Board of Directors

The Board of Directors is the most senior body with ultimate responsibility for the strategy and management of the company and for the supervision of its executive management. The shareholders elect each member of the Board of Directors, which appoints its Chairman, at least one Vice Chairman and the members of its various committees.

Members of the Board of Directors

The text in the boxes below provides information on the composition of the Board of Directors (BoD) as of 31 December 2007. It shows each member's functions in UBS, nationality, year of initial appointment to the BoD and current term of office, professional history and education, date of birth and other activities and functions, such as mandates on boards of important corporations, organizations and foundations, permanent functions for important interest groups and official functions and political mandates.

As of the annual general meeting (AGM) held on 18 April 2007, Stephan Haeringer, Helmut Panke and Peter Spuhler were re-elected as their term of office expired. Sir Peter Davis, who had reached the retirement age limit, did not stand for re-election. Sergio Marchionne was newly elected. Furthermore, as part of the changes in management announced in October 2007, Marco Suter stepped down from the BoD to take up the position of Group Chief Financial Officer (CFO) and became a member of the Group Executive Board (GEB).

As of 31 December 2007, the membership consisted of 11 directors, of which the majority (nine members) were non-executive and independent.

Elections and terms of office

All the members of the BoD are elected individually by the AGM for a term of office of three years. The initial term of each member is fixed in such a way as to ensure that about one-third of the membership have to be newly elected or re-elected every year.

The BoD of UBS will propose to the AGM to be held on 23 April 2008 to reduce the terms of office of its members from three years to one year. The proposal will require that the "Articles of Association UBS AG" ("Articles of Association") be amended at the AGM on 23 April 2008. The same regulation will apply to all members who subsequently stand for re-election after the expiration of their terms of office. As a result, by 2010 at the latest, the entire membership of the UBS BoD will have to be confirmed on a yearly basis by the AGM.

A director shall not normally stand for re-election if he or she has reached the age of 65 when the mandate expires. The BoD may propose to the AGM that a director be re-elected despite having reached this age limit. No director shall, however, hold office beyond the age of 70.

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Changes in 2008

The BoD will propose to the AGM on 23 April 2008 that Marcel Ospel, Peter Voser and Larry Weinbach, whose terms expire on the date of the AGM, be re-elected for a one-year term.

The BoD has also appointed Sergio Marchionne as a non-executive Vice Chairman of the BoD. Effective 24 April 2008, the Chairman's Office will therefore consist of Marcel Ospel, Chairman of the BoD, and Stephan Haeringer as executive Vice Chairman and Sergio Marchionne as non-executive Vice Chairman.

Larry Weinbach, who had expressed his desire to hand over the chairmanship of the Audit Committee, will remain a member of this committee and continue to provide his valuable experience and expertise. He will be succeeded as Chairman of the Audit Committee by Peter Voser.

The BoD will propose as non-executive director the following new member for election at the AGM on 23 April 2008: David Sidwell, former Chief Financial Officer (CFO) of Morgan Stanley. The BoD will thereafter consist of 12 members.

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Organizational principles

The BoD has ultimate responsibility for the mid- and long-term strategic direction of the Group, for appointments and dismissals at top management levels and the definition of the firm's risk principles and risk capacity. While the majority of members are always non-executive and independent, the Chairman of the BoD and at least one Vice Chairman have executive roles, in line with Swiss banking laws, and assume supervisory and leadership responsibilities.

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Internal organization, Board of Directors' committees and meetings in 2007

After each AGM, the BoD elects its Chairman and one or more Vice Chairmen and appoints its Secretary. It meets as often as business requires, but at least six times per year. In 2007, seven meetings were held together with the members of the GEB, as well as one telephone conference and a full-day strategy seminar. The BoD met nine times without participation of executive management. On average, 96% of the BoD members were present at the meetings and 91% at private board meetings (i.e. without participation of executive management). In addition, the BoD held five ad-hoc meetings with individual GEB members. Participation at these meetings was 91%. The BoD, without executive management, was also asked to take one decision by written consent (circular decision).

Sergio Marchionne was introduced to his new function through a tailored program, consisting of a session focusing on a detailed description of the various businesses by the Chief Executive Officers (CEOs) of each business group.

