Dear shareholders,

Kaspar Villiger & Oswald J. Grübel

Dear shareholders,

Our first quarter results were again negative despite continued and considerable efforts to reduce our balance sheet and risks, rebuild our capital base and cut costs. We recorded a net loss for first quarter 2009 of CHF 2.0 billion. As reported at the time of our annual general meeting in April, this loss stemmed mainly from trading losses made by the Investment Bank as it continued to reduce risk in businesses it has now exited or is in the process of exiting. This result also includes a goodwill impairment charge related to the sale of UBS Pactual announced in April.

Net new money outflows were CHF 23.4 billion in Wealth Management & Swiss Bank, including the effect of deleveraging by clients. In Wealth Management Americas we successfully attracted a large number of high producing financial advisors, which contributed to net inflows of CHF 16.2 billion. Global Asset Management outflows slowed to CHF 7.7 billion and the net new money outlook became more promising as improved performance of key capabilities, notably in equities, should aid retention and stimulate inflows. In the Investment Bank, the business (excluding risk positions from businesses now exited or in the process of being exited) generated a significant increase in revenue compared with the fourth quarter in most of our client-facing activities, notably in equities and the rates and emerging markets businesses within FICC.

Our most important task is to rebuild the trust placed in us by you as shareholders, the trust of our clients and the trust of political institutions. The support we have been given by all our stakeholders has obliged us to do no less, and we take this obligation seriously. An indispensable condition for achieving this is having enough leeway in terms of our financial capital, and that can happen only if we are profitable. In order to achieve this, we are stream­lining our business. During the first quarter, we reduced the size of our balance sheet by CHF 153 billion and risk-­weighted assets by CHF 25 billion, which resulted in a BIS tier 1 ratio of 10.5% and a FINMA leverage ratio of 2.56% at the end of March 2009.

We are continuing to reduce costs because our cost base remains too high for current conditions. Our goal is to reduce Group expenses by approximately CHF 3.5 to 4 billion by the end of 2010 compared with 2008 levels. We expect that the effect of these measures will start to become visible during the second half of 2009. Our cost-cutting measures are targeted at those areas where they will have the greatest impact. Unfortunately, our cost-saving program requires a major reduction in staff numbers. We will employ about 10,000 fewer people in 2010 compared with year-end 2008. While approximately 2,500 of these job losses will be in Switzerland, these cuts do not indicate a decrease in our commitment to the Swiss economy - we remain committed to optimizing UBS's role in the Swiss financial market.

We are reviewing all our areas of business to determine their long-term viability as part of UBS. Our decision to streamline certain business areas reflects near-term pressure on revenues as well as expected permanent changes to industry profitability. For the Investment Bank, there are fewer business opportunities and increased capital costs, and in Wealth Management & Swiss Bank lower invested assets are coupled with negative trends for margins as clients opt for simpler, lower-risk and lower-margin products.

As announced on 20 April, we are disposing of our Brazilian financial services business, UBS Pactual. The transaction is expected to be completed by mid-2009. Upon closing, it will reduce risk-weighted assets, increase BIS tier 1 capital and boost our BIS tier 1 ratio by approximately 50 basis points, resulting in a pro forma BIS tier 1 ratio of 11.0% as at 31 March 2009.

Outlook - There has been an improvement in market sentiment during the first quarter, with a strong rebound in global stock market indices since early March, but the credit markets improved only partly and trading in complex financial products remains illiquid. The markets continue to be unsettled, and we remain cautious on the immediate outlook for UBS. The strong influence that government policy has on the market environment was clearly demonstrated in the first quarter as investors became less risk averse. However, the real economy has continued to deteriorate, and this is expected to have negative implications for credit-related provisioning in coming quarters.

Yours sincerely,