UBS shares are listed on the Swiss Exchange (where they are traded on virt-x), and on the New York and Tokyo stock exchanges. For a detailed definition of UBS shares (par value, type, rights of security), see the Capital Structure section of the Corporate Governance chapter.

In 2006, major equity markets saw significant gains on 2005 against a backdrop of continued strength in corporate earnings and high levels of corporate merger and acquisition activity. Buoyant investor confidence at the outset of the year, however, was quickly dampened by concerns over growth and inflation – leading to a sharp pull back in global markets in May that was exacerbated by a reduction in very high levels of liquidity, almost reversing the year's gains. Global market performance remained subdued over the summer months as geopolitical tension increased in the Middle East and commodity prices peaked. The autumn saw market performance return – spurred by a raft of significant corporate actions and moderating oil prices.

In the US, the Federal Reserve continued to raise interest rates. By the end of the year, the effect of the rate increases had ­become evident as house prices started to fall, mortgage ­default rates increased and economic growth slowed. Weakness in the US economy, combined with a growing trade deficit, were factors in the considerable decline of the dollar against major currencies. Despite this, US markets remained robust, with the DJIA up 14.9% in the year, driven by record profits in the energy sector and continued strength in banking and financials, particularly for investment banks. The MSCI (World) Index showed stronger gains, rising 17.8%, benefiting from strong Asian economic growth as well as the buoyant performance in the energy and banking sectors. The DJ Stoxx Banks Index reported similar gains, up 18.3%. UBS shares traded broadly in line with the index, ­closing 17.5% higher on the year.

First quarter 2006

A record performance by US investment banks at the close of 2005, growing merger and acquisition deal pipelines, high levels of market liquidity and relatively low interest rates left investors upbeat at the outset of 2006. UBS shares rose 13.1% in the first quarter of the year, supported by its record fourth quarter performance, which closed its then best-ever year. The Board of Directors recommended a 7% increase in the dividend to CHF 3.20, plus a one time par value repayment of CHF 0.60, reflecting the gain realized from the sale of Private Banks & GAM to Julius Baer (both figures before the 2-for-1 share split).

Second quarter 2006

Market sentiment remained buoyant well into the second quarter, although the market rally that had started in early 2003 came to an abrupt end in May 2006. Rising interest rates, high commodity prices, which fed inflation, and geopolitical concerns in the Middle East led to a sharp and sudden decline in world equity markets in late May. The financials sector bore the brunt of the decline, as deal flows dried up and higher interest rates prompted investors to shift into cash and defensive stocks. While the DJIA remained flat, supported by energy stocks, the MSCI fell 1.7%. Despite reporting a record first quarter result, UBS shares declined by 7.1%, marginally underperforming the DJ Stoxx Banks index, which fell 6.2%.

Third quarter 2006

Geopolitical concerns deepened in summer on the Israeli-Lebanese conflict, driving oil prices to record highs. Many investors chose to remain on the sidelines of the market, resulting in a sharp drop in trading activity. September heralded a return to rising markets and active trading as commodity prices eased. UBS shares gained 10.6% in the third quarter, supported by robust second quarter results. The DJ Stoxx banks index also delivered a strong performance, up 8.3% in the quarter. The broader indices showed more muted performance, with the Dow Jones up 3.7% and the MSCI flat.

Fourth quarter 2006

The fourth quarter of 2006 saw many world markets reach all-time highs buoyed by vigorous M&A activity and growing support for a soft landing in the US. The MSCI and Dow Jones indices showed very strong performance up 8.6% and 8.7% respectively. UBS shares closed the quarter up 5.1%, but performance lagged that of its wider peer group, with the DJ Stoxx banks up 8.7%, reflecting the market's disappointment with third quarter results.

Share liquidity

During 2006, daily average volume in UBS shares on virt-x was 10.9 million shares. On NYSE, it was 0.85 million shares.

Because of the greater volume on virt-x, trading of UBS shares there is expected to remain the main factor determining the movement in our share price.

During the hours in which both virt-x and NYSE are simultaneously open for trading (currently 3:30 pm to 5.30 pm 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 virt-x price and the prevailing US dollar / Swiss franc exchange rate. When virt-x 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.