Changes in 2008

Accounting and presentation

Rounding

Numbers presented throughout this report may not add up precisely to the totals provided in the tables. Percentages and percent changes are calculated based on rounded figures displayed in the tables and text and may not precisely reflect the percentages and percent changes that would be derived based on figures that are not rounded.

Mandatory equity deferral plan

The accrued compensation expense recognized in first quarter 2008 for awards to be granted to employees in early 2009 under UBS's mandatory equity deferral plan, the Equity Ownership Plan (EOP), was based on the assumption that these awards would be subject to the same forfeiture rules as EOP awards granted in first quarter 2008. EOP awards granted in first quarter 2008 were expensed in 2007, the year preceding the award date.

During second quarter 2008, UBS decided that future awards to be granted to employees under the EOP will generally be forfeitable upon voluntary termination of employment. This is consistent with generally observed market practice.

As a consequence of this change, the compensation expense for these awards will be recognized over their vesting period, which will begin on the grant date of these awards. This led to the reversal of accruals made in first quarter 2008 for EOP awards to be granted in early 2009. This reversal resulted in a CHF 256 million reduction in personnel expenses for second quarter 2008, the majority of which was attributed to the Investment Bank, and an increase in tax expense of CHF 38 million.

Corporate governance update

New corporate governance guidelines

As announced at the annual general meeting (AGM) of 23 April 2008, UBS's Board of Directors (BoD) has reviewed its corporate governance to bring it in line with best practices and proposed a number of changes in this area. Key changes, which were based on a thorough review of international best practices in corporate governance, are as follows:

In effect since 1 July 2008, UBS's new organizational regulations clarify the separation of responsibilities between its BoD and executive management. The BoD has a clear strategy-setting responsibility and both supervises and monitors the business. The Chief Executive Officer and the Group Executive Board are fully responsible for the executive management of the bank.
The review abolished the former Chairman's Office and reallocated its duties and responsibilities to an increased number of BoD committees, with all BoD committees being given clear specification of their mandate and scope of operation. The scope of responsibilities of the Governance and Nominating Committee and the Human Resources and Compensation Committee has been expanded. New committees have been established to deal with risk and strategy, with the new Risk Committee being a particularly important step as it clarifies responsibilities for the firm's risk governance between the BoD, as the most senior body of the firm, and executive management, to which it delegates certain powers. Refer to Risk Management and control of this report for further details on changes to risk governance.
A Senior Independent Director position has been established and will be assumed by Sergio Marchionne, who will also continue in his role as UBS's non-executive Vice Chairman. Role profiles and expectations have been clearly defined for the positions of Chairman of the BoD, Vice Chairman, Senior Independent Director and BoD members. It is expected that UBS will not require a full-time Executive Vice Chairman in the future.

Changes to the Board of Directors

On 1 July 2008, UBS announced that Stephan Haeringer, Rolf Meyer, Peter Spuhler and Lawrence Weinbach have tendered their resignations effective in October 2008. Following the proposal of the Governance and Nominating Committee, the UBS BoD nominates Sally Bott, Rainer-Marc Frey, Bruno Gehrig and William G. Parrett for election as independent members of the BoD for a term of office to expire at the 2009 AGM. All four nominees possess strong backgrounds in the financial services industry. The nominees shall be proposed for election at the extraordinary general meeting of UBS AG on 2 October 2008.