UBS Group AG - Annual Report 2017

6-K 1 6kubsle.htm 6kubsle

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

Date: March 10, 2017

UBS Group AG

Commission File Number: 1-36764

UBS AG

Commission File Number: 1-15060

(Registrants' Names)

Bahnhofstrasse 45, Zurich, Switzerland, and

Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20‑F or Form 40-F.

Form 20-F x Form 40-F o

This Form 6-K consists of the following legal entity financial information for the year ended 31 December 2016, which appears immediately following this page:

UBS Switzerland AG standalone financial statements for the year ended 31 December 2016
UBS Limited standalone financial and regulatory information for the financial year 2016
UBS Americas Holding LLC consolidated selected financial information for the financial year 2016

UBS Switzerland AG

Standalone financial statements and regulatory information for the year ended 31 December 2016

Table of contents

| 1 | UBS Switzerland AG standalone
financial statements (audited) |
| --- | --- |
| 19 | UBS Switzerland AG standalone
regulatory information |

UBS Switzerland AG standalone financial statements (audited)

| Income
statement | | For the year ended | | % change from |
| --- | --- | --- | --- | --- |
| CHF million | Note | 31.12.16 | 31.12.15¹ | 31.12.15¹ |
| Interest and discount income²˒⁴ | | 3,795 | 2,963 | 28 |
| Interest and dividend income from trading portfolio | | 1 | 0 | |
| Interest and dividend income from financial investments | | 94 | 54 | 74 |
| Interest expense³ | | (467) | (533) | (12) |
| Gross interest income | | 3,423 | 2,484 | 38 |
| Credit loss (expense) / recovery | | 6 | (4) | |
| Net interest income | | 3,429 | 2,480 | 38 |
| Fee and commission income from securities and investment
business | | 3,272 | 2,642 | 24 |
| Credit-related fees and commissions | | 156 | 116 | 34 |
| Other fee and commission income | | 712 | 524 | 36 |
| Fee and commission expense | | (359) | (281) | 28 |
| Net fee and commission income | | 3,782 | 3,001 | 26 |
| Net trading income⁴ | 3 | 805 | 735 | 10 |
| Net income from disposal of financial investments | | 159 | 11 | |
| Dividend income from investments in subsidiaries and other
participations | | 28 | 30 | (7) |
| Income from real estate holdings | | (1) | 0 | |
| Sundry ordinary income | | 198 | 103 | 92 |
| Sundry ordinary expenses | | (58) | (66) | (12) |
| Other income from ordinary activities | | 326 | 79 | 313 |
| Total operating income | | 8,341 | 6,295 | 33 |
| Personnel expenses | 4 | 2,109 | 1,608 | 31 |
| General and administrative expenses | 5 | 3,469 | 2,583 | 34 |
| Subtotal operating expenses | | 5,578 | 4,192 | 33 |
| Depreciation and impairment of property, equipment and software | | 12 | 11 | 9 |
| Amortization and impairment of goodwill and other intangible
assets | | 1,050 | 788 | 33 |
| Changes in provisions and other allowances and losses | | 5 | 15 | (67) |
| Total operating expenses | | 6,644 | 5,005 | 33 |
| Operating profit | | 1,697 | 1,290 | 32 |
| Extraordinary income | | 0 | 0 | |
| Extraordinary expenses | | 0 | 0 | |
| Tax expense / (benefit) | 6 | 384 | 222 | 73 |
| Net profit / (loss) | | 1,313 | 1,068 | 23 |
| 1 The financial year ended 31 December 2015 covers the period 1
April 2015 to 31 December 2015. Refer to “Establishment of UBS Switzerland
AG” in the “Legal entity financial and regulatory information” section of the
UBS Group AG Annual Report 2015 for more information. 2 Interest and
discount income includes negative interest income on financial assets of CHF
111 million and CHF 25 million for the years ended 31 December 2016 and 31
December 2015, respectively. 3 Interest expense includes negative interest
expense on financial liabilities of CHF 136 million and CHF 74 million for
the years ended 31 December 2016 and 31 December 2015, respectively. 4
From 2016, the difference between forward rates and spot rates on certain
short duration foreign exchange derivative contracts which are part of
economic hedge relationships (CHF 280 million) is presented in Interest and
discount income. For 2015, the comparative amount of CHF 205 million is
presented in Net trading income. | | | | |

| Balance
sheet | | | | |
| --- | --- | --- | --- | --- |
| | | | | % change from |
| CHF million | Note | 31.12.16 | 31.12.15 | 31.12.15 |
| Assets | | | | |
| Cash and balances with central banks | | 44,528 | 38,701 | 15 |
| Due from banks | | 4,355 | 3,477 | 25 |
| Receivables from securities financing transactions | 7 | 25,930 | 23,672 | 10 |
| of which: cash collateral on
securities borrowed | | 6,657 | 7,414 | (10) |
| of which: reverse repurchase
agreements | | 19,273 | 16,258 | 19 |
| Due from customers | 8, 9 | 38,168 | 38,373 | (1) |
| Mortgage loans | 8, 9 | 146,061 | 148,492 | (2) |
| Trading portfolio assets | 10 | 1,673 | 1,736 | (4) |
| Positive replacement values | 11 | 2,133 | 2,274 | (6) |
| Financial investments | 12 | 27,002 | 22,878 | 18 |
| Accrued income and prepaid expenses | | 264 | 237 | 11 |
| Investments in subsidiaries and other participations | | 56 | 42 | 33 |
| Property, equipment and software | | 19 | 15 | 27 |
| Goodwill and other intangible assets | | 3,413 | 4,463 | (24) |
| Other assets | 13 | 893 | 817 | 9 |
| Total assets | | 294,497 | 285,176 | 3 |
| Liabilities | | | | |
| Due to banks | | 13,248 | 19,280 | (31) |
| Payables from securities financing transactions | 7 | 6,903 | 8,997 | (23) |
| of which: cash collateral on
securities lent | | 1,518 | 2,493 | (39) |
| of which: repurchase
agreements | | 5,385 | 6,505 | (17) |
| Due to customers | | 248,796 | 231,294 | 8 |
| Trading portfolio liabilities | 10 | 154 | 128 | 20 |
| Negative replacement values | 11 | 1,212 | 1,092 | 11 |
| Bonds issued | | 8,331 | 8,274 | 1 |
| Accrued expenses and deferred income | | 929 | 822 | 13 |
| Other liabilities | 13 | 1,276 | 963 | 33 |
| Provisions | 9 | 186 | 179 | 4 |
| Total liabilities | | 281,034 | 271,027 | 4 |
| Equity | | | | |
| Share capital | 16 | 10 | 10 | 0 |
| General reserve | | 12,139 | 13,072 | (7) |
| of which: statutory capital
reserve | | 12,139 | 13,072 | (7) |
| of which: capital
contribution reserve | | 12,139 | 13,072 | (7) |
| Voluntary earnings reserve | | 0 | 0 | |
| Net profit / (loss) for the period | | 1,313 | 1,068 | 23 |
| Total equity | | 13,463 | 14,149 | (5) |
| Total liabilities and equity | | 294,497 | 285,176 | 3 |
| of which: subordinated
liabilities | | 4,521 | 4,020 | 12 |
| of which: subject to mandatory
conversion and / or debt waiver | | 4,521 | 4,020 | 12 |

UBS Switzerland AG standalone financial statements (audited)

| Balance
sheet (continued) | | | |
| --- | --- | --- | --- |
| | | | % change from |
| CHF million | 31.12.16 | 31.12.15 | 31.12.15 |
| Off-balance
sheet items | | | |
| Contingent liabilities,
gross | 9,608 | 8,784 | 9 |
| Sub-participations | (976) | (854) | 14 |
| Contingent liabilities, net | 8,632 | 7,930 | 9 |
| of which: guarantees to
third parties related to subsidiaries | 7 | 9 | (22) |
| of which: credit guarantees
and similar instruments | 3,180 | 3,313 | (4) |
| of which: performance
guarantees and similar instruments | 2,442 | 2,318 | 5 |
| of which: documentary
credits | 3,002 | 2,291 | 31 |
| Irrevocable commitments,
gross | 8,780 | 7,982 | 10 |
| Sub-participations | (2) | 0 | |
| Irrevocable commitments, net | 8,778 | 7,982 | 10 |
| of which: loan commitments | 7,906 | 7,117 | 11 |
| of which: payment commitment
related to deposit insurance | 872 | 865 | 1 |
| Liabilities for calls on
shares and other equity instruments | 43 | 37 | 16 |

Off-balance sheet items

UBS Switzerland AG is jointly and severally liable for the combined value added tax (VAT) liability of UBS entities that belong to the VAT group of UBS in Switzerland. This contingent liability is not included in the table above.

Swiss deposit insurance

Swiss banking law and the deposit insurance system require Swiss banks and securities dealers to jointly guarantee an amount of up to CHF 6 billion for privileged client deposits in the event that a Swiss bank or securities dealer becomes insolvent. The Swiss Financial Market Supervisory Authority (FINMA) estimates the share of UBS Switzerland AG from 1 July 2016 to 30 June 2017 to be CHF 872 million, which is reflected in the table above.

