ADDENDUM DATED 25 AUGUST 2017

If you are in any doubt about any of the contents of this addendum, you should obtain independentprofessional advice.

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited (the “StockExchange”) and Hong Kong Securities Clearing Company Limited (“HKSCC”) take no responsibilityfor the contents of this addendum, make no representation as to its accuracy or completeness andexpressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance uponthe whole or any part of the contents of this addendum.

Addendum to the Base Listing Document dated 31 March 2017relating to Non-collateralised Structured Products

to be issued by

UBS AG(incorporated with limited liability in Switzerland)

acting through its London Branch

SponsorUBS SECURITIES ASIA LIMITED

This addendum, for which we accept full responsibility, includes particulars given in compliance withthe Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the“Listing Rules”) for the purpose of giving further information with regard to us. You must read thisaddendum in conjunction with our base listing document dated 31 March 2017 (our “Base ListingDocument”).

We, having made all reasonable enquiries, confirm that to the best of our knowledge and belief theinformation contained in this addendum is accurate and complete in all material respects and notmisleading or deceptive, and there are no other matters the omission of which would make anystatement in this addendum misleading.

The Structured Products involve derivatives. Investors should not invest in the StructuredProducts unless they fully understand and are willing to assume the risks associated with them.

Investors are warned that the price of the Structured Products may fall in value as rapidly asit may rise and holders may sustain a total loss of their investment. Prospective purchasersshould therefore ensure that they understand the nature of the Structured Products andcarefully study the risk factors set out in our Base Listing Document and the relevant launchannouncement and supplemental listing document and, where necessary, seek professionaladvice, before they invest in the Structured Products.

The Structured Products constitute our general unsecured contractual obligations and of noother person and will rank equally among themselves and with all our other unsecuredobligations (save for those obligations preferred by law) upon liquidation. If you purchase theStructured Products, you are relying upon our creditworthiness, and have no rights under theStructured Products against (a) the company which has issued the underlying securities; (b) thetrustee or the manager of the underlying unit trust; or (c) the index compiler of any underlyingindex. If we become insolvent or default on our obligations under the Structured Products, youmay not be able to recover all or even part of the amount due under the Structured Products (ifany).

IMPORTANT INFORMATION

What is this addendum about?

This addendum contains supplemental general information on us, our unaudited second quarter 2017financial information for the quarter period ended 31 March 2017 and the risk management andcontrol applicable to UBS Group AG (our holding company), UBS AG and our subsidiaries (together,“UBS Group”) extracted from UBS Group AG’s second quarter 2017 financial report. This addendumis a supplement to our Base Listing Document.

What documents should you read before investing in the Structured Products?

You must read this addendum together with our Base Listing Document (including any otheraddendum to our Base Listing Document to be issued by us from time to time) and the relevant launchannouncement and supplemental listing document (including any addendum to such launchannouncement and supplemental listing document to be issued by us from time to time) (together, the“Listing Documents”) before investing in any Structured Product.

Where can you inspect the relevant documents?

Copies of this addendum, our Base Listing Document and the relevant launch announcement andsupplemental listing document and other documents set out in the relevant launch announcement andsupplemental listing document may be inspected during usual business hours on any weekday(Saturdays, Sundays and holidays excepted) at the offices of UBS Securities Asia Limited.

本增編、我們的基礎上市文件連同相關發行公佈及補充上市文件及於相關發行公佈及補充上市文件內所列的其他文件，可於平日(星期六、日及假期除外)的一般辦公時間於瑞銀証券亞洲有限公司(UBS Securities Asia Limited) 辦事處查閱。

Are we subject to any litigation?

Save as disclosed in the Listing Documents, we and our subsidiaries are not aware of any litigationor claims of material importance pending or threatened against us or them.

Has our financial position changed since last financial year-end?

There has been no material adverse change in our financial or trading position since 31 December2016.

What are our credit ratings?

Our long term debt ratings are:

Rating agency Rating as of the date of this addendum

Moody’s Investors Service Ltd A1 (stable outlook)

Standard & Poor’s Credit Market

Services Europe Limited A+ (stable outlook)

Rating agencies usually receive a fee from the companies that they rate. When evaluating ourcreditworthiness, you should not solely rely on our credit ratings because:

• a credit rating is not a recommendation to buy, sell or hold the Structured Products;

• ratings of companies may involve difficult-to-quantify factors such as market competition, thesuccess or failure of new products and markets and managerial competence;

• a high credit rating is not necessarily indicative of low risk. Our credit ratings as of the date ofthis addendum are for reference only. Any downgrading of our credit ratings could result in areduction in the value of the Structured Products;

• a credit rating is not an indication of the liquidity or volatility of the Structured Products; and

• a credit rating may be downgraded if our credit quality declines.

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The Structured Products are not rated.

Our credit ratings are subject to change or withdrawal at any time within each rating agency’s sole

discretion. You should conduct your own research using publicly available sources to obtain the latest

information with respect to our ratings from time to time.

How can you get further information about us or the Structured Products?

You may visit http://warrants.ubs.com/en/home_e.cgi to obtain further information about us and/or

the Structured Products.

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TABLE OF CONTENTS

Page

INFORMATION IN RELATION TO US. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

THE UNAUDITED FINANCIAL INFORMATION OF UBS AG

FOR THE QUARTERLY PERIOD ENDED 30 JUNE 2017 - EXTRACTED

FROM UBS AG’S SECOND QUARTER 2017 FINANCIAL REPORT . . . . . . . . . . . . . . . . 25

RISK MANAGEMENT AND CONTROL - EXTRACTED

FROM UBS GROUP AG’S SECOND QUARTER 2017 FINANCIAL REPORT . . . . . . . . . . 32

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INFORMATION IN RELATION TO US

(1) Updated “Information in relation to us”

The following pages under this section shall replace the information in the section headed

“Information in relation to us” on pages 14 to 17 of our Base Listing Document in its entirety.

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1. Overview

UBS AG with its subsidiaries (together, “UBS AG (consolidated)”, or “UBS AG Group”;together with UBS Group AG, which is the holding company of UBS AG, and its subsidiaries,“UBS Group”, “Group”, “UBS” or “UBS Group AG (consolidated)”) provides financial adviceand solutions to private, institutional and corporate clients worldwide, as well as private clientsin Switzerland. The operational structure of the Group is comprised of the Corporate Center andfive business divisions: Wealth Management, Wealth Management Americas, Personal &Corporate Banking, Asset Management and the Investment Bank. UBS’s strategy is centered onits wealth management businesses and its universal bank in Switzerland, which are enhanced byAsset Management and the Investment Bank.

2. Corporate Information

The legal and commercial name of the company is UBS AG.

The company was incorporated under the name SBC AG on 28 February 1978 for an unlimitedduration and entered in the Commercial Register of Canton Basel-City on that day. On 8December 1997, the company changed its name to UBS AG. The company in its present form wascreated on 29 June 1998 by the merger of Union Bank of Switzerland (founded 1862) and SwissBank Corporation (founded 1872). UBS AG is entered in the Commercial Registers of CantonZurich and Canton Basel-City. The registration number is CHE-101.329.561.

UBS AG is incorporated and domiciled in Switzerland and operates under the Swiss Code ofObligations as an Aktiengesellschaft, a corporation limited by shares.

According to article 2 of the articles of association of UBS AG dated 4 May 2016, the purposeof UBS AG is the operation of a bank. Its scope of operations extends to all types of banking,financial, advisory, trading and service activities in Switzerland and abroad. UBS AG mayestablish branches and representative offices as well as banks, finance companies and otherenterprises of any kind in Switzerland and abroad, hold equity interests in these companies, andconduct their management. UBS AG is authorized to acquire, mortgage and sell real estate andbuilding rights in Switzerland and abroad. UBS AG may borrow and invest money on the capitalmarkets. UBS AG is part of the group of companies controlled by the group parent company UBSGroup AG. It may promote the interests of the group parent company or other group companies.It may provide loans, guarantees and other kinds of financing and security for group companies.

The addresses and telephone numbers of UBS AG’s two registered offices and principal placesof business are: Bahnhofstrasse 45, CH-8001 Zurich, Switzerland, telephone +41 44 234 1111;and Aeschenvorstadt 1, CH-4051 Basel, Switzerland, telephone +41 61 288 5050.

3. Business Overview

3.1. Organizational Structure of UBS AG

UBS AG is a Swiss bank and the parent company of the UBS AG Group. It is 100% owned byUBS Group AG, which is the holding company of the UBS Group. UBS operates as a group withfive business divisions (Wealth Management, Wealth Management Americas, Personal &Corporate Banking, Asset Management and the Investment Bank) and a Corporate Center.

Since 2014, UBS has undertaken a series of measures to improve the resolvability of the Groupin response to too big to fail requirements in Switzerland and other countries in which the Groupoperates.

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In December 2014, UBS Group AG completed an exchange offer for the shares of UBS AG andbecame the holding company of the UBS Group. During 2015, UBS Group AG completed a courtprocedure under the Swiss Stock Exchange and Securities Trading Act resulting in thecancellation of the shares of the remaining minority shareholders of UBS AG. As a result, UBSGroup AG owns 100% of the outstanding shares of UBS AG.

In June 2015, UBS AG transferred its Personal & Corporate Banking and Wealth Managementbusinesses booked in Switzerland to UBS Switzerland AG, a banking subsidiary of UBS AG inSwitzerland. Also in 2015, UBS implemented a more self-sufficient business and operatingmodel for UBS Limited, UBS’s investment banking subsidiary in the UK, and established UBSBusiness Solutions AG as a direct subsidiary of UBS Group AG to act as the Group servicecompany. The purpose of the service company structure is to improve the resolvability of theGroup by enabling UBS to maintain operational continuity of critical services should a recoveryor resolution event occur.

In the second half of 2015, UBS transferred the ownership of the majority of its existing servicesubsidiaries outside the US to UBS Business Solutions AG. As of 1 January 2017, UBScompleted the transfer of the shared service employees in the US to the US service company,UBS Business Solutions US LLC, a subsidiary of UBS AG. In the second quarter of 2017, UBStransferred shared services functions in Switzerland from UBS AG to UBS Business SolutionsAG, and expects to complete the transfer of shared services functions in the UK in the fourthquarter of 2017.

As of 1 July 2016, UBS Americas Holding LLC was designated as intermediate holding companyfor UBS’s US subsidiaries as required under the enhanced prudential standards regulationspursuant to the Dodd-Frank Act. UBS Americas Holding LLC holds all of UBS’s US subsidiariesand is subject to US capital requirements, governance requirements and other prudentialregulation.

In addition, UBS transferred the majority of the operating subsidiaries of Asset Management toUBS Asset Management AG during 2016. Furthermore, UBS merged its Wealth Managementsubsidiaries in Italy, Luxembourg (including its branches in Austria, Denmark and Sweden), theNetherlands and Spain into UBS Deutschland AG, which was renamed to UBS Europe SE, toestablish UBS’s new European legal entity which is headquartered in Frankfurt, Germany.

UBS continues to consider further changes to the Group’s legal structure in response toregulatory requirements and other external developments, including the anticipated exit of theUnited Kingdom from the European Union. Such changes may include the transfer of operatingsubsidiaries of UBS AG to become direct subsidiaries of UBS Group AG, further consolidationof operating subsidiaries in the EU and adjustments to the booking entity or location of productsand services. These structural changes are being discussed on an ongoing basis with the SwissFinancial Market Supervisory Authority FINMA (“FINMA”) and other regulatory authoritiesand remain subject to a number of uncertainties that may affect their feasibility, scope or timing.

