UBS reporting structure

Changes in 2005

In 2005, we implemented several accounting and reporting structure changes. To reflect these changes, we have restated our consolidated financial statements and the segment reporting of business units affected for all prior periods, except for the amortization of goodwill, which ceased at the beginning of 2005 for financial years after 2004. The figures and results presented in this report are based on restated numbers.

Changes to reporting structure and presentation

In 2005, we implemented several changes in our reporting structure. At the year’s outset, we decided to start reporting our private equity investments, until then a part of the Investment Bank, in the Industrial Holdings segment.

Effective 1 July, we brought our US, Swiss and international wealth management units along with our Swiss corporate and retail banking unit into one Business Group titled Global Wealth Management & Business Banking. We continue to disclose the Wealth Management International & Switzerland, Wealth Management US and Business Banking Switzerland units separately. We also transferred our municipal securities unit, until then a part of the Wealth Management US unit, to the Investment Bank’s fixed income area.

In December 2005, we sold our independently branded Private Banks and specialist asset manager GAM to Julius Baer. The performance of Private Banks & GAM is shown as discontinued operations in a separate line in Corporate Center for all periods presented.

Changes to accounting

At the start of 2005, we implemented the following changes in accounting:

– IFRS 2 Share-based Payment. IFRS 2 requires entities to recognize the fair value of share-based payments made to employees as compensation expense, recognized over the service period, which is generally equal to the vesting period.

– IAS 27 Consolidated and Separate Financial Statements and IAS 28 Investments in Associates. In the past, we treated all our private equity investments as “Financial investments available-for-sale”. The revised IAS 27 and IAS 28 required us to change the accounting treatment for some of our private equity investments, consolidating those that we control, and using the equity method of accounting where we exercise significant influence.

– IFRS 3 Business Combinations. With the introduction of IFRS 3, we stopped amortizing goodwill at the beginning of 2005. Instead, from now on, we will test goodwill annually for impairment.

– IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. This new standard requires that major lines of business and subsidiaries acquired exclusively with the intent of future sale be presented as “discontinued operations” from the time a sale is highly likely to occur. Private Banks & GAM and certain of our previously held private equity investments (now reported in Industrial Holdings) met these criteria and were reclassified accordingly.

– IAS 1 Presentation of Financial Statements. The adoption of revised IAS 1 requires the inclusion of minority interests in both net profit and equity. The newly defined net profit is then allocated into “Net profit attributable to UBS shareholders” and “Net profit attributable to minority interests”. When analyzing our performance, our focus will, as before, be on “Net profit attributable to UBS shareholders” (attributable profit) and “Equity attributable to UBS shareholders” (shareholders’ equity).

– IFRS 4 Insurance Contracts. The majority of insurance products issued by UBS are considered investment contracts and are accounted for as financial liabilities and not as insurance contracts under IFRS 4. The related assets in the balance sheet were reclassified from other assets to trading assets in 2004.

– A redefinition of recurring income for the Wealth Management US unit to include interest income, bringing it in line with the definition of recurring income for the other wealth management units.

The overall impact of all the changes above was a decrease in net profit attributable to UBS shareholders by CHF 73 million and CHF 335 million for 2004 and 2003, respectively.

Other new disclosures

As part of our continuing effort to improve the transparency of our financial reporting and provide the best possible understanding of our business, we have made a number of enhancements to our disclosure during 2005.

We have split personnel expenses into cash and share-based components. This helps to distinguish between cash expenses paid or accrued during the quarter, and deferred payments which are driven by option and share grants made in previous periods.

In our Information Technology Infrastructure (ITI) unit, we show the cost of IT infrastructure per average number of financial business employees, helping us to track the success of the unit. We also provided a new capital ratio to measure capital consumption by our business units. Called the return on adjusted regulatory capital, it is shown as a key performance indicator for the Investment Bank and Business Banking Switzerland.