Balance Sheet

As mentioned on page 6 of this report and described in detail in Note 1 to the financial statements, we have adjusted certain balance sheet items. All current and prior-period figures in the balance sheet text and tables reflect the restatement.

On 30 June 2007, UBS's total assets stood at CHF 2,539.7 billion, up a moderate 1% from CHF 2,514.1 billion on 31 March 2007. The increase was driven by higher positive replacement values on derivatives transactions (up CHF 45 billion), increased lending portfolios (up CHF 25 billion) and higher trading assets (up CHF 20 billion). Currency fluctuations against the Swiss franc contributed about CHF 19 billion to the increase. Total liabilities rose due to higher levels of borrowing (up CHF 68 billion) and negative replacement values on derivatives (up CHF 42 billion), which were partly offset by lower trading liabilities (down CHF 11 billion). Collateral trading levels declined on both the asset (down CHF 67 billion) and liability (down CHF 80 billion) sides of the balance sheet.

Lending and borrowing

Lending

Our loans to customers stood at CHF 334 billion on 30 June 2007, up CHF 21 billion from 31 March 2007, reflecting higher secured lending volumes for wealth management clients, especially in Asia. Private client mortgage volumes in Switzerland also rose, but to a lesser extent. The increase was further accentuated by the continued rise in the Investment Bank's secured lending volumes to prime brokerage clients and higher commercial lending in global syndicated finance, both slightly offset by lower secured lending balances to US mortgage originators as a result of the US mortgage securities market slowdown. Cash was CHF 6 billion on 30 June 2007, rising CHF 2 billion from 31 March 2007, while interbank balances were up slightly (CHF 1 billion).

Borrowing

Due to banks rose by CHF 11 billion to CHF 231 billion, mainly due to increased time deposits in the Investment Bank's cash and collateral trading activities to accommodate the firm's growth. Total debt issued (including financial liabilities designated at fair value) increased to CHF 402 billion on 30 June 2007, up CHF 22 billion from 31 March 2007. Money market paper issuance increased by CHF 5 billion, while the amount of long-term debt issued (including financial liabilities designated at fair value) grew by CHF 17 billion to CHF 257 billion. Due to customers was up CHF 35 billion, mainly reflecting larger time deposits from private clients in our wealth management franchise around the globe and additional growth in the Investment Bank's prime brokerage and exchange traded derivatives businesses.

Repo and securities borrowing/lending

In second quarter 2007, cash collateral on securities borrowed and reverse repurchase agreements decreased sharply by CHF 67 billion or 8% to CHF 775 billion, while the sum of securities lent and repos declined by CHF 80 billion or 12% to CHF 573 billion. The changes occurred primarily in the Investment Bank, from reductions in the matched book (a repo portfolio comprised of assets and liabilities with equal maturities and equal value, so that the market risks substantially cancel each other out) and in the fixed income book as a result of lower short trading inventories slightly offset by higher equity securities borrowing activities.

Trading portfolio/derivative instruments

Between 31 March 2007 and 30 June 2007, trading assets increased by CHF 20 billion to reach CHF 958 billion. Equity instruments were up by CHF 16 billion, largely driven by general rises in equity markets and higher volumes. Debt instrument inventory (including money market paper, and traded loans) and precious metals grew moderately by CHF 4 billion. Over the same period, short trading positions decreased by CHF 11 billion to CHF 230 billion.

The positive replacement value of derivative instruments increased in second quarter by CHF 45 billion to CHF 335 billion as a result of a net increase in trades, upward trending yield curves and currency movements.

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