UBS Group AG’s interests in subsidiaries and other entities as of 31 December 2016, includinginterests in significant subsidiaries, are discussed in “Note 28 Interests in subsidiaries and otherentities” to the UBS Group AG’s consolidated financial statements included in the UBS GroupAG and UBS AG Annual Report 2016 published on 10 March 2017 (“Annual Report 2016”).

UBS AG’s interests in subsidiaries and other entities as of 31 December 2016, including interestsin significant subsidiaries, are discussed in “Note 28 Interests in subsidiaries and other entities”to the UBS AG’s consolidated financial statements included in the Annual Report 2016.

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3.2. Recent Developments

Regulatory and legal developments

Transfer of shared services functions to UBS Business Solutions AG

In the second quarter of 2017, UBS transferred shared services functions in Switzerland fromUBS AG to UBS Business Solutions AG, UBS’s Group service company and a wholly ownedsubsidiary of UBS Group AG. The transfer was recorded retrospectively as of 1 April 2017 andresulted in the derecognition of Swiss franc (“CHF”) 706 million of assets and CHF 259 millionof liabilities, the granting of a loan of CHF 140 million and a reduction in share premium withinequity attributable to shareholders of CHF 307 million for UBS AG consolidated.

Following the transfer, UBS Business Solutions AG charges other legal entities within the Groupfor services provided, including a markup on costs incurred. For UBS AG, this resulted in adecrease in direct costs recognized as personnel and depreciation expenses, which was more thanoffset by an increase in general and administrative expenses related to the service charge fromUBS Business Solutions AG. In addition, entities within the UBS AG consolidated scope nowcharge UBS Business Solutions AG for certain services provided to Swiss shared servicesfunctions, resulting in an increase in other income for UBS AG. Overall, the new shared servicesmodel involving UBS Business Solutions AG resulted in a decrease in UBS AG consolidated netprofit of approximately CHF 50 million in the second quarter of 2017.

The effect of the transfer on the risk-weighted assets and leverage ratio denominator of UBS AGconsolidated and UBS AG standalone was not material.

UBS expects to complete the transfer of shared services functions in the UK in the fourth quarterof 2017.

US Department of Labor fiduciary rule becomes effective

The US Department of Labor (“DOL”) fiduciary rule became effective on 9 June 2017. The ruleremains under review by the DOL, and the effective dates of some requirements and conditionsto exemptions have been deferred to January 2018. The rule significantly expands thecircumstances that cause a person to become a fiduciary subject to the Employee RetirementIncome Security Act of 1974 in relation to corporate and individual retirement plans. WealthManagement Americas has implemented changes to its compensation programs for financialadvisors in relation to retirement plan accounts as well as to the product offerings for theseplans. These changes are intended to comply with the rule while minimizing disruption to clientsuntil all aspects of the rule become final. The effects of the DOL fiduciary rule on the financialperformance of UBS’s business remain uncertain.

Refer to “Regulatory and legal developments” in the UBS Group AG second quarter 2017 report,published on 28 July 2017, (“UBS Group Second Quarter 2017 Report”) for information onfurther recent regulatory and legal developments.

3.3. Trend Information

As indicated in the UBS Group Second Quarter 2017 Report, improved investor sentiment andenhanced confidence have translated into improvements in wealth management client activitylevels. However, the persistence of low volatility levels and seasonality factors may continue toaffect overall client activity. In addition, while UBS expects the global economic recovery tostrengthen, geopolitical tensions and macroeconomic uncertainty still pose risks to clientsentiment. Low and negative interest rates, particularly in Switzerland and the eurozone, putpressure on net interest margins, which may be partially offset by the effect of a further

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normalization of US monetary policy. Implementing Switzerland’s new bank capital standards

and further changes to national and international regulatory frameworks for banks will result in

increased capital requirements, interest and operating costs. UBS is well positioned to mitigate

these challenges and benefit from further improvements in market conditions.

Refer to “Current market climate and industry trends” and “Risk factors” in the “Operating

environment and strategy” section of the Annual Report 2016 for more information.

4. Board of Directors (“BoD”)

The BoD is the most senior body of UBS AG. The BoD consists of at least five and a maximum

of twelve members. All the members of the BoD are elected individually by the Annual General

Meeting of Shareholders (“AGM”) for a term of office of one year, which expires after

completion of the next AGM. Shareholders also elect the Chairman upon proposal of the BoD.

The BoD meets as often as business requires, and at least six times a year.

4.1. Members of the Board of Directors

Member Title

Term of

office Current principal positions outside UBS AG

Axel A. Weber Chairman 2018 Chairman of the Board of Directors of UBSGroup AG; board member of the Swiss BankersAssociation; member of the Board of Trustees ofAvenir Suisse; Advisory Board member of the“Beirat Zukunft Finanzplatz”; board member ofthe Swiss Finance Council; Chairman of theboard of the Institute of International Finance;President of the International MonetaryConference; member of the European FinancialServices Round Table; member of the EuropeanBanking Group; member of the MonetaryEconomics and International Advisory Panel,Monetary Authority of Singapore; member ofthe Group of Thirty, Washington, D.C.;Chairman of the DIW Berlin Board of Trustees;Advisory Board member of the Department ofEconomics at the University of Zurich; memberof the Trilateral Commission.

Michel Demaré IndependentVice Chairman

2018 Independent Vice-Chairman of the Board ofDirectors of UBS Group AG; Vice Chairman ofthe board of Syngenta; board member ofLouis-Dreyfus Commodities Holdings BV; ViceChairman of the Supervisory Board of IMD,Lausanne; Chairman of the Syngenta Foundationfor Sustainable Agriculture; Advisory Boardmember of the Department of Banking andFinance at the University of Zurich.

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Member Title

Term of

office Current principal positions outside UBS AG

David Sidwell Member 2018 Senior Independent Director of the Board ofDirectors of UBS Group AG; Senior Advisor atOliver Wyman, New York; board member ofChubb Limited; board member of GAVIAlliance; Chairman of the Board of VillageCare, New York; Director of the NationalCouncil on Aging, Washington D.C.

Reto Francioni Member 2018 Member of the Board of Directors of UBS GroupAG; professor, University of Basel; boardmember of Coca-Cola HBC AG; Chairman ofthe board of Swiss International Air Lines AG;board member of Francioni AG; board memberof MedTech Innovation Partners AG.

Ann F.Godbehere

Member 2018 Member of the Board of Directors of UBS GroupAG; board member of Rio Tinto plc (chairmanof the audit committee); board member of RioTinto Limited (chairman of the auditcommittee); board member of British AmericanTobacco plc.

William G.Parrett

Member 2018 Member of the Board of Directors of UBS GroupAG; board member of the Eastman KodakCompany (chairman of the audit and financecommittee); board member of the BlackstoneGroup LP (chairman of the audit committee andchairman of the conflicts committee); boardmember of Thermo Fisher Scientific Inc.(chairman of the audit committee); Chairman ofthe Board of Conduent Inc; member of theCommittee on Capital Markets Regulation;member of the Carnegie Hall Board of Trustees;Past Chairman of the board of the United StatesCouncil for International Business; PastChairman of United Way Worldwide.

Julie G.Richardson

Member 2018 Member of the Board of Directors of UBS GroupAG; board member of The Hartford FinancialServices Group, Inc. (chairman of the auditcommittee); Board member of Yext (chairman ofthe audit committee); board member of ArconicInc.; board member of Vereit, Inc. (chairman ofthe compensation committee).

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Member Title

Term of

office Current principal positions outside UBS AG

Isabelle Romy Member 2018 Member of the Board of Directors of UBS GroupAG; partner and board member at Froriep LegalAG, Zurich; associate professor at theUniversity of Fribourg and at the FederalInstitute of Technology, Lausanne; vicechairman of the Sanction Commission of SIXSwiss Exchange; member of the FundraisingCommittee of the Swiss National Committee forUNICEF; Supervisory Board member of theCAS program Financial Regulation of theUniversity of Bern and University of Geneva.

Robert W.Scully

Member 2018 Member of the Board of Directors of UBS GroupAG; board member of Chubb Limited; boardmember of Zoetis Inc.; board member of KKR &Co LP; board member of the Dean’s Advisors ofHarvard Business School.

Beatrice Wederdi Mauro

Member 2018 Member of the Board of Directors of UBS GroupAG; distinguished fellow at INSEAD inSingapore (on leave from the University ofMainz); Supervisory Board member of RobertBosch GmbH; board member of BombardierInc.; member of the ETH Zurich FoundationBoard of Trustees; Economic Advisory Boardmember of Fraport AG; Advisory Board memberof Deloitte Germany; Deputy Chairman of theUniversity Council of the University of Mainz.

Dieter Wemmer Member 2018 Member of the Board of Directors of UBS GroupAG; CFO at Allianz SE; Administrative Boardmember of Allianz Asset Management AG andAllianz Investment Management SE, bothAllianz Group mandates; member of the CFOForum; member of the Systemic Risk WorkingGroup of the European Central Bank and theBank for International Settlements; Chairman ofthe Economic & Finance Committee ofInsurance Europe; member of the Berlin Centerof Corporate Governance.

5. Litigation, Regulatory and Similar Matters

UBS operates in a legal and regulatory environment that exposes it to significant litigation andsimilar risks arising from disputes and regulatory proceedings. As a result, UBS (which forpurposes of this section may refer to UBS AG and / or one or more of its subsidiaries, asapplicable) is involved in various disputes and legal proceedings, including litigation,arbitration, and regulatory and criminal investigations.

Such matters are subject to many uncertainties and the outcome and the timing of resolution areoften difficult to predict, particularly in the earlier stages of a case. There are also situationswhere UBS may enter into a settlement agreement. This may occur in order to avoid the expense,management distraction or reputational implications of continuing to contest liability, even for

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those matters for which UBS believes it should be exonerated. The uncertainties inherent in allsuch matters affect the amount and timing of any potential outflows for both matters with respectto which provisions have been established and other contingent liabilities. UBS makesprovisions for such matters brought against it when, in the opinion of management after seekinglegal advice, it is more likely than not that UBS has a present legal or constructive obligationas a result of past events, it is probable that an outflow of resources will be required, and theamount can be reliably estimated. Where these factors are otherwise satisfied, a provision maybe established for claims that have not yet been asserted against UBS, but are neverthelessexpected to be, based on UBS’s experience with similar asserted claims. If any of thoseconditions is not met, such matters result in contingent liabilities. If the amount of an obligationcannot be reliably estimated, a liability exists that is not recognized even if an outflow ofresources is probable. Accordingly, no provision is established even if the potential outflow ofresources with respect to select matters could be significant.

Specific litigation, regulatory and other matters are described below, including all such mattersthat management considers to be material and others that management believes to be ofsignificance due to potential financial, reputational and other effects. The amount of damagesclaimed, the size of a transaction or other information is provided where available andappropriate in order to assist users in considering the magnitude of potential exposures.

