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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20–F
(Mark One)
[ ] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2002 | ||
OR | ||
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to . | ||
Commission file number: 1-15060 |
UBS AG
(Exact Name of Registrant as Specified in Its Charter)
Switzerland
(Jurisdiction of Incorporation or Organization)
Bahnhofstrasse 45
CH-8098 Zurich, Switzerland
and
Aeschenvorstadt 1,
CH-4051 Basel, Switzerland
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Please see the following page.
Securities registered or to be registered pursuant to Section 12 (g) of the Act:
None.
Securities for which there is a reporting obligation pursuant to Section 15 (d) of the Act:
Please see the following page.
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Indicate the number of outstanding shares of each of the issuer’s classes of
capital or common stock as of 31 December 2002:
Ordinary shares, par value CHF 0.80 per share: 1,256,297,678 ordinary shares
(including 97,181,094 treasury shares)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] | No [ ] |
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 [ ] | Item 18 [X] |
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Securities registered or to be registered pursuant to Section 12(b) of the Act:
Name of each exchange on | ||
Title of each class | which registered | |
Ordinary Shares (par value of CHF 0.80 each) | New York Stock Exchange | |
7.25% Noncumulative Trust Preferred Securities | New York Stock Exchange | |
7.25% Noncumulative Company Preferred Securities | New York Stock Exchange* | |
Subordinated Guarantee of UBS AG with respect to | ||
Company Preferred Securities | New York Stock Exchange* | |
$80,000,000 BULs due April 10, 2003 | American Stock Exchange | |
$40,000,000 BULs due April 28, 2003 | American Stock Exchange | |
$32,000,000 BULs due May 16, 2003 | American Stock Exchange | |
$54,000,000 BULs due September 1, 2006 | American Stock Exchange | |
$4,500,000 BULs due October 17, 2006 | American Stock Exchange | |
$46,000,000 PPNs due May 4, 2005 | American Stock Exchange | |
$16,500,000 PPNs due June 3, 2005 | American Stock Exchange | |
$8,129,000 PPNs due November 3, 2005 | American Stock Exchange | |
$8,961,000 PPNs due December 5, 2005 | American Stock Exchange | |
$31,517,000 PPNs due November 5, 2007 | American Stock Exchange | |
$52,000,000 PPNs due November 7, 2007 | American Stock Exchange | |
$14,500,000 PPNs due December 7, 2007 | American Stock Exchange | |
$20,000,000 PPNs due February 7, 2008 | American Stock Exchange | |
$16,000,000 PPNs due February 28, 2008 | American Stock Exchange | |
$9,000,000 PPNs due April 25, 2009 | American Stock Exchange | |
$6,900,000 PPNs due May 29, 2009 | American Stock Exchange | |
$12,660,000 PPNs due September 8, 2010 | American Stock Exchange | |
$17,842,000 PPNs due October 7, 2011 | American Stock Exchange | |
$63,000,000 EASs due December 2, 2003 | American Stock Exchange | |
$35,000,000 EASs due January 15, 2004 | American Stock Exchange | |
$7,300,000 EASs due February 4, 2004 | American Stock Exchange | |
$6,800,000 EASs due March 3, 2004 | American Stock Exchange |
Securities registered or to be registered pursuant to Section12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section15(d)
of the Act:
8.622% Noncumulative Trust Preferred Securities
8.622% Noncumulative Company Preferred Securities
7.247% Noncumulative Trust Preferred Securities
7.247% Noncumulative Company Preferred Securities
Subordinated Guarantee of UBS AG with respect to Company Preferred Securities
$14,000,000 Equity Linked Notes due February 1, 2007
$4,976,000 Equity Linked Notes due June 20, 2007
$150,000,000 Variable Rate Credit Linked Notes due October 24, 2003
$1,667,000 12.5% GOALs due June 23, 2003
Guarantees with respect to certain securities of UBS Americas Inc.
* | Not for trading, but solely in connection with the registration of the corresponding Trust Preferred Securities. |
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CONTENTS
Page | |||||
Cautionary Statement Regarding Forward-Looking Statements | 1 | ||||
PART I | 3 | ||||
Item 1. Identity of Directors, Senior Management and Advisors | 3 | ||||
Item 2. Offer Statistics and Expected Timetable | 3 | ||||
Item 3. Key Information | 3 | ||||
Item 4. Information on the Company | 3 | ||||
Item 5. Operating and Financial Review and Prospects | 4 | ||||
Item 6. Directors, Senior Management and Employees | 5 | ||||
Item 7. Major Shareholders and Related Party Transactions | 5 | ||||
Item 8. Financial Information | 6 | ||||
Item 9. The Offer and Listing | 6 | ||||
Item 10. Additional Information | 8 | ||||
Item 11. Quantitative and Qualitative Disclosures About Market Risk | 11 | ||||
Item 12. Description of Securities Other than Equity Securities | 12 | ||||
PART II | 13 | ||||
Item 13. Defaults, Dividend Arrearages and Delinquencies | 13 | ||||
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds | 13 | ||||
Item 15. Controls and Procedures | 13 | ||||
Item 16. [Reserved] | 13 | ||||
Item 17. Financial Statements | 13 | ||||
Item 18. Financial Statements | 13 | ||||
Item 19. Exhibits | 13 | ||||
Signatures | 14 | ||||
Certifications under Section 302 of the Sarbanes-Oxley Act of 2002 | 15 | ||||
Index to Exhibits |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as the information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. The words “anticipate”, “believe”, “expect”, “estimate”, “intend”, “plan”, “should”, “could”, “may” and other similar expressions are used in connection with forward-looking statements. In this annual report, forward-looking statements may, without limitation, relate to:
• | The implementation of strategic initiatives, such as the implementation of the European wealth management strategy and our plans to continue to expand our corporate finance business; | ||
• | The development of revenues overall and within specific business areas, including the possibility of further losses in UBS Capital in 2003; | ||
• | The development of operating expenses; | ||
• | The anticipated level of capital expenditures and associated depreciation expense; | ||
• | The expected impact of the risks that affect UBS’s business, including the risk of loss resulting from the default of an obligor or counterparty; | ||
• | Expected credit losses based upon UBS’s credit review; and | ||
• | Other statements relating to UBS’s future business development and economic performance. |
There can be no assurance that forward-looking statements will approximate actual experience. Several important factors exist that could cause UBS’s actual results to differ materially from expected results as described in the forward-looking statements. Such factors include:
• | General economic conditions, including prevailing interest rates and performance of financial markets, which may affect demand for products and services and the value of our assets; | ||
• | Changes in UBS’s expenses associated with acquisitions and dispositions; | ||
• | General competitive factors, locally, nationally, regionally and globally; | ||
• | Industry consolidation and competition; | ||
• | Changes affecting the banking industry generally and UBS’s banking operations specifically, including asset quality; | ||
• | Developments in technology; | ||
• | Credit ratings and the financial position of obligors and counterparties; | ||
• | UBS’s ability to control risk in its businesses; | ||
• | Changes in tax laws in the countries in which UBS operates, which could adversely affect the tax advantages of certain of UBS’s products or subject it to increased taxation; | ||
• | Changes in accounting standards applicable to UBS, as more fully described below; |
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• | Changes in investor confidence in the future performance of financial markets, affecting the level of transactions they undertake, and hence the levels of transaction-based fees UBS earns; | ||
• | Changes in the market value of securities held by UBS’s clients, affecting the level of asset-based fees UBS can earn on the services it provides; and | ||
• | Changes in currency exchange rates, including the exchange rate for the Swiss franc into US dollars. |
UBS is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
The effect of future changes in accounting standards
Included in the Notes to the Financial Statements is a description of the expected effect of accounting standards that have been issued but have not yet been adopted, for both IFRS and US GAAP.
Although we believe that description includes all significant matters that have been approved by the IASB and the FASB, those standard-setting bodies have a large number of projects in process that could result in significant new accounting standards or significant changes to existing standards.
This increased level of activity includes normal ongoing development and efforts to improve the existing body of accounting standards, and also is in response to a number of perceived deficiencies in accounting standards exemplified by reported abuses by various companies.
We believe it is likely that several new accounting standards will be issued in the near future, and that those new standards could have a significant effect on our reported results of operations and financial position, but cannot predict the precise nature or amounts of any such changes.
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PART I
Item 1. Identity of Directors, Senior Management and Advisors.
Not required because this Form 20-F is filed as an annual report.
Item 2. Offer Statistics and Expected Timetable.
Not required because this Form 20-F is filed as an annual report.
Item 3. Key Information.
A—Selected Financial Data.
Please see pages 195 to 199 of the attached Financial Report 2002.
Ratio of Earnings to Fixed Charges
Please see page 199 of the attached Financial Report 2002, and Exhibit 7 to this Form 20-F.
B—Capitalization and Indebtedness.
Not required because this Form 20-F is filed as an annual report.
C—Reasons for the Offer and Use of Proceeds.
Not required because this Form 20-F is filed as an annual report.
D—Risk Factors.
Please see pages 16 and 17 of the attached Financial Report 2002
Item 4. Information on the Company.
A—History and Development of the Company.
1-3 | Please see page 6 of the attached Handbook 2002/2003 and page 6 of the attached Financial Report 2002. | ||
4 | Please see pages 18 and 19 of the attached Handbook 2002/2003. | ||
5, 6 | Please see the sectionInformation for Readerson pages 8 to 15 of the attached Financial Report 2002, in particular, subsectionsPaineWebber merger,Restructuring provisionandSignificant financial events; also see sectionGroup Resultson pages 20 to 32 of the attached Financial Report 2002, in particular, the subsections regarding PaineWebber merger-related costs. | ||
7 | Not applicable. |
B—Business Overview.
1, 2, 3, 5, 7 | Please see sectionThe Business Groupson pages 21 to 51 of the attached Handbook 2002/2003 and the sectionSeasonal Characteristicson page 39 of the attached Financial Report 2002. For a breakdown of revenues by category of activity and geographic market for each of the last three financial years, please refer to Notes 2a and 2b to the Financial |
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Statements, on pages 96 to 99 of the attached Financial Report 2002. | |||
4, 6 | Not applicable. | ||
8 | Please see the sectionRegulation and Supervisionon pages 117 to 120 of the attached Handbook 2002/2003. |
C—Organizational Structure.
Please see Note 35 to the Financial Statements on pages 153 to 156 of the attached Financial Report 2002.
D—Property, Plant and Equipment.
Please see the sectionProperty, Plant and Equipmenton page 199 of the attached Financial Report 2002.
Information Required by Industry Guide 3
Please see pages 200 to 216 of the attached Financial Report 2002.
Item 5. Operating and Financial Review and Prospects.
A—Operating Results.
Please see sectionsInformation for Readers,Group Financial ReviewandReview of Business Group Performanceon pages 8 to 74 of the attached Financial Report 2002.
Please also see Note 39 to the Financial StatementsReconciliation of International Financial Reporting Standards (IFRS) to United States Generally Accepted Accounting Principles (US GAAP)on pages 160 to 171 of the attached Financial Report 2002 and theCurrency managementsubsection of theGroup Treasurysection, on pages 84 to 85 of the attached Handbook 2002/2003.
B—Liquidity and Capital Resources.
We believe that our working capital is sufficient for the company’s present requirements.
Group liquidity and capital management is undertaken at UBS by Group Treasury as an integrated asset and liability management function. For a detailed discussion of Group Treasury’s functions and results, including our capital resources, please see pages 78 to 87 of the attached Handbook 2002/2003, and Note 18 to the Financial StatementsDebt Issuedon pages 114 to 119 of the attached Financial Report 2002.
For a discussion of UBS Group’s balance sheet and cash flows, please see pages 26 to 28 of the attached Financial Report 2002.
For a discussion of UBS’s long term credit ratings, please see theCapital Strengthsubsection of the sectionStrategy, Structure and Historyon pages 10 and 11 of the attached Handbook 2002/2003.
C—Research and Development, Patents and Licenses, etc.
Not applicable.
D—Trend Information.
Please seeOutlook 2003subsection of the sectionGroup Resultson page 28 of the attached Financial Report 2002, and pages 15, 37, 42 and 49 of the attached Handbook 2002/2003, which contain more detailed trend information.
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Item 6. Directors, Senior Management and Employees.
A— Directors and Senior Management.
1, 2, 3 | Please see pages 95 to 103 of the attached Handbook 2002/2003. | ||
4 and 5 | None. |
B—Compensation.
Please see theCompensation, Shareholdings and Loanssection on pages 104 to 108 of the attached Handbook 2002/2003 and also Notes 32 and 33 to the Financial Statements on pages 147 to 152 of the attached Financial Report 2002.
C—Board Practices.
Please see pages 95 to 100 of the attached Handbook 2002/2003 and Note 33 to the Financial Statements on pages 151 to 152 of the attached Financial Report 2002.
D—Employees.
Please see page 25 of the attached Financial Report 2002 and the charts on page 14 of the attached Handbook 2002/2003.
E—Share Ownership.
Please see the sectionCompensation, Shareholdings and Loanson pages 104 to 108 of the attached Handbook 2002/2003 and also Notes 32 and 33 to the Financial Statements on pages 147 to 152 of the attached Financial Report 2002.
Item 7. Major Shareholders and Related Party Transactions.
A—Major Shareholders.
Please see pages 91 to 92 and 139 and 140 of the attached Handbook 2002/2003.
B—Related Party Transactions.
For 2002 and 2001, please see Note 33 to the Financial Statements on pages 151 to 152 of the attached Financial Report 2002.
The number of long-term stock options outstanding to members of the Board of Directors, Group Executive Board and Group Managing Board from equity participation plans was 4,693,458 at 31 December 2000.
The total loans and advances receivable were CHF 36 million at 31 December 2000.
The total amounts of shares and warrants held by members of the Board of Directors, Group Executive Board and Group Managing Board were 7,583,184 and 69,504,577 as of 31 December 2000.
C—Interests of Experts and Counsel.
Not applicable because this Form 20-F is filed as an annual report.
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Item 8. Financial Information.
A—Consolidated Statements and Other Financial Information.
Please see Item 18 of this Form 20-F.
B—Significant Changes.
UBS is not aware of any significant change that has occurred since the date of the annual financial statements included in this Form 20-F.
Item 9. The Offer and Listing.
A—Offer and Listing Details.
1, 2, 3, 5, 6, 7 | Not required because this Form 20-F is filed as an annual report. | ||
4 | Please see page 138 of the attached Handbook 2002/2003. |
B—Plan of Distribution
Not required because this Form 20-F is filed as an annual report.
C—Markets.
UBS’s shares are traded on the virt-x, the New York Stock Exchange and the Tokyo Stock Exchange. The symbols are shown on page 135 of the attached Handbook 2002/2003.
Trading on virt-x
Since July 2001, Swiss blue chip stocks have no longer been traded on the SWX Swiss Exchange. All trading in the shares of members of the Swiss Market Index (SMI) now takes place on virt-x, although these stocks remain listed on the SWX Swiss Exchange. Altogether, approximately 600 blue-chip stocks representing around 80% of European market capitalization are traded on virt-x, in the currency of their home market.
virt-x is majority owned by the SWX Swiss Exchange. It provides an efficient and cost effective pan-European blue-chip market. It addresses the increasing requirement for equity investment to be conducted on a sectoral basis across Europe rather than being limited to national markets.
virt-x is a Recognized Investment Exchange supervised by the Financial Services Authority in the United Kingdom. It is delivered on the modern, scalable SWX trading platform.
Trading is possible on all target days, as specified by the European Central Bank. The opening hours are 06:00 to 22:00 CET and the trading hours are 09:00 to 17:30 CET. During the after-hours trading phase from 17:30 to 22:00 CET and in the pre-trading phase from 06:00 to 09:00 CET, orders can be entered or deleted. From 09:00 CET, once the opening price is set, trading begins. Orders are executed automatically according to established rules that match bid and asked prices. Regardless of their size or origin, incoming orders are executed on a price/time priority, i.e., in the order of price (first priority) and time received (second priority). Depending on the type of transaction, the order and trade details are also transmitted to data vendors (Reuters, Bloomberg, Telekurs, etc.).
In most cases, each trade triggers an automatic settlement instruction which is routed through one of three central securities depositories (CSD); SIS SEGAINTERSETTLE AG, CRESTCo or Euroclear. Members can choose to settle from one or more account within these CSD’s and when counterparties have selected different CSD’s, settlement will be cross-border. The introduction of a central counterparty is planned for the beginning of 2003 which will allow optional netting of trades.
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All trades executed through the order book settle on a uniform “T+3” basis, meaning that delivery and payment of exchange transactions occur three days after the trade date. The buyer is able to ask virt-x to enforce settlement if the seller has not delivered within two days of the intended settlement date.
Any transaction executed under the rules of virt-x must be reported to virt-x. Order book executions are automatically reported by the trading system. There are separate provisions for the delayed reporting of certain qualifying trades. Individual elements of Portfolio Trades must be reported within one hour while Block Trades and enlarged risk trades must be reported when the business is substantially (80%) complete, or by the end of order book trading that day, unless the trade is agreed one hour or less before the market close, when the Trade must be reported by the end of order book trading on the following market day. Block Trades and Enlarged Risk Trades are subject to minimum trade size criteria. During normal trading hours all other transactions must be reported within three minutes. The Enlarged Risk Trades provisions enable a member to protect a client’s interest while the member works a large trade on behalf of the client. The Block Trade provisions allow a member a publication delay when the member has executed a large transaction for a client; the delay gives the member time in which to offset the risk of the large trade.
In the event of extraordinary situations such as large price fluctuations and other situations likely to hamper fair and orderly trading, virt-x may take whatever measures it deems necessary to maintain fair and orderly markets. A listed security may be suspended, the opening of trading in that security may be delayed or continuous trading may be interrupted.
Trading on the New York Stock Exchange
UBS listed its shares on the New York Stock Exchange (“NYSE”) on 16 May 2000.
As of 31 December 2002, the equity securities of nearly 2,800 corporations were listed on the NYSE. Non-US issuers, currently over 470 in number with a combined market valuation exceeding USD 4 trillion, are playing an increasingly important role on the NYSE.
The NYSE is open Monday through Friday, 9:30 A.M. - 4:00 P.M., EST.
The NYSE is an agency auction market. Trading at the NYSE takes place by open bids and offers by Exchange members, acting as agents for institutions or individual investors. Buy and sell orders meet directly on the trading floor, and prices are determined by the interplay of supply and demand. In contrast, in the US over-the-counter market, the price is determined by a dealer who buys and sells out of inventory.
At the NYSE, each listed stock is assigned to a single post where the specialist manages the auction process. NYSE members bring all orders for NYSE-listed stocks to the Exchange floor either electronically or through a floor broker. As a result, the flow of buy and sell orders for each stock is funnelled to a single location.
This heavy stream of diverse orders is one of the great strengths of the Exchange. It provides liquidity — the ease with which securities can be bought and sold without wide price fluctuations.
When an investor’s transaction is completed, the best price will have been exposed to a wide range of potential buyers and sellers.
Every transaction made at the NYSE is under continuous surveillance during the trading day. Stock Watch, a computer system that searches for unusual trading patterns, alerts NYSE regulatory personnel to possible insider trading abuses or other prohibited trading practices. The NYSE’s other regulatory activities include the supervision of member firms to enforce compliance with financial and operational requirements, periodic checks on brokers’ sales practices, and the continuous monitoring of specialist operations.
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Trading on the Tokyo Stock Exchange
The volume of UBS shares traded on the Tokyo Stock Exchange is negligible in comparison to the volume on virt-x or on the NYSE.
D—Selling Shareholders.
Not required because this Form 20-F is filed as an annual report.
E—Dilution.
Not required because this Form 20-F is filed as an annual report.
F—Expenses of the Issue.
Not required because this Form 20-F is filed as an annual report.
Item 10. Additional Information.
A—Share Capital.
Not required because this Form 20-F is filed as an annual report.
B—Memorandum and Articles of Association.
Please see:
a) | Item 14 of our registration statement on Form 20-F filed 9 May 2000. Please see Articles of Association of UBS AG and Organization Regulations of UBS AG filed as Exhibits 1.1 and 1.2, respectively. | ||
b) | The sectionGlobal Registered Shareon pages 134 to 135 of the attached Handbook 2002/2003 which provides details of recent changes relating to the par value of the UBS share. | ||
c) | Pages 7 and 134 of the attached Handbook 2002/2003 which provide details of our new transfer agent in the US, Mellon Investor Services. |
C—Material Contracts.
None.
D—Exchange Controls.
There are no restrictions under UBS’s Articles of Association or Swiss law, presently in force, that limit the right of non-resident or foreign owners to hold UBS’s securities freely. There are currently no Swiss foreign exchange controls or other Swiss laws restricting the import or export of capital by UBS or its subsidiaries. In addition, there are currently no restrictions under Swiss law affecting the remittance of dividends, interest or other payments to non-resident holders of UBS securities.
E—Taxation.
This section outlines the material Swiss tax and United States federal income tax consequences of the ownership of UBS ordinary shares by a US holder (as defined below) who holds UBS ordinary shares as capital assets. It is designed to explain the major interactions between Swiss and US taxation for US persons who hold UBS shares.
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The discussion does not address the tax consequences to persons who hold UBS ordinary shares in particular circumstances, such as tax-exempt entities, banks, financial institutions, insurance companies, broker-dealers, traders in securities that elect to mark to market, holders liable for alternative minimum tax, holders that actually or constructively own 10% or more of the voting stock of UBS, holders that hold UBS ordinary shares as part of a straddle or a hedging or conversion transaction or holders whose functional currency for US tax purposes is not the US dollar. This discussion also does not apply to holders who acquired their UBS ordinary shares pursuant to the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan.
The discussion is based on the tax laws of Switzerland and the United States, including the US Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, as in effect on the date of this document, as well as the convention between the United States of America and Switzerland, which we call the “Treaty,” all of which may be subject to change or change in interpretation, possibly with retroactive effect.
For purposes of this discussion, a “US holder” is any beneficial owner of UBS ordinary shares that is:
• | a citizen or resident of the United States, | ||
• | a corporation or other entity taxable as a corporation organized under the laws of the United States or any political subdivision of the United States, | ||
• | an estate the income of which is subject to United States federal income tax without regard to its source, or | ||
• | a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. |
The discussion does not generally address any aspects of Swiss taxation other than income and capital taxation or of United States taxation other than federal income taxation. Holders of UBS shares are urged to consult their tax advisors regarding the United States federal, state and local and the Swiss and other tax consequences of owning and disposing of these shares.
Ownership of UBS Ordinary Shares—Swiss Taxation
Dividends and Distributions
Dividends paid by UBS to a holder of UBS ordinary shares (including dividends on liquidation proceeds and stock dividends) are subject to a Swiss federal withholding tax at a rate of 35%. The withholding tax must be withheld from the gross distribution, and be paid to the Swiss Federal Tax Administration.
A US holder that qualifies for Treaty benefits may apply for a refund of the withholding tax withheld in excess of the 15% Treaty rate. The claim for refund must be filed with the Swiss Federal Tax Administration, Eigerstrasse 65, CH-3003 Berne, Switzerland no later than December 31 of the third year following the end of the calendar year in which the income subject to withholding was due. The form used for obtaining a refund is Swiss Tax Form 82 (82C for companies; 82E for other entities; 82I for individuals), which may be obtained from any Swiss Consulate General in the United States or from the Swiss Federal Tax Administration at the address above. The form must be filled out in triplicate with each copy duly completed and signed before a notary public in the United States. The form must be accompanied by evidence of the deduction of withholding tax withheld at the source.
Repayment of capital in the form of a par value reduction is not subject to Swiss withholding tax.
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Transfers of UBS Ordinary Shares
The sale of UBS ordinary shares, whether by Swiss resident or non-resident holders (including US holders), may be subject to a Swiss securities transfer stamp duty of up to 0.15% calculated on the sale proceeds if it occurs through or with a bank or other securities dealer in Switzerland as defined in the Swiss Federal Stamp Tax Act. In addition to the stamp duty, the sale of UBS ordinary shares by or through a member of a recognized stock exchange may be subject to a stock exchange levy. Capital gains realized by a US holder upon the sale of UBS ordinary shares are not subject to Swiss income or gains taxes, unless such US holder holds such shares as business assets of a Swiss business operation qualifying as a permanent establishment for the purposes of the Treaty. In the latter case, gains are taxed at ordinary Swiss individual or corporate income tax rates, as the case may be, and losses are deductible for purposes of Swiss income taxes.
Ownership of UBS Ordinary Shares—United States Federal Income Taxation
Dividends and Distribution
Subject to the passive foreign investment company rules discussed below, US holders will include in gross income the gross amount of any dividend paid, before reduction for Swiss withholding taxes, by UBS out of its current or accumulated earnings and profits, as determined for United States federal income tax purposes, as ordinary income when the dividend is actually or constructively received by the US holder.
For United States federal income tax purposes, a dividend will include a distribution characterized as a repayment of capital in the form of a par value reduction, if the distribution is made out of current or accumulated earnings and profits, as described above.
Dividends will be income from sources outside the United States for foreign tax credit limitation purposes, but generally will be “passive income” or “financial services income,” which are treated separately from other types of income for foreign tax credit limitation purposes. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution included in income of a US holder will be the US dollar value of the Swiss franc payments made, determined at the spot Swiss franc/US dollar rate on the date such dividend distribution is included in the income of the US holder, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend distribution is included in income to the date such dividend distribution is converted into US dollars will be treated as ordinary income or loss. Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a return of capital to the extent of the US holder’s basis in its UBS ordinary shares and thereafter as capital gain.
Subject to certain limitations, the Swiss tax withheld in accordance with the Treaty and paid over to Switzerland will be creditable against the US holder’s United States federal income tax liability. To the extent a refund of the tax withheld is available to a US holder under the laws of Switzerland or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the US holder’s United States federal income tax liability, whether or not the refund is actually obtained.
Stock dividends to US holders that are made as part of a pro rata distribution to all shareholders of UBS generally will not be subject to United States federal income tax. US holders that received a stock dividend that is subject to Swiss tax but not US tax, may not have enough foreign income for US tax purposes to receive the benefit of the foreign tax credit associated with that tax, unless the holder has foreign income from other sources.
Transfers of UBS Ordinary Shares
Subject to the passive foreign investment company rules discussed below, a US holder that sells or otherwise disposes of UBS ordinary shares generally will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the US dollar value of the amount realized and the tax basis,
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determined in US dollars, in the UBS ordinary shares. Capital gain of a non-corporate US holder is generally taxed at a maximum rate of 20% if the UBS ordinary shares were held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.
Passive Foreign Investment Company Rules
UBS believes that UBS ordinary shares should not be treated as stock of a passive foreign investment company for United States federal income tax purposes, but this conclusion is a factual determination made annually and thus may be subject to change. In general, UBS will be a passive foreign investment company with respect to a US holder if, for any taxable year in which the US holder held UBS ordinary shares, either at least 75% of the gross income of UBS for the taxable year is passive income or at least 50% of the value, determined on the basis of a quarterly average, of UBS’s assets is attributable to assets that produce or are held for the production of passive income. If UBS were to be treated as a passive foreign investment company, then unless a US holder makes a mark-to-market election, gain realized on the sale or other disposition of UBS ordinary shares would in general not be treated as capital gain. Instead, a US holder would be treated as if the holder had realized such gain and certain “excess distributions” ratably over the holder’s holding period for the shares and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year.
F—Dividends and Paying Agents.
Not required because this Form 20-F is filed as an annual report.
G—Statement by Experts.
Not required because this Form 20-F is filed as an annual report.
H—Documents on Display.
UBS files periodic reports and other information with the Securities and Exchange Commission. You may read and copy any document that UBS files with the SEC at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its public reference room. You may also inspect UBS’s SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and the American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006. Some of this information may also be found on the UBS website at www.ubs.com/investors.
I—Subsidiary Information.
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
A—Quantitative Information About Market Risk.
Please see the sectionMarket Riskon pages 71 to 75 of the attached Handbook 2002/2003.
B—Qualitative Information About Market Risk.
Please see the sectionMarket Riskon pages 71 to 75 of the attached Handbook 2002/2003.
C—Interim Periods.
Not applicable.
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D—Safe Harbor.
The safe harbor provided in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (“statutory safe harbors”) applies to information provided pursuant to paragraphs (a), (b) and (c) of this Item 11.
E—Small Business Issuers.
Not applicable.
Item 12. Description of Securities Other than Equity Securities.
Not required because this Form 20-F is filed as an annual report.
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PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
There has been no material default in respect of any indebtedness of UBS AG or any of its significant subsidiaries or any arrearages of dividends or any other material delinquency not cured within 30 days relating to any preferred stock of UBS AG or any of its significant subsidiaries.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not applicable.
Item 15. Controls and Procedures.
Please see page 116 of the attached Handbook 2002/2003.
Item 16. [Reserved].
Item 17. Financial Statements.
Not applicable.
Item 18. Financial Statements.
The Financial Statements included on pages 77 to 177 of the attached Financial Report 2002 are incorporated by reference herein.
Item 19. Exhibits.
Exhibit | ||
Number | Description | |
1.1. | Articles of Association of UBS AG. | |
1.2. | Organization Regulations of UBS AG. | |
2(b) | Instruments defining the rights of the holders of long-term debt issued by UBS AG and its subsidiaries. We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt. | |
7. | Statement regarding ratio of earnings to fixed charges. | |
8. | Significant Subsidiaries of UBS AG. Please see Note 35 on pages 153 to 156 of the attached Financial Report 2002. | |
10. | Consent of Ernst & Young Ltd. |
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
UBS AG | ||
/s/ Peter A. Wuffli ———————————————————————— Name: Peter A. Wuffli Title: President of the Group Executive Board | ||
/s/ Hugo Schaub ———————————————————————— Name: Hugo Schaub Title: Group Controller | ||
Date: March 19, 2003 |
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CERTIFICATIONS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter A. Wuffli, certify that:
1. | I have reviewed this annual report on Form 20-F of UBS AG; | ||
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | ||
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: |
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |||
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | |||
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |||
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. | The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: March 19, 2003 | ||
/s/ Peter A. Wuffli Name: Peter A. Wuffli Title: President of the Group Executive Board (principal executive officer) |
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I, Hugo Schaub, certify that:
1. | I have reviewed this annual report on Form 20-F of UBS AG; | ||
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | ||
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: |
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |||
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | |||
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |||
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. | The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: March 19, 2003 | ||
/s/ Hugo Schaub Name: Hugo Schaub Title: Group Controller (principal accounting officer and principal financial officer) |
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Contents | ||||
Profile | ||||
Introduction | 1 | |||
UBS Group Financial Highlights | 2 | |||
UBS Group | 3 | |||
Our Business Groups | 4 | |||
Sources of Information about UBS | 5 | |||
Information for Readers | 8 | |||
Group Financial Review | 19 | |||
Group Results | 20 | |||
Review of Business | ||||
Group Performance | 35 | |||
Introduction | 36 | |||
UBS Wealth Management & Business Banking | 42 | |||
UBS Global Asset Management | 52 | |||
UBS Warburg | 57 | |||
UBS PaineWebber | 66 | |||
Corporate Center | 72 | |||
UBS Group Financial Statements | 77 | |||
UBS AG (Parent Bank) | 179 | |||
Additional Disclosure Required under SEC Regulations | 193 |
Introduction
The Financial Report 2002 forms an essential part of our reporting portfolio. It includes the audited Financial Statements of the UBS Group for 2002 and 2001, prepared according to International Financial Reporting Standards (IFRS) and reconciled to the United States’ Generally Accepted Accounting Principles (US GAAP), and the audited financial statements of UBS AG (the “Parent Bank”) for 2002, prepared according to Swiss Banking Law requirements. It also contains a discussion and analysis of the financial and business performance of the UBS Group and its Business Groups, and additional disclosures required under Swiss and US regulations.
The Financial Report should be read in conjunction with the other information published by UBS, described on pages 5 and 6.
We hope that you will find the information in our reporting documents useful and informative. We believe that UBS is among the leaders in corporate disclosure, but we would be very interested to hear your views on how we might improve the content and presentation of our information portfolio.
Mark Branson
Chief Communication Officer
UBS AG
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Profile |
UBS Group Financial Highlights
1 | Operating expenses/operating income before credit loss expense. | |
2 | Excludes the amortization of goodwill and other intangible assets. | |
3 | For EPS calculation, see Note 8 to the Financial Statements. | |
4 | Net profit/average shareholders’ equity excluding dividends. | |
5 | Includes hybrid Tier 1 capital, please refer to Note 29e in the Notes to the Financial Statements. | |
6 | Klinik Hirslanden was sold on 5 December 2002. The Group headcount does not include the Klinik Hirslanden headcount of 2,450 and 1,839 for 31 December 2001 and 31 December 2000, respectively. | |
7 | See the Capital strength section on pages 10 and 11 of the UBS Handbook 2002/2003. | |
8 | Details of significant financial events can be found in the Group Financial Review section. | |
The segment results have been restated to reflect the new Business Group structure and associated management accounting changes implemented during 2002. | ||
All results presented include PaineWebber from the date of acquisition, 3 November 2000. |
CHF million, except where indicated | % change from | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Income statement key figures | |||||||||||||||||
Operating income | 34,121 | 37,114 | 36,402 | (8 | ) | ||||||||||||
Operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | ||||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | (32 | ) | ||||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | ||||||||||||
Cost/income ratio (%)1 | 86.2 | 80.8 | 72.2 | ||||||||||||||
Cost/income ratio before goodwill (%)1, 2 | 79.0 | 77.3 | 70.4 | ||||||||||||||
Per share data (CHF) | |||||||||||||||||
Basic earnings per share3 | 2.92 | 3.93 | 6.44 | (26 | ) | ||||||||||||
Basic earnings per share before goodwill2, 3 | 4.73 | 4.97 | 7.00 | (5 | ) | ||||||||||||
Diluted earnings per share3 | 2.87 | 3.78 | 6.35 | (24 | ) | ||||||||||||
Diluted earnings per share before goodwill2, 3 | 4.65 | 4.81 | 6.89 | (3 | ) | ||||||||||||
Return on shareholders’ equity (%) | |||||||||||||||||
Return on shareholders’ equity4 | 8.9 | 11.7 | 21.5 | ||||||||||||||
Return on shareholders’ equity before goodwill2, 4 | 14.4 | 14.8 | 23.4 | ||||||||||||||
CHF million, except where indicated | % change from | ||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Balance sheet key figures | |||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | (6 | ) | ||||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | (10 | ) | ||||||||||||
Market capitalization | 79,448 | 105,475 | 112,666 | (25 | ) | ||||||||||||
BIS capital ratios | |||||||||||||||||
Tier 1 (%)5 | 11.3 | 11.6 | 11.7 | 7 | |||||||||||||
Total BIS (%) | 13.8 | 14.8 | 15.7 | ||||||||||||||
Risk-weighted assets | 238,790 | 253,735 | 273,290 | (6 | ) | ||||||||||||
Invested assets (CHF billion) | 2,037 | 2,448 | 2,445 | (17 | ) | ||||||||||||
Headcount (full-time equivalents) | 69,061 | 69,9856 | 71,0766 | (1 | ) | ||||||||||||
Long-term ratings7 | �� | ||||||||||||||||
Fitch, London | AAA | AAA | AAA | ||||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa1 | ||||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | ||||||||||||||
Earnings adjusted for significant financial events and pre-goodwill2, 8 | |||||||||||||||||
CHF million, except where indicated | % change from | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Operating income | 33,894 | 37,114 | 36,402 | (9 | ) | ||||||||||||
Operating expenses | 27,117 | 29,073 | 25,096 | (7 | ) | ||||||||||||
Operating profit before tax | 6,777 | 8,041 | 11,306 | (16 | ) | ||||||||||||
Net profit | 5,529 | 6,296 | 8,799 | (12 | ) | ||||||||||||
Cost/income ratio (%)1 | 79.5 | 77.3 | 69.2 | ||||||||||||||
Basic earnings per share (CHF)3 | 4.57 | 4.97 | 7.28 | (8 | ) | ||||||||||||
Diluted earnings per share (CHF)3 | 4.50 | 4.81 | 7.17 | (6 | ) | ||||||||||||
Return on shareholders’ equity (%)4 | 13.9 | 14.8 | 24.3 | ||||||||||||||
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UBS Group |
UBS is one of the world’s leading financial firms, serving a discerning global client base. As an organization, we combine financial strength with a global culture that embraces change. We are the world’s leading provider of wealth management services and one of the largest asset managers globally. In the investment banking and securities businesses, we are among the select bracket of major global houses. In Switzerland, we are the clear market leader serving corporate and retail clients. As an integrated firm, we create added value for our clients by drawing on the combined resources and expertise of all our businesses.
Our first priority is always our clients’ success and we put advice at the heart of our relationships with them. We take the time to understand the unique needs and goals of each of our clients. Our priority is to provide premium quality services to our clients, giving them the best possible choice by supplementing best-in-class solutions we develop ourselves with a quality-screened selection of products from others.
With head offices in Zurich and Basel, and more than 69,000 employees, we operate in over 50 countries and from all major international financial centers. Our global physical presence is complemented by our strategy of offering clients products and services via a variety of different channels — from the traditional retail bank branch to sophisticated, interactive online tools, helping us to deliver our services more quickly, widely and cost-effectively than ever before.
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Profile
All our Business Groups are in the top echelons of their sectors globally and are committed to vigorously growing their franchises.
UBS Wealth Management & Business Banking
UBS Global Asset Management
UBS Warburg
UBS PaineWebber
Corporate Center
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Sources of Information about UBS
This Financial Report contains our audited Financial Statements for the year 2002 and the related detailed analysis. You can find out more about UBS from the sources shown below.
Publications |
Annual Review 2002
Handbook 2002/2003
Quarterly reports
How to order reports
E-information tools for investors |
Website
Messenger service
Results presentations
UBS and the environment
Form 20-F and other submissions to the US Securities and Exchange Commission
We file periodic reports and submit other information about UBS with the US Securities and Exchange Commission (SEC). Principal among these filings is the Form 20-F, our Annual Report filed pursuant to the US Securities Exchange Act of 1934.
Our Form 20-F filing is structured as a “wrap-around” document. Most sections of the filing are satisfied by referring to parts of this
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Profile
Handbook or to parts of the Financial Report 2002. However, there is a small amount of additional information in the Form 20-F which is not presented elsewhere, and is particularly targeted at readers in the US. You are encouraged to refer to this additional disclosure.
US) for further information on the operation of its public reference room. You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005 and the American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006. Much of this additional information may also be found on the UBS website at www.ubs.com/investors, and copies of documents filed with the SEC may be obtained from UBS’s Investor Relations team, at the addresses shown on the following page.
Corporate information
The legal and commercial name of the company is UBS AG. The company was formed on 29 June 1998, when Union Bank of Switzerland (founded 1862) and Swiss Bank Corporation (founded 1872) merged to form UBS.
two registered offices and principal places of business are:
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Switchboards | Zurich | +41 1 234 1111 | ||||
For all general queries. | London | +44 20 7568 0000 | ||||
New York | +1 212 821 3000 | |||||
Hong Kong | +852 2971 8888 | |||||
UBS Investor Relations | Zurich | |||||
Our Investor Relations team supports | Hotline: | +41 1 234 4100 | UBS AG | |||
institutional, professional | Christian Gruetter | +41 1 234 4360 | Investor Relations G41B | |||
and retail investors from offices in | Mark Hengel | +41 1 234 8439 | P.O. Box | |||
Zurich and New York. | Catherine Lybrook | +41 1 234 2281 | CH-8098 Zurich, Switzerland | |||
Oliver Lee | +41 1 234 2733 | |||||
www.ubs.com/investors | Fax | +41 1 234 3415 | ||||
New York | ||||||
Hotline: | +1 212 713 3641 | UBS Americas Inc. | ||||
Richard Feder | +1 212 713 6142 | Investor Relations | ||||
Christopher McNamee | +1 212 713 3091 | 135 W. 50th Street, 9th Floor | ||||
Fax | +1 212 713 1381 | New York, NY 10020, USA | ||||
sh-investorrelations@ubs.com | ||||||
UBS Group Media Relations | Zurich | +41 1 234 8500 | sh-gpr@ubs.com | |||
Our Group Media Relations team | London | +44 20 7567 4714 | sh-mr-london@ubsw.com | |||
supports global media and | New York | +1 212 713 8391 | sh-mediarelations-ny@ubsw.com | |||
journalists from offices in Zurich, London, | Hong Kong | +852 2971 8200 | sh-mediarelations-ap@ubs.com | |||
New York and Hong Kong. | ||||||
www.ubs.com/media | ||||||
UBS Shareholder Services | Hotline | +41 1 235 6202 | UBS AG | |||
UBS Shareholder Services, a unit of | Fax | +41 1 235 3154 | Shareholder Services — GUMV | |||
the Company Secretary, is responsible | P.O. Box | |||||
for the registration of the Global | CH-8098 Zurich, Switzerland | |||||
Registered Shares. It is split into two | ||||||
parts — a Swiss register, which is | sh-shareholder-service@ubs.com | |||||
maintained by UBS acting as Swiss transfer | ||||||
agent, and a US register, which is | ||||||
maintained by Mellon Investor Service | ||||||
as US transfer agent (see below). | ||||||
US Transfer Agent | calls from the US | +1 866 541 9689 | c/o Mellon Investor Services | |||
For all Global Registered Share | calls outside the US | +1 201 329 8451 | Overpeck Centre | |||
related queries in the USA. www.melloninvestor.com | 85 Challenger Road Ridgefield Park, NJ 07660, USA shrrelations@melloninvestor.com |
UBS listed its Global Registered Shares on the New York Stock Exchange on 16 May 2000. Prior to that date UBS operated an ADR program. See the Frequently Asked Questions (FAQs) section at www.ubs.com/investors for further details about the UBS share.
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Profile |
Information for Readers
The discussion and analysis in the Group Financial Review and Review of Business Group Performance should be read in conjunction with the UBS Group Financial Statements and the related notes, which are shown in pages 77 to 177 of this document.
Parent Bank |
Pages 179 to 190 contain the financial statements for the UBS AG Parent Bank — the Swiss company, including branches worldwide, which owns all the UBS Group companies, directly or indirectly. Except in those pages, or where otherwise explicitly stated, all references to “UBS” refer to the UBS Group and not to the Parent Bank.
Accounting standards |
The UBS Group Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS). As a US listed company, UBS Group provides a description in Note 39 to the UBS Group Financial Statements of the significant differences which would arise were our accounts to be presented under the United States Generally Accepted Accounting Principles (US GAAP), and a detailed reconciliation of IFRS shareholders’ equity and net profit to US GAAP. Major differences between Swiss Federal Banking Law requirements and IFRS are described in Note 38 to the UBS Group Financial Statements.
Group and the Parent Bank for each of these periods have been audited by Ernst & Young Ltd., as described in the Report of the Independent Auditors on page 177 and the Report of the Statutory Auditors on page 189.
Changes to accounting presentation |
The segment reporting shown in Note 2 to UBS Group Financial Statements has been restated to reflect the reorganization of the Group in 2002. See the “Review of Business Group Performance” on page 35 for details of changes since the 2001 presentation.
PaineWebber merger |
Except where otherwise stated, all 2000 figures for UBS Group throughout this report include the impact of the merger with Paine Webber Group, Inc., which was completed on 3 November 2000. Under purchase accounting rules, the results for 2000 reflect PaineWebber’s income and expenses for two months only, from 3 November 2000 until 31 December 2000.
Restructuring provision |
After the merger of Swiss Bank Corporation and Union Bank of Switzerland was completed on 29 June 1998, we began integrating the operations of the two predecessor banks. This process included streamlining operations, eliminating duplicate information technology infrastructure, and consolidating banking premises. We established a restructuring provision of CHF 7 billion to cover UBS’s expected costs associated with the integration process. In December 1999, we recognized an additional pre-tax restructuring charge of CHF 300 million because of the merger.
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Critical accounting policies |
Basis of preparation and selection of policies
Recognition and measurement of financial instruments
Profit and loss impact
Changes to shareholders’ equity
– | the opening balance of “Unrealized gains/ losses on available-for-sale investments” was a net increase of CHF 1,577 million, net of taxes, on 1 January 2001 due to unrealized mark-to-market gains on financial investments classified as available for sale which were principally attributable to private equity investments, but which also included other financial investments held by the Group. |
– | the opening balance of “Changes in fair value of derivative instruments designated as cash flow hedges” was a net loss of CHF 380 million, net of taxes, on 1 January 2001 due to unrealized mark-to-market losses on derivatives designated as cash flow hedges. These losses were previously recorded in the balance sheet as part of “Deferred losses”. |
Financial instruments — fair value
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Profile
For substantially all of our portfolios, fair values are based on quoted market prices for the specific instrument, comparisons with other highly similar financial instruments, or the use of models. Valuation models are used primarily to value credit derivatives and certain equity and fixed income derivatives. Where valuation models are used to compute fair values, or where they are used in our control functions for independent risk monitoring, they must be validated and periodically reviewed by qualified personnel independent of the area that created the model.
Hedge accounting.IAS 39 allows a company to apply hedge accounting if it fully complies with the specified hedge criteria. One of the goals of a hedging program is to reduce volatility of fair values by entering into a hedging transaction where changes in fair values of the hedging transaction offset changes in the fair values of the hedged item. Due to cost and other considerations, a transaction may not be hedged over its entire life, or a dynamic hedging strategy may be used whereby different transactions are designated as the hedging transaction at different times. However, if the hedged item is one that would normally not be recorded at fair value (for instance if it is held at cost less impairment), but the hedging instrument is of a sort that would normally be accounted for at fair value, there could be substantial differences in the profit and loss effect for the two items during specific accounting periods, although over the whole life of the instrument these would be expected to balance out. We believe that, in such cases, not applying hedge accounting could lead to misinterpretations of our results and financial position, since hedging transactions could have a material impact on reported net profit in a particular period.
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undrawn commitment is expected to be drawn without prospect of full repayment. This timing mismatch between recognizing income from increases in the fair value of a CDS and recognizing expense for credit losses may introduce period-to-period volatility in net profit. In addition, the positive effect of CDSs on reducing credit losses is not reflected as a reduction in reported credit loss expense.
Financial investments — available-for-sale
these were trading assets, or if we were to reclassify these assets as trading assets, changes in fair value would then have to be reflected in income rather than shareholders’ equity. The amount of unrealized gains or losses on the balance sheet date is disclosed in the statement of changes in equity in the UBS Group Financial Statements.
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Profile
decline in fair value below cost extends beyond the near term, unless it is readily apparent that an investment is impaired, in which case this would result in an immediate loss recognition.
Goodwill and other intangible assets
Allowances and provisions for credit losses
consistent and fair basis, especially for those impaired claims for which no market estimate or benchmark for the likely recovery value is available. Future cash flows considered recoverable are discounted to present value in accordance with IAS 39. A provision is then recorded for the probable loss on the claim in question and charged to the income statement as credit loss expense.
Securitizations and Special Purpose Entities
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is appropriate and that the SPEs and their assets and liabilities are properly recorded, if consolidated.
Principal types of SPE used by UBS
may not be held by UBS, to investors. They are primarily to allow UBS to have a single counterparty (the SPE) which sells credit protection to UBS. The SPE in turn has investors who provide it with capital and participate in the risks and rewards of the credit events that it insures. SPEs used for credit protection are generally consolidated.
Equity compensation
Deferred tax
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Profile
for book purposes but are taxable only when the valuation change is realized.
Segment reporting
Analysis of adjusted key figures and results |
We analyze UBS’s performance on a reported basis determined in accordance with 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.
Significant financial events
– | Non-recurring |
– | Event-specific |
– | Material at Group level |
– | UBS-specific, not industry-wide |
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amount of each individual significant financial event, and the net tax benefit or loss associated with all the SFEs in each period, allowing the reader to reconcile adjusted figures to the reported ones. Where tables in the Business Group reporting show adjusted figures, we also include a table showing the reported figures.
– | In first quarter 2002, we realized a pre-tax gain of CHF 155 million from the sale of the private bank Hyposwiss. |
– | In fourth quarter 2002, we recorded a non-cash pre-tax writedown of CHF 1,234 million related to the PaineWebber brand, an intangible asset. It was recorded following our decision to move to a single UBS brand. This change in our brand strategy was announced in November 2002 and we will effectively introduce the single brand in June 2003. |
– | In fourth quarter 2002, we realized a pre-tax gain of CHF 72 million from the sale of Klinik Hirslanden, a private hospital group. |
– | During 2000, we recorded restructuring charges and provisions of CHF 290 million pre-tax relating to the integration of Paine-Webber into UBS. |
– | In 2000 UBS recognized an additional pre-tax provision of CHF 150 million in connection |
with the US Global Settlement of World War II-related claims. Previously, we had established a provision of CHF 842 million (in 1998) and one of CHF 154 million (in 1999) relating to this claim. |
Amortization of goodwill and other
intangibles
Significant Financial Events
CHF million For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Operating income as reported | 34,121 | 37,114 | 36,402 | |||||||||
Gain on disposal of Hyposwiss | (155 | ) | ||||||||||
Gain on disposal of Klinik Hirslanden | (72 | ) | ||||||||||
Adjusted operating income | 33,894 | 37,114 | 36,402 | |||||||||
Operating expenses as reported | 29,577 | 30,396 | 26,203 | |||||||||
Writedown of PaineWebber brand name | (1,234 | ) | ||||||||||
US Global Settlement Fund provision | (150 | ) | ||||||||||
PaineWebber integration costs | (290 | ) | ||||||||||
Adjusted operating expenses | 28,343 | 30,396 | 25,763 | |||||||||
Adjusted operating profit before tax and minority interests | 5,551 | 6,718 | 10,639 | |||||||||
Tax expense | 678 | 1,401 | 2,320 | |||||||||
Tax effect of significant financial events | 239 | 100 | ||||||||||
Adjusted tax expense | 917 | 1,401 | 2,420 | |||||||||
Minority interests | (331 | ) | (344 | ) | (87 | ) | ||||||
Adjusted net profit | 4,303 | 4,973 | 8,132 | |||||||||
Adjusted net profit before goodwill | 5,529 | 6,296 | 8,799 | |||||||||
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Profile |
Risk factors |
As a global financial services firm, UBS’s businesses are affected by the external environment in the markets in which we operate. Different risk factors can impact our ability to effectively carry out our business strategies or can directly affect our earnings. Due to the factors described below and to other influences beyond our control, UBS’s revenues and operating profit have been and are likely to continue to be subject to a measure of variability from period to period. Therefore UBS’s revenues and operating profit for any particular period may not be indicative of sustainable results, may vary from year to year and may affect our ability to achieve UBS’s strategic objectives.
Fluctuations in interest rates, equity prices, foreign currency rates and other market variables
Counterparty risks
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In general, we aim to avoid risk concentrations in our credit portfolio. We believe that the incurred losses are adequately covered by our allowances and provisions. Additionally, we make active use of credit protection. A detailed discussion of credit risk and our approach to managing this risk can be found in the “Risk Analysis” section of the “Risk Management and Control” chapter in the Handbook 2002/ 2003. If our risk management and control measures prove inadequate or are not effective, then credit losses could have a material adverse effect on our income and the value of our assets.
Consequential risk
losses. A detailed discussion of our approach in management and control of these risks can be found in the “Consequential risk” section of the “Risk Management and Control” chapter in the Handbook 2002/2003.
Competitive forces
Other risks arising from our global
presence
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Group Financial Review | |
Group Results | |
Group Results |
UBS Group Performance Against Targets | ||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
RoE (%) | ||||||||||||
as reported | 8.9 | 11.7 | 21.5 | |||||||||
before goodwill and adjusted for significant financial events1 | 13.9 | 14.8 | 24.3 | |||||||||
Basic EPS (CHF) | ||||||||||||
as reported | 2.92 | 3.93 | 6.44 | |||||||||
before goodwill and adjusted for significant financial events1 | 4.57 | 4.97 | 7.28 | |||||||||
Cost/income ratio (%) | ||||||||||||
as reported | 86.2 | 80.8 | 72.2 | |||||||||
before goodwill and adjusted for significant financial events1 | 79.5 | 77.3 | 69.2 | |||||||||
Net new money, private client units (CHF billion)2, 3 | ||||||||||||
Private Banking | 16.6 | 24.6 | 4 | 1.2 | 4 | |||||||
UBS PaineWebber | 18.5 | 33.2 | 14.5 | 5 | ||||||||
Total | 35.1 | 57.8 | 15.7 | |||||||||
1 | Excludes the amortization of goodwill and other intangible assets and adjusted for significant financial events. | |
2 | Private Banking and UBS PaineWebber. | |
3 | Excludes interest and dividend income. | |
4 | Calculated using the former definition of assets under management up to and including second quarter 2001. | |
5 | Calculated using the former definition of assets under management in 2000. |
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Invested Assets and Net New Money
Invested assets | Net new money1 | |||||||||||||||||||||||
CHF billion | 31.12.02 | 31.12.01 | 31.12.00 | 2002 | 2001 | 2000 | ||||||||||||||||||
UBS Group | 2,037 | 2,448 | 2,445 | 36.9 | 102.0 | (49.5 | ) | |||||||||||||||||
UBS Wealth Management & Business Banking2 | ||||||||||||||||||||||||
Private Banking | 688 | 791 | 798 | 16.6 | 24.6 | 3 | 1.2 | 3 | ||||||||||||||||
Business Banking Switzerland | 205 | 215 | 239 | 3.7 | 9.2 | 3 | 2.7 | 3 | ||||||||||||||||
UBS Global Asset Management | ||||||||||||||||||||||||
Institutional | 279 | 328 | 323 | (0.6 | ) | 6.2 | (70.8 | ) | ||||||||||||||||
Wholesale Intermediary | 278 | 344 | 319 | (1.8 | ) | 28.7 | 2.9 | |||||||||||||||||
UBS Warburg | 3 | 1 | 1 | 0.5 | 0.1 | |||||||||||||||||||
UBS PaineWebber | 584 | 769 | 765 | 18.5 | 33.2 | 14.5 | 4 | |||||||||||||||||
2002 |
UBS made significant progress in 2002. After the successful integration of PaineWebber in 2001, we continued to expand our investment banking capabilities, especially in the US, and to build up our European wealth management business. Our achievements should be viewed in the context of last year’s environment, which was one of the most challenging seen in the financial industry during the post-war era. Extensive corrections in major global equity markets, depressed market levels, low corporate activity, and broadly subdued investor optimism reflected uncertainty about economic and political developments. However, our businesses were remarkably resilient and competitive in view of the general conditions they faced in 2002. Strict cost discipline and focus on growth across the firm helped us expand our market position in a period where many in the financial industry were forced to re-assess the basic assumptions about their business. Our clients made substantial new investments into our private client businesses, and we significantly improved our investment banking market share. Despite market developments, the relative operational performance in our core businesses remained strong and we benefited from our prudent attitude to risk and our tight management of costs.
Net profit |
UBS’s 2002 net profit was CHF 3,535 million, down 29% from CHF 4,973 million in 2001.
This full-year profit was impacted by several items which we call significant financial events (SFEs): the non-cash after-tax writedown of the value of the PaineWebber brand, which reduced profit by 21%, and the impact of sales of subsidiaries, which added 6% to profit. Excluding these effects, and before goodwill amortization, net profit fell by 12% between 2001 and 2002.
Group targets |
We focus on four key performance targets, designed to ensure that UBS delivers continually improving returns to its shareholders.
– | We seek to increase the value of UBS by achieving a sustainable, after-tax return on equity of 15-20%, across periods of varying market conditions. |
– | We aim to increase shareholder value through double-digit average annual percentage growth of basic earnings per share (EPS), across periods of varying market conditions. |
– | Through cost reduction and earnings enhancement initiatives, we aim to reduce UBS’s cost/ income ratio to a level that compares positively with best-in-class competitors. |
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2
Group Financial Review Group Results |
Net Interest and Trading Income
CHF million | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | % change from 31.12.01 | ||||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 31 | ||||||||||||
Net trading income | 5,572 | 8,802 | 9,953 | (37 | ) | |||||||||||
Total net interest and trading income | 16,118 | 16,843 | 18,083 | (4 | ) | |||||||||||
Breakdown by business activity: | ||||||||||||||||
Net income from interest margin products | 5,275 | 5,694 | 5,430 | (7 | ) | |||||||||||
Net income from trading activities | 10,605 | 11,529 | 12,642 | (8 | ) | |||||||||||
Net income from treasury activities | 1,667 | 1,424 | 762 | 17 | ||||||||||||
Other1 | (1,429 | ) | (1,804 | ) | (751 | ) | 21 | |||||||||
Total net interest and trading income | 16,118 | 16,843 | 18,083 | (4 | ) | |||||||||||
– | We aim to achieve a clear growth trend in net new money in the private client businesses (Private Banking and UBS PaineWebber). |
– | Our return on equity for 2002 was 13.9%, down from 14.8% a year ago and slightly below our target range of 15-20%. The lower average level of equity, which was 6% lower because of our ongoing share buyback programs, partially offset the market-related decline in earnings of 12%. |
– | Basic earnings per share for 2002 were CHF 4.57, a decline of 8% from 2001. The 12% decline in profit was partially offset by the reduced average number of shares outstanding. Without the buyback programs, our earnings per share in 2002 would have been 9% lower. |
– | The cost/income ratio increased to 79.5% from 77.3%. Ongoing cost initiatives across all our businesses could not fully counteract the drop in revenues due to the declining market activity levels and subdued levels of transactional and corporate activity as well as ongoing private equity writedowns. |
Results |
Operating income
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IFRS Actual Credit Loss Expense/(Recovery)
CHF million | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | % change from 31.12.01 | ||||||||||||
UBS Wealth Management & Business Banking | 241 | 123 | (695 | ) | 96 | |||||||||||
UBS Warburg | (35 | ) | 360 | 562 | ||||||||||||
UBS PaineWebber | 15 | 15 | 3 | 0 | ||||||||||||
Corporate Center | (15 | ) | 0 | 0 | ||||||||||||
Total | 206 | 498 | (130 | ) | (59 | ) | ||||||||||
accounts, as well as mortgages because of the extremely low interest rate environment. This was accentuated by the decline of the US dollar and euro, which caused the Swiss franc equivalent of US dollar interest rate revenues to drop.
unrealized gains on derivatives used to economically hedge interest rate risk related to structured notes issued.
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Group Financial Review
Group Results
Net Fee and Commission Income
CHF million | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | % change from 31.12.01 | ||||||||||||
Underwriting fees | 2,134 | 2,158 | 1,434 | (1 | ) | |||||||||||
Corporate finance fees | 848 | 1,339 | 1,772 | (37 | ) | |||||||||||
Brokerage fees | 5,987 | 6,445 | 5,742 | (7 | ) | |||||||||||
Investment fund fees | 4,033 | 4,276 | 2,821 | (6 | ) | |||||||||||
Fiduciary fees | 300 | 355 | 351 | (15 | ) | |||||||||||
Custodian fees | 1,302 | 1,356 | 1,439 | (4 | ) | |||||||||||
Portfolio and other management and advisory fees | 4,065 | 4,650 | 3,666 | (13 | ) | |||||||||||
Insurance-related and other fees | 417 | 538 | 111 | (22 | ) | |||||||||||
Total securities trading and investment activity fees | 19,086 | 21,117 | 17,336 | (10 | ) | |||||||||||
Credit-related fees and commissions | 275 | 307 | 310 | (10 | ) | |||||||||||
Commission income from other services | 1,006 | 946 | 802 | 6 | ||||||||||||
Total fee and commission income | 20,367 | 22,370 | 18,448 | (9 | ) | |||||||||||
Brokerage fees paid | 1,349 | 1,281 | 1,084 | 5 | ||||||||||||
Other | 797 | 878 | 661 | (9 | ) | |||||||||||
Total fee and commission expense | 2,146 | 2,159 | 1,745 | (1 | ) | |||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | (10 | ) | |||||||||||
undertaken to improve the asset quality of our domestic credit portfolio. The gradual slowdown of the Swiss economy and our success in substantially reducing our impaired portfolio have, however, resulted in a lower level of recoveries compared to previous years. This largely explains the increase of our credit loss expense in UBS Wealth Management & Business Banking to CHF 241 million, compared to CHF 123 million in 2001.
which increased by 67% compared to a year earlier. However, this was offset by a much lower result in our equity underwriting business due to the markedly lower market activity.
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Headcount1 | |||||||||||||||||
Change in % | |||||||||||||||||
(full-time equivalents) | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
UBS Wealth Management & Business Banking | 28,930 | 29,469 | 30,272 | (2 | ) | ||||||||||||
Private Banking | 10,488 | 10,249 | 9,835 | 2 | |||||||||||||
Business Banking Switzerland | 18,442 | 19,220 | 20,437 | (4 | ) | ||||||||||||
UBS Global Asset Management | 3,346 | 3,281 | 2,860 | 2 | |||||||||||||
UBS Warburg | 16,037 | 15,690 | 15,391 | 2 | |||||||||||||
Corporate and Institutional Clients | 15,964 | 15,562 | 15,262 | 3 | |||||||||||||
UBS Capital | 73 | 128 | 129 | (43 | ) | ||||||||||||
UBS PaineWebber | 19,563 | 20,413 | 21,567 | (4 | ) | ||||||||||||
Corporate Center | 1,185 | 1,132 | 986 | 5 | |||||||||||||
Group total | 69,061 | 69,985 | 71,076 | (1 | ) | ||||||||||||
thereof: Switzerland | 27,972 | 29,163 | 30,095 | (4 | ) | ||||||||||||
age asset levels and third-party fees due to the difficult market environment.
Operating expenses
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Group Financial Review Group Results |
At CHF 1,614 million in 2001,depreciationfell by 6% to CHF 1,521 million in 2002 mainly due to lower depreciation charges for machines and equipment.
Tax
PaineWebber merger-related costs
Dividend |
For 2002, we plan to pay a normal dividend to our shareholders after having made use of the possibility to make a tax efficient distribution in 2000 (for the fourth quarter only) and 2001 in the form of par value reductions.
Balance sheet |
Total assets were CHF 1,181 billion on 31 December 2002, down CHF 72 billion, or 6%, from CHF 1,253 billion on 31 December 2001. The balance sheet shrank because of the weakening of the US dollar and UK sterling against the Swiss franc, falling by 17% and 8% in the period respectively.
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market environment. The drop was partially offset by an increase in reverse repurchase agreements, due to higher volumes in our mortgage-backed securities business in the US, which benefited from the low interest rate levels for home mortgages.
mainly the strengthening of the Swiss franc against the US dollar. We believe the maturity profile of our long-term debt portfolio is well balanced to match the maturity profile of our assets.
Cash flows |
In the twelve-month period to December 2002, cash equivalents decreased by CHF 33,915 million, principally as a result of financing activities, which generated negative cash flow of CHF 32,470 million. A cash outflow of CHF 26,206 million resulted from the repayment of money market paper, CHF 5,605 million from movements in treasury shares and derivative activity in own equity, with CHF 2,509 million resulting from a capital repayment by par value reduction. The issuance of long-term debt of CHF 17,132 million and repayments of CHF 14,911 million brought a net cash inflow of CHF 2,221 million.
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Group Financial Review Group Results |
Investing activities generated cash inflow of CHF 1,381 million. Divestments of financial investments contributed CHF 2,153 million while the sale of Hyposwiss and Klinik Hirslanden brought in CHF 984 million, both partially offset the CHF 1,763 million of cash outflow for the purchase of property and equipment.
Outlook 2003 |
As 2003 begins, the environment continues to be a challenging one. Uncertainty over economic developments and market direction, and rising geopolitical concerns are affecting investor sentiment and therefore transaction levels, and are holding back a significant recovery in corporate activity. Therefore, we do not expect to see an immediate pick-up in our financial performance, as depressed asset levels, low levels of investor activity and possible deterioration of the credit environment weigh on our revenues. Any recovery in the latter part of this year remains simply unpredictable.
2001 |
Net profit |
Our net profit for the year 2001 was CHF 4,973 million, 36% less than the CHF 7,792 million achieved in 2000, reflecting the much more difficult market environment in 2001.
Group targets |
Before goodwill and adjusted for significant financial events:
– | Our return on equity for 2001 was 14.8%, only just below our target range of 15-20%. Although this is lower than the 24.3% that we achieved in 2000, it represented a solid performance when set in the context of the trading environment. Our return on equity in 2000 was boosted by extremely high returns in the exuberant markets of the first half-year, while 2001 saw much weaker economic and stock market performance combined with higher average equity resulting from the acquisition of PaineWebber in fourth quarter 2000. |
– | Basic earnings per share fell 32% to CHF 4.97 in 2001 from 2000. Despite the decline, 2001’s result was still 21% higher than that achieved in 1999. The number of outstanding shares at the outset of 2001 was higher than during most of 2000 because of share issuance to fund the merger with PaineWebber. An ongoing share buyback program, however, caused the number of outstanding shares to fall to below their pre-merger level by 31 December 2001. |
– | The cost/income ratio rose from 69.2% to 77.3%, reflecting lower revenues, the poor performance of our private equity portfolio in 2001 and the influence of the relatively high cost/income ratio typical of UBS Paine-Webber’s business. Despite this rise, operating expenses remained under tight control, with decreases from 2000 levels in UBS Wealth Management’s Business Banking Switzerland business unit and UBS Warburg’s Corporate and Institutional Clients business unit, as well as a clear reduction throughout the year of costs at UBS PaineWebber. |
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Results |
Operating income
rise to the income, rather than by the type of income generated.
– | increased income from our invested equity, as a result of the expansion of our capital base since the PaineWebber merger, and changes in the investment portfolio’s maturity structure leading to an increase in average interest rates; |
– | improved currency management results due to introduction of a new economic hedging strategy and some one-off gains. |
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Group Financial Review Group Results |
sions to a relatively low level, resulting in an actual credit loss expense of CHF 360 million in 2001, compared to CHF 562 million in 2000.
suance. However, UBS’s league table rankings improved, from seventh in international equity new issues in 2000 to second in 2001, according to Dealogic EquitywarePlus. Even excluding the contribution from UBS PaineWebber, equity underwriting revenues increased by CHF 77 million, or 7%, from 2000.
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biggest contribution came from the deferred annuities business.
Operating expenses
31 December 2001, principally reflecting the effect of successful cost control efforts at UBS Wealth Management & Business Banking’s Business Banking Switzerland business unit and UBS PaineWebber, although that was slightly offset by the effect of acquisitions in UBS Global Asset Management and further hiring for the European wealth management initiative.
Tax
PaineWebber merger-related costs
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Group Financial Review Group Results |
periods of up to four years from the merger and the vast majority of them will be paid in the form of UBS shares. Because these payments are a regular and continuing cost of the business, they are not treated as significant financial events. Personnel expenses in 2001 include retention payments for key PaineWebber staff of USD 284 million (CHF 482 million) for the full year.
Dividend |
For 2001, we again made a tax-efficient distribution of capital to our shareholders rather than paying a dividend. On 10 July 2002, we made a distribution of CHF 2.00 to shareholders for the financial year 2001 which reduced the par value from CHF 2.80 to CHF 0.80. This is consistent with the total per share distribution to shareholders of CHF 2.03 in 2000.
Cash flows |
In the twelve-month period to December 2001, cash equivalents increased by CHF 22,889 mil-
lion, principally as a result of financing activities, which generated positive cash flow of CHF 18,103 million. CHF 24,226 million from the issuance of money market paper was offset by CHF 6,038 million for treasury shares and treasury share contract activity as well as CHF 683 million for capital repayments.
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Review of Business Group Performance Introduction |
Introduction
Reporting by Business Unit1
1 | All figures have been adjusted for significant financial events. | |
2 | In management accounts, statistically derived actuarial expected loss adjusted by deferred releases rather than the net IFRS actual credit loss is reported for each business unit (see Note 2 to the Financial Statements). | |
3 | Excludes the amortization of goodwill and other intangible assets. | |
4 | Operating expenses/operating income before credit loss expense. | |
5 | Excludes interest and dividend income. | |
6 | Calculated using the former definition of assets under management up to and including second quarter 2001. | |
7 | For informational purposes only. These pre-tax amounts have not been recorded in the income statement. For details on the fair value calculation, refer to Note 32e to the Financial Statements. |
Business Banking | ||||||||||||||||
Private Banking | Switzerland | |||||||||||||||
CHF million except where indicated | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | ||||||||||||
Income | 7,279 | 7,696 | 5,494 | 5,792 | ||||||||||||
Credit loss (expense)/recovery2 | (28 | ) | (37 | ) | (286 | ) | (567 | ) | ||||||||
Total operating income | 7,251 | 7,659 | 5,208 | 5,225 | ||||||||||||
Personnel expenses | 2,083 | 1,947 | 2,727 | 2,878 | ||||||||||||
General and administrative expenses | 2,158 | 2,038 | 159 | 396 | ||||||||||||
Depreciation | 125 | 151 | 355 | 465 | ||||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 0 | 0 | ||||||||||||
Total operating expenses | 4,477 | 4,245 | 3,241 | 3,739 | ||||||||||||
Business Group performance before tax | 2,774 | 3,414 | 1,967 | 1,486 | ||||||||||||
Business Group performance before tax and goodwill3 | 2,885 | 3,523 | 1,967 | 1,486 | ||||||||||||
Additional information | ||||||||||||||||
Cost/income ratio before goodwill (%)3,4 | 60 | 54 | 59 | 65 | ||||||||||||
Net new money (CHF billion)5 | 16.6 | 24.66 | 3.7 | 9.26 | ||||||||||||
Invested assets (CHF billion) | 688 | 791 | 205 | 215 | ||||||||||||
Fair value of employee stock options granted7 | 58 | 38 | ||||||||||||||
Headcount (full-time equivalents) | 10,488 | 10,249 | 18,442 | 19,220 | ||||||||||||
Management accounting
relating to balance sheet products is calculated on a fully funded basis. In a second step, business units are additionally credited with the risk-free return achieved on the average regulatory equity used.
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UBS Global | Corporate and | |||||||||||||||||||||||||||||||||||||||
Asset Management | Institutional Clients | UBS Capital | UBS PaineWebber | Corporate Center | ||||||||||||||||||||||||||||||||||||
31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||
1,953 | 2,218 | 14,100 | 15,587 | (1,602 | ) | (872 | ) | 5,561 | 6,391 | 1,315 | 800 | |||||||||||||||||||||||||||||
0 | 0 | (128 | ) | (112 | ) | 0 | 0 | (13 | ) | (18 | ) | 249 | 236 | |||||||||||||||||||||||||||
1,953 | 2,218 | 13,972 | 15,475 | (1,602 | ) | (872 | ) | 5,548 | 6,373 | 1,564 | 1,036 | |||||||||||||||||||||||||||||
946 | 1,038 | 7,784 | 8,258 | 94 | 96 | 4,245 | 5,019 | 645 | 592 | |||||||||||||||||||||||||||||||
513 | 569 | 2,314 | 2,586 | 64 | 64 | 1,263 | 1,441 | 601 | 537 | |||||||||||||||||||||||||||||||
37 | 46 | 381 | 454 | 1 | 2 | 149 | 124 | 473 | 372 | |||||||||||||||||||||||||||||||
270 | 286 | 364 | 402 | 0 | 0 | 457 | 502 | 24 | 24 | |||||||||||||||||||||||||||||||
1,766 | 1,939 | 10,843 | 11,700 | 159 | 162 | 6,114 | 7,086 | 1,743 | 1,525 | |||||||||||||||||||||||||||||||
187 | 279 | 3,129 | 3,775 | (1,761 | ) | (1,034 | ) | (566 | ) | (713 | ) | (179 | ) | (489 | ) | |||||||||||||||||||||||||
457 | 565 | 3,493 | 4,177 | (1,761 | ) | (1,034 | ) | (109 | ) | (211 | ) | (155 | ) | (465 | ) | |||||||||||||||||||||||||
77 | 75 | 74 | 72 | 102 | 103 | |||||||||||||||||||||||||||||||||||
(2.4 | ) | 34.9 | 18.5 | 33.2 | ||||||||||||||||||||||||||||||||||||
557 | 672 | 584 | 769 | |||||||||||||||||||||||||||||||||||||
44 | 567 | 15 | 73 | 32 | ||||||||||||||||||||||||||||||||||||
3,346 | 3,281 | 15,964 | 15,562 | 73 | 128 | 19,563 | 20,413 | 1,185 | 1,132 | |||||||||||||||||||||||||||||||
Changes to disclosure since 2001 |
Business unit structure
amortization expense and net funding charges are now being charged to each business unit in proportion to the share of goodwill and intangible assets assigned.
