aUBS

Our commitment tothe environmentExtract from the UBSEnvironmental Report 1998-99

ForewordThe Group Executive Board’s view

On 15 July 1998, shortly after the merger, the Group Executive Board ofUBS AG passed the new environmentalpolicy. This signalizes the high priorityUBS assigns to environmental issues.For UBS, environmental sustainabilityplays a considerable part in solid andresponsible management practices.

Our environmental policy concentrateson the fields of banking, in-house ecology and environmental manage-ment. In banking, we aim to takeadvantage of environmental opportuni-ties and duly take environmental risksinto account in our risk management.

With regard to in-house operations, we wish to reduce air, soil and waterpollution whilst focusing on the reduc-tion of greenhouse gas emissions. Westrive to ensure the efficient implemen-tation of our measures by a lean andeffective environmental managementsystem. In all our efforts, we seek openand active dialogue with all stakehold-ers concerned.

UBS AG is a globally active, dynamicfinancial institution and, as such, mustpay regard to the objectives of its divisions and also to the varyingdemands and aspirations of sharehold-ers, clients, staff and society. The implementation of our environmentalpolicy, therefore, presents a specialchallenge for all involved.

Over the past few months we havedeveloped our existing environmentalmanagement system further, in accor-dance with the requirements of the ISO 14001 international environmental

standard. SGS International Certifica-tion Services AG recently confirmedthat our system conforms to theserequirements. This means that we arethe first financial service institution tohave a world-wide environmental management system certified accordingto ISO 14001.

We are proud to present, with this report, our own contribution to a better environment.

Marcel OspelPresident & Group CEO

Foreword 2

The 1998-99 environmental report 3

Environmental management at UBS 4

Environmental communications 5

Banking and the environment 6

Commercial banking Switzerland 7

Asset management 8

Investment banking 9

In-house ecology 10

Benefits of our commitment to the environment 12

The next steps 13

UBS environmental policy 14

Functional environmental units 15

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Contents

For UBS, environmental sustainability plays aconsiderable part in solidand responsible management practices.

The 1998-99 environmental reportFacts and basis

UBS is one of the world’s leadingfinancial service providers and boastsexcellent financial ratings. At theend of 1998, the group had a totalof CHF 1,572 billion of assets undermanagement and total balancesheet assets of CHF 944 billion.

The 5 divisionsThe Private and Corporate Clientsdivision has a network of 520 branchand agency offices (as at 31 Dec.,1998) in Switzerland, servicing approxi-mately 4.4 million private clients,180,000 business clients and 10,000larger corporate clients.

The Private Banking division providescustomized services for high-net-worthindividuals world-wide.

The Warburg Dillon Read divisionprovides a comprehensive range ofinvestment banking services, on a global basis.

The UBS Brinson division is a world-wide operation. It specializes in inter-national investment business, whichincludes asset management for institu-tional investors.

The UBS Capital division is a world-wide operation specializing in privateequity business. Its portfolio, at the endof 1998, amounted to approximatelyCHF 1.8 billion.

ReportingThe 1998-99 environmental report illus-trates how environmental aspects areintegrated into the group’s businessactivities and details the environmental

performance of UBS. In our in-houseoperations, environmental performanceis quantified, whilst for bank products,it is described with reference to estab-lished processes and specific examples. This report shows how far we have pro-gressed in implementing our environ-mental policy, including the successesalready achieved and the areas in whichthere is further room for improvement.

How the report was producedAt the outset of the environmentalreport, we conducted a broad-basedsurvey of environmental experts toidentify the requirements that an environmental report must satisfy. Thedetailed contents were provided by thevarious divisions of UBS in cooperationwith our external consultants. Addi-tionally, a neutral expert accompaniedthe drafting of this report. Respon-sibility for the report lies with the Environmental Risk Management Ser-vices specialist unit at UBS. The internal and external members ofthe project team may be found on theinternet. The deadline for the validity ofthe contents of the printed version is22 April 1999.

The scope of the reportThe environmental report covers theworld-wide bank products and servicesof UBS AG, together with all in-houseoperations carried out, across all UBSdivisions, in Switzerland. It does notcover the operations of UBS subsidi-aries, health and safety aspects norsocial considerations.

The complete UBS environmentalreport, for 1998-99, is published onthe Internet.This brochure is only an extract of the full environmental report, which is available on the Internet athttp://www.ubs.com/environment.The Internet version is regularlyupdated and contains further informa-tion and greater detail. In addition, the printed brochure can be down-loaded from the Internet as a .pdf file.

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Private and Corporate Clients 24 043 staffPrivate Banking 7634 staffWarburg Dillon Read 13 794 staffUBS Brinson 1497 staffUBS Capital 122 staffCorporate Center 921 staffTotal 48 011 staffNo. of which in Switzerland 32 706 staff

Number of employees (as at 31 Dec., 1998)

This brochure is onlyan extract of the full environmental report, whichis available on the Internet at http://www.ubs.com/environment.

