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SECURITIES AND EXCHANGE COMMISSION
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date: March 21, 2003
Commission file number:
1-15060
UBS AG
Bahnhofstrasse 45, Zurich, Switzerland, and
Aeschenvorstadt 1, Basel, Switzerland
(Registrant’s Address)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x | Form 40-F o |
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o | No x |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
INCORPORATION BY REFERENCE | ||||||||
SIGNATURES |
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This Form 6-K consists of the following three documents, which appear immediately following this page:
• | Invitation to Annual General Meeting | ||
• | Additional Information for our US Shareholders | ||
• | Annual Review 2002 |
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Invitation to the
Annual General Meeting of UBS AG
Wednesday, 16 April 2003, 2.30 p.m. (doors open 1.30 p.m.)
Hallenstadion, Zurich-Oerlikon, Wallisellenstrasse 45
Agenda
1. | Annual Report, Group and Parent Company Accounts for 2002 Reports of the Group and Statutory Auditors |
2. | Appropriation of retained earnings Dividend for financial year 2002 |
3. | Discharge of the members of the Board of Directors and the Group Executive Board |
4. | Amendment of the Articles of Association |
4.1. Adaptation of English version of the company name (Art. 1) |
4.2. Joint shareholdings / Entry in the share register (Art. 5 and 7) |
4.3. Placing of items on the agenda (Art. 12) |
4.4. Term of office of Board members (Art. 19) |
4.5. Appointment of members of the Group Managing Board (Art. 24) |
5. | Elections | |||||||
5.1 | Re-election of Board members | |||||||
5.1.1. | Peter Böckli | |||||||
5.1.2. | Johannes A. de Gier | |||||||
5.1.3. | Rolf A. Meyer | |||||||
5.2. | Re-election of Group and Statutory Auditors: Ernst & Young Ltd., Basel | |||||||
5.3. | Re-election of Special Auditors: Deloitte & Touche AG, Basel |
6. | Capital reduction | |||||||
6.1. | Cancellation of shares repurchased under the 2002 / 2003 and 2002b share buyback programs and respective amendment of article 4 of the Articles of Association | |||||||
6.2. | Approval of a new 2003 / 2004 share buyback program |
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Annual General Meeting of UBS AG,16 April 2003
Introduction |
Requests for including items in the agenda
Call to register claims
Organizational issues |
Admission cards for the Annual General Meeting
Shareholders listed in the Share Registerin the United Statescan order their admission cards in writing up to 11 April 2003 from:
S. Hackensack, NJ 07606-9267.
Any admission cards already issued will lose their validity and will be recalled if the shares concerned are sold prior to the Annual General Meeting and the Share Register is notified of the sale.
Representation at the Annual General Meeting
– | UBS AG, P. O. Box, CH-8098 Zurich as a corporate proxy or a custody proxy |
– | Schweizerische Treuhandgesellschaft / Swiss Auditing and Fiduciary Company (Professor Carl Helbling) Talstrasse 11, CH-8022 Zurich as an independent proxy. |
Zurich and Basel, 6 March 2003
UBS AG
For the Board of Directors:
Marcel Ospel, Chairman
Gertrud Erismann-Peyer, Company Secretary
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Item 1 |
Annual Report, Group and Parent Company Accounts for 2002 Reports of the Group and Statutory Auditors |
A. Motion
B. Explanations
The Group income statement shows total operating income of CHF 34,121 million and total operating expenses of CHF 29,577 million, resulting in pre-tax profit of CHF 4,544 million
and a net profit of CHF 3,535 million. At year-end, total consolidated assets amounted to CHF 1,181.1 billion, CHF 72.2 billion down from a year earlier, and shareholders’ equity totaled CHF 39.0 billion.
Parent Company net profit was CHF 5,834 million. Total operating income of CHF 23,633 million and total operating expenses of CHF 13,295 million resulted in an operating profit of CHF 10,338 million. Depreciations, write-offs and provisions amounted to CHF 4,078 million and extraordinary income to CHF 265 million. Extraordinary expenses totaled CHF 7 million and taxes amounted to CHF 684 million.
Ernst & Young Ltd. as Group and Statutory Auditors recommend in unqualified reports to the Annual General Meeting that the Group and Parent Company Accounts be approved. The Group Auditors confirm that “the Group financial statements present fairly, in all material respects, the consolidated financial position of UBS AG as of 31 December 2002 and 2001, and the consolidated results of operations and cash flows for each of the three years in the period ended 31 December 2002, in conformity with International Financial Reporting Standards (IFRS), and they comply with the Swiss law”. The Statutory Auditors express their opinion that “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”.
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Annual General Meeting of UBS AG,16 April 2003
Item 2 |
Appropriation of retained earnings Dividend for financial year 2002 |
A. Motion
Profit for the financial year 2002 as per the income statement | CHF | 5,834 million | ||||||
Allocation to General statutory reserves | CHF | 232 million | ||||||
Proposed dividend | CHF | 2,365 million | ||||||
Allocation to Other reserves | CHF | 3,237 million | ||||||
Total allocated | CHF | 5,834 million | ||||||
The Board of Directors proposes to distribute a dividend of CHF 2 per share.
B. Explanations
Upon approval of the proposal by the AGM, the distribution of CHF 1.30 per share (after deduction of 35% Swiss withholding tax) will be made on 23 April 2003 to shareholders on record as at 16 April 2003.
Item 3 |
Discharge of the members of the Board of Directors and the Group Executive Board |
Motion
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Item 4 |
Amendment of the Articles of Association |
4.1. Adaptation of the English version of the company name |
A. Motion
Association be amended as follows:
Current version | Proposed new version(changes in italics) | |
Article 1 Name and registered office | ||
A corporation limited by shares under the name of UBS AG/UBS SA/UBS Ltd. is established with a registered office in Zurich and Basel. | A corporation limited by shares under the name of UBS AG/UBS SA/UBS Inc. is established with a registered office in Zurich and Basel. | |
B. Explanations
4.2. Joint shareholdings/Entry in the share register |
A. Motion
Current version | Proposed new version(changes in italics) | |
Article 5 Share register and nominees | ||
1 A share register is maintained for the registered shares, in which owners’ and usufructuaries’ family and given names are entered, with their complete address and nationality (or registered office for legal entities). 2-6 unchanged | 1 A share register is maintained for the registered shares, in which owners’ and usufructuaries’ family and given names are entered, with their complete address and nationality (or registered office for legal entities).Shares held in joint accounts may be registered jointly with voting rights, if all registered owners of the shares provide the declaration requested in paragraph 3 below. | |
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Annual General Meeting of UBS AG,16 April 2003
Current version | Proposed new version(changes in italics) | |
Article 7 Exercise of rights | ||
1 Shares are indivisible. The Corporation recognizes only one representative per share. 2 unchanged | 1 (...) The Corporation recognizes only one representative per share. | |
B. Explanations
Article 5
Article 7
4.3. Placing of items on the agenda |
A. Motion
Current version | Proposed new version(changes in italics) | |
Article 12 Placing of items on the agenda | ||
1 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 General Meeting, provided that their proposals are submitted in writing within the deadline published by the Corporation and include the actual motion(s) to be put forward. 2 unchanged | 1 Shareholders representing shares with an aggregate par value of250,000 Swiss francs may submit proposals for matters to be placed on the agenda for consideration by the General Meeting, provided that their proposals are submitted in writing within the deadline published by the Corporation and include the actual motion(s) to be put forward. | |
B. Explanations
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4.4. Term of office of Board members |
A. Motion
Current version | Proposed new version(changes in italics) | |
Article 19 Term of office | ||
1 The term of office for members of the Board of Directors is four years, with the interval between two Annual General Meetings being deemed a year for this purpose. The initial term of office for each Director shall be fixed in such a way as to assure that about one fourth of all the members have to be newly elected or re-elected every year. 2 unchanged | 1 The term of office for members of the Board of Directors isthree years, with the interval between two Annual General Meetings being deemed a year for this purpose. The initial term of office for each Director shall be fixed in such a way as to assure that about onethirdof all the members have to be newly elected or re-elected every year. | |
B. Explanations
4.5. Appointment of members of the Group Managing Board |
A. Motion
Current version | Proposed new version(changes in italics) | |||||
Article 24 | ||||||
Ultimate responsibility for the management of the Corporation | ||||||
Ultimate responsibility for the management of the Corporation comprises in particular: | ||||||
a)-d) | unchanged | |||||
e) | Appointment and removal of the President and the members of the Group Executive Board, the members of the Group Managing Board and the head of Group Internal Audit | e) | Appointment and removal of the President and the members of the Group Executive Board(...) and the head of Group Internal Audit. | |||
f) | unchanged | |||||
B. Explanations
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Annual General Meeting of UBS AG,16 April 2003
Item 5 |
Elections |
5.1. Re-election of Board members |
A. Motion
5.1.1. Peter Böckli |
5.1.2. Johannes A. de Gier |
5.1.3. Rolf A. Meyer |
B. Explanations
5.1.1.
Peter Böckli (1936) has been a member of the Board since the merger in 1998, after having served on the Board of Swiss Bank Corporation since 1985. He is non-executive, independent Vice Chairman of the Board and chairman of its Nominating Committee. Professor Böckli is a partner in the law office Böckli Bodmer & Partners in Basel and a Swiss citizen.
5.1.2.
Johannes A. de Gier (1944) has been on the Board since 2001 and was one of the Executive Vice Chairmen until recently. After having taken responsibility as Chairman of the newly established holding company within the UBS Group, in which the five Private Label Banks and GAM, UBS’ specialist asset management firm, are being integrated, he stepped down as Vice Chairman in February, but is prepared to stand for re-election as Board member. Johannes A. de Gier is a Dutch citizen.
5.1.3.
Rolf A. Meyer (1943) has been a member of the Board since the merger in 1998, after having been a member of the Board of Union Bank of Switzerland since 1992. He is the chairman of the Compensation Committee and a member of the Audit Committee of the Board. Rolf A. Meyer holds a number of international Board mandates. He is a Swiss citizen.
Detailed CVs of the three gentlemen are published in the “Handbook 2002 / 2003” and are available on the Internet under www.ubs.com/about.
5.2. Re-election of Group and Statutory Auditors |
A. Motion
B. Explanations
5.3. Re-election of Special Auditors |
A. Motion
B. Explanations
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Item 6 |
Capital reduction |
6.1. Cancellation of shares repurchased under the 2002/2003 and 2002 b share
buyback programs and respective amendment of article 4 of the Articles of Association
A. Motion
Article 4 of the Articles of Association shall be amended as follows:
Current version | Proposed new version(changes in italics) | |
Article 4 Share capital | ||
1 The share capital of the Corporation is CHF 1,005,038,142.40 (one billion, five million, thirty-eight thousand, one hundred and forty-two Swiss francs and forty centimes), divided into 1,256,297,678 registered shares with a par value of CHF 0.80 each. The share capital is fully paid up. 2 unchanged | 1 The share capital of the Corporation isCHF 944,262,078.40 (nine hundred and forty-four million, two hundred and sixty-two thousand, seventy-eight Swiss francs and forty centimes),divided into1,180,327,598registered shares with a par value of CHF 0.80 each. The share capital is fully paid up. | |
B. Explanations
Ernst & Young as Statutory Auditors have confirmed in a special audit report on behalf of the AGM that as at 31 December 2002 the claims of creditors were fully covered even after the reduction in capital and that the Bank has adequate liquidity.
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Annual General Meeting of UBS AG,16 April 2003
6.2. Approval of a new 2003/2004 share buyback program |
A. Motion
“The Board of Directors shall be authorized to buy back a maximum amount of CHF 5 billion in UBS shares via a second trading line on the virt-x exchange. These shares are to be cancelled definitively and are not therefore regarded as own shares within the meaning of Article 659 of the Swiss Code of Obligations. The required amendment to the Articles of Association (reduction of share capital) will be submitted to the AGM in 2004 for approval.”
