2011 country briefing: switzerland
DESCRIPTION
2011 Country Briefing: SwitzerlandTRANSCRIPT
The European-American Chamber of Commerce European Country Briefing: Switzerland
Welcome: Minister Martin von Walterskirchen – Regional Director Americas,
Switzerland Trade and Investment Promotion
Mr. Daniel Bangser – Director North America, Switzerland Trade and Investment Promotion
Mr. Sébastien Maury – Senior Manager, International Corporate Tax ,
KPMG Switzerland
Mr. Douglas Ebert- Senior Advisor Americas , Greater Zurich Area
Presenting Sponsor: Sponsors:
Host Company:
Country Briefing Agenda
Presentation by
Jon Ramey, UBS Director and Complex Manager, Southwest Ohio
Presentation by Mr. Daniel Bangster, Mr. Sébastien Maury and Mr. Doug Ebert
Interactive Panel Discussion
Moderated by Anne Cappel, Executive Director, EACC
Cocktail Reception & Networking
UBS standard presentation
July 26, 2011
Jon Ramey, Director
GENERALLY ACCESSIBLE
Complex Manager Southwest Ohio Complex
Second quarter 2011
SECTION 1
Brief introduction to UBS UBS – one of the world's leading financial firms UBS facts and figures Worldwide presence Over 150 years of experience
5
UBS – one of the leading financial firms
• UBS draws on its 150-year heritage to serve private, institutional and corporate clients worldwide, as well as retail clients in Switzerland.
• We combine our wealth management, investment banking and asset management businesses with our Swiss operations to deliver superior financial solutions.
• UBS is present in all major financial centers worldwide. It has offices in over 50 countries, with about 37% of its employees working in the Americas, 37% in Switzerland, 16% in the rest of Europe and 10% in Asia Pacific. UBS employs about 65,000 people around the world.
• Its shares are listed on the SIX Swiss Exchange and the New York Stock Exchange (NYSE).
6
UBS facts and figures
Accolades
One of the largest wealth managers in the world
One of the largest global institutional asset managers
UBS Investment Bank ranked #1 nine years in a row in Institutional Investor's All-Europe Research survey
Market capitalization of CHF 59 billion
CHF 2,069 billion in assets under management
Well capitalized with a BIS Tier 1 capital ratio of 18.1% and a FINMA leverage ratio of 4.8%
Financials1
Over 150 years experience in private banking
About 65,000 people in 50 countries
Know how
1 As at 26.7.2011; UBS quarterly report
7
Worldwide presence About 66,000 people in 50 countries
Americas 36%
Europe, Middle East and Africa 16%
Switzerland 36%
Asia Pacific 12%
8
Over 150 years of experience
SECTION 2
UBS's business aspiration UBS's strategy UBS governance UBS organization UBS's businesses UBS's strategic principles Integration as a major underlying driver Code of business conduct and ethics of UBS
10
UBS's business aspiration Become the leading client-focused global bank
Continue to have a leading position across all client segments in Switzerland !
Strengthen our position as the #1 global bank for HNW/UHNW clients !
A top-tier bank in every growth region ! A leading client-focused investment bank !
11
UBS's strategy
• Our joint efforts are focused on – Wealthy investors, institutional and corporate clients, and our domestic Swiss business. – Geographically, we aim to be a top tier bank in every growth region. – We will optimize the combination of our businesses to generate more value.
• In order to refocus our portfolio, we will concentrate our efforts on the following:
Our business is built on strong relationships
Businesses Build on our strong Wealth Management franchise
Transform our Investment Bank into an integrated and client-focused business
Manage Wealth Management Americas for increased profitability
Monetize improved investment performance in Global Asset Management through gaining new client assets and improving retention of existing client assets
Geographies Reinforce commitment to our leading position in Switzerland
Capture the full value from growth in Asia Pacific and other emerging markets
Clients Further strengthen our Ultra High Net Worth franchise and increase market share
Position Wealth Management Americas as an advice-led Wealth Management platform while focusing on our High Net Worth/Ultra High Net Worth client franchise
12
UBS corporate governance
Board of Directors
Group Executive Board
The BoD has ultimate responsibility for the success of the UBS Group and for delivering sustainable shareholder value within a framework of prudent and effective controls. It decides on UBS’s strategic aims and the necessary financial and human resources upon recommendation of the Group Chief Executive Officer ("Group CEO") and sets the UBS Group’s values and standards to ensure that its obligations to its shareholders and others are met.
Shareholders elect each member of the BoD, which in turn appoints its Chairman, the Vice Chairman, the Senior Independent Director, and the chairpersons and members of its various committees.
Kaspar Villiger Chairman BoD
Under the leadership of the Group CEO, the GEB has executive management responsibility for the UBS Group and its business. It assumes overall responsibility for the development of the UBS Group and business division strategies and the implementation of the approved strategies.
All GEB members (with the exception of the Group CEO) are proposed by the Group CEO. The appointments are approved by the BoD.
