1.1 Background
In 2007 and in relation to the first quarter of 2008, UBS AG ("UBS") has made several
announcements of losses incurred in relation to structuring, trading and investment activities
in mortgage and asset-backed securities, in particular with respect to securities referencing
US "Subprime" residential mortgages. UBS first announced Subprime-related losses in
connection with the closure of Dillon Read Capital Management ("DRCM") in May 2007.1
UBS ultimately reported net losses of USD 18.7 bn in relation to US residential mortgage
sector exposures for the year ended 31 December 2007 (the "Subprime Losses").
The Swiss Federal Banking Commission ("EBK") requested that UBS report to it the key facts
relevant to understanding the principal root causes leading to the Subprime Losses. Based
on UBS’s current knowledge of the facts, UBS reported on 7 April 2008 on the factual basis
of UBS's Subprime Losses, as well as a preliminary analysis of the root causes leading to such
losses. UBS has not yet provided a comprehensive report to the EBK on remediation or other
actions taken (or to be taken). UBS will formally discuss these matters with the EBK at a later
date and will then communicate them to its shareholders in due course.
This Shareholder Report (the "Shareholder Report") sets out UBS's key findings, including
the principal causes of the Subprime Losses UBS identified in retrospect following an internal
review of the various businesses incurring the Subprime Losses. While not addressing every
detail that UBS discussed with the EBK, the Shareholder Report provides (within the relevant
Swiss data protection laws and business secrecy limitations) a comprehensive overview of
the relevant developments that led to the Subprime Losses, as well as the relevant causes
and contributing factors to those losses.