UBS - Note 2a

UBS's financial businesses are organized on a worldwide basis into three Business Groups and the Corporate Center. Global Wealth Management & Business Banking consists of three segments: Wealth Management International & Switzerland, Wealth Management US and Business Banking Switzerland. The Business Groups Investment Bank and Global Asset Management constitute one segment each. In addition, the Industrial Holdings segment holds all industrial operations controlled by the Group. In total, UBS now reports six business segments and Corporate Center. Corporate Center includes all corporate functions and elimination items and is not considered a business segment.

Global Wealth Management & Business Banking

Global Wealth Management & Business Banking comprises three segments. Wealth Management International & Switzerland offers a comprehensive range of products and services individually tailored to affluent international and Swiss clients and operates from offices around the world. Wealth Management US is a US financial services firm providing sophisticated wealth management services to affluent US clients through a highly trained financial advisor network. Business Banking Switzerland provides individual and corporate clients in Switzerland with a complete portfolio of banking and securities services, focused on customer service excellence, profitability and growth, using a multi-channel distribution. The segments share technological and physical infrastructure, and have joint departments supporting major functions such as e-commerce, financial planning and wealth management, investment policy and strategy.

Global Asset Management

Global Asset Management provides investment products and services to institutional investors and wholesale intermediaries around the globe. Clients include corporate and public pension plans, financial institutions and advisors, central banks, charities, foundations and individual investors.

Investment Bank

The Investment Bank operates globally as a client-driven investment banking and securities firm providing innovative products, research, advice and complete access to the world's capital markets for intermediaries, governments, corporate and institutional clients and other parts of UBS. In addition, UBS is active in market-making and proprietary trading.

Industrial Holdings

The Industrial Holdings segment comprises the non-financial businesses of UBS, including the private equity business which primarily invests UBS and third-party funds in unlisted companies. The most significant business in this segment, Motor-Columbus, was sold on 23 March 2006 and is presented as discontinued operations. Additionally, certain private equity investments sold in 2007 and prior years are presented as discontinued operations.

Corporate Center

Corporate Center ensures that the Business Groups operate as a coherent and effective whole with a common set of values and principles in such areas as risk management and control, financial reporting, marketing and communications, funding, capital and balance sheet management, management of foreign currency earnings, information technology infrastructure and service centers. Private Banks & GAM, which was shown as a separate segment within Corporate Center prior to 2006, was sold on 2 December 2005 and is presented as discontinued operations.

DRCM closure

Global Asset Management performance from continuing operations before tax in 2007 includes costs of CHF 384 million for the DRCM closure. These costs are reflected in Personnel expenses (CHF 318 million), General and administrative expenses (CHF 38 million) and impairments reflected in Depreciation of property and equipment (CHF 28 million). More than 50% of the Personnel expenses recorded relate to accelerated recognition of deferred compensation of former DRCM employees leaving UBS.

Reporting by Business Group

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 internally agreed transfer prices or at arm’s length.

For the year ended 31 December 2007
	Financial Businesses						Industrial Holdings	UBS
	Global Wealth Management & Business Banking			Global Asset Management	Investment Bank	Corporate Center
CHF million	Wealth Management International & Switzerland	Wealth Management US	Business Banking Switzerland
Income ¹	12,893	6,662	5,286	4,094	(538)	2,873	948	32,218
Credit loss (expense) / recovery	(1)	(2)	31	0	(266)	0	0	(238)
Total operating income	12,892	6,660	5,317	4,094	(804)	2,873	948	31,980
Personnel expenses	3,851	4,506	2,535	1,995	10,417	1,383	111	24,798
General and administrative expenses	1,064	976	1,101	559	3,423	1,298	44	8,465
Services (to) / from other business units	1,531	314	(674)	153	746	(2,194)	124	0
Depreciation of property and equipment	95	79	67	53	2102	739	8	1,251
Amortization of intangible assets ³	19	66	0	19	172	0	6	282
Goods and materials purchased							119	119
Total operating expenses	6,560	5,941	3,029	2,779	14,968	1,226	412	34,915
Business Group performance from continuing operations before tax	6,332	719	2,288	1,315	(15,772)	1,647	536	(2,935)
Business Group performance from discontinued operations before tax						7	128	135
Business Group performance before tax	6,332	719	2,288	1,315	(15,772)	1,654	664	(2,800)
Tax expense on continuing operations								1,311
Tax expense on discontinued operations								(266)
Net profit								(3,845)
Additional information ⁴
Total assets	349,731	71,560	295,657	51,471	1,984,045	(480,386)	501	2,272,579
Total liabilities	344,661	66,334	290,999	49,049	1,965,465	(488,124)	1,659	2,230,043
Capital expenditure	106	254	26	319	88	1,326	19	2,138