Sergio P. Ermotti UBS Group CEO
13
UBS organization
Sergio P. Ermotti Group Chief Executive Officer
Group Executive Board
Board of Directors
Kaspar Villiger, Chairman
Global Asset Management
John A. Fraser Chairman & Chief Executive Officer
Investment Bank
Carsten Kengeter Chief Executive Officers
Corporate Center
Ulrich Körner Group Chief Operating Officer & Chief Executive Officer, Corporate Center
Wealth Management Americas
Bob Mc Cann Chief Executive Officer
Wealth Management & Swiss Bank
Lukas Gähwiler CEO UBS Switzerland Juerg Zeltner CEO UBS Wealth Management
14
UBS's businesses
Wealth Management & Swiss Bank Focuses on delivering comprehensive financial services to high net worth and ultra high net worth individuals around the world – except to those served by Wealth Management Americas – as well as private and corporate clients in Switzerland. Our Wealth Management business unit provides clients in over 40 countries, including Switzerland, with financial advice, products and tools to fit their individual needs. Our Retail & Corporate business unit has a leading position across its client segments in Switzerland.
Wealth Management Americas Provides advice-based relationships through financial advisors who deliver a fully integrated set of products and services specifically designed to address the needs of ultra high net worth, high net worth and core affluent individuals and families. It includes the Wealth Management US business, as well as the domestic Canadian business and the international business booked in the United States.
Global Asset Management A large-scale asset manager with businesses diversified across regions, capabilities and distribution channels. It offers investment capabilities and investment styles across all major traditional and alternative asset classes. These include equities, fixed income, currency, hedge fund, real estate, infrastructure and private equity investment capabilities that can also be combined in multi-asset strategies. The fund services unit provides legal fund set-up and accounting and reporting for all retail and institutional funds.
Investment Bank Provides securities and other financial products and research in equities, fixed income, rates, foreign exchange and precious metals. It also provides advisory services and access to the world's capital markets for corporate and institutional clients, governments, financial intermediaries, alternative asset managers and private investors.
Provides and manages support and control functions for Group in such areas as risk control, finance, legal and compliance, funding, capital and balance sheet management, management of foreign currencies, communication and branding, human resources, information technology, real estate, procurement corporate development and service centers. Most costs and personnel of the Corporate Center are allocated to the business divisions.
Corporate Center
15
UBS's strategic principles Reputation, integration, execution
Reputation
Put the clients at the center of everything we do
Treat reputation and people as our most valuable assets
Ensure discipline and implement best-in-class governance processes
Integration Deliver the best of all of UBS to our clients
Enhance structures & processes for further cost and capital efficiency
Take a holistic portfolio view in decision-making
Execution Build a strong performance-oriented culture
Ensure consistent high-quality delivery externally & internally
Retain, develop and hire the best talent at all levels
16
Integration as a major underlying driver
Wealth Management
Investment Bank
Global Asset Management
• Silo-business culture • Common business goals and holistic group portfolio view
From: «One brand» as the main integrating factor
To: Integration as the key underlying force of UBS
• Limited integration efforts • Systematic approach with explicit structures/ incentives to enforce integration
• No systematic cross-divisional client coverage • Delivering the best of UBS to all our clients
• Limited synergy potential captured • Full value creation potential through explicit integration measures
17
Code of Business Conduct and Ethics of UBS The Code defines the way UBS does business
• It sets out the principles and practices that UBS expects all of its employees and directors to follow unreservedly.
• It underscores the critical importance of responsible corporate behavior.
• It sets out the way we behave in pursuing business opportunities and all our dealings with stakeholders.
• It is the basis for all UBS policies, guidelines and statements relating to each of our employees' personal commitment to appropriate and responsible corporate behavior.
• And all related internal and external policies and rules must be complied with.
SECTION 3
Our identity Vision and mission Our values Corporate responsibility at UBS
19
UBS: defining our identity
Our essence What we want to be known for:
Our vision As a firm, we want to be:
Our strategy Collectively, we focus on:
Our values Each of us is committed to:
Relationships are the basis of our business: We believe that investing in relationships gives the best return for our clients, our people and our shareholders.
That’s why we put the needs of our clients and building long-term relationships at the heart of our business. We deliver all our expertise, and execute to the most exacting standards.
Our joint efforts are focused on wealthy investors, institutional and corporate clients, and our domestic Swiss business. Geographically, we aim to be a top tier bank in every growth region.
Return on relationships
The choice of clients – worldwide
Reputation Integration Execution
Truth Clarity Performance
20
Our values Each of us is committed to truth, clarity and performance Higher standards are the foundation for long term, mutually rewarding relationships. These three values shape the behaviour of everyone at UBS as they work to reach our firm's vision.
Accuracy. Authenticity. Certainty We behave with respect and integrity. We are accurate, realistic and accountable. We always act fairly and abide by the law.
Clarity
Achievement. Execution. Attainment We will always give our best. We will perform to the highest professional standards. We will lead the market through superior service and execution.
Performance
Ease. Simplicity. Directness We make it easy to do business with UBS. We are concise, precise and to the point. We are reliable and consistent.