– | Private Banking, which includes the full private banking business and the high-end affluent clients segment that were previously part of the PCC business unit. |
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Review of Business Group Performance Introduction |
– | Business Banking Switzerland, consisting of the individual and corporate clients businesses of the former PCC business unit. |
Other management accounting changes
– | We simplified our allocation of Corporate Center costs to the Business Groups. In the past certain central costs were allocated proportionally to UBS business units. Since 1 January 2002, these charges have been restricted to services that are provided directly under explicit Service Level Agreements. |
– | On 1 January 2002, we changed the way in which we calculate regulatory equity allocated |
to the business units, adjusting the leverage ratio (ratio of BIS Tier 1 capital excluding hybrid capital to BIS total capital) for non-goodwill items. This change in allocation also affects the interest earned on regulatory equity.
– | On 1 January 2002, we reclassified certain client assets of the Business Banking Switzerland business unit as custody-only, which required a restatement of the business unit’s invested assets. |
– | From 1 October 2002, recurring fees at UBS PaineWebber were redefined to include alternative investment fees, fees from UBS Global Asset Management and other advisory fees that were not formerly included in the definition. These changes align the UBS Paine-Webber definition of recurring fees with the asset-based fee definition applied to the Private Banking business. We now uniformly characterize this type of revenue as “recurring fees” -both in Private Banking and UBS PaineWebber. |
Additional disclosure in 2002 |
In our management accounting, the expense for equity-based compensation plans — including employee option plans — is recorded at the intrinsic value of the instruments at grant date. To enhance transparency, for every business unit and Business Group we now disclose the additional compensation expense we would have incurred in 2002 had we recognized the fair value of stock option grants. On a Group level, this additional expense would have been CHF 827 million in 2002 (CHF 690 million after-tax).
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Seasonal characteristics |
Our main businesses do not show significant seasonal patterns - except for UBS Warburg’s Corporate and Institutional Clients business unit, where revenues are impacted by the seasonal characteristics of general financial market activity and deal flows in investment banking.
Client/invested assets reporting |
When reporting on client assets, we show two assets metrics: client assets and invested assets:
– | Client assetsrepresent all client assets managed by or deposited with UBS. |
– | Invested assetsis a more restrictive term and includes all client assets managed by or deposited with UBSfor investment purposes only. |
both the investment management unit and the distribution unit, and double counted in Group totals. For example, a mutual fund provided by UBS Global Asset Management but sold by Private Banking will be counted as invested assets in both business units, as they both provide an independent service to their respective client, add value and generate revenues. This approach is in line with our open architecture strategy and allows us to accurately reflect the actual performance of our individual businesses.
Credit loss expense |
Credit loss expense represents the charges to the profit and loss account relating to amounts due to UBS from loans and advances, over-the-counter (OTC) derivatives and off-balance sheet products that are considered impaired or uncollectable (for more information, please refer to Note 11 to the UBS Group Financial Statements of this report).
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Review of Business Group Performance Introduction |
Business Group Credit Loss Charge
UBS | ||||||||||||||||||||
Wealth | ||||||||||||||||||||
CHF million | Management & | UBS | UBS | Corporate | ||||||||||||||||
For the year ended 31.12.02 | Business Banking | Warburg | PaineWebber | Center | Total | |||||||||||||||
Actuarial expected loss | 569 | 126 | 13 | 708 | ||||||||||||||||
Deferred releases | (255 | ) | 2 | 0 | (253 | ) | ||||||||||||||
Credit loss expense charged to the Business Groups | 314 | 128 | 13 | 455 | ||||||||||||||||
IFRS actual credit loss expense | 241 | (35 | ) | 15 | (15 | ) | 206 | |||||||||||||
Balancing item charged as Credit loss expense in Corporate Center | (249 | ) |
longer term, the expected loss should equal the actual credit loss expense, although the latter is more erratic, in both timing and amount. Therefore, in business unit reporting, in addition to the expected loss, we also charge or refund the difference between actual credit loss expense and expected loss, amortized over a three-year period. With this deferred charging mechanism we not only make Business Groups ultimately accountable for any credit losses they suffer but also give them the incentive to align their credit decisions and risk-adjusted pricing with the medium-term risk profile of their credit transactions. The sum of this “deferral” and the expected loss makes up the Credit loss expense charged in our segment and business unit reporting.
Key performance indicators |
On Group level, we focus on a consistent set of long-term financial targets defined across periods of varying market conditions and designed to ensure that UBS delivers continuously improving returns to shareholders (see pages 21 and 22 of this report). At the Business Group or business unit level, performance is measured with carefully chosen key performance indicators (KPIs). These do not carry explicit targets, but are indicators of the business units’ success in creating value for shareholders. They reflect the key drivers of each unit’s core business activities and include both financial metrics, such as the cost/income ratio, and non-financial metrics, such as invested assets or the number of client advisors.
Reconciliation of Business Group Credit Loss Charge to IFRS Actual Credit Loss Expense/(Recovery) |
Credit loss charge | IFRS actual credit loss expense | |||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
UBS Wealth Management & Business Banking | 314 | 604 | 785 | 241 | 123 | (695 | ) | |||||||||||||||||
UBS Warburg | 128 | 112 | 243 | (35 | ) | 360 | 562 | |||||||||||||||||
UBS PaineWebber | 13 | 18 | 3 | 15 | 15 | 3 | ||||||||||||||||||
Corporate Center | 0 | 0 | 0 | (15 | ) | 0 | 0 | |||||||||||||||||
Total | 455 | 734 | 1,031 | 206 | 498 | (130 | ) | |||||||||||||||||
Balancing item in Corporate Center | (249 | ) | (236 | ) | (1,161 | ) | ||||||||||||||||||
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Indicative Tax Rates
Tax rate | ||||
For the year ended 31 December 2002 | Pre-Goodwill | |||
UBS Wealth Management & Business Banking | 19 | |||
Private Banking | 18 | |||
Business Banking Switzerland | 20 | |||
UBS Global Asset Management | 22 | |||
UBS Warburg | 38 | |||
Corporate and Institutional Clients | 31 | |||
UBS Capital | 3 | |||
UBS PaineWebber | 37 | |||
Business Group tax rates |
Indicative Business Group and business unit tax rates are calculated on an annual basis based on the results and statutory tax rates of the financial year. These rates are approximate calculations, based upon the application to the year’s adjusted earnings of statutory tax rates for the locations in which the Business Groups operated. These tax rates therefore give guidance on the tax cost to each Business Group of doing business during 2002 on a stand-alone basis, without the benefit of tax losses brought forward from earlier years.
The indicative tax rates are presented “pre-goodwill”. They give an indication of what the tax rate would have been if goodwill were not charged for accounting purposes. It is the sum of the tax expense payable on net profit before tax and goodwill in each location, divided by the total net profit before tax and goodwill. However, the tax rates post-goodwill are higher than the pre-goodwill rates, because in some jurisdictions there are limitations on the tax deductibility of amortization costs.
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Review of Business Group Performance UBS Wealth Management & Business Banking |
UBS Wealth Management & Business Banking
Georges Gagnebin
Chairman UBS Wealth Management &
Business Banking
Marcel Rohner
CEO UBS Wealth Management & Business Banking
1 | In management accounts, statistically derived actuarial expected loss adjusted by deferred releases rather than the net IFRS actual credit loss is reported in the Business Groups (see Note 2 to the Financial Statements). | |
2 | Excludes the amortization of goodwill and other intangible assets. | |
3 | Operating expenses/operating income before credit loss expense. | |
4 | For informational purposes only. These pre-tax amounts have not been recorded in the Income statement. For details on the fair value calculation, refer to Note 32e to the Financial Statements. | |
5 | Excludes significant financial event: Income, CHF 155 million (Gain on disposal of Hyposwiss). | |
6 | Excludes significant financial events: General and administrative expenses, CHF 80 million and Depreciation, CHF 72 million (PaineWebber integration costs). |
In 2002, Private Banking’s pre-tax profit adjusted for SFEs was CHF 2,774 million, a 19% decline from 2001. Business Banking Switzerland’s profit before tax was CHF 1,967 million, up 32% from the previous year. Private Banking continues to attract net new money with further strong inflows in our European wealth management initiative. In Business Banking Switzerland, operating expenses fell 13%, and were at their lowest level since 1999.
Business Group reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,928 | 13,488 | 14,355 | (4 | ) | |||||||||||
Credit loss expense1 | (314 | ) | (604 | ) | (785 | ) | (48 | ) | ||||||||
Total operating income | 12,614 | 12,884 | 13,570 | (2 | ) | |||||||||||
Personnel expenses | 4,810 | 4,825 | 5,151 | 0 | ||||||||||||
General and administrative expenses | 2,317 | 2,434 | 2,478 | (5 | ) | |||||||||||
Depreciation | 480 | 616 | 633 | (22 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 81 | 2 | ||||||||||||
Total operating expenses | 7,718 | 7,984 | 8,343 | (3 | ) | |||||||||||
Business Group performance before tax | 4,896 | 4,900 | 5,227 | 0 | ||||||||||||
Business Group performance before tax and goodwill2 | 5,007 | 5,009 | 5,308 | 0 | ||||||||||||
Additional information | ||||||||||||||||
Regulatory equity allocated (average) | 8,800 | 9,400 | 10,150 | (6 | ) | |||||||||||
Cost/income ratio (%)3 | 60 | 59 | 58 | |||||||||||||
Cost/income ratio before goodwill (%)2, 3 | 59 | 58 | 58 | |||||||||||||
Fair value of employee stock options granted | 96 | 4 | ||||||||||||||
Business Group reporting adjusted for Significant Financial Events
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,773 | 5 | 13,488 | 14,355 | (5 | ) | ||||||||||
Credit loss expense1 | (314 | ) | (604 | ) | (785 | ) | (48 | ) | ||||||||
Total operating income | 12,459 | 12,884 | 13,570 | (3 | ) | |||||||||||
Personnel expenses | 4,810 | 4,825 | 5,151 | 0 | ||||||||||||
General and administrative expenses | 2,317 | 2,434 | 2,398 | 6 | (5 | ) | ||||||||||
Depreciation | 480 | 616 | 561 | 6 | (22 | ) | ||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 81 | 2 | ||||||||||||
Total operating expenses | 7,718 | 7,984 | 8,191 | (3 | ) | |||||||||||
Business Group performance before tax | 4,741 | 4,900 | 5,379 | (3 | ) | |||||||||||
Business Group performance before tax and goodwill2 | 4,852 | 5,009 | 5,460 | (3 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost/income ratio (%)3 | 60 | 59 | 57 | |||||||||||||
Cost/income ratio before goodwill (%)2,3 | 60 | 58 | 56 | |||||||||||||
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Review of Business Group Performance UBS Wealth Management & Business Banking |
Private Banking |
1 | Excludes significant financial event: Income, CHF 155 million (Gain on disposal of Hyposwiss). | |
2 | Excludes significant financial events: General and administrative expenses, CHF 80 million and Depreciation, CHF 72 million (PaineWebber integration costs). | |
3 | In management accounts, statistically derived actuarial expected loss adjusted by deferred releases rather than the net IFRS actual credit loss is reported in the Business Groups (see Note 2 to the Financial Statements). | |
4 | Excludes the amortization of goodwill and other intangible assets. | |
5 | Excludes interest and dividend income. | |
6 | Calculated using the former definition of assets under management up to and including second quarter 2001. | |
7 | Income/average invested assets. | |
8 | Operating expenses/operating income before credit loss expense. | |
9 | For informational purposes only. These pre-tax amounts have not been recorded in the Income statement. For details on the fair value calculation, refer to Note 32e to the Financial Statements. |
Business unit reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 7,2791 | 7,696 | 8,402 | (5 | ) | |||||||||||
Credit loss expense3 | (28 | ) | (37 | ) | (35 | ) | (24 | ) | ||||||||
Total operating income | 7,251 | 7,659 | 8,367 | (5 | ) | |||||||||||
Personnel expenses | 2,083 | 1,947 | 2,030 | 7 | ||||||||||||
General and administrative expenses | 2,158 | 2,038 | 2,0192 | 6 | ||||||||||||
Depreciation | 125 | 151 | 1452 | (17 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 55 | 2 | ||||||||||||
Total operating expenses | 4,477 | 4,245 | 4,249 | 5 | ||||||||||||
Business unit performance before tax | 2,774 | 3,414 | 4,118 | (19 | ) | |||||||||||
Business unit performance before tax and goodwill4 | 2,885 | 3,523 | 4,173 | (18 | ) | |||||||||||
KPIs | ||||||||||||||||
Invested assets (CHF billion) | 688 | 791 | 798 | (13 | ) | |||||||||||
Net new money (CHF billion)5, 6 | 16.6 | 24.6 | 1.2 | |||||||||||||
Gross margin on invested assets (bps)7 | 98 | 97 | 105 | 1 | ||||||||||||
Cost/income ratio (%)8 | 62 | 55 | 51 | |||||||||||||
Cost/income ratio before goodwill (%)4, 8 | 60 | 54 | 50 | |||||||||||||
Cost/income ratio before goodwill and excluding the European wealth management initiative (%)4, 8 | 53 | 48 | ||||||||||||||
Client advisors (full-time equivalents) | 3,291 | 3,043 | 8 | |||||||||||||
Private Banking — International Clients | ||||||||||||||||
Income | 5,2291 | 5,498 | 5,890 | (5 | ) | |||||||||||
Invested assets (CHF billion) | 493 | 555 | 550 | (11 | ) | |||||||||||
Net new money (CHF billion)5 | 19.1 | 23.2 | 7.5 | |||||||||||||
Gross margin on invested assets (bps)7 | 100 | 99 | 107 | 1 | ||||||||||||
European wealth management initiative | ||||||||||||||||
(part of Private Banking — International Clients) | ||||||||||||||||
Income | 186 | 140 | 33 | |||||||||||||
Invested assets (CHF billion) | 28 | 16 | 75 | |||||||||||||
Net new money (CHF billion)5 | 7.6 | 5.6 | ||||||||||||||
Client advisors (full-time equivalents) | 551 | 370 | 49 | |||||||||||||
Private Banking — Swiss Clients | ||||||||||||||||
Income | 2,050 | 2,198 | 2,512 | (7 | ) | |||||||||||
Invested assets (CHF billion) | 195 | 236 | 248 | (17 | ) | |||||||||||
Net new money (CHF billion)5, 6 | (2.5 | ) | 1.4 | (6.3 | ) | |||||||||||
Gross margin on invested assets (bps)7 | 95 | 92 | 100 | 3 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Client assets (CHF billion) | 836 | 949 | (12 | ) | ||||||||||||
Regulatory equity allocated (average) | 3,100 | 3,550 | 2,600 | (13 | ) | |||||||||||
Fair value of employee stock options granted | 589 | |||||||||||||||
Headcount (full-time equivalents) | 10,488 | 10,249 | 9,835 | 2 | ||||||||||||
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Components of Operating Income | ||||
Private Banking derives its operating income principally from: | Private Banking’s fees are based on the market value of invested assets and the level of transaction-related activity. As a result, Private Banking’s operating income is affected by such factors as fluctuations in invested assets, changes in market conditions, investment performance and outflows of client funds. | |||
– | fees for financial planning and wealth management services; | |||
– | fees for investment management services; and | |||
– | transaction-related fees |
Significant Financial Events
2002 |
Key performance indicators |
For the full year, net new money inflows totaled CHF 16.6 billion, down from the 2001 result of CHF 24.6 billion. Excluding the net outflow of over CHF 8 billion related to the Italian tax amnesty, the net new money result was essentially unchanged. International clients invested net new money of CHF 19.1 billion in 2002,
down by only CHF 4.1 billion from a year earlier despite the Italian tax amnesty. This excellent underlying result in these difficult markets was due to the continued success of our European wealth management initiative as well as significant inflows from clients in Asia and the Americas.
In the year to 31 December 2002, invested assets fell 13% to CHF 688 billion, mainly due to the steep drop in global equity markets as well as the 17% drop in the US dollar against the Swiss franc. Some 38% of Private Banking’s invested assets are denominated in US dollars.
Gross margin on invested assets remained resilient and rose by 1 basis point to 98 basis
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points. Assets as well as revenues fell in 2002 from the already depressed 2001 levels. The split of the margin remained unchanged from 2001 with 72% of the margin stemming from recurring revenue and 28% from transactional fees.
Over the full year, the pre-goodwill cost/ income ratio increased from 54% in 2001 to 60% in 2002, reflecting the ongoing investment in our European wealth management initiative as well as the strong decline in asset-based revenues. Excluding the European wealth management initiative, our cost/income ratio increased from 48% in 2001 to 53% in 2002.
European wealth management
Progress so far has been promising with net new money inflows into our domestic European network for full-year 2002 totaling CHF 7.6 billion, up 36% from last year’s intake of CHF 5.6 billion. The inflow in 2002 reflects an annual growth rate in net new money of 48%. For full-year 2002, income from our European wealth management initiative was CHF 186 million, 33% or CHF 46 million above the 2001 level, reflecting the success of our business expansion program.
We hired a total of 181 client advisors in 2002, bringing the total at 31 December 2002 to 551. We remain committed to growing our presence in our European target markets and will continue to invest in qualified advisory staff at a rate determined by the market environment and business opportunities.
Results |
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Review of Business Group Performance UBS Wealth Management & Business Banking |
Personnel as well as general and administrative expenses increased due to this strategic initiative.
Operating income
Operating expenses
Headcount
2001 |
Key performance indicators |
Net new money inflows in 2001, at CHF 24.6 billion, were CHF 23.4 billion higher than in 2000, demonstrating our success in re-energizing our asset-gathering performance, as well as our determined focus on growing our wealth management franchise.
European wealth management
Results |
Weaker markets than in 2000 and the costs of investing in the European wealth management initiative brought full-year pre-tax profits in
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2001 down 17% from 2000 to CHF 3,414 million, despite a continued focus on controlling operating costs.
Operating income
Operating expenses
Headcount
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Review of Business Group Performance UBS Wealth Management & Business Banking |
Business Banking Switzerland |
Business unit reporting
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Private clients | 3,014 | 3,185 | 3,520 | (5 | ) | |||||||||||
Corporate clients | 2,148 | 2,263 | 2,217 | (5 | ) | |||||||||||
Other areas | 332 | 344 | 216 | (3 | ) | |||||||||||
Income | 5,494 | 5,792 | 5,953 | (5 | ) | |||||||||||
Credit loss expense1 | (286 | ) | (567 | ) | (750 | ) | (50 | ) | ||||||||
Total operating income | 5,208 | 5,225 | 5,203 | 0 | ||||||||||||
Personnel expenses | 2,727 | 2,878 | 3,121 | (5 | ) | |||||||||||
General and administrative expenses | 159 | 396 | 379 | (60 | ) | |||||||||||
Depreciation | 355 | 465 | 416 | (24 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 26 | |||||||||||||
Total operating expenses | 3,241 | 3,739 | 3,942 | (13 | ) | |||||||||||
Business unit performance before tax | 1,967 | 1,486 | 1,261 | 32 | ||||||||||||
Business unit performance before tax and goodwill2 | 1,967 | 1,486 | 1,287 | 32 | ||||||||||||
KPIs | ||||||||||||||||
Invested assets (CHF billion) | 205 | 215 | 239 | (5 | ) | |||||||||||
Net new money (CHF billion)3, 4 | 3.7 | 9.2 | 2.7 | |||||||||||||
Cost/income ratio (%)5 | 59 | 65 | 66 | |||||||||||||
Cost/income ratio before goodwill (%)2, 5 | 59 | 65 | 66 | |||||||||||||
Non-performing loans/gross loans outstanding (%) | 3.6 | 4.8 | 5.5 | |||||||||||||
Impaired loans/gross loans outstanding (%) | 6.0 | 7.7 | 9.4 | |||||||||||||
Additional information | % change from | |||||||||||||||
As at or for the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Deferred releases included in credit loss expense1 | 240 | 115 | 109 | |||||||||||||
Client assets (CHF billion) | 494 | 544 | (9 | ) | ||||||||||||
Regulatory equity allocated (average) | 5,700 | 5,850 | 7,550 | (3 | ) | |||||||||||
Fair value of employee stock options granted | 38 | 6 | ||||||||||||||
Headcount (full-time equivalents) | 18,442 | 19,220 | 20,437 | (4 | ) | |||||||||||
Components of Operating Income | ||||
Business Banking Switzerland derives its operating income principally from: | As a result, Business Banking Switzerland’s operating income is affected by movements in interest rates, fluctuations in invested assets, client activity levels, investment performance and changes in market conditions. | |||
– | net interest income from its loan portfolio and customer deposits; | |||
– | fees for investment management services; | |||
– | transaction fees. |
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Significant financial events
2002 |
Key performance indicators |
Invested assets fell from CHF 215 billion in 2001 to CHF 205 billion in 2002 as negative market developments and the weakening of major currencies against the Swiss franc were only partially offset by positive net new money inflows. In 2002, Business Banking Switzerland attracted net new money of CHF 3.7 billion, down from CHF 9.2 billion in 2001. This drop was due to smaller inflows from large corporate client accounts — a business traditionally subject to volatile inflows and outflows.
Business Banking Switzerland’s loan portfolio decreased to CHF 139 billion at 31 December 2002 from CHF 146 billion at 31 December 2001, driven by lower volumes in the corporate clients area and the further reduction in the recovery portfolio from CHF 12 billion at 31 December 2001 to CHF 8.6 billion at 31 December 2002. This positive development was also reflected in the key credit quality ratios: the non-performing loan ratio declined to 3.6% from 4.8%, while the ratio of impaired loans to gross loans saw a further improvement, falling to 6.0% from 7.7%.
margins on savings and cash accounts as well as the fall in the US dollar, which caused the Swiss franc equivalent of US dollar interest rate revenues to drop.
Results |
In 2002, full-year pre-tax profit was a record CHF 1,967 million, up 32% from 2001, achieved despite declining revenues in difficult market conditions, due to continued tight management of our cost base and lower credit loss expenses. Personnel expenses dropped due to lower performance-related compensation as well as a drop in headcount whereas general and administrative expenses reached their lowest level since 1999.
Operating income
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Review of Business Group Performance UBS Wealth Management & Business Banking |
286 million in 2002, down 50% from CHF 567 million in 2001. This drop reflects the continued success in improving the quality of our loan portfolio through the implementation of risk-adjusted pricing and the deferred benefit of the prior year’s better than expected credit performance.
Operating expenses
Headcount
2001 |
Key performance indicators |
In 2001, Business Banking Switzerland attracted net new money of CHF 9.2 billion, a clear improvement over 2000’s CHF 2.7 billion, reflecting improved flows from both private clients and corporate clients, where flows can be larger and more volatile. Invested assets were CHF 215 billion as of 31 December 2001.
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Results |
Business Banking Switzerland enjoyed a very strong year, despite the much more difficult market conditions, with profit before tax in 2001 up 18% compared to 2000, at CHF 1,486 million. The implementation of risk-adjusted pricing and the strength of the Swiss economy in 2000 and early 2001 led to a significant increase in credit quality, while operating expenses have remained under tight control, falling 5% compared to 2000.
Operating income
Operating expenses
Headcount
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Review of Business Group Performance UBS Global Asset Management |
UBS Global Asset Management
John A. Fraser
Chairman and CEO
UBS Global Asset Management
Pre-tax profit in 2002 was CHF 187 million, down 33% from 2001. The declines in equity markets throughout 2002 resulted in lower invested asset levels and subsequently, lower asset-based revenues. This decrease was partially offset by ongoing initiatives to control costs.
Business Group reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Institutional fees | 899 | 1,174 | 1,242 | (23 | ) | |||||||||||
Wholesale Intermediary fees | 1,054 | 1,044 | 836 | 1 | ||||||||||||
Total operating income | 1,953 | 2,218 | 2,078 | (12 | ) | |||||||||||
Personnel expenses | 946 | 1,038 | 941 | (9 | ) | |||||||||||
General and administrative expenses | 513 | 569 | 434 | (10 | ) | |||||||||||
Depreciation | 37 | 46 | 49 | (20 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 270 | 286 | 267 | (6 | ) | |||||||||||
Total operating expenses | 1,766 | 1,939 | 1,691 | (9 | ) | |||||||||||
Business Group performance before tax | 187 | 279 | 387 | (33 | ) | |||||||||||
Business Group performance before tax and goodwill1 | 457 | 565 | 654 | (19 | ) | |||||||||||
KPIs | ||||||||||||||||
Cost/income ratio (%)2 | 90 | 87 | 81 | |||||||||||||
Cost/income ratio before goodwill (%)1, 2 | 77 | 75 | 69 | |||||||||||||
Institutional | ||||||||||||||||
Invested assets (CHF billion) | 2793 | 328 | 323 | (15 | ) | |||||||||||
Net new money (CHF billion)4 | (0.6 | ) | 6.2 | (70.8 | )5 | |||||||||||
Gross margin on invested assets (bps)6 | 29 | 37 | 38 | (22 | ) | |||||||||||
Wholesale Intermediary | ||||||||||||||||
Invested assets (CHF billion) | 2783 | 344 | 319 | (19 | ) | |||||||||||
Net new money (CHF billion)4 | (1.8 | ) | 28.7 | 2.9 | 5 | |||||||||||
Gross margin on invested assets (bps)6 | 34 | 32 | 36 | 6 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Client assets (CHF billion) | 557 | 672 | (17 | ) | ||||||||||||
Regulatory equity allocated (average) | 1,750 | 1,850 | 1,550 | (5 | ) | |||||||||||
Fair value of employee stock options granted | 447 | |||||||||||||||
Headcount (full-time equivalents) | 3,346 | 3,281 | 2,860 | 2 | ||||||||||||
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Components of Operating Income | ||
UBS Global Asset Management generates its revenue from the asset management services it provides to institutional and wholesale intermediary clients. Fees charged to institutional clients and wholesale intermediary clients are based on the market value of invested assets and on | successful investment performance. As a result, UBS Global Asset Management’s revenues are affected by changes in market and currency valuation levels as well as flows of client funds, and relative investment performance. |
Significant financial events
2002 |
Key performance indicators |
For 2002, the pre-goodwill cost/income ratio was 77%, up 2 percentage points from a year earlier. The increase was primarily due to lower invested asset values, which resulted in lower asset-based revenues. Those developments, however, were partially offset by lower operating expenses prompted by ongoing initiatives to control costs.
Institutional
Full-year gross margin was 29 basis points, a decrease of 8 basis points from 2001 due to lower performance fees and a lower proportion of assets in alternative investments.
Wholesale Intermediary
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Review of Business Group Performance UBS Global Asset Management |
native investments, primarily at GAM, largely offset the outflow.
Investment capabilities and performance |
Global equity markets ended the year in significantly negative territory with the US market, as measured by the S&P 500, posting its first consecutive three-year decline since the Second World War. Markets outside the US have now fallen further from peak to trough than in their most significant previous contraction in the mid-1970s. Contributing to the erosion of equity values was the investor realization that any recovery would not be as robust as hoped, both with regard to economic fundamentals and earnings.
significant margins. The UK Balanced Equity portfolio continued to perform well against theFTSE All-Share Indexfor the same periods and our US Equity Composite surpassed theWilshire 5000benchmark by more than 5 percentage points in 2002. It also remains ahead of the benchmark for 3-, and 5-year periods. Emerging equities also showed good results for the year and have also outperformed their benchmark, theMSCI Emerging Equity Markets Free Index, for each of the past 3- and 5-year periods as well.
Results |
UBS Global Asset Management reported for full-year 2002 a pre-tax profit of CHF 187 million, a decrease of 33% from 2001’s pre-tax profit of CHF 279 million. The declines in equity markets experienced throughout 2002 resulted in lower invested asset levels and subsequently, lower asset-based revenues. These developments were partially offset by ongoing initiatives to control costs. Over the year, personnel expenses decreased due to a decline in incentive compensation while general and administrative
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expenses fell due to lower IT and premises expenditures.
Operating income
Operating expenses
Headcount
2001 |
Key performance indicators |
Invested assets increased 5% during the year from CHF 642 billion on 31 December 2000 to CHF 672 billion on 31 December 2001. Net new money was CHF 34.9 billion for the year, reflecting the recognition of strong relative investment performance and business development efforts. The pre-goodwill cost/income ratio rose from 69% in 2000 to 75% in 2001, principally reflecting the higher cost/income ratio of the Brinson Advisors (now rebranded UBS Global Asset Management) business transferred from UBS PaineWebber at the start of the year.
Institutional
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Review of Business Group Performance UBS Global Asset Management |
ment management platform, which delivered strong relative investment performance in both 2001 and 2000.
Wholesale Intermediary
Results |
Pre-tax profit of CHF 279 million in 2001 was 28% lower than 2000. Despite market declines and lower performance fees in the O’Connor business, income increased as a result of the new investment funds pricing structure introduced in 2001, the acquisition of RT Capital and the inclusion of Brinson Advisors. This was more than offset by higher personnel expenses and general and administrative expenses driven by spending on growth initiatives, the integration of Brinson Advisors and the acquisition of RT Capital in third quarter.
Operating income
Operating expenses
Headcount
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Review of Business Group Performance UBS Warburg |
UBS Warburg
John P. Costas
Chairman and CEO
UBS Warburg
1 | In management accounts, statistically derived actuarial expected loss adjusted by deferred releases rather than the net IFRS actual credit loss is reported in the Business Groups (see Note 2 to the Financial Statements). | |
2 | Excludes the amortization of goodwill and other intangible assets. | |
3 | Operating expenses/operating income before credit loss expense. | |
4 | Excludes interest and dividend income. | |
5 | For informational purposes only. These pre-tax amounts have not been recorded in the Income statement. For details on the fair value calculation, refer to Note 32e to the Financial Statements. | |
6 | Excludes significant financial events: Personnel expenses, CHF 86 million, General and administrative expenses, CHF 13 million and Depreciation, CHF 7 million (all PaineWebber integration costs). |
Corporate and Institutional Clients net profit before tax in 2002, at CHF 3,129 million, was 17% lower than in 2001. Market conditions remained challenging, although our Fixed Income, Rates and Currencies business held up well. UBS Capital recorded a pre-tax loss of CHF 1,761 million, with challenging market conditions and a slowdown in corporate activity leading to deteriorating valuations in all markets and industries.
Business Group reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,498 | 14,715 | 18,240 | (15 | ) | |||||||||||
Credit loss expense1 | (128 | ) | (112 | ) | (243 | ) | 14 | |||||||||
Total operating income | 12,370 | 14,603 | 17,997 | (15 | ) | |||||||||||
Personnel expenses | 7,878 | 8,354 | 9,451 | (6 | ) | |||||||||||
General and administrative expenses | 2,378 | 2,650 | 2,755 | (10 | ) | |||||||||||
Depreciation | 382 | 456 | 564 | (16 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 192 | (9 | ) | |||||||||||
Total operating expenses | 11,002 | 11,862 | 12,962 | (7 | ) | |||||||||||
Business Group performance before tax | 1,368 | 2,741 | 5,035 | (50 | ) | |||||||||||
Business Group performance before tax and goodwill2 | 1,732 | 3,143 | 5,227 | (45 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost/income ratio (%)3 | 88 | 81 | 71 | |||||||||||||
Cost/income ratio before goodwill (%)2, 3 | 85 | 78 | 70 | |||||||||||||
Net new money (CHF billion)4 | 0.5 | 0.1 | ||||||||||||||
Invested assets (CHF billion) | 3 | 1 | 1 | 200 | ||||||||||||
Client assets (CHF billion) | 133 | 109 | 22 | |||||||||||||
Regulatory equity allocated (average) | 13,100 | 14,300 | 10,800 | (8 | ) | |||||||||||
Fair value of employee stock options granted | 5825 | |||||||||||||||
Business Group reporting adjusted for Significant Financial Events | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 12,498 | 14,715 | 18,240 | (15 | ) | |||||||||||
Credit loss expense1 | (128 | ) | (112 | ) | (243 | ) | 14 | |||||||||
Total operating income | 12,370 | 14,603 | 17,997 | (15 | ) | |||||||||||
Personnel expenses | 7,878 | 8,354 | 9,365 | 6 | (6 | ) | ||||||||||
General and administrative expenses | 2,378 | 2,650 | 2,742 | 6 | (10 | ) | ||||||||||
Depreciation | 382 | 456 | 557 | 6 | (16 | ) | ||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 192 | (9 | ) | |||||||||||
Total operating expenses | 11,002 | 11,862 | 12,856 | (7 | ) | |||||||||||
Business Group performance before tax | 1,368 | 2,741 | 5,141 | (50 | ) | |||||||||||
Business Group performance before tax and goodwill2 | 1,732 | 3,143 | 5,333 | (45 | ) | |||||||||||
Additional information | ||||||||||||||||
Cost/income ratio (%)3 | 88 | 81 | 70 | |||||||||||||
Cost/income ratio before goodwill (%)2, 3 | 85 | 78 | 69 | |||||||||||||
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Corporate and Institutional Clients |
Business Unit reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Investment Banking1 | 1,915 | 2,541 | 2,700 | (25 | ) | |||||||||||
Equities | 5,625 | 6,422 | 10,300 | (12 | ) | |||||||||||
Fixed Income, Rates and Currencies2 | 6,490 | 6,350 | 4,590 | 2 | ||||||||||||
Non-core business | 70 | 274 | 280 | (74 | ) | |||||||||||
Income | 14,100 | 15,587 | 17,870 | (10 | ) | |||||||||||
Credit loss expense3 | (128 | ) | (112 | ) | (243 | ) | 14 | |||||||||
Total operating income | 13,972 | 15,475 | 17,627 | (10 | ) | |||||||||||
Personnel expenses4 | 7,784 | 8,258 | 9,223 | 5 | (6 | ) | ||||||||||
General and administrative expenses | 2,314 | 2,586 | 2,695 | 5 | (11 | ) | ||||||||||
Depreciation | 381 | 454 | 555 | 5 | (16 | ) | ||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 190 | (9 | ) | |||||||||||
Total operating expenses | 10,843 | 11,700 | 12,663 | (7 | ) | |||||||||||
Business unit performance before tax | 3,129 | 3,775 | 4,964 | (17 | ) | |||||||||||
Business unit performance before tax and goodwill6 | 3,493 | 4,177 | 5,154 | (16 | ) | |||||||||||
KPIs | ||||||||||||||||
Compensation ratio (%)7 | 55 | 53 | 52 | |||||||||||||
Cost/income ratio (%)8 | 77 | 75 | 71 | |||||||||||||
Cost/income ratio before goodwill (%)6, 8 | 74 | 72 | 70 | |||||||||||||
Non-performing loans/gross loans outstanding (%) | 1.6 | 2.6 | 2.8 | |||||||||||||
Impaired loans/gross loans outstanding (%) | 3.2 | 5.4 | 5.6 | |||||||||||||
Average VaR (10-day 99%) | 275 | 252 | 242 | 9 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at or for the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Deferred releases included in credit loss expense3 | (2 | ) | 38 | 36 | ||||||||||||
Regulatory equity allocated (average) | 12,550 | 13,600 | 10,250 | (8 | ) | |||||||||||
Fair value of employee stock options granted | 5679 | |||||||||||||||
Headcount (full-time equivalents) | 15,964 | 15,562 | 15,262 | 3 | ||||||||||||
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Components of Operating Income | ||||||
The Corporate and Institutional Clients unit generates operating income from: | – | gains and losses on market making, proprietary, and arbitrage positions. | ||||
– | commissions on agency transactions and spreads or markups on principal transactions; | As a result, Corporate and Institutional Clients’ operating income is affected by movements in market conditions, interest rate swings, the level of trading activity in primary and secondary markets and the extent of merger and acquisition activity. These and other factors have had, and may in the future have, a significant impact on results of operations from year to year. | ||||
– | fees from debt and equity capital markets transactions, leveraged finance, and the structuring of derivatives and complex transactions; | |||||
– | mergers and acquisitions and other advisory fees; | |||||
– | interest income on principal transactions and from the loan portfolio; and |
Significant financial events
2002 |
Key performance indicators |
Our performance in 2002 reflects the worldwide downturn in market conditions. However, as a result of our strong client franchise and continuing efforts to manage costs, results have proven relatively resilient.
Our compensation ratio in 2002 was 55%, a slight increase on the 53% recorded in 2001, reflecting the relatively strong performance of many of our businesses compared to competitors and to market conditions.
Average Value at Risk (VaR) for Corporate and Institutional Clients increased from CHF 252 million in 2001 to CHF 275 million in 2002, remaining within the normal ranges.
Total loans increased by 2% from CHF 61 billion on 31 December 2001 to CHF 62 billion on 31 December 2002, due to an increase in short-term money market deposits although this was partially offset by repayments from European multi-
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nationals, reflecting the continued reduction of our non-core commercial lending activities as well as the drop in the US dollar against the Swiss franc.
Results |
UBS Warburg’s Corporate and Institutional Clients business unit reported 2002 pre-tax profit of CHF 3,129 million, a decrease of 17% from 2001, reflecting difficult economic conditions, particularly for the investment banking and equities businesses. This was partially offset by the strong result of our fixed income, rates and currencies business. Over the full year, overall expenses dropped by 7% reflecting lower personnel expenses driven by a reduction in incentive compensation as well as the success of our continued cost containment initiatives.
Operating income
Investment Bankingrevenues for the full-year dropped by 25% from CHF 2,541 million to CHF 1,915 million in 2002, due to much lower corporate activity, which translated into a 22% drop in the global fee pool compared to 2001.
Operating expenses
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underlying reduction of 9% from last year’s expense levels reflects the continuing success of our cost containment initiatives accentuated by the drop of the US dollar against the Swiss franc.
Headcount
2001 |
Key performance indicators |
Corporate and Institutional Clients measures its expense base primarily in terms of percentage of
revenues, looking at both personnel costs and non-personnel costs on this basis.
Results |
We recorded a strong performance in 2001, relative to the much weaker markets this year. Pre-tax profit in 2001 was CHF 3,775 million, a decline of 24% over 2000, our best year ever. Equities and Investment Banking both suffered from the economic downturn and the consequent weakness in their global markets, while the Fixed Income, Rates and Currencies business delivered record results, driven by interest rate reductions and increased volatility, and supported by the expansion of businesses acquired from Paine-Webber. Investment Banking continued to outperform 2000 in terms of market share, with full-year analysis showing us with a 4.4% share of fees, compared to 3.6% in 2000.
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Review of Business Group Performance UBS Warburg |
Operating income
Operating expenses
Headcount
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UBS Capital |
Business unit reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Total operating income | (1,602 | ) | (872 | ) | 370 | (84 | ) | |||||||||
Personnel expenses | 94 | 96 | 142 | (2 | ) | |||||||||||
General and administrative expenses | 64 | 64 | 47 | 0 | ||||||||||||
Depreciation | 1 | 2 | 2 | (50 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 2 | |||||||||||||
Total operating expenses | 159 | 162 | 193 | (2 | ) | |||||||||||
Business unit performance before tax | (1,761 | ) | (1,034 | ) | 177 | (70 | ) | |||||||||
Business unit performance before tax and goodwill1 | (1,761 | ) | (1,034 | ) | 179 | (70 | ) | |||||||||
KPIs | ||||||||||||||||
Value creation (CHF billion) | (1.4 | ) | (1.4 | ) | 0.6 | 0 | ||||||||||
% change from | ||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Investment (CHF billion)2 | 3.1 | 5.0 | 5.5 | (38 | ) | |||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Portfolio fair value (CHF billion) | 3.8 | 5.6 | 6.9 | (32 | ) | |||||||||||
Regulatory equity allocated (average) | 550 | 700 | 550 | (21 | ) | |||||||||||
Fair value of employee stock options granted | 153 | |||||||||||||||
Headcount (full-time equivalents) | 73 | 128 | 129 | (43 | ) | |||||||||||
Components of Operating Income | ||
UBS Capital’s primary source of operating income is capital gains from the disposal or sale of its investments, which are recorded at the time of ultimate divestment. As a result, appreciation in fair market value is recognized as operating income only at the time of sale. The level of annual operating income from UBS Capital is directly | affected by the level of investment disposals that take place during the year. Similarly, depreciation in fair market value is only recognized against operating income if an investment becomes permanently impaired and has to be written down. Writedowns of the value of its investments can negatively affect UBS Capital’s operating income. |
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Review of Business Group Performance UBS Warburg |
Significant financial events
2002 |
Key performance indicators |
The level of our private equity investments was CHF 3.1 billion on 31 December 2002, a decline of 38% from CHF 5.0 billion on 31 December 2001. This reduction reflects writedowns made on direct investments and third party funds, as well as successfully executed exits. In full-year 2002, write-downs included in operating income totaled CHF 1.7 billion, up from CHF 1.1 billion a year earlier.
The fair value of the portfolio on 31 December 2002 was CHF 3.8 billion, down from CHF 5.6 billion on 31 December 2001, reflecting divestments in the portfolio and value reductions for existing investments. The level of net unrealized gains was CHF 0.8 billion on 31 December 2002, up from CHF 0.6 billion on 31 December 2001.
Results |
Full-year results for UBS Capital reflect continued tough economic conditions, impacting private equity valuations across a range of sectors, a factor that was compounded by the prolonged downturn suffered by all major equity markets. The challenging economic environment has adversely affected many of the companies in the portfolio while the continued hostile climate for divestments has restricted capital gains from exit opportunities. Against this background, UBS Capital posted a pre-tax loss in 2002 of CHF 1,761 million, CHF 727 million worse than in 2001.
2001 |
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Key performance indicators |
UBS Capital’s private equity investments decreased to CHF 5.0 billion on 31 December 2001 from CHF 5.5 billion at the end of 2000, with the decline due to writedowns on the book value of investments, as well as a small number of divestments during the year, which more than offset drawdowns of previously committed investments and the low level of other new investments during the year.
Results |
UBS Capital recorded an operating loss of CHF 872 million in 2001, compared to operating income of CHF 370 million in 2000. Challenging markets and the continued slowdown in corporate activity meant that there were few opportunities for significant divestments in 2001, while weak economic conditions led to deteriorating valuations across a range of industry sectors, resulting in a high level of writedowns of investments in the portfolio.
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Review of Business Group Performance UBS PaineWebber |
UBS PaineWebber
Joseph J. Grano, Jr.
Chairman and CEO, UBS PaineWebber
Mark B. Sutton
President and Chief Operating Officer
UBS PaineWebber
UBS PaineWebber’s pre-tax loss adjusted for SFEs in 2002 was CHF 566 million, with the depreciation of the US dollar against the Swiss franc weighing on results. Excluding acquisition costs, operating pre-tax profit was CHF 632 million compared to CHF 693 million a year earlier.
Business Group reporting1 | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 5,561 | 6,391 | 1,214 | (13 | ) | |||||||||||
Credit loss expense2 | (13 | ) | (18 | ) | (3 | ) | (28 | ) | ||||||||
Total operating income | 5,548 | 6,373 | 1,211 | (13 | ) | |||||||||||
Personnel expenses3 | 4,245 | 5,019 | 1,098 | (15 | ) | |||||||||||
General and administrative expenses | 1,263 | 1,441 | 344 | (12 | ) | |||||||||||
Depreciation | 149 | 124 | 42 | 20 | ||||||||||||
Amortization of goodwill and other intangible assets | 1,691 | 502 | 84 | 237 | ||||||||||||
Total operating expenses | 7,348 | 7,086 | 1,568 | 4 | ||||||||||||
Business Group performance before tax | (1,800 | ) | (713 | ) | (357 | ) | 152 | |||||||||
Business Group performance before tax and goodwill4 | (109 | ) | (211 | ) | (273 | ) | (48 | ) | ||||||||
Business Group performance before tax and acquisition costs12 | 632 | 693 | (72 | ) | (9 | ) | ||||||||||
KPIs | ||||||||||||||||
Invested assets (CHF billion) | 584 | 769 | 765 | (24 | ) | |||||||||||
Net new money (CHF billion)5 | 18.5 | 33.2 | 14.5 | 6 | ||||||||||||
Interest and dividend income (CHF billion)7 | 17.9 | 21.5 | (17 | ) | ||||||||||||
Cost/income ratio (%)8 | 132 | 111 | 129 | |||||||||||||
Cost/income ratio before goodwill (%)4, 8 | 102 | 103 | 122 | |||||||||||||
Recurring fees9 | 2,199 | 2,366 | 434 | (7 | ) | |||||||||||
Financial advisors (full-time equivalents) | 8,857 | 8,718 | 8,731 | 2 | ||||||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Client assets (CHF billion) | 650 | 841 | (23 | ) | ||||||||||||
Regulatory equity allocated (average) | 7,450 | 8,550 | 9,200 | (13 | ) | |||||||||||
Fair value of employee stock options granted | 7310 | |||||||||||||||
Headcount (full-time equivalents) | 19,563 | 20,413 | 21,567 | (4 | ) | |||||||||||
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Business Group reporting adjusted for Significant Financial Events | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 5,561 | 6,391 | 1,214 | (13 | ) | |||||||||||
Credit loss expense2 | (13 | ) | (18 | ) | (3 | ) | (28 | ) | ||||||||
Total operating income | 5,548 | 6,373 | 1,211 | (13 | ) | |||||||||||
Personnel expenses3 | 4,245 | 5,019 | 1,098 | (15 | ) | |||||||||||
General and administrative expenses | 1,263 | 1,441 | 344 | (12 | ) | |||||||||||
Depreciation | 149 | 124 | 42 | 20 | ||||||||||||
Amortization of goodwill and other intangible assets | 457 | 11 | 502 | 84 | (9 | ) | ||||||||||
Total operating expenses | 6,114 | 7,086 | 1,568 | (14 | ) | |||||||||||
Business Group performance before tax | (566 | ) | (713 | ) | (357 | ) | (21 | ) | ||||||||
Business Group performance before tax and goodwill4 | (109) | (211 | ) | (273 | ) | (48 | ) | |||||||||
Business Group performance before tax and acquisition costs12 | 632 | 693 | (72 | ) | (9 | ) | ||||||||||
KPIs | ||||||||||||||||
Gross margin on invested assets (bps)13 | 82 | 84 | 67 | (2 | ) | |||||||||||
Gross margin on invested assets before acquisition costs (bps)12, 13 | 88 | 90 | 71 | (2 | ) | |||||||||||
Cost/income ratio (%)8 | 110 | 111 | 129 | |||||||||||||
Cost/income ratio before goodwill (%)4, 8 | 102 | 103 | 122 | |||||||||||||
Cost/income ratio before acquisition costs (%)8, 12 | 89 | 90 | 105 | |||||||||||||
Components of Operating Income | ||||
UBS PaineWebber principally derives its operating income from: | These fees are based on the market value of invested assets transaction-related activity. As a result, operating income is affected by such factors as fluctuations in invested assets, change in market conditions, investment performance and inflows and outflows of client funds, and investor activity levels. | |||
– | fees for financial planning and wealth management services | |||
– | fees for discretionary management services and | |||
– | transaction-related fees. |
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Review of Business Group Performance UBS PaineWebber |
Significant financial events
PaineWebber |
UBS PaineWebber became part of UBS following the merger between UBS and Paine Webber Group, Inc., which was completed on 3 November 2000. At the merger, it became a business unit of UBS Warburg. On 1 January 2002, UBS PaineWebber became a separate Business Group within UBS.
2002 |
Key performance indicators
US dollar’s weakening against the Swiss franc. Excluding the impact of currency fluctuations, invested assets fell 8% during the year, mainly due to US equity market declines although that was partially offset by net new money inflows.
The gross margin on invested assets was 82 basis points for full-year 2002, down from 84 basis points in 2001. The gross margin on invested assets before acquisition costs (goodwill, net funding costs and retention payments) was 88 basis points, down from 90 basis points in 2001. Revenues declined more than invested assets due to lower customer activity levels. This was partially offset by higher revenues from our municipal securities business which had a record result in 2002.
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is a direct result of cost management initiatives implemented in 2002, among them reductions in non-financial advisor headcount, professional fees, advertising and office-related costs.
We continue to invest in our distribution channels and advisory personnel. In 2002, the number of financial advisors rose by 139 from 8,718 to 8,857 with recruiting and retention success partially offset by higher attrition rates among less experienced and less productive financial advisors.
Results
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Review of Business Group Performance UBS PaineWebber |
Operating income
Operating expenses
Depreciation increased CHF 25 million to CHF 149 million in 2002 from CHF 124 million in 2001. Excluding currency movements, the increase in depreciation of 32% was due to higher technology equipment charges. Goodwill and other intangible amortization dropped from CHF 502 million in 2001 to CHF 457 million in 2002 as a result of the weakening US dollar against the Swiss franc.
Headcount
2001 |
Comparisons of full-year 2001 results to full-year 2000 reflect the very different scale of this Business Group prior to the acquisition of Paine-Webber in November 2000.
Key performance indicators
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Webber. UBS PaineWebber’s ability to continue to generate high levels of net new money despite the uncertain markets in 2001 reflects the strength of its client franchise amongst high net worth individuals in the US.
Results
Operating income
Operating expenses
Headcount
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Review of Business Group Performance Corporate Center |
Corporate Center
Business Group reporting | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 1,387 | 800 | 385 | 73 | ||||||||||||
Credit loss recovery1 | 249 | 236 | 1,161 | 6 | ||||||||||||
Total operating income | 1,636 | 1,036 | 1,546 | 58 | ||||||||||||
Personnel expenses | 645 | 592 | 522 | 9 | ||||||||||||
General and administrative expenses | 601 | 537 | 754 | 12 | ||||||||||||
Depreciation | 473 | 372 | 320 | 27 | ||||||||||||
Amortization of goodwill and other intangible assets | 24 | 24 | 43 | 0 | ||||||||||||
Total operating expenses | 1,743 | 1,525 | 1,639 | 14 | ||||||||||||
Business Group performance before tax | (107 | ) | (489 | ) | (93 | ) | (78 | ) | ||||||||
Business Group performance before tax and goodwill2 | (83 | ) | (465 | ) | (50 | ) | (82 | ) | ||||||||
Additional information | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Regulatory equity allocated (average) | 9,400 | 8,250 | 12,300 | 14 | ||||||||||||
Fair value of employee stock options granted | 32 | 3 | ||||||||||||||
Headcount (full-time equivalents) | 1,185 | 1,132 | 986 | 5 | ||||||||||||
Business Group reporting adjusted for Significant Financial Events | ||||||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income | 1,315 | 4 | 800 | 385 | 64 | |||||||||||
Credit loss recovery1 | 249 | 236 | 1,161 | 6 | ||||||||||||
Total operating income | 1,564 | 1,036 | 1,546 | 51 | ||||||||||||
Personnel expenses | 645 | 592 | 490 | 5 | 9 | |||||||||||
General and administrative expenses | 601 | 537 | 604 | 5 | 12 | |||||||||||
Depreciation | 473 | 372 | 320 | 27 | ||||||||||||
Amortization of goodwill and other intangible assets | 24 | 24 | 43 | 0 | ||||||||||||
Total operating expenses | 1,743 | 1,525 | 1,457 | 14 | ||||||||||||
Business Group performance before tax | (179 | ) | (489 | ) | 89 | (63 | ) | |||||||||
Business Group performance before tax and goodwill2 | (155 | ) | (465 | ) | 132 | (67 | ) | |||||||||
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Significant financial events
– | Operating income of CHF 72 million from the sale of Klinik Hirslanden in 2002. |
– | Personnel expenses of CHF 32 million relating to the integration of PaineWebber into UBS in 2000. |
– | General and administrative costs of CHF 150 million in 2000 in connection with the US Global Settlement of World War II-related claims. |
2002 |
Results |
Corporate Center recorded a pre-tax loss of CHF 179 million in 2002, compared to the pre-tax loss of CHF 489 million in 2001.
Operating income
Operating expenses
Headcount
2001 |
Results
Corporate Center recorded a pre-tax loss of CHF 489 million in 2001, compared to a pre-tax profit of CHF 89 million in 2000, adjusted for significant financial events.
Operating income
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Review of Business Group Performance Corporate Center |
Operating income decreased by CHF 510 million from 2000 to CHF 1,036 million in 2001, principally reflecting the swing in the credit loss results, offset by higher income from treasury activities.
Operating expenses
than in 2000. This was due to lower corporate real estate costs and lower professional fees connected to the US Global Settlement of World War II-related claims, offset by higher IT costs and one-off charges relating to the bankruptcy of SAir Group.
Headcount
74
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75
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76
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77
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UBS Group Financial Statements
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Financial Statements
Table of Contents
Financial Statements | 80 | |||
UBS Group Income Statement | 80 | |||
UBS Group Balance Sheet | 81 | |||
UBS Group Statement of Changes in Equity | 82 | |||
UBS Group Statement of Cash Flows | 84 | |||
Notes to the Financial Statements | 86 | |||
1 | Summary of Significant Accounting Policies | 86 | ||
2a | Segment Reporting by Business Group | 96 | ||
2b | Segment Reporting by Geographic Location | 99 | ||
Income Statement | 100 | |||
3 | Net Interest and Trading Income | 100 | ||
4 | Net Fee and Commission Income | 101 | ||
5 | Other Income | 101 | ||
6 | Personnel Expenses | 102 | ||
7 | General and Administrative Expenses | 102 | ||
8 | Earnings per Share (EPS) and Shares Outstanding | 103 | ||
Balance Sheet: Assets | 104 | |||
9a | Due from Banks and Loans | 104 | ||
9b | Allowances and Provisions for Credit Losses | 105 | ||
9c | Impaired Loans | 105 | ||
9d | Non-Performing Loans | 106 | ||
10 | Securities Borrowing, Securities Lending, Repurchase and Reverse Repurchase Agreements | 107 | ||
11 | Trading Portfolio | 108 | ||
12 | Financial Investments | 109 | ||
13 | Investments in Associates | 110 | ||
14 | Property and Equipment | 111 | ||
15 | Goodwill and Other Intangible Assets | 111 | ||
16 | Other Assets | 113 | ||
Balance Sheet: Liabilities | 114 | |||
17 | Due to Banks and Customers | 114 | ||
18 | Debt Issued | 114 | ||
19 | Other Liabilities | 120 | ||
20 | Provisions | 120 | ||
21 | Income Taxes | 120 | ||
22 | Minority Interests | 122 | ||
23 | Derivative Instruments | 122 |
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Off-Balance Sheet Information | 127 | |||||||
24 | Fiduciary Transactions | 127 | ||||||
25 | Commitments and Contingent Liabilities | 127 | ||||||
26 | Operating Lease Commitments | 129 | ||||||
Additional Information | 130 | |||||||
27 | Pledged Assets | 130 | ||||||
28 | Litigation | 130 | ||||||
29 | Financial Instruments Risk Position | 130 | ||||||
a) | Market Risk | 131 | ||||||
(a)(i) | Overview | 131 | ||||||
(a)(ii) | Interest Rate Risk | 131 | ||||||
(a)(iii) | Currency Risk | 133 | ||||||
(a)(iv) | Equity Risk | 135 | ||||||
(a)(v) | Issuer Risk | 135 | ||||||
b) | Credit Risk | 135 | ||||||
c) | Liquidity Risk | 138 | ||||||
d) | Capital Adequacy | 139 | ||||||
30 | Fair Value of Financial Instruments | 141 | ||||||
31 | Retirement Benefit Plans and Other Employee Benefits | 143 | ||||||
32 | Equity Participation Plans | 147 | ||||||
a) | Equity Participation Plans Offered | 147 | ||||||
b) | UBS Share Awards | 148 | ||||||
c) | UBS Option Awards | 149 | ||||||
d) | Compensation Expense | 150 | ||||||
e) | Pro-Forma Net Income | 150 | ||||||
33 | Related Parties | 151 | ||||||
34 | Post-Balance Sheet Events | 153 | ||||||
35 | Significant Subsidiaries and Associates | 153 | ||||||
36 | Acquisition of Paine Webber Group, Inc. | 157 | ||||||
37 | Currency Translation Rates | 157 | ||||||
38 | Swiss Banking Law Requirements | 157 | ||||||
39 | Reconciliation to US GAAP | 160 | ||||||
40 | Additional Disclosures Required under US GAAP and SEC Rules | 172 | ||||||
Report of the Group Auditors | 177 |
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UBS Group Financial Statements
Financial Statements
Financial Statements
UBS Group Income Statement
CHF million, except per share data | % change from | |||||||||||||||||||
For the year ended | Note | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 3 | 39,963 | 52,277 | 51,745 | (24 | ) | ||||||||||||||
Interest expense | 3 | (29,417 | ) | (44,236 | ) | (43,615 | ) | (33 | ) | |||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 31 | ||||||||||||||||
Credit loss (expense)/recovery | (206 | ) | (498 | ) | 130 | (59 | ) | |||||||||||||
Net interest income after credit loss expense | 10,340 | 7,543 | 8,260 | 37 | ||||||||||||||||
Net fee and commission income | 4 | 18,221 | 20,211 | 16,703 | (10 | ) | ||||||||||||||
Net trading income | 3 | 5,572 | 8,802 | 9,953 | (37 | ) | ||||||||||||||
Other income | 5 | (12 | ) | 558 | 1,486 | |||||||||||||||
Total operating income | 34,121 | 37,114 | 36,402 | (8 | ) | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 6 | 18,524 | 19,828 | 17,163 | (7 | ) | ||||||||||||||
General and administrative expenses | 7 | 7,072 | 7,631 | 6,765 | (7 | ) | ||||||||||||||
Depreciation of property and equipment | 14 | 1,521 | 1,614 | 1,608 | (6 | ) | ||||||||||||||
Amortization of goodwill and other intangible assets | 15 | 2,460 | 1,323 | 667 | 86 | |||||||||||||||
Total operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | |||||||||||||||
Operating profit before tax and minority interests | 4,544 | 6,718 | 10,199 | (32 | ) | |||||||||||||||
Tax expense | 21 | 678 | 1,401 | 2,320 | (52 | ) | ||||||||||||||
Net profit before minority interests | 3,866 | 5,317 | 7,879 | (27 | ) | |||||||||||||||
Minority interests | 22 | (331 | ) | (344 | ) | (87 | ) | (4 | ) | |||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||||||
Basic earnings per share (CHF) | 8 | 2.92 | 3.93 | 6.44 | (26 | ) | ||||||||||||||
Basic earnings per share before goodwill (CHF)1 | 8 | 4.73 | 4.97 | 7.00 | (5 | ) | ||||||||||||||
Diluted earnings per share (CHF) | 8 | 2.87 | 3.78 | 6.35 | (24 | ) | ||||||||||||||
Diluted earnings per share before goodwill (CHF)1 | 8 | 4.65 | 4.81 | 6.89 | (3 | ) | ||||||||||||||
1 | Excludes the amortization of goodwill and other intangible assets. |
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UBS Group Balance Sheet
% change from | ||||||||||||||||
CHF million | Note | 31.12.02 | 31.12.01 | 31.12.01 | ||||||||||||
Assets | ||||||||||||||||
Cash and balances with central banks | 4,271 | 20,990 | (80 | ) | ||||||||||||
Due from banks | 9 | 32,468 | 27,526 | 18 | ||||||||||||
Cash collateral on securities borrowed | 10 | 139,052 | 162,938 | (15 | ) | |||||||||||
Reverse repurchase agreements | 10 | 294,086 | 269,256 | 9 | ||||||||||||
Trading portfolio assets | 11 | 371,436 | 397,886 | (7 | ) | |||||||||||
Positive replacement values | 23 | 82,092 | 73,447 | 12 | ||||||||||||
Loans | 9 | 211,647 | 226,545 | (7 | ) | |||||||||||
Financial investments | 12 | 8,391 | 28,803 | (71 | ) | |||||||||||
Accrued income and prepaid expenses | 6,453 | 7,554 | (15 | ) | ||||||||||||
Investments in associates | 13 | 705 | 697 | 1 | ||||||||||||
Property and equipment | 14 | 7,869 | 8,695 | (9 | ) | |||||||||||
Goodwill and other intangible assets | 15 | 13,696 | 19,085 | (28 | ) | |||||||||||
Other assets | 16, 21 | 8,952 | 9,875 | (9 | ) | |||||||||||
Total assets | 1,181,118 | 1,253,297 | (6 | ) | ||||||||||||
Total subordinated assets1 | 3,652 | 2,732 | 34 | |||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 17 | 83,178 | 106,531 | (22 | ) | |||||||||||
Cash collateral on securities lent | 10 | 36,870 | 30,317 | 22 | ||||||||||||
Repurchase agreements | 10 | 366,858 | 368,620 | 0 | ||||||||||||
Trading portfolio liabilities | 11 | 106,453 | 105,798 | 1 | ||||||||||||
Negative replacement values | 23 | 81,282 | 71,443 | 14 | ||||||||||||
Due to customers | 17 | 306,876 | 333,781 | (8 | ) | |||||||||||
Accrued expenses and deferred income | 15,331 | 17,289 | (11 | ) | ||||||||||||
Debt issued | 18 | 129,411 | 156,218 | (17 | ) | |||||||||||
Other liabilities | 19, 20, 21 | 12,339 | 15,658 | (21 | ) | |||||||||||
Total liabilities | 1,138,598 | 1,205,655 | (6 | ) | ||||||||||||
Minority interests | 22 | 3,529 | 4,112 | (14 | ) | |||||||||||
Shareholders’ equity | ||||||||||||||||
Share capital | 1,005 | 3,589 | (72 | ) | ||||||||||||
Share premium account | 12,638 | 14,408 | (12 | ) | ||||||||||||
Net gains/(losses) not recognized in the income statement, net of tax | (159 | ) | (193 | ) | 18 | |||||||||||
Retained earnings | 32,638 | 29,103 | 12 | |||||||||||||
Treasury shares | (7,131 | ) | (3,377 | ) | (111 | ) | ||||||||||
Total shareholders’ equity | 38,991 | 43,530 | (10 | ) | ||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,181,118 | 1,253,297 | (6 | ) | ||||||||||||
Total subordinated liabilities | 10,102 | 13,818 | (27 | ) | ||||||||||||
1 | The subordinated assets for 2001 have been restated to include the subordinated traded assets of CHF 2,325 million. |
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1 | On 16 July 2001, UBS made a distribution to shareholders of CHF 1.60 per share, paid in the form of a reduction in the par value of its shares, from CHF 10.00 to CHF 8.40. At the same time, UBS split its share 3 for 1, resulting in a new par value of CHF 2.80 per share. On 10 July 2002 UBS made a distribution of CHF 2.00 to shareholders which reduced the par value from CHF 2.80 to CHF 0.80. | |
2 | Included are gains and losses from match-funding of net investments in foreign entities as follows: CHF 849 million net gain for 2002 and CHF 43 million net loss for 2001. | |
3 | Opening adjustments to reflect the adoption of IAS 39 (see Note 1: Summary of Significant Accounting Policies). | |
4 | Dividends declared per share were CHF 1.50 in 2000 and CHF 1.83 in 1999, both paid in the year 2000. |
UBS Group Financial Statements
Financial Statements
UBS Group Statement of Changes in Equity
CHF million | ||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Issued and paid up share capital | ||||||||||||
Balance at the beginning of the year | 3,589 | 4,444 | 4,309 | |||||||||
Issue of share capital | 6 | 12 | 135 | |||||||||
Capital repayment by par value reduction1 | (2,509 | ) | (683 | ) | ||||||||
Cancellation of second trading line treasury shares (2000 Program) | (184 | ) | ||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (81 | ) | ||||||||||
Balance at the end of the year | 1,005 | 3,589 | 4,444 | |||||||||
Share premium | ||||||||||||
Balance at the beginning of the year | 14,408 | 20,885 | 14,437 | |||||||||
Premium on shares issued and warrants exercised | 157 | 80 | 139 | |||||||||
Net premium/(discount) on treasury share and own equity derivative activity | 282 | (239 | ) | (391 | ) | |||||||
Share premium increase due to PaineWebber acquisition | 4,198 | |||||||||||
Borrow of own shares to be delivered | 5,895 | |||||||||||
Settlement of own shares to be delivered | (2,502 | ) | (3,393 | ) | ||||||||
Cancellation of second trading line treasury shares (2000 Program) | (3,816 | ) | ||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (2,209 | ) | ||||||||||
Balance at the end of the year | 12,638 | 14,408 | 20,885 | |||||||||
Net gains/(losses) not recognized in the income statement, net of taxes | ||||||||||||
Foreign currency translation | ||||||||||||
Balance at the beginning of the year | (769 | ) | (687 | ) | (442 | ) | ||||||
Movements during the year2 | (80 | ) | (82 | ) | (245 | ) | ||||||
Subtotal — balance at the end of the year | (849 | ) | (769 | ) | (687 | ) | ||||||
Net unrealized gains/(losses) on available for sale investments, net of taxes | ||||||||||||
Balance at the beginning of the year | 1,035 | 0 | ||||||||||
Change in accounting policy | 1,577 | 3 | ||||||||||
Net unrealized gains/(losses) on available for sale investments | (144 | ) | (139 | ) | ||||||||
Impairment charges reclassified to the income statement | 635 | 47 | ||||||||||
Gains reclassified to the income statement | (600 | ) | (461 | ) | ||||||||
Losses reclassified to the income statement | 20 | 11 | ||||||||||
Subtotal — balance at the end of the year | 946 | 1,035 | ||||||||||
Change in fair value of derivative instruments designated as cash flow hedges, net of taxes | ||||||||||||
Balance at the beginning of the year | (459 | ) | 0 | |||||||||
Change in accounting policy | (380 | )3 | ||||||||||
Net unrealized gains/(losses) on the revaluation of cash flow hedges | (11 | ) | (316 | ) | ||||||||
Net (gains)/losses reclassified to the income statement | 214 | 237 | ||||||||||
Subtotal — balance at the end of the year | (256 | ) | (459 | ) | ||||||||
Balance at the end of the year | (159 | ) | (193 | ) | (687 | ) | ||||||
Retained earnings | ||||||||||||
Balance at the beginning of the year | 29,103 | 24,191 | 20,327 | |||||||||
Change in accounting policy | (61 | )3 | ||||||||||
Balance at the beginning of the year (restated) | 29,103 | 24,130 | 20,327 | |||||||||
Net profit for the year | 3,535 | 4,973 | 7,792 | |||||||||
Dividends paid1, 4 | (3,928 | ) | ||||||||||
Balance at the end of the year | 32,638 | 29,103 | 24,191 | |||||||||
Treasury shares, at cost | ||||||||||||
Balance at the beginning of the year | (3,377 | ) | (4,000 | ) | (8,023 | ) | ||||||
Acquisitions | (8,313 | ) | (13,506 | ) | (16,330 | ) | ||||||
Disposals | 2,269 | 10,129 | 20,353 | |||||||||
Cancellation of second trading line treasury shares (2000 Program) | 4,000 | |||||||||||
Cancellation of second trading line treasury shares (2001 Program) | 2,290 | |||||||||||
Balance at the end of the year | (7,131 | ) | (3,377 | ) | (4,000 | ) | ||||||
Total shareholders’ equity | 38,991 | 43,530 | 44,833 | |||||||||
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UBS Group Statement of Changes in Equity (continued)
Shares issued
Number of shares | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Balance at the beginning of the year | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | (4 | ) | |||||||||||
Issue of share capital | 3,398,869 | 3,843,661 | 4,459,701 | (12 | ) | |||||||||||
Issue of share capital due to PaineWebber acquisition | 36,000,000 | |||||||||||||||
Cancellation of second trading line treasury shares (2000 Program) | (55,265,349 | ) | ||||||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (28,818,690 | ) | ||||||||||||||
Balance at the end of the year | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | (2 | ) | |||||||||||
Treasury shares
Number of shares | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Balance at the beginning of the year | 41,254,951 | 55,265,349 | 110,621,142 | (25 | ) | |||||||||||
Acquisitions | 110,710,741 | 162,818,045 | 257,121,477 | 1 | (32 | ) | ||||||||||
Disposals | (25,965,908 | ) | (121,563,094 | ) | (312,477,270 | )1 | (79 | ) | ||||||||
Cancellation of second trading line treasury shares (2000 Program) | (55,265,349 | ) | ||||||||||||||
Cancellation of second trading line treasury shares (2001 Program) | (28,818,690 | ) | ||||||||||||||
Balance at the end of the year | 97,181,094 | 41,254,951 | 55,265,349 | 136 | ||||||||||||
During the year a total of 28,818,690 shares acquired under the second trading line buyback program 2001 were cancelled. At 31 December 2002, a maximum of 9,590,918 shares can be issued against the exercise of options from former PaineWebber employee option plans. These shares are shown as conditional share capital in the UBS AG (Parent Bank) disclosure. Out of the total number of 97,181,094 treasury shares, 74,035,080 shares (CHF 5,416 million) were acquired under the second trading line buyback program 2002 and are earmarked for cancellation. The Board of Directors will propose to the Annual General Meeting on 16 April 2003 to reduce the issued number of shares and the share capital by the number of shares purchased for cancellation. All issued shares are fully paid.