Management reporting based on expected credit loss

For internal management reporting purposes, credit loss is measured using an expected loss concept. This table shows Business Group performance consistent with the way in which the businesses are managed and the way Business Group performance is measured. Expected credit loss reflects the average annual costs that are expected to arise from positions in the current portfolio that become impaired. The adjusted expected credit loss reported for each Business Group is the expected credit loss on its portfolio plus the difference between credit loss expense and expected credit loss, amortized over a three-year period. The difference between these adjusted expected credit loss figures and the credit loss expense recorded at Group level for reporting purposes is reported in Corporate Center as adjusted expected credit loss.


Income ¹	12,893	6,662	5,286	4,094	(538)	2,873	948	32,218
Adjusted expected credit loss	(27)	(3)	203	0	(19)	(392)	0	(238)
Total operating income	12,866	6,659	5,489	4,094	(557)	2,481	948	31,980
Personnel expenses	3,851	4,506	2,535	1,995	10,417	1,383	111	24,798
General and administrative expenses	1,064	976	1,101	559	3,423	1,298	44	8,465
Services (to) / from other business units	1,531	314	(674)	153	746	(2,194)	124	0
Depreciation of property and equipment	95	79	67	53	2102	739	8	1,251
Amortization of intangible assets ³	19	66	0	19	172	0	6	282
Goods and materials purchased							119	119
Total operating expenses	6,560	5,941	3,029	2,779	14,968	1,226	412	34,915
Business Group performance from continuing operations before tax	6,306	718	2,460	1,315	(15,525)	1,255	536	(2,935)
Business Group performance from discontinued operations before tax						7	128	135
Business Group performance before tax	6,306	718	2,460	1,315	(15,525)	1,262	664	(2,800)
Tax expense on continuing operations								1,311
Tax expense on discontinued operations								(266)
Net profit								(3,845)

1 Impairments of financial investments available-for-sale for the year ended 31 December 2007 were as follows: Global Wealth Management & Business Banking CHF 11 million; Global Asset Management CHF 39 million; Investment Bank CHF 22 million; Corporate Center CHF (1) million and Industrial Holdings CHF 3 million. 2 Includes CHF 34 million for impairments of leasehold improvements and other machines and equipment. 3 For further information regarding goodwill and intangible assets by Business Group, please see Note 16: Goodwill and Intangible Assets. 4 The funding surplus or requirement is reflected in each Business Group and adjusted in Corporate Center.

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 internally agreed transfer prices or at arm’s length.

