UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 20–20—F
(Mark One)
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the fiscal year ended December 31, | ||
OR | ||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the transition period from to .
Commission file number: 1-15060
UBS AG
Switzerland
(Jurisdiction of Incorporation or Organization)
Bahnhofstrasse 45
CH-8098 Zurich, Switzerland
and
Aeschenvorstadt 1,
CH-4051 Basel, Switzerland
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Please see the following page.
Securities registered or to be registered pursuant to Section 12 (g) of the Act:
None.
Securities for which there is a reporting obligation pursuant to Section 15 (d) of the Act:
Please see the following page.
Indicate the number of outstanding shares of each of the issuer’s classes of
capital or common stock as of 31 December 2002:2003:
Ordinary shares, par value CHF 0.80 per share: 1,256,297,6781,183,046,764 ordinary shares
(including 97,181,094111,360,692 treasury shares)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 o Item 18 þ
2
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Name of each exchange on | ||
Title of each class | ||
which registered | ||
Ordinary Shares (par value of CHF 0.80 each) | New York Stock Exchange | |
$300,000,000 7.25% Noncumulative Trust Preferred Securities | New York Stock Exchange | |
$300,000,000 7.25% Noncumulative Company Preferred Securities | New York Stock Exchange* | |
$300,000,000 Floating Rate Noncumulative Trust Preferred Securities | New York Stock Exchange | |
$300,000,000 Floating Rate Noncumulative Company Preferred Securities | New York Stock Exchange* | |
Subordinated Guarantee of UBS AG with respect to | ||
Company Preferred Securities | New York Stock Exchange* | |
$ | ||
American Stock Exchange | ||
$4,500,000 BULs due October | American Stock Exchange | |
$46,000,000 PPNs due May | American Stock Exchange | |
$16,500,000 PPNs due June | American Stock Exchange | |
$8,129,000 PPNs due November | American Stock Exchange | |
$8,961,000 PPNs due December | American Stock Exchange | |
$31,517,000 | American Stock Exchange | |
$52,000,000 PPNs due November | American Stock Exchange | |
$14,500,000 PPNs due December | American Stock Exchange | |
$20,000,000 PPNs due February | American Stock Exchange | |
$16,000,000 PPNs due February | American Stock Exchange | |
$8,000,000 PPNs due November 2010 | American Stock Exchange | |
$9,000,000 PPNs due April | American Stock Exchange | |
$6,900,000 PPNs due May | American Stock Exchange | |
$12,660,000 PPNs due September | American Stock Exchange | |
$17,842,000 PPNs due October | American Stock Exchange | |
$ | American Stock Exchange | |
$ | American Stock Exchange | |
$31,000,000 PPNs due May 2010 | American Stock Exchange | |
$133,000,000 EASs due | American Stock Exchange | |
$ | American Stock Exchange | |
$ | American Stock Exchange | |
$10,000,000 PPNs due July 2010 | American Stock Exchange | |
$7,750,000 PPNs due August 2010 | American Stock Exchange | |
$5,100,000 PPNs due September 2009 | American Stock Exchange |
Securities registered or to be registered pursuant to Section12(g)Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section15(d)Section 15(d)
of the Act:
$1,500,000,000 8.622% Noncumulative Trust Preferred Securities
$1,500,000,000 8.622% Noncumulative Company Preferred Securities
$500,000,000 7.247% Noncumulative Trust Preferred Securities
$500,000,000 7.247% Noncumulative Company Preferred Securities
Subordinated Guarantee of UBS AG with respect to Company Preferred Securities
$14,000,000 Equity Linked Notes due February 1, 2007
$4,976,000 Equity Linked Notes due June 20, 2007
$150,000,000 Variable Rate Credit26,000,000 PPNs due August 2008
$9,200,000 EASs due October 2004
$23,000,000 EASs due October 2004
$11,200,000 PPNs due February 2011
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$14,000,000 EASs due October 2004
$5,500,000 EASs due October 2004
$8,500,000 EASs due October 2004
$13,000,000 PPNs due July 2004
$9,000,000 EASs due November 2004
$5,000,000 EASs due November 2004
$2,000,000 EASs due November 2004
$3,600,620 EASs due November 2004
$6,393,920 EASs due November 2004
$4,012,800 EASs due November 2004
$4,677,030 EASs due November 2004
$4,500,000 PPNs due July 2009
$35,000,000 EASs due December 2004
$1,546,930 EASs due December 2004
$3,282,240 EASs due December 2004
$1,452,000 EASs due December 2004
$1,942,330 EASs due December 2004
$3,570,800 EASs due December 2004
$22,500,000 EASs due January 2005
$11,000,000 PPCNs due January 2012
$1,800,920 EASs due January 2005
$900,500 EASs due January 2005
$891,450 EASs due January 2005
$1,141,080 EASs due January 2005
$755,430 EASs due January 2005
$3,700,000 EASs due January 2005
$20,000,000 EASs due February 2005
$22,000,000 EASs due March 2005
$19,100,000 EASs due March 2005
$25,500,000 PPNs due January 2009
$26,000,000 EASs due April 2005
$11,500,000 CPNs due August 2009
$7,500,000 PPNs due February 2009
$15,500,000 PPNs due January 2012
$12,000,000 EASs due June 2005
$42,000,000 Commodity Linked Notes due October 24, 2003$1,667,000 12.5% GOALs due June 23, 2003May 2005
Guarantees with respect to certain securities of UBS Americas Inc.
* | Not for trading, but solely in connection with the registration of the corresponding Trust Preferred Securities. |
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CONTENTS
5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as the information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. The words “anticipate”, “believe”, “expect”, “estimate”, “intend”, “plan”, “should”, “could”, “may” and other similar expressions are used in connection with forward-looking statements. In this annual report, forward-looking statements may, without limitation, relate to:
• | The implementation of strategic initiatives, such as the implementation of the European wealth management strategy and our plans to continue to expand our corporate finance business; | |||
• | The development of revenues overall and within specific business | |||
• | The development of operating expenses; | |||
• | The anticipated level of capital expenditures and associated depreciation expense; | |||
• | The expected impact of the risks that affect UBS’s business, including the risk of loss resulting from the default of an obligor or counterparty; | |||
• | Expected credit losses based upon UBS’s credit review; and | |||
• | Other statements relating to UBS’s future business development and economic performance. |
There can be no assurance that forward-looking statements will approximate actual experience. Several important factors exist that could cause UBS’s actual results to differ materially from expected results as described in the forward-looking statements. Such factors include:
• | General economic conditions, including prevailing interest rates and performance of financial markets, which may affect demand for products and services and the value of our assets; | |||
• | Changes in UBS’s expenses associated with acquisitions and dispositions; | |||
• | General competitive factors, locally, nationally, regionally and globally; | |||
• | Industry consolidation and competition; | |||
• | Changes affecting the banking industry generally and UBS’s banking operations specifically, including asset quality; | |||
• | Developments in technology; | |||
• | Credit ratings and the financial position of obligors and counterparties; | |||
• | UBS’s ability to control risk in its businesses; | |||
• | Changes in tax laws in the countries in which UBS operates, which could adversely affect the tax advantages of certain of UBS’s products or subject it to increased taxation; | |||
• | Changes in accounting standards applicable to UBS, as more fully described below; |
• | Changes in investor confidence in the future performance of financial markets, affecting the level of transactions they undertake, and hence the levels of transaction-based fees UBS earns; | |||
• | Changes in the market value of securities held by UBS’s clients, affecting the level of asset-based fees UBS can earn on the services it provides; and | |||
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UBS is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
The effect of future changes in accounting standards
Included in the Notes to the Financial Statements is a description of the expected effect of accounting standards that have been issued but have not yet been adopted, for both IFRS and US GAAP.
Although we believe that description includes all significant matters that have been approved by the IASB and the FASB, those standard-setting bodies have a large number of projects in process that could result in significant new accounting standards or significant changes to existing standards.
This increased level of activity includes normal ongoing development and efforts to improve the existing body of accounting standards, and also is in response to a number of perceived deficiencies in accounting standards exemplified by reported abuses by various companies.
We believe it is likely that several new accounting standards will be issued in the near future, and that those new standards could have a significant effect on our reported results of operations and financial position, but cannot predict the precise nature or amounts of any such changes.
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PART I
Item 1. Identity of Directors, Senior Management and Advisors.
Not required because this Form 20-F is filed as an annual report.
Item 2. Offer Statistics and Expected Timetable.
Not required because this Form 20-F is filed as an annual report.
Item 3. Key Information.
A—Selected Financial Data.
Please see pages 195199 to 199203 of the attached Financial Report 2002.2003 U.S. Version, also referred to as “Financial Report 2003”.
Ratio of Earnings to Fixed Charges
Please see page 199203 of the attached Financial Report 2002,2003, and Exhibit 7 to this Form 20-F.
B—Capitalization and Indebtedness.
Not required because this Form 20-F is filed as an annual report.
C—Reasons for the Offer and Use of Proceeds.
Not required because this Form 20-F is filed as an annual report.
D—Risk Factors.
Please see pages 1620 and 1721 of the attached Financial Report 20022003.
Item 4. Information on the Company.
A—History and Development of the Company.
1-3 | Please see page | |
4 | Please see | |
5, 6 | Please see the section | |
7 | Not applicable. |
B—Business Overview.
1, 2, 3, 5, 7 | Please see sectionThe Business Groupson pages |
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4, 6 | Not applicable. | ||
8 | Please see the sectionRegulation and Supervisionon pages |
8
C—Organizational Structure.
Please see Note 3536 to the Financial Statements on pages 153159 to 156162 of the attached Financial Report 2002.2003.
D—Property, Plant and Equipment.
Please see the sectionProperty, Plant and Equipmenton page 199203 of the attached Financial Report 2002.2003.
Information Required by Industry Guide 3
Please see pages 200204 to 216220 of the attached Financial Report 2002.2003.
Item 5. Operating and Financial Review and Prospects.
A—Operating Results.
Please see sectionsInformation for ReadersOverview,Group Financial ReviewUBS ResultsandReview of Business Group PerformanceResultson pages 87 to 7475 of the attached Financial Report 2002.2003.
Please also see Note 3940 to the Financial StatementsReconciliation of International Financial Reporting Standards (IFRS) to United States Generally Accepted Accounting Principles (US GAAP)on pages 160165 to 171177 of the attached Financial Report 20022003 and theCurrency managementsubsection of theGroup Treasurysection, on pages 84 to 8571 and 72 of the attached Handbook 2002/2003.2003/2004.
B—Liquidity and Capital Resources.
We believe that our working capital is sufficient for the company’s present requirements.
Group UBS liquidity and capital management is undertaken at UBS by Group Treasury as an integrated asset and liability management function. For a detailed discussion of Group Treasury’s functions and results, including our capital resources, please see pages 7867 to 8774 of the attached Handbook 2002/2003,2003/2004, and Note 18 to the Financial StatementsDebt Issuedon pages 114 to 119121 and 122 of the attached Financial Report 2002.2003.
For a discussion of UBS Group’sUBS’s balance sheet and cash flows, please see pages 26 to 2831, 32, 34 and 35 of the attached Financial Report 2002.2003.
For a discussion of UBS’s long term credit ratings, please see theCapital Strengthsubsection of the sectionStrategy, Structure and HistoryCapital Managementon pages 10 and 11page 74 of the attached Handbook 2002/2003.2003/2004.
C—Research and Development, Patents and Licenses, etc.
Not applicable.
D—Trend Information.
Please seeOutlook 2003subsection of the sectionGroupUBS Resultson page 2834 of the attached Financial Report 2002,2003, and pages 15, 37, 4211, 12, 30, 34, 35 and 4941 of the attached Handbook 2002/2003,2003/2004, which contain more detailed trend information.
-4-E—Off-balance sheet arrangements.
F—Tabular disclosure of contractual obligations.
Please seeContractual Obligationssubsection of the sectionUBS Results on page 32 of the attached Financial Report 2003.
Item 6. Directors, Senior Management and Employees.
A—Directors and Senior Management.
1, 2, 3 | Please see pages | |
4 and 5 | None. |
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B—Compensation.
Please see theCompensation, Shareholdings and Loanssection on pages 10491 to 10895 of the attached Handbook 2002/20032003/2004 and also Notes 32 and 33 to the Financial Statements on pages 147151 to 152157 of the attached Financial Report 2002.2003.
C—Board Practices.
Please see pages 9581 to 10086 of the attached Handbook 2002/20032003/2004 and Note 33 to the Financial Statements on pages 151155 to 152157 of the attached Financial Report 2002.2003.
D—Employees.
Please see page 25pages 30-31 of the attached Financial Report 20022003.
E—Share Ownership.
Please see the subsectionCompensation, Shareholdings and Loansin the chartsCorporate Governancesection on page 14pages 91 to 95 of the attached Handbook 2002/2003.
E—Share Ownership.
Please see the sectionCompensation, Shareholdings and Loanson pages 104 to 108 of the attached Handbook 2002/20032003/2004 and also Notes 32 and 33 to the Financial Statements on pages 147151 to 152157 of the attached Financial Report 2002.2003.
Item 7. Major Shareholders and Related Party Transactions.
A—Major Shareholders.
Please see pages 91 to 9277 and 139 and 14078 of the attached Handbook 2002/2003.2003/2004.
B—Related Party Transactions.
For 2002 and 2001, please see Note 33 to the Financial Statements on pages 151 to 152 of the attached Financial Report 2002.
The number of long-term stock options outstanding to members of the Board of Directors, Group Executive Board and Group Managing Board from equity participation plans was 4,693,458 at 31 December 2000.
The total loans and advances receivable were CHF 36 million at 31 December 2000.
The total amountsnumber of shares and warrants held by members of the Board of Directors (including those nominated for election to the Board of Directors at the annual general meeting to be held on 15 April 2004), and the Group Executive Board and parties closely linked to them was 3,152,617 at 31 December 2003 and 2,139,371 at 31 December 2002. The total number of shares held by these two groups plus the Group Managing Board were 7,583,184 and 69,504,577 as ofwas 4,068,918 at 31 December 2000.2001. No member of the Board of Directors or Group Executive Board is the beneficial owner of more than 1% of the Group’s shares at 31 December 2003.
C—Interests of Experts and Counsel.
Not applicable because this Form 20-F is filed as an annual report.
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Item 8. Financial Information.
A—Consolidated Statements and Other Financial Information.
Please see Item 18 of this Form 20-F.
B—Significant Changes.
UBS is not aware of any significant change that has occurred since the date of the annual financial statements included in this Form 20-F.
Item 9. The Offer and Listing.
A—Offer and Listing Details.
1, 2, 3, 5, 6, 7 | Not required because this Form 20-F is filed as an annual report. | |
4 | Please see page |
10
B—Plan of Distribution
Not required because this Form 20-F is filed as an annual report.
C—Markets.
UBS’s shares are traded on the virt-x, the New York Stock Exchange and the Tokyo Stock Exchange. The symbols are shown on page 135119 of the attached Handbook 2002/2003.2003/2004.
Trading on virt-x
Since July 2001, Swiss blue chip stocks have no longer been traded on the SWX Swiss Exchange. All trading in the shares of members of the Swiss Market Index (SMI) now takes place on virt-x, although these stocks remain listed on the SWX Swiss Exchange. Altogether, approximately 600400 blue-chip stocks representing around 80% of European market capitalization are traded on virt-x, in the currency of their home market.
virt-x is majoritywholly owned by the SWX Swiss Exchange. It provides an efficient and cost effective pan-European blue-chip market. It addresses the increasing requirement for equity investment to be conducted on a sectoral basis across Europe rather than being limited to national markets.
virt-x is a Recognized Investment Exchange supervised by the Financial Services Authority in the United Kingdom. It is delivered on the modern, scalable SWX trading platform.
Trading is possible on all target days, as specified by the European Central Bank. The opening hours are 06:00 to 22:00 CET and the trading hours are 09:00 to 17:30 CET. During the after-hours trading phase from 17:30 to 22:00 CET and in the pre-trading phase from 06:00 to 09:00 CET, orders can be entered or deleted. From 09:00 CET, once the opening price is set, trading begins. Orders are executed automatically according to established rules that match bid and asked prices. Regardless of their size or origin, incoming orders are executed on a price/time priority, i.e., in the order of price (first priority) and time received (second priority). Depending on the type of transaction, the order and trade details are also transmitted to data vendors (Reuters, Bloomberg, Telekurs, etc.).
In most cases, each trade triggers an automatic settlement instruction which is routed through one of three central securities depositories (CSD); SIS SEGAINTERSETTLE AG, CRESTCo or Euroclear. Members can choose to settle from one or more accountaccounts within these CSD’s and when counterparties have selected different CSD’s, settlement will be cross-border. The introduction of a central counterparty is plannedAdditionally, virt-x introduced the first pan-European Central Counterparty (CCP) for the beginning of 2003 which will allow optional netting of trades.
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cross-border trading in May 2003.
All trades executed through the order book settle on a uniform “T+3” basis, meaning that delivery and payment of exchange transactions occur three days after the trade date. The buyer is able to ask virt-x to enforce settlement if the seller has not delivered within twothree days of the intended settlement date.
Any transaction executed under the rules of virt-x must be reported to virt-x. Order book executions are automatically reported by the trading system. There are separate provisions for the delayed reporting of certain qualifying trades. Individual elements of Portfolio Trades must be reported within one hour while Block Trades and enlarged risk trades must be reported when the business is substantially (80%) complete, or by the end of order book trading that day, unless the trade is agreed one hour or less before the market close, when the Trade must be reported by the end of order book trading on the following market day. Block Trades and Enlarged Risk Trades are subject to minimum trade size criteria. During normal trading hours all other transactions must be reported within three minutes. The Enlarged Risk Trades provisions enable a member to protect a client’s interest while the member works a large trade on behalf of the client. The Block Trade provisions allow a member a publication delay when the member has executed a large transaction for a client; the delay gives the member time in which to offset the risk of the large trade.
In the event of extraordinary situations such as large price fluctuations and other situations likely to hamper fair and orderly trading, virt-x may take whatever measures it deems necessary to maintain fair and orderly markets. A listed security may be suspended, the opening of trading in that security may be delayed or continuous trading may be interrupted.
Trading on the New York Stock Exchange
UBS listed its shares on the New York Stock Exchange (“NYSE”) on 16 May 2000.
As of 31 December 2002,2003, the equity securities of nearly 2,800 corporations were listed on the NYSE. Non-US issuers, currently over 470 in number with a combined market valuation exceeding USD 45.8 trillion, are playing an increasingly important role on the NYSE.
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The NYSE is open Monday through Friday, 9:30 A.M. -— 4:00 P.M., EST.
The NYSE is an agency auction market. Trading at the NYSE takes place by open bids and offers by Exchange members, acting as agents for institutions or individual investors. Buy and sell orders meet directly on the trading floor, and prices are determined by the interplay of supply and demand. In contrast, in the US over-the-counter market, the price is determined by a dealer who buys and sells out of inventory.
At the NYSE, each listed stock is assigned to a single post where the specialist manages the auction process. NYSE members bring all orders for NYSE-listed stocks to the Exchange floor either electronically or through a floor broker. As a result, the flow of buy and sell orders for each stock is funnelled to a single location.
This heavy stream of diverse orders is one of the great strengths of the Exchange. It provides liquidity — the ease with which securities can be bought and sold without wide price fluctuations.
When an investor’s transaction is completed, the best price will have been exposed to a wide range of potential buyers and sellers.
Every transaction made at the NYSE is under continuous surveillance during the trading day. Stock Watch, a computer system that searches for unusual trading patterns, alerts NYSE regulatory personnel to possible insider trading abuses or other prohibited trading practices. The NYSE’s other regulatory activities include the supervision of member firms to enforce compliance with financial and operational requirements, periodic checks on brokers’ sales practices, and the continuous monitoring of specialist operations.
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Trading on the Tokyo Stock Exchange
The volume of UBS shares traded on the Tokyo Stock Exchange is negligible in comparison to the volume on virt-x or on the NYSE.
D—Selling Shareholders.
Not required because this Form 20-F is filed as an annual report.
E—Dilution.
Not required because this Form 20-F is filed as an annual report.
F—Expenses of the Issue.
Not required because this Form 20-F is filed as an annual report.
Item 10. Additional Information.
A—Share Capital.
Not required because this Form 20-F is filed as an annual report.
B—Memorandum and Articles of Association.
Please see:
a) | Item 14 of our registration statement on Form 20-F filed 9 May 2000. Please see Articles of Association of UBS AG filed as Exhibit 1.1 and Organization Regulations of UBS AG filed as | |||
b) | The sectionGlobal Registered Shareon pages | |||
c) | Pages |
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C—Material Contracts.
None.
D—Exchange Controls.
There are no restrictions under UBS’s Articles of Association or Swiss law, presently in force, that limit the right of non-resident ornor foreign owners to hold UBS’s securities freely. There are currently no Swiss foreign exchange controls or other Swiss laws restricting the import or export of capital by UBS or its subsidiaries. In addition, there are currently no restrictions under Swiss law affecting the remittance of dividends, interest or other payments to non-resident holders of UBS securities.
E—Taxation.E-Taxation.
This section outlines the material Swiss tax and United States federal income tax consequences of the ownership of UBS ordinary shares by a US holder (as defined below) who holds UBS ordinary shares as capital assets. It is designed to explain the major interactions between Swiss and US taxation for US persons who hold UBS shares.
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The discussion does not address the tax consequences to persons who hold UBS ordinary shares in particular circumstances, such as tax-exempt entities, banks, financial institutions, insurance companies, broker-dealers, traders in securities that elect to mark to market, holders liable for alternative minimum tax, holders that actually or constructively own 10% or more of the voting stock of UBS, holders that hold UBS ordinary shares as part of a straddle or a hedging or conversion transaction or holders whose functional currency for US tax purposes is not the US dollar. This discussion also does not apply to holders who acquired their UBS ordinary shares pursuant to the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan.
The discussion is based on the tax laws of Switzerland and the United States, including the US Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, as in effect on the date of this document, as well as the convention between the United States of America and Switzerland, which we call the “Treaty,” all of which may be subject to change or change in interpretation, possibly with retroactive effect.
For purposes of this discussion, a “US holder” is any beneficial owner of UBS ordinary shares that is:
• | a citizen or resident of the United States, | |||
• | a corporation or other entity taxable as a corporation organized under the laws of the United States or any political subdivision of the United States, | |||
• | an estate the income of which is subject to United States federal income tax without regard to its source, or | |||
• | a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. |
The discussion does not generally address any aspects of Swiss taxation other than income and capital taxation or of United States taxation other than federal income taxation. Holders of UBS shares are urged to consult their tax advisors regarding the United States federal, state and local and the Swiss and other tax consequences of owning and disposing of these shares.shares in their particular circumstances.
Ownership of UBS Ordinary Shares—SwissShares-Swiss Taxation
Dividends and Distributions
Dividends paid by UBS to a holder of UBS ordinary shares (including dividends on liquidation proceeds and stock dividends) are subject to a Swiss federal withholding tax at a rate of 35%. The withholding tax must be withheld from the gross distribution, and be paid to the Swiss Federal Tax Administration.
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A US holder that qualifies for Treaty benefits may apply for a refund of the withholding tax withheld in excess of the 15% Treaty rate. The claim for refund must be filed with the Swiss Federal Tax Administration, Eigerstrasse 65, CH-3003 Berne, Switzerland no later than December 31 of the third year following the end of the calendar year in which the income subject to withholding was due. The form used for obtaining a refund is Swiss Tax Form 82 (82C for companies; 82E for other entities; 82I821 for individuals), which may be obtained from any Swiss Consulate General in the United States or from the Swiss Federal Tax Administration at the address above. The form must be filled out in triplicate with each copy duly completed and signed before a notary public in the United States. The form must be accompanied by evidence of the deduction of withholding tax withheld at the source.
Repayment of capital in the form of a par value reduction is not subject to Swiss withholding tax.
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Transfers of UBS Ordinary Shares
The sale of UBS ordinary shares, whether by Swiss resident or non-resident holders (including US holders), may be subject to a Swiss securities transfer stamp duty of up to 0.15% calculated on the sale proceeds if it occurs through or with a bank or other securities dealer in Switzerland as defined in the Swiss Federal Stamp Tax Act. In addition to the stamp duty, the sale of UBS ordinary shares by or through a member of a recognized stock exchange may be subject to a stock exchange levy. Capital gains realized by a US holder upon the sale of UBS ordinary shares are not subject to Swiss income or gains taxes, unless such US holder holds such shares as business assets of a Swiss business operation qualifying as a permanent establishment for the purposes of the Treaty. In the latter case, gains are taxed at ordinary Swiss individual or corporate income tax rates, as the case may be, and losses are deductible for purposes of Swiss income taxes.
Ownership of UBS Ordinary Shares—UnitedShares-United States Federal Income Taxation
Dividends and Distribution
Subject to the passive foreign investment company rules discussed below, US holders will include in gross income the gross amount of any dividend paid, before reduction for Swiss withholding taxes, by UBS out of its current or accumulated earnings and profits, as determined for United States federal income tax purposes, as ordinary income when the dividend is actually or constructively received by the US holder. Dividends paid to a noncorporate US holder in taxable years beginning after December 31, 2002 and before January 1, 2009 that constitute qualified dividend income will be taxable to the holder at a maximum rate of 15%, provided that the holder has a holding period in the shares of more than 60 days during the 120-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. On February 19, 2004, the IRS announced that it will permit taxpayers to apply a proposed legislative change to the holding period requirement described in the preceding sentence as if such change were already effective. This legislative “technical correction” would change the minimum required holding period, retroactive to January 1, 2003, to more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. Dividends paid by UBS with respect to the shares will generally be qualified dividend income.
For United States federal income tax purposes, a dividend will include a distribution characterized as a repayment of capital in the form of a par value reduction, if the distribution is made out of current or accumulated earnings and profits, as described above.
Dividends will be income from sources outside the United States for foreign tax credit limitation purposes, but generally will be “passive income” or “financial services income,” which are treated separately from other types of income for foreign tax credit limitation purposes. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% rate. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution included in income of a US holder will be the US dollar value of the Swiss franc payments made, determined at the spot Swiss franc/US dollar rate on the date such dividend distribution is included in the income of the US holder, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend distribution is included in income to the date such dividend distribution is converted into US dollars will be treated as ordinary income or loss. Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a return of capital to the extent of the US holder’s basis in its UBS ordinary shares and thereafter as capital gain.
Subject to certain limitations, the Swiss tax withheld in accordance with the Treaty and paid over to Switzerland will be creditable against the US holder’s United States federal income tax liability. To the extent a refund of the tax withheld is available to a US holder
14
under the laws of Switzerland or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the US holder’s United States federal income tax liability, whether or not the refund is actually obtained.
Stock dividends to US holders that are made as part of a pro rata distribution to all shareholders of UBS generally will not be subject to United States federal income tax. US holders that received a stock dividend that is subject to Swiss tax but not US tax may not have enough foreign income for US tax purposes to receive the benefit of the foreign tax credit associated with that tax, unless the holder has foreign income from other sources.
Transfers of UBS Ordinary Shares
Subject to the passive foreign investment company rules discussed below, a US holder that sells or otherwise disposes of UBS ordinary shares generally will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the US dollar value of the amount realized and the tax basis,
-10-
determined in US dollars, in the UBS ordinary shares. Capital gain of a non-corporate US holder that is recognized on or after May 6, 2003 and before January 1, 2009 is generally taxed at a maximum rate of 20%15% if the UBS ordinary shares were held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.
Passive Foreign Investment Company Rules
UBS believes that UBS ordinary shares should not be treated as stock of a passive foreign investment company for United States federal income tax purposes, but this conclusion is a factual determination made annually and thus may be subject to change. In general, UBS will be a passive foreign investment company with respect to a US holder if, for any taxable year in which the US holder held UBS ordinary shares, either (i) at least 75% of the gross income of UBS for the taxable year is passive income or (ii) at least 50% of the value, determined on the basis of a quarterly average, of UBS’s assets is attributable to assets that produce or are held for the production of passive income.income (including cash). If UBS were to be treated as a passive foreign investment company, then unless a US holder makes a mark-to-market election, gain realized on the sale or other disposition of UBS ordinary shares would in general not be treated as capital gain. Instead, a US holder would be treated as if the holder had realized such gain and certain “excess distributions” ratably over the holder’s holding period for the shares and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends received from UBS would not be eligible for the preferential tax rate applicable to qualified dividend income if UBS were to be treated as a passive foreign investment company either in the taxable year of the distribution or the preceding taxable year, but would instead be taxable at rates applicable to ordinary income.
F—Dividends and Paying Agents.
Not required because this Form 20-F is filed as an annual report.
G—Statement by Experts.
Not required because this Form 20-F is filed as an annual report.
H—Documents on Display.
UBS files periodic reports and other information with the Securities and Exchange Commission. You may read and copy any document that UBS fileswe file with the SEC on the SEC’s website, www.sec.gov, or at the SEC’s public reference room at 450 Fifth Street N.W.,NW, Washington, D.C.DC, 20549. Please call the SEC at 1-800-SEC-0330 (in the US) or at +1 202 942 8088 (outside the US) for further information on the operation of its public reference room. You may also inspect UBS’sour SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and the American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006. Some10005. Much of this additional information may also be found on the UBS website at www.ubs.com/investors. http://www.ubs.com/investors.
I—Subsidiary Information.
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
A—Quantitative Information About Market Risk.
15
Please see the sectionMarket Riskon pages 7160 to 7564 of the attached Handbook 2002/2003.2003/2004.
B—Qualitative Information About Market Risk.
Please see the sectionMarket Riskon pages 7160 to 7564 of the attached Handbook 2002/2003.2003/2004.
C—Interim Periods.
Not applicable.
-11-
D—Safe Harbor.
The safe harbor provided in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (“statutory safe harbors”) applies to information provided pursuant to paragraphs (a), (b) and (c) of this Item 11.
E—Small Business Issuers.
Not applicable.
Item 12. Description of Securities Other than Equity Securities.
Not required because this Form 20-F is filed as an annual report.
-12-16
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
There has been no material default in respect of any indebtedness of UBS AG or any of its significant subsidiaries or any arrearages of dividends or any other material delinquency not cured within 30 days relating to any preferred stock of UBS AG or any of its significant subsidiaries.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not applicable.
Item 15. Controls and Procedures.
Please see page 116103 of the attached Handbook 2002/2003.2003/2004.
Item 16. [Reserved].16.A Audit Committee Financial Expert
See subsectionCompliance with NYSE Standards on Corporate Governancein our Corporate Governance section on page 108 of the attached Handbook 2003/2004.
Item 16.B Code of Ethics
See subsectionCompliance with NYSE Listing Standards on Corporate Governancein ourCorporate Governancesection on page 109 of the attached Handbook 2003/2004. The code is published on our website under http://www.ubs.com/corporate-governance.
Item 16.C Principal Accountant Fees and Services
See subsectionAuditorsin ourCorporate Governancesection on pages 99 to 101 of the attached Handbook 2003/2004.
Item 16.D Exemptions from the Listing Standards for Audit Committee
Not applicable.
17
PART III
Item 17. Financial Statements.
Not applicable.
Item 18. Financial Statements.
The Financial Statements included on pages 77 to 177184 of the attached Financial Report 20022003 are incorporated by reference herein.
Item 19. Exhibits.
Exhibit | ||
Number | Description | |
1.1. | Articles of Association of UBS AG. | |
1.2. | Organization Regulations of UBS AG (incorporated by reference to Exhibit 1.2 to UBS AG’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002). | |
2(b). | Instruments defining the rights of the holders of long-term debt issued by UBS AG and its subsidiaries. | |
We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt. | ||
7. | Statement regarding ratio of earnings to fixed charges. | |
8. | Significant Subsidiaries of UBS AG. Please see Note 36 on pages 159 to 162 of the attached Financial Report 2003. | |
12. | The certifications required by Rule 13(a)-14(a) (17 CFR 240.13a-14(a)). | |
13. | The certifications required by Rule 13(a)-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). | |
14. | Consent of Ernst & Young Ltd |
18
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
UBS AG | ||||
/s/ Peter A. Wuffli | ||||
Name: | Peter A. Wuffli | |||
Title: | Chief Executive Officer | |||
/s/ Hugo Schaub | ||||
Name: | Hugo Schaub | |||
Title: | Group Controller | |||
Date: March 31, 2004 | ||||
19
INDEX TO EXHIBITS
Exhibit | ||
Number | Description | |
1.1. | Articles of Association of UBS AG. | |
1.2. | Organization Regulations of UBS AG (incorporated by reference to Exhibit 1.2 to UBS AG’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002). | |
2(b). | Instruments defining the rights of the holders of long-term debt issued by UBS AG and its subsidiaries. We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt. | |
7. | Statement regarding ratio of earnings to fixed charges. | |
8. | Significant Subsidiaries of UBS AG. | |
-13-
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
attached Financial Report 2003. | ||
-14-
CERTIFICATIONS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter A. Wuffli, certify that:
The |
-15-
I, Hugo Schaub, certify that:
The |
-16-20
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Introduction
Introduction
TheOur Financial Report 2002 forms an essential part of our annual reporting portfolio. It includes the audited Financial Statements of the UBS Group for 2002 and 2001,2003, prepared according to International Financial Reporting Standards (IFRS) and reconciled to the United States’ Generally Accepted Accounting Principles (US GAAP), and the audited financial statements of UBS AG (the “Parent Bank”) for 2002 and 2003, prepared according to Swiss Banking Law requirements. It also contains a discussion and analysis of the financial and business performance of the UBS Group and its Business Groups, and additional disclosures required under Swiss and US regulations.
The Financial Report should be read in conjunction with the other information published by UBS, described on pages 5 and 6.page 4.
We sincerely hope that you will find the information in our reporting documentsannual reports useful and informative. We believe that UBS is amongone of the leaders in corporate disclosure, butalthough we would be very interested to hear your views on how we might improve the content, information and presentation of our information portfolio.
the reporting products that we publish.
1
Introduction
UBS Group Financial Highlights
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Income statement key figures | ||||||||||||||||
Operating income | 33,972 | 34,121 | 37,114 | 0 | ||||||||||||
Operating expenses | 25,624 | 29,577 | 30,396 | (13 | ) | |||||||||||
Operating profit before tax | 8,348 | 4,544 | 6,718 | 84 | ||||||||||||
Net profit | 6,385 | 3,535 | 4,973 | 81 | ||||||||||||
Cost / income ratio (%)1 | 75.2 | 86.2 | 80.8 | |||||||||||||
Per share data (CHF) | ||||||||||||||||
Basic earnings per share2 | 5.72 | 2.92 | 3.93 | 96 | ||||||||||||
Diluted earnings per share2 | 5.61 | 2.87 | 3.78 | 95 | ||||||||||||
Return on shareholders’ equity (%)3 | 18.2 | 8.9 | 11.7 | |||||||||||||
CHF million, except where indicated | % change from | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Income statement key figures | |||||||||||||||||
Operating income | 34,121 | 37,114 | 36,402 | (8 | ) | ||||||||||||
Operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | ||||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | (32 | ) | ||||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | ||||||||||||
Cost/income ratio (%)1 | 86.2 | 80.8 | 72.2 | ||||||||||||||
Cost/income ratio before goodwill (%)1, 2 | 79.0 | 77.3 | 70.4 | ||||||||||||||
Per share data (CHF) | |||||||||||||||||
Basic earnings per share3 | 2.92 | 3.93 | 6.44 | (26 | ) | ||||||||||||
Basic earnings per share before goodwill2, 3 | 4.73 | 4.97 | 7.00 | (5 | ) | ||||||||||||
Diluted earnings per share3 | 2.87 | 3.78 | 6.35 | (24 | ) | ||||||||||||
Diluted earnings per share before goodwill2, 3 | 4.65 | 4.81 | 6.89 | (3 | ) | ||||||||||||
Return on shareholders’ equity (%) | |||||||||||||||||
Return on shareholders’ equity4 | 8.9 | 11.7 | 21.5 | ||||||||||||||
Return on shareholders’ equity before goodwill2, 4 | 14.4 | 14.8 | 23.4 | ||||||||||||||
CHF million, except where indicated | % change from | ||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Balance sheet key figures | |||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | (6 | ) | ||||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | (10 | ) | ||||||||||||
Market capitalization | 79,448 | 105,475 | 112,666 | (25 | ) | ||||||||||||
BIS capital ratios | |||||||||||||||||
Tier 1 (%)5 | 11.3 | 11.6 | 11.7 | 7 | |||||||||||||
Total BIS (%) | 13.8 | 14.8 | 15.7 | ||||||||||||||
Risk-weighted assets | 238,790 | 253,735 | 273,290 | (6 | ) | ||||||||||||
Invested assets (CHF billion) | 2,037 | 2,448 | 2,445 | (17 | ) | ||||||||||||
Headcount (full-time equivalents) | 69,061 | 69,9856 | 71,0766 | (1 | ) | ||||||||||||
Long-term ratings7 | �� | ||||||||||||||||
Fitch, London | AAA | AAA | AAA | ||||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa1 | ||||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | ||||||||||||||
Earnings adjusted for significant financial events and pre-goodwill2, 8 | |||||||||||||||||
CHF million, except where indicated | % change from | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Operating income | 33,894 | 37,114 | 36,402 | (9 | ) | ||||||||||||
Operating expenses | 27,117 | 29,073 | 25,096 | (7 | ) | ||||||||||||
Operating profit before tax | 6,777 | 8,041 | 11,306 | (16 | ) | ||||||||||||
Net profit | 5,529 | 6,296 | 8,799 | (12 | ) | ||||||||||||
Cost/income ratio (%)1 | 79.5 | 77.3 | 69.2 | ||||||||||||||
Basic earnings per share (CHF)3 | 4.57 | 4.97 | 7.28 | (8 | ) | ||||||||||||
Diluted earnings per share (CHF)3 | 4.50 | 4.81 | 7.17 | (6 | ) | ||||||||||||
Return on shareholders’ equity (%)4 | 13.9 | 14.8 | 24.3 | ||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Balance sheet key figures | ||||||||||||||||
Total assets | 1,386,000 | 1,181,118 | 1,253,297 | 17 | ||||||||||||
Shareholders’ equity | 35,446 | 38,991 | 43,530 | (9 | ) | |||||||||||
Market capitalization | 95,401 | 79,448 | 105,475 | 20 | ||||||||||||
BIS capital ratios | ||||||||||||||||
Tier 1 (%)4 | 11.8 | 11.3 | 11.6 | |||||||||||||
Total BIS (%) | 13.3 | 13.8 | 14.8 | |||||||||||||
Risk-weighted assets | 251,901 | 238,790 | 253,735 | 5 | ||||||||||||
Invested assets (CHF billion) | 2,209 | 2,037 | 2,448 | 8 | ||||||||||||
Headcount (full-time equivalents) | ||||||||||||||||
Switzerland | 26,662 | 27,972 | 29,163 | (5 | ) | |||||||||||
Europe (excluding Switzerland) | 9,906 | 10,009 | 9,650 | (1 | ) | |||||||||||
Americas | 25,511 | 27,350 | 27,463 | (7 | ) | |||||||||||
Asia Pacific | 3,850 | 3,730 | 3,709 | 3 | ||||||||||||
Total | 65,929 | 69,061 | 69,985 | (5 | ) | |||||||||||
Long-term ratings5 | ||||||||||||||||
Fitch, London | AA+ | AAA | AAA | |||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa2 | |||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||||||
Throughout this report, 2001 and 2002 segment results have been restated to reflect the transfer of the Private Banks & GAM to Corporate Center.
2
UBS at a Glance
UBS is one of the world’s leading financial firms, serving a discerning global client base. As an organization, we combineit combines financial strength with a global culture that embraces change. We are the world’s leading provider of wealth management services and one of the largest asset managers globally. In the investment banking and securities businesses, we are among the select bracket of major global houses. In Switzerland, we are the clear market leader serving corporate and retail clients. As an integrated firm, we createUBS creates added value for our clients by drawing on the combined resources and expertise of all ourits businesses.
Our first priority
With head offices in Zurich11.8%, invested assets of CHF 2.2 trillion, shareholders’ equity of CHF 35.4 billion and Basel, and more than 69,000 employees, we operate in over 50 countries and from all major international financial centers. Our global physical presence is complemented by our strategymarket capitalization of offering clients products and services via a variety of different channels — from the traditional retail bank branch to sophisticated, interactive online tools, helping us to deliver our services more quickly, widely and cost-effectively than ever before.
Businesses
3
Profile
All our Business Groups are in the top echelons of their sectors globally and are committed to vigorously growing their franchises.
UBS Wealth Management & Business Bankingmanagement
Investment banking and securities services for 3.5 million individuals and 180,000 corporate clients in Switzerland as well as 5,000 financial institutions worldwide.
UBS Global Asset Management
UBS Warburg
Asset management
Swiss corporate and institutionalindividual clients and for the rest of UBS.
UBS PaineWebber
Corporate Center
Corporate Center
43
Introduction
Sources of Information about UBS
This Financial Report contains our audited Financial Statements for the year 20022003 and the related detailed analysis. You can find out more about UBS from the sources shown below.below.
This Financial Report is available in English and German. (SAP-R/3 80531-0301)(SAP no. 80531-0401).
Annual Review 20022003
Handbook 2002/20032003/2004
Quarterly reports
How to order reports
Website
Messenger service
Results presentations
UBS and the environment
4
Form 20-F and other submissions to the US Securities and Exchange Commission
We file periodic reports and submit other information about UBS withto the US Securities and Exchange Commission (SEC). Principal among these filings is the Form 20-F, our Annual Report filed pursuant to the US Securities Exchange Act of 1934.“wrap-around”“wraparound” document. Most sections of the filing are satisfied by referring to parts of this
5
Profile
the Handbook 2003/2004 or to parts of thethis Financial Report 2002.2003. However, there is a small amount of additional information in the Form 20-F, which is not presented elsewhere, and is particularly targeted at readers in the US. You are encouraged to refer to this additional disclosure.
You may read and copy any document that we file with the SEC on the SEC’s website, www.sec.gov, or at the SEC’s public reference room at 450 Fifth Street NW, Washington, DC, 20549. Please call the SEC at 1-800-SEC-0330 (in the US) or at +1 202 942 8088 (outside the
US) for further information on the operation of its public reference room. You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005 and the American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006.10005. Much of this additional information may also be found on the UBS websiteweb-site at www.ubs.com/www.ubs.com / investors, and copies of documents filed with the SEC may be obtained from UBS’s Investor Relations team, at the addresses shown on the followingnext page.
The legal and commercial name of the company is UBS AG. The company was formed on 29 June 1998, when Union Bank of Switzerland (founded 1862) and Swiss Bank Corporation (founded 1872) merged to form UBS. The addresses and telephone numbers of our
two registered offices and principal places of business are:
65
Introduction
Contacts
Switchboards | Zurich | + | ||||||||||
For all general queries. | London | + | ||||||||||
New York | + | |||||||||||
Hong Kong | + | |||||||||||
Investor Relations | Zurich | |||||||||||
Our Investor Relations team supports | + | UBS AG | ||||||||||
institutional, professional | Christian Gruetter | + | Investor Relations | |||||||||
and retail investors from offices in | + | P.O. Box | ||||||||||
Zurich and New York. | + | CH-8098 Zurich, Switzerland | ||||||||||
+ | ||||||||||||
www.ubs.com/investors | ||||||||||||
New York | ||||||||||||
Hotline | + | UBS Americas Inc. | ||||||||||
+ | Investor Relations | |||||||||||
+ | 135 W. 50th Street, | |||||||||||
New York, NY 10020, USA | ||||||||||||
sh-investorrelations@ubs.com | ||||||||||||
Media Relations | Zurich | + | sh-gpr@ubs.com | |||||||||
Our | London | + | ||||||||||
New York | + | |||||||||||
Hong Kong | + | sh-mediarelations-ap@ubs.com | ||||||||||
www.ubs.com/media | ||||||||||||
Shareholder Services | Hotline | + | UBS AG | |||||||||
UBS Shareholder Services, a unit of | Fax | + | Shareholder Services | |||||||||
the Company Secretary, is responsible | P.O. Box | |||||||||||
for the registration of the Global | CH-8098 Zurich, Switzerland | |||||||||||
Registered Shares. | ||||||||||||
US | calls from the US | +1-866-541 9689 | Mellon Investor Services | |||||||||
For all Global Registered Share- | calls outside the US | +1-201-329 8451 | Overpeck Centre | |||||||||
related queries in the USA. | Fax | +1-201-296 4801 | 85 Challenger Road | |||||||||
Ridgefield Park, NJ 07660, USA | ||||||||||||
www.melloninvestor.com | ||||||||||||
shrrelations@melloninvestor.com | ||||||||||||
UBS listed its Global Registered Shares on the New York Stock Exchange on 16 May 2000. Prior to that date UBS operated an ADR program. See the Frequently Asked Questions (FAQs) section at www.ubs.com/investors for further details about the UBS share.
76
Information for Readers Overview
7
The discussion
Overview
Preparation and analysisPresentation of
Financial Information
Standards and principles in the Group Financial Review and Review of Business Group Performance should be read in conjunction with the UBS Group Financial Statements and the related notes, which are shown in pages 77 to 177 of this document.financial
reporting
Pages 179 to 190 contain the financial statements for the UBS AG Parent Bank — the Swiss company, including branches worldwide, which owns all the UBS Group companies, directly or indirectly. Except in those pages, or where otherwise explicitly stated, all references to “UBS” refer to the UBS Group and not to the Parent Bank.
Accounting principles Group Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS). As a US listed company, UBS Group provideswe also provide a description in Note 3940 to the UBS Group Financial Statements of the significant differences which would arise were our accounts to be presented under the United States Generally Accepted Accounting Principles (US GAAP), and a detailed reconciliation of IFRS shareholders’ equity and net profit to US GAAP. Major differences between Swiss Federal Banking Law requirements and IFRS are described in Note 38 to the UBS Group Financial Statements.otherwise, all of UBS Group’sUBS’s financial information presented in this document is presented on a consolidated basis under IFRS.2001 and 20002001 refer to the UBS Group and the Parent Bank’s fiscal years ended 31 December 2003, 2002, 2001, and 2000, respectively.2001. The Financial Statements for the UBS
Group and the Parent Bank for each of these periods have been audited by Ernst & Young Ltd., as described in the Report of the Independent Auditors on page 17781 and the Report of the Statutory Auditors on page 189.195.
attributable to each business unit. Internal charges and transfer pricing adjustments are reflected in the performance of each business unit.
The8
than short-term temporary workers (hired for less than 90 calendar days) and contractors.
Disclosure principles and
additional financial information
Restatement of results
Changes to accounting presentation in 2003
There were no other accounting changes during 2003 that affected either the UBS Financial Statements or our business unit reporting.
Fair value disclosure of employee
stock options
PaineWebber merger-related costs
Except where otherwise stated, allacquisition of PaineWebber in 2000, figures for UBS Group throughout this report include the impact of the merger with Paine Webber Group, Inc., which was completedwhile goodwill funding costs amounted to CHF 754 million. The remaining goodwill and intangible assets on 3 November 2000. Under purchase accounting rules, the results for 2000 reflect PaineWebber’s income and expenses for two months only, from 3 November 2000 untilour balance sheet amount to CHF 9.3 billion on 31 December 2000.
After the merger of Swiss Bank Corporation and Union Bank of Switzerland was completed on 29 June 1998, we began integrating the operations of the two predecessor banks. This process included streamlining operations, eliminating duplicate information technology infrastructure, and consolidating banking premises. We established a restructuring provision of CHF 7 billion to cover UBS’s expected costs associated with the integration process. In December 1999, we recognized an additional pre-tax restructuring charge of CHF 300 million because of the merger.
89
Overview
Indicative Pre-goodwill Tax Rates
in % | ||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Wealth Management & Business Banking | 18 | 19 | 20 | |||||||||
Wealth Management | 16 | 18 | 18 | |||||||||
Business Banking Switzerland | 20 | 20 | 22 | |||||||||
Global Asset Management | 20 | 22 | 22 | |||||||||
Investment Bank | 32 | 38 | 39 | |||||||||
Investment Banking & Securities | 30 | 31 | 31 | |||||||||
Private Equity | 3 | 3 | 4 | |||||||||
Wealth Management USA | 38 | 37 | 37 | |||||||||
As part of the merger, UBS agreed to make retention payments to PaineWebber key function holders, subject to these employees’ continued employment and other restrictions. The payments vest over periods of up to four years from November 2000 and the vast majority of them
are paid in the form of UBS shares. Personnel expenses in 2003 include retention payments of USD 196 million (CHF 263 million). In 2004, we expect a final expense of approximately USD 80 million.
Effective 2004, we will make a number of changes in accounting and presentation as well as to our disclosure. They will require us to restate comparative prior periods, although not all of them will have an effect on net profit or shareholders’ equity. Because of the changes, we will release restated interim and annual financial statement figures for 2002 and 2003 before we publish our first quarter 2004 report.
Early adoption of IAS 32 and 39
Adopting the two standards will largely eliminate the separation requirement for derivatives embedded in the structured notes we issue. It will reduce profit and loss volatility generated by issuance of structured debt instruments (for example equity-linked GOALs or credit-linked notes). Previously, such instruments had to be accounted for on an accrual basis, while the embedded derivative and related hedge instruments were carried at fair value. The revised standards now allow us to measure both components of our structured notes at fair value, with any changes in their value directly recorded in the income statement – just as we already do for the related hedging instruments. The change will, as an example, eliminate unwanted volatility in our net income from treasury activities income line.
only if normal settlement is also intended to take place on a net basis. In general, that condition is not met and therefore we will now separately record the replacement values that were previously offset. This will increase the gross value of the assets and liabilities on our balance sheet by approximately CHF 165 billion at 31 December 2003. There will be no effect on net profit, shareholders’ equity, earnings per share or regulatory capital from this change.
Accounting for investment property
10
Business Group tax rates
The indicative tax rates are presented pre-goodwill. They give an indication of what the tax rate would have been if goodwill were not charged for accounting purposes. It is the sum of the tax expense payable on net profit before tax and goodwill in each location, divided by the total net profit before tax and goodwill. Tax rates post-goodwill are higher than the pre-goodwill rates, because in some jurisdictions there are limitations on the tax deductibility of amortization costs.
nized immediately in the profit and loss account. Investment property is held exclusively to earn rental income and benefit from appreciation in value. That contrasts with bank property, which we use to supply services or for administration purposes. Carrying investment property at fair value better reflects the business rationale behind acquiring and managing these assets.
to credit retained earnings as of 1 January 2002 by CHF 202 million for the then existing difference between book value and fair value of the investment property portfolio |
– | to reduce net profit for 2002 by CHF 117 million |
– | to reduce net profit for 2003 by CHF 64 million. |
ties during those two years. Our current investment property portfolio is valued at CHF 236 million on 31 December 2003. While this new treatment eliminates regular depreciation charges on investment property, it is likely that the fair value model will add some volatility to our income statement.
Credit risk losses incurred on OTC
derivatives
income are not subject to such a deferral. In the segment report, therefore, losses on OTC derivatives will now be reported as incurred. The changed accounting will not have a material effect on the Investment Bank’s restated performance before tax.
Change in treatment of
corporate client assets in Business
Banking Switzerland
11
Overview
Analysis of Performance
Amortization of goodwill and
other intangibles
IFRS rules currently require that goodwill be amortized over its estimated useful life regardless of whether its economic value is maintained or even increased. We believe, however, goodwill is not a wasting asset that needs to be replaced at the end of its life. Amortization charges do not represent cash outflows and are not an economic cost. We believe that the value of our business is driven by future cash flows and that these amortization charges are not a driver of the value created for our shareholders. In early 2004, the International Accounting Standard Board (IASB) is expected to issue a new standard regarding business combinations, which would be effective for 2005. We presume that the accounting for goodwill will change to the model applicable under US GAAP, which requires that goodwill is tested for impairment rather than amortized over its estimated life. We would then cease amortizing goodwill starting in 2005, eliminating a significant reconciling item to US GAAP as currently included in Note 40.
Performance indicators
UBS performance indicators
– | return on equity |
– | growth in basic earnings per share (EPS) |
– | cost / income ratio |
– | net new money in our wealth management units. |
Business Group performance indicators
explicit targets, but are indicators of the business units’ success in creating value for shareholders. They reflect the key drivers of each unit’s core business activities and include both financial metrics, such as the cost / income ratio, and non-financial metrics, such as invested assets or the number of client advisors.
Client / invested assets reporting
Since 2001 we report two distinct metrics for client funds:
– | Client assets are all client assets managed by or deposited with UBS including custody-only assets and assets held for purely transactional purposes |
– | Invested assets is a more restrictive term and includes all client assets managed by or deposited with UBS for investment purposes. |
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Performance Indicators
Performance | ||||
Business | indicators | Definition | ||
All business units | Cost / income ratio | Total operating expenses / total operating income before adjusted expected credit loss. | ||
Wealth Management and Asset Management businesses and Business Banking Switzerland | Invested assets | Assets managed by or deposited with UBS for investment purposes only (for further details please refer to page 12). | ||
Net new money | Inflow of invested assets from new clients - - outflows due to client defection +/- inflows / outflows from existing clients. (for further details please refer to page 12) | |||
Wealth Management and Asset Management businesses | Gross Margin on invested assets | Annualized operating income before adjusted expected credit loss / average invested assets. | ||
Wealth Management | Client advisors (CAs) | Expressed in full-time equivalents. | ||
Business Banking Switzerland | Non-performing loans (%) | Non-performing loans / gross loans. | ||
Impaired loans (%) | Impaired loans / gross loans. | |||
Investment Banking & Securities | Compensation ratio | Personnel expenses / operating income before adjusted expected credit loss. | ||
Non-performing loans (%) | Non-performing loans / gross loans. | |||
Impaired loans (%) | Impaired loans / gross loans. | |||
Average VaR (10-day 99%) | VaR expresses the potential loss on a trading portfolio assuming a 10-day time horizon before positions can be adjusted, and measured to a 99% level of confidence. | |||
Private Equity | Value creation | Value creation adds the increase in the unrealized portfolio gains to realized gains / losses for the period. | ||
Investment | Historical cost of investment made, less divestments and impairments. | |||
Wealth Management USA | Recurring fees | Asset-based fees for portfolio management and fund distribution, account based and advisory fees (as opposed to transactional fees). | ||
Financial advisors (FAs) | Expressed in full-time equivalents. | |||
from net new money. Interest expense on loans results in net new money outflows.
Global Asset Management business or GAM and sold by a wealth management unit (Wealth Management or Wealth Management USA). Both business units involved count these funds as invested assets. This approach is in line with the overall industry and our open architecture strategy and allows us to accurately reflect the performance of each individual business. Overall, CHF 287 billion of invested assets were double counted in 2003 (CHF 295 billion in 2002).
13
Overview
Seasonal characteristics
Of our main businesses, only Investment Banking & Securities shows significant seasonal patterns. Its revenues are impacted by the seasonal characteristics of general financial market activity and
deal flows in investment banking. In our quarterly reporting, we therefore compare the Investment Bank’s results for the reported quarter with those achieved in the same period of the previous year. For all other business units, results are compared with the previous quarter.
14
Critical Accounting Policies
Basis of preparation and selection of We prepare our Financial Statements in accordance with IFRS, and provide a reconciliation to
policiesgenerally accepted accounting principlesGenerally Accepted Accounting Principles in the United States (US GAAP). WhenWhere feasible, we reduce the differences between our Financial Statements under the two standards by applying accounting policies that are in accordance with both sets of standards. This approach limits (but does not completely eliminate) the range of elective accounting treatments available to us, but there are still rules under both standards which require us to apply judgement and make estimates in preparing our Financial Statements. The more significant of these accounting treatments are discussed in this section, as a guide to understanding how their application affects our reported results and our disclosure. A broader description of the accounting policies we employ is shown in Note 1 to the UBS Group Financial Statements.— i.e.– i. e. that we do not need to realize positions at unfavorable prices in order to fund immediate cash needs. Liquidity is discussed in more detail on pages 81 to 84page 69 of the Handbook 2002/2003.2003/2004.
Recognition and measurement of
financial instruments
Profit and loss impact
Changes to shareholders’ equity
Financial instruments — fair value
9
Profile
For substantially all of our portfolios, fair values are based on quoted market prices for the specific instrument, comparisons with other highly similar financial instruments, or the use of models. Valuation models are used primarily to value credit derivatives and certain equity and fixed income derivatives. Where valuation models are used to compute fair values, or where they are used in our control functions for independent risk monitoring, they must be validated and periodically reviewed by qualified personnel independent of the area that created the model. Our Quantitative Risk Models and Statistics unit certifies all models before they are used, we generally employ ‘backtesting’ procedures to check model outputs against actual data and we seek comparative market prices for additional verification.
15
Overview
use of judgement, and management also applies its judgement in establishing reserves against indicated valuations for aged positions, deteriorating economic conditions (including country-specific risks), concentrations in specific industries, types of instruments or currencies, market liquidity, model risk itself, and other factors.
Hedge accounting
Hedge accounting.IAS 39 allows a company to apply hedge accounting if it fully complies with the specified hedge criteria. One of the goals of a hedging program is to reduce volatility of fair values by entering into a hedging transaction where changes in fair valuesvalue of the hedging transaction offset changes in the fair valuesvalue of the hedged item. Due to cost and other considerations, a transaction may not be hedged over its entire life, or a dynamic hedging strategy may be used whereby different transactions are designated as the hedging transaction at different times. However, if the hedged item is one that would normally not be recorded at fair value (for instance if it is held at cost less impairment), but the hedging instrument is of a sort that would normally be accounted for at fair value, there could be substantial differences in the profit and loss effect for the two items during specific accounting periods, although over the whole life of the instrument these would be expected to balance out. We believe that, in such cases, not applyingnon-application of hedge accounting could lead to misinterpretations of our results and financial position, since hedging transactions could have a material impact on reported net profit in a particular period.
of the designated hedging instruments in each individual reporting period would be reported in net income for that period, regardless of the economic effectiveness of the hedge. For our fair value hedges, the net effect of not applying hedge accounting would have resulted in a pre-tax loss of CHF 555 million in 2003, a pre-tax gain of CHF 951 million in 2002, and a pre-tax gain of CHF 319 million in 2001. For our cash flow hedges, the respective amounts of the net effect are a pre-tax gain of CHF 199 million in 2003, a pre-tax gain of CHF 326 million for 2002 and a pre-tax loss of CHF 79 million for 2001. Please refer to Note 1(v) to the Financial Statements for further information on hedge accounting.
10
undrawn commitment is expected to be drawn without prospect of full repayment. This timing mismatch between recognizing income from increases in the fair value of a CDS and recognizing expense for credit losses may introduce period-to-period volatility in net profit. In addition, the positive effect of CDSs on reducing credit losses is not reflected as a reduction in reported credit loss expense.
16
In 2003, UBS recorded mark to market losses of CHF 678 million on CDSs that hedge existing credit exposures, without recording a corresponding credit loss expense recovery. The development in 2003 is explained by improved credit ratings of the hedged exposures, which means lower probabilities of default and hence a decline in fair value of the related CDSs. In 2002, the opposite development occurred and UBS recorded mark-to-marketmark to market gains of CHF 226 million on CDSs that hedge existing credit risk exposures without recording a corresponding credit loss expense. Had our CDSs qualified forwe been able to apply hedge accounting, we could have deferred recognition of gains on the CDSs until the underlying claim became impaired. Unless we decide to settle CDSs prematurely, and thus realize the mark-to-marketmark to market gains or losses, for example because we believe that we will ultimately not incur a credit loss on thea hedged exposure, these mark-to-marketany mark to market gains may be offset by losses in future periods. This may occur either because the fair value of the CDS will decrease or because a credit loss is incurred on the hedged exposure.
Financial investments — available-for-sale
UBS has classified some of its financial assets, including investments not held for trading purposes, as available-for-sale.available for sale. This classification is based on our determination that these assets are not held for the purpose of generating short-term trading gains, but rather for mid-to-long-term capital appreciation. If we had originally decided that
these were trading assets, or if we were to reclassify these assets as trading assets, changes in fair value would then have to be reflected in income rather than shareholders’ equity. The amount of unrealized gains or losses on the balance sheet date is disclosed in the statement of changes in equity in the UBS Group Financial Statements.
not expected to be recoverable within a reasonable time period are recorded in our income statement as impairment charges. Since quoted market prices are generally unavailable for these companies, fair value is determined by applying recognized valuation techniques, which require the use of assumptions and estimates. The valuation of our investments is derived by application of our valuation policy in a detailed quarterly investment by investmentinvestment-by-investment review involving the business and control functions. Our standard valuation method is to apply multiples of earnings that are observed for comparable companies. These multiples depend on a number of factors and may fluctuate over time. However theThe geographic, stage and sector diversity of the portfolio means that the valuations of these positions may not move uniformly based onin line with the changing economic environment. Although judgement is involved, we believe that the estimates and assumptions made in determining the fair value of each investment are reasonable and supportable. Since there are no general estimates or assumptions underlying the determination of fair value, but instead fair value is determined on a case-by-casecase by case basis, it is not possible to provide any meaningful estimate of the impact on earnings of variations in assumptions and estimates.
11
Profile
decline in fair value below cost extends beyond the near term, unless it is readily apparent that an investment is impaired, in which case this would result in an immediate loss recognition.
Goodwill and other intangible assets
We regularly review assets that are not carried at fair value (e. g. goodwill and other intangibles) for possible impairment indications. If impairment indicators are identified, we make an assessment about whether the carrying value of such assets remains fully recoverable. When making this assessment, we compare the carrying value to the market value, if available, or the value in use. Value in use is determined by discounting expected future net cash flows generatedgener-
17
Overview
ated by an asset or group of assets to present value. Determination of the value in use requires management to make assumptions and use estimates. We believe that the assumptions and estimates used are reasonable and supportable in the existing market environment and commensurate with the risk profile of the assets valued, but different ones could be used which would lead to different results.
Allowances and provisions for credit losses
UBS classifies a claim as impaired if the book value of the claim exceeds the present value of the cash flows actually expected in future periods —– loan interest payments, scheduled loan principal repayments, or other payments due (for example on derivatives transactions or guarantees), including liquidation of collateral where available. UBS has established policies to ensure that the carrying values of impaired claims are determined on a
consistent and fair basis, especially for those impaired claims for which no market estimate or benchmark for the likely recovery value is available. Future cash flows considered recoverable are discounted to present value in accordance with IAS 39. A provisionloan loss allowance is then recorded for the probable loss on the claim in question and charged to the income statement as credit loss expense.
considered recoverable are independently approved by the Credit Risk Control function. Although judgement is involved, we believe that the estimates and assumptions made in determining provisions and allowances on each individual impaired claim are reasonable and supportable. Since there are no general estimates or assumptions underlying the determination of allowances and provisions, but instead, as noted above, these allowances and provisions are determined on a case-by-casecase by case basis, it is not possible to provide any meaningful estimate of the impact on earnings of variations in assumptions and estimates.
Securitizations and Special Purpose Entities
UBS sponsors the formation of Special Purpose Entities (SPEs) primarily for the purpose of allowing clients to hold investments, for asset securitization transactions, and for buying or selling credit protection. In accordance with IFRS we do not consolidate SPEs that we do not control. As it can sometimes be difficult to determine whether we exercise control over an SPE, we have to make judgements about risks and rewards as well as our ability to make operational decisions for the SPE in question. In many instances, elements are present that, considered in isolation, indicate control or lack of control over an SPE, but when considered together make it difficult to reach a clear conclusion. In such cases the Groupwe generally consolidatesconsolidate an SPE.
12
is appropriate and that the SPEs and their assets and liabilities are properly recorded, if consolidated.
18
Principal types of SPE used by UBS
SPEs used to allow clients to hold investmentsare structures that allow one or more clients to invest in an asset or set of assets which are generally purchased by the SPE in the open market and not transferred from UBS. The risk or reward of the assets held by the SPE resides with the clients. Typically, UBS will receive service and commission fees for creation of the SPE, or because it acts as investment manager, custodian or in some other function.
may not be held by UBS, to investors. They are primarily to allow UBS to have a single counterparty (the SPE) which sells credit protection to UBS. The SPE in turn has investors who provide it with capital and participate in the risks and rewards of the credit events that it insures. SPEs used for credit protection are generally consolidated.
Equity compensation
Currently IFRS does not specifically address the recognition and measurement of equity-based compensation plans, including employee option plans. Extensive literature on accounting for options granted to employees exists under US GAAP, which permits a company to elect eitherHowever, two basic methods, the intrinsic value method orand the fair value method.method, are applied in practice. Under the intrinsic value method, if the exercise price of options granted is equal to or greater than the fair value of the underlying equity at grant date, no compensation expense need be recorded. Under the fair value method, an amount would be computed for such options and charged to compensation expense. For IFRS, UBS records as compensation expense only the intrinsic value at grant date, if any, of options granted to employees. Subsequent changes in intrinsic value are not recognized.
Deferred tax
Deferred tax assets arise from a variety of sources, the most significant being: a) tax losses that can be carried forward to be utilized against profits in future years; b) expenses recognized in the books but disallowed in the tax return until the associated cash flow occurs; and c) valuation changes of assets which need to be tax-effected
13
Profile
tax effected for book purposes but are taxable only when the valuation change is realized.
19
Overview
The magnitude of the valuation allowance is significantly influenced by our own forecast of future profit generation, which drives the extent to which we will be able to utilize the deferred tax assets. Were we to be more optimistic or pessimistic when forecasting future taxable profits, we would record a lower or higher valuation allowance, which would have a direct impact on earnings. Additionally, changes in circumstances may result in either an increase or a reduction of the valuation allowance, and therefore net income, depending on an adverse or favorable
income. An example of such might be a change in the factors that impact the recognized deferred tax assets.legislation. See Note 21 to the UBS Group Financial Statements for further details.
Segment reporting
The policies used to prepare our segment reporting affect the split of our income and expenses between the different Business Groups. Although the application of rules different from the ones we currently use would lead to altered net profit results in the Business Groups, they would have no effect(continued on the total Group profit number.
We analyze UBS’s performance on a reported basis determined in accordance with IFRS. Additionally, we provide comments and analysis on an adjusted basis which excludes from the reported amounts certain items we term significant financial events (SFEs). An additional adjustment we use in our results discussion is the exclusion of the amortization of goodwill and other acquired intangible assets.
Significant financial events
14
amount of each individual significant financial event, and the net tax benefit or loss associated with all the SFEs in each period, allowing the reader to reconcile adjusted figures to the reported ones. Where tables in the Business Group reporting show adjusted figures, we also include a table showing the reported figures.
Amortization of goodwill and otherintangibles
Significant Financial Events
CHF million For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Operating income as reported | 34,121 | 37,114 | 36,402 | |||||||||
Gain on disposal of Hyposwiss | (155 | ) | ||||||||||
Gain on disposal of Klinik Hirslanden | (72 | ) | ||||||||||
Adjusted operating income | 33,894 | 37,114 | 36,402 | |||||||||
Operating expenses as reported | 29,577 | 30,396 | 26,203 | |||||||||
Writedown of PaineWebber brand name | (1,234 | ) | ||||||||||
US Global Settlement Fund provision | (150 | ) | ||||||||||
PaineWebber integration costs | (290 | ) | ||||||||||
Adjusted operating expenses | 28,343 | 30,396 | 25,763 | |||||||||
Adjusted operating profit before tax and minority interests | 5,551 | 6,718 | 10,639 | |||||||||
Tax expense | 678 | 1,401 | 2,320 | |||||||||
Tax effect of significant financial events | 239 | 100 | ||||||||||
Adjusted tax expense | 917 | 1,401 | 2,420 | |||||||||
Minority interests | (331 | ) | (344 | ) | (87 | ) | ||||||
Adjusted net profit | 4,303 | 4,973 | 8,132 | |||||||||
Adjusted net profit before goodwill | 5,529 | 6,296 | 8,799 | |||||||||
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As a global financial services firm, UBS’s businesseswe are affected by the external environment infactors driving the markets in which we operate. Different risk factors can impact our ability to effectively carry out our business strategies orand can directly affect our earnings. Due to theThe factors described below, and toas well as other influences beyond our control, UBS’smean that our revenues and operating profit have been and are likely to continue to be subject to a measure of variability from period to period. Therefore UBS’sOur revenues and operating profit for any particular period may not, therefore, be indicative of sustainable results, they may vary from year to year and may affect our ability to achieve UBS’s strategic objectives.
Fluctuations in interestInterest rates, equity prices, foreign currency rates
exchange levels and other market variables
fluctuations may affect earnings
Furthermore, income in many of our businesses such as investment banking, and wealth and asset management is often
Counterparty risksfailure may lead to
credit loss
1620
Credit Loss Expense Charged to the Business Groups
Wealth | Wealth | |||||||||||||||||||
CHF million | Management & | Investment | Management | Corporate | ||||||||||||||||
For the year ended 31.12.03 | Business Banking | Bank | USA | Center1 | Total | |||||||||||||||
Credit loss expense | (75 | ) | (40 | ) | (3 | ) | 2 | (116 | ) | |||||||||||
Expected loss | (542 | ) | (94 | ) | (8 | ) | (2 | ) | (646 | ) | ||||||||||
Deferral | 411 | (45 | ) | 0 | 0 | 366 | ||||||||||||||
Adjusted expected credit loss expense charged to the Business Groups | (131 | ) | (139 | ) | (8 | ) | (2 | ) | (280 | ) | ||||||||||
Balancing item charged as credit loss expense in Corporate Center | 164 | |||||||||||||||||||
political event. Any of these events could lead us to incur losses.
ConsequentialOperational risk may increase costs
and impact revenues
losses. A detailed discussion of our approach into the management and control of these operational
risks can be foundis provided on page 64 of our Handbook 2003/2004.
Legal claims may arise in the “Consequential risk” section conduct
of our business
Competitive forces may influence
business direction
trends to continue and competition to increase in the future. Our competitive strength will depend on the ability of our businesses to adapt quickly to significant market and industry trends.
OtherOur global presence exposes us to
other risks arising from our globalpresence
1721
18
Overview
Reconciliation of Adjusted Expected Credit Loss Charged to the Business Groups to
Credit Loss (Expense) / Recovery
CHF million | Adjusted expected credit loss | Credit loss (expense)/recovery | ||||||||||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Wealth Management & Business Banking | (131 | ) | (312 | ) | (601 | ) | (75 | ) | (238 | ) | (124 | ) | ||||||||||||
Investment Bank | (139 | ) | (128 | ) | (112 | ) | (40 | ) | 35 | (360 | ) | |||||||||||||
Wealth Management USA | (8 | ) | (13 | ) | (18 | ) | (3 | ) | (15 | ) | (15 | ) | ||||||||||||
Corporate Center | (2 | ) | (2 | ) | (3 | ) | 2 | 12 | 1 | |||||||||||||||
Total | (280 | ) | (455 | ) | (734 | ) | (116 | ) | (206 | ) | (498 | ) | ||||||||||||
Balancing item in Corporate Center | 164 | 249 | 236 | |||||||||||||||||||||
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results in the Business Groups, they would have no effect on the total Group profit number.
although the latter is more erratic, in both timing and amount.
22
UBS Group Performance Against Targets | ||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
RoE (%) | ||||||||||||
as reported | 8.9 | 11.7 | 21.5 | |||||||||
before goodwill and adjusted for significant financial events1 | 13.9 | 14.8 | 24.3 | |||||||||
Basic EPS (CHF) | ||||||||||||
as reported | 2.92 | 3.93 | 6.44 | |||||||||
before goodwill and adjusted for significant financial events1 | 4.57 | 4.97 | 7.28 | |||||||||
Cost/income ratio (%) | ||||||||||||
as reported | 86.2 | 80.8 | 72.2 | |||||||||
before goodwill and adjusted for significant financial events1 | 79.5 | 77.3 | 69.2 | |||||||||
Net new money, private client units (CHF billion)2, 3 | ||||||||||||
Private Banking | 16.6 | 24.6 | 4 | 1.2 | 4 | |||||||
UBS PaineWebber | 18.5 | 33.2 | 14.5 | 5 | ||||||||
Total | 35.1 | 57.8 | 15.7 | |||||||||
UBS Results
23
UBS Results
UBS Results
1 | ||
Net profit/average shareholders’ equity less dividends. | ||
2 | For the EPS calculation, see Note 8 to the Financial Statements. | |
3 | Operating expenses/operating income less credit loss expense or recovery. | |
4 | ||
Excludes interest and dividend income. | ||
UBS Performance Indicators
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
RoE (%)1 | 18.2 | 8.9 | 11.7 | |||||||||
Basic EPS (CHF)2 | 5.72 | 2.92 | 3.93 | |||||||||
Cost / income ratio (%)3 | 75.2 | 86.2 | 80.8 | |||||||||
Net new money, wealth management units (CHF billion)4, 5 | ||||||||||||
Wealth Management | 29.7 | 17.7 | 23.2 | |||||||||
Wealth Management USA | 21.1 | 18.5 | 33.2 | |||||||||
Total | 50.8 | 36.2 | 56.4 | |||||||||
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This time last year, we could not have anticipated that 2003 would turn out to be such a positive year for the financial services industry. It was also an excellent year for UBS – the second most profitable in our history. When conditions were difficult at the outset of the year, our results were resilient. As the year progressed, investor sentiment turned increasingly positive and activity levels picked up along with stock market valuations. Helped by this improving environment, we fully captured the resulting revenue opportunities.
Net profit
In 2003, we recorded the second-best annual result since UBS and SBC merged in 1998. All businesses reported a stronger set of results in 2003 than in the previous year. Our net profit in full-year 2003 was CHF 6,385 million, up from CHF 3,535 million in 2002 - an increase of 81%. In 2002, our results were negatively influenced by the CHF 953 million writedown of the value of the PaineWebber brand but benefited from both the sale of private bank Hyposwiss, which resulted in a net gain of CHF 125 million and the divestment of Klinik Hirslanden, a private hospital group with a net gain of CHF 60 million. Excluding the amortization of goodwill and other intangibles and the sale of these subsidiaries, net profit increased 33% in 2003 from 2002. The increase was driven by our tight management of costs and our ability to build market share and capture revenues during the steady recovery in financial markets as the year
progressed. In particular, our asset-based revenues recovered from the lows posted in 2002. Our result was further helped by much improved trading opportunities, a gradual improvement in investor sentiment and significantly lower writedowns in our Private Equity business. At the same time, expenses remained under tight control. We recorded reductions in all cost categories compared with 2002, with non-personnel expenses falling below the year 2000 level.
UBS performance indicators
As mentioned in the previous section ‘Analysis of Performance’, we focus on four performance indicators, designed to deliver continually improving returns to our shareholders:
– | Basic earnings per share (EPS) stood at the highest level since 2000. In 2003, they were CHF 5.72, an increase of CHF 2.80 or 96% from 2002, reflecting the increase in profit as well as the 8% reduction in the average number of shares outstanding due to our continued buyback activities. In 2002, basic EPS was boosted by CHF 0.15 from the Klinik Hirslanden and Hyposwiss divestments, but lowered by CHF 0.79 through the writedown of the PaineWebber brand. Amortization of goodwill reduced basic EPS by CHF 0.84 in 2003, compared to CHF 1.81 in 2002. Excluding these divestment gains and the amortization of goodwill and other intangibles, basic EPS increased by CHF 1.99. |
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UBS Results
Invested Assets and Net New Money
Invested assets | Net new money1 | |||||||||||||||||||||||
CHF billion | 31.12.02 | 31.12.01 | 31.12.00 | 2002 | 2001 | 2000 | ||||||||||||||||||
UBS Group | 2,037 | 2,448 | 2,445 | 36.9 | 102.0 | (49.5 | ) | |||||||||||||||||
UBS Wealth Management & Business Banking2 | ||||||||||||||||||||||||
Private Banking | 688 | 791 | 798 | 16.6 | 24.6 | 3 | 1.2 | 3 | ||||||||||||||||
Business Banking Switzerland | 205 | 215 | 239 | 3.7 | 9.2 | 3 | 2.7 | 3 | ||||||||||||||||
UBS Global Asset Management | ||||||||||||||||||||||||
Institutional | 279 | 328 | 323 | (0.6 | ) | 6.2 | (70.8 | ) | ||||||||||||||||
Wholesale Intermediary | 278 | 344 | 319 | (1.8 | ) | 28.7 | 2.9 | |||||||||||||||||
UBS Warburg | 3 | 1 | 1 | 0.5 | 0.1 | |||||||||||||||||||
UBS PaineWebber | 584 | 769 | 765 | 18.5 | 33.2 | 14.5 | 4 | |||||||||||||||||
Invested assets | Net new money1 | |||||||||||||||||||||||
CHF billion | 31.12.03 | 31.12.02 | 31.12.01 | 2003 | 2002 | 2001 | ||||||||||||||||||
UBS | 2,209 | 2,037 | 2,448 | 61.6 | 36.9 | 102.0 | ||||||||||||||||||
Wealth Management & Business Banking | ||||||||||||||||||||||||
Wealth Management | 701 | 642 | 728 | 29.7 | 17.7 | 23.2 | ||||||||||||||||||
Business Banking Switzerland | 212 | 205 | 215 | (5.0 | ) | 3.7 | 9.2 | |||||||||||||||||
Global Asset Management | ||||||||||||||||||||||||
Institutional | 313 | 274 | 324 | 12.7 | (1.4 | ) | 6.4 | |||||||||||||||||
Wholesale Intermediary | 261 | 259 | 325 | (5.0 | ) | (6.3 | ) | 24.5 | ||||||||||||||||
Investment Bank | 4 | 3 | 1 | 0.9 | 0.5 | 0.1 | ||||||||||||||||||
Wealth Management USA | 634 | 584 | 769 | 21.1 | 18.5 | 33.2 | ||||||||||||||||||
Corporate Center | ||||||||||||||||||||||||
Private Banks & GAM | 84 | 70 | 86 | 7.2 | 4.2 | 5.4 | ||||||||||||||||||
– | The cost / income ratio was 75.2% in 2003, an improvement from 86.2% in 2002. It stands at its lowest level since PaineWebber became part of UBS. The slight drop in income reflected the difficult market environment in first half 2003 and lower divestment gains. This was more than compensated by a decline in operating expenses due to ongoing cost management initiatives and the downward pressure on compensation ratios. In 2002, the ratio was boosted by 0.6 percentage points from the Klinik Hirslanden and Hypo-swiss divestments, but experienced a 3.6 percentage point negative impact from the PaineWebber writedown. Amortization of goodwill accounted for 2.8 percentage points of the 2003 ratio, compared to an effect of 7.2 percentage points in 2002. Excluding these divestment gains and the amortization of goodwill and other intangibles, the ratio decreased by 6.8 percentage points. |
Results
Operating income
in 2002. The drop was caused by lower asset-based revenues impacted by the low market levels in early 2003, which only started to recover in the second half of the year. Operating income was also affected by the weakening of major currencies against the Swiss franc, including the 13% drop of the US dollar. This was partially offset by higher income from fixed income trading and much lower private equity writedowns. Excluding the divestment gains of CHF 227 million from the sale of Hyposwiss and Klinik Hirslanden in 2002 and CHF 161 million from the sale of Correspondent Services Corporation in 2003, total operating income decreased by CHF 83 million from 2002 compared to 2003.
26
Net Interest and Trading Income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Net interest income | 12,299 | 10,546 | 8,041 | 17 | ||||||||||||
Net trading income | 3,883 | 5,572 | 8,802 | (30 | ) | |||||||||||
Total net interest and trading income | 16,182 | 16,118 | 16,843 | 0 | ||||||||||||
Breakdown by business activity
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Net income from interest margin products | 5,077 | 5,275 | 5,694 | (4 | ) | |||||||||||
Equities | 2,464 | 2,794 | 3,661 | (12 | ) | |||||||||||
Fixed income | 6,530 | 6,041 | 6,294 | 8 | ||||||||||||
Foreign exchange | 1,501 | 1,500 | 1,490 | 0 | ||||||||||||
Other | 315 | 270 | 84 | 17 | ||||||||||||
Net income from trading activities | 10,810 | 10,605 | 11,529 | 2 | ||||||||||||
Net income from treasury activities | 1,415 | 1,667 | 1,424 | (15 | ) | |||||||||||
Other1 | (1,120 | ) | (1,429 | ) | (1,804 | ) | 22 | |||||||||
Total net interest and trading income | 16,182 | 16,118 | 16,843 | 0 | ||||||||||||
reflects lower interest margins on client savings and cash accounts, and declining revenues from our diminishing recovery portfolio in Switzerland as well as lower interest revenue on margin loans in the US as we sold our Correspondent Services Corporation (CSC) clearing business. These effects were partially offset by higher mortgages and saving accounts volumes in Switzerland.
Credit Default Swaps (CDS) hedging existing credit exposure in the loan book. In 2002, we recorded a mark to market gain of CHF 226 million on these CDS positions. Our use of CDSs as hedging instruments for our loan book is only one part of our overall management approach to trading credit risk. The Critical accounting policies section on page 15 in this report and the Capital and Risk Management section of our Handbook 2003/2004 contain further information on how we use CDSs to hedge our credit exposure. Over the full year, foreign exchange trading revenues, at CHF 1,501 million, remained virtually unchanged from CHF 1,500 million in 2002.
27
UBS Results
Credit Loss (Expense) / Recovery
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Wealth Management & Business Banking | (75 | ) | (238 | ) | (124 | ) | 68 | |||||||||
Investment Bank | (40 | ) | 35 | (360 | ) | |||||||||||
Wealth Management USA | (3 | ) | (15 | ) | (15 | ) | 80 | |||||||||
Corporate Center | 2 | 12 | 1 | (83 | ) | |||||||||||
UBS | (116 | ) | (206 | ) | (498 | ) | 44 | |||||||||
down of the value of the PaineWebber brand, and lower funding needs for our private equity portfolio.
managing the former definitionimpaired portfolio has resulted in a higher than anticipated level of assets under management uprecoveries. In response to an improving economic and includingpolitical environment in some emerging markets, we were also able to release country allowances relating to our correspondent banking business.
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Security trading and investment activity fees | ||||||||||||||||
Underwriting fees | 2,354 | 2,134 | 2,158 | 10 | ||||||||||||
Corporate finance fees | 761 | 848 | 1,339 | (10 | ) | |||||||||||
Brokerage fees | 5,608 | 5,987 | 6,445 | (6 | ) | |||||||||||
Investment fund fees | 3,895 | 4,033 | 4,276 | (3 | ) | |||||||||||
Fiduciary fees | 241 | 300 | 355 | (20 | ) | |||||||||||
Custodian fees | 1,201 | 1,302 | 1,356 | (8 | ) | |||||||||||
Portfolio and other management and advisory fees | 3,855 | 4,065 | 4,650 | (5 | ) | |||||||||||
Insurance-related and other fees | 355 | 417 | 538 | (15 | ) | |||||||||||
Total securities trading and investment activity fees | 18,270 | 19,086 | 21,117 | (4 | ) | |||||||||||
Credit-related fees and commissions | 249 | 275 | 307 | (9 | ) | |||||||||||
Commission income from other services | 1,087 | 1,006 | 946 | 8 | ||||||||||||
Total fee and commission income | 19,606 | 20,367 | 22,370 | (4 | ) | |||||||||||
Brokerage fees paid | 1,483 | 1,349 | 1,281 | 10 | ||||||||||||
Other | 778 | 797 | 878 | (2 | ) | |||||||||||
Total fee and commission expense | 2,261 | 2,146 | 2,159 | 5 | ||||||||||||
Net fee and commission income | 17,345 | 18,221 | 20,211 | (5 | ) | |||||||||||
UBS made significant progress28
with the more favorable outlook for emerging market economies. For further details on our risk management approach, how we measure credit risk and the development of our credit risk exposures, please see the Capital and Risk Management section in our Handbook 2003/2004.
fees resulting from the low market levels at the outset of the year. This was partially offset by higher performance fees. At CHF 355 million in 2003, insurance-related and other fees decreased by 15% from a year earlier, mainly reflecting the weakening of the US dollar.
Operating expenses
29
UBS Results
Headcount
% change from | ||||||||||||||||
(full-time equivalents) | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Wealth Management & Business Banking | 26,796 | 27,841 | 28,138 | (4 | ) | |||||||||||
Wealth Management | 9,176 | 9,399 | 8,918 | (2 | ) | |||||||||||
Business Banking Switzerland | 17,620 | 18,442 | 19,220 | (4 | ) | |||||||||||
Global Asset Management | 2,689 | 2,733 | 2,704 | (2 | ) | |||||||||||
Investment Bank | 15,550 | 16,037 | 15,690 | (3 | ) | |||||||||||
Investment Banking & Securities | 15,500 | 15,964 | 15,562 | (3 | ) | |||||||||||
Private Equity | 50 | 73 | 128 | (32 | ) | |||||||||||
Wealth Management USA | 18,016 | 19,563 | 20,413 | (8 | ) | |||||||||||
Corporate Center | 2,878 | 2,887 | 3,040 | 0 | ||||||||||||
Total | 65,929 | 69,061 | 69,985 | (5 | ) | |||||||||||
tributions to retirement plans. Personnel expenses are managed on a full-year basis with final fixing of annual performance-related payments in the fourth quarter. Over the full year, approximately 44% of this year’s personnel expense was paid as bonus or other variable compensation, up from 42% last year. Average variable compensation per head in 2003 was 3% higher than in 2002.
Tax
Headcount
30
Headcount, at 65,929 on 31 December 2003, was 5% lower than a year ago. While we have been able to avoid major job cut programs in the context of last year’s environment, which was one of the most challenging seen in the financial industrythree years, we have closely monitored our cost structure and staffing needs. We have not needed to maintain all our capacity during the post-war era. Extensive corrections in major global equity markets, depressedrecent market levels, low corporate activity,downturn and broadly subdued investor optimism reflected uncertainty about economicwe have continued to improve efficiency and political developments. However, our businesses were remarkably resilient and competitive in view of the general conditions they faced in 2002. Strict cost discipline and focus on growthproductivity. Therefore, we have gradually reduced headcount across the firm helpedwhile, at the same time, expanding our capabilities in areas with positive growth potential.
Dividend
The Board of Directors will recommend at the Annual General Meeting on 15 April 2004 that UBS should pay a dividend of CHF 2.60 per share for the 2003 financial year, an increase of 30% or CHF 0.60 from the CHF 2.00 dividend paid at the same time a year earlier for the 2002 financial year.
Balance sheet
Total assets, at CHF 1,386 billion on 31 December 2003, increased by 17% from CHF 1,181 billion on 31 December 2002. The increase was mainly due to higher overall trading activities although that was partially offset by the weakening of the US dollar, which fell by 10% against
the Swiss franc in the period. Cash and balances with central banks was CHF 3.6 billion on 31 December 2003, down slightly from CHF 4.3 billion on the same date a year earlier. The drop was mainly due to a decline in our positions held with the Swiss National Bank. Assets due from banks decreased to CHF 31.7 billion on 31 December 2003 from CHF 32.5 billion on 31 December 2002, reflecting lower short-term deposits with third-party banks. Trading-related assets (cash collateral on securities borrowed, trading portfolio assets and reverse repurchase agreements) rose by CHF 191.7 billion between 31 December 2003 and the same date a year earlier. This increase reflects higher trading activities, mainly in the Fixed Income, Rates and Currencies (FIRC) business, especially in the US. Cash collateral on securities borrowed rose by 54% or CHF 74.9 billion in the same period, reflecting an increase in securities lending activities, influenced by our acquisition of ABN AMRO’s US prime brokerage business. Reverse repurchase agreements increased by 9% or CHF 26.5 billion, reflecting higher client and market making activity and a lower level of counter party netting. Trading portfolio assets increased by 24% or CHF 90.3 billion, mirroring higher positions in most products, particularly in mortgage-backed securities and principal finance positions. Loans, net of allowances for credit losses, remained virtually unchanged in the period. Financial investments fell to CHF 5.1 billion on 31 December 2003 from CHF 8.4 billion on the same date a year earlier, mainly reflecting a decrease in money market and debt positions, and reduced equity investments and private equity positions. Goodwill and other intangible assets, at CHF 11.5 billion on 31 December 2003, fell 16% or CHF 2.2 billion from CHF 13.7 billion a year earlier. The drop was mainly due to ongoing amortization, the sale of our CSC clearing business in the US (with its goodwill written down accordingly), as well as the decline of the US dollar against the Swiss franc.
31
UBS Results
bilities) increased by CHF 102.9 billion in 2003 from a year earlier, reflecting growth across most sectors of the business. Amounts due to customers increased by 13% or CHF 40.5 billion, as a result of the acquired customer accounts from ABN AMRO’s US prime brokerage business and the launch of UBS Bank USA, where client cash balances previously swept into money market funds are now redirected into FDIC-insured deposit accounts. Debt issued decreased by CHF 9.2 billion to CHF 120.2 billion on 31 December 2003, reflecting a decrease in commercial paper issuance as the bank funded more in the interbank market and on a collateralized basis. Our long-term debt rose to CHF 62.1 billion on 31 December 2003 from CHF 56.6 billion a year earlier, reflecting attractive market conditions for new issuance of bonds and structured funding products. We believe the maturity profile of our long-term debt portfolio balances well and matches the maturity profile of our assets. For further details, please refer to Note 18 to the Financial Statements. Minority interests increased by 15% to CHF 4.1 billion on 31 December 2003 as we issued an additional USD 300 million (CHF 372 million) in trust preferred securities.
Contractual obligations
The table below summarizes our contractual obligations as of 31 December 2003. All contracts, with the exception of purchase obligations (those where we are committed to purchase determined volumes of goods and services), are
either recognized as liabilities on our balance sheet or, in the case of operating leases, are disclosed in Note 26 to the Financial Statements.
Off-balance sheet arrangements
In the normal course of business, UBS enters into arrangements that, under IFRS, are not recognized on the balance sheet and do not affect the income statement. These types of arrangements are kept off-balance sheet as long as UBS does not incur an obligation from them or become entitled to an asset itself. As soon as an obligation is incurred, it is recognized on the balance sheet, with the resulting loss recorded in the income statement. It should be noted, however, that the amount recognized on the balance sheet does not, in many instances, represent the full loss potential inherent in such arrangements.
Contractual Obligations
Payment due by period | ||||||||||||||||
Less than | More than | |||||||||||||||
CHF million | 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||
Long-term debt | 7,598 | 18,828 | 14,719 | 20,977 | ||||||||||||
Capital lease obligations | 64 | 147 | 130 | 0 | ||||||||||||
Operating leases | 876 | 1,477 | 1,227 | 3,992 | ||||||||||||
Purchase obligations | 937 | 594 | 169 | 11 | ||||||||||||
Other long-term liabilities | 267 | 1 | 0 | 6 | ||||||||||||
Total | 9,742 | 21,047 | 16,245 | 24,986 | ||||||||||||
32
es in the past and we do not expect to do so in the future. The following paragraphs discuss four distinct areas of off-balance sheet arrangements as of 31 December 2003 and any potential obligations that may arise from them.
Guarantees
Retained interests
Derivative instruments recorded in
shareholders’ equity
Variable Interest Entities (VIE)
VIEs in which UBS is the primary beneficiary
VIEs in which UBS has a significant interest,
but is not the primary beneficiary
33
UBS Results
has actually invested into the entities in question, as there are no additional contractual obligations. Again, we believe that the probability of suffering the maximum loss from these VIEs is remote.
VIEs in which UBS may hold a significant variable
interest, or be the primary beneficiary
Cash flows
In the full year to 31 December 2003, cash and cash equivalents decreased by CHF 9.0 billion, principally as a result of financing activities, which generated negative cash flows of CHF 13.3 billion. Significant cash outflows resulted from CHF 14.7 billion in repayments of money market positionpaper, CHF 6.8 billion from movements in treasury shares and derivative activity in own equity, and CHF 2.3 billion from dividends paid. Issuance of long-term debt of CHF 23.6 billion and repayments of CHF 13.6 billion brought a net cash inflow of CHF 10.0 billion. When compared to 2002, cash outflows from financing activities fell by approximately CHF 19 billion. The main reasons for the reduced outflows were an approximate CHF 12 billion decline in repayments of money market paper and higher net inflows of roughly CHF 8 billion in both issuance and repayment of long-term debt. Increased buybacks of treasury shares in 2003, coupled with a higher average price for our shares, resulted in a period where manyhigher cash outflow of approximately CHF 1.2 billion in 2003.
Operating cash inflows (before changes in operating assets and liabilities and income taxes paid) amounted to CHF 9.1 billion, an increase of CHF 944 million from 2002. While net profit in 2003 was CHF 2.9 billion higher than a year earlier, we had considerably higher non-cash expenses in 2002, which reduce net profit but do not affect cash flow. Notably, amortization of goodwill and intangible assets was CHF 1.5 billion higher in 2002 than in 2003. The main reason was the writedown of the value of the PaineWebber brand name of CHF 1,234 million, but the US dollar exchange rate, which was higher in 2002 against most currencies than it was last year, also contributed to the difference. The other two items were deferred tax expense and gains or losses from investing activities included in net profit. In 2003, we had deferred tax expenses of CHF 514 million, attributable to a range of sources generating taxable temporary differences. In 2002, we had a deferred tax benefit of CHF 509 million, to which the release of deferred tax liabilities related to the PaineWebber brand name was the largest single contributor.
Outlook
Having successfully navigated the turbulent down-markets of the last few years with no unpredictable changes in our core businesses remained strong andprofitability, our strategy, or our staffing levels, we benefited fromnow enter what seem likely to be calmer waters with, we
34
believe, the full confidence of our prudent attitude to riskclients, our employees and our tight managementshareholders. Our businesses are all performing extremely well. And while, of costs.course, we cannot predict with certainty whether markets will continue in their friendly mood, we are committed to again securing for our investors the best possible returns in 2004.
Net profit |
UBS’s 2002 net profit was CHF 3,535 million, downa 29% decline from CHF 4,973 million in 2001.
This full-year In 2002, profit was impactedaffected by several items which we call significant financial events (SFEs): the non-cash after-tax writedownwrite-down of the value of the PaineWebber brand, which reduced after-tax profit by 21%, and the impact offrom sales of the Hyposwiss and Klinik Hirslanden subsidiaries, which added 6% to profit. Excluding the amortization of goodwill and other intangibles and the sale of these effects, and before goodwill amortization,subsidiaries, net profit fell by 12% between 20012002 and 2002.
We focus on four key performance targets,indicators, designed to ensure that UBS deliversdeliver continually improving returns to its shareholders.
21
2
Net Interest and Trading Income
CHF million | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | % change from 31.12.01 | ||||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 31 | ||||||||||||
Net trading income | 5,572 | 8,802 | 9,953 | (37 | ) | |||||||||||
Total net interest and trading income | 16,118 | 16,843 | 18,083 | (4 | ) | |||||||||||
Breakdown by business activity: | ||||||||||||||||
Net income from interest margin products | 5,275 | 5,694 | 5,430 | (7 | ) | |||||||||||
Net income from trading activities | 10,605 | 11,529 | 12,642 | (8 | ) | |||||||||||
Net income from treasury activities | 1,667 | 1,424 | 762 | 17 | ||||||||||||
Other1 | (1,429 | ) | (1,804 | ) | (751 | ) | 21 | |||||||||
Total net interest and trading income | 16,118 | 16,843 | 18,083 | (4 | ) | |||||||||||
– | Our return on equity for 2002 was |
– | Basic earnings per share (EPS) for 2002 were CHF |
Amortization of goodwill and intangible assets reduced basic EPS by CHF 0.24 percentage points, equal to the effect of 2001. Excluding the effects of these divestment gains and the PaineWebber brand writedown, basic EPS fell by CHF 0.37. The |
– | The |
Results |
Operating income
35
UBS Results
Net interest income and net trading income. Net interest incomeof CHF 10,546 million in 2002 was 31% higher than in 2001.Net trading incomedeclined 37% from CHF 8,802 million in 2001 to CHF 5,572 million in 2002.
22
IFRS Actual Credit Loss Expense/(Recovery)
CHF million | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | % change from 31.12.01 | ||||||||||||
UBS Wealth Management & Business Banking | 241 | 123 | (695 | ) | 96 | |||||||||||
UBS Warburg | (35 | ) | 360 | 562 | ||||||||||||
UBS PaineWebber | 15 | 15 | 3 | 0 | ||||||||||||
Corporate Center | (15 | ) | 0 | 0 | ||||||||||||
Total | 206 | 498 | (130 | ) | (59 | ) | ||||||||||
accounts, as well as mortgages because of the extremely low interest rate environment. This was accentuated by the decline of the US dollar and the euro, which caused the Swiss franc equivalent of US dollar interest rate revenues to drop.
Net income from treasury activitieswas CHF 1,667 million in 2002, an increase of 17% overfrom 2001, reflecting higher income from our invested equity, a drop in funding costs as well as higher
unrealized gains on derivatives used to economically hedge interest rate risk related to structured notes issued.
23
Group Financial ReviewGroup Results
Net Fee and Commission Income
CHF million | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | % change from 31.12.01 | ||||||||||||
Underwriting fees | 2,134 | 2,158 | 1,434 | (1 | ) | |||||||||||
Corporate finance fees | 848 | 1,339 | 1,772 | (37 | ) | |||||||||||
Brokerage fees | 5,987 | 6,445 | 5,742 | (7 | ) | |||||||||||
Investment fund fees | 4,033 | 4,276 | 2,821 | (6 | ) | |||||||||||
Fiduciary fees | 300 | 355 | 351 | (15 | ) | |||||||||||
Custodian fees | 1,302 | 1,356 | 1,439 | (4 | ) | |||||||||||
Portfolio and other management and advisory fees | 4,065 | 4,650 | 3,666 | (13 | ) | |||||||||||
Insurance-related and other fees | 417 | 538 | 111 | (22 | ) | |||||||||||
Total securities trading and investment activity fees | 19,086 | 21,117 | 17,336 | (10 | ) | |||||||||||
Credit-related fees and commissions | 275 | 307 | 310 | (10 | ) | |||||||||||
Commission income from other services | 1,006 | 946 | 802 | 6 | ||||||||||||
Total fee and commission income | 20,367 | 22,370 | 18,448 | (9 | ) | |||||||||||
Brokerage fees paid | 1,349 | 1,281 | 1,084 | 5 | ||||||||||||
Other | 797 | 878 | 661 | (9 | ) | |||||||||||
Total fee and commission expense | 2,146 | 2,159 | 1,745 | (1 | ) | |||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | (10 | ) | |||||||||||
undertaken to improve the asset quality of our domestic credit portfolio. The gradual slowdown of the Swiss economy and our success in substantially reducing our impaired portfolio have, however, resulted in a lower level of recoveries compared to previous years. This largely explains the increase of our credit loss expense in UBS Wealth Management & Business Banking to CHF 241 million, compared to CHF 123 million in 2001.
which increased by 67% compared to a year earlier.2001. However, this was offset by a much lower result in our equity underwriting business due to the markedly lower market activity.
36
our market share as overall market volumes decreased at a sharper rate.
24
Headcount1 | |||||||||||||||||
Change in % | |||||||||||||||||
(full-time equivalents) | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
UBS Wealth Management & Business Banking | 28,930 | 29,469 | 30,272 | (2 | ) | ||||||||||||
Private Banking | 10,488 | 10,249 | 9,835 | 2 | |||||||||||||
Business Banking Switzerland | 18,442 | 19,220 | 20,437 | (4 | ) | ||||||||||||
UBS Global Asset Management | 3,346 | 3,281 | 2,860 | 2 | |||||||||||||
UBS Warburg | 16,037 | 15,690 | 15,391 | 2 | |||||||||||||
Corporate and Institutional Clients | 15,964 | 15,562 | 15,262 | 3 | |||||||||||||
UBS Capital | 73 | 128 | 129 | (43 | ) | ||||||||||||
UBS PaineWebber | 19,563 | 20,413 | 21,567 | (4 | ) | ||||||||||||
Corporate Center | 1,185 | 1,132 | 986 | 5 | |||||||||||||
Group total | 69,061 | 69,985 | 71,076 | (1 | ) | ||||||||||||
thereof: Switzerland | 27,972 | 29,163 | 30,095 | (4 | ) | ||||||||||||
ageaverage asset levels and third-party fees due toresulting from the difficult market environment.
Operating expenses
in UBS PaineWebberWealth Management USA and Business Banking Switzerland. The drop was further accentuated by lower recruitment, training and contractor costs across the firm, reflecting our continued cost control initiatives. Finally, the result was helped by a weaker US dollar against the Swiss franc.
25
At CHF 1,614 million in 2001,depreciationfell by 6% to CHF 1,521 million in 2002 mainly due to lower depreciation charges for machines and equipment.
Tax
37
UBS Results
PaineWebber merger-related costs
For 2002, we plan to pay a normal dividend to our shareholders after having made use of the possibility to make a tax efficient distribution in 2000 (for the fourth quarter only) and 2001 in the form of par value reductions.
On 23 April 2003, that UBS should paywe paid a dividend of CHF 2.00 per share to our shareholders for the 2002 financial year 2002, a level on par with last year’s2001’s CHF 2.00 distribution.
Total assets were CHF 1,181 billion on 31 December 2002, down CHF 72 billion, or 6%, from CHF 1,253 billion on 31 December 2001. The balance sheet shrank because of the weakening of the US dollar and UK sterling against the Swiss franc, falling by 17% and 8%distribution (which was distributed in the period respectively.
26
tax-efficient way).
market environment. The drop was partially offset by an increase in reverse repurchase agreements, due to higher volumes in our mortgage-backed securities business in the US, which benefited from the low interest rate levels for home mortgages.
mainly the strengthening of the Swiss franc against the US dollar. We believe the maturity profile of our long-term debt portfolio is well balanced to match the maturity profile of our assets.
In the twelve-month period to December 2002, cash equivalents decreased by CHF 33,915 million, principally as a result of financing activities, which generated negative cash flow of CHF 32,470 million. A cash outflow of CHF 26,206 million resulted from the repayment of money market paper, CHF 5,605 million from movements in treasury shares and derivative activity in own equity, with CHF 2,509 million resulting from a capital repayment by par value reduction. The issuance of long-term debt of CHF 17,132 million and repayments of CHF 14,911 million brought a net cash inflow of CHF 2,221 million.
27
Investing activities generated cash inflow of CHF 1,381 million. Divestments of financial investments contributed CHF 2,153 million while the sale of Hyposwiss and Klinik Hirslanden brought in CHF 984 million, both partially offsetoffsetting the CHF 1,763 million of cash outflow for the purchase of property and equipment.
As 2003 begins, the environment continues to be a challenging one. Uncertainty over economic developments and market direction, and rising geopolitical concerns are affecting investor sentiment and therefore transaction levels, and are holding back a significant recovery in corporate activity. Therefore, we do not expect to see an immediate pick-up in our financial performance, as depressed asset levels, low levels of investor activity and possible deterioration of the credit environment weigh on our revenues. Any recovery in the latter part of this year remains simply unpredictable.
Our net profit for the year 2001 was CHF 4,973 million, 36% less than the CHF 7,792 million achieved in 2000, reflecting the much more difficult market environment in 2001.
Before goodwill and adjusted for significant financial events:
2838
Operating income
rise to the income, rather than by the type of income generated.
29
Business Group Results |
sions to a relatively low level, resulting in an actual credit loss expense of CHF 360 million in 2001, compared to CHF 562 million in 2000.
suance. However, UBS’s league table rankings improved, from seventh in international equity new issues in 2000 to second in 2001, according to Dealogic EquitywarePlus. Even excluding the contribution from UBS PaineWebber, equity underwriting revenues increased by CHF 77 million, or 7%, from 2000.
30
biggest contribution came from the deferred annuities business.
Operating expenses
31 December 2001, principally reflecting the effect of successful cost control efforts at UBS Wealth Management & Business Banking’s Business Banking Switzerland business unit and UBS PaineWebber, although that was slightly offset by the effect of acquisitions in UBS Global Asset Management and further hiring for the European wealth management initiative.
Tax
PaineWebber merger-related costs
31
periods of up to four years from the merger and the vast majority of them will be paid in the form of UBS shares. Because these payments are a regular and continuing cost of the business, they are not treated as significant financial events. Personnel expenses in 2001 include retention payments for key PaineWebber staff of USD 284 million (CHF 482 million) for the full year.
For 2001, we again made a tax-efficient distribution of capital to our shareholders rather than paying a dividend. On 10 July 2002, we made a distribution of CHF 2.00 to shareholders for the financial year 2001 which reduced the par value from CHF 2.80 to CHF 0.80. This is consistent with the total per share distribution to shareholders of CHF 2.03 in 2000.
In the twelve-month period to December 2001, cash equivalents increased by CHF 22,889 mil-
lion, principally as a result of financing activities, which generated positive cash flow of CHF 18,103 million. CHF 24,226 million from the issuance of money market paper was offset by CHF 6,038 million for treasury shares and treasury share contract activity as well as CHF 683 million for capital repayments.
32
33
34
35
Introduction
Reporting by Business Unit1
Business Banking | ||||||||||||||||
Private Banking | Switzerland | |||||||||||||||
CHF million except where indicated | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | ||||||||||||
Income | 7,279 | 7,696 | 5,494 | 5,792 | ||||||||||||
Credit loss (expense)/recovery2 | (28 | ) | (37 | ) | (286 | ) | (567 | ) | ||||||||
Total operating income | 7,251 | 7,659 | 5,208 | 5,225 | ||||||||||||
Personnel expenses | 2,083 | 1,947 | 2,727 | 2,878 | ||||||||||||
General and administrative expenses | 2,158 | 2,038 | 159 | 396 | ||||||||||||
Depreciation | 125 | 151 | 355 | 465 | ||||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 0 | 0 | ||||||||||||
Total operating expenses | 4,477 | 4,245 | 3,241 | 3,739 | ||||||||||||
Business Group performance before tax | 2,774 | 3,414 | 1,967 | 1,486 | ||||||||||||
Business Group performance before tax and goodwill3 | 2,885 | 3,523 | 1,967 | 1,486 | ||||||||||||
Additional information | ||||||||||||||||
Cost/income ratio before goodwill (%)3,4 | 60 | 54 | 59 | 65 | ||||||||||||
Net new money (CHF billion)5 | 16.6 | 24.66 | 3.7 | 9.26 | ||||||||||||
Invested assets (CHF billion) | 688 | 791 | 205 | 215 | ||||||||||||
Fair value of employee stock options granted7 | 58 | 38 | ||||||||||||||
Headcount (full-time equivalents) | 10,488 | 10,249 | 18,442 | 19,220 | ||||||||||||
Management accounting
relating to balance sheet products is calculated on a fully funded basis. In a second step, business units are additionally credited with the risk-free return achieved on the average regulatory equity used.
36
UBS Global | Corporate and | |||||||||||||||||||||||||||||||||||||||
Asset Management | Institutional Clients | UBS Capital | UBS PaineWebber | Corporate Center | ||||||||||||||||||||||||||||||||||||
31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||
1,953 | 2,218 | 14,100 | 15,587 | (1,602 | ) | (872 | ) | 5,561 | 6,391 | 1,315 | 800 | |||||||||||||||||||||||||||||
0 | 0 | (128 | ) | (112 | ) | 0 | 0 | (13 | ) | (18 | ) | 249 | 236 | |||||||||||||||||||||||||||
1,953 | 2,218 | 13,972 | 15,475 | (1,602 | ) | (872 | ) | 5,548 | 6,373 | 1,564 | 1,036 | |||||||||||||||||||||||||||||
946 | 1,038 | 7,784 | 8,258 | 94 | 96 | 4,245 | 5,019 | 645 | 592 | |||||||||||||||||||||||||||||||
513 | 569 | 2,314 | 2,586 | 64 | 64 | 1,263 | 1,441 | 601 | 537 | |||||||||||||||||||||||||||||||
37 | 46 | 381 | 454 | 1 | 2 | 149 | 124 | 473 | 372 | |||||||||||||||||||||||||||||||
270 | 286 | 364 | 402 | 0 | 0 | 457 | 502 | 24 | 24 | |||||||||||||||||||||||||||||||
1,766 | 1,939 | 10,843 | 11,700 | 159 | 162 | 6,114 | 7,086 | 1,743 | 1,525 | |||||||||||||||||||||||||||||||
187 | 279 | 3,129 | 3,775 | (1,761 | ) | (1,034 | ) | (566 | ) | (713 | ) | (179 | ) | (489 | ) | |||||||||||||||||||||||||
457 | 565 | 3,493 | 4,177 | (1,761 | ) | (1,034 | ) | (109 | ) | (211 | ) | (155 | ) | (465 | ) | |||||||||||||||||||||||||
77 | 75 | 74 | 72 | 102 | 103 | |||||||||||||||||||||||||||||||||||
(2.4 | ) | 34.9 | 18.5 | 33.2 | ||||||||||||||||||||||||||||||||||||
557 | 672 | 584 | 769 | |||||||||||||||||||||||||||||||||||||
44 | 567 | 15 | 73 | 32 | ||||||||||||||||||||||||||||||||||||
3,346 | 3,281 | 15,964 | 15,562 | 73 | 128 | 19,563 | 20,413 | 1,185 | 1,132 | |||||||||||||||||||||||||||||||
Business unit structure
amortization expense and net funding charges are now being charged to each business unit in proportion to the share of goodwill and intangible assets assigned.
37
Other management accounting changes
to the business units, adjusting the leverage ratio (ratio of BIS Tier 1 capital excluding hybrid capital to BIS total capital) for non-goodwill items. This change in allocation also affects the interest earned on regulatory equity.
In our management accounting, the expense for equity-based compensation plans — including employee option plans — is recorded at the intrinsic value of the instruments at grant date. To enhance transparency, for every business unit and Business Group we now disclose the additional compensation expense we would have incurred in 2002 had we recognized the fair value of stock option grants. On a Group level, this additional expense would have been CHF 827 million in 2002 (CHF 690 million after-tax).
3839
Our main businesses do not show significant seasonal patterns - except for UBS Warburg’s Corporate and Institutional Clients business unit, where revenues are impacted by the seasonal characteristicsReview of general financial market activity and deal flows in investment banking.
When reporting on client assets, we show two assets metrics: client assets and invested assets:
both the investment management unit and the distribution unit, and double counted in Group totals. For example, a mutual fund provided by UBS Global Asset Management but sold by Private Banking will be counted as invested assets in both business units, as they both provide an independent service to their respective client, add value and generate revenues. This approach is in line with our open architecture strategy and allows us to accurately reflect the actual performance of our individual businesses.
Credit loss expense represents the charges to the profit and loss account relating to amounts due to UBS from loans and advances, over-the-counter (OTC) derivatives and off-balance sheet products that are considered impaired or uncollectable (for more information, please refer to Note 11 to the UBS Group Financial Statements of this report).
39
UBS | ||||||||||||||||||||
Wealth | ||||||||||||||||||||
CHF million | Management & | UBS | UBS | Corporate | ||||||||||||||||
For the year ended 31.12.02 | Business Banking | Warburg | PaineWebber | Center | Total | |||||||||||||||
Actuarial expected loss | 569 | 126 | 13 | 708 | ||||||||||||||||
Deferred releases | (255 | ) | 2 | 0 | (253 | ) | ||||||||||||||
Credit loss expense charged to the Business Groups | 314 | 128 | 13 | 455 | ||||||||||||||||
IFRS actual credit loss expense | 241 | (35 | ) | 15 | (15 | ) | 206 | |||||||||||||
Balancing item charged as Credit loss expense in Corporate Center | (249 | ) |
longer term, the expected loss should equal the actual credit loss expense, although the latter is more erratic, in both timing and amount. Therefore, in business unit reporting, in addition to the expected loss, we also charge or refund the difference between actual credit loss expense and expected loss, amortized over a three-year period. With this deferred charging mechanism we not only make Business Groups ultimately accountable for any credit losses they suffer but also give them the incentive to align their credit decisions and risk-adjusted pricing with the medium-term risk profile of their credit transactions. The sum of this “deferral” and the expected loss makes up the Credit loss expense charged in our segment and business unit reporting.
On Group level, we focus on a consistent set of long-term financial targets defined across periods of varying market conditions and designed to ensure that UBS delivers continuously improving returns to shareholders (see pages 21 and 22 of this report). At the Business Group or business unit level, performance is measured with carefully chosen key performance indicators (KPIs). These do not carry explicit targets, but are indicators of the business units’ success in creating value for shareholders. They reflect the key drivers of each unit’s core business activities and include both financial metrics, such as the cost/income ratio, and non-financial metrics, such as invested assets or the number of client advisors.
Credit loss charge | IFRS actual credit loss expense | |||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
UBS Wealth Management & Business Banking | 314 | 604 | 785 | 241 | 123 | (695 | ) | |||||||||||||||||
UBS Warburg | 128 | 112 | 243 | (35 | ) | 360 | 562 | |||||||||||||||||
UBS PaineWebber | 13 | 18 | 3 | 15 | 15 | 3 | ||||||||||||||||||
Corporate Center | 0 | 0 | 0 | (15 | ) | 0 | 0 | |||||||||||||||||
Total | 455 | 734 | 1,031 | 206 | 498 | (130 | ) | |||||||||||||||||
Balancing item in Corporate Center | (249 | ) | (236 | ) | (1,161 | ) | ||||||||||||||||||
40
Indicative Tax Rates
Indicative Business Group and business unit tax rates are calculated on an annual basis based on the results and statutory tax rates of the financial year. These rates are approximate calculations, based upon the application to the year’s adjusted earnings of statutory tax rates for the locations in which the Business Groups operated. These tax rates therefore give guidance on the tax cost to each Business Group of doing business during 2002 on a stand-alone basis, without the benefit of tax losses brought forward from earlier years.
The indicative tax rates are presented “pre-goodwill”. They give an indication of what the tax rate would have been if goodwill were not charged for accounting purposes. It is the sum of the tax expense payable on net profit before tax and goodwill in each location, divided by the total net profit before tax and goodwill. However, the tax rates post-goodwill are higher than the pre-goodwill rates, because in some jurisdictions there are limitations on the tax deductibility of amortization costs.
41
UBS Wealth Management & Business Banking
Georges Gagnebin
Chairman, UBSWealth
Management & Business Banking
Marcel Rohner
CEO, Wealth Management &
Business Banking
Marcel RohnerCEO UBS Wealth Management & Business Banking
In 2002, Private Banking’s2003, Wealth Management’s pre-tax profit adjusted for SFEs was CHF 2,7742,609 million, a 19% decline4% increase from 2001.2002. Strong inflows in most markets resulted in net new money rising to CHF 29.7 billion from CHF 17.7 billion. Business Banking Switzerland’s profit before tax wasrose 9% to CHF 1,9672,153 million up 32% from the previous year. Private Banking continues to attract net new moneyin 2003, with further strong inflows in our European wealth management initiative. In Business Banking Switzerland, operating expenses fell 13%, and were at theirfalling a further 8% – to the lowest level since 1999.