B. Explanations
The Board of Directors has again decided to proceed in two stages, with shareholders taking the decision in principle at the first AGM and deciding on the definitive cancellation of the shares at the next AGM. By obtaining shareholders’ approval for the future cancellation of the repurchased shares, these shares no longer fall under the statutory limit of Swiss Company Law, which prohibits companies from holding more than 10% of their own shares. The proposed procedure provides greater flexibility, which UBS believes to be in the interests of efficient capital management and the ongoing trading activities of the Bank.
Ernst & Young Ltd. as Statutory Auditors have confirmed in a special audit report on behalf of the Board of Directors that the claims of creditors were fully covered even after this additional capital reduction and that the Bank has adequate liquidity.
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UBS AG
P. O. Box, CH-8098 Zurich
P. O. Box, CH-4002 Basel
www.ubs.com
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Additional Information
for our US Shareholders
March 2003
Dear Shareholders
The accompanying Annual Review 2002 contains summary financial information. Our audited Financial Statements and detailed analysis are included in our Financial Report 2002, which is available upon request. Please use the accompanying order form.
The consolidated Financial Statements of the UBS Group have been prepared in accordance with International Financial Reporting Standards (IFRS). The principles of IFRS differ in certain respects from United States Generally Accepted
Accounting Principles (US GAAP). To clarify the effects of these differences in standards, this Additional Information includes:
– | a reconciliation of Net profit and Shareholders’ equity as determined under IFRS to the amounts as determined under US GAAP, with a brief description of the significant differences affecting Net profit and Shareholders’ equity, and |
– | the Income statements and Balance sheets presented in accordance with US GAAP. |
Please refer to our Financial Report 2002, Notes 39 and 40, for a detailed description of these differences.
Reconciliation of IFRS Shareholders’ Equity and Net Profit to US GAAP
Shareholders’ equity | Net profit | |||||||||||||||||||||||
CHF million | Reference | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Amounts determined in accordance with IFRS | 38,991 | 43,530 | 3,535 | 4,973 | 7,792 | |||||||||||||||||||
Adjustments in respect of: | ||||||||||||||||||||||||
SBC purchase accounting goodwill and other purchase accounting adjustments | a | 15,285 | 15,413 | (128 | ) | (1,614 | ) | (1,669 | ) | |||||||||||||||
Reversal of IFRS goodwill amortization | b | 1,017 | 0 | 1,017 | 0 | 0 | ||||||||||||||||||
Restructuring provision | c | 0 | 0 | 0 | (112 | ) | (238 | ) | ||||||||||||||||
Derivative instruments | d | (138 | ) | (169 | ) | 354 | 25 | (1,353 | ) | |||||||||||||||
Financial investments (prior to the adoption of IAS 39) | e | 0 | 0 | 0 | 0 | 28 | ||||||||||||||||||
Financial investments and private equity | f | (30 | ) | (709 | ) | 767 | 0 | 0 | ||||||||||||||||
Retirement benefit plans | g | 621 | 1,714 | (156 | ) | 119 | 59 | |||||||||||||||||
Other employee benefits | h | (1 | ) | (8 | ) | 7 | 8 | 8 | ||||||||||||||||
Equity participation plans | i | (164 | ) | (186 | ) | 63 | (12 | ) | (167 | ) | ||||||||||||||
Software capitalization | j | 0 | 60 | (60 | ) | (169 | ) | (160 | ) | |||||||||||||||
Tax adjustments | (5 | ) | (363 | ) | 147 | 16 | 137 | |||||||||||||||||
Total adjustments | 16,585 | 15,752 | 2,011 | (1,739 | ) | (3,355 | ) | |||||||||||||||||
Amounts determined in accordance with US GAAP | 55,576 | 59,282 | 5,546 | 3,234 | 4,437 | |||||||||||||||||||
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Additional Information for our US Shareholders, March 2003
Description of differences:
a. Purchase accounting:
b. Reversal of IFRS goodwill amortization:
c. Restructuring Provision:
d. Derivative instruments:
e. Financial investments (prior to the adoption of IAS 39):
f. Financial Investments and Private Equity:
g. Retirement benefit plans:
h. Other employee benefits:
i. Equity participation plans:
j. Software capitalization:
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Comparison of UBS Group Income Statement to US GAAP
The following is a Consolidated Income Statement of the Group, for the years ended 31 December 2002, 31 December 2001 and 31 December 2000, restated to reflect the impact of valuation and income recognition differences and presentation differences between IFRS and US GAAP.
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
For the year ended | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | ||||||||||||||||||
Operating income | ||||||||||||||||||||||||
Interest income | 39,679 | 39,963 | 51,907 | 52,277 | 51,565 | 51,745 | ||||||||||||||||||
Interest expense | (29,334 | ) | (29,417 | ) | (44,096 | ) | (44,236 | ) | (43,584 | ) | (43,615 | ) | ||||||||||||
Net interest income | 10,345 | 10,546 | 7,811 | 8,041 | 7,981 | 8,130 | ||||||||||||||||||
Credit loss expense/(recovery) | (206 | ) | (206 | ) | (498 | ) | (498 | ) | 130 | 130 | ||||||||||||||
Net interest income after credit loss expense/(recovery) | 10,139 | 10,340 | 7,313 | 7,543 | 8,111 | 8,260 | ||||||||||||||||||
Net fee and commission income | 18,221 | 18,221 | 20,211 | 20,211 | 16,703 | 16,703 | ||||||||||||||||||
Net trading income | 6,031 | 5,572 | 8,959 | 8,802 | 8,597 | 9,953 | ||||||||||||||||||
Other income1 | 96 | (12 | ) | 534 | 558 | 1,514 | 1,486 | |||||||||||||||||
Total operating income | 34,487 | 34,121 | 37,017 | 37,114 | 34,925 | 36,402 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Personnel expenses | 18,610 | 18,524 | 19,713 | 19,828 | 17,262 | 17,163 | ||||||||||||||||||
General and administrative expenses | 7,072 | 7,072 | 7,631 | 7,631 | 6,813 | 6,765 | ||||||||||||||||||
Depreciation of property and equipment | 1,613 | 1,521 | 1,815 | 1,614 | 1,800 | 1,608 | ||||||||||||||||||
Amortization of goodwill | 0 | 930 | 2,484 | 1,025 | 2,018 | 533 | ||||||||||||||||||
Amortization of other intangible assets | 1,443 | 1,530 | 298 | 298 | 134 | 134 | ||||||||||||||||||
Restructuring costs | 0 | 0 | 112 | 0 | 191 | 0 | ||||||||||||||||||
Total operating expenses | 28,738 | 29,577 | 32,053 | 30,396 | 28,218 | 26,203 | ||||||||||||||||||
Operating profit/(loss) before tax and minority interests | 5,749 | 4,544 | 4,964 | 6,718 | 6,707 | 10,199 | ||||||||||||||||||
Tax expense/(benefit) | 511 | 678 | 1,386 | 1,401 | 2,183 | 2,320 | ||||||||||||||||||
Net profit/(loss) before minority interests | 5,238 | 3,866 | 3,578 | 5,317 | 4,524 | 7,879 | ||||||||||||||||||
Minority interests | (331 | ) | (331 | ) | (344 | ) | (344 | ) | (87 | ) | (87 | ) | ||||||||||||
Change in accounting principle: cumulative effect of adoption of “AICPA Audit and Accounting Guide, Audits of Investment Companies” on certain financial investments, net of tax | 639 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Net profit | 5,546 | 3,535 | 3,234 | 4,973 | 4,437 | 7,792 | ||||||||||||||||||
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
Full disclosure of valuation, income recognition and presentation differences are detailed in Notes 39 and 40 which may be found on pages 160 to 176 of our Financial Report 2002.
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Additional Information for our US Shareholders, March 2003
Comparison of UBS Group Balance Sheet to US GAAP
The following is a Condensed Consolidated Balance Sheet of the Group, as at 31 December 2002 and 31 December 2001, restated to reflect the impact of valuation and income recognition principles and presentation differences between IFRS and US GAAP.
31.12.02 | 31.12.01 | |||||||||||||||||||||||||||
CHF million | US GAAP | IFRS | US GAAP | IFRS | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Cash and balances with central banks | 4,271 | 4,271 | 20,990 | 20,990 | ||||||||||||||||||||||||
Due from banks | 32,481 | 32,468 | 27,550 | 27,526 | ||||||||||||||||||||||||
Cash collateral on securities borrowed | 139,073 | 139,052 | 162,566 | 162,938 | ||||||||||||||||||||||||
Reverse repurchase agreements | 294,086 | 294,086 | 269,256 | 269,256 | ||||||||||||||||||||||||
Trading portfolio assets (including assets pledged as collateral of CHF 110,365 million at 31.12.02 and CHF 121,456 million at 31.12.01) | 441,845 | 371,436 | 455,406 | 397,886 | ||||||||||||||||||||||||
Positive replacement values | 83,757 | 82,092 | 73,474 | 73,447 | ||||||||||||||||||||||||
Loans, net of allowances for credit losses | 211,755 | 211,647 | 226,747 | 226,545 | ||||||||||||||||||||||||
Financial investments | 2,846 | 8,391 | 20,676 | 28,803 | ||||||||||||||||||||||||
Securities received as collateral | 16,308 | 10,931 | ||||||||||||||||||||||||||
Accrued income and prepaid expenses | 6,462 | 6,453 | 7,545 | 7,554 | ||||||||||||||||||||||||
Investments in associates | 705 | 705 | 697 | 697 | ||||||||||||||||||||||||
Property and equipment | 8,358 | 7,869 | 9,276 | 8,695 | ||||||||||||||||||||||||
Goodwill | 28,127 | 11,181 | 29,255 | 14,578 | ||||||||||||||||||||||||
Other Intangible assets | 1,222 | 2,515 | 4,510 | 4,507 | ||||||||||||||||||||||||
Private equity investments | 4,328 | 6,069 | ||||||||||||||||||||||||||
Other assets | 21,314 | 8,952 | 36,972 | 9,875 | ||||||||||||||||||||||||
Total assets | 1,296,938 | 1,181,118 | 1,361,920 | 1,253,297 | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Due to banks | 83,178 | 83,178 | 106,531 | 106,531 | ||||||||||||||||||||||||
Cash collateral on securities lent | 36,870 | 36,870 | 30,317 | 30,317 | ||||||||||||||||||||||||
Repurchase agreements | 366,858 | 366,858 | 368,620 | 368,620 | ||||||||||||||||||||||||
Trading portfolio liabilities | 117,721 | 106,453 | 119,528 | 105,798 | ||||||||||||||||||||||||
Obligation to return securities received as collateral | 16,308 | 10,931 | ||||||||||||||||||||||||||
Negative replacement values | 132,354 | 81,282 | 116,666 | 71,443 | ||||||||||||||||||||||||
Due to customers | 306,872 | 306,876 | 333,766 | 333,781 | ||||||||||||||||||||||||
Accrued expenses and deferred income | 15,330 | 15,331 | 17,289 | 17,289 | ||||||||||||||||||||||||
Debt issued | 129,527 | 129,411 | 156,462 | 156,218 | ||||||||||||||||||||||||
Other liabilities | 32,815 | 12,339 | 38,416 | 15,658 | ||||||||||||||||||||||||
Total liabilities | 1,237,833 | 1,138,598 | 1,298,526 | 1,205,655 | ||||||||||||||||||||||||
Minority interests | 3,529 | 3,529 | 4,112 | 4,112 | ||||||||||||||||||||||||
Total shareholders’ equity | 55,576 | 38,991 | 59,282 | 43,530 | ||||||||||||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,296,938 | 1,181,118 | 1,361,920 | 1,253,297 | ||||||||||||||||||||||||
Full disclosure of valuation, income recognition and presentation differences are detailed in Notes 39 and 40 which may be found on pages 160 to 176 of our Financial Report 2002.