Truth
21
Corporate Responsibility at UBS
Corporate Responsibility
Communications, training & awareness raising
Societal responsibilities
• Environment • Human rights • Responsible
supply chain • Community
investment
Workplace responsibilities
• Responsible employment practices
• Diversity & equal opportunity
• Health & safety
• Compliance with laws, rules & regulations
• Combating financial crime
• Tax compliance
Legal & regulatory responsibilities
Code of Business Conduct & Ethics
• Ethical standards • UBS values • Fairness and
integrity in client relations
Ethical responsibilities
Responsible behavior creates sustainable value for UBS and its stakeholders
22
Caution regarding forward looking statements/Disclaimer
Cautionary Statement Regarding Forward-Looking Statements | This report contains statements that constitute “forward-looking statements”, including but not limited to management’s outlook for UBS’s financial performance and statements relating to the anticipated effect of transactions and strategic initiatives on UBS’s business and future development. While these forward-looking statements represent UBS’s judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS’s expectations. These factors include, but are not limited to: (1) developments in the markets in which UBS operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, currency exchange rates and interest rates and the effect of economic conditions and market developments on the financial position or creditworthiness of UBS’s clients and counterparties; (2) changes in the availability of capital and funding, including any changes in UBS’s credit spreads and ratings; (3) the ability of UBS to retain earnings and reduce its risk-weighted assets in order to comply with recommended Swiss capital requirements without adversely affecting its business; (4) changes in financial regulation in Switzerland, the US, the UK and other major financial centers which may impose constraints on or necessitate changes in the scope and location of UBS’s business activities and in its legal and booking structures, including the imposition of more stringent capital and liquidity requirements, incremental tax requirements and constraints on remuneration, some of which may affect UBS in a different manner or degree than they affect competing institutions; (5) the liability to which UBS may be exposed due to legal claims and regulatory investigations, including those stemming from market dislocation and losses incurred by clients and counterparties during the financial crisis; (6) the outcome and possible consequences of pending or future inquiries or actions concerning UBS’s cross-border banking business by tax or regulatory authorities in various jurisdictions; (7) the degree to which UBS is successful in effecting organizational changes and implementing strategic plans, and whether those changes and plans will have the effects intended; (8) UBS’s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses; (9) changes in accounting standards or policies, and accounting determinations affecting the recognition of gain or loss, the valuation of goodwill and other matters; (10) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (11) changes in the size, capabilities and effectiveness of UBS’s competitors, including whether UBS will be successful in keeping pace with competitors in updating its technology, particularly in trading businesses; and (12) the occurrence of operational failures, such as fraud, unauthorized trading and systems failures, either within UBS or within a counterparty. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS’s Annual Report on Form 20-F for the year ended 31 December 2010. UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Disclaimer | This document and the information contained herein are provided solely for information purposes, and are not to be construed as a solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS AG or its affiliates should be made on the basis of this document. Refer to the UBS's annual and quarterly financial reports, including UBS's fourth quarter 2010 report for additional information. These reports are available at http://www.ubs.com/1/e/investors/topics.html. UBS undertakes no obligation to update the information contained herein.
UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect.
© UBS 2010. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Switzerland Business and Tax Update
Cincinnati, OH – October 13, 2011
Switzerland in a nutshell
• In the heart of Europe
• 7.5m inhabitants
• Would fit 238 times into the US territory!
• 4 official languages
• Politically not part of the EU but economically (fully) integrated – own currency (CHF)
• Direct and very stable democracy – neutral
• Tops the overall ranking in The WEF Global Competitiveness Report 2011-2012
Switzerland in a nutshell
Ohio 41,330 square miles (107,044 km²) Longest E-W extention: 210 mi (338 km) Longest N-S extention: 230 mi (370 km) Nominal GDP per Capita: $41‘000
Switzerland 15'940 square miles (41,285 km²) Longest E-W extention: 216 mi (348 km) Longest N-S extention: 137 mi (220 km) Nominal GDP per Capita: $66‘600
In 2010, Switzerland was the single biggest FDI investor in the U.S.
Swiss-U.S. Impact
• Switzerland is second largest foreign direct investor in the U.S. manufacturing sector
• Swiss investment in U.S. $189 billion, more than all of Latin America and Australia combined
• Annual trade in goods U.S.-Switzerland is worth approx. US$33.5 billion
• Switzerland purchases more U.S. private services than China and Indonesia combined
• Eighth largest destination for US foreign direct investment abroad
Over 500 Swiss companies in the U.S. have
created about 500,000 American jobs
• Over 800 U.S. companies in Switzerland have created about 75,000 Swiss jobs
Swiss-U.S. Impact
Europe‘s Most Innovative Country Pro Inno Europe: European Innovation Scoreboard 2010
Swiss Global Impact
Country /Economy 2011/2012 Rank
2010/2011 Rank
Switzerland 1 1
Singapore 2 3
Sweden 3 2
Finland 4 7
United States 5 4
Germany 6 5
Netherlands 7 8
Denmark 8 9
Japan 9 6
United Kingdom 10 12
World‘s Most Competitive Economy The Global Competitiveness Report, World Economic Forum
Income Taxation – General Principles at a Glance (1)
Overall Ordinary Effective Tax Rates
Jura
Vaud
Bern
Valais
Ticino
Glarus
Luzern
Fribourg
Neuchâtel
Aargau Z ü rich
Thurgau
Schwyz
St. Gallen
Zug
Uri
Jura
Vaud
Valais
Graubünden
Glarus
Luzern 16%
Fribourg
Neuchatel
Aargau 19.7%
Zürich 21.2%
Thurgau 16.6%
Schwyz 14.1%
St. Gallen 16.9%
Zug
Uri
16.0%
Bern 21.6%
22.6%
15.6%
12.7%
12.7%
NW OW
Genève
Schaffhausen
BL
Basel
SO
AR AI
Tessin
20.7%
19.6%
16.4%
20.8%
15.8%
21.6%
23.5%
24.2%
22.2%
20.8%
22.3%
Income Taxation – General Principles at a Glance (2)
• Three levels of income taxation, leading to an ordinary overall Effective Tax Rates (“ETR”) ranging between 11.6% and 25.4% (depending on location)
• Trend: Reduction
• Tax planning: Privileged tax regimes
Holding company > ETR of 7.8% Mixed company > ETR of 8% - 12% Principal company > ETR of 5% -10% Tax holidays possible (on cantonal/communal and federal level)
Examples 2009 2010 2012
Canton of Luzern 18.4% 16% 12%
2010 2014 2016
Canton of Neuchatel 22.2% 18.4% 15.6%
Swiss (IP) Mixed
Company
Foreign Company
Foreign Company
80% of income 80% of expenses
Base statutory mixed company rate:
Examples
Canton of Zug (quota of 10%) 8.7%
Canton of Schaffhausen (quota of 10%) 8.7%
Canton of Aargau (quota of 10%) 9.1%
Canton of Luzern (cantonal flat tax of 1.5%) 8.5%
Mixed company as tax planning tool
A multi purpose vehicle
No Swiss substance requirement (foreign CFC rules to be considered)
No restriction regarding type of IP
Not limited to IP income
No obligation to further develop the IP in- or outside of Switzerland
Reduction of tax base leads to substantially lower ETR
Depreciation of IP Branch exemption Hybrid instrument Principal structures
legal title physical flow
Principal company
Research Centre (contract R&D)
Distribution Centers
Customers
Suppliers
Manufacturing (consignment)
Sales and Marketing (limited risk distribution)
Principal Trading functions and risks
IP
Delivery of materials
purchase of materials
Delivery of goods
Delivery of goods
Sale 2 Sale 1 (flash title)
ETR of 5%-10% (depending on location and set-up) Further reduction through base erosion planning
Principal company (cont.)