Business Group reportingReporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,928 | 13,488 | 14,355 | (4 | ) | |||||||||||
Credit loss expense1 | (314 | ) | (604 | ) | (785 | ) | (48 | ) | ||||||||
Total operating income | 12,614 | 12,884 | 13,570 | (2 | ) | |||||||||||
Personnel expenses | 4,810 | 4,825 | 5,151 | 0 | ||||||||||||
General and administrative expenses | 2,317 | 2,434 | 2,478 | (5 | ) | |||||||||||
Depreciation | 480 | 616 | 633 | (22 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 81 | 2 | ||||||||||||
Total operating expenses | 7,718 | 7,984 | 8,343 | (3 | ) | |||||||||||
Business Group performance before tax | 4,896 | 4,900 | 5,227 | 0 | ||||||||||||
Business Group performance before tax and goodwill2 | 5,007 | 5,009 | 5,308 | 0 | ||||||||||||
Additional information | ||||||||||||||||
Regulatory equity allocated (average) | 8,800 | 9,400 | 10,150 | (6 | ) | |||||||||||
Cost/income ratio (%)3 | 60 | 59 | 58 | |||||||||||||
Cost/income ratio before goodwill (%)2, 3 | 59 | 58 | 58 | |||||||||||||
Fair value of employee stock options granted | 96 | 4 | ||||||||||||||
Business Group reporting adjusted for Significant Financial Events
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,773 | 5 | 13,488 | 14,355 | (5 | ) | ||||||||||
Credit loss expense1 | (314 | ) | (604 | ) | (785 | ) | (48 | ) | ||||||||
Total operating income | 12,459 | 12,884 | 13,570 | (3 | ) | |||||||||||
Personnel expenses | 4,810 | 4,825 | 5,151 | 0 | ||||||||||||
General and administrative expenses | 2,317 | 2,434 | 2,398 | 6 | (5 | ) | ||||||||||
Depreciation | 480 | 616 | 561 | 6 | (22 | ) | ||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 81 | 2 | ||||||||||||
Total operating expenses | 7,718 | 7,984 | 8,191 | (3 | ) | |||||||||||
Business Group performance before tax | 4,741 | 4,900 | 5,379 | (3 | ) | |||||||||||
Business Group performance before tax and goodwill2 | 4,852 | 5,009 | 5,460 | (3 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost/income ratio (%)3 | 60 | 59 | 57 | |||||||||||||
Cost/income ratio before goodwill (%)2,3 | 60 | 58 | 56 | |||||||||||||
42
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Income | 12,052 | 12,184 | 12,782 | (1 | ) | |||||||||||
Adjusted expected credit loss1 | (131 | ) | (312 | ) | (601 | ) | (58 | ) | ||||||||
Total operating income | 11,921 | 11,872 | 12,181 | 0 | ||||||||||||
Personnel expenses | 4,584 | 4,596 | 4,558 | 0 | ||||||||||||
General and administrative expenses | 2,116 | 2,251 | 2,319 | (6 | ) | |||||||||||
Depreciation | 384 | 448 | 568 | (14 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 75 | 97 | 100 | (23 | ) | |||||||||||
Total operating expenses | 7,159 | 7,392 | 7,545 | (3 | ) | |||||||||||
Business Group performance before tax | 4,762 | 4,480 | 4,636 | 6 | ||||||||||||
Additional information | ||||||||||||||||
Regulatory equity allocated (average) | 8,750 | 8,600 | 9,150 | 2 | ||||||||||||
Cost / income ratio (%) 2 | 59 | 61 | 59 | |||||||||||||
Fair value of employee stock options granted 3 | 64 | 92 | (30 | ) | ||||||||||||
Business unit reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 7,2791 | 7,696 | 8,402 | (5 | ) | |||||||||||
Credit loss expense3 | (28 | ) | (37 | ) | (35 | ) | (24 | ) | ||||||||
Total operating income | 7,251 | 7,659 | 8,367 | (5 | ) | |||||||||||
Personnel expenses | 2,083 | 1,947 | 2,030 | 7 | ||||||||||||
General and administrative expenses | 2,158 | 2,038 | 2,0192 | 6 | ||||||||||||
Depreciation | 125 | 151 | 1452 | (17 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 55 | 2 | ||||||||||||
Total operating expenses | 4,477 | 4,245 | 4,249 | 5 | ||||||||||||
Business unit performance before tax | 2,774 | 3,414 | 4,118 | (19 | ) | |||||||||||
Business unit performance before tax and goodwill4 | 2,885 | 3,523 | 4,173 | (18 | ) | |||||||||||
KPIs | ||||||||||||||||
Invested assets (CHF billion) | 688 | 791 | 798 | (13 | ) | |||||||||||
Net new money (CHF billion)5, 6 | 16.6 | 24.6 | 1.2 | |||||||||||||
Gross margin on invested assets (bps)7 | 98 | 97 | 105 | 1 | ||||||||||||
Cost/income ratio (%)8 | 62 | 55 | 51 | |||||||||||||
Cost/income ratio before goodwill (%)4, 8 | 60 | 54 | 50 | |||||||||||||
Cost/income ratio before goodwill and excluding the European wealth management initiative (%)4, 8 | 53 | 48 | ||||||||||||||
Client advisors (full-time equivalents) | 3,291 | 3,043 | 8 | |||||||||||||
Private Banking — International Clients | ||||||||||||||||
Income | 5,2291 | 5,498 | 5,890 | (5 | ) | |||||||||||
Invested assets (CHF billion) | 493 | 555 | 550 | (11 | ) | |||||||||||
Net new money (CHF billion)5 | 19.1 | 23.2 | 7.5 | |||||||||||||
Gross margin on invested assets (bps)7 | 100 | 99 | 107 | 1 | ||||||||||||
European wealth management initiative | ||||||||||||||||
(part of Private Banking — International Clients) | ||||||||||||||||
Income | 186 | 140 | 33 | |||||||||||||
Invested assets (CHF billion) | 28 | 16 | 75 | |||||||||||||
Net new money (CHF billion)5 | 7.6 | 5.6 | ||||||||||||||
Client advisors (full-time equivalents) | 551 | 370 | 49 | |||||||||||||
Private Banking — Swiss Clients | ||||||||||||||||
Income | 2,050 | 2,198 | 2,512 | (7 | ) | |||||||||||
Invested assets (CHF billion) | 195 | 236 | 248 | (17 | ) | |||||||||||
Net new money (CHF billion)5, 6 | (2.5 | ) | 1.4 | (6.3 | ) | |||||||||||
Gross margin on invested assets (bps)7 | 95 | 92 | 100 | 3 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Client assets (CHF billion) | 836 | 949 | (12 | ) | ||||||||||||
Regulatory equity allocated (average) | 3,100 | 3,550 | 2,600 | (13 | ) | |||||||||||
Fair value of employee stock options granted | 589 | |||||||||||||||
Headcount (full-time equivalents) | 10,488 | 10,249 | 9,835 | 2 | ||||||||||||
43
Significant Financial Events
For the full year, net new money inflows totaled CHF 16.6 billion, down from the 2001 result of CHF 24.6 billion. Excluding the net outflow of over CHF 8 billion related to the Italian tax amnesty, the net new money result was essentially unchanged. International clients invested net new money of CHF 19.1 billion in 2002,
down by only CHF 4.1 billion from a year earlier despite the Italian tax amnesty. This excellent underlying result in these difficult markets was due to the continued success of our European wealth management initiative as well as significant inflows from clients in Asia and the Americas.
In the year to 31 December 2002, invested assets fell 13% to CHF 688 billion, mainly due to the steep drop in global equity markets as well as the 17% drop in the US dollar against the Swiss franc. Some 38% of Private Banking’s invested assets are denominated in US dollars.
Gross margin on invested assets remained resilient and rose by 1 basis point to 98 basis
44
points. Assets as well as revenues fell in 2002 from the already depressed 2001 levels. The split of the margin remained unchanged from 2001 with 72% of the margin stemming from recurring revenue and 28% from transactional fees.
Over the full year, the pre-goodwill cost/ income ratio increased from 54% in 2001 to 60% in 2002, reflecting the ongoing investment in our European wealth management initiative as well as the strong decline in asset-based revenues. Excluding the European wealth management initiative, our cost/income ratio increased from 48% in 2001 to 53% in 2002.
European wealth management
Progress so far has been promising with net new money inflows into our domestic European network for full-year 2002 totaling CHF 7.6 billion, up 36% from last year’s intake of CHF 5.6 billion. The inflow in 2002 reflects an annual growth rate in net new money of 48%. For full-year 2002, income from our European wealth management initiative was CHF 186 million, 33% or CHF 46 million above the 2001 level, reflecting the success of our business expansion program.
We hired a total of 181 client advisors in 2002, bringing the total at 31 December 2002 to 551. We remain committed to growing our presence in our European target markets and will continue to invest in qualified advisory staff at a rate determined by the market environment and business opportunities.
45
Personnel as well as general and administrative expenses increased due to this strategic initiative.
Operating income
Operating expenses
Headcount
Net new money inflows in 2001, at CHF 24.6 billion, were CHF 23.4 billion higher than in 2000, demonstrating our success in re-energizing our asset-gathering performance, as well as our determined focus on growing our wealth management franchise.
European wealth management
Weaker markets than in 2000 and the costs of investing in the European wealth management initiative brought full-year pre-tax profits in
46
2001 down 17% from 2000 to CHF 3,414 million, despite a continued focus on controlling operating costs.
Operating income
Operating expenses
Headcount
47
Business unit reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Private clients | 3,014 | 3,185 | 3,520 | (5 | ) | |||||||||||
Corporate clients | 2,148 | 2,263 | 2,217 | (5 | ) | |||||||||||
Other areas | 332 | 344 | 216 | (3 | ) | |||||||||||
Income | 5,494 | 5,792 | 5,953 | (5 | ) | |||||||||||
Credit loss expense1 | (286 | ) | (567 | ) | (750 | ) | (50 | ) | ||||||||
Total operating income | 5,208 | 5,225 | 5,203 | 0 | ||||||||||||
Personnel expenses | 2,727 | 2,878 | 3,121 | (5 | ) | |||||||||||
General and administrative expenses | 159 | 396 | 379 | (60 | ) | |||||||||||
Depreciation | 355 | 465 | 416 | (24 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 26 | |||||||||||||
Total operating expenses | 3,241 | 3,739 | 3,942 | (13 | ) | |||||||||||
Business unit performance before tax | 1,967 | 1,486 | 1,261 | 32 | ||||||||||||
Business unit performance before tax and goodwill2 | 1,967 | 1,486 | 1,287 | 32 | ||||||||||||
KPIs | ||||||||||||||||
Invested assets (CHF billion) | 205 | 215 | 239 | (5 | ) | |||||||||||
Net new money (CHF billion)3, 4 | 3.7 | 9.2 | 2.7 | |||||||||||||
Cost/income ratio (%)5 | 59 | 65 | 66 | |||||||||||||
Cost/income ratio before goodwill (%)2, 5 | 59 | 65 | 66 | |||||||||||||
Non-performing loans/gross loans outstanding (%) | 3.6 | 4.8 | 5.5 | |||||||||||||
Impaired loans/gross loans outstanding (%) | 6.0 | 7.7 | 9.4 | |||||||||||||
Additional information | % change from | |||||||||||||||
As at or for the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Deferred releases included in credit loss expense1 | 240 | 115 | 109 | |||||||||||||
Client assets (CHF billion) | 494 | 544 | (9 | ) | ||||||||||||
Regulatory equity allocated (average) | 5,700 | 5,850 | 7,550 | (3 | ) | |||||||||||
Fair value of employee stock options granted | 38 | 6 | ||||||||||||||
Headcount (full-time equivalents) | 18,442 | 19,220 | 20,437 | (4 | ) | |||||||||||
40
Wealth Management
1 | In management accounts, adjusted expected credit loss rather than credit loss is reported for the Business Groups (see Note 2 to the Financial Statements). | ||
Excludes interest and dividend income. | |||
3 | Income/average invested assets. | ||
4 | Operating expenses/income. | ||
5 | Operating expenses less expenses for the European wealth management initiative/income less income for the European wealth management initiative. | ||
6 | For informational purposes only. These pre-tax amounts have not been recorded in the Income statement. For details on the fair value calculation, refer to Note 32e to the Financial Statements. |
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Income | 6,797 | 6,690 | 6,990 | 2 | ||||||||||||
Adjusted expected credit loss1 | (4 | ) | (26 | ) | (34 | ) | (85 | ) | ||||||||
Total operating income | 6,793 | 6,664 | 6,956 | 2 | ||||||||||||
Personnel expenses | 1,944 | 1,869 | 1,680 | 4 | ||||||||||||
General and administrative expenses | 2,083 | 2,092 | 1,923 | 0 | ||||||||||||
Depreciation | 82 | 93 | 103 | (12 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 75 | 97 | 100 | (23 | ) | |||||||||||
Total operating expenses | 4,184 | 4,151 | 3,806 | 1 | ||||||||||||
Business unit performance before tax | 2,609 | 2,513 | 3,150 | 4 | ||||||||||||
Performance Indicators | ||||||||||||||||
Invested assets (CHF billion) | 701 | 642 | 728 | 9 | ||||||||||||
Net new money (CHF billion)2 | 29.7 | 17.7 | 23.2 | |||||||||||||
Gross margin on invested assets (bps)3 | 101 | 97 | 96 | 4 | ||||||||||||
Cost / income ratio (%)4 | 62 | 62 | 54 | |||||||||||||
Cost / income ratio excluding the European wealth management initiative (%)5 | 53 | 55 | 48 | |||||||||||||
Client advisors (full-time equivalents) | 3,300 | 3,001 | 2,681 | 10 | ||||||||||||
International Clients | ||||||||||||||||
Income | 4,734 | 4,640 | 4,792 | 2 | ||||||||||||
Invested assets (CHF billion) | 491 | 447 | 492 | 10 | ||||||||||||
Net new money (CHF billion)2 | 29.7 | 20.2 | 21.8 | |||||||||||||
Gross margin on invested assets (bps)3 | 101 | 98 | 98 | 3 | ||||||||||||
European wealth management initiative (part of International Clients) | ||||||||||||||||
Income | 267 | 186 | 140 | 44 | ||||||||||||
Invested assets (CHF billion) | 46 | 28 | 16 | 64 | ||||||||||||
Net new money (CHF billion)2 | 10.8 | 7.6 | 5.6 | |||||||||||||
Client advisors (full-time equivalents) | 672 | 551 | 370 | 22 | ||||||||||||
Swiss Clients Income | 2,063 | 2,050 | 2,198 | 1 | ||||||||||||
Invested assets (CHF billion) | 210 | 195 | 236 | 8 | ||||||||||||
Net new money (CHF billion)2 | 0.0 | (2.5 | ) | 1.4 | ||||||||||||
Gross margin on invested assets (bps)3 | 102 | 95 | 92 | 7 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Client assets (CHF billion) | 884 | 788 | 886 | 12 | ||||||||||||
Regulatory equity allocated (average) | 2,650 | 2,900 | 3,300 | (9 | ) | |||||||||||
Fair value of employee stock options granted6 | 37 | 54 | (31 | ) | ||||||||||||
Headcount (full-time equivalents) | 9,176 | 9,399 | 8,918 | (2 | ) | |||||||||||
41
Review of Business Group Performance
Wealth Management & Business Banking
Components of operating income
Wealth Management derives its operating income principally from:
– | fees for financial planning and wealth management services; |
– | fees for investment management services; and |
– | transaction-related fees. |
Wealth Management’s fees are based on the market value of invested assets and the level of transaction-related activity. As a result, operating income is affected by such factors as fluctuations in invested assets, changes in market conditions, investment performance and inflows and outflows of client funds.
Performance indicators
In full-year 2003, net new money inflows totaled CHF 29.7 billion, up 68% from CHF 17.7 billion in 2002. The excellent performance was due to strong inflows into our European wealth management business as well as significant inflows from clients in Asia and Eastern Europe.
Invested assets, at CHF 701 billion on 31 December 2003, were up 9% from CHF 642 billion a year earlier, mainly due to the recovery in global equity markets during the second half of the year, as well as the strong inflows of net new money. That more than compensated for the 10% fall in the US dollar against the Swiss franc in 2003, which had a direct impact on the value of Wealth Management’s invested assets, 37% of which are denominated in US dollars.
and a gain on disposal of our participation in Deutsche Börse. The gross margin on invested assets was 101 basis points in 2003, up 4 basis points from 97 basis points a year earlier.
The cost / income ratio remained unchanged at 62%, with higher non-recurring revenues offsetting the increased costs from rising personnel expenses. Goodwill amortization accounted for 1.1 percentage point of the 2003 cost / income ratio. Excluding the European wealth management business, the cost / income ratio fell to 53% in 2003 from 55% a year earlier.
42
European wealth management
Our European wealth management business continued to make significant progress. After three years of intense effort, the total level of invested assets in Germany, France, UK, Spain and Italy reached CHF 46 billion.
The level of invested assets reached a record CHF 46 billion on 31 December 2003, up from CHF 28 billion a year earlier, reflecting healthy inflows of net new money, our acquisition of the French business of Lloyds TSB and positive markets.
ted to growing our presence in our European target markets and will continue to invest in qualified advisory staff at a rate determined by the market environment and business opportunities.
Results
Wealth Management’s full-year 2003 pre-tax profit, at CHF 2,609 million, increased 4% from 2002 on the financial market recovery in the second half of the year, which resulted in higher revenues.
Operating income
Operating expenses
43
Review of Business Group Performance
Wealth Management & Business Banking
a year earlier, reflecting our investments in the European wealth management business and higher personnel expenses. Personnel expenses rose 4% to CHF 1,944 million in 2003 compared to a year earlier, mainly due to an increased severance payments as well as slightly higher performance-related compensation. General and administrative expenses in 2003, at CHF 2,083 million, were almost unchanged from 2002, as our ongoing tight management of costs more than offset the investments in our European wealth management business. Full-year depreciation was CHF 82 million in 2003, down 12% from a year earlier because of lower charges for information technology equipment, which is increasingly being leased instead of bought. Goodwill amortization was CHF 75 million in 2003, down 23% from 2002 mainly due to the weakening of the US dollar against the Swiss franc.
Headcount
Performance indicators
In 2002, net new money inflows totaled CHF 17.7 billion, down from the 2001 result of CHF 23.2 billion. International clients invested net new money of CHF 20.2 billion in 2002, down by only CHF 1.6 billion from 2001 despite the Italian tax amnesty. This excellent underlying result in these difficult markets was due to the
continued success of our European wealth management business as well as significant inflows from clients in Asia and the Americas.
European wealth management
Net new money inflows into our domestic European network for full-year 2002 was CHF 7.6 billion, up 36% from 2001’s intake of CHF 5.6 billion. The result in 2002 reflects an annual net new money inflow rate of 48% of the underlying asset base. For full-year 2002, income from our European wealth management business was CHF 186 million, 33% or CHF 46 million above the 2001 level. The number of client advisors increased in 2002 by 181, bringing the total on 31 December 2002 to 551.
Results
Wealth Management’s full-year 2002 pre-tax profit, at CHF 2,513 million, fell 20% from 2001 due to the steep decline in asset-based revenues which could not be fully offset by cost reductions as we continue to invest in our European wealth management business. Personnel as well as general and administrative expenses increased due to this strategic initiative.
Operating income
44
lion in 2001. Both non-recurring transaction revenues and recurring asset-based revenues fell from 2001.
Operating expenses
by 10% to CHF 93 million because of lower charges for information technology equipment, which is increasingly being leased instead of bought, while goodwill amortization was CHF 97 million, down 3% from 2001.
Headcount
45
Review of Business Group Performance
Wealth Management & Business Banking
Business Banking Switzerland
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Income | 5,255 | 5,494 | 5,792 | (4 | ) | |||||||||||
Adjusted expected credit loss1 | (127 | ) | (286 | ) | (567 | ) | (56 | ) | ||||||||
Total operating income | 5,128 | 5,208 | 5,225 | (2 | ) | |||||||||||
Personnel expenses | 2,640 | 2,727 | 2,878 | (3 | ) | |||||||||||
General and administrative expenses | 33 | 159 | 396 | (79 | ) | |||||||||||
Depreciation | 302 | 355 | 465 | (15 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 0 | |||||||||||||
Total operating expenses | 2,975 | 3,241 | 3,739 | (8 | ) | |||||||||||
Business unit performance before tax | 2,153 | 1,967 | 1,486 | 9 | ||||||||||||
Performance Indicators | ||||||||||||||||
Invested assets (CHF billion) | 212 | 205 | 215 | 3 | ||||||||||||
Net new money (CHF billion)2 | (5.0 | ) | 3.7 | 9.2 | ||||||||||||
Cost / income ratio (%)3 | 57 | 59 | 65 | |||||||||||||
Non-performing loans / gross loans (%) | 3.2 | 3.6 | 4.8 | |||||||||||||
Impaired loans / gross loans (%) | 4.6 | 6.0 | 7.7 | |||||||||||||
Additional information | % change from | |||||||||||||||
As at or for the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Deferral included in adjusted expected credit loss1 | 383 | 240 | 115 | 60 | ||||||||||||
Client assets (CHF billion) | 622 | 494 | 544 | 26 | ||||||||||||
Regulatory equity allocated (average) | 6,100 | 5,700 | 5,850 | 7 | ||||||||||||
Fair value of employee stock options granted4 | 27 | 38 | (29 | ) | ||||||||||||
Headcount (full-time equivalents) | 17,620 | 18,442 | 19,220 | (4 | ) | |||||||||||
Components of operating income
Business Banking Switzerland derives its operating income principally from:
– | net interest income from its loan portfolio and customer deposits; | |
– | fees for investment management services; | |
– | transaction fees. |
As a result, operating income is affected by movements in interest rates, fluctuations in invested assets, client activity levels, investment performance, changes in market conditions and the credit environment.
46
Performance indicators
In full-year 2003, the cost / income ratio was a record low 57%, two percentage points below the previous year’s ratio of 59%, reflecting total operating expenses dropping to their lowest level since 1999.
Invested assets rose to CHF 212 billion in 2003 from CHF 205 billion a year earlier as positive market developments were only partially offset by the weakening of the US dollar against the Swiss franc and outflows of net new money. Net new money was negative CHF 5.0 billion in 2003 compared to an inflow of CHF 3.7 billion in 2002, as corporate clients continued to make transfers from short-term deposits to current accounts, which are not classified as invested assets. We will in future no longer classify assets from corporate clients (except for pension funds) as invested assets. This change will reduce invested assets by approximately CHF 75 billion.
revenues from our reduced recovery portfolio. This was partially offset by higher mortgage and saving account volumes.
Results
Full-year pre-tax profit in 2003 was a record CHF 2,153 million, up 9% from 2002. The result was achieved despite slightly lower revenues in market conditions that were difficult at the outset of the year but improved steadily thereafter. This performance is also evidence of the continued tight management of our cost base, and lower credit loss expenses reflecting the deferred benefit of the structural improvement in our loan portfolio in recent years. In 2003, personnel expenses, general and administrative expenses and depreciation all reached their lowest levels since 1999.
Operating income
4847
Significant financial eventsReview of Business Group Performance
Wealth Management & Business Banking
mostly offset by lower credit loss expense, which fell to CHF 127 million in 2003, down 56% from CHF 286 million in 2002. The latter reflects the deferred benefit of the structural improvement in our loan portfolio in recent years.
Operating expenses
Performance indicators
Invested assets fell from CHF 215 billion in 2001 to CHF 205 billion in 2002 as negative market developments and the weakening of major currencies against the Swiss franc were only partially offset by positive net new money inflows. In 2002, Business Banking Switzerland attracted net new money of CHF 3.7 billion, down from CHF 9.2 billion in 2001. This drop was due to smaller inflows from large corporate client accounts —– a business traditionally subject to volatile inflows and outflows.
the previous year2001’s mainly due to lower interest
margins on savings and cash accounts as well as the fall in the US dollar, which caused the Swiss franc equivalent of US dollar interest ratelower revenues to drop.from our reduced recovery portfolio.
In 2002, full-year pre-tax profit was a record CHF 1,967 million, up 32% from 2001, achieved despite declining revenues in difficult market conditions, due to continued tight management of our cost base and lower credit loss expenses. Personnel expenses dropped due to lower performance-related compensation as well as a dropfall in headcount whereaswhile general and administrative expenses reached their lowest level since 1999.declined due to our continued cost management initiatives.
Operating income
48
level of CHF 5,225 million. Interest income fell because of continued pressure on margins of liability products. Trading and transactionalfee income also declined, reflecting the difficult market environment, although these developments were mostly offset by lower credit loss expenses,expense, which fell to CHF
49
286 million in 2002, down 50% from CHF 567 million in 2001. This drop reflectsreflected the continued success in improving the quality of our loan portfolio through the implementation of risk-adjusted pricing and the deferred benefit of the prior year’s better than expected credit performance.
Operating expenses
decrease reflected our continuous efforts to control costs as well as higher usage of services, mainly IT, provided to other business units. Overall, thethis very low level of general and administrative expenses is explained by the integrated business model of UBS, through which Business Banking Switzerland provides a significant number of services to other business units, of the Group, mainly Private Banking.Wealth Management. In accounting terms, the costs for these services are charged to the receiving unit as general and administrative expenses, offset by lower general and administrative expenses in the provider unit.
Headcount
In 2001, Business Banking Switzerland attracted net new money of CHF 9.2 billion, a clear improvement over 2000’s CHF 2.7 billion, reflecting improved flows from both private clients and corporate clients, where flows can be larger and more volatile. Invested assets were CHF 215 billion as of 31 December 2001.
5049
Review of Business Banking Switzerland enjoyed a very strong year, despite the much more difficult market conditions, with profit before tax in 2001 up 18% compared to 2000, at CHF 1,486 million. The implementation of risk-adjusted pricing and the strength of the Swiss economy in 2000 and early 2001 led to a significant increase in credit quality, while operating expenses have remained under tight control, falling 5% compared to 2000.
Operating income
Operating expenses
Headcount
51
UBS Global Asset Management
John A. Fraser
Chairman and CEOUBS Global Asset Management
Pre-taxStrong markets in the second half of the year, net new money inflows into equities, fixed income and alternative investment mandates and ongoing cost control measures all contributed towards a 2003 pre-tax profit of CHF 332 million, up by 52% from CHF 219 million in 2002 was CHF 187 million, down 33% from 2001. The declines in equity markets throughout 2002 resulted in lower invested2002. Money market fund outflows disguised strong inflows to higher-quality asset levels and subsequently, lower asset-based revenues. This decrease was partially offset by ongoing initiatives to control costs.classes.
Business Group Reporting
Business Group reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Institutional fees | 899 | 1,174 | 1,242 | (23 | ) | |||||||||||
Wholesale Intermediary fees | 1,054 | 1,044 | 836 | 1 | ||||||||||||
Total operating income | 1,953 | 2,218 | 2,078 | (12 | ) | |||||||||||
Personnel expenses | 946 | 1,038 | 941 | (9 | ) | |||||||||||
General and administrative expenses | 513 | 569 | 434 | (10 | ) | |||||||||||
Depreciation | 37 | 46 | 49 | (20 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 270 | 286 | 267 | (6 | ) | |||||||||||
Total operating expenses | 1,766 | 1,939 | 1,691 | (9 | ) | |||||||||||
Business Group performance before tax | 187 | 279 | 387 | (33 | ) | |||||||||||
Business Group performance before tax and goodwill1 | 457 | 565 | 654 | (19 | ) | |||||||||||
KPIs | ||||||||||||||||
Cost/income ratio (%)2 | 90 | 87 | 81 | |||||||||||||
Cost/income ratio before goodwill (%)1, 2 | 77 | 75 | 69 | |||||||||||||
Institutional | ||||||||||||||||
Invested assets (CHF billion) | 2793 | 328 | 323 | (15 | ) | |||||||||||
Net new money (CHF billion)4 | (0.6 | ) | 6.2 | (70.8 | )5 | |||||||||||
Gross margin on invested assets (bps)6 | 29 | 37 | 38 | (22 | ) | |||||||||||
Wholesale Intermediary | ||||||||||||||||
Invested assets (CHF billion) | 2783 | 344 | 319 | (19 | ) | |||||||||||
Net new money (CHF billion)4 | (1.8 | ) | 28.7 | 2.9 | 5 | |||||||||||
Gross margin on invested assets (bps)6 | 34 | 32 | 36 | 6 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Client assets (CHF billion) | 557 | 672 | (17 | ) | ||||||||||||
Regulatory equity allocated (average) | 1,750 | 1,850 | 1,550 | (5 | ) | |||||||||||
Fair value of employee stock options granted | 447 | |||||||||||||||
Headcount (full-time equivalents) | 3,346 | 3,281 | 2,860 | 2 | ||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Institutional fees | 922 | 865 | 1,154 | 7 | ||||||||||||
Wholesale Intermediary fees | 815 | 790 | 809 | 3 | ||||||||||||
Total operating income | 1,737 | 1,655 | 1,963 | 5 | ||||||||||||
Personnel expenses | 816 | 774 | 886 | 5 | ||||||||||||
General and administrative expenses | 407 | 447 | 498 | (9 | ) | |||||||||||
Depreciation | 29 | 29 | 38 | 0 | ||||||||||||
Amortization of goodwill and other intangible assets | 153 | 186 | 196 | (18 | ) | |||||||||||
Total operating expenses | 1,405 | 1,436 | 1,618 | (2 | ) | |||||||||||
Business Group performance before tax | 332 | 219 | 345 | 52 | ||||||||||||
Performance Indicators Cost/income ratio (%)1 | 81 | 87 | 82 | |||||||||||||
Institutional Invested assets (CHF billion) | 313 | 274 | 324 | 14 | ||||||||||||
of which: money market funds | 14 | 19 | 23 | (26 | ) | |||||||||||
Net new money (CHF billion)2 | 12.7 | (1.4 | ) | 6.4 | ||||||||||||
of which: money market funds | (5.0 | ) | (1.8 | ) | 12.0 | |||||||||||
Gross margin on invested assets (bps)3 | 32 | 29 | 37 | 10 | ||||||||||||
Wholesale Intermediary Invested assets (CHF billion) | 261 | 259 | 325 | 1 | ||||||||||||
of which: money market funds | 87 | 106 | 134 | (18 | ) | |||||||||||
Net new money (CHF billion)2 | (5.0 | ) | (6.3 | ) | 24.5 | |||||||||||
of which: money market funds | (23.0 | ) | (6.9 | ) | 2.5 | |||||||||||
Gross margin on invested assets (bps)3 | 31 | 27 | 26 | 15 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Client assets (CHF billion) | 574 | 533 | 649 | 8 | ||||||||||||
Regulatory equity allocated (average) | 1,000 | 1,100 | 1,050 | (9 | ) | |||||||||||
Fair value of employee stock options granted4 | 41 | 43 | (5 | ) | ||||||||||||
Headcount (full-time equivalents) | 2,689 | 2,733 | 2,704 | (2 | ) | |||||||||||
5250
Components of operating income
Global Asset Management generates its revenue from the asset management services it provides to private clients, financial intermediaries and institutional investors. Fees charged to institutional clients and wholesale intermediary clients are based on the market value of invested
assets and on successful investment performance. As a result, revenues are affected by changes in market and currency valuation levels, as well as flows of client funds, and relative investment performance.
Performance indicators
The cost / income ratio dropped to 81% in 2003 from 87% in 2002. Amortization expenses fell, driving the cost / income ratio down 2.5 percentage points and now accounting for 8.8 percentage points of the ratio. The residual improvement of 3.4 percentage points was a result of increases in both operating income and operating expenses. The recovery in equity markets experienced in the second half of the year resulted in higher invested asset levels, and, consequently, higher asset-based revenues. Strong inflows of net new money (excluding lower fee money market funds), combined with improved investment performance, especially in the alternative and quantitative platform, also helped revenues to rise.
Institutional
Institutional invested assets totaled CHF 313 billion on 31 December 2003, up 14% from CHF 274 billion on 31 December 2002, reflecting the strong market development in the second half of the year and strong inflows of net new money. The increase was partly offset by the weakening of major currencies against the Swiss franc.
For full-year 2003, net new money inflows were CHF 12.7 billion, up significantly from the outflows of CHF 1.4 billion recorded in 2002. Equity mandates and alternative and quantitative investments experienced strong inflows, partially offset by outflows from asset allocation mandates and money market funds.
The full-year 2003 gross margin was 32 basis points, up from 29 basis points a year earlier, reflecting higher performance fees and an improving asset mix.
51
Review of Business Group Performance
Global Asset Management
Wholesale Intermediary
Invested assets were CHF 261 billion on 31 December 2003, up by CHF 2 billion from the same date a year earlier. The impact of adverse currency movements and the launch of UBS Bank USA, which prompted outflows from money market funds, nearly offset the positive effect from rising financial markets.
with the CHF 6.3 billion outflow in 2002. The money market outflow in 2003 was CHF 23.0 billion, partially offset by inflows of CHF 17.1 billion into higher-margin equity and fixed income mandates. The outflows in money market funds were primarily in the Americas as a result of the launch of UBS Bank USA.
Money market sweep accounts
Investment capabilities and performance
After three years of disappointing returns, equity markets posted convincing gains in 2003 as the global economy improved and corporate earnings recovered. Cyclical industries, such as the technology sector, led the rally. Fixed income
52
Annualized | ||||||||||||||||
Composite | 1 Year | 3 Years | 5 Years | 10 Years | ||||||||||||
Global | - | + | + | + | ||||||||||||
Global Bond Composite vs. Citigroup World Government Bond Index | + | + | - | - | ||||||||||||
Global Securities Composite vs. Global Securities Markets Index | + | + | + | + | ||||||||||||
(+) above benchmark; (-) under benchmark. All after fees. |
Significant financial events
Results
Global Asset Management reported a pre-tax profit of CHF 332 million in 2003, an increase of 52% from 2002’s pre-tax profit of CHF 219 million. The recovery in the second half of the year in equity market valuations, coupled with strong inflows into alternative investments, equities and fixed income mandates, resulted in higher invested asset levels and, consequently, increased
asset-based revenues. Performance-related fees, especially in the alternative and quantitative business, showed significant financial eventsimprovement over 2002. Ongoing cost control initiatives that affected thissystematically reduced operating expenses contributed significantly to improved profitability. General and administrative expenses decreased due to lower IT and premises costs. Amortization expenses fell as the goodwill of some assets became fully amortized. These developments were partially offset by higher incentive-based compensation resulting from the increase in operating income.
Operating income
53
Review of Business Group Performance
Global Asset Management
recovery in the equity markets and an improvement in the asset mix, both of which had a positive impact on our asset-based revenues.
Operating expenses
For
Performance indicators
The cost/income ratio was 77%, up 2 percentage pointsrose to 87% in 2002 from a year earlier.82% in 2001. The increase was primarily due to
lower invested asset values, which resulted in lower asset-based revenues. Those developments, however, were partially offset by lower operating expenses prompted by ongoing initiatives to control costs. Goodwill amortization accounted for 11.3 percentage points of the 2002 cost / income ratio.
Institutional
Full-year 2002 gross margin was 29 basis points, a decrease of 8 basis points from 2001 due to lower performance fees and a lower proportion of assets in alternative investments.
Wholesale Intermediary
53
native investments, primarily at GAM, largely offset the outflow.
Results
Global equity markets ended the year in significantly negative territory with the US market, as measured by the S&P 500, posting its first consecutive three-year decline since the Second World War. Markets outside the US have now fallen further from peak to trough than in their most significant previous contraction in the mid-1970s. Contributing to the erosion of equity values was the investor realization that any recovery would not be as robust as hoped, both with regard to economic fundamentals and earnings.
significant margins. The UK Balanced Equity portfolio continued to perform well against theFTSE All-Share Indexfor the same periods and our US Equity Composite surpassed theWilshire 5000benchmark by more than 5 percentage points in 2002. It also remains ahead of the benchmark for 3-, and 5-year periods. Emerging equities also showed good results for the year and have also outperformed their benchmark, theMSCI Emerging Equity Markets Free Index, for each of the past 3- and 5-year periods as well.
UBS Global Asset Management reported for full-year 2002 a pre-tax profit of CHF 187219 million, a decrease of 33%37% from 2001’s pre-tax profit of CHF 279345 million. The declines in equity markets experienced throughout 2002 resulted in lower invested asset levels and, subsequently, lower asset-based revenues. These developments were
54
partially offset by ongoing initiatives to control costs. Over the year,2002, personnel expenses decreased due to a decline in incentive compensation while general and administrative
54
expenses fell due to lower IT and premises expenditures. However, the drop in expenses could not compensate for the drop in revenues.
Operating income
Operating expenses
Headcount
Invested assets increased 5% during the year from CHF 642 billion on 31 December 2000 to CHF 672 billion on 31 December 2001. Net new money was CHF 34.9 billion for the year, reflecting the recognition of strong relative investment performance and business development efforts. The pre-goodwill cost/income ratio rose from 69% in 2000 to 75% in 2001, principally reflecting the higher cost/income ratio of the Brinson Advisors (now rebranded UBS Global Asset Management) business transferred from UBS PaineWebber at the start of the year.
Institutional
55
ment management platform, which delivered strong relative investment performance in both 2001 and 2000.
Wholesale Intermediary
Pre-tax profit of CHF 279 million in 2001 was 28% lower than 2000. Despite market declines and lower performance fees in the O’Connor business, income increased as a result of the new investment funds pricing structure introduced in 2001, the acquisition of RT Capital and the inclusion of Brinson Advisors. This was more than offset by higher personnel expenses and general and administrative expenses driven by spending on growth initiatives, the integration of Brinson Advisors and the acquisition of RT Capital in third quarter.Bank
Operating income
Operating expenses
Headcount
56
UBS Warburg
Investment Bank
John P. Costas
Chairman and CEO,UBS Warburg
Corporate and Institutional Clients netIn 2003, the Investment Bank as a whole posted pre-tax profit before tax in 2002, atof CHF 3,1293,889 million. The Investment Banking & Securities business unit’s pre-tax profit was CHF 4,078 million, was 17% lower than in 2001. Market conditions remained challenging, although our Fixed Income, Rates and Currencies business held up well. UBS Capital recorded30% from 2002. Private Equity reported a pre-tax loss of CHF 189 million in 2003 compared to a loss of CHF 1,761 million with challenging market conditionsin 2002. This improvement reflects much lower levels of writedowns and a slowdown in corporate activity leading to deteriorating valuations in all markets and industries.
Business Group reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,498 | 14,715 | 18,240 | (15 | ) | |||||||||||
Credit loss expense1 | (128 | ) | (112 | ) | (243 | ) | 14 | |||||||||
Total operating income | 12,370 | 14,603 | 17,997 | (15 | ) | |||||||||||
Personnel expenses | 7,878 | 8,354 | 9,451 | (6 | ) | |||||||||||
General and administrative expenses | 2,378 | 2,650 | 2,755 | (10 | ) | |||||||||||
Depreciation | 382 | 456 | 564 | (16 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 192 | (9 | ) | |||||||||||
Total operating expenses | 11,002 | 11,862 | 12,962 | (7 | ) | |||||||||||
Business Group performance before tax | 1,368 | 2,741 | 5,035 | (50 | ) | |||||||||||
Business Group performance before tax and goodwill2 | 1,732 | 3,143 | 5,227 | (45 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost/income ratio (%)3 | 88 | 81 | 71 | |||||||||||||
Cost/income ratio before goodwill (%)2, 3 | 85 | 78 | 70 | |||||||||||||
Net new money (CHF billion)4 | 0.5 | 0.1 | ||||||||||||||
Invested assets (CHF billion) | 3 | 1 | 1 | 200 | ||||||||||||
Client assets (CHF billion) | 133 | 109 | 22 | |||||||||||||
Regulatory equity allocated (average) | 13,100 | 14,300 | 10,800 | (8 | ) | |||||||||||
Fair value of employee stock options granted | 5825 | |||||||||||||||
Business Group reporting adjusted for Significant Financial Events | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,498 | 14,715 | 18,240 | (15 | ) | |||||||||||
Credit loss expense1 | (128 | ) | (112 | ) | (243 | ) | 14 | |||||||||
Total operating income | 12,370 | 14,603 | 17,997 | (15 | ) | |||||||||||
Personnel expenses | 7,878 | 8,354 | 9,365 | 6 | (6 | ) | ||||||||||
General and administrative expenses | 2,378 | 2,650 | 2,742 | 6 | (10 | ) | ||||||||||
Depreciation | 382 | 456 | 557 | 6 | (16 | ) | ||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 192 | (9 | ) | |||||||||||
Total operating expenses | 11,002 | 11,862 | 12,856 | (7 | ) | |||||||||||
Business Group performance before tax | 1,368 | 2,741 | 5,141 | (50 | ) | |||||||||||
Business Group performance before tax and goodwill2 | 1,732 | 3,143 | 5,333 | (45 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost/income ratio (%)3 | 88 | 81 | 70 | |||||||||||||
Cost/income ratio before goodwill (%)2, 3 | 85 | 78 | 69 | |||||||||||||
57number of successful divestments.
Business Group Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Income | 14,120 | 12,498 | 14,715 | 13 | ||||||||||||
Adjusted expected credit loss1 | (139 | ) | (128 | ) | (112 | ) | 9 | |||||||||
Total operating income | 13,981 | 12,370 | 14,603 | 13 | ||||||||||||
Personnel expenses | 7,357 | 7,878 | 8,354 | (7 | ) | |||||||||||
General and administrative expenses | 2,130 | 2,378 | 2,650 | (10 | ) | |||||||||||
Depreciation | 327 | 382 | 456 | (14 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 278 | 364 | 402 | (24 | ) | |||||||||||
Total operating expenses | 10,092 | 11,002 | 11,862 | (8 | ) | |||||||||||
Business Group performance before tax | 3,889 | 1,368 | 2,741 | 184 | ||||||||||||
Additional information | ||||||||||||||||
Cost / income ratio (%)2 | 71 | 88 | 81 | |||||||||||||
Net new money (CHF billion)3 | 0.9 | 0.5 | 0.1 | |||||||||||||
Invested assets (CHF billion) | 4 | 3 | 1 | 33 | ||||||||||||
Client assets (CHF billion) | 143 | 133 | 109 | 8 | ||||||||||||
Regulatory equity allocated (average) | 12,700 | 13,100 | 14,300 | (3 | ) | |||||||||||
Fair value of employee stock options granted4 | 391 | 582 | (32 | ) | ||||||||||||
Business Unit reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Investment Banking1 | 1,915 | 2,541 | 2,700 | (25 | ) | |||||||||||
Equities | 5,625 | 6,422 | 10,300 | (12 | ) | |||||||||||
Fixed Income, Rates and Currencies2 | 6,490 | 6,350 | 4,590 | 2 | ||||||||||||
Non-core business | 70 | 274 | 280 | (74 | ) | |||||||||||
Income | 14,100 | 15,587 | 17,870 | (10 | ) | |||||||||||
Credit loss expense3 | (128 | ) | (112 | ) | (243 | ) | 14 | |||||||||
Total operating income | 13,972 | 15,475 | 17,627 | (10 | ) | |||||||||||
Personnel expenses4 | 7,784 | 8,258 | 9,223 | 5 | (6 | ) | ||||||||||
General and administrative expenses | 2,314 | 2,586 | 2,695 | 5 | (11 | ) | ||||||||||
Depreciation | 381 | 454 | 555 | 5 | (16 | ) | ||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 190 | (9 | ) | |||||||||||
Total operating expenses | 10,843 | 11,700 | 12,663 | (7 | ) | |||||||||||
Business unit performance before tax | 3,129 | 3,775 | 4,964 | (17 | ) | |||||||||||
Business unit performance before tax and goodwill6 | 3,493 | 4,177 | 5,154 | (16 | ) | |||||||||||
KPIs | ||||||||||||||||
Compensation ratio (%)7 | 55 | 53 | 52 | |||||||||||||
Cost/income ratio (%)8 | 77 | 75 | 71 | |||||||||||||
Cost/income ratio before goodwill (%)6, 8 | 74 | 72 | 70 | |||||||||||||
Non-performing loans/gross loans outstanding (%) | 1.6 | 2.6 | 2.8 | |||||||||||||
Impaired loans/gross loans outstanding (%) | 3.2 | 5.4 | 5.6 | |||||||||||||
Average VaR (10-day 99%) | 275 | 252 | 242 | 9 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at or for the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Deferred releases included in credit loss expense3 | (2 | ) | 38 | 36 | ||||||||||||
Regulatory equity allocated (average) | 12,550 | 13,600 | 10,250 | (8 | ) | |||||||||||
Fair value of employee stock options granted | 5679 | |||||||||||||||
Headcount (full-time equivalents) | 15,964 | 15,562 | 15,262 | 3 | ||||||||||||
5856
Investment Banking & Securities
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Investment Banking | 1,703 | 1,915 | 2,541 | (11 | ) | |||||||||||
Equities | 4,894 | 5,625 | 6,422 | (13 | ) | |||||||||||
Fixed Income, Rates and Currencies | 7,600 | 6,560 | 6,624 | 16 | ||||||||||||
Income | 14,197 | 14,100 | 15,587 | 1 | ||||||||||||
Adjusted expected credit loss1 | (139 | ) | (128 | ) | (112 | ) | 9 | |||||||||
Total operating income | 14,058 | 13,972 | 15,475 | 1 | ||||||||||||
Personnel expenses2 | 7,308 | 7,784 | 8,258 | (6 | ) | |||||||||||
General and administrative expenses | 2,071 | 2,314 | 2,586 | (11 | ) | |||||||||||
Depreciation | 323 | 381 | 454 | (15 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 278 | 364 | 402 | (24 | ) | |||||||||||
Total operating expenses | 9,980 | 10,843 | 11,700 | (8 | ) | |||||||||||
Business unit performance before tax | 4,078 | 3,129 | 3,775 | 30 | ||||||||||||
Performance Indicators | ||||||||||||||||
Compensation ratio (%)3 | 51 | 55 | 53 | |||||||||||||
Cost / income ratio (%)4 | 70 | 77 | 75 | |||||||||||||
Non-performing loans / gross loans (%) | 0.9 | 1.6 | 2.6 | |||||||||||||
Impaired loans / gross loans (%) | 2.2 | 3.2 | 5.4 | |||||||||||||
Average VaR (10-day 99%) | 354 | 275 | 252 | 29 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at or for the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Deferral included in adjusted expected credit loss1 | (45 | ) | (2 | ) | 38 | |||||||||||
Regulatory equity allocated (average) | 12,250 | 12,550 | 13,600 | (2 | ) | |||||||||||
Fair value of employee stock options granted5 | 390 | 567 | (31 | ) | ||||||||||||
Headcount (full-time equivalents) | 15,500 | 15,964 | 15,562 | (3 | ) | |||||||||||
57
Review of Business Group Performance
Investment Bank
Components of operating income The Investment Banking & Securities unit generates operating income from: |
– | commissions on agency transactions and spreads or markups on principal transactions; | |||||
– | fees from debt and equity capital markets transactions, leveraged finance, and the structuring of derivatives and complex transactions; | |||||
– | mergers and acquisitions and other advisory fees; | |||||
– | interest income on principal transactions and from the loan portfolio; and |
– | gains and losses on market making, proprietary, and arbitrage positions. |
Performance indicators
In 2003, we performed strongly despite the difficult market environment at the start of the year. As the year progressed, and the overall environment improved, we were able to profit from market opportunities, capturing market share in most of our businesses.
Our compensation ratio in 2003 was 51%, down from 55% in 2002. The payout levels of annual performance-related payments are driven
by the revenue mix across business areas and are managed in line with market levels.
Total loans were CHF 55 billion on 31 December 2003, down 11% from CHF 62 billion a year earlier, mainly due to the drop in the US dol-
58
lar against the Swiss franc. Continued successful recovery efforts led the ratio of impaired loans to total loans to fall from 3.2% on 31 December 2002 to 2.2% at the end of 2003. The non-performing loans to total loans ratio declined from 1.6% to 0.9% in the same period.
Results
Pre-tax profit was CHF 4,078 million in full-year 2003, up 30% from a year earlier. This result was achieved despite the weakening of the US dollar against the Swiss franc and reflects strong performances in all our businesses. In particular, the Fixed Income, Rates and Currencies business, gaining 16% from a year earlier, posted a record result, reflecting the breadth of our capabilities and our expanding franchise. At the same time, costs were tightly controlled. Both personnel expenses and general and administrative expenses fell because of currency fluctuations. Excluding the impact of currency movements, personnel expenses rose in 2003, reflecting improved revenues, while general and administrative expenses remained largely unchanged from the previous year’s level.
Operating income
Operating expenses
59
Review of Business Group Performance
Investment Bank
Significant financial events
Headcount
Performance indicators
Our performance in 2002 reflectsreflected the worldwide downturn in market conditions. However as a result of our strong client franchise and continuingcon-
tinuing efforts to manage costs, results have provenproved relatively resilient.
Our compensation ratio in 2002 was 55%, a slight increase on the 53% recorded in 2001, reflecting the relatively strong performance of many of our businesses compared to competitors and to market conditions.
59
nationals,multinationals, reflecting the continued reduction of our non-core commercial lending activities, as well as the drop in the US dollar against the Swiss franc.
Results
UBS Warburg’s Corporate and Institutional ClientsThe business unit Investment Banking & Securities reported 2002 pre-tax profit of CHF 3,129 million, a decrease of 17% from 2001, reflecting difficult economic conditions, particularly for the investment banking and equities businesses. This was partially offset by the strong result of our fixed income, ratesFixed Income, Rates and currenciesCurrencies business. Over the full year,2002, overall expenses dropped by 7%, reflecting lower personnel expenses driven by a reduction in incentive compensation, as well as the success of our continued cost containment initiatives.
Operating income
Investment Bankingrevenues for the full-year 2002 dropped by 25% from CHF 2,541 million to CHF 1,915 million in 2002, due to much lower corporate activity,activ-
60
ity, which translated into a 22% drop in the global fee pool compared to 2001.
Operating expenses
our Energy trading business. The significant
60
underlying reduction of 9% from last year’s2001’s expense levels reflectsreflected the continuing success of our cost containment initiatives accentuated by the drop of the US dollar against the Swiss franc.
Headcount
Corporate and Institutional Clients measures its expense base primarily in terms of percentage of
revenues, looking at both personnel costs and non-personnel costs on this basis.
We recorded a strong performance in 2001, relative to the much weaker markets this year. Pre-tax profit in 2001 was CHF 3,775 million, a decline of 24% over 2000, our best year ever. Equities and Investment Banking both suffered from the economic downturn and the consequent weakness in their global markets, while the Fixed Income, Rates and Currencies business delivered record results, driven by interest rate reductions and increased volatility, and supported by the expansion of businesses acquired from Paine-Webber. Investment Banking continued to outperform 2000 in terms of market share, with full-year analysis showing us with a 4.4% share of fees, compared to 3.6% in 2000.
61
Operating income
Operating expenses
Headcount
62
Business Unit Reporting
Business unit reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Total operating income | (1,602 | ) | (872 | ) | 370 | (84 | ) | |||||||||
Personnel expenses | 94 | 96 | 142 | (2 | ) | |||||||||||
General and administrative expenses | 64 | 64 | 47 | 0 | ||||||||||||
Depreciation | 1 | 2 | 2 | (50 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 2 | |||||||||||||
Total operating expenses | 159 | 162 | 193 | (2 | ) | |||||||||||
Business unit performance before tax | (1,761 | ) | (1,034 | ) | 177 | (70 | ) | |||||||||
Business unit performance before tax and goodwill1 | (1,761 | ) | (1,034 | ) | 179 | (70 | ) | |||||||||
KPIs | ||||||||||||||||
Value creation (CHF billion) | (1.4 | ) | (1.4 | ) | 0.6 | 0 | ||||||||||
% change from | ||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Investment (CHF billion)2 | 3.1 | 5.0 | 5.5 | (38 | ) | |||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Portfolio fair value (CHF billion) | 3.8 | 5.6 | 6.9 | (32 | ) | |||||||||||
Regulatory equity allocated (average) | 550 | 700 | 550 | (21 | ) | |||||||||||
Fair value of employee stock options granted | 153 | |||||||||||||||
Headcount (full-time equivalents) | 73 | 128 | 129 | (43 | ) | |||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Total operating income | (77 | ) | (1,602 | ) | (872 | ) | 95 | |||||||||
Personnel expenses | 49 | 94 | 96 | (48 | ) | |||||||||||
General and administrative expenses | 59 | 64 | 64 | (8 | ) | |||||||||||
Depreciation | 4 | 1 | 2 | 300 | ||||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 0 | |||||||||||||
Total operating expenses | 112 | 159 | 162 | (30 | ) | |||||||||||
Business unit performance before tax | (189 | ) | (1,761 | ) | (1,034 | ) | 89 | |||||||||
Performance Indicators Value creation (CHF billion) | (0.3 | ) | (1.4 | ) | (1.4 | ) | 79 | |||||||||
% change from | ||||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Investment (CHF billion)1 | 2.3 | 3.1 | 5.0 | (26 | ) | |||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Portfolio fair value (CHF billion) | 2.9 | 3.8 | 5.6 | (24 | ) | |||||||||||
Regulatory equity allocated (average) | 450 | 550 | 700 | (18 | ) | |||||||||||
Fair value of employee stock options granted2 | 1 | 15 | (93 | ) | ||||||||||||
Headcount (full-time equivalents) | 50 | 73 | 128 | (32 | ) | |||||||||||
63
Significant financial eventsComponents of operating income
Private Equity’s primary source of operating income is capital gains from the disposal or sale of its investments, which are recorded at the time of ultimate divestment. As a result, appreciation in fair market value is recognized as operating income only at the time of sale. The level of annual operating income from Private Equity is directly
affected by the level of investment disposals that affected this business unittake place during the year. Similarly, depreciation in fair market value is only recognized against operating income if an investment becomes permanently impaired and has to be written down. Writedowns of the value of its investments can negatively affect operating income.
62
Performance indicators
The level of our private equity investments was CHF 2.3 billion on 31 December 2003, a decline of 26% from CHF 3.1 billion on 31 December 2002 reflecting writedowns made on direct investments and third-party funds, as well as successful exits and currency fluctuations. Unfunded commitments fell by 29% to CHF 1.5 billion on 31 December 2003 from CHF 2.1 billion a year ago.
The level of net unrealized gains was CHF 0.6 billion on 31 December 2003, down from CHF 0.8 billion on 31 December 2002, partially reflecting successful divestments.
Results
In full-year 2003, Private Equity posted a pre-tax loss of CHF 189 million – a marked improve-
ment on the pre-tax loss of CHF 1,761 million in 2002, 2001 or 2000.reflecting lower levels of writedowns and a number of successful exits. Writedowns in 2003 totaled CHF 353 million, compared to CHF 1.7 billion in 2002.
Headcount levels dropped to 50 employees on 31 December 2003, down from 73 on 31 December 2002, reflecting the reduction of our portfolio and the restructuring of some regional investment teams.
Change in disclosure from 2004
From first quarter 2004 onwards, we will no longer report Private Equity as a stand-alone business unit. Results from the private equity business will be reported as a separate revenue line in the income statement of the Investment Bank – just as we currently do for all the major business areas. We will continue to disclose
63
Review of Business Group Performance
Investment Bank
Private Equity’s performance indicators – portfolio size, fair value, and the value created.
Performance indicators
The level of our private equity investments was CHF 3.1 billion on 31 December 2002, a decline of 38% from CHF 5.0 billion on 31 December 2001. This reduction reflectsreflected writedowns made on direct investments and third partythird-party funds, as well as successfullysuccessful executed exits. In full-year 2002, write-downswritedowns included in operating income totaled CHF 1.7 billion, up from CHF 1.1 billion a year earlier.
in 2001.
Full-year 2002 results for UBS Capital reflectour Private Equity business unit reflected continued tough economic conditions, impacting private equity valuations across a range of sectors, a factor that was compounded by the prolonged downturn suffered byin all major equity markets. The challenging economic environment has adversely affected many of the companies in the portfolio while the continued hostile climate for divestments has restricted capital gains from exit opportunities. Against this background, UBS Capitalour Private Equity business unit posted a pre-tax loss in 2002 of CHF 1,761 million, CHF 727 million worse than in 2001.
64
UBS Capital’s private equity investments decreased to CHF 5.0 billion on 31 December 2001 from CHF 5.5 billion at the endReview of 2000, with the decline due to writedowns on the book value of investments, as well as a small number of divestments during the year, which more than offset drawdowns of previously committed investments and the low level of other new investments during the year.
UBS Capital recorded an operating loss of CHF 872 million in 2001, compared to operating income of CHF 370 million in 2000. Challenging markets and the continued slowdown in corporate activity meant that there were few opportunities for significant divestments in 2001, while weak economic conditions led to deteriorating valuations across a range of industry sectors, resulting in a high level of writedowns of investments in the portfolio.
65
UBS PaineWebber
Wealth Management USA
Joseph J. Grano, Jr.
Chairman, and CEO, UBS PaineWebberWealth Management USA
Mark B. SuttonPresident and Chief Operating OfficerUBS PaineWebberCEO, Wealth Management USA
UBS PaineWebber’sIn 2003, Wealth Management USA’s pre-tax loss adjusted for SFEs in 2002 was CHF 566 million, with the depreciation of the US dollar against the Swiss franc weighing on results. Excluding acquisition costs, operating pre-tax profit was CHF 6325 million compared to a pre-tax loss of CHF 6931,800 million in 2002, when the value of the PaineWebber brand was written down. Before acquisition costs, pre-tax profit increased 5% from a year earlier.
Business Group reporting1 | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 5,561 | 6,391 | 1,214 | (13 | ) | |||||||||||
Credit loss expense2 | (13 | ) | (18 | ) | (3 | ) | (28 | ) | ||||||||
Total operating income | 5,548 | 6,373 | 1,211 | (13 | ) | |||||||||||
Personnel expenses3 | 4,245 | 5,019 | 1,098 | (15 | ) | |||||||||||
General and administrative expenses | 1,263 | 1,441 | 344 | (12 | ) | |||||||||||
Depreciation | 149 | 124 | 42 | 20 | ||||||||||||
Amortization of goodwill and other intangible assets | 1,691 | 502 | 84 | 237 | ||||||||||||
Total operating expenses | 7,348 | 7,086 | 1,568 | 4 | ||||||||||||
Business Group performance before tax | (1,800 | ) | (713 | ) | (357 | ) | 152 | |||||||||
Business Group performance before tax and goodwill4 | (109 | ) | (211 | ) | (273 | ) | (48 | ) | ||||||||
Business Group performance before tax and acquisition costs12 | 632 | 693 | (72 | ) | (9 | ) | ||||||||||
KPIs | ||||||||||||||||
Invested assets (CHF billion) | 584 | 769 | 765 | (24 | ) | |||||||||||
Net new money (CHF billion)5 | 18.5 | 33.2 | 14.5 | 6 | ||||||||||||
Interest and dividend income (CHF billion)7 | 17.9 | 21.5 | (17 | ) | ||||||||||||
Cost/income ratio (%)8 | 132 | 111 | 129 | |||||||||||||
Cost/income ratio before goodwill (%)4, 8 | 102 | 103 | 122 | |||||||||||||
Recurring fees9 | 2,199 | 2,366 | 434 | (7 | ) | |||||||||||
Financial advisors (full-time equivalents) | 8,857 | 8,718 | 8,731 | 2 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Client assets (CHF billion) | 650 | 841 | (23 | ) | ||||||||||||
Regulatory equity allocated (average) | 7,450 | 8,550 | 9,200 | (13 | ) | |||||||||||
Fair value of employee stock options granted | 7310 | |||||||||||||||
Headcount (full-time equivalents) | 19,563 | 20,413 | 21,567 | (4 | ) | |||||||||||
66 On the same basis, but in US dollars, the operating result rose 21%.
Business Group Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Income | 5,190 | 1 | 5,561 | 6,391 | (7 | ) | ||||||||||
Adjusted expected credit loss2 | (8 | ) | (13 | ) | (18 | ) | (38 | ) | ||||||||
Total operating income | 5,182 | 5,548 | 6,373 | (7 | ) | |||||||||||
Personnel expenses3 | 3,712 | 4,245 | 5,019 | (13 | ) | |||||||||||
General and administrative expenses | 988 | 1,263 | 1,441 | (22 | ) | |||||||||||
Depreciation | 151 | 149 | 124 | 1 | ||||||||||||
Amortization of goodwill and other intangible assets | 336 | 1,691 | 4 | 502 | (80 | ) | ||||||||||
Total operating expenses | 5,187 | 7,348 | 7,086 | (29 | ) | |||||||||||
Business Group performance before tax | (5 | ) | (1,800 | ) | (713 | ) | (100 | ) | ||||||||
Acquisition costs Net goodwill funding5 | 231 | 390 | 468 | (41 | ) | |||||||||||
Retention payments | 263 | 351 | 436 | (25 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 336 | 1,691 | 4 | 502 | (80 | ) | ||||||||||
Total acquisition costs | 830 | 2,432 | 4 | 1,406 | (66 | ) | ||||||||||
Business Group reporting adjusted for Significant Financial Events | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 5,561 | 6,391 | 1,214 | (13 | ) | |||||||||||
Credit loss expense2 | (13 | ) | (18 | ) | (3 | ) | (28 | ) | ||||||||
Total operating income | 5,548 | 6,373 | 1,211 | (13 | ) | |||||||||||
Personnel expenses3 | 4,245 | 5,019 | 1,098 | (15 | ) | |||||||||||
General and administrative expenses | 1,263 | 1,441 | 344 | (12 | ) | |||||||||||
Depreciation | 149 | 124 | 42 | 20 | ||||||||||||
Amortization of goodwill and other intangible assets | 457 | 11 | 502 | 84 | (9 | ) | ||||||||||
Total operating expenses | 6,114 | 7,086 | 1,568 | (14 | ) | |||||||||||
Business Group performance before tax | (566 | ) | (713 | ) | (357 | ) | (21 | ) | ||||||||
Business Group performance before tax and goodwill4 | (109) | (211 | ) | (273 | ) | (48 | ) | |||||||||
Business Group performance before tax and acquisition costs12 | 632 | 693 | (72 | ) | (9 | ) | ||||||||||
KPIs | ||||||||||||||||
Gross margin on invested assets (bps)13 | 82 | 84 | 67 | (2 | ) | |||||||||||
Gross margin on invested assets before acquisition costs (bps)12, 13 | 88 | 90 | 71 | (2 | ) | |||||||||||
Cost/income ratio (%)8 | 110 | 111 | 129 | |||||||||||||
Cost/income ratio before goodwill (%)4, 8 | 102 | 103 | 122 | |||||||||||||
Cost/income ratio before acquisition costs (%)8, 12 | 89 | 90 | 105 | |||||||||||||
65
Review of Business Group Performance
Wealth Management USA
Wealth Management USA (continued)
Performance Indicators
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Invested assets (CHF billion) | 634 | 584 | 769 | 9 | ||||||||||||
Net new money (CHF billion)1 | 21.1 | 18.5 | 33.2 | |||||||||||||
Interest and dividend income (CHF billion)2 | 15.8 | 17.9 | 21.5 | (12 | ) | |||||||||||
Gross margin on invested assets (bps)3 | 86 | 82 | 84 | 5 | ||||||||||||
Cost / income ratio (%)4 | 100 | 132 | 111 | |||||||||||||
Recurring fees5 | 1,927 | 2,199 | 2,366 | (12 | ) | |||||||||||
Financial advisors (full-time equivalents) | 7,766 | 8,857 | 8,718 | (12 | ) | |||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Client assets (CHF billion) | 690 | 650 | 841 | 6 | ||||||||||||
Regulatory equity allocated (average) | 5,700 | 7,450 | 8,550 | (23 | ) | |||||||||||
Fair value of employee stock options granted 6 | 62 | 73 | (15 | ) | ||||||||||||
Headcount (full-time equivalents) | 18,016 | 19,563 | 20,413 | (8 | ) | |||||||||||
Components of PaineWebber brand of CHF 1,234 million. 12 Acquisition costs include goodwill and intangible asset amortization and related funding, net of risk-free return on the corresponding equity allocated, and retention payments. 13 Income/average invested assets.
operating income
Wealth Management USA principally derives its operating income from: |
– | fees for financial planning and wealth management services | ||
– | fees for discretionary management services and | ||
– | transaction-related fees. |
These fees are based on the market value of invested assets and the level of transaction-related activity. As a result, operating income is affected by such factors as fluctuations in invested assets, change in market conditions, investment performance and inflows and outflows of client funds, and investor activity levels.
6766
Performance indicators
Wealth Management USA had CHF 634 billion in invested assets on 31 December 2003, up 9% from CHF 584 billion on 31 December 2002. The increase was due to inflows of net new money and the effects of market appreciation. In US dollar terms, invested assets were 21% higher on 31 December 2003 than they were a year earlier.
We continue to report consistently strong inflows of net new money. In 2003, inflows were CHF 21.1 billion, 14% above the CHF 18.5 billion result reported for 2002. Including interest and dividends, net new money in 2003 was CHF 36.9 billion, up from CHF 36.4 billion in 2002.
The gross margin on invested assets was 86 basis points for full-year 2003, up from 82 basis points in 2002. The gain from the sale of the CSC business helped the margin by 3 basis points while goodwill funding lowered it by 4 basis points compared to a 6 basis point effect in 2002.
Significant financial events
Excluding these effects, the gross margin fell 1 basis point year on year.
67
Review of Business Group results on the previous page.Performance
Wealth Management USA
The writedown followednumber of financial advisors decreased to 7,766 in 2003 from 8,857 a strategic decision announced in November 2002 to move all our businessesyear earlier due to the single UBS brand. The new brand structure will be implementedcurtailment of our training program and an increase in June 2003.
Results
In the discussion below exclude significant financial events.
On this basis and in US dollar terms, performance in 2003 was 21% above that in 2002, reflecting higher recurring fee gains and improved transactional revenues. Client activity increased, with daily average trades rising 3% above their 2002 level. In addition, conditions in the municipal securities market remained extremely buoyant, with new issues hitting an all-time high in 2003. At the same time, we continued to benefit from cost-saving initiatives started when we became a part of UBS. Operating income Operating expensesUBS PaineWebber becameearly part of the year, political, economic and financial uncertainty adversely affected investor activity. Conditions, however, started to improve over the course of second quarter 2003 and continued to do so as the year progressed. The UBS followingIndex of Investor Optimism rose steadily in 2003, reaching its highest level in 21 months by December.merger between UBS and Paine Webber Group, Inc., which was completed on 3 November 2000. Atdepreciation of the merger, it becameUS dollar versus the Swiss franc.business unitpre-tax loss of UBS Warburg. On 1 January 2002, UBS PaineWebber becameCHF 5 million compared to a separate Business Group within UBS. The merger was accounted for using purchase accounting, soloss of CHF 1,800 million a year earlier. This change includes the results shown for UBS Paine-Webber for 2000 reflecteffects of write-down of the inclusionvalue of the PaineWebber businesses onlybrand in 2002 and the CSC disposal in 2003. After their exclusion and before acquisition costs, performance improved 5%.
68
the effects of currency translation, personnel expenses were actually slightly higher than in 2002, reflecting higher performance-related compensation due to an increase in revenue partially offset by lower retention payments. General and administrative expenses fell 22% from CHF 1,263 million in 2002 to CHF 988 million in 2003. Excluding the impact of currency fluctuations, general and administrative expenses dropped 10% compared to 2002 due to the strict cost management discipline that we have exerted in the past three years. Operational provisions also fell as 2002 included the equity research settlement charge of CHF 21 million. The drop was further accentuated by the sale of the CSC business. Depreciation increased CHF 2 million to CHF 151 million in 2003 from CHF 149 million in 2002. Excluding currency movements, the increase in depreciation of 16% was due to higher charges for broker workstations purchased in 2003. Goodwill and other intangible amortization decreased from CHF 1,691 million in 2002 to CHF 336 million in 2003. This decrease was due to the period from 3 November 2000 until 31 December 2000. Results for 2001prior-year writedown of the Paine-Webber brand name, and 2002 reflectthe sale of CSC. Excluding the writedown and the sale of CSC, amortization charges dropped by 26% as a full-year’s contribution.result of the weakening US dollar against the Swiss franc.
Headcount
Performance indicators
Key performance indicators
US dollar’s weakening against the Swiss franc. Excluding the impact of currency fluctuations, invested assets fell 8% during the year,full-year 2002, mainly due to US equity market declines, although that was partially offset by net new money inflows.
basis points in 2001. The gross margin on invested assets before acquisition costs (goodwill, net funding costs and retention payments) was 88 basis points, down from 90 basis points in 2001. Revenues declined more than invested assets due to lower customer activity levels. This was partially offset by higher revenues from our municipal securities business which had a record result in 2002. Goodwill funding lowered the 2002 margin by 6 basis points.cost/cost / income ratio increased from 111% in 2001 to 132% in 2002, reflecting the writedown of the PaineWebber brand in 2002, which accounted for 22.2 percentage points of the ratio. Excluding the effect of the writedown and before acquisition costs, was 89% for full-year 2002, compared to 90% in 2001. The improvement in the cost/cost / income ratio
68
is improved 1 percentage point from 2001 as a direct result of cost management initiatives implemented in 2002, among them reductions in non-financial advisor headcount, professional fees, advertising and office-related costs.
Acquisition costs which include the writedown accounted for 42.9 percentage points of the 2002 cost / income ratio.
69
Review of Business Group Performance
Wealth Management USA
offset by lower asset-based fees, which fell in line with the decline in asset levels.
We continue to invest in our distribution channels and advisory personnel. In 2002, the number of financial advisors rose by 139 from 8,718 to 8,857 with recruiting and retention success partially offset by higher attrition rates among less experienced and less productive financial advisors.
Results
In 2002, political, economic and financial uncertainty continued to adversely affect investor activity. The UBS Index of Investor Optimism dropped significantly during 2002, reached an all-timewith a low in October and only slightly recovered by the end of the year.October. Daily average client transaction volumes were 10% lower than in 2001.
69
Operating income
Operating expenses
franc, operating expenses declined 5% from 2001, reflecting lower performance-driven compensation and lower retention expenses. In addition, cost management initiatives implemented during the course of 2002, the transfer of the prime brokerage business to UBS Warburgthe Investment Bank and the closure of the Japanese domestic private client businesses helped to reduce overall expenses.
Depreciation increased CHF 25 million to CHF 149 million in 2002 from CHF 124 million in 2001. Excluding currency movements, the increase in depreciation of 32% was due to higher technology equipment charges. Goodwill and other intangible amortization droppedincreased from CHF 502 million in 2001 to CHF 4571,691 million in 20022002. This increase was entirely due to the writedown of the PaineWebber brand name. Excluding the writedown, amortization charges would have dropped as a result of the weakening US dollar against the Swiss franc.
Headcount
70
Japanese domestic private client business and transferred the prime brokerage business to UBS Warburg.the Investment Bank. At the same time, we expanded our financial advisor headcount by 139, reflecting our continued aim to extend the reach of our business.
Comparisons of full-year 2001 results to full-year 2000 reflect the very different scale of this Business Group prior to the acquisition of Paine-Webber in November 2000.
Key performance indicators
7071
Webber. UBS PaineWebber’s ability to continue to generate high levels of net new money despite the uncertain markets in 2001 reflects the strength of its client franchise amongst high net worth individuals in the US.
Results
Operating income
Operating expenses
Headcount
71
Corporate Center
Business Group reporting | ||||||||||||||||||||||||||||||||
Business Group Reporting | ||||||||||||||||||||||||||||||||
CHF million, except where indicated | % change from | % change from | ||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||||||||||||||
Income | 1,387 | 800 | 385 | 73 | 989 | 2,429 1 | 1,761 | (59 | ) | |||||||||||||||||||||||
Credit loss recovery1 | 249 | 236 | 1,161 | 6 | ||||||||||||||||||||||||||||
Credit loss (expense) / recovery 2 | 162 | 247 | 233 | (34 | ) | |||||||||||||||||||||||||||
Total operating income | 1,636 | 1,036 | 1,546 | 58 | 1,151 | 2,676 | 1,994 | (57 | ) | |||||||||||||||||||||||
Personnel expenses | 645 | 592 | 522 | 9 | 762 | 1,031 | 1,011 | (26 | ) | |||||||||||||||||||||||
General and administrative expenses | 601 | 537 | 754 | 12 | 445 | 733 | 723 | (39 | ) | |||||||||||||||||||||||
Depreciation | 473 | 372 | 320 | 27 | 473 | 513 | 428 | (8 | ) | |||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 24 | 24 | 43 | 0 | 101 | 122 | 123 | (17 | ) | |||||||||||||||||||||||
Total operating expenses | 1,743 | 1,525 | 1,639 | 14 | 1,781 | 2,399 | 2,285 | (26 | ) | |||||||||||||||||||||||
Business Group performance before tax | (107 | ) | (489 | ) | (93 | ) | (78 | ) | (630 | ) | 277 | (291 | ) | |||||||||||||||||||
Business Group performance before tax and goodwill2 | (83 | ) | (465 | ) | (50 | ) | (82 | ) | ||||||||||||||||||||||||
Private Banks & GAM | ||||||||||||||||||||||||||||||||
Performance before tax | 208 | 384 3 | 198 | (46 | ) | |||||||||||||||||||||||||||
Invested assets (CHF billion) | 84 | 70 | 86 | 20 | ||||||||||||||||||||||||||||
Net new money (CHF billion) 4 | 7.2 | 4.2 | 5.4 | |||||||||||||||||||||||||||||
Additional information | % change from | |||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||||||||||||||||||
Regulatory equity allocated (average) | 9,400 | 8,250 | 12,300 | 14 | ||||||||||||||||||||||||||||
Fair value of employee stock options granted | 32 | 3 | ||||||||||||||||||||||||||||||
Headcount (full-time equivalents) | 1,185 | 1,132 | 986 | 5 | 1,672 | 1,702 | 1,908 | (2 | ) | |||||||||||||||||||||||
Business Group reporting adjusted for Significant Financial Events | ||||||||||||||||||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||||||||||||||||||
Income | 1,315 | 4 | 800 | 385 | 64 | |||||||||||||||||||||||||||
Credit loss recovery1 | 249 | 236 | 1,161 | 6 | ||||||||||||||||||||||||||||
Total operating income | 1,564 | 1,036 | 1,546 | 51 | ||||||||||||||||||||||||||||
Personnel expenses | 645 | 592 | 490 | 5 | 9 | |||||||||||||||||||||||||||
General and administrative expenses | 601 | 537 | 604 | 5 | 12 | |||||||||||||||||||||||||||
Depreciation | 473 | 372 | 320 | 27 | ||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 24 | 24 | 43 | 0 | ||||||||||||||||||||||||||||
Total operating expenses | 1,743 | 1,525 | 1,457 | 14 | ||||||||||||||||||||||||||||
Business Group performance before tax | (179 | ) | (489 | ) | 89 | (63 | ) | |||||||||||||||||||||||||
Business Group performance before tax and goodwill2 | (155 | ) | (465 | ) | 132 | (67 | ) | |||||||||||||||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Regulatory equity allocated (average) | 9,150 | 10,250 | 9,300 | (11 | ) | |||||||||||
Fair value of employee stock options granted 5 | 18 | 37 | (51 | ) | ||||||||||||
Total headcount (full-time equivalents) | 2,878 | 2,887 | 3,040 | 0 | ||||||||||||
72
Significant financial events
Results |
Corporate Center recorded a pre-tax loss of CHF 179630 million in full-year 2003, down from the CHF 277 million profit reported a year earlier.
Operating income
Operating expenses
445 million from CHF 733 million. This was mainly due to lower legal provisions, the disposal of Klinik Hirslanden and lower project-related expenses, partially offset by higher branding costs. Depreciation dropped from CHF 513 million in 2002 to CHF 473 million in 2003. The decrease is mainly due to the absence of depreciation expenses from Klinik Hirslanden and lower depreciation in the Private Banks & GAM unit. At CHF 101 million in 2003, amortization of goodwill and other intangibles dropped by 17% from CHF 122 million in 2002, reflecting the drop of the US dollar against the Swiss franc.
Headcount
Private Banks & GAM
Headcount Private Banks & GAM
73
Review of Business Group Performance
Corporate Center
acquisition of Banque Notz Stucki S.A. as well as an increase in headcount at GAM due to the growth of the business.
Results
Corporate Center recorded a pre-tax gain of CHF 277 million in 2002, compared to the pre-taxpretax loss of CHF 489291 million in 2001.
Operating income
CHF 249247 million, compared to a credit loss recovery of CHF 236233 million in 2001.
Operating expenses
Headcount
Results
Corporate Center recorded a pre-tax loss of CHF 489 million in 2001, compared to a pre-tax profit of CHF 89 million in 2000, adjusted for significant financial events.
Operating income
73
Operating income decreased by CHF 510 million from 2000 to CHF 1,036 million in 2001, principally reflecting the swing in the credit loss results, offset by higher income from treasury activities.
Operating expenses
than in 2000. This was due to lower corporate real estate costs and lower professional fees connected to the US Global Settlement of World War II-related claims, offset by higher IT costs and one-off charges relating to the bankruptcy of SAir Group.
Headcount
74
75
76
77
UBS Group Financial StatementsTablePrivate Banks & GAM
Invested assets were CHF 70 billion on 31 December 2002, down from CHF 86 billion a year earlier, reflecting the drop in equity markets in 2002.
lion of Hyposwiss and after goodwill, the increase was CHF 31 million or 16%. On the same basis, operating income was down CHF 73 million due to generally weaker income as a result of unfavorable market conditions. On the other hand, expenses were CHF 104 million lower as a result of rigid cost control. The decline in revenues and expenses includes the divestment of Hyposwiss (two months of business in 2002).
Headcount Private Banks & GAM
75
Financial StatementsTable of Contents
Financial Statements | 80 | |||
UBS Group Income Statement | 80 | |||
UBS Group Balance Sheet | 81 | |||
UBS Group Statement of Changes in Equity | 82 | |||
UBS Group Statement of Cash Flows | 84 | |||
Notes to the Financial Statements | 86 | |||
1 | Summary of Significant Accounting Policies | 86 | ||
2a | Segment Reporting by Business Group | 96 | ||
2b | Segment Reporting by Geographic Location | 99 | ||
Income Statement | 100 | |||
3 | Net Interest and Trading Income | 100 | ||
4 | Net Fee and Commission Income | 101 | ||
5 | Other Income | 101 | ||
6 | Personnel Expenses | 102 | ||
7 | General and Administrative Expenses | 102 | ||
8 | Earnings per Share (EPS) and Shares Outstanding | 103 | ||
Balance Sheet: Assets | 104 | |||
9a | Due from Banks and Loans | 104 | ||
9b | Allowances and Provisions for Credit Losses | 105 | ||
9c | Impaired Loans | 105 | ||
9d | Non-Performing Loans | 106 | ||
10 | Securities Borrowing, Securities Lending, Repurchase and Reverse Repurchase Agreements | 107 | ||
11 | Trading Portfolio | 108 | ||
12 | Financial Investments | 109 | ||
13 | Investments in Associates | 110 | ||
14 | Property and Equipment | 111 | ||
15 | Goodwill and Other Intangible Assets | 111 | ||
16 | Other Assets | 113 | ||
Balance Sheet: Liabilities | 114 | |||
17 | Due to Banks and Customers | 114 | ||
18 | Debt Issued | 114 | ||
19 | Other Liabilities | 120 | ||
20 | Provisions | 120 | ||
21 | Income Taxes | 120 | ||
22 | Minority Interests | 122 | ||
23 | Derivative Instruments | 122 |
7876
Off-Balance Sheet Information | 127 | |||||||
24 | Fiduciary Transactions | 127 | ||||||
25 | Commitments and Contingent Liabilities | 127 | ||||||
26 | Operating Lease Commitments | 129 | ||||||
Additional Information | 130 | |||||||
27 | Pledged Assets | 130 | ||||||
28 | Litigation | 130 | ||||||
29 | Financial Instruments Risk Position | 130 | ||||||
a) | Market Risk | 131 | ||||||
(a)(i) | Overview | 131 | ||||||
(a)(ii) | Interest Rate Risk | 131 | ||||||
(a)(iii) | Currency Risk | 133 | ||||||
(a)(iv) | Equity Risk | 135 | ||||||
(a)(v) | Issuer Risk | 135 | ||||||
b) | Credit Risk | 135 | ||||||
c) | Liquidity Risk | 138 | ||||||
d) | Capital Adequacy | 139 | ||||||
30 | Fair Value of Financial Instruments | 141 | ||||||
31 | Retirement Benefit Plans and Other Employee Benefits | 143 | ||||||
32 | Equity Participation Plans | 147 | ||||||
a) | Equity Participation Plans Offered | 147 | ||||||
b) | UBS Share Awards | 148 | ||||||
c) | UBS Option Awards | 149 | ||||||
d) | Compensation Expense | 150 | ||||||
e) | Pro-Forma Net Income | 150 | ||||||
33 | Related Parties | 151 | ||||||
34 | Post-Balance Sheet Events | 153 | ||||||
35 | Significant Subsidiaries and Associates | 153 | ||||||
36 | Acquisition of Paine Webber Group, Inc. | 157 | ||||||
37 | Currency Translation Rates | 157 | ||||||
38 | Swiss Banking Law Requirements | 157 | ||||||
39 | Reconciliation to US GAAP | 160 | ||||||
40 | Additional Disclosures Required under US GAAP and SEC Rules | 172 | ||||||
Report of the Group Auditors | 177 |
79
UBS Group Financial StatementsFinancial Statements
Financial Statements
UBS Group Income Statement
CHF million, except per share data | % change from | |||||||||||||||||||
For the year ended | Note | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 3 | 39,963 | 52,277 | 51,745 | (24 | ) | ||||||||||||||
Interest expense | 3 | (29,417 | ) | (44,236 | ) | (43,615 | ) | (33 | ) | |||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 31 | ||||||||||||||||
Credit loss (expense)/recovery | (206 | ) | (498 | ) | 130 | (59 | ) | |||||||||||||
Net interest income after credit loss expense | 10,340 | 7,543 | 8,260 | 37 | ||||||||||||||||
Net fee and commission income | 4 | 18,221 | 20,211 | 16,703 | (10 | ) | ||||||||||||||
Net trading income | 3 | 5,572 | 8,802 | 9,953 | (37 | ) | ||||||||||||||
Other income | 5 | (12 | ) | 558 | 1,486 | |||||||||||||||
Total operating income | 34,121 | 37,114 | 36,402 | (8 | ) | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 6 | 18,524 | 19,828 | 17,163 | (7 | ) | ||||||||||||||
General and administrative expenses | 7 | 7,072 | 7,631 | 6,765 | (7 | ) | ||||||||||||||
Depreciation of property and equipment | 14 | 1,521 | 1,614 | 1,608 | (6 | ) | ||||||||||||||
Amortization of goodwill and other intangible assets | 15 | 2,460 | 1,323 | 667 | 86 | |||||||||||||||
Total operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | |||||||||||||||
Operating profit before tax and minority interests | 4,544 | 6,718 | 10,199 | (32 | ) | |||||||||||||||
Tax expense | 21 | 678 | 1,401 | 2,320 | (52 | ) | ||||||||||||||
Net profit before minority interests | 3,866 | 5,317 | 7,879 | (27 | ) | |||||||||||||||
Minority interests | 22 | (331 | ) | (344 | ) | (87 | ) | (4 | ) | |||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||||||
Basic earnings per share (CHF) | 8 | 2.92 | 3.93 | 6.44 | (26 | ) | ||||||||||||||
Basic earnings per share before goodwill (CHF)1 | 8 | 4.73 | 4.97 | 7.00 | (5 | ) | ||||||||||||||
Diluted earnings per share (CHF) | 8 | 2.87 | 3.78 | 6.35 | (24 | ) | ||||||||||||||
Diluted earnings per share before goodwill (CHF)1 | 8 | 4.65 | 4.81 | 6.89 | (3 | ) | ||||||||||||||
80
UBS Group Balance Sheet
% change from | ||||||||||||||||
CHF million | Note | 31.12.02 | 31.12.01 | 31.12.01 | ||||||||||||
Assets | ||||||||||||||||
Cash and balances with central banks | 4,271 | 20,990 | (80 | ) | ||||||||||||
Due from banks | 9 | 32,468 | 27,526 | 18 | ||||||||||||
Cash collateral on securities borrowed | 10 | 139,052 | 162,938 | (15 | ) | |||||||||||
Reverse repurchase agreements | 10 | 294,086 | 269,256 | 9 | ||||||||||||
Trading portfolio assets | 11 | 371,436 | 397,886 | (7 | ) | |||||||||||
Positive replacement values | 23 | 82,092 | 73,447 | 12 | ||||||||||||
Loans | 9 | 211,647 | 226,545 | (7 | ) | |||||||||||
Financial investments | 12 | 8,391 | 28,803 | (71 | ) | |||||||||||
Accrued income and prepaid expenses | 6,453 | 7,554 | (15 | ) | ||||||||||||
Investments in associates | 13 | 705 | 697 | 1 | ||||||||||||
Property and equipment | 14 | 7,869 | 8,695 | (9 | ) | |||||||||||
Goodwill and other intangible assets | 15 | 13,696 | 19,085 | (28 | ) | |||||||||||
Other assets | 16, 21 | 8,952 | 9,875 | (9 | ) | |||||||||||
Total assets | 1,181,118 | 1,253,297 | (6 | ) | ||||||||||||
Total subordinated assets1 | 3,652 | 2,732 | 34 | |||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 17 | 83,178 | 106,531 | (22 | ) | |||||||||||
Cash collateral on securities lent | 10 | 36,870 | 30,317 | 22 | ||||||||||||
Repurchase agreements | 10 | 366,858 | 368,620 | 0 | ||||||||||||
Trading portfolio liabilities | 11 | 106,453 | 105,798 | 1 | ||||||||||||
Negative replacement values | 23 | 81,282 | 71,443 | 14 | ||||||||||||
Due to customers | 17 | 306,876 | 333,781 | (8 | ) | |||||||||||
Accrued expenses and deferred income | 15,331 | 17,289 | (11 | ) | ||||||||||||
Debt issued | 18 | 129,411 | 156,218 | (17 | ) | |||||||||||
Other liabilities | 19, 20, 21 | 12,339 | 15,658 | (21 | ) | |||||||||||
Total liabilities | 1,138,598 | 1,205,655 | (6 | ) | ||||||||||||
Minority interests | 22 | 3,529 | 4,112 | (14 | ) | |||||||||||
Shareholders’ equity | ||||||||||||||||
Share capital | 1,005 | 3,589 | (72 | ) | ||||||||||||
Share premium account | 12,638 | 14,408 | (12 | ) | ||||||||||||
Net gains/(losses) not recognized in the income statement, net of tax | (159 | ) | (193 | ) | 18 | |||||||||||
Retained earnings | 32,638 | 29,103 | 12 | |||||||||||||
Treasury shares | (7,131 | ) | (3,377 | ) | (111 | ) | ||||||||||
Total shareholders’ equity | 38,991 | 43,530 | (10 | ) | ||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,181,118 | 1,253,297 | (6 | ) | ||||||||||||
Total subordinated liabilities | 10,102 | 13,818 | (27 | ) | ||||||||||||
81
Financial Statements
77
Financial Statements
Table of Contents
Financial Statements
Table of Contents
80
Financial Statements
Report of the Group Auditors
81
Financial Statements
Financial Statements
UBS Income Statement
CHF million, except per share data | % change from | |||||||||||||||||||
For the year ended | Note | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 3 | 40,159 | 39,963 | 52,277 | 0 | |||||||||||||||
Interest expense | 3 | (27,860 | ) | (29,417 | ) | (44,236 | ) | (5 | ) | |||||||||||
Net interest income | 12,299 | 10,546 | 8,041 | 17 | ||||||||||||||||
Credit loss (expense) / recovery | (116 | ) | (206 | ) | (498 | ) | (44 | ) | ||||||||||||
Net interest income after credit loss expense | 12,183 | 10,340 | 7,543 | 18 | ||||||||||||||||
Net fee and commission income | 4 | 17,345 | 18,221 | 20,211 | (5 | ) | ||||||||||||||
Net trading income | 3 | 3,883 | 5,572 | 8,802 | (30 | ) | ||||||||||||||
Other income | 5 | 561 | (12 | ) | 558 | |||||||||||||||
Total operating income | 33,972 | 34,121 | 37,114 | 0 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 6 | 17,231 | 18,524 | 19,828 | (7 | ) | ||||||||||||||
General and administrative expenses | 7 | 6,086 | 7,072 | 7,631 | (14 | ) | ||||||||||||||
Depreciation of property and equipment | 14 | 1,364 | 1,521 | 1,614 | (10 | ) | ||||||||||||||
Amortization of goodwill and other intangible assets | 15 | 943 | 2,460 | 1,323 | (62 | ) | ||||||||||||||
Total operating expenses | 25,624 | 29,577 | 30,396 | (13 | ) | |||||||||||||||
Operating profit before tax and minority interests | 8,348 | 4,544 | 6,718 | 84 | ||||||||||||||||
Tax expense | 21 | 1,618 | 678 | 1,401 | 139 | |||||||||||||||
Net profit before minority interests | 6,730 | 3,866 | 5,317 | 74 | ||||||||||||||||
Minority interests | 22 | (345 | ) | (331 | ) | (344 | ) | 4 | ||||||||||||
Net profit | 6,385 | 3,535 | 4,973 | 81 | ||||||||||||||||
Basic earnings per share (CHF) | 8 | 5.72 | 2.92 | 3.93 | 96 | |||||||||||||||
Diluted earnings per share (CHF) | 8 | 5.61 | 2.87 | 3.78 | 95 | |||||||||||||||
82
UBS Balance Sheet
% change from | ||||||||||||||||
CHF million | Note | 31.12.03 | 31.12.02 | 31.12.02 | ||||||||||||
Assets | ||||||||||||||||
Cash and balances with central banks | 3,584 | 4,271 | (16 | ) | ||||||||||||
Due from banks | 9 | 31,667 | 32,468 | (2 | ) | |||||||||||
Cash collateral on securities borrowed | 10 | 213,932 | 139,052 | 54 | ||||||||||||
Reverse repurchase agreements | 10 | 320,587 | 294,086 | 9 | ||||||||||||
Trading portfolio assets | 11 | 461,772 | 371,436 | 24 | ||||||||||||
Positive replacement values | 23 | 84,334 | 82,092 | 3 | ||||||||||||
Loans | 9 | 212,504 | 211,647 | 0 | ||||||||||||
Financial investments | 12 | 5,139 | 8,391 | (39 | ) | |||||||||||
Accrued income and prepaid expenses | 6,218 | 6,453 | (4 | ) | ||||||||||||
Investments in associates | 13 | 1,616 | 705 | 129 | ||||||||||||
Property and equipment | 14 | 7,659 | 7,869 | (3 | ) | |||||||||||
Goodwill and other intangible assets | 15 | 11,529 | 13,696 | (16 | ) | |||||||||||
Other assets | 16,21 | 25,459 | 8,952 | 184 | ||||||||||||
Total assets | 1,386,000 | 1,181,118 | 17 | |||||||||||||
Total subordinated assets | 4,794 | 3,652 | 31 | |||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 17 | 127,153 | 83,178 | 53 | ||||||||||||
Cash collateral on securities lent | 10 | 53,278 | 36,870 | 45 | ||||||||||||
Repurchase agreements | 10 | 415,863 | 366,858 | 13 | ||||||||||||
Trading portfolio liabilities | 11 | 143,957 | 106,453 | 35 | ||||||||||||
Negative replacement values | 23 | 93,646 | 81,282 | 15 | ||||||||||||
Due to customers | 17 | 347,358 | 306,876 | 13 | ||||||||||||
Accrued expenses and deferred income | 13,673 | 15,331 | (11 | ) | ||||||||||||
Debt issued | 18 | 120,237 | 129,411 | (7 | ) | |||||||||||
Other liabilities | 19,20,21 | 31,316 | 12,339 | 154 | ||||||||||||
Total liabilities | 1,346,481 | 1,138,598 | 18 | |||||||||||||
Minority interests | 22 | 4,073 | 3,529 | 15 | ||||||||||||
Shareholders’ equity | ||||||||||||||||
Share capital | 946 | 1,005 | (6 | ) | ||||||||||||
Share premium account | 6,938 | 12,638 | (45 | ) | ||||||||||||
Net gains / (losses) not recognized in the income statement, net of tax | (983 | ) | (159 | ) | (518 | ) | ||||||||||
Retained earnings | 36,725 | 32,638 | 13 | |||||||||||||
Treasury shares | (8,180 | ) | (7,131 | ) | (15 | ) | ||||||||||
Total shareholders’ equity | 35,446 | 38,991 | (9 | ) | ||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,386,000 | 1,181,118 | 17 | |||||||||||||
Total subordinated liabilities | 9,301 | 10,102 | (8 | ) | ||||||||||||
83
Financial Statements
1 | On 16 July 2001, UBS made a distribution to shareholders of CHF 1.60 per share, paid in the form of a reduction in the par value of its shares, from CHF 10.00 to CHF 8.40. At the same time, UBS split its share 3 for 1, resulting in a new par value of CHF 2.80 per share. On 10 July 2002, UBS made a distribution of CHF 2.00 per share to shareholders which reduced the par value from CHF 2.80 to CHF | |
2 | Included are gains and losses from match-funding of net investments in foreign entities as follows: CHF 93 million net gain for 2003, CHF 849 million net gain for 2002 and CHF 43 million net loss for 2001. | |
3 | Opening adjustments to reflect the adoption of IAS 39 (see Note 1: Summary of Significant Accounting Policies). | |
UBS Group Financial StatementsFinancial Statements
UBS Group Statement of Changes in Equity
CHF million | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Issued and paid up share capital | ||||||||||||||||||||||||
Balance at the beginning of the year | 3,589 | 4,444 | 4,309 | 1,005 | 3,589 | 4,444 | ||||||||||||||||||
Issue of share capital | 6 | 12 | 135 | 2 | 6 | 12 | ||||||||||||||||||
Capital repayment by par value reduction1 | (2,509 | ) | (683 | ) | (2,509 | ) | (683 | ) | ||||||||||||||||
Cancellation of second trading line treasury shares (2000 Program) | (184 | ) | (184 | ) | ||||||||||||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (81 | ) | (81 | ) | ||||||||||||||||||||
Cancellation of second trading line treasury shares (2002 Program) | (61 | ) | ||||||||||||||||||||||
Balance at the end of the year | 1,005 | 3,589 | 4,444 | 946 | 1,005 | 3,589 | ||||||||||||||||||
Share premium | ||||||||||||||||||||||||
Balance at the beginning of the year | 14,408 | 20,885 | 14,437 | 12,638 | 14,408 | 20,885 | ||||||||||||||||||
Premium on shares issued and warrants exercised | 157 | 80 | 139 | 92 | 157 | 80 | ||||||||||||||||||
Net premium/(discount) on treasury share and own equity derivative activity | 282 | (239 | ) | (391 | ) | |||||||||||||||||||
Share premium increase due to PaineWebber acquisition | 4,198 | |||||||||||||||||||||||
Borrow of own shares to be delivered | 5,895 | |||||||||||||||||||||||
Net premium / (discount) on treasury share and own equity derivative activity | (324 | ) | 282 | (239 | ) | |||||||||||||||||||
Settlement of own shares to be delivered | (2,502 | ) | (3,393 | ) | (2,502 | ) | ||||||||||||||||||
Cancellation of second trading line treasury shares (2000 Program) | (3,816 | ) | (3,816 | ) | ||||||||||||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (2,209 | ) | (2,209 | ) | ||||||||||||||||||||
Cancellation of second trading line treasury shares (2002 Program) | (5,468 | ) | ||||||||||||||||||||||
Balance at the end of the year | 12,638 | 14,408 | 20,885 | 6,938 | 12,638 | 14,408 | ||||||||||||||||||
Net gains/(losses) not recognized in the income statement, net of taxes | ||||||||||||||||||||||||
Net gains / (losses) not recognized in the income statement, net of taxes | Net gains / (losses) not recognized in the income statement, net of taxes | |||||||||||||||||||||||
Foreign currency translation | ||||||||||||||||||||||||
Balance at the beginning of the year | (769 | ) | (687 | ) | (442 | ) | (849 | ) | (769 | ) | (687 | ) | ||||||||||||
Movements during the year2 | (80 | ) | (82 | ) | (245 | ) | (795 | ) | (80 | ) | (82 | ) | ||||||||||||
Subtotal — balance at the end of the year | (849 | ) | (769 | ) | (687 | ) | ||||||||||||||||||
Subtotal – balance at the end of the year | (1,644 | ) | (849 | ) | (769 | ) | ||||||||||||||||||
Net unrealized gains/(losses) on available for sale investments, net of taxes | ||||||||||||||||||||||||
Net unrealized gains / (losses) on available-for-sale investments, net of taxes | Net unrealized gains / (losses) on available-for-sale investments, net of taxes | |||||||||||||||||||||||
Balance at the beginning of the year | 1,035 | 0 | 946 | 1,035 | 0 | |||||||||||||||||||
Change in accounting policy | 1,577 | 3 | 1,577 | 3 | ||||||||||||||||||||
Net unrealized gains/(losses) on available for sale investments | (144 | ) | (139 | ) | ||||||||||||||||||||
Net unrealized gains / (losses) on available-for-sale investments | (108 | ) | (144 | ) | (139 | ) | ||||||||||||||||||
Impairment charges reclassified to the income statement | 635 | 47 | 285 | 635 | 47 | |||||||||||||||||||
Gains reclassified to the income statement | (600 | ) | (461 | ) | (340 | ) | (600 | ) | (461 | ) | ||||||||||||||
Losses reclassified to the income statement | 20 | 11 | 22 | 20 | 11 | |||||||||||||||||||
Subtotal — balance at the end of the year | 946 | 1,035 | ||||||||||||||||||||||
Subtotal – balance at the end of the year | 805 | 946 | 1,035 | |||||||||||||||||||||
Change in fair value of derivative instruments designated as cash flow hedges, net of taxes | Change in fair value of derivative instruments designated as cash flow hedges, net of taxes | Change in fair value of derivative instruments designated as cash flow hedges, net of taxes | ||||||||||||||||||||||
Balance at the beginning of the year | (459 | ) | 0 | (256 | ) | (459 | ) | 0 | ||||||||||||||||
Change in accounting policy | (380 | )3 | (380) | 3 | ||||||||||||||||||||
Net unrealized gains/(losses) on the revaluation of cash flow hedges | (11 | ) | (316 | ) | ||||||||||||||||||||
Net (gains)/losses reclassified to the income statement | 214 | 237 | ||||||||||||||||||||||
Net unrealized gains / (losses) on the revaluation of cash flow hedges | 116 | (11 | ) | (316 | ) | |||||||||||||||||||
Net (gains) / losses reclassified to the income statement | (4 | ) | 214 | 237 | ||||||||||||||||||||
Subtotal — balance at the end of the year | (256 | ) | (459 | ) | ||||||||||||||||||||
Subtotal – balance at the end of the year | (144 | ) | (256 | ) | (459 | ) | ||||||||||||||||||
Balance at the end of the year | (159 | ) | (193 | ) | (687 | ) | (983 | ) | (159 | ) | (193 | ) | ||||||||||||
Retained earnings | ||||||||||||||||||||||||
Balance at the beginning of the year | 29,103 | 24,191 | 20,327 | 32,638 | 29,103 | 24,191 | ||||||||||||||||||
Change in accounting policy | (61 | )3 | (61) | 3 | ||||||||||||||||||||
Balance at the beginning of the year (restated) | 29,103 | 24,130 | 20,327 | 32,638 | 29,103 | 24,130 | ||||||||||||||||||
Net profit for the year | 3,535 | 4,973 | 7,792 | 6,385 | 3,535 | 4,973 | ||||||||||||||||||
Dividends paid1, 4 | (3,928 | ) | ||||||||||||||||||||||
Dividends paid 1 | (2,298 | ) | ||||||||||||||||||||||
Balance at the end of the year | 32,638 | 29,103 | 24,191 | 36,725 | 32,638 | 29,103 | ||||||||||||||||||
Treasury shares, at cost | ||||||||||||||||||||||||
Balance at the beginning of the year | (3,377 | ) | (4,000 | ) | (8,023 | ) | (7,131 | ) | (3,377 | ) | (4,000 | ) | ||||||||||||
Acquisitions | (8,313 | ) | (13,506 | ) | (16,330 | ) | (8,424 | ) | (8,313 | ) | (13,506 | ) | ||||||||||||
Disposals | 2,269 | 10,129 | 20,353 | 1,846 | 2,269 | 10,129 | ||||||||||||||||||
Cancellation of second trading line treasury shares (2000 Program) | 4,000 | 4,000 | ||||||||||||||||||||||
Cancellation of second trading line treasury shares (2001 Program) | 2,290 | 2,290 | ||||||||||||||||||||||
Cancellation of second trading line treasury shares (2002 Program) | 5,529 | |||||||||||||||||||||||
Balance at the end of the year | (7,131 | ) | (3,377 | ) | (4,000 | ) | (8,180 | ) | (7,131 | ) | (3,377 | ) | ||||||||||||
Total shareholders’ equity | 38,991 | 43,530 | 44,833 | 35,446 | 38,991 | 43,530 | ||||||||||||||||||
8284
UBS Group Statement of Changes in Equity (continued)
Shares issued
Number of shares | % change from | |||||||||||||||||||||||||||||||
Number of shares | % change from | |||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||||||||||||||
Balance at the beginning of the year | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | (4 | ) | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | (2 | ) | ||||||||||||||||||||||
Issue of share capital | 3,398,869 | 3,843,661 | 4,459,701 | (12 | ) | 2,719,166 | 3,398,869 | 3,843,661 | (20 | ) | ||||||||||||||||||||||
Issue of share capital due to PaineWebber acquisition | 36,000,000 | |||||||||||||||||||||||||||||||
Cancellation of second trading line treasury shares (2000 Program) | (55,265,349 | ) | (55,265,349 | ) | ||||||||||||||||||||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (28,818,690 | ) | (28,818,690 | ) | ||||||||||||||||||||||||||||
Cancellation of second trading line treasury shares (2002 Program) | (75,970,080 | ) | ||||||||||||||||||||||||||||||
Balance at the end of the year | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | (2 | ) | 1,183,046,764 | 1,256,297,678 | 1,281,717,499 | (6 | ) | ||||||||||||||||||||||
Treasury shares
Number of shares | % change from | |||||||||||||||||||||||||||||||
Number of shares | % change from | |||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||||||||||||||
Balance at the beginning of the year | 41,254,951 | 55,265,349 | 110,621,142 | (25 | ) | 97,181,094 | 41,254,951 | 55,265,349 | 136 | |||||||||||||||||||||||
Acquisitions | 110,710,741 | 162,818,045 | 257,121,477 | 1 | (32 | ) | 116,080,976 | 110,710,741 | 162,818,045 | 5 | ||||||||||||||||||||||
Disposals | (25,965,908 | ) | (121,563,094 | ) | (312,477,270 | )1 | (79 | ) | (25,931,298 | ) | (25,965,908 | ) | (121,563,094 | ) | 0 | |||||||||||||||||
Cancellation of second trading line treasury shares (2000 Program) | (55,265,349 | ) | (55,265,349 | ) | ||||||||||||||||||||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (28,818,690 | ) | (28,818,690 | ) | ||||||||||||||||||||||||||||
Cancellation of second trading line treasury shares (2002 Program) | (75,970,080 | ) | ||||||||||||||||||||||||||||||
Balance at the end of the year | 97,181,094 | 41,254,951 | 55,265,349 | 136 | 111,360,692 | 97,181,094 | 41,254,951 | 15 | ||||||||||||||||||||||||
During the year a total of 28,818,69075,970,080 shares acquired under the second trading line buyback program 20012002 were cancelled. At 31 December 2002,2003, a maximum of 9,590,9186,871,752 shares can be issued against the exercise of options from former PaineWebber employee option plans. These shares are shown as conditional share capital in the UBS AG (Parent Bank) disclosure. Out of the total number of 97,181,094111,360,692 treasury
shares, 74,035,08056,707,000 shares (CHF 5,4164,266 million) were acquired under the second trading line buyback program 20022003 and are earmarked for cancellation. The Board of Directors will propose to the Annual General Meeting on 1615 April 20032004 to reduce the issuedoutstanding number of shares and the share capital by the number of shares purchased for cancellation. All issued shares are fully paid.
8385
UBS Group Financial Statements
Financial Statements
UBS Group Statement of Cash Flows
CHF million | CHF million | ||||||||||||||||||||||||||||
For the year ended | For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||
Cash flow from/(used in) operating activities | |||||||||||||||||||||||||||||
Cash flow from / (used in) operating activities | |||||||||||||||||||||||||||||
Net profit | Net profit | 3,535 | 4,973 | 7,792 | 6,385 | 3,535 | 4,973 | ||||||||||||||||||||||
Adjustments to reconcile net profit to cash flow from/(used in) operating activities | |||||||||||||||||||||||||||||
Adjustments to reconcile net profit to cash flow from / (used in) operating activities | |||||||||||||||||||||||||||||
Non-cash items included in net profit and other adjustments: | Non-cash items included in net profit and other adjustments: | ||||||||||||||||||||||||||||
Depreciation of property and equipment | 1,521 | 1,614 | 1,608 | ||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 2,460 | 1,323 | 667 | ||||||||||||||||||||||||||
Credit loss expense/(recovery) | 206 | 498 | (130 | ) | |||||||||||||||||||||||||
Equity in income of associates | (7 | ) | (72 | ) | (58 | ) | |||||||||||||||||||||||
Deferred tax expense/(benefit) | (509 | ) | 292 | 544 | |||||||||||||||||||||||||
Net loss/(gain) from investing activities | 986 | 513 | (730 | ) | |||||||||||||||||||||||||
Net (increase)/decrease in operating assets: | |||||||||||||||||||||||||||||
Net due from/to banks | (22,382 | ) | 27,306 | (915 | ) | ||||||||||||||||||||||||
Reverse repurchase agreements and cash collateral on securities borrowed | (944 | ) | (60,536 | ) | (81,054 | ) | |||||||||||||||||||||||
Trading portfolio and net replacement values | 21,967 | (78,456 | ) | 11,553 | |||||||||||||||||||||||||
Loans/due to customers | (11,537 | ) | 42,813 | 12,381 | |||||||||||||||||||||||||
Accrued income, prepaid expenses and other assets | 2,875 | (424 | ) | 6,923 | |||||||||||||||||||||||||
Net increase/(decrease) in operating liabilities: | |||||||||||||||||||||||||||||
Repurchase agreements, cash collateral on securities lent | 4,791 | 80,006 | 50,762 | ||||||||||||||||||||||||||
Accrued expenses and other liabilities | (4,754 | ) | (5,235 | ) | 3,313 | ||||||||||||||||||||||||
Depreciation of property and equipment | 1,364 | 1,521 | 1,614 | ||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 943 | 2,460 | 1,323 | ||||||||||||||||||||||||||
Credit loss expense / (recovery) | 116 | 206 | 498 | ||||||||||||||||||||||||||
Equity in income of associates | (123 | ) | (7 | ) | (72 | ) | |||||||||||||||||||||||
Deferred tax expense / (benefit) | 514 | (509 | ) | 292 | |||||||||||||||||||||||||
Net loss / (gain) from investing activities | (63 | ) | 986 | 513 | |||||||||||||||||||||||||
Net (increase) / decrease in operating assets: | |||||||||||||||||||||||||||||
Net due from / to banks | 42,921 | (22,382 | ) | 27,306 | |||||||||||||||||||||||||
Reverse repurchase agreements and cash collateral on securities borrowed | (101,381 | ) | (944 | ) | (60,536 | ) | |||||||||||||||||||||||
Trading portfolio and net replacement values | (52,264 | ) | 21,967 | (78,456 | ) | ||||||||||||||||||||||||
Loans / due to customers | 38,594 | (11,537 | ) | 42,813 | |||||||||||||||||||||||||
Accrued income, prepaid expenses and other assets | (16,100 | ) | 2,875 | (424 | ) | ||||||||||||||||||||||||
Net increase / (decrease) in operating liabilities: | |||||||||||||||||||||||||||||
Repurchase agreements and cash collateral on securities lent | 65,413 | 4,791 | 80,006 | ||||||||||||||||||||||||||
Accrued expenses and other liabilities | 18,188 | (4,754 | ) | (5,235 | ) | ||||||||||||||||||||||||
Income taxes paid | Income taxes paid | (572 | ) | (1,742 | ) | (959 | ) | (1,104 | ) | (572 | ) | (1,742 | ) | ||||||||||||||||
Net cash flow from/(used in) operating activities | (2,364 | ) | 12,873 | 11,697 | |||||||||||||||||||||||||
Net cash flow from / (used in) operating activities | 3,403 | (2,364 | ) | 12,873 | |||||||||||||||||||||||||
Cash flow from/(used in) investing activities | |||||||||||||||||||||||||||||
Cash flow from / (used in) investing activities | |||||||||||||||||||||||||||||
Investments in subsidiaries and associates | Investments in subsidiaries and associates | (60 | ) | (467 | ) | (9,729 | ) | (428 | ) | (60 | ) | (467 | ) | ||||||||||||||||
Disposal of subsidiaries and associates | Disposal of subsidiaries and associates | 984 | 95 | 669 | 834 | 984 | 95 | ||||||||||||||||||||||
Purchase of property and equipment | Purchase of property and equipment | (1,763 | ) | (2,021 | ) | (1,640 | ) | (1,376 | ) | (1,763 | ) | (2,021 | ) | ||||||||||||||||
Disposal of property and equipment | Disposal of property and equipment | 67 | 380 | 335 | 123 | 67 | 380 | ||||||||||||||||||||||
Net (investment in)/divestment of financial investments | 2,153 | (5,770 | ) | (8,770 | ) | ||||||||||||||||||||||||
Net (investment in) / divestment of financial investments | 2,317 | 2,153 | (5,770 | ) | |||||||||||||||||||||||||
Net cash flow from/(used in) investing activities | 1,381 | (7,783 | ) | (19,135 | ) | ||||||||||||||||||||||||
Net cash flow from / (used in) investing activities | 1,470 | 1,381 | (7,783 | ) | |||||||||||||||||||||||||
Cash flow from/(used in) financing activities | |||||||||||||||||||||||||||||
Net money market paper issued/(repaid) | (26,206 | ) | 24,226 | 10,125 | |||||||||||||||||||||||||
Net movements in treasury shares and own equity derivative activity | (5,605 | ) | (6,038 | ) | (647 | ) | |||||||||||||||||||||||
Cash flow from / (used in) financing activities | |||||||||||||||||||||||||||||
Net money market paper issued / (repaid) | (14,737 | ) | (26,206 | ) | 24,226 | ||||||||||||||||||||||||
Net movements in treasury shares and treasury share contract activity | (6,810 | ) | (5,605 | ) | (6,038 | ) | |||||||||||||||||||||||
Capital issuance | Capital issuance | 6 | 12 | 15 | 2 | 6 | 12 | ||||||||||||||||||||||
Capital repayment by par value reduction | Capital repayment by par value reduction | (2,509 | ) | (683 | ) | 0 | (2,509 | ) | (683 | ) | |||||||||||||||||||
Dividends paid | Dividends paid | (3,928 | ) | (2,298 | ) | ||||||||||||||||||||||||
Issuance of long-term debt | Issuance of long-term debt | 17,132 | 18,233 | 14,884 | 23,644 | 17,132 | 18,233 | ||||||||||||||||||||||
Repayment of long-term debt | Repayment of long-term debt | (14,911 | ) | (18,477 | ) | (24,640 | ) | (13,615 | ) | (14,911 | ) | (18,477 | ) | ||||||||||||||||
Increase in minority interests | 0 | 1,291 | 2,683 | ||||||||||||||||||||||||||
Dividend payments to/and purchase from minority interests | (377 | ) | (461 | ) | (73 | ) | |||||||||||||||||||||||
Increase in minority interests1 | 755 | 0 | 1,291 | ||||||||||||||||||||||||||
Dividend payments to / and purchase from minority interests | (278 | ) | (377 | ) | (461 | ) | |||||||||||||||||||||||
Net cash flow from/(used in) financing activities | (32,470 | ) | 18,103 | (1,581 | ) | ||||||||||||||||||||||||
Net cash flow from / (used in) financing activities | (13,337 | ) | (32,470 | ) | 18,103 | ||||||||||||||||||||||||
Effects of exchange rate differences | Effects of exchange rate differences | (462 | ) | (304 | ) | 112 | (524 | ) | (462 | ) | (304 | ) | |||||||||||||||||
Net increase/(decrease) in cash equivalents | (33,915 | ) | 22,889 | (8,907 | ) | ||||||||||||||||||||||||
Net increase / (decrease) in cash and cash equivalents | (8,988 | ) | (33,915 | ) | 22,889 | ||||||||||||||||||||||||
Cash and cash equivalents, beginning of the year | Cash and cash equivalents, beginning of the year | 116,259 | 93,370 | 102,277 | 82,344 | 116,259 | 93,370 | ||||||||||||||||||||||
Cash and cash equivalents, end of the year | Cash and cash equivalents, end of the year | 82,344 | 116,259 | 93,370 | 73,356 | 82,344 | 116,259 | ||||||||||||||||||||||
Cash and cash equivalents comprise: | Cash and cash equivalents comprise: | ||||||||||||||||||||||||||||
Cash and balances with central banks | Cash and balances with central banks | 4,271 | 20,990 | 2,979 | 3,584 | 4,271 | 20,990 | ||||||||||||||||||||||
Money market paper1 | 46,183 | 69,938 | 66,454 | ||||||||||||||||||||||||||
Money market paper2 | 40,599 | 46,183 | 69,938 | ||||||||||||||||||||||||||
Due from banks maturing in less than three months | Due from banks maturing in less than three months | 31,890 | 25,331 | 23,937 | 29,173 | 31,890 | 25,331 | ||||||||||||||||||||||
Total | Total | 82,344 | 116,259 | 93,370 | 73,356 | 82,344 | 116,259 | ||||||||||||||||||||||
8486
UBS Group Statement of Cash Flows (continued)
Significant non-cash investing and financing activities
Significant non-cash investing and financing activities | |||||||||||||||||||||||||
CHF million | CHF million | ||||||||||||||||||||||||
For the year ended | For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Paine Webber Group, Inc. acquisition | |||||||||||||||||||||||||
Hyposwiss, Zurich, deconsolidation | |||||||||||||||||||||||||
Financial investments | 0 | 53 | 0 | ||||||||||||||||||||||
Property and equipment | 0 | 18 | 0 | ||||||||||||||||||||||
Debt issued | 0 | 63 | 0 | ||||||||||||||||||||||
Hirslanden Holding AG, Zurich, deconsolidation | |||||||||||||||||||||||||
Financial investments | 0 | 3 | 0 | ||||||||||||||||||||||
Property and equipment | 0 | 718 | 0 | ||||||||||||||||||||||
Goodwill and other intangible assets | 0 | 15 | 0 | ||||||||||||||||||||||
Consolidation of special purpose entities | |||||||||||||||||||||||||
Debt issued | 0 | 2,322 | 0 | ||||||||||||||||||||||
Provisions for reinstatement costs | |||||||||||||||||||||||||
Property and equipment | 137 | 0 | 0 | ||||||||||||||||||||||
Value of shares issued (121,741,710 shares issued) | 0 | 0 | 10,246 | ||||||||||||||||||||||
Value of options issued (18,975,810 options issued) | 0 | 0 | 992 | ||||||||||||||||||||||
Solothurner Bank SOBA, Solothurn, deconsolidation | |||||||||||||||||||||||||
Investments in associates | 0 | 0 | 1 | ||||||||||||||||||||||
Property and equipment | 0 | 0 | 77 | ||||||||||||||||||||||
Debt issued | 0 | 0 | 493 | ||||||||||||||||||||||
Hyposwiss, Zurich, deconsolidation | |||||||||||||||||||||||||
Financial investments | 53 | 0 | 0 | ||||||||||||||||||||||
Property and equipment | 18 | 0 | 0 | ||||||||||||||||||||||
Debt issued | 63 | 0 | 0 | ||||||||||||||||||||||
Hirslanden Holding AG, Zurich, deconsolidation | |||||||||||||||||||||||||
Financial investments | 3 | 0 | 0 | ||||||||||||||||||||||
Property and equipment | 718 | 0 | 0 | ||||||||||||||||||||||
Goodwill and other intangible assets | 15 | 0 | 0 | ||||||||||||||||||||||
Consolidation of special purpose entities | |||||||||||||||||||||||||
Debt issued | 2,322 | 0 | 0 | ||||||||||||||||||||||
8587
UBS Group Financial Statements
Notes to the Financial Statements
Notes to the Financial Statements
a) Basis of accounting
b) Use of estimates in the preparation of Financial Statements
c) Consolidation
and held with a view to their subsequent disposal, are recorded as Financial investments.