UBS AG, P.O. Box, CH-8098 Zurich | www.ubs.com/investors |
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Annual Review 2002 | ||
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Contents
03 | UBS Group Financial Highlights | ||||
04 | Letter to Shareholders | ||||
08 | The Year in Review | ||||
10 | Our Businesses | ||||
12 | UBS Wealth Management & Business Banking | ||||
16 | UBS Global Asset Management | ||||
18 | UBS Warburg | ||||
22 | UBS PaineWebber | ||||
24 | Our Value Drivers | ||||
26 | Client Focus | ||||
30 | Innovation and Learning | ||||
34 | Talent and Culture | ||||
38 | Brand and Identity | ||||
42 | Financial Intelligence | ||||
46 | 2002 Report | ||||
48 | Corporate Governance | ||||
52 | Financial Results in 2002 | ||||
54 | UBS Group Results in 2002 | ||||
58 | Business Group Results in 2002 | ||||
61 | Sources of Information about UBS |
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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 global culture that embraces change. We are the world’s leading provider of wealth management services and one of the largest asset managers globally. In the investment banking and securities businesses, we are among the select bracket of major global houses. In Switzerland, we are the clear market leader serving corporate and retail clients. As an integrated firm, we create added value for our clients by drawing on the combined resources and expertise of all our businesses.
Our first priority is always our clients’ success and we put advice at the heart of our relationships with them. We take the time to understand the unique needs and goals of each of our clients. Our priority is to provide premium quality services to our clients, giving them the best possible choice by supplementing best-in-class solutions we develop ourselves with a quality-screened selection of products from others.
With head offices in Zurich and Basel, and more than 69,000 employees, we operate in over 50 countries and from all major international financial centers. Our global physical presence is complemented by our strategy of offering clients products and services via a variety of different channels – from the traditional retail bank branch to sophisticated, interactive online tools, helping us to deliver our services more quickly, widely and cost-effectively than ever before.
UBS 2002 / 1
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We have chosen a number of distinct gardens from around the world as the pictorial theme for our Annual Review this year. Gardens are the product of imagination, expertise and careful attention to detail. Celebrated gardens evolve from inspired ideas that are developed with consistent and relentless dedication over years – and even generations.
Like a garden, a flourishing business enterprise requires a special combination of creativity and commitment. At UBS, we know it is the qualities of our people who nurture the success of our business. In reflection of that, we portray a representative selection of our teams, each photographed against different garden backdrops. For a brief description of the gardens from around the world in this report, please refer to page 64.
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UBS Group | Highlights 2002 | |
Financial Highlights | ||
1 | Operating expenses/operating income before credit loss expense. | |
2 | Excludes the amortization of goodwill and other intangible assets. | |
3 | Details of the EPS calculation can be found in Note 8 in the Financial Report 2002. | |
4 | Net profit/average shareholders’ equity excluding dividends. | |
5 | Includes hybrid Tier 1 capital, please refer to Note 29e in the Financial Report 2002. | |
6 | Klinik Hirslanden was sold on 5 December 2002. The Group headcount does not include the Klinik Hirslanden headcount of 2,450 and 1,839 for 31 December 2001 and 31 December 2000, respectively. | |
7 | See the “Capital strength” section in the UBS Handbook 2002/2003. | |
8 | Details of significant financial events can be found on page 55 of this report. | |
The segment results have been restated to reflect the new Business Group structure and associated management accounting changes implemented during 2002. | ||
All results presented include PaineWebber from the date of acquisition, 3 November 2000. |
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income statement key figures | ||||||||||||||||
Operating income | 34,121 | 37,114 | 36,402 | (8 | ) | |||||||||||
Operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | |||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | (32 | ) | |||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||
Cost/income ratio (%)1 | 86.2 | 80.8 | 72.2 | |||||||||||||
Cost/income ratio before goodwill (%)1, 2 | 79.0 | 77.3 | 70.4 | |||||||||||||
Per share data (CHF) | ||||||||||||||||
Basic earnings per share3 | 2.92 | 3.93 | 6.44 | (26 | ) | |||||||||||
Basic earnings per share before goodwill2, 3 | 4.73 | 4.97 | 7.00 | (5 | ) | |||||||||||
Diluted earnings per share3 | 2.87 | 3.78 | 6.35 | (24 | ) | |||||||||||
Diluted earnings per share before goodwill2, 3 | 4.65 | 4.81 | 6.89 | (3 | ) | |||||||||||
Return on shareholders’ equity (%) | ||||||||||||||||
Return on shareholders’ equity 4 | 8.9 | 11.7 | 21.5 | |||||||||||||
Return on shareholders’ equity before goodwill2, 4 | 14.4 | 14.8 | 23.4 | |||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Balance sheet key figures | ||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | (6 | ) | |||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | (10 | ) | |||||||||||
Market capitalization | 79,448 | 105,475 | 112,666 | (25 | ) | |||||||||||
BIS capital ratios | ||||||||||||||||
Tier 1 (%)5 | 11.3 | 11.6 | 11.7 | |||||||||||||
Total BIS (%) | 13.8 | 14.8 | 15.7 | |||||||||||||
Risk-weighted assets | 238,790 | 253,735 | 273,290 | (6 | ) | |||||||||||
Invested assets (CHF billion) | 2,037 | 2,448 | 2,445 | (17 | ) | |||||||||||
Headcount (full-time equivalents) | 69,061 | 69,9856 | 71,0766 | (1 | ) | |||||||||||
Long-term ratings7 | ||||||||||||||||
Fitch, London | AAA | AAA | AAA | |||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa1 | |||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||||||
Earnings adjusted for significant financial events and pre-goodwill2, 8 | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Operating income | 33,894 | 37,114 | 36,402 | (9 | ) | |||||||||||
Operating expenses | 27,117 | 29,073 | 25,096 | (7 | ) | |||||||||||
Operating profit before tax | 6,777 | 8,041 | 11,306 | (16 | ) | |||||||||||
Net profit | 5,529 | 6,296 | 8,799 | (12 | ) | |||||||||||
Cost/income ratio (%)1 | 79.5 | 77.3 | 69.2 | |||||||||||||
Basic earnings per share (CHF)3 | 4.57 | 4.97 | 7.28 | (8 | ) | |||||||||||
Diluted earnings per share (CHF)3 | 4.50 | 4.81 | 7.17 | (6 | ) | |||||||||||
Return on shareholders’ equity (%)4 | 13.9 | 14.8 | 24.3 | |||||||||||||
UBS 2002 / 3
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Letter to Shareholders
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Dear Shareholders,
The year 2002 was one of the most challenging ever for the financial industry. Uncertainty about economic developments depressed transaction levels and corporate activity. Equity markets suffered considerable corrections as investor confidence was undermined by negative corporate newsflow in the first part of the year, with worries about international political developments further subduing sentiment as the year drew to a close.
Our integrated business modelmeans that teams across Business Groups work together to pool expertise and skills for the benefit of their clients. Our clients should effortlessly be able to access all the services UBS can provide, wherever and whenever they need them.
Net profit in 2002was negatively impacted by this write-down of CHF 953 million after-tax. Compared to 2001, we reported a 29% decrease in net profit to CHF 3,535 million while our basic earnings per share fell 26% to CHF 2.92. However, before goodwill amortization, adjusted for the brand writedown and stripping out gains from divestments, net profit in 2002 only fell 12%.
We did not build up significant overcapacity during the peak of the last business cycle, and have therefore been able to reduce headcount gradually as economic conditions weaken – without resorting to drastic cuts. Over 2002, headcount decreased by 1.3% to 69,061 employees, as we streamlined some processes and structures at the same time as expanding our capabilities in areas with positive growth potential.
Expanding our market positionin core businesses was one of 2002’s overriding objectives. We have continued to invest in our growth initiatives, gaining market share from competitors.
As shareholders,you may have followed the public debate on corporate governance in the US and Europe. Over the last year, the discussion was particularly animated in the US as markets and corporations continued to confront the excesses of the 1990s, triggering new rules, standards and legislation. At UBS we are committed to meeting international standards in the way we organize our leadership structures and processes.
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Letter to Shareholders
of both boards and ultimately the professionalism of their members that put effective checks and balances into action.
As 2003 unfolds,the environment continues to be a challenging one. At the time of writing, it is unclear how investor sentiment will develop considering the unpromising economic developments and heightened geopolitical concerns. Therefore, it is very difficult to make any meaningful predictions about the possibility or timing of a broad-based economic recovery.
Marcel Ospel | Peter Wuffli | |
Chairman | President | |
19 March 2003 |
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The Year in Review
January nThe Wolfsberg Group of financial institutions, of which UBS is a member, signals its intention to support governments around the world in their efforts to fight the financing of terrorism. February | nUBS Warburg enters the energy trading markets, through the exclusive licensing of Enron’s North American natural gas and power trading technology, and establishes UBS Warburg Energy. March April | nThe brands of Brinson Partners, Brinson Advisors, Phillips & Drew and UBS Asset Management are retired and replaced with UBS Global Asset Management, reflecting the global integration and scope of our investment management approach and service offerings. The move is one step in UBS’s overall brand evolution that will be completed in the second half of 2003. May |
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In 2002, we announced a new brand strategy and broadened our senior management team. These and other highlights of the year are summarized below.
nSignaling its momentum in the US capital markets, UBS Warburg completes the expansion of its Stamford trading floor. At 103,000 square feet, it is the largest securities trading floor in the world (a fact confirmed by the Guinness Book of World Records), accommodating 1,400 traders and staff. June July | September nThe UBS Tower, which co- locates all the Group’s businesses, officially opens in Chicago. The building brings together almost 1,500 Chicago-based employees. nA two-year wait comes to an end for UBS when the Louis Vuitton Cup, the qualifying competition for the America’s Cup, starts in New Zealand. UBS is the main partner of Alinghi, the Swiss Challenge for the America’s Cup 2003. nUBS is again listed as a component of the Dow Jones STOXX Sustainability Index and the Dow Jones Sustainability World Index – the first global indices to track the financial performance of leading global companies which pursue a strategy of sustainable growth. November | nUBS announces that it will introduce a simplified brand strategy and structure using the single brand UBS from 9 June 2003. The move to a simpler branding accurately reflects UBS’s integrated business model and “one firm” approach. nUBS announces its decision to sell its 91.15% equity stake in Hirslanden Holding AG, the leading Swiss private hospital group, continuing its strategy of divesting non- core businesses. nUBS Warburg announces the decision to fully integrate its US energy trading activities, based in Houston, within its trading operations in Stamford, Connecticut. December |
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Our Businesses
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We operate as one firm with a common set of values and aspirations and under the leadership of one management team. With this integrated model, we run a diverse set of global businesses, each in the top echelon of their sectors and committed to vigorously growing their franchises.
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UBS Wealth Management &
Business Banking
We deliver comprehensive financial services to wealthy private clients worldwide and are the leading bank for individual and corporate clients in Switzerland.
Private Banking
Our global product offering is carefully tailored to meet country-specific tax and legal frameworks as well as the varied aspirations of clients in different countries. We are also committed to an open product platform, which widens the choices available to our clients by complementing UBS’s own products with top-quality products provided by third parties.
Private Banking continues to expand its presence in the five key European markets of France, Germany, Italy, Spain and the UK as part of its European wealth management initiative, a major strategic drive for UBS. Since the start of the initiative in 2001, we have tripled the number of client advisors to a total of 551 in the five countries. Clients in these countries invested net new money of CHF 7.6 billion in 2002, bringing total invested assets to CHF 28 billion.