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UBS Group Financial Statements
Financial Statements
UBS Group Statement of Cash Flows
CHF million | |||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||
Cash flow from/(used in) operating activities | |||||||||||||||||
Net profit | 3,535 | 4,973 | 7,792 | ||||||||||||||
Adjustments to reconcile net profit to cash flow from/(used in) operating activities | |||||||||||||||||
Non-cash items included in net profit and other adjustments: | |||||||||||||||||
Depreciation of property and equipment | 1,521 | 1,614 | 1,608 | ||||||||||||||
Amortization of goodwill and other intangible assets | 2,460 | 1,323 | 667 | ||||||||||||||
Credit loss expense/(recovery) | 206 | 498 | (130 | ) | |||||||||||||
Equity in income of associates | (7 | ) | (72 | ) | (58 | ) | |||||||||||
Deferred tax expense/(benefit) | (509 | ) | 292 | 544 | |||||||||||||
Net loss/(gain) from investing activities | 986 | 513 | (730 | ) | |||||||||||||
Net (increase)/decrease in operating assets: | |||||||||||||||||
Net due from/to banks | (22,382 | ) | 27,306 | (915 | ) | ||||||||||||
Reverse repurchase agreements and cash collateral on securities borrowed | (944 | ) | (60,536 | ) | (81,054 | ) | |||||||||||
Trading portfolio and net replacement values | 21,967 | (78,456 | ) | 11,553 | |||||||||||||
Loans/due to customers | (11,537 | ) | 42,813 | 12,381 | |||||||||||||
Accrued income, prepaid expenses and other assets | 2,875 | (424 | ) | 6,923 | |||||||||||||
Net increase/(decrease) in operating liabilities: | |||||||||||||||||
Repurchase agreements, cash collateral on securities lent | 4,791 | 80,006 | 50,762 | ||||||||||||||
Accrued expenses and other liabilities | (4,754 | ) | (5,235 | ) | 3,313 | ||||||||||||
Income taxes paid | (572 | ) | (1,742 | ) | (959 | ) | |||||||||||
Net cash flow from/(used in) operating activities | (2,364 | ) | 12,873 | 11,697 | |||||||||||||
Cash flow from/(used in) investing activities | |||||||||||||||||
Investments in subsidiaries and associates | (60 | ) | (467 | ) | (9,729 | ) | |||||||||||
Disposal of subsidiaries and associates | 984 | 95 | 669 | ||||||||||||||
Purchase of property and equipment | (1,763 | ) | (2,021 | ) | (1,640 | ) | |||||||||||
Disposal of property and equipment | 67 | 380 | 335 | ||||||||||||||
Net (investment in)/divestment of financial investments | 2,153 | (5,770 | ) | (8,770 | ) | ||||||||||||
Net cash flow from/(used in) investing activities | 1,381 | (7,783 | ) | (19,135 | ) | ||||||||||||
Cash flow from/(used in) financing activities | |||||||||||||||||
Net money market paper issued/(repaid) | (26,206 | ) | 24,226 | 10,125 | |||||||||||||
Net movements in treasury shares and own equity derivative activity | (5,605 | ) | (6,038 | ) | (647 | ) | |||||||||||
Capital issuance | 6 | 12 | 15 | ||||||||||||||
Capital repayment by par value reduction | (2,509 | ) | (683 | ) | |||||||||||||
Dividends paid | (3,928 | ) | |||||||||||||||
Issuance of long-term debt | 17,132 | 18,233 | 14,884 | ||||||||||||||
Repayment of long-term debt | (14,911 | ) | (18,477 | ) | (24,640 | ) | |||||||||||
Increase in minority interests | 0 | 1,291 | 2,683 | ||||||||||||||
Dividend payments to/and purchase from minority interests | (377 | ) | (461 | ) | (73 | ) | |||||||||||
Net cash flow from/(used in) financing activities | (32,470 | ) | 18,103 | (1,581 | ) | ||||||||||||
Effects of exchange rate differences | (462 | ) | (304 | ) | 112 | ||||||||||||
Net increase/(decrease) in cash equivalents | (33,915 | ) | 22,889 | (8,907 | ) | ||||||||||||
Cash and cash equivalents, beginning of the year | 116,259 | 93,370 | 102,277 | ||||||||||||||
Cash and cash equivalents, end of the year | 82,344 | 116,259 | 93,370 | ||||||||||||||
Cash and cash equivalents comprise: | |||||||||||||||||
Cash and balances with central banks | 4,271 | 20,990 | 2,979 | ||||||||||||||
Money market paper1 | 46,183 | 69,938 | 66,454 | ||||||||||||||
Due from banks maturing in less than three months | 31,890 | 25,331 | 23,937 | ||||||||||||||
Total | 82,344 | 116,259 | 93,370 | ||||||||||||||
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UBS Group Statement of Cash Flows (continued)
Significant non-cash investing and financing activities | |||||||||||||
CHF million | |||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Paine Webber Group, Inc. acquisition | |||||||||||||
Value of shares issued (121,741,710 shares issued) | 0 | 0 | 10,246 | ||||||||||
Value of options issued (18,975,810 options issued) | 0 | 0 | 992 | ||||||||||
Solothurner Bank SOBA, Solothurn, deconsolidation | |||||||||||||
Investments in associates | 0 | 0 | 1 | ||||||||||
Property and equipment | 0 | 0 | 77 | ||||||||||
Debt issued | 0 | 0 | 493 | ||||||||||
Hyposwiss, Zurich, deconsolidation | |||||||||||||
Financial investments | 53 | 0 | 0 | ||||||||||
Property and equipment | 18 | 0 | 0 | ||||||||||
Debt issued | 63 | 0 | 0 | ||||||||||
Hirslanden Holding AG, Zurich, deconsolidation | |||||||||||||
Financial investments | 3 | 0 | 0 | ||||||||||
Property and equipment | 718 | 0 | 0 | ||||||||||
Goodwill and other intangible assets | 15 | 0 | 0 | ||||||||||
Consolidation of special purpose entities | |||||||||||||
Debt issued | 2,322 | 0 | 0 | ||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Notes to the Financial Statements
a) Basis of accounting
b) Use of estimates in the preparation of Financial Statements
c) Consolidation
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ties meet the criteria for derecognition of financial assets. Derecognition of a financial asset takes place when the Group loses control of the contractual rights that comprise the financial asset. These transactions do not affect the consolidation status of an entity.
d) Foreign currency translation
e) Business and geographical segments
f) Cash and cash equivalents
g) Fee income
h) Securities borrowing and lending
i) Repurchase and reverse repurchase transactions
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UBS Group Financial Statements
Notes to the Financial Statements
j) Trading portfolio
k) Loans originated by the Group
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l) Allowance and provision for credit losses
m) Securitizations
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UBS Group Financial Statements
Notes to the Financial Statements
n) Financial investments
o) Property and equipment
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Properties, excluding land | Not exceeding 50 years | |
Other machines and equipment | Not exceeding 10 years | |
IT, software and communication | Not exceeding 3 years | |
Property formerly bank-occupied or leased to third parties under an operating lease, which the Group has decided to dispose of and foreclosed property are defined as Properties held for resale and disclosed in Other assets. They are carried at the lower of cost or recoverable value.
p) Goodwill and other intangible assets
q) Income taxes
r) Debt issued
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UBS Group Financial Statements
Notes to the Financial Statements
s) Treasury shares
t) Retirement benefits
a) | 10% of present value of the defined benefit obligation at that date (before deducting plan assets); and | |
b) | 10% of the fair value of any plan assets at that date. | |
The unrecognized actuarial gains and losses exceeding the greater of the two values are recognized in the income statement over the expected average remaining working lives of the employees participating in the plans.
u) Equity participation plans
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v) Derivative instruments and hedging
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UBS Group Financial Statements
Notes to the Financial Statements
w) Earnings per Share (EPS)
x) Comparability
IFRIC Interpretations
Segment Reporting
IAS 39, Recognition and Measurement of Financial Instruments
94
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95
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UBS Group Financial Statements
Notes to the Financial Statements
Note 2a Segment Reporting by Business Group
Based on our integrated business model, UBS is organized into the four Business Groups: UBS Wealth Management & Business Banking, UBS Global Asset Management, UBS Warburg and UBS PaineWebber, and our Corporate Center.
UBS Wealth Management &
Business Banking
UBS Global Asset Management
UBS Warburg
UBS PaineWebber
Corporate Center
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Note 2a Segment Reporting by Business Group
The Business Group results are presented on a management reporting basis. Internal charges and transfer pricing adjustments are reflected in the performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a Business Group on a reasonable basis. Transactions between Business Groups are conducted at arm’s length. The segment reporting for all periods reflects the changes in the structure implemented during 2002. Prior year amounts have been restated to conform to current year presentation.
For the year ended 31 December 2002
UBS Wealth | UBS | |||||||||||||||||||||||
Management & | Global Asset | UBS | UBS | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Warburg | PaineWebber | Center | UBS Group | ||||||||||||||||||
Income1 | 12,928 | 1,953 | 12,498 | 5,561 | 1,387 | 34,327 | ||||||||||||||||||
Credit loss expense2 | (314 | ) | 0 | (128 | ) | (13 | ) | 249 | (206 | ) | ||||||||||||||
Total operating income | 12,614 | 1,953 | 12,370 | 5,548 | 1,636 | 34,121 | ||||||||||||||||||
Personnel expenses | 4,810 | 946 | 7,878 | 4,245 | 645 | 18,524 | ||||||||||||||||||
General and administrative expenses | 2,317 | 513 | 2,378 | 1,263 | 601 | 7,072 | ||||||||||||||||||
Depreciation | 480 | 37 | 382 | 149 | 473 | 1,521 | ||||||||||||||||||
Amortization of goodwill and other intangible assets3 | 111 | 270 | 364 | 1,691 | 24 | 2,460 | ||||||||||||||||||
Total operating expenses | 7,718 | 1,766 | 11,002 | 7,348 | 1,743 | 29,577 | ||||||||||||||||||
Business Group performance before tax | 4,896 | 187 | 1,368 | (1,800 | ) | (107 | ) | 4,544 | ||||||||||||||||
Tax expense | 678 | |||||||||||||||||||||||
Net profit before minority interests | 3,866 | |||||||||||||||||||||||
Minority interests | (331 | ) | ||||||||||||||||||||||
Net profit | 3,535 | |||||||||||||||||||||||
Other information as at 31 December 20024 | ||||||||||||||||||||||||
Total assets | 310,722 | 4,428 | 933,962 | 39,610 | (107,604 | ) | 1,181,118 | |||||||||||||||||
Total liabilities and minority interests | 302,272 | 2,937 | 921,446 | 33,225 | (117,753 | ) | 1,142,127 | |||||||||||||||||
Capital expenditure | 380 | 20 | 473 | 185 | 705 | 1,763 | ||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
For the year ended 31 December 2001
UBS Wealth | UBS | |||||||||||||||||||||||
Management & | Global Asset | UBS | UBS | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Warburg | PaineWebber | Center | UBS Group | ||||||||||||||||||
Income1 | 13,488 | 2,218 | 14,715 | 6,391 | 800 | 37,612 | ||||||||||||||||||
Credit loss expense2 | (604 | ) | 0 | (112 | ) | (18 | ) | 236 | (498 | ) | ||||||||||||||
Total operating income | 12,884 | 2,218 | 14,603 | 6,373 | 1,036 | 37,114 | ||||||||||||||||||
Personnel expenses | 4,825 | 1,038 | 8,354 | 5,019 | 592 | 19,828 | ||||||||||||||||||
General and administrative expenses | 2,434 | 569 | 2,650 | 1,441 | 537 | 7,631 | ||||||||||||||||||
Depreciation | 616 | 46 | 456 | 124 | 372 | 1,614 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 109 | 286 | 402 | 502 | 24 | 1,323 | ||||||||||||||||||
Total operating expenses | 7,984 | 1,939 | 11,862 | 7,086 | 1,525 | 30,396 | ||||||||||||||||||
Business Group performance before tax | 4,900 | 279 | 2,741 | (713 | ) | (489 | ) | 6,718 | ||||||||||||||||
Tax expense | 1,401 | |||||||||||||||||||||||
Net profit before minority interests | 5,317 | |||||||||||||||||||||||
Minority interests | (344 | ) | ||||||||||||||||||||||
Net profit | 4,973 | |||||||||||||||||||||||
Other information as at 31 December 20013 | ||||||||||||||||||||||||
Total assets | 313,800 | 6,335 | 1,005,397 | 39,747 | (111,982 | ) | 1,253,297 | |||||||||||||||||
Total liabilities and minority interests | 304,988 | 4,367 | 992,272 | 31,556 | (123,416 | ) | 1,209,767 | |||||||||||||||||
Capital expenditure | 540 | 37 | 337 | 296 | 811 | 2,021 | ||||||||||||||||||
For the year ended 31 December 2000
UBS Wealth | UBS | |||||||||||||||||||||||
Management & | Global Asset | UBS | UBS | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Warburg | PaineWebber | Center | UBS Group | ||||||||||||||||||
Income1 | 14,355 | 2,078 | 18,240 | 1,214 | 385 | 36,272 | ||||||||||||||||||
Credit loss expense/recovery2 | (785 | ) | 0 | (243 | ) | (3 | ) | 1,161 | 130 | |||||||||||||||
Total operating income | 13,570 | 2,078 | 17,997 | 1,211 | 1,546 | 36,402 | ||||||||||||||||||
Personnel expenses | 5,151 | 941 | 9,451 | 1,098 | 522 | 17,163 | ||||||||||||||||||
General and administrative expenses | 2,478 | 434 | 2,755 | 344 | 754 | 6,765 | ||||||||||||||||||
Depreciation | 633 | 49 | 564 | 42 | 320 | 1,608 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 81 | 267 | 192 | 84 | 43 | 667 | ||||||||||||||||||
Total operating expenses | 8,343 | 1,691 | 12,962 | 1,568 | 1,639 | 26,203 | ||||||||||||||||||
Business Group performance before tax | 5,227 | 387 | 5,035 | (357 | ) | (93 | ) | 10,199 | ||||||||||||||||
Tax expense | 2,320 | |||||||||||||||||||||||
Net profit before minority interests | 7,879 | |||||||||||||||||||||||
Minority interests | (87 | ) | ||||||||||||||||||||||
Net profit | 7,792 | |||||||||||||||||||||||
Other information as at 31 December 20003 | ||||||||||||||||||||||||
Total assets | 281,984 | 7,558 | 817,264 | 50,691 | (69,945 | ) | 1,087,552 | |||||||||||||||||
Total liabilities and minority interests | 272,173 | 5,787 | 803,159 | 41,826 | (80,226 | ) | 1,042,719 | |||||||||||||||||
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Note 2b Segment Reporting by Geographic Location
The geographic analysis of total assets is based on customer domicile whereas operating income and capital expenditure is based on the location of the office in which the transactions and assets are recorded. Because of the global nature of financial markets the Group’s business is managed on an integrated basis worldwide, with a view to profitability by product line. The geographical analysis of operating income, total assets, and capital expenditure is provided in order to comply with IFRS, and does not reflect the way the Group is managed. Management believes that analysis by Business Group, as shown in Note 2a to these Financial Statements, is a more meaningful representation of the way in which the Group is managed.
For the year ended 31 December 2002
Total operating income | Total assets | Capital expenditure | ||||||||||||||||||||||
CHF million | Share % | CHF million | Share % | CHF million | Share % | |||||||||||||||||||
Switzerland | 14,307 | 42 | 174,878 | 15 | 885 | 51 | ||||||||||||||||||
Rest of Europe | 6,837 | 20 | 256,110 | 22 | 199 | 11 | ||||||||||||||||||
Americas | 11,055 | 32 | 669,823 | 56 | 635 | 36 | ||||||||||||||||||
Asia/Pacific | 1,909 | 6 | 78,270 | 7 | 44 | 2 | ||||||||||||||||||
Africa/Middle East | 13 | 0 | 2,037 | 0 | 0 | 0 | ||||||||||||||||||
Total | 34,121 | 100 | 1,181,118 | 100 | 1,763 | 100 | ||||||||||||||||||
For the year ended 31 December 2001
Total operating income | Total assets | Capital expenditure | ||||||||||||||||||||||
CHF million | Share % | CHF million | Share % | CHF million | Share % | |||||||||||||||||||
Switzerland | 14,223 | 38 | 195,321 | 16 | 1,039 | 52 | ||||||||||||||||||
Rest of Europe | 7,411 | 20 | 236,775 | 19 | 303 | 15 | ||||||||||||||||||
Americas | 13,587 | 37 | 691,157 | 55 | 630 | 31 | ||||||||||||||||||
Asia/Pacific | 1,859 | 5 | 126,725 | 10 | 48 | 2 | ||||||||||||||||||
Africa/Middle East | 34 | 0 | 3,319 | 0 | 1 | 0 | ||||||||||||||||||
Total | 37,114 | 100 | 1,253,297 | 100 | 2,021 | 100 | ||||||||||||||||||
For the year ended 31 December 2000
Total operating income | Total assets | Capital expenditure | ||||||||||||||||||||||
CHF million | Share % | CHF million | Share % | CHF million | Share % | |||||||||||||||||||
Switzerland | 15,836 | 44 | 211,851 | 19 | 1,135 | 43 | ||||||||||||||||||
Rest of Europe | 10,907 | 30 | 305,342 | 28 | 311 | 12 | ||||||||||||||||||
Americas | 6,976 | 19 | 474,617 | 44 | 1,169 | 44 | ||||||||||||||||||
Asia/Pacific | 2,626 | 7 | 87,831 | 8 | 36 | 1 | ||||||||||||||||||
Africa/Middle East | 57 | 0 | 7,911 | 1 | 8 | 0 | ||||||||||||||||||
Total | 36,402 | 100 | 1,087,552 | 100 | 2,659 | 100 | ||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Income Statement
Note 3 Net Interest and Trading Income
Net interest Income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Interest income | ||||||||||||||||
Interest earned on loans and advances | 11,600 | 16,955 | 20,413 | (32 | ) | |||||||||||
Interest earned on securities borrowed and reverse repurchase agreements | 11,184 | 18,337 | 19,088 | (39 | ) | |||||||||||
Interest and dividend income from financial investments | 165 | 453 | 402 | (64 | ) | |||||||||||
Interest and dividend income from trading portfolio | 17,014 | 16,532 | 11,842 | 3 | ||||||||||||
Total | 39,963 | 52,277 | 51,745 | (24 | ) | |||||||||||
Interest expense | ||||||||||||||||
Interest on amounts due to banks and customers | 6,383 | 14,088 | 15,660 | (55 | ) | |||||||||||
Interest on securities lent and repurchase agreements | 10,081 | 14,517 | 14,915 | (31 | ) | |||||||||||
Interest and dividend expense from trading portfolio | 8,366 | 7,815 | 5,309 | 7 | ||||||||||||
Interest on debt issued | 4,587 | 7,816 | 7,731 | (41 | ) | |||||||||||
Total | 29,417 | 44,236 | 43,615 | (33 | ) | |||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 31 | ||||||||||||
Net trading income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Equities | 2,638 | 4,026 | 7,754 | (34 | ) | |||||||||||
Fixed income1 | 1,061 | 2,731 | 912 | (61 | ) | |||||||||||
Foreign exchange and other | 1,873 | 2,045 | 1,287 | (8 | ) | |||||||||||
Net trading income | 5,572 | 8,802 | 9,953 | (37 | ) | |||||||||||
Net interest and trading income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 31 | ||||||||||||
Net trading income | 5,572 | 8,802 | 9,953 | (37 | ) | |||||||||||
Total net interest and trading income | 16,118 | 16,843 | 18,083 | (4 | ) | |||||||||||
Breakdown by business activity: | ||||||||||||||||
Net income from interest margin products | 5,275 | 5,694 | 5,430 | (7 | ) | |||||||||||
Net income from trading activities | 10,605 | 11,529 | 12,642 | (8 | ) | |||||||||||
Net income from treasury activities | 1,667 | 1,424 | 762 | 17 | ||||||||||||
Other1 | (1,429 | ) | (1,804 | ) | (751 | ) | 21 | |||||||||
Total net interest and trading income | 16,118 | 16,843 | 18,083 | (4 | ) | |||||||||||
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Note 4 Net Fee and Commission Income
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Underwriting fees | 2,134 | 2,158 | 1,434 | (1 | ) | |||||||||||
Corporate finance fees | 848 | 1,339 | 1,772 | (37 | ) | |||||||||||
Brokerage fees | 5,987 | 6,445 | 5,742 | (7 | ) | |||||||||||
Investment fund fees | 4,033 | 4,276 | 2,821 | (6 | ) | |||||||||||
Fiduciary fees | 300 | 355 | 351 | (15 | ) | |||||||||||
Custodian fees | 1,302 | 1,356 | 1,439 | (4 | ) | |||||||||||
Portfolio and other management and advisory fees | 4,065 | 4,650 | 3,666 | (13 | ) | |||||||||||
Insurance-related and other fees | 417 | 538 | 111 | (22 | ) | |||||||||||
Total securities trading and investment activity fees | 19,086 | 21,117 | 17,336 | (10 | ) | |||||||||||
Credit-related fees and commissions | 275 | 307 | 310 | (10 | ) | |||||||||||
Commission income from other services | 1,006 | 946 | 802 | 6 | ||||||||||||
Total fee and commission income | 20,367 | 22,370 | 18,448 | (9 | ) | |||||||||||
Brokerage fees paid | 1,349 | 1,281 | 1,084 | 5 | ||||||||||||
Other | 797 | 878 | 661 | (9 | ) | |||||||||||
Total fee and commission expense | 2,146 | 2,159 | 1,745 | (1 | ) | |||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | �� | (10 | ) | ||||||||||
Note 5 Other Income
CHF million | % change from | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Gains/losses from disposal of associates and subsidiaries | |||||||||||||||||
Net gain from disposal of: | |||||||||||||||||
Consolidated subsidiaries | 228 | 3 | 57 | ||||||||||||||
Investments in associates | 0 | 0 | 26 | ||||||||||||||
Total | 228 | 3 | 83 | ||||||||||||||
Financial investments available for sale | |||||||||||||||||
Net gain from disposal of: | |||||||||||||||||
Private equity investments | 273 | 454 | 919 | (40 | ) | ||||||||||||
Other financial investments | 457 | 256 | 162 | 79 | |||||||||||||
Impairment charges on private equity investments and other financial investments | (1,944 | ) | (1,294 | ) | (507 | ) | (50 | ) | |||||||||
Total | (1,214 | ) | (584 | ) | 574 | (108 | ) | ||||||||||
Net income from investments in property | 90 | 68 | 96 | 32 | |||||||||||||
Equity in income of associates | 7 | 72 | 58 | (90 | ) | ||||||||||||
Other | 877 | 999 | 675 | (12 | ) | ||||||||||||
Total other income | (12 | ) | 558 | 1,486 | |||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 6 Personnel Expenses
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Salaries and bonuses | 14,219 | 15,238 | 13,523 | (7 | ) | |||||||||||
Contractors | 579 | 729 | 725 | (21 | ) | |||||||||||
Insurance and social contributions | 939 | 984 | 959 | (5 | ) | |||||||||||
Retirement benefit expenses | 676 | 603 | 475 | 12 | ||||||||||||
Other personnel expenses | 2,111 | 2,274 | 1,481 | (7 | ) | |||||||||||
Total personnel expenses | 18,524 | 19,828 | 17,163 | (7 | ) | |||||||||||
Note 7 General and Administrative Expenses
CHF million | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Occupancy | 1,354 | 1,314 | 979 | 3 | ||||||||||||
Rent and maintenance of machines and equipment | 665 | 632 | 520 | 5 | ||||||||||||
Telecommunications and postage | 1,019 | 1,213 | 914 | (16 | ) | |||||||||||
Administration | 819 | 906 | 750 | (10 | ) | |||||||||||
Marketing and public relations | 453 | 574 | 480 | (21 | ) | |||||||||||
Travel and entertainment | 600 | 700 | 656 | (14 | ) | |||||||||||
Professional fees | 568 | 667 | 660 | (15 | ) | |||||||||||
IT and other outsourcing | 1,036 | 1,224 | 1,246 | (15 | ) | |||||||||||
Other | 558 | 401 | 560 | 39 | ||||||||||||
Total general and administrative expenses | 7,072 | 7,631 | 6,765 | (7 | ) | |||||||||||
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Note 8 Earnings per Share (EPS) and Shares Outstanding
% change from | ||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Basic Earnings (CHF million) | ||||||||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 2,179 | 2 | 1,323 | 667 | 65 | |||||||||||
Net profit before goodwill amortization1 | 5,714 | 6,296 | 8,459 | (9 | ) | |||||||||||
Diluted Earnings (CHF million) | ||||||||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||
Less: profit on own equity derivative contracts deemed dilutive | (20 | ) | (99 | ) | (14 | ) | 80 | |||||||||
Net profit for diluted EPS | 3,515 | 4,874 | 7,778 | (28 | ) | |||||||||||
Amortization of goodwill and other intangible assets | 2,179 | 2 | 1,323 | 667 | 65 | |||||||||||
Net profit for diluted EPS before goodwill amortization1 | 5,694 | 6,197 | 8,445 | (8 | ) | |||||||||||
Weighted average shares outstanding | ||||||||||||||||
Weighted average shares outstanding | 1,208,586,678 | 1,266,038,193 | 1,209,087,927 | (5 | ) | |||||||||||
Potentially dilutive ordinary shares resulting from options and warrants outstanding3 | 14,796,264 | 22,539,745 | 16,489,773 | (34 | ) | |||||||||||
Weighted average shares outstanding for diluted EPS | 1,223,382,942 | 1,288,577,938 | 1,225,577,700 | (5 | ) | |||||||||||
Earnings per share (CHF) | ||||||||||||||||
Basic EPS | 2.92 | 3.93 | 6.44 | (26 | ) | |||||||||||
Basic EPS before goodwill amortization1 | 4.73 | 4.97 | 7.00 | (5 | ) | |||||||||||
Diluted EPS | 2.87 | 3.78 | 6.35 | (24 | ) | |||||||||||
Diluted EPS before goodwill amortization1 | 4.65 | 4.81 | 6.89 | (3 | ) | |||||||||||
Shares outstanding | % change from | ||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Total ordinary shares issued | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | (2 | ) | ||||||||||||
Own shares to be delivered | 28,444,788 | ||||||||||||||||
Second trading line treasury shares | |||||||||||||||||
2000 program | 55,265,349 | ||||||||||||||||
2001 program | 23,064,356 | ||||||||||||||||
2002 first program | 67,700,000 | ||||||||||||||||
2002 second program | 6,335,080 | ||||||||||||||||
Other treasury shares | 23,146,014 | 18,190,595 | 0 | 27 | |||||||||||||
Total treasury shares | 97,181,094 | 41,254,951 | 55,265,349 | 136 | |||||||||||||
Shares outstanding | 1,159,116,584 | 1,240,462,548 | 1,306,318,626 | (7 | ) | ||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Balance Sheet: Assets
Note 9a Due from Banks and Loans
By type of exposure
CHF million | 31.12.02 | 31.12.01 | |||||||
Banks | 32,911 | 28,261 | |||||||
Allowance for credit losses | (443 | ) | (735 | ) | |||||
Net due from banks | 32,468 | 27,526 | |||||||
Loans | |||||||||
Mortgages | 127,869 | 126,211 | |||||||
Other loans | 88,590 | 107,512 | |||||||
Subtotal | 216,459 | 233,723 | |||||||
Allowance for credit losses | (4,812 | ) | (7,178 | ) | |||||
Net loans | 211,647 | 226,545 | |||||||
Net due from banks and loans | 244,115 | 254,071 | |||||||
thereof subordinated | 115 | 249 | |||||||
By geographical region(based on the location of the borrower)
CHF million | 31.12.02 | 31.12.01 | ||||||
Switzerland | 151,604 | 158,996 | ||||||
Rest of Europe | 38,131 | 42,279 | ||||||
Americas | 48,412 | 42,809 | ||||||
Asia/Pacific | 10,002 | 15,986 | ||||||
Africa/Middle East | 1,221 | 1,914 | ||||||
Subtotal | 249,370 | 261,984 | ||||||
Allowance for credit losses | (5,255 | ) | (7,913 | ) | ||||
Net due from banks and loans | 244,115 | 254,071 | ||||||
By type of collateral
CHF million | 31.12.02 | 31.12.01 | ||||||
Secured by real estate | 129,525 | 128,259 | ||||||
Collateralized by securities | 26,769 | 30,635 | ||||||
Guarantees and other collateral | 12,398 | 20,217 | ||||||
Unsecured | 80,678 | 82,873 | ||||||
Subtotal | 249,370 | 261,984 | ||||||
Allowance for credit losses | (5,255 | ) | (7,913 | ) | ||||
Net due from banks and loans | 244,115 | 254,071 | ||||||
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Note 9b Allowances and Provisions for Credit Losses
Specific | Country risk | |||||||||||||||
allowances and | allowances and | Total | Total | |||||||||||||
CHF million | provisions | provisions | 31.12.02 | 31.12.01 | ||||||||||||
Balance at the beginning of the year | 7,212 | 1,006 | 8,218 | 10,581 | ||||||||||||
Write-offs | (2,508 | ) | (28 | ) | (2,536 | ) | (3,008 | ) | ||||||||
Recoveries | 63 | 7 | 70 | 81 | ||||||||||||
Increase/(decrease) in credit loss allowance and provision | 365 | (159 | ) | 206 | 498 | |||||||||||
Foreign currency translation and other adjustments | (247 | ) | (90 | ) | (337 | ) | 66 | |||||||||
Balance at the end of the year | 4,885 | 736 | 5,621 | 8,218 | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | ||||||||||||||
As a reduction of Due from banks | 443 | 735 | ||||||||||||||
As a reduction of Loans | 4,812 | 7,178 | ||||||||||||||
Subtotal | 5,255 | 7,913 | ||||||||||||||
Included in other liabilities | ||||||||||||||||
related to commitments and contingent liabilities | 366 | 305 | ||||||||||||||
Total allowances and provisions for credit losses | 5,621 | 8,218 | ||||||||||||||
Note 9c Impaired Loans
CHF million | 31.12.02 | 31.12.01 | ||||||
Impaired loans1, 2 | 10,365 | 14,629 | ||||||
Amount of allowance for credit losses related to impaired loans | 4,892 | 7,294 | ||||||
Average impaired loans3 | 12,623 | 16,555 | ||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 9d Non-Performing Loans
An impaired loan is classified as non-performing when the contractual payments of principal and/or interest are in arrears for 90 days or more.
CHF million | 31.12.02 | 31.12.01 | ||||||
Non-performing loans | 6,029 | 8,639 | ||||||
Amount of allowance for credit losses related to non-performing loans | 3,485 | 5,374 | ||||||
Average non-performing loans1 | 7,361 | 9,648 | ||||||
CHF million | 31.12.02 | 31.12.01 | ||||||
Non-performing loans at beginning of the year | 8,639 | 10,452 | ||||||
Net additions/(reductions) | (509 | ) | 1,111 | |||||
Write-offs and disposals | (2,101 | ) | (2,924 | ) | ||||
Non-performing loans at the end of the year | 6,029 | 8,639 | ||||||
By type of exposure
CHF million | 31.12.02 | 31.12.01 | |||||||
Banks | 311 | 386 | |||||||
Loans | |||||||||
Mortgages | 1,972 | 2,659 | |||||||
Other | 3,746 | 5,594 | |||||||
Total loans | 5,718 | 8,253 | |||||||
Total non-performing loans | 6,029 | 8,639 | |||||||
By geographical region(based on the location of the borrower)
CHF million | 31.12.02 | 31.12.01 | ||||||
Switzerland | 4,609 | 6,531 | ||||||
Rest of Europe | 379 | 466 | ||||||
Americas | 499 | 737 | ||||||
Asia/Pacific | 300 | 653 | ||||||
Africa/Middle East | 242 | 252 | ||||||
Total non-performing loans | 6,029 | 8,639 | ||||||
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Note 10 Securities Borrowing, Securities Lending, Repurchase and Reverse Repurchase Agreements
The Group enters into collateralized reverse repurchase and repurchase agreements and securities borrowing and securities lending transactions that may result in credit exposure in the event that the counterparty to the transaction is unable to fulfill its contractual obligations. The Group controls credit risk associated with these activities by monitoring counterparty credit exposure and collateral values on a daily basis and requiring additional collateral to be deposited with or returned to the Group when deemed necessary.
Balance sheet assets
Cash collateral | Reverse | Cash collateral | Reverse | |||||||||||||
on securities | Repurchase | on securities | Repurchase | |||||||||||||
borrowed | agreements | borrowed | agreements | |||||||||||||
CHF million | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | ||||||||||||
By counterparty: | ||||||||||||||||
Banks | 122,764 | 201,269 | 155,214 | 197,902 | ||||||||||||
Customers | 16,288 | 92,817 | 7,724 | 71,354 | ||||||||||||
Total | 139,052 | 294,086 | 162,938 | 269,256 | ||||||||||||
Balance sheet liabilities
Cash collateral | Cash collateral | |||||||||||||||
on securities | Repurchase | on securities | Repurchase | |||||||||||||
lent | agreements | lent | agreements | |||||||||||||
CHF million | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | ||||||||||||
By counterparty: | ||||||||||||||||
Banks | 29,748 | 200,904 | 27,640 | 213,942 | ||||||||||||
Customers | 7,122 | 165,954 | 2,677 | 154,678 | ||||||||||||
Total | 36,870 | 366,858 | 30,317 | 368,620 | ||||||||||||
Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms as at 31 December 2002 and 31 December 2001 were as follows:
CHF million | 31.12.02 | 31.12.01 | ||||||
Securities received under reverse repurchase and/or securities borrowing arrangements which can be repledged or resold | 641,341 | 592,903 | ||||||
thereof repledged/transferred to others in connection with financing activities or to satisfy commitments under short sale transactions | 530,188 | 474,963 | ||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 11 Trading Portfolio
The Group trades money market paper, debt, equity, precious metals, foreign currency and derivatives to meet the financial needs of its customers and to generate revenue through its trading activities. Note 23 provides a description of the various classes of derivatives together with the related notional amounts, whereas Note 10 provides further details about cash collateral on securities borrowed and lent and repurchase and reverse repurchase agreements.
CHF million | 31.12.02 | 31.12.01 | ||||||
Trading portfolio assets | ||||||||
Money market paper | 45,310 | 63,164 | ||||||
thereof pledged as collateral with central banks | 10,475 | 29,895 | ||||||
Debt instruments | ||||||||
Swiss government and government agencies | 1,140 | 1,246 | ||||||
US Treasury and government agencies | 71,884 | 95,203 | ||||||
Other government agencies | 50,296 | 18,811 | ||||||
Corporate listed | 73,268 | 108,114 | ||||||
Other unlisted | 39,613 | 26,642 | ||||||
Total | 236,201 | 250,016 | ||||||
thereof pledged as collateral | 132,221 | 153,464 | ||||||
thereof can be repledged or resold by the counterparty | 92,460 | 101,517 | ||||||
Equity instruments | ||||||||
Listed | 66,150 | 67,772 | ||||||
Unlisted | 4,841 | 6,367 | ||||||
Total | 70,991 | 74,139 | ||||||
thereof pledged as collateral | 18,614 | 21,264 | ||||||
thereof can be repledged or resold by the counterparty | 17,905 | 19,939 | ||||||
Traded loans | 11,533 | 6,139 | ||||||
Precious metals | 7,401 | 4,428 | ||||||
Total trading portfolio assets | 371,436 | 397,886 | ||||||
Trading portfolio liabilities | ||||||||
Debt instruments | ||||||||
Swiss government and government agencies | 1,807 | 565 | ||||||
US Treasury and government agencies | 38,327 | 25,117 | ||||||
Other government agencies | 19,722 | 12,187 | ||||||
Corporate listed | 14,177 | 10,868 | ||||||
Other unlisted | 8,296 | 30,793 | ||||||
Total | 82,329 | 79,530 | ||||||
Equity instruments | 24,124 | 26,268 | ||||||
Total trading portfolio liabilities | 106,453 | 105,798 | ||||||
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Note 12 Financial Investments (available for sale)
CHF million | 31.12.02 | 31.12.01 | ||||||
Money market paper | 873 | 6,774 | ||||||
Other debt instruments | ||||||||
Listed | 290 | 1,194 | ||||||
Unlisted | 885 | 10,348 | ||||||
Total | 1,175 | 11,542 | ||||||
Equity investments | ||||||||
Listed | 596 | 1,949 | ||||||
Unlisted | 1,443 | 1,819 | ||||||
Total | 2,039 | 3,768 | ||||||
Private equity investments | 4,304 | 6,719 | ||||||
Total financial investments | 8,391 | 28,803 | ||||||
thereof eligible for discount at central banks | 261 | 10,370 | ||||||
The following tables show the unrealized gains and losses not recognized in the income statement for the years ended 2002 and 2001.
Unrealized gains/losses not recognized in the income statement | ||||||||||||||||||||||||
CHF million | Fair value | Gross gains | Gross losses | Net, before tax | Tax effect | Net, after tax | ||||||||||||||||||
31 December 2002 | ||||||||||||||||||||||||
Money market paper | 873 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Debt securities issued by the Swiss national government and agencies | 16 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||
Debt securities issued by Swiss local governments | 42 | 2 | 0 | 2 | 0 | 2 | ||||||||||||||||||
Debt securities issued by US Treasury and agencies | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Debt securities issued by foreign governments and official institutions | 81 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||
Corporate debt securities | 964 | 7 | 0 | 7 | 1 | 6 | ||||||||||||||||||
Mortgage-backed securities | 23 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||
Other debt securities | 49 | 1 | 1 | 0 | 0 | 0 | ||||||||||||||||||
Equity securities | 2,039 | 335 | 31 | 304 | 82 | 222 | ||||||||||||||||||
Private equity investments | 4,304 | 966 | 223 | 743 | 30 | 713 | ||||||||||||||||||
Total | 8,391 | 1,314 | 255 | 1,059 | 113 | 946 | ||||||||||||||||||
Unrealized gains/losses not recognized in the income statement | ||||||||||||||||||||||||
CHF million | Fair value | Gross gains | Gross losses | Net, before tax | Tax effect | Net, after tax | ||||||||||||||||||
31 December 2001 | ||||||||||||||||||||||||
Money market paper | 6,774 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||
Debt securities issued by the Swiss national government and agencies | 36 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||
Debt securities issued by Swiss local governments | 45 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||
Debt securities issued by US Treasury and agencies | 32 | 2 | 0 | 2 | 1 | 1 | ||||||||||||||||||
Debt securities issued by foreign governments and official institutions | 10,089 | 31 | 1 | 30 | 11 | 19 | ||||||||||||||||||
Corporate debt securities | 1,218 | 4 | 2 | 2 | 0 | 2 | ||||||||||||||||||
Mortgage-backed securities | 5 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Other debt securities | 117 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Equity securities | 3,768 | 627 | 65 | 562 | 187 | 375 | ||||||||||||||||||
Private equity investments | 6,719 | 1,189 | 539 | 650 | 15 | 635 | ||||||||||||||||||
Total | 28,803 | 1,856 | 607 | 1,249 | 214 | 1,035 | ||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 12 Financial Investments (available for sale) (continued)
Contractual maturities of the investments in debt instruments1
Within 1 year | 1-5 years | 5-10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 2002 | ||||||||||||||||||||||||||||||||
Swiss national government and agencies | 0 | 0.00 | 7 | 4.88 | 8 | 3.86 | 1 | 4.00 | ||||||||||||||||||||||||
Swiss local governments | 8 | 4.02 | 30 | 3.94 | 4 | 3.59 | 0 | 0.00 | ||||||||||||||||||||||||
Foreign governments and official institutions | 35 | 4.63 | 45 | 3.13 | 1 | 6.12 | 0 | 0.00 | ||||||||||||||||||||||||
Corporate debt securities | 675 | 2.23 | 249 | 2.64 | 19 | 3.41 | 21 | 8.02 | ||||||||||||||||||||||||
Mortgage-backed securities | 4 | 2.25 | 15 | 3.97 | 4 | 4.03 | 0 | 0.00 | ||||||||||||||||||||||||
Other debt securities | 1 | 4.77 | 48 | 2.65 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Total fair value | 723 | 394 | 36 | 22 | ||||||||||||||||||||||||||||
Proceeds from sales and maturities of investment securities available for sale, excluding private equity, were as follows:
CHF million | 31.12.02 | 31.12.01 | ||||||
Proceeds | 1,820 | 27,910 | ||||||
Gross realized gains | 479 | 223 | ||||||
Gross realized losses | (21 | ) | (28 | ) | ||||
Note 13 Investments in Associates
CHF million | 31.12.02 | 31.12.01 | ||||||
Carrying amount at the beginning of the year | 697 | 880 | ||||||
Additions | 51 | 11 | ||||||
Disposals | (1 | ) | (216 | )1 | ||||
Income | 24 | 74 | ||||||
Write-offs | (17 | ) | (2 | ) | ||||
Dividend paid | (44 | ) | (48 | ) | ||||
Foreign currency translation | (5 | ) | (2 | ) | ||||
Carrying amount at the end of the year | 705 | 697 | ||||||
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Note 14 Property and Equipment
IT, soft- | Other | |||||||||||||||||||||||
Bank- | ware and | machines | ||||||||||||||||||||||
occupied | Investment | communi- | and | |||||||||||||||||||||
CHF million | properties | properties1 | cation | equipment | 31.12.02 | 31.12.01 | ||||||||||||||||||
Historical cost | ||||||||||||||||||||||||
Balance at the beginning of the year | 9,297 | 893 | 5,146 | 4,143 | 19,479 | 18,631 | ||||||||||||||||||
Additions | 147 | 366 | 811 | 439 | 1,763 | 2,021 | ||||||||||||||||||
Disposals/write-offs2 | (62 | ) | (747 | ) | (1,330 | ) | (449 | ) | (2,588 | ) | (715 | ) | ||||||||||||
Reclassifications | (34 | ) | 50 | 51 | (53 | ) | 14 | (482 | ) | |||||||||||||||
Foreign currency translation | (41 | ) | (2 | ) | (339 | ) | (336 | ) | (718 | ) | 24 | |||||||||||||
Balance at the end of the year | 9,307 | 560 | 4,339 | 4 | 3,744 | 17,950 | 19,479 | |||||||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||
Balance at the beginning of the year | 4,039 | 239 | 3,932 | 2,574 | 10,784 | 9,721 | ||||||||||||||||||
Depreciation | 224 | 28 | 926 | 343 | 1,521 | 1,654 | ||||||||||||||||||
Disposals/write-offs2 | (34 | ) | (100 | ) | (1,316 | ) | (336 | ) | (1,786 | ) | (403 | ) | ||||||||||||
Reclassifications | (10 | ) | 44 | (2 | ) | 3 | 35 | (189 | ) | |||||||||||||||
Foreign currency translation | (9 | ) | 0 | (300 | ) | (164 | ) | (473 | ) | 1 | ||||||||||||||
Balance at the end of the year | 4,210 | 211 | 3,240 | 2,420 | 10,081 | 10,784 | ||||||||||||||||||
Net book value at the end of the year3 | 5,097 | 349 | 1,099 | 1,324 | 7,869 | 8,695 | ||||||||||||||||||
Note 15 Goodwill and Other Intangible Assets
Goodwill | Other intangible assets | |||||||||||||||||||||||||||
Customer | ||||||||||||||||||||||||||||
Brand- | Infra- | lists | ||||||||||||||||||||||||||
CHF million | Total | name | structure | and other | Total | 31.12.02 | 31.12.01 | |||||||||||||||||||||
Historical cost | ||||||||||||||||||||||||||||
Balance at the beginning of the year | 16,819 | 1,293 | 1,293 | 2,387 | 4,973 | 21,792 | 21,166 | |||||||||||||||||||||
Additions and reallocations | 9 | 281 | 0 | 0 | 281 | 290 | 456 | |||||||||||||||||||||
Disposals and other reductions | (98 | ) | 0 | 0 | (17 | ) | (17 | ) | (115 | ) | 0 | |||||||||||||||||
Write-offs1 | 0 | (1,350 | ) | 0 | 0 | (1,350 | ) | (1,350 | ) | (247 | ) | |||||||||||||||||
Foreign currency translation | (2,773 | ) | (224 | ) | (224 | ) | (374 | ) | (822 | ) | (3,595 | ) | 417 | |||||||||||||||
Balance at the end of the year | 13,957 | 0 | 1,069 | 1,996 | 3,065 | 17,022 | 21,792 | |||||||||||||||||||||
Accumulated amortization | ||||||||||||||||||||||||||||
Balance at the beginning of the year | 2,241 | 76 | 76 | 314 | 466 | 2,707 | 1,629 | |||||||||||||||||||||
Amortization | 930 | 1,306 | 54 | 170 | 1,530 | 2,460 | 1,323 | |||||||||||||||||||||
Disposals | (13 | ) | 0 | 0 | (15 | ) | (15 | ) | (28 | ) | 0 | |||||||||||||||||
Write-offs1 | 0 | (1,350 | ) | 0 | 0 | (1,350 | ) | (1,350 | ) | (247 | ) | |||||||||||||||||
Foreign currency translation | (382 | ) | (32 | ) | (14 | ) | (35 | ) | (81 | ) | (463 | ) | 2 | |||||||||||||||
Balance at the end of the year | 2,776 | 0 | 116 | 434 | 550 | 3,326 | 2,707 | |||||||||||||||||||||
Net book value at the end of the year | 11,181 | 0 | 953 | 1,562 | 2,515 | 13,696 | 19,085 | |||||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 15 Goodwill and Other Intangible Assets (continued)
The following table presents the disclosure of goodwill and other intangible assets by Business Group for the year ended 31 December 2002.
Balance | Additions | Disposals | ||||||||||||||||||||||
at the | and | and | Foreign | Balance | ||||||||||||||||||||
beginning | reallo- | other | currency | at the end | ||||||||||||||||||||
CHF million | of the year | cations | reductions | Amortization | translation | of the year | ||||||||||||||||||
Goodwill | ||||||||||||||||||||||||
UBS Wealth Management & Business Banking | 1,305 | 0 | (8 | ) | (81 | ) | (213 | ) | 1,003 | |||||||||||||||
UBS Global Asset Management | 2,926 | 0 | (5 | ) | (269 | ) | (467 | ) | 2,185 | |||||||||||||||
UBS Warburg | 4,950 | 0 | (25 | ) | (315 | ) | (817 | ) | 3,793 | |||||||||||||||
UBS PaineWebber | 5,390 | 0 | (33 | ) | (264 | ) | (894 | ) | 4,199 | |||||||||||||||
Corporate Center | 7 | 9 | (14 | ) | (1 | ) | 0 | 1 | ||||||||||||||||
UBS Group | 14,578 | 9 | (85 | ) | (930 | ) | (2,391 | ) | 11,181 | |||||||||||||||
Other Intangible Assets | ||||||||||||||||||||||||
UBS Wealth Management & Business Banking | 65 | 0 | (2 | ) | (30 | ) | 0 | 33 | ||||||||||||||||
UBS Global Asset Management | 2 | 0 | 0 | (1 | ) | 0 | 1 | |||||||||||||||||
UBS Warburg | 390 | 0 | 0 | (49 | ) | (63 | ) | 278 | ||||||||||||||||
UBS PaineWebber | 3,942 | 281 | 0 | (1,427 | ) | (662 | ) | 2,134 | ||||||||||||||||
Corporate Center | 108 | 0 | 0 | (23 | ) | (16 | ) | 69 | ||||||||||||||||
UBS Group | 4,507 | 281 | (2 | ) | (1,530 | ) | (741 | ) | 2,515 | |||||||||||||||
Until 31 December 2001, goodwill and other intangible assets relating to the merger of UBS and PaineWebber were reported in the UBS Warburg Business Group. With the separation of UBS PaineWebber from UBS Warburg at 1 January 2002, goodwill and other intangible assets have been allocated to the Business Groups that have benefited from the merger with PaineWebber. For further information about disclosure by Business Group, including the amortization of goodwill and other intangible assets of previous years, please see Note 2a: Segment Reporting by Business Group.
The estimated, aggregated amortization expenses for Goodwill and Other intangible assets are as follows:
Other | ||||||||||||
CHF million | Goodwill | intangible assets | Total | |||||||||
Estimated, aggregated amortization expenses for: | ||||||||||||
2003 | 817 | 189 | 1,006 | |||||||||
2004 | 769 | 170 | 939 | |||||||||
2005 | 738 | 166 | 904 | |||||||||
2006 | 702 | 153 | 855 | |||||||||
2007 | 646 | 144 | 790 | |||||||||
2008 and thereafter | 7,509 | 1,693 | 9,202 | |||||||||
Total | 11,181 | 2,515 | 13,696 | |||||||||
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Note 16 Other Assets
CHF million | Note | 31.12.02 | 31.12.01 | |||||||||
Deferred tax assets | 21 | 2,800 | 3,449 | |||||||||
Settlement and clearing accounts | 1,449 | 1,431 | ||||||||||
VAT and other tax receivables | 436 | 452 | ||||||||||
Prepaid pension costs | 250 | 567 | ||||||||||
Properties held for resale | 1,071 | 844 | ||||||||||
Other receivables | 2,946 | 3,132 | ||||||||||
Total other assets | 8,952 | 9,875 | ||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Balance Sheet: Liabilities
Note 17 Due to Banks and Customers
CHF million | 31.12.02 | 31.12.01 | ||||||
Due to banks | 83,178 | 106,531 | ||||||
Due to customers in savings and investment accounts | 76,884 | 67,782 | ||||||
Other amounts due to customers | 229,992 | 265,999 | ||||||
Total due to customers | 306,876 | 333,781 | ||||||
Total due to banks and customers | 390,054 | 440,312 | ||||||
Note 18 Debt Issued
The Group issues both CHF and non-CHF denominated fixed and floating rate debt. Floating rate debt generally pays interest based on the three-month or six-month London Interbank Offered Rate (LIBOR).
derivatives embedded in these instruments are separated from the host debt contract and reported as stand-alone derivatives. The amount recorded within Debt Issued represents the host contract after the separation of the embedded derivative. At 31 December 2002 and 31 December 2001, the Group had CHF 1,389 million and CHF 1,397 million, respectively, in convertible and exchangeable debt on UBS shares and notes with warrants attached on UBS shares outstanding.
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PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note | |
CLN | Credit Linked Note |
Note 18 Debt Issued (continued)
CHF million | 31.12.02 | 31.12.01 | ||||||
Money market paper issued | 72,800 | 99,006 | ||||||
Bonds issued | 51,872 | 51,061 | ||||||
Shares in bond issues of the Swiss Regional or Cantonal Banks’ Central Bond Institutions | 517 | 934 | ||||||
Medium-term notes | 4,222 | 5,217 | ||||||
Total debt issued | 129,411 | 156,218 | ||||||
The following table shows the split between fixed and floating rate debt issues based on the contractual terms. However it should be noted that the Group uses interest rate swaps to hedge many of the fixed rate debt issues, which changes their re-pricing characteristics into those of floating rate debt.
Contractual maturity date
UBS AG (Parent Bank) | Subsidiaries | |||||||||||||||||||
Fixed | Floating | Fixed | Floating | Total | ||||||||||||||||
CHF million | rate | rate | rate | rate | 31.12.02 | |||||||||||||||
2003 | 24,010 | 244 | 52,095 | 70 | 76,419 | |||||||||||||||
2004 | 4,965 | 609 | 1,432 | 574 | 7,580 | |||||||||||||||
2005 | 4,998 | 726 | 907 | 382 | 7,013 | |||||||||||||||
2006 | 3,359 | 790 | 8,000 | 439 | 12,588 | |||||||||||||||
2007 | 3,166 | 1,564 | 1,105 | 70 | 5,905 | |||||||||||||||
2008-2010 | 1,714 | 1,048 | 2,476 | 1,949 | 7,187 | |||||||||||||||
Thereafter | 2,726 | 6,672 | 269 | 3,052 | 12,719 | |||||||||||||||
Total | 44,938 | 11,653 | 66,284 | 6,536 | 129,411 | |||||||||||||||
The table below shows the notional amount and stated interest rate on the Group’s publicly placed bonds prior to the separation of any embedded derivatives or the application of hedge accounting, where applicable. As a result, the notional amount shown does not necessarily correspond to the carrying amount of the debt and the stated interest rate on the debt does not necessarily reflect the effective interest rate the Group is paying to service its debt after the separation of embedded derivatives and the application of hedge accounting, where applicable.
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
2001 | 16.000 | GOAL on Siemens | 17.01.2003 | EUR | 55 | |||||||||||||||||||
2002 | 0.000 | CLN Linked to GECC | 18.02.2003 | EUR | 50 | |||||||||||||||||||
2001 | 8.000 | GOAL on UBS | 26.02.2003 | CHF | 220 | |||||||||||||||||||
2002 | 11.250 | GOAL on Royal Dutch Petroleum | 28.02.2003 | EUR | 95 | |||||||||||||||||||
1993 | 4.875 | subordinated | 03.03.2003 | CHF | 200 | |||||||||||||||||||
2001 | 8.750 | GOAL on General Electric | 07.03.2003 | USD | 125 | |||||||||||||||||||
2001 | 13.500 | GOAL on Nokia Oyj | 10.03.2003 | EUR | 45 | |||||||||||||||||||
2002 | 0.000 | Linked to 30yr OAT | 11.03.2003 | GBP | 50 | |||||||||||||||||||
2002 | FRN | CLN Linked to GECC | 14.03.2003 | USD | 100 | |||||||||||||||||||
1997 | 1.500 | Indexed to UBS Currency Portfolio | 14.03.2003 | EUR | 51 | |||||||||||||||||||
Convertible into | ||||||||||||||||||||||||
1998 | FRN | UBS Dutch Corporate Basket | 20.03.2003 | EUR | 57 | |||||||||||||||||||
1993 | 3.500 | subordinated | 31.03.2003 | CHF | 200 | |||||||||||||||||||
1993 | 4.000 | subordinated | 31.03.2003 | CHF | 200 | |||||||||||||||||||
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PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note | |
CLN | Credit Linked Note |
UBS Group Financial Statements
Notes to the Financial Statements
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
2001 | 0.000 | BULS on technology stock basket | 10.04.2003 | USD | 78 | |||||||||||||||||||
2001 | 0.000 | BULS on Celestica and others | 28.04.2003 | USD | 40 | |||||||||||||||||||
2002 | 9.500 | GOAL on UBS | 22.05.2003 | CHF | 110 | |||||||||||||||||||
2001 | 10.250 | GOAL on Deutsche Bank | 30.05.2003 | EUR | 40 | |||||||||||||||||||
2002 | 9.500 | GOAL on DJ Euro Stoxx 50 index | 02.06.2003 | EUR | 50 | |||||||||||||||||||
2001 | 7.250 | GOAL on Aventis | 05.06.2003 | EUR | 75 | |||||||||||||||||||
2001 | 6.000 | GOAL on Total SA | 11.06.2003 | EUR | 45 | |||||||||||||||||||
2001 | 7.750 | GOAL on E.ON AG | 17.06.2003 | EUR | 40 | |||||||||||||||||||
1995 | 5.250 | subordinated | 20.06.2003 | CHF | 200 | |||||||||||||||||||
2001 | 8.250 | GOAL on Pfizer | 16.07.2003 | USD | 70 | |||||||||||||||||||
2002 | 9.500 | GOAL on SUEZ SA (Suez) | 04.09.2003 | EUR | 35 | |||||||||||||||||||
2002 | 13.000 | GOAL on Royal Dutch Petroleum | 06.10.2003 | EUR | 35 | |||||||||||||||||||
2002 | FRN | CLN Linked to Allianz AG | 24.10.2003 | USD | 150 | |||||||||||||||||||
1993 | 3.000 | 26.11.2003 | CHF | 200 | ||||||||||||||||||||
2002 | 0.000 | Linked to Basket of Common Stock | 02.12.2003 | USD | 63 | |||||||||||||||||||
1994 | 6.250 | subordinated | 06.01.2004 | USD | 300 | |||||||||||||||||||
2002 | 7.750 | GOAL on Novartis | 28.01.2004 | CHF | 100 | |||||||||||||||||||
2002 | 5.125 | GOAL on General Electric Company | 30.01.2004 | USD | 75 | |||||||||||||||||||
2002 | 6.000 | GOAL on Unilever NV | 06.02.2004 | EUR | 40 | |||||||||||||||||||
2002 | 6.250 | GOAL on Nestlé AG | 14.05.2004 | CHF | 100 | |||||||||||||||||||
2001 | 0.000 | Cliquet GROI on NASDAQ 100 Index | 27.05.2004 | USD | 42 | |||||||||||||||||||
1991 | 4.250 | subordinated | 25.06.2004 | CHF | 300 | |||||||||||||||||||
1999 | 3.500 | 01.07.2004 | EUR | 250 | ||||||||||||||||||||
2001 | 1.750 | Exchangeable bonds on Yukos | 31.08.2004 | USD | 310 | |||||||||||||||||||
1997 | 7.380 | subordinated | 26.11.2004 | GBP | 250 | |||||||||||||||||||
1995 | 4.000 | subordinated | 07.02.2005 | CHF | 150 | |||||||||||||||||||
1995 | 5.500 | Convertible into Nasdaq 100 Index | 10.02.2005 | CHF | 150 | |||||||||||||||||||
2002 | 0.000 | Equity GROI | 07.03.2005 | AUD | 233 | |||||||||||||||||||
2002 | 0.500 | Convertible into STOXX 50 Index | 21.03.2005 | EUR | 75 | |||||||||||||||||||
1995 | 5.625 | subordinated | 13.04.2005 | CHF | 150 | |||||||||||||||||||
2002 | 0.000 | GROI on FTSE 100 Index | 25.04.2005 | GBP | 46 | |||||||||||||||||||
Principal Protected Note Linked | ||||||||||||||||||||||||
2002 | 0.000 | to NASDAQ 100-Index | 04.05.2005 | USD | 46 | |||||||||||||||||||
2002 | 0.000 | Exchangeable Bonds on Yukos | 19.06.2005 | USD | 120 | |||||||||||||||||||
1995 | 8.750 | subordinated | 20.06.2005 | GBP | 249 | |||||||||||||||||||
GROI - Australian | ||||||||||||||||||||||||
2002 | 0.000 | Growth Guaranteed Fund II | 21.06.2005 | AUD | 67 | |||||||||||||||||||
1998 | 6.750 | subordinated | 15.07.2005 | USD | 200 | |||||||||||||||||||
1995 | 5.250 | subordinated | 18.07.2005 | CHF | 200 | |||||||||||||||||||
2002 | 0.000 | Cliquet GROI - Units on SMI Index | 25.07.2005 | CHF | 53 | |||||||||||||||||||
1995 | 5.000 | subordinated | 24.08.2005 | CHF | 250 | |||||||||||||||||||
2002 | 0.125 | Exchangeable Bonds on Yukos | 19.09.2005 | USD | 120 | |||||||||||||||||||
1995 | 4.500 | 21.11.2005 | CHF | 300 | ||||||||||||||||||||
2002 | 0.250 | Exchangeable Bonds on Yukos | 19.12.2005 | USD | 160 | |||||||||||||||||||
1999 | 3.500 | Straight Bond | 26.01.2006 | EUR | 650 | |||||||||||||||||||
Equity Exchangeables into | ||||||||||||||||||||||||
2001 | 1.000 | Euro. Insurance Basket | 01.02.2006 | 01.02.2004 | EUR | 100 | ||||||||||||||||||
1996 | 4.250 | subordinated | 06.02.2006 | CHF | 250 | |||||||||||||||||||
1996 | 4.000 | 14.02.2006 | CHF | 200 | ||||||||||||||||||||
2000 | 2.500 | Straight Bond | 29.03.2006 | CHF | 250 | |||||||||||||||||||
1996 | 7.250 | subordinated | 17.07.2006 | USD | 500 | |||||||||||||||||||
2001 | 0.000 | BULS on S&P 500 | 01.09.2006 | USD | 54 | |||||||||||||||||||
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PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note | |
CLN | Credit Linked Note |
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS AG (Parent Bank) outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
1996 | 7.250 | subordinated | 01.09.2006 | USD | 150 | |||||||||||||||||||
2001 | 5.500 | GOAL on UBS | 02.10.2006 | CHF | 106 | |||||||||||||||||||
Cliquet GROI-Units | ||||||||||||||||||||||||
2001 | 0.000 | on Nasdaq 100-Index | 19.10.2006 | USD | 39 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 07.11.2006 | 07.02.2003 | USD | 56 | ||||||||||||||||||
1995 | 5.000 | subordinated | 07.11.2006 | CHF | 250 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 13.11.2006 | 12.02.2003 | USD | 40 | ||||||||||||||||||
1996 | 6.250 | subordinated | 06.12.2006 | EUR | 254 | |||||||||||||||||||
2001 | 0.000 | Zero-rate Note O'Connor Fund | 29.12.2006 | EUR | 40 | |||||||||||||||||||
1997 | 8.000 | subordinated | 08.01.2007 | GBP | 242 | |||||||||||||||||||
1997 | 8.000 | subordinated | 08.01.2007 | GBP | 302 | |||||||||||||||||||
1997 | 5.750 | subordinated | 12.03.2007 | EUR | 204 | |||||||||||||||||||
Step-Up Callable | ||||||||||||||||||||||||
2002 | FRN | Daily Range Accrual Note | 15.07.2007 | 15.01.2003 | USD | 67 | ||||||||||||||||||
2002 | 1.000 | Exchangeable on DJ Euro Stoxx 50E | 23.07.2007 | EUR | 50 | |||||||||||||||||||
2002 | FRN | CLN | 01.09.2007 | USD | 50 | |||||||||||||||||||
Exchangeable Bond | ||||||||||||||||||||||||
2002 | 0.500 | on the S&P 500 Index | 05.09.2007 | USD | 40 | |||||||||||||||||||
Exchangeable Bond | ||||||||||||||||||||||||
2002 | 0.500 | on the DJ Euro STOXX 50 | 05.09.2007 | EUR | 35 | |||||||||||||||||||
2002 | 0.250 | Exchangeable Bond on the SMI | 05.09.2007 | CHF | 75 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 02.10.2007 | 02.01.2003 | USD | 61 | ||||||||||||||||||
Exchangeable bond | ||||||||||||||||||||||||
2002 | 0.500 | on Royal Dutch Petroleum | 30.10.2007 | EUR | 100 | |||||||||||||||||||
Principal Protected Notes Linked | ||||||||||||||||||||||||
2002 | 0.000 | to the S&P 500 Index | 07.11.2007 | USD | 52 | |||||||||||||||||||
2002 | 7.250 | GOAL on Royal Dutch Petroleum | 14.11.2007 | EUR | 150 | |||||||||||||||||||
2002 | 1.250 | Linked to Nikkei 225 Index | 28.11.2007 | JPY | 7,742 | |||||||||||||||||||
2002 | 5.000 | Linked to Nikkei 225 Index | 19.12.2007 | JPY | 5,537 | |||||||||||||||||||
1998 | 3.500 | 27.08.2008 | CHF | 300 | ||||||||||||||||||||
1997 | 5.875 | subordinated | 18.08.2009 | EUR | 305 | |||||||||||||||||||
2002 | FRN | Callable Daily Range Accrual Note | 23.10.2012 | 23.01.2003 | USD | 64 | ||||||||||||||||||
1995 | 7.375 | subordinated | 15.07.2015 | USD | 150 | |||||||||||||||||||
1995 | 7.000 | subordinated | 15.10.2015 | USD | 300 | |||||||||||||||||||
1997 | 7.375 | subordinated | 15.06.2017 | USD | 300 | |||||||||||||||||||
1995 | 7.500 | subordinated | 15.07.2025 | USD | 350 | |||||||||||||||||||
1995 | 8.750 | subordinated | 18.12.2025 | GBP | 149 | |||||||||||||||||||
1996 | 7.750 | subordinated | 01.09.2026 | USD | 300 | |||||||||||||||||||
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PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note | |
CLN | Credit Linked Note |
UBS Group Financial Statements
Notes to the Financial Statements
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS subsidiaries outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
Brooklands Euro Referenced Linked Notes 2001-1 Ltd | ||||||||||||||||||||||||
2002 | 2.594 | 15.12.2012 | EUR | 100 | ||||||||||||||||||||
2002 | 3.480 | 15.12.2012 | EUR | 75 | ||||||||||||||||||||
2002 | 3.293 | 23.12.2012 | EUR | 75 | ||||||||||||||||||||
2002 | 3.893 | 23.12.2012 | EUR | 35 | ||||||||||||||||||||
2001 | FRN | 20.12.2013 | EUR | 50 | ||||||||||||||||||||
2001 | FRN | 20.12.2013 | EUR | 50 | ||||||||||||||||||||
Alpine Partners L.P. | ||||||||||||||||||||||||
2000 | FRN | 08.10.2009 | 08.01.2003 | USD | 445 | |||||||||||||||||||
North Street | ||||||||||||||||||||||||
2000 | FRN | 28.04.2011 | USD | 40 | ||||||||||||||||||||
2002 | FRN | 28.04.2011 | USD | 100 | ||||||||||||||||||||
2002 | FRN | 28.04.2011 | USD | 50 | ||||||||||||||||||||
2000 | 20.000 | 28.04.2011 | USD | 43 | ||||||||||||||||||||
2000 | FRN | 30.10.2011 | USD | 61 | ||||||||||||||||||||
2000 | 18.000 | 30.10.2011 | USD | 43 | ||||||||||||||||||||
2002 | FRN | 30.01.2016 | USD | 40 | ||||||||||||||||||||
2002 | 20.000 | 30.01.2016 | USD | 49 | ||||||||||||||||||||
2002 | FRN | 30.01.2016 | USD | 46 | ||||||||||||||||||||
2002 | 5.160 | 30.01.2016 | USD | 61 | ||||||||||||||||||||
2002 | FRN | 30.01.2016 | USD | 353 | ||||||||||||||||||||
2002 | FRN | 20.08.2030 | 20.08.2003 | USD | 100 | |||||||||||||||||||
2001 | FRN | 30.04.2031 | USD | 60 | ||||||||||||||||||||
2001 | FRN | 30.04.2031 | USD | 100 | ||||||||||||||||||||
2001 | FRN | 30.07.2031 | USD | 100 | ||||||||||||||||||||
2001 | FRN | 30.07.2031 | USD | 60 | ||||||||||||||||||||
UBS Americas Inc. (former PaineWebber) | ||||||||||||||||||||||||
1993 | 7.875 | 17.02.2003 | USD | 100 | ||||||||||||||||||||
2000 | 1.270 | 13.03.2003 | JPY | 9,000 | ||||||||||||||||||||
1998 | 6.320 | 18.03.2003 | USD | 45 | ||||||||||||||||||||
1998 | 6.450 | 01.12.2003 | USD | 340 | ||||||||||||||||||||
1999 | FRN | 11.05.2004 | USD | 45 | ||||||||||||||||||||
1999 | 6.375 | 17.05.2004 | USD | 525 | ||||||||||||||||||||
1995 | 8.875 | 15.03.2005 | USD | 125 | ||||||||||||||||||||
1999 | 2.210 | 15.03.2005 | USD | 45 | ||||||||||||||||||||
1993 | 6.500 | 01.11.2005 | USD | 200 | ||||||||||||||||||||
1996 | 6.750 | 01.02.2006 | USD | 100 | ||||||||||||||||||||
1998 | 6.720 | 01.04.2008 | USD | 35 | ||||||||||||||||||||
1998 | 6.730 | 03.04.2008 | USD | 43 | ||||||||||||||||||||
1998 | 6.550 | 15.04.2008 | USD | 250 | ||||||||||||||||||||
1996 | 7.625 | 15.10.2008 | USD | 150 | ||||||||||||||||||||
1999 | 7.625 | 01.12.2009 | USD | 275 | ||||||||||||||||||||
1994 | 7.625 | 17.02.2014 | USD | 200 | ||||||||||||||||||||
Eisberg Finance Ltd. | ||||||||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 83 | |||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 65 | |||||||||||||||||||
1998 | FRN | 15.06.2004 | 10.10.2003 | USD | 41 | |||||||||||||||||||
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PIP | Protected Index Participation | |
PEP | Protected Equity Participation | |
GOAL | Geld- oder Aktien-Lieferung (cash or share delivery) | |
BULS | Bullish Underlying Linked Securities | |
GROI | Guaranteed Return On Investment | |
FRN | Floating Rate Note | |
CLN | Credit Linked Note |
Note 18 Debt Issued (continued)
Publicly placed bond issues of UBS subsidiaries outstanding as at 31.12.20021
Notional | ||||||||||||||||||||||||
amounts | ||||||||||||||||||||||||
Early | in millions | |||||||||||||||||||||||
Year of | Interest | redemption | in local | |||||||||||||||||||||
issue | rate in % | Remarks | Maturity | option | Currency | currency | ||||||||||||||||||
UBS Finance N.V., Curaçao | ||||||||||||||||||||||||
1997 | 0.000 | Zero Coupons | 29.01.2027 | EUR | 226 | |||||||||||||||||||
1998 | 0.000 | Zero Coupons | 03.03.2028 | 03.03.2003 | EUR | 81 | ||||||||||||||||||
UBS Australia Holdings Ltd. | ||||||||||||||||||||||||
1999 | 5.000 | European commercial paper | 25.02.2004 | AUD | 104 | |||||||||||||||||||
UBS Warburg AG | ||||||||||||||||||||||||
1998 | 0.000 | 19.12.2005 | EUR | 56 | ||||||||||||||||||||
2001 | 0.000 | 30.06.2006 | 30.06.2003 | EUR | 505 | |||||||||||||||||||
2001 | 0.000 | 30.06.2006 | 30.06.2003 | USD | 202 | |||||||||||||||||||
2001 | 0.000 | 31.07.2006 | 30.06.2003 | EUR | 500 | |||||||||||||||||||
2001 | 0.000 | 08.08.2006 | EUR | 77 | ||||||||||||||||||||
2001 | 0.000 | 30.09.2006 | 30.06.2003 | USD | 200 | |||||||||||||||||||
2001 | 0.000 | 30.09.2006 | 30.06.2003 | CHF | 200 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 350 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 300 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 350 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 450 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 300 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 450 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | EUR | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | CHF | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 250 | |||||||||||||||||||
2002 | 0.000 | 31.12.2006 | 30.06.2003 | USD | 250 | |||||||||||||||||||
2001 | 0.000 | 02.01.2007 | 30.06.2003 | EUR | 100 | |||||||||||||||||||
2001 | 0.000 | 02.01.2007 | 30.06.2003 | EUR | 100 | |||||||||||||||||||
2001 | 0.000 | 02.01.2007 | 30.06.2003 | EUR | 100 | |||||||||||||||||||
2002 | 0.000 | 30.03.2007 | 30.06.2003 | EUR | 60 | |||||||||||||||||||
2002 | 0.000 | 31.12.2007 | 30.06.2003 | EUR | 50 | |||||||||||||||||||
2001 | 0.000 | 30.09.2011 | 31.03.2003 | EUR | 50 | |||||||||||||||||||
2001 | 0.000 | 31.12.2011 | 30.06.2003 | EUR | 150 | |||||||||||||||||||
2002 | 0.000 | 28.09.2012 | 30.06.2003 | EUR | 50 | |||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 19 Other Liabilities
CHF million | Note | 31.12.02 | 31.12.01 | |||||||||
Provisions | 20 | 1,375 | 1,748 | |||||||||
Provision for commitments and contingent liabilities | 9b | 366 | 305 | |||||||||
Current tax liabilities | 2,079 | 1,799 | ||||||||||
Deferred tax liabilities | 21 | 2,239 | 2,827 | |||||||||
VAT and other tax payables | 613 | 622 | ||||||||||
Settlement and clearing accounts | 1,354 | 4,473 | ||||||||||
Other payables | 4,313 | 3,884 | ||||||||||
Total other liabilities | 12,339 | 15,658 | ||||||||||
Note 20 Provisions
Total | Total | |||||||||||||||
CHF million | Operational | Litigation | 31.12.02 | 31.12.01 | ||||||||||||
Balance at the beginning of the year | 1,036 | 712 | 1,748 | 2,294 | ||||||||||||
New provisions charged to income | 210 | 478 | 688 | 384 | ||||||||||||
Recoveries | 16 | 9 | 25 | 95 | ||||||||||||
Provisions applied | (439 | ) | (463 | ) | (902 | ) | (1,115 | ) | ||||||||
Reclassifications | (9 | ) | 9 | 0 | 64 | |||||||||||
Foreign currency translation | (93 | ) | (91 | ) | (184 | ) | 26 | |||||||||
Balance at the end of the year | 721 | 654 | 1,375 | 1,748 | ||||||||||||
Note 21 Income Taxes
CHF million For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Domestic | |||||||||||||
Current | 938 | 563 | 1,325 | ||||||||||
Deferred | (32 | ) | 231 | 233 | |||||||||
Foreign | |||||||||||||
Current | 249 | 546 | 451 | ||||||||||
Deferred | (477 | ) | 61 | 311 | |||||||||
Total income tax expense | 678 | 1,401 | 2,320 | ||||||||||
The Group made net tax payments, including domestic and foreign taxes, of CHF 572 million, CHF 1,742 million and CHF 959 million for the full years of 2002, 2001 and 2000, respectively.
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Note 21 Income Taxes (continued)
The components of operating profit before tax, and the differences between income tax expense reflected in the financial statements and the amounts calculated at the Swiss statutory rate of 25% are as follows:
CHF million | |||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | ||||||||||
Domestic | 6,510 | 5,565 | 7,079 | ||||||||||
Foreign | (1,966 | ) | 1,153 | 3,120 | |||||||||
Income taxes at Swiss statutory rate of 25% | 1,136 | 1,680 | 2,550 | ||||||||||
Increase/(decrease) resulting from: | |||||||||||||
Applicable tax rates differing from Swiss statutory rate | (341 | ) | (239 | ) | (336 | ) | |||||||
Tax losses not recognized | 51 | 77 | 164 | ||||||||||
Previously unrecorded tax losses now recognized | (349 | ) | (630 | ) | (655 | ) | |||||||
Lower taxed income | (378 | ) | (499 | ) | (401 | ) | |||||||
Non-deductible goodwill amortization | 291 | 429 | 159 | ||||||||||
Other non-deductible expenses | 301 | 134 | 432 | ||||||||||
Adjustments related to prior years and other | (122 | ) | 371 | 245 | |||||||||
Change in deferred tax valuation allowance | 89 | 78 | 162 | ||||||||||
Income tax expense | 678 | 1,401 | 2,320 | ||||||||||
Significant components of the Group’s gross deferred income tax assets and liabilities are as follows:
CHF million | 31.12.02 | 31.12.01 | ||||||
Deferred tax assets | ||||||||
Compensation and benefits | 1,559 | 1,778 | ||||||
Allowance for credit losses | 84 | 122 | ||||||
Net operating loss carry forwards | 2,883 | 2,902 | ||||||
Trading assets | 330 | 259 | ||||||
Other | 779 | 1,365 | ||||||
Total | 5,635 | 6,426 | ||||||
Valuation allowance | (2,835 | ) | (2,977 | ) | ||||
Net deferred tax assets | 2,800 | 3,449 | ||||||
Deferred tax liabilities | ||||||||
Property and equipment | 412 | 449 | ||||||
Investments | 430 | 464 | ||||||
Other provisions | 470 | 571 | ||||||
Trading assets | 182 | 298 | ||||||
Other | 745 | 1,045 | ||||||
Total deferred tax liabilities | 2,239 | 2,827 | ||||||
The change in the balance of net deferred tax assets and deferred tax liabilities does not equal the deferred tax expense in those years. This is due to the effect of foreign currency rate changes on tax assets and liabilities denominated in currencies other than CHF.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 21 Income Taxes (continued)
At 31 December 2002 net operating loss carry forwards totaling CHF 6,572 million are available to reduce future taxable income of certain branches and subsidiaries.