The BoD is organized as follows:

Chairman's Office

The Chairman operates a Chairman's Office, including the Vice Chairman (or Vice Chairmen if more than one), which meets to address issues that are fundamental for UBS, such as overall strategy, mid-term succession plans at GEB level, compensation systems and principles and the risk profile of the firm. The Group CEO normally participates in formal meetings of the Chairman's Office in an advisory capacity. The Chairman's Office acts as the Risk Committee of the BoD. In this capacity it has the highest approval authority for the following (within the risk capacity and principles approved by the BoD): allocation of responsibility for credit, market and other risk-related matters; setting of standards, concepts and methodologies for risk control; and allocation of the major risk limits to the business groups. It also acts as the supervisory body for Group Internal Audit. The Chairman's Office is responsible for shaping the corporate governance of the firm and formulates appropriate principles, which it submits to the Nominating Committee for review and subsequent submission to the full BoD for approval. It also assumes responsibility for long-term succession planning at BoD level and reviews, upon proposal by the Chairman of the BoD and the Group CEO, GEB candidates for appointment or dismissal by the full BoD. In exceptional cases, and in consideration of the non-transferable and inalienable duties of the BoD under mandatory corporate law, urgent decisions falling within the authority of the BoD may be taken by the Chairman's Office. Such decisions have to be reported to the full BoD as soon as possible.

The members of the Chairman's Office, as of 31 December 2007, were Marcel Ospel, Chairman of the BoD, and Stephan Haeringer, executive Vice Chairman.

The Chairman's Office held 15 meetings in 2007 and met once with the lead partners of UBS's external independent auditors, Ernst & Young Ltd. The Chairman's Office also met once with members of the Swiss Federal Banking Commission (SFBC). It additionally met seven times as supervisory body for Group Internal Audit, with these meetings chaired by Stephan Haeringer. The Chairman's Office was also asked to take four circular decisions. The executive Vice Chairman attended the 15 Chairman's Office meetings, including the ones related to Group Internal Audit issues. Since October 2007, there has been only one executive Vice Chairman.

Audit Committee

The BoD appoints an Audit Committee with at least three members from among the non-executive, independent directors. The Audit Committee assists the BoD in monitoring the integrity of the financial statements of the firm, compliance with legal and regulatory requirements, the qualification, independence and performance of UBS's external auditors and their lead partners, and the integrity of the systems of internal controls for financial reporting. All members of the Audit Committee have been determined by the BoD as being fully independent and financially literate. Lawrence A. Weinbach, the Audit Committee's Chairman, as well as Rolf A. Meyer and Peter Voser have accounting or financial management expertise and are therefore considered "financial experts", according to the rules established by the US Sarbanes-Oxley Act of 2002. The Audit Committee does not itself perform audits, but supervises the work of the auditors. Its primary responsibility is thereby to monitor and review the organization and efficiency of internal control procedures and the financial reporting process. The Audit Committee plays an important role in ensuring the independence of the external auditors and therefore has to authorize all mandates assigned to them. It also has responsibility for the treatment of complaints regarding accounting and auditing matters ("whistleblowing").

As of 31 December 2007, Lawrence A. Weinbach was the Chairman of the Audit Committee and Rolf A. Meyer and Peter Voser its additional members. The Audit Committee met seven times in 2007, with representatives of the external auditors, the Group CFO, the Head Group Controlling & Accounting, Head Group Accounting Policies and the Head Group Internal Audit participating. The seven meetings included regular separate sessions with these representatives. In addition, the Group General Counsel attended one meeting. A special session was organized with the Group CEO to discuss the annual financial results. All three members of the committee were present at all the meetings.

Compensation Committee

The Compensation Committee, comprising at least three non-executive, independent members of the BoD, has a specific responsibility to review the Group compensation policy for submission to the BoD and for approving the design of the compensation system for the members of the GEB and the executive members of the BoD (senior executives). It determines the individual salaries and incentive awards for the executive members of the BoD, the Group CEO and the members of the GEB. It reviews and approves contracts and employment agreements with executive BoD members and the GEB, as well as termination agreements with GEB members relinquishing their positions. The Compensation Committee also reviews the compensation disclosure included in this report.

As of 31 December 2007, Rolf A. Meyer chaired the committee, with Sergio Marchionne and Peter Spuhler as its additional members. The committee met four times during 2007, with each meeting attended by all three members. The committee was also asked to take one circular decision.

Nominating Committee

The Nominating Committee comprises at least three non-executive, independent directors. It assumes responsibility for defining the principles governing the selection of candidates for BoD membership, reviewing possible candidates and proposing to the full BoD those to be submitted for election to the BoD by the AGM. The committee supports the Chairman's Office and the full BoD in evaluating the performance of the BoD and executive management.

As of 31 December 2007, Helmut Panke was the Chairman and Ernesto Bertarelli, Gabrielle Kaufmann-Kohler and Joerg Wolle the additional members of the committee. In 2007, the Nominating Committee held six meetings, and all four members were present at each meeting. Gabrielle Kaufmann-Kohler, who joined the committee in April 2007, was briefed on important UBS nominations as well as corporate governance philosophy, policies and procedures in a special session.

Corporate Responsibility Committee

UBS has a Corporate Responsibility Committee, normally consisting of six to ten members appointed by the BoD from among its members, the members of the GEB and the Group Managing Board (GMB). On an exceptional basis, external specialists may also be appointed as members of the committee.

