Targets

Interactive Report

Performance Against Targets

Year-to-date, annualized	30.6.2004	31.3.2004	30.6.2003

RoE (%)
as reported ¹	26.5	29.2	15.1
before goodwill and adjusted for significant financial events ²	29.2	31.9	17.8

For the quarter ended	30.6.2004	31.3.2004	30.6.2003

Basic EPS (CHF)
as reported ³	1.85	2.25	1.35
before goodwill and adjusted for significant financial events ⁴	2.06	2.46	1.56


Cost / income ratio (%)
as reported ⁵	73.7	70.0	75.6
before goodwill and adjusted for significant financial events ⁶	71.2	67.8	74.2


Net new money, wealth management units (CHF billion) ^{7, 8}
Wealth Management	8.2	16.2	6.5
Wealth Management USA	2.2	2.8	3.9


Total	10.4	19.0	10.4

1 Net profit / average shareholders’ equity less dividends.
2 Net profit less the amortization of goodwill and other intangible assets and significant financial events (after-tax) / average shareholders’ equity less dividends.
3 Details of the EPS calculation can be found in Note 8 to the Financial Statements.
4 Net profit less the amortization of goodwill and other intangible assets and significant financial events (after-tax) /weighted average shares outstanding.
5 Operating expenses / operating income less credit loss expense or recovery.
6 Operating expenses less the amortization of goodwill and other intangible assets and significant financial events / operating income less credit loss expense or recovery and significant financial events.
7 Excludes interest and dividend income.

Invested Assets

	Quarter ended			% change from

CHF billion	30.6. 2004	31.3. 2004	30.6. 2003	31.3. 2004	30.6. 2003


UBS	2,231	2,238	2,091	0	7


Wealth Management & Business Banking
Wealth Management	750	737	691	2	9
Business Banking Switzerland	139	139	132	0	5


Global Asset Management
Institutional	338	335	297	1	14
Wholesale Intermediary	257	267	270	(4)	(5)


Investment Bank	1	4	3	(75)	(67)


Wealth Management USA	652	663	622	(2)	5


Corporate Center
Private Banks & GAM	94	93	76	1	24

Net New Money 1

	Quarter ended			Year to date

CHF billion	30.6. 2004	31.3. 2004	30.6. 2003	30.6. 2004	30.6. 2003


UBS	16.9	35.1	14.7	52.0	35.4


Wealth Management & Business Banking
Wealth Management	8.2	16.2	6.5	24.4	13.9
Business Banking Switzerland	1.0	1.0	0.6	2.0	2.3


Global Asset Management
Institutional	7.6	10.1	1.1	17.7	5.0
Wholesale Intermediary	(4.6)	(1.4)	1.3	(6.0)	4.7


Investment Bank	0.0	0.0	0.1	0.0	0.1


Wealth Management USA	2.2	2.8	3.9	5.0	7.6


Corporate Center
Private Banks & GAM	2.5	6.4	1.2	8.9	1.8

Results

This is our second best quarterly result since 2000 and follows last quarter’s record performance. Net profit was CHF 1,974 million in second quarter 2004, up 28% from CHF 1,537 million in the same quarter a year earlier. Before goodwill and excluding the CHF 2 million gain from the sale of our clearing subsidiary Correspondent Services Corporation (CSC), sold in second quarter 2003, net profit rose 24%. Our performance was driven by particularly strong asset-based income as equity markets continued to hold up. Revenues were up 6% (excluding the CSC gain, they rose 8%). The 6% drop in income from trading activities reflected a more difficult fixed income environment, but this decline was more than offset by a 12% increase in fee and commission income, again accounting for more than 50% of our total revenues. Asset-based revenues in our wealth and asset management businesses were particularly strong, with the level of their invested assets rising by 6% to CHF 2.0 trillion on 30 June 2004 from CHF 1.9 trillion twelve months earlier. This increase in the asset base was driven by the year-on-year recovery in equity markets as well as the CHF 68.4 billion inflow in net new money attracted during the last 12 months. Our Investment Bank also posted higher revenues, helped by a strong 15% improvement in our investment banking revenues from corporate clients, and a turnaround to profitable private equity results. We also posted an unusually high level of credit recoveries. Total costs rose 2% as general and administrative expenses increased due to the USD 100 million (CHF 128 million) penalty levied by the Federal Reserve (Fed) due to the mishandling of our banknote trading business, and higher operational provisions. Excluding these effects, underlying general and administrative expenses declined, reflecting our ongoing tight cost controls. Personnel, depreciation and amortization expenses all dropped compared to a year ago.

Annualized return on equity for the first six months of 2004 was 26.5%, compared to 15.1% a year earlier. Basic earnings per share were CHF 1.85 in second quarter 2004, against CHF 1.35 in the same quarter a year earlier. The cost / income ratio was 73.7% in second quarter 2004, down from 75.6% a year earlier.

UBS targets

UBS’s performance is reported in accordance with International Financial Reporting Standards (IFRS). Additionally, we provide comments and analysis on an adjusted basis which excludes from the reported amounts certain items we term significant financial events (SFEs). An additional adjustment we use in our results discussion is the exclusion of the amortization of goodwill and other acquired intangible assets.

These adjustments reflect our internal approach to analyzing our results and managing the company, in which SFE-adjusted figures before the amortization of goodwill and intangibles are used to assess performance against peers and to estimate future growth potential. In particular, our financial targets have been set in terms of adjusted results, excluding SFEs and the amortization of goodwill and intangibles. All the analysis provided in our internal management accounting is based on operational SFE-adjusted performance. This helps us to illustrate the underlying operational performance of our business, insulated from the impact of individual gain or loss items that are not relevant to our management’s business planning decisions. A policy approved by the Group Executive Board (GEB) defines which items are classified as SFEs.

We focus on four key performance targets, designed to deliver continually improving returns to our shareholders. These targets are evaluated on this adjusted basis.

Accordingly, before goodwill and adjusted for significant financial events:

For the first six months of 2004, our annualized return on equity was 29.2%, up from 17.8% in the same period a year ago and well above our target range of 15% to 20%. It reflects higher net profit combined with a lower average level of equity due to our continued buyback programs and generous dividend, outpacing retained earnings.
Basic earnings per share (EPS) – at its second highest level ever – increased by 32% to CHF 2.06 in second quarter 2004 from CHF 1.56 in the same quarter a year ago. The increase was driven by the sharp rise in net profit as well as the 6% reduction in average number of shares outstanding from our continuous repurchase program.
The cost/income ratio was 71.2% in second quarter 2004, an improvement from 74.2% in the same period last year. The improvement was driven by higher revenues in most of our businesses, especially wealth and asset management, as well as the high level of credit recoveries. This was partially offset by higher expenses due to the USD 100 million (CHF 128 million) banknotes-related fine and higher operational provisions.

Net new money inflows in our wealth management businesses remain very strong, although they were down from the exceptional levels of first quarter 2004. Inflows in second quarter 2004 totaled CHF 10.4 billion, down from CHF 19.0 billion in the previous quarter. The Wealth Management unit attracted CHF 8.2 billion in second quarter 2004, driven by another quarter of healthy inflows into our domestic European wealth management business, which attracted CHF 2.7 billion, as well as contributions from Asian clients. The inflow was lower than the record of CHF 16.2 billion achieved in first quarter 2004, when the market environment led to an exceptional burst of new investment activity. In our Wealth Management USA business, net new money was CHF 2.2 billion in second quarter 2004, down from CHF 2.8 billion in the previous quarter. The decline reflects the uncertain investor sentiment in the US wealth management market, especially at the beginning of the quarter.

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