Auditors

Audit is an integral part of corporate governance. While retaining their independence, the external auditors and Group Internal Audit closely coordinate their work. The risk committee, the audit committee and ultimately the Board of Directors (BoD) supervise the adequacy of audit work.

External, independent auditors

At the annual general meeting (AGM) in 2008, Ernst & Young Ltd., Basel, (Ernst & Young) were re-elected as auditors for the UBS Group (Group) for a further one-year term of office. Ernst & Young assume all auditing functions according to laws, regulatory requests and the "Articles of Association of UBS AG". The Ernst & Young lead partners in charge of the UBS audit are Andrew McIntyre and Andreas Blumer (since 2005 and 2004, respectively). Ernst & Young will be proposed for re-election at the AGM in 2009.

At the AGM in 2006, BDO Visura, Zurich, was appointed as special auditor for a three-year term of office. The special auditors provide audit opinions in connection with capital increases independently from the Group auditors. BDO Visura will be proposed for re-election at the AGM in 2009.

Fees paid to external independent auditors

The fees (including expenses) paid by UBS to its auditors are listed in the following table. In addition, Ernst & Young received CHF 31,561,000 in 2008 (CHF 31,050,000 in 2007) for audit and tax work performed on behalf of UBS investment funds, many of which have independent fund boards or trustees.

Audit work includes all services necessary to perform the audit in accordance with applicable laws and generally accepted auditing principles as well as other assurance services that generally only the principal auditor can provide. This includes statutory and regulatory audits, attest services, and reviews of documents to be filed with regulatory bodies.

Audit-related work comprises assurance and related services that are traditionally performed by the principal auditors, such as letters of comfort, internal control reviews, attestation services related to financial reporting, consultation concerning financial accounting and reporting standards as well as investment performance reports.

Tax work performed by Ernst & Young's tax division ­encompasses routine preparation of draft original and amended tax returns, general tax planning and advice on tax compliance matters.

Other services are approved on an exceptional basis only. In 2007 and 2008, they mainly comprised on-call advisory services.

Pre-approval procedures and policies

To ensure their independence, all services provided by Ernst & Young have to be pre-approved by the audit committee of the BoD. A pre-approval may be granted either for a specific mandate or in the form of a general pre-approval authorizing a limited and well-defined type and amount of services.

The audit committee has delegated pre-approval authority to its chair; hence the Group Chief Financial Officer submits all proposals for services by Ernst & Young to the chair of the audit committee for approval. At each quarterly meeting, the committee is informed of the approvals granted by its chair.

Group Internal Audit

With 331 staff members worldwide at 31 December 2008, Group Internal Audit supports the BoD and its committees by independently assessing the effectiveness of UBS's system of internal controls and the firm's compliance with statutory, legal and regulatory requirements. All key issues raised by Group Internal Audit are communicated to the management responsible, to the Group Chief Executive Officer (Group CEO) and to the Chairman of the BoD via formal audit reports. In addition, the BoD's risk and audit committees are regularly informed about important issues. Group Internal Audit closely cooperates with internal and external legal advisors and risk control units on investigations into major control issues.

To maximize its independence from management, the head of Group Internal Audit, Ian Overton, reports directly to the Chairman of the BoD and to the risk committee. Group Internal Audit has unrestricted access to all accounts, books and records and must be provided with all information and data needed to fulfill its auditing duties. The risk committee may order special audits to be conducted. BoD members, BoD committees or the Group CEO may submit requests for such audits to the risk committee.

Coordination and close cooperation with the auditors enhance the efficiency of Group Internal Audit's work.

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