Criteria for defining external Board member's independence

Based on the Corporate Governance Listing Standards of the New York Stock Exchange, the UBS Board of Directors has formulated the following Criteria for defining its external Board members' independence:

For a director to be considered independent, he may not have any material relationship¹ with UBS, either directly or as a partner, controlling shareholder or executive officer of a company that has a relationship with UBS.

A director will not be considered independent, if

he is or has been an employee of UBS within the last three years.
he has an immediate family member² who is or has been an executive officer³ of UBS within the last three years.
he has received or has an immediate family member who has received during any twelve-month period within the last three years more than USD 100,000 in direct compensation from UBS (other than director and committee fees).
he is a current partner or a current employee of Ernst & Young Limited, UBS’s Group and Statutory auditors.
he has an immediate family member who is a current partner of Ernst & Young or a current employee of Ernst & Young, participating in UBS’s audit, assurance or tax compliance (but not tax planning) practice.
he or an immediate family member was within the last three years (but is no longer) a partner or employee of Ernst & Young and personally worked on UBS’s audit within that time.
he or an immediate family member is or has been within the last three years employed as an executive officer of a company where any of UBS’s present executive officers at the same time serves or served on that company’s compensation committee.
he is a current employee of a company that has made payments to or received payments from UBS in any of the last three fiscal years in excess of the greater of USD 1 million or 2% of the consolidated revenues of the director’s company.
he has an immediate family member who is a current executive officer of a company that has made payments to or received payments from UBS in any of the last three fiscal years in excess of the greater of USD 1 million or 2% of the consolidated revenues of the director’s company.
he, his immediate family members and/or companies controlled⁴ by him have banking relationships with UBS that are not in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with other clients.
he has entered into consulting contracts with UBS.
he holds any other Board mandates that might infringe on his independence.
there were any interlocking directorships over the past three years between the companies related to the director and UBS.

A director will not qualify as “independent” under the tightened independence requirements for members of the Audit Committee if:

he accepts directly or indirectly any consulting, advisory or other compensatory fees from the company, other than in his capacity as a director (compensation for board and board committee services).
he holds directly or indirectly UBS shares in excess of 5% of the outstanding capital.
he serves on the audit committees of more than two other public companies. The Board may approve exceptions from this rule if the simultaneous service does not impair the ability of the director to fulfill his mandate. Such exceptions would be disclosed and explained in the annual reporting.

Approved by the UBS Board of Directors on 10 December 2004

1 "Material relationship" meaning: UBS accounting for more than 2% of the directors' / his company's sales or purchases of products and/or services. Banking relationships in the ordinary course of business - wealth and asset management, private mortgages etc. - do not qualify as "material relationship".
2 Immediate family member meaning: spouse, parents, children, siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law and anyone (other than domestic employees) who shares the director’s home.
3 Executive officer meaning: president, principal financial officer, principal accounting officer or controller, any vice-president in charge of a principal business unit, division or function, any other officer who performs a policy-making function.
4 Controlled" meaning: being a controlling shareholder (owning 50% or more of the voting power) or the Chairman and/or CEO of the company.