his own name and for his own account. Global Registered Shares provide direct and equal ownership for all shareholders, irrespective of the country and stock exchange where they are traded. For details, see the Shareholders’ participation rights section on pages 122–123 of this Handbook.

On 31 December 2005, 520,667,405 shares carried voting rights, 151,713,384 shares were entered in the share register without voting rights, and 416,251,733 shares were not registered. All 1,088,632,522 shares were fully paid up, and 1,054,747,522 shares ranked for dividends. There are no preferential rights for individual shareholders.

UBS has not issued any participation certificates or bonus certificates.

UBS raised CHF 1.6 billion hybrid Tier 1 capital in the form of preferred shares denominated in euros and raised CHF 2.6 billion in subordinated debt in various currencies in capital markets in 2005 to fund its operations with capital securities. Outstanding Tier 2 capital securities accounted for CHF 7.2 billion in eligible capital as of 31 December 2005. Additionally, UBS has CHF 5.0 billion in preferred shares outstanding which count as Tier 1 capital under regulatory rules.

Limitation on transferability and nominee registration

UBS does not apply any restrictions or limitations on the transferability of its shares. Shares registered according to the provisions in the Articles of Association (express declaration of beneficial ownership) may be voted without any limit in scope.

UBS has issued special provisions for the registration of fiduciaries / nominees. Fiduciaries / nominees are entered in the share register with voting rights up to a total of 5% of all shares issued, if they agree to disclose, upon request from the firm, beneficial owners holding 0.3% or more of all UBS shares. An exception to the 5% rule exists for securities clearing organizations such as The Depository Trust Company (DTC) in New York and SIS SegaInterSettle in Switzerland.

Convertible bonds and options

UBS currently has no convertible debt on UBS shares outstanding. The only options outstanding were 90,882,545 employee options on UBS shares as reported in note 31c to the financial statements. For a total of 1,823,501 of those options, exercise will be satisfied through the creation of newly issued shares (conditional capital). Share capital would therefore be increased by a maximum of CHF 1,458,800.80. Once the proposed conditional capital is approved by the Annual General Meeting 2006, the number of options exercisable against the creation of newly issued shares will increase. For the other employee options, exercise would be satisfied by the delivery of already issued treasury shares.

The Investment Bank, acting as liquidity provider to the equity futures market and as a market maker in UBS shares and derivatives, has issued derivatives linked to UBS stock. Most of these instruments are classified as cash-settled derivatives and are held for trading purposes only. To hedge the economic exposure, a limited number of UBS shares are held by the Investment Bank.