In the case of certain matters below, UBS states that it has established a provision, and for theother matters, it makes no such statement. When UBS makes this statement and it expectsdisclosure of the amount of a provision to prejudice seriously its position with other parties inthe matter because it would reveal what UBS believes to be the probable and reliably estimableoutflow, UBS does not disclose that amount. In some cases UBS is subject to confidentialityobligations that preclude such disclosure. With respect to the matters for which UBS does notstate whether it has established a provision, either (a) it has not established a provision, in whichcase the matter is treated as a contingent liability under the applicable accounting standard, or(b) it has established a provision but expects disclosure of that fact to prejudice seriously itsposition with other parties in the matter because it would reveal the fact that UBS believes anoutflow of resources to be probable and reliably estimable.

With respect to certain litigation, regulatory and similar matters for which UBS has establishedprovisions, UBS is able to estimate the expected timing of outflows. However, the aggregateamount of the expected outflows for those matters for which it is able to estimate expectedtiming is immaterial relative to its current and expected levels of liquidity over the relevant timeperiods.

The aggregate amount provisioned for litigation, regulatory and similar matters as a class isdisclosed in “Note 13a Provisions” to the UBS AG’s interim consolidated financial statementsincluded in UBS AG second quarter 2017 report, published on 3 August 2017. It is notpracticable to provide an aggregate estimate of liability for UBS’s litigation, regulatory andsimilar matters as a class of contingent liabilities. Doing so would require UBS to providespeculative legal assessments as to claims and proceedings that involve unique fact patterns ornovel legal theories, that have not yet been initiated or are at early stages of adjudication, or asto which alleged damages have not been quantified by the claimants. Although it thereforecannot provide a numerical estimate of the future losses that could arise from litigation,regulatory and similar matters, UBS believes that the aggregate amount of possible future lossesfrom this class that are more than remote substantially exceeds the level of current provisions.Litigation, regulatory and similar matters may also result in non-monetary penalties andconsequences. For example, the Non-Prosecution Agreement (“NPA”) described in item E of thissection, which UBS entered into with the US Department of Justice (“DOJ”), Criminal Division,Fraud Section in connection with UBS’s submissions of benchmark interest rates, including,among others, the British Bankers’ Association London Interbank Offered Rate (“LIBOR”), wasterminated by the DOJ based on its determination that UBS had committed a

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US crime in relation to foreign exchange (“FX”) matters. As a consequence, UBS AG pleadedguilty to one count of wire fraud for conduct in the LIBOR matter, paid a US dollar (“USD”)203 million fine and is subject to a three-year term of probation. A guilty plea to, or convictionof, a crime (including as a result of termination of the NPA) could have material consequencesfor UBS. Resolution of regulatory proceedings may require UBS to obtain waivers of regulatorydisqualifications to maintain certain operations, may entitle regulatory authorities to limit,suspend or terminate licenses and regulatory authorizations and may permit financial marketutilities to limit, suspend or terminate UBS’s participation in such utilities. Failure to obtainsuch waivers, or any limitation, suspension or termination of licenses, authorizations orparticipations, could have material consequences for UBS.

The risk of loss associated with litigation, regulatory and similar matters is a component ofoperational risk for purposes of determining UBS’s capital requirements. Informationconcerning UBS’s capital requirements and the calculation of operational risk for this purposeis included in the “Capital management” section of UBS Group Second Quarter 2017 Report.

Provisions for litigation, regulatory and similar matters by business division and CorporateCenter unit1

CHF million

WealthManagement

WealthManagement

Americas

Personal &Corporate

BankingAsset

ManagementInvestment

BankCC —

Services

CC —Group

ALM

CC —Non-core and

LegacyPortfolio UBS

Balance as of 31 December2016 292 425 78 5 616 259 0 1,585 3,261

Balance as of 31 March 2017 244 385 77 4 404 255 0 1,550 2,918

Increase in provisions

recognized in the income

statement 1 44 0 5 0 0 0 2 53

Release of provisions

recognized in the income

statement 0 (2) 0 (4) 0 0 0 (36) (43)

Provisions used in conformity

with designated purpose (1) (50) 0 0 0 (2) 0 (356) (410)

Foreign currency translation /

unwind of discount 6 (16) 0 0 (12) 0 0 (50) (72)

Balance as of 30 June 2017 249 361 77 5 391 253 0 1,110 2,446

1 Provisions, if any, for the matters described in this section are recorded in Wealth Management (item C), WealthManagement Americas (item D), the Investment Bank (item H), Corporate Center — Services (item G) andCorporate Center — Non-core and Legacy Portfolio (item B). Provisions, if any, for the matters described in itemsA and F of this section are allocated between Wealth Management and Personal & Corporate Banking, andprovisions, if any, for the matters described in this section in item E are allocated between the Investment Bank,Corporate Center — Services and Corporate Center — Non-core and Legacy Portfolio.

A. Inquiries regarding cross-border wealth management businesses

Tax and regulatory authorities in a number of countries have made inquiries, served requests forinformation or examined employees located in their respective jurisdictions relating to thecross-border wealth management services provided by UBS and other financial institutions. It ispossible that implementation of automatic tax information exchange and other measures relatingto cross-border provision of financial services could give rise to further inquiries in the future.UBS has received disclosure orders from the Swiss Federal Tax Administration (“FTA”) totransfer information based on requests for international administrative assistance in tax matters.The requests concern a number of UBS account numbers pertaining to current and former clientsand are based on data from 2006 and 2008. UBS has taken steps to inform affected clients aboutthe administrative assistance proceedings and their procedural rights, including the right toappeal. The requests are based on data received from the German authorities, who seized certaindata related to UBS clients booked in Switzerland during their investigations and have

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apparently shared this data with other European countries. UBS expects additional countries tofile similar requests. In addition, the Swiss Federal Supreme Court ruled in 2016 that the doubletaxation agreement between the Netherlands and Switzerland provides a sufficient legal basis foran administrative assistance group request without specifying the names of the targetedtaxpayers, which makes it more likely that similar requests for administrative assistance will begranted by the FTA.

The Swiss Federal Administrative Court ruled in 2016 that in the administrative assistanceproceedings related to a French bulk request, UBS has the right to appeal all final FTA clientdata disclosure orders.

Since 2013, UBS (France) S.A. and UBS AG and certain former employees have been underinvestigation in France for alleged complicity in having illicitly solicited clients on Frenchterritory and regarding the laundering of proceeds of tax fraud and of banking and financialsolicitation by unauthorized persons. In connection with this investigation, the investigatingjudges ordered UBS AG to provide bail of Euro (“EUR”) 1.1 billion and UBS (France) S.A. topost bail of EUR 40 million, which was reduced on appeal to EUR 10 million.

In February 2016, the investigating judges notified UBS AG and UBS (France) S.A. that theyhave closed their investigation. In July 2016, UBS AG and UBS (France) S.A. received theNational Financial Prosecutor’s recommendation. In March 2017, the investigating judges issuedthe trial order that charges UBS AG and UBS (France) S.A., as well as various formeremployees, with illicit solicitation of clients on French territory and with participation in thelaundering of the proceeds of tax fraud, and which transfers the case to court. The trial schedulehas not yet been announced.

In February 2016, UBS was notified by the Belgian investigating judge that it is under formalinvestigation regarding the laundering of proceeds of tax fraud and of banking, financialsolicitation by unauthorized persons and serious tax fraud.

In 2015, UBS received inquiries from the US Attorney’s Office for the Eastern District of NewYork and from the US Securities and Exchange Commission (“SEC”), which are investigatingpotential sales to US persons of bearer bonds and other unregistered securities in possibleviolation of the Tax Equity and Fiscal Responsibility Act of 1982 and the registrationrequirements of the US securities laws. UBS is cooperating with the authorities in theseinvestigations.

UBS has, and reportedly numerous other financial institutions have, received inquiries fromauthorities concerning accounts relating to the Fédération Internationale de Football Associationand other constituent soccer associations and related persons and entities. UBS is cooperatingwith authorities in these inquiries.

UBS’s balance sheet at 30 June 2017 reflected provisions with respect to matters described inthis item A in an amount that UBS believes to be appropriate under the applicable accountingstandard. As in the case of other matters for which UBS has established provisions, the futureoutflow of resources in respect of such matters cannot be determined with certainty based oncurrently available information and accordingly may ultimately prove to be substantially greater(or may be less) than the provision that UBS has recognized.

B. Claims related to sales of residential mortgage-backed securities and mortgages

From 2002 through 2007, prior to the crisis in the US residential loan market, UBS was asubstantial issuer and underwriter of US residential mortgage-backed securities (“RMBS”) andwas a purchaser and seller of US residential mortgages. A subsidiary of UBS, UBS Real Estate

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Securities Inc. (“UBS RESI”), acquired pools of residential mortgage loans from originators and(through an affiliate) deposited them into securitization trusts. In this manner, from 2004through 2007, UBS RESI sponsored approximately USD 80 billion in RMBS, based on theoriginal principal balances of the securities issued.

UBS RESI also sold pools of loans acquired from originators to third-party purchasers. Thesewhole loan sales during the period 2004 through 2007 totalled approximately USD 19 billion inoriginal principal balance.

UBS was not a significant originator of US residential loans. A branch of UBS originatedapproximately USD 1.5 billion in US residential mortgage loans during the period in which itwas active from 2006 to 2008, and securitized less than half of these loans.

RMBS-related lawsuits concerning disclosures: UBS has been named as a defendant in lawsuitsrelating to its role as underwriter and issuer of RMBS.

In April 2017, UBS reached a final settlement in a lawsuit brought in the US District Court forthe District of Kansas by the National Credit Union Administration (“NCUA”) as conservator forcertain failed credit unions, asserting misstatements and omissions in the offering documents forUSD 1.15 billion in original principal balance of RMBS purchased by the credit unions. UBS andthe NCUA settled this matter for USD 445 million. A similar case brought by the NCUA in theUS District Court for the Southern District of New York (“SDNY”) was settled in 2016.

UBS has indemnification rights against surviving third-party issuers or originators for losses orliabilities incurred by UBS in connection with certain of these matters.

Lawsuits related to contractual representations and warranties concerning mortgages andRMBS: When UBS acted as an RMBS sponsor or mortgage seller, it generally made certainrepresentations relating to the characteristics of the underlying loans. In the event of a materialbreach of these representations, UBS was in certain circumstances contractually obligated torepurchase the loans to which the representations related or to indemnify certain parties againstlosses. UBS has received demands to repurchase US residential mortgage loans as to which UBSmade certain representations at the time the loans were transferred to the securitization trustaggregating USD 4.1 billion in original principal balance. Of this amount, UBS considers claimsrelating to USD 2 billion in original principal balance to be resolved, including claims barredby the statute of limitations. Substantially all of the remaining claims are in litigation, includingthe matters described in the next paragraph. UBS believes that new demands to repurchase USresidential mortgage loans are time-barred under a decision rendered by the New York Court ofAppeals.

In 2012, certain RMBS trusts filed an action (“Trustee Suit”) in the SDNY seeking to enforceUBS RESI’s obligation to repurchase loans in the collateral pools for three RMBS securitizationswith an original principal balance of approximately USD 2 billion, for which Assured GuarantyMunicipal Corp., a financial guaranty insurance company, had previously demanded repurchase.Approximately 9,000 loans were at issue in a bench trial in the SDNY in 2016, following whichthe court issued an order ruling on numerous legal and factual issues and applying those rulingsto 20 exemplar loans. The court further ordered that a lead master be appointed to apply thecourt’s rulings to the loans that remain at issue following the trial. With respect to the loanssubject to the Trustee Suit that were originated by institutions still in existence, UBS intends toenforce its indemnity rights against those institutions.