86
tiesentities meet the criteria for derecognition of financial assets. Derecognition of a financial asset takes place when the Group loses control of the contractual rights that comprise the financial asset.asset, which is normally the case when the asset is sold, or all the cash flows attributable to
88
the asset are passed through to an independent third party. These transactions do not affect the consolidation status of an entity.
d) Foreign currency translation
e) Business and geographical segmentsSegment reporting
f) Cash and cash equivalents
g) Fee income
h) Securities borrowing and lending
i) Repurchase and reverse repurchase transactions
87
UBS Group Financial StatementsNotes to the Financial Statements
89
Financial Statements
Notes to the Financial Statements
ized financing transactions and are carried attransactions. In reverse repurchase agreements, the amounts of cash advanced, orincluding accrued interest, is recognized on the balance sheet as Reverse repurchase agreements. In repurchase agreements, the cash received, plusincluding accrued interest.
j) Trading portfolio
arising from revaluing that contract to fair value.value in the income statement. Subsequent to the trade date, when the transaction is consummated (settlement date) a resulting financial asset or liability is recognized on the balance sheet at the fair value of the consideration given or received plus or minus the change in fair value of the contract since the trade date. When the Group becomes party to a sales contract of a financial asset classified in its trading portfolio, it derecognizes the asset on the day of its transfer.
k) Loans originated by the Group
8890
l) Allowance and provision for credit losses
result in a change in the allowance for credit losses and be charged or credited to credit loss expense.
m) Securitizations
91
Financial Statements
Notes to the Financial Statements
tions which may include credit losses, discount rates, yield curves and other factors.
89
UBS Group Financial StatementsNotes to the Financial Statements
n) Financial investments
reported in Other income. A financial investment is considered impaired if its cost exceeds the recoverable amount. For non-quoted equity investments, the recoverable amount is determined by applying recognized valuation techniques. The standard method applied is based on the multiple of earnings observed in the market for comparable companies. Management may adjust valuations determined in this way based on its judgement. For quoted financial investments, the recoverable amount is determined by reference to the market price. They are considered impaired if objective evidence indicates that the decline in market price has reached such a level that recovery of the cost value cannot be reasonably expected within the foreseeable future.
o) Property and equipment
92
90
Properties, excluding land | Not exceeding 50 years | |
Leasehold improvements | Residual lease term, but not exceeding 10 years | |
Other machines and equipment | Not exceeding 10 years | |
IT, software and communication | Not exceeding | |
bank-occupiedown-used or leased to third parties under an operating lease which the Group has decided to dispose of, and foreclosed property are defined as Properties held for resale and disclosedrecorded in Other assets. They are carried at the lower of cost or recoverable value.When theFor investment property carried at cost model is applied, IAS 40, Investment Property, requires the disclosure ofless accumulated depreciation, the investment property’s fair value (see Note 14) and details of how fair value is determined.determined are disclosed in Note 14. UBS employs internal real estate experts who determine the fair value of investment property by applying recognized valuation techniques. In cases where prices of recent market transactions of comparable objectsproperties are available, fair value is determined by reference to these transactions.
p) Goodwill and other intangible assets
nomic life, not exceeding 20 years. At each balance sheet date, goodwill and other intangible assets are reviewed for indications of impairment or changes in estimated future benefits. If such indications exist, an analysis is performed to assess whether the carrying amount of goodwill or other intangible assets is fully recoverable. A write-downwritedown is made if the carrying amount exceeds the recoverable amount.
q) Income taxes
r) Debt issued
93
Financial Statements
Notes to the Financial Statements
ment is at amortized cost, using the effective interest rate method to amortize cost at inception to the redemption value over the life of the debt.
91
UBS Group Financial StatementsNotes to the Financial Statements
s) Treasury shares
t) Retirement benefits
a) | 10% of present value of the defined benefit obligation at that date (before deducting plan assets); and | |
b) | 10% of the fair value of any plan assets at that date. | |
94
expected average remaining working lives of the employees participating in the plans.
u) Equity participation plans
92
v) Derivative instruments and hedging
arising from forecast transactions. The Group applies either fair value or cash flow hedge accounting when transactions meet the specified criteria to obtain hedge accounting treatment.
95
Financial Statements
Notes to the Financial Statements
hedged item, which is also recognized in net profit or loss. If the hedge relationship is terminated for reasons other than the derecognition of the hedged item, the difference between the carrying value of the hedged item at that point and the value at which it would have been carried had the hedge never existed (the “unamortized fair value adjustment”), is, in the case of interest bearing instruments, amortized to net profit or loss over the remaining term of the original hedge, while for non-interest bearing instruments that amount is immediately recognized in earnings. If the hedged instrument is derecognized, e.g. is sold or repaid, the unamortized fair value adjustment is recognized immediately in net profit and loss.
93
UBS Group Financial StatementsNotes to the Financial Statements
the issuance of certain structured debt instruments. If the host contract is not carried at fair value with changes in fair value reported in net profit or loss, the embedded derivative is separated from the host contract and accounted for as a stand-alone derivative instrument at fair value if, and only if: the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract and the embedded derivative actually meets the definition of a derivative.
w) Earnings per Share (EPS)
x) Comparability
IFRIC Interpretations
Segment Reporting
96
prior year amounts have been restated to conform to the current year presentation.
IAS 39, Recognition and Measurement of Financial Instruments
94
y) Recently issued International Financial Reporting Standards
9597
UBS Group Financial Statements
Notes to the Financial Statements
recognition related to guarantees, and the effect from restating prior periods is insignificant.
IASB Improvements Project
IFRS 2 Share-based Payment
98
ing for share-based payments. When share-based payments are made to employees, for example through awards of shares or share options, the fair value of these awards measured at the date of grant must be recognized as compensation expense. The new standard is effective for financial years beginning on or after 1 January 2005 and applies to equity-settled awards granted after 7 November 2002 that have not vested at 1 January 2005 and to liabilities arising from share-based awards that exist at the effective date. Comparative prior periods need to be restated and the opening balance of retained earnings at 1 January 2003 has to be adjusted. UBS discloses the compensation expense attributable to share-based awards in Note 32, but the amounts disclosed are based on the requirements under US generally accepted accounting principles, which may differ from IFRS 2. UBS is currently evaluating the impact the new standard will have on its financial statements.
z) Accounting changes effective in 2004
– | to credit (increase) retained earnings as of 1 January 2002 by CHF 202 million, net of |
taxes of CHF 64 million, for the then existing difference between book value and fair value of the investment property portfolio; | ||
– | to reduce net profit for 2003 by CHF 64 million; and | |
– | to reduce net profit for 2002 by CHF 117 million. |
Credit risk losses incurred on OTC derivatives
Change in treatment of corporate client assets
99
Financial Statements
Notes to the Financial Statements
Based on our integrated business model, UBS is organized into the four Business Groups: UBS Wealth Management & Business Banking, UBS Global Asset Management, UBS WarburgInvestment Bank and UBS PaineWebber,Wealth Management USA, and our Corporate Center.
UBS
Business Banking and Global Asset Management into a separate new holding company held by the Corporate Center. While this restructuring had no impact on the UBS Financial Statements, we have restated all prior periods for all Business Groups affected to reflect these changes.
Wealth Management & Business Banking
UBS Global Asset Management
UBS WarburgInvestment Bank
plete access to the world’s capital markets for intermediaries, governments, corporate and institutional clients and other parts of UBS.
UBS PaineWebberWealth Management USA
Corporate Center
Credit Loss Expense
96100
Business Group performance based on an adjusted measure of credit loss which varies with the current portfolio composition and recent loss experience. b) Expected Credit Loss c) Computation of Adjusted Expected Credit Loss– the probability that the counterparty will default — referred to as probability of default (PD), i.e. the likelihood that a counterparty (or obligor) will not be able to meet its obligations. UBS rates counterparties to determine a counterparty specific PD by means of rating tools tailored to customer segments. Clients are segmented into 15 rating classes. We have assigned to each rating class a fixed probability of default except for the two lowest categories which are used to classify clients where a loss event has already occured due to default and impairment. – the current and likely future exposure should default occur, known as Exposure at Default (EAD): this is the amount of exposure to the obligor – the value of the transaction – which we expect to be outstanding at the time when default occurs. – the likely severity of the loss should default occur, typically described as Loss Given Default (LGD), expressed as a rate per unit of exposure. LGDs are typically differentiated by type of counterparty, claim and seniority, taking into account any available collateral.
101
Financial Statements
Notes to the Financial Statements
Note 2a Segment Reporting by Business Group (continued)
The Business Group results are presented on a management reporting basis. Internal charges and transfer pricing adjustments are reflected in the performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a Business Group on a reasonable basis. Transactions between Business Groups are conducted at arm’s length.
For the year ended 31 December 2003
Wealth | Wealth | |||||||||||||||||||||||
Management & | Global Asset | Investment | Management | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||
Income1 | 12,052 | 1,737 | 14,120 | 5,190 | 989 | 34,088 | ||||||||||||||||||
Credit loss (expense) / recovery | (75 | ) | 0 | (40 | ) | (3 | ) | 2 | (116 | ) | ||||||||||||||
Total operating income | 11,977 | 1,737 | 14,080 | 5,187 | 991 | 33,972 | ||||||||||||||||||
Personnel expenses | 4,584 | 816 | 7,357 | 3,712 | 762 | 17,231 | ||||||||||||||||||
General and administrative expenses | 2,116 | 407 | 2,130 | 988 | 445 | 6,086 | ||||||||||||||||||
Depreciation | 384 | 29 | 327 | 151 | 473 | 1,364 | ||||||||||||||||||
Amortization of goodwill and other intangible assets2 | 75 | 153 | 278 | 336 | 101 | 943 | ||||||||||||||||||
Total operating expenses | 7,159 | 1,405 | 10,092 | 5,187 | 1,781 | 25,624 | ||||||||||||||||||
Business Group contribution before tax | 4,818 | 332 | 3,988 | 0 | (790 | ) | 8,348 | |||||||||||||||||
Tax expense | 1,618 | |||||||||||||||||||||||
Net profit before minority interests | 6,730 | |||||||||||||||||||||||
Minority interests | (345 | ) | ||||||||||||||||||||||
Net profit | 6,385 | |||||||||||||||||||||||
Additional information3 | ||||||||||||||||||||||||
Total assets | 312,520 | 21,928 | 1,151,750 | 46,837 | (147,035 | ) | 1,386,000 | |||||||||||||||||
Total liabilities and minority interests | 303,382 | 20,917 | 1,138,133 | 41,732 | (153,610 | ) | 1,350,554 | |||||||||||||||||
Capital expenditure | 436 | 17 | 424 | 68 | 436 | 1,381 | ||||||||||||||||||
For internal management reporting purposes we measure credit loss expense using an expected loss concept. The segment reporting for all periodstable below shows Business Group performance consistent with the way in which our businesses are managed and the way Business Group performance is measured. Expected credit loss reflects the changesaverage annual costs that are expected to arise from positions in the structure implemented during 2002. Priorcurrent portfolio that become impaired in the future. The Adjusted expected credit loss reported for each Business Group is the Expected credit loss on its portfolio, plus the difference between Credit loss expense and Expected credit loss, amortized over a three year amounts have been restated to conform to currentperiod. The difference between these Adjusted expected credit loss figures and the Credit loss expense recorded at Group level for financial reporting purposes is reported in the Corporate Center.
Wealth | Wealth | |||||||||||||||||||||||
Management & | Global Asset | Investment | Management | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||
Income1 | 12,052 | 1,737 | 14,120 | 5,190 | 989 | 34,088 | ||||||||||||||||||
Expected credit loss | (542 | ) | 0 | (94 | ) | (8 | ) | 528 | (116 | ) | ||||||||||||||
Deferral | 411 | 0 | (45 | ) | 0 | (366 | ) | 0 | ||||||||||||||||
Adjusted expected credit loss | (131 | ) | 0 | (139 | ) | (8 | ) | 162 | (116 | ) | ||||||||||||||
Total operating income | 11,921 | 1,737 | 13,981 | 5,182 | 1,151 | 33,972 | ||||||||||||||||||
Personnel expenses | 4,584 | 816 | 7,357 | 3,712 | 762 | 17,231 | ||||||||||||||||||
General and administrative expenses | 2,116 | 407 | 2,130 | 988 | 445 | 6,086 | ||||||||||||||||||
Depreciation | 384 | 29 | 327 | 151 | 473 | 1,364 | ||||||||||||||||||
Amortization of goodwill and other intangible assets2 | 75 | 153 | 278 | 336 | 101 | 943 | ||||||||||||||||||
Total operating expenses | 7,159 | 1,405 | 10,092 | 5,187 | 1,781 | 25,624 | ||||||||||||||||||
Business Group performance before tax | 4,762 | 332 | 3,889 | (5 | ) | (630 | ) | 8,348 | ||||||||||||||||
Tax expense | 1,618 | |||||||||||||||||||||||
Net profit before minority interests | 6,730 | |||||||||||||||||||||||
Minority interests | (345 | ) | ||||||||||||||||||||||
Net profit | 6,385 | |||||||||||||||||||||||
102
For the year ended 31 December 2002
UBS Wealth | UBS | Wealth | Wealth | |||||||||||||||||||||||||||||||||||||||||||||
Management & | Global Asset | UBS | UBS | Corporate | Management & | Global Asset | Investment | Management | Corporate | |||||||||||||||||||||||||||||||||||||||
CHF million | Business Banking | Management | Warburg | PaineWebber | Center | UBS Group | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||||||||||||||||||||
Income1 | 12,928 | 1,953 | 12,498 | 5,561 | 1,387 | 34,327 | 12,184 | 1,655 | 12,498 | 5,561 | 2,429 | 34,327 | ||||||||||||||||||||||||||||||||||||
Credit loss expense2 | (314 | ) | 0 | (128 | ) | (13 | ) | 249 | (206 | ) | ||||||||||||||||||||||||||||||||||||||
Credit loss (expense) / recovery | (238 | ) | 0 | 35 | (15 | ) | 12 | (206 | ) | |||||||||||||||||||||||||||||||||||||||
Total operating income | 12,614 | 1,953 | 12,370 | 5,548 | 1,636 | 34,121 | 11,946 | 1,655 | 12,533 | 5,546 | 2,441 | 34,121 | ||||||||||||||||||||||||||||||||||||
Personnel expenses | 4,810 | 946 | 7,878 | 4,245 | 645 | 18,524 | 4,596 | 774 | 7,878 | 4,245 | 1,031 | 18,524 | ||||||||||||||||||||||||||||||||||||
General and administrative expenses | 2,317 | 513 | 2,378 | 1,263 | 601 | 7,072 | 2,251 | 447 | 2,378 | 1,263 | 733 | 7,072 | ||||||||||||||||||||||||||||||||||||
Depreciation | 480 | 37 | 382 | 149 | 473 | 1,521 | 448 | 29 | 382 | 149 | 513 | 1,521 | ||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets3 | 111 | 270 | 364 | 1,691 | 24 | 2,460 | ||||||||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets2 | 97 | 186 | 364 | 1,691 | 122 | 2,460 | ||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 7,718 | 1,766 | 11,002 | 7,348 | 1,743 | 29,577 | 7,392 | 1,436 | 11,002 | 7,348 | 2,399 | 29,577 | ||||||||||||||||||||||||||||||||||||
Business Group performance before tax | 4,896 | 187 | 1,368 | (1,800 | ) | (107 | ) | 4,544 | ||||||||||||||||||||||||||||||||||||||||
Business Group contribution before tax | 4,554 | 219 | 1,531 | (1,802 | ) | 42 | 4,544 | |||||||||||||||||||||||||||||||||||||||||
Tax expense | 678 | 678 | ||||||||||||||||||||||||||||||||||||||||||||||
Net profit before minority interests | 3,866 | 3,866 | ||||||||||||||||||||||||||||||||||||||||||||||
Minority interests | (331 | ) | (331 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net profit | 3,535 | 3,535 | ||||||||||||||||||||||||||||||||||||||||||||||
Other information as at 31 December 20024 | ||||||||||||||||||||||||||||||||||||||||||||||||
Additional information3 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 310,722 | 4,428 | 933,962 | 39,610 | (107,604 | ) | 1,181,118 | 310,722 | 4,428 | 933,962 | 39,610 | (107,604 | ) | 1,181,118 | ||||||||||||||||||||||||||||||||||
Total liabilities and minority interests | 302,272 | 2,937 | 921,446 | 33,225 | (117,753 | ) | 1,142,127 | 302,272 | 2,937 | 921,446 | 33,225 | (117,753 | ) | 1,142,127 | ||||||||||||||||||||||||||||||||||
Capital expenditure | 380 | 20 | 473 | 185 | 705 | 1,763 | 380 | 20 | 473 | 185 | 705 | 1,763 | ||||||||||||||||||||||||||||||||||||
For internal management reporting purposes we measure credit loss expense using an expected loss concept. The table below shows Business Group performance consistent with the way in which our businesses are managed and the way Business Group performance is measured. Expected credit loss reflects the average annual costs that are expected to arise from positions in the current portfolio that become impaired in the future. The Adjusted expected credit loss reported for each Business Group is the Expected credit loss on its portfolio, plus the difference between Credit loss expense and Expected credit loss, amortized over a three year period. The difference between these Adjusted expected credit loss figures and the Credit loss expense recorded at Group level for financial reporting purposes is reported in the Corporate Center.
Wealth | Wealth | |||||||||||||||||||||||
Management & | Global Asset | Investment | Management | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||
Income1 | 12,184 | 1,655 | 12,498 | 5,561 | 2,429 | 34,327 | ||||||||||||||||||
Expected credit loss | (567 | ) | 0 | (126 | ) | (13 | ) | 500 | (206 | ) | ||||||||||||||
Deferral | 255 | 0 | (2 | ) | 0 | (253 | ) | 0 | ||||||||||||||||
Adjusted expected credit loss | (312 | ) | 0 | (128 | ) | (13 | ) | 247 | (206 | ) | ||||||||||||||
Total operating income | 11,872 | 1,655 | 12,370 | 5,548 | 2,676 | 34,121 | ||||||||||||||||||
Personnel expenses | 4,596 | 774 | 7,878 | 4,245 | 1,031 | 18,524 | ||||||||||||||||||
General and administrative expenses | 2,251 | 447 | 2,378 | 1,263 | 733 | 7,072 | ||||||||||||||||||
Depreciation | 448 | 29 | 382 | 149 | 513 | 1,521 | ||||||||||||||||||
Amortization of goodwill and other intangible assets2 | 97 | 186 | 364 | 1,691 | 122 | 2,460 | ||||||||||||||||||
Total operating expenses | 7,392 | 1,436 | 11,002 | 7,348 | 2,399 | 29,577 | ||||||||||||||||||
Business Group performance before tax | 4,480 | 219 | 1,368 | (1,800 | ) | 277 | 4,544 | |||||||||||||||||
Tax expense | 678 | |||||||||||||||||||||||
Net profit before minority interests | 3,866 | |||||||||||||||||||||||
Minority interests | (331 | ) | ||||||||||||||||||||||
Net profit | 3,535 | |||||||||||||||||||||||
97103
UBS Group Financial Statements
Notes to the Financial Statements
For the year ended 31 December 2001
UBS Wealth | UBS | Wealth | Wealth | |||||||||||||||||||||||||||||||||||||||||||||
Management & | Global Asset | UBS | UBS | Corporate | Management & | Global Asset | Investment | Management | Corporate | |||||||||||||||||||||||||||||||||||||||
CHF million | Business Banking | Management | Warburg | PaineWebber | Center | UBS Group | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||||||||||||||||||||
Income1 | 13,488 | 2,218 | 14,715 | 6,391 | 800 | 37,612 | 12,782 | 1,963 | 14,715 | 6,391 | 1,761 | 37,612 | ||||||||||||||||||||||||||||||||||||
Credit loss expense2 | (604 | ) | 0 | (112 | ) | (18 | ) | 236 | (498 | ) | ||||||||||||||||||||||||||||||||||||||
Credit loss (expense) / recovery | (124 | ) | 0 | (360 | ) | (15 | ) | 1 | (498 | ) | ||||||||||||||||||||||||||||||||||||||
Total operating income | 12,884 | 2,218 | 14,603 | 6,373 | 1,036 | 37,114 | 12,658 | 1,963 | 14,355 | 6,376 | 1,762 | 37,114 | ||||||||||||||||||||||||||||||||||||
Personnel expenses | 4,825 | 1,038 | 8,354 | 5,019 | 592 | 19,828 | 4,558 | 886 | 8,354 | 5,019 | 1,011 | 19,828 | ||||||||||||||||||||||||||||||||||||
General and administrative expenses | 2,434 | 569 | 2,650 | 1,441 | 537 | 7,631 | 2,319 | 498 | 2,650 | 1,441 | 723 | 7,631 | ||||||||||||||||||||||||||||||||||||
Depreciation | 616 | 46 | 456 | 124 | 372 | 1,614 | 568 | 38 | 456 | 124 | 428 | 1,614 | ||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 109 | 286 | 402 | 502 | 24 | 1,323 | ||||||||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets2 | 100 | 196 | 402 | 502 | 123 | 1,323 | ||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 7,984 | 1,939 | 11,862 | 7,086 | 1,525 | 30,396 | 7,545 | 1,618 | 11,862 | 7,086 | 2,285 | 30,396 | ||||||||||||||||||||||||||||||||||||
Business Group performance before tax | 4,900 | 279 | 2,741 | (713 | ) | (489 | ) | 6,718 | ||||||||||||||||||||||||||||||||||||||||
Business Group contribution before tax | 5,113 | 345 | 2,493 | (710 | ) | (523 | ) | 6,718 | ||||||||||||||||||||||||||||||||||||||||
Tax expense | 1,401 | 1,401 | ||||||||||||||||||||||||||||||||||||||||||||||
Net profit before minority interests | 5,317 | 5,317 | ||||||||||||||||||||||||||||||||||||||||||||||
Minority interests | (344 | ) | (344 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net profit | 4,973 | 4,973 | ||||||||||||||||||||||||||||||||||||||||||||||
Other information as at 31 December 20013 | ||||||||||||||||||||||||||||||||||||||||||||||||
Additional information3 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 313,800 | 6,335 | 1,005,397 | 39,747 | (111,982 | ) | 1,253,297 | 313,800 | 6,335 | 1,005,397 | 39,747 | (111,982 | ) | 1,253,297 | ||||||||||||||||||||||||||||||||||
Total liabilities and minority interests | 304,988 | 4,367 | 992,272 | 31,556 | (123,416 | ) | 1,209,767 | 304,988 | 4,367 | 992,272 | 31,556 | (123,416 | ) | 1,209,767 | ||||||||||||||||||||||||||||||||||
Capital expenditure | 540 | 37 | 337 | 296 | 811 | 2,021 | 540 | 37 | 337 | 296 | 811 | 2,021 | ||||||||||||||||||||||||||||||||||||
For internal management reporting purposes we measure credit loss expense using an expected loss concept. The table below shows Business Group performance consistent with the way in which our businesses are managed and the way Business Group performance is measured. Expected credit loss reflects the average annual costs that are expected to arise from positions in the current portfolio that become impaired in the future. The Adjusted expected credit loss reported for each Business Group is the Expected credit loss on its portfolio, plus the difference between credit loss expense and Expected credit loss, amortized over a three year period. The difference between these Adjusted expected credit loss figures and the Credit loss expense recorded at Group level for financial reporting purposes is reported in the Corporate Center.
Wealth | Wealth | |||||||||||||||||||||||
Management & | Global Asset | Investment | Management | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||
Income1 | 12,782 | 1,963 | 14,715 | 6,391 | 1,761 | 37,612 | ||||||||||||||||||
Expected credit loss | (719 | ) | 0 | (150 | ) | (18 | ) | 389 | (498 | ) | ||||||||||||||
Deferral | 118 | 0 | 38 | 0 | (156 | ) | 0 | |||||||||||||||||
Adjusted expected credit loss | (601 | ) | 0 | (112 | ) | (18 | ) | 233 | (498 | ) | ||||||||||||||
Total operating income | 12,181 | 1,963 | 14,603 | 6,373 | 1,994 | 37,114 | ||||||||||||||||||
Personnel expenses | 4,558 | 886 | 8,354 | 5,019 | 1,011 | 19,828 | ||||||||||||||||||
General and administrative expenses | 2,319 | 498 | 2,650 | 1,441 | 723 | 7,631 | ||||||||||||||||||
Depreciation | 568 | 38 | 456 | 124 | 428 | 1,614 | ||||||||||||||||||
Amortization of goodwill and other intangible assets2 | 100 | 196 | 402 | 502 | 123 | 1,323 | ||||||||||||||||||
Total operating expenses | 7,545 | 1,618 | 11,862 | 7,086 | 2,285 | 30,396 | ||||||||||||||||||
Business Group performance before tax | 4,636 | 345 | 2,741 | (713 | ) | (291 | ) | 6,718 | ||||||||||||||||
Tax expense | 1,401 | |||||||||||||||||||||||
Net profit before minority interests | 5,317 | |||||||||||||||||||||||
Minority interests | (344 | ) | ||||||||||||||||||||||
Net profit | 4,973 | |||||||||||||||||||||||
For the year ended 31 December 2000
UBS Wealth | UBS | |||||||||||||||||||||||
Management & | Global Asset | UBS | UBS | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Warburg | PaineWebber | Center | UBS Group | ||||||||||||||||||
Income1 | 14,355 | 2,078 | 18,240 | 1,214 | 385 | 36,272 | ||||||||||||||||||
Credit loss expense/recovery2 | (785 | ) | 0 | (243 | ) | (3 | ) | 1,161 | 130 | |||||||||||||||
Total operating income | 13,570 | 2,078 | 17,997 | 1,211 | 1,546 | 36,402 | ||||||||||||||||||
Personnel expenses | 5,151 | 941 | 9,451 | 1,098 | 522 | 17,163 | ||||||||||||||||||
General and administrative expenses | 2,478 | 434 | 2,755 | 344 | 754 | 6,765 | ||||||||||||||||||
Depreciation | 633 | 49 | 564 | 42 | 320 | 1,608 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 81 | 267 | 192 | 84 | 43 | 667 | ||||||||||||||||||
Total operating expenses | 8,343 | 1,691 | 12,962 | 1,568 | 1,639 | 26,203 | ||||||||||||||||||
Business Group performance before tax | 5,227 | 387 | 5,035 | (357 | ) | (93 | ) | 10,199 | ||||||||||||||||
Tax expense | 2,320 | |||||||||||||||||||||||
Net profit before minority interests | 7,879 | |||||||||||||||||||||||
Minority interests | (87 | ) | ||||||||||||||||||||||
Net profit | 7,792 | |||||||||||||||||||||||
Other information as at 31 December 20003 | ||||||||||||||||||||||||
Total assets | 281,984 | 7,558 | 817,264 | 50,691 | (69,945 | ) | 1,087,552 | |||||||||||||||||
Total liabilities and minority interests | 272,173 | 5,787 | 803,159 | 41,826 | (80,226 | ) | 1,042,719 | |||||||||||||||||
98104
The geographic analysis of total assets is based on customer domicile whereas operating income and capital expenditure is based on the location of the office in which the transactions and assets are recorded. Because of the global nature of financial markets the Group’s business is managed on an integrated basis worldwide, with a view to profitability by product line. The geographicalgeo-
graphic analysis of operating income, total assets, and capital expenditure is provided in order to comply with IFRS, and does not reflect the way the Group is managed. Management believes that analysis by Business Group, as shown in Note 2a to these Financial Statements, is a more meaningful representation of the way in which the Group is managed.
For the year ended 31 December 2003 For the year ended 31 December 2002 Total operating income Total assets Capital expenditure CHF million Share % CHF million Share % CHF million Share % Switzerland 13,278 39 180,629 13 689 50 Rest of Europe / Africa / Middle East 6,057 18 430,901 31 247 18 Americas 12,923 38 688,762 50 411 30 Asia Pacific 1,714 5 85,708 6 34 2 33,972 100 1,386,000 100 1,381 100 Total operating income Total assets Capital expenditure Total operating income Total assets Capital expenditure CHF million Share % CHF million Share % CHF million Share % CHF million Share % CHF million Share % CHF million Share % Switzerland 14,307 42 174,878 15 885 51 14,307 42 174,878 15 885 51 Rest of Europe 6,837 20 256,110 22 199 11 Rest of Europe / Africa / Middle East 6,850 20 258,147 22 199 11 Americas 11,055 32 669,823 56 635 36 11,055 32 669,823 56 635 36 Asia/Pacific 1,909 6 78,270 7 44 2 Africa/Middle East 13 0 2,037 0 0 0 Asia Pacific 1,909 6 78,270 7 44 2 34,121 100 1,181,118 100 1,763 100 34,121 100 1,181,118 100 1,763 100
For the year ended 31 December 2001
Total operating income | Total assets | Capital expenditure | ||||||||||||||||||||||
CHF million | Share % | CHF million | Share % | CHF million | Share % | |||||||||||||||||||
Switzerland | 14,223 | 38 | 195,321 | 16 | 1,039 | 52 | ||||||||||||||||||
Rest of Europe | 7,411 | 20 | 236,775 | 19 | 303 | 15 | ||||||||||||||||||
Americas | 13,587 | 37 | 691,157 | 55 | 630 | 31 | ||||||||||||||||||
Asia/Pacific | 1,859 | 5 | 126,725 | 10 | 48 | 2 | ||||||||||||||||||
Africa/Middle East | 34 | 0 | 3,319 | 0 | 1 | 0 | ||||||||||||||||||
Total | 37,114 | 100 | 1,253,297 | 100 | 2,021 | 100 | ||||||||||||||||||
For the year ended 31 December 2000
Total operating income | Total assets | Capital expenditure | ||||||||||||||||||||||||||||||||||||||||||||||
Total operating income | Total assets | Capital expenditure | ||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Share % | CHF million | Share % | CHF million | Share % | CHF million | Share % | CHF million | Share % | CHF million | Share % | |||||||||||||||||||||||||||||||||||||
Switzerland | 15,836 | 44 | 211,851 | 19 | 1,135 | 43 | 14,223 | 38 | 195,321 | 16 | 1,039 | 52 | ||||||||||||||||||||||||||||||||||||
Rest of Europe | 10,907 | 30 | 305,342 | 28 | 311 | 12 | ||||||||||||||||||||||||||||||||||||||||||
Rest of Europe / Africa / Middle East | 7,445 | 20 | 240,094 | 19 | 304 | 15 | ||||||||||||||||||||||||||||||||||||||||||
Americas | 6,976 | 19 | 474,617 | 44 | 1,169 | 44 | 13,587 | 37 | 691,157 | 55 | 630 | 31 | ||||||||||||||||||||||||||||||||||||
Asia/Pacific | 2,626 | 7 | 87,831 | 8 | 36 | 1 | ||||||||||||||||||||||||||||||||||||||||||
Africa/Middle East | 57 | 0 | 7,911 | 1 | 8 | 0 | ||||||||||||||||||||||||||||||||||||||||||
Asia Pacific | 1,859 | 5 | 126,725 | 10 | 48 | 2 | ||||||||||||||||||||||||||||||||||||||||||
Total | 36,402 | 100 | 1,087,552 | 100 | 2,659 | 100 | 37,114 | 100 | 1,253,297 | 100 | 2,021 | 100 | ||||||||||||||||||||||||||||||||||||
99105
UBS Group Financial Statements
Notes to the Financial Statements
Income Statement
Accounting standards require separate disclosure of net interest and trading income according to the business activity generating it. The table below provides information that corresponds to this management view. For example, net income from trading activities is further broken down into the four sub-components of Equities, Fixed income, Foreign exchange and Other. These activities generate both types of income (interest and trading revenue) and therefore this analysis is not comparable to the breakdown provided in the third table on the next page (Net trading income only). Net Interest and Trading Income Breakdown by business activity 106 Note 3 Net Interest and Trading Income (continued) Net interest Income1 Net trading income1 Note 4 Net Fee and Commission Income 107 Financial Statements Note 5 Other Income Note 6 Personnel Expenses Note 7 General and Administrative Expenses Note 8 Earnings per Share (EPS) and Shares OutstandingNetIncome CHF million % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 Interest earned on loans and advances 11,600 16,955 20,413 (32 ) Interest earned on securities borrowed and reverse repurchase agreements 11,184 18,337 19,088 (39 ) Interest and dividend income from financial investments 165 453 402 (64 ) Interest and dividend income from trading portfolio 17,014 16,532 11,842 3 Total 39,963 52,277 51,745 (24 ) Interest on amounts due to banks and customers 6,383 14,088 15,660 (55 ) Interest on securities lent and repurchase agreements 10,081 14,517 14,915 (31 ) Interest and dividend expense from trading portfolio 8,366 7,815 5,309 7 Interest on debt issued 4,587 7,816 7,731 (41 ) Total 29,417 44,236 43,615 (33 ) 10,546 8,041 8,130 31 Netincome and net trading income CHF million % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 Equities 2,638 4,026 7,754 (34 ) 1,061 2,731 912 (61 ) Foreign exchange and other 1,873 2,045 1,287 (8 ) 5,572 8,802 9,953 (37 ) 1 Includes commodities trading income.Net (see the tables on the following page). This required disclosure, however, does not take into account that net interest and trading income are generated by a range of different business activities. In many cases, a particular business activity can generate both net interest and trading income. Fixed income trading activity, for example, generates both trading profits and coupon income. UBS management therefore analyzes net interest CHF million % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 Net interest income 10,546 8,041 8,130 31 Net trading income 5,572 8,802 9,953 (37 ) 16,118 16,843 18,083 (4 ) Breakdown by business activity: Net income from interest margin products 5,275 5,694 5,430 (7 ) Net income from trading activities 10,605 11,529 12,642 (8 ) Net income from treasury activities 1,667 1,424 762 17 (1,429 ) (1,804 ) (751 ) 21 16,118 16,843 18,083 (4 ) CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 Net interest income 12,299 10,546 8,041 17 Net trading income 3,883 5,572 8,802 (30 ) 16,182 16,118 16,843 0 CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 5,077 5,275 5,694 (4 ) Equities 2,464 2,794 3,661 (12 ) Fixed Income 6,530 6,041 6,294 8 Foreign Exchange 1,501 1,500 1,490 0 Other 315 270 84 17 10,810 10,605 11,529 2 1,415 1,667 1,424 (15 ) (1,120 ) (1,429 ) (1,804 ) 22 16,182 16,118 16,843 0 CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 Interest earned on loans and advances 10,542 11,600 16,955 (9 ) Interest earned on securities borrowed and reverse repurchase agreements 11,148 11,184 18,337 0 Interest and dividend income from financial investments 75 165 453 (55 ) Interest and dividend income from trading portfolio 18,394 17,014 16,532 8 40,159 39,963 52,277 0 Interest on amounts due to banks and customers 5,093 6,383 14,088 (20 ) Interest on securities lent and repurchase agreements 9,623 10,081 14,517 (5 ) Interest and dividend expense from trading portfolio 10,101 8,366 7,815 21 Interest on debt issued 3,043 4,587 7,816 (34 ) 27,860 29,417 44,236 (5 ) 12,299 10,546 8,041 17 CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 Equities 1,679 2,638 4,026 (36 ) 452 1,061 2,731 (57 ) Foreign exchange and other 1,752 1,873 2,045 (6 ) 3,883 5,572 8,802 (30 ) CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 Underwriting fees 2,354 2,134 2,158 10 Corporate finance fees 761 848 1,339 (10 ) Brokerage fees 5,608 5,987 6,445 (6 ) Investment fund fees 3,895 4,033 4,276 (3 ) Fiduciary fees 241 300 355 (20 ) Custodian fees 1,201 1,302 1,356 (8 ) Portfolio and other management and advisory fees 3,855 4,065 4,650 (5 ) Insurance-related and other fees 355 417 538 (15 ) Total securities trading and investment activity fees 18,270 19,086 21,117 (4 ) Credit-related fees and commissions 249 275 307 (9 ) Commission income from other services 1,087 1,006 946 8 Total fee and commission income 19,606 20,367 22,370 (4 ) Brokerage fees paid 1,483 1,349 1,281 10 Other 778 797 878 (2 ) Total fee and commission expense 2,261 2,146 2,159 5 17,345 18,221 20,211 (5 )
Notes to the Financial Statements CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 Net gain from disposal of: Consolidated subsidiaries 160 228 3 (30 ) Investments in associates 2 0 0 162 228 3 (29 ) Net gain from disposal of: Private equity investments 352 273 454 29 Other financial investments 90 457 256 (80 ) Impairment charges on private equity investments and other financial investments (541 ) (1,944 ) (1,294 ) 72 (99 ) (1,214 ) (584 ) 92 Net income from investments in property 75 90 68 (17 ) Equity in income of associates 123 7 72 Other 300 877 999 (66 ) 561 (12 ) 558 CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 Salaries and bonuses 13,478 14,219 15,238 (5 ) Contractors 539 579 729 (7 ) Insurance and social contributions 923 939 984 (2 ) Contribution to retirement plans 721 676 603 7 Other personnel expenses 1,570 2,111 2,274 (26 ) 17,231 18,524 19,828 (7 ) CHF million % change from For the year ended 31.12.03 31.12.02 31.12.01 31.12.02 Occupancy 1,304 1,354 1,314 (4 ) Rent and maintenance of machines and equipment 708 665 632 6 Telecommunications and postage 864 1,019 1,213 (15 ) Administration 599 819 906 (27 ) Marketing and public relations 398 453 574 (12 ) Travel and entertainment 526 600 700 (12 ) Professional fees 589 568 667 4 IT and other outsourcing 844 1,036 1,224 (19 ) Other 254 558 401 (54 ) 6,086 7,072 7,631 (14 ) 100108Note 4 Net Fee and Commission Income CHF million % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 Underwriting fees 2,134 2,158 1,434 (1 ) Corporate finance fees 848 1,339 1,772 (37 ) Brokerage fees 5,987 6,445 5,742 (7 ) Investment fund fees 4,033 4,276 2,821 (6 ) Fiduciary fees 300 355 351 (15 ) Custodian fees 1,302 1,356 1,439 (4 ) Portfolio and other management and advisory fees 4,065 4,650 3,666 (13 ) Insurance-related and other fees 417 538 111 (22 ) Total securities trading and investment activity fees 19,086 21,117 17,336 (10 ) Credit-related fees and commissions 275 307 310 (10 ) Commission income from other services 1,006 946 802 6 Total fee and commission income 20,367 22,370 18,448 (9 ) Brokerage fees paid 1,349 1,281 1,084 5 Other 797 878 661 (9 ) Total fee and commission expense 2,146 2,159 1,745 (1 ) Net fee and commission income 18,221 20,211 16,703 �� (10 ) Note 5 Other Income CHF million % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 Gains/losses from disposal of associates and subsidiaries Net gain from disposal of: Consolidated subsidiaries 228 3 57 Investments in associates 0 0 26 Total 228 3 83 Financial investments available for sale Net gain from disposal of: Private equity investments 273 454 919 (40 ) Other financial investments 457 256 162 79 Impairment charges on private equity investments and other financial investments (1,944 ) (1,294 ) (507 ) (50 ) Total (1,214 ) (584 ) 574 (108 ) Net income from investments in property 90 68 96 32 Equity in income of associates 7 72 58 (90 ) Other 877 999 675 (12 ) Total other income (12 ) 558 1,486 101UBS Group Financial StatementsNotes to the Financial StatementsNote 6 Personnel Expenses CHF million % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 Salaries and bonuses 14,219 15,238 13,523 (7 ) Contractors 579 729 725 (21 ) Insurance and social contributions 939 984 959 (5 ) Retirement benefit expenses 676 603 475 12 Other personnel expenses 2,111 2,274 1,481 (7 ) Total personnel expenses 18,524 19,828 17,163 (7 ) Note 7 General and Administrative Expenses CHF million % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 Occupancy 1,354 1,314 979 3 Rent and maintenance of machines and equipment 665 632 520 5 Telecommunications and postage 1,019 1,213 914 (16 ) Administration 819 906 750 (10 ) Marketing and public relations 453 574 480 (21 ) Travel and entertainment 600 700 656 (14 ) Professional fees 568 667 660 (15 ) IT and other outsourcing 1,036 1,224 1,246 (15 ) Other 558 401 560 39 Total general and administrative expenses 7,072 7,631 6,765 (7 ) 102 % change from % change from For the year ended 31.12.02 31.12.01 31.12.00 31.12.01 31.12.03 31.12.02 31.12.01 31.12.02 Basic Earnings (CHF million) Net profit 3,535 4,973 7,792 (29 ) 6,385 3,535 4,973 81 Amortization of goodwill and other intangible assets 2,179 2 1,323 667 65 Net profit before goodwill amortization1 5,714 6,296 8,459 (9 ) Diluted Earnings (CHF million) Net profit 3,535 4,973 7,792 (29 ) 6,385 3,535 4,973 81 Less: profit on own equity derivative contracts deemed dilutive (20 ) (99 ) (14 ) 80 1 (20 ) (99 ) Net profit for diluted EPS 3,515 4,874 7,778 (28 ) 6,386 3,515 4,874 82 Amortization of goodwill and other intangible assets 2,179 2 1,323 667 65 Net profit for diluted EPS before goodwill amortization1 5,694 6,197 8,445 (8 ) Weighted average shares outstanding Weighted average shares outstanding 1,208,586,678 1,266,038,193 1,209,087,927 (5 ) 1,116,953,623 1,208,586,678 1,266,038,193 (8 ) Potentially dilutive ordinary shares resulting from options and warrants outstanding3 14,796,264 22,539,745 16,489,773 (34 ) 21,847,002 14,796,264 22,539,745 48 Weighted average shares outstanding for diluted EPS 1,223,382,942 1,288,577,938 1,225,577,700 (5 ) 1,138,800,625 1,223,382,942 1,288,577,938 (7 ) Earnings per share (CHF) Basic EPS 2.92 3.93 6.44 (26 ) 5.72 2.92 3.93 96 Basic EPS before goodwill amortization1 4.73 4.97 7.00 (5 ) Diluted EPS 2.87 3.78 6.35 (24 ) 5.61 2.87 3.78 95 Diluted EPS before goodwill amortization1 4.65 4.81 6.89 (3 ) Excludes the amortization of goodwill and other intangible assets. 2 Includes an income tax benefit of CHF 281 million for the writedown of the PaineWebber brandname. 3 Total equivalent shares outstanding on options that were not dilutive for the respective periods but could potentially dilute earnings per share in the future were 37,234,538, 75,385,368 28,741,886 and 27,524,28028,741,886 for the years ended 31 December 2003, 31 December 2002 and 31 December 2001, and 31 December 2000, respectively. Shares outstanding Shares outstanding % change from % change from As at As at 31.12.02 31.12.01 31.12.00 31.12.01 31.12.03 31.12.02 31.12.01 31.12.02 Total ordinary shares issued Total ordinary shares issued 1,256,297,678 1,281,717,499 1,333,139,187 (2 ) 1,183,046,764 1,256,297,678 1,281,717,499 (6 ) Own shares to be delivered 28,444,788 Second trading line treasury shares Second trading line treasury shares 2000 program 55,265,349 2001 program 23,064,356 2002 first program 67,700,000 2002 second program 6,335,080 2001 program 23,064,356 2002 first program 67,700,000 2002 second program 6,335,080 2003 program 56,707,000 Other treasury shares Other treasury shares 23,146,014 18,190,595 0 27 54,653,692 23,146,014 18,190,595 136 Total treasury shares Total treasury shares 97,181,094 41,254,951 55,265,349 136 111,360,692 97,181,094 41,254,951 15 Shares outstanding Shares outstanding 1,159,116,584 1,240,462,548 1,306,318,626 (7 ) 1,071,686,072 1,159,116,584 1,240,462,548 (8 )
103109
UBS Group Financial Statements
Notes to the Financial Statements
Balance Sheet: Assets
Note 9a Due from Banks and Loans
By type of exposure
CHF million | 31.12.02 | 31.12.01 | |||||||
Banks | 32,911 | 28,261 | |||||||
Allowance for credit losses | (443 | ) | (735 | ) | |||||
Net due from banks | 32,468 | 27,526 | |||||||
Loans | |||||||||
Mortgages | 127,869 | 126,211 | |||||||
Other loans | 88,590 | 107,512 | |||||||
Subtotal | 216,459 | 233,723 | |||||||
Allowance for credit losses | (4,812 | ) | (7,178 | ) | |||||
Net loans | 211,647 | 226,545 | |||||||
Net due from banks and loans | 244,115 | 254,071 | |||||||
thereof subordinated | 115 | 249 | |||||||
By geographical region(based on the location of the borrower)
CHF million | 31.12.02 | 31.12.01 | ||||||
Switzerland | 151,604 | 158,996 | ||||||
Rest of Europe | 38,131 | 42,279 | ||||||
Americas | 48,412 | 42,809 | ||||||
Asia/Pacific | 10,002 | 15,986 | ||||||
Africa/Middle East | 1,221 | 1,914 | ||||||
Subtotal | 249,370 | 261,984 | ||||||
Allowance for credit losses | (5,255 | ) | (7,913 | ) | ||||
Net due from banks and loans | 244,115 | 254,071 | ||||||
By type of collateral
CHF million | 31.12.03 | 31.12.02 | ||||||||||||||
Banks | 32,024 | 32,911 | ||||||||||||||
Allowance for credit losses | (357 | ) | (443 | ) | ||||||||||||
Net due from banks | 31,667 | 32,468 | ||||||||||||||
Loans | ||||||||||||||||
Residential mortgages | 110,239 | 108,779 | ||||||||||||||
Commercial mortgages | 18,903 | 19,090 | ||||||||||||||
Other loans | 87,041 | 88,590 | ||||||||||||||
Subtotal | 216,183 | 216,459 | ||||||||||||||
Allowance for credit losses | (3,679 | ) | (4,812 | ) | ||||||||||||
Net loans | 212,504 | 211,647 | ||||||||||||||
Net due from banks and loans | 244,171 | 244,115 | ||||||||||||||
thereof subordinated | 23 | 115 | ||||||||||||||
By geographic region (based on the location of the borrower) | By geographic region (based on the location of the borrower) | |||||||||||||||
CHF million | 31.12.03 | 31.12.02 | ||||||||||||||
Switzerland | 152,374 | 151,604 | ||||||||||||||
Rest of Europe / Africa / Middle East | 43,842 | 39,352 | ||||||||||||||
Americas | 42,653 | 48,412 | ||||||||||||||
Asia Pacific | 9,338 | 10,002 | ||||||||||||||
Subtotal | 248,207 | 249,370 | ||||||||||||||
Allowance for credit losses | (4,036 | ) | (5,255 | ) | ||||||||||||
Net due from banks and loans | 244,171 | 244,115 | ||||||||||||||
By type of collateral | ||||||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Secured by real estate | 129,525 | 128,259 | 130,740 | 129,525 | ||||||||||||
Collateralized by securities | 26,769 | 30,635 | 28,062 | 26,769 | ||||||||||||
Guarantees and other collateral | 12,398 | 20,217 | 18,507 | 12,398 | ||||||||||||
Unsecured | 80,678 | 82,873 | 70,898 | 80,678 | ||||||||||||
Subtotal | 249,370 | 261,984 | 248,207 | 249,370 | ||||||||||||
Allowance for credit losses | (5,255 | ) | (7,913 | ) | (4,036 | ) | (5,255 | ) | ||||||||
Net due from banks and loans | 244,115 | 254,071 | 244,171 | 244,115 | ||||||||||||
104110
Note 9b Allowances and Provisions for Credit Losses
Specific | Country risk | Specific | Country risk | |||||||||||||||||||||||||||||
allowances and | allowances and | Total | Total | allowances and | allowances and | Total | Total | |||||||||||||||||||||||||
CHF million | provisions | provisions | 31.12.02 | 31.12.01 | provisions | provisions | 31.12.03 | 31.12.02 | ||||||||||||||||||||||||
Balance at the beginning of the year | 7,212 | 1,006 | 8,218 | 10,581 | 4,885 | 736 | 5,621 | 8,218 | ||||||||||||||||||||||||
Write-offs | (2,508 | ) | (28 | ) | (2,536 | ) | (3,008 | ) | (1,413 | ) | (23 | ) | (1,436 | ) | (2,536 | ) | ||||||||||||||||
Recoveries | 63 | 7 | 70 | 81 | 87 | 0 | 87 | 70 | ||||||||||||||||||||||||
Increase/(decrease) in credit loss allowance and provision | 365 | (159 | ) | 206 | 498 | |||||||||||||||||||||||||||
Increase / (decrease) in credit loss allowance and provision | 191 | (75 | ) | 116 | 206 | |||||||||||||||||||||||||||
Foreign currency translation and other adjustments | (247 | ) | (90 | ) | (337 | ) | 66 | (28 | ) | (34 | ) | (62 | ) | (337 | ) | |||||||||||||||||
Transfers1 | 318 | (318 | ) | 0 | 0 | |||||||||||||||||||||||||||
Balance at the end of the year | 4,885 | 736 | 5,621 | 8,218 | 4,040 | 286 | 4,326 | 5,621 | ||||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||||||||||||||||||
As a reduction of Due from banks | 443 | 735 | 357 | 443 | ||||||||||||||||||||||||||||
As a reduction of Loans | 4,812 | 7,178 | 3,679 | 4,812 | ||||||||||||||||||||||||||||
Subtotal | 5,255 | 7,913 | 4,036 | 5,255 | ||||||||||||||||||||||||||||
Included in other liabilities | ||||||||||||||||||||||||||||||||
related to commitments and contingent liabilities | 366 | 305 | ||||||||||||||||||||||||||||||
Included in other liabilities related to commitments and contingent liabilities | 290 | 366 | ||||||||||||||||||||||||||||||
Total allowances and provisions for credit losses | 5,621 | 8,218 | 4,326 | 5,621 | ||||||||||||||||||||||||||||
Note 9c Impaired Due from Banks and Loans
CHF million | 31.12.02 | 31.12.01 | ||||||
Impaired loans1, 2 | 10,365 | 14,629 | ||||||
Amount of allowance for credit losses related to impaired loans | 4,892 | 7,294 | ||||||
Average impaired loans3 | 12,623 | 16,555 | ||||||
CHF million | 31.12.03 | 31.12.02 | ||||||
Total gross impaired due from banks and loans1, 2 | 7,606 | 10,365 | ||||||
Allowance for impaired due from banks | 245 | 291 | ||||||
Allowance for impaired loans | 3,561 | 4,601 | ||||||
Total allowances for credit losses related to impaired due from banks and loans | 3,806 | 4,892 | ||||||
Average total gross impaired due from banks and loans3 | 8,985 | 12,623 | ||||||
CHF million | 31.12.03 | 31.12.02 | ||||||
Total gross impaired due from banks and loans | 7,606 | 10,365 | ||||||
Estimated liquidation proceeds of collateral | 2,465 | 3,531 | ||||||
Net impaired due from banks and loans | 5,141 | 6,834 | ||||||
Specific allowances and provisions | 3,806 | 4,892 | ||||||
105111
UBS Group Financial Statements
Notes to the Financial Statements
Note 9d Non-Performing Due from Banks and Loans
An impairedA loan (included in due from banks or loans) is classified as non-performing when the contractual paymentspayment of interest, principal and/or interest are in arrears forfees is overdue by more than 90 days or more.– as required by Swiss regulatory guidelines as at 31 December 2003 – when insolvency proceedings have commenced or obligations have been restructured on concessionary terms. Prior year numbers have not been restated.
CHF million | 31.12.02 | 31.12.01 | ||||||
Non-performing loans | 6,029 | 8,639 | ||||||
Amount of allowance for credit losses related to non-performing loans | 3,485 | 5,374 | ||||||
Average non-performing loans1 | 7,361 | 9,648 | ||||||
CHF million | 31.12.03 | 31.12.02 | ||||||
Total gross non-performing due from banks and loans | 4,959 | 6,029 | ||||||
Total allowances for credit losses related to non-performing due from banks and loans | 2,815 | 3,485 | ||||||
Average total gross non-performing due from banks and loans1 | 5,482 | 7,361 | ||||||
CHF million | 31.12.02 | 31.12.01 | ||||||
Non-performing loans at beginning of the year | 8,639 | 10,452 | ||||||
Net additions/(reductions) | (509 | ) | 1,111 | |||||
Write-offs and disposals | (2,101 | ) | (2,924 | ) | ||||
Non-performing loans at the end of the year | 6,029 | 8,639 | ||||||
By type of exposure
CHF million | 31.12.02 | 31.12.01 | |||||||
Banks | 311 | 386 | |||||||
Loans | |||||||||
Mortgages | 1,972 | 2,659 | |||||||
Other | 3,746 | 5,594 | |||||||
Total loans | 5,718 | 8,253 | |||||||
Total non-performing loans | 6,029 | 8,639 | |||||||
By geographical region(based on the location of the borrower)
CHF million | 31.12.02 | 31.12.01 | ||||||
Switzerland | 4,609 | 6,531 | ||||||
Rest of Europe | 379 | 466 | ||||||
Americas | 499 | 737 | ||||||
Asia/Pacific | 300 | 653 | ||||||
Africa/Middle East | 242 | 252 | ||||||
Total non-performing loans | 6,029 | 8,639 | ||||||
CHF million | 31.12.03 | 31.12.02 | ||||||
Non-performing due from banks and loans at the beginning of the year | 6,029 | 8,639 | ||||||
Net additions / (reductions) | 346 | (509 | ) | |||||
Write-offs and disposals | (1,416 | ) | (2,101 | ) | ||||
Non-performing due from banks and loans at the end of the year | 4,959 | 6,029 | ||||||
By type of exposure | ||||||||
CHF million | 31.12.03 | 31.12.02 | ||||||
Banks | 253 | 311 | ||||||
Loans | ||||||||
Mortgages | 1,470 | 1,972 | ||||||
Other | 3,236 | 3,746 | ||||||
Total loans | 4,706 | 5,718 | ||||||
Total non-performing due from banks and loans | 4,959 | 6,029 | ||||||
By geographic region (based on the location of the borrower) | ||||||||
CHF million | 31.12.03 | 31.12.02 | ||||||
Switzerland | 4,012 | 4,609 | ||||||
Rest of Europe / Africa / Middle East | 488 | 621 | ||||||
Americas | 366 | 499 | ||||||
Asia Pacific | 93 | 300 | ||||||
Total non-performing due from banks and loans | 4,959 | 6,029 | ||||||
106112
Note 10 Securities Borrowing, Securities Lending, Repurchase and Reverse Repurchase Agreements
The Group enters into collateralized reverse repurchase and repurchase agreements and securities borrowing and securities lending transactions that may result in credit exposure in the event that the counterparty to the transaction is unable to fulfill its contractual obligations. The Group controls credit risk associated with these activities by monitoring counterparty credit exposure and collateral values on a daily basis and requiring additional collateral to be deposited with or returned to the Group when deemed necessary.
Balance sheet assets
Cash collateral | Reverse | Cash collateral | Reverse | Cash collateral | Reverse | Cash collateral | Reverse | |||||||||||||||||||||||||
on securities | Repurchase | on securities | Repurchase | on securities | repurchase | on securities | repurchase | |||||||||||||||||||||||||
borrowed | agreements | borrowed | agreements | borrowed | agreements | borrowed | agreements | |||||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.03 | 31.12.02 | 31.12.02 | ||||||||||||||||||||||||
By counterparty: | ||||||||||||||||||||||||||||||||
Banks | 122,764 | 201,269 | 155,214 | 197,902 | 172,783 | 237,212 | 122,764 | 201,269 | ||||||||||||||||||||||||
Customers | 16,288 | 92,817 | 7,724 | 71,354 | 41,149 | 83,375 | 16,288 | 92,817 | ||||||||||||||||||||||||
Total | 139,052 | 294,086 | 162,938 | 269,256 | 213,932 | 320,587 | 139,052 | 294,086 | ||||||||||||||||||||||||
Balance sheet liabilities
Cash collateral | Cash collateral | Cash collateral | Cash collateral | |||||||||||||||||||||||||||||
on securities | Repurchase | on securities | Repurchase | on securities | Repurchase | on securities | Repurchase | |||||||||||||||||||||||||
lent | agreements | lent | agreements | lent | agreements | lent | agreements | |||||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.03 | 31.12.02 | 31.12.02 | ||||||||||||||||||||||||
By counterparty: | ||||||||||||||||||||||||||||||||
Banks | 29,748 | 200,904 | 27,640 | 213,942 | 39,587 | 263,905 | 29,748 | 200,904 | ||||||||||||||||||||||||
Customers | 7,122 | 165,954 | 2,677 | 154,678 | 13,691 | 151,958 | 7,122 | 165,954 | ||||||||||||||||||||||||
Total | 36,870 | 366,858 | 30,317 | 368,620 | 53,278 | 415,863 | 36,870 | 366,858 | ||||||||||||||||||||||||
Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms as at 31 December 20022003 and 31 December 20012002 were as follows:
CHF million | 31.12.02 | 31.12.01 | ||||||
Securities received under reverse repurchase and/or securities borrowing arrangements which can be repledged or resold | 641,341 | 592,903 | ||||||
thereof repledged/transferred to others in connection with financing activities or to satisfy commitments under short sale transactions | 530,188 | 474,963 | ||||||
CHF million | 31.12.03 | 31.12.02 | ||||||
Securities received under reverse repurchase and /or securities borrowing arrangements which can be repledged or resold | 827,602 | 641,341 | ||||||
thereof repledged /transferred to others in connection with financing activities or to satisfy commitments under short sale transactions | 593,049 | 530,188 | ||||||
107113
UBS Group Financial Statements
Notes to the Financial Statements
Note 11 Trading Portfolio
The Group trades money market paper, debt and equity instruments, loans, precious metals foreign currency and derivatives to meet the financial needs of its customers and to generate revenue through its trading activities.revenue. Note 23 provides a description of the various classes of derivatives together with the related notional amounts, whereaswhile Note 10 provides further details about cash collateral on securities borrowed and lent and repurchase and reverse repurchase agreements.
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Trading portfolio assets | ||||||||||||||||
Money market paper | 45,310 | 63,164 | 40,003 | 45,310 | ||||||||||||
thereof pledged as collateral with central banks | 10,475 | 29,895 | 6,208 | 10,475 | ||||||||||||
Debt instruments | ||||||||||||||||
Swiss government and government agencies | 1,140 | 1,246 | 1,011 | 1,140 | ||||||||||||
US Treasury and government agencies | 71,884 | 95,203 | 92,250 | 71,884 | ||||||||||||
Other government agencies | 50,296 | 18,811 | 69,755 | 50,296 | ||||||||||||
Corporate listed | 73,268 | 108,114 | 152,413 | 73,268 | ||||||||||||
Other unlisted | 39,613 | 26,642 | 8,457 | 39,613 | ||||||||||||
Total | 236,201 | 250,016 | 323,886 | 236,201 | ||||||||||||
thereof pledged as collateral | 132,221 | 153,464 | 130,093 | 132,221 | ||||||||||||
thereof can be repledged or resold by the counterparty | 92,460 | 101,517 | 104,402 | 92,460 | ||||||||||||
Equity instruments | ||||||||||||||||
Listed | 66,150 | 67,772 | 64,116 | 66,150 | ||||||||||||
Unlisted | 4,841 | 6,367 | 10,507 | 4,841 | ||||||||||||
Total | 70,991 | 74,139 | 74,623 | 70,991 | ||||||||||||
thereof pledged as collateral | 18,614 | 21,264 | 16,426 | 18,614 | ||||||||||||
thereof can be repledged or resold by the counterparty | 17,905 | 19,939 | 16,357 | 17,905 | ||||||||||||
Traded loans | 11,533 | 6,139 | 12,650 | 11,533 | ||||||||||||
Precious metals | 7,401 | 4,428 | 10,610 | 7,401 | ||||||||||||
Total trading portfolio assets | 371,436 | 397,886 | 461,772 | 371,436 | ||||||||||||
Trading portfolio liabilities | ||||||||||||||||
Debt instruments | ||||||||||||||||
Swiss government and government agencies | 1,807 | 565 | 586 | 1,807 | ||||||||||||
US Treasury and government agencies | 38,327 | 25,117 | 52,377 | 38,327 | ||||||||||||
Other government agencies | 19,722 | 12,187 | 38,369 | 19,722 | ||||||||||||
Corporate listed | 14,177 | 10,868 | 13,537 | 14,177 | ||||||||||||
Other unlisted | 8,296 | 30,793 | 10,851 | 8,296 | ||||||||||||
Total | 82,329 | 79,530 | 115,720 | 82,329 | ||||||||||||
Equity instruments | 24,124 | 26,268 | 28,237 | 24,124 | ||||||||||||
Total trading portfolio liabilities | 106,453 | 105,798 | 143,957 | 106,453 | ||||||||||||
108114
Note 12 Financial Investments (available for sale)(available-for-sale)
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Money market paper | 873 | 6,774 | 596 | 873 | ||||||||||||
Other debt instruments | ||||||||||||||||
Listed | 290 | 1,194 | 189 | 290 | ||||||||||||
Unlisted | 885 | 10,348 | 72 | 885 | ||||||||||||
Total | 1,175 | 11,542 | 261 | 1,175 | ||||||||||||
Equity investments | ||||||||||||||||
Listed | 596 | 1,949 | 387 | 596 | ||||||||||||
Unlisted | 1,443 | 1,819 | 630 | 1,443 | ||||||||||||
Total | 2,039 | 3,768 | 1,017 | 2,039 | ||||||||||||
Private equity investments | 4,304 | 6,719 | 3,265 | 4,304 | ||||||||||||
Total financial investments | 8,391 | 28,803 | 5,139 | 8,391 | ||||||||||||
thereof eligible for discount at central banks | 261 | 10,370 | 196 | 261 | ||||||||||||
115
Financial Statements
Notes to the Financial Statements
Note 12 Financial Investments (available-for-sale) (continued)
The following tables show the unrealized gains and losses not recognized in the income statement for the years ended 20022003 and 2001.2002:
Unrealized gains/losses not recognized in the income statement | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains / losses not recognized in the income statement | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Fair value | Gross gains | Gross losses | Net, before tax | Tax effect | Net, after tax | Fair value | Gross gains | Gross losses | Net, before tax | Tax effect | Net, after tax | ||||||||||||||||||||||||||||||||||||
31 December 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||
31 December 2003 | ||||||||||||||||||||||||||||||||||||||||||||||||
Money market paper | 873 | 0 | 0 | 0 | 0 | 0 | 596 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by the Swiss national government and agencies | 16 | 1 | 0 | 1 | 0 | 1 | 14 | 2 | 0 | 2 | 0 | 2 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by Swiss local governments | 42 | 2 | 0 | 2 | 0 | 2 | 25 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by US Treasury and agencies | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by foreign governments and official institutions | 81 | 1 | 0 | 1 | 0 | 1 | 54 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Corporate debt securities | 964 | 7 | 0 | 7 | 1 | 6 | 156 | 3 | 8 | (5 | ) | 1 | (6 | ) | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 23 | 1 | 0 | 1 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Other debt securities | 49 | 1 | 1 | 0 | 0 | 0 | 12 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Equity securities | 2,039 | 335 | 31 | 304 | 82 | 222 | 1,017 | 296 | 7 | 289 | 58 | 231 | ||||||||||||||||||||||||||||||||||||
Private equity investments | 4,304 | 966 | 223 | 743 | 30 | 713 | 3,265 | 781 | 216 | 565 | 0 | 565 | ||||||||||||||||||||||||||||||||||||
Total | 8,391 | 1,314 | 255 | 1,059 | 113 | 946 | 5,139 | 1,082 | 231 | 851 | 59 | 792 | ||||||||||||||||||||||||||||||||||||
Unrealized gains/losses not recognized in the income statement | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains / losses not recognized in the income statement | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Fair value | Gross gains | Gross losses | Net, before tax | Tax effect | Net, after tax | Fair value | Gross gains | Gross losses | Net, before tax | Tax effect | Net, after tax | ||||||||||||||||||||||||||||||||||||
31 December 2001 | ||||||||||||||||||||||||||||||||||||||||||||||||
31 December 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||
Money market paper | 6,774 | 1 | 0 | 1 | 0 | 1 | 873 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by the Swiss national government and agencies | 36 | 1 | 0 | 1 | 0 | 1 | 16 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by Swiss local governments | 45 | 1 | 0 | 1 | 0 | 1 | 42 | 2 | 0 | 2 | 0 | 2 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by US Treasury and agencies | 32 | 2 | 0 | 2 | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Debt securities issued by foreign governments and official institutions | 10,089 | 31 | 1 | 30 | 11 | 19 | 81 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||||||||||||||||||||
Corporate debt securities | 1,218 | 4 | 2 | 2 | 0 | 2 | 964 | 7 | 0 | 7 | 1 | 6 | ||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 5 | 0 | 0 | 0 | 0 | 0 | 23 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||||||||||||||||||||
Other debt securities | 117 | 0 | 0 | 0 | 0 | 0 | 49 | 1 | 1 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Equity securities | 3,768 | 627 | 65 | 562 | 187 | 375 | 2,039 | 335 | 31 | 304 | 82 | 222 | ||||||||||||||||||||||||||||||||||||
Private equity investments | 6,719 | 1,189 | 539 | 650 | 15 | 635 | 4,304 | 966 | 223 | 743 | 30 | 713 | ||||||||||||||||||||||||||||||||||||
Total | 28,803 | 1,856 | 607 | 1,249 | 214 | 1,035 | 8,391 | 1,314 | 255 | 1,059 | 113 | 946 | ||||||||||||||||||||||||||||||||||||
109116
UBS Group Financial StatementsNotes to the Financial Statements
Note 12 Financial Investments (available(available-for-sale) (continued)
The unrealized losses not recognized in the income statement are considered to be temporary on the basis that the investments are intended to be held for sale) (continued)a period of time sufficient to recover their cost, and UBS believes that the evidence indicating that the cost of the investments should be recoverable within a reasonable period of time outweighs the evidence to the contrary. This includes the nature of the investments, valuations and research undertaken by UBS, the current outlook for each investment, offers under negotiation at favourable prices, the duration of the unrealized losses, and the relationship of unrealized losses with unrealized gains on other investments.
Fair Value | Unrealized Losses | |||||||||||||||||||||||
Investments | Investments | Investments | Investments | |||||||||||||||||||||
with unrealized | with unrealized | with unrealized | with unrealized | |||||||||||||||||||||
loss less than | loss more than | loss less than | loss more than | |||||||||||||||||||||
CHF million | 12 months | 12 months | Total | 12 months | 12 months | Total | ||||||||||||||||||
31 December 2003 | ||||||||||||||||||||||||
Money market paper | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Debt securities issued by the Swiss national government and agencies | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Debt securities issued by Swiss local governments | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Debt securities issued by US Treasury and agencies | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Debt securities issued by foreign governments and official institutions | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Corporate debt securities | 0 | 0 | 0 | 8 | 0 | 8 | ||||||||||||||||||
Mortgage-backed securities | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Other debt securities | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Equity securities | 6 | 44 | 50 | 3 | 4 | 7 | ||||||||||||||||||
Private equity investments | 98 | 359 | 457 | 86 | 130 | 216 | ||||||||||||||||||
Total | 104 | 403 | 507 | 97 | 134 | 231 | ||||||||||||||||||
Contractual maturities of the investments in debt instruments1
Within 1 year | 1-5 years | 5-10 years | Over 10 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Within 1 year | 1-5 years | 5-10 years | Over 10 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||||||||||||||||||||||||||
31 December 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31 December 2003 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Swiss national government and agencies | 0 | 0.00 | 7 | 4.88 | 8 | 3.86 | 1 | 4.00 | 3 | 6.61 | 4 | 2.92 | 6 | 3.80 | 1 | 4.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Swiss local governments | 8 | 4.02 | 30 | 3.94 | 4 | 3.59 | 0 | 0.00 | 5 | 3.90 | 20 | 2.01 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign governments and official institutions | 35 | 4.63 | 45 | 3.13 | 1 | 6.12 | 0 | 0.00 | 45 | 1.89 | 9 | 1.49 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 675 | 2.23 | 249 | 2.64 | 19 | 3.41 | 21 | 8.02 | 81 | 1.09 | 68 | 3.53 | 7 | 7.38 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 4 | 2.25 | 15 | 3.97 | 4 | 4.03 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other debt securities | 1 | 4.77 | 48 | 2.65 | 0 | 0.00 | 0 | 0.00 | 4 | 0.00 | 8 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total fair value | 723 | 394 | 36 | 22 | 138 | 109 | 13 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proceeds from sales and maturities of investment securities available for sale, excluding private equity, were as follows:
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Proceeds | 1,820 | 27,910 | 1379 | 1,820 | ||||||||||||
Gross realized gains | 479 | 223 | 112 | 479 | ||||||||||||
Gross realized losses | (21 | ) | (28 | ) | (23 | ) | (21 | ) | ||||||||
Note 13 Investments in Associates
CHF million | 31.12.02 | 31.12.01 | ||||||
Carrying amount at the beginning of the year | 697 | 880 | ||||||
Additions | 51 | 11 | ||||||
Disposals | (1 | ) | (216 | )1 | ||||
Income | 24 | 74 | ||||||
Write-offs | (17 | ) | (2 | ) | ||||
Dividend paid | (44 | ) | (48 | ) | ||||
Foreign currency translation | (5 | ) | (2 | ) | ||||
Carrying amount at the end of the year | 705 | 697 | ||||||
110117
Notes to the Financial Statements
Financial Statements
Note 13 Investments in Associates CHF million 31.12.03 31.12.02 Carrying amount at the beginning of the year 705 697 Additions 1,232 51 Disposals (285 )1 (1 ) Income 123 24 Write-offs 0 (17 ) Dividend paid (30 ) (44 ) Foreign currency translation (129 ) (5 ) 1,616 705
Note 14 Property and Equipment
IT, soft- | Other | Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank- | ware and | machines | Leasehold | IT, software | machines | |||||||||||||||||||||||||||||||||||||||||||||||||||
occupied | Investment | communi- | and | Own-used | Investment | improve- | and com- | and | Projects in | |||||||||||||||||||||||||||||||||||||||||||||||
CHF million | properties | properties1 | cation | equipment | 31.12.02 | 31.12.01 | properties | properties | 1 | ments | munication | equipment | progress | 31.12.03 | 31.12.02 | |||||||||||||||||||||||||||||||||||||||||
Historical cost | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at the beginning of the year | 9,297 | 893 | 5,146 | 4,143 | 19,479 | 18,631 | 9,307 | 560 | 1,312 | 4,105 | 2,432 | 234 | 17,950 | 19,479 | ||||||||||||||||||||||||||||||||||||||||||
Additions | 147 | 366 | 811 | 439 | 1,763 | 2,021 | 297 | 5 | 83 | 674 | 120 | 178 | 1,357 | 1,763 | ||||||||||||||||||||||||||||||||||||||||||
Disposals/write-offs2 | (62 | ) | (747 | ) | (1,330 | ) | (449 | ) | (2,588 | ) | (715 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Additions from acquired companies | 3 | 0 | 14 | 3 | 4 | 0 | 24 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||
Disposals / write-offs2 | (118 | ) | (89 | ) | (59 | ) | (720 | ) | (126 | ) | (7 | ) | (1,119 | ) | (2,588 | ) | ||||||||||||||||||||||||||||||||||||||||
Reclassifications | (34 | ) | 50 | 51 | (53 | ) | 14 | (482 | ) | (46 | ) | (257 | ) | 1,257 | 313 | (928 | ) | (125 | ) | 214 | 14 | |||||||||||||||||||||||||||||||||||
Foreign currency translation | (41 | ) | (2 | ) | (339 | ) | (336 | ) | (718 | ) | 24 | (35 | ) | (1 | ) | (62 | ) | (134 | ) | (77 | ) | 0 | (309 | ) | (718 | ) | ||||||||||||||||||||||||||||||
Balance at the end of the year | 9,307 | 560 | 4,339 | 4 | 3,744 | 17,950 | 19,479 | 9,408 | 218 | 2,545 | 4,241 | 1,425 | 280 | 18,117 | 17,950 | |||||||||||||||||||||||||||||||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at the beginning of the year | 4,039 | 239 | 3,932 | 2,574 | 10,784 | 9,721 | 4,210 | 211 | 757 | 3,240 | 1,663 | 0 | 10,081 | 10,784 | ||||||||||||||||||||||||||||||||||||||||||
Depreciation | 224 | 28 | 926 | 343 | 1,521 | 1,654 | 221 | 14 | 184 | 859 | 86 | 0 | 1,364 | 1,521 | ||||||||||||||||||||||||||||||||||||||||||
Disposals/write-offs2 | (34 | ) | (100 | ) | (1,316 | ) | (336 | ) | (1,786 | ) | (403 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Disposals / write-offs2 | (114 | ) | (60 | ) | (50 | ) | (709 | ) | (63 | ) | 0 | (996 | ) | (1,786 | ) | |||||||||||||||||||||||||||||||||||||||||
Reclassifications | (10 | ) | 44 | (2 | ) | 3 | 35 | (189 | ) | 49 | (145 | ) | 715 | 61 | (499 | ) | 4 | 185 | 35 | |||||||||||||||||||||||||||||||||||||
Foreign currency translation | (9 | ) | 0 | (300 | ) | (164 | ) | (473 | ) | 1 | (1 | ) | 0 | (36 | ) | (117 | ) | (22 | ) | 0 | (176 | ) | (473 | ) | ||||||||||||||||||||||||||||||||
Balance at the end of the year | 4,210 | 211 | 3,240 | 2,420 | 10,081 | 10,784 | 4,365 | 20 | 1,570 | 3,334 | 1,165 | 4 | 10,458 | 10,081 | ||||||||||||||||||||||||||||||||||||||||||
Net book value at the end of the year3 | 5,097 | 349 | 1,099 | 1,324 | 7,869 | 8,695 | 5,043 | 198 | 975 | 907 | 260 | 276 | 7,659 | 7,869 | ||||||||||||||||||||||||||||||||||||||||||
118
Note 15 Goodwill and Other Intangible Assets
Goodwill | Other intangible assets | Goodwill | Other intangible assets | |||||||||||||||||||||||||||||||||||||||||||||||||
Customer | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer | relation- | |||||||||||||||||||||||||||||||||||||||||||||||||||
Brand- | Infra- | lists | Infra- | ships | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Total | name | structure | and other | Total | 31.12.02 | 31.12.01 | Total | structure | and other | Total | 31.12.03 | 31.12.02 | |||||||||||||||||||||||||||||||||||||||
Historical cost | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at the beginning of the year | 16,819 | 1,293 | 1,293 | 2,387 | 4,973 | 21,792 | 21,166 | 13,957 | 1,069 | 1,996 | 3,065 | 17,022 | 21,792 | |||||||||||||||||||||||||||||||||||||||
Additions and reallocations | 9 | 281 | 0 | 0 | 281 | 290 | 456 | 241 | 0 | 99 | 99 | 340 | 290 | |||||||||||||||||||||||||||||||||||||||
Disposals and other reductions | (98 | ) | 0 | 0 | (17 | ) | (17 | ) | (115 | ) | 0 | (368 | ) | 0 | (3 | ) | (3 | ) | (371 | ) | (115 | ) | ||||||||||||||||||||||||||||||
Write-offs1 | 0 | (1,350 | ) | 0 | 0 | (1,350 | ) | (1,350 | ) | (247 | ) | (508 | ) | 0 | 0 | 0 | (508 | ) | (1,350 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation | (2,773 | ) | (224 | ) | (224 | ) | (374 | ) | (822 | ) | (3,595 | ) | 417 | (1,290 | ) | (111 | ) | (177 | ) | (288 | ) | (1,578 | ) | (3,595 | ) | |||||||||||||||||||||||||||
Balance at the end of the year | 13,957 | 0 | 1,069 | 1,996 | 3,065 | 17,022 | 21,792 | 12,032 | 958 | 1,915 | 2,873 | 14,905 | 17,022 | |||||||||||||||||||||||||||||||||||||||
Accumulated amortization | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at the beginning of the year | 2,241 | 76 | 76 | 314 | 466 | 2,707 | 1,629 | 2,776 | 116 | 434 | 550 | 3,326 | 2,707 | |||||||||||||||||||||||||||||||||||||||
Amortization | 930 | 1,306 | 54 | 170 | 1,530 | 2,460 | 1,323 | 756 | 52 | 135 | 187 | 943 | 2,460 | |||||||||||||||||||||||||||||||||||||||
Disposals | (13 | ) | 0 | 0 | (15 | ) | (15 | ) | (28 | ) | 0 | (68 | ) | 0 | (2 | ) | (2 | ) | (70 | ) | (28 | ) | ||||||||||||||||||||||||||||||
Write-offs1 | 0 | (1,350 | ) | 0 | 0 | (1,350 | ) | (1,350 | ) | (247 | ) | (508 | ) | 0 | 0 | 0 | (508 | ) | (1,350 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation | (382 | ) | (32 | ) | (14 | ) | (35 | ) | (81 | ) | (463 | ) | 2 | (272 | ) | (16 | ) | (27 | ) | (43 | ) | (315 | ) | (463 | ) | |||||||||||||||||||||||||||
Balance at the end of the year | 2,776 | 0 | 116 | 434 | 550 | 3,326 | 2,707 | 2,684 | 152 | 540 | 692 | 3,376 | 3,326 | |||||||||||||||||||||||||||||||||||||||
Net book value at the end of the year | 11,181 | 0 | 953 | 1,562 | 2,515 | 13,696 | 19,085 | 9,348 | 806 | 1,375 | 2,181 | 11,529 | 13,696 | |||||||||||||||||||||||||||||||||||||||
111
UBS Group Financial StatementsNotes to the Financial Statements
Note 15 Goodwill and Other Intangible Assets (continued)
The following table presents the disclosure of goodwill and other intangible assets by Business Group for the year ended 31 December 2002.2003.
Balance | Additions | Disposals | ||||||||||||||||||||||
at the | and | and | Foreign | Balance | ||||||||||||||||||||
beginning | reallo- | other | currency | at the end | ||||||||||||||||||||
CHF million | of the year | cations | reductions | Amortization | translation | of the year | ||||||||||||||||||
Goodwill | ||||||||||||||||||||||||
UBS Wealth Management & Business Banking | 1,305 | 0 | (8 | ) | (81 | ) | (213 | ) | 1,003 | |||||||||||||||
UBS Global Asset Management | 2,926 | 0 | (5 | ) | (269 | ) | (467 | ) | 2,185 | |||||||||||||||
UBS Warburg | 4,950 | 0 | (25 | ) | (315 | ) | (817 | ) | 3,793 | |||||||||||||||
UBS PaineWebber | 5,390 | 0 | (33 | ) | (264 | ) | (894 | ) | 4,199 | |||||||||||||||
Corporate Center | 7 | 9 | (14 | ) | (1 | ) | 0 | 1 | ||||||||||||||||
UBS Group | 14,578 | 9 | (85 | ) | (930 | ) | (2,391 | ) | 11,181 | |||||||||||||||
Other Intangible Assets | ||||||||||||||||||||||||
UBS Wealth Management & Business Banking | 65 | 0 | (2 | ) | (30 | ) | 0 | 33 | ||||||||||||||||
UBS Global Asset Management | 2 | 0 | 0 | (1 | ) | 0 | 1 | |||||||||||||||||
UBS Warburg | 390 | 0 | 0 | (49 | ) | (63 | ) | 278 | ||||||||||||||||
UBS PaineWebber | 3,942 | 281 | 0 | (1,427 | ) | (662 | ) | 2,134 | ||||||||||||||||
Corporate Center | 108 | 0 | 0 | (23 | ) | (16 | ) | 69 | ||||||||||||||||
UBS Group | 4,507 | 281 | (2 | ) | (1,530 | ) | (741 | ) | 2,515 | |||||||||||||||
Balance | Additions | Disposals | ||||||||||||||||||||||
at the | and | and | Foreign | Balance | ||||||||||||||||||||
beginning | reallo- | other | Amorti- | currency | at the end | |||||||||||||||||||
CHF million | of the year | cations | 1 | reductions | zation | translation | of the year | |||||||||||||||||
Goodwill | ||||||||||||||||||||||||
Wealth Management & Business Banking | 1,003 | (10 | ) | (4 | ) | (54 | ) | (98 | ) | 837 | ||||||||||||||
Global Asset Management | 2,185 | (525 | ) | (1 | ) | (152 | ) | (106 | ) | 1,401 | ||||||||||||||
Investment Bank | 3,793 | 218 | (16 | ) | (251 | ) | (372 | ) | 3,372 | |||||||||||||||
Wealth Management USA | 4,199 | (1 | ) | (270 | ) | (220 | ) | (393 | ) | 3,315 | ||||||||||||||
Corporate Center | 1 | 559 | (9 | ) | (79 | ) | (49 | ) | 423 | |||||||||||||||
UBS | 11,181 | 241 | (300 | ) | (756 | ) | (1,018 | ) | 9,348 | |||||||||||||||
Other Intangible Assets | ||||||||||||||||||||||||
Wealth Management & Business Banking | 33 | (8 | ) | 0 | (21 | ) | 0 | 4 | ||||||||||||||||
Global Asset Management | 1 | 0 | 0 | (1 | ) | 0 | 0 | |||||||||||||||||
Investment Bank | 278 | 99 | 0 | (27 | ) | (26 | ) | 324 | ||||||||||||||||
Wealth Management USA | 2,134 | 0 | 0 | (116 | ) | (213 | ) | 1,805 | ||||||||||||||||
Corporate Center | 69 | 8 | (1 | ) | (22 | ) | (6 | ) | 48 | |||||||||||||||
UBS | 2,515 | 99 | (1 | ) | (187 | ) | (245 | ) | 2,181 | |||||||||||||||
Until 31 December 2001, goodwill and other intangible assets relating
For further information about disclosure by Business Group, including the amortization of goodwill and other intangible assets of previous years, please see Note 2a: Segment Reporting by Business Group.
119
Financial Statements
Notes to the Financial Statements
Note 15 Goodwill and Other Intangible Assets (continued)
The estimated, aggregated amortization expenses for Goodwill and Other intangible assets are as follows:
Other | Other | |||||||||||||||||||||||
CHF million | Goodwill | intangible assets | Total | Goodwill | intangible assets | Total | ||||||||||||||||||
Estimated, aggregated amortization expenses for: | ||||||||||||||||||||||||
2003 | 817 | 189 | 1,006 | |||||||||||||||||||||
2004 | 769 | 170 | 939 | 709 | 162 | 871 | ||||||||||||||||||
2005 | 738 | 166 | 904 | 704 | 159 | 863 | ||||||||||||||||||
2006 | 702 | 153 | 855 | 695 | 146 | 841 | ||||||||||||||||||
2007 | 646 | 144 | 790 | 668 | 139 | 807 | ||||||||||||||||||
2008 and thereafter | 7,509 | 1,693 | 9,202 | |||||||||||||||||||||
2008 | 588 | 138 | 726 | |||||||||||||||||||||
2009 and thereafter | 5,984 | 1,437 | 7,421 | |||||||||||||||||||||
Total | 11,181 | 2,515 | 13,696 | 9,348 | 2,181 | 11,529 | ||||||||||||||||||
If the IASB issues in 2004 a final standard following ED3 Business Combinations, as proposed, goodwill amortization will cease as of 1 January 2005.
Note 16 Other Assets
CHF million | Note | 31.12.03 | 31.12.02 | |||||||||
Deferred tax assets | 21 | 2,276 | 2,800 | |||||||||
Settlement and clearing accounts | 2,874 | 1,449 | ||||||||||
VAT and other tax receivables | 338 | 436 | ||||||||||
Prepaid pension costs | 862 | 250 | ||||||||||
Properties held for resale | 754 | 1,071 | ||||||||||
Receivables under life insurance policies | 13,544 | 0 | ||||||||||
Other receivables | 4,811 | 2,946 | ||||||||||
Total other assets | 25,459 | 8,952 | ||||||||||
112120
Note 16 Other Assets
CHF million | Note | 31.12.02 | 31.12.01 | |||||||||
Deferred tax assets | 21 | 2,800 | 3,449 | |||||||||
Settlement and clearing accounts | 1,449 | 1,431 | ||||||||||
VAT and other tax receivables | 436 | 452 | ||||||||||
Prepaid pension costs | 250 | 567 | ||||||||||
Properties held for resale | 1,071 | 844 | ||||||||||
Other receivables | 2,946 | 3,132 | ||||||||||
Total other assets | 8,952 | 9,875 | ||||||||||
113
UBS Group Financial StatementsNotes to the Financial Statements
Balance Sheet: Liabilities
Note 17 Due to Banks and Customers
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Due to banks | 83,178 | 106,531 | 127,153 | 83,178 | ||||||||||||
Due to customers in savings and investment accounts | 76,884 | 67,782 | 94,914 | 76,884 | ||||||||||||
Other amounts due to customers | 229,992 | 265,999 | 252,444 | 229,992 | ||||||||||||
Total due to customers | 306,876 | 333,781 | 347,358 | 306,876 | ||||||||||||
Total due to banks and customers | 390,054 | 440,312 | 474,511 | 390,054 | ||||||||||||
Note 18 Debt Issued
The Group issues both CHF and non-CHF denominated fixed and floating rate debt. Floating rate debt generally pays interest based on the three-month or six-month London Interbank Offered Rate (LIBOR).
derivatives embedded in these instruments are separated from the host debt contract and reported as stand-alone derivatives. The amount recorded within Debt Issued represents the host contract after the separation of the embedded derivative. At 31 December 20022003 and 31 December 2001,2002, the Group had CHF 1,389427 million and CHF 1,3971,389 million, respectively, in convertible and exchangeable debtbonds with attached warrants on UBS shares and notes withoutstanding. At year end 2003 all warrants attached on UBS shares outstanding.related to those bonds have expired.
114121
Financial Statements
Notes to the Financial Statements
Note 18 Debt Issued (continued)
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Money market paper issued | 72,800 | 99,006 | ||||||||||||||
Bonds issued | 51,872 | 51,061 | ||||||||||||||
Short-term debt: Money market paper issued | 58,115 | 72,800 | ||||||||||||||
Long-term debt: | ||||||||||||||||
Bonds | ||||||||||||||||
Senior | 51,324 | 41,939 | ||||||||||||||
Subordinated | 8,014 | 9,933 | ||||||||||||||
Shares in bond issues of the Swiss Regional or Cantonal Banks’ Central Bond Institutions | 517 | 934 | 210 | 517 | ||||||||||||
Medium-term notes | 4,222 | 5,217 | 2,574 | 4,222 | ||||||||||||
Subtotal long-term debt | 62,122 | 56,611 | ||||||||||||||
Total debt issued | 129,411 | 156,218 | 120,237 | 129,411 | ||||||||||||
The following table shows the split between fixed and floating rate debt issues based on the contractual terms. However, it should be noted that the Group uses interest rate swaps to hedge many of the fixed rate debt issues which changes their re-pricing characteristics into thosethat of floating rate debt.
Contractual maturity date
UBS AG (Parent Bank) | Subsidiaries | |||||||||||||||||||
Fixed | Floating | Fixed | Floating | Total | ||||||||||||||||
CHF million | rate | rate | rate | rate | 31.12.02 | |||||||||||||||
2003 | 24,010 | 244 | 52,095 | 70 | 76,419 | |||||||||||||||
2004 | 4,965 | 609 | 1,432 | 574 | 7,580 | |||||||||||||||
2005 | 4,998 | 726 | 907 | 382 | 7,013 | |||||||||||||||
2006 | 3,359 | 790 | 8,000 | 439 | 12,588 | |||||||||||||||
2007 | 3,166 | 1,564 | 1,105 | 70 | 5,905 | |||||||||||||||
2008-2010 | 1,714 | 1,048 | 2,476 | 1,949 | 7,187 | |||||||||||||||
Thereafter | 2,726 | 6,672 | 269 | 3,052 | 12,719 | |||||||||||||||
Total | 44,938 | 11,653 | 66,284 | 6,536 | 129,411 | |||||||||||||||
Contractual maturity dates | Total | |||||||||||||||||||||||||||||||
CHF million, except where indicated | 2004 | 2005 | 2006 | 2007 | 2008 | 2009-2013 | Thereafter | 31.12.03 | ||||||||||||||||||||||||
UBS AG Parent Bank | ||||||||||||||||||||||||||||||||
Senior debt | ||||||||||||||||||||||||||||||||
Fixed rate | 28,981 | 4,299 | 5,958 | 4,419 | 3,702 | 1,446 | 377 | 49,182 | ||||||||||||||||||||||||
Interest rates (range in %) | 0.00-20.00 | 0.00-19.00 | 0.00-16.50 | 0.00-11.00 | 0.00-20.00 | 0.00-13.50 | 0.00-8.50 | |||||||||||||||||||||||||
Floating rate | 65 | 339 | 138 | 179 | 791 | 2,236 | 7,941 | 11,689 | ||||||||||||||||||||||||
Subordinated debt | ||||||||||||||||||||||||||||||||
Fixed rate | 1,036 | 1,505 | 1,772 | 1,430 | 0 | 525 | 1,199 | 7,467 | ||||||||||||||||||||||||
Interest rates (range in %) | 4.25-7.38 | 4.00-8.75 | 4.25-7.25 | 5.75-8.00 | 5.88 | 0.00-8.75 | ||||||||||||||||||||||||||
Floating rate | 0 | 0 | 0 | 0 | 0 | 0 | 506 | 506 | ||||||||||||||||||||||||
Subtotal | 30,082 | 6,143 | 7,868 | 6,028 | 4,493 | 4,207 | 10,023 | 68,844 | ||||||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||||||||||
Senior debt | ||||||||||||||||||||||||||||||||
Fixed rate | 35,336 | 535 | 2,377 | 1,237 | 2,712 | 1,135 | 247 | 43,579 | ||||||||||||||||||||||||
Interest rates (range in %) | 0.00-10.00 | 0.00-10.00 | 0.00-10.00 | 0.00-10.00 | 0.00-10.00 | 0.00-35.00 | 0.00-20.00 | |||||||||||||||||||||||||
Floating rate | 199 | 592 | 1,360 | 25 | 236 | 1,689 | 3,672 | 7,773 | ||||||||||||||||||||||||
Subordinated debt | ||||||||||||||||||||||||||||||||
Fixed rate | 23 | 0 | 0 | 0 | 0 | 0 | 18 | 41 | ||||||||||||||||||||||||
Interest rates (range in %) | 6.90-8.06 | 9.00 | ||||||||||||||||||||||||||||||
Floating rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Subtotal | 35,558 | 1,127 | 3,737 | 1,262 | 2,948 | 2,824 | 3,937 | 51,393 | ||||||||||||||||||||||||
Total | 65,640 | 7,270 | 11,605 | 7,290 | 7,441 | 7,031 | 13,960 | 120,237 | ||||||||||||||||||||||||
The table below shows the notional amount and statedabove indicates fixed interest raterates coupons ranging from 0 up to 35 percent on the Group’s publicly placed bondsbonds. These high or low coupons generally relate to structured debt issues prior to the separation of any embedded derivatives or the application of hedge accounting, where applicable.derivatives. As a result, the notional amount shown does not necessarily correspond to the carrying amount of the debt and the stated interest rate on thesuch debt issues generally does not necessarily reflect the effective interest rate the Group is paying to service its debt after the separation of embedded derivativesderivative has been separated and, where applicable, the application of hedge accounting, where applicable.accounting.
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
2001 | 16.000 | GOAL on Siemens | 17.01.2003 | EUR | 55 | |||||||||||||||||||
2002 | 0.000 | CLN Linked to GECC | 18.02.2003 | EUR | 50 | |||||||||||||||||||
2001 | 8.000 | GOAL on UBS | 26.02.2003 | CHF | 220 | |||||||||||||||||||
2002 | 11.250 | GOAL on Royal Dutch Petroleum | 28.02.2003 | EUR | 95 | |||||||||||||||||||
1993 | 4.875 | subordinated | 03.03.2003 | CHF | 200 | |||||||||||||||||||
2001 | 8.750 | GOAL on General Electric | 07.03.2003 | USD | 125 | |||||||||||||||||||
2001 | 13.500 | GOAL on Nokia Oyj | 10.03.2003 | EUR | 45 | |||||||||||||||||||
2002 | 0.000 | Linked to 30yr OAT | 11.03.2003 | GBP | 50 | |||||||||||||||||||
2002 | FRN | CLN Linked to GECC | 14.03.2003 | USD | 100 | |||||||||||||||||||
1997 | 1.500 | Indexed to UBS Currency Portfolio | 14.03.2003 | EUR | 51 | |||||||||||||||||||
Convertible into | ||||||||||||||||||||||||
1998 | FRN | UBS Dutch Corporate Basket | 20.03.2003 | EUR | 57 | |||||||||||||||||||
1993 | 3.500 | subordinated | 31.03.2003 | CHF | 200 | |||||||||||||||||||
1993 | 4.000 | subordinated | 31.03.2003 | CHF | 200 | |||||||||||||||||||
115
UBS Group Financial StatementsNotes to the Financial Statements
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
2001 | 0.000 | BULS on technology stock basket | 10.04.2003 | USD | 78 | |||||||||||||||||||
2001 | 0.000 | BULS on Celestica and others | 28.04.2003 | USD | 40 | |||||||||||||||||||
2002 | 9.500 | GOAL on UBS | 22.05.2003 | CHF | 110 | |||||||||||||||||||
2001 | 10.250 | GOAL on Deutsche Bank | 30.05.2003 | EUR | 40 | |||||||||||||||||||
2002 | 9.500 | GOAL on DJ Euro Stoxx 50 index | 02.06.2003 | EUR | 50 | |||||||||||||||||||
2001 | 7.250 | GOAL on Aventis | 05.06.2003 | EUR | 75 | |||||||||||||||||||
2001 | 6.000 | GOAL on Total SA | 11.06.2003 | EUR | 45 | |||||||||||||||||||
2001 | 7.750 | GOAL on E.ON AG | 17.06.2003 | EUR | 40 | |||||||||||||||||||
1995 | 5.250 | subordinated | 20.06.2003 | CHF | 200 | |||||||||||||||||||
2001 | 8.250 | GOAL on Pfizer | 16.07.2003 | USD | 70 | |||||||||||||||||||
2002 | 9.500 | GOAL on SUEZ SA (Suez) | 04.09.2003 | EUR | 35 | |||||||||||||||||||
2002 | 13.000 | GOAL on Royal Dutch Petroleum | 06.10.2003 | EUR | 35 | |||||||||||||||||||
2002 | FRN | CLN Linked to Allianz AG | 24.10.2003 | USD | 150 | |||||||||||||||||||
1993 | 3.000 | 26.11.2003 | CHF | 200 | ||||||||||||||||||||
2002 | 0.000 | Linked to Basket of Common Stock | 02.12.2003 | USD | 63 | |||||||||||||||||||
1994 | 6.250 | subordinated | 06.01.2004 | USD | 300 | |||||||||||||||||||
2002 | 7.750 | GOAL on Novartis | 28.01.2004 | CHF | 100 | |||||||||||||||||||
2002 | 5.125 | GOAL on General Electric Company | 30.01.2004 | USD | 75 | |||||||||||||||||||
2002 | 6.000 | GOAL on Unilever NV | 06.02.2004 | EUR | 40 | |||||||||||||||||||
2002 | 6.250 | GOAL on Nestlé AG | 14.05.2004 | CHF | 100 | |||||||||||||||||||
2001 | 0.000 | Cliquet GROI on NASDAQ 100 Index | 27.05.2004 | USD | 42 | |||||||||||||||||||
1991 | 4.250 | subordinated | 25.06.2004 | CHF | 300 | |||||||||||||||||||
1999 | 3.500 | 01.07.2004 | EUR | 250 | ||||||||||||||||||||
2001 | 1.750 | Exchangeable bonds on Yukos | 31.08.2004 | USD | 310 | |||||||||||||||||||
1997 | 7.380 | subordinated | 26.11.2004 | GBP | 250 | |||||||||||||||||||
1995 | 4.000 | subordinated | 07.02.2005 | CHF | 150 | |||||||||||||||||||
1995 | 5.500 | Convertible into Nasdaq 100 Index | 10.02.2005 | CHF | 150 | |||||||||||||||||||
2002 | 0.000 | Equity GROI | 07.03.2005 | AUD | 233 | |||||||||||||||||||
2002 | 0.500 | Convertible into STOXX 50 Index | 21.03.2005 | EUR | 75 | |||||||||||||||||||
1995 | 5.625 | subordinated | 13.04.2005 | CHF | 150 | |||||||||||||||||||
2002 | 0.000 | GROI on FTSE 100 Index | 25.04.2005 | GBP | 46 | |||||||||||||||||||
Principal Protected Note Linked | ||||||||||||||||||||||||
2002 | 0.000 | to NASDAQ 100-Index | 04.05.2005 | USD | 46 | |||||||||||||||||||
2002 | 0.000 | Exchangeable Bonds on Yukos | 19.06.2005 | USD | 120 | |||||||||||||||||||
1995 | 8.750 | subordinated | 20.06.2005 | GBP | 249 | |||||||||||||||||||
GROI - Australian | ||||||||||||||||||||||||
2002 | 0.000 | Growth Guaranteed Fund II | 21.06.2005 | AUD | 67 | |||||||||||||||||||
1998 | 6.750 | subordinated | 15.07.2005 | USD | 200 | |||||||||||||||||||
1995 | 5.250 | subordinated | 18.07.2005 | CHF | 200 | |||||||||||||||||||
2002 | 0.000 | Cliquet GROI - Units on SMI Index | 25.07.2005 | CHF | 53 | |||||||||||||||||||
1995 | 5.000 | subordinated | 24.08.2005 | CHF | 250 | |||||||||||||||||||
2002 | 0.125 | Exchangeable Bonds on Yukos | 19.09.2005 | USD | 120 | |||||||||||||||||||
1995 | 4.500 | 21.11.2005 | CHF | 300 | ||||||||||||||||||||
2002 | 0.250 | Exchangeable Bonds on Yukos | 19.12.2005 | USD | 160 | |||||||||||||||||||
1999 | 3.500 | Straight Bond | 26.01.2006 | EUR | 650 | |||||||||||||||||||
Equity Exchangeables into | ||||||||||||||||||||||||
2001 | 1.000 | Euro. Insurance Basket | 01.02.2006 | 01.02.2004 | EUR | 100 | ||||||||||||||||||
1996 | 4.250 | subordinated | 06.02.2006 | CHF | 250 | |||||||||||||||||||
1996 | 4.000 | 14.02.2006 | CHF | 200 | ||||||||||||||||||||
2000 | 2.500 | Straight Bond | 29.03.2006 | CHF | 250 | |||||||||||||||||||
1996 | 7.250 | subordinated | 17.07.2006 | USD | 500 | |||||||||||||||||||
2001 | 0.000 | BULS on S&P 500 | 01.09.2006 | USD | 54 | |||||||||||||||||||
116
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
1996 | 7.250 | subordinated | 01.09.2006 | USD | 150 | |||||||||||||||||||
2001 | 5.500 | GOAL on UBS | 02.10.2006 | CHF | 106 | |||||||||||||||||||
Cliquet GROI-Units | ||||||||||||||||||||||||
2001 | 0.000 | on Nasdaq 100-Index | 19.10.2006 | USD | 39 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 07.11.2006 | 07.02.2003 | USD | 56 | ||||||||||||||||||
1995 | 5.000 | subordinated | 07.11.2006 | CHF | 250 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 13.11.2006 | 12.02.2003 | USD | 40 | ||||||||||||||||||
1996 | 6.250 | subordinated | 06.12.2006 | EUR | 254 | |||||||||||||||||||
2001 | 0.000 | Zero-rate Note O'Connor Fund | 29.12.2006 | EUR | 40 | |||||||||||||||||||
1997 | 8.000 | subordinated | 08.01.2007 | GBP | 242 | |||||||||||||||||||
1997 | 8.000 | subordinated | 08.01.2007 | GBP | 302 | |||||||||||||||||||
1997 | 5.750 | subordinated | 12.03.2007 | EUR | 204 | |||||||||||||||||||
Step-Up Callable | ||||||||||||||||||||||||
2002 | FRN | Daily Range Accrual Note | 15.07.2007 | 15.01.2003 | USD | 67 | ||||||||||||||||||
2002 | 1.000 | Exchangeable on DJ Euro Stoxx 50E | 23.07.2007 | EUR | 50 | |||||||||||||||||||
2002 | FRN | CLN | 01.09.2007 | USD | 50 | |||||||||||||||||||
Exchangeable Bond | ||||||||||||||||||||||||
2002 | 0.500 | on the S&P 500 Index | 05.09.2007 | USD | 40 | |||||||||||||||||||
Exchangeable Bond | ||||||||||||||||||||||||
2002 | 0.500 | on the DJ Euro STOXX 50 | 05.09.2007 | EUR | 35 | |||||||||||||||||||
2002 | 0.250 | Exchangeable Bond on the SMI | 05.09.2007 | CHF | 75 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 02.10.2007 | 02.01.2003 | USD | 61 | ||||||||||||||||||
Exchangeable bond | ||||||||||||||||||||||||
2002 | 0.500 | on Royal Dutch Petroleum | 30.10.2007 | EUR | 100 | |||||||||||||||||||
Principal Protected Notes Linked | ||||||||||||||||||||||||
2002 | 0.000 | to the S&P 500 Index | 07.11.2007 | USD | 52 | |||||||||||||||||||
2002 | 7.250 | GOAL on Royal Dutch Petroleum | 14.11.2007 | EUR | 150 | |||||||||||||||||||
2002 | 1.250 | Linked to Nikkei 225 Index | 28.11.2007 | JPY | 7,742 | |||||||||||||||||||
2002 | 5.000 | Linked to Nikkei 225 Index | 19.12.2007 | JPY | 5,537 | |||||||||||||||||||
1998 | 3.500 | 27.08.2008 | CHF | 300 | ||||||||||||||||||||
1997 | 5.875 | subordinated | 18.08.2009 | EUR | 305 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 23.10.2012 | 23.01.2003 | USD | 64 | ||||||||||||||||||
1995 | 7.375 | subordinated | 15.07.2015 | USD | 150 | |||||||||||||||||||
1995 | 7.000 | subordinated | 15.10.2015 | USD | 300 | |||||||||||||||||||
1997 | 7.375 | subordinated | 15.06.2017 | USD | 300 | |||||||||||||||||||
1995 | 7.500 | subordinated | 15.07.2025 | USD | 350 | |||||||||||||||||||
1995 | 8.750 | subordinated | 18.12.2025 | GBP | 149 | |||||||||||||||||||
1996 | 7.750 | subordinated | 01.09.2026 | USD | 300 | |||||||||||||||||||
117
UBS Group Financial StatementsNotes to the Financial Statements
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS subsidiaries outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
Brooklands Euro Referenced Linked Notes 2001-1 Ltd | ||||||||||||||||||||||||
2002 | 2.594 | 15.12.2012 | EUR | 100 | ||||||||||||||||||||
2002 | 3.480 | 15.12.2012 | EUR | 75 | ||||||||||||||||||||
2002 | 3.293 | 23.12.2012 | EUR | 75 | ||||||||||||||||||||
2002 | 3.893 | 23.12.2012 | EUR | 35 | ||||||||||||||||||||
2001 | FRN | 20.12.2013 | EUR | 50 | ||||||||||||||||||||
2001 | FRN | 20.12.2013 | EUR | 50 | ||||||||||||||||||||
Alpine Partners L.P. | ||||||||||||||||||||||||
2000 | FRN | 08.10.2009 | 08.01.2003 | USD | 445 | |||||||||||||||||||
North Street | ||||||||||||||||||||||||
2000 | FRN | 28.04.2011 | USD | 40 | ||||||||||||||||||||
2002 | FRN | 28.04.2011 | USD | 100 | ||||||||||||||||||||
2002 | FRN | 28.04.2011 | USD | 50 | ||||||||||||||||||||
2000 | 20.000 | 28.04.2011 | USD | 43 | ||||||||||||||||||||
2000 | FRN | 30.10.2011 | USD | 61 | ||||||||||||||||||||
2000 | 18.000 | 30.10.2011 | USD | 43 | ||||||||||||||||||||
2002 | FRN | 30.01.2016 | USD | 40 | ||||||||||||||||||||
2002 | 20.000 | 30.01.2016 | USD | 49 | ||||||||||||||||||||
2002 | FRN | 30.01.2016 | USD | 46 | ||||||||||||||||||||
2002 | 5.160 | 30.01.2016 | USD | 61 | ||||||||||||||||||||
2002 | FRN | 30.01.2016 | USD | 353 | ||||||||||||||||||||
2002 | FRN | 20.08.2030 | 20.08.2003 | USD | 100 | |||||||||||||||||||
2001 | FRN | 30.04.2031 | USD | 60 | ||||||||||||||||||||
2001 | FRN | 30.04.2031 | USD | 100 | ||||||||||||||||||||
2001 | FRN | 30.07.2031 | USD | 100 | ||||||||||||||||||||
2001 | FRN | 30.07.2031 | USD | 60 | ||||||||||||||||||||
UBS Americas Inc. (former PaineWebber) | ||||||||||||||||||||||||
1993 | 7.875 | 17.02.2003 | USD | 100 | ||||||||||||||||||||
2000 | 1.270 | 13.03.2003 | JPY | 9,000 | ||||||||||||||||||||
1998 | 6.320 | 18.03.2003 | USD | 45 | ||||||||||||||||||||
1998 | 6.450 | 01.12.2003 | USD | 340 | ||||||||||||||||||||
1999 | FRN | 11.05.2004 | USD | 45 | ||||||||||||||||||||
1999 | 6.375 | 17.05.2004 | USD | 525 | ||||||||||||||||||||
1995 | 8.875 | 15.03.2005 | USD | 125 | ||||||||||||||||||||
1999 | 2.210 | 15.03.2005 | USD | 45 | ||||||||||||||||||||
1993 | 6.500 | 01.11.2005 | USD | 200 | ||||||||||||||||||||
1996 | 6.750 | 01.02.2006 | USD | 100 | ||||||||||||||||||||
1998 | 6.720 | 01.04.2008 | USD | 35 | ||||||||||||||||||||
1998 | 6.730 | 03.04.2008 | USD | 43 | ||||||||||||||||||||
1998 | 6.550 | 15.04.2008 | USD | 250 | ||||||||||||||||||||
1996 | 7.625 | 15.10.2008 | USD | 150 | ||||||||||||||||||||
1999 | 7.625 | 01.12.2009 | USD | 275 | ||||||||||||||||||||
1994 | 7.625 | 17.02.2014 | USD | 200 | ||||||||||||||||||||
Eisberg Finance Ltd. | ||||||||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 83 | |||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 65 | |||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 41 | |||||||||||||||||||
118
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS subsidiaries outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
UBS Finance N.V., Curaçao | ||||||||||||||||||||||||
1997 | 0.000 | Zero Coupons | 29.01.2027 | EUR | 226 | |||||||||||||||||||
1998 | 0.000 | Zero Coupons | 03.03.2028 | 03.03.2003 | EUR | 81 | ||||||||||||||||||
UBS Australia Holdings Ltd. | ||||||||||||||||||||||||
1999 | 5.000 | European commercial paper | 25.02.2004 | AUD | 104 | |||||||||||||||||||
UBS Warburg AG | ||||||||||||||||||||||||
1998 | 0.000 | 19.12.2005 | EUR | 56 | ||||||||||||||||||||
2001 | 0.000 | 30.06.2006 | 30.06.2003 | EUR | 505 | |||||||||||||||||||
2001 | 0.000 | 30.06.2006 | 30.06.2003 | USD | 202 | |||||||||||||||||||
2001 | 0.000 | 31.07.2006 | 30.06.2003 | EUR | 500 | |||||||||||||||||||
2001 | 0.000 | 08.08.2006 | EUR | 77 | ||||||||||||||||||||
2001 | 0.000 | 30.09.2006 | 30.06.2003 | USD | 200 | |||||||||||||||||||
2001 | 0.000 | 30.09.2006 | 30.06.2003 | CHF | 200 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 350 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 300 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 350 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 450 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 300 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 450 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | CHF | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 250 | |||||||||||||||||||
2001 | 0.000 | 02.01.2007 | 30.06.2003 | EUR | 100 | |||||||||||||||||||
2001 | 0.000 | 02.01.2007 | 30.06.2003 | EUR | 100 | |||||||||||||||||||
2001 | 0.000 | 02.01.2007 | 30.06.2003 | EUR | 100 | |||||||||||||||||||
2002 | 0.000 | 30.03.2007 | 30.06.2003 | EUR | 60 | |||||||||||||||||||
2002 | 0.000 | 31.12.2007 | 30.06.2003 | EUR | 50 | |||||||||||||||||||
2001 | 0.000 | 30.09.2011 | 31.03.2003 | EUR | 50 | |||||||||||||||||||
2001 | 0.000 | 31.12.2011 | 30.06.2003 | EUR | 150 | |||||||||||||||||||
2002 | 0.000 | 28.09.2012 | 30.06.2003 | EUR | 50 | |||||||||||||||||||
119122
UBS Group Financial StatementsNotes to the Financial Statements
Note 19 Other Liabilities
CHF million | Note | 31.12.02 | 31.12.01 | Note | 31.12.03 | 31.12.02 | ||||||||||||||||||
Provisions | 20 | 1,375 | 1,748 | 20 | 1,361 | 1,375 | ||||||||||||||||||
Provision for commitments and contingent liabilities | 9b | 366 | 305 | 9b | 290 | 366 | ||||||||||||||||||
Current tax liabilities | 2,079 | 1,799 | 1,754 | 2,079 | ||||||||||||||||||||
Deferred tax liabilities | 21 | 2,239 | 2,827 | 21 | 2,214 | 2,239 | ||||||||||||||||||
VAT and other tax payables | 613 | 622 | 544 | 613 | ||||||||||||||||||||
Settlement and clearing accounts | 1,354 | 4,473 | ||||||||||||||||||||||
Settlement and clearing account | 2,608 | 1,354 | ||||||||||||||||||||||
Obligations under life insurance policies | 13,544 | 0 | ||||||||||||||||||||||
Other payables | 4,313 | 3,884 | 9,001 | 4,313 | ||||||||||||||||||||
Total other liabilities | 12,339 | 15,658 | 31,316 | 12,339 | ||||||||||||||||||||
Note 20 Provisions
Total | Total | Total | Total | |||||||||||||||||||||||||||||
CHF million | Operational | Litigation | 31.12.02 | 31.12.01 | Operational | Litigation | 31.12.03 | 31.12.02 | ||||||||||||||||||||||||
Balance at the beginning of the year | 1,036 | 712 | 1,748 | 2,294 | 721 | 654 | 1,375 | 1,748 | ||||||||||||||||||||||||
New provisions charged to income | 210 | 478 | 688 | 384 | 136 | 194 | 330 | 688 | ||||||||||||||||||||||||
Capitalized reinstatement costs | 155 | 155 | ||||||||||||||||||||||||||||||
Recoveries | 16 | 9 | 25 | 95 | 17 | 23 | 40 | 25 | ||||||||||||||||||||||||
Provisions applied | (439 | ) | (463 | ) | (902 | ) | (1,115 | ) | (135 | ) | (317 | ) | (452 | ) | (902 | ) | ||||||||||||||||
Reclassifications | (9 | ) | 9 | 0 | 64 | 4 | (4 | ) | 0 | 0 | ||||||||||||||||||||||
Foreign currency translation | (93 | ) | (91 | ) | (184 | ) | 26 | (43 | ) | (44 | ) | (87 | ) | (184 | ) | |||||||||||||||||
Balance at the end of the year | 721 | 654 | 1,375 | 1,748 | 855 | 506 | 1,361 | 1,375 | ||||||||||||||||||||||||
Note 21 Income Taxes
CHF million For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||
CHF million | |||||||||||||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||
Domestic | Domestic | ||||||||||||||||||||||||
Current | Current | 938 | 563 | 1,325 | 810 | 938 | 563 | ||||||||||||||||||
Deferred | Deferred | (32 | ) | 231 | 233 | 143 | (32 | ) | 231 | ||||||||||||||||
Foreign | Foreign | ||||||||||||||||||||||||
Current | Current | 249 | 546 | 451 | 294 | 249 | 546 | ||||||||||||||||||
Deferred | Deferred | (477 | ) | 61 | 311 | 371 | (477 | ) | 61 | ||||||||||||||||
Total income tax expense | Total income tax expense | 678 | 1,401 | 2,320 | 1,618 | 678 | 1,401 | ||||||||||||||||||
The Group made net tax payments, including domestic and foreign taxes, of CHF 5721,104 million, CHF 1,742572 million and CHF 9591,742 million for the full years of 2003, 2002 2001 and 2000,2001, respectively.
120123
Financial Statements
Notes to the Financial Statements
Note 21 Income Taxes (continued)
The components of operating profit before tax, and the differences between income tax expense reflected in the financial statements and the amounts calculated at the Swiss statutory rate of 25% are as follows:
CHF million | CHF million | ||||||||||||||||||||||||
For the year ended | For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Operating profit before tax | Operating profit before tax | 4,544 | 6,718 | 10,199 | 8,348 | 4,544 | 6,718 | ||||||||||||||||||
Domestic | 5,491 | 6,510 | 5,565 | ||||||||||||||||||||||
Foreign | 2,857 | (1,966 | ) | 1,153 | |||||||||||||||||||||
Domestic | 6,510 | 5,565 | 7,079 | ||||||||||||||||||||||
Foreign | (1,966 | ) | 1,153 | 3,120 | |||||||||||||||||||||
Income taxes at Swiss statutory rate of 25% | 1,136 | 1,680 | 2,550 | ||||||||||||||||||||||
Increase/(decrease) resulting from: | |||||||||||||||||||||||||
Income taxes at Swiss statutory rate of 24% in 2003 and 25% in 2002 and 2001, respectively | 2,004 | 1,136 | 1,680 | ||||||||||||||||||||||
Increase / (decrease) resulting from: | |||||||||||||||||||||||||
Applicable tax rates differing from Swiss statutory rate | Applicable tax rates differing from Swiss statutory rate | (341 | ) | (239 | ) | (336 | ) | (250 | ) | (341 | ) | (239 | ) | ||||||||||||
Tax losses not recognized | Tax losses not recognized | 51 | 77 | 164 | 42 | 51 | 77 | ||||||||||||||||||
Previously unrecorded tax losses now recognized | Previously unrecorded tax losses now recognized | (349 | ) | (630 | ) | (655 | ) | (291 | ) | (349 | ) | (630 | ) | ||||||||||||
Lower taxed income | Lower taxed income | (378 | ) | (499 | ) | (401 | ) | (366 | ) | (378 | ) | (499 | ) | ||||||||||||
Non-deductible goodwill amortization | Non-deductible goodwill amortization | 291 | 429 | 159 | 386 | 291 | 429 | ||||||||||||||||||
Other non-deductible expenses | Other non-deductible expenses | 301 | 134 | 432 | 186 | 301 | 134 | ||||||||||||||||||
Adjustments related to prior years and other | Adjustments related to prior years and other | (122 | ) | 371 | 245 | (191 | ) | (122 | ) | 371 | |||||||||||||||
Change in deferred tax valuation allowance | Change in deferred tax valuation allowance | 89 | 78 | 162 | 98 | 89 | 78 | ||||||||||||||||||
Income tax expense | Income tax expense | 678 | 1,401 | 2,320 | 1,618 | 678 | 1,401 | ||||||||||||||||||
Significant components of the Group’s gross deferred income tax assets and liabilities are as follows:
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||||||
Deferred tax assets | ||||||||||||||||||||
Compensation and benefits | 1,559 | 1,778 | 1,538 | 1,559 | ||||||||||||||||
Allowance for credit losses | 84 | 122 | 4 | 84 | ||||||||||||||||
Net operating loss carry forwards | 2,883 | 2,902 | 2,626 | 2,883 | ||||||||||||||||
Trading assets | 330 | 259 | 306 | 330 | ||||||||||||||||
Other | 779 | 1,365 | 685 | 779 | ||||||||||||||||
Total | 5,635 | 6,426 | 5,159 | 5,635 | ||||||||||||||||
Valuation allowance | (2,835 | ) | (2,977 | ) | (2,883 | ) | (2,835 | ) | ||||||||||||
Net deferred tax assets | 2,800 | 3,449 | 2,276 | 2,800 | ||||||||||||||||
Deferred tax liabilities | ||||||||||||||||||||
Property and equipment | 412 | 449 | 307 | 412 | ||||||||||||||||
Investments | 430 | 464 | 388 | 430 | ||||||||||||||||
Other provisions | 470 | 571 | 401 | 470 | ||||||||||||||||
Trading assets | 182 | 298 | 348 | 182 | ||||||||||||||||
Other | 745 | 1,045 | 770 | 745 | ||||||||||||||||
Total deferred tax liabilities | 2,239 | 2,827 | 2,214 | 2,239 | ||||||||||||||||
The change in the balance of net deferred tax assets and deferred tax liabilities does not equal the deferred tax expense in those years. This is due to the effect of foreign currency rate changes on tax assets and liabilities denominated in currencies other than CHF.
