BU Latin America, Caribbean & Canada Contingency Measures

Dear Colleagues,





The cycle of prosperity that we have witnessed and enjoyed over the last two decades has ended: We now live in a new world. We are witnessing a period of financial turmoil that is totally unprecedented. Stock markets have fallen around the world, large financial institutions have collapsed or been bought out, and governments from the wealthiest of nations have had to come up with rescue packages in efforts to restore their financial system. As difficult as it may be to accept, this crisis will continue to impact the global economy for the foreseeable future.

One of our biggest strengths as a firm, which has saved us from suffering the consequences of other large financial institutions, has been our ability to react quickly and proactively to upcoming challenges. As a response to the changing market situations and in order to better position ourselves for the future, I have therefore decided to implement significant contingency measures in our business unit.

Our network of Representative Offices in the Latin American market has faithfully served us for many years. Unfortunately, the economic realities have changed and I had to make some difficult decisions towards this effort:

As of January 1, 2009, we will no longer operate our Representative Offices in Caracas, Bogota, and in Lima. In addition, our commitment to our offices in Buenos Aires and Santiago will be significantly reduced. Our advisory office in Panama and the proposed advisory office project in Montevideo will not be affected by these measures.

As you already may know, last week we also announced the halt of the current onshore build-up in Mexico and the repositioning of our local offering to an advisory solution, effective January 1, 2009.

Those who would like to have more detailed information on this topic can consult the attached Q&A (see Related Documents), which also features guidelines on how do handle discussions with clients.

These measures do not imply or suggest a lack of interest in these markets, nor are we lowering our growth ambitions in the region. In fact our commitment to the Latin American region is as strong as ever. Our ambitions towards growth remain the same, and we have no doubt of the growth opportunities that lie within these markets.

However, in these difficult times, we need to rescale our investment and develop our business in a way that it protects the sustainability of our business unit's bottom-line.

I want to assure every one of you that we have made our best effort to treat our colleagues that are affected fairly and we will assist them in pursuing other career opportunities.

Since our reorganization in September, I have initiated various contingency measures within the Management Office and I will shortly announce further measures there, and in other areas of the business unit.

We are dealing with painful challenges in these difficult times. The material economic problems that face us today are not evident in modern memory, but the underlying facts of human nature are harsh and unfortunate.

You may ask: How do we arrive at these decisions? Obviously, we get all the facts and consider the opinions of different members of the management team. All views are weighted and discussed exhaustively, and in the end, the final decision is mine. To procrastinate, agonize, and wait for a more favorable turn of events that may never come is a weak and potentially dangerous course for us to follow.

Perhaps, you are distrustful of these decisions, and believe your voice has not been heard. But, make no mistake, we are in a dangerous situation right now. Our asset outflows have shown signs of stabilization, but we still lost nearly a CHF 1 billion last month. Our revenues also continue to decline as we begin to feel the effects of cancelled fee-based mandates and the shift to the short-end of the duration curve.

At this moment, and for the better part of 2009, we are passing through a period of great economic unrestan unrest that will have social, political, and industrial implications. To overcome this, we must strive to secure a united front. A front that will enable us to show the stuff of which we are made of.

There is a tremendous amount of client dissatisfaction in our industry. Although we are not entirely spared from it, there are clients that not only feel hampered by performance, but feel exposed in institutions in far worse shape than we are, or marginalized as result of the recent wave of bank consolidations. This is an extraordinary opportunity for us to deliver this united front with the highest possible level of client service. That is something we know how to do, and have always done better than the rest of the industry.

My colleagues, let there be no illusions about the difficulty of the times to come. The environment is tough and it will get even tougher. If each of us agrees to make the necessary sacrifices, especially when self-interest and bitterness can threaten our resolve, we will then achieve the common unity we need to emerge out of this storm.

I have the optimism and the confidence that we will overcome our challenges, and that in the end, we will reap the benefits of our hard work. After all, and despite the negative environment we continue to witness, the tide is definitely turning as we enjoy consistent success stories not only on client retention, but on new asset inflows as well.

Sincerely,

Rick Gonzalez