Joint and several liability

In June 2015, the Personal & Corporate Banking and Wealth Management businesses booked in Switzerland were transferred from UBS AG to UBS Switzerland AG through an asset transfer in accordance with the Swiss Merger Act. Under the Swiss Merger Act, UBS AG assumed joint liability for obligations existing on the asset transfer date, 14 June 2015, which were transferred to UBS Switzerland AG.

Similarly, under the terms of the asset transfer agreement UBS Switzerland AG assumed joint liability for approximately CHF 325 billion of contractual obligations of UBS AG existing on the asset transfer date, excluding the collateralized portion of secured contractual obligations and covered bonds. UBS Switzerland AG has no liability for new obligations incurred by UBS AG after the asset transfer date. Under certain circumstances, the Swiss Banking Act and the Bank Insolvency Ordinance of FINMA authorize FINMA to modify, extinguish or convert to common equity liabilities of a bank in connection with a resolution or insolvency of such bank. The joint liability amount declines as obligations mature, terminate or are novated following the asset transfer date. As of 31 December 2016, the joint liability of UBS Switzerland AG for contractual obligations of UBS AG amounted to CHF 91 billion compared with CHF 136 billion as of December 2015.

As of 31 December 2016, the probability of an outflow under this joint and several liability was assessed to be remote, and as a result, the table above does not include any exposures arising under this joint and several liability.

® Refer to “Establishment of UBS Switzerland AG” in the “Legal entity financial and regulatory information” section of the UBS Group AG Annual Report 2015 for more information

| Statement
of changes in equity — CHF million | Share capital | Statutory capital reserve | Voluntary earnings reserve | Net profit / (loss) for the period | Total equity |
| --- | --- | --- | --- | --- | --- |
| Balance as of 1 January 2016 | 10 | 13,072 | 0 | 1,068 | 14,149 |
| Dividends and other distributions | | (932) | (1,068) | | (2,000) |
| Net profit / (loss) appropriation | | | 1,068 | (1,068) | 0 |
| Net profit / (loss) for the period | | | | 1,313 | 1,313 |
| Balance as of 31 December
2016 | 10 | 12,139 | 0 | 1,313 | 13,463 |

In December 2016, an extraordinary dividend of CHF 2 billion was paid out of the voluntary earnings reserve (CHF 1,068 million) and statutory capital reserve (CHF 932 million) to UBS AG.

Statement of appropriation of retained earnings

Proposed appropriation of retained earnings

The Board of Directors proposes that the Annual General Meeting of Shareholders (AGM) on 21 April 2017 approve the following appropriation of retained earnings.

	For the year ended
CHF million	31.12.16
Net profit for the period	1,313
Retained earnings carried forward	0
Total retained earnings
available for appropriation	1,313
Proposed appropriation of
retained earnings
Dividend distribution	(191)
Appropriation to voluntary earnings reserve	(1,122)
Retained earnings carried
forward	0

UBS Switzerland AG standalone financial statements (audited)

Note 1 Name, legal form and registered office

UBS Switzerland AG is incorporated and domiciled in Switzerland. Its registered office is at Bahnhofstrasse 45, CH-8001 Zurich, Switzerland. UBS Switzerland AG operates under the Swiss Code of Obligations and Swiss federal banking law as a corporation limited by shares (Aktiengesellschaft), a corporation that has issued shares of common stock to investors. UBS Switzerland AG is 100% owned by UBS AG.

Note 2 Accounting policies

UBS Switzerland AG standalone financial statements are prepared in accordance with Swiss GAAP (FINMA Circular 2015 / 1 and Banking Ordinance) and represent "reliable assessment statutory single-entity financial statements". The accounting policies are principally the same as for the consolidated financial statements of UBS Group AG outlined in Note 1 to the consolidated financial statements of UBS Group AG included in the UBS Group AG Annual Report 2016. Major differences between the Swiss GAAP requirements and International Financial Reporting Standards are described in Note 36 to the consolidated financial statements of UBS Group AG. The significant accounting policies applied for the standalone financial statements of UBS Switzerland AG are discussed below.

® Refer to the UBS Group AG Annual Report 2016 for more information

Risk management

UBS Switzerland AG is fully integrated into the Group-wide risk management process described in the audited part of the “Risk management and control” section of the UBS Group AG Annual Report 2016.

Further information on the use of derivative instruments and hedge accounting is provided in Notes 1 and 12 to the consolidated financial statements of UBS Group AG.

® Refer to the UBS Group AG Annual Report 2016 for more information

Compensation policy

The compensation structure and processes of UBS Switzerland AG conform to the compensation principles and framework of UBS Group AG. For detailed information refer to the Compensation Report of UBS Group AG.

® Refer to the UBS Group AG Annual Report 2016 for more information

Foreign currency translation

Transactions denominated in foreign currency are translated into Swiss francs at the spot exchange rate on the date of the transaction. At the balance sheet date, all monetary assets and liabilities, as well as equity instruments recorded in Trading portfolio assets and Financial investments denominated in foreign currency, are translated into Swiss francs using the closing exchange rate. Non-monetary items measured at historic cost are translated at the spot exchange rate on the date of the transaction. All currency translation effects are recognized in the income statement.

The main currency translation rates used by UBS Switzerland AG are provided in Note 34 to the consolidated financial statements of UBS Group AG.

® Refer to the UBS Group AG Annual Report 2016 for more information

Goodwill

As part of the business transfer, mainly of the Personal & Corporate Banking and Wealth Management businesses booked in Switzerland, from UBS AG effective 1 April 2015, UBS Switzerland AG recognized goodwill of CHF 5,250 million. This goodwill is amortized on a straight-line basis over five years and assessed for impairment annually.

Deferred taxes

Deferred tax assets are not recognized in UBS Switzerland AG’s standalone financial statements. However, deferred tax liabilities may be recognized for taxable temporary differences. Changes in the deferred tax liability balance are recognized in the income statement.

Note 2 Accounting policies (continued)

Services provided to and received from subsidiaries, affiliated entities, UBS AG and UBS Group AG

Services provided to and received from UBS Group AG or any of its subsidiaries are settled in cash as hard cost transfers or hard revenue transfers paid or received.

When the nature of the underlying transaction between UBS Switzerland AG and UBS Group AG or any of its subsidiaries contains a single, clearly identifiable service element, related income and expenses are presented in the respective income statement line item, e.g., Fee and commission income from securities and investment business, Other fee and commission income, Fee and commission expense, Net trading income or General and administrative expenses. To the extent the nature of the underlying transaction contains various service elements and is not clearly attributable to a particular income statement line item, related income and expenses are presented in Sundry ordinary income and Sundry ordinary expenses.

® Refer to Note 5 for more information

Pension and other post-employment benefit plans

Swiss GAAP permits the use of IFRS or Swiss accounting standards for pension and other post-employment benefit plans, with the election made on a plan-by-plan basis.

UBS Switzerland AG has elected to apply Swiss GAAP (FER 16) for its pension plan. The requirements of Swiss GAAP are better aligned with the specific nature of Swiss pension plans, which are hybrid in that they combine elements of defined contribution and defined benefit plans but are treated as defined benefit plans under IFRS. Swiss GAAP requires that the employer contributions to the pension fund are recognized as Personnel expenses in the income statement. The employer contributions to the Swiss pension fund are determined as a percentage of contributory compensation. Furthermore, Swiss GAAP requires an assessment as to whether, based on the financial statements of the pension fund prepared in accordance with Swiss accounting standards (FER 26), an economic benefit to, or obligation of, UBS Switzerland AG arises from the pension fund and is recognized in the balance sheet when conditions are met. Conditions for recording a pension asset or liability would be met if, for example, an employer contribution reserve is available or UBS Switzerland AG is required to contribute to the reduction of a pension deficit (on a FER 26 basis).

® Refer to Note 17 for more information

Subordinated assets and liabilities

Subordinated assets are comprised of claims that, based on an irrevocable written declaration, in the event of liquidation, bankruptcy or restructuring of the debtor, rank after the claims of all other creditors and may not be offset against amounts payable to the debtor nor secured by its assets. Subordinated liabilities are comprised of corresponding obligations.

Subordinated assets and liabilities that contain a point-of-non-viability clause in accordance with Swiss capital requirements per articles 29 and 30 of the Capital Adequacy Ordinance are disclosed as being subject to mandatory conversion and / or debt waiver and provide for the claim or the obligation to be written off or converted into equity in the event that the issuing bank reaches a point of non-viability.

Dispensations in the standalone financial statements

As UBS Switzerland AG has no listed shares outstanding and is within the scope of the UBS Group AG consolidated financial statements prepared in accordance with IFRS, UBS Switzerland AG is exempt from various disclosures in the standalone financial statements. The dispensations include the management report and the statement of cash flows, as well as various note disclosures.