124
Note 21 Income Taxes (continued)
Certain foreign branches and subsidiaries of the Group have deferred tax assets related to net operating loss carry forwards and other items. Due to realization of these assets being uncertain, the Group has established valuation allowances of CHF 2,8352,883 million (CHF 2,9772,835 million at 31 December 2001)2002). For companies that suffered tax losses in either the current or preceding year an amount of CHF 947542 million (CHF 965947 million at 31 December 2001)2002) has been recognized as deferred tax assets based on expectations that sufficient taxable income will be generated in future years to utilize the tax loss carry forwards.
121
UBS Group Financial StatementsNotes to the Financial Statements
Note 21 Income Taxes (continued)
At 31 December 20022003 net operating loss carry forwards totaling CHF 6,5726,989 million (not recognized as a deferred tax asset) are available to reduce future taxable income of certain branches and subsidiaries.
The carry forwards expire as follows: | ||||||||
Within 1 year | ||||||||
From 2 to 4 years | ||||||||
After 4 years | ||||||||
Total | 6,989 | |||||||
Note 22 Minority Interests
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Balance at the beginning of the year | 4,112 | 2,885 | 3,529 | 4,112 | ||||||||||||
Issuance of trust preferred securities | 0 | 1,291 | 372 | 0 | ||||||||||||
Other increases | 172 | 0 | 573 | 172 | ||||||||||||
Decreases and dividend payments | (377 | ) | (461 | ) | (357 | ) | (377 | ) | ||||||||
Foreign currency translation | (709 | ) | 53 | (389 | ) | (709 | ) | |||||||||
Minority interest in net profit | 331 | 344 | 345 | 331 | ||||||||||||
Balance at the end of the year | 3,529 | 4,112 | 4,073 | 3,529 | ||||||||||||
125
Type of derivatives
– | Interest rate swap contracts generally entail the contractual exchange of fixed and floating rate interest payments in a single currency, based on a notional amount and an interest reference rate. |
– | Cross currency swaps involve the exchange of interest payments based on two different currency principal balances and interest reference rates and generally also entail exchange of principal amounts at the start |
– | Credit default swaps (CDS) are the most common form of credit derivative, under which the party buying protection makes one or more payments to the party selling protection during |
the life of the swap in exchange for an undertaking by the seller to make a payment to the buyer following a credit event, as defined in the contract, with respect to a third party. Settlement following a credit event may be a cash amount, or cash in return for physical delivery of one or more deliverable obligations of the credit entity, as defined in the contract, and is made regardless of whether the protection buyer has suffered a loss. After a credit event and settlement, the contract is terminated. |
– | Total Rate of Return Swaps give the total return receiver exposure to all of the cash flow and economic benefits and risks of an underlying security without actually owning the security, while the total return payer has a synthetic short position in the underlying reference security. |
the-counter (OTC) market, whereas futures are
122
Derivatives transacted for trading purposes
Derivatives transacted for hedging purposes
126
Derivatives designated and accounted
for
as hedging instruments
Fair value hedges
Cash flow hedges of individual variable
rate assets and liabilities
Cash flow hedges of forecast transactions
123
UBS Group Financial StatementsNotes to the Financial Statements
ingnon-trading interest rate risk of the Group, which is hedged with interest rate swaps, which extend over a twenty-four-yeartwenty-three-year period.
The schedule of forecast principal cash flows as at 31 December 20022003 is as follows:follows.
CHF billion | < 1 year | 1-3 years | 3-5 years | 5-10 years | over 10 years | |||||||||||||||
Cash inflows (Assets) | 119 | 202 | 124 | 128 | 8 | |||||||||||||||
Cash outflows (Liabilities) | 159 | 247 | 193 | 324 | 237 | |||||||||||||||
Net cash flows | (40 | ) | (45 | ) | (69 | ) | (196 | ) | (229 | ) | ||||||||||
CHF billion | < 1 year | 1–3 years | 3–5 years | 5–10 years | over 10 years | |||||||||||||||
Cash inflows (Assets) | 170 | 261 | 181 | 191 | 16 | |||||||||||||||
Cash outflows (Liabilities) | 148 | 250 | 183 | 287 | 167 | |||||||||||||||
Net cash flows | 22 | 11 | (2 | ) | (96 | ) | (151 | ) | ||||||||||||
127
Financial Statements
Notes to the Financial Statements
Gains and losses on derivatives designated as cash flow hedges of forecast transactions are initially recorded in Shareholders’ equity as “Gains/Gains / losses not recognized in the income statement”statement and transferred to current period earnings when the forecast cash flows occur.affect net profit or loss. As at 31 December 2002,2003, the fair value of outstanding derivatives designated as cash flow hedges of forecast transactions was a CHF 181871 million net unrealizednegative replacement value. During the year, certain CHF hedging interest rate swaps with a positive replacement value of CHF 867 million were terminated. At this year-end, the unrecognized income of CHF 805 million associated with swaps has remained deferred in shareholders’ equity to be removed from the equity when the underlying previously hedged cash flows impact net profit or loss. Amounts reclassified from Gains/Gains / losses not recognized in the income statement to current period earnings due to discontinuation of hedge accounting were immaterial.CHF 7 million net gain which is recorded in net interest income.
Notional amounts and replacement values
value is the cost to the Group’s counterparties of replacing all their transactions with the Group where the fair value is in their favor if the Group were to default. The total positive and negative replacement values are included in the balance sheet separately. For internal credit risk measurement the potential evolution of the value of the portfolio of trades with each counterparty is also modelledmodeled over its life (potential future exposure), taking into account legally enforceable close outclose-out netting agreements where applicable (see below).
Credit mitigation
124128
Note 23 Derivative Instruments (continued)
As at 31 December 2002 | Term to maturity | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at 31 December 2003 | Term to maturity | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
notional | notional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3-12 months | 1-5 years | over 5 years | Total | Total | amount | Within 3 months | 3–12 months | 1–5 years | over 5 years | Total | Total | amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | CHF million | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts | Interest rate contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 3,785 | 4,127 | 93 | 121 | 141 | 333 | 33 | 8 | 4,052 | 4,589 | 1,517.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Swaps | 2,862 | 3,778 | 9,451 | 8,127 | 78,413 | 76,244 | 55,377 | 51,917 | 146,103 | 140,066 | 5,753.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 338 | 706 | 1,143 | 1,488 | 4,216 | 5,484 | 3,905 | 4,464 | 9,602 | 12,142 | 663.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 423 | 588 | 258 | 312 | 71 | 130 | 6 | 4 | 758 | 1,034 | 1,128.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Swaps | 3,831 | 4,388 | 9,715 | 9,918 | 66,959 | 65,074 | 52,019 | 50,517 | 132,524 | 129,897 | 8,064.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 464 | 977 | 868 | 992 | 4,579 | 5,967 | 4,223 | 5,334 | 10,134 | 13,270 | 815.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 40.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4 | 16 | 1 | 4 | 17 | 101.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 243.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 7 | 9 | 2 | 8 | 9 | 17 | 63.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 6,989 | 8,627 | 10,687 | 9,737 | 82,770 | 82,061 | 59,315 | 56,389 | 159,761 | 156,814 | 8,074.9 | 4,725 | 5,962 | 10,843 | 11,230 | 71,609 | 71,171 | 56,248 | 55,855 | 143,425 | 144,218 | 10,315.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit derivative contracts | Credit derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 2 | 7 | 95 | 504 | 1,636 | 2,740 | 2,852 | 958 | 4,585 | 4,209 | 164.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total rate of return swaps | 15 | 21 | 194 | 782 | 2,308 | 1,726 | 162 | 35 | 2,679 | 2,564 | 14.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 109 | 102 | 39 | 61 | 3,443 | 3,537 | 2,105 | 1,880 | 5,696 | 5,580 | 289.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total rate of return swaps | 27 | 2 | 29 | 576 | 197 | 470 | 112 | 305 | 365 | 1,353 | 12.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 17 | 28 | 289 | 1,286 | 3,944 | 4,466 | 3,014 | 993 | 7,264 | 6,773 | 179.1 | 136 | 104 | 68 | 637 | 3,640 | 4,007 | 2,217 | 2,185 | 6,061 | 6,933 | 301.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 2,406 | 3,100 | 1,005 | 1,732 | 232 | 270 | 11 | 1 | 3,654 | 5,103 | 252.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and currency swaps | 21,561 | 20,641 | 8,962 | 10,292 | 8,627 | 8,907 | 3,360 | 3,990 | 42,510 | 43,830 | 1,843.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 2,223 | 2,219 | 1,681 | 1,636 | 361 | 312 | 7 | 4,272 | 4,167 | 500.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 3,045 | 3,879 | 1,978 | 2,573 | 161 | 317 | 15 | 12 | 5,199 | 6,781 | 298.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and currency swaps | 24,929 | 25,242 | 14,258 | 12,428 | 17,804 | 14,394 | 6,002 | 5,250 | 62,993 | 57,314 | 2,254.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 3,232 | 3,348 | 3,211 | 2,550 | 360 | 356 | 9 | 1 | 6,812 | 6,255 | 576.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 1 | 1 | 1 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 5.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 3 | 3 | 119 | 116 | 122 | 119 | 13.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 26,190 | 25,961 | 11,649 | 13,660 | 9,220 | 9,489 | 3,378 | 3,991 | 50,437 | 53,101 | 2,596.0 | 31,209 | 32,472 | 19,566 | 17,667 | 18,325 | 15,067 | 6,026 | 5,263 | 75,126 | 70,469 | 3,147.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Precious metals contracts | Precious metals contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 329 | 231 | 235 | 257 | 150 | 121 | 9 | 8 | 723 | 617 | 18.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 205 | 217 | 325 | 289 | 407 | 373 | 86 | 63 | 1,023 | 942 | 38.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 246 | 247 | 377 | 306 | 333 | 270 | 18 | 23 | 974 | 846 | 15.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 304 | 193 | 308 | 386 | 668 | 629 | 116 | 54 | 1,396 | 1,262 | 35.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 1 | 4 | 0 | 6 | 0.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 1.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 9 | 40 | 21 | 63 | 3 | 4 | 33 | 107 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 534 | 449 | 560 | 547 | 557 | 498 | 95 | 71 | 1,746 | 1,565 | 56.8 | 559 | 480 | 706 | 755 | 1,004 | 903 | 134 | 77 | 2,403 | 2,215 | 54.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity/Index contracts | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity / Index contracts | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 5,393 | 1,406 | 583 | 512 | 917 | 205 | 124 | 219 | 7,017 | 2,342 | 33.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 8,676 | 12,441 | 2,515 | 3,496 | 6,650 | 7,125 | 403 | 794 | 18,244 | 23,856 | 99.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 510 | 529 | 760 | 583 | 923 | 449 | 1,408 | 500 | 3,601 | 2,061 | 57.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 1,843 | 2,788 | 3,476 | 7,847 | 8,584 | 13,646 | 1,329 | 4,560 | 15,232 | 28,841 | 213.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 7.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 861 | 246 | 316 | 247 | 443 | 338 | 1,620 | 831 | 7.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 8.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 708 | 858 | 892 | 1,363 | 886 | 768 | 54 | 117 | 2,540 | 3,106 | 62.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 14,930 | 14,093 | 3,414 | 4,255 | 8,010 | 7,668 | 527 | 1,013 | 26,881 | 27,029 | 147.4 | 3,061 | 4,175 | 5,128 | 9,793 | 10,393 | 14,863 | 2,791 | 5,177 | 21,373 | 34,008 | 342.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity contracts | Commodity contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 5 | 3 | 2,629 | 2,670 | 346 | 304 | 2,980 | 2,977 | 24.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 206 | 181 | 456 | 424 | 93 | 42 | 755 | 647 | 10.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 168 | 153 | 73 | 53 | 241 | 206 | 1.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 5 | 3 | 2,629 | 2,670 | 346 | 304 | 0 | 0 | 2,980 | 2,977 | 24.9 | 374 | 334 | 529 | 477 | 93 | 42 | 0 | 0 | 996 | 853 | 12.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total derivative instruments | Total derivative instruments | 48,665 | 49,161 | 29,228 | 32,155 | 104,847 | 104,486 | 66,329 | 62,457 | 249,069 | 248,259 | 40,064 | 43,527 | 36,840 | 40,559 | 105,064 | 106,053 | 67,416 | 68,557 | 249,384 | 258,696 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Replacement value netting | Replacement value netting | 166,977 | 166,977 | 165,050 | 165,050 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Replacement values after netting | Replacement values after netting | 82,092 | 81,282 | 84,334 | 93,646 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
125129
UBS Group Financial Statements
Notes to the Financial Statements
Note 23 Derivative Instruments (continued)
As at 31 December 2001 | Term to maturity | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at 31 December 2002 | Term to maturity | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
notional | notional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3-12 months | 1-5 years | over 5 years | Total | Total | amount | Within 3 months | 3–12 months | 1–5 years | over 5 years | Total | Total | amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | CHF million | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts | Interest rate contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 2,844 | 3,260 | 114 | 530 | 108 | 245 | 48 | 134 | 3,114 | 4,169 | 1,768.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Swaps | 2,807 | 4,322 | 5,724 | 6,393 | 49,043 | 45,029 | 25,232 | 22,866 | 82,806 | 78,610 | 4,552.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 388 | 950 | 670 | 2,095 | 3,037 | 4,048 | 2,830 | 3,336 | 6,925 | 10,429 | 784.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 3,785 | 4,127 | 93 | 121 | 141 | 333 | 33 | 8 | 4,052 | 4,589 | 1,517.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Swaps | 2,862 | 3,778 | 9,451 | 8,127 | 78,413 | 76,244 | 55,377 | 51,917 | 146,103 | 140,066 | 5,753.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 338 | 706 | 1,143 | 1,488 | 4,216 | 5,484 | 3,905 | 4,464 | 9,602 | 12,142 | 663.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 83.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 3 | 24 | 3 | 24 | 63.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 40.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4 | 16 | 1 | 4 | 17 | 101.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 6,042 | 8,532 | 6,508 | 9,042 | 52,188 | 49,322 | 28,110 | 26,336 | 92,848 | 93,232 | 7,252.8 | 6,989 | 8,627 | 10,687 | 9,737 | 82,770 | 82,061 | 59,315 | 56,389 | 159,761 | 156,814 | 8,074.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit derivative contracts | Credit derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 6 | 18 | 707 | 1,104 | 1,020 | 1,490 | 773 | 1,184 | 2,506 | 3,796 | 75.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total rate of return swaps | 84 | 621 | 636 | 12 | 0 | 96 | 1,257 | 3.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 2 | 7 | 95 | 504 | 1,636 | 2,740 | 2,852 | 958 | 4,585 | 4,209 | 164.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total rate of return swaps | 15 | 21 | 194 | 782 | 2,308 | 1,726 | 162 | 35 | 2,679 | 2,564 | 14.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 6 | 18 | 791 | 1,725 | 1,020 | 2,126 | 785 | 1,184 | 2,602 | 5,053 | 79.3 | 17 | 28 | 289 | 1,286 | 3,944 | 4,466 | 3,014 | 993 | 7,264 | 6,773 | 179.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 3,615 | 3,163 | 1,639 | 1,899 | 755 | 428 | 20 | 6,029 | 5,490 | 279.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and currency swaps | 19,344 | 11,224 | 8,991 | 7,763 | 7,463 | 7,673 | 3,465 | 2,312 | 39,263 | 28,972 | 1,699.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 2,138 | 1,942 | 2,148 | 1,888 | 445 | 433 | 23 | 1 | 4,754 | 4,264 | 1,033.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 2,406 | 3,100 | 1,005 | 1,732 | 232 | 270 | 11 | 1 | 3,654 | 5,103 | 252.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and currency swaps | 21,561 | 20,641 | 8,962 | 10,292 | 8,627 | 8,907 | 3,360 | 3,990 | 42,510 | 43,830 | 1,843.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 2,223 | 2,219 | 1,681 | 1,636 | 361 | 312 | 7 | 4,272 | 4,167 | 500.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 2 | 1 | 2 | 0.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 1 | 1 | 1 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 25,097 | 16,329 | 12,779 | 11,552 | 8,663 | 8,534 | 3,508 | 2,313 | 50,047 | 38,728 | 3,013.5 | 26,190 | 25,961 | 11,649 | 13,660 | 9,220 | 9,489 | 3,378 | 3,991 | 50,437 | 53,101 | 2,596.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Precious metals contracts | Precious metals contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 242 | 223 | 210 | 198 | 195 | 179 | 6 | 653 | 600 | 17.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 177 | 164 | 535 | 507 | 740 | 805 | 90 | 81 | 1,542 | 1,557 | 54.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 329 | 231 | 235 | 257 | 150 | 121 | 9 | 8 | 723 | 617 | 18.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 205 | 217 | 325 | 289 | 407 | 373 | 86 | 63 | 1,023 | 942 | 38.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 2 | 3 | 1 | 3 | 3 | 0.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 1 | 4 | 0 | 6 | 0.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 419 | 389 | 748 | 706 | 935 | 984 | 96 | 81 | 2,198 | 2,160 | 72.0 | 534 | 449 | 560 | 547 | 557 | 498 | 95 | 71 | 1,746 | 1,565 | 56.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity/Index contracts | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity / Index contracts | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 1,402 | 1,422 | 445 | 1,713 | 1,461 | 1,464 | 111 | 85 | 3,419 | 4,684 | 35.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 6,140 | 6,222 | 4,294 | 5,105 | 4,076 | 6,991 | 1,087 | 2,844 | 15,597 | 21,162 | 238.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 5,393 | 1,406 | 583 | 512 | 917 | 205 | 124 | 219 | 7,017 | 2,342 | 33.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 8,676 | 12,441 | 2,515 | 3,496 | 6,650 | 7,125 | 403 | 794 | 18,244 | 23,856 | 99.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | Exchange-traded contracts3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 12.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 1,497 | 1,080 | 1,187 | 1,431 | 601 | 463 | 21 | 14 | 3,306 | 2,988 | 440.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 7.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 861 | 246 | 316 | 247 | 443 | 338 | 1,620 | 831 | 7.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 9,039 | 8,724 | 5,926 | 8,249 | 6,138 | 8,918 | 1,219 | 2,943 | 22,322 | 28,834 | 726.0 | 14,930 | 14,093 | 3,414 | 4,255 | 8,010 | 7,668 | 527 | 1,013 | 26,881 | 27,029 | 147.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity contracts | Commodity contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | Over the counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 8 | 14 | 1 | 1 | 9 | 15 | 6.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 5 | 3 | 2,629 | 2,670 | 346 | 304 | 2,980 | 2,977 | 24.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | 8 | 14 | 1 | 1 | 0 | 0 | 0 | 0 | 9 | 15 | 6.4 | 5 | 3 | 2,629 | 2,670 | 346 | 304 | 0 | 0 | 2,980 | 2,977 | 24.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total derivative instruments | Total derivative instruments | 40,611 | 34,006 | 26,753 | 31,275 | 68,944 | 69,884 | 33,718 | 32,857 | 170,026 | 168,022 | 48,665 | 49,161 | 29,228 | 32,155 | 104,847 | 104,486 | 66,329 | 62,457 | 249,069 | 248,259 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Replacement value netting | Replacement value netting | 96,579 | 96,579 | 166,977 | 166,977 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Replacement values after netting | Replacement values after netting | 73,447 | 71,443 | 82,092 | 81,282 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
126130
Off-Balance Sheet Information |
Note 24 Fiduciary Transactions
Fiduciary placement represents funds which customers have instructed the Group to place in foreign banks. The Group is not liable to the customer for any default by the foreign bank nor do creditors of the Group have a claim on the assets placed.
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Placements with third parties | 43,440 | 58,466 | 37,851 | 43,440 | ||||||||||||
Fiduciary credits and other fiduciary financial transactions | 774 | 1,136 | 74 | 774 | ||||||||||||
Total fiduciary transactions | 44,214 | 59,602 | 37,925 | 44,214 | ||||||||||||
The Group also acts in its own name as trustee or in fiduciary capacities for the account of third parties. The assets managed in such capacities are not reported on the balance sheet unless they are invested with UBS. UBS earns commission and fee income from such transactions and assets. These activities potentially expose UBS to liability risks in cases of gross negligence with regard to non-compliance ofwith its fiduciary and contractual duties. The risks associated with this business are covered by the standard UBS risk framework.
The Group utilizes various lending-related financial instruments in order to meet the financial needs of its customers. The Group issues commitments to extend credit, standby and other letters of credit, guarantees, commitments to enter into repurchase agreements, note issuance facilities and revolving underwriting facilities. Guarantees represent irrevocable assurances, subject to the satisfaction of certain conditions, that the Group will make payment in the event that the customer fails to fulfill its obligation to third parties. The Group also enters into commitments to extend credit in the form of credit lines which are available to secure the liquidity needs of ourits customers, but not yet drawn upon by them, the majority of which range in maturity from 1 month to 5 years.
loan facilities and is monitored with the same risk control processes and specific credit risk policies. For the years ended 31 December 2003, 2002 2001 and 20002001 the Group recognized CHF 23 million expense recovery, CHF 13 million expense and CHF 25 million expense, respectively, in the income statement related to obligations incurred for contingencies and commitments of CHF 13 million, CHF 25 million and CHF 1 million, respectively.
127131
UBS Group Financial Statements
Notes to the Financial Statements
Note 25 Commitments and Contingent Liabilities (continued)
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Contingent liabilities | ||||||||||||||||
Credit guarantees and similar instruments1 | 11,522 | 18,566 | 10,832 | 11,522 | ||||||||||||
Sub-participations | (650 | ) | (4,944 | ) | (765 | ) | (650 | ) | ||||||||
Total | 10,872 | 13,622 | 10,067 | 10,872 | ||||||||||||
Performance guarantees and similar instruments2 | 3,216 | 4,865 | 2,760 | 3,216 | ||||||||||||
Sub-participations | (348 | ) | (4 | ) | (276 | ) | (348 | ) | ||||||||
Total | 2,868 | 4,861 | 2,484 | 2,868 | ||||||||||||
Irrevocable commitments under documentary credits | 1,856 | 2,056 | 1,971 | 1,856 | ||||||||||||
Sub-participations | (259 | ) | 0 | (373 | ) | (259 | ) | |||||||||
Total | 1,597 | 2,056 | 1,598 | 1,597 | ||||||||||||
Gross contingent liabilities | 16,594 | 25,487 | 15,563 | 16,594 | ||||||||||||
Sub-participations | (1,257 | ) | (4,948 | ) | (1,414 | ) | (1,257 | ) | ||||||||
Net contingent liabilities | 15,337 | 20,539 | 14,149 | 15,337 | ||||||||||||
Irrevocable commitments | ||||||||||||||||
Undrawn irrevocable credit facilities | 39,306 | 50,608 | 46,623 | 39,306 | ||||||||||||
Sub-participations | (446 | ) | (532 | ) | (235 | ) | (446 | ) | ||||||||
Total | 38,860 | 50,076 | 46,388 | 38,860 | ||||||||||||
Liabilities for calls on shares and other equities | 21 | 98 | 337 | 21 | ||||||||||||
Gross irrevocable commitments | 39,327 | 50,706 | 46,960 | 39,327 | ||||||||||||
Sub-participations | (446 | ) | (532 | ) | (235 | ) | (446 | ) | ||||||||
Net irrevocable commitments | 38,881 | 50,174 | 46,725 | 38,881 | ||||||||||||
Gross commitments and contingent liabilities | 55,921 | 76,193 | 62,523 | 55,921 | ||||||||||||
Sub-participations | (1,703 | ) | (5,480 | ) | (1,649 | ) | (1,703 | ) | ||||||||
Net commitments and contingent liabilities | 54,218 | 70,713 | 60,874 | 54,218 | ||||||||||||
Mortgage | Other | Mortgage | Other | |||||||||||||||||||||||||||||
CHF million | collateral | collateral | Unsecured | Total | collateral | collateral | Unsecured | Total | ||||||||||||||||||||||||
Overview of collateral | ||||||||||||||||||||||||||||||||
Gross contingent liabilities | 275 | 8,254 | 8,065 | 16,594 | 142 | 7,297 | 8,124 | 15,563 | ||||||||||||||||||||||||
Gross irrevocable commitments | 1,084 | 14,956 | 23,266 | 39,306 | 2,495 | 23,573 | 20,555 | 46,623 | ||||||||||||||||||||||||
Liabilities for calls on shares and other equities | 21 | 21 | 337 | 337 | ||||||||||||||||||||||||||||
Total 31.12.2003 | 2,637 | 30,870 | 29,016 | 62,523 | ||||||||||||||||||||||||||||
Total 31.12.2002 | 1,359 | 23,210 | 31,352 | 55,921 | 1,359 | 23,210 | 31,352 | 55,921 | ||||||||||||||||||||||||
Total 31.12.2001 | 1,711 | 25,625 | 48,857 | 76,193 | ||||||||||||||||||||||||||||
Other commitments
128132
Note 26 Operating Lease Commitments
At 31 December 2002,2003, UBS was obligated under a number of non-cancellable operating leases for premises and equipment used primarily for banking purposes. The significant premises leases usually include renewal options and escalation clauses in line with general office rental market conditions as well as rent adjustments based on price indices. However, the lease agreements do not contain contingent rent payment clauses and purchase options. The leases also do not impose any restrictions on UBS’s ability to pay dividends, engage in debt financing transactions or enter into further lease agreements.
CHF million | 31.12.02 | 31.12.03 | ||||||
Operating leases due | ||||||||
2003 | 1,038 | |||||||
2004 | 913 | 876 | ||||||
2005 | 777 | 770 | ||||||
2006 | 663 | 707 | ||||||
2007 | 623 | 632 | ||||||
2008 and thereafter | 5,082 | |||||||
2008 | 595 | |||||||
2009 and thereafter | 3,992 | |||||||
Total commitments for minimum payments under operating leases | 9,096 | |||||||
Subtotal commitments for minimum payments under operating leases | 7,572 | |||||||
Less: Sublease rentals under non-cancellable leases | 645 | |||||||
Net commitments for minimum payments under operating leases | 6,927 | |||||||
Operating expenses for the year ended 31 December 2003 include CHF 1,233 million of gross operating lease rentals which were reduced by CHF 43 million of sublease income. Operating expenses include CHF 1,193 million CHF 1,092 million and CHF 8161,092 million in respect of operating lease rentals for the yearyears ended 31 December 2002 and 31 December 2001, and 31 December 2000, respectively.
129133
UBS Group Financial Statements
Notes to the Financial Statements
Additional Information |
Note 27 Pledged Assets
Assets are pledged as collateral for collateralized credit lines with central banks, loans from central mortgage institutions, deposit guarantees for savings banks, security deposits relating to stock exchange membership and mortgages on the Group’s property. The following table shows additional information about assets pledged or assigned as security for liabilities and assets subject to reservation of title for the years ended 31 December 20022003 and 31 December 2001. The securities presented in the table below2002. Carrying Related Carrying Related amount liability amount liability CHF million 31.12.03 31.12.03 31.12.02 31.12.02 Mortgage loans 428 209 808 506 157,639 121,984 50,945 37,038 Property and equipment 0 0 129 33 Other 0 0 2 0 158,067 122,193 51,884 37,577 agreements. Carrying Related Carrying Related amount liability amount liability CHF million 31.12.02 31.12.02 31.12.01 31.12.01 Mortgage loans 808 506 1,311 873 Securities 50,945 37,038 204,623 163,134 Property and equipment 129 33 160 89 Other 2 0 2 0 Total pledged assets 51,884 37,577 206,096 164,096 Note 28 Litigation
Due to the nature of their business, the bank and other companies within the UBS Group are involved in various claims, disputes and legal proceedings, arising in the ordinary course of business. The Group makes provisions for such matters when, in the opinion of management and its professional advisors, it is probable that a payment will be made by the Group, and the amount can be reasonably estimated (see Note 20).
In respect of the further claims asserted against the Group of which management is aware (and which, according to the principles outlined above, have not been provided for), it is the opinion of the management that such claims are either without merit, can be successfully defended or will not have a material adverse effect on the Group’s financial condition, results of operations or liquidity.
This section presents information about the Group’sUBS’s exposure to and its management and control of risks, in particular the primary risks associated with its use of financial instruments:
– | market risk is exposure to observable market variables such as interest rates, exchange rates and equity markets |
– | credit risk is the risk of loss resulting from client or counterparty default and arises on |
credit exposure in all forms, including settlement risk |
– |
130134
(a)(i) Overview
tions in price volatility and market depth and liquidity. They include controls on exposure to individual market risk variables, such as individual interest or
exchange rates, and limits on positions in the securities of individual issuers. These controls are set at levels which reflect variations in price volatility and market depth and liquidity.issuers (‘issuer risk’).
(a)(ii) Interest Rate Risk
131135
UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (continued)
Interest rate sensitivity position (continued)
Interest rate sensitivity by time bands at 31.12.2003 | ||||||||||||||||||||||||||
CHF thousand | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||||
per basis point increase | month | months | months | years | years | Total | ||||||||||||||||||||
CHF | Trading | 19 | (185 | ) | (6 | ) | 311 | (91 | ) | 48 | ||||||||||||||||
Non-trading | (38 | ) | (99 | ) | (359 | ) | (4,288 | ) | (3,587 | ) | (8,371 | ) | ||||||||||||||
USD | Trading | (17 | ) | (690 | ) | (638 | ) | (941 | ) | 1,190 | (1,096 | ) | ||||||||||||||
Non-trading | 50 | (55 | ) | (92 | ) | (2,213 | ) | (1,702 | ) | (4,012 | ) | |||||||||||||||
EUR | Trading | (84 | ) | (206 | ) | 398 | (1,018 | ) | 649 | (261 | ) | |||||||||||||||
Non-trading | 4 | 6 | (21 | ) | (131 | ) | (196 | ) | (338 | ) | ||||||||||||||||
GBP | Trading | 24 | 31 | 131 | (736 | ) | 536 | (14 | ) | |||||||||||||||||
Non-trading | 0 | (10 | ) | (55 | ) | (40 | ) | 481 | 376 | |||||||||||||||||
JPY | Trading | 59 | (326 | ) | (34 | ) | 410 | (273 | ) | (164 | ) | |||||||||||||||
Non-trading | (4 | ) | 3 | (1 | ) | (5 | ) | (2 | ) | (9 | ) | |||||||||||||||
Others | Trading | (43 | ) | 22 | 80 | (464 | ) | 335 | (70 | ) | ||||||||||||||||
Non-trading | (1 | ) | 0 | (6 | ) | (1 | ) | (3 | ) | (11 | ) | |||||||||||||||
Interest rate sensitivity by time bands at 31.12.2002 | ||||||||||||||||||||||||||
CHF thousand | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||||
per basis point increase | month | months | months | years | years | Total | ||||||||||||||||||||
CHF | Trading | (10 | ) | 211 | (287 | ) | (47 | ) | (18 | ) | (151 | ) | ||||||||||||||
Non-trading | (42 | ) | (153 | ) | (365 | ) | (6,504 | ) | (5,119 | ) | (12,183 | ) | ||||||||||||||
USD | Trading | (93 | ) | (256 | ) | (1,021 | ) | (2,668 | ) | 2,445 | (1,593 | ) | ||||||||||||||
Non-trading | 26 | (82 | ) | (72 | ) | (927 | ) | (230 | ) | (1,285 | ) | |||||||||||||||
EUR | Trading | 114 | 33 | 12 | (1,387 | ) | 728 | (500 | ) | |||||||||||||||||
Non-trading | (1 | ) | 10 | (2 | ) | (86 | ) | (193 | ) | (272 | ) | |||||||||||||||
GBP | Trading | (78 | ) | 200 | (227 | ) | (453 | ) | (269 | ) | (827 | ) | ||||||||||||||
Non-trading | (1 | ) | (6 | ) | (39 | ) | 92 | 587 | 633 | |||||||||||||||||
JPY | Trading | 21 | 12 | (502 | ) | (249 | ) | (204 | ) | (922 | ) | |||||||||||||||
Non-trading | 0 | 1 | 0 | 18 | (24 | ) | (5 | ) | ||||||||||||||||||
Others | Trading | (46 | ) | (61 | ) | 500 | (54 | ) | (286 | ) | 53 | |||||||||||||||
Non-trading | 0 | 0 | (4 | ) | (1 | ) | (3 | ) | (8 | ) | ||||||||||||||||
Interest rate sensitivity by time bands at 31.12.2001 | ||||||||||||||||||||||||||||
CHF thousand | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||||||
per basis point increase | month | months | months | years | years | Total | ||||||||||||||||||||||
CHF | Trading | 22 | (121 | ) | (35 | ) | (297 | ) | (314 | ) | (745 | ) | ||||||||||||||||
Non-trading | 3 | (24 | ) | (366 | ) | (7,656 | ) | (6,030 | ) | (14,073 | ) | |||||||||||||||||
USD | Trading | (299 | ) | 35 | 96 | (960 | ) | (2,115 | ) | (3,243 | ) | |||||||||||||||||
Non-trading | 35 | (113 | ) | (157 | ) | (274 | ) | (15 | ) | (524 | ) | |||||||||||||||||
EUR | Trading | (129 | ) | 73 | (269 | ) | (308 | ) | (806 | ) | (1,439 | ) | ||||||||||||||||
Non-trading | (2 | ) | (6 | ) | (38 | ) | 182 | 0 | 136 | |||||||||||||||||||
GBP | Trading | (89 | ) | 27 | (520 | ) | 65 | 172 | (345 | ) | ||||||||||||||||||
Non-trading | 0 | (7 | ) | (57 | ) | 175 | 624 | 735 | ||||||||||||||||||||
JPY | Trading | 175 | 695 | (98 | ) | (1,386 | ) | 246 | (368 | ) | ||||||||||||||||||
Non-trading | 1 | 0 | (3 | ) | 1 | (4 | ) | (5 | ) | |||||||||||||||||||
Others | Trading | (51 | ) | 167 | 126 | (404 | ) | 369 | 207 | |||||||||||||||||||
Non-trading | 0 | (1 | ) | 0 | (1 | ) | (4 | ) | (6 | ) | ||||||||||||||||||
Positions shown as “trading”‘trading’ are those which contribute to market risk regulatory capital, i. e. those considered “trading book”‘trading book’ for regulatory capital purposes (see section d). “Non-trading”‘Non-trading’ includes all other interest rate sensitive assets and liabilities including derivatives designated as hedges for accounting purposes (as explained in Note 23). This distinction differs somewhat from the accounting classification of trading and non-trading assets and liabilities.
of debt instruments defined as financial invest-
Trading
132136
Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (continued)
Non-trading
with CHF 8.1 million arising in CHF, CHF 4.3 million in USD and the remainder in EUR and GBP. The interest rate sensitivity of these investments is directly related to the chosen investment duration and it should be recognized that, although investing in significantly shorter maturities would lead to a reduction in apparent interest rate sensitivity, it would lead to higher volatility in the Group’s interest earnings.
(a)(iii) Currency Risk
Trading
Non-tradingNon-Trading
133
UBS Group Financial StatementsNotes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (continued)
Group Executive Board and subject to its VaR limit. Economic hedging strategies employed include a cost-efficient option strategy, providing a safety net against unfavorable currency fluctuations while preserving upside potential.
137
Financial Statements
Notes to the Group has begunFinancial Statements
Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (Continued)
The Group’s equity investment is managed in order to diversifyreflect the investmentcurrency distribution of its equityrisk-weighted assets and is diversified into CHF, USD, EUR and EUR in proportionGBP. This creates structural foreign currency exposures, the gains or losses on which are recorded through equity, leading to the currencies of its
fluctuations in UBS’s capital base in line with the fluctuations in risk-weighted assets, in order to protect itsthereby protecting the BIS Tier 1 capital ratio against adverse exchange rate movements against CHF. Other foreign currency assets and liabilities of the business units are required to be match-funded/invested in the relevant currency or otherwise hedged to avoid currency risk.
Breakdown of assets and liabilities by currencies
31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31.12.03 | 31.12.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF billion | CHF | USD | EUR | Other | CHF | USD | EUR | Other | CHF | USD | EUR | Other | CHF | USD | EUR | Other | ||||||||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 2.4 | 0.1 | 0.6 | 1.2 | 3.0 | 0.3 | 0.6 | 17.1 | 2.4 | 0.1 | 0.8 | 0.3 | 2.4 | 0.1 | 0.6 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||||||
Due from banks | 5.2 | 11.4 | 7.4 | 8.5 | 5.0 | 8.6 | 5.2 | 8.7 | 4.6 | 11.8 | 8.2 | 7.1 | 5.2 | 11.4 | 7.4 | 8.5 | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | 0.1 | 126.7 | 2.7 | 9.5 | 0.1 | 156.4 | 2.5 | 3.9 | 0.7 | 192.5 | 7.3 | 13.4 | 0.1 | 126.7 | 2.7 | 9.5 | ||||||||||||||||||||||||||||||||||||||||||||||||
Reverse repurchase agreements | 1.9 | 164.6 | 61.0 | 66.5 | 5.1 | 142.9 | 40.2 | 81.1 | 1.2 | 162.4 | 73.8 | 83.2 | 1.9 | 164.6 | 61.0 | 66.5 | ||||||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | 6.1 | 247.6 | 51.7 | 66.0 | 9.6 | 265.2 | 47.2 | 75.9 | 8.9 | 288.9 | 77.6 | 86.4 | 6.1 | 247.6 | 51.7 | 66.0 | ||||||||||||||||||||||||||||||||||||||||||||||||
Positive replacement values | 10.4 | 8.1 | 0.8 | 62.8 | 30.6 | 11.4 | 1.2 | 30.2 | 14.6 | 7.6 | 0.8 | 61.3 | 10.4 | 8.1 | 0.8 | 62.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Loans | 147.8 | 39.5 | 11.5 | 12.8 | 151.4 | 43.1 | 11.9 | 20.1 | 149.7 | 39.2 | 12.9 | 10.7 | 147.8 | 39.5 | 11.5 | 12.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Financial investments | 1.1 | 5.0 | 1.5 | 0.8 | 2.9 | 7.4 | 1.5 | 17.0 | 0.6 | 2.4 | 1.2 | 0.9 | 1.1 | 5.0 | 1.5 | 0.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 0.5 | 4.0 | 0.3 | 1.7 | 0.7 | 4.9 | 0.8 | 1.2 | 0.3 | 3.0 | 1.8 | 1.1 | 0.5 | 4.0 | 0.3 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||||
Investments in associates | 0.7 | 0.0 | 0.0 | 0.0 | 0.7 | 0.0 | 0.0 | 0.0 | 0.5 | 1.1 | 0.0 | 0.0 | 0.7 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | 5.6 | 1.3 | 0.1 | 0.9 | 6.3 | 1.5 | 0.1 | 0.8 | 5.9 | 1.2 | 0.1 | 0.5 | 5.6 | 1.3 | 0.1 | 0.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and other intangible assets | 0.7 | 12.7 | 0.0 | 0.3 | 0.2 | 18.5 | 0.0 | 0.4 | 0.1 | 11.1 | 0.0 | 0.3 | 0.7 | 12.7 | 0.0 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 1.4 | 5.0 | 1.0 | 1.6 | 2.1 | 5.6 | 0.8 | 1.4 | 2.4 | 4.2 | 1.8 | 17.1 | 1.4 | 5.0 | 1.0 | 1.6 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 183.9 | 626.0 | 138.6 | 232.6 | 217.7 | 665.8 | 112.0 | 257.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total balance sheet assets | 191.9 | 725.5 | 186.3 | 282.3 | 183.9 | 626.0 | 138.6 | 232.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables from FX spot, FX forwards, FX options and currency swaps1 | 189.5 | 1,210.5 | 604.5 | 871.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets including FX derivatives1 | 381.4 | 1,936.0 | 790.8 | 1,153.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due to banks | 7.6 | 48.0 | 13.8 | 13.8 | 8.0 | 68.6 | 12.9 | 17.0 | 5.8 | 58.7 | 39.2 | 23.5 | 7.6 | 48.0 | 13.8 | 13.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities lent | 0.0 | 21.6 | 5.2 | 10.1 | 0.0 | 24.3 | 3.2 | 2.8 | 0.1 | 35.4 | 6.8 | 11.0 | 0.0 | 21.6 | 5.2 | 10.1 | ||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase agreements | 17.8 | 260.8 | 51.9 | 36.4 | 12.8 | 271.1 | 30.7 | 54.0 | 17.9 | 277.8 | 76.4 | 43.7 | 17.8 | 260.8 | 51.9 | 36.4 | ||||||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio liabilities | 3.7 | 68.6 | 11.3 | 22.9 | 2.8 | 65.2 | 12.5 | 25.3 | 2.4 | 90.8 | 20.3 | 30.5 | 3.7 | 68.6 | 11.3 | 22.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
Negative replacement values | 10.1 | 7.1 | 0.7 | 63.5 | 25.7 | 6.5 | 1.6 | 37.7 | 15.8 | 7.0 | 0.4 | 70.4 | 10.1 | 7.1 | 0.7 | 63.5 | ||||||||||||||||||||||||||||||||||||||||||||||||
Due to customers | 123.5 | 111.5 | 43.6 | 28.2 | 123.3 | 138.8 | 41.5 | 30.2 | 137.1 | 126.4 | 51.8 | 32.1 | 123.5 | 111.5 | 43.6 | 28.2 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accrued expenses and deferred income | 1.9 | 8.1 | 0.9 | 4.3 | 2.4 | 10.0 | 0.9 | 4.0 | 2.0 | 7.1 | 0.8 | 3.8 | 1.9 | 8.1 | 0.9 | 4.3 | ||||||||||||||||||||||||||||||||||||||||||||||||
Debt issued | 11.4 | 96.1 | 14.3 | 7.6 | 15.7 | 120.0 | 8.8 | 11.7 | 10.0 | 68.1 | 21.0 | 21.1 | 11.4 | 96.1 | 14.3 | 7.6 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 5.4 | 4.1 | 0.9 | 1.9 | 7.2 | 6.1 | 0.9 | 1.5 | 6.6 | 5.3 | 2.9 | 16.5 | 5.4 | 4.1 | 0.9 | 1.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
Minority interests | 0.0 | 3.4 | 0.0 | 0.1 | 0.1 | 3.9 | 0.0 | 0.1 | 0.0 | 3.9 | 0.1 | 0.1 | 0.0 | 3.4 | 0.0 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity | 39.0 | 0.0 | 0.0 | 0.0 | 43.5 | 0.0 | 0.0 | 0.0 | 35.4 | 0.0 | 0.0 | 0.0 | 39.0 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||
Of which foreign currency capital in subsidiaries | (13.2 | ) | 10.2 | 1.3 | 1.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 220.4 | 629.3 | 142.6 | 188.8 | 241.5 | 714.5 | 113.0 | 184.3 | 219.9 | 690.7 | 221.0 | 254.4 | 220.4 | 629.3 | 142.6 | 188.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Payables from FX spot, FX forwards, FX options and currency swaps1 | 160.6 | 1,246.2 | 569.7 | 899.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities, minority interests and shareholders’ equity including FX derivatives1 | 380.5 | 1,936.9 | 790.7 | 1,153.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net position by currency1 | 0.9 | (0.9 | ) | 0.1 | (0.1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
134138
(a)(iv) Equity Risk
(a)(v) Issuer Risk
Credit risk represents the loss which UBS would suffer if a client or counterparty failed to meet its contractual obligations. It is inherent in traditional banking products by the GEB (by delegation to the Group CCO) and within the Business Groups.—– loans, commitments to lend and other contingent liabilities, such as letters of credit —– and in foreign exchange and derivativestraded products – derivative contracts such as forwards, swaps and options, (“traded products”).and repo and securities borrowing and lending transactions.wheretaking material credit risk is taken have independent credit risk control (CRC) functions within whichheaded by Chief Credit officers (CCOs) reporting functionally to the Group CCO. They are responsible for counterparty ratings and credit approvalrisk assessment.authorized credit officers. CRC has authority over counterparty rating,the Chairman’s Office (by delegation to an Executive Vice Chairman),assessmentwherever they are identified, in particular to individual counterparties and approval,groups and the establishment of allowancesto industries and provisions.countries.The Group restrictsUBS sets limits on its credit exposure to both individual counterparties and counterparty groups by credit limits. The size of limit depends on the assessment of their financial strength, particularly the sustainable free cash flow to service obligations, and on the economic environment, industry position, and qualitative factors such as management strength.groups. Exposure against limits is measured on a continuous basis and is subject to standard exception reporting. Exposure against limits for banking products is measured atas the face value.value amount. For loans, this is shown on the balance sheet and detailed in Note 9a), and for commitments, detailed in Note 25. Both are included in the table below.on not only on the current replacement value of contracts but also on potential future changes in replacement value, and credit limits are applied on this basis. The replacement values of derivatives are included in the balance sheet and in the table below. For further information about derivatives see Note 23. Securities borrowing and lending transactions are represented on the balance sheet by the values of cash collateral placed with or received from counterparties while repo/repo / reverse repo transactions are represented by the amounts of the forward commitments —– for
139
Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
b) Credit Risk (continued)
details see Note 10. The credit exposure is generally only a small percentage of the balance sheet amounts. The amounts shown in the table below represent the mark to market values of these
transactions, i.e.i. e. the difference in value between the cash or securities lent or given as collateral by UBS and the value of cash or securities borrowed or taken as collateral by UBS.
135
UBS Group Financial StatementsNotes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
b) Credit Risk (continued)
Breakdown of credit exposure
Amounts for each product type are shown gross before allowances and provisions.
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Banking products | ||||||||||||||||
Loans and due from banks1 | 249,370 | 261,984 | ||||||||||||||
Contingent liabilities (gross — before participations)2 | 16,594 | 25,487 | ||||||||||||||
Undrawn irrevocable commitments (gross — before participations)2 | 39,306 | 50,608 | ||||||||||||||
Loans to customers and due from banks1 | 248,207 | 249,370 | ||||||||||||||
Contingent liabilities (gross – before participations)2 | 15,563 | 16,594 | ||||||||||||||
Undrawn irrevocable commitments (gross – before participations)2 | 46,623 | 39,306 | ||||||||||||||
Traded products3 | ||||||||||||||||
Derivatives positive replacement values (before collateral but after netting)4 | 82,092 | 73,447 | 84,334 | 82,092 | ||||||||||||
Securities borrowing and lending, repos and reverse repos5, 6 | 20,120 | 14,074 | 30,833 | 20,120 | ||||||||||||
Allowances and provisions7 | (5,621 | ) | (8,218 | ) | (4,326 | ) | (5,621 | ) | ||||||||
Total credit exposure net of allowances and provisions8 | 401,861 | 417,382 | 421,234 | 401,861 | ||||||||||||
136140
UBS is an active user of credit derivatives to hedge credit risk in banking and traded products. It also makes use of master netting agreements where possible in its OTC derivatives trading and, in line with general market trends, UBS Warburg has also entered into bilateral collateral agreements with market participants. Further information is given in Note 23.
fied as non-performing where payment of interest, principal or fees is overdue by more than 90 days or (as now required by Swiss regulatory guidelines) when insolvency proceedings have commenced or obligations have been restructured on concessionary terms. Allowances or provisions are established to ensuredetermined such that the carrying values of impaired claims are determined in accordanceconsistent with the principles of IAS 39. For further information about accounting policy for allowance and provision for credit losses see Note 1 l). For the amounts of allowance and provision for credit losses and amounts of impaired and non-performing loans, see Note 9 b), c) and d).
137141
UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
c) Liquidity Risk
The Group’sUBS’s approach to liquidity management is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, without compromising its ability to respond quickly to strategic market opportunities. The Group’sA centralized approach is adopted, based on an integrated framework incorporating the assessment of expected cash flows and the availability of high-grade collateral which could be used to secure additional funding if required. The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors. Scenarios
factors. Scenarios encompass both normal market conditions and stressed conditions, including both UBS-specific and general market crises. The impact on both trading and client businesses is considered, taking account of potential collateral with which funds might be raised, and the possibility that customers might seek to withdraw funds or draw down unutilized committed credit lines.
Maturity analysis of assets and liabilities
Due | Due | Due | Due | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Due | between | between | Due | Due | between | between | Due | |||||||||||||||||||||||||||||||||||||||||||||||||
On | Subject | within | 3 and | 1 and | after | On | Subject | within | 3 and | 1 and | after | |||||||||||||||||||||||||||||||||||||||||||||
CHF billion | demand | to notice1 | 3 mths | 12 mths | 5 years | 5 years | Total | demand | to notice1 | 3 mths | 12 mths | 5 years | 5 years | Total | ||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 4.3 | 4.3 | 3.6 | 3.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Due from banks | 10.5 | 0.0 | 20.5 | 0.8 | 0.5 | 0.2 | 32.5 | 22.4 | 0.8 | 6.0 | 0.9 | 1.4 | 0.2 | 31.7 | ||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | 0.0 | 0.0 | 138.7 | 0.0 | 0.4 | 0.0 | 139.1 | 9.5 | 166.2 | 37.4 | 0.7 | 0.1 | 0.0 | 213.9 | ||||||||||||||||||||||||||||||||||||||||||
Reverse repurchase agreements | 0.0 | 2.7 | 230.8 | 55.3 | 3.7 | 1.5 | 294.0 | 44.0 | 35.1 | 193.7 | 43.0 | 3.7 | 1.1 | 320.6 | ||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | 371.4 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 371.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
Positive replacement values | 82.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 82.1 | |||||||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets2 | 461.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 461.8 | |||||||||||||||||||||||||||||||||||||||||||||||||
Positive replacement values2 | 84.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 84.3 | |||||||||||||||||||||||||||||||||||||||||||||||||
Loans | 0.0 | 21.0 | 86.6 | 34.4 | 64.6 | 4.9 | 211.5 | 20.6 | 44.9 | 33.5 | 37.8 | 66.8 | 8.9 | 212.5 | ||||||||||||||||||||||||||||||||||||||||||
Financial investments | 5.9 | 0.0 | 1.5 | 0.2 | 0.5 | 0.3 | 8.4 | 4.0 | 0.0 | 0.6 | 0.2 | 0.2 | 0.1 | 5.1 | ||||||||||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 6.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 6.5 | 6.2 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||
Investments in associates | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.7 | 0.7 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 1.6 | 1.6 | ||||||||||||||||||||||||||||||||||||||||||
Property and equipment | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 7.9 | 7.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 7.7 | 7.7 | ||||||||||||||||||||||||||||||||||||||||||
Goodwill and other intangible assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 13.7 | 13.7 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 11.5 | 11.5 | ||||||||||||||||||||||||||||||||||||||||||
Other assets | 9.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 9.0 | 11.9 | 13.6 | 0.0 | 0.0 | 0.0 | 0.0 | 25.5 | ||||||||||||||||||||||||||||||||||||||||||
Total 31.12.2003 | 668.3 | 260.6 | 271.2 | 82.6 | 72.2 | 31.1 | 1,386.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total 31.12.2002 | 489.7 | 23.7 | 478.1 | 90.7 | 69.7 | 29.2 | 1,181.1 | 489.7 | 23.7 | 478.1 | 90.7 | 69.7 | 29.2 | 1,181.1 | ||||||||||||||||||||||||||||||||||||||||||
Total 31.12.2001 | 529.7 | 30.0 | 513.4 | 74.2 | 63.6 | 42.4 | 1,253.3 | |||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due to banks | 10.7 | 2.9 | 64.7 | 2.5 | 2.2 | 0.1 | 83.1 | 52.0 | 4.6 | 66.3 | 3.4 | 0.8 | 0.1 | 127.2 | ||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities lent | 0.0 | 0.0 | 36.8 | 0.0 | 0.0 | 0.0 | 36.8 | 5.1 | 46.8 | 1.4 | 0.0 | 0.0 | 0.0 | 53.3 | ||||||||||||||||||||||||||||||||||||||||||
Repurchase agreements | 0.0 | 0.3 | 329.5 | 36.9 | 0.1 | 0.1 | 366.9 | 158.5 | 13.2 | 186.0 | 57.8 | 0.3 | 0.0 | 415.8 | ||||||||||||||||||||||||||||||||||||||||||
Trading portfolio liabilities | 106.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 106.5 | |||||||||||||||||||||||||||||||||||||||||||||||||
Negative replacement values | 81.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 81.3 | |||||||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio liabilities2 | 144.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 144.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
Negative replacement values2 | 93.6 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 93.6 | |||||||||||||||||||||||||||||||||||||||||||||||||
Due to customers | 147.3 | 2.2 | 150.2 | 5.1 | 1.3 | 0.9 | 307.0 | 146.3 | 109.7 | 83.1 | 5.3 | 1.8 | 1.2 | 347.4 | ||||||||||||||||||||||||||||||||||||||||||
Accrued expenses and deferred income | 15.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 15.3 | 13.7 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 13.7 | ||||||||||||||||||||||||||||||||||||||||||
Debt issued | 0.0 | 0.0 | 54.8 | 21.6 | 33.1 | 19.9 | 129.4 | 0.0 | 0.0 | 1.7 | 63.9 | 33.6 | 21.0 | 120.2 | ||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 12.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 12.3 | 17.6 | 13.7 | 0.0 | 0.0 | 0.0 | 0.0 | 31.3 | ||||||||||||||||||||||||||||||||||||||||||
Total 31.12.2003 | 630.8 | 188.0 | 338.5 | 130.4 | 36.5 | 22.3 | 1,346.5 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total 31.12.2002 | 373.4 | 5.4 | 636.0 | 66.1 | 36.7 | 21.0 | 1,138.6 | 373.4 | 5.4 | 636.0 | 66.1 | 36.7 | 21.0 | 1,138.6 | ||||||||||||||||||||||||||||||||||||||||||
Total 31.12.2001 | 362.8 | 6.4 | 700.0 | 93.9 | 29.3 | 13.3 | 1,205.7 | |||||||||||||||||||||||||||||||||||||||||||||||||
138142
The Group monitors the adequacy of itsUBS’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision (“BIS rules/rules / ratios”). The BIS ratios compare the amount of the Group’s eligible capital (in total and Tier 1) with the total of its risk weightedrisk-weighted assets (RWAs).
BIS Eligible capital
BIS Risk-Weighted Assets (RWAs)
unsecured claims on corporates and
private customers, are weighted at 100%, meaning that 8% capital support is required.
139143
UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
d) Capital Adequacy (continued)
Risk-weighted assets (BIS)
Balance | Balance | Balance | Balance | |||||||||||||||||||||||||||||
sheet/ | Risk- | sheet/ | Risk- | sheet/ | Risk- | sheet / | Risk- | |||||||||||||||||||||||||
notional | weighted | notional | weighted | notional | weighted | notional | weighted | |||||||||||||||||||||||||
amount | amount | amount | amount | amount | amount | amount | amount | |||||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.03 | 31.12.02 | 31.12.02 | ||||||||||||||||||||||||
Balance sheet assets | ||||||||||||||||||||||||||||||||
Due from banks and other collateralized lendings1 | 356,501 | 8,877 | 380,641 | 7,640 | 441,662 | 8,565 | 356,501 | 8,877 | ||||||||||||||||||||||||
Net positions in securities2 | 9,096 | 8,193 | 29,500 | 10,992 | 6,755 | 6,182 | 9,096 | 8,193 | ||||||||||||||||||||||||
Positive replacement values3 | 82,092 | 21,680 | 73,447 | 19,556 | 84,334 | 22,324 | 82,092 | 21,680 | ||||||||||||||||||||||||
Loans and other collateralized lendings1 | 320,752 | 147,703 | 305,624 | 154,908 | ||||||||||||||||||||||||||||
Loans, net of allowances for credit losses and other collateralized lendings1 | 337,028 | 153,537 | 320,752 | 147,703 | ||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 6,453 | 3,025 | 7,554 | 3,679 | 6,218 | 4,284 | 6,453 | 3,025 | ||||||||||||||||||||||||
Property and equipment | 10,384 | 10,149 | 13,202 | 13,202 | 9,840 | 9,614 | 10,384 | 10,149 | ||||||||||||||||||||||||
Other assets | 8,952 | 5,774 | 9,875 | 4,504 | 25,459 | 7,670 | 8,952 | 5,774 | ||||||||||||||||||||||||
Off-balance sheet and other positions | ||||||||||||||||||||||||||||||||
Contingent liabilities | 16,594 | 8,224 | 25,487 | 9,868 | 15,563 | 8,167 | 16,594 | 8,224 | ||||||||||||||||||||||||
Irrevocable commitments | 39,327 | 4,622 | 50,705 | 5,034 | 46,960 | 6,863 | 39,327 | 4,622 | ||||||||||||||||||||||||
Forward and swap contracts4 | 9,455,928 | 4,253 | 8,362,374 | 9,256 | 11,746,880 | 4,710 | 9,455,928 | 4,253 | ||||||||||||||||||||||||
Purchased options4 | 298,800 | 1,023 | 365,100 | 1,777 | 1,183,708 | 1,716 | 298,800 | 1,023 | ||||||||||||||||||||||||
Market risk positions5 | 15,267 | 13,319 | 18,269 | 15,267 | ||||||||||||||||||||||||||||
Total risk-weighted assets | 238,790 | 253,735 | 251,901 | 238,790 | ||||||||||||||||||||||||||||
BIS capital ratios
Capital | Ratio | Capital | Ratio | Capital | Ratio | Capital | Ratio | |||||||||||||||||||||||||
CHF million | % | CHF million | % | CHF million | % | CHF million | % | |||||||||||||||||||||||||
31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.03 | 31.12.02 | 31.12.02 | |||||||||||||||||||||||||
Tier 1 | 27,047 | 11.3 | 29,322 | 11.6 | 29,765 | 11.8 | 27,047 | 11.3 | ||||||||||||||||||||||||
of which hybrid Tier 1 | 3,182 | 1.3 | 3,848 | 1.5 | 3,224 | 1.3 | 3,182 | 1.3 | ||||||||||||||||||||||||
Tier 2 | 5,962 | 2.5 | 8,149 | 3.2 | 3,816 | 1.5 | 5,962 | 2.5 | ||||||||||||||||||||||||
Total BIS | 33,009 | 13.8 | 37,471 | 14.8 | 33,581 | 13.3 | 33,009 | 13.8 | ||||||||||||||||||||||||
The Tier 1 capital includes CHF 3,1823,224 million (USD 2,3002,600 million) trust preferred securities at 31 December 20022003 and CHF 3,8483,182 million (USD 2,300 million) at 31 December 2001.2002.
140144
The following table presents the fair value of financial instruments based on the following valuation methods and assumptions. It is presented because not all financial instruments are reflected in the financial statements at fair value.
(a) | trading assets, derivatives and other transactions undertaken for trading purposes are measured at fair value by reference to quoted market prices when available. If quoted market prices are not available, then fair values are estimated on the basis of pricing models, or discounted cash flows. Fair value is equal to the carrying amount for these items; |
(b) | financial investments classified as available for sale are measured at fair value by reference to quoted market prices when available. If quoted market prices are not available, then fair values are estimated on the basis of pricing models or other recognized valuation techniques. Prior to the adoption of IAS 39 in 2001, financial investments were carried at cost or if considered held for sale, at the |
lower of cost or market. Upon the adoption of the standard, all financial investments are carried at fair value. Unrealized gains and unrealized losses, excluding impairment writedowns, are recorded in |
(c) | the carrying amount of liquid assets and other assets maturing within 12 months is assumed to approximate their fair value. This assumption is applied to liquid assets and the |
(d) | the fair value of demand deposits and savings accounts with no specific maturity is assumed to be the amount payable on demand at the balance sheet date; |
(e) | the fair value of variable rate financial instruments is assumed to be approximated by their carrying amounts and, in the case of loans, does not, therefore, reflect changes in their credit quality as the impact of credit risk is recognized separately by deducting the amount of the allowance for credit losses from both book and fair values; |
(f) | the fair value of fixed rate loans and mortgages is estimated by comparing market interest rates when the loans were granted with current market rates offered on similar loans. Changes in the credit quality of loans within the portfolio are not taken into account in determining gross fair values as the impact of credit risk is recognized separately by deducting the amount of the allowance for credit losses from both book and fair values. |
141145
UBS Group Financial Statements
Notes to the Financial Statements
Note 30 Fair Value of Financial Instruments (continued)
Carrying | Fair | Unrealized | Carrying | Fair | Unrealized | Carrying | Fair | Unrealized | Carrying | Fair | Unrealized | ||||||||||||||||||||||||||||||||||||||
value | value | gain/(loss) | value | value | gain/(loss) | value | value | gain/(loss) | value | value | gain/(loss) | ||||||||||||||||||||||||||||||||||||||
CHF billion | CHF billion | 31.12.02 | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.03 | 31.12.03 | 31.12.02 | 31.12.02 | 31.12.02 | ||||||||||||||||||||||||||||||||||||
Assets | Assets | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | Cash and balances with central banks | 4.3 | 4.3 | 0.0 | 21.0 | 21.0 | 0.0 | 3.6 | 3.6 | 0.0 | 4.3 | 4.3 | 0.0 | ||||||||||||||||||||||||||||||||||||
Due from banks | Due from banks | 32.5 | 32.5 | 0.0 | 27.7 | 27.7 | 0.0 | 31.7 | 31.7 | 0.0 | 32.5 | 32.5 | 0.0 | ||||||||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | Cash collateral on securities borrowed | 139.1 | 139.1 | 0.0 | 162.9 | 162.9 | 0.0 | 213.9 | 213.9 | 0.0 | 139.1 | 139.1 | 0.0 | ||||||||||||||||||||||||||||||||||||
Reverse repurchase agreements | Reverse repurchase agreements | 294.1 | 294.1 | 0.0 | 269.3 | 269.3 | 0.0 | 320.6 | 320.6 | 0.0 | 294.1 | 294.1 | 0.0 | ||||||||||||||||||||||||||||||||||||
Trading portfolio assets | Trading portfolio assets | 371.4 | 371.4 | 0.0 | 397.9 | 397.9 | 0.0 | 461.8 | 461.8 | 0.0 | 371.4 | 371.4 | 0.0 | ||||||||||||||||||||||||||||||||||||
Positive replacement values | Positive replacement values | 82.1 | 82.1 | 0.0 | 73.4 | 73.4 | 0.0 | 84.3 | 84.3 | 0.0 | 82.1 | 82.1 | 0.0 | ||||||||||||||||||||||||||||||||||||
Loans | Loans | 211.8 | 214.1 | 2.3 | 226.7 | 227.0 | 0.3 | 212.5 | 213.8 | 1.3 | 211.8 | 214.1 | 2.3 | ||||||||||||||||||||||||||||||||||||
Financial investments | Financial investments | 8.4 | 8.4 | 0.0 | 28.8 | 28.8 | 0.0 | 5.1 | 5.1 | 0.0 | 8.4 | 8.4 | 0.0 | ||||||||||||||||||||||||||||||||||||
Liabilities | Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
Due to banks | Due to banks | 83.4 | 83.4 | 0.0 | 107.2 | 107.2 | 0.0 | 127.2 | 127.2 | 0.0 | 83.4 | 83.4 | 0.0 | ||||||||||||||||||||||||||||||||||||
Cash collateral on securities lent | Cash collateral on securities lent | 36.9 | 36.9 | 0.0 | 30.3 | 30.3 | 0.0 | 53.3 | 53.3 | 0.0 | 36.9 | 36.9 | 0.0 | ||||||||||||||||||||||||||||||||||||
Repurchase agreements | Repurchase agreements | 366.9 | 366.9 | 0.0 | 368.6 | 368.6 | 0.0 | 415.9 | 415.9 | 0.0 | 366.9 | 366.9 | 0.0 | ||||||||||||||||||||||||||||||||||||
Trading portfolio liabilities | Trading portfolio liabilities | 106.5 | 106.5 | 0.0 | 105.8 | 105.8 | 0.0 | 144.0 | 144.0 | 0.0 | 106.5 | 106.5 | 0.0 | ||||||||||||||||||||||||||||||||||||
Negative replacement values | Negative replacement values | 81.3 | 81.3 | 0.0 | 71.4 | 71.4 | 0.0 | 93.6 | 93.6 | 0.0 | 81.3 | 81.3 | 0.0 | ||||||||||||||||||||||||||||||||||||
Due to customers | Due to customers | 307.4 | 307.5 | (0.1 | ) | 334.0 | 334.0 | 0.0 | 347.3 | 347.3 | 0.0 | 307.4 | 307.5 | (0.1 | ) | ||||||||||||||||||||||||||||||||||
Debt issued | Debt issued | 129.8 | 131.7 | (1.9 | ) | 157.5 | 158.6 | (1.1 | ) | 120.2 | 121.5 | (1.3 | ) | 129.8 | 131.7 | (1.9 | ) | ||||||||||||||||||||||||||||||||
Subtotal | Subtotal | 0.3 | (0.8 | ) | 0.0 | 0.3 | |||||||||||||||||||||||||||||||||||||||||||
Unrealized gains and losses recorded in shareholders’ equity before tax on: | Unrealized gains and losses recorded in shareholders’ equity before tax on: | ||||||||||||||||||||||||||||||||||||||||||||||||
Financial investments | 1.1 | 1.2 | |||||||||||||||||||||||||||||||||||||||||||||||
Derivative instruments designated as cash flow hedges | (0.3 | ) | (0.6 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Financial investments | 0.8 | 1.1 | |||||||||||||||||||||||||||||||||||||||||||||||
Derivative instruments designated as cash flow hedges | (0.2 | ) | (0.3 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net unrealized gains and losses not recognized in the income statement | Net unrealized gains and losses not recognized in the income statement | 1.1 | (0.2 | ) | 0.6 | 1.1 | |||||||||||||||||||||||||||||||||||||||||||
The table does not reflect the fair values of non-financial assets and liabilities such as property, equipment, goodwill, prepayments and non-interest accruals. Where applicable, the interest accrued to date on financial instruments is included, for purposes of the above fair value disclosure, in the carrying value of the financial instruments.
included in the Positive or Negative replacement values in the above table. When the interest rate risk on a fixed rate financial instrument is hedged with a derivative in a fair value hedge, the fixed rate financial instrument (or hedged portion thereof) is reflected in the above table at fair value only in relation to the interest rate risk, not the credit risk as explained in (f) above. Fair value changes are recorded in net profit. The treatment of derivatives designated as cash flow hedges is explained in Note 1v). The amount shown in the table as “derivative instruments designated as cash flow hedges” is the net change in fair values on such derivatives that is recorded in Shareholders’ equity and not yet transferred to income or expense.
142146
a) Defined benefit plans
Swiss pension plan
excess employer contributions. In 2002,2003, the remaining CHF 33 million (2002 CHF 323 million, (20012001 CHF 0 million, 2000 CHF 100 million) of this asset was used to fund the employer contributions and was recognized as a pension expenses.expense.
Foreign pension plans
The retirement plans provide benefits in the event of retirement, death, disability or employment termination. The plans’ retirement benefits depend on age, contributions and level of compensation. The principal plans are financed in full by the Group. The employer contributions expected to be made in 2004 to these pension plans are CHF 63 million. The funding policy for these plans is consistent with local government and tax requirements.
147
Financial Statements
Notes to the major foreign plans.
Note 31 Pension and Other Post-Retirement Benefit Plans (continued)
b) Post-retirement medical and life plans
2003, 31 December 2002 and 31 December 2001 and 31 December 2000 were CHF 22 million, CHF 25 million and CHF 24 million, and CHF 22 million, respectively.
c) Defined contribution plans
143
a) Defined benefit plans
Swiss | Foreign | |||||||||||||||||||||||
CHF million | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Defined benefit obligation at the beginning of the year | (19,204 | ) | (17,879 | ) | (17,712 | ) | (3,436 | ) | (3,553 | ) | (3,406 | ) | ||||||||||||
Service cost | (564 | ) | (554 | ) | (541 | ) | (91 | ) | (108 | ) | (121 | ) | ||||||||||||
Interest cost | (703 | ) | (699 | ) | (674 | ) | (197 | ) | (210 | ) | (204 | ) | ||||||||||||
Plan amendments | (1 | ) | ||||||||||||||||||||||
Special termination benefits | (70 | ) | (209 | ) | (262 | ) | ||||||||||||||||||
Actuarial gain / (loss) | 1,395 | (681 | ) | 421 | (201 | ) | (177 | ) | (345 | ) | ||||||||||||||
Benefits paid | 930 | 818 | 889 | 124 | 111 | 107 | ||||||||||||||||||
Curtailment / settlement | 74 | |||||||||||||||||||||||
Foreign currency translation | 138 | 427 | (12 | ) | ||||||||||||||||||||
Other | 429 | |||||||||||||||||||||||
Defined benefit obligation at the end of the year | (18,216 | ) | (19,204 | ) | (17,879 | ) | (3,663 | ) | (3,436 | ) | (3,553 | ) | ||||||||||||
Fair value of plan assets at the beginning of the year | 16,566 | 18,289 | 19,074 | 2,382 | 2,887 | 3,378 | ||||||||||||||||||
Actual return on plan assets | 1,411 | (1,350 | ) | (765 | ) | 429 | (240 | ) | (220 | ) | ||||||||||||||
Employer contributions | 370 | 236 | 656 | 831 | 164 | 258 | ||||||||||||||||||
Plan participant contributions | 202 | 209 | 213 | |||||||||||||||||||||
Benefits paid | (930 | ) | (818 | ) | (889 | ) | (124 | ) | (111 | ) | (107 | ) | ||||||||||||
Foreign currency translation | (116 | ) | (318 | ) | 7 | |||||||||||||||||||
Other | (429 | ) | ||||||||||||||||||||||
Fair value of plan assets at the end of the year | 17,619 | 16,566 | 18,289 | 3,402 | 2,382 | 2,887 | ||||||||||||||||||
Funded status | (597 | ) | (2,638 | ) | 410 | (261 | ) | (1,054 | ) | (666 | ) | |||||||||||||
Unrecognized net actuarial (gains) / losses | 1,716 | 3,892 | 961 | 970 | 1,126 | 673 | ||||||||||||||||||
Unrecognized prior service cost | 1 | 1 | 2 | |||||||||||||||||||||
Unrecognized asset | (1,119 | ) | (1,221 | ) | (1,015 | ) | ||||||||||||||||||
(Accrued) / prepaid pension cost | 0 | 33 | 356 | 710 | 73 | 9 | ||||||||||||||||||
148
UBS Group Financial StatementsNotes to the Financial Statements
Note 31 RetirementPension and Other Post-Retirement Benefit Plans and Other Employee Benefits
(continued)
a) Defined benefit plans
Swiss | Foreign | |||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Defined benefit obligation at the beginning of the year | (17,879 | ) | (17,712 | ) | (17,011 | ) | (3,553 | ) | (3,406 | ) | (2,444 | ) | ||||||||||||
Service cost | (554 | ) | (541 | ) | (545 | ) | (108 | ) | (121 | ) | (165 | ) | ||||||||||||
Interest cost | (699 | ) | (674 | ) | (666 | ) | (210 | ) | (204 | ) | (162 | ) | ||||||||||||
Plan amendments | (1 | ) | ||||||||||||||||||||||
Special termination benefits | (209 | ) | (262 | ) | (211 | ) | (3 | ) | ||||||||||||||||
Actuarial gain/(loss) | (681 | ) | 421 | (177 | ) | (345 | ) | (99 | ) | |||||||||||||||
Benefits paid | 818 | 889 | 721 | 111 | 107 | 84 | ||||||||||||||||||
Curtailment/settlement | 74 | |||||||||||||||||||||||
Acquisition of PaineWebber | (740 | ) | ||||||||||||||||||||||
Foreign currency translation | 427 | (12 | ) | 123 | ||||||||||||||||||||
Other | 429 | |||||||||||||||||||||||
Defined benefit obligation at the end of the year | (19,204 | ) | (17,879 | ) | (17,712 | ) | (3,436 | ) | (3,553 | ) | (3,406 | ) | ||||||||||||
Fair value of plan assets at the beginning of the year | 18,289 | 19,074 | 18,565 | 2,887 | 3,378 | 2,880 | ||||||||||||||||||
Actual return on plan assets | (1,350 | ) | (765 | ) | 535 | (240 | ) | (220 | ) | |||||||||||||||
Employer contributions | 236 | 656 | 490 | 164 | 258 | 13 | ||||||||||||||||||
Plan participant contributions | 209 | 213 | 205 | 23 | ||||||||||||||||||||
Benefits paid | (818 | ) | (889 | ) | (721 | ) | (111 | ) | (107 | ) | (84 | ) | ||||||||||||
Acquisition of PaineWebber | 676 | |||||||||||||||||||||||
Foreign currency translation | (318 | ) | 7 | (130 | ) | |||||||||||||||||||
Other | (429 | ) | ||||||||||||||||||||||
Fair value of plan assets at the end of the year | 16,566 | 18,289 | 19,074 | 2,382 | 2,887 | 3,378 | ||||||||||||||||||
Funded status | (2,638 | ) | 410 | 1,362 | (1,054 | ) | (666 | ) | (28 | ) | ||||||||||||||
Unrecognized net actuarial (gains)/losses | 3,892 | 961 | (331 | ) | 1,126 | 673 | (81 | ) | ||||||||||||||||
Unrecognized transition amount | 1 | |||||||||||||||||||||||
Unrecognized prior service cost | 1 | 2 | 2 | |||||||||||||||||||||
Unrecognized asset | (1,221 | ) | (1,015 | ) | (675 | ) | (47 | ) | ||||||||||||||||
(Accrued)/prepaid pension cost | 33 | 356 | 356 | 73 | 9 | (153 | ) | |||||||||||||||||
Movement in the net (liability) or asset | ||||||||||||||||||||||||
(Accrued)/prepaid pension cost at the beginning of the year | 356 | 356 | 456 | 9 | (153 | ) | (63 | ) | ||||||||||||||||
Net periodic pension cost | (559 | ) | (656 | ) | (590 | ) | (83 | ) | (97 | ) | (55 | ) | ||||||||||||
Employer contributions | 236 | 656 | 490 | 164 | 258 | 13 | ||||||||||||||||||
Acquisition of PaineWebber | (63 | ) | ||||||||||||||||||||||
Foreign currency translation | (17 | ) | 1 | 15 | ||||||||||||||||||||
(Accrued)/prepaid pension cost | 33 | 356 | 356 | 73 | 9 | (153 | ) | |||||||||||||||||
Amounts recognized in the Balance Sheet | ||||||||||||||||||||||||
Prepaid pension cost | 33 | 356 | 356 | 220 | 185 | 53 | ||||||||||||||||||
Accrued pension liability | (147 | ) | (176 | ) | (206 | ) | ||||||||||||||||||
(Accrued)/prepaid pension cost | 33 | 356 | 356 | 73 | 9 | (153 | ) | |||||||||||||||||
144
Swiss | Foreign | |||||||||||||||||||||||
CHF million | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Movement in the net (liability) or asset | ||||||||||||||||||||||||
(Accrued) / prepaid pension cost at the beginning of the year | 33 | 356 | 356 | 73 | 9 | (153 | ) | |||||||||||||||||
Net periodic pension cost | (403 | ) | (559 | ) | (656 | ) | (168 | ) | (83 | ) | (97 | ) | ||||||||||||
Employer contributions | 370 | 236 | 656 | 831 | 164 | 258 | ||||||||||||||||||
Foreign currency translation | (26 | ) | (17 | ) | 1 | |||||||||||||||||||
(Accrued) / prepaid pension cost | 0 | 33 | 356 | 710 | 73 | 9 | ||||||||||||||||||
Amounts recognized in the Balance Sheet | ||||||||||||||||||||||||
Prepaid pension cost | 33 | 356 | 862 | 220 | 185 | |||||||||||||||||||
Accrued pension liability | (152 | ) | (147 | ) | (176 | ) | ||||||||||||||||||
(Accrued) / prepaid pension cost | 0 | 33 | 356 | 710 | 73 | 9 | ||||||||||||||||||
CHF million For the year ended | ||||||||||||||||||||||||
Components of net periodic pension cost | ||||||||||||||||||||||||
Service cost | 564 | 554 | 541 | 91 | 108 | 121 | ||||||||||||||||||
Interest cost | 703 | 699 | 674 | 197 | 210 | 204 | ||||||||||||||||||
Expected return on plan assets | (818 | ) | (900 | ) | (947 | ) | (178 | ) | (199 | ) | (228 | ) | ||||||||||||
Increase / (decrease) of unrecognized assets | (102 | ) | 206 | 339 | ||||||||||||||||||||
Special termination benefits | 70 | 209 | 262 | |||||||||||||||||||||
Amortization of unrecognized prior service cost | 1 | |||||||||||||||||||||||
Amortization of unrecognized net (gains) / losses | 188 | 58 | 22 | |||||||||||||||||||||
Curtailment / settlement | (59 | ) | ||||||||||||||||||||||
Employee contributions | (202 | ) | (209 | ) | (213 | ) | ||||||||||||||||||
Net periodic pension cost | 403 | 559 | 656 | 168 | 83 | 97 | ||||||||||||||||||
Principal actuarial assumptions used (%) | ||||||||||||||||||||||||
Assumptions used to determine defined benefit obligations at the end of the year | ||||||||||||||||||||||||
Discount rate | 3.8 | 3.8 | 4.0 | 5.7 | 5.8 | 6.2 | ||||||||||||||||||
Expected rate of salary increase | 2.5 | 2.5 | 2.5 | 4.6 | 4.4 | 4.4 | ||||||||||||||||||
Rate of pension increase | 1.0 | 1.5 | 1.5 | 1.9 | 1.5 | 1.5 | ||||||||||||||||||
Assumptions used to determine net periodic pension cost for the year ended | ||||||||||||||||||||||||
Discount rate | 3.8 | 4.0 | 4.0 | 5.8 | 6.2 | 6.3 | ||||||||||||||||||
Expected rate of return on plan assets | 5.0 | 5.0 | 5.0 | 7.1 | 7.3 | 7.9 | ||||||||||||||||||
Expected rate of salary increase | 2.5 | 2.5 | 2.5 | 4.4 | 4.4 | 4.4 | ||||||||||||||||||
Rate of pension increase | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.6 | ||||||||||||||||||
Plan assets | ||||||||||||||||||||||||
Actual plan asset allocation (%) | ||||||||||||||||||||||||
Equity instruments | 39 | 35 | 45 | 52 | 57 | 57 | ||||||||||||||||||
Debt instruments | 43 | 47 | 39 | 30 | 36 | 35 | ||||||||||||||||||
Real estate | 12 | 13 | 13 | 1 | 1 | 1 | ||||||||||||||||||
Other | 6 | 5 | 3 | 17 | 6 | 7 | ||||||||||||||||||
Total | 100 | 100 | 100 | 100 | 100 | 100 | ||||||||||||||||||
149
Financial Statements
Notes to the Financial Statements
Note 31 RetirementPension and Other Post-Retirement Benefit Plans and Other Employee Benefits
(continued)
a) Defined benefit plans (continued)
Swiss | Foreign | |||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Components of net periodic pension cost | ||||||||||||||||||||||||
Current service cost | 554 | 541 | 545 | 108 | 121 | 165 | ||||||||||||||||||
Interest cost | 699 | 674 | 666 | 210 | 204 | 162 | ||||||||||||||||||
Expected return on plan assets | (900 | ) | (947 | ) | (927 | ) | (199 | ) | (228 | ) | (243 | ) | ||||||||||||
Adjustment to limit prepaid pension cost | 206 | 339 | 300 | |||||||||||||||||||||
Amortization of unrecognized prior service cost | 209 | 262 | 211 | 1 | 3 | |||||||||||||||||||
Amortization of unrecognized net (gains)/losses | 22 | (9 | ) | |||||||||||||||||||||
Curtailment/settlement | (59 | ) | ||||||||||||||||||||||
Employee contributions | (209 | ) | (213 | ) | (205 | ) | (23 | ) | ||||||||||||||||
Net periodic pension cost | 559 | 656 | 590 | 83 | 97 | 55 | ||||||||||||||||||
Actual return on plan assets (%) | (7.5 | ) | (4.0 | ) | 2.9 | (8.7 | ) | (7.3 | ) | (0.9 | ) | |||||||||||||
Principal actuarial assumptions used (%) | ||||||||||||||||||||||||
Discount rate | 3.8 | 4.0 | 4.0 | 5.8 | 6.2 | 6.3 | ||||||||||||||||||
Expected rate of return on plan assets | 5.0 | 5.0 | 5.0 | 7.3 | 7.9 | 8.1 | ||||||||||||||||||
Expected rate of salary increase | 2.5 | 2.5 | 2.5 | 4.4 | 4.4 | 4.4 | ||||||||||||||||||
Rate of pension increase | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.6 | ||||||||||||||||||
Swiss | ||||||||||||||||||||||||
Additional details to fair value of plan assets | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||
UBS financial instruments and UBS bank accounts | 814 | 476 | 920 | |||||||||||||||||||||
UBS AG shares1 | 206 | 305 | 291 | |||||||||||||||||||||
Securities lent to UBS included in plan assets | 2,645 | 824 | 3,432 | |||||||||||||||||||||
Other assets used by UBS included in plan assets | 90 | 104 | 179 | |||||||||||||||||||||
Swiss | Foreign | |||||||||||||||||||||||
31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||
Long-term target plan asset allocation (%) | ||||||||||||||||||||||||
Equity instruments | 35–53 | 51–55 | ||||||||||||||||||||||
Debt instruments | 30–48 | 44–46 | ||||||||||||||||||||||
Real estate | 12–19 | 0–1 | ||||||||||||||||||||||
Other | 0 | 1–2 | ||||||||||||||||||||||
Actual return on plan assets (%) | 8.6 | (7.5 | ) | (4.0 | ) | 17.8 | (8.7 | ) | (7.3 | ) | ||||||||||||||
CHF million | ||||||||||||||||||||||||
Additional details to fair value of plan assets | ||||||||||||||||||||||||
UBS financial instruments and UBS bank accounts | 1,005 | 814 | 476 | |||||||||||||||||||||
UBS AG shares1 | 246 | 206 | 305 | |||||||||||||||||||||
Securities lent to UBS included in plan assets | 2,930 | 2,645 | 824 | |||||||||||||||||||||
Other assets used by UBS included in plan assets | 84 | 90 | 104 | |||||||||||||||||||||
145
UBS Group Financial StatementsNotes to the Financial Statements
Note 31 Retirement Benefit Plans and Other Employee Benefits(continued)
b) Post-retirement medical and life plans
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Post-retirement benefit obligation at the beginning of the year | (145 | ) | (115 | ) | (117 | ) | (166 | ) | (145 | ) | (115 | ) | ||||||||||||
Service cost | (8 | ) | (7 | ) | (6 | ) | (11 | ) | (8 | ) | (7 | ) | ||||||||||||
Interest cost | (9 | ) | (9 | ) | (8 | ) | (10 | ) | (9 | ) | (9 | ) | ||||||||||||
Plan amendments | (3 | ) | (10 | ) | (7 | ) | (3 | ) | (10 | ) | ||||||||||||||
Actuarial gain/(loss) | (31 | ) | (6 | ) | 27 | |||||||||||||||||||
Actuarial gain / (loss) | (14 | ) | (31 | ) | (6 | ) | ||||||||||||||||||
Benefits paid | 4 | 4 | 5 | 6 | 4 | 4 | ||||||||||||||||||
Acquisition of PaineWebber | (9 | ) | ||||||||||||||||||||||
Foreign currency translation | 26 | (2 | ) | 0 | 16 | 26 | (2 | ) | ||||||||||||||||
Post-retirement benefit obligation at the end of the year | (166 | ) | (145 | ) | (115 | ) | (179 | ) | (166 | ) | (145 | ) | ||||||||||||
Fair value of plan assets at the beginning of the year | 3 | 4 | 4 | 2 | 3 | 4 | ||||||||||||||||||
Actual return on plan assets | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Employer contributions | 3 | 3 | 4 | 4 | 3 | 3 | ||||||||||||||||||
Benefits paid | (4 | ) | (4 | ) | (4 | ) | (6 | ) | (4 | ) | (4 | ) | ||||||||||||
Fair value of plan assets at the end of the year | 2 | 3 | 4 | 0 | 2 | 3 | ||||||||||||||||||
The assumed average health care cost trend rates used in determining post-retirement benefit expense is assumed to be 10.4%10.3% for 20022003 and to decrease to an ultimate trend rate of 5% in 2008.2010. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in the assumed health care cost trend rates would change the US post-retirement benefit obligation and the service and interest cost components of the net periodic post-retirement benefit costs as follows:
CHF million | 1% increase | 1% decrease | 1% increase | 1% decrease | ||||||||||||
Effect on total service and interest cost | 4 | (3 | ) | 5 | (4 | ) | ||||||||||
Effect on the post-retirement benefit obligation | 17 | (13 | ) | 25 | (19 | ) | ||||||||||
146150
UBS has established several equity participation plans to further align the long-term interests of executives, managers, staff and shareholders. The plans are offered to eligible employees in approximately 50 countries and are designed to meet the complex legal, tax and regulatory requirements of each country in which they are offered. The explanations below describe the most significant plans in general, but specific plan rules and investment offerings may vary by country.
UBS and non-UBS mutual funds and other UBS sponsored funds. EOP awards normally vest in one-third increments over a three-year vesting period. Under certain conditions, these awards are fully forfeitable by the employee.
147151
UBS Group Financial Statements
Notes to the Financial Statements
Note 32 Equity Participation Plans (continued) b) UBS share awards i) Stock compensation plans ii) Stock purchase plans The following table shows the shares awarded and the weighted-average fair value per share for the Group’s stock purchase plans.SharesMovements in shares granted under the various equity participation plans mentioned on the previous page are as follows: Stock bonus plans 31.12.02 31.12.01 31.12.00 Unvested shares outstanding, at the beginning of the year 52,299,332 47,458,928 14,418,646 Shares awarded during the year 13,511,655 16,850,859 1 39,188,528 1 Vested during the year (16,333,832 ) (10,740,466 )1 (5,215,503 )1 Forfeited during the year (1,340,594 ) (1,269,989 ) (932,743 ) Unvested shares outstanding, at the end of the year 48,136,561 52,299,332 47,458,928 Weighted-average fair market value of shares awarded (in CHF) 71 90 76 Fair market value of outstanding shares at the end of the year (CHF billion) 3.2 4.4 4.2 1 Restated for shares granted and fully vested at grant date. Stock compensation plans 31.12.03 31.12.02 31.12.01 Unvested shares outstanding, at the beginning of the year 48,136,561 52,299,332 47,458,928 Shares awarded during the year 11,023,553 13,511,655 16,850,859 Vested during the year (26,915,860 ) (16,333,832 ) (10,740,466 ) Forfeited during the year (860,364 ) (1,340,594 ) (1,269,989 ) Unvested shares outstanding, at the end of the year 31,383,890 48,136,561 52,299,332 Weighted-average fair market value of shares awarded (in CHF) 61 71 90 Fair market value of outstanding shares at the end of the year (CHF billion) 2.7 3.2 4.4 The stock bonus awards for 2000 include approximately 19.8 million shares granted under the retention agreements with key employees of UBS PaineWebber at the time of merger. Stock purchase plans 31.12.02 31.12.01 31.12.00 Share quantity purchased 3,822,907 2,922,515 1,264,725 Weighted-average purchase price (in CHF)1 63 63 44 1 Some of the shares purchased are denominated in US dollars and were converted into CHF for purposes of this table. Stock purchase plans 31.12.03 31.12.02 31.12.01 Share quantity purchased through discounted purchase plans 1,722,492 1,339,223 1,701,099 Weighted-average purchase price (in CHF) 31 40 47 Share quantity purchased through EP at fair market value 2,593,391 2,483,684 1,221,416 Weighted-average purchase price (in CHF) 61 77 Weighted-average purchase price (in USD) 49 46 51
148152
Note 32 Equity Participation Plans (continued)
c) UBS option awards
Movements in options granted under the various equity participation plans mentioned aboveon the previous page are as follows:
Weighted | Weighted | Weighted | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||||||||||||||||||||||||
average | average | average | average | average | average | |||||||||||||||||||||||||||||||||||||||||||
exercise | exercise | exercise | exercise | exercise | exercise | |||||||||||||||||||||||||||||||||||||||||||
Number of | price | Number of | price | Number of | price | Number of | price | Number of | price | Number of | price | |||||||||||||||||||||||||||||||||||||
options | (in CHF) | options | (in CHF) | options | (in CHF) | options | (in CHF) | options | (in CHF) | options | (in CHF) | |||||||||||||||||||||||||||||||||||||
31.12.02 | 31.12.021 | 31.12.01 | 31.12.011 | 31.12.00 | 31.12.00 | 31.12.03 | 31.12.031 | 31.12.02 | 31.12.021 | 31.12.01 | 31.12.011 | |||||||||||||||||||||||||||||||||||||
Outstanding, at the beginning of the year | 63,286,669 | 66 | 63,308,502 | 58 | 30,415,386 | 66 | 88,164,227 | 67 | 63,286,669 | 66 | 63,308,502 | 58 | ||||||||||||||||||||||||||||||||||||
Options due to the acquisition of PaineWebber | 18,975,8102 | 34 | ||||||||||||||||||||||||||||||||||||||||||||||
Granted during the year | 37,060,178 | 71 | 11,070,992 | 94 | 21,248,0463 | 72 | 38,969,319 | 59 | 37,060,178 | 71 | 11,070,992 | 94 | ||||||||||||||||||||||||||||||||||||
Exercised during the year | (9,595,133 | ) | 54 | (10,083,075 | ) | 49 | (5,390,307 | ) | 50 | (14,782,471 | ) | 54 | (9,595,133 | ) | 54 | (10,083,075 | ) | 49 | ||||||||||||||||||||||||||||||
Forfeited during the year | (2,082,356 | ) | 71 | (1,009,750 | ) | 74 | (1,940,433 | ) | 64 | (2,721,970 | ) | 64 | (2,082,356 | ) | 71 | (1,009,750 | ) | 74 | ||||||||||||||||||||||||||||||
Expired unexercised | (505,131 | ) | 77 | 0 | 0 | 0 | 0 | (589,079 | ) | 76 | (505,131 | ) | 77 | 0 | 0 | |||||||||||||||||||||||||||||||||
Outstanding, at the end of the year | 88,164,227 | 67 | 63,286,669 | 66 | 63,308,502 | 58 | 109,040,026 | 63 | 88,164,227 | 67 | 63,286,669 | 66 | ||||||||||||||||||||||||||||||||||||
Exercisable, at the end of the year | 21,765,482 | 51 | 25,550,932 | 50 | 18,310,839 | 34 | 34,726,720 | 59 | 21,765,482 | 51 | 25,550,932 | 50 | ||||||||||||||||||||||||||||||||||||
The following table summarizes additional information about stock options outstanding at 31 December 2002:2003:
Options outstanding | Options exercisable | |||||||||||||||||||
Range of exercise | Number of options | Weighted-average | Weighted-average | Number of | Weighted-average | |||||||||||||||
prices per share | outstanding | exercise price | remaining contractual life | options exercisable | exercise price | |||||||||||||||
CHF | CHF | Years | CHF | |||||||||||||||||
56.67-70.00 | 18,132,696 | 63.02 | 2.3 | 5,643,680 | 58.37 | |||||||||||||||
70.01-85.00 | 25,733,308 | 77.99 | 7.1 | 6,406,246 | 79.00 | |||||||||||||||
85.01-106.00 | 5,565,873 | 98.51 | 5.2 | 31,800 | 90.00 | |||||||||||||||
56.67-106.00 | 49,431,877 | 74.81 | 5.1 | 12,081,726 | 69.39 | |||||||||||||||
USD | USD | Years | USD | |||||||||||||||||
6.34-15.00 | 3,986,289 | 8.91 | 1.8 | 3,986,289 | 8.91 | |||||||||||||||
15.01-25.00 | 2,340,754 | 22.52 | 2.2 | 2,340,754 | 22.52 | |||||||||||||||
25.01-35.00 | 2,870,675 | 27.05 | 4.0 | 2,870,675 | 27.05 | |||||||||||||||
35.01-45.00 | 222,175 | 39.24 | 9.6 | 0 | 0 | |||||||||||||||
45.01-55.00 | 27,328,610 | 46.85 | 7.7 | 451,038 | 47.72 | |||||||||||||||
55.01-66.08 | 1,983,847 | 57.96 | 5.1 | 35,000 | 57.80 | |||||||||||||||
6.34-66.08 | 38,732,350 | 40.54 | 6.4 | 9,683,756 | 19.56 | |||||||||||||||
Options outstanding | Options exercisable | |||||||||||||||||||
Range of exercise | Number of options | Weighted-average | Weighted-average | Number of | Weighted-average | |||||||||||||||
prices per share | outstanding | exercise price | remaining contractual life | options exercisable | exercise price | |||||||||||||||
CHF | CHF | Years | CHF | |||||||||||||||||
53.37–70.00 | 27,389,634 | 61.17 | 6.4 | 10,496,007 | 63.76 | |||||||||||||||
70.01–85.00 | 23,708,208 | 78.13 | 6.7 | 8,845,007 | 78.52 | |||||||||||||||
85.01–106.00 | 5,686,709 | 98.66 | 4.7 | 420,348 | 87.56 | |||||||||||||||
53.37–106.00 | 56,784,551 | 72.00 | 6.3 | 19,761,362 | 70.87 | |||||||||||||||
USD | USD | Years | USD | |||||||||||||||||
6.48–35.00 | 6,342,786 | 19.32 | 2.0 | 6,342,786 | 19.32 | |||||||||||||||
35.01–45.00 | 14,530,862 | 43.15 | 9.1 | 79,679 | 39.52 | |||||||||||||||
45.01–55.00 | 26,951,159 | 47.30 | 7.1 | 8,500,619 | 46.57 | |||||||||||||||
55.01–65.31 | 4,430,668 | 59.11 | 7.4 | 42,274 | 57.87 | |||||||||||||||
6.48–65.31 | 52,255,475 | 43.75 | 7.1 | 14,965,358 | 35.02 | |||||||||||||||
Options are normally granted with a strike price either equal to fair market value or approximately 10% greater than the fair value of the underlying share on the grant date.
149153
UBS Group Financial Statements
Notes to the Financial Statements
Generally the Group’s policy is to recognize expense at the date of grantunder IFRS, for all equity participation instruments (shares, cash-settled warrants options and other cash-settled derivatives for which the underlying is UBS shares) except options, UBS accrues expense in the Group’s own shares). Theperformance year and determines the number of instruments granted to employees based on the instrument’s market price at the grant date, which is generally in the year following the performance year. For options, the amount of expense recognized is equal to the intrinsic value of the instrument at suchgrant date and is calculated as follows: 1) For stock options, it is(i. e. the difference between the strike price and fair
market value of shares at the date of grant, if any. 2) For UBS shares and other
derivative instruments, itgrant. This difference is generally zero, as option strike prices are generally at or above the fair market value. 3)prices of the shares). For discounted share plans, the expense is equal to the difference between the fair market value and the discounted value.value and is accrued for in the performance year. Management’s estimate of the accrued expense before tax for share-based compensation for the years ended 31 December 2003, 2002 and 2001 and 2000 was CHF 833 million, CHF 592 million and CHF 974 million, and CHF 1,749 million, respectively. The accruals include awards earned currently but issued in the following year.
The following table presents IFRS Net incomeprofit and Earnings per share for 2003, 2002 2001 and 20002001 as if the GroupUBS had adoptedapplied the fair value method of accounting for its equity participation plans, ratherplans. The
fair value method would recognize expense equal to the fair value of option awards at grant, which is higher than the intrinsic value method describedbecause of the time value of options.
in paragraph d) above. In addition, the table shows amounts already recorded in the Income statement for equity participation plans and the total expense that would have been recognized had the fair value method been applied.
CHF million, except per share data | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Net Income, as reported | 3,535 | 4,973 | 7,792 | ||||||||||
Add: Equity-based employee compensation expense included in reported net income, net of tax | 493 | 769 | 1,347 | ||||||||||
Deduct: Total equity-based employee compensation expense determined under the fair-value-based method for all awards, net of tax | (1,183 | ) | (1,116 | ) | (1,505 | ) | |||||||
Net income, pro-forma | 2,845 | 4,626 | 7,634 | ||||||||||
Earnings per share | |||||||||||||
Basic, as reported | 2.92 | 3.93 | 6.44 | ||||||||||
Basic, pro-forma | 2.35 | 3.65 | 6.31 | ||||||||||
Diluted, as reported | 2.87 | 3.78 | 6.35 | ||||||||||
Diluted, pro-forma | 2.31 | 3.51 | 6.22 | ||||||||||
CHF million, except per share data | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Net Profit, as reported | 6,385 | 3,535 | 4,973 | |||||||||
Add: Equity-based employee compensation expense included in reported net income, net of tax | 630 | 493 | 769 | |||||||||
Deduct: Total equity-based employee compensation expense determined under the fair-value-based method for all awards, net of tax | (1,069 | ) | (1,183 | ) | (1,116 | ) | ||||||
Net profit, pro-forma | 5,946 | 2,845 | 4,626 | |||||||||
Earnings per share | ||||||||||||
Basic, as reported | 5.72 | 2.92 | 3.93 | |||||||||
Basic, pro-forma | 5.32 | 2.35 | 3.65 | |||||||||
Diluted, as reported | 5.61 | 2.87 | 3.78 | |||||||||
Diluted, pro-forma | 5.22 | 2.31 | 3.51 | |||||||||
The fair value of options granted was determined using a proprietary option pricing model, substantially similar to the Black-Scholes model, with the following assumptions:
31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||
Expected volatility | 35 | % | 30 | % | 30 | % | 35% | 35% | 30% | |||||||||||||||
Risk free interest rate (CHF) | 3.28 | % | 3.51 | % | 3.27 | % | ||||||||||||||||||
Risk free interest rate (USD) | 4.65 | % | 5.81 | % | 5.66 | % | ||||||||||||||||||
Risk-free interest rate (CHF) | 1.70% | 3.28% | 3.51% | |||||||||||||||||||||
Risk-free interest rate (USD) | 3.17% | 4.65% | 5.81% | |||||||||||||||||||||
Expected dividend rate | 3.35 | % | 2.67 | % | 2.44 | % | 4.43% | 3.35% | 2.67% | |||||||||||||||
Expected life (years) | 4.5 | 4.5 | 4.4 | 4.5 | 4.5 | 4.5 | ||||||||||||||||||
The weighted-average fair value of options granted in 2003, 2002 2001 and 20002001 was CHF 15, CHF 20 and CHF 23 and CHF 16 per share, respectively.
150154
For its 2003 and 2002 Financial Statements, the Group defines related parties as Associated companies, private equity investees, the Board of Directors, the Group Executive Board, close family members and enterprises which are controlled by these individuals through their majority shareholding or their role as chairman a) Remuneration and equity holdings the Board of Directors, Group Executive Board and Group Managing Board including accrued pension benefits amounted to CHF 321.4 million in The external members of the Board of Directors do not have employment or service contracts with UBS, and thus are not entitled to benefits upon termination of their service on the Board of Directors. Total fees paid to these individuals for their services as external board members amounted to CHF 5.4 million in 2003, CHF 3.5 million in 2002and/and / or CEO in those companies. In 2001, and 2000, the Group Managing Board was also included in the above definition.Prior period figuresAmounts and share and option quantities for 2001 are based on the definition applied for 2001 and 2000.in that year.
The executive members of the Board of Directors have top-management employment contracts and receive pension benefits upon retirement. Total remuneration to the executive members of the Board of Directors and Group Executive Board recognized in the income statement including cash, shares and accrued pension benefits amounted to CHF 144.6 million in 2003 and CHF 131.8 million in 2002. Total compensation numbers exclude merger-related retention payments for the two ex-PaineWebber executives of CHF 21.1 million (USD 17.0 million) in 2003 and CHF 20.6 million (USD 14.9 million) in 2002. These retention payments were committed to at the time of the merger in 2000 and fully disclosed at the time. Total remuneration to the executive members of2001 and CHF 272.3 million in 2000. CHF 3.3 million in 2001 and CHF 3.3 million in 2000.2001.and the Group Executive Board and parties closely linked to them was 3,150,217 at 31 December 2003 and 2,139,371 at 31 December 2002. The total number of shares held by these two groups plus the Group Managing Board was 4,068,918 at 31 December 2001. No member of the Board of Directors Group Executive Board or Group ManagingExecutive Board is the beneficial owner of more than 1% of the Group’s shares at 31 December 2002 and 31 December 2001.2003.
b) Loans and advances to Board of Directors and senior executives
155
Financial Statements
Notes to the Financial Statements
Note 33 Related Parties (continued)
members were granted loans, to these two groups plus the Group Managing Board amounted to CHF 32 millionfixed advances and mortgages at 31 December 2001. The 2001 amount only included mortgages. Loans and advances are granted with the same terms and conditions that are available to other employees. Theemployees, based on terms and conditions are based on those granted to third parties adjusted for reduced credit risk.
are now granted at general market conditions with no preferential rates, following the US Sarbanes-Oxley Act of 2002. Non-executive Board members are granted loans and mortgages at general market conditions.
151
UBS Group Financial StatementsNotes to the Financial Statements
Note 33 Related Parties (continued)
c) Loans, advances to and transactions with significant associated companies
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Balance at the beginning of the year | 65 | 0 | 40 | 65 | ||||||||||||
Additions | 10 | 65 | 48 | 10 | ||||||||||||
Reductions | (35 | ) | 0 | (25 | ) | (35 | ) | |||||||||
Balance at the end of the year | 40 | 65 | 63 | 40 | ||||||||||||
All loans and advances to associated companies are transacted at arm’s length. At 31 December 20022003 and 2001,2002, there were trading exposures and guarantees to significant associated companies of CHF 13635 million and CHF 306136 million, respectively. In addition, the Group routinely receives services from associated companies at arm’s length terms. For the years ended 31 December 2003, 31 December 2002 and 31 December 2001, the amount paid to significant associates for these services was CHF 106 million, CHF 60 million and CHF 98 million, respectively.
d) Loans, advances to and transactions with private equity investees
CHF million | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | ||||||||||||
Balance at the beginning of the year | 489 | 682 | 338 | 489 | ||||||||||||
Additions | 328 | 65 | 153 | 328 | ||||||||||||
Reductions | (479 | ) | (258 | ) | (125 | ) | (479 | ) | ||||||||
Balance at the end of the year | 338 | 489 | 366 | 338 | ||||||||||||
At 31 December 20022003 and 31 December 20012002, there were trading exposures and guarantees or commitments to private equity companies of CHF 7323 million and CHF 17773 million, respectively. In addition the Group purchased services from private equity companies at arm’s length terms for the years ended 31 December 2003, 31 December 2002 and 31 December 2001 in the amount of CHF 14 million, CHF 116 million and CHF 196 million, respectively.
156
Note 33 Related Parties (continued)
e) Other related party transactions
During 20012003 and 2002, UBS entered into the following transactions at arm’s length with companies whose Chairman and/and / or CEO is an external member of UBS’the Board of Directors of UBS or of which an external director is a controlling shareholder.
CHF million | 2002 | 2001 | 2003 | 2002 | ||||||||||||
Goods sold and services provided by related parties to UBS | 54 | 38 | 43 | 54 | ||||||||||||
Services provided to related parties by UBS (fees received) | 13 | 17 | 7 | 13 | ||||||||||||
Loans granted to related parties by UBS | 140 | 0 | 79 | 1 | 140 | |||||||||||
As part of its sponsorship of Team Alinghi, UBS paid CHF 12 million to AC 2003 SA during 2002. AC 2003 SA, whose controlling shareholder is UBS board member Ernesto Bertarelli, is Team Alinghi’s management company.
152157
Financial Statements
Notes to the Financial Statements
Note 34 Sales of Financial Assets in Securitizations
During the years ended 31 December 2003, 2002 and 2001, UBS securitized (i.e., transformed owned financial assets into securities through sales transactions) residential mortgage loans and securities, commercial mortgage loans and other financial assets, acting as lead or co-manager. UBS’s continuing involvement in these transactions was primarily limited to the temporary retention of various security interests.
Proceeds Received | ||||||||||||
CHF billion | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Residential mortgage securitizations | 131 | 143 | 68 | |||||||||
Commercial mortgage securitizations | 4 | 4 | 4 | |||||||||
Other financial asset securitizations | 2 | 6 | 3 | |||||||||
Related pre-tax gains (losses) recognized, including unrealized gains (losses) on retained interests, at the time of securitization were as follows:
Pre-tax gains / (losses) recognized | ||||||||||||
CHF million | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Residential mortgage securitizations | 338 | 524 | 113 | |||||||||
Commercial mortgage securitizations | 214 | 206 | 130 | |||||||||
Other financial asset securitizations | 2 | (5 | ) | 21 | ||||||||
At 31 December 2003 and 2002, UBS retained CHF 3.8 billion and CHF 5.2 billion, respectively in agency residential mortgage securities, backed by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). The fair value of retained interests in residential mortgage securities is generally determined using observable market prices. Retained interests in other residential mortgage, commercial mortgage and other securities were not material at 31 December 2003 and 2002.
There have been no material post-balance sheet events which would require disclosure or adjustment to the 31 December 20022003 Financial Statements.
158
The legal entity group structure of UBS is designed to support the Group’s businesses within an efficient legal, tax, regulatory and funding framework. Neither the Business Groups of UBS (namely UBS Warburg, UBS PaineWebber, UBS Wealth Management & Business Banking, Global Asset Management, Investment Bank and UBS Asset Management)Wealth Management USA) nor Corporate Center are replicated in their own individual legal entities but rather they generally operate out of the parent bank, UBS AG, through its Swiss and foreign branches.
