Shareholders' Letter

Marcel Ospel & Peter Wuffli

Dear Shareholders,

We are pleased to be able to report that 2004 has been a record year for UBS. Our net profit for the year stood at CHF 8,089 million, with CHF 45 million coming from our industrial holdings. Our financial businesses contributed the remaining CHF 8,044 million, up 29% from a year earlier despite the falling US dollar. Our clients entrusted us with a total of CHF 88.9 billion in net new money this year, bringing total invested assets to CHF 2.3 trillion. In turn this drove our asset-based revenues 19% higher. This, combined with higher income from our investment banking business and private client transactions, pushed fee and commission income up to 52% of revenues. Upbeat market conditions at both the start and end of the year encouraged strong activity levels in the securities markets, helping our trading revenues.

Costs remain under strict control, increasing less than revenues, and we end the year with a 3 percentage point improvement in our pre-goodwill cost / income ratio – now just a shade above 70%. Our commitment to capital discipline means that we finish the year with an excellent 28% pre-goodwill return on equity, with earnings per share 34% higher than in 2003.

When we look at fourth quarter, net profit stood at CHF 2,021 million, with CHF 1,993 million coming from our financial businesses (up 10% from the same quarter a year earlier). This strong result, a record for a fourth quarter, was driven by an excellent performance in the securities businesses and the continued strength of all our wealth and asset management businesses. Operating income in our financial businesses was up 7% – more than outpacing a 4% increase in costs. Asset-based fees rose alongside trading revenues, which were particularly strong in the equities and foreign exchange markets. Our result was further helped by another quarter of credit loss recoveries.

Net new money inflows in fourth quarter totaled CHF 16.4 billion. Our wealth management businesses worldwide contributed CHF 13.3 billion, with strong inflows from Asian, US and onshore European clients.

We are delivering on our growth promise. Throughout 2004, we demonstrated our strength in growing our businesses – both organically and through targeted acquisitions. In the increasingly important Asian time zone, our revenues rose 24% in 2004. Our Investment Bank expanded its competitive position in the US in key areas such as prime brokerage and equities sales and trading. In wealth management, we made several small acquisitions. In total, we announced acquisitions of around CHF 40 billion of invested assets in key wealth management markets, paying approximately CHF 1 billion in total. The integration of these franchises is proceeding smoothly; indeed, completing such transactions is one of our strengths.

These “bolt-on” acquisitions, combined with our investments in growing our business, have resulted in a somewhat reduced level of share repurchases this year. In our current buyback program, which ends on 5 March 2005, we have bought back a total value of approximately CHF 3.5 billion. Attractive opportunities for investment in the growth of our businesses will always take first priority. But, in their absence, we will continue to return any excess capital to you, our shareholders, and buybacks will remain an important way of doing so.

Next year’s buyback program, commencing in March, will have a maximum limit of CHF 5 billion – a limit, not necessarily a target.

The Board of Directors will recommend a dividend of CHF 3.00 per share at the Annual General Meeting (AGM) on 21 April 2005 – a 15% increase over the CHF 2.60 paid out last year. Including par value repayments, cash dividends and share buybacks, we have distributed a total of CHF 32.1 billion to shareholders since the start of 2000, when we began buying back shares for cancellation. That represents an average total yield of approximately 6.6% per annum, and accounts for as much as 60% of the total cash flow our businesses generated over the period.

Outlook – A record result is always challenging to beat. As every year, our investment banking and securities business will have to contend with the somewhat unpredictable rise and fall of the world’s financial markets. But 2004 showed that our wealth and asset management businesses can provide both growth momentum and earnings quality, even if trading conditions fluctuate. We will continue re-investing in our growth businesses and expect 2005 to be the next exciting step on a journey we believe will be very rewarding for our long-term investors.


8 February 2005

UBS AG