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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 20-F
(Mark One) | ||
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, 2001 | ||
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: 1-15026
UBS AG
Switzerland
Bahnhofstrasse 45, CH-8098 Zurich, Switzerland, and Aeschenvorstadt 1, CH-4051 Basel, Switzerland
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Securities registered or to be registered pursuant to Section 12 (g) of the Act:
Securities for which there is as reporting obligation pursuant to Section 15 (d) of the Act:
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of 31 December 2001:
Ordinary shares, par value CHF 2.80 per share: 1,281,717,499 ordinary shares (including 41,254,951 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 No
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 Item 18
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Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Ordinary Shares (par value of CHF 2.80 each) | New York Stock Exchange | |
7.25% Noncumulative Trust Preferred Securities | New York Stock Exchange | |
7.25% Noncumulative Company Preferred Securities | New York Stock Exchange* | |
Subordinated Guarantee of UBS AG with respect to Company Preferred Securities | New York Stock Exchange* | |
$75,000,000 18.5% GOALS due May 28, 2002 | American Stock Exchange | |
$50,000,000 18.25% GOALS due June 27, 2002 | American Stock Exchange | |
$60,000,000 19.5% GOALS due July 23, 2002 | American Stock Exchange | |
$45,000,000 18.25% GOALS due July 31, 2002 | American Stock Exchange | |
$30,000,000 14.125% GOALS due August 15, 2002 | American Stock Exchange | |
$51,000,000 26% GOALS due September 12, 2002 | American Stock Exchange | |
$80,000,000 BULS due April 10, 2003 | American Stock Exchange | |
$40,000,000 BULS due April 28, 2003 | American Stock Exchange | |
$32,000,000 BULS due May 16, 2003 | American Stock Exchange | |
$17,000,000 16.25% GOALS due November 18, 2002 | American Stock Exchange | |
$45,000,000 23.125% GOALS due May 31, 2002 | American Stock Exchange | |
$6,500,000 16.125% GOALS due July 2, 2002 | American Stock Exchange | |
$54,000,000 BULS due September 1, 2006 | American Stock Exchange | |
$4,500,000 BULS due October 17, 2006 | American Stock Exchange | |
$48,000,000 12.5% GOALS+ due November 1, 2002 | American Stock Exchange | |
$27,000,000 10.5% GOALS+ due December 2, 2002 | American Stock Exchange | |
$15,000,000 9.5% GOALS+ due December 23, 2002 | American Stock Exchange | |
$19,500,000 12% GOALS+ due January 24, 2003 | American Stock Exchange | |
$23,500,000 14% GOALS+ due February 3, 2003 | American Stock Exchange |
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:
8.622% Noncumulative Trust Preferred Securities
8.622% Noncumulative Company Preferred Securities
7.247% Noncumulative Trust Preferred Securities
7.247% Noncumulative Company Preferred Securities
Subordinated Guarantee of UBS AG with respect to Company Preferred Securities
$100,000,000 Variable Rate Credit Linked Notes due September 5, 2002
$14,000,000 Equity Linked Notes due February 1, 2007
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
Cautionary Statement Regarding Forward-Looking Statements | 4 | ||||
PART I | 6 | ||||
Item 1. Identity of Directors, Senior Management and Advisors. | 6 | ||||
Item 2. Offer Statistics and Expected Timetable. | 6 | ||||
Item 3. Key Information. | 6 | ||||
Item 4. Information on the Company. | 6 | ||||
Information required by Industry Guide 3. | 7 | ||||
Item 5. Operating and Financial Review and Prospects. | 7 | ||||
Item 6. Directors, Senior Management and Employees. | 8 | ||||
Item 7. Major Shareholders and Related Party Transactions. | 8 | ||||
Item 8. Financial Information. | 9 | ||||
Item 9. The Offer and Listing. | 9 | ||||
Item 10. Additional Information. | 11 | ||||
Item 11. Quantitative and Qualitative Disclosures About Market Risk. | 15 | ||||
Item 12. Description of Securities Other than Equity Securities. | 15 | ||||
PART II | 16 | ||||
Item 13. Defaults, Dividend Arrearages and Delinquencies. | 16 | ||||
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. | 16 | ||||
Item 15. [Reserved]. | 16 | ||||
Item 16. [Reserved]. | 16 | ||||
PART III | 17 | ||||
Item 17. Financial Statements. | 17 | ||||
Item 18. Financial Statements. | 17 | ||||
Item 19. Exhibits. | 17 | ||||
Signatures | 18 | ||||
Index to Exhibits | 19 |
A reader-friendly PDF version of this report is available at www.ubs.com/investors, in the SEC filings section.
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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 areas, including the possibility of further losses in UBS Capital in 2002; | ||
• | 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; |
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Cautionary Statement Regarding Forward-Looking Statements(continued)
• | 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 | ||
• | Changes in currency exchange rates, including the exchange rate for the Swiss franc into US dollars. |
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 IAS 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 185 to 189 of the attached Financial Report 2001.
Ratio of Earnings to Fixed Charges
Please see page 189 of the attached Financial Report 2001, 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 10 to 15 of the attached Financial Report 2001.
Item 4. Information on the Company.
A—History and Development of the Company.
1 – 3 | Please see page 6 of the attached Handbook 2001/2002. | |
4 | Please see pages 14 to 15 of the attached UBS Handbook 2001/2002. | |
5, 6 | Please see the sectionInformation for Readerson page 8 of the attached Financial Report 2001, in particular, subsectionsPaineWebber mergerandRestructuring provision; also see sectionGroup Results 2001of theGroup Financial Reviewon pages 17 to 29 of the attached Financial Report 2001, in particular, the subsection regarding PaineWebber merger-related costs. | |
7 | Not applicable. |
B—Business Overview.
1, 2, 3, 5, 7 | Please see sectionsThe UBS Group andThe Business Groups on pages 9 to 53 of the attached UBS Handbook 2001/2002. For a breakdown of revenues by category of activity and geographic market, please refer to Notes 2a and 2b to the Financial Statements, on pages 92 to 95 of the attached Financial Report 2001. | |
4, 6 | Not applicable. | |
8 | Please see the sectionRegulation and Supervisionon pages 106 to 110 of the attached UBS Handbook 2001/2002. |
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PART I(continued)
C—Organizational Structure.
Please see Note 36 to the Financial Statements on pages 147 to 150 of the attached Financial Report 2001. |
D—Property, Plant and Equipment.
Please see pageProperty, plant and equipmenton page 189 of the attached Financial Report 2001. |
Information Required by Industry Guide 3
Please see pages 190 to 205 of the attached Financial Report 2001. |
Item 5. Operating and Financial Review and Prospects.
A—Operating Results.
Please see sectionsInformation for Readers,Group Financial Review andReview of Business Group Performanceon pages 8 to 73 of the attached Financial Report 2001. | ||
Please also see Note 40 to the Financial StatementsReconciliation of International Accounting Standards (IAS) to United States Generally Accepted Accounting Principles (US GAAP) and Note 41 to the Financial StatementsAdditional Disclosures Required Under US GAAP and SEC Ruleson pages 154 to 168 of the attached Financial Report 2001 and theCurrency managementsubsection of the Group Treasury section, on page 83 of the attached Handbook 2001/2002. |
B—Liquidity and Capital Resources.
We believe that our working capital is sufficient for the company’s present requirements. | ||
Group 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 77 to 85 of the attached UBS Handbook 2001/2002, and Note 19Debt Issued on pages 108 to 113 of the attached Financial Report 2001. | ||
For comments on UBS Group’s balance sheet and cash flows, please see pages 25 to 26 of the attached Financial Report 2001. | ||
For comment on UBS’s long term credit ratings, please see theCapital strengthsubsection on page 11 of the attached UBS Handbook 2001/2002. |
C—Research and Development, Patents and Licenses, etc.
Not applicable. |
D—Trend Information.
Please see the subsectionOutlook 2002 on page 26 of the attached Financial Report 2001, and pages 13-14, 37, 44, and 50 of the attached Handbook 2001/2002, which contain trend information. |
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PART I(continued)
Item 6. Directors, Senior Management and Employees.
A—Directors and Senior Management.
1, 2, 3 | Please see pages 94 to 98 of the attached UBS Handbook 2001/2002. |
The Board of Directors has nominated Ernesto Bertarelli to become a member of the Board of Directors, subject to the approval of the Annual General Meeting on 18 April 2002. His biographical details are provided below: | ||
Ernesto Bertarelli (born 1965), a Swiss citizen, has been the Chief Executive Officer and Chairman of the Executive Committee of Serono International SA since 1996. He started his career with Serono in 1985 and held several positions in sales and marketing. Prior to his appointment as CEO, he served for five years as Deputy CEO and Vice Chairman of the Board of Directors. Mr. Bertarelli received his Bachelor of Science degree from Babson College in Boston, Massachusetts, and his MBA from Harvard Business School. Mr. Bertarelli’s business address is Serono International SA, Chemin des Mines 15 bis, 1202 Genève. |
4. and 5. | None. |
B—Compensation.
Please see Notes 33 and 34 to the Financial Statements on pages 141 to 146 of the attached Financial Report 2001. |
C—Board Practices.
Please see pages 88 to 98 of the attached UBS Handbook 2001/2002 and Note 34 to the Financial Statements on page 146 of the attached Financial Report 2001. |
D—Employees.
Please see page 24 of the attached Financial Report 2001 and the charts on page 13 of the attached UBS Handbook 2001/2002. |
E—Share Ownership.
Please see Notes 33 and 34 to the Financial Statements on pages 141 to 146 of the attached Financial Report 2001. |
Item 7. Major Shareholders and Related Party Transactions.
A—Major Shareholders.
Please see pages 127 to 128 of the attached UBS Handbook 2001/2002. |
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PART I(continued)
B—Related Party Transactions.
For 2001 and 2000, please see Note 34 to the Financial Statements on page 146 of the attached Financial Report 2001. | ||
The number of long-term stock options outstanding to related parties from equity plans was 823,848 at 31 December 1999. | ||
The total loans and advances receivable were CHF 28 million at 31 December 1999. | ||
The total amounts of shares and warrants held by members of the Board of Directors, Group Executive Board and Group Managing Board were 7,368,276 and 11,424,514 as of 31 December 1999. (These figures have been restated to reflect the effect of the 3 for 1 share split which took place on 16 July 2001). |
C—Interests of Experts and Counsel.
Not applicable because this Form 20-F is filed as an annual report. |
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 126 of the attached UBS Handbook 2001/2002. |
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 123 of the attached UBS Handbook 2001/2002. |
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. | ||
virt-x, the new name for Tradepoint, is a collaboration between the TP Group LDC and the SWX Swiss Exchange to provide the first platform on which all European blue chips can be traded electronically and which offers integrated clearing and settlement. 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. |
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PART I(continued)
All the constituents of the SMI are traded on virt-x. Altogether, approximately 600 blue chips representing around 80% of European market capitalization are traded on virt-x, in the currency of their home market. | ||
virt-x is available for trading 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 pre-opening phase from 17:30 to 22:00 CET on the previous business day and from 06:00 to 09:00 CET on the current business day, 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 to the Swiss national central securities depository SIS SEGAINTERSETTLE AG, the UK national central securities depository CRESTCo or Euroclear. | ||
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 two 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 2001, the equity securities of more than 2,797 corporations were listed on the NYSE. | ||
The NYSE is open Monday through Friday, 9:30 A.M.-4:00 P.M., eastern time. | ||
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 funneled to a single location. |
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PART I(continued)
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 Exchange’s other regulatory activities include the supervision of member firms to enforce compliance with financial and operational requirements, periodic checks on broker’s sales practices, and the continuous monitoring of specialist operations. |
Trading on the Tokyo Stock Exchange
Volumes of UBS shares traded on the Tokyo Stock Exchange are negligible in comparison to the volumes 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 | ||
b) The “Global Registered Share” chapter on pages 122 to 123 of the attached Handbook 2001/2002 which provides details of recent changes relating to the par value of the UBS share. | ||
c) Pages 7 and 122 of the attached Handbook 2001/2002 which provide details of our new transfer agent in the US, Mellon Investor Services. |
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 or foreign owners to hold UBS’s securities freely or to vote UBS’s securities freely in matters put to a vote of UBS security holders generally. 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. |
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PART I(continued)
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. | ||
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. |
Ownership of UBS Ordinary Shares—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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PART I(continued)
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. The form used for obtaining a refund is Swiss Tax Form 82 (82C for companies; 82E for other entities; 82I 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. |
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—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. | ||
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. 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. |
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PART I(continued)
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 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, determined in US dollars, in the UBS ordinary shares. Capital gain of a non-corporate US holder is generally taxed at a maximum rate of 20% 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 at least 75% of the gross income of UBS for the taxable year is passive income or 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. 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. |
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 files with the SEC at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its public reference room. You may also inspect UBS’s 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. Some of this information may also be found on the UBS website at www.ubs.com/investors. |
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PART I(continued)
I—Subsidiary Information.
Not applicable. |
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
A—Quantitative Information About Market Risk.
Please see theMarket Risksection on pages 72 to 76 of the attached UBS Handbook 2001/2002. |
B—Qualitative Information About Market Risk.
Please see theMarket Risksection on pages 72 to 76 of the attached UBS Handbook 2001/2002. |
C—Interim Periods.
Not applicable. |
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. |
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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. [Reserved].
Item 16. [Reserved].
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PART III
Item 17. Financial Statements.
Not applicable. |
Item 18. Financial Statements.
The Financial Statements included on pages 75 to 169 in the attached Financial Report 2001 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. | ||
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 147 to 150 of the attached Financial Report 2001. | |||
10. | Consent of Ernst & Young Ltd. |
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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 Wuffli | |||
Name: | Peter Wuffli | ||
Title: | President of the Group Executive Board | ||
/s/ Hugo Schaub | |||
Name: | Hugo Schaub | ||
Title: | Group Controller and Member of the Group Managing Board |
Date: March 14, 2002
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HANDBOOK 2001/2002
Table of Contents
Table of Contents
Contents | ||||
Profile | ||||
Introduction | 1 | |||
UBS Group Financial Highlights | 2 | |||
UBS Group | 3 | |||
Our Business Groups | 4 | |||
Sources of Information about UBS | 5 | |||
The UBS Group | 9 | |||
Strategy, Structure and History | 10 | |||
The Business Groups | 17 | |||
UBS Switzerland | 18 | |||
UBS Asset Management | 34 | |||
UBS Warburg | 38 | |||
Corporate Center | 52 | |||
Capital and Risk Management | 55 | |||
Risk Management and Control | 56 | |||
Risk Analysis | 61 | |||
Group Treasury | 77 | |||
Corporate Governance | 87 | |||
Corporate Organization | 88 | |||
Directors and Officers of UBS | 94 | |||
Financial Disclosure Principles | 99 | |||
Value-based Management | 102 | |||
Regulation and Supervision | 106 | |||
Corporate Responsibility | 111 | |||
UBS Share Information | 121 | |||
The Global Registered Share | 122 | |||
UBS Shares 2001 | 124 |
Introduction
This is the second annual edition of the UBS Group Handbook.
The Handbook describes the UBS Group: its strategy and organization, and the businesses it operates. It outlines the principles by which the Group manages risk, and reports on developments during 2001 in the areas of credit risk, market risk, and treasury management. It also contains a description of the Group’s environmental policies.
The Handbook describes the value-based management processes that are being implemented at UBS. It contains an extensive discussion of the Group’s corporate governance arrangements and its relationships with regulators and shareholders, along with detailed facts about the UBS ordinary share.
The Handbook should be read in conjunction with the other information published by UBS, described on page 5.
We hope that you will find the information in our reporting documents useful and informative. We believe that UBS is among the leaders in corporate disclosure, but we would be very interested to hear your views on how we might improve the content and presentation of our information portfolio.
Mark Branson
Head of Group Communications
UBS AG
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Profile
UBS Group Financial Highlights
1 | Operating expenses / operating income before credit loss expense. | |
2 | Excludes the amortization of goodwill and other intangible assets. | |
3 | For EPS calculation, see Note 9 to the Financial Statements. | |
4 | Net profit / average shareholders’ equity excluding dividends. | |
5 | Includes hybrid tier 1 capital, please refer to Note 30e in the Notes to the Financial Statements. | |
6 | Calculated using the former definition of assets under management. | |
7 | The Group headcount does not include the Klinik Hirslanden AG headcount of 2,450, 1,839 and 1,853 for 31 December 2001, 31 December 2000 and 31 December 1999, respectively. | |
8 | See the Capital strength section on pages 10-11. | |
9 | Details of significant financial events can be found in the Financial Report 2001. |
All earnings per share figures have been restated for the 3 for 1 share split which took place on 16 July 2001. Except where otherwise stated, all 31 December 2001 and 31 December 2000 figures throughout this report include the impact of the acquisition of PaineWebber, which occurred on 3 November 2000.
All invested assets figures for 31 December 2000 have been restated to reflect the new definition.
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Income statement key figures | ||||||||||||||||
Operating income | 37,114 | 36,402 | 28,425 | 2 | ||||||||||||
Operating expenses | 30,396 | 26,203 | 20,532 | 16 | ||||||||||||
Operating profit before tax | 6,718 | 10,199 | 7,893 | (34 | ) | |||||||||||
Net profit | 4,973 | 7,792 | 6,153 | (36 | ) | |||||||||||
Cost / income ratio (%)1 | 80.8 | 72.2 | 69.9 | |||||||||||||
Cost / income ratio before goodwill (%)1, 2 | 77.3 | 70.4 | 68.7 | |||||||||||||
Per share data (CHF) | ||||||||||||||||
Basic earnings per share3 | 3.93 | 6.44 | 5.07 | (39 | ) | |||||||||||
Basic earnings per share before goodwill2, 3 | 4.97 | 7.00 | 5.35 | (29 | ) | |||||||||||
Diluted earnings per share3 | 3.78 | 6.35 | 5.02 | (40 | ) | |||||||||||
Diluted earnings per share before goodwill2, 3 | 4.81 | 6.89 | 5.30 | (30 | ) | |||||||||||
Return on shareholders’ equity (%) | ||||||||||||||||
Return on shareholders’ equity4 | 11.7 | 21.5 | 22.4 | |||||||||||||
Return on shareholders’ equity before goodwill2, 4 | 14.8 | 23.4 | 23.6 | |||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Balance sheet key figures | ||||||||||||||||
Total assets | 1,253,297 | 1,087,552 | 896,556 | 15 | ||||||||||||
Shareholders’ equity | 43,530 | 44,833 | 30,608 | (3 | ) | |||||||||||
Market capitalization | 105,475 | 112,666 | 92,642 | (6 | ) | |||||||||||
BIS capital ratios | ||||||||||||||||
Tier 1 (%)5 | 11.6 | 11.7 | 10.6 | (1 | ) | |||||||||||
Total BIS (%) | 14.8 | 15.7 | 14.5 | (6 | ) | |||||||||||
Risk-weighted assets | 253,735 | 273,290 | 273,107 | (7 | ) | |||||||||||
Invested assets (CHF billion) | 2,457 | 2,452 | 1,744 | 6 | 0 | |||||||||||
Headcount (full time equivalents)7 | 69,985 | 71,076 | 49,058 | (2 | ) | |||||||||||
Long-term ratings8 | AAA | AAA | AAA | |||||||||||||
Fitch, London | Aa2 | Aa1 | Aa1 | |||||||||||||
Moody’s, New York | AA+ | AA+ | AA+ | |||||||||||||
Standard & Poor’s, New York | ||||||||||||||||
Earnings adjusted for significant financial events and pre-goodwill2, 9
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Operating income | 37,114 | 36,402 | 26,587 | 2 | ||||||||||||
Operating expenses | 29,073 | 25,096 | 20,194 | 16 | ||||||||||||
Operating profit before tax | 8,041 | 11,306 | 6,393 | (29 | ) | |||||||||||
Net profit | 6,296 | 8,799 | 5,005 | (28 | ) | |||||||||||
Cost / income ratio (%)1 | 77.3 | 69.2 | 73.3 | |||||||||||||
Basic earnings per share (CHF)3 | 4.97 | 7.28 | 4.12 | (32 | ) | |||||||||||
Diluted earnings per share (CHF)3 | 4.81 | 7.17 | 4.09 | (33 | ) | |||||||||||
Return on shareholders’ equity (%)4 | 14.8 | 24.3 | 18.2 | |||||||||||||
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UBS Group
UBS is one of the world’s leading financial firms, serving a discerning global client base. As an organization, we combine financial strength with a reputation for innovation and a global culture which embraces change. Our vision is to be the pre-eminent global integrated investment services firm and the leading bank in Switzerland. We are the world’s leading provider of private banking 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 in corporate and retail banking. As an integrated group, not merely a holding company, we create added value for our clients by drawing on the combined resources and expertise of all our businesses.
Our client philosophy puts advice at the heart of relationships. Our priority is to provide premium-quality services to our clients, giving them the best possible choice by supplementing best-in-class products we develop ourselves with a quality-screened selection of products from others.
With head offices in Zurich and Basel, we operate in over 50 countries and from all major international financial centers. Our global physical presence is complemented by leading edge on-line services. All our clients can benefit from our technology — it complements our advisory services and allows us to deliver our services faster, more widely and more cost-effectively than ever before.
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Profile
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 Switzerland
UBS Asset Management
UBS Warburg
Corporate Center
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Sources of information about UBS
This Handbook contains a detailed description of UBS, its strategy, its organization and the businesses that make it up. You can find out more about UBS from the sources shown below.
Publications
This Handbook is available in English and German. (SAP-R/3 80532-0201)
Annual Review 2001
Financial Report 2001
Quarterly reports
How to order reports
E-information tools for investors
Website
Our internet-based information is available in English and German, with some sections also in French and Italian.
Messenger service
Results presentations
UBS and the Environment
Form 20-F and other submissions to the US Securities and Exchange Commission
We file periodic reports and other information about UBS with 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.
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Profile
Our Form 20-F filing is structured as a “wrap-around” document. Most sections of the filing are satisfied by referring to part of this Handbook or to part of the Financial Report 2001. 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 from 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, D.C. 20549. Please call the SEC at 1-800-SEC-0330 (in 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. 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 next 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.
UBS AG is incorporated and domiciled in Switzerland and operates under Swiss Company Law and Swiss Federal Banking Law as an Aktiengesellschaft, a corporation that has issued shares of common stock to investors.
The address and telephone number of our two registered offices and principal places of business are:
Bahnhofstrasse 45, CH-8098 Zurich, Switzerland, telephone +41-1-234 11 11;
and Aeschenvorstadt 1, CH-4051 Basel, Switzerland, telephone +41-61-288 20 20.
UBS AG shares are listed on the SWX Swiss Exchange and traded through virt-x (a joint venture between Tradepoint and the SWX Swiss Exchange). They are also listed on the New York Stock Exchange and on the Tokyo Stock Exchange.
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UBS Investor Relations Our Investor Relations team supports institutional, professional and retail investors from offices in Zurich and New York. | E-mail: sh-investorrelations@ubs.com | Web: www.ubs.com/investors | ||||||||||
Zurich | New York | |||||||||||
Hotline Zurich: | +41 1 234 4100 | Hotline New York: | +1 212 713 3641 | |||||||||
Christian Gruetter | +41 1 234 4360 | Richard Feder | +1 212 713 6142 | |||||||||
Mark Hengel | +41 1 234 8439 | Christopher McNamee | +1 212 713 3091 | |||||||||
Charles Gorman | +41 1 234 2733 | |||||||||||
Catherine Lybrook | +41 1 234 2281 | |||||||||||
Fax | +41 1 234 3415 | Fax | +1 212 713 1381 | |||||||||
UBS AG | UBS Americas Inc. | |||||||||||
Investor Relations G41B | Investor Relations | |||||||||||
P.O. Box | 1285 Avenue of the Americas, 14th Floor | |||||||||||
CH-8098 Zurich, Switzerland | New York, NY 10019, USA | |||||||||||
UBS Group Media Relations | Telephone | Fax | ||||||||||
Zurich | +41 1 234 8500 | +41 1234 8561 | sh-gpr@ubs.com | |||||||||
London | +44 20 7567 4714 | +44 20 7568 0955 | sh-mr-london@ubsw.com | |||||||||
New York | +1 212 713 83 91 | +1 212 713 98 18 | mediarelations-ny@ubsw.com | |||||||||
Tokyo | +81 3 52 08 62 75 | +81 3 52 08 69 51 | sh-comms-mktg-tokyo@ubs.com | |||||||||
Other useful contacts | ||||||||||||
Switchboards | Telephone | |||||||||||
For all general queries. | Zurich | +41 1 234 1111 | ||||||||||
London | +44 20 7568 0000 | |||||||||||
New York | +1 212 821 3000 | |||||||||||
Tokyo | +81 3 5293 3000 | |||||||||||
UBS Shareholder Services UBS Shareholder Services, a unit of the Company Secretary, is responsible for the registration of the Global Registered Shares. It is split into two parts — a Swiss register, which is maintained by UBS acting as Swiss transfer agent, and a US register, which is maintained by Mellon Investor Service as US transfer agent (see below). | Telephone | Fax | ||||||||||
Zurich | +41 1 235 6202 | +41 1 235 3154 | sh-shareholder-service@ubs.com | |||||||||
UBS AG | ||||||||||||
Shareholder Services | ||||||||||||
P.O. Box | ||||||||||||
CH-8098 Zurich, Switzerland | ||||||||||||
US Transfer Agent For all Global Registered Share related queries in the USA. | Mellon Investor Services | Telephone: +1 866 541 9689 | ||||||||||
Overpeck Center | Fax: +1 201 296 4801 | |||||||||||
85 Challenger Road | Web: http:// www.melloninvestor.com | |||||||||||
Ridgefield Park, NJ 07660, USA | ||||||||||||
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. | ||||||||||||
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The UBS Group
Strategy, Structure and History
Strategy, Structure and History
Our vision is to be the pre-eminent global integrated investment services firm and the leading bank in Switzerland. We are the world’s leading provider of private banking 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 in corporate and retail banking. As an integrated group, not merely a holding company, we create added value for our clients by drawing on the combined resources and expertise of all our businesses.
Being dedicated to total value management means creating value for all stakeholders.
We will only succeed by providing ourclientswith innovative and high-quality service coupled with long-term personal relationships. Client focus is the main driver of all our activities.
We seek to create value for ourshareholdersthrough sustainable growth of our business within appropriate risk parameters.
We are committed to succeed in the fierce competition for talent. The expertise and integrity of ourstaff create value for our clients and for the Group as a whole. We seek to be a highly attractive firm for our employees.
UBS’s reputation is one of our most valuable assets. We aim to adhere to the highest ethical standards, and to manage our risks with the greatest care. We are committed to thecommunitieswe are part of and to complying fully with the letter and spirit of the laws, rules and practices that govern UBS and its staff.
Strategy
Choice is central to enhancing UBS’s client offerings. We aim to increase product choice by augmenting our in-house range with a quality-screened selection of third-party products.
We believe that in the future, our clients will be global in outlook: either with global presence or global investments. All our businesses must compete on a global scale.
We are committed to attaining scale and scope in all our key businesses: this is both desirable and necessary to enable us to deliver the full spectrum of services at maximum efficiency, though we will rarely use price as a first-line competitive weapon.
Our client philosophy is advice-led, with intimacy stemming from the quality of our relationship managers. UBS’s businesses offer convenient access through multiple conventional and online channels, but put advice at the heart of relationships.
We are committed to being part of the technological elite, but we see e-commerce not as a business per se, nor as a discipline in its own right, but as integral to all our businesses. We aim to use technology to extend our reach to clients and markets we could not previously have accessed, to perfect clients’ experience of UBS, to increase the number of products and services they buy, and to minimize the production cost of our services.
UBS has a strong and well-managed capital structure. We are committed to rigorous balance sheet management and the optimization of UBS’s capital structure. We use the full range of capital management tools to apply any excess capital generated in the best interests of UBS’s shareholders, or to return it to them.
Financial targets
– | We seek to increase the value of UBS by achieving a sustainable, after-tax return on equity of 15-20%, across periods of varying market conditions. | |
– | We aim to increase shareholder value through double-digit average annual percentage growth of basic earnings per share (EPS), across periods of varying market conditions. | |
– | Through cost reduction and earnings enhancement initiatives we aim to reduce UBS’s cost / income ratio to a level that compares positively with best-in-class competitors. | |
– | We aim to achieve a clear growth trend in net new money in the private client businesses. |
The first three targets are all reported pre-goodwill amortization, and adjusted for significant financial events (for an explanation of significant financial events see Financial Disclosure Principles on pages 99 to 101).
We seek to achieve an appropriate market price for UBS’s shares by communicating transparently, openly and consistently with investors and the financial markets.
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Capital strength
UBS’s financial stability stems from the fact that it is one of the most well capitalized banks in the world. We believe that this financial strength is a key part of the value proposition offered to both clients and investors.
In May 2001, Moody’s downgraded UBS’s long-term credit rating from Aa1 to Aa2, attributing the change to concerns about “the ongoing challenges UBS faces in gradually shifting the center of its global private banking activities to onshore client segments”.
At the same time, Moody’s commented that the new long-term ratings continue to reflect UBS’s position as one of the world’s stronger and financially sounder banking groups and pointed to UBS’s “good profitability, low and balanced risk profile, and its ample economic capitalization”, adding that it expects UBS to preserve these healthy fundamentals.
In early August 2001, Standard & Poor’s reaffirmed its AA+ rating for UBS’s long-term debt, citing UBS’s strong market positions and franchises across a wide range of private banking and international securities activities, which provide a high degree of business and geographic diversification. Standard & Poor’s commented
In December 2001, Fitch reaffirmed its AAA long-term rating of UBS, but changed the outlook for the rating to negative, reflecting “the weaker operating environment for investment banking”.
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 cautious risk profile, UBS is one of the soundest financial institutions worldwide.
UBS’s long-term credit ratings are shown in the table below. Each of these ratings reflects only the view of the applicable rating agency at the time the rating was issued, and any explanation of the significance of a rating may be obtained only from the rating agency. There is no assurance that any credit rating will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the rating agency, if in the rating agency’s judgment, circumstances so warrant.
Long-term credit ratings
As at | ||||||||||||
31.12.01 | 31.12.00 | 31.12.99 | ||||||||||
Fitch, London | AAA | AAA | AAA | |||||||||
Moody’s, New York | Aa2 | Aa1 | Aa1 | |||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||
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The UBS Group
Strategy, Structure and History
Business and management structure
UBS’s Business Groups are managed together to optimize shareholder value — to make the whole worth more than the sum of the parts.
In practice this means that products from the wholesale-focused Business Groups, UBS Warburg and UBS Asset Management, are distributed to their own corporate and institutional clients and through the Business Groups focused on individual clients, UBS Switzerland and UBS PaineWebber. This exchange benefits both sides — UBS’s individual clients get access to sophisticated products and services; UBS’s wholesale Business Groups have access to premier distribution; and the Group captures the whole of the value chain.
Each Business Group is led by a member of the Group Executive Board or Group Managing
Board who is individually responsible for the performance of the Business Group.
UBS’s Corporate Center complements the Business Groups, aiming to ensure that the Business Groups operate as a coherent and effective whole, in alignment with UBS’s overall corporate goals.
UBS Switzerland — Stephan Haeringer
Private Banking is the world’s biggest private bank. Its strategy is centered on the client advisor, combining strong personal relationships with a full range of products and services specifically designed for the wealthy client, complemented by leading-edge technology.
Within Switzerland, the Private and Corporate Clients business unit provides a complete set of banking and securities services for individual and corporate clients, focused foremost on customer service excellence, profitability and growth via multi-channel distribution.
UBS Asset Management — John Fraser
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between asset prices and their fundamental worth. UBS Asset Management also provides investment fund products for the UBS Group and intends to increasingly widen its reach through third parties to individual clients outside the UBS Group.
UBS Asset Management is the twelfth largest institutional asset managers in the world, the second largest investment fund manager in Europe and the leading fund manager in Switzerland.
UBS Warburg — John Costas and Markus Granziol
In 2001, UBS PaineWebber was part of UBS Warburg, and was reported as a business unit called Private Clients. This is the structure reflected in the UBS Financial Report 2001 and in this Handbook. On 1 January 2002, UBS PaineWebber was separated from UBS Warburg to form a new Business Group within UBS, and will be reported separately with effect from our First Quarter 2002 Report.
UBS PaineWebber — Joseph J. Grano, Jr.
Corporate Center — Peter Wuffli
Corporate Center is led by Peter Wuffli, President of the Group Executive Board.
Board structure
Industry trends
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The UBS Group
Strategy, Structure and History
The increasing reliance of individuals on equity investment, for their personal savings and for their pension provision, will benefit firms that manage assets or trade in capital market products.
Commoditization of wholesale products, with increased competition and shrinking margins, is a fact of life, but one that is least harmful to institutions like UBS with the scale, global reach and technology infrastructure to support the volumes required to maintain profitability.
UBS believes markets will further deregulate and globalize, driving sharp increases in cross-border investment, both corporate and institutional. These changes present enormous opportunities for a firm like UBS with a global presence and the expertise to capitalize on cross-border flows.
The biggest trend that will drive UBS’s business in the coming years is the anticipated expansion and concentration of private wealth. In the US, wealthy households (those with USD 500,000 or more in net investable assets), represented 65% of assets in 2001, according to UBS proprietary research data. By 2005 they are expected to represent 68% of total household assets. The compound annual growth rate of this segment from 2001 to 2005 amounts to 6.6%, compared to 5.9% for total US household assets. While wealth is less concentrated in Europe, wealthy households (in this case with more than EUR 500,000 of investable assets), are still expected to own 42% of total household assets by 2005, up from 38% in 2001, with annual growth of 9.6% compared to 8.0% for total household assets.
The combination of this growth in wealth with the increasing shift towards equity investments, will provide huge opportunities for the best, most global, asset managers. Those securities firms with large institutional franchises will experience significant growth servicing the expanding asset management industry. And of course, the concentration and growth of wealth will bring with it a huge demand for private banking services, providing a further opportunity for the current market leaders to grow their market share.
All of UBS’s businesses are positioned to benefit from this increase in private wealth. UBS Asset Management is among the top five global asset managers, with an increasingly diversified range of investment styles. UBS Warburg has an extremely strong institutional client franchise. And the combination of Private Banking and UBS PaineWebber gives UBS the largest and most balanced share of the global wealth market.
Strategic developments in 2001
The merger with PaineWebber has been a transforming partnership for UBS, not just in the US, but across our private client businesses, through the strengths that UBS PaineWebber can bring to our developing European wealth management business. Applying the combined skills and expertise of Private Banking and UBS PaineWebber, we have started to build a successful business in the growing domestic wealth management markets of Europe. Since the start of 2001, we have added almost 250 new client advisors in our key European markets of Germany, France, Italy, Spain and the UK, and projects to upgrade products, training, marketing and technology are all on target.
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UBS was formed on 29 June 1998, by the merger of two of Switzerland’s leading banking groups, Union Bank of Switzerland and Swiss Bank Corporation.
Union Bank of Switzerland’s history as a powerful force in banking began in the 1860s with the founding of the Bank in Winterthur and the Toggenburger Bank. In 1912, the merger of these two financial institutions resulted in the creation of the Union Bank of Switzerland. Subsequently, Union Bank of Switzerland developed primarily through internal growth, although it also made certain significant acquisitions, such as the asset management firm Phillips & Drew in 1985.
Swiss Bank Corporation celebrated its 125th anniversary in 1997. It was incorporated in Basel in 1872 and its history can be traced back to the creation of “Bankverein” from six private banking houses in 1854. Swiss Bank Corporation’s expansion involved significant acquisitions, including:
– | O’Connor & Associates, a group of affiliated firms specializing in the trading of options and other derivative instruments, in 1992. | |
– | Brinson Partners, a leading institutional investment management firm, in 1995. | |
– | the investment banking and securities operations of S.G. Warburg Group, in 1995. | |
– | Dillon Read & Co. Inc., a United States-based investment bank, in 1997. |
All the entities that have joined UBS have, regardless of their size, had a significant impact on our culture and ethos. O’Connor & Associates was a much smaller firm, but brought an affinity for technology, which has remained with UBS ever since, and a trading approach and risk management sophistication which still remains core to our operations today. The most significant benefit was the reverse cultural revolution O’Connor brought. This was quite deliberate; it transformed the company and helped it move into the modern age in a dramatic way. Later mergers reinforced this pattern of cultural change, with S.G. Warburg bringing a deep and passionate client focus, and Brinson Partners redefining the asset management process.
Merger with PaineWebber
The operational integration of PaineWebber’s businesses was completed swiftly and smoothly in early 2001, and capped by the introduction of the new brand, UBS PaineWebber. We had not planned to change the PaineWebber brand so soon after the merger, but it was made possible by the extremely positive reception for the merger from PaineWebber staff and the smooth progress of integration. The decision to implement the new brand was supported by requests from UBS PaineWebber financial advisors, who wanted a way to emphasize to their clients the advantages in scope, scale and access to global resources brought by this business’s new place in the UBS Group.
At the same time, like previous merger partners, UBS PaineWebber is already transforming UBS; not just through increased US presence and distribution capacity, but through the proven strengths in marketing, technology, product development and training that it is bringing to all our private client businesses, leveraging its skills to help drive UBS’s European wealth management initiative.
This history of acquisition and openness to cultural diversity continues to be a key strength of the UBS Group. We are conscious of the importance of cultural change as a response to the growing challenges of the competitive global environment. The diversity of knowledge and experience offered by new acquisitions means that we can import into UBS better corporate cultures, better ways of doing business and better insights.
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The Business Groups
UBS Switzerland
UBS Switzerland
UBS Switzerland is the world’s largest private banking business and the leading bank in Switzerland.
Business Group Reporting adjusted for significant financial events
Private and | ||||||||||||||||||||||||
Corporate Clients | Private Banking | UBS Switzerland | ||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Income | 7,161 | 7,443 | 6,314 | 6,928 | 13,475 | 14,371 | ||||||||||||||||||
Credit loss expense | (576 | ) | (759 | ) | (28 | ) | (26 | ) | (604 | ) | (785 | ) | ||||||||||||
Total operating income | 6,585 | 6,684 | 6,286 | 6,902 | 12,871 | 13,586 | ||||||||||||||||||
Personnel expenses | 2,988 | 3,187 | 1,776 | 1,956 | 4,764 | 5,143 | ||||||||||||||||||
General and administrative expenses | 991 | 1,058 | 1,609 | 1,561 | 2,600 | 2,619 | ||||||||||||||||||
Depreciation | 459 | 419 | 157 | 142 | 616 | 561 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 0 | 27 | 41 | 43 | 41 | 70 | ||||||||||||||||||
Total operating expenses | 4,438 | 4,691 | 3,583 | 3,702 | 8,021 | 8,393 | ||||||||||||||||||
Business Group performance before tax | 2,147 | 1,993 | 2,703 | 3,200 | 4,850 | 5,193 | ||||||||||||||||||
Cost / income ratio before goodwill (%) | 62 | 63 | 56 | 53 | 59 | 58 | ||||||||||||||||||
Net new money (CHF billion) | 8.5 | 0.4 | 22.5 | 2.8 | ||||||||||||||||||||
Invested assets (CHF billion) | 320 | 345 | 682 | 691 | ||||||||||||||||||||
Heacount (Full time equivalents) | 19,938 | 21,100 | 9,266 | 8,925 | 29,204 | 30,025 | ||||||||||||||||||
Organization structure
– | Private Banking, the world’s leading provider of wealth management services; | |
– | Private and Corporate Clients, Switzerland’s premier retail and commercial bank. |
Shared expertise
Product development
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Services UBS Switzerland
e-commerce
e-commerce strategy
e-commerce highlights 2001
– | Secure Messagingis a secure mechanism for transferring messages from a client to and from their advisor. It operates in a safeguarded environment, avoiding the need to send e-mail messages over the open internet. The system automatically routes client messages to the appropriate client advisor, who can respond via the same secure link. | |
– | my Opportunitiesallows e-banking clients to create an investor profile and call up corresponding investment proposals. Additional tools help a client to plan the financing of lifecycle events, such as buying a first house, or paying for a child’s education. |
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UBS Switzerland
– | myIPO is a calendar containing details of current and expected initial public offerings that will be available through UBS. |
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Private and Corporate Clients
Private and Corporate Clients, UBS Switzerland’s retail and commercial banking unit, provides a complete set of banking and securities services for individual and corporate clients, focused foremost on customer service excellence, profitability and growth via multi-channel distribution.
Business description and organization
Our business areas
Individual Clients
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UBS Switzerland
ties of UBS Warburg or UBS Asset Management. Examples include the recently launched UBS classic mortgage, where the interest rate is linked to the ten-year Swiss federal bond rate, the newly established Alternative Investments unit, which provides screened access to high quality alternative investments, or innovative investment products such as UBS’s Fresco Index shares, which bring the benefits of exchange traded funds to the European market.
As a leader in a relatively slow growing market, we are dedicated to increasing operational efficiency through the intelligent application of technology. Centered on UBS Switzerland’s integrated multi-channel strategy, with its extensive e-banking offering, our infrastructure is designed to give our clients convenient and efficient access to banking services. For basic products and services technology is used, both to ensure round the clock availability and low cost provision. Our customer service centers provide convenient contact, and basic information or advice 24 hours a day, while for in depth advice and to work out specific individual investment solutions all our clients have our expert client advisors and Switzerland’s largest banking network at their disposal. In 26 of our branches we have implemented a “two-zone concept”: standard transactions can be undertaken via ATMs, while client advisors focus on value-adding advice.
Corporate Clients
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markets for their funding needs. Approximately 8,000 large companies utilize our expertise in handling complex financial transactions; focused on the domestic market, around 170,000 small and medium enterprises (SMEs) primarily require local market know-how and access to a full range of products and services. We are also the leading bank in Switzerland for public sector bodies.
Risk Transformation and
Capital Management
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The Business Groups
UBS Switzerland
Operations
Loan Portfolio
For details on the credit portfolio, please refer to the Risk Analysis section on pages 61 to 76.
Recovery portfolio
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CHF 26 billion at 31 December 1998, soon after it was set up, thanks to the improved economic situation in Switzerland and our successful recovery efforts. Over the same period, non-performing loans with payments outstanding for ninety days or longer decreased from CHF 14.0 billion at 31 December 1998 to CHF 7.0 billion at 31 December 2001, leading to a non-performing loans to gross loans ratio of 4.6%.
Strategic initiatives
The Strategic Projects Portfolio
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UBS Switzerland
Private Banking
UBS Private Banking is committed to becoming the wealth management provider of choice for private investors, world-wide.
Business description
Private Banking’s 2,346 highly trained client advisors, combine strong personal relationships with access to the resources of the whole UBS Group to provide a full range of wealth management services, from asset management to estate planning, corporate finance advice to art banking. Private Banking is committed to developing an open product platform, widening the choices available to its clients by complementing UBS’s own products with top quality third party products, through a screened open-architecture.
Private Banking is currently expanding its domestic business in five key European markets – France, Germany, Italy, Spain and the UK – opening new offices and aiming to hire a total of up to 250 new client advisors each year.
Organization
– | Europe | |
– | Asia | |
– | Middle East and Africa | |
– | Americas International, and | |
– | Swiss Clients |
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The Intermediaries business area is the market leading provider of products and services to financial intermediaries in Switzerland. Leveraging the scale and scope of our private banking expertise, we provide financial intermediaries in Switzerland, Germany and elsewhere with solutions, products and services that add substantial value to their client relationships, and allow efficient and convenient management of their clients’ assets through UBS Connect, our sophisticated e-platform.
Clients and marketing
Target clients
Marketing
Structured advisory process
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UBS Switzerland
Together with the client, the client advisor invests significant time and energy to understand and analyze the client’s situation, taking into account all the different factors which affect the client’s investment goals and risk appetite. The client advisor then acts as a consultant, helping to build a personalized financial strategy to meet these requirements.
Products and Services
Open architecture
Product positioning framework
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vides the whole range of financial services in an exclusive and very individualized format for ultra high net worth individuals.
Research and investment products
Investment solutions
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The Business Groups
UBS Switzerland
Clients can elect either to invest in the full range of securities directly, or to limit their investments to investment funds, through our Managed Fund Portfolio product. In each case, our portfolio management service offers clients an active, but risk-controlled investment approach, based on consistent analysis of macroeconomics, markets and individual companies with regular monitoring of credit quality and liquidity of assets. Investments are managed with an emphasis on diversification across asset categories and markets, and an increasing focus on a regional and sector orientation. We can also take into consideration tax aspects in our investment process, if requested.
Financial planning
Corporate finance advice
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Family office team
Banking products
e-business
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UBS Switzerland
illustration of our strategy for delivering successful global e-commerce projects: solutions and applications arefirst developed for a particular local market and then, after successful implementation, adapted to reflect local characteristics and requirements and rolled out in other locations.
European wealth management
and the UK, which together represent about 80% of the European market. By deploying staff and expertise, we have taken the best of UBS PaineWebber’s top-class abilities in marketing, product management and innovation, technology, and training and applied them as a key catalyst in building our European business.
People
Products
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as identifying offerings with a superior performance track-record. Around 30 providers have been selected for the initial launch from a screened universe of over 1,000, including AXA Investment Management, DWS, Fidelity, JP Morgan Fleming Asset Management and Swissca.
Platform
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The Business Groups
UBS Asset Management
UBS Asset Management
UBS Asset Management delivers superior results for its clients through a globally integrated investment organization.
Business Group Reporting
CHF million | UBS Asset Management | |||||||
For the year ended | 31.12.01 | 31.12.00 | ||||||
Institutional fees | 1,007 | 1,119 | ||||||
Mutual funds fees | 1,103 | 834 | ||||||
Total operating income | 2,110 | 1,953 | ||||||
Personnel expenses | 1,003 | 880 | ||||||
General and administrative expenses | 564 | 439 | ||||||
Depreciation | 46 | 49 | ||||||
Amortization of goodwill and other intangible assets | 266 | 263 | ||||||
Total operating expenses | 1,879 | 1,631 | ||||||
Business Group performance before tax | 231 | 322 | ||||||
Cost / income ratio before goodwill (%) | 76 | 70 | ||||||
Net new money — Institutional (CHF billion) | 6.2 | (70.8 | ) | |||||
Invested assets — Institutional (CHF billion) | 328 | 323 | ||||||
Net new money — Mutual Funds (CHF billion) | 28.7 | 2.9 | ||||||
Invested assets — Mutual Funds (CHF billion) | 344 | 319 | ||||||
Headcount (full time equivalents) | 3,281 | 2,860 | ||||||
Business
Our business is investment management: delivering value-added investment performance and excellence in client service to a diverse international client base, ranging from major institutions to
individual mutual fund clients. The breadth, depth and global scope of UBS Asset Management’s investment capabilities, research and risk management distinguishes it from its peers.
UBS Asset Management has a total of CHF 672 billion of invested assets making it the twelfth largest global institutional asset manager, the second largest mutual fund manager in Europe, and by far the largest mutual fund manager in Switzerland.
UBS Asset Management brings together the key elements of investment solutions for its clients:
– | A global perspective on markets and economies. | |
– | A top quality investment management platform, dedicated to valuing markets, currencies and securities around the world, based on a range of investment styles, with a particular expertise in identifying price/value discrepancies derived from fundamental research. |
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– | Innovative thought leadership and investment ideas. | |
– | Extensive financial, informational and, most important, human capital. | |
– | A dedication to providing personal client services and personalized business solutions. |
UBS Asset Management’s main offices are in Chicago, London and Zurich. With 3,000 employees in over 15 countries, UBS Asset Management offers a truly global perspective on investment management.
Organization
UBS Asset Management’s investment expertise is based on a single global investment platform, with over 450 investment specialists located in the world’s major financial centers. The resources and expertise of all these specialists are available to support all of UBS Asset Management’s clients, wherever they are located.
UBS Asset Management’s investment expertise is delivered through specialized local client franchises around the world, which combine access to UBS Asset Management’s global investment management platform with detailed knowledge of local clients, markets and regulations. Our best known client brands are Brinson Partners, Brinson Advisors and Brinson Canada in the Americas, Phillips and Drew in the UK, and UBS Asset Management and UBS Investment Funds in Europe, the Middle East, Africa and Asia.
In addition, specialized investment capabilities are offered through specific brands including: O’Connor, which offers hedge funds and other alternative investments; GAM (Global Asset Management) a multi-manager specialist; Fresco exchange traded funds; UBS Realty and UBS Timber.
In April 2002, we will launch a new brand, UBS Global Asset Management, to replace the different brands that have been used around the world for our core institutional and wholesale businesses. This strategic move reflects the global integration and scope of our investment approach and offerings and underlines our consistency of approach and commitment to shared principles throughout the world. Specialty businesses with separate identities such as GAM, Fresco and O’Connor will retain their current names.
Investment capabilities
UBS Asset Management has historically been closely associated with a price/intrinsic value investment style. Although this remains true, we have broadened our capabilities and developed our investment platform in recent years to the point where we believe that we are now better described as a multi-paradigm investment firm. This paradigm is supported by one global, totally integrated investment platform, employing resources from all areas of the globe.
Our investment capabilities include:
– | Equities | |
– | Balanced | |
– | Fixed Income | |
– | Alternative — Private equity, real estate, timber, farmland, hedge funds | |
– | Multi-manager and fund of funds |
Our client mandates reflect the very broad range of these capabilities, from fully discretionary global asset allocation portfolios to equity or fixed income portfolios with a single country emphasis, including alternative asset classes such as real estate, timber, hedge funds and private equity. These portfolios are available through separately managed portfolios as well as through a comprehensive range of pooled investment funds. We pride ourselves on our ability to create customized investment portfolios to meet the specific needs of any prospective client.
Our underlying investment philosophy remains: the ultimate value of a security is based on fundamentals, specifically, the present worth of future discounted cash flows. We are constantly looking for discrepancies between asset prices and their fundamental worth, but further-
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UBS Asset Management
more, we look to understand these differences. We realize that these differences and the risks associated with them, if not fully understood, can lead to periods of under-performance. Therefore it is important to both understand the market pricing and actively manage the risk.
Our investment process is driven by essential fundamentals, which are necessary for us to be successful value added providers. These include recruiting and maintaining the highest quality investment talent, a focus on excellent and innovative research and disciplined portfolio construction and risk management. In addition, we pride ourselves in providing thought leadership, which extends our influence to assets beyond the realm of UBS.
Clients and marketing
Institutional
We have a diverse institutional client base located throughout the world. Our clients include:
– | corporate and public pension plans | |
– | endowments and private foundations | |
– | insurance companies | |
– | central banks and supranationals | |
– | financial advisors |
We use our long-term track record and strong client franchise to increase the penetration of our services with both new and existing clients. As a full service institutional asset management firm, offering our clients a comprehensive global range of research and investment analysis is a key part of our overall service and capability package.
In consultant-driven markets, such as the United States and the United Kingdom, we rely on developing and maintaining strong relationships with the major consultants that advise corporate and public pension plans, endowments, foundations, and other institutions. We also dedicate resources to generating new business directly with large clients.
In the US, our Brinson Advisors business provides products and services to the wholesale intermediary market, focusing on three core areas: quantitatively driven investments, short-term fixed income products and municipal securities. We are committed to developing and extending this wholesale business over the next two years.
Mutual funds
UBS Asset Management offers almost 500 mutual funds, exchange traded funds and other investment vehicles, across all asset types in diverse country, regional, and industry sectors.
In general, we do not maintain direct relationships with individual customers, but distribute our funds through intermediaries. Our most significant distribution channels are UBS Switzerland and UBS PaineWebber, with a minority of assets distributed through third-party providers. The penetration of our mutual fund products within the UBS Group’s existing client base is already very high, especially within Switzerland. The trend in the industry towards an open, multi-channel distribution architecture will
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provide increased competition for sales within UBS, but also increased opportunities outside the Group. Our business is on the leading edge of this trend, in which an increasing proportion of funds will be sold through third party channels. Within the UBS Group, we have an opportunity to offer our products through UBS PaineWebber, and to build on their successful experience of open architecture products in the US. Outside the UBS Group, UBS Asset Management will focus on distribution through third party financial institutions as demand increases for outsourcing of asset management and mutual fund services.
UBS Asset Management will increasingly leverage GAM’s range of mutual funds and its external manager selection process, in which it selects the best from over 4,000 third-party fund providers, to enhance the range of its investment styles and products. GAM products are now actively distributed by UBS Switzerland.
Strategic opportunities
Industry trends and competitive positioning
UBS Asset Management operates in a business which is growing across all market segments and geographic locations, with Europe and Japan leading the way. The US remains the largest market on an absolute basis, but shows slower growth rates and a much more competitive environment than other regions.
The trend to open architecture is fully entrenched within the US but is in its early stages in Europe and other regions of the globe. This clearly changes the landscape of the mutual fund business, presenting both opportunities and challenges. The biggest opportunity is the chance to increasingly offer our investment management services through other distribution channels. Undoubtedly, the challenge will be to retain our very high market share among UBS clients as competitors begin to offer their own investment management services.
The asset mix of investors throughout the world is expected to shift towards alternative investments, driven largely by regulatory activity and the continued pursuit of consistent risk-adjusted returns. Alternative investments can provide returns with a low correlation to traditional markets and therefore offer an investor’s portfolio potential for better risk-adjusted return. Management of alternative investments offers us the potential for higher margins, as well as a closer alignment of fees with relative performance.
Global pension reform is expected to continue as regulatory constraints ease. The pension market is undergoing a shift towards increased private funding which is expected to provide significant opportunities to asset managers.
UBS Asset Management believes that it is strongly positioned to take advantage of this growing and changing market:
– | We have the reach to succeed in an increasingly global industry. | |
– | We have a multi-specialist offering of diverse investment capabilities matched by very few companies. | |
– | We are one of very few large investment management firms with an equally strong institutional and mutual fund capability. |
Investment performance
UBS Asset Management continued its strong relative investment performance from 2000 into and through 2001. 2001 brought us one of the best years of relative performance in the history of the organization, exceeded only by 2000.
UBS Asset Management was well positioned for the economic down-turn that occurred in the US. and spread throughout the world. Overall performance was helped by relative overweights to high yield and emerging market debt, real estate and a general underweight to equities. Within each asset type, individual security selection contributed significantly to our strong relative performance. We feel this is a direct result of the integration of our investment platform, with the opportunities this has brought to share knowledge and research across the world.
We believe that UBS Asset Management is well positioned to continue its recent strength of the past two years’ investment performance. We will continue to develop the integrated global investment platform created in 2000, increase the coverage of our research in all major asset classes and continue to leverage the strengths of O’Connor and GAM. Additionally, we will continue to broaden our search for future investment opportunities in alternative asset classes and continue to commit significant resources to product innovation, research and thought leadership.
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The Business Groups
UBS Warburg
UBS Warburg
UBS Warburg is a leading investment banking and securities firm, providing a full spectrum of products to institutional and corporate clients, governments and intermediaries globally.
Business Group Reporting adjusted for significant financial events
Corporate and | ||||||||||||||||||||||||||||||||
CHF million, except where indicated | Institutional Clients | UBS Capital | Private Clients | UBS Warburg | ||||||||||||||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||
Income | 16,011 | 18,033 | (868 | ) | 368 | 6,969 | 1,321 | 21,349 | 19,590 | |||||||||||||||||||||||
Credit loss expense | (112 | ) | (243 | ) | (18 | ) | (3 | ) | (130 | ) | (246 | ) | ||||||||||||||||||||
Total operating income | 15,899 | 17,790 | (868 | ) | 368 | 6,951 | 1,318 | 21,219 | 19,344 | |||||||||||||||||||||||
Personnel expenses | 8,339 | 9,284 | 96 | 142 | 5,080 | 1,106 | 13,515 | 10,532 | ||||||||||||||||||||||||
General and administrative expenses | 2,705 | 2,779 | 66 | 49 | 1,489 | 355 | 4,260 | 3,183 | ||||||||||||||||||||||||
Depreciation | 454 | 555 | 2 | 2 | 124 | 42 | 580 | 599 | ||||||||||||||||||||||||
Goodwill amortization | 145 | 149 | 0 | 2 | 0 | 1 | 991 | 290 | ||||||||||||||||||||||||
Total operating expenses | 11,643 | 12,767 | 164 | 195 | 6,693 | 1,504 | 19,346 | 14,604 | ||||||||||||||||||||||||
Business Group performance before tax | 4,256 | 5,023 | (1,032 | ) | 173 | 258 | (186 | ) | 1,873 | 4,740 | ||||||||||||||||||||||
Cost/income ratio before goodwill(%) | 72 | 70 | 90 | 1 | 105 | 1 | 86 | 73 | ||||||||||||||||||||||||
Net new money (CHF billion) | 36.0 | 15.2 | ||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 1 | 1 | 782 | 773 | ||||||||||||||||||||||||||||
Headcount (full time equivalents) | 15,562 | 15,262 | 128 | 129 | 20,678 | 21,814 | 36,368 | 37,205 | ||||||||||||||||||||||||
(1) | Excluding retention payments. |
Business
UBS Warburg operates globally as a client-driven securities and investment banking firm. For both its own corporate and institutional clients and the individual clients of other parts of the UBS Group, UBS Warburg provides product innovation, top-quality research and advice, and comprehensive access to the world’s capital markets.
Organization
Since 1 January 2002, UBS Warburg has been organized into two business units:
– | The Corporate and Institutional Clients business unit is one of the leading global investment banking and securities firms, providing products and advice to institutional and corporate clients. | |
– | UBS Capital is responsible for the private equity investment of UBS and third-party funds in a diverse global range of private companies. |
During 2001, the private clients business centered on UBS PaineWebber was also reported as a business unit of UBS Warburg, and this is the financial presentation shown here and in the Financial Report 2001. With effect from 1 January 2002, UBS PaineWebber became a separate Business Group within UBS, and this will be the structure used for future financial reporting.
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Corporate and Institutional Clients
The global reach, breadth and diversification of our direct access to investors is unique, and our relationship-enhancing technology is among the best in the world.
Business
UBS Warburg is one of the leading global investment banking and securities firms. Its diverse heritage has shaped a business with a truly global client base and culture.
Our Corporate and Institutional Clients business unit provides wholesale products and advisory services to a diversified client base worldwide. It has a significant corporate client financing and advisory business, with particular strengths in advising on cross-border mergers and acquisitions and the capital raising requirements of our global corporate and government client base. Historically, among the leaders in corporate finance in Europe, we have expanded our US capabilities considerably over the last 18 months, leading to increased market share and visibility. We are one of the top-ranked firms in the world for institutional clients, with particular strengths in global equities research and distribution and in originating, structuring and distributing fixed income cash and derivatives products.
UBS Warburg has a strong history of risk management skills across all product areas, with integrated trading and risk management across cash and derivative products, and a consolidated global view of risk across different world regions. We leverage these skills to provide a broad array of risk management products for our institutional and corporate clients.
Corporate and Institutional Clients also manages cash and collateral trading and interest rate risks on behalf of the UBS Group and executes the vast majority of securities, derivatives and foreign exchange transactions for UBS’s retail clients.
Corporate and Institutional Clients’ headquarters are in London and it employs 15,562 people in over 30 countries throughout the world.
Organization
We organize our business into three main business areas, distinguished by the type of products and services offered and the nature of business risks: Equities, Fixed Income and Foreign Exchange, and Corporate Finance. All businesses are run on a global basis, with co-heads in place across each of the business areas to provide leadership across our regions and product sectors.
Legal structure
UBS Warburg operates through branches and subsidiaries of UBS AG. Securities activities in the US are conducted through UBS Warburg LLC, a registered broker-dealer.
Clients
Our client base is truly global and broad based, and our salespeople, research analysts and investment bankers provide products and services to institutional investors, intermediaries, banks, insurance companies, corporations, sovereign governments and supranational organizations.
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UBS Warburg
Corporate and Institutional Clients Operating income by client type
For the year ended | ||||||||||||
% of total | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Investment Banking | 23 | 23 | 23 | |||||||||
Securities revenue from corporate clients | 5 | 5 | 5 | |||||||||
Institutional clients and markets | 72 | 72 | 72 | |||||||||
Total | 100 | 100 | 100 | |||||||||
Products and services
Equities
Our Equities business area is a leading player in the secondary equity markets and in equity, equity-linked and equity derivative products for the primary markets. In 2001, we were a leading player in the primary markets as measured by league tables, ranked 2nd in International Equities and in International Equity Linked and were one of the top two distributors of equities globally and the top ranked player in Europe. During the year we have rapidly expanded our client penetration in the US, as measured by a leading private industry survey. Key products and services within Equities include:
– | providing research about companies, industry sectors, geographic markets and macro-economic trends to our corporate and institutional clients. | |
– | sales and trading of cash equities, equity-linked products, equity derivatives and equity structured products. | |
– | structuring, originating, distributing and trading newly issued equity, equity-linked and equity derivative products. |
We operate a multi-local model, with membership on over 87 different stock exchanges in 31 countries and a local presence in 40 offices globally, giving us enviable market access. We also have memberships of a wide range of electronic exchange ventures, and UBS Warburg owns equity stakes in some of these, including FXAll and Volbroker.
Our commitment to giving our clients the best possible access to the world’s equity markets is delivered through a team of 900 sales people and sales traders, in 40 locations globally. They are supported by a focused account management structure, in which continuous review and feedback from our institutional clients covers all aspects of our performance including research, sales, trading, execution and settlement.
Our equity research team supplies independent assessments of the prospects of approximately 3,400 companies across diverse sectors worldwide, representing about 90% of world market capitalization. With 600 professionals worldwide, we now have the largest team of equity analysts at any firm, according to Nelson Information’s Investment Research Survey 2001.
Direct client contact is complemented by our leading edge technology and e-commerce tools. We aim to use e-commerce to help enhance our clients’ experience of UBS Warburg, using the internet and other technologies to empower our clients, and offering direct access to our products and services via their medium of choice. Technology allows us to intensify our relationship with our clients, providing individualized content and automating routine tasks, allowing our staff to concentrate on providing value added advice.
The merger with PaineWebber in November 2000 has transformed our US equity franchise. The addition of a significant number of highly rated equity research analysts, combined with access to the wealthy US private client base of UBS PaineWebber have helped us to become one of the top five firms, by volume, in trading equities on the New York Stock Exchange, as well as having one of the fastest growing market shares in equity underwriting, up to 4.7% (ranked 7th) in 2001 from 1.0% (ranked 12th) in 2000. Our US equity research team now numbers over 100 analysts making it the fifth largest in the US.
In Europe, we have regained a leadership position in primary issuance in 2001, combining our extensive knowledge of the international markets with strong research and trading capabilities. Our strengths lie not only in the issuance of ordinary shares, but, through our
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top-tier capabilities in equity-linked products including convertibles and exchangeables, in our ability to lead manage the issuance of the most appropriate products to meet our clients’ equity financing needs. We more than doubled our market share internationally in 2001 and were the only firm to increase market share in all regions. We improved our position in all products and regions, converted the secondary franchise into primary solutions, and generated a positive momentum that is the envy of our peer group.
During 2001, UBS Warburg was widely recognized in industry awards, receiving the following accolades from industry publications and peers:
– | Best Equity House of the Year according to The Banker Magazine in September 2001. | |
– | First for equity research in the Thomson Extel Pan-European Research Survey, capturing 22 first places among 71 different industry-sector awards. | |
– | Institutional Investor Research rankings 1st for Global Sector Teams, 4th in Europe, 2nd in All Asia ex-Japan (with the largest increase in rankings) and 8th in the All American Research Team 2001 (improved from 17th in 2000). | |
– | Best Broker for Execution in the Reuters UK Larger Company Survey, for the fifth year running. | |
– | Most Improved Broker Award in the Reuters US Larger Companies Survey. | |
– | First for Independent European Equity Research in Global Investor Magazine. | |
– | International Financial Review’s European Equity House of the Year (and Australian Equity House of the Year for the fifth consecutive year). |
IFR praised UBS Warburg for “consistently pushing back the boundaries of what was considered feasible and for moving the Equity Capital Markets industry forward in tough conditions. Time and again in 2001, UBS Warburg showed how an equity house could draw on all its resources in atrocious market conditions in order to win and execute mandates.”
Corporate finance
The Corporate Finance business area provides a variety of advisory services including mergers and acquisitions, strategic advisory and restructuring to supranational, corporate and sovereign clients. It also provides primary capital markets and global syndicated finance services, in cooperation with the Equities and Fixed income and foreign exchange businesses. Products and services include:
– | mergers and acquisitions. | |
– | equity and equity-linked capital offerings, initial public offerings and other public and private equity offerings in conjunction with the Equities business area. | |
– | investment grade and high-yield debt offerings in conjunction with the Fixed Income and Foreign Exchange business area. | |
– | leveraged debt offerings in conjunction with the Fixed Income and Foreign Exchange business area. | |
– | structured finance. |
We were very active in all sectors in 2001, across all regions, providing our expertise, knowledge and execution capabilities to help our key clients in their ongoing strategic development. Just a few examples of the deals included:
– | Vodafone, the leading global mobile phone operator used UBS Warburg for all five transactions required for the USD 11.5 billion takeover of J-Tel. This further strengthens an already deep relationship where we have been advising Vodafone on acquisitions for several years. | |
– | De Beers of South Africa, a USD 19.3 billion public to private transaction, where we proved our familiarity with the highest levels of complexity, and provided a USD 3 billion underwritten loan commitment to assist the financing. | |
– | Allianz AG, one of the worlds leading insurance companies, used us as their advisors on their EUR 24.2 billion acquisition of Dresdner Bank AG – a testament to our creativity when it comes to problem solving. |
We have more than 2,600 corporate finance professionals worldwide, providing top-quality strategic advice and capital markets execution to our key clients globally.
Expansion of UBS Warburg’s global corporate client franchise is one of our key strategic goals. Over the last eighteen months, we have been actively recruiting, gathering together some of the best professionals in the industry to extend both our client reach and our execution capabilities. We have appointed senior bankers and research professionals in Media, Telecoms, Technology, General Industrials and Mergers and acquisitions, both in the US and elsewhere, including
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UBS Warburg
Ken Moelis, now head of our Corporate Finance business in the US. As a result of these successes our Corporate Finance team in the US has almost doubled in size since 1999.