Footnotes
1 | WM&BB: Wealth Management & Business Banking, Global AM: Global Asset Management, IB: Investment Bank, WM-US: Wealth Management USA, CC: Corporate Center. | |
2 | Share Capital and Share Premium. |
Significant subsidiaries
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumu- | |||||||||||
Company | of incorporation | Group1 | in millions | lated in % | ||||||||||
Aventic AG | Zurich, Switzerland | WM&BB | CHF | 30.0 | 100.0 | |||||||||
Banco UBS SA | Rio de Janeiro, Brazil | IB | BRL | 52.9 | 100.0 | |||||||||
BDL Banco di Lugano | Lugano, Switzerland | CC | CHF | 50.0 | 100.0 | |||||||||
BDL Banco di Lugano (Singapore) Ltd | Singapore, Singapore | CC | SGD | 25.0 | 100.0 | |||||||||
Brunswick UBS Ltd | George Town, Cayman Islands | IB | USD | 25.0 | 50.0 | |||||||||
Cantrade Private Bank | ||||||||||||||
Switzerland (CI) Limited | St. Helier, Jersey | CC | GBP | 0.7 | 100.0 | |||||||||
Crédit Industriel SA | Zurich, Switzerland | WM&BB | CHF | 10.0 | 100.0 | |||||||||
Ehinger & Armand von Ernst AG | Zurich, Switzerland | CC | CHF | 21.0 | 100.0 | |||||||||
Factors AG | Zurich, Switzerland | WM&BB | CHF | 5.0 | 100.0 | |||||||||
Ferrier Lullin & Cie SA | Geneva, Switzerland | CC | CHF | 30.0 | 100.0 | |||||||||
GAM Holding AG | Zurich, Switzerland | CC | CHF | 116.0 | 100.0 | |||||||||
GAM Limited | Hamilton, Bermuda | CC | USD | 2.0 | 100.0 | |||||||||
Giubergia UBS SIM SpA | Milan, Italy | IB | EUR | 15.1 | 50.0 | |||||||||
Noriba Bank BSC | Manama, Bahrain | WM&BB | USD | 10.0 | 100.0 | |||||||||
PaineWebber Capital Inc | Delaware, USA | WM-US | USD | 25.8 | 2 | 100.0 | ||||||||
PT UBS Securities Indonesia | Jakarta, Indonesia | IB | IDR | 25,000.0 | 93.4 | |||||||||
SBC Wealth Management AG | Zug, Switzerland | CC | CHF | 290.1 | 100.0 | |||||||||
SBCI IB Limited | London, Great Britain | IB | GBP | 100.0 | 100.0 | |||||||||
SG Warburg & Co International BV | Amsterdam, the Netherlands | IB | GBP | 40.5 | 100.0 | |||||||||
Thesaurus Continentale | ||||||||||||||
Effekten-Gesellschaft in Zürich | Zurich, Switzerland | WM&BB | CHF | 30.0 | 100.0 | |||||||||
UBS (Bahamas) Ltd | Nassau, Bahamas | WM&BB | USD | 4.0 | 100.0 | |||||||||
UBS (France) SA | Paris, France | WM&BB | EUR | 10.7 | 100.0 | |||||||||
UBS (Italia) SpA | Milan, Italy | WM&BB | EUR | 42.0 | 100.0 | |||||||||
UBS (Luxembourg) SA | Luxembourg, Luxembourg | WM&BB | CHF | 150.0 | 100.0 | |||||||||
UBS (Monaco) SA | Monte Carlo, Monaco | WM&BB | EUR | 9.2 | 100.0 | |||||||||
UBS (Trust and Banking) Limited | Tokyo, Japan | Global AM | JPY | 10,900.0 | 100.0 | |||||||||
UBS Advisory and | ||||||||||||||
Capital Markets Australia Ltd | Sydney, Australia | IB | AUD | 580.8 | 2 | 100.0 | ||||||||
UBS Americas Inc | Delaware, USA | IB | USD | 4,490.8 | 2 | 100.0 | ||||||||
UBS Asesores SA | Panama, Panama | WM&BB | USD | – | 100.0 | |||||||||
UBS Australia Limited | Sydney, Australia | IB | AUD | 50.0 | 100.0 | |||||||||
UBS Bank (Canada) | Toronto, Canada | WM&BB | CAD | 8.5 | 100.0 | |||||||||
UBS Bank USA | Utah, USA | WM-US | USD | 1,700.0 | 2 | 100.0 | ||||||||
UBS Belgium SA / NV | Brussels, Belgium | WM&BB | EUR | 14.5 | 100.0 | |||||||||
UBS Beteiligungs-GmbH & Co KG | Frankfurt am Main, Germany | IB | EUR | 398.8 | 100.0 | |||||||||
159
Financial Statements
Notes to the Financial Statements
Note 36 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Footnotes
1 | ||
2 | Share Capital and Share Premium. |
Significant subsidiaries
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
Armand von Ernst & Cie AG | Berne, Switzerland | WB | CHF | 5.0 | 100.0 | |||||||||
Aventic AG | Zurich, Switzerland | WB | CHF | 30.0 | 100.0 | |||||||||
Banco UBS Warburg SA | Rio de Janeiro, Brazil | WA | BRL | 52.9 | 100.0 | |||||||||
Bank Ehinger & Cie AG | Basel, Switzerland | WB | CHF | 6.0 | 100.0 | |||||||||
BDL Banco di Lugano | Lugano, Switzerland | WB | CHF | 50.0 | 100.0 | |||||||||
BDL Banco di Lugano (Singapore) Ltd | Singapore, Singapore | WB | CHF | 22.5 | 100.0 | |||||||||
Brunswick UBS Warburg Ltd | George Town, Cayman Islands | WA | USD | 25.0 | 2 | 50.0 | ||||||||
Cantrade Privatbank AG | Zurich, Switzerland | WB | CHF | 10.0 | 100.0 | |||||||||
Cantrade Private Bank | ||||||||||||||
Switzerland (CI) Limited | St. Helier, Jersey | WB | GBP | 0.7 | 100.0 | |||||||||
Crédit Industriel SA | Zurich, Switzerland | WB | CHF | 10.0 | 100.0 | |||||||||
EIBA AG | Zurich, Switzerland | WA | CHF | 1.4 | 100.0 | |||||||||
Factors AG | Zurich, Switzerland | WB | CHF | 5.0 | 100.0 | |||||||||
Ferrier Lullin & Cie SA | Geneva, Switzerland | WB | CHF | 30.0 | 100.0 | |||||||||
Fondvest AG | Zurich, Switzerland | AM | CHF | 4.3 | 100.0 | |||||||||
GAM Holding AG | Zurich, Switzerland | AM | CHF | 200.0 | 100.0 | |||||||||
Global Asset Management Limited, Bermuda | Hamilton, Bermuda | AM | USD | 2.0 | 100.0 | |||||||||
IL Immobilien-Leasing AG | Opfikon, Switzerland | WB | CHF | 5.0 | 100.0 | |||||||||
Noriba Bank BSC | Manama, Bahrain | WB | USD | 10.0 | 100.0 | |||||||||
PaineWebber Capital Inc | Delaware, USA | PW | USD | 25.8 | 2 | 100.0 | ||||||||
PT UBS Warburg Indonesia | Jakarta, Indonesia | WA | IDR | 11,000.0 | 85.0 | |||||||||
PW Trust Company | New Jersey, USA | PW | USD | 4.4 | 2 | 99.6 | ||||||||
SG Warburg & Co International BV | Amsterdam, the Netherlands | WA | GBP | 40.5 | 100.0 | |||||||||
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumu- | |||||||||||
Company | of incorporation | Group1 | in millions | lated in % | ||||||||||
UBS Capital (Jersey) Ltd | St. Helier, Jersey | IB | GBP | 226.0 | 100.0 | |||||||||
UBS Capital AG | Zurich, Switzerland | IB | CHF | 5.0 | 100.0 | |||||||||
UBS Capital Americas Investments II LLC | Delaware, USA | IB | USD | 130.0 | 2 | 100.0 | ||||||||
UBS Capital Americas Investments III Ltd | George Town, Cayman Islands | IB | USD | 61.1 | 2 | 100.0 | ||||||||
UBS Capital Asia Pacific Limited | George Town, Cayman Islands | IB | USD | 5.0 | 100.0 | |||||||||
UBS Capital BV | Amsterdam, the Netherlands | IB | EUR | 118.8 | 2 | 100.0 | ||||||||
UBS Capital II LLC | Delaware, USA | IB | USD | 2.6 | 2 | 100.0 | ||||||||
UBS Capital Latin America LDC | George Town, Cayman Islands | IB | USD | 113.0 | 2 | 100.0 | ||||||||
UBS Capital LLC | Delaware, USA | IB | USD | 378.5 | 2 | 100.0 | ||||||||
UBS Capital SpA | Milan, Italy | IB | EUR | 25.8 | 100.0 | |||||||||
UBS Card Center AG | Glattbrugg, Switzerland | WM&BB | CHF | 40.0 | 100.0 | |||||||||
UBS Corporate Finance Italia SpA | Milan, Italy | IB | EUR | 1.9 | 100.0 | |||||||||
UBS Corporate Finance | ||||||||||||||
South Africa (Proprietary) Limited | Sandton, South Africa | IB | ZAR | – | 100.0 | |||||||||
UBS Derivatives Hong Kong Limited | Hong Kong, China | IB | HKD | 20.0 | 100.0 | |||||||||
UBS Employee Benefits Trust Limited | St. Helier, Jersey | CC | CHF | – | 100.0 | |||||||||
UBS Equity Research Malaysia Sdn Bhd | Kuala Lumpur, Malaysia | IB | MYR | 0.5 | 70.0 | |||||||||
UBS España SA | Madrid, Spain | WM&BB | EUR | 115.3 | 100.0 | |||||||||
UBS Fiduciaria SpA | Milan, Italy | WM&BB | EUR | 0.2 | 100.0 | |||||||||
UBS Fiduciary Trust Company | New Jersey, USA | WM-US | USD | 4.4 | 2 | 99.6 | ||||||||
UBS Finance (Cayman Islands) Ltd | George Town, Cayman Islands | CC | USD | 0.5 | 100.0 | |||||||||
UBS Finance (Curação) NV | Willemstad, Netherlands Antilles | CC | USD | 0.1 | 100.0 | |||||||||
UBS Finance (Delaware) LLC | Delaware, USA | IB | USD | 37.3 | 2 | 100.0 | ||||||||
UBS Financial Services Inc. | Delaware, USA | WM-US | USD | 1,672.3 | 2 | 100.0 | ||||||||
UBS Financial Services | ||||||||||||||
Incorporated of Puerto Rico | Hato Rey, Puerto Rico | WM-US | USD | 31.0 | 2 | 100.0 | ||||||||
UBS Finanzholding AG | Zurich, Switzerland | CC | CHF | 10.0 | 100.0 | |||||||||
UBS Fund Advisor LLC | Delaware, USA | WM-US | USD | – | 100.0 | |||||||||
UBS Fund Holding (Luxembourg) SA | Luxembourg, Luxembourg | Global AM | CHF | 42.0 | 100.0 | |||||||||
UBS Fund Holding (Switzerland) AG | Basel, Switzerland | Global AM | CHF | 18.0 | 100.0 | |||||||||
UBS Fund Management (Switzerland) AG | Basel, Switzerland | Global AM | CHF | 1.0 | 100.0 | |||||||||
UBS Fund Services (Cayman) Ltd | George Town, Cayman Islands | Global AM | USD | 5.6 | 100.0 | |||||||||
UBS Fund Services (Luxembourg) SA | Luxembourg, Luxembourg | Global AM | CHF | 2.5 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Americas) Inc | Delaware, USA | Global AM | USD | – | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Australia) Ltd | Sydney, Australia | Global AM | AUD | 8.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Canada) Co | Halifax, Canada | Global AM | CAD | 117.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(France) SA | Paris, France | WM&BB | EUR | 2.1 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Hong Kong) Limited | Hong Kong, China | Global AM | HKD | 25.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Italia) SIM SpA | Milan, Italy | Global AM | EUR | 2.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Japan) Ltd | Tokyo, Japan | Global AM | JPY | 2,200.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Singapore) Ltd | Singapore, Singapore | Global AM | SGD | 4.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Taiwan) Ltd | Taipei, Taiwan | Global AM | TWD | 340.0 | 84.1 | |||||||||
UBS Global Asset Management (US) Inc | Delaware, USA | Global AM | USD | 35.2 | 2 | 100.0 | ||||||||
UBS Global Asset Management Holding Ltd | London, Great Britain | Global AM | GBP | 8.0 | 100.0 | |||||||||
153160
Note 36 Significant Subsidiaries and Associates (continued)
Significant subsidiaries continued)
Footnotes
1 | ||
2 |
UBS Group Financial StatementsNotes to the Financial Statements
Note 35 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
Thesaurus Continentale | ||||||||||||||
Effekten-Gesellschaft in Zürich | Zurich, Switzerland | WB | CHF | 30.0 | 100.0 | |||||||||
UBS (Bahamas) Ltd | Nassau, Bahamas | WB | USD | 4.0 | 100.0 | |||||||||
UBS (France) SA | Paris, France | WB | EUR | 10.0 | 100.0 | |||||||||
UBS (Italia) SpA | Milan, Italy | WB | EUR | 22.2 | 100.0 | |||||||||
UBS (Luxembourg) SA | Luxembourg, Luxembourg | WB | CHF | 150.0 | 100.0 | |||||||||
UBS (Monaco) SA | Monte Carlo, Monaco | WB | EUR | 9.2 | 100.0 | |||||||||
UBS (Sydney) Limited | Sydney, Australia | WA | AUD | 12.7 | 100.0 | |||||||||
UBS (Trust and Banking) Limited | Tokyo, Japan | AM | JPY | 10,900.0 | 100.0 | |||||||||
UBS (USA) Inc | Delaware, USA | WA | USD | 315.0 | 100.0 | |||||||||
UBS Americas Inc | Delaware, USA | WA | USD | 4,490.82 | 100.0 | |||||||||
UBS Australia Limited | Sydney, Australia | WA | AUD | 50.0 | 100.0 | |||||||||
UBS Bank (Canada) | Toronto, Canada | WB | CAD | 20.7 | 100.0 | |||||||||
UBS Beteiligungs-GmbH & Co KG | Frankfurt, Germany | WA | EUR | 398.8 | 100.0 | |||||||||
UBS Bunting Warburg Inc | Toronto, Canada | WA | CAD | 33.3 | 50.0 | |||||||||
UBS Capital (Jersey) Ltd | St. Helier, Jersey | WA | GBP | 226.0 | 100.0 | |||||||||
UBS Capital AG | Zurich, Switzerland | WA | CHF | 5.0 | 100.0 | |||||||||
UBS Capital Americas Investments II LLC | Delaware, USA | WA | USD | 130.0 | 2 | 100.0 | ||||||||
UBS Capital Americas Investments III Ltd | George Town, Cayman Islands | WA | USD | 61.0 | 2 | 100.0 | ||||||||
UBS Capital Asia Pacific Limited | George Town, Cayman Islands | WA | USD | 5.0 | 100.0 | |||||||||
UBS Capital BV | Amsterdam, the Netherlands | WA | EUR | 104.1 | 2 | 100.0 | ||||||||
UBS Capital II LLC | Delaware, USA | WA | USD | 2.6 | 2 | 100.0 | ||||||||
UBS Capital Latin America LDC | George Town, Cayman Islands | WA | USD | 113.0 | 2 | 100.0 | ||||||||
UBS Capital LLC | Delaware, USA | WA | USD | 378.5 | 2 | 100.0 | ||||||||
UBS Capital Partners Limited | London, Great Britain | WA | GBP | 6.7 | 100.0 | |||||||||
UBS Capital SpA | Milan, Italy | WA | EUR | 25.8 | 100.0 | |||||||||
UBS Card Center AG | Glattbrugg, Switzerland | WB | CHF | 40.0 | 100.0 | |||||||||
UBS Employee Benefits Trust Limited | St. Helier, Jersey | CC | CHF | — | 100.0 | |||||||||
UBS España SA | Madrid, Spain | WB | EUR | 85.3 | 100.0 | |||||||||
UBS Fiduciaria SpA | Milan, Italy | WB | EUR | 0.2 | 100.0 | |||||||||
UBS Finance (Cayman Islands) Ltd | George Town, Cayman Islands | CC | USD | 0.5 | 100.0 | |||||||||
UBS Finance (Curação) NV | Willemstad, Netherlands | CC | USD | 0.1 | 100.0 | |||||||||
Antilles | ||||||||||||||
UBS Finance (Delaware) LLC | Delaware, USA | WA | USD | 37.3 | 2 | 100.0 | ||||||||
UBS Finanzholding AG | Zurich, Switzerland | CC | CHF | 10.0 | 100.0 | |||||||||
UBS Fund Holding (Luxembourg) SA | Luxembourg, Luxembourg | AM | CHF | 42.0 | 100.0 | |||||||||
UBS Fund Holding (Switzerland) AG | Basel, Switzerland | AM | CHF | 18.0 | 100.0 | |||||||||
UBS Fund Management (Switzerland) AG | Basel, Switzerland | AM | CHF | 1.0 | 100.0 | |||||||||
UBS Fund Services (Cayman) Ltd | George Town, Cayman Islands | AM | USD | 5.6 | 100.0 | |||||||||
UBS Fund Services (Luxembourg) SA | Luxembourg, Luxembourg | AM | CHF | 2.5 | 100.0 | |||||||||
UBS Global Asset Management (Americas) Inc | Delaware, USA | AM | USD | — | 100.0 | |||||||||
UBS Global Asset Management (Australia) Ltd | Sydney, Australia | AM | AUD | 8.0 | 100.0 | |||||||||
UBS Global Asset Management (Canada) Co | Halifax, Canada | AM | CAD | 117.0 | 100.0 | |||||||||
UBS Global Asset Management (France) SA | Paris, France | AM | EUR | 1.5 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Hong Kong) Limited | Hong Kong, China | AM | HKD | 25.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Italia) SIM SpA | Milan, Italy | AM | EUR | 2.0 | 100.0 | |||||||||
UBS Global Asset Management (Japan) Ltd | Tokyo, Japan | AM | JPY | 2,200.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(New York) Inc | New York, USA | AM | USD | 0.5 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Singapore) Ltd | Singapore, Singapore | AM | SGD | 4.0 | 100.0 | |||||||||
UBS Global Asset Management (Taiwan) Ltd | Taipei, Taiwan | AM | TWD | 340.0 | 84.1 | |||||||||
UBS Global Asset Management (US) Inc | Delaware, USA | AM | USD | 35.3 | 2 | 100.0 | ||||||||
154
Footnotes
Share Capital and Share Premium. |
Note 35 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
UBS Global Asset Management Holding Ltd | London, Great Britain | AM | GBP | 8.0 | 2 | 100.0 | ||||||||
UBS Global Trust Corporation | St. John, Canada | WB | CAD | 0.1 | 100.0 | |||||||||
UBS Immoleasing AG | Zurich, Switzerland | WB | CHF | 3.0 | 100.0 | |||||||||
UBS International Holdings BV | Amsterdam, the Netherlands | CC | CHF | 13.8 | 100.0 | |||||||||
UBS Invest Kapitalanlagegesellschaft mbH | Frankfurt, Germany | AM | EUR | 6.4 | 100.0 | |||||||||
UBS Investment Bank Limited | London, Great Britain | WA | GBP | 10.0 | 100.0 | |||||||||
UBS Leasing AG | Brugg, Switzerland | WB | CHF | 10.0 | 100.0 | |||||||||
UBS Life AG | Zurich, Switzerland | WB | CHF | 25.0 | 100.0 | |||||||||
UBS Limited | London, Great Britain | WA | GBP | 10.0 | 100.0 | |||||||||
UBS O’Connor LLC | Delaware, USA | AM | USD | 1.0 | 100.0 | |||||||||
UBS O’Connor Trading Limited | George Town, Cayman Islands | AM | USD | 350.0 | 100.0 | |||||||||
UBS PaineWebber Inc | Delaware, USA | PW | USD | 1,707.5 | 2 | 100.0 | ||||||||
UBS PaineWebber Incorporated of | ||||||||||||||
Puerto Rico | Hato Rey, Puerto Rico | PW | USD | 31.6 | 2 | 100.0 | ||||||||
UBS PaineWebber Life Insurance Company | California, USA | PW | USD | 39.3 | 2 | 100.0 | ||||||||
UBS Portfolio LLC | New York, USA | WA | USD | 0.1 | 100.0 | |||||||||
UBS Preferred Funding Company LLC I | Delaware, USA | WA | USD | — | 100.0 | |||||||||
UBS Preferred Funding Company LLC II | Delaware, USA | WA | USD | — | 100.0 | |||||||||
UBS Preferred Funding Company LLC III | Delaware, USA | WA | USD | — | 100.0 | |||||||||
UBS Principal Finance LLC | Delaware, USA | WA | USD | 0.1 | 100.0 | |||||||||
UBS Private Banking (Belgium) SA | Brussels, Belgium | WB | EUR | 7.3 | 100.0 | |||||||||
UBS Private Banking Deutschland AG | Hamburg, Germany | WB | EUR | 51.0 | 100.0 | |||||||||
UBS Realty Investors LLC | Massachusetts, USA | AM | USD | — | 100.0 | |||||||||
UBS Trust (Canada) | Toronto, Canada | WB | CAD | 12.5 | 100.0 | |||||||||
UBS Trustees (Bahamas) Ltd | Nassau, Bahamas | WB | USD | 2.0 | 100.0 | |||||||||
UBS Trustees (Cayman) Ltd | George Town, Cayman Islands | WB | USD | 2.0 | 100.0 | |||||||||
UBS Trustees (Jersey) Ltd | St. Helier, Jersey | WB | GBP | 0.7 | 100.0 | |||||||||
UBS Trustees (Singapore) Limited | Singapore, Singapore | WB | SGD | 3.3 | 100.0 | |||||||||
UBS UK Holding Limited | London, Great Britain | WA | GBP | 5.0 | 100.0 | |||||||||
UBS UK Limited | London, Great Britain | WA | GBP | 609.0 | 100.0 | |||||||||
UBS Warburg (France) SA | Paris, France | WA | EUR | 22.9 | 100.0 | |||||||||
UBS Warburg (Italia) SpA | Milan, Italy | WA | EUR | 1.9 | 100.0 | |||||||||
UBS Warburg (Japan) Limited | George Town, Cayman Islands | WA | JPY | 50,000.0 | 100.0 | |||||||||
UBS Warburg (Malaysia) Sdn Bhd | Kuala Lumpur, Malaysia | WA | MYR | 0.5 | 70.0 | |||||||||
UBS Warburg (Nederland) BV | Amsterdam, the Netherlands | WA | EUR | 10.9 | 100.0 | |||||||||
UBS Warburg AG | Frankfurt, Germany | WA | EUR | 155.7 | 100.0 | |||||||||
UBS Warburg Asia Limited | Hong Kong, China | WA | HKD | 20.0 | 100.0 | |||||||||
UBS Warburg | ||||||||||||||
Australia Corporate Finance Ltd | Sydney, Australia | WA | AUD | — | 100.0 | |||||||||
UBS Warburg | ||||||||||||||
Australia Corporation Pty Limited | Sydney, Australia | WA | AUD | 50.4 | 2 | 100.0 | ||||||||
UBS Warburg Australia Equities Ltd | Sydney, Australia | WA | AUD | 190.0 | 2 | 100.0 | ||||||||
UBS Warburg Australia Limited | Sydney, Australia | WA | AUD | 571.5 | 2 | 100.0 | ||||||||
UBS Warburg Derivatives Limited | Hong Kong, China | WA | HKD | 20.0 | 100.0 | |||||||||
UBS Warburg Hong Kong Limited | Hong Kong, China | WA | HKD | 30.0 | 100.0 | |||||||||
UBS Warburg International Ltd | London, Great Britain | WA | GBP | 18.0 | 100.0 | |||||||||
UBS Warburg Investments Ltd | Sydney, Australia | WA | AUD | 0.1 | 100.0 | |||||||||
UBS Warburg LLC | Delaware, USA | WA | USD | 948.1 | 100.0 | |||||||||
UBS Warburg Ltd | London, Great Britain | WA | GBP | 17.5 | 100.0 | |||||||||
UBS Warburg New Zealand Equities Ltd | Auckland, New Zealand | WA | NZD | 7.5 | 100.0 | |||||||||
UBS Warburg Private Clients Ltd | Melbourne, Australia | WA | AUD | 53.9 | 100.0 | |||||||||
UBS Warburg Pte Ltd | Singapore, Singapore | WA | SGD | 55.0 | 100.0 | |||||||||
UBS Warburg Real Estate Securities Inc | Delaware, USA | WA | USD | 0.4 | 100.0 | |||||||||
UBS Warburg Securities (España) SV SA | Madrid, Spain | WA | EUR | 15.0 | 100.0 | |||||||||
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumu- | |||||||||||
Company | of incorporation | Group1 | in millions | lated in % | ||||||||||
UBS Global Trust Corporation | St. John, Canada | WM&BB | CAD | 0.1 | 100.0 | |||||||||
UBS International Holdings BV | Amsterdam, the Netherlands | CC | EUR | 6.8 | 100.0 | |||||||||
UBS International Inc | New York, USA | WM&BB | USD | 34.3 | 2 | 100.0 | ||||||||
UBS International Life Limited | Dublin, Ireland | WM&BB | EUR | 1.0 | 100.0 | |||||||||
UBS Invest Kapitalanlagegesellschaft mbH | Frankfurt am Main, Germany | Global AM | EUR | 7.7 | 100.0 | |||||||||
UBS Investment Bank AG | Frankfurt am Main, Germany | IB | EUR | 155.7 | 100.0 | |||||||||
UBS Investment Bank Nederland BV | Amsterdam, the Netherlands | IB | EUR | 10.9 | 100.0 | |||||||||
UBS Leasing AG | Brugg, Switzerland | WM&BB | CHF | 10.0 | 100.0 | |||||||||
UBS Life AG | Zurich, Switzerland | WM&BB | CHF | 25.0 | 100.0 | |||||||||
UBS Limited | London, Great Britain | IB | GBP | 21.2 | 100.0 | |||||||||
UBS Loan Finance LLC | Delaware, USA | IB | USD | 16.7 | 100.0 | |||||||||
UBS Mortgage Holdings LLC | Delaware, USA | WM-US | USD | – | 100.0 | |||||||||
UBS New Zealand Limited | Auckland, New Zealand | IB | NZD | 7.5 | 100.0 | |||||||||
UBS O’Connor LLC | Delaware, USA | Global AM | USD | 1.0 | 100.0 | |||||||||
UBS PaineWebber Life Insurance Company | California, USA | WM-US | USD | 39.3 | 2 | 100.0 | ||||||||
UBS Portfolio LLC | New York, USA | IB | USD | 0.1 | 100.0 | |||||||||
UBS Preferred Funding Company LLC I | Delaware, USA | IB | USD | – | 100.0 | |||||||||
UBS Preferred Funding Company LLC II | Delaware, USA | IB | USD | – | 100.0 | |||||||||
UBS Preferred Funding Company LLC III | Delaware, USA | IB | USD | – | 100.0 | |||||||||
UBS Preferred Funding Company LLC IV | Delaware, USA | IB | USD | – | 100.0 | |||||||||
UBS Principal Finance LLC | Delaware, USA | IB | USD | 0.1 | 100.0 | |||||||||
UBS Private Clients Australia Ltd | Melbourne, Australia | IB | AUD | 53.9 | 100.0 | |||||||||
UBS Real Estate Investments Inc | Delaware, USA | IB | USD | 0.3 | 100.0 | |||||||||
UBS Real Estate Securities Inc | Delaware, USA | IB | USD | 0.4 | 100.0 | |||||||||
UBS Realty Investors LLC | Connecticut, USA | Global AM | USD | 9.3 | 100.0 | |||||||||
UBS Securities (Thailand) Ltd | Bangkok, Thailand | IB | THB | 400.0 | 100.0 | |||||||||
UBS Securities Asia Limited | Hong Kong, China | IB | HKD | 20.0 | 100.0 | |||||||||
UBS Securities Australia Ltd | Sydney, Australia | IB | AUD | 209.8 | 2 | 100.0 | ||||||||
UBS Securities Canada Inc | Toronto, Canada | IB | CAD | 10.0 | 50.0 | |||||||||
UBS Securities España | ||||||||||||||
Sociedad de Valores SA | Madrid, Spain | IB | EUR | 15.0 | 100.0 | |||||||||
UBS Securities France SA | Paris, France | IB | EUR | 22.9 | 100.0 | |||||||||
UBS Securities Hong Kong Limited | Hong Kong, China | IB | HKD | 30.0 | 100.0 | |||||||||
UBS Securities India Private Limited | Mumbai, India | IB | INR | 237.8 | 75.0 | |||||||||
UBS Securities International Limited | London, Great Britain | IB | GBP | 18.0 | 100.0 | |||||||||
UBS Securities Japan Ltd | George Town, Cayman Islands | IB | JPY | 50,000.0 | 100.0 | |||||||||
UBS Securities Limited | London, Great Britain | IB | GBP | 140.0 | 100.0 | |||||||||
UBS Securities LLC | Delaware, USA | IB | USD | 2,141.4 | 2 | 100.0 | ||||||||
UBS Securities Philippines Inc | Makati City, Philippines | IB | PHP | 150.0 | 100.0 | |||||||||
UBS Securities Singapore Pte Ltd | Singapore, Singapore | IB | SGD | 55.0 | 100.0 | |||||||||
UBS Securities South Africa | ||||||||||||||
(Proprietary) Limited | Sandton, South Africa | IB | ZAR | 87.1 | 2 | 100.0 | ||||||||
UBS Trust (Canada) | Toronto, Canada | WM&BB | CAD | 12.5 | 100.0 | |||||||||
UBS Trust Company National Association | New York, USA | WM-US | USD | 5.0 | 2 | 100.0 | ||||||||
UBS Trustees (Bahamas) Ltd | Nassau, Bahamas | WM&BB | USD | 2.0 | 100.0 | |||||||||
UBS Trustees (Cayman) Ltd | George Town, Cayman Islands | WM&BB | USD | 2.0 | 100.0 | |||||||||
UBS Trustees (Jersey) Ltd | St. Helier, Jersey | WM&BB | GBP | – | 100.0 | |||||||||
UBS Trustees (Singapore) Limited | Singapore, Singapore | WM&BB | SGD | 3.3 | 100.0 | |||||||||
UBS UK Holding Limited | London, Great Britain | IB | GBP | 5.0 | 100.0 | |||||||||
UBS Wealth Management AG | Hamburg, Germany | WM&BB | EUR | 51.0 | 100.0 | |||||||||
155161
UBS Group Financial Statements
Notes to the Financial Statements
Note 3536 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
UBS Warburg Securities | ||||||||||||||
(South Africa) (Pty) Limited | Sandton, South Africa | WA | ZAR | 87.1 | 100.0 | |||||||||
UBS Warburg Securities Co Ltd | Bangkok, Thailand | WA | THB | 400.0 | 100.0 | |||||||||
UBS Warburg Securities India Private Limited | Mumbai, India | WA | INR | 237.8 | 75.0 | |||||||||
UBS Warburg Securities Ltd | London, Great Britain | WA | GBP | 140.0 | 100.0 | |||||||||
UBS Warburg Securities Philippines Inc | Makati City, Philippines | WA | PHP | 150.0 | 100.0 | |||||||||
Consolidated companies: changes in 2002
Significant new companies
Deconsolidated companies2003
Significant new companies | ||
Giubergia UBS SIM SpA – Milan, Italy | ||
SBC Wealth Management AG – Zug, Switzerland UBS Bank USA – Utah, USA | ||
UBS International Life Limited – Dublin, Ireland | ||
UBS Preferred Funding Company LLC IV – Delaware, USA | ||
Deconsolidated companies
Significant deconsolidated companies | Reason for deconsolidation | |||
Bank Ehinger & Cie AG – Basel, Switzerland | Merged | |||
Merged |
Significant associates
Equity interest | Share capital | |||||||||||||
Company | Industry | in % | in millions | |||||||||||
SIS Swiss Financial Services Group AG — Zurich, Switzerland | Financial | 32.9 | CHF | 26 | ||||||||||
Giubergia UBS Warburg SIM SpA — Milan, Italy | Financial | 49.9 | EUR | 15 | ||||||||||
Motor Columbus AG — Baden, Switzerland | Electricity | 35.6 | CHF | 253 | ||||||||||
Telekurs Holding AG — Zurich, Switzerland | Financial | 33.3 | CHF | 45 | ||||||||||
Volbroker.com Limited — London, Great Britain | Financial | 21.0 | GBP | 18 | ||||||||||
Equity interest | Share capital | ||||||||||
Company | Industry | in % | in millions | ||||||||
Motor Columbus AG – Baden, Switzerland | Electricity | 36 | CHF | 253 | |||||||
SIS Swiss Financial Services Group AG – Zurich, Switzerland | Financial | 33 | CHF | 26 | |||||||
Telekurs Holding AG – Zurich, Switzerland | Financial | 33 | CHF | 45 | |||||||
O’Connor Global Convertible Portfolio – | Private Investment | ||||||||||
Luxembourg, Luxembourg | Company | 60 | USD | 33 | 1 | ||||||
UBS Currrency Portfolio Ltd – | Private Investment | ||||||||||
George Town, Cayman Islands | Company | 20 | USD | 1,750 | 1 | ||||||
UBS Global Equity Arbitrage Ltd – | Private Investment | ||||||||||
George Town, Cayman Islands | Company | 52 | USD | 823 | 1 | ||||||
UBS Neutral Alpha Strategies Ltd – | Private Investment | ||||||||||
George Town, Cayman Islands | Company | 12 | USD | 695 | 1 | ||||||
Volbroker.com Limited – London, Great Britain | Financial | 21 | GBP | 18 | |||||||
None of the above investments carry voting rights that are significantly different from the proportion of shares held.
156162
On 3 November 2000,Invested assetsinclude all client assets managed by or deposited with UBS completed its acquisitionfor investment purposes only. They therefore exclude all assets held for purely transactional purposes. Assets included are, for example, managed fund assets, managed institutional assets, discretionary and advisory wealth management portfolios, fiduciary deposits, time deposits, savings accounts and wealth management securities or brokerage accounts. Custody-only assets and transactional cash or current accounts as well as non-bankable assets (e.g. art collections) and deposits from third-party banks for funding or trading purposes are excluded.
both the Business Group that does the investment management and the one that distributes it. This results in double counting within UBS total invested assets, as both Business Groups are providing a service independently to their respective clients, and both add value and generate revenue.
options issued was measured on the date of acquisition, 3 November 2000.
CHF billion | 31.12.03 | 31.12.02 | ||||||
Fund assets managed by UBS | 339 | 322 | ||||||
Discretionary assets | 511 | 446 | ||||||
Other invested assets | 1,359 | 1,269 | ||||||
Total invested assets | 2,209 | 2,037 | ||||||
thereof double count | 287 | 295 | ||||||
Net new money | 61.6 | 36.9 | ||||||
Note 3738 Currency Translation Rates
The following table shows the principal rates used to translate the financial statements of foreign entities into Swiss francs:
Spot rate | Average rate | |||||||||||||||||||||||||||||||||||||||
As at | Year ended | Spot rate | Average rate | |||||||||||||||||||||||||||||||||||||
As at | Year ended | |||||||||||||||||||||||||||||||||||||||
31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||
1 USD | 1.38 | 1.67 | 1.54 | 1.69 | 1.69 | 1.24 | 1.38 | 1.34 | 1.54 | 1.69 | ||||||||||||||||||||||||||||||
1 EUR | 1.45 | 1.48 | 1.46 | 1.50 | 1.56 | 1.56 | 1.45 | 1.54 | 1.46 | 1.50 | ||||||||||||||||||||||||||||||
1 GBP | 2.23 | 2.43 | 2.33 | 2.44 | 2.57 | 2.22 | 2.23 | 2.20 | 2.33 | 2.44 | ||||||||||||||||||||||||||||||
100 JPY | 1.17 | 1.27 | 1.24 | 1.40 | 1.57 | 1.15 | 1.17 | 1.16 | 1.24 | 1.40 | ||||||||||||||||||||||||||||||
163
The consolidated financial statements of UBS are prepared in accordance with International Financial Reporting Standards. Set out below are the deviations which would result ifsignificant differences regarding recognition and measurement between IFRS and the provisions of the Banking Ordinance and the Guidelines of the Swiss Federal Banking Commission governing financial statement reporting pursuant to Article 23 through Article 27 of the Banking Ordinance were applied in the preparation of the consolidated financial statements of UBS.Ordinance.
1. Treasury sharesFinancial investments
157
UBS Group Financial StatementsNotes to the Financial Statements
held for other purposes are classified as Financial investments and a corresponding reserve for own shares is established within Shareholders’ equity. All derivative contracts on own shares are reported as Positive or Negative replacement values. Traded own shares and derivatives on own shares are carried at fair value. Gains and losses realized on disposal and unrealized gains and losses from changes in the fair value are recorded as Net trading income. Own shares reported within Financial investments are reported at the lower of cost or market value. Reductions to market value and reversals of such reductions, as well as gains and losses on disposal, are included in Other income. Own shares repurchased for cancellation are reported as financial investments and accounted for at cost. Upon cancellation, the par value of shares repurchased and cancelled is debited against Share capital for the par value, with the remainder of the purchase cost debited against General statutory reserve.
2. Financial investments
or loss arising from a changebalance recognized in fair value reported within Shareholders’ equity, is included in net profit or loss for the period.
3.2. Cash flow hedges
4. Gains/losses not recognized in the income statement
5. Extraordinary income and expense
158164
Note 38 Swiss Banking Law Requirements (continued)
CHF million | 31.12.02 | 31.12.01 | |||||||
Differences in the Balance Sheet | |||||||||
Treasury shares | |||||||||
Trading portfolio | 371 | 128 | |||||||
Financial investments | 6,623 | 3,253 | |||||||
Due to banks | 23 | 24 | |||||||
Negative replacement values | (2 | ) | 0 | ||||||
Other liabilities | 293 | 0 | |||||||
Shareholders’ equity | 6,680 | 3,357 | |||||||
Financial investments | |||||||||
Financial investments | (1,314 | ) | (1,856 | ) | |||||
Other liabilities | (113 | ) | (215 | ) | |||||
Shareholders’ equity | (1,201 | ) | (1,641 | ) | |||||
Cash flow hedges | |||||||||
Other liabilities | (256 | ) | (459 | ) | |||||
Shareholders’ equity | 256 | 459 | |||||||
Differences in the Income Statement | |||||||||
Treasury shares | |||||||||
Net trading income | (70 | ) | (70 | ) | |||||
Other income | (269 | ) | (231 | ) | |||||
Personnel expenses | 4 | ||||||||
Tax expenses | (53 | ) | (71 | ) | |||||
Financial investments | |||||||||
Other income | (255 | ) | (607 | ) | |||||
Reclassification of extraordinary income and expense | |||||||||
Other income | (350 | ) | (95 | ) | |||||
Extraordinary income | 361 | 109 | |||||||
Extraordinary expense | 11 | 14 | |||||||
159
UBS Group Financial StatementsNotes to the Financial Statements
Note 3940 Reconciliation of International Financial Reporting Standards (IFRS) to United States Generally Accepted Accounting Principles (US GAAP)
Note 40.1 Valuation and income recognition differences between IFRS and US GAAP
The consolidated financial statements of the GroupUBS have been prepared in accordance with IFRS. The principles of IFRS differ in certain respects from United States Generally Accepted Accounting Principles (“US GAAP”). The following is a summary of the relevant significant accounting and valuation differences between IFRS and US GAAP.
a. Purchase accounting (merger of Union Bank of Switzerland and Swiss Bank Corporation) |
Under IFRS, the Group accounted for the 1998 merger of Union Bank of Switzerland and Swiss Bank Corporation was accounted for under the uniting of interests method. The balance sheets and income statements of the banks were combined, and no adjustments were made to the carrying values of the assets and liabilities. Under US GAAP, the business combination creating UBS AG is accounted for under the purchase method with Union Bank of Switzerland being considered the acquirer. Under the purchase method, the cost of acquisition is measured at fair value and the acquirer’s interests in identifiable tangible assets and liabilities of the acquiree are restated to fair values at the date of acquisition. Any excess consideration paid over the fair value of net tangible assets acquired is allocated, first to identifiable intangible assets based on their fair values, if determinable, with the remainder allocated to goodwill.
Goodwill and intangible assets
On 1 January 2002, the GroupUBS adopted SFAS 141, “Business Combinations” and SFAS 142, “Goodwill and Other Intangible Assets”. SFAS 141 requires reclassification of intangible assets to goodwill which no longer meet the recognition criteria under the new standard. SFAS 142 requires that goodwill and intangible assets with indefinite lives no longer be amortized but be tested annually for impairment. Identifiable intangible assets with finite lives will continue to be amortized.
Other purchase accounting adjustments
b. Reversal of IFRS goodwill amortization |
The adoption of SFAS 142 “Goodwill and Intangible Assets” resulted in two new reconciling itemsitems: 1) Intangible assets on the IFRS Balancebalance sheet with a book value of CHF 1.8 billion at 31 December 2001 were reclassified to goodwill for US GAAP.GAAP; 2) The amortization of IFRS goodwill and the intangible assets reclassified to goodwill for US GAAP (CHF 831 million and CHF 1,017 million for the yearyears ended 31 December 2002)2003 and 31 December 2002, respectively) was reversed for US GAAP.
160165
Financial Statements
Notes to the Financial Statements
CHF million, except for per share data | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Reported Net profit under US GAAP | 5,546 | 3,234 | 4,437 | 6,513 | 5,546 | 3,234 | ||||||||||||||||||
Add back: SBC purchase accounting goodwill | 0 | 1,657 | 1,679 | 0 | 0 | 1,657 | ||||||||||||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and/or IFRS goodwill | 0 | 886 | 315 | |||||||||||||||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and / or IFRS goodwill | 0 | 0 | 886 | |||||||||||||||||||||
Adjusted net profit under US GAAP | 5,546 | 5,777 | 6,431 | 6,513 | 5,546 | 5,777 | ||||||||||||||||||
Reported basic earnings per share under US GAAP | 4.59 | 2.58 | 3.70 | 5.83 | 4.59 | 2.58 | ||||||||||||||||||
Add back: SBC purchase accounting goodwill | 0.00 | 1.32 | 1.40 | 0.00 | 0.00 | 1.32 | ||||||||||||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and/or IFRS goodwill | 0.00 | 0.71 | 0.26 | |||||||||||||||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and / or IFRS goodwill | 0.00 | 0.00 | 0.71 | |||||||||||||||||||||
Adjusted basic earnings per share under US GAAP | 4.59 | 4.61 | 5.36 | 5.83 | 4.59 | 4.61 | ||||||||||||||||||
Reported diluted earnings per share under US GAAP | 4.51 | 2.46 | 3.64 | 5.72 | 4.51 | 2.46 | ||||||||||||||||||
Add back: SBC purchase accounting goodwill | 0.00 | 1.30 | 1.38 | 0.00 | 0.00 | 1.30 | ||||||||||||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and/or IFRS goodwill | 0.00 | 0.70 | 0.26 | |||||||||||||||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and / or IFRS goodwill | 0.00 | 0.00 | 0.70 | |||||||||||||||||||||
Adjusted diluted earnings per share under US GAAP | 4.51 | 4.46 | 5.28 | 5.72 | 4.51 | 4.46 | ||||||||||||||||||
The table below shows the estimated, aggregated amortization expenses for other intangible assets, which are still subject to an annual amortization, on a US GAAP basis:
CHF million | ||||||||
Estimated, aggregated amortization expense for: | ||||||||
2003 | 116 | |||||||
2004 | 97 | 93 | ||||||
2005 | 93 | 90 | ||||||
2006 | 80 | 77 | ||||||
2007 | 71 | 70 | ||||||
2008 and thereafter | 765 | |||||||
2008 | 69 | |||||||
2009 and thereafter | 775 | |||||||
Total | 1,222 | 1,174 | ||||||
c. Restructuring provision |
Under IFRS, restructuring provisions are recognized when a legal or constructive obligation has been incurred. In 1997, the Group recognized a CHF 7,000 million restructuring provision was recognized to cover personnel, IT, premises and other costs associated with combining and restructuring the merged Group.banks. A further CHF 300 million provision was recognized in 1999, reflecting the impact of increased precision in the estimation of certain leased and owned property costs.
turing provision of CHF 1,575 million during 1998 for US GAAP. CHF 759 million of this provision related to estimated costs for restructuring the operations and activities of Swiss Bank Corporation, and that amount was recorded as a liability of the acquired business. The remaining CHF 816 million of estimated costs were charged to restructuring expense during 1998. The US GAAP restructuring provision was increased by CHF 600 million and CHF 130 million in 1999 and 2000, respectively.
161166
UBS Group Financial StatementsNotes to the Financial Statementsd. Derivative instruments
Derivative instruments held or issued for hedging activities
In addition, amounts deferred under previous hedging relationships that now do not qualify as hedges under IAS 39 are being amortized against IFRS net profit over the remaining life of the hedging relationship. Such amounts have been reversed for US GAAP as they have never been treated as hedges.
Derivative instruments indexed to UBS shares
162
167
Financial Statements
Notes to the Financial Statements
Bifurcation of embedded issuer calls out of structured debt instruments
Prior to the adoption of IAS 39 on 1 January 2001, financial investments were classified as either current investments or long-term investments under IFRS. The Group considered current financial investments to be held for sale and carried at lower of cost or market value (“LOCOM”). The Group accounted for long-term financial investments at cost, less any impairments. Under US GAAP, the Group’s financial investments are classified as available for sale (debt and marketable equity securities), and are carried at fair value with changes in fair value recorded in Other comprehensive income. Gains and losses are recognized in Net profit in the period sold, and losses are recognized in the period of impairment for IFRS and US GAAP. For the IFRS to US GAAP reconciliation, debt and marketable equity securities were adjusted from LOCOM to fair value and classified as available for sale investments. Unrealized gains or unrealized losses relating to these investments were recorded in Other comprehensive income.
Financial investments available for sale
Private equity investments
163
UBS Group Financial StatementsNotes to the Financial Statements
posespurposes is that certain private equity investments are now recorded at fair value, with changes in fair value recognized in US GAAP net profit. The remaining private equity investments continue to be accounted for at cost less “other than temporary” impairment.
cumulative effect of this change in accounting on US GAAP net profit was an increase of CHF 639 million, after tax. For the yearyears ended 31 December 2003 and 31 December 2002, the effect of applying the new standard on the reconciliation of IFRS net profit to US GAAP was to increasedecrease US GAAP net profit by an additional CHF 19 million, after tax and to increase US GAAP net profit by CHF 83 million, after tax.tax, respectively.
168
CHF million, except for per share data | pro-forma | pro-forma | pro-forma | |||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Net profit under US GAAP | 4,907 | 2,763 | 5,523 | 6,513 | 4,907 | 2,763 | ||||||||||||||||||
Basic earnings per share | 4.06 | 2.21 | 4.61 | 5.83 | 4.06 | 2.21 | ||||||||||||||||||
Diluted earnings per share | 3.99 | 2.09 | 4.53 | 5.72 | 3.99 | 2.09 | ||||||||||||||||||
See Note 2 for information regarding impairment charges recorded for private equity investments.
Under IFRS, the GroupUBS recognizes pension expense based on a specific method of actuarial valuation used to determine the projected plan liabilities for accrued service, including future expected salary increases, and expected return on plan assets. Plan assets are recorded at fair value and are held in a separate trust to satisfy plan liabilities. Under IFRS the recognition of a prepaid asset is subject to certain limitations, and any unrecognized prepaid asset is recorded as pension expense. US GAAP does not allow a limitation on the recognition of prepaid assets recorded in the Balance Sheet.sheet.
liability is recognized, an equal amount will be recognized as an intangible asset up to the amount of any unrecognized past service cost. Any amount not recognized as an intangible asset is reported in Other comprehensive income. The additional minimum liability required under US GAAP before tax amounts to CHF 306 million, CHF 1,225 million and CHF 306 million as at 31 December 2003, 2002 and 2001, respectively. The amount recognized in intangible assets was CHF 0 million, CHF 2 million and CHF 3 million and the amount recognized in Other comprehensive income before tax was CHF 306 million, CHF 1,223 million before taxes and CHF
303 million before taxes as at 31 December 2003, 2002 and 2001, respectively.
Under IFRS, the GroupUBS has recorded expenses and liabilities for post-retirement, medical and life insurance benefits, determined under a methodology similar to that described above under retirement benefitpension plans.
h. Equity participation plans
164
IFRS does not specifically address the recognition and measurement requirements for equity participation plans.
169
Financial Statements
Notes to the Financial Statements
to increase assets by CHF 396460 million and CHF 1,485396 million, liabilities by CHF 429483 million and CHF 1,607429 million, and decrease Shareholders’ equity by CHF 3323 million and CHF 12233 million (for UBS AG shares held by the trusts which are treated as treasury shares) at 31 December 2003 and 2002 and 2001 respectively.
Under IFRS, effective 1 January 2000, certain costs associated with the acquisitions or development of internal useinternal-use software musthad to be capitalized. Once the software iswas ready for its intended use, the costs capitalized arewere amortized to the Income statement over the estimated life of the software. Under US GAAP, the same principle applies,applied, however this standard was effective 1 January 1999. For US GAAP, the costs associated with the acquisition or development of internal useinternal-use software that met the US GAAP software capitalization criteria in 1999 have beenwere reversed from Operating expenses and amortized over a life of two years from the time that the software iswas ready for its intended use. From 1 January 2000, the only remaining reconciliationrecon-
j. Consolidation of Variable Interest Entities (VIEs)
In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145, “RescissionUS GAAP, like IFRS, generally requires consolidation of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. The new standard is effective for fiscal years beginning after 15 May 2002. UBS will adopt the new standard for its fiscal year 2003, but does not expect that it will have a significant effectentities on the financial statements.basis of controlling a majority of voting rights. In certain situations, control over the majority of voting rights is not a reliable indicator of the need to consolidate, such as when there are no voting rights, or when voting rights and exposure to risks and rewards are largely disproportionate. However, there are differences in the approach of IFRS and US GAAP to those situations.
165
UBS Group Financial StatementsNotesif control is exercised through other means, consideration is given to the Financial Statements
nized at its fair valuesubstance of the relationship. Indicators of these situations include: predetermination of the entity’s activities; the entity’s activities being conducted on behalf of the enterprise; decision-making powers being held by the enterprise; the right to obtain the majority of the benefits or be exposed to the risks inherent in the periodactivities of the entity; or retaining the majority of the residual or ownership risks related to the entity’s assets in which the liability is incurred and not at the time an entity commitsorder to an exit or disposal plan. SFAS No. 146 is applicable prospectively for exit or disposal activities initiated after 31 December 2002. UBS does not expect that the new standard will have a significant impact onobtain benefits from its financial statements.
– | do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties |
– | do not have the characteristics of a controlling financial interest |
170
– | have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of an investor with disproportionately small voting interest. |
forand consolidation in the US GAAP Balance sheet of VIEs that an enterprise will consolidate or in which it will have a significant variable interest. These disclosure requirements became effective for financial statements issuedcreated after 31 January 2003 in which UBS is the primary beneficiary, and FIN 46 transitional disclosures, are providedset out in Note 40.2.41.1.
k. Recently issued US accounting standards
On 1 January 2003, UBS adopted SFAS 145, Rescission of FASB Statements 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The adoption of this new accounting standard did not affect the Financial Statements for the year ended 31 December 2003.
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that a liability be recognized at inception of certain guarantees equal to the fair value of the obligation assumed, which extends over the period of the guarantee. FIN 45 is applicable prospectively for certain guarantees issued or modified after 31 December 2002. The adoption of FIN 45 had no material impact on the results of operations and financial position of UBS.
– | for a financial instrument linked to an entity’s own shares that embodies an obligation to repurchase the equity shares or settle the obligation by transferring assets. |
– | for an obligation that the entity must or may settle by issuing a variable number of its equity shares whereby the counterparty receiving the equity shares has no or only little exposure to changes in the entity’s share price. |
– | for an instrument whose fair value is inversely related to the change in fair value of the entity’s equity shares, for example a written put option that could be net share settled. |
166171
Financial Statements
Notes to the Financial Statements
ments entered into or modified after that date, and adopted the standard as at 1 July 2003 for financial instruments entered into on or before 31 May 2003.
the aggregate amount of |
– | the aggregate related fair value of investments with unrealized losses. |
Shareholders’ equity | Net profit | |||||||||||||||||||||||
Note 39.1 | ||||||||||||||||||||||||
CHF million | Reference | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Amounts determined in accordance with IFRS | 38,991 | 43,530 | 3,535 | 4,973 | 7,792 | |||||||||||||||||||
Adjustments in respect of: | ||||||||||||||||||||||||
SBC purchase accounting goodwill and other purchase accounting adjustments | a | 15,285 | 15,413 | (128 | ) | (1,614 | ) | (1,669 | ) | |||||||||||||||
Reversal of IFRS goodwill amortization | b | 1,017 | 0 | 1,017 | 0 | 0 | ||||||||||||||||||
Restructuring provision | c | 0 | 0 | 0 | (112 | ) | (238 | ) | ||||||||||||||||
Derivative instruments | d | (138 | ) | (169 | ) | 354 | 25 | (1,353 | ) | |||||||||||||||
Financial investments (prior to the adoption of IAS 39) | e | 0 | 0 | 0 | 0 | 28 | ||||||||||||||||||
Financial investments and private equity | f | (30 | ) | (709 | ) | 767 | 0 | 0 | ||||||||||||||||
Retirement benefit plans | g | 621 | 1,714 | (156 | ) | 119 | 59 | |||||||||||||||||
Other employee benefits | h | (1 | ) | (8 | ) | 7 | 8 | 8 | ||||||||||||||||
Equity participation plans | i | (164 | ) | (186 | ) | 63 | (12 | ) | (167 | ) | ||||||||||||||
Software capitalization | j | 0 | 60 | (60 | ) | (169 | ) | (160 | ) | |||||||||||||||
Tax adjustments | (5 | ) | (363 | ) | 147 | 16 | 137 | |||||||||||||||||
Total adjustments | 16,585 | 15,752 | 2,011 | (1,739 | ) | (3,355 | ) | |||||||||||||||||
Amounts determined in accordance with US GAAP | 55,576 | 59,282 | 5,546 | 3,234 | 4,437 | |||||||||||||||||||
the nature of the investment(s) |
– | the cause(s) of the impairment(s) |
– | the number of investment positions that are in an unrealized loss position |
– | the severity and duration of the impairment(s) |
– | other evidence considered by the investor in reaching its conclusion that the investment(s) is not other-than-temporarily impaired, including, for example, industry analyst reports, sector credit ratings, volatility of the security’s market price, and / or any other information that the investor considers relevant. |
172
Pursuant to guidance included in FASB Staff Position FAS 106-1, the Group has chosen to defer recognition of the potential effects of the Act. This decision was made largely due to the number of open issues about various provisions of the Act and a lack of authoritative accounting guidance concerning certain technical matters. Therefore, the retiree health obligation and cost reported in these Financial Statements and the accompanying notes as at and for the year ended 31 December 2003 do not yet reflect any poten-
tial impact of the Act. Specific authoritative guidance on the accounting for the government subsidy is pending and that guidance, when issued, could require the Group to change previously reported information. It is expected that a change would decrease the obligation and cost attributable to post-retirement medical coverage.
Note 40.2 Reconciliation of IFRS Shareholders’ equity and Net profit to US GAAP
Note 40.1 | Shareholders' equity | Net profit | ||||||||||||||||||||||
CHF million | Reference | 31.12.03 | 31.12.02 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Amounts determined in accordance with IFRS | 35,446 | 38,991 | 6,385 | 3,535 | 4,973 | |||||||||||||||||||
Adjustments in respect of: | ||||||||||||||||||||||||
SBC purchase accounting goodwill and other purchase accounting adjustments | a | 15,196 | 15,285 | (89 | ) | (128 | ) | (1,614 | ) | |||||||||||||||
Reversal of IFRS goodwill amortization | b | 1,825 | 1,017 | 808 | 1,017 | 0 | ||||||||||||||||||
Restructuring provision | c | 0 | 0 | 0 | 0 | (112 | ) | |||||||||||||||||
Derivative instruments | d | (94 | ) | (138 | ) | 188 | 354 | 25 | ||||||||||||||||
Financial investments and private equity | e | (84 | ) | (30 | ) | (159 | ) | 767 | 0 | |||||||||||||||
Pension plans | f | 1,303 | 621 | (235 | ) | (156 | ) | 119 | ||||||||||||||||
Other post-retirement benefit plans | g | (1 | ) | (1 | ) | 0 | 7 | 8 | ||||||||||||||||
Equity participation plans | h | (112 | ) | (164 | ) | (152 | ) | 63 | (12 | ) | ||||||||||||||
Software capitalization | i | 0 | 0 | 0 | (60 | ) | (169 | ) | ||||||||||||||||
Consolidation of variable interest entities (VIEs) | j | (10 | ) | 0 | (10 | ) | 0 | 0 | ||||||||||||||||
Tax adjustments | (295 | ) | (5 | ) | (223 | ) | 147 | 16 | ||||||||||||||||
Total adjustments | 17,728 | 16,585 | 128 | 2,011 | (1,739 | ) | ||||||||||||||||||
Amounts determined in accordance with US GAAP | 53,174 | 55,576 | 6,513 | 5,546 | 3,234 | |||||||||||||||||||
Note 40.3 Earnings per share
Under both IFRS and US GAAP, basic earnings per share (“EPS”) isare computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted EPS includesinclude the determinants of basic EPS and, in addition, gives effect to dilutive potential common shares that were outstanding during the period.
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||||||||||||||||||||||||
31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||||||||||||||||||||||||||
For the year ended | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | ||||||||||||||||||||||||||||||||||||
Net profit available for ordinary shares (CHF million) | 5,546 | 3,535 | 3,234 | 4,973 | 4,437 | 7,792 | 6,513 | 6,385 | 5,546 | 3,535 | 3,234 | 4,973 | ||||||||||||||||||||||||||||||||||||
Net profit for diluted EPS (CHF million) | 5,520 | 3,515 | 3,135 | 4,874 | 4,423 | 7,778 | 6,514 | 6,386 | 5,520 | 3,515 | 3,135 | 4,874 | ||||||||||||||||||||||||||||||||||||
Weighted-average shares outstanding | 1,208,055,132 | 1,208,586,678 | 1,251,180,815 | 1,266,038,193 | 1,198,680,193 | 1,209,087,927 | 1,116,602,289 | 1,116,953,623 | 1,208,055,132 | 1,208,586,678 | 1,251,180,815 | 1,266,038,193 | ||||||||||||||||||||||||||||||||||||
Diluted weighted average shares outstanding | 1,222,862,165 | 1,223,382,942 | 1,273,720,560 | 1,288,577,938 | 1,215,169,966 | 1,225,577,700 | ||||||||||||||||||||||||||||||||||||||||||
Diluted weighted-average shares outstanding | 1,138,800,625 | 1,138,800,625 | 1,222,862,165 | 1,223,382,942 | 1,273,720,560 | 1,288,577,938 | ||||||||||||||||||||||||||||||||||||||||||
Basic earnings per share (CHF) | 4.59 | 2.92 | 2.58 | 3.93 | 3.70 | 6.44 | 5.83 | 5.72 | 4.59 | 2.92 | 2.58 | 3.93 | ||||||||||||||||||||||||||||||||||||
Diluted earnings per share (CHF) | 4.51 | 2.87 | 2.46 | 3.78 | 3.64 | 6.35 | 5.72 | 5.61 | 4.51 | 2.87 | 2.46 | 3.78 | ||||||||||||||||||||||||||||||||||||
167173
UBS Group Financial Statements
Notes to the Financial Statements
Note 39.440.4 Presentation differences between IFRS and US GAAP
In addition to the differences in valuation and income recognition, other differences, essentially related to presentation, exist between IFRS and US GAAP. Although there is no impact on IFRS and US GAAP reported Shareholders’ equity and Net profit due to these differences, it may be useful to understand them to interpret the financial statements presented in accordance with US GAAP. The following is a summary of presentation differences that relate to the basic IFRS financial statements.
1. Settlement date vs. trade date accounting
2. Financial investments
3. Securities received as proceeds in a securities for securities lending transaction
4. Reverse repurchase, repurchase, securities borrowing and securities lending transactions
168174
The following is a Consolidated Income Statement of the Group, for the years ended 31 December 2002,2003, 31 December 20012002 and 31 December 2000,2001, restated to reflect the impact of valuation and income recognition differences and presentation differences between IFRS and US GAAP.
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
For the year ended | Reference | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | Reference | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | ||||||||||||||||||||||||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | a, d, 4 | 39,679 | 39,963 | 51,907 | 52,277 | 51,565 | 51,745 | a, d, 4, j | 39,940 | 40,159 | 39,679 | 39,963 | 51,907 | 52,277 | ||||||||||||||||||||||||||||||||||||||||||
Interest expense | a, 4 | (29,334 | ) | (29,417 | ) | (44,096 | ) | (44,236 | ) | (43,584 | ) | (43,615 | ) | a, 4 | (27,700 | ) | (27,860 | ) | (29,334 | ) | (29,417 | ) | (44,096 | ) | (44,236 | ) | ||||||||||||||||||||||||||||||
Net interest income | 10,345 | 10,546 | 7,811 | 8,041 | 7,981 | 8,130 | 12,240 | 12,299 | 10,345 | 10,546 | 7,811 | 8,041 | ||||||||||||||||||||||||||||||||||||||||||||
Credit loss expense/(recovery) | (206 | ) | (206 | ) | (498 | ) | (498 | ) | 130 | 130 | ||||||||||||||||||||||||||||||||||||||||||||||
Credit loss expense / (recovery) | (116 | ) | (116 | ) | (206 | ) | (206 | ) | (498 | ) | (498 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net interest income after credit loss expense/(recovery) | 10,139 | 10,340 | 7,313 | 7,543 | 8,111 | 8,260 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income after credit loss expense / (recovery) | 12,124 | 12,183 | 10,139 | 10,340 | 7,313 | 7,543 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net fee and commission income | 18,221 | 18,221 | 20,211 | 20,211 | 16,703 | 16,703 | 17,345 | 17,345 | 18,221 | 18,221 | 20,211 | 20,211 | ||||||||||||||||||||||||||||||||||||||||||||
Net trading income | d, 4 | 6,031 | 5,572 | 8,959 | 8,802 | 8,597 | 9,953 | d, 4, h, j | 4,065 | 3,883 | 6,031 | 5,572 | 8,959 | 8,802 | ||||||||||||||||||||||||||||||||||||||||||
Other income1 | e, f, 4 | 96 | (12 | ) | 534 | 558 | 1,514 | 1,486 | b, e, 4 | 380 | 561 | 96 | (12 | ) | 534 | 558 | ||||||||||||||||||||||||||||||||||||||||
Total operating income | 34,487 | 34,121 | 37,017 | 37,114 | 34,925 | 36,402 | 33,914 | 33,972 | 34,487 | 34,121 | 37,017 | 37,114 | ||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personnel expenses | c, g, h, i | 18,610 | 18,524 | 19,713 | 19,828 | 17,262 | 17,163 | f, g, h | 17,615 | 17,231 | 18,610 | 18,524 | 19,713 | 19,828 | ||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | c | 7,072 | 7,072 | 7,631 | 7,631 | 6,813 | 6,765 | 6,086 | 6,086 | 7,072 | 7,072 | 7,631 | 7,631 | |||||||||||||||||||||||||||||||||||||||||||
Depreciation of property and equipment | a, j | 1,613 | 1,521 | 1,815 | 1,614 | 1,800 | 1,608 | a, i | 1,396 | 1,364 | 1,613 | 1,521 | 1,815 | 1,614 | ||||||||||||||||||||||||||||||||||||||||||
Amortization of goodwill | a, b | 0 | 930 | 2,484 | 1,025 | 2,018 | 533 | a, b | 0 | 756 | 0 | 930 | 2,484 | 1,025 | ||||||||||||||||||||||||||||||||||||||||||
Amortization of other intangible assets | b | 1,443 | 1,530 | 298 | 298 | 134 | 134 | b | 112 | 187 | 1,443 | 1,530 | 298 | 298 | ||||||||||||||||||||||||||||||||||||||||||
Restructuring costs | c | 0 | 0 | 112 | 0 | 191 | 0 | c | 0 | 0 | 0 | 0 | 112 | 0 | ||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 28,738 | 29,577 | 32,053 | 30,396 | 28,218 | 26,203 | 25,209 | 25,624 | 28,738 | 29,577 | 32,053 | 30,396 | ||||||||||||||||||||||||||||||||||||||||||||
Operating profit/(loss) before tax and minority interests | 5,749 | 4,544 | 4,964 | 6,718 | 6,707 | 10,199 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit / (loss) before tax and minority interests | 8,705 | 8,348 | 5,749 | 4,544 | 4,964 | 6,718 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax expense/(benefit) | 511 | 678 | 1,386 | 1,401 | 2,183 | 2,320 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax expense / (benefit) | 1,842 | 1,618 | 511 | 678 | 1,386 | 1,401 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net profit/(loss) before minority interests | 5,238 | 3,866 | 3,578 | 5,317 | 4,524 | 7,879 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net profit / (loss) before minority interests | 6,863 | 6,730 | 5,238 | 3,866 | 3,578 | 5,317 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Minority interests | (331 | ) | (331 | ) | (344 | ) | (344 | ) | (87 | ) | (87 | ) | j | (350 | ) | (345 | ) | (331 | ) | (331 | ) | (344 | ) | (344 | ) | |||||||||||||||||||||||||||||||
Change in accounting principle: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
cumulative effect of adoption of “AICPA Audit and Accounting Guide, Audits of Investment Companies” on certain financial investments, net of tax | f | 639 | 0 | 0 | 0 | 0 | 0 | e | 0 | 0 | 639 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
Net profit | 5,546 | 3,535 | 3,234 | 4,973 | 4,437 | 7,792 | 6,513 | 6,385 | 5,546 | 3,535 | 3,234 | 4,973 | ||||||||||||||||||||||||||||||||||||||||||||
169175
UBS Group Financial Statements
Notes to the Financial Statements
The following is a Condensed Consolidated Balance Sheet of the Group, as ofat 31 December 20022003 and 31 December 2001,2002, restated to reflect the impact of valuation and income recognition principles and presentation differences between IFRS and US GAAP.
31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||||||||||
31.12.03 | 31.12.02 | |||||||||||||||||||||||||||||||||||||||
CHF million | Reference | US GAAP | IFRS | US GAAP | IFRS | Reference | US GAAP | IFRS | US GAAP | IFRS | ||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 4,271 | 4,271 | 20,990 | 20,990 | 3,584 | 3,584 | 4,271 | 4,271 | ||||||||||||||||||||||||||||||||
Due from banks | a | 32,481 | 32,468 | 27,550 | 27,526 | a, j | 31,685 | 31,667 | 32,481 | 32,468 | ||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | 4 | 139,073 | 139,052 | 162,566 | 162,938 | 4 | 211,058 | 213,932 | 139,073 | 139,052 | ||||||||||||||||||||||||||||||
Reverse repurchase agreements | 294,086 | 294,086 | 269,256 | 269,256 | 320,587 | 320,587 | 294,086 | 294,086 | ||||||||||||||||||||||||||||||||
Trading portfolio assets (including assets pledged as collateral of CHF 110,365 million at 31.12.02 and CHF 121,456 million at 31.12.01) | 1, 4 | 441,845 | 371,436 | 455,406 | 397,886 | |||||||||||||||||||||||||||||||||||
Trading portfolio assets (including assets pledged as collateral of CHF 125,411 million at 31.12.03 and CHF 110,365 million at 31.12.02) | 1, 4, h, j | 544,492 | 461,772 | 441,845 | 371,436 | |||||||||||||||||||||||||||||||||||
Positive replacement values | 1, 4 | 83,757 | 82,092 | 73,474 | 73,447 | 1,4, j | 84,034 | 84,334 | 83,757 | 82,092 | ||||||||||||||||||||||||||||||
Loans | a, d | 211,755 | 211,647 | 226,747 | 226,545 | a, d | 212,554 | 212,504 | 211,755 | 211,647 | ||||||||||||||||||||||||||||||
Financial investments | f, 2 | 2,846 | 8,391 | 20,676 | 28,803 | e, 2 | 1,303 | 5,139 | 2,846 | 8,391 | ||||||||||||||||||||||||||||||
Securities received as collateral | 3 | 16,308 | 10,931 | 3 | 13,071 | 16,308 | ||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 4 | 6,462 | 6,453 | 7,545 | 7,554 | 4, h | 6,219 | 6,218 | 6,462 | 6,453 | ||||||||||||||||||||||||||||||
Investments in associates | 705 | 705 | 697 | 697 | 1,616 | 1,616 | 705 | 705 | ||||||||||||||||||||||||||||||||
Property and equipment | a, j | 8,358 | 7,869 | 9,276 | 8,695 | a | 8,116 | 7,659 | 8,358 | 7,869 | ||||||||||||||||||||||||||||||
Goodwill | a, b | 28,127 | 11,181 | 29,255 | 14,578 | a, b | 26,775 | 9,348 | 28,127 | 11,181 | ||||||||||||||||||||||||||||||
Other intangible assets | b, g | 1,222 | 2,515 | 4,510 | 4,507 | b | 1,174 | 2,181 | 1,222 | 2,515 | ||||||||||||||||||||||||||||||
Private equity investments | 2 | 4,328 | 6,069 | e, 2 | 3,308 | 4,328 | ||||||||||||||||||||||||||||||||||
Other assets | d, f, g, h, i, 1, 2 | 21,314 | 8,952 | 36,972 | 9,875 | d, e, f, h, j, l, 2 | 64,381 | 25,459 | 21,314 | 8,952 | ||||||||||||||||||||||||||||||
Total assets | 1,296,938 | 1,181,118 | 1,361,920 | 1,253,297 | 1,533,957 | 1,386,000 | 1,296,938 | 1,181,118 | ||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||
Due to banks | 83,178 | 83,178 | 106,531 | 106,531 | 127,385 | 127,153 | 83,178 | 83,178 | ||||||||||||||||||||||||||||||||
Cash collateral on securities lent | 36,870 | 36,870 | 30,317 | 30,317 | 4 | 51,157 | 53,278 | 36,870 | 36,870 | |||||||||||||||||||||||||||||||
Repurchase agreements | 366,858 | 366,858 | 368,620 | 368,620 | 415,863 | 415,863 | 366,858 | 366,858 | ||||||||||||||||||||||||||||||||
Trading portfolio liabilities | 1, 4 | 117,721 | 106,453 | 119,528 | 105,798 | 1,4 | 149,380 | 143,957 | 117,721 | 106,453 | ||||||||||||||||||||||||||||||
Obligation to return securities received as collateral | 3 | 16,308 | 10,931 | 3 | 13,071 | 16,308 | ||||||||||||||||||||||||||||||||||
Negative replacement values | 1, 4 | 132,354 | 81,282 | 116,666 | 71,443 | 1,4, j | 161,086 | 93,646 | 132,354 | 81,282 | ||||||||||||||||||||||||||||||
Due to customers | a, d | 306,872 | 306,876 | 333,766 | 333,781 | a, d | 347,358 | 347,358 | 306,872 | 306,876 | ||||||||||||||||||||||||||||||
Accrued expenses and deferred income | 4 | 15,330 | 15,331 | 17,289 | 17,289 | 4 | 13,673 | 13,673 | 15,330 | 15,331 | ||||||||||||||||||||||||||||||
Debt issued | a, d | 129,527 | 129,411 | 156,462 | 156,218 | a, d, j, 1 | 123,259 | 120,237 | 129,527 | 129,411 | ||||||||||||||||||||||||||||||
Other liabilities | d, g, h, i, 1 | 32,815 | 12,339 | 38,416 | 15,658 | d, f, g, h, j, 1 | 74,044 | 31,316 | 32,815 | 12,339 | ||||||||||||||||||||||||||||||
Total liabilities | 1,237,833 | 1,138,598 | 1,298,526 | 1,205,655 | 1,476,276 | 1,346,481 | 1,237,833 | 1,138,598 | ||||||||||||||||||||||||||||||||
Minority interests | 3,529 | 3,529 | 4,112 | 4,112 | j | 4,507 | 4,073 | 3,529 | 3,529 | |||||||||||||||||||||||||||||||
Total shareholders’ equity | 55,576 | 38,991 | 59,282 | 43,530 | 53,174 | 35,446 | 55,576 | 38,991 | ||||||||||||||||||||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,296,938 | 1,181,118 | 1,361,920 | 1,253,297 | 1,533,957 | 1,386,000 | 1,296,938 | 1,181,118 | ||||||||||||||||||||||||||||||||
170176
Note 40.7 Comprehensive income
Comprehensive income under US GAAP is defined as the change in Shareholders’ equity excluding transactions with shareholders. Comprehensive income has two major components: Net profit, as reported in the income statement, and Other comprehensive income. Other comprehensive income includes such items as foreign currency translation, unrealized gains/gains / losses on available for saleavailable-for-sale securities, unrealized gains/gains / losses on changes in fair value of derivative instruments designated as cash flow hedges and additional minimum pension liability. The components and accumulated other comprehensive income amounts on a US GAAP basis for the years ended 31 December 2003, 31 December 2002 and 31 December 2001 and 31 December 2000 are as follows:
Unrealized | Unrealized | Additional | Accumulated | |||||||||||||||||||||
Foreign | gains/(losses) | gains/(losses) | minimum | other | ||||||||||||||||||||
currency | on available for | on cash flow | pension | comprehensive | Comprehensive | |||||||||||||||||||
CHF million | translation | sale securities | hedges | liability | income/(loss) | income/(loss) | ||||||||||||||||||
Balance at 1 January 2000 | (442 | ) | 16 | (426 | ) | |||||||||||||||||||
Net profit | 4,437 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (245 | ) | (245 | ) | ||||||||||||||||||||
Net unrealized gains on available for sale investments arising during the year, net of CHF 152 million tax | 456 | 456 | ||||||||||||||||||||||
Reclassification adjustment for gains on available for sale investments realized in net profit, net of CHF 40 million tax | (121 | ) | (121 | ) | ||||||||||||||||||||
Other comprehensive income/(loss) | 90 | |||||||||||||||||||||||
Comprehensive income | 4,527 | |||||||||||||||||||||||
Balance at 31 December 2000 | (687 | ) | 351 | (336 | ) | |||||||||||||||||||
Net profit | 3,234 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (82 | ) | (82 | ) | ||||||||||||||||||||
Net unrealized gains on available for sale investments arising during the year, net of CHF 27 million tax | 109 | 109 | ||||||||||||||||||||||
Reclassification adjustment for gains on available for sale investments realized in net profit, net of CHF 26 million tax | (104 | ) | (104 | ) | ||||||||||||||||||||
Net unrealized gains on cash flow hedges arising during the year, net of CHF 1 million tax | 4 | 4 | ||||||||||||||||||||||
Reclassification adjustment for losses on cash flow hedges realized in net profit, net of CHF 1 million tax | 3 | 3 | ||||||||||||||||||||||
Additional minimum pension liability, net of CHF 108 million tax | (195 | ) | (195 | ) | ||||||||||||||||||||
Other comprehensive income/(loss) | (265 | ) | ||||||||||||||||||||||
Comprehensive income | 2,969 | |||||||||||||||||||||||
Balance at 31 December 2001 | (769 | ) | 356 | 7 | (195 | ) | (601 | ) | ||||||||||||||||
Net profit | 5,546 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (80 | ) | (80 | ) | ||||||||||||||||||||
Net unrealized gains on available for sale investments arising during the year, net of CHF 34 million tax | 109 | 109 | ||||||||||||||||||||||
Impairment charges reclassified to the income statement, net of CHF 26 million tax | 95 | 95 | ||||||||||||||||||||||
Reclassification adjustment for gains on available for sale investments realized in net profit, net of CHF 102 million tax | (368 | ) | (368 | ) | ||||||||||||||||||||
Net unrealized losses on cash flow hedges arising during the year, net of CHF 3 million tax | (1 | ) | (1 | ) | ||||||||||||||||||||
Reclassification adjustment for gains on cash flow hedges realized in net profit, net of CHF 0 million tax | (8 | ) | (8 | ) | ||||||||||||||||||||
Additional minimum pension liability, net of CHF 93 million tax | (827 | ) | (827 | ) | ||||||||||||||||||||
Other comprehensive income/(loss) | (1,080 | ) | ||||||||||||||||||||||
Comprehensive income | 4,466 | |||||||||||||||||||||||
Balance at 31 December 2002 | (849 | ) | 192 | (2 | ) | (1,022 | ) | (1,681 | ) | |||||||||||||||
Unrealized | Accumu- | |||||||||||||||||||||||||||
gains/ | Unrealized | lated other | ||||||||||||||||||||||||||
(losses) on | gains/ | Additional | compre- | Compre- | ||||||||||||||||||||||||
Foreign | available- | (losses) on | minimum | Deferred | hensive | hensive | ||||||||||||||||||||||
currency | for-sale | cash flow | pension | income | income/ | income / | ||||||||||||||||||||||
CHF million | translation | investments | hedges | liability | taxes | (loss) | (loss) | |||||||||||||||||||||
Balance at 1 January 2001 | (687 | ) | 463 | 0 | 0 | (112 | ) | (336 | ) | |||||||||||||||||||
Net profit | 3,234 | |||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Foreign currency translation | (82 | ) | (82 | ) | (82 | ) | ||||||||||||||||||||||
Net unrealized gains on available-for-sale investments | 136 | (27 | ) | 109 | 109 | |||||||||||||||||||||||
Reclassification of gains on available-for-sale investments realized in net profit | (130 | ) | 26 | (104 | ) | (104 | ) | |||||||||||||||||||||
Net unrealized gains on cash flow hedges | 5 | (1 | ) | 4 | 4 | |||||||||||||||||||||||
Reclassification of losses on cash flow hedges realized in net profit | 4 | (1 | ) | 3 | 3 | |||||||||||||||||||||||
Additional minimum pension liability | (303 | ) | 108 | (195 | ) | (195 | ) | |||||||||||||||||||||
Other comprehensive income / (loss) | (82 | ) | 6 | 9 | (303 | ) | 105 | (265 | ) | (265 | ) | |||||||||||||||||
Comprehensive income | 2,969 | |||||||||||||||||||||||||||
Balance at 31 December 2001 | (769 | ) | 469 | 9 | (303 | ) | (7 | ) | (601 | ) | ||||||||||||||||||
Net profit | 5,546 | |||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Foreign currency translation | (80 | ) | (80 | ) | (80 | ) | ||||||||||||||||||||||
Net unrealized gains on available-for-sale investments | 143 | (34 | ) | 109 | 109 | |||||||||||||||||||||||
Impairment charges reclassified to the income statement | 121 | (26 | ) | 95 | 95 | |||||||||||||||||||||||
Reclassification of gains on available-for-sale investments realized in net profit | (470 | ) | 102 | (368 | ) | (368 | ) | |||||||||||||||||||||
Net unrealized losses on cash flow hedges | (4 | ) | 3 | (1 | ) | (1 | ) | |||||||||||||||||||||
Reclassification of gains on cash flow hedges realized in net profit | (8 | ) | 0 | (8 | ) | (8 | ) | |||||||||||||||||||||
Additional minimum pension liability | (920 | ) | 93 | (827 | ) | (827 | ) | |||||||||||||||||||||
Other comprehensive income / (loss) | (80 | ) | (206 | ) | (12 | ) | (920 | ) | 138 | (1,080 | ) | (1,080 | ) | |||||||||||||||
Comprehensive income | 4,466 | |||||||||||||||||||||||||||
Balance at 31 December 2002 | (849 | ) | 263 | (3 | ) | (1,223 | ) | 131 | (1,681 | ) | ||||||||||||||||||
Net profit | 6,513 | |||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Foreign currency translation | (795 | ) | (795 | ) | (795 | ) | ||||||||||||||||||||||
Net unrealized losses on available-for-sale investments | (130 | ) | 49 | (81 | ) | (81 | ) | |||||||||||||||||||||
Impairment charges reclassified to the income statement | 111 | (18 | ) | 93 | 93 | |||||||||||||||||||||||
Reclassification of gains on available-for-sale investments realized in net profit | (69 | ) | 11 | (58 | ) | (58 | ) | |||||||||||||||||||||
Reclassification of losses on cash flow hedges realized in net profit | 3 | (1 | ) | 2 | 2 | |||||||||||||||||||||||
Additional minimum pension liability | 917 | (82 | ) | 835 | 835 | |||||||||||||||||||||||
Other comprehensive income / (loss) | (795 | ) | (88 | ) | 3 | 917 | (41 | ) | (4 | ) | (4 | ) | ||||||||||||||||
Comprehensive income | 6,509 | |||||||||||||||||||||||||||
Balance at 31 December 2003 | (1,644 | ) | 175 | 0 | (306 | ) | 90 | (1,685 | ) | |||||||||||||||||||
171177
UBS Group Financial Statements
Notes to the Financial Statements
Note 4041 Additional Disclosures Required under US GAAP and SEC Rules
During the years ended 31 December 2002 and 2001, the Group securitized (i.e., transformed owned financial assets into securities through sales transactions) residential mortgage loans and securities, commercial mortgage loans and other financial assets, acting as lead or co-manager. The Group’s continuing involvement in these transactionsFIN 46 was primarily limited to the temporary retention of various security interests. Proceeds received at the time of securitization from residential mortgage, commercial mortgage and other financial asset securitizations were CHF 143.5 billion, CHF 4.0 billion and CHF 5.8 billion, respectively in 2002 and CHF 67.6 billion, CHF 4.1 billion and CHF 2.8 billion, respectively in 2001. Related pre-tax gains (losses) recognized, including unrealized gains (losses) on retained interests, at the time of securitization were CHF 523.9 million, CHF 206.4 million and CHF (4.5) million, respectively in 2002 and CHF 112.9 million, CHF 129.7 mil-
ion and CHF 20.6 million, respectively in 2001. A significant portion of the securitization activities conducted in 2002 and 2001 were derived from businesses acquired in the purchase of PaineWebber Group Inc. in November 2000. During 2000, the Group did not engage in significant securitization transactions involving the transfer of its financial assets.
FASB interpretation (FIN) No. 46, Consolidation of Variable Interest Entities, wasoriginally issued on 17 January 2003. Subsequently, in December 2003, and provides guidance for determining whether or not such entities are subject to consolidation.the FASB issued a revised version of FIN 46.a special purposean entity be assessed first assessed based on voting interests, and onlyinterests; if voting interests do not exist, or differ significantly from economic interests, then an entity is considered to be a “Variable Interest Entity” (“VIE”), and the assessment of control is based on its variable interests. SuchFIN 46 provides guidance for determining whether entities are referredconsidered to as Variable Interest Entities. (“VIE’s”)be VIEs, and whether “variable interests” in such VIEs result in an enterprise being the “primary beneficiary”, or the holder of a “significant variable interest”. UBS considers a variable interest to be significant if it expects to receive more than 20% of a VIE’s residual losses, residual gains, or both.varychange with changes in the fair value of that entity’s net asset value,
includingassets exclusive of variable interests. Variable interests may include fee payments to decision makers and to providers of guarantees (including writers of put options and other instruments with similar results) as well as. In assessing the extent of an entity’s variable interests, FIN 46 requires that the interests of an enterprise’s related parties (including management, employees, affiliates and agents). be evaluated as if owned directly by the enterprise.
Measurement
Some VIEs function as a passive intermediary to a derivative transaction and are generally established to facilitate the transfer of credit risk on portfolios to investors. The size of such VIEs may also be measured using the “notional amount” of the derivatives’ underlying referenced assets, i.e. the size of the portfolio for which credit risk has been transferred. These notional amounts are also included in Note 23. In measuring the total size of VIEs quantified below, the most appropriate measure has been taken for each specific VIE on an individual basis.
VIEs created after 31 January 2003
178
VIEs, created after 31 January 2003, for all newly acquired orwhich UBS is the primary beneficiary1
Consolidated assets that are collateral | Creditors' | |||||||||||||
(CHF million) | for the VIEs' obligations | recourse | ||||||||||||
Nature, purpose and activities of VIEs | Total assets | Classification | Amount | to UBS | ||||||||||
Passive intermediary to a derivative transaction | 1,013 | Cash, corporate debt securities | 494 | 0 | ||||||||||
Credit protection vehicles | 3,548 | Credit derivatives, corporate debt securities | 2,795 | 0 | ||||||||||
Investment funds managed by UBS | 541 | Debt, equity | 428 | 0 | ||||||||||
Total 31.12.2003 | 5,102 | 3,717 | 0 | |||||||||||
VIEs, created interestsafter 31 January 2003, in VIE’swhich UBS has a significant variable interest
Maximum | ||||||||||||||
(CHF million) | exposure | |||||||||||||
Nature, purpose and activities of VIEs | Total assets | Nature of involvement | to loss | |||||||||||
Credit protection vehicles | 281 | SPE used for credit protection – | ||||||||||||
(UBS sells credit risk on portfolios to investors) | 1 | |||||||||||||
Total 31.12.2003 | 281 | 1 | ||||||||||||
VIEs created prior to 1 February 2003
172
(in CHF million) | Notional amount | Maximum loss | ||||||||||||
SPE category | Total assets | of derivatives | Description of primary assets | exposure | ||||||||||
Trust vehicles for awards to UBS employees | 4,624.6 | 37,717.0 | UBS shares and derivatives thereon, alternative | |||||||||||
investments | 4,982.2 | 1 | ||||||||||||
Private equity investments | 784.6 | 0 | Private equity investments | 318.4 | ||||||||||
Hedge fund products including | Bonds, equities, derivatives | |||||||||||||
direct investment funds and funds of funds | 4,970.6 | 8,665.0 | and alternative investments | 1,643.6 | ||||||||||
Passive intermediary to a derivative transaction2 | 2,131.1 | 37,248.2 | Cash/corporate securities | 876.9 | ||||||||||
Dispersion of risk in a pool of investments | 2,689.1 | 8,125.6 | Debt securities, loan receivables and credit linked notes | 333.8 | ||||||||||
Cash, debt securities, | ||||||||||||||
Other credit protection vehicles | 1,639.0 | 2,922.5 | asset-backed securities and credit default swaps | 528.9 | ||||||||||
Other miscellaneous structures | 205.3 | 205.3 | Corporate debt and equities | 194.8 | ||||||||||
Total 31.12.2002 | 17,044.3 | 94,883.6 | 8,878.6 | |||||||||||
179
Financial Statements
Notes to the Financial Statements
has committed to provide up to CHF 440.8394 million in loans to employee investment partnerships. At 31 December 2002,2003, a total of CHF 35.577 million in loans had actually been drawn down. Repayment of these loans is on a non recourse basis but is senior to the employees’ investment in the partnerships. The remaining unfunded portion of these commitments is also included in Note 25. In addition, if employees default on their future investment commitments, the GroupUBS is obliged to assume the remaining unfunded portion, which amounted to CHF 137.7109 million at 31 December 2002.2003. In the event that all the investments made by these partnerships became worthless, UBS could be exposed to the loss of the entire committed amount of CHF 578.5503 million which is included in the CHF 4,982.2503 million maximum exposure to loss noted for these VIEs.
assets in relation to derivatives. UBS has a maximum exposure to loss of approximately CHF 1.8 billion in relation to these VIEs, which are used primarily as credit protection vehicles, or passive intermediaries to derivative transactions.
The table above includes information for consolidated and non-consolidated special purpose entities. Certain entities subject to the above disclosure have been consolidatedFIN 46 has seen continued development, UBS is still in the Group’s Financial Statements under IFRSprocess of evaluating the full impact FIN 46 may have on its US GAAP financial position, results, and US GAAPreporting, including possible changes in employee equity compensation expense accounting due to the Group’s significant economic interest. However, in many special purpose entities UBS has a less than significant variable interest, or control is determined based on voting interest. These entities are not included in the table.
173180
UBS Group Financial StatementsNotes to the Financial Statements
Guarantee of PaineWebber securities
tions under the subordinated note guarantee are subordinated to the prior payment in full of the deposit liabilities of UBS and all other liabilities of
UBS. At 31 December 2002,2003, the amount of senior liabilities of UBS to which the holders of the subordinated debt securities would be subordinated is approximately CHF 1,1291,337 billion.
Supplemental Guarantor Consolidating Income Statement
CHF million | UBS AG | UBS | Consolidating | UBS AG | UBS | Consolidating | ||||||||||||||||||||||||||||||||||
For the year ended 31 December 2002 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | UBS Group | |||||||||||||||||||||||||||||||||||
For the year ended 31 December 2003 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | UBS Group | |||||||||||||||||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||||||||||||||
Interest income | 25,253 | 16,693 | 4,520 | (6,503 | ) | 39,963 | 28,749 | 13,091 | 9,280 | (10,961 | ) | 40,159 | ||||||||||||||||||||||||||||
Interest expense | 18,187 | 14,273 | 3,460 | (6,503 | ) | 29,417 | 20,033 | 10,292 | 8,496 | (10,961 | ) | 27,860 | ||||||||||||||||||||||||||||
Net interest income | 7,066 | 2,420 | 1,060 | 0 | 10,546 | 8,716 | 2,799 | 784 | 0 | 12,299 | ||||||||||||||||||||||||||||||
Credit loss expense | (134 | ) | (15 | ) | (57 | ) | 0 | (206 | ) | (124 | ) | (12 | ) | 20 | 0 | (116 | ) | |||||||||||||||||||||||
Net interest income after credit loss expense | 6,932 | 2,405 | 1,003 | 0 | 10,340 | 8,592 | 2,787 | 804 | 0 | 12,183 | ||||||||||||||||||||||||||||||
Net fee and commission income | 6,841 | 7,325 | 4,055 | 0 | 18,221 | 6,873 | 6,711 | 3,761 | 0 | 17,345 | ||||||||||||||||||||||||||||||
Net trading income | 4,420 | 773 | 379 | 0 | 5,572 | 1,525 | 1,540 | 818 | 0 | 3,883 | ||||||||||||||||||||||||||||||
Income from subsidiaries | (1,429 | ) | 0 | 0 | 1,429 | 0 | 2,466 | 0 | 0 | (2,466 | ) | 0 | ||||||||||||||||||||||||||||
Other income | (131 | ) | (26 | ) | 145 | 0 | (12 | ) | 337 | 230 | (6 | ) | 0 | 561 | ||||||||||||||||||||||||||
Total operating income | 16,633 | 10,477 | 5,582 | 1,429 | 34,121 | 19,793 | 11,268 | 5,377 | (2,466 | ) | 33,972 | |||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||||
Personnel expenses | 8,370 | 7,531 | 2,623 | 0 | 18,524 | 8,853 | 6,886 | 1,492 | 0 | 17,231 | ||||||||||||||||||||||||||||||
General and administrative expenses | 2,627 | 2,003 | 2,443 | 0 | 7,073 | 2,861 | 1,620 | 1,605 | 0 | 6,086 | ||||||||||||||||||||||||||||||
Depreciation of property and equipment | 1,062 | 204 | 255 | 0 | 1,521 | 682 | 186 | 496 | 0 | 1,364 | ||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 144 | 2,211 | 104 | 0 | 2,459 | 104 | 789 | 50 | 0 | 943 | ||||||||||||||||||||||||||||||
Total operating expenses | 12,203 | 11,949 | 5,425 | 0 | 29,577 | 12,500 | 9,481 | 3,643 | 0 | 25,624 | ||||||||||||||||||||||||||||||
Operating profit/(loss) before tax and minority interests | 4,430 | (1,472 | ) | 157 | 1,429 | 4,544 | ||||||||||||||||||||||||||||||||||
Operating profit / (loss) before tax and minority interests | 7,293 | 1,787 | 1,734 | (2,466 | ) | 8,348 | ||||||||||||||||||||||||||||||||||
Tax expense/(benefit) | 895 | (460 | ) | 243 | 0 | 678 | ||||||||||||||||||||||||||||||||||
Tax expense / (benefit) | 908 | 344 | 366 | 0 | 1,618 | |||||||||||||||||||||||||||||||||||
Net profit/(loss) before minority interests | 3,535 | (1,012 | ) | (86 | ) | 1,429 | 3,866 | |||||||||||||||||||||||||||||||||
Net profit /(loss) before minority interests | 6,385 | 1,443 | 1,368 | (2,466 | ) | 6,730 | ||||||||||||||||||||||||||||||||||
Minority interests | 0 | 0 | (331 | ) | 0 | (331 | ) | 0 | 0 | (345 | ) | 0 | (345 | ) | ||||||||||||||||||||||||||
Net profit/(loss) | 3,535 | (1,012 | ) | (417 | ) | 1,429 | 3,535 | |||||||||||||||||||||||||||||||||
Net profit / (loss) | 6,385 | 1,443 | 1,023 | (2,466 | ) | 6,385 | ||||||||||||||||||||||||||||||||||
Net profit/(loss) US GAAP2 | 5,214 | (65 | ) | 397 | 0 | 5,546 | ||||||||||||||||||||||||||||||||||
Net profit / (loss) US GAAP2 | 3,389 | 2,120 | 1,004 | 0 | 6,513 | |||||||||||||||||||||||||||||||||||
174
Supplemental Guarantor Consolidating Balance Sheet
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2002 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | UBS Group | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 3,609 | 7 | 655 | 0 | 4,271 | |||||||||||||||
Due from banks | 65,992 | 14,205 | 82,384 | (130,113 | ) | 32,468 | ||||||||||||||
Cash collateral on securities borrowed | 32,248 | 139,424 | 1,056 | (33,676 | ) | 139,052 | ||||||||||||||
Reverse repurchase agreements | 197,168 | 150,717 | 40,725 | (94,524 | ) | 294,086 | ||||||||||||||
Trading portfolio assets | 197,184 | 148,430 | 25,823 | 0 | 371,437 | |||||||||||||||
Positive replacement values | 82,087 | 3,249 | 17,168 | (20,413 | ) | 82,091 | ||||||||||||||
Loans | 252,625 | 25,904 | 14,796 | (81,678 | ) | 211,647 | ||||||||||||||
Financial investments | 1,613 | 1,684 | 5,094 | 0 | 8,391 | |||||||||||||||
Accrued income and prepaid expenses | 2,343 | 3,143 | 1,458 | (491 | ) | 6,453 | ||||||||||||||
Investments in associates | 9,730 | 20 | 81 | (9,126 | ) | 705 | ||||||||||||||
Property and equipment | 6,144 | 731 | 994 | 0 | 7,869 | |||||||||||||||
Goodwill and other intangible assets | 128 | 12,946 | 622 | 0 | 13,696 | |||||||||||||||
Other assets | 3,989 | 4,009 | 3,603 | (2,649 | ) | 8,952 | ||||||||||||||
Total assets | 854,860 | 504,469 | 194,459 | (372,670 | ) | 1,181,118 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 85,634 | 89,815 | 37,842 | (130,113 | ) | 83,178 | ||||||||||||||
Cash collateral on securities lent | 35,800 | 32,625 | 2,121 | (33,676 | ) | 36,870 | ||||||||||||||
Repurchase agreements | 136,797 | 295,885 | 28,700 | (94,524 | ) | 366,858 | ||||||||||||||
Trading portfolio liabilities | 56,105 | 43,784 | 6,564 | 0 | 106,453 | |||||||||||||||
Negative replacement values | 89,135 | 3,524 | 9,036 | (20,413 | ) | 81,282 | ||||||||||||||
Due to customers | 339,787 | 19,957 | 28,810 | (81,678 | ) | 306,876 | ||||||||||||||
Accrued expenses and deferred income | 7,779 | 6,580 | 1,463 | (491 | ) | 15,331 | ||||||||||||||
Debt issued | 58,704 | 7,111 | 63,596 | 0 | 129,411 | |||||||||||||||
Other liabilities | 6,933 | 2,604 | 5,451 | (2,649 | ) | 12,339 | ||||||||||||||
Total liabilities | 816,674 | 501,885 | 183,583 | (363,544 | ) | 1,138,598 | ||||||||||||||
Minority interests | 0 | 55 | 3,474 | 0 | 3,529 | |||||||||||||||
Total shareholders’ equity | 38,186 | 2,529 | 7,402 | (9,126 | ) | 38,991 | ||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 854,860 | 504,469 | 194,459 | (372,670 | ) | 1,181,118 | ||||||||||||||
Total shareholders’ equity — US GAAP 2 | 44,852 | 3,176 | 7,548 | 0 | 55,576 | |||||||||||||||
175181
UBS Group Financial Statements
Notes to the Financial Statements
Supplemental Guarantor Consolidating Cash Flow StatementBalance Sheet
CHF million | UBS AG | UBS | ||||||||||||||
For the year ended 31 December 2002 | Parent Bank1 | Americas Inc. | Subsidiaries | UBS Group | ||||||||||||
Net cash flow from/(used in) operating activities | 8,422 | (927 | ) | (9,859 | ) | (2,364 | ) | |||||||||
Cash flow from/(used in) investing activities | ||||||||||||||||
Investments in subsidiaries and associates | (23 | ) | (16 | ) | (21 | ) | (60 | ) | ||||||||
Disposal of subsidiaries and associates | 984 | 0 | 0 | 984 | ||||||||||||
Purchase of property and equipment | (1,019 | ) | (189 | ) | (555 | ) | (1,763 | ) | ||||||||
Disposal of property and equipment | 22 | 28 | 17 | 67 | ||||||||||||
Net (investment in)/divestment of financial investments | 931 | 307 | 915 | 2,153 | ||||||||||||
Net cash flow from/(used in) investing activities | 895 | 130 | 356 | 1,381 | ||||||||||||
Cash flow from/(used in) investing activities | ||||||||||||||||
Net money market paper issued/(repaid) | (30,635 | ) | 471 | 3,958 | (26,206 | ) | ||||||||||
Net movements in treasury shares and own equity derivative activity | (5,605 | ) | 0 | 0 | (5,605 | ) | ||||||||||
Capital issuance | 6 | 0 | 0 | 6 | ||||||||||||
Capital repayment by par value reduction | (2,509 | ) | 0 | 0 | (2,509 | ) | ||||||||||
Issuance of long-term debt | 8,414 | 915 | 7,803 | 17,132 | ||||||||||||
Repayment of long-term debt | (11,099 | ) | (2,780 | ) | (1,032 | ) | (14,911 | ) | ||||||||
Increase in minority interests | 0 | 0 | 0 | 0 | ||||||||||||
Dividend payments to/and purchase from minority interests | 0 | 0 | (377 | ) | (377 | ) | ||||||||||
Net activity in investments in subsidiaries | 2,775 | (161 | ) | (2,614 | ) | 0 | ||||||||||
Net cash flow from/(used in) financing activities | (38,653 | ) | (1,555 | ) | 7,738 | (32,470 | ) | |||||||||
Effects of exchange rate differences | (2,608 | ) | 1,919 | 227 | (462 | ) | ||||||||||
Net increase/(decrease) in cash equivalents | (31,944 | ) | (433 | ) | (1,538 | ) | (33,915 | ) | ||||||||
Cash and cash equivalents, beginning of the year | 89,856 | 15,552 | 10,851 | 116,259 | ||||||||||||
Cash and cash equivalents, end of the year | 57,912 | 15,119 | 9,313 | 82,344 | ||||||||||||
Cash and cash equivalents comprise: | ||||||||||||||||
Cash and balances with central banks | 3,609 | 7 | 655 | 4,271 | ||||||||||||
Money market paper2 | 33,509 | 9,615 | 3,059 | 46,183 | ||||||||||||
Due from banks maturing in less than three months | 20,794 | 5,497 | 5,599 | 31,890 | ||||||||||||
Total | 57,912 | 15,119 | 9,313 | 82,344 | ||||||||||||
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2003 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | UBS Group | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 2,894 | 8 | 682 | 0 | 3,584 | |||||||||||||||
Due from banks | 76,780 | 12,106 | 109,713 | (166,932 | ) | 31,667 | ||||||||||||||
Cash collateral on securities borrowed | 75,609 | 190,993 | 76,773 | (129,443 | ) | 213,932 | ||||||||||||||
Reverse repurchase agreements | 197,765 | 149,507 | 219,444 | (246,129 | ) | 320,587 | ||||||||||||||
Trading portfolio assets | 248,999 | 182,346 | 30,427 | 0 | 461,772 | |||||||||||||||
Positive replacement values | 111,612 | 849 | 25,474 | (53,601 | ) | 84,334 | ||||||||||||||
Loans | 234,356 | 23,001 | 40,420 | (85,273 | ) | 212,504 | ||||||||||||||
Financial investments | 826 | 739 | 3,574 | 0 | 5,139 | |||||||||||||||
Accrued income and prepaid expenses | 3,665 | 1,868 | 3,391 | (2,706 | ) | 6,218 | ||||||||||||||
Investments in associates | 14,077 | 11 | 594 | (13,066 | ) | 1,616 | ||||||||||||||
Property and equipment | 5,891 | 787 | 981 | 0 | 7,659 | |||||||||||||||
Goodwill and other intangible assets | 218 | 11,270 | 41 | 0 | 11,529 | |||||||||||||||
Other assets | 5,194 | 3,356 | 19,958 | (3,049 | ) | 25,459 | ||||||||||||||
Total assets | 977,886 | 576,841 | 531,472 | (700,199 | ) | 1,386,000 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 139,525 | 83,193 | 71,367 | (166,932 | ) | 127,153 | ||||||||||||||
Cash collateral on securities lent | 59,356 | 46,313 | 77,052 | (129,443 | ) | 53,278 | ||||||||||||||
Repurchase agreements | 112,245 | 337,030 | 212,717 | (246,129 | ) | 415,863 | ||||||||||||||
Trading portfolio liabilities | 79,714 | 55,351 | 8,892 | 0 | 143,957 | |||||||||||||||
Negative replacement values | 125,925 | 1,157 | 20,165 | (53,601 | ) | 93,646 | ||||||||||||||
Due to customers | 343,297 | 34,530 | 54,804 | (85,273 | ) | 347,358 | ||||||||||||||
Accrued expenses and deferred income | 7,034 | 6,026 | 3,319 | (2,706 | ) | 13,673 | ||||||||||||||
Debt issued | 64,264 | 7,331 | 48,642 | 0 | 120,237 | |||||||||||||||
Other liabilities | 11,222 | 1,873 | 21,270 | (3,049 | ) | 31,316 | ||||||||||||||
Total liabilities | 942,582 | 572,804 | 518,228 | (687,133 | ) | 1,346,481 | ||||||||||||||
Minority interests | 0 | 42 | 4,031 | 0 | 4,073 | |||||||||||||||
Total shareholders’ equity | 35,304 | 3,995 | 9,213 | (13,066 | ) | 35,446 | ||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 977,886 | 576,841 | 531,472 | (700,199 | ) | 1,386,000 | ||||||||||||||
Total shareholders’ equity – US GAAP2 | 38,129 | 5,471 | 9,574 | 0 | 53,174 | |||||||||||||||
182
Supplemental Guarantor Consolidating Cash Flow Statement
CHF million | UBS AG | UBS | ||||||||||||||
For the year ended 31 December 2003 | Parent Bank | 1 | Americas Inc. | Subsidiaries | UBS Group | |||||||||||
Net cash flow from / (used in) operating activities | (12,936 | ) | 1,366 | 14,973 | 3,403 | |||||||||||
Cash flow from / (used in) investing activities Investments in subsidiaries and associates | (428 | ) | 0 | 0 | (428 | ) | ||||||||||
Disposal of subsidiaries and associates | 123 | 667 | 44 | 834 | ||||||||||||
Purchase of property and equipment | (862 | ) | (338 | ) | (176 | ) | (1,376 | ) | ||||||||
Disposal of property and equipment | 88 | 17 | 18 | 123 | ||||||||||||
Net (investment in) / divestment of financial investments | 524 | 867 | 926 | 2,317 | ||||||||||||
Net cash flow from / (used in) investing activities | (555 | ) | 1,213 | 812 | 1,470 | |||||||||||
Cash flow from / (used in) financing activities Net money market paper issued / (repaid) | 1,910 | (333 | ) | (16314 | ) | (14737 | ) | |||||||||
Net movements in treasury shares and treasury share contract activity | (6,810 | ) | 0 | 0 | (6810 | ) | ||||||||||
Capital issuance | 2 | 0 | 0 | 2 | ||||||||||||
Dividends paid | (2,298 | ) | 0 | 0 | (2,298 | ) | ||||||||||
Issuance of long-term debt | 15,932 | 2,362 | 5,350 | 23,644 | ||||||||||||
Repayment of long-term debt | (8,324 | ) | (1,254 | ) | (4,037 | ) | (13,615 | ) | ||||||||
Increase in minority interests2 | 0 | 0 | 755 | 755 | ||||||||||||
Dividend payments to / and purchase from minority interests | 0 | (8 | ) | (270 | ) | (278 | ) | |||||||||
Net activity in investments in subsidiaries | (773 | ) | 1,007 | (234 | ) | 0 | ||||||||||
Net cash flow from / (used in) financing activities | (361 | ) | 1,774 | (14,750 | ) | (13,337 | ) | |||||||||
Effects of exchange rate differences | (751 | ) | (661 | ) | 888 | (524 | ) | |||||||||
Net increase / (decrease) in cash equivalents | (14,603 | ) | 3,692 | 1,923 | (8,988 | ) | ||||||||||
Cash and cash equivalents, beginning of the year | 57,912 | 15,119 | 9,313 | 82,344 | ||||||||||||
Cash and cash equivalents, end of the year | 43,309 | 18,811 | 11,236 | 73,356 | ||||||||||||
Cash and cash equivalents comprise: | ||||||||||||||||
Cash and balances with central banks | 2,894 | 8 | 682 | 3,584 | ||||||||||||
Money market paper3 | 21,232 | 15,812 | 3,555 | 40,599 | ||||||||||||
Due from banks maturing in less than three months | 19,183 | 2,991 | 6,999 | 29,173 | ||||||||||||
Total | 43,309 | 18,811 | 11,236 | 73,356 | ||||||||||||
Guarantee of other securities
one-month LIBOR of such securities. UBS AG has fully and unconditionally guaranteed
these securities. UBS’s obligations under the trust preferred securities guarantee are subordinated to the prior payment in full of the deposit liabilities of UBS and all other liabilities of UBS. At 31 December 2002,2003, the amount of senior liabilities of UBS to which the holders of the subordinated debt securities would be subordinated is approximately CHF 1,1291,337 billion.
183
176184
177185
178
179
UBS AG (Parent Bank)
Table of Contents
UBS AG (Parent Bank)
Table of Contents
180186
UBS AG (Parent Bank)
Parent Bank Review
Parent Bank Review
Income Statement |
The Parent Bank UBS AG net profit increaseddecreased CHF 1,1791,637 million from CHF 4,6555,834 million to CHF 5,8344,197 million. Income from investments in associates increaseddecreased to CHF 1,914 million from CHF 3,417 million from CHF 1,532 million in 20012002 mainly due to higherless distribution received. Sundry expense from ordinary activities was CHF 381 million, up from CHF 139 million in 2001. This was mainly due to higher net writedown of financial investments. Depreciation and write-offswriteoffs were CHF 919 million, down from CHF 3,025 million up from CHF 1,650 million in 20012002 mainly caused by higher writedownlower writeoffs on investments in
associated companies. Extraordinary income contains CHF 26033 million (2001:(2002: CHF 87260 million) from the sale of subsidiaries.associates and CHF 59 million from release of provisions.
Balance Sheet |
Total assets increasedoverall decreased by CHF 4869 billion to CHF 1,064995 billion by 31 December 2002.2003. This movementreduction is mostly impactedcaused by the first-time netting of the positive and negative replacement values on the Parent Bank level in accordance with the RRV-EBK requirement of CHF 141 billion in 2003 (netting impact in 2002 would have been CHF 167 billion). This change was partially offset by the increased trading-related assets where mainlypositions in due from banks and trading balances in securities and positive replacement values have increased. Liquid assets have significantly decreased due to reduction of deposits with the Bank of Japan.securities.
181
Financial Statements
Income Statement
CHF million | % change from | |||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Interest and discount income | 20,059 | 29,967 | (33 | ) | ||||||||
Interest and dividend income from trading portfolio | 7,074 | 8,089 | (13 | ) | ||||||||
Interest and dividend income from financial investments | 23 | 185 | (88 | ) | ||||||||
Interest expense | (20,125 | ) | (31,444 | ) | (36 | ) | ||||||
Net interest income | 7,031 | 6,797 | 3 | |||||||||
Credit-related fees and commissions | 252 | 291 | (13 | ) | ||||||||
Fee and commission income from securities and investment business | 7,249 | 8,232 | (12 | ) | ||||||||
Other fee and commission income | 515 | 524 | (2 | ) | ||||||||
Fee and commission expense | (1,167 | ) | (1,176 | ) | (1 | ) | ||||||
Net fee and commission income | 6,849 | 7,871 | (13 | ) | ||||||||
Net trading income | 4,634 | 5,015 | (8 | ) | ||||||||
Net income from disposal of financial investments | 125 | 15 | 733 | |||||||||
Income from investments in associated companies | 3,417 | 1,532 | 123 | |||||||||
Income from real estate holdings | 50 | 54 | (7 | ) | ||||||||
Sundry income from ordinary activities | 1,908 | 1,183 | 61 | |||||||||
Sundry ordinary expenses | (381 | ) | (139 | ) | 174 | |||||||
Other income from ordinary activities | 5,119 | 2,645 | 94 | |||||||||
Operating income | 23,633 | 22,328 | 6 | |||||||||
Personnel expenses | 8,916 | 9,443 | (6 | ) | ||||||||
General and administrative expenses | 4,379 | 4,869 | (10 | ) | ||||||||
Operating expenses | 13,295 | 14,312 | (7 | ) | ||||||||
Operating profit | 10,338 | 8,016 | 29 | |||||||||
Depreciation and write-offs on investments in | ||||||||||||
associated companies and fixed assets | 3,025 | 1,650 | 83 | |||||||||
Allowances, provisions and losses | 1,053 | 1,140 | (8 | ) | ||||||||
Profit before extraordinary items and taxes | 6,260 | 5,226 | 20 | |||||||||
Extraordinary income | 265 | 95 | 179 | |||||||||
Extraordinary expenses | 7 | 7 | 0 | |||||||||
Tax expense/(benefit) | 684 | 659 | 4 | |||||||||
Profit for the period | 5,834 | 4,655 | 25 | |||||||||
182187
UBS AG (Parent Bank)
Financial Statements
Financial Statements
Income Statement
CHF million | % change from | |||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.02 | |||||||||
Interest and discount income | 19,417 | 20,059 | (3 | ) | ||||||||
Interest and dividend income from trading portfolio | 9,325 | 7,074 | 32 | |||||||||
Interest and dividend income from financial investments | 11 | 23 | (52 | ) | ||||||||
Interest expense | (20,034 | ) | (20,125 | ) | 0 | |||||||
Net interest income | 8,719 | 7,031 | 24 | |||||||||
Credit-related fees and commissions | 228 | 252 | (10 | ) | ||||||||
Fee and commission income from securities and investment business | 6,998 | 7,249 | (3 | ) | ||||||||
Other fee and commission income | 826 | 515 | 60 | |||||||||
Fee and commission expense | (1,180 | ) | (1,167 | ) | 1 | |||||||
Net fee and commission income | 6,872 | 6,849 | 0 | |||||||||
Net trading income | 521 | 4,634 | (89 | ) | ||||||||
Net income from disposal of financial investments | (69 | ) | 125 | |||||||||
Income from investments in associated companies | 1,914 | 3,417 | (44 | ) | ||||||||
Income from real estate holdings | 43 | 50 | (14 | ) | ||||||||
Sundry income from ordinary activities | 1,213 | 1,908 | (36 | ) | ||||||||
Sundry ordinary expenses | (96 | ) | (381 | ) | (75 | ) | ||||||
Other income from ordinary activities | 3,005 | 5,119 | (41 | ) | ||||||||
Operating income | 19,117 | 23,633 | (19 | ) | ||||||||
Personnel expenses | 8,889 | 8,916 | 0 | |||||||||
General and administrative expenses | 3,943 | 4,379 | (10 | ) | ||||||||
Operating expenses | 12,832 | 13,295 | (3 | ) | ||||||||
Operating profit | 6,285 | 10,338 | (39 | ) | ||||||||
Depreciation and writeoffs on investments in associated companies and fixed assets | 919 | 3,025 | (70 | ) | ||||||||
Allowances, provisions and losses | 658 | 1,053 | (38 | ) | ||||||||
Profit before extraordinary items and taxes | 4,708 | 6,260 | (25 | ) | ||||||||
Extraordinary income | 92 | 265 | (65 | ) | ||||||||
Extraordinary expenses | 1 | 7 | (86 | ) | ||||||||
Tax expense / (benefit) | 602 | 684 | (12 | ) | ||||||||
Profit for the period | 4,197 | 5,834 | (28 | ) | ||||||||
188
Balance Sheet
% change from | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Assets | ||||||||||||
Liquid assets | 3,609 | 20,215 | (82 | ) | ||||||||
Money market paper | 33,671 | 54,384 | (38 | ) | ||||||||
Due from banks | 265,106 | 252,226 | 5 | |||||||||
Due from customers | 165,938 | 173,690 | (4 | ) | ||||||||
Mortgage loans | 117,677 | 117,706 | 0 | |||||||||
Trading balances in securities and precious metals | 199,546 | 185,306 | 8 | |||||||||
Financial investments | 8,377 | 17,253 | (51 | ) | ||||||||
Investments in associated companies | 10,275 | 11,331 | (9 | ) | ||||||||
Tangible fixed assets | 4,633 | 5,624 | (18 | ) | ||||||||
Accrued income and prepaid expenses | 2,342 | 3,231 | (28 | ) | ||||||||
Positive replacement values | 249,064 | 171,798 | 45 | |||||||||
Other assets | 3,734 | 3,725 | 0 | |||||||||
Total assets | 1,063,972 | 1,016,489 | 5 | |||||||||
Total subordinated assets1 | 4,717 | 4,219 | 12 | |||||||||
Total amounts receivable from Group companies | 218,915 | 213,954 | 2 | |||||||||
Liabilities | ||||||||||||
Money market paper issued | 22,131 | 52,604 | (58 | ) | ||||||||
Due to banks | 303,023 | 303,036 | 0 | |||||||||
Due to customers on savings and deposit accounts | 76,687 | 67,664 | 13 | |||||||||
Other amounts due to customers | 274,431 | 288,684 | (5 | ) | ||||||||
Medium-term note issues | 4,220 | 5,213 | (19 | ) | ||||||||
Bond issues and loans from central mortgage institutions | 67,759 | 65,471 | 3 | |||||||||
Accruals and deferred income | 7,846 | 8,707 | (10 | ) | ||||||||
Negative replacement values | 256,278 | 172,469 | 49 | |||||||||
Other liabilities | 3,281 | 5,795 | (43 | ) | ||||||||
Value adjustments and provisions | 4,177 | 3,959 | 6 | |||||||||
Share capital | 1,005 | 3,589 | (72 | ) | ||||||||
General statutory reserve | 12,392 | 14,507 | (15 | ) | ||||||||
Reserve for own shares | 6,623 | 3,253 | 104 | |||||||||
Other reserves | 18,285 | 16,883 | 8 | |||||||||
Profit brought forward | ||||||||||||
Profit for the period | 5,834 | 4,655 | 25 | |||||||||
Total liabilities | 1,063,972 | 1,016,489 | 5 | |||||||||
Total subordinated liabilities | 13,315 | 16,444 | (19 | ) | ||||||||
Total amounts payable to Group companies | 142,139 | 126,182 | 13 | |||||||||
% change from | ||||||||||||
CHF million | 31.12.03 | 31.12.02 | 31.12.02 | |||||||||
Assets | ||||||||||||
Liquid assets | 2,895 | 3,609 | (20 | ) | ||||||||
Money market paper | 21,233 | 33,671 | (37 | ) | ||||||||
Due from banks | 321,796 | 265,106 | 21 | |||||||||
Due from customers | 130,814 | 165,938 | (21 | ) | ||||||||
Mortgage loans | 131,900 | 117,677 | 12 | |||||||||
Trading balances in securities and precious metals | 236,096 | 199,546 | 18 | |||||||||
Financial investments | 8,955 | 8,377 | 7 | |||||||||
Investments in associated companies | 14,757 | 10,275 | 44 | |||||||||
Tangible fixed assets | 4,367 | 4,633 | (6 | ) | ||||||||
Accrued income and prepaid expenses | 3,666 | 2,342 | 57 | |||||||||
Positive replacement values | 111,612 | 249,064 | (55 | ) | ||||||||
Other assets | 6,585 | 3,734 | 76 | |||||||||
Total assets | 994,676 | 1,063,972 | (7 | ) | ||||||||
Total subordinated assets | 4,450 | 4,717 | (6 | ) | ||||||||
Total amounts receivable from Group companies | 397,410 | 218,915 | 82 | |||||||||
Liabilities | ||||||||||||
Money market paper issued | 23,879 | 22,131 | 8 | |||||||||
Due to banks | 377,447 | 303,023 | 25 | |||||||||
Due to customers on savings and deposit accounts | 84,360 | 76,687 | 10 | |||||||||
Other amounts due to customers | 274,408 | 274,431 | 0 | |||||||||
Medium-term bonds | 2,403 | 4,220 | (43 | ) | ||||||||
Bond issues and loans from central mortgage institutions | 45,968 | 67,759 | (32 | ) | ||||||||
Accruals and deferred income | 7,060 | 7,846 | (10 | ) | ||||||||
Negative replacement values | 127,885 | 256,278 | (50 | ) | ||||||||
Other liabilities | 6,802 | 3,281 | 107 | |||||||||
Value adjustments and provisions | 3,894 | 4,177 | (7 | ) | ||||||||
Share capital | 946 | 1,005 | (6 | ) | ||||||||
General statutory reserve | 7,212 | 12,392 | (42 | ) | ||||||||
Reserve for own shares | 8,024 | 6,623 | 21 | |||||||||
Other reserves | 20,191 | 18,285 | 10 | |||||||||
Profit brought forward | ||||||||||||
Profit for the period | 4,197 | 5,834 | (28 | ) | ||||||||
Total liabilities | 994,676 | 1,063,972 | (7 | ) | ||||||||
Total subordinated liabilities | 12,471 | 13,315 | (6 | ) | ||||||||
Total amounts payable to Group companies | 257,955 | 142,139 | 81 | |||||||||
Statement of Appropriation of Retained Earnings
CHF million | ||||
The Board of Directors proposes to the Annual General Meeting the following appropriation: | ||||
Profit for the financial year | ||||
Appropriation to general statutory reserve | ||||
Appropriation to other reserves | ||||
Proposed dividends | ||||
Total appropriation | ||||
Dividend Distribution
The Board of Directors will recommend to the Annual General Meeting on 1615 April 20032004 that UBS should pay a dividend of CHF 2.002.60 per share of CHF 0.80 par value. If the dividend is approved, the payment of CHF 2.002.60 per share, after deduction of 35% Swiss withholding tax, would be made on 2320 April 20032004 for shareholders who hold UBS shares on 1615 April 2003.2004.
183189
UBS AG (Parent Bank)
Notes to the Financial Statements
Notes to the Financial Statements
Accounting and Valuation Principles
The Parent Bank’s accounting and valuation policies are in compliance with Swiss banking law. The accounting and valuation policies are principally the same as for the Group Financial Statements outlined in Note 1:1, Summary of Significant Accounting Policies. Major differences between the Swiss banking law requirements and International Financial Reporting Standards are described in Note 3839 to the Group Financial Statements.
Treasury shares
value are included in the incomeIncome statement. Treasury shares included in Financial investments are carried at the lower of cost or market value.
Foreign currency translation
in Note 1d). Assets and liabilities of foreign branches are translated into CHF at the exchange rates at the balance sheet date, while income and expense items are translated at weighted average rates for the period. Exchange differences arising on the translation of each of these foreign branches are credited to a provision account (other liabilities) in case of a gain, while any losses are firstly debited to that provision account until such provision is fully utilized, and secondly to profit and loss.
Investments in associated companies
Property and equipment
Extraordinary income and expenses
184190
Additional Income Statement Information |
Net Trading Income
CHF million | % change from | % change from | ||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.02 | ||||||||||||||||||
Equities | 2,208 | 2,435 | (9 | ) | 1,708 | 2,208 | (23 | ) | ||||||||||||||||
Fixed income1 | 565 | 829 | (32 | ) | (1,307 | ) | 565 | |||||||||||||||||
Foreign exchange and other | 1,861 | 1,751 | 6 | 120 | 1,861 | (94 | ) | |||||||||||||||||
Total | 4,634 | 5,015 | (8 | ) | 521 | 4,634 | (89 | ) | ||||||||||||||||
Extraordinary Income and Expenses
Extraordinary income contains CHF 33 million (2002: CHF 260 million) from the sale of associates and CHF 59 million from release of provisions (2002: CHF 5 million from other disposals).