For the year ended 31 December 2006
	Financial Businesses						Industrial Holdings	UBS
	Global Wealth Management & Business Banking			Global Asset Management	Investment Bank	Corporate Center
CHF million	Wealth Management International & Switzerland	Wealth Management US	Business Banking Switzerland
Income ¹	10,827	5,863	5,085	3,220	21,726	294	565	47,580
Credit loss (expense) / recovery	1	(1)	109	0	47	0	0	156
Total operating income	10,828	5,862	5,194	3,220	21,773	294	565	47,736
Personnel expenses	3,137	3,800	2,412	1,503	11,353	1,264	122	23,591
General and administrative expenses	885	1,073	1,070	399	3,260	1,242	51	7,980
Services (to) / from other business units	1,479	281	(642)	(105)	956	(1,978)	9	0
Depreciation of property and equipment	84	74	74	27	2032	783	7	1,252
Amortization of intangible assets ³	10	53	0	4	72	9	5	153
Goods and materials purchased							116	116
Total operating expenses	5,595	5,281	2,914	1,828	15,844	1,320	310	33,092
Business Group performance from continuing operations before tax	5,233	581	2,280	1,392	5,929	(1,026)	255	14,644
Business Group performance from discontinued operations before tax						4	875	879
Business Group performance before tax	5,233	581	2,280	1,392	5,929	(1,022)	1,130	15,523
Tax expense on continuing operations								2,785
Tax expense on discontinued operations								(12)
Net profit								12,750
Additional information ⁴
Total assets	286,241	63,249	211,123	48,616	2,058,679	(323,434)	1,888	2,346,362
Total liabilities	281,327	57,681	205,747	46,589	2,038,991	(343,152)	3,404	2,290,587
Capital expenditure	257	273	14	498	593	1,385	97	3,117

Management reporting based on expected credit loss

For internal management reporting purposes, credit loss is measured using an expected loss concept. This table shows Business Group performance consistent with the way in which the businesses are managed and the way Business Group performance is measured. Expected credit loss reflects the average annual costs that are expected to arise from positions in the current portfolio that become impaired. The adjusted expected credit loss reported for each Business Group is the expected credit loss on its portfolio plus the difference between credit loss expense and expected credit loss, amortized over a three-year period. The difference between these adjusted expected credit loss figures and the credit loss expense recorded at Group level for reporting purposes is reported in Corporate Center as adjusted expected credit loss.


Income ¹	10,827	5,863	5,085	3,220	21,726	294	565	47,580
Adjusted expected credit loss	(29)	0	185	0	61	(61)	0	156
Total operating income	10,798	5,863	5,270	3,220	21,787	233	565	47,736
Personnel expenses	3,137	3,800	2,412	1,503	11,353	1,264	122	23,591
General and administrative expenses	885	1,073	1,070	399	3,260	1,242	51	7,980
Services (to) / from other business units	1,479	281	(642)	(105)	956	(1,978)	9	0
Depreciation of property and equipment	84	74	74	27	2032	783	7	1,252
Amortization of intangible assets ³	10	53	0	4	72	9	5	153
Goods and materials purchased							116	116
Total operating expenses	5,595	5,281	2,914	1,828	15,844	1,320	310	33,092
Business Group performance from continuing operations before tax	5,203	582	2,356	1,392	5,943	(1,087)	255	14,644
Business Group performance from discontinued operations before tax						4	875	879
Business Group performance before tax	5,203	582	2,356	1,392	5,943	(1,083)	1,130	15,523
Tax expense on continuing operations								2,785
Tax expense on discontinued operations								(12)
Net profit								12,750

1 Impairments of financial investments available-for-sale for the year ended 31 December 2006 were as follows: Global Wealth Management & Business Banking CHF 8 million; Global Asset Management CHF 1 million; Investment Bank CHF 5 million; Corporate Center CHF (2) million and Industrial Holdings CHF 23 million. 2 Includes a CHF 34 million software impairment. 3 For further information regarding goodwill and intangible assets by Business Group, please see Note 16: Goodwill and Intangible Assets. 4 The funding surplus or requirement is reflected in each Business Group and adjusted in Corporate Center.

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 internally agreed transfer prices or at arm’s length.