E Further informationon the Internet

E environmental managementobjectives

E environmental managementcycle

E environmental training

Environmental management at UBSContinuous improvement

The aim of environmental manage-ment at UBS is to systematize theenvironmental measures taken by the bank and to improve theefficiency of all environmentally-related action.

The environmental managementsystemCompleted in 1998, after the merger,the UBS environmental managementsystem is in line with the internationalISO 14001 standard for environmentalmanagement systems and was designed to be compatible with theclassic management cycle.

Environmental policyIn July 1998, the Group ExecutiveBoard decided on the new UBS AGenvironmental policy (see page 14).This policy states the UBS pledge tointegrate environmental aspects intothe three action areas of “bankingoperations, financial products and services”, “in-house ecology” and“management”.

In 1992, UBS was amongst the first, of what have since grown to 140 banks,to sign the UNEP (United Nations Environment Programme) bank declara-tion. UNEP hopes that this declarationwill help to anchor environmental considerations in all areas in whichfinancial service providers operate.

Annual objectives and environmental programmeThe different divisions are responsiblefor drafting their own annual objectivesand environmental programme. Theseare formulated after intensive discus-sions between the functional environ-mental units and the front line units,before being approved and adopted bythe chief line unit responsible.

Also factored into this planning processare: the annually updated analysis ofthe environmental impact of the bank’sproducts; the environmental perfor-mance evaluation (EPE) of the bank’soperations (analysis of the main mate-rials and energy flows); and the monitoring of our compliance withlegal provisions and other environ-mental regulations.

Organization and implementationThe ultimate responsibility for environ-mental matters lies with the UBS ChiefExecutive Officer. However, as part oftheir functional responsibilities, all managers and employees are chargedwith the task of implementing thebank’s environmental policy. In addi-tion, the functional environmental unitsprovide support for the work carriedout by the line units.

When integrating environmental con-siderations into staff training, the aim isto make employees aware of environ-mentally-friendly conduct and to moti-vate and empower them to act accord-ingly. Overall, in 1997 and 1998,environmentally-related training mod-ules were taught to more than 1,300members of staff; induction and tech-nical training was provided to morethan 600 individuals, whilst more than 170 managers attended environmen-tally-related courses.

Controlling and auditWe are constantly and actively develop-ing the environmental controlling forthe activities of our divisions. Accord-ingly, we attach great importance toour environmental audits – extensiveand systematic annual, internal reviewsof environmental organization andenvironmental management through-out the bank’s activities and operations.In 1998, for example, we performedsome 100 environmental audits of ourbanking activities in the Private andCorporate clients, Warburg Dillon Read,Private Banking and UBS Brinson divi-sions, as well as approximately 35 auditsof energy management and in-houseecology.

Management reviewEach year the Group Executive Boardtakes stock of the progress made towardimplementing the environmental policyand, based upon the results of the internalaudits, sets overall environmental objec-tives. In 1998 this evaluation by top man-agement took place on 17 December.

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Annualobjectivesand environ-mentalprogramme

Environ-mental policy

Benefits Organizationand imple-mentation

Controllingand audit

Managementreview

As part of their functional responsibilities, all managersand employees are chargedwith the task of implementingthe bank’s environmental policy.

Environmental communicationsInformation at all levels

In accordance with our environ-mental policy, we pursue an openinformation policy with all UBS stakeholders concerning the environmentally-related aspects of our activities. We aim to use our environmental track record toenhance our profile and therebypromote our banking products. At the same time, we act to raiseour business partners’ awareness of environmental issues.

Client requirements and shareholders’ interestsWe endeavour to inform our customersof our environmentally-friendly products and services, as well as aboutthe environmental risks and opportuni-ties arising in business management.

In the case of shareholders, we mainlyinteract with equity analysts who areinterested in our environmental man-agement and environmental perfor-mance, and in their consequences forshareholder value.

Members of staff are kept constantlyinformed of environmental issues. Besides technical training, the emphasisin staff communications is on ways tomake behaviour at the workplace moreenvironmentally-friendly.

Working with the authoritiesAs a matter of priority, we have enteredinto voluntary collaboration with theauthorities on environmental matters atinternational, national and local levels.

For instance, as part of the “ZurichEnergy Model” scheme, UBS, and othermajor energy consumers, have reacheda voluntary agreement with the govern-ment of the Canton of Zurich to increaseenergy efficiency.

UBS actively supports the Confedera-tion’s “Energy 2000” programme andis represented on the steering commit-tee of the “Services and Commerce”section. This, of course, is in addition toimplementing the measures of “Energy2000”, such as energy-saving weeks,ourselves.

Environmental awardsIn 1997, our new Lugano Suglio administrative complex was awardedboth the Swiss and European Solar prizes for being a pioneering project in energy-related, ecological and archi-tectural terms.

