Letter to Shareholders

Dear Shareholders,

Marcel Ospel and Peter Wuffli

Last year was an extremely successful one for UBS – in financial terms and in how we grew our businesses. While it is just the two of us who write to you on behalf of the firm, it is in fact our 67,000 people around the world who achieved this success, by delivering the best of what UBS can offer to our clients – day in and day out.

From a financial perspective, 2004 was a record year. Our net profit 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 last year, bringing the total assets they have invested with us to CHF 2.25 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 total revenues. Upbeat market conditions at both the start and end of the year also encouraged strong activity levels in the securities markets, helping our trading revenues.

Costs remain under strict control, increasing less than revenues, and we ended 2004 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 finished the year with an excellent 28% pregoodwill return on equity,with earnings per share34%higher than in 2003.

We want to share UBS’s success. For our shareholders, the Board of Directors is recommending a dividend of CHF 3.00 per share to the Annual General Meeting (AGM) – a 15% increase. 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.

We also paid our employees more on average in variable compensation, with bonuses increasing in all our businesses, reflecting the strong contribution of our staff to growing our revenues last year.

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 that helped us to gain critical mass. As a result, for example, we now have top-five positions in both Germany and the UK. In total, last year we announced acquisitions of around CHF 40 billion of invested assets, paying approximately CHF 1 billion for them. 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 ended on 5 March 2005, we 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. The degree to which we use this limit will again depend on opportunities we see for making further investments in the growth of our businesses.

As a firm, we have to grow by building lasting and meaningful relationships. From our long experience in advising clients on financial matters, we know that a meaningful relationship is a personal one. In short, between you and us. Just as we show in our advertising. To achieve that, we like to think of each interaction with clients, shareholders, employees and people living in the communities where we work as an individual relationship. We hope this will bring open-mindedness, an entrepreneurial attitude and thoughtfulness – despite our size and complexity.

This means we want to be open to other views. In our Annual Review this year, six influential personalities discuss topics that matter to us – the future of our industry and financial markets, how perceptions of financial risk have changed and continue to change, entrepreneurial leadership and the positive impact corporations can have. We enjoyed listening to them – to their views, opinions and priorities.We hope you will find them interesting – even inspiring.