Despite these investments, we do not expect immediate results. Gaining new corporate finance business can involve very long lead times, but we are very pleased at the progress that we have made during 2001, both in terms of league table position and market share. The combination of our expanded corporate finance and equities footprint in the US, giving us greater access to key corporate executives, combined with our global reach and scale, has allowed us to become involved in some of the largest and most complex deals in 2001, helping us to achieve the highest fee pool market share growth of any leading investment bank this year.
We have established a longer term goal of achieving market share, on a global basis, in excess of 5%, which effectively means a target of maintaining a leading fee pool market share in Europe and Asia-Pacific and a top 5 position in the Americas. We believe that the market share gains we have achieved this year represent a solid foundation on our path to this goal, particularly against a background of very challenging conditions this year for corporate finance, with the combined effects of volatile markets and uncertain economic conditions significantly reducing the overall levels of market activity and the total fee pool.
Fixed income and foreign exchange
Our Fixed Income and Foreign Exchange business area operates across a broad spectrum of products and markets, including government
and corporate bonds, fixed income derivatives, mortgage backed securities, foreign exchange, cash and collateral trading, principal finance and credit derivatives. For institutional investor clients, we can provide access to the widest range of cash and derivative products covering bonds, foreign exchange and other fixed income products. Our global structuring capability combined with our distribution to investor clients allows us to provide unique financing and hedging products to issuing clients.
Our approach to specific products and markets varies. Where potential for sufficient risk adjusted returns exist, we will seek market share leadership in high-volume, liquid markets, using our client flow, capital and economies of scale to generate returns. However there are certain high profile fixed income markets where scale can only be gained at the expense of returns. In these cases, we focus on earning higher margins in specialized products where we can develop a position as a dominant global intermediary, leveraging our top quality research, and our premier structuring, trading, distribution and execution capabilities.
The prime example of this approach is in the most visible segments of the global fixed income markets: the primary international and eurobond sectors. We have always made a conscious decision to operate our businesses and allocate resources based on profitability and not on pure league table positions. So, while our league table positions have slipped in 2001 as compared to 2000, we have recorded a record year in terms of revenues, with full year revenues across all products increasing by 41%.
While there are no definitive surveys or measures of market share in the highly fragmented fixed income and foreign exchange markets, we continue to win awards for the depth of our client coverage and technical expertise with products:
– | 1st in Fixed Income Strategy Research – Institutional Investor Global Survey. | |
– | 2nd Best overall bank in FX Week Awards 2001, with 1st place rankings in FX forwards, currency options and internet trading. We also received the 1st place ranking overall with corporate clients. | |
– | Best website in the euromoney.com 2001 internet awards for: FX Research and Analytics, FX Options and Execution, Swaps, Medium Term Notes, Euro-Commercial Paper and Fixed Income Analytics. |
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Loan portfolio
UBS took a strategic decision during 1998 to reduce the size of its international loan portfolio, limiting exposures unless they directly supported core client relationships. UBS continues to avoid engaging in substantial balance-sheet-led earnings growth, with the result that the size of its international loan portfolio has reduced considerably from the level recorded in 1998. Despite this, we continue to support our core clients in their financing needs. Risk/return considerations will be the paramount consideration in determining balance sheet usage.
Corporate and Institutional Clients’ loan portfolio was CHF 61.2 billion at 31 December 2001. The Risk Analysis section on pages 61 to 76 contains an in-depth review of UBS’s credit portfolio and business, including a discussion of its impaired and non-performing loans.
e-commerce capabilities
UBS Warburg is among the leaders in the provision of innovative e-commerce and technology solutions to institutional clients, using these to strengthen the link between advisors and our clients. We will continue to expand and enhance our web-based technology solutions, in order to simplify distribution of information and execution, and provide individualized services, analytic tools and transparency to our clients.
Our e-commerce capabilities are based around our Client Portal, formerly known as Investment Banking On-Line (IBOL). Through this single home page, our clients have direct access to prices, research, trade ideas and analytical tools through leading edge 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.
The quality of our e-commerce sites has again been recognized by industry awards in 2001. In the euromoney.com 2001 internet awards, UBS Warburg won more awards than any other bank, including Best Site awards to: FX Research and Analytics –FX Web, FX Options and Execution –FX Option Trader, Swap –LIBOR Derivatives Online, Medium Term Notes –MTNWeb, Euro-commercial paper –ECPWeb and Fixed Income Analytics –CreditDelta. The Extel European Research Survey also ranked ResearchWeb as the number one Equity Research Website, as voted by institutional clients.
UBS Warburg sees technology as an enabling tool, allowing clients to benefit from the expertise and skills of its advisors. While the pace of technology development has not changed in 2001, we have focused on developing e-commerce capabilities as core components of our products and services, rather than as stand alone initiatives. Each business is continually seeking to enhance products and distribution methods with one goal – delivering the whole of UBS Warburg effortlessly and seamlessly to our clients.
Providing superior advice will be key to the Corporate and Institutional Clients business unit’s future success. UBS believes its e-commerce initiatives enhance its ability to add value to clients, as well as allowing it to extract value from the scale of its core business processes.
Energy trading
Early in 2002, UBS Warburg established an energy trading unit, based on Enron’s wholesale electricity and natural gas trading operations, through a licensing agreement that will give Enron an interest in the future income of our new business. UBS Warburg has not agreed to assume any of Enron’s past, current or future liabilities, and started with an empty trading book.
Under the deal, UBS Warburg will use Enron’s proprietary software (including EnronOnline), some of its trading floors and its back office equipment. We hare hired 650 former Enron employees, including 150 trading professionals. The key members of Enron’s electricity and natural gas trading management team will join UBS, including Greg Whalley, who became President and Chief Operating Officer of Enron in August 2001. The Enron team will be supplemented by management and other staff transferred from existing UBS businesses.
Despite the recent interruption of Enron’s trading businesses, we expect that the combination of Enron’s existing technology and personnel together with the risk management skills and financial strength of UBS Warburg will prove attractive to Enron’s former clients and trading partners. Prior to its collapse, Enron was the undisputed leader in this market, with a reputation for trading innovation and the excellence of its technology. We believe that the talent and expertise of the team will continue to be per-
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UBS Warburg
ceived as the market’s best, recovering past relationships and attracting new clients.
We see this as a great opportunity for UBS Warburg to leverage its risk management skills and trusted capital strength in an area in which market risk is largely uncorrelated to market risk in our other trading operations. It will take time to establish ourselves in this business, but we are confident that the combination of UBS Warburg with the technology and staff of the Enron trading operations will prove highly successful.
Strategic opportunities
UBS Warburg is one of the few truly global content and advice providers for institutional clients, with a full range of products. The international reach, breadth and diversification of its direct access to investors is best-in-class. We believe that markets will continue to be difficult until the second half of 2002 at the earliest, which will have a short term negative impact, particularly on our equity and corporate finance businesses. Nonetheless, we are confident that as recent new hires build their productivity, and as the momentum we have built in European and US markets pays dividends, we will continue to gain market share across all businesses, products and regions in 2002.
Industry trends and competitive positioning
We continue to show a significantly improved competitive position in both the corporate client segment and with institutional clients. Our market share in virtually all markets has improved and although we have not yet broken in to the top 5 in the corporate finance fee markets, we are a solid top 3 institutional player and have demonstrated strong momentum this year.
Our profits and cost/income ratio were hurt by the weaker revenue opportunities as 2001 progressed, but our overall costs are down and are tightly controlled. We are increasingly competitive and well positioned to take full advantage of any market improvements.
Expansion of Corporate finance
The merger with PaineWebber has positioned UBS Warburg as an employer of choice in the key US market by further demonstrating UBS Group’s commitment to the worlds largest market and establishing a solid platform from which to build.
During the latter part of 2000 and continuing throughout 2001, we took advantage of our enhanced credibility as an employer, and the dislocation in labor markets through various mergers within our industry, to hire key experienced and talented individuals and small teams in corporate finance.
We have focused on specific sectors where there is a substantial current fee pool, as well as sectors where we believe there are significant opportunities in the future. Our hiring efforts have been mainly centered on the development of industry-leading franchises in several key sectors, including Consumer Products, Energy and Power, Healthcare, Wireless, Media and Industrials. We also intend to build on our existing franchise in the Financial Institutions sector.
Building our franchise in this way will not result in overnight success. We expect it to take
Structure of the Enron deal
Under the agreement, UBS Warburg receives an exclusive license for ten years for the North American natural gas and electricity trading systems and a non-exclusive license for its systems in the rest of the world and for trading any other commodity or financial instrument globally. There will be no initial cash payment – all payments will take the form of royalties, based on future pre-tax income. Through the exercise of call options, UBS Warburg has the possibility to acquire all rights to the business (each call option would allow UBS Warburg to buy a third of Enron’s retained interest). If we exercise no calls after ten years and three months, our exclusive license for the North American gas and power trading operations will convert into a non-exclusive license and Enron will have the right to offer the intellectual property for trading gas and power in North America on a non-exclusive basis to other parties.
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two or three years for the new hires we have made and the new teams we are building to reach full productivity and generate substantial returns. Despite this, we have already achieved significant results, dramatically improving our corporate finance rankings compared to 2000. Using Freeman & Co data as a reasonable proxy for improvement in competitive positioning, we have clearly started building positive momentum with corporate clients in the Americas and are one of the few among our competitors to have increased absolute fee revenues in the Americas in 2001. However, we recognize the need to continue to build our franchise, hiring bankers and research analysts with significant expertise and client relationships.
Expansion in secondary markets in the US
We aim to build a secondary markets franchise in the US that is similar in depth and breadth to our leading European and Asia Pacific businesses. As a result of the boost to our franchise from the integration of UBS PaineWebber, we now rank strongly in equity research and have more than doubled our US secondary equity market share, although we remain some way behind the market share we enjoy in Europe.
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UBS Warburg
UBS Capital
UBS Capital will focus on managing its existing portfolio and selectively investing in core sectors and industries where we can leverage our capabilities and experience.
Business
In July 2001, we announced the postponement of plans to spin off UBS Capital to an affiliated status given the difficult market conditions for the private equity asset class. Since then, results at UBS Capital have continued to disappoint, as further deterioration of the economic climate has forced the postponement of planned divestments and led to continued degradation of value in parts of the portfolio.
During this period, we carefully considered the strategic future of UBS Capital in the light of the market environment, shifts in the structure of the private equity industry and our current assessment of the long-term opportunities for UBS Group. Although we are still undergoing a detailed review of the prospects for continued investments in some limited sectors, we expect that, consistent with our overall focus on advisory services, UBS will now concentrate on the management of its existing portfolio of investments, on enhancing our capabilities in private equity asset management, and restricting the level of our direct investments as principal.
New investments by UBS and its clients in UBS Capital funds will be limited to those sectors and regions with the strongest performance track record, and where UBS has the greatest competitive strengths, management depth and industry knowledge.
UBS Capital’s portfolio outside these strongest performing sectors and regions will be managed down by a team of proven and experienced investment managers over a period of several years to reduce UBS’s exposure without unnecessary sacrifice of fair value.
In the short-term, divestment opportunities remain highly restricted, and the future development of the portfolio will depend on the performance of the portfolio companies, the resumption of more normal levels of capital market activity, as well as the general outlook for company valuations.
Investment portfolio
UBS Capital had a total investment portfolio of CHF 5.0 billion at 31 December 2001, defined as historic cost of investments made, less divestments and permanent impairments. The fair value of the portfolio at the same date was CHF 5.6 billion.
At 31 December 2001, approximately 68% of the investment portfolio was three years old or less. Generally, investments are sold, and operating income recognized, between the third and the sixth year after the initial investment.
Organization
UBS Capital is structured on both a regional and sector basis. Given our revised approach, we now focus our efforts on ongoing management of our portfolio, and evaluating opportunities to exit investments which are appropriate to market conditions, the strategic positioning of the operating company and a satisfactory return for UBS and other investors. In considering any new
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UBS Capital investment portfolio
Aging (based on date of initial investment)
As at | ||||||||||||
CHF million1 | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
pre-1994 | 85 | 65 | 89 | |||||||||
1994 | 190 | 253 | 200 | |||||||||
1995 | 214 | 272 | 308 | |||||||||
1996 | 202 | 166 | 204 | |||||||||
1997 | 207 | 520 | 496 | |||||||||
1998 | 722 | 842 | 718 | |||||||||
1999 | 1,123 | 1,490 | 978 | |||||||||
2000 | 1,781 | 1,941 | ||||||||||
2001 | 487 | |||||||||||
Total | 5,011 | 5,549 | 2,993 | |||||||||
1All amounts are Investment, defined as cost less disposals and permanent impairments. |
UBS Capital investment portfolio
Geographic region (by headquarters of investee)
As at | ||||||||||||
CHF million1 | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
North America | 2,134 | 2,356 | 1,389 | |||||||||
Europe | 339 | 382 | 217 | |||||||||
Latin-America | 2,018 | 2,333 | 1,153 | |||||||||
Asia-Pacific | 520 | 478 | 234 | |||||||||
Total | 5,011 | 5,549 | 2,993 | |||||||||
1All amounts are Investment, defined as cost less disposals and permanent impairments. |
UBS Capital investment portfolio
Industry sector (based on industry classification codes)
As at | ||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
CHF million1 | 31.12.01 | Portfolio | 31.12.00 | Portfolio | 31.12.99 | Portfolio | ||||||||||||||||||
Consumer related | 773 | 15 | 1,023 | 18 | 610 | 20 | ||||||||||||||||||
Transportation | 522 | 10 | 640 | 12 | 605 | 20 | ||||||||||||||||||
Communications | 414 | 8 | 380 | 7 | 326 | 11 | ||||||||||||||||||
Computer related | 833 | 17 | 819 | 15 | 282 | 9 | ||||||||||||||||||
Energy | 152 | 3 | 190 | 3 | 167 | 6 | ||||||||||||||||||
Other electronics related | 247 | 5 | 247 | 4 | 38 | 1 | ||||||||||||||||||
Other Manufacturing | 94 | 2 | 106 | 2 | 45 | 2 | ||||||||||||||||||
Chemicals and materials | 54 | 2 | 106 | 2 | 23 | 1 | ||||||||||||||||||
Industrial products and services | 1,360 | 27 | 1,361 | 25 | 635 | 21 | ||||||||||||||||||
Others | 562 | 11 | 677 | 12 | 262 | 9 | ||||||||||||||||||
Total | 5,011 | 100 | 5,549 | 100 | 2,993 | 100 | ||||||||||||||||||
1All amounts are Investment, defined as cost less disposals and permanent impairments. |
investments we will aim to exploit the specific skills of our most successful teams, and draw on the resources and strengths of the Group.
Investment process
UBS Capital concentrates on late-stage investments, believing that these have a better chance of producing superior risk-adjusted returns. At 31 December 2001, 86% of the book value of UBS Capital’s investments was late-stage at the time of investment.
Investment opportunities have originated from a variety of sources, including referrals from UBS Switzerland and UBS Warburg. UBS Capital’s investment policy concentrates on five aims:
– | negotiate an attractive entry price. | |
– | increase the company’s efficiency. | |
– | implement a sales growth strategy. | |
– | repay company debt and reduce leverage. | |
– | achieve an exit at a higher multiple of earnings than the entry price. |
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UBS Warburg
Where appropriate, UBS Capital aims to provide a broader depth of resources and experience to the management teams of these companies to allow them to develop their businesses over the medium term (three to six years) in order to optimize their performance. UBS Capital’s exit strategies for the businesses include direct sales to strategic buyers, initial public offerings, leveraged recapitalizations and sales to other financial sponsors.
Strategic opportunities
Private equity funds
An established strategic goal of UBS Capital has been to develop best-of-breed alternative investments for the private clients of UBS Group. We will therefore leverage our knowledge of the industry, its dynamics and its key players to provide a screen selection of best-of-breed providers and advise institutional clients on third party private equity investments.
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Private Clients (UBS Paine Webber)
UBS PaineWebber — providing sophisticated wealth management services to affluent clients in the US.
During 2001, Private Clients was a business unit of UBS Warburg, which is how it is presented in this Handbook and how its results are reported in the Financial Report 2001. On 1 January 2002, the Private Clients business unit was renamed UBS PaineWebber and became a separate Business Group within UBS. Future financial reporting will follow this new structure.
Business
Operating under the brand name UBS PaineWebber, Private Clients is the fourth largest private client business in the US, with one of the most affluent client bases in the industry. Its 8,870 financial advisors provide a full range of wealth management services to some 2.5 million wealthy households in America. Its focus is on households with investable assets in excess of USD 500,000, the segment with the largest, fastest growing pool of assets in the US. Private Clients also has operations in Japan and Australia, although these represent a small percentage of its overall business.
Organization
The primary business area within UBS PaineWebber is the Private Clients Group, serving wealthy clients in the US. In addition, specialist products areas include Corporate Employee Financial Services, which provides stock option and stock purchase programs to corporations and employees in the US, and Transaction Services, which provides prime brokerage and securities lending to major US and international investment firms, and execution and clearing services to correspondent broker-dealers across the US, leveraging UBS PaineWebber’s infrastructure and skills.
Legal Structure
UBS PaineWebber operates through branches and subsidiaries of UBS AG. Securities activities in the US are conducted through UBS PaineWebber Inc., a registered broker-dealer.
Clients and marketing
UBS PaineWebber financial advisors are key to its client relationships, supported, but never replaced, by its top class online services. Financial advisors build and maintain strong relationships with their clients, taking the time to understand their financial objectives and risk appetite, in order to help them select the specific products and services they need. They also form the front-line in client acquisition, responsible for developing relationships with prospective investors and converting them into UBS PaineWebber clients. UBS PaineWebber’s financial advisors are based in 385 offices across the US, with representation in every major region.
Each year, UBS PaineWebber recruits on average 1,800 financial advisors, both experienced professionals and new entrants to the industry. All new brokers undergo a rigorous training program which is designed to provide them with the necessary financial planning, analysis, client management, legal and compliance training for dealing with our clients. The training program is a continuous process and does not end when the broker enters a branch office. In fact it is key to the development of our relationships with our clients and to retaining our brokers: broker turnover has been maintained at 8% over the last five years, and the average length of service is nine years.
Financial advisors’ individual efforts are backed up by sophisticated and long-running marketing and advertising campaigns, featuring the long famous tag-line “Thank you, PaineWebber”, and now its revised version “UBS PaineWebber, Thank you”, reflecting the introduction in March 2001 of the new brand, UBS PaineWebber. The new name is designed to underscore UBS and PaineWebber’s complemen-
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tary strengths and to reinforce the benefits of the merger to clients, financial advisors and other employees.
Products and Services
– | financial planning and wealth management consulting. | |
– | asset-based and advisory services such as discretionary and non-discretionary portfolio management, money market accounts, loans and fiduciary products. | |
– | transaction-based services, such as securities brokerage. |
It covers the full range of products available to private clients, including purchase and sale of securities, option contracts, commodity and financial futures contracts, fixed income instruments, mutual funds, trusts, wrap-fee products, alternative investments and selected insurance products.
UBS PaineWebber’s financial advisors are backed up by comprehensive online capabilities, centered on UBS PaineWebber Online Services. Launched in 1997, this now reaches 525,000 client households, representing more than USD 254 billion in invested assets at year-end 2001. The system provides a wealth of information and analysis to each client, about their accounts, and the markets and stocks they might want to invest in, and gives them a convenient means to keep in touch with his or her financial advisor. It also provides a range of trading, bill payment and other transactional tools. Each client and their client advisor has the opportunity to customize these services, extending the advisory relationship online, and empowering the client to make more confident decisions.
Strategic opportunities
Industry trends and competitive positioning
We believe we understand the goals and needs of core affluent investors and believe those needs are best met within the framework of the financial advisor relationship. UBS PaineWebber is distinguished by its personal approach to client relationships, placing the financial advisor at the forefront of all interactions with the client. Among core affluent investors, we have developed the following key capabilities:
– | National network of core affluent-focused financial advisors allowing us to develop and maintain local, personalized client relationships. | |
– | A strong US brand name, which builds trust with our clients, is now backed up by the international resources and capital strength of UBS. | |
– | A long commitment to, and understanding of, the benefits for our clients of a truly open product architecture providing screened selections of the best products available in the market. | |
– | Innovative investment products giving us comprehensive financial solutions. | |
– | A unique approach and process for the affluent providing unbiased investment advice. | |
– | Leveraging technology to develop an interactive client/advisor relationship. |
PACE and ACCESS
– | ACCESS combines the money management expertise of third-party professional investment managers with personal guidance by the UBS financial advisor. The managers selected to participate in the ACCESS program are some of the most prestigious in the industry and count among their clients many large |
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pension funds, foundations, endowments and wealthy individuals. UBS PaineWebber clients may invest in ACCESS with a minimum investment of USD 100,000. | ||
– | PACE (Personalized Asset Consulting and Evaluation) incorporates the consulting process into a single, comprehensive service that includes access to hundreds of no-load, load-waived and low-load mutual funds managed by some of the world’s leading investment management companies. The client is guided through a personal evaluation of investment needs to determine the correct risk profile and investment mix. |
While these products meet client needs for fee-based products, wrap products also help UBS PaineWebber to enhance its revenue stream, by expanding recurring fees which are not-related to the volume of transactions carried out, and so are less sensitive to changes in market sentiment.
Products from UBS Group
UBS PaineWebber continues to benefit from UBS’s strong balance sheet and product expertise, making new structured products available to its clients.
One example of these is GOALS, equity-linked securities created by UBS Warburg that combine a bond with a short put option on a specific stock. An entirely new kind of investment product for UBS PaineWebber, GOALS were developed using UBS Warburg’s expertise in packaging structured products for private clients, and rely on the UBS Group’s rating and capital strength for the credit element of the product. Combined with its equity derivative features, this was a product that PaineWebber could not have originated before joining the UBS Group, and UBS Warburg could not have distributed in the US.
UBS PaineWebber distributed 12 different GOALs and GOALs+ issues to its clients during 2001, together with several other issues of other structured securities such as BULS and FORENS.
During early 2002, we plan to roll-out a series of new secured lending products. Our financial advisors will be able to offer UBS PaineWebber branded liquidity solutions such as fixed and variable rate non-purpose loans as well as residential mortgages to their individual clients, increasing our ability to meet the wider financial needs of our clients.
Corporate Employee Financial Services
Over the last few years, UBS PaineWebber’s Corporate Employee Financial Services (CEFS) business has established a strong franchise in the delivery of Stock Option Processing services for S&P 500 companies with broad based plan participation. UBS PaineWebber provides services to over 500,000 active employee share plan participants with “in the money value” of unexercised options of over USD 40 billion. As well as a good business in its own right, CEFS acts as an important asset-gathering tool. By providing a high service relationship with the employees prior to the execution of the options, we aim to encourage them to invest their option proceeds through UBS PaineWebber. We operate a dedicated network of specially selected and trained financial advisors who offer a suite of advisory and educational services to our clients’ employees. Through this network we can maintain our market position as the best full service provider for corporations, while building a book of prequalified high net worth clients.
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The Business Groups
Corporate Center
Corporate Center
Our Business Groups are managed together to optimize shareholder value making the whole worth more than the sum of the parts.
Business Group Reporting adjusted for significant financial events | ||||||||
Corporate Center | ||||||||
CHF million | ||||||||
For the year ended | 31.12.01 | 31.12.00 | ||||||
Income | 678 | 358 | ||||||
Credit loss recovery | 236 | 1,161 | ||||||
Total operating income | 914 | 1,519 | ||||||
Personnel expenses | 546 | 490 | ||||||
General and administrative expenses | 207 | 281 | ||||||
Depreciation | 372 | 320 | ||||||
Amortization of goodwill and other intangible assets | 25 | 44 | ||||||
Total operating expenses | 1,150 | 1,135 | ||||||
Business Group performance before tax | (236 | ) | 384 | |||||
Headcount (full time equivalents) | 1,132 | 986 | ||||||
Aims and objectives
UBS’s commitment to an integrated business model remains as strong as ever. UBS is not merely a holding company. It is a portfolio of complementary businesses, managed together for optimal shareholder value, where the whole is worth more than the sum of its parts.
UBS’s Business Groups are accountable for their results and enjoy considerable autonomy in pursuing their business objectives hence the need for a strong Corporate Center, with the mission to maximize sustainable shareholder value by coordinating the activities of the Business Groups. It aims to ensure that they operate as a coherent and effective Group with a common set of values and principles. To perform its role, Corporate Center avoids ownership of processes wherever possible, but instead establishes standards and principles, thereby minimizing its own staffing levels.
Key functions
Finance and Risk management and control
Corporate Center includes the Group’s accounting, tax, treasury and risk management and control functions. These teams are responsible for safeguarding UBS’s long-term financial stability by maintaining an appropriate balance between risk and rewards, so that the Group is competitively positioned in growing market places with an optimal business model and adequate resources.
Further details of risk management and control policies and Treasury activities can be found in the Risk Management and Control, Regulators and Supervision and Group Treasury sections of this Handbook.
Group Controlling
Group Controlling is responsible for devising and implementing integrated and consistent
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financial control and accounting processes throughout the Group, in order to produce the Group’s regulatory, financial and management accounts.
Group Communications and Marketing
The Group Communications and Marketing function is responsible for the effective communication of our strategy, values and results to employees, clients, investors, media and the public, and for building the UBS brand worldwide.
Group Human Resources
Group Human Resources’ mission is to make UBS a global employer of choice, able to attract, develop, motivate and retain top talent by establishing standards, principles and procedures for performance evaluation, compensation and ben- efits, graduate and professional recruitment, training and development.
Legal
Legal protects UBS’s reputation by managing its legal affairs and coordinating the activities of Business Group legal departments.
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Risk Management and Control
Risk Management and Control
Risk is an integral part of all our activities. Excellence in risk management and control is a key success factor and therefore requires everyone’s commitment within our organization.
Risk management and control principles
– | We continue to develop potential stress loss measures for credit and market risk. |
– | We avoid taking extreme positions in tax, regulatory and accounting sensitive transactions. |
– | We aspire to the highest standards in protecting the confidentiality and integrity of our internal information. |
– | We aim to maintain the highest ethical standards in all our businesses. |
Every employee, but in particular those involved in risk decisions, must make UBS’s reputation an overriding concern. Responsibility for the risk of reputation damage cannot be delegated or syndicated.
An integrated approach to risk
management and control
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Key responsibilities
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Capital and Risk Management
Risk Management and Control
The risk control process
– | risk identification,particularly in new businesses and in complex or unusual transactions but also in response to external events and in the continuous monitoring of the portfolio. |
– | risk measurement,using approved methodologies and models which have been independently validated. |
– | risk policies,covering all inherent risk categories, both at Group level and in the Business Groups, consistent with evolving business requirements and international best practice. |
– | comprehensiverisk reportingto management at all levels against the approved risk limits and control framework, for all inherent risk categories. |
– | risk control,to enforce compliance with the Risk Management and Control Principles, and with policies, limits and regulatory requirements. |
The risks we take
Inherent risksare the risks inherent in our business activities which are subject to independent risk control. A distinction is made between primary and consequential risks.
– | credit riskis the risk of loss resulting from client, counterparty or issuer default and arises on credit exposure in all forms, including settlement risk. |
– | market riskis exposure to observable market variables such as interest rates, exchange rates and equity markets. |
– | liquidity and funding riskis the risk that the Group is unable to fund assets or meet obligations at a reasonable price or, in extreme situations, at any price. These risks are managed at the Group level, rather than in the Business Groups, and are discussed in the Group Treasury section on pages 77 to 85. |
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– | 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), and UBS’s own internal standards. | |
– | legal riskis the risk of financial loss resulting from the unenforceability of rights under a contract or property due to inadequate or inappropriate contractual arrangements or other causes. | |
– | liability riskis the risk of financial loss arising from a legal or equitable claim against the Group. | |
– | security riskis the risk of loss of confidentiality, integrity, or availability of information or assets, through accident or crime, and includes both IT and physical security. | |
– | tax riskis the risk of financial loss due to tax authorities opposing the Group’s position on tax matters. While the other consequential risk categories are managed at Business Group level, tax risk is managed at the Group level since tax is assessed on a legal entity basis and the parent bank and many subsidiary groupings carry out activities for more than one Business Group. |
A failure adequately to identify, manage or control any of these risks, including business risks, may result not only in financial loss but also in loss of reputation, and repeated or widespread failure compounds the impact. Reputation risk is not directly quantifiable and cannot be managed and controlled independently of the other risks.
How we measure risk
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Risk Management and Control
structure and the measure used to determine our market risk regulatory capital charge. We continue to work towards robust measures of statistical loss for other risk categories, although it can be complex to apply statistical techniques to risks for which the loss distribution is irregular and discontinuous.
Risk reporting
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Capital and Risk Management
Risk Analysis
Risk Analysis
Credit risk
Credit limits
Credit risk measurement
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Risk Analysis
Financial Statements, we report results according to International Accounting Standards (IAS) definitions. Under these rules, losses are recognized and charged to the Financial Statements in the period when they arise (see the Provisioning Policies section on page 64 and Notes 1 and 10 to the Financial Statements). By contrast, in its segment and business unit reporting, UBS aims to reflect the fact that credit risk exists in every credit engagement, and that credit loss expenses must be expected as an inherent cost of the business.
Expected loss
UBS internal rating scale and
mapping to external ratings
Moody's | Standard | |||||
Investor | and | |||||
UBS | Services | Poor's | ||||
rating | Description | equivalent | equivalent | |||
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 | |||
impaired or defaulted. The UBS rating scale, which is shown in the table above, is not only an ordinal ranking of our counterparties. We have assigned to each rating class a fixed probability of default, and thus clients migrate between rating classes as our assessment of their probability of default changes. As shown in the table above, we map the ratings of the major rating agencies to our rating classes based on the long-term average default observations for each external grade. Observed defaults per rating category vary year on year, and especially over an economic cycle, and this mapping does not, therefore, imply that UBS expects this number of defaults in any given period.
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Statistical and stress loss
Settlement risk
Country risk
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Risk Analysis
countries, and extension of credit may be denied on the basis of a country risk ceiling even if there are adequate counterparty limits available.
Provisioning policies
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Composition of credit risk
Total credit risk exposure
UBS Switzerland | UBS Warburg | Other1 | UBS Group | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans utilization (gross) | 181,854 | 185,271 | 199,960 | 79,475 | 98,459 | 77,151 | 655 | 786 | 903 | 261,984 | 284,516 | 278,014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingent claims | 13,235 | 10,613 | 9,465 | 7,301 | 11,440 | 15,136 | 2 | 0 | 0 | 20,538 | 22,053 | 24,601 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Unutilized committed lines | 2,009 | 3,574 | 3,444 | 48,026 | 47,402 | 60,412 | 18 | 0 | 0 | 50,053 | 50,976 | 63,856 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total banking products | 197,098 | 199,458 | 212,869 | 134,802 | 157,301 | 152,699 | 675 | 786 | 903 | 332,575 | 357,545 | 366,471 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Unsecured OTC products | 1,961 | 883 | 2,415 | 64,416 | 61,340 | 107,898 | 0 | 0 | 11 | 66,377 | 62,223 | 110,324 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other derivatives (secured exchange-traded) | 2,317 | 1,638 | 2,338 | 12,150 | 8,994 | 8,133 | 0 | 0 | 0 | 14,467 | 10,632 | 10,471 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities lending | 45 | 2,193 | 32 | 14,575 | 12,159 | 11,732 | 0 | 0 | 0 | 14,620 | 14,352 | 11,764 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Repo | 67 | 650 | 11 | 18,948 | 22,183 | 12,287 | 0 | 0 | 2 | 19,015 | 22,833 | 12,300 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total traded products2 | 4,390 | 5,364 | 4,796 | 110,089 | 104,676 | 140,050 | 0 | 0 | 13 | 114,479 | 110,040 | 144,859 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total tradable assets3 | 2,908 | 2,626 | 2,785 | 241,357 | 219,070 | 219,019 | 121 | 136 | 471 | 244,386 | 221,832 | 222,275 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total credit risk exposure, gross | 204,396 | 207,448 | 220,450 | 486,248 | 481,047 | 511,768 | 796 | 922 | 1,387 | 691,440 | 689,417 | 733,605 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total credit risk exposure, net of allowances | 198,886 | 199,670 | 210,003 | 483,850 | 478,303 | 508,972 | 791 | 917 | 1,381 | 683,327 | 678,890 | 720,356 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total loan portfolio exposure by Business Group
UBS Switzerland | UBS Warburg | Other1 | UBS Group | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans to banks (gross) | 7,938 | 9,150 | 8,780 | 19,853 | 20,370 | 21,481 | 470 | 544 | 524 | 28,261 | 30,064 | 30,785 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans to customers (gross) | 173,916 | 176,121 | 191,180 | 59,622 | 78,089 | 55,670 | 185 | 242 | 379 | 233,723 | 254,452 | 247,229 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans (gross) | 181,854 | 185,271 | 199,960 | 79,475 | 98,459 | 77,151 | 655 | 786 | 903 | 261,984 | 284,516 | 278,014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Counterparty allowance | 5,016 | 7,280 | 10,447 | 1,899 | 1,962 | 1,550 | 5 | 5 | 6 | 6,920 | 9,247 | 12,003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Country allowance | 494 | 498 | 0 | 499 | 782 | 1,246 | 0 | 0 | 0 | 993 | 1,280 | 1,246 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowances for loan losses2 | 5,510 | 7,778 | 10,447 | 2,398 | 2,744 | 2,796 | 5 | 5 | 6 | 7,913 | 10,527 | 13,249 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans, net of allowances | 176,344 | 176,165 | 189,513 | 77,077 | 97,043 | 74,355 | 650 | 781 | 897 | 254,071 | 273,989 | 264,765 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Counterparty provision for contingent claims | 111 | 23 | 0 | 181 | 19 | 19 | 0 | 0 | 0 | 292 | 42 | 19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Country provision for contingent claims | 13 | 0 | 0 | 0 | 12 | 130 | 0 | 0 | 0 | 13 | 12 | 130 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total provisions3 | 124 | 23 | 0 | 181 | 31 | 149 | 0 | 0 | 0 | 305 | 54 | 149 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary | �� | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowances and provisions for counterparty risk | 5,127 | 7,303 | 10,447 | 2,080 | 1,981 | 1,569 | 5 | 5 | 6 | 7,212 | 9,289 | 12,022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowances and provisions for country risk | 507 | 498 | 0 | 499 | 794 | 1,376 | 0 | 0 | 0 | 1,006 | 1,292 | 1,376 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total allowances and provisions | 5,634 | 7,801 | 10,447 | 2,579 | 2,775 | 2,945 | 5 | 5 | 6 | 8,218 | 10,581 | 13,398 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Risk Analysis
business unit and, to a lesser extent, by the private banking businesses of these Business Groups. The tables on page 65 provide an overview of the aggregate credit risk exposure of the UBS Group and, within that, of the loan portfolio.
Note that in the tables and charts which follow, where we show the rating distribution of counterparties, we refer to the credit exposure and the probability of default only, without reference to any potential loss mitigation from collateral.
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UBS Warburg
A substantial majority of UBS Warburg Corporate and Institutional Clients’ counterparties fall into the investment grade category (internal counterparty rating grades 1 to 5), both for banking products (66%) and for the traded products portfolio (95%). These counterparties are primarily sovereigns, insurance companies, financial institutions, multinational corporate clients and investment funds. Exposure to lower rated counterparties is generally collateralized or otherwise structurally supported.
UBS WarburgCorporate and Institutional Clients
Credit hedging, banking products1
As at 31.12.01 | |||||||||||||
CHF million | As reported | Amount hedged | Net3 | ||||||||||
Investment Grade | 60,174 | 21,394 | 39,765 | ||||||||||
Sub-investment Grade | 22,189 | 2,831 | 19,496 | ||||||||||
Impaired and Defaulted | 3,431 | 2,017 | 2 | 1,787 | |||||||||
Total exposure | 85,794 | 26,242 | 2 | 61,048 | |||||||||
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Risk Analysis
ucts, by their nature, are sensitive to changes in market prices and UBS therefore pays close attention to the management and control of these risks.
The graphs show UBS Group’s OTC derivative exposure by product type and maturity at 31 December 2001, while the table on page 66 shows details of all traded products exposure at 31 December 2001, by counterparty rating. See Note 24 to the UBS Group Financial Statements Derivative Instruments for further details.
UBS Switzerland
pledge of marketable securities where UBS applies conservative standards to determine the advance value of the collateral.
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clients are fairly widely spread across rating categories and industry sectors, which reflects UBS’s position as a market leading lender to this segment of predominantly small to medium sized enterprises in Switzerland. During 2001, our high credit underwriting standards and the continued relative strength of the Swiss economy have contributed to improved credit quality within UBS Switzerland’s portfolio, with individual and sector concentrations having been further reduced.
Country risk
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Emerging markets exposures by major geographical area and product type
Total | Banking products | Traded products1 | Tradable assets2 | |||||||||||||||||||||||||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||||||||
Emerging Europe | 1,954 | 1,612 | 1,586 | 632 | 809 | 919 | 750 | 395 | 248 | 572 | 408 | 419 | ||||||||||||||||||||||||||||||||||||
Emerging Asia | 7,747 | 7,642 | 10,055 | 4,029 | 4,053 | 5,003 | 1,537 | 1,355 | 3,873 | 2,181 | 2,234 | 1,179 | ||||||||||||||||||||||||||||||||||||
Latin America | 2,876 | 4,268 | 9,647 | 1,122 | 2,352 | 8,169 | 863 | 1,025 | 665 | 891 | 891 | 813 | ||||||||||||||||||||||||||||||||||||
Africa / Middle East | 2,858 | 2,736 | 3,314 | 1,432 | 1,564 | 2,539 | 962 | 669 | 659 | 464 | 503 | 116 | ||||||||||||||||||||||||||||||||||||
Total | 15,435 | 16,258 | 24,602 | 7,215 | 8,778 | 16,630 | 4,112 | 3,444 | 5,445 | 4,108 | 4,036 | 2,527 | ||||||||||||||||||||||||||||||||||||
1 | Traded products consist of derivative instruments, reverse repurchase agreements and other collateralized transactions. | |
2 | Tradable assets consist of equity and fixed income financial instruments held for trading purposes, which are marked to market on a daily basis. |
of this ongoing reduction, the Argentinedefault in late 2001 had almost no effect on us.
Credit loss expense
Credit loss expense
UBS Switzerland | UBS Warburg | Other1 | UBS Group | |||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | ||||||||||||||||||||||||||||||||||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||||||||
Total banking products exposure at year end | 197,098 | 198,130 | 212,869 | 134,802 | 158,629 | 152,699 | 675 | 786 | 903 | 332,575 | 357,545 | 366,471 | ||||||||||||||||||||||||||||||||||||
IAS actual credit loss expense/(recovery) | 123 | (695 | ) | 965 | 375 | 565 | 0 | 0 | 0 | (9 | ) | 498 | (130 | ) | 956 | |||||||||||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 6 | (35 | ) | 45 | 28 | 36 | 0 | 0 | 0 | (100 | ) | 15 | (4 | ) | 26 | |||||||||||||||||||||||||||||||||
Adjusted expected loss charged to Business Groups2 | 604 | 784 | 1,071 | 130 | 247 | 333 | 0 | 0 | 0 | 734 | 1,031 | 1,404 | ||||||||||||||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 31 | 40 | 50 | 10 | 16 | 22 | 0 | 0 | 0 | 22 | 29 | 38 | ||||||||||||||||||||||||||||||||||||
1 | Includes Corporate Center and UBS Asset Management. | |
2 | For an explanation of the credit loss charge used in our Business Group reporting please see the Expected loss section on page 62 and pages 34-35 of the Financial Report 2001. |
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growth in the Swiss economy towards the end of 2001, following the global economic slowdown. As a result, the trend of net recoveries of loan loss provisions observed in the previous year was reversed and credit loss expenses increased accordingly during 2001, althought remaining below the long-term trend. Credit loss expense in UBS Switzerland in 2001 was CHF 123 million, compared to a net recovery of CHF 695 million in 2000.
Impaired loans, allowances and provisions
Allowances and provisions for credit risk
UBS Switzerland | UBS Warburg | Other1 | UBS Group | |||||||||||||||||||||||||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||||||||||||
Loans (gross) | 181,854 | 185,271 | 200,479 | 79,475 | 98,459 | 76,632 | 655 | 786 | 903 | 261,984 | 284,516 | 278,014 | ||||||||||||||||||||||||||||||||||||
Non-performing loans | 7,004 | 8,342 | 11,847 | 1,626 | 2,084 | 1,163 | 9 | 26 | 63 | 8,639 | 10,452 | 13,073 | ||||||||||||||||||||||||||||||||||||
Other impaired loans | 4,306 | 5,978 | 8,038 | 1,684 | 2,064 | 1,344 | 0 | 0 | 1 | 5,990 | 8,042 | 9,383 | ||||||||||||||||||||||||||||||||||||
Total impaired loans | 11,310 | 14,320 | 19,885 | 3,310 | 4,148 | 2,507 | 9 | 26 | 64 | 14,629 | 18,494 | 22,456 | ||||||||||||||||||||||||||||||||||||
Allowances for non-performing loans | 4,248 | 5,141 | 7,738 | 1,121 | 1,183 | 918 | 5 | 5 | 5 | 5,374 | 6,329 | 8,661 | ||||||||||||||||||||||||||||||||||||
Allowances for other impaired loans | 1,143 | 2,579 | 3,182 | 777 | 777 | 627 | 0 | 0 | 1 | 1,920 | 3,356 | 3,810 | ||||||||||||||||||||||||||||||||||||
Total allowances for impaired loans | 5,391 | 7,720 | 10,920 | 1,898 | 1,960 | 1,545 | 5 | 5 | 6 | 7,294 | 9,685 | 12,471 | ||||||||||||||||||||||||||||||||||||
Other allowances and provisions | 243 | 83 | 33 | 681 | 813 | 894 | 0 | 0 | 0 | 924 | 896 | 927 | ||||||||||||||||||||||||||||||||||||
Total allowances and provisions | 5,634 | 7,803 | 10,953 | 2,579 | 2,773 | 2,439 | 5 | 5 | 6 | 8,218 | 10,581 | 13,398 | ||||||||||||||||||||||||||||||||||||
of which country allowances and provisions | 507 | 498 | 0 | 499 | 794 | 1,376 | 0 | 0 | 0 | 1,006 | 1,292 | 1,376 | ||||||||||||||||||||||||||||||||||||
Ratios | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired loans as a % of gross loans | 6.2 | 7.7 | 9.9 | 4.2 | 4.2 | 3.3 | 1.4 | 3.3 | 7.1 | 5.6 | 6.5 | 8.1 | ||||||||||||||||||||||||||||||||||||
Non-performing loans as a % of gross loans | 3.9 | 4.5 | 5.9 | 2.0 | 2.1 | 1.5 | 1.4 | 3.3 | 7.0 | 3.3 | 3.7 | 4.7 | ||||||||||||||||||||||||||||||||||||
Allowances and provisions for credit loss as a % of gross loans | 3.1 | 4.2 | 5.5 | 3.2 | 2.8 | 3.2 | 0.8 | 0.6 | 0.7 | 3.1 | 3.7 | 4.8 | ||||||||||||||||||||||||||||||||||||
Allocated allowances as a % of impaired loans | 47.7 | 53.9 | 54.9 | 57.3 | 47.3 | 61.6 | 55.6 | 19.2 | 9.4 | 49.9 | 52.4 | 55.5 | ||||||||||||||||||||||||||||||||||||
Allocated allowances as a % of non-performing loans | 60.7 | 61.6 | 65.3 | 68.9 | 56.8 | 78.9 | 55.6 | 19.2 | 7.9 | 62.2 | 60.6 | 66.3 | ||||||||||||||||||||||||||||||||||||
1 | Includes Corporate Center and UBS Asset Management. UBS Asset Management had no impaired or non-performing loans at 31 December 01, 31 December 00 and 31 December 99. |
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Provisions and allowances for emerging market-related exposures stood at CHF 1,006 million at 31 December 2001, compared to CHF 1,292 million at 31 December 2000 and 1,376 million at 31 December 1999. The reduction is mainly a consequence of our policy of reducing the overall size of UBS’s emerging market exposures, especially in Latin America.
Market risk
Risk measurement
– | Expected lossis reflected in the valuation adjustments made to the portfolio. These cover price uncertainties resulting from a lack of market liquidity or the absence of a reliable market price for an instrument or position, and model risk in more complex models. | |
– | Statistical lossis measured using a Value at Risk (VaR) methodology. VaR expresses the potential loss on the current portfolio assuming a specified time horizon before positions can be adjusted (holding period), and measured to a specified level of confidence. UBS measures VaR on both a one-day and a tenday holding period, in both cases to a 99% confidence level. Estimates are based on historical simulation, assessing the impact of historical market movements on today’s portfolio, based on five years of historical data. |
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One-day VaR exposure expresses the maximum daily mark-to-market loss that UBS is likely to incur on the current portfolio under normal market conditions with a larger loss being statistically likely only once in a hundred business days. | ||
Stress lossis assessed against our standard set of forward looking scenarios, approved by the Board of Directors, using stress moves in market variables which are regularly reviewed and approved by the Group CRO. Scenarios may be derived from severe historical events or based on prospective crisis scenarios developed from the current economic situation and perceived market trends. They are kept under continuous review and enhanced or augmented as and when necessary to reflect changing market and economic conditions. |
Risk control of investment positions
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Risk Analysis
UBS Warburg — Value at Risk (10-day 99% confidence)1
Year ended 31.12.01 | Year ended 31.12.00 | Year ended 31.12.99 | |||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.01 | Min. | Max. | Average | 31.12.00 | Min. | Max. | Average | 31.12.99 | |||||||||||||||||||||||||||||||||||||||
Risk type | |||||||||||||||||||||||||||||||||||||||||||||||||||
Equities | 124.1 | 458.0 | 181.6 | 157.4 | 144.7 | 245.9 | 199.4 | 146.5 | 121.8 | 207.6 | 162.5 | 172.8 | |||||||||||||||||||||||||||||||||||||||
Interest rates | 136.6 | 318.7 | 193.3 | 239.7 | 113.8 | 202.3 | 149.8 | 132.8 | 87.7 | 187.6 | 140.2 | 140.1 | |||||||||||||||||||||||||||||||||||||||
Foreign exchange | 9.3 | 90.7 | 28.5 | 25.8 | 7.6 | 97.5 | 32.5 | 31.6 | 9.5 | 144.7 | 57.5 | 76.1 | |||||||||||||||||||||||||||||||||||||||
Precious metals | 2.2 | 14.4 | 6.1 | 5.1 | 2.1 | 27.4 | 9.7 | 5.3 | 5.3 | 35.8 | 21.0 | 27.8 | |||||||||||||||||||||||||||||||||||||||
Diversification effect | 2 | 2 | (148.6 | ) | (144.2 | ) | 2 | 2 | (148.3 | ) | (129.0 | ) | 2 | 2 | (168.1 | ) | (193.2 | ) | |||||||||||||||||||||||||||||||||
Total | 187.2 | 479.6 | 260.9 | 3 | 283.8 | 186.8 | 296.1 | 243.0 | 3 | 187.1 | 176.6 | 275.7 | 213.1 | 3 | 223.6 | ||||||||||||||||||||||||||||||||||||
1 | Positions from PaineWebber are included from legal merger date 3 November 2000 onwards. | |
2 | As the minimum and maximum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification effect. | |
3 | The corresponding figures for the Corporate and Institutional Clients business unit of UBS Warburg were CHF 252 million at 31 December 2001, CHF 242 million at 31 December 2000 and CHF 213 million at 31 December 1999. |
Market risk developments
UBS Group — Value at Risk (10-day 99% confidence)
Average utilization for the year ended | ||||||||||||||||
CHF million | Limit | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||
Business Groups | ||||||||||||||||
UBS Warburg | 450 | 260.9 | 243.0 | 213.1 | ||||||||||||
UBS Switzerland1 | 50 | 4.8 | 4.1 | 4.1 | ||||||||||||
Corporate Center2 | 250 | 37.4 | 69.4 | 37.1 | ||||||||||||
Reserves | 100 | |||||||||||||||
Diversification effect | n/a | (37.3 | ) | (68.5 | ) | (40.5 | ) | |||||||||
UBS Group | 600 | 265.8 | 248.0 | 213.8 | ||||||||||||
1 | Includes interest rate exposures in the banking books of the private label banks. | |
2 | Includes interest exposures in the banking book of Group Treasury. |
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context of backtesting. The first histogram below shows these backtesting revenues, while the second shows daily revenues from all sources in Corporate and Institutional Clients (“full revenues”).
Market risk in energy trading
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Capital and Risk Management
Risk Analysis
reviewed later in 2002 in light of the performance of the new business.
Consequential risk developments
Information security
Basel Capital Accord
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Capital and Risk Management
Group Treasury
Group Treasury
Group Treasury manages the core financial positions of the Group and coordinates and controls the corresponding processes on a Group-wide basis.
– | Efficient management of the Group’s main non-trading interest rate exposures, to immunize originating business units from interest rate risk and provide them with an interest rate risk free margin. | |
– | Sustainable and cost-efficient funding of the Group’s balance sheet, using a well diversified portfolio of funding sources and preserving a balanced liability structure. | |
– | Providing a framework for optimal liquidity management in order to generate cash when required without compromising our ability to take advantage of market opportunities. This includes an integrated collateral management process, operated in conjunction with UBS Warburg’s Cash and Collateral Trading book (CCT) to generate revenues for both the Group and our clients. | |
– | Efficient management of the Group’s nontrading foreign exchange exposure, to shield our equity and expected future cash flows from adverse fluctuations in exchange rates against the Swiss franc. | |
– | Efficient management of regulatory capital, while maintaining strategic flexibility, sound capitalization and strong ratings. |
Interest rate risk management
Internal hedging process
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Capital and Risk Management
Group Treasury
Transactions with fixed maturities are transferred by individual back-to-back transactions to Group Treasury in the case of long-term Swiss franc transactions, and to CCT in the case of short-term Swiss franc and all non-Swiss franc transactions.
Interest rate risk in the Bank Book
– | Interest rate sensitivity expresses the impact of a one basis point (0.01%) parallel rise in interest rates on the fair value (net present value) of all Bank Book items. | |
– | Economic value sensitivity measures the potential change in fair value of the Bank Book resulting from a large instantaneous shock to interest rates. | |
– | Net interest income at risk is defined as the potential change in net interest income from the Bank Book resulting from adverse movements in interest rates over the next twelve months. Various changes in the level of interest rates are applied. Usually the worst case is captured by |
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Interest rate sensitivity of the Bank Book
As at 31.12.2001 | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||
CHF thousand per basis point increase | month | months | months | years | years | Total | ||||||||||||||||||
CHF | 9 | 0 | (2 | ) | (173 | ) | (863 | ) | (1,029 | ) | ||||||||||||||
USD | 35 | (113 | ) | (157 | ) | (274 | ) | (15 | ) | (524 | ) | |||||||||||||
EUR | (2 | ) | (6 | ) | (38 | ) | 182 | 0 | 136 | |||||||||||||||
GBP | 0 | (7 | ) | (57 | ) | 175 | 624 | 735 | ||||||||||||||||
JPY | 1 | 0 | (3 | ) | 1 | (4 | ) | (5 | ) | |||||||||||||||
Others | 0 | (1 | ) | 0 | (1 | ) | (4 | ) | (6 | ) | ||||||||||||||
Total | 43 | (127 | ) | (257 | ) | (90 | ) | (262 | ) | (693 | ) | |||||||||||||
of which equity replicating portfolio (CHF) | 6 | 24 | 364 | 7,483 | 5,167 | 13,044 | ||||||||||||||||||
Bank Book without equity replicating portfolio (total) | 37 | (151 | ) | (621 | ) | (7,573 | ) | (5,429 | ) | (13,737 | ) | |||||||||||||
using instantaneous shock scenarios. All of the scenarios are compared with a scenario where current market rates and client behavior are held constant for the next twelve months. This measure considers such variables as: | ||
– | Re-pricing characteristics of assets and liabilities. | |
– | The effect of rate barriers, such as caps and floors, on assets and liabilities. | |
– | Maturity effects of replicating portfolios. | |
– | Behavior of clients. |
Change in risk under the two methodologies
As at | |||||||||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||
Net interest income at risk | (313 | ) | (247 | ) | (355 | ) | |||||||
Economic value sensitivity | (1,319 | ) | (908 | ) | (555 | ) | |||||||
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Capital and Risk Management
Group Treasury
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. At 31 December 2001, the difference in the projected outcome in this scenario from that projected in a constant market rate scenario represented a reduction of 3.9% in the year’s total net interest income, compared with a reduction of 3% at 31 December 2000. In this extreme scenario, the largest part of the decrease would result from lower margins on savings, deposit and current accounts and lower returns on the investment of the Group’s equity.
Other effects of interest rate changes on UBS’s profitability
Liquidity and funding management
Liquidity management approach
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– | inability to roll over maturing unsecured debt (both long-term and short-term debt such as UBS’s commercial paper programs), | |
– | inability to raise new unsecured (short-term or long-term) debt, | |
– | increased collateral margins on the banks secured funding sources, | |
– | a sudden, large outflow of retail deposits (“bank run”), | |
– | a large increase in draw-downs of unutilized committed credit lines. |
Benefits of centralization
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Capital and Risk Management
Group Treasury
individual funding sources, and also provides a broader range of investment opportunities, which in turn reduces liquidity risk. The centralized approach 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, high-quality pool of collateral gathered across the Group is made accessible for repurchase and securities lending transactions as part of UBS Warburg’s CCT activities. Through these securities lending transactions, CCT creates additional revenues for both UBS Group and its clients, and also generates substantial funding on a secured basis, providing an additional liquidity cushion that could be crucial in crisis situations.
Funding management approach
In the course of 2001, UBS’s long-term debt increased slightly from CHF 54.9 billion at 31 December 2000 to CHF 57.2 billion at 31 December 2001. The maturity profile of our long-term debt portfolio is well balanced. See Note 19 to the Financial Statements in UBS’s Financial Report 2001 for further information concerning long-term debt.
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Currency management
– | Equity must be invested in Swiss francs. | |
– | Currency management processes must be designed to minimize exposures against the Swiss franc. | |
– | Core currency exposures must be actively managed to protect against adverse currency movements. |
Translation (balance sheet) currency risk
Transaction (revenues/expenses) currency risk
– | The monthly sell-down of foreign currency profits or losses into Swiss francs reduces volatility in the Group’s earnings from changes in exchange rates. | |
– | The visibility of the underlying original transaction currencies enables UBS to manage the currency exposures inherent in the Group’s cost and revenue flows. |
While the process reduces the susceptibility of annual earnings to adverse currency movements, it does not completely eliminate their effect. Group Treasury therefore proactively hedges significant currency exposures (mainly USD, EUR and GBP), in accordance with the instructions of the Group Executive Board and subject to the VaR limit which has been established for this risk. Economic hedging strategies employed include a cost-efficient option strategy, providing a safety net against unfavorable currency fluctuations while preserving upside potential.
New developments
Non-trading currency risk VaR
CHF million | Minimum | Maximum | Average | End of period | |||||||||||||||
1999 | 1.4 | 77.8 | 37.1 | 59.7 | |||||||||||||||
2000 | 11.6 | 113.4 | 33.7 | 12.7 | |||||||||||||||
2001 | 0.9 | 16.2 | 3.6 | 1.0 | |||||||||||||||
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Capital and Risk Management
Group Treasury
Capital management
Sound capitalization
– | Where BIS guidelines apply a maximum risk weight of 100%, the EBK applies risk weights above 100% to certain asset classes (for example real estate, bank premises, other fixed assets, intangible assets excluding goodwill, equity securities and unconsolidated equity investments). | |
– | Where the BIS guidelines apply a 20% risk weight to obligations of OECD banks, the EBK applies risk weights of 25% to 75%, depending on maturity, to such obligations. |
Capital adequacy
As at | ||||||||||||
CHF million, except ratios | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
BIS Tier 1 capital | 29,322 | 31,892 | 28,952 | |||||||||
BIS total capital | 37,471 | 42,860 | 39,682 | |||||||||
BIS Tier 1 capital ratio (%) | 11.6 | 11.7 | 10.6 | |||||||||
BIS total capital ratio (%) | 14.8 | 15.7 | 14.5 | |||||||||
Balance sheet assets | 214,481 | 223,528 | 214,012 | |||||||||
Off balance sheet and other positions | 25,935 | 39,002 | 48,282 | |||||||||
Market risk positions | 13,319 | 10,760 | 10,813 | |||||||||
Total BIS risk-weighted assets | 253,735 | 273,290 | 273,107 | |||||||||
Capital management in 2001
Share buy back and cancellation
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Effect of second line trading program on basic earnings per share (EPS)
For the year ended | |||||||||||||
31.12.01 | 31.12.00 | 31.12.99 | |||||||||||
Weighted average shares for basic EPS after treasury shares | 1,266,038,193 | 1,209,087,927 | 1,214,227,446 | ||||||||||
Weighted average second trading line treasury shares | 40,116,921 | 43,261,410 | 0 | ||||||||||
Basic EPS | 3.93 | 6.44 | 5.07 | ||||||||||
Impact of buy-back on basic EPS | 0.12 | 0.23 | 0 | ||||||||||
The number of shares bought back through the second line trading programm is linked to the Group’s ability to generate free equity while maintaining a strong BIS Tier 1 capital ratio. The table shows the impact on basic earnings per share of the purchase of Treasury shares through the second line trading program.
Share split and par value reduction
Capital management plans for 2002
New second line buy back program
Par value reduction
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Corporate Governance
Corporate Organization
Corpor
Corporate Organization
UBS is committed to meeting the highest international standards of corporate governance in its organizational structure. Corporate and executive bodies are organized in line with the leading codes of best practice.
UBS’s organizational structure, based on two separate boards having different functions and responsibilities, provides clear controls and a balance between the Board of Directors (Board) and the Group Executive Board (GEB).
The functions of Chairman of the Board of Directors (Chairman) and President of the Group Executive Board (President) are conferred on two different people, thus providing separation of powers.
Organizational principles
The Board is the highest corporate body with responsibility for the ultimate direction of the company and the supervision of its executive management. 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 global compensation principles. It defines the Group’s risk appetite and risk limit structure. A large majority of the Board members are non-executive and independent. The Chairman and at least one Vice Chairman have executive roles 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 GEB has business management responsibility for the company. Together with the Chairman’s Office (the Chairman working with the executive and non-executive Vice Chairmen) it assumes overall responsibility for the development of UBS’s strategies. The GEB, and in particular its President, is responsible for the implementation and results of those strategies, for the alignment of the Business Groups to the UBS Group’s integrated model and for the exploitation of synergies across the Group. The President also assumes responsibility for business and financial planning, financial reporting and the definition and supervision of risk control. The President and the GEB are accountable to the Chairman and the Board for the Group results, and the Board in turn is accountable to UBS’s shareholders.
In order to ensure that the Board and GEB are independent of each other, no member of one board may also be a member of the other.
The Board of Directors
The Board is organized as follows:
The Chairman operates aChairman’s Office, including the Vice Chairmen, which meets regularly with the President and his appointees drawn from the GEB to address fundamental issues for the Group, such as overall strategy, mid-term financial and business planning, mid-term succession plans, global compensation principles, and the risk profile of the Group. The
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Chairman’s Office assumes special authority in the credit approval process and is responsible for the appointment and dismissal of the members of the Group Managing Board (GMB). It also acts as theAudit Supervisory Board, with responsibility for the supervision of Group Internal Audit, and as theNomination Committee, with responsibility for identifying and proposing candidates for membership of the Board of Directors and for the long-term preparation of succession planning for the Chairman and Board of Directors.
TheCompensation Committee has responsibility for determining the individual compensation and bonus for the executive Directors, the President and members of the GEB and for submitting proposals for the compensation of non-executive Directors to the Board. The Committee is chaired by Markus Kundig, with Rolf A. Meyer and Marcel Ospel as its additional members.
The Board appoints anAudit Committee from among its non-executive members. The Audit Committee meets at least four times a year to oversee the performance of the external Group and Statutory Auditors. It also monitors interaction between Group Internal Audit and the external auditors. All three members — Peter Böckli as Chairman, Lawrence A. Weinbach and Hans Peter Ming — are fully independent from UBS. They are financially literate and familiar with the accounting practices of international financial services groups. The Audit Committee does not itself perform audits, but supervises the work of the auditors. Its primary responsibility is thereby to review the organization and efficiency of internal control procedures and the financial reporting process.
TheCorporate Responsibility Committee is described in the Corporate Responsibility section on pages 111 to 118.
Changes to committee memberships following the AGM
The Group Executive Board
Marcel Ospel, Chief Executive Officer, stepped down from his function after the 2001 AGM when he was elected to the Board. At the same time, Luqman Arnold became President of the Group Executive Board. Pierre de Weck left UBS in July 2001.
In December 2001, Luqman Arnold left UBS and was replaced as President of the Group Executive Board by Peter Wuffli. John Costas was appointed Chief Executive Officer of UBS Warburg and joined the Group Executive Board.
The GEB appoints the following major committees:
– | TheGroup Governance Committee is responsible for the coordination of the Group’s interface with central banks and regulators, and for minimizing the Group’s reputation risks. | |
– | TheGroup Finance and Risk Committee is responsible for coordinating the Group’s accounting, risk management and control, treasury and financial communication processes, aiming for the long-term maximization of shareholder value. The Group Finance and Risk Committee includes the chairmen of the associated functional committees: Group Risk Committee, Group Controlling Committee, and Group Treasury Committee. | |
– | TheGroup Communications and Marketing Committee ensures that communication to all stakeholders, internally and externally, is transparent, accurate, concise, timely and consistent. | |
– | TheGroup Human Resources Committee has responsibility for the definition of human resources policies and standards which contribute to the identification, recruitment, development and retention of high-caliber staff. |
The Group Managing Board
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Corporate Governance
Corporate Organization
the most senior managers from the Business Groups and Corporate Center, who are not members of the GEB. The GMB meets at least once a year to discuss fundamental Group issues.
As of 31 December 2001 the GMB had 30 members (see list on page 98).
Senior management compensation principles
Overall philosophy
The performance of senior executives (executive members of the UBS Board of Directors, members of the UBS Group Executive Board, and members of the UBS Group Managing Board) is evaluated in the context of UBS Group, Business Group and business area results, as appropriate to a particular executive’s responsibilities. Performance assessments consider both quantitative and qualitative factors, and include a balanced assessment of both current financial results and key performance indicators, which are longer-term value drivers crucial to the Group’s ability to deliver future performance and growth. This assessment process is closely linked to the value-based management process that UBS is now implementing.
In conducting its assessments of executive performance, UBS reviews changes to its overall performance and the performance of its individual businesses over time, results achieved against specifically established performance targets, and results compared to competitor performance, to the extent that such data are available.
Compensation levels are strongly correlated with performance assessments and are highly variable from year to year. As such, should UBS Group and Business Group performance decline from the prior year, lag behind established performance targets or trail competitor trends, senior executives’ compensation will clearly reflect this. The converse is also true, should performance exceed all of these benchmarks.
Components of compensation
Executive share ownership commitment
– | A significant portion of each senior executive’s annual performance-based incentive compensation is delivered in the form of UBS shares or employee stock options, on a mandatory basis. | |
– | Additional incentives are provided for senior executives who voluntarily elect to take an even greater portion of their annual performance-based incentive compensation in the form of restricted UBS shares. Executives opting to take a greater than mandatory proportion of their annual incentive in restricted/ deferred UBS shares will receive additional stock options. Executives will also be eligible for additional discretionary stock option grants made separately from the regular annual incentive awards and intended to reward exemplary performance. | |
– | Beginning in 2002, senior executives will be required to accumulate over a five-year period and then hold, a number of UBS shares |
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equivalent in value to a multiple of their cash compensation earned (base salary plus cash portion of incentive). Although the first official measurement of stock ownership attainment will be conducted after five years, progress reports will be provided annually in the interim and executives will be expected to make steady progress towards attaining their target multiple. |
Governance
– | Group Managing Board members: Compensation recommendations are developed by the responsible member of the Group Executive Board. Recommendations are reviewed by the President of the Group Executive Board and then final recommendations are submitted to the Chairman of the Board for approval. The compensation system for the Group Managing Board is subject to the approval of the Chairman’s Office. | |
– | Group Executive Board members: Compensation recommendations are developed jointly by the President of the Group Executive Board and the Chairman of the Board. The Compensation Committee of the Board of Directors reviews and approves the design of the compensation system for the Group Executive Board and all resulting compensation recommendations. | |
– | President of the Group Executive Board and Vice Chairmen: Compensation recommendations are developed by the Chairman of the Board. The Compensation Committee of the Board of Directors reviews and approves the design of the compensation system for the President of the Group Executive Board and the Vice Chairmen and all resulting compensation recommendations. | |
– | Chairman of the Board: On behalf of the full Board of Directors, non-executive members of the Compensation Committee of the Board of Directors have authority to develop and approve the design of the compensation system for the Chairman of the Board and all resulting compensation recommendations. For details of membership of the Compensation Committee, please see page 89. |
Employee share ownership commitment
UBS also 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. UBS hopes to increase its level of employee stock ownership through shares and options from approximately 14% in 2000 to 20-25% over the next three years. Broader employee share ownership is encouraged in the following ways:
– | Employee incentive awards above a certain threshold are delivered in UBS shares, or a combination of shares and employee stock options, on a mandatory basis. The threshold varies by business and labor market. Generally, employees are further encouraged to voluntarily elect to defer a portion of their incentives into UBS shares in exchange for additional stock options, or to diversify into an array of funds including those managed by UBS fund managers. UBS believes it is important to provide employees the opportunity and incentive to voluntarily invest into UBS shares, but where possible also to encourage employees to consider the same wealth management principles in diversifying their personal portfolios as they would apply to a client. | |
– | The highest performing and highest potential employees are also eligible for discretionary stock option grants. These highly selective awards are intended to provide the greatest degree of shareholder alignment among the emerging pool of future UBS leaders, senior managers and technical experts, and to enhance UBS’s value proposition in an increasingly competitive market for the best management, financial and technical talent. |
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Corporate Governance
Corporate Organization
– | Beginning in 2002, all UBS employees (unless prohibited by local law) are eligible to participate in a program called Equity Plus which is a global adaptation of a program that was implemented at PaineWebber before its merger with UBS in November 2000. Equity Plus enables UBS employees in 48 countries to voluntarily elect to purchase a limited number of UBS shares with after-tax funds either from their incentive awards or base salaries, and receive two UBS stock options for every share acquired and held for two years. The goal of this program is to build on UBS’s “Power of Partnership” strategy by motivating employees at all levels to become partners in UBS’s success. |
Audit
Group Internal Audit
With 230 professionals worldwide at 31 December 2001, Group Internal Audit provides an independent review of the effectiveness of the system of internal controls and compliance with key rules and regulations. All key issues raised by Group Internal Audit are communicated to the management responsible, to the President of the GEB and to the Chairman’s Office via formal Audit Reports. The Audit Supervisory Board and the Audit Committee of the Board are regularly informed of important findings.
