Shareholders' Letter

Dear Shareholders,

Marcel Ospel & Peter Wuffli

With our best quarterly performance on record, the year has started extremely well. Net profit was CHF 2,423 million, double our result in first quarter 2003 (and up 82% before goodwill). Revenues rose 33%. Before goodwill, earnings per share increased 95% to CHF 2.46 while return on equity was at 31.9% – record quarterly levels for both.

This outstanding performance is naturally a reflection of the excellent trading conditions in major financial markets and the positive effect of strong market valuations on invested assets. We also believe, however, that it shows the payoff from investing in our businesses somewhat countercyclically over the past few years – positioning ourselves for exactly these kinds of opportunities.

All our businesses reported both revenue and pre-tax profit gains compared to a year ago. Our Investment Bank reported a 115% gain in pre-tax profit, with results driven by the best fixed income and second best equities performances since 2000. Our wealth management and institutional asset management businesses profited as financial markets attracted more frequent investor activity. Strong market valuations also helped asset-based fees. Our Wealth Management and Global Asset Management units reported their best results in three years, and the Wealth Management USA business reported its best operating performance since PaineWebber became part of UBS.

At the same time, we have not eased our cost discipline which was so critical in tougher revenue environments. Total operating expenses, up 17% compared to first quarter 2003, rose far less than revenues, with the increase mainly reflecting higher accruals for performance-related compensation.

Net new money flows are the best indicator of growth in our wealth and asset management businesses. This quarter saw clients add CHF 35 billion to their investments with UBS. Private investors added a record CHF 19 billion to our wealth management businesses worldwide, compared to CHF 11 billion a year earlier. Inflows from our institutional asset management clients reached a record high of CHF 10 billion. Our independent private banks and GAM together recorded an inflow of CHF 6 billion.

Increasing our market risk limits allowed us to take advantage of the trading conditions we saw in first quarter, particularly in fixed income where the high level of client activity, along with the levels of rates and steepness of the yield curve remained attractive. Set against a 34% increase in average Value at Risk compared to a year earlier, total income from trading activities rose 33%.

UBS has all that it needs to grow. One of our major investments is in our brand, which this quarter was reflected in a new global advertising campaign, launched in February. Our advertising investment concentrates on key markets where we need to further build familiarity with our brand in order to achieve our growth targets – particularly the US. The campaign – themed „You and us” – shows how UBS delivers global financial resources through personal client relationships based on intimate understanding.

Selective, bolt-on acquisitions will continue to be an element of our growth strategy. The two acquisitions we have made so far this year – Laing & Cruickshank and Scott Goodman Harris – have helped us become one of the top-tier providers in the UK wealth management market.

Expanding our core businesses also implies that we will continue to divest non-core businesses and participations. Our current stake in Motor-Columbus (a Swiss holding company whose most significant asset is a majority ownership interest in Atel, a Swiss electricity company) is no exception. At the beginning of April, we announced the acquisition of an additional 20% stake in Motor-Columbus from the German utility RWE, temporarily raising our participation to 55.6%, allowing us to protect the value of our investment and putting us in a strong position, as majority shareholder, to divest it in the future when the opportunity arises.

Outlook – This quarter was one of those rare periods when conditions for every one of our businesses were simultaneously excellent. As the year progresses, such a positive combination of circumstances is not likely to continue, especially given the natural seasonality that boosts the first quarter in some units. That said, with our businesses firing on all cylinders and the growth indicators all showing positive, we have every reason to feel optimistic about UBS’s future.

4 May 2004

UBS AG