The carry forwards expire as follows: | 31.12.02 | |||
Within 1 year | 29 | |||
From 2 to 4 years | 252 | |||
After 4 years | 6,291 | |||
Total | 6,572 | |||
Note 22 Minority Interests
CHF million | 31.12.02 | 31.12.01 | ||||||
Balance at the beginning of the year | 4,112 | 2,885 | ||||||
Issuance of trust preferred securities | 0 | 1,291 | ||||||
Other increases | 172 | 0 | ||||||
Decreases and dividend payments | (377 | ) | (461 | ) | ||||
Foreign currency translation | (709 | ) | 53 | |||||
Minority interest in net profit | 331 | 344 | ||||||
Balance at the end of the year | 3,529 | 4,112 | ||||||
Note 23 Derivative Instruments
Type of derivatives
Swapsare transactions in which two parties exchange cash flows on a specified notional amount for a predetermined period. The major types of swap transaction undertaken by the Group are as follows:
– | Interest rate swap contracts generally entail the contractual exchange of fixed and floating rate interest payments in a single currency, based on a notional amount and an interest reference rate. |
– | Cross currency swaps involve the exchange of interest payments based on two different currency principal balances and interest reference rates and generally also entail exchange of principal amounts at the start and/or end of the contract. |
– | Credit default swaps (CDS) are the most common form of credit derivative, under which the party buying protection makes one or more payments to the party selling protection during |
the life of the swap in exchange for an undertaking by the seller to make a payment to the buyer following a credit event, as defined in the contract, with respect to a third party. Settlement following a credit event may be a cash amount, or cash in return for physical delivery of one or more deliverable obligations of the credit entity, as defined in the contract and is made regardless of whether the protection buyer has suffered a loss. After a credit event and settlement, the contract is terminated. |
– | Total Rate of Return Swaps give the total return receiver exposure to all of the cash flow and economic benefits and risks of an underlying security without actually owning the security, while the total return payer has a synthetic short position in the underlying reference security. |
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Optionsare contractual agreements under which the seller (writer) grants the purchaser the right, but not the obligation, either to buy (call option) or to sell (put option) by or at a set date, a specified amount of a financial instrument or commodity at a predetermined price. The seller receives a premium from the purchaser for this right. Options may be traded OTC or on a regulated exchange.
Derivatives transacted for trading purposes
Derivatives transacted for hedging purposes
Derivatives designated and accounted for
as hedging instruments
Fair value hedges
Cash flow hedges of individual variable
rate assets and liabilities
Cash flow hedges of forecast transactions
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UBS Group Financial Statements
Notes to the Financial Statements
ing interest rate risk of the Group, which is hedged with interest rate swaps, which extend over a twenty-four-year period.
The schedule of forecast principal cash flows as at 31 December 2002 is as follows:
CHF billion | < 1 year | 1-3 years | 3-5 years | 5-10 years | over 10 years | |||||||||||||||
Cash inflows (Assets) | 119 | 202 | 124 | 128 | 8 | |||||||||||||||
Cash outflows (Liabilities) | 159 | 247 | 193 | 324 | 237 | |||||||||||||||
Net cash flows | (40 | ) | (45 | ) | (69 | ) | (196 | ) | (229 | ) | ||||||||||
Gains and losses on derivatives designated as cash flow hedges of forecast transactions are initially recorded in Shareholders’ equity as “Gains/losses not recognized in the income statement” and transferred to current period earnings when the forecast cash flows occur. As at 31 December 2002, the fair value of outstanding derivatives designated as cash flow hedges of forecast transactions was a CHF 181 million net unrealized loss. Amounts reclassified from Gains/losses not recognized in the income statement to current period earnings due to discontinuation of hedge accounting were immaterial.
Notional amounts and replacement values
value is the cost to the Group’s counterparties of replacing all their transactions with the Group where the fair value is in their favor if the Group were to default. The total positive and negative replacement values are included in the balance sheet separately. For internal credit risk measurement the potential evolution of the value of the portfolio of trades with each counterparty is also modelled over its life (potential future exposure), taking into account legally enforceable close out netting agreements where applicable (see below).
Credit mitigation
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Note 23 Derivative Instruments (continued)
As at 31 December 2002 | Term to maturity | Total | |||||||||||||||||||||||||||||||||||||||||||
notional | |||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3-12 months | 1-5 years | over 5 years | Total | Total | amount | |||||||||||||||||||||||||||||||||||||||
CHF million | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | ||||||||||||||||||||||||||||||||||
Interest rate contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 3,785 | 4,127 | 93 | 121 | 141 | 333 | 33 | 8 | 4,052 | 4,589 | 1,517.3 | ||||||||||||||||||||||||||||||||||
Swaps | 2,862 | 3,778 | 9,451 | 8,127 | 78,413 | 76,244 | 55,377 | 51,917 | 146,103 | 140,066 | 5,753.0 | ||||||||||||||||||||||||||||||||||
Options | 338 | 706 | 1,143 | 1,488 | 4,216 | 5,484 | 3,905 | 4,464 | 9,602 | 12,142 | 663.2 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 40.3 | ||||||||||||||||||||||||||||||||||||||||||
Options | 4 | 16 | 1 | 4 | 17 | 101.1 | |||||||||||||||||||||||||||||||||||||||
Total | 6,989 | 8,627 | 10,687 | 9,737 | 82,770 | 82,061 | 59,315 | 56,389 | 159,761 | 156,814 | 8,074.9 | ||||||||||||||||||||||||||||||||||
Credit derivative contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 2 | 7 | 95 | 504 | 1,636 | 2,740 | 2,852 | 958 | 4,585 | 4,209 | 164.6 | ||||||||||||||||||||||||||||||||||
Total rate of return swaps | 15 | 21 | 194 | 782 | 2,308 | 1,726 | 162 | 35 | 2,679 | 2,564 | 14.5 | ||||||||||||||||||||||||||||||||||
Total | 17 | 28 | 289 | 1,286 | 3,944 | 4,466 | 3,014 | 993 | 7,264 | 6,773 | 179.1 | ||||||||||||||||||||||||||||||||||
Foreign exchange contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 2,406 | 3,100 | 1,005 | 1,732 | 232 | 270 | 11 | 1 | 3,654 | 5,103 | 252.0 | ||||||||||||||||||||||||||||||||||
Interest and currency swaps | 21,561 | 20,641 | 8,962 | 10,292 | 8,627 | 8,907 | 3,360 | 3,990 | 42,510 | 43,830 | 1,843.1 | ||||||||||||||||||||||||||||||||||
Options | 2,223 | 2,219 | 1,681 | 1,636 | 361 | 312 | 7 | 4,272 | 4,167 | 500.8 | |||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 1 | 1 | 1 | 0.1 | ||||||||||||||||||||||||||||||||||||||||
Total | 26,190 | 25,961 | 11,649 | 13,660 | 9,220 | 9,489 | 3,378 | 3,991 | 50,437 | 53,101 | 2,596.0 | ||||||||||||||||||||||||||||||||||
Precious metals contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 329 | 231 | 235 | 257 | 150 | 121 | 9 | 8 | 723 | 617 | 18.0 | ||||||||||||||||||||||||||||||||||
Options | 205 | 217 | 325 | 289 | 407 | 373 | 86 | 63 | 1,023 | 942 | 38.6 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 1 | 4 | 0 | 6 | 0.2 | |||||||||||||||||||||||||||||||||||||||
Total | 534 | 449 | 560 | 547 | 557 | 498 | 95 | 71 | 1,746 | 1,565 | 56.8 | ||||||||||||||||||||||||||||||||||
Equity/Index contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 5,393 | 1,406 | 583 | 512 | 917 | 205 | 124 | 219 | 7,017 | 2,342 | 33.2 | ||||||||||||||||||||||||||||||||||
Options | 8,676 | 12,441 | 2,515 | 3,496 | 6,650 | 7,125 | 403 | 794 | 18,244 | 23,856 | 99.3 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 7.4 | ||||||||||||||||||||||||||||||||||||||||||
Options | 861 | 246 | 316 | 247 | 443 | 338 | 1,620 | 831 | 7.5 | ||||||||||||||||||||||||||||||||||||
Total | 14,930 | 14,093 | 3,414 | 4,255 | 8,010 | 7,668 | 527 | 1,013 | 26,881 | 27,029 | 147.4 | ||||||||||||||||||||||||||||||||||
Commodity contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 5 | 3 | 2,629 | 2,670 | 346 | 304 | 2,980 | 2,977 | 24.9 | ||||||||||||||||||||||||||||||||||||
Options | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||
Total | 5 | 3 | 2,629 | 2,670 | 346 | 304 | 0 | 0 | 2,980 | 2,977 | 24.9 | ||||||||||||||||||||||||||||||||||
Total derivative instruments | 48,665 | 49,161 | 29,228 | 32,155 | 104,847 | 104,486 | 66,329 | 62,457 | 249,069 | 248,259 | |||||||||||||||||||||||||||||||||||
Replacement value netting | 166,977 | 166,977 | |||||||||||||||||||||||||||||||||||||||||||
Replacement values after netting | 82,092 | 81,282 | |||||||||||||||||||||||||||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 23 Derivative Instruments (continued)
As at 31 December 2001 | Term to maturity | Total | |||||||||||||||||||||||||||||||||||||||||||
notional | |||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3-12 months | 1-5 years | over 5 years | Total | Total | amount | |||||||||||||||||||||||||||||||||||||||
CHF million | PRV1 | NRV2 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | NRV | CHF bn | ||||||||||||||||||||||||||||||||||
Interest rate contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 2,844 | 3,260 | 114 | 530 | 108 | 245 | 48 | 134 | 3,114 | 4,169 | 1,768.7 | ||||||||||||||||||||||||||||||||||
Swaps | 2,807 | 4,322 | 5,724 | 6,393 | 49,043 | 45,029 | 25,232 | 22,866 | 82,806 | 78,610 | 4,552.4 | ||||||||||||||||||||||||||||||||||
Options | 388 | 950 | 670 | 2,095 | 3,037 | 4,048 | 2,830 | 3,336 | 6,925 | 10,429 | 784.9 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 83.6 | ||||||||||||||||||||||||||||||||||||||||||
Options | 3 | 24 | 3 | 24 | 63.2 | ||||||||||||||||||||||||||||||||||||||||
Total | 6,042 | 8,532 | 6,508 | 9,042 | 52,188 | 49,322 | 28,110 | 26,336 | 92,848 | 93,232 | 7,252.8 | ||||||||||||||||||||||||||||||||||
Credit derivative contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 6 | 18 | 707 | 1,104 | 1,020 | 1,490 | 773 | 1,184 | 2,506 | 3,796 | 75.7 | ||||||||||||||||||||||||||||||||||
Total rate of return swaps | 84 | 621 | 636 | 12 | 0 | 96 | 1,257 | 3.6 | |||||||||||||||||||||||||||||||||||||
Total | 6 | 18 | 791 | 1,725 | 1,020 | 2,126 | 785 | 1,184 | 2,602 | 5,053 | 79.3 | ||||||||||||||||||||||||||||||||||
Foreign exchange contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 3,615 | 3,163 | 1,639 | 1,899 | 755 | 428 | 20 | 6,029 | 5,490 | 279.7 | |||||||||||||||||||||||||||||||||||
Interest and currency swaps | 19,344 | 11,224 | 8,991 | 7,763 | 7,463 | 7,673 | 3,465 | 2,312 | 39,263 | 28,972 | 1,699.3 | ||||||||||||||||||||||||||||||||||
Options | 2,138 | 1,942 | 2,148 | 1,888 | 445 | 433 | 23 | 1 | 4,754 | 4,264 | 1,033.7 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||
Options | 1 | 2 | 1 | 2 | 0.8 | ||||||||||||||||||||||||||||||||||||||||
Total | 25,097 | 16,329 | 12,779 | 11,552 | 8,663 | 8,534 | 3,508 | 2,313 | 50,047 | 38,728 | 3,013.5 | ||||||||||||||||||||||||||||||||||
Precious metals contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 242 | 223 | 210 | 198 | 195 | 179 | 6 | 653 | 600 | 17.0 | |||||||||||||||||||||||||||||||||||
Options | 177 | 164 | 535 | 507 | 740 | 805 | 90 | 81 | 1,542 | 1,557 | 54.1 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||
Options | 2 | 3 | 1 | 3 | 3 | 0.9 | |||||||||||||||||||||||||||||||||||||||
Total | 419 | 389 | 748 | 706 | 935 | 984 | 96 | 81 | 2,198 | 2,160 | 72.0 | ||||||||||||||||||||||||||||||||||
Equity/Index contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 1,402 | 1,422 | 445 | 1,713 | 1,461 | 1,464 | 111 | 85 | 3,419 | 4,684 | 35.3 | ||||||||||||||||||||||||||||||||||
Options | 6,140 | 6,222 | 4,294 | 5,105 | 4,076 | 6,991 | 1,087 | 2,844 | 15,597 | 21,162 | 238.0 | ||||||||||||||||||||||||||||||||||
Exchange-traded contracts3 | |||||||||||||||||||||||||||||||||||||||||||||
Futures | 0 | 0 | 12.4 | ||||||||||||||||||||||||||||||||||||||||||
Options | 1,497 | 1,080 | 1,187 | 1,431 | 601 | 463 | 21 | 14 | 3,306 | 2,988 | 440.3 | ||||||||||||||||||||||||||||||||||
Total | 9,039 | 8,724 | 5,926 | 8,249 | 6,138 | 8,918 | 1,219 | 2,943 | 22,322 | 28,834 | 726.0 | ||||||||||||||||||||||||||||||||||
Commodity contracts | |||||||||||||||||||||||||||||||||||||||||||||
Over the counter (OTC) contracts | |||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 8 | 14 | 1 | 1 | 9 | 15 | 6.4 | ||||||||||||||||||||||||||||||||||||||
Options | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||
Total | 8 | 14 | 1 | 1 | 0 | 0 | 0 | 0 | 9 | 15 | 6.4 | ||||||||||||||||||||||||||||||||||
Total derivative instruments | 40,611 | 34,006 | 26,753 | 31,275 | 68,944 | 69,884 | 33,718 | 32,857 | 170,026 | 168,022 | |||||||||||||||||||||||||||||||||||
Replacement value netting | 96,579 | 96,579 | |||||||||||||||||||||||||||||||||||||||||||
Replacement values after netting | 73,447 | 71,443 | |||||||||||||||||||||||||||||||||||||||||||
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Off-Balance Sheet Information |
Note 24 Fiduciary Transactions
Fiduciary placement represents funds which customers have instructed the Group to place in foreign banks. The Group is not liable to the customer for any default by the foreign bank nor do creditors of the Group have a claim on the assets placed.
CHF million | 31.12.02 | 31.12.01 | ||||||
Placements with third parties | 43,440 | 58,466 | ||||||
Fiduciary credits and other fiduciary financial transactions | 774 | 1,136 | ||||||
Total fiduciary transactions | 44,214 | 59,602 | ||||||
The Group also acts in its own name as trustee or in fiduciary capacities for the account of third parties. The assets managed in such capacities are not reported on the balance sheet unless they are invested with UBS. UBS earns commission and fee income from such transactions and assets. These activities potentially expose UBS to liability risks in cases of gross negligence with regard to non-compliance of its fiduciary and contractual duties. The risks associated with this business are covered by the standard UBS risk framework.
Note 25 Commitments and Contingent Liabilities
The Group utilizes various lending-related financial instruments in order to meet the financial needs of its customers. The Group issues commitments to extend credit, standby and other letters of credit, guarantees, commitments to enter into repurchase agreements, note issuance facilities and revolving underwriting facilities. Guarantees represent irrevocable assurances, subject to the satisfaction of certain conditions, that the Group will make payment in the event that the customer fails to fulfill its obligation to third parties. The Group also enters into commitments to extend credit in the form of credit lines which are available to secure the liquidity needs of our customers, but not yet drawn upon by them, the majority of which range in maturity from 1 month to 5 years.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 25 Commitments and Contingent Liabilities (continued)
CHF million | 31.12.02 | 31.12.01 | ||||||
Contingent liabilities | ||||||||
Credit guarantees and similar instruments1 | 11,522 | 18,566 | ||||||
Sub-participations | (650 | ) | (4,944 | ) | ||||
Total | 10,872 | 13,622 | ||||||
Performance guarantees and similar instruments2 | 3,216 | 4,865 | ||||||
Sub-participations | (348 | ) | (4 | ) | ||||
Total | 2,868 | 4,861 | ||||||
Irrevocable commitments under documentary credits | 1,856 | 2,056 | ||||||
Sub-participations | (259 | ) | 0 | |||||
Total | 1,597 | 2,056 | ||||||
Gross contingent liabilities | 16,594 | 25,487 | ||||||
Sub-participations | (1,257 | ) | (4,948 | ) | ||||
Net contingent liabilities | 15,337 | 20,539 | ||||||
Irrevocable commitments | ||||||||
Undrawn irrevocable credit facilities | 39,306 | 50,608 | ||||||
Sub-participations | (446 | ) | (532 | ) | ||||
Total | 38,860 | 50,076 | ||||||
Liabilities for calls on shares and other equities | 21 | 98 | ||||||
Gross irrevocable commitments | 39,327 | 50,706 | ||||||
Sub-participations | (446 | ) | (532 | ) | ||||
Net irrevocable commitments | 38,881 | 50,174 | ||||||
Gross commitments and contingent liabilities | 55,921 | 76,193 | ||||||
Sub-participations | (1,703 | ) | (5,480 | ) | ||||
Net commitments and contingent liabilities | 54,218 | 70,713 | ||||||
Mortgage | Other | |||||||||||||||
CHF million | collateral | collateral | Unsecured | Total | ||||||||||||
Overview of collateral | ||||||||||||||||
Gross contingent liabilities | 275 | 8,254 | 8,065 | 16,594 | ||||||||||||
Gross irrevocable commitments | 1,084 | 14,956 | 23,266 | 39,306 | ||||||||||||
Liabilities for calls on shares and other equities | 21 | 21 | ||||||||||||||
Total 31.12.2002 | 1,359 | 23,210 | 31,352 | 55,921 | ||||||||||||
Total 31.12.2001 | 1,711 | 25,625 | 48,857 | 76,193 | ||||||||||||
Other commitments
ket value at the time the commitments are drawn. The maximum amount available to fund these investments at 31 December 2002 and 31 December 2001 was CHF 2,245 million and CHF 3,548 million, respectively.
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Note 26 Operating Lease Commitments
At 31 December 2002, UBS was obligated under a number of non-cancellable operating leases for premises and equipment used primarily for banking purposes. The significant premises leases usually include renewal options and escalation clauses in line with general office rental market conditions as well as rent adjustments based on price indices. However, the lease agreements do not contain contingent rent payment clauses and purchase options. The leases also do not impose any restrictions on UBS’s ability to pay dividends, engage in debt financing transactions or enter into further lease agreements.
CHF million | 31.12.02 | |||
Operating leases due | ||||
2003 | 1,038 | |||
2004 | 913 | |||
2005 | 777 | |||
2006 | 663 | |||
2007 | 623 | |||
2008 and thereafter | 5,082 | |||
Total commitments for minimum payments under operating leases | 9,096 | |||
Operating expenses include CHF 1,193 million, CHF 1,092 million and CHF 816 million in respect of operating lease rentals for the year ended 31 December 2002, 31 December 2001 and 31 December 2000, respectively.
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UBS Group Financial Statements
Notes to the Financial Statements
Additional Information |
Note 27 Pledged Assets
Assets are pledged as collateral for collateralized credit lines with central banks, loans from central mortgage institutions, deposit guarantees for savings banks, security deposits relating to stock exchange membership and mortgages on the Group’s property. The following table shows additional information about assets pledged or assigned as security for liabilities and assets subject to reservation of title for the years ended 31 December 2002 and 31 December 2001. The securities presented in the table below include securities pledged in respect of securities lending and repurchase agreements.
Carrying | Related | Carrying | Related | |||||||||||||
amount | liability | amount | liability | |||||||||||||
CHF million | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | ||||||||||||
Mortgage loans | 808 | 506 | 1,311 | 873 | ||||||||||||
Securities | 50,945 | 37,038 | 204,623 | 163,134 | ||||||||||||
Property and equipment | 129 | 33 | 160 | 89 | ||||||||||||
Other | 2 | 0 | 2 | 0 | ||||||||||||
Total pledged assets | 51,884 | 37,577 | 206,096 | 164,096 | ||||||||||||
Note 28 Litigation
Due to the nature of their business, the bank and other companies within the UBS Group are involved in various claims, disputes and legal proceedings, arising in the ordinary course of business. The Group makes provisions for such matters when, in the opinion of management and its professional advisors, it is probable that a payment will be made by the Group, and the amount can be reasonably estimated (see Note 20).
In respect of the further claims asserted against the Group of which management is aware (and which, according to the principles outlined above, have not been provided for), it is the opinion of the management that such claims are either without merit, can be successfully defended or will not have a material adverse effect on the Group’s financial condition, results of operations or liquidity.
This section presents information about the Group’s exposure to and its management and control of risks, in particular the primary risks associated with its use of financial instruments:
– | market risk is exposure to observable market variables such as interest rates, exchange rates and equity markets |
– | credit risk is the risk of loss resulting from client or counterparty default and arises on |
credit exposure in all forms, including settlement risk |
– | liquidity and funding risk is the risk that the Group is unable to fund assets or meet obligations at a reasonable price or, in extreme situations, at any price. |
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(a)(i) Overview
exchange rates, and limits on positions in the securities of individual issuers. These controls are set at levels which reflect variations in price volatility and market depth and liquidity.
(a)(ii) Interest Rate Risk
131
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UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (continued)
Interest rate sensitivity position
Interest rate sensitivity by time bands at 31.12.2002 | ||||||||||||||||||||||||||||
CHF thousand | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||||||
per basis point increase | month | months | months | years | years | Total | ||||||||||||||||||||||
CHF | Trading | (10 | ) | 211 | (287 | ) | (47 | ) | (18 | ) | (151 | ) | ||||||||||||||||
Non-trading | (42 | ) | (153 | ) | (365 | ) | (6,504 | ) | (5,119 | ) | (12,183 | ) | ||||||||||||||||
USD | Trading | (93 | ) | (256 | ) | (1,021 | ) | (2,668 | ) | 2,445 | (1,593 | ) | ||||||||||||||||
Non-trading | 26 | (82 | ) | (72 | ) | (927 | ) | (230 | ) | (1,285 | ) | |||||||||||||||||
EUR | Trading | 114 | 33 | 12 | (1,387 | ) | 728 | (500 | ) | |||||||||||||||||||
Non-trading | (1 | ) | 10 | (2 | ) | (86 | ) | (193 | ) | (272 | ) | |||||||||||||||||
GBP | Trading | (78 | ) | 200 | (227 | ) | (453 | ) | (269 | ) | (827 | ) | ||||||||||||||||
Non-trading | (1 | ) | (6 | ) | (39 | ) | 92 | 587 | 633 | |||||||||||||||||||
JPY | Trading | 21 | 12 | (502 | ) | (249 | ) | (204 | ) | (922 | ) | |||||||||||||||||
Non-trading | 0 | 1 | 0 | 18 | (24 | ) | (5 | ) | ||||||||||||||||||||
Others | Trading | (46 | ) | (61 | ) | 500 | (54 | ) | (286 | ) | 53 | |||||||||||||||||
Non-trading | 0 | 0 | (4 | ) | (1 | ) | (3 | ) | (8 | ) | ||||||||||||||||||
Interest rate sensitivity by time bands at 31.12.2001 | ||||||||||||||||||||||||||||
CHF thousand | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||||||
per basis point increase | month | months | months | years | years | Total | ||||||||||||||||||||||
CHF | Trading | 22 | (121 | ) | (35 | ) | (297 | ) | (314 | ) | (745 | ) | ||||||||||||||||
Non-trading | 3 | (24 | ) | (366 | ) | (7,656 | ) | (6,030 | ) | (14,073 | ) | |||||||||||||||||
USD | Trading | (299 | ) | 35 | 96 | (960 | ) | (2,115 | ) | (3,243 | ) | |||||||||||||||||
Non-trading | 35 | (113 | ) | (157 | ) | (274 | ) | (15 | ) | (524 | ) | |||||||||||||||||
EUR | Trading | (129 | ) | 73 | (269 | ) | (308 | ) | (806 | ) | (1,439 | ) | ||||||||||||||||
Non-trading | (2 | ) | (6 | ) | (38 | ) | 182 | 0 | 136 | |||||||||||||||||||
GBP | Trading | (89 | ) | 27 | (520 | ) | 65 | 172 | (345 | ) | ||||||||||||||||||
Non-trading | 0 | (7 | ) | (57 | ) | 175 | 624 | 735 | ||||||||||||||||||||
JPY | Trading | 175 | 695 | (98 | ) | (1,386 | ) | 246 | (368 | ) | ||||||||||||||||||
Non-trading | 1 | 0 | (3 | ) | 1 | (4 | ) | (5 | ) | |||||||||||||||||||
Others | Trading | (51 | ) | 167 | 126 | (404 | ) | 369 | 207 | |||||||||||||||||||
Non-trading | 0 | (1 | ) | 0 | (1 | ) | (4 | ) | (6 | ) | ||||||||||||||||||
Trading
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Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (continued)
Non-trading
(a)(iii) Currency Risk
Trading
Non-trading
133
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UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (continued)
Group Executive Board and subject to its VaR limit. Economic hedging strategies employed include a cost-efficient option strategy, providing a safety net against unfavorable currency fluctuations while preserving upside potential.
Breakdown of assets and liabilities by currencies
31.12.02 | 31.12.01 | |||||||||||||||||||||||||||||||
CHF billion | CHF | USD | EUR | Other | CHF | USD | EUR | Other | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and balances with central banks | 2.4 | 0.1 | 0.6 | 1.2 | 3.0 | 0.3 | 0.6 | 17.1 | ||||||||||||||||||||||||
Due from banks | 5.2 | 11.4 | 7.4 | 8.5 | 5.0 | 8.6 | 5.2 | 8.7 | ||||||||||||||||||||||||
Cash collateral on securities borrowed | 0.1 | 126.7 | 2.7 | 9.5 | 0.1 | 156.4 | 2.5 | 3.9 | ||||||||||||||||||||||||
Reverse repurchase agreements | 1.9 | 164.6 | 61.0 | 66.5 | 5.1 | 142.9 | 40.2 | 81.1 | ||||||||||||||||||||||||
Trading portfolio assets | 6.1 | 247.6 | 51.7 | 66.0 | 9.6 | 265.2 | 47.2 | 75.9 | ||||||||||||||||||||||||
Positive replacement values | 10.4 | 8.1 | 0.8 | 62.8 | 30.6 | 11.4 | 1.2 | 30.2 | ||||||||||||||||||||||||
Loans | 147.8 | 39.5 | 11.5 | 12.8 | 151.4 | 43.1 | 11.9 | 20.1 | ||||||||||||||||||||||||
Financial investments | 1.1 | 5.0 | 1.5 | 0.8 | 2.9 | 7.4 | 1.5 | 17.0 | ||||||||||||||||||||||||
Accrued income and prepaid expenses | 0.5 | 4.0 | 0.3 | 1.7 | 0.7 | 4.9 | 0.8 | 1.2 | ||||||||||||||||||||||||
Investments in associates | 0.7 | 0.0 | 0.0 | 0.0 | 0.7 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||||||||
Property and equipment | 5.6 | 1.3 | 0.1 | 0.9 | 6.3 | 1.5 | 0.1 | 0.8 | ||||||||||||||||||||||||
Goodwill and other intangible assets | 0.7 | 12.7 | 0.0 | 0.3 | 0.2 | 18.5 | 0.0 | 0.4 | ||||||||||||||||||||||||
Other assets | 1.4 | 5.0 | 1.0 | 1.6 | 2.1 | 5.6 | 0.8 | 1.4 | ||||||||||||||||||||||||
Total assets | 183.9 | 626.0 | 138.6 | 232.6 | 217.7 | 665.8 | 112.0 | 257.8 | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Due to banks | 7.6 | 48.0 | 13.8 | 13.8 | 8.0 | 68.6 | 12.9 | 17.0 | ||||||||||||||||||||||||
Cash collateral on securities lent | 0.0 | 21.6 | 5.2 | 10.1 | 0.0 | 24.3 | 3.2 | 2.8 | ||||||||||||||||||||||||
Repurchase agreements | 17.8 | 260.8 | 51.9 | 36.4 | 12.8 | 271.1 | 30.7 | 54.0 | ||||||||||||||||||||||||
Trading portfolio liabilities | 3.7 | 68.6 | 11.3 | 22.9 | 2.8 | 65.2 | 12.5 | 25.3 | ||||||||||||||||||||||||
Negative replacement values | 10.1 | 7.1 | 0.7 | 63.5 | 25.7 | 6.5 | 1.6 | 37.7 | ||||||||||||||||||||||||
Due to customers | 123.5 | 111.5 | 43.6 | 28.2 | 123.3 | 138.8 | 41.5 | 30.2 | ||||||||||||||||||||||||
Accrued expenses and deferred income | 1.9 | 8.1 | 0.9 | 4.3 | 2.4 | 10.0 | 0.9 | 4.0 | ||||||||||||||||||||||||
Debt issued | 11.4 | 96.1 | 14.3 | 7.6 | 15.7 | 120.0 | 8.8 | 11.7 | ||||||||||||||||||||||||
Other liabilities | 5.4 | 4.1 | 0.9 | 1.9 | 7.2 | 6.1 | 0.9 | 1.5 | ||||||||||||||||||||||||
Minority interests | 0.0 | 3.4 | 0.0 | 0.1 | 0.1 | 3.9 | 0.0 | 0.1 | ||||||||||||||||||||||||
Shareholders’ equity | 39.0 | 0.0 | 0.0 | 0.0 | 43.5 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 220.4 | 629.3 | 142.6 | 188.8 | 241.5 | 714.5 | 113.0 | 184.3 | ||||||||||||||||||||||||
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Note 29 Financial Instruments Risk Position (continued)
a) Market Risk (continued)
(a)(iv) Equity Risk
(a)(v) Issuer Risk
b) Credit Risk
Credit risk represents the loss which UBS would suffer if a client or counterparty failed to meet its contractual obligations. It is inherent in traditional banking products — loans, commitments to lend and other contingent liabilities, such as letters of credit — and in foreign exchange and derivatives contracts, such as swaps and options (“traded products”).
Exposure against limits for banking products is measured at face value. For loans, this is shown on the balance sheet and detailed in Note 9a), and for commitments detailed in Note 25. Both are included in the table below.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
b) Credit Risk (continued)
Breakdown of credit exposure
Amounts for each product type are shown gross before allowances and provisions.
CHF million | 31.12.02 | 31.12.01 | ||||||
Banking products | ||||||||
Loans and due from banks1 | 249,370 | 261,984 | ||||||
Contingent liabilities (gross — before participations)2 | 16,594 | 25,487 | ||||||
Undrawn irrevocable commitments (gross — before participations)2 | 39,306 | 50,608 | ||||||
Traded products3 | ||||||||
Derivatives positive replacement values (before collateral but after netting)4 | 82,092 | 73,447 | ||||||
Securities borrowing and lending, repos and reverse repos5, 6 | 20,120 | 14,074 | ||||||
Allowances and provisions7 | (5,621 | ) | (8,218 | ) | ||||
Total credit exposure net of allowances and provisions8 | 401,861 | 417,382 | ||||||
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Note 29 Financial Instruments Risk Position (continued)
b) Credit Risk (continued)
137
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UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
c) Liquidity Risk
The Group’s approach to liquidity management is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, without compromising its ability to respond quickly to strategic market opportunities. The Group’s centralized approach is based on an integrated framework incorporating the assessment of expected cash flows and the availability of high-grade collateral which could be used to secure additional funding if required. The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors. Scenarios
encompass both normal market conditions and stressed conditions, including both UBS-specific and general market crises. The impact on both trading and client businesses is considered, taking account of potential collateral with which funds might be raised, and the possibility that customers might seek to withdraw funds or draw down unutilized committed credit lines.
Maturity analysis of assets and liabilities
Due | Due | |||||||||||||||||||||||||||
Due | between | between | Due | |||||||||||||||||||||||||
On | Subject | within | 3 and | 1 and | after | |||||||||||||||||||||||
CHF billion | demand | to notice1 | 3 mths | 12 mths | 5 years | 5 years | Total | |||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Cash and balances with central banks | 4.3 | 4.3 | ||||||||||||||||||||||||||
Due from banks | 10.5 | 0.0 | 20.5 | 0.8 | 0.5 | 0.2 | 32.5 | |||||||||||||||||||||
Cash collateral on securities borrowed | 0.0 | 0.0 | 138.7 | 0.0 | 0.4 | 0.0 | 139.1 | |||||||||||||||||||||
Reverse repurchase agreements | 0.0 | 2.7 | 230.8 | 55.3 | 3.7 | 1.5 | 294.0 | |||||||||||||||||||||
Trading portfolio assets | 371.4 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 371.4 | |||||||||||||||||||||
Positive replacement values | 82.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 82.1 | |||||||||||||||||||||
Loans | 0.0 | 21.0 | 86.6 | 34.4 | 64.6 | 4.9 | 211.5 | |||||||||||||||||||||
Financial investments | 5.9 | 0.0 | 1.5 | 0.2 | 0.5 | 0.3 | 8.4 | |||||||||||||||||||||
Accrued income and prepaid expenses | 6.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 6.5 | |||||||||||||||||||||
Investments in associates | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.7 | 0.7 | |||||||||||||||||||||
Property and equipment | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 7.9 | 7.9 | |||||||||||||||||||||
Goodwill and other intangible assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 13.7 | 13.7 | |||||||||||||||||||||
Other assets | 9.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 9.0 | |||||||||||||||||||||
Total 31.12.2002 | 489.7 | 23.7 | 478.1 | 90.7 | 69.7 | 29.2 | 1,181.1 | |||||||||||||||||||||
Total 31.12.2001 | 529.7 | 30.0 | 513.4 | 74.2 | 63.6 | 42.4 | 1,253.3 | |||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Due to banks | 10.7 | 2.9 | 64.7 | 2.5 | 2.2 | 0.1 | 83.1 | |||||||||||||||||||||
Cash collateral on securities lent | 0.0 | 0.0 | 36.8 | 0.0 | 0.0 | 0.0 | 36.8 | |||||||||||||||||||||
Repurchase agreements | 0.0 | 0.3 | 329.5 | 36.9 | 0.1 | 0.1 | 366.9 | |||||||||||||||||||||
Trading portfolio liabilities | 106.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 106.5 | |||||||||||||||||||||
Negative replacement values | 81.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 81.3 | |||||||||||||||||||||
Due to customers | 147.3 | 2.2 | 150.2 | 5.1 | 1.3 | 0.9 | 307.0 | |||||||||||||||||||||
Accrued expenses and deferred income | 15.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 15.3 | |||||||||||||||||||||
Debt issued | 0.0 | 0.0 | 54.8 | 21.6 | 33.1 | 19.9 | 129.4 | |||||||||||||||||||||
Other liabilities | 12.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 12.3 | |||||||||||||||||||||
Total 31.12.2002 | 373.4 | 5.4 | 636.0 | 66.1 | 36.7 | 21.0 | 1,138.6 | |||||||||||||||||||||
Total 31.12.2001 | 362.8 | 6.4 | 700.0 | 93.9 | 29.3 | 13.3 | 1,205.7 | |||||||||||||||||||||
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Note 29 Financial Instruments Risk Position (continued)
d) Capital Adequacy
The Group monitors the adequacy of its capital using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision (“BIS rules/ratios”). The BIS ratios compare the amount of the Group’s eligible capital (in total and Tier 1) with the total of its risk weighted assets (RWAs).
BIS Eligible capital
BIS Risk-Weighted Assets (RWAs)
private customers, are weighted at 100%, meaning that 8% capital support is required.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 29 Financial Instruments Risk Position (continued)
d) Capital Adequacy (continued)
Risk-weighted assets (BIS)
Balance | Balance | |||||||||||||||
sheet/ | Risk- | sheet/ | Risk- | |||||||||||||
notional | weighted | notional | weighted | |||||||||||||
amount | amount | amount | amount | |||||||||||||
CHF million | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | ||||||||||||
Balance sheet assets | ||||||||||||||||
Due from banks and other collateralized lendings1 | 356,501 | 8,877 | 380,641 | 7,640 | ||||||||||||
Net positions in securities2 | 9,096 | 8,193 | 29,500 | 10,992 | ||||||||||||
Positive replacement values3 | 82,092 | 21,680 | 73,447 | 19,556 | ||||||||||||
Loans and other collateralized lendings1 | 320,752 | 147,703 | 305,624 | 154,908 | ||||||||||||
Accrued income and prepaid expenses | 6,453 | 3,025 | 7,554 | 3,679 | ||||||||||||
Property and equipment | 10,384 | 10,149 | 13,202 | 13,202 | ||||||||||||
Other assets | 8,952 | 5,774 | 9,875 | 4,504 | ||||||||||||
Off-balance sheet and other positions | ||||||||||||||||
Contingent liabilities | 16,594 | 8,224 | 25,487 | 9,868 | ||||||||||||
Irrevocable commitments | 39,327 | 4,622 | 50,705 | 5,034 | ||||||||||||
Forward and swap contracts4 | 9,455,928 | 4,253 | 8,362,374 | 9,256 | ||||||||||||
Purchased options4 | 298,800 | 1,023 | 365,100 | 1,777 | ||||||||||||
Market risk positions5 | 15,267 | 13,319 | ||||||||||||||
Total risk-weighted assets | 238,790 | 253,735 | ||||||||||||||
BIS capital ratios
Capital | Ratio | Capital | Ratio | |||||||||||||
CHF million | % | CHF million | % | |||||||||||||
31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||||||
Tier 1 | 27,047 | 11.3 | 29,322 | 11.6 | ||||||||||||
of which hybrid Tier 1 | 3,182 | 1.3 | 3,848 | 1.5 | ||||||||||||
Tier 2 | 5,962 | 2.5 | 8,149 | 3.2 | ||||||||||||
Total BIS | 33,009 | 13.8 | 37,471 | 14.8 | ||||||||||||
The Tier 1 capital includes CHF 3,182 million (USD 2,300 million) trust preferred securities at 31 December 2002 and CHF 3,848 million (USD 2,300 million) at 31 December 2001.
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The following table presents the fair value of financial instruments based on the following valuation methods and assumptions. It is presented because not all financial instruments are reflected in the financial statements at fair value.
(a) | trading assets, derivatives and other transactions undertaken for trading purposes are measured at fair value by reference to quoted market prices when available. If quoted market prices are not available, then fair values are estimated on the basis of pricing models, or discounted cash flows. Fair value is equal to the carrying amount for these items; |
(b) | financial investments classified as available for sale are measured at fair value by reference to quoted market prices when available. If quoted market prices are not available, then fair values are estimated on the basis of pricing models or other recognized valuation techniques. Prior to the adoption of IAS 39 in 2001, financial investments were carried at cost or if considered held for sale, at the |
lower of cost or market. Upon the adoption of the standard, all financial investments are carried at fair value. Unrealized gains and unrealized losses, excluding impairment writedowns, are recorded in Shareholders’ equity until an asset is sold, collected or otherwise disposed of; |
(c) | the carrying amount of liquid assets and other assets maturing within 12 months is assumed to approximate their fair value. This assumption is applied to liquid assets and the short term elements of all other financial assets and financial liabilities; |
(d) | the fair value of demand deposits and savings accounts with no specific maturity is assumed to be the amount payable on demand at the balance sheet date; |
(e) | the fair value of variable rate financial instruments is assumed to be approximated by their carrying amounts and, in the case of loans, does not, therefore, reflect changes in their credit quality as the impact of credit risk is recognized separately by deducting the amount of the allowance for credit losses from both book and fair values; |
(f) | the fair value of fixed rate loans and mortgages is estimated by comparing market interest rates when the loans were granted with current market rates offered on similar loans. Changes in the credit quality of loans within the portfolio are not taken into account in determining gross fair values as the impact of credit risk is recognized separately by deducting the amount of the allowance for credit losses from both book and fair values. |
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UBS Group Financial Statements
Notes to the Financial Statements
Note 30 Fair Value of Financial Instruments (continued)
Carrying | Fair | Unrealized | Carrying | Fair | Unrealized | ||||||||||||||||||||
value | value | gain/(loss) | value | value | gain/(loss) | ||||||||||||||||||||
CHF billion | 31.12.02 | 31.12.02 | 31.12.02 | 31.12.01 | 31.12.01 | 31.12.01 | |||||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and balances with central banks | 4.3 | 4.3 | 0.0 | 21.0 | 21.0 | 0.0 | |||||||||||||||||||
Due from banks | 32.5 | 32.5 | 0.0 | 27.7 | 27.7 | 0.0 | |||||||||||||||||||
Cash collateral on securities borrowed | 139.1 | 139.1 | 0.0 | 162.9 | 162.9 | 0.0 | |||||||||||||||||||
Reverse repurchase agreements | 294.1 | 294.1 | 0.0 | 269.3 | 269.3 | 0.0 | |||||||||||||||||||
Trading portfolio assets | 371.4 | 371.4 | 0.0 | 397.9 | 397.9 | 0.0 | |||||||||||||||||||
Positive replacement values | 82.1 | 82.1 | 0.0 | 73.4 | 73.4 | 0.0 | |||||||||||||||||||
Loans | 211.8 | 214.1 | 2.3 | 226.7 | 227.0 | 0.3 | |||||||||||||||||||
Financial investments | 8.4 | 8.4 | 0.0 | 28.8 | 28.8 | 0.0 | |||||||||||||||||||
Liabilities | |||||||||||||||||||||||||
Due to banks | 83.4 | 83.4 | 0.0 | 107.2 | 107.2 | 0.0 | |||||||||||||||||||
Cash collateral on securities lent | 36.9 | 36.9 | 0.0 | 30.3 | 30.3 | 0.0 | |||||||||||||||||||
Repurchase agreements | 366.9 | 366.9 | 0.0 | 368.6 | 368.6 | 0.0 | |||||||||||||||||||
Trading portfolio liabilities | 106.5 | 106.5 | 0.0 | 105.8 | 105.8 | 0.0 | |||||||||||||||||||
Negative replacement values | 81.3 | 81.3 | 0.0 | 71.4 | 71.4 | 0.0 | |||||||||||||||||||
Due to customers | 307.4 | 307.5 | (0.1 | ) | 334.0 | 334.0 | 0.0 | ||||||||||||||||||
Debt issued | 129.8 | 131.7 | (1.9 | ) | 157.5 | 158.6 | (1.1 | ) | |||||||||||||||||
Subtotal | 0.3 | (0.8 | ) | ||||||||||||||||||||||
Unrealized gains and losses recorded in shareholders’ equity before tax on: | |||||||||||||||||||||||||
Financial investments | 1.1 | 1.2 | |||||||||||||||||||||||
Derivative instruments designated as cash flow hedges | (0.3 | ) | (0.6 | ) | |||||||||||||||||||||
Net unrealized gains and losses not recognized in the income statement | 1.1 | (0.2 | ) | ||||||||||||||||||||||
The table does not reflect the fair values of non-financial assets and liabilities such as property, equipment, goodwill, prepayments and non-interest accruals. Where applicable, the interest accrued to date on financial instruments is included, for purposes of the above fair value disclosure, in the carrying value of the financial instruments.
included in the Positive or Negative replacement values in the above table. When the interest rate risk on a fixed rate financial instrument is hedged with a derivative in a fair value hedge, the fixed rate financial instrument (or hedged portion thereof) is reflected in the above table at fair value only in relation to the interest rate risk, not the credit risk as explained in (f) above. Fair value changes are recorded in net profit. The treatment of derivatives designated as cash flow hedges is explained in Note 1v). The amount shown in the table as “derivative instruments designated as cash flow hedges” is the net change in fair values on such derivatives that is recorded in Shareholders’ equity and not yet transferred to income or expense.
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Note 31 Retirement Benefit Plans and Other Employee Benefits
Defined benefit plans
Swiss pension plan
Foreign pension plans
The retirement plans provide benefits in the event of retirement, death, disability or employment termination. The plans’ retirement benefits depend on age, contributions and level of compensation. The principal plans are financed in full by the Group. The funding policy for these plans is consistent with local government and tax requirements.
Post-retirement medical and life plans
Defined contribution plans
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UBS Group Financial Statements
Notes to the Financial Statements
Note 31 Retirement Benefit Plans and Other Employee Benefits (continued)
Defined benefit plans
Swiss | Foreign | |||||||||||||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Defined benefit obligation at the beginning of the year | (17,879 | ) | (17,712 | ) | (17,011 | ) | (3,553 | ) | (3,406 | ) | (2,444 | ) | ||||||||||||
Service cost | (554 | ) | (541 | ) | (545 | ) | (108 | ) | (121 | ) | (165 | ) | ||||||||||||
Interest cost | (699 | ) | (674 | ) | (666 | ) | (210 | ) | (204 | ) | (162 | ) | ||||||||||||
Plan amendments | (1 | ) | ||||||||||||||||||||||
Special termination benefits | (209 | ) | (262 | ) | (211 | ) | (3 | ) | ||||||||||||||||
Actuarial gain/(loss) | (681 | ) | 421 | (177 | ) | (345 | ) | (99 | ) | |||||||||||||||
Benefits paid | 818 | 889 | 721 | 111 | 107 | 84 | ||||||||||||||||||
Curtailment/settlement | 74 | |||||||||||||||||||||||
Acquisition of PaineWebber | (740 | ) | ||||||||||||||||||||||
Foreign currency translation | 427 | (12 | ) | 123 | ||||||||||||||||||||
Other | 429 | |||||||||||||||||||||||
Defined benefit obligation at the end of the year | (19,204 | ) | (17,879 | ) | (17,712 | ) | (3,436 | ) | (3,553 | ) | (3,406 | ) | ||||||||||||
Fair value of plan assets at the beginning of the year | 18,289 | 19,074 | 18,565 | 2,887 | 3,378 | 2,880 | ||||||||||||||||||
Actual return on plan assets | (1,350 | ) | (765 | ) | 535 | (240 | ) | (220 | ) | |||||||||||||||
Employer contributions | 236 | 656 | 490 | 164 | 258 | 13 | ||||||||||||||||||
Plan participant contributions | 209 | 213 | 205 | 23 | ||||||||||||||||||||
Benefits paid | (818 | ) | (889 | ) | (721 | ) | (111 | ) | (107 | ) | (84 | ) | ||||||||||||
Acquisition of PaineWebber | 676 | |||||||||||||||||||||||
Foreign currency translation | (318 | ) | 7 | (130 | ) | |||||||||||||||||||
Other | (429 | ) | ||||||||||||||||||||||
Fair value of plan assets at the end of the year | 16,566 | 18,289 | 19,074 | 2,382 | 2,887 | 3,378 | ||||||||||||||||||
Funded status | (2,638 | ) | 410 | 1,362 | (1,054 | ) | (666 | ) | (28 | ) | ||||||||||||||
Unrecognized net actuarial (gains)/losses | 3,892 | 961 | (331 | ) | 1,126 | 673 | (81 | ) | ||||||||||||||||
Unrecognized transition amount | 1 | |||||||||||||||||||||||
Unrecognized prior service cost | 1 | 2 | 2 | |||||||||||||||||||||
Unrecognized asset | (1,221 | ) | (1,015 | ) | (675 | ) | (47 | ) | ||||||||||||||||
(Accrued)/prepaid pension cost | 33 | 356 | 356 | 73 | 9 | (153 | ) | |||||||||||||||||
Movement in the net (liability) or asset | ||||||||||||||||||||||||
(Accrued)/prepaid pension cost at the beginning of the year | 356 | 356 | 456 | 9 | (153 | ) | (63 | ) | ||||||||||||||||
Net periodic pension cost | (559 | ) | (656 | ) | (590 | ) | (83 | ) | (97 | ) | (55 | ) | ||||||||||||
Employer contributions | 236 | 656 | 490 | 164 | 258 | 13 | ||||||||||||||||||
Acquisition of PaineWebber | (63 | ) | ||||||||||||||||||||||
Foreign currency translation | (17 | ) | 1 | 15 | ||||||||||||||||||||
(Accrued)/prepaid pension cost | 33 | 356 | 356 | 73 | 9 | (153 | ) | |||||||||||||||||
Amounts recognized in the Balance Sheet | ||||||||||||||||||||||||
Prepaid pension cost | 33 | 356 | 356 | 220 | 185 | 53 | ||||||||||||||||||
Accrued pension liability | (147 | ) | (176 | ) | (206 | ) | ||||||||||||||||||
(Accrued)/prepaid pension cost | 33 | 356 | 356 | 73 | 9 | (153 | ) | |||||||||||||||||
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Note 31 Retirement Benefit Plans and Other Employee Benefits
(continued)
Defined benefit plans (continued)
Swiss | Foreign | |||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Components of net periodic pension cost | ||||||||||||||||||||||||
Current service cost | 554 | 541 | 545 | 108 | 121 | 165 | ||||||||||||||||||
Interest cost | 699 | 674 | 666 | 210 | 204 | 162 | ||||||||||||||||||
Expected return on plan assets | (900 | ) | (947 | ) | (927 | ) | (199 | ) | (228 | ) | (243 | ) | ||||||||||||
Adjustment to limit prepaid pension cost | 206 | 339 | 300 | |||||||||||||||||||||
Amortization of unrecognized prior service cost | 209 | 262 | 211 | 1 | 3 | |||||||||||||||||||
Amortization of unrecognized net (gains)/losses | 22 | (9 | ) | |||||||||||||||||||||
Curtailment/settlement | (59 | ) | ||||||||||||||||||||||
Employee contributions | (209 | ) | (213 | ) | (205 | ) | (23 | ) | ||||||||||||||||
Net periodic pension cost | 559 | 656 | 590 | 83 | 97 | 55 | ||||||||||||||||||
Actual return on plan assets (%) | (7.5 | ) | (4.0 | ) | 2.9 | (8.7 | ) | (7.3 | ) | (0.9 | ) | |||||||||||||
Principal actuarial assumptions used (%) | ||||||||||||||||||||||||
Discount rate | 3.8 | 4.0 | 4.0 | 5.8 | 6.2 | 6.3 | ||||||||||||||||||
Expected rate of return on plan assets | 5.0 | 5.0 | 5.0 | 7.3 | 7.9 | 8.1 | ||||||||||||||||||
Expected rate of salary increase | 2.5 | 2.5 | 2.5 | 4.4 | 4.4 | 4.4 | ||||||||||||||||||
Rate of pension increase | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.6 | ||||||||||||||||||
Swiss | ||||||||||||||||||||||||
Additional details to fair value of plan assets | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||
UBS financial instruments and UBS bank accounts | 814 | 476 | 920 | |||||||||||||||||||||
UBS AG shares1 | 206 | 305 | 291 | |||||||||||||||||||||
Securities lent to UBS included in plan assets | 2,645 | 824 | 3,432 | |||||||||||||||||||||
Other assets used by UBS included in plan assets | 90 | 104 | 179 | |||||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 31 Retirement Benefit Plans and Other Employee Benefits
(continued)
Post-retirement medical and life plans
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Post-retirement benefit obligation at the beginning of the year | (145 | ) | (115 | ) | (117 | ) | ||||||
Service cost | (8 | ) | (7 | ) | (6 | ) | ||||||
Interest cost | (9 | ) | (9 | ) | (8 | ) | ||||||
Plan amendments | (3 | ) | (10 | ) | (7 | ) | ||||||
Actuarial gain/(loss) | (31 | ) | (6 | ) | 27 | |||||||
Benefits paid | 4 | 4 | 5 | |||||||||
Acquisition of PaineWebber | (9 | ) | ||||||||||
Foreign currency translation | 26 | (2 | ) | 0 | ||||||||
Post-retirement benefit obligation at the end of the year | (166 | ) | (145 | ) | (115 | ) | ||||||
Fair value of plan assets at the beginning of the year | 3 | 4 | 4 | |||||||||
Actual return on plan assets | 0 | 0 | 0 | |||||||||
Employer contributions | 3 | 3 | 4 | |||||||||
Benefits paid | (4 | ) | (4 | ) | (4 | ) | ||||||
Fair value of plan assets at the end of the year | 2 | 3 | 4 | |||||||||
The assumed average health care cost trend rates used in determining post-retirement benefit expense is assumed to be 10.4% for 2002 and to decrease to an ultimate trend rate of 5% in 2008. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in the assumed health care cost trend rates would change the US post-retirement benefit obligation and the service and interest cost components of the net periodic post-retirement benefit costs as follows:
CHF million | 1% increase | 1% decrease | ||||||
Effect on total service and interest cost | 4 | (3 | ) | |||||
Effect on the post-retirement benefit obligation | 17 | (13 | ) | |||||
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UBS has established several equity participation plans to further align the long-term interests of executives, managers, staff and shareholders. The plans are offered to eligible employees in approximately 50 countries and are designed to meet the complex legal, tax and regulatory requirements of each country in which they are offered. The explanations below describe the most significant plans in general, but specific plan rules and investment offerings may vary by country.
UBS and non-UBS mutual funds and other UBS sponsored funds. EOP awards normally vest in one-third increments over a three-year vesting period. Under certain conditions, these awards are fully forfeitable by the employee.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 32 Equity Participation Plans (continued)
b) UBS share awards
i) Stock compensation plans
Shares granted under the various equity participation plans are as follows:
Stock bonus plans | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Unvested shares outstanding, at the beginning of the year | 52,299,332 | 47,458,928 | 14,418,646 | |||||||||
Shares awarded during the year | 13,511,655 | 16,850,859 | 1 | 39,188,528 | 1 | |||||||
Vested during the year | (16,333,832 | ) | (10,740,466 | )1 | (5,215,503 | )1 | ||||||
Forfeited during the year | (1,340,594 | ) | (1,269,989 | ) | (932,743 | ) | ||||||
Unvested shares outstanding, at the end of the year | 48,136,561 | 52,299,332 | 47,458,928 | |||||||||
Weighted-average fair market value of shares awarded (in CHF) | 71 | 90 | 76 | |||||||||
Fair market value of outstanding shares at the end of the year (CHF billion) | 3.2 | 4.4 | 4.2 | |||||||||
The stock bonus awards for 2000 include approximately 19.8 million shares granted under the retention agreements with key employees of UBS PaineWebber at the time of merger.
ii) Stock purchase plans
The following table shows the shares awarded and the weighted-average fair value per share for the Group’s stock purchase plans.
Stock purchase plans | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Share quantity purchased | 3,822,907 | 2,922,515 | 1,264,725 | |||||||||
Weighted-average purchase price (in CHF)1 | 63 | 63 | 44 | |||||||||
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Note 32 Equity Participation Plans (continued)
c) UBS option awards
Movements in options granted under the various equity participation plans mentioned above are as follows:
Weighted | Weighted | Weighted | ||||||||||||||||||||||
average | average | average | ||||||||||||||||||||||
exercise | exercise | exercise | ||||||||||||||||||||||
Number of | price | Number of | price | Number of | price | |||||||||||||||||||
options | (in CHF) | options | (in CHF) | options | (in CHF) | |||||||||||||||||||
31.12.02 | 31.12.021 | 31.12.01 | 31.12.011 | 31.12.00 | 31.12.00 | |||||||||||||||||||
Outstanding, at the beginning of the year | 63,286,669 | 66 | 63,308,502 | 58 | 30,415,386 | 66 | ||||||||||||||||||
Options due to the acquisition of PaineWebber | 18,975,8102 | 34 | ||||||||||||||||||||||
Granted during the year | 37,060,178 | 71 | 11,070,992 | 94 | 21,248,0463 | 72 | ||||||||||||||||||
Exercised during the year | (9,595,133 | ) | 54 | (10,083,075 | ) | 49 | (5,390,307 | ) | 50 | |||||||||||||||
Forfeited during the year | (2,082,356 | ) | 71 | (1,009,750 | ) | 74 | (1,940,433 | ) | 64 | |||||||||||||||
Expired unexercised | (505,131 | ) | 77 | 0 | 0 | 0 | 0 | |||||||||||||||||
Outstanding, at the end of the year | 88,164,227 | 67 | 63,286,669 | 66 | 63,308,502 | 58 | ||||||||||||||||||
Exercisable, at the end of the year | 21,765,482 | 51 | 25,550,932 | 50 | 18,310,839 | 34 | ||||||||||||||||||
The following table summarizes additional information about stock options outstanding at 31 December 2002:
Options outstanding | Options exercisable | |||||||||||||||||||
Range of exercise | Number of options | Weighted-average | Weighted-average | Number of | Weighted-average | |||||||||||||||
prices per share | outstanding | exercise price | remaining contractual life | options exercisable | exercise price | |||||||||||||||
CHF | CHF | Years | CHF | |||||||||||||||||
56.67-70.00 | 18,132,696 | 63.02 | 2.3 | 5,643,680 | 58.37 | |||||||||||||||
70.01-85.00 | 25,733,308 | 77.99 | 7.1 | 6,406,246 | 79.00 | |||||||||||||||
85.01-106.00 | 5,565,873 | 98.51 | 5.2 | 31,800 | 90.00 | |||||||||||||||
56.67-106.00 | 49,431,877 | 74.81 | 5.1 | 12,081,726 | 69.39 | |||||||||||||||
USD | USD | Years | USD | |||||||||||||||||
6.34-15.00 | 3,986,289 | 8.91 | 1.8 | 3,986,289 | 8.91 | |||||||||||||||
15.01-25.00 | 2,340,754 | 22.52 | 2.2 | 2,340,754 | 22.52 | |||||||||||||||
25.01-35.00 | 2,870,675 | 27.05 | 4.0 | 2,870,675 | 27.05 | |||||||||||||||
35.01-45.00 | 222,175 | 39.24 | 9.6 | 0 | 0 | |||||||||||||||
45.01-55.00 | 27,328,610 | 46.85 | 7.7 | 451,038 | 47.72 | |||||||||||||||
55.01-66.08 | 1,983,847 | 57.96 | 5.1 | 35,000 | 57.80 | |||||||||||||||
6.34-66.08 | 38,732,350 | 40.54 | 6.4 | 9,683,756 | 19.56 | |||||||||||||||
Options are normally granted with a strike price either equal to fair market value or approximately 10% greater than the fair value of the underlying share on the grant date.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 32 Equity Participation Plans (continued)
Generally, the Group’s policy is to recognize expense at the date of grant for equity participation instruments (shares, warrants, options and other derivatives for which the underlying is the Group’s own shares). The amount of expense recognized is equal to the intrinsic value of the instrument at such date and is calculated as follows: 1) For stock options, it is the difference between the strike price and fair market value of shares at the date of grant, if any. 2) For UBS shares and other
derivative instruments, it is the fair market value. 3) For discounted share plans, the expense is equal to the difference between the fair market value and discounted value. Management’s estimate of the accrued expense before tax for share-based compensation for the years ended 31 December 2002, 2001 and 2000 was CHF 592 million, CHF 974 million and CHF 1,749 million, respectively. The accruals include awards earned currently but issued in the following year.
e) Pro-Forma Net Income
The following table presents Net income and Earnings per share for 2002, 2001 and 2000 as if the Group had adopted the fair value method of accounting for its equity participation plans, rather than the intrinsic value method described
in paragraph d) above. In addition, the table shows amounts already recorded in the Income statement for equity participation plans and the total expense that would have been recognized had the fair value method been applied.
CHF million, except per share data | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Net Income, as reported | 3,535 | 4,973 | 7,792 | ||||||||||
Add: Equity-based employee compensation expense included in reported net income, net of tax | 493 | 769 | 1,347 | ||||||||||
Deduct: Total equity-based employee compensation expense determined under the fair-value-based method for all awards, net of tax | (1,183 | ) | (1,116 | ) | (1,505 | ) | |||||||
Net income, pro-forma | 2,845 | 4,626 | 7,634 | ||||||||||
Earnings per share | |||||||||||||
Basic, as reported | 2.92 | 3.93 | 6.44 | ||||||||||
Basic, pro-forma | 2.35 | 3.65 | 6.31 | ||||||||||
Diluted, as reported | 2.87 | 3.78 | 6.35 | ||||||||||
Diluted, pro-forma | 2.31 | 3.51 | 6.22 | ||||||||||
The fair value of options granted was determined using a proprietary option pricing model, substantially similar to the Black-Scholes model, with the following assumptions:
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Expected volatility | 35 | % | 30 | % | 30 | % | ||||||
Risk free interest rate (CHF) | 3.28 | % | 3.51 | % | 3.27 | % | ||||||
Risk free interest rate (USD) | 4.65 | % | 5.81 | % | 5.66 | % | ||||||
Expected dividend rate | 3.35 | % | 2.67 | % | 2.44 | % | ||||||
Expected life (years) | 4.5 | 4.5 | 4.4 | |||||||||
The weighted-average fair value of options granted in 2002, 2001 and 2000 was CHF 20, CHF 23 and CHF 16 per share, respectively.
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Note 33 Related Parties
For its 2002 Financial Statements, the Group defines related parties as Associated companies, private equity investees, the Board of Directors, the Group Executive Board, close family members and enterprises which are controlled by these individuals through their majority shareholding or their role as chairman and/or CEO in those companies. In 2001 and 2000, the Group Managing Board was also included in the above definition.
a) Remuneration and equity holdings
The external members of the Board of Directors do not have employment or service contracts with UBS, and thus are not entitled to benefits upon termination of their service on the Board of Directors. Total fees paid to these individuals for their services as external board members amounted to CHF 3.5 million in 2002, CHF 3.3 million in 2001 and CHF 3.3 million in 2000.
b) Loans and advances to Board of Directors and senior executives
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UBS Group Financial Statements
Notes to the Financial Statements
Note 33 Related Parties (continued)
c) Loans, advances to and transactions with significant associated companies
CHF million | 31.12.02 | 31.12.01 | ||||||
Balance at the beginning of the year | 65 | 0 | ||||||
Additions | 10 | 65 | ||||||
Reductions | (35 | ) | 0 | |||||
Balance at the end of the year | 40 | 65 | ||||||
All loans and advances to associated companies are transacted at arm’s length. At 31 December 2002 and 2001, there were trading exposures and guarantees to significant associated companies of CHF 136 million and CHF 306 million, respectively. In addition, the Group routinely receives services from associated companies at arm’s length terms. For the years ended 31 December 2002 and 31 December 2001, the amount paid to significant associates for these services was CHF 60 million and CHF 98 million, respectively. Note 35 provides a list of significant associates.
d) Loans, advances to and transactions with private equity investees
CHF million | 31.12.02 | 31.12.01 | ||||||
Balance at the beginning of the year | 489 | 682 | ||||||
Additions | 328 | 65 | ||||||
Reductions | (479 | ) | (258 | ) | ||||
Balance at the end of the year | 338 | 489 | ||||||
At 31 December 2002 and 31 December 2001 there were trading exposures and guarantees or commitments to private equity companies of CHF 73 million and CHF 177 million, respectively. In addition the Group purchased services from private equity companies at arm’s length terms for the years ended 31 December 2002 and 31 December 2001 in the amount of CHF 116 million and CHF 196 million, respectively.
e) Other related party transactions
CHF million | 2002 | 2001 | ||||||
Goods sold and services provided by related parties to UBS | 54 | 38 | ||||||
Services provided to related parties by UBS (fees received) | 13 | 17 | ||||||
Loans granted to related parties by UBS | 140 | 0 | ||||||
As part of its sponsorship of Team Alinghi, UBS paid CHF 12 million to AC 2003 SA during 2002. AC 2003 SA, whose controlling shareholder is UBS board member Ernesto Bertarelli, is Team Alinghi’s management company.
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There have been no material post-balance sheet events which would require disclosure or adjustment to the 31 December 2002 Financial Statements.
On 11 February 2003, the Board of Directors reviewed the Financial Statements and authorized them for issue. These Financial Statements will be submitted to the Annual General Meeting of Shareholders to be held on 16 April 2003 for approval.
The legal entity group structure of UBS is designed to support the Group’s businesses within an efficient legal, tax, regulatory and funding framework. Neither the Business Groups of UBS (namely UBS Warburg, UBS PaineWebber, UBS Wealth Management & Business Banking and UBS Asset Management) nor Corporate Center are replicated in their own individual legal entities but rather they generally operate out of the parent bank, UBS AG, through its Swiss and foreign branches.
Footnotes
1 | WB: UBS Wealth Management & Business Banking, AM: UBS Global Asset Management, WA: UBS Warburg, PW: UBS PaineWebber, CC: Corporate Center. | |
2 | Share Capital and Share Premium. |
Significant subsidiaries
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
Armand von Ernst & Cie AG | Berne, Switzerland | WB | CHF | 5.0 | 100.0 | |||||||||
Aventic AG | Zurich, Switzerland | WB | CHF | 30.0 | 100.0 | |||||||||
Banco UBS Warburg SA | Rio de Janeiro, Brazil | WA | BRL | 52.9 | 100.0 | |||||||||
Bank Ehinger & Cie AG | Basel, Switzerland | WB | CHF | 6.0 | 100.0 | |||||||||
BDL Banco di Lugano | Lugano, Switzerland | WB | CHF | 50.0 | 100.0 | |||||||||
BDL Banco di Lugano (Singapore) Ltd | Singapore, Singapore | WB | CHF | 22.5 | 100.0 | |||||||||
Brunswick UBS Warburg Ltd | George Town, Cayman Islands | WA | USD | 25.0 | 2 | 50.0 | ||||||||
Cantrade Privatbank AG | Zurich, Switzerland | WB | CHF | 10.0 | 100.0 | |||||||||
Cantrade Private Bank | ||||||||||||||
Switzerland (CI) Limited | St. Helier, Jersey | WB | GBP | 0.7 | 100.0 | |||||||||
Crédit Industriel SA | Zurich, Switzerland | WB | CHF | 10.0 | 100.0 | |||||||||
EIBA AG | Zurich, Switzerland | WA | CHF | 1.4 | 100.0 | |||||||||
Factors AG | Zurich, Switzerland | WB | CHF | 5.0 | 100.0 | |||||||||
Ferrier Lullin & Cie SA | Geneva, Switzerland | WB | CHF | 30.0 | 100.0 | |||||||||
Fondvest AG | Zurich, Switzerland | AM | CHF | 4.3 | 100.0 | |||||||||
GAM Holding AG | Zurich, Switzerland | AM | CHF | 200.0 | 100.0 | |||||||||
Global Asset Management Limited, Bermuda | Hamilton, Bermuda | AM | USD | 2.0 | 100.0 | |||||||||
IL Immobilien-Leasing AG | Opfikon, Switzerland | WB | CHF | 5.0 | 100.0 | |||||||||
Noriba Bank BSC | Manama, Bahrain | WB | USD | 10.0 | 100.0 | |||||||||
PaineWebber Capital Inc | Delaware, USA | PW | USD | 25.8 | 2 | 100.0 | ||||||||
PT UBS Warburg Indonesia | Jakarta, Indonesia | WA | IDR | 11,000.0 | 85.0 | |||||||||
PW Trust Company | New Jersey, USA | PW | USD | 4.4 | 2 | 99.6 | ||||||||
SG Warburg & Co International BV | Amsterdam, the Netherlands | WA | GBP | 40.5 | 100.0 | |||||||||
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Footnotes
1 | WB: UBS Wealth Management & Business Banking, AM: UBS Global Asset Management, WA: UBS Warburg, PW: UBS PaineWebber, CC: Corporate Center. | |
2 | Share Capital and Share Premium. |
UBS Group Financial Statements
Notes to the Financial Statements
Note 35 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
Thesaurus Continentale | ||||||||||||||
Effekten-Gesellschaft in Zürich | Zurich, Switzerland | WB | CHF | 30.0 | 100.0 | |||||||||
UBS (Bahamas) Ltd | Nassau, Bahamas | WB | USD | 4.0 | 100.0 | |||||||||
UBS (France) SA | Paris, France | WB | EUR | 10.0 | 100.0 | |||||||||
UBS (Italia) SpA | Milan, Italy | WB | EUR | 22.2 | 100.0 | |||||||||
UBS (Luxembourg) SA | Luxembourg, Luxembourg | WB | CHF | 150.0 | 100.0 | |||||||||
UBS (Monaco) SA | Monte Carlo, Monaco | WB | EUR | 9.2 | 100.0 | |||||||||
UBS (Sydney) Limited | Sydney, Australia | WA | AUD | 12.7 | 100.0 | |||||||||
UBS (Trust and Banking) Limited | Tokyo, Japan | AM | JPY | 10,900.0 | 100.0 | |||||||||
UBS (USA) Inc | Delaware, USA | WA | USD | 315.0 | 100.0 | |||||||||
UBS Americas Inc | Delaware, USA | WA | USD | 4,490.82 | 100.0 | |||||||||
UBS Australia Limited | Sydney, Australia | WA | AUD | 50.0 | 100.0 | |||||||||
UBS Bank (Canada) | Toronto, Canada | WB | CAD | 20.7 | 100.0 | |||||||||
UBS Beteiligungs-GmbH & Co KG | Frankfurt, Germany | WA | EUR | 398.8 | 100.0 | |||||||||
UBS Bunting Warburg Inc | Toronto, Canada | WA | CAD | 33.3 | 50.0 | |||||||||
UBS Capital (Jersey) Ltd | St. Helier, Jersey | WA | GBP | 226.0 | 100.0 | |||||||||
UBS Capital AG | Zurich, Switzerland | WA | CHF | 5.0 | 100.0 | |||||||||
UBS Capital Americas Investments II LLC | Delaware, USA | WA | USD | 130.0 | 2 | 100.0 | ||||||||
UBS Capital Americas Investments III Ltd | George Town, Cayman Islands | WA | USD | 61.0 | 2 | 100.0 | ||||||||
UBS Capital Asia Pacific Limited | George Town, Cayman Islands | WA | USD | 5.0 | 100.0 | |||||||||
UBS Capital BV | Amsterdam, the Netherlands | WA | EUR | 104.1 | 2 | 100.0 | ||||||||
UBS Capital II LLC | Delaware, USA | WA | USD | 2.6 | 2 | 100.0 | ||||||||
UBS Capital Latin America LDC | George Town, Cayman Islands | WA | USD | 113.0 | 2 | 100.0 | ||||||||
UBS Capital LLC | Delaware, USA | WA | USD | 378.5 | 2 | 100.0 | ||||||||
UBS Capital Partners Limited | London, Great Britain | WA | GBP | 6.7 | 100.0 | |||||||||
UBS Capital SpA | Milan, Italy | WA | EUR | 25.8 | 100.0 | |||||||||
UBS Card Center AG | Glattbrugg, Switzerland | WB | CHF | 40.0 | 100.0 | |||||||||
UBS Employee Benefits Trust Limited | St. Helier, Jersey | CC | CHF | — | 100.0 | |||||||||
UBS España SA | Madrid, Spain | WB | EUR | 85.3 | 100.0 | |||||||||
UBS Fiduciaria SpA | Milan, Italy | WB | EUR | 0.2 | 100.0 | |||||||||
UBS Finance (Cayman Islands) Ltd | George Town, Cayman Islands | CC | USD | 0.5 | 100.0 | |||||||||
UBS Finance (Curação) NV | Willemstad, Netherlands | CC | USD | 0.1 | 100.0 | |||||||||
Antilles | ||||||||||||||
UBS Finance (Delaware) LLC | Delaware, USA | WA | USD | 37.3 | 2 | 100.0 | ||||||||
UBS Finanzholding AG | Zurich, Switzerland | CC | CHF | 10.0 | 100.0 | |||||||||
UBS Fund Holding (Luxembourg) SA | Luxembourg, Luxembourg | AM | CHF | 42.0 | 100.0 | |||||||||
UBS Fund Holding (Switzerland) AG | Basel, Switzerland | AM | CHF | 18.0 | 100.0 | |||||||||
UBS Fund Management (Switzerland) AG | Basel, Switzerland | AM | CHF | 1.0 | 100.0 | |||||||||
UBS Fund Services (Cayman) Ltd | George Town, Cayman Islands | AM | USD | 5.6 | 100.0 | |||||||||
UBS Fund Services (Luxembourg) SA | Luxembourg, Luxembourg | AM | CHF | 2.5 | 100.0 | |||||||||
UBS Global Asset Management (Americas) Inc | Delaware, USA | AM | USD | — | 100.0 | |||||||||
UBS Global Asset Management (Australia) Ltd | Sydney, Australia | AM | AUD | 8.0 | 100.0 | |||||||||
UBS Global Asset Management (Canada) Co | Halifax, Canada | AM | CAD | 117.0 | 100.0 | |||||||||
UBS Global Asset Management (France) SA | Paris, France | AM | EUR | 1.5 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Hong Kong) Limited | Hong Kong, China | AM | HKD | 25.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Italia) SIM SpA | Milan, Italy | AM | EUR | 2.0 | 100.0 | |||||||||
UBS Global Asset Management (Japan) Ltd | Tokyo, Japan | AM | JPY | 2,200.0 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(New York) Inc | New York, USA | AM | USD | 0.5 | 100.0 | |||||||||
UBS Global Asset Management | ||||||||||||||
(Singapore) Ltd | Singapore, Singapore | AM | SGD | 4.0 | 100.0 | |||||||||
UBS Global Asset Management (Taiwan) Ltd | Taipei, Taiwan | AM | TWD | 340.0 | 84.1 | |||||||||
UBS Global Asset Management (US) Inc | Delaware, USA | AM | USD | 35.3 | 2 | 100.0 | ||||||||
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Footnotes
1 | WB: UBS Wealth Management & Business Banking, AM: UBS Global Asset Management, WA: UBS Warburg, PW: UBS PaineWebber, CC: Corporate Center. | |
2 | Share Capital and Share Premium. |
Note 35 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
UBS Global Asset Management Holding Ltd | London, Great Britain | AM | GBP | 8.0 | 2 | 100.0 | ||||||||
UBS Global Trust Corporation | St. John, Canada | WB | CAD | 0.1 | 100.0 | |||||||||
UBS Immoleasing AG | Zurich, Switzerland | WB | CHF | 3.0 | 100.0 | |||||||||
UBS International Holdings BV | Amsterdam, the Netherlands | CC | CHF | 13.8 | 100.0 | |||||||||
UBS Invest Kapitalanlagegesellschaft mbH | Frankfurt, Germany | AM | EUR | 6.4 | 100.0 | |||||||||
UBS Investment Bank Limited | London, Great Britain | WA | GBP | 10.0 | 100.0 | |||||||||
UBS Leasing AG | Brugg, Switzerland | WB | CHF | 10.0 | 100.0 | |||||||||
UBS Life AG | Zurich, Switzerland | WB | CHF | 25.0 | 100.0 | |||||||||
UBS Limited | London, Great Britain | WA | GBP | 10.0 | 100.0 | |||||||||
UBS O’Connor LLC | Delaware, USA | AM | USD | 1.0 | 100.0 | |||||||||
UBS O’Connor Trading Limited | George Town, Cayman Islands | AM | USD | 350.0 | 100.0 | |||||||||
UBS PaineWebber Inc | Delaware, USA | PW | USD | 1,707.5 | 2 | 100.0 | ||||||||
UBS PaineWebber Incorporated of | ||||||||||||||
Puerto Rico | Hato Rey, Puerto Rico | PW | USD | 31.6 | 2 | 100.0 | ||||||||
UBS PaineWebber Life Insurance Company | California, USA | PW | USD | 39.3 | 2 | 100.0 | ||||||||
UBS Portfolio LLC | New York, USA | WA | USD | 0.1 | 100.0 | |||||||||
UBS Preferred Funding Company LLC I | Delaware, USA | WA | USD | — | 100.0 | |||||||||
UBS Preferred Funding Company LLC II | Delaware, USA | WA | USD | — | 100.0 | |||||||||
UBS Preferred Funding Company LLC III | Delaware, USA | WA | USD | — | 100.0 | |||||||||
UBS Principal Finance LLC | Delaware, USA | WA | USD | 0.1 | 100.0 | |||||||||
UBS Private Banking (Belgium) SA | Brussels, Belgium | WB | EUR | 7.3 | 100.0 | |||||||||
UBS Private Banking Deutschland AG | Hamburg, Germany | WB | EUR | 51.0 | 100.0 | |||||||||
UBS Realty Investors LLC | Massachusetts, USA | AM | USD | — | 100.0 | |||||||||
UBS Trust (Canada) | Toronto, Canada | WB | CAD | 12.5 | 100.0 | |||||||||
UBS Trustees (Bahamas) Ltd | Nassau, Bahamas | WB | USD | 2.0 | 100.0 | |||||||||
UBS Trustees (Cayman) Ltd | George Town, Cayman Islands | WB | USD | 2.0 | 100.0 | |||||||||
UBS Trustees (Jersey) Ltd | St. Helier, Jersey | WB | GBP | 0.7 | 100.0 | |||||||||
UBS Trustees (Singapore) Limited | Singapore, Singapore | WB | SGD | 3.3 | 100.0 | |||||||||
UBS UK Holding Limited | London, Great Britain | WA | GBP | 5.0 | 100.0 | |||||||||
UBS UK Limited | London, Great Britain | WA | GBP | 609.0 | 100.0 | |||||||||
UBS Warburg (France) SA | Paris, France | WA | EUR | 22.9 | 100.0 | |||||||||
UBS Warburg (Italia) SpA | Milan, Italy | WA | EUR | 1.9 | 100.0 | |||||||||
UBS Warburg (Japan) Limited | George Town, Cayman Islands | WA | JPY | 50,000.0 | 100.0 | |||||||||
UBS Warburg (Malaysia) Sdn Bhd | Kuala Lumpur, Malaysia | WA | MYR | 0.5 | 70.0 | |||||||||
UBS Warburg (Nederland) BV | Amsterdam, the Netherlands | WA | EUR | 10.9 | 100.0 | |||||||||
UBS Warburg AG | Frankfurt, Germany | WA | EUR | 155.7 | 100.0 | |||||||||
UBS Warburg Asia Limited | Hong Kong, China | WA | HKD | 20.0 | 100.0 | |||||||||
UBS Warburg | ||||||||||||||
Australia Corporate Finance Ltd | Sydney, Australia | WA | AUD | — | 100.0 | |||||||||
UBS Warburg | ||||||||||||||
Australia Corporation Pty Limited | Sydney, Australia | WA | AUD | 50.4 | 2 | 100.0 | ||||||||
UBS Warburg Australia Equities Ltd | Sydney, Australia | WA | AUD | 190.0 | 2 | 100.0 | ||||||||
UBS Warburg Australia Limited | Sydney, Australia | WA | AUD | 571.5 | 2 | 100.0 | ||||||||
UBS Warburg Derivatives Limited | Hong Kong, China | WA | HKD | 20.0 | 100.0 | |||||||||
UBS Warburg Hong Kong Limited | Hong Kong, China | WA | HKD | 30.0 | 100.0 | |||||||||
UBS Warburg International Ltd | London, Great Britain | WA | GBP | 18.0 | 100.0 | |||||||||
UBS Warburg Investments Ltd | Sydney, Australia | WA | AUD | 0.1 | 100.0 | |||||||||
UBS Warburg LLC | Delaware, USA | WA | USD | 948.1 | 100.0 | |||||||||
UBS Warburg Ltd | London, Great Britain | WA | GBP | 17.5 | 100.0 | |||||||||
UBS Warburg New Zealand Equities Ltd | Auckland, New Zealand | WA | NZD | 7.5 | 100.0 | |||||||||
UBS Warburg Private Clients Ltd | Melbourne, Australia | WA | AUD | 53.9 | 100.0 | |||||||||
UBS Warburg Pte Ltd | Singapore, Singapore | WA | SGD | 55.0 | 100.0 | |||||||||
UBS Warburg Real Estate Securities Inc | Delaware, USA | WA | USD | 0.4 | 100.0 | |||||||||
UBS Warburg Securities (España) SV SA | Madrid, Spain | WA | EUR | 15.0 | 100.0 | |||||||||
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Notes to the Financial Statements
Note 35 Significant Subsidiaries and Associates (continued)
Significant subsidiaries (continued)
Equity | ||||||||||||||
Share | interest | |||||||||||||
Jurisdiction | Business | capital | accumul- | |||||||||||
Company | of incorporation | Group1 | in millions | ated in % | ||||||||||
UBS Warburg Securities | ||||||||||||||
(South Africa) (Pty) Limited | Sandton, South Africa | WA | ZAR | 87.1 | 100.0 | |||||||||
UBS Warburg Securities Co Ltd | Bangkok, Thailand | WA | THB | 400.0 | 100.0 | |||||||||
UBS Warburg Securities India Private Limited | Mumbai, India | WA | INR | 237.8 | 75.0 | |||||||||
UBS Warburg Securities Ltd | London, Great Britain | WA | GBP | 140.0 | 100.0 | |||||||||
UBS Warburg Securities Philippines Inc | Makati City, Philippines | WA | PHP | 150.0 | 100.0 | |||||||||
Consolidated companies: changes in 2002
Significant new companies
BDL Banco di Lugano (Singapore) Ltd — Singapore, Singapore |
GAM Holding AG — Zurich, Switzerland |
Noriba Bank BSC — Manama, Bahrain |
UBS Fiduciaria SpA — Milan, Italy |
UBS Private Banking (Belgium) SA — Brussels, Belgium |
Deconsolidated companies
Significant deconsolidated companies | Reason for deconsolidation | |||
Hirslanden Holding AG — Zurich, Switzerland | Sold | |||
HYPOSWISS Schweizerische Hypotheken- und Handelsbank — Zurich, Switzerland | Sold | |||
Significant associates
Equity interest | Share capital | |||||||||||||
Company | Industry | in % | in millions | |||||||||||
SIS Swiss Financial Services Group AG — Zurich, Switzerland | Financial | 32.9 | CHF | 26 | ||||||||||
Giubergia UBS Warburg SIM SpA — Milan, Italy | Financial | 49.9 | EUR | 15 | ||||||||||
Motor Columbus AG — Baden, Switzerland | Electricity | 35.6 | CHF | 253 | ||||||||||
Telekurs Holding AG — Zurich, Switzerland | Financial | 33.3 | CHF | 45 | ||||||||||
Volbroker.com Limited — London, Great Britain | Financial | 21.0 | GBP | 18 | ||||||||||
None of the above investments carry voting rights that are significantly different from the proportion of shares held.
