Second quarter results
UBS reports second quarter loss of CHF 358 million

Second quarter Group net loss attributable to shareholders of CHF 358 million • Net new money outflows in the two wealth management businesses of CHF 17.3 billion; Business Banking Switzerland had additional net outflows of CHF 2.0 billion; and Global Asset Management had net outflows of CHF 24.5 billion • Results were impacted by realized and unrealized losses of USD 5.1 billion on legacy risk positions, mainly on exposures related to US residential real estate related securities and other credit positions • Decisive action taken to reduce exposures to significant risk concentrations, specifically through sales during the quarter, the largest of which was the sale of US residential mortgage-backed securities to a fund managed by BlackRock • Provision of USD 900 million (CHF 919 million) associated with the comprehensive settlement related to auction rate securities

Second Quarter 2008
Second quarter Group net loss attributable to shareholders of CHF 358 million

Net new money outflows in the two wealth management businesses of CHF 17.3 billion; Business Banking Switzerland had additional net outflows of CHF 2.0 billion; and Global Asset Management had net outflows of CHF 24.5 billion


Risk positions
Results were impacted by realized and unrealized losses of USD 5.1 billion on legacy risk positions, mainly on exposures related to US residential real estate related securities and other credit positions

Decisive action taken to reduce exposures to significant risk concentrations, specifically through sales during the quarter, the largest of which was the sale of US residential mortgage-backed securities to a fund managed by BlackRock


Auction rate securities
Provision of USD 900 million (CHF 919 million) associated with the comprehensive settlement related to auction rate securities


Capital and balance sheet strengthening
Successful completion of rights issue in June 2008, with 99.4% of shares taken up by existing and new shareholders

Lower level of risk-weighted assets resulting from risk and balance sheet reduction

Capital ratio rebuilt to the very strong levels UBS had prior to the outbreak of the credit crisis. Tier 1 ratio of 11.6% and total capital adequacy ratio of 15.7%, among the highest in the global banking industry


Cost reduction
Total operating expenses down by 18% compared with second quarter 2007 to CHF 8,110 million, despite USD 900 million (CHF 919 million) auction rate securities provision

Personnel numbers reduced to 81,452 on 30 June 2008, down by 2,387 from 31 March 2008 with most of the reduction in the Investment Bank

Outlook
In the second half of this year, UBS does not expect to see any improvement in the adverse economic and financial market trends that affected this quarter's results. UBS will continue its program to reduce personnel levels, costs and risk concentrations


UBS reports a Group net loss attributable to shareholders of CHF 358 million for second quarter 2008.

The second quarter 2008 remained difficult for several reasons:

The positive sentiment seen at the end of first quarter 2008 that the credit crisis may be easing was short-lived, as trading conditions deteriorated significantly in the second half of May, in particular for assets related to US residential real estate as well as other structured credit positions. This development led to second quarter losses and writedowns of around USD 5.1 billion on related positions (for further details, please see Note 3 to the unaudited financial statements in UBS's Second Quarter 2008 financial report and the discussion of revenues for the fixed income, currencies and commodities (FICC) area of the Investment Bank on page 7-8 of this media release).

This quarter was also characterized by generally lower client activity, in particular lower capital markets and mergers and acquisitions activity, and falling securities prices.

For the wealth and asset management businesses and Business Banking Switzerland, profit levels remained high in absolute terms despite a reduction in comparison with the prior quarter, excluding the impact of the provision for auction rate securities in Wealth Management US. Invested assets rose slightly as currency movements offset net new money outflows of CHF 43.8 billion across the Group.

In the Investment Bank, revenues generated by the advisory and capital markets business fell considerably in comparison with second quarter 2007, in the context of a significant contraction in global deal volume. However, equity capital markets revenues were up significantly from first quarter 2008.

Across the firm, total operating expenses were CHF 8,110 million, down by 18% compared to second quarter 2007. This decline was driven by lower accruals on performance-related compensation and the reversal of certain accruals recognized in first quarter 2008. General and administrative expenses increased by 25% to CHF 2,831 million, as lower expenses in most categories were offset by provisions of USD 900 million (CHF 919 million) in relation to the recent actions taken by UBS in the US auction rate securities markets. The number of people employed at UBS was 81,452 on 30 June 2008, down by 2,387 compared with the end of first quarter 2008, with 1,695 of the reduction in the Investment Bank.

UBS recognized a net income tax benefit of CHF 3,829 million for second quarter 2008, which includes a net impact of CHF 3,200 million from the recognition of a deferred tax asset on available tax losses.

Risk inventory reduced
UBS took decisive action to materially reduce its exposures to significant risk concentrations, specifically through sustained and ongoing sales during the quarter, the largest of which was the sale of US residential mortgage-backed securities to a fund managed by BlackRock.

UBS will continue to manage its remaining exposure to the US real estate market through a separate work-out portfolio unit within the FICC area of the Investment Bank. In view of the significant reductions in risk exposures in second quarter 2008, however, UBS may determine not to place a subset of this portfolio into a new, wholly-owned entity, as originally envisaged.