UBS Switzerland AG standalone financial statements (audited)

Note 3a Net trading income by business

CHF million	For the year ended — 31.12.16	31.12.15	% change from — 31.12.15
Wealth Management	399	280	43
Personal & Corporate Banking	381	248	54
Other business divisions and Corporate Center	24	206	(88)
Total net trading income	805	735	10

Note 3b Net trading income by underlying risk category

CHF million	For the year ended — 31.12.16	31.12.15	% change from — 31.12.15
Interest rate instruments (including funds)	(4)	123
Foreign exchange instruments	778	571	36
Equity instruments (including funds)	7	11	(36)
Credit instruments	6	7	(14)
Precious metal / commodities	17	22	(23)
Total net trading income	805	735	10

Note 4 Personnel expenses

CHF million	For the year ended — 31.12.16	31.12.15	% change from — 31.12.15
Salaries	1,299	976	33
Variable compensation – performance awards	392	314	25
Variable compensation – other	23	14	64
Contractors	3	3	0
Social security	105	80	31
Pension and other post-employment benefit plans	242	181	34
Other personnel expenses	45	41	10
Total personnel expenses	2,109	1,608	31

Note 5 General and administrative expenses

CHF million	For the year ended — 31.12.16	31.12.15	% change from — 31.12.15
Occupancy	2	2	0
Rent and maintenance of IT equipment	9	5	80
Communication and market data services	29	23	26
Administration	2,927	2,182	34
of which: hard cost
transfers paid¹	2,817	2,097	34
Marketing and public relations	177	148	20
Travel and entertainment	97	75	29
Fees to audit firms	7	2	250
of which: financial and
regulatory audits	7	1	600
of which: audit-related
services	0	0
Other professional fees	102	69	48
Outsourcing of IT and other services	120	78	54
Total general and
administrative expenses	3,469	2,583	34
1 Represents expenses for services provided by UBS Group AG and
subsidiaries in the UBS Group to UBS Switzerland AG.

Note 6 Taxes

CHF million	For the year ended — 31.12.16	31.12.15	% change from — 31.12.15
Income tax expense / (benefit)	350	199	76
of which: current	350	199	76
of which: deferred	0	0
Capital tax	34	23	48
Total tax expense /
(benefit)	384	222	73

For the full year 2016, the weighted average tax rate, defined as the income tax expense divided by the sum of operating profit and extraordinary income minus extraordinary expenses and capital tax, was 21.0% (2015: 15.7%).

Note 7 Securities financing transactions

CHF billion	31.12.16	31.12.15
On-balance
sheet
Receivables from securities financing transactions, gross	26.1	24.4
Netting of securities financing transactions	(0.2)	(0.8)
Receivables from securities financing transactions, net	25.9	23.7
Payables from securities financing transactions, gross	7.1	9.8
Netting of securities financing transactions	(0.2)	(0.8)
Payables from securities financing transactions, net	6.9	9.0
Off-balance
sheet
Fair value of assets received as collateral in connection with securities
financing transactions	121.9	118.1
of which: repledged	100.4	102.9
of which: sold in connection
with short sale transactions	0.2	0.1

UBS Switzerland AG standalone financial statements (audited)

Note 8a Collateral for loans and off-balance sheet transactions

	31.12.16 — Secured			Unsecured	Total	31.12.15 — Secured			Unsecured	Total
	Secured by collateral		Secured by other credit enhancements²			Secured by collateral		Secured by other credit enhancements²
CHF million	Real estate	Other collateral¹				Real estate	Other collateral¹
On-balance
sheet
Due from customers, gross	1,506	25,890	1,519	9,713	38,627	1,301	27,589	1,462	8,533	38,885
Mortgage loans, gross	146,095				146,095	148,514				148,514
of which: residential
mortgages	126,442				126,442	127,252				127,252
of which: office and
business premises mortgages	6,975				6,975	7,908				7,908
of which: industrial
premises mortgages	2,890				2,890	3,170				3,170
of which: other mortgages	9,788				9,788	10,184				10,184
Total on-balance sheet,
gross	147,600	25,890	1,519	9,713	184,722	149,815	27,589	1,462	8,533	187,400
Allowances	(36)	(71)	(53)	(332)	(492)	(28)	(73)	(57)	(376)	(534)
Total on-balance sheet, net	147,564	25,819	1,465	9,382	184,229	149,787	27,517	1,405	8,157	186,865
Off-balance
sheet
Contingent liabilities, gross	184	2,481	1,112	5,831	9,608	175	2,452	1,033	5,125	8,784
Irrevocable commitments, gross	606	528	83	7,562	8,780	1,251	82	304	6,345	7,982
Liabilities for calls on shares and other equities			0	43	43			0	37	37
Total off-balance sheet	790	3,009	1,196	13,436	18,430	1,425	2,535	1,336	11,507	16,804
1 Includes but not limited to deposits, securities, life
insurance contracts, inventory, accounts receivable, patents and
copyrights. 2 Includes credit default swaps and guarantees.

Note 8b Impaired financial instruments

CHF million	31.12.16 — Gross impaired financial instruments	Allowances and provisions¹	Estimated liquidation proceeds of collateral	Net impaired financial instruments	31.12.15 — Gross impaired financial instruments	Allowances and provisions¹	Estimated liquidation proceeds of collateral	Net impaired financial instruments
Amounts due from banks	3	3	0	0	3	3	0	0
Amounts due from customers	649	464	12	174	702	512	22	168
Mortgage loans	146	29	110	7	185	22	137	26
Guarantees and loan commitments	236	41	10	185	275	31	4	239
Total impaired financial
instruments	1,034	536	132	366	1,164	568	163	433
1 Includes CHF 5 million collective loan loss allowances
(December 2015: CHF 4 million).

Note 9a Allowances

CHF million	Balance as of 31.12.15	Increase recognized in the income statement	Release recognized in the income statement	Write-offs	Recoveries and past due interest	Reclassifications	Foreign currency translation	Balance as of 31.12.16
Specific allowances for amounts due from customers and mortgage
loans	530	113	(120)	(53)	25	(10)	1	488
Specific allowances for amounts due from banks	3	0	0	0	0	0	0	3
Collective allowances¹	4	1	0	0	0	0	0	5
Total allowances	537	114	(120)	(53)	25	(10)	1	495
1 Mainly relates to amounts due from customers.

Note 9b Provisions

CHF million	Balance as of 31.12.15	Increase recognized in the income statement	Release recognized in the income statement	Provisions used in conformity with designated purpose	Recoveries	Reclassifica- tions	Balance as of 31.12.16
Default risk related to loan commitments and guarantees	31	4	(4)	0	0	10	41
Operational risks	3	1	(1)	0	0	0	3
Litigation, regulatory and similar matters¹	96	11	(8)	(21)	2	0	79
Restructuring	13	59	(7)	(33)	0	0	32
Employee benefits	27	0	(8)	0	0	0	19
Other	8	4	(1)	(1)	0	0	10
Total provisions	179	79	(28)	(56)	2	10	186
1 Includes provisions for litigation resulting from security
risks.

Note 10 Trading portfolio and other financial instruments measured at fair value

CHF million	31.12.16	31.12.15
Assets
Trading portfolio assets	1,673	1,736
of which: debt instruments¹	9	2
of which: listed	5	1
of which: equity instruments	20	7
of which: precious metals
and other physical commodities	1,645	1,728
Total assets measured at
fair value	1,673	1,736
of which: fair value derived
using a valuation model	23	6
of which: securities
eligible for repurchase transactions in accordance with liquidity
regulations²	3	0
Liabilities
Trading portfolio liabilities	154	128
of which: debt instruments¹	106	64
of which: listed	87	61
of which: equity instruments	48	64
Total liabilities measured at
fair value	154	128
of which: fair value derived
using a valuation model	130	89
1 Includes money market paper. 2 Consists of high-quality
liquid debt securities that are eligible for repurchase transactions at the
Swiss National Bank (SNB) or other central banks.