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On 3 November 2000, UBS completed its acquisition of 100% of the outstanding common stock of the Paine Webber Group, Inc. (“Paine-Webber”), a full-service broker-dealer and one of the largest securities and commodities firms in the United States servicing both individual and institutional clients. The transaction was accounted for using the purchase method of accounting, making PaineWebber a wholly owned subsidiary of UBS. Results of operations of PaineWebber have been included in the consolidated results beginning on the date of acquisition. Under IFRS, the valuation of shares and
options issued was measured on the date of acquisition, 3 November 2000.
Note 37 Currency Translation Rates
The following table shows the principal rates used to translate the financial statements of foreign entities into Swiss francs:
Spot rate | Average rate | |||||||||||||||||||
As at | Year ended | |||||||||||||||||||
31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||
1 USD | 1.38 | 1.67 | 1.54 | 1.69 | 1.69 | |||||||||||||||
1 EUR | 1.45 | 1.48 | 1.46 | 1.50 | 1.56 | |||||||||||||||
1 GBP | 2.23 | 2.43 | 2.33 | 2.44 | 2.57 | |||||||||||||||
100 JPY | 1.17 | 1.27 | 1.24 | 1.40 | 1.57 | |||||||||||||||
The consolidated financial statements of UBS are prepared in accordance with International Financial Reporting Standards. Set out below are the deviations which would result if the provisions of the Banking Ordinance and the Guidelines of the Swiss Federal Banking Commission governing financial statement reporting pursuant to Article 23 through Article 27 of the Banking Ordinance were applied in the preparation of the consolidated financial statements of UBS.
1. Treasury shares
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Notes to the Financial Statements
held for other purposes are classified as Financial investments and a corresponding reserve for own shares is established within Shareholders’ equity. All derivative contracts on own shares are reported as Positive or Negative replacement values. Traded own shares and derivatives on own shares are carried at fair value. Gains and losses realized on disposal and unrealized gains and losses from changes in the fair value are recorded as Net trading income. Own shares reported within Financial investments are reported at the lower of cost or market value. Reductions to market value and reversals of such reductions, as well as gains and losses on disposal, are included in Other income. Own shares repurchased for cancellation are reported as financial investments and accounted for at cost. Upon cancellation, the par value of shares repurchased and cancelled is debited against Share capital for the par value, with the remainder of the purchase cost debited against General statutory reserve.
2. Financial investments
3. Cash flow hedges
4. Gains/losses not recognized in the income statement
5. Extraordinary income and expense
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Note 38 Swiss Banking Law Requirements (continued)
CHF million | 31.12.02 | 31.12.01 | |||||||
Differences in the Balance Sheet | |||||||||
Treasury shares | |||||||||
Trading portfolio | 371 | 128 | |||||||
Financial investments | 6,623 | 3,253 | |||||||
Due to banks | 23 | 24 | |||||||
Negative replacement values | (2 | ) | 0 | ||||||
Other liabilities | 293 | 0 | |||||||
Shareholders’ equity | 6,680 | 3,357 | |||||||
Financial investments | |||||||||
Financial investments | (1,314 | ) | (1,856 | ) | |||||
Other liabilities | (113 | ) | (215 | ) | |||||
Shareholders’ equity | (1,201 | ) | (1,641 | ) | |||||
Cash flow hedges | |||||||||
Other liabilities | (256 | ) | (459 | ) | |||||
Shareholders’ equity | 256 | 459 | |||||||
Differences in the Income Statement | |||||||||
Treasury shares | |||||||||
Net trading income | (70 | ) | (70 | ) | |||||
Other income | (269 | ) | (231 | ) | |||||
Personnel expenses | 4 | ||||||||
Tax expenses | (53 | ) | (71 | ) | |||||
Financial investments | |||||||||
Other income | (255 | ) | (607 | ) | |||||
Reclassification of extraordinary income and expense | |||||||||
Other income | (350 | ) | (95 | ) | |||||
Extraordinary income | 361 | 109 | |||||||
Extraordinary expense | 11 | 14 | |||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 39 Reconciliation of International Financial Reporting Standards (IFRS) to United States Generally Accepted Accounting Principles (US GAAP)
Note 39.1 Valuation and income recognition differences between IFRS and US GAAP |
The consolidated financial statements of the Group have been prepared in accordance with IFRS. The principles of IFRS differ in certain respects from United States Generally Accepted Accounting Principles (“US GAAP”). The following is a summary of the relevant significant accounting and valuation differences between IFRS and US GAAP.
a. Purchase accounting (merger of Union Bank of Switzerland and Swiss Bank Corporation) |
Under IFRS, the Group accounted for the 1998 merger of Union Bank of Switzerland and Swiss Bank Corporation under the uniting of interests method. The balance sheets and income statements of the banks were combined, and no adjustments were made to the carrying values of the assets and liabilities. Under US GAAP, the business combination creating UBS AG is accounted for under the purchase method with Union Bank of Switzerland being considered the acquirer. Under the purchase method, the cost of acquisition is measured at fair value and the acquirer’s interests in identifiable tangible assets and liabilities of the acquiree are restated to fair values at the date of acquisition. Any excess consideration paid over the fair value of net tangible assets acquired is allocated, first to identifiable intangible assets based on their fair values, if determinable, with the remainder allocated to goodwill.
Goodwill and intangible assets
On 1 January 2002, the Group adopted SFAS 141, “Business Combinations” and SFAS 142, “Goodwill and Other Intangible Assets”. SFAS 141 requires reclassification of intangible assets to goodwill which no longer meet the recognition criteria under the new standard. SFAS 142 requires that goodwill and intangible assets with indefinite lives no longer be amortized but be tested annually for impairment. Identifiable intangible assets with finite lives will continue to be amortized.
Other purchase accounting adjustments
b. Reversal of IFRS goodwill amortization |
The adoption of SFAS 142 “Goodwill and Intangible Assets” resulted in two new reconciling items 1) Intangible assets on the IFRS Balance sheet with a book value of CHF 1.8 billion at 31 December 2001 were reclassified to goodwill for US GAAP. 2) The amortization of IFRS goodwill and the intangible assets reclassified to goodwill for US GAAP (CHF 1,017 million for the year ended 31 December 2002) was reversed for US GAAP.
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CHF million, except for per share data | ||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Reported Net profit under US GAAP | 5,546 | 3,234 | 4,437 | |||||||||
Add back: SBC purchase accounting goodwill | 0 | 1,657 | 1,679 | |||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and/or IFRS goodwill | 0 | 886 | 315 | |||||||||
Adjusted net profit under US GAAP | 5,546 | 5,777 | 6,431 | |||||||||
Reported basic earnings per share under US GAAP | 4.59 | 2.58 | 3.70 | |||||||||
Add back: SBC purchase accounting goodwill | 0.00 | 1.32 | 1.40 | |||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and/or IFRS goodwill | 0.00 | 0.71 | 0.26 | |||||||||
Adjusted basic earnings per share under US GAAP | 4.59 | 4.61 | 5.36 | |||||||||
Reported diluted earnings per share under US GAAP | 4.51 | 2.46 | 3.64 | |||||||||
Add back: SBC purchase accounting goodwill | 0.00 | 1.30 | 1.38 | |||||||||
Add back: Amortization of intangibles reclassified to goodwill for US GAAP and/or IFRS goodwill | 0.00 | 0.70 | 0.26 | |||||||||
Adjusted diluted earnings per share under US GAAP | 4.51 | 4.46 | 5.28 | |||||||||
The table below shows the estimated, aggregated amortization expenses for other intangible assets, which are still subject to an annual amortization, on a US GAAP basis:
CHF million | ||||
Estimated, aggregated amortization expense for: | ||||
2003 | 116 | |||
2004 | 97 | |||
2005 | 93 | |||
2006 | 80 | |||
2007 | 71 | |||
2008 and thereafter | 765 | |||
Total | 1,222 | |||
c. Restructuring provision |
Under IFRS, restructuring provisions are recognized when a legal or constructive obligation has been incurred. In 1997, the Group recognized a CHF 7,000 million restructuring provision to cover personnel, IT, premises and other costs associated with combining and restructuring the merged Group. A further CHF 300 million provision was recognized in 1999, reflecting the impact of increased precision in the estimation of certain leased and owned property costs.
turing provision of CHF 1,575 million during 1998 for US GAAP. CHF 759 million of this provision related to estimated costs for restructuring the operations and activities of Swiss Bank Corporation, and that amount was recorded as a liability of the acquired business. The remaining CHF 816 million of estimated costs were charged to restructuring expense during 1998. The US GAAP restructuring provision was increased by CHF 600 million and CHF 130 million in 1999 and 2000, respectively.
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Notes to the Financial Statements
d. Derivative instruments |
Derivative instruments held or issued for hedging activities
Derivative instruments indexed to UBS shares
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Bifurcation of embedded issuer calls out of structured debt instruments
e. Financial investments (prior to the adoption of IAS 39) |
Prior to the adoption of IAS 39 on 1 January 2001, financial investments were classified as either current investments or long-term investments under IFRS. The Group considered current financial investments to be held for sale and carried at lower of cost or market value (“LOCOM”). The Group accounted for long-term financial investments at cost, less any impairments. Under US GAAP, the Group’s financial investments are classified as available for sale (debt and marketable equity securities), and are carried at fair value with changes in fair value recorded in Other comprehensive income. Gains and losses are recognized in Net profit in the period sold, and losses are recognized in the period of impairment for IFRS and US GAAP. For the IFRS to US GAAP reconciliation, debt and marketable equity securities were adjusted from LOCOM to fair value and classified as available for sale investments. Unrealized gains or unrealized losses relating to these investments were recorded in Other comprehensive income.
f. Financial investments and private equity |
Financial investments available for sale
Private equity investments
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Notes to the Financial Statements
poses is that certain private equity investments are now recorded at fair value, with changes in fair value recognized in US GAAP net profit. The remaining private equity investments continue to be accounted for at cost less impairment.
cumulative effect of this change in accounting on US GAAP net profit was an increase of CHF 639 million, after tax. For the year ended 31 December 2002, the effect of applying the new standard on the reconciliation of IFRS net profit to US GAAP was to increase US GAAP net profit by an additional CHF 83 million, after tax.
CHF million, except for per share data | ||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Net profit under US GAAP | 4,907 | 2,763 | 5,523 | |||||||||
Basic earnings per share | 4.06 | 2.21 | 4.61 | |||||||||
Diluted earnings per share | 3.99 | 2.09 | 4.53 | |||||||||
See Note 2 for information regarding impairment charges recorded for private equity investments.
g. Retirement benefit plans |
Under IFRS, the Group recognizes pension expense based on a specific method of actuarial valuation used to determine the projected plan liabilities for accrued service, including future expected salary increases, and expected return on plan assets. Plan assets are recorded at fair value and are held in a separate trust to satisfy plan liabilities. Under IFRS the recognition of a prepaid asset is subject to certain limitations, and any unrecognized prepaid asset is recorded as pension expense. US GAAP does not allow a limitation on the recognition of prepaid assets recorded in the Balance Sheet.
liability is recognized, an equal amount will be recognized as an intangible asset up to the amount of any unrecognized past service cost. Any amount not recognized as an intangible asset is reported in Other comprehensive income. The additional minimum liability required under US GAAP before tax amounts to CHF 1,225 million and CHF 306 million as at 31 December 2002 and 2001, respectively. The amount recognized in intangible assets was CHF 2 million and CHF 3 million and the amount recognized in Other comprehensive income was CHF 1,223 million, before taxes and CHF 303 million, before taxes as at 31 December 2002 and 2001 respectively.
h. Other employee benefits |
Under IFRS, the Group has recorded expenses and liabilities for post-retirement, medical and life insurance benefits, determined under a methodology similar to that described above under retirement benefit plans.
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i. Equity participation plans |
IFRS does not specifically address the recognition and measurement requirements for equity participation plans.
j. Software capitalization |
Under IFRS, effective 1 January 2000, certain costs associated with the acquisitions or development of internal use software must be capitalized. Once the software is ready for its intended use, the costs capitalized are amortized to the Income statement over the estimated life of the software. Under US GAAP, the same principle applies, however this standard was effective 1 January 1999. For US GAAP, the costs associated with the acquisition or development of internal use software that met the US GAAP software capitalization criteria in 1999 have been reversed from Operating expenses and amortized over a life of two years from the time that the software is ready for its intended use. From 1 January 2000, the only remaining reconciliation item is the amortization of software capitalized in 1999 for US GAAP purposes. At 31 December 2002, this amount was fully utilized and there is no longer a difference between IFRS and US GAAP.
k. Recently issued US accounting standards |
In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. The new standard is effective for fiscal years beginning after 15 May 2002. UBS will adopt the new standard for its fiscal year 2003, but does not expect that it will have a significant effect on the financial statements.
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Notes to the Financial Statements
nized at its fair value in the period in which the liability is incurred and not at the time an entity commits to an exit or disposal plan. SFAS No. 146 is applicable prospectively for exit or disposal activities initiated after 31 December 2002. UBS does not expect that the new standard will have a significant impact on its financial statements.
for VIEs that an enterprise will consolidate or in which it will have a significant variable interest. These disclosure requirements became effective for financial statements issued after 31 January 2003 and are provided in Note 40.2.
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Note 39.2 Reconciliation of IFRS Shareholders’ equity and Net profit to US GAAP |
Shareholders’ equity | Net profit | |||||||||||||||||||||||
Note 39.1 | ||||||||||||||||||||||||
CHF million | Reference | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Amounts determined in accordance with IFRS | 38,991 | 43,530 | 3,535 | 4,973 | 7,792 | |||||||||||||||||||
Adjustments in respect of: | ||||||||||||||||||||||||
SBC purchase accounting goodwill and other purchase accounting adjustments | a | 15,285 | 15,413 | (128 | ) | (1,614 | ) | (1,669 | ) | |||||||||||||||
Reversal of IFRS goodwill amortization | b | 1,017 | 0 | 1,017 | 0 | 0 | ||||||||||||||||||
Restructuring provision | c | 0 | 0 | 0 | (112 | ) | (238 | ) | ||||||||||||||||
Derivative instruments | d | (138 | ) | (169 | ) | 354 | 25 | (1,353 | ) | |||||||||||||||
Financial investments (prior to the adoption of IAS 39) | e | 0 | 0 | 0 | 0 | 28 | ||||||||||||||||||
Financial investments and private equity | f | (30 | ) | (709 | ) | 767 | 0 | 0 | ||||||||||||||||
Retirement benefit plans | g | 621 | 1,714 | (156 | ) | 119 | 59 | |||||||||||||||||
Other employee benefits | h | (1 | ) | (8 | ) | 7 | 8 | 8 | ||||||||||||||||
Equity participation plans | i | (164 | ) | (186 | ) | 63 | (12 | ) | (167 | ) | ||||||||||||||
Software capitalization | j | 0 | 60 | (60 | ) | (169 | ) | (160 | ) | |||||||||||||||
Tax adjustments | (5 | ) | (363 | ) | 147 | 16 | 137 | |||||||||||||||||
Total adjustments | 16,585 | 15,752 | 2,011 | (1,739 | ) | (3,355 | ) | |||||||||||||||||
Amounts determined in accordance with US GAAP | 55,576 | 59,282 | 5,546 | 3,234 | 4,437 | |||||||||||||||||||
Note 39.3 Earnings per share |
Under both IFRS and US GAAP, basic earnings per share (“EPS”) is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted EPS includes the determinants of basic EPS and, in addition, gives effect to dilutive potential common shares that were outstanding during the period.
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||
For the year ended | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | ||||||||||||||||||
Net profit available for ordinary shares (CHF million) | 5,546 | 3,535 | 3,234 | 4,973 | 4,437 | 7,792 | ||||||||||||||||||
Net profit for diluted EPS (CHF million) | 5,520 | 3,515 | 3,135 | 4,874 | 4,423 | 7,778 | ||||||||||||||||||
Weighted-average shares outstanding | 1,208,055,132 | 1,208,586,678 | 1,251,180,815 | 1,266,038,193 | 1,198,680,193 | 1,209,087,927 | ||||||||||||||||||
Diluted weighted average shares outstanding | 1,222,862,165 | 1,223,382,942 | 1,273,720,560 | 1,288,577,938 | 1,215,169,966 | 1,225,577,700 | ||||||||||||||||||
Basic earnings per share (CHF) | 4.59 | 2.92 | 2.58 | 3.93 | 3.70 | 6.44 | ||||||||||||||||||
Diluted earnings per share (CHF) | 4.51 | 2.87 | 2.46 | 3.78 | 3.64 | 6.35 | ||||||||||||||||||
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Notes to the Financial Statements
Note 39.4 Presentation differences between IFRS and US GAAP
In addition to the differences in valuation and income recognition, other differences, essentially related to presentation, exist between IFRS and US GAAP. Although there is no impact on IFRS and US GAAP reported Shareholders’ equity and Net profit due to these differences, it may be useful to understand them to interpret the financial statements presented in accordance with US GAAP. The following is a summary of presentation differences that relate to the basic IFRS financial statements.
1. Settlement date vs. trade date accounting
2. Financial investments
3. Securities received as proceeds in a securities for securities lending transaction
4. Reverse repurchase, repurchase, securities borrowing and securities lending transactions
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Note 39.5 Consolidated Income Statement |
The following is a Consolidated Income Statement of the Group, for the years ended 31 December 2002, 31 December 2001 and 31 December 2000, restated to reflect the impact of valuation and income recognition differences and presentation differences between IFRS and US GAAP.
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||||||
For the year ended | Reference | US GAAP | IFRS | US GAAP | IFRS | US GAAP | IFRS | |||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||
Interest income | a, d, 4 | 39,679 | 39,963 | 51,907 | 52,277 | 51,565 | 51,745 | |||||||||||||||||||||
Interest expense | a, 4 | (29,334 | ) | (29,417 | ) | (44,096 | ) | (44,236 | ) | (43,584 | ) | (43,615 | ) | |||||||||||||||
Net interest income | 10,345 | 10,546 | 7,811 | 8,041 | 7,981 | 8,130 | ||||||||||||||||||||||
Credit loss expense/(recovery) | (206 | ) | (206 | ) | (498 | ) | (498 | ) | 130 | 130 | ||||||||||||||||||
Net interest income after credit loss expense/(recovery) | 10,139 | 10,340 | 7,313 | 7,543 | 8,111 | 8,260 | ||||||||||||||||||||||
Net fee and commission income | 18,221 | 18,221 | 20,211 | 20,211 | 16,703 | 16,703 | ||||||||||||||||||||||
Net trading income | d, 4 | 6,031 | 5,572 | 8,959 | 8,802 | 8,597 | 9,953 | |||||||||||||||||||||
Other income1 | e, f, 4 | 96 | (12 | ) | 534 | 558 | 1,514 | 1,486 | ||||||||||||||||||||
Total operating income | 34,487 | 34,121 | 37,017 | 37,114 | 34,925 | 36,402 | ||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||
Personnel expenses | c, g, h, i | 18,610 | 18,524 | 19,713 | 19,828 | 17,262 | 17,163 | |||||||||||||||||||||
General and administrative expenses | c | 7,072 | 7,072 | 7,631 | 7,631 | 6,813 | 6,765 | |||||||||||||||||||||
Depreciation of property and equipment | a, j | 1,613 | 1,521 | 1,815 | 1,614 | 1,800 | 1,608 | |||||||||||||||||||||
Amortization of goodwill | a, b | 0 | 930 | 2,484 | 1,025 | 2,018 | 533 | |||||||||||||||||||||
Amortization of other intangible assets | b | 1,443 | 1,530 | 298 | 298 | 134 | 134 | |||||||||||||||||||||
Restructuring costs | c | 0 | 0 | 112 | 0 | 191 | 0 | |||||||||||||||||||||
Total operating expenses | 28,738 | 29,577 | 32,053 | 30,396 | 28,218 | 26,203 | ||||||||||||||||||||||
Operating profit/(loss) before tax and minority interests | 5,749 | 4,544 | 4,964 | 6,718 | 6,707 | 10,199 | ||||||||||||||||||||||
Tax expense/(benefit) | 511 | 678 | 1,386 | 1,401 | 2,183 | 2,320 | ||||||||||||||||||||||
Net profit/(loss) before minority interests | 5,238 | 3,866 | 3,578 | 5,317 | 4,524 | 7,879 | ||||||||||||||||||||||
Minority interests | (331 | ) | (331 | ) | (344 | ) | (344 | ) | (87 | ) | (87 | ) | ||||||||||||||||
Change in accounting principle: | ||||||||||||||||||||||||||||
cumulative effect of adoption of “AICPA Audit and Accounting Guide, Audits of Investment Companies” on certain financial investments, net of tax | f | 639 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Net profit | 5,546 | 3,535 | 3,234 | 4,973 | 4,437 | 7,792 | ||||||||||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 39.6 Condensed Consolidated Balance Sheet |
The following is a Condensed Consolidated Balance Sheet of the Group, as of 31 December 2002 and 31 December 2001, restated to reflect the impact of valuation and income recognition principles and presentation differences between IFRS and US GAAP.
31.12.02 | 31.12.01 | |||||||||||||||||||
CHF million | Reference | US GAAP | IFRS | US GAAP | IFRS | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 4,271 | 4,271 | 20,990 | 20,990 | ||||||||||||||||
Due from banks | a | 32,481 | 32,468 | 27,550 | 27,526 | |||||||||||||||
Cash collateral on securities borrowed | 4 | 139,073 | 139,052 | 162,566 | 162,938 | |||||||||||||||
Reverse repurchase agreements | 294,086 | 294,086 | 269,256 | 269,256 | ||||||||||||||||
Trading portfolio assets (including assets pledged as collateral of CHF 110,365 million at 31.12.02 and CHF 121,456 million at 31.12.01) | 1, 4 | 441,845 | 371,436 | 455,406 | 397,886 | |||||||||||||||
Positive replacement values | 1, 4 | 83,757 | 82,092 | 73,474 | 73,447 | |||||||||||||||
Loans | a, d | 211,755 | 211,647 | 226,747 | 226,545 | |||||||||||||||
Financial investments | f, 2 | 2,846 | 8,391 | 20,676 | 28,803 | |||||||||||||||
Securities received as collateral | 3 | 16,308 | 10,931 | |||||||||||||||||
Accrued income and prepaid expenses | 4 | 6,462 | 6,453 | 7,545 | 7,554 | |||||||||||||||
Investments in associates | 705 | 705 | 697 | 697 | ||||||||||||||||
Property and equipment | a, j | 8,358 | 7,869 | 9,276 | 8,695 | |||||||||||||||
Goodwill | a, b | 28,127 | 11,181 | 29,255 | 14,578 | |||||||||||||||
Other intangible assets | b, g | 1,222 | 2,515 | 4,510 | 4,507 | |||||||||||||||
Private equity investments | 2 | 4,328 | 6,069 | |||||||||||||||||
Other assets | d, f, g, h, i, 1, 2 | 21,314 | 8,952 | 36,972 | 9,875 | |||||||||||||||
Total assets | 1,296,938 | 1,181,118 | 1,361,920 | 1,253,297 | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 83,178 | 83,178 | 106,531 | 106,531 | ||||||||||||||||
Cash collateral on securities lent | 36,870 | 36,870 | 30,317 | 30,317 | ||||||||||||||||
Repurchase agreements | 366,858 | 366,858 | 368,620 | 368,620 | ||||||||||||||||
Trading portfolio liabilities | 1, 4 | 117,721 | 106,453 | 119,528 | 105,798 | |||||||||||||||
Obligation to return securities received as collateral | 3 | 16,308 | 10,931 | |||||||||||||||||
Negative replacement values | 1, 4 | 132,354 | 81,282 | 116,666 | 71,443 | |||||||||||||||
Due to customers | a, d | 306,872 | 306,876 | 333,766 | 333,781 | |||||||||||||||
Accrued expenses and deferred income | 4 | 15,330 | 15,331 | 17,289 | 17,289 | |||||||||||||||
Debt issued | a, d | 129,527 | 129,411 | 156,462 | 156,218 | |||||||||||||||
Other liabilities | d, g, h, i, 1 | 32,815 | 12,339 | 38,416 | 15,658 | |||||||||||||||
Total liabilities | 1,237,833 | 1,138,598 | 1,298,526 | 1,205,655 | ||||||||||||||||
Minority interests | 3,529 | 3,529 | 4,112 | 4,112 | ||||||||||||||||
Total shareholders’ equity | 55,576 | 38,991 | 59,282 | 43,530 | ||||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,296,938 | 1,181,118 | 1,361,920 | 1,253,297 | ||||||||||||||||
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Note 39.7 Comprehensive Income |
Comprehensive income under US GAAP is defined as the change in Shareholders’ equity excluding transactions with shareholders. Comprehensive income has two major components: Net profit, as reported in the income statement, and Other comprehensive income. Other comprehensive income includes such items as foreign currency translation, unrealized gains/losses on available for sale securities, unrealized gains/losses on changes in fair value of derivative instruments designated as cash flow hedges and additional minimum pension liability. The components and accumulated other comprehensive income amounts on a US GAAP basis for the years ended 31 December 2002, 31 December 2001 and 31 December 2000 are as follows:
Unrealized | Unrealized | Additional | Accumulated | |||||||||||||||||||||
Foreign | gains/(losses) | gains/(losses) | minimum | other | ||||||||||||||||||||
currency | on available for | on cash flow | pension | comprehensive | Comprehensive | |||||||||||||||||||
CHF million | translation | sale securities | hedges | liability | income/(loss) | income/(loss) | ||||||||||||||||||
Balance at 1 January 2000 | (442 | ) | 16 | (426 | ) | |||||||||||||||||||
Net profit | 4,437 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (245 | ) | (245 | ) | ||||||||||||||||||||
Net unrealized gains on available for sale investments arising during the year, net of CHF 152 million tax | 456 | 456 | ||||||||||||||||||||||
Reclassification adjustment for gains on available for sale investments realized in net profit, net of CHF 40 million tax | (121 | ) | (121 | ) | ||||||||||||||||||||
Other comprehensive income/(loss) | 90 | |||||||||||||||||||||||
Comprehensive income | 4,527 | |||||||||||||||||||||||
Balance at 31 December 2000 | (687 | ) | 351 | (336 | ) | |||||||||||||||||||
Net profit | 3,234 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (82 | ) | (82 | ) | ||||||||||||||||||||
Net unrealized gains on available for sale investments arising during the year, net of CHF 27 million tax | 109 | 109 | ||||||||||||||||||||||
Reclassification adjustment for gains on available for sale investments realized in net profit, net of CHF 26 million tax | (104 | ) | (104 | ) | ||||||||||||||||||||
Net unrealized gains on cash flow hedges arising during the year, net of CHF 1 million tax | 4 | 4 | ||||||||||||||||||||||
Reclassification adjustment for losses on cash flow hedges realized in net profit, net of CHF 1 million tax | 3 | 3 | ||||||||||||||||||||||
Additional minimum pension liability, net of CHF 108 million tax | (195 | ) | (195 | ) | ||||||||||||||||||||
Other comprehensive income/(loss) | (265 | ) | ||||||||||||||||||||||
Comprehensive income | 2,969 | |||||||||||||||||||||||
Balance at 31 December 2001 | (769 | ) | 356 | 7 | (195 | ) | (601 | ) | ||||||||||||||||
Net profit | 5,546 | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation | (80 | ) | (80 | ) | ||||||||||||||||||||
Net unrealized gains on available for sale investments arising during the year, net of CHF 34 million tax | 109 | 109 | ||||||||||||||||||||||
Impairment charges reclassified to the income statement, net of CHF 26 million tax | 95 | 95 | ||||||||||||||||||||||
Reclassification adjustment for gains on available for sale investments realized in net profit, net of CHF 102 million tax | (368 | ) | (368 | ) | ||||||||||||||||||||
Net unrealized losses on cash flow hedges arising during the year, net of CHF 3 million tax | (1 | ) | (1 | ) | ||||||||||||||||||||
Reclassification adjustment for gains on cash flow hedges realized in net profit, net of CHF 0 million tax | (8 | ) | (8 | ) | ||||||||||||||||||||
Additional minimum pension liability, net of CHF 93 million tax | (827 | ) | (827 | ) | ||||||||||||||||||||
Other comprehensive income/(loss) | (1,080 | ) | ||||||||||||||||||||||
Comprehensive income | 4,466 | |||||||||||||||||||||||
Balance at 31 December 2002 | (849 | ) | 192 | (2 | ) | (1,022 | ) | (1,681 | ) | |||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Note 40 Additional Disclosures Required under US GAAP and SEC Rules
Note 40.1 Sales of financial assets in securitizations |
During the years ended 31 December 2002 and 2001, the Group securitized (i.e., transformed owned financial assets into securities through sales transactions) residential mortgage loans and securities, commercial mortgage loans and other financial assets, acting as lead or co-manager. The Group’s continuing involvement in these transactions was primarily limited to the temporary retention of various security interests. Proceeds received at the time of securitization from residential mortgage, commercial mortgage and other financial asset securitizations were CHF 143.5 billion, CHF 4.0 billion and CHF 5.8 billion, respectively in 2002 and CHF 67.6 billion, CHF 4.1 billion and CHF 2.8 billion, respectively in 2001. Related pre-tax gains (losses) recognized, including unrealized gains (losses) on retained interests, at the time of securitization were CHF 523.9 million, CHF 206.4 million and CHF (4.5) million, respectively in 2002 and CHF 112.9 million, CHF 129.7 mil-
ion and CHF 20.6 million, respectively in 2001. A significant portion of the securitization activities conducted in 2002 and 2001 were derived from businesses acquired in the purchase of PaineWebber Group Inc. in November 2000. During 2000, the Group did not engage in significant securitization transactions involving the transfer of its financial assets.
Note 40.2 Variable interest entities |
FASB interpretation (FIN) No. 46, Consolidation of Variable Interest Entities, was issued on 17 January 2003 and provides guidance for determining whether or not such entities are subject to consolidation. FIN 46 requires that control over a special purpose entity be first assessed based on voting interests, and only if voting interests do not exist or differ significantly from economic interests, the assessment of control is based on variable interests. Such entities are referred to as Variable Interest Entities. (“VIE’s”).
including fee payments to decision makers and to providers of guarantees (including writers of put options and other instruments with similar results) as well as the interests of related parties (including management, employees, affiliates and agents).
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Note 40.2 Variable interest entities (continued) |
(in CHF million) | Notional amount | Maximum loss | ||||||||||||
SPE category | Total assets | of derivatives | Description of primary assets | exposure | ||||||||||
Trust vehicles for awards to UBS employees | 4,624.6 | 37,717.0 | UBS shares and derivatives thereon, alternative | |||||||||||
investments | 4,982.2 | 1 | ||||||||||||
Private equity investments | 784.6 | 0 | Private equity investments | 318.4 | ||||||||||
Hedge fund products including | Bonds, equities, derivatives | |||||||||||||
direct investment funds and funds of funds | 4,970.6 | 8,665.0 | and alternative investments | 1,643.6 | ||||||||||
Passive intermediary to a derivative transaction2 | 2,131.1 | 37,248.2 | Cash/corporate securities | 876.9 | ||||||||||
Dispersion of risk in a pool of investments | 2,689.1 | 8,125.6 | Debt securities, loan receivables and credit linked notes | 333.8 | ||||||||||
Cash, debt securities, | ||||||||||||||
Other credit protection vehicles | 1,639.0 | 2,922.5 | asset-backed securities and credit default swaps | 528.9 | ||||||||||
Other miscellaneous structures | 205.3 | 205.3 | Corporate debt and equities | 194.8 | ||||||||||
Total 31.12.2002 | 17,044.3 | 94,883.6 | 8,878.6 | |||||||||||
The table above includes information for consolidated and non-consolidated special purpose entities. Certain entities subject to the above disclosure have been consolidated in the Group’s Financial Statements under IFRS and US GAAP due to the Group’s significant economic interest. However, in many special purpose entities UBS has a less than significant variable interest, or control is determined based on voting interest. These entities are not included in the table.
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UBS Group Financial Statements
Notes to the Financial Statements
Note 40.3 Supplemental Guarantor Information |
Guarantee of PaineWebber securities
UBS. At 31 December 2002, the amount of senior liabilities of UBS to which the holders of the subordinated debt securities would be subordinated is approximately CHF 1,129 billion.
Supplemental Guarantor Consolidating Income Statement
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2002 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | UBS Group | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 25,253 | 16,693 | 4,520 | (6,503 | ) | 39,963 | ||||||||||||||
Interest expense | 18,187 | 14,273 | 3,460 | (6,503 | ) | 29,417 | ||||||||||||||
Net interest income | 7,066 | 2,420 | 1,060 | 0 | 10,546 | |||||||||||||||
Credit loss expense | (134 | ) | (15 | ) | (57 | ) | 0 | (206 | ) | |||||||||||
Net interest income after credit loss expense | 6,932 | 2,405 | 1,003 | 0 | 10,340 | |||||||||||||||
Net fee and commission income | 6,841 | 7,325 | 4,055 | 0 | 18,221 | |||||||||||||||
Net trading income | 4,420 | 773 | 379 | 0 | 5,572 | |||||||||||||||
Income from subsidiaries | (1,429 | ) | 0 | 0 | 1,429 | 0 | ||||||||||||||
Other income | (131 | ) | (26 | ) | 145 | 0 | (12 | ) | ||||||||||||
Total operating income | 16,633 | 10,477 | 5,582 | 1,429 | 34,121 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 8,370 | 7,531 | 2,623 | 0 | 18,524 | |||||||||||||||
General and administrative expenses | 2,627 | 2,003 | 2,443 | 0 | 7,073 | |||||||||||||||
Depreciation of property and equipment | 1,062 | 204 | 255 | 0 | 1,521 | |||||||||||||||
Amortization of goodwill and other intangible assets | 144 | 2,211 | 104 | 0 | 2,459 | |||||||||||||||
Total operating expenses | 12,203 | 11,949 | 5,425 | 0 | 29,577 | |||||||||||||||
Operating profit/(loss) before tax and minority interests | 4,430 | (1,472 | ) | 157 | 1,429 | 4,544 | ||||||||||||||
Tax expense/(benefit) | 895 | (460 | ) | 243 | 0 | 678 | ||||||||||||||
Net profit/(loss) before minority interests | 3,535 | (1,012 | ) | (86 | ) | 1,429 | 3,866 | |||||||||||||
Minority interests | 0 | 0 | (331 | ) | 0 | (331 | ) | |||||||||||||
Net profit/(loss) | 3,535 | (1,012 | ) | (417 | ) | 1,429 | 3,535 | |||||||||||||
Net profit/(loss) US GAAP2 | 5,214 | (65 | ) | 397 | 0 | 5,546 | ||||||||||||||
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Supplemental Guarantor Consolidating Balance Sheet
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2002 | Parent Bank1 | Americas Inc. | Subsidiaries | Entries | UBS Group | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 3,609 | 7 | 655 | 0 | 4,271 | |||||||||||||||
Due from banks | 65,992 | 14,205 | 82,384 | (130,113 | ) | 32,468 | ||||||||||||||
Cash collateral on securities borrowed | 32,248 | 139,424 | 1,056 | (33,676 | ) | 139,052 | ||||||||||||||
Reverse repurchase agreements | 197,168 | 150,717 | 40,725 | (94,524 | ) | 294,086 | ||||||||||||||
Trading portfolio assets | 197,184 | 148,430 | 25,823 | 0 | 371,437 | |||||||||||||||
Positive replacement values | 82,087 | 3,249 | 17,168 | (20,413 | ) | 82,091 | ||||||||||||||
Loans | 252,625 | 25,904 | 14,796 | (81,678 | ) | 211,647 | ||||||||||||||
Financial investments | 1,613 | 1,684 | 5,094 | 0 | 8,391 | |||||||||||||||
Accrued income and prepaid expenses | 2,343 | 3,143 | 1,458 | (491 | ) | 6,453 | ||||||||||||||
Investments in associates | 9,730 | 20 | 81 | (9,126 | ) | 705 | ||||||||||||||
Property and equipment | 6,144 | 731 | 994 | 0 | 7,869 | |||||||||||||||
Goodwill and other intangible assets | 128 | 12,946 | 622 | 0 | 13,696 | |||||||||||||||
Other assets | 3,989 | 4,009 | 3,603 | (2,649 | ) | 8,952 | ||||||||||||||
Total assets | 854,860 | 504,469 | 194,459 | (372,670 | ) | 1,181,118 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 85,634 | 89,815 | 37,842 | (130,113 | ) | 83,178 | ||||||||||||||
Cash collateral on securities lent | 35,800 | 32,625 | 2,121 | (33,676 | ) | 36,870 | ||||||||||||||
Repurchase agreements | 136,797 | 295,885 | 28,700 | (94,524 | ) | 366,858 | ||||||||||||||
Trading portfolio liabilities | 56,105 | 43,784 | 6,564 | 0 | 106,453 | |||||||||||||||
Negative replacement values | 89,135 | 3,524 | 9,036 | (20,413 | ) | 81,282 | ||||||||||||||
Due to customers | 339,787 | 19,957 | 28,810 | (81,678 | ) | 306,876 | ||||||||||||||
Accrued expenses and deferred income | 7,779 | 6,580 | 1,463 | (491 | ) | 15,331 | ||||||||||||||
Debt issued | 58,704 | 7,111 | 63,596 | 0 | 129,411 | |||||||||||||||
Other liabilities | 6,933 | 2,604 | 5,451 | (2,649 | ) | 12,339 | ||||||||||||||
Total liabilities | 816,674 | 501,885 | 183,583 | (363,544 | ) | 1,138,598 | ||||||||||||||
Minority interests | 0 | 55 | 3,474 | 0 | 3,529 | |||||||||||||||
Total shareholders’ equity | 38,186 | 2,529 | 7,402 | (9,126 | ) | 38,991 | ||||||||||||||
Total liabilities, minority interests and shareholders’ equity | 854,860 | 504,469 | 194,459 | (372,670 | ) | 1,181,118 | ||||||||||||||
Total shareholders’ equity — US GAAP 2 | 44,852 | 3,176 | 7,548 | 0 | 55,576 | |||||||||||||||
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UBS Group Financial Statements
Notes to the Financial Statements
Supplemental Guarantor Consolidating Cash Flow Statement
CHF million | UBS AG | UBS | ||||||||||||||
For the year ended 31 December 2002 | Parent Bank1 | Americas Inc. | Subsidiaries | UBS Group | ||||||||||||
Net cash flow from/(used in) operating activities | 8,422 | (927 | ) | (9,859 | ) | (2,364 | ) | |||||||||
Cash flow from/(used in) investing activities | ||||||||||||||||
Investments in subsidiaries and associates | (23 | ) | (16 | ) | (21 | ) | (60 | ) | ||||||||
Disposal of subsidiaries and associates | 984 | 0 | 0 | 984 | ||||||||||||
Purchase of property and equipment | (1,019 | ) | (189 | ) | (555 | ) | (1,763 | ) | ||||||||
Disposal of property and equipment | 22 | 28 | 17 | 67 | ||||||||||||
Net (investment in)/divestment of financial investments | 931 | 307 | 915 | 2,153 | ||||||||||||
Net cash flow from/(used in) investing activities | 895 | 130 | 356 | 1,381 | ||||||||||||
Cash flow from/(used in) investing activities | ||||||||||||||||
Net money market paper issued/(repaid) | (30,635 | ) | 471 | 3,958 | (26,206 | ) | ||||||||||
Net movements in treasury shares and own equity derivative activity | (5,605 | ) | 0 | 0 | (5,605 | ) | ||||||||||
Capital issuance | 6 | 0 | 0 | 6 | ||||||||||||
Capital repayment by par value reduction | (2,509 | ) | 0 | 0 | (2,509 | ) | ||||||||||
Issuance of long-term debt | 8,414 | 915 | 7,803 | 17,132 | ||||||||||||
Repayment of long-term debt | (11,099 | ) | (2,780 | ) | (1,032 | ) | (14,911 | ) | ||||||||
Increase in minority interests | 0 | 0 | 0 | 0 | ||||||||||||
Dividend payments to/and purchase from minority interests | 0 | 0 | (377 | ) | (377 | ) | ||||||||||
Net activity in investments in subsidiaries | 2,775 | (161 | ) | (2,614 | ) | 0 | ||||||||||
Net cash flow from/(used in) financing activities | (38,653 | ) | (1,555 | ) | 7,738 | (32,470 | ) | |||||||||
Effects of exchange rate differences | (2,608 | ) | 1,919 | 227 | (462 | ) | ||||||||||
Net increase/(decrease) in cash equivalents | (31,944 | ) | (433 | ) | (1,538 | ) | (33,915 | ) | ||||||||
Cash and cash equivalents, beginning of the year | 89,856 | 15,552 | 10,851 | 116,259 | ||||||||||||
Cash and cash equivalents, end of the year | 57,912 | 15,119 | 9,313 | 82,344 | ||||||||||||
Cash and cash equivalents comprise: | ||||||||||||||||
Cash and balances with central banks | 3,609 | 7 | 655 | 4,271 | ||||||||||||
Money market paper2 | 33,509 | 9,615 | 3,059 | 46,183 | ||||||||||||
Due from banks maturing in less than three months | 20,794 | 5,497 | 5,599 | 31,890 | ||||||||||||
Total | 57,912 | 15,119 | 9,313 | 82,344 | ||||||||||||
Guarantee of other securities
these securities. UBS’s obligations under the trust preferred securities guarantee are subordinated to the prior payment in full of the deposit liabilities of UBS and all other liabilities of UBS. At 31 December 2002, the amount of senior liabilities of UBS to which the holders of the subordinated debt securities would be subordinated is approximately CHF 1,129 billion.
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178
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179
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UBS AG (Parent Bank) | |
Table of Contents |
UBS AG (Parent Bank)
Table of Contents
Parent Bank Review | 181 | |||
Financial Statements | 182 | |||
Income Statement | 182 | |||
Balance Sheet | 183 | |||
Statement of Appropriation of Retained Earnings | 183 | |||
Notes to the Financial Statements | 184 | |||
Additional Income Statement Information | 185 | |||
Net Trading Income | 185 | |||
Extraordinary Income and Expenses | 185 | |||
Additional Balance Sheet Information | 186 | |||
Value Adjustments and Provisions | 186 | |||
Statement of Shareholders’ Equity | 187 | |||
Share Capital | 187 | |||
Off-Balance Sheet and Other Information | 188 | |||
Assets Pledged or Assigned as Security for Own Obligations, Assets Subject to Reservation of Title | 188 | |||
Fiduciary Transactions | 188 | |||
Due to UBS Pension Plans, Loans to Corporate Bodies/Related Parties | 188 | |||
Report of the Statutory Auditors | 189 | |||
Report of the Capital Increase Auditors | 190 |
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UBS AG (Parent Bank) Parent Bank Review |
Parent Bank Review
Income Statement |
The Parent Bank UBS AG net profit increased CHF 1,179 million from CHF 4,655 million to CHF 5,834 million. Income from investments in associates increased to CHF 3,417 million from CHF 1,532 million in 2001 mainly due to higher distribution received. Sundry expense from ordinary activities was CHF 381 million, up from CHF 139 million in 2001. This was mainly due to higher net writedown of financial investments. Depreciation and write-offs were CHF 3,025 million, up from CHF 1,650 million in 2001 mainly caused by higher writedown on investments in
associated companies. Extraordinary income contains CHF 260 million (2001: CHF 87 million) from the sale of subsidiaries.
Balance Sheet |
Total assets increased by CHF 48 billion to CHF 1,064 billion by 31 December 2002. This movement is mostly impacted by increased trading-related assets where mainly trading balances in securities and positive replacement values have increased. Liquid assets have significantly decreased due to reduction of deposits with the Bank of Japan.
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UBS AG (Parent Bank) Financial Statements |
Financial Statements
Income Statement
CHF million | % change from | |||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Interest and discount income | 20,059 | 29,967 | (33 | ) | ||||||||
Interest and dividend income from trading portfolio | 7,074 | 8,089 | (13 | ) | ||||||||
Interest and dividend income from financial investments | 23 | 185 | (88 | ) | ||||||||
Interest expense | (20,125 | ) | (31,444 | ) | (36 | ) | ||||||
Net interest income | 7,031 | 6,797 | 3 | |||||||||
Credit-related fees and commissions | 252 | 291 | (13 | ) | ||||||||
Fee and commission income from securities and investment business | 7,249 | 8,232 | (12 | ) | ||||||||
Other fee and commission income | 515 | 524 | (2 | ) | ||||||||
Fee and commission expense | (1,167 | ) | (1,176 | ) | (1 | ) | ||||||
Net fee and commission income | 6,849 | 7,871 | (13 | ) | ||||||||
Net trading income | 4,634 | 5,015 | (8 | ) | ||||||||
Net income from disposal of financial investments | 125 | 15 | 733 | |||||||||
Income from investments in associated companies | 3,417 | 1,532 | 123 | |||||||||
Income from real estate holdings | 50 | 54 | (7 | ) | ||||||||
Sundry income from ordinary activities | 1,908 | 1,183 | 61 | |||||||||
Sundry ordinary expenses | (381 | ) | (139 | ) | 174 | |||||||
Other income from ordinary activities | 5,119 | 2,645 | 94 | |||||||||
Operating income | 23,633 | 22,328 | 6 | |||||||||
Personnel expenses | 8,916 | 9,443 | (6 | ) | ||||||||
General and administrative expenses | 4,379 | 4,869 | (10 | ) | ||||||||
Operating expenses | 13,295 | 14,312 | (7 | ) | ||||||||
Operating profit | 10,338 | 8,016 | 29 | |||||||||
Depreciation and write-offs on investments in | ||||||||||||
associated companies and fixed assets | 3,025 | 1,650 | 83 | |||||||||
Allowances, provisions and losses | 1,053 | 1,140 | (8 | ) | ||||||||
Profit before extraordinary items and taxes | 6,260 | 5,226 | 20 | |||||||||
Extraordinary income | 265 | 95 | 179 | |||||||||
Extraordinary expenses | 7 | 7 | 0 | |||||||||
Tax expense/(benefit) | 684 | 659 | 4 | |||||||||
Profit for the period | 5,834 | 4,655 | 25 | |||||||||
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Balance Sheet
% change from | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Assets | ||||||||||||
Liquid assets | 3,609 | 20,215 | (82 | ) | ||||||||
Money market paper | 33,671 | 54,384 | (38 | ) | ||||||||
Due from banks | 265,106 | 252,226 | 5 | |||||||||
Due from customers | 165,938 | 173,690 | (4 | ) | ||||||||
Mortgage loans | 117,677 | 117,706 | 0 | |||||||||
Trading balances in securities and precious metals | 199,546 | 185,306 | 8 | |||||||||
Financial investments | 8,377 | 17,253 | (51 | ) | ||||||||
Investments in associated companies | 10,275 | 11,331 | (9 | ) | ||||||||
Tangible fixed assets | 4,633 | 5,624 | (18 | ) | ||||||||
Accrued income and prepaid expenses | 2,342 | 3,231 | (28 | ) | ||||||||
Positive replacement values | 249,064 | 171,798 | 45 | |||||||||
Other assets | 3,734 | 3,725 | 0 | |||||||||
Total assets | 1,063,972 | 1,016,489 | 5 | |||||||||
Total subordinated assets1 | 4,717 | 4,219 | 12 | |||||||||
Total amounts receivable from Group companies | 218,915 | 213,954 | 2 | |||||||||
Liabilities | ||||||||||||
Money market paper issued | 22,131 | 52,604 | (58 | ) | ||||||||
Due to banks | 303,023 | 303,036 | 0 | |||||||||
Due to customers on savings and deposit accounts | 76,687 | 67,664 | 13 | |||||||||
Other amounts due to customers | 274,431 | 288,684 | (5 | ) | ||||||||
Medium-term note issues | 4,220 | 5,213 | (19 | ) | ||||||||
Bond issues and loans from central mortgage institutions | 67,759 | 65,471 | 3 | |||||||||
Accruals and deferred income | 7,846 | 8,707 | (10 | ) | ||||||||
Negative replacement values | 256,278 | 172,469 | 49 | |||||||||
Other liabilities | 3,281 | 5,795 | (43 | ) | ||||||||
Value adjustments and provisions | 4,177 | 3,959 | 6 | |||||||||
Share capital | 1,005 | 3,589 | (72 | ) | ||||||||
General statutory reserve | 12,392 | 14,507 | (15 | ) | ||||||||
Reserve for own shares | 6,623 | 3,253 | 104 | |||||||||
Other reserves | 18,285 | 16,883 | 8 | |||||||||
Profit brought forward | ||||||||||||
Profit for the period | 5,834 | 4,655 | 25 | |||||||||
Total liabilities | 1,063,972 | 1,016,489 | 5 | |||||||||
Total subordinated liabilities | 13,315 | 16,444 | (19 | ) | ||||||||
Total amounts payable to Group companies | 142,139 | 126,182 | 13 | |||||||||
Statement of Appropriation of Retained Earnings
CHF million | ||||
The Board of Directors proposes to the Annual General Meeting the following appropriation: | ||||
Profit for the financial year 2002 as per the Parent Bank’s Income Statement | 5,834 | |||
Appropriation to general statutory reserve | 232 | |||
Appropriation to other reserves | 3,237 | |||
Proposed dividends | 2,365 | |||
Total appropriation | 5,834 | |||
Dividend Distribution
The Board of Directors will recommend to the Annual General Meeting on 16 April 2003 that UBS should pay a dividend of CHF 2.00 per share of CHF 0.80 par value. If the dividend is approved, the payment of CHF 2.00 per share, after deduction of 35% Swiss withholding tax would be made on 23 April 2003 for shareholders who hold UBS shares on 16 April 2003.
183
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UBS AG (Parent Bank) | |
Notes to the Financial Statements |
Notes to the Financial Statements
Accounting and Valuation Principles
The Parent Bank’s accounting and valuation policies are in compliance with Swiss banking law. The accounting and valuation policies are principally the same as for the Group Financial Statements outlined in Note 1: Summary of Significant Accounting Policies. Major differences between the Swiss banking law requirements and International Financial Reporting Standards are described in Note 38 to the Group Financial Statements.
Treasury shares
value are included in the income statement. Treasury shares included in Financial investments are carried at the lower of cost or market value.
Investments in associated companies
Property and equipment
Extraordinary income and expenses
184
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Additional Income Statement Information |
Net Trading Income
CHF million | % change from | |||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Equities | 2,208 | 2,435 | (9 | ) | ||||||||
Fixed income1 | 565 | 829 | (32 | ) | ||||||||
Foreign exchange and other | 1,861 | 1,751 | 6 | |||||||||
Total | 4,634 | 5,015 | (8 | ) | ||||||||
Extraordinary Income and Expenses
Extraordinary income contains CHF 260 million (2001: CHF 87 million) from the sale of subsidiaries and CHF 5 million (2001: CHF 8 million)
185
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UBS AG (Parent Bank) | |
Notes to the Financial Statements |
Additional Balance Sheet Information |
Value Adjustments and Provisions
Provisions | Recoveries, | |||||||||||||||||||
applied in | doubtful | |||||||||||||||||||
accordance | interest, | New | ||||||||||||||||||
with their | currency | provisions | ||||||||||||||||||
Balance at | specified | translation | charged | Balance at | ||||||||||||||||
CHF million | 31.12.01 | purpose | differences | to income | 31.12.02 | |||||||||||||||
Default risks (credit and country risk) | 8,032 | (2,451 | ) | (310 | ) | 135 | 5,406 | |||||||||||||
Trading portfolio risks | 2,133 | (285 | ) | 511 | 2,359 | |||||||||||||||
Litigation risks | 528 | (235 | ) | (39 | ) | 191 | 445 | |||||||||||||
Operational risks | 1,264 | (630 | ) | (90 | ) | 893 | 1,437 | |||||||||||||
Capital and income taxes | 901 | (394 | ) | 6 | 766 | 1,279 | ||||||||||||||
Total allowance for general credit losses and other provisions | 12,858 | (3,710 | ) | (718 | ) | 2,496 | 10,926 | |||||||||||||
Allowances deducted from assets | 8,899 | 6,749 | ||||||||||||||||||
Total provisions as per balance sheet | 3,959 | 4,177 | ||||||||||||||||||
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Statement of Shareholders’ Equity
Total share- | ||||||||||||||||||||||||
General | General | holders' | ||||||||||||||||||||||
statutory | statutory | equity | ||||||||||||||||||||||
reserves: | reserves: | Reserves | (before | |||||||||||||||||||||
Share | Share | Retained | for own | Other | distribution | |||||||||||||||||||
CHF million | capital | premium | earnings | shares | reserves | of profit) | ||||||||||||||||||
As at 31.12.00 and 1.1.01 | 4,444 | 17,370 | 677 | 4,007 | 16,274 | 42,772 | ||||||||||||||||||
Par value reduction | (683 | ) | 20 | (663 | ) | |||||||||||||||||||
Cancellation of own shares | (184 | ) | (3,815 | ) | (3,999 | ) | ||||||||||||||||||
Capital increase | 12 | 110 | 122 | |||||||||||||||||||||
Increase in reserves | 165 | (165 | ) | 0 | ||||||||||||||||||||
Profit for the period | 4,655 | 4,655 | ||||||||||||||||||||||
Changes in reserves for own shares | (754 | ) | 754 | 0 | ||||||||||||||||||||
As at 31.12.01 and 1.1.02 | 3,589 | 13,665 | 842 | 3,253 | 21,538 | 42,887 | ||||||||||||||||||
Par value reduction | (2,509 | ) | 117 | (2,392 | ) | |||||||||||||||||||
Cancellation of own shares | (81 | ) | (2,209 | ) | (2,290 | ) | ||||||||||||||||||
Capital increase | 6 | 94 | 100 | |||||||||||||||||||||
Increase in reserves | 0 | |||||||||||||||||||||||
Profit for the period | 5,834 | 5,834 | ||||||||||||||||||||||
Changes in reserves for own shares | 3,370 | (3,370 | ) | 0 | ||||||||||||||||||||
As at 31.12.02 | 1,005 | 11,550 | 842 | 6,623 | 24,119 | 44,139 | ||||||||||||||||||
Share Capital
Par value | Ranking for dividends | |||||||||||||||
As at 31 December 2002 | No. of shares | Capital in CHF | No. of shares | Capital in CHF | ||||||||||||
Issued and paid up | 1,256,297,678 | 1,005,038,142 | 1,182,262,598 | 945,810,078 | ||||||||||||
Conditional share capital | 9,590,918 | 7,672,734 | 0 | 0 | ||||||||||||
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UBS AG (Parent Bank) | ||
Notes to the Financial Statements | ||
Off-Balance Sheet and Other Information |
Assets Pledged or Assigned as Security for Own Obligations,
Assets Subject to Reservation of Title
31.12.02 | 31.12.01 | Change in % | ||||||||||||||||||||||
Book | Effective | Book | Effective | Book | Effective | |||||||||||||||||||
CHF million | value | liability | value | liability | value | liability | ||||||||||||||||||
Money market paper | 10,475 | 29,893 | (65 | ) | ||||||||||||||||||||
Mortgage loans | 808 | 506 | 1,239 | 813 | (35 | ) | (38 | ) | ||||||||||||||||
Securities | 2,495 | 5,224 | (52 | ) | ||||||||||||||||||||
Total | 13,778 | 506 | 36,356 | 813 | (62 | ) | (38 | ) | ||||||||||||||||
Assets are pledged as collateral for securities borrowing and repo transactions, for collateralized credit lines with central banks, loans from mortgage institutions and security deposits relating to stock exchange membership.
Fiduciary Transactions
% change from | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Deposits | ||||||||||||
with other banks | 28,865 | 38,978 | (26 | ) | ||||||||
with Group banks | 351 | 532 | (34 | ) | ||||||||
Loans and other financial transactions | 713 | 1,042 | (32 | ) | ||||||||
Total | 29,929 | 40,552 | (26 | ) | ||||||||
Due to UBS Pension Plans, Loans to Corporate Bodies/Related Parties
% change from | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.01 | |||||||||
Due to UBS pension plans and UBS debt instruments held by pension plans | 814 | 476 | 71 | |||||||||
Securities borrowed from pension plans | 2,645 | 824 | 221 | |||||||||
Loans to directors, senior executives and auditors1 | 28 | 32 | (13 | ) | ||||||||
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189
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190
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191
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192
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193
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Additional Disclosure Required | ||
under SEC Regulations | ||
Table of Contents |
Additional Disclosure Required under SEC Regulations
Table of Contents
A | Introduction | 195 | ||
B | Selected Financial Data | 195 | ||
Balance Sheet Data | 197 | |||
US GAAP Income Statement Data | 198 | |||
US GAAP Balance Sheet Data | 199 | |||
Ratio of Earnings to Fixed Charges | 199 | |||
C | Information on the Company | 199 | ||
Property, plant and equipment | 199 | |||
D | Information Required by Industry Guide 3 | 200 | ||
Selected statistical information | 200 | |||
Average Balances and Interest Rates | 200 | |||
Analysis of Changes in Interest Income and Expense | 202 | |||
Deposits | 204 | |||
Short-term Borrowings | 205 | |||
Loans | 207 | |||
Loan Maturities | 208 | |||
Impaired, Non-performing and Restructured Loans | 209 | |||
Cross-Boarder Outstandings | 210 | |||
Summary of Movements in Allowances and | ||||
Provisions for Credit Losses | 212 | |||
Allocation of the Allowances and | ||||
Provisions for Credit Losses | 214 | |||
Loans by industry sector | 215 | |||
Loss History Statistics | 216 |
194
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A — Introduction |
The following pages contain additional disclosure about UBS Group which is required under SEC regulations.
dards (IFRS) and are denominated in Swiss francs, or CHF, the reporting currency of the Group. Certain financial information has also been presented in accordance with United States Generally Accepted Accounting Principles (US GAAP).
B — Selected Financial Data |
The tables below set forth, for the periods and dates indicated, information concerning the noon buying rate for the Swiss franc, expressed in United States dollars, or USD, per one Swiss franc. The noon buying rate is the rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.