Mortgage-related regulatory matters: In 2014, UBS received a subpoena from the US Attorney’sOffice for the Eastern District of New York issued pursuant to the Financial Institutions Reform,Recovery and Enforcement Act of 1989 (“FIRREA”), which seeks documents and informationrelated to UBS’s RMBS business from 2005 through 2007. In 2015, the Eastern District of NewYork identified a number of transactions that are the focus of their inquiry, and has subsequently

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provided a revised list of transactions. UBS has provided and continues to provide information.UBS continues to respond to the FIRREA subpoena and to subpoenas from the New York StateAttorney General and other state attorneys general relating to its RMBS business. In addition,UBS has also been responding to inquiries from both the Special Inspector General for theTroubled Asset Relief Program (who is working in conjunction with the US Attorney’s Office forConnecticut and the DOJ) and the SEC relating to trading practices in connection with purchasesand sales of mortgage-backed securities in the secondary market from 2009 through 2014. UBSis cooperating with the authorities in these matters.

UBS’s balance sheet at 30 June 2017 reflected a provision with respect to matters described inthis item B in an amount that UBS believes to be appropriate under the applicable accountingstandard. As in the case of other matters for which UBS has established provisions, the futureoutflow of resources in respect of this matter cannot be determined with certainty based oncurrently available information and accordingly may ultimately prove to be substantially greater(or may be less) than the provision that UBS has recognized.

C. Madoff

In relation to the Bernard L. Madoff Investment Securities LLC (“BMIS”) investment fraud,UBS AG, UBS (Luxembourg) S.A. (now UBS Europe SE, Luxembourg branch) and certain otherUBS subsidiaries have been subject to inquiries by a number of regulators, including the FINMAand the Luxembourg Commission de Surveillance du Secteur Financier. Those inquiriesconcerned two third-party funds established under Luxembourg law, substantially all assets ofwhich were with BMIS, as well as certain funds established in offshore jurisdictions with eitherdirect or indirect exposure to BMIS. These funds now face severe losses, and the Luxembourgfunds are in liquidation. The last reported net asset value of the two Luxembourg funds beforerevelation of the Madoff scheme was approximately USD 1.7 billion in the aggregate althoughthat figure likely includes fictitious profit reported by BMIS. The documentation establishingboth funds identifies UBS entities in various roles, including custodian, administrator, manager,distributor and promoter, and indicates that UBS employees serve as board members. UBSEurope SE, Luxembourg branch, and certain other UBS subsidiaries are responding to inquiriesby Luxembourg investigating authorities, without, however, being named as parties in thoseinvestigations.

In 2009 and 2010, the liquidators of the two Luxembourg funds filed claims on behalf of thefunds against UBS entities, non-UBS entities and certain individuals, including current andformer UBS employees. The amounts claimed are approximately EUR 890 million and EUR 305million, respectively. The liquidators have filed supplementary claims for amounts that the fundsmay possibly be held liable to pay the trustee for the liquidation of BMIS (“BMIS Trustee”).These amounts claimed by the liquidator are approximately EUR 564 million and EUR 370million, respectively.

In addition, a large number of alleged beneficiaries have filed claims against UBS entities (andnon-UBS entities) for purported losses relating to the Madoff scheme. The majority of thesecases are pending in Luxembourg, where appeals were filed by the claimants against the 2010decisions of the court in which the claims in a number of test cases were held to be inadmissible.The Luxembourg Court of Appeal has found in favor of UBS and dismissed all of these test caseappeals, confirming that the claims are inadmissible. The Luxembourg Supreme Court has alsodismissed a further appeal brought by the claimant in one of the test cases.

In the US, the BMIS Trustee filed claims in 2010 against UBS entities, among others, in relationto the two Luxembourg funds and one of the offshore funds. The total amount claimed againstall defendants in these actions was not less than USD 2 billion. Following a motion by UBS, in2011, the SDNY dismissed all of the BMIS Trustee’s claims other than claims for recovery offraudulent conveyances and preference payments that were allegedly transferred to UBS on theground that the BMIS Trustee lacks standing to bring such claims. In 2013, the Second Circuit

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affirmed the District Court’s decision and, in 2014, the US Supreme Court denied the BMIS

Trustee’s petition seeking review of the Second Circuit ruling. In 2016, the bankruptcy court

issued an opinion dismissing the remaining claims for recovery of subsequent transfers of

fraudulent conveyances and preference payments on the ground that the US Bankruptcy Code

does not apply to transfers that occurred outside the US, and judgment was entered in March

2017. The BMIS Trustee has appealed that ruling. In 2014, several claims, including a purported

class action, were filed in the US by BMIS customers against UBS entities, asserting claimssimilar to the ones made by the BMIS Trustee, seeking unspecified damages. One claim wasvoluntarily withdrawn by the plaintiff. In 2015, following a motion by UBS, the SDNYdismissed the two remaining claims on the basis that the New York courts did not havejurisdiction to hear the claims against the UBS entities. The plaintiff in one of those claims hasappealed the dismissal.

In Germany, certain clients of UBS are exposed to Madoff-managed positions throughthird-party funds and funds administered by UBS entities in Germany. A small number of claimshave been filed with respect to such funds. In 2015, a court of appeal ordered UBS to pay EUR49 million, plus interest of approximately EUR 15.3 million.

D. Puerto Rico

Declines since August 2013 in the market prices of Puerto Rico municipal bonds and ofclosed-end funds (“funds”) that are sole-managed and co-managed by UBS Trust Company ofPuerto Rico and distributed by UBS Financial Services Incorporated of Puerto Rico (“UBS PR”)have led to multiple regulatory inquiries, as well as customer complaints and arbitrations withaggregate claimed damages of USD 2.1 billion, of which claims with aggregate claimed damagesof USD 1.1 billion have been resolved through settlements, arbitration or withdrawal of theclaim. The claims are filed by clients in Puerto Rico who own the funds or Puerto Rico municipalbonds and / or who used their UBS account assets as collateral for UBS non-purpose loans;customer complaint and arbitration allegations include fraud, misrepresentation andunsuitability of the funds and of the loans. A shareholder derivative action was filed in 2014against various UBS entities and current and certain former directors of the funds, alleginghundreds of millions of US dollars in losses in the funds. In 2015, defendants’ motion to dismisswas denied. Defendants’ requests for permission to appeal that ruling were denied by the PuertoRico Court of Appeals and the Puerto Rico Supreme Court. In 2014, a federal class actioncomplaint also was filed against various UBS entities, certain members of UBS PR seniormanagement and the co-manager of certain of the funds, seeking damages for investor losses inthe funds during the period from May 2008 through May 2014. In 2016, defendants’ motion todismiss was granted in part and denied in part. In 2015, a class action was filed in Puerto Ricostate court against UBS PR seeking equitable relief in the form of a stay of any effort by UBSPR to collect on non-purpose loans it acquired from UBS Bank USA in December 2013 basedon plaintiffs’ allegation that the loans are not valid. The trial court denied defendant’s motionto dismiss the action based on a forum selection clause in the loan agreements. The Puerto RicoSupreme Court reversed that decision and remanded the case back to the trial court forreconsideration.

In 2014, UBS reached a settlement with the Office of the Commissioner of Financial Institutionsfor the Commonwealth of Puerto Rico (“OCFI”) in connection with OCFI’s examination ofUBS’s operations from January 2006 through September 2013, pursuant to which UBS is payingup to an aggregate of USD 7.7 million in investor education contributions and restitution.

In 2015, the SEC and the Financial Industry Regulatory Authority (“FINRA”) announcedsettlements with UBS PR of their separate investigations stemming from the 2013 market events.

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Without admitting or denying the findings in either matter, UBS PR agreed in the SEC settlement

to pay USD 15 million and USD 18.5 million in the FINRA matter. UBS also understands that

the DOJ is conducting a criminal inquiry into the impermissible reinvestment of non-purpose

loan proceeds. UBS is cooperating with the authorities in this inquiry.

In 2011, a purported derivative action was filed on behalf of the Employee Retirement System

of the Commonwealth of Puerto Rico (“System”) against over 40 defendants, including UBS PR,

which was named in connection with its underwriting and consulting services. Plaintiffs alleged

that defendants violated their purported fiduciary duties and contractual obligations in

connection with the issuance and underwriting of USD 3 billion of bonds by the System in 2008

and sought damages of over USD 800 million. In December 2016, the court granted the System’s

request to join the action as a plaintiff, but ordered that plaintiffs must file an amended

complaint. In March 2017, the court denied defendants’ motion to dismiss the amendedcomplaint.

Also, in 2013, an SEC Administrative Law Judge dismissed a case brought by the SEC againsttwo UBS executives, finding no violations. The charges had stemmed from the SEC’sinvestigation of UBS’s sale of closed-end funds in 2008 and 2009, which UBS settled in 2012.Beginning in 2012, two federal class action complaints, which were subsequently consolidated,were filed against various UBS entities, certain of the funds and certain members of UBS PRsenior management, seeking damages for investor losses in the funds during the period fromJanuary 2008 through May 2012 based on allegations similar to those in the SEC action. In 2016,the court denied plaintiffs’ motion for class certification. In March 2017, the US Court ofAppeals for the First Circuit denied plaintiffs’ petition seeking permission to bring aninterlocutory appeal challenging the denial of their motion for class certification.

In 2015, certain agencies and public corporations of the Commonwealth of Puerto Rico(“Commonwealth”) defaulted on certain interest payments, in 2016, the Commonwealthdefaulted on payments on its general obligation debt (“GO Bonds”), and in 2017 theCommonwealth defaulted on payments on its debt backed by the Commonwealth’s Sales and UseTax (“COFINA Bonds”) as well as on bonds issued by the Commonwealth’s EmployeeRetirement System (“ERS Bonds”). The funds hold significant amounts of both COFINA andERS Bonds and the defaults on interest payments are expected to adversely affect dividends fromthe funds. Executive orders of the Governor that have diverted funds to pay for essential servicesinstead of debt payments and stayed any action to enforce creditors’ rights on the Puerto Ricobonds continue to be in effect. In 2016, US federal legislation created an oversight board withpower to oversee Puerto Rico’s finances and to restructure its debt. The oversight board isauthorized to impose, and has imposed, a stay on exercise of creditors’ rights. In May and June2017, the oversight board placed the GO, COFINA and ERS Bonds, among others, into abankruptcy-like proceeding under the supervision of a Federal District Judge as authorized bythe oversight board’s enabling statute. These events, further defaults, any further legislativeaction to create a legal means of restructuring Commonwealth obligations or to imposeadditional oversight on the Commonwealth’s finances, or any restructuring of theCommonwealth’s obligations may increase the number of claims against UBS concerning PuertoRico securities, as well as potential damages sought.

UBS’s balance sheet at 30 June 2017 reflected provisions with respect to matters described inthis item D in amounts that UBS believes to be appropriate under the applicable accountingstandard. As in the case of other matters for which UBS has established provisions, the futureoutflow of resources in respect of such matters cannot be determined with certainty based oncurrently available information and accordingly may ultimately prove to be substantially greater(or may be less) than the provisions that UBS has recognized.