Auction rate securities
On 15 July 2008, UBS announced that it is developing a trust structure that would, if completed, have the ability to purchase approximately USD 3.5 billion in tax-exempt auction preferred stock, a type of auction rate securities (ARS), at par from clients. The trust would issue securities supported by a liquidity put or similar demand feature provided by UBS or another highly rated bank, and would be consolidated in UBS's financial statements. The transaction is subject to regulatory approval and other conditions.

On 8 August 2008, UBS announced a comprehensive settlement with the SEC and certain US state regulatory authorities, in principle, for all clients holding auction rate securities and booked a provision of USD 900 million (CHF 919 million).

Capital base and balance sheet reinforced
On 30 June 2008, UBS’s BIS tier 1 capital ratio stood at 11.6% and its BIS total capital ratio was 15.7%, up from 6.9% and 10.7% respectively on 31 March 2008. This improvement is the result of actions taken in second quarter 2008 as part of UBS's capital improvement program.

The balance sheet totaled CHF 2,078 billion at 30 June 2008, compared with CHF 2,231 billion at 31 March 2008, a decline of 7%. Risk-weighted assets were reduced by CHF 10 billion, or 3.0%, during second quarter 2008 to CHF 323 billion as at 30 June 2008.

On 17 June 2008, a capital increase was completed by means of a rights offering through the issue of 760,295,181 fully paid-up registered shares. Subscription rights for 755,466,901 new shares were exercised in the offering, representing 99.4% of all new shares offered. 4,828,280 new shares for which subscription rights were not validly exercised have been sold by UBS Investment Bank in open market transactions. This capital increase generated net proceeds of CHF 15.6 billion.

UBS also issued EUR 1 billion of perpetual preferred securities in second quarter 2008, which qualified as tier 1 capital.

Cost reduction
Across the firm, total operating expenses were CHF 8,110 million, down 18% compared to second quarter 2007. This decline was driven by lower accruals on performance-related compensation and the reversal of accruals recognized in first quarter 2008.

General and administrative expenses increased by 25% to CHF 2,831 million, as lower expenses in most categories were offset by the provision of USD 900 million (CHF 919 million) in respect of ARS.

The number of people employed at UBS was 81,452 on 30 June 2008, down by 2,387 compared with the end of first quarter 2008, with a reduction of 1,695 in the Investment Bank.

Outlook
In the second half of the year, UBS does not expect any improvement in current adverse economic and financial market trends. UBS will continue its program to reduce personnel levels, costs and risk concentrations.

Performance against targets
UBS focuses on four key performance indicators: return on equity (RoE), diluted earnings per share (EPS), cost / income ratio and net new money. These are designed to monitor the continuous delivery of adequate returns to shareholders and are calculated using results from continuing operations.

UBS's annualized RoE was negative 85.7% in first half 2008 compared with positive 31.8% in first half 2007, following substantial negative impact from Investment Bank losses on exposures related to the US residential mortgage market and other credit positions.

Diluted EPS were negative CHF 0.17 in second quarter 2008. Results were impacted by the same factors as RoE and the number of shares outstanding increased following the rights issue completed in June 2008 and the stock dividend. The second quarter 2008 diluted EPS calculation assumes the issuance of the shares issuable upon conversion of the mandatory convertible notes. In comparison, diluted EPS were CHF 2.36 in second quarter 2007.

The cost / income ratio was 200.7% in second quarter 2008.

Second quarter 2008 saw net new money outflows of CHF 43.8 billion, compared with inflows of CHF 34.0 billion in second quarter 2007. This occurred in the context of continuing credit market turbulence and its impact on the firm's operating performance and reputation. At the end of second quarter 2008, total invested assets stood at CHF 2,763 billion, of which CHF 2,006 billion were attributable to Global Wealth Management & Business Banking and CHF 757 billion were attributable to Global Asset Management.

Global Wealth Management & Business Banking saw total net new money outflows of CHF 19.3 billion. Wealth Management International & Switzerland recorded net outflows of CHF 9.3 billion, Wealth Management US recorded net outflows of CHF 8.0 billion and Business Banking Switzerland recorded net outflows of CHF 2.0 billion. Outflows of net new money for Global Wealth Management & Business Banking were most pronounced in April.

Global Asset Management saw total net new money outflows of CHF 24.5 billion, with underperformance in certain investment capabilities in prior quarters also contributing to outflows. Institutional clients recorded net outflows of CHF 8.4 billion, with outflows in multi-asset, fixed income and equities mandates partly offset by inflows into alternative and quantitative investments and real estate. Wholesale intermediary recorded net outflows of CHF 16.1 billion, with outflows in multi-asset, fixed income, equities and real estate funds partly offset by inflows into alternative and quantitative investments.

Report on remediation of causes of sub-prime losses
Today, UBS published a summary of the remediation plan submitted to the Swiss Federal Banking Commission (SFBC). The plan details the actions UBS is taking to address the findings of its earlier report to the SFBC (summary published on 21 April 2008) on the causes of the sub-prime losses incurred in 2007. Some of the measures are already well under way. The plan details their owners and commits UBS to specific deadlines. The summary remediation report can be found at www.ubs.com/remediation.