E Further informationon the Internet

E communication with ourstakeholders

E examples of co-operationE our contributions to

environmental organizationsE questionnaires drafted by

environmental analysts

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Clients

Shareholders

Employees

Authorities

Environmentalpartners

Awards

Organizations& experts

UBS AG

In 1997, in conjunction with the BBL(Swiss Federal Department of Civil Engineering and Logistics), we compiledthe brochure “Environmental manage-ment for building construction projects”,complete with detailed checklists foruse by construction specialists.

Partners for environmental trainingWe encourage environmental initia-tives, in particular those aiming to integrate environmental aspects into all forms of management training. For instance, we support the “Prince of Wales Business and EnvironmentProgramme” and the establishment ofthe European-wide, environmental economics, students’ initiative, “oikosinternational”.

Environmental organizationsOur contributions, to the work of environmental organizations, encour-age the exchange of experience andthe development of new approaches to environmental management. For example, we are involved in or working with: • the UNEP Financial Services Initiative• the World Business Council for

Sustainable Development (WBCSD)• the Global Reporting Initiative (GRI) • the Swiss Association for Ecologically

Aware Company Management (öbu) • the Banks and the Environment

working group of the Swiss Bankers’Association

• the Environmental Issues Advisory Panel of the British Bankers’Association

Our contributions, to thework of environmental organizations, encourage theexchange of experience andthe development of newapproaches to environmentalmanagement.

Banking and the environmentSeize opportunities, reduce risks

In the long term, thesuccessful companies will be those which display high levels of resource efficiency and which marketecologically responsible products.

“We seek to build shareholdervalue by taking advantage of envi-ronmental market opportunities. Atthe same time, we will incorporatedue consideration of environmentalrisks into our risk managementprocesses, especially in lending andinvestment banking.”

(UBS environmental policy)

Environmentally-related opportuni-ties and risks in commercial bankingNew business opportunities and lowercosts are benefits of being an environ-mentally-oriented company. At thesame time, environmental risks incurredby our credit clients can also have con-sequences for UBS.

Environmental and financial risksin Investment BankingTo include environmental risks, whereappropriate, in investment banking,Warburg Dillon Read approved the newGlobal Environmental Risk Policy, whichcame into force in February 1999.

Our clients’ business performance couldbe damaged by inadequate considera-tion of environmental aspects. Therequirement to comply with new envi-ronmental legislation, or the obligationto clean up contaminated land, cancost companies dearly, much to thedetriment of future cash flows.

Special criteria on which certain in-vestors insist, such as conformity withWorld Bank standards, also have to beconsidered in certain cases. In initialpublic offerings (IPOs) and equity issu-ing business, we endeavour to factorany existing environmental risks intoour pricing structures and into our pro-cedures for placing the issues.

In addition to this, environmentally con-troversial transactions are increasinglybeing targeted by pressure groups.

Future trends in banking In asset management we now offerenvironmental investment funds and, inour Swiss commercial banking opera-tions, we have integrated the assessmentof environmental aspects into our credit application processes.

But what does the future hold? Cur-rently, we are investigating the possibleenvironmental market opportunities inthe field of private equity, as well aslooking at the increasingly significantimpact of global climate policies on ourbanking business. In order to carry outthese assessments as expeditiously aspossible, we are making progressivelygreater use of information and otherservices provided by external companieswhich specialize in these areas.

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CommercialBanking inSwitzerland

InvestmentBanking

AssetManagment

Benefits for the clients, the bank and theenvironment

Taking advantageof environmental

opportunities

Addressenvironmentalrisks

In as early as 1994, in order to identifythese risks and opportunities, UBSincorporated the systematic assessmentof environmental aspects into its creditapplication processes – especially in relation to corporate and business clients.

Increased value with less pollutionin asset managementIn the long term, the successful com-panies will be those which display highlevels of resource efficiency and whichmarket ecologically responsible products.The underlying idea behind this theoryis the concept of eco-efficiency. The primary objective of eco-efficiency is to reduce the amount of energy andresources consumed per unit of addedvalue: increased value with less impacton the environment.

Environmentally-oriented investmentproducts have been available in theAnglo-Saxon countries since the late1960s. They are based first and fore-most on ethical principles and are geared towards excluding companieswith particularly poor environmentalrecords. Since the mid-1990s, thesehave been joined by investment fundproducts, such as the UBS Eco-Perfor-mance-Portfolios, which are increas-ingly geared to the concept of eco-efficiency. Although such eco-efficientinvestment products still account foronly a small share of the market, thatshare is growing rapidly.

Commercial banking SwitzerlandAssessing environmental aspects

Since 1994, UBS has operated athree-phase procedure for the systematic assessment of environ-mental aspects in its lending operations.

Three-phase assessment procedure1. During discussions with our client,we explore possible environmentalopportunities and risks. To this end, ourclient advisor is issued with a checklistand other tools.

2. Where environmental credit risks are present, in the second phase the client advisor raises these with the in-house credit officer and values themwith a view to establishing whetherfinancing the proposed loan is a viableproposition.

3. In the third phase of evaluating thecredit application, if further clarifica-tions are required, we are able to callupon the services of the external environmental specialists, Ecofact AG.

