Capital management

Graphs and Spreadsheets

BIS risk-weighted assets stood at CHF 341.9 billion on 31 December 2006, up CHF 10.2 billion from 30 September 2006. The higher level of BIS risk-weighted assets was mainly driven by the Investment Bank as a result of higher credit exposures on OTC derivatives, collateral trading and the assumption of exposures from the acquisition of Pactual. This was partly offset by reduced market risk capital requirements.

BIS Tier 1 capital on 31 December 2006 was CHF 40.6 billion, unchanged from 30 September 2006. Strong quarterly net profit was offset by quarterly dividend accruals and shares bought back for cancellation and for share-based compensation plans.

As a result, the BIS Tier 1 ratio was 11.9% on 31 December 2006, down from 12.3% on 30 September 2006. Total capital was CHF 50.5 billion, up from CHF 50.3 billion on 30 September 2006, with the increase related to the issuance of a new lower Tier 2 capital security in October 2006 (a CHF 250 million, 12-year subordinated bond).

2006 / 2007 buyback program

In fourth quarter 2006, under our current buyback program, we repurchased 11,335,000 shares for an average price of CHF 73.81 a share, representing a total cost of CHF 837 million. As per year-end, the number of shares repurchased under this 2006 / 2007 buyback program was 22,600,000 shares for an average price of CHF 71.46 per share and a total cost of CHF 1.6 billion. The current program runs until 7 March 2007. We will seek approval for the cancellation of shares bought back under this program by the Annual General Meeting (AGM) in April 2007.

After the 2006 / 2007 buyback program ends, we will launch a new three-year second-line repurchase program with a maximum limit of 10% of shares issued (total UBS shares issued on 31 December 2006 were 2,105,273,286). As in all past programs, the shares bought in this program will be cancelled as and when approved by the AGM. At the current share price level, the new program would represent a maximum total amount of approximately CHF 16 billion in shares to be bought back over the three-year period.

The extended three-year commitment underlines our continuous discipline, giving us the flexibility to manage capital in line with our main strategic priority, which is to invest in growth. We will make add-on acquisitions if appropriate opportunities arise and we will continue to make disciplined investments in organic growth.

BIS capital and ratios
	As of			% change from
CHF million, except where indicated	31.12.06	30.9.06	31.12.05	30.9.06	31.12.05
Risk-weighted assets	341,892	331,697	310,409	3	10
BIS Tier 1 capital	40,643	40,645	39,943	1	3
of which hybrid Tier 1 capital ¹	5,633	5,714	4,975	(1)	13
BIS total capital	50,479	50,279	43,917	1	16
Tier 1 (%)	11.9	12.3	12.9
of which hybrid Tier 1 capital (%) ¹	1.6	1.7	1.6
Total BIS (%)	14.8	15.2	14.1
1 Trust preferred securities.

UBS shares and market capitalization¹
	As of			% change from
Number of shares, except where indicated	31.12.06	30.9.06	31.12.05	30.9.06	31.12.05
Total ordinary shares issued	2,105,273,286	2,105,049,946	2,177,265,044	0	(3)
Second trading line treasury shares
2005 program	0	0	(67,770,000)
2006 program	(22,600,000)	(11,265,000)
Shares outstanding for market capitalization	2,082,673,286	2,093,784,946	2,109,495,044	(1)	(1)
Share price (CHF)	74.05	74.80	62.55	(1)	18
Market capitalization (CHF million)	154,222	156,615	131,949	(2)	17
Total treasury shares	*164,475,699*	130,134,858	208,519,748	26	(21)
1 All figures reflect the 2-for-1 share split made on 10 July 2006.

Treasury shares

Our holding of own shares rose to 164,475,699, or 7.8% of shares issued on 31 December 2006, from 130,134,858, or 6.2%, of shares issued on 30 September 2006. The quarterly change reflects an increase of 11,335,000 shares earmarked for cancellation under the 2006 / 2007 buyback program, 21,151,049 additional shares held to cover employee share and option programs and a marginally higher number of shares held for market-making activities at the Investment Bank. The Investment Bank, which acts as a market maker in UBS shares and derivatives in UBS shares, issues derivatives to retail and institutional investors and may hold shares to hedge these products. 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.