• Substantive, and not just contractual, reallocation of function, risk, IP and the respective income (as opposed to fully-fledged local distributors)
• Foreign branch exemption if foreign sales entities are operating under limited risk buy-sell arrangement
• 50% exemption of sales and sales related income
• Royalties typically in sales price included
• Effective Tax Rate
• Approx. 6% (SH) as starting point
• Further reduction possible through tax base erosion planning
• Principal structure very suitable as post-acquisition structure
Base erosion: Lux Hybrid
• Equity in Lux and loan payable in Switzerland
• In Lux / NL income qualifies for participation exemption
• Interest expenses are tax deductible in Switzerland (thin cap rules to be respected)
Lux/NL Company
Swiss Company
Hybrid loan Interest
Parent Co
New license box – Canton of Nidwalden (1)
• Net licensing income taxed separately at an effective tax rate of 8.84%
• Net income defined as gross income less proportion of admin and finance expenses, attributable tax expense and directly attributable depreciation and license fee expenses R&D expenses not included in this definition => fully deductible against other (ordinarily taxed) income
• Very broad definition of IP (in line with OECD definition), including amongst others:
Copyright Secret formula or process Patents Trademarks Design or model Plans Information concerning industrial, commercial or scientific experience
New license box – Canton of Nidwalden (2)
• Applies to acquired and self-developed IP
• No further development of IP required
• Tax provisions allowed for future R&D expenses – no time or amount restrictions (justification needed)
• Outlook: Various other cantons in process of implementation – similar solution discussed at federal level (leading to ETR ranging from approx. 2.5% to 5%, depending on location)
Swiss corporate taxation – short update/outlook
• Trend towards reduction of corporate income tax rates
Various cantons have already reduced (Lucerne) or have decided to reduce the rate in the coming years (Neuchatel, Schaffhausen)
Initial discussions to reduce the federal tax rate by half
• Increase of VAT (from 7.6% to 8% effective January 1st, 2011) – still by far the lowest rate in Europe (min. 15% in the EU)
• Abolishment of issuance stamp duty (within the next 5 years) and net wealth tax (initial discussions)
• Amendment of the participation exemption system (change from an indirect to a direct exemption system/reduction of minimum holding requirements
What is driving the decision?
• Customer need?
• Proximity to the Market?
• Technology (R&D)?
• Regulatory Environment?
• Availability of workforce?
• Fiscal Advantages?
Due Diligence: What Makes or Breaks a Project?
Switzerland Wins on Soft Factors Too • Business-friendly legal system and labor relations
• Highly productive, multi-lingual workforce
• Excellent protection of intellectual property rights
• Efficient capital markets
• World renowned universities and R&D
• Great quality of life and international schools
• A strategic Europe or EMEA location
Due Diligence: Other Typical Considerations
Swiss Investment in the Tri-State Area
…and about 100 more!
− AIG − Parker Hannifin − Kelly − Agilent Technologies − Polo Ralph Lauren − Cargill − Energizer − Chiquita − Autodesk − Palm one − Colgate-Palmolive − Owens-Illinois − Verisign − Columbia
− IBM − General Motors − Google − Teredata − Dow − Pfizer − Invacare − Kraft Foods − 3M − Lexmark
International − Merck − International
Paper
− Baxter Healthcare − Ashland − Johnson
& Johnson − Thomson Reuters − MAG − AGCO − Ecolab − Citrix − Abbott − Garmin − Nordson − Tyco − Amgen
− Proctor & Gamble − Caterpillar − Cisco − Fedex − Honeywell − Cardinal Health − Dupont − General Mills − Medtronic − Eaton − PPG Industries − Eastman Kodak − Stryker − Ebay
− Huntsman − Fisher Clinical/
Thermo Fisher − Becton Dickinson − Genzymes − Synthes − Fossil Group
Central/East West Northwest
US Investment in Switzerland
− Alpharma − Abercrombie & Fitch − Guess? − VF Corporation − Acer America − Allied Telesis
South
Switzerland Scored 99 Foreign Direct Investment Projects in 2010 New investments in 2011 include…
•Cytori– European Sales Headquarters (Zug) •Fletcher/CSI – European Operations (Basel) •Kayak – European Headquarters (Zurich) •Newell Rubbermaid – EMEA Headquarters (Geneva) •Special Materials Company – European Commercial/Logistics (Martigny)
with more to come…
Latest News from the U.S.