Decision on viability and conditionsDuring credit application processing,UBS takes due account of all financiallyrelevant environmental aspects: theyare factored into the credit assessmentprocedure in the same way as moreconventional rating factors (key finan-

cial figures/ratios, industry in which the client operates or the quality of themanagement).

When assessing the extent to whichassets offered as security will maintaintheir value, we also include potentialclean-up costs or loss of value, as aresult of site contamination, in our calculations. The results of the environ-mental assessment may also affect the terms and conditions on which aloan is granted.

Environmental training in commercial bankingOur client advisors and credit unitsreceive carefully targeted training onthe subject of environmental opportu-nities and risks. To this end, we havedeveloped an environmental trainingmodule entitled “Credit risks from environmental risks”.

External environmental specialistsThe tasks performed by the externalenvironmental specialists, Ecofact AG,include the co-ordination of technicalinvestigations into sites which may becontaminated, compilation of back-

ground documentation for client advisorsand collaboration in training activities.Ecofact AG is an integral part of ourenvironmental management systemwithin commercial banking, and hasperformed approximately 400 “third-phase” environmental audits, since1994.

E Further informationon the Internet

E environmental objectives forcommercial banking

E environmental training withincommercial banking

E case studiesE results of the environmental

auditsE benefits for commercial banking

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Three-phase rating procedure:1. Recognizing environmental opportunities2. Assessing credit risks3. Deeper analysis of important environmental

aspects

Environmental trainingin commercial banking

External functional unit

During credit applicationprocessing, UBS takes due account of all financially relevant environmentalaspects: they are factored into the credit assessmentprocedure in the same way as more conventional rat-ing factors.

E Further informationon the Internet

E environmental objectives inasset management

E stock selection and investmentstrategy of the Eco-Performance-Portfolios

E development of the Eco-Performance-Portfolios

E benefits in asset management

Asset managementEco-efficiency as investment strategy

By selecting companieswhose environmental commitment leads to reducedenvironmental risks andopens up new market opportunities, UBS aims tooffer investors a combinationof extra environmental benefits, in addition to levelsof return at least in line with the market.

• they are globally diversified equityfunds investing in all the leadingcountries and sectors;

• they invest only in ecologically soundcompanies which seize environmentalmarket opportunities; and

• they select and/or invest in a firm only if conventional financial analysis criteria are also fulfilled.

The fund has been designed to ensurethat the stocks selected for investmentare those which carry above-averageratings for both financial and environ-mental performance. By selecting com-panies whose environmental commit-ment leads to reduced environmentalrisks and opens up new market oppor-tunities, UBS aims to offer investors acombination of extra environmentalbenefits, in addition to levels of returnat least in line with the market.

At UBS Brinson, the functional unit“Environmental Performance Analysis”is responsible for making the relevantenvironmental assessments. Since1996, this unit has been dedicated tointegrating ecological criteria intoinvestment products.

UBS Brinson, Inc.The UBS Brinson, Inc. timber invest-ment funds offer institutional investorsthe opportunity to invest in forestry.UBS Brinson manages a total of tenfunds, investing in timberland projectsin the USA, New Zealand, Argentina,Chile and Uruguay.

These funds invest in forestry assetsand co-invest in forestry companiesthat are managed in an environ-mentally responsible manner. One ofthese companies, in New Zealand, hasalready earned the ISO 14001 certifi-cation. The average return achieved bythe funds since 1988 is 14.2 %.

VolumeThe total volume of assets managedaccording to ecological criteria at UBS is approximately CHF 180 million in the UBS Eco-Performance-Portfolios,CHF 150 million in individual discre-tionary management mandates andCHF 1.6 billion in the UBS Brinson, Inc. timber investment funds (as at 31 Dec., 1998). This corresponds to roughly 0.12 % of the total assetsunder management at UBS.

If demand for ecological investmentproducts from institutional and privateinvestors continues to strengthen in thefuture, we expect the volume of assetsmanaged according to ecological crite-ria to increase.

Other investment productsIn the past, environmental aspects werefactored into asset management by ageneral clause contained in the InternalInvestment Guidelines of the invest-ment funds. However, the wisdom ofmaintaining this clause and extending itto cover the whole area of fund man-agement has been questioned, sinceputting it into practice is very problem-atical. One of the main problems is thedifficulty investment funds face inachieving a benchmark return calcu-lated without allowance for investmentconstraints.

UBS’ asset management is carriedout in the Private Banking, UBSBrinson and Private and Corporate Clients divisions. The bank offersenvironmentally-friendly investorstwo investment products: the Eco-Performance-Portfolios and the timber investment funds of UBS Brinson, Inc.

