UBS shares in 2008

UBS shares are listed on the SIX Swiss Exchange (traded on SWX Europe), the New York Stock Exchange and the Tokyo Stock Exchange.

Refer to the "Capital structure" section of this report for more information on UBS shares including par value, type and rights of security

2008 saw the unfolding of a global financial crisis and a marked global economic slowdown, with falling prices in nearly every asset class. Concerns that the deterioration in the US housing market seen in 2007 would spread to the general consumer area materialized as consumer confidence reached new lows and several western economies fell into recession. Government central banks and regulators joined forces in a global policy response to stabilize and provide liquidity to a financial system that, in the opinion of many, nearly collapsed in the second part of the year. Capital injections, the partial or full nationalization of several financial institutions and sharp reductions in interest rates did not, however, restore confidence and liquidity in the short term and credit markets remained paralyzed for most of 2008. Emerging markets suffered and commodities prices saw a sharp reversal and falling prices in the second half of 2008.

Corporate earnings deteriorated at a fast pace during 2008 and entire segments of the economy entered 2009 with a very uncertain outlook. Worldwide stock markets dropped significantly during the year, with the financial sector most hit: the Dow Jones Banks Titans 30 Index dropped 58%, the MSCI World index closed down 42%, the Dow Jones Industrial Average closed down 34% and the S&P 500 closed down 38%.

First quarter 2008

2008 continued in the same vein as the closing months of 2007, with growing concerns over contagion from real estate losses to the real economy. At the end of January, UBS pre-announced its fourth quarter 2007 results as a loss of CHF 12.5 billion. In March, UBS's peer Bear Stearns approached bankruptcy as it suffered a liquidity crisis in the wake of speculation over growing losses. This put further pressure on industry stock prices as the quarter ended. The global banking sector and the broader global indices declined by 13% and 10% respectively, while UBS underperformed the market with its shares declining 45%.

Second quarter 2008

The Bear Stearns bankruptcy and acquisition by JPMorgan announced in March proved somewhat purgative for the markets in the second quarter, which remained steady as expectations of a deep global recession were tempered. In the banking sector, however, reported losses mounted leading to capital-raising by a number of large international banks including UBS. Alongside the pre-anouncement of the first quarter results, a rights issue to raise approximately CHF 15 billion was announced together with a number of measures to reduce risks and costs and stabilize per-formance. UBS performed in line with the global banking sector, down 16% in the quarter while the broader indices remained generally flat.

Third quarter 2008

The third quarter of 2008 proved to be one of the most tumultuous in banking history. The collapse of Lehman Brothers in September triggered a series of banking failures and government rescues which brought the global banking system close to breaking point. Despite posting modest losses for the second quarter in August, UBS shares declined 14% in the quarter and underperformed the global banking sector, down 2% in the wake of the failure of Lehman Brothers.

Fourth quarter 2008

The fourth quarter commenced with persistent concerted efforts by central banks to maintain liquidity and, shortly afterwards, a series of government-led programs to stabilize the banking system. As the prospect of a deep global recession loomed, central banks united to deliver their first ever coordinated rate cut. UBS announced a further material risk reduction of its balance sheet through the transfer of risk assets to the Swiss National Bank as well as further strengthening its capital base through the issue of CHF 6 billion in mandatory convertible notes to the Swiss Confederation. UBS reported a modest profit for the third quarter. Market volatility remained extreme with a slew of profit warnings and losses reported across the banking sector. UBS shares closed the quarter down 20%, outperforming the global banking sector which fell 41% as well as the broader indices which declined by more than 20% on average.

Over the course of 2008 UBS shares declined 68%, underperforming the global banking sector (down 58%), the MSCI and the S&P (down 42% and 38% respectively).

Share liquidity

During 2008, daily average volume in UBS shares on SWX Europe was 28.5 million shares. On the New York Stock -Exchange (NYSE), it was 2.1 million shares.

Because of the greater volume on SWX Europe, trading of UBS shares there is expected to remain the main factor -determining the movement in UBS's share price.

During the hours in which both SWX Europe and NYSE are simultaneously open for trading (currently 3:30 p.m. to 5:30 p.m. Central European Time), price differences are likely to be arbitraged away by professional market-makers. The NYSE price will therefore typically be expected to depend on both the SWX Europe price and the prevailing US dollar / Swiss franc exchange rate. When SWX Europe is closed for trading, traded volumes will typically be lower. However, the specialist firm making a market in UBS shares on the NYSE, Van der Moolen, is required to facilitate sufficient -liquidity and an orderly market in UBS shares.