Notes to the financial statements

UBS AG's ("UBS") consolidated financial statements (financial statements) are prepared in accordance with Inter­national Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and ­stated in Swiss francs (CHF). These financial statements are presented in accordance with IAS 34 Interim Financial ­Reporting.

In preparing the interim financial statements, the same accounting principles and methods of computation are applied as in the financial statements on 31 December 2008 and for the year then ended except for the changes set out below. For fair value measurements and changes in valuation techniques, UBS provides complementary information in "Note 11 Fair value of financial instruments" in the financial statements of this report.

The interim financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been made. These interim financial statements should be read in conjunction with the audited financial statements included in UBS's annual report for 2008.

Restatements made to the financial statements 2008

UBS has restated its 2008 financial statements to correct identified accounting errors related to the 2008 financial statements, predominately to the fourth quarter 2008 financial statements. These errors are not material to the annual or quarterly 2008 financial statements but corrections related to first quarter 2009 would have been material to financial statements. The restatement comprises three items in excess of CHF 100 million as follows:

- The fair value of auction rate securities purchase commitments at 31 December 2008, which are recognized as negative replacement values on UBS's balance sheet, was increased by CHF 112 million, resulting in a corresponding charge to net trading income.

- For certain assets reclassified from "held-for-trading" to "loans and receivables" in fourth quarter 2008, recognition of interest income based on the effective interest rate method was reduced by CHF 180 million. Other assets were reduced accordingly as of 31 December 2008.

- The partial disposals of an investment in a consolidated investment fund in 2008 gave rise to the realization of the related foreign currency translation loss deferred in shareholders' equity. This adjustment reduced other income for the year 2008 by CHF 192 million but did not have a net impact on UBS's equity.

In addition to the above mentioned items, a number of misstatements individually below CHF 65 million were adjusted. The aggregate net effect of these items on net profit attributable to UBS shareholders was an increase of net profit attributable to shareholders of CHF 79 million.

The total net impact of all restated items on the 2008 results was a reduction of net profit and net profit attributable to UBS shareholders of CHF 405 million, a reduction of equity and equity attributable to UBS shareholders of CHF 269 million, and a reduction of basic and diluted earnings per share by CHF 0.15 and CHF 0.14 respectively. There was no effect on income tax expense. Periods prior to 2008 were not affected by the restatement. 2008 quarterly net profits attributable to UBS shareholders were reduced by the following amounts: CHF 82 million in Q1, CHF 37 million in Q2, CHF 13 million in Q3, and CHF 273 million in Q4.

The restatement of previous periods resulting from the reorganization of the former Global Wealth Management & Business Banking business division is described in the context of IFRS 8 below.

IAS 1 (revised) Presentation of Financial Statements

Effective as of 1 January 2009, the revised International ­Accounting Standard (IAS) 1 affects the presentation of owner changes in equity and of comprehensive income. UBS continues to present owner changes in equity in the "statement of changes in equity", but detailed information relating to non-owner changes in equity, such as foreign ­exchange translation, cash flow hedges and financial investments available-for-sale, is now presented in the "statement of comprehensive income".

When implementing these amendments, UBS also adjusted the format of its "statement of changes in equity" and replaced the "statement of recognized income and expense" in the financial statements of previous years with a "statement of comprehensive income". Preferred securities issued by consolidated trusts are reported as "equity attributable to minority interests", as they are equity instruments held by third parties. As these securities make up the largest part of UBS's equity attributable to minority interests, UBS discloses movement information in a separate table.

The revised IAS 1 guidance does not change the recognition and measurement of assets and liabilities.

IAS 1 (revised) Presentation of Financial Statements, and IAS 32 (revised) Financial Instruments: Presentation

The IASB issued a further amendment to IAS 1 and an amendment to IAS 32 regarding puttable financial instruments and obligations arising on liquidation. The IAS 32 amendment clarifies under which circumstances puttable ­financial instruments and obligations arising on liquidation have to be treated as equity instruments.

The amendment is limited in scope and is restricted to the accounting for such instruments under IAS 1, IAS 32, IAS 39 and IFRS 7. The amendment to IAS 1 requires additional information about puttable financial instruments and obligations arising on liquidations which have to be treated as equity instruments. UBS adopted the amendments on 1 January 2009. The adoption of the amendments did not have a significant impact on UBS's financial statements.

IFRS 7 (revised) Financial Instruments: Disclosures

This standard was revised in March 2009 when the International Accounting Standards Board (IASB) published the amendment "Improving Disclosures about Financial Instruments". Effective as of 1 January 2009, the amendment requires enhanced disclosures about fair value measurements and liquidity risk.