IT MUST MAKE GOOD BUSINESS SENSE!
In conclusion
Swiss Map
UBS standard presentation
July 26, 2011
Jon Ramey, Director
GENERALLY ACCESSIBLE
Complex Manager Southwest Ohio Complex
Second quarter 2011
SECTION 1
Brief introduction to UBS UBS – one of the world's leading financial firms UBS facts and figures Worldwide presence Over 150 years of experience
2
UBS – one of the leading financial firms
• UBS draws on its 150-year heritage to serve private, institutional and corporate clients worldwide, as well as retail clients in Switzerland.
• We combine our wealth management, investment banking and asset management businesses with our Swiss operations to deliver superior financial solutions.
• UBS is present in all major financial centers worldwide. It has offices in over 50 countries, with about 37% of its employees working in the Americas, 37% in Switzerland, 16% in the rest of Europe and 10% in Asia Pacific. UBS employs about 65,000 people around the world.
• Its shares are listed on the SIX Swiss Exchange and the New York Stock Exchange (NYSE).
3
UBS facts and figures
Accolades One of the largest wealth managers in the world
One of the largest global institutional asset managers
UBS Investment Bank ranked #1 nine years in a row in Institutional Investor's All-Europe Research survey
Market capitalization of CHF 59 billion
CHF 2,069 billion in assets under management
Well capitalized with a BIS Tier 1 capital ratio of 18.1% and a FINMA leverage ratio of 4.8%
Financials1
Over 150 years experience in private banking
About 65,000 people in 50 countries
Know how
1 As at 26.7.2011; UBS quarterly report
4
Worldwide presence About 66,000 people in 50 countries
Americas 36%
Europe, Middle East and Africa 16%
Switzerland 36%
Asia Pacific 12%
5
Over 150 years of experience
SECTION 2
UBS's business aspiration UBS's strategy UBS governance UBS organization UBS's businesses UBS's strategic principles Integration as a major underlying driver Code of business conduct and ethics of UBS
7
UBS's business aspiration Become the leading client-focused global bank
Continue to have a leading position across all client segments in Switzerland !
Strengthen our position as the #1 global bank for HNW/UHNW clients !
A top-tier bank in every growth region ! A leading client-focused investment bank !
8
UBS's strategy
• Our joint efforts are focused on – Wealthy investors, institutional and corporate clients, and our domestic Swiss business. – Geographically, we aim to be a top tier bank in every growth region. – We will optimize the combination of our businesses to generate more value.
• In order to refocus our portfolio, we will concentrate our efforts on the following:
Our business is built on strong relationships
Businesses
Build on our strong Wealth Management franchise
Transform our Investment Bank into an integrated and client-focused business
Manage Wealth Management Americas for increased profitability
Monetize improved investment performance in Global Asset Management through gaining new client assets and improving retention of existing client assets
Geographies
Reinforce commitment to our leading position in Switzerland
Capture the full value from growth in Asia Pacific and other emerging markets
Clients
Further strengthen our Ultra High Net Worth franchise and increase market share
Position Wealth Management Americas as an advice-led Wealth Management platform while focusing on our High Net Worth/Ultra High Net Worth client franchise
9
UBS corporate governance
Board of Directors
Group Executive Board
The BoD has ultimate responsibility for the success of the UBS Group and for delivering sustainable shareholder value within a framework of prudent and effective controls. It decides on UBS’s strategic aims and the necessary financial and human resources upon recommendation of the Group Chief Executive Officer ("Group CEO") and sets the UBS Group’s values and standards to ensure that its obligations to its shareholders and others are met.
Shareholders elect each member of the BoD, which in turn appoints its Chairman, the Vice Chairman, the Senior Independent Director, and the chairpersons and members of its various committees.
Kaspar Villiger Chairman BoD
Under the leadership of the Group CEO, the GEB has executive management responsibility for the UBS Group and its business. It assumes overall responsibility for the development of the UBS Group and business division strategies and the implementation of the approved strategies.
All GEB members (with the exception of the Group CEO) are proposed by the Group CEO. The appointments are approved by the BoD.
Sergio P. Ermotti UBS Group CEO
10
UBS organization
Sergio P. Ermotti Group Chief Executive Officer
Group Executive Board
Board of Directors
Kaspar Villiger, Chairman
Global Asset Management
John A. Fraser Chairman & Chief Executive Officer
Investment Bank
Carsten Kengeter Chief Executive Officers
Corporate Center
Ulrich Körner Group Chief Operating Officer & Chief Executive Officer, Corporate Center
Wealth Management Americas
Bob Mc Cann Chief Executive Officer
Wealth Management & Swiss Bank
Lukas Gähwiler CEO UBS Switzerland Juerg Zeltner CEO UBS Wealth Management
11
UBS's businesses
Wealth Management & Swiss Bank Focuses on delivering comprehensive financial services to high net worth and ultra high net worth individuals around the world – except to those served by Wealth Management Americas – as well as private and corporate clients in Switzerland. Our Wealth Management business unit provides clients in over 40 countries, including Switzerland, with financial advice, products and tools to fit their individual needs. Our Retail & Corporate business unit has a leading position across its client segments in Switzerland.