Average rate1 | ||||||||||||||||
Year ended 31 December | High | Low | (USD per 1 CHF) | At period end | ||||||||||||
1998 | 0.7731 | 0.6485 | 0.6894 | 0.7281 | ||||||||||||
1999 | 0.7361 | 0.6244 | 0.6605 | 0.6277 | ||||||||||||
2000 | 0.6441 | 0.5479 | 0.5912 | 0.6172 | ||||||||||||
2001 | 0.6331 | 0.5495 | 0.5910 | 0.5857 | ||||||||||||
2002 | 0.7229 | 0.5817 | 0.6453 | 0.7229 | ||||||||||||
Month | High | Low | ||||||||||||||
September 2002 | 0.6789 | 0.6578 | ||||||||||||||
October 2002 | 0.6760 | 0.6605 | ||||||||||||||
November 2002 | 0.6928 | 0.6714 | ||||||||||||||
December 2002 | 0.7229 | 0.6736 | ||||||||||||||
January 2003 | 0.7401 | 0.7135 | ||||||||||||||
February 2003 | 0.7411 | 0.7275 | ||||||||||||||
195
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Additional Disclosure Required
under SEC Regulations
B — Selected Financial Data (continued) |
CHF million, except where indicated | ||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Income statement data | ||||||||||||||||||||
Interest income | 39,963 | 52,277 | 51,745 | 35,604 | 37,442 | |||||||||||||||
Interest expense | 29,417 | 44,236 | 43,615 | 29,695 | 32,424 | |||||||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | 5,909 | 5,018 | |||||||||||||||
Credit loss (expense)/recovery | (206 | ) | (498 | ) | 130 | (956 | ) | (951 | ) | |||||||||||
Net interest income after credit loss (expense)/recovery | 10,340 | 7,543 | 8,260 | 4,953 | 4,067 | |||||||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | 12,607 | 12,626 | |||||||||||||||
Net trading income | 5,572 | 8,802 | 9,953 | 7,719 | 3,313 | |||||||||||||||
Other income | (12 | ) | 558 | 1,486 | 3,146 | 2,241 | ||||||||||||||
Operating income | 34,121 | 37,114 | 36,402 | 28,425 | 22,247 | |||||||||||||||
Operating expenses | 29,577 | 30,396 | 26,203 | 20,532 | 18,376 | |||||||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | 7,893 | 3,871 | |||||||||||||||
Tax expense/(benefit) | 678 | 1,401 | 2,320 | 1,686 | 904 | |||||||||||||||
Minority interests | (331 | ) | (344 | ) | (87 | ) | (54 | ) | 5 | |||||||||||
Net profit | 3,535 | 4,973 | 7,792 | 6,153 | 2,972 | |||||||||||||||
Cost/income ratio (%)1 | 86.2 | 80.8 | 72.2 | 69.9 | 79.2 | |||||||||||||||
Cost/income ratio before goodwill (%)1, 2 | 79.0 | 77.3 | 70.4 | 68.7 | 77.7 | |||||||||||||||
Per share data (CHF) | ||||||||||||||||||||
Basic earnings per share3 | 2.92 | 3.93 | 6.44 | 5.07 | 2.44 | |||||||||||||||
Basic earnings per share before goodwill2, 3 | 4.73 | 4.97 | 7.00 | 5.35 | 2.72 | |||||||||||||||
Diluted earnings per share3 | 2.87 | 3.78 | 6.35 | 5.02 | 2.40 | |||||||||||||||
Diluted earnings per share before goodwill2, 3 | 4.65 | 4.81 | 6.89 | 5.30 | 2.68 | |||||||||||||||
Cash dividends declared per share (CHF)4 | 2.00 | 1.50 | 1.83 | 1.67 | ||||||||||||||||
Cash dividends declared per share (USD)4 | 0.86 | 1.10 | 1.10 | |||||||||||||||||
Dividend payout ratio (%)4 | 68.49 | 23.28 | 36.18 | 68.21 | ||||||||||||||||
Rates of return (%) | ||||||||||||||||||||
Return on shareholders’ equity5 | 8.9 | 11.7 | 21.5 | 22.4 | 10.7 | |||||||||||||||
Return on shareholders’ equity before goodwill2, 5 | 14.4 | 14.8 | 23.4 | 23.6 | 12.0 | |||||||||||||||
Return on average equity | 7.6 | 10.4 | 22.0 | 18.6 | 9.0 | |||||||||||||||
Return on average assets | 0.24 | 0.36 | 0.70 | 0.65 | 0.28 | |||||||||||||||
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B — Selected Financial Data (continued) |
CHF million, except where indicated | ||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Balance sheet data | ||||||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | 896,556 | 861,282 | |||||||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | 30,608 | 28,794 | |||||||||||||||
Average equity to average assets (%) | 3.14 | 3.49 | 3.17 | 3.52 | 3.06 | |||||||||||||||
Market capitalization | 79,448 | 105,475 | 112,666 | 92,642 | 90,720 | |||||||||||||||
Shares | ||||||||||||||||||||
Registered ordinary shares | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | 1,292,679,486 | 1,289,857,836 | |||||||||||||||
Own shares to be delivered | 0 | 0 | 28,447,788 | 0 | 0 | |||||||||||||||
Treasury shares | 97,181,094 | 41,254,951 | 55,265,349 | 110,621,142 | 73,370,094 | |||||||||||||||
BIS capital ratios | ||||||||||||||||||||
Tier 1 (%) | 11.3 | 11.6 | 11.7 | 10.6 | 9.3 | |||||||||||||||
Total BIS (%) | 13.8 | 14.8 | 15.7 | 14.5 | 13.2 | |||||||||||||||
Risk-weighted assets | 238,790 | 253,735 | 273,290 | 273,107 | 303,719 | |||||||||||||||
Invested assets (CHF billion) | 2,037 | 2,448 | 2,445 | 1,744 | 1,573 | |||||||||||||||
Headcount (full-time equivalents)1 | 69,061 | 69,985 | 71,076 | 49,058 | 48,011 | |||||||||||||||
Long-term ratings2 | ||||||||||||||||||||
Fitch, London | AAA | AAA | AAA | AAA | AAA | |||||||||||||||
Moody’s, New York | AA2 | AA2 | Aa1 | Aa1 | Aa1 | |||||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | AA+ | AA+ | |||||||||||||||
Balance Sheet Data
CHF million | ||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Assets | ||||||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | 896,556 | 861,282 | |||||||||||||||
Due from banks | 32,468 | 27,526 | 29,147 | 29,907 | 68,495 | |||||||||||||||
Cash collateral on securities borrowed | 139,052 | 162,938 | 177,857 | 113,162 | 91,695 | |||||||||||||||
Reverse repurchase agreements | 294,086 | 269,256 | 193,801 | 132,391 | 141,285 | |||||||||||||||
Trading portfolio assets | 371,436 | 397,886 | 315,588 | 211,932 | 159,179 | |||||||||||||||
Positive replacement values | 82,092 | 73,447 | 57,875 | 62,957 | 90,511 | |||||||||||||||
Loans | 211,647 | 226,545 | 244,842 | 234,858 | 247,926 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 83,178 | 106,531 | 82,240 | 76,365 | 85,716 | |||||||||||||||
Cash collateral on securities lent | 36,870 | 30,317 | 23,418 | 12,832 | 19,171 | |||||||||||||||
Repurchase agreements | 366,858 | 368,620 | 295,513 | 196,914 | 137,617 | |||||||||||||||
Trading portfolio liabilities | 106,453 | 105,798 | 82,632 | 54,638 | 47,033 | |||||||||||||||
Negative replacement values | 81,282 | 71,443 | 75,923 | 95,786 | 125,847 | |||||||||||||||
Due to customers | 306,876 | 333,781 | 310,679 | 279,960 | 274,850 | |||||||||||||||
Debt issued | 129,411 | 156,218 | 129,635 | 120,987 | 102,310 | |||||||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | 30,608 | 28,794 | |||||||||||||||
197
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Additional Disclosure Required
under SEC Regulations
B — Selected Financial Data (continued) |
US GAAP Income Statement Data
CHF million | ||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 39,679 | 51,907 | 51,565 | 35,404 | 29,136 | |||||||||||||||
Interest expense | (29,334 | ) | (44,096 | ) | (43,584 | ) | (29,660 | ) | (25,773 | ) | ||||||||||
Net interest income | 10,345 | 7,811 | 7,981 | 5,744 | 3,363 | |||||||||||||||
Credit loss (expense)/recovery | (206 | ) | (498 | ) | 130 | (956 | ) | (787 | ) | |||||||||||
Net interest income after credit loss (expense)/recovery | 10,139 | 7,313 | 8,111 | 4,788 | 2,576 | |||||||||||||||
Net fee and commission income | 18,221 | 20,211 | 16,703 | 12,607 | 8,925 | |||||||||||||||
Net trading income | 6,031 | 8,959 | 8,597 | 7,174 | 455 | |||||||||||||||
Other income | 96 | 534 | 1,514 | 3,182 | 725 | |||||||||||||||
Total operating income | 34,487 | 37,017 | 34,925 | 27,751 | 12,681 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 18,610 | 19,713 | 17,262 | 12,483 | 7,938 | |||||||||||||||
General and administrative expenses | 7,072 | 7,631 | 6,813 | 6,664 | 6,259 | |||||||||||||||
Depreciation of property and equipment | 1,613 | 1,815 | 1,800 | 1,619 | 1,439 | |||||||||||||||
Amortization of goodwill | 0 | 2,484 | 2,018 | 1,793 | 936 | |||||||||||||||
Amortization of other intangible assets | 1,443 | 298 | 134 | 42 | 28 | |||||||||||||||
Restructuring costs | 0 | 112 | 191 | 750 | 1,089 | |||||||||||||||
Total operating expenses | 28,738 | 32,053 | 28,218 | 23,351 | 17,689 | |||||||||||||||
Operating profit/(loss) before tax and minority interests | 5,749 | 4,964 | 6,707 | 4,400 | (5,008 | ) | ||||||||||||||
Tax expense/(benefit) | 511 | 1,386 | 2,183 | 1,509 | (1,339 | ) | ||||||||||||||
Net profit/(loss) before minority interests | 5,238 | 3,578 | 4,524 | 2,891 | (3,669 | ) | ||||||||||||||
Minority interests | (331 | ) | (344 | ) | (87 | ) | (54 | ) | 4 | |||||||||||
Change in accounting principle: cumulative effect of adoption of “AICPA Audit and Accounting Guide, Audits of Investment Companies” on certain financial investments, net of tax | 639 | 0 | 0 | 0 | 0 | |||||||||||||||
Net profit/(loss) | 5,546 | 3,234 | 4,437 | 2,837 | (3,665 | ) | ||||||||||||||
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B — Selected Financial Data (continued) |
US GAAP Balance Sheet Data
CHF million | ||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Assets | ||||||||||||||||||||
Total assets | 1,296,938 | 1,361,920 | 1,124,554 | 893,525 | 899,589 | |||||||||||||||
Due from banks | 32,481 | 27,550 | 29,182 | 29,954 | 68,554 | |||||||||||||||
Cash collateral on securities borrowed | 139,073 | 162,566 | 177,857 | 113,162 | 91,695 | |||||||||||||||
Reverse repurchase agreements | 294,086 | 269,256 | 193,801 | 132,391 | 141,285 | |||||||||||||||
Trading portfolio assets | 441,845 | 455,406 | 318,788 | 228,230 | 178,130 | |||||||||||||||
Positive replacement values1 | 83,757 | 73,474 | 57,775 | 62,294 | 90,520 | |||||||||||||||
Loans | 211,755 | 226,747 | 245,214 | 235,401 | 248,657 | |||||||||||||||
Goodwill | 28,127 | 29,255 | 31,016 | 21,163 | 21,455 | |||||||||||||||
Other intangible assets | 1,222 | 4,510 | 4,710 | 265 | 252 | |||||||||||||||
Other assets | 21,314 | 36,972 | 27,955 | 18,717 | 29,398 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 83,178 | 106,531 | 82,240 | 76,363 | 85,716 | |||||||||||||||
Cash collateral on securities lent | 36,870 | 30,317 | 23,418 | 12,832 | 19,127 | |||||||||||||||
Repurchase agreements | 366,858 | 368,620 | 295,513 | 173,840 | 136,824 | |||||||||||||||
Trading portfolio liabilities | 117,721 | 119,528 | 87,832 | 52,658 | 47,772 | |||||||||||||||
Obligation to return securities received as collateral | 16,308 | 10,931 | 0 | 0 | 0 | |||||||||||||||
Negative replacement values1 | 132,354 | 116,666 | 75,423 | 95,004 | 125,857 | |||||||||||||||
Due to customers | 306,872 | 333,766 | 310,686 | 279,971 | 274,861 | |||||||||||||||
Accrued expenses and deferred income | 15,330 | 17,289 | 21,038 | 12,040 | 11,232 | |||||||||||||||
Debt issued | 129,527 | 156,462 | 129,750 | 120,704 | 101,973 | |||||||||||||||
Shareholders’ equity | 55,576 | 59,282 | 62,960 | 51,833 | 54,761 | |||||||||||||||
Ratio of Earnings to Fixed Charges
The following table sets forth UBS AG’s ratio of earnings to fixed charges, for the periods indicated. Ratios of earnings to combined fixed charges and preferred stock dividends requirements are not presented as there were no preferred share dividends in any of the periods indicated.
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
IFRS1 | 1.14 | 1.14 | 1.23 | 1.25 | 1.11 | |||||||||||||||
US GAAP1, 2 | 1.18 | 1.10 | 1.15 | 1.14 | 0.80 | |||||||||||||||
C — Information on the Company |
Property, Plant and Equipment
remainder, along with most of UBS’s offices outside Switzerland, being held under commercial leases.
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Additional Disclosure Required under SEC Regulations | ||
D — Information Required by Industry Guide 3 |
Selected Statistical Information
D — Information Required by Industry Guide 3 (continued) |
Average Balances and Interest Rates
The following table sets forth average interest-earning assets and average interest-bearing liabilities, along with the average rates, for the years ended 31 December 2002, 2001 and 2000.
31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | ||||||||||||||||||||||||||||||||
CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | ||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Due from banks | |||||||||||||||||||||||||||||||||||||
Domestic | 12,534 | 388 | 3.1 | 11,753 | 1,055 | 9.0 | 13,366 | 1,273 | 9.5 | ||||||||||||||||||||||||||||
Foreign | 17,603 | 634 | 3.6 | 15,528 | 1,823 | 11.7 | 16,994 | 2,280 | 13.4 | ||||||||||||||||||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | |||||||||||||||||||||||||||||||||||||
Domestic | 5,471 | 235 | 4.3 | 7,868 | 563 | 7.2 | 8,383 | 558 | 6.7 | ||||||||||||||||||||||||||||
Foreign | 573,576 | 10,949 | 1.9 | 474,295 | 17,774 | 3.7 | 348,395 | 18,530 | 5.3 | ||||||||||||||||||||||||||||
Trading portfolio assets | |||||||||||||||||||||||||||||||||||||
Domestic | 7,812 | 269 | 3.4 | 12,940 | 307 | 2.4 | 20,800 | 244 | 1.2 | ||||||||||||||||||||||||||||
Foreign — taxable | 373,810 | 16,714 | 4.5 | 332,126 | 16,183 | 4.9 | 255,399 | 11,560 | 4.5 | ||||||||||||||||||||||||||||
Foreign — non-taxable | 1,720 | 31 | 1.8 | 1,450 | 42 | 2.9 | 1,206 | 38 | 3.2 | ||||||||||||||||||||||||||||
Foreign — total | 375,530 | 16,745 | 4.5 | 333,576 | 16,225 | 4.9 | 256,605 | 11,598 | 4.5 | ||||||||||||||||||||||||||||
Loans | |||||||||||||||||||||||||||||||||||||
Domestic | 170,641 | 6,987 | 4.1 | 177,404 | 8,017 | 4.5 | 181,646 | 10,985 | 6.0 | ||||||||||||||||||||||||||||
Foreign | 55,199 | 1,789 | 3.2 | 72,176 | 3,090 | 4.3 | 67,528 | 3,813 | 5.6 | ||||||||||||||||||||||||||||
Financial investments | |||||||||||||||||||||||||||||||||||||
Domestic | 3,794 | 60 | 1.6 | 4,598 | 90 | 2.0 | 3,440 | 105 | 3.1 | ||||||||||||||||||||||||||||
Foreign — taxable | 8,781 | 105 | 1.2 | 39,252 | 363 | 0.9 | 22,529 | 297 | 1.3 | ||||||||||||||||||||||||||||
Foreign — non-taxable | 0 | 0 | 0.0 | 0 | 0 | 0.0 | 0 | 0 | 0.0 | ||||||||||||||||||||||||||||
Foreign — total | 8,781 | 105 | 1.2 | 39,252 | 363 | 0.9 | 22,529 | 297 | 1.3 | ||||||||||||||||||||||||||||
Total interest-earning assets | 1,230,941 | 38,161 | 3.1 | 1,149,390 | 49,307 | 4.3 | 939,686 | 49,683 | 5.3 | ||||||||||||||||||||||||||||
Net interest on swaps | 1,802 | 2,970 | 2,062 | ||||||||||||||||||||||||||||||||||
Interest income and average interest-earning assets | 1,230,941 | 39,963 | 3.2 | 1,149,390 | 52,277 | 4.5 | 939,686 | 51,745 | 5.5 | ||||||||||||||||||||||||||||
Non-interest-earning assets | |||||||||||||||||||||||||||||||||||||
Positive replacement values | 190,063 | 153,687 | 135,762 | ||||||||||||||||||||||||||||||||||
Fixed assets | 12,532 | 13,376 | 9,660 | ||||||||||||||||||||||||||||||||||
Other | 53,293 | 46,954 | 32,925 | ||||||||||||||||||||||||||||||||||
Total average assets | 1,486,829 | 1,363,407 | 1,118,033 | ||||||||||||||||||||||||||||||||||
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D — Information Required by Industry Guide 3 (continued) |
Average Balances and Interest Rates (continued)
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||||
CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | |||||||||||||||||||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||||||||||||||||
Due to banks | ||||||||||||||||||||||||||||||||||||||
Domestic | 28,625 | 452 | 1.6 | 36,260 | 1,424 | 3.9 | 31,133 | 2,397 | 7.7 | |||||||||||||||||||||||||||||
Foreign | 60,621 | 1,362 | 2.2 | 61,642 | 3,506 | 5.7 | 57,258 | 3,758 | 6.6 | |||||||||||||||||||||||||||||
Cash collateral on securities lent and repurchase agreements | ||||||||||||||||||||||||||||||||||||||
Domestic | 18,382 | 355 | 1.9 | 13,147 | 600 | 4.6 | 12,700 | 478 | 3.8 | |||||||||||||||||||||||||||||
Foreign | 523,375 | 9,726 | 1.9 | 415,121 | 13,917 | 3.4 | 284,220 | 14,437 | 5.1 | |||||||||||||||||||||||||||||
Trading portfolio liabilities | ||||||||||||||||||||||||||||||||||||||
Domestic | 3,239 | 146 | 4.5 | 2,526 | 1 | 0.0 | 1,078 | 4 | 0.4 | |||||||||||||||||||||||||||||
Foreign | 109,013 | 8,220 | 7.5 | 94,597 | 7,814 | 8.3 | 66,597 | 5,305 | 8.0 | |||||||||||||||||||||||||||||
Due to customers | ||||||||||||||||||||||||||||||||||||||
Domestic — demand deposits | 42,484 | 435 | 1.0 | 41,664 | 715 | 1.7 | 44,403 | 595 | 1.3 | |||||||||||||||||||||||||||||
Domestic — savings deposits | 71,465 | 625 | 0.9 | 66,089 | 716 | 1.1 | 72,207 | 781 | 1.1 | |||||||||||||||||||||||||||||
Domestic — time deposits | 27,646 | 447 | 1.6 | 31,261 | 989 | 3.2 | 27,199 | 826 | 3.0 | |||||||||||||||||||||||||||||
Domestic — total | 141,595 | 1,507 | 1.1 | 139,014 | 2,420 | 1.7 | 143,809 | 2,202 | 1.5 | |||||||||||||||||||||||||||||
Foreign1 | 172,650 | 3,062 | 1.8 | 187,783 | 6,738 | 3.6 | 143,432 | 7,303 | 5.1 | |||||||||||||||||||||||||||||
Short-term debt | ||||||||||||||||||||||||||||||||||||||
Domestic | 69 | 0 | 0.0 | 69 | 0 | 0.0 | 79 | 0 | 0.0 | |||||||||||||||||||||||||||||
Foreign | 91,616 | 1,915 | 2.1 | 96,184 | 4,227 | 4.4 | 78,075 | 4,338 | 5.6 | |||||||||||||||||||||||||||||
Long-term debt | ||||||||||||||||||||||||||||||||||||||
Domestic | 10,082 | 433 | 4.3 | 12,754 | 587 | 4.6 | 15,490 | 778 | 5.0 | |||||||||||||||||||||||||||||
Foreign | 46,930 | 2,239 | 4.8 | 43,798 | 3,002 | 6.9 | 38,020 | 2,615 | 6.9 | |||||||||||||||||||||||||||||
Total interest-bearing liabilities | 1,206,197 | 29,417 | 2.4 | 1,102,895 | 44,236 | 4.0 | 871,891 | 43,615 | 5.0 | |||||||||||||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
Negative replacement values | 192,659 | 165,220 | 157,668 | |||||||||||||||||||||||||||||||||||
Other | 41,297 | 47,676 | 53,049 | |||||||||||||||||||||||||||||||||||
Total liabilities | 1,440,153 | 1,315,791 | 1,082,608 | |||||||||||||||||||||||||||||||||||
Shareholders’ equity | 46,676 | 47,616 | 35,425 | |||||||||||||||||||||||||||||||||||
Total average liabilities and shareholders’ equity | 1,486,829 | 1,363,407 | 1,118,033 | |||||||||||||||||||||||||||||||||||
Net interest income | 10,546 | 8,041 | 8,130 | |||||||||||||||||||||||||||||||||||
Net yield on interest-earning assets | 0.9 | 0.7 | 0.9 | |||||||||||||||||||||||||||||||||||
The percentage of total average interest-earning assets attributable to foreign activities was 84% for 2002 (81% for 2001 and 76% for 2000). The percentage of total average interest-bearing liabilities attributable to foreign activities was 83% for 2002 (82% for 2001 and 77% for 2000).
Average rates earned and paid on assets and liabilities can change from period to period based on the changes in interest rates in general, but are also affected by changes in the currency mix included in the assets and liabilities. This is especially true for foreign assets and liabilities. Tax-exempt income is not recorded on a tax-equivalent basis. For all three years presented, tax-exempt income is considered to be insignificant and therefore the impact from such income is negligible.
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Additional Disclosure Required
under SEC Regulations
D — Information Required by Industry Guide 3 (continued) |
Analysis of Changes in Interest Income and Expense
The following tables allocate, by categories of interest-earning assets and interest-bearing liabilities, the changes in interest income and expense due to changes in volume and interest rates for the year ended 31 December 2002 compared to the year ended 31 December 2001, and for the year ended 31 December 2001 compared to the year ended 31 December 2000. Volume and rate variances have been calculated on movements in average balances and changes in interest rates. Changes due to a combination of volume and rates have been allocated proportionally. Refer to page 209 of Industry Guide 3 for a discussion of the treatment of impaired, non-performing and restructured loans.
2002 compared to 2001 | 2001 compared to 2000 | ||||||||||||||||||||||||
Increase/(decrease) | Increase/(decrease) | ||||||||||||||||||||||||
due to changes in | due to changes in | ||||||||||||||||||||||||
Average | Average | Net | Average | Average | Net | ||||||||||||||||||||
CHF million | volume | rate | change | volume | rate | change | |||||||||||||||||||
Interest income from interest-earning assets | |||||||||||||||||||||||||
Due from banks | |||||||||||||||||||||||||
Domestic | 70 | (737 | ) | (667 | ) | (153 | ) | (65 | ) | (218 | ) | ||||||||||||||
Foreign | 243 | (1,432 | ) | (1,189 | ) | (196 | ) | (261 | ) | (457 | ) | ||||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | |||||||||||||||||||||||||
Domestic | (173 | ) | (155 | ) | (328 | ) | (35 | ) | 40 | 5 | |||||||||||||||
Foreign | 3,673 | (10,498 | ) | (6,825 | ) | 6,673 | (7,429 | ) | (756 | ) | |||||||||||||||
Trading portfolio assets | |||||||||||||||||||||||||
Domestic | (123 | ) | 85 | (38 | ) | (94 | ) | 157 | 63 | ||||||||||||||||
Foreign — taxable | 2,043 | (1,512 | ) | 531 | 3,456 | 1,167 | 4,623 | ||||||||||||||||||
Foreign — non-taxable | 8 | (19 | ) | (11 | ) | 8 | (4 | ) | 4 | ||||||||||||||||
Foreign — total | 2,051 | (1,531 | ) | 520 | 3,464 | 1,163 | 4,627 | ||||||||||||||||||
Loans | |||||||||||||||||||||||||
Domestic | (304 | ) | (726 | ) | (1,030 | ) | (255 | ) | (2,713 | ) | (2,968 | ) | |||||||||||||
Foreign | (730 | ) | (571 | ) | (1,301 | ) | 260 | (983 | ) | (723 | ) | ||||||||||||||
Financial investments | |||||||||||||||||||||||||
Domestic | (16 | ) | (14 | ) | (30 | ) | 36 | (51 | ) | (15 | ) | ||||||||||||||
Foreign — taxable | (274 | ) | 16 | (258 | ) | 217 | (151 | ) | 66 | ||||||||||||||||
Foreign — non-taxable | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||
Foreign — total | (274 | ) | 16 | (258 | ) | 217 | (151 | ) | 66 | ||||||||||||||||
Interest income | |||||||||||||||||||||||||
Domestic | (546 | ) | (1,547 | ) | (2,093 | ) | (501 | ) | (2,632 | ) | (3,133 | ) | |||||||||||||
Foreign | 4,963 | (14,016 | ) | (9,053 | ) | 10,418 | (7,661 | ) | 2,757 | ||||||||||||||||
Total interest income from interest-earning assets | 4,417 | (15,563 | ) | (11,146 | ) | 9,917 | (10,293 | ) | (376 | ) | |||||||||||||||
Net interest on swaps | (1,168 | ) | 908 | ||||||||||||||||||||||
Total interest income | (12,314 | ) | 532 | ||||||||||||||||||||||
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D — Information Required by Industry Guide 3 (continued) |
Analysis of Changes in Interest Income and Expense (continued)
2002 compared to 2001 | 2001 compared to 2000 | |||||||||||||||||||||||||
Increase/(decrease) | Increase/(decrease) | |||||||||||||||||||||||||
due to changes in | due to changes in | |||||||||||||||||||||||||
Average | Average | Net | Average | Average | Net | |||||||||||||||||||||
CHF million | volume | rate | change | volume | rate | change | ||||||||||||||||||||
Interest expense on interest-bearing liabilities | ||||||||||||||||||||||||||
Due to banks | ||||||||||||||||||||||||||
Domestic | (298 | ) | (674 | ) | (972 | ) | 395 | (1,368 | ) | (973 | ) | |||||||||||||||
Foreign | (58 | ) | (2,086 | ) | (2,144 | ) | 289 | (541 | ) | (252 | ) | |||||||||||||||
Cash collateral on securities lent and repurchase agreements | ||||||||||||||||||||||||||
Domestic | 241 | (486 | ) | (245 | ) | 17 | 105 | 122 | ||||||||||||||||||
Foreign | 3,681 | (7,872 | ) | (4,191 | ) | 6,676 | (7,196 | ) | (520 | ) | ||||||||||||||||
Trading portfolio liabilities | ||||||||||||||||||||||||||
Domestic | 0 | 145 | 145 | 6 | (9 | ) | (3 | ) | ||||||||||||||||||
Foreign | 1,197 | (791 | ) | 406 | 2,240 | 269 | 2,509 | |||||||||||||||||||
Due to customers | ||||||||||||||||||||||||||
Domestic — demand deposits | 14 | (294 | ) | (280 | ) | (36 | ) | 156 | 120 | |||||||||||||||||
Domestic — savings deposits | 59 | (150 | ) | (91 | ) | (67 | ) | 2 | (65 | ) | ||||||||||||||||
Domestic — time deposits | (116 | ) | (426 | ) | (542 | ) | 31 | 132 | 163 | |||||||||||||||||
Domestic — total | (43 | ) | (870 | ) | (913 | ) | (72 | ) | 290 | 218 | ||||||||||||||||
Foreign | (545 | ) | (3,131 | ) | (3,676 | ) | 2,262 | (2,827 | ) | (565 | ) | |||||||||||||||
Short-term debt | ||||||||||||||||||||||||||
Domestic | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Foreign | (201 | ) | (2,111 | ) | (2,312 | ) | 1,014 | (1,125 | ) | (111 | ) | |||||||||||||||
Long-term debt | ||||||||||||||||||||||||||
Domestic | (123 | ) | (31 | ) | (154 | ) | (137 | ) | (54 | ) | (191 | ) | ||||||||||||||
Foreign | 216 | (979 | ) | (763 | ) | 419 | (32 | ) | 387 | |||||||||||||||||
Interest expense | ||||||||||||||||||||||||||
Domestic | (223 | ) | (1,916 | ) | (2,139 | ) | 209 | (1,036 | ) | (827 | ) | |||||||||||||||
Foreign | 4,290 | (16,970 | ) | (12,680 | ) | 12,900 | (11,452 | ) | 1,448 | |||||||||||||||||
Total interest expense | 4,067 | (18,886 | ) | (14,819 | ) | 13,109 | (12,488 | ) | 621 | |||||||||||||||||
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Additional Disclosure Required
under SEC Regulations
D — Information Required by Industry Guide 3 (continued) |
Deposits
The following table analyzes average deposits and the average rates on each deposit category listed below for the years ended 31 December 2002, 2001 and 2000. The geographic allocation is based on the location of the office or branch where the deposit is made. Deposits by foreign depositors in domestic offices were CHF 43,914 million, CHF 54,095 million and CHF 45,815 million at 31 December 2002, 31 December 2001 and 31 December 2000, respectively.
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
CHF million, except where indicated | deposit | rate (%) | deposit | rate (%) | deposit | rate (%) | ||||||||||||||||||
Banks | ||||||||||||||||||||||||
Domestic offices | ||||||||||||||||||||||||
Demand deposits | 3,524 | 0.7 | 3,741 | 1.2 | 4,649 | 1.9 | ||||||||||||||||||
Time deposits | 9,010 | 1.7 | 8,012 | 4.2 | 8,717 | 8.7 | ||||||||||||||||||
Total domestic offices | 12,534 | 1.4 | 11,753 | 3.3 | 13,366 | 6.3 | ||||||||||||||||||
Foreign offices | ||||||||||||||||||||||||
Interest-bearing deposits1 | 17,603 | 2.2 | 15,528 | 5.7 | 16,994 | 6.6 | ||||||||||||||||||
Total due to banks | 30,137 | 1.9 | 27,281 | 4.6 | 30,360 | 6.5 | ||||||||||||||||||
Customer accounts | ||||||||||||||||||||||||
Domestic offices | ||||||||||||||||||||||||
Demand deposits | 42,484 | 1.0 | 41,664 | 1.7 | 44,403 | 1.3 | ||||||||||||||||||
Savings deposits | 71,465 | 0.9 | 66,089 | 1.1 | 72,207 | 1.1 | ||||||||||||||||||
Time deposits | 27,646 | 1.6 | 31,261 | 3.2 | 27,199 | 3.0 | ||||||||||||||||||
Total domestic offices | 141,595 | 1.1 | 139,014 | 1.7 | 143,809 | 1.5 | ||||||||||||||||||
Foreign offices | ||||||||||||||||||||||||
Interest bearing deposits1 | 172,650 | 1.8 | 187,783 | 3.6 | 143,432 | 5.1 | ||||||||||||||||||
Total due to customers | 314,245 | 1.5 | 326,797 | 2.8 | 287,241 | 3.3 | ||||||||||||||||||
1Mainly time deposits.
At 31 December 2002, the maturity of time deposits exceeding CHF 150,000, or an equivalent amount in other currencies, was as follows:
CHF million | Domestic | Foreign | ||||||
Within 3 months | 27,456 | 110,053 | ||||||
3 to 12 months | 8,202 | 26,821 | ||||||
1 to 5 years | 768 | 2,766 | ||||||
Over 5 years | 44 | 859 | ||||||
Total time deposits | 36,470 | 140,499 | ||||||
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D — Information Required by Industry Guide 3 (continued) |
Short-term Borrowings
The following table presents our period-end, average and maximum month-end outstanding amounts for short-term borrowings, along with the average rates and period-end rates at and for the years ended 31 December 2002, 2001 and 2000.
Money market paper issued | Due to banks | Repurchase agreements1 | ||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||
Period-end balance | 72,800 | 99,006 | 74,780 | 48,780 | 77,312 | 51,245 | 464,020 | 462,316 | 330,857 | |||||||||||||||||||||||||||
Average balance | 91,685 | 96,253 | 78,154 | 59,109 | 70,621 | 58,031 | 509,572 | 400,648 | 278,601 | |||||||||||||||||||||||||||
Maximum month-end balance | 108,463 | 117,022 | 89,821 | 77,312 | 85,808 | 73,355 | 593,786 | 502,578 | 342,427 | |||||||||||||||||||||||||||
Average interest rate during the period (%) | 2.1 | 4.4 | 5.6 | 3.1 | 7.0 | 7.0 | 1.8 | 3.2 | 4.8 | |||||||||||||||||||||||||||
Average interest rate at period-end (%) | 1.5 | 2.6 | 6.0 | 2.0 | 2.2 | 4.1 | 1.7 | 2.9 | 4.8 | |||||||||||||||||||||||||||
1For the purpose of this disclosure, balances are presented on a gross basis.
205
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Additional Disclosure Required under SEC Regulations |
D — Information Required by Industry Guide 3 (continued) |
Contractual Maturities of the Investments in Debt Instruments
Due to the adoption of IAS 39, Financial investments, available for sale, are reported at fair value from 1 January 2001. 31 December 2000 amounts have not been restated.
Within 1 year | 1 - 5 years | 5 - 10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 20021 | ||||||||||||||||||||||||||||||||
Swiss national government and agencies | 0 | 0.00 | 7 | 4.88 | 8 | 3.86 | 1 | 4.00 | ||||||||||||||||||||||||
Swiss local governments | 8 | 4.02 | 30 | 3.94 | 4 | 3.59 | 0 | 0.00 | ||||||||||||||||||||||||
US Treasury and agencies | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Foreign governments and official institutions | 35 | 4.63 | 45 | 3.13 | 1 | 6.12 | 0 | 0.00 | ||||||||||||||||||||||||
Corporate debt securities | 675 | 2.23 | 249 | 2.64 | 19 | 3.41 | 21 | 8.02 | ||||||||||||||||||||||||
Mortgage-backed securities | 4 | 2.25 | 15 | 3.97 | 4 | 4.03 | 0 | 0.00 | ||||||||||||||||||||||||
Other debt securities | 1 | 4.77 | 48 | 2.65 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Total fair value | 723 | 394 | 36 | 22 | ||||||||||||||||||||||||||||
1Money market papers have contractual maturities of less than one year.
Within 1 year | 1 - 5 years | 5 - 10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 20011 | ||||||||||||||||||||||||||||||||
Swiss national government and agencies | 9 | 5.26 | 10 | 4.50 | 16 | 3.43 | 1 | 4.00 | ||||||||||||||||||||||||
Swiss local governments | 3 | 4.36 | 38 | 3.90 | 4 | 3.59 | 0 | 0.00 | ||||||||||||||||||||||||
US Treasury and agencies | 0 | 0.00 | 24 | 4.38 | 8 | 5.15 | 0 | 0.00 | ||||||||||||||||||||||||
Foreign governments and official institutions | 5,014 | 0.97 | 5,048 | 1.01 | 27 | 2.88 | 0 | 0.00 | ||||||||||||||||||||||||
Corporate debt securities | 63 | 4.53 | 1,102 | 4.59 | 30 | 3.22 | 23 | 15.372 | ||||||||||||||||||||||||
Mortgage-backed securities | 0 | 0.00 | 5 | 5.41 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Other debt securities | 2 | 4.77 | 87 | 3.91 | 28 | 3.56 | 0 | 0.00 | ||||||||||||||||||||||||
Total fair value | 5,091 | 6,314 | 113 | 24 | ||||||||||||||||||||||||||||
1Money market papers have contractual maturities of less than one year. 2The yield presented is the current contractual yield based on current market rates at 31 December 2001, but may not represent the yield through maturity since this is a floating rate debt instrument.
Within 1 year | 1 - 5 years | 5 - 10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 2000 | ||||||||||||||||||||||||||||||||
Swiss national government and agencies | 2 | 6.90 | 16 | 5.13 | 16 | 6.45 | 0 | 0.00 | ||||||||||||||||||||||||
Swiss local governments | 1 | 6.11 | 27 | 5.19 | 18 | 4.43 | 0 | 0.00 | ||||||||||||||||||||||||
US Treasury and agencies | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Foreign governments and official institutions | 2,451 | 1.62 | 1,236 | 1.80 | 1,165 | 0.85 | 0 | 0.00 | ||||||||||||||||||||||||
Corporate debt securities | 16 | 5.20 | 917 | 6.02 | 206 | 2.21 | 0 | 0.00 | ||||||||||||||||||||||||
Mortgage-backed securities | 20 | 6.02 | 5 | 6.54 | 22 | 14.46 | 0 | 0.00 | ||||||||||||||||||||||||
Other debt securities | 21 | 6.57 | 56 | 4.33 | 11 | 3.68 | 0 | 0.00 | ||||||||||||||||||||||||
Total amortized cost | 2,511 | 2,257 | 1,438 | 0 | ||||||||||||||||||||||||||||
Total market value | 2,514 | 2,272 | 1,434 | 0 | ||||||||||||||||||||||||||||
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Loans
Loans are widely dispersed over industry sectors both within and outside of Switzerland. With the exceptions of private households (foreign and domestic) and banks and financial institutions outside Switzerland and real estate and rentals in Switzerland, there is no material concentration of loans. For further discussion of the loan portfolio, see the UBS Handbook 2002/2003. The following table illustrates the diversification of the loan portfolio among industry sectors at 31 December 2002, 2001, 2000, 1999 and 1998. The industry categories presented are consistent with the classification of loans for reporting to the Swiss Federal Banking Commission and Swiss National Bank.
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 1,029 | 1,533 | 2,896 | 5,802 | 4,543 | |||||||||||||||
Construction | 2,838 | 3,499 | 4,870 | 6,577 | 7,897 | |||||||||||||||
Financial institutions | 4,301 | 5,673 | 5,725 | 9,387 | 10,240 | |||||||||||||||
Hotels and restaurants | 2,655 | 2,950 | 3,526 | 4,259 | 4,129 | |||||||||||||||
Manufacturing1 | 7,237 | 8,686 | 9,577 | 11,377 | 13,505 | |||||||||||||||
Private households | 95,295 | 93,746 | 91,667 | 93,846 | 97,664 | |||||||||||||||
Public authorities | 5,529 | 5,222 | 5,658 | 5,277 | 5,858 | |||||||||||||||
Real estate and rentals | 13,573 | 14,992 | 16,673 | 19,835 | 21,231 | |||||||||||||||
Retail and wholesale | 7,172 | 8,674 | 9,635 | 10,904 | 8,912 | |||||||||||||||
Services2 | 10,237 | 12,161 | 11,767 | 14,862 | 11,582 | |||||||||||||||
Other3 | 1,738 | 1,860 | 2,651 | 1,818 | 1,662 | |||||||||||||||
Total domestic | 151,604 | 158,996 | 164,645 | 183,944 | 187,223 | |||||||||||||||
Foreign4 | ||||||||||||||||||||
Banks | 31,882 | 26,728 | 27,168 | 24,983 | 65,000 | |||||||||||||||
Chemicals | 519 | 1,080 | 1,423 | |||||||||||||||||
Construction | 153 | 266 | 773 | |||||||||||||||||
Electricity, gas and water supply | 1,105 | 977 | 1,584 | |||||||||||||||||
Financial institutions | 18,378 | 14,458 | 20,348 | |||||||||||||||||
Manufacturing5 | 2,300 | 4,258 | 4,596 | |||||||||||||||||
Mining | 868 | 1,313 | 2,070 | |||||||||||||||||
Private households | 33,063 | 25,619 | 29,470 | |||||||||||||||||
Public authorities | 2,628 | 6,454 | 11,754 | |||||||||||||||||
Real estate and rentals | 616 | 10,227 | 5,077 | |||||||||||||||||
Retail and wholesale | 1,367 | 1,732 | 1,862 | |||||||||||||||||
Services | 1,654 | 4,786 | 1,585 | |||||||||||||||||
Transport, storage and communication | 676 | 2,117 | 993 | |||||||||||||||||
Other6 | 2,557 | 2,973 | 11,168 | 69,087 | 78,741 | |||||||||||||||
Total foreign | 97,766 | 102,988 | 119,871 | 94,070 | 143,741 | |||||||||||||||
Total gross | 249,370 | 261,984 | 284,516 | 278,014 | 330,964 | |||||||||||||||
1Includes chemicals, food and beverages. 2Includes transportation, communication, health and social work, education and other social and personal service activities. 3Includes mining and electricity, gas and water supply. 4For the years prior to the year 2000, no detailed industry classifications are available. 5Includes food and beverages. 6Includes hotels and restaurants.
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D — Information Required by Industry Guide 3 (continued) |
Loans (continued)
The following table analyzes the Group’s mortgage portfolio by geographic origin of the client and type of mortgage at 31 December 2002, 2001, 2000, 1999 and 1998. Mortgages are included in the industry categories mentioned above.
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Mortgages | ||||||||||||||||||||
Domestic | 116,359 | 116,628 | 116,348 | 126,677 | 138,306 | |||||||||||||||
Foreign | 11,510 | 9,583 | 4,206 | 1,310 | 2,479 | |||||||||||||||
Total gross mortgages | 127,869 | 126,211 | 120,554 | 127,987 | 140,785 | |||||||||||||||
Mortgages | ||||||||||||||||||||
Residential | 108,779 | 101,969 | 96,181 | 91,408 | 106,093 | |||||||||||||||
Commercial | 19,090 | 24,242 | 24,373 | 36,579 | 34,692 | |||||||||||||||
Total gross mortgages | 127,869 | 126,211 | 120,554 | 127,987 | 140,785 | |||||||||||||||
Loan Maturities
The following table discloses loans by maturity at 31 December 2002. The determination of maturities is based on contract terms. Information on interest rate sensitivities can be found in Note 29 to the UBS Group Financial Statements.
CHF million | Within 1 year | 1 to 5 years | Over 5 years | Total | ||||||||||||
Domestic | ||||||||||||||||
Banks | 969 | 60 | 0 | 1,029 | ||||||||||||
Mortgages | 57,875 | 55,676 | 2,808 | 116,359 | ||||||||||||
Other loans | 24,905 | 7,534 | 1,777 | 34,216 | ||||||||||||
Total domestic | 83,749 | 63,270 | 4,585 | 151,604 | ||||||||||||
Foreign | ||||||||||||||||
Banks | 31,285 | 373 | 224 | 31,882 | ||||||||||||
Mortgages | 10,711 | 688 | 111 | 11,510 | ||||||||||||
Other loans | 52,447 | 1,492 | 435 | 54,374 | ||||||||||||
Total foreign | 94,443 | 2,553 | 770 | 97,766 | ||||||||||||
Total gross loans | 178,192 | 65,823 | 5,355 | 249,370 | ||||||||||||
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Impaired, Non-performing and Restructured Loans
loans to reflect their net estimated recoverable amount.
The gross interest income that would have been recorded on non-performing loans was CHF 201 million for the year ended 31 December 2002, CHF 336 million for the year ended 31 December 2001 and CHF 182 million for the year ended 31 December 2000. The amount of interest income that was included in net income for those loans was CHF 174 million for the year ended 31 December 2002 and CHF 201 million for the year ended 31 December 2001. There was no interest income recorded in net income for non-performing loans in 2000. The table below provides an analysis of the Group’s non-performing loans, for further information see the UBS Handbook 2002/2003.
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Non-performing loans: | ||||||||||||||||||||
Domestic | 4,609 | 6,531 | 7,588 | 11,435 | 14,023 | |||||||||||||||
Foreign | 1,420 | 2,108 | 2,864 | 1,638 | 2,091 | |||||||||||||||
Total non-performing loans | 6,029 | 8,639 | 10,452 | 13,073 | 16,114 | |||||||||||||||
Foreign restructured loans1 | 179 | 287 | 449 | |||||||||||||||||
1 Include only performing foreign restructured loans. UBS does not, as a matter of policy, typically restructure loans to accrue interest at rates different from the original contractual terms or reduce the principal amount of loans. Instead, specific loan allowances are established as necessary. Unrecognized interest related to foreign restructured loans was not material to the results of operations during these periods.
or less than 90 days in arrears, with respect to payment of principal or interest; however, the Group’s credit officers have expressed doubts as to the ability of the borrowers to repay the loans. As at 31 December 2002 specific allowances of CHF 1,407 million had been established against these loans.
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D — Information Required by Industry Guide 3 (continued) |
Cross-Border Outstandings
Cross-border outstandings consist of general banking products such as loans (including unutilized commitments) and deposits with third parties, credit equivalents of over the counter (OTC) derivatives and repurchase agreements, and the market value of the inventory of securities. Outstandings are monitored and reported on an ongoing basis by the credit risk management and control organization with a dedicated country risk information system. With the exception of the 32 most developed economies, these exposures are rigorously limited.
the asset could be liquidated. This follows the “Guidelines for the Management of Country Risk”, which are applicable to all banks that are supervised by the Swiss Federal Banking Commission.
The following tables list those countries for which cross-border outstandings exceeded 0.75% of total assets at 31 December 2002, 2001 and 2000. At 31 December 2002, there were no outstandings that exceeded 0.75% of total assets in any country currently facing liquidity problems that the Group expects would materially affect the country’s ability to service its obligations.
For more information on cross-border exposure, see the UBS Handbook 2002/2003.
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31.12.02 | ||||||||||||||||||||||||
Banking products | ||||||||||||||||||||||||
Traded | Tradable | % of total | ||||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 1,083 | 698 | 27,617 | 95,046 | 124,444 | 10.5 | ||||||||||||||||||
Germany | 2,590 | 4,732 | 13,101 | 9,104 | 29,527 | 2.5 | ||||||||||||||||||
Italy | 1,139 | 296 | 7,229 | 14,852 | 23,516 | 2.0 | ||||||||||||||||||
United Kingdom | 4,161 | 606 | 5,437 | 12,106 | 22,310 | 1.9 | ||||||||||||||||||
France | 2,077 | 1,805 | 5,710 | 11,403 | 20,995 | 1.8 | ||||||||||||||||||
Australia | 133 | 535 | 4,514 | 6,651 | 11,833 | 1.0 | ||||||||||||||||||
Canada | 130 | 872 | 4,964 | 5,115 | 11,081 | 0.9 | ||||||||||||||||||
Japan | 312 | 88 | 1,766 | 7,816 | 9,982 | 0.8 | ||||||||||||||||||
Cayman Islands | 7 | 1,175 | 5,054 | 3,387 | 9,623 | 0.8 | ||||||||||||||||||
Netherlands | 289 | 1,548 | 4,110 | 3,313 | 9,260 | 0.8 | ||||||||||||||||||
31.12.01 | ||||||||||||||||||||||||
Banking products | ||||||||||||||||||||||||
Traded | Tradable | % of total | ||||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 2,360 | 1,284 | 31,129 | 114,615 | 149,388 | 11.9 | ||||||||||||||||||
United Kingdom | 2,483 | 543 | 9,128 | 27,754 | 39,908 | 3.2 | ||||||||||||||||||
Germany | 3,605 | 6,395 | 11,962 | 11,755 | 33,717 | 2.7 | ||||||||||||||||||
Japan | 640 | 770 | 4,442 | 22,995 | 28,847 | 2.3 | ||||||||||||||||||
Italy | 1,086 | 498 | 11,628 | 11,180 | 24,392 | 1.9 | ||||||||||||||||||
France | 159 | 2,043 | 4,114 | 8,052 | 14,368 | 1.1 | ||||||||||||||||||
Canada | 114 | 950 | 5,220 | 8,038 | 14,322 | 1.1 | ||||||||||||||||||
Netherlands | 1,834 | 2,414 | 6,126 | 3,110 | 13,484 | 1.1 | ||||||||||||||||||
31.12.00 | ||||||||||||||||||||||||
Banking products | ||||||||||||||||||||||||
Traded | Tradable | % of total | ||||||||||||||||||||||
CHF million | Banks | Non-banks | products1 | assets2 | Total | assets | ||||||||||||||||||
United States | 1,826 | 958 | 21,796 | 64,077 | 88,657 | 8.2 | ||||||||||||||||||
Japan | 123 | 895 | 6,378 | 58,779 | 66,175 | 6.1 | ||||||||||||||||||
United Kingdom | 1,795 | 1,224 | 9,037 | 22,440 | 34,496 | 3.2 | ||||||||||||||||||
Germany | 2,686 | 3,720 | 13,198 | 5,085 | 24,689 | 2.3 | ||||||||||||||||||
Italy | 1,293 | 931 | 3,629 | 9,700 | 15,553 | 1.4 | ||||||||||||||||||
France | 1,085 | 1,900 | 3,956 | 5,987 | 12,928 | 1.2 | ||||||||||||||||||
Netherlands | 910 | 1,480 | 6,092 | 3,803 | 12,285 | 1.1 | ||||||||||||||||||
Australia | 27 | 370 | 3,113 | 7,508 | 11,018 | 1.0 | ||||||||||||||||||
1Traded products consist of derivative instruments and repurchase agreements. In 2002, 2001 and 2000 unsecured OTC derivatives exposure is reported based on the Potential Credit Exposure measurement methodology and is therefore not directly comparable to the exposures in the prior years, which were measured based on Gross Replacement Values plus Add-on. 2Tradable assets consist of equity and fixed income financial instruments held for trading purposes, which are marked to market on a daily basis and private equity investments at the lower of book or market value.
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D — Information Required by Industry Guide 3 (continued) |
Summary of Movements in Allowances and Provisions for Credit Losses
The following table provides an analysis of movements in allowances and provisions for credit losses.
As a result of Swiss bankruptcy laws, banks write-off loans against allowances only upon final settlement of bankruptcy proceedings, the sale of the underlying assets and/or in case of debt forgiveness. Under Swiss law, a creditor can continue to collect from a debtor who has emerged from bankruptcy, unless the debt has been forgiven through a formal agreement.
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Balance at beginning of year | 8,218 | 10,581 | 13,398 | 14,978 | 16,213 | |||||||||||||||
Write-offs | ||||||||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 0 | 0 | 0 | (4 | ) | (2 | ) | |||||||||||||
Construction | (148 | ) | (248 | ) | (261 | ) | (296 | ) | (228 | ) | ||||||||||
Financial institutions | (103 | ) | (51 | ) | (178 | ) | (92 | ) | (66 | ) | ||||||||||
Hotels and restaurants | (48 | ) | (52 | ) | (193 | ) | (137 | ) | (98 | ) | ||||||||||
Manufacturing1 | (275 | ) | (109 | ) | (264 | ) | (242 | ) | (214 | ) | ||||||||||
Private households | (536 | ) | (1,297 | ) | (640 | ) | (598 | ) | (534 | ) | ||||||||||
Public authorities | 0 | 0 | 0 | 0 | (2 | ) | ||||||||||||||
Real estate and rentals | (357 | ) | (317 | ) | (729 | ) | (823 | ) | (610 | ) | ||||||||||
Retail and wholesale | (101 | ) | (115 | ) | (160 | ) | (210 | ) | (178 | ) | ||||||||||
Services2 | (155 | ) | (93 | ) | (227 | ) | (315 | ) | (116 | ) | ||||||||||
Other3 | (49 | ) | (46 | ) | (30 | ) | (41 | ) | (15 | ) | ||||||||||
Total domestic write-offs | (1,772 | ) | (2,328 | ) | (2,682 | ) | (2,758 | ) | (2,063 | ) | ||||||||||
Foreign4 | ||||||||||||||||||||
Banks | (49 | ) | (24 | ) | (15 | ) | ||||||||||||||
Chemicals | 0 | (2 | ) | 0 | ||||||||||||||||
Construction | 0 | (10 | ) | (13 | ) | |||||||||||||||
Electricity, gas and water supply | (36 | ) | (63 | ) | (3 | ) | ||||||||||||||
Financial institutions | (228 | ) | (74 | ) | (33 | ) | ||||||||||||||
Manufacturing5 | (70 | ) | (119 | ) | (11 | ) | ||||||||||||||
Mining | (1 | ) | (304 | ) | 0 | |||||||||||||||
Private households | (65 | ) | (5 | ) | 0 | |||||||||||||||
Public authorities | (1 | ) | 0 | (4 | ) | |||||||||||||||
Real estate and rentals | (2 | ) | (1 | ) | 0 | |||||||||||||||
Retail and wholesale | (10 | ) | 0 | (160 | ) | |||||||||||||||
Services | (39 | ) | (30 | ) | (8 | ) | ||||||||||||||
Transport, storage and communication | (74 | ) | 0 | (11 | ) | |||||||||||||||
Other6 | (189 | ) | (48 | ) | (55 | ) | ||||||||||||||
Total foreign write-offs | (764 | ) | (680 | ) | (313 | ) | (517 | ) | (261 | ) | ||||||||||
Total write-offs | (2,536 | ) | (3,008 | ) | (2,995 | ) | (3,275 | ) | (2,324 | ) | ||||||||||
Recoveries | ||||||||||||||||||||
Domestic | 43 | 58 | 124 | 54 | 59 | |||||||||||||||
Foreign | 27 | 23 | 39 | 11 | 0 | |||||||||||||||
Total recoveries | 70 | 81 | 163 | 65 | 59 | |||||||||||||||
Net write-offs | (2,466 | ) | (2,927 | ) | (2,832 | ) | (3,210 | ) | (2,265 | ) | ||||||||||
Credit loss expense/(recovery) | 206 | 498 | (130 | ) | 956 | 951 | ||||||||||||||
Other adjustments7 | (337 | ) | 66 | 145 | 674 | 79 | ||||||||||||||
Balance at end of year | 5,621 | 8,218 | 10,581 | 13,398 | 14,978 | |||||||||||||||
1Includes chemicals, food and beverages. 2Includes transportation, communication, health and social work, education and other social and personal service activities. 3Includes mining and electricity, gas and water supply. 4For years prior to 2000, no detailed industry classifications are available. 5Includes food and beverages. 6Includes hotels and restaurants. 7See the following table for details.
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D — Information Required by Industry Guide 3 (continued) |
Summary of Movements in Allowances and Provisions for Credit Losses (continued)
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Doubtful interest | 0 | 0 | 182 | 409 | 423 | |||||||||||||||
Net foreign exchange | (269 | ) | 44 | 23 | 351 | (98 | ) | |||||||||||||
Subsidiaries sold and other | (68 | ) | 22 | (60 | ) | (86 | ) | (246 | ) | |||||||||||
Total adjustments | (337 | ) | 66 | 145 | 674 | 79 | ||||||||||||||
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under SEC Regulations
D — Information Required by Industry Guide 3 (continued) |
Allocation of the Allowances and Provisions for Credit Losses
The following table provides an analysis of the allocation of the allowances and provisions for credit loss by industry sectors and geographic location at 31 December 2002, 2001, 2000, 1999 and 1998. For a description of procedures with respect to allowances and provisions for credit losses, see the UBS Handbook 2002/2003.
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 10 | 34 | 0 | 41 | 49 | |||||||||||||||
Construction | 265 | 467 | 843 | 1,247 | 1,671 | |||||||||||||||
Financial institutions | 89 | 262 | 328 | 342 | 668 | |||||||||||||||
Hotels and restaurants | 286 | 346 | 454 | 690 | 657 | |||||||||||||||
Manufacturing1 | 458 | 722 | 863 | 1,223 | 1,331 | |||||||||||||||
Private households | 750 | 1,082 | 1,570 | 2,350 | 2,741 | |||||||||||||||
Public authorities | 39 | 37 | 0 | 40 | 107 | |||||||||||||||
Real estate and rentals | 577 | 1,067 | 1,635 | 2,696 | 3,333 | |||||||||||||||
Retail and wholesale | 315 | 395 | 629 | 779 | 825 | |||||||||||||||
Services2 | 470 | 448 | 419 | 934 | 766 | |||||||||||||||
Other3 | 315 | 165 | 413 | 141 | 71 | |||||||||||||||
Total domestic | 3,574 | 5,025 | 7,154 | 10,483 | 12,219 | |||||||||||||||
Foreign4 | ||||||||||||||||||||
Banks5 | 24 | 39 | 32 | |||||||||||||||||
Chemicals | 5 | 5 | 0 | |||||||||||||||||
Construction | 6 | 0 | 11 | |||||||||||||||||
Electricity, gas and water supply | 96 | 88 | 107 | |||||||||||||||||
Financial institutions | 153 | 420 | 262 | |||||||||||||||||
Manufacturing6 | 314 | 653 | 547 | |||||||||||||||||
Mining | 148 | 169 | 586 | |||||||||||||||||
Private households | 58 | 103 | 72 | |||||||||||||||||
Public authorities | 0 | 0 | 0 | |||||||||||||||||
Real estate and rentals | 6 | 9 | 82 | |||||||||||||||||
Retail and wholesale | 13 | 0 | 41 | |||||||||||||||||
Services | 262 | 414 | 126 | |||||||||||||||||
Transport, storage and communication | 144 | 45 | 2 | |||||||||||||||||
Other7 | 82 | 242 | 267 | |||||||||||||||||
Total foreign, net of country provisions | 1,311 | 2,187 | 2,135 | 1,539 | 1,309 | |||||||||||||||
Country provisions | 736 | 1,006 | 1,292 | 1,376 | 1,450 | |||||||||||||||
Total foreign8 | 2,047 | 3,193 | 3,427 | 2,915 | 2,759 | |||||||||||||||
Total allowances and provisions for credit losses | 5,621 | 8,218 | 10,581 | 13,398 | 14,978 | |||||||||||||||
1Includes chemicals, food and beverages. 2Includes transportation, communication, health and social work, education and other social and personal service activities. 3Includes mining and electricity, gas and water supply. 4For years prior to 2000, no detailed industry classifications are available. 5Counterparty allowances and provisions only. Country provisions with banking counterparties amounting to CHF 409 million are disclosed under country provisions. 6Includes food and beverages. 7Includes hotels and restaurants. 8The 2002, 2001, 2000, 1999 and 1998 amounts include CHF 366 million, CHF 305 million, CHF 54 million, CHF 149 million and CHF 435 million respectively of provisions and for unused commitments and contingent liabilities.
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D — Information Required by Industry Guide 3 (continued) |
Loans by industry sector
The following table presents the percentage of loans in each industry sector and geographic location to total loans. This table can be read in conjunction with the preceding table showing the breakdown of the allowances and provisions for credit losses by industry sectors to evaluate the credit risks in each of the categories.
in % | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 0.4 | 0.6 | 1.0 | 2.1 | 1.4 | |||||||||||||||
Construction | 1.1 | 1.3 | 1.7 | 2.4 | 2.4 | |||||||||||||||
Financial institutions | 1.7 | 2.2 | 2.0 | 3.4 | 3.1 | |||||||||||||||
Hotels and restaurants | 1.1 | 1.1 | 1.2 | 1.5 | 1.2 | |||||||||||||||
Manufacturing1 | 2.9 | 3.3 | 3.4 | 4.1 | 4.1 | |||||||||||||||
Private households | 38.2 | 35.8 | 32.2 | 33.8 | 29.5 | |||||||||||||||
Public authorities | 2.2 | 2.0 | 2.0 | 1.9 | 1.8 | |||||||||||||||
Real estate and rentals | 5.5 | 5.7 | 5.9 | 7.1 | 6.4 | |||||||||||||||
Retail and wholesale | 2.9 | 3.3 | 3.4 | 3.9 | 2.7 | |||||||||||||||
Services2 | 4.1 | 4.6 | 4.1 | 5.3 | 3.5 | |||||||||||||||
Other3 | 0.7 | 0.8 | 1.0 | 0.7 | 0.5 | |||||||||||||||
Total domestic | 60.8 | 60.7 | 57.9 | 66.2 | 56.6 | |||||||||||||||
Foreign4 | ||||||||||||||||||||
Banks | 12.8 | 10.2 | 9.5 | 9.0 | 19.6 | |||||||||||||||
Chemicals | 0.2 | 0.4 | 0.5 | |||||||||||||||||
Construction | 0.1 | 0.1 | 0.3 | |||||||||||||||||
Electricity, gas and water supply | 0.4 | 0.4 | 0.6 | |||||||||||||||||
Financial institutions | 7.4 | 5.5 | 7.2 | |||||||||||||||||
Manufacturing5 | 0.9 | 1.6 | 1.6 | |||||||||||||||||
Mining | 0.3 | 0.5 | 0.7 | |||||||||||||||||
Private households | 13.3 | 9.8 | 10.4 | |||||||||||||||||
Public authorities | 1.1 | 2.5 | 4.1 | |||||||||||||||||
Real estate and rentals | 0.2 | 3.9 | 1.8 | |||||||||||||||||
Retail and wholesale | 0.5 | 0.7 | 0.7 | |||||||||||||||||
Services | 0.7 | 1.8 | 0.6 | |||||||||||||||||
Transport, storage and communication | 0.3 | 0.8 | 0.3 | |||||||||||||||||
Other6 | 1.0 | 1.1 | 3.8 | 24.8 | 23.8 | |||||||||||||||
Total foreign | 39.2 | 39.3 | 42.1 | 33.8 | 43.4 | |||||||||||||||
Total gross loans | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||
1Includes chemicals, food and beverages. 2Includes transportation, communication, health and social work, education and other social and personal service activities. 3Includes mining and electricity, gas and water supply. 4For the years prior to 2000, no detailed industry classifications are available. 5Includes food and beverages. 6Includes hotels and restaurants.
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Additional Disclosure Required
under SEC Regulations
D — Information Required by Industry Guide 3 (continued) |
Loss History Statistics
The following is a summary of the Group’s loan loss history.
CHF million, except where indicated | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.99 | 31.12.98 | ||||||||||||||||
Gross loans | 249,370 | 261,984 | 284,516 | 278,014 | 330,964 | ||||||||||||||||
Impaired loans | 10,365 | 14,629 | 18,494 | 22,456 | 26,447 | ||||||||||||||||
Non-performing loans | 6,029 | 8,639 | 10,452 | 13,073 | 16,114 | ||||||||||||||||
Allowances and provisions for credit losses | 5,621 | 8,218 | 10,581 | 13,398 | 14,978 | ||||||||||||||||
Net write-offs | 2,466 | 2,927 | 2,832 | 3,210 | 2,265 | ||||||||||||||||
Credit loss expense/(recovery) | 206 | 498 | (130 | ) | 956 | 951 | |||||||||||||||
Ratios | |||||||||||||||||||||
Impaired loans as a percentage of gross loans | 4.2 | 5.6 | 6.5 | 8.1 | 8.0 | ||||||||||||||||
Non-performing loans as a percentage of gross loans | 2.4 | 3.3 | 3.7 | 4.7 | 4.9 | ||||||||||||||||
Allowances and provisions for credit losses as a percentage of: | |||||||||||||||||||||
Gross loans | 2.3 | 3.1 | 3.7 | 4.8 | 4.5 | ||||||||||||||||
Impaired loans | 54.2 | 56.2 | 57.2 | 59.7 | 56.6 | ||||||||||||||||
Non-performing loans | 93.2 | 95.1 | 101.2 | 102.5 | 93.0 | ||||||||||||||||
Allocated allowances as a percentage of impaired loans1 | 47.2 | 49.9 | 52.4 | 55.5 | 51.4 | ||||||||||||||||
Allocated allowances as a percentage of non-performing loans2 | 57.8 | 62.2 | 60.6 | 3 | 66.3 | 62.1 | |||||||||||||||
Net write-offs as a percentage of: | |||||||||||||||||||||
Gross loans | 1.0 | 1.1 | 1.0 | 1.2 | 0.7 | ||||||||||||||||
Average loans outstanding during the period | 1.1 | 1.2 | 1.1 | 1.2 | 0.8 | ||||||||||||||||
Allowances and provisions for credit losses | 43.9 | 35.6 | 26.8 | 24.0 | 15.1 | ||||||||||||||||
Allowances and provisions for credit losses as multiple of net write-offs | 2.28 | 2.81 | 3.74 | 4.17 | 6.61 | ||||||||||||||||
1Allowances relating to impaired loans only. 2Allowances relating to non-performing loans only. 331 December 2000 figure has been restated to account for an overallocation of allowances to non-performing loans.
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Contents |
Profile
Introduction | 1 | |||
UBS Group Financial Highlights | 2 | |||
The UBS Group | 3 | |||
Our Business Groups | 4 | |||
Sources of Information about UBS | 5 | |||
The UBS Group | 9 | |||
Strategy, Structure and History | 10 | |||
The Business Groups | 21 | |||
UBS Wealth Management & Business Banking | 22 | |||
UBS Global Asset Management | 34 | |||
UBS Warburg | 38 | |||
UBS PaineWebber | 45 | |||
Corporate Center | 50 | |||
Capital and Risk Management | 53 | |||
Risk Management and Control | 54 | |||
Risk Analysis | 59 | |||
Group Treasury | 78 | |||
Corporate Governance | 89 | |||
Introduction and Principles | 90 | |||
Group Structure and Shareholders | 91 | |||
Capital Structure | 93 | |||
Board of Directors | 95 | |||
Group Executive Board | 101 | |||
Compensation, Shareholdings and Loans | 104 | |||
Shareholders’ Participation Rights | 109 | |||
Change of Control and Defensive Measures | 111 | |||
Auditors | 112 | |||
Information Policy: | ||||
UBS Financial Disclosure Principles | 114 | |||
Regulation and Supervision | 117 | |||
Compliance with NYSE Listing Standards on Corporate Governance | 121 | |||
Group Managing Board | 124 | |||
Corporate Responsibility | 127 | |||
UBS Share Information | 133 | |||
The Global Registered Share | 134 | |||
UBS Share 2002 | 136 |
Introduction
This is the third annual edition of the UBS Group Handbook.
The Handbook describes the UBS Group: its strategy, organization, and businesses. It outlines the principles by which the Group manages risk, and reports on developments in 2002 for the credit risk, market risk, and treasury management areas.
The Handbook extensively discusses the Group’s corporate governance arrangements and its relationships with regulators and shareholders, along with detailed facts about the UBS share.
The Handbook should be read in conjunction with the other information published by UBS, described on page 5 and 6.
We hope that you will find the information in our reporting documents useful and informative. We believe that UBS is among the leaders in corporate disclosure, but we would be very interested to hear your views on how we might improve the content and presentation of our information portfolio.
Mark Branson
Chief Communication Officer
UBS AG
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Profile | ||
UBS Group Financial Highlights
1 Operating expenses/operating income before credit loss expense. | ||
2 Excludes the amortization of goodwill and other intangible assets. | ||
3 For EPS calculation, see Note 8 to the Financial Statements. | ||
4 Net profit/average shareholders’ equity excluding dividends. | ||
5 Includes hybrid Tier 1 capital, please refer to Note 29e in the Notes to the Financial Statements. | ||
6 Klinik Hirslanden was sold on 5 December 2002. The Group headcount does not include the Klinik Hirslanden headcount of 2,450 and 1,839 for 31 December 2001 and 31 December 2000, respectively | ||
7 See the Capital strength section on pages 10 to 11. | ||
8 Details of significant financial events can be found in the Group Financial Review section of the Financial Report 2002. | ||
The segment results have been restated to reflect the new Business Group structure and associated management accounting changes implemented during 2002. | ||
All results presented include PaineWebber from the date of acquisition, 3 November 2000. |
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Income statement key figures | ||||||||||||||||
Operating income | 34,121 | 37,114 | 36,402 | (8 | ) | |||||||||||
Operating expenses | 29,577 | 30,396 | 26,203 | (3 | ) | |||||||||||
Operating profit before tax | 4,544 | 6,718 | 10,199 | (32 | ) | |||||||||||
Net profit | 3,535 | 4,973 | 7,792 | (29 | ) | |||||||||||
Cost/income ratio (%)1 | 86.2 | 80.8 | 72.2 | |||||||||||||
Cost/income ratio before goodwill(%)1, 2 | 79.0 | 77.3 | 70.4 | |||||||||||||
Per share data (CHF) | ||||||||||||||||
Basic earnings per share3 | 2.92 | 3.93 | 6.44 | (26 | ) | |||||||||||
Basic earnings per share before goodwill2, 3 | 4.73 | 4.97 | 7.00 | (5 | ) | |||||||||||
Diluted earnings per share3 | 2.87 | 3.78 | 6.35 | (24 | ) | |||||||||||
Diluted earnings per share before goodwill2, 3 | 4.65 | 4.81 | 6.89 | (3 | ) | |||||||||||
Return on shareholders’ equity (%) | ||||||||||||||||
Return on shareholders’ equity4 | 8.9 | 11.7 | 21.5 | |||||||||||||
Return on shareholders’ equity before goodwill2, 4 | 14.4 | 14.8 | 23.4 | |||||||||||||
CHF million, except where indicated | % change from | |||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Balance sheet key figures | ||||||||||||||||
Total assets | 1,181,118 | 1,253,297 | 1,087,552 | (6 | ) | |||||||||||
Shareholders’ equity | 38,991 | 43,530 | 44,833 | (10 | ) | |||||||||||
Market capitalization | 79,448 | 105,475 | 112,666 | (25 | ) | |||||||||||
BIS capital ratios Tier 1 (%)5 | 11.3 | 11.6 | 11.7 | |||||||||||||
Total BIS (%) | 13.8 | 14.8 | 15.7 | |||||||||||||
Risk-weighted assets | 238,790 | 253,735 | 273,290 | (6 | ) | |||||||||||
Invested assets (CHF billion) | 2,037 | 2,448 | 2,445 | (17 | ) | |||||||||||
Headcount (full-time equivalents) | 69,061 | 69,985 | 6 | 71,076 | 6 | (1 | ) | |||||||||
Long-term ratings7 | ||||||||||||||||
Fitch, London | AAA | AAA | AAA | |||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa1 | |||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||||||
Earnings adjusted for significant financial events and pre-goodwill2, 8
CHF million, except where indicated | % change from | |||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | ||||||||||||
Operating income | 33,894 | 37,114 | 36,402 | (9 | ) | |||||||||||
Operating expenses | 27,117 | 29,073 | 25,096 | (7 | ) | |||||||||||
Operating profit before tax | 6,777 | 8,041 | 11,306 | (16 | ) | |||||||||||
Net profit | 5,529 | 6,296 | 8,799 | (12 | ) | |||||||||||
Cost/income ratio (%)1 | 79.5 | 77.3 | 69.2 | |||||||||||||
Basic earnings per share (CHF)3 | 4.57 | 4.97 | 7.28 | (8 | ) | |||||||||||
Diluted earnings per share (CHF)3 | 4.50 | 4.81 | 7.17 | (6 | ) | |||||||||||
Return on shareholders’ equity (%)4 | 13.9 | 14.8 | 24.3 | |||||||||||||
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The UBS Group
UBS is one of the world’s leading financial firms, serving a discerning global client base. We combine financial strength with a global culture that embraces change. We are the world’s leading provider of wealth management services and one of the largest asset managers globally. In the investment banking and securities businesses, we are among the select bracket of major global houses. In Switzerland, we are the clear market leader serving corporate and retail clients. As an integrated firm, we create added value for our clients by drawing on the combined resources and expertise of all our businesses.
Our first priority is always our clients’ success and we put advice at the heart of our relationships with them. We aim to take the time to understand the unique needs and goals of each of our clients. Our priority is to provide premium quality services to our clients, giving them the best possible choice by supplementing best-in-class solutions we develop ourselves with a quality-screened selection of products from others.
With head offices in Zurich and Basel, and more than 69,000 employees, we operate in over 50 countries and from all major international financial centers. Our global physical presence is complemented by our strategy of offering clients products and services via a variety of different channels — from the traditional retail bank branch to sophisticated, interactive online tools, helping us to deliver our services more quickly, widely and cost-effectively than ever before.
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Profile | ||
Our Business Groups
All our Business Groups are in the top echelons of their sectors globally and are committed to vigorously growing their franchises.
UBS Wealth Management & Business Banking
UBS Global Asset Management
UBS Warburg
UBS PaineWebber
Corporate Center
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Sources of Information about UBS
This Handbook contains a detailed description of UBS, its strategy, its organization and its businesses. You can find out more about UBS from the sources shown below.
Publications
(SAP-R/3 80532-0301).
Annual Review 2002
(SAP-R/3 80530-0301).
Financial Report 2002
(SAP-R/3 80531-0301).
Quarterly reports
How to order reports
E-information tools for investors |
Website
mation and copies of recent presentations given by members of senior management to investors at external conferences.
Messenger service
Results presentations
UBS and the environment
Form 20-F and other submissions to the US Securities and Exchange Commission |
We file periodic reports and submit other information about UBS with the US Securities and Exchange Commission (SEC). Principal among these filings is the Form 20-F, our Annual Report filed pursuant to the US Securities Exchange Act of 1934.
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Profile
Handbook or to parts of the Financial Report 2002. However, there is a small amount of additional information in the Form 20-F which is not presented elsewhere, and is particularly targeted at readers in the US. You are encouraged to refer to this additional disclosure.
the US) for further information on the operation of its public reference room. You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005 and the American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006. Much of this additional information may also be found on the UBS website at www.ubs.com/investors, and copies of documents filed with the SEC may be obtained from UBS’s Investor Relations team, at the addresses shown on the following page.
Corporate information |
The legal and commercial name of the company is UBS AG. The company was formed on 29 June 1998, when Union Bank of Switzerland (founded 1862) and Swiss Bank Corporation (founded 1872) merged to form UBS.
two registered offices and principal places of business are:
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Switchboards | Zurich | +41 1 234 1111 | |||||
For all general queries. | London | +44 20 7568 0000 | |||||
New York | +1 212 821 3000 | ||||||
Hong Kong | +852 2971 8888 | ||||||
UBS Investor Relations | Zurich | ||||||
Our Investor Relations team supports | Hotline: | +41 1 234 4100 | UBS AG | ||||
institutional, professional | Christian Gruetter | +41 1 234 4360 | Investor Relations G41B | ||||
and retail investors from offices in | Mark Hengel | +41 1 234 8439 | P.O. Box | ||||
Zurich and New York. | Catherine Lybrook | +41 1 234 2281 | CH-8098 Zurich, Switzerland | ||||
Oliver Lee | +41 1 234 2733 | ||||||
www.ubs.com/investors | Fax | +41 1 234 3415 | |||||
New York | |||||||
Hotline: | +1 212 713 3641 | UBS Americas Inc. | |||||
Richard Feder | +1 212 713 6142 | Investor Relations | |||||
Christopher McNamee | +1 212 713 3091 | 135 W. 50th Street, 9th Floor | |||||
Fax | +1 212 713 1381 | New York, NY 10020, USA | |||||
sh-investorrelations@ubs.com | |||||||
UBS Group Media Relations | Zurich | +41 1 234 8500 | sh-gpr@ubs.com | ||||
Our Group Media Relations team | London | +44 20 7567 4714 | sh-mr-london@ubsw.com | ||||
supports global media and journalists | New York | +1 212 713 8391 | sh-mediarelations-ny@ubsw.com | ||||
from offices in Zurich, London, | Hong Kong | +852 2971 8200 | sh-mediarelations-ap@ubs.com | ||||
New York and Hong Kong. | |||||||
www.ubs.com/media | |||||||
UBS Shareholder Services | Hotline | +41 1 235 6202 | UBS AG | ||||
UBS Shareholder Services, a unit of | Fax | +41 1 235 3154 | Shareholder Services — GUMV | ||||
the Company Secretary, is responsible | P.O. Box | ||||||
for the registration of the Global | CH-8098 Zurich, Switzerland | ||||||
Registered Shares. It is split into two | |||||||
parts — a Swiss register, which is main- | sh-shareholder-service@ubs.com | ||||||
tained by UBS acting as Swiss transfer | |||||||
agent, and a US register, which is | |||||||
maintained by Mellon Investor Service | |||||||
as US transfer agent (see below). | |||||||
US Transfer Agent | calls from the US | +1 866 541 9689 | c/o Mellon Investor Services | ||||
For all Global Registered Share | calls outside the US | +1 201 329 8451 | Overpeck Centre | ||||
related queries in the USA. | 85 Challenger Road | ||||||
Ridgefield Park, NJ 07660, USA | |||||||
www.melloninvestor.com | shrrelations@melloninvestor.com | ||||||
UBS listed its Global Registered Shares on the New York Stock Exchange on 16 May 2000. Prior to that date UBS operated an ADR program. See the Frequently Asked Questions (FAQs) section at www.ubs.com/investors for further details about the UBS share. | |||||||
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The UBS Group | ||
Strategy, Structure and History | ||
Strategy, Structure and History
Our vision of UBS is as one of the world’s pre-eminent financial firms. We are the world’s largest private bank, while in investment banking and securities trading we are among a select bracket of major global houses. In Switzerland, we are the clear market leader in corporate and retail banking. As an integrated group, we deliver the whole firm to our clients, giving them added value by drawing on the combined resources and expertise of all our businesses. Every client is a client of UBS, not of an individual business unit. Our first priority is always our clients’ success.
Our vision
Our strategic future
Capital strength |
Our financial stability stems from the fact that we are one of the best capitalized banks in the world. We believe that this financial strength is a key part of our value proposition for both our clients and our investors.
performance of UBS reflects the Group’s strong franchise in each of its core businesses” resulting in broadly-diversified revenue sources.
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sesses long-term growth opportunities and we will therefore continue to strongly expand in the key US market. An extensive presence in the US is critical to maintaining a strong global position as it accounts for half of the global investment banking fee pool.
should be pursued solely for its own sake. It is a tool that is an integral component of all our businesses. We use technology to extend our reach to clients and markets we could not previously have accessed, enhancing client service and experience.