Continous coordination and close coopera- tion with the external auditors enhances the efficiency of Group Internal Audit’s work.
External auditors
At the Extraordinary General Meeting on 7 September 2000, UBS shareholders appointed Deloitte & Touche Experta AG, Basel, as Special auditors according to Article 31 paragraph 3 of the UBS Articles of Association. The Special auditors provide audit opinions in respect of the details of capital increases, independently from the Group auditors.
Relations with shareholders
Shareholder rights
UBS Annual General Meetings (AGMs) are open for participation to all shareholders. Personal invitations are sent to every registered shareholder at least 20 days ahead of the meeting. Shareholders may, if they do not wish to attend in
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person, issue instructions to accept, reject or abstain on each individual item on the agenda. They may also appoint UBS, another bank or a person of their choice to vote on their behalf, or appoint the Independent Proxy designated by UBS as required under Swiss company law. AGMs offer the opportunity to shareholders to raise any questions regarding the development of the company and the events of the year under review. The members of the Board and Group Executive Board as well as the internal and external auditors are present to answer these questions. Decisions are normally taken by the majority of votes cast and in some cases, defined by law or UBS Articles of Association, a two-third majority of the votes represented at the AGM is required.
Shareholders representing shares with an aggregate par value of one million Swiss francs may submit proposals for matters to be placed on the agenda for consideration by the AGM, provided that their proposals are submitted in writing within the deadline published by the company. Shareholders representing at least ten percent of the share capital, may ask that an Extraordinary General Meeting be convened to deal with a specific issue put forward by these shareholders.
UBS Group legal entity structure
The goal of the focus on the parent bank structure is to capitalize on the synergies offered by the use of a single legal platform, enable the flexible use of capital in an efficient manner and to provide a structure where the activities of the Business Groups may be carried on without the need to set up separate subsidiaries beforehand.
Where it is either not possible or not efficient to operate out of the parent bank, usually due to local legal, tax or regulatory rules or due to additional legal entities joining the UBS Group via acquisition, then the businesses operate through local subsidiary companies. The significant operating subsidiary companies in the Group are listed in note 36 to the Financial Statements, in our Financial Report 2001.
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Corporate Governance
Directors and Officers of UBS
Directors and Officers of UBS
The Board of Directors
The table below shows information about the Board of Directors as at 31 December 2001.
Expiration of | ||||||||||
Year of initial | current term | |||||||||
Name and business address | Positions held | appointment | of office | |||||||
Marcel Ospel UBS AG Bahnhofstrasse 45 CH-8098 Zurich | Chairman Chairman of the Corporate Responsibility Committee | 2001 | 2005 | |||||||
Alberto Togni UBS AG Bahnhofstrasse 45 CH-8098 Zurich | Executive Vice Chairman Chairman of the Audit Supervisory Board | 1998 | 2005 | |||||||
Johannes A. de Gier UBS AG Bahnhofstrasse 45 CH-8098 Zurich | Executive Vice Chairman | 2001 | 2003 | |||||||
Markus Kundig Bundesplatz 10 CH-6304 Zug | Vice Chairman Chairman of the Compensation Committee | 1998 | 2002 | |||||||
Peter Böckli Böckli Bodmer & Partners St. Jakobs-Strasse 41 P.O. Box 2348 CH-4002 Basel | Chairman of the Audit Committee | 1998 | 2003 | |||||||
Sir Peter Davis J. Sainsbury plc. Stamford House, Stamford Street London SE1 9LL | Board Member | 2001 | 2004 | |||||||
Rolf A. Meyer Heiniweidstrasse 18 CH-8806 Bach | Member of the Compensation Committee | 1998 | 2003 | |||||||
Hans Peter Ming Sika Finanz AG Wiesenstrasse 7 CH-8008 Zurich | Member of the Audit Committee | 1998 | 2004 | |||||||
Lawrence A. Weinbach Unisys Corporation Unisys Way Blue Bell, PA 19424 | Member of the Audit Committee | 2001 | 2005 |
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Marcel Ospelwas elected to the Board at the AGM in April 2001 and thereafter appointed as Chairman. Prior to this mandate, he served as Group Chief Executive Officer of UBS AG. He was the President and Group Chief Executive Officer of Swiss Bank Corporation (SBC) from 1996 to 1998. He was made CEO of SBC Warburg in 1995, having been a member of the Executive Board of SBC since 1990. From 1987 to 1990 he was in charge of Securities Trading and Sales at SBC. From 1984 to 1987 Mr. Ospel was Managing Director with Merrill Lynch Capital Markets, and from 1980 to 1984 he worked at SBC London and New York in the Capital Markets division. He began his career at Swiss Bank Corporation in the Central Planning and Marketing Division in 1977. Mr. Ospel was born on 8 February 1950 and is a Swiss citizen.
Alberto Togni, Vice Chairman, has been with UBS and SBC since 1959. From 1994 to 1997 he was Chief Risk Officer and a member of the Group Executive Committee of Swiss Bank Corporation. He previously held various functions in the Commercial division, becoming its head in 1993. In 1987 he was named General Manager and member of the Executive Board. Prior to that, he assumed different management roles in Zurich, New York, Tokyo and as representative for the Middle East in Beirut. Mr. Togni serves as a director of Unilever (Schweiz) AG, Zurich; Laboratories Thomson Multimedia Ltd., Zurich; and Swiss National Bank, Zurich. Mr. Togni was born on 30 October 1938 and is a Swiss citizen.
Johannes A. de Gier, Vice Chairman, was with UBS and SBC from 1980 until 1999. From 1998 to 1999 he was Chairman and CEO of Warburg Dillon Read and a member of the Group Executive Board of UBS AG. Prior to this, he served as Chairman of SBC Warburg and as Vice President of the Executive Committee of SBC. From 1991 to 1994 Mr. de Gier was responsible for Global Corporate Finance and from 1994 for the International Finance division. From 1988 to 1991 he was Chief Executive of SBC London. He first joined SBC International London in 1980 as an Executive Director, after having been with ABN, Amsterdam and Amro, Amsterdam. Mr. de Gier was born on 24 December 1944 and is a Dutch citizen.
Markus Kundig,Vice Chairman of the Board and Chairman of the Compensation Committee, is also the Chairman of the Board of Directors of LZ Medien Holding AG and the Vice Chairman of the Board of Directors of Clariant. He is a member of the Boards of Directors of Metro International AG, and Pelikan Holding AG. Until 1999, Mr. Kundig was the proprietor of Kundig Printers Ltd. Mr. Kundig was born on 12 October 1931 and is a Swiss citizen.
Peter Böckli,Chairman of the Audit Committee, is a partner in the law office of Böckli Bodmer & Partners and a part-time pro- fessor of tax and business law at the University of Basel. He is a member of the Boards of Directors of Nestle S.A., Vevey and Firmenich International S.A., Geneva. In addition, he is the Vice Chairman of the Board of Directors of Manufacture des Montres Rolex S.A., Bienne. Mr. Bockli was born on 7 May 1936 and is a Swiss citizen.
Sir Peter Davis, a member of the Board since 2001, has been Group Chief Executive Officer of J. Sainsbury plc, London, since 2000. He was the Group Chief Executive of Prudential plc from 1995 to 2000 and Chief Executive and Chairman of Reed International and Chairman of Reed Elsevier respectively (following the merger of Reed International with Elsevier) from 1986 to 1995. From 1976 to 1986, he had responsibility for all buying and marketing operations at J. Sainsbury plc. Prior to that he served as Marketing and Sales Director at Fitch Lovell Ltd., and as Marketing and Sales manager at General Foods Ltd., Banbury. He is also a member of the Board of Directors of Shaw’s Supermarkets Inc., Boston, USA. Sir Peter was born on 23 December 1941 and is a British citizen.
Rolf A. Meyer, a member of the Compensation Committee, was Chairman and CEO of Ciba Specialty Chemicals until November 2000. He was with Ciba-Geigy Ltd. from when he first joined in 1973 as a financial analyst, and subsequently became Head of Finance and Information Systems and later Chief Financial Officer. After the merger of Ciba-Geigy and Sandoz to create Novartis, he led the spinoff of Ciba Specialty Chemicals. He is now a consultant and is also Vice Chairman of the Board of Siber Hegner AG and a member of the Board of COS AG. Mr. Meyer was born on 31 October 1943 and is a Swiss citizen.
Hans Peter Ming, a member of the Audit Committee, is the Chairman of the Board of
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Directors and Officers of UBS
Directors of Sika Finanz AG. He has been with SIKA AG since he first joined in 1967, and assumed various management positions in this group in Germany and in Switzerland. He was named CEO in 1986 and delegate of the Board of Directors in 1987. In 1999 he was elected as Chairman. He is also a member of the Board of Pestalozzi AG, Dietikon, Switzerland. Mr. Ming was born on 12 October 1938 and is a Swiss citizen.
Lawrence A. Weinbach, a member of the Audit Committee, has been the Chairman, President and CEO of Unisys Corporation since 1997. From 1961 to 1997 he was with Arthur Andersen / Andersen Worldwide, as Managing Partner and Chief Executive of Andersen Worldwide from 1989 to 1997, Chief Operating Officer from 1987 to 1989, and Managing Partner of the New York office since 1983. He was elected to partnership at Arthur Andersen in 1970 and became Managing Partner of the Stamford, Connecticut, office in 1974 and Partner in charge of accounting audit practice in New York. He is also a member of the Board of Directors of Avon Products Inc., New York. Mr. Weinbach was born on 8 January 1940 and is a US citizen.
Marcel Ospel, Alberto Togni and Johannes de Gier, the Chairman and the two executive Vice Chairmen of the Board, have entered into contracts with UBS AG in connection with their service in those capacities. The compensation payable to them under those contracts is included in the compensation arrangements described in Notes 33 and 34 to the Financial Statements.
There are no service contracts with any of the other members of the Board, although they do receive remuneration for their work for UBS. The remuneration paid to the non-executive Directors is also included in the compensation figures shown in Note 34 to the Financial Statements.
The Group Executive Board
Year of initial | ||||||
appointment | ||||||
Name | Position held | to the GEB | ||||
Peter A. Wuffli | President | 1998 | ||||
John P. Costas | Chief Executive Officer, UBS Warburg | 2001 | ||||
Georges Gagnebin | Chief Executive Officer, UBS Private Banking | 2000 | ||||
Joseph J. Grano Jr. | Chairman and Chief Executive Officer, UBS PaineWebber | 2001 | ||||
Markus Granziol | Chairman, UBS Warburg | 1999 | ||||
Stephan Haeringer | Chief Executive Officer, UBS Switzerland | 1998 | ||||
Peter A. Wuffli,previously Chairman and CEO of UBS Asset Management, was named President of the Group Executive Board on 18 December 2001. He was Group Chief Financial Officer of UBS from 1998 to 1999. From 1994 to 1998, he was the Chief Financial Officer at SBC and a member of SBC’s Group Executive Committee. In 1984, he joined McKinsey & Co as management consultant and in 1990 became a partner of the McKinsey Switzerland senior management. Mr. Wuffli was born on 26 October 1957. He is a Swiss citizen.
John P. Costasis the CEO of UBS Warburg. He was President and Chief Operating Officer of UBS Warburg from the beginning of 2001, after having been COO and Global Head Fixed Income. Mr. Costas joined UBS in 1996 as Head of Fixed Income. From 1981 to 1996 he was in charge of Global Fixed Income at Credit Suisse First Boston. Mr. Costas was born on 27 January 1957. He is a US citizen.
Georges Gagnebinis the CEO of the Private Banking unit of UBS Switzerland. Before holding this function, he was the Head of the International Clients Europe, Middle East & Africa business area in the Private Banking division. In 1994, he was named General Manager and Member of the SBC Group Executive Board, and in 1992, he became Deputy General Manager and a Member of the Executive Board.
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Between 1987 and 1992, he served as Head of Finance & Investment at SBC in Berne and Lausanne. In 1982, he was named Head of the Finance & Investment unit of SBC in Berne. Mr. Gagnebin began his career in 1969 at SBC in Berne. Mr. Gagnebin was born on 3 March 1946. He is a Swiss citizen.
Joseph J. Grano, Jr., Chairman and CEO of UBS PaineWebber, joined the UBS Group Executive Board on 1 January 2001 after the merger of PaineWebber with UBS. In 1994, he was named President of PaineWebber Inc. He joined PaineWebber in 1988 as President of Retail Sales and Marketing. Before working for PaineWebber, Mr. Grano was with Merrill Lynch for 16 years holding various senior management positions including director of National Sales for Merrill Lynch Consumer Markets. Prior to joining Merrill Lynch in 1972, Mr. Grano served in the US Special Forces. Mr. Grano was born on 7 March 1948. He is a US citizen.
Markus Granziol, Chairman of UBS Warburg, was also CEO of this Business Group from 1999 until 2001. From 1998 to 1999 he served as Global Head Equities and Fixed Income at Warburg Dillon Read and was a member of the Group Managing Board. From 1996 to 1998, he was General Manager and member of the SBC Group Executive Board. Between 1995 and 1996 he served with SBC Warburg as the Joint Global Head of Equities. In 1994, he became Global Head of Equities at SBC in Hong Kong. Mr. Granziol joined SBC in 1987 as Head of the Securities Department in Zurich. Prior to that, he was Chief of Staff at the Swiss National Bank, and was also lecturer in macro-economics and financial theory at the University of Zurich. Mr. Granziol was born on 21 January 1952. He is a Swiss citizen.
Stephan Haeringer,CEO of UBS Switzerland and of its Private and Corporate Clients business unit, has held several positions with UBS during the last three decades. From 1996 to 1998, he was Chief Executive Officer Region Switzerland. From 1991 to 1996, he served as Division Head, Private Banking and Institutional Asset Management. In 1991, he was appointed member of the Group Executive Board, and in 1987 he became Executive Vice President and served as Head of the Financial division. During the years 1967 to 1988, Mr. Haeringer assumed various management roles within the areas of Investment Counseling, Specialized Investments, Portfolio Management, Securities Administration and Collateral Loans. Mr. Haeringer was born on 6 December 1946. He is a Swiss citizen.
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Corporate Governance
Directors and Officers of UBS
Group Managing Board
Colin Buchan | Senior Advisor, UBS Warburg | |
Crispian Collins | Vice Chairman, UBS Asset Management | |
Arthur Decurtins | Head of Asia, UBS Private Banking | |
Jeffrey J. Diermeier | Chief Investment Officer, UBS Asset Management | |
Regina A. Dolan | Chief Administrative Officer, UBS PaineWebber | |
Thomas K. Escher | Head of IT, UBS Switzerland | |
John A. Fraser | Chief Executive Officer, UBS Asset Management | |
Robert Gillespie | Joint Global Head of Corporate Finance, UBS Warburg | |
Jurg Haller | Head of Risk Transformation and Capital Management, UBS Switzerland | |
Eugen Haltiner | Head of Corporate Clients, UBS Switzerland | |
Gabriel Herrera | Head of Europe, Middle East and Africa / Investment Funds, UBS Asset Management | |
Alan C. Hodson | Head of Equities, UBS Warburg | |
Peter Kurer | Group General Counsel | |
Benjamin F. Lenhardt, Jr. | Deputy Head of Business Management / Head of Americas, UBS Asset Management | |
Donald B. Marron | Chairman UBS Americas (ex officio GMB member) | |
Urs. B. Rinderknecht | Group Mandates | |
Alain Robert | Head of Individual Clients, UBS Switzerland | |
Marcel Rohner | Chief Operating Officer, Deputy CEO, UBS Private Banking | |
Gian Pietro Rossetti | Head of Swiss Clients, UBS Private Banking | |
Hugo Schaub | Group Controller | |
Jean Francis Sierro | Head of Resources, UBS Switzerland | |
Robert H. Silver | HeadofOperations,Technology,andCorporateEmployeeFinancialServices,UBSPaineWebber | |
J. Richard Sipes | Joint Head of Europe, UBS Private Banking | |
Clive Standish | Chief Executive Officer Asia Pacific, UBS Warburg | |
Walter Sturzinger | Group Chief Risk Officer | |
Marco Suter | Group Chief Credit Officer | |
Mark B. Sutton | Head of US Private Clients, UBS PaineWebber | |
Rory Tapner | Joint Global Head of Corporate Finance, UBS Warburg | |
Raoul Weil | Joint Head of Europe, UBS Private Banking | |
Stephan Zimmermann | Head of Operations, UBS Switzerland | |
Auditors
External auditors
Ernst & Young Ltd.,Basel | Auditors for the Parent Bank and for the Group | (term expires AGM 2002, proposed for reelection) | ||
Deloitte & Touche Experta, Ltd., Basel | Special auditors | (term expires AGM 2003) | ||
Internal audit
Markus Ronner | Head of Group Internal Audit | |||
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Financial Disclosure Principles
Financial Disclosure Principles
UBS’s financial disclosure policies aim to achieve a fair market value for the UBS share by communicating transparently, openly and consistently with investors and the financial markets at all times.
Based on our discussions with analysts and investors, we believe that the market accords a “transparency premium” to the share prices of companies who 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 investors can gain a full and accurate understanding of how the company works, what its growth prospects are and what risks there are that this growth will not be realized.
To continue to achieve these goals, we apply the following principles in our financial reporting and disclosure:
– | Transparency: our disclosure is designed to enhance understanding of the economic drivers and detailed results of the business, building trust and credibility. | |
– | Consistency: we aim to ensure that our disclosure is consistent and comparable within each reporting period and between reporting periods. | |
– | 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’ performance. | |
– | Relevance: we aim to avoid information overload by disclosing information only where it is relevant to UBS’s stakeholders, or required by regulation or statute. | |
– | Best practice: we strive to ensure that our disclosure is in line with industry norms, and if possible leads the way to improved standards. |
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 quantity of disclosure and the quality of analysis and comment we provide put UBS’s reporting among the leaders in the banking sector, worldwide.
We also aim to take a prominent role in developing and enhancing industry standards for disclosure. UBS is actively represented in committees and similar bodies helping to improve accounting standards and risk disclosure stan- dards. Last year we took the lead in proposing a new standard for measuring and reporting client assets. This was well received by investors, analysts and peers.
Performance measures and targets
Group targets
– | We seek to increase the value of the Group by achieving a sustainable, after-tax return on equity of 15-20%, across periods of varying market conditions. | |
– | We aim to increase shareholder value through double-digit average annual percentage growth in basic earnings per share (EPS), across periods of varying market conditions. | |
– | Through cost reduction and earnings enhancement initiatives we aim to reduce UBS’s cost/income ratio, to a level that compares positively with best-in-class competitors. | |
– | We aim to achieve a clear growth trend in net new money in our private client businesses. |
The first three targets are all reported pre- goodwill amortization, and adjusted for significant financial events (see below).
Business Group key performance indicators
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creating value for shareholders. They include financial metrics, such as the cost/income ratio, and non-financial metrics such as client assets.
These key performance indicators are used for internal performance measurement and planning as well as external reporting. This ensures that management has a clear responsibility to lead their businesses towards achieving success in the externally reported value drivers and avoid the risk of managing to purely internal performance measures.
Financial reporting policies
Accounting principles
In addition, the Financial Report 2001 contains the financial statements of the UBS AG parent bank, the Swiss company, including branches worldwide, which owns all the UBS Group companies directly or indirectly. These parent bank financial statements exclude the results of all UBS’s subsidiaries and associated companies, and are prepared to meet Swiss regulatory requirements and Swiss federal banking law. Major differences between Swiss federal banking law requirements and International Accounting Standards are described in Note 39 to the UBS Group Financial Statements.
Significant financial events
Treatment of an item as a significant financial event is at the discretion of the Group Executive Board, but in general the item should be:
– | Non-recurring | |
– | Event specific | |
– | Material at Group level | |
– | UBS-specific, not industry-wide and should not be a consequence of the normal run of business. |
Examples of items that we would treat as significant financial events include the gain or loss on the sale of a significant subsidiary or associate, such as the divestment in 1999 of UBS’s stake in Swiss Life/Rentenanstalt, or the restructuring costs associated with a major integration, such as the merger in 2000 with PaineWebber.
Significant financial events are not a recognized accounting concept under International Accounting Standards or US GAAP, and are therefore not separately reflected in our Financial Statements. The use of numbers which have been adjusted for significant financial events is restricted to the Business Group and business unit reporting and to the analysis of the Group results and the accompanying illustrative tables. We clearly identify all adjusted figures, and disclose the pre-tax amount of each individual significant financial event in the quarter in which it is recorded, and in the annual report for that year, together with the net tax benefit or cost associated with the significant financial events recorded in each period.
Restatement of results
Disclosure channels
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We fully subscribe to the principle of equal treatment of all shareholders. To ensure fair access to information, we make UBS publications available to all shareholders at the same time and generally make key documents available in both English and German. Letters to shareholders and media releases about results are also translated into French and Italian. We post letters to shareholders and material information related to corporate events direct to all shareholders, while other information is distributed via press release and posted to UBS’s website, at www.ubs.com/investors. Our website includes comprehensive information about UBS, including a complete set of our published reporting documents, on demand access to recent webcast presentations and copies of presentations that senior management have given at industry conferences.
US regulatory disclosure requirements
New Basel Capital Accord — Pillar 3
UBS is a supporter and exponent of transparency in banks’ financial statements, and of disclosure as a means to promote market discipline. The philosophy behind Pillar 3 is therefore close to our thinking and we fully support it indeed, we would like to see it extended to other financial institutions, including securities firms, insurance companies and intermediaries.
For a publicly quoted financial institution, we believe market discipline is a three-step feedback loop:
– | evidence of a firm’s practices and their results through disclosure | |
– | market reaction to the disclosure, and its impact on shareholder value | |
– | change in behavior or strategy by firms seeking to maximize shareholder value. |
Although the effect of market discipline is not uniform, enhanced disclosure requirements can undoubtedly contribute to improved risk management and control. In this we fully support the aims of Pillar 3.
UBS has been active in the ongoing discussion between the regulators and the industry, and we believe that this is a unique opportunity for regulators, accounting standard setters and industry participants to work together to achieve a disclosure framework that meets the needs of all relevant parties.
As a result of these discussions, we have identified areas where further improvements to our risk disclosure can be made in future, taking into account the needs of both equity and credit analysts. New developments and standards in risk management and control emerge all the time, and risk disclosure is therefore a moving target, but we are committed to developing our reporting over coming years, with the aim of remaining at the forefront of meaningful disclosure.
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Corporate Governance
Value-based Management
Value-based Management
UBS’s performance measurement framework considers the creation of long-term value for shareholders in a more explicit way than traditional profit-based measures. UBS believes that the measurement of value creation can only be effective in the context of a comprehensive value-based management (VBM) process which is truly embedded in its management decisions, and consistently applied across the organization.
UBS’s value-based management (VBM) framework supports value-based decisions, performance assessment and external communication. The heart of the framework is a process for monitoring the development of the value of the Group and its constituent businesses, based on the identification of the fundamental drivers of value creation.
Overview of objectives and process
Value-based business decisions:To ensure that UBS’s actions are value-enhancing, the Group evaluates strategic initiatives, acquisitions and investments on the basis of the impact of their earnings potential and inherent risk on shareholder value. Funding and capital resources are allocated only to business plans and projects that are expected to create value on a sustainable basis.
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To help make this evaluation, UBS benchmarks the internal assessment of a project’s value creation potential against analysts’ and investors’ expectations. The Group also assesses and manages the risk of current and planned business strategies by analyzing the impact of long-term industry and macro-economic trends on value.
Performance assessment: Performance measures are designed to demonstrate the extent to which value has been created: both the value derived from actual performance during the current reporting period and the value of future growth prospects resulting from tactical and strategic positioning.
External communication:The drivers of value creation are a focal point of our communication to investors and analysts. The analysis and interpretation of sources of valuation gaps provides valuable evidence of the external evaluation of our future prospects.
Measuring value creation
Measuring value creation at the Group level
To be a long-term success, a company must provide its owners with a total return greater than its risk-adjusted cost of capital. For the shareholders, the total return on their investment is a combination of cash distributions and share price appreciation over a specific period. Share price development is therefore a very important indicator of value creation at the corporate level, since it reflects the assessment by investors of current performance, of the ability of management to define, communicate and implement innovative and compelling strategies for the future and of the level of strategic risk those plans involve.
Measuring value creation at the business level
The starting point in assessing value creation for a business unit is thus to assess its fair value, i.e., the theoretical value of the current franchise and associated earnings potential as well as the resources the business unit management has been entrusted with.
By relating realized cash earnings and the incremental fair value added by strategic plans and investments to the initial fair value, we then calculate the total return on fair value of the business unit. Actual total return is compared to the business unit hurdle rate, which represents the minimum required return for a given level of business risk.
For the purposes of value-based management, fair value is calculated as the sum of all future discounted free cash flows, which correspond to anticipated earnings adjusted for investments and depreciation. The discount rate reflects the financial and business risks of the unit and is also the targeted total return on fair value (the business unit hurdle rate). Discount rates are derived from historical market data using the capital asset pricing model (CAPM), which yields discount rates that account for the undiversifiable (systematic) risk of the business.
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Value-based Management
Since our business units are not listed on any stock market, their cost of equity is inferred from stock market data of listed competitors and peers.
Generated free equity
In view of these differences, free cash flow for banks is generally defined as the change in free equity, after investments and after all claims from debt holders (interests and principal repayments) have been serviced. UBS has dubbed this measure “Generated Free Equity” (GFE) as it is the amount that can be either reinvested or returned to shareholders via dividends and share repurchases. We use GFE in the calculation of its fair value and the total return on fair value. This method is known as the equity method of valuation, as opposed to the enterprise method which arrives at the value of the equity by discounting the entire cash flow and thereafter deducting the value of the debt.
GFE is the net profit after tax adjusted for changes in the required equity. There are many possible methods to determine the equity requirements for a business. For the calculation of GFE, UBS uses the regulatory requirements for each business unit as the key for determining the equity requirements of its business units.
The VBM process
Value drivers
The analysis of the future development of value drivers extends beyond the standard business plan horizon of three years to consider the potential impact on value of long-term industry and macro-economic trends, and constitutes an important input in the evaluation of strategic options.
Internal value driver projections and valuations are benchmarked against external assessments and the expectations of the stock market and leading analysts and against performance of key competitors. They are also subjected to a sensitivity analysis, both to understand the sensitivity of the valuation to assumptions, and to test the impact on value of failing to meet plans. Together these measures help to avoid the risk that over-optimistic planning might distort the VBM process.
Value-based decisions in strategic planning
The impact of business plans on valuation is analyzed on the basis of the internal value driver targets and long-term forecasts on the development of value drivers beyond the planning horizon. The valuation analysis considers the views on sector and macro-economic development of neutral internal and external experts and the impact of worst case scenarios.
Value-based decisions and strategic risk
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In order to meet this challenge, companies need to implement systematic and rigorous tools and processes (as has already been done in the case of market, credit and operational risk control) to identify and manage strategic risk. Valuebased analysis constitutes a key input for assessing and addressing strategic risk.
UBS produces a Value Report, circulated quarterly to senior managers throughout the Group. This report to management tracks the development of value drivers and also measures total return on fair value of the Group and Business Groups, which includes the incremental impact of new business initiatives and the realized generated free equity. In addition, the value report contains a section which analyzes the source of gaps between internal valuation and market capitalization and between internal valuation of the Group and its Business Groups and leading external analysts’ valuations of business units.
Compensation
Total return on fair value and the development of value drivers are very powerful measures for compensation and UBS currently is in the process of developing methods to include the VBM measures in its compensation scheme. However, UBS believes that compensation should never be formula driven, so, while these measures will become important inputs, they will not replace managerial judgement in determining compensation levels.
One of the goals of value-based compensation is the alignment of the interests of employees and shareholders. Such alignment can also be achieved through increased employee ownership. UBS has launched Equity Plus, a program that aims to substantially increase employee ownership by stimulating employees to use part of their total compensation to buy UBS shares.
External communication
Conclusion
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Corporate Governance
Regulation and Supervision
Regulation and Supervision
As a Swiss-registered company, UBS’s main regulator is the Swiss Federal Banking Commission (Eidgenossische Bankenkommission or “EBK”), but we are also regulated worldwide by supervisory agencies in the countries in which we conduct business, most notably the US and the UK. We aim to monitor regulatory developments, to comply with all local and regional provisions and to work closely and maintain good relations with the regulators in all jurisdictions where we have offices, branches and subsidiaries. The Group Governance Committee oversees the interface with our regulators, which is coordinated by the risk control, compliance and financial control functions at Corporate Center and in the Business Groups.
UBS’s operations throughout the world are regulated and supervised by the relevant central banks and regulatory authorities in each of the jurisdictions in which we have offices, branches and subsidiaries. These authorities impose reserve and reporting requirements and controls on banks, including those relating to capital adequacy, depositor protection and prudential supervision. In addition, a number of countries where UBS operates impose additional limitations on or affecting foreign-owned or controlled banks and financial institutions, including
– | restrictions on the opening of local offices, branches or subsidiaries and the types of banking and non-banking activities that may be conducted by those local offices, branches or subsidiaries; | |
– | restrictions on the acquisition or level of ownership of local banks; | |
– | restrictions on investment and other financial flows entering or leaving the country. |
The supervisory and regulatory regimes of the countries where UBS operates will determine, to some degree, our ability to expand into new markets, the services and products that we will be able to offer in those markets and how we structure specific operations.
The following sections describe the regulation and supervision of UBS’s business in Switzerland, our home market, and in the United States and the United Kingdom, our next two largest operations which together employ a total of 49% of our staff.
Regulation and supervision in Switzerland
General
UBS is regulated in Switzerland under a system established by the Swiss Federal Law relating to Banks and Savings Banks of 8 November 1934, as amended, and the related Implementing Ordinance of 17 May 1972, as amended, which are together known as the Federal Banking Law. Under this law, banks in Switzerland are permitted to engage in a full range of financial services activities, including commercial banking, investment banking and fund management. Banking groups may also engage in insurance activities, but these must be undertaken through a separate subsidiary. The Federal Banking Law establishes a framework for supervision by the EBK.
In our capacity as a securities broker, UBS is governed by the Swiss Federal Law on Stock Exchanges and Trading in Securities of 24 March 1995, as amended, under which the EBK is appointed as prime regulator for these activities.
Regulatory policy
– | Guidelines concerning a Code of Conduct with regard to the Exercise of Due Diligence by Banks, 1998. |
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– | Guidelines concerning the Treatment of Accounts, Custody Deposits and Safe Deposit Boxes Remaining Dormant at Swiss Banks, 2000. | |
– | Guidelines concerning the Exercise of Asset Management Mandates, 2000. |
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 EBK.
Role of external auditors and direct supervision of large banking groups
In recent years, the EBK has taken on more direct responsibility for supervision in two areas: capital requirements for market risk, for which there is a specialist team; and the supervision of the two large Swiss banking groups, including UBS, for which a dedicated department was created in 1998. Thus, the supervisory strategy now entails direct supervision in the form of regular meetings with bank management, supervisory visits, on site reviews, direct reporting, both routine and ad hoc, and regular meetings with the host regulators of our overseas operations. Close cooperation, including regular trilateral meetings, has been established between the EBK and UBS’s US and UK regulators, and further links are being established by the EBK with other relevant regulators.
Reporting requirements and capital requirements
Switzerland applies the internationally accepted capital adequacy rules of the Basel Capital Accord but the EBK implementation imposes a more differentiated and tighter regime than the internationally agreed rules, including a more stringent definition of capital (see Capital management on page 84.) Furthermore, the EBK expects banks to hold capital at least 20% above the minimum that would be required under the Basel Capital Accord. A bank falling below this level would be subject to more intense supervision. (The Basel Capital Accord is currently in the process of being revised, as discussed below on page 110) .
Disclosures to the Swiss National Bank
Regulation and supervision in the
United States
Banking regulation
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Regulation and Supervision
offices, as well as prudential restrictions, such as limits on extensions of credit to a single borrower, including UBS subsidiaries.
The licensing authority of each US banking office has the authority to take possession of the business and property of the office it licenses in certain circumstances. Such circumstances generally include violations of law, unsafe business practices and insolvency. So long as UBS maintains one or more federal branches, such as our California branches, the Office of the Comptroller of the Currency also has the authority to take possession of our US operations under similar circumstances, and this 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 our US banking offices 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.
In addition to the direct regulation of our US banking offices, operating US banking offices subjects UBS to regulation by the Board of Governors of the Federal Reserve System under various laws, including the International Banking Act of 1978, as amended, the Bank Holding Company Act of 1956, as amended, and the Gramm-Leach-Bliley Financial Modernization Act of 1999. The Bank Holding Company Act imposes significant restrictions on UBS’s US non-banking operations and on our worldwide holdings of equity in companies operating in the United States, as well as restrictions on transactions between our US banking offices and our non-banking subsidiaries. On 10 April 2000, UBS AG was designated a “financial holding company” under the Gramm-Leach-Bliley Act. This designation generally permits us to exercise the new powers granted by that act, which include the following:
– | Bank holding companies meeting management and capital standards are permitted to engage in a substantially broader range of non-banking activities than previously was permissible, including insurance underwriting and making merchant banking investments. | |
– | Insurers and other financial services companies are permitted to acquire banks. | |
– | Various restrictions that previously applied to bank holding company ownership of securities firms and mutual fund advisory companies have been removed. | |
– | The overall regulatory structure applicable to bank holding companies, including those that also engage in insurance and securities operations, has been revised. |
The Gramm-Leach-Bliley Act also modified other existing financial laws, including laws related to the conduct of securities activities by US banks and US banking offices. As a result, UBS is in the process of relocating certain activities previously conducted by our US banking offices to a UBS subsidiary or elsewhere.
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 Association of Securities Dealers. Depending upon the specific nature of a broker-dealer’s business, it may also be regulated by some or all of the New York Stock Exchange, the Municipal Securities Rulemaking Board, the US Department of the Treasury, the Commodities Futures Trading Commission, and other exchanges of which it may be a member. These regulators have available a variety of sanctions, including the authority to conduct 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.
UBS subsidiaries in the United States are also subject to regulation by applicable federal and state regulators of their activities in the invest-
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ment advisory, mutual fund, trust company, mortgage lending and insurance businesses.
USA Patriot Act
The scope of the Act will be determined, to some degree, by the regulations that are adopted to implement its provisions. The US Secretary of the Treasury has published interim guidance and proposed regulations to implement some portions of the Act, and is expected to propose additional regulations to implement other sections. Although we cannot predict when and in what form these regulations will be adopted, we believe that the cost of compliance with the Act is not likely to be material to us, and that compliance with the statute will not have a material effect on our global operations.
Regulation and supervision in the
United Kingdom
The FSA has established a risk-based approach to supervision and UBS is supervised by the Major Financial Groups section of the Deposit Takers and Markets Directorate. The FSA has a wide variety of supervisory tools available to it, including on-site inspections by supervisors (which may relate to a risk-based industry-wide theme or be firm-specific) and the ability to commission reports by skilled persons (who may be the firm’s auditors or IT specialists, compliance consultants or lawyers). The FSA also has an extremely wide set of sanctions which it may impose under the new Act, similar to those available to US regulators.
During most of 2001, however, UBS was regulated by the FSA in respect of its banking activities but continued to be regulated by the Securities and Futures Authority in respect of its investment banking, individual asset management, brokerage and principal trading activities, and by the Investment Management Regulatory Organisation in respect of its institutional asset management and fund management activities.
Some of our subsidiaries and affiliates are also regulated by the London Stock Exchange and other United Kingdom securities and commodities exchanges of which UBS is a member.
The investment services that are subject to oversight by United Kingdom regulators are regulated in accordance with European Union directives requiring, among other things, compliance with certain capital adequacy standards, customer protection requirements and conduct of business rules. These standards, requirements and rules are similarly implemented, under the same directives, throughout the European Union and are broadly comparable in scope and purpose to the regulatory capital and customer protection requirements imposed under applicable US law.
Basel Committee on Banking Supervision
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Regulation and Supervision
The new Accord will introduce a capital requirement for operational (consequential) risks. It is hoped that, when finally agreed, this requirement will be responsive to changing risk and loss experience and will promote further rational development of risk control practice in this area.
Implementation was originally scheduled for 1 January 2004, but has been delayed to 1 January 2005 following intensive consultation with the industry. UBS provided a comprehensive written response to the Committee, participated actively in the development of industry group responses and contributed to the formal quantitative impact studies conducted by the regulators. Discussions will continue with the Committee well into 2002 when a third quantitative impact study will be conducted and a final consultative paper issued. The release of the final Accord will then be followed by extensive dialogue with individual regulators as they incorporate the new Accord into local regulations.
The new Accord has been the main focus of industry and UBS interaction with the Committee over the last year, but the Committee continues to explore other areas of regulatory interest and concern and to issue consultative and sound practice papers, for example “Customer Due Diligence for Banks”.
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Corporate Governance
Corporate Responsibility
Corporate Responsibility
UBS has a strong commitment to corporate responsibility. We recognize the demands that are placed on us by different stakeholders, and have therefore made corporate responsibility part of our culture and our identity, integral to our business model.
Corporate responsibility means different things to different people and different businesses. UBS aims to build a truly responsible corporate strategy by continuously identifying and anticipating new issues through regular dialogues with stakeholders, outside experts and the media. Key corporate responsibility issues for a financial institution like UBS include strengthening corporate governance, fighting money laundering, protecting financial privacy, being an equal opportunity employer, promoting environmental stewardship and contributing to the communities which we are part of. At UBS, we take a pragmatic approach, emphasizing issues that provide clear benefits for our shareholders, clients, employees and societies in our main markets.
We realize that simply meeting existing legal requirements is not sufficient. Society’s expectations are constantly evolving and often precede formal legal and regulatory requirements; we find that we are being held to ever higher standards. Globalization has added to these demands as multinationals are accused of arbitraging social standards to boost their bottom line. However the growing demand for more responsible corporate behavior means that firms that meet this demand at an early stage stand to win, while laggards put themselves at risk.
Taking our corporate responsibilities seriously can bring positive benefits to all our stakeholders. Good corporate governance benefits our shareholders, putting their interests first. Protecting the privacy of our clients helps win their trust. Being recognized as a responsible employer helps increase employee satisfaction and the retention and recruitment of the best staff.
Managing our responsibilities
The challenge is to develop a comprehensive approach to corporate responsibility that is Group-wide and globally consistent. The active participation of all Business Groups and regions is critical for an effective corporate responsibility program. Our goal is to build upon their different areas of expertise and to ensure that corporate responsibility issues are handled as part of regular ongoing business operations. At the same time, implementing a corporate responsibility strategy requires sustained effort over a number of years policies and procedures can be changed relatively quickly, but reshaping attitudes can be much harder, and requires commitment throughout an organization, especially at the highest levels.
In 2001, we created a Corporate Responsibility Committee to guide this process at UBS, comprising members of the Board of Directors, the Group Executive Board, and the Group Managing Board. This committee is chaired by Marcel Ospel and has Hans de Gier, Vice Chairman of the Board, Peter Wuffli, President of the Group Executive Board, Donald Marron, Chairman UBS Americas, and Marcel Rohner, Chief Operating Officer UBS Private Banking as members. The Committee has the following duties:
– | to determine the company’s policy with respect to corporate responsibility and sustainable development; | |
– | to support increased awareness of and moni- tor the company’s adherence to international standards in these areas; | |
– | to advise the Group Executive Board and other bodies on corporate responsibility; | |
– | to advise the Board of Directors on reporting about the Group’s efforts on corporate responsibility and sustainable development. |
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In close cooperation with the Business Groups, a specialized unit in the Corporate Center guides the Corporate Responsibility Committee in shaping the Group’s overall strategy. The objective is to add value by combining existing, Group-wide activities into a consistent framework, systematically identifying and analyzing market opportunities and risks associated with society’s changing expectations of corporate behavior, and ensuring that all relevant corporate responsibility issues are effectively covered. The following section highlights some of the progress made in key issues of interest to our stakeholders.
Shareholders
Corporate governance
In 2001 a working group under the lead of Economiesuisse, the Swiss business federation, has been involved in drafting a “Swiss Code of Best Practice” in Corporate Governance, while the SWX Swiss Exchange has proposed “Reporting Guidelines on Corporate Governance”, which aim to make available for investors standardized information on the corporate governance of the companies listed on the Swiss Exchange. UBS has contributed to the review of both proposals. It is planned that both the Code and the Reporting Guidelines become effective mid-2002.
Clients
Fighting money laundering
– | Banks in Switzerland are not only required to verify the identity of their clients but also have to establish the identity of the beneficial owners of funds and assets. | |
– | To prevent the misuse of their services for purposes of money laundering or financing crime, banks in Switzerland must notify the authorities whenever they have knowledge or a justified suspicion that assets are of criminal origin or are under the control of a criminal organization. This includes the financing of terrorist activity. |
Since 11 September 2001, UBS has actively supported the investigations into the terrorist attacks in the US, making use of the procedures already in place. A process of gathering information from all accessible public and private sources globally was started immediately. Based on this information, an internal Watch List of all names of persons and companies who could be implicated in the terrorist attacks was created and is continually updated. Currently the list contains more than a thousand names, predominantly those published by the US government, and it is steadily growing. UBS has searched its files and reported a small number of possible matches which could be of help for further investigation by the relevant local authorities.
The effectiveness of UBS’s process of due diligence is further enhanced by an internal Financial
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Intelligence Unit. Drawing on worldwide research and intelligence resources, the unit can provide detailed information on existing and prospective clients. In addition, it maintains a special database on politically exposed persons (and other persons with public exposure) in order to reduce reputation and legal risks that may arise from such client relationships.
The Wolfsberg Principles
These principles encompass “know your customer” policies, in particular identification of the source of a client’s wealth, and the identification and follow-up or reporting of unusual or suspicious activities. They are designed to ensure that private banking services are only offered to clients with legitimate sources of wealth and that the same high standards are applied globally.
Following the attacks in the US on 11 September 2001, the Wolfsberg group has drafted a statement on the “Suppression of the Financing of Terrorism” in which the banks commit themselves to support authorities in the fight against terrorism.
Employees
An important part of developing a strong and compelling corporate culture in the workplace is promoting diversity: accepting and valuing people from different backgrounds and cultures, and encouraging them to bring their varied talents and perspectives to bear on all tasks, encouraging problem-solving and innovation.
Since the mid-1990s, we have initiated more than 200 pro-diversity activities in UBS’s different businesses across the world, designed to approach this issue with appropriate sensitivity to local circumstances. Our efforts have covered recruiting, education, training and development programs, but also the creation of structures and networks to provide long-term support.
One of our competitive strengths in many of our businesses is the ability to leverage the skills
The challenges of avoiding money laundering
As part of our ongoing internal control procedures, UBS in Zurich identified a business relationship with a suspected connection to the family of the late Nigerian dictator Sani Abacha, and reported this suspicion to the Swiss Federal Banking Commission and the Swiss Federal Money Laundering Reporting Office.
This case demonstrated the challenges of preventing money laundering, but also gave us an opportunity to publicly reaffirm the strength of our commitment to avoiding inappropriate banking relationships.
In 1996, a British citizen resident in London who was a reputable and longstanding UBS client, introduced to UBS a company in which he and two Nigerian business partners held interests. When questioned by us, the client gave a credible assurance that his business partners had no political background or interests.
After ascertaining one of the false names used by one of Abacha’s sons, we requested further information. When further clarifications were not forthcoming, we conducted additional internal investigations, which led us to suspect that at least part of the money in the accounts belongs to Abacha’s sons. At this point we reported this suspicion to the authorities and blocked the company’s accounts.
It is our strict policy that suspect business connections of this sort are to be avoided under all circumstances, so it was a matter of deep regret that this relationship with UBS was not prevented at the outset and was not discovered earlier.
UBS takes its responsibilities in this area extremely seriously and remains dedicated to meeting both legal and regulatory requirements and our commitments under the Wolfsberg principles.
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and knowledge of our staff across the 50 countries in which UBS operates. We believe that our intercultural training program is one of the most integrated, comprehensive and advanced in the world. Last year more than 600 new and early career staff worldwide were involved in workshops to help them learn how to develop cultural understanding and how to succeed in intercultural communication and integration.
We are increasingly coordinating our efforts on a global basis. In February 2001, a “Global Diversity Steering Committee” was established within UBS Warburg, supported by a Global Diversity Manager in human resources. In November 2001, the Committee launched a Diversity intranet website which provides detailed information about UBS Warburg’s diversity initiatives and is designed to facilitate employee involvement.
A number of initiatives are specifically targeted to increase the representation of women in senior management positions at UBS. For example, UBS Warburg has increased the number of college graduate women it hires. Of some 600 hires in the latest UBS Warburg graduate intake, approximately 30 per cent are women, even though women represented only 20 per cent of applicants. In July 2001, 375 senior female executives and financial advisors from UBS Warburg and UBS PaineWebber offices around the globe attended the fourth annual UBS Women’s Leadership Conference in New York City to share insights and exchange ideas with UBS’s senior managers.
Valuing diversity also opens up market opportunities: a workforce that reflects the variety of cultures where the bank does business will help identify new markets, develop innovative products and strengthen client relationships. A report on women and investing was commissioned as part of UBS PaineWebber’s ongoing Index of Investor Optimism Survey. It showed that the number of wealthy women investors had increased significantly, despite the recent economic downturn. In 2001, they represented 47% of investors with $100,000 or more in investable assets an increase of 11% since 1999.
Our Annual Review 2001 provides more information about how UBS recruits and
retains some of the best talent in the industry.
Society
Investing in the community
UBS supports communities through cash donations given directly to organizations, through employee volunteering and through matching donations made by employees on their own initiative. We have set up several Community Affairs programs, organized at a regional level in order to be responsive to local expectations. Here are some examples of their activities.
At Group level we provide regular ongoing support to UNICEF and the Theodora Foundation, and in September 2001 we set up a special UBS Humanitarian Fund to help the victims of the terrorist attacks in the US.
UNICEF, the United Nations Children’s Fund, is dedicated to ensuring that the basic needs of children around the world are met. UBS has been in partnership with UNICEF Switzerland since November 1996, actively supporting the Fund in its aid programs. One such is the “Change for Good” fund-raising campaign. Its aim is to encourage people to donate any foreign currency they may have that is too small to be changed at a bank. Donation envelopes are available throughout our branches in Switzerland. We then convert the money into Swiss Francs for UNICEF. In the context of the physical introduction of the Euro in January 2002, the amounts collected by UBS massively increased towards the end of 2001: up to 2 tons of coins were collected every week in the last quarter of 2001.
The Theodora Foundation is a Swiss based charity which aims to help ease the suffering of children in hospital by making them laugh. Specially trained Clown Doctors entertain them with music, juggling, conjuring tricks and by telling them stories. UBS has supported the Theodora Foundation since 1995.
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In September 2001, following the terrorist attacks in the US, UBS set up the UBS Humanitarian Fund to help those in need as a result of the attacks. UBS pledged USD 5 million towards the relief efforts, alongside many donations from our employees. Many of our US staff, especially from our New York, New Jersey and Stamford offices, took part in volunteer efforts in support of the injured and bereaved.
UBS Warburg runs a tightly focussed program of community investment, concentrated on education and community regeneration. In the UK, community regeneration is targeted at the East End of London and aims to assist in the social and economic regeneration of one of the country’s most deprived regions. For instance, UBS Warburg provides funds and expertise to assist in job creation and business start up in the deprived boroughs adjacent to the City of London. The bank also encourages its employees to be actively involved in the community and to contribute time and skills to help causes they care about. One example is the mentoring scheme run in cooperation with local schools, where UBS Warburg employees act as mentor to a teenager, meeting regularly with them to motivate them, to give them an idea of how business works and to help them understand the importance of succeeding in their education. In 2001 nearly 15% of staff in London took part in volunteering activities through UBS. For the fourth consecutive year, UBS Warburg employees in London have won an `Employee Volunteer of the Year’ award by the East London Business Alliance.
In the US, UBS has also been recognized as a leader in community affairs. Employees of UBS PaineWebber, UBS Warburg and UBS Asset Management serve as literacy tutors and mentors in their local communities. For example, over 200 employees in New York, Stamford and Chicago volunteered in 2001 to participate in the Everybody WINS! Power Lunch program, a lunchtime reading and mentoring program for elementary school students.
In Switzerland, the UBS Optimus Foundation harnesses the expertise and the capabilities of UBS as a global financial services company to support clients in their contributions to worthy causes. The Foundation focuses on three areas - Children, Talents and Medical Research. Another foundation, the UBS Foundation for Social Issues and Education, contributes to various social projects in Switzerland. Finally, the association “UBS employees lend a hand” in Switzerland provides assistance through staff collection schemes to charitable institutions, which has collected over CHF 3 million for a great number of social projects.
Promoting environmental awareness
– | Environmental protection is one of the most pressing issues facing our world today. UBS is committed to continuing the integration of environmental issues into business activities, while building shareholder value by taking advantage of environmental market opportu- nities. We also incorporate due consideration of environmental risks into our risk management processes, especially in lending and investment banking. | |
– | We actively seek ways to reduce the environmental impact to air, soil and water from our in-house operations. The main focus is the reduction of greenhouse gas emissions. | |
– | We seek to ensure the efficient implementation of our environmental policy through an environmental management system which includes sound objectives, programs and monitoring. |
The environmental factor in asset management Studies and stock indices have shown that there can be a positive link between environmental and social aspects and economic performance. As a result, clients — particularly institutional investors such as pension funds — increasingly demand that asset management decisions take into account environmental and social aspects as well as economic ones. UBS Asset Management has developed expertise in incorporating environmental and social aspects into its investment research, looking at how companies’ strategies, processes and products impact their financial success, society and the environment.
Focusing on the concept of sustainability, UBS launched a new investment fund in 1997, the “UBS (Lux) Equity Fund — Eco Performance”. This fund invests worldwide in stocks of exemplary sector leaders and forward-looking small
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and medium-sized companies with above average financial, environmental and social performance.
Moves towards low-carbon energy production, (lower CO2 emissions per unit of usable energy produced), continue to be supported by legislative changes and the increasing liberalization of the energy markets. Against this background, in July 2001 UBS launched a new energy sector fund, the UBS (Lux) Equity Fund - Future Energy. The fund invests in carefully selected smaller and medium-sized companies which operate in solar energy, wind energy and fuel cell technology as well as other forward- looking research areas in the renewable energy sector.
By 31 December 2001, the total of UBS clients’ invested assets managed according to environmental and social criteria amounted to approximately CHF 776 million.
The environmental factor in investment banking
Based on its Global Environmental Risk Policy, UBS Warburg has introduced processes that allow early identification of environmental risks in transactions. Initially, environmental factors are screened by investment banking staff. If there are indications of increased risk, external environment specialists are called in to investigate the issues as part of the due diligence process.
The environmental factor in credit business
During 2001 we have continued to integrate environmental risk assessment into our loan processes. We have rolled out a comprehensive information platform for account managers and credit officers to help identification and decision- making in case of environmental risks.
The benefits of incorporating the “environmental factor” into the lending business are threefold: UBS has a healthier loan portfolio, the client is aware of the environmental risks and opportunities for its company, and the environ- ment itself benefits from the resulting improvements.
The environmental factor in-house
During 2001, as part of our regular process of updating obsolete IT equipment, we replaced 32,000 CRT monitors in UBS Switzerland with more energy-efficient flat screen LCD monitors. These new displays require 75%-80% less electrical power. We expect that as a result, UBS will save between 4 and 6 Gigawatt hours of electricity each year, representing around 2-3% of our total electricity consumption in Switzerland.
We have also entered into a pilot project with ATEL, our exclusive energy supplier in Switzerland. ATEL will install monitoring devices for heating, cooling, water and electricity consumption and UBS’s building maintenance staff will periodically receive advice on how to reduce energy consumption. ATEL will receive a share of any profit resulting from cost and energy saving. Finally, we have started work on integrating all of our non-Swiss locations into our formal environmental management system.
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Further details and Environmental Performance Indicators are available in
our Environmental Report, which can be found at www.ubs.com/environment.
Performance assessment
We believe that corporate responsibility criteria and standards must be industry specific, and need to be defined through consultation with key players. An example of what can be done is the EPI-Finance 2000 standard, jointly developed by eleven finance and insurance companies, including UBS, to measure and report environmental performance. Details of our performance against EPI-Finance 2000 indicators are shown in our Environmental Report.
A similar process was initiated in 2001, to develop performance indicators for the financial industry covering key areas of social performance.
Third-party ratings of our corporate responsibility programs
– | In May 1999, UBS was the first bank to obtain ISO 14001 certification for its worldwide environmental management system in its banking business. UBS also received certification for its corporate services in Switzerland. The certification was undertaken by an independent certification company, SGS International Certification Services AG. | |
– | The Dow Jones Sustainability Group Indexes (DJSGI) have tracked, since 1999, the per- |
Commitments and memberships
UBS has undertaken to comply with the UN Global Compact principles proposed at the 1999 World Economic Forum in Davos. These principles set out the framework in which a company can help ensure sustainable development worldwide. In addition to protecting the environment, the nine principles deal with aspects such as respecting human rights and workplace rights.
In 1992, UBS was one of the first signatories to the United Nations Environment Program’s Bank Declaration and is helping to shape further developments through its role on the Steering Committee for financial institutions. The Statement commits UBS to integrating environmentally sound practices into all its activities.
UBS is also an active member of the World Business Council for Sustainable Development (WBCSD), a coalition of 150 international companies united by a shared commitment to sustainable development. The WBCSD provides business leadership as a catalyst for change toward sustainable development, and promotes the role of eco-efficiency, innovation and corporate responsibility.
UBS was one of the 36 companies from around the world to sign the Statement “Global Corporate Citizenship: The Leadership Challenge for CEOs and Boards” presented at the World Economic Forum Annual Meeting in New York in January 2002. The statement recommends a framework for action that CEOs, chairmen, and executive management teams can use to develop a strategy for managing their company’s impact on society and its relationships with stakeholders.
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formance of companies in the Dow Jones Global Index that lead the field in terms of corporate responsibility. UBS has been part of the DJSGI since their inception, and has been the leader in the global banking industry since 2000. The bank’s top position in this sector of the index was last confirmed on 15 October 2001. | ||
– | In October 2001, UBS was selected as leader for the banking sector of the Dow Jones STOXX Sustainability indices, that track the performance of the top 20% of sustainability leaders of the Dow Jones STOXX 600 index. | |
– | UBS is included in the FTSE4Good Index, which measures global companies performance in the areas of environmental sustainability, stakeholder relations and support for human rights. | |
– | In Spring 2001, UBS was the strongest new entrant in the Business in the Environment Index of global corporate environmental management. This index is designed to engage companies and drive continuous improvement in environmental management and performance. 184 international companies were included in this year’s index. |
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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 2.80 per share, fully paid up and non-assessable. As outlined in the Capital Management section on page 85, UBS plans to reduce the par value of its shares through a distribution of CHF 2.00 per share on 8 July 2002, to shareholders of record on 5 July 2002. Following this distribution, the par value of the share will be reduced to CHF 0.80.
UBS’s ordinary shares are issued in the form of Global Registered Shares. UBS has pioneered the use of Global Registered Shares (GRS), which allow for cross-market portability at a minimized cost to investors. Alternatives to the GRS involve the creation of tailor-made securities for individual unlinked markets, following local regulations. UBS believes that, with the globalization of financial markets, this concept is becoming less valid, and that securities will increasingly be traded in multiple markets; such global fungible securities can best track the changing patterns of liquidity across the world.
UBS also believes that regulatory structures of different markets will continue to align, reducing the need to have individual securities in each mar- ket to comply with different local regulations.
A Global Registered Share is a security that provides direct and equal ownership for all shareholders. It can be traded and transferred across applicable borders without the need for conversion, with identical shares traded on different stock exchanges in different currencies. For example, the same 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. The UBS GRS is listed on the Swiss, New York and Tokyo stock exchanges. All members of the SMI Swiss Market Index listed on the Swiss stock exchange are now traded on virt-x, a joint venture between the SWX Swiss Exchange and Tradepoint.
The UBS ADR (American Depositary Receipt) program was terminated at the time of the listing of the GRS on the New York Stock Exchange (NYSE) 16 May 2000.
Registration
A single register exists for UBS ordinary shares, split into two parts a Swiss 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 their 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
For the foreseeable future, because of the greater volume of UBS shares traded on virt-x, trading on this exchange is expected to be the primary determinant of the share price, and liquidity on virt-x is expected to be higher than on the NYSE. During 2001, daily trading volume in UBS shares on the NYSE represented an average of just 5.19% of the total daily trading volume in UBS shares.
During the hours in which both virt-x and NYSE are simultaneously open for trading (currently 15.30 to 17.30 CET), price differences are likely to be arbitraged away by professional market makers. The NYSE price will therefore typically be expected to depend on both the virt-x price and the prevailing USD/CHF exchange rate. When virt-x is closed for trading, traded volumes will typically be lower, however the specialist firm making a market in UBS shares on the NYSE, Van der Moolen, is required to facilitate sufficient liquidity and an orderly market in the UBS share.
As a global financial services firm, UBS earns profits in many currencies. Since UBS prepares its accounts in CHF, changes in currency exchange rates, particularly CHF/USD and CHF/EUR may have an effect on reported earnings.
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.
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Following an AGM, UBS shares typically begin trading ex-dividend. As a result of this structure, shareholders that sell shares on virt-x two business days prior to the payment date are required to compensate the purchaser for the amount of the dividend. An automated compensation system properly allocates the dividend for those transactions and allows SIS SegaInterSettle participants to execute transactions between the record date and the payment date.
These practices differ from the US norm of declaring dividends at least ten days in advance of the applicable record date and the commencement of ex-dividend trading 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 will be with due bills for the two business day period preceding the dividend record date.
UBS pays dividends in CHF (Swiss francs). For UBS ordinary shares held in street name through The Depository Trust Company, any dividend will be converted into USD (US dollars). Holders of UBS ordinary shares registered on the US reg- ister will receive dividend payments in USD unless they provide notice to Mellon Investor Services, UBS’s US transfer agent, that they wish to receive dividend payments in CHF.
UBS will fix the USD dividend amount on the basis of the DJ Interbank Foreign Exchange rate for sale of CHF against USD. The date for this fixing will be set at the same time as the respective ex-dividend, record and payment dates are set.
Holders of UBS shares who are US taxpayers are normally subject to 35% withholding tax on dividends they receive from UBS, although they can normally reclaim part of this, bringing their withholding tax rate down to 15%. UBS is currently in discussions with the Swiss tax authorities to change the withholding tax treatment of Global Registered Shares, so that either tax is only withheld at 15% for US tax payers, or to allow approved processors to file bulk reclamations on behalf of qualified UBS shareholders. Despite our efforts, there can be no assurance that this withholding tax will be reduced or eliminated. Further disclosure relating to the taxation of US holders of UBS shares can be found in our Form 20-F, in section E of item 10.
Dividends in 2001
In 2001 UBS departed from its normal process for paying dividends. Initially, as part of the process for the acquisition of Paine Webber Group, Inc., we paid a dividend in respect of the first three quarters of 2000 in October 2000. In 2001 we then took advantage of Swiss regulations which allow a company to reduce the par value of its shares by returning capital to shareholders, to make a distribution in this form in respect of the last quarter of 2000, instead of paying a dividend.
Par value distribution July 2002
As outlined in the Capital management section on page 85, UBS again plans to reduce the par value of its shares through a distribution of CHF 2.00 on 8 July 2002. This will be done instead of paying a dividend in respect of the year ended 31 December 2001.
This will generally follow the principles described in the preceding section with respect to dividends. The record date for the distribution has been set for the close of business on 5 July 2002. NYSE trades on 8 and 9 July will be with due bills. The CHF/USD exchange rate for the distribution will be fixed on 8 July 2002 the day on which the par value reduction itself takes place. The distribution will be paid for value on 10 July 2002.
The par value distribution in July 2002 will not be subject to the 35% withholding tax on dividends.
Ticker symbols
Trading exchange | Bloomberg | Reuters | Telekurs | |||||||||
virt-x | UBSN VX | UBSZn.VX | UBSN, 004 | |||||||||
New York Stock Exchange | UBS US | UBS.N | UBS, 65 | |||||||||
Tokyo Stock Exchange | 8657 JP | UBS.T | N16631, 106 | |||||||||
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UBS Shares 2001
UBS Shares 2001
UBS share price performance in 2001
The UBS share price performed well during 2001, in the context of weak European bank stocks in general (as measured by the DJ Europe Stoxx Europe Banks index). The UBS share fell 5.0% through the year, and generated a total pre-tax return of -4.4% to investors over the year if distributions are included.
The year began well for European banking stocks, rising approximately 4% by 6 February. In the same period, UBS rose 10% to the year’s high of CHF 96.83. By 22 March, however, the index had fallen 18% from these levels with rising investor fears over a sharp economic downturn, and a related decline in investment banking profits, combined with increased credit losses. The UBS share fell to a first-quarter low of CHF 72.33 on this date.
Sentiment improved during April and May 2001, and by 1 June the index had recovered to the level at the start of the year. UBS outperformed European banks during this period, rising to a mid-year high of CHF 91.17 on 5 June. From this date, pessimistic economic data, and poor second quarter financial results, caused European bank stock prices to decline slowly, falling 9% by end August 2001. The UBS share fell to CHF 81.40.
As September 2001 began, bank stocks fell 7% in the first 10 days of September, as fears rapidly escalated over further economic downturn. In the three days following the US terrorist attacks on 11 September bank stocks fell a further 10% from their 10 September close. The UBS share price fell to a year low of CHF 62.10 on 21 September. However, during the first week in December 2001, European bank stocks were once again nearing their end-August levels. UBS reached a fourth quarter high of CHF 86.85 on 10 December. Our share price then declined, ending the year down 5.0% from the level on 1 January 2001 at CHF 83.80, although outperforming the DJ Europe Stoxx Banks index by 5.1% over the year.