Wealth Management Americas Provides advice-based relationships through financial advisors who deliver a fully integrated set of products and services specifically designed to address the needs of ultra high net worth, high net worth and core affluent individuals and families. It includes the Wealth Management US business, as well as the domestic Canadian business and the international business booked in the United States.
Global Asset Management A large-scale asset manager with businesses diversified across regions, capabilities and distribution channels. It offers investment capabilities and investment styles across all major traditional and alternative asset classes. These include equities, fixed income, currency, hedge fund, real estate, infrastructure and private equity investment capabilities that can also be combined in multi-asset strategies. The fund services unit provides legal fund set-up and accounting and reporting for all retail and institutional funds.
Investment Bank Provides securities and other financial products and research in equities, fixed income, rates, foreign exchange and precious metals. It also provides advisory services and access to the world's capital markets for corporate and institutional clients, governments, financial intermediaries, alternative asset managers and private investors.
Provides and manages support and control functions for Group in such areas as risk control, finance, legal and compliance, funding, capital and balance sheet management, management of foreign currencies, communication and branding, human resources, information technology, real estate, procurement corporate development and service centers. Most costs and personnel of the Corporate Center are allocated to the business divisions.
Corporate Center
12
UBS's strategic principles Reputation, integration, execution
Reputation
Put the clients at the center of everything we do
Treat reputation and people as our most valuable assets
Ensure discipline and implement best-in-class governance processes
Integration Deliver the best of all of UBS to our clients
Enhance structures & processes for further cost and capital efficiency
Take a holistic portfolio view in decision-making
Execution Build a strong performance-oriented culture
Ensure consistent high-quality delivery externally & internally
Retain, develop and hire the best talent at all levels
13
Integration as a major underlying driver
Wealth Management
Investment Bank
Global Asset Management
• Silo-business culture • Common business goals and holistic group portfolio view
From: «One brand» as the main integrating factor
To: Integration as the key underlying force of UBS
• Limited integration efforts • Systematic approach with explicit structures/ incentives to enforce integration
• No systematic cross-divisional client coverage • Delivering the best of UBS to all our clients
• Limited synergy potential captured • Full value creation potential through explicit integration measures
14
Code of Business Conduct and Ethics of UBS The Code defines the way UBS does business
• It sets out the principles and practices that UBS expects all of its employees and directors to follow unreservedly.
• It underscores the critical importance of responsible corporate behavior.
• It sets out the way we behave in pursuing business opportunities and all our dealings with stakeholders.
• It is the basis for all UBS policies, guidelines and statements relating to each of our employees' personal commitment to appropriate and responsible corporate behavior.
• And all related internal and external policies and rules must be complied with.
SECTION 3
Our identity Vision and mission Our values Corporate responsibility at UBS
16
UBS: defining our identity
Our essence What we want to be known for:
Our vision As a firm, we want to be:
Our strategy Collectively, we focus on:
Our values Each of us is committed to:
Relationships are the basis of our business: We believe that investing in relationships gives the best return for our clients, our people and our shareholders.
That’s why we put the needs of our clients and building long-term relationships at the heart of our business. We deliver all our expertise, and execute to the most exacting standards.
Our joint efforts are focused on wealthy investors, institutional and corporate clients, and our domestic Swiss business. Geographically, we aim to be a top tier bank in every growth region.
Return on relationships
The choice of clients – worldwide
Reputation Integration Execution
Truth Clarity Performance
17
Our values Each of us is committed to truth, clarity and performance Higher standards are the foundation for long term, mutually rewarding relationships. These three values shape the behaviour of everyone at UBS as they work to reach our firm's vision.
Accuracy. Authenticity. Certainty We behave with respect and integrity. We are accurate, realistic and accountable. We always act fairly and abide by the law.
Clarity
Achievement. Execution. Attainment We will always give our best. We will perform to the highest professional standards. We will lead the market through superior service and execution.
Performance
Ease. Simplicity. Directness We make it easy to do business with UBS. We are concise, precise and to the point. We are reliable and consistent.