191
UBS AG (Parent Bank)
Notes to the Financial Statements
Additional Balance Sheet Information
Extraordinary Income and Expenses
Extraordinary income contains CHF 260 million (2001: CHF 87 million) from the sale of subsidiaries and CHF 5 million (2001: CHF 8 million)
185
Value Adjustments and Provisions
Provisions | Recoveries, | Provisions | Recoveries, | |||||||||||||||||||||||||||||||||||||
applied in | doubtful | applied in | doubtful | |||||||||||||||||||||||||||||||||||||
accordance | interest, | New | accordance | interest, | New | |||||||||||||||||||||||||||||||||||
with their | currency | provisions | with their | currency | provisions | |||||||||||||||||||||||||||||||||||
Balance at | specified | translation | charged | Balance at | Balance at | specified | translation | charged | Balance at | |||||||||||||||||||||||||||||||
CHF million | 31.12.01 | purpose | differences | to income | 31.12.02 | 31.12.02 | purpose | differences | to income | 31.12.03 | ||||||||||||||||||||||||||||||
Default risks (credit and country risk) | 8,032 | (2,451 | ) | (310 | ) | 135 | 5,406 | 5,406 | (1,372 | ) | 66 | 118 | 4,218 | |||||||||||||||||||||||||||
Trading portfolio risks | 2,133 | (285 | ) | 511 | 2,359 | 2,359 | (221 | ) | 585 | 2,723 | ||||||||||||||||||||||||||||||
Litigation risks | 528 | (235 | ) | (39 | ) | 191 | 445 | 445 | (98 | ) | (20 | ) | 65 | 392 | ||||||||||||||||||||||||||
Operational risks | 1,264 | (630 | ) | (90 | ) | 893 | 1,437 | 1,437 | (332 | ) | 151 | 615 | 1,871 | |||||||||||||||||||||||||||
Capital and income taxes | 901 | (394 | ) | 6 | 766 | 1,279 | 1,279 | (743 | ) | (96 | ) | 678 | 1,118 | |||||||||||||||||||||||||||
Total allowance for general credit losses and other provisions | 12,858 | (3,710 | ) | (718 | ) | 2,496 | 10,926 | |||||||||||||||||||||||||||||||||
Total allowance for general credit | ||||||||||||||||||||||||||||||||||||||||
losses and other provisions | 10,926 | (2,545 | ) | (120 | ) | 2,061 | 10,322 | |||||||||||||||||||||||||||||||||
Allowances deducted from assets | 8,899 | 6,749 | 6,749 | 6,428 | ||||||||||||||||||||||||||||||||||||
Total provisions as per balance sheet | 3,959 | 4,177 | 4,177 | - | - | - | 3,894 | |||||||||||||||||||||||||||||||||
186192
Statement of Shareholders’ Equity
Total share- | Total share- | |||||||||||||||||||||||||||||||||||||||||||||||
General | General | holders' | General | General | holders' | |||||||||||||||||||||||||||||||||||||||||||
statutory | statutory | equity | statutory | statutory | equity | |||||||||||||||||||||||||||||||||||||||||||
reserves: | reserves: | Reserves | (before | reserves: | reserves: | Reserves | (before | |||||||||||||||||||||||||||||||||||||||||
Share | Share | Retained | for own | Other | distribution | Share | Share | Retained | for own | Other | distribution | |||||||||||||||||||||||||||||||||||||
CHF million | capital | premium | earnings | shares | reserves | of profit) | capital | premium | earnings | shares | reserves | of profit) | ||||||||||||||||||||||||||||||||||||
As at 31.12.00 and 1.1.01 | 4,444 | 17,370 | 677 | 4,007 | 16,274 | 42,772 | ||||||||||||||||||||||||||||||||||||||||||
Par value reduction | (683 | ) | 20 | (663 | ) | |||||||||||||||||||||||||||||||||||||||||||
Cancellation of own shares | (184 | ) | (3,815 | ) | (3,999 | ) | ||||||||||||||||||||||||||||||||||||||||||
Capital increase | 12 | 110 | 122 | |||||||||||||||||||||||||||||||||||||||||||||
Increase in reserves | 165 | (165 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | 4,655 | 4,655 | ||||||||||||||||||||||||||||||||||||||||||||||
Changes in reserves for own shares | (754 | ) | 754 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
As at 31.12.01 and 1.1.02 | 3,589 | 13,665 | 842 | 3,253 | 21,538 | 42,887 | 3,589 | 13,665 | 842 | 3,253 | 21,538 | 42,887 | ||||||||||||||||||||||||||||||||||||
Par value reduction | (2,509 | ) | 117 | (2,392 | ) | (2,509 | ) | 117 | (2,392 | ) | ||||||||||||||||||||||||||||||||||||||
Cancellation of own shares | (81 | ) | (2,209 | ) | (2,290 | ) | (81 | ) | (2,209 | ) | (2,290 | ) | ||||||||||||||||||||||||||||||||||||
Capital increase | 6 | 94 | 100 | 6 | 94 | 100 | ||||||||||||||||||||||||||||||||||||||||||
Increase in reserves | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | 5,834 | 5,834 | 5,834 | 5,834 | ||||||||||||||||||||||||||||||||||||||||||||
Changes in reserves for own shares | 3,370 | (3,370 | ) | 0 | 3,370 | (3,370 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||
As at 31.12.02 | 1,005 | 11,550 | 842 | 6,623 | 24,119 | 44,139 | ||||||||||||||||||||||||||||||||||||||||||
As at 31.12.02 and 1.1.03 | 1,005 | 11,550 | 842 | 6,623 | 24,119 | 44,139 | ||||||||||||||||||||||||||||||||||||||||||
Par value reduction | ||||||||||||||||||||||||||||||||||||||||||||||||
Cancellation of own shares | (61 | ) | (5,468 | ) | (5,529 | ) | ||||||||||||||||||||||||||||||||||||||||||
Capital increase | 2 | 59 | 61 | |||||||||||||||||||||||||||||||||||||||||||||
Increase in reserves | 229 | (229 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||||||
Prior year dividend | (2,298 | ) | (2,298 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | 4,197 | 4,197 | ||||||||||||||||||||||||||||||||||||||||||||||
Changes in reserves for own shares | 1,401 | (1,401 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||||||
As at 31.12.03 | 946 | 6,141 | 1,071 | 8,024 | 24,388 | 40,570 | ||||||||||||||||||||||||||||||||||||||||||
Share Capital
Par value | Ranking for dividends | Par value | Ranking for dividends | |||||||||||||||||||||||||||||
As at 31 December 2002 | No. of shares | Capital in CHF | No. of shares | Capital in CHF | ||||||||||||||||||||||||||||
As at 31 December 2003 | No. of shares | Capital in CHF | No. of shares | Capital in CHF | ||||||||||||||||||||||||||||
Issued and paid up | 1,256,297,678 | 1,005,038,142 | 1,182,262,598 | 945,810,078 | 1,183,046,764 | 946,437,411 | 1,126,339,764 | 901,071,811 | ||||||||||||||||||||||||
Conditional share capital | 9,590,918 | 7,672,734 | 0 | 0 | 6,871,752 | 5,497,402 | 0 | 0 | ||||||||||||||||||||||||
187193
UBS AG (Parent Bank) | ||
Off-Balance Sheet and Other Information |
Assets Pledged or Assigned as Security for Own Obligations,
Assets Subject to Reservation of Title
31.12.02 | 31.12.01 | Change in % | ||||||||||||||||||||||||||||||||||||||||||||||
31.12.03 | 31.12.02 | Change in % | ||||||||||||||||||||||||||||||||||||||||||||||
Book | Effective | Book | Effective | Book | Effective | Book | Effective | Book | Effective | Book | Effective | |||||||||||||||||||||||||||||||||||||
CHF million | value | liability | value | liability | value | liability | value | liability | value | liability | value | liability | ||||||||||||||||||||||||||||||||||||
Money market paper | 10,475 | 29,893 | (65 | ) | 6,225 | 10,475 | (41 | ) | ||||||||||||||||||||||||||||||||||||||||
Mortgage loans | 808 | 506 | 1,239 | 813 | (35 | ) | (38 | ) | 428 | 210 | 808 | 506 | (47 | ) | (58 | ) | ||||||||||||||||||||||||||||||||
Securities | 2,495 | 5,224 | (52 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Securities1 | 96,065 | 66,395 | 2,495 | |||||||||||||||||||||||||||||||||||||||||||||
Total | 13,778 | 506 | 36,356 | 813 | (62 | ) | (38 | ) | 102,718 | 66,605 | 13,778 | 506 | 646 | |||||||||||||||||||||||||||||||||||
Assets are pledged as collateral for securities borrowing and repo transactions, for collateralized credit lines with central banks, loans from mortgage institutions and security deposits relating to stock exchange membership.
Fiduciary Transactions
% change from | % change from | |||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.02 | ||||||||||||||||||
Deposits | Deposits | |||||||||||||||||||||||
with other banks | 28,865 | 38,978 | (26 | ) | 29,549 | 28,865 | 2 | |||||||||||||||||
with Group banks | 351 | 532 | (34 | ) | 672 | 351 | 91 | |||||||||||||||||
Loans and other financial transactions | 713 | 1,042 | (32 | ) | 6 | 713 | (99 | ) | ||||||||||||||||
Total | 29,929 | 40,552 | (26 | ) | 30,227 | 29,929 | 1 | |||||||||||||||||
Due to UBS Pension Plans, Loans to Corporate Bodies/Related Parties
% change from | % change from | |||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.02 | ||||||||||||||||||
Due to UBS pension plans and UBS debt instruments held by pension plans | 814 | 476 | 71 | |||||||||||||||||||||
Due to UBS pension plans and | ||||||||||||||||||||||||
UBS debt instruments held by pension plans | 1,096 | 905 | 21 | |||||||||||||||||||||
Securities borrowed from pension plans | 2,645 | 824 | 221 | 2,930 | 2,645 | 11 | ||||||||||||||||||
Loans to directors, senior executives and auditors1 | 28 | 32 | (13 | ) | 25 | 28 | (11 | ) | ||||||||||||||||
188194
189195
190196
197
192Additional Disclosure Required
under SEC Regulations
Table of Contents
193
Additional Disclosure Required under SEC Regulations
Table of Contents
A | |||||||
B | |||||||
201 | |||||||
202 | |||||||
203 | |||||||
203 | |||||||
C | |||||||
203 | |||||||
D | |||||||
204 | |||||||
204 | |||||||
206 | |||||||
208 | |||||||
209 | |||||||
210 | |||||||
211 | |||||||
212 | |||||||
213 | |||||||
214 | |||||||
216 | |||||||
218 | |||||||
219 | |||||||
220 |
194198
The following pages contain additional disclosure about UBS Group which is required under SEC regulations.
dards (IFRS) and are denominated in Swiss francs, or CHF, the reporting currency of the Group. Certain financial information has also been presented in accordance with United States Generally Accepted Accounting Principles (US GAAP).
The tables below set forth, for the periods and dates indicated, information concerning the noon buying rate for the Swiss franc, expressed in United States dollars, or USD, per one Swiss franc. The noon buying rate is the rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.
Average rate1 | ||||||||||||||||
Year ended 31 December | High | Low | (USD per 1 CHF) | At period end | ||||||||||||
1998 | 0.7731 | 0.6485 | 0.6894 | 0.7281 | ||||||||||||
1999 | 0.7361 | 0.6244 | 0.6605 | 0.6277 | ||||||||||||
2000 | 0.6441 | 0.5479 | 0.5912 | 0.6172 | ||||||||||||
2001 | 0.6331 | 0.5495 | 0.5910 | 0.5857 | ||||||||||||
2002 | 0.7229 | 0.5817 | 0.6453 | 0.7229 | ||||||||||||
Month | High | Low | ||||||||||||||
September 2002 | 0.6789 | 0.6578 | ||||||||||||||
October 2002 | 0.6760 | 0.6605 | ||||||||||||||
November 2002 | 0.6928 | 0.6714 | ||||||||||||||
December 2002 | 0.7229 | 0.6736 | ||||||||||||||
January 2003 | 0.7401 | 0.7135 | ||||||||||||||
February 2003 | 0.7411 | 0.7275 | ||||||||||||||
Average rate1 | ||||||||||||||||
Year ended 31 December | High | Low | (USD per 1 CHF) | At period end | ||||||||||||
1999 | 0.7361 | 0.6244 | 0.6605 | 0.6277 | ||||||||||||
2000 | 0.6441 | 0.5479 | 0.5912 | 0.6172 | ||||||||||||
2001 | 0.6331 | 0.5495 | 0.5910 | 0.5857 | ||||||||||||
2002 | 0.7229 | 0.5817 | 0.6453 | 0.7229 | ||||||||||||
2003 | 0.8189 | 0.7048 | 0.7493 | 0.8069 | ||||||||||||
Month | High | Low | ||||||||||||||
September 2003 | 0.7581 | 0.7048 | ||||||||||||||
October 2003 | 0.7618 | 0.7468 | ||||||||||||||
November 2003 | 0.7745 | 0.7261 | ||||||||||||||
December 2003 | 0.8069 | 0.7709 | ||||||||||||||
January 2004 | 0.8036 | 0.7958 | ||||||||||||||
February 2004 | 0.8152 | 0.7891 | ||||||||||||||
195199
Additional Disclosure Required
under SEC Regulations
B – Selected Financial Data (continued)
CHF million, except where indicated | ||||||||||||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
Income statement data | ||||||||||||||||||||||||||||||||||||||||
Interest income | 39,963 | 52,277 | 51,745 | 35,604 | 37,442 | 40,159 | 39,963 | 52,277 | 51,745 | 35,604 | ||||||||||||||||||||||||||||||
Interest expense | 29,417 | 44,236 | 43,615 | 29,695 | 32,424 | 27,860 | 29,417 | 44,236 | 43,615 | 29,695 | ||||||||||||||||||||||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 5,909 | 5,018 | 12,299 | 10,546 | 8,041 | 8,130 | 5,909 | ||||||||||||||||||||||||||||||
Credit loss (expense)/recovery | (206 | ) | (498 | ) | 130 | (956 | ) | (951 | ) | |||||||||||||||||||||||||||||||
Net interest income after credit loss (expense)/recovery | 10,340 | 7,543 | 8,260 | 4,953 | 4,067 | |||||||||||||||||||||||||||||||||||
Credit loss (expense) / recovery | (116 | ) | (206 | ) | (498 | ) | 130 | (956 | ) | |||||||||||||||||||||||||||||||
Net interest income after credit loss (expense) / recovery | 12,183 | 10,340 | 7,543 | 8,260 | 4,953 | |||||||||||||||||||||||||||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | 12,607 | 12,626 | 17,345 | 18,221 | 20,211 | 16,703 | 12,607 | ||||||||||||||||||||||||||||||
Net trading income | 5,572 | 8,802 | 9,953 | 7,719 | 3,313 | 3,883 | 5,572 | 8,802 | 9,953 | 7,719 | ||||||||||||||||||||||||||||||
Other income | (12 | ) | 558 | 1,486 | 3,146 | 2,241 | 561 | (12 | ) | 558 | 1,486 | 3,146 | ||||||||||||||||||||||||||||
Operating income | 34,121 | 37,114 | 36,402 | 28,425 | 22,247 | 33,972 | 34,121 | 37,114 | 36,402 | 28,425 | ||||||||||||||||||||||||||||||
Operating expenses | 29,577 | 30,396 | 26,203 | 20,532 | 18,376 | 25,624 | 29,577 | 30,396 | 26,203 | 20,532 | ||||||||||||||||||||||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | 7,893 | 3,871 | 8,348 | 4,544 | 6,718 | 10,199 | 7,893 | ||||||||||||||||||||||||||||||
Tax expense/(benefit) | 678 | 1,401 | 2,320 | 1,686 | 904 | |||||||||||||||||||||||||||||||||||
Tax expense / (benefit) | 1,618 | 678 | 1,401 | 2,320 | 1,686 | |||||||||||||||||||||||||||||||||||
Minority interests | (331 | ) | (344 | ) | (87 | ) | (54 | ) | 5 | (345 | ) | (331 | ) | (344 | ) | (87 | ) | (54 | ) | |||||||||||||||||||||
Net profit | 3,535 | 4,973 | 7,792 | 6,153 | 2,972 | 6,385 | 3,535 | 4,973 | 7,792 | 6,153 | ||||||||||||||||||||||||||||||
Cost/income ratio (%)1 | 86.2 | 80.8 | 72.2 | 69.9 | 79.2 | |||||||||||||||||||||||||||||||||||
Cost/income ratio before goodwill (%)1, 2 | 79.0 | 77.3 | 70.4 | 68.7 | 77.7 | |||||||||||||||||||||||||||||||||||
Cost / income ratio (%)1 | 75.2 | 86.2 | 80.8 | 72.2 | 69.9 | |||||||||||||||||||||||||||||||||||
Per share data (CHF) | ||||||||||||||||||||||||||||||||||||||||
Basic earnings per share3 | 2.92 | 3.93 | 6.44 | 5.07 | 2.44 | |||||||||||||||||||||||||||||||||||
Basic earnings per share before goodwill2, 3 | 4.73 | 4.97 | 7.00 | 5.35 | 2.72 | |||||||||||||||||||||||||||||||||||
Diluted earnings per share3 | 2.87 | 3.78 | 6.35 | 5.02 | 2.40 | |||||||||||||||||||||||||||||||||||
Diluted earnings per share before goodwill2, 3 | 4.65 | 4.81 | 6.89 | 5.30 | 2.68 | |||||||||||||||||||||||||||||||||||
Cash dividends declared per share (CHF)4 | 2.00 | 1.50 | 1.83 | 1.67 | ||||||||||||||||||||||||||||||||||||
Cash dividends declared per share (USD)4 | 0.86 | 1.10 | 1.10 | |||||||||||||||||||||||||||||||||||||
Dividend payout ratio (%)4 | 68.49 | 23.28 | 36.18 | 68.21 | ||||||||||||||||||||||||||||||||||||
Basic earnings per share2 | 5.72 | 2.92 | 3.93 | 6.44 | 5.07 | |||||||||||||||||||||||||||||||||||
Diluted earnings per share2 | 5.61 | 2.87 | 3.78 | 6.35 | 5.02 | |||||||||||||||||||||||||||||||||||
Cash dividends declared per share (CHF)3 | 2.60 | 2.00 | 0.00 | 1.50 | 1.83 | |||||||||||||||||||||||||||||||||||
Cash dividends equivalent in USD3 | 1.46 | 0.00 | 0.86 | 1.10 | ||||||||||||||||||||||||||||||||||||
Dividend payout ratio (%)3 | 45.45 | 68.49 | 23.28 | 36.18 | ||||||||||||||||||||||||||||||||||||
Rates of return (%) | ||||||||||||||||||||||||||||||||||||||||
Return on shareholders’ equity5 | 8.9 | 11.7 | 21.5 | 22.4 | 10.7 | |||||||||||||||||||||||||||||||||||
Return on shareholders’ equity before goodwill2, 5 | 14.4 | 14.8 | 23.4 | 23.6 | 12.0 | |||||||||||||||||||||||||||||||||||
Return on shareholders’ equity4 | 18.2 | 8.9 | 11.7 | 21.5 | 22.4 | |||||||||||||||||||||||||||||||||||
Return on average equity | 7.6 | 10.4 | 22.0 | 18.6 | 9.0 | 17.1 | 8.3 | 11.3 | 22.0 | 18.6 | ||||||||||||||||||||||||||||||
Return on average assets | 0.24 | 0.36 | 0.70 | 0.65 | 0.28 | 0.41 | 0.24 | 0.36 | 0.70 | 0.65 | ||||||||||||||||||||||||||||||
196200
CHF million, except where indicated | ||||||||||||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
Balance sheet data | ||||||||||||||||||||||||||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | 896,556 | 861,282 | 1,386,000 | 1,181,118 | 1,253,297 | 1,087,552 | 896,556 | ||||||||||||||||||||||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | 30,608 | 28,794 | 35,446 | 38,991 | 43,530 | 44,833 | 30,608 | ||||||||||||||||||||||||||||||
Average equity to average assets (%) | 3.14 | 3.49 | 3.17 | 3.52 | 3.06 | 2.38 | 3.14 | 3.49 | 3.17 | 3.52 | ||||||||||||||||||||||||||||||
Market capitalization | 79,448 | 105,475 | 112,666 | 92,642 | 90,720 | 95,401 | 79,448 | 105,475 | 112,666 | 92,642 | ||||||||||||||||||||||||||||||
Shares | ||||||||||||||||||||||||||||||||||||||||
Registered ordinary shares | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | 1,289,857,836 | 1,183,046,764 | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | ||||||||||||||||||||||||||||||
Own shares to be delivered | 0 | 0 | 28,447,788 | 0 | 0 | 0 | 0 | 0 | 28,444,788 | 0 | ||||||||||||||||||||||||||||||
Treasury shares | 97,181,094 | 41,254,951 | 55,265,349 | 110,621,142 | 73,370,094 | 111,360,692 | 97,181,094 | 41,254,951 | 55,265,349 | 110,621,142 | ||||||||||||||||||||||||||||||
BIS capital ratios | ||||||||||||||||||||||||||||||||||||||||
Tier 1 (%) | 11.3 | 11.6 | 11.7 | 10.6 | 9.3 | 11.8 | 11.3 | 11.6 | 11.7 | 10.6 | ||||||||||||||||||||||||||||||
Total BIS (%) | 13.8 | 14.8 | 15.7 | 14.5 | 13.2 | 13.3 | 13.8 | 14.8 | 15.7 | 14.5 | ||||||||||||||||||||||||||||||
Risk-weighted assets | 238,790 | 253,735 | 273,290 | 273,107 | 303,719 | 251,901 | 238,790 | 253,735 | 273,290 | 273,107 | ||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 2,037 | 2,448 | 2,445 | 1,744 | 1,573 | 2,209 | 2,037 | 2,448 | 2,445 | 1,744 | ||||||||||||||||||||||||||||||
Headcount (full-time equivalents)1 | 69,061 | 69,985 | 71,076 | 49,058 | 48,011 | |||||||||||||||||||||||||||||||||||
Headcount (full-time equivalents) | ||||||||||||||||||||||||||||||||||||||||
Switzerland | 26,662 | 27,972 | 29,163 | 30,215 | 32,843 | |||||||||||||||||||||||||||||||||||
Europe (excluding Switzerland) | 9,906 | 10,009 | 9,650 | 9,286 | 7,892 | |||||||||||||||||||||||||||||||||||
Americas | 25,511 | 27,350 | 27,463 | 28,114 | 5,025 | |||||||||||||||||||||||||||||||||||
Asia Pacific | 3,850 | 3,730 | 3,709 | 3,461 | 3,298 | |||||||||||||||||||||||||||||||||||
Total | 65,929 | 69,061 | 69,985 | 71,076 | 49,058 | |||||||||||||||||||||||||||||||||||
Long-term ratings2 | ||||||||||||||||||||||||||||||||||||||||
Long-term ratings1 | ||||||||||||||||||||||||||||||||||||||||
Fitch, London | AAA | AAA | AAA | AAA | AAA | AA+ | AAA | AAA | AAA | AAA | ||||||||||||||||||||||||||||||
Moody’s, New York | AA2 | AA2 | Aa1 | Aa1 | Aa1 | Aa2 | AA2 | AA2 | Aa1 | Aa1 | ||||||||||||||||||||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | AA+ | AA+ | AA+ | AA+ | AA+ | AA+ | AA+ | ||||||||||||||||||||||||||||||
Balance Sheet Data
CHF million | ||||||||||||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | 896,556 | 861,282 | 1,386,000 | 1,181,118 | 1,253,297 | 1,087,552 | 896,556 | ||||||||||||||||||||||||||||||
Due from banks | 32,468 | 27,526 | 29,147 | 29,907 | 68,495 | 31,667 | 32,468 | 27,526 | 29,147 | 29,907 | ||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | 139,052 | 162,938 | 177,857 | 113,162 | 91,695 | 213,932 | 139,052 | 162,938 | 177,857 | 113,162 | ||||||||||||||||||||||||||||||
Reverse repurchase agreements | 294,086 | 269,256 | 193,801 | 132,391 | 141,285 | 320,587 | 294,086 | 269,256 | 193,801 | 132,391 | ||||||||||||||||||||||||||||||
Trading portfolio assets | 371,436 | 397,886 | 315,588 | 211,932 | 159,179 | 461,772 | 371,436 | 397,886 | 315,588 | 211,932 | ||||||||||||||||||||||||||||||
Positive replacement values | 82,092 | 73,447 | 57,875 | 62,957 | 90,511 | 84,334 | 82,092 | 73,447 | 57,875 | 62,957 | ||||||||||||||||||||||||||||||
Loans | 211,647 | 226,545 | 244,842 | 234,858 | 247,926 | 212,504 | 211,647 | 226,545 | 244,842 | 234,858 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||
Due to banks | 83,178 | 106,531 | 82,240 | 76,365 | 85,716 | 127,153 | 83,178 | 106,531 | 82,240 | 76,365 | ||||||||||||||||||||||||||||||
Cash collateral on securities lent | 36,870 | 30,317 | 23,418 | 12,832 | 19,171 | 53,278 | 36,870 | 30,317 | 23,418 | 12,832 | ||||||||||||||||||||||||||||||
Repurchase agreements | 366,858 | 368,620 | 295,513 | 196,914 | 137,617 | 415,863 | 366,858 | 368,620 | 295,513 | 196,914 | ||||||||||||||||||||||||||||||
Trading portfolio liabilities | 106,453 | 105,798 | 82,632 | 54,638 | 47,033 | 143,957 | 106,453 | 105,798 | 82,632 | 54,638 | ||||||||||||||||||||||||||||||
Negative replacement values | 81,282 | 71,443 | 75,923 | 95,786 | 125,847 | 93,646 | 81,282 | 71,443 | 75,923 | 95,786 | ||||||||||||||||||||||||||||||
Due to customers | 306,876 | 333,781 | 310,679 | 279,960 | 274,850 | 347,358 | 306,876 | 333,781 | 310,679 | 279,960 | ||||||||||||||||||||||||||||||
Debt issued | 129,411 | 156,218 | 129,635 | 120,987 | 102,310 | 120,237 | 129,411 | 156,218 | 129,635 | 120,987 | ||||||||||||||||||||||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | 30,608 | 28,794 | 35,446 | 38,991 | 43,530 | 44,833 | 30,608 | ||||||||||||||||||||||||||||||
197201
Additional Disclosure Required
under SEC Regulations
B – Selected Financial Data (continued) |
US GAAP Income Statement Data
CHF million | ||||||||||||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||||||||||||||
Interest income | 39,679 | 51,907 | 51,565 | 35,404 | 29,136 | 39,940 | 39,679 | 51,907 | 51,565 | 35,404 | ||||||||||||||||||||||||||||||
Interest expense | (29,334 | ) | (44,096 | ) | (43,584 | ) | (29,660 | ) | (25,773 | ) | (27,700 | ) | (29,334 | ) | (44,096 | ) | (43,584 | ) | (29,660 | ) | ||||||||||||||||||||
Net interest income | 10,345 | 7,811 | 7,981 | 5,744 | 3,363 | 12,240 | 10,345 | 7,811 | 7,981 | 5,744 | ||||||||||||||||||||||||||||||
Credit loss (expense)/recovery | (206 | ) | (498 | ) | 130 | (956 | ) | (787 | ) | |||||||||||||||||||||||||||||||
Credit loss (expense) / recovery | (116 | ) | (206 | ) | (498 | ) | 130 | (956 | ) | |||||||||||||||||||||||||||||||
Net interest income after credit loss (expense)/recovery | 10,139 | 7,313 | 8,111 | 4,788 | 2,576 | |||||||||||||||||||||||||||||||||||
Net interest income after credit loss (expense) / recovery | 12,124 | 10,139 | 7,313 | 8,111 | 4,788 | |||||||||||||||||||||||||||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | 12,607 | 8,925 | 17,345 | 18,221 | 20,211 | 16,703 | 12,607 | ||||||||||||||||||||||||||||||
Net trading income | 6,031 | 8,959 | 8,597 | 7,174 | 455 | 4,065 | 6,031 | 8,959 | 8,597 | 7,174 | ||||||||||||||||||||||||||||||
Other income | 96 | 534 | 1,514 | 3,182 | 725 | 380 | 96 | 534 | 1,514 | 3,182 | ||||||||||||||||||||||||||||||
Total operating income | 34,487 | 37,017 | 34,925 | 27,751 | 12,681 | 33,914 | 34,487 | 37,017 | 34,925 | 27,751 | ||||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||||
Personnel expenses | 18,610 | 19,713 | 17,262 | 12,483 | 7,938 | 17,615 | 18,610 | 19,713 | 17,262 | 12,483 | ||||||||||||||||||||||||||||||
General and administrative expenses | 7,072 | 7,631 | 6,813 | 6,664 | 6,259 | 6,086 | 7,072 | 7,631 | 6,813 | 6,664 | ||||||||||||||||||||||||||||||
Depreciation of property and equipment | 1,613 | 1,815 | 1,800 | 1,619 | 1,439 | 1,396 | 1,613 | 1,815 | 1,800 | 1,619 | ||||||||||||||||||||||||||||||
Amortization of goodwill | 0 | 2,484 | 2,018 | 1,793 | 936 | 0 | 0 | 2,484 | 2,018 | 1,793 | ||||||||||||||||||||||||||||||
Amortization of other intangible assets | 1,443 | 298 | 134 | 42 | 28 | 112 | 1,443 | 298 | 134 | 42 | ||||||||||||||||||||||||||||||
Restructuring costs | 0 | 112 | 191 | 750 | 1,089 | 0 | 0 | 112 | 191 | 750 | ||||||||||||||||||||||||||||||
Total operating expenses | 28,738 | 32,053 | 28,218 | 23,351 | 17,689 | 25,209 | 28,738 | 32,053 | 28,218 | 23,351 | ||||||||||||||||||||||||||||||
Operating profit/(loss) before tax and minority interests | 5,749 | 4,964 | 6,707 | 4,400 | (5,008 | ) | ||||||||||||||||||||||||||||||||||
Operating profit / (loss) before tax and minority interests | 8,705 | 5,749 | 4,964 | 6,707 | 4,400 | |||||||||||||||||||||||||||||||||||
Tax expense/(benefit) | 511 | 1,386 | 2,183 | 1,509 | (1,339 | ) | ||||||||||||||||||||||||||||||||||
Tax expense / (benefit) | 1,842 | 511 | 1,386 | 2,183 | 1,509 | |||||||||||||||||||||||||||||||||||
Net profit/(loss) before minority interests | 5,238 | 3,578 | 4,524 | 2,891 | (3,669 | ) | ||||||||||||||||||||||||||||||||||
Net profit / (loss) before minority interests | 6,863 | 5,238 | 3,578 | 4,524 | 2,891 | |||||||||||||||||||||||||||||||||||
Minority interests | (331 | ) | (344 | ) | (87 | ) | (54 | ) | 4 | (350 | ) | (331 | ) | (344 | ) | (87 | ) | (54 | ) | |||||||||||||||||||||
Change in accounting principle: cumulative effect of adoption of “AICPA Audit and Accounting Guide, Audits of Investment Companies” on certain financial investments, net of tax | 639 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Change in accounting principle: cumulative effect of adoption of “AICPA Audit and Accounting Guide, Audits of Investment Companies” on certain financial investments, net of tax1 | 0 | 639 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Net profit/(loss) | 5,546 | 3,234 | 4,437 | 2,837 | (3,665 | ) | ||||||||||||||||||||||||||||||||||
Net profit / (loss) | 6,513 | 5,546 | 3,234 | 4,437 | 2,837 | |||||||||||||||||||||||||||||||||||
198202
US GAAP Balance Sheet Data
CHF million | ||||||||||||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||
Total assets | 1,296,938 | 1,361,920 | 1,124,554 | 893,525 | 899,589 | 1,533,957 | 1,296,938 | 1,361,920 | 1,124,554 | 893,525 | ||||||||||||||||||||||||||||||
Due from banks | 32,481 | 27,550 | 29,182 | 29,954 | 68,554 | 31,685 | 32,481 | 27,550 | 29,182 | 29,954 | ||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | 139,073 | 162,566 | 177,857 | 113,162 | 91,695 | 211,058 | 139,073 | 162,566 | 177,857 | 113,162 | ||||||||||||||||||||||||||||||
Reverse repurchase agreements | 294,086 | 269,256 | 193,801 | 132,391 | 141,285 | 320,587 | 294,086 | 269,256 | 193,801 | 132,391 | ||||||||||||||||||||||||||||||
Trading portfolio assets | 441,845 | 455,406 | 318,788 | 228,230 | 178,130 | 544,492 | 441,845 | 455,406 | 318,788 | 228,230 | ||||||||||||||||||||||||||||||
Positive replacement values1 | 83,757 | 73,474 | 57,775 | 62,294 | 90,520 | 84,034 | 83,757 | 73,474 | 57,775 | 62,294 | ||||||||||||||||||||||||||||||
Loans | 211,755 | 226,747 | 245,214 | 235,401 | 248,657 | 212,554 | 211,755 | 226,747 | 245,214 | 235,401 | ||||||||||||||||||||||||||||||
Goodwill | 28,127 | 29,255 | 31,016 | 21,163 | 21,455 | 26,775 | 28,127 | 29,255 | 31,016 | 21,163 | ||||||||||||||||||||||||||||||
Other intangible assets | 1,222 | 4,510 | 4,710 | 265 | 252 | 1,174 | 1,222 | 4,510 | 4,710 | 265 | ||||||||||||||||||||||||||||||
Other assets | 21,314 | 36,972 | 27,955 | 18,717 | 29,398 | 64,381 | 21,314 | 36,972 | 27,955 | 18,717 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||
Due to banks | 83,178 | 106,531 | 82,240 | 76,363 | 85,716 | 127,385 | 83,178 | 106,531 | 82,240 | 76,363 | ||||||||||||||||||||||||||||||
Cash collateral on securities lent | 36,870 | 30,317 | 23,418 | 12,832 | 19,127 | 51,157 | 36,870 | 30,317 | 23,418 | 12,832 | ||||||||||||||||||||||||||||||
Repurchase agreements | 366,858 | 368,620 | 295,513 | 173,840 | 136,824 | 415,863 | 366,858 | 368,620 | 295,513 | 173,840 | ||||||||||||||||||||||||||||||
Trading portfolio liabilities | 117,721 | 119,528 | 87,832 | 52,658 | 47,772 | 149,380 | 117,721 | 119,528 | 87,832 | 52,658 | ||||||||||||||||||||||||||||||
Obligation to return securities received as collateral | 16,308 | 10,931 | 0 | 0 | 0 | 13,071 | 16,308 | 10,931 | 0 | 0 | ||||||||||||||||||||||||||||||
Negative replacement values1 | 132,354 | 116,666 | 75,423 | 95,004 | 125,857 | 161,086 | 132,354 | 116,666 | 75,423 | 95,004 | ||||||||||||||||||||||||||||||
Due to customers | 306,872 | 333,766 | 310,686 | 279,971 | 274,861 | 347,358 | 306,872 | 333,766 | 310,686 | 279,971 | ||||||||||||||||||||||||||||||
Accrued expenses and deferred income | 15,330 | 17,289 | 21,038 | 12,040 | 11,232 | 13,673 | 15,330 | 17,289 | 21,038 | 12,040 | ||||||||||||||||||||||||||||||
Debt issued | 129,527 | 156,462 | 129,750 | 120,704 | 101,973 | 123,259 | 129,527 | 156,462 | 129,750 | 120,704 | ||||||||||||||||||||||||||||||
Shareholders’ equity | 55,576 | 59,282 | 62,960 | 51,833 | 54,761 | 53,174 | 55,576 | 59,282 | 62,960 | 51,833 | ||||||||||||||||||||||||||||||
Ratio of Earnings to Fixed Charges
The following table sets forth UBS AG’sUBS’s ratio of earnings to fixed charges, for the periods indicated. Ratios of earnings to combined fixed charges and preferred stock dividends requirements are not presented as there were no preferred share dividends in any of the periods indicated.
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
IFRS1 | 1.14 | 1.14 | 1.23 | 1.25 | 1.11 | 1.28 | 1.14 | 1.14 | 1.23 | 1.25 | ||||||||||||||||||||||||||||||
US GAAP1, 2 | 1.18 | 1.10 | 1.15 | 1.14 | 0.80 | |||||||||||||||||||||||||||||||||||
US GAAP1 | 1.29 | 1.18 | 1.10 | 1.15 | 1.14 | |||||||||||||||||||||||||||||||||||
C – Information on the Company
Property, Plant and Equipment
remainder, along with most of UBS’s offices outside Switzerland, being held under commercial leases.
199203
Additional Disclosure Required
under SEC Regulations
D – Information Required by Industry Guide 3 | ||
Selected Statistical Information
Average Balances and Interest Rates
The following table sets forth average interest-earning assets and average interest-bearing liabilities, along with the average rates, for the years ended 31 December 2003, 2002 2001 and 2000.2001.
31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | Average | Average | Average | Average | Average | Average | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets | Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due from banks | Due from banks | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 12,534 | 388 | 3.1 | 11,753 | 1,055 | 9.0 | 13,366 | 1,273 | 9.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 17,603 | 634 | 3.6 | 15,528 | 1,823 | 11.7 | 16,994 | 2,280 | 13.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 11,417 | 200 | 1.8 | 12,534 | 388 | 3.1 | 11,753 | 1,055 | 9.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 20,997 | 1,035 | 4.9 | 17,603 | 634 | 3.6 | 15,528 | 1,823 | 11.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | Cash collateral on securities borrowed and reverse repurchase agreements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 5,471 | 235 | 4.3 | 7,868 | 563 | 7.2 | 8,383 | 558 | 6.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 573,576 | 10,949 | 1.9 | 474,295 | 17,774 | 3.7 | 348,395 | 18,530 | 5.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 6,576 | 200 | 3.0 | 5,471 | 235 | 4.3 | 7,868 | 563 | 7.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 582,152 | 10,948 | 1.9 | 573,576 | 10,949 | 1.9 | 474,295 | 17,774 | 3.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | Trading portfolio assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 7,812 | 269 | 3.4 | 12,940 | 307 | 2.4 | 20,800 | 244 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign — taxable | 373,810 | 16,714 | 4.5 | 332,126 | 16,183 | 4.9 | 255,399 | 11,560 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign — non-taxable | 1,720 | 31 | 1.8 | 1,450 | 42 | 2.9 | 1,206 | 38 | 3.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign — total | 375,530 | 16,745 | 4.5 | 333,576 | 16,225 | 4.9 | 256,605 | 11,598 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 7,990 | 222 | 2.8 | 7,812 | 269 | 3.4 | 12,940 | 307 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign – taxable | 407,867 | 18,151 | 4.5 | 373,810 | 16,714 | 4.5 | 332,126 | 16,183 | 4.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign – non-taxable | 1,668 | 21 | 1.3 | 1,720 | 31 | 1.8 | 1,450 | 42 | 2.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign – total | 409,535 | 18,172 | 4.4 | 375,530 | 16,745 | 4.5 | 333,576 | 16,225 | 4.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 170,641 | 6,987 | 4.1 | 177,404 | 8,017 | 4.5 | 181,646 | 10,985 | 6.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 55,199 | 1,789 | 3.2 | 72,176 | 3,090 | 4.3 | 67,528 | 3,813 | 5.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 165,397 | 6,437 | 3.9 | 170,641 | 6,987 | 4.1 | 177,404 | 8,017 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 51,457 | 1,805 | 3.5 | 55,199 | 1,789 | 3.2 | 72,176 | 3,090 | 4.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial investments | Financial investments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 3,794 | 60 | 1.6 | 4,598 | 90 | 2.0 | 3,440 | 105 | 3.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign — taxable | 8,781 | 105 | 1.2 | 39,252 | 363 | 0.9 | 22,529 | 297 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign — non-taxable | 0 | 0 | 0.0 | 0 | 0 | 0.0 | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign — total | 8,781 | 105 | 1.2 | 39,252 | 363 | 0.9 | 22,529 | 297 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 1,988 | 40 | 2.0 | 3,794 | 60 | 1.6 | 4,598 | 90 | 2.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign – taxable | 4,798 | 35 | 0.7 | 8,781 | 105 | 1.2 | 39,252 | 363 | 0.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign – non-taxable | 0 | 0 | 0.0 | 0 | 0 | 0.0 | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign – total | 4,798 | 35 | 0.7 | 8,781 | 105 | 1.2 | 39,252 | 363 | 0.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest-earning assets | Total interest-earning assets | 1,230,941 | 38,161 | 3.1 | 1,149,390 | 49,307 | 4.3 | 939,686 | 49,683 | 5.3 | 1,262,307 | 39,094 | 3.1 | 1,230,941 | 38,161 | 3.1 | 1,149,390 | 49,307 | 4.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest on swaps | Net interest on swaps | 1,802 | 2,970 | 2,062 | 1,065 | 1,802 | 2,970 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income and average interest-earning assets | Interest income and average interest-earning assets | 1,230,941 | 39,963 | 3.2 | 1,149,390 | 52,277 | 4.5 | 939,686 | 51,745 | 5.5 | 1,262,307 | 40,159 | 3.2 | 1,230,941 | 39,963 | 3.2 | 1,149,390 | 52,277 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest-earning assets | Non-interest-earning assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Positive replacement values | 190,063 | 153,687 | 135,762 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed assets | 12,532 | 13,376 | 9,660 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 53,293 | 46,954 | 32,925 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Positive replacement values | 250,871 | 190,063 | 153,687 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed assets | 11,643 | 12,532 | 13,376 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 40,104 | 53,293 | 46,954 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total average assets | Total average assets | 1,486,829 | 1,363,407 | 1,118,033 | 1,564,925 | 1,486,829 | 1,363,407 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
200204
Average Balances and Interest Rates (continued)
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities and Equity | Liabilities and Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due to banks | Due to banks | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 28,625 | 452 | 1.6 | 36,260 | 1,424 | 3.9 | 31,133 | 2,397 | 7.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 60,621 | 1,362 | 2.2 | 61,642 | 3,506 | 5.7 | 57,258 | 3,758 | 6.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 28,719 | 150 | 0.5 | 28,625 | 452 | 1.6 | 36,260 | 1,424 | 3.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 72,757 | 1,751 | 2.4 | 60,621 | 1,362 | 2.2 | 61,642 | 3,506 | 5.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities lent and repurchase agreements | Cash collateral on securities lent and repurchase agreements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 18,382 | 355 | 1.9 | 13,147 | 600 | 4.6 | 12,700 | 478 | 3.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 523,375 | 9,726 | 1.9 | 415,121 | 13,917 | 3.4 | 284,220 | 14,437 | 5.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 23,287 | 295 | 1.3 | 18,382 | 355 | 1.9 | 13,147 | 600 | 4.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 515,665 | 9,328 | 1.8 | 523,375 | 9,726 | 1.9 | 415,121 | 13,917 | 3.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio liabilities | Trading portfolio liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 3,239 | 146 | 4.5 | 2,526 | 1 | 0.0 | 1,078 | 4 | 0.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 109,013 | 8,220 | 7.5 | 94,597 | 7,814 | 8.3 | 66,597 | 5,305 | 8.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 3,252 | 156 | 4.8 | 3,239 | 146 | 4.5 | 2,526 | 1 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 127,104 | 9,945 | 7.8 | 109,013 | 8,220 | 7.5 | 94,597 | 7,814 | 8.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due to customers | Due to customers | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic — demand deposits | 42,484 | 435 | 1.0 | 41,664 | 715 | 1.7 | 44,403 | 595 | 1.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic — savings deposits | 71,465 | 625 | 0.9 | 66,089 | 716 | 1.1 | 72,207 | 781 | 1.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic — time deposits | 27,646 | 447 | 1.6 | 31,261 | 989 | 3.2 | 27,199 | 826 | 3.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic — total | 141,595 | 1,507 | 1.1 | 139,014 | 2,420 | 1.7 | 143,809 | 2,202 | 1.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign1 | 172,650 | 3,062 | 1.8 | 187,783 | 6,738 | 3.6 | 143,432 | 7,303 | 5.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic – demand deposits | 55,496 | 100 | 0.2 | 42,484 | 435 | 1.0 | 41,664 | 715 | 1.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic – savings deposits | 81,963 | 527 | 0.6 | 71,465 | 625 | 0.9 | 66,089 | 716 | 1.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic – time deposits | 21,125 | 395 | 1.9 | 27,646 | 447 | 1.6 | 31,261 | 989 | 3.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic – total | 158,584 | 1,022 | 0.6 | 141,595 | 1,507 | 1.1 | 139,014 | 2,420 | 1.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign1 | 161,942 | 2,170 | 1.3 | 172,650 | 3,062 | 1.8 | 187,783 | 6,738 | 3.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term debt | Short-term debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 69 | 0 | 0.0 | 69 | 0 | 0.0 | 79 | 0 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 91,616 | 1,915 | 2.1 | 96,184 | 4,227 | 4.4 | 78,075 | 4,338 | 5.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 64 | 0 | 0.0 | 69 | 0 | 0.0 | 69 | 0 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 73,193 | 1,015 | 1.4 | 91,616 | 1,915 | 2.1 | 96,184 | 4,227 | 4.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | Long-term debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 10,082 | 433 | 4.3 | 12,754 | 587 | 4.6 | 15,490 | 778 | 5.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 46,930 | 2,239 | 4.8 | 43,798 | 3,002 | 6.9 | 38,020 | 2,615 | 6.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 6,413 | 188 | 2.9 | 10,082 | 433 | 4.3 | 12,754 | 587 | 4.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | 52,216 | 1,840 | 3.5 | 46,930 | 2,239 | 4.8 | 43,798 | 3,002 | 6.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | Total interest-bearing liabilities | 1,206,197 | 29,417 | 2.4 | 1,102,895 | 44,236 | 4.0 | 871,891 | 43,615 | 5.0 | 1,223,196 | 27,860 | 2.3 | 1,206,197 | 29,417 | 2.4 | 1,102,895 | 44,236 | 4.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest-bearing liabilities | Non-interest-bearing liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Negative replacement values | 192,659 | 165,220 | 157,668 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 41,297 | 47,676 | 53,049 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Negative replacement values | 257,075 | 192,659 | 165,220 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 47,410 | 45,217 | 51,308 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | Total liabilities | 1,440,153 | 1,315,791 | 1,082,608 | 1,527,681 | 1,444,073 | 1,319,423 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity | Shareholders’ equity | 46,676 | 47,616 | 35,425 | 37,244 | 42,756 | 43,984 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total average liabilities and shareholders’ equity | Total average liabilities and shareholders’ equity | 1,486,829 | 1,363,407 | 1,118,033 | 1,564,925 | 1,486,829 | 1,363,407 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | Net interest income | 10,546 | 8,041 | 8,130 | 12,299 | 10,546 | 8,041 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net yield on interest-earning assets | Net yield on interest-earning assets | 0.9 | 0.7 | 0.9 | 1.0 | 0.9 | 0.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
84%85% for 2003 (84% for 2002 (81%and 81% for 2001 and 76% for 2000)2001). The percentage of total average interest-bearing liabilities attributable to foreign activities was 83%82% for 2003 (83% for 2002 (82%and 82% for 2001 and 77% for 2000)2001).
201205
Analysis of Changes in Interest Income and Expense The following tables allocate, by categories of interest-earning assets and interest-bearing liabilities, the changes in interest income and expense due to changes in volume and interest rates for the year ended 31 December 2003 compared to the year ended 31 December 2002, and for the year ended 31 December 2002 compared to the year ended 31 December
Required
under SEC Regulations
D – Information Required by Industry Guide 3 (continued)D — Information Required by Industry Guide 3 (continued)2001, and for the year ended 31 December 2001 compared to the year ended 31 December 2000.2001. Volume and rate variances have been calculated on movements in average balances and changes in interest rates. Changes due to a combination of volume and rates have been allocated proportionally. Refer to page 209213 of Industry Guide 3 for a discussion of the treatment of impaired, non-performing and restructured loans. 2002 compared to 2001 2001 compared to 2000 Increase/(decrease) Increase/(decrease) 2003 compared to 2002 2002 compared to 2001 due to changes in due to changes in Increase/(decrease) Increase/(decrease) due to changes in due to changes in Average Average Net Average Average Net Average Average Net Average Average Net CHF million CHF million volume rate change volume rate change volume rate change volume rate change Due from banks Due from banks Domestic 70 (737 ) (667 ) (153 ) (65 ) (218 ) Foreign 243 (1,432 ) (1,189 ) (196 ) (261 ) (457 ) Domestic (35 ) (153 ) (188 ) 70 (737 ) (667 ) Foreign 122 279 401 243 (1,432 ) (1,189 ) Cash collateral on securities borrowed and reverse repurchase agreements Cash collateral on securities borrowed and reverse repurchase agreements Domestic (173 ) (155 ) (328 ) (35 ) 40 5 Foreign 3,673 (10,498 ) (6,825 ) 6,673 (7,429 ) (756 ) Domestic 48 (83 ) (35 ) (173 ) (155 ) (328 ) Foreign 163 (164 ) (1 ) 3,673 (10,498 ) (6,825 ) Trading portfolio assets Trading portfolio assets Domestic (123 ) 85 (38 ) (94 ) 157 63 Foreign — taxable 2,043 (1,512 ) 531 3,456 1,167 4,623 Foreign — non-taxable 8 (19 ) (11 ) 8 (4 ) 4 Foreign — total 2,051 (1,531 ) 520 3,464 1,163 4,627 Domestic 6 (53 ) (47 ) (123 ) 85 (38 ) Foreign – taxable 1,533 (96 ) 1,437 2,043 (1,512 ) 531 Foreign – non-taxable (1 ) (9 ) (10 ) 8 (19 ) (11 ) Foreign – total 1,532 (105 ) 1,427 2,051 (1,531 ) 520 Loans Loans Domestic (304 ) (726 ) (1,030 ) (255 ) (2,713 ) (2,968 ) Foreign (730 ) (571 ) (1,301 ) 260 (983 ) (723 ) Domestic (215 ) (335 ) (550 ) (304 ) (726 ) (1,030 ) Foreign (120 ) 136 16 (730 ) (571 ) (1,301 ) Financial investments Financial investments Domestic (16 ) (14 ) (30 ) 36 (51 ) (15 ) Foreign — taxable (274 ) 16 (258 ) 217 (151 ) 66 Foreign — non-taxable 0 0 0 0 0 0 Foreign — total (274 ) 16 (258 ) 217 (151 ) 66 Domestic (29 ) 9 (20 ) (16 ) (14 ) (30 ) Foreign – taxable (48 ) (22 ) (70 ) (274 ) 16 (258 ) Foreign – non-taxable 0 0 0 0 0 0 Foreign – total (48 ) (22 ) (70 ) (274 ) 16 (258 ) Interest income Interest income Domestic (546 ) (1,547 ) (2,093 ) (501 ) (2,632 ) (3,133 ) Foreign 4,963 (14,016 ) (9,053 ) 10,418 (7,661 ) 2,757 Domestic (225 ) (615 ) (840 ) (546 ) (1,547 ) (2,093 ) Foreign 1,649 124 1,773 4,963 (14,016 ) (9,053 ) Total interest income from interest-earning assets Total interest income from interest-earning assets 4,417 (15,563 ) (11,146 ) 9,917 (10,293 ) (376 ) 1,424 (491 ) 933 4,417 (15,563 ) (11,146 ) Net interest on swaps Net interest on swaps (1,168 ) 908 (737 ) (1,168 ) (12,314 ) 532 196 (12,314 )
202206
D – Information Required by Industry Guide 3 (continued) |
Analysis of Changes in Interest Income and Expense (continued)
2002 compared to 2001 | 2001 compared to 2000 | |||||||||||||||||||||||||||||||||||||||||||||||||
Increase/(decrease) | Increase/(decrease) | 2003 compared to 2002 | 2002 compared to 2001 | |||||||||||||||||||||||||||||||||||||||||||||||
due to changes in | due to changes in | Increase/(decrease) | Increase/(decrease) | |||||||||||||||||||||||||||||||||||||||||||||||
due to changes in | due to changes in | |||||||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Net | Average | Average | Net | Average | Average | Net | Average | Average | Net | |||||||||||||||||||||||||||||||||||||||
CHF million | CHF million | volume | rate | change | volume | rate | change | volume | rate | change | volume | rate | change | |||||||||||||||||||||||||||||||||||||
Interest expense on interest-bearing liabilities | Interest expense on interest-bearing liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||
Due to banks | Due to banks | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | (298 | ) | (674 | ) | (972 | ) | 395 | (1,368 | ) | (973 | ) | |||||||||||||||||||||||||||||||||||||||
Foreign | (58 | ) | (2,086 | ) | (2,144 | ) | 289 | (541 | ) | (252 | ) | |||||||||||||||||||||||||||||||||||||||
Domestic | 2 | (304 | ) | (302 | ) | (298 | ) | (674 | ) | (972 | ) | |||||||||||||||||||||||||||||||||||||||
Foreign | 267 | 122 | 389 | (58 | ) | (2,086 | ) | (2,144 | ) | |||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities lent and repurchase agreements | Cash collateral on securities lent and repurchase agreements | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 241 | (486 | ) | (245 | ) | 17 | 105 | 122 | ||||||||||||||||||||||||||||||||||||||||||
Foreign | 3,681 | (7,872 | ) | (4,191 | ) | 6,676 | (7,196 | ) | (520 | ) | ||||||||||||||||||||||||||||||||||||||||
Domestic | 93 | (153 | ) | (60 | ) | 241 | (486 | ) | (245 | ) | ||||||||||||||||||||||||||||||||||||||||
Foreign | (146 | ) | (252 | ) | (398 | ) | 3,681 | (7,872 | ) | (4,191 | ) | |||||||||||||||||||||||||||||||||||||||
Trading portfolio liabilities | Trading portfolio liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 0 | 145 | 145 | 6 | (9 | ) | (3 | ) | ||||||||||||||||||||||||||||||||||||||||||
Foreign | 1,197 | (791 | ) | 406 | 2,240 | 269 | 2,509 | |||||||||||||||||||||||||||||||||||||||||||
Domestic | 1 | 9 | 10 | 0 | 145 | 145 | ||||||||||||||||||||||||||||||||||||||||||||
Foreign | 1,357 | 368 | 1,725 | 1,197 | (791 | ) | 406 | |||||||||||||||||||||||||||||||||||||||||||
Due to customers | Due to customers | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic — demand deposits | 14 | (294 | ) | (280 | ) | (36 | ) | 156 | 120 | |||||||||||||||||||||||||||||||||||||||||
Domestic — savings deposits | 59 | (150 | ) | (91 | ) | (67 | ) | 2 | (65 | ) | ||||||||||||||||||||||||||||||||||||||||
Domestic — time deposits | (116 | ) | (426 | ) | (542 | ) | 31 | 132 | 163 | |||||||||||||||||||||||||||||||||||||||||
Domestic — total | (43 | ) | (870 | ) | (913 | ) | (72 | ) | 290 | 218 | ||||||||||||||||||||||||||||||||||||||||
Foreign | (545 | ) | (3,131 | ) | (3,676 | ) | 2,262 | (2,827 | ) | (565 | ) | |||||||||||||||||||||||||||||||||||||||
Domestic – demand deposits | 130 | (465 | ) | (335 | ) | 14 | (294 | ) | (280 | ) | ||||||||||||||||||||||||||||||||||||||||
Domestic – savings deposits | 94 | (192 | ) | (98 | ) | 59 | (150 | ) | (91 | ) | ||||||||||||||||||||||||||||||||||||||||
Domestic – time deposits | (104 | ) | 52 | (52 | ) | (116 | ) | (426 | ) | (542 | ) | |||||||||||||||||||||||||||||||||||||||
Domestic – total | 120 | (605 | ) | (485 | ) | (43 | ) | (870 | ) | (913 | ) | |||||||||||||||||||||||||||||||||||||||
Foreign | (193 | ) | (699 | ) | (892 | ) | (545 | ) | (3,131 | ) | (3,676 | ) | ||||||||||||||||||||||||||||||||||||||
Short-term debt | Short-term debt | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
Foreign | (201 | ) | (2,111 | ) | (2,312 | ) | 1,014 | (1,125 | ) | (111 | ) | |||||||||||||||||||||||||||||||||||||||
Domestic | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
Foreign | (387 | ) | (513 | ) | (900 | ) | (201 | ) | (2,111 | ) | (2,312 | ) | ||||||||||||||||||||||||||||||||||||||
Long-term debt | Long-term debt | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | (123 | ) | (31 | ) | (154 | ) | (137 | ) | (54 | ) | (191 | ) | ||||||||||||||||||||||||||||||||||||||
Foreign | 216 | (979 | ) | (763 | ) | 419 | (32 | ) | 387 | |||||||||||||||||||||||||||||||||||||||||
Domestic | (158 | ) | (87 | ) | (245 | ) | (123 | ) | (31 | ) | (154 | ) | ||||||||||||||||||||||||||||||||||||||
Foreign | 254 | (653 | ) | (399 | ) | 216 | (979 | ) | (763 | ) | ||||||||||||||||||||||||||||||||||||||||
Interest expense | Interest expense | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | (223 | ) | (1,916 | ) | (2,139 | ) | 209 | (1,036 | ) | (827 | ) | |||||||||||||||||||||||||||||||||||||||
Foreign | 4,290 | (16,970 | ) | (12,680 | ) | 12,900 | (11,452 | ) | 1,448 | |||||||||||||||||||||||||||||||||||||||||
Domestic | 58 | (1,140 | ) | (1,082 | ) | (223 | ) | (1,916 | ) | (2,139 | ) | |||||||||||||||||||||||||||||||||||||||
Foreign | 1,152 | (1,627 | ) | (475 | ) | 4,290 | (16,970 | ) | (12,680 | ) | ||||||||||||||||||||||||||||||||||||||||
Total interest expense | Total interest expense | 4,067 | (18,886 | ) | (14,819 | ) | 13,109 | (12,488 | ) | 621 | 1,210 | (2,767 | ) | (1,557 | ) | 4,067 | (18,886 | ) | (14,819 | ) | ||||||||||||||||||||||||||||||
203207
Deposits The following table analyzes average deposits and the average rates on each deposit category listed below for the years ended 31 December 2003, 2002
under SEC Regulations
D – Information Required by Industry Guide 3 (continued)D — Information Required by Industry Guide 3 (continued)2001 and 2000.2001. The geographic allocation is based on the location of the office or branch where the deposit is made. Deposits by foreign depositors in domestic offices were CHF 43,91492,858 million, CHF 54,09543,914 million and CHF 45,81554,095 million at 31 December 2003, 31 December 2002 and 31 December 2001, and 31 December 2000, respectively. 31.12.02 31.12.01 31.12.00 31.12.03 31.12.02 31.12.01 Average Average Average Average Average Average Average Average Average Average Average Average CHF million, except where indicated deposit rate (%) deposit rate (%) deposit rate (%) deposit rate (%) deposit rate (%) deposit rate (%) Demand deposits 3,524 0.7 3,741 1.2 4,649 1.9 3,836 0.0 3,524 0.7 3,741 1.2 Time deposits 9,010 1.7 8,012 4.2 8,717 8.7 7,581 0.6 9,010 1.7 8,012 4.2 Total domestic offices 12,534 1.4 11,753 3.3 13,366 6.3 11,417 0.4 12,534 1.4 11,753 3.3 17,603 2.2 15,528 5.7 16,994 6.6 20,997 2.4 17,603 2.2 15,528 5.7 30,137 1.9 27,281 4.6 30,360 6.5 32,414 1.7 30,137 1.9 27,281 4.6 Demand deposits 42,484 1.0 41,664 1.7 44,403 1.3 55,496 0.2 42,484 1.0 41,664 1.7 Savings deposits 71,465 0.9 66,089 1.1 72,207 1.1 81,963 0.6 71,465 0.9 66,089 1.1 Time deposits 27,646 1.6 31,261 3.2 27,199 3.0 21,125 1.9 27,646 1.6 31,261 3.2 Total domestic offices 141,595 1.1 139,014 1.7 143,809 1.5 158,584 0.6 141,595 1.1 139,014 1.7 172,650 1.8 187,783 3.6 143,432 5.1 161,942 1.3 172,650 1.8 187,783 3.6 314,245 1.5 326,797 2.8 287,241 3.3 320,526 1.0 314,245 1.5 326,797 2.8
At 31 December 2002,2003, the maturity of time deposits exceeding CHF 150,000, or an equivalent amount in other currencies, was as follows:
CHF million | Domestic | Foreign | Domestic | Foreign | ||||||||||||
Within 3 months | 27,456 | 110,053 | 22,382 | 122,522 | ||||||||||||
3 to 12 months | 8,202 | 26,821 | ||||||||||||||
3 to 6 months | 1,492 | 3,354 | ||||||||||||||
6 to 12 months | 1,335 | 2,384 | ||||||||||||||
1 to 5 years | 768 | 2,766 | 483 | 2,172 | ||||||||||||
Over 5 years | 44 | 859 | 94 | 1,241 | ||||||||||||
Total time deposits | 36,470 | 140,499 | 25,786 | 131,673 | ||||||||||||
204208
Short-term Borrowings
The following table presents our period-end, average and maximum month-end outstanding amounts for short-term borrowings, along with the average rates and period-end rates at and for the years ended 31 December 2003, 2002 2001 and 2000.2001.
Money market paper issued | Due to banks | Repurchase agreements1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Money market paper issued | Due to banks | Repurchase agreements1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Period-end balance | 72,800 | 99,006 | 74,780 | 48,780 | 77,312 | 51,245 | 464,020 | 462,316 | 330,857 | 58,115 | 72,800 | 99,006 | 89,303 | 48,780 | 77,312 | 500,592 | 464,020 | 462,316 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average balance | 91,685 | 96,253 | 78,154 | 59,109 | 70,621 | 58,031 | 509,572 | 400,648 | 278,601 | 73,257 | 91,685 | 96,253 | 69,062 | 59,109 | 70,621 | 498,679 | 509,572 | 400,648 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maximum month-end balance | 108,463 | 117,022 | 89,821 | 77,312 | 85,808 | 73,355 | 593,786 | 502,578 | 342,427 | 92,605 | 108,463 | 117,022 | 96,694 | 77,312 | 85,808 | 593,738 | 593,786 | 502,578 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average interest rate during the period (%) | 2.1 | 4.4 | 5.6 | 3.1 | 7.0 | 7.0 | 1.8 | 3.2 | 4.8 | 1.4 | 2.1 | 4.4 | 2.8 | 3.1 | 7.0 | 1.8 | 1.8 | 3.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average interest rate at period-end (%) | 1.5 | 2.6 | 6.0 | 2.0 | 2.2 | 4.1 | 1.7 | 2.9 | 4.8 | 1.3 | 1.5 | 2.6 | 1.5 | 2.0 | 2.2 | 1.3 | 1.7 | 2.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
205209
Additional Disclosure Required
under SEC Regulations
D – Information Required by Industry Guide 3 (continued)
Contractual Maturities of the Investments in Debt Instruments
Due to the adoption of IAS 39, Financial investments, available for sale, are reported at fair value from 1 January 2001. 31 December 2000 amounts have not been restated.
Within 1 year | 1 - 5 years | 5 - 10 years | Over 10 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Within 1 year | 1–5 years | 5–10 years | Over 10 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||||||||||||||||||||||||||
31 December 20021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31 December 20031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Swiss national government and agencies | 0 | 0.00 | 7 | 4.88 | 8 | 3.86 | 1 | 4.00 | 3 | 6.61 | 4 | 2.92 | 6 | 3.80 | 1 | 4.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Swiss local governments | 8 | 4.02 | 30 | 3.94 | 4 | 3.59 | 0 | 0.00 | 5 | 3.90 | 20 | 2.01 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
US Treasury and agencies | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign governments and official institutions | 35 | 4.63 | 45 | 3.13 | 1 | 6.12 | 0 | 0.00 | 45 | 1.89 | 9 | 1.49 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 675 | 2.23 | 249 | 2.64 | 19 | 3.41 | 21 | 8.02 | 81 | 1.09 | 68 | 3.53 | 7 | 7.38 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 4 | 2.25 | 15 | 3.97 | 4 | 4.03 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other debt securities | 1 | 4.77 | 48 | 2.65 | 0 | 0.00 | 0 | 0.00 | 4 | 0.00 | 8 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total fair value | 723 | 394 | 36 | 22 | 138 | 109 | 13 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Within 1 year 1 - 5 years 5 - 10 years Over 10 years Within 1 year 1–5 years 5–10 years Over 10 years CHF million, except percentages Amount Yield (%) Amount Yield (%) Amount Yield (%) Amount Yield (%) Amount Yield (%) Amount Yield (%) Amount Yield (%) Amount Yield (%) Swiss national government and agencies 9 5.26 10 4.50 16 3.43 1 4.00 0 0.00 7 4.88 8 3.86 1 4.00 Swiss local governments 3 4.36 38 3.90 4 3.59 0 0.00 8 4.02 30 3.94 4 3.59 0 0.00 US Treasury and agencies 0 0.00 24 4.38 8 5.15 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 Foreign governments and official institutions 5,014 0.97 5,048 1.01 27 2.88 0 0.00 35 4.63 45 3.13 1 6.12 0 0.00 Corporate debt securities 63 4.53 1,102 4.59 30 3.22 23 15.372 675 2.23 249 2.64 19 3.41 21 8.02 Mortgage-backed securities 0 0.00 5 5.41 0 0.00 0 0.00 4 2.25 15 3.97 4 4.03 0 0.00 Other debt securities 2 4.77 87 3.91 28 3.56 0 0.00 1 4.77 48 2.65 0 0.00 0 0.00 5,091 6,314 113 24 723 394 36 22
Due from Banks and Loans (gross) Loans are widely dispersed over industry sectors both within and outside of Switzerland. With the exceptions of private households (foreign and domestic) and banks and financial institutions outside Switzerland and real estate and rentals in Switzerland, there is no material concentration of loans. For further discussion of the loan portfolio, see the Within 1 year 1–5 years 5–10 years Over 10 years CHF million, except percentages Amount Yield (%) Amount Yield (%) Amount Yield (%) Amount Yield (%) Swiss national government and agencies 9 5.26 10 4.50 16 3.43 1 4.00 Swiss local governments 3 4.36 38 3.90 4 3.59 0 0.00 US Treasury and agencies 0 0.00 24 4.38 8 5.15 0 0.00 Foreign governments and official institutions 5,014 0.97 5,048 1.01 27 2.88 0 0.00 Corporate debt securities 63 4.53 1,102 4.59 30 3.22 23 15.37 2 Mortgage-backed securities 0 0.00 5 5.41 0 0.00 0 0.00 Other debt securities 2 4.77 87 3.91 28 3.56 0 0.00 5,091 6,314 113 24 Within 1 year 1 - 5 years 5 - 10 years Over 10 years CHF million, except percentages Amount Yield (%) Amount Yield (%) Amount Yield (%) Amount Yield (%) Swiss national government and agencies 2 6.90 16 5.13 16 6.45 0 0.00 Swiss local governments 1 6.11 27 5.19 18 4.43 0 0.00 US Treasury and agencies 0 0.00 0 0.00 0 0.00 0 0.00 Foreign governments and official institutions 2,451 1.62 1,236 1.80 1,165 0.85 0 0.00 Corporate debt securities 16 5.20 917 6.02 206 2.21 0 0.00 Mortgage-backed securities 20 6.02 5 6.54 22 14.46 0 0.00 Other debt securities 21 6.57 56 4.33 11 3.68 0 0.00 Total amortized cost 2,511 2,257 1,438 0 2,514 2,272 1,434 0 206210D — Information Required by Industry Guide 3 (continued)
D – Information Required by Industry Guide 3 (continued)UBS Handbook 2002/2003.2003 / 2004. The following table illustrates the diversification of the loan portfolio among industry sectors at 31 December 2003, 2002, 2001, 2000 1999 and 1998.1999. The industry categories presented are consistent with the classification of loans for reporting to the Swiss Federal Banking Commission and Swiss National Bank. CHF million 31.12.02 31.12.01 31.12.00 31.12.99 31.12.98 31.12.03 31.12.02 31.12.01 31.12.00 31.12.99 Banks 1,029 1,533 2,896 5,802 4,543 619 1,029 1,533 2,896 5,802 Construction 2,838 3,499 4,870 6,577 7,897 2,175 2,838 3,499 4,870 6,577 Financial institutions 4,301 5,673 5,725 9,387 10,240 4,009 4,301 5,673 5,725 9,387 Hotels and restaurants 2,655 2,950 3,526 4,259 4,129 2,440 2,655 2,950 3,526 4,259 7,237 8,686 9,577 11,377 13,505 6,478 7,237 8,686 9,577 11,377 Private households 95,295 93,746 91,667 93,846 97,664 102,181 95,295 93,746 91,667 93,846 Public authorities 5,529 5,222 5,658 5,277 5,858 5,251 5,529 5,222 5,658 5,277 Real estate and rentals 13,573 14,992 16,673 19,835 21,231 12,449 13,573 14,992 16,673 19,835 Retail and wholesale 7,172 8,674 9,635 10,904 8,912 6,062 7,172 8,674 9,635 10,904 10,237 12,161 11,767 14,862 11,582 9,493 10,237 12,161 11,767 14,862 1,738 1,860 2,651 1,818 1,662 1,217 1,738 1,860 2,651 1,818 Total domestic 151,604 158,996 164,645 183,944 187,223 152,374 151,604 158,996 164,645 183,944 Banks 31,882 26,728 27,168 24,983 65,000 31,405 31,882 26,728 27,168 24,983 Chemicals 519 1,080 1,423 245 519 1,080 1,423 Construction 153 266 773 84 153 266 773 Electricity, gas and water supply 1,105 977 1,584 249 1,105 977 1,584 Financial institutions 18,378 14,458 20,348 23,493 18,378 14,458 20,348 2,300 4,258 4,596 2,421 2,300 4,258 4,596 Mining 868 1,313 2,070 1,114 868 1,313 2,070 Private households 33,063 25,619 29,470 21,194 33,063 25,619 29,470 Public authorities 2,628 6,454 11,754 1,224 2,628 6,454 11,754 Real estate and rentals 616 10,227 5,077 473 616 10,227 5,077 Retail and wholesale 1,367 1,732 1,862 1,880 1,367 1,732 1,862 Services 1,654 4,786 1,585 7,983 1,654 4,786 1,585 Transport, storage and communication 676 2,117 993 3,658 676 2,117 993 2,557 2,973 11,168 69,087 78,741 410 2,557 2,973 11,168 69,087 Total foreign 97,766 102,988 119,871 94,070 143,741 95,833 97,766 102,988 119,871 94,070 249,370 261,984 284,516 278,014 330,964 248,207 249,370 261,984 284,516 278,014 the years prior to the year 2000,1999, no detailed industry classifications are available. 5Includes food and beverages. 6Includes hotels and restaurants.
207211
Additional Disclosure Required D – Information Required by Industry Guide 3 (continued) Due from Banks and Loans (gross) (continued) The following table analyzes the Group’s mortgage portfolio by geographic origin of the client and type of mortgage at 31 December 2003, 2002, 2001, 2000
under SEC RegulationsD — Information Required by Industry Guide 3 (continued)Loans (continued)1999 and 1998.1999. Mortgages are included in the industry categories mentioned above. CHF million 31.12.02 31.12.01 31.12.00 31.12.99 31.12.98 31.12.03 31.12.02 31.12.01 31.12.00 31.12.99 Domestic 116,359 116,628 116,348 126,677 138,306 122,069 116,359 116,628 116,348 126,677 Foreign 11,510 9,583 4,206 1,310 2,479 7,073 11,510 9,583 4,206 1,310 127,869 126,211 120,554 127,987 140,785 129,142 127,869 126,211 120,554 127,987 Residential 108,779 101,969 96,181 91,408 106,093 110,239 108,779 101,969 96,181 91,408 Commercial 19,090 24,242 24,373 36,579 34,692 18,903 19,090 24,242 24,373 36,579 127,869 126,211 120,554 127,987 140,785 129,142 127,869 126,211 120,554 127,987
Due from Banks and Loan Maturities (gross)
The following table discloses due from banks and loans by maturity at 31 December 2002.2003. The determination of maturities is based on contract terms. Information on interest rate sensitivities can be found in Note 29 to the UBS Group Financial Statements.
CHF million | Within 1 year | 1 to 5 years | Over 5 years | Total | Within 1 year | 1 to 5 years | Over 5 years | Total | ||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||
Banks | 969 | 60 | 0 | 1,029 | 619 | 0 | 0 | 619 | ||||||||||||||||||||||||
Mortgages | 57,875 | 55,676 | 2,808 | 116,359 | 56,604 | 58,666 | 6,799 | 122,069 | ||||||||||||||||||||||||
Other loans | 24,905 | 7,534 | 1,777 | 34,216 | 21,695 | 6,528 | 1,463 | 29,686 | ||||||||||||||||||||||||
Total domestic | 83,749 | 63,270 | 4,585 | 151,604 | 78,918 | 65,194 | 8,262 | 152,374 | ||||||||||||||||||||||||
Foreign | ||||||||||||||||||||||||||||||||
Banks | 31,285 | 373 | 224 | 31,882 | 29,587 | 1,382 | 436 | 31,405 | ||||||||||||||||||||||||
Mortgages | 10,711 | 688 | 111 | 11,510 | 6,287 | 732 | 54 | 7,073 | ||||||||||||||||||||||||
Other loans | 52,447 | 1,492 | 435 | 54,374 | 54,220 | 2,419 | 716 | 57,355 | ||||||||||||||||||||||||
Total foreign | 94,443 | 2,553 | 770 | 97,766 | 90,094 | 4,533 | 1,206 | 95,833 | ||||||||||||||||||||||||
Total gross loans | 178,192 | 65,823 | 5,355 | 249,370 | ||||||||||||||||||||||||||||
Total gross | 169,012 | 69,727 | 9,468 | 248,207 | ||||||||||||||||||||||||||||
208At 31 December 2003, the total amount of due from banks and loans due after one year granted at fixed and floating rates are as follows:
CHF million | 1 to 5 years | Over 5 years | Total | |||||||||
Fixed rate loans | 67,134 | 8,856 | 75,990 | |||||||||
Adjustable or floating rate loans | 2,593 | 612 | 3,205 | |||||||||
Total | 69,727 | 9,468 | 79,195 | |||||||||
212
D – Information Required by Industry Guide 3 (continued)
Impaired, Non-performing and Restructured Loans
A loan (included in due from banks and loans) is classified as impaired if the book value of the claim exceeds the present value of the cash flows actually expected in future periods —– interest payments, scheduled principal repayments, or other payments due (for example on derivative transactions)guarantees), and including liquidation of collateral where available. Impaired obligations are thus obligationsWithin this category, we further classify loans as non-performing where losses are foreseeable. An allowance for credit losspayment of interest, principal or fees is then made with respect to the loan in question. Impaired loans include non-performing loans, for which the contractual payments of principal, interest or commission are overdue by more than 90 days. When loans are classifieddays or – as non-performing, the recognition of interestrequired by Swiss regulatory guidelines as at 31 December 2003 – when insolvency proceedings have commenced or commission income ceases according to the original terms of the loan agreement. Allowances are provided for non-performing
loans to reflect their net estimated recoverable amount.
The gross interest income that would have been recorded on non-performing loans was CHF 201171 million for domestic loans and CHF 23 million for foreign loans for the year ended 31 December 2003, CHF 148 million for domes-
tic loans and CHF 53 million for foreign loans for the year ended 31 December 2002, CHF 336 million for all non-performing loans for the year ended 31 December 2001 and CHF 182 million for all non-performing loans for the year ended 31 December 2000. The amount of interest income that was included in net income for those loans was CHF 174163 million for domestic loans and CHF 8 million for foreign loans for the year ended 31 December 2003, CHF 152 million for domestic loans and CHF 22 million for foreign loans for the year ended 31 December 2002 and CHF 201 million for all non-performing loans for the year ended 31 December 2001. There was no interest income recorded in net income for non-performing loans in 2000. The table below provides an analysis of the Group’s non-performing loans, for further information see the UBS Handbook 2002/2003.2003 / 2004.
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Non-performing loans: | ||||||||||||||||||||
Domestic | 4,609 | 6,531 | 7,588 | 11,435 | 14,023 | |||||||||||||||
Foreign | 1,420 | 2,108 | 2,864 | 1,638 | 2,091 | |||||||||||||||
Total non-performing loans | 6,029 | 8,639 | 10,452 | 13,073 | 16,114 | |||||||||||||||
Foreign restructured loans1 | 179 | 287 | 449 | |||||||||||||||||
CHF million 31.12.03 31.12.02 31.12.01 31.12.00 31.12.99 Non-performing due from banks and loans: Domestic 4,012 4,609 6,531 7,588 11,435 Foreign 947 1,420 2,108 2,864 1,638 4,959 6,029 8,639 10,452 13,073 179 287
or less than
90 days in arrears, with respect to payment of principal or interest; and for the year ended 31 December 2003, these are loans not considered “non-performing” in accordance with Swiss regulatory guidelines, however, the Group’s credit officers have expressed doubts as to the ability of the borrowers to repay the loans. As at 31 December 20022003 specific allowances of CHF 1,407991 million had been established against these loans.
209213
Additional Disclosure Required Cross-Border Outstandings
under SEC Regulations
D – Information Required by Industry Guide 3 (continued)D — Information Required by Industry Guide 3 (continued)
Cross-border outstandings consist of general banking products such as loans (including unutilized commitments) and deposits with third parties, credit equivalents of over the counter (OTC) derivatives and repurchase agreements, and the market value of the inventory of securities. Outstandings are monitored and reported on an ongoing basis by the credit risk management and control organization with a dedicated country risk information system. With the exception of the 32 most developed economies, these exposures are rigorously limited.
the asset could be liquidated. This follows the “Guidelines for the Management of Country Risk”, which are applicable to all banks that are supervised by the Swiss Federal Banking Commission.
210214
D — Information Required by Industry Guide 3 (continued)
31.12.03 | ||||||||||||||||||||||||
Banking products | Traded | Tradable | % of total | |||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 916 | 288 | 17,470 | 108,050 | 126,724 | 9.1 | ||||||||||||||||||
Italy | 1,041 | 967 | 8,714 | 14,547 | 25,269 | 1.8 | ||||||||||||||||||
Germany | 1,928 | 3,814 | 13,307 | 5,605 | 24,654 | 1.8 | ||||||||||||||||||
United Kingdom | 4,223 | 525 | 4,374 | 11,112 | 20,234 | 1.5 | ||||||||||||||||||
France | 441 | 1,505 | 4,450 | 8,320 | 14,716 | 1.1 | ||||||||||||||||||
Japan | 7 | 300 | 1,622 | 11,548 | 13,477 | 1.0 | ||||||||||||||||||
31.12.02 | ||||||||||||||||||||||||
Banking products | Traded | Tradable | % of total | |||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 1,083 | 698 | 27,617 | 95,046 | 124,444 | 10.5 | ||||||||||||||||||
Germany | 2,590 | 4,732 | 13,101 | 9,104 | 29,527 | 2.5 | ||||||||||||||||||
Italy | 1,139 | 296 | 7,229 | 14,852 | 23,516 | 2.0 | ||||||||||||||||||
United Kingdom | 4,161 | 606 | 5,437 | 12,106 | 22,310 | 1.9 | ||||||||||||||||||
France | 2,077 | 1,805 | 5,710 | 11,403 | 20,995 | 1.8 | ||||||||||||||||||
Australia | 133 | 535 | 4,514 | 6,651 | 11,833 | 1.0 | ||||||||||||||||||
Canada | 130 | 872 | 4,964 | 5,115 | 11,081 | 0.9 | ||||||||||||||||||
Japan | 312 | 88 | 1,766 | 7,816 | 9,982 | 0.8 | ||||||||||||||||||
Cayman Islands | 7 | 1,175 | 5,054 | 3,387 | 9,623 | 0.8 | ||||||||||||||||||
Netherlands | 289 | 1,548 | 4,110 | 3,313 | 9,260 | 0.8 | ||||||||||||||||||
31.12.01 | ||||||||||||||||||||||||
Banking products | Traded | Tradable | % of total | |||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 2,360 | 1,284 | 31,129 | 114,615 | 149,388 | 11.9 | ||||||||||||||||||
United Kingdom | 2,483 | 543 | 9,128 | 27,754 | 39,908 | 3.2 | ||||||||||||||||||
Germany | 3,605 | 6,395 | 11,962 | 11,755 | 33,717 | 2.7 | ||||||||||||||||||
Japan | 640 | 770 | 4,442 | 22,995 | 28,847 | 2.3 | ||||||||||||||||||
Italy | 1,086 | 498 | 11,628 | 11,180 | 24,392 | 1.9 | ||||||||||||||||||
France | 159 | 2,043 | 4,114 | 8,052 | 14,368 | 1.1 | ||||||||||||||||||
Canada | 114 | 950 | 5,220 | 8,038 | 14,322 | 1.1 | ||||||||||||||||||
Netherlands | 1,834 | 2,414 | 6,126 | 3,110 | 13,484 | 1.1 | ||||||||||||||||||
31.12.00 | ||||||||||||||||||||||||
Banking products | ||||||||||||||||||||||||
Traded | Tradable | % of total | ||||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 1,826 | 958 | 21,796 | 64,077 | 88,657 | 8.2 | ||||||||||||||||||
Japan | 123 | 895 | 6,378 | 58,779 | 66,175 | 6.1 | ||||||||||||||||||
United Kingdom | 1,795 | 1,224 | 9,037 | 22,440 | 34,496 | 3.2 | ||||||||||||||||||
Germany | 2,686 | 3,720 | 13,198 | 5,085 | 24,689 | 2.3 | ||||||||||||||||||
Italy | 1,293 | 931 | 3,629 | 9,700 | 15,553 | 1.4 | ||||||||||||||||||
France | 1,085 | 1,900 | 3,956 | 5,987 | 12,928 | 1.2 | ||||||||||||||||||
Netherlands | 910 | 1,480 | 6,092 | 3,803 | 12,285 | 1.1 | ||||||||||||||||||
Australia | 27 | 370 | 3,113 | 7,508 | 11,018 | 1.0 | ||||||||||||||||||
1Traded products consist of derivative instruments and repurchase agreements. In 2002, 2001 and 2000 unsecured OTC derivatives exposure is reported based on the Potential Credit Exposure measurement methodology and is therefore not directly comparable to the exposures in the prior years, which were measured based on Gross Replacement Values plus Add-on. 2Tradable assets consist of equity and fixed income financial instruments held for trading purposes, which are marked to market on a daily basis and private equity investments at the lower of book or market value.
211215
Additional Disclosure Required Summary of Movements in Allowances and Provisions for Credit Losses The following table provides an analysis of movements in allowances and provisions for credit losses.
under SEC Regulations
D — Information Required by Industry Guide 3 (continued)D — Information Required by Industry Guide 3 (continued)write-offwrite off loans against allowances only upon final settlement of bankruptcy proceedings, the sale of the underlying assets and/and / or in case of debt forgiveness. Under Swiss law, a creditor can continue to collect from a debtor who has emerged from bankruptcy, unless the debt has been forgiven through a formal agreement. CHF million 31.12.02 31.12.01 31.12.00 31.12.99 31.12.98 31.12.03 31.12.02 31.12.01 31.12.00 31.12.99 8,218 10,581 13,398 14,978 16,213 5,621 8,218 10,581 13,398 14,978 Banks 0 0 0 (4 ) (2 ) 0 0 0 0 (4 ) Construction (148 ) (248 ) (261 ) (296 ) (228 ) (73 ) (148 ) (248 ) (261 ) (296 ) Financial institutions (103 ) (51 ) (178 ) (92 ) (66 ) (37 ) (103 ) (51 ) (178 ) (92 ) Hotels and restaurants (48 ) (52 ) (193 ) (137 ) (98 ) (57 ) (48 ) (52 ) (193 ) (137 ) (275 ) (109 ) (264 ) (242 ) (214 ) (121 ) (275 ) (109 ) (264 ) (242 ) Private households (536 ) (1,297 ) (640 ) (598 ) (534 ) (262 ) (536 ) (1,297 ) (640 ) (598 ) Public authorities 0 0 0 0 (2 ) (18 ) 0 0 0 0 Real estate and rentals (357 ) (317 ) (729 ) (823 ) (610 ) (206 ) (357 ) (317 ) (729 ) (823 ) Retail and wholesale (101 ) (115 ) (160 ) (210 ) (178 ) (67 ) (101 ) (115 ) (160 ) (210 ) (155 ) (93 ) (227 ) (315 ) (116 ) (111 ) (155 ) (93 ) (227 ) (315 ) (49 ) (46 ) (30 ) (41 ) (15 ) (43 ) (49 ) (46 ) (30 ) (41 ) (1,772 ) (2,328 ) (2,682 ) (2,758 ) (2,063 ) (995 ) (1,772 ) (2,328 ) (2,682 ) (2,758 ) Banks (49 ) (24 ) (15 ) (17 ) (49 ) (24 ) (15 ) Chemicals 0 (2 ) 0 0 0 (2 ) 0 Construction 0 (10 ) (13 ) 0 0 (10 ) (13 ) Electricity, gas and water supply (36 ) (63 ) (3 ) 0 (36 ) (63 ) (3 ) Financial institutions (228 ) (74 ) (33 ) (112 ) (228 ) (74 ) (33 ) (70 ) (119 ) (11 ) (77 ) (70 ) (119 ) (11 ) Mining (1 ) (304 ) 0 (15 ) (1 ) (304 ) 0 Private households (65 ) (5 ) 0 (11 ) (65 ) (5 ) 0 Public authorities (1 ) 0 (4 ) 0 (1 ) 0 (4 ) Real estate and rentals (2 ) (1 ) 0 (1 ) (2 ) (1 ) 0 Retail and wholesale (10 ) 0 (160 ) (76 ) (10 ) 0 (160 ) Services (39 ) (30 ) (8 ) (25 ) (39 ) (30 ) (8 ) Transport, storage and communication (74 ) 0 (11 ) (24 ) (74 ) 0 (11 ) (189 ) (48 ) (55 ) (83 ) (189 ) (48 ) (55 ) (764 ) (680 ) (313 ) (517 ) (261 ) (441 ) (764 ) (680 ) (313 ) (517 ) (2,536 ) (3,008 ) (2,995 ) (3,275 ) (2,324 ) (1,436 ) (2,536 ) (3,008 ) (2,995 ) (3,275 ) Domestic 43 58 124 54 59 49 43 58 124 54 Foreign 27 23 39 11 0 38 27 23 39 11 70 81 163 65 59 87 70 81 163 65 (2,466 ) (2,927 ) (2,832 ) (3,210 ) (2,265 ) (1,349 ) (2,466 ) (2,927 ) (2,832 ) (3,210 ) Credit loss expense/(recovery) 206 498 (130 ) 956 951 Credit loss expense / (recovery) 116 206 498 (130 ) 956 (337 ) 66 145 674 79 (62 ) (337 ) 66 145 674 5,621 8,218 10,581 13,398 14,978 4,326 5,621 8,218 10,581 13,398
years prior to 2000,1999, no detailed industry classifications are available. 5Includes food and beverages. 6Includes hotels and restaurants. 7See the following table for details.
212216
D — Information Required by Industry Guide 3 (continued) |
Summary of Movements in Allowances and Provisions for Credit Losses (continued)
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
Doubtful interest | 0 | 0 | 182 | 409 | 423 | 0 | 0 | 0 | 182 | 409 | ||||||||||||||||||||||||||||||
Net foreign exchange | (269 | ) | 44 | 23 | 351 | (98 | ) | (57 | ) | (269 | ) | 44 | 23 | 351 | ||||||||||||||||||||||||||
Subsidiaries sold and other | (68 | ) | 22 | (60 | ) | (86 | ) | (246 | ) | (5 | ) | (68 | ) | 22 | (60 | ) | (86 | ) | ||||||||||||||||||||||
Total adjustments | (337 | ) | 66 | 145 | 674 | 79 | (62 | ) | (337 | ) | 66 | 145 | 674 | |||||||||||||||||||||||||||
213217
Additional Disclosure Required Allocation of the Allowances and Provisions for Credit Losses (continued) The following table provides an analysis of the allocation of the allowances and provisions for credit
under SEC Regulations
D — Information Required by Industry Guide 3 (continued)D — Information Required by Industry Guide 3 (continued)losslosses by industry sectors and geographic location at 31 December 2003, 2002, 2001, 2000 1999 and 1998.1999. For a description of procedures with respect to allowances and provisions for credit losses, see the UBS Handbook 2002/2003.2003 / 2004. CHF million 31.12.02 31.12.01 31.12.00 31.12.99 31.12.98 31.12.03 31.12.02 31.12.01 31.12.00 31.12.99 Banks 10 34 0 41 49 10 10 34 0 41 Construction 265 467 843 1,247 1,671 158 265 467 843 1,247 Financial institutions 89 262 328 342 668 137 89 262 328 342 Hotels and restaurants 286 346 454 690 657 214 286 346 454 690 458 722 863 1,223 1,331 327 458 722 863 �� 1,223 Private households 750 1,082 1,570 2,350 2,741 511 750 1,082 1,570 2,350 Public authorities 39 37 0 40 107 9 39 37 0 40 Real estate and rentals 577 1,067 1,635 2,696 3,333 383 577 1,067 1,635 2,696 Retail and wholesale 315 395 629 779 825 201 315 395 629 779 470 448 419 934 766 549 470 448 419 934 315 165 413 141 71 241 315 165 413 141 3,574 5,025 7,154 10,483 12,219 2,740 3,574 5,025 7,154 10,483 24 39 32 256 24 39 32 Chemicals 5 5 0 5 5 5 0 Construction 6 0 11 0 6 0 11 Electricity, gas and water supply 96 88 107 0 96 88 107 Financial institutions 153 420 262 168 153 420 262 314 653 547 359 314 653 547 Mining 148 169 586 19 148 169 586 Private households 58 103 72 48 58 103 72 Public authorities 0 0 0 69 0 0 0 Real estate and rentals 6 9 82 7 6 9 82 Retail and wholesale 13 0 41 51 13 0 41 Services 262 414 126 32 262 414 126 Transport, storage and communication 144 45 2 195 144 45 2 82 242 267 91 82 242 267 1,311 2,187 2,135 1,539 1,309 1,300 1,311 2,187 2,135 1,539 Country provisions 736 1,006 1,292 1,376 1,450 286 736 1,006 1,292 1,376 2,047 3,193 3,427 2,915 2,759 1,586 2,047 3,193 3,427 2,915 5,621 8,218 10,581 13,398 14,978 4,326 5,621 8,218 10,581 13,398
years prior to 2000,1999, no detailed industry classifications are available. 5Counterparty allowances and provisions only. Country provisions with banking counterparties amounting to CHF 40991 million are disclosed under country provisions. 6Includes food and beverages. 7Includes hotels and restaurants. 8The 2003, 2002, 2001, 2000 1999 and 19981999 amounts include CHF 290 million, CHF 366 million, CHF 305 million, CHF 54 million CHF 149 million and CHF 435149 million respectively of provisions and for unused commitments and contingent liabilities.
214218
D — Information Required by Industry Guide 3 (continued)
Due from Bank and Loans by industry sectorIndustry Sector (gross)
The following table presents the percentage of loans in each industry sector and geographic location to total loans. This table can be read in conjunction with the preceding table showing the breakdown of the allowances and provisions for credit losses by industry sectors to evaluate the credit risks in each of the categories.
in % | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||||||
Banks | 0.4 | 0.6 | 1.0 | 2.1 | 1.4 | 0.2 | 0.4 | 0.6 | 1.0 | 2.1 | ||||||||||||||||||||||||||||||
Construction | 1.1 | 1.3 | 1.7 | 2.4 | 2.4 | 0.9 | 1.1 | 1.3 | 1.7 | 2.4 | ||||||||||||||||||||||||||||||
Financial institutions | 1.7 | 2.2 | 2.0 | 3.4 | 3.1 | 1.6 | 1.7 | 2.2 | 2.0 | 3.4 | ||||||||||||||||||||||||||||||
Hotels and restaurants | 1.1 | 1.1 | 1.2 | 1.5 | 1.2 | 1.0 | 1.1 | 1.1 | 1.2 | 1.5 | ||||||||||||||||||||||||||||||
Manufacturing1 | 2.9 | 3.3 | 3.4 | 4.1 | 4.1 | 2.6 | 2.9 | 3.3 | 3.4 | 4.1 | ||||||||||||||||||||||||||||||
Private households | 38.2 | 35.8 | 32.2 | 33.8 | 29.5 | 41.2 | 38.2 | 35.8 | 32.2 | 33.8 | ||||||||||||||||||||||||||||||
Public authorities | 2.2 | 2.0 | 2.0 | 1.9 | 1.8 | 2.1 | 2.2 | 2.0 | 2.0 | 1.9 | ||||||||||||||||||||||||||||||
Real estate and rentals | 5.5 | 5.7 | 5.9 | 7.1 | 6.4 | 5.0 | 5.5 | 5.7 | 5.9 | 7.1 | ||||||||||||||||||||||||||||||
Retail and wholesale | 2.9 | 3.3 | 3.4 | 3.9 | 2.7 | 2.4 | 2.9 | 3.3 | 3.4 | 3.9 | ||||||||||||||||||||||||||||||
Services2 | 4.1 | 4.6 | 4.1 | 5.3 | 3.5 | 3.8 | 4.1 | 4.6 | 4.1 | 5.3 | ||||||||||||||||||||||||||||||
Other3 | 0.7 | 0.8 | 1.0 | 0.7 | 0.5 | 0.6 | 0.7 | 0.8 | 1.0 | 0.7 | ||||||||||||||||||||||||||||||
Total domestic | 60.8 | 60.7 | 57.9 | 66.2 | 56.6 | 61.4 | 60.8 | 60.7 | 57.9 | 66.2 | ||||||||||||||||||||||||||||||
Foreign4 | ||||||||||||||||||||||||||||||||||||||||
Banks | 12.8 | 10.2 | 9.5 | 9.0 | 19.6 | 12.7 | 12.8 | 10.2 | 9.5 | 9.0 | ||||||||||||||||||||||||||||||
Chemicals | 0.2 | 0.4 | 0.5 | 0.1 | 0.2 | 0.4 | 0.5 | |||||||||||||||||||||||||||||||||
Construction | 0.1 | 0.1 | 0.3 | 0.0 | 0.1 | 0.1 | 0.3 | |||||||||||||||||||||||||||||||||
Electricity, gas and water supply | 0.4 | 0.4 | 0.6 | 0.1 | 0.4 | 0.4 | 0.6 | |||||||||||||||||||||||||||||||||
Financial institutions | 7.4 | 5.5 | 7.2 | 9.5 | 7.4 | 5.5 | 7.2 | |||||||||||||||||||||||||||||||||
Manufacturing5 | 0.9 | 1.6 | 1.6 | 1.0 | 0.9 | 1.6 | 1.6 | |||||||||||||||||||||||||||||||||
Mining | 0.3 | 0.5 | 0.7 | 0.4 | 0.3 | 0.5 | 0.7 | |||||||||||||||||||||||||||||||||
Private households | 13.3 | 9.8 | 10.4 | 8.5 | 13.3 | 9.8 | 10.4 | |||||||||||||||||||||||||||||||||
Public authorities | 1.1 | 2.5 | 4.1 | 0.5 | 1.1 | 2.5 | 4.1 | |||||||||||||||||||||||||||||||||
Real estate and rentals | 0.2 | 3.9 | 1.8 | 0.2 | 0.2 | 3.9 | 1.8 | |||||||||||||||||||||||||||||||||
Retail and wholesale | 0.5 | 0.7 | 0.7 | 0.8 | 0.5 | 0.7 | 0.7 | |||||||||||||||||||||||||||||||||
Services | 0.7 | 1.8 | 0.6 | 3.2 | 0.7 | 1.8 | 0.6 | |||||||||||||||||||||||||||||||||
Transport, storage and communication | 0.3 | 0.8 | 0.3 | 1.5 | 0.3 | 0.8 | 0.3 | |||||||||||||||||||||||||||||||||
Other6 | 1.0 | 1.1 | 3.8 | 24.8 | 23.8 | 0.1 | 1.0 | 1.1 | 3.8 | 24.8 | ||||||||||||||||||||||||||||||
Total foreign | 39.2 | 39.3 | 42.1 | 33.8 | 43.4 | 38.6 | 39.2 | 39.3 | 42.1 | 33.8 | ||||||||||||||||||||||||||||||
Total gross loans | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||||||||||||||||||||||
Total gross | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||||||||||||||||||||||
the years prior to 2000,1999, no detailed industry classifications are available. 5Includes food and beverages. 6Includes hotels and restaurants.
215219
Additional Disclosure Required Loss History Statistics The following is a summary of the Group’s loan loss
under SEC Regulations
D — Information Required by Industry Guide 3 (continued)D — Information Required by Industry Guide 3 (continued)history.history (relating to due from banks and loans). CHF million, except where indicated CHF million, except where indicated 31.12.02 31.12.01 31.12.00 31.12.99 31.12.98 31.12.03 31.12.02 31.12.01 31.12.00 31.12.99 Gross loans Gross loans 249,370 261,984 284,516 278,014 330,964 248,207 249,370 261,984 284,516 278,014 Impaired loans Impaired loans 10,365 14,629 18,494 22,456 26,447 7,606 10,365 14,629 18,494 22,456 Non-performing loans Non-performing loans 6,029 8,639 10,452 13,073 16,114 4,959 6,029 8,639 10,452 13,073 Allowances and provisions for credit losses Allowances and provisions for credit losses 5,621 8,218 10,581 13,398 14,978 4,326 5,621 8,218 10,581 13,398 Net write-offs 2,466 2,927 2,832 3,210 2,265 Credit loss expense/(recovery) 206 498 (130 ) 956 951 Net write offs 1,349 2,466 2,927 2,832 3,210 Credit loss expense / (recovery) 116 206 498 (130 ) 956 Impaired loans as a percentage of gross loans Impaired loans as a percentage of gross loans 4.2 5.6 6.5 8.1 8.0 3.1 4.2 5.6 6.5 8.1 Non-performing loans as a percentage of gross loans Non-performing loans as a percentage of gross loans 2.4 3.3 3.7 4.7 4.9 2.0 2.4 3.3 3.7 4.7 Allowances and provisions for credit losses as a percentage of: Gross loans 2.3 3.1 3.7 4.8 4.5 Impaired loans 54.2 56.2 57.2 59.7 56.6 Non-performing loans 93.2 95.1 101.2 102.5 93.0 Allowance and provisions for credit losses as a percentage of: Gross loans 1.7 2.3 3.1 3.7 4.8 Impaired loans 56.9 54.2 56.2 57.2 59.7 Non-performing loans 87.2 93.2 95.1 101.2 102.5 47.2 49.9 52.4 55.5 51.4 50.0 47.2 49.9 52.4 55.5 57.8 62.2 60.6 3 66.3 62.1 56.8 57.8 62.2 60.6 66.3 Net write-offs as a percentage of: Net write offs as a percentage of: Gross loans 0.5 1.0 1.1 1.0 1.2 Average loans outstanding during the period 0.6 1.1 1.2 1.1 1.2 Allowance and provisions for credit losses 31.2 43.9 35.6 26.8 24.0 Allowance and provisions for credit losses as a multiple of net write offs 3.21 2.28 2.81 3.74 4.17 Gross loans 1.0 1.1 1.0 1.2 0.7 Average loans outstanding during the period 1.1 1.2 1.1 1.2 0.8 Allowances and provisions for credit losses 43.9 35.6 26.8 24.0 15.1 Allowances and provisions for credit losses as multiple of net write-offs 2.28 2.81 3.74 4.17 6.61
331 December 2000 figure has been restated to account for an overallocation of allowances to non-performing loans.
216220
UBS AG | ||
P.O. Box, CH-8098 Zurich | ||
P.O. Box, CH-4002 Basel | ||
www.ubs.com |
Profile
Handbook 2003/2004 U.S. Version
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Introduction
This is the thirdfourth annual edition of the UBS Groupour Handbook.
The Handbook describes the UBS Group: itsIn it, we describe ourselves – our strategy, organization, and businesses. It outlinesWe outline the principles by which the Group manageswe manage risk, and reportsreport on last year’s developments in 2002 for theour credit risk, market risk, and treasury management areas.
The Handbook extensivelyalso discusses the Group’sour corporate governance arrangements and itsour relationships with regulators and shareholders, along withwhile providing detailed facts aboutinformation on the UBS share.
TheYou should read the Handbook should be read in conjunction with the other information published by UBS, as described on page 5 and 6.4.
We sincerely hope that you will find the information in our reporting documentsannual reports useful and informative. We believe that UBS is amongone of the leaders in corporate disclosure, butand we would be very interested to hear your views on how we might improve the content, information and presentation of our information portfolio.the reporting products we publish.
Mark Branson
Chief Communication Officer
UBS AG
1
Introduction
UBS Financial Highlights
1 | Operating expenses / operating income less credit loss expense or recovery. | |
2 | For EPS calculation, see Note 8 to the Financial Statements of the Financial Report 2003. | |
3 | Net profit / average shareholders’ equity less dividends. | |
4 | Includes hybrid Tier 1 capital, please refer to Note 29 in the Notes to the Financial Statements of the Financial Report 2003. | |
5 | See the Capital strength section on page 74. | |
Throughout this report, 2001 and 2002 segment results have been restated to reflect the transfer of the Private Banks & GAM to Corporate Center. |
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Income statement key figures | ||||||||||||||||
Operating income | 33,972 | 34,121 | 37,114 | 0 | ||||||||||||
Operating expenses | 25,624 | 29,577 | 30,396 | (13 | ) | |||||||||||
Operating profit before tax | 8,348 | 4,544 | 6,718 | 84 | ||||||||||||
Net profit | 6,385 | 3,535 | 4,973 | 81 | ||||||||||||
Cost / income ratio (%)1 | 75.2 | 86.2 | 80.8 | |||||||||||||
Per share data (CHF) | ||||||||||||||||
Basic earnings per share2 | 5.72 | 2.92 | 3.93 | 96 | ||||||||||||
Diluted earnings per share2 | 5.61 | 2.87 | 3.78 | 95 | ||||||||||||
Return on shareholders’ equity (%)3 | 18.2 | 8.9 | 11.7 | |||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Balance sheet key figures | ||||||||||||||||
Total assets | 1,386,000 | 1,181,118 | 1,253,297 | 17 | ||||||||||||
Shareholders’ equity | 35,446 | 38,991 | 43,530 | (9 | ) | |||||||||||
Market capitalization | 95,401 | 79,448 | 105,475 | 20 | ||||||||||||
BIS capital ratios | ||||||||||||||||
Tier 1 (%)4 | 11.8 | 11.3 | 11.6 | |||||||||||||
Total BIS (%) | 13.3 | 13.8 | 14.8 | |||||||||||||
Risk-weighted assets | 251,901 | 238,790 | 253,735 | 5 | ||||||||||||
Invested assets (CHF billion) | 2,209 | 2,037 | 2,448 | 8 | ||||||||||||
Headcount (full-time equivalents) | ||||||||||||||||
Switzerland | 26,662 | 27,972 | 29,163 | (5 | ) | |||||||||||
Europe (excluding Switzerland) | 9,906 | 10,009 | 9,650 | (1 | ) | |||||||||||
Americas | 25,511 | 27,350 | 27,463 | (7 | ) | |||||||||||
Asia Pacific | 3,850 | 3,730 | 3,709 | 3 | ||||||||||||
Total | 65,929 | 69,061 | 69,985 | (5 | ) | |||||||||||
Long-term ratings5 | ||||||||||||||||
Fitch, London | AA+ | AAA | AAA | |||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa2 | |||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||||||
12
Introduction | ||
UBS Group Financial Highlights
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income statement key figures | ||||||||||||||||
Operating income | 34,121 | 37,114 | 36,402 | (8 | ) | |||||||||||
Operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | |||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | (32 | ) | |||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||
Cost/income ratio (%)1 | 86.2 | 80.8 | 72.2 | |||||||||||||
Cost/income ratio before goodwill(%)1, 2 | 79.0 | 77.3 | 70.4 | |||||||||||||
Per share data (CHF) | ||||||||||||||||
Basic earnings per share3 | 2.92 | 3.93 | 6.44 | (26 | ) | |||||||||||
Basic earnings per share before goodwill2, 3 | 4.73 | 4.97 | 7.00 | (5 | ) | |||||||||||
Diluted earnings per share3 | 2.87 | 3.78 | 6.35 | (24 | ) | |||||||||||
Diluted earnings per share before goodwill2, 3 | 4.65 | 4.81 | 6.89 | (3 | ) | |||||||||||
Return on shareholders’ equity (%) | ||||||||||||||||
Return on shareholders’ equity4 | 8.9 | 11.7 | 21.5 | |||||||||||||
Return on shareholders’ equity before goodwill2, 4 | 14.4 | 14.8 | 23.4 | |||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Balance sheet key figures | ||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | (6 | ) | |||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | (10 | ) | |||||||||||
Market capitalization | 79,448 | 105,475 | 112,666 | (25 | ) | |||||||||||
BIS capital ratios Tier 1 (%)5 | 11.3 | 11.6 | 11.7 | |||||||||||||
Total BIS (%) | 13.8 | 14.8 | 15.7 | |||||||||||||
Risk-weighted assets | 238,790 | 253,735 | 273,290 | (6 | ) | |||||||||||
Invested assets (CHF billion) | 2,037 | 2,448 | 2,445 | (17 | ) | |||||||||||
Headcount (full-time equivalents) | 69,061 | 69,985 | 6 | 71,076 | 6 | (1 | ) | |||||||||
Long-term ratings7 | ||||||||||||||||
Fitch, London | AAA | AAA | AAA | |||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa1 | |||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||||||
Earnings adjusted for significant financial events and pre-goodwill2, 8
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Operating income | 33,894 | 37,114 | 36,402 | (9 | ) | |||||||||||
Operating expenses | 27,117 | 29,073 | 25,096 | (7 | ) | |||||||||||
Operating profit before tax | 6,777 | 8,041 | 11,306 | (16 | ) | |||||||||||
Net profit | 5,529 | 6,296 | 8,799 | (12 | ) | |||||||||||
Cost/income ratio (%)1 | 79.5 | 77.3 | 69.2 | |||||||||||||
Basic earnings per share (CHF)3 | 4.57 | 4.97 | 7.28 | (8 | ) | |||||||||||
Diluted earnings per share (CHF)3 | 4.50 | 4.81 | 7.17 | (6 | ) | |||||||||||
Return on shareholders’ equity (%)4 | 13.9 | 14.8 | 24.3 | |||||||||||||
2
The UBS Group
at a Glance
UBS is one of the world’s leading financial firms, serving a discerning global client base. We combineAs an organization, it combines financial strength with a global culture that embraces change. We are the world’s leading provider of wealth management services and one of the largest asset managers globally. In the investment banking and securities businesses, we are among the select bracket of major global houses. In Switzerland, we are the clear market leader serving corporate and retail clients. As an integrated firm, we createUBS creates added value for our clients by drawing on the combined resources and expertise of all ourits businesses.
Our first priority
With head offices in Zurich11.8%, invested assets of CHF 2.2 trillion, shareholders’ equity of CHF 35.4 billion and Basel, and more than 69,000 employees, we operate in over 50 countries and from all major international financial centers. Our global physical presence is complemented by our strategymarket capitalization of offering clients products and services via a variety of different channels — from the traditional retail bank branch to sophisticated, interactive online tools, helping us to deliver our services more quickly, widely and cost-effectively than ever before.
Businesses
3
Our Business Groups
All our Business Groups are in the top echelons of their sectors globally and are committed to vigorously growing their franchises.
UBS Wealth Management & Business Bankingmanagement
Investment banking and securities services for 3.5 million individuals and 180,000 corporate clients in Switzerland as well as 5,000 financial institutions worldwide.
UBS Global Asset Management
UBS Warburg
Asset management
Swiss corporate and institutionalindividual clients and for the rest of UBS.
UBS PaineWebber
Corporate Center
Corporate Center
43
Introduction
Sources of Information about UBS
This Handbook contains a detailed description of UBS, its strategy, its organization and its businesses. You can find out more about UBS from the sources shown below.businesses, as well as our financial management including credit, market and operational risk, our treasury processes, and details of our corporate governance.
Publications
This Handbook is available in English and German.(SAP-R/3 80532-0301) (SAP no. 80532-0401).
Annual Review 20022003
Financial Report 20022003
Quarterly reports
How to order reports
Website
mationinformation and copies of recent presentations given by members of senior management to investors at external conferences.
Messenger service
Results presentations
UBS and the environment
4
Introduction | ||
Form 20-F and other submissions to the We file periodic reports and submit other information about UBS
US Securities and Exchange Commissionwithto the US Securities and Exchange Commission (SEC). Principal among these filings is the Form 20-F, our Annual Report filed pursuant to the US Securities Exchange Act of 1934.“wrap-around”“wraparound” document. Most sections of the filing are satisfied by referring to parts of this
5
Profile
the Handbook 2003/2004 or to parts of thethis Financial Report 2002.2003. However, there is a small amount of additional information in the Form 20-F, which is not presented elsewhere, and is particularly targeted at readers in the US. You are encouraged to refer to this additional disclosure.
You may read and copy any document that we file with the SEC on the SEC’s website, www.sec.gov, or at the SEC’s public reference room at 450 Fifth Street NW, Washington, DC, 20549. Please call the SEC at 1-800-SEC-0330 (in the US) or at +1 202 942+1-202-942 8088 (outside
the US) for further information on the operation of its public reference room. You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005 and the American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006.10005. Much of this additional information may also be found on the UBS website at www.ubs.com/investors, and copies of documents filed with the SEC may be obtained from UBS’s Investor Relations team, at the addresses shown on the followingnext page.
Corporate information
The legal and commercial name of the company is UBS AG. The company was formed on 29 June 1998, when Union Bank of Switzerland (founded 1862) and Swiss Bank Corporation (founded 1872) merged to form UBS.
The addresses and telephone numbers of our
two registered offices and principal places of business are:
65
Introduction
Contacts
Switchboards | Zurich | + | ||||||||||
For all general queries. | London | + | ||||||||||
New York | + | |||||||||||
Hong Kong | + | |||||||||||
Zurich | ||||||||||||
Our Investor Relations team supports | +41-1-234 41 | UBS AG | ||||||||||
institutional, professional | Christian Gruetter | + | Investor Relations | |||||||||
and retail investors from offices in | + | P.O. Box | ||||||||||
Zurich and New York. | + | CH-8098 Zurich, Switzerland | ||||||||||
+ | ||||||||||||
www.ubs.com/investors | ||||||||||||
New York | ||||||||||||
+ | UBS Americas Inc. | |||||||||||
+ | Investor Relations | |||||||||||
+ | 135 W. 50th Street, | |||||||||||
New York, NY 10020, USA | ||||||||||||
sh-investorrelations@ubs.com | ||||||||||||
Zurich | + | sh-gpr@ubs.com | ||||||||||
Our | London | + | ||||||||||
New York | + | |||||||||||
Hong Kong | + | sh-mediarelations-ap@ubs.com | ||||||||||
www.ubs.com/media | ||||||||||||
Hotline | + | UBS AG | ||||||||||
UBS Shareholder Services, a unit of | Fax | + | Shareholder Services | |||||||||
the Company Secretary, is responsible | P.O. Box | |||||||||||
for the registration of the Global | CH-8098 Zurich, Switzerland | |||||||||||
Registered Shares. | ||||||||||||
US Transfer Agent | calls from the US | + | ||||||||||
For all Global Registered | calls outside the US | + | Overpeck Centre | |||||||||
related queries in the USA. | Fax | +1-201-296 4801 | 85 Challenger Road | |||||||||
Ridgefield Park, NJ 07660, USA | ||||||||||||
www.melloninvestor.com | shrrelations@melloninvestor.com | |||||||||||
76
7
UBS
Strategy, Structure and Culture
9
Strategy, Structure and HistoryCulture
OurWe at UBS have an ambitious vision of UBS is– to be recognized as one of the world’s pre-eminentbest global financial firms.services company. We are the world’s largest private bank,wealth and asset manager, while in investment banking and securities trading we are among a select bracket of majorleading global houses. In Switzerland, we are the clear market leader in corporate and retail banking. As anBased on our integrated group,approach, we deliver the whole firm to our clients, giving them added value by drawing on the combined resources and expertise of all our businesses. Every client is a client of UBS, not of an individual business unit. Our first priority is always our clients’ success.
Our vision
Our strategic future
Our strategy | ||
In the financial services industry, we are a truly global firm, working with corporate, institutional and private clients around the world. Our strategy focuses on investment banking and securities trading, asset management and wealth management, all on a global scale, as well as retail and business banking in Switzerland. These areas have been our consistent strategic priorities for many years and here we strive to achieve a leading position. This long-term perspective and commitment has helped us to become the successful firm we are today, with a broadly diversified business mix. | ||
One of the keys to our success is our “one firm” approach. We believe our clients should effortlessly be able to access all the services our firm can provide, where and when they are required, and regardless of what combinations of teams lie behind the solutions. Our clients should |
Our financial stability stems from the fact that we are one of the best capitalized banks in the world. We believe that this financial strength is a key part of our value proposition for both our clients and our investors.
performance of UBS reflects the Group’s strong franchise in each of its core businesses” resulting in broadly-diversified revenue sources.
10
sesses long-term growth opportunities and we will therefore continue to strongly expand in the key US market. An extensive presence in the US is critical to maintaining a strong global position as it accounts for half of the global investment banking fee pool.
should be pursued solely for its own sake. It is a tool that is an integral component of all our businesses. We use technology to extend our reach to clients and markets we could not previously have accessed, enhancing client service and experience.
Integrated business model
In August 2002, Fitch reaffirmed its AAA long-term rating of UBS, while keeping the outlook negative, “because of the potential threat a sustained bear market over the next year would pose to earnings”. At the same time Fitch commented that “UBS is exceptionally well-capitalized with a strong performance, particularly in comparison with its European peers but also on a global scale”.
Long-term credit ratings
As at | ||||||||||||
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Fitch, London | AAA | AAA | AAA | |||||||||
Moody’s, New York | Aa2 | Aa2 | Aa1 | |||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||
11
last year to a renowned private equity firm which came to us wanting to raise new money. UBS Warburg’s Financial Sponsors Group managed the day-to-day relationship with the client, while the Private Equity Funds Group, also part of UBS Warburg, raised institutional funds in Europe and Asia. At the same time, we successfully offered the investment opportunity to both UBS PaineWebber and UBS Private Banking’s high-net worth clients.
Financial success, risk and capital
management
8
UBS | ||
priate balance between risk and return, limiting the scope for adverse variations in our earnings from exposure to major individual ‘stress’ events. In recent times, market opportunities as well as our business and client franchise have both grown very considerably, as a result of which we see enhanced potential for revenue growth. Consequently, our market and credit risk levels are likely to experience a gradual increase in coming quarters. We have, however, no intention of substantially changing our risk culture and processes, and we are determined to retain our overriding commitment to high-quality earnings through diversification and liquidity of risk. As one example, we continue to believe that the end,quality of our advice will remain the principal driving factor in building our global investment banking franchise. That means that we will neither attempt to acquire new business through balance sheet strength alone nor systematically increase our appetite for pure proprietary trading.
Operational efficiency and innovation
In all our key businesses, we are committed to attaining scale and scope, as this will enable us to deliver a full spectrum of services efficiently. Our integrated business model, in line with our overall “one firm” approach, ensures that, where UBS has a best-in-class offering, we capture the whole of the value chain. The partnership between our businesses ensures that the exchange of services, knowledge and capabilities across the Groupfirm gives us the ability to
build a coherent infrastructure that does not duplicate activities unnecessarily.
Organic growth
129
UBS
Strategy, Structure and Culture
the French business of Lloyds TSB and the German wealth management business of Merrill Lynch. In 2004, we acquired Laing & Cruickshank and Scott Goodman Harris. Both helped us reinforce our platform in key countries targeted by our European wealth management business. Another example was our acquisition of ABN AMRO’s prime brokerage business. That transaction immediately boosted the Investment Bank’s services to hedge fund clients.
UBS Wealth Management &Business Banking
Business strategies
UBS Global Asset Management
With its integrated global investmentstrong platform it seeks to deliver superior investment performance to institutional investors and financial intermediaries. More than 440 investment professionals, located in all the major financial centers around the world, provide clients with access to a breadth and scope of investment capabilities that distinguishes it from its competitors.
UBS Warburg
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UBS | ||
Ininvestmentimportance of gains in market share. The increasing importance of elevating compliance and risk control to anticipate and exceed regulatory standards represents an opportunity for large global asset managers, such as UBS. UBS Warburg provides first-class advice and execution capabilities, our strategy concentrates on retaining our position as the country’s leading bank, taking
UBS PaineWebber
Long-term perspectives
– | financial liberalization and deregulation |
– | wealth accumulation |
– | retirement provisioning |
– | securitization |
– | equitization |
– | corporate restructuring |
Financial liberalization and
deregulation
Wealth accumulation
Retirement provisioning
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UBS
Strategy, Structure and Culture
Securitization
Equitization
Corporate restructuring
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UBS | ||
Managing our business
worth clients and their financial advisors, who offer their clients a wide array of investment products and services.
Corporate Center
Board structure
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ty of the membersmajority of the Board of Directors areis non-executive and fully independent.
Senior executive appointments
communicated in 2003
As 2003 progresses,13
UBS
Strategy, Structure and Culture
Our culture and values
Striving for Excellence
Responsible Relationships
believe, however, in the long-term potential
High Ethical Standards
Long-termmost valuable asset – our reputation.