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E. Foreign exchange, LIBOR, and benchmark rates, and other trading practices

Foreign exchange-related regulatory matters: Following an initial media report in 2013 ofwidespread irregularities in the foreign exchange markets, UBS immediately commenced aninternal review of its foreign exchange business, which includes its precious metals and relatedstructured products businesses. Since then, various authorities have commenced investigationsconcerning possible manipulation of foreign exchange markets, including FINMA, the SwissCompetition Commission (“WEKO”), the DOJ, the SEC, the US Commodity Futures TradingCommission (“CFTC”), the Board of Governors of the Federal Reserve System (“FederalReserve Board”), the California State Attorney General, the UK Financial Conduct Authority(“FCA”) (to which certain responsibilities of the UK Financial Services Authority (“FSA”) havepassed), the UK Serious Fraud Office (“SFO”), the Australian Securities and InvestmentsCommission (“ASIC”), the Hong Kong Monetary Authority (“HKMA”), the Korea Fair TradeCommission and the Brazil Competition Authority. In addition, WEKO is, and a number of otherauthorities reportedly are, investigating potential manipulation of precious metals prices.

In 2014, UBS reached settlements with the FCA and the CFTC in connection with their foreignexchange investigations, and FINMA issued an order concluding its formal proceedings withrespect to UBS relating to its foreign exchange and precious metals businesses. In 2015, theFederal Reserve Board and the Connecticut Department of Banking issued an Order to Cease andDesist and Order of Assessment of a Civil Monetary Penalty Issued upon Consent to UBS AG.

In 2015, the DOJ’s Criminal Division (“Criminal Division”) terminated the December 2012Non-Prosecution Agreement (“NPA”) with UBS AG related to UBS’s submissions of benchmarkinterest rates. As a result, UBS AG entered into a plea agreement with the Criminal Divisionpursuant to which UBS AG pleaded guilty to a one-count criminal information filed in the USDistrict Court for the District of Connecticut charging UBS AG with one count of wire fraud inviolation of 18 USC Sections 1343 and 2. Sentencing occurred in January 2017. Under the pleaagreement, UBS AG has paid a USD 203 million fine and is subject to a three-year term ofprobation starting on the sentencing date. The criminal information charges that, betweenapproximately 2001 and 2010, UBS AG engaged in a scheme to defraud counterparties to interestrate derivatives transactions by manipulating benchmark interest rates, including Yen LIBOR.The Criminal Division terminated the NPA based on its determination, in its sole discretion, thatcertain UBS AG employees committed criminal conduct that violated the NPA in certain foreignexchange market transactions.

UBS has ongoing obligations to cooperate with these authorities and to undertake certainremediation, including actions to improve UBS’s processes and controls.

UBS has been granted conditional leniency or conditional immunity by the Antitrust Division ofthe DOJ (“Antitrust Division”) from prosecution for EUR / USD collusion and entered into anon-prosecution agreement covering other currency pairs. As a result, UBS AG will not besubject to prosecutions, fines or other sanctions for antitrust law violations by the AntitrustDivision, subject to UBS AG’s continuing cooperation. However, the conditional leniency andconditional immunity grant does not bar government agencies from asserting other claims andimposing sanctions against UBS AG. UBS has also been granted conditional immunity byauthorities in certain jurisdictions, including WEKO, in connection with potential competitionlaw violations relating to foreign exchange and precious metals businesses and, as a result, willnot be subject to prosecutions, fines or other sanctions for antitrust or competition law violationsin those jurisdictions, subject to UBS AG’s continuing cooperation as the leniency applicant.

Investigations relating to foreign exchange and precious metals matters by numerous authorities,including the CFTC, remain ongoing notwithstanding these resolutions.

Foreign exchange-related civil litigation: Putative class actions have been filed since November2013 in US federal courts and in other jurisdictions against UBS and other banks on behalf of

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putative classes of persons who engaged in foreign currency transactions with any of thedefendant banks. They allege collusion by the defendants and assert claims under the antitrustlaws and for unjust enrichment. In 2015, additional putative class actions were filed in federalcourt in New York against UBS and other banks on behalf of a putative class of persons whoentered into or held any foreign exchange futures contracts and options on foreign exchangefutures contracts since 1 January 2003. The complaints assert claims under the CommodityExchange Act (“CEA”) and the US antitrust laws. In 2015, a consolidated complaint was filedon behalf of both putative classes of persons covered by the US federal court class actionsdescribed above. UBS has entered into a settlement agreement that would resolve all of these USfederal court class actions. The agreement, which has been preliminarily approved by the courtand is subject to final court approval, requires, among other things, that UBS pay an aggregateof USD 141 million and provide cooperation to the settlement classes.

A putative class action has been filed in federal court in New York against UBS and other bankson behalf of participants, beneficiaries, and named fiduciaries of plans qualified under theEmployee Retirement Income Security Act of 1974 (“ERISA”) for whom a defendant bankprovided foreign currency exchange transactional services, exercised discretionary authority ordiscretionary control over management of such ERISA plan, or authorized or permitted theexecution of any foreign currency exchange transactional services involving such plan’s assets.The complaint asserts claims under ERISA. The parties filed a stipulation to dismiss the casewith prejudice. The plaintiffs have appealed the dismissal. The appeals court heard oralargument in June 2017.

In 2015, a putative class action was filed in federal court against UBS and numerous other bankson behalf of a putative class of persons and businesses in the US who directly purchased foreigncurrency from the defendants and their co-conspirators for their own end use. That action hasbeen transferred to federal court in New York. In March 2017, the court granted UBS’s (and theother banks’) motions to dismiss the complaint.

In 2016, a putative class action was filed in federal court in New York against UBS andnumerous other banks on behalf of a putative class of persons and entities who had indirectlypurchased FX instruments from a defendant or co-conspirator in the US. The complaint assertsclaims under federal and state antitrust laws. In response to defendants’ motion to dismiss,plaintiffs agreed to dismiss their complaint. In April and June 2017, two new putative classactions were filed in federal court in New York against UBS and numerous other banks on behalfof different proposed classes of indirect purchasers of currency, and a consolidated complaintwas filed on 30 June 2017.

In 2015, UBS was added to putative class actions pending against other banks in federal courtin New York and other jurisdictions on behalf of putative classes of persons who had bought orsold physical precious metals and various precious metal products and derivatives. Thecomplaints in these lawsuits assert claims under the antitrust laws and the CEA, and otherclaims. In October 2016, the court in New York granted UBS’s motions to dismiss the putativeclass actions relating to gold and silver. Plaintiffs in those cases sought to amend theircomplaints to add new allegations about UBS, which the court granted. In March 2017, the courtin New York granted UBS’s motion to dismiss the platinum and palladium action. In May 2017,plaintiffs filed an amended complaint that did not allege claims against UBS.

LIBOR and other benchmark-related regulatory matters: Numerous government agencies,including the SEC, the CFTC, the DOJ, the FCA, the SFO, the Monetary Authority of Singapore(“MAS”), the HKMA, FINMA, the various state attorneys general in the US and competitionauthorities in various jurisdictions have conducted or are continuing to conduct investigationsregarding submissions with respect to LIBOR and other benchmark rates. These investigationsfocus on whether there were improper attempts by UBS, among others, either acting on its ownor together with others, to manipulate LIBOR and other benchmark rates at certain times.

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In 2012, UBS reached settlements with the FSA, the CFTC and the Criminal Division of the DOJin connection with their investigations of benchmark interest rates. At the same time, FINMAissued an order concluding its formal proceedings with respect to UBS relating to benchmarkinterest rates. UBS has paid a total of CHF 1.4 billion in fines and disgorgement in connectionwith these resolutions. UBS Securities Japan Co. Ltd. entered into a plea agreement with theDOJ under which it entered a plea to one count of wire fraud relating to the manipulation ofcertain benchmark interest rates, including Yen LIBOR. UBS entered into an NPA with the DOJ,which (along with the plea agreement) covered conduct beyond the scope of the conditionalleniency / immunity grants described below. Under the NPA, UBS agreed, among other things,that for two years from 18 December 2012 it would not commit any US crime and would advisethe DOJ of any potentially criminal conduct by UBS or any of its employees relating toviolations of US laws concerning fraud or securities and commodities markets. The term of theNPA was extended by one year to 18 December 2015. In 2015, the Criminal Division terminatedthe NPA based on its determination, in its sole discretion, that certain UBS AG employeescommitted criminal conduct that violated the NPA.

In 2014, UBS reached a settlement with the European Commission (“EC”) regarding itsinvestigation of bid-ask spreads in connection with Swiss franc interest rate derivatives and paida EUR 12.7 million fine, which was reduced to this level based in part on UBS’s cooperationwith the EC. In 2016, UBS reached a settlement with WEKO regarding its investigation ofbid-ask spreads in connection with Swiss franc interest rate derivatives and received fullimmunity from fines. The MAS, HKMA and the Japan Financial Services Agency have alsoresolved investigations of UBS (and in some cases, other banks). UBS has ongoing obligationsto cooperate with the authorities with whom UBS has reached resolutions and to undertakecertain remediation with respect to benchmark interest rate submissions.

Investigations by the CFTC, ASIC and other governmental authorities remain ongoingnotwithstanding these resolutions.

UBS has been granted conditional leniency or conditional immunity from authorities in certainjurisdictions, including the Antitrust Division of the DOJ and WEKO, in connection withpotential antitrust or competition law violations related to submissions for Yen LIBOR andEuroyen TIBOR. As a result of these conditional grants, UBS will not be subject to prosecutions,fines or other sanctions for antitrust or competition law violations in the jurisdictions whereUBS has conditional immunity in connection with the matters covered by the conditional grants,subject to UBS’s continuing cooperation as leniency applicant. However, since the Secretariat ofWEKO has asserted that UBS does not qualify for full immunity, UBS has been unable to reacha settlement with WEKO, and therefore the investigation will continue. Furthermore, theconditional leniency and conditional immunity grants UBS has received do not bar governmentagencies from asserting other claims and imposing sanctions against UBS. In addition, as a resultof the conditional leniency agreement with the DOJ, UBS is eligible for a limit on liability toactual rather than treble damages were damages to be awarded in any civil antitrust action underUS law based on conduct covered by the agreement and for relief from potential joint and severalliability in connection with such civil antitrust action, subject to UBS satisfying the DOJ and thecourt presiding over the civil litigation of its cooperation. The conditional leniency andconditional immunity grants do not otherwise affect the ability of private parties to assert civilclaims against UBS.

LIBOR and other benchmark-related civil litigation: A number of putative class actions andother actions are pending in the federal courts in New York against UBS and numerous otherbanks on behalf of parties who transacted in certain interest rate benchmark-based derivatives.Also pending in the US and in other jurisdictions are actions asserting losses related to variousproducts whose interest rates were linked to LIBOR and other benchmarks, including adjustablerate mortgages, preferred and debt securities, bonds pledged as collateral, loans, depositoryaccounts, investments and other interest-bearing instruments. All of the complaints allege

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manipulation, through various means, of various benchmark interest rates, including USDLIBOR, Euroyen TIBOR, Yen LIBOR, EURIBOR, CHF LIBOR, GBP LIBOR, USD and SGDSIBOR and SOR, Australian BBSW and USD ISDAFIX, and seek unspecified compensatory andother damages under varying legal theories.

