Corporate Center

Profit from continuing operations was CHF 1,734 million, up from the loss of CHF 193 million in first quarter 2007. Without the gain of CHF 1,950 million from the sale of our 20.7% stake in Julius Baer in second quarter, Corporate Center would have posted a loss of CHF 216 million.

In first half 2007, Corporate Center recorded a pre-tax gain from continuing operations of CHF 1,541 million compared with a loss of CHF 312 million in the same period a year earlier. The difference was driven by the CHF 1,950 million gain from the sale of the Julius Baer stake. Excluding this gain, Corporate Center would have recorded a loss of CHF 409 million, with the decline attributable to higher credit loss expenses recorded in first half.

Operating income

Total operating income was CHF 2,061 million in second quarter 2007, up CHF 1,982 million from CHF 79 million in first quarter 2007. This reflects the gain from the sale of the Julius Baer stake of CHF 1,950 million booked at the end of June. Excluding this gain, total operating income was CHF 111 million in second quarter, with the slight improvement mainly due to the lower credit loss expense recorded this quarter.

The credit loss expense booked in Corporate Center represents the difference between the adjusted expected credit loss results booked in the business units and the actual credit loss expense recognized in the UBS financial statements. In second quarter 2007, UBS recorded a recovery of CHF 14 million, compared with a recovery of CHF 1 million in first quarter 2007. In the same period, adjusted expected credit loss recoveries booked in the business units amounted to CHF 45 million. The difference of CHF 31 million was booked in Corporate Center as credit loss expense. In contrast, in first quarter 2007 Corporate Center booked an expense of CHF 51 million.

Compared with first quarter 2007, total operating income was positively affected by rising income from certain interest rate swaps, with dividends from the Julius Baer stake also driving results higher. These improvements were partly offset by foreign exchange losses on deconsolidated entities.

Operating expenses

Total operating expenses were CHF 327 million in second quarter 2007, up 55 million from CHF 272 million in first quarter 2007. Personnel expenses were CHF 358 million, up 12% from CHF 320 million in first quarter 2007. This was driven by increased personnel levels relating to the IT Infrastructure unit and the offshoring initiative. General and administrative expenses increased 11% to CHF 337 million in second quarter 2007 from first quarter 2007, mainly reflecting higher sponsoring and advertising costs. Project expenditures also rose, but to a lesser extent. Other businesses were charged CHF 552 million for services provided by Corporate Center in second quarter 2007, compared with CHF 539 million in first quarter 2007, reflecting higher charges from the UBS Service Center and IT infrastructure expenses in support of continued business growth.

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