BCV to repurchase participation certificates issued in 2003

In line with the announcement made at the last Shareholders' Meeting, BCV and the Vaud Cantonal Government have agreed upon a proposal put forward by the Bank for the participation- certificate capital issued in 2003. Under this proposal, BCV will gradually buy back the participation certificates and decide on the volume and timing of repurchases in the light of the Bank's financial situation. The operation will be carried out in several tranches, with no commitment by BCV as to the volume of each tranche and the timetable for its repurchase. The buyback price will consist of the issue price of CHF 92 per certificate, plus an annual risk premium of 2%. The Cantonal Government has drawn up a bill (draft legislation, known locally as an "EMPD") on the repurchase for submission to the Cantonal Parliament.

Background
Following the insufficient levels of shareholders’ equity that came to light at BCV in October 2002, a recapitalization was necessary. The Vaud cantonal authorities reacted promptly to this situation, making the courageous decision to stand behind the Bank. The subsequent recapitalization was implemented in February 2003, with the Canton purchasing 99.84% of the 13,586,956 participation certificates issued by the Bank.
BCV has also taken major strategic and organizational measures over the last two years, and the re-alignment on its core businesses has paid off. The 2003 results, as well as those projected for 2004, show that the Bank's finances are back on a sound footing. Having now put in place solid foundations for the long term, it intends to press ahead with its efforts to implement in-depth structural changes and enhance performance.
Reasons for the Buyback
At the Annual Shareholders' Meeting held in April 2004, BCV announced that it was time to begin talks with the Vaud cantonal authorities on future plans for the participation-certificate capital. The improvement in its finances offers scope for the Bank to gradually optimize its capital structure, thus providing the Canton with an opportunity to reduce its stake. Furthermore, the uncertainty surrounding the future of the participation-certificate capital has led to numerous questions from shareholders and potential investors.
At the time of the recapitalization, the Cantonal Government regarded its purchase of the certificates as a move to support the Bank and help see it through a difficult period, with the intention of reducing its commitment eventually. Given the clear improvement in its finances, the Bank has put forward a proposal for the participation certificates which takes into account the interests of Vaud Canton, minority shareholders, minority certificate holders and BCV.
Buyback Conditions
The transaction provides for the conversion into shares of the participation certificates held by minority holders (0.16% of the participation-certificate capital). Thereafter, BCV will gradually repurchase the certificates held by the Canton of Vaud.
The buyback will be carried out in tranches, with no commitment by the Bank as to the volume of each tranche and the timetable for its repurchase. The entire operation will be contingent upon the future financial performance of BCV, as the Bank must at all times ensure that the level and structure of its shareholders’ equity meet legal requirements and remain compatible with its development within the context of sound and prudent management.
The buyback price agreed upon by the Bank and the Cantonal Government consists of the issue price of CHF 92 per participation certificate, supplemented by a cumulative annual risk premium of 2% to provide adequate compensation for the risk taken by the Canton at the time of the recapitalization.
Final Approval by Cantonal Parliament
A bill ("EMPD") concerning the repurchase operation has been drawn up by the Cantonal Government for submission to the Cantonal Parliament.

Contact(s)

Wilhelm Blaeuer, Investor relations
Phone + 41 21 212 20 71
E-mail

Paul Coudret, Press Relations
Phone +41 21 212 22 51
E-mail

This press release is being issued outside the trading hours of the SIX, Swiss Exchange in order to comply with the principles of ad hoc disclosure pursuant to the SIX listing rules.

A joint press conference by Vaud Canton and the Bank will be held at 9 a.m. today, Tuesday 21 December 2004, at the Salle du Bicentenaire, Place du Château 6, Lausanne, to present details of the proposed legislation that will be submitted by the Cantonal Government to the Cantonal Parliament.
The full text of the bill ("EMPD") will be available (in French) on the Vaud Canton website www.vd.ch from 9 a.m. onwards.