Eco-Performance-PortfoliosIn June 1997, UBS broke new groundwith the launch of its Eco-Performance-Portfolios. These consist of investmentfunds for private investors and of aninvestment foundation for Swiss occupa-tional pension schemes. The most impor-tant characteristics of these products are:

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Considerationof eco-efficiencyaspects

Penetration in UBS asset management

Eco-efficiencyin assetmanagement

UBS Brinson Eco-Performance-Portfolios

UBS Brinson Timber InvestmentFunds

Other UBSinvestmentproducts

Investment bankingComprehensive strategy

Warburg Dillon Read (WDR) is oneof the world’s leading investmentbanks and, to our knowledge, isone of the first to institute its ownenvironmental policy.

WDR Global Environmental Risk Policy The WDR Global Environmental RiskPolicy has been in force since February1999. It sets out principles which must be considered, where appropriate,in the business commitment and creditprocesses at WDR.

Environmental risk managementprocesses In order to ensure that environmentalrisks can be accurately identified andmanaged, potential risks of this nature,arising in connection with a trans-action, must be given suitable attentionat an early stage. This then enables thebank to make cost-effective decisions.Due consideration of environmentalrisks will be incorporated, where appropriate, into the business commit-ment decision, the credit analysis, and the due diligence and credit deci-sion processes.

Help DeskEnvironmental Risk Management Ser-vices (ERMS) has established an HelpDesk to provide business and creditofficers with support in assessing andmanaging environmental risks asso-ciated with financial transactions.Among the services typically providedby the Help Desk are the identificationof suitable external experts, the for-mulation of due diligence strategies,the evaluation of environmental assessment reports, and staff training.Additionally, the Help Desk providesinformation internally about environ-mental risks and answers environ-mentally-related enquiries from investors and environmental groups.

Risk management toolsThe tools at our disposal are the WorldBank standards and guidelines, whichinclude, for instance, sectoral emissionstandards as well as terms of referencefor environmental impact assessments.We also have a list of environmentalconsultants, upon whom we can call, to carry out due diligence investi-gations.

Training and awareness raisingTo raise the awareness of the environ-mental policy and the associatedprocesses throughout the entire WDR division, a wide-ranging informationand training campaign is being designed. In addition, our website onthe intranet provides tools for, andinformation regarding, environmentalrisk management at WDR. We havealso installed an on-line Help Deskrequest facility. In addition, a newsletteris published monthly, to keep readersinformed of trends in the different sectors, in environmental policy and inthe legal sphere.

E Further informationon the Internet

E environmental objectives ininvestment banking at WDR

E explanation of WDR Environ-mental Risk Policy

E benefits in investment banking

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Policy

•UBS Environ-mental Policy

•WDR GlobalEnviron-mentalRisk Policy

Process

•Due Dilligence

•Rating

•Industry list

•Help Desk

People

•Newsletter

•Training

•Intranet

•Roadshows

In order to ensure that environmental risks can beaccurately identified andmanaged, potential risks ofthis nature, arising in con-nection with a transaction,must be given suitable atten-tion at an early stage.

In-house ecologyTaking the responsible attitude

The line units bear generalresponsibility for in-house environmentalobjectives and measures.

“We will actively seek ways ofreducing the environmental impactto air, soil and water from our in-house operations. The main focus isthe reduction of greenhouse gasemissions.”

(UBS environmental policy)

The environmental aspects of in-house operationsAccording to our environmental perfor-mance evaluation (EPE), which followsthe environmental pollution score ‘97methodology, the greatest impact onthe environment resulting from our in-house operations comes from electricityconsumption (for IT, air conditioning,lighting, etc.) and also from running ourheating systems. We perceive ongoingenergy management, eco-efficient building design and the use of energy-saving appliances, as opportunities tooptimize our energy consumption.

Integrating our outsourcing partnersThe contractors chosen for cleaningservices, post and freight transport andoffice supply storage are likewise inte-grated into the UBS environmentalmanagement system. Our environ-mental requirements are stipulated inthe contracts.

Functional environmental unitsas centers of competenceThe In-house Ecology functional unitsupports staff members with environ-mental responsibilities and deals directly with such issues as paper con-sumption, business travel and staffcommuting, which do not in them-selves constitute line functions. In addition, the In-house Ecology unitensures that responsible line units have access to current environmentallegislation.

Energy controllingFor ten years, the Energy Managementfunctional unit has drafted energyreports, which contain energy andwater consumption figures for all 700-plus UBS locations. The majority ofrecords for these reports have beenkept continually since 1980. Manage-ment and specialists are thus keptinformed of the success of our energy-saving objectives and of UBS key energyfigures (i.e. most important eco-per-formance indicators). The results of in-house energy optimization in selectedbuildings are published in the annualenergy report and are communicated in

training courses for janitors. In future,they will also be published on the intranet. The building’s managementand staff thus receive feedback on theresults.

In-house eco-controlling and EPEOn the basis of energy and materialflows, the In-house Ecology functionalunit produces the in-house EPE, a com-prehensive survey of all environmentalimpacts. Future measures are plannedon the basis of the results of this in-house EPE.

