Navigating Current Market Turmoil

A global leader focused on you   Source: company second-quarter earnings reports for 2008. Global influence The world’s leading wealth manager Wealth management presence Wealth management is our core business Historical perspective 140-year tradition serving individuals and families in Europe and the U.S. UBS Financial strength Well-capitalized bank with strong industry credit rating

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Navigating the current market turmoil Conversations with UBS

What is happening in the markets? • The S&P is down by 40% over the past 12 months* • Global equity markets have performed even worse • Fixed income provides no refuge • Investors are fleeing to cash positions * As of October 10, 2008

The most excessive buildup of consumer debt in history ,[object Object],Source: Datastream and UBS-WMR, as of October 10, 2008 0% 20% 40% 60% 80% 100% 120% 140% 160% Q1 1952 Q1 1962 Q1 1972 Q1 1982 Q1 1992 Q1 2002

Recent events resulted in locked markets and loss of confidence ,[object Object],Source: UBS-WMR, as of October10, 2008 900 1,000 1,100 1,200 1,300 1,400 50 100 150 200 250 300 350 Fannie and Freddie placed in conservatorship Lehman files Chapter 11 Rescue of AIG Paulson announces TARP FDIC seizes WaMu FDIC seizes Wachovia Congress approves TARP Congress rejects TARP Fed creates CPFF Coordinated central bank rate cut Sep 1 Sep 8 Sep 15 Sep 22 Oct 6 Sep 29 LIBOR 3 month – Fed funds rate S&P 500

Equity markets have provided the greatest returns over time ,[object Object],Source: Ibbotson and UBS-WMR, as of October 10, 2008 Stocks Bonds Cash 9.5% 5.5% 3.7%

Stocks have rarely been negative over five-year periods Source: Ibbotson and UBS-WMR, as of October 10, 2008 ,[object Object],1928 1938 1948 1958 1968 1978 1988 1998 2008 -100% 0% 100% 200% 300% 400% 500% 600%

Ten-year periods of negative growth are rarer still ,[object Object],Source: Ibbotson and UBS-WMR, as of October 10, 2008 1928 1938 1948 1958 1968 1978 1988 1998 2008 ,[object Object],-100% 0% 100% 200% 300% 400% 500% 600%

The five years following periods of negative returns show strong growth ,[object Object],Note: the dates listed indicate the first month that the S&P 500 rolling five-year total return first turned negative. Past performance is no guarantee of future results. Source: Ibbotson and UBS-WMR, as of October 10, 2008 21% 33% -6% Average 16% 37% -12% Oct 2008 24% 62% -8% Sep 2002 35% 31% -1% Dec 1977 33% 22% -0.5% May 1974 0% 25% -8% Jan 1941 16% 22% -9% Sep 1931 Cash Bonds Stocks Periods of negative five-year returns for stocks 24% 32% 101% ?? ?? ?? 15% 25% 105% 67% 34% 93% 36% 42% 44% 1% 24% 146% 2% 34% 118% Cash Bonds Stocks Next five years

Why it’s not another Great Depression • Comparisons to the Great Depression are misleading • The lessons were learned and steps have been taken • Global economy is expected to expand above 3% in 2008 and 2% in 2009 • Longer-term growth prospects are better now than they were then

Recommendations Stay with a diversified portfolio Stay defensive

Consider municipal bonds 137% Oct 10, 2008 ,[object Object],Source UBS-WMR, as of October 10, 2008 70.0 80.0 90.0 100.0 110.0 120.0 130.0 140.0 30-year Five-year average Jan 1985 Jan 1987 Jan 1989 Jan 1991 Jan 1993 Jan 1995 Jan 1997 Jan 1999 Jan 2001 Jan 2003 Jan 2005 Jan 2007 Jan 2009

Stay in the game ,[object Object],Source: © 2007 Morningstar, Inc. All rights reserved, 3/1/2007. Used with permission. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any specific investment. Indexes are not available for direct investment and reflect an unmanaged universe of securities which does not take into account advisory or transaction fees, all of which will reduce their overall return. S&P 500 S&P 500 minus best 17 months Treasury bills $9.31 $2.32 $2.42

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Navigating Current Market Turmoil

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