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UBS | ||
Global strategy, regional focus and Our global strategy has the While a global diversity strategy is From vision to reality – progress in 2003nal research,indicatesspur challenging intellectual debates, are key to our firm’s success around the globe.world’s core affluent, an estimated 11 million households globally, will raise their current 50% shareunique contribution of total global financial wealth. The US iseach and every one example, where core affluent individuals are expected to hold 70% of all wealth by 2012, up from 64% in 2002. The first trend, for further wealth growth, underpins the strategic rationale of our European wealth management initiative. Europepeople – regardless of nationality, gender, physical attributes, or ethnicity.
local respectexpectedcommitted to experiencea diversity strategy that, although global, has a regional focus and is based on respecting local cultures.second highest rate of wealth growth worldwide over the next ten years, and thatfollowing priorities:– integrating diversity into the employee life cycle – which includes recruiting, orientation, training and development, as well as performance management and succession planning – tracking progress consistently to create both organizational and individual accountability – communicating our commitment to diversity to key stakeholders. a key reason why weessential, implementation must be driven regionally. We have builtset up a strong domestic presenceseparate Regional Diversity Boards in Asia Pacific, Germany, France, Italy,Spainthe US. In 2004, each Regional Diversity Board will identify relevant diversity issues and develop strategies to meet the region’s specific needs. For example, in the last two years and continueAsia Pacific region, the Diversity Board, among other activities, has the task of identifying 50 local employees poised to expandsucceed expatriates in those markets. Together,key positions, while in the five countries account for EUR 3.8 trillion or 80% of total Western European wealth, and 16%UK, one of the world total. The core affluentkey objectives is to address work/life balance. In the US, an important priority is to coordinate resources for regional key sponsorships to cultivate minority and female talent, while in whatSwitzerland the focus is on women’s advancement and age issues.callmoved a step forward in implementing our diversity vision, from improving awareness to enhancing the EU-5 accountedstructures and systems helping us to manage diversity in an integrated way.35%diversity. In 2003, we analyzed our key client and contact lists for various businesses. In the US, for example, women in leading fixed income buy-side companies control over a trillion dollars worth of all private wealth in 2002, withassets. We also discovered that figure seen rising to 42% by 2012. Turning to the investment banking and securities markets, we see continued strong client demand for corporate advice combined with a broad arraymany of securities services. Despite the general slowdown experienced in investment banking and securities activity last year and the generally pessimistic investor sentiment, we see market opportunities in the merger and acquisition, restructuringour key institutional and corporate advisory businesses. Overall levels of activity, however, will not return to the levels seen in 1999-2000 in the near future. The current environment still presents opportunities to firms with a global presenceclients are focused on diversity themselves. Many have won awards and in-depth experience in cross-border transactions. The expansion we are undertaking will take some time, although we are currently seeing the first signs of successaccolades for their internal diversity efforts. A closer look at asset management, brokerage and private clients shows us that minority-held accounts in the US whereand women-held accounts in Switzerland are increasingly a substantial portion of our business.achieved clear market share gains last year as our recent hires acquire new businesshave integrated diversity into recruiting, employee training, and deal mandates.succession planning. Additionally, we have piloted a Leadership Links program to foster dialogue between senior management and women and minorities in the firm. We have also developed an interactive toolkit designed to help managers address issues related to diversity that are part of their day-to-day work.institutional client business, whereInvestment Bank, we have rolled out a strong position in equities, fixed income and foreign exchange, we expect the environment to remain competitive with an ongoing commoditization of wholesale products and shrinking margins. We expect overall volumes to grow further, so keeping the overall pool of commission income roughly stable. Institutionswith scale and scope, global reach and advanced technology will benefitdiversity awareness program in the long-term despiteUS, UK, Asia Pacific and Continental Europe. In the current market environment.UK, we launched a reverse mentoring program that gives junior women and minorities exposure to senior management.asset management,2003, for example, we believe thatlaunched an intranet site for employees. We also sponsored a number of internal events around the long-term outlook isglobe to bring employees together, and support their networking with one other and also with clients. Our Stamford women’s network in December, for example, co-hosted an event for “100 Women in Hedge Funds”, an association for women hedge fund managers, while our women’s network in Singapore held a strong one. Despite continued equity market volatility, business will be driven by demographic pressures,successful event in November for local women clients. Other employee groups established in 2003 include the UBS Pride network, which should bring further pension reform by governments worldwide.supports employees facing gay and lesbian related issues in the US and the Minority Leadership Council, comprised of senior-level African-American and Hispanic employees in the New York area. On the external front, UBS sponsored several diversity-related organizations and participated in conferences and events around the globe. In June, senior women from UBS spoke about their work/life balance at the “Women in European Leadership: A Business Imperative” conference in Geneva, Switzerland.take advantage ofbuild on the trend towards open architecture, which will provide opportunitiesmomentum we have generated in giving us access to new distribution channels while also providing2003, focusing on integration within all our clients with a wide array of alternative forms of investments such as hedge funds, which allow them to diversify their allocation of assets and investment styles. In Switzerland,human resources activities. Additionally, we will seekpartner with the businesses to maintain our leading position while continuing to increase the overall efficiency of our activities, although we do not believe the retailintegrate diversity into their strategic planning, and corporate market will grow significantly in coming years.Adoption of a single UBS brandIn November 2002 we announced a further evolution of our brand strategy and portfolio. On 9 June 2003, we will adopt the single UBS brand to represent all our businesses and will no longer market our services using the UBS Warburg or UBS PaineWebber brands. The move to a simpler branding accurately reflects our integrated business model and the “one firm” approach we deliver to clients. Before the decision was taken to adopt a single brand, we undertook a thorough review of our brand strategy, focusing on brand values as much as brand structure. The review included market research in 14 countries involving thousands of existing and potential clients, including high net worth individuals, corporate and institutional clients, assetdaily management clients, and Swiss individual clients. UBS client advisors and relationship managers were also part of the research. The results showed that all UBS’s different client groups had similar expectations regarding the provision of their financial services and their relationship with UBS. Across the board, they expect their financial firm to relentlessly pursue their financial success and provide access to the resources of a global powerhouse, while giving proactive advice and a choice of solutions.processes.
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UBS
The Making of UBS
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The makingMaking of UBS
whichthat have come to make up today’s UBS look back on a long and illustrious history. The two Swiss predecessor banks came into being in the 19th century, as did PaineWebber, while SG Warburg was founded in 1934. But it is in the past decade that UBS’s current identity began to take concrete shape.(SBC) and Union Bank of Switzerland, (UBS), were commercial banks operating mainly out of Switzerland. The two banks shared a similar vision: to become a world leader in wealth management and a global bulge bracketbulge-bracket investment bank with a strong position in global asset management, while remaining an important main commercial and retail bank in Switzerland.third largestthird-largest Swiss bank, decided to take another route by starting a joint venture with O’Connor, a leading US derivatives firm that was fully acquired by SBC in 1992. O’Connor was noted for its young, dynamic and innovative culture, its meritocracy and team-orientation. It brought SBC state-of-the-art risk management and derivatives technology.—– one
of the leading US-based institutional asset management firms. Both the O’Connor and Brinson
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Although the synergies and strategic benefits resulting from the 1998 merger between the former Union Bank of Switzerland and Swiss Bank Corporation are widely acknowledged, less is known of a comprehensive program in Switzerland that has softened the blow for many employees displaced by the integration. Called MIDSAM (a combined German acronym that roughly equates with “job reduction measures”), the program has effectively helped over 3,000 UBS employees affected by merger-related restructuring in the four years it was in place. Employees who lost their jobs as a result of the merger or the subsequent reorganization were given considerable support. Their periods of notice were doubled, while financial contributions were made to training programs and outplacement consulting. They were also closely assisted by dedicated teams ofThe Business Groups
Wealth Management & Business Banking
experts, specifically trained for the task, whose sole job was to find creative ways for employees to find a new and fulfilling occupation — or help them settle into early retirement. For UBS itself, with total program costs of around CHF 900 million, MIDSAM was by no means a low-cost option.
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UBS Wealth Management & Business Banking
Georges Gagnebin
Chairman, UBS Wealth Management
& Business Banking
Marcel Rohner
CEO, UBS Wealth Management
& Business Banking
UBS Wealth Management & Business Banking provides private bankingwealth management services for wealthy clients around the world and is the leading bank for individual and corporate clients in Switzerland.
Business Banking | UBS Wealth Management | |||||||||||||||||||||||
Private Banking | Switzerland | & Business Banking | ||||||||||||||||||||||
CHF million, except where indicated | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Income | 7,279 | 7,696 | 5,494 | 5,792 | 12,773 | 13,488 | ||||||||||||||||||
Credit loss expense | (28 | ) | (37 | ) | (286 | ) | (567 | ) | (314 | ) | (604 | ) | ||||||||||||
Total operating income | 7,251 | 7,659 | 5,208 | 5,225 | 12,459 | 12,884 | ||||||||||||||||||
Personnel expenses | 2,083 | 1,947 | 2,727 | 2,878 | 4,810 | 4,825 | ||||||||||||||||||
General and administrative expenses | 2,158 | 2,038 | 159 | 396 | 2,317 | 2,434 | ||||||||||||||||||
Depreciation | 125 | 151 | 355 | 465 | 480 | 616 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 0 | 0 | 111 | 109 | ||||||||||||||||||
Total operating expenses | 4,477 | 4,245 | 3,241 | 3,739 | 7,718 | 7,984 | ||||||||||||||||||
Business Group performance before tax | 2,774 | 3,414 | 1,967 | 1,486 | 4,741 | 4,900 | ||||||||||||||||||
Cost/income ratio before goodwill (%) | 60 | 54 | 59 | 65 | 60 | 58 | ||||||||||||||||||
Net new money (CHF billion) | 16.6 | 24.6 | 3.7 | 9.2 | ||||||||||||||||||||
Invested assets (CHF billion) | 688 | 791 | 205 | 215 | ||||||||||||||||||||
Headcount (full-time equivalents) | 10,488 | 10,249 | 18,442 | 19,220 | 28,930 | 29,469 | ||||||||||||||||||
Business Banking | Wealth Management & | |||||||||||||||||||||||
CHF million, except where indicated | Wealth Management | Switzerland | Business Banking | |||||||||||||||||||||
For the year ended or as at | 31.12.03 | 31.12.02 | 31.12.03 | 31.12.02 | 31.12.03 | 31.12.02 | ||||||||||||||||||
Total operating income | 6,793 | 6,664 | 5,128 | 5,208 | 11,921 | 11,872 | ||||||||||||||||||
Total operating expenses | 4,184 | 4,151 | 2,975 | 3,241 | 7,159 | 7,392 | ||||||||||||||||||
Business Group / Business unit performance before tax | 2,609 | 2,513 | 2,153 | 1,967 | 4,762 | 4,480 | ||||||||||||||||||
Net new money (CHF billion) | 29.7 | 17.7 | (5.0 | ) | 3.7 | |||||||||||||||||||
Invested assets (CHF billion) | 701 | 642 | 212 | 205 | ||||||||||||||||||||
Headcount (full-time equivalents) | 9,176 | 9,399 | 17,620 | 18,442 | 26,796 | 27,841 | ||||||||||||||||||
Business
Organizational structure
In 2002, ourwe created the new name and management came into effect, replacing the former UBS Switzerland designation.Wealth Management & Business Banking organization. High-end affluent clients that were previously the responsibility of the former Private and Corporate Clients (PCC) unit became Private BankingWealth Management clients, although their advisor relationships
remained the same. Product development was consolidated into a single Products and Services area, andwith a new Market Strategy and Development area was created which providesto provide comprehensive marketing services for the whole Business
Group. We report results for the following two business units:
– |
– | Business Banking Switzerland, |
Competitors
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The Business Groups |
Wealth Management
With more than 140 years of private banking experience, an extensive global network and CHF 688701 billion in invested assets on 31 December 2002, UBS Private Banking is2003, we are the world’s largest private bank.
Business
UBS Private BankingWealth Management provides a comprehensive range of products and services individually tailored for wealthy clients around the world via its global branch network and an extensive channel ofthrough financial intermediaries.
At the beginning of 2001, we launched the European wealth management initiative, a major
growth initiative to expand our domestic private bankingwealth management presence in the five key European markets of France, Germany, Italy, Spain and the UK. Since 2001, we have steadily opened offices and hired experienced client advisors in key locations within our fivethese target markets.
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The Business Groups
Wealth Management & Business Banking
Organizational structure
Our clients have specific needs and we carefully tailor our global product offering is carefully tailoredin order to meet country-specific taxtheir financial aspirations. Where it is necessary, we complement our range of internal and legal regulations as well as the varied aspirations of clientsexternal products by entering into partnerships with local specialist providers, for example, in different markets. With this geographical focus in mind, ourlife insurance. Our client advisors are organized into the two business areas of:
– |
– |
– | Italy | ||
– | Western Europe | ||
– | Benelux (Belgium, Netherlands, Luxembourg), Germany and | ||
– | UK, North and | ||
– | Eastern Mediterranean, Middle East and Africa | ||
– | Asia | ||
– | Americas International. |
We have athat havewith specialized areas of specialized expertise and which concentrate on the requirements of particular client groups. In September 2002, we were the first European financial group to open aAn example is our Islamic finance subsidiary in Bahrain. CalledBahrain, Noriba, bank, itwhich we opened in September 2002. It offers sharia-compliant products to institutions and high net worth individuals residing in the Arabian GulfMiddle East and around the world.
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The Business GroupsUBS Competitors
Wealth Management & Business Banking
During the first half of 2003, UBS will create a new holding company to incorporate GAM, its specialist asset management firm, as well as its five independent private banks — Cantrade (Zurich), Banco di Lugano (Lugano), Ferrier Lullin (Geneva), Bank Ehinger (Basel) and Armand von Ernst (Bern). With this common platform,Management’s major competitors comprise all of our independentglobally active wealth management subsidiaries will be equipped and encouraged to grow faster, and deliver their full value creation potential. The new structure will ease the path to integration where it makes sense, targeting economies of scale not achievable by each organization on its own. It may allow a future role in the consolidation of the private banking industry.
Office. He will be joined on the board as Deputy Chairman by Georges Gagnebin, Chairman of UBS Wealth Management & Business Banking and Peter Kurer, UBS Group General Counsel. Hans De Gier will lead the strategic reorganization and integration efforts, supported by the six current Chief Executives of the subsidiaries, and will join the boards of all six firms.
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In order to achieve our business objectives and maintain our positionmanagers, such as the wealth management provideroperations of choice, itCredit Suisse, HSBC, and Citigroup. We also compete with private banks that operate within their respective domestic markets, such as Pictet and Julius Baer in Switzerland, Coutts in the UK, Deutsche Bank and Sal. Oppenheim in Germany, and Unicredito in Italy.
Clients
Client focus is imperative that we constantly workthe main driver of all our activities. We are committed to fulfillproactively and consistently delivering tailored and unbiased financial solutions of the highest quality to our clients. We strive to create long-term personal relationships.
Four-step advisory process
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The Business Groups |
tial to putting Wealth Management’s value proposition into action. Our process can be broken down into four clear, mutually enhancing steps. In the first, our advisors take the time to understand what it is their clients want and need, and look at all the different factors that might affect their goals and willingness to take risk. As a second step, the advisor formulates investment proposals crafted for | ||
that client’s specific requirements by selecting from the best products and services available. In the third step, the advisor agrees with the client advisors take time to understand client needs, taking into account all the different factors that might affect a client’s investment goals and risk appetite. The client advisor then acts as a consultant, helping to build a personalized financial strategy that meets those requirements - one that provides best-in-class solutions supported by state-of-the-art technology. Thus, our commitment to open architecture forms a key partwhich of the value proposition for our clients in this process.solutions should be implemented. The selection offourth step rounds out the most appro-
priate solution is based on an agreement between the client and the client advisor, a solid basis for a long-lasting relationship.
Financial intermediaries
European wealth management |
The European wealth management initiative was launched in early 2001, and is aimed at wealthy clients in the five target countries of France, Germany, Italy, Spain and the UK. Together theythese countries comprise around 80% of the total European market for wealthy clients. The initiative combines our extensive private banking experience withdraws on the best of UBS PaineWebber’sthe marketing and product skills using both as powerful catalysts to build a significant domestic European presence.
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developed over the years by PaineWebber in the US.
Strategy
21
The Business Groups
Wealth Management & Business Banking
Wealth Management |
Product positioning framework |
UBS Investment Products UBS Investment Solutions UBS Financial Planning UBS Wealth Management Solutions |
Provide transaction-oriented Add systematic advisory services Go beyond pure investment Provide the whole range products & services and such as asset allocation, decisions and provide of financial services related advice. investment selection and portfolio comprehensive financial in an exclusive and very management. Client chooses services according to individualized format between discretionary and non- the life cycle of the client. discretionary as well as between UBS and 3rd party investment content.of offering |
Comprehensiveness |
Level IV Level III Level III |
Level II Level II Level II Level I Level I Level I Level I |
11.5 billion) and Scott Goodman Harris.
Products
Platform
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port the European wealth management initiative. It was successfully launched in France in 2002, and will be rolled out next in Germany and Italy, followed by the remaining target markets.
Products and services |
In order to maintain ourOur credibility and reputation withhinges on our ability to ensure that clients we have to offer them neutral advice that is not biased towards any particular set of products or services. Doing this successfully entails opening our product architecture to includereceive the best products and services available, regardless of whether we produce them internally or access them from third-party suppliers. At the same time,external sources. However, as we have no intention of becoming a one-stop financial supermarket, and we therefore carefully choose and screen third party offers, onlythird-party offerings, selecting those that meet the high quality standards our clients demand. Combining this careful product selection with our structured advisory process ensures that the solutions we propose to clients are the ones that best fit their needs and goals. Open architecture is key to offering high-quality solutions building on the trust inherent in any relationship between client and client advisor.
Product positioning framework
Investment products
Investment products
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Our UBS Life business which wasin Switzerland, established in first quarter 2001, focuses on the sale of unit-linked products. Theyproducts that are sold alongside more traditional life insurance policies that we provide from third partythird-party sources. In 2002, 4,193UBS International Life, launched in 2003, extends our product offering to Europe and provides clients bought life insurance from UBS Life, ranking it among the top providers in the Swiss market for unit-linked insurance.
Investment solutions
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The Business Groups | ||
Wealth Management |
Product Portal |
UBS Investment Products UBS Investment Solutions UBS Financial Planning UBS Wealth Management Solutions |
Direct Investments Portfolio Management Financial Planning Ultra-HNWI Solutions Money Market UBS Managed Fund Portfolio Tax Planning Corporate Advisory Services Structured Products / Derivatives UBS Active Advisory Retirement Planning Real Estate Services Investment Funds UBS Fund Advisory Succession Planning Wine Banking Alternative Investments Trust and Foundation Art Banking Provision / Life Insurance Gold and Numismatics |
Credits Corporate Executive Financial ServicesBasic Products and Services Acccounts / Payments / Cards Custody Account / Services Reporting UBS Key Clube-banking Special ServicesBanking abroad VIP Center UBS Optimus Foundation EscrowResearch Groups Business The |
support from UBS’s investment professionals. For them, Private BankingWealth Management provides analysis and supervision of portfolios and their risk profiles, together with tailor-made proposals to support investment decisions. We offer different levels of structured advisory services, eachmost based on an all-inclusive fee.
Financial planning
Wealth management solutions
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The family office team helps wealthy families preserve and optimize their investments across generations, taking into account all economic, political, legal, and personal aspects.
Distribution
real estate portfolios, offering support in complicated cross-border real estate transactions.
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The Business Groups Business Banking Switzerland Business Banking Switzerland, |
Business Banking Switzerland, UBS Wealth Management & Business Banking’s retail and commercial banking unit, is the market leader in Switzerland and provides a complete set of banking and securities services for individual and corporate clients.
Business |
UBS isWe are the leading bank in Switzerland. At the end of 2002, the2003, our Business Banking Switzerland unit had around 3.5 million individual client accounts, and relationships with around 180,000 enterprises acrosssome 150,000 corporate clients, including institutional investors, public entities and foundations based in Switzerland, as well as 5,0003,000 financial institutions worldwide. Clients have invested assets of CHF 205212 billion with us. With a total loan book of CHF 139 billion on 31 December 2002,2003, we have a leading position inlead the Swiss lending and retail mortgage market.
Organizational structure |
The Business Banking Switzerland unit comprises the Business Banking retaildomestic branch network as well as the main activities of the three logistics business
areas offor corporate and individual clients, which is organized into eight regions. It also includes Operations, Resources, and Information Technology.Technology business areas.
Competitors Business Banking Switzerland’s major competitors are banks active in the retail and corporate banking markets in Switzerland. This group includes Credit Suisse, the country’s cantonal banks, Raiffeisen Bank, and other regional or local Swiss banks. Clients and products |
Business Banking Switzerland offers high-quality, standardized products to the retail market for individual and small company clients, as well as more complex products and advisory services for larger corporate and institutional clients and financial institutions.
PrivateIndividual clients
Business Banking Switzerland Invested assets by asset class Total: CHF 215 billion CHF 205 billionCHF 212 billion100%11% 12% 90%14%80%28% 28% 28% 70% 60% 50%21% 22% 20% 40% 30%22% 21% 20% 20% 10%18% 17% 18% 0% 31.12.01 31.12.0231.12.03As at UBS investment funds Accounts / Money markets Bonds Others Equities |
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The Business Groups | ||
Business Banking SwitzerlandInvested assets by client type Total: CHF 215 billion CHF 205 billionCHF 212 billion100% 90% 80%41% 41% 41%70% 60% 50% 40% 30%59% 59% 59%20% 10% 0% 31.12.01 31.12.0231.12.03As at Individual clients Corporate clients and pension funds |
cash accounts, savings products, wealth management services, residential mortgages, pensions and life insurance.
Corporate clients
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Around 7,5007,600 of our clients are large companies that utilize our expertise in handling complex financial transactions. We provide them with a wide range of financial advice, to them, from the selection and design of investment products to assisting within complex mergers and acquisitions or providing structured financing, advice services, often working in close cooperation with specialists from elsewhere in the UBS Group.other parts of UBS.
relationship. As a result of this process, the risk profile of our loan portfolio has gradually improved in the four years since its introduction, while the credit quality of counterparties has also improved. At the same time, risk-adjusted pricing benefits our clients by promoting transparent and open discussions between client and advisor. The advisor clearly communicates the basis for credit decisions, and possible areas of improvement can be identified, which, if successfully implemented, can then be reflected in lower loan pricing.
Financial institutions
Logistics areas |
Business areas focusing on client needs can only fully exploit their potential if they are provided with a reliable and efficient infrastructure.
New IT platform
3125
As further bank applications in Switzerland are transferred to the SSP platform, it will allow for real-time processing around the clock as well as shortening the length of time it takes to bring new product solutions to market. As it will also progressively replace our old IT system, SSP will help us lower operational and maintenance costs over the next few years. Distribution Our private clients’ needs have changed in recent On 31 December Inyears the needs of our private clients have changed. Although our physical branch network used to be the principal distribution platform, today clientsyears. Today, they want the flexibility of being able to access their accounts using the full range of modern communication technology. They want to contact their banktechnology when it is convenient for them, and without restrictions imposed by regular business hours.Because of that, UBS Wealth Management &To meet these needs, Business Banking pursues an integrated, multi-channel strategy. We use technology to complement, rather than replace the traditional physical branch network. Standard transactions can be conveniently executed using one of the alternative electronic channels, enabling client advisors to focus on providing personalized advice to individuals,and developing financial solutions to match each client’s individual requirements. Technology is therefore critical to supporting our goal of building strong client relationships, with advice at the center.round the clockaround-the-clock availability. Our five customer service centers provide basic information and advicesupport 24 hours a day. In 39day over the phone. Additionally, in 51 of our branches in Switzerland, we have implemented a “two-zone concept”two-zone concept where standard transactions are executed via ATMs, while client advisors sit in an open plan desk area next to the ATMs, and focus on giving clients value-added advice.e-commerceOur internet and other e-banking platforms are part of this integrated multi-channel strategy. As well as being a transaction tool, e-banking is an important method for distributing information about UBS’s products and services. UBS’s website provides a wide spectrum of information on specific UBS products. If questions arise, call centers are available to support the client or to arrange in-depth advice from specialists. Security of the e-banking platform has become an important competitive factor for UBS Wealth Management & Business Banking. Because of that, over the course of last year, we introduced a new UBS Smartcard access system to replace our paper password lists. UBS Smartcard is based on a code that is saved on each individual UBS e-banking card and does not require any installation. The card’s content is protected and cannotbe copied or decoded. Its codes are only valid for a very short timespan — unlike the paper list.On 31 December 2002, almost 330,000 clients had active e-banking contracts. During 2002, 74%2003, 76% of payment orders were initiated via e-banking, and 12% of securities transactions were initiated via e-banking.electronic channels, up 2% from 2002.Loan portfolio 2002,2003, Business Banking Switzerland’s loan portfolio was CHF 139 billion. Mortgages represented CHF 107109 billion, of which more than 80% were residential mortgages.continues to improve.
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further improved during 2003. For details onof the credit portfolio, please refer to the “Risk Analysis”Risk Analysis section on pages 59 to 77.page 50.
Recovery portfolio
The Our recovery portfolio amounted to CHF 8.66.4 billion at 31 December 2002,2003, of which CHF 7.85.8 billion was impaired and carried provisions of CHF 3.42.8 billion. TheSince 1998, the recovery portfolioportfolio’s size has been cut by 67% over the last four years from CHF 26 billion at 31 December 199875% thanks to our successful recovery efforts. Over the same five-year period, non-performing loans (those with payments outstanding for ninety days or longer) decreased from CHF 14.0 billion to CHF 5.04.4 billion, leading to a non-performing loans to gross loans ratio of 3.6%3.2%.
Business Banking SwitzerlandDevelopment of UBS’s recovery portfolio, 1999–2003CHF billion 405 (10)3026 3 (9) 21202 (5) 15 1 (4) 12 1 (4)109 6 31.12.98 31.12.99 31.12.00 31.12.01 31.12.01 31.12.02 31.12.03 0Balance Settlement of recovery loans outstanding New recovery loans addedBusiness Banking SwitzerlandLoan portfolio by loan category Total: CHF 146 billion CHF 139 billionCHF 139 billion100%5% 8% 6%90%20% 18%80%22%70% 60% 50% 40%77% 70% 74% 30% 20% 10% 0% 31.12.01 31.12.0231.12.03As at Mortgages Commercial credits Recovery portfolio | |
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The Business Groups | ||
The extensive consolidation in the financial industry over the last decade and the rise of new, interactive technologies such as the internet have substantially changed the demands and performance requirements for the IT infrastructures of major global financial service providers. Flexible platforms and online capabilities are now de rigueur, as are IT applications that give clients comprehensive real-time, online services and allow the bank and client advisors to get an integrated view of client data and transactions.
operational risks, achieve shorter times to market for products and services, introduce front-line applications for all business processes, cut operational costs and create clearly-defined interfaces based on industry standards.
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UBS Global Asset Management
Chairman and CEOUBS Global Asset ManagementUBSThe Global Asset Management business is aone of the world’s leading asset manager,managers, providing investment management solutions to institutional clients as well as to private clients, through financial intermediaries.intermediaries and institutional investors. Business Group reporting UBS Global Asset Management CHF million, except where indicated For the year ended 31.12.02 31.12.01 Institutional fees 899 1,174 Wholesale Intermediary fees 1,054 1,044 Total operating income 1,953 2,218 Personnel expenses 946 1,038 General and administrative expenses 513 569 Depreciation 37 46 Amortization of goodwill and other intangible assets 270 286 Total operating expenses 1,766 1,939 Business Group performance before tax 187 279 Cost/income ratio before goodwill (%) 77 75 Net new money — Institutional (CHF billion) (0.6 ) 6.2 Invested assets — Institutional (CHF billion) 279 328 Net new money — Wholesale Intermediary (CHF billion) (1.8 ) 28.7 Invested assets — Wholesale Intermediary (CHF billion) 278 344 Headcount (full-time equivalents) 3,346 3,281
Business Group Reporting CHF million, except where indicated Global Asset Management For the year ended or as at 31.12.03 31.12.02 Total operating income 1,737 1,655 Total operating expenses 1,405 1,436 332 219 Net new money – Institutional (CHF billion) 12.7 (1.4 ) (5.0 ) (1.8 ) Invested assets – Institutional (CHF billion) 313 274 14 19 Net new money – Wholesale Intermediary (CHF billion) (5.0 ) (6.3 ) (23.0 ) (6.9 ) Invested assets – Wholesale Intermediary (CHF billion) 261 259 87 106 Headcount (full-time equivalents) 2,689 2,733
Business |
UBS Global Asset Management provides investment management services for institutional investors, and for financial intermediaries worldwide. Our purpose is to deliver superior results for clients through our integrated investment platform.
Thealternative and quantitative investments business encompasses several specialist areas, including the O’Connor hedge funds business. Unlike many alternative investment management business. We can demonstrate strengthproviders, we have both single and depth ofmulti-manager investment resources around the world and have the critical mass to attract and retain the best people. State-of-the-art risk management tools
Global Asset ManagementInvested assets by client type Total: CHF 649 billion CHF 533 billionCHF 574 billion100% 90% 80%50% 49% 45% 70% 60% 50% 40% 30%50% 51% 55%20% 10% 0% 31.12.01 31.12.0231.12.03As at Institutional Wholesale Intermediary |
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Global Asset Management
Ourreal estate business provides specialized property investment expertise. The business purchases, sells and processes are centralactively manages investments in property, including office, industrial, retail and residential real estate. It then structures the investments into private funds, publicly listed investment funds or individually managed client accounts. The business is active in the Americas, UK, Continental Europe and Asia Pacific.
Organizational structure |
UBS Global Asset Management’sOur main offices are in London, Chicago, New York, Tokyo and Zurich. With over 3,000We have around 2,600 employees, of which some 520 are investment professionals, located in more than 20 countries, UBS Global Asset Management is truly global.21 countries.
son Partners (whose Chicago origins date back to the early 1970s) and Phillips & Drew (established in London in 1895). In April 2002, with the integration completed, the Business Group was re-branded as UBS Global Asset Management.
Competitors
In the “Private Banking” section on page 24).
UBSinstitutional arena, Global Asset Management competes against other global asset managers such as Merrill Lynch Investment Managers,including Capital, Guardian, PIMCO, Deutsche Asset Management and Alliance Bernstein. In the wholesale area, our main global competitors include Fidelity, AMVESCAP (INVESCO) and AMVESCAP.JP Morgan Fleming.
Clients |
UBS Global Asset Management offersOur clients receive the most appropriate investment solutions for their needs through our combination of investment expertise with local delivery of our capabilities and services as well as an ongoing dialogue with clients. Apart from the advisory and reporting aspects of our client communications, we also keep them updated on current investment perspectives and business issues through a comprehensive range of investment capabilities designed forpublications and events.
Distribution
Institutional
world. Our clients include:
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The Business Groups |
– corporate and public pension plans | ||
– endowments, municipalities, charities and private foundations | ||
– insurance companies | ||
– governments and central banks; and | ||
– supranationals | ||
In consultant-driven markets, such as the US and UK, we rely on developing and maintaining strong relationships with the major consultants that advise corporates and institutions. | ||
Wholesale Intermediary | ||
The Global Asset Management business offers over 400 investment funds, exchange traded funds and other investment vehicles, across all asset types in diverse country, regional and industry sectors. | ||
Distribution of our investment funds is principally through financial intermediaries. Our most significant distribution channels are Wealth | ||
TheManagement & Business GroupsUBS Global AssetBanking and Wealth Management USA. We are continuing to evolve towards a distribution architecture in which an increasing proportion of funds will be sold through third-party channels.
Products and services
We combine investment expertise and sophisticated risk and currency management with a clear commitment to providing client-centric solutions. Our capabilities and services include active investment in equity and fixed income passiveasset classes, indexed and exchange-traded funds, as well as alternative investment strategies using fund-of-fundsadvisory services, hedge funds with both single and multi-manager funds,investment streams, and real estate and timber.estate.
Institutional
Wholesale Intermediary
Investment performance
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benefited from interest rate and Strategic initiatives / strategic opportunities Global equity markets staged a convincing recovery in 2003, helping to support the asset management industry’s recovery. In the medium to longer term, the industry Industry trendscompetitive positioningindividual security selection, with our asset allocation and currency strategies also making a strong contribution.Despite In the recentalternative and quantitative business, strategies performed well across the board in 2003. All key equity-oriented strategies recorded positive returns and core strategies based on macro-economic themes performed strongly over the full year. Across the multi-manager groups, strategies with exposure to the equity markets performed exceptionally well, while more market volatilityneutral strategies also recorded solid returns.longer-term outlook forlatest available return information, the real estate business achieved strong returns in the US, Switzerland, UK and Japan.remains strong, primarily driven by demographic pressures and accompanying pension reform. However, asset management, like mostoutlook continues to be bright, because of the financial services industry, is undergoing a period of reassessment and review. There is widespread recognition that costs will need to be reduced and that fee levels cannot be sustained. Open architecture distribution appears to be increasingly commonplaceshift in the US while it is making inroads into the European and Asia Pacific regions. This continues to present both opportunities and challenges for asset managers; opportunities to gain access to new and formerly closed distribution channels and challengesdemographics in maintaining penetration rates within proprietary ones. Recent volatility within the equity markets has encouraged many investors to seek alternative forms of investment that diversify their investment styles. This has led to the increased popularity of hedge funds and private equity investments driven by higher potential returns and lower correlationdeveloped societies towards older populations, coupled with stock market indices. Furthermore, in the short-term, an increased allocationneed for private savings to fixed incomesupplement the various public pension systems. With a record of strong three- and money market instruments has been witnessed. Only asset managers possessing global, multi-specialist offerings are able to service such changing needs infive-year investment performance for most core capabilities and a flexible manner. We believesolid reputation, we are strongly positionedcompetitively placed to take advantage of this changing market as we havebenefit from the reach and necessary scale to succeedexpected growth in an
On a product level, Europe is expected to continue to rely heavily upon our strong regional business structure.see a broad shift towards open architecture platforms and further development of multi-manager investment solutions – although progress to date has been slower than expected. In this way, we will endeavorterms of asset mix, real estate and hedge funds are expected to provide clientscontinue to benefit from investors’ need for greater portfolio diversification. Passive investments are also expected to increase in importance, implying a relatively subdued outlook for traditional active equity and fixed income capabilities. As a result, competitive pressures for traditional products are expected to increase, with slower growth underscoring the best solutionsimportance of gains in market share. This is compounded by continuing pressure on industry fees as consultants and institutional investors remain sensitive to their needs.
Investment performancepricing levels, as well as expected continued regulatory pressure on wholesale and retail fund pricing.
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The Business Groups |
The Business GroupsUBS WarburgInvestment Bank
UBS Warburg
Investment Bank
UBS Warburg is one of the world’s leading firms in the investment banking and securities firms,business, providing a full spectrum of services to institutional and corporate clients, governments and financial intermediaries around the world.intermediaries.
Business Group reportingGroup/Business Unit Reporting
Corporate and | ||||||||||||||||||||||||
Institutional Clients | UBS Capital | UBS Warburg | ||||||||||||||||||||||
CHF million, except where indicated | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Income | 14,100 | 15,587 | (1,602 | ) | (872 | ) | 12,498 | 14,715 | ||||||||||||||||
Credit loss expense | (128 | ) | (112 | ) | (128 | ) | (112 | ) | ||||||||||||||||
Total operating income | 13,972 | 15,475 | (1,602 | ) | (872 | ) | 12,370 | 14,603 | ||||||||||||||||
Personnel expenses | 7,784 | 8,258 | 94 | 96 | 7,878 | 8,354 | ||||||||||||||||||
General and administrative expenses | 2,314 | 2,586 | 64 | 64 | 2,378 | 2,650 | ||||||||||||||||||
Depreciation | 381 | 454 | 1 | 2 | 382 | 456 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 0 | 0 | 364 | 402 | ||||||||||||||||||
Total operating expenses | 10,843 | 11,700 | 159 | 162 | 11,002 | 11,862 | ||||||||||||||||||
Business Group performance before tax | 3,129 | 3,775 | (1,761 | ) | (1,034 | ) | 1,368 | 2,741 | ||||||||||||||||
Cost/income ratio before goodwill (%) | 74 | 72 | 85 | 78 | ||||||||||||||||||||
Net new money (CHF billion) | 0.5 | 0.1 | ||||||||||||||||||||||
Invested assets (CHF billion) | 3 | 1 | ||||||||||||||||||||||
Headcount (full-time equivalents) | 15,964 | 15,562 | 73 | 128 | 16,037 | 15,690 | ||||||||||||||||||
Investment Banking | ||||||||||||||||||||||||
CHF million, except where indicated | & Securities | Private Equity | Investment Bank | |||||||||||||||||||||
For the year ended or as at | 31.12.03 | 31.12.02 | 31.12.03 | 31.12.02 | 31.12.03 | 31.12.02 | ||||||||||||||||||
Total operating income | 14,058 | 13,972 | (77 | ) | (1,602 | ) | 13,981 | 12,370 | ||||||||||||||||
Total operating expenses | 9,980 | 10,843 | 112 | 159 | 10,092 | 11,002 | ||||||||||||||||||
Business Group / Business unit performance before tax | 4,078 | 3,129 | (189 | ) | (1,761 | ) | 3,889 | 1,368 | ||||||||||||||||
Headcount (full-time equivalents) | 15,500 | 15,964 | 50 | 73 | 15,550 | 16,037 | ||||||||||||||||||
Business |
UBS WarburgUBS’s Investment Bank operates globally as a client-driven investment banking and securities firm. Our salespeople, research analysts and investment bankers provide products and services to the world’s key institutional investors, intermediaries, banks, insurance companies, corporations, sovereign governments, supranational organizations and supranational organizations.private investors.
Organizational structure
– | the |
banking and securities firms, |
– |
From first quarter 2004 onwards, we will no longer report Private Equity as a stand-alone business unit. Results from the private clientsequity business centered around UBS PaineWebber, becamewill be reported as a separate and independent Business Group effective 1 January 2002. Results shownrevenue line in the Business Group reporting table have therefore been restated to reflect this.
Competitors
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The Business Groups
Investment Bank
Investment Banking & Securities
Our global reach, supported by a complete array of products and services, gives our clients unique access to financial markets around the world backed up by a complete array of services and products.world.
Business |
The Corporate and Institutional Clients (CIC)Investment Banking & Securities (IB&S) business unit provides wholesale financial products and advisory services to a diverse client base worldwide.spread throughout the globe. It has a significant corporate client financing and advisory business, withwhose particular strengths lie in advisingproviding advice on cross-border mergers and acquisitions and theraising capital raising requirements offor our global corporate and governmental client base. Although historicallyHistorically, we have been among the leaders in European corporate finance, and in recent years we arehave also nowbeen one of the fastest growingfew investment bankbanks experiencing strong growth in the US, according to data provided by Freeman & Co’s “All Industries” data.All Industries survey.
tives and foreign exchange transactions for UBS’s retailthe firm’s individual clients.
We organize our businessOrganizational structure
Our businesses are run on a global basis and organized into the three distinct areas:areas of:
– | Equities |
– | Investment Banking |
– | Fixed Income, Rates and Currencies |
They are distinguished by the type of products and services offered and the nature of the business risks they raise. All businesses are run on a global basis.
Legal structure
Investment Banking & Securities: income by client type
For the year ended | ||||||||||||
% of total | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Investment banking clients | 21 | 23 | 23 | |||||||||
Securities revenue from corporate clients | 4 | 6 | 6 | |||||||||
Institutional clients and markets | 75 | 71 | 71 | |||||||||
Total | 100 | 100 | 100 | |||||||||
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The Business Groups |
Products and services EquitiesUBS Warburg’s equity businessThe Investment Bank is a leading player in the global primary and secondary markets for equity, equity-linked and equity derivative products. We sell, trade, finance and clear cash equity and equity-linked products. We also structure, originate and distribute new equity and equity-linked issues. Additionally, we provide research on companies, industry sectors, geographic markets and macro-economic trends.
39
The Business GroupsUBS Warburg
For the year ended | |||||||||||||
% of total | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Investment banking clients | 23 | 23 | 23 | ||||||||||
Securities revenue from corporate clients | 6 | 6 | 5 | ||||||||||
Institutional clients and markets | 71 | 71 | 72 | ||||||||||
Total | 100 | 100 | 100 | ||||||||||
2003, we introduced a new simplified rating system for equity analysis that combines a recommendation with a new predictability indicator that highlights the degree of certainty an analyst has in their price target. We believe the new research process is both easier to understand and more comprehensive. By carefully coordinating the efforts of our regional and product distribution teams, we have built a global cash equities franchise that is second to none. With the scale and balance of our platform across all time zones, we offer liquidity, and efficient completion in executing orders in every major world market.
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The Business Groups
Investment Bank
operations of ABN AMRO, significantly enhancing our market position there. The business was focused on small and mid-segment hedge funds and formed an excellent strategic fit with our existing platform by adding over 300 new clients, helping UBS position itself among the top five prime brokers in the US.
Investment Banking
40
ence in the US is critical and we have made substantial investments to invest in completingexpand our business there over the buildup of our US franchise, which we started to do in late 2000, by hiring highly qualified bankers. Despite these investments, we do not expect immediate results. Gaining new investment banking business involves long lead times, but we are pleased with the progress made in 2002.last three years. The combination of our expandedlarger investment banking and equities footprintpresence in the US, givesas well as increased awareness of the UBS brand, has given us greater access to key corporate executives, which has allowedallowing us to become involvedparticipate in some of the largest and most complex deals in 2002. We achievedtransactions last year. As a result, we had one of the highest growth rates in US market share growth of any investment bank in 2002.
Fixed Income, Rates and Currencies
– |
– |
– | Rates, incorporating interest |
– |
Key performance indicators: league table rankings
31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||
Market | Market | Market | ||||||||||||||||||||||
Rank | share % | Rank | share % | Rank | share % | |||||||||||||||||||
Global mergers and acquisitions (completed) | 8 | 11.2 | 9 | 10.4 | 8 | 9.8 | ||||||||||||||||||
International equity new issues | 4 | 8.5 | 6 | 8.6 | 2 | 13.0 | ||||||||||||||||||
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The Business Groups |
These major business lines are underpinned by our global distribution and our highly regarded research capabilities, as acknowledged by our number one ranking for Fixed Income Strategy inThomson Financial’sExtel survey and number one ranking inInstitutional Investorfor mortgage-backed securities (MBS) research.
In 2002,2003, we maintained our presence in the international and US debt capital markets through our ability to execute across a range of currencies and products and our placing capabilitiesto distribute those products in the global institutional and retail markets. We have continued not pursuedto pursue volume and have not chased mandates through large-scale lending, nor have we issued in large volume where mandates are awarded on price.
LoanStrategic opportunities
Markets are showing signs of a pick-up in activity, especially in the US and Asia, giving us reason for cautious optimism. With our diversified business portfolio,
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The Business GroupsUBS WarburgInvestment Bank
Private Equity
Our e-commerce capabilities are based around our client online portal. This site gives our clients direct access to prices, research, trade ideas and analytical tools through applications such as ResearchWeb - - our equity research site, DealKey, an internet facility for managing equity and equity-linked new issues, and CreditDelta, our credit portfolio management product.
We believe that markets will continue to be difficult until at least the second half of 2003,
which will have a short-term negative impact, particularly on our equities and investment banking businesses. Nonetheless, we are confident that as recent new investment banking hires build their productivity, and as the momentum we have built in the European and US markets pays dividends, we will continue to gain market share in 2003.
42
UBS Capital is the Group’s private equity business. It now focuses on managing its existing portfolio to maximize value.
Business |
UBS Capital investedThe Private Equity business seeks to maximize the value of its investments through active portfolio management and to capitalize on orderly exit opportunities. The portfolio comprises majority and minority stakes in unlisted companies withsubstantially privately owned companies. These investments were made, either directly or as a viewlimited partner in third-party funds, in a number of different regions and sectors. In our direct investments we support management teams to preparing them for salegrow earnings, rationalize costs and enhance the value of the company before selling to a trade or financial buyers, and, where appropriate, stagingbuyer, or through an Initial Public Offering (IPO). A review in late 2001 and early 2002, carefully considered the strategic future of UBS Capital in light of the generally negative market environment, the overall changes occurring in the private equity industry and our assessment of the long-term opportunities inherent in the business. After the review, and in light of UBS’s focusIPO.
Organizational structure
The Private Equity business is managed on advisory services, we decided that UBS Capital should focus on managing down its existing portfolio, capitalizing on exit opportunities where they arise and minimizing the level of new direct investments.
UBS Capital is structured along regional lines and isa global basis, fully integrated within the UBS Warburg Business Group.management and control structures of the Investment Bank. Its portfolio in Asia and Europe mostlymainly comprises direct balance sheet investments. UBS CapitalPrivate Equity in the US is focused on both direct balance sheet investments and the UBS Capital Americas
fund. Around 30%20% of UBS Capital’sour portfolio is invested in third partythird-party funds, which are overseen by a dedicated portfolio management team.
Investment portfolio |
UBS CapitalPrivate Equity had a total investment portfolio of CHF 3.12.3 billion on 31 December 2002,2003, measured by the historichistorical cost of investments less divestments, returns of capital and permanent impairments. The fair value of the portfolio at the same date was CHF 3.82.9 billion.
exposure to the private equity UBS Capital gradually reducedasset class, undrawn commitments were reduced to CHF 2.11.5 billion on 31 December 20022003 from CHF 3.02.1 billion a year earlier, while obtainingearlier.
Business outlook
The Private Equity business will continue to focus on managing existing assets in order to maximize value for UBS shareholders and for existinginvestors in UBS Capital funds.
UBS Capital’s Consistent with the de-emphasis of this asset class, we continue to capitalize on orderly exit opportunities for investments when they arise and to reduce exposure to private equity funds. As the portfolio primarily comprises late stage investments that are spread throughout Europe,shrinks, our performance will continue to be linked to the US and Asia and are typically held for three to six years. UBS Capital’s exit strategies include direct sales to strategic buyers, initial public offerings, leveraged recapitalizations and sales to other financial sponsors.
Conditionseconomic conditions prevailing in the international capital markets and in the global economy more generally, are expected to remain harsh for some time. UBS Capital’s strategy is to manage existing assets in order to reduce balance sheet risk. The investment teams managing UBS Capital’s assets will endeavor to obtain the best possible returns for UBS and for investors in its private equity funds.of our underlying investments.
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The Business Groups |
The Business GroupsUBS Warburg
The Business Groups Business Group Business Organizational structure Management business unit. The US private client business became 38 Wealth Management USA Officer to Mark B. Sutton effective 1 January 2004. Sutton was previously President and Chief Operating Officer of Wealth Management USA. Grano will remain Chairman of our Business Group until the middle of 2004. Legal in a position to provide them with a complete wealth management platform – embracing both the assets and liabilities of our clients. Our asset-gathering strategy emphasizes the importance of generating recurring fees from advice and products, as fee-based relationships provide us with a source of regular, low volatility revenues. 39 The Business Groups a visible example of the success of our strategy, a leading industry survey indicated our share of the US private clients market grew to expertise of our financial advisors. All new client relationship management, and legal and compliance We offer clients wealth management services that meet individual investment Investment productsUBS CapitalPrivate Equity investment portfolio As at CHF million1 31.12.02 31.12.01 31.12.00 pre-1994 54 85 65 1994 97 190 253 1995 112 214 272 1996 63 202 166 1997 134 207 520 1998 373 722 842 1999 636 1,123 1,490 2000 1,119 1,781 1,941 2001 438 487 2002 58 3,084 5,011 5,549 As at CHF million1 31.12.03 31.12.02 31.12.01 pre-1994 46 54 85 1994 4 97 190 1995 40 112 214 1996 44 63 202 1997 95 134 207 1998 91 373 722 1999 258 636 1,123 2000 986 1,119 1,781 2001 284 438 487 2002 79 58 2003 386 2,313 3,084 5,011 Investment,investments, defined as cost less disposals and impairments.UBS CapitalPrivate Equity investment portfolio As at CHF million1 31.12.02 31.12.01 31.12.00 North America 1,302 2,134 2,356 Europe 1,238 2,018 2,333 Latin America 189 339 382 Asia Pacific 355 520 478 Total 3,084 5,011 5,549 As at CHF million1 31.12.03 31.12.02 31.12.01 North America 1,157 1,302 2,134 Europe 794 1,238 2,018 Latin America 108 189 339 Asia Pacific 254 355 520 2,313 3,084 5,011 Investment,investments, defined as cost less disposals and impairments.UBS CapitalPrivate Equity investment portfolio As at CHF million1 31.12.02 % of Portfolio 31.12.01 % of Portfolio 31.12.00 % of Portfolio Consumer related 517 17 773 15 1,023 18 Transportation 85 3 522 10 640 12 Communications 240 8 414 8 380 7 Computer related 342 11 833 17 819 15 Energy 83 3 152 3 190 3 Other electronics related 174 6 247 5 247 4 Other manufacturing 286 9 94 2 106 2 Chemicals and materials 8 0 54 1 106 2 Industrial products and services 746 24 1,360 27 1,361 25 Others 603 19 562 12 677 12 Total 3,084 100 5,011 100 5,549 100 CHF million, As at except where indicated1 31.12.03 % of Portfolio 31.12.02 % of Portfolio 31.12.01 % of Portfolio Consumer-related 383 17 517 17 773 15 Transportation 17 1 85 3 522 10 Communications 170 7 240 8 414 8 Computer-related 132 6 342 11 833 17 Energy 0 0 83 3 152 3 Other electronics-related 145 6 174 6 247 5 Other manufacturing 59 3 286 9 94 2 Chemicals and materials 2 0 8 0 54 1 Industrial products and services 422 18 746 24 1,360 27 Others 983 42 603 19 562 12 2,313 100 3,084 100 5,011 100 Investment,investments, defined as cost less disposals and permanent impairments.4437UBS PaineWebberWealth Management USAUBS PaineWebberWealth Management USA
Chairman, and CEO, UBS PaineWebberWealth Management USAPresident and Chief Operating OfficerUBS PaineWebberCEO, Wealth Management USAUBS PaineWebber,As one of the top wealth managers in the US, provideswe provide a complete set of sophisticated wealth management services through consultative relationships withto our affluent and high net worth clients.reporting adjusted for significant financial eventsReporting CHF million, except where indicated Wealth Management USA For the year ended or as at 31.12.03 31.12.02 Total operating income 5,182 5,548 Total operating expenses 5,187 7,348 1 (5 ) (1,800 ) Net new money (CHF billion) 21.1 18.5 Interest and dividend income (CHF billion) 15.8 17.9 Invested assets (CHF billion) 634 584 Headcount (full-time equivalents) 18,016 19,563 UBS PaineWebber CHF million, except where indicated For the year ended 31.12.02 31.12.01 Income 5,561 6,391 Credit loss expense (13 ) (18 ) 5,548 6,373 Personnel expenses 4,245 5,019 General and administrative expenses 1,263 1,441 Depreciation 149 124 Amortization of goodwill and other intangible assets 457 502 6,114 7,086 (566 ) (713 ) 632 693 Cost/income ratio before goodwill (%) 102 103 89 90 Net new money (CHF billion) 18.5 33.2 Interest and dividend income (CHF billion) 17.9 21.5 Invested assets (CHF billion) 584 769 Headcount (full-time equivalents) 19,563 20,413 1DetailsIncludes: writedown of significant financial events can be found in the Financial Report 2002.2Acquisition costs include goodwill and intangible asset amortization and related funding, netPaineWebber brand name of risk-free return on the corresponding equity allocated, and retention payments.45The Business GroupsUBS PaineWebberBusinessUBS PaineWebber, withWith CHF 584634 billion in invested assets and nearly 2 million private client relationships, focusesour focus is on providing wealth management services to the core affluent (clients with more than USD 500,000 in investable assets) and to high net worth individuals (upwards of(clients with more than USD 5 million in investable assets). We have a network of almost 9,0007,800 financial advisors in 365366 branch office locations. Our strength lies in the emphasis we put on buildinglocations that build and maintainingmaintain consultative relationships with ourtheir clients.When PaineWebber merged with UBS in November 2000 with UBS,and its US private clients business became a separate business unit of UBS Warburg.within UBS’s Investment Bank. At the same time, PaineWebber’s Capital Markets Group was integrated intowithin the Corporate and Institutional ClientsInvestment Banking & Securities business unit of UBS Warburg; thewhile its asset management unit (formerly(then called Mitchell Hutchins) moved into UBSthe Global Asset Management and mostBusiness Group. Most non-US private client businesses became part of the non-USour Wealthpart of UBS Private Banking. Onan independent Business Group on 1 January 2002, UBS PaineWebber became a separate Business Group within UBS. Our business comprises the US Private Client Group, which offers a full range of wealth management2002.affluent investorsthe clients of 148 US broker dealer firms.United States.Federal Deposit Insurance Corporation (FDIC), the bank operates as a fully integrated unit of our Business Group and employed 18 people on 31 December 2003. In addition, there were 21 regional lending managers in major US metropolitan markets. UBS Bank USA offers FDIC-insured deposits and collateralized lending products.
Geographical presence in key marketsStructurestructureUBS PaineWebber operatesIn the US, we operate through direct and indirect subsidiaries of UBS. SecuritiesUBS and securities activitiesin the US are conducted through fourthree registered broker-dealers.Competitors UBS PaineWebber competesWe compete against other wealth management firms in the US, including Citigroup’s Smith Barney business, Morgan Stanley and Merrill Lynch.Clients and strategy Our business strategy is based on gathering new assets, which we achieve by focusing on meetingWe aim to meet the investment needs of core affluent and high net worth clients in the US. During 2002,Now, with the launch of UBS Bank USA, we are18.521.1 billion in net new money, excluding interest and dividends, and, according todividends. As
Wealth Management USA13.8%15.2% in 2003 from 12.8%14.4% in 2001.46Our asset-gathering strategy also emphasizes the importance of generating recurring fees from advice and products. Fee-based relationships provide UBS PaineWebber with a source of regular, low volatility revenues. Another component of our asset-gathering strategy is the work of the Corporate Employee Financial Services group, which provides stock option financing and other services to many of the largest US corporations. This corporate relationship, in turn, helps create relationships with core affluent and high net worth corporate executives. At theThe heart of the relationship between theclientour clients and thetheir financial advisoradvisors is our consultative process, induring which each financial advisor profiles and creates an investment plan for his or her client based on the client’s individual needs, requirements and goals. Centered around an asset allocation strategy and consideringIt takes the client’s risk tolerance into account, and follows the appropriate asset allocation strategy. The plan is designed to help the client accumulate, preserve and transfer wealth. AfterOnce the plan is put in place, there areadvisors hold regular portfolio reviews that help ensure it remains on track to meet the client’s long-term goals.goals are met.capabilities47The Business GroupsUBS PaineWebberfinancial advisors undergo a training program that is designed to provide them with the necessary financial planning, analysis,expertise. This is a continuousknowledge. Moreover, this process and does not end when the financialan advisor entersstarts working at a branch office. In our– it is continuous. We believe experience shows that our training programs are a key factor in both developinghelping to develop long-term, mutually beneficial relationships with our clients as well as in retaining our financial advisors.clients.made in fourth quarter 20022003 put our revenue per financial advisor at 16.5%15% above the industry average at the end of 2002.on 31 December. By comparison, in second quarter 2000 (when we announced the merger withbecame part of UBS), our productivity stood 4% above the average.Products and services needs. We haveneeds with an open architecture product platform that gives our clientsthem investment products from both UBS and third partythird-party providers —– where and when appropriate. This ensures that financial advisors and clients have a comprehensive source of investment solutions at their disposal. Our array of wealth management services includeincludes financial planning and wealth management consulting,consulting. It also comprises transaction-based services such as securities brokerage, as well as asset-based and advisory services such as discretionary(discretionary and non-discretionary portfolio management,management). Furthermore, we also provide money market accounts and fiduciary products, FDIC-insured deposits and lending products, including collaterizedcollateralized loans and mortgagesmortgages.2002, in order2003, we continued to meet client needs for innovative typesdevelop our equity-linked note products as well as issuing a variety of products, we launched two equity-linked investments: the Enhanced Appreciation Security, linked to 20 blue chip stocks,principal protected notes, enhanced appreciation securities, and a Principal Protected Note, linked to the S&P 500 Index.hedge fund underlying structured products.can choose from an arrayalso have a wide selection of fixed income securities to choose from, including government,gov-
40
The Business Groups |
ernment, mortgage-backed, corporate and municipal bonds, as well as preferred stock. As one of the leading US underwriters of municipal bonds, an investment class that is particularly attractive to many core affluent and high net worth investors, we offergive clients access to new issue offerings andas well as the secondary market. Our Municipal Securities Group is a complete origination, structuring and distribution team. It assists municipalities and agencies in addressing their funding needs by accessing the debt markets, and distributing securities through the UBS PaineWebberour network. For 2002,In 2003, the Group was ranked second in senior negotiated volume.
Lending products
revolving lines of credit that offer competitive interest rates and are secured by the client’s investment portfolio.
48
to can offer a full array of mortgage products that helpshelp meet our clients’ home financing needs.
For corporations and corporate executives
For financial advisors, 2002 sawToday, we are the introductionfifth-largest full-service brokerage firm in the US in terms of a number of tools to leverage the asset-gathering technology available on ConsultWorks, the firm’s web-based workstation. Chief among these was the UBS PaineWebberAdvisor,smwhich can help lead financial advisors step-by-step through our consultative process with both clients and prospects.advisors. In 2003, we will introduce Consultworks2 that will give our financial advisors the ability to con-
duct comprehensive profiling and asset allocation, and offer investment recommendations.
In 2003,2004, we plan to remain focused on further increasing our market share of US household financial assets and capitalizing on theour enhanced capabilities and balance sheet strength thatas well as the merger with UBS has brought.
41
The Business Groups
Corporate Center
Corporate Center
Corporate Center creates sustainable value for shareholders and stakeholders by partnering with the Business Groups to ensure that the firm operates as an effective and integrated whole with a common vision and set of values.
Business Group Reporting
CHF million, except where indicated | Corporate Center | |||||||
For the year ended or as at | 31.12.03 | 31.12.02 | ||||||
Total operating income | 1,151 | 2,676 | ||||||
Total operating expenses | 1,781 | 2,399 | ||||||
Business Group performance before tax | (630 | ) | 277 | |||||
Private Banks & GAM | ||||||||
Performance before tax | 208 | 384 | ||||||
Invested assets (CHF billion) | 84 | 70 | ||||||
Net new money (CHF billion) | 7.2 | 4.2 | ||||||
Headcount (full-time equivalents) | 1,672 | 1,702 | ||||||
Additional information | ||||||||
Total headcount (full-time equivalents) | 2,878 | 2,887 | ||||||
4942
The Business Groups | ||
74%">
Corporate Center’s aim is to ensure that all our businesses act as coherently and effectively as possible.
Corporate Center | |||||||||
CHF million, except where indicated | |||||||||
For the year ended | 31.12.02 | 31.12.01 | |||||||
Income | 1,315 | 800 | |||||||
Credit loss recovery | 249 | 236 | |||||||
Total operating income | 1,564 | 1,036 | |||||||
Personnel expenses | 645 | 592 | |||||||
General and administrative expenses | 601 | 537 | |||||||
Depreciation | 473 | 372 | |||||||
Amortization of goodwill and other intangible assets | 24 | 24 | |||||||
Total operating expenses | 1,743 | 1,525 | |||||||
Business Group performance before tax | (179 | ) | (489 | ) | |||||
Headcount (full-time equivalents) | 1,185 | 1,132 | |||||||
Aims and objectives
Our commitment to a strong, integrated business model means that our portfolio of complementary businesses are managed together to optimize shareholder value, making the whole worth more than the sum of its parts.
Organizational structure
The key functions within Corporate Center avoids ownership ofare:
Group Controller
Chief Risk Officer/Chief Credit Officer
50
agement and control principles can be found in the “Risk Management and Control” section of this Handbook.
Group Treasurer
Group Human Resources
Group Controller
ensures a central treatment of UBS’s real estate activities and controls their impact on Group results as well as on its capital and tax position.
Group Human Resources
Chief Communication Officer
Group Legal Services
51
The Business Groups
Corporate Center
52 In 2003, UBS announced a number of senior executive appointments and succession plans outlined in detail in the Strategy and Structure section on page 13. Pertaining to Corporate Center, Clive Standish will become UBS’s Chief Financial Officer (CFO) from 1 April 2004. As
CFO, Standish will lead our finance, risk, treasury, and strategy functions. In 2004, Scott Abbey will take up the new Chief Technology Officer (CTO) function, which was created to integrate information technology infrastructure (ITI) functions across the firm.
In February 2003, UBS announced the creation of a holding company for its five fully owned private banking subsidiaries (Armand von Ernst, Banco di Lugano, Bank Ehinger, Cantrade and Ferrier Lullin) and GAM, our specialist asset manager. The move was made to assist them in growing faster, support them in integrating their activities, and help them to deliver their full value creation potential. They can
also target economies of scale not achievable by each organization on its own. Private Banks & GAM may also be able to expand their presence further by playing a future role in the consolidation of the Swiss wealth management industry.
to form Ehinger & Armand von Ernst –headquartered in Zurich, with branches in Basel and Bern. It is one of the most important providers of private banking services to the Swiss-German region. In late 2003, Ferrier Lullin acquired Banque Notz Stucki S.A., which specializes in wealth management for private individuals. The acquisition adds approximately CHF 2 billion in invested assets.
44
45
Financial Management |
Risk Management and Control |
RiskTaking risk is an integral part of all our activities. Excellencebusiness. Therefore our overriding goal is not to minimize risk, but to achieve an appropriate balance between risk and return, limiting the scope for adverse variations in risk management and control is a key success factor and requires everyone’s commitment within our organization.earnings through exposure to major individual ‘stress’ events.
UBS’sGood risk management and control lie at the heart of banking and are an integral part of providing consistent, high-quality returns for shareholders. A bank that fails to adequately manage and control its risks will suffer financial losses. Potentially more devastating is the resultant damage to its reputation, which can undermine its share price, its client base and its ability to retain top talent, and may force regulators to impose constraints upon its business. We recognize that taking risk is core to our business, and aim to achieve an appropriate balance between risk and return. In our day to day business and in the strategic management of our balance sheet and capital, we therefore seek to limit the scope for adverse variations in our earnings and exposure to stress events arising from any of the material risks we face.is set out in the firm’s Risk Management and Control Principles, which lay the foundations on which we build our risk culture and risk process.five principles.Management Accountability.The management of each business throughout UBS is responsible accountablefor the risks it assumes and for the continuous and active management of all risk exposures, so that risk and return are prudently balanced.Controls.controlAn independent control process is implemented when required by the nature of the inherent risks and the incentive structure of the business processes. The control functions are responsible for providing an independent and objective check on risk-taking activities to safeguard the integrity of the entire risk management and control process.Risk Disclosure. Comprehensive, transparent and objectiverisk reporting and disclosureto senior management, the Board of Directors, shareholders, regulators, rating agencies and to shareholdersother stakeholders is the cornerstone of the risk control process.Earnings Protection.protect our earnings Operating, we set limits, are set to quantify risk appetite and allocated among business lines to controlwhere appropriate. These limits not only govern normal periodic adverse results in an attempt to limit such losses relative to the potential profit of each business. The Group’s risk capacity is expressed throughour businesses but also help protect us from stress loss limits with the aim of protecting UBS fromevents which might cause unacceptable damage to our annual earnings capacity,capaci-
ty, our dividend paying ability and, ultimately, our reputation and ongoing business viability.
An integrated approach to riskmanagement and control
Key responsibilities
54
Managementrisk principles and Control Principles), and for the determination of our risk capacity andcapacity.
46
Financial Management | ||
UBS Risk Management and country risk limits.Control Framework
necessary, given the aggregate risk profile of the portfolio or the risks of specific positions.
The risk control process
– | weidentify risk |
– | we |
55
– | we establishrisk policiesconsistent with evolving business requirements and international best practice |
– | we have comprehensiverisk reportingto stakeholders, and to management at all levels, against the approved risk control framework and, where applicable, limits |
– | we imposerisk control |
Coordinated processes coveringinvolving all inherent risk categories whichrelevant control and logistics functions are applied before commencement of any new business or significant change in business, and before the execution of any transaction which is complex or unusual in its structure or motivation, including transactions which are sensitive to or motivated by tax, legal, regulatory or accounting considerations. These processes, which involve the Business, Risk Control, Legal, Compliance, Financial Control and Logistics functions, ensure that all these critical elements are addressed, including the assurance that transactions can be booked in a way that will permit appropriate ongoing risk monitoring, reporting and control.
47
Financial Control and the Logistics Areas,notably Operations, which are critical to establishing an effective control environment.
The risks we take
The risks we take | ||
Business risks are the risks associated with a chosen business strategy, including business cycles, industry cycles, and technological change. They are the sole responsibility of the relevant business, and are not subject to an independent control process. They are, however, factored into the firm’s planning and budgeting process. | ||
The ‘primary’ and ‘operational’ risks inherent in our business activities are subject to independent risk control. Primary risks are exposures deliberately entered into for business reasons which are actively traded and managed. Operational risk is the risk of loss arising from inadequate or failed internal processes, people or systems, or from external causes, deliberate, accidental or natural. These risks are not actively taken, but arise as a consequence of business undertaken and as a consequence of internal control gaps, which cannot be entirely eliminated. | ||
Primary risks are credit risk, market risk and funding and liquidity risk: | ||
–credit riskis the risk of loss resulting from client |
–market riskis exposure to observable market variables such as interest rates, exchange rates and equity markets, and to price movements on securities and other obligations which we trade |
– |
Operational risk can arise in a number of ways: | ||
–transaction processing riskarises from errors, failures or shortcomings at any point in the transaction process, from deal execution and capture to final settlement |
–compliance riskis the risk of financial loss due to regulatory fines or penalties, restriction or suspension of business, or costs of |
mandatory corrective action. Such risks may be incurred by not adhering to applicable laws, rules and regulations, local or international best practice (including ethical standards), or UBS’s own internal standards
– | legal riskis the risk of financial loss resulting from the non-enforceability of UBS’s actual or anticipated rights arising under |
– | liability riskis the risk that we, or someone acting on our behalf, fail to fulfill the obligations, responsibilities or duties imposed by law or assumed under a contract and that claims are therefore made against us |
– | security riskis the risk of loss of confidentiality, integrity or availability of our information or other assets |
– | tax riskis the risk of additional tax arising from technically incorrect positions taken on tax matters, or failure to comply with tax |
56
withholding or reporting requirements on behalf of clients or employees; and the risk of claims by clients or counterparties as a result of UBS involvement in tax sensitive products or transactions. |
How we measure risk
48
Financial Management |
viability. The identification of stress events and scenarios to which we are vulnerable and an assessment of their potential impact, and in particular the danger of aggregated losses from a single event through concentrated exposures, is therefore a key component of the risk control process. Formal
57
liosavoiding the temptation to ignore risks that cannot be properly quantified, and for country risk, but we use a variety of scenariosplace great emphasis on qualitative controls and techniques, which we continueprocesses to refine,help in order to identify other areas of risk concentrationidentifying and potential vulnerability to stress events.assessing both quantifiable and unquantifiable risks.
Risk reporting
5849
Capital and RiskFinancial Management
Risk Analysis
Credit risk |
Credit risk represents the loss which UBS would suffer if a client or counterparty failed to meet its contractual obligations. It is inherent in traditional banking products —– loans, commitments to lend and other contingent liabilities, such as letters of credit —– and in “traded products” — forward contracts,‘traded products’ – derivative contracts such as forwards, swaps and options, and repo transactions and securities borrowing and lending relationships. Positionstransactions.“tradable assets” such as bondsthe market values of tradable assets (securities and equities, including both direct holdings and synthetic positions through derivatives, also carry credit risk, but where they areother obligations in tradable form held for trading and are marked to market they fall under the market risk limits and controls described under “Market risk” on page 71 below. For completeness, they are included, where applicable,trading) resulting from changes in the credit risk exposures reported in “Compositionquality of credit exposures” on pages 63individual obligors are considered to 68 below.be market risks – see page 60.isare governed by a Group Credit Policy Framework, and by detailed credit policies and procedures developed for the Group and within the Business Groups.procedures. and unified approach with appropriate checks and balances, all Business Groups wheretaking material credit risk is taken have independent credit risk control (CRC) functions. They areunits, headed by chief credit officersChief Credit Officers (CCOs) reporting functionally to the Group CCOCCO. They are responsible for counterparty ratings and credit risk assessment.Business Group senior management.industries and countries. Disciplined processes are in place, within the Business Groups and centrally,Corporate Center, to ensure prompt identification, accurate assessment, proper approval and consistent monitoring and reporting of credit risk. Senior business management, the GEB and the Chairman’s Office are provided with regular, standardized reports of aggregate Business Group credit risk exposure by the CRC organization as part of a comprehensive risk reporting framework. The approval and monitoring of new counterparties, and of new transactions giving rise to
Credit risk of counterparties and groups
59
Capital and Risk ManagementRisk Analysis
this analysis,exposure’, a 95% confidence statistical measure of the exposure in each counterparty portfolio.derived from this model.
Portfolio measures of credit riskExpected loss
Expected loss
50
Financial Management |
UBS internal rating scale and
mapping to external ratings
Moody’s | Standard | |||||
Investor | and | |||||
UBS | Services | Poor’s | ||||
Rating | Description | equivalent | equivalent | |||
0 and 1 | Investment | Aaa | AAA | |||
2 | grade | Aa1 to Aa3 | AA+ to AA– | |||
3 | A1 to A3 | A+ to A– | ||||
4 | Baa1 to Baa2 | BBB+ to BBB | ||||
5 | Baa3 | BBB– | ||||
6 | Sub-investment | Ba1 | BB+ | |||
7 | grade | Ba2 | BB | |||
8 | Ba3 | BB– | ||||
9 | B1 | B+ | ||||
10 | B2 | B | ||||
11 | B3 | B– | ||||
12 | Caa to C | CCC to C | ||||
13 | Impaired and | D | D | |||
14 | defaulted | D | D | |||
will default, our current and likely future exposure to that counterparty and the likely severity of the loss should default occur.
UBS internal rating scale andmapping to external ratings
The We assess the default probabilitiesof individual coun-terparties are assessed by means ofcounterparties using rating tools tailored to the various categories of counterparty. For the major part of the business within UBS Wealth Management & Business Banking,counterparty, and from these we usederive a statistical approach or “score card” to form groups of clients with similar propensity to default. UBS Warburg, with its less homogeneous client base, uses an approach under which credit officers assess the credit standing of counterparties based on guidelines and an analytical format or “template”, designed to ensure consistency of ratings across the Business Group. In all cases, the analysis is founded on an assessment of both financial ratios and qualitative factors. The result of this counterparty specific analysis is expressed as a rating.
60
imply that UBS expects this number of defaults in any given period.
account the seniority of the claim, and collateral or other credit mitigation where available.
Statistical and stress loss
Composition of credit exposures
Credit is an integral part of many of our business activities.
51
Financial Management
Risk Analysis
Total exposure
Wealth Management | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | & Business Banking | Investment Bank | Wealth Management USA | Other 1 | UBS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||||||||||||||||
Loans utilization (gross) | 174,772 | 169,106 | 175,693 | 55,366 | 61,718 | 61,229 | 13,116 | 12,857 | 18,246 | 4,953 | 5,689 | 6,816 | 248,207 | 249,370 | 261,984 | |||||||||||||||||||||||||||||||||||||||||||||
Contingent claims | 11,424 | 11,448 | 12,839 | 3,201 | 4,407 | 11,640 | 355 | 430 | 542 | 583 | 309 | 466 | 15,563 | 16,594 | 25,487 | |||||||||||||||||||||||||||||||||||||||||||||
Unutilized committed lines | 1,800 | 1,984 | 2,509 | 44,670 | 36,439 | 47,355 | 80 | 811 | 715 | 73 | 72 | 29 | 46,623 | 39,306 | 50,608 | |||||||||||||||||||||||||||||||||||||||||||||
Total banking products | 187,996 | 182,538 | 191,041 | 103,237 | 102,564 | 120,224 | 13,551 | 14,098 | 19,503 | 5,609 | 6,070 | 7,311 | 310,393 | 305,270 | 338,079 | |||||||||||||||||||||||||||||||||||||||||||||
Unsecured OTC products | 1,385 | 1,682 | 1,961 | 53,649 | 55,002 | 64,416 | 573 | 55,607 | 56,684 | 66,377 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other derivatives (secured or exchange-traded) | 1,190 | 712 | 2,317 | 14,535 | 10,850 | 12,150 | 1 | 3 | 15,726 | 11,565 | 14,467 | |||||||||||||||||||||||||||||||||||||||||||||||||
Securities lending / borrowing | 1,093 | 917 | 45 | 22,220 | 11,962 | 14,575 | 23,313 | 12,879 | 14,620 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Repo / Reverse-Repo | 26 | 14 | 67 | 19,546 | 21,744 | 18,948 | 151 | 439 | 19,723 | 22,197 | 19,015 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total traded products 2 | 3,694 | 3,325 | 4,390 | 109,950 | 99,558 | 110,089 | 152 | 442 | 573 | 114,369 | 103,325 | 114,479 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total credit exposure, gross | 191,690 | 185,863 | 195,431 | 213,187 | 202,122 | 230,313 | 13,703 | 14,540 | 19,503 | 6,182 | 6,070 | 7,311 | 424,762 | 408,595 | 452,558 | |||||||||||||||||||||||||||||||||||||||||||||
Total credit exposure, net of allowances | 188,798 | 182,148 | 189,929 | 212,072 | 200,620 | 227,949 | 13,678 | 14,511 | 19,469 | 6,178 | 6,061 | 7,298 | 420,726 | 403,340 | 444,645 | |||||||||||||||||||||||||||||||||||||||||||||
traded products. Traded products exposure to lower rated counterparties is generally collateralized or otherwise supported.
Wealth Management & Business Banking
tors, which reflects our position as a consequencemarket-leading lender to this segment of predominantly small-to medium-sized enterprises in Switzerland. During 2003, we have again focused on improving the quality of our credit portfolio, and further reducing individual and sector concentrations.
52
Financial Management |
Wealth Management & Business Banking:
distribution of gross loans across counterparty rating and loss given default (LGD) buckets
Weighted | ||||||||||||||||||||||||
Gross | Loss given default buckets | Average | ||||||||||||||||||||||
CHF million | Exposure | 0-25% | 26-50% | 51-75% | 76-100% | LGD (%) | ||||||||||||||||||
0 1 2 3 4 5 6 7 8 9 10 11 12 | 1,019 567 3,611 17,024 6,261 104,355 8,618 11,124 9,309 4,934 1,065 217 278 | 469 318 2,101 10,807 2,531 96,942 2,899 3,899 2,452 1,414 249 33 133 | 404 56 1,000 1,566 1,727 3,484 3,657 4,497 5,013 2,470 520 115 92 | 146 188 497 3,142 1,966 2,280 1,768 1,335 1,261 740 216 56 25 | 0 5 13 1,509 37 1,649 294 1,393 583 310 80 13 28 | 34 37 32 27 38 25 39 41 38 39 42 44 35 | ||||||||||||||||||
Total | 168,382 | 124,247 | 24,601 | 13,620 | 5,914 | 29 | ||||||||||||||||||
Investment grade Sub-investment grade Impaired and defaulted | 132,837 35,545 6,390 | 113,168 11,079 | 8,237 16,364 | 8,219 5,401 | 3,213 2,701 | |||||||||||||||||||
Total gross loans | 174,772 | |||||||||||||||||||||||
53
Financial Management
Risk Analysis
Investment Bank
billion loans at 31 December 2002 and CHF 120 billion total and CHF 61 billion loans at 31 December 2001. In the last few years, the Investment Bank has engaged in a substantial credit risk hedging program through which we have effectively reduced our banking products exposure at 31 December 2003 by CHF 22 billion. This was achieved mainly by transferring the underlying risk to high-grade market counterparties using credit default swaps. The table below provides a view of the net banking products exposure, reflecting the effect of these credit risk hedging activities. To illustrate the effects
Investment Bank: credit hedging, banking products
As at 31.12.2003 | ||||||||||||||||
Gross | Credit | Other Risk | Net | |||||||||||||
CHF million | Exposure1 | Hedges2 | Mitigants3 | Exposure | ||||||||||||
Investment grade | 39,227 | (18,892 | ) | 609 | 22,314 | |||||||||||
Sub-investment grade | 22,306 | (3,508 | ) | (498 | ) | 18,626 | ||||||||||
Impaired and defaulted | 1,495 | 0 | (889 | ) | 615 | |||||||||||
Total banking products exposure | 63,028 | (22,400 | ) | (778 | ) | 41,555 | ||||||||||
Note: Columns cannot be totaled as net exposure is set to zero in case of over-hedging.
Investment Bank: distribution of net take and hold banking products exposure1
across counterparty rating and loss given default (LGD) buckets
Net | Weighted | |||||||||||||||||||||||
Credit | Loss given default buckets | Average | ||||||||||||||||||||||
CHF million | Exposure 2 | 0–25% | 26–50% | 51–75% | 76–100% | LGD (%) | ||||||||||||||||||
Not rated | 36 | 22 | 14 | 0 | 0 | 27 | ||||||||||||||||||
0 and 1 | 1,875 | 0 | 1,875 | 0 | 0 | 49 | ||||||||||||||||||
2 | 4,019 | 217 | 3,790 | 0 | 12 | 47 | ||||||||||||||||||
3 | 5,520 | 2,513 | 2,767 | 238 | 2 | 38 | ||||||||||||||||||
4 | 3,887 | 63 | 3,757 | 67 | 0 | 50 | ||||||||||||||||||
5 | 1,694 | 573 | 1,121 | 0 | 0 | 45 | ||||||||||||||||||
6 | 989 | 345 | 627 | 5 | 12 | 44 | ||||||||||||||||||
7 | 5,227 | 4,538 | 629 | 60 | 0 | 15 | ||||||||||||||||||
8 | 4,731 | 4,255 | 341 | 0 | 135 | 14 | ||||||||||||||||||
9 | 3,177 | 2,095 | 872 | 198 | 12 | 25 | ||||||||||||||||||
10 | 797 | 119 | 636 | 36 | 6 | 46 | ||||||||||||||||||
11 | 492 | 140 | 316 | 24 | 12 | 48 | ||||||||||||||||||
12 | 491 | 163 | 310 | 18 | 0 | 34 | ||||||||||||||||||
Total non-impaired | 32,935 | 15,043 | 17,055 | 646 | 191 | 34 | ||||||||||||||||||
Investment grade | 17,031 | 3,388 | 13,324 | 305 | 14 | |||||||||||||||||||
Sub-investment grade | 15,904 | 11,655 | 3,731 | 341 | 177 | |||||||||||||||||||
Impaired and defaulted | 609 | |||||||||||||||||||||||
Total take and hold | 33,544 | |||||||||||||||||||||||
54
Financial Management | ||
55
Financial Management
Risk Analysis
of credit hedging and other risk mitigation, the rating distribution graph on the previous page shows exposures before and after risk mitigation. Additionally, in the matrix on page 54, we show the distribution of Investment Bank’s net banking products exposure across rating grades and LGD buckets. In this portfolio, the LGD for senior claims is normally between 40% and 50%, which explains the concentration in the 26–50% bucket. The significant exposure in the sub-investment grade 0–25% bucket is mainly comprised of short-term loans to US mortgage originators, secured on their mortgage portfolios, pending securitization. Exposure distribution across counterparty ratings shown elsewhere in this section refers only to gross exposure and probability of default, without reference to the likely severity of loss or loss mitigation from collateral or credit hedges.
sory or underwriting clients, avoiding pure commercial lending, and thereby substantially reducing our international transactional businesses. credit exposure. With the increasing strength of the business franchise with such core clients, and the improvement in market conditions, we expect to selectively allocate moderately higher capital resources to support our business growth. Any increase in credit exposure will, however, be gradual and balanced across our lending business for core corporate clients, derivatives activity and loan underwriting.
Wealth Management USA
Settlement risk
Settlement risk arises in transactions involving the exchange of values when we must honor our obligation to deliver cash or securities without first being able to determine that we have received the counter-value. ThisThe most significant element of our settlement risk is particularly significant inarises from foreign exchange and precious metals transactions, and we limit and monitor the risk on a continuous basis against settlement limits for each counterparty based on our assessment of their credit standing. Settlement risk reduction is a high priority and we continue to work to achieve shorter settlement cycles from payment release to reconciliation, and to reduce exposure by establishing risk reduction arrangements with counterparties, such as payment netting and covered settlements.
56
Financial Management | ||
Country risk
The CRC functionCCO organization at the Corporate Center assigns ratings to all countries to which we have exposure. Like the counterparty ratings, the sov-
61
Capital and Risk ManagementRisk Analysis
ereignsovereign ratings express the probability of the occurrence of a country risk event that would lead to an impairment of UBS’sour exposures. The default probabilities and the mapping to the ratings of the major rating agencies are the same as for counterparty credit risks (see table on page 60)51), the three lowest ratings being designated “distressed”‘distressed’.
Country risk exposure
Emerging market exposure by the Board of Directors.major geographical area and product type
CHF million | Total | Banking products | Traded products | Tradable assets | ||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||||||||||||||||
Emerging Europe | 1,833 | 2,005 | 1,954 | 441 | 390 | 632 | 606 | 532 | 750 | 786 | 1,083 | 572 | ||||||||||||||||||||||||||||||||||||
Emerging Asia | 7,721 | 4,755 | 7,747 | 2,416 | 2,189 | 4,029 | 1,113 | 1,179 | 1,537 | 4,192 | 1,387 | 2,181 | ||||||||||||||||||||||||||||||||||||
Latin America | 1,849 | 1,711 | 2,876 | 425 | 618 | 1,122 | 568 | 330 | 863 | 856 | 763 | 891 | ||||||||||||||||||||||||||||||||||||
Africa / Middle East | 2,363 | 2,205 | 2,858 | 882 | 979 | 1,432 | 1,083 | 818 | 962 | 398 | 408 | 464 | ||||||||||||||||||||||||||||||||||||
Total | 13,766 | 10,676 | 15,435 | 4,164 | 4,176 | 7,215 | 3,370 | 2,859 | 4,112 | 6,232 | 3,641 | 4,108 | ||||||||||||||||||||||||||||||||||||
57
We define emerging market countries as countries which have yet to reach a mature stage of economic, financial, institutional, political and social development or where there is significant potential for economic or political instability. All emerging market countries are subject to country ceilings. The country data provided on pages 68 and 69 covers only emerging market countries and not all countries which are subject to ceilings.Financial Management
Risk Analysis
Provisioning policies
UBS classifies a claim as impaired if the book value of the claim exceeds the present value of the cash flows actually expected in future periods —– loan interest payments and scheduled principal repayments, or other payments due, (forfor example on derivatives transactions),guarantees, and including liquidation of collateral where available. Within this category, weWe further classify loans as non-performing where payment of interest, principal or fees is overdue by more than 90 days. Non-performance is not the determinant of impairment, although it may, in some circumstances, be the first evidence of impairment.days or – as now required by Swiss regulatory guidelines – when insolvency proceedings have commenced or obligations have been restructured on concessionary terms.
62
establish country-specific scenarios, which are kept under review and updated as necessary, to evaluate the extent to which the value of our banking and tradedtrad-
Credit loss expense
Our Financial Statements are prepared in accordance with IFRS, under which credit loss expense charged to the UBS Financial Statements in any period is the sum of net allowances and direct writeoffs minus recoveries arising in that period, i.e. the credit losses actually incurred. By contrast, in our segment reporting we measure credit loss expense using the expected loss concept, which reflects the annual cost that is expected to arise on transactions in the current portfolio that become impaired in the future. To hold the Business Groups accountable for credit losses actually incurred, we charge or refund them with the difference between actual credit loss expense and expected loss, amortized over a three-year period. The amount
Actual credit loss (expense) / recovery versus Business Group credit loss charge
Wealth Management | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | & Business Banking | Investment Bank | Wealth Management USA | Other1 | UBS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the year ended | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||||||||||||||||
Total banking products exposure at year end | 187,996 | 182,538 | 191,041 | 103,237 | 102,564 | 120,224 | 13,551 | 14,098 | 19,503 | 5,609 | 6,070 | 7,311 | 310,393 | 305,270 | 338,079 | |||||||||||||||||||||||||||||||||||||||||||||
Actual credit loss (expense)/recovery | (75 | ) | (238 | ) | (124 | ) | (40 | ) | 35 | (360 | ) | (3 | ) | (15 | ) | (15 | ) | 2 | 12 | 1 | (116 | ) | (206 | ) | (498 | ) | ||||||||||||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | (4 | ) | (13 | ) | (6 | ) | (4 | ) | 3 | (30 | ) | (2 | ) | (11 | ) | (8 | ) | 4 | 20 | 1 | (4 | ) | (7 | ) | (15 | ) | ||||||||||||||||||||||||||||||||||
Credit loss expense charged to the Business Groups2 | (131 | ) | (312 | ) | (601 | ) | (139 | ) | (128 | ) | (112 | ) | (8 | ) | (13 | ) | (18 | ) | (2 | ) | (2 | ) | (3 | ) | (280 | ) | (455 | ) | (734 | ) | ||||||||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | (7 | ) | (17 | ) | (31 | ) | (13 | ) | (12 | ) | (9 | ) | (6 | ) | (9 | ) | (9 | ) | (4 | ) | (3 | ) | (4 | ) | (9 | ) | (15 | ) | (22 | ) | ||||||||||||||||||||||||||||||
58
Financial Management | ||
difference between the amounts charged to the Business Groups and the actual credit loss expense recorded at Group level is reported in the Corporate Center. The following discussion covers the actual credit loss expense.
Impaired loans, allowances and provisions
As shown in the table on the following page, allowances and provisions for credit losses decreased by 23%, to CHF 4,326 million at 31 December 2003 from CHF 5,621 million at
31 December 2002. Note 9b to the Financial Statements provides further details of the changes in allowances and provisions during the year.
59
Financial Management
Risk Analysis
Allowances and provisions for credit loss
1 | Includes Global Asset Management and Corporate Center including Private Banks. Global Asset Management had no impaired or non-performing loans at 31.12.02 and 31.12.01. | |
2 | Includes country allowances and provisions and provisions for off balance sheet liabilities. | |
3 | In the fourth quarter 2003 CHF 318 million of country provisions earmarked to cover defaulted and rescheduled non-performing claims on sovereign and quasi-sovereign borrowers were reclassified to counterparty-specific loan loss allowances. |
Wealth Management | ||||||||||||
CHF million | & Business Banking | |||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Loans to banks (gross) | 3,312 | 3,292 | 3,964 | |||||||||
Loans to customers (gross) | 171,460 | 165,814 | 171,729 | |||||||||
Gross loans | 174,772 | 169,106 | 175,693 | |||||||||
Non-performing loans | 4,420 | 5,032 | 7,001 | |||||||||
Other impaired loans | 1,970 | 3,332 | 4,303 | |||||||||
Total impaired loans | 6,390 | 8,364 | 11,304 | |||||||||
Allowances for non-performing loans | 2,346 | 2,749 | 4,245 | |||||||||
Allowances for other impaired loans | 484 | 824 | 1,137 | |||||||||
Total allowances for impaired loans | 2,830 | 3,573 | 5,382 | |||||||||
Other allowances and provisions 2 | 312 | 452 | 243 | |||||||||
Total allowances and provisions | 3,142 | 4,025 | 5,625 | |||||||||
of which country allowances and provisions 3 | 118 | 515 | 507 | |||||||||
Ratios | ||||||||||||
Impaired loans as a % of gross loans | 3.7 | 4.9 | 6.4 | |||||||||
Non-performing loans as a % of gross loans | 2.5 | 3.0 | 4.0 | |||||||||
Allowances and provisions for credit loss as a % of gross loans | 1.8 | 2.4 | 3.2 | |||||||||
Allocated allowances as a % of impaired loans | 44.3 | 42.7 | 47.6 | |||||||||
Allocated allowances as a % of non-performing loans | 53.1 | 54.6 | 60.6 | |||||||||
loans ratio improved to 2.0% at 31 December 2003 from 2.4% at 31 December 2002 and 3.3% at 31 December 2001. These positive results were due, in part, to the reduction of the amounts that we deemour exposure to be irrecoverable.international credit risk in previous years, resulting in fewer new impaired and non-performing loans than in prior periods, and in part to continuing efforts to conclude proceedings and reach settlement on existing non-performing loans.
Credit is an integral part of many of our business activities.
Total exposure
UBS Wealth Management | ||||||||||||||||||||||||||||||||||||
& Business Banking | UBS Warburg | UBS PaineWebber | ||||||||||||||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||
Loans utilization (gross) | 174,032 | 181,854 | 185,271 | 61,718 | 61,229 | 73,810 | 12,857 | 18,246 | 24,649 | |||||||||||||||||||||||||||
Contigent claims | 11,752 | 13,303 | 10,613 | 4,407 | 11,640 | 17,173 | 430 | 542 | ||||||||||||||||||||||||||||
Unutilized committed lines | 1,984 | 2,520 | 3,574 | 36,439 | 47,355 | 49,936 | 811 | 715 | ||||||||||||||||||||||||||||
Total banking products | 187,768 | 197,677 | 199,458 | 102,564 | 120,224 | 140,919 | 14,098 | 19,503 | 24,649 | |||||||||||||||||||||||||||
Unsecured OTC products | 1,682 | 1,961 | 883 | 55,002 | 64,416 | 61,340 | ||||||||||||||||||||||||||||||
Other derivatives (secured exchange-traded) | 712 | 2,317 | 1,638 | 10,850 | 12,150 | 8,994 | ||||||||||||||||||||||||||||||
Securities lending | 917 | 45 | 2,193 | 11,962 | 14,575 | 12,159 | ||||||||||||||||||||||||||||||
Repo | 14 | 67 | 650 | 21,744 | 18,948 | 22,183 | ||||||||||||||||||||||||||||||
Total traded products2 | 3,325 | 4,390 | 5,364 | 99,558 | 110,089 | 104,676 | ||||||||||||||||||||||||||||||
Total credit exposure, gross | 191,093 | 202,067 | 204,822 | 202,122 | 230,313 | 245,595 | 14,098 | 19,503 | 24,649 | |||||||||||||||||||||||||||
Total credit exposure, | ||||||||||||||||||||||||||||||||||||
net of allowances | 187,369 | 196,557 | 197,042 | 200,620 | 227,949 | 242,873 | 14,069 | 19,469 | 24,629 | |||||||||||||||||||||||||||
Total tradable assets3 | 164 | 2,908 | 2,626 | 183,977 | 241,357 | 219,070 | ||||||||||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
Other1 | UBS Group | |||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Loans utilization (gross) | 763 | 655 | 786 | 249,370 | 261,984 | 284,516 | ||||||||||||||||||
Contigent claims | 5 | 2 | 16,594 | 25,487 | 27,786 | |||||||||||||||||||
Unutilized committed lines | 72 | 18 | 39,306 | 50,608 | 53,510 | |||||||||||||||||||
Total banking products | 840 | 675 | 786 | 305,270 | 338,079 | 365,812 | ||||||||||||||||||
Unsecured OTC products | 56,684 | 66,377 | 62,223 | |||||||||||||||||||||
Other derivatives (secured exchange-traded) | 11,562 | 14,467 | 10,632 | |||||||||||||||||||||
Securities lending | 12,879 | 14,620 | 14,352 | |||||||||||||||||||||
Repo | 21,758 | 19,015 | 22,833 | |||||||||||||||||||||
Total traded products2 | 102,883 | 114,479 | 110,040 | |||||||||||||||||||||
Total credit exposure, gross | 840 | 675 | 786 | 408,153 | 452,558 | 475,852 | ||||||||||||||||||
Total credit exposure, | ||||||||||||||||||||||||
net of allowances | 840 | 670 | 781 | 402,898 | 444,645 | 465,325 | ||||||||||||||||||
Total tradable assets3 | 613 | 121 | 136 | 184,754 | 244,386 | 221,832 | ||||||||||||||||||
63
Capital and Risk ManagementRisk Analysis
Group in nominal terms. For internal risk management and risk control purposes, we also measure credit risk in terms of statistical and stress loss, taking into account the size of the credit exposures, plus the quality of the counterparty, collateral and diversification effects, as explained on page 61.
UBS Wealth Management& Business Banking
mortgages, are predominantly extended against the pledge of marketable securities where UBS applies conservative standards to determine the advance value of the collateral.
64
UBS Wealth Management & Business Banking:distribution of gross loans across counterparty rating and loss given default (LGD) buckets
Loss given default buckets | Weighted | |||||||||||||||||||||||
Gross | Average | |||||||||||||||||||||||
CHF million | Exposure | 0-25% | 26-50% | 51-75% | 76-100% | LGD(%) | ||||||||||||||||||
0 | 1,183 | 512 | 576 | 95 | 0 | 36 | ||||||||||||||||||
1 | 476 | 388 | 48 | 39 | 1 | 31 | ||||||||||||||||||
2 | 2,963 | 1,721 | 860 | 341 | 41 | 32 | ||||||||||||||||||
3 | 35,555 | 18,017 | 8,579 | 3,771 | 5,188 | 33 | ||||||||||||||||||
4 | 5,743 | 1,936 | 1,738 | 2,024 | 45 | 40 | ||||||||||||||||||
5 | 81,954 | 75,014 | 4,184 | 1,775 | 981 | 27 | ||||||||||||||||||
6 | 8,596 | 1,955 | 3,691 | 2,753 | 197 | 42 | ||||||||||||||||||
7 | 10,953 | 3,055 | 4,825 | 1,654 | 1,419 | 43 | ||||||||||||||||||
8 | 10,235 | 2,017 | 5,938 | 1,461 | 819 | 39 | ||||||||||||||||||
9 | 5,987 | 1,257 | 3,494 | 843 | 393 | 40 | ||||||||||||||||||
10 | 1,206 | 218 | 694 | 212 | 82 | 42 | ||||||||||||||||||
11 | 341 | 53 | 208 | 54 | 26 | 41 | ||||||||||||||||||
12 | 467 | 166 | 134 | 118 | 49 | 43 | ||||||||||||||||||
Total | 165,659 | 106,309 | 34,969 | 15,140 | 9,241 | 33 | ||||||||||||||||||
Investment grade | 127,874 | 97,588 | 15,985 | 8,045 | 6,256 | |||||||||||||||||||
Sub-investment grade | 37,785 | 8,721 | 18,984 | 7,095 | 2,985 | |||||||||||||||||||
Impaired and defaulted | 8,373 | |||||||||||||||||||||||
Total gross loans | 174,032 | |||||||||||||||||||||||
predominantly small to medium sized enterprises in Switzerland. During 2002, our high credit underwriting standards and the continued relative strength of the Swiss economy have contributed to improved credit quality within the portfolio, with individual and sector concentrations having been further reduced.
UBS Warburg
years, UBS Warburg has engaged in a substantial credit risk hedging program through which we have effectively reduced our banking products exposure by CHF 25.3 billion. This was achieved mainly by transferring the underlying risk to high grade market counterparties using credit default swaps. The table on the following page provides a view of the net banking products exposure, reflecting the effect of these credit risk hedging activities. In order to better illustrate the effects of credit hedging and other risk mitigation, we have expanded the 2002 columns in the rating distribution graph on page 67 to show exposures before and after risk mitigation. Additionally, in the matrix on the following page, we show the distribution of UBS Warburg’s net banking products exposure across rating grades and LGD buckets. In UBS Warburg’s portfolio, the standard LGD on senior secured claims is 40% and on senior unsecured claims 50%, which explains the concentration in the 26-50% bucket in the matrix on page 66. The significant exposure in the sub-investment grade 0-25% bucket is mainly comprised of collateralized short-term bridge loans for US residential real estate portfolios awaiting securitization.
65
As at 31.12.2002 | ||||||||||||||||
Gross | Credit | Other Risk | Net | |||||||||||||
CHF million | Exposure1 | Hedges2 | Mitigants3 | Exposure | ||||||||||||
Investment grade | 47,020 | 21,463 | 913 | 26,272 | ||||||||||||
Sub-investment grade | 29,256 | 3,770 | 613 | 25,551 | ||||||||||||
Impaired and defaulted | 1,981 | 99 | 1,229 | 818 | ||||||||||||
Total banking products exposure | 78,257 | 25,332 | 2,755 | 52,641 | ||||||||||||
Note: Columns cannot be totaled as net exposure is set to zero in case of over-hedging or over-provisioning.
UBS Warburg: distribution of net take and hold banking products exposure1across counterparty rating and loss given default (LGD) buckets
Net | Loss given default buckets | Weighted | ||||||||||||||||||||||
Credit | Average | |||||||||||||||||||||||
CHF million | Exposure2 | 0-25% | 26-50% | 51-75% | 76-100% | LGD(%) | ||||||||||||||||||
Not rated | 26 | 25 | 1 | 47 | ||||||||||||||||||||
0 and 1 | 2,245 | 2,243 | 2 | 50 | ||||||||||||||||||||
2 | 5,006 | 349 | 4,650 | 3 | 4 | 52 | ||||||||||||||||||
3 | 8,398 | 4,315 | 4,069 | 14 | 39 | |||||||||||||||||||
4 | 4,661 | 347 | 4,232 | 82 | 50 | |||||||||||||||||||
5 | 2,594 | 367 | 2,218 | 9 | 47 | |||||||||||||||||||
6 | 2,840 | 1,537 | 1,272 | 7 | 24 | 32 | ||||||||||||||||||
7 | 5,558 | 4,315 | 1,243 | 23 | ||||||||||||||||||||
8 | 8,599 | 7,854 | 734 | 11 | 9 | |||||||||||||||||||
9 | 5,051 | 3,969 | 1,041 | 1 | 40 | 16 | ||||||||||||||||||
10 | 551 | 67 | 482 | 2 | 45 | |||||||||||||||||||
11 | 312 | 312 | 42 | |||||||||||||||||||||
12 | 802 | 132 | 628 | 9 | 33 | 39 | ||||||||||||||||||
Total non-impaired | 46,643 | 23,252 | 23,149 | 42 | 200 | 38 | ||||||||||||||||||
Investment grade | 22,930 | 5,378 | 17,437 | 12 | 103 | |||||||||||||||||||
Sub-investment grade | 23,713 | 17,874 | 5,712 | 30 | 97 | |||||||||||||||||||
Impaired and defaulted | 797 | |||||||||||||||||||||||
Total take and hold | 47,440 | |||||||||||||||||||||||
66
67
Capital and Risk ManagementRisk Analysis
agement activities. Providing risk management solutions to our customers, including the use of derivative products, is a core business of UBS Warburg. Here, transactions with counterparties of lower quality are generally conducted on a secured basis or for short tenors only. In line with general market trends, UBS Warburg has also entered into bilateral collateral agreements with other major banks to mitigate the potential concentrations of exposure arising from industry consolidation and the continuing increase in volumes of OTC derivatives traded.
UBS PaineWebber
Country risk
68
Emerging market exposure by major geographical area and product type
CHF million | Total | Banking products | Traded products | Tradable assets | ||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||||||||||||||
Emerging Europe | 2,005 | 1,954 | 1,612 | 390 | 632 | 809 | 532 | 750 | 395 | 1,083 | 572 | 408 | ||||||||||||||||||||||||||||||||||||
Emerging Asia | 4,755 | 7,747 | 7,642 | 2,189 | 4,029 | 4,053 | 1,179 | 1,537 | 1,355 | 1,387 | 2,181 | 2,234 | ||||||||||||||||||||||||||||||||||||
Latin America | 1,711 | 2,876 | 4,268 | 618 | 1,122 | 2,352 | 330 | 863 | 1,025 | 763 | 891 | 891 | ||||||||||||||||||||||||||||||||||||
Africa/Middle East | 2,205 | 2,858 | 2,736 | 979 | 1,432 | 1,564 | 818 | 962 | 669 | 408 | 464 | 503 | ||||||||||||||||||||||||||||||||||||
Total | 10,676 | 15,435 | 16,258 | 4,176 | 7,215 | 8,778 | 2,859 | 4,112 | 3,444 | 3,641 | 4,108 | 4,036 | ||||||||||||||||||||||||||||||||||||
UBS Group’s Financial Statements are prepared in accordance with IFRS, under which credit loss expense charged to the Financial Statements in any period is the sum of net allowances and direct writeoffs minus recoveries arising in that period, i.e. the credit losses actually incurred. To better reflect the characteristics of credit risks in our activities, we measure and present our Business Group results in terms of expected loss, rather than actual IFRS loss, and provide a reconciliation between the two - see the section “Expected loss” on pages 60 to 61 and pages 39 to 40 of our Financial Report 2002 for further details. The following discussion covers the actual credit loss expense recorded under IFRS.
was characterized by heightened investor risk aversion, with pronounced tiering by credit quality, resulting in higher-risk corporate and sovereign borrowers facing increasingly difficult financing conditions.
69
IFRS credit loss expense
UBS Wealth Management | ||||||||||||||||||||||||||||||||||||
CHF million | & Business Banking | UBS Warburg | UBS PaineWebber | |||||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||
Total banking products exposure at year end | 187,768 | 197,677 | 199,458 | 102,564 | 120,224 | 140,919 | 14,098 | 19,503 | 24,649 | |||||||||||||||||||||||||||
IFRS actual credit loss expense/(recovery) | 241 | 123 | (695 | ) | (35 | ) | 360 | 562 | 15 | 15 | 3 | |||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 13 | 6 | (35 | ) | (3 | ) | 30 | 40 | 11 | 8 | 1 | |||||||||||||||||||||||||
Expected loss charged to Business Groups2 | 314 | 604 | 785 | 128 | 112 | 243 | 13 | 18 | 3 | |||||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 17 | 31 | 39 | 12 | 9 | 17 | 9 | 9 | 1 | |||||||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
CHF million | Other1 | UBS Group | ||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Total banking products exposure at year end | 840 | 675 | 786 | 305,270 | 338,079 | 365,812 | ||||||||||||||||||
IFRS actual credit loss expense/(recovery) | (15 | ) | 0 | 0 | 206 | 498 | (130 | ) | ||||||||||||||||
- as a proportion of total banking products exposure (bps) | (179 | ) | 0 | 0 | 7 | 15 | (4 | ) | ||||||||||||||||
Expected loss charged to Business Groups2 | 0 | 0 | 0 | 455 | 734 | 1,031 | ||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 0 | 0 | 0 | 15 | 22 | 28 | ||||||||||||||||||
1Includes UBS Global Asset Management and Corporate Center. 2 For an explanation of the credit loss charge used in our Business Group reporting, please see the “Expected loss” section on page 60 and 61 and pages 39 and 40 of the Financial Report 2002.
Impaired loans, allowances and provisions
on page 62. We are confident that our policies and processes ensure a consistent and fair basis for determining prudent levels of allowances and provisions.
Allowances and provisions for credit loss
UBS Wealth Management & | ||||||||||||
CHF million | Business Banking | |||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Loans to banks (gross) | 6,449 | 7,938 | 9,150 | |||||||||
Loans to customers (gross) | 167,583 | 173,916 | 176,121 | |||||||||
Gross loans | 174,032 | 181,854 | 185,271 | |||||||||
Non-performing loans | 5,033 | 7,004 | 8,342 | |||||||||
Other impaired loans | 3,340 | 4,306 | 5,978 | |||||||||
Total impaired loans | 8,373 | 11,310 | 14,320 | |||||||||
Allowances for non-performing loans | 2,750 | 4,248 | 5,141 | |||||||||
Allowances for other impaired loans | 832 | 1,143 | 2,579 | |||||||||
Total allowances for impaired loans | 3,582 | 5,391 | 7,720 | |||||||||
Other allowances and provisions2 | 452 | 243 | 83 | |||||||||
Total allowances and provisions | 4,034 | 5,634 | 7,803 | |||||||||
of which country allowances and provisions | 515 | 507 | 498 | |||||||||
Ratios | ||||||||||||
Impaired loans as a % of gross loans | 4.8 | 6.2 | 7.7 | |||||||||
Non-performing loans as a % of gross loans | 2.9 | 3.9 | 4.5 | |||||||||
Allowances and provisions for credit loss as a % of gross loans | 2.3 | 3.1 | 4.2 | |||||||||
Allocated allowances as a % of impaired loans | 42.8 | 47.7 | 53.9 | |||||||||
Allocated allowances as a % of non-performing loans | 54.6 | 60.7 | 61.6 | |||||||||
70
to CHF 5,621 million at 31 December 2002. Note 9b to the UBS Group Financial Statements provides further details of the changes in allowances and provisions during the year.
loans ratio improved to 2.4% at 31 December 2002 from 3.3% at 31 December 2001 and 3.7% at 31 December 2000. These positive results were due, in part, to the reduction of our exposure to international credit risk, which produced fewer new impaired and non-performing loans than in previous years, and in part to continuing efforts to conclude proceedings and reach settlement on existing non-performing loans.
Market risk is the risk of loss arising from movements in observable market variables such as interest rates, exchange rates and equity markets. In addition to these and other general market risk factors, theThe risk of price movements on securities resulting from general credit and country risk factors and events specific to individual issuers of securities is also considered market risk.
UBS Warburg | UBS PaineWebber | Other1 | UBS Group | |||||||||||||||||||||||||||||||||||||||||
31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||||||||
24,495 | 17,702 | 18,310 | 1,327 | 2,151 | 2,061 | 640 | 470 | 543 | 32,911 | 28,261 | 30,064 | |||||||||||||||||||||||||||||||||
37,223 | 43,527 | 55,500 | 11,530 | 16,095 | 22,588 | 123 | 185 | 243 | 216,459 | 233,723 | 254,452 | |||||||||||||||||||||||||||||||||
61,718 | 61,229 | 73,810 | 12,857 | 18,246 | 24,649 | 763 | 655 | 786 | 249,370 | 261,984 | 284,516 | |||||||||||||||||||||||||||||||||
967 | 1,609 | 2,068 | 29 | 17 | 16 | 0 | 9 | 26 | 6,029 | 8,639 | 10,452 | |||||||||||||||||||||||||||||||||
996 | 1,667 | 2,064 | 0 | 17 | 0 | 0 | 0 | 0 | 4,336 | 5,990 | 8,042 | |||||||||||||||||||||||||||||||||
1,963 | 3,276 | 4,132 | 29 | 34 | 16 | 0 | 9 | 26 | 10,365 | 14,629 | 18,494 | |||||||||||||||||||||||||||||||||
706 | 1,104 | 1,167 | 29 | 17 | 16 | 0 | 5 | 5 | 3,485 | 5,374 | 6,329 | |||||||||||||||||||||||||||||||||
575 | 760 | 777 | 0 | 17 | 0 | 0 | 0 | 0 | 1,407 | 1,920 | 3,356 | |||||||||||||||||||||||||||||||||
1,281 | 1,864 | 1,944 | 29 | 34 | 16 | 0 | 5 | 5 | 4,892 | 7,294 | 9,685 | |||||||||||||||||||||||||||||||||
264 | 681 | 813 | 13 | 0 | 0 | 0 | 0 | 0 | 729 | 924 | 896 | |||||||||||||||||||||||||||||||||
1,545 | 2,545 | 2,757 | 42 | 34 | 16 | 0 | 5 | 5 | 5,621 | 8,218 | 10,581 | |||||||||||||||||||||||||||||||||
221 | 499 | 794 | 0 | 0 | 0 | 0 | 0 | 0 | 736 | 1,006 | 1,292 | |||||||||||||||||||||||||||||||||
3.2 | 5.4 | 5.6 | 0.2 | 0.2 | 0.1 | 0.0 | 1.4 | 3.3 | 4.2 | 5.6 | 6.5 | |||||||||||||||||||||||||||||||||
1.6 | 2.6 | 2.8 | 0.2 | 0.1 | 0.1 | 0.0 | 1.4 | 3.3 | 2.4 | 3.3 | 3.7 | |||||||||||||||||||||||||||||||||
2.5 | 4.2 | 3.7 | 0.3 | 0.2 | 0.1 | 0.0 | 0.8 | 0.6 | 2.3 | 3.1 | 3.7 | |||||||||||||||||||||||||||||||||
65.3 | 56.9 | 47.0 | 100.0 | 100.0 | 100.0 | 0.0 | 55.6 | 19.2 | 47.2 | 49.9 | 52.4 | |||||||||||||||||||||||||||||||||
73.0 | 68.6 | 56.4 | 100.0 | 100.0 | 100.0 | 0.0 | 55.6 | 19.2 | 57.8 | 62.2 | 60.6 | |||||||||||||||||||||||||||||||||
71
etaryproprietary positions in equities, fixed income and interest rate products, foreign exchange and, to a lesser extent, precious metals and energy. Activity is mainly in OECD markets, with some business in emerging markets.
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Financial Management |
Investment Bank | Wealth Management USA | Other 1 | UBS | |||||||||||||||||||||||||||||||||||||||||
31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||||
24,486 | 24,495 | 17,702 | 1,493 | 1,327 | 2,151 | 2,733 | 3,797 | 4,444 | 32,024 | 32,911 | 28,261 | |||||||||||||||||||||||||||||||||
30,880 | 37,223 | 43,527 | 11,623 | 11,530 | 16,095 | 2,220 | 1,892 | 2,372 | 216,183 | 216,459 | 233,723 | |||||||||||||||||||||||||||||||||
55,366 | 61,718 | 61,229 | 13,116 | 12,857 | 18,246 | 4,953 | 5,689 | 6,816 | 248,207 | 249,370 | 261,984 | |||||||||||||||||||||||||||||||||
513 | 967 | 1,609 | 25 | 29 | 17 | 1 | 1 | 12 | 4,959 | 6,029 | 8,639 | |||||||||||||||||||||||||||||||||
675 | 996 | 1,667 | 0 | 0 | 17 | 2 | 8 | 3 | 2,647 | 4,336 | 5,990 | |||||||||||||||||||||||||||||||||
1,188 | 1,963 | 3,276 | 25 | 29 | 34 | 3 | 9 | 15 | 7,606 | 10,365 | 14,629 | |||||||||||||||||||||||||||||||||
443 | 706 | 1,104 | 25 | 29 | 17 | 1 | 1 | 8 | 2,815 | 3,485 | 5,374 | |||||||||||||||||||||||||||||||||
504 | 575 | 760 | 0 | 0 | 17 | 3 | 8 | 6 | 991 | 1,407 | 1,920 | |||||||||||||||||||||||||||||||||
947 | 1,281 | 1,864 | 25 | 29 | 34 | 4 | 9 | 14 | 3,806 | 4,892 | 7,294 | |||||||||||||||||||||||||||||||||
205 | 264 | 681 | 3 | 13 | 0 | 0 | 0 | 0 | 520 | 729 | 924 | |||||||||||||||||||||||||||||||||
1,152 | 1,545 | 2,545 | 28 | 42 | 34 | 4 | 9 | 14 | 4,326 | 5,621 | 8,218 | |||||||||||||||||||||||||||||||||
168 | 221 | 499 | 0 | 0 | 0 | 0 | 0 | 0 | 286 | 736 | 1,006 | |||||||||||||||||||||||||||||||||
2.1 | 3.2 | 5.4 | 0.2 | 0.2 | 0.2 | 0.1 | 0.2 | 0.2 | 3.1 | 4.2 | 5.6 | |||||||||||||||||||||||||||||||||
0.9 | 1.6 | 2.6 | 0.2 | 0.2 | 0.1 | 0.0 | 0.0 | 0.2 | 2.0 | 2.4 | 3.3 | |||||||||||||||||||||||||||||||||
2.1 | 2.5 | 4.2 | 0.2 | 0.3 | 0.2 | 0.1 | 0.2 | 0.2 | 1.7 | 2.3 | 3.1 | |||||||||||||||||||||||||||||||||
79.7 | 65.3 | 56.9 | 100.0 | 100.0 | 100.0 | 133.3 | 100.0 | 93.3 | 50.0 | 47.2 | 49.9 | |||||||||||||||||||||||||||||||||
86.4 | 73.0 | 68.6 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 66.7 | 56.8 | 57.8 | 62.2 | |||||||||||||||||||||||||||||||||
tation of customer business, but also in the form ofincluding interest rate risk in the banking books of the independent private banks (UBS’s independently branded, but wholly owned private banking subsidiaries).banks.
Risk measurement
ket price for an instrument or position, and model risk in more complex products and transactions.measurement(VaR) methodology. VaR expresses the potential loss on the current portfolio from adverse market movements, assuming a specified time horizon before positions can be adjusted (holding period), and measured to a specified level of confidence. These estimates are based on historical simulation, i.e. assessing the impact of historical market movements on today’s portfolio. We set our VaR limits in terms of a 10-day holding period, measured to a 99% confidence level, and using five years of historical data, in line with the regulatory measure of market risk capital. 10-day VaR is a statistical measure of potential trading revenue volatility and a change in the general level of VaR would normally be expected to lead to a corresponding change in the volatility of daily trading revenues. However, the 10-day VaR measure takes no account of the mitigating action that could be taken in the event of adverse market moves, nor does it express the
61
Financial Management
Risk Analysis
worst result that could occur as a result of extreme or unusual market conditions. The expected, statistical and stress loss framework is appliedabsolute level of VaR should not, therefore, be interpreted as the likely range of daily trading revenues. We also measure VaR based on a 1-day holding period. 1-day VaR exposure expresses the maximum daily mark to market risk as follows:
72
The BoardStress lossis assessed against a standard set of Directors hasforward-looking scenarios, using stress moves in market variables which are regularly reviewed and approved by the Group CRO. Stress events modeled in our standard scenarios include crises in equity, corporate bond and emerging markets, and severe currency and interest rate movements. They are kept under constant review and fine-tuned as necessary to reflect changing market and economic conditions. We also monitor our positions against more specific scenarios that target individual sectors or are based on current concerns. Where appropriate, we also set amarket risk stress loss limit on market risklimits for UBS Warburg.Business Groups.
Market risk developments
In 2002, we have seen periods of exceptional volatility, in conjunction with extraordinary falls in securities prices in the bond and equity markets, especially in the telecommunications and energy sectors. These falls occurred in response to profit warnings, and revelations of accounting irregularities and corporate misgovernance, particularly in the secondUS, flowed through to equities with stronger deal flow and third quartersa more active IPO market, particularly in the latter part of 2002.the year. However, the year was peppered with periods of increased volatility. In the US mortgage market, prepayment rates increased due to the low interest rate environment, and in July/August yield curves steepened sharply as US treasuries were sold off. In addition, 2003 saw a depreciation of the US dollar against other currencies, in particular the euro which, in December, reached its highest level since its launch in 1999.
62
Financial Management |
trading activity in the middleFixed Income, Rates and Currencies business area, particularly in US corporate and asset backed securities and, to a lesser extent, emerging market issues. As a consequence, average interest rate VaR for the year increased to CHF 323 million from CHF 219 million in 2002. Equity VaR was at similar levels to 2002. As can be seen in the VaR and backtesting revenue chart on page 64, VaR for the Investment Bank as a whole was within a tight range for most of the year, with occasional peaks as selected opportunities were taken in various emerging markets.
