Prospectus (including Fund Rules) July 2011 C-QUADRAT ART Total Return Flexible (UCITS-compliant German investment fund)

Transcription

1 Prospectus (including Fund Rules) July 2011 C-QUADRAT ART Total Return Flexible (UCITS-compliant German investment fund) Page 1 of 60

2 Prospectus Issued by HANSAINVEST Hanseatische Investment-GmbH (hereinafter HANSAINVEST or Company or Investment Company ), this prospectus is intended to inform interested parties about the UCITS-compliant fund C-QUADRAT ARTS Total Return Flexible (hereinafter also the or this Fund ), introducing the responsible parties and offering details that investors should be aware of when purchasing units of the above fund. In form and scope, this prospectus corresponds with the requirements of the German Investment Act (InvG) for the sale of investment units in the Federal Republic of Germany. The purchase and sale of investment units is subject to the provisions of the current prospectus and the General Fund Rules in conjunction with the Special Fund Rules. Providing information or making statements that deviate from this prospectus is not permitted. Purchases and sales of units made on the strength of information or statements not contained in this prospectus are entered into at the buyer s exclusive risk. This prospectus is supplemented by the most recent annual report. In the event that the reporting date of the annual report is more than eight months in the past, the purchaser shall also be offered a copy of the semiannual report prior to the execution of a contract. This prospectus and its contents were current at the time of its finalization. They will be updated in the event of material changes. Changes to equity capital, the composition of the supervisory board or the management may be updated in the annual report. The contractual and pre-contractual relations between the Investment Company and the investor are based on German law. Pursuant to Sec. 23 para. 2 of the General Fund Rules, the location of the Investment Company s registered offices is the place of jurisdiction for any dispute arising from the contractual relationship, unless the investor has a general place of jurisdiction in Germany. Pursuant to Sec. 123 para. 1 InvG, all publications and promotional materials shall be drawn up in German or accompanied by a German translation. Furthermore, the Investment Company shall communicate with its investors in German. In the event of disputes in connection with the terms of the Investment Act, consumers may appeal to the consumer advocate for investment funds with BVI, the federal association of investment and asset management, Unter den Linden 42, Berlin. For additional contact details, see the BVI homepage This does not affect the right to take legal action. In the event of disputes arising from the application of the provisions of the German Civil Code (BGB) concerning the distance-selling of financial services effective since 8 December 2004, the parties may contact the conciliation board of Deutsche Bundesbank, Post Box in Frankfurt, Tel or -1906, Fax , schlichtung@bundesbank.de. This does not affect the right to take legal action. Since this prospectus reflects both mandatory information and the fund rules approved by the German Federal Financial Supervisory Authority (BaFin), repetition could not be avoided. HANSAINVEST Hanseatische Investment-GmbH Hamburg, 29 June 2011 Page 2 of 60

3 Table of contents Fundamentals... 6 Overview of parties... 7 Investment Company... 7 Shareholders... 7 Management... 7 Supervisory board... 7 Deposits... 8 Portfolio manager and initiator... 8 Auditor... 8 Management company... 9 Custodian... 9 Fund Designation, time of inception, term Investment objectives, principles and restrictions Investment objective Investment principles Specific investment instruments Securities Money-market instruments Investment limits for securities and money-market instruments Bank deposits Investment units Derivatives Derivatives qualified approach Futures Options Swaps Swaptions Credit default swaps Securitized financial instruments OTC derivatives Lending Repurchase agreements Borrowing Valuation General asset-valuation rules Assets admitted to an exchange/traded on a regulated market Assets not listed on exchanges or not traded on regulated markets or assets lacking tradable prices. 18 Special valuation rules for individual assets Unlisted bonds and promissory note bonds Money-market instruments Derivatives Options and futures Bank deposits, fixed deposits, investment units, loans Assets denominated in foreign currencies Composite assets Performance Risk factors General information Possible range of investments Market risk Country or transfer risk Transaction risk Liquidity risk Counterparty risk Emerging markets Currency risk Custodial risk Concentration risk Page 3 of 60