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UBS share data1
As at | ||||||||||||
Registered shares in 1000 units | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Total shares outstanding | 1,281,717 | 1,333,139 | 1,292,679 | |||||||||
Total shares ranking for dividend | 1,258,653 | 1,277,874 | 1,292,679 | |||||||||
Treasury shares (average) | 47,244 | 97,545 | 77,264 | |||||||||
Treasury shares (year end) | 41,255 | 55,265 | 110,621 | |||||||||
Weighted average shares (for basic EPS calculations) | 1,266,038 | 1,209,088 | 1,214,227 | |||||||||
Weighted average shares (for diluted EPS calculations) | 1,288,578 | 1,225,578 | 1,225,125 | |||||||||
For the year ended | ||||||||||||
CHF | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Earnings per share | ||||||||||||
Basic EPS | 3.93 | 6.44 | 5.07 | |||||||||
Basic EPS before goodwill amortization2 | 4.97 | 7.00 | 5.35 | |||||||||
Diluted EPS | 3.78 | 6.35 | 5.02 | |||||||||
Diluted EPS before goodwill amortization2 | 4.81 | 6.89 | 5.30 | |||||||||
As at | ||||||||||||
CHF billions | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Market capitalization | 105.5 | 112.7 | 92.6 | |||||||||
% change year-on-year | (6 | ) | 22 | 2 | ||||||||
As a % of the Swiss Market Index (SMI) | 13.80 | 10.80 | 10.62 | |||||||||
As a % of the Swiss Performance Index (SPI) | 12.48 | 9.08 | 8.51 | |||||||||
For the year ended | ||||||||||||
1000 shares | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Trading volumes virt-x/SWX total | 1,000,402 | 1,211,446 | 1,068,732 | |||||||||
virt-x/SWX daily average | 4,002 | 4,826 | 4,224 | |||||||||
NYSE total | 54,768 | 83,032 | — | |||||||||
NYSE daily average | 221 | 522 | — |
1 | All share and earnings per share figures have been restated for the 3 for 1 share split which took place on 16 July 2001. 2Excludes the amortization of goodwill and other intangible assets. |
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UBS Share Information
UBS Shares 2001
Stock exchange prices1
virt-x/SWX Swiss Exchange | New York Stock Exchange2 | |||||||||||||||||||||||
High | Low | Period end | High | Low | Period end | |||||||||||||||||||
(CHF) | (CHF) | (CHF) | (USD) | (USD) | (USD) | |||||||||||||||||||
2001 | 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 | ||||||||||||||||||
December | 86.85 | 80.90 | 83.80 | 52.83 | 49.18 | 50.00 | ||||||||||||||||||
November | 86.15 | 76.55 | 81.75 | 51.80 | 47.52 | 49.86 | ||||||||||||||||||
October | 79.05 | 69.70 | 75.95 | 47.60 | 43.23 | 46.37 | ||||||||||||||||||
Third quarter 2001 | 86.33 | 62.10 | 75.60 | 49.73 | 40.12 | 46.15 | ||||||||||||||||||
September | 81.20 | 62.10 | 75.60 | 47.70 | 40.12 | 46.15 | ||||||||||||||||||
August | 82.80 | 74.30 | 81.40 | 49.73 | 44.36 | 48.82 | ||||||||||||||||||
July | 86.33 | 75.00 | 78.35 | 47.09 | 43.41 | 45.15 | ||||||||||||||||||
Second quarter 2001 | 92.00 | 77.50 | 85.83 | 51.47 | 44.87 | 47.02 | ||||||||||||||||||
June | 91.17 | 83.17 | 85.83 | 50.69 | 46.33 | 47.02 | ||||||||||||||||||
May | 92.00 | 82.50 | 89.33 | 51.47 | 47.35 | 49.62 | ||||||||||||||||||
April | 88.33 | 77.50 | 88.00 | 51.16 | 44.87 | 50.26 | ||||||||||||||||||
First quarter 2001 | 96.83 | 72.33 | 83.17 | 58.49 | 43.02 | 47.68 | ||||||||||||||||||
March | 90.83 | 72.33 | 83.17 | 54.57 | 43.02 | 47.68 | ||||||||||||||||||
February | 96.83 | 86.33 | 88.67 | 58.32 | 50.96 | 52.85 | ||||||||||||||||||
January | 96.67 | 86.67 | 96.67 | 58.49 | 53.24 | 58.49 | ||||||||||||||||||
2000 | 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 | ||||||||||||||||||
Third quarter 2000 | 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 | ||||||||||||||||||
First quarter 2000 | 72.83 | 63.58 | 72.83 | |||||||||||||||||||||
1999 | 80.00 | 67.50 | 71.67 | |||||||||||||||||||||
Fourth quarter 1999 | 79.92 | 67.50 | 71.67 | |||||||||||||||||||||
Third quarter 1999 | 82.25 | 67.50 | 70.50 | |||||||||||||||||||||
Second quarter 1999 | 88.00 | 73.67 | 77.33 | |||||||||||||||||||||
First quarter 1999 | 82.00 | 69.08 | 77.50 | |||||||||||||||||||||
19983 | 108.83 | 45.00 | 70.33 | |||||||||||||||||||||
19973 |
1 | The share prices and volumes have been adjusted for the two-for-one share split that became effective on 8 May 2000 and for the three-for-one share split effective 16 July 2001. |
2 | UBS was listed on 16 May 2000, therefore there are no NYSE figures for periods prior to May 2000. NYSEfigures for second quarter 2000 are for 16 May 2000 to 30 June 2000 only, and NYSE figures for full year 2000 are for 16 May 2000 to 31 December 2000 only. |
3 | UBS was created by the merger of Union Bank of Switzerland and Swiss Bank Corporation, on 29 June 1998. 1998 figures are therefore for the period 29 June 1998 to 31 December 1998 only. There are no figures for 1997. |
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UBS Shares and market capitalization
% change from | ||||||||||||||||||||
Number of shares, except where indicated | ||||||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | 31.12.99 | |||||||||||||||
Total ordinary shares issued | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | (4 | ) | (1 | ) | |||||||||||||
Second trading line treasury shares (2000 program) | (55,265,349 | ) | ||||||||||||||||||
Second trading line treasury shares (2001 program) | (23,064,356 | ) | ||||||||||||||||||
Shares outstanding for market capitalization | 1,258,653,143 | 1,277,873,838 | 1,292,679,486 | (2 | ) | (3 | ) | |||||||||||||
Share Price (CHF) | 83.80 | 88.17 | 71.67 | (5 | ) | 17 | ||||||||||||||
Market Capitalization (CHF million) | 105,475 | 112,666 | 92,642 | (6 | ) | 14 | ||||||||||||||
Total treasury shares | 41,254,951 | 55,265,349 | 110,621,142 | (25 | ) | (63 | ) | |||||||||||||
Distribution of UBS Shares
Shareholders registered | Shares registered | |||||||||||||||
As at 31.12.01 | ||||||||||||||||
Number of shares registered | Number | % | Number | % of shares issued | ||||||||||||
1-100 | 43,268 | 19.7 | 2,211,404 | 0.2 | ||||||||||||
101-1,000 | 134,713 | 61.3 | 52,016,145 | 4.1 | ||||||||||||
1,001-10,000 | 38,414 | 17.5 | 95,134,124 | 7.4 | ||||||||||||
10,001-100,000 | 2,905 | 1.3 | 71,936,991 | 5.6 | ||||||||||||
100,001-1,000,000 | 338 | 0.2 | 94,420,825 | 7.4 | ||||||||||||
1,000,001-5,000,000 | 61 | 127,656,380 | 10.0 | |||||||||||||
5,000,001-12,817,174 (1%) | 14 | 108,210,291 | 8.4 | |||||||||||||
1-2% | 2 | 28,812,592 | 2.2 | |||||||||||||
2-3% | 0 | 0 | ||||||||||||||
3-4% | 1 | 40,834,352 | 3.2 | |||||||||||||
4-5% | 1 | 54,816,479 | 4.3 | |||||||||||||
Over 5% | 1 | 1 | 88,946,417 | 6.9 | ||||||||||||
Total registered | 219,718 | 100 | 764,996,000 | 3 | 59.7 | |||||||||||
Unregistered2 | 516,721,499 | 40.3 | ||||||||||||||
Total shares issued | 1,281,717,499 | 100 | ||||||||||||||
1 | As at 31.12.2001, Chase Nominees Ltd., London, was entered as a trustee/nominee holding 6.94% of all shares issued. 2Shares not entered in the share register at 31 December 2001. 3154,153,201 shares registered do not carry voting rights. |
As far as UBS is aware, UBS is neither directly nor indirectly owned or controlled by another corporation or government, there are no arrangements in place, the operation of which may result in a change in control and UBS has no shareholders whose beneficial ownership exceeds 5% of the total shares issued.
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UBS Share Information
UBS Shares 2001
Registered shareholders: type and distribution
Shareholders | Shares | |||||||||||||||
As at 31.12.2001 | Number | % | Number | % | ||||||||||||
Individual shareholders | 210,463 | 95.8 | 182,196,910 | 23.8 | ||||||||||||
Legal entities | 8,610 | 3.9 | 235,014,128 | 30.7 | ||||||||||||
Nominees, fiduciaries | 645 | 0.3 | 347,784,962 | 45.5 | ||||||||||||
Total | 219,718 | 100.0 | 764,996,000 | 100.0 | ||||||||||||
Switzerland | 204,582 | 93.1 | 396,665,957 | 51.9 | ||||||||||||
Europe | 9,612 | 4.4 | 227,465,501 | 29.7 | ||||||||||||
North America | 2,995 | 1.4 | 59,904,634 | 7.8 | ||||||||||||
Other Countries | 2,529 | 1.1 | 80,959,908 | 10.6 | ||||||||||||
Total | 219,718 | 100.0 | 764,996,000 | 100.0 | ||||||||||||
At 31 December 2001,UBS employees held approximately 8% of all shares issued, and options equivalent to about a further 6%.
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Financial Report 2001
Table of Contents
Table of Contents
Contents
Profile | ||||
Introduction | 1 | |||
UBS Group Financial Highlights | 2 | |||
UBS Group | 3 | |||
Our Business Groups | 4 | |||
Sources of Information about UBS | 5 | |||
Information for Readers | 8 | |||
Group Financial Review | 17 | |||
Group Results | 18 | |||
Review of Business | ||||
Group Performance | 31 | |||
Introduction | 32 | |||
UBS Switzerland | 38 | |||
UBS Asset Management | 50 | |||
UBS Warburg | 56 | |||
Corporate Center | 70 | |||
UBS Group Financial Statements | 75 | |||
UBS AG (Parent Bank) | 171 | |||
Additional Disclosure Required under SEC Regulations | 183 |
Introduction
The Financial Report 2001 forms an essential part of our reporting portfolio. It includes the audited Financial Statements of UBS Group for 2001 and 2000, prepared according to International Accounting Standards (IAS) and reconciled to United States Generally Accepted Accounting Principles (US GAAP), and the audited financial statements of UBS AG (the Parent Bank) for 2001, prepared according to Swiss Banking Law requirements. It also contains a discussion and analysis of the financial and business performance of UBS Group and its Business Groups, and some 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 page 5.
We hope that you will find the information in these documents useful and informative. We believe that UBS is among the leaders in corporate disclosure, but we would be very interested to hear your views on how we might improve the content and presentation of our information portfolio.
Mark Branson
Head of Group Communications
UBS AG
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Profile
1 | Operating expenses / operating income before credit loss expense. | |
2 | Excludes the amortization of goodwill and other intangible assets. | |
3 | For EPS calculation, see Note 9 to the Financial Statements. | |
4 | Net profit / average shareholders’ equity excluding dividends. | |
5 | Includes hybrid tier 1 capital, please refer to Note 30e in the Notes to the Financial Statements. | |
6 | Calculated using the former definition of assets under management. | |
7 | The Group headcount does not include the Klinik Hirslanden AG headcount of 2,450, 1,839 and 1,853 for 31 December 2001, 31 December 2000 and 31 December 1999, respectively. | |
8 | See the Capital strength section on pages 10 to 11 of the UBS Handbook 2001/2002. | |
9 | Details of significant financial events can be found in the Group Financial Review. |
All earnings per share figures have been restated for the 3 for 1 share split which took place on 16 July 2001. |
Except where otherwise stated, all 31 December 2001 and 31 December 2000 figures throughout this report include the impact of the acquisition of PaineWebber, which occurred on 3 November 2000. |
All invested assets figures for 31 December 2000 have been restated to reflect the new definition. |
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Income statement key figures | ||||||||||||||||
Operating income | 37,114 | 36,402 | 28,425 | 2 | ||||||||||||
Operating expenses | 30,396 | 26,203 | 20,532 | 16 | ||||||||||||
Operating profit before tax | 6,718 | 10,199 | 7,893 | (34 | ) | |||||||||||
Net profit | 4,973 | 7,792 | 6,153 | (36 | ) | |||||||||||
Cost / income ratio (%)1 | 80.8 | 72.2 | 69.9 | |||||||||||||
Cost / income ratio before goodwill (%)1,2 | 77.3 | 70.4 | 68.7 | |||||||||||||
Per share data (CHF) | ||||||||||||||||
Basic earnings per share3 | 3.93 | 6.44 | 5.07 | (39 | ) | |||||||||||
Basic earnings per share before goodwill2,3 | 4.97 | 7.00 | 5.35 | (29 | ) | |||||||||||
Diluted earnings per share3 | 3.78 | 6.35 | 5.02 | (40 | ) | |||||||||||
Diluted earnings per share before goodwill2,3 | 4.81 | 6.89 | 5.30 | (30 | ) | |||||||||||
Return on shareholders’ equity (%) | ||||||||||||||||
Return on shareholders’ equity4 | 11.7 | 21.5 | 22.4 | |||||||||||||
Return on shareholders’ equity before goodwill2,4 | 14.8 | 23.4 | 23.6 | |||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Balance sheet key figures | ||||||||||||||||
Total assets | 1,253,297 | 1,087,552 | 896,556 | 15 | ||||||||||||
Shareholders’ equity | 43,530 | 44,833 | 30,608 | (3 | ) | |||||||||||
Market capitalization | 105,475 | 112,666 | 92,642 | (6 | ) | |||||||||||
BIS capital ratios | ||||||||||||||||
Tier 1 (%)5 | 11.6 | 11.7 | 10.6 | (1 | ) | |||||||||||
Total BIS (%) | 14.8 | 15.7 | 14.5 | (6 | ) | |||||||||||
Risk-weighted assets | 253,735 | 273,290 | 273,107 | (7 | ) | |||||||||||
Invested assets (CHF billion) | 2,457 | 2,452 | 1,744 | 6 | 0 | |||||||||||
Headcount (full time equivalents)7 | 69,985 | 71,076 | 49,058 | (2 | ) | |||||||||||
Long-term ratings8 | ||||||||||||||||
Fitch, London | AAA | AAA | AAA | |||||||||||||
Moody’s, New York | Aa2 | Aa1 | Aa1 | |||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Operating income | 37,114 | 36,402 | 26,587 | 2 | ||||||||||||
Operating expenses | 29,073 | 25,096 | 20,194 | 16 | ||||||||||||
Operating profit before tax | 8,041 | 11,306 | 6,393 | (29 | ) | |||||||||||
Net profit | 6,296 | 8,799 | 5,005 | (28 | ) | |||||||||||
Cost / income ratio (%)1 | 77.3 | 69.2 | 73.3 | |||||||||||||
Basic earnings per share (CHF)3 | 4.97 | 7.28 | 4.12 | (32 | ) | |||||||||||
Diluted earnings per share (CHF)3 | 4.81 | 7.17 | 4.09 | (33 | ) | |||||||||||
Return on shareholders’ equity (%)4 | 14.8 | 24.3 | 18.2 | |||||||||||||
Table of Contents
UBS Group
UBS is one of the world’s leading financial firms, serving a discerning global client base. As an organization, we combine financial strength with a reputation for innovation and a global culture which embraces change. Our vision is to be the pre-eminent global integrated investment services firm and the leading bank in Switzerland. We are the world’s leading provider of private banking 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 in corporate and retail banking. As an integrated group, not merely a holding company, we create added value for our clients by drawing on the combined resources and expertise of all our businesses.
Our client philosophy puts advice at the heart of relationships. Our priority is to provide premium-quality services to our clients, giving them the best possible choice by supplementing best-in-class products we develop ourselves with a quality-screened selection of products from others.
With head offices in Zurich and Basel, we operate in over 50 countries and from all major international financial centers. Our global physical presence is complemented by leading edge on-line services. All our clients can benefit from our technology – it complements our advisory services and allows us to deliver our services faster, more widely and more cost-effectively than ever before.
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Profile
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 Switzerland
UBS Asset Management
UBS Warburg
Corporate Center
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Sources of Information about UBS
This Financial Report contains our audited Financial Statements for the year 2001 and accompanying detailed analysis. You can find out more about UBS from the sources shown below.
Publications
Annual Review 2001
Handbook 2001/2002
Quarterly reports
How to order reports
E-information tools for investors
Website
Messenger service
Results presentations
UBS and the Environment
Form 20-F and other submissions to the US Securities and Exchange Commission
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Profile
2001. 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 from the US. You are encouraged to refer to this additional disclosure.
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.
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UBS Investor Relations | E-mail: sh-investorrelations@ubs.com | Web: www.ubs.com/investors | ||||||
Our Investor Relations team | ||||||||
supports institutional, | ||||||||
professional and retail | Zurich | New York | ||||||
investors from offices | ||||||||
in Zurich and New York. | Hotline Zurich: | +41 1 234 4100 | Hotline New York: | +1 212 713 3641 | ||||
Christian Gruetter | +41 1 234 4360 | Richard Feder | +1 212 713 6142 | |||||
Mark Hengel | +41 1 234 8439 | Christopher McNamee | +1 212 713 3091 | |||||
Charles Gorman | +41 1 234 2733 | |||||||
Catherine Lybrook | +41 1 234 2281 | |||||||
Fax | +41 1 234 3415 | Fax | +1 212 713 1381 | |||||
UBS AG Investor Relations G41B P.O. Box CH-8098 Zurich, Switzerland | UBS Americas Inc. Investor Relations 1285 Avenue of the Americas, 14th Floor New York, NY 10019, USA | |||||||
UBS Group Media Relations | Telephone | Fax | ||||||
Zurich | +41 1 234 8500 | +41 1 234 8561 | sh-gpr@ubs.com | |||||
London | +44 20 7567 4714 | +44 20 7568 0955 | sh-mr-london@ubsw.com | |||||
New York | +1 212 713 8391 | +1 212 713 9818 | mediarelations-ny@ubsw.com | |||||
Tokyo | +81 3 5208 6275 | +81 3 52 08 69 51 | sh-comms-mktg-tokyo@ubs.com | |||||
Other useful contacts | ||||||||
Switchboards | Telephone | |||||||
For all general queries. | Zurich | +41 1 234 1111 | ||||||
London | +44 20 7568 0000 | |||||||
New York | +1 212 821 3000 | |||||||
Tokyo | +81 3 5293 3000 | |||||||
UBS Shareholder Services | Telephone | Fax | ||||||
UBS Shareholder Services, | ||||||||
a unit of the Company Secretary, is responsible for | Zurich | +41 1 235 6202 | +41 1 235 3154 | sh-shareholder-service@ubs.com | ||||
Global Registered Shares. It | ||||||||
the registration of the | ||||||||
is split into two parts – a Swiss 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 (see below). | UBS AG Shareholder Services P.O. Box CH-8098 Zurich, Switzerland | |||||||
UBS Transfer Agent For all Global Registered Share related queries in the USA. | Mellon Investor Services Overpeck Center 85 Challenger Road Ridgefield Park, NJ 07660, USA. | Telephone: +1 866 541 9689 Fax: +1 201 296 4801 Web: http://www.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. | ||||||||
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Profile
Information for Readers
You should read the discussion and analysis in the Group Financial Review and Review of Business Group Performance in conjunction with the UBS Group Financial Statements and the related notes, which are shown in pages 75 to 169 of this document.
Parent Bank
Accounting standards
Implementation of IAS 39
Profit and loss impact
Changes to shareholders’ equity
– | The opening balance of Unrealized gains/losses on available-for-sale investments was a net gain of CHF 1,577 million, net of taxes, due to unrealized mark-to-market gains on financial investments classified as available for sale which were principally attributable to private equity investments, but also included other financial investments held by the Group. | |
– | The opening balance of Changes in fair value of derivative instruments designated as cash flows hedges was a net loss of CHF 380 million, net of taxes, due to unrealized mark-to-market losses on derivatives designated as cash flow hedges. These losses were previously |
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UBS / SBC merger restructuring provision used
For the year ended | ||||||||||||||||||||||||||||
CHF million | Personnel | IT | Premises | Other | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||||
UBS Switzerland | 361 | 23 | 35 | 0 | 419 | 228 | 916 | |||||||||||||||||||||
UBS Asset Management | 2 | 0 | 0 | 0 | 2 | 7 | 15 | |||||||||||||||||||||
UBS Warburg | 0 | 0 | 0 | 0 | 0 | 0 | 348 | |||||||||||||||||||||
Corporate Center | 7 | 0 | 267 | 14 | 288 | 464 | 565 | |||||||||||||||||||||
Group total | 370 | 23 | 302 | 14 | 709 | 699 | 1,844 | |||||||||||||||||||||
Initial restructuring provision in 1997 | 7,000 | |||||||||||||||||||||||||||
Additional provision in 1999 | 300 | |||||||||||||||||||||||||||
Used in 1998 | 4,027 | |||||||||||||||||||||||||||
Used in 1999 | 1,844 | |||||||||||||||||||||||||||
Used in 2000 | 699 | |||||||||||||||||||||||||||
Used in 2001 | 709 | |||||||||||||||||||||||||||
Total used up to 31.12.2001 | 7,279 | |||||||||||||||||||||||||||
Released to the income statement | 21 | |||||||||||||||||||||||||||
Restructuring provision at 31.12.2001 | 0 | |||||||||||||||||||||||||||
recorded in the balance sheet as a part of deferred losses. |
Other changes to accounting presentation
PaineWebber merger
Restructuring provision
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Profile
31 December 2001, CHF 21 million of the restructuring provision remained and was released to the income statement.
Critical accounting policies
Financial instruments – fair value
10
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Alternatively, if we were to choose not to apply hedge accounting, the entire change in fair value 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 2001, this would have resulted in a pre-tax gain of CHF 240 million. We believe that not applying 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, although over the total life of a hedge the net effect of the two treatments is identical.
Financial investments – available for sale
Goodwill and other intangible assets
Allowances and provisions for credit losses
11
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Profile
Further details of our policies in this area are given in the Risk Analysis section of the UBS Handbook 2001/2002, on pages 61 to 76.
Securitizations and Special Purpose Entities
Principal types of SPE used by UBS
Equity compensation
12
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Deferred tax
Segment reporting
Significant financial events
– | Non-recurring | |
– | Event specific | |
– | Material at Group level | |
– | UBS-specific, not industry-wide |
– | During 2000, we recorded restructuring charges and provisions of CHF 290 million pre-tax relating to the integration of PaineWebber into UBS. | |
– | During 1999, we recognized pre-tax gains of CHF 1,490 million on the sale of our 25% stake in Swiss Life/Rentenanstalt; CHF 110 |
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Profile
Significant Financial Events
CHF million | %changefrom | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Operating income as reported | 37,114 | 36,402 | 28,425 | 2 | ||||||||||||
Julius Baer registered shares divestment | (110 | ) | ||||||||||||||
International Global Trade Finance divestment | (200 | ) | ||||||||||||||
Swiss Life / Rentenanstalt divestment | (1,490 | ) | ||||||||||||||
LTCM gain | (38 | ) | ||||||||||||||
Adjusted operating income | 37,114 | 36,402 | 26,587 | 2 | ||||||||||||
Operating expenses as reported | 30,396 | 26,203 | 20,532 | 16 | ||||||||||||
US Global Settlement Fund provision | (150 | ) | (154 | ) | ||||||||||||
Pension Fund Accounting credit | 456 | |||||||||||||||
UBS / SBC Restructuring provision | (300 | ) | ||||||||||||||
PaineWebber integration costs | (290 | ) | ||||||||||||||
Adjusted operating expenses | 30,396 | 25,763 | 20,534 | 18 | ||||||||||||
Adjusted operating profit before tax and minority interests | 6,718 | 10,639 | 6,053 | (37 | ) | |||||||||||
Tax expense | 1,401 | 2,320 | 1,686 | (40 | ) | |||||||||||
Tax effect of significant financial events | 100 | (352 | ) | |||||||||||||
Adjusted tax expense | 1,401 | 2,420 | 1,334 | (42 | ) | |||||||||||
Minority interests | (344 | ) | (87 | ) | (54 | ) | 295 | |||||||||
Adjusted net profit | 4,973 | 8,132 | 4,665 | (39 | ) | |||||||||||
Adjusted net profit before goodwill | 6,296 | 8,799 | 5,005 | (28 | ) | |||||||||||
million on the disposal of Julius Baer registered shares; CHF 200 million on the sale of our international Global Trade Finance business; and CHF 38 million from our residual holding in Long Term Capital Management. | ||
– | In fourth quarter 1999, we recognized a one-time credit of CHF 456 million in connection with excess employer pre-payments to staff pension funds. | |
– | In fourth quarter 1999, UBS recognized an additional pre-tax restructuring charge of CHF 300 million in respect of the 1998 merger between Union Bank of Switzerland and Swiss Bank Corporation. | |
– | During 1998, we established a provision of CHF 842 million in connection with the US Global Settlement of World War II related claims. We recognized additional pre-tax provisions relating to this claim of CHF 154 million in 1999 and CHF 150 million in 2000. |
Risk factors
Competitive forces
14
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Fluctuations in currency exchange rates and interest rates
Operational risks
15
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16
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17
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Group Financial Review
Group Results
Group Results
2001
UBS made significant progress in 2001, successfully integrating UBS PaineWebber, building our European wealth management business and expanding our presence in corporate finance, particularly in the US. Our clients invested substantial net new money through our private client and asset management businesses, and we significantly improved our investment banking market share. It has been a challenging year for us financially, with a difficult market environment depressing trading returns, transaction volumes, and private equity valuations, in stark contrast to the buoyant climate in 2000. Despite the markets, relative operational performance in our core businesses has remained strong and we have benefited from our prudent attitude to risk and careful cost control.
Group targets
– | We seek to increase the value of UBS by achieving a sustainable, after-tax return on equity of 15–20%, across periods of varying market conditions. |
– | We aim to increase shareholder value through double-digit average annual percentage growth of basic earnings per share (EPS), across periods of varying market conditions. |
– | Through cost reduction and earnings enhancement initiatives, we aim to reduce UBS’s cost/income ratio to a level that compares positively with best-in-class competitors. |
– | We aim to achieve a clear growth trend in net new money in the private client businesses (Private Banking and Private Clients). |
– | Our return on equity for 2001 was 14.8%, only just below our target range of 15–20%. |
UBS Group Performance against Targets
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
RoE (%) | ||||||||||||
as reported | 11.7 | 21.5 | 22.4 | |||||||||
before goodwill and adjusted for significant financial events1 | 14.8 | 24.3 | 18.2 | |||||||||
Basic EPS (CHF) | ||||||||||||
as reported | 3.93 | 6.44 | 5.07 | |||||||||
before goodwill and adjusted for significant financial events1 | 4.97 | 7.28 | 4.12 | |||||||||
Cost / income ratio (%) | ||||||||||||
as reported | 80.8 | 72.2 | 69.9 | |||||||||
before goodwill and adjusted for significant financial events1 | 77.3 | 69.2 | 73.3 | |||||||||
Net new money, private client units (CHF bn)2,3 | ||||||||||||
UBS Switzerland – Private Banking | 22.5 | 2.8 | 2.3 | |||||||||
UBS Warburg – Private Clients | 36.0 | 15.2 | 2.0 | |||||||||
Total | 58.5 | 18.0 | 4.3 | |||||||||
1 | Excludes the amortization of goodwill and other intangible assets. | |
2 | Excludes interest and dividend income. | |
3 | Calculated using the former definition of assets under management in 2000 and 1999. |
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Although this is lower than the 24.3% that we achieved in 2000, it represents a solid performance when set in the context of the trading environment. Our return on equity in 2000 was boosted by extremely high returns in the exuberant markets of the first half-year, while this year has seen much weaker economic and stock market performance combined with higher average equity resulting from the acquisition of PaineWebber in fourth quarter 2000.
– | Basic earnings per share fell 32% to CHF 4.97, a level still 21% higher than we achieved in 1999. Outstanding shares started 2001 higher than in most of 2000, as a result of issuance to fund the merger with PaineWebber, but our continued buy-back program meant that by 31 December 2001 they were again below the pre-merger level. |
– | The cost/income ratio for the year rose from 69.2% to 77.3%, reflecting lower revenues, the poor performance of our private equity portfolio this year and the influence of the relatively high cost/income ratio typical of |
UBS PaineWebber’s business. Despite this rise, operating expenses remained under tight control, with decreases from 2000 levels in UBS Switzerland’s Private Banking and Private and Corporate Clients business units and UBS Warburg’s Corporate and Institutional Clients business unit, and a clear reduction through the year in UBS Warburg’s Private Clients business unit.
Our disciplined approach to both compensation and non-personnel costs allows us to continue investing in the future growth of our key businesses. The percentage of revenue which we dedicate to rewarding our staff has remained almost unchanged since last year in our most important businesses, reflecting a substantial decrease in bonus payments.
Our asset gathering activities have delivered very strong results this year, with inflows in the private client units (Private Banking and Private Clients) of CHF 58.5 billion during 2001, compared to CHF 18.0 billion in 2000. Over the whole Group, we attracted a total of
19
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Group Financial Review
Group Results
Invested Assets
Net new | Net new | |||||||||||||||
money2 | money2,3 | |||||||||||||||
CHF billion | 31.12.01 | 31.12.001 | 2001 | 2000 | ||||||||||||
UBS Group | 2,457 | 2,452 | ||||||||||||||
UBS Switzerland | ||||||||||||||||
Private and Corporate Clients | 320 | 345 | 8.5 | 0.4 | ||||||||||||
Private Banking | 682 | 691 | 22.5 | 2.8 | ||||||||||||
UBS Asset Management | ||||||||||||||||
Institutional | 328 | 323 | 6.2 | (70.8 | ) | |||||||||||
Mutual funds | 344 | 319 | 28.7 | 2.9 | ||||||||||||
UBS Warburg | ||||||||||||||||
Private Clients | 782 | 773 | 36.0 | 15.2 | ||||||||||||
UBS Capital | 1 | 1 | 0.1 | |||||||||||||
1 | Calculated using the new definition of invested assets. | |
2 | Excludes interest and dividend income. | |
3 | Calculated using the former definition of assets under management. |
CHF 102.0 billion in net new money, as clients increasingly value the quality of our advice and the breadth and depth of our wealth management capabilities.
Net profit
Operating income
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Net Interest and Trading Income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Net interest income | 8,041 | 8,130 | 5,909 | (1 | ) | |||||||||||
Net trading income | 8,802 | 9,953 | 7,719 | (12 | ) | |||||||||||
Total net interest and trading income | 16,843 | 18,083 | 13,628 | (7 | ) | |||||||||||
Breakdown by business activity: | ||||||||||||||||
Net income from interest margin products | 5,694 | 5,430 | 5,139 | 5 | ||||||||||||
Net income from trading activities | 11,529 | 12,642 | 8,200 | (9 | ) | |||||||||||
Net income from treasury activities | 1,424 | 762 | 628 | 87 | ||||||||||||
Other1 | (1,804 | ) | (751 | ) | (339 | ) | (140 | ) | ||||||||
Total net interest and trading income | 16,843 | 18,083 | 13,628 | (7 | ) | |||||||||||
1 | Principally goodwill funding costs. |
In order to provide a better explanation of the movements in net interest income and net trading income, we produce the disclosure shown above which sums net interest income and net trading income, and then analyzes the total according to the business activities which gave rise to the income, rather than by the type of income generated.
– | increased income from our invested equity, as a result of the expansion of our capital base since the PaineWebber merger, and changes in the investment portfolio’s maturity structure leading to an increase in average interest rates; |
– | and improved currency management results due to introduction of a new economic hedging strategy and some one-off gains. |
Actual IAS Credit Loss Expense (Recovery)
CHF million | ||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
UBS Switzerland | 123 | (695 | ) | 965 | ||||||||
UBS Asset Management | 0 | 0 | 0 | |||||||||
UBS Warburg | 375 | 565 | 0 | |||||||||
Corporate Center | (9 | ) | ||||||||||
Total | 498 | (130 | ) | 956 | ||||||||
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Group Financial Review
Group Results
Net Fee and Commission Income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Underwriting fees | 2,158 | 1,434 | 905 | 50 | ||||||||||||
Corporate finance fees | 1,339 | 1,772 | 1,298 | (24 | ) | |||||||||||
Brokerage fees1 | 6,445 | 5,742 | 3,934 | 12 | ||||||||||||
Investment fund fees | 4,276 | 2,821 | 1,915 | 52 | ||||||||||||
Fiduciary fees | 355 | 351 | 317 | 1 | ||||||||||||
Custodian fees | 1,356 | 1,439 | 1,583 | (6 | ) | |||||||||||
Portfolio and other management and advisory fees1 | 4,650 | 3,666 | 2,612 | 27 | ||||||||||||
Insurance-related and other fees1 | 538 | 111 | 57 | 385 | ||||||||||||
Total security trading and investment activity fees | 21,117 | 17,336 | 12,621 | 22 | ||||||||||||
Credit-related fees and commissions | 307 | 310 | 372 | (1 | ) | |||||||||||
Commission income from other services | 946 | 802 | 765 | 18 | ||||||||||||
Total fee and commission income | 22,370 | 18,448 | 13,758 | 21 | ||||||||||||
Brokerage fees paid | 1,281 | 1,084 | 795 | 18 | ||||||||||||
Other | 878 | 661 | 356 | 33 | ||||||||||||
Total fee and commission expense | 2,159 | 1,745 | 1,151 | 24 | ||||||||||||
Net fee and commission income | 20,211 | 16,703 | 12,607 | 21 | ||||||||||||
1 | Fee and commission income from insurance products now reported in Insurance-related and other fees was previously reported in Brokerage fees and in Portfolio and other management and advisory fees. Prior years have been restated. |
and challenging environment we have focused on ensuring that our counterparty ratings are rapidly adjusted to reflect the changing economic situation. At the same time, we have increased the frequency of sector and geographic rating reviews.
22
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whole of 2001. The mortgage-backed securities business in the US has also benefited from the combination of UBS’s franchise and capital strength with existing PaineWebber expertise. UBS Warburg ranked first in US residential mortgage-backed securities in 2001, according to Thomson Financial Data.
Operating expenses
23
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Group Financial Review
Group Results
Headcount1
(full time equivalents) | 31.12.01 | 31.12.00 | Change in % | |||||||||
UBS Switzerland | 29,204 | 30,025 | (3 | ) | ||||||||
Private and Corporate Clients | 19,938 | 21,100 | (6 | ) | ||||||||
Private Banking | 9,266 | 8,925 | 4 | |||||||||
UBS Asset Management | 3,281 | 2,860 | 15 | |||||||||
UBS Warburg | 36,368 | 37,205 | (2 | ) | ||||||||
Corporate and Institutional Clients | 15,562 | 15,262 | 2 | |||||||||
UBS Capital | 128 | 129 | (1 | ) | ||||||||
Private Clients | 20,678 | 21,814 | (5 | ) | ||||||||
Corporate Center | 1,132 | 986 | 15 | |||||||||
Group total | 69,985 | 71,076 | (2 | ) | ||||||||
thereof: Switzerland | 29,163 | 30,095 | (3 | ) | ||||||||
1 | The Group headcount does not include the Klinik Hirslanden AG headcount of 2,450 at 31 December 2001 and 1,839 at 31 December 2000. |
Personnel expenses in 2001 reflect considerable reductions in bonus and performance-related compensation, with average variable compensation per head down 23%, ensuring that overall compensation ratios for the year were kept in line with 2000’s ratio in our core businesses. However, the inclusion of CHF 5,178 million of PaineWebber personnel expenses more than offset the reduction in performance-related pay, bringing the total to CHF 19,828 million, 16% up from 2000. Approximately 43% of this year’s personnel expenses were bonus or other variable compensation, down from 48% last year.
PaineWebber merger-related costs
24
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Dividend
Balance sheet
Cash flows
25
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Group Financial Review
Group Results
CHF 6,038 million for treasury shares and treasury share contract activity as well as CHF 683 million for capital repayment.
Outlook 2002
2000
Group targets
Net profit
Operating income
26
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27
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Group Financial Review
Group Results
Custodian fees and Portfolio and other management and advisory fees increased by a total of CHF 910 million, or 22%, from 1999, due to higher asset-related fees in 2000 and the inclusion of PaineWebber and the new O’Connor business.
Operating expenses
UBS Group’s performance without the impact of PaineWebber
28
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Earnings Adjusted for Significant Financial Events and the Estimated Impact of the PaineWebber Merger
CHF million, except where indicated | % change from | |||||||||||
For the year ended | 31.12.00 | 31.12.99 | 31.12.99 | |||||||||
Operating income | 35,309 | 26,587 | 33 | |||||||||
Operating expenses | 24,319 | 20,534 | 18 | |||||||||
Operating profit before tax | 10,990 | 6,053 | 82 | |||||||||
Net profit | 8,403 | 4,665 | 80 | |||||||||
Cost / income ratio before goodwill (%) | 67.6 | 73.3 | ||||||||||
Basic earnings per share before goodwill (CHF) | 7.48 | 4.12 | 82 | |||||||||
Diluted earnings per share before goodwill (CHF) | 7.39 | 4.09 | 81 | |||||||||
Return on shareholders’ equity before goodwill (%) | 27.5 | 18.2 | ||||||||||
Clients unit. This was carried out very soon after the merger was completed on 3 November 2000, with staff and revenues completely integrated into the existing UBS Warburg structure. It is therefore not possible to identify clearly the specific impact of the capital markets business on results. However, the remaining PaineWebber businesses were reported as a separate business unit: US Private Clients. It is possible therefore to distinguish their contribution to Group profits. If additional adjustments are made for: goodwill amortization, funding costs, the share issuance, borrowing and subsequent repurchase, restructuring costs, and retention payments; it is possible to make an approximate estimate of the underlying performance of UBS for 2000.
Par value reduction
Cash flows
29
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30
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31
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Review of Business Group Performance
Introduction
Introduction
Reporting by Business Unit1
Private and | ||||||||||||||||
CHF million | Corporate Clients | Private Banking | ||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | ||||||||||||
Income | 7,161 | 7,443 | 6,314 | 6,928 | ||||||||||||
Credit loss expense / recovery2 | (576 | ) | (759 | ) | (28 | ) | (26 | ) | ||||||||
Total operating income | 6,585 | 6,684 | 6,286 | 6,902 | ||||||||||||
Personnel expenses | 2,988 | 3,187 | 1,776 | 1,956 | ||||||||||||
General and administrative expenses | 991 | 1,058 | 1,609 | 1,561 | ||||||||||||
Depreciation | 459 | 419 | 157 | 142 | ||||||||||||
Amortization of goodwill and other intangible assets | 0 | 27 | 41 | 43 | ||||||||||||
Total operating expenses | 4,438 | 4,691 | 3,583 | 3,702 | ||||||||||||
Business unit performance before tax | 2,147 | 1,993 | 2,703 | 3,200 | ||||||||||||
Business unit performance before tax and goodwill3 | 2,147 | 2,020 | 2,744 | 3,243 | ||||||||||||
Cost income ratio before goodwill (%)3,4 | 62 | 63 | 56 | 53 | ||||||||||||
Invested assets | 320 | 345 | 682 | 691 | ||||||||||||
Net new money5 | 8.5 | 0.4 | 22.5 | 2.8 | ||||||||||||
Headcount | 19,938 | 21,100 | 9,266 | 8,925 | ||||||||||||
1 | Figures for 2000 have been restated to reflect the current business structure of the Group. All figures have been adjusted for significant financial events. | |
2 | In management accounts, statistically derived adjusted expected credit loss rather than the IAS actual net credit loss expense is reported in the business units. See Note 2 to the Financial Statements for further details. | |
3 | Excludes the amortization of goodwill and other intangible assets. | |
4 | Operating expenses/operating income before credit loss expense. | |
5 | Excludes dividend and interest income. Figures for 2000 are calculated using the former definition of assets under management. |
Management accounting
Changes to disclosure since 2000
Business unit structure
32
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Corporate and | ||||||||||||||||||||||||
UBS Asset Management | Institutional Clients | UBS Capital | ||||||||||||||||||||||
31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | |||||||||||||||||||
2,110 | 1,953 | 16,011 | 18,033 | (868 | ) | 368 | ||||||||||||||||||
0 | 0 | (112 | ) | (243 | ) | 0 | 0 | |||||||||||||||||
2,110 | 1,953 | 15,899 | 17,790 | (868 | ) | 368 | ||||||||||||||||||
1,003 | 880 | 8,339 | 9,284 | 96 | 142 | |||||||||||||||||||
564 | 439 | 2,705 | 2,779 | 66 | 49 | |||||||||||||||||||
46 | 49 | 454 | 555 | 2 | 2 | |||||||||||||||||||
266 | 263 | 145 | 149 | 0 | 2 | |||||||||||||||||||
1,879 | 1,631 | 11,643 | 12,767 | 164 | 195 | |||||||||||||||||||
231 | 322 | 4,256 | 5,023 | (1,032 | ) | 173 | ||||||||||||||||||
497 | 585 | 4,401 | 5,172 | (1,032 | ) | 175 | ||||||||||||||||||
76 | 70 | 72 | 70 | |||||||||||||||||||||
672 | 642 | 1 | 1 | |||||||||||||||||||||
34.9 | (67.9 | ) | ||||||||||||||||||||||
3,281 | 2,860 | 15,562 | 15,262 | 128 | 129 | |||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
Private Clients | Corporate Center | |||||||||||||||
31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | |||||||||||||
6,969 | 1,321 | 678 | 358 | |||||||||||||
(18 | ) | (3 | ) | 236 | 1,161 | |||||||||||
6,951 | 1,318 | 914 | 1,519 | |||||||||||||
5,080 | 1,106 | 546 | 490 | |||||||||||||
1,489 | 355 | 207 | 281 | |||||||||||||
124 | 42 | 372 | 320 | |||||||||||||
0 | 1 | 25 | 44 | |||||||||||||
6,693 | 1,504 | 1,150 | 1,135 | |||||||||||||
258 | (186 | ) | (236 | ) | 384 | |||||||||||
258 | (185 | ) | (211 | ) | 428 | |||||||||||
96 | 114 | |||||||||||||||
782 | 773 | |||||||||||||||
36.0 | 15.2 | |||||||||||||||
20,678 | 21,814 | 1,132 | 986 | |||||||||||||
for the mutual funds and institutional businesses. In addition, UBS Asset Management now includes Brinson Advisors (formerly Mitchell Hutchins), whose results were previously reported in UBS Warburg’s US Private Clients business unit.
33
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Review of Business Group Performance
Introduction
reorganized our business unit reporting with effect from first quarter 2001.
Client assets reporting
– | Client assets represents all client assets managed by or deposited with UBS. |
– | Invested assets is more restricted and includes all client assets managed by or deposited with UBS for investment purposes. |
Credit loss expense
34
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Business Group Credit Loss Charge
CHF million | UBS | UBS | UBS Asset | |||||||||||||
For the year ended 31.12.01 | Switzerland | Warburg | Management | Total | ||||||||||||
Actuarial expected loss | 722 | 168 | 0 | 890 | ||||||||||||
Deferred releases | (118 | ) | (38 | ) | 0 | (156 | ) | |||||||||
Credit loss expense charged to the Business Groups | 604 | 130 | 0 | 734 | ||||||||||||
IAS actual credit loss expense | 123 | 375 | 0 | 498 | ||||||||||||
Balancing item charged as Credit loss expense in Corporate Center | (236) |
pates will arise from today’s transactions that may become impaired in future. In order to manage exposure to credit risk more effectively, we price transactions with a view to earning – over time – sufficient income to compensate for the losses that are expected to be caused by value adjustments for impaired assets. The basis for measuring these inherent risks in the credit portfolios is the concept of “actuarial expected loss” (see further page 62 in the Risk Analysis section of the UBS Handbook 2001/2002).
Key performance indicators
Reconciliation of Business Group Credit Loss Charge to IAS Actual Credit Loss Expense/(Recovery)
�� | ||||||||||||||||||||||||
CHF million | Credit loss charge | IAS actual credit loss expense | ||||||||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||
UBS Switzerland | 604 | 785 | 1,071 | 123 | (695 | ) | 965 | |||||||||||||||||
UBS Asset Management | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
UBS Warburg | 130 | 246 | 333 | 375 | 565 | 0 | ||||||||||||||||||
Corporate Center | (9 | ) | ||||||||||||||||||||||
Total | 734 | 1,031 | 1,404 | 498 | (130 | ) | 956 | |||||||||||||||||
Balancing item in Corporate Center | (236 | ) | (1,161 | ) | (448 | ) | ||||||||||||||||||
35
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Review of Business Group Performance
Introduction
Indicative Tax Rates
Tax rate | ||||||||
Pre-goodwill | Post-goodwill | |||||||
UBS Switzerland | 20 | 20 | ||||||
Private and Corporate Clients | 22 | 22 | ||||||
Private Banking | 19 | 19 | ||||||
UBS Asset Management | 23 | 33 | ||||||
UBS Warburg | 39 | 68 | ||||||
Corporate and Institutional Clients | 32 | 33 | ||||||
US Private Clients | 37 | 37 | ||||||
UBS Capital | 4 | 4 | ||||||
ment have a clear responsibility to lead their businesses towards achieving success in the Group’s key value drivers and avoids any risk of managing to purely internal performance measures.
Business Group tax rates
36
Table of Contents
The following changes will be implemented in our financial disclosure with effect from the First Quarter Report 2002. They do not apply to the Business Group disclosures in this Financial Report – details are provided here to help readers who may read our future reports.
Accounting for goodwill under US GAAP
37
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Review of Business Group Performance
UBS Switzerland
UBS Switzerland
“UBS Switzerland has completed another successful year, with the launch of the European wealth management initiative and very strong progress in asset gathering.”
Stephan Haeringer
Business Group Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.001 | 31.12.991 | 31.12.00 | ||||||||||||
Income | 13,475 | 14,371 | 12,884 | (6 | ) | |||||||||||
Credit loss expense2 | (604 | ) | (785 | ) | (1,071 | ) | (23 | ) | ||||||||
Total operating income | 12,871 | 13,586 | 11,813 | (5 | ) | |||||||||||
Personnel expenses | 4,764 | 5,143 | 4,882 | (7 | ) | |||||||||||
General and administrative expenses | 2,600 | 2,699 | 2,450 | (4 | ) | |||||||||||
Depreciation | 616 | 633 | 475 | (3 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 41 | 70 | 38 | (41 | ) | |||||||||||
Total operating expenses | 8,021 | 8,545 | 7,845 | (6 | ) | |||||||||||
Business Group performance before tax | 4,850 | 5,041 | 3,968 | (4 | ) | |||||||||||
Business Group performance before tax and goodwill4 | 4,891 | 5,111 | 4,006 | (4 | ) | |||||||||||
Additional information | ||||||||||||||||
Regulatory equity used (average) | 9,300 | 10,550 | 10,150 | (12 | ) | |||||||||||
Cost / income ratio (%)5 | 60 | 59 | 61 | |||||||||||||
Cost / income ratio before goodwill (%)4,5 | 59 | 59 | 61 | |||||||||||||
38
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Business Group Reporting Adjusted for Significant Financial Events
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.001 | 31.12.991 | 31.12.00 | ||||||||||||
Income | 13,475 | 14,371 | 12,884 | (6 | ) | |||||||||||
Credit loss expense2 | (604 | ) | (785 | ) | (1,071 | ) | (23 | ) | ||||||||
Total operating income | 12,871 | 13,586 | 11,813 | (5 | ) | |||||||||||
Personnel expenses | 4,764 | 5,143 | 4,882 | (7 | ) | |||||||||||
General and administrative expenses | 2,600 | 2,619 | 3 | 2,450 | (1 | ) | ||||||||||
Depreciation | 616 | 561 | 3 | 475 | 10 | |||||||||||
Amortization of goodwill and other intangible assets | 41 | 70 | 38 | (41 | ) | |||||||||||
Total operating expenses | 8,021 | 8,393 | 7,845 | (4 | ) | |||||||||||
Business Group performance before tax | 4,850 | 5,193 | 3,968 | (7 | ) | |||||||||||
Business Group performance before tax and goodwill4 | 4,891 | 5,263 | 4,006 | (7 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost / income ratio (%)5 | 60 | 58 | 61 | |||||||||||||
Cost / income ratio before goodwill (%)4,5 | 59 | 58 | 61 | |||||||||||||
1 | The 2000 and 1999 figures have been restated to reflect the restructuring of the Group on 1 January 2001. | |
2 | In management accounts, statistically derived adjusted expected loss rather than the net IAS actual credit loss is reported in the business units (see Note 2 of the Financial Statements). | |
3 | Excludes Significant Financial Events: General and administrative expenses, CHF 80 million, Depreciation, CHF 72 million for the PaineWebber integration. | |
4 | Excludes the amortization of goodwill and other intangible assets. | |
5 | Operating expenses / operating income before credit loss expense. |
39
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Review of Business Group Performance
UBS Switzerland
Private and Corporate Clients
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Individual clients | 4,532 | 5,026 | 4,553 | (10 | ) | |||||||||||
Corporate clients | 1,891 | 1,975 | 1,855 | (4 | ) | |||||||||||
Risk transformation and capital management | 358 | 307 | 330 | 17 | ||||||||||||
Operations | 242 | 205 | 313 | 18 | ||||||||||||
Other | 138 | (70 | ) | 142 | ||||||||||||
Income | 7,161 | 7,443 | 7,193 | (4 | ) | |||||||||||
Credit loss expense1 | (576 | ) | (759 | ) | (1,050 | ) | (24 | ) | ||||||||
Total operating income | 6,585 | 6,684 | 6,143 | (1 | ) | |||||||||||
Personnel expenses | 2,988 | 3,187 | 3,363 | (6 | ) | |||||||||||
General and administrative expenses | 991 | 1,058 | 1,123 | (6 | ) | |||||||||||
Depreciation | 459 | 419 | 384 | 10 | ||||||||||||
Amortization of goodwill and other intangible assets | 0 | 27 | 2 | (100 | ) | |||||||||||
Total operating expenses | 4,438 | 4,691 | 4,872 | (5 | ) | |||||||||||
Business unit performance before tax | 2,147 | 1,993 | 1,271 | 8 | ||||||||||||
Business unit performance before tax and goodwill2 | 2,147 | 2,020 | 1,273 | 6 | ||||||||||||
KPI’s | ||||||||||||||||
Invested assets (CHF billion) | 320 | 345 | 4393 | (7 | ) | |||||||||||
Net new money (CHF billion)4,5 | 8.5 | 0.4 | ||||||||||||||
Cost / income ratio (%)6 | 62 | 63 | 68 | |||||||||||||
Cost / income ratio before goodwill (%)2,6 | 62 | 63 | 68 | |||||||||||||
Non-performing loans / gross loans outstanding (%) | 4.6 | 5.3 | 6.8 | |||||||||||||
Impaired loans / gross loans outstanding (%) | 7.4 | 9.1 | 11.4 | |||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Client assets (CHF billion) | 640 | |||||||||||||||
Regulatory equity used (average) | 7,350 | 8,550 | 8,550 | (14 | ) | |||||||||||
Headcount (full time equivalents) | 19,938 | 21,100 | 24,098 | (6 | ) | |||||||||||
1 | In management accounts, statistically derived adjusted expected loss rather than the net IAS actual credit loss is reported in the business units (see Note 2 of the Financial Statements). | |
2 | Excludes the amortization of goodwill and other intangible assets. | |
3 | Calculated using the former definition of assets under management. | |
4 | Calculated using the former definition of assets under management up to and including second quarter 2001. | |
5 | Excludes dividend and interest income. | |
6 | Operating expenses / operating income before credit loss expense. |
Components of Operating Income
Private and Corporate Clients derives its operating income principally from:
– | net interest income from its loan portfolio and customer deposits; | |
– | fees for investment management services; and | |
– | transaction fees. |
As a result, Private and Corporate Clients’ operating income is affected by movements in interest rates, fluctuations in invested assets, client activity levels, investment performance and changes in market conditions.
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Significant Financial Events
2001
Key performance Indicators
ber 2000 to CHF 152 billion at 31 December 2001, driven by reductions in the more volatile business with banks and the further reduction in the recovery portfolio from CHF 15 billion to CHF 12 billion.
Results
Operating income
41
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Review of Business Group Performance
UBS Switzerland
charged to the Business Groups, under which the difference between the actual IAS credit losses and the actuarial expected loss calculated for management reporting purposes is charged or credited back to the business units over a three year period, so that the risks and rewards over the cycle are better reflected in their results. Since actual credit losses in Private and Corporate Clients have recently been lower than the adjusted expected loss charge, this deferral process has also resulted in a lower adjusted expected loss charge (see page 35 for further details).
Operating expenses
Headcount
42
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2000
Key performance indicators
Results
Operating income
Both of Private and Corporate Clients’ two main client business areas recorded increases in their operating income in 2000 as compared to 1999.
– | Individual Clients: Operating income in 2000 was CHF 5,026 million, an increase of CHF 473 million, or 10%, from CHF 4,553 million in 1999. This was primarily due to increases in brokerage and investment fund fees resulting from increased investment activity, and minor gains on sales of subsidiaries and participations. | |
– | Corporate Clients:Operating income in 2000 was CHF 1,975 million, an increase of CHF 120 million, or 6%, from CHF 1,855 million in 1999, primarily due to higher interest income resulting from improved margins as well as increased fee and commission income. |
– | Risk Transformation and Capital Management:Income was CHF 307 million in 2000. This was a decrease of CHF 23 million, or 7%, from the CHF 330 million recorded in 1999, primarily as a result of the reduced average size of the recovery loan portfolio, managed by this unit. | |
– | Operations:Revenues in 2000 were CHF 205 million, a decrease of CHF 108 million, or 35%, from CHF 313 million in 1999. Operations revenues were affected by lower interest revenues as a result of reduced correspondent bank overdraft balances, partially offset by small one-off revenues from the revaluation of minority holdings in other companies. |
43
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Review of Business Group Performance
UBS Switzerland
Operating expenses
Headcount
44
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Private Banking
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.001 | 31.12.991 | 31.12.00 | ||||||||||||
Income | 6,314 | 6,928 | 5,691 | (9 | ) | |||||||||||
Credit loss expense2 | (28 | ) | (26 | ) | (21 | ) | 8 | |||||||||
Total operating income | 6,286 | 6,902 | 5,670 | (9 | ) | |||||||||||
Personnel expenses | 1,776 | 1,956 | 1,519 | (9 | ) | |||||||||||
General and administrative expenses | 1,609 | 1,561 | 3 | 1,327 | 3 | |||||||||||
Depreciation | 157 | 142 | 3 | 91 | 11 | |||||||||||
Amortization of goodwill and other intangible assets | 41 | 43 | 36 | (5 | ) | |||||||||||
Total operating expenses | 3,583 | 3,702 | 2,973 | (3 | ) | |||||||||||
Business unit performance before tax | 2,703 | 3,200 | 2,697 | (16 | ) | |||||||||||
Business unit performance before tax and goodwill4 | 2,744 | 3,243 | 2,733 | (15 | ) | |||||||||||
KPI’s | ||||||||||||||||
Invested assets (CHF billion) | 682 | 691 | 682 | 5 | (1 | ) | ||||||||||
Net new money (CHF billion)6 | 22.5 | 2.8 | 5 | 2.3 | 5 | |||||||||||
Gross margin on invested assets (bps)7 | 92 | 99 | 90 | (7 | ) | |||||||||||
Cost / income ratio (%)8 | 57 | 53 | 52 | |||||||||||||
Cost / income ratio before goodwill (%)4,8 | 56 | 53 | 52 | |||||||||||||
Cost / income ratio before goodwill and excluding the European Wealth Management Initiative (%)4,8 | 49 | |||||||||||||||
Client advisors (full time equivalents) | 2,346 | 1,744 | 35 | |||||||||||||
KPI’s for the European Wealth Management Initiative | ||||||||||||||||
Income | 140 | |||||||||||||||
Invested assets (CHF billion) | 16 | |||||||||||||||
Net new money (CHF billion)6 | 5.6 | |||||||||||||||
Client advisors (full time equivalents) | 370 | |||||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Client assets (CHF billion) | 840 | |||||||||||||||
Regulatory equity used (average) | 1,950 | 2,000 | 1,600 | (3 | ) | |||||||||||
Headcount (full time equivalents) | 9,266 | 8,925 | 8,131 | 4 | ||||||||||||
1 | The 2000 and 1999 figures have been restated to reflect the restructuring of the Group on 1 January 2001. | |
2 | In management accounts, statistically derived adjusted expected loss rather than the net IAS actual credit loss is reported in the business units (see Note 2 of the Financial Statements). | |
3 | Excludes Significant Financial Events: General and administrative expenses, CHF 80 million, Depreciation, CHF 72 million for the PaineWebber integration. | |
4 | Excludes the amortization of goodwill and other intangible assets. | |
5 | Calculated using the former definition of assets under management. | |
6 | Excludes dividend and interest income. | |
7 | Income / average invested assets. | |
8 | Operating expenses / operating income before credit loss expense. |
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Review of Business Group Performance
UBS Switzerland
Components of Operating Income
Private Banking derives its operating income principally from:
– | fees for financial planning and wealth management services; | |
– | fees for investment management services; and | |
– | transaction-related fees. |
Private Banking’s fees are based on the market value of invested assets and the level of transaction-related activity. As a result, Private Banking’s 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.
Significant financial events
2001
Key performance indicators
Over the year from 31 December 2000, invested assets have fallen only 1%, despite the poor performance of securities markets, reflecting strong net new money growth and a relatively conservative asset mix.
The gross margin fell from 99 basis points in 2000 to 92 basis points in 2001, clearly reflecting reduced transaction volumes, especially compared to the exuberant markets of the early part of 2000.
The pre-goodwill cost/income ratio increased by three percentage points from 53% in 2000 to 56% in 2001, reflecting the costs of our invest-
46
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ments in the European wealth management initiative, and weaker transaction volumes.
European wealth management
tive – expanding our physical presence in the target markets. Hiring plans progressed well in 2001, with the number of client advisers in our five target countries rising to 370 at 31 December 2001, an increase of 208 for the year. A further 40 newly hired advisors started on 1 January 2002, bringing our total hiring in 2001 to 248, in line with our intention to recruit around 250 advisors a year.
Results
Operating income
47
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Review of Business Group Performance
UBS Switzerland
Operating expenses
Headcount
2000
Key performance indicators
Results
Operating income
Operating expenses
48
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Headcount
49
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Review of Business Group Performance
UBS Asset Management
UBS Asset Management
“A second straight year of successful relative investment performance provides a strong foundation for continued progress in 2002.”
John Fraser
Business Group Reporting
CHF million, except where indicated | % change from | ||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | |||||||||||||
Institutional fees | 1,007 | 1,119 | 857 | (10 | ) | ||||||||||||
Mutual funds fees | 1,103 | 834 | 512 | 32 | |||||||||||||
Total operating income | 2,110 | 1,953 | 1,369 | 8 | |||||||||||||
Personnel expenses | 1,003 | 880 | 516 | 14 | |||||||||||||
General and administrative expenses | 564 | 439 | 271 | 28 | |||||||||||||
Depreciation | 46 | 49 | 32 | (6 | ) | ||||||||||||
Amortization of goodwill and other intangible assets | 266 | 263 | 113 | 1 | |||||||||||||
Total operating expenses | 1,879 | 1,631 | 932 | 15 | |||||||||||||
Business Group performance before tax | 231 | 322 | 437 | (28 | ) | ||||||||||||
Business Group performance before tax and goodwill1 | 497 | 585 | 550 | (15 | ) | ||||||||||||
KPI’s | |||||||||||||||||
Cost / income ratio (%)2 | 89 | 84 | 68 | ||||||||||||||
Cost / income ratio before goodwill (%)1,2 | 76 | 70 | 60 | ||||||||||||||
Institutional | |||||||||||||||||
Invested assets (CHF billion) | 328 | 323 | 367 | 3 | 2 | ||||||||||||
Net new money (CHF billion)4 | 6.2 | (70.8 | )3 | (49.9 | )3 | ||||||||||||
Gross margin on invested assets (bps)5 | 32 | 34 | 24 | (6 | ) | ||||||||||||
Mutual funds | |||||||||||||||||
Invested assets (CHF billion) | 344 | 319 | 231 | 3 | 8 | ||||||||||||
Net new money (CHF billion)4 | 28.7 | 2.9 | 3 | (0.3 | )3 | ||||||||||||
Gross margin on invested assets (bps)5 | 33 | 36 | 25 | (8 | ) | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Client assets (CHF billion) | 672 | |||||||||||||||
Regulatory equity used (average) | 1,250 | 1,250 | 162 | 0 | ||||||||||||
Headcount (full time equivalents) | 3,281 | 2,860 | 2,576 | 15 | ||||||||||||
1 | Excludes the amortization of goodwill and other intangible assets. | |
2 | Operating expenses / operating income. | |
3 | Calculated using the former definition of assets under management. | |
4 | Excludes dividend and interest income. | |
5 | Income / average invested assets. |
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Components of Operating Income
UBS Asset Management generates most of its revenue from the asset management services it provides to institutional clients, and from the distribution of investment funds. Fees charged to institutional clients and on investment funds are based on the market value of invested assets and on successful investment performance. As a result, UBS Asset Management’s revenues are affected by changes in market levels as well as flows of client funds.
Significant Financial Events
2001
Key performance indicators
Institutional
Mutual funds
51
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Review of Business Group Performance
UBS Asset Management
52
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ness, income increased as a result of the new investment funds pricing structure introduced in 2001, the acquisition of RT Capital (renamed Brinson Canada) 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 Brinson Canada in third quarter.
2000
Key performance indicators
53
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Review of Business Group Performance
UBS Asset Management
Mutual funds
Investment performance in 2000
Results
Operating income
Operating expenses
54
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Headcount
55
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Review of Business Group Performance
UBS Warburg
UBS Warburg
“We have made excellent strategic progress in 2001, with increased share of fees in corporate finance and the successful merger with UBS PaineWebber.”
Markus Granziol
Business Group Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.001 | 31.12.991 | 31.12.00 | ||||||||||||
Income2 | 21,349 | 19,590 | 13,118 | 9 | ||||||||||||
Credit loss expense3 | (130 | ) | (246 | ) | (333 | ) | (47 | ) | ||||||||
Total operating income | 21,219 | 19,344 | 12,785 | 10 | ||||||||||||
Personnel expenses | 13,515 | 10,618 | 7,087 | 27 | ||||||||||||
General and administrative expenses | 4,260 | 3,196 | 2,538 | 33 | ||||||||||||
Depreciation | 580 | 606 | 644 | (4 | ) | |||||||||||
Amortization of goodwill and other intangible assets2 | 991 | 290 | 139 | 242 | ||||||||||||
Total operating expenses | 19,346 | 14,710 | 10,408 | 32 | ||||||||||||
Business Group performance before tax | 1,873 | 4,634 | 2,377 | (60 | ) | |||||||||||
Business Group performance before tax and goodwill6 | 2,864 | 4,924 | 2,516 | (42 | ) | |||||||||||
Additional information | ||||||||||||||||
Regulatory equity used (average) | 26,200 | 24,850 | 10,590 | 5 | ||||||||||||
Cost / income ratio (%)7 | 91 | 75 | 79 | |||||||||||||
Cost / income ratio before goodwill (%)6,7 | 86 | 74 | 78 | |||||||||||||
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Business Group Reporting Adjusted for Significant Financial Events
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.001 | 31.12.991 | 31.12.00 | ||||||||||||
Income2 | 21,349 | 19,590 | 12,9184 | 9 | ||||||||||||
Credit loss expense3 | (130 | ) | (246 | ) | (333 | ) | (47 | ) | ||||||||
Total operating income | 21,219 | 19,344 | 12,585 | 10 | ||||||||||||
Personnel expenses | 13,515 | 10,5325 | 7,087 | 28 | ||||||||||||
General and administrative expenses | 4,260 | 3,1835 | 2,538 | 34 | ||||||||||||
Depreciation | 580 | 5995 | 644 | (3 | ) | |||||||||||
Amortization of goodwill and other intangible assets2 | 991 | 290 | 139 | 242 | ||||||||||||
Total operating expenses | 19,346 | 14,604 | 10,408 | 32 | ||||||||||||
Business Group performance before tax | 1,873 | 4,740 | 2,177 | (60 | ) | |||||||||||
Business Group performance before tax and goodwill6 | 2,864 | 5,030 | 2,316 | (43 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost / income ratio (%)7 | 91 | 75 | 81 | |||||||||||||
Cost / income ratio before goodwill (%)6, 7 | 86 | 73 | 79 | |||||||||||||
1 | The 2000 and 1999 figures have been restated to reflect the restructuring of the Group on 1 January 2001. | |
2 | Goodwill funding costs of CHF 763 million (2000: CHF 132 million) and amortization of goodwill and other intangible assets of CHF 846 million (2000: CHF 138 million) in respect of the PaineWebber acquisition are included in UBS Warburg results but are not reflected in any of its individual business units. | |
3 | In management accounts, statistically derived adjusted expected loss rather than the net IAS actual credit loss is reported in the business units (see Note 2 of the Financial Statements). | |
4 | Excludes Significant Financial Events: Income, CHF 200 million for the sale of the international Global Trade Finance business. | |
5 | Excludes Significant Financial Events: Personnel expenses, CHF 86 million, General and administrative expenses, CHF 13 million and Depreciation, CHF 7 million, for the PaineWebber integration. | |
6 | Excludes the amortization of goodwill and other intangible assets. | |
7 | Operating expenses / operating income before credit loss expense. |
Goodwill costs
57
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Review of Business Group Performance
UBS Warburg
Corporate and Institutional Clients
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Corporate Finance | 2,544 | 2,701 | 2,054 | (6 | ) | |||||||||||
Equities | 6,655 | 10,429 | 5,724 | (36 | ) | |||||||||||
Fixed income and foreign exchange | 6,536 | 4,622 | 4,269 | 41 | ||||||||||||
Non-core business | 276 | 281 | 482 | 1 | (2 | ) | ||||||||||
Income | 16,011 | 18,033 | 12,529 | (11 | ) | |||||||||||
Credit loss expense2 | (112 | ) | (243 | ) | (330 | ) | (54 | ) | ||||||||
Total operating income | 15,899 | 17,790 | 12,199 | (11 | ) | |||||||||||
Personnel expenses3 | 8,339 | 9,284 | 4 | 6,861 | (10 | ) | ||||||||||
General and administrative expenses | 2,705 | 2,779 | 4 | 2,429 | (3 | ) | ||||||||||
Depreciation | 454 | 555 | 4 | 629 | (18 | ) | ||||||||||
Amortization of goodwill and other intangible assets | 145 | 149 | 134 | (3 | ) | |||||||||||
Total operating expenses | 11,643 | 12,767 | 10,053 | (9 | ) | |||||||||||
Business unit performance before tax | 4,256 | 5,023 | 2,146 | (15 | ) | |||||||||||
Business unit performance before tax and goodwill5 | 4,401 | 5,172 | 2,280 | (15 | ) | |||||||||||
KPI’s | ||||||||||||||||
Compensation ratio (%)6 | 52 | 51 | 55 | |||||||||||||
Cost / income ratio (%)7 | 73 | 71 | 80 | |||||||||||||
Cost / income ratio before goodwill (%)5,7 | 72 | 70 | 79 | |||||||||||||
Non-performing loans / gross loans outstanding (%) | 2.6 | 2.8 | 1.6 | |||||||||||||
Impaired loans / gross loans outstanding (%) | 5.4 | 5.6 | 3.4 | |||||||||||||
Average VaR (10-day 99%) | 252 | 242 | 213 | 4 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Client assets (CHF billion) | 108 | |||||||||||||||
Regulatory equity used (average) | 9,900 | 10,000 | 10,050 | (1 | ) | |||||||||||
Headcount (full time equivalents) | 15,562 | 15,262 | 12,694 | 2 | ||||||||||||
1 Excludes Significant Financial Events: Income, CHF 200 million for the sale of the international Global Trade Finance business.
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Components of Operating Income
The Corporate and Institutional Clients 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. |
As a result, Corporate and Institutional Clients’ operating income is affected by movements in market conditions, interest rate swings, the level of trading activity in primary and secondary markets and the extent of merger and acquisition activity. These and other factors have had, and may in the future have, a significant impact on results of operations from year to year.
Significant financial events
2001
Key performance indicators
59
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Review of Business Group Performance
UBS Warburg
Executive Board. The trades were successfully executed and the risk reduced to normal levels.
Results
finance we continued to outperform 2000 in terms of market share, with full year analysis showing us with a 4.5% share of fees, compared to 3.6% in 2000. Costs fell sharply to their lowest ever total.
Operating income
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Operating expenses
Headcount
2000
The results for Corporate and Institutional Clients include the costs and revenues for November and December 2000 of the former PaineWebber capital markets businesses, which were integrated into this business unit from the completion of the merger on 3 November 2000.