In 2013, the US district court in the USD LIBOR action dismissed the federal antitrust andracketeering claims of certain USD LIBOR plaintiffs and a portion of their claims brought underthe CEA and state common law. Certain plaintiffs appealed the decision to the Second Circuit,which, in 2016, vacated the district court’s ruling finding no antitrust injury and remanded thecase back to the district court for a further determination on whether plaintiffs have antitruststanding. In December 2016, the district court again dismissed plaintiffs’ antitrust claims, thistime for lack of personal jurisdiction over UBS and other foreign banks. In 2014, the court inone of the Euroyen TIBOR lawsuits dismissed certain of the plaintiff ’s claims, including federalantitrust claims. In 2015, the same court dismissed plaintiff ’s federal racketeering claims andaffirmed its previous dismissal of plaintiff ’s antitrust claims. In 2017, the court also dismissedthe other Yen LIBOR / Euroyen TIBOR action in its entirety on standing grounds. Also in 2017,the courts in the EURIBOR and the SIBOR and SOR lawsuits dismissed the cases as to UBS andcertain other foreign defendants for lack of personal jurisdiction. UBS and other defendants inother lawsuits including those related to CHF LIBOR, GBP LIBOR and Australian BBSW havefiled motions to dismiss. In 2016, UBS entered into an agreement with representatives of a classof bondholders to settle their USD LIBOR class action. The agreement has received preliminarycourt approval and remains subject to final approval.

Since September 2014, putative class actions have been filed in federal court in New York andNew Jersey against UBS and other financial institutions, among others, on behalf of parties whoentered into interest rate derivative transactions linked to ISDAFIX. The complaints, which havesince been consolidated into an amended complaint, allege that the defendants conspired tomanipulate ISDAFIX rates from 1 January 2006 through June 2013, in violation of US antitrustlaws and certain state laws, and seek unspecified compensatory damages, including trebledamages. On 12 July 2017, the court overseeing the ISDAFIX class action preliminarilyapproved a settlement agreement between UBS AG and the plaintiffs, whereby UBS AG agreedto pay USD 14 million to settle the case in its entirety.

Government bonds: Putative class actions have been filed in US federal courts against UBS andother banks on behalf of persons who participated in markets for US Treasury securities since2007. The complaints generally allege that the banks colluded with respect to, and manipulatedprices of, US Treasury securities sold at auction. They assert claims under the antitrust laws andthe CEA and for unjust enrichment. The cases have been consolidated in the SDNY. Followingfiling of these complaints, UBS and reportedly other banks are responding to investigations andrequests for information from various authorities regarding US Treasury securities and othergovernment bond trading practices. As a result of its review to date, UBS has taken appropriateaction.

With respect to additional matters and jurisdictions not encompassed by the settlements andorder referred to above, UBS’s balance sheet at 30 June 2017 reflected a provision in an amountthat UBS believes to be appropriate under the applicable accounting standard. As in the case ofother matters for which UBS has established provisions, the future outflow of resources inrespect of such matters cannot be determined with certainty based on currently availableinformation and accordingly may ultimately prove to be substantially greater (or may be less)than the provision that UBS has recognized.

F. Swiss retrocessions

The Federal Supreme Court of Switzerland ruled in 2012, in a test case against UBS, thatdistribution fees paid to a firm for distributing third-party and intra-group investment funds andstructured products must be disclosed and surrendered to clients who have entered into adiscretionary mandate agreement with the firm, absent a valid waiver.

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FINMA has issued a supervisory note to all Swiss banks in response to the Supreme Courtdecision. UBS has met the FINMA requirements and has notified all potentially affected clients.

The Supreme Court decision has resulted, and may continue to result, in a number of clientrequests for UBS to disclose and potentially surrender retrocessions. Client requests are assessedon a case-by-case basis. Considerations taken into account when assessing these cases include,among others, the existence of a discretionary mandate and whether or not the clientdocumentation contained a valid waiver with respect to distribution fees.

UBS’s balance sheet at 30 June 2017 reflected a provision with respect to matters described inthis item F in an amount that UBS believes to be appropriate under the applicable accountingstandard. The ultimate exposure will depend on client requests and the resolution thereof, factorsthat are difficult to predict and assess. Hence, as in the case of other matters for which UBS hasestablished provisions, the future outflow of resources in respect of such matters cannot bedetermined with certainty based on currently available information and accordingly mayultimately prove to be substantially greater (or may be less) than the provision that UBS hasrecognized.

G. Banco UBS Pactual tax indemnity

Pursuant to the 2009 sale of Banco UBS Pactual S.A. (“Pactual”) by UBS to BTG Investments,LP (“BTG”), BTG has submitted contractual indemnification claims that UBS estimates amountto Brazilian Real 2.7 billion, including interest and penalties, which is net of liabilities retainedby BTG. The claims pertain principally to several tax assessments issued by the Brazilian taxauthorities against Pactual relating to the period from December 2006 through March 2009,when UBS owned Pactual. These assessments are being challenged in administrative and judicialproceedings. The majority of these assessments relate to the deductibility of goodwillamortization in connection with UBS’s 2006 acquisition of Pactual and payments made toPactual employees through various profit-sharing plans. In 2015, an intermediate administrativecourt issued a decision that was largely in favour of the tax authority with respect to the goodwillamortization assessment. In 2016, the highest level of the administrative court agreed to reviewthis decision on a number of the significant issues.

H. Investigation of UBS’s role in initial public offerings in Hong Kong

The Hong Kong Securities and Futures Commission (“SFC”) has been conducting investigationsinto UBS’s role as a sponsor of certain initial public offerings listed on the Hong Kong StockExchange. In 2016, the SFC informed UBS that it intends to commence action against UBS andcertain UBS employees with respect to sponsorship work in those offerings, which could resultin financial ramifications for UBS, including fines and obligations to pay investor compensation,and suspension of UBS’s ability to provide corporate finance advisory services in Hong Kongfor a period of time. In January 2017, a writ was filed by the SFC with Hong Kong’s High Courtin which UBS is named as one of six defendants from whom the SFC is seeking compensationin an unspecified amount for losses incurred by certain shareholders of China Forestry HoldingsCompany Limited, for whom UBS acted as a sponsor in connection with their 2009 listingapplication.

Except as otherwise disclosed in this document (including in the documents incorporated byreference herein), there are no court, arbitral or administrative proceedings (including any suchproceedings which are pending or threatened, of which UBS AG is aware), which are of materialimportance to UBS AG’s assets and liabilities or profits and losses.

5.1. Material Contracts

No material contracts have been entered into outside of the ordinary course of UBS AG’s or UBSAG Group’s business, which could result in any member of the UBS AG Group being under anobligation or entitlement that is material to UBS AG’s ability to meet its obligations to theinvestors in relation to the issued securities.

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5.2. Significant Changes in the Financial or Trading Position; Material Adverse Change inProspects

There has been no significant change in the financial or trading position of UBS AG or UBS AG

Group since 30 June 2017, which is the end of the last financial period for which interim

financial information has been published.

There has been no material adverse change in the prospects of UBS AG or UBS AG Group since

31 December 2016.

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THE UNAUDITED FINANCIAL INFORMATION OFUBS AG FOR THE QUARTERLY PERIOD ENDED 30 JUNE 2017

- EXTRACTED FROM UBS AG’S SECOND QUARTER2017 FINANCIAL REPORT

The information set out below in this section has been extracted without adjustment from the

unaudited second quarter 2017 financial report of UBS AG for the quarterly period ended 30 June

2017 released on 3 August 2017. The page numbers of the second quarter 2017 financial report appear

on the bottom left or right hand side of the pages in this addendum.

The second quarter 2017 financial report is available for inspection at the office of the Sponsor

specified on the back page. You may also visit our website at

https://www.ubs.com/global/en/about_ubs/investor_relations/quarterly_reporting/2017.html to access such

report.

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15

UBS AG interim consolidatedfinancial statements (unaudited)

Income statementFor the quarter ended % change from Year-to-date

CHF million Note 330.6.17 31.3.17 30.6.16 1Q17 2Q16 30.6.17 30.6.16

Interest income 33,590 3,392 3,548 6 1 6,982 6,953

Interest expense ((2,186) (1,704) (2,390) 28 (9) (3,890) (4,088)

Net interest income 11,404 1,688 1,157 (17) 21 3,092 2,866

Credit loss (expense) / recovery ((46) 0 (7) 557 (46) (9)

Net interest income after credit loss expense 11,358 1,688 1,151 (20) 18 3,046 2,857

Net fee and commission income 3 44,296 4,371 4,087 (2) 5 8,667 8,208

Net trading income 11,459 1,441 1,891 1 (23) 2,900 2,902

Other income 4 2285 60 270 375 6 345 288

Total operating income 77,398 7,560 7,399 (2) 0 14,958 14,254

Personnel expenses 5 33,611 4,044 3,953 (11) (9) 7,654 7,852

General and administrative expenses 6 22,111 1,601 1,727 32 22 3,712 3,438

Depreciation and impairment of property, equipment and software 2220 253 239 (13) (8) 473 481

Amortization and impairment of intangible assets 116 21 24 (24) (33) 37 47

Total operating expenses 55,957 5,919 5,942 1 0 11,876 11,818

Operating profit / (loss) before tax 11,441 1,641 1,457 (12) (1) 3,082 2,436

Tax expense / (benefit) 7 3317 364 369 (13) (14) 681 634

Net profit / (loss) 11,124 1,277 1,088 (12) 3 2,401 1,802

Net profit / (loss) attributable to preferred noteholders 00 46 78 (100) (100) 46 78

Net profit / (loss) attributable to non-controlling interests 11 1 1 0 0 1 1

NNet profit / (loss) attributable to shareholders 11,123 1,231 1,009 (9) 11 2,354 1,723

− 26 −

UBS AG interim consolidated financial statements (unaudited)

16

Statement of comprehensive income

For the quarter ended Year-to-date

CHF million 330.6.17 31.3.17 30.6.16 30.6.17 30.6.16

Comprehensive income attributable to shareholders

NNet profit / (loss) 11,123 1,231 1,009 2,354 1,723

OOther comprehensive income that may be reclassified to the income statement

FForeign currency translation

Foreign currency translation movements, before tax ((992) (373) 311 (1,365) (642)

Foreign exchange amounts reclassified to the income statement from equity 221 4 26 25 149

Income tax relating to foreign currency translation movements 11 2 (2) 3 3

Subtotal foreign currency translation, net of tax ((969) (368) 335 (1,337) (491)

FFinancial assets available for sale

Net unrealized gains / (losses) on financial assets available for sale, before tax 110 44 116 53 369

Impairment charges reclassified to the income statement from equity ((1) 14 3 13 3

Realized gains reclassified to the income statement from equity ((135) (8) (166) (143) (255)

Realized losses reclassified to the income statement from equity 55 2 5 7 19

Income tax relating to net unrealized gains / (losses) on financial assets available for sale 66 (8) 3 (2) (44)

Subtotal financial assets available for sale, net of tax ((115) 43 (39) (72) 93

CCash flow hedges

Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax 1165 (30) 502 136 1,445

Net (gains) / losses reclassified to the income statement from equity ((211) (220) (274) (431) (577)

Income tax relating to cash flow hedges 111 52 (47) 63 (174)