Business and management structure |
Integrated business model
In August 2002, Fitch reaffirmed its AAA long-term rating of UBS, while keeping the outlook negative, “because of the potential threat a sustained bear market over the next year would pose to earnings”. At the same time Fitch commented that “UBS is exceptionally well-capitalized with a strong performance, particularly in comparison with its European peers but also on a global scale”.
UBS’s long-term credit ratings are shown in the table below. Each of these ratings reflects only the view of the applicable rating agency at the time the rating was issued, and any explanation of the significance of a rating may be obtained only from the rating | agency. There is no assurance that any credit rating will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the rating agency, if in the rating agency’s judgment, circumstances so warrant. |
Long-term credit ratings
As at | ||||||||||||
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Fitch, London | AAA | AAA | AAA | |||||||||
Moody’s, New York | Aa2 | Aa2 | Aa1 | |||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||
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The UBS Group | ||
Strategy, Structure and History | ||
last year to a renowned private equity firm which came to us wanting to raise new money. UBS Warburg’s Financial Sponsors Group managed the day-to-day relationship with the client, while the Private Equity Funds Group, also part of UBS Warburg, raised institutional funds in Europe and Asia. At the same time, we successfully offered the investment opportunity to both UBS PaineWebber and UBS Private Banking’s high-net worth clients.
build a coherent infrastructure that does not duplicate activities unnecessarily.
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The Business Groups
UBS Wealth Management &
Business Banking
UBS Global Asset Management
With its integrated global investment platform, it seeks to deliver superior investment performance to institutional investors and financial intermediaries. More than 440 investment professionals, located in all the major financial centers around the world, provide clients with access to a breadth and scope of investment capabilities that distinguishes it from its competitors.
UBS Warburg
– | Investment Banking |
– | Equities |
– | Fixed Income, Rates and Currencies |
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The UBS Group | ||
Strategy, Structure and History | ||
In the investment banking business, UBS Warburg provides first-class advice and execution capabilities to a global corporate client base. In the equities business, it is a leader in both primary and secondary markets for equity, equity-linked (e.g. convertible bonds) and equity derivative products. In the fixed income and foreign exchange business, it is a top-tier global house, providing innovative products and original thinking to corporate and institutional clients in all major markets.
UBS PaineWebber
worth clients and their financial advisors, who offer their clients a wide array of investment products and services.
Corporate Center
Board structure
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ty of the members of the Board of Directors are non-executive and fully independent.
Industry trends |
As 2003 progresses, the environment for the financial services industry as a whole continues to be a challenging one. Uncertainty over economic developments and rising geopolitical concerns are affecting investor sentiment and therefore transaction levels, and are holding back a significant recovery in corporate activity. Despite that, we believe UBS Warburg’s extremely strong institutional client franchise and growing corporate client franchise will help it further grow its business in the future, with restructuring activity by corporations expected to provide new business opportunities. The global reach of our wealth management businesses and the quality of our financial advisors worldwide make us confident that we will be able to meet the varied aspirations of our clients in different markets. In the short-term, market levels will have a direct impact on asset-based fees while transaction revenues remain heavily linked to investor confidence. We still firmly
believe, however, in the long-term potential of the global wealth management market as we continue to invest in building up our domestic presence in key European markets.
Long-term perspectives
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The UBS Group | ||
Strategy, Structure and History | ||
nal research, which indicates that the world’s core affluent, an estimated 11 million households globally, will raise their current 50% share of total global financial wealth. The US is one example, where core affluent individuals are expected to hold 70% of all wealth by 2012, up from 64% in 2002.
with scale and scope, global reach and advanced technology will benefit in the long-term despite the current market environment.
Adoption of a single UBS brand |
In November 2002 we announced a further evolution of our brand strategy and portfolio. On 9 June 2003, we will adopt the single UBS brand to represent all our businesses and will no longer market our services using the UBS Warburg or UBS PaineWebber brands. The move to a simpler branding accurately reflects our integrated business model and the “one firm” approach we deliver to clients.
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Branding structure, to be implemented during 2003 | |||||
Overall Brand | |||||
Business | Old names | New logo with client segment descriptor | |||
Wealth management (Swiss and International Clients) | UBS Private Banking | ||||
Wealth management in the US | UBS PaineWebber | ||||
Investment banking and securities | UBS Warburg | ||||
Institutional asset management and funds | UBS Global Asset Management | ||||
Retail and corporate banking in Switzerland | UBS | ||||
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The UBS Group | ||
Strategy, Structure and History | ||
The making of UBS
All of the firms which have come to make up today’s UBS look back on a long and illustrious history. The two Swiss predecessor banks came into being in the 19th century, as did PaineWebber, while SG Warburg was founded in 1934. But it is in the past decade that UBS’s current identity began to take concrete shape.
of the leading US-based institutional asset management firms. Both the O’Connor and Brinson deals represented fundamental steps in the development of the firm’s products and processes.
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Taking responsibility | ||
Although the synergies and strategic benefits resulting from the 1998 merger between the former Union Bank of Switzerland and Swiss Bank Corporation are widely acknowledged, less is known of a comprehensive program in Switzerland that has softened the blow for many employees displaced by the integration. Called MIDSAM (a combined German acronym that roughly equates with “job reduction measures”), the program has effectively helped over 3,000 UBS employees affected by merger-related restructuring in the four years it was in place. Employees who lost their jobs as a result of the merger or the subsequent reorganization were given considerable support. Their periods of notice were doubled, while financial contributions were made to training programs and outplacement consulting. They were also closely assisted by dedicated teams of
experts, specifically trained for the task, whose sole job was to find creative ways for employees to find a new and fulfilling occupation — or help them settle into early retirement. For UBS itself, with total program costs of around CHF 900 million, MIDSAM was by no means a low-cost option.
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The Business Groups UBS Wealth Management & Business Banking |
UBS Wealth Management & Business Banking
Georges Gagnebin
Chairman UBS Wealth Management
& Business Banking
Marcel Rohner
CEO UBS Wealth Management
& Business Banking
UBS Wealth Management & Business Banking provides private banking services for wealthy clients around the world and is the leading bank for individual and corporate clients in Switzerland.
Business Group reporting adjusted for significant financial events1
Business Banking | UBS Wealth Management | |||||||||||||||||||||||
Private Banking | Switzerland | & Business Banking | ||||||||||||||||||||||
CHF million, except where indicated | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Income | 7,279 | 7,696 | 5,494 | 5,792 | 12,773 | 13,488 | ||||||||||||||||||
Credit loss expense | (28 | ) | (37 | ) | (286 | ) | (567 | ) | (314 | ) | (604 | ) | ||||||||||||
Total operating income | 7,251 | 7,659 | 5,208 | 5,225 | 12,459 | 12,884 | ||||||||||||||||||
Personnel expenses | 2,083 | 1,947 | 2,727 | 2,878 | 4,810 | 4,825 | ||||||||||||||||||
General and administrative expenses | 2,158 | 2,038 | 159 | 396 | 2,317 | 2,434 | ||||||||||||||||||
Depreciation | 125 | 151 | 355 | 465 | 480 | 616 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 111 | 109 | 0 | 0 | 111 | 109 | ||||||||||||||||||
Total operating expenses | 4,477 | 4,245 | 3,241 | 3,739 | 7,718 | 7,984 | ||||||||||||||||||
Business Group performance before tax | 2,774 | 3,414 | 1,967 | 1,486 | 4,741 | 4,900 | ||||||||||||||||||
Cost/income ratio before goodwill (%) | 60 | 54 | 59 | 65 | 60 | 58 | ||||||||||||||||||
Net new money (CHF billion) | 16.6 | 24.6 | 3.7 | 9.2 | ||||||||||||||||||||
Invested assets (CHF billion) | 688 | 791 | 205 | 215 | ||||||||||||||||||||
Headcount (full-time equivalents) | 10,488 | 10,249 | 18,442 | 19,220 | 28,930 | 29,469 | ||||||||||||||||||
Business
Organizational structure
Group. We report results for the following two business units:
– | Private Banking, which comprises the full private banking business, and now includes the high-end affluent clients segment |
– | Business Banking Switzerland, consisting mainly of the individual and corporate client businesses of the former PCC business unit. |
Competitors
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Private Banking |
With more than 140 years of private banking experience, an extensive global network and CHF 688 billion in invested assets on 31 December 2002, UBS Private Banking is the world’s largest private bank.
Business
UBS Private Banking provides a comprehensive range of products and services individually tailored for wealthy clients around the world via its global branch network and an extensive channel of financial intermediaries.
growth initiative to expand our domestic private banking presence in the five key European markets of France, Germany, Italy, Spain and the UK. Since 2001, we have steadily opened offices and hired experienced client advisors in key locations within our five target markets.
Organizational structure
Our global product offering is carefully tailored to meet country-specific tax and legal regulations as well as the varied aspirations of clients in different markets. With this geographical focus in mind, our client advisors are organized into the two business areas of:
– | Private Banking — Swiss Clients, covering clients domiciled in Switzerland, divided into eight geographical regions in Switzerland |
– | Private Banking — International Clients, serving clients domiciled outside of Switzerland, including the clients of the European wealth management initiative. It is organized into the seven regions of Italy, Western Europe, Germany and Benelux, UK/Northeastern and Southeastern Europe, the Middle East and Africa, Asia, and the Americas. |
We have a number of global teams that have areas of specialized expertise and which concentrate on the requirements of particular client groups. In September 2002, we were the first European financial group to open a subsidiary in Bahrain. Called Noriba bank, it offers sharia-compliant products to institutions and high net worth individuals residing in the Arabian Gulf and around the world.
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The Business Groups
UBS Wealth Management & Business Banking
Growth platform for independent wealth management subsidiaries |
During the first half of 2003, UBS will create a new holding company to incorporate GAM, its specialist asset management firm, as well as its five independent private banks — Cantrade (Zurich), Banco di Lugano (Lugano), Ferrier Lullin (Geneva), Bank Ehinger (Basel) and Armand von Ernst (Bern). With this common platform, all of our independent wealth management subsidiaries will be equipped and encouraged to grow faster, and deliver their full value creation potential. The new structure will ease the path to integration where it makes sense, targeting economies of scale not achievable by each organization on its own. It may allow a future role in the consolidation of the private banking industry.
Office. He will be joined on the board as Deputy Chairman by Georges Gagnebin, Chairman of UBS Wealth Management & Business Banking and Peter Kurer, UBS Group General Counsel. Hans De Gier will lead the strategic reorganization and integration efforts, supported by the six current Chief Executives of the subsidiaries, and will join the boards of all six firms.
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Clients |
In order to achieve our business objectives and maintain our position as the wealth management provider of choice, it is imperative that we constantly work to fulfill our clients objectives, demands and needs around the world.
Four-step advisory process
priate solution is based on an agreement between the client and the client advisor, a solid basis for a long-lasting relationship.
Financial intermediaries
European wealth management |
The European wealth management initiative was launched in early 2001 and is aimed at wealthy clients in the five target countries of France, Germany, Italy, Spain and the UK. Together they comprise around 80% of the total European market for wealthy clients. The initiative combines our extensive private banking experience with the best of UBS PaineWebber’s marketing and product skills, using both as powerful catalysts to build a significant domestic European presence.
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The Business Groups UBS Wealth Management & Business Banking |
People Acquiring high quality client advisors with specialized knowledge of their domestic markets is a cornerstone of the European wealth management initiative. Since the initiative’s start in early 2001, we have tripled the number of advisors in our five key European countries. In 2002, we employed an additional 181, raising the total to 551 client advisors on 31 December 2002. New hires benefit from a training initiative that helps every private banker learn about the current state-of-the-art in wealth management, complemented by product-specific training on the new generation of open architecture solutions. We regularly review the performance of our client advisors against pre-set, mutually agreed targets. |
Strategy
Products
Platform
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port the European wealth management initiative. It was successfully launched in France in 2002, and will be rolled out next in Germany and Italy, followed by the remaining target markets.
Products and services |
In order to maintain our credibility and reputation with clients, we have to offer them neutral advice that is not biased towards any particular set of products or services. Doing this successfully entails opening our product architecture to include products and services from third-party suppliers. At the same time, we have no intention of becoming a one-stop financial supermarket, and we therefore carefully choose and screen third party offers, only selecting those that meet the high quality standards our clients demand. Combining this careful product selection with our structured advisory process ensures that the solutions we propose to clients are the ones that best fit their needs and goals. Open architecture is key to offering high-quality solutions building on the trust inherent in any relationship between client and client advisor.
Product positioning framework
Investment products
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The Business Groups UBS Wealth Management & Business Banking | ||
Our UBS Life business, which was established in first quarter 2001, focuses on the sale of unit-linked products. They are sold alongside more traditional life insurance policies that we provide from third party sources. In 2002, 4,193 clients bought life insurance from UBS Life, ranking it among the top providers in the Swiss market for unit-linked insurance.
Investment solutions
support from UBS’s investment professionals. For them, Private Banking provides analysis and supervision of portfolios and their risk profiles, together with tailor-made proposals to support investment decisions. We offer different levels of structured advisory services, each based on an all-inclusive fee.
Financial planning
Wealth management solutions
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The family office team helps wealthy families preserve and optimize their investments across generations, taking into account all economic, political, legal, and personal aspects.
real estate portfolios, offering support in complicated cross-border real estate transactions.
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The Business Groups UBS Wealth Management & Business Banking | ||
Business Banking Switzerland |
Business Banking Switzerland, UBS Wealth Management & Business Banking’s retail and commercial banking unit, is the market leader in Switzerland and provides a complete set of banking and securities services for individual and corporate clients.
Business |
UBS is the leading bank in Switzerland. At the end of 2002, the Business Banking Switzerland unit had around 3.5 million individual client accounts, and relationships with around 180,000 enterprises across Switzerland as well as 5,000 financial institutions worldwide. Clients have invested assets of CHF 205 billion with us. With a total loan book of CHF 139 billion on 31 December 2002, we have a leading position in the Swiss lending and retail mortgage market.
Organizational structure |
The Business Banking Switzerland unit comprises the Business Banking retail network, as well as the main activities of the three logistics business
areas of Operations, Resources, and Information Technology.
Clients and products |
Business Banking Switzerland offers high-quality, standardized products to the retail market for individual and small company clients, as well as more complex products and advisory services for larger corporate and institutional clients and financial institutions.
Private clients
Corporate clients
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Around 7,500 of our clients are large companies that utilize our expertise in handling complex financial transactions. We provide a wide range of financial advice to them, from the selection and design of investment products to assisting with complex mergers and acquisitions or providing structured financing advice services, often working in close cooperation with specialists from elsewhere in the UBS Group.
relationship. As a result of this process, the risk profile of our loan portfolio has gradually improved in the four years since its introduction, while the credit quality of counterparties has also improved. At the same time, risk-adjusted pricing benefits our clients by promoting transparent and open discussions between client and advisor. The advisor clearly communicates the basis for credit decisions, and possible areas of improvement can be identified, which, if successfully implemented, can then be reflected in lower loan pricing.
Financial institutions
Logistics areas |
Business areas focusing on client needs can only fully exploit their potential if they are provided with a reliable and efficient infrastructure.
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The Business Groups UBS Wealth Management & Business Banking | ||
Distribution |
In recent years the needs of our private clients have changed. Although our physical branch network used to be the principal distribution platform, today clients want the flexibility of being able to access their accounts using the full range of modern communication technology. They want to contact their bank when it is convenient for them, and without restrictions imposed by regular business hours.
e-commerce
be copied or decoded. Its codes are only valid for a very short timespan — unlike the paper list.
Loan portfolio |
On 31 December 2002, Business Banking Switzerland’s loan portfolio was CHF 139 billion. Mortgages represented CHF 107 billion, of which more than 80% were residential mortgages.
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For details on the credit portfolio, please refer to the “Risk Analysis” section on pages 59 to 77.
Recovery portfolio
The recovery portfolio amounted to CHF 8.6 billion at 31 December 2002, of which CHF 7.8 billion was impaired and carried provisions of CHF 3.4 billion. The recovery portfolio has been cut by 67% over the last four years from CHF 26 billion at 31 December 1998 thanks to our successful recovery efforts. Over the same period, non-performing loans (those with payments outstanding for ninety days or longer) decreased from CHF 14.0 billion to CHF 5.0 billion, leading to a non-performing loans to gross loans ratio of 3.6%.
Strategic Solution Project (SSP) | ||
The extensive consolidation in the financial industry over the last decade and the rise of new, interactive technologies such as the internet have substantially changed the demands and performance requirements for the IT infrastructures of major global financial service providers. Flexible platforms and online capabilities are now de rigueur, as are IT applications that give clients comprehensive real-time, online services and allow the bank and client advisors to get an integrated view of client data and transactions.
operational risks, achieve shorter times to market for products and services, introduce front-line applications for all business processes, cut operational costs and create clearly-defined interfaces based on industry standards.
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The Business Groups | ||
UBS Global Asset Management | ||
UBS Global Asset Management
John A. Fraser
Chairman and CEO
UBS Global Asset Management
UBS Global Asset Management is a leading asset manager, providing investment management solutions to institutional clients as well as to private clients through financial intermediaries.
Business Group reporting | ||||||||
UBS Global Asset Management | ||||||||
CHF million, except where indicated | ||||||||
For the year ended | 31.12.02 | 31.12.01 | ||||||
Institutional fees | 899 | 1,174 | ||||||
Wholesale Intermediary fees | 1,054 | 1,044 | ||||||
Total operating income | 1,953 | 2,218 | ||||||
Personnel expenses | 946 | 1,038 | ||||||
General and administrative expenses | 513 | 569 | ||||||
Depreciation | 37 | 46 | ||||||
Amortization of goodwill and other intangible assets | 270 | 286 | ||||||
Total operating expenses | 1,766 | 1,939 | ||||||
Business Group performance before tax | 187 | 279 | ||||||
Cost/income ratio before goodwill (%) | 77 | 75 | ||||||
Net new money — Institutional (CHF billion) | (0.6 | ) | 6.2 | |||||
Invested assets — Institutional (CHF billion) | 279 | 328 | ||||||
Net new money — Wholesale Intermediary (CHF billion) | (1.8 | ) | 28.7 | |||||
Invested assets — Wholesale Intermediary (CHF billion) | 278 | 344 | ||||||
Headcount (full-time equivalents) | 3,346 | 3,281 | ||||||
Business |
UBS Global Asset Management provides investment management services for institutional investors, and for financial intermediaries worldwide. Our purpose is to deliver superior results for clients through our integrated investment platform.
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and processes are central to our disciplined investment approach. Developed in-house, our Global Equity Risk System allows portfolio managers to call upon comprehensive risk analysis within seconds. In this way, portfolio managers can be sure that portfolios are managed in line with clients’ individual risk/return objectives.
Organizational structure |
UBS Global Asset Management’s main offices are in London, Chicago, New York, Tokyo and Zurich. With over 3,000 employees in more than 20 countries, UBS Global Asset Management is truly global.
Competitors |
UBS Global Asset Management competes against other global asset managers such as Merrill Lynch Investment Managers, Deutsche Asset Management, Fidelity and AMVESCAP.
Clients |
UBS Global Asset Management offers a range of investment capabilities designed for institutional investors and the wholesale intermediary marketplace around the globe.
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The Business Groups
UBS Global Asset Management
We combine investment expertise and sophisticated risk and currency management with a clear commitment to providing client-centric solutions. Our capabilities include active investment in equity and fixed income, passive and exchange-traded funds, as well as alternative investment strategies using fund-of-funds and multi-manager funds, real estate and timber.
Institutional
– | corporate and public pension plans |
– | endowments and private foundations |
– | insurance companies |
– | sovereign governments and their central banks; and |
– | supranationals |
Wholesale Intermediary
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Strategic opportunities |
Industry trends and competitive positioning
Investment performance
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The Business Groups
UBS Warburg
UBS Warburg is one of the leading investment banking and securities firms, providing a full spectrum of services to institutional and corporate clients, governments and financial intermediaries around the world.
Business Group reporting
Corporate and | ||||||||||||||||||||||||
Institutional Clients | UBS Capital | UBS Warburg | ||||||||||||||||||||||
CHF million, except where indicated | ||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | 31.12.02 | 31.12.01 | ||||||||||||||||||
Income | 14,100 | 15,587 | (1,602 | ) | (872 | ) | 12,498 | 14,715 | ||||||||||||||||
Credit loss expense | (128 | ) | (112 | ) | (128 | ) | (112 | ) | ||||||||||||||||
Total operating income | 13,972 | 15,475 | (1,602 | ) | (872 | ) | 12,370 | 14,603 | ||||||||||||||||
Personnel expenses | 7,784 | 8,258 | 94 | 96 | 7,878 | 8,354 | ||||||||||||||||||
General and administrative expenses | 2,314 | 2,586 | 64 | 64 | 2,378 | 2,650 | ||||||||||||||||||
Depreciation | 381 | 454 | 1 | 2 | 382 | 456 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 364 | 402 | 0 | 0 | 364 | 402 | ||||||||||||||||||
Total operating expenses | 10,843 | 11,700 | 159 | 162 | 11,002 | 11,862 | ||||||||||||||||||
Business Group performance before tax | 3,129 | 3,775 | (1,761 | ) | (1,034 | ) | 1,368 | 2,741 | ||||||||||||||||
Cost/income ratio before goodwill (%) | 74 | 72 | 85 | 78 | ||||||||||||||||||||
Net new money (CHF billion) | 0.5 | 0.1 | ||||||||||||||||||||||
Invested assets (CHF billion) | 3 | 1 | ||||||||||||||||||||||
Headcount (full-time equivalents) | 15,964 | 15,562 | 73 | 128 | 16,037 | 15,690 | ||||||||||||||||||
Business |
UBS Warburg operates globally as a client-driven investment banking and securities firm. Our salespeople, research analysts and investment bankers provide products and services to the world’s key institutional investors, intermediaries, banks, insurance companies, corporations, sovereign governments and supranational organizations.
Organizational structure
– | the Corporate and Institutional Clients business unit, which is one of the leading global investment banking and securities firms, providing products and advice to institutional and corporate clients |
– | UBS Capital, which is responsible for managing our private equity investments in a diverse global range of private companies |
Competitors
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Corporate and Institutional Clients |
Our global reach gives our clients unique access to financial markets around the world backed up by a complete array of services and products.
Business |
The Corporate and Institutional Clients (CIC) business unit provides wholesale products and advisory services to a diverse client base worldwide. It has a significant corporate client financing and advisory business, with particular strengths in advising on cross-border mergers and acquisitions and the capital raising requirements of our global corporate and governmental client base. Although historically we have been among the leaders in European corporate finance, we are also now the fastest growing investment bank in the US, according to Freeman & Co’s “All Industries” data.
Organizational structure |
We organize our business into three distinct areas:
– | Equities |
– | Investment Banking |
– | Fixed Income, Rates and Currencies |
Legal structure
Products and services |
Equities
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The Business Groups
UBS Warburg
For the year ended | |||||||||||||
% of total | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Investment banking clients | 23 | 23 | 23 | ||||||||||
Securities revenue from corporate clients | 6 | 6 | 5 | ||||||||||
Institutional clients and markets | 71 | 71 | 72 | ||||||||||
Total | 100 | 100 | 100 | ||||||||||
– | “Equity House of the Year” fromThe Banker(second year running) |
– | “No. 1 Global Product Sales” fromInstitutional Investor |
– | “Equity Derivatives House of the Year” fromInternational Financing Review |
Investment Banking
– | Carnival’s USD 7.5 billion acquisition of P&O Princess |
– | Univision Communications USD 3.5 billion all-stock acquisition of Hispanic Broadcasting Corporation — a landmark strategic deal to combine the leading US Spanish language television and radio companies |
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– | Network Rail’s GBP 9 billion acquisition of Railtrack Plc, which was supported by GBP 21 billion of standby loans |
– | the USD 24 billion restructuring of NTL — one of the largest corporate restructuring transactions in history for the leading UK broadband cable operator |
– | Bank of China (Hong Kong) restructuring and USD 2.7 billion IPO, the first from a state-owned financial institution in the People’s Republic of China. |
Fixed Income, Rates and Currencies
– | government and corporate bonds |
– | foreign exchange |
– | interest rates derivatives |
– | vanilla and structured credit derivatives |
– | mortgage and asset-backed securities |
– | principal finance |
– | cash and collateral trading |
– | structured products |
Loan portfolio
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The Business Groups
UBS Warburg
E-commerce capabilities |
Our e-commerce capabilities are based around our client online portal. This site gives our clients direct access to prices, research, trade ideas and analytical tools through applications such as ResearchWeb - - our equity research site, DealKey, an internet facility for managing equity and equity-linked new issues, and CreditDelta, our credit portfolio management product.
Strategic opportunities |
We believe that markets will continue to be difficult until at least the second half of 2003,
which will have a short-term negative impact, particularly on our equities and investment banking businesses. Nonetheless, we are confident that as recent new investment banking hires build their productivity, and as the momentum we have built in the European and US markets pays dividends, we will continue to gain market share in 2003.
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UBS Capital |
UBS Capital is the Group’s private equity business. It now focuses on managing its existing portfolio to maximize value.
Business |
UBS Capital invested in unlisted companies with a view to preparing them for sale to a trade or financial buyers, and, where appropriate, staging an Initial Public Offering (IPO). A review in late 2001 and early 2002, carefully considered the strategic future of UBS Capital in light of the generally negative market environment, the overall changes occurring in the private equity industry and our assessment of the long-term opportunities inherent in the business. After the review, and in light of UBS’s focus on advisory services, we decided that UBS Capital should focus on managing down its existing portfolio, capitalizing on exit opportunities where they arise and minimizing the level of new direct investments.
Organizational structure |
UBS Capital is structured along regional lines and is fully integrated within the UBS Warburg Business Group. Its portfolio in Asia and Europe mostly comprises balance sheet investments. UBS Capital in the US is focused on both balance sheet investments and the UBS Capital Americas
fund. Around 30% of UBS Capital’s portfolio is invested in third party funds which are overseen by a dedicated portfolio management team.
Investment portfolio |
UBS Capital had a total investment portfolio of CHF 3.1 billion on 31 December 2002, measured by the historic cost of investments less divestments and permanent impairments. The fair value of the portfolio at the same date was CHF 3.8 billion.
Investment process |
UBS Capital’s portfolio primarily comprises late stage investments that are spread throughout Europe, the US and Asia and are typically held for three to six years. UBS Capital’s exit strategies include direct sales to strategic buyers, initial public offerings, leveraged recapitalizations and sales to other financial sponsors.
Strategic opportunities |
Conditions in the international capital markets, and in the global economy more generally, are expected to remain harsh for some time. UBS Capital’s strategy is to manage existing assets in order to reduce balance sheet risk. The investment teams managing UBS Capital’s assets will endeavor to obtain the best possible returns for UBS and for investors in its private equity funds.
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UBS Warburg
UBS Capital investment portfolio
Aging (based on date of initial investment)
As at | ||||||||||||
CHF million1 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
pre-1994 | 54 | 85 | 65 | |||||||||
1994 | 97 | 190 | 253 | |||||||||
1995 | 112 | 214 | 272 | |||||||||
1996 | 63 | 202 | 166 | |||||||||
1997 | 134 | 207 | 520 | |||||||||
1998 | 373 | 722 | 842 | |||||||||
1999 | 636 | 1,123 | 1,490 | |||||||||
2000 | 1,119 | 1,781 | 1,941 | |||||||||
2001 | 438 | 487 | ||||||||||
2002 | 58 | |||||||||||
Total | 3,084 | 5,011 | 5,549 | |||||||||
UBS Capital investment portfolio
Geographic region (by headquarters of investee)
As at | ||||||||||||
CHF million1 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
North America | 1,302 | 2,134 | 2,356 | |||||||||
Europe | 1,238 | 2,018 | 2,333 | |||||||||
Latin America | 189 | 339 | 382 | |||||||||
Asia Pacific | 355 | 520 | 478 | |||||||||
Total | 3,084 | 5,011 | 5,549 | |||||||||
UBS Capital investment portfolio
Industry sector (based on industry classification codes)
As at | ||||||||||||||||||||||||
CHF million1 | 31.12.02 | % of Portfolio | 31.12.01 | % of Portfolio | 31.12.00 | % of Portfolio | ||||||||||||||||||
Consumer related | 517 | 17 | 773 | 15 | 1,023 | 18 | ||||||||||||||||||
Transportation | 85 | 3 | 522 | 10 | 640 | 12 | ||||||||||||||||||
Communications | 240 | 8 | 414 | 8 | 380 | 7 | ||||||||||||||||||
Computer related | 342 | 11 | 833 | 17 | 819 | 15 | ||||||||||||||||||
Energy | 83 | 3 | 152 | 3 | 190 | 3 | ||||||||||||||||||
Other electronics related | 174 | 6 | 247 | 5 | 247 | 4 | ||||||||||||||||||
Other manufacturing | 286 | 9 | 94 | 2 | 106 | 2 | ||||||||||||||||||
Chemicals and materials | 8 | 0 | 54 | 1 | 106 | 2 | ||||||||||||||||||
Industrial products and services | 746 | 24 | 1,360 | 27 | 1,361 | 25 | ||||||||||||||||||
Others | 603 | 19 | 562 | 12 | 677 | 12 | ||||||||||||||||||
Total | 3,084 | 100 | 5,011 | 100 | 5,549 | 100 | ||||||||||||||||||
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The Business Groups
UBS PaineWebber
UBS PaineWebber
UBS PaineWebber
UBS PaineWebber, one of the top wealth managers in the US, provides a complete set of sophisticated wealth management services through consultative relationships with affluent and high net worth clients.
Business Group reporting adjusted for significant financial events1
UBS PaineWebber | ||||||||
CHF million, except where indicated | ||||||||
For the year ended | 31.12.02 | 31.12.01 | ||||||
Income | 5,561 | 6,391 | ||||||
Credit loss expense | (13 | ) | (18 | ) | ||||
Total operating income | 5,548 | 6,373 | ||||||
Personnel expenses | 4,245 | 5,019 | ||||||
General and administrative expenses | 1,263 | 1,441 | ||||||
Depreciation | 149 | 124 | ||||||
Amortization of goodwill and other intangible assets | 457 | 502 | ||||||
Total operating expenses | 6,114 | 7,086 | ||||||
Business Group performance before tax | (566 | ) | (713 | ) | ||||
Business Group performance before tax and acquisition costs2 | 632 | 693 | ||||||
Cost/income ratio before goodwill (%) | 102 | 103 | ||||||
Cost/income ratio before acquisition costs (%)2 | 89 | 90 | ||||||
Net new money (CHF billion) | 18.5 | 33.2 | ||||||
Interest and dividend income (CHF billion) | 17.9 | 21.5 | ||||||
Invested assets (CHF billion) | 584 | 769 | ||||||
Headcount (full-time equivalents) | 19,563 | 20,413 | ||||||
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The Business Groups
UBS PaineWebber
Business |
Organizational structure
Legal Structure
in the US are conducted through four registered broker-dealers.
Competitors |
UBS PaineWebber competes against other wealth management firms in the US, including Citigroup’s Smith Barney business, Morgan Stanley and Merrill Lynch.
Clients and strategy |
Our business strategy is based on gathering new assets, which we achieve by focusing on meeting the investment needs of core affluent and high net worth clients in the US. During 2002, we attracted CHF 18.5 billion in net new money excluding interest and dividends, and, according to a leading industry survey, our share of the US private clients market grew to 13.8% from 12.8% in 2001.
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client and the financial advisor is our consultative process, in which each financial advisor profiles and creates an investment plan for his or her client based on the client’s individual needs and goals. Centered around an asset allocation strategy and considering the client’s risk tolerance, the plan is designed to help the client accumulate, preserve and transfer wealth. After the plan is in place, there are regular portfolio reviews that help ensure it remains on track to meet the client’s long-term goals.
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The Business Groups
UBS PaineWebber
of our financial advisors. All new financial advisors undergo a training program designed to provide them with the necessary financial planning, analysis, client relationship management, and legal and compliance expertise. This is a continuous process and does not end when the financial advisor enters a branch office. In our experience, our training programs are a key factor in both developing long-term, mutually beneficial relationships with our clients as well as in retaining our financial advisors.
Products and services |
We offer clients wealth management services that meet individual investment needs. We have an open architecture product platform that gives our clients investment products from both UBS and third party providers — where and when appropriate. This ensures that financial advisors and clients have a comprehensive source of investment solutions at their disposal. Our wealth management services include financial planning and wealth management consulting, transaction-based services such as securities brokerage, asset-based and advisory services such as discretionary and non-discretionary portfolio management, money market accounts and fiduciary products, and lending products, including collaterized loans and mortgages
Investment products
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to offer a full array of mortgage products that helps meet our clients’ home financing needs.
For corporations and corporate executives
Technology for clients and financial advisors |
For financial advisors, 2002 saw the introduction of a number of tools to leverage the asset-gathering technology available on ConsultWorks, the firm’s web-based workstation. Chief among these was the UBS PaineWebberAdvisor,smwhich can help lead financial advisors step-by-step through our consultative process with both clients and prospects. In 2003, we will introduce Consultworks2 that will give our financial advisors the ability to con-
duct comprehensive profiling and asset allocation, and offer investment recommendations.
Industry trends |
In 2003, we plan to remain focused on further increasing our market share of US household financial assets and capitalizing on the enhanced capabilities and balance sheet strength that the merger with UBS has brought.
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The Business Groups Corporate Center | |
Corporate Center |
Corporate Center’s aim is to ensure that all our businesses act as coherently and effectively as possible.
Corporate Center | |||||||||
CHF million, except where indicated | |||||||||
For the year ended | 31.12.02 | 31.12.01 | |||||||
Income | 1,315 | 800 | |||||||
Credit loss recovery | 249 | 236 | |||||||
Total operating income | 1,564 | 1,036 | |||||||
Personnel expenses | 645 | 592 | |||||||
General and administrative expenses | 601 | 537 | |||||||
Depreciation | 473 | 372 | |||||||
Amortization of goodwill and other intangible assets | 24 | 24 | |||||||
Total operating expenses | 1,743 | 1,525 | |||||||
Business Group performance before tax | (179 | ) | (489 | ) | |||||
Headcount (full-time equivalents) | 1,185 | 1,132 | |||||||
Aims and objectives
Key functions |
Chief Risk Officer/Chief Credit Officer
50
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agement and control principles can be found in the “Risk Management and Control” section of this Handbook.
Group Treasurer
Group Controller
ensures a central treatment of UBS’s real estate activities and controls their impact on Group results as well as on its capital and tax position.
Group Human Resources
Chief Communication Officer
Group Legal Services
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Capital and Risk Management Risk Management and Control |
Risk Management and Control |
Risk is an integral part of all our activities. Excellence in risk management and control is a key success factor and requires everyone’s commitment within our organization.
Risk management and control principles |
UBS’s approach to risk management and control is set out in the firm’s Risk Management and Control Principles, which lay the foundations on which we build our risk culture and risk process.
– | we continue to develop potential stress loss measures for credit and market risk |
– | we avoid taking extreme positions in tax, reg- |
ulatory and accounting sensitive transactions |
– | we aspire to the highest standards in protecting the confidentiality and integrity of our client information |
– | we aim to maintain the highest ethical standards in all our businesses. |
An integrated approach to risk
management and control
Key responsibilities
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Management and Control Principles), and for the determination of our risk capacity and risk appetite.
necessary, given the aggregate risk profile of the portfolio or the risks of specific positions.
The risk control process
– | risk identification,particularly in new businesses and in complex or unusual transactions, but also in response to external events and in the continuous monitoring of the portfolio |
– | risk measurementof quantifiable risks, using approved methodologies and models which have been independently validated |
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Capital and Risk Management Risk Management and Control |
– | risk policies,consistent with evolving business requirements and international best practice |
– | comprehensiverisk reportingto management at all levels against the approved risk control framework and, where applicable, limits |
– | risk control,to enforce compliance with the Risk Management and Control Principles, and with policies, limits and regulatory requirements. |
The risks we take
– | credit riskis the risk of loss resulting from client, counterparty or issuer default and arises on credit exposure in all forms, including settlement risk |
– | market riskis exposure to observable market variables such as interest rates, exchange rates and equity markets |
– | liquidity and funding riskis the risk that the Group is unable to fund assets or meet obligations at a reasonable price or, in extreme situations, at any price. These risks are discussed in the “Group Treasury” section on pages 78 to 87. |
– | transaction processing riskarises from errors, failures or shortcomings at any point in the transaction process, from deal execution and capture to final settlement |
– | compliance riskis the risk of financial loss due to regulatory fines or penalties, restriction or suspension of business, or costs of mandatory corrective action. Such risks may be incurred by not adhering to applicable laws, rules and regulations, local or international best practice (including ethical standards), or UBS’s own internal standards |
– | legal riskis the risk of financial loss resulting from the non-enforceability of UBS’s actual or anticipated rights arising under a contract or other arrangement or under case or statute law |
– | liability riskis the risk that we, or someone acting on our behalf, fail to fulfill the obligations, responsibilities or duties imposed by law or assumed under a contract and that claims are therefore made against us |
– | security riskis the risk of loss of confidentiality, integrity or availability of our information or other assets |
– | tax riskis the risk of additional tax arising from technically incorrect positions taken on tax matters, or failure to comply with tax |
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withholding or reporting requirements on behalf of clients or employees; and the risk of claims by clients or counterparties as a result of UBS involvement in tax sensitive products or transactions. |
How we measure risk
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Capital and Risk Management Risk Management and Control |
lios and for country risk, but we use a variety of scenarios and techniques, which we continue to refine, in order to identify other areas of risk concentration and potential vulnerability to stress events.
Risk reporting
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Capital and Risk Management
Risk Analysis
Credit risk |
Credit risk represents the loss which UBS would suffer if a client or counterparty failed to meet its contractual obligations. It is inherent in traditional banking products — loans, commitments to lend and other contingent liabilities, such as letters of credit — and in “traded products” — forward contracts, derivative contracts such as swaps and options, repo transactions and securities borrowing and lending relationships. Positions in “tradable assets” such as bonds and equities, including both direct holdings and synthetic positions through derivatives, also carry credit risk, but where they are held for trading and are marked to market they fall under the market risk limits and controls described under “Market risk” on page 71 below. For completeness, they are included, where applicable, in the credit risk exposures reported in “Composition of credit exposures” on pages 63 to 68 below.
Credit risk of counterparties and groups
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this analysis, a 95% confidence statistical measure of the exposure in each counterparty portfolio.
Portfolio measures of credit risk
Expected loss
UBS internal rating scale and
mapping to external ratings
Moody's | Standard | |||||
Investor | and | |||||
UBS | Services | Poor's | ||||
Rating | Description | equivalent | equivalent | |||
0 and 1 | Investment | Aaa | AAA | |||
2 | grade | Aa1 to Aa3 | AA+ to AA- | |||
3 | A1 to A3 | A+ to A- | ||||
4 | Baa1 to Baa2 | BBB+ to BBB | ||||
5 | Baa3 | BBB- | ||||
6 | Sub-investment | Ba1 | BB+ | |||
7 | grade | Ba2 | BB | |||
8 | Ba3 | BB- | ||||
9 | B1 | B+ | ||||
10 | B2 | B | ||||
11 | B3 | B- | ||||
12 | Caa to C | CCC to C | ||||
13 | Impaired and | D | D | |||
14 | defaulted | D | D | |||
Thedefault probabilitiesof individual coun-terparties are assessed by means of rating tools tailored to the various categories of counterparty. For the major part of the business within UBS Wealth Management & Business Banking, we use a statistical approach or “score card” to form groups of clients with similar propensity to default. UBS Warburg, with its less homogeneous client base, uses an approach under which credit officers assess the credit standing of counterparties based on guidelines and an analytical format or “template”, designed to ensure consistency of ratings across the Business Group. In all cases, the analysis is founded on an assessment of both financial ratios and qualitative factors. The result of this counterparty specific analysis is expressed as a rating.
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imply that UBS expects this number of defaults in any given period.
Statistical and stress loss
Settlement risk |
UBS is exposed to settlement risk as a consequence of its international transactional businesses. Settlement risk arises in transactions involving the exchange of values when we must honor our obligation to deliver cash or securities without first being able to determine that we have received the counter-value. This risk is particularly significant in foreign exchange and precious metals transactions, and we limit and monitor the risk on a continuous basis against settlement limits for each counterparty based on our assessment of their credit standing. Settlement risk reduction is a high priority and we continue to work to achieve shorter settlement cycles from payment release to reconciliation, and to reduce exposure by establishing risk reduction arrangements with counterparties, such as payment netting and covered settlements.
Country risk |
The CRC function at the Corporate Center assigns ratings to all countries to which we have exposure. Like the counterparty ratings, the sov-
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Risk Analysis
ereign ratings express the probability of the occurrence of a country risk event that would lead to an impairment of UBS’s exposures. The default probabilities and the mapping to the ratings of the major rating agencies are the same as for counterparty credit risks (see table on page 60), the three lowest ratings being designated “distressed”.
We define emerging market countries as countries which have yet to reach a mature stage of economic, financial, institutional, political and social development or where there is significant potential for economic or political instability. All emerging market countries are subject to country ceilings. The country data provided on pages 68 and 69 covers only emerging market countries and not all countries which are subject to ceilings.
Provisioning policies |
UBS classifies a claim as impaired if the book value of the claim exceeds the present value of the cash flows actually expected in future periods — interest payments, scheduled principal repayments, or other payments due (for example on derivatives transactions), and including liquidation of collateral where available. Within this category, we further classify loans as non-performing where payment of interest, principal or fees is overdue by more than 90 days. Non-performance is not the determinant of impairment, although it may, in some circumstances, be the first evidence of impairment.
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establish country-specific scenarios, which are kept under review and updated as necessary, to evaluate the extent to which the value of our banking and traded product exposure are affected by country risk incidents or country-specific systemic risks. The appropriate provisions are then determined by evaluating the type of credit exposure in the portfolio for each country and the loss severities that have been attributed to each exposure type. Furthermore, we have specific allowances against exposures in countries that are subject to a moratorium or have been rescheduled. The amount of such allowances is determined case by case from an assessment of the amounts that we deem to be irrecoverable.
Composition of credit exposures |
Credit is an integral part of many of our business activities.
Total exposure
UBS Wealth Management | ||||||||||||||||||||||||||||||||||||
& Business Banking | UBS Warburg | UBS PaineWebber | ||||||||||||||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||
Loans utilization (gross) | 174,032 | 181,854 | 185,271 | 61,718 | 61,229 | 73,810 | 12,857 | 18,246 | 24,649 | |||||||||||||||||||||||||||
Contigent claims | 11,752 | 13,303 | 10,613 | 4,407 | 11,640 | 17,173 | 430 | 542 | ||||||||||||||||||||||||||||
Unutilized committed lines | 1,984 | 2,520 | 3,574 | 36,439 | 47,355 | 49,936 | 811 | 715 | ||||||||||||||||||||||||||||
Total banking products | 187,768 | 197,677 | 199,458 | 102,564 | 120,224 | 140,919 | 14,098 | 19,503 | 24,649 | |||||||||||||||||||||||||||
Unsecured OTC products | 1,682 | 1,961 | 883 | 55,002 | 64,416 | 61,340 | ||||||||||||||||||||||||||||||
Other derivatives (secured exchange-traded) | 712 | 2,317 | 1,638 | 10,850 | 12,150 | 8,994 | ||||||||||||||||||||||||||||||
Securities lending | 917 | 45 | 2,193 | 11,962 | 14,575 | 12,159 | ||||||||||||||||||||||||||||||
Repo | 14 | 67 | 650 | 21,744 | 18,948 | 22,183 | ||||||||||||||||||||||||||||||
Total traded products2 | 3,325 | 4,390 | 5,364 | 99,558 | 110,089 | 104,676 | ||||||||||||||||||||||||||||||
Total credit exposure, gross | 191,093 | 202,067 | 204,822 | 202,122 | 230,313 | 245,595 | 14,098 | 19,503 | 24,649 | |||||||||||||||||||||||||||
Total credit exposure, | ||||||||||||||||||||||||||||||||||||
net of allowances | 187,369 | 196,557 | 197,042 | 200,620 | 227,949 | 242,873 | 14,069 | 19,469 | 24,629 | |||||||||||||||||||||||||||
Total tradable assets3 | 164 | 2,908 | 2,626 | 183,977 | 241,357 | 219,070 | ||||||||||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
Other1 | UBS Group | |||||||||||||||||||||||
CHF million | ||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Loans utilization (gross) | 763 | 655 | 786 | 249,370 | 261,984 | 284,516 | ||||||||||||||||||
Contigent claims | 5 | 2 | 16,594 | 25,487 | 27,786 | |||||||||||||||||||
Unutilized committed lines | 72 | 18 | 39,306 | 50,608 | 53,510 | |||||||||||||||||||
Total banking products | 840 | 675 | 786 | 305,270 | 338,079 | 365,812 | ||||||||||||||||||
Unsecured OTC products | 56,684 | 66,377 | 62,223 | |||||||||||||||||||||
Other derivatives (secured exchange-traded) | 11,562 | 14,467 | 10,632 | |||||||||||||||||||||
Securities lending | 12,879 | 14,620 | 14,352 | |||||||||||||||||||||
Repo | 21,758 | 19,015 | 22,833 | |||||||||||||||||||||
Total traded products2 | 102,883 | 114,479 | 110,040 | |||||||||||||||||||||
Total credit exposure, gross | 840 | 675 | 786 | 408,153 | 452,558 | 475,852 | ||||||||||||||||||
Total credit exposure, | ||||||||||||||||||||||||
net of allowances | 840 | 670 | 781 | 402,898 | 444,645 | 465,325 | ||||||||||||||||||
Total tradable assets3 | 613 | 121 | 136 | 184,754 | 244,386 | 221,832 | ||||||||||||||||||
1 | Includes UBS Global Asset Management and Corporate Center. 2 Traded products exposure is based on internal measurement methodology. 3 Tradable assets valuation: trading positions — net long, maximum default exposure; private equity — lower of cost or market; financial investments — fair value. |
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Risk Analysis
Group in nominal terms. For internal risk management and risk control purposes, we also measure credit risk in terms of statistical and stress loss, taking into account the size of the credit exposures, plus the quality of the counterparty, collateral and diversification effects, as explained on page 61.
UBS Wealth Management
& Business Banking
mortgages, are predominantly extended against the pledge of marketable securities where UBS applies conservative standards to determine the advance value of the collateral.
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UBS Wealth Management & Business Banking:
distribution of gross loans across counterparty rating and loss given default (LGD) buckets
Loss given default buckets | Weighted | |||||||||||||||||||||||
Gross | Average | |||||||||||||||||||||||
CHF million | Exposure | 0-25% | 26-50% | 51-75% | 76-100% | LGD(%) | ||||||||||||||||||
0 | 1,183 | 512 | 576 | 95 | 0 | 36 | ||||||||||||||||||
1 | 476 | 388 | 48 | 39 | 1 | 31 | ||||||||||||||||||
2 | 2,963 | 1,721 | 860 | 341 | 41 | 32 | ||||||||||||||||||
3 | 35,555 | 18,017 | 8,579 | 3,771 | 5,188 | 33 | ||||||||||||||||||
4 | 5,743 | 1,936 | 1,738 | 2,024 | 45 | 40 | ||||||||||||||||||
5 | 81,954 | 75,014 | 4,184 | 1,775 | 981 | 27 | ||||||||||||||||||
6 | 8,596 | 1,955 | 3,691 | 2,753 | 197 | 42 | ||||||||||||||||||
7 | 10,953 | 3,055 | 4,825 | 1,654 | 1,419 | 43 | ||||||||||||||||||
8 | 10,235 | 2,017 | 5,938 | 1,461 | 819 | 39 | ||||||||||||||||||
9 | 5,987 | 1,257 | 3,494 | 843 | 393 | 40 | ||||||||||||||||||
10 | 1,206 | 218 | 694 | 212 | 82 | 42 | ||||||||||||||||||
11 | 341 | 53 | 208 | 54 | 26 | 41 | ||||||||||||||||||
12 | 467 | 166 | 134 | 118 | 49 | 43 | ||||||||||||||||||
Total | 165,659 | 106,309 | 34,969 | 15,140 | 9,241 | 33 | ||||||||||||||||||
Investment grade | 127,874 | 97,588 | 15,985 | 8,045 | 6,256 | |||||||||||||||||||
Sub-investment grade | 37,785 | 8,721 | 18,984 | 7,095 | 2,985 | |||||||||||||||||||
Impaired and defaulted | 8,373 | |||||||||||||||||||||||
Total gross loans | 174,032 | |||||||||||||||||||||||
predominantly small to medium sized enterprises in Switzerland. During 2002, our high credit underwriting standards and the continued relative strength of the Swiss economy have contributed to improved credit quality within the portfolio, with individual and sector concentrations having been further reduced.
UBS Warburg
years, UBS Warburg has engaged in a substantial credit risk hedging program through which we have effectively reduced our banking products exposure by CHF 25.3 billion. This was achieved mainly by transferring the underlying risk to high grade market counterparties using credit default swaps. The table on the following page provides a view of the net banking products exposure, reflecting the effect of these credit risk hedging activities. In order to better illustrate the effects of credit hedging and other risk mitigation, we have expanded the 2002 columns in the rating distribution graph on page 67 to show exposures before and after risk mitigation. Additionally, in the matrix on the following page, we show the distribution of UBS Warburg’s net banking products exposure across rating grades and LGD buckets. In UBS Warburg’s portfolio, the standard LGD on senior secured claims is 40% and on senior unsecured claims 50%, which explains the concentration in the 26-50% bucket in the matrix on page 66. The significant exposure in the sub-investment grade 0-25% bucket is mainly comprised of collateralized short-term bridge loans for US residential real estate portfolios awaiting securitization.
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Risk Analysis
UBS Warburg: credit hedging, banking products
As at 31.12.2002 | ||||||||||||||||
Gross | Credit | Other Risk | Net | |||||||||||||
CHF million | Exposure1 | Hedges2 | Mitigants3 | Exposure | ||||||||||||
Investment grade | 47,020 | 21,463 | 913 | 26,272 | ||||||||||||
Sub-investment grade | 29,256 | 3,770 | 613 | 25,551 | ||||||||||||
Impaired and defaulted | 1,981 | 99 | 1,229 | 818 | ||||||||||||
Total banking products exposure | 78,257 | 25,332 | 2,755 | 52,641 | ||||||||||||
1 Banking products exposure excludes money market deposits of CHF 13.3 billion. 2 Credit Hedges includes single name credit default swaps (CDS) and credit linked notes (CLN) programs at notional amounts. 3 Other Risk Mitigants include cash collateral and unfunded risk participations. The impaired and defaulted category also includes counterparty specific allowances of CHF 995 million. |
Note: Columns cannot be totaled as net exposure is set to zero in case of over-hedging or over-provisioning.
UBS Warburg: distribution of net take and hold banking products exposure1
across counterparty rating and loss given default (LGD) buckets
Net | Loss given default buckets | Weighted | ||||||||||||||||||||||
Credit | Average | |||||||||||||||||||||||
CHF million | Exposure2 | 0-25% | 26-50% | 51-75% | 76-100% | LGD(%) | ||||||||||||||||||
Not rated | 26 | 25 | 1 | 47 | ||||||||||||||||||||
0 and 1 | 2,245 | 2,243 | 2 | 50 | ||||||||||||||||||||
2 | 5,006 | 349 | 4,650 | 3 | 4 | 52 | ||||||||||||||||||
3 | 8,398 | 4,315 | 4,069 | 14 | 39 | |||||||||||||||||||
4 | 4,661 | 347 | 4,232 | 82 | 50 | |||||||||||||||||||
5 | 2,594 | 367 | 2,218 | 9 | 47 | |||||||||||||||||||
6 | 2,840 | 1,537 | 1,272 | 7 | 24 | 32 | ||||||||||||||||||
7 | 5,558 | 4,315 | 1,243 | 23 | ||||||||||||||||||||
8 | 8,599 | 7,854 | 734 | 11 | 9 | |||||||||||||||||||
9 | 5,051 | 3,969 | 1,041 | 1 | 40 | 16 | ||||||||||||||||||
10 | 551 | 67 | 482 | 2 | 45 | |||||||||||||||||||
11 | 312 | 312 | 42 | |||||||||||||||||||||
12 | 802 | 132 | 628 | 9 | 33 | 39 | ||||||||||||||||||
Total non-impaired | 46,643 | 23,252 | 23,149 | 42 | 200 | 38 | ||||||||||||||||||
Investment grade | 22,930 | 5,378 | 17,437 | 12 | 103 | |||||||||||||||||||
Sub-investment grade | 23,713 | 17,874 | 5,712 | 30 | 97 | |||||||||||||||||||
Impaired and defaulted | 797 | |||||||||||||||||||||||
Total take and hold | 47,440 | |||||||||||||||||||||||
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agement activities. Providing risk management solutions to our customers, including the use of derivative products, is a core business of UBS Warburg. Here, transactions with counterparties of lower quality are generally conducted on a secured basis or for short tenors only. In line with general market trends, UBS Warburg has also entered into bilateral collateral agreements with other major banks to mitigate the potential concentrations of exposure arising from industry consolidation and the continuing increase in volumes of OTC derivatives traded.
UBS PaineWebber
Country risk
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Emerging market exposure by major geographical area and product type
CHF million | Total | Banking products | Traded products | Tradable assets | ||||||||||||||||||||||||||||||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||||||||||||||||||||
Emerging Europe | 2,005 | 1,954 | 1,612 | 390 | 632 | 809 | 532 | 750 | 395 | 1,083 | 572 | 408 | ||||||||||||||||||||||||||||||||||||
Emerging Asia | 4,755 | 7,747 | 7,642 | 2,189 | 4,029 | 4,053 | 1,179 | 1,537 | 1,355 | 1,387 | 2,181 | 2,234 | ||||||||||||||||||||||||||||||||||||
Latin America | 1,711 | 2,876 | 4,268 | 618 | 1,122 | 2,352 | 330 | 863 | 1,025 | 763 | 891 | 891 | ||||||||||||||||||||||||||||||||||||
Africa/Middle East | 2,205 | 2,858 | 2,736 | 979 | 1,432 | 1,564 | 818 | 962 | 669 | 408 | 464 | 503 | ||||||||||||||||||||||||||||||||||||
Total | 10,676 | 15,435 | 16,258 | 4,176 | 7,215 | 8,778 | 2,859 | 4,112 | 3,444 | 3,641 | 4,108 | 4,036 | ||||||||||||||||||||||||||||||||||||
Credit loss expense |
UBS Group’s Financial Statements are prepared in accordance with IFRS, under which credit loss expense charged to the Financial Statements in any period is the sum of net allowances and direct writeoffs minus recoveries arising in that period, i.e. the credit losses actually incurred. To better reflect the characteristics of credit risks in our activities, we measure and present our Business Group results in terms of expected loss, rather than actual IFRS loss, and provide a reconciliation between the two - see the section “Expected loss” on pages 60 to 61 and pages 39 to 40 of our Financial Report 2002 for further details. The following discussion covers the actual credit loss expense recorded under IFRS.
was characterized by heightened investor risk aversion, with pronounced tiering by credit quality, resulting in higher-risk corporate and sovereign borrowers facing increasingly difficult financing conditions.
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Capital and Risk Management Risk Analysis |
IFRS credit loss expense
UBS Wealth Management | ||||||||||||||||||||||||||||||||||||
CHF million | & Business Banking | UBS Warburg | UBS PaineWebber | |||||||||||||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||
Total banking products exposure at year end | 187,768 | 197,677 | 199,458 | 102,564 | 120,224 | 140,919 | 14,098 | 19,503 | 24,649 | |||||||||||||||||||||||||||
IFRS actual credit loss expense/(recovery) | 241 | 123 | (695 | ) | (35 | ) | 360 | 562 | 15 | 15 | 3 | |||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 13 | 6 | (35 | ) | (3 | ) | 30 | 40 | 11 | 8 | 1 | |||||||||||||||||||||||||
Expected loss charged to Business Groups2 | 314 | 604 | 785 | 128 | 112 | 243 | 13 | 18 | 3 | |||||||||||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 17 | 31 | 39 | 12 | 9 | 17 | 9 | 9 | 1 | |||||||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
CHF million | Other1 | UBS Group | ||||||||||||||||||||||
For the year ended | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | ||||||||||||||||||
Total banking products exposure at year end | 840 | 675 | 786 | 305,270 | 338,079 | 365,812 | ||||||||||||||||||
IFRS actual credit loss expense/(recovery) | (15 | ) | 0 | 0 | 206 | 498 | (130 | ) | ||||||||||||||||
- as a proportion of total banking products exposure (bps) | (179 | ) | 0 | 0 | 7 | 15 | (4 | ) | ||||||||||||||||
Expected loss charged to Business Groups2 | 0 | 0 | 0 | 455 | 734 | 1,031 | ||||||||||||||||||
- as a proportion of total banking products exposure (bps) | 0 | 0 | 0 | 15 | 22 | 28 | ||||||||||||||||||
1Includes UBS Global Asset Management and Corporate Center. 2 For an explanation of the credit loss charge used in our Business Group reporting, please see the “Expected loss” section on page 60 and 61 and pages 39 and 40 of the Financial Report 2002.
Impaired loans, allowances and provisions
on page 62. We are confident that our policies and processes ensure a consistent and fair basis for determining prudent levels of allowances and provisions.
1 | Includes UBS Global Asset Management and Corporate Center. UBS Global Asset Management had no impaired or non-performing loans at 31.12.02, 31.12.01 and 31.12.00. | |
2 | Includes country allowances and provisions and provisions for off-balance-sheet liabilities. |
Allowances and provisions for credit loss
UBS Wealth Management & | ||||||||||||
CHF million | Business Banking | |||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Loans to banks (gross) | 6,449 | 7,938 | 9,150 | |||||||||
Loans to customers (gross) | 167,583 | 173,916 | 176,121 | |||||||||
Gross loans | 174,032 | 181,854 | 185,271 | |||||||||
Non-performing loans | 5,033 | 7,004 | 8,342 | |||||||||
Other impaired loans | 3,340 | 4,306 | 5,978 | |||||||||
Total impaired loans | 8,373 | 11,310 | 14,320 | |||||||||
Allowances for non-performing loans | 2,750 | 4,248 | 5,141 | |||||||||
Allowances for other impaired loans | 832 | 1,143 | 2,579 | |||||||||
Total allowances for impaired loans | 3,582 | 5,391 | 7,720 | |||||||||
Other allowances and provisions2 | 452 | 243 | 83 | |||||||||
Total allowances and provisions | 4,034 | 5,634 | 7,803 | |||||||||
of which country allowances and provisions | 515 | 507 | 498 | |||||||||
Ratios | ||||||||||||
Impaired loans as a % of gross loans | 4.8 | 6.2 | 7.7 | |||||||||
Non-performing loans as a % of gross loans | 2.9 | 3.9 | 4.5 | |||||||||
Allowances and provisions for credit loss as a % of gross loans | 2.3 | 3.1 | 4.2 | |||||||||
Allocated allowances as a % of impaired loans | 42.8 | 47.7 | 53.9 | |||||||||
Allocated allowances as a % of non-performing loans | 54.6 | 60.7 | 61.6 | |||||||||
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to CHF 5,621 million at 31 December 2002. Note 9b to the UBS Group Financial Statements provides further details of the changes in allowances and provisions during the year.
loans ratio improved to 2.4% at 31 December 2002 from 3.3% at 31 December 2001 and 3.7% at 31 December 2000. These positive results were due, in part, to the reduction of our exposure to international credit risk, which produced fewer new impaired and non-performing loans than in previous years, and in part to continuing efforts to conclude proceedings and reach settlement on existing non-performing loans.
Market risk |
Market risk is the risk of loss arising from movements in observable market variables such as interest rates, exchange rates and equity markets. In addition to these and other general market risk factors, the risk of price movements specific to individual issuers of securities is considered market risk.
UBS Warburg | UBS PaineWebber | Other1 | UBS Group | |||||||||||||||||||||||||||||||||||||||||
31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||||||||||||||||||||||||||
24,495 | 17,702 | 18,310 | 1,327 | 2,151 | 2,061 | 640 | 470 | 543 | 32,911 | 28,261 | 30,064 | |||||||||||||||||||||||||||||||||
37,223 | 43,527 | 55,500 | 11,530 | 16,095 | 22,588 | 123 | 185 | 243 | 216,459 | 233,723 | 254,452 | |||||||||||||||||||||||||||||||||
61,718 | 61,229 | 73,810 | 12,857 | 18,246 | 24,649 | 763 | 655 | 786 | 249,370 | 261,984 | 284,516 | |||||||||||||||||||||||||||||||||
967 | 1,609 | 2,068 | 29 | 17 | 16 | 0 | 9 | 26 | 6,029 | 8,639 | 10,452 | |||||||||||||||||||||||||||||||||
996 | 1,667 | 2,064 | 0 | 17 | 0 | 0 | 0 | 0 | 4,336 | 5,990 | 8,042 | |||||||||||||||||||||||||||||||||
1,963 | 3,276 | 4,132 | 29 | 34 | 16 | 0 | 9 | 26 | 10,365 | 14,629 | 18,494 | |||||||||||||||||||||||||||||||||
706 | 1,104 | 1,167 | 29 | 17 | 16 | 0 | 5 | 5 | 3,485 | 5,374 | 6,329 | |||||||||||||||||||||||||||||||||
575 | 760 | 777 | 0 | 17 | 0 | 0 | 0 | 0 | 1,407 | 1,920 | 3,356 | |||||||||||||||||||||||||||||||||
1,281 | 1,864 | 1,944 | 29 | 34 | 16 | 0 | 5 | 5 | 4,892 | 7,294 | 9,685 | |||||||||||||||||||||||||||||||||
264 | 681 | 813 | 13 | 0 | 0 | 0 | 0 | 0 | 729 | 924 | 896 | |||||||||||||||||||||||||||||||||
1,545 | 2,545 | 2,757 | 42 | 34 | 16 | 0 | 5 | 5 | 5,621 | 8,218 | 10,581 | |||||||||||||||||||||||||||||||||
221 | 499 | 794 | 0 | 0 | 0 | 0 | 0 | 0 | 736 | 1,006 | 1,292 | |||||||||||||||||||||||||||||||||
3.2 | 5.4 | 5.6 | 0.2 | 0.2 | 0.1 | 0.0 | 1.4 | 3.3 | 4.2 | 5.6 | 6.5 | |||||||||||||||||||||||||||||||||
1.6 | 2.6 | 2.8 | 0.2 | 0.1 | 0.1 | 0.0 | 1.4 | 3.3 | 2.4 | 3.3 | 3.7 | |||||||||||||||||||||||||||||||||
2.5 | 4.2 | 3.7 | 0.3 | 0.2 | 0.1 | 0.0 | 0.8 | 0.6 | 2.3 | 3.1 | 3.7 | |||||||||||||||||||||||||||||||||
65.3 | 56.9 | 47.0 | 100.0 | 100.0 | 100.0 | 0.0 | 55.6 | 19.2 | 47.2 | 49.9 | 52.4 | |||||||||||||||||||||||||||||||||
73.0 | 68.6 | 56.4 | 100.0 | 100.0 | 100.0 | 0.0 | 55.6 | 19.2 | 57.8 | 62.2 | 60.6 | |||||||||||||||||||||||||||||||||
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Capital and Risk Management Risk Analysis |
etary positions in equities, fixed income and interest rate products, foreign exchange and, to a lesser extent, precious metals and energy. Activity is mainly in OECD markets, with some business in emerging markets.
Risk measurement
– | expected lossis reflected in the valuation adjustments made to the portfolio. These cover price uncertainties resulting from a lack of market liquidity or the absence of a reliable market price for an instrument or position, and model risk in more complex models |
– | statistical loss is measured using a Value at Risk (VaR) methodology. VaR expresses the potential loss on the current portfolio assuming a specified time horizon before positions can be adjusted (holding period), and measured to a specified level of confidence. UBS measures VaR on both a one day and a ten day holding period, in both cases to a 99% confidence level. Estimates are based on historical simulation, assessing the impact of historical market movements on today’s portfolio, based on five years of historical data. 1-day VaR exposure expresses the maximum daily mark to market loss that UBS is likely to incur on the current portfolio under normal market conditions with a larger loss being statistically likely only once in a hundred business days |
– | stress lossis assessed against a set of forward looking scenarios, approved by the Board of Directors, using stress moves in market variables which are regularly reviewed and approved by the Group CRO. Stress events modeled in our standard scenarios include crises in equity, corporate bond and emerging markets, and severe currency and interest rate movements. They are kept under constant review and fine tuned as necessary to reflect changing market and economic conditions. We also monitor our positions against more specific scenarios that target individual sectors or are based on current concerns. |
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The Board of Directors has also set a stress loss limit on market risk for UBS Warburg.
Market risk developments
In 2002, we have seen periods of exceptional volatility, in conjunction with extraordinary falls in securities prices in the bond and equity markets, especially in the telecommunications and energy sectors. These falls occurred in response to profit warnings, and revelations of accounting irregularities and corporate misgovernance, particularly in the second and third quarters of 2002.
UBS Warburg Corporate and Institutional Clients1: Value at Risk (10-day 99% confidence)
Year ended 31.12.02 | Year ended 31.12.01 | Year ended 31.12.00 | |||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.02 | Min. | Max. | Average | 31.12.01 | Min. | Max. | Average | 31.12.00 | |||||||||||||||||||||||||||||||||||||
Risk type | |||||||||||||||||||||||||||||||||||||||||||||||||
Equities | 123.3 | 293.0 | 177.2 | 178.3 | 123.9 | 454.9 | 181.1 | 157.0 | 144.7 | 245.9 | 199.4 | 146.5 | |||||||||||||||||||||||||||||||||||||
Interest rates | 161.8 | 303.4 | 219.2 | 280.9 | 127.6 | 299.8 | 182.7 | 226.2 | 113.8 | 182.4 | 148.1 | 122.4 | |||||||||||||||||||||||||||||||||||||
Foreign exchange | 6.2 | 100.0 | 35.0 | 9.6 | 9.3 | 90.7 | 28.5 | 25.8 | 7.8 | 98.0 | 32.7 | 31.5 | |||||||||||||||||||||||||||||||||||||
Other (incl. energy)2 | 3.6 | 112.8 | 29.8 | 12.6 | 2.2 | 14.4 | 6.1 | 5.1 | 2.1 | 27.4 | 9.7 | 5.3 | |||||||||||||||||||||||||||||||||||||
Diversification effect | 3 | 3 | (186.3 | ) | (171.4 | ) | 3 | 3 | (146.2 | ) | (143.1 | ) | 3 | 3 | (148.2 | ) | (128.2 | ) | |||||||||||||||||||||||||||||||
Total | 198.3 | 389.6 | 274.9 | 310.0 | 179.8 | 470.3 | 252.2 | 271.0 | 177.2 | 296.1 | 241.7 | 177.2 | |||||||||||||||||||||||||||||||||||||
2 Includes energy risk from UBS Warburg Energy and precious metals risk. 3 As the minimum and maximum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification effect.
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UBS Group: Value at Risk (10-day 99% confidence)
Year ended 31.12.02 | Year ended 31.12.01 | Year ended 31.12.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Limits | Min. | Max. | Average | 31.12.02 | Min. | Max. | Average | 31.12.01 | Min. | Max. | Average | 31.12.00 | |||||||||||||||||||||||||||||||||||||||
Business Groups | ||||||||||||||||||||||||||||||||||||||||||||||||||||
UBS Warburg — Corporate and Institutional Clients1, 2 | 450 | 198.3 | 389.6 | 274.9 | 310.0 | 179.8 | 470.3 | 252.2 | 271.0 | 177.2 | 296.1 | 241.7 | 177.2 | |||||||||||||||||||||||||||||||||||||||
UBS PaineWebber3 | 50 | 11.1 | 36.2 | 18.9 | 14.2 | 13.2 | 37.3 | 20.4 | 23.6 | 17.8 | 28.2 | 21.8 | 21.3 | |||||||||||||||||||||||||||||||||||||||
UBS Global Asset Management | 30 | 7.0 | 13.1 | 9.4 | 8.6 | |||||||||||||||||||||||||||||||||||||||||||||||
UBS Wealth Management & Business Banking4 | 50 | 4.1 | 8.9 | 5.4 | 4.1 | 3.7 | 5.3 | 4.8 | 4.8 | 3.3 | 4.8 | 4.1 | 3.7 | |||||||||||||||||||||||||||||||||||||||
Corporate Center5 | 150 | 30.1 | 63.7 | 39.8 | 62.1 | 31.3 | 63.5 | 37.4 | 40.9 | 29.9 | 149.4 | 69.4 | 45.3 | |||||||||||||||||||||||||||||||||||||||
Reserve | 150 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification effect | (68.3 | ) | (86.6 | ) | (49.0 | ) | (35.7 | ) | (89.0 | ) | (58.0 | ) | ||||||||||||||||||||||||||||||||||||||||
Total | 600 | 211.3 | 373.9 | 280.1 | 312.4 | 191.9 | 482.5 | 265.8 | 304.6 | 189.0 | 321.9 | 248 | 189.6 | |||||||||||||||||||||||||||||||||||||||
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al, market risk exposures have stayed within the normal ranges.
Consequential risk |
In June 2002, we appointed a Group Head of Consequential Risk, reporting to the Group CRO, whose mission is to ensure that the Group has formulated and implemented, and constantly reviews and refines, a consistent, coherent and
comprehensive approach to the management and control of consequential risk throughout our business.
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Capital and Risk Management Risk Analysis |
fore also important, to ensure that our standards are complied with, that they are effective, and that remedial action is taken where necessary.
Consequential risk developments |
Know Your Customer and Anti-money laundering controls
IT security
participant and a market leader in the provision of internet based and other “e” services to our clients, we need both strong IT security and adequate business continuity arrangements to protect a range of interest groups, including our clients and customers, other market participants and our shareholders, and to meet our legal and regulatory obligations.
Fraud prevention
New Basel capital accord (“Basel II”) |
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– | Pillar 1sets capital requirements for credit risk, market risk and operational risk. Existing rules for market risk capital are substantially unchanged. The rules for credit risk capital will be more risk-sensitive than at present and banks will be permitted to use some of their own internal risk assessments to determine regulatory capital. The regulatory capital charge for operational risk (consequential risk) is new |
– | Pillar 2involves regulatory assessment of models, controls, standards and processes in the organization — a qualitative assessment to complement the quantitative assessment under Pillar 1. This process already exists for market risk but will be more extensive under Basel II |
– | Pillar 3requires enhanced disclosure by banks. In 2002, we launched a project to implement |
consistency of detail and definition. Banks will have to support their quantitative approaches with a strong qualitative framework and, as outlined in the “Consequential risk” section above, we are developing group-wide qualitative standards. While it is clear that improving the qualitative framework should beneficially impact loss experience, there is no simple formula. Once the final details of Basel II are clear, we will further accelerate our quantitative work.
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Capital and Risk Management Group Treasury |
Group Treasury
The processes and transactions for which Group Treasury is responsible relate to our corporate legal structure, regulatory capital, balance sheet, funding and liquidity, non-trading currency and interest rate risk and financial investments, including:
– | efficient governance of the firm’s interest rate risk process with the aim of optimizing risk capture and management, netting potential and organizational cost |
– | management of Group Treasury’s own interest rate risk position, which arises from its balance sheet management activities, which are non-trading |
– | providing a framework for sustainable and cost-efficient funding of the firm’s balance sheet, using a well-diversified portfolio of funding sources and preserving a balanced liability structure |
– | management of UBS’s long-term debt portfolio |
– | providing a framework for optimal liquidity management in order to generate cash when required without compromising the Group’s ability to take advantage of market opportunities |
– | efficient management of the currency-diversified equity investment portfolio, and of the Group’s non-trading foreign exchange exposure, to shield regulatory capital ratios and expected future cash flows from fluctuations in exchange rates against the Swiss franc |
– | efficient management of the capital base, taking into account financial ratios and regulatory capital requirements with a view to maintaining strategic flexibility, sound capitalization and strong ratings |
– | efficient management of UBS’s own shares |
– | adherence to an adequate, lean and transparent corporate legal structure to underpin the Group’s commitment to meeting international standards for corporate governance |
– | efficient management of specific strategic investment holdings. |
Interest rate risk management |
Interest rate risk is inherent in many of our businesses. It arises from a variety of factors, including differences in timing between contractual maturity or re-pricing of assets, liabilities and derivative instruments, which impact net interest income in the event of changes in market interest rates. In the case of variable rate assets and liabilities, UBS is also exposed to basis risk, which is the difference in re-pricing characteristics of floating rate indices, such as the savings rate and market rates, and which can result in changes to net income and the valuation of our assets and liabilities. In addition, certain products have embedded options that affect their pricing and effective maturity.
