Date: July 07, 2000

To: Ulrich Rimensberger

From:

RE: Strategic Options with ATM and Outsourcing

Our strategy at Union Bank of Switzerland is to be the leading financial services institution for large clients worldwide. We also strive for cost leadership. I would like to meet with you prior to your meeting with GTEC’s managers to discuss moving towards ATM and the process of outsourcing services.

There are many great reasons for moving towards ATM. With increased bandwidth and speed we would have opportunities to move into new banking applications and consolidate existing networks to reduce costs. We have a great IT team that has done an excellent job in networking the firm and creating a sound client server architecture. I have the utmost confidence that they would do a great job on any technology platform we choose to move towards.

To move into ATM, however, there is great risk and substantial cost involved. ATM provides a great transmission function, but is enough value gained as an early mover to justify the risk and cost at this time of change and increasing competitive pressure in our industry? Your short to medium term plans suggest internal development to start since there are no service providers with guaranteed service levels. We are unsure of how to integrate this platform with some of our current technology, and presently, ATM is the most expensive WAN technology. Cost would restrict us from using ATM on desktop applications, and we would only be utilizing ATM in business units of 1000 employees and greater. The smaller units would still be operating on the current frame-relay platform. Would this decrease our costs, or create more cost, work and increased staff due to different platforms and a need to keep both systems functioning properly?

Our venture with Newtelco creates a drop in carrier expenses and will work great domestically, but for international operations there is still a need for an international carrier. Their fiber-optic network is sufficiently dense, but seldom able to reach UBS locations directly, so there is still a need to lease local loop connections. We are also relying on certain assumptions in the future as a result of telecommunications deregulation, reduced legal barriers, and decreases in tariffs that are not in place yet. We know the players in telecommunications are going to need to redefine their strategic positions. This will be a highly competitive field, technology will be changing very rapidly, and many applications will become obsolete very quickly.

Sprint and Metropolitan Fiber Systems introduced ATM in 1993 and experienced extremely slow growth due to high equipment costs, evolving standards, scarcity of staff with ATM network skills, and lack of applications needing ATM bandwidth. We are still faced with those same problems today.

There are two separate issues that need to be faced in our decision of ATM and outsourcing.

1) Should we be the early mover in ATM, and 2) Which strategic options will be available for outsourcing. I believe that with our heavy reliance on service providers and the speed in which this technology will be changing, that our development of ATM is not a best solution for cost reduction and we should allocate our energy and resources elsewhere at this time. I do believe that outsourcing certain functions of our current IT processes and future projects would have great strategic, tactical, and cost advantages, and we should develop a plan to move in this direction. We will discuss all of these issues in further detail in our meeting today.