UBS Warburg Corporate and Institutional Clients1:Investment Bank: Value at Risk (10-day 99% confidence)
Year ended 31.12.02 | Year ended 31.12.01 | Year ended 31.12.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 31.12.03 | Year ended 31.12.02 | Year ended 31.12.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.02 | Min. | Max. | Average | 31.12.01 | Min. | Max. | Average | 31.12.00 | Min. | Max. | Average | 31.12.03 | Min. | Max. | Average | 31.12.02 | Min. | Max. | Average | 31.12.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk type | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equities | 123.3 | 293.0 | 177.2 | 178.3 | 123.9 | 454.9 | 181.1 | 157.0 | 144.7 | 245.9 | 199.4 | 146.5 | 142 | 194 | 171 | 160 | 123 | 293 | 177 | 178 | 124 | 455 | 181 | 157 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rates | 161.8 | 303.4 | 219.2 | 280.9 | 127.6 | 299.8 | 182.7 | 226.2 | 113.8 | 182.4 | 148.1 | 122.4 | 251 | 437 | 323 | 395 | 162 | 303 | 219 | 281 | 128 | 300 | 183 | 226 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange | 6.2 | 100.0 | 35.0 | 9.6 | 9.3 | 90.7 | 28.5 | 25.8 | 7.8 | 98.0 | 32.7 | 31.5 | 7 | 82 | 31 | 28 | 6 | 100 | 35 | 10 | 9 | 91 | 29 | 26 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (incl. energy)2 | 3.6 | 112.8 | 29.8 | 12.6 | 2.2 | 14.4 | 6.1 | 5.1 | 2.1 | 27.4 | 9.7 | 5.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other 1 | 7 | 51 | 15 | 10 | 4 | 113 | 30 | 13 | 2 | 14 | 6 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification effect | 3 | 3 | (186.3 | ) | (171.4 | ) | 3 | 3 | (146.2 | ) | (143.1 | ) | 3 | 3 | (148.2 | ) | (128.2 | ) | 2 | 2 | (186 | ) | (182 | ) | 2 | 2 | (186 | ) | (171 | ) | 2 | 2 | (146 | ) | (143 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 198.3 | 389.6 | 274.9 | 310.0 | 179.8 | 470.3 | 252.2 | 271.0 | 177.2 | 296.1 | 241.7 | 177.2 | 290 | 447 | 354 | 411 | 198 | 390 | 275 | 310 | 180 | 470 | 252 | 271 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
73
UBS Group:UBS: Value at Risk (10-day 99% confidence)
Year ended 31.12.02 | Year ended 31.12.01 | Year ended 31.12.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Limits | Min. | Max. | Average | 31.12.02 | Min. | Max. | Average | 31.12.01 | Min. | Max. | Average | 31.12.00 | |||||||||||||||||||||||||||||||||||||||
Business Groups | ||||||||||||||||||||||||||||||||||||||||||||||||||||
UBS Warburg — Corporate and Institutional Clients1, 2 | 450 | 198.3 | 389.6 | 274.9 | 310.0 | 179.8 | 470.3 | 252.2 | 271.0 | 177.2 | 296.1 | 241.7 | 177.2 | |||||||||||||||||||||||||||||||||||||||
UBS PaineWebber3 | 50 | 11.1 | 36.2 | 18.9 | 14.2 | 13.2 | 37.3 | 20.4 | 23.6 | 17.8 | 28.2 | 21.8 | 21.3 | |||||||||||||||||||||||||||||||||||||||
UBS Global Asset Management | 30 | 7.0 | 13.1 | 9.4 | 8.6 | |||||||||||||||||||||||||||||||||||||||||||||||
UBS Wealth Management & Business Banking4 | 50 | 4.1 | 8.9 | 5.4 | 4.1 | 3.7 | 5.3 | 4.8 | 4.8 | 3.3 | 4.8 | 4.1 | 3.7 | |||||||||||||||||||||||||||||||||||||||
Corporate Center5 | 150 | 30.1 | 63.7 | 39.8 | 62.1 | 31.3 | 63.5 | 37.4 | 40.9 | 29.9 | 149.4 | 69.4 | 45.3 | |||||||||||||||||||||||||||||||||||||||
Reserve | 150 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification effect | (68.3 | ) | (86.6 | ) | (49.0 | ) | (35.7 | ) | (89.0 | ) | (58.0 | ) | ||||||||||||||||||||||||||||||||||||||||
Total | 600 | 211.3 | 373.9 | 280.1 | 312.4 | 191.9 | 482.5 | 265.8 | 304.6 | 189.0 | 321.9 | 248 | 189.6 | |||||||||||||||||||||||||||||||||||||||
Year ended 31.12.03 | Year ended 31.12.02 | Year ended 31.12.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Limits | Min. | Max. | Average | 31.12.03 | Min. | Max. | Average | 31.12.02 | Min. | Max. | Average | 31.12.01 | |||||||||||||||||||||||||||||||||||||||
Business Groups | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Bank 1 | 450 | 290 | 447 | 354 | 411 | 198 | 390 | 275 | 310 | 180 | 470 | 252 | 271 | |||||||||||||||||||||||||||||||||||||||
Wealth Management USA | 50 | 8 | 21 | 14 | 17 | 11 | 36 | 19 | 14 | 13 | 37 | 20 | 24 | |||||||||||||||||||||||||||||||||||||||
Global Asset Management | 30 | 7 | 16 | 11 | 8 | 7 | 13 | 9 | 9 | |||||||||||||||||||||||||||||||||||||||||||
Wealth Management & Business Banking 2 | 50 | 1 | 5 | 2 | 1 | 4 | 9 | 5 | 4 | 4 | 5 | 5 | 5 | |||||||||||||||||||||||||||||||||||||||
Corporate Center 2, 3 | 150 | 40 | 83 | 58 | 49 | 30 | 64 | 40 | 62 | 31 | 63 | 37 | 41 | |||||||||||||||||||||||||||||||||||||||
Reserve 1 | 150 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification effect | 4 | 4 | (76 | ) | (72 | ) | 4 | 4 | (68 | ) | (87 | ) | 4 | 4 | (49 | ) | (36 | ) | ||||||||||||||||||||||||||||||||||
Total | 600 | 297 | 462 | 363 | 414 | 211 | 374 | 280 | 312 | 192 | 482 | 266 | 305 | |||||||||||||||||||||||||||||||||||||||
7463
Financial Management
Risk Analysis
al, market risk exposures have stayed within the normal ranges.
ket opportunities we see, we have been madedecided to specific areas ofraise the VaR model,limit for the Investment Bank, which has remained unchanged since 1999. From 2004, the VaR limit for the Investment Bank will increase to CHF 600 million and the limit for UBS as a whole to CHF 750 million.
Operational risk
Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external causes, whether deliberate, accidental or natural. It is inherent in all our activities, not only in the business we conduct but nonealso from the fact that wearea business – an employer, owning and occu-
64
Financial Management | ||
pying property, and holding assets, including information, belonging to ourselves and our clients. Our operational risk framework is not designed to eliminate risk per se but, rather, to contain it within acceptable levels, as determined by senior management, and to ensure that we have sufficient information to make informed decisions about additional controls, adjustments to controls, or risk mitigation efforts.
Operational risk framework
In June 2002, we appointed a Group Headindependent governance of Consequential Risk, reporting to the Group CRO whose mission is toand Head of Operational Risk. This ensures an element of independence in risk decisions.
comprehensive approach to the management and controlthere is adequate segregation of consequential risk throughout our business.
does not always lead to a direct or indirect financial loss, but may indicate that our standards are not being complied with or that they are ineffective,
Measurement of operational risk
65
Financial Management
Risk Analysis
Our approach to stress loss is primarily to consider extreme but plausible events that might occur (e.g., major litigation or extreme physical disasters) and to identify the management steps that can be taken to limit the losses they might cause. We also use this form of scenario analysis to develop contingency/crisis and business continuity plans to cover extreme events, affecting a limited area (e.g. one IT system or server) or a
significant part of the causes of consequentialbusiness (e.g. all operations in one location), as an essential complement to our day to day operational risk events is there-
While industry standards are still evolving, we believe that our operational risk control framework meets current best practice and will provide the necessary foundation for Basel II compliance.
7566
fore also important, to ensure that our standards are complied with, that they are effective, and that remedial action is taken where necessary.
Know Your Customer and Anti-money laundering controls
IT security
participant and a market leader in the provision of internet based and other “e” services to our clients, we need both strong IT security and adequate business continuity arrangements to protect a range of interest groups, including our clients and customers, other market participants and our shareholders, and to meet our legal and regulatory obligations.
Fraud prevention
76
consistency of detail and definition. Banks will have to support their quantitative approaches with a strong qualitative framework and, as outlined in the “Consequential risk” section above, we are developing group-wide qualitative standards. While it is clear that improving the qualitative framework should beneficially impact loss experience, there is no simple formula. Once the final details of Basel II are clear, we will further accelerate our quantitative work.
77
Treasury
The Treasury activities of UBS are the responsibility of the Group TreasuryTreasurer and encompass management of most of the non-trading market risk arising outside Investment Bank, as well as our funding and liquidity position and capital.
The processes and transactions for which Group Treasury is responsible relate to our corporate legal structure, regulatory capital, balance sheet, funding and liquidity, non-trading currency and interest rate risk and financial investments, including:
Interest rate risk is inherent in many of our businesses. It arises from a variety of factors, including differences in timing between contractual maturity or re-pricing of assets, liabilities and derivative instruments, which impact net interest income in the event of changes in market interest rates. In the case of variable rate assets and liabilities, UBS is also exposed to basis risk, which is the difference in re-pricing characteristics of floating rate indices, such as the savings rate and market rates, and which can result in changes to net income and the valuation of our assets and liabilities. In addition, certain products have embedded options that affect their pricing and effective maturity.
Most non-trading interest rate risks are captured attransferred from the point oforiginating business origination and then transferred, through a transfer pricing mechanism,units to one of the two centralized risk management units, predominantly either Group Treasury or UBS Warburg’sand the Investment Bank’s Cash and Collateral Trading unit (CCT).
78
Internal hedging process
2003, and the increased client demand for floating rate investment accounts, temporary adjustments, deviating from long-term observations, were made to the model that replicates client behavior.
and the investment of our own equity. These are all strategic decisions, which implicitly create interest rate exposures. TheseThe risk in these non-business items areis also transferred to Group Treasury through replicating portfolios which, in this case, are designed to approximate the desired investment or funding profile mandated by the GEB.
Interest ratein the Group TreasuryBank BookThe GEB has approved risk management policies, risk limits and a control framework for Group Treasury’s Bank Book interest rate risk management process. The internal control framework includes an allocation of the Groupmeasure, VaR, limit (which also covers Group Treasury’s foreign exchange risk). Group Treasury’s VaR exposure is included in the table on page 74.
79
Capital and Risk ManagementGroup Treasury
– | Interest rate sensitivity, which expresses the impact of a one basis point (0.01%) parallel rise in interest rates on the fair value (net present value) of |
– | Economic value sensitivity, which measures the potential change in fair value of Group Treasury’s interest rate positions resulting from a large instantaneous shock to interest |
– | Net interest income at risk, which is defined as the potential change in |
67
Financial Management
Group Treasury
interest rate risk. The economic value sensitivity measure provides both a longer-termlong-term view and a view of the whole book, since it takes into account the present value of all future cash flows generated from the existing balance sheet positions. TheBy contrast, the net interest income at risk measure by contrast, considers only the re-pricing effect from positions maturing over the next twelve months, and thus provides a shorter-term view but one which more closely reflects financial reporting.
Interest rate risk development
In order to reflect the significant increase in our business activities denominated in foreign currencies, the GEBwe decided in 2002 to diversify the investment of our equity investment strategy from purely Swiss francs into a pure Swiss franc investment portfolio into portfolios of differentmajor currencies. Our equity is currently invested in portfolios of longer term fixed-rate assetsat longer-term fixed interest rates in Swiss francs, US dollars, UK sterling and euros, in line with the strategic investment targets set by the GEB.euros. At 31 December 20022003 the Swiss franc portfolio had an average duration of 3.33.4 years and an interest rate sensitivity of CHF 11.938.07 million per basis point. For the US dollar portfolio,portfo-
Interest rate sensitivity of the bank book
As at 31.12.03 | ||||||||||||||||||||||||
CHF thousand per | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||
basis point increase | month | months | months | years | years | Total | ||||||||||||||||||
CHF | (44 | ) | (57 | ) | (64 | ) | (110 | ) | 44 | (231 | ) | |||||||||||||
USD | 41 | (42 | ) | (28 | ) | (65 | ) | 676 | 582 | |||||||||||||||
EUR | 7 | (3 | ) | 41 | 168 | 12 | 225 | |||||||||||||||||
GBP | 0 | (2 | ) | (52 | ) | 75 | 560 | 581 | ||||||||||||||||
JPY | 0 | 0 | 0 | (4 | ) | 0 | (4 | ) | ||||||||||||||||
Others | 0 | 0 | 0 | (1 | ) | (2 | ) | (3 | ) | |||||||||||||||
Total1 | 4 | (104 | ) | (103 | ) | 63 | 1,290 | 1,150 | ||||||||||||||||
of which equity replicating portfolio (CHF) | 6 | 30 | 270 | 4,132 | 3,635 | 8,073 | ||||||||||||||||||
of which equity replicating portfolio (USD) | 2 | 4 | 104 | 2,102 | 2,131 | 4,343 | ||||||||||||||||||
of which equity replicating portfolio (EUR) | 0 | 1 | 17 | 286 | 204 | 508 | ||||||||||||||||||
of which equity replicating portfolio (GBP) | 0 | 1 | 6 | 113 | 80 | 200 | ||||||||||||||||||
Total equity replicating portfolio | 8 | 36 | 397 | 6,633 | 6,050 | 13,124 | ||||||||||||||||||
Bank book without equity replicating portfolio (total) | (4 | ) | (140 | ) | (500 | ) | (6,570 | ) | (4,760 | ) | (11,974 | ) | ||||||||||||
Change in risk under the two methodologies
As at | ||||||||||||
CHF million | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Net interest income at risk | (233 | ) | (151 | ) | (313 | ) | ||||||
Economic value sensitivity | (1,169 | ) | (1,246 | ) | (1,319 | ) | ||||||
68
Financial Management | ||
The net interest income at risk figure shown is the worst case among various interest rate scenarios that have been analyzed, and results from an assumed downward interest rate shock (parallel shift) of 200 basis points. AtOn 31 December 2002,2003, the difference in the projected outcome in this scenario from that projected in a constant market rate scenario represented a reduction of CHF 151233 million in the year’s total net interest income, compared with a reduction of CHF 313151 million on 31 December 2001.
80
Interest rate sensitivity of the bank book
As at 31.12.02 | ||||||||||||||||||||||||
CHF thousand per | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||
basis point increase | month | months | months | years | years | Total | ||||||||||||||||||
CHF | 16 | (126 | ) | 97 | (63 | ) | (114 | ) | (190 | ) | ||||||||||||||
USD | 27 | (80 | ) | (66 | ) | 56 | 936 | 873 | ||||||||||||||||
EUR | 8 | (3 | ) | 44 | 191 | 1 | 241 | |||||||||||||||||
GBP | 0 | 0 | (37 | ) | 89 | 581 | 632 | |||||||||||||||||
JPY | 0 | 0 | 0 | 20 | (24 | ) | (4 | ) | ||||||||||||||||
Others | 0 | 0 | 0 | (1 | ) | (3 | ) | (4 | ) | |||||||||||||||
Total1 | 50 | (208 | ) | 38 | 292 | 1,378 | 1,549 | |||||||||||||||||
of which equity replicating portfolio (CHF) | 62 | 24 | 439 | 6,393 | 5,011 | 11,929 | ||||||||||||||||||
of which equity replicating portfolio (USD) | 3 | 0 | 11 | 629 | 1,164 | 1,807 | ||||||||||||||||||
of which equity replicating portfolio (EUR) | 1 | 1 | 16 | 267 | 189 | 474 | ||||||||||||||||||
Total equity replicating portfolio | 66 | 25 | 466 | 7,289 | 6,364 | 14,210 | ||||||||||||||||||
Bank book without equity replicating portfolio (total) | (16 | ) | (233 | ) | (428 | ) | (6,997 | ) | (4,987 | ) | (12,661 | ) | ||||||||||||
Change in risk under the two methodologies
As at | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Net interest income at risk | (151 | ) | (313 | ) | (247 | ) | ||||||
Economic value sensitivity | (1,246 | ) | (1,319 | ) | (908 | ) | ||||||
would lead to a CHF 1,2461,169 million decline in fair value, compared with an exposure of CHF 1,3191,246 million to the same scenario on 31 December 2001.2002.
Liquidity and funding management UBS’s range of business activities naturally generates asset and liability portfolios which are highly diversified with respect to market, product and currency. This reduces our exposure to individual funding sources, and also provides a broad range of investment opportunities, which in turn reduces liquidity risk. We adopt a centralized approach to liquidity and funding management to exploit these advantages to the full. The liquidity and funding |
The liquidity management process is undertaken jointly by Group Treasury and CCT. Group Treasury’s function is to establishTreasury establishes a comprehensive management framework, including policies and risk limits, while CCT undertakes operational cash and collateral management transactions within the established parameters. This centralized cash and collateral management structure permits tight control on both our global cash position and our stock of highly liquid and rediscountable securities.
Liquidity management approach
limits are set by the GEB and monitored by Group Treasury. The Group’sTreasury and our liquidity exposure is regularly assessed by the
Group Treasury Committee, (GTC), which is chaired by the Group Treasurer and meets on a monthly basis. A second set of principles concentrates onTreasurer. Moreover, detailed contingency plans have been developed for liquidity crisis management for which a detailed Group Liquidity Contingency Plan has been developed. This hasand have been incorporated into UBS’s Global Crisis Management Concept,our global crisis management concept, which covers all types of crisis events, including a liquidity crisis, and applies to all Business Groups and subsidiaries of the UBS Group.events. Regional committees monitor the markets in which UBS operates for potential threats and regularly report their findings to Group Treasury. In the event of a liquidity crisis, regional crisis task forces would implement contingency plans under the direction of senior management.
Benefits of centralization
81
Capital and Risk ManagementGroupTreasury
to liquidity management adopted at UBS allows these advantages to be exploited. Group Treasury is, furthermore, instrumental in executing an integrated collateral management process on a Group-wide basis to ensure that the large pool of high-quality collateral gathered across the Group is made available for repurchase and securities lending transactions through which CCT creates additional revenues for both UBS and our clients, and also generates substantial funding on a secured basis. This additional liquidity cushion could be crucial in crisis situations.
Funding sources and approach
sale of corporate loans and retail mortgages. These do not, however, constitute a material portion of UBS’s funding activities and our liquidity status would not be significantly affected if capital markets were to become inaccessible for such securitization transactions. UBS has no long-term commitments to continue to purchase the types of assets being securitized.
82
other currencies (primarily sterling and Japanese yen). UBS does not rely on buying committed credit facilities from third party banks, but instead we base our contingent funding sources on our ability to raise secured funding through the use of high-quality collateral.
Liquidity management approach
them, which may place further demands on liquidity. We also take into account the fact that, while under normal market conditions it can be safely assumed that most maturing assets would be repaid, trading assets successfully liquidated and maturing liabilities replaced by creating new liabilities, this will not necessarily be the case under stressed conditions.
83
Capital and Risk ManagementGroup Treasury
UBS-specific crisis: liquidity gap and contingency funding
As at | ||||||||||||||||
CHF billion | 31.12.02 | 30.9.02 | 30.6.02 | 31.3.02 | ||||||||||||
Crisis liquidity gap | (26 | ) | (33 | ) | (10 | ) | (12 | ) | ||||||||
Secured contingency funding | 71 | 73 | 72 | 89 | ||||||||||||
Net position | 45 | 40 | 62 | 77 | ||||||||||||
Our exposure under these liquidity stress scenarios is analyzed on a monthly basis and any ensuing liquidity gap is assessed to ascertain the ability of the bank to bridge the gap by means of our large stock of committed, undrawn central bank facilities and through increased use of repurchase and similar transactions. The assumed crisis gap is monitored monthly by Group Treasury and action is taken if it exceeds a predefined trigger level.
69
Financial Management
Group Treasury
UBS-specific crisis: liquidity gap and contingency funding
As at | ||||||||||||||||||||
CHF billion | 31.12.03 | 30.9.03 | 30.6.03 | 31.3.03 | 31.12.02 | |||||||||||||||
Crisis liquidity gap | (36 | ) | (35 | ) | (36 | ) | (42 | ) | (26 | ) | ||||||||||
Secured contingency funding | 74 | 81 | 78 | 72 | 71 | |||||||||||||||
Net position | 38 | 46 | 42 | 30 | 45 | |||||||||||||||
were to suffer a severe downgrading of our credit ratings. It further encompasses potential liquidity outflows due to contingent liabilities, in particular those due to undrawnthe drawdown of committed credit lines. Exposures to other contingent commitments, such as guarantees and letters of credit, are also included in this analysis, even though these are not as vulnerable since they are generally not
unconditional but are, rather, linked to other, (independent)independent conditions precedent being fulfilled. The scenario also assumes that the crisis would engulf UBS’s source of retail deposits, thereby leading to massive withdrawals from current accounts, savings accounts and deposits. Furthermore, access to the client collateral pool is assumed to be limited as a result of securities lending agreements being cancelled during such a crisis.
Funding sources and approach
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Financial Management | ||
UBS funding by product type UBS funding by currency |
5% 9% 13% 10% Retail savings/deposits 16% CHF 12% Demand deposits EUR Fiduciary USD Time deposits Others 5% Long-term debt 18% Securities lending 9% Repurchase agreements Inter-bank Money market papers 6% 53% 39% 5% As at 31.12.03 As at 31.12.03 |
Currency management
We report our results in Swiss francs, the currency of the country in which we are incorporated.
84
are designed to protect the Group’sUBS’s BIS Tier 1 ratio and expected future foreign currency cash flowsearnings (or financial net profits) from adverse movements of the Swiss franc against the currencies of our assets, revenues and costs, while preserving the option to take advantage of market opportunities which may arise.
Translation (balance sheet) currency risk
The For financial transactions to achieve this structure were started in fourth quarter 2002. The first significant impact on our capital base can be expected in first quarter 2003 (depending on the size of currency moves against the Swiss franc). Further equity investments will follow in the course of 2003. We believe that complete BIS Tier 1 ratio protection will be achieved towards the end of 2003 when the target currency mix of invested equity should be in place.
Transaction (revenues/expenses)currency risk
Non-trading currency risk VaR
CHF million | 2003 | 2002 | 2001 | |||||||||
Minimum | 0.7 | 0.7 | 0.9 | |||||||||
Maximum | 32.0 | 14.2 | 16.2 | |||||||||
Average | 12.3 | 3.0 | 3.6 | |||||||||
End of period | 28.3 | 0.7 | 1.0 | |||||||||
71
Financial Management
Group Treasury
sustained downward or losses from timing differences between month-endupward move of one of the main currencies against the Swiss franc.
Non-trading currency risk VaR
CHF million | 2002 | 2001 | 2000 | |||||||||
Minimum | 0.7 | 0.9 | 11.6 | |||||||||
Maximum | 14.2 | 16.2 | 113.4 | |||||||||
Average | 3.0 | 3.6 | 33.7 | |||||||||
End of period | 0.7 | 1.0 | 12.7 | |||||||||
85
Capital adequacymanagement
As at | ||||||||||||
CHF million, except ratios | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
BIS Tier 1 capital | 27,047 | 29,322 | 31,892 | |||||||||
of which hybrid Tier 1 capital1 | 3,182 | 3,848 | 2,456 | |||||||||
BIS total capital | 33,009 | 37,471 | 42,860 | |||||||||
BIS Tier 1 capital ratio (%) | 11.3 | 11.6 | 11.7 | |||||||||
BIS total capital ratio (%) | 13.8 | 14.8 | 15.7 | |||||||||
Balance sheet assets | 205,401 | 214,481 | 223,528 | |||||||||
Off balance sheet and other positions | 18,122 | 25,935 | 39,002 | |||||||||
Market risk positions | 15,267 | 13,319 | 10,760 | |||||||||
Total BIS risk-weighted assets | 238,790 | 253,735 | 273,290 | |||||||||
We are dedicated to remaining one of the best capitalized financial services firms in the world with sound capital ratios and strong debt ratings —
– both are key to our attractiveness to clients and investors. Our overall capital needs are continually reviewed to ensure that our capital base appropriately supports our current and planned business and regulatory capital requirements. TheWe use of a variety of instruments, such as trust preferredincluding trust-preferred securities, to meet our overall capital levels, is designedneeds, in order to support our efforts to meet return on equity targets and enhance shareholder value.
Sound capitalization
– | where BIS guidelines apply a maximum risk weight of 100%, the SFBC applies risk weights above 100% to certain asset classes (for example real estate, |
– | where the BIS guidelines apply a 20% risk weight to obligations of OECD banks, the SFBC applies risk weights of 25% to 75%, depending on |
Capital adequacy
As at | ||||||||||||
CHF million, except ratios | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
BIS Tier 1 capital | 29,765 | 27,047 | 29,322 | |||||||||
of which hybrid Tier 1 capital1 | 3,224 | 3,182 | 3,848 | |||||||||
BIS total capital | 33,581 | 33,009 | 37,471 | |||||||||
BIS Tier 1 capital ratio (%) | 11.8 | 11.3 | 11.6 | |||||||||
BIS total capital ratio (%) | 13.3 | 13.8 | 14.8 | |||||||||
Balance sheet assets | 212,176 | 205,401 | 214,481 | |||||||||
Off balance sheet and other positions | 21,456 | 18,122 | 25,935 | |||||||||
Market risk positions | 18,269 | 15,267 | 13,319 | |||||||||
Total BIS risk-weighted assets | 251,901 | 238,790 | 253,735 | |||||||||
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Financial Management | ||
lations than under the BIS guidelines. Nevertheless, UBS and its predecessor banks have always had total capital and Tier 1 capital in excess of the minimum requirements of both the BIS and the SFBC since these regulations and guidelines were first implementedtheir implementation in 1988.
Share buyback and cancellation
86
Effect of second line trading program on basic earnings per share (EPS)
For the year ended | ||||||||||||
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Weighted average shares for basic EPS after treasury shares | 1,208,586,678 | 1,266,038,193 | 1,209,087,927 | |||||||||
Weighted average second trading line treasury shares | 118,594,983 | 65,624,005 | 43,261,410 | |||||||||
Basic EPS | 2.92 | 3.93 | 6.44 | |||||||||
Cumulative impact of treasury shares on basic EPS (CHF) | 0.26 | 0.19 | 0.22 | |||||||||
Cumulative impact of treasury shares on basic EPS (%) | 8.9 | 4.9 | 3.5 | |||||||||
exchange under a special security code which clearly identifies the time and quantity of shares repurchased for this purpose.
Dividends and par value reduction
Effect of second trading line program on basic earnings per share (EPS)
For the year ended | ||||||||||||
31.12.03 | 31.12.02 | 31.12.01 | ||||||||||
Weighted average shares for basic EPS after treasury shares | 1,116,953,623 | 1,208,586,678 | 1,266,038,193 | |||||||||
Weighted average second trading line treasury shares | 182,301,119 | 118,594,983 | 65,624,005 | |||||||||
Basic EPS | 5.72 | 2.92 | 3.93 | |||||||||
Cumulative impact of treasury shares on basic EPS (CHF)1 | 0.80 | 0.26 | 0.19 | |||||||||
Cumulative impact of treasury shares on basic EPS (%)1 | 14.0 | 8.9 | 4.9 | |||||||||
73
Capital management plans for 2004
New second line buy backbuyback program
Dividend
87
Our financial stability stems from the fact that we are one of the best capitalized banks in the world. We believe that this financial strength is a key part of our value proposition for both our clients and our investors.
tional securities activities. Organizational fine-tuning is positioning the group to reap good benefits from economic recovery and a stabilization of equity markets, as well as to garner more synergies from the key group activities,” the agency said in a press release.
Long-term credit ratings
As at | ||||||||||||
31.12.03 | 31.12.02 | 31.12.01 | ||||||||||
Fitch, London | AA+ | AAA | AAA | |||||||||
Moody’s, New York | Aa2 | Aa2 | Aa2 | |||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||
UBS’s ratings remain among the best of any major globally active financial institution. Well capitalized, with strong and balanced cash-flow generation, and a well controlled risk profile, UBS is one of the soundest financial institutions worldwide.
74
88
75
Corporate Governance
Introduction and Principles
Introduction and Principles
UBS is committed to meeting high standards of corporate governance. Our corporate and executive bodies are organized in line with the leading codes of best practice.
Corporate governance —– the way that the leadership and management of the firm are organized and how they operate in practice —– ultimately aims at leading UBS to success, protecting the interests of its shareholders and creating value for them and for all stakeholders. Good corporate governance seeks to balance “entrepreneurship”,entrepreneurship, control and transparency, while supporting the firm’s success by ensuring efficient decision-making processes.
people, thus providing separation of powers. No member of one board may be a
member of the other. This structure establishes checks and balances and creates an institutional independence of the Board of Directors from the day-to-day management of the firm, for which responsibility is conferred on the Group Executive Board.
SWX Swiss Exchange Reporting on Corporate Governance This Corporate Governance |
The Handbook’s “Corporate Governance” section contains the following information required by the SWX Swiss Exchange Directive on Information relating to Corporate Governance:
– | group structure and shareholders |
– | capital structure |
– | Board of Directors |
– | Group Executive Board |
– | compensation, shareholdings and loans to corporate bodies |
– | shareholders’ participation rights |
– | change of control and defense measures |
– | auditors |
– | information policy |
In addition, this section describessummarizes the regulatory and supervisory environment of UBS in its principal locations of activity, explainsdescribes the few exceptions where UBS’s corporate governance standards differ fromcompliance of UBS with the NYSE listing standards of the New York Stock Exchange (NYSE),on corporate governance, and contains a list of the members of the Group Managing Board of UBS, the next layer of management responsibility below the Group Executive Board.
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Corporate Governance | ||
Corporate Governance
Group Structure and Shareholders
Under Swiss company law, UBS AG is organized as an “Aktiengesellschaft (AG)”, a corporation that has issued shares of common stock to investors. UBS AG is the parent company of the UBS Group.
The legal entity structure of UBS is designed to support the Group’s businesses within an efficient legal, tax, regulatory and funding framework. NeitherNone of the Business Groups of UBS nor theor Corporate Center operate through separate legal entities, but rather they generally operate out of the parent bank, UBS AG, through its branches worldwide.
The four Business Groups UBS– Wealth Management & Business Banking (with its two business units Private BankingWealth Management and Business Banking Switzerland), UBS WarburgInvestment Bank (comprising the Corporatetwo business units Investment Banking & Securities and Institutional ClientsPrivate Equity), Wealth Management USA, and UBS Capital business units), UBS PaineWebber and UBS Global Asset Management – together with the Corporate Center, form the operational structure of the Group. Group performance is reported according to this structure (see the Financial Report 2002, pages 35-74)2003). A description of the various Business Groups, their strategy, structure, organization, products and services is contained in this Handbook on pages 21-51.17–44.
Listed and non-listed companies belonging to the Group |
The following listed company is included in the Group’s financial statements on an equity
participation basis:
Chase NomineeNominees Ltd., London, acting in its capacity as a nominee for other investors, was registered with 7.68%8.27% of all shares issued as of 31 December 2002,2003, compared to 6.94%7.68% at year-end 2001.2002. According to UBS’s Regulation on the Registration of Shares, voting rights of nominees are restricted to 5%. As in previous years, no other shareholder was registered with more than 5% of all shares issued. Ownership of UBS shares is widely spread. Details aboutspread, as can be seen from the distribution of UBS shares,tables on the number of shares registered and not registered, voting rights, as well asnext page, which also provide information about the distribution by category of shareholders and by geographygeography.publishedexercisable or not. The methodology for calculating the limit is defined in the Ordinance of the Federal Banking Commission on pages 139-140the Stock Exchange (disclosure of this Handbook.shareholdings).
77
Corporate Governance
Group Structure and Shareholders
Distribution of UBS shares
As at 31.12.03 | Shareholders registered | Shares registered | |||||||||||||||||
Number of shares registered | Number | % | Number | % of shares issued | |||||||||||||||
1–100 | 46,071 | 22.1 | 2,447,526 | 0.2 | |||||||||||||||
101–1,000 | 126,940 | 60.9 | 48,592,426 | 4.1 | |||||||||||||||
1,001–10,000 | 32,872 | 15.8 | 81,182,005 | 6.9 | |||||||||||||||
10,001–100,000 | 2,307 | 1.1 | 57,611,168 | 4.9 | |||||||||||||||
100,001–1,000,000 | 298 | 0.1 | 84,193,059 | 7.1 | |||||||||||||||
1,000,001–5,000,000 | 55 | 0.0 | 117,412,209 | 9.9 | |||||||||||||||
5,000,001–11,830,467 (1%) | 11 | 0.0 | 67,775,354 | 5.7 | |||||||||||||||
1–2% | 3 | 0.0 | 50,156,159 | 4.2 | |||||||||||||||
2–3% | 1 | 0.0 | 24,643,927 | 2.1 | |||||||||||||||
3–4% | 0 | 0.0 | 0 | 0.0 | |||||||||||||||
4–5% | 1 | 0.0 | 53,756,375 | 4.5 | |||||||||||||||
Over 5% | 1 | 1 | 0.0 | 97,792,404 | 8.3 | ||||||||||||||
Total registered | 208,560 | 100.0 | 685,562,6123 | 57.9 | |||||||||||||||
Unregistered2 | 497,484,152 | 42.1 | |||||||||||||||||
Total shares issued | 1,183,046,764 | 100.0 | |||||||||||||||||
Shareholders: type and distribution
Shareholders | Shares | |||||||||||||||
As at 31.12.03 | Number | % | Number | % | ||||||||||||
Individual shareholders | 200,346 | 96.1 | 157,734,755 | 13.3 | ||||||||||||
Legal entities | 7,616 | 3.6 | 171,901,983 | 14.5 | ||||||||||||
Nominees, fiduciaries | 598 | 0.3 | 355,925,874 | 30.1 | ||||||||||||
Unregistered | 497,484,152 | 42.1 | ||||||||||||||
Total | 208,560 | 100.0 | 1,183,046,764 | 100.0 | ||||||||||||
Switzerland | 192,070 | 92.1 | 308,364,680 | 26.0 | ||||||||||||
Europe | 11,837 | 5.7 | 243,605,541 | 20.6 | ||||||||||||
North America | 2,730 | 1.3 | 89,480,078 | 7.6 | ||||||||||||
Other countries | 1,923 | 0.9 | 44,112,313 | 3.7 | ||||||||||||
Unregistered | 497,484,152 | 42.1 | ||||||||||||||
Total | 208,560 | 100.0 | 1,183,046,764 | 100.0 | ||||||||||||
Since 13 September 2002, UBS’s holdings of its own shares twice surpassedhave been above the 5% threshold requiring disclosure under the Swiss Stock Exchange law,law. Primarily due to share repurchases for subsequent cancelation. This led tocancellation, UBS’s holdings surpassed the 10% limit as of 5 June 2003 and dropped below 10% on 10 July following announcements:
91
the cancellation of 76 million shares repurchased under the two 2002/2003 share buyback programs. A press release was issued on 8 June 2003 in that respect. On 11 July 2003, UBS’s holdings consisted of 5.9% of its own shares, and an additional 0.8% of its own shares through derivatives. UBS’s position in its own shares stood
Corporate GovernanceGroup Structurebetween 5 and Shareholders
UBS has no cross shareholdings in excess of a reciprocal 5% of capital or voting rights with any other company.
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Corporate Governance | ||
Corporate Governance
Capital Structure
UBS is committed to capital management that is driven by shareholder value considerations. At the same time, UBS is dedicated to remaining one of the best capitalizedbest-capitalized financial services firms in the world.
Ordinary share capital
Conditional and authorized share capital
Changes of capital
Shareholders’ equity on 31 December 20022003 amounted to CHF 38,99135,446 million, down 10%9% from a year earlier. For all details on changes in shareholders equity over the last three years, please refer to pages 82-83 ofpage 84 in the UBS Group Financial Statements.
UBS shares are issued as Global Registered Shares with a par value of CHF 0.80 each, with each carrying one vote. Voting rights may, however, only be exercised if the holder expressly declares having acquired these shares in his own name and for his own account. Global Registered Shares provide direct and equal ownership for all shareholders, irrespective of the country and stock exchange where they are traded. For details see the “Shareholders’Shareholders’ participation rights”rights section on pages 109-11096–97 of this Handbook.
Ordinary share capital
Share capital in CHF | Number of shares | Par value in CHF | ||||||||||
As at 31 December 2002 | 1,005,038,142 | 1,256,297,678 | 0.80 | |||||||||
Share repurchase programs 2002/2003 and 2002b: | ||||||||||||
Cancelation of shares upon AGM decision of 16 April 2003 | (60,776,064 | ) | (75,970,080 | ) | 0.80 | |||||||
Options exercised from conditional capital | 2,175,333 | 2,719,166 | 0.80 | |||||||||
As at 31 December 2003 | 946,437,411 | 1,183,046,764 | 0.80 | |||||||||
79
Corporate Governance
Capital Structure
UBS has not issued any participation certificates or bonus certificates.
Limitation on transferability and nominee registration |
UBS does not apply any restrictions or limitations on the transferability of its shares. Shares registered according to the provisions in the Articles of Association (express declaration of beneficial ownership) may be voted without any limit in scope.
93
Corporate GovernanceCorporate Organization
UBS has issued special provisions for the registration of fiduciaries/nominees. Fiduciaries/ nomineesnomi-
Convertible bonds and options
UBS has currently no convertible debt on UBS shares outstanding. OptionsThe only options outstanding were 109,040,026 employee options on UBS shares accounted for the total of 88,164,227 employee options
on which all details areas reported in Note 32e32c to the UBS Group Financial Statements. For a total of 9,590,9186,871,752 of those options, exercise will be satisfied through the creation of newly issued shares (conditional capital). Share capital would therefore be increased by a maximum of CHF 7,672,734.40.5,497,401.60. For the other employee options, the exercise would be satisfied by the delivery of already issued treasury shares.
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Corporate Governance |
Corporate Governance
Board of Directors
The Board of Directors is the most senior body with ultimate responsibility for the strategy and the management of the company and for the supervision of its executive management. The shareholders elect each member of the Board, which appoints the Chairman, the Vice Chairmen and the various Board Committees.
The Board, and in particular its Chairman, takes responsibility for the mid- and long-term strategic direction of the Group, for appointments and dismissals at top management levels, for mid-term succession planning and for compensation principles. It defines the firm’s risk parameter and risk limit structure. A large majorityMembers of the Board members are non-executive and independent. The Chairman and at least one Vice Chairman have executive roles in line with Swiss
Banking laws, and assume supervisory and leadership responsibilities. The Chairman also assumes a leadership role in corporate responsibility issues, public and political affairs and developing corporate culture.
The table below provides information abouton the composition of the Board of Directors as at 31 December 2002.
Year of | Current term | |||||||
initial | of office | |||||||
Name and business address | Positions held in UBS | appointment | runs until | |||||
Marcel Ospel UBS AG, Bahnhofstrasse 45, CH-8098 Zurich | Chairman | 2001 | 2005 | |||||
Alberto Togni UBS AG, Bahnhofstrasse 45, CH-8098 Zurich | Executive Vice Chairman | 1998 | 2005 | |||||
Johannes A. de Gier UBS AG, Bahnhofstrasse 45, CH-8098 Zurich | Executive Vice Chairman | 2001 | 20031 | |||||
Peter Böckli Böckli Bodmer & Partners, St. Jakobs-Strasse 41, P.O. Box 2348, CH-4002 Basel | Non-executive Vice Chairman Chairman of the Nominating Committee | 1998 | 20031 | |||||
Ernesto Bertarelli Serono International SA, Chemin des Mines 15bis, CH-121Y1 Geneva 20 | Member of the Compensation Committee | 2002 | 2006 | |||||
Sir Peter Davis J Sainsbury plc, 33 Holborn, London EC 1N 2HT | Member of the Audit Committee Member of the Nominating Committee | 2001 | 2004 | |||||
Rolf A. Meyer Heiniweidstrasse 18, CH-8806 Bäch | Chairman of the Compensation Committee Member of the Audit Committee | 1998 | 20031 | |||||
Hans Peter Ming Sika AG, Wiesenstrasse 7, CH-8008 Zurich | Member of the Compensation Committee Member of the Nominating Committee | 1998 | 2004 | |||||
Lawrence A. Weinbach Unisys Corporation, Unisys Way, Blue Bell, PA 19424 | Chairman of the Audit Committee | 2001 | 2005 | |||||
95
2003. It shows each member’s functions in UBS, nationality, year of initial appointment to the Board and current term of
Corporate GovernanceBoardoffice, professional history and education, date of Directorsbirth, and other activities and functions such as mandates on boards of important corporations, organizations and foundations, permanent functions for important interest and pressure groups and official functions and political mandates.
Address | UBS AG Bahnhofstrasse 45 CH-8098 Zurich | |
Function in UBS | Chairman | |
Nationality | Swiss | |
Year of initial appointment | 2001 | |
Current term of office runs until | 2005 | |
Other activities and functionsSwiss Bank CorporationSBC in the Central Planning and Marketing Division in 1977. Mr. Ospel graduated from the School of Economics and Business Administration (SEBA) in Basel. He was born on 8 February 19501950.citizen.business federation, Zurich, and a member of the Board of Trustees of the Think Tank “Avenir Suisse” in Zurich.
Address | UBS AG Bahnhofstrasse 45 CH-8098 Zurich | |
Function in UBS | Executive Vice Chairman | |
Nationality | Swiss | |
Year of initial appointment | 1998 | |
Current term of office runs until | 2005 | |
Other activities and functions
81
Corporate Governance
Board of Directors
Address | Böckli Bodmer & Partners St. Jakobsstrasse 41 CH-4002 Basel | |
Functions in UBS | Non-executive Vice Chairman Chairman of the Nominating Committee | |
Nationality | Swiss | |
Year of initial appointment | 1998 | |
Current term of office runs until | 2006 | |
Other activities and functions
Address | Serono International SA Ch. des Mines 15bis CH-1211 Geneva 20 | |
Function in UBS | Member of the Com- pensation Committee | |
Nationality | Swiss | |
Year of initial appointment | 2002 | |
Current term of office runs until | 2006 | |
Other activities and functions
Address | J Sainsbury plc 33 Holborn London EC1N 2HT | |
Functions in UBS | Member of the Audit Committee Member of the Nominating Committee | |
Nationality | British | |
Year of initial appointment | 2001 | |
Current term of office runs until | 2004 (proposed for re-election at the 2004 AGM) | |
Other activities and functions
Address | GAM Klausstrasse 10 CH-8008 Zurich | |
Functions in UBS | Member of the Board Executive Vice Chairman until February 2003 | |
Nationality | Dutch | |
Year of initial appointment | 2001 | |
Current term of office runs until | 2006 (stepping down as per AGM 2004) | |
the University of Amsterdam. He was born on 24 December 19441944.
Other activities and functions
82
Corporate Governance |
Address | Heiniweidstrasse 18 CH-8806 Bäch | |
Functions in UBS | Chairman of the Com- pensation Committee Member of the Audit Committee | |
Nationality | Swiss | |
Year of initial appointment | 1998 | |
Current term of office runs until | 2006 | |
96
Controller in Johannesburg, South Africa, Head of Strategic Planning and Control in Basel, Head of Finance and Information Systems in Ardsley, N.Y., and later Chief Financial Officer of the Group. After the merger of Ciba-Geigy and Sandoz to create Novartis, he led the spin-off of Ciba Specialty Chemicals. He now holds various international board mandates. Mr. Meyer graduated in Political Science (Ph.D.) and holds a Master of Business Administration. He was born on 31 October 19431943.
Other activities and functions
Address | Sika AG Wiesenstrasse 7 CH-8008 Zurich | |
Functions in UBS | Member of the Com- pensation Committee Member of the Nominating Committee | |
Nationality | Swiss | |
Year of initial appointment | 1998 | |
Current term of office runs until | 2004 (not standing for re-election) | |
Other activities and functions
Address | Unisys Corporation Unisys Way Blue Bell, PA 19424 | |
Function in UBS | Chairman of the Audit Committee | |
Nationality | American (US) | |
Year of initial appointment | 2001 | |
Current term of office runs until | 2005 | |
Other activities and functions
Executive responsibilities
Organizational principles and personnel changes
The Board, and in particular its Chairman, takes responsibility for the mid- and long-term strategic direction of the Group, for appointments and dismissals at top management levels, for mid-term succession planning and for compensation principles. It defines the firm’s risk parameters and principles. A majority of the Board members
are non-executive and independent. The Chairman and at least one Vice Chairman have executive roles in line with Swiss banking laws, and assume supervisory and leadership responsibilities. As at 31 December 2003, the Board consisted of nine directors.
Changes in 2004
83
Corporate Governance
Board of Directors
down from the Board due to his new function as Chairman of SBC Wealth Management, the holding company established in 2003 within the UBS Group, with which the independent private banks and GAM have been integrated. Hans Peter Ming, whose term of office expires in 2004, is not standing for re-election as he has reached retirement age. The Board of Directors will propose the following new members for election: Stephan Haeringer, currently Deputy President of the UBS Group Executive Board, Helmut Panke, Chairman of the Board of Management of BMW AG, Munich, Germany, and Peter Spuhler, owner of Stadler Rail AG, Bussnang, Switzerland. The Board of Directors will consist of ten members – three executive and seven non-executive directors – after these changes.
Executive responsibilities
Chairman Marcel Ospel assumes a leading role in mid- and long-term strategic planning, the selection and supervision of top-level management,the CEO and the members of the Group Executive Board, mid-term succession planning, developing and shaping global compensation principles, and the definition of the Group’s risk appetiteprinciples and risk limit structure.capacity. He also actively supports major client and transaction initiatives.
Non-executive Board members
Non-executive Board members
or service contracts with any of the non-executive members of the Board.them. They receive fixed fees for their Board mandate and for the special functions they assume in the various Board Committees.
Important business connections of non-executive Board members with UBS
Elections and term of office
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Corporate GovernanceBoard of Directors
Mandates on Boards of important corporations, organizations and foundations
Hans Peter Ming is the Chairman of Sika AG, Baar (Switzerland), and a member of the Board of Pestalozzi AG, Dietikon (Switzerland).
Permanent functions for important interestand pressure groups
Official functions and political mandates
The members of the Board of Directors are elected by the AGM for a term of office of fourthree years. The initial term of each member is fixed in such a way as to assureensure that about one fourththird of all the members havehas to be newly elected or reelected every year. The Board will propose to the 2003 AGM to reduce the term of office from four to three years.
Internal organization
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After each Annual General Meeting of Shareholders, the Board elects its Chairman and one or more Vice Chairmen and appoints its Secretary. It meets as often as business requires, but at least six times per year. As a rule,In 2003 the Board held six meetings with the members of the Group Executive Board (GEB) participate in Board meetings in an advisory capacity, butparticipating, one telephone
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Corporate Governance |
conference for the final sign-off on the annual financial statements and a two-day strategy seminar. In addition, the Board also holds regular meetingsmet five times without the GEB.
Chairman’s Office
Audit Committee
mustLawrence Weinbach, chairman, and Rolf Meyer have accounting or financial management expertise.expertise and are therefore considered as “financial experts”, according to the rules established by the US Sarbanes-Oxley Act of
2002. The Audit Committee does not itself perform audits, but supervises the work of the auditors. Its primary responsibility is thereby to monitor and review the organization and efficiency of internal control procedures and the financial reporting process. As of 31 December 2002,2003, Lawrence A. Weinbach was the chairman and Sir Peter Davis and Rolf A. Meyer the additional members of the Committee. The Audit Committee meets 4-6met five times per year.
Compensation Committee
Nominating Committeeis composed of
Corporate Responsibility Committee comprises members of the Board of Directors, the Group Executive Board and other senior executives. The
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Corporate Governance
Board of Directors
and sustainable development, supports awareness within UBS for adherence to international standards in these areas and advises the GEB and other bodies on corporate responsibility. As of 31 December 2002,2003, the Committee was chaired by Marcel Ospel. Additional members were Johannes A. de Gier and Hans Peter Ming, representing the Board, Peter Wuffli, Group CEO, Peter Kurer, Group General Counsel, Clive Standish, Chairman & CEO Asia Pacific, Mark Branson, Chief Communication Officer, Marco Suter, Group Chief Credit Officer, Bob Silver, President and COO of
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the GEB, Marcel Rohner, CEO UBS Wealth Management & Business Banking, Donald B. Marron, Chairman UBS Americas,USA, and Ken Costa, Vice Chairman UBS Warburg.Raoul Weil, Head of Wealth Management International. The Corporate Responsibility Committee met twice during 2003.
Charters and additional information
Areas of responsibility of Board of Directors and Group Executive Board |
The ultimate responsibility for the strategy and the management of UBS lies with the Board of Directors. In line with Swiss banking law, the Board has delegated the responsibility for day-to-day management to the Group Executive Board. No-oneNo one may be a member of both bodies. The supervision and control of the executive management remains with the Board of Directors. All details as to authorities and responsibilities of the two bodies are governed by the Articles of Association, the Organization Regulations and their Appendices. Please refer to www.ubs.com/about.corporate-governance.
Information and control instruments vis-à-vis the Group Executive Board |
The Board of Directors is kept informed onof the activities of the Group Executive Board in various ways. The Chairman of the Board or one of the executiveExecutive Vice ChairmenChairman participate in each
meeting of the GEB in an advisory capacity, thus keeping the Chairman’s Office apprised of all current developments. The minutes of the GEB are filed with the executive Board members and made available for inspection to the non-executive members. At Board meetings, the PresidentGroup CEO and the members of the GEB regularly updatesupdate the Board on important issues.
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Corporate Governance
Group Executive Board
The Group Executive Board (GEB) has business management responsibility for UBS. The PresidentGroup CEO and the members of the GEB are appointed by the Board of Directors and are accountable to the Chairman and the Board for the firm’s results.
The GEB, and in particular its President, is responsible for the implementation and resultsMembers of the firm’s business strategies, for the alignment of the Business Groups to UBS’s integrated business model and for the exploitation of synergies across the firm. The President also assumes responsibility for business and financial planning, financial reporting and the definition and supervision of risk control. Together with the
Chairman’s Office, the GEB assumes overall responsibility for the development of UBS’s strategies.
The table below provides information on the memberscomposition of the GEBGroup Executive Board as at 31 December 2002:2003. It shows each member’s function in UBS, nationality, year of initial appointment to
the GEB, professional history and education, date of birth, and other activities and functions such as mandates on boards of important corporations, organizations and foundations, permanent functions for important interest and pressure groups and official functions and political mandates.
Address | UBS AG | |||
Bahnhofstrasse 45 | ||||
CH-8098 Zurich | ||||
Function in UBS | Group Chief | |||
Executive Officer | ||||
Nationality | Swiss | |||
Year of initial | ||||
appointment | ||||
to the GEB | ||||
1998 | ||||
at Swiss Bank Corporation (SBC) and a member of SBC’s Group Executive Committee. In 1984, he joined McKinsey & Co as management consultant where he became a partner in 1990. He was a freelance economics reporter for “Neue Zurcher Zeitung” before joining McKinsey. Mr. Wuffli graduated in economics and social sciences from the University of St. Gallen and holds a doctor’s degree in international management. He was born on 26 October Other activities and functions2001.2001 and Group CEO in 2003. Previously he was Chairman and CEO of UBS Asset Management, and from 1998 to 1999 Group Chief Financial Officer of UBS. From 1994 to 1998, he was the Chief Financial Officer101Corporate GovernanceGroup Executive Board19571957.
Peter Wuffli is a Swiss citizen.Board member of the Zurich Opera House and of the Institute of International Finance Inc., Washington DC. He is the Vice Chairman of the Board of IMD International Institute for Management Development in Lausanne (Switzerland) and the Treasurer of the Swiss-American Chamber of Commerce in Zurich.
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | Deputy President of the Group Executive Board | |
Nationality | Swiss | |
Year of initial appointment to the GEB | 1998 (proposed for election to the Board of Directors at the AGM 2004) | |
Other activities and functions
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Corporate Governance
Group Executive Board
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | Chairman and Chief Executive Officer Investment Bank | |
Nationality | American (US) | |
Year of initial appointment to the GEB | 2001 | |
Other activities and functions
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | Chairman and Chief Executive Officer Global Asset Management | |
Nationality | Australian | |
Year of initial appointment to the GEB | 2002 | |
graduated from Monash University in Australia in 1972 withand holds a first class B.Econ. (Hons.).honours degree in economics. He was born on 8 August 19511951.
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Functions in UBS | Chairman Wealth Management & Business Banking | |
Nationality | Swiss | |
Year of initial appointment to the GEB | 2001 | |
Other activities and functions
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | Chairman and Chief Executive Officer Wealth Management USA | |
Nationality | American (US) | |
Year of initial appointment to the GEB | 2001 (stepped down from the GEB in January 2004) | |
Other activities and functions
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Corporate Governance |
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | Group General Counsel | |
Nationality | Swiss | |
Year of initial appointment to the GEB | 2002 | |
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | Chief Executive Officer Wealth Management & Business Banking | |
Nationality | Swiss | |
Year of initial appointment to the GEB | 2002 | |
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1999 he was named Group Chief Risk Officer. In 1998 he becameOfficer, after having been Head of Market Risk Control.Control of Warburg Dillon Read since 1998. Between 1993 and 1998, Mr. Rohner was with Swiss Bank Corporation’s investment banking arm. In 1995 he was appointed Head of Market Risk Control Europe. Mr. Rohner graduated with a Ph.D in economics from the University of Zurich and was a teaching assistant at the Institute for Empirical Research in Economics at the University of Zurich from 1990 to 1992. He was born on 4 September 19641964.
Other activities and functions
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | Chairman & Chief Executive Officer Asia Pacific (Group Chief Financial Officer from 1 April 2004) | |
Nationality | British | |
Year of initial appointment to the GEB | 2002 | |
Address | UBS AG | |
Bahnhofstrasse 45 | ||
CH-8098 Zurich | ||
Function in UBS | President and Chief Operating Officer Wealth Management USA (CEO as from 2004) | |
Nationality | American (US) | |
Year of initial appointment to the GEB | 2002 |
Other activities and is a US citizen.
Mandates on Boards of important corporations, organizations and foundationsfoundations:
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Corporate Governance
Group Executive Board hold
Responsibilities, authorities and organizational principles
The GEB has executive management responsibility for the following mandates:
Permanent functions for importantinterestthe firm’s results. The GEB, and pressure groups
Official functionsfirm’s business strategies, for the alignment of the Business Groups to UBS’s integrated business model and political mandatesfor the exploitation of synergies across the firm. The GEB fosters an entrepreneurial leadership spirit throughout the firm. Together with the Chairman’s Office, the GEB assumes overall responsibility for the development of UBS’s strategies. The authorities of the GEB are defined in the Organization Regulations, which are available on the internet at www.ubs.com/corporate-governance.
Personnel changes in 2004
Management contracts |
UBS has not entered into any management contracts.
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Corporate Governance
Compensation, Shareholdings and Loans
Compensation, Shareholdings and Loans
UBS seeks to attract, retain, motivate, develop and developretain highly qualified people for senior management positions, thereby ensuring the sustainable creationpositions. Compensation of shareholder value. UBS is prepared to provide its senior executives with superior compensation in returnis closely linked to the achievement of sustainable shareholder returns and provides appropriate incentives for superior performance.long-term value creation.
Compensation principles
SeniorComponents of senior executive compensation principles and authorities
Components of compensation
executives, motivating and retaining valuable employees, and delivering sustained superior returns to shareholders.
Executive share ownership commitmentprograms
– | A significant portion (25% to 50%) of each senior executive’s or GMB member’s annual performance-based incentive compensation is delivered on a mandatory basis in the form of restricted or deferred UBS shares. Shares of Swiss participants are restricted from sale for five years, due to tax reasons. Normally shares of all participants are vesting during a period of five years. Prior to vesting, the shares can be forfeited in clearly defined circumstances, primarily if the executive is joining a competitor. |
– | Executives are also eligible for |
– | Additional incentives are provided for senior executives and GMB members who voluntarily elect to take an even greater portion of their annual performance-based incentive compensation in the form of restricted or deferred UBS shares. Executives opting to |
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Compensation, Shareholdings and Loans
take a greater than mandatory proportion of their annual incentive in restricted or deferred UBS shares receive additional stock options. |
– | Senior executives and GMB members are required to accumulate over a certain period of time, and then hold, a significant number of UBS shares. |
Components of non-executive directors’ remuneration
Governance
No one at UBS has any approval authority for his/her own compensation. The approval of senior executive compensation recommendations and the design of senior executive compensation systems (plan design, performance measures, pay/performance relationship) are subject to a rigorous process which ensures that decisions are taken at least at two organizational levels above the executive concerned. No-one has any approval authority for his/her own compensation. The following is a
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description of the decision making process for different executive populations:populations and the non-executive directors:
– | Group Managing Board members: compensation recommendations are developed by the responsible member of the Group Executive Board. Recommendations are reviewed and approved by the |
– | Group Executive Board members: Compensation recommendations are developed jointly by the |
– |
– | Chairman of the Board: On behalf of the full Board of Directors, the Compensation Committee |
– | Non-executive members of the Board: |
Employee share ownership commitment
UBS believes that broader-based employee stock ownership will further enhance its ability to deliver superior shareholder returns by increasing the alignment between the interests of employees and shareholders. Broader employee share ownership will be achieved in the following ways:
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Compensation for acting members of the Board of Directors (Board)(BoD) and the Group Executive Board (GEB)
Executive members of the Board and members of the GEB
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Corporate Governance |
Compensation for executive members of the BoD and members of the GEB 1
in CHF | ||||||||
For the year ended | 31.12.03 | 31.12.02 2 | ||||||
Cash component (base salary, cash portion of bonus) | 79,204,558 | 89,499,015 | ||||||
Employer’s contributions to retirement benefit plans | 1,225,543 | 1,320,220 | ||||||
Benefits in kind, fringe benefits (at market value) | 993,719 | 1,019,000 | ||||||
Restricted UBS shares (at fair value) 3 | 64,176,428 | 41,006,156 | ||||||
Restricted UBS options (at fair value) 4 | 12,752,019 | 14,268,501 | ||||||
Compensation for non-executive members of the BoD
in CHF | ||||||||
For the year ended | 31.12.03 | 31.12.02 1 | ||||||
Cash component | 1,889,097 | 1,825,000 | ||||||
Restricted UBS shares (at fair value) 2 | 3,513,044 | 1,705,865 | ||||||
Non-executive members of the Board
to receive their remuneration (base Board fee plus fees for chairs and memberships of Board Committees) either 50% in cash and 50% in restricted UBS shares or 100% restricted UBS shares. Shares are attributed with a price discount of 15% and are restricted for four years.
Additional severance payments
Compensation for former members
of the Board and GEB
Former members of the Board of Directors or the Group Executive Board were not paid any compensation during the year under review, neither in cash nor in kind.
Share grants for the year under review |
Executive Board members and
members of the GEB
Non-executive Board members
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Compensation, Shareholdings and Loans
Share ownership
Executive Board members and members of the GEB
Non-executive Board members
Options grants for the year under review
Executive Board members and members of the GEB
options in 2003 as a long-term incentive. The strike price was CHF 65 and USD 48 respectively, ten percent above the average high and low sale price at the virt-x and the NYSE respectively on the last trading day in January 2003. Options vest three years after grant and will expire ten or ten and a half years from the date of grant.
Non-executive Board members
Options held
Executive Board members and members of the GEB
Options held as of 31 December 2003
Number | Year | Vesting | Expiry | Subscription | Strike | |||||
of options | of grant | date | date | ratio | price | |||||
87,882 | 1998 | 26/05/03 | 26/05/04 | 1:1 | CHF 85.12 | |||||
64,616 | 1998 | 26/05/03 | 26/08/04 | 1:1 | CHF 85.12 | |||||
72,006 | 1998 | 01/07/03 | 30/06/04 | 1:1 | CHF 56.67 | |||||
79,566 | 1999 | 26/02/02 | 26/02/05 | 1:1 | CHF 79.00 | |||||
396,000 | 2000 | 01/02/03 | 01/02/06 | 1:1 | CHF 66.67 | |||||
360,000 | 2001 | 24/01/04 | 24/01/08 | 1:1 | USD 57.80 | |||||
3,000 | 2001 | 28/02/04 | 29/02/08 | 1:1 | USD 53.39 | |||||
2,006,490 | 2001 | 20/02/04 | 20/02/09 | 1:1 | CHF 100.00 | |||||
290,828 | 2002 | 20/02/05 | 31/01/12 | 1:1 | CHF 77.75 | |||||
568,663 | 2002 | 31/01/05 | 31/01/12 | 1:1 | USD 45.26 | |||||
2,000 | 2002 | 28/02/04 | 29/02/12 | 1:1 | USD 46.24 | |||||
255,000 | 2002 | 28/06/07 | 28/06/12 | 1:1 | CHF 80.75 | |||||
380,000 | 2002 | 28/06/05 | 28/06/12 | 1:1 | USD 54.50 | |||||
367,960 | 2002 | 20/02/05 | 31/07/12 | 1:1 | CHF 77.75 | |||||
215,000 | 2002 | 28/06/05 | 28/12/12 | 1:1 | CHF 80.75 | |||||
60,000 | 2003 | 31/01/06 | 31/01/13 | 1:1 | CHF 65.00 | |||||
580,000 | 2003 | 31/01/06 | 31/01/13 | 1:1 | USD 48.00 | |||||
2,000 | 2003 | 28/02/05 | 28/02/13 | 1:1 | USD 41.61 | |||||
427,000 | 2003 | 31/01/06 | 31/07/13 | 1:1 | CHF 65.00 | |||||
In addition, this group of senior executives held the following warrants as of 31 December 2003: | ||||||||||
120,264 | 2000 | 20/03/03 | 01/04/04 | 16.67:1 | CHF 75.00 | |||||
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Number | Year | Vesting | Expiry | Subscription | Strike | ||||||||||||||||
of options | of grant | date | date | ratio | price | ||||||||||||||||
122,657 | 1997 | 24/06/02 | 24/06/03 | 1:1 | CHF 61.91 | ||||||||||||||||
40,002 | 1998 | 01/07/01 | 30/06/04 | 1:1 | CHF 56.67 | ||||||||||||||||
12,277 | 1998 | 26/05/03 | 26/05/04 | 1:1 | CHF 85.12 | ||||||||||||||||
140,214 | 1998 | 26/05/03 | 26/08/04 | 1:1 | CHF 85.12 | ||||||||||||||||
48,006 | 1998 | 30/06/03 | 30/06/04 | 1:1 | CHF 56.67 | ||||||||||||||||
119,544 | 1999 | 26/02/02 | 26/02/05 | 1:1 | CHF 79.00 | ||||||||||||||||
546,000 | 2000 | 01/02/03 | 01/02/06 | 1:1 | CHF 66.67 | ||||||||||||||||
2,006,490 | 2001 | 20/02/04 | 20/02/09 | 1:1 | CHF 100.00 | ||||||||||||||||
290,828 | 2002 | 20/02/05 | 31/01/12 | 1:1 | CHF 77.75 | ||||||||||||||||
300,491 | 2002 | 20/02/05 | 31/07/12 | 1:1 | CHF 77.75 | ||||||||||||||||
235,000 | 2002 | 28/06/05 | 28/12/12 | 1:1 | CHF 80.75 | ||||||||||||||||
140,000 | 2002 | 28/06/07 | 28/06/12 | 1:1 | CHF 80.75 | ||||||||||||||||
95,000 | 2002 | 28/06/07 | 28/06/12 | 1:1 | CHF 80.75 | ||||||||||||||||
3,000 | 2001 | 29/02/04 | 29/02/08 | 1:1 | USD 53.39 | ||||||||||||||||
360,000 | 2001 | 24/01/04 | 24/01/08 | 1:1 | USD 57.80 | ||||||||||||||||
568,663 | 2002 | 31/01/05 | 01/01/12 | 1:1 | USD 45.26 | ||||||||||||||||
2,000 | 2002 | 29/02/04 | 29/02/12 | 1:1 | USD 46.24 | ||||||||||||||||
380,000 | 2002 | 28/06/05 | 28/06/12 | 1:1 | USD 54.50 | ||||||||||||||||
In addition, this group of senior executives held the following warrants as of 31 December 2002: | |||||||||||||||||||||
24,558,529 | 2000 | 20/03/03 | 01/04/04 | 16.67 : 1 | CHF 75.00 | ||||||||||||||||
Non-executive Board members
Additional honorariums and remuneration |
No material additional honorariums and remuneration were paid to any of the Board or GEB members.
Loans granted to members of the Board and the GEB |
Granting loans is part of the ordinary business of Loans granted to executive Board members and members of the GEB of senior executives and their close family members.UBS, andUBS. Executive members of the Board and the members of the GEB have been granted loans, fixed advances and mortgages at the same terms and conditions as other employees, based on third-party conditions adjusted for reduced credit risk. In 2002, a thorough review of outstanding loans to senior executives was performed to ensure compliance with the US Sarbanes-Oxley Act of 2002. New loans and mortgages are now granted at general market conditions with no preferential rates. A thorough review of all outstanding loans For details see Note 33 to senior executives and Board members was performed in 2002 in order to ensure compliance with the new requirements of the US Sarbanes-Oxley Act, which limit or prohibit the extension of credit by UBS to certain of its executive officers. New loans and mortgages are now granted at general market conditions, with no preferential rates.Financial Statements.2002,2003, collateral loans and fixed advances of CHF 14,425,0009,882,000 were receivable from executive Board members and members of the GEB, and mortgages in the amount of CHF 13,264,00013,704,000 had been granted to this group
Loans granted to non-executive
Board members
Highest total compensation |
Total compensation of the highest paid member of the Board of Directors, Chairman Marcel
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Ospel, amounted to CHF 11,341,58817,232,588 for financial year 2002,2003, including 75,15578,698 restricted UBS shares. In addition, 75,000127,000 options were granted as part of the senior executivea long-term incentive (LTI) award made in June 2002 for financial years 2001 and 2002.award. At fair value these options were worth CHF 1,222,500. No such award was made in 2001.1,565,910.
Additional information on equity-based
compensation and retirement benefit plans
Note 32 to the UBS Group Financial Statements provides comprehensive information on the
Group’s various Equity Participation Plansequity participation plans for employees on various levels of the organization. It shows pro-forma results under the assumption of expensing options at fair value rather than charging their intrinsic value at grant date. The Financial Report 20022003 also provides information on how business unit results would have been impacted if options granted to employees had been expensed (please refer to “Review ofthe Business Group performance”Results on page 35)41).
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Shareholders’ Participation Rights
Shareholders’ Participation Rights
UBS is committed to makemaking it as easy as possible for shareholders to take part in its decision-making processes. All 210,000 registered shareholders — nearly 220,000 —and some 50,000 US shareholders registered via nominee companies receive regular written information about the firm’s activities and performance and are personally invited to shareholder meetings.
Relations with shareholders |
UBS fully subscribes to the principle of equal treatment of all shareholders, ranging from large investment institutions to individual investors, and regularly informs them about the development of the company of which they are co-owners.
Voting rights, restrictions and representation |
UBS is committed to making it as easy as possible for shareholders to take part in its decision-making processes and therefore places no restrictions on share ownership and voting rights. Only voting rights of nominee companies and trustees, who normally represent a great number of individual shareholders, are limited to a maximum of 5% of outstanding UBS shares in order to avoid the risk of unknown shareholders with large stakes being entered into the share register. Securities clearing organizations such as the Depository Trust Company (DTC) in New York and SegaInterSettle (SIS) in Switzerland are exempt from the 5% voting limit.
accept, reject or abstain on each individual item on the meeting agenda by either giving instructions to an Independent Proxy designated by UBS (as required under Swiss company law) or by appointing UBS, another bank or another registered shareholder of their choice, to vote on their behalf.
Statutory quorums |
Shareholder resolutions, the election and re-election of Board members and the appointment of the Group and Statutory Auditors are decided at the General MeetingsMeeting of Shareholders by an absolute majority of the votes cast, excluding blank and invalid ballots. Article 704 of the Swiss Code of Obligations (Company Law) requires that for certain specific issues a majority of two-thirds of the votes represented at the meeting vote in favor of the resolution. These issues include the introduction of voting shares, the introduction of restrictions on the transferability of registered shares, conditional and authorized capital increases, restrictions or exclusion of shareholders’ pre-emptive rights.
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Corporate GovernanceShareholders’ Participation RightsConvocation of General Meetings of Shareholders
The Annual General Meeting of Shareholders (AGM) normally takes place in April, but in any case within six months after the close of the financial year. A personal invitation including a detailed agenda and explanation of each motion is sent to every registered shareholder at least 20 days ahead of the scheduled meeting. The meeting agenda is also published in various Swiss and international newspapers.newspapers and on the internet at www.ubs.com/shareholder-meeting.
Placing of items on the agenda |
Shareholders individually or jointly representing shares with an aggregate par value of one million Swiss francsCHF 250,000 may submit proposals for matters to be placed on the agenda for consideration by the shareholdersshareholders’ meeting. The Board of Directors will
submit to the AGM in 2003 a proposal to facilitate the exercise of this shareholder right, which — as a result of the two par-value repayments in 2001 and 2002 — had become more difficult. The proposed limit of an aggregate par value of CHF 250,000 brings the threshold back to what it used to be before the par value repayments.
Registrations in share register |
The general rules for being entered with voting rights in the Swiss or US Share Register of UBS also apply before General Meetings of Shareholders (for details see pages 134 and 135)previous page). Registrations including the transfer of voting rights are processed for as long as technically possible.
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Change of Control and Defensive Measures
Change of Control and Defensive Measures
UBS believes in market forces. It therefore refrains from restrictions whichthat would hinder developments otherwise initiated or supported by the financial markets. There are no specific protections against hostile takeover in place.
Duty to make an offer |
An investor who acquires 33 1/3 %3% of all voting rights, whether they are exercisable or not, has to submit a take-overtakeover offer for all shares outstanding, according to the Swiss Stock Exchange Law. UBS has not elected to change or opt out of this rule.
Clauses on changes of control |
The service agreements and employment contracts of the executive Board members, of the
members of the Group Executive Board and of the Group Managing Board do not contain clauses on change of control. UBS does not offer “golden parachutes” to its senior executives. Employment contracts contain notice periods of 12 months for GEB members and 6six months for GMB members, during which they are entitled to running salary and bonuses.
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Corporate Governance
Auditors
Auditors
Audit, with its various functions and authorities, plays an important role in Corporate Governance.corporate governance. While remaining independent, the External Auditorsexternal auditors and Group Internal Audit closely coordinate their work, thereby ensuring the most effective performance of their responsibilities. The Chairman’s Office, the Audit Committee and ultimately the Board of Directors supervise the functioning of the overall audit work.
External, independent Auditors |
Ernst & Young Ltd., Basel, have been assigned the mandate to serve as global auditors for the UBS Group. They assume all auditing functions according to laws, regulatory requests, and the UBS Articles of Association (see also the paragraph about auditors responsibilities in the “RegulationRegulation and supervision section”,section on page 118)104–105). The Audit Committee of the Board has determined that Ernst & Young Ltd. meets all independence requirements established by the US Securities and Exchange Commission (SEC). As partAuthority for pre-approval of itsall additional audit, process,audit-related and non-audit mandates to the principal auditors is with the Audit Committee, ensuring that independence of the auditors is not jeopardized by conflicts of interests through additional mandates. Ernst & Young Ltd. informsinform the Audit Committee annually of the measures it takes to ensure its and its employees’ independenceindepend-
ence from UBS. The Audit Committee assesses this information on behalf of the Board and informs the Board accordingly.
Duration of the mandate and term of office of the lead auditor
Fees paid to auditors in CHF For the year ended 31.12.03 31.12.02 Global audit fees 27,645,000 26,023,000 Additional services classified as audit (services required by law or statute, including work of non-recurring nature mandated by regulators) 4,589,000 6,106,000 32,234,000 32,129,000 Audit-related services 10,267,000 9,342,000 Tax advisory 5,947,000 11,047,000 Other 3,404,000 3,452,000 19,618,000 23,841,000
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Corporate
Governance Auditors
through 2003 annually confirmed their mandate, and they will be proposed for re-election at the AGM 2003.2004.
Auditing fees
Additional fees paid to auditors
Chief Financial Officer). These pre-approvals have to be brought to the Audit Committee for approval at its next meeting.
Group Internal Audit |
With around 240 professionals worldwide at 31 December 2002,2003, Group Internal Audit provides an independent review of the effectiveness of the system of internal controls and compliance with key rules and regulations. It specifically verifies or assesses whether the internal controls are commensurate with the risks and are working effectively, whether activities within the firm are being
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conducted and recorded properly, correctly and fully, and whether the organization of operations, including information technology, is efficient and the information is reliable. All key issues raised by Group Internal Audit are communicated to the management responsible, to the President of the GEBGroup CEO and to the Chairman’s Officeexecutive members of the Board of Directors via formal Audit Reports. The Chairman’s Office and the Audit Committee of the Board are regularly informed of important findings.
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Corporate Governance |
the agreement of the Chairman, may instruct Group Internal Audit to conduct such audits.
The Audit Committee, on behalf of the Board of Directors, monitors the qualification, independence and performance of the Group Auditors and the lead partners. It prepares proposals for appointment or removal of the external auditors
for submission toreview by the full Board, which then submits the proposal to the AGM.
The external auditors also provide timely reports to the Audit Committee on critical accounting policies and practices used, on alternative treatments of financial information discussed with management, and other material written communication between external auditors and management.
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Corporate Governance
Information Policy:UBS Financial Disclosure PrinciplesPolicy
Information Policy: UBS Financial Disclosure PrinciplesPolicy
UBS’sOur financial disclosure policies aim to achieveat achieving a fair market value of thefor UBS share by communicating transparently, openlyshares through open, transparent and consistentlyconsistent communication with investors and the financial markets at all times.markets.
Main sources of information |
UBS provides regular information to its shareholders and to the financial community. For details, see page 5 and 6 of this Handbook.
Financial results will be published as follows:
First Quarter | ||||
Second Quarter | ||||
Third Quarter | ||||
Fourth Quarter | ||||
The Annual General Meeting of Shareholders will take place as follows:
2004 | 15 April | |||||
2005 | 21 April 2005 | |||||
UBS meets regularly with institutional investors throughout the year, holding results presentations, specialist investor seminars, road shows and one-to-one or group meetings across the world. Where possible, these events involve UBS senior management in addition toas well as the UBS Investor Relations team. We haveAs a means of further widening our audience and maintaining contact with our shareholders around the world, we also made significant progress in developing themake use of technology to further broaden access to our presentations throughdiverse technologies such as webcasting, audio links and cross-location video-conferencing for external audiences.video-conferencing.
Financial disclosure principles
Based on our discussions with analysts and investors, we believe that the market rewards companies that provide clear, consistent and informative disclosure about their business. Our aim therefore is to communicate UBS’s strategy and results in such a way that shareholders and investors can gain a full and accurate understanding of how the company works, what its growth prospects are and what risks there areexist that this growth will not be realized.
– | Transparency:our disclosure is designed to enhance understanding of the economic drivers and detailed results of the business, in order to build trust and |
– | Consistency:we aim to ensure that our disclosure is consistent and comparable within each reporting period and between reporting |
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– | Simplicity:we try to disclose information in as simple a manner as possible consistent with allowing readers to gain the appropriate level of understanding of our businesses’ |
– | Relevance:we aim to avoid information overload by focusing our disclosure on what is relevant to UBS’s stakeholders, or required by regulation or |
– | Best practice:we strive to ensure that our disclosure is in line with industry norms, and if possible leads the way to improved standards. |
Financial reporting policies
We report UBS’s results quarterly, including a breakdown of results by Business Groups and business units and extensive disclosures relating to credit and market risk. The extent of disclosure and the quality of analysis and comment we provide put UBS’s reporting among the leaders in the banking sector, worldwide.
Group targets
Business Group key performance indicators
Accounting principles
Analysis of adjusted figures and results
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Corporate GovernanceInformation Policy:UBS Financial Disclosure Principles
UBS, we believe that equity values are driven by future cash flows.
Restatement of results
we restate UBS’s results for previous periods to show how they would have been reported according to the new basis, and provide clear explanations of all changes.
US regulatory disclosure requirements
closuredisclosure requirements of the Securities and Exchange Commission (SEC) and the NYSE for private foreign issuers. These include the requirement to make certain filings with the SEC. As a private foreign issuer, some of the SEC’s regulations and requirements which apply to domestic issuers are not applicable to UBS. We provide UBS’s regular quarterly reports to the SEC under cover of Form 6-K, and file an annual report on Form 20-F. We also provide additional disclosure at half yearhalf-year to meet specific SEC requirements, which again is provided under cover of Form 6-K. In addition, important corporate announcements, including press releases, are provided under cover of Form 6-K as they occur. These reports, as well as materials sent to shareholders in connection with annual and special meetings, are all available on our website, at www.ubs.com/investors.
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Regulation and Supervision
Regulation and Supervision
We aim to monitor regulatory developments, to comply with all applicable provisions and to work closely and maintain good relations with the regulators in all jurisdictions where we have offices, branches and subsidiaries.conduct business.
As a Swiss-registered company, UBS’s main regulator is the Swiss Federal Banking Commission (SFBC), but we are also regulated worldwide by supervisory agencies in the countries in which we conduct business, most notably the US and the UK..
Regulation and supervision in Switzerland |
General
Regulatory policy
primary and secondary legislation issued by Parliament and the Swiss Federal Council. The SFBC has substantial influence on the drafting of these regulatory statutes. On more technical policy, the SFBC is empowered to issue so-called circulars, 2123 of which are presently effective. The SFBC haslatest was issued a new Ordinance updating its rules on anti-money14 October 2003 and sets minimum standards for the use of guarantees and credit derivatives, while the ordinance concerning the prevention of money laundering which will comecame into force inon 1 July 2003. In certain fields, the SFBC officially endorses self-regulatory guidelines issued by the banking industry (through the Swiss Bankers’ Association), which thus become an integral part of banking regulation. Recent examplesExamples are:
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Corporate GovernanceRegulation and Supervision
– | Guidelines concerning a Code of Conduct with regard to the Exercise of Due Diligence by Banks, |
– | Guidelines concerning the Treatment of Accounts, Custody Deposits and Safe Deposit Boxes Remaining Dormant at Swiss Banks, |
– | Guidelines concerning the Exercise of Asset Management Mandates, |
– | Guidelines on Internal Control, | |
– | Directives on the Independence of Financial Research, 2003. |
Certain aspects of securities broking, such as the organization of trading, are subject to self-regulation through the SWX Swiss Exchange and the Swiss Bankers’ Association, under the overall supervision of the SFBC.
Role of external auditors and direct
supervision of large banking groups
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Corporate Governance | ||
not only encompasses the audit of Financial Statements but also entails the review of banks’ compliance with all prudential requirements.
Reporting requirements and capitalcapital requirements
ad-hoc ad hoc and event-based information requests connected with direct supervisionsupervisory activity.
Disclosures to the Swiss National Bank
condition and detailed monthly interim balance sheets to the Swiss National Bank, which monitors compliance with liquidity rules.quarterly stress testing results. The Swiss National BankSNB can also require UBS to supply furthermake additional disclosures of financial condition and other information relevant to its regulatory oversight.
Banking regulation
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Corporate Governance
Regulation and Supervision
federal power may preempt the state insolvency regimes that would otherwise be applicable to our state-licensed offices. As a result, if the Office of the Comptroller of the Currency exercised its authority over ourthe US banking offices of UBS AG pursuant to federal law in the event of a UBS insolvency, all of UBS’s US assets would be applied first to satisfy creditors of our US banking offices as a group, and then made available for application pursuant to any Swiss insolvency proceeding.
US regulation of other US operations
– | sales methods |
– | trade practices among broker-dealers |
– | use and safekeeping of customers’ funds and securities |
– | capital structure |
– | record-keeping |
– | the financing of customers’ purchases |
– | the conduct of directors, officers and employees. |
These entities are regulated by a number of different government agencies and self-regulatory organizations, including the Securities and Exchange Commission and the National
duct administrative proceedings that can result in censure, fines, the issuance of cease-and-desist orders or the suspension or expulsion of the broker-dealer or its directors, officers or employees.
USA Patriot Act
Since 1 December 2001, following the implementation of the Financial Services and Markets Act 2000, UBS’s operations in the United
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Corporate Governance | ||
Corporate Governance
Compliance with NYSE Listing Standards
on Corporate Governance
Compliance with NYSE Listing Standards
on Corporate Governance
UBS aims to comply with all relevant standards on corporate governance. As a foreign company, listed at the New York Stock Exchange (NYSE), we only have to explain differences between our corporate governance standards andfully comply with the rules for Audit Committees. UBS, however, is also in compliance with the overwhelming majority of the NYSE rules for US companies.
Introduction |
On 15 August 2002,4 November 2003, the Securities and Exchange Commission (SEC) approved the revised New York Stock Exchange corporate governance rules, as filed on 8 October 2003 by the NYSE. Foreign private issuers – such as UBS – must comply with the rules on Audit Committees by 31 July 2005 and disclose significant differences and material non-compliance with the NYSE filedstandards by the first annual shareholders meeting after 15 January 2004.proposed rules that would effect substantial changesrequirements as to its Audit Committee and fulfills the overwhelming majority of the NYSE listing standards on corporate governance. The few exceptions are mainly due to the NYSE corporate governance listing standards. The proposed changes would tighten the definitiondifferent legal system in Switzerland.
Independence of director independence, expand the responsibilities of the audit committee, mandate the establishment of a compensation committee and nominating committee both composed of only independent directors and require listed companies to have a code of ethics and corporate governance guidelines.
In line with competing or overlapping requirements under the Sarbanes-Oxley Act. The current proposed rules would require each non-US issuer to provide a brief and general summary of any significant differences between its home country corporate governance practices and the NYSE rules, for US companies.
The NYSE rules will require that theUBS Board of Directors of a listed company have a majority of independent directors. Forhas established the following criteria for a director to be considered independent, the Board of Directors must affirmatively determine that the director has no material relationship with the company, either
– | The | |
– | The director has not been employed by UBS during the last |
– | Immediate family members of the director have not been employed by UBS as an executive officer during the last three years. | |
– | The | |
– | Immediate family members |
as an employee at a level below executive officer) within the past three years. | ||
– | The director has not been affiliated with or employed by UBS’s principal auditors, Ernst & Young Ltd. during the last |
– | Immediate family members of the director have not been affiliated with or employed in a professional capacity by Ernst & Young Ltd. during the past three years. | |
– | The |
– | The |
– |
– |
– | The |
– |
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Corporate GovernanceCompliance with NYSE Listing Standardson Corporate Governance
– | There were no interlocking directorships over the past |
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Corporate Governance
Compliance with NYSE Listing Standards
on Corporate Governance
The Board of Directors, based on an individual assessment of its external members and their relationships with UBS, and after having carefully considered the detailed information provided by its external members,them as to the independence standards listed above, has determined that Peter Böckli, Ernesto Bertarelli, Sir Peter Davis, Rolf A. Meyer, Hans Peter Ming and Lawrence A. Weinbach are independent in accordance with the criteria mentioned above.above and therefore meet the independence requirements established by the NYSE.
tors, although the threetwo executive members of the Chairman’s Office are former members of the executive management and have entered into employment contracts with UBS in connection with their functions as Board members.
Board Committees |
UBS has established an Audit, a Compensation and a Nominating Committee,Committee. The charters for all composed solelythe Board Committees are published on www.ubs.com/corporate-governance. Additional information on the Board Committee’s mandates, responsibilities and authorities can be found on page 85 of independent directors, as required by the NYSE rules.
Differences from NYSE standards
For US listed companies the Board Committee’s mandates, responsibilities and authorities can be found on pages 99 and 100 of this Section. The charters for all the Board Committees are published on (www.ubs.com/about).
The NYSE rules require:
– | ||
– | discussion on risk assessment and risk management between management and the Audit Committee. UBS, as a global financial services firm, has a very sophisticated and complex system of risk management and control. Risk management and control is the clear |
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Corporate Governance | ||
bility of the business and not of the Board or of its Committees. The full Board has authority to define the firm’s risk |
– | supervision of internal audit by Audit Committee. In accordance with the Swiss Federal Banking Commission’s Circular Letter on Internal Audit, dated 14 December 1995, UBS gave the Chairman’s Office responsibility and authority for supervising the internal audit function. The complexity of the financial services industry requires in-depth knowledge of the global businesses to allow for an effective supervision of the internal audit function. The Chairman’s Office reports back to the full Board on all important |
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– | responsibility of the Nominating Committee for oversight of management and Board evaluation. Management evaluation (performance of the |
– | proxy statement reports of the Audit and Compensation Committees. Under Swiss Company Law, all reports addressed to |
holders are provided and signed by the full Board. The Committees submit their reports to the Board. | ||
– | shareholders’ votes on equity compensation plans. Under Swiss Company Law, the approval of compensation plans is not within the authority of the AGM, but of the Board of Directors. The reason for this approach is the fact that the capital of a Swiss company is determined in the Articles of Association and, therefore, each increase of capital has to be submitted for shareholders’ approval. If equity-based compensation plans result in a need for a capital increase, AGM approval is mandatory. If, however, shares for such plans are purchased in the market, shareholders do not have the authority to vote. |
The proposed NYSE rules require that shareholders must vote on all equity-compensation plans and any material revisions to the terms of such plans (including for purposes of re-pricing existing options). UBS does not comply with this requirement.
The proposed NYSE rules require each listed company to adopt and make publicly available Corporate Governance Guidelines, and a
Code of Business Conduct and Ethics. These documents must be adopted within six months of the SEC’s approval of the NYSE’s rules.
The UBS Board of Directors has already adopted Corporate Governance Guidelines,corporate governance guidelines, which are published on the UBS website at www.ubs.com/about.
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Corporate Governance
Group Managing Board
Group Managing Board
The Group Managing Board (GMB) represents the next layer in the leadership of the Group below the Group Executive Board. Its members are drawn from the management teams of the Business Groups and the Corporate Center.
Role of the Group Managing Board |
The purpose of the GMB has a crucial role in implementing our integrated business modelis to align leadership with the firm’s agenda and in promoting the UBStargets according to strategic objectives, culture and incentives. Its
role is to understand, challenge and contribute to further developing the firm’s direction, values and principles and to promote and communicate its culture both throughout the GroupUBS and externally.
UBS Wealth Management & Business Banking
Michel Adjadj | Head of | |
Arthur Decurtins | Head of | |
Thomas Escher | Head of IT | |
Jürg Haller | Head of Products & Services | |
Eugen Haltiner | Head of Business Banking Switzerland | |
Marten Hoekstra | Head of Market Strategy & Development | |
Dieter Kiefer | Head of | |
Martin Liechti | Head of | |
Joe Rickenbacher | Chief Credit Officer | |
Alain Robert | Head of | |
Kathryn Shih | Head of | |
Jean Francis Sierro | Head of Resources | |
Richard Sipes | Head of | |
(retired as of 31.12.03) | ||
Anton Stadelmann | Chief Financial Officer | |
Vittorio Volpi | Head of | |
Raoul Weil | Head of | |
Stephan Zimmermann | Head of Operations | |
New members as from 1 March 2004: | ||
Hans-Ulrich Meister | Head of Business Unit Large Corporates & Multinationals | |
Jeremy Palmer | Head of Wealth Management UK, Northern & Eastern Europe | |
Werner Peyer | Head of Wealth Management Region Zurich | |
Investment Bank | ||
Andy Amschwand | Head of Investment Bank Switzerland Global | |
Mike Bolin | Chief Administrative Officer | |
Jonathan Britton | Chief Financial Officer | |
Gary Bullock | Global Head of Infrastructure Logistics | |
Regina A. Dolan | Global Head of Strategic Planning and Business Development | |
Robert Gillespie | Joint Global Head of Investment Banking | |
Alan C. Hodson | Global Head of Equities |
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Corporate Governance | ||
Investment Bank (continued) | ||
Michael Hutchins | Global Head of Fixed Income, | |
Currencies | ||
Huw Jenkins | Head of Equities for the Americas | |
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Ken Moelis | ||||
Head of Investment Banking for the Americas | ||||
Rory Tapner | Joint Global Head of Investment Banking | |||
Robert Wolf | Global Head of Fixed Income | |||
New members as from 1 March 2004: | ||||
Stephan Keller | Chief Risk Officer | |||
Wealth Management USA | ||||
Barry Buchsbaum | Director of the Branch Group | |||
(until 29 February 2004) | ||||
Bruce Bursey | Director of Investment | |||
(until 29 February 2004) | ||||
Luzius Cameron | Director of Strategic Planning and New Business Development | |||
Tom Naratil | Director of | |||
Investment Products Group | ||||
James D. Price | Director of Investment and Marketing Solutions | |||
Robert H. Silver | President and Chief Operating Officer | |||
New members as from 1 March 2004: | ||||
Mike Davis | Division Manager Western Division | |||
James M. Pierce | Division Manager Central Division | |||
Timothy J. Sennatt | Division Manager Eastern Division | |||
Global Asset Management | ||||
Gabriel Herrera | Head of Europe, Middle East & Africa | |||
Thomas Madsen | Global Head of Equities | |||
Joe Scoby | CEO | |||
Danny Schweizer | Deputy CEO Alternative & Quantitative Investments | |||
Brian Singer | Global Head of Asset Allocation | |||
Kai Sotorp | Head of Asia Pacific | |||
Brian M. Storms | CEO Americas | |||
Mark Wallace | Global Head of Logistics Infrastructure | |||
Paul Yates | Head of UK | |||
Corporate Center | ||||
Mark Branson | Chief Communication Officer | |||
Rolf Enderli | Group Treasurer | |||
Thomas Hammer | Group Head of Human Resources | |||
Robert Mann | Head UBS Leadership Institute | |||
Hugo Schaub | Group Controller | |||
Walter H. Stuerzinger | Group Chief Risk Officer | |||
Marco Suter | Group Chief Credit Officer | |||
New member as from 1 March 2004: | ||||
Scott G. Abbey | Chief Technology Officer | |||
Chairman’s Office | ||||
Gertrud Erismann-Peyer | Company Secretary | |||
Markus Ronner | Head of Group Internal Audit | |||
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Corporate Responsibility
Corporate Responsibility
For us, corporate responsibilityresponsible behavior is integral to everything we do, meaning that we want to create sustainable value sustainably for allour shareholders, clients and employees, and at the same time, preserve our environment and contribute to the development of our stakeholders.the communities we do business in.
UBS has made corporate responsibilitymakes responsible behavior an important part of its culture, identity and business model. Our approach is to focus on corporate responsibility issues that provide clear benefits to all our stakeholders — clients, employees, shareholders and the community.practices. As a leading global financial services firm, we want to provide our clients with value-added products and services, promote a corporate culture that adheres to the highest ethical standards, while generatingand generate superior but sustainable returns for our shareholders. For UBS, responsible corporate conduct means sometimes moving beyond purely profit oriented or legal and regulatory considerations when doing business.
Our corporate responsibility processes
Corporate responsibility is not simply another “issue” that needs to be managed. We are alsobelieve it is an activeunderlying principle of doing business.
In 2001, we created a Corporate Responsibility Committee. It discusses and judges how to meet the evolving expectations of our stakeholders related to responsible corporate conduct. If it comes to the conclusion that there is gap between what stakeholders expect and our practice, the committee suggests appropriate measures to management, which is then responsible for finding solutions.
Atseven senior UBS the value-based management framework views management as the custodian of shareholder wealth. This framework sees the creation of long-term shareholder value as resting on four, mutually supporting pillars. First, we ensure that business decisions are analyzed in terms of the value that they create. Second, the realized value creation is measured and compared with targets. Third, we have incentive systems in place to align the interests of managers with those of shareholders, including tying a meaningful part of total compensation to individual performance targetsexecutives representing our businesses, as well as encouraging managersa number of corporate functions, including legal, communication and staffrisk management.
Investing in our communities
The “raison d’être” behind our well established program of community investment is the recognition that our success does not only depend on the skill and leading analyst forecasts.
Trust is critical for a global financial services provider. It requires a corporate culture that promotes behavior consistent with the highest ethical standards. To enhance the trust placed in us, it is vital that we protect our clients’ legitimate right to financial privacy while preventing the abuseresources of our services by criminals or terrorists.
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Becausepeople and the relationships we foster with clients, but also on the health and prosperity of the growing importancecommunities of advisory-based financial services and regulations regarding the exercise of due diligence, financial institutions are gathering more and more information from and about their clients. Unsurprisingly, public and private sector agents are showing a strong appetite for that data, and clients are increasingly worried about its misuse. Financial privacy, as with medical and other forms of personal privacy, are privileges enjoyed by citizens living in a modern, democratic society. At UBS, we firmly believe we should uphold and defend our clients’ right to safeguard their private financial information from third party interests.
the tool. The Financial Intelligence Unit (FIU), a dedicated compliance team maintaining the register, is automatically notified if and when any queries match with names on its database.
An important part of our success as a firm is the fact that our corporate culture blends the best influences of its diverse roots and encourages diversity. Our goal is to attract and retain the most talented and motivated individuals by offering them a rewarding and challenging environment. By encouraging individual success, we allow employees to develop their skills and progress within our organization. One of our competitive strengths is the ability to leverage the skills and knowledge of our staff across the 50 countries in which we operate. In order to fully take advantage of that, we have appointed
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Corporate Responsibility | ||
a Global Head of Diversity for the Group. At the same time, we have established Business Group-specific regional and global diversity initiatives. In Switzerland, for example, comprehensive intercultural training is part of our management development program.
The success of UBS depends not only on the skills and resources of our people and the relationships we have with our clients, but also on the health and prosperity of the communities of which we are a part. We directly benefit from a stable politicalDedicated teams worldwide work closely with senior managers to build partnerships with organizations in the communities where we operate, focusing on education, regeneration and social environment, modern infrastructure and a good education system. Furthermore, community programs create benefits for a company’s reputation, and increase its appeal to its clients.environmental projects.
On another level, thecharitable causes. The UBS Optimus Foundation harnesses the expertise and the capabilities of UBS asinvests donations from our clients into a global financial services company by supporting clients when they express a desire to contribute to worthy causes. Since its launch over three years ago, the foundation has concentrated its investments in a select number of programs and organizations — allthat focus particularly on children. The projects involve close collaboration with respected partner organizations and are selected by a team of which focus on people. The total number of projects is now twelve, divided into the categories of children and talents as well as medical research — running from one that aims to re-integrate Brazil’s street children in society to another that finances a Swiss cancer research project.
Environmental protection is onespecialists of the most pressing issues facingFoundation, which also
closely monitors their implementation. The costs of managing and administering the UBS Optimus Foundation are borne in full by UBS, so that the full contribution from our world today. Consequently, it posesclients reaches the projects.
Promoting environmental awareness
Our commitment to the environment is underpinned with a challenge to companies, industries and sectors. At UBS, weprofessional environmental management system certified under the ISO 14001 standard. We remain committed to further integrating environmental considerations into all our business activities. To make this happen,end, our environmental policy focuses on taking advantage of environmentalthe market opportunities,for environmentally friendly products and consideringservices, and taking environmental risks into account in our risk management processes, especially in lending and investment banking. In corporate services,our inhouse operations, we actively look for ways to reduce
The community investment programs we support are regionally focused and respond to a variety of needs in the communities we do business in around the world. A few examples of our activities last year:
were determined to respond to the SARS crisis in a way that not only allowed us and our employees to contribute in a sustainable way, but would also serve as a vehicle for clients to support efforts to fight the disease. Within six weeks of its launch, donations from corporate and individual donors exceeded USD 330,000 while donations from UBS employees in Hong Kong and elsewhere stood at more than USD 117,000. In addition to the USD 128,000 of seed capital provided by UBS, donations by employees qualify for our match-giving program. Furthermore, the Hong Kong government matches our donations.
the poverty index. By offering a range of services to unemployed people who are interested in working for a City firm, The Brokerage has helped more than 1,000 individuals find employment. To complement our financial contributions, our volunteers have hosted three-month internships for The Brokerage candidates and also run workshops for them in our London offices.
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Corporate Responsibility
the direct environmental impact of our business activities.
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introduced established processes thatto allow early identification of environmental risks in transactions. Initially,In 2003, an institutional investment research firm was hired to design and deliver a training program for senior managers and executives on the key environmental factors are screened by the corresponding investment banking staff. If there are indications of heightened environmental risk, external specialists are called in to investigate them as part of the overall due diligence process. Also in the Swiss lendingrisks arising from business activities. In our Wealth Management & Business Banking business, a careful review of financially relevant environmental aspectsfactors is an important part of UBS’sthe credit risk analysis.process. The environmental risk assessment procedures within this Business Group have improved significantly over the last few years. For example, environmental criteria are now fully built into the IT-based standard credit process. The Wealth Management USA business was also integrated into our program in 2003.
Our electricity consumption, the running of our heating, systems, our paper consumption and business travel are the major factors that have a direct impact on the environment. Following the successful extension in 2002 of our ISO 14001 certification of inhouse operations, we implemented a number of environmental improvement initiatives. One example is the comprehensive recycling program now established in all major buildings globally. In 2003, the top 20 largest offices outside Switzerland recycled an estimated 6,100 tons of waste, 43% more than in 2002. The environmental management system helps us use our resources far more efficiently, cutting exhaust gas emissions and costs. As an example, last year in Switzerland, UBS completed a major project of replacing 18,000 printers and 1,400 photocopiers with 5,800 new, multifunctional machines, optimizing energy consumption. We believe the new energy-efficient machines will save 3.0-3.5 gigawatts a year, corresponding to approximately 1-2% of UBS’s annual consumption of electricity in Switzerland. Also, during the installation process, we took the opportunity to encourage employees to cut their paper consumption by promoting wider useproportion of recycled paper,waste in these offices increased from 39% in 2002 to 50% in 2003. Annually, this equates to a saving of approximately 80,000 trees and informing and training employees
about double-sided printing capabilities and other ways to save paper.25,000 cubic meters of landfill.
A number of different independent rating agencies that assess corporate responsibility programs across the world have rated UBSus among the leaders in the field.
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UBS Share Information
The Global Registered Share
The Global Registered Share
UBS ordinary shares are registered shares with a par value of CHF 0.80 per share,each, fully paid up and non-assessable. They are issued in the form of Global Registered Shares (GRS). and listed on the Swiss Exchange (where they are traded on virt-x), and the New York and Tokyo stock exchanges.applicable borders without the need for conversion, with identical shares traded on different stock exchanges in different currencies. For example, the samea share purchased on the New York Stock Exchange (NYSE) can be sold on virt-x the pan-European stock exchange where Swiss-listed blue chip stocks are traded, or vice versa. Alternatives to the GRS involve the creation of tailor-made securities for individual securities exchanges. Because of the trend towards global financial markets we believe that individual securities will be increasingly traded in multiple markets around the world. Another effect we anticipate is an increasing similarity between the regulatory structures of different markets, reducing the need to have individual securities in each market that comply with different local regulations. In these changing patterns, GRS, which allow for cross-market portability, are ideal to minimize costs to investors. The UBS GRS is listed on the Swiss, New York and Tokyo stock exchanges. Although Swiss blue chip stocks (members of the SMI Swiss Market Index) are listed on the SWX Swiss Exchange, all trading takes place on virt-x. virt-x is majority-owned by the SWX Swiss Exchange. It provides an efficient and cost effective pan-European blue chip market. virt-x is a recognized investment exchange supervised by the Financial Services Authority in the United Kingdom. It is delivered on the modern scalable SWX trading platform. The UBS ADR (American Depositary Receipt) program was terminated on 16 May 2000 on the listing of the GRS on the New York Stock Exchange (NYSE).RegistrationRegisterreg-ister,register, which is maintained by UBS acting as Swiss transfer agent, and a US register, which is maintained by Mellon Investor Services, as US transfer agent. A shareholder is entitled to hold shares registered in theirhis/her name on either register and transfer shares from one register to the other upon giving proper instruction to the transfer agents.
Share liquidity and currency effects
NYSE, Van der Moolen, is required to facilitate sufficient liquidity and an orderly market in the UBS share.
Dividends |
UBS normally pays a regular annual dividend to shareholders registered as of the date of the Annual General Meeting (the record date). Payment is usually scheduled three business days thereafter.
134
The norm in the US is to declare dividends at least ten days in advance of the applicable record date andwith ex-dividend trading commencescommencing two days before the record date. To ensure that shareholders on the Swiss and US registers are similarly treated in connection with dividend payments, and to avoid disparities between the two markets, NYSE trading takes place with due bills for the two businesstwo-business day period preceding the dividend record date.
Par value distribution July 2002
Dividend
Ticker symbols
135
UBS Share InformationThe UBS Share 2002
The UBS Share 2002
economic data indicated no sign of a sustained global recovery and investors became increasingly cautious in their outlook.
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UBS share data
As at | ||||||||||||
Registered shares in 1000 units | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Total shares outstanding | 1,256,298 | 1,281,717 | 1,333,139 | |||||||||
Total shares ranking for dividend | 1,182,263 | 1,258,653 | 1,277,874 | |||||||||
Treasury shares (average) | 61,266 | 47,244 | 97,545 | |||||||||
Treasury shares (year end) | 97,181 | 41,255 | 55,265 | |||||||||
Weighted average shares (for basic EPS calculations) | 1,208,587 | 1,266,038 | 1,209,088 | |||||||||
Weighted average shares (for diluted EPS calculations) | 1,223,383 | 1,288,578 | 1,225,578 | |||||||||
For the year ended | ||||||||||||
CHF | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Earnings per share | ||||||||||||
Basic EPS | 2.92 | 3.93 | 6.44 | |||||||||
Basic EPS before goodwill amortization1 | 4.73 | 4.97 | 7.00 | |||||||||
Diluted EPS | 2.87 | 3.78 | 6.35 | |||||||||
Diluted EPS before goowill amortization1 | 4.65 | 4.81 | 6.89 | |||||||||
As at | ||||||||||||
CHF billion | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Market capitalization | 79.4 | 105.5 | 112.7 | |||||||||
% change year-on-year | (25 | ) | (6 | ) | ||||||||
For the year ended | ||||||||||||
100 shares | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Trading volumes2 | ||||||||||||
SWX total | 1,049,364 | 1,000,402 | 1,211,446 | |||||||||
SWX daily average | 4,148 | 4,002 | 4,826 | |||||||||
NYSE total | 48,850 | 54,768 | 83,032 | |||||||||
NYSE daily average | 194 | 221 | 522 | |||||||||
137118
UBS Share |
Trading volumes For the year ended 1,000 shares 31.12.03 31.12.02 31.12.01 SWX total 987,743 1,049,364 1,000,402 SWX daily average 3,951 4,148 4,002 NYSE total 71,096 48,850 54,768 NYSE daily average 282 194 221 1 The trading volumes have been adjusted for the three-for-one share split effective 16 July 2001.
Ticker symbols
Trading exchange | Bloomberg | Reuters | Telekurs | |||
virt-x | UBSN VX | UBSN.VX | UBSN, 380 | |||
New York Stock Exchange | UBS US | UBS.N | UBS, 65 | |||
Tokyo Stock Exchange | 8657 JP | UBS.T | N16631, 106 |
a dividend of CHF 2.60 per share for the 2003 financial year, 30% higher than last year’s CHF 2.00. This increase reflects the continuously high cash flow generation and strong equity base of the company, but also the fact that our shareholders have different preferences for receiving shareholder returns: some prefer cash dividends, some prefer share buybacks. By pursuing both avenues, we aim to attract and retain the widest, most diverse global shareholder base.
Previous dividends, par value reductions
119
UBS Share
The UBS Share 2003
The UBS Share 2003
UBS Share Price Chart vs DJ Stoxx banks |
UBS share price performance in 2003
The global equity markets rebounded significantly in 2003 on evidence of a sustained recovery in corporate earnings and favorable leading economic indicators. Banking and financial stocks in particular gained considerably year on year, with most outperforming the main market indices. The UBS share was no exception and closed 2003 at CHF 84.7, up 26% from the year’s start. Over the same period, the Dow Jones Europe Stoxx Banks Index, our main benchmark, gained 22%.
Market capitalization |
120
UBS Share |
UBS share data
As at | ||||||||||||
Registered shares in 1000 units | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Total shares outstanding | 1,183,047 | 1,256,298 | 1,281,717 | |||||||||
Total shares ranking for dividend | 1,126,340 | 1,182,263 | 1,258,653 | |||||||||
Treasury shares | 111,361 | 97,181 | 41,255 | |||||||||
Weighted average shares (for basic EPS calculations) | 1,116,954 | 1,208,587 | 1,266,038 | |||||||||
Weighted average shares (for diluted EPS calculations) | 1,138,801 | 1,223,383 | 1,288,578 | |||||||||
For the year ended | ||||||||||||
CHF | 31.12.03 | 31.12.02 | 31.12.01 | |||||||||
Earnings per share | ||||||||||||
Basic EPS | 5.72 | 2.92 | 3.93 | |||||||||
Diluted EPS | 5.61 | 2.87 | 3.78 | |||||||||
UBS shares and market capitalization
Number of shares, except where indicated | % change from | |||||||||||||||
As at | 31.12.03 | 31.12.02 | 31.12.01 | 31.12.02 | ||||||||||||
Total ordinary shares issued | 1,183,046,764 | 1,256,297,678 | 1,281,717,499 | (6 | ) | |||||||||||
Second trading line treasury shares | ||||||||||||||||
2001 program | (23,064,356 | ) | ||||||||||||||
2002 first program | (67,700,000 | ) | ||||||||||||||
2002 second program | (6,335,080 | ) | ||||||||||||||
2003 program | (56,707,000 | ) | ||||||||||||||
Shares outstanding for market capitalization | 1,126,339,764 | 1,182,262,598 | 1,258,653,143 | (5 | ) | |||||||||||
Share price (CHF) | 84.70 | 67.20 | 83.80 | 26 | ||||||||||||
Market capitalization (CHF million) | 95,401 | 79,448 | 105,475 | 20 | ||||||||||||
Total treasury shares | 111,360,692 | 97,181,094 | 41,254,951 | 15 | ||||||||||||
The UBS share fluctuated between CHF 73.5 and CHF 80.5 in third quarter, following broader equity market developments, despite UBS itself reporting a strong set of second quarter results. Although investor confidence remained high in the market, there were latent concerns
Dividend yield1 4%3.59% 3%2.72% 2.63% 2.43% 2.41% 2% 1% 0%1999 2000 2001 2002 2003 1 Dividend and par value reduction paid / average share price of the year for which dividend or par value reduction were paid. |
about the general sustainability of the corporate earnings recovery then underway, as well as whether the upward spike in GDP growth in certain major industrial economies would last. The UBS share price reflected this by declining just over 1.7%.
121
UBS Share
The UBS Share 2003
Stock exchange prices1
SWX Swiss Exchange | New York Stock Exchange2 | SWX Swiss Exchange | New York Stock Exchange 2 | |||||||||||||||||||||||||||||||||||||||||||||
High | Low | Period end | High | Low | Period end | |||||||||||||||||||||||||||||||||||||||||||
High | Low | Period end | High | Low | Period end | (CHF) | (CHF) | (CHF) | (USD) | (USD) | (USD) | |||||||||||||||||||||||||||||||||||||
(CHF) | (CHF) | (CHF) | (USD) | (USD) | (USD) | |||||||||||||||||||||||||||||||||||||||||||
2002 | 84.30 | 51.05 | 67.20 | 51.99 | 34.54 | 48.12 | ||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2002 | 75.45 | 51.05 | 67.20 | 50.88 | 34.54 | 48.12 | ||||||||||||||||||||||||||||||||||||||||||
2003 | 85.40 | 49.80 | 84.70 | 68.16 | 38.00 | 67.99 | ||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2003 | 85.40 | 74.85 | 84.70 | 68.16 | 57.54 | 67.99 | ||||||||||||||||||||||||||||||||||||||||||
December | 75.30 | 66.50 | 67.20 | 50.54 | 47.56 | 48.12 | 85.40 | 83.10 | 84.70 | 68.16 | 65.07 | 67.99 | ||||||||||||||||||||||||||||||||||||
November | 75.45 | 66.95 | 74.75 | 50.88 | 45.72 | 50.18 | 84.35 | 80.20 | 83.25 | 64.38 | 59.52 | 64.18 | ||||||||||||||||||||||||||||||||||||
October | 70.35 | 51.05 | 70.35 | 47.26 | 34.54 | 47.26 | 82.00 | 74.85 | 82.00 | 61.34 | 57.54 | 61.34 | ||||||||||||||||||||||||||||||||||||
Third quarter 2002 | 75.15 | 56.80 | 61.30 | 49.94 | 37.86 | 41.00 | ||||||||||||||||||||||||||||||||||||||||||
Third quarter 2003 | 80.50 | 73.50 | 74.10 | 59.25 | 54.38 | 56.23 | ||||||||||||||||||||||||||||||||||||||||||
September | 70.55 | 57.50 | 61.30 | 46.26 | 38.75 | 41.00 | 79.60 | 74.10 | 74.10 | 58.20 | 54.45 | 56.23 | ||||||||||||||||||||||||||||||||||||
August | 73.40 | 59.40 | 70.70 | 48.69 | 39.80 | 47.01 | 80.50 | 75.55 | 75.55 | 59.25 | 54.38 | 54.38 | ||||||||||||||||||||||||||||||||||||
July | 75.15 | 56.80 | 65.30 | 49.94 | 37.86 | 44.30 | 80.40 | 73.50 | 80.40 | 58.90 | 55.20 | 58.30 | ||||||||||||||||||||||||||||||||||||
Second quarter 2002 | 84.15 | 69.80 | 74.85 | 51.99 | 46.90 | 49.89 | ||||||||||||||||||||||||||||||||||||||||||
Second quarter 2003 | 75.75 | 58.90 | 75.35 | 58.35 | 43.58 | 55.40 | ||||||||||||||||||||||||||||||||||||||||||
June | 81.95 | 69.80 | 74.85 | 51.99 | 46.90 | 49.89 | 75.75 | 72.75 | 75.35 | 58.35 | 55.31 | 55.40 | ||||||||||||||||||||||||||||||||||||
May | 82.20 | 75.00 | 81.95 | 51.98 | 46.95 | 51.90 | 71.40 | 64.60 | 70.20 | 55.14 | 47.39 | 54.72 | ||||||||||||||||||||||||||||||||||||
April | 84.15 | 77.55 | 78.10 | 50.30 | 47.63 | 48.49 | 67.75 | 58.90 | 64.35 | 49.30 | 43.58 | 47.45 | ||||||||||||||||||||||||||||||||||||
First quarter 2002 | 84.30 | 73.00 | 82.80 | 50.50 | 43.27 | 49.75 | ||||||||||||||||||||||||||||||||||||||||||
First quarter 2003 | 72.10 | 49.80 | 57.50 | 51.86 | 38.00 | 42.70 | ||||||||||||||||||||||||||||||||||||||||||
March | 84.30 | 79.20 | 82.80 | 50.50 | 46.69 | 49.75 | 63.20 | 49.80 | 57.50 | 46.09 | 38.00 | 42.70 | ||||||||||||||||||||||||||||||||||||
February | 81.30 | 73.00 | 78.85 | 47.70 | 43.27 | 46.44 | 64.50 | 55.55 | 56.90 | 45.43 | 40.94 | 41.70 | ||||||||||||||||||||||||||||||||||||
January | 83.95 | 77.30 | 77.50 | 50.42 | 45.50 | 45.45 | 72.10 | 59.05 | 59.05 | 51.86 | 43.75 | 43.92 | ||||||||||||||||||||||||||||||||||||
2002 | 84.30 | 51.05 | 67.20 | 51.99 | 34.54 | 48.12 | ||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2002 | 75.45 | 51.05 | 67.20 | 50.88 | 34.54 | 48.12 | ||||||||||||||||||||||||||||||||||||||||||
Third quarter 2002 | 75.15 | 56.80 | 61.30 | 49.94 | 37.86 | 41.00 | ||||||||||||||||||||||||||||||||||||||||||
Second quarter 2002 | 84.15 | 69.80 | 74.85 | 51.99 | 46.90 | 49.89 | ||||||||||||||||||||||||||||||||||||||||||
First quarter 2002 | 84.30 | 73.00 | 82.80 | 50.50 | 43.27 | 49.75 | ||||||||||||||||||||||||||||||||||||||||||
2001 | 96.83 | 62.10 | 83.80 | 58.49 | 40.12 | 50.00 | 96.83 | 62.10 | 83.80 | 58.49 | 40.12 | 50.00 | ||||||||||||||||||||||||||||||||||||
Fourth quarter 2001 | 86.85 | 69.70 | 83.80 | 52.83 | 43.23 | 50.00 | 86.85 | 69.70 | 83.80 | 52.83 | 43.23 | 50.00 | ||||||||||||||||||||||||||||||||||||
Third quarter 2001 | 86.33 | 62.10 | 75.60 | 49.73 | 40.12 | 46.15 | 86.33 | 62.10 | 75.60 | 49.73 | 40.12 | 46.15 | ||||||||||||||||||||||||||||||||||||
Second quarter 2001 | 92.00 | 77.50 | 85.83 | 51.47 | 44.87 | 47.02 | 92.00 | 77.50 | 85.83 | 51.47 | 44.87 | 47.02 | ||||||||||||||||||||||||||||||||||||
First quarter 2001 | 96.83 | 72.33 | 83.17 | 58.49 | 43.02 | 47.68 | 96.83 | 72.33 | 83.17 | 58.49 | 43.02 | 47.68 | ||||||||||||||||||||||||||||||||||||
2000 | 88.17 | 63.58 | 88.17 | 54.10 | 40.18 | 54.10 | 88.17 | 63.58 | 88.17 | 54.10 | 40.18 | 54.10 | ||||||||||||||||||||||||||||||||||||
Fourth quarter 2000 | 88.17 | 71.17 | 88.17 | 54.10 | 40.18 | 54.10 | 88.17 | 71.17 | 88.17 | 54.10 | 40.18 | 54.10 | ||||||||||||||||||||||||||||||||||||
Third quarter 2000 | 88.00 | 74.67 | 76.67 | 50.74 | 44.76 | 44.85 | 88.00 | 74.67 | 76.67 | 50.74 | 44.76 | 44.85 | ||||||||||||||||||||||||||||||||||||
Second quarter 2000 | 83.33 | 69.83 | 79.67 | 50.66 | 42.99 | 48.67 | 83.33 | 69.83 | 79.67 | 50.66 | 42.99 | 48.67 | ||||||||||||||||||||||||||||||||||||
First quarter 2000 | 72.83 | 63.58 | 72.83 | 72.83 | 63.58 | 72.83 | ||||||||||||||||||||||||||||||||||||||||||
1999 | 80.00 | 67.50 | 71.67 | 80.00 | 67.50 | 71.67 | ||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 1999 | 79.92 | 67.50 | 71.67 | 79.92 | 67.50 | 71.67 | ||||||||||||||||||||||||||||||||||||||||||
Third quarter 1999 | 82.25 | 67.50 | 70.50 | 82.25 | 67.50 | 70.50 | ||||||||||||||||||||||||||||||||||||||||||
Second quarter 1999 | 88.00 | 73.67 | 77.33 | 88.00 | 73.67 | 77.33 | ||||||||||||||||||||||||||||||||||||||||||
First quarter 1999 | 82.00 | 69.08 | 77.50 | 82.00 | 69.08 | 77.50 | ||||||||||||||||||||||||||||||||||||||||||
19983 | 108.83 | 45.00 | 70.33 | |||||||||||||||||||||||||||||||||||||||||||||
138122
shares and market capitalization Number of shares, except where indicated % change from As at 31.12.02 31.12.01 31.12.00 31.12.01 1,256,297,678 1,281,717,499 1,333,139,187 (2 ) Second trading line treasury shares 2000 program (55,265,349 ) 2001 program (23,064,356 ) 2002 first program (67,700,000 ) 2002 second program (6,335,080 ) 1,182,262,598 1,258,653,143 1,277,873,838 (6 ) 67.20 83.80 88.17 (20 ) 79,448 105,475 112,666 (25 ) 97,181,094 41,254,951 55,265,349 136 Distribution offilings made by UBS Shares Shareholders registered Shares registered As at 31.12.02 Number of shares registered Number % Number % of shares issued 1-100 46,868 21.3 2,430,181 0.2 101-1,000 133,449 60.7 51,563,181 4.1 1,001-10,000 36,546 16.6 90,247,647 7.2 10,001-100,000 2,635 1.2 65,357,281 5.2 100,001-1,000,000 328 0.2 96,176,568 7.7 1,000,001-5,000,000 55 0.0 120,932,421 9.6 5,000,001-12,562,975 (1%) 10 0.0 75,122,855 6.0 1-2% 0 0.0 0 0.0 2-3% 0 0.0 0 0.0 3-4% 2 0.0 98,849,839 7.9 4-5% 0 0.0 0 0.0 Over 5% 1 1 0.0 96,531,157 7.7 Total registered 219,894 100.0 697,211,130 55.6 559,086,548 44.4 1,256,297,678 3 100.0 1 As at 31.12.2002, Chase Nominees Ltd., London, was enteredwith the SEC, including UBS’s Annual Report on Form 20-F for the year ended 31 December 2003. UBS is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a trustee/nominee holding 7.68%result of all shares issued. 2 Shares not entered in the share register at 31 December 2002. 3 140,763,036 shares registered do not carry voting rights.new information, future events, or otherwise.
Publisher/Copyright: UBS AG, Switzerland
Languages: English, German. SAP-No. 80532E-0401
139
Registered shareholders: type and distribution
Shareholders | Shares | |||||||||||||||
As at 31.12.02 | Number | % | Number | % | ||||||||||||
Individual shareholders | 211,100 | 96.0 | 173,717,031 | 24.9 | ||||||||||||
Legal entities | 8,205 | 3.7 | 189,658,658 | 27.2 | ||||||||||||
Nominees, fiduciaries | 589 | 0.3 | 333,835,441 | 47.9 | ||||||||||||
Total | 219,894 | 100.0 | 697,211,130 | 100 | ||||||||||||
Switzerland | 203,739 | 92.7 | 349,906,904 | 50.2 | ||||||||||||
Europe | 11,283 | 5.1 | 225,581,696 | 32.3 | ||||||||||||
North America | 2,872 | 1.3 | 59,723,099 | 8.6 | ||||||||||||
Other countries | 2,000 | 0.9 | 61,999,431 | 8.9 | ||||||||||||
Total | 219,894 | 100.0 | 697,211,130 | 100.0 | ||||||||||||
140
INDEX TO EXHIBITS
UBS AG | ||
P.O. Box, CH-8098 Zurich | ||
-17-