UBS Switzerland AG standalone financial statements (audited)

Note 11 Derivative instruments

| CHF million, except where
indicated | 31.12.16 — PRV² | NRV³ | Total notional values (CHF billion) | 31.12.15 — PRV² | NRV³ | Total notional values (CHF billion) |
| --- | --- | --- | --- | --- | --- | --- |
| Interest rate contracts | | | | | | |
| Forwards¹ | 26 | 30 | 10 | 13 | 19 | 5 |
| Swaps | 2,776 | 2,563 | 189 | 3,393 | 3,099 | 213 |
| of which: designated in
hedge accounting relationships | 977 | 404 | 37 | 1,022 | 382 | 44 |
| Over-the-counter (OTC) options | 84 | 80 | 5 | 81 | 78 | 3 |
| Total | 2,886 | 2,673 | 203 | 3,488 | 3,196 | 222 |
| Foreign exchange contracts | | | | | | |
| Forwards | 563 | 547 | 41 | 551 | 517 | 42 |
| Interest and currency swaps | 846 | 595 | 104 | 876 | 819 | 127 |
| Over-the-counter (OTC) options | 332 | 332 | 28 | 245 | 244 | 31 |
| Total | 1,742 | 1,473 | 172 | 1,672 | 1,580 | 200 |
| Equity / index contracts | | | | | | |
| Forwards | 26 | 26 | 4 | 18 | 21 | 3 |
| Swaps | 1 | 1 | 0 | 2 | 2 | 0 |
| Over-the-counter (OTC) options | 291 | 291 | 4 | 323 | 323 | 7 |
| Exchange-traded options | 255 | 255 | | 281 | 281 | 0 |
| Total | 574 | 574 | 8 | 625 | 627 | 10 |
| Credit derivative contracts | | | | | | |
| Credit default swaps | 1 | 7 | 0 | 7 | 10 | 1 |
| Total | 1 | 7 | 0 | 7 | 10 | 1 |
| Commodity, precious metals
and other contracts | | | | | | |
| Forwards | 16 | 15 | 1 | 15 | 14 | 1 |
| Swaps | 45 | 45 | 2 | 51 | 51 | 2 |
| Over-the-counter (OTC) options | 195 | 195 | 7 | 176 | 176 | 6 |
| Total | 256 | 255 | 10 | 242 | 241 | 9 |
| Total before netting | 5,458 | 4,982 | 394 | 6,033 | 5,655 | 441 |
| of which: trading
derivatives | 4,481 | 4,578 | | 5,011 | 5,273 | |
| of which: fair value derived
using a valuation model | 4,432 | 4,532 | | 4,968 | 5,223 | |
| of which: derivatives
designated in hedge accounting relationships | 977 | 404 | | 1,022 | 382 | |
| of which: fair value derived
using a valuation model | 977 | 404 | | 1,022 | 382 | |
| Netting with cash collateral payables / receivables | | (445) | | | (804) | |
| Replacement value netting | (3,325) | (3,325) | | (3,759) | (3,759) | |
| Total after netting | 2,133 | 1,212 | | 2,274 | 1,092 | |
| of which: with bank and
broker-dealer counterparties | 112 | 259 | | 80 | 259 | |
| of which: other client
counterparties | 2,021 | 954 | | 2,194 | 833 | |
| 1 Includes forward rate agreements. 2 PRV: positive
replacement values. 3 NRV: negative replacement values. | | | | | | |

Note 12a Financial investments by instrument type

CHF million	31.12.16 — Carrying value	Fair value	31.12.15 — Carrying value	Fair value
Debt instruments	26,943	26,803	22,849	22,875
of which: held to maturity	8,762	8,595	0	0
of which: available for sale	18,181	18,208	22,849	22,875
Equity instruments	18	18	0	0
Property	42	42	29	29
Total financial investments	27,002	26,863	22,878	22,904
of which: securities
eligible for repurchase transactions in accordance with liquidity
regulations¹	26,666	26,526	22,849	22,875
1 Consists of high-quality liquid debt securities that are
eligible for repurchase transactions at the Swiss National Bank (SNB) or
other central banks.

Note 12b Financial investments by counterparty rating – debt instruments

CHF million	31.12.16	31.12.15
Internal UBS rating¹
0–1	23,883	22,321
2–3	3,060	528
4–5	0	0
6–8	0	0
9–13	0	0
Non-rated	0	0
Total financial investments
– debt instruments	26,943	22,849
1 Refer to Note 15 for more information.

Note 13a Other assets

CHF million	31.12.16	31.12.15
Deferral position for hedging instruments	95	349
Settlement and clearing accounts	292	101
VAT and other indirect tax receivables	27	33
Other	478	334
of which: other receivables
from UBS Group AG and subsidiaries in the UBS Group	417	293
Total other assets	893	817

Note 13b Other liabilities

CHF million	31.12.16	31.12.15
Settlement and clearing accounts	593	338
VAT and other indirect tax payables	112	115
Other	571	510
of which: other payables to
UBS Group AG and subsidiaries in the UBS Group	333	323
Total other liabilities	1,276	963

Note 14 Pledged assets 1

CHF million	31.12.16 — Carrying value of pledged assets	Effective commitment	31.12.15 — Carrying value of pledged assets	Effective commitment
Mortgage loans²	19,887	14,138	24,980	16,235
Total pledged assets	19,887	14,138	24,980	16,235
1 Excluding securities financing transactions. Refer to Note 7
for more information on securities financing transactions. 2 These pledged
mortgage loans serve as collateral for existing liabilities against Swiss
central mortgage institutions and for existing covered bond issuances. Of
these pledged mortgage loans, approximately CHF 1.9 billion as of 31 December
2016 (approximately CHF 4.4 billion as of 31 December 2015) could be
withdrawn or used for future liabilities or covered bond issuances without breaching
existing collateral requirements.

UBS Switzerland AG standalone financial statements (audited)

Note 15 Country risk of total assets

The table below provides a breakdown of total non-Swiss assets by credit rating. These credit ratings reflect the sovereign credit rating of the country to which the ultimate risk of the underlying asset is related. The ultimate country of risk for unsecured loan positions is the domicile of the immediate borrower or, in the case of a legal entity, the domicile of the ultimate parent entity. For collateralized or guaranteed positions, the ultimate country of risk is the domicile of the provider of the collateral or guarantor or, if applicable, the domicile of the ultimate parent entity of the provider of the collateral or guarantor. For mortgage loans, the ultimate country of risk is the country where the real estate is located. Similarly, the ultimate country of risk for property and equipment is the country where the property and equipment is located. Assets for which Switzerland is the ultimate country of risk are provided separately in order to reconcile them to total balance sheets assets.

® Refer to the “Risk management and control” section of the UBS Group AG Annual Report 2016 for more information

Classification	Internal UBS rating	Description	Moody’s Investors Service	Standard & Poor’s	Fitch	31.12.16 — CHF million	%	31.12.15 — CHF million	%
	0 and 1	Investment grade	Aaa	AAA	AAA	44,870	15	40,924	14
Low risk	2		Aa1 to Aa3	AA+ to AA–	AA+ to AA–	15,916	5	14,884	5
	3		A1 to A3	A+ to A–	A+ to AA–	2,423	1	5,906	2
Medium risk	4		Baa1 to Baa2	BBB+ to BBB	BBB+ to BBB	2,886	1	2,518	1
	5		Baa3	BBB–	BBB–	1,837	1	1,248	0
High risk	6	Sub-investment grade	Ba1	BB+	BB+	1,327	0	884	0
	7		Ba2	BB	BB	410	0	17	0
	8		Ba3	BB–	BB–	61	0	16	0
	9		B1	B+	B+	91	0	53	0
Very high risk	10		B2	B	B	802	0	39	0
	11		B3	B–	B–	271	0	99	0
	12		Caa	CCC	CCC	123	0	144	0
	13		Ca to C	CC to C	CC to C	41	0	33	0
Distressed	Default	Defaulted	D	D	D	1	0	0	0
Subtotal						71,056	24	66,767	23
Switzerland						223,440	76	218,410	77
Total assets						294,497	100	285,176	100

Note 16a Share capital

	31.12.16 — Par value in CHF	Number of shares	of which: dividend bearing	31.12.15 — Par value in CHF	Number of shares	of which: dividend bearing
Share capital¹	10,000,000	100,000,000	100,000,000	10,000,000	100,000,000	100,000,000
of which: shares outstanding	10,000,000	100,000,000	100,000,000	10,000,000	100,000,000	100,000,000
1 Registered shares issued.

UBS Switzerland AG’s share capital is fully paid up. Each share has a par value of CHF 0.10 and entitles the holder to one vote at the UBS Switzerland AG shareholders’ meeting, if entered into the share register as having the right to vote, as well as a proportionate share of distributed dividends. UBS Switzerland AG does not apply any restrictions or limitations on the transferability of shares.

Non-distributable reserves

Non-distributable reserves consist of 50% of the share capital of UBS Switzerland AG, amounting to CHF 5 million as of 31 December 2016.

Note 16b Significant shareholders

The sole direct shareholder of UBS Switzerland AG is UBS AG, which holds 100% of UBS Switzerland AG shares. These shares are entitled to voting rights. Indirect shareholders of UBS Switzerland AG, who do not have voting rights, include UBS Group AG, which holds 100% of UBS AG shares. Included in the table below are also direct shareholders of UBS Group AG (acting in their own name or in their capacity as nominees for other investors or beneficial owners) that were registered in the UBS Group AG share register with 3% or more of the share capital of UBS Group AG as of 31 December 2016 or as of 31 December 2015.

The shares and share capital of UBS Switzerland AG held by indirect shareholders represent their relative holding of UBS Group AG shares.

