Annual General Meeting 2002


Item 5: Capital reduction

A. Proposal
5.1. Cancellation of shares repurchased under the 2001 share buyback program
The Board of Directors proposes that the 28,818,690 shares repurchased under the buyback program approved by the 2001 AGM be definitively cancelled, that the share capital be reduced accordingly and that Article 4 of the Articles of Association be amended to reflect this.

5.2. Establishment of a 2002/2003 share buyback program
The Board of Directors proposes that the following resolution be approved:
The Board of Directors shall be authorized to buy back a maximum amount of CHF 5 billion in UBS shares via a second trading line on the virt-x 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 2003 for approval."

B. Explanations
The AGM on 26 April 2001 authorized the Board of Directors to buy back UBS shares in a maximum amount of CHF 5 billion via a second trading line on the stock exchange and subsequently to cancel them. A total of 28,818,690 shares with an overall value of CHF 2,289,916,993 were repurchased under this program between 5 March 2001 and 5 March 2002. The average purchase price was CHF 79. Shareholders are now being requested to approve the definitive cancellation of these shares and the corresponding reduction in capital.

The Statutory Auditors Ernst & Young Ltd. have confirmed in a special audit report on behalf of the AGM that as at 31 December 2001 the claims of creditors were fully covered even after the reduction in capital and that the Bank has adequate liquidity.

The Board of Directors again requests the AGM to authorize it to repurchase a maximum amount of CHF 5 billion in UBS shares between March 2002 and March 2003. The decision of the Board of Directors to again repurchase own shares has been published on 14 February 2002. Share repurchases, which were started on 6 March 2002, are handled via a second trading line on the virt-x. With the share buyback program the Board aims at counterbalancing steadily increasing shareholders' equity and thereby positively influencing earnings per share. The BIS tier 1 capital ratio continues to be comparatively high at 11.6% at year-end 2001.

The Board of Directors has again decided to proceed in two stages, with shareholders taking the decision in principle at the first AGM and deciding on the definitive cancellation of the shares at the next AGM. 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 provides greater flexibility, which UBS believes to be in the interests of efficient capital management and the ongoing trading activities of the Bank.