Key performance indicators
Results
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Review of Business Group Performance
UBS Warburg
Operating income
Non core income
Operating expenses
Headcount
62
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UBS Capital
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Total operating income / (loss) | (868 | ) | 368 | 315 | ||||||||||||
Personnel expenses | 96 | 142 | 105 | (32 | ) | |||||||||||
General and administrative expenses | 66 | 49 | 46 | 35 | ||||||||||||
Depreciation | 2 | 2 | 2 | 0 | ||||||||||||
Amortization of goodwill and other intangible assets | 0 | 2 | 5 | (100 | ) | |||||||||||
Total operating expenses | 164 | 195 | 158 | (16 | ) | |||||||||||
Business unit performance before tax | (1,032 | ) | 173 | 157 | ||||||||||||
Business unit performance before tax and goodwill1 | (1,032 | ) | 175 | 162 | ||||||||||||
KPI’s | ||||||||||||||||
Value creation (CHF billion) | (1.4 | ) | 0.6 | 0.6 | ||||||||||||
% change from | ||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Investment (CHF billion)2 | 5.0 | 5.5 | 3.0 | (9 | ) | |||||||||||
Additional information | ||||||||||||||||
Portfolio fair value (CHF billion) | 5.6 | 6.9 | 4.2 | (19 | ) | |||||||||||
Invested assets (CHF billion) | 1 | 1 | 0 | |||||||||||||
Regulatory equity used (average) | 800 | 600 | 340 | 33 | ||||||||||||
Headcount (full time equivalents) | 128 | 129 | 116 | (1 | ) |
1 | Excludes the amortization of goodwill and other intangible assets. | |
2 | Historic cost of investments made, less divestments and permanent impairments. |
Components of Operating Income
UBS Capital’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 UBS Capital is directly affected by the level of investment disposals that take 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. Write-downs of the value of its investments can negatively affect UBS Capital’s operating income.
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Review of Business Group Performance
UBS Warburg
Significant financial events
2001
Key performance indicators
Results
64
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2000
Key performance indicators
Results
Operating income
Operating expenses
65
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Review of Business Group Performance
UBS Warburg
Private Clients
Business Unit Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.012 | 31.12.001, 2 | 31.12.991 | 31.12.00 | ||||||||||||
Income | 6,969 | 1,321 | 74 | 428 | ||||||||||||
Credit loss expense3 | (18 | ) | (3 | ) | (3 | ) | 500 | |||||||||
Total operating income | 6,951 | 1,318 | 71 | 427 | ||||||||||||
Personnel expenses4 | 5,080 | 1,106 | 121 | 359 | ||||||||||||
General and administrative expenses | 1,489 | 355 | 63 | 319 | ||||||||||||
Depreciation | 124 | 42 | 13 | 195 | ||||||||||||
Amortization of goodwill and other intangible assets | 0 | 1 | 0 | (100 | ) | |||||||||||
Total operating expenses | 6,693 | 1,504 | 197 | 345 | ||||||||||||
Business unit performance before tax | 258 | (186 | ) | (126 | ) | |||||||||||
Business unit performance before tax and goodwill5 | 258 | (185 | ) | (126 | ) | |||||||||||
KPI’s | ||||||||||||||||
Invested assets (CHF billion) | 782 | 773 | 25 | 6 | 1 | |||||||||||
Net new money (CHF billion)7 | 36.0 | 15.2 | 6 | 2.0 | 6 | |||||||||||
Gross margin on invested assets (bps)8 | 90 | 72 | 35 | 25 | ||||||||||||
Cost / income ratio (%)9 | 96 | 114 | 266 | |||||||||||||
Cost / income ratio before goodwill (%)5, 9 | 96 | 114 | 266 | |||||||||||||
Cost / income ratio before goodwill and retention payments (%)5, 9 | 90 | 105 | ||||||||||||||
Recurring fees10 | 2,277 | 430 | 430 | |||||||||||||
Financial advisors (full time equivalents) | 8,870 | 8,871 | 0 | |||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Client assets (CHF billion) | 854 | |||||||||||||||
Regulatory equity used (average) | 1,750 | 2,750 | 200 | (36 | ) | |||||||||||
Headcount (full time equivalents) | 20,678 | 21,814 | 581 | (5 | ) | |||||||||||
1 The 2000 and 1999 figures have been restated to reflect the restructuring of the Group on 1 January 2001. | ||
2 Private Clients results include PaineWebber for 2001 and for 2000 from the date of acquisition, 3 November 2000. | ||
3 In management accounts, statistically derived adjusted expected loss rather than the net IAS actual credit loss is reported in the business units (see Note 2 of the Financial Statements). | ||
4 Includes retention payments in respect of the PaineWebber acquisition. 2001: CHF 436 million. 2000: CHF 117 million. | ||
5 Excludes the amortization of goodwill and other intangible assets. | ||
6 Calculated using the former definition of assets under management. | ||
7 Excludes interest and dividend income. | ||
8 Income / average invested assets. | ||
9 Operating expenses / operating income before credit loss expense. | ||
10 Asset based and advisory revenues including fees from mutual funds, wrap fee products and insurance products. |
Components of Operating Income
The Private Clients business unit 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, changes in market conditions, investment performance and inflows and outflows of client funds.
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Significant financial events
PaineWebber
2001
Comparisons of full year results reflect the very different scale of the UBS Warburg Private Clients business prior to the acquisition of PaineWebber in November 2000.
Key performance indicators
67
Table of Contents
Review of Business Group Performance
UBS Warburg
integration of UBS PaineWebber in November 2000. During 2001, recurring fees declined 6% to CHF 545 million in fourth quarter 2001 compared to CHF 580 in first quarter 2001, due to the effects of market depreciation on client assets – recurring fees are priced based on the asset level at the end of the prior quarter.
Results
Operating income
Operating expenses
68
Table of Contents
Headcount
2000
Results for 2000 reflect the inclusion of UBS PaineWebber only for the period from the merger, on 3 November 2000, until 31 December 2000.
Key performance indicators
Results
Operating income
Operating expenses
Headcount
69
Table of Contents
Review of Business Group Performance
Corporate Center
Corporate Center
Business Group Reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Income | 678 | 358 | 2,010 | 89 | ||||||||||||
Credit loss recovery1 | 236 | 1,161 | 448 | (80 | ) | |||||||||||
Total operating income | 914 | 1,519 | 2,458 | (40 | ) | |||||||||||
Personnel expenses | 546 | 522 | 92 | 5 | ||||||||||||
General and administrative expenses | 207 | 431 | 839 | (52 | ) | |||||||||||
Depreciation | 372 | 320 | 366 | 16 | ||||||||||||
Amortization of goodwill and other intangible assets | 25 | 44 | 50 | (43 | ) | |||||||||||
Total operating expenses | 1,150 | 1,317 | 1,347 | (13 | ) | |||||||||||
Business Group performance before tax | (236 | ) | 202 | 1,111 | ||||||||||||
Business Group performance before tax and goodwill2 | (211 | ) | 246 | 1,161 |
Additional information | % change from | |||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Regulatory equity used (average) | 6,200 | 8,450 | 7,850 | (27 | ) | |||||||||||
Headcount (full time equivalents) | 1,132 | 986 | 862 | 15 | ||||||||||||
Business Group Reporting Adjusted for Significant Financial Events3
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Income | 678 | 358 | 372 | 89 | ||||||||||||
Credit loss recovery1 | 236 | 1,161 | 448 | (80 | ) | |||||||||||
Total operating income | 914 | 1,519 | 820 | (40 | ) | |||||||||||
Personnel expenses | 546 | 490 | 548 | 11 | ||||||||||||
General and administrative expenses | 207 | 281 | 385 | (26 | ) | |||||||||||
Depreciation | 372 | 320 | 366 | 16 | ||||||||||||
Amortization of goodwill and other intangible assets | 25 | 44 | 50 | (43 | ) | |||||||||||
Total operating expenses | 1,150 | 1,135 | 1,349 | 1 | ||||||||||||
Business Group performance before tax | (236 | ) | 384 | (529 | ) | |||||||||||
Business Group performance before tax and goodwill2 | (211 | ) | 428 | (479 | ) |
1 In order to show the relevant Business Group performance over time, adjusted expected loss figures rather than the net IAS actual credit loss expenses are reported for all business units. The statistically derived adjusted expected losses reflect the inherent counterparty and country risks in the respective portfolios. The difference between the statistically derived adjusted expected loss figures and the net IAS actual credit loss expenses recorded at Group level is reported in the Corporate Center (see Note 2 to the Financial Statements).
2 Excludes the amortization of goodwill and other intangible assets.
3 Excludes Significant Financial Events: Income, year ended 31 December 1999, CHF 38 million from the Long Term Capital Management (LTCM) fund, CHF 1,490 million for the sale of our 25% stake in Swiss Life / Rentenanstalt and CHF 110 million for the sale of Julius Baer registered shares. Personnel expenses, year ended 31 December 2000, CHF 32 million for the PaineWebber integration. General and administrative expenses, year ended 31 December 2000, CHF 150 million net additional provision relating to the US Global Settlement. Personnel expenses, year ended 31 December 1999, CHF 456 million for the Pension Fund Accounting Credit. General and administrative expenses, year ended 31 December 1999, CHF 300 million for the UBS / SBC Restructuring Provision and CHF 154 million for the increase in the provision for the US Global Settlement.
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Significant financial events
– | Personnel expenses of CHF 32 million relating to the integration of PaineWebber into UBS in 2000. | |
– | Costs of CHF 154 million in 1999 and CHF 150 million in 2000 in General and administrative expenses in connection with the US Global Settlement of World War II related claims. | |
– | Operating income of CHF 1,490 million from the sale of UBS’s 25% stake in Swiss Life/Rentenanstalt, CHF 110 million from the sale of Julius Baer registered shares, and CHF 38 million from UBS’s residual holding in Long Term Capital Management L.P., all in 1999. | |
– | A credit to Personnel expenses in 1999 of CHF 456 million in connection with excess pension fund employer pre-payments. | |
– | Costs of CHF 300 million in General and administrative expenses in 1999 in respect of an additional restructuring charge relating to the 1998 merger between UBS and SBC. |
2001
Results
Operating income
Operating expenses
Headcount
2000
Results
Operating income
71
Table of Contents
Review of Business Group Performance
Corporate Center
omy was strong in 2000, leading to credit loss expenses below the statistically calculated expected level, and to a net write back of credit loss provisions of CHF 695 million, resulting in a credit of CHF 130 million at the Group level. Corporate Center’s credit loss recovery of CHF 1,161 million reflects the balancing item between this amount and the CHF 1,031 million expected loss charged to the business units.
Operating expenses
Headcount
72
Table of Contents
73
Table of Contents
74
Table of Contents
75
Table of Contents
UBS Group Financial Statements
Table of Contents
Financial Statements
Table of Contents
Financial Statements | 78 | |||||
UBS Group Income Statement | 78 | |||||
UBS Group Balance Sheet | 79 | |||||
UBS Group Statement of Changes in Equity | 80 | |||||
UBS Group Statement of Cash Flows | 82 | |||||
Notes to the Financial Statements | 83 | |||||
1 | Summary of Significant Accounting Policies | 83 | ||||
2a | Segment Reporting by Business Group | 92 | ||||
2b | Segment Reporting by Geographic Location | 95 | ||||
Income Statement | 96 | |||||
3 | Net Interest Income | 96 | ||||
4 | Net Fee and Commission Income | 96 | ||||
5 | Net Trading Income | 97 | ||||
6 | Other Income | 97 | ||||
7 | Personnel Expenses | 97 | ||||
8 | General and Administrative Expenses | 98 | ||||
9 | Earnings per Share (EPS) and Outstanding Shares | 98 | ||||
Balance Sheet: Assets | 99 | |||||
10a | Due from Banks and Loans to Customers | 99 | ||||
10b | Allowances and Provisions for Credit Losses | 100 | ||||
10c | Impaired Loans | 100 | ||||
10d | Non-Performing Loans | 101 | ||||
11 | Securities Borrowing, Securities Lending, Repurchase and Reverse Repurchase Agreements and Other Collateralized Transactions | 102 | ||||
12 | Trading Portfolio | 103 | ||||
13 | Financial Investments | 104 | ||||
14 | Investments in Associates | 106 | ||||
15 | Property and Equipment | 106 | ||||
16 | Goodwill and Other Intangible Assets | 107 | ||||
17 | Other Assets | 107 | ||||
Balance Sheet: Liabilities | 108 | |||||
18 | Due to Banks and Customers | 108 | ||||
19 | Debt Issued | 108 | ||||
20 | Other Liabilities | 114 | ||||
21 | Provisions, including Restructuring Provision | 114 | ||||
22 | Income Taxes | 116 | ||||
23 | Minority Interests | 118 | ||||
24 | Derivative Instruments | 118 |
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Off-Balance Sheet and other Information | 123 | |||||
25 | Pledged Assets | 123 | ||||
26 | Fiduciary Transactions | 123 | ||||
27 | Commitments and Contingent Liabilities | 124 | ||||
28 | Operating Lease Commitments | 125 | ||||
29 | Litigation | 126 | ||||
30 | Financial Instruments Risk Position | 127 | ||||
a) Interest Rate Risk | 127 | |||||
b) Credit Risk | 129 | |||||
(b)(i) On-balance sheet assets | 129 | |||||
(b)(ii) Off-balance sheet financial instruments | 130 | |||||
(b)(iii) Credit risk mitigation techniques | 130 | |||||
c) Currency Risk | 131 | |||||
d) Liquidity Risk | 132 | |||||
e) Capital Adequacy | 133 | |||||
31 | Fair Value of Financial Instruments | 135 | ||||
32 | Retirement Benefit Plans and Other Employee Benefits | 137 | ||||
33 | Equity Participation Plans | 141 | ||||
a) Equity Participation Plans Offered | 141 | |||||
b) UBS Share Awards | 143 | |||||
c) UBS Option Awards | 144 | |||||
d) Compensation Expense | 145 | |||||
e) Pro-Forma Net Income | 145 | |||||
34 | Related Parties | 146 | ||||
35 | Post–Balance Sheet Events | 147 | ||||
36 | Significant Subsidiaries and Associates | 147 | ||||
37 | Acquisition of Paine Webber Group, Inc. | 151 | ||||
38 | Currency Translation Rates | 151 | ||||
39 | Swiss Banking Law Requirements | 151 | ||||
40 | Reconciliation to US GAAP | 154 | ||||
41 | Additional Disclosures Required under US GAAP and SEC Rules | 164 | ||||
Report of the Group Auditors | 169 |
77
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UBS Group Financial Statements
Financial Statements
Financial Statements
UBS Group Income Statement
CHF million, except per share data | % change from | |||||||||||||||||||
For the year ended | Note | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 3 | 52,277 | 51,745 | 35,604 | 1 | |||||||||||||||
Interest expense | 3 | (44,236 | ) | (43,615 | ) | (29,695 | ) | 1 | ||||||||||||
Net interest income | 8,041 | 8,130 | 5,909 | (1 | ) | |||||||||||||||
Credit loss expense / recovery | (498 | ) | 130 | (956 | ) | |||||||||||||||
Net interest income after credit loss expense / recovery | 7,543 | 8,260 | 4,953 | (9 | ) | |||||||||||||||
Net fee and commission income | 4 | 20,211 | 16,703 | 12,607 | 21 | |||||||||||||||
Net trading income | 5 | 8,802 | 9,953 | 7,719 | (12 | ) | ||||||||||||||
Other income | 6 | 558 | 1,486 | 3,146 | (62 | ) | ||||||||||||||
Total operating income | 37,114 | 36,402 | 28,425 | 2 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 7 | 19,828 | 17,163 | 12,577 | 16 | |||||||||||||||
General and administrative expenses | 8 | 7,631 | 6,765 | 6,098 | 13 | |||||||||||||||
Depreciation of property and equipment | 15 | 1,614 | 1,608 | 1,517 | 0 | |||||||||||||||
Amortization of goodwill and other intangible assets | 16 | 1,323 | 667 | 340 | 98 | |||||||||||||||
Total operating expenses | 30,396 | 26,203 | 20,532 | 16 | ||||||||||||||||
Operating profit before tax and minority interests | 6,718 | 10,199 | 7,893 | (34 | ) | |||||||||||||||
Tax expense | 22 | 1,401 | 2,320 | 1,686 | (40 | ) | ||||||||||||||
Net profit before minority interests | 5,317 | 7,879 | 6,207 | (33 | ) | |||||||||||||||
Minority interests | 23 | (344 | ) | (87 | ) | (54 | ) | 295 | ||||||||||||
Net profit | 4,973 | 7,792 | 6,153 | (36 | ) | |||||||||||||||
Basic earnings per share (CHF)1 | 9 | 3.93 | 6.44 | 5.07 | (39 | ) | ||||||||||||||
Basic earnings per share before goodwill (CHF)1, 2 | 9 | 4.97 | 7.00 | 5.35 | (29 | ) | ||||||||||||||
Diluted earnings per share (CHF)1 | 9 | 3.78 | 6.35 | 5.02 | (40 | ) | ||||||||||||||
Diluted earnings per share before goodwill (CHF)1, 2 | 9 | 4.81 | 6.89 | 5.30 | (30 | ) | ||||||||||||||
1 | All earnings per share figures have been restated for the 3 for 1 share split which took place on 16 July 2001. | |
2 | Excludes the amortization of goodwill and other intangible assets. |
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UBS Group Balance Sheet
% change from | ||||||||||||||||
CHF million | Note | 31.12.01 | 31.12.001 | 31.12.00 | ||||||||||||
Assets | ||||||||||||||||
Cash and balances with central banks | 20,990 | 2,979 | 605 | |||||||||||||
Due from banks | 10 | 27,526 | 29,147 | (6 | ) | |||||||||||
Cash collateral on securities borrowed | 11 | 162,938 | 177,857 | (8 | ) | |||||||||||
Reverse repurchase agreements | 11 | 269,256 | 193,801 | 39 | ||||||||||||
Trading portfolio assets | 12 | 397,886 | 315,588 | 26 | ||||||||||||
Positive replacement values | 24 | 73,447 | 57,875 | 27 | ||||||||||||
Loans, net of allowance for credit losses | 10 | 226,545 | 244,842 | (7 | ) | |||||||||||
Financial investments | 13 | 28,803 | 19,583 | 47 | ||||||||||||
Accrued income and prepaid expenses | 7,554 | 7,062 | 7 | |||||||||||||
Investments in associates | 14 | 697 | 880 | (21 | ) | |||||||||||
Property and equipment | 15 | 8,695 | 8,910 | (2 | ) | |||||||||||
Goodwill and other intangible assets | 16 | 19,085 | 19,537 | (2 | ) | |||||||||||
Other assets | 17,22 | 9,875 | 9,491 | 4 | ||||||||||||
Total assets | 1,253,297 | 1,087,552 | 15 | |||||||||||||
Total subordinated assets | 407 | 475 | (14 | ) | ||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 18 | 106,531 | 82,240 | 30 | ||||||||||||
Cash collateral on securities lent | 11 | 30,317 | 23,418 | 29 | ||||||||||||
Repurchase agreements | 11 | 368,620 | 295,513 | 25 | ||||||||||||
Trading portfolio liabilities | 12 | 105,798 | 82,632 | 28 | ||||||||||||
Negative replacement values | 24 | 71,443 | 75,923 | (6 | ) | |||||||||||
Due to customers | 18 | 333,781 | 310,679 | 7 | ||||||||||||
Accrued expenses and deferred income | 17,289 | 21,038 | (18 | ) | ||||||||||||
Debt issued | 19 | 156,218 | 129,635 | 21 | ||||||||||||
Other liabilities | 20,21,22 | 15,658 | 18,756 | (17 | ) | |||||||||||
Total liabilities | 1,205,655 | 1,039,834 | 16 | |||||||||||||
Minority interests | 23 | 4,112 | 2,885 | 43 | ||||||||||||
Shareholders’ equity | ||||||||||||||||
Share capital | 3,589 | 4,444 | (19 | ) | ||||||||||||
Share premium account | 14,408 | 20,885 | (31 | ) | ||||||||||||
Gains / (losses) not recognized in the income statement | (193 | ) | (687 | ) | (72 | ) | ||||||||||
Retained earnings | 29,103 | 24,191 | 20 | |||||||||||||
Treasury shares | (3,377 | ) | (4,000 | ) | (16 | ) | ||||||||||
Total shareholders’ equity | 43,530 | 44,833 | (3 | ) | ||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,253,297 | 1,087,552 | 15 | |||||||||||||
Total subordinated liabilities | 13,818 | 13,996 | (1 | ) | ||||||||||||
1 | Changes have been made to prior year to conform to the current presentation (see Note 1: Summary of Significant Accounting Policies). |
79
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UBS Group Financial Statements
Financial Statements
UBS Group Statement of Changes in Equity
CHF million | ||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Issued and paid up share capital | ||||||||||||
Balance at the beginning of the year | 4,444 | 4,309 | 4,300 | |||||||||
Issue of share capital | 12 | 135 | 9 | |||||||||
Capital repayment by par value reduction3 | (683 | ) | ||||||||||
Cancellation of second trading line treasury shares (2000 Program) | (184 | ) | ||||||||||
Balance at the end of the year | 3,589 | 4,444 | 4,309 | |||||||||
Share premium | ||||||||||||
Balance at the beginning of the year | 20,885 | 14,437 | 13,617 | |||||||||
Premium on shares issued and warrants exercised | 80 | 139 | 45 | |||||||||
Net premium / (discount) on treasury share and own equity derivative activity | (239 | ) | (391 | ) | 775 | |||||||
Share premium increase due to PaineWebber acquisition | 4,198 | |||||||||||
Borrow of own shares to be delivered | 5,895 | |||||||||||
Settlement of own shares to be delivered | (2,502 | ) | (3,393 | ) | ||||||||
Cancellation of second trading line treasury shares (2000 Program) | (3,816 | ) | ||||||||||
Balance at the end of the year | 14,408 | 20,885 | 14,437 | |||||||||
Gains / (losses) not recognized in the income statement Foreign currency translation | ||||||||||||
Balance at the beginning of the year | (687 | ) | (442 | ) | (456 | ) | ||||||
Movements during the year | (82 | ) | (245 | ) | 14 | |||||||
Subtotal – balance at the end of the year | (769 | ) | (687 | ) | (442 | ) | ||||||
Unrealized gains / (losses) on available for sale investments, net of taxes | ||||||||||||
Balance at the beginning of the year | 0 | |||||||||||
Change in accounting policy1 | 1,577 | |||||||||||
Net unrealized gains / (losses) on available for sale investments | (92 | ) | ||||||||||
Gains reclassified to the income statement | (461 | ) | ||||||||||
Losses reclassified to the income statement | 11 | |||||||||||
Subtotal – balance at the end of the year | 1,035 | |||||||||||
Change in fair value of derivative instruments designated as cash flow hedges, net of taxes | ||||||||||||
Balance at the beginning of the year | 0 | |||||||||||
Change in accounting policy1 | (380 | ) | ||||||||||
Net unrealized gains / (losses) on the revaluation of cash flow hedges | (316 | ) | ||||||||||
Net losses reclassified to the income statement | 237 | |||||||||||
Subtotal – balance at the end of the year | (459 | ) | ||||||||||
Balance at the end of the year | (193 | ) | (687 | ) | (442 | ) | ||||||
Retained earnings | ||||||||||||
Balance at the beginning of the year | 24,191 | 20,327 | 16,224 | |||||||||
Change in accounting policy1 | (61 | ) | ||||||||||
Balance at the beginning of the year (restated) | 24,130 | 20,327 | 16,224 | |||||||||
Net profit for the year | 4,973 | 7,792 | 6,153 | |||||||||
Dividends paid2, 3 | (3,928 | ) | (2,050 | ) | ||||||||
Balance at the end of the year | 29,103 | 24,191 | 20,327 | |||||||||
Treasury shares, at cost | ||||||||||||
Balance at the beginning of the year | (4,000 | ) | (8,023 | ) | (4,891 | ) | ||||||
Acquisitions | (13,506 | ) | (16,330 | ) | (6,595 | ) | ||||||
Disposals | 10,129 | 20,353 | 3,463 | |||||||||
Cancellation of second trading line treasury shares (2000 Program) | 4,000 | |||||||||||
Balance at the end of the year | (3,377 | ) | (4,000 | ) | (8,023 | ) | ||||||
Total shareholders’ equity | 43,530 | 44,833 | 30,608 | |||||||||
1 | Opening adjustments to reflect the adoption of IAS 39 (see Note 1: Summary of Significant Accounting Policies). | |
2 | Dividends declared per share were CHF 1.50 in 2000 and CHF 1.83 in 1999, both paid in the year 2000. | |
3 | 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. |
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UBS Group Statement of Changes in Equity (continued)
Shares issued
Number of shares | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Balance at the beginning of the year | 1,333,139,187 | 1,292,679,486 | 1,289,857,836 | 3 | ||||||||||||
Issue of share capital | 3,843,661 | 4,459,701 | 2,821,650 | (14 | ) | |||||||||||
Issue of share capital due to PaineWebber acquisition | 36,000,000 | |||||||||||||||
Cancellation of second trading line treasury shares (2000 Program) | (55,265,349 | ) | ||||||||||||||
Balance at the end of the year | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | (4 | ) | |||||||||||
Treasury shares
Number of shares | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Balance at the beginning of the year | 55,265,349 | 110,621,142 | 73,370,094 | (50 | ) | |||||||||||
Acquisitions | 162,818,045 | 16,824,039 | 87,659,019 | 868 | ||||||||||||
Disposals | (121,563,094 | ) | (72,179,832 | ) | (50,407,971 | ) | 68 | |||||||||
Cancellation of second trading line treasury shares (2000 Program) | (55,265,349 | ) | ||||||||||||||
Balance at the end of the year | 41,254,951 | 55,265,349 | 110,621,142 | (25 | ) | |||||||||||
During the year a total of 55,265,349 shares acquired under the second trading line buyback program 2000 were cancelled. At 31 December 2001, a maximum of 13,017,716 shares can be issued against the excercise of options from former PaineWebber employee option plans. Out of the total number of 41,254,951 treasury shares, 23,064,356 shares (CHF 1,834 million) were acquired under the second trading line buyback program 2001 and are earmarked for cancellation. The Board of Directors will propose to the Annual General Meeting on 18 April 2002 to reduce the outstanding number of shares and the share capital by the number of shares purchased for cancellation.
81
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UBS Group Financial Statements
Financial Statements
UBS Group Statement of Cash Flows
CHF million | |||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||
Cash flow from / (used in) operating activities | |||||||||||||
Net profit | 4,973 | 7,792 | 6,153 | ||||||||||
Adjustments to reconcile net profit to cash flow from / (used in) operating activities | |||||||||||||
Non-cash items included in net profit and other adjustments: | |||||||||||||
Depreciation of property and equipment | 1,614 | 1,608 | 1,517 | ||||||||||
Amortization of goodwill and other intangible assets | 1,323 | 667 | 340 | ||||||||||
Credit loss expense / (recovery) | 498 | (130 | ) | 956 | |||||||||
Equity in income of associates | (72 | ) | (58 | ) | (211 | ) | |||||||
Deferred tax expense | 292 | 544 | 479 | ||||||||||
Net loss / (gain) from investing activities | 513 | (730 | ) | (2,282 | ) | ||||||||
Net (increase) / decrease in operating assets: | |||||||||||||
Net due from / to banks | 27,306 | (915 | ) | (5,298 | ) | ||||||||
Reverse repurchase agreements, cash collateral on securities borrowed | (60,536 | ) | (81,054 | ) | (12,656 | ) | |||||||
Trading portfolio including net replacement values and securities pledged as collateral | (78,456 | ) | 11,553 | (49,956 | ) | ||||||||
Loans / due to customers | 42,813 | 12,381 | 17,222 | ||||||||||
Accrued income, prepaid expenses and other assets | (424 | ) | 6,923 | 2,545 | |||||||||
Net increase / (decrease) in operating liabilities: | |||||||||||||
Repurchase agreements, cash collateral on securities lent | 80,006 | 50,762 | 52,958 | ||||||||||
Accrued expenses and other liabilities | (5,235 | ) | 3,313 | (7,366 | ) | ||||||||
Income taxes paid | (1,742 | ) | (959 | ) | (1,063 | ) | |||||||
Net cash flow from / (used in) operating activities | 12,873 | 11,697 | 3,338 | ||||||||||
Cash flow from / (used in) investing activities | |||||||||||||
Investments in subsidiaries and associates | (467 | ) | (9,729 | ) | (1,720 | ) | |||||||
Disposal of subsidiaries and associates | 95 | 669 | 3,782 | ||||||||||
Purchase of property and equipment | (2,021 | ) | (1,640 | ) | (2,820 | ) | |||||||
Disposal of property and equipment | 380 | 335 | 1,880 | ||||||||||
Net (investment) / divestment in financial investments | (5,770 | ) | (8,770 | ) | 356 | ||||||||
Net cash flow from / (used in) investing activities | (7,783 | ) | (19,135 | ) | 1,478 | ||||||||
Cash flow from / (used in) financing activities | |||||||||||||
Net money market paper issued | 24,226 | 10,125 | 13,128 | ||||||||||
Net movements in treasury shares and treasury share contract activity | (6,038 | ) | (647 | ) | (2,312 | ) | |||||||
Capital issuance | 12 | 15 | 9 | ||||||||||
Capital repayment by par value reduction | (683 | ) | |||||||||||
Dividends paid | (3,928 | ) | (2,050 | ) | |||||||||
Issuance of long-term debt | 18,233 | 14,884 | 12,661 | ||||||||||
Repayment of long-term debt | (18,477 | ) | (24,640 | ) | (7,112 | ) | |||||||
Issuance of trust preferred securities | 1,291 | 2,683 | |||||||||||
Dividend payments to / and purchase from minority interests | (461 | ) | (73 | ) | (689 | ) | |||||||
Net cash flow from / (used in) financing activities | 18,103 | (1,581 | ) | 13,635 | |||||||||
Effects of exchange rate differences | (304 | ) | 112 | 148 | |||||||||
Net increase / (decrease) in cash equivalents | 22,889 | (8,907 | ) | 18,599 | |||||||||
Cash and cash equivalents, beginning of the year | 93,370 | 102,277 | 83,678 | ||||||||||
Cash and cash equivalents, end of the year | 116,259 | 93,370 | 102,277 | ||||||||||
Cash and cash equivalents comprise: | |||||||||||||
Cash and balances with central banks | 20,990 | 2,979 | 5,073 | ||||||||||
Money market paper1 | 69,938 | 66,454 | 69,717 | ||||||||||
Due from banks maturing in less than three months | 25,331 | 23,937 | 27,487 | ||||||||||
Total | 116,259 | 93,370 | 102,277 | ||||||||||
1 | Money market paper is included in the Balance sheet under Trading portfolio assets and Financial investments. |
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UBS Group Financial Statements
Notes to the Financial Statements
Notes to the Financial Statements
Note 1 Summary of Significant Accounting Policies
a) Basis of accounting
b) Use of estimates in the preparation of Financial Statements
c) Consolidation
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UBS Group Financial Statements
Notes to the Financial Statements
d) Foreign currency translation
e) Business and geographical segments
f) Cash and cash equivalents
g) Fee income
h) Securities borrowing and lending
i) Repurchase and reverse repurchase transactions
j) Trading portfolio
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ments as well as traded loans and precious metals which are owned by the Group (“long” positions). Obligations to deliver trading securities sold but not yet purchased are reported as Trading portfolio liabilities. Trading portfolio liabilities consist of money market paper, other debt instruments and equity instruments which the Group has sold to third parties but does not own (“short” positions).
k) Loans originated by the Group
l) Allowance and provision for credit losses
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UBS Group Financial Statements
Notes to the Financial Statements
When a loan has been identified as impaired, the carrying amount of the loan is reduced by recording specific allowances for credit losses to its estimated recoverable amount, which is the present value of expected future cash flows discounted at the original effective interest rate of the loan. Upon impairment the accrual of interest income based on the original terms of the loan is discontinued. The increase of the present value of impaired loans due to the passage of time is reported as interest income.
m) Securitizations
n) Financial investments
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if the decline in market price below cost is of such a magnitude that recovery of the cost value cannot be reasonably expected within the foreseeable future.
o) Property and equipment
Properties | Not exceeding 50 years | |
Other machines and equipment | Not exceeding 10 years | |
IT, software and communication | Not exceeding 3 years | |
Property formerly bank-occupied 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 disclosed in Other assets. They are carried at the lower of cost or recoverable value. During 2001, properties with a carrying value of CHF 293 million (cost CHF 482 million less accumulated depreciation of CHF 189 million) have been reclassified from Investment property to Property held for resale.
p) Goodwill and other intangible assets
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UBS Group Financial Statements
Notes to the Financial Statements
ment. 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-down is made if the carrying amount exceeds the recoverable amount.
q) Income taxes
r) Debt issued
s) Treasury shares
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tracts the proceeds received less cost (net of tax, if any), are reported as Share premium.
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. | |
The unrecognized actuarial gains and losses exceeding the greater of the two values are recognized in the income statement over the expected average remaining working lives of the employees participating in the plans.
u) Equity participation plans
v) Derivative instruments
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UBS Group Financial Statements
Notes to the Financial Statements
or loss in the same period during which the forecasted transaction affects net profit or loss. If the forecasted transaction is no longer expected to occur, the cumulative gain or loss on the hedging derivative is recognized immediately in net profit or loss. If the hedge relationship is terminated, the cumulative gain or loss on the hedging derivative that initially had been reported in Shareholders’ equity when the hedge was effective, remains in Shareholders’ equity until the committed or forecasted transaction occurs, at which point it is reported in net profit or loss.
w) Comparability
IAS 12 (Revised) | Income Taxes | |
IAS 39 | Financial Instruments: Recognition and Measurement | |
IAS 40 | Investment Property | |
Interpretation SIC 17 | Equity – Costs of an Equity Transaction | |
Interpretation SIC 18 | Consistency – Alternative Methods | |
Interpretation SIC 19 | Reporting Currency – Measurement and Presentation of Financial Statements under IAS 21 and IAS 29 | |
Interpretation SIC 22 | Business Combinations – Subsequent Adjustment of Fair Values and Goodwill Initially Reported | |
Interpretation SIC 24 | Earnings Per Share – Financial Instruments and Other Contracts that May Be Settled in Shares | |
Additional SIC interpretations became effective during 2001, which are not applicable to the Group. The implementation of the above standards and interpretations had no material impact on the Group’s Financial Statements in 2001 except for the following:
IAS 39, Recognition and measurement of financial instruments
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determined to be impaired, the cumulative unrealized loss previously recognized in Shareholders’ equity is included in net profit or loss for the period.
Money market paper and Money market paper issued
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UBS Group Financial Statements
Notes to the Financial Statements
Note 2a Segment Reporting by Business Group
UBS is organized into three Business Groups: UBS Switzerland, UBS Warburg and UBS Asset Management, and our Corporate Center.
UBS Switzerland
UBS Asset Management
UBS Warburg
Corporate Center
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Note 2a Segment Reporting by Business Group (continued)
The Business Group results are presented on a management reporting basis. Consequently, internal charges and transfer pricing adjustments have been 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. The segment reporting for all periods presented reflects the changes in business unit structure implemented 1 January 2001.
For the year ended 31 December 2001
UBS | UBS Asset | UBS | Corporate | |||||||||||||||||
CHF million | Switzerland | Management | Warburg | Center | UBS Group | |||||||||||||||
Income | 13,475 | 2,110 | 21,349 | 678 | 37,612 | |||||||||||||||
Credit loss expense1 | (604 | ) | 0 | (130 | ) | 236 | (498 | ) | ||||||||||||
Total operating income | 12,871 | 2,110 | 21,219 | 914 | 37,114 | |||||||||||||||
Personnel expenses | 4,764 | 1,003 | 13,515 | 546 | 19,828 | |||||||||||||||
General and administrative expenses | 2,600 | 564 | 4,260 | 207 | 7,631 | |||||||||||||||
Depreciation | 616 | 46 | 580 | 372 | 1,614 | |||||||||||||||
Amortization of goodwill and other intangible assets | 41 | 266 | 991 | 25 | 1,323 | |||||||||||||||
Total operating expenses | 8,021 | 1,879 | 19,346 | 1,150 | 30,396 | |||||||||||||||
Business Group performance before tax | 4,850 | 231 | 1,873 | (236 | ) | 6,718 | ||||||||||||||
Tax expense | 1,401 | |||||||||||||||||||
Net profit before minority interests | 5,317 | |||||||||||||||||||
Minority interests | (344 | ) | ||||||||||||||||||
Net profit | 4,973 | |||||||||||||||||||
Other information as at 31 December 20012 | ||||||||||||||||||||
Total assets | 313,389 | 5,988 | 1,045,297 | (111,377 | ) | 1,253,297 | ||||||||||||||
Total liabilities and minority interests | 304,875 | 4,638 | 1,022,907 | (122,653 | ) | 1,209,767 | ||||||||||||||
Capital expenditure | 540 | 37 | 633 | 811 | 2,021 | |||||||||||||||
1 In order to show the relevant Business Group performance over time, adjusted expected loss figures rather than the IAS actual net credit loss expense are reported for each Business Group. The statistically derived adjusted expected losses reflect the inherent counterparty and country risks in the respective portfolios. The difference between the statistically derived adjusted expected loss figures and the IAS actual net credit loss expense recorded at Group level for financial reporting purposes is reported in the Corporate Center. The Business Group breakdown of the net credit loss expense for financial reporting purposes of CHF 498 million for the year ended 31 December 2001 is as follows: UBS Switzerland CHF 123 million, UBS Warburg CHF 375 million.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 2a Segment Reporting by Business Group (continued)
For the year ended 31 December 2000
UBS | UBS Asset | UBS | Corporate | ||||||||||||||||||
CHF million | Switzerland | Management | Warburg | Center | UBS Group | ||||||||||||||||
Income | 14,371 | 1,953 | 19,590 | 358 | 36,272 | ||||||||||||||||
Credit loss recovery1 | (785 | ) | 0 | (246 | ) | 1,161 | 130 | ||||||||||||||
Total operating income | 13,586 | 1,953 | 19,344 | 1,519 | 36,402 | ||||||||||||||||
Personnel expenses | 5,143 | 880 | 10,618 | 522 | 17,163 | ||||||||||||||||
General and administrative expenses | 2,699 | 439 | 3,196 | 431 | 6,765 | ||||||||||||||||
Depreciation | 633 | 49 | 606 | 320 | 1,608 | ||||||||||||||||
Amortization of goodwill and other intangible assets | 70 | 263 | 290 | 44 | 667 | ||||||||||||||||
Total operating expenses | 8,545 | 1,631 | 14,710 | 1,317 | 26,203 | ||||||||||||||||
Business Group performance before tax | 5,041 | 322 | 4,634 | 202 | 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 20002 | |||||||||||||||||||||
Total assets | 281,780 | 6,727 | 870,608 | (71,563 | ) | 1,087,552 | |||||||||||||||
Total liabilities and minority interests | 272,134 | 5,513 | 846,451 | (81,379 | ) | 1,042,719 | |||||||||||||||
1 In order to show the relevant Business Group performance over time, adjusted expected loss figures rather than the IAS actual net credit loss expense are reported for each Business Group. The statistically derived adjusted expected losses reflect the inherent counterparty and country risks in the respective portfolios. The difference between the statistically derived adjusted expected loss figures and the IAS actual net credit loss expense recorded at Group level for financial reporting purposes is reported in the Corporate Center. The Business Group breakdown of the net credit loss recovery for financial reporting purposes of CHF 130 million for the year ended 31 December 2000 is as follows: UBS Switzerland CHF 695 million recovery, UBS Warburg CHF 565 million expense.
2 The funding surplus or requirement is reflected in each Business Group and adjusted in Corporate Center.
For the year ended 31 December 1999
UBS | UBS Asset | UBS | Corporate | |||||||||||||||||
CHF million | Switzerland | Management | Warburg | Center | UBS Group | |||||||||||||||
Income | 12,884 | 1,369 | 13,118 | 2,010 | 29,381 | |||||||||||||||
Credit loss expense1 | (1,071 | ) | 0 | (333 | ) | 448 | (956 | ) | ||||||||||||
Total operating income | 11,813 | 1,369 | 12,785 | 2,458 | 28,425 | |||||||||||||||
Personnel expenses | 4,882 | 516 | 7,087 | 92 | 12,577 | |||||||||||||||
General and administrative expenses | 2,450 | 271 | 2,538 | 839 | 6,098 | |||||||||||||||
Depreciation | 475 | 32 | 644 | 366 | 1,517 | |||||||||||||||
Amortization of goodwill and other intangible assets | 38 | 113 | 139 | 50 | 340 | |||||||||||||||
Total operating expenses | 7,845 | 932 | 10,408 | 1,347 | 20,532 | |||||||||||||||
Business Group performance before tax | 3,968 | 437 | 2,377 | 1,111 | 7,893 | |||||||||||||||
Tax expense | 1,686 | |||||||||||||||||||
Net profit before minority interests | 6,207 | |||||||||||||||||||
Minority interests | (54 | ) | ||||||||||||||||||
Net profit | 6,153 | |||||||||||||||||||
Other information as at 31 December 19992 | ||||||||||||||||||||
Total assets | 254,577 | 10,451 | 719,568 | (88,040 | ) | 896,556 | ||||||||||||||
Total liabilities and minority interests | 270,137 | 4,614 | 693,633 | (102,436 | ) | 865,948 | ||||||||||||||
1 In order to show the relevant Business Group performance over time, adjusted expected loss figures rather than the IAS actual net credit loss expense are reported for each Business Group. The statistically derived adjusted expected losses reflect the inherent counterparty and country risks in the respective portfolios. The difference between the statistically derived adjusted expected loss figures and the IAS actual net credit loss expense recorded at Group level for financial reporting purposes is reported in the Corporate Center. The Business Group breakdown of the net credit loss expense for financial reporting purposes of CHF 956 million for the year ended 31 December 1999 is as follows: UBS Switzerland CHF 965 million expense and Corporate Center CHF 9 million recovery.
2 The funding surplus or requirement is reflected in each Business Group and adjusted in Corporate Center.
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Note 2b Segment Reporting by Geographic Location
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 geographical analysis of operating income, total assets, and capital expenditure is provided in order to comply with International Accounting Standards, 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 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 | ||||||||||||||||||||||
CHF million | Share % | CHF million | Share % | CHF million | Share % | |||||||||||||||||||
Switzerland | 15,836 | 44 | 211,851 | 19 | 1,135 | 43 | ||||||||||||||||||
Rest of Europe | 10,907 | 30 | 305,342 | 28 | 311 | 12 | ||||||||||||||||||
Americas | 6,976 | 19 | 474,617 | 44 | 1,169 | 44 | ||||||||||||||||||
Asia / Pacific | 2,626 | 7 | 87,831 | 8 | 36 | 1 | ||||||||||||||||||
Africa / Middle East | 57 | 0 | 7,911 | 1 | 8 | 0 | ||||||||||||||||||
Total | 36,402 | 100 | 1,087,552 | 100 | 2,659 | 100 | ||||||||||||||||||
For the year ended 31 December 1999
Total operating income | Total assets | Capital expenditure | ||||||||||||||||||||||
CHF million | Share % | CHF million | Share % | CHF million | Share % | |||||||||||||||||||
Switzerland | 14,976 | 52 | 207,702 | 23 | 1,990 | 70 | ||||||||||||||||||
Rest of Europe | 7,626 | 27 | 303,365 | 34 | 356 | 13 | ||||||||||||||||||
Americas | 3,861 | 14 | 281,974 | 31 | 386 | 14 | ||||||||||||||||||
Asia / Pacific | 1,945 | 7 | 96,469 | 11 | 87 | 3 | ||||||||||||||||||
Africa / Middle East | 17 | 0 | 7,046 | 1 | 1 | 0 | ||||||||||||||||||
Total | 28,425 | 100 | 896,556 | 100 | 2,820 | 100 | ||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Income Statement
Note 3 Net Interest Income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Interest income | ||||||||||||||||
Interest earned on loans and advances1 | 16,955 | 20,413 | 18,340 | (17 | ) | |||||||||||
Interest earned on securities borrowed and reverse repurchase agreements | 18,337 | 19,088 | 11,422 | (4 | ) | |||||||||||
Interest and dividend income from financial investments2 | 453 | 402 | 244 | 13 | ||||||||||||
Interest and dividend income from trading portfolio | 16,532 | 11,842 | 5,598 | 40 | ||||||||||||
Total | 52,277 | 51,745 | 35,604 | 1 | ||||||||||||
Interest expense | ||||||||||||||||
Interest on amounts due to banks and customers | 14,088 | 15,660 | 13,845 | (10 | ) | |||||||||||
Interest on securities lent and repurchase agreements | 14,517 | 14,915 | 8,446 | (3 | ) | |||||||||||
Interest and dividend expense from trading portfolio | 7,815 | 5,309 | 2,070 | 47 | ||||||||||||
Interest on debt issued | 7,816 | 7,731 | 5,334 | 1 | ||||||||||||
Total | 44,236 | 43,615 | 29,695 | 1 | ||||||||||||
Net interest income | 8,041 | 8,130 | 5,909 | (1 | ) | |||||||||||
1 Includes interest income from finance leasing and other interest income. All prior year figures have been restated accordingly.
Note 4 Net Fee and Commission Income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Underwriting fees | 2,158 | 1,434 | 905 | 50 | ||||||||||||
Corporate finance fees | 1,339 | 1,772 | 1,298 | (24 | ) | |||||||||||
Brokerage fees1 | 6,445 | 5,742 | 3,934 | 12 | ||||||||||||
Investment fund fees | 4,276 | 2,821 | 1,915 | 52 | ||||||||||||
Fiduciary fees | 355 | 351 | 317 | 1 | ||||||||||||
Custodian fees | 1,356 | 1,439 | 1,583 | (6 | ) | |||||||||||
Portfolio and other management and advisory fees1 | 4,650 | 3,666 | 2,612 | 27 | ||||||||||||
Insurance-related and other fees1 | 538 | 111 | 57 | 385 | ||||||||||||
Total Security trading and investment activity fees | 21,117 | 17,336 | 12,621 | 22 | ||||||||||||
Credit-related fees and commissions | 307 | 310 | 372 | (1 | ) | |||||||||||
Commission income from other services | 946 | 802 | 765 | 18 | ||||||||||||
Total fee and commission income | 22,370 | 18,448 | 13,758 | 21 | ||||||||||||
Brokerage fees paid | 1,281 | 1,084 | 795 | 18 | ||||||||||||
Other | 878 | 661 | 356 | 33 | ||||||||||||
Total fee and commission expense | 2,159 | 1,745 | 1,151 | 24 | ||||||||||||
Net fee and commission income | 20,211 | 16,703 | 12,607 | 21 | ||||||||||||
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Note 5 Net Trading Income
Foreign exchange net trading income include gains and losses from spot and forward contracts, options, futures, and translation of foreign currency assets and liabilities, bank notes, precious metals, and commodities. Fixed income net trading income includes the results of making markets in instruments of both developed and emerging countries in government securities, corporate debt securities, money market instruments, interest rate and currency swaps, options, and other derivatives. Equities net trading income includes the results of making markets globally in equity securities and equity derivatives such as swaps, options, futures, and forward contracts.
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Foreign exchange1 | 2,045 | 1,287 | 1,108 | 59 | ||||||||||||
Fixed income | 2,731 | 912 | 2,603 | 199 | ||||||||||||
Equities | 4,026 | 7,754 | 4,008 | (48 | ) | |||||||||||
Net trading income | 8,802 | 9,953 | 7,719 | (12 | ) | |||||||||||
1 | Includes other trading income such as banknotes, precious metals and commodities. |
Note 6 Other Income
CHF million | % change from | ||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | |||||||||||||
Gains / losses from disposal of associates and subsidiaries | |||||||||||||||||
Net gain from disposal of: | |||||||||||||||||
Consolidated subsidiaries | 3 | 57 | 8 | (95 | ) | ||||||||||||
Investments in associates | 0 | 26 | 1,813 | (100 | ) | ||||||||||||
Total | 3 | 83 | 1,821 | (96 | ) | ||||||||||||
Financial Investments available for sale | |||||||||||||||||
Net gain from disposal of: | |||||||||||||||||
Private equity investments | 454 | 919 | 374 | (51 | ) | ||||||||||||
Other financial investments | 256 | 162 | 180 | 58 | |||||||||||||
Impairment charges on private equity investments and other financial investments | (1,294 | ) | (507 | ) | (102 | ) | 155 | ||||||||||
Total | (584 | ) | 574 | 452 | |||||||||||||
Net income from investments in property | 68 | 96 | (20 | ) | (29 | ) | |||||||||||
Equity in income of associates | 72 | 58 | 211 | 24 | |||||||||||||
Other1 | 999 | 675 | 682 | 48 | |||||||||||||
Total other income | 558 | 1,486 | 3,146 | (62 | ) | ||||||||||||
1 | Includes income from properties held for disposal. |
Note 7 Personnel Expenses
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Salaries and bonuses | 15,238 | 13,523 | 9,872 | 13 | ||||||||||||
Contractors | 729 | 725 | 886 | 1 | ||||||||||||
Insurance and social contributions | 984 | 959 | 717 | 3 | ||||||||||||
Contribution to retirement plans | 603 | 475 | 8 | 27 | ||||||||||||
Employee share plans | 103 | 97 | 151 | 6 | ||||||||||||
Other personnel expenses | 2,171 | 1,384 | 943 | 57 | ||||||||||||
Total personnel expenses | 19,828 | 17,163 | 12,577 | 16 | ||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 8 General and Administrative Expenses
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Occupancy | 1,314 | 979 | 847 | 34 | ||||||||||||
Rent and maintenance of machines and equipment | 632 | 520 | 410 | 22 | ||||||||||||
Telecommunications and postage | 1,213 | 914 | 756 | 33 | ||||||||||||
Administration | 906 | 750 | 784 | 21 | ||||||||||||
Marketing and public relations | 574 | 480 | 335 | 20 | ||||||||||||
Travel and entertainment | 700 | 656 | 552 | 7 | ||||||||||||
Professional fees | 667 | 660 | 526 | 1 | ||||||||||||
IT and other outsourcing | 1,224 | 1,246 | 1,289 | (2 | ) | |||||||||||
Other | 401 | 560 | 599 | (28 | ) | |||||||||||
Total general and administrative expenses | 7,631 | 6,765 | 6,098 | 13 | ||||||||||||
Note 9 Earnings per Share (EPS) and Outstanding Shares
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | ||||||||||||
Earnings (CHF million) | ||||||||||||||||
Net profit | 4,973 | 7,792 | 6,153 | (36 | ) | |||||||||||
Net profit before goodwill amortization1 | 6,296 | 8,459 | 6,493 | (26 | ) | |||||||||||
Net profit for diluted EPS | 4,874 | 2 | 7,778 | 2 | 6,153 | (37 | ) | |||||||||
Net profit before goodwill amortization for diluted EPS1 | 6,197 | 2 | 8,445 | 2 | 6,493 | (27 | ) | |||||||||
Weighted average shares outstanding | ||||||||||||||||
Weighted average shares outstanding | 1,266,038,193 | 1,209,087,927 | 1,214,227,446 | 5 | ||||||||||||
Potentially dilutive ordinary shares resulting from outstanding options, warrants and convertible debt securities3 | 22,539,745 | 16,489,773 | 10,898,010 | 37 | ||||||||||||
Weighted average shares outstanding for diluted EPS | 1,288,577,938 | 1,225,577,700 | 1,225,125,456 | 5 | ||||||||||||
Earnings per share (CHF) | ||||||||||||||||
Basic EPS | 3.93 | 6.44 | 5.07 | (39 | ) | |||||||||||
Basic EPS before goodwill amortization1 | 4.97 | 7.00 | 5.35 | (29 | ) | |||||||||||
Diluted EPS | 3.78 | 6.35 | 5.02 | (40 | ) | |||||||||||
Diluted EPS before goodwill amortization1 | 4.81 | 6.89 | 5.30 | (30 | ) | |||||||||||
1 Excludes amortization of goodwill and other intangible assets.
Shares outstanding | % change from | ||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.00 | |||||||||||||
Total ordinary shares issued | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | (4 | ) | ||||||||||||
Own shares to be delivered | 28,444,788 | ||||||||||||||||
Second trading line treasury shares | |||||||||||||||||
(2000 program) | 55,265,349 | ||||||||||||||||
(2001 program) | 23,064,356 | ||||||||||||||||
Other treasury shares | 18,190,595 | 0 | 110,621,142 | ||||||||||||||
Total treasury shares | 41,254,951 | 55,265,349 | 110,621,142 | (25 | ) | ||||||||||||
Outstanding shares | 1,240,462,548 | 1,306,318,626 | 1,182,058,344 | (5 | ) | ||||||||||||
All shares and earnings per share figures have been restated for the 3 for 1 share split which took place on 16 July 2001.
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Balance Sheet: Assets
Note 10a Due from Banks and Loans to Customers
By type of exposure
CHF million | 31.12.01 | 31.12.00 | |||||||
Banks | 28,261 | 30,064 | |||||||
Allowance for credit losses | (735 | ) | (917 | ) | |||||
Net due from banks | 27,526 | 29,147 | |||||||
Loans to customers | |||||||||
Mortgages | 126,211 | 120,554 | |||||||
Other loans | 107,512 | 133,898 | |||||||
Subtotal | 233,723 | 254,452 | |||||||
Allowance for credit losses | (7,178 | ) | (9,610 | ) | |||||
Net loans to customers | 226,545 | 244,842 | |||||||
Net due from banks and loans to customers | 254,071 | 273,989 | |||||||
thereof subordinated | 249 | 393 | |||||||
By geographical region (based on the location of the borrower)
CHF million | 31.12.01 | 31.12.00 | ||||||
Switzerland | 158,996 | 164,645 | ||||||
Rest of Europe | 42,279 | 46,882 | ||||||
Americas | 42,809 | 52,939 | ||||||
Asia / Pacific | 15,986 | 16,504 | ||||||
Africa / Middle East | 1,914 | 3,546 | ||||||
Subtotal | 261,984 | 284,516 | ||||||
Allowance for credit losses | (7,913 | ) | (10,527 | ) | ||||
Net due from banks and loans to customers | 254,071 | 273,989 | ||||||
By type of collateral
CHF million | 31.12.01 | 31.12.00 | ||||||
Secured by real estate | 128,259 | 122,898 | ||||||
Collateralized by securities | 30,635 | 37,714 | ||||||
Guarantees and other collateral | 20,217 | 28,373 | ||||||
Unsecured | 82,873 | 95,531 | ||||||
Subtotal | 261,984 | 284,516 | ||||||
Allowance for credit losses | (7,913 | ) | (10,527 | ) | ||||
Net due from banks and loans to customers | 254,071 | 273,989 | ||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 10b Allowances and Provisions for Credit Losses
Country risk | ||||||||||||||||
Specific | allowances | Total | Total | |||||||||||||
CHF million | allowances | and provisions | 31.12.01 | 31.12.00 | ||||||||||||
Balance at the beginning of the year | 9,289 | 1,292 | 10,581 | 13,398 | ||||||||||||
Write-offs | (2,967 | ) | (41 | ) | (3,008 | ) | (2,995 | ) | ||||||||
Recoveries | 81 | 0 | 81 | 163 | ||||||||||||
Increase / (decrease) in credit loss allowance and provision | 756 | (258 | ) | 498 | (130 | ) | ||||||||||
Foreign currency translation and other adjustments | 53 | 13 | 66 | 145 | ||||||||||||
Balance at the end of the year | 7,212 | 1,006 | 8,218 | 10,581 | ||||||||||||
CHF million | 31.12.01 | 31.12.00 | ||||||||||||||
As a reduction of Due from banks | 735 | 917 | ||||||||||||||
As a reduction of Loans to customers | 7,178 | 9,610 | ||||||||||||||
Subtotal | 7,913 | 10,527 | ||||||||||||||
Included in other liabilities related to commitments and contingent liabilities | 305 | 54 | ||||||||||||||
Total allowances and provisions for credit losses | 8,218 | 10,581 | ||||||||||||||
Note 10c Impaired Loans
A loan 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 and including liquidation of collateral. Impaired obligations are thus obligations where losses are probable and estimable. A provision is then made with respect to the loan in question.
CHF million | 31.12.01 | 31.12.00 | ||||||
Impaired loans1, 2 | 14,629 | 18,494 | ||||||
Amount of allowance for credit losses related to impaired loans | 7,294 | 9,685 | ||||||
Average impaired loans3 | 16,555 | 20,804 | ||||||
1 | All impaired loans have a specific allowance for credit losses. | |
2 | Interest income on impaired loans was CHF 504 million for 2001. | |
3 | Average balances were calculated from quarterly data. |
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Note 10d Non-Performing Loans
When principal, interest or commission are overdue by 90 days, loans are classified as non-performing, the recognition of interest 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.
CHF million | 31.12.01 | 31.12.00 | ||||||
Non-performing loans | 8,639 | 10,452 | ||||||
Amount of allowance for credit losses related to non-performing loans | 5,374 | 6,329 | 1 | |||||
Average non-performing loans2 | 9,648 | 11,884 | ||||||
1 | 31 December 2000 figure has been restated to account for an overallocation of allowances to non-performing loans. | |
2 | Average balances are calculated from quarterly data. |
CHF million | 31.12.01 | 31.12.00 | ||||||
Non-performing loans at beginning of year | 10,452 | 13,073 | ||||||
Net additions / (reductions) | 1,111 | (290 | ) | |||||
Write-offs and disposals | (2,924 | ) | (2,331 | ) | ||||
Non-performing loans at the end of the year | 8,639 | 10,452 | ||||||
By type of exposure
CHF million | 31.12.01 | 31.12.00 | |||||||
Banks | 386 | 172 | |||||||
Loans to customers | |||||||||
Mortgages | 2,659 | 4,586 | |||||||
Other | 5,594 | 5,694 | |||||||
Total loans to customers | 8,253 | 10,280 | |||||||
Total non-performing loans | 8,639 | 10,452 | |||||||
By geographical region (based on the location of the borrower)
CHF million | 31.12.01 | 31.12.00 | ||||||
Switzerland | 6,531 | 7,588 | ||||||
Rest of Europe | 466 | 342 | ||||||
Americas | 737 | 1,865 | ||||||
Asia / Pacific | 653 | 307 | ||||||
Africa / Middle East | 252 | 350 | ||||||
Total non-performing loans | 8,639 | 10,452 | ||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 11 Securities Borrowing, Securities Lending, Repurchase and Reverse Repurchase Agreements and Other Collateralized Transactions
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 minimizes 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.
Securities | Securities | Securities | Securities | |||||||||||||
borrowed | lent | borrowed | lent | |||||||||||||
CHF million | 31.12.01 | 31.12.01 | 31.12.00 | 31.12.00 | ||||||||||||
Cash collateral by counterparty | ||||||||||||||||
Banks | 155,214 | 27,640 | 159,619 | 18,291 | ||||||||||||
Customers | 7,724 | 2,677 | 18,238 | 5,127 | ||||||||||||
Total cash collateral on securities borrowed and lent | 162,938 | 30,317 | 177,857 | 23,418 | ||||||||||||
Reverse | Reverse | |||||||||||||||
repurchase | Repurchase | repurchase | Repurchase | |||||||||||||
agreements | agreements | agreements | agreements | |||||||||||||
CHF million | 31.12.01 | 31.12.01 | 31.12.00 | 31.12.00 | ||||||||||||
Agreements by counterparty | ||||||||||||||||
Banks | 197,902 | 213,942 | 144,505 | 175,421 | ||||||||||||
Customers | 71,354 | 154,678 | 49,296 | 120,092 | ||||||||||||
Total repurchase and reverse repurchase agreements | 269,256 | 368,620 | 193,801 | 295,513 | ||||||||||||
Under reverse repurchase, securities borrowing, and other collateralized arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. At 31 December 2001, the Group held CHF 593 billion (CHF 478 billion at 31 December 2000) of securities on such terms, CHF 475 billion (CHF 407 billion at 31 December 2000) of which have been either pledged or otherwise transferred to others in connection with its financing activities or to satisfy its commitments under short sale transactions.
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Note 12 Trading Portfolio
CHF million | 31.12.01 | 31.12.00 | ||||||
Trading portfolio assets | ||||||||
Money market paper1 | 63,164 | 62,292 | ||||||
Debt instruments | ||||||||
Swiss government and government agencies | 1,246 | 1,104 | ||||||
US Treasury and government agencies | 95,203 | 19,769 | ||||||
Other government | 18,811 | 33,222 | ||||||
Corporate listed instruments | 108,114 | 64,514 | ||||||
Other unlisted instruments2 | 32,781 | 26,583 | ||||||
Total | 256,155 | 145,192 | ||||||
thereof pledged as collateral | 153,464 | 63,071 | ||||||
thereof can be repledged or resold by the counterparty | 101,517 | 49,687 | ||||||
Equity instruments | ||||||||
Listed instruments | 67,772 | 102,571 | ||||||
Unlisted instruments | 6,367 | 2,320 | ||||||
thereof pledged as collateral | 21,264 | 8,683 | ||||||
thereof can be repledged or resold by the counterparty | 19,939 | 9,761 | ||||||
Total | 74,139 | 104,891 | ||||||
Precious metals | 4,428 | 3,213 | ||||||
Total trading portfolio assets | 397,886 | 315,588 | ||||||
Trading portfolio liabilities | ||||||||
Debt instruments | ||||||||
Swiss government and government agencies | 565 | 439 | ||||||
US Treasury and government agencies | 25,117 | 13,645 | ||||||
Other government | 12,187 | 5,070 | ||||||
Corporate listed instruments | 10,868 | 31,905 | ||||||
Other unlisted instruments | 30,793 | 192 | ||||||
Total | 79,530 | 51,251 | ||||||
Equity instruments | 26,268 | 31,381 | ||||||
Total trading portfolio liabilities | 105,798 | 82,632 | ||||||
1 | CHF 29,895 million is pledged with central banks (CHF 28,395 million at 31 December 2000). | |
2 | Includes CHF 6,139 million of traded loans reclassified to trading portfolio assets at 31 December 2001, upon the adoption of IAS 39. The amounts at 31 December 2000 | |
have not been restated. |
The Group trades money market paper, debt, equity, precious metals, foreign currency and derivatives to meet the financial needs of its customers and to generate revenue through its trading activities. Note 24 provides a description of the various classes of derivatives together with the related notional amounts, whereas Note11 provides further details about cash collateral on securities borrowed and lent and repurchase and reverse repurchase agreements.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 13 Financial Investments
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.
CHF million | 31.12.01 | 31.12.00 | ||||||
Money market paper | 6,774 | 4,162 | ||||||
Debt instruments | ||||||||
Listed | 1,194 | 1,403 | ||||||
Unlisted | 10,348 | 4,803 | ||||||
Total | 11,542 | 6,206 | ||||||
Equity investments | ||||||||
Listed | 1,949 | 1,119 | ||||||
Unlisted | 1,819 | 1,438 | ||||||
Total | 3,768 | 2,557 | ||||||
Private equity investments | 6,719 | 6,658 | ||||||
Total financial investments | 28,803 | 19,583 | ||||||
thereof eligible for discount at central banks | 10,370 | 381 | ||||||
The following table gives additional disclosure in respect of the valuation methods used in 2000.
Book Value | Fair Value | |||||||
CHF million | 31.12.00 | 31.12.001 | ||||||
Valued at fair value | ||||||||
Money market paper | 4,162 | 4,162 | ||||||
Valued at amortized cost | ||||||||
Debt instruments | 5,851 | 5,853 | ||||||
Valued at the lower of cost or market value | ||||||||
Debt instruments | 355 | 367 | ||||||
Equity instruments | 2,557 | 3,031 | ||||||
Total | 2,912 | 3,398 | ||||||
Valued at cost less adjustments for impairments | ||||||||
Private equity investments | 6,658 | 7,940 | ||||||
Total financial investments | 19,583 | 21,353 | ||||||
1 | This column is presented for comparison purposes only and does not reflect amounts recorded in the Financial Statements. |
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Note 13 Financial Investments (continued)
Unrealized gains | Unrealized losses | |||||||||||||||||||||||||||
not recognized | not recognized | |||||||||||||||||||||||||||
in the income statement | in the income statement | |||||||||||||||||||||||||||
CHF million | Fair value | Gross | Tax effect | Net | Gross | Tax effect | Net | |||||||||||||||||||||
31 December 2001 | ||||||||||||||||||||||||||||
Money market paper | 6,774 | 1 | 0 | 1 | 0 | 0 | 0 | |||||||||||||||||||||
Debt securities issued by the Swiss national government and agencies | 36 | 1 | 0 | 1 | 0 | 0 | 0 | |||||||||||||||||||||
Debt securities issued by Swiss local governments | 45 | 1 | 0 | 1 | 0 | 0 | 0 | |||||||||||||||||||||
Debt securities issued by US Treasury and agencies | 32 | 2 | 1 | 1 | 0 | 0 | 0 | |||||||||||||||||||||
Debt securities issued by foreign governments and official institutions | 10,089 | 31 | 11 | 20 | 1 | 0 | 1 | |||||||||||||||||||||
Corporate debt securities | 1,218 | 4 | 1 | 3 | 2 | 1 | 1 | |||||||||||||||||||||
Mortgage-backed securities | 5 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Other debt securities | 117 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Equity securities | 3,768 | 627 | 206 | 421 | 65 | 19 | 46 | |||||||||||||||||||||
Private equity investments | 6,719 | 1,189 | 28 | 1,161 | 539 | 13 | 526 | |||||||||||||||||||||
Total | 28,803 | 1,856 | 247 | 1,609 | 607 | 33 | 574 | |||||||||||||||||||||
Contractual maturities of the investments in debt instruments
Within 1 year | 1–5 years | 5–10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 2001 | ||||||||||||||||||||||||||||||||
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 | 1 | |||||||||||||||||||||||
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 | ||||||||||||||||||||||||
Total fair value | 5,091 | 6,314 | 113 | 24 | ||||||||||||||||||||||||||||
1 The yield presented is the current contractual yield based on current market rates at 31 December 2001, but may not represent the yield through maturity since this is a floating rate debt instrument.