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Our Businesses: UBS Wealth Management & Business Banking
>> A strong Italian presence |
Last yearproved particularly challenging for our Milan office because of Italy’s fiscal amnesty, which allowed Italians to repatriate funds held abroad by paying a small nominal tax. But thanks to our private banking team in Milan and local teams throughout Italy, UBS retained more than half of the capital repatriated by its Italian clients. “It proved the effectivenessof our strategy of having a strong presence | locally,” Vittorio Volpi, UBS Private Banking’s Regional Manager Italy, explained. The basefor all of UBS’s Italian wealth management operations is in Milan, which now houses more than 200 employees who are headed by Mauro Costa. Costa maintains that wide-spread local presence throughout Italy has proven a real competitive advantage. | “Regional diversityis one of the strong points of our team. It allows us to fully understand clients across the whole country,” says Ferruccio Ferri, team head of the Central Italy region. “More than almost any other countryin Europe, having branches across the country is an absolute necessity, as each region has its own unique features,” says Mauro Costa. And, in 2002, the team was able to | fully exploit that key competitive advantage, says Andrea Cingoli, team head for the north-east region of Italy. “UBS has a unique offerfor the Italian market. Our clients appreciate our approach, which delivers tailor-made solutions that meet their individual needs. We exploit opportunities to meet goals they hadn’t even imagined.” |
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Our Businesses: UBS Wealth Management & Business Banking
Business Banking
Our range of products and services comprehensively meets all of an individual client’s needs. Our product palette runs from current accounts and saving products to residential mortgages, wealth management services, pensions and life insurance.
We have 311 branches and 1,225 ATMs in Switzerland – the broadest distribution network of any Swiss bank. We are the leading lender to private clients in Switzerland, and the biggest player in both the credit card and private mortgage markets.
In corporate banking, our range of products and services is tailored to the needs and sophistication of our corporate clients. We serve top-tier corporations demanding comprehensive access to capital markets, large companies needing our expertise in the handling of complex financial transactions, and small to medium enterprises requiring access to a full range of financial products and services.
Clients have invested assets of over CHF 200 billion with us while our loan book total of CHF 139 billion on 31 December 2002 demonstrates our leading position in the Swiss mortgage and lending markets.
>> UBS Service Line |
If you managethe financial transactions of a small or medium-sized Swiss company and are a client of ours, you are probably familiar with the UBS Service Line’s 0844 853 002 telephone number. Dialing it puts you through to Roger Koestli and a team of 41 employees, whose job is to help small and medium-sized companies manage their daily banking transactions. According to Koestli, the service line, introduced in January 2002, is an additional channel for companies in Switzerland, one that complements | and supports traditional retail branches. It gives companies the capability to access basic payment and transaction services far more quickly and efficiently than before – and whenever they want. Before the Service Linewas introduced, companies depended on their client advisors for everything down to the most basic transaction. By switching to a multichannel philosophy, we help clients choose the most efficient way of doing business with us. Routine transactions are shifted towards e-banking and | telephone banking, which are available 24 hours a day. And now, client advisors can focus on the more complex solutions and advice that their corporate clients require, paying more individual attention to them. “The intensive contactwith our clients allows us to feel the pulse of small business in Switzerland. We take around 1,000 telephone calls a day – giving information, completing transactions, and recommending solutions,” Koestli said. Currently, the Service Line manages the affairs of around a third of UBS’s | small and medium-sized corporate clients, and the trend is clearly gaining momentum. “We see ourselvesand sell ourselves as a team. For our clients, efficient service is of primary importance. When companies need more comprehensive advice, we help them find the right advisor at a retail branch. As what we do helps those client advisors lighten their workload, they then have more time to work with their clients,” he added. |
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UBS Global Asset Management
We are a top-tier worldwide asset manager, distinguished by the diversity and global scope of our investment capabilities.
With our integrated global investment platform, we seek to deliver superior investment performance to institutional investors, private investors and financial intermediaries. Our 440 investment professionals, located in all the major financial centers, provide our clients with access to a breadth and scope of investment capabilities which, we believe, distinguishes us from our competitors.
Our organization focuses on three major areas of expertise. Our core investment management business has a clear price/value investment philosophy which means we pay great attention to fundamental analysis when assessing securities. We have disciplined processes to systematically apply our philosophy and to ensure the quality of our execution. Our second focus area is alternative and quantitative investments, encompassing several specialist businesses with distinctive brands like O’Connor, which manages hedge funds and other alternative instruments. The third focus is on our real estate management capabilities in the US, UK, Switzerland and Japan.
Our Business Group had total invested assets of CHF 557 billion on 31 December 2002, of which CHF 279 billion were from institutional investors and CHF 278 billion from private clients via financial intermediaries like UBS PaineWebber or UBS Private Banking.
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Our Businesses: UBS Global Asset Management
>> The team that powers partnerships |
Open architectureis bringing new challenges to our business. As private banks establish their mutual fund product ranges, including products from third party institutions, they must develop procedures to track product information and monitor performance. | This is the rationale behind UBS Global Asset Management’s Key Account Management (KAM) group. Based in Zurich, the KAM team oversees key client relationships in Europe and the Middle East, providing comprehensive support for open architecture strategies and a one-stop | coordinated approach to providing data on UBS products and portfolio information. Centrally coordinatedinformation is combined with local relationships. “Localized support is critical,” explains the KAM team’s head, Marianne Loner. “We recognize | that local client needs will vary, as will their selection and use of our funds.” The KAM formulahas found such favor with UBS’s wholesale clients that the Business Group will soon extend it to institutional clients. |
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UBS Warburg
We are a leading investment banking and securities firm providing a full spectrum of products to institutional and corporate clients, governments and financial intermediaries around the world.
With almost 16,000 professionals in 30 countries around the world, we are one of the world’s leading investment banking and securities firms. Our global reach, the quality of our service, our unique access to investors and our award-winning technology result in a world-class offering to clients.
Corporate and Institutional Clients
In the investment banking business, we provide first-class advice and execution capabilities to a global corporate client base. This business thrives on our particular strengths in advising on cross- border mergers and acquisitions and on capital raising strategies. Although historically we have always been among the leaders in European investment banking, we have put considerable resources and effort into expanding our US capabilities in the last two years, resulting in increased market share and significantly greater presence in the American market.
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Our Businesses: UBS Warburg
>> Reshaping the global broadcasting industry |
In 2002,many of the 57 investment bankers of UBS Warburg’s global media group had the privilege of playing an important part in shaping the global broadcasting industry’s future. The investment banking media group,led by Global Head of Tech- | nology, Media and Telecommunications (TMT) and Vice Chairman, Jeff Sine, and Global Head of Media, Simon Warshaw, is organized into teams that each take a global approach to the broadcasting, cable and satellite, publishing and information and entertainment sectors. | Jeff Sine and his teamwere hired as part of our expansion drive into the US investment banking market to further enhance the relationships between UBS Warburg and the largest players in the media sector. The media group teamswork seamlessly with each other across | borders, leveraging their various areas of expertise where and when it is needed, with the result that in 2002 they successfully advised on many of the transactions that fundamentally altered the global broadcasting landscape. >> |
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>> Reshaping the global broadcasting industry(continued) |
As an example,the media group helped to create the world’s largest Spanish-language media company when they acted as sole financial advisor to Univision, the leading US Spanish-language TV broadcaster, in its USD 3.5 billion acquisition of | Hispanic Broadcasting, the top US Spanish-language radio broadcaster. The media groupfollowed that achievement by acting in the UK as Carlton’s exclusive financial advisor in the GBP 2.9 billion proposed merger with Granada that will create | one of Europe’s leading commercial broadcasters. Meanwhile,UBS Warburg acts as sole advisor to KirchMedia on its insolvency and restructuring – one of the largest media restructurings in German history. | Overall, these transactionshelped the media group to significantly contribute to UBS’s long-term drive to expand its investment banking market share – both in the US and around the world. |
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Our Businesses: UBS Warburg
In the equities business, we are a leader in both primary and secondary markets for equity, equity-linked (e.g. convertible bonds) and equity derivative products. We are the preeminent provider of international equities for US institutional clients while in Europe we enjoy a dominant position, with a reputation for excellent client service, creative products and unequalled execution capabilities. In the Asia Pacific markets, we have built the leading equities franchise.
In the fixed income and foreign exchange business, we are one of the leading global houses, providing innovative products and original thinking to corporate and institutional clients in all major markets. Offering our clients a genuinely seamless global service, we operate across the complete spectrum of products and markets.
We provide a comprehensive range of currency-driven financial solutions, placing first in online currency trading, where we have more than twice the market share of our nearest rival.
All of our business areas are run on a global basis. A consolidated global view of risk across different world regions is one of our main competitive advantages. It is based on a strong history of risk management skills across all product areas.
UBS Capital
UBS Capital is structured along regional lines and fully integrated within the UBS Warburg Business Group. Around 30% of UBS Capital’s portfolio is invested in third party funds.
After a review in late 2001 and early 2002, we decided that private equity would no longer be a core business for UBS, and UBS Capital should focus on managing its existing portfolio to maximize value, capitalizing on exit opportunities where they arise with a minimal level of new investments.
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>> Teaming up in Atlanta |
When UBS PaineWebber financial advisors Bruce Bickley and Keith Mericka teamed up in 1989 in Atlanta, Georgia, they saw a unique opportunity to serve private company owners across the country wanting to sell their businesses. Working as partners, they spent a great deal of time working with clients and trying to understand their unique financial needs, developing individual wealth management plans for each client and keeping each client on track to |
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UBS PaineWebber | Our Businesses:UBS PaineWebber |
As one of the top wealth managers in the US, we build consultative relationships with affluent clients and provide them with a complete set of sophisticated wealth management services.
With approximately 2 million client relationships, we are one of the largest private client businesses in the US, offering a full set of services to the most affluent Americans. Our strength lies in the emphasis we put on building and maintaining consultative relationships between our high net worth clients and their financial advisors, offering a wide array of investment products and services. Our service palette includes financial planning, wealth management consulting, discretionary and non-discretionary portfolio management, money market accounts, loans and fiduciary products and transaction-based services such as securities brokerage.
Our highly trained network of 8,857 financial advisors, working from 365 offices across the US, managed CHF 584 billion in assets invested by clients as of 31 December 2002. Providing tailored investment advice based on each client’s individual specific needs, our advisors focus on households with investable assets in excess of USD 500,000 – the largest and fastest growing pool of assets in the US. Our client advisors are further supported by a dedicated telephone service center available 24 hours a day and seven days a week.
The UBS PaineWebber Online Services unit, with a user base of 460,000 households, offers our clients a selection of online tools that complements and enhances their relationship with their financial advisor. Our Municipal Securities Group, which is leading in the US market, is a complete origination, structuring and distribution team offering an array of related products to high net worth clients, while our Corporate Employee Financial Services Group administers share option plans for large corporations. Another team, the Alternative Investment Group, provides investment management services to clients who wish to pursue alternative investment strategies. UBS PaineWebber is also the industry leader in the sale of insurance annuity products.