® Refer to Note 23 to the UBS Group AG standalone financial statements in the UBS Group AG Annual Report 2016 for more information on significant shareholders of UBS Group AG

| CHF million, except where
indicated | 31.12.16 — Share capital held | Shares held (%) | 31.12.15 — Share capital held | Shares held (%) |
| --- | --- | --- | --- | --- |
| Significant direct
shareholder of UBS Switzerland AG | | | | |
| UBS AG | 10 | 100 | 10 | 100 |
| Significant indirect
shareholders of UBS Switzerland AG | | | | |
| UBS Group AG | 10 | 100 | 10 | 100 |
| Chase Nominees Ltd., London | 1 | 9 | 1 | 9 |
| GIC Private Limited, Singapore | | | 1 | 6 |
| DTC (Cede & Co.), New York¹ | 1 | 7 | 1 | 6 |
| Nortrust Nominees Ltd., London | 0 | 4 | 0 | 4 |
| 1 DTC (Cede & Co.), New York, “The Depository Trust
Company”is a US securities clearing organization. | | | | |

Note 17 Swiss pension plan

| a)
Liabilities related to Swiss pension plan — CHF million | 31.12.16 | 31.12.15 |
| --- | --- | --- |
| Provision for Swiss pension plan | 0 | 0 |
| Bank accounts at UBS and UBS debt instruments held by Swiss
pension fund | 216 | 262 |
| UBS derivative financial instruments held by Swiss pension fund | 46 | 27 |
| Total liabilities related to
Swiss pension plan | 262 | 289 |
| b)
Swiss pension plan | | |
| | As of or for the year ended | |
| CHF million | 31.12.16 | 31.12.15 |
| Pension plan surplus¹ | 2,458 | 2,264 |
| Economic benefit / (obligation) of UBS Switzerland AG | 0 | 0 |
| Change in economic benefit / obligation recognized in the income
statement | 0 | 0 |
| Employer contributions in the period recognized in the income
statement | 211 | 158 |
| Performance awards-related employer contributions accrued | 31 | 24 |
| Total pension expense
recognized in the income statement within Personnel expenses | 241 | 181 |
| 1 The pension plan surplus is determined in accordance with FER
26 and consists of the reserve for the fluctuation in asset value. The
surplus did not represent an economic benefit for UBS Switzerland AG in
accordance with FER 16 both as of 31 December 2016 and 31 December 2015. | | |

The Swiss pension plan had no employer contribution reserve both as of 31 December 2016 and 31 December 2015.

Note 18 Share-based compensation

UBS Group AG is the grantor of the majority of UBS’s deferred compensation plans. Expenses for awards granted under such plans to UBS Switzerland AG employees are charged by UBS Group AG to UBS Switzerland AG.

® Refer to Note 27 to the UBS Group AG consolidated financial statements in the UBS Group AG Annual Report 2016 for more information

UBS Switzerland AG standalone financial statements (audited)

Note 19 Related parties

Transactions with related parties are conducted at internally agreed transfer prices or at arm’s length, or with respect to loans, fixed advances and mortgages to non-independent members of the Board of Directors and Group Executive Board members on the same terms and conditions that are available to other employees.

CHF million	31.12.16 — Amounts due from	Amounts due to	31.12.15 — Amounts due from	Amounts due to
Qualified shareholders¹	18,037	15,771	11,232	21,683
of which: due from / to
banks	925	8,356	743	13,881
of which: receivables /
payables from securities financing transactions	16,551	5,133	9,958	5,760
of which: due from / to
customers	67	1,692	169	1,442
Subsidiaries²	56	1,831	35	380
of which: due from / to
customers	53	1,831	30	380
Affiliated entities³	384	1,057	1,239	2,232
of which: due from / to
banks	211	587	318	629
of which: receivables / payables
from securities financing transactions	0	0	372	786
of which: due from / to
customers	72	350	78	328
Members of governing bodies⁴	48		39
External auditors		1		1
Other related parties⁵	465		468
1 Qualified shareholders of UBS Switzerland AG are UBS Group AG
and UBS AG. 2 Subsidiaries of UBS Switzerland AG are UBS Card Center AG,
Topcard Service AG and UBS Hypotheken AG. 3 Affiliated entities of UBS
Switzerland AG are all direct and indirect subsidiaries of UBS Group AG
including subsidiaries of UBS AG. 4 Members of governing bodies consist of
members of the Board of Directors and Group Executive Board of UBS Group AG
and UBS AG and members of the Board of Directors and Executive Board of UBS
Switzerland AG. 5 Primarily relates to SIX Group AG, in which UBS AG has
a 17.3% equity interest.

Note 20 Fiduciary transactions

CHF million	31.12.16	31.12.15
Fiduciary deposits	15,719	13,210
of which: placed with
third-party banks	9,757	7,246
of which: placed with
subsidiaries and affiliated entities	5,962	5,964
Total fiduciary transactions	15,719	13,210

Fiduciary transactions encompass transactions entered into or granted by UBS Switzerland AG that result in holding or placing assets on behalf of individuals, trusts, defined benefit plans and other institutions. Unless the recognition criteria for the assets are satisfied, these assets and the related income are excluded from UBS Switzerland AG’s balance sheet and income statement, but disclosed in this Note as off-balance sheet fiduciary transactions. Client deposits that are initially placed as fiduciary transactions with UBS Switzerland AG may be recognized on UBS Switzerland AG’s balance sheet in situations in which the deposit is subsequently placed within UBS Switzerland AG. In such cases, these deposits are not reported in the table above.

Note 21a Invested assets and net new money

CHF billion	For the year ended — 31.12.16	31.12.15
Fund assets managed	0	0
Discretionary assets	88	88
Other invested assets	447	444
Total invested assets	535	532
of which: double count	0	0
Net new money	(3.5)	(17.3)

Note 21b Development of invested assets

CHF billion	For the year ended — 31.12.16	31.12.15
Total invested assets at the beginning of the year	532	557
Net new money	(4)	(17)
Market movements¹	9	(17)
Foreign currency translation	(2)	9
Other effects	(1)	0
of which: acquisitions /
(divestments)	(1)	0
Total invested assets at the
end of the year²	535	532
1 Includes interest and dividend income. 2 As of 31 December
2016 and 31 December 2015 there were no invested assets double counts.

® Refer to Note 33 to the UBS Group AG consolidated financial statements in the UBS Group AG Annual Report 2016 for more information

UBS Switzerland AG standalone financial statements (audited)

UBS Switzerland AG standalone regulatory information

Swiss SRB going and gone concern requirements and information

UBS Switzerland AG is considered a systemically relevant bank (SRB) under Swiss banking law and is subject to capital regulations on a standalone basis . In May 2016, the Swiss Federal Council adopted amendments to the too big to fail (TBTF) provisions, based on the cornerstones announced by the Swiss Federal Council in October 2015. The revised Capital Adequacy Ordinance forms the basis of a revised Swiss SRB framework, which became effective on 1 July 2016.

As of 31 December 2016, the phase-in going concern capital and leverage ratio requirements for UBS Switzerland AG standalone were 11.19% and 3.0%, respectively. The gone concern requirements on a phase-in basis were 3.5% for the RWA-based requirement and 1.0% for the LRD-based requirement.

| Swiss
SRB going and gone concern requirements and information¹ | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| As of 31.12.16 | Swiss SRB including transitional arrangements (phase-in) | | | | Swiss SRB as of 1.1.20 (fully applied) | | | |
| CHF million, except where
indicated | Risk-weighted assets | | Leverage ratio denominator | | Risk-weighted assets | | Leverage ratio denominator | |
| Required
loss-absorbing capacity | in %² | | in % | | in % | | in % | |
| Common equity tier 1 capital | 8.56 | 7,989 | 2.30 | 7,051 | 10.44 | 9,738 | 3.50 | 10,731 |
| of which: minimum capital | 6.18 | 5,760 | 2.30 | 7,051 | 4.50 | 4,198 | 1.50 | 4,599 |
| of which: buffer capital | 1.95 | 1,819 | | | 5.50 | 5,130 | 2.00 | 6,132 |
| of which: countercyclical
buffer³ | 0.44 | 410 | | | 0.44 | 410 | | |
| Maximum additional tier 1
capital | 2.63 | 2,449 | 0.70 | 2,146 | 4.30 | 4,011 | 1.50 | 4,599 |
| of which: high-trigger
loss-absorbing additional tier 1 minimum capital | 1.83 | 1,702 | 0.70 | 2,146 | 3.50 | 3,265 | 1.50 | 4,599 |
| of which: high-trigger
loss-absorbing additional tier 1 buffer capital | 0.80 | 746 | | | 0.80 | 746 | | |
| Total going concern capital | 11.19 | 10,438 | 3.00 | 9,198 | 14.74⁴ | 13,749 | 5.00⁴ | 15,329 |
| Base gone concern requirement | 3.50 | 3,265 | 1.00 | 3,066 | 14.30⁴ | 13,339 | 5.00⁴ | 15,329 |
| Total gone concern
loss-absorbing capacity | 3.50 | 3,265 | 1.00 | 3,066 | 14.30 | 13,339 | 5.00 | 15,329 |
| Total loss-absorbing
capacity | 14.69 | 13,702 | 4.00 | 12,263 | 29.04 | 27,088 | 10.00 | 30,659 |
| Eligible
loss-absorbing capacity | | | | | | | | |
| Common equity tier 1 capital | 11.17 | 10,416 | 3.40 | 10,416 | 11.17 | 10,416 | 3.40 | 10,416 |
| High-trigger loss-absorbing
additional tier 1 capital | 1.32 | 1,235 | 0.40 | 1,235 | 2.14 | 2,000 | 0.65 | 2,000 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 1.32 | 1,235 | 0.40 | 1,235 | 2.14 | 2,000 | 0.65 | 2,000 |
| Total going concern capital | 12.49 | 11,651 | 3.80 | 11,651 | 13.31 | 12,416 | 4.05 | 12,416 |
| Gone concern loss-absorbing
capacity | 3.50 | 3,265 | 1.06 | 3,265 | 2.68 | 2,500 | 0.82 | 2,500 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 0.82 | 765 | 0.25 | 765 | | | | |
| of which: low-trigger
loss-absorbing tier 2 capital | 2.68 | 2,500 | 0.82 | 2,500 | 2.68 | 2,500 | 0.82 | 2,500 |
| Total gone concern
loss-absorbing capacity | 3.50 | 3,265 | 1.06 | 3,265 | 2.68 | 2,500 | 0.82 | 2,500 |
| Total loss-absorbing
capacity | 15.99 | 14,916 | 4.87 | 14,916 | 15.99 | 14,916 | 4.87 | 14,916 |
| 1 This table does not include the effect of any potential gone
concern requirement rebate. 2 The total capital ratio requirement of
14.69% is the current phase-in requirement according to the Swiss Capital
Adequacy Ordinance. In addition, FINMA has defined a total capital ratio
requirement, which is the sum of 14.4% and the effect of countercyclical
buffer requirements of 0.44%, of which 10% plus the effect of countercyclical
buffer requirements must be satisfied with common equity tier 1 capital. The FINMA
total capital requirement will be effective until it is exceeded by the Swiss
SRB phase-in requirement. 3 Going concern capital ratio requirements as of
31 December 2016 include countercyclical buffer requirements of 0.44% for the
phase-in and fully applied requirement. 4 Includes applicable add-ons of
1.44% for RWA and 0.5% for LRD. | | | | | | | | |