Environmental audits of in-houseoperationsAnnually, environmental audits of in-house operations are performed by theIn-house Ecology functional unit. In1998, 35 of these were carried out inlarge and characteristic UBS buildings.The audits focused on compliance withenvironmental regulations, the use andstorage of materials/chemicals, andstrategies and recommendations con-cerning environmental accidents.

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Business travel, particularly air travel,and our employees’ commuting, likewise contribute to environmentalpollution.

The environmental pollution caused byUBS in-house operations in Switzerland,is expressed as contributions to thegreenhouse effect (CO2), to acid rain(SO2, NOX) and to hazardous waste(nuclear energy).

Responsibility in line unitsThe line units bear general responsibil-ity for in-house environmental objec-tives and measures: the cleaning ser-vice, for example, is responsible for the implementation of waste disposalobjectives; the construction depart-ment, for construction ecology and theconsideration of energy aspects in con-struction projects; and the purchasingdepartment, for the integration of envi-ronmental aspects into procurement.

Environmentally-friendly solutions

Saving energy on the wayto successBetween 1990 and 1997, the volumeof electricity consumed by UBS inSwitzerland shrank by 18%. Over thesame period, staff numbers fell slightly(minus 3.5 %). In absolute terms, heat-ing energy consumption rose by 15%,compared with a 28% increase in theenergy-relevant office space.

This means that total energy use persquare metre was decreased by 25%,to 244 kWh/m2, over the period 1990-97. Since 1990, total water consump-tion has been reduced by an impressive21%.

Our energy savings are the result ofmany combined measures. A new UBS administration building, which wasopened in 1997 at Lugano Suglio, contains 700 workplaces and requiresroughly 70% less electricity and 50%less heating energy than conventionalbuildings of comparable capacity.

Cutting costs with LCD screensOne example of the measures that havemade it so successful: LCD screens areapproximately twice as expensive asstandard PC monitors but, thanks totheir lower power consumption, emitmuch less heat. The 60 LCD screens inthe offices of the Suglio building madeit possible to do without the special airconditioning system that would other-wise be necessary, leading on balanceto cost savings of some 30%.

IT wasteWhen disposing of old PCs and otheroffice equipment, we work only withwaste disposal experts who are licensedby SWICO (the Swiss trade organizationfor information, communication and

organization technology). SWICO con-sists of a group of office equipmentproducers who guarantee environmen-tally sound recycling and disposal oftheir old equipment.

Video conferencingAs an alternative to business trips, UBSin Switzerland held more than 1,000video conferences in 1997. Thus, UBSsaved an estimated 6 million kilometresin travel and CHF 1.5 million. In theGroup as a whole, about 5,000 videoconferences took place in 1997,increasing to over 6,500 in 1998.

E Further informationon the Internet

E environmental objectives andnext steps in in-house ecology

E methodology and results of our EPE

E environmental measures and examples in energy man-agement, paper procurement, waste disposal and travel

E in-house environmental communications

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absolute value relative value data quality

Employees 34 500 EMP goodBank area 1801 000 m2 goodBalance sheet 1016 524 m CHF very good

Electricity consumption 251000 MWh 7300 kWh/EMP very goodPercentage computing centres 64 300 MWh 25.6 % very goodPercentage solar energy 120 MWh 0.05 % very good

Heat consumption 187 000 MWh 104 kWh/m2 very goodPercentage district heating 13 900 MWh 7.4 % very good

Water consumption 811 200 m3 94 l/EMP/day good450 l/m2 very good

Paper consumption 8700 t 252 kg/EMP very goodRecycled paper 700 t 8 % very goodChlorine-bleached paper 400 t 4 % very goodChlorine-free paper 7600 t 88 % very good

Copier/printer paper 366 m sheets A4 10 600 sheets A4/EMP very good

Waste disposal1 9850 t 285 kg/EMP mediumRefuse 3450 t 35 % mediumPaper (recycl.) 4820 t 49 % mediumCardboard (recycl.) 630 t 6 % mediumRecyclable materials (misc.) 290 t 3 % mediumSpecial/hazardous waste 660 t 7 % medium

Business travel 102 m km 3000 km/EMP goodFlight km. 64 m km 63 % goodRail km. 28 m km 27 % mediumRoad km. 10 m km 10 % medium

Carbon dioxide CO2 97 900 t 2800 kg/EMP very good

1 not including building rubble and those company records which in normal circumstances would be disposed of but which, since1997, have been kept in compliance with the ban on the destruction of archive documents imposed by the Federal decree con-cerning the historical and legal investigation into the fate of assets held in Switzerland as a result of events in connection withGermany’s Nationalist Socialist regime, issued on 13 December 1996.

1997 Environmental Performance Indicators(UBS AG in Switzerland excl. affiliates)

The benefits of our commitmentFor customers, the bank and theenvironment

UBS’s commitment to the environ-ment strengthens our competitiveedge: by identifying environmentalrisks, we are in a position to con-sider them systematically. At thesame time, we also take advantageof environmental opportunities,whilst simultaneously reducingenvironmental impacts: directlythrough the increased eco-effi-ciency of UBS in-house operations,and indirectly through the integra-tion of environmental aspects intoUBS services and products.