Overall, our business strategy is focused on securing recurring fees from advice and product sales, with such recurring fees now accounting for around 40% of our revenue. We offer clients an open architecture platform that makes available the best-in-class products from UBS Global Asset Management as well as from third party investment managers, while also leveraging UBS Warburg’s broad line of equity-linked securities and other structured products.
meet their financial goals. After a few years in business, their shared expertise and client contacts brought them a positive reputation nationwide, allowing them to tap into a far greater pool of private wealth than either could have done alone. After business boomed,Bickley and Mericka enlisted the services of financial advisor Andrew Byer, one junior advisor and five associates with the goal of boosting client service, improving performance and helping | the team better preserve and grow the assets of their clientele. Soon, PaineWebber merged with UBS, and a vast array of new resources became available to help them address the fast-increasing complexity of their clients’ accounts. Like other partnerships at UBS PaineWebber, Bickley and Mericka took advantage of these newfound strengths to offer investors a variety of expertise that ranges from lending to structured products to hedge funds to art banking. |
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Our Value Drivers |
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To the outside world, our strength is often perceived as being derived from the financial success of our businesses. Yet, at the same time, we also believe our strength is projected through other more intangible factors – factors such as the values we share, our culture, our client relationships and our brands. We have distilled these factors down into the five key elements of Client Focus, Innovation and Learning, Talent and Culture, Brand and Identity and Financial Intelligence. They are the value drivers of our business. In the pages that follow, we will show you what they mean to us and how they translate into tangible success. | ||
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A lasting partnership
Our clients’ success is our success. The only way we can build lasting relationships with them is by taking the time to understand their specific financial situations and their individual objectives. When we combine that understanding with our expertise, we become their partner, helping them achieve their financial goals.
Understanding each client’s individual situation helps us to build strong relationships and effectively offer proactive advice. But having in-depth knowledge of our clients’ goals and needs also brings with it the responsibility to safeguard their private information. The deep respect we have for their right to financial privacy and the appropriate level of discretion we use when dealing with confidential information justify the trust that our clients continue to place in us.
Our client advisors and relationship managers are not there to simply sell more products or close deals – their true aim is to become a partner of their clients. When we work together as partners, we are able to provide our clients with advice, solve their individual issues and to achieve their specific goals and aspirations. In all our Business Groups, our broad range of products and services, advisory experience and the efficiency of our processes provide us with the capabilities to tailor our services to an individual client’s needs.
The trust clients have placed in us, across all our businesses, is a source of considerable pride to us. Although our expertise and products have earned us prestigious industry awards, we feel that the approval of our clients is our most important reward. It is only when we have helped them reach their individual targets and they consider us their dependable partner that we feel we have really succeeded.
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Our Value Drivers: Client Focus | ||
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Our Value Drivers: Client Focus | ||||||
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>> Bank of China makes historic debut
When UBS Warburg actedas joint global coordinator and bookrunner for the Initial Public Offering (IPO) of shares in the Bank of China, Hong Kong, headlines were guaranteed. The USD 2.9 billion IPO, which took place in July 2002, was the first-ever internationally mandated IPO for a Chinese state-owned institution and the year’s third largest IPO worldwide.More than six times subscribed, the deal generated demand in excess | of USD 18 billion. UBS Warburg generated the most demand in the international offer and significantly outsold the other joint bookrunners. “This outcome, in the face of difficult market conditions, demonstrates the distribution power that we can bring to bear for our clients,” said Colin West, head of the equity capital markets Asia team. The deal brought an evolving relationship to a new stage. The previous | year, advised by UBS Warburg’s investment banking team, the Bank of China had taken an all-important first step towards the IPO. By consolidating the bank’s 13 affiliated but independently managed financial institutions in Hong Kong into a single new entity, it created a business with approximately USD 100 billion in assets and three million customers.“All of us working on this deal were acutely aware that we were | making history in contributing to the reform of China’s banking sector,” said Peter Burnett, joint head of investment banking for Asia. Established in 1912, the Bank of China started life as the nation’s central bank. With the support of UBS Warburg, it is now well on the way to establishing a major international presence. |
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Our Value Drivers: Innovation and Learning | ||
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Supporting client needs
Innovation and Learning are central to our vision. Clients look to us for the experience embodied by our staff and the creativity characterized by effective solutions.
Every day, our clients around the world benefit from the expertise of our staff, which is built on experience, innovation and learning. Our creativity drives our ambition to always find better solutions for our clients’ challenges. Team-work and partnership between our different businesses allow us to leverage insights across various functions and to take advantage of knowledge and ideas from across the firm.
Technology plays an integral role in our businesses by enhancing our clients’ experience of doing business with UBS, increasing the demand for our products, and minimizing the production cost for our services — from multichannel e-banking platforms to state-of-the-art portfolio management tools. Although we are constantly refining our technology to keep our client advisors superbly equipped and trained, we only use innovation in support of our relationships with clients, and never for its own sake.
Technology supports the client/advisor relationship — never supplanting it. We offer clients convenient access through multiple channels and put advice at the heart of relationships. At the same time, choice is central to our client offerings and we aim to increase product and service availability by augmenting our in-house range with a quality-screened selection of third-party products. We are also open to partnerships with intermediaries that leverage our knowledge, skills, services and products and make them accessible to an even broader client base.
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>> New chip cards for e-bankers |
Our e-banking servicesfor private clients in Switzerland emphasize the traditional values of trust, quality, security and discretion. Using the most advanced security solutions and technology available is one of the many ways we ensure that we are upholding those values. Until last year, clients accessing their e-banking accounts needed an individual con- | tract number, a password and a physical paper list of access codes. Although the old system more than adequately fulfilled our stringent encryption requirements, we started to deploy a more convenient electronic solution to replace the paper list. Together with IBM,we developed an innovative, easy to use chip-card system that uses state-of-the-art | technology — considerably enhancing the overall level of online security. The new system is based on a code saved on each individual UBS e-banking card (which all of our Swiss clients receive). The card’s contentis protected and cannot be copied or decoded. Its codes are only valid for a very short time-span — unlike the paper lists of | access codes. When using a card, a client does not have to enter a pass- word directly into his or her computer. Instead, it is processed directly by a card reader (which is also sent to clients). The system was gradually introduced during the course of 2002, and we expect that all of our e-banking clients will be using the new system by the middle of 2003. |
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Our Value Drivers: Innovation and Learning | ||
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More than just a job
Knowledge and innovation come from the talent, enthusiasm, creativity and experience of our people. At UBS, we recognize that the people joining us are looking for more than just a job – they are looking for challenging, rewarding, long-term careers in an organization that encourages them to continue developing their knowledge and skills, whatever their role may be.
Banking relies on the skills and talents of its employees. In order to thrive, UBS must be capable of attracting, developing and retaining the most qualified, talented and motivated staff. At UBS we have succeeded in recruiting some of the brightest individuals by offering an inspiring environment. Each of our core businesses offers them exciting opportunities, where they can act like entrepreneurs, capturing opportunities and growing their experience and skills – for example by taking part in our major strategic initiatives: the European wealth management initiative and the expansion in US investment banking. We encourage the development of our people, by fostering creative collaboration, leadership and accountability. Above all we offer an organization where individuals are motivated to be successful, which ultimately makes the firm itself successful.
Our values are a strong foundation for our way of doing business. Our firm and our people will refrain from doing business if it violates our ethical standards.
At UBS, we respect the views of others, even if they are controversial. We coach and guide, rather than dictate, and our people feel empowered to challenge conventional wisdom. This helps us to create a working environment based on mutual support and active contribution.
At the same time we have no desire to impose a restrictively uniform UBS culture on all of our employees around the world. Rather, we let national characteristics thrive, along with local business customs, individual skills and perspectives, helping to leverage all our strengths. In our approach to doing business, we are strict in giving no room to discrimination, neither by gender, religion, age nor race.
Ultimately, our culture is what we make of it. Our success as a “learning organization” is not about theory, or about knowledge management. It’s about being an organization that has the drive and desire to transform itself whenever opportunities arrive.
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Our Value Drivers: Talent and Culture |
>> The UBS Leadership Institute |
Don’t look for marble hallsor classical pediments. Our UBS Leadership Institute is grounded in the firm’s top leaders, not in bricks and mortar. Yet this global initiative is more crucial to the organization’s future than any building could ever be. Robert Mann, global head of Group Learning and Development, explains why: “Increasingly, success depends on our ability to manage change faster than the competition.” To build the leadership that drives such change, Mann’s team launched the UBS Leadership Institute in August | 2002. The Institute develops programs and processes to help senior leaders shape, communicate and implement the firm’s strategy. The centerpiece of the Institute is the Annual Strategic Forum (ASF), the yearly gathering of the Group Managing Board, whose 52 members form the executive teams of the UBS businesses. The ASF has become a vital forum for discussing UBS’s strategic agenda, building unity and accelerating strategic change within the firm. | In addition, the Institute builds the organizational and leadership capabilities needed to support the firm’s strategic agenda through a trio of leadership development programs called the Global Leadership Experience (GLE). Senior leaders throughout the firm participate in GLE as coaches, teachers and participants. Finally, the Institute has developed a talent management process whereby the firm’s key talent is actively engaged and developed by the firm’s most senior leaders. | The Institute,concludes President Peter Wuffli, is an investment in the future of UBS: “It will ensure that we have a strong and deep leadership bench to sustain our growth as a firm. This commitment should send a strong signal to our colleagues in UBS, to clients, to shareholders and to all who have an interest in our ongoing success.” |
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Our Value Drivers: Talent and Culture | ||||||
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Client Focus
Entrepreneurial Leadership
Ambition, Energy and Fun
Innovation and Learning
>> Responsible Relationships
Partnership
Meritocracy
Corporate Responsibility
>> High Ethical Standards
Integrity
Privacy
Diversity
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UBS – much more than a name
UBS is more than just a name or logo. It is a promise to our clients – our promise to use all our global resources to develop tailored solutions and to help them achieve long-term financial success.
The UBS name and what it stands for is one of our most precious assets and must be managed as such. The image it conveys – to our customers, our employees, our shareholders – is essentially the sum of all the experiences they have had with UBS. For this reason, our brand must be not only relevant and consistent in the image it portrays but must deliver on the promises it makes.
In an increasingly competitive financial services industry, the strength of a company’s brand is one of the critical factors that attracts and retains clients. At the end of last year, we decided to move to a single brand because it best reflects our integrated business model and the “one firm” approach we deliver to our clients. From 9 June 2003 onwards, we will use “UBS” as the only brand for our major businesses.
Before making the decision to move to a single brand, we conducted a thorough review of our brand strategy, which focused on brand values as much as brand structure. The review was backed up by comprehensive market research in 14 countries that involved thousands of clients and prospects as well as UBS client advisors. The results showed that all our different client groups had similar expectations regarding the provision of financial services, and, consequently, their relationship with UBS.
Clients expect from us the relentless pursuit of their financial success, and they also demand the resources of a global power-house. They want proactive advice and a choice of relevant solutions that fit their needs. They want a close relationship with UBS, and for us to understand their individual goals and motivations.
If we are to harness the power of our brand so that it is indeed more than just a mere logo but an emotional attachment we have with our clients, it must be truly relevant and credible. We are building a flagship brand to match our position as one of the world’s flagship financial services firms.
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Our Value Drivers: Brand and Identity | ||
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Our Value Drivers: Brand and Identity | ||||||
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>> Award-winning advertising
When we embarkon an advertising campaign, we do not just want to drum a long list of products and services into people’s heads. Instead, we look for creative and innovative ways that cut through the media and advertising clutter while intuitively helping people to quickly grasp and understand who we are, what we stand for and what we do.
The advertisementwe are portraying here shows, “wa,” the character for “sum” and “harmony”, which symbolizes how each business unit of the UBS Group is integrated into one collective force, working in harmony with clients. The left half of the Chinese character, the “nogi-hen”, symbolizes a camp gate. The right half indicates a vessel called “sai”, which was used to hold documents. The Chinese character “wa” represents the conclusion of a pact to reach peace in front of a camp gate. It also means to establish a friendly relationship, or the matching of voices.
Also pictured above is UBS-sponsored Team Alinghi, which won a historic victory in the Americas Cup 2003 last March, bringing the trophy back to Europe for the first time since 1851.
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Managing for value
A defining strength of UBS is financial management: our prudence in managing and deploying capital resources – the transparency of our financial communications – our sound risk management processes.