The committee's mandate is to discuss and judge the relevance of current or anticipated developments in stakeholder expectations related to responsible corporate conduct and their possible consequences for UBS. The committee suggests appropriate action to the GEB or other bodies in UBS. As of 31 December 2007, Stephan Haeringer chaired the committee. Additional members were Gabrielle Kaufmann-Kohler, representing the BoD, Peter Kurer, Group General Counsel, Marco Suter, Group CFO, Maria Bentley, Global Head Human Resources, Investment Bank, Gabriel Herrera, Head of Europe, Middle East & Africa, Global Asset Management, Thomas R. Hill, Chief Communication Officer, Corporate Center, Marten Hoekstra, Head Wealth Management Americas, Global Wealth Management & Business Banking, Jeremy Palmer, CEO Investment Bank in Europe, Middle East & Africa, Investment Bank and Kathryn Shih, Head Wealth Management Asia Pacific and CEO UBS Hong Kong, Global Wealth Management & Business Banking. The Corporate Responsibility Committee met twice during 2007 with an average participation of 78%.

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Roles and responsibilities of executive members of the Board of Directors

Marcel Ospel and Stephan Haeringer, the Chairman of the BoD and the executive Vice Chairman, have entered into employment contracts with UBS AG in connection with their services on the BoD and are entitled to receive pension benefits upon retirement. They assume clearly defined management responsibilities.

Chairman of the BoD Marcel Ospel takes a leading role in mid- and long-term strategic planning, the selection and supervision of the CEO and the members of the GEB, mid-term succession planning and developing and shaping compensation principles. He also actively supports major client and transaction initiatives.

Stephan Haeringer is responsible for corporate governance issues on behalf of the BoD. He chairs the Chairman's Office meetings on group internal audit issues, where the Chairman's Office acts as supervisory body for Group Internal Audit. Credit and market risk approval authorities have also been delegated by the Chairman's Office to Stephan Haeringer, who brings his decisions to the Chairman's Office for ratification. He also assumes the function of Chairman's Office delegate to the GEB Risk Subcommittee, where all major risk issues (credit, market and operational risks) are dealt with. In addition, he is responsible for helping to foster, maintain and support relationships with major clients.

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Non-executive members of the Board of Directors

Important business connections of non-executive members of the Board of Directors with UBS

UBS, as a global financial services provider and the major bank in Switzerland, has business relationships with many large companies including those in which UBS BoD members assume management or non-executive board responsibilities. None of the relationships with companies represented on the BoD by their chairman or chief executive is of a magnitude that jeopardizes the BoD members' independent judgment; furthermore, no non-executive director has personal business relationships with UBS that could infringe on his or her independence.

All relationships and transactions with UBS directors and their affiliated companies are in the ordinary course of business and are on the same terms as those prevailing at the time for comparable transactions with non-affiliated persons.

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Checks and balances: Board of Directors and Group Executive Board

UBS operates under a strict dual board structure, as mandated by Swiss banking law. The functions of Chairman of the BoD and Group Chief Executive Officer (Group CEO) are assigned to two different people, thus providing separation of powers. This structure establishes checks and balances and creates an institutional independence of the BoD from the day-to-day management of the firm, for which responsibility is delegated to the GEB. No member of one board may be a member of the other.

The supervision and control of the executive management remains with the BoD. All details as to authorities and responsibilities of the two bodies are governed by the "Articles of Association" and the "Organization Regulations", including the "Appendix to the Organization Regulations - Authorities".

Information and control instruments vis-à-vis the Group Executive Board

The BoD is kept informed of the activities of the GEB in various ways. The Chairman or the executive Vice Chairman participates in each meeting of the GEB in an advisory capacity, thus keeping the Chairman's Office appraised of all current developments. The minutes of the GEB meetings are filed with the executive BoD members and made available for inspection to the non-executive members. At BoD meetings, the Group CEO and the members of the GEB regularly update the BoD on important issues.

At BoD meetings, members may request from members of the BoD or the GEB any information about any matters concerning UBS that are necessary to fulfill their duties. Outside of meetings, any member may request information from executive BoD members and members of the GEB concerning the Group's business development. Requests for information about individual businesses or transactions must be approved by the Chairman of the BoD.

Group Internal Audit monitors compliance of business activities with legal and regulatory requirements and all internal regulations, policies and guidelines. This internal audit organization, which is independent from management, reports significant findings to the Chairman of the BoD, the Chairman's Office and the Audit Committee.

The GEB submits a quarterly risk report to the Chairman's Office for approval. This report provides an update on all categories of risk and contains a comprehensive assessment of the risk situation of the Group. The full BoD is briefed quarterly on the major developments through an executive summary of the report and an oral update. For the first time in February 2008, the compliance function provided an annual compliance report to the BoD. This report is required by section 109 of the SFBC's circular EBK-RS 06 / 6 and includes a risk-based action plan.