Proceeds from sales and maturities of investment securities available for sale during the year ended 31 December 2001 were CHF 27,910 million. Gross gains of CHF 223 million and gross losses of CHF 28 million were realized on those sales in 2001.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 14 Investments in Associates
CHF million | 31.12.01 | 31.12.00 | ||||||
Carrying amount at the beginning of the year | 880 | 1,102 | ||||||
Additions | 11 | 65 | ||||||
Disposals | (216 | )2 | (287 | )1 | ||||
Income | 74 | 62 | ||||||
Write-offs | (2 | ) | (4 | ) | ||||
Change in equity | (50 | ) | (58 | ) | ||||
Carrying amount at the end of the year | 697 | 880 | ||||||
1 | Primarily consists of disposal of an investment in National Versicherung AG. | |
2 | Includes a transfer of CHF 172 million to Financial Investments following a review of the level of influence by the bank over certain investees. The impact of this reclassification on net profit is immaterial. |
Note 15 Property and Equipment
IT, soft- | Other | |||||||||||||||||||||||
Bank | ware and | machines | ||||||||||||||||||||||
occupied | Investment | communi- | and | |||||||||||||||||||||
CHF million | properties | properties5 | cation | equipment | 31.12.01 | 31.12.00 | ||||||||||||||||||
Historical cost | ||||||||||||||||||||||||
Balance at the beginning of the year | 8,807 | 1,830 | 4,257 | 3,737 | 18,631 | 17,210 | ||||||||||||||||||
Additions | 222 | 148 | 919 | 728 | 2,017 | 1,640 | ||||||||||||||||||
Additions from acquired companies | 0 | 0 | 4 | 0 | 4 | 1,019 | ||||||||||||||||||
Disposals1 | (179 | ) | (132 | ) | (184 | ) | (220 | ) | (715 | ) | (769 | ) | ||||||||||||
Reclassifications2 | 447 | (959 | ) | 144 | (114 | ) | (482 | ) | (432 | ) | ||||||||||||||
Foreign currency translation | 0 | 6 | 6 | 12 | 24 | (37 | ) | |||||||||||||||||
Balance at the end of the year | 9,297 | 893 | 5,146 | 4,143 | 19,479 | 18,631 | ||||||||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||
Balance at the beginning of the year | 3,840 | 550 | 3,074 | 2,257 | 9,721 | 8,509 | ||||||||||||||||||
Depreciation3 | 262 | 13 | 933 | 446 | 1,654 | 1,885 | ||||||||||||||||||
Disposals1 | (162 | ) | (40 | ) | (76 | ) | (125 | ) | (403 | ) | (453 | ) | ||||||||||||
Reclassifications2 | 97 | (286 | ) | 0 | 0 | (189 | ) | (176 | ) | |||||||||||||||
Foreign currency translation | 2 | 2 | 1 | (4 | ) | 1 | (44 | ) | ||||||||||||||||
Balance at the end of the year | 4,039 | 239 | 3,932 | 2,574 | 10,784 | 9,721 | ||||||||||||||||||
Net book value at the end of the year4 | 5,258 | 654 | 1,214 | 1,569 | 8,695 | 8,910 | ||||||||||||||||||
1 | Includes write-offs of fully depreciated assets. | |
2 | Properties held for resale and foreclosed properties have been reclassified (see Note1: Summary of significant accounting policies). | |
3 | Depreciation of CHF 1,654 million at 31 December 2001 and CHF 1,885 million at 31 December 2000 includes CHF 40 million in 2001 and CHF 277 million in 2000 which were charged against the UBS / SBC restructuring provision. | |
4 | Fire insurance value of property and equipment is CHF 15,531 million (2000: CHF 14,570 million). | |
5 | At 31 December 2001 the fair value of Investment properties was CHF 990 million. |
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Note 16 Goodwill and Other Intangible Assets
Other | ||||||||||||||||
intangible | ||||||||||||||||
CHF million | Goodwill | assets | 31.12.01 | 31.12.00 | ||||||||||||
Historical cost | ||||||||||||||||
Balance at the beginning of the year | 16,272 | 4,894 | 21,166 | 4,534 | ||||||||||||
Additions | 454 | 2 | 456 | 17,841 | ||||||||||||
Write-offs1 | (232 | ) | (15 | ) | (247 | ) | (16 | ) | ||||||||
Foreign currency translation | 325 | 92 | 417 | (1,193 | ) | |||||||||||
Balance at the end of the year | 16,819 | 4,973 | 21,792 | 21,166 | ||||||||||||
Accumulated amortization | ||||||||||||||||
Balance at the beginning of the year | 1,445 | 184 | 1,629 | 991 | ||||||||||||
Amortization | 1,025 | 298 | 1,323 | 667 | ||||||||||||
Write-offs1 | (232 | ) | (15 | ) | (247 | ) | (16 | ) | ||||||||
Foreign currency translation | 3 | (1 | ) | 2 | (13 | ) | ||||||||||
Balance at the end of the year | 2,241 | 466 | 2,707 | 1,629 | ||||||||||||
Net book value at the end of the year | 14,578 | 4,507 | 19,085 | 19,537 | ||||||||||||
1 | Represents write-offs of fully amortized goodwill and other intangible assets. |
A significant portion of the Goodwill and other intangible assets relates to the acquisition of Paine Webber Group, Inc. For more information, please refer to Note 37.
Note 17 Other Assets
CHF million | Note | 31.12.01 | 31.12.00 | |||||||||
Deferred tax assets | 22 | 3,449 | 2,208 | |||||||||
Settlement and clearing accounts | 1,431 | 3,153 | ||||||||||
VAT and other tax receivables | 452 | 419 | ||||||||||
Prepaid pension costs | 567 | 405 | ||||||||||
Properties held for resale | 844 | 984 | ||||||||||
Other receivables | 3,132 | 2,322 | ||||||||||
Total other assets | 9,875 | 9,491 | ||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Balance Sheet: Liabilities
Note 18 Due to Banks and Customers
CHF million | 31.12.01 | 31.12.00 | ||||||
Due to banks | 106,531 | 82,240 | ||||||
Due to customers in savings and investment accounts | 67,782 | 68,213 | ||||||
Other amounts due to customers | 265,999 | 242,466 | ||||||
Total due to customers | 333,781 | 310,679 | ||||||
Total due to banks and customers | 440,312 | 392,919 | ||||||
Note 19 Debt Issued
The Group issues both CHF and non-CHF denominated fixed and floating rate debt. Floating rate debt pays interest based on the three-month or six-month London Interbank Offered Rate (LIBOR).
CHF million | 31.12.01 | 31.12.00 | ||||||
Money market paper issued | 99,006 | 74,780 | ||||||
Total bond issues | 51,061 | 48,179 | ||||||
Shares in bond issues of the Swiss Regional or Cantonal Banks’ Central Bond Institutions | 934 | 1,305 | ||||||
Medium-term notes | 5,217 | 5,371 | ||||||
Total debt issued | 156,218 | 129,635 | ||||||
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Note 19 Debt Issued (continued)
Contractual maturity date
UBS AG (Parent Bank) | Subsidiaries | |||||||||||||||||||
Fixed | Floating | Fixed | Floating | Total | ||||||||||||||||
CHF million | rate | rate | rate | rate | 31.12.01 | |||||||||||||||
2002 | 64,596 | 1,503 | 48,161 | 1,779 | 116,039 | |||||||||||||||
2003 | 6,287 | 887 | 1,461 | 125 | 8,760 | |||||||||||||||
2004 | 2,661 | 778 | 1,451 | 1,164 | 6,054 | |||||||||||||||
2005 | 3,119 | 1,041 | 700 | 227 | 5,087 | |||||||||||||||
2006 | 3,343 | 1,833 | 1,242 | 635 | 7,053 | |||||||||||||||
2007–2009 | 2,930 | 592 | 2,353 | 1,708 | 7,583 | |||||||||||||||
Thereafter | 2,581 | 984 | 1,387 | 690 | 5,642 | |||||||||||||||
Total | 85,517 | 7,618 | 56,755 | 6,328 | 156,218 | |||||||||||||||
The table above 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 that of floating rate debt.
The table below shows the notional amount and stated interest rate on the Group’s publicly placed bonds prior to the separation of any embedded derivatives or the application of hedge accounting. As a result, the notional amount shown does not necessarily correspond to the carrying amount of the debt and the stated interest rate on the debt does not necessarily refelect the effective interest rate the Group is paying to service its debt after the separation of embedded derivatives and the application of hedge accounting.
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20011
Notional | ||||||||||||||||||||||||
amount | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
1992 | 7.250 | 10.01.2002 | CHF | 150 | ||||||||||||||||||||
2000 | 13.250 | GOAL on Carrefour shares | 18.01.2002 | EUR | 45 | |||||||||||||||||||
2000 | 12.500 | GOAL on Bayer shares | 18.01.2002 | EUR | 85 | |||||||||||||||||||
2000 | 0.100 | Convertible into Nikkei 225 Index | 28.01.2002 | JPY | 13,000 | |||||||||||||||||||
1992 | 7.000 | subordinated | 06.02.2002 | CHF | 200 | |||||||||||||||||||
2001 | FRN | Resettable Daily Accrual Note | 08.02.2002 | USD | 200 | |||||||||||||||||||
1986 | 5.000 | 10.02.2002 | CHF | 250 | ||||||||||||||||||||
2000 | 3.300 | 12.02.2002 | JPY | 3,807 | ||||||||||||||||||||
2001 | 1.980 | 28.02.2002 | USD | 130 | ||||||||||||||||||||
2001 | 16.000 | GOAL on JP Morgan Chase shares | 01.03.2002 | USD | 30 | |||||||||||||||||||
2001 | 20.750 | GOAL on Nokia shares | 01.03.2002 | EUR | 135 | |||||||||||||||||||
GOAL on | ||||||||||||||||||||||||
2001 | 11.250 | Royal Dutch Petroleum shares | 08.03.2002 | EUR | 85 | |||||||||||||||||||
2001 | 11.250 | GOAL on Allianz shares | 08.03.2002 | EUR | 50 | |||||||||||||||||||
2000 | 9.010 | GOAL on ABB shares | 14.03.2002 | CHF | 366 | |||||||||||||||||||
1998 | 5.750 | 18.03.2002 | USD | 250 | ||||||||||||||||||||
2001 | 18.000 | GOAL on Alcatel shares | 22.03.2002 | EUR | 75 | |||||||||||||||||||
2000 | 10.010 | GOAL on UBS shares | 10.04.2002 | CHF | 100 | |||||||||||||||||||
1996 | 4.000 | 18.04.2002 | CHF | 200 | ||||||||||||||||||||
2000 | 18.500 | GOAL on Motorola shares | 28.05.2002 | USD | 75 | |||||||||||||||||||
2001 | 23.125 | GOAL on EMC Corp shares | 31.05.2002 | USD | 45 | |||||||||||||||||||
1990 | 7.500 | subordinated | 07.06.2002 | CHF | 300 | |||||||||||||||||||
PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note |
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Notes to the Financial Statements
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20011
Notional | ||||||||||||||||||||||||
amount | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
2000 | 18.250 | GOAL on Intel shares | 27.06.2002 | USD | 50 | |||||||||||||||||||
1997 | 6.500 | 08.07.2002 | USD | 300 | ||||||||||||||||||||
2001 | 19.500 | GOAL on Deutsche Telecom shares | 08.07.2002 | EUR | 45 | |||||||||||||||||||
1992 | 7.500 | subordinated | 10.07.2002 | CHF | 200 | |||||||||||||||||||
2001 | 19.250 | GOAL on SAP shares | 15.07.2002 | EUR | 45 | |||||||||||||||||||
2001 | 19.500 | GOAL on Cisco Systems shares | 23.07.2002 | USD | 60 | |||||||||||||||||||
2001 | 8.000 | GOAL on Nestlé shares | 25.07.2002 | CHF | 325 | |||||||||||||||||||
2001 | 12.250 | GOAL on Deutsche Post shares | 25.07.2002 | EUR | 45 | |||||||||||||||||||
2001 | 18.250 | GOAL on UBS shares | 31.07.2002 | USD | 45 | |||||||||||||||||||
2000 | 8.375 | GOAL on DaimlerChrysler shares | 07.08.2002 | EUR | 70 | |||||||||||||||||||
2001 | 14.125 | GOAL on Home Depot shares | 15.08.2002 | USD | 30 | |||||||||||||||||||
2001 | 14.000 | GOAL on Deutsche Bank shares | 19.08.2002 | EUR | 70 | |||||||||||||||||||
1996 | 2.002 | 23.08.2002 | CHF | 299 | ||||||||||||||||||||
2001 | 26.000 | GOAL on Uniphase Corporaton shares | 12.09.2002 | USD | 51 | |||||||||||||||||||
2000 | 9.000 | GOAL on UBS shares | 02.10.2002 | CHF | 345 | |||||||||||||||||||
1992 | 7.000 | subordinated | 16.10.2002 | CHF | 200 | |||||||||||||||||||
1996 | 6.750 | 18.10.2002 | USD | 250 | ||||||||||||||||||||
2001 | 12.500 | GOAL on AOL Time Warner shares | 01.11.2002 | USD | 48 | |||||||||||||||||||
1995 | 4.375 | 07.11.2002 | CHF | 250 | ||||||||||||||||||||
2001 | 10.000 | GOAL on Credit Suisse shares | 15.11.2002 | CHF | 325 | |||||||||||||||||||
2001 | 7.375 | GOAL on Novartis shares | 22.11.2002 | CHF | 100 | |||||||||||||||||||
2001 | 8.125 | GOAL on Roche shares | 06.12.2002 | CHF | 325 | |||||||||||||||||||
1996 | 3.250 | 20.12.2002 | CHF | 350 | ||||||||||||||||||||
2001 | 8.000 | GOAL on UBS shares | 26.02.2003 | CHF | 220 | |||||||||||||||||||
1993 | 4.875 | subordinated | 03.03.2003 | CHF | 200 | |||||||||||||||||||
2001 | 8.750 | GOAL on General Electric shares | 07.03.2003 | USD | 105 | |||||||||||||||||||
1997 | 1.500 | Indexed to UBS Currency Portfolio | 14.03.2003 | EUR | 51 | |||||||||||||||||||
Convertible into | ||||||||||||||||||||||||
1998 | 1.000 | UBS Dutch Corporate Basket | 20.03.2003 | EUR | 57 | |||||||||||||||||||
2001 | 8.500 | GOAL on PepsiCo shares | 28.03.2003 | USD | 30 | |||||||||||||||||||
1993 | 3.500 | subordinated | 31.03.2003 | CHF | 200 | |||||||||||||||||||
1993 | 4.000 | subordinated | 31.03.2003 | CHF | 200 | |||||||||||||||||||
2001 | FRN | BULS on technology stock basket | 10.04.2003 | USD | 80 | |||||||||||||||||||
2001 | 0.000 | BULS on Celestica and others | 28.04.2003 | USD | 40 | |||||||||||||||||||
2001 | 0.000 | BULS on Biotech shares | 16.05.2003 | USD | 32 | |||||||||||||||||||
2001 | 7.250 | GOAL on Aventis shares | 05.06.2003 | EUR | 55 | |||||||||||||||||||
1995 | FRN | subordinated | 20.06.2003 | CHF | 200 | |||||||||||||||||||
2001 | 8.250 | GOAL on Pfizer shares | 16.07.2003 | USD | 45 | |||||||||||||||||||
1993 | 3.000 | 26.11.2003 | CHF | 200 | ||||||||||||||||||||
1994 | FRN | subordinated | 06.01.2004 | USD | 300 | |||||||||||||||||||
2000 | 0.500 | Convertible into NTT shares | 10.02.2004 | USD | 40 | |||||||||||||||||||
2001 | 0.000 | 14.04.2004 | USD | 46 | ||||||||||||||||||||
2001 | 0.000 | Cliquet GROI on NASDAQ 100 Index | 27.05.2004 | USD | 40 | |||||||||||||||||||
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 | 7.375 | subordinated | 26.11.2004 | GBP | 265 | |||||||||||||||||||
1993 | 4.750 | subordinated | 08.01.2005 | 08.01.2003 | CHF | 200 | ||||||||||||||||||
1995 | 4.000 | subordinated | 07.02.2005 | CHF | 150 | |||||||||||||||||||
1995 | 5.500 | 10.02.2005 | CHF | 150 | ||||||||||||||||||||
2000 | 1.000 | Convertible into Nasdaq 100 Index | 18.02.2005 | USD | 50 | |||||||||||||||||||
2000 | 1.000 | Convertible into STOXX 50 Index | 21.03.2005 | EUR | 50 | |||||||||||||||||||
PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note |
Table of Contents
Note 19 Debt Issued (continued)
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20011
Notional | ||||||||||||||||||||||||
amount | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
1995 | 5.625 | subordinated | 15.04.2005 | CHF | 150 | |||||||||||||||||||
2000 | 0.000 | Convertible into Nikkei 225 Index | 31.05.2005 | JPY | 5,000 | |||||||||||||||||||
1995 | FRN | subordinated | 20.06.2005 | GBP | 249 | |||||||||||||||||||
1995 | 6.750 | subordinated | 15.07.2005 | USD | 200 | |||||||||||||||||||
1995 | 5.250 | subordinated | 18.07.2005 | CHF | 200 | |||||||||||||||||||
1995 | 5.000 | subordinated | 24.08.2005 | CHF | 250 | |||||||||||||||||||
2001 | 0.000 | 18.10.2005 | USD | 288 | ||||||||||||||||||||
1995 | 4.500 | 21.11.2005 | CHF | 300 | ||||||||||||||||||||
1999 | 0.000 | PEP on Internet Perf. Basket | 08.12.2005 | USD | 50 | |||||||||||||||||||
1999 | 3.500 | 26.01.2006 | EUR | 650 | ||||||||||||||||||||
Equity Exchangeables into | ||||||||||||||||||||||||
2001 | 1.000 | Euro. Insurance Basket | 01.02.2006 | EUR | 100 | |||||||||||||||||||
1996 | 4.250 | subordinated | 06.02.2006 | CHF | 250 | |||||||||||||||||||
1996 | 4.000 | 14.02.2006 | CHF | 200 | ||||||||||||||||||||
2000 | 2.500 | 29.03.2006 | CHF | 250 | ||||||||||||||||||||
Bermuda Callable | ||||||||||||||||||||||||
2001 | FRN | Daily Accrual Range Note | 29.06.2006 | USD | 98 | |||||||||||||||||||
1996 | 7.250 | subordinated | 17.07.2006 | USD | 500 | |||||||||||||||||||
2001 | 7.500 | Bermuda Callable Daily Accrual Note | 26.07.2006 | USD | 39 | |||||||||||||||||||
2001 | FRN | Callable Reverse Floater | 17.08.2006 | USD | 30 | |||||||||||||||||||
1996 | 7.250 | subordinated | 01.09.2006 | USD | 150 | |||||||||||||||||||
2001 | 0.000 | BULS on S&P 500 | 01.09.2006 | USD | 54 | |||||||||||||||||||
2001 | 5.500 | GOAL on UBS shares | 02.10.2006 | CHF | 66 | |||||||||||||||||||
1995 | 5.000 | subordinated | 07.11.2006 | CHF | 250 | |||||||||||||||||||
1996 | FRN | 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 | 237 | |||||||||||||||||||
1997 | 8.000 | subordinated | 08.01.2007 | GBP | 296 | |||||||||||||||||||
1997 | 5.750 | subordinated | 12.03.2007 | EUR | 197 | |||||||||||||||||||
2001 | FRN | Fixed/Reverse Floating Note | 02.11.2007 | USD | 59 | |||||||||||||||||||
2001 | 1.000 | Notes on World Index Basket | 11.12.2007 | EUR | 50 | |||||||||||||||||||
1998 | 3.500 | 27.08.2008 | CHF | 300 | ||||||||||||||||||||
1997 | 5.875 | subordinated | 18.08.2009 | EUR | 329 | |||||||||||||||||||
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 | FRN | subordinated | 18.12.2025 | GBP | 149 | |||||||||||||||||||
1996 | 7.750 | subordinated | 01.09.2026 | USD | 300 | |||||||||||||||||||
PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note |
111
Table of Contents
UBS Group Financial Statements
Notes to the Financial Statements
Note 19 Debt Issued (continued)
Publicly placed bond issues of UBS subsidiaries outstanding as at 31.12.20011
Notional | ||||||||||||||||||||||||
amount | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
2001 | FRN | 20.12.2003 | 20.12.2003 | EUR | 50 | |||||||||||||||||||
2001 | FRN | 20.12.2013 | 20.12.2013 | EUR | 50 | |||||||||||||||||||
Alpine Partners L.P. | ||||||||||||||||||||||||
2000 | FRN | 08.10.2009 | 08.01.2003 | USD | 709 | |||||||||||||||||||
North Street | ||||||||||||||||||||||||
2000 | FRN | 28.04.2011 | USD | 31 | ||||||||||||||||||||
2000 | FRN | 28.04.2011 | USD | 40 | ||||||||||||||||||||
2000 | FRN | 28.04.2011 | USD | 36 | ||||||||||||||||||||
2000 | 20.000 | 28.04.2011 | USD | 43 | ||||||||||||||||||||
2000 | 9.490 | 30.10.2011 | USD | 36 | ||||||||||||||||||||
2000 | 18.000 | 30.10.2011 | USD | 43 | ||||||||||||||||||||
2000 | FRN | 30.10.2011 | USD | 61 | ||||||||||||||||||||
2000 | FRN | 30.10.2011 | USD | 33 | ||||||||||||||||||||
2001 | FRN | 30.04.2031 | USD | 100 | ||||||||||||||||||||
2001 | FRN | 30.04.2031 | USD | 60 | ||||||||||||||||||||
2001 | FRN | 30.07.2031 | USD | 100 | ||||||||||||||||||||
2001 | FRN | 30.07.2031 | USD | 60 | ||||||||||||||||||||
UBS Americas Inc. (former PaineWebber) | ||||||||||||||||||||||||
1999 | 6.020 | 22.04.2002 | USD | 45 | ||||||||||||||||||||
1995 | 8.250 | 01.05.2002 | USD | 125 | ||||||||||||||||||||
2000 | FRN | 15.07.2002 | USD | 100 | ||||||||||||||||||||
1992 | 7.750 | 02.09.2002 | USD | 175 | ||||||||||||||||||||
1999 | FRN | 18.11.2002 | USD | 40 | ||||||||||||||||||||
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 | ||||||||||||||||||||
1993 | 6.785 | 01.07.2003 | USD | 30 | ||||||||||||||||||||
1998 | 6.450 | 01.12.2003 | USD | 340 | ||||||||||||||||||||
1999 | FRN | 11.05.2004 | USD | 45 | ||||||||||||||||||||
1999 | 6.375 | 17.05.2004 | USD | 525 | ||||||||||||||||||||
1999 | 2.580 | 13.10.2004 | USD | 30 | ||||||||||||||||||||
1999 | 2.670 | 15.03.2005 | USD | 45 | ||||||||||||||||||||
1995 | 8.875 | 15.03.2005 | USD | 125 | ||||||||||||||||||||
1998 | 6.520 | 06.04.2005 | USD | 30 | ||||||||||||||||||||
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 | ||||||||||||||||||||
1998 | 6.640 | 14.04.2010 | USD | 30 | ||||||||||||||||||||
1994 | 7.625 | 17.02.2014 | USD | 200 | ||||||||||||||||||||
1997 | 8.060 | 17.01.2017 | USD | 25 | ||||||||||||||||||||
1997 | 8.080 | subordinated | 01.03.2037 | 01.03.2002 | USD | 199 | ||||||||||||||||||
UBS Principal Finance LLC | ||||||||||||||||||||||||
2000 | 8.670 | 20.01.2009 | 20.01.2002 | USD | 102 | |||||||||||||||||||
PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note |
112
Table of Contents
Note 19 Debt Issued (continued)
Publicly placed bond issues of UBS subsidiaries outstanding as at 31.12.20011
Notional | ||||||||||||||||||||||||
amount | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
Eisberg Finance Ltd. | ||||||||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 41 | |||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 65 | |||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 83 | |||||||||||||||||||
UBS Finance N.V., Curaçao | ||||||||||||||||||||||||
1990 | 9.125 | 08.02.2002 | USD | 225 | ||||||||||||||||||||
1992 | FRN | 13.11.2002 | USD | 250 | ||||||||||||||||||||
1997 | 0.000 | 29.01.2027 | EUR | 210 | ||||||||||||||||||||
1998 | 0.000 | 03.03.2028 | 03.03.2003 | EUR | 77 | |||||||||||||||||||
UBS Australia Holdings Ltd. | ||||||||||||||||||||||||
1999 | 5.000 | 25.02.2002 | AUD | 104 | ||||||||||||||||||||
1999 | 5.000 | 25.02.2004 | AUD | 104 | ||||||||||||||||||||
SBC Glacier Finance Ltd. | ||||||||||||||||||||||||
1997 | FRN | 10.09.2004 | 10.09.2002 | USD | 36 | |||||||||||||||||||
1997 | FRN | 10.09.2004 | 10.03.2002 | USD | 798 | |||||||||||||||||||
1997 | FRN | 10.09.2006 | 10.03.2002 | USD | 798 | |||||||||||||||||||
UBS Warburg AG | ||||||||||||||||||||||||
1998 | 0.000 | 19.12.2005 | EUR | 56 | ||||||||||||||||||||
2001 | 0.000 | 30.06.2006 | USD | 202 | ||||||||||||||||||||
2001 | 0.000 | 30.06.2006 | EUR | 505 | ||||||||||||||||||||
2001 | 0.000 | 31.07.2006 | EUR | 500 | ||||||||||||||||||||
2001 | 0.000 | 30.09.2006 | CHF | 200 | ||||||||||||||||||||
2001 | 0.000 | 30.09.2006 | USD | 200 | ||||||||||||||||||||
2001 | 0.000 | 02.01.2007 | EUR | 100 | ||||||||||||||||||||
2001 | 0.000 | 02.01.2007 | EUR | 100 | ||||||||||||||||||||
2001 | 0.000 | 02.01.2007 | EUR | 100 | ||||||||||||||||||||
2001 | 0.000 | 30.09.2011 | EUR | 50 | ||||||||||||||||||||
1 | In this table only bonds with a carrying value exceeding CHF 50 million have been disclosed. The total notional amount of the bonds disclosed in this table is CHF 40,859 million. The total notional amount of publicly placed bonds of UBS Group is CHF 48,646 million of the total bond issues. |
PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note |
113
Table of Contents
UBS Group Financial Statements
Notes to the Financial Statements
Note 20 Other Liabilities
CHF million | Note | 31.12.01 | 31.12.00 | |||||||||
Provisions, including restructuring provision | 21 | 1,748 | 3,024 | |||||||||
Provision for commitments and contingent liabilities | 10b | 305 | 54 | |||||||||
Current tax liabilities | 1,799 | 2,423 | ||||||||||
Deferred tax liabilities | 22 | 2,827 | 1,565 | |||||||||
VAT and other tax payables | 622 | 1,071 | ||||||||||
Settlement and clearing accounts | 4,473 | 4,906 | ||||||||||
Other payables | 3,884 | 5,713 | ||||||||||
Total other liabilities | 15,658 | 18,756 | ||||||||||
Note 21 Provisions, including Restructuring Provision
Business risk provisions
CHF million | 31.12.01 | 31.12.00 | ||||||
Balance at the beginning of the year | 2,294 | 2,182 | ||||||
New provisions charged to income | 384 | 746 | ||||||
Provisions applied | (1,020 | ) | (1,316 | ) | ||||
Recoveries and adjustments | 90 | 682 | ||||||
Balance at the end of the year | 1,748 | 2,294 | ||||||
CHF million | 31.12.01 | 31.12.00 | ||||||
Litigation | 712 | 598 | ||||||
Operational | 240 | 374 | ||||||
Other | 796 | 1,322 | ||||||
Total | 1,748 | 2,294 | ||||||
UBS / SBC merger restructuring provision
CHF million | 31.12.01 | 31.12.00 | |||||||
Balance at the beginning of the year | 730 | 1,429 | |||||||
Addition | 0 | 0 | |||||||
Applied1 | |||||||||
Personnel | (370 | ) | (188 | ) | |||||
IT | (23 | ) | (63 | ) | |||||
Premises | (302 | ) | (399 | ) | |||||
Other | (14 | ) | (49 | ) | |||||
Total utilized during the year | (709 | ) | (699 | ) | |||||
Released to the Income Statement | (21 | ) | 0 | ||||||
Balance at the end of the year | 0 | 730 | |||||||
Total provisions, including restructuring provision | 1,748 | 3,024 | |||||||
114
Table of Contents
Note 21 Provisions, including Restructuring Provision (continued)
Cumulative utilization, since establishment of UBS/SBC merger restructuring
provision through 31 December 2001
CHF million | Personnel | IT | Premises | Other | Total | ||||||||||||||||
UBS Switzerland | 837 | 1,109 | 219 | 220 | 2,385 | ||||||||||||||||
Private and Corporate Clients | 707 | 974 | 209 | 217 | 2,107 | ||||||||||||||||
Private Banking | 130 | 135 | 10 | 3 | 278 | ||||||||||||||||
UBS Asset Management | 34 | 9 | 0 | 3 | 46 | ||||||||||||||||
UBS Warburg | 1,983 | 373 | 1 | 413 | 2,770 | ||||||||||||||||
Corporate Center | 106 | 34 | 1,421 | 517 | 2,078 | ||||||||||||||||
Group total | 2,960 | 1,525 | 1,641 | 1,153 | 7,279 | ||||||||||||||||
Released to the Income Statement | 21 | ||||||||||||||||||||
Total | 7,300 | ||||||||||||||||||||
At the announcement of the UBS / SBC merger in December 1997, it was communicated that the merged firm’s operations in various locations would be combined, resulting in vacant properties, reductions in personnel, elimination of redundancies in the information technology platforms, exit costs and other costs. As a result, a restructuring provision of CHF 7,300 million (of which CHF 7,000 million was recognized as a restructuring expense in 1997 and CHF 300 million was recognized as a component of general and administrative expense in the fourth quarter of 1999) was established, to be used over a period of four years.
115
Table of Contents
UBS Group Financial Statements
Notes to the Financial Statements
Note 22 Income Taxes
CHF million | |||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||
Domestic | |||||||||||||
Current payable | 563 | 1,325 | 849 | ||||||||||
Deferred | 231 | 233 | 511 | ||||||||||
Foreign | |||||||||||||
Current payable | 546 | 451 | 359 | ||||||||||
Deferred | 61 | 311 | (33 | ) | |||||||||
Total income tax expense | 1,401 | 2,320 | 1,686 | ||||||||||
The Group made net tax payments, including domestic and foreign taxes, of CHF 1,742 million, CHF 959 million and CHF 1,063 million for the full years of 2001, 2000 and 1999, respectively.
CHF million | ||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||
Operating profit before tax | 6,718 | 10,199 | 7,893 | |||||||||||
Domestic | 5,565 | 7,079 | 6,957 | |||||||||||
Foreign | 1,153 | 3,120 | 936 | |||||||||||
Income taxes at Swiss statutory rate of 25% | 1,680 | 2,550 | 1,973 | |||||||||||
Increase / (decrease) resulting from: | ||||||||||||||
Applicable tax rates differing from Swiss statutory rate | (239 | ) | (336 | ) | 55 | |||||||||
Tax losses not recognized | 77 | 164 | 39 | |||||||||||
Previously unrecorded tax losses now recognized | (630 | ) | (655 | ) | (215 | ) | ||||||||
Lower taxed income | (499 | ) | (401 | ) | (278 | ) | ||||||||
Non-deductible goodwill amortization | 429 | 159 | 98 | |||||||||||
Other non-deductible expenses | 134 | 432 | 34 | |||||||||||
Adjustments related to prior years | 371 | 245 | (112 | ) | ||||||||||
Change in deferred tax valuation allowance | 78 | 162 | 92 | |||||||||||
Income tax expense | 1,401 | 2,320 | 1,686 | |||||||||||
116
Table of Contents
Note 22 Income Taxes (continued)
Significant components of the Group’s deferred income tax assets and liabilities (gross) are as follows:
CHF million | 31.12.01 | 31.12.00 | ||||||
Deferred tax assets | ||||||||
Compensation and benefits | 1,778 | 1,705 | ||||||
Restructuring provision | 0 | 160 | ||||||
Allowance for credit losses | 122 | 148 | ||||||
Net operating loss carry forwards | 2,902 | 1,690 | ||||||
Trading assets | 259 | 24 | ||||||
Other | 1,365 | 1,045 | ||||||
Total | 6,426 | 4,772 | ||||||
Valuation allowance | (2,977 | ) | (2,564 | ) | ||||
Net deferred tax assets | 3,449 | 2,208 | ||||||
Deferred tax liabilities | ||||||||
Property and equipment | 449 | 457 | ||||||
Investments | 464 | 86 | ||||||
Other provisions | 571 | 133 | ||||||
Trading assets | 298 | 306 | ||||||
Other | 1,045 | 583 | ||||||
Total deferred tax liabilities | 2,827 | 1,565 | ||||||
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 and also due to the acquisition of PaineWebber.
The carry forwards expire as follows: | 31.12.01 | |||
Within 1 year | 123 | |||
From 2 to 4 years | 148 | |||
After 4 years | 7,191 | |||
Total | 7,462 | |||
117
Table of Contents
UBS Group Financial Statements
Notes to the Financial Statements
Note 23 Minority Interests
CHF million | 31.12.01 | 31.12.00 | ||||||
Balance at the beginning of the year | 2,885 | 434 | ||||||
Issuance of trust preferred securities | 1,291 | 2,594 | ||||||
Increases | 0 | 2 | ||||||
Decreases and dividend payments | (461 | ) | (73 | ) | ||||
Foreign currency translation | 53 | (159 | ) | |||||
Minority interest in net profit | 344 | 87 | ||||||
Balance at the end of the year | 4,112 | 2,885 | ||||||
Note 24 Derivative Instruments
Type of derivatives
Swaps
Forwards and futures
Options
Derivatives held or issued for trading purposes
Derivatives held or issued for hedging purposes
118
Table of Contents
Derivatives designated and accounted for as hedging instruments
Fair value hedges
Cash flow hedges of individual variable rate assets and liabilities
119
Table of Contents
UBS Group Financial Statements
Notes to the Financial Statements
Note 24 Derivative Instruments (continued)
fair value of outstanding derivatives designated as cash flow hedges was a CHF 16 million net unrealized gain recorded in shareholders’ equity.
Cash flow hedges of forecasted transactions
CHF million | <1 year | 1–3 years | 3–5 years | 5–10 years | over 10 years | |||||||||||||||
Cash in flows (Assets) | 92,483 | 154,733 | 81,015 | 92,027 | 11,253 | |||||||||||||||
Cash out flows (Liabilities) | 183,482 | 299,566 | 229,368 | 401,674 | 352,707 | |||||||||||||||
Net cash flows | (90,999 | ) | (144,833 | ) | (148,353 | ) | (309,647 | ) | (341,454 | ) | ||||||||||
Gains and losses on derivative contracts that are reclassified from accumulated Gains/losses not recognized in the income statement to current period earnings are included in Net interest income. As of 31 December 2001, the fair value of outstanding derivatives designated as cash flow hedges of forecasted transactions was a CHF 554 million unrealized loss. Amounts reclassified from Gains/losses not recognized in the income statement to the Income statement due to discontinued hedges of forecasted transactions were immaterial.
Notional amounts and replacement values
120
Table of Contents
Note 24 Derivative Instruments (continued)
As at 31 December 2001
Total | |||||||||||||||||||||||||||||||||||||||||||||
Term to maturity | notional | ||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3–12 months | 1–5 years | over 5 years | Total | Total | amount | |||||||||||||||||||||||||||||||||||||||
CHF million | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | ||||||||||||||||||||||||||||||||||
Interest rate 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 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 83.6 | ||||||||||||||||||||||||||||||||||||||||||
Options | 3 | 24 | 3 | 24 | 63.2 | ||||||||||||||||||||||||||||||||||||||||
Total | 6,042 | 8,532 | 6,508 | 9,042 | 52,188 | 49,322 | 28,110 | 26,336 | 92,848 | 93,232 | 7,252.8 | ||||||||||||||||||||||||||||||||||
Credit derivative 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 | |||||||||||||||||||||||||||||||||||||
Total | 6 | 18 | 791 | 1,725 | 1,020 | 2,126 | 785 | 1,184 | 2,602 | 5,053 | 79.3 | ||||||||||||||||||||||||||||||||||
Foreign exchange 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 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 2 | 1 | 2 | 0.8 | ||||||||||||||||||||||||||||||||||||||||
Total | 25,097 | 16,329 | 12,779 | 11,552 | 8,663 | 8,534 | 3,508 | 2,313 | 50,047 | 38,728 | 3,013.5 | ||||||||||||||||||||||||||||||||||
Precious metals 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 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||
Options | 2 | 3 | 1 | 3 | 3 | 0.9 | |||||||||||||||||||||||||||||||||||||||
Total | 419 | 389 | 748 | 706 | 935 | 984 | 96 | 81 | 2,198 | 2,160 | 72.0 | ||||||||||||||||||||||||||||||||||
Equity / Index 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 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Total | 9,039 | 8,724 | 5,926 | 8,249 | 6,138 | 8,918 | 1,219 | 2,943 | 22,322 | 28,834 | 726.0 | ||||||||||||||||||||||||||||||||||
Commodity contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 8 | 14 | 1 | 1 | 9 | 15 | 6.4 | ||||||||||||||||||||||||||||||||||||||
Options | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||
Total | 8 | 14 | 1 | 1 | 0 | 0 | 0 | 0 | 9 | 15 | 6.4 | ||||||||||||||||||||||||||||||||||
Total derivative instruments | 40,611 | 34,006 | 26,753 | 31,275 | 68,944 | 69,884 | 33,718 | 32,857 | 170,026 | 168,022 | |||||||||||||||||||||||||||||||||||
Replacement value netting | 96,579 | �� | 96,579 | ||||||||||||||||||||||||||||||||||||||||||
Replacement values after netting | 73,447 | 71,443 | |||||||||||||||||||||||||||||||||||||||||||
1 | PRV: Positive replacement value. | |
2 | NRV: Negative replacement value. | |
3 | Exchange-traded products include proprietary trades only. |
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UBS Group Financial Statements
Notes to the Financial Statements
Note 24 Derivative Instruments (continued)
As at 31 December 2000
Total | |||||||||||||||||||||||||||||||||||||||||||||
Term to maturity | notional | ||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3–12 months | 1–5 years | over 5 years | Total | Total | amount | |||||||||||||||||||||||||||||||||||||||
CHF million | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | ||||||||||||||||||||||||||||||||||
Interest rate contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 517 | 791 | 167 | 360 | 284 | 256 | 968 | 1,407 | 1,066.3 | ||||||||||||||||||||||||||||||||||||
Swaps | 1,566 | 4,231 | 5,398 | 1,694 | 15,759 | 7,793 | 27,892 | 20,872 | 50,615 | 34,590 | 3,030.2 | ||||||||||||||||||||||||||||||||||
Options | 542 | 453 | 865 | 2,882 | 623 | 5,162 | 625 | 2,044 | 2,655 | 10,541 | 829.1 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 454.6 | ||||||||||||||||||||||||||||||||||||||||||
Options | 6 | 10 | 0 | 16 | 24.1 | ||||||||||||||||||||||||||||||||||||||||
Total | 2,625 | 5,481 | 6,430 | 4,946 | 16,666 | 13,211 | 28,517 | 22,916 | 54,238 | 46,554 | 5,404.3 | ||||||||||||||||||||||||||||||||||
Credit derivative contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 88 | 87 | 889 | 1,700 | 76 | 2,497 | 965 | 4,372 | 35.5 | ||||||||||||||||||||||||||||||||||||
Total rate of return swaps | 313 | 91 | 1,087 | 1,453 | 356 | 121 | 1,756 | 1,665 | 3.0 | ||||||||||||||||||||||||||||||||||||
Total | 313 | 88 | 0 | 178 | 1,976 | 3,153 | 432 | 2,618 | 2,721 | 6,037 | 38.5 | ||||||||||||||||||||||||||||||||||
Foreign exchange contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 22,652 | 20,140 | 8,098 | 9,410 | 939 | 1,084 | 35 | 27 | 31,724 | 30,661 | 1,250.3 | ||||||||||||||||||||||||||||||||||
Interest and currency swaps | 2,563 | 1,621 | 2,921 | 2,507 | 8,715 | 7,031 | 3,019 | 2,098 | 17,218 | 13,257 | 345.9 | ||||||||||||||||||||||||||||||||||
Options | 2,958 | 2,726 | 2,896 | 3,031 | 821 | 438 | 28 | 35 | 6,703 | 6,230 | 786.8 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 1.0 | ||||||||||||||||||||||||||||||||||||||||||
Options | 4 | 1 | 21 | 4 | 25 | 5 | 1.2 | ||||||||||||||||||||||||||||||||||||||
Total | 28,177 | 24,488 | 13,936 | 14,952 | 10,475 | 8,553 | 3,082 | 2,160 | 55,670 | 50,153 | 2,385.2 | ||||||||||||||||||||||||||||||||||
Precious metals contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 176 | 187 | 211 | 181 | 369 | 394 | 2 | 17 | 758 | 779 | 15.3 | ||||||||||||||||||||||||||||||||||
Options | 128 | 80 | 206 | 201 | 934 | 936 | 85 | 119 | 1,353 | 1,336 | 75.2 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.7 | ||||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 2 | 6 | 12 | 7 | 14 | 1.3 | ||||||||||||||||||||||||||||||||||||||
Total | 305 | 269 | 423 | 394 | 1,303 | 1,330 | 87 | 136 | 2,118 | 2,129 | 92.5 | ||||||||||||||||||||||||||||||||||
Equity / Index contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 1,417 | 3,186 | 1,170 | 2,271 | 2,424 | 3,019 | 1,715 | 2,948 | 6,726 | 11,424 | 32.2 | ||||||||||||||||||||||||||||||||||
Options | 1,751 | 3,867 | 6,977 | 12,358 | 4,752 | 17,985 | 311 | 2,648 | 13,791 | 36,858 | 283.8 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 15.3 | ||||||||||||||||||||||||||||||||||||||||||
Options | 1,771 | 1,647 | 819 | 1,051 | 400 | 446 | 2 | 3 | 2,992 | 3,147 | 45.2 | ||||||||||||||||||||||||||||||||||
Total | 4,939 | 8,700 | 8,966 | 15,680 | 7,576 | 21,450 | 2,028 | 5,599 | 23,509 | 51,429 | 376.5 | ||||||||||||||||||||||||||||||||||
Commodity contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 1 | 0 | 2 | 0.0 | |||||||||||||||||||||||||||||||||||||||||
Options | 1 | 3 | 3 | 3 | 4 | 4 | 0.0 | ||||||||||||||||||||||||||||||||||||||
Total | 0 | 2 | 1 | 0 | 3 | 4 | 0 | 0 | 4 | 6 | 0.0 | ||||||||||||||||||||||||||||||||||
Total derivative instruments | 36,359 | 39,028 | 29,756 | 36,150 | 37,999 | 47,701 | 34,146 | 33,429 | 138,260 | 156,308 | |||||||||||||||||||||||||||||||||||
Replacement value netting | 80,385 | 80,385 | |||||||||||||||||||||||||||||||||||||||||||
Replacement values after netting | 57,875 | 75,923 | |||||||||||||||||||||||||||||||||||||||||||
1 | PRV: Positive replacement value. | |
2 | NRV: Negative replacement value. | |
3 | Exchange-traded products include proprietary trades only. |
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Off-Balance Sheet and other Information
Note 25 Pledged Assets
Carrying | Related | Carrying | Related | |||||||||||||
amount | liability | amount | liability | |||||||||||||
CHF million | 31.12.01 | 31.12.01 | 31.12.00 | 31.12.00 | ||||||||||||
Mortgage loans | 1,311 | 873 | 1,639 | 1,121 | ||||||||||||
Securities 1 | 204,623 | 163,134 | 116,266 | 62,616 | ||||||||||||
Property and equipment | 160 | 89 | 137 | 66 | ||||||||||||
Other | 2 | 0 | 1 | 0 | ||||||||||||
Total pledged assets | 206,096 | 164,096 | 118,043 | 63,803 | ||||||||||||
1 Includes securities pledged in respect of securities lending and repurchase agreements.
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.
Note 26 Fiduciary Transactions
CHF million | 31.12.01 | 31.12.00 | ||||||
Placements with third parties | 58,466 | 69,300 | ||||||
Fiduciary credits and other fiduciary financial transactions | 1,136 | 1,234 | ||||||
Total fiduciary transactions | 59,602 | 70,534 | ||||||
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.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 27 Commitments and Contingent Liabilities
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 our customers, but not yet drawn upon by them, the majority of which range in maturity from 1 month to 5 years.
CHF million | 31.12.01 | 31.12.00 | ||||||
Contingent liabilities | ||||||||
Credit guarantees and similar instruments1 | 18,566 | 18,651 | ||||||
Sub-participations | (4,944 | ) | (5,669 | ) | ||||
Total | 13,622 | 12,982 | ||||||
Performance guarantees and similar instruments2 | 4,865 | 6,337 | ||||||
Sub-participations | (4 | ) | (62 | ) | ||||
Total | 4,861 | 6,275 | ||||||
Irrevocable commitments under documentary credits | 2,056 | 2,798 | ||||||
Sub-participations | 0 | 0 | ||||||
Total | 2,056 | 2,798 | ||||||
Gross contingent liabilities | 25,487 | 27,786 | ||||||
Sub-participations | (4,948 | ) | (5,731 | ) | ||||
Net contingent liabilities | 20,539 | 22,055 | ||||||
Irrevocable commitments | ||||||||
Undrawn irrevocable credit facilities | 50,608 | 53,510 | ||||||
Sub-participations | (532 | ) | (788 | ) | ||||
Total | 50,076 | 52,722 | ||||||
Liabilities for calls on shares and other equities | 98 | 133 | ||||||
Gross irrevocable commitments | 50,706 | 53,643 | ||||||
Sub-participations | (532 | ) | (788 | ) | ||||
Net irrevocable commitments | 50,174 | 52,855 | ||||||
Gross commitments and contingent liabilities | 76,193 | 81,429 | ||||||
Sub-participations | (5,480 | ) | (6,519 | ) | ||||
Net commitments and contingent liabilities | 70,713 | 74,910 | ||||||
1 | Credit guarantees in the form of bill of exchange and other guarantees, including guarantees in the form of irrevocable letters of credit, endorsement liabilities from bills rediscounted, advance payment guarantees and similar facilities. | |
2 | Bid bonds, performance bonds, builders’ guarantees, letters of indemnity, other performance guarantees in the form of irrevocable letters of credit and similar facilities. |
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Note 27 Commitments and Contingent Liabilities (continued)
Mortgage | Other | |||||||||||||||
CHF million | collateral | collateral | Unsecured | Total | ||||||||||||
Overview of collateral | ||||||||||||||||
Gross contingent liabilities | 293 | 14,243 | 10,951 | 25,487 | ||||||||||||
Gross irrevocable commitments | 1,418 | 11,382 | 37,808 | 50,608 | ||||||||||||
Liabilities for calls on shares and other equities | 98 | 98 | ||||||||||||||
Total 31.12.2001 | 1,711 | 25,625 | 48,857 | 76,193 | ||||||||||||
Total 31.12.2000 | 1,278 | 20,158 | 59,993 | 81,429 | ||||||||||||
Other commitments
The Group enters into commitments to fund external private equity funds and investments, which typically expire within five years. These commitments do not involve credit or market risk as the funds purchase investments at market value at the time the commitments are drawn. The maximum amount available to fund these investments at 31 December 2001 and 31 December 2000 was CHF 3,548 million and CHF 3,276 million, respectively.
Note 28 Operating Lease Commitments
Our minimum commitments for non-cancellable leases of premises and equipment are presented as follows:
CHF million | 31.12.01 | |||
Operating leases due | ||||
2002 | 1,200 | |||
2003 | 1,081 | |||
2004 | 965 | |||
2005 | 823 | |||
2006 | 742 | |||
2007 and thereafter | 5,953 | |||
Total commitments for minimum payments under operating leases | 10,764 | |||
Operating expenses include CHF 1,092 million, CHF 816 million and CHF 742 million in respect of operating lease rentals for the year ended 31 December 2001, 31 December 2000 and 31 December 1999, respectively.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Litigation
In the United States, several class actions in relation to the business activities of Swiss Companies during World War II, have been brought against the bank (as legal successor to Swiss Bank Corporation and Union Bank of Switzerland) in the United States District Court for the Eastern District of New York (Brooklyn). These lawsuits were initially filed in October 1996. Another Swiss bank was designated as a defendant alongside us. On 12 August 1998, however, a settlement was reached between the parties. This settlement provides for a payment by the defendant banks to the plaintiffs, under certain terms and conditions, of an aggregate amount of USD 1.25 billion. UBS agreed to contribute up to two-thirds of this amount. As a result of contributions by Swiss industrial companies to the settlement, UBS’ share was reduced by CHF 50 million. A number of persons have elected to opt out of the settlement and not to participate in the class action. The settlement agreement was approved by the court on 26 July 2000, and on 22 November 2000 the distribution plan has been approved. By 23 November 2000 the banks have transferred the last instalment of the settlement amount to the court for distribution. The approval of the Settlement became final by 30 May 2001. There is one appeal by the banks regarding the interpretation of the Settlement Agreement which has yet to be decided. However, this appeal is without financial impact to the bank.
126
Table of Contents
Note 30 Financial Instruments Risk Position
Overall risk position
a) Interest Rate Risk
Interest rate risk is the potential impact from changes in market interest rates on the fair values of assets and liabilities on the balance sheet and on the annual interest income and expense in the income statement.
Interest rate sensitivity
127
Table of Contents
UBS Group Financial Statements
Notes to the Financial Statements
Note 30 Financial Instruments Risk Position (continued)
a) Interest Rate Risk (continued)
Interest rate sensitivity position
Interest sensitivity by time bands as of 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 | ) | ||||||||||||||||||
Interest sensitivity by time bands as of 31.12.2000 | ||||||||||||||||||||||||||||
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 | 41 | (471 | ) | 854 | 63 | (478 | ) | 9 | |||||||||||||||||||
Non-trading | (39 | ) | 49 | (49 | ) | (6,802 | ) | (3,018 | ) | (9,859 | ) | |||||||||||||||||
USD | Trading | (493 | ) | 2,007 | 293 | (2,293 | ) | 380 | (106 | ) | ||||||||||||||||||
Non-trading | 13 | 58 | 11 | (342 | ) | (183 | ) | (443 | ) | |||||||||||||||||||
EUR | Trading | (82 | ) | (152 | ) | 114 | 1,190 | (1,801 | ) | (731 | ) | |||||||||||||||||
Non-trading | 0 | 9 | 1 | 82 | 177 | 269 | ||||||||||||||||||||||
GBP | Trading | (227 | ) | 152 | 145 | (229 | ) | 521 | 362 | |||||||||||||||||||
Non-trading | 0 | 0 | (36 | ) | 270 | 585 | 819 | |||||||||||||||||||||
JPY | Trading | 293 | (1,532 | ) | 1,088 | 62 | (450 | ) | (539 | ) | ||||||||||||||||||
Non-trading | 0 | 0 | 0 | (1 | ) | (4 | ) | (5 | ) | |||||||||||||||||||
Others | Trading | (2 | ) | (41 | ) | 124 | (50 | ) | (44 | ) | (13 | ) | ||||||||||||||||
Non-trading | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Trading
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Note 30 Financial Instruments Risk Position (continued)
a) Interest Rate Risk (continued)
Non-trading
b) Credit Risk
Credit risk represents the loss which the Group would suffer if a counterparty or issuer failed to perform its contractual obligations in all forms. Credit risk is inherent in traditional banking products – loans, commitments to lend, and contracts to support counterparties’ obligations to third parties such as letters of credit – and in foreign exchange and derivatives contracts, such as swaps and options (“traded products”). Positions in tradable assets such as bonds and equities, including both direct holdings and synthetic positions through derivatives, also carry credit risk.
(b)(i) On-balance sheet assets
Derivatives
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Table of Contents
UBS Group Financial Statements
Notes to the Financial Statements
Note 30 Financial Instruments Risk Position (continued)
b) Credit Risk (continued)
(b)(ii) Off-balance sheet financial instruments
Credit commitments and contingent liabilities
(b)(iii) Credit risk mitigation techniques
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Note 30 Financial Instruments Risk Position (continued)
c) Currency Risk
The Swiss franc is the Group’s reporting currency. Hedging transactions are used to manage foreign currency risks (see Note 24: Derivative Instruments).
Breakdown of assets and liabilities by currencies
31.12.01 | 31.12.00 | |||||||||||||||||||||||||||||||
CHF billion | CHF | USD | EUR | Other | CHF | USD | EUR | Other | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and balances with central banks | 3.0 | 0.3 | 0.6 | 17.1 | 1.9 | 0.2 | 0.5 | 0.4 | ||||||||||||||||||||||||
Due from banks | 5.0 | 8.6 | 5.2 | 8.7 | 5.8 | 10.4 | 8.0 | 4.9 | ||||||||||||||||||||||||
Cash collateral on securities borrowed | 0.1 | 156.4 | 2.5 | 3.9 | 0.5 | 169.2 | 2.4 | 5.8 | ||||||||||||||||||||||||
Reverse repurchase agreements | 5.1 | 142.9 | 40.2 | 81.1 | 5.3 | 83.7 | 37.4 | 67.4 | ||||||||||||||||||||||||
Trading portfolio assets | 9.6 | 265.2 | 47.2 | 75.9 | 16.1 | 184.1 | 38.2 | 77.2 | ||||||||||||||||||||||||
Positive replacement values | 30.6 | 11.4 | 1.2 | 30.2 | 11.7 | 6.9 | 0.6 | 38.7 | ||||||||||||||||||||||||
Loans, net of allowance for credit losses | 151.4 | 43.1 | 11.9 | 20.1 | 154.2 | 52.3 | 7.1 | 31.2 | ||||||||||||||||||||||||
Financial investments | 2.9 | 7.4 | 1.5 | 17.0 | 6.5 | 8.3 | 0.9 | 3.9 | ||||||||||||||||||||||||
Accrued income and prepaid expenses | 0.7 | 4.9 | 0.8 | 1.2 | 1.6 | 4.4 | 0.2 | 0.9 | ||||||||||||||||||||||||
Investments in associates | 0.7 | 0.0 | 0.0 | 0.0 | 0.7 | 0.0 | 0.1 | 0.1 | ||||||||||||||||||||||||
Property and equipment | 6.3 | 1.5 | 0.1 | 0.8 | 6.9 | 1.4 | 0.0 | 0.6 | ||||||||||||||||||||||||
Goodwill and other intangible assets | 0.2 | 18.5 | 0.0 | 0.4 | 0.3 | 19.1 | 0.0 | 0.1 | ||||||||||||||||||||||||
Other assets | 2.1 | 5.6 | 0.8 | 1.4 | 3.2 | 3.3 | 0.6 | 2.4 | ||||||||||||||||||||||||
Total assets | 217.7 | 665.8 | 112.0 | 257.8 | 214.7 | 543.3 | 96.0 | 233.6 | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Due to banks | 8.0 | 68.6 | 12.9 | 17.0 | 6.5 | 46.5 | 10.6 | 18.6 | ||||||||||||||||||||||||
Cash collateral on securities lent | 0.0 | 24.3 | 3.2 | 2.8 | 0.1 | 12.6 | 5.0 | 5.7 | ||||||||||||||||||||||||
Repurchase agreements | 12.8 | 271.1 | 30.7 | 54.0 | 10.0 | 194.6 | 16.1 | 74.9 | ||||||||||||||||||||||||
Trading portfolio liabilities | 2.8 | 65.2 | 12.5 | 25.3 | 2.0 | 52.4 | 11.4 | 16.8 | ||||||||||||||||||||||||
Negative replacement values | 25.7 | 6.5 | 1.6 | 37.7 | 8.6 | 6.3 | 2.0 | 59.0 | ||||||||||||||||||||||||
Due to customers | 123.3 | 138.8 | 41.5 | 30.2 | 118.8 | 129.7 | 29.9 | 32.4 | ||||||||||||||||||||||||
Accrued expenses and deferred income | 2.4 | 10.0 | 0.9 | 4.0 | 3.0 | 11.8 | 1.7 | 4.5 | ||||||||||||||||||||||||
Debt issued | 15.7 | 120.0 | 8.8 | 11.7 | 18.3 | 90.7 | 4.4 | 16.2 | ||||||||||||||||||||||||
Other liabilities | 7.2 | 6.1 | 0.9 | 1.5 | 9.9 | 3.6 | 2.5 | 2.8 | ||||||||||||||||||||||||
Minority interests | 0.1 | 3.9 | 0.0 | 0.1 | 0.2 | 2.5 | 0.1 | 0.1 | ||||||||||||||||||||||||
Shareholders’ equity | 43.5 | 0.0 | 0.0 | 0.0 | 44.8 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 241.5 | 714.5 | 113.0 | 184.3 | 222.2 | 550.7 | 83.7 | 231.0 | ||||||||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 30 Financial Instruments Risk Position (continued)
d) Liquidity Risk
Maturity analysis of assets and liabilities
Due | Due | |||||||||||||||||||||||||||
Due | between | between | Due | |||||||||||||||||||||||||
On | Subject | within | 3 and | 1 and | after | |||||||||||||||||||||||
CHF billion | demand | to notice1 | 3 mths | 12 mths | 5 years | 5 years | Total | |||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Cash and balances with central banks | 21.0 | 21.0 | ||||||||||||||||||||||||||
Due from banks | 10.6 | 0.0 | 14.7 | 1.5 | 0.4 | 0.3 | 27.5 | |||||||||||||||||||||
Cash collateral on securities borrowed | 0.0 | 0.0 | 162.5 | 0.0 | 0.4 | 0.0 | 162.9 | |||||||||||||||||||||
Reverse repurchase agreements | 0.0 | 0.0 | 236.9 | 31.4 | 1.0 | 0.0 | 269.3 | |||||||||||||||||||||
Trading portfolio assets | 397.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 397.9 | |||||||||||||||||||||
Positive replacement values | 73.4 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 73.4 | |||||||||||||||||||||
Loans, net of allowance for credit losses | 0.0 | 29.7 | 96.0 | 36.5 | 54.7 | 9.6 | 226.5 | |||||||||||||||||||||
Financial investments | 9.3 | 0.3 | 3.3 | 4.8 | 7.1 | 4.0 | 28.8 | |||||||||||||||||||||
Accrued income and prepaid expenses | 7.6 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 7.6 | |||||||||||||||||||||
Investments in associates | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.7 | 0.7 | |||||||||||||||||||||
Property and equipment | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 8.7 | 8.7 | |||||||||||||||||||||
Goodwill and other intangible assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 19.1 | 19.1 | |||||||||||||||||||||
Other assets | 9.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 9.9 | |||||||||||||||||||||
Total 31.12.2001 | 529.7 | 30.0 | 513.4 | 74.2 | 63.6 | 42.4 | 1,253.3 | |||||||||||||||||||||
Total 31.12.2000 | 351.8 | 38.8 | 502.3 | 87.3 | 60.8 | 46.6 | 1,087.6 | |||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Due to banks | 11.1 | 2.7 | 87.9 | 4.2 | 0.5 | 0.1 | 106.5 | |||||||||||||||||||||
Cash collateral on securities lent | 0.0 | 0.0 | 30.3 | 0.0 | 0.0 | 0.0 | 30.3 | |||||||||||||||||||||
Repurchase agreements | 0.0 | 0.0 | 336.9 | 31.7 | 0.0 | 0.0 | 368.6 | |||||||||||||||||||||
Trading portfolio liabilities | 105.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 105.8 | |||||||||||||||||||||
Negative replacement values | 71.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 71.5 | |||||||||||||||||||||
Due to customers | 141.4 | 3.7 | 178.9 | 7.7 | 1.2 | 0.9 | 333.8 | |||||||||||||||||||||
Accrued expenses and deferred income | 17.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 17.3 | |||||||||||||||||||||
Debt issued | 0.0 | 0.0 | 66.0 | 50.3 | 27.6 | 12.3 | 156.2 | |||||||||||||||||||||
Other liabilities | 15.7 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 15.7 | |||||||||||||||||||||
Total 31.12.2001 | 362.8 | 6.4 | 700.0 | 93.9 | 29.3 | 13.3 | 1,205.7 | |||||||||||||||||||||
Total 31.12.2000 | 283.1 | 77.2 | 536.5 | 84.3 | 33.3 | 25.4 | 1,039.8 | |||||||||||||||||||||
1 | Deposits without a fixed term, on which notice of withdrawal or termination has not been given (such funds may be withdrawn by the depositor or repaid by the borrower subject to an agreed period of notice). |
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Note 30 Financial Instruments Risk Position (continued)
e) Capital Adequacy
Risk-weighted assets (BIS)
Balance | Balance | |||||||||||||||
sheet / | Risk- | sheet / | Risk- | |||||||||||||
notional | weighted | notional | weighted | |||||||||||||
amount | amount | amount1 | amount1 | |||||||||||||
CHF million | 31.12.01 | 31.12.01 | 31.12.00 | 31.12.00 | ||||||||||||
Balance sheet assets | ||||||||||||||||
Due from banks and other collateralized lendings | 380,641 | 7,640 | 333,270 | 7,409 | ||||||||||||
Net positions on securities2 | 29,500 | 10,992 | 20,463 | 10,979 | ||||||||||||
Positive replacement values | 73,447 | 19,556 | 57,875 | 18,763 | ||||||||||||
Loans, net of allowances for credit losses and other collateralized lendings | 305,624 | 154,908 | 312,376 | 162,539 | ||||||||||||
Accrued income and prepaid expenses | 7,554 | 3,679 | 7,062 | 4,653 | ||||||||||||
Property and equipment | 13,202 | 13,202 | 13,620 | 13,620 | ||||||||||||
Other assets | 9,875 | 4,504 | 9,491 | 5,565 | ||||||||||||
Off-balance sheet and other positions | ||||||||||||||||
Contingent liabilities | 25,487 | 9,868 | 27,786 | 12,548 | ||||||||||||
Irrevocable commitments | 50,705 | 5,034 | 53,643 | 12,599 | ||||||||||||
Forward and swap contracts3 | 8,362,374 | 9,256 | 5,743,239 | 10,933 | ||||||||||||
Purchased options3 | 365,100 | 1,777 | 380,411 | 2,922 | ||||||||||||
Market risk positions4 | 13,319 | 10,760 | ||||||||||||||
Total risk-weighted assets | 253,735 | 273,290 | ||||||||||||||
1 | Changes have been made to prior year to conform to the current presentation (see Note 1: Summary of Significant Accounting Policies). | |
2 | Excluding positions in the trading book, these are included in market risk positions. | |
3 | The risk-weighted amount corresponds to the security margin (add-on) of the contracts. | |
4 | Value at Risk according to the internal model multiplied by a factor of 12.5 to create the risk-weighted amount of the market risk positions in the trading book. |
BIS capital ratios
Capital | Ratio | Capital | Ratio | |||||||||||||
CHF million | % | CHF million | % | |||||||||||||
31.12.01 | 31.12.01 | 31.12.00 | 31.12.00 | |||||||||||||
Tier 1 | 29,322 | 11.6 | 31,892 | 11.7 | ||||||||||||
of which hybrid Tier 1 | 3,638 | 1.4 | 2,456 | 0.9 | ||||||||||||
Tier 2 | 8,149 | 3.2 | 10,968 | 4.0 | ||||||||||||
Total BIS | 37,471 | 14.8 | 42,860 | 15.7 | ||||||||||||
The Tier 1 capital includes CHF 3,638 million (USD 2,175 million) trust preferred securities at 31 December 2001 and CHF 2,456 million (USD 1,500 million) at 31 December 2000.
Among other measures the Group monitors the adequacy of its capital using ratios established by the Bank for International Settlements (BIS). The BIS ratio is required to be at least 8%. The Group has complied with all BIS and Swiss capital adequacy rules for all periods presented. These ratios measure capital adequacy by comparing the Group’s eligible capital with its risk weighted positions which include balance sheet assets, net positions in securities not held in the trading book, off-balance sheet transactions converted into their credit equivalents and market risk positions at a weighted amount to reflect their relative risk.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 30 Financial Instruments Risk Position (continued)
e) Capital Adequacy (continued)
risk weighting according to the amount of capital deemed to be necessary to support them. Four categories of risk weights (0%, 20%, 50%, 100%) are applied; for example cash, claims collateralized by cash or claims collateralized by OECD central-government securities have a zero risk weighting which means that no capital is required to be held in respect of these assets. Uncollateralized loans granted to corporate or private customers carry a 100% risk weighting, meaning that they must be supported by capital equal to 8% of the carrying amount. Other asset categories have weightings of 20% or 50% which require 1.6% or 4% capital.