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Internal hedging process
and the investment of our own equity. These are all strategic decisions, which implicitly create interest rate exposures. These non-business items are also transferred to Group Treasury through replicating portfolios which, in this case, are designed to approximate the investment or funding profile mandated by the GEB.
Interest rate risk in the Group Treasury
Bank Book
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Capital and Risk Management
Group Treasury
– | Interest rate sensitivity expresses the impact of a one basis point (0.01%) parallel rise in interest rates on the fair value (net present value) of all our interest rate risk positions |
– | Economic value sensitivity measures the potential change in fair value of Group Treasury’s interest rate positions resulting from a large instantaneous shock to interest rates |
– | Net interest income at riskis defined as the potential change in our net interest income resulting from adverse movements in interest rates over the next twelve months. Various changes in the level of interest rates are applied. Usually the worst case is captured by using instantaneous shock scenarios. All of the scenarios are compared with a scenario where current market rates and client behavior are held constant for the next twelve months. The methodology is designed to highlight the effects of market changes in interest rates on Group Treasury’s balance sheet positions — it ignores future changes in the asset and liability mix and it is not, therefore, a predictor of future net interest income. |
In order to reflect the significant increase in business activities in foreign currencies, the GEB decided in 2002 to diversify the equity investment strategy from a pure Swiss franc investment portfolio into portfolios of different currencies. Our equity is currently invested in portfolios of longer term fixed-rate assets in Swiss francs, US dollars and euros, in line with the strategic investment targets set by the GEB. At 31 December 2002 the Swiss franc portfolio had an average duration of 3.3 years and an interest rate sensitivity of CHF 11.93 million per basis point. For the US dollar portfolio, the duration was 5.1 years and its sensitivity CHF 1.81 million per basis point and for the euro portfolio the duration was 3.3 years and its sensitivity CHF 0.47 million per basis point.
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Interest rate sensitivity of the bank book
As at 31.12.02 | ||||||||||||||||||||||||
CHF thousand per | Within 1 | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | |||||||||||||||||||
basis point increase | month | months | months | years | years | Total | ||||||||||||||||||
CHF | 16 | (126 | ) | 97 | (63 | ) | (114 | ) | (190 | ) | ||||||||||||||
USD | 27 | (80 | ) | (66 | ) | 56 | 936 | 873 | ||||||||||||||||
EUR | 8 | (3 | ) | 44 | 191 | 1 | 241 | |||||||||||||||||
GBP | 0 | 0 | (37 | ) | 89 | 581 | 632 | |||||||||||||||||
JPY | 0 | 0 | 0 | 20 | (24 | ) | (4 | ) | ||||||||||||||||
Others | 0 | 0 | 0 | (1 | ) | (3 | ) | (4 | ) | |||||||||||||||
Total1 | 50 | (208 | ) | 38 | 292 | 1,378 | 1,549 | |||||||||||||||||
of which equity replicating portfolio (CHF) | 62 | 24 | 439 | 6,393 | 5,011 | 11,929 | ||||||||||||||||||
of which equity replicating portfolio (USD) | 3 | 0 | 11 | 629 | 1,164 | 1,807 | ||||||||||||||||||
of which equity replicating portfolio (EUR) | 1 | 1 | 16 | 267 | 189 | 474 | ||||||||||||||||||
Total equity replicating portfolio | 66 | 25 | 466 | 7,289 | 6,364 | 14,210 | ||||||||||||||||||
Bank book without equity replicating portfolio (total) | (16 | ) | (233 | ) | (428 | ) | (6,997 | ) | (4,987 | ) | (12,661 | ) | ||||||||||||
1 | Total risk position includes adjustments of the replication portfolios for variable-rate products. |
Change in risk under the two methodologies
As at | ||||||||||||
CHF million | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Net interest income at risk | (151 | ) | (313 | ) | (247 | ) | ||||||
Economic value sensitivity | (1,246 | ) | (1,319 | ) | (908 | ) | ||||||
would lead to a CHF 1,246 million decline in fair value, compared with an exposure of CHF 1,319 million to the same scenario on 31 December 2001.
Liquidity and funding management |
The liquidity management process is undertaken jointly by Group Treasury and CCT. Group Treasury’s function is to establish a comprehensive management framework, including policies and risk limits, while CCT undertakes operational cash and collateral management transactions within the established parameters. This centralized cash and collateral management structure permits tight control on both our global cash position and our stock of highly liquid and rediscountable securities.
Group Treasury Committee (GTC), which is chaired by the Group Treasurer and meets on a monthly basis. A second set of principles concentrates on liquidity crisis management, for which a detailed Group Liquidity Contingency Plan has been developed. This has been incorporated into UBS’s Global Crisis Management Concept, which covers all types of crisis events, including a liquidity crisis, and applies to all Business Groups and subsidiaries of the UBS Group. Regional committees monitor the markets in which UBS operates for potential threats and regularly report their findings to Group Treasury. In the event of a liquidity crisis, regional crisis task forces implement contingency plans under the direction of senior management.
Benefits of centralization
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Capital and Risk Management
GroupTreasury
to liquidity management adopted at UBS allows these advantages to be exploited. Group Treasury is, furthermore, instrumental in executing an integrated collateral management process on a Group-wide basis to ensure that the large pool of high-quality collateral gathered across the Group is made available for repurchase and securities lending transactions through which CCT creates additional revenues for both UBS and our clients, and also generates substantial funding on a secured basis. This additional liquidity cushion could be crucial in crisis situations.
Funding sources and approach
sale of corporate loans and retail mortgages. These do not, however, constitute a material portion of UBS’s funding activities and our liquidity status would not be significantly affected if capital markets were to become inaccessible for such securitization transactions. UBS has no long-term commitments to continue to purchase the types of assets being securitized.
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other currencies (primarily sterling and Japanese yen). UBS does not rely on buying committed credit facilities from third party banks, but instead we base our contingent funding sources on our ability to raise secured funding through the use of high-quality collateral.
Liquidity management approach
them, which may place further demands on liquidity. We also take into account the fact that, while under normal market conditions it can be safely assumed that most maturing assets would be repaid, trading assets successfully liquidated and maturing liabilities replaced by creating new liabilities, this will not necessarily be the case under stressed conditions.
– | inability to roll over maturing unsecured debt (both long-term and short-term debt such as UBS’s commercial paper programs) |
– | inability to raise new unsecured (short-term or long-term) debt |
– | increased collateral margins on the bank’s secured funding sources — a sudden, large outflow of retail deposits (“bank run”) |
– | a large increase in drawdowns of unutilized committed credit lines |
– | an increase in haircuts applied to trading portfolio assets (for sale or pledging in repo transactions). |
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Capital and Risk Management
Group Treasury
UBS-specific crisis: liquidity gap and contingency funding
As at | ||||||||||||||||
CHF billion | 31.12.02 | 30.9.02 | 30.6.02 | 31.3.02 | ||||||||||||
Crisis liquidity gap | (26 | ) | (33 | ) | (10 | ) | (12 | ) | ||||||||
Secured contingency funding | 71 | 73 | 72 | 89 | ||||||||||||
Net position | 45 | 40 | 62 | 77 | ||||||||||||
Our exposure under these liquidity stress scenarios is analyzed on a monthly basis and any ensuing liquidity gap is assessed to ascertain the ability of the bank to bridge the gap by means of our large stock of committed, undrawn central bank facilities and through increased use of repurchase and similar transactions. The assumed crisis gap is monitored monthly by Group Treasury and action is taken if it exceeds a predefined trigger level.
unconditional but are, rather, linked to other (independent) conditions precedent being fulfilled. The scenario also assumes that the crisis would engulf UBS’s source of retail deposits, thereby leading to massive withdrawals from current accounts, savings accounts and deposits. Furthermore, access to the client collateral pool is assumed to be limited as a result of securities lending agreements being cancelled during such a crisis.
Currency management |
We report our results in Swiss francs, the currency of the country in which we are incorporated. Our corporate currency management activities
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are designed to protect the Group’s BIS Tier 1 ratio and expected future foreign currency cash flows from adverse movements of the Swiss franc against the currencies of our assets, revenues and costs, while preserving the option to take advantage of market opportunities which may arise.
Translation (balance sheet) currency risk
The financial transactions to achieve this structure were started in fourth quarter 2002. The first significant impact on our capital base can be expected in first quarter 2003 (depending on the size of currency moves against the Swiss franc). Further equity investments will follow in the course of 2003. We believe that complete BIS Tier 1 ratio protection will be achieved towards the end of 2003 when the target currency mix of invested equity should be in place.
Transaction (revenues/expenses)
currency risk
Non-trading currency risk VaR
CHF million | 2002 | 2001 | 2000 | |||||||||
Minimum | 0.7 | 0.9 | 11.6 | |||||||||
Maximum | 14.2 | 16.2 | 113.4 | |||||||||
Average | 3.0 | 3.6 | 33.7 | |||||||||
End of period | 0.7 | 1.0 | 12.7 | |||||||||
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Group Treasury
Capital adequacy
As at | ||||||||||||
CHF million, except ratios | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
BIS Tier 1 capital | 27,047 | 29,322 | 31,892 | |||||||||
of which hybrid Tier 1 capital1 | 3,182 | 3,848 | 2,456 | |||||||||
BIS total capital | 33,009 | 37,471 | 42,860 | |||||||||
BIS Tier 1 capital ratio (%) | 11.3 | 11.6 | 11.7 | |||||||||
BIS total capital ratio (%) | 13.8 | 14.8 | 15.7 | |||||||||
Balance sheet assets | 205,401 | 214,481 | 223,528 | |||||||||
Off balance sheet and other positions | 18,122 | 25,935 | 39,002 | |||||||||
Market risk positions | 15,267 | 13,319 | 10,760 | |||||||||
Total BIS risk-weighted assets | 238,790 | 253,735 | 273,290 | |||||||||
1 | Trust preferred securities. |
|
Capital management |
We are dedicated to remaining one of the best capitalized financial services firms in the world with sound capital ratios and strong debt ratings — both are key to our attractiveness to clients and investors. Our overall capital needs are continually reviewed to ensure that our capital base appropriately supports our current and planned business and regulatory capital requirements. The use of a variety of instruments, such as trust preferred securities, to meet overall capital levels, is designed to support our efforts to meet return on equity targets and enhance shareholder value.
Sound capitalization
– | where BIS guidelines apply a maximum risk weight of 100%, the SFBC applies risk weights above 100% to certain asset classes (for example real estate, bank premises, other fixed assets, intangible assets excluding goodwill, equity securities and unconsolidated equity investments) |
– | where the BIS guidelines apply a 20% risk weight to obligations of OECD banks, the SFBC applies risk weights of 25% to 75%, depending on maturity, to such obligations |
Capital management in 2002 |
Share buyback and cancellation
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Effect of second line trading program on basic earnings per share (EPS)
For the year ended | ||||||||||||
31.12.02 | 31.12.01 | 31.12.00 | ||||||||||
Weighted average shares for basic EPS after treasury shares | 1,208,586,678 | 1,266,038,193 | 1,209,087,927 | |||||||||
Weighted average second trading line treasury shares | 118,594,983 | 65,624,005 | 43,261,410 | |||||||||
Basic EPS | 2.92 | 3.93 | 6.44 | |||||||||
Cumulative impact of treasury shares on basic EPS (CHF) | 0.26 | 0.19 | 0.22 | |||||||||
Cumulative impact of treasury shares on basic EPS (%) | 8.9 | 4.9 | 3.5 | |||||||||
Dividends and par value reduction
Capital management plans for 2003 |
New second line buy back program
Dividend
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Corporate Governance
Introduction and Principles
Introduction and Principles
UBS is committed to meeting high standards of corporate governance. Our corporate and executive bodies are organized in line with the leading codes of best practice.
Corporate governance — the way that the leadership and management of the firm are organized and how they operate in practice — ultimately aims at leading UBS to success, protecting the interests of its shareholders and creating value for them and for all stakeholders. Good corporate governance seeks to balance “entrepreneurship”, control and transparency, while supporting the firm’s success by ensuring efficient decision-making processes.
member of the other. This structure establishes checks and balances and creates an institutional independence of the Board of Directors from the day-to-day management of the firm, for which responsibility is conferred on the Group Executive Board.
SWX Swiss Exchange Reporting on Corporate Governance |
The Handbook’s “Corporate Governance” section contains the following information required by the SWX Swiss Exchange Directive on Information relating to Corporate Governance:
– | group structure and shareholders |
– | capital structure |
– | Board of Directors |
– | Group Executive Board |
– | compensation, shareholdings and loans to corporate bodies |
– | shareholders’ participation rights |
– | change of control and defense measures |
– | auditors |
– | information policy |
In addition, this section describes the regulatory and supervisory environment of UBS in its principal locations of activity, explains the few exceptions where UBS’s corporate governance standards differ from the listing standards of the New York Stock Exchange (NYSE), and contains a list of the members of the Group Managing Board of UBS, the next layer of management responsibility below the Group Executive Board.
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Corporate Governance
Group Structure and Shareholders
Under Swiss company law, UBS AG is organized as an “Aktiengesellschaft (AG)”, a corporation that has issued shares of common stock to investors. UBS AG is the parent company of the UBS Group.
UBS Group legal entity structure |
The legal entity structure of UBS is designed to support the Group’s businesses within an efficient legal, tax, regulatory and funding framework. Neither the Business Groups of UBS nor the Corporate Center operate through separate legal entities, but rather they generally operate out of the parent bank, UBS AG, through its branches worldwide.
Operational Group structure |
The four Business Groups UBS Wealth Management & Business Banking (with its two business units Private Banking and Business Banking Switzerland), UBS Warburg (comprising the Corporate and Institutional Clients and UBS Capital business units), UBS PaineWebber and UBS Global Asset Management, together with the Corporate Center, form the operational structure of the Group. Group performance is reported according to this structure (see the Financial Report 2002, pages 35-74). A description of the various Business Groups, their strategy, structure, organization, products and services is contained in this Handbook on pages 21-51.
Listed and non-listed companies belonging to the Group |
The following listed company is included in the Group’s financial statements on an equity
participation basis:
Significant shareholders |
Chase Nominee Ltd., London, acting in its capacity as a nominee for other investors, was registered with 7.68% of all shares issued as of 31 December 2002, compared to 6.94% at year-end 2001. According to UBS’s Regulation on the Registration of Shares, voting rights of nominees are restricted to 5%. As in previous years, no other shareholder was registered with more than 5% of all shares issued. Ownership of UBS shares is widely spread. Details about the distribution of UBS shares, the number of shares registered and not registered, voting rights, as well as about the distribution by category of shareholders and by geography are published on pages 139-140 of this Handbook.
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Corporate Governance
Group Structure and Shareholders
– | 17 June 2002. Announcement of a holding of 5.1% of the share capital in the form of shares and 1.3% through derivatives as per 13 June 2002. Simultaneous announcement that the holding would fall below the 5% threshold as per 5 July 2002 following the cancelation of shares repurchased under the 2001 program. |
– | 18 September 2002. Announcement of move beyond the 5% limit as per 13 September 2002. |
Cross shareholdings |
UBS has no cross shareholdings in excess of a reciprocal 5% of capital or voting rights with any other company.
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Corporate Governance
Capital Structure
UBS is committed to capital management that is driven by shareholder value considerations. At the same time, UBS is dedicated to remaining one of the best capitalized financial services firms in the world.
Capital |
Ordinary share capital
Conditional and authorized share capital
Changes of capital
Shares, Participation and Bonus certificates |
UBS shares are issued as Global Registered Shares with a par value of CHF 0.80 each, with each carrying one vote. Voting rights may, however, only be exercised if the holder expressly declares having acquired these shares in his own name and for his own account. Global Registered Shares provide direct and equal ownership for all shareholders, irrespective of the country and stock exchange where they are traded. For details see the “Shareholders’ participation rights” section on pages 109-110 of this Handbook.
Limitation on transferability and nominee registration |
UBS does not apply any restrictions or limitations on the transferability of its shares. Shares registered according to the provisions in the Articles of Association (express declaration of beneficial ownership) may be voted without any limit in scope.
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Corporate Organization
UBS has issued special provisions for the registration of fiduciaries/nominees. Fiduciaries/ nominees are entered in the share register with voting rights up to a total of 5% of all shares issued, if they agree to disclose, upon request from the firm, beneficial owners holding 0.3% or more of all UBS shares. An exception from the 5% rule exists for securities clearing organizations such as the Depository Trust Company (DTC) in New York and SegaInterSettle (SIS) in Switzerland.
Convertible bonds and options |
on which all details are reported in Note 32e to the UBS Group Financial Statements. For a total of 9,590,918 of those options exercise will be satisfied through the creation of newly issued shares (conditional capital). Share capital would therefore be increased by a maximum of CHF 7,672,734.40. For the other employee options the exercise would be satisfied by the delivery of already issued treasury shares.
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Corporate Governance
Board of Directors
The Board of Directors is the most senior body with ultimate responsibility for the strategy and the management of the company and for the supervision of its executive management. The shareholders elect each member of the Board, which appoints the Chairman, the Vice Chairmen and the various Board Committees.
Organizational principles and personnel changes |
The Board, and in particular its Chairman, takes responsibility for the mid- and long-term strategic direction of the Group, for appointments and dismissals at top management levels, for mid-term succession planning and for compensation principles. It defines the firm’s risk parameter and risk limit structure. A large majority of the Board members are non-executive and independent. The Chairman and at least one Vice Chairman have executive roles in line with Swiss
Banking laws, and assume supervisory and leadership responsibilities. The Chairman also assumes a leadership role in corporate responsibility issues, public and political affairs and developing corporate culture.
Members of the Board of Directors |
The table below provides information about the Board of Directors as at 31 December 2002.
Year of | Current term | |||||||
initial | of office | |||||||
Name and business address | Positions held in UBS | appointment | runs until | |||||
Marcel Ospel UBS AG, Bahnhofstrasse 45, CH-8098 Zurich | Chairman | 2001 | 2005 | |||||
Alberto Togni UBS AG, Bahnhofstrasse 45, CH-8098 Zurich | Executive Vice Chairman | 1998 | 2005 | |||||
Johannes A. de Gier UBS AG, Bahnhofstrasse 45, CH-8098 Zurich | Executive Vice Chairman | 2001 | 20031 | |||||
Peter Böckli Böckli Bodmer & Partners, St. Jakobs-Strasse 41, P.O. Box 2348, CH-4002 Basel | Non-executive Vice Chairman Chairman of the Nominating Committee | 1998 | 20031 | |||||
Ernesto Bertarelli Serono International SA, Chemin des Mines 15bis, CH-121Y1 Geneva 20 | Member of the Compensation Committee | 2002 | 2006 | |||||
Sir Peter Davis J Sainsbury plc, 33 Holborn, London EC 1N 2HT | Member of the Audit Committee Member of the Nominating Committee | 2001 | 2004 | |||||
Rolf A. Meyer Heiniweidstrasse 18, CH-8806 Bäch | Chairman of the Compensation Committee Member of the Audit Committee | 1998 | 20031 | |||||
Hans Peter Ming Sika AG, Wiesenstrasse 7, CH-8008 Zurich | Member of the Compensation Committee Member of the Nominating Committee | 1998 | 2004 | |||||
Lawrence A. Weinbach Unisys Corporation, Unisys Way, Blue Bell, PA 19424 | Chairman of the Audit Committee | 2001 | 2005 | |||||
1 | Proposed for reelection at the AGM 2003. |
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Board of Directors
Marcel Ospelwas elected to the Board at the AGM in April 2001 and thereafter appointed as Chairman. Prior to this mandate, he served as Group Chief Executive Officer of UBS. He was the President and Group Chief Executive Officer of Swiss Bank Corporation (SBC) from 1996 to 1998. He was made CEO of SBC Warburg in 1995, having been a member of the Executive Board of SBC since 1990. From 1987 to 1990 he was in charge of Securities Trading and Sales at SBC. From 1984 to 1987 Mr. Ospel was a Managing Director with Merrill Lynch Capital Markets, and from 1980 to 1984 he worked at SBC International London and New York in the Capital Markets division. He began his career at Swiss Bank Corporation in the Central Planning and Marketing Division in 1977. Mr. Ospel graduated from the School of Economics and Business Administration (SEBA) in Basel. He was born on 8 February 1950 and is a Swiss citizen.
the University of Amsterdam. He was born on 24 December 1944 and is a Dutch citizen.
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Controller in Johannesburg, South Africa, Head of Strategic Planning and Control in Basel, Head of Finance and Information Systems in Ardsley, N.Y., and later Chief Financial Officer of the Group. After the merger of Ciba-Geigy and Sandoz to create Novartis, he led the spin-off of Ciba Specialty Chemicals. He now holds various international board mandates. Mr. Meyer graduated in Political Science (Ph.D.) and holds a Master of Business Administration. He was born on 31 October 1943 and is a Swiss citizen.
Executive responsibilities
Chairman Marcel Ospel assumes a leading role in mid- and long-term strategic planning, the selection and supervision of top-level management, mid-term succession planning, developing and shaping global compensation principles, and the definition of the Group’s risk appetite and risk limit structure. He also actively supports major client and transaction initiatives.
Non-executive Board members
Important business connections of non-executive Board members with UBS
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Board of Directors
Other activities and functions of Board members |
Mandates on Boards of important corporations, organizations and foundations
Hans Peter Ming is the Chairman of Sika AG, Baar (Switzerland), and a member of the Board of Pestalozzi AG, Dietikon (Switzerland).
Permanent functions for important interest
and pressure groups
Official functions and political mandates
Elections and term of office |
The members of the Board of Directors are elected by the AGM for a term of office of four years. The initial term of each member is fixed in such a way as to assure that about one fourth of all the members have to be newly elected or reelected every year. The Board will propose to the 2003 AGM to reduce the term of office from four to three years.
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Internal organization |
After each Annual General Meeting of Shareholders, the Board elects its Chairman and one or more Vice Chairmen and appoints its Secretary. It meets as often as business requires, but at least six times per year. As a rule, the members of the Group Executive Board (GEB) participate in Board meetings in an advisory capacity, but the Board also holds regular meetings without the GEB.
must have accounting or financial management expertise. The Audit Committee does not itself perform audits, but supervises the work of the auditors. Its primary responsibility is thereby to monitor and review the organization and efficiency of internal control procedures and the financial reporting process. As of 31 December 2002, Lawrence A. Weinbach was the chairman and Sir Peter Davis and Rolf A. Meyer the additional members of the Committee. The Audit Committee meets 4-6 times per year.
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the GEB, Marcel Rohner, CEO UBS Wealth Management & Business Banking, Donald B. Marron, Chairman UBS Americas, and Ken Costa, Vice Chairman UBS Warburg.
Areas of responsibility of Board of Directors and Group Executive Board |
The ultimate responsibility for the strategy and the management of UBS lies with the Board of Directors. In line with Swiss banking law, the Board has delegated the responsibility for day-to-day management to the Group Executive Board. No-one may be a member of both bodies. The supervision and control of the executive management remains with the Board of Directors. All details as to authorities and responsibilities of the two bodies are governed by the Articles of Association, the Organization Regulations and their Appendices. Please refer to www.ubs.com/about.
Information and control instruments vis-à-vis the Group Executive Board |
The Board of Directors is kept informed on the activities of the Group Executive Board in various ways. The Chairman of the Board or one of the executive Vice Chairmen participate in each
meeting of the GEB in an advisory capacity, thus keeping the Chairman’s Office apprised of all current developments. The minutes of the GEB are filed with the executive Board members and made available for inspection to the non-executive members. At Board meetings, the President of the GEB regularly updates the Board on important issues.
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Corporate Governance Group Executive Board |
The Group Executive Board (GEB) has business management responsibility for UBS. The President and the members are appointed by the Board of Directors and are accountable to the Chairman and the Board for the firm’s results.
Organizational principles and personnel changes |
The GEB, and in particular its President, is responsible for the implementation and results of the firm’s business strategies, for the alignment of the Business Groups to UBS’s integrated business model and for the exploitation of synergies across the firm. The President also assumes responsibility for business and financial planning, financial reporting and the definition and supervision of risk control. Together with the
Chairman’s Office, the GEB assumes overall responsibility for the development of UBS’s strategies.
The Group Executive Board |
The table below provides information on the members of the GEB as at 31 December 2002:
Year of initial | ||||
appointment | ||||
Name | Position held | to the GEB | ||
Peter A. Wuffli | President | 1998 | ||
Stephan Haeringer | Deputy President | 1998 | ||
John P. Costas | Chairman and Chief Executive Officer UBS Warburg | 2001 | ||
John A. Fraser | Chairman and Chief Executive Officer UBS Global Asset Management | 2002 | ||
Georges Gagnebin | Chairman UBS Wealth Management & Business Banking | 2000 | ||
Joseph J. Grano Jr. | Chairman and Chief Executive Officer UBS PaineWebber | 2001 | ||
Peter Kurer | Group General Counsel | 2002 | ||
Marcel Rohner | Chief Executive Officer UBS Wealth Management & Business Banking | 2002 | ||
Clive Standish | Chairman and Chief Executive Officer Asia Pacific | 2002 | ||
Mark B. Sutton | President and Chief Operating Officer UBS PaineWebber | 2002 | ||
Peter A. Wuffliwas named President of the Group Executive Board on 18 December 2001. Previously he was Chairman and CEO of UBS Asset Management, and from 1998 to 1999 Group Chief Financial Officer of UBS. From 1994 to 1998, he was the Chief Financial Officer
at Swiss Bank Corporation (SBC) and a member of SBC’s Group Executive Committee. In 1984, he joined McKinsey & Co as management consultant where he became a partner in 1990. Mr. Wuffli graduated in economics and social sciences from the University of St. Gallen and
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holds a doctor’s degree in international management. He was born on 26 October 1957 and is a Swiss citizen.
graduated from Monash University in Australia in 1972 with a first class B.Econ. (Hons.). He was born on 8 August 1951 and is an Australian citizen.
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1999 he was named Group Chief Risk Officer. In 1998 he became Head of Market Risk Control. Between 1993 and 1998, Mr. Rohner was with Swiss Bank Corporation’s investment banking arm. In 1995 he was appointed Head of Market Risk Control Europe. Mr. Rohner graduated with a Ph.D in economics from the University of Zurich and was a teaching assistant at the Institute for Empirical Research in Economics at the University of Zurich from 1990 to 1992. He was born on 4 September 1964 and is a Swiss citizen.
Other activities and functions of GEB members |
Mandates on Boards of important corporations, organizations and foundations
– | Peter Wuffli is a Board member of the Institute of International Finance Inc., Washington DC. He is the Vice Chairman of the Board of IMD International Institute for Management Development in Lausanne (Switzerland) and a Vice President of the Swiss-American Chamber of Commerce in Zurich. |
– | Stephan Haeringer is a member of the Board of Directors of Robert Bosch Internationale Beteiligungen AG, Zurich, and a member of the Board Committee of the Zurich Chamber of Commerce. |
– | John Costas is a member of the New York City Partnership & Chamber of Commerce, Inc. |
– | John Fraser has been a member of the board of Australian Stock Exchange since 1997. |
– | Georges Gagnebin is a member of the Foundation Board of the International Center for Monetary and Banking Studies (ICMB), Geneva, and of the UBS Optimus Foundation. |
– | Joseph J. Grano is a member of the Board of Trustees of the Lenox Hill Hospital, New York, and of the Council for the US & Italy, Washington, DC. |
– | Peter Kurer was a member of the Board of Directors of Holcim Ltd., Zurich, until the end of financial year 2002. |
– | Marcel Rohner is a member of the Admission Board and the Committee of the Admission Board of the SWX Swiss Exchange, Zurich. |
Permanent functions for important
interest and pressure groups
Official functions and political mandates
Management contracts |
UBS has not entered into any management contracts.
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Corporate Governance Compensation, Shareholdings and Loans |
Compensation, Shareholdings and Loans |
UBS seeks to attract, retain, motivate and develop highly qualified people for senior management positions, thereby ensuring the sustainable creation of shareholder value. UBS is prepared to provide its senior executives with superior compensation in return for superior performance.
Senior executive compensation principles and authorities
Components of compensation
Executive share ownership commitment
– | A significant portion of each senior executive’s or GMB member’s annual performance-based incentive compensation is delivered on a mandatory basis in the form of restricted or deferred UBS shares. |
– | Executives are also eligible for highly selective discretionary stock option awards, which vest over time, and are made separately from regular annual incentive awards. Stock options are used to reward exemplary performance as well as superior leadership skills and potential. |
– | Additional incentives are provided for senior executives and GMB members who voluntarily elect to take an even greater portion of their annual performance-based incentive compensation in the form of restricted or deferred UBS shares. Executives opting to take a greater than mandatory proportion of their annual incentive in restricted or deferred UBS shares receive additional stock options. |
– | Senior executives and GMB members are required to accumulate and then hold, a significant number of UBS shares. |
Governance
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description of the decision making process for different executive populations:
– | Group Managing Board members: compensation recommendations are developed by the responsible member of the Group Executive Board. Recommendations are reviewed and approved by the President of the Group Executive Board. For GMB members in the Corporate Center, who report directly to the President, approval by the Chairman is required. The compensation system for the Group Managing Board is subject to the approval of the Chairman’s Office. |
– | Group Executive Board members: Compensation recommendations are developed jointly by the President of the Group Executive Board and the Chairman of the Board. The Compensation Committee of the Board of Directors reviews and approves the design of the compensation system for the Group Executive Board and all resulting compensation recommendations. |
– | President of the Group Executive Board and Executive Vice Chairmen: Compensation recommendations are developed by the Chairman of the Board. The Compensation Committee of the Board of Directors reviews and approves the design of the compensation system for the President of the Group Executive Board and the Executive Vice Chairmen and all resulting compensation recommendations. |
– | Chairman of the Board: On behalf of the full Board of Directors, the Compensation Committee of the Board of Directors has authority to develop and approve the design of the compensation system for the Chairman of the Board and all resulting compensation recommendations. |
– | Non-executive members of the Board: Proposals for the remuneration of the non-executive directors are prepared by the Compensation Committee and submitted to the executive Board members for approval. |
Employee share ownership commitment
UBS believes that broader-based employee stock ownership will further enhance its ability to deliver superior shareholder returns by increasing the alignment between the interests of employees and shareholders. Broader employee share ownership will be achieved in the following ways:
– | The best performing and highest potential employees are also eligible for highly selective discretionary stock option awards which vest over time. These awards are intended to provide the greatest degree of shareholder alignment among the emerging pool of future UBS leaders, senior managers and technical experts, and to enhance UBS’s appeal in the competitive market for the best managerial, financial and technical talent. |
– | Employee incentive awards above a certain threshold are delivered, on a mandatory basis, in restricted or deferred UBS shares, or a combination of shares and employee stock options that vest over time. The threshold varies by business and labor market. Generally, employees are further encouraged to voluntarily elect to defer a portion of their incentives into UBS shares in exchange for additional stock options, or to diversify into an array of funds including those managed by UBS fund managers. UBS believes it is important to provide employees the opportunity and incentive to voluntarily invest into UBS shares, but where possible also to encourage employees to consider the same wealth management principles in diversifying their personal portfolios as they would apply to a client. |
– | All UBS employees (unless prohibited by local law) are eligible to participate in a program called Equity Plus which is a global adaptation of a program that was implemented at PaineWebber before its merger with UBS in November 2000. Equity Plus enables UBS employees in over 45 countries to voluntarily elect to purchase a limited number of UBS shares with after-tax funds either from their incentive awards or base salaries, and receive two UBS stock options for every share acquired and held for two years. The stock options vest after two years as well. The goal of this program is to motivate employees at all levels to become partners in UBS’s success. Over the last two years since Equity Plus was launched as a global program, nearly a quarter of UBS employees have elected to participate. |
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Corporate Governance Compensation, Shareholdings and Loans |
Compensation for acting members of the Board of Directors (Board) and the Group Executive Board (GEB)
Executive members of the Board and members of the GEB
Cash component (base salary, cash part of bonus) | CHF 89,499,015 | |||
Employer’s contributions to retirement benefit plans | CHF 1,320,220 | |||
Benefits in kind, fringe benefits (at market value) | CHF 1,019,000 | |||
Non-executive members of the Board
to receive their remuneration (base Board fee plus fees for chairs and memberships of Board Committees) either 50% in cash and 50% in restricted UBS shares or 100% restricted UBS shares. Shares are attributed with a price discount of 15% and are restricted for four years.
Additional severance payments
Compensation for former members
of the Board and GEB
Former members of the Board of Directors or the Group Executive Board were not paid any compensation during the year under review, neither in cash nor in kind.
Share grants for the year under review |
Executive Board members and
members of the GEB
Non-executive Board members
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Share ownership | ||
Executive Board members and members of the GEB | ||
The three executive Board members and the ten members of the GEB, and parties closely linked to them, held 2,096,603 UBS shares at year-end 2002. No individual BoD or GEB member holds 1% or more of all shares issued. | ||
Non-executive Board members | ||
The six non-executive Board members and parties closely linked to them held 42,768 UBS shares as of 31 December 2002. | ||
Options | ||
Executive Board members and members of the GEB | ||
The three executive Board members and the ten GEB members held the following options on UBS shares as of 31 December 2002: |
Number | Year | Vesting | Expiry | Subscription | Strike | ||||||||||||||||
of options | of grant | date | date | ratio | price | ||||||||||||||||
122,657 | 1997 | 24/06/02 | 24/06/03 | 1:1 | CHF 61.91 | ||||||||||||||||
40,002 | 1998 | 01/07/01 | 30/06/04 | 1:1 | CHF 56.67 | ||||||||||||||||
12,277 | 1998 | 26/05/03 | 26/05/04 | 1:1 | CHF 85.12 | ||||||||||||||||
140,214 | 1998 | 26/05/03 | 26/08/04 | 1:1 | CHF 85.12 | ||||||||||||||||
48,006 | 1998 | 30/06/03 | 30/06/04 | 1:1 | CHF 56.67 | ||||||||||||||||
119,544 | 1999 | 26/02/02 | 26/02/05 | 1:1 | CHF 79.00 | ||||||||||||||||
546,000 | 2000 | 01/02/03 | 01/02/06 | 1:1 | CHF 66.67 | ||||||||||||||||
2,006,490 | 2001 | 20/02/04 | 20/02/09 | 1:1 | CHF 100.00 | ||||||||||||||||
290,828 | 2002 | 20/02/05 | 31/01/12 | 1:1 | CHF 77.75 | ||||||||||||||||
300,491 | 2002 | 20/02/05 | 31/07/12 | 1:1 | CHF 77.75 | ||||||||||||||||
235,000 | 2002 | 28/06/05 | 28/12/12 | 1:1 | CHF 80.75 | ||||||||||||||||
140,000 | 2002 | 28/06/07 | 28/06/12 | 1:1 | CHF 80.75 | ||||||||||||||||
95,000 | 2002 | 28/06/07 | 28/06/12 | 1:1 | CHF 80.75 | ||||||||||||||||
3,000 | 2001 | 29/02/04 | 29/02/08 | 1:1 | USD 53.39 | ||||||||||||||||
360,000 | 2001 | 24/01/04 | 24/01/08 | 1:1 | USD 57.80 | ||||||||||||||||
568,663 | 2002 | 31/01/05 | 01/01/12 | 1:1 | USD 45.26 | ||||||||||||||||
2,000 | 2002 | 29/02/04 | 29/02/12 | 1:1 | USD 46.24 | ||||||||||||||||
380,000 | 2002 | 28/06/05 | 28/06/12 | 1:1 | USD 54.50 | ||||||||||||||||
In addition, this group of senior executives held the following warrants as of 31 December 2002: | |||||||||||||||||||||
24,558,529 | 2000 | 20/03/03 | 01/04/04 | 16.67 : 1 | CHF 75.00 | ||||||||||||||||
Non-executive Board members
Additional honorariums and remuneration |
No material additional honorariums and remuneration were paid to any of the Board or GEB members.
Loans granted to members of the Board and the GEB |
Granting loans is part of the ordinary business of UBS, and members of the Board and the GEB have been granted loans, fixed advances and mortgages at the same terms and conditions as other employees, based on third-party conditions adjusted for reduced credit risk. Loans and advances to related parties are transacted on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated persons.
Loans granted to executive Board members and members of the GEB
Loans granted to non-executive
Board members
Highest total compensation |
Total compensation of the highest paid member of the Board of Directors, Chairman Marcel
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Ospel, amounted to CHF 11,341,588 for financial year 2002, including 75,155 restricted UBS shares. In addition, 75,000 options were granted as part of the senior executive long-term incentive (LTI) award made in June 2002 for financial years 2001 and 2002. At fair value these options were worth CHF 1,222,500. No such award was made in 2001.
Additional information on equity-based
compensation and retirement benefit plans
Note 32 to the UBS Group Financial Statements provides comprehensive information on the
Group’s various Equity Participation Plans for employees on various levels of the organization. It shows pro-forma results under the assumption of expensing options at fair value rather than charging their intrinsic value at grant date. The Financial Report 2002 also provides information on how business unit results would have been impacted if options granted to employees had been expensed (please refer to “Review of Business Group performance” on page 35).
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Corporate Governance
Shareholders’ Participation Rights
Shareholders’ Participation Rights
UBS is committed to make it as easy as possible for shareholders to take part in its decision-making processes. All registered shareholders — nearly 220,000 — receive regular written information about the firm’s activities and performance and are personally invited to shareholder meetings.
Relations with shareholders |
UBS fully subscribes to the principle of equal treatment of all shareholders, ranging from large investment institutions to individual investors, and regularly informs them about the development of the company of which they are co-owners.
Voting rights, restrictions and representation |
UBS is committed to making it as easy as possible for shareholders to take part in its decision-making processes and therefore places no restrictions on share ownership and voting rights. Only voting rights of nominee companies and trustees, who normally represent a great number of individual shareholders, are limited to a maximum of 5% of outstanding UBS shares in order to avoid the risk of unknown shareholders with large stakes being entered into the share register. Securities clearing organizations such as the Depository Trust Company (DTC) in New York and SegaInterSettle (SIS) in Switzerland are exempt from the 5% voting limit.
accept, reject or abstain on each individual item on the meeting agenda by either giving instructions to an Independent Proxy designated by UBS (as required under Swiss company law) or by appointing UBS, another bank or another registered shareholder of their choice, to vote on their behalf.
Statutory quorums |
Shareholder resolutions, the election and re-election of Board members and the appointment of the Group and Statutory Auditors are decided at the General Meetings of Shareholders by an absolute majority of the votes cast, excluding blank and invalid ballots. Article 704 of the Swiss Code of Obligations (Company Law) requires that for certain specific issues a majority of two-thirds of the votes represented at the meeting vote in favor of the resolution. These issues include the introduction of voting shares, the introduction of restrictions on the transferability of registered shares, conditional and authorized capital increases, restrictions or exclusion of shareholders’ pre-emptive rights.
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Corporate Governance
Shareholders’ Participation Rights
Convocation of General Meetings of Shareholders |
The Annual General Meeting of Shareholders (AGM) normally takes place in April, but in any case within six months after the close of the financial year. A personal invitation including a detailed agenda and explanation of each motion is sent to every registered shareholder at least 20 days ahead of the scheduled meeting. The meeting agenda is also published in various Swiss and international newspapers.
Placing of items on the agenda |
Shareholders individually or jointly representing shares with an aggregate par value of one million Swiss francs may submit proposals for matters to be placed on the agenda for consideration by the shareholders meeting. The Board of Directors will
submit to the AGM in 2003 a proposal to facilitate the exercise of this shareholder right, which — as a result of the two par-value repayments in 2001 and 2002 — had become more difficult. The proposed limit of an aggregate par value of CHF 250,000 brings the threshold back to what it used to be before the par value repayments.
Registrations in share register |
The general rules for being entered with voting rights in the Swiss or US Share Register of UBS also apply before General Meetings of Shareholders (for details see pages 134 and 135). Registrations including the transfer of voting rights are processed for as long as technically possible.
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Corporate Governance
Change of Control and Defensive Measures
Change of Control and Defensive Measures
UBS believes in market forces. It therefore refrains from restrictions which would hinder developments otherwise initiated or supported by the financial markets. There are no specific protections against hostile takeover in place.
Duty to make an offer |
An investor who acquires 33 1/3 % of all voting rights has to submit a take-over offer for all shares outstanding, according to the Swiss Stock Exchange Law. UBS has not elected to change or opt out of this rule.
Clauses on changes of control |
The service agreements and employment contracts of the executive Board members, of the
members of the Group Executive Board and of the Group Managing Board do not contain clauses on change of control. UBS does not offer “golden parachutes” to its senior executives. Employment contracts contain notice periods of 12 months for GEB members and 6 months for GMB members, during which they are entitled to running salary and bonuses.
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Corporate Governance
Auditors
Auditors
Audit, with its various functions and authorities, plays an important role in Corporate Governance. While remaining independent, the External Auditors and Group Internal Audit closely coordinate their work, thereby ensuring the most effective performance of their responsibilities. The Chairman’s Office, the Audit Committee and ultimately the Board of Directors supervise the functioning of the overall audit work.
External, independent Auditors |
Ernst & Young Ltd., Basel, have been assigned the mandate to serve as global auditors for the UBS Group. They assume all auditing functions according to laws, regulatory requests, and the UBS Articles of Association (see also the paragraph about auditors responsibilities in the “Regulation and supervision section”, on page 118). The Audit Committee of the Board has determined that Ernst & Young Ltd. meets all independence requirements established by the Securities and Exchange Commission (SEC). As part of its audit process, Ernst & Young Ltd. informs the Audit Committee of the measures it takes to ensure its and its employees’ independence from UBS. The Audit Committee assesses this information on behalf of the Board and informs the Board accordingly.
Duration of the mandate and term of office of the lead auditor
and will be proposed for re-election at the AGM 2003.
Auditing fees
Additional fees paid to auditors
Group Internal Audit |
With around 240 professionals worldwide at 31 December 2002, Group Internal Audit provides an independent review of the effectiveness of the system of internal controls and compliance with key rules and regulations. It specifically verifies or assesses whether the internal controls are commensurate with the risks and are working effectively, whether activities within the firm are being
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conducted and recorded properly, correctly and fully, and whether the organization of operations, including information technology, is efficient and the information is reliable. All key issues raised by Group Internal Audit are communicated to the management responsible, to the President of the GEB and to the Chairman’s Office via formal Audit Reports. The Chairman’s Office and the Audit Committee of the Board are regularly informed of important findings.
Supervisory and control instruments vis-à- vis the external auditors |
The Audit Committee, on behalf of the Board of Directors, monitors the qualification, independence and performance of the Group Auditors and the lead partners. It prepares proposals for appointment or removal of the external auditors
for submission to the full Board, which then submits the proposal to the AGM.
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Corporate Governance
Information Policy:
UBS Financial Disclosure Principles
Information Policy:
UBS Financial Disclosure Principles
UBS’s financial disclosure policies aim to achieve a fair market value of the UBS share by communicating transparently, openly and consistently with investors and the financial markets at all times.
Main sources of information |
UBS provides regular information to its shareholders and to the financial community. For details, see page 5 and 6 of this Handbook.
Financial results will be published as follows:
First Quarter | 13 May 2003 | |
Second Quarter | 13 August 2003 | |
Third Quarter | 11 November 2003 | |
Fourth Quarter | 10 February 2004 | |
The Annual General Meeting of Shareholders will take place as follows:
2003 | 16 April, Zurich | |
2004 | 15 April, Basel | |
UBS meets regularly with institutional investors throughout the year, holding results presentations, specialist investor seminars, road shows and one-to-one or group meetings across the world. Where possible, these events involve UBS senior management in addition to the UBS Investor Relations team. We have also made significant progress in developing the use of technology to further broaden access to our presentations through webcasting, audio links and cross-location video-conferencing for external audiences.
Financial disclosure principles |
Based on our discussions with analysts and investors, we believe that the market rewards companies that provide clear, consistent and informative disclosure about their business. Our aim therefore is to communicate UBS’s strategy and results in such a way that investors can gain a full and accurate understanding of how the company works, what its growth prospects are and what risks there are that this growth will not be realized.
– | Transparency:our disclosure is designed to enhance understanding of the economic drivers and detailed results of the business, in order to build trust and credibility. |
– | Consistency:we aim to ensure that our disclosure is consistent and comparable within each reporting period and between reporting periods. |
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– | Simplicity:we try to disclose information in as simple a manner as possible consistent with allowing readers to gain the appropriate level of understanding of our businesses’ performance. |
– | Relevance:we aim to avoid information overload by focusing our disclosure on what is relevant to UBS’s stakeholders, or required by regulation or statute. |
– | Best practice:we strive to ensure that our disclosure is in line with industry norms, and if possible leads the way to improved standards. |
Performance measures and targets |
Group targets
– | We seek to increase the value of UBS by achieving a sustainable, after-tax return on equity of 15-20%, across periods of varying market conditions. |
– | We aim to increase shareholder value through double-digit average annual percentage growth in basic earnings per share (EPS), across periods of varying market conditions. |
– | Through cost reduction and earnings enhancement initiatives we aim to reduce UBS’s cost/income ratio, to a level that compares positively with best-in-class competitors. |
– | We aim to achieve a clear growth trend in net new money in our private client businesses. |
Business Group key performance indicators
Financial reporting policies |
Accounting principles
Analysis of adjusted figures and results
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Corporate Governance
Information Policy:
UBS Financial Disclosure Principles
UBS, we believe that equity values are driven by future cash flows.
Restatement of results
US regulatory disclosure requirements
closure requirements of the Securities and Exchange Commission (SEC) and the NYSE for foreign issuers. These include the requirement to make certain filings with the SEC. As a foreign issuer, some of the SEC’s regulations and requirements which apply to domestic issuers are not applicable to UBS. We provide UBS’s regular quarterly reports to the SEC under cover of Form 6-K, and file an annual report on Form 20-F. We also provide additional disclosure at half year to meet specific SEC requirements, which again is provided under cover of Form 6-K. In addition, important corporate announcements, including press releases, are provided under cover of Form 6-K as they occur. These reports, as well as materials sent to shareholders in connection with annual and special meetings, are all available on our website, at www.ubs.com/investors.
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Corporate Governance
Regulation and Supervision
Regulation and Supervision
We aim to monitor regulatory developments, to comply with all applicable provisions and to work closely and maintain good relations with the regulators in all jurisdictions where we have offices, branches and subsidiaries.
As a Swiss-registered company, UBS’s main regulator is the Swiss Federal Banking Commission (SFBC), but we are also regulated worldwide by supervisory agencies in the countries in which we conduct business, most notably the US and the UK.
– | licensing requirements and restrictions of the opening of local offices, branches or subsidiaries and the types of banking and non-banking activities that may be conducted by those local offices, branches or subsidiaries; |
– | restrictions on the acquisition or level of ownership of local banks; |
– | restrictions on investment and other financial flows entering or leaving the country. |
Regulation and supervision in Switzerland |
General
Regulatory policy
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Regulation and Supervision
– | Guidelines concerning a Code of Conduct with regard to the Exercise of Due Diligence by Banks, 1998. |
– | Guidelines concerning the Treatment of Accounts, Custody Deposits and Safe Deposit Boxes Remaining Dormant at Swiss Banks, 2000. |
– | Guidelines concerning the Exercise of Asset Management Mandates, 2000. |
– | Guidelines on Internal Control, 2002. |
Role of external auditors and direct supervision of large banking groups
Reporting requirements and
capital requirements
ad-hoc and event-based information requests connected with direct supervision activity.
Disclosures to the Swiss National Bank
Regulation and supervision in the United States |
Banking regulation
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US regulation of other US operations
– | sales methods |
– | trade practices among broker-dealers |
– | use and safekeeping of customers’ funds and securities |
– | capital structure |
– | record-keeping |
– | the financing of customers’ purchases |
– | the conduct of directors, officers and employees. |
USA Patriot Act
Regulation and supervision in the United Kingdom |
Since 1 December 2001, following the implementation of the Financial Services and Markets Act 2000, UBS’s operations in the United
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Regulation and Supervision
which it may impose under the new Act, similar to those available to US regulators.
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Corporate Governance
Compliance with NYSE Listing Standards
on Corporate Governance
Compliance with NYSE Listing Standards
on Corporate Governance
UBS aims to comply with all relevant standards on corporate governance. As a foreign company, listed at the New York Stock Exchange (NYSE), we have to explain differences between our corporate governance standards and the NYSE rules for US companies.
Introduction |
On 15 August 2002, the NYSE filed with the SEC proposed rules that would effect substantial changes to the NYSE corporate governance listing standards. The proposed changes would tighten the definition of director independence, expand the responsibilities of the audit committee, mandate the establishment of a compensation committee and nominating committee both composed of only independent directors and require listed companies to have a code of ethics and corporate governance guidelines.
Independence of directors |
The NYSE rules will require that the Board of Directors of a listed company have a majority of independent directors. For a director to be considered independent, the Board of Directors must affirmatively determine that the director has no material relationship with the company, either
– | The external director and his or her immediate family members have not been employed by UBS during the last five years. |
– | The external director and his or her immediate family members have not been employed by UBS’s principal auditors, Ernst & Young Ltd. during the last five years. |
– | The external director is not and has not been employed by a company whose compensation committee includes a senior executive of UBS. |
– | The external director does not have — directly or indirectly — any material relationship with UBS, i.e.: |
– | No shareholdings in excess of 3% of all outstanding shares. |
– | No business relationships with UBS accounting for more than 5% of the total revenues either of the companies related to the director or of UBS. |
– | No banking relationships with UBS that are not in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with other clients. |
– | UBS does not make any meaningful charitable contributions to organizations in which the external director is affiliated. |
– | The external director has not entered into consulting contracts with UBS. |
– | UBS does not pay its directors fees that exceed what is customary in the financial services industry. |
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Compliance with NYSE Listing Standards
on Corporate Governance
– | There were no interlocking directorships over the past five years between the companies related to the director and UBS. |
– | The external director does not hold any other Board mandates that would infringe on his independence. |
The Board of Directors, after having carefully considered the information provided by its external members, has determined that Peter Böckli, Ernesto Bertarelli, Sir Peter Davis, Rolf A. Meyer, Hans Peter Ming and Lawrence A. Weinbach are independent in accordance with the criteria mentioned above.
Board Committees |
UBS has established an Audit, a Compensation and a Nominating Committee, all composed solely of independent directors, as required by the NYSE rules.
Differences from NYSE standards |
The NYSE rules require:
– | expanded discussion on risk assessment and risk management between management and the Audit Committee. UBS, as a global financial services firm, has a very sophisticated and complex system of risk management and control. Risk management and control is the clear responsibility of the business and not of the Board or of its Committees. The full Board has authority to define the firm’s risk framework. It is responsible for monitoring the adherence to the defined risk limits and for reviewing whether the business and the control units run appropriate systems of management and control of risks. The Chairman’s Office, with financial services specialists among its members, provides the bulk of the preparatory work for these full Board reviews. It also assumes approval authorities for the definition of specific credit risks and for clearly specified credits. For further details see Section “Risk Management and Control” of this Handbook. |
– | supervision of internal audit by Audit Committee. In accordance with the Swiss Federal Banking Commission’s Circular Letter on Internal Audit, dated 14 December 1995, UBS gave the Chairman’s Office responsibility and authority for supervising the internal audit function. The Chairman’s Office reports back to the full Board on all important findings. |
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– | responsibility of the Nominating Committee for oversight of management and Board evaluation. Management evaluation (performance of the President and the members of the Group Executive Board) is done by the Chairman’s Office and reported to the full Board. All Board Committees perform a self-assessment of their activities and report back to the full Board. The Board has direct responsibility and authority to evaluate the Board’s own performance, without preparation by a Board Committee. |
– | proxy statement reports of the Audit and Compensation Committees. Under Swiss Company Law, all reports addressed to shareholders must be provided and signed by the full Board. The Committees submit their reports to the Board. |
Shareholder votes on equity-compensation plans |
The proposed NYSE rules require that shareholders must vote on all equity-compensation plans and any material revisions to the terms of such plans (including for purposes of re-pricing existing options). UBS does not comply with this requirement.
Corporate Governance Guidelines and Code of Business Conduct and Ethics |
The proposed NYSE rules require each listed company to adopt and make publicly available Corporate Governance Guidelines and a Code of Business Conduct and Ethics. These documents must be adopted within six months of the SEC’s approval of the NYSE’s rules.
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Corporate Governance
Group Managing Board
Group Managing Board
The Group Managing Board (GMB) represents the next layer in the leadership of the Group below the Group Executive Board. Its members are drawn from the management teams of the Business Groups and the Corporate Center.
Role of the Group Managing Board |
The GMB has a crucial role in implementing our integrated business model and in promoting the UBS culture and values throughout the Group and externally.
Members of the Group Managing Board as of 31 December 2002: |
UBS Wealth Management & Business Banking
Michael Adjadj | Head of Private Banking Middle East & Africa | |
Arthur Decurtins | Head of Private Banking Germany & Benelux | |
Thomas Escher | Head of IT | |
Jürg Haller | Head of Products & Services | |
Eugen Haltiner | Head of Business Banking Switzerland | |
Marten Hoekstra | Head of Market Strategy & Development | |
Dieter Kiefer | Head of Private Banking Western Europe | |
Martin Liechti | Head of Private Banking Americas | |
Joe Rickenbacher | Chief Credit Officer | |
Alain Robert | Head of Private Banking Switzerland | |
Kathryn Shih | Head of Private Banking Asia Pacific | |
Jean Francis Sierro | Head of Resources | |
Richard Sipes | Head of Private Banking UK & Northern, Eastern and Southern Europe | |
Anton Stadelmann | Chief Financial Officer | |
Vittorio Volpi | Head of Private Banking Italy | |
Raoul Weil | Head of Private Banking International | |
Stephan Zimmermann | Head of Operations | |
UBS Warburg | ||
Andy Amschwand | Global Co-Head of Interest Rates and Foreign Exchange | |
Jonathan Britton | Chief Financial Officer | |
Regina Dolan | Global Head of Strategic Planning and Business Development | |
Ian Drew | Chief Credit Officer | |
Tim Fredrickson | Global Co-Head of Interest Rates and Foreign Exchange | |
Robert Gillespie | Joint Global Head of Investment Banking | |
Alan C. Hodson | Global Head of Equities | |
Michael Hutchins | Global Head of Fixed Income and Interest Rates & Foreign Exchange | |
Huw Jenkins | Head of Equities for the Americas | |
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UBS Warburg (continued) | ||
Danny Schweizer | CEO Switzerland | |
Rory Tapner | Joint Global Head of Investment Banking | |
Mark Wallace | Chief Risk Officer | |
Robert Wolf | Joint Global Head of Fixed Income | |
New members as from 1 March 2003: | ||
Mike Bolin | Chief Administrative Officer | |
Gary Bullock | Head of Infrastructure Logistics | |
Ken Moelis | Head of Investment Banking in the Americas | |
UBS PaineWebber | ||
Barry Buchsbaum | Director of the Branch Group | |
Bruce Bursey | Director of Investment Consulting Services | |
Luzius Cameron | Director of Strategic Planning and New Business Development | |
Tom Naratil | Director of Banking and Transactional Solutions | |
Robert Silver | President UBS PaineWebber Services | |
New member as from 1 March 2003: | ||
James D. Price | Director of Investment and Marketing Solutions | |
UBS Global Asset Management | ||
Crispian Collins | Vice Chairman (until 31 March 2003) | |
Jeffrey J. Diermeier | Chief Investment Officer | |
Gabriel Herrera | Head of Europe, Middle East & Africa | |
Benjamin F. Lenhardt Jr. | Chairman Americas (until 31 March 2003) | |
Thomas Madsen | Global Head of Equities | |
Joe Scoby | CEO O’Connor | |
Brian Singer | Global Head of Asset Allocation | |
Brian Storms | CEO Americas | |
Paul Yates | Head of UK | |
New member as from 1 March 2003: | ||
Kai Sotorp | Head of Asia Pacific | |
Corporate Center | ||
Mark Branson | Chief Communication Officer | |
Rolf Enderli | Group Treasurer | |
Thomas Hammer | Group Head of Human Resources (from 1 March 2003) | |
Hugo Schaub | Group Controller | |
Walter Stuerzinger | Group Chief Risk Officer | |
Marco Suter | Group Chief Credit Officer | |
Robert Zeltner | Group Head of Human Resources (until 28 February 2003) | |
Group Internal Audit | ||
Markus Ronner | Head of Group Internal Audit | |
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Corporate Responsibility
Corporate Responsibility
For us, corporate responsibility is integral to everything we do, meaning that we want to create value sustainably for all of our stakeholders.
Creating long-term value for our shareholders |
At UBS, the value-based management framework views management as the custodian of shareholder wealth. This framework sees the creation of long-term shareholder value as resting on four, mutually supporting pillars. First, we ensure that business decisions are analyzed in terms of the value that they create. Second, the realized value creation is measured and compared with targets. Third, we have incentive systems in place to align the interests of managers with those of shareholders, including tying a meaningful part of total compensation to individual performance targets as well as encouraging managers and staff to become shareholders. Moreover, internal value driver projections and valuations are benchmarked against external assessments, stock market expectations, and leading analyst forecasts.
Safeguarding our clients’ right to financial privacy and fighting money laundering |
Trust is critical for a global financial services provider. It requires a corporate culture that promotes behavior consistent with the highest ethical standards. To enhance the trust placed in us, it is vital that we protect our clients’ legitimate right to financial privacy while preventing the abuse of our services by criminals or terrorists.
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Because of the growing importance of advisory-based financial services and regulations regarding the exercise of due diligence, financial institutions are gathering more and more information from and about their clients. Unsurprisingly, public and private sector agents are showing a strong appetite for that data, and clients are increasingly worried about its misuse. Financial privacy, as with medical and other forms of personal privacy, are privileges enjoyed by citizens living in a modern, democratic society. At UBS, we firmly believe we should uphold and defend our clients’ right to safeguard their private financial information from third party interests.
the tool. The Financial Intelligence Unit (FIU), a dedicated compliance team maintaining the register, is automatically notified if and when any queries match with names on its database.
Creating an equal opportunity environment for our employees |
An important part of our success as a firm is the fact that our corporate culture blends the best influences of its diverse roots and encourages diversity. Our goal is to attract and retain the most talented and motivated individuals by offering them a rewarding and challenging environment. By encouraging individual success, we allow employees to develop their skills and progress within our organization. One of our competitive strengths is the ability to leverage the skills and knowledge of our staff across the 50 countries in which we operate. In order to fully take advantage of that, we have appointed
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Corporate Responsibility |
a Global Head of Diversity for the Group. At the same time, we have established Business Group-specific regional and global diversity initiatives. In Switzerland, for example, comprehensive intercultural training is part of our management development program.
Investing in our communities |
The success of UBS depends not only on the skills and resources of our people and the relationships we have with our clients, but also on the health and prosperity of the communities of which we are part. We directly benefit from a stable political and social environment, modern infrastructure and a good education system. Furthermore, community programs create benefits for a company’s reputation, and increase its appeal to its clients.
On another level, the UBS Optimus Foundation harnesses the expertise and the capabilities of UBS as a global financial services company by supporting clients when they express a desire to contribute to worthy causes. Since its launch over three years ago, the foundation has concentrated its investments in a select number of programs and organizations — all of which focus on people. The total number of projects is now twelve, divided into the categories of children and talents as well as medical research — running from one that aims to re-integrate Brazil’s street children in society to another that finances a Swiss cancer research project.
Promoting environmental awareness |
Environmental protection is one of the most pressing issues facing our world today. Consequently, it poses a challenge to companies, industries and sectors. At UBS, we remain committed to further integrating environmental considerations into all our business activities. To make this happen, our environmental policy focuses on taking advantage of environmental market opportunities, and considering environmental risks in our risk management processes, especially in lending and investment banking. In corporate services, we actively look for ways to reduce the direct environmental impact of our business activities.
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introduced processes that allow early identification of environmental risks in transactions. Initially, environmental factors are screened by the corresponding investment banking staff. If there are indications of heightened environmental risk, external specialists are called in to investigate them as part of the overall due diligence process. Also in the Swiss lending business, a careful review of financially relevant environmental aspects is an important part of UBS’s credit risk analysis.
about double-sided printing capabilities and other ways to save paper.
Third party ratings |
A number of different independent rating agencies that assess corporate responsibility programs across the world have rated UBS among the leaders in the field.
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UBS Share Information
The Global Registered Share
The Global Registered Share
UBS ordinary shares are registered shares with a par value of CHF 0.80 per share, fully paid up and non-assessable. They are issued in the form of Global Registered Shares (GRS). A Global Registered Share is a security that provides direct and equal ownership for all shareholders. It can be traded and transferred across applicable borders without the need for conversion, with identical shares traded on different stock exchanges in different currencies. For example, the same share purchased on the New York Stock Exchange (NYSE) can be sold on virt-x, the pan-European stock exchange where Swiss-listed blue chip stocks are traded, or vice versa.
Registration
ister, which is maintained by UBS acting as Swiss transfer agent, and a US register, which is maintained by Mellon Investor Services, as US transfer agent. A shareholder is entitled to hold shares registered in their name on either register and transfer shares from one register to the other upon giving proper instruction to the transfer agents.
Share liquidity and currency effects
Dividends |
UBS normally pays a regular annual dividend to shareholders registered as of the date of the Annual General Meeting (the record date). Payment is usually scheduled three business days thereafter.
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The norm in the US is to declare dividends at least ten days in advance of the applicable record date and ex-dividend trading commences two days before the record date. To ensure that shareholders on the Swiss and US registers are similarly treated in connection with dividend payments, and to avoid disparities between the two markets, NYSE trading takes place with due bills for the two business day period preceding the dividend record date.
Par value distribution July 2002
Dividend
Ticker symbols
Trading exchange | Bloomberg | Reuters | Telekurs | |||||||||
virt-x | UBSN VX | UBSZn.VX | UBSN, 004 | |||||||||
New York Stock Exchange | UBS US | UBS.N | UBS, 65 | |||||||||
Tokyo Stock Exchange | 8657 JP | UBS.T | N16631, 106 | |||||||||
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UBS Share Information
The UBS Share 2002
The UBS Share 2002
UBS share price performance in 2002 |
economic data indicated no sign of a sustained global recovery and investors became increasingly cautious in their outlook.
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UBS share data
As at | ||||||||||||
Registered shares in 1000 units | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Total shares outstanding | 1,256,298 | 1,281,717 | 1,333,139 | |||||||||
Total shares ranking for dividend | 1,182,263 | 1,258,653 | 1,277,874 | |||||||||
Treasury shares (average) | 61,266 | 47,244 | 97,545 | |||||||||
Treasury shares (year end) | 97,181 | 41,255 | 55,265 | |||||||||
Weighted average shares (for basic EPS calculations) | 1,208,587 | 1,266,038 | 1,209,088 | |||||||||
Weighted average shares (for diluted EPS calculations) | 1,223,383 | 1,288,578 | 1,225,578 | |||||||||
For the year ended | ||||||||||||
CHF | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Earnings per share | ||||||||||||
Basic EPS | 2.92 | 3.93 | 6.44 | |||||||||
Basic EPS before goodwill amortization1 | 4.73 | 4.97 | 7.00 | |||||||||
Diluted EPS | 2.87 | 3.78 | 6.35 | |||||||||
Diluted EPS before goowill amortization1 | 4.65 | 4.81 | 6.89 | |||||||||
As at | ||||||||||||
CHF billion | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Market capitalization | 79.4 | 105.5 | 112.7 | |||||||||
% change year-on-year | (25 | ) | (6 | ) | ||||||||
For the year ended | ||||||||||||
100 shares | 31.12.02 | 31.12.01 | 31.12.00 | |||||||||
Trading volumes2 | ||||||||||||
SWX total | 1,049,364 | 1,000,402 | 1,211,446 | |||||||||
SWX daily average | 4,148 | 4,002 | 4,826 | |||||||||
NYSE total | 48,850 | 54,768 | 83,032 | |||||||||
NYSE daily average | 194 | 221 | 522 | |||||||||
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UBS Share Information The UBS Share 2002 |
Stock exchange prices1
SWX Swiss Exchange | New York Stock Exchange2 | |||||||||||||||||||||||
High | Low | Period end | High | Low | Period end | |||||||||||||||||||
(CHF) | (CHF) | (CHF) | (USD) | (USD) | (USD) | |||||||||||||||||||
2002 | 84.30 | 51.05 | 67.20 | 51.99 | 34.54 | 48.12 | ||||||||||||||||||
Fourth quarter 2002 | 75.45 | 51.05 | 67.20 | 50.88 | 34.54 | 48.12 | ||||||||||||||||||
December | 75.30 | 66.50 | 67.20 | 50.54 | 47.56 | 48.12 | ||||||||||||||||||
November | 75.45 | 66.95 | 74.75 | 50.88 | 45.72 | 50.18 | ||||||||||||||||||
October | 70.35 | 51.05 | 70.35 | 47.26 | 34.54 | 47.26 | ||||||||||||||||||
Third quarter 2002 | 75.15 | 56.80 | 61.30 | 49.94 | 37.86 | 41.00 | ||||||||||||||||||
September | 70.55 | 57.50 | 61.30 | 46.26 | 38.75 | 41.00 | ||||||||||||||||||
August | 73.40 | 59.40 | 70.70 | 48.69 | 39.80 | 47.01 | ||||||||||||||||||
July | 75.15 | 56.80 | 65.30 | 49.94 | 37.86 | 44.30 | ||||||||||||||||||
Second quarter 2002 | 84.15 | 69.80 | 74.85 | 51.99 | 46.90 | 49.89 | ||||||||||||||||||
June | 81.95 | 69.80 | 74.85 | 51.99 | 46.90 | 49.89 | ||||||||||||||||||
May | 82.20 | 75.00 | 81.95 | 51.98 | 46.95 | 51.90 | ||||||||||||||||||
April | 84.15 | 77.55 | 78.10 | 50.30 | 47.63 | 48.49 | ||||||||||||||||||
First quarter 2002 | 84.30 | 73.00 | 82.80 | 50.50 | 43.27 | 49.75 | ||||||||||||||||||
March | 84.30 | 79.20 | 82.80 | 50.50 | 46.69 | 49.75 | ||||||||||||||||||
February | 81.30 | 73.00 | 78.85 | 47.70 | 43.27 | 46.44 | ||||||||||||||||||
January | 83.95 | 77.30 | 77.50 | 50.42 | 45.50 | 45.45 | ||||||||||||||||||
2001 | 96.83 | 62.10 | 83.80 | 58.49 | 40.12 | 50.00 | ||||||||||||||||||
Fourth quarter 2001 | 86.85 | 69.70 | 83.80 | 52.83 | 43.23 | 50.00 | ||||||||||||||||||
Third quarter 2001 | 86.33 | 62.10 | 75.60 | 49.73 | 40.12 | 46.15 | ||||||||||||||||||
Second quarter 2001 | 92.00 | 77.50 | 85.83 | 51.47 | 44.87 | 47.02 | ||||||||||||||||||
First quarter 2001 | 96.83 | 72.33 | 83.17 | 58.49 | 43.02 | 47.68 | ||||||||||||||||||
2000 | 88.17 | 63.58 | 88.17 | 54.10 | 40.18 | 54.10 | ||||||||||||||||||
Fourth quarter 2000 | 88.17 | 71.17 | 88.17 | 54.10 | 40.18 | 54.10 | ||||||||||||||||||
Third quarter 2000 | 88.00 | 74.67 | 76.67 | 50.74 | 44.76 | 44.85 | ||||||||||||||||||
Second quarter 2000 | 83.33 | 69.83 | 79.67 | 50.66 | 42.99 | 48.67 | ||||||||||||||||||
First quarter 2000 | 72.83 | 63.58 | 72.83 | |||||||||||||||||||||
1999 | 80.00 | 67.50 | 71.67 | |||||||||||||||||||||
Fourth quarter 1999 | 79.92 | 67.50 | 71.67 | |||||||||||||||||||||
Third quarter 1999 | 82.25 | 67.50 | 70.50 | |||||||||||||||||||||
Second quarter 1999 | 88.00 | 73.67 | 77.33 | |||||||||||||||||||||
First quarter 1999 | 82.00 | 69.08 | 77.50 | |||||||||||||||||||||
19983 | 108.83 | 45.00 | 70.33 | |||||||||||||||||||||
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UBS shares and market capitalization
Number of shares, except where indicated | % change from | ||||||||||||||||
As at | 31.12.02 | 31.12.01 | 31.12.00 | 31.12.01 | |||||||||||||
Total ordinary shares issued | 1,256,297,678 | 1,281,717,499 | 1,333,139,187 | (2 | ) | ||||||||||||
Second trading line treasury shares | |||||||||||||||||
2000 program | (55,265,349 | ) | |||||||||||||||
2001 program | (23,064,356 | ) | |||||||||||||||
2002 first program | (67,700,000 | ) | |||||||||||||||
2002 second program | (6,335,080 | ) | |||||||||||||||
Shares outstanding for market capitalization | 1,182,262,598 | 1,258,653,143 | 1,277,873,838 | (6 | ) | ||||||||||||
Share price (CHF) | 67.20 | 83.80 | 88.17 | (20 | ) | ||||||||||||
Market capitalization (CHF million) | 79,448 | 105,475 | 112,666 | (25 | ) | ||||||||||||
Total treasury shares | 97,181,094 | 41,254,951 | 55,265,349 | 136 | |||||||||||||
Distribution of UBS Shares
Shareholders registered | Shares registered | |||||||||||||||
As at 31.12.02 | ||||||||||||||||
Number of shares registered | Number | % | Number | % of shares issued | ||||||||||||
1-100 | 46,868 | 21.3 | 2,430,181 | 0.2 | ||||||||||||
101-1,000 | 133,449 | 60.7 | 51,563,181 | 4.1 | ||||||||||||
1,001-10,000 | 36,546 | 16.6 | 90,247,647 | 7.2 | ||||||||||||
10,001-100,000 | 2,635 | 1.2 | 65,357,281 | 5.2 | ||||||||||||
100,001-1,000,000 | 328 | 0.2 | 96,176,568 | 7.7 | ||||||||||||
1,000,001-5,000,000 | 55 | 0.0 | 120,932,421 | 9.6 | ||||||||||||
5,000,001-12,562,975 (1%) | 10 | 0.0 | 75,122,855 | 6.0 | ||||||||||||
1-2% | 0 | 0.0 | 0 | 0.0 | ||||||||||||
2-3% | 0 | 0.0 | 0 | 0.0 | ||||||||||||
3-4% | 2 | 0.0 | 98,849,839 | 7.9 | ||||||||||||
4-5% | 0 | 0.0 | 0 | 0.0 | ||||||||||||
Over 5% | 1 | 1 | 0.0 | 96,531,157 | 7.7 | |||||||||||
Total registered | 219,894 | 100.0 | 697,211,130 | 55.6 | ||||||||||||
Unregistered2 | 559,086,548 | 44.4 | ||||||||||||||
Total shares issued | 1,256,297,678 | 3 | 100.0 | |||||||||||||
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UBS Share Information The UBS Share 2002 |
Registered shareholders: type and distribution
Shareholders | Shares | |||||||||||||||
As at 31.12.02 | Number | % | Number | % | ||||||||||||
Individual shareholders | 211,100 | 96.0 | 173,717,031 | 24.9 | ||||||||||||
Legal entities | 8,205 | 3.7 | 189,658,658 | 27.2 | ||||||||||||
Nominees, fiduciaries | 589 | 0.3 | 333,835,441 | 47.9 | ||||||||||||
Total | 219,894 | 100.0 | 697,211,130 | 100 | ||||||||||||
Switzerland | 203,739 | 92.7 | 349,906,904 | 50.2 | ||||||||||||
Europe | 11,283 | 5.1 | 225,581,696 | 32.3 | ||||||||||||
North America | 2,872 | 1.3 | 59,723,099 | 8.6 | ||||||||||||
Other countries | 2,000 | 0.9 | 61,999,431 | 8.9 | ||||||||||||
Total | 219,894 | 100.0 | 697,211,130 | 100.0 | ||||||||||||
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INDEX TO EXHIBITS
Exhibit | ||
Number | Description | |
1.1. | Articles of Association of UBS AG. | |
1.2. | Organization Regulations of UBS AG. | |
2(b) | Instruments defining the rights of the holders of long-term debt issued by UBS AG and its subsidiaries. We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt. | |
7. | Statement regarding ratio of earnings to fixed charges. | |
8. | Significant Subsidiaries of UBS AG. Please see Note 35 on pages 153 to 156 of the attached Financial Report 2002. | |
10. | Consent of Ernst & Young Ltd. |
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