UBS - UBS results

Results

In 2005, net profit attributable to UBS shareholders was 14,029 million, with CHF 512 million coming from industrial holdings. This also includes a net gain of CHF 3,705 million from the sale of Private Banks & GAM.

Our financial businesses contributed CHF 13,517 million to attributable profit, of which CHF 9,442 million was from continuing operations. This was an improvement of 18% (pre-goodwill) from CHF 8,003 million in 2004. Higher revenues in practically all businesses drove the increase, clearly outpacing growth in costs. Asset-based revenues showed particular strength, reflecting rising market levels as well as strong inflows into our wealth and asset management businesses. We also saw a strong increase in brokerage, corporate finance and underwriting fees. Overall, net fee and commission income now contributes 54% to total operating income. Income from trading activities reached a record high as well, fueled by improved market opportunities, particularly in second half 2005. Revenues from interest margin products increased, reflecting the success and growth of lending activities to wealthy private clients worldwide. We also reported record credit loss recoveries.

Shareholder distribution

The Board of Directors will recommend a total payout of CHF 3.80 per share for the 2005 financial year at the Annual General Meeting (AGM) on 19 April 2006 in Basel. The payout comprises a regular dividend of CHF 3.20 and a one-time par value repayment of CHF 0.60 per share. The repayment will allow our shareholders to benefit from the gain realized from the sale of Private Banks & GAM. Our dividend for the 2004 financial year (paid in 2005) was CHF 3.00 a share, up from the CHF 2.60 paid for the 2003 financial year.

Capital management in 2006

At the AGM on 19 April in Basel, the Board of Directors will propose a series of corporate actions impacting the capital management of UBS.

Share split 2-for-1

The Board will recommend a 2-for-1 share split. If approved by shareholders, this will become effective on 10 July 2006. Combined with the par value repayment, this will reduce the par value of each share to CHF 0.10. UBS believes this will improve trading and liquidity of its shares, and bring the price more into line with other major companies whose shares are traded on international financial markets.

Creation of conditional capital

The Board will ask the AGM to approve the creation of conditional capital of a maximum of 75 million shares (150 million after the split) to fund our employee share option programs. Currently, UBS holds treasury shares to cover the need to deliver shares at the point when options are exercised. If approved by shareholders, the creation of conditional capital will help UBS to avoid substantial holdings of own shares over extended periods and add transparency to its capital management. Neither UBS’s use of options as part of its overall compensation strategy, nor its disciplined approach to capital management, will change.

New share buyback program for 2006 / 2007

Given our continued strong cash flow generation, the Board of Directors will propose a new share buyback program for capital reduction. This will be the eighth consecutive second line buyback program. It will start on 8 March 2006 and will allow for a maximum of CHF 5 billion in shares to be repurchased. The program will run until 7 March 2007.

Balance sheet

UBS’s total assets stood at CHF 2,060 billion on 31 December 2005, up from CHF 1,737 billion on 31 December 2004. The increase in total assets was largely due to currency movements against the Swiss franc (mainly the 15% appreciation of the US dollar spot rate). Other factors contributing to the rise were the growth in collateral trading, the trading portfolio, positive replacement values and the loan book. Total liabilities rose due to higher borrowing (up CHF 174 billion), collateral trading liabilities (up CHF 72 billion) and negative replacement values.

At CHF 44.3 billion on 31 December 2005, shareholders’ equity increased by CHF 10.4 billion from 2004. The increase reflects the net profit of CHF 14.0 billion, which includes the gain on sale of Private Banks & GAM and the strengthening of the US dollar against the Swiss franc, partially offset by dividend payments, and share repurchases.

Income statement

	For the year ended
CHF million, except per share data	31.12.05	31.12.04	% change

Continuing operations
Interest income	59,286	39,228	51
Interest expense	(49,758)	(27,484)	81
Net interest income	9,528	11,744	(19)
Credit loss (expense) / recovery	375	241	56
Net interest income after credit loss expense	9,903	11,985	(17)
Net fee and commission income	21,436	18,506	16
Net trading income	7,996	4,902	63
Other income	1,125	932	21
Revenues from industrial holdings	10,515	6,086	73
Total operating income	50,975	42,411	20
Personnel expenses	21,049	18,612	13
General and administrative expenses	7,047	7,160	(2)
Depreciation of property and equipment	1,493	1,477	1
Amortization of goodwill	0	653	(100)
Amortization of other intangible assets	334	337	(1)
Goods and materials purchased	8,003	3,885	106
Total operating expenses	37,926	32,124	18
Operating profit from continuing operations before tax	13,049	10,287	27
Tax expense	2,549	2,224	15
Net profit from continuing operations	10,500	8,063	30