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Note 31 Fair Value of Financial Instruments
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 write-downs, are recorded in shareholders’ equity until an asset is sold, collected or otherwise disposed of; | |
(c) | the fair value of liquid assets and other assets maturing within 12 months is assumed to approximate their carrying amount. This assumption is applied to liquid assets and the short-term elements of all other financial assets and financial liabilities; | |
(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 approximate their carrying amounts; | |
(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. |
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UBS Group Financial Statements
Notes to the Financial Statements
Note 31 Fair Value of Financial Instruments (continued)
Carrying | Fair | Unrealized | Carrying | Fair | Unrealized | |||||||||||||||||||
value | value | gain / (loss) | value | value | gain / (loss) | |||||||||||||||||||
CHF billion | 31.12.01 | 31.12.01 | 31.12.01 | 31.12.00 | 31.12.00 | 31.12.00 | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and balances with central banks | 21.0 | 21.0 | 0.0 | 3.0 | 3.0 | 0.0 | ||||||||||||||||||
Due from banks | 27.7 | 27.7 | 0.0 | 29.1 | 29.1 | 0.0 | ||||||||||||||||||
Cash collateral on securities borrowed | 162.9 | 162.9 | 0.0 | 177.9 | 177.9 | 0.0 | ||||||||||||||||||
Reverse repurchase agreements | 269.3 | 269.3 | 0.0 | 193.8 | 193.8 | 0.0 | ||||||||||||||||||
Trading portfolio assets | 397.9 | 397.9 | 0.0 | 315.6 | 315.6 | 0.0 | ||||||||||||||||||
Positive replacement values | 73.4 | 73.4 | 0.0 | 57.9 | 57.9 | 0.0 | ||||||||||||||||||
Loans, net of allowance for credit losses | 226.7 | 227.0 | 0.3 | 245.1 | 244.9 | (0.2 | ) | |||||||||||||||||
Financial investments | 28.8 | 28.8 | 0.0 | 19.6 | 21.4 | 1.8 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Due to banks | 107.2 | 107.2 | 0.0 | 82.8 | 82.8 | 0.0 | ||||||||||||||||||
Cash collateral on securities lent | 30.3 | 30.3 | 0.0 | 23.4 | 23.4 | 0.0 | ||||||||||||||||||
Repurchase agreements | 368.6 | 368.6 | 0.0 | 295.5 | 295.5 | 0.0 | ||||||||||||||||||
Trading portfolio liabilities | 105.8 | 105.8 | 0.0 | 82.6 | 82.6 | 0.0 | ||||||||||||||||||
Negative replacement values | 71.4 | 71.4 | 0.0 | 75.9 | 75.9 | 0.0 | ||||||||||||||||||
Due to customers | 334.0 | 334.0 | 0.0 | 311.2 | 311.2 | 0.0 | ||||||||||||||||||
Debt issued | 157.5 | 158.6 | (1.1 | ) | 130.5 | 131.4 | (0.9 | ) | ||||||||||||||||
Subtotal | (0.8 | ) | 0.7 | |||||||||||||||||||||
Unrealized gains and losses recorded in shareholders’ equity before tax on: | ||||||||||||||||||||||||
Financial investments | 1.2 | |||||||||||||||||||||||
Derivative instruments designated as cash flow hedges | (0.6 | ) | (0.5) | 1 | ||||||||||||||||||||
Net unrealized gains and losses | ||||||||||||||||||||||||
not recognized in the income statement | (0.2 | ) | 0.2 | |||||||||||||||||||||
1 | Relates to the cash flow hedge opening adjustment for IAS 39 at 1 January 2001 (see Note1 Summary of Significant Accounting Policies for more information on the adoption of IAS 39). |
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Note 31 Fair Value of Financial Instruments (continued)
The table does not reflect the fair values of non-financial assets and liabilities such as property, equipment, goodwill, prepayments and non-interest accruals. The interest amounts accrued to date for respective financial instruments are included, for purposes of the above fair value disclosure, in the carrying value of the financial instruments.
Note 32 Retirement Benefit Plans and Other Employee Benefits
The Group has established various pension plans inside and outside of Switzerland. The major plans are located in Switzerland, the UK, the US and Germany. Independent actuarial valuations are performed for the plans in these locations.
Swiss pension plans until 30 June 1999
Swiss pension plans starting 1 July 1999
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UBS Group Financial Statements
Notes to the Financial Statements
Note 32 Retirement Benefit Plans and Other Employee Benefits (continued)
CHF 3,525 million. In accordance with IAS 19 (revised 2000) this resulted in a one-time charge to income which was offset by the recognition of assets previously unrecognized due to the paragraph 58 (b) limitation of IAS 19 (revised 2000) used to fund this increase in benefits.
Foreign pension plans
Postretirement medical and life plans
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Note 32 Retirement Benefit Plans and Other Employee Benefits (continued)
Swiss | Foreign | |||||||||||||||||||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||
Reconciliation of benefit obligation | ||||||||||||||||||||||||
Defined benefit obligation at beginning of the year | (17,712 | ) | (17,011 | ) | (14,944 | ) | (3,406 | ) | (2,444 | ) | (2,009 | ) | ||||||||||||
Service cost | (541 | ) | (545 | ) | (464 | ) | (121 | ) | (165 | ) | (118 | ) | ||||||||||||
Interest cost | (674 | ) | (666 | ) | (636 | ) | (204 | ) | (162 | ) | (123 | ) | ||||||||||||
Plan amendments | (3,517 | ) | (1 | ) | (2 | ) | ||||||||||||||||||
Special termination benefits | (262 | ) | (211 | ) | 1,000 | (3 | ) | |||||||||||||||||
Actuarial gain/(loss) | 421 | 571 | (345 | ) | (99 | ) | 2 | |||||||||||||||||
Benefits paid | 889 | 721 | 979 | 107 | 84 | 133 | ||||||||||||||||||
Acquisition of PaineWebber | (740 | ) | ||||||||||||||||||||||
Currency adjustment | (12 | ) | 123 | (269 | ) | |||||||||||||||||||
Other | 429 | (58 | ) | |||||||||||||||||||||
Defined benefit obligation | ||||||||||||||||||||||||
at the end of the year | (17,879 | ) | (17,712 | ) | (17,011 | ) | (3,553 | ) | (3,406 | ) | (2,444 | ) | ||||||||||||
Reconciliation of fair value of plan assets | ||||||||||||||||||||||||
Fair value of plan assets at the beginning of the year | 19,074 | 18,565 | 17,885 | 3,378 | 2,880 | 2,173 | ||||||||||||||||||
Actual return on plan assets | (765 | ) | 535 | 2,136 | (220 | ) | 352 | |||||||||||||||||
Employer contributions | 656 | 490 | 515 | 258 | 13 | 22 | ||||||||||||||||||
Plan participant contributions | 213 | 205 | 180 | 23 | 15 | |||||||||||||||||||
Benefits paid | (889 | ) | (721 | ) | (979 | ) | (107 | ) | (84 | ) | (133 | ) | ||||||||||||
Special termination benefits | (1,172 | ) | ||||||||||||||||||||||
Acquisition of PaineWebber | 676 | |||||||||||||||||||||||
Currency adjustments | 7 | (130 | ) | 333 | ||||||||||||||||||||
Other | (429 | ) | 118 | |||||||||||||||||||||
Fair value of plan assets | ||||||||||||||||||||||||
at the end of the year | 18,289 | 19,074 | 18,565 | 2,887 | 3,378 | 2,880 | ||||||||||||||||||
Funded status | ||||||||||||||||||||||||
Plan assets in excess of benefit obligation | 410 | 1,362 | 1,554 | (666 | ) | (28 | ) | 436 | ||||||||||||||||
Unrecognized net actuarial gains | 961 | (331 | ) | (724 | ) | 673 | (81 | ) | (474 | ) | ||||||||||||||
Unrecognized transition amount | 1 | 1 | ||||||||||||||||||||||
Unrecognized past service cost | 2 | 2 | 2 | |||||||||||||||||||||
Unrecognized assets | (1,015 | ) | (675 | ) | (374 | ) | (47 | ) | (28 | ) | ||||||||||||||
(Unfunded accrued) / prepaid pension cost | 356 | 356 | 456 | 9 | (153 | ) | (63 | ) | ||||||||||||||||
Movement in the net (liability) or asset | ||||||||||||||||||||||||
(Unfunded accrued) / prepaid pension cost | ||||||||||||||||||||||||
at the beginning of the year | 356 | 456 | 0 | (153 | ) | (63 | ) | 43 | ||||||||||||||||
Net periodic pension cost | (656 | ) | (590 | ) | (59 | ) | (97 | ) | (55 | ) | (123 | ) | ||||||||||||
Employer contributions | 656 | 490 | 515 | 258 | 13 | 22 | ||||||||||||||||||
Acquisition of PaineWebber | (63 | ) | ||||||||||||||||||||||
Currency adjustments | 1 | 15 | (5 | ) | ||||||||||||||||||||
(Unfunded accrued) / prepaid pension cost | 356 | 356 | 456 | 9 | (153 | ) | (63 | ) | ||||||||||||||||
Amounts recognized in the balance sheet | ||||||||||||||||||||||||
Prepaid pension cost | 356 | 356 | 456 | 185 | 53 | 49 | ||||||||||||||||||
Accrued pension liability | (176 | ) | (206 | ) | (112 | ) | ||||||||||||||||||
(Unfunded accrued) / prepaid pension cost | 356 | 356 | 456 | 9 | (153 | ) | (63 | ) | ||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 32 Retirement Benefit Plans and Other Employee Benefits (continued)
Swiss | Foreign | |||||||||||||||||||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||
Amounts recognized | ||||||||||||||||||||||||
in the Income Statement | ||||||||||||||||||||||||
Current service cost | 541 | 545 | 464 | 121 | 165 | 118 | ||||||||||||||||||
Interest cost | 674 | 666 | 636 | 204 | 162 | 123 | ||||||||||||||||||
Expected return on plan assets | (947 | ) | (927 | ) | (883 | ) | (228 | ) | (243 | ) | (195 | ) | ||||||||||||
Adjustment to limit prepaid pension cost | 339 | 300 | (150 | ) | 21 | |||||||||||||||||||
Amortization of unrecognized prior service costs | 262 | 211 | 172 | 3 | 77 | |||||||||||||||||||
Amortization of unrecognized net (gains)/losses | (9 | ) | (6 | ) | ||||||||||||||||||||
Employee contributions | (213 | ) | (205 | ) | (180 | ) | (23 | ) | (15 | ) | ||||||||||||||
Actuarially determined | ||||||||||||||||||||||||
net periodic pension cost | 656 | 590 | 59 | 97 | 55 | 123 | ||||||||||||||||||
Actual return on plan assets (%) | (4.0 | ) | 2.9 | 11.9 | (7.3 | ) | (0.9 | ) | 15.3 | |||||||||||||||
Principal actuarial assumptions used (%) | ||||||||||||||||||||||||
Discount rate | 4.0 | 4.0 | 4.0 | 6.2 | 6.3 | 6.0 | ||||||||||||||||||
Expected rate of return on plan assets | 5.0 | 5.0 | 5.0 | 7.9 | 8.1 | 8.1 | ||||||||||||||||||
Expected rate of salary increase | 2.5 | 2.5 | 2.5 | 4.4 | 4.4 | 4.6 | ||||||||||||||||||
Rate of pension increase | 1.5 | 1.5 | 1.5 | 1.5 | 1.6 | 2.2 | ||||||||||||||||||
Swiss | ||||||||||||||||||||||||
Additional details to fair value | ||||||||||||||||||||||||
of plan assets | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||||
Own financial instruments | 781 | 1,211 | 846 | |||||||||||||||||||||
Securities lent to UBS included in plan assets | 824 | 3,432 | 5,939 | |||||||||||||||||||||
Other assets used by UBS included in plan assets | 104 | 179 | 187 | |||||||||||||||||||||
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Note 32 Retirement Benefit Plans and Other Employee Benefits (continued)
Foreign post-retirement medical and life plans
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Post-retirement benefit obligation at beginning of the year | (115 | ) | (117 | ) | (96 | ) | ||||||
Service cost | (7 | ) | (6 | ) | (2 | ) | ||||||
Interest cost | (9 | ) | (8 | ) | (6 | ) | ||||||
Plan amendments | (10 | ) | (7 | ) | 0 | |||||||
Actuarial gain/(loss) | (6 | ) | 27 | 0 | ||||||||
Benefits paid | 4 | 5 | 4 | |||||||||
Acquisition of PaineWebber | (9 | ) | 0 | |||||||||
Currency adjustment | (2 | ) | 0 | (16 | ) | |||||||
Other | 0 | (1 | ) | |||||||||
Post-retirement benefit obligation at end of the year | (145 | ) | (115 | ) | (117 | ) | ||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Fair value of plan assets at beginning of the year | 4 | 4 | 3 | |||||||||
Actual return on plan assets | 0 | 0 | 1 | |||||||||
Company contributions | 3 | 4 | 4 | |||||||||
Benefits paid | (4 | ) | (4 | ) | (4 | ) | ||||||
Fair value of plan assets at end of the year | 3 | 4 | 4 | |||||||||
The assumed health care cost trend used in determining the benefit expense for 2001 is 5.32%. 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 | ||||||||||
Effect on total service and interest cost | 3.0 | (2.0 | ) | |||||||||
Effect on the post-retirement benefit obligation | 17.0 | (14.0 | ) | |||||||||
Note 33 Equity Participation Plans
a) Equity Participation Plans Offered
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.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 33 Equity Participation Plans (continued)
a) Equity Participation Plans Offered (continued)
two or three year vesting requirement and expire either seven or ten years after the date of grant.
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Note 33 Equity Participation Plans (continued)
b) UBS Share Awards
i) Stock bonus plans
Shares granted under the various equity participation plans mentioned above are as follows:
Stock bonus plans | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Shares awarded | 15,644,000 | 38,340,000 | 10,407,000 | |||||||||
Weighted-average fair market value per share (in CHF) | 90 | 76 | 73 | |||||||||
The stock bonus awards for 2000 include approximately 19.8 million shares granted under the retention agreements with key employees of UBS PaineWebber. The bonus awards for 1999 include 4.2 million shares issued in exchange for previously issued non-share awards and for special bonuses.
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.
Stock purchase plans | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||
Share quantity for discounted purchase plans | 1,701,099 | 966,000 | 5,406,000 | |||||||||
Weighted-average purchase price (in CHF) | 47 | 35 | 49 | |||||||||
Share quantity for UBS PaineWebber plans | 1,221,416 | 298,725 | ||||||||||
Weighted-average fair value purchase price (in USD) | 51 | 46 | ||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 33 Equity Participation Plans (continued)
c) UBS Option Awards
Movements in options granted under various equity participation plans are as follows:
Weighted | Weighted | Weighted | ||||||||||||||||||||||
average | average | average | ||||||||||||||||||||||
exercise | exercise | exercise | ||||||||||||||||||||||
Number of | price | Number of | price | Number of | price | |||||||||||||||||||
options | (in CHF) | options | (in CHF) | options | (in CHF) | |||||||||||||||||||
31.12.01 | 31.12.01 | 31.12.00 | 31.12.00 | 31.12.99 | 31.12.99 | |||||||||||||||||||
Outstanding, at the beginning of the year | 63,308,502 | 58 | 30,415,386 | 66 | 21,608,358 | 59 | ||||||||||||||||||
Options due to the acquisition of | ||||||||||||||||||||||||
PaineWebber | 0 | 18,975,810 | 1 | 34 | 0 | 0 | ||||||||||||||||||
Granted during the year | 11,070,992 | 94 | 21,248,046 | 2 | 72 | 10,317,426 | 79 | |||||||||||||||||
Exercised during the year | (10,083,075 | ) | 49 | (5,390,307 | ) | 50 | (215,298 | ) | 60 | |||||||||||||||
Forfeited during the year | (1,009,750 | ) | 74 | (1,940,433 | ) | 64 | (1,295,100 | ) | 63 | |||||||||||||||
Outstanding, at the end of the year | 63,286,669 | 66 | 63,308,502 | 58 | 30,415,386 | 66 | ||||||||||||||||||
Exercisable, at the end of the year | 25,550,932 | 50 | 18,310,839 | 34 | 1,951,920 | 62 | ||||||||||||||||||
1 | UBS AG issued options in exchange for options of PaineWebber which have been included in the purchase price for PaineWebber at a fair value of CHF 992 million. | |
2 | Includes options granted to key employees of UBS PaineWebber, vesting over a 3-year period, subject to employee’s continued employment and other restrictions. |
Some of the options in the table above have exercise prices denominated in US dollars which have been converted into CHF at the year-end spot exchange rate for purposes of this table. The exercise dates can occur on any business day during the year.
The following table summarizes additional information about stock options outstanding at 31 December 2001:
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 | 19,966,200 | 63.08 | 3.3 | 4,374,462 | 57.85 | |||||||||||||||
70.01–85.00 | 11,017,595 | 78.41 | 3.3 | 0 | 0 | |||||||||||||||
85.01–106.00 | 6,024,480 | 98.60 | 6.8 | 31,800 | 90.00 | |||||||||||||||
56.67–106.00 | 37,008,275 | 73.42 | 3.8 | 4,406,262 | 58.08 | |||||||||||||||
USD | USD | Years | USD | |||||||||||||||||
6.34–15.00 | 5,269,657 | 8.79 | 2.7 | 5,269,657 | 8.79 | |||||||||||||||
15.01–25.00 | 2,879,652 | 22.61 | 3.2 | 2,879,652 | 22.61 | |||||||||||||||
25.01–35.00 | 5,983,999 | 28.62 | 4.3 | 5,983,999 | 28.62 | |||||||||||||||
35.01–45.00 | 0 | 0 | 0.0 | 0 | 0 | |||||||||||||||
45.01–55.00 | 10,067,766 | 48.05 | 6.1 | 7,011,362 | 47.05 | |||||||||||||||
55.01–58.76 | 2,077,320 | 57.81 | 6.1 | 0 | 0 | |||||||||||||||
6.34–58.76 | 26,278,394 | 33.74 | 4.7 | 21,144,670 | 28.97 | |||||||||||||||
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.
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Note 33 Equity Participation Plans (continued)
d) Compensation Expense
Generally, the Group’s policy is to recognize expense at the date of grant for equity participation instruments (shares, warrants, options and other derivatives for which the underlying is the Group’s own shares). The amount of expense recognized is equal to the intrinsic value of the instrument at such date and is calculated as follows: 1) For stock options, it is the difference between the strike price and fair value of shares at the date of grant, if any. 2) For UBS shares and other derivative instruments, it is the fair market value. 3) For discounted share plans, the expense is equal to the difference between the fair market value and discounted value.
e) Pro-Forma Net Income
The following table presents Net income and Earnings per share for 2001, 2000 and 1999 as if the Group had adopted the fair value method of accounting for its equity compensation plans, rather than the intrinsic value method described in paragraph d) above.
CHF million, except per share data | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||
Net income | As reported | 4,973 | 7,792 | 6,153 | ||||||||||||
Pro-forma | 4,626 | 7,634 | 1 | 6,028 | 1 | |||||||||||
Basic EPS | As reported | 3.93 | 6.44 | 5.07 | ||||||||||||
Pro-forma | 3.65 | 6.31 | 4.96 | |||||||||||||
Diluted EPS | As reported | 3.78 | 6.35 | 5.02 | ||||||||||||
Pro-forma | 3.51 | 6.22 | 4.92 | |||||||||||||
1. | Pro-forma net income at 31 December 2000 and 31 December 1999 has been adjusted for expense reversals related to forfeitures. |
The effects of recognizing compensation expense and providing pro-forma disclosures are not likely to be representative of the effects on reported Net profit for future years.
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:
31.12.01 | 31.12.00 | 31.12.99 | ||||||||||
Expected volatility | 30 | % | 30 | % | 33 | % | ||||||
Risk free interest rate (CHF) | 3.51 | % | 3.27 | % | 2.07 | % | ||||||
Risk free interest rate (USD) | 5.81 | % | 5.66 | % | – | |||||||
Expected dividend rate | 2.67 | % | 2.44 | % | 1.44 | % | ||||||
Expected life (years) | 4.5 | 4.4 | 6 | |||||||||
The weighted-average fair value of options granted in 2001, 2000 and 1999 was CHF 23, CHF 16 and CHF 20 per share, respectively.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 34 Related Parties
Related parties include Associated companies, the Board of Directors, the Group Executive Board, the Group Managing Board, close family members and enterprises which are controlled by these individuals as well as certain persons performing similar functions.
Loans and advances receivable from related parties were as follows:
CHF million | 31.12.01 | 31.12.00 | ||||||
Mortgages at the beginning of the year | 36 | 28 | ||||||
Additions | 8 | 9 | ||||||
Reductions | (12 | ) | (1 | ) | ||||
Mortgages at the end of the year | 32 | 36 | ||||||
Members of the Board of Directors, Group Executive Board and Group Managing Board are granted mortgages at the same terms and conditions as other employees. Terms and conditions are based on third-party conditions adjusted for reduced credit risk.
Loans and advances to significant associated companies were as follows:
CHF million | 31.12.01 | 31.12.00 | ||||||
Loans and advances at the beginning of the year | 0 | 62 | ||||||
Additions | 65 | 0 | ||||||
Reductions | 0 | (62 | ) | |||||
Loans and advances at the end of the year | 65 | 0 | ||||||
All loans and advances to associated companies are transacted at arm’s length. At 31 December 2001, there are trading exposures and guarantees to significant associated companies of CHF 306 million. The Group routinely receives services from associated companies at an arm’s length basis. For the year ended 31 December 2001, the amount paid to significant associates was CHF 98 million. Note 36 provides a list of significant associates.
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Note 35 Post-Balance Sheet Events
There have been no material post-balance sheet events which would require disclosure or adjustment to the 31 December 2001 Financial Statements.
Note 36 Significant Subsidiaries and Associates
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 Switzerland and UBS Asset Management) 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.
Significant subsidiaries
Equity | ||||||||||||||||||||
Share | interest | |||||||||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||||||||
Armand von Ernst & Cie AG | Bern, Switzerland | CH | CHF | 5.0 | 100.0 | |||||||||||||||
Aventic AG | Zurich, Switzerland | CH | 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 | CH | CHF | 6.0 | 100.0 | |||||||||||||||
BDL Banco di Lugano | Lugano, Switzerland | CH | CHF | 50.0 | 100.0 | |||||||||||||||
Brinson Advisors Inc | Delaware, USA | AM | USD | 35.2 | 2 | 100.0 | ||||||||||||||
Brinson Canada Co | Halifax, Canada | AM | CAD | 117.0 | 100.0 | |||||||||||||||
Brinson Partners (New York) Inc | New York, USA | AM | USD | 0.5 | 100.0 | |||||||||||||||
Brinson Partners Inc | Delaware, USA | AM | USD | – | 100.0 | |||||||||||||||
Brunswick UBS Warburg Limited | George Town, Cayman Islands | WA | USD | 25.0 | 2 | 50.0 | ||||||||||||||
Cantrade Privatbank AG | Zurich, Switzerland | CH | CHF | 10.0 | 100.0 | |||||||||||||||
Cantrade Private Bank Switzerland (CI) Limited | St. Helier, Jersey | CH | GBP | 0.7 | 100.0 | |||||||||||||||
Crédit Industriel SA | Zurich, Switzerland | CH | CHF | 10.0 | 100.0 | |||||||||||||||
EIBA «Eidgenössische Bank» Beteiligungs- und Finanzgesellschaft | Zurich, Switzerland | WA | CHF | 14.0 | 100.0 | |||||||||||||||
Factors AG | Zurich, Switzerland | CH | CHF | 5.0 | 100.0 | |||||||||||||||
Ferrier Lullin & Cie SA | Geneva, Switzerland | CH | CHF | 30.0 | 100.0 | |||||||||||||||
Fondvest AG | Zurich, Switzerland | AM | CHF | 4.3 | 100.0 | |||||||||||||||
Global Asset Management Limited | Hamilton, Bermuda | AM | USD | 2.0 | 100.0 | |||||||||||||||
Hirslanden Holding AG | Zurich, Switzerland | CC | CHF | 22.5 | 91.2 | |||||||||||||||
HYPOSWISS, Schweizerische Hypotheken- und Handelsbank | Zurich, Switzerland | CH | CHF | 26.0 | 100.0 | 3 | ||||||||||||||
Footnotes
1 | CH: UBS Switzerland, AM: UBS Asset Management, WA: UBS Warburg, CC: Corporate Center. | |
2 | Share Capital and Share Premium. | |
3 | Sold subsequently to 31 December 2001. |
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UBS Group Financial Statements
Notes to the Financial Statements
Note 36 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||||||||
Share | interest | |||||||||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||||||||
IL Immobilien-Leasing AG | Opfikon, Switzerland | CH | CHF | 5.0 | 100.0 | |||||||||||||||
PaineWebber Capital Inc | Delaware, USA | WA | USD | 25.7 | 2 | 100.0 | ||||||||||||||
PT UBS Warburg Indonesia | Jakarta, Indonesia | WA | IDR | 11,000.0 | 85.0 | |||||||||||||||
PW Trust Company | New Jersey, USA | WA | USD | 4.4 | 2 | 99.6 | ||||||||||||||
SG Warburg & Co International BV | Amsterdam, the Netherlands | WA | GBP | 40.5 | 100.0 | |||||||||||||||
SG Warburg Securities SA | Geneva, Switzerland | WA | CHF | 14.5 | 100.0 | |||||||||||||||
Thesaurus Continentale Effekten-Gesellschaft Zürich | Zurich, Switzerland | CH | CHF | 30.0 | 100.0 | |||||||||||||||
UBS (Bahamas) Ltd | Nassau, Bahamas | CH | USD | 4.0 | 100.0 | |||||||||||||||
UBS (Cayman Islands) Ltd | George Town, Cayman Islands | CH | USD | 5.6 | 100.0 | |||||||||||||||
UBS (France)SA | Paris, France | CH | EUR | 10.0 | 100.0 | |||||||||||||||
UBS (Italia) SpA | Milan, Italy | CH | EUR | 22.2 | 100.0 | |||||||||||||||
UBS (Luxembourg) SA | Luxembourg, Luxembourg | CH | CHF | 150.0 | 100.0 | |||||||||||||||
UBS (Monaco) SA | Monte Carlo, Monaco | CH | EUR | 9.2 | 100.0 | |||||||||||||||
UBS (Sydney) Limited | Sydney, Australia | WA | AUD | 12.7 | 100.0 | |||||||||||||||
UBS (Trust and Banking) Ltd | 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 | 3,562.9 | 2 | 100.0 | ||||||||||||||
UBS Asset Management (Australia) Ltd | Sydney, Australia | AM | AUD | 8.0 | 100.0 | |||||||||||||||
UBS Asset Management (France) SA | Paris, France | AM | EUR | 0.8 | 100.0 | |||||||||||||||
UBS Asset Management (Italia) SIM SpA | Milan, Italy | AM | EUR | 0.5 | 100.0 | |||||||||||||||
UBS Asset Management (Japan) Ltd | Tokyo, Japan | AM | JPY | 2,200.0 | 100.0 | |||||||||||||||
UBS Asset Management (Singapore) Ltd | Singapore, Singapore | AM | SGD | 4.0 | 100.0 | |||||||||||||||
UBS Asset Management (Taiwan) Ltd | Taipei, Taiwan | AM | TWD | 340.0 | 84.1 | |||||||||||||||
UBS Asset Management Holding Limited | London, Great Britain | AM | GBP | 8.0 | 2 | 100.0 | ||||||||||||||
UBS Australia Limited | Sydney, Australia | WA | AUD | 50.0 | 100.0 | |||||||||||||||
UBS Bank (Canada) | Toronto, Canada | CH | 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 | 36.0 | 2 | 100.0 | ||||||||||||||
UBS Capital AG | Zurich, Switzerland | WA | CHF | 5.0 | 100.0 | |||||||||||||||
UBS Capital Americas Investments II LLC | Delaware, USA | WA | USD | 90.0 | 2 | 100.0 | ||||||||||||||
UBS Capital Asia Pacific Limited | George Town, Cayman Islands | WA | USD | 5.0 | 92.9 | |||||||||||||||
UBS Capital BV | The Hague, the Netherlands | WA | EUR | 3.2 | 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 | – | 100.0 | |||||||||||||||
UBS Capital LLC | Delaware, USA | WA | USD | 18.5 | 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 | CH | CHF | 40.0 | 100.0 | |||||||||||||||
UBS España SA | Madrid, Spain | CH | EUR | 65.3 | 100.0 | |||||||||||||||
UBS Finance (Cayman Islands) Limited | 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 | 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 | 8.0 | 100.0 | |||||||||||||||
UBS Fund Management (Switzerland) AG | Basel, Switzerland | AM | CHF | 1.0 | 100.0 | |||||||||||||||
UBS Fund Services (Luxembourg) SA | Luxembourg, Luxembourg | AM | CHF | 2.5 | 100.0 | |||||||||||||||
UBS Global Trust Corporation | St. John, Canada | CH | CAD | 0.1 | 100.0 | |||||||||||||||
UBS Immoleasing AG | Zurich, Switzerland | CH | CHF | 3.0 | 100.0 | |||||||||||||||
UBS International Holdings BV | Amsterdam, the Netherlands | CC | CHF | 5.5 | 100.0 | |||||||||||||||
UBS Invest Kapitalanlagegesellschaft mbH | Frankfurt, Germany | AM | EUR | 6.4 | 100.0 | |||||||||||||||
UBS Leasing AG | Brugg, Switzerland | CH | CHF | 10.0 | 100.0 | |||||||||||||||
1 | CH: UBS Switzerland, AM: UBS Asset Management, WA: UBS Warburg, CC: Corporate Center. | |
2 | Share Capital and Share Premium. |
Table of Contents
Note 36 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||||||||
Share | interest | |||||||||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||||||||
UBS Life AG | Zurich, Switzerland | CH | 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 PaineWebber Inc | Delaware, USA | WA | USD | 1,672.3 | 2 | 100.0 | ||||||||||||||
UBS PaineWebber Incorporated of Puerto Rico | Hato Rey, Puerto Rico | WA | USD | 31.0 | 2 | 100.0 | ||||||||||||||
UBS PaineWebber Life Insurance Company | California, USA | WA | USD | 29.3 | 2 | 100.0 | ||||||||||||||
UBS Portfolio LLC | Delaware, USA | WA | USD | 0.1 | 100.0 | |||||||||||||||
UBS Principal Finance LLC | Delaware, USA | WA | USD | 0.1 | 100.0 | |||||||||||||||
UBS Private Banking Deutschland AG | Hamburg, Germany | CH | EUR | 51.0 | 100.0 | |||||||||||||||
UBS Realty Investors LLC | Connecticut, USA | AM | USD | – | 100.0 | |||||||||||||||
UBS Securities Limited | London, Great Britain | WA | GBP | 10.0 | 100.0 | |||||||||||||||
UBS Trust (Canada) | Toronto, Canada | CH | CAD | 12.5 | 100.0 | |||||||||||||||
UBS Trustees (Bahamas) Ltd | Nassau, Bahamas | CH | USD | 2.0 | 100.0 | |||||||||||||||
UBS Trustees (Cayman) Ltd | George Town, Cayman Islands | CH | USD | 0.5 | 100.0 | |||||||||||||||
UBS Trustees (Jersey) Ltd | St. Helier, Jersey | CH | GBP | 0.7 | 100.0 | |||||||||||||||
UBS Trustees (Singapore) Ltd | Singapore, Singapore | CH | 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 Asia Limited | Hong Kong, China | WA | HKD | 20.0 | 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 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 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 Limited | Singapore, Singapore | WA | SGD | 55.0 | 100.0 | |||||||||||||||
UBS Warburg Real Estate Securities Inc | Delaware, USA | WA | USD | 0.4 | 2 | 100.0 | ||||||||||||||
UBS Warburg Securities (España) SV SA | Madrid, Spain | WA | EUR | 15.0 | 100.0 | |||||||||||||||
UBS Warburg Securities (South Africa) (Pty) Limited | Sandton, South Africa | WA | ZAR | 22.1 | 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 | |||||||||||||||
Footnotes
1 | CH: UBS Switzerland, AM: UBS Asset Management, WA: UBS Warburg, CC: Corporate Center. | |
2 | Share Capital and Share Premium. |
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Notes to the Financial Statements
Note 36 Significant Subsidiaries and Associates (continued)
Consolidated companies: changes in 2001
Significant new companies | ||
Brinson Canada Co — Halifax, Canada | ||
Deconsolidated companies
Significant deconsolidated companies | Reason for deconsolidation | |
UBS (Panama) SA — Panama City, Panama | Liquidated | |
Significant associates
Equity interest | Share capital | |||||||||||||||
Company | Industry | in % | in millions | |||||||||||||
FSG Swiss Financial Services Group AG — Zurich, Switzerland | Financial | 33.0 | 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 | 20.6 | GBP | 19 | ||||||||||||
None of the above investments carry voting rights that are significantly different from the proportion of shares held.
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Note 37 Acquisition of Paine Webber Group, Inc.
On 3 November 2000, UBS completed its acquisition of 100% of the outstanding common stock of the Paine Webber Group, Inc. (“PaineWebber”), a full-service broker-dealer and one of the largest securities and commodities firms in the United States servicing both individual and institutional clients. The transaction was accounted for using the purchase method of accounting, making PaineWebber a wholly owned subsidiary of UBS. Results of operations of PaineWebber have been included in the consolidated results beginning on the date of acquisition. Under IAS, the valuation of shares and options issued was measured on the date the acquisition was completed, 3 November 2000.
Note 38 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-to-date | |||||||||||||||||||
31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||
1 USD | 1.67 | 1.64 | 1.69 | 1.69 | 1.50 | |||||||||||||||
1 EUR | 1.48 | 1.52 | 1.50 | 1.56 | 1.60 | |||||||||||||||
1 GBP | 2.43 | 2.44 | 2.44 | 2.57 | 2.43 | |||||||||||||||
100 JPY | 1.27 | 1.43 | 1.40 | 1.57 | 1.33 | |||||||||||||||
Note 39 Swiss Banking Law Requirements
The consolidated financial statements of UBS are prepared in accordance with International Accounting Standards. Set out below are the deviations which would result if the provisions of the Banking Ordinance and the Guidelines of the Swiss 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.
1. Treasury shares
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UBS Group Financial Statements
Notes to the Financial Statements
Under Swiss law, own shares held for market making purposes are presented in the balance sheet as Trading portfolio assets. Own shares 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
3. Cash flow hedges
4. Gains/losses not recognized in the income statement
5. Extraordinary income and expense
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Note 39 Swiss Banking Law Requirements (continued)
CHF million | 31.12.01 | 31.12.00 | |||||||
Differences in the Balance Sheet | |||||||||
Treasury shares | |||||||||
Trading portfolio | 128 | ||||||||
Financial investments | 3,253 | 4,007 | |||||||
Due to banks | 24 | 2,516 | |||||||
Shareholders’ equity | 3,357 | 1,491 | |||||||
Financial investments | |||||||||
Due to banks | (1,856 | ) | |||||||
Other liabilities | (215 | ) | |||||||
Shareholders’ equity | (1,641 | ) | |||||||
Cash flow hedges | |||||||||
Other liabilities | (459 | ) | |||||||
Shareholders’ equity | 459 | ||||||||
Differences in the Income Statement | |||||||||
Treasury shares Net trading income | (70 | ) | 133 | ||||||
Other income | (231 | ) | 68 | ||||||
Financial investments Other income | (607 | ) | |||||||
Reclassification of extraordinary income and expense | |||||||||
Other income | (95 | ) | (211 | ) | |||||
Extraordinary income | 109 | 233 | |||||||
Extraordinary expense | 14 | 22 | |||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 40 Reconciliation of International Accounting Standards (IAS) to United States Generally Accepted Accounting Principles (US GAAP)
Note 40.1 Valuation and income recognition differences between IAS and US GAAP
The consolidated financial statements of the Group have been prepared in accordance with IAS. The principles of IAS 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 IAS and US GAAP.
a. Purchase accounting (merger of Union Bank of Switzerland and Swiss Bank Corporation)
Goodwill
Other purchase accounting adjustments
b. Harmonization of accounting policies
c. Restructuring provision
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merged Group. 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.
d. Derivative instruments held or issued for hedging activities
e. Financial investments (prior to the adoption of IAS 39)
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UBS Group Financial Statements
Notes to the Financial Statements
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 permanent impairment. For the IAS 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.
f. Financial investments and private equity (after the adoption of IAS 39)
g. Retirement benefit plans
h. Other employee benefits
i. Equity participation plans
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“APB” No. 25), with the disclosure of the pro forma effects of equity participation plans on net profit and earnings per share, as if the fair value had been recorded on the grant date. Under IAS, the Group recognizes only intrinsic values at the grant date with subsequent changes in value not recognized. Under US GAAP, the Group applies the APB No. 25 intrinsic value method, which requires adjustments to intrinsic values subsequent to the grant date in certain circumstances.
j. Software capitalization
k. IAS 39 opening retained earnings adjustment
l. Recently issued US accounting standards
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UBS Group Financial Statements
Notes to the Financial Statements
nite lives no longer be amortized, but be tested annually for impairment. Identifiable intangible assets with finite lives will continue to be amortized.
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40.2 Reconciliation of IAS Shareholders’ equity and Net profit to US GAAP
Shareholders' equity | Net profit | ||||||||||||||||||||||||
Note 40.1 | |||||||||||||||||||||||||
CHF million | Reference | 31.12.01 | 31.12.00 | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||
Amounts determined in accordance with IAS | 43,530 | 44,833 | 4,973 | 7,792 | 6,153 | ||||||||||||||||||||
Adjustments in respect of SBC purchase accounting: | |||||||||||||||||||||||||
Goodwill | a | 16,142 | 17,835 | (1,693 | ) | (1,719 | ) | (1,729 | ) | ||||||||||||||||
Other purchase accounting adjustments | a | (729 | ) | (808 | ) | 79 | 50 | 37 | |||||||||||||||||
Harmonization of accounting policies | b | 0 | 0 | 0 | 0 | (20 | ) | ||||||||||||||||||
Restructuring provision | c | 0 | 112 | (112 | ) | (238 | ) | (1,598 | ) | ||||||||||||||||
Derivative instruments held or issued for hedging activities | d | (188 | ) | (857 | ) | 67 | (1,353 | ) | (545 | ) | |||||||||||||||
Financial investments (prior to the adoption of IAS 39) | e | 0 | 379 | 0 | 28 | 36 | |||||||||||||||||||
Financial investments and private equity (after the adoption of IAS 39) | f | (709 | ) | 0 | 0 | 0 | 0 | ||||||||||||||||||
Retirement benefit plans | g | 1,714 | 1,898 | 119 | 59 | (19 | ) | ||||||||||||||||||
Other employee benefits | h | (8 | ) | (16 | ) | 8 | 8 | 2 | |||||||||||||||||
Equity participation plans | i | (186 | ) | (311 | ) | (12 | ) | (167 | ) | (47 | ) | ||||||||||||||
Software capitalization | j | 60 | 229 | (169 | ) | (160 | ) | 389 | |||||||||||||||||
IAS 39 opening retained earnings adjustments | k | 19 | 0 | (42 | ) | 0 | 0 | ||||||||||||||||||
Tax adjustments | (363 | ) | (334 | ) | 16 | 137 | 178 | ||||||||||||||||||
Total adjustments | 15,752 | 18,127 | (1,739 | ) | (3,355 | ) | (3,316 | ) | |||||||||||||||||
Amounts determined in accordance with US GAAP | 59,282 | 62,960 | 3,234 | 4,437 | 2,837 | ||||||||||||||||||||
40.3 Earnings per share
Under IAS and US GAAP, basic earnings per share (EPS) is computed by dividing income available to common shareholders by the weighted-average common shares outstanding. Diluted EPS includes the determinants of basic EPS and, in addition, gives effect to dilutive potential common shares that were outstanding during the period.
31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||
For the year ended | US GAAP | IAS | US GAAP | IAS | US GAAP | IAS | ||||||||||||||||||
Net profit available for ordinary shares (CHF million) | 3,234 | 4,973 | 4,437 | 7,792 | 2,837 | 6,153 | ||||||||||||||||||
Net profit for diluted EPS (CHF million) | 3,135 | 4,874 | 4,423 | 7,778 | 2,837 | 6,153 | ||||||||||||||||||
Weighted average shares outstanding | 1,251,180,815 | 1 | 1,266,038,193 | 1,198,680,193 | 1 | 1,209,087,927 | 1,208,614,215 | 1 | 1,214,227,446 | |||||||||||||||
Diluted weighted average shares outstanding | 1,273,720,560 | 1 | 1,288,577,938 | 1,215,169,966 | 1 | 1,225,577,700 | 1,219,512,225 | 1 | 1,225,125,456 | |||||||||||||||
Basic earnings per share (CHF) | 2.58 | 3.93 | 3.70 | 6.44 | 2.35 | 5.07 | ||||||||||||||||||
Diluted earnings per share (CHF) | 2.46 | 3.78 | 3.64 | 6.35 | 2.33 | 5.02 | ||||||||||||||||||
1 | The difference between the IAS and US GAAP weighted average shares outstanding and diluted weighted average shares outstanding is related to the shares for employee equity participation plans. These shares are held in trusts which are consolidated for US GAAP only and are recorded as treasury shares. Amounts in prior years have been restated for these treasury shares. |
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Notes to the Financial Statements
Note 40.4 Presentation differences between IAS and US GAAP
In addition to the differences in valuation and income recognition, other differences, essentially related to presentation, exist between IAS and US GAAP. Although there is no impact on IAS 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 IAS 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. Secured financing without margining
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40.5 Consolidated Income Statement
The following is a Consolidated Income Statement of the Group, for the years ended 31 December 2001, 31 December 2000 and 31 December 1999, restated to reflect the impact of valuation and income recognition differences and presentation differences between IAS and US GAAP.
31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||||||
For the year ended | Reference | US GAAP | IAS | US GAAP | IAS | US GAAP | IAS | |||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||
Interest income | a, d, 4 | 51,975 | 52,277 | 51,565 | 51,745 | 35,404 | 35,604 | |||||||||||||||||||||
Interest expense | a, 4 | (44,178 | ) | (44,236 | ) | (43,584 | ) | (43,615 | ) | (29,660 | ) | (29,695 | ) | |||||||||||||||
Net interest income | 7,797 | 8,041 | 7,981 | 8,130 | 5,744 | 5,909 | ||||||||||||||||||||||
Credit loss expense / (recovery) | (498 | ) | (498 | ) | 130 | 130 | (956 | ) | (956 | ) | ||||||||||||||||||
Net interest income after credit loss expense / (recovery) | 7,299 | 7,543 | 8,111 | 8,260 | 4,788 | 4,953 | ||||||||||||||||||||||
Net fee and commission income | 20,211 | 20,211 | 16,703 | 16,703 | 12,607 | 12,607 | ||||||||||||||||||||||
Net trading income | d, k, 4 | 8,973 | 8,802 | 8,597 | 9,953 | 7,174 | 7,719 | |||||||||||||||||||||
Other income | e, 4 | 534 | 558 | 1,514 | 1,486 | 3,182 | 3,146 | |||||||||||||||||||||
Total operating income | 37,017 | 37,114 | 34,925 | 36,402 | 27,751 | 28,425 | ||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||
Personnel | c, g, h, i, j | 19,713 | 19,828 | 17,262 | 17,163 | 12,483 | 12,577 | |||||||||||||||||||||
General and administrative | c, j | 7,631 | 7,631 | 6,813 | 6,765 | 6,664 | 6,098 | |||||||||||||||||||||
Depreciation of property and equipment | a, b, j | 1,815 | 1,614 | 1,800 | 1,608 | 1,619 | 1,517 | |||||||||||||||||||||
Amortization of goodwill and other intangible assets | a | 2,782 | 1,323 | 2,152 | 667 | 1,835 | 340 | |||||||||||||||||||||
Restructuring costs | c | 112 | 0 | 191 | 0 | 750 | 0 | |||||||||||||||||||||
Total | 32,053 | 30,396 | 28,218 | 26,203 | 23,351 | 20,532 | ||||||||||||||||||||||
Operating profit / (loss) before tax and minority interests | 4,964 | 6,718 | 6,707 | 10,199 | 4,400 | 7,893 | ||||||||||||||||||||||
Tax expense / (benefit) | 1,386 | 1,401 | 2,183 | 2,320 | 1,509 | 1,686 | ||||||||||||||||||||||
Net profit / (loss) before minority interests | 3,578 | 5,317 | 4,524 | 7,879 | 2,891 | 6,207 | ||||||||||||||||||||||
Minority interests | (344 | ) | (344 | ) | (87 | ) | (87 | ) | (54 | ) | (54 | ) | ||||||||||||||||
Net profit | 3,234 | 4,973 | 4,437 | 7,792 | 2,837 | 6,153 | ||||||||||||||||||||||
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Notes to the Financial Statements
40.6 Condensed Consolidated Balance Sheet
The following is a Condensed Consolidated Balance Sheet of the Group, as of 31 December 2001 and 31 December 2000, restated to reflect the impact of valuation and income recognition principles and presentation differences between IAS and US GAAP
31.12.01 | 31.12.00 | |||||||||||||||||||
CHF million | Reference | US GAAP | IAS | US GAAP | IAS | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 20,990 | 20,990 | 2,979 | 2,979 | ||||||||||||||||
Due from banks | a | 27,550 | 27,526 | 29,182 | 29,147 | |||||||||||||||
Cash collateral on securities borrowed | 4 | 162,566 | 162,938 | 177,857 | 177,857 | |||||||||||||||
Reverse repurchase agreements | 269,256 | 269,256 | 193,801 | 193,801 | ||||||||||||||||
Trading portfolio assets | 1, 4 | 399,577 | 397,886 | 318,788 | 315,588 | |||||||||||||||
Positive replacement values | 1, 4 | 73,051 | 73,447 | 57,775 | 57,875 | |||||||||||||||
Loans, net of allowance for credit losses | a, d | 226,747 | 226,545 | 245,214 | 244,842 | |||||||||||||||
Financial investments | e, f, 2 | 20,676 | 28,803 | 10,985 | 19,583 | |||||||||||||||
Securities received as collateral | 3 | 20,119 | ||||||||||||||||||
Accrued income and prepaid expenses | 4 | 7,545 | 7,554 | 7,062 | 7,062 | |||||||||||||||
Investments in associates | 697 | 697 | 880 | 880 | ||||||||||||||||
Property and equipment | a, j | 9,276 | 8,695 | 9,692 | 8,910 | |||||||||||||||
Intangible assets and goodwill | a, g | 33,765 | 19,085 | 35,726 | 19,537 | |||||||||||||||
Private equity investments | 2 | 6,069 | 6,658 | |||||||||||||||||
Other assets | d, g, h, i, 1, 2 | 36,972 | 9,875 | 27,955 | 9,491 | |||||||||||||||
Total assets | 1,314,856 | 1,253,297 | 1,124,554 | 1,087,552 | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 106,531 | 106,531 | 82,240 | 82,240 | ||||||||||||||||
Cash collateral on securities lent | 30,317 | 30,317 | 23,418 | 23,418 | ||||||||||||||||
Repurchase agreements | 368,620 | 368,620 | 295,513 | 295,513 | ||||||||||||||||
Trading portfolio liabilities | 1 | 108,924 | 105,798 | 87,832 | 82,632 | |||||||||||||||
Obligation to return securities received as collateral | 3 | 20,119 | ||||||||||||||||||
Negative replacement values | 1,4 | 71,018 | 71,443 | 75,423 | 75,923 | |||||||||||||||
Due to customers | a, d | 333,766 | 333,781 | 310,686 | 310,679 | |||||||||||||||
Accrued expenses and deferred income | 17,289 | 17,289 | 21,038 | 21,038 | ||||||||||||||||
Debt issued | a, d, k | 156,462 | 156,218 | 129,750 | 129,635 | |||||||||||||||
Other liabilities | a, c, d, e, g, h, i, 1 | 38,416 | 15,658 | 32,809 | 18,756 | |||||||||||||||
Total liabilities | 1,251,462 | 1,205,655 | 1,058,709 | 1,039,834 | ||||||||||||||||
Minority interests | 4,112 | 4,112 | 2,885 | 2,885 | ||||||||||||||||
Total shareholders’ equity | 59,282 | 43,530 | 62,960 | 44,833 | ||||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,314,856 | 1,253,297 | 1,124,554 | 1,087,552 | ||||||||||||||||
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40.7 Comprehensive Income
Comprehensive income is defined as the change in Shareholders’ equity excluding transaction 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/losses on available for sale securities, unrealized 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 for the years ended 31 December 2001, 31 December 2000 and 31 December 1999 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 | income | ||||||||||||||||||
Balance, 1 January 1999 | (456 | ) | 85 | (371 | ) | |||||||||||||||||||
Net Profit | 2,837 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | 14 | 14 | ||||||||||||||||||||||
Unrealized gains on available for sale investments arising during the year, net of CHF 18 million tax | 74 | 74 | ||||||||||||||||||||||
Reclassification adjustment for gains on available for sale investments realized in net profit, net of CHF 40 million tax | (143 | ) | (143 | ) | (55 | ) | ||||||||||||||||||
Comprehensive income | 2,782 | |||||||||||||||||||||||
Balance, 31 December 1999 | (442 | ) | 16 | (426 | ) | |||||||||||||||||||
Net profit | 4,437 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (245 | ) | (245 | ) | ||||||||||||||||||||
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 | ) | 90 | |||||||||||||||||||
Comprehensive income | 4,527 | |||||||||||||||||||||||
Balance, 31 December 2000 | (687 | ) | 351 | (336 | ) | |||||||||||||||||||
Net profit | 3,234 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (82 | ) | (82 | ) | ||||||||||||||||||||
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 | ) | ||||||||||||||||||||
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 | (303 | ) | (303 | ) | (373 | ) | ||||||||||||||||||
Comprehensive income | 2,861 | |||||||||||||||||||||||
Balance, 31 December 2001 | (769 | ) | 356 | 7 | (303 | ) | (709 | ) | ||||||||||||||||
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Notes to the Financial Statements
Note 41 Additional Disclosures Required under US GAAP and
SEC Rules
41.1 Financial investments
See Note 13 for additional information on financial investments. The following table summarizes the Group’s financial investments at 31 December 2000:
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | Fair | |||||||||||||
cost | gains | losses | value | |||||||||||||
31 December 2000 | ||||||||||||||||
Money market paper | 4,162 | 0 | 0 | 4,162 | ||||||||||||
Equity securities1 | 1,147 | 447 | 6 | 1,588 | ||||||||||||
Debt securities issued by the Swiss national government and agencies | 34 | 2 | 0 | 36 | ||||||||||||
Debt securities issued by Swiss local governments | 46 | 1 | 1 | 46 | ||||||||||||
Debt securities issued by foreign governments and official institutions | 4,852 | 7 | 3 | 4,856 | ||||||||||||
Corporate debt securities | 1,139 | 5 | 1 | 1,143 | ||||||||||||
Mortgage-backed securities | 47 | 0 | 0 | 47 | ||||||||||||
Other debt securities | 88 | 4 | 0 | 92 | ||||||||||||
Total | 11,515 | 466 | 11 | 11,970 | ||||||||||||
1 | The LOCOM value of the equity securities as reported in Note 13 is adjusted to cost basis for the purpose of the fair value calculation. |
Proceeds from sales and maturities of investment securities available for sale during the year ended 31 December 2000 were CHF 325 million. On those sales gross gains of CHF 162 million and gross losses of CHF 1 million were realized in 2000 in the income statement.
Note 41.2 Sales of Financial Assets in Securitizations
During the year ended 31 December 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 transactions 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 67.6 billion, CHF 4.1 billion and CHF 2.8 billion, respectively. Related pre-tax gains recognized, including unrealized gains on retained interests, at the time of securitization were CHF 112.9 million, CHF 129.7 million and CHF 20.6 million, respectively. During 2000, the Group did not engage in significant securitization transactions involving the transfer of its financial assets. A significant portion of the securitization activities conducted in 2001 were derived from businesses acquired in the purchase of Paine Webber Group Inc. in November 2000.
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Note 41.3 Supplemental Guarantor Information
Guarantee of PaineWebber Securities
Supplemental Guarantor Consolidating Income Statement
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2001 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | UBS Group | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 33,997 | 5,303 | 23,667 | (10,690 | ) | 52,277 | ||||||||||||||
Interest expense | (26,979 | ) | (5,724 | ) | (22,223 | ) | 10,690 | (44,236 | ) | |||||||||||
Net interest income | 7,018 | (421 | ) | 1,444 | 0 | 8,041 | ||||||||||||||
Credit loss expense | (471 | ) | (15 | ) | (12 | ) | 0 | (498 | ) | |||||||||||
Net interest income after credit loss expense | 6,547 | (436 | ) | 1,432 | 0 | 7,543 | ||||||||||||||
Net fee and commission income | 7,689 | 5,587 | 6,935 | 0 | 20,211 | |||||||||||||||
Net trading income | 5,643 | 870 | 2,289 | 0 | 8,802 | |||||||||||||||
Income from subsidiaries | (21 | ) | 0 | 0 | 21 | 0 | ||||||||||||||
Other income | 1,182 | 39 | (663 | ) | 0 | 558 | ||||||||||||||
Total operating income | 21,040 | 6,060 | 9,993 | 21 | 37,114 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 9,388 | 5,178 | 5,262 | 0 | 19,828 | |||||||||||||||
General and administrative expenses | 3,891 | 1,853 | 1,887 | 0 | 7,631 | |||||||||||||||
Depreciation of property and equipment | 1,147 | 181 | 286 | 0 | 1,614 | |||||||||||||||
Amortization of goodwill and other intangible assets | 155 | 808 | 360 | 0 | 1,323 | |||||||||||||||
Total operating expenses | 14,581 | 8,020 | 7,795 | 0 | 30,396 | |||||||||||||||
Operating profit/(loss) before tax and minority interests | 6,459 | (1,960 | ) | 2,198 | 21 | 6,718 | ||||||||||||||
Tax expense/(benefit) | 1,486 | (477 | ) | 392 | 0 | 1,401 | ||||||||||||||
Net profit before minority interests | 4,973 | (1,483 | ) | 1,806 | 21 | 5,317 | ||||||||||||||
Minority interests | 0 | 0 | (344 | ) | 0 | (344 | ) | |||||||||||||
Net profit/(loss) | 4,973 | (1,483 | ) | 1,462 | 21 | 4,973 | ||||||||||||||
Net profit/(loss) US GAAP2 | 2,869 | (1,519 | ) | 1,884 | 0 | 3,234 | ||||||||||||||
1 | UBS AG Parent Bank prepares its financial statements in accordance with Swiss Banking Law requirements. For the purpose of this disclosure, the accounts have been adjusted to IAS. | |
2 | Refer to Note 40 for a description of the differences between IAS and US GAAP. |
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UBS Group Financial Statements
Notes to the Financial Statements
Supplemental Guarantor Consolidating Balance Sheet
CHF million | UBS AG | UBS | Consolidating | UBS | ||||||||||||||||
At 31 December 2001 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | Group | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 20,215 | 0 | 775 | 0 | 20,990 | |||||||||||||||
Due from banks | 70,265 | 17,819 | 85,139 | (145,697 | ) | 27,526 | ||||||||||||||
Cash collateral on securities borrowed | 29,134 | 35,723 | 140,668 | (42,587 | ) | 162,938 | ||||||||||||||
Reverse repurchase agreements | 180,103 | 40,857 | 168,685 | (120,389 | ) | 269,256 | ||||||||||||||
Trading portfolio assets | 206,899 | 7,604 | 183,383 | 0 | 397,886 | |||||||||||||||
Positive replacement values | 75,218 | 457 | 11,030 | (13,258 | ) | 73,447 | ||||||||||||||
Loans, net of allowance for credit losses | 263,128 | 20,870 | 20,226 | (77,679 | ) | 226,545 | ||||||||||||||
Financial investments | 18,807 | 2,523 | 7,473 | 0 | 28,803 | |||||||||||||||
Accrued income and prepaid expenses | 3,231 | 1,834 | 3,973 | (1,484 | ) | 7,554 | ||||||||||||||
Investments in associates | 14,537 | 837 | 61 | (14,738 | ) | 697 | ||||||||||||||
Property and equipment | 6,310 | 838 | 1,547 | 0 | 8,695 | |||||||||||||||
Goodwill and other intangible assets | 114 | 14,971 | 4,000 | 0 | 19,085 | |||||||||||||||
Other assets | 4,353 | 3,885 | 3,963 | (2,326 | ) | 9,875 | ||||||||||||||
Total assets | 892,314 | 148,218 | 630,923 | (418,158 | ) | 1,253,297 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 111,963 | 43,875 | 96,390 | (145,697 | ) | 106,531 | ||||||||||||||
Cash collateral on securities lent | 22,461 | 22,491 | 27,952 | (42,587 | ) | 30,317 | ||||||||||||||
Repurchase agreements | 113,288 | 39,112 | 336,609 | (120,389 | ) | 368,620 | ||||||||||||||
Trading portfolio liabilities | 56,082 | 1,550 | 48,166 | 0 | 105,798 | |||||||||||||||
Negative replacement values | 75,417 | 405 | 8,879 | (13,258 | ) | 71,443 | ||||||||||||||
Due to customers | 354,580 | 21,893 | 34,987 | (77,679 | ) | 333,781 | ||||||||||||||
Accrued expenses and deferred income | 9,129 | 4,347 | 5,297 | (1,484 | ) | 17,289 | ||||||||||||||
Debt issued | 96,045 | 8,234 | 51,939 | 0 | 156,218 | |||||||||||||||
Other liabilities | 10,549 | 2,217 | 5,218 | (2,326 | ) | 15,658 | ||||||||||||||
Total liabilities | 849,514 | 144,124 | 615,437 | (403,420 | ) | 1,205,655 | ||||||||||||||
Minority interests | 0 | 0 | 4,112 | 0 | 4,112 | |||||||||||||||
Total shareholders’ equity | 42,800 | 4,094 | 11,374 | (14,738 | ) | 43,530 | ||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 892,314 | 148,218 | 630,923 | (418,158 | ) | 1,253,297 | ||||||||||||||
Total shareholders’ equity – US GAAP2 | 59,178 | 3,620 | 11,222 | (14,738 | ) | 59,282 | ||||||||||||||
1 | UBS AG Parent Bank prepares its financial statements in accordance with Swiss Banking Law requirements. For the purpose of this disclosure, the accounts have been adjusted to IAS. | |
2 | Refer to Note 40 for a description of the differences between IAS and US GAAP. |
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Supplemental Guarantor Consolidating Cash Flow Statement
CHF million | UBS AG | UBS | ||||||||||||||
For the year ended 31 December 2001 | Parent Bank1 | Americas Inc. | Subsidiaries | UBS Group | ||||||||||||
Net cash flow from/(used in) operating activities | 10,243 | 85 | 2,545 | 12,873 | ||||||||||||
Cash flow (used in)/from investing activities | ||||||||||||||||
Investments in subsidiaries and associates | (44 | ) | (54 | ) | (369 | ) | (467 | ) | ||||||||
Disposal of subsidiaries and associates | 95 | 0 | 0 | 95 | ||||||||||||
Purchase of property and equipment | (1,316 | ) | (295 | ) | (410 | ) | (2,021 | ) | ||||||||
Disposal of property and equipment | 191 | 137 | 52 | 380 | ||||||||||||
Net (investment)/divestment in financial investments | (5,514 | ) | (269 | ) | 13 | (5,770 | ) | |||||||||
Net cash flow (used in)/from investing activities | (6,588 | ) | (481 | ) | (714 | ) | (7,783 | ) | ||||||||
Cash flow (used in) / from financing activities | ||||||||||||||||
Net money market paper issued | 16,263 | (6 | ) | 7,969 | 24,226 | |||||||||||
Net movements in treasury shares and treasury share contract activity | (6,038 | ) | 0 | 0 | (6,038 | ) | ||||||||||
Capital issuance | 12 | 0 | 0 | 12 | ||||||||||||
Capital repayment by par value reduction | (683 | ) | 0 | 0 | (683 | ) | ||||||||||
Issuance of long-term debt | 15,044 | 208 | 2,981 | 18,233 | ||||||||||||
Repayment of long-term debt | (15,861 | ) | (1,260 | ) | (1,356 | ) | (18,477 | ) | ||||||||
Issuance of trust preferred securities | 0 | 0 | 1,291 | 1,291 | ||||||||||||
Dividend payments to / and purchase from minority interests | 0 | 0 | (461 | ) | (461 | ) | ||||||||||
Net activity in investments in subsidiaries | (620 | ) | 60 | 560 | 0 | |||||||||||
Net cash flow from/(used in) financing activities | 8,117 | (998 | ) | 10,984 | 18,103 | |||||||||||
Effects of exchange rate differences | (164 | ) | (207 | ) | 67 | (304 | ) | |||||||||
Net increase / (decrease) in cash equivalents | 11,608 | (1,601 | ) | 12,882 | 22,889 | |||||||||||
Cash and cash equivalents, beginning of the year | 78,248 | 5,405 | 9,717 | 93,370 | ||||||||||||
Cash and cash equivalents, end of the year | 89,856 | 3,804 | 22,599 | 116,259 | ||||||||||||
Cash and cash equivalents comprise: | ||||||||||||||||
Cash and balances with central banks | 20,215 | 0 | 775 | 20,990 | ||||||||||||
Money market paper | 54,387 | 1,521 | 14,030 | 69,938 | ||||||||||||
Due from banks maturing in less than three months | 15,254 | 2,283 | 7,794 | 25,331 | ||||||||||||
Total | 89,856 | 3,804 | 22,599 | 116,259 | ||||||||||||
1 | UBS AG Parent Bank prepares its financial statements in accordance with Swiss Banking Law requirements. For the purpose of this disclosure, the accounts have been adjusted to IAS. |
Guarantee of other securities
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UBS Group Financial Statements
Notes to the Financial Statements
Note 41.4 Derivative instruments indexed to UBS shares
US GAAP, like IAS, requires that derivatives indexed to a company’s own stock be recorded as an equity instrument if settlement is required in actual shares or the company has the choice to settle the contract by delivery or receipt of its own shares. If, however, the counterparty may require cash settlement, then the derivative must be classified as an asset or liability, with changes in fair value being recorded in income. Because the Group has no contracts for which the accounting treatment under US GAAP differs from IAS, there is no reconciling item for these derivative instruments. However, US GAAP also requires disclosure of the amount of income recognized from such derivative instruments.
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UBS Group Financial Statements
Report of the Group Auditors
Report of the Group Auditors
to the General Meeting of
UBS AG, ZURICH AND BASEL
Mr. Chairman,
Ladies and Gentlemen,
We have audited the accompanying Group balance sheets of UBS AG as of 31 December 2001 and 2000, and the related Group statements of income, cash flows and changes in equity for each of the three years in the period ended 31 December 2001, and notes thereto. These financial statements are the responsibility of the Company's management and the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audits. We confirm that we meet the legal requirements in Switzerland concerning professional qualification and independence.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America, as well as those promulgated by the profession in Switzerland. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the Group financial statements referred to above present fairly, in all material respects, the consolidated financial position of UBS AG as of 31 December 2001 and 2000, and the consolidated results of operations and cash flows for each of the three years in the period ended 31 December 2001, in conformity with International Accounting Standards (“IAS”), and they comply with Swiss Law.
In accordance with Swiss Law, we recommend that the Group financial statements submitted to you be approved.
IAS vary in certain significant respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected shareholders' equity as of 31 December 2001 and 2000 and the results of operations for each of the three years in the period ended 31 December 2001 to the extent summarized in Note 40 of the notes to the financial statements.
Basel, 12 February 2002 | Ernst & Young Ltd | |||
Roger K. Perkin | Peter Heckendorn | |||
Chartered Accountant | lic. oec. | |||
in charge of the audit | in charge of the audit | |||
Enclosures |
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170
Table of Contents
171
Table of Contents
UBS AG (Parent Bank) Table of Contents |
UBS AG (Parent Bank)
Table of Contents
Parent Bank Review | 173 | |||
Financial Statements | 174 | |||
Income Statement | 174 | |||
Balance Sheet | 175 | |||
Statement of Appropriation of Retained Earnings | 175 | |||
Notes to the Financial Statements | 176 | |||
Additional Income Statement Information | 177 | |||
Net Trading Income | 177 | |||
Extraordinary Income and Expenses | 177 | |||
Additional Balance Sheet Information | 178 | |||
Value Adjustments and Provisions | 178 | |||
Statement of Shareholders’ Equity | 179 | |||
Share Capital | 179 | |||
Off-Balance Sheet and Other Information | 180 | |||
Assets Pledged or Assigned as Security for Own Obligations, Assets Subject to Reservation of Title | 180 | |||
Fiduciary Transactions | 180 | |||
Due to UBS Pension Plans, Loans to Corporate Bodies/Related Parties | 180 | |||
Report of the Statutory Auditors | 181 |
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UBS AG (Parent Bank)
Parent Bank Review
Parent Bank Review
Income Statement
Balance Sheet
173
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UBS AG (Parent Bank)
Financial Statements
Financial Statements
Income Statement
CHF million | % change from | |||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.00 | |||||||||
Interest and discount income | 38,056 | 40,375 | (6 | ) | ||||||||
Interest and dividend income from financial investments | 185 | 93 | 99 | |||||||||
Interest expense | (31,444 | ) | (32,161 | ) | (2 | ) | ||||||
Net interest income | 6,797 | 8,307 | (18 | ) | ||||||||
Credit-related fees and commissions | 291 | 292 | 0 | |||||||||
Fee and commission income from securities and investment business | 8,232 | 9,574 | (14 | ) | ||||||||
Other fee and commission income | 524 | 492 | 7 | |||||||||
Fee and commission expense | (1,176 | ) | (1,229 | ) | (4 | ) | ||||||
Net fee and commission income | 7,871 | 9,129 | (14 | ) | ||||||||
Net trading income | 5,015 | 7,378 | (32 | ) | ||||||||
Net income from disposal of financial investments | 15 | 785 | (98 | ) | ||||||||
Income from investments in associated companies | 1,532 | 896 | 71 | |||||||||
Income from real estate holdings | 54 | 41 | 32 | |||||||||
Sundry income from ordinary activities | 1,183 | 380 | 211 | |||||||||
Sundry ordinary expenses | (139 | ) | (614 | ) | (77 | ) | ||||||
Other income from ordinary activities | 2,645 | 1,488 | 78 | |||||||||
Operating income | 22,328 | 26,302 | (15 | ) | ||||||||
Personnel expenses | 9,443 | 10,292 | (8 | ) | ||||||||
General and administrative expenses | 4,869 | 5,405 | (10 | ) | ||||||||
Operating expenses | 14,312 | 15,697 | (9 | ) | ||||||||
Operating profit | 8,016 | 10,605 | (24 | ) | ||||||||
Depreciation and write-offs on investments in associated companies and fixed assets | 1,650 | 1,623 | 2 | |||||||||
Allowances, provisions and losses | 1,140 | 345 | 230 | |||||||||
Profit before extraordinary items and taxes | 5,226 | 8,637 | (39 | ) | ||||||||
Extraordinary income | 95 | 650 | (85 | ) | ||||||||
Extraordinary expenses | 7 | 20 | (65 | ) | ||||||||
Tax expense / (benefit) | 659 | 1,361 | (52 | ) | ||||||||
Profit for the period | 4,655 | 7,906 | (41 | ) | ||||||||
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Balance Sheet
% change from | ||||||||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.00 | |||||||||
Assets | ||||||||||||
Liquid assets | 20,215 | 2,242 | 802 | |||||||||
Money market paper | 54,384 | 61,152 | (11 | ) | ||||||||
Due from banks | 252,226 | 243,911 | 3 | |||||||||
Due from customers | 173,690 | 175,255 | (1 | ) | ||||||||
Mortgage loans | 117,706 | 117,830 | 0 | |||||||||
Trading balances in securities and precious metals | 185,306 | 155,342 | 19 | |||||||||
Financial investments | 17,253 | 12,133 | 42 | |||||||||
Investments in associated companies | 11,331 | 10,587 | 7 | |||||||||
Tangible fixed assets | 5,624 | 5,949 | (5 | ) | ||||||||
Accrued income and prepaid expenses | 3,231 | 3,239 | 0 | |||||||||
Positive replacement values | 171,798 | 141,516 | 21 | |||||||||
Other assets | 3,725 | 6,242 | (40 | ) | ||||||||
Total assets | 1,016,489 | 935,398 | 9 | |||||||||
Total subordinated assets | 1,894 | 805 | 135 | |||||||||
Total amounts receivable from Group companies | 213,954 | 187,724 | 14 | |||||||||
Liabilities | ||||||||||||
Money market paper issued | 52,604 | 36,340 | 45 | |||||||||
Due to banks | 303,036 | 294,440 | 1 | 3 | ||||||||
Due to customers on savings and deposit accounts | 67,664 | 68,069 | (1 | ) | ||||||||
Other amounts due to customers | 288,684 | 263,459 | 10 | |||||||||
Medium-term note issues | 5,213 | 5,408 | (4 | ) | ||||||||
Bond issues and loans from central mortgage institutions | 65,471 | 42,731 | 53 | |||||||||
Accruals and deferred income | 8,707 | 11,230 | (22 | ) | ||||||||
Negative replacement values | 172,469 | 155,059 | 11 | |||||||||
Other liabilities | 5,795 | 8,073 | 1 | (28 | ) | |||||||
Value adjustments and provisions | 3,959 | 7,817 | (49 | ) | ||||||||
Share capital | 3,589 | 4,444 | (19 | ) | ||||||||
General statutory reserve | 14,507 | 18,047 | (20 | ) | ||||||||
Reserve for own shares | 3,253 | 4,007 | (19 | ) | ||||||||
Other reserves | 16,883 | 8,361 | 102 | |||||||||
Profit brought forward | 7 | (100 | ) | |||||||||
Profit for the period | 4,655 | 7,906 | (41 | ) | ||||||||
Total liabilities | 1,016,489 | 935,398 | 9 | |||||||||
Total subordinated liabilities | 16,444 | 15,302 | 7 | |||||||||
Total liabilities to Group companies | 126,182 | 142,263 | (11 | ) | ||||||||
1 | Reclassification of CHF 65,512 million trading liabilities from Other liabilities to Due to banks. |
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 2001 as per the Parent Bank’s Income Statement | 4,655 | |||
Appropriation to other reserves | 4,655 | |||
Par Value Repayment
The Board of Directors proposes to repay CHF 2.00 of the par value of each CHF 2.80 share, instead of distributing a dividend. This repayment would reduce the share capital by CHF 2,517 million, as at 31 December 2001, and reduce the par amount per share to CHF 0.80. The repayment of CHF 2.00 of the par value would be made on 10 July 2002 to those shareholders who hold UBS shares on 5 July 2002.