UBS Switzerland AG standalone regulatory information

Swiss SRB loss-absorbing capacity

| Current
and former Swiss SRB going and gone concern information | Swiss SRB including transitional arrangements (phase-in) | Swiss SRB as of 1.1.20 (fully applied) | Former Swiss SRB (phase-in) |
| --- | --- | --- | --- |
| CHF million, except where
indicated | 31.12.16 | 31.12.16 | 31.12.15 |
| Common equity tier 1 capital | 10,416 | 10,416 | 10,468 |
| High-trigger loss-absorbing additional tier 1 capital | 1,235¹ | 2,000 | 1,500 |
| Total tier 1 capital | 11,651 | 12,416 | 11,968 |
| Low-trigger loss-absorbing tier 2 capital | | | 2,500 |
| Total going concern capital | 11,651¹ | 12,416 | |
| Total capital | | | 14,468 |
| Gone
concern loss-absorbing capacity | | | |
| High-trigger loss-absorbing additional tier 1 capital | 765 | | |
| Low-trigger loss-absorbing tier 2 capital | 2,500 | 2,500 | |
| Total gone concern
loss-absorbing capacity | 3,265 | 2,500 | |
| Total
loss-absorbing capacity | | | |
| Total loss-absorbing capacity | 14,916 | 14,916 | |
| Risk-weighted
assets / leverage ratio denominator | | | |
| Risk-weighted assets | 93,281 | 93,281 | 95,765 |
| Leverage ratio denominator | 306,586 | 306,586 | 296,865 |
| Capital
and loss-absorbing capacity ratios (%) | | | |
| Tier 1 capital ratio | | | 12.5 |
| Total capital ratio | | | 15.1 |
| Going concern capital ratio | 12.5 | 13.3 | |
| of which: common equity tier
1 capital ratio | 11.2 | 11.2 | 10.9 |
| Gone concern loss-absorbing capacity ratio | 3.5 | 2.7 | |
| Total loss-absorbing capacity ratio | 16.0 | 16.0 | |
| Leverage
ratios (%) | | | |
| Leverage ratio | | | 4.9 |
| Going concern leverage ratio | 3.8 | 4.0 | |
| of which: common equity tier
1 leverage ratio | 3.4 | 3.4 | 3.5 |
| Gone concern leverage ratio | 1.1 | 0.8 | |
| Total loss-absorbing capacity leverage ratio | 4.9 | 4.9 | |
| 1 Under the Swiss SRB rules, going concern capital includes CET1
and high-trigger loss-absorbing additional tier 1 capital. Outstanding
low-trigger loss-absorbing tier 2 capital instruments will also remain
available to meet the going concern capital requirements until the earlier of
(i) their maturity or first call date or (ii) 31 December 2019. However, as
of 31 December 2016, CHF 765 million of high-trigger loss-absorbing
additional tier 1 capital as well as the total low-trigger loss-absorbing
tier 2 capital of CHF 2,500 million were used to meet the gone concern
requirement. | | | |

| Reconciliation
Swiss federal banking law equity to Swiss SRB common equity tier 1 capital — CHF billion | 31.12.16 | 31.12.15 |
| --- | --- | --- |
| Equity – Swiss federal
banking law¹ | 13.5 | 14.1 |
| Deferred tax assets | 0.7 | 0.9 |
| Goodwill and intangible assets | (3.4) | (4.5) |
| Other | (0.3) | (0.1) |
| Common equity tier 1 capital
(phase-in) | 10.4 | 10.5 |
| 1 Equity under Swiss federal banking law is adjusted to derive
equity in accordance with IFRS and then further adjusted to derive common
equity tier 1 (CET1) capital in accordance with Swiss SRB requirements. | | |

Leverage ratio information

| Swiss
SRB leverage ratio | Swiss SRB including transitional arrangements (phase-in) | Swiss SRB as of 1.1.20 (fully applied) | Former Swiss SRB (phase-in) |
| --- | --- | --- | --- |
| | 31.12.16 | 31.12.16 | 31.12.15 |
| Leverage
ratio denominator (CHF billion) | | | |
| Swiss GAAP total assets | 294.5 | 294.5 | 285.2 |
| Difference between Swiss GAAP and IFRS total assets | 1.5 | 1.5 | 1.4 |
| Less: derivative exposures and SFTs¹ | (32.3) | (32.3) | (30.8) |
| On-balance sheet exposures
(excluding derivative exposures and SFTs) | 263.7 | 263.7 | 255.8 |
| Derivative exposures | 4.7 | 4.7 | 4.7 |
| Securities financing transactions | 26.4 | 26.4 | 24.7 |
| Off-balance sheet items | 12.0 | 12.0 | 11.9 |
| Items deducted from Swiss SRB tier 1 capital | (0.3) | (0.3) | (0.3) |
| Total exposures (leverage
ratio denominator) | 306.6 | 306.6 | 296.9 |
| Loss-absorbing
capacity (CHF million) | | | |
| Common equity tier 1 including loss-absorbing capital | | | 14,468 |
| Going concern capital | 11,651² | 12,416 | |
| of which: common equity tier
1 capital | 10,416 | 10,416 | 10,468 |
| Gone concern capital | 3,265² | 2,500 | |
| Total loss-absorbing capacity | 14,916 | 14,916 | |
| Leverage
ratios (%) | | | |
| Leverage ratio | | | 4.9 |
| Going concern leverage ratio | 3.8 | 4.0 | |
| of which: common equity tier
1 leverage ratio | 3.4 | 3.4 | 3.5 |
| Gone concern leverage ratio | 1.1 | 0.8 | |
| Total loss-absorbing capacity leverage ratio | 4.9 | 4.9 | |
| 1 Consists of positive replacement values, cash collateral
receivables on derivative instruments, cash collateral on securities
borrowed, reverse repurchase agreements, margin loans and prime brokerage
receivables related to securities financing transactions, which are presented
separately under Derivative exposures and Securities financing transactions
in this table. 2 Under the Swiss SRB rules, going concern capital includes
CET1 and high-trigger additional tier 1 capital. Outstanding low-trigger tier
2 capital instruments will also remain available to meet the going concern
capital requirements until the earlier of (i) their maturity or first call
date or (ii) 31 December 2019. However, as of 31 December 2016, CHF 765
million of high-trigger loss-absorbing additional tier 1 capital as well as
the total low-trigger loss-absorbing tier 2 capital of CHF 2,500 million were
used to meet the gone concern requirement. | | | |

| BIS
Basel III leverage ratio (phase-in) — CHF million, except where
indicated | 31.12.16 | 30.9.16 | 30.6.16 | 31.3.16 | 31.12.15 |
| --- | --- | --- | --- | --- | --- |
| Total tier 1 capital | 12,416 | 12,476 | 12,489 | 12,495 | 11,968 |
| Total exposures (leverage ratio denominator) | 306,586 | 315,057 | 313,285 | 309,001 | 296,865 |
| BIS Basel III leverage ratio (%) | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 |

