Annual General Meeting 2000


Item 7: Capital reduction

A. Resolution
The Board of Directors proposes that the following resolution be approved:

The Board of Directors shall be authorized to buy back a total amount of no more than CHF 4 billion or 9,673,934 shares via a second trading line on the stock exchange. These shares are to be cancelled definitively and are not therefore regarded as own shares within the meaning of article 659 of the Swiss Code of Obligations. The required amendment to the Articles of Association (reduction of share capital) will be submitted to the AGM in 2001 for approval.

B. Explanations
With the aim of reducing its share capital UBS AG set up a second trading line on the Swiss Exchange on 17 January 2000 for the purpose of buying back our own shares. The share buyback program will run until March 2001. Its aim is to eliminate capital which is no longer needed, this being in the interests of our shareholders, who will benefit from higher earnings per share.

The Board of Directors has decided to put the basic question of reducing capital to this year's Annual General Meeting.The definitive capital reduction cannot take place until the exact amount of the reduction is known, that is, when the buyback program is completed. A second resolution will therefore need to be approved at the AGM in 2001. By proceeding in two stages like this we have the advantage that by obtaining shareholders' approval for the elimination of a maximum amount of shares, these shares no longer fall under the statutory limit, which prohibits companies from holding more than 10% of their own shares. We thus gain greater flexibility which is in the interests of the Bank's trading activities.

The auditors ATAG Ernst & Young Ltd. have confirmed in a special audit report to the Board of Directors that the claims of creditors are fully covered even after the reduction in our capital and that the liquidity of the Bank is assured. The call to register claims was published in the Swiss Commercial Gazette on the 9th, 10th and 14th of February 2000.