Capital Management

The BIS Tier 1 ratio was 11.7% on 31 March 2007, down from 11.9% on 31 December 2006. BIS risk-weighted assets stood at CHF 354.6 billion on 31 March 2007, up CHF 12.7 bil­lion from 31 December 2006. The higher level of BIS risk-weighted assets was mainly driven by the Investment Bank as a result of additional market risk (VaR) risk-weighted ­assets from equity index derivative and proprietary positions and from exposures in emerging markets, related to the UBS Pactual business. The continued lending growth in our Global Wealth Management & Business Banking business, in particular collateralized loans and drawdowns of credit facilities by Investment Bank clients, led to larger lending risk-weighted assets, while the increase from collateral trading is largely attributable to the Investment Bank's matched book growth.

BIS Tier 1 capital on 31 March 2007 was CHF 41.5 billion, up CHF 1.0 billion from 31 December 2006. Strong quarterly net profit was only partially offset by quarterly dividend accruals and shares bought back for cancellation and for share-based compensation plans. Total BIS capital was CHF 52.1 billion, up from CHF 50.4 billion, resulting in a total ­ BIS capital ratio of 14.7%, unchanged from 31 December 2006.

Old 2006 / 2007 and new 2007 / 2010 buyback programs

In first quarter 2007, under our old buyback program, we repurchased 10,420,000 shares for an average price of CHF 76.79 a share, representing a total cost of CHF 800 million. As per 7 March 2007 – the end of the old 2006 / 2007 buyback program – the total number of shares repurchased ­under this program was 33,020,000 shares for an average price of CHF 73.14 per share and a total cost of CHF 2.4 billion. As in all past programs, the shares bought in this program will be cancelled after approval by the Annual General Meeting (AGM) on 18 April 2007. In March 2007, we launched our 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). At the current share price level, the new program would represent a total amount of approximately CHF 15 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. Up to 31 March 2007, we repurchased 7,210,000 shares for an average price of CHF 69.35 a share under the new program, representing a total cost of CHF 500 million.

Treasury shares

Our holding of own shares rose to 165,758,986, or 7.9% of shares issued on 31 March 2007, from 164,475,699, or 7.8%, of shares issued on 31 December 2006. The quarterly change reflects a net increase of 1,283,287 shares resulting from an increase of 17,630,000 shares earmarked for cancellation (10,420,000 shares under the 2006 / 2007 and 7,210,000 shares under the 2007 / 2010 buyback program) and 617,382 additional shares held for market-making activities at the Investment Bank, which were almost offset by net 16,964,095 shares delivered for different compensation plans. 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.