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Our Value Drivers: Financial Intelligence |
UBS’s financial strength makes it one of the best capitalized banks in the world. Yet how does a global institution of scope and scale mesh its diverse financial strategies and processes into a cohesive whole? The answer is through a thorough commitment to the creation of shareholder value.
Traditionally, business thinking has focused on the profitability of products or services. Our goal goes beyond that – to create a common understanding – both internally and externally – of shareholder value creation within all of UBS’s businesses. We achieve this through the publication of Key Performance Indicators (KPIs) which identify the primary sources and drivers of value creation. This value-driven management approach is integrated into all our management processes to ensure that all UBS actions add value.
Throughout our history, prudent capital management has been a trademark of UBS. Our focus when managing capital is to employ all the tools at hand, while assuring a balance between the maximization of shareholder value and our strong inherent levels of capitalization. Our strong earnings generation and careful management of our balance sheet mean that UBS continues to generate capital well in excess of our minimum regulatory requirements.
Because risk is an integral part of our business, the main role of our risk management experts is to find the optimal balance between risk and return. Excellence in this area is a key success factor and requires the commitment of everyone within our organization. Fundamentally, sound risk management is based on implementing an appropriate governance model, and institutionalizing checks and balances between business representatives and risk managers.
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Our Value Drivers: Financial Intelligence |
>> Pioneers of the buyback
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2002 Report |
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This chapter dicusses UBS Group’s results for 2002, provides details of our directors and officers and outlines our corporate governance principles. | ||
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Corporate Governance
UBS is committed to high standards of corporate governance, ensuring that we create value sustainably for our shareholders while protecting their interests.
The Group Executive Board
Corporate governance – the way that the leadership and management of UBS is organized and how they operate in practice – ultimately aims at leading UBS to success, protecting the interests of shareholders and creating value for them and for all stakeholders. Good corporate governance seeks to balance entrepreneurial leadership, control and transparency, supporting a company’s success by ensuring an efficient decision-making process.
We operate under a strict dual Board structure, as mandated by Swiss banking law. 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. No member of one board is a member of the other. This structure establishes checks and balances and creates an institutional independence of the two boards.
Management structure
The Board of Directors is the most senior body with ultimate responsibility for management and the strategy of the company and for the supervision of its executive management. Our shareholders elect each member of the Board. The Board appoints its Chairman, its Vice Chairmen and its Board Committees, including the Audit Committee, the Compensation Committee, and the Nominating Committee. A large majority of the Board members at UBS are non-executive and independent.
In line with Swiss banking law, the Board has delegated the responsibility for day-to-day management to the Group Executive Board. The supervision and control of the executive management remains with the Board of Directors, in particular with the Chairman and the Vice Chairmen.
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2002 Report
On 31 December 2002, the Board consisted of nine directors (see list on page 50). At its Annual General Meeting on 18 April 2002, UBS’s shareholders elected Ernesto Bertarelli, CEO of Serono International SA (Geneva) to the Board. Markus Kündig, Vice Chairman since 1998, reached retirement age and therefore stepped down at that time.
The Group Executive Board(GEB) has business management responsibility for UBS. All its members are appointed by the Board of Directors. The GEB is accountable to the Chairman and the Board for the implementation of the strategy and the financial results of the firm’s businesses. Its President, in particular, is responsible for business and financial planning, financial reporting and risk control. Together with the Chairman and the Vice-Chairmen, the GEB assumes overall responsibility for the development of UBS’s strategies.
As at 31 December 2002, the GEB consisted of the ten members portrayed in the photographs above.
In 2002, Markus Granziol, former Chairman of UBS Warburg, decided to leave the Company following a very successful career at UBS. In July 2002, the Board of Directors appointed John Fraser, Peter Kurer, Marcel Rohner, Clive Standish and Mark Sutton to the GEB.
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2002 Report
Members of the Board of Directors
as at 31 December 2002
Year of initial | Current term of office | |||||||
Name and business address | Positions held | appointment | runs until | |||||
Marcel Ospel | Chairman | 2001 | 2005 | |||||
UBS AG | ||||||||
Bahnhofstrasse 45 | ||||||||
CH-8098 Zurich | ||||||||
Alberto Togni | Executive Vice Chairman | 1998 | 2005 | |||||
UBS AG | ||||||||
Bahnhofstrasse 45 | ||||||||
CH-8098 Zurich | ||||||||
Johannes A. de Gier | Executive Vice Chairman | 2001 | 20031 | |||||
UBS AG | ||||||||
Bahnhofstrasse 45 | ||||||||
CH-8098 Zurich | ||||||||
Peter Böckli | Non-executive Vice Chairman | 1998 | 20031 | |||||
Böckli Bodmer & Partners | Chairman of the Nominating Committee | |||||||
St. Jakobs-Strasse 41 | ||||||||
P.O. Box 2348 | ||||||||
CH-4002 Basel | ||||||||
Ernesto Bertarelli | Member of the Compensation Committee | 2002 | 2006 | |||||
Serono International SA | ||||||||
Chemin des Mines 15bis | ||||||||
CH-1211 Geneva 20 | ||||||||
Sir Peter Davis | Member of the Audit Committee | 2001 | 2004 | |||||
J Sainsbury plc | Member of the Nominating Committee | |||||||
33 Holborn | ||||||||
London EC 1N 2HT | ||||||||
Rolf A. Meyer | Chairman of the Compensation Committee | 1998 | 20031 | |||||
Heiniweidstrasse 18 | Member of the Audit Committee | |||||||
CH-8806 Bäch | ||||||||
Hans Peter Ming | Member of the Compensation Committee | 1998 | 2004 | |||||
Sika AG | Member of the Nominating Committee | |||||||
Wiesenstrasse 7 | ||||||||
CH-8008 Zurich | ||||||||
Lawrence A. Weinbach | Chairman of the Audit Committee | 2001 | 2005 | |||||
Unisys Corporation | ||||||||
Unisys Way | ||||||||
Blue Bell, PA 19424 | ||||||||
Secretary to the Board of Directors | Gertrud Erismann-Peyer | |||||||
1 | Proposed for reelection at the AGM 2003. |
Each member of the Board is elected at the Annual General Meeting of Shareholders for a four-year term. The initial term of office for each Director is, however, fixed in such a way as to ensure that about a quarter of all the members have to be newly elected or reelected every year.
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Compensation for senior executives
Individual performance assessments consider both quantitative and qualitative factors, and include a balanced appraisal of both current financial results and key performance indicators, which are the longer-term value drivers considered crucial for UBS’s ability to deliver future growth.
An annual examination of competitor pay practices is conducted to ensure that our compensation policies and practices are in line with the market and help us to attract, motivate and retain valuable executives and employees.
The approval of senior executive compensation and the design of senior executive compensation schemes are subject to a rigorous process which ensures that decisions are taken at least at two organizational levels above the executive concerned. The Compensation Committee of the Board of Directors, which consists only of independent members, has a central role in the compensation process. No one has any approval authority for his or her own compensation.
Details of senior executive compensation can be found in the UBS Handbook 2002/2003.
Audit
Ernst & Young Ltd.,Basel, have been assigned the mandate to serve as global auditors for the UBS Group. They were first appointed as UBS’s principal external auditor for the audit of the 1998 financial statements. They have been reelected ever since at the Annual General Meetings, and will be proposed for reelection at the Annual General Meeting 2003. The Audit Committee of the Board has determined that Ernst & Young Ltd. meets all independence requirements.
At the Extraordinary General Meeting on 7 September 2000, UBS shareholders appointedDeloitte & Touche AG,Basel, as special auditors for a three-year term of office. The special auditors provide audit opinions in connection with capital increases, independently from the principal auditors. Deloitte & Touche will be proposed to the Annual General Meeting 2003 for reelection for another three years.
Group Internal Auditprovides an independent review of effectiveness of the system of internal controls and compliance with key rules and regulations. It has unrestricted access to all accounts, books and records and must be provided with all information and data required to fulfill its auditing duties. All key issues raised by Group Internal Audit are communicated to the management in charge, to the President of the GEB and to the Chairman’s Office via formal Audit Reports. Group Internal Audit employs around 240 professionals worldwide. To maximize its independence from management, the head of Group Internal Audit, Markus Ronner, reports directly to the Chairman of the Board.
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Financial Results in 2002
UBS Group Income Statement
CHF million, except per share data | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Operating income | ||||||||||||||||
Interest income | 39,963 | 52,277 | 51,745 | (24 | ) | |||||||||||
Interest expense | (29,417 | ) | (44,236 | ) | (43,615 | ) | (33 | ) | ||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 31 | ||||||||||||
Credit loss (expense) / recovery | (206 | ) | (498 | ) | 130 | (59 | ) | |||||||||
Net interest income after credit loss expense | 10,340 | 7,543 | 8,260 | 37 | ||||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | (10 | ) | |||||||||||
Net trading income | 5,572 | 8,802 | 9,953 | (37 | ) | |||||||||||
Other income | (12 | ) | 558 | 1,486 | ||||||||||||
Total operating income | 34,121 | 37,114 | 36,402 | (8 | ) | |||||||||||
Operating expenses | ||||||||||||||||
Personnel expenses | 18,524 | 19,828 | 17,163 | (7 | ) | |||||||||||
General and administrative expenses | 7,072 | 7,631 | 6,765 | (7 | ) | |||||||||||
Depreciation of property and equipment | 1,521 | 1,614 | 1,608 | (6 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 2,460 | 1,323 | 667 | 86 | ||||||||||||
Total operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | |||||||||||
Operating profit before tax and minority interests | 4,544 | 6,718 | 10,199 | (32 | ) | |||||||||||
Tax expense | 678 | 1,401 | 2,320 | (52 | ) | |||||||||||
Net profit before minority interests | 3,866 | 5,317 | 7,879 | (27 | ) | |||||||||||
Minority interests | (331 | ) | (344 | ) | (87 | ) | (4 | ) | ||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||
Basic earnings per share (CHF) | 2.92 | 3.93 | 6.44 | (26 | ) | |||||||||||
Basic earnings per share before goodwill (CHF) 1 | 4.73 | 4.97 | 7.00 | (5 | ) | |||||||||||
Diluted earnings per share (CHF) | 2.87 | 3.78 | 6.35 | (24 | ) | |||||||||||
Diluted earnings per share before goodwill (CHF) 1 | 4.65 | 4.81 | 6.89 | (3 | ) | |||||||||||
1 | Excludes the amortization of goodwill and other intangible assets. |
>> Letter from Group Auditors |
We have audited, in accordance with auditing standards generally accepted in the United States of America as well as those promulgated by the profession in Switzerland, the Group balance sheets of UBS AG as of 31 December 2002 and 2001, 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 2002 and the notes thereto (not presented herein). In our report dated 11 February 2003, (see UBS | Financial Report page 177) we expressed an unqualified opinion on those Group financial statements which are prepared in accordance with International Financial Reporting Standards. In our opinion, the information set forth in the accompanying Group balance sheet and income statement on pages 52 and 53 are fairly stated, in all material respects, in relation to the Group financial statements from which they have been derived | Basel, 11 February 2003 Ernst & Young Ltd Roger K. Perkin Chartered Accountant in charge of the audit | Peter Heckendorn lic.oec. in charge of the audit |
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2002 Report
UBS Group Balance Sheet
% change from | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Assets | ||||||||||||
Cash and balances with central banks | 4,271 | 20,990 | (80 | ) | ||||||||
Due from banks | 32,468 | 27,526 | 18 | |||||||||
Cash collateral on securities borrowed | 139,052 | 162,938 | (15 | ) | ||||||||
Reverse repurchase agreements | 294,086 | 269,256 | 9 | |||||||||
Trading portfolio assets | 371,436 | 397,886 | (7 | ) | ||||||||
Positive replacement values | 82,092 | 73,447 | 12 | |||||||||
Loans | 211,647 | 226,545 | (7 | ) | ||||||||
Financial investments | 8,391 | 28,803 | (71 | ) | ||||||||
Accrued income and prepaid expenses | 6,453 | 7,554 | (15 | ) | ||||||||
Investments in associates | 705 | 697 | 1 | |||||||||
Property and equipment | 7,869 | 8,695 | (9 | ) | ||||||||
Goodwill and other intangible assets | 13,696 | 19,085 | (28 | ) | ||||||||
Other assets | 8,952 | 9,875 | (9 | ) | ||||||||
Total assets | 1,181,118 | 1,253,297 | (6 | ) | ||||||||
Total subordinated assets1 | 3,652 | 2,732 | 34 | |||||||||
Liabilities | ||||||||||||
Due to banks | 83,178 | 106,531 | (22 | ) | ||||||||
Cash collateral on securities lent | 36,870 | 30,317 | 22 | |||||||||
Repurchase agreements | 366,858 | 368,620 | 0 | |||||||||
Trading portfolio liabilities | 106,453 | 105,798 | 1 | |||||||||
Negative replacement values | 81,282 | 71,443 | 14 | |||||||||
Due to customers | 306,876 | 333,781 | (8 | ) | ||||||||
Accrued expenses and deferred income | 15,331 | 17,289 | (11 | ) | ||||||||
Debt issued | 129,411 | 156,218 | (17 | ) | ||||||||
Other liabilities | 12,339 | 15,658 | (21 | ) | ||||||||
Total liabilities | 1,138,598 | 1,205,655 | (6 | ) | ||||||||
Minority interests | 3,529 | 4,112 | (14 | ) | ||||||||
Shareholders’ equity | ||||||||||||
Share capital | 1,005 | 3,589 | (72 | ) | ||||||||
Share premium account | 12,638 | 14,408 | (12 | ) | ||||||||
Net gains / (losses) not recognized in the income statement, net of tax | (159 | ) | (193 | ) | 18 | |||||||
Retained earnings | 32,638 | 29,103 | 12 | |||||||||
Treasury shares | (7,131 | ) | (3,377 | ) | (111 | ) | ||||||
Total shareholders’ equity | 38,991 | 43,530 | (10 | ) | ||||||||
Total liabilities, minority interests and shareholders’ equity | 1,181,118 | 1,253,297 | (6 | ) | ||||||||
Total subordinated liabilities | 10,102 | 13,818 | (27 | ) | ||||||||
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UBS Group Results in 2002
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 UBS PaineWebber). |
The first three targets are all measured pre-goodwill amortization, and adjusted for significant financial events.
