Global Asset Management

Pre-tax profit was CHF 369 million in third quarter 2007, up from CHF 66 million in second quarter 2007, which included DRCM closure costs of CHF 384 million. Excluding DRCM closure costs, pre-tax profit was down 18% from CHF 450 million in second quarter. This was mainly the result of lower performance fees, primarily in alternative and quantitative investments and the Brazilian asset management business.

Operating income

Total operating income in third quarter 2007 was CHF 942 million, down 13% from CHF 1,078 million in the previous quarter. Institutional revenues were CHF 503 million in third quarter 2007, down from CHF 642 million in second quarter 2007, reflecting lower performance fees from alternative and quantitative investments and the Brazilian asset management business. Wholesale intermediary revenues were CHF 439 million in third quarter 2007, up slightly from CHF 436 million a quarter earlier due to the inclusion of UBS Hana Asset Management, which was partly offset by lower performance fees.

Operating expenses

Total operating expenses were CHF 573 million in third quarter 2007, down from CHF 1,012 million in second quarter. Expenses declined CHF 55 million or 9% from the second quarter level, excluding DRCM closure costs. This mainly reflected lower incentive-based compensation. Personnel expenses were CHF 413 million in third quarter 2007. Adjusted for DRCM closure costs, they were down CHF 47 million or 10% from second quarter 2007, as incentive-based compensation declined in line with performance fees. General and administrative expenses were CHF 107 million in third quarter 2007, down from CHF 124 million a quarter earlier (excluding DRCM closure costs), mostly due to lower legal, IT and travel and entertainment costs. Depreciation of property and equipment was CHF 5 million, in line with average quarterly levels, and after the prior quarter was impacted by the closure of DRCM. Net charges-in from other business groups were CHF 42 million in third quarter 2007, up from CHF 33 million in last quarter, mainly as a result of lower costs charged to Global Wealth Management & Business Banking for alternative investment research combined with higher charges for IT infrastructure.

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