For the year ended 31 December 2005
	Financial Businesses							Industrial Holdings	UBS
	Global Wealth Management & Business Banking			Global Asset Management	Investment Bank	Corporate Center
CHF million	Wealth Management International & Switzerland	Wealth Management US	Business Banking Switzerland			Private Banks & GAM	Corporate Functions
Income ¹	9,024	5,158	4,949	2,487	17,448		455	795	40,316
Credit loss (expense) / recovery	(8)	0	231	0	152		0	0	375
Total operating income	9,016	5,158	5,180	2,487	17,600		455	795	40,691
Personnel expenses	2,579	3,460	2,450	988	9,259		1,167	164	20,067
General and administrative expenses	804	1,047	994	304	2,215		1,084	56	6,504
Services (to) / from other business units	1,371	223	(634)	116	640		(1,730)	14	0
Depreciation of property and equipment	89	65	72	21	136		857	7	1,247
Amortization of intangible assets ²	7	49	0	1	53		17	6	133
Goods and materials purchased								97	97
Total operating expenses	4,850	4,844	2,882	1,430	12,303		1,395	344	28,048
Business Group performance from continuing operations before tax	4,166	314	2,298	1,057	5,297		(940)	451	12,643
Business Group performance from discontinued operations before tax						4,556	8	530	5,094
Business Group performance before tax	4,166	314	2,298	1,057	5,297	4,556	(932)	981	17,737
Tax expense on continuing operations									2,465
Tax expense on discontinued operations									582
Net profit									14,690
Additional information ³
Total assets	223,790	64,896	176,837	40,782	1,706,670		(226,069)	11,549	1,998,455
Total liabilities	219,140	59,567	170,668	39,191	1,689,041		(242,600)	11,814	1,946,821
Capital expenditure	81	84	58	16	138	25	1,264	299	1,965

Management reporting based on expected credit loss

For internal management reporting purposes, credit loss is measured using an expected loss concept. This table shows Business Group performance consistent with the way in which the businesses are managed and the way Business Group performance is measured. Expected credit loss reflects the average annual costs that are expected to arise from positions in the current portfolio that become impaired. The adjusted expected credit loss reported for each Business Group is the expected credit loss on its portfolio plus the difference between credit loss expense and expected credit loss, amortized over a three-year period. The difference between these adjusted expected credit loss figures and the credit loss expense recorded at Group level for reporting purposes is reported in Corporate Functions as adjusted expected credit loss.


Management reporting based on expected credit loss
Income ¹	9,024	5,158	4,949	2,487	17,448		455	795	40,316
Adjusted expected credit loss	(13)	(2)	122	0	36		232	0	375
Total operating income	9,011	5,156	5,071	2,487	17,484		687	795	40,691
Personnel expenses	2,579	3,460	2,450	988	9,259		1,167	164	20,067
General and administrative expenses	804	1,047	994	304	2,215		1,084	56	6,504
Services (to) / from other business units	1,371	223	(634)	116	640		(1,730)	14	0
Depreciation of property and equipment	89	65	72	21	136		857	7	1,247
Amortization of intangible assets ²	7	49	0	1	53		17	6	133
Goods and materials purchased								97	97
Total operating expenses	4,850	4,844	2,882	1,430	12,303		1,395	344	28,048
Business Group performance from continuing operations before tax	4,161	312	2,189	1,057	5,181		(708)	451	12,643
Business Group performance from discontinued operations before tax						4,508	56	530	5,094
Business Group performance before tax	4,161	312	2,189	1,057	5,181	4,508	(652)	981	17,737
Tax expense on continuing operations									2,465
Tax expense on discontinued operations									582
Net profit									14,690

1 Impairments of financial investments available-for-sale for the year ended 31 December 2005 were as follows: Global Wealth Management & Business Banking CHF 10 million; Global Asset Management CHF 0 million; Investment Bank CHF 0 million; Corporate Center CHF 16 million and Industrial Holdings CHF 81 million. 2 For further information regarding goodwill and intangible assets by Business Group, please see Note 16: Goodwill and Intangible Assets. 3 The funding surplus or requirement is reflected in each Business Group and adjusted in Corporate Center.

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Note 2a

Segment Reporting by Business Group