Capital Management

We remain committed to being one of the best-capitalized financial services firms in the world and will therefore continue to manage our balance sheet prudently. This clear focus and our ongoing strong cash flow generation means that we have been able to keep our BIS Tier 1 ratio high while continuing our share buyback programs, which have now been running for four years.

Risk-weighted assets rose 1% to CHF 266.5 billion on 30 June 2004 from CHF 262.7 billion on 31 March 2004. The increase was driven by higher capital requirements from our loan portfolio, especially at the Investment Bank, as well as an increase in commitments. This was partially offset by lower requirements for market risk (VaR). BIS Tier 1 capital dropped a slight CHF 0.1 billion to CHF 31.6 billion on 30 June 2004 from CHF 31.7 billion on 31 March 2004, as our ongoing share buyback program offset retained earnings. This resulted in a decrease of our BIS Tier 1 ratio to 11.8% at the end of June 2004 from 12.1% on 31 March 2004.

Successful launch for UBS domestic CHF bond

For capital management purposes, we launched a 10-year, CHF 300 million subordinated bond issue on 1 June 2004 (with an increase of CHF 100 million on 7 July). Our issue was fully subscribed. We issue subordinated bonds which count as BIS Tier 2 capital at regular intervals to replace previous issues as they mature and maintain total capital levels. We choose the type, term, and currency of bond according to market conditions and the firm’s funding needs.

Buyback program

Following the approval of the Annual General Meeting on 15 April 2004, 59,482,000 shares bought back under the 2003 program for a total value of CHF 4.5 billion were irrevocably canceled on 30 June 2004.

In light of our continued strong capitalization, we launched our sixth consecutive buyback program on 8 March 2004. It enables us to repurchase shares for cancelation for a maximum value of CHF 6 billion or approximately 5.4% of total share capital. The program, approved by the shareholders at the Annual General Meeting, will again run for one year.

Under the new program, we repurchased 14,905,094 shares in second quarter 2004 at an average price of CHF 91.72 representing a total cost of CHF 1,367 million.

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