Subtotal cash flow hedges, net of tax ((35) (198) 181 (233) 694

TTotal other comprehensive income that may be reclassified to the income statement, net of tax ((1,119) (522) 476 (1,641) 296

OOther comprehensive income that will not be reclassified to the income statement

DDefined benefit plans

Gains / (losses) on defined benefit plans, before tax 1115 49 (198) 164 (389)

Income tax relating to defined benefit plans 00 2 (4) 2 8

Subtotal defined benefit plans, net of tax 1115 51 (202) 166 (381)

OOwn credit on financial liabilities designated at fair value

Gains / (losses) from own credit on financial liabilities designated at fair value, before tax ((72) (181) (173) (252) (105)

Income tax relating to own credit on financial liabilities designated at fair value ((1) 0 16 (1) 0

Subtotal own credit on financial liabilities designated at fair value, net of tax ((73) (181) (157) (254) (105)

TTotal other comprehensive income that will not be reclassified to the income statement, net of tax 442 (129) (359) (87) (486)

TTotal other comprehensive income ((1,077) (652) 118 (1,729) (190)

TTotal comprehensive income attributable to shareholders 446 579 1,127 625 1,533

− 27 −

17

Statement of comprehensive income (continued)For the quarter ended Year-to-date

CHF million 330.6.17 31.3.17 30.6.16 30.6.17 30.6.16

Comprehensive income attributable to preferred noteholders

NNet profit / (loss) 00 46 78 46 78

OOther comprehensive income that will not be reclassified to the income statement

Foreign currency translation movements, before tax 116 (2) 328 14 279

Income tax relating to foreign currency translation movements 00 0 0 0 0

Subtotal foreign currency translation, net of tax 116 (2) 328 14 279

TTotal other comprehensive income that will not be reclassified to the income statement, net of tax 116 (2) 328 14 279

TTotal comprehensive income attributable to preferred noteholders 116 44 406 60 357

Comprehensive income attributable to non-controlling interests

NNet profit / (loss) 11 1 1 1 1

OOther comprehensive income that will not be reclassified to the income statement

Foreign currency translation movements, before tax ((2) 2 0 (1) 0

Income tax relating to foreign currency translation movements 00 0 0 0 0

Subtotal foreign currency translation, net of tax ((2) 2 0 (1) 0

TTotal other comprehensive income that will not be reclassified to the income statement, net of tax ((2) 2 0 (1) 0

TTotal comprehensive income attributable to non-controlling interests ((2) 2 1 1 1

Total comprehensive income

NNet profit / (loss) 11,124 1,277 1,088 2,401 1,802

OOther comprehensive income ((1,064) (651) 446 (1,715) 88

of which: other comprehensive income that may be reclassified to the income statement ((1,119) (522) 476 (1,641) 296

of which: other comprehensive income that will not be reclassified to the income statement 555 (129) (30) (74) (207)

TTotal comprehensive income 660 626 1,535 686 1,890

− 28 −

UBS AG interim consolidated financial statements (unaudited)

18

Balance sheet% change from

CHF million Note 330.6.17 31.3.17 31.12.16 31.3.17 31.12.16

Assets

Cash and balances with central banks 1100,071 108,931 107,767 (8) (7)

Due from banks 114,390 14,191 13,125 1 10

Cash collateral on securities borrowed 115,081 18,512 15,111 (19) 0

Reverse repurchase agreements 775,324 77,004 66,246 (2) 14

Trading portfolio assets 8 1107,738 107,345 96,661 0 11

of which: assets pledged as collateral which may be sold or repledged by counterparties 332,679 30,346 30,260 8 8

Positive replacement values 8, 9 1121,910 121,549 158,411 0 (23)

Cash collateral receivables on derivative instruments 9 222,687 22,522 26,664 1 (15)

Loans 3310,366 310,754 307,004 0 1

Financial assets designated at fair value 8 551,436 48,760 65,024 5 (21)

Financial assets available for sale 8 114,114 16,235 15,676 (13) (10)

Financial assets held to maturity 88,710 8,962 9,289 (3) (6)

Investments in associates 9972 977 963 (1) 1

Property, equipment and software 77,716 8,327 8,297 (7) (7)

Goodwill and intangible assets 66,226 6,458 6,556 (4) (5)

Deferred tax assets 112,303 12,914 13,144 (5) (6)

Other assets 10 222,717 27,482 25,412 (17) (11)

TTotal assets 8891,763 910,924 935,353 (2) (5)

− 29 −

19

Balance sheet (continued)% change from

CHF million Note 330.6.17 31.3.17 31.12.16 31.3.17 31.12.16

Liabilities

Due to banks 111,598 8,747 10,645 33 9

Cash collateral on securities lent 22,538 3,067 2,818 (17) (10)

Repurchase agreements 111,286 10,621 6,612 6 71

Trading portfolio liabilities 8 225,321 28,576 22,825 (11) 11

Negative replacement values 8, 9 1119,027 119,964 153,810 (1) (23)

Cash collateral payables on derivative instruments 9 331,520 29,875 35,472 6 (11)

Due to customers 4438,309 455,386 450,199 (4) (3)

Financial liabilities designated at fair value 8, 11 554,215 56,640 55,017 (4) (1)

Debt issued 12 990,757 83,563 78,998 9 15

Provisions 13 33,167 3,752 4,169 (16) (24)

Other liabilities 10 551,596 58,064 60,443 (11) (15)

TTotal liabilities 8839,335 858,255 881,009 (2) (5)

Equity

Share capital 3386 386 386 0 0

Share premium 226,953 27,254 29,505 (1) (9)

Retained earnings 330,532 29,367 28,265 4 8

Other comprehensive income recognized directly in equity, net of tax ((6,136) (5,017) (4,494) 22 37

EEquity attributable to shareholders 551,735 51,990 53,662 0 (4)

Equity attributable to preferred noteholders 6657 641 642 2 2

Equity attributable to non-controlling interests 337 38 40 (3) (8)

TTotal equity 552,428 52,669 54,343 0 (4)

TTotal liabilities and equity 8891,763 910,924 935,353 (2) (5)

− 30 −

Notes to the UBS AG interim consolidated financial statements (unaudited)

24

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 1 Basis of accounting

The consolidated financial statements (the Financial Statements) of UBS AG and its subsidiaries (together “UBS AG”) are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), and are presented in Swiss francs (CHF), which is also the functional currency of UBS AG's Head Office and its Swiss-based operations. These interim Financial Statements are prepared in accordance with IAS 34, Interim Financial Reporting.

In preparing these interim Financial Statements, the same accounting policies and methods of computation have been applied as in the UBS AG consolidated annual Financial Statements for the period ended 31 December 2016, except for the changes described below and in “Note 1 Basis of accounting” in the “Consolidated financial statements” section of the first quarter 2017 report. These interim Financial Statements are unaudited and should be read in conjunction with UBS AG’s audited consolidated Financial Statements included in the Annual Report 2016. In the opinion of management, all necessary adjustments were made for a fair presentation of UBS AG’s financial position, results of operations and cash flows.

Preparation of these interim Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities. These estimates and assumptions are based on the best available information. Actual results in the future could differ from such estimates, and such differences may be material to the Financial Statements. Revisions to estimates, based on regular reviews, are recognized in the period in which they occur. For more information on areas of estimation uncertainty considered to require critical judgment, refer to “Note 1a Significant accounting policies” in the “Consolidated financial statements” section of the Annual Report 2016.

Classification of financial assets containing prepayment features with negative compensation under IFRS 9, Financial Instruments

In April 2017, the International Accounting Standards Board (IASB) issued the Exposure Draft Prepayment Features with Negative Compensation, which proposed an amendment to IFRS 9, Financial Instruments that would allow amortized cost accounting for instruments that provide for two-way compensation if a prepayment occurs. These features are common in Swiss private mortgages and corporate loans.

In July 2017, the IASB approved the amendment, subject to some refinements. UBS AG expects to early adopt the amendment and continue measuring Swiss private mortgages and corporate loans at amortized cost upon adoption of IFRS 9 on 1 January 2018.

IFRIC 23, Uncertainty over Income Tax Treatments

In June 2017, the IASB issued IFRIC Interpretation 23, Uncertainty over Income Tax Treatments (IFRIC 23), which addresses how uncertain tax positions should be accounted for under IFRS. Under this interpretation, IFRIC 23 requires that, where acceptance of the tax treatment by the relevant tax authority is considered probable, it should be assumed as an accounting recognition matter that treatment of the item will ultimately be accepted. Therefore, no tax provision would be required in such cases. However, if acceptance of the tax treatment is not considered probable, the entity is required to reflect that uncertainty using an expected value (i.e., a probability-weighted approach) or the single most likely amount.

IFRIC 23 is mandatorily effective for accounting periods beginning on or after 1 January 2019, and any resulting change to the tax provisions should be recognized in retained earnings. UBS AG is in the process of carrying out a detailed review on the impacts arising from this interpretation, although it is not expected to have a significant effect on its financial statements.

− 31 −

RISK MANAGEMENT AND CONTROL - EXTRACTED FROMUBS GROUP AG’S SECOND QUARTER 2017 FINANCIAL REPORT

The information set out below in this section has been extracted without adjustment from the second

quarter 2017 financial report of UBS Group AG. The page numbers of the second quarter 2017

financial report appear on the bottom left or right hand side of the pages in this addendum.

The second quarter 2017 financial report is available for inspection at the office of the Sponsor

specified on the back page. You may also visit our website at

https://www.ubs.com/global/en/about_ubs/investor_relations/quarterly_reporting/2017.html to access such

report.

− 32 −

47

Risk management and control

This section provides information on key developments during the reporting period and should be read in conjunction with the “Risk management and control” section of our Annual Report 2016.

Credit risk

Overall credit risk exposures were broadly unchanged during the second quarter of 2017. Net credit loss expenses in the second quarter of 2017 were CHF 46 million, mainly reflecting expenses of CHF 28 million in Personal & Corporate Banking, driven by a small number of newly impaired corporate client positions across a range of sectors.

We continue to manage our Swiss lending portfolios prudently, and we remain watchful for any signs of deterioration in the Swiss economy that could impact some of our counterparties.

While many energy segments appear to have adapted to operating in a lower oil price environment, the recent decline in oil prices has led to renewed market concerns regarding the energy sector. There has been no material impact on our portfolios from the recent oil price decline. Nevertheless, we continue to actively monitor these portfolios, including through scenario analysis.

Within the Investment Bank, leveraged loan underwriting activity increased during the quarter and distribution remained sound. The large investment grade merger and acquisition financing commitment highlighted in previous quarters as it had exceeded its targeted distribution date, expired unused during the second quarter of 2017. Loan underwriting exposures are classified as held for trading, with fair values reflecting the market conditions at the end of the quarter.

Market risk

We continued to manage market risks at generally low levels. Relative to the first quarter of 2017, average 1-day, 95% confidence level, management value-at-risk (VaR) increased from CHF 10 million to CHF 12 million. Regulatory VaR and stressed VaR also increased during the second quarter of 2017, leading to a commensurate increase in market risk-related risk-weighted assets (RWA).

There were no Group VaR negative backtesting exceptions in the second quarter of 2017 and the total number of negative backtesting exceptions within a 250-business-day window decreased from three to two. The FINMA VaR multiplier for market risk RWA remained unchanged at 3.

