Balance Sheet

UBS's total assets were CHF 2,484.2 billion on 30 September 2007, down from CHF 2,539.7 billion on 30 June 2007. There was a sharp drop in trading assets (down CHF 112 billion), which was partially offset by higher positive replacement values on derivative transactions (up CHF 81 billion) and increased lending portfolios (up CHF 14 billion). As almost half of our balance sheet assets are denominated in US dollars, the weakening of the US dollar against the Swiss franc in third quarter 2007 was a large factor (approximately CHF 64 billion) behind the overall reduction. Total liabilities declined due to lower trading liabilities volume (down CHF 20 billion) and lower levels of unsecured borrowing (down CHF 8 billion), which were partly offset by a rise in negative replacement values on derivatives (up CHF 77 billion). Collateral trading levels declined on both the asset (down CHF 33 billion) and the liability (down CHF 99 billion) sides of the balance sheet.

Lending and borrowing

Lending

Our loans to customers stood at CHF 343 billion on 30 September 2007, up CHF 9 billion from 30 June 2007. Two thirds of the increase derived from Global Wealth Management & Business Banking's loan book and was driven by higher collateralized loan volumes for wealth management clients and rising mortgage volumes in Switzerland. The continued rise in the Investment Bank's secured lending volumes to prime brokerage clients also contributed to the increase. Cash was CHF 10 billion on 30 September 2007, rising CHF 4 billion from 30 June 2007, while interbank loan balances were up only slightly (CHF 1 billion).

Borrowing

To reduce UBS's dependence in the interbank market, we decreased our short-term "due to banks" positions sharply by CHF 41 billion to CHF 190 billion, and mostly replaced this funding with 3- to 6-month money market paper issuances, which rose by CHF 22 billion to reach CHF 167 billion. With the credit market turmoil, our long-term debt issuances (including financial liabilities designated at fair value) were kept stable at CHF 264 billion, rising only CHF 6 billion. The amount "due to customers" was marginally up CHF 5 billion at CHF 621 billion, mainly reflecting larger deposits from private clients in our wealth management franchise around the globe.

Repo and securities borrowing / lending

Cash collateral on securities borrowed and reverse repurchase agreements stood at CHF 742 billion on 30 September 2007, down CHF 33 billion from CHF 775 billion on 30 June 2007, while the sum of securities lent and repos declined by CHF 99 billion to CHF 474 billion. The drop occurred in the Investment Bank's 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). The fixed income book also saw a drop as a result of reduced short trading inventories and lower equity securities borrowing activities. On the liability repo side, the decline also reflects a reduction of repo-eligible inventory triggered by the drop in the firm's trading portfolio.

Trading portfolio / derivative instruments

Between 30 June 2007 and 30 September 2007, trading assets declined sharply by CHF 112 billion to CHF 846 bil- lion - this includes a currency impact of approximately CHF 23 billion. Trading assets inventory in debt instruments dropped by CHF 88 billion mainly due to position disposals and markdowns in asset-backed securities and commercial paper and, to a lesser extent, in corporate bonds and traded loans. Equity instruments also decreased, by CHF 27 billion, on the back of volatile equity markets and the weakening of the US dollar, while precious metals inventory continued to grow by CHF 3 billion. The replacement value of derivative instruments increased by CHF 81 billion to CHF 416 billion, due to movements in interest rates and currencies and accentuated by heightened spread volatility in credit default swaps on ABS and ABX-index products.