Balance Sheet & Capital Management

Risk-weighted assets stood at CHF 331.7 billion on 30 September 2006, up CHF 15.8 billion from 30 June 2006, driven in particular by the appreciation of the US dollar against the Swiss franc. Lending-related risk-weighted assets in Global Wealth Management & Business Banking grew as a result of the increase in collateralized lending and Swiss residential mortgages. The acquisition of ABN AMRO’s futures and options business, drawdowns of credit facilities by Investment Bank clients and, to a lesser extent, higher lending to US mortgage originators also contributed to the increase. Risk-weighted assets, driven by market risk, were up, mostly related to the Investment Bank’s US-based business.

BIS Tier 1 capital on 30 September 2006 amounted to CHF 40.6 billion, up from CHF 38.4 billion on 30 June 2006, driven by the quarterly net profit and positive currency impacts, and partly offset by quarterly dividend accruals, additional share buybacks and the announced acquisition of the branch network of McDonald Investments.

The quarterly growth in risk-weighted assets was more than offset by the increase in BIS Tier 1 capital. As a result, the BIS Tier 1 ratio was 12.3% on 30 September 2006, up marginally from 12.2% on 30 June 2006.

Total capital was CHF 50.3 billion, up from CHF 45.3 billion on June 2006, predominantly due to the issuance of new lower Tier 2 capital securities as well as the positive currency impact on existing securities. A USD 1 billion 10-year subordinated bond was issued in July and a 12-year (callable after 7 years) EUR 750 million subordinated bond was raised in September.

2006 / 2007 buyback program

Our policy is to invest in the growth of our businesses by growing organically or with bolt-on acquisitions. Our strong balance sheet and high return on equity allow us to do this with internal resources. After exploiting opportunities to invest in growth, we will continue to return excess capital to our shareholders through dividends and, ultimately, through share buybacks, while maintaining our BIS Tier 1 ratio at a high level.

Under the current 2006 / 2007 buyback program on the second trading line, 11,265,000 shares have been purchased to date at an average price of CHF 69.09, representing a total cost of CHF 778 million. Our share buybacks in third quarter, as in first half, were fairly limited because of the use of capital for the acquisitions. A relatively small quantity of UBS shares were also purchased on the first trading line for employee compensation purposes. The second line program, which runs until 7 March 2007, allows us to repurchase up to CHF 5 billion in shares in total. However, under current assumptions, it does not seem likely that we will utilize the 2006 / 2007 buyback program to its full extent. We will seek approval for the cancellation of shares bought back under this program by the Annual General Meeting in April 2007.

Treasury shares

IFRS requires a company that holds its own shares for trading or non-trading purposes to record them as treasury shares and deduct them from shareholders’ equity.

Our holding of own shares fell to 130,134,858, or 6.2% of shares issued on 30 September 2006 from 202,183,442, or 9.3%, of shares issued on 30 June 2006. The decline mainly reflects the 74,200,000 shares cancelled under our previous 2005 / 2006 buyback program.

Of the treasury shares held at quarter-end, 11,265,000 were bought for cancellation whereas the other 118,869,858 primarily cover employee share and option programs, and, to a limited extent, market-making activities at the Investment Bank. The Investment Bank acts as a market maker in UBS shares and derivatives in UBS shares. It issues derivatives to retail and institutional investors and may hold shares to hedge these products. The drop in treasury share holdings compared to second quarter mainly reflects the fact that shares delivered against employee option exercises were not offset by the limited first-line share purchases to fund employee participation plans.