Truth
18
Corporate Responsibility at UBS
Corporate Responsibility
Communications, training & awareness raising
Societal responsibilities
• Environment • Human rights • Responsible
supply chain • Community
investment
Workplace responsibilities
• Responsible employment practices
• Diversity & equal opportunity
• Health & safety
• Compliance with laws, rules & regulations
• Combating financial crime
• Tax compliance
Legal & regulatory responsibilities
Code of Business Conduct & Ethics
• Ethical standards • UBS values • Fairness and
integrity in client relations
Ethical responsibilities
Responsible behavior creates sustainable value for UBS and its stakeholders
19
Caution regarding forward looking statements/Disclaimer
Cautionary Statement Regarding Forward-Looking Statements | This report contains statements that constitute “forward-looking statements”, including but not limited to management’s outlook for UBS’s financial performance and statements relating to the anticipated effect of transactions and strategic initiatives on UBS’s business and future development. While these forward-looking statements represent UBS’s judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS’s expectations. These factors include, but are not limited to: (1) developments in the markets in which UBS operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, currency exchange rates and interest rates and the effect of economic conditions and market developments on the financial position or creditworthiness of UBS’s clients and counterparties; (2) changes in the availability of capital and funding, including any changes in UBS’s credit spreads and ratings; (3) the ability of UBS to retain earnings and reduce its risk-weighted assets in order to comply with recommended Swiss capital requirements without adversely affecting its business; (4) changes in financial regulation in Switzerland, the US, the UK and other major financial centers which may impose constraints on or necessitate changes in the scope and location of UBS’s business activities and in its legal and booking structures, including the imposition of more stringent capital and liquidity requirements, incremental tax requirements and constraints on remuneration, some of which may affect UBS in a different manner or degree than they affect competing institutions; (5) the liability to which UBS may be exposed due to legal claims and regulatory investigations, including those stemming from market dislocation and losses incurred by clients and counterparties during the financial crisis; (6) the outcome and possible consequences of pending or future inquiries or actions concerning UBS’s cross-border banking business by tax or regulatory authorities in various jurisdictions; (7) the degree to which UBS is successful in effecting organizational changes and implementing strategic plans, and whether those changes and plans will have the effects intended; (8) UBS’s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses; (9) changes in accounting standards or policies, and accounting determinations affecting the recognition of gain or loss, the valuation of goodwill and other matters; (10) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (11) changes in the size, capabilities and effectiveness of UBS’s competitors, including whether UBS will be successful in keeping pace with competitors in updating its technology, particularly in trading businesses; and (12) the occurrence of operational failures, such as fraud, unauthorized trading and systems failures, either within UBS or within a counterparty. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS’s Annual Report on Form 20-F for the year ended 31 December 2010. UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Disclaimer | This document and the information contained herein are provided solely for information purposes, and are not to be construed as a solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS AG or its affiliates should be made on the basis of this document. Refer to the UBS's annual and quarterly financial reports, including UBS's fourth quarter 2010 report for additional information. These reports are available at http://www.ubs.com/1/e/investors/topics.html. UBS undertakes no obligation to update the information contained herein.
UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect.
© UBS 2010. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Switzerland Business and
Tax Update Cincinnati, OH – October 13, 2011
Switzerland in a nutshell
• In the heart of Europe
• 7.5m inhabitants
• Would fit 238 times into the US
territory!
• 4 official languages
• Politically not part of the EU but
economically (fully) integrated – own
currency (CHF)
• Direct and very stable democracy –
neutral
• Tops the overall ranking in The WEF
Global Competitiveness Report 2011-
2012
Switzerland in a nutshell
Ohio
41,330 square miles (107,044 km²)
Longest E-W extention: 210 mi (338 km)
Longest N-S extention: 230 mi (370 km)
Nominal GDP per Capita: $41„000
Switzerland
15'940 square miles (41,285 km²)
Longest E-W extention: 216 mi (348 km)
Longest N-S extention: 137 mi (220 km)
Nominal GDP per Capita: $66„600
In 2010, Switzerland was the single biggest FDI investor in the U.S.
Swiss-U.S. Impact
• Switzerland is second largest foreign direct
investor in the U.S. manufacturing sector
• Swiss investment in U.S. $189 billion, more than
all of Latin America and Australia combined
• Annual trade in goods U.S.-Switzerland is worth
approx. US$33.5 billion
• Switzerland purchases more U.S. private services
than China and Indonesia combined
• Eighth largest destination for US foreign direct
investment abroad
Over 500 Swiss companies in the U.S. have
created about 500,000 American jobs
• Over 800 U.S. companies in Switzerland have
created about 75,000 Swiss jobs
Swiss-U.S. Impact
Europe„s Most Innovative Country Pro Inno Europe: European Innovation Scoreboard 2010
Swiss Global Impact
Country /Economy 2011/2012
Rank
2010/2011
Rank
Switzerland 1 1
Singapore 2 3
Sweden 3 2
Finland 4 7
United States 5 4
Germany 6 5
Netherlands 7 8
Denmark 8 9
Japan 9 6
United Kingdom 10 12
World„s Most Competitive Economy The Global Competitiveness Report, World Economic Forum
Income Taxation – General Principles at a Glance (1)
Overall Ordinary Effective Tax Rates
Jura
Vaud
Bern
Valais
Ticino
Glarus
Luzern
Fribourg
Neuchâtel
Aargau Z ü rich
Thurgau
Schwyz
St.
Gallen Zug
Uri
Jura
Vaud
Valais
Graubünden
Glarus
Luzern
16%
Fribourg
Neuchatel
Aargau
19.7% Zürich
21.2%
Thurgau
16.6%
Schwyz
14.1%
St. Gallen
16.9% Zug
Uri
16.0%
Bern
21.6%
22.6%
15.6%
12.7%
12.7%
NW OW
Genève
Schaffhausen
BL
Basel
SO
AR
AI
Tessin
20.7%
19.6%
16.4%
20.8%
15.8%
21.6%
23.5%
24.2%
22.2%
20.8%
22.3%
Income Taxation – General Principles at a Glance (2)
• Three levels of income taxation, leading to an ordinary overall Effective Tax
Rates (“ETR”) ranging between 11.6% and 25.4% (depending on location)
• Trend: Reduction
• Tax planning: Privileged tax regimes
Holding company > ETR of 7.8%
Mixed company > ETR of 8% - 12%
Principal company > ETR of 5% -10%
Tax holidays possible (on cantonal/communal and federal level)
Examples 2009 2010 2012
Canton of Luzern 18.4% 16% 12%
2010 2014 2016
Canton of Neuchatel 22.2% 18.4% 15.6%
Swiss (IP)
Mixed
Company
Foreign
Company
Foreign
Company
80% of income 80% of expenses
Base statutory mixed company rate:
Examples
Canton of Zug (quota of 10%) 8.7%
Canton of Schaffhausen (quota of 10%) 8.7%
Canton of Aargau (quota of 10%) 9.1%
Canton of Luzern (cantonal flat tax of 1.5%) 8.5%
Mixed company as tax planning tool
A multi purpose vehicle
No Swiss substance requirement
(foreign CFC rules to be
considered)
No restriction regarding type of IP
Not limited to IP income
No obligation to further develop the
IP in- or outside of Switzerland
Reduction of tax base leads to
substantially lower ETR
Depreciation of IP
Branch exemption
Hybrid instrument
Principal structures
legal title
physical flow
Principal company
Research Centre
(contract R&D)
Distribution Centers
Customers
Suppliers
Manufacturing
(consignment)
Sales and Marketing
(limited risk distribution)
Principal
Trading functions and risks
IP
Delivery of
materials
purchase of
materials
Delivery of
goods Delivery of
goods
Sale 2 Sale 1
(flash title)
ETR of 5%-10% (depending on location and set-up)
Further reduction through base erosion planning
Principal company (cont.)