The enhanced fair value measurement disclosure requirements include: a fair value hierarchy (i.e. categorization of all financial instruments into levels 1, 2 and 3 based on the relevant definitions); significant transfers between level 1 and level 2; reconciliation of level 3 instruments at the beginning of the period to the ending balance (level 3 movement table); level 3 profit or loss for positions still held at balance sheet date; and sensitivity information for the total position of level 3 instruments and the basis for the calculation of such information. Refer to "Note 11 Fair value of financial instruments" in the financial statements of this report for the most relevant disclosures about fair value measurements.

The amended liquidity risk disclosure requirements largely confirm the previous rules for providing maturity information for non-derivative financial liabilities, but amend the rules for providing maturity information for derivative financial liabilities. UBS presents maturity analysis information for financial liabilities in its annual reports.

IFRS 8 Operating Segments

IFRS 8 Operating Segments is effective from 1 January 2009 onwards and replaces IAS 14 Segment Reporting. Under the requirements of the new standard, UBS's external segmental reporting is now based on the internal reporting to the Group Executive Board (or the "chief operating decision maker"), which makes decisions on the allocation of resources and ­assesses the performance of the reportable segments.

In accordance with the new UBS structure announced in February 2009, and following the guidance of IFRS 8, UBS will disclose four reportable segments in 2009. These segments are the business divisions - Wealth Management & Swiss Bank, Wealth Management Americas, Global Asset Management and Investment Bank. While the Corporate Center does not meet the requirements of an operating segment, it is also shown separately. Segment information from prior periods has been restated to conform to the requirements of this new standard and the interim financial reporting requirements.

Wealth Management & Swiss Bank

Wealth Management & Swiss Bank caters to high net worth and affluent individuals around the world (except those served by Wealth Management Americas) whether they are investing internationally or in their home country. UBS offers these clients a complete range of tailored advice and investment services. Its Swiss Bank business provides a complete set of banking services for Swiss individual and corporate clients.

Wealth Management Americas

Wealth Management Americas offers sophisticated products and services specifically designed to address the needs of high net worth and affluent individuals. It includes the former Wealth Management US business unit, as well as the domestic Canadian business and the international business booked in the United States.

Global Asset Management

Global Asset Management is one of the world's leading asset managers, providing investment solutions to private clients, financial intermediaries and institutional investors worldwide. The business division offers diverse investment capabilities and investment styles across all major traditional and alternative asset classes. Specialist equity, fixed income, currency, hedge fund, real estate, infrastructure and private equity investment capabilities can also be combined in multi-asset strategies.

Investment Bank

In the investment banking and securities businesses, UBS provides securities products and research in equities, fixed income, rates, foreign exchange and metals. It also provides advisory services as well as access to the world's capital markets for corporate, institutional, intermediary and alternative asset management clients.

Corporate Center

The Corporate Center ensures that all business divisions operate as a coherent and effective whole with a common set of values and principles in such areas as risk management and control, finance, legal and compliance, marketing and communications, funding, capital and balance sheet management, management of foreign currency earnings, information technology infrastructure and service centers.

As UBS's reportable segment operations are mainly financial, the total interest income and expense for all reportable segments is presented on a net basis. Based on the present ­arrangement of revenue-sharing agreements, the intersegment revenue for UBS is immaterial. From first quarter 2009 onwards, the segment assets are disclosed without the intercompany balances and this basis is in line with the internal reporting. For more details on the basis on which the segment information is prepared and reconciled to the amounts presented in UBS's income statement and balance sheet, ­refer to "Note 2 Segment reporting" in the financial statements of this report.

For the year-end 2009 reporting, UBS will be providing geographical information about total operating income and total non-current assets based on the following new geographical breakdown: Switzerland, United Kingdom, Rest of Europe, United States, Asia Pacific and Rest of the World.

Reassessment of embedded derivatives

The International Financial Reporting Interpretations Committee (IFRIC) has issued in March 2009 the supplement Embedded Derivatives: Amendments to IFRIC 9 and IAS 39. This guidance amends IFRIC 9 Reassessment of Embedded Derivatives, and IAS 39 Financial Instruments: Recognition and Measurement. The amendments clarify that on reclassification of a financial asset out of the "Held for trading" category, all embedded derivatives have to be assessed and, if necessary, separately accounted for in the financial statements. The application of this guidance did not materially impact UBS's financial statements.

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