Discontinued operations
Profit from discontinued operations before tax	4,688	536	775
Tax expense	498	129	286
Net profit from discontinued operations	4,190	407	929

Net profit	14,690	8,470	73
Net profit attributable to minority interests	661	454	46
from continuing operations	656	454	44
from discontinued operations	5	0
Net profit attributable to UBS shareholders	14,029	8,016	75
from continuing operations	9,844	7,609	29
from discontinued operations	4,185	407	928

Earnings per share
Basic earnings per share (CHF)	13.93	7.78	79
from continuing operations	9.78	7.39	32
from discontinued operations	4.15	0.39	964
Diluted earnings per share (CHF)	13.36	7.40	81
from continuing operations	9.39	7.04	33
from discontinued operations	3.97	0.36

Balance sheet

CHF million	31.12.05	31.12.04	% change

Assets
Cash and balances with central banks	5,359	6,036	(11)
Due from banks	33,644	35,419	(5)
Cash collateral on securities borrowed	300,331	220,242	36
Reverse repurchase agreements	404,432	357,164	13
Trading portfolio assets	499,297	389,487	28
Trading portfolio assets pledged as collateral	154,759	159,115	(3)
Positive replacement values	333,782	284,577	17
Financial assets designated at fair value	1,153	653	77
Loans	269,969	232,167	16
Financial investments	6,551	4,188	56
Accrued income and prepaid expenses	8,918	6,309	41
Investments in associates	2,956	2,675	11
Property and equipment	9,423	9,510	(1)
Goodwill and other intangible assets	13,486	12,201	11
Other assets	16,190	17,375	(7)
Total assets	2,060,250	1,737,118	19

Liabilities
Due to banks	124,328	120,026	4
Cash collateral on securities lent	77,267	61,545	26
Repurchase agreements	478,508	422,587	13
Trading portfolio liabilities	188,631	171,033	10
Negative replacement values	337,663	303,712	11
Financial liabilities designated at fair value	117,401	65,756	79
Due to customers	451,533	376,076	20
Accrued expenses and deferred income	18,392	15,040	22
Debt issued	160,710	117,856	36
Other liabilities	53,874	44,120	22
Total liabilities	2,008,307	1,697,751	18

Equity
Share capital	871	901	(3)
Share premium	9,992	9,231	8
Net gains / (losses) not recognized in the income statement, net of tax	(182)	(2,081)	91
Revaluation reserve from step acquisitions, net of tax	101	90	12
Retained earnings	44,414	37,001	20
Equity classified as obligation to purchase own shares	(133)	(96)	(39)
Treasury shares	(10,739)	(11,105)	3
Equity attributable to UBS shareholders	44,324	33,941	31
Minority interests	7,619	5,426	40
Total equity	51,943	39,367	32
Total liabilities and equity	2,060,250	1,737,118	19

Letter from Group Auditors

As auditors of the group we have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America) as well as Swiss Auditing Standards, the consolidated balance sheets of UBS AG as of 31 December 2005 and 2004, and the related consolidated statements of income, changes in equity and cash flows for each of the three years in the period ended 31 December 2005 and the notes thereto, from which the summarised consolidated financial statements were derived. In our report dated 2 March 2006 (see UBS Financial Report, page 73), we expressed an unqualified opinion on those consolidated financial statements which are prepared in accordance with International Financial Reporting Standards.

In our opinion, the summarised consolidated financial statements on pages 37 to 38 of the Annual Review are consistent, in all material respects, with the consolidated financial statements from which they were derived and on which we expressed an unqualified opinion.

For a more comprehensive understanding of the group’s financial position and the results of its operations for the period and of the scope of our audit, the summarised consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived and our audit report thereon.

Basel, 2 March 2006

Ernst & Young Ltd

Andrew McIntyre | Chartered Accountant Dr. Andreas Blumer | Swiss Certified Accountant in charge of the audit in charge of the audit

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