Earnings adjusted for significant financial
events and pre-goodwill 1, 2
% change | ||||||||||||||||
CHF million, except where indicated | from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Operating income | 33,894 | 37,114 | 36,402 | (9 | ) | |||||||||||
Operating expenses | 27,117 | 29,073 | 25,096 | (7 | ) | |||||||||||
Operating profit before tax | 6,777 | 8,041 | 11,306 | (16 | ) | |||||||||||
Net profit | 5,529 | 6,296 | 8,799 | (12 | ) | |||||||||||
Cost/income ratio (%)3 | 79.5 | 77.3 | 69.2 | |||||||||||||
Basic earnings per share (CHF)4 | 4.57 | 4.97 | 7.28 | (8 | ) | |||||||||||
Diluted earnings per share (CHF)4 | 4.50 | 4.81 | 7.17 | (6 | ) | |||||||||||
Return on shareholders’ equity (%)5 | 13.9 | 14.8 | 24.3 | |||||||||||||
The segment results have been restated to reflect the new Business Group structure and associated management accounting changes implemented during 2002.
All results presented include PaineWebber from the date of acquisition, 3 November 2000.
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2002 Report
Our Performance against these targets in 2002 reflects the extremely difficult market conditions. Before goodwill and adjusted for significant financial events:
Our return on equity for 2002 was 13.9%, down from 14.8% a year ago and slightly below our target range of 15-20%. The lower average level of equity, down 6% because of our ongoing share buyback programs, could not compensate for market-related declines in earnings of 12% | ||
Basic earnings per share for 2002 were CHF 4.57, a decline of 8% from 2001. The 12% decline in profit was partially offset by the reduced average number of shares outstanding. | ||
The cost/income ratio for the year rose to 79.5% from 77.3%. Ongoing cost initiatives across all our businesses could not fully counteract the drop in revenues due to the declining market activity levels and subdued levels of transactional and corporate activity as well as ongoing private equity writedowns. | ||
Net new money in the private client units (Private Banking and UBS PaineWebber) dropped from CHF 57.8 billion in 2001 to CHF 35.1 billion in 2002. The drop was mainly due to difficult market conditions, which were accentuated by the Italian tax amnesty. |
Significant financial events
– | In fourth quarter 2002, UBS recorded a non-cash writedown of CHF 953 million after-tax for the value of the PaineWebber brand that was held as an intangible asset on our balance sheet. The writedown followed a strategic decision announced in November 2002 to move all our businesses to the single UBS brand. The new brand structure will be implemented in June 2003. |
– | In fourth quarter 2002, UBS realized a gain of CHF 60 million after-tax from the sale of Klinik Hirslanden, a private hospital group. |
– | In first quarter 2002, UBS realized a gain of CHF 125 million after-tax from the sale of Hyposwiss, an independent private bank. |
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2002 Report
Results
Income
Net interest incomeof CHF 10,546 million in 2002 was 31% higher than in 2001.Net trading incomedeclined 37% from CHF 8,802 million in 2001 to CHF 5,572 million in 2002.
Net income from interest margin productswas CHF 5,275 million in 2002, down 7% from CHF 5,694 million a year earlier, mainly reflecting lower margins on savings, cash accounts and mortgages because of margin pressure that reflected the extremely low interest rate environment. This was accentuated by the decline of the US dollar, which caused the Swiss franc equivalent of US dollar interest rate revenues to drop.
Over the full-year,net income from trading activitiesfell by 8% from CHF 11,529 million in 2001 to CHF 10,605 million in 2002, as equity revenues declined, reflecting worsening market conditions and lower client activity. Fixed income trading revenues remained at strong levels although they were lower than a year earlier, when they
benefited from a buoyant trading environment. Foreign exchange revenues rose slightly due to increased volumes and spreads.
Net income from treasury activitieswas CHF 1,667 million in 2002, an increase of 17%, reflecting higher income from our invested equity and a drop in funding costs.
Other net trading and interest incomeshowed a loss of CHF 1,429 million compared to a loss of CHF 1,804 million in 2001. This drop was mainly due to lower goodwill funding costs, which reflected the weakening of the US dollar against the Swiss franc, lower funding costs for our private equity portfolio as well as the reclassification of some revenues previously reported as income from trading activities.
Net fee and commission incomefor the full-year was CHF 18,221 million, a drop of 10% compared to a year earlier, reflecting a drop in most revenue categories, as brokerage and investment banking fees fell, due to much lower market and client activity, although underwriting fees remained resilient.
Other incomeshowed a loss of CHF 12 million compared to a gain of CHF 558 million a year earlier. Higher impairment charges at UBS Capital’s private equity investments and other financial investments were only partially offset by gains from disposals of financial investments, and the Klinik Hirslanden and Hyposwiss subsidiaries.
Expenses
Full-yearpersonnel expensesdropped by 7% to CHF 18,524 million reflecting much lower performance-related compensation expenses and lower salaries due to a reduction in headcount, especially in UBS PaineWebber and Business Banking Switzerland. The drop was further accentuated by lower recruitment,
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training and much lower contractor costs across the firm, reflecting our continued cost control initiatives. Finally, the result was helped by a weaker US dollar against the Swiss franc.
General and administrative expenses, at CHF 7,072 million, were down from CHF 7,631 million a year earlier. Strict cost control in all our businesses led to a drop in nearly all cost categories. The biggest declines were in telecommunication, IT, outsourcing and branding expenses. This was partially offset by higher legal and security provisions including a global settlement charge of CHF 111 million (USD 80 million) regarding equity research in the US.
At CHF 1,614 million in 2001,depreciation fell by 6% to CHF 1,521 million in 2002, mainly because of lower depreciation charges for machines and equipment.
Amortization of goodwill and other intangible assetsincreased from CHF 1,323 million in 2001 to CHF 2,460 million in 2002, due to the writedown of the PaineWebber brand name following our decision made in fourth quarter 2002 to move to a single brand.
We incurred ataxexpense of CHF 678 million in 2002, down from CHF 1,401 million in 2001. This corresponds to an effective tax rate of 15% in 2002. Adjusted for significant financial events, our 2002 tax expense of CHF 917 million reflects an effective tax rate of 16.5%, well below 2001’s rate of 21%. The decline is mainly driven by significantly lower progressive tax rates in Switzerland, the ability to benefit from tax loss carry forwards in the US and UK and a higher proportion of earnings generated in lower tax jurisdictions.
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Business Group Results
in 2002
UBS Wealth | ||||||||||||||||||||||||||||||||||||||||||||||||
Management & | UBS Global | |||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Business Banking | Asset Management | UBS Warburg | UBS PaineWebber | Corporate Center | UBS Group | ||||||||||||||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | ||||||||||||||||||||||||||||||||||||
Income | 12,773 | 13,488 | 1,953 | 2,218 | 12,498 | 14,715 | 5,561 | 6,391 | 1,315 | 800 | 34,100 | 37,612 | ||||||||||||||||||||||||||||||||||||
Credit loss (expense) / recovery 1 | (314 | ) | (604 | ) | 0 | 0 | (128 | ) | (112 | ) | (13 | ) | (18 | ) | 249 | 236 | (206 | ) | (498 | ) | ||||||||||||||||||||||||||||
Total operating income | 12,459 | 12,884 | 1,953 | 2,218 | 12,370 | 14,603 | 5,548 | 6,373 | 1,564 | 1,036 | 33,894 | 37,114 | ||||||||||||||||||||||||||||||||||||
Personnel expenses | 4,810 | 4,825 | 946 | 1,038 | 7,878 | 8,354 | 4,245 | 5,019 | 645 | 592 | 18,524 | 19,828 | ||||||||||||||||||||||||||||||||||||
General and administrative expenses | 2,317 | 2,434 | 513 | 569 | 2,378 | 2,650 | 1,263 | 1,441 | 601 | 537 | 7,072 | 7,631 | ||||||||||||||||||||||||||||||||||||
Depreciation | 480 | 616 | 37 | 46 | 382 | 456 | 149 | 124 | 473 | 372 | 1,521 | 1,614 | ||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 270 | 286 | 364 | 402 | 457 | 502 | 24 | 24 | 1,226 | 1,323 | ||||||||||||||||||||||||||||||||||||
Total operating expenses | 7,718 | 7,984 | 1,766 | 1,939 | 11,002 | 11,862 | 6,114 | 7,086 | 1,743 | 1,525 | 28,343 | 30,396 | ||||||||||||||||||||||||||||||||||||
Business Group performance before tax and excluding significant financial events | 4,741 | 4,900 | 187 | 279 | 1,368 | 2,741 | (566 | ) | (713 | ) | (179 | ) | (489 | ) | 5,551 | 6,718 | ||||||||||||||||||||||||||||||||
Significant financial events | 155 | 0 | 0 | 0 | 0 | 0 | (1,234 | ) | 0 | 72 | 0 | (1,007 | ) | 0 | ||||||||||||||||||||||||||||||||||
Tax expense | 678 | 1,401 | ||||||||||||||||||||||||||||||||||||||||||||||
Net profit before minority interests | 3,866 | 5,317 | ||||||||||||||||||||||||||||||||||||||||||||||
Minority interests | (331 | ) | (344 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net profit | 3,535 | 4,973 | ||||||||||||||||||||||||||||||||||||||||||||||
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2002 Report
UBS Wealth Management & Business Banking
Private Banking’s full-year 2002 pre-tax profit, at CHF 2,774 million, fell 19% from 2001 due to the steep decline in asset-based revenues which was not fully compensated by cost reductions as we continue to invest in our European wealth-management initiative. Personnel as well as general and administrative expenses increased due to this strategic initiative.