• Substantive, and not just contractual, reallocation of function, risk, IP and the
respective income (as opposed to fully-fledged local distributors)
• Foreign branch exemption if foreign sales entities are operating under limited risk
buy-sell arrangement
• 50% exemption of sales and sales related income
• Royalties typically in sales price included
• Effective Tax Rate
• Approx. 6% (SH) as starting point
• Further reduction possible through tax base erosion planning
• Principal structure very suitable as post-acquisition structure
Base erosion: Lux Hybrid
• Equity in Lux and loan payable in
Switzerland
• In Lux / NL income qualifies for
participation exemption
• Interest expenses are tax
deductible in Switzerland (thin
cap rules to be respected)
Lux/NL
Company
Swiss
Company
Hybrid loan Interest
Parent Co
New license box – Canton of Nidwalden (1)
• Net licensing income taxed separately at an effective tax rate of 8.84%
• Net income defined as gross income less proportion of admin and finance
expenses, attributable tax expense and directly attributable depreciation and
license fee expenses
R&D expenses not included in this definition => fully deductible against other
(ordinarily taxed) income
• Very broad definition of IP (in line with OECD definition), including amongst
others:
Copyright Secret formula or process
Patents Trademarks
Design or model
Plans
Information concerning industrial, commercial or scientific experience
New license box – Canton of Nidwalden (2)
• Applies to acquired and self-developed IP
• No further development of IP required
• Tax provisions allowed for future R&D expenses – no time or amount
restrictions (justification needed)
• Outlook: Various other cantons in process of implementation – similar
solution discussed at federal level (leading to ETR ranging from approx. 2.5% to
5%, depending on location)
Swiss corporate taxation – short update/outlook
• Trend towards reduction of corporate income tax rates
Various cantons have already reduced (Lucerne) or have decided to reduce
the rate in the coming years (Neuchatel, Schaffhausen)
Initial discussions to reduce the federal tax rate by half
• Increase of VAT (from 7.6% to 8% effective January 1st, 2011) – still by far
the lowest rate in Europe (min. 15% in the EU)
• Abolishment of issuance stamp duty (within the next 5 years) and net
wealth tax (initial discussions)
• Amendment of the participation exemption system (change from an indirect
to a direct exemption system/reduction of minimum holding requirements
What is driving the decision?
• Customer need?
• Proximity to the Market?
• Technology (R&D)?
• Regulatory Environment?
• Availability of workforce?
• Fiscal Advantages?
Due Diligence: What Makes or Breaks a Project?
Switzerland Wins on Soft Factors Too
• Business-friendly legal system and labor relations
• Highly productive, multi-lingual workforce
• Excellent protection of intellectual property rights
• Efficient capital markets
• World renowned universities and R&D
• Great quality of life and international schools
• A strategic Europe or EMEA location
Due Diligence: Other Typical Considerations
Swiss Investment in the Tri-State Area
…and about 100 more!
AIG
Parker Hannifin
Kelly
Agilent Technologies
Polo Ralph Lauren
Cargill
Energizer
Chiquita
Autodesk
Palm one
Colgate-Palmolive
Owens-Illinois
Verisign
Columbia
IBM
General Motors
Teredata
Dow
Pfizer
Invacare
Kraft Foods
3M
Lexmark International
Merck
International Paper
Baxter Healthcare
Ashland
Johnson & Johnson
Thomson Reuters
MAG
AGCO
Ecolab
Citrix
Abbott
Garmin
Nordson
Tyco
Amgen
Proctor & Gamble
Caterpillar
Cisco
Fedex
Honeywell
Cardinal Health
Dupont
General Mills
Medtronic
Eaton
PPG Industries
Eastman Kodak
Stryker
Ebay
Huntsman
Fisher Clinical/ Thermo Fisher
Becton Dickinson
Genzymes
Synthes
Fossil Group
Central/East West Northwest
US Investment in Switzerland
Alpharma
Abercrombie & Fitch
Guess?
VF Corporation
Acer America
Allied Telesis
South
Switzerland Scored 99 Foreign Direct Investment Projects in 2010
New investments in 2011 include…
•Cytori– European Sales Headquarters (Zug)
•Fletcher/CSI – European Operations (Basel)
•Kayak – European Headquarters (Zurich)
•Newell Rubbermaid – EMEA Headquarters (Geneva)
•Special Materials Company – European Commercial/Logistics (Martigny)
with more to come…
Latest News from the U.S.
IT MUST MAKE GOOD BUSINESS SENSE!
In conclusion
Swiss Map