Regulatory News:

UBS (NYSE:UBS) (SWX:UBSN) has established UBS Group Funding (Switzerland) AG, a wholly owned direct subsidiary of UBS Group AG, to issue future loss-absorbing additional tier 1 (AT1) capital instruments and total loss-absorbing capacity- (TLAC-) eligible senior unsecured debt, which will be guaranteed by UBS Group AG. UBS also intends to substitute the issuer of outstanding TLAC-eligible senior unsecured debt, with UBS Group Funding (Switzerland) AG replacing UBS Group Funding (Jersey) Limited as the issuer. Outstanding loss-absorbing AT1 capital instruments issued by UBS Group AG may in the future be transferred to UBS Group Funding (Switzerland) AG, subject to further regulatory review.

Under current Swiss tax law, capital instruments and debt issued directly by UBS Group AG increase the overall tax burden for the Group. However, this can be mitigated by issuing capital and debt instruments through a subsidiary, with a guarantee provided by UBS Group AG, as confirmed by the tax authorities. The Swiss Federal Council has requested the Swiss Federal Tax Administration to propose amendments to the current Swiss tax law in order to reduce the additional tax burden on debt issuances by bank top holding companies. When such changes become effective, we expect loss-absorbing AT1 capital instruments and TLAC-eligible senior unsecured debt to be issued directly out of UBS Group AG. At that point, we also expect to substitute UBS Group AG as issuer of outstanding capital and debt instruments issued by UBS Group Funding (Switzerland) AG. Both loss-absorbing AT1 capital instruments and TLAC-eligible senior unsecured debt are exempt from withholding tax under Swiss law.

We expect the substitution of UBS Group Funding (Switzerland) AG as issuer of outstanding TLAC-eligible senior unsecured debt to be completed during the second quarter of 2017. The issuer substitution will be carried out pursuant to the voluntary substitution provisions provided in the terms and conditions of the relevant instruments. Upon completion of the issuer substitution, outstanding TLAC-eligible senior unsecured debt will continue to be guaranteed by UBS Group AG, and investors' seniority of claim against UBS Group AG will remain unchanged.

Supporting documents on UBS Group Funding (Switzerland) AG are available under the "Disclosures for legal entities" section on www.ubs.com/investors

UBS Group AGInvestor contactSwitzerland: +41-44-234 41 00orMedia contactSwitzerland: +41-44-234 85 00orUK: +44-207-567 47 14orAmericas: +1-212-882 58 57orAPAC: +852-297-1 82 00www.ubs.com

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