Business Banking Switzerland’s full-year pre-tax profit was a record CHF 1,967 million, up 32% from 2001, achieved despite declining revenues in difficult market conditions, and evidence both of the continued tight management of our cost base and of lower credit loss expenses. Operating expenses at their lowest level since 1999, fell 13% on another decline in general and administrative expenses and a continued drop in personnel expenses, which decreased because of lower performance-related compensation.
UBS Global Asset Management
UBS Global Asset Management reported full-year 2002 pre-tax profit of CHF 187 million, a decrease of 33% from 2001’s pre-tax profit of CHF 279 million. The declines in equity markets experienced throughout 2002 resulted in lower invested asset levels and subsequently, lower asset-based revenues. These developments were partially offset by ongoing initiatives to control costs. Over the year, personnel expenses decreased due to a decline in incentive compensation while general and administrative expenses fell due to lower IT and premises expenditures.
UBS Warburg
UBS Warburg’s Corporate and Institutional Clients business unit reported 2002 pre-tax profit of CHF 3,129 million, a decrease of 17% from 2001, reflecting difficult economic conditions, particularly for the investment banking and equities businesses. This was partially offset by the strong result of our Fixed Income, Rates and Currencies business. Over the full-year, overall expenses dropped by 7% reflecting lower personnel expenses driven by a reduction in incentive compensation as well as the success of our continued cost containment initiatives.
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2002 Report
Total operating expenses dropped by 7% from 2001 to CHF 10,843 million in 2002. The underlying decline in 2002 is even more marked than these figures would suggest as the 2002 results include a provision of CHF 90 million (USD 65 million) for the US equity research settlement and a CHF 72 million charge for the restructuring of our energy trading business. The significant underlying reduction of 9% from last year’s expense levels reflects the continuing success of our cost containment initiatives.
UBS Capital posted a pre-tax loss in 2002 of CHF 1,761 million, CHF 727 million worse than in 2001. Total operating losses for 2002 were CHF 1,602 million, compared to CHF 872 million in 2001. Challenging economic conditions have led to deteriorating valuations in all markets and industries. The level of writedowns in the portfolio has therefore been high and there have been few opportunities to make any significant divestments in 2002.
UBS PaineWebber
UBS PaineWebber reported a pre-tax loss of CHF 566 million in 2002 compared to a loss of CHF 713 million in 2001. Performance before tax and acquisition costs showed a profit of CHF 632 million in 2002 compared to CHF 693 million a year earlier. Excluding the effects of currency movements, 2002 performance before tax and acquisition costs was 3% higher than 2001.
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Sources of Information about UBS
This Annual Review provides an overview of UBS and its financial results for the year 2002. You can find out more about UBS from the sources shown below.
Publications
This Annual Review is available in English, German, French, Italian and Spanish. (SAP-R/80530-0301)
Handbook 2002/2003: Our Handbook contains a detailed description of UBS, its strategy, organization and the businesses that make it up. It is available in English and German. (SAP-R/80532-0301)
Financial Report 2002: Our Financial Report contains our audited Financial Statements for the year 2002 and related detailed analysis. It is available in English and German. (SAP-R/80531-0301)
Quarterly reports: We provide detailed quarterly financial reporting and analysis, including comment on the progress of our businesses and key strategic initiatives. These quarterly reports are available in English.
How to order reports: Each of these reports is available on the internet at: www.ubs.com/investors, in the “Financials” section. Alternatively, printed copies can be ordered, quoting the SAP number and the language preference where applicable, from UBS AG, Information Center, CA50-XMB, P.O. Box, CH-8098 Zurich, Switzerland.
E-information tools for investors
Website: Our Investors and Analysts website at www.ubs.com/ investors offers a wide range of information about UBS, including our financial reporting, media releases, UBS share price graphs and data, corporate calendar and dividend information and copies of recent presentations given by members of senior management to investors at external conferences. Our internet-based information is available in English and German, with some sections in French and Italian.
Messenger service: On the Investors and Analysts website, you can register to receive news alerts about UBS via Short Messaging System (SMS) or e-mail. Messages are sent in either English or German and users are able to state their preferences for the theme of the alerts received.
Results presentations: Senior management present UBS’s results every quarter. These presentations are broadcast live over the internet, and can be downloaded on demand. The most recent results webcasts can also be found in the “Financials” section of our Investors and Analysts website.
UBS and the environment: The Handbook contains a summary of UBS environmental policies as part of the Corporate Responsibility section. More detailed information is available at www.ubs.com/environment.
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2002 Report
Form 20-F and other submissions to the
US Securities and Exchange Commission
We file periodic reports and submit 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. Our Form 20-F filing is structured as a “wrap-around” document. Most sections of the filing are satisfied by referring to parts of the Handbook or to parts of the Financial Report 2002. However, there is a small amount of additional information in the Form 20-F which is not presented elsewhere, and is particularly targeted at readers in the US. You are encouraged to refer to this additional disclosure.
You may read and copy any document that we file with the SEC on the SEC’s website, www.sec.gov, or at the SEC’s public reference room at 450 Fifth Street NW, Washington, DC, 20549. Please call the SEC at 1-800-SEC-0330 (in the US) or at +1 202 942 8088 (outside the US) for further information on the operation of its public reference room. You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005 and the American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006. 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 following 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 addresses and telephone | numbers 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 the latter’s majority-owned virt-x trading platform. UBS shares are also listed on the New York Stock Exchange and the Tokyo Stock Exchange. |
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Switchboards For all general queries | Zurich London New York Hong Kong | +41 1 234 1111 +44 20 7568 0000 +1 212 821 3000 +852 2971 8888 | ||||
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UBS Investor Relations Our Investor Relations team supports institutional, professional and retail investors from offices in Zurich and New York. www.ubs.com/investors | Zurich Hotline: Christian Gruetter Mark Hengel Catherine Lybrook Oliver Lee Fax | +41 1 234 4100 +41 1 234 4360 +41 1 234 8439 +41 1 234 2281 +41 1 234 2733 +41 1 234 3415 | UBS AG Investor Relations G41B P.O. Box CH-8098 Zurich, Switzerland | |||
New York Hotline: Richard Feder Christopher McNamee Fax | +1 212 713 3641 +1 212 713 6142 +1 212 713 3091 +1 212 713 1381 | UBS Americas Inc. Investor Relations 135 W. 50th Street, 9th Floor New York, NY 10020, USA | ||||
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UBS Group Media Relations Our Group Media Relations team supports global media and journalist from offices in Zurich, London, New York and Hong Kong | Zurich London New York Hong Kong | +41 1 234 8500 +44 20 7567 4714 +1 212 713 8391 +852 2971 8200 | sh-gpr@ubs.com sh-mr-london@ubsw.com sh-mediarelations-ny@ubsw.com sh-mediarelations-ap@ubs.com | |||
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www.ubs.com/media | ||||||
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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) | Hotline Fax | +41 1 235 6202 +41 1 235 3154 | UBS AG Shareholder Services — GUMV P.O. Box CH-8098 Zurich, Switzerland sh-shareholder-service@ubs.com | |||
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US Transfer Agent For all Global Registered Share related queries in the USA | calls from the US calls outside the US | +1 866 541 9689 +1 201 329 8451 | c/o Mellon Investor Services Overpeck Centre 85 Challenger Road Ridgefield Park, NJ 07660, USA | |||
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www.melloninvestor.com | shrrelations@melloninvestor.com |
UBS listed its Global Registered Shares on the New York Stock Exchange on 16 May 2000. Prior to that date UBS operated an ADR program. See the Frequently Asked Questions (FAQs) section at www.ubs.com/investors for further details about the UBS share. |
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The Concept: Gardens Site of Reversible Destiny-Yoro Park (Gifu, Japan) Located in a section of Yoro Park, the Site of Reversible Destiny, which opened in 1995, is an innovative park and architectural “intervention” conceived by artists Shusaku Arakawa and Madeline Gins. Their intention was to illustrate the concept of deconstruction by using the traditional idea of a garden as a labyrinth for a series of physical meetings. Visitors are given directions for use when entering — most of which are rather original and unconventional. The site’s basic structure is a large oval basin with various archipelagos of different sizes overlapped by pairs of hemispherical craters and mounds linked by a number of maze-like winding paths. La Geria (Lanzarote, Canary Islands, Spain) La Geria, known as the “wine road” of Lanzarote, passes through the mountains of Chupaderos and Guadilama. It is directly bordered by lava fields and vineyards, a unique feature of the overall landscape. The grapes, which produce Malvasia wine, grow on vines that are protected from winds by small curving walls. Tofuku-ji (Kyoto, Japan) Laid out in 1939 by Mirei Shigemori, a famous garden builder, the gardens were arranged in four quarters around the Hojo, one of the main buildings in the Tofuku-ji Temple. Originally founded in 1235 and reconstructed in 1890, Tofuku-ji was the head temple of the Rinzai sect of Zen Buddhism. When he designed the garden, Shigemori’s intention was to combine the simplicity of Zen during the Kamakura period with the abstract constructions of modern art. Barnsley House Garden (Cirencester, Gloucestershire, UK) Designed in the early 1950s by Rosemary Verey (OBE), a leading exponent of the classic English Arts and Crafts country garden style, Barnsley House Garden is a four and a half acre garden bounded on three sides by a high 18th century wall which divides the garden into different areas of interest. Set around Verey’s 17th century home, the garden also includes a gothic summer house, a classical temple, a sculpture by Simon Verity and furniture by Charles Verey. Features of the garden itself include a knot garden that was laid out in 1975, a herb garden and the renowned Laburnum Walk (with yellow laburnum falling onto purple alliums). Royal Botanic Gardens (Peradeniya, Sri Lanka) One of the four colonial botanic gardens of the British Empire, Peradeniya’s history goes back to 1821. The basic idea behind the founding of the garden in the 19th century was to transfer the concept of an English landscape garden to a tropical environment. Despite that, one part of the garden was left to achieve a “tame jungle” effect, whereby branches are left uncut, and dead tree trunks left to lie. |
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Cautionary statement regarding
forward-looking statements
Imprint
Languages: English, German, French, Italian, Spanish
SAP-R/3 80530E-0301
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UBS AG
P.O. Box, CH-8098 Zurich
P.O. Box, CH-4002 Basel
www.ubs.com
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INCORPORATION BY REFERENCE
This Form 6-K is hereby incorporated by reference into each prospectus currently outstanding under the registration statements of UBS AG on Form F-1 (Registration Numbers 333-52832; 333-52832-01 to –03; 333-46216; 333-46216-01 and –02; and 333-46930), Form F-3 (Registration Numbers 333-64844; 333-62448; 333-62448-01 to –04) and Form S-8 (Registration Numbers 333-57878; 333-50320; 333-49216; 333-49214; 333-49212; and 333-49210), and the registration statement of Corporate Asset Backed Corporation on Form S-3 (Registration Number 333-61522), and into any outstanding offering circular that incorporates by reference any Forms 6-K of UBS AG that are incorporated into its registration statements filed with the SEC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UBS AG | ||||||
By: | /s/ Robert Dinerstein | |||||
Name: Title | Robert Dinerstein Managing Director | |||||
By: | /s/ Robert Mills | |||||
Title: | Name: Robert Mills Managing Director | |||||
Date: March 21, 2003 |