→ Refer to “Market risk” in the “Risk, treasury and capital

management” section of our Annual Report 2016 for more

information on our backtesting exceptions

As of 30 June 2017, the interest rate sensitivity of our banking book to a +1 basis point parallel shift in yield curves decreased to negative CHF 2.9 million from negative CHF 3.6 million as of 31 March 2017. Part of these fair value changes would impact other comprehensive income (OCI). The interest rate sensitivity to a +1 basis point parallel shift in yield curves of financial assets and derivatives in the banking book valued through OCI was negative CHF 22 million as of 30 June 2017. This OCI sensitivity was predominantly attributable to cash flow hedges denominated in US dollars and, to a lesser extent, in euros and Swiss francs. These cash flow hedges are not recognized for the purposes of calculating regulatory capital.

→ Refer to “Sensitivity to interest rate movements” in the “Group

performance” section of this report for more information on the

impact of rising interest rates on equity, capital and net interest

income

− 33 −

Risk management and control

48

Country risk

We remain watchful of developments in Europe. Our direct exposure to peripheral European countries remained limited, with the exception of Spain, where net exposures increased to CHF 4.9 billion due to a temporary exposure relating to a rights offering. In addition, we continue to have significant country risk exposure to major EU economies, including the UK, Germany and France.

Our binding stress scenario within our combined stress test framework has a eurozone crisis at its core, so that potential effects are captured in the calculation of our post-stress fully applied common equity tier 1 capital ratio.

→ Refer to the “Risk management and control” section of our

Annual Report 2016 for more information

Operational risk

The pervasive consequential risk themes that continue to challenge UBS and the financial industry are operational resilience, conduct and culture, and financial crime. Cyber security is at the forefront of operational resilience and we continue to invest into preemptive and detective measures to defend against evolving and highly sophisticated attacks.

− 34 −

49

Key risk metrics

Banking and traded products exposure by business division and Corporate Center unit330.6.17

CHF millionWWealth

Management

WWealthManagement

Americas

PPersonal &Corporate

BankingAAsset

ManagementIInvestment

BankCCC –

Services

CCC – Group

ALM

CCC – Non-core

and Legacy Portfolio GGroup

BBanking productsGross exposure¹ ² ³ ⁴ 1111,497 554,742 1152,178 4455 555,744 9914 1108,980 6609 4485,120

of which: loans (on-balance sheet) 1106,656 550,857 1132,792 11 112,516 668 66,219 1121 3309,229of which: guarantees and loan commitments (off-balance sheet) 33,509 11,037 117,515 00 332,982 1104 44 4489 555,639

Total impaired exposure, gross 660 223 9928 00 1113 00 00 442 11,166of which: impaired loan exposure, gross 660 223 7718 00 997 442 9940

Total allowances and provisions for credit losses 332 225 4495 00 552 00 00 226 6630TTraded products¹ ⁵Gross exposure 66,477 11,997 11,462 00 337,377 447,313

of which: over-the-counter derivatives 55,370 338 11,347 00 114,988 221,743of which: securities financing transactions 00 2241 00 00 116,635 116,876of which: exchange-traded derivatives 11,107 11,718 1115 00 55,753 88,694

31.3.17

CHF millionWealth

Management

WealthManagement

Americas

Personal &Corporate

BankingAsset

ManagementInvestment

BankCC –

Services

CC – Group

ALM

CC – Non-core

and Legacy Portfolio Group

BBanking productsGross exposure¹ ² ³ ⁴ 109,553 55,008 153,408 533 58,026 707 117,782 608 495,624

of which: loans (on-balance sheet) 104,302 51,632 133,914 0 12,991 49 6,350 124 309,363of which: guarantees and loan commitments (off-balance sheet) 3,946 1,006 17,706 0 34,572 110 3 484 57,827

Total impaired exposure, gross 71 27 949 0 118 0 0 18 1,183of which: impaired loan exposure, gross 71 27 734 0 94 18 944

Total allowances and provisions for credit losses 42 29 485 0 64 0 0 15 635TTraded products¹ ⁵Gross exposure 6,250 1,992 1,480 0 36,759 46,482

of which: over-the-counter derivatives 5,228 44 1,391 0 11,977 18,639of which: securities financing transactions 0 241 0 0 18,392 18,633of which: exchange-traded derivatives 1,022 1,708 89 0 6,390 9,209

1 Internal management view of credit risk, which differs in certain respects from IFRS. 2 Excludes reclassified securities and similar acquired securities held by Corporate Center – Non-core and Legacy Portfolio. 3 Excludes loans designated at fair value. 4 As of 30 June 2017, IFRS loans exposure for the Investment Bank and Corporate Center – Non-core and Legacy Portfolio was CHF 9,861 million (31 March 2017: CHF 10,905 million) and CHF 2,401 million (31 March 2017: CHF 2,544 million), respectively. For all other business divisions and Corporate Center units, IFRS loans exposure was the same as the internal management view. 5 As counterparty risk for traded products is managed at counterparty level, no further split between exposures in the Investment Bank, Corporate Center – Non-core and Legacy Portfolio and Corporate Center – Group ALM is provided.

Wealth Management, Wealth Management Americas and Personal & Corporate Banking loan portfolios, grossWealth Management Wealth Management Americas Personal & Corporate Banking

CHF million 30.6.17 31.3.17 30.6.17 31.3.17 30.6.17 31.3.17Secured by residential property 33,323 32,547 10,334 10,354 95,679 95,587

Secured by commercial / industrial property 2,004 2,029 0 0 17,413 17,678

Secured by cash¹ 13,141 13,978 4,499 995 1,775 1,839

Secured by securities¹ 50,928 48,258 34,978 39,408 2,035 2,082

Secured by guarantees and other collateral 6,772 7,144 694 603 6,115 6,743

Unsecured loans 488 346 352 271 9,774 9,985

Total loans, gross 106,656 104,302 50,857 51,632 132,792 133,914Total loans, net of allowances 106,625 104,260 50,831 51,603 132,345 133,4671 Collateral arrangements generally incorporate a range of collateral, including cash, securities, property and other collateral. In the second quarter of 2017, we further aligned our collateral allocation processes within Wealth Management Americas to prioritize collateral mainly according to its liquidity profile. This resulted in an increase in loans secured by cash and a decrease in loans secured by securities of CHF 4.1 billion.

− 35 −

Risk management and control

50

Management value-at-risk (1-day, 95% confidence, 5 years of historical data) by business division andCorporate Center unit and general market risk type¹

AAverage by risk type

CHF million Min. Max. Period end Average EquityInterest

ratesCredit

spreadsForeign

exchange CommoditiesWealth Management 0 0 0 0 0 0 0 0 0

Wealth Management Americas 0 1 1 1 0 1 1 0 0

Personal & Corporate Banking 0 0 0 0 0 0 0 0 0

Asset Management 0 0 0 0 0 0 0 0 0

Investment Bank 6 14 12 10 6 7 5 2 2

CC – Services 0 0 0 0 0 0 0 0 0

CC – Group ALM 3 8 3 6 0 6 2 1 0

CC – Non-core and Legacy Portfolio 3 4 3 3 1 2 2 0 0

Diversification effect² ³ (8) (9) (1) (7) (4) (1) 0

Total 30.6.17 8 15 12 12 6 10 6 2 2

Total 31.3.17 8 15 9 10 4 11 6 3 11 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may occur on different days, and likewise, the VaR for each business line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical time series, rendering invalid the simple summation of figures to arrive at the aggregate total. 2 Difference between the sum of the standalone VaR for the business divisions and Corporate Center units and the VaR for the Group as a whole. 3 As the minimum and maximum occur on different days for different business divisions and Corporate Center units, it is not meaningful to calculate a portfolio diversification effect.

Interest rate sensitivity – banking book¹CHF million –200 bps –100 bps +1 bp +100 bps +200 bps

CHF (12.0) (12.0) 0.6 55.2 109.2

EUR (105.2) (78.4) 0.3 26.8 54.5

GBP (187.5) (88.1) 0.0 (7.8) (22.8)

USD 606.2 282.8 (3.8) (384.4) (780.6)

Other 4.1 1.0 0.1 7.4 14.9

Total effect on fair value of interest rate-sensitive banking book positions 30.6.17 305.6 105.3 (2.9) (302.8) (624.8)

Total effect on fair value of interest rate-sensitive banking book positions 31.3.17 424.2 137.3 (3.6) (367.5) (745.6)1 In the prevailing negative interest rate environment for the Swiss franc in particular, and to a lesser extent for the euro, interest rates for Wealth Management and Personal & Corporate Banking client transactions are generally floored at non-negative levels. Accordingly, for the purposes of this disclosure table, downward moves of 100 / 200 basis points are floored to ensure that the resulting shocked interest rates do not turn negative. The flooring results in non-linear sensitivity behavior.

Exposures to eurozone countries rated lower than AAA / Aaa by at least one major rating agency CHF million 30.6.17 31.3.17

Banking products Traded productsTrading

inventory Total TotalBeforehedges

Net ofhedges¹

Beforehedges

Net ofhedges

Net long per issuer

Net ofhedges¹

Net ofhedges¹

Austria 36 36 178 51 1,893 2,107 1,980 1,956 1,853Belgium 102 102 87 87 316 504 504 348 348Finland 73 40 25 25 573 671 638 786 754France 1,007 872 1,372 1,286 2,277 4,656 4,435 5,887 5,632Greece 3 3 0 0 2 4 4 3 3Ireland² 183 183 1,020 1,020 179 1,382 1,382 1,148 1,148Italy 1,400 1,070 297 297 274 1,971 1,641 1,670 1,258Portugal 53 53 8 8 15 76 76 33 33Spain 584 458 57 57 4,368 5,009 4,883 960 763Other³ 413 413 6 6 26 445 445 455 4551 Not deducted from the “Net of hedges” exposures are total allowances and provisions for credit losses of CHF 47 million (of which: Malta CHF 35 million, Ireland CHF 6 million and France CHF 5 million). 2 The majority of the Ireland exposure relates to funds and foreign bank subsidiaries. 3 Represents aggregate exposures to Andorra, Cyprus, Estonia, Latvia, Lithuania, Malta, Monaco, Montenegro, San Marino, Slovakia and Slovenia.

− 36 −

PARTIES

HEAD OFFICE OF THE ISSUER

UBS AG

Bahnhofstrasse 45CH-8001 Zurich

Switzerlandand

Aeschenvorstadt 1CH-4051 Basel

Switzerland

OFFICE OF THE ISSUER

UBS AG, London Branch

5 BroadgateLondon

EC2M 2QSUnited Kingdom

PLACE OF BUSINESS OF THE ISSUER IN HONG KONG

52nd FloorTwo International Finance Centre

8 Finance StreetCentral

Hong Kong

SPONSOR

UBS Securities Asia Limited

52nd FloorTwo International Finance Centre

8 Finance StreetCentral

Hong Kong

LEGAL ADVISORS AS TO HONG KONG LAW

King & Wood Mallesons

13th FloorGloucester Tower

The Landmark15 Queen’s Road Central

CentralHong Kong

AUDITORS

Ernst & Young Ltd

Aeschengraben 9P.O. Box 2149 CH-4002 Basel

Switzerland

LIQUIDITY PROVIDER

UBS Securities Hong Kong Limited

52nd FloorTwo International Finance Centre

8 Finance StreetCentral

Hong Kong

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170317-08