Balance Sheet & Capital Management

UBS’s total assets were CHF 2,299 billion on 30 September 2006, up from CHF 2,177 billion on 30 June 2006. The strengthening of the US dollar against the Swiss franc in third quarter 2006 was a large factor behind the increase, as almost half of our balance sheet assets are denominated in US dollars. Asset growth was driven by the trading portfolio (up CHF 64 billion), collateral trading (up CHF 53 billion) and loans to customers (up CHF 17 billion). This was partially offset by a drop in positive replacement values (down CHF 9 billion). The integration of the ABN AMRO futures and options business, which closed on 30 September 2006, added CHF 24 billion in assets - mainly related to positive replacement values for derivatives, loans to customers and banks, and collateral trading. The ABN AMRO acquisition will only impact the fourth quarter profit and loss statement even though it is already visible on our third quarter balance sheet.

Lending and borrowing

UBS’s lending volume (cash and balances with central banks, due from banks, loans and financial assets designated at fair value) increased by CHF 18 billion to reach CHF 352 billion on 30 September 2006. Net loans in the Investment Bank increased as a result of growth in the prime brokerage business, mainly in loan arranging and cash and collateral trading in reflection of higher short-term client demand. In addition, the ABN AMRO acquisition contributed to higher lending volumes. The increase in Global Wealth Management & Business Banking’s loan book was driven by rising mortgage volume in Switzerland and higher collateralized loan volumes for wealth management clients. The higher level of loans was also related to the Piper Jaffray acquisition. UBS’s borrowing position rose CHF 65 billion, a result of cash inflows from client and interbank deposits and additional money market papers and long-term debt issuances.

Repo and securities borrowing / lending

Cash collateral on securities borrowed and reverse repurchase agreements stood at CHF 771 billion on 30 September 2006, up CHF 53 billion from CHF 718 billion on 30 June 2006. This growth stems largely from the fixed income matched book (a portfolio comprised of assets and liabilities with equal maturities and equal value, so that market risks cancel out), higher equity financing activities (securities borrowing and lending), and a higher fixed income book to cover an increase in short trading inventories.

Trading portfolio / derivative instruments

Between 30 June 2006 and 30 September 2006, trading assets increased by CHF 64 billion to CHF 815 billion. Trading assets inventory in debt instruments rose by CHF 50 billion, mainly due to higher positions in asset-backed securities, traded loans and commercial paper. Equity instruments increased by CHF 14 billion on the back of rising equity markets. The replacement value of derivative instruments decreased slightly by CHF 9 billion to CHF 307 billion, due to movements in interest rates and currencies, partially offset by the integration of derivatives positions acquired through the ABN AMRO futures and options business.