Our customers benefit from theseimproved UBS services, as a result of:• reduction of the risks associated with

commercial banking;

• new products and services in assetmanagement;

• optimized risk management in invest-ment banking; and

• our customer advisors’ greater know-how regarding environmental aspectsin finance.

UBS shareholder value can be increased through:• optimized internal processes, which

allow us to reduce risks in commercialand investment banking, for UBS andits clients;

• new products and services in assetmanagement;

• lower in-house operational costs due to improved energy efficiency,reduced waste disposal costs, etc.;and

• the enhanced reputation of UBS andthe strengthened motivation of UBSemployees.

The environment benefits indirectlyfrom UBS’s commitment: • through the ecological influence of

services and products in commercialbanking, asset management andinvestment banking; and

• because the bank’s commitment toenvironmentally sound and sustain-able behaviour may provide incentivesto other businesses and institutions.

Directly the environment can benefitthrough:• reduced consumption of energy and

materials, and a correspondingdecrease in emissions to air, waterand soil (the most significant effectin environmental terms being on electricity consumption).

UBS employees benefit from our en-vironmental commitment through: • potentially improved workplace qual-

ity, especially through good energymanagement and optimized buildingdesign; and

• the enhanced reputation of UBS as anemployer.

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AssetManagement

Benefits of UBSenvironmentalcommitment

Investment Banking

CommercialBanking

In-houseOperations

Environ-mentalManagement

We reduce environmentalimpacts: directly through theincreased eco-efficiency of UBS in-house operations,and indirectly through theintegration of environmentalaspects into UBS services and products.

The next stepsContinually attaining new objectives

We aim to maintain the ISO 14001 certification capacity of the UBS environ-mental management system.

The UBS environmental pro-gramme, for 1999-2000, aims tobring about improvements in ourbanking products, in-house opera-tions and environmental organiza-tion. We performed approximately140 in-house environmental audits,the results of which served as thebasis for planning what measuresare necessary and how we shouldproceed. The most important “nextsteps” are outlined below.

Next steps: environmental management• Maintain the ISO 14001 certification

capacity of the UBS environmentalmanagement system.

• We will further develop environmen-tal performance indicators in banking.

• In collaboration with the responsibleinternal units, we will further developour communications strategy for environmental issues.

Next steps: commercial banking• We will further develop the checklists

used for assessing environmental andsector-specific risks.

• We intend to develop key environ-mental management figures for ourcredit monitoring systems, so that infuture we are better able to quantifythe effectiveness of our assessmentsystem.

• As part of the restructuring of UBS’straining activities, we will formulate a new underlying concept for ecologytraining in commercial banking.

Next steps: asset management• In our Eco-Performance-Portfolios,

we aim to achieve a significantincrease in the volume of assetsunder management.

• The Environmental Performance Analysis functional unit intends toprovide clients and investment con-sultants with a structured flow ofinformation regarding funds and the results of company ratings.

• The Environmental Performance Analysis functional unit aims tostrengthen its already close contactswith the companies previously evaluated.

• As a part of the restructuring of theUBS training activities, we will for-mulate a new underlying concept forecology training in asset manage-ment.

Next steps: investment banking• We aim to achieve continuous

improvement of implementationmethods of environmental risk management processes.

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• We aim to intensify the Business andCredit Officers’ training, regardingthe new WDR Global EnvironmentalRisk Policy.

• The existence and services of the Help Desk facility have to be commu-nicated within WDR.

• We aim to achieve continuous impro-vement in the controlling mechanismsfor the environmental policy.

Next steps: in-house ecology• We look to achieve further improve-

ments in our energy and materialsconsumption.

• We will take further steps to ensurethat all members of staff are in-formed of, and adequately trained in,methods to make their business con-duct more environmentally-friendlyand, in particular, to make more eco-nomical use of energy.

• We aim to further promote the use ofaudio-visual communication media(video conferencing, tele-conferences,etc.), by means of an information andawareness-raising campaign.

• We aim to increase the in-houseusage of recycled paper.

Environmental policy of UBS AGEnvironmental protection is one of themost pressing issues facing our worldtoday. Consequently environmentalissues are a challenge for all companiesin all sectors. UBS regards sustainabledevelopment as a fundamental aspect ofsound business management and wasone of the first banks to sign the UnitedNations Environment Programme’s “Statement by Financial Institutions onthe Environment and Sustainable Devel-opment”. UBS is committed to continu-ing the integration of environmentalaspects into its business activities.

To make this happen, our environmen-tal policy focuses on three action areas:

Banking, financial products and servicesWe seek to build shareholder value bytaking advantage of environmentalmarket opportunities. At the sametime, we will incorporate due consider-ation of environmental risks into ourrisk management processes, especiallyin lending and investment banking.

OperationsWe will actively seek ways of reducingthe environmental impact to air, soiland water from our in-house opera-tions. The main focus is the reductionof greenhouse gas emissions.