UBS Switzerland AG standalone regulatory information

Capital instruments

| Capital
instruments of UBS Switzerland AG - key features | | | | | |
| --- | --- | --- | --- | --- | --- |
| Presented
according to issuance date | | | | | |
| | | Share capital | Additional tier 1 capital | Tier 2 capital | Additional tier 1 capital |
| 1 | Issuer (country of incorporation; if applicable, branch) | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland |
| 1a | Instrument number | 1 | 2 | 3 | 4 |
| 2 | Unique identifier (e.g., ISIN) | N/A | N/A | N/A | N/A |
| 3 | Governing law(s) of the instrument | Swiss | Swiss | Swiss | Swiss |
| | Regulatory treatment | | | | |
| 4 | Transitional Basel III rules (1) | Common equity tier 1 – Going concern capital | Additional tier 1 – Going concern capital | Tier 2 – Going concern capital (4) | Additional tier 1 – Going concern capital |
| 5 | Post-transitional Basel III rules (2) | Common equity tier 1 – Going concern capital | Additional tier 1 – Going concern capital | Tier 2 – Gone concern loss-absorbing capacity (4) | Additional tier 1 – Going concern capital |
| 6 | Eligible at solo / group / group&solo | UBS Switzerland AG standalone | UBS Switzerland AG standalone | UBS Switzerland AG standalone | UBS Switzerland AG standalone |
| 7 | Instrument type | Ordinary shares | Loan (5) | Loan (5) | Loan (5) |
| 8 | Amount recognized in regulatory capital (currency in million, as
of most recent reporting date) (1) | CHF 10.0 | CHF 1,500 | CHF 2,500 | CHF 500 |
| 9 | Outstanding amount (par value, million) | CHF 10.0 | CHF 1,500 | CHF 2,500 | CHF 500 |
| 10 | Accounting classification (3) | Equity attributable to UBS Switzerland AG shareholders | Due to banks held at amortized cost | Due to banks held at amortized cost | Due to banks held at amortized cost |
| 11 | Original date of issuance | – | 1 April 2015 | 1 April 2015 | 11 March 2016 |
| 12 | Perpetual or dated | – | Perpetual | Dated | Perpetual |
| 13 | Original maturity date | – | – | 1 April 2025 | – |
| 14 | Issuer call subject to prior supervisory approval | – | Yes | Yes | Yes |
| 15 | Optional call date, subsequent call dates, if applicable, and
redemption amount | – | First optional repayment date: 1 April 2020 | First optional repayment date: 1 April 2020 | First optional repayment date: 11 March 2021 |
| | | | Repayable at any time after the first optional repayment date. Repayment subject to FINMA approval. Optional repayment amount:
principal amount, together with any accrued and unpaid interest thereon | | |
| 16 | Contingent call dates and redemption amount | – | Early repayment possible due to a tax or regulatory event.
Repayment due to tax event subject to FINMA approval. Repayment amount: principal amount, together with accrued and
unpaid interest | | |
| | | | – | Early repayment possible upon a change in progressive capital
component requirement, subject to FINMA approval. Repayment amount: 101% of
principal amount, together with accrued and unpaid interest | – |
| | Coupons / dividend | | | | |
| 17 | Fixed or floating dividend / coupon | – | Floating | Floating | Floating |
| 18 | Coupon rate and any related index; frequency of payment | – | 6-month CHF Libor + 370 bps per annum semi-annually | 6-month CHF Libor + 200 bps per annum semi-annually | 3-month CHF Libor + 459 bps per annum quarterly |
| 19 | Existence of a dividend stopper | – | No | No | No |
| 20 | Fully discretionary, partially discretionary or mandatory | Fully discretionary | Fully discretionary | Mandatory | Fully discretionary |
| 21 | Existence of step-up or other incentive to redeem | – | No | No | No |

| Capital
instruments of UBS Switzerland AG - key features (continued) — 22 | Non-cumulative or cumulative | Non-cumulative | Non-cumulative | Cumulative | Non-cumulative |
| --- | --- | --- | --- | --- | --- |
| 23 | Convertible or non-convertible | – | Non-convertible | Non-convertible | Non-convertible |
| 24 | If convertible, conversion trigger(s) | – | – | – | – |
| 25 | If convertible, fully or partially | – | – | – | – |
| 26 | If convertible, conversion rate | – | – | – | – |
| 27 | If convertible, mandatory or optional conversion | – | – | – | – |
| 28 | If convertible, specify instrument type convertible into | – | – | – | – |
| 29 | If convertible, specify issuer of instrument it converts into | – | – | – | – |
| 30 | Write-down feature | – | Yes | Yes | Yes |
| 31 | If write-down, write-down trigger(s) | – | Trigger: CET1 ratio is less than 7% | Trigger: CET1 ratio is less than 5% | Trigger: CET1 ratio is less than 7% |
| | | | FINMA determines a write-down necessary to ensure UBS
Switzerland AG viability; or UBS Switzerland AG receives a commitment of
governmental support that FINMA determines necessary to ensure UBS
Switzerland AG's viability Subject to applicable conditions. | | |
| 32 | If write-down, full or partial | – | Full | Full | Full |
| 33 | If write-down, permanent or temporary | – | Permanent | Permanent | Permanent |
| 34 | If temporary write-down, description of write-up mechanism | – | – | – | – |
| 35 | Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) | Unless otherwise stated in the Articles of Association, once
debts are paid back, the assets of the liquidated company are divided between
the shareholders pro rata based on their contributions and considering the
preferences attached to certain categories of shares (section 745, Swiss
Civil Code of Obligations) | Subject to any obligations that are mandatorily preferred by
law, all obligations of UBS Switzerland AG that are unsubordinated or that
are subordinated and do not rank junior, such as all classes of share
capital, or at par, such as tier 1 instruments | Subject to any obligations that are mandatorily preferred by
law, all obligations of UBS Switzerland AG that are unsubordinated or that
are subordinated and do not rank junior, such as all classes of share
capital, or at par, such as unsecured, subordinated and dated obligations | Subject to any obligations that are mandatorily preferred by
law, all obligations of UBS Switzerland AG that are unsubordinated or that
are subordinated and do not rank junior, such as all classes of share
capital, or at par, such as tier 1 instruments |
| 36 | Existence of features, which prevent full recognition under
Basel III | – | – | – | – |
| 37 | If yes, specify non-compliant features | – | – | – | – |
| (1) Based on Swiss SRB phase-in (including transitional
arrangement) requirements. (2) Based on Swiss SRB requirements applicable
as of 1.1.20. (3) As applied in UBS Switzerland AG's financial statements
under Swiss GAAP. (4) Outstanding low-trigger loss-absorbing tier 2 capital
qualifies as going concern capital until the earlier of (i) their maturity or
first call date or (ii) 31 December 2019. From 1 January 2020, these
instruments may be used to meet the gone concern requirements until one year
before maturity, with a haircut of 50% applied in the last year of
eligibility. (5) Loans granted by UBS AG, Switzerland. | | | | | |

Liquidity coverage ratio

UBS Switzerland AG, as a Swiss SRB, is required to maintain a minimum LCR of 100%.

| Liquidity
coverage ratio | |
| --- | --- |
| | Weighted value¹ |
| CHF billion, except where
indicated | Average 4Q16 |
| High-quality liquid assets | 75 |
| Total net cash outflows | 63 |
| of which: cash outflows | 97 |
| of which: cash inflows | 34 |
| Liquidity coverage ratio (%) | 120 |
| 1 Calculated after the application of haircuts and inflow and
outflow rates. | |

UBS Switzerland AG standalone regulatory information

Notice to investors | This document and the information contained herein are provided solely for information purposes, and are not to be construed as solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS Group AG, UBS AG or their affiliates should be made on the basis of this document. Refer to UBS’s Annual Report 2016 for additional information. This report is available at www.ubs.com/investors.

Rounding | Numbers presented throughout this document may not add up precisely to the totals provided in the tables and text. Percentages, percent changes and absolute variances are calculated on the basis of rounded figures displayed in the tables and text and may not precisely reflect the percentages, percent changes and absolute variances that would be derived based on figures that are not rounded.

Tables | Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Percentage changes are presented as a mathematical calculation of the change between periods.

