Corporate Center

Corporate Center’s result from continuing operations – formerly reported as the separate Business Unit Corporate Functions – was a loss of CHF 708 million in full-year 2005, compared to a loss of CHF 777 million (pre-goodwill) a year earlier. The improvement was driven by a CHF 343 million increase in income. This was partly offset by lower credit loss recoveries and a rise in performance-related personnel costs.

Pre-goodwill, Corporate Center saw a pre-tax loss from continuing operations of CHF 242 million in fourth quarter 2005, compared to a loss of CHF 417 million in the same quarter a year earlier.

Private Banks & GAM (discontinued operations)

The sale of Private Banks & GAM to Julius Baer was successfully completed on 2 December 2005. The disposal gain and the operating result realized during the quarter before the deal closed are reported as discontinued operations, resulting in a pre-tax gain of CHF 4,153 million in fourth quarter 2005. This includes the disposal gain of CHF 4,094 million before tax (CHF 3,705 million after tax) and CHF 59 million in operating pre-tax profit.

Private Banks & GAM recorded net new money outflows of CHF 0.1 billion in the period between 1 October 2005 and 2 December, the date the sale closed.

Operating income

Total operating income was CHF 199 million in fourth quarter 2005, up CHF 271 million from a loss of CHF 72 million a year ago, reflecting higher income and higher credit loss recoveries.

The credit loss expense or recovery booked in Corporate Center represents the difference between the adjusted expected credit losses charged to the business units and the actual credit loss recognized in the UBS Financial Statements. In fourth quarter 2005, UBS recorded a credit loss recovery of CHF 132 million, compared to a recovery of CHF 57 million in fourth quarter 2004. In both quarters, credit loss expense was lower than the adjusted expected credit loss charged to the business units, resulting in a credit loss recovery in Corporate Center of CHF 88 million in fourth quarter 2005 and CHF 48 million in the same period a year earlier.

Total operating income was positively affected by the further diversification of capital into US dollars and by lower writedowns in Corporate Real Estate. Income also increased due to a timing effect related to cash flow hedge ineffectiveness (for more details please refer to page 12 of this report). This result was partly offset by the transaction costs paid to the Investment Bank in relation to the sale of Private Banks & GAM and negative currency impacts.

Operating expenses

Total operating expenses were CHF 441 million in fourth quarter 2005, up by CHF 95 million from CHF 346 million in the same quarter in 2004. Personnel expenses were CHF 377 million, up 56% from CHF 241 million in fourth quarter 2004. This was driven by higher costs reflecting the further integration of UBS’s IT infrastructure into ITI. The rise in costs also reflected additional hiring and accruals for performance-related compensation in our other corporate functions. General and administrative expenses increased by 26% to CHF 315 million in fourth quarter 2005 compared to fourth quarter 2004, reflecting higher branding and corporate real estate costs and increased payments of membership fees. This was partly offset by a release of accumulated tax accruals. Other businesses were charged CHF 457 million for services provided by Corporate Center in fourth quarter 2005, compared to CHF 353 million in the same period a year ago, reflecting the further integration of UBS’s IT infrastructure into ITI.