Business Context and Reporting Period
This Form 6-K filing, dated March 9, 2018, presents the audited standalone financial statements for UBS Group Funding (Switzerland) AG, a wholly owned subsidiary of UBS Group AG. The reporting period covers the entity's inception on November 14, 2016, through December 31, 2017. The subsidiary was established to issue Total Loss-Absorbing Capacity (TLAC)-eligible senior unsecured debt and perpetual capital notes to support UBS Group AG's regulatory capital requirements. Proceeds from these issuances are on-lent to UBS AG.
Key Financial Metrics
| Metric | Value (CHF Million) |
|---|---|
| Total Assets | 28,196 |
| Financial Assets (Loans to UBS AG) | 27,708 |
| Long-term Interest-bearing Liabilities | 27,835 |
| Financial Income | 495 |
| Financial Expenses | 491 |
| Net Profit | 3 |
| Equity Attributable to Shareholders | 13 |
Liquidity and Debt: The entity holds CHF 19 million in liquid assets (current accounts at UBS AG). Total liabilities amount to CHF 28,183 million, dominated by long-term interest-bearing liabilities of CHF 27,835 million, which consist of CHF 27,706 million in issued notes and CHF 129 million in fixed-term loans.
Material Changes and Operational Activity
As this is the first full reporting period following incorporation in November 2016, year-over-year comparisons are not applicable. Key operational developments include:
- Debt Issuance: Commenced issuing TLAC-eligible senior unsecured debt in March 2017.
- Issuer Substitution: In May 2017, outstanding TLAC-eligible debt previously issued by UBS Group Funding (Jersey) Limited was transferred to this Swiss entity via issuer substitution.
- Related Party Transactions: The entity has no employees. All financial assets represent loans to UBS AG, and all liabilities represent debt issued to external investors or fees payable to UBS Group AG.
Guidance, Risks, and Unusual Items
Management Commentary: The Board of Directors proposed a dividend distribution of CHF 3 million to UBS Group AG, equal to the net profit for the period. No cash flow statement is provided as the entity is exempt from this disclosure under Swiss law due to the parent company's consolidated IFRS reporting.
Risks and Contingencies: The filing notes that the entity is designated as a significant group company by FINMA. The primary risk exposure is tied to the creditworthiness of UBS AG, as the entity's assets are loans to the parent. The filing includes a standard notice that the document is for information purposes only and not a solicitation to buy or sell securities.
Investor Verification Checklist
- Parent Guarantee Status: Verify that the TLAC-eligible senior unsecured debt remains fully guaranteed by UBS Group AG following the issuer substitution.
- Regulatory Capital Treatment: Confirm the classification of issued notes as Basel III Additional Tier 1 (AT1) capital or TLAC-eligible debt in the context of UBS Group AG's consolidated regulatory filings.
- Currency Exposure: Review the mix of debt denominated in USD, EUR, and CHF against the functional currency (CHF) to assess translation risk, noting the spot rates used (USD 0.97, EUR 1.17 as of Dec 31, 2017).
- Dividend Policy: Confirm the approval of the proposed CHF 3 million dividend distribution at the Annual General Meeting.