UBS Limited standalone financial and regulatory information

Financial year 2016

UBS Limited standalone financial and regulatory information

| Income
statement | For the year ended | | % change from |
| --- | --- | --- | --- |
| GBP million | 31.12.16 | 31.12.15 | 31.12.15 |
| Interest income | 377 | 289 | 30 |
| Interest expense | (394) | (289) | 36 |
| Net interest income | (17) | 0 | |
| Credit loss (expense) / recovery | (2) | 2 | |
| Net fee and commission income | 699 | 667 | 5 |
| Net trading income | 68 | 42 | 62 |
| Other income | 12 | 16 | (25) |
| Total operating income | 760 | 727 | 5 |
| Total operating expenses | 563 | 538 | 5 |
| Operating profit before tax | 197 | 189 | 4 |
| Tax expense / (benefit) | 171 | (52) | |
| Net profit | 26 | 241 | (89) |

| Statement
of comprehensive income | For the year ended | | % change from |
| --- | --- | --- | --- |
| GBP million | 31.12.16 | 31.12.15 | 31.12.15 |
| Net profit | 26 | 241 | (89) |
| Other comprehensive income | | | |
| Other comprehensive income
that may be reclassified to the income statement | | | |
| Financial investments
available for sale | | | |
| Net unrealized gains / (losses) on financial investments
available for sale | 0 | (5) | (100) |
| Total other comprehensive
income that may be reclassified to the income statement | 0 | (5) | (100) |
| Total comprehensive income | 26 | 236 | (89) |

Balance sheet
			% change from
GBP million	31.12.16	31.12.15	31.12.15
Assets
Cash and balances with central banks	3	5	(42)
Due from banks	1,054	841	25
Cash collateral on securities borrowed	2,799	3,047	(8)
Reverse repurchase agreements	2,638	2,973	(11)
Trading portfolio assets	4,698	3,770	25
Positive replacement values	17,451	17,668	(1)
Cash collateral receivables on derivative instruments	6,490	6,027	8
Loans and advances to customers	1,054	791	33
Financial assets designated at fair value	3,931	666	490
Financial assets available for sale	123	3,163	(96)
Deferred tax asset	47	172	(73)
Other assets	333	319	4
Total assets	40,621	39,442	3
Liabilities
Due to banks	2,715	2,309	18
Cash collateral on securities lent	228	4
Repurchase agreements	3,472	4,021	(14)
Trading portfolio liabilities	5,780	4,787	21
Negative replacement values	17,904	18,040	(1)
Cash collateral payables on derivative instruments	6,153	5,966	3
Due to customers	385	230	67
Financial liabilities designated at fair value	724	728	(1)
Other liabilities	387	316	22
Total liabilities	37,748	36,400	4
Equity
Share capital	227	227	0
Share premium	2,184	2,184	0
Retained earnings	226	396	(43)
Cumulative net income recognized directly in equity, net of tax	2	1	27
Other equity instruments	235	235	0
Total equity	2,874	3,042	(6)
Total liabilities and equity	40,622	39,442	3

UBS Limited standalone financial and regulatory information

Basis of accounting

The financial statements of UBS Limited are prepared in accordance with the International Financial Reporting Standards (IFRS) , as endorsed by the EU, and are stated in British pounds (GBP), the functional currency of the entity. UBS Limited is wholly owned by UBS AG, which is wholly owned by UBS Group AG, the ultimate parent company of the UBS Group.

This financial information is unaudited and should be read in conjunction with the audited financial statements of UBS Limited. The full Annual Report and Financial Statements of UBS Limited for the year ended 31 December 2016 will be made available in April 2017 under “Disclosure for legal entities” at www.ubs.com/investors.

| Capital
information¹˒²˒³˒⁴ — GBP million, except where
indicated | 31.12.16 | 31.12.15 |
| --- | --- | --- |
| Capital | | |
| Common equity tier 1 capital before adjustment | 2,596 | 2,807 |
| Regulatory adjustments | (244) | (239) |
| Common equity tier 1 capital | 2,352 | 2,568 |
| Additional tier 1 capital | 235 | 235 |
| Total tier 1 capital | 2,587 | 2,803 |
| Tier 2 capital | 687 | 587 |
| Total capital | 3,274 | 3,390 |
| Risk-weighted
assets and leverage ratio denominator | | |
| Risk-weighted assets | 11,081 | 12,317 |
| Leverage ratio denominator | 35,794 | 37,807 |
| Capital
and leverage ratios | | |
| Common equity tier 1 capital ratio (%) | 21.2 | 20.8 |
| Tier 1 capital ratio (%) | 23.3 | 22.8 |
| Total capital ratio (%) | 29.5 | 27.5 |
| Leverage ratio (%) | 7.2 | 7.4 |
| 1 Capital information for UBS Limited has been prepared in
accordance with Regulation (EU) No 575 / 2013 (as amended by Regulation (EU)
2015 / 62 in respect of the leverage ratio). 2 There was no local
disclosure requirement for the liquidity coverage ratio as of 31 December
2016. 3 Capital information presented for 31 December 2015 is based on UBS
Limited’s Pillar 3 – Supplementary Disclosures as of 31 December 2015. 4
Capital information presented for 31 December 2016 excludes 2016 net profit
carried forward, which will become eligible for inclusion only after
completion of the statutory audit. | | |

UBS Limited standalone financial and regulatory information

UBS Americas Holding LLC consolidated selected financial information

Financial year 2016

UBS Americas Holding LLC consolidated financial and regulatory information

| Selected
financial information¹ | | |
| --- | --- | --- |
| | For the financial year ended | |
| USD million | | 31.12.16 |
| Income
statement | | |
| Net interest income (including credit loss expense / recovery) | | 1,216 |
| Net fee and commission income | | 7,954 |
| Net trading income | | 419 |
| Other income | | 561 |
| Total operating income | | 10,149 |
| Personnel expenses | | 6,936 |
| General and administrative expenses | | 2,830 |
| Other operating expenses | | 257 |
| Total operating expenses | | 10,022 |
| Operating profit / (loss) before tax | | 127 |
| Tax expense / (benefit) | | (1,201) |
| Net profit / (loss) | | 1,328 |
| | As of | |
| USD million | 31.12.16 | 31.12.15 |
| Balance
sheet | | |
| Deposits with central banks and other banks | 10,576 | 6,713 |
| Receivables from banks, brokers, dealers and clearing
organizations | 4,318 | 13,883 |
| Receivables from securities financing transactions | 27,378 | 59,446 |
| Financial assets at fair value | 17,998 | 8,218 |
| Loans and other receivables from customers | 50,465 | 49,562 |
| Securities available for sale | 6,269 | 5,162 |
| Goodwill and other intangible assets | 6,254 | 6,310 |
| Deferred tax assets | 8,962 | 7,689 |
| Other assets | 6,636 | 6,094 |
| Total assets | 138,858 | 163,077 |
| Payables to banks, brokers, dealers and clearing organizations | 33,121 | 23,262 |
| Payables from securities financing transactions | 5,449 | 35,359 |
| Deposits and payables to customers | 65,425 | 71,482 |
| Financial liabilities at fair value | 3,709 | 4,370 |
| Other liabilities | 6,667 | 9,430 |
| Total liabilities | 114,371 | 143,903 |
| Total equity | 24,487 | 19,174 |
| 1 The UBS Americas Holding LLC consolidated selected financial
information is prepared in accordance with accounting principles generally
accepted in the US (US GAAP), but does not represent financial statements
under US GAAP. | | |

Basis of accounting

The financial statements of UBS Americas Holding LLC are prepared in accordance with accounting principles generally accepted in the US (US GAAP), and are stated in US dollars (USD), the functional currency of the entity. UBS Americas Holding LLC is wholly owned by UBS AG, which is wholly owned by UBS Group AG, the ultimate parent company of the UBS Group. The financial information is unaudited and should be read in conjunction with the audited financial statements of UBS Americas Holding LLC.

The table below provides the key regulatory capital components and capital ratios of UBS Americas Holding LLC (consolidated). This information is prepared in accordance with applicable US Basel III rules and has not been audited by the external auditors of UBS Americas Holding LLC.

| Regulatory
capital components and capital ratios | |
| --- | --- |
| USD million, except where
indicated | 31.12.16 |
| Capital | |
| Common equity tier 1
capital¹ | 11,648 |
| Additional tier 1 capital² | 0 |
| Tier 1 capital | 11,648 |
| Tier 2 capital | 722 |
| Total capital | 12,370 |
| Risk-weighted
assets and leverage ratio denominator | |
| Total risk-weighted assets | 51,443 |
| Leverage ratio denominator | 140,174 |
| Capital
and leverage ratios (%)³ | |
| Common equity tier 1 capital ratio | 22.6 |
| Tier 1 capital ratio | 22.6 |
| Total capital ratio | 24.0 |
| Leverage ratio | 8.3 |
| 1 The difference between total equity of USD 24.5 billion as of
31 December 2016 and CET 1 capital of USD 11.6 billion mainly relates to
deductions for goodwill and intangible assets and deferred tax assets. 2
Additional tier 1 capital is reduced to zero by deduction of deferred tax
assets attributable to net operating losses. 3 As of 31 December 2016, UBS
Americas Holding LLC had a CET1 capital ratio requirement of 5.125%, a tier 1
capital ratio requirement of 6.625% and a total capital ratio requirement of
8.625%, which are the current phase-in requirements according to the
applicable US Basel III rules. | |

UBS Americas Holding LLC consolidated financial and regulatory information

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UBS Group AG

By: _/s/ Todd Tuckner _____

Name: Todd Tuckner

Title: Group Controller and

Chief Accounting Officer

By: _/s/ David Kelly_______

Name: David Kelly

Title: Managing Director

UBS AG

By: _/s/ Todd Tuckner ______

Name: Todd Tuckner

Title: Group Controller and

Chief Accounting Officer

By: _/s/ David Kelly_______

Name: David Kelly

Title: Managing Director

Date: March 10, 2017

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