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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 prinicipally the same as for the Group Financial Statements outlined in Note 1: Summary of Significant Accounting Policies. Major differences between the Swiss banking law requirements and International Accounting Standards are described in Note 39 to the Group Financial Statements.
Treasury shares
Investments in associated companies
Property and equipment
Extraordinary income and expenses
Taxation
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Additional Income Statement Information
Net Trading Income
CHF million | % change from | |||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.00 | |||||||||
Foreign exchange and bank notes | 1,629 | 1,151 | 42 | |||||||||
Bonds and other interest rate instruments | 805 | 88 | 815 | |||||||||
Equities | 2,435 | 6,117 | (60 | ) | ||||||||
Precious metals and commodities | 146 | 22 | 564 | |||||||||
Total | 5,015 | 7,378 | (32 | ) | ||||||||
Extraordinary Income and Expenses
Extraordinary income contains CHF 87 million (2000: CHF 496 million) from the sale of subsidiaries and CHF 8 million (2000: CHF 15 million) from other disposals. Extraordinary expenses consist mainly of losses of CHF 4 million from the liquidation of investments in subsidiaries. In 2000 losses of CHF 20 million resulted from the sale of tangible fixed assets.
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UBS AG (Parent Bank)
Notes to the Financial Statements
Additional Balance Sheet Information
Value Adjustments and Provisions
Provisions | Recoveries, | |||||||||||||||||||
applied in | doubtful | |||||||||||||||||||
accordance | interest, | New | ||||||||||||||||||
with their | currency | provisions | ||||||||||||||||||
Balance at | specified | translation | charged | Balance at | ||||||||||||||||
CHF million | 31.12.00 | purpose | differences | to income | 31.12.01 | |||||||||||||||
Default risks (credit and country risk) | 10,389 | (2,976 | ) | 252 | 367 | 8,032 | ||||||||||||||
Other business risks | 2,933 | (163 | ) | (165 | ) | 289 | 2,894 | |||||||||||||
Capital and income taxes | 2,054 | (1,634 | ) | (68 | ) | 549 | 901 | |||||||||||||
Other provisions | 1,573 | (799 | ) | (212 | ) | 469 | 1,031 | |||||||||||||
Total allowance for general credit losses and other provisions | 16,949 | (5,572 | ) | (193 | ) | 1,674 | 12,858 | |||||||||||||
Allowances deducted from assets | 9,132 | 8,899 | ||||||||||||||||||
Total provisions as per balance sheet | 7,817 | 3,959 | ||||||||||||||||||
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Statement of Shareholders’ Equity
% change from | |||||||||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.00 | ||||||||||
Shareholders’ equity Share capital at beginning of the period | 4,444 | 4,309 | 3 | ||||||||||
General statutory reserves | 18,047 | 14,528 | 24 | ||||||||||
Reserves for own shares | 4,007 | 3,462 | 16 | ||||||||||
Other reserves | 8,361 | 6,356 | 32 | ||||||||||
Retained earnings | 7,913 | 6,791 | 17 | ||||||||||
Total shareholders’ equity at beginning of the period (before distribution of profit) | 42,772 | 35,446 | 21 | ||||||||||
Reduction of share capital | (867 | ) | |||||||||||
Capital increase | 12 | 135 | (91 | ) | |||||||||
Increase in General statutory reserves | 275 | 215 | 28 | ||||||||||
Share premium | (3,815 | ) | 3,304 | ||||||||||
Other allocations1 | (145 | ) | (1,979 | ) | (93 | ) | |||||||
Prior-year dividend2 | (2,255 | ) | (100 | ) | |||||||||
Profit for the period | 4,655 | 7,906 | (41 | ) | |||||||||
Total shareholders’ equity at the end of the period (before distribution of profit) | 42,887 | 42,772 | 0 | ||||||||||
of which: | |||||||||||||
Share capital | 3,589 | 4,444 | (19 | ) | |||||||||
General statutory reserves | 14,507 | 18,047 | (20 | ) | |||||||||
Reserves for own shares | 3,253 | 4,007 | (19 | ) | |||||||||
Other reserves | 16,883 | 8,361 | 102 | ||||||||||
Retained earnings | 4,655 | 7,913 | (41 | ) | |||||||||
1 | The 31 December 2000 figure includes a partial dividend for the period from 1 January 2000 until 30 September 2000 distributed in the year 2000. | |
2 | For the fourth quarter 2000 a par value repayment has been done instead of distributing a final dividend. |
Share Capital
Par value | Ranking for dividends | |||||||||||||||
No. of shares | Capital in CHF | No. of shares | Capital in CHF | |||||||||||||
Issued and paid up | 1,281,717,499 | 3,588,808,997 | 1,258,653,143 | 3,524,228,800 | ||||||||||||
Conditional share capital | 13,017,716 | 36,449,605 | ||||||||||||||
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UBS AG (Parent Bank)
Notes to the Financial Statements
Off-Balance Sheet and Other Information
Assets Pledged or Assigned as Security for Own Obligations,
Assets Subject to Reservation of Title
31.12.01 | 31.12.00 | Change in % | ||||||||||||||||||||||
Book | Effective | Book | Effective | Book | Effective | |||||||||||||||||||
CHF million | value | liability | value | liability | value | liability | ||||||||||||||||||
Money market paper | 29,893 | 28,355 | 5 | |||||||||||||||||||||
Mortgage loans | 1,239 | 813 | 1,565 | 1,066 | (21 | ) | (24 | ) | ||||||||||||||||
Securities | 5,224 | 40,649 | 24,721 | (87 | ) | (100 | ) | |||||||||||||||||
Total | 36,356 | 813 | 70,569 | 25,787 | (48 | ) | (97 | ) | ||||||||||||||||
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 | ||||||||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.00 | |||||||||
Deposits | ||||||||||||
with other banks | 38,978 | 50,274 | (22 | ) | ||||||||
with Group banks | 532 | 682 | (22 | ) | ||||||||
Loans and other financial transactions | 1,042 | 403 | 159 | |||||||||
Total | 40,552 | 51,359 | (21 | ) | ||||||||
Due to UBS Pension Plans, Loans to Corporate Bodies/Related Parties
% change from | ||||||||||||
CHF million | 31.12.01 | 31.12.00 | 31.12.00 | |||||||||
Due to UBS pension plans (including securities borrowed) and UBS securities held by pension plans | 1,605 | 4,644 | (65 | ) | ||||||||
Loans to directors, senior executives and auditors1 | 32 | 36 | (11 | ) | ||||||||
1 | Loans to directors, senior executives and auditors are loans to members of the Board of Directors, the Group Executive Board, the Group Managing Board and the Group’s official auditors under Swiss company law. This also includes loans to companies which are controlled by these natural or legal persons. There are no loans to the auditors. |
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UBS AG (Parent Bank)
Report of the Statutory Auditors
Report of the statutory auditors
to the General Meeting of
UBS AG, ZURICH AND BASEL
Mr. Chairman,
Ladies and Gentlemen,
As statutory auditors, we have audited the accounting records and the financial statements (income statement, balance sheet and notes) of UBS AG for the year ended 31 December 2001.
These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the accounting records and financial statements and the proposed appropriation of available earnings comply with the Swiss Law and the company's articles of association.
We recommend that the financial statements submitted to you be approved.
Basel, 12 February 2002 | Ernst & Young Ltd | |||
Roger K. Perkin | Peter Heckendorn | |||
Chartered Accountant | lic. oec. | |||
in charge of the audit | in charge of the audit | |||
Enclosures |
181
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182
Table of Contents
183
Table of Contents
Additional Disclosure Required under SEC Regulations Table of Contents | |
Additional Disclosure Required under SEC Regulations
Table of Contents
A | Introduction | 185 | ||
B | Selected Financial Data | 185 | ||
Balance Sheet Data | 187 | |||
US GAAP Income Statement Data | 188 | |||
US GAAP Balance Sheet Data | 189 | |||
Ratio of Earnings to Fixed Charges | 189 | |||
C | Information on the Company | 189 | ||
Property, plant and equipment | 189 | |||
D | Information Required by Industry Guide 3 | 190 | ||
Selected statistical information | 190 | |||
Average Balances and Interest Rates | 190 | |||
Analysis of Changes in Interest Income and Expense | 192 | |||
Deposits | 194 | |||
Short-term Borrowings | 195 | |||
Loans | 196 | |||
Loan Maturities | 197 | |||
Impaired, Non-performing and Restructured Loans | 198 | |||
Cross-Boarder Outstandings | 199 | |||
Summary of Movements in Allowances and Provisions for Credit Losses | 201 | |||
Allocation of the Allowances and Provisions for Credit Losses | 203 | |||
Loss History Statistics | 205 |
184
Table of Contents
A – Introduction
The following pages contain additional disclosure about UBS Group which is required under SEC regulations.
B – Selected Financial Data
UBS’s Financial Statements have been prepared in accordance with International Accounting Standards (IAS) 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).
Average rate1 | ||||||||||||||||
Year ended 31 December | High | Low | (USD per 1 CHF) | At period end | ||||||||||||
1997 | 0.7446 | 0.6510 | 0.6890 | 0.6845 | ||||||||||||
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 | ||||||||||||
Month | High | Low | ||||||||||||||
September 2001 | 0.6331 | 0.5859 | ||||||||||||||
October 2001 | 0.6217 | 0.6021 | ||||||||||||||
November 2001 | 0.6132 | 0.5985 | ||||||||||||||
December 2001 | 0.6136 | 0.5907 | ||||||||||||||
January 2002 | 0.6081 | 0.5814 | ||||||||||||||
February 2002 | 0.5932 | 0.5833 |
1 | The average of the noon buying rates on the last business day of each full month during the relevant period. |
185
Table of Contents
Additional Disclosure Required
under SEC Regulations
B – Selected Financial Data (continued)
CHF million, except where indicated | ||||||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Income statement data | ||||||||||||||||||||
Interest income | 52,277 | 51,745 | 35,604 | 37,442 | 23,669 | |||||||||||||||
Interest expense | 44,236 | 43,615 | 29,695 | 32,424 | 16,733 | |||||||||||||||
Net interest income | 8,041 | 8,130 | 5,909 | 5,018 | 6,936 | |||||||||||||||
Credit loss (expense) / recovery | (498 | ) | 130 | (956 | ) | (951 | ) | (1,278 | ) | |||||||||||
Net interest income after credit loss (expense) / recovery | 7,543 | 8,260 | 4,953 | 4,067 | 5,658 | |||||||||||||||
Net fee and commission income | 20,211 | 16,703 | 12,607 | 12,626 | 12,234 | |||||||||||||||
Net trading income | 8,802 | 9,953 | 7,719 | 3,313 | 5,491 | |||||||||||||||
Other income | 558 | 1,486 | 3,146 | 2,241 | 1,497 | |||||||||||||||
Operating income | 37,114 | 36,402 | 28,425 | 22,247 | 24,880 | |||||||||||||||
Operating expenses | 30,396 | 26,203 | 20,532 | 18,376 | 18,636 | |||||||||||||||
Operating profit before tax | 6,718 | 10,199 | 7,893 | 3,871 | 6,244 | |||||||||||||||
Restructuring costs | 0 | 0 | 0 | 0 | 7,000 | |||||||||||||||
Tax expense/(benefit) | 1,401 | 2,320 | 1,686 | 904 | (105 | ) | ||||||||||||||
Minority interests | (344 | ) | (87 | ) | (54 | ) | 5 | (16 | ) | |||||||||||
Net profit | 4,973 | 7,792 | 6,153 | 2,972 | (667 | ) | ||||||||||||||
Cost / income ratio (%)1 | 80.8 | 72.2 | 69.9 | 79.2 | 71.2 | |||||||||||||||
Cost / income ratio before goodwill (%)1, 2 | 77.3 | 70.4 | 68.7 | 77.7 | 70.7 | |||||||||||||||
Per share data (CHF) | ||||||||||||||||||||
Basic earnings per share3, 4 | 3.93 | 6.44 | 5.07 | 2.44 | (0.53 | ) | ||||||||||||||
Basic earnings per share before goodwill2, 3, 4 | 4.97 | 7.00 | 5.35 | 2.72 | ||||||||||||||||
Diluted earnings per share3, 4 | 3.78 | 6.35 | 5.02 | 2.40 | (0.53 | ) | ||||||||||||||
Diluted earnings per share before goodwill2, 3, 4 | 4.81 | 6.89 | 5.30 | 2.68 | ||||||||||||||||
Cash dividends declared per share (CHF)5 | 1.50 | 1.83 | 1.67 | |||||||||||||||||
Cash dividends declared per share (USD)5 | 0.86 | 1.10 | 1.10 | |||||||||||||||||
Dividend payout ratio (%)5 | 23.28 | 36.18 | 68.21 | |||||||||||||||||
Rates of return (%) | ||||||||||||||||||||
Return on shareholders’ equity6 | 11.7 | 21.5 | 22.4 | 10.7 | ||||||||||||||||
Return on shareholders’ equity before goodwill2, 6 | 14.8 | 23.4 | 23.6 | 12.0 | ||||||||||||||||
Return on average equity | 10.4 | 22.0 | 18.6 | 9.0 | (2.0 | ) | ||||||||||||||
Return on average assets | 0.36 | 0.7 | 0.65 | 0.28 | (0.07 | ) | ||||||||||||||
1 | Operating expenses / operating income before credit loss expense. | |
2 | The amortization of goodwill and other intangible assets is excluded from the calculation. | |
3 | For EPS calculation, see Note 9 to the Financial Statements. | |
4 | The 2000, 1999, 1998 and 1997 share and earnings per share figures have been adjusted for the 3 for 1 share split which took place on 16 July 2001. | |
5 | Dividends are normally declared and paid in the year subsequent to the reporting period. In 2000, as part of the arrangements of the acquisition of PaineWebber, a dividend of CHF 1.50 was paid on 5 October 2000 in respect of the nine months ended 30 September 2000. Prior to the merger between Union Bank of Switzerland and Swiss Bank Corporation, each paid dividends in accordance with its own dividend policies. In 2001 a further amount of CHF 1.60 per share was distributed to shareholders in the form of a par value reduction, in respect of 2000. No dividend will be paid out for the year 2001. A par value reduction of CHF 2.00 per share will be paid on 10 July 2002, in respect of 2001, subject to approval by shareholders at the Annual General Meeting. | |
6 | Net profit / average shareholders’ equity excluding dividends. |
186
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B – Selected Financial Data (continued)
CHF million, except where indicated | ||||||||||||||||||||
As at | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Balance sheet data | ||||||||||||||||||||
Total assets | 1,253,297 | 1,087,552 | 896,556 | 861,282 | 1,086,414 | |||||||||||||||
Shareholders’ equity | 43,530 | 44,833 | 30,608 | 28,794 | 30,927 | |||||||||||||||
Average equity to average assets (%) | 3.49 | 3.17 | 3.52 | 3.06 | 3.40 | |||||||||||||||
Market capitalization | 105,475 | 112,666 | 92,642 | 90,720 | ||||||||||||||||
Shares1 | ||||||||||||||||||||
Registered ordinary shares | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | 1,289,857,836 | 1,286,174,100 | |||||||||||||||
Own shares to be delivered | 0 | 28,447,788 | 0 | 0 | 0 | |||||||||||||||
Treasury shares | 41,254,951 | 55,265,349 | 110,621,142 | 73,370,094 | 38,236,224 | |||||||||||||||
BIS capital ratios | ||||||||||||||||||||
Tier 1 (%) | 11.6 | 11.7 | 10.6 | 9.3 | 8.3 | |||||||||||||||
Total BIS (%) | 14.8 | 15.7 | 14.5 | 13.2 | 12.6 | |||||||||||||||
Risk-weighted assets | 253,735 | 273,290 | 273,107 | 303,719 | 345,904 | |||||||||||||||
Invested assets (CHF billion) | 2,457 | 2,452 | 4 | 1,744 | 1,573 | |||||||||||||||
Headcount (full time equivalents)2 | 69,985 | 71,076 | 49,058 | 48,011 | ||||||||||||||||
Long-term ratings3 | ||||||||||||||||||||
Fitch, London | AAA | AAA | AAA | AAA | ||||||||||||||||
Moody’s, New York | AA2 | Aa1 | Aa1 | Aa1 | ||||||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | AA+ | ||||||||||||||||
1 | The 2000, 1999, 1998 and 1997 share figures have been adjusted for the 3 for 1 split which took place on 16 July 2001. | |
2 | The Group headcount does not include the Klinik Hirslanden AG headcount. | |
3 | See the UBS Handbook 2001/2002, page 10 to 11 for information about the nature of these ratings. | |
4 | Restated to reflect the new definition. |
Balance Sheet Data
CHF million | ||||||||||||||||||||
As at | 31.12.01 | 31.12.001 | 31.12.991 | 31.12.981 | 31.12.971 | |||||||||||||||
Assets | ||||||||||||||||||||
Total assets | 1,253,297 | 1,087,552 | 896,556 | 861,282 | 1,086,414 | |||||||||||||||
Due from banks | 27,526 | 29,147 | 29,907 | 68,495 | 66,582 | |||||||||||||||
Cash collateral on securities borrowed | 162,938 | 177,857 | 113,162 | 91,695 | 82,656 | |||||||||||||||
Reverse repurchase agreements | 269,256 | 193,801 | 132,391 | 141,285 | 216,355 | |||||||||||||||
Trading portfolio assets | 397,886 | 315,588 | 211,932 | 159,179 | 210,738 | |||||||||||||||
Positive replacement values | 73,447 | 57,875 | 62,957 | 90,511 | 149,538 | |||||||||||||||
Loans, net of allowances for credit losses | 226,545 | 244,842 | 234,858 | 247,926 | 270,917 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 106,531 | 82,240 | 76,365 | 85,716 | 159,634 | |||||||||||||||
Cash collateral on securities lent | 30,317 | 23,418 | 12,832 | 19,171 | 14,140 | |||||||||||||||
Repurchase agreements | 368,620 | 295,513 | 196,914 | 137,617 | 191,793 | |||||||||||||||
Trading portfolio liabilities | 105,798 | 82,632 | 54,638 | 47,033 | 68,215 | |||||||||||||||
Negative replacement values | 71,443 | 75,923 | 95,786 | 125,847 | 170,162 | |||||||||||||||
Due to customers | 333,781 | 310,679 | 279,960 | 274,850 | 302,516 | |||||||||||||||
Debt issued | 156,218 | 129,635 | 120,987 | 102,310 | 109,864 | |||||||||||||||
Shareholders’ equity | 43,530 | 44,833 | 30,608 | 28,794 | 30,927 | |||||||||||||||
1 | Changes have been made to prior year to conform to the current presentation (see Note 1: Summary of Significant Accounting Policies in the Financial Statements). |
187
Table of Contents
Additional Disclosure Required
under SEC Regulations
B – Selected Financial Data (continued)
US GAAP Income Statement Data
CHF million | ||||||||||||||||
For the year ended | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | ||||||||||||
Operating income | ||||||||||||||||
Interest income | 51,975 | 51,565 | 35,404 | 29,136 | ||||||||||||
Interest expense | (44,178 | ) | (43,584 | ) | (29,660 | ) | (25,773 | ) | ||||||||
Net interest income | 7,797 | 7,981 | 5,744 | 3,363 | ||||||||||||
Credit loss (expense) / recovery | (498 | ) | 130 | (956 | ) | (787 | ) | |||||||||
Net interest income after credit loss (expense) / recovery | 7,299 | 8,111 | 4,788 | 2,576 | ||||||||||||
Net fee and commission income | 20,211 | 16,703 | 12,607 | 8,925 | ||||||||||||
Net trading income | 8,973 | 8,597 | 7,174 | 455 | ||||||||||||
Other income | 534 | 1,514 | 3,182 | 725 | ||||||||||||
Total operating income | 37,017 | 34,925 | 27,751 | 12,681 | ||||||||||||
Operating expenses | ||||||||||||||||
Personnel expenses | 19,713 | 17,262 | 12,483 | 7,938 | ||||||||||||
General and administrative expenses | 7,631 | 6,813 | 6,664 | 6,259 | ||||||||||||
Depreciation and amortization | 4,597 | 3,952 | 3,454 | 2,403 | ||||||||||||
Restructuring costs | 112 | 191 | 750 | 1,089 | ||||||||||||
Total operating expenses | 32,053 | 28,218 | 23,351 | 17,689 | ||||||||||||
Operating profit / (loss) before tax and minority interests | 4,964 | 6,707 | 4,400 | (5,008 | ) | |||||||||||
Tax expense / (benefit) | 1,386 | 2,183 | 1,509 | (1,339 | ) | |||||||||||
Net profit / (loss) before minority interests | 3,578 | 4,524 | 2,891 | (3,669 | ) | |||||||||||
Minority interests | (344 | ) | (87 | ) | (54 | ) | 4 | |||||||||
Net profit / (loss) | 3,234 | 4,437 | 2,837 | (3,665 | ) | |||||||||||
188
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B – Selected Financial Data (continued)
US GAAP Balance Sheet Data
CHF million | ||||||||||||||||
As at | 31.12.01 | 31.12.001 | 31.12.991 | 31.12.981 | ||||||||||||
Assets | ||||||||||||||||
Total assets | 1,314,856 | 1,124,554 | 893,525 | 899,589 | ||||||||||||
Due from banks | 27,550 | 29,182 | 29,954 | 68,554 | ||||||||||||
Cash collateral on securities borrowed | 162,566 | 177,857 | 113,162 | 91,695 | ||||||||||||
Reverse repurchase agreements | 269,256 | 193,801 | 132,391 | 141,285 | ||||||||||||
Trading portfolio assets | 399,577 | 318,788 | 228,230 | 178,130 | ||||||||||||
Positive replacement values2 | 73,051 | 57,775 | 62,294 | 90,520 | ||||||||||||
Loans, net of allowances for credit losses | 226,747 | 245,214 | 235,401 | 248,657 | ||||||||||||
Intangible assets and goodwill | 33,765 | 35,726 | 21,428 | 21,707 | ||||||||||||
Other assets | 36,972 | 27,955 | 18,717 | 29,398 | ||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 106,531 | 82,240 | 76,363 | 85,716 | ||||||||||||
Cash collateral on securities lent | 30,317 | 23,418 | 12,832 | 19,127 | ||||||||||||
Repurchase agreements | 368,620 | 295,513 | 173,840 | 136,824 | ||||||||||||
Trading portfolio liabilities | 108,924 | 87,832 | 52,658 | 47,772 | ||||||||||||
Negative replacement values2 | 71,018 | 75,423 | 95,004 | 125,857 | ||||||||||||
Due to customers | 333,766 | 310,686 | 279,971 | 274,861 | ||||||||||||
Accrued expenses and deferred income | 17,289 | 21,038 | 12,040 | 11,232 | ||||||||||||
Debt issued | 156,462 | 129,750 | 120,704 | 101,973 | ||||||||||||
Shareholders’ equity | 59,282 | 62,960 | 51,833 | 54,761 | ||||||||||||
1 Changes have been made to prior year to conform to the current presentation (see Note 1: Summary of significant Accounting Policies in the Financial Statements). | ||
2 Positive and negative replacement values represent the fair value of derivative instruments. |
Ratio of Earnings to Fixed Charges
The following table sets forth UBS AG’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 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
IAS | 1.14 | 1 | 1.23 | 1 | 1.25 | 1 | 1.11 | 1 | 0.95 | 1,3 | ||||||||||
US GAAP | 1.10 | 1,2 | 1.15 | 1,2 | 1.14 | 1,2 | 0.80 | 1,2 | ||||||||||||
1 The ratio is provided using both IAS and US GAAP values, since the ratio is materially different under the two accounting standards. No US GAAP information is provided for 31 December 1997 as a US GAAP reconciliation was not required for that period. | ||
2 The deficiency in the coverage of fixed charges by earnings before fixed charges at 31 December 1998 was CHF 5,319 million. | ||
3 The deficiency in the coverage of fixed charges by earnings before fixed charges at 31 December 1997 was CHF 851 million. |
C – Information on the Company
Property, plant and equipment
189
Table of Contents
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 2001, 2000 and 1999.
31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | ||||||||||||||||||||||||||||||||
CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | ||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Due from banks | |||||||||||||||||||||||||||||||||||||
Domestic | 11,753 | 1,055 | 9.0 | 13,366 | 1,273 | 9.5 | 19,451 | 1,757 | 9.0 | ||||||||||||||||||||||||||||
Foreign | 15,528 | 1,823 | 11.7 | 16,994 | 2,280 | 13.4 | 28,999 | 2,739 | 9.4 | ||||||||||||||||||||||||||||
Cash collateral on securities borrowed and on reverse repurchase agreements | |||||||||||||||||||||||||||||||||||||
Domestic | 7,868 | 563 | 7.2 | 8,383 | 558 | 6.7 | 3,265 | 117 | 3.6 | ||||||||||||||||||||||||||||
Foreign | 474,295 | 17,774 | 3.7 | 348,395 | 18,530 | 5.3 | 223,962 | 11,305 | 5.0 | ||||||||||||||||||||||||||||
Trading portfolio assets | |||||||||||||||||||||||||||||||||||||
Domestic | 12,940 | 307 | 2.4 | 20,800 | 244 | 1.2 | 38,372 | 72 | 0.2 | ||||||||||||||||||||||||||||
Foreign | 333,576 | 16,225 | 4.9 | 256,605 | 11,598 | 4.5 | 159,327 | 5,526 | 3.5 | ||||||||||||||||||||||||||||
Loans | |||||||||||||||||||||||||||||||||||||
Domestic | 177,404 | 8,017 | 4.5 | 181,646 | 10,985 | 6.0 | 200,111 | 8,750 | 4.4 | ||||||||||||||||||||||||||||
Foreign | 72,176 | 3,090 | 4.3 | 67,528 | 3,813 | 5.6 | 58,634 | 3,485 | 5.9 | ||||||||||||||||||||||||||||
Financial investments | |||||||||||||||||||||||||||||||||||||
Domestic | 4,598 | 90 | 2.0 | 3,440 | 105 | 3.1 | 2,761 | 101 | 3.7 | ||||||||||||||||||||||||||||
Foreign | 39,252 | 363 | 0.9 | 22,529 | 297 | 1.3 | 17,153 | 143 | 0.8 | ||||||||||||||||||||||||||||
Net interest on swaps | 2,970 | 2,062 | 1,609 | ||||||||||||||||||||||||||||||||||
Total interest-earning assets | 1,149,390 | 52,277 | 4.5 | 939,686 | 51,745 | 5.5 | 752,035 | 35,604 | 4.7 | ||||||||||||||||||||||||||||
Non-interest-earning assets | |||||||||||||||||||||||||||||||||||||
Positive replacement values | 153,687 | 135,762 | 146,036 | ||||||||||||||||||||||||||||||||||
Fixed assets | 13,376 | 9,660 | 8,824 | ||||||||||||||||||||||||||||||||||
Other | 46,954 | 32,925 | 34,957 | ||||||||||||||||||||||||||||||||||
Total average assets | 1,363,407 | 1,118,033 | 941,852 | ||||||||||||||||||||||||||||||||||
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D – Information Required by Industry Guide 3 (continued)
Average Balances and Interest Rates (continued)
31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | ||||||||||||||||||||||||||||||||
CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | ||||||||||||||||||||||||||||
Liabilities and Equity | |||||||||||||||||||||||||||||||||||||
Due to banks | |||||||||||||||||||||||||||||||||||||
Domestic | 36,260 | 1,424 | 3.9 | 31,133 | 2,397 | 7.7 | 37,581 | 3,254 | 8.7 | ||||||||||||||||||||||||||||
Foreign | 61,642 | 3,506 | 5.7 | 57,258 | 3,758 | 6.6 | 41,583 | 2,261 | 5.4 | ||||||||||||||||||||||||||||
Cash collateral on securities lent and repurchase agreements | |||||||||||||||||||||||||||||||||||||
Domestic | 13,147 | 600 | 4.6 | 12,700 | 478 | 3.8 | 12,830 | 106 | 0.8 | ||||||||||||||||||||||||||||
Foreign | 415,121 | 13,917 | 3.4 | 284,220 | 14,437 | 5.1 | 144,837 | 8,340 | 5.8 | ||||||||||||||||||||||||||||
Trading portfolio liabilities | |||||||||||||||||||||||||||||||||||||
Domestic | 2,526 | 1 | 0.0 | 1,078 | 4 | 0.4 | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||
Foreign | 94,597 | 7,814 | 8.3 | 66,597 | 5,305 | 8.0 | 48,560 | 2,070 | 4.3 | ||||||||||||||||||||||||||||
Due to customers | |||||||||||||||||||||||||||||||||||||
Domestic | 139,014 | 2,420 | 1.7 | 143,809 | 2,202 | 1.5 | 155,887 | 1,931 | 1.2 | ||||||||||||||||||||||||||||
Foreign | 187,783 | 6,738 | 3.6 | 143,432 | 7,303 | 5.1 | 122,411 | 6,399 | 5.2 | ||||||||||||||||||||||||||||
Debt issued | |||||||||||||||||||||||||||||||||||||
Domestic | 12,823 | 587 | 4.6 | 15,569 | 778 | 5.0 | 16,387 | 952 | 5.8 | ||||||||||||||||||||||||||||
Foreign | 139,982 | 7,229 | 5.2 | 116,095 | 6,953 | 6.0 | 95,919 | 4,382 | 4.6 | ||||||||||||||||||||||||||||
Total interest-bearing liabilities | 1,102,895 | 44,236 | 4.0 | 871,891 | 43,615 | 5.0 | 675,995 | 29,695 | 4.4 | ||||||||||||||||||||||||||||
Non-interest-bearing liabilities | |||||||||||||||||||||||||||||||||||||
Negative replacement values | 165,220 | 157,668 | 171,800 | ||||||||||||||||||||||||||||||||||
Other | 47,676 | 53,049 | 60,946 | ||||||||||||||||||||||||||||||||||
Total liabilities | 1,315,791 | 1,082,608 | 908,741 | ||||||||||||||||||||||||||||||||||
Shareholders’ equity | 47,616 | 35,425 | 33,111 | ||||||||||||||||||||||||||||||||||
Total average liabilities and shareholders’ equity | 1,363,407 | 1,118,033 | 941,852 | ||||||||||||||||||||||||||||||||||
Net interest income | 8,041 | 8,130 | 5,909 | ||||||||||||||||||||||||||||||||||
Net yield on interest-earning assets | 0.7 | 0.9 | 0.8 | ||||||||||||||||||||||||||||||||||
The percentage of total average interest-earning assets attributable to foreign activities was 81% for 2001 (76% for 2000 and 65% for 1999). The percentage of total average interest-bearing liabilities attributable to foreign activities was 82% for 2001 (77% for 2000 and 67% for 1999).
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D – Information Required by Industry Guide 3 (continued)
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 2001 compared to the year ended 31 December 2000, and for the year ended 31 December 2000 compared to the year ended 31 December 1999. 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.
2001 compared to 2000 | 2000 compared to 1999 | ||||||||||||||||||||||||
Increase (decrease) | Increase (decrease) | ||||||||||||||||||||||||
due to changes in | due to changes in | ||||||||||||||||||||||||
Average | Average | Net | Average | Average | Net | ||||||||||||||||||||
CHF million | volume | rate | change | volume | rate | change | |||||||||||||||||||
Interest income from interest-earning assets | |||||||||||||||||||||||||
Due from banks | |||||||||||||||||||||||||
Domestic | (153 | ) | (65 | ) | (218 | ) | (550 | ) | 66 | (484 | ) | ||||||||||||||
Foreign | (196 | ) | (261 | ) | (457 | ) | (1,134 | ) | 675 | (459 | ) | ||||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | |||||||||||||||||||||||||
Domestic | (35 | ) | 40 | 5 | 183 | 258 | 441 | ||||||||||||||||||
Foreign | 6,673 | (7,429 | ) | (756 | ) | 6,281 | 944 | 7,225 | |||||||||||||||||
Trading portfolio assets | |||||||||||||||||||||||||
Domestic | (94 | ) | 157 | 63 | (33 | ) | 205 | 172 | |||||||||||||||||
Foreign | 3,464 | 1,163 | 4,627 | 3,374 | 2,698 | 6,072 | |||||||||||||||||||
Loans | |||||||||||||||||||||||||
Domestic | (255 | ) | (2,713 | ) | (2,968 | ) | (807 | ) | 3,042 | 2,235 | |||||||||||||||
Foreign | 260 | (983 | ) | (723 | ) | 529 | (201 | ) | 328 | ||||||||||||||||
Financial investments | |||||||||||||||||||||||||
Domestic | 36 | (51 | ) | (15 | ) | 25 | (21 | ) | 4 | ||||||||||||||||
Foreign | 217 | (151 | ) | 66 | 45 | 109 | 154 | ||||||||||||||||||
Interest income | |||||||||||||||||||||||||
Domestic | (501 | ) | (2,632 | ) | (3,133 | ) | (1,182 | ) | 3,550 | 2,368 | |||||||||||||||
Foreign | 10,418 | (7,661 | ) | 2,757 | 9,095 | 4,225 | 13,320 | ||||||||||||||||||
Total interest income from interest-earning assets | 9,917 | (10,293 | ) | (376 | ) | 7,913 | 7,775 | 15,688 | |||||||||||||||||
Net interest on swaps | 908 | 453 | |||||||||||||||||||||||
Total interest income | 532 | 16,141 | |||||||||||||||||||||||
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Analysis of Changes in Interest Income and Expense (continued)
2001 compared to 2000 | 2000 compared to 1999 | ||||||||||||||||||||||||
Increase (decrease) | Increase (decrease) | ||||||||||||||||||||||||
due to changes in | due to changes in | ||||||||||||||||||||||||
Average | Average | Net | Average | Average | Net | ||||||||||||||||||||
CHF million | volume | rate | change | volume | rate | change | |||||||||||||||||||
Interest expense on interest-bearing liabilities | |||||||||||||||||||||||||
Due to banks | |||||||||||||||||||||||||
Domestic | 395 | (1,368 | ) | (973 | ) | (558 | ) | (299 | ) | (857 | ) | ||||||||||||||
Foreign | 289 | (541 | ) | (252 | ) | 852 | 645 | 1,497 | |||||||||||||||||
Cash collateral on securities lent and repurchase agreements | |||||||||||||||||||||||||
Domestic | 17 | 105 | 122 | (1 | ) | 373 | 372 | ||||||||||||||||||
Foreign | 6,676 | (7,196 | ) | (520 | ) | 8,026 | (1,929 | ) | 6,097 | ||||||||||||||||
Trading portfolio liabilities | |||||||||||||||||||||||||
Domestic | 6 | (9 | ) | (3 | ) | 4 | 0 | 4 | |||||||||||||||||
Foreign | 2,240 | 269 | 2,509 | 769 | 2,466 | 3,235 | |||||||||||||||||||
Due to customers | |||||||||||||||||||||||||
Domestic | (72 | ) | 290 | 218 | (150 | ) | 421 | 271 | |||||||||||||||||
Foreign | 2,262 | (2,827 | ) | (565 | ) | 1,099 | (195 | ) | 904 | ||||||||||||||||
Debt issued | |||||||||||||||||||||||||
Domestic | (137 | ) | (54 | ) | (191 | ) | (48 | ) | (126 | ) | (174 | ) | |||||||||||||
Foreign | 1,433 | (1,157 | ) | 276 | 922 | 1,649 | 2,571 | ||||||||||||||||||
Interest expense | |||||||||||||||||||||||||
Domestic | 209 | (1,036 | ) | (827 | ) | (753 | ) | 369 | (384 | ) | |||||||||||||||
Foreign | 12,900 | (11,452 | ) | 1,448 | 11,668 | 2,636 | 14,304 | ||||||||||||||||||
Total interest expense | 13,109 | (12,488 | ) | 621 | 10,915 | 3,005 | 13,920 | ||||||||||||||||||
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D – Information Required by Industry Guide 3 (continued)
Deposits
The following table analyzes average deposits and the average rates on each deposit category listed below for the years ended 31 December 2001, 2000 and 1999. 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 54,095 million, CHF 45,815 million and CHF 45,285 million at 31 December 2001, 31 December 2000 and 31 December 1999, respectively.
31.12.01 | 31.12.00 | 31.12.99 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
CHF million, except where indicated | deposit | rate (%) | deposit | rate (%) | deposit | rate (%) | ||||||||||||||||||
Banks | ||||||||||||||||||||||||
Domestic offices | ||||||||||||||||||||||||
Demand deposits | 3,741 | 1.2 | 4,649 | 1.9 | 12,736 | 0.9 | ||||||||||||||||||
Time deposits | 8,012 | 4.2 | 8,717 | 8.7 | 6,715 | 12.6 | ||||||||||||||||||
Total domestic offices | 11,753 | 3.3 | 13,366 | 6.3 | 19,451 | 5.0 | ||||||||||||||||||
Foreign offices | ||||||||||||||||||||||||
Interest-bearing deposits 1 | 15,528 | 5.7 | 16,994 | 6.6 | 28,999 | 5.4 | ||||||||||||||||||
Total due to banks | 27,281 | 4.6 | 30,360 | 6.5 | 48,450 | 5.2 | ||||||||||||||||||
Customer accounts | ||||||||||||||||||||||||
Domestic offices | ||||||||||||||||||||||||
Demand deposits | 41,664 | 1.7 | 44,403 | 1.3 | 49,261 | 0.6 | ||||||||||||||||||
Savings deposits | 66,089 | 1.1 | 72,207 | 1.1 | 80,543 | 1.1 | ||||||||||||||||||
Time deposits | 31,261 | 3.2 | 27,199 | 3.0 | 26,083 | 2.8 | ||||||||||||||||||
Total domestic offices | 139,014 | 1.7 | 143,809 | 1.5 | 155,887 | 1.2 | ||||||||||||||||||
Foreign offices | ||||||||||||||||||||||||
Demand deposits | 187,783 | 3.6 | 143,432 | 5.1 | 122,411 | 5.2 | ||||||||||||||||||
Total due to customers | 326,797 | 2.8 | 287,241 | 3.3 | 278,298 | 3.0 | ||||||||||||||||||
1 | Mainly time deposits. |
At 31 December 2001, the maturity of time deposits exceeding CHF 150,000, or an equivalent amount in other currencies, was as follows:
CHF million | Domestic | Foreign | ||||||
Within 3 months | 34,240 | 156,183 | ||||||
3 to 12 months | 4,103 | 7,783 | ||||||
1 to 5 years | 981 | 705 | ||||||
Over 5 years | 56 | 896 | ||||||
Total time deposits | 39,380 | 165,567 | ||||||
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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 2001, 2000 and 1999.
Money market paper issued | Due to banks | Repurchase agreements1 | ||||||||||||||||||||||||||||||||||
CHF million, | ||||||||||||||||||||||||||||||||||||
except where indicated | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.01 | 31.12.00 | 31.12.99 | |||||||||||||||||||||||||||
Period-end balance | 99,006 | 74,780 | 64,655 | 77,312 | 51,245 | 40,580 | 462,316 | 330,857 | 217,736 | |||||||||||||||||||||||||||
Average balance | 96,253 | 78,154 | 58,102 | 70,621 | 58,031 | 30,714 | 400,648 | 278,601 | 149,071 | |||||||||||||||||||||||||||
Maximum month-end balance | 117,022 | 89,821 | 76,368 | 85,808 | 73,355 | 64,562 | 502,578 | 342,427 | 217,736 | |||||||||||||||||||||||||||
Average interest rate during the period (%) | 4.4 | 5.6 | 3.9 | 7.0 | 7.0 | 9.7 | 3.2 | 4.8 | 4.8 | |||||||||||||||||||||||||||
Average interest rate at period-end (%) | 2.6 | 6.0 | 4.6 | 2.2 | 4.1 | 4.8 | 2.9 | 4.8 | 3.9 | |||||||||||||||||||||||||||
1 | For the purpose of this disclosure, balances are presented on a gross basis. |
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D – Information Required by Industry Guide 3 (continued)
Loans
Loans are widely dispersed over customer categories both within and outside of Switzerland. With the exceptions of private households (foreign and domestic) and banks and financial institutions outside Switzerland, there is no material concentration of loans. For further discussion of the loan portfolio, see the UBS Handbook 2001/2002. The following table illustrates the diversification of the loan portfolio among customer categories at 31 December 2001, 2000, 1999, 1998 and 1997. 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 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 1,533 | 2,896 | 5,802 | 4,543 | 17,751 | |||||||||||||||
Construction | 3,499 | 4,870 | 6,577 | 7,897 | 9,627 | |||||||||||||||
Financial institutions | 5,673 | 5,725 | 9,387 | 10,240 | 11,371 | |||||||||||||||
Hotels and restaurants | 2,950 | 3,526 | 4,259 | 4,129 | 4,668 | |||||||||||||||
Manufacturing1 | 8,686 | 9,577 | 11,377 | 13,505 | 16,440 | |||||||||||||||
Private households | 93,746 | 91,667 | 93,846 | 97,664 | 109,044 | |||||||||||||||
Public authorities | 5,222 | 5,658 | 5,277 | 5,858 | 6,354 | |||||||||||||||
Real estate and rentals | 14,992 | 16,673 | 19,835 | 21,231 | 22,915 | |||||||||||||||
Retail and wholesale | 8,674 | 9,635 | 10,904 | 8,912 | 10,512 | |||||||||||||||
Services2 | 12,161 | 11,767 | 14,862 | 11,582 | 13,083 | |||||||||||||||
Other3 | 1,860 | 2,651 | 1,818 | 1,662 | 1,862 | |||||||||||||||
Total domestic | 158,996 | 164,645 | 183,944 | 187,223 | 223,627 | |||||||||||||||
Foreign | ||||||||||||||||||||
Banks | 26,728 | 27,168 | 24,983 | 65,000 | 49,559 | |||||||||||||||
Chemicals | 1,080 | 1,423 | ||||||||||||||||||
Construction | 266 | 773 | ||||||||||||||||||
Electricity, gas and water supply | 977 | 1,584 | ||||||||||||||||||
Financial institutions | 14,458 | 20,348 | ||||||||||||||||||
Manufacturing6 | 4,258 | 4,596 | ||||||||||||||||||
Mining | 1,313 | 2,070 | ||||||||||||||||||
Private households | 25,619 | 29,470 | ||||||||||||||||||
Public authorities | 6,454 | 11,754 | ||||||||||||||||||
Real estate and rentals | 10,227 | 5,077 | ||||||||||||||||||
Retail and wholesale | 1,732 | 1,862 | ||||||||||||||||||
Services | 4,786 | 1,585 | ||||||||||||||||||
Transport, storage and communication | 2,117 | 993 | ||||||||||||||||||
Other4, 5 | 2,973 | 11,168 | 69,087 | 78,741 | 80,054 | |||||||||||||||
Total foreign | 102,988 | 119,871 | 94,070 | 143,741 | 129,613 | |||||||||||||||
Total gross | 261,984 | 284,516 | 278,014 | 330,964 | 353,240 | |||||||||||||||
1 | Includes chemicals, food and beverages. | |
2 | Includes transportation, communication, health and social work, education and other social and personal service activities. | |
3 | Includes mining and electricity, gas and water supply. | |
4 | For the years prior to the year 2000, no detailed industry classifications are available. | |
5 | Includes hotels and restaurants. | |
6 | Includes food and beverages. |
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D – Information Required by Industry Guide 3 (continued)
Loans (continued)
The following table analyzes the Group’s mortgage portfolio by geographic origin of the customer and type of mortgage at 31 December 2001, 2000, 1999, 1998 and 1997. Mortgages are included in the industry categories mentioned above.
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Mortgages | ||||||||||||||||||||
Domestic | 116,628 | 116,348 | 126,677 | 138,306 | 142,919 | |||||||||||||||
Foreign | 9,583 | 4,206 | 1,310 | 2,479 | 3,883 | |||||||||||||||
Total gross mortgages | 126,211 | 120,554 | 127,987 | 140,785 | 146,802 | |||||||||||||||
Mortgages | ||||||||||||||||||||
Residential | 101,969 | 96,181 | 91,408 | 106,093 | 105,926 | |||||||||||||||
Commercial | 24,242 | 24,373 | 36,579 | 34,692 | 40,876 | |||||||||||||||
Total gross mortgages | 126,211 | 120,554 | 127,987 | 140,785 | 146,802 | |||||||||||||||
Loan Maturities
The following table discloses loans by maturity at 31 December 2001. The determination of maturities is based on contract terms. Information on interest rate sensitivities can be found in Note 30 to the UBS Group Financial Statements.
CHF million | Within 1 year | 1 to 5 years | Over 5 years | Total | ||||||||||||
Domestic | ||||||||||||||||
Banks | 1,384 | 149 | 0 | 1,533 | ||||||||||||
Mortgages | 63,952 | 45,246 | 7,430 | 116,628 | ||||||||||||
Other loans | 31,578 | 7,671 | 1,586 | 40,835 | ||||||||||||
Total domestic | 96,914 | 53,066 | 9,016 | 158,996 | ||||||||||||
Foreign | ||||||||||||||||
Banks | 26,153 | 305 | 270 | 26,728 | ||||||||||||
Mortgages | 8,746 | 664 | 173 | 9,583 | ||||||||||||
Other loans | 63,927 | 2,110 | 640 | 66,677 | ||||||||||||
Total foreign | 98,826 | 3,079 | 1,083 | 102,988 | ||||||||||||
Total gross loans | 195,740 | 56,145 | 10,099 | 261,984 | ||||||||||||
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D – Information Required by Industry Guide 3 (continued)
Impaired, Non-performing and Restructured Loans
A loan 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 and liquidation of collateral. Impaired obligations are thus obligations where losses are probable and estimable. A provision 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 90 days. When loans are classified as non-performing, the recognition of interest or commission income ceases to be recorded 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 336 million for the year ended 31 December 2001, CHF 182 million for the year ended 31 December 2000 and CHF 409 million for the year ended 31 December 1999. The amount of interest income that was included in net income for those loans was CHF 201 million for the year ended 31 December 2001. There was no interest income recorded in net income for non performing loans in 2000 and 1999. The table below provides an analysis of the Group’s non-performing and restructured loans. For further discussion of impaired and non-performing loans, see the UBS Handbook 2001/2002.
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||||||
Non-performing loans: | ||||||||||||||||||||||||
Domestic | 6,531 | 7,588 | 11,435 | 14,023 | 15,238 | |||||||||||||||||||
Foreign | 2,108 | 2,864 | 1,638 | 2,091 | 1,426 | |||||||||||||||||||
Total non-performing loans | 8,639 | 10,452 | 13,073 | 16,114 | 16,664 | |||||||||||||||||||
Foreign restructured loans1 | 179 | 287 | 449 | 638 | ||||||||||||||||||||
1 | Amounts presented for 2001, 2000, 1999 and 1998 include only performing foreign restructured loans. Amounts presented for 1997 include both performing and non-performing foreign restructured loans. UBS does not, as a matter of policy, typically restructure loans to accrue interest at rates different from the original contractual terms or reduce the principal amount of loans. Instead, specific loan allowances are established as necessary. Unrecognized interest related to foreign restructured loans was not material to the results of operations during these periods. |
In addition to the non-performing loans shown above, the Group had CHF 5,990 million, CHF 8,042 million, CHF 9,383 million and CHF 10,333 million in “other impaired loans” for the years ended 31 December 2001, 2000, 1999 and 1998, respectively. These are loans that are current, or less than 90 days in arrears, with respect to payment of principal or interest however, the Group’s credit officers have expressed doubts as to the ability of the borrowers to repay the loans. As at 31 December 2001 specific allowances of CHF 1,920 million had been established against these loans, which are primarily domestic.
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Cross-Border Outstandings
Cross-border outstandings consist of general banking products such as loans 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 27 most developed economies, these exposures are rigorously limited.
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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 | ||||||||||||||||||
31.12.99 | ||||||||||||||||||||||||
Banking products | ||||||||||||||||||||||||
Traded | Tradable | % of total | ||||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 3,202 | 2,508 | 41,970 | 48,012 | 95,692 | 10.7 | ||||||||||||||||||
Japan | 1,117 | 965 | 7,153 | 69,194 | 78,429 | 8.8 | ||||||||||||||||||
United Kingdom | 3,417 | 3,193 | 11,273 | 58,300 | 76,183 | 8.5 | ||||||||||||||||||
Germany | 4,455 | 3,174 | 41,422 | 8,181 | 57,232 | 6.4 | ||||||||||||||||||
Italy | 2,462 | 762 | 6,803 | 8,708 | 18,735 | 2.1 | ||||||||||||||||||
Netherlands | 1,932 | 1,149 | 6,648 | 4,993 | 14,722 | 1.6 | ||||||||||||||||||
France | 1,200 | 1,395 | 7,324 | 4,379 | 14,298 | 1.6 | ||||||||||||||||||
Australia | 2,688 | 409 | 6,342 | 3,735 | 13,174 | 1.5 | ||||||||||||||||||
Canada | 866 | 492 | 5,233 | 807 | 7,398 | 0.8 | ||||||||||||||||||
1 | Traded products consist of derivative instruments and repurchase agreements. In 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 exposure in the prior years, which were measured based on Gross Replacement Values plus Add-on. | |
2 | Tradeable assets consist of equity and fixed income financial instruments held for trading purposes, which are marked to market on a daily basis. |
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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.
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Balance at beginning of year | 10,581 | 13,398 | 14,978 | 16,213 | 18,135 | |||||||||||||||
Write-offs | ||||||||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 0 | 0 | (4 | ) | (2 | ) | (5 | ) | ||||||||||||
Construction | (248 | ) | (261 | ) | (296 | ) | (228 | ) | (408 | ) | ||||||||||
Financial institutions | (51 | ) | (178 | ) | (92 | ) | (66 | ) | (226 | ) | ||||||||||
Hotels and restaurants | (52 | ) | (193 | ) | (137 | ) | (98 | ) | (138 | ) | ||||||||||
Manufacturing1 | (109 | ) | (264 | ) | (242 | ) | (214 | ) | (514 | ) | ||||||||||
Private households | (1,297 | ) | (640 | ) | (598 | ) | (534 | ) | (1,214 | ) | ||||||||||
Public authorities | 0 | 0 | 0 | (2 | ) | (19 | ) | |||||||||||||
Real estate and rentals | (317 | ) | (729 | ) | (823 | ) | (610 | ) | (871 | ) | ||||||||||
Retail and wholesale | (115 | ) | (160 | ) | (210 | ) | (178 | ) | (227 | ) | ||||||||||
Services2 | (93 | ) | (227 | ) | (315 | ) | (116 | ) | (229 | ) | ||||||||||
Other3 | (46 | ) | (30 | ) | (41 | ) | (15 | ) | (29 | ) | ||||||||||
Total domestic domestic write-offs | (2,328 | ) | (2,682 | ) | (2,758 | ) | (2,063 | ) | (3,880 | ) | ||||||||||
Foreign4 | ||||||||||||||||||||
Banks | (24 | ) | (15 | ) | ||||||||||||||||
Chemicals | (2 | ) | ||||||||||||||||||
Construction | (10 | ) | (13 | ) | ||||||||||||||||
Electricity, gas and water supply | (63 | ) | (3 | ) | ||||||||||||||||
Financial institutions | (74 | ) | (33 | ) | ||||||||||||||||
Manufacturing6 | (119 | ) | (11 | ) | ||||||||||||||||
Mining | (304 | ) | ||||||||||||||||||
Private households | (5 | ) | ||||||||||||||||||
Public authorities | 0 | (4 | ) | |||||||||||||||||
Real estate and rentals | (1 | ) | ||||||||||||||||||
Retail and wholesale | 0 | (160 | ) | |||||||||||||||||
Services | (30 | ) | (8 | ) | ||||||||||||||||
Transport, storage and communication | 0 | (11 | ) | |||||||||||||||||
Other | (48 | ) | (55 | ) | ||||||||||||||||
Total foreign write-offs | (680 | ) | (313 | ) | (517 | ) | (261 | ) | (240 | ) | ||||||||||
Total write-offs | (3,008 | ) | (2,995 | ) | (3,275 | ) | (2,324 | ) | (4,120 | ) | ||||||||||
Recoveries | ||||||||||||||||||||
Domestic | 58 | 124 | 54 | 59 | 406 | |||||||||||||||
Foreign | 23 | 39 | 11 | 36 | ||||||||||||||||
Total recoveries | 81 | 163 | 65 | 59 | 442 | |||||||||||||||
Net write-offs | (2,927 | ) | (2,832 | ) | (3,210 | ) | (2,265 | ) | (3,678 | ) | ||||||||||
Credit loss expense / (recovery) | 498 | (130 | ) | 956 | 951 | 1,432 | ||||||||||||||
Other adjustments5 | 66 | 145 | 674 | 79 | 324 | |||||||||||||||
Balance at end of year | 8,218 | 10,581 | 13,398 | 14,978 | 16,213 | |||||||||||||||
1 | Includes chemicals, food and beverages. | |
2 | Includes transportation, communication, health and social work, education and other social and personal service activities. | |
3 | Includes mining and electricity, gas and water supply. | |
4 | For years prior to 2000, no detailed industry classifications are available. | |
5 | See the following table for details. | |
6 | Includes food and beverages. |
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Additional Disclosure Required
under SEC Regulations
D – Information Required by Industry Guide 3 (continued)
Summary of Movements in Allowances and Provisions for Credit Losses (continued)
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Doubtful interest | 0 | 182 | 409 | 423 | 450 | |||||||||||||||
Net foreign exchange | 44 | 23 | 351 | (98 | ) | 91 | ||||||||||||||
Subsidiaries sold and other | 22 | (60 | ) | (86 | ) | (246 | ) | (217 | ) | |||||||||||
Total adjustments | 66 | 145 | 674 | 79 | 324 | |||||||||||||||
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D – Information Required by Industry Guide 3 (continued)
Allocation of the Allowances and Provisions for Credit Losses
The following table provide an analysis of the allocation of the allowances and provisions for credit losses by industry categories and geographic location at 31 December 2001, 2000, 1999, 1998 and 1997. For a description of procedures with respect to allowances and provisions for credit losses, see the UBS Handbook 2001/2002.
CHF million | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 34 | 41 | 49 | 34 | ||||||||||||||||
Construction | 467 | 843 | 1,247 | 1,671 | 1,449 | |||||||||||||||
Financial institutions | 262 | 328 | 342 | 668 | 510 | |||||||||||||||
Hotels and restaurants | 346 | 454 | 690 | 657 | 512 | |||||||||||||||
Manufacturing1 | 722 | 863 | 1,223 | 1,331 | 1,036 | |||||||||||||||
Private households | 1,082 | 1,570 | 2,350 | 2,741 | 2,264 | |||||||||||||||
Public authorities | 37 | 40 | 107 | 59 | ||||||||||||||||
Real estate and rentals | 1,067 | 1,635 | 2,696 | 3,333 | 2,591 | |||||||||||||||
Retail and wholesale | 395 | 629 | 779 | 825 | 723 | |||||||||||||||
Services2 | 448 | 419 | 934 | 766 | 661 | |||||||||||||||
Other3 | 165 | 413 | 141 | 71 | 52 | |||||||||||||||
Total domestic | 5,025 | 7,154 | 10,483 | 12,219 | 9,891 | |||||||||||||||
Foreign8 | ||||||||||||||||||||
Banks4 | 39 | 32 | ||||||||||||||||||
Chemicals | 5 | 0 | ||||||||||||||||||
Construction | 0 | 11 | ||||||||||||||||||
Electricity, gas and water supply | 88 | 107 | ||||||||||||||||||
Financial institutions | 420 | 262 | ||||||||||||||||||
Manufacturing9 | 653 | 547 | ||||||||||||||||||
Mining | 169 | 586 | ||||||||||||||||||
Private households | 103 | 72 | ||||||||||||||||||
Public authorities | 0 | 0 | ||||||||||||||||||
Real estate and rentals | 9 | 82 | ||||||||||||||||||
Retail and wholesale | 0 | 41 | ||||||||||||||||||
Services | 414 | 126 | ||||||||||||||||||
Transport, storage and communication | 45 | 2 | ||||||||||||||||||
Other5 | 242 | 267 | ||||||||||||||||||
Total foreign, net of country provisions | 2,187 | 2,135 | 1,539 | 1,309 | 1,399 | |||||||||||||||
Country provisions | 1,006 | 1,292 | 1,376 | 1,450 | 1,175 | |||||||||||||||
Total foreign6 | 3,193 | 3,427 | 2,915 | 2,759 | 2,574 | |||||||||||||||
Unallocated allowances7 | 3,748 | |||||||||||||||||||
Total allowances and provisions for credit losses | 8,218 | 10,581 | 13,398 | 14,978 | 16,213 | |||||||||||||||
1 | Includes chemicals, food and beverages. | |
2 | Includes transportation, communication, health and social work, education and other social and personal service activities. | |
3 | Includes mining and electricity, gas and water supply. | |
4 | Counterparty allowances and provisions only. Country provisions with banking counterparties amounting to CHF 662 million are disclosed under country provisions. | |
5 | Includes hotels and restaurants. | |
6 | The 2001, 2000, 1999 and 1998 amounts include CHF 305 million, CHF 54 million, CHF 149 million and CHF 435 million respectively of provisions and commitments for contingent liabilities. | |
7 | The 1997 amount includes a provision for commitments and contingent liabilities of CHF 472 million. | |
8 | For years prior to 2000, no detailed industry classifications are available. | |
9 | Includes food and beverages. |
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Additional Disclosure Required
under SEC Regulations
D – Information Required by Industry Guide 3 (continued)
Allocation of the Allowances and Provisions for Credit Losses (continued)
The following table presents the percentage of loans in each category 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 categories to evaluate the credit risks in each of the categories.
in % | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 0.6 | 1.0 | 2.1 | 1.4 | 5.0 | |||||||||||||||
Construction | 1.3 | 1.7 | 2.4 | 2.4 | 2.7 | |||||||||||||||
Financial institutions | 2.2 | 2.0 | 3.4 | 3.1 | 3.2 | |||||||||||||||
Hotels and restaurants | 1.1 | 1.2 | 1.5 | 1.2 | 1.3 | |||||||||||||||
Manufacturing | 3.3 | 3.4 | 4.1 | 4.1 | 4.7 | |||||||||||||||
Private households | 35.8 | 32.2 | 33.8 | 29.5 | 30.9 | |||||||||||||||
Public authorities | 2.0 | 2.0 | 1.9 | 1.8 | 1.8 | |||||||||||||||
Real estate and rentals | 5.7 | 5.9 | 7.1 | 6.4 | 6.5 | |||||||||||||||
Retail and wholesale | 3.3 | 3.4 | 3.9 | 2.7 | 3.0 | |||||||||||||||
Services | 4.6 | 4.1 | 5.3 | 3.5 | 3.7 | |||||||||||||||
Other | 0.8 | 1.0 | 0.7 | 0.5 | 0.5 | |||||||||||||||
Total domestic | 60.7 | 57.9 | 66.2 | 56.6 | 63.3 | |||||||||||||||
Foreign | ||||||||||||||||||||
Banks | 10.2 | 9.5 | 9.0 | 19.6 | 14.0 | |||||||||||||||
Chemicals | 0.4 | 0.5 | ||||||||||||||||||
Construction | 0.1 | 0.3 | ||||||||||||||||||
Electricity, gas and water supply | 0.4 | 0.6 | ||||||||||||||||||
Financial institutions | 5.5 | 7.2 | ||||||||||||||||||
Manufacturing | 1.6 | 1.6 | ||||||||||||||||||
Mining | 0.5 | 0.7 | ||||||||||||||||||
Private households | 9.8 | 10.4 | ||||||||||||||||||
Public authorities | 2.5 | 4.1 | ||||||||||||||||||
Real estate and rentals | 3.9 | 1.8 | ||||||||||||||||||
Retail and wholesale | 0.7 | 0.7 | ||||||||||||||||||
Services | 1.8 | 0.6 | ||||||||||||||||||
Transport, storage and communication | 0.8 | 0.3 | ||||||||||||||||||
Other | 1.1 | 3.8 | 24.8 | 23.8 | 22.7 | |||||||||||||||
Total foreign | 39.3 | 42.1 | 33.8 | 43.4 | 36.7 | |||||||||||||||
Total gross loans | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||
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D – Information Required by Industry Guide 3 (continued)
Loss History Statistics
The following is a summary of the Group’s loan loss history.
CHF million, except where indicated | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | 31.12.97 | |||||||||||||||
Gross loans | 261,984 | 284,516 | 278,014 | 330,964 | 353,240 | |||||||||||||||
Impaired loans | 14,629 | 18,494 | 22,456 | 26,447 | ||||||||||||||||
Non-performing loans | 8,639 | 10,452 | 13,073 | 16,114 | 16,664 | |||||||||||||||
Allowances and provisions for credit losses | 8,218 | 10,581 | 13,398 | 14,978 | 16,213 | |||||||||||||||
Net write-offs | 2,927 | 2,832 | 3,210 | 2,265 | 3,678 | |||||||||||||||
Credit loss expense / (recovery) | 498 | (130 | ) | 956 | 951 | 1,432 | ||||||||||||||
Ratios | ||||||||||||||||||||
Impaired loans as a percentage of gross loans | 5.6 | 6.5 | 8.1 | 8.0 | ||||||||||||||||
Non-performing loans as a percentage of gross loans | 3.3 | 3.7 | 4.7 | 4.9 | 4.7 | |||||||||||||||
Allowance and provisions for credit losses as a percentage of: | ||||||||||||||||||||
Gross loans | 3.1 | 3.7 | 4.8 | 4.5 | 4.6 | |||||||||||||||
Impaired loans | 56.2 | 57.2 | 59.7 | 56.6 | ||||||||||||||||
Non-performing loans | 95.1 | 101.2 | 102.5 | 93.0 | 97.3 | |||||||||||||||
Allocated allowances as a percentage of impaired loans1 | 49.9 | 52.4 | 55.5 | 51.4 | ||||||||||||||||
Allocated allowances as a percentage of non-performing loans2 | 62.2 | 60.6 | 3 | 66.3 | 62.1 | |||||||||||||||
Net write-offs as a percentage of: | ||||||||||||||||||||
Gross loans | 1.1 | 1.0 | 1.2 | 0.7 | 1.0 | |||||||||||||||
Allowance and provisions for credit losses | 35.6 | 26.8 | 24.0 | 15.1 | 22.7 | |||||||||||||||
Allowance and provisions for credit losses as multiple of net write-offs | 2.81 | 3.74 | 4.17 | 6.61 | 4.41 | |||||||||||||||
1 Allowances relating to impaired loans only. | ||
2 Allowances relating to non-performing loans only. | ||
3 31 December 2000 figure has been restated to account for an overallocation of allowances to non-performing loans. |
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Cautionary statement regarding forward-looking statements
Imprint
Table of Contents
Table of Contents
Index to Exhibits
Exhibit | |||
Number | Description | ||
1.1. | Articles of Association of UBS AG | ||
1.2. | Organization Regulations of UBS AG | ||
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 147 to 150 of the attached Financial Report 2001. | |||
10. | Consent of Ernst & Young Ltd. |