ManagementWe seek to ensure the efficient imple-mentation of our environmental policyvia an environmental management system which includes sound objec-tives, programs and monitoring. Weensure compliance with regulatoryrequirements and furthermore, we inte-grate environmental aspects in internalcommunication and training. We wel-come open dialogue and communicateactively with all relevant stakeholders.

The UBS environmental policyOur engagement

Validation by SGS InternationalCertification Services AG“We have verified the correctness ofthe statements in the 1998-99 envi-ronmental report (web-version) ofUBS AG and, where necessary, haverequested that proof be presented.

We hereby confirm that the reporthas been prepared with the neces-sary care, that its contents are cor-rect, that it describes the essentialaspects of the environmental man-agement system at UBS AG and thatit reflects the actual practices andprocedures at UBS AG.”

Elvira Bieri and Dr Franz HeinzerZurich, 20. May 1999

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ISO 14001 certification for UBS AGIn May 1999 UBS AG received certi-fication according to the ISO 14001environmental standard. This makesUBS the first bank in the world tohave its environmental managementsystem in banking operations certi-fied according to ISO 14001 on aworld-wide basis. The bank’s in-houseoperations in Switzerland were alsorecognized as being in accordancewith ISO 14001. Certification wascarried out by SGS International Cer-tification Services AG.

The implementation of this environ-mental policy is a process of continuousimprovement which will take severalyears to complete. Although manygoals have already been achieved, there are still areas which need to beaddressed. The content of this policywill be reviewed periodically by themanagement.

Zurich, 15 July 1998

Marcel OspelPresident & Group CEOUBS regards sustainable

development as a fundamental aspect of soundbusiness management.

E Further information on the Internet

E report of the neutral expertDeloitte & Touche, Copenhagen

Our environmental functional unitsImplementation in the divisions

The central environmental unitThe central Environmental Risk Man-agement Services unit (ERMS) monitorsthe implementation of the UBS environ-mental policy throughout the corpora-tion, the development of the environ-mental management system andenvironmental communication. ERMSacts as an Help Desk for Warburg DillonRead and is also responsible for innova-tions in the field of product ecology aswell as for environmental controlling.

Asset managementThe Environmental Performance Analy-sis functional unit analyzes the eco-efficiency of companies and managesthe “UBS (Lux) Equity Fund-Eco Perfor-

15

mance CHF” and the “World EquitiesEco Performance” investment founda-tion. UBS Brinson, Inc. manages invest-ment funds which invest in timberlandstewardship in the USA, Argentina,New Zealand, Chile and Uruguay.

Commercial bankingIn commercial banking our client advi-sors have the opportunity to call uponthe external functional unit, EcofactAG, for support in assessing and valu-ing environmental aspects, e.g. withregard to site contamination.

Ecology TrainingThe Ecology Training functional unit, a part of Private and Corporate Clients,is responsible for integrating environ-mentally-related modules into trainee,specialist and management trainingcourses.

In-house Ecology and Energy ManagementThe In-house Ecology and Energy Management functional units provideline units with advice and support con-cerning in-house ecology and energymonitoring in Switzerland. They alsodraft the environmental performanceevaluation of UBS in Switzerland.

For information andto order copies:UBS AGEnvironmental Risk Management Services (ERMS)Bahnhofstr. 45CH-8098 Zuriche-mail: environment@ubs.comhttp://www.ubs.com/environmenttel: + 41 - 1 - 234 20 40fax: + 41 - 1 - 234 32 45

This is a standard paper of UBS AG.It is produced using 100% recycled paper.

This report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. This report is based on information obtained from sources believedto be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not to be con-structed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice and the division, subsidiary oraffiliate of UBS AG (”UBS”) identified in this report is under no obligation to update or keep current the information contained in this report. UBS accepts no liability for any loss or damageof any kind arising out of this report. US: This report is being distributed to US persons by either (I) Warburg Dillon Read LLC (”WDR LLC”), a subsidiary of UBS AG; or (ii) by another divisionor affiliate of UBS AG to major US institutional investors only. WDR LLC accepts responsibility for the content of a report prepared by another division or affiliate of UBS AG only when distributed by WDR LLC to US persons. Canada: Bunting Warburg Dillon Read Inc. will provide upon request a statement of its financial condition and a list of its directory and senior officers.For transactions, please contact your local sales representative. Additional information will be made available upon request.

© 1999, All rights reserved. This report may not be reproduced or distributed in any manner without the permission of UBS.

Can economics and ecology go hand in hand? Or must one always flourish at the expense of the other? It’s a question a business like ours, in a worldlike ours, must face every single day.

And how we answer it is what makesus not only globally successful, but alsosuccessful global citizens. If you shareour concerns, come and get to knowus better: www.ubs.com/environment

aUBSUBS AGEnvironmental Risk Management ServicesBahnhofstr. 45CH-8098 Zurichenvironment@ubs.comwww.ubs.comtel: + 41-1-234 1111 Th

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