New alternative investment business

In late June, we announced that towards the end of the year we would launch a new alternative investment management business, Dillon Read Capital Management, which will be part of our Global Asset Management Business Group.

The core of the business, to be headed by John Costas, will be formed by transferring the principal finance and commercial real estate teams from our Investment Bank. Approximately 120 staff, mainly based in New York, will move from the fixed income, rates and currencies area of our Investment Bank to the new unit. Subsequently, the trading strategies managed by the team will be opened up to co-investment from large, sophisticated clients, and supplemented by further new offerings. This will allow us to satisfy the increasing demand from these clients for long-term alternative investment opportunities provided by strong industry leaders. It will create a new asset management revenue stream from what has until now been a purely in-house trading activity. We will retain our current direct investment in the relevant trading portfolios with the Investment Bank. Control of the risk on this and any incremental future investments will be subject to our usual processes. Returns achieved on this capital will remain with the Investment Bank, which, like other investors, will pay a management fee to Dillon Read Capital Management. This new business is another example of leveraging skill from the Investment Bank into a broader client offering. In particular, it will be an ideal complement to the other alternative asset management businesses at UBS.

As a result of moving to Dillon Read Capital Management, John Costas will leave UBS’s Group Executive Board at the end of 2005, remaining non-executive Chairman of the Investment Bank. Huw Jenkins, previously head of the equities business, has succeeded John Costas as CEO of UBS’s Investment Bank. He became a member of the Group Executive Board on 1 July 2005.