4 Performance risk Political risk / Risk of regulation Risk of inflation Legal and fiscal risks Changes in investment policies Changes in Fund Rules; dissolution or merger Risk of suspension of redemption Risk of changes in key staff Risks in connection with investments Risks associated with stock purchases Risks associated with purchase of interest-bearing securities (interest-rate risk) Risks in connection with derivatives transactions Industry-specific risks Risks in connection with purchase of investment units Increased volatility Profile of typical investor Units Issue and redemption of units Issue of units minimum investment Redemption of units Settlement for issue and redemption of units Investment types HANSAINVEST securities accounts Securities accounts with credit institutions Suspension of redemption of units Exchanges and markets Issue and redemption prices and costs Issue and redemption prices Suspension of calculation of issue and redemption prices Front-end load Back-end load Publication of issue and redemption prices Costs of unit issue and redemption Management fees and other costs Characteristics of purchase of investment units Sub-fund Unit classes Code numbers Rules governing calculation and use of income Income-equalization method Financial year and distributions End of the Fund s financial year; frequency of dividend distributions Mechanics of distribution Crediting dividends Dissolution and transfer of the Fund Requirements for dissolution of the Fund Procedure for dissolution of the Fund Transfer of all assets of the Fund Procedure for transfer of funds Overview of applicable provision of tax code Overview of tax provisions important for the investors Units held as personal assets (German residents) Income from sale of securities, income from futures and income from no-action-premiums (Stillhalterprämien) Interest and similar income as well as foreign dividends Domestic dividends Negative tax income Distributions of capital assets Capital gains at investor level Units held as business assets (German residents) Income from sale of securities, income from futures and income from no-action premiums Interest and similar income Page 4 of 60

5 Domestic and foreign dividends Negative tax income Distributions of capital assets Capital gains at investor level Non-residents Solidarity surcharge Church tax Foreign withholding tax Income equalization Separate assessment, field audit Taxation of interim profits Consequences of merger of funds Transparent, semi-transparent und intransparent taxation Council Directive 2003/48/EC, ZIV Outsourcing Annual / semi-annual reports, auditor Financial year, reporting Auditor of fund Payments to investors, circulation of reports and other information Others funds managed by HANSAINVEST Sales restrictions General Fund Rules Special Fund Rules Appendix: Characteristics of Unit Classes Additional information for investors in Austria Page 5 of 60

6 Fundamentals The fund C-QUADRAT ARTS Total Return Flexible is a UCITS-compliant German investment fund within the meaning of the InvG. It is managed by HANSAINVEST Hanseatische Investment-GmbH (hereinafter HANSAINVEST or Company ). The management of the Fund consists primarily of investing the capital deposited with the Company by investors in assets subject to the principle of risk diversification and separately from the Company s own assets. The Fund shall not be part of the Company s bankruptcy estate. The InvG and the fund rules governing the legal relationship between investors and the Company also determine the assets in which the Company may invest as well as the provisions it must observe in doing so. The fund rules contain both a general and a specific section ( General Fund Rules and Special Fund Rules ). The application of the fund rules to a fund is subject to approval by the German Financial Supervisory Authority ( BaFin ). The prospectus, the key investor information, the fund rules and the latest annual and semi-annual reports are available free of charge from the Company and on the website Additional information on the Fund s investment restrictions imposed by the Fund s risk management, riskmanagement methods and the latest developments in the risks and returns of major asset categories may be obtained in writing from the Company upon request. The fund rules are included in this prospectus. The Company is entitled to amend the fund rules. Changes in the fund rules shall be subject to BaFin approval. Changes in the Fund s investment policies shall further require the approval of the Company s supervisory board. Planned changes shall be published in the electronic federal gazette (elektronischer Bundesanzeiger) and at If changes refer to fees and reimbursements of expenses that may be charged to the Fund or to the Fund s investment principles or key investor rights, investors are further notified via the entity maintaining their securities account in paper form or electronically. Such notification typically contains an overview of planned changes, their backgrounds, the investors rights in connection with the changes as well as instructions on how and where additional information may be obtained. The duty to notify investors in paper form or electronically does not apply to changes of the fund rules made for the sole purpose of achieving compliance with the Investment Act in effect since 1 July Changes shall come into effect on the day following publication. Changes in the provision governing fees and expenses shall come into effect three months after publication at the earliest unless an earlier date is determined upon BaFin approval. Changes to the Fund s investment policies shall come into effect three months after publication at the earliest and are subject to the condition that the Company affords investors an opportunity to exchange their units for units in funds with comparable investment policies free of charge, provided such funds are also managed by the Investment Company or an affiliated company, or offers to redeem their units free of charge before the changes become effective. Page 6 of 60

7 Overview of parties Investment Company HANSAINVEST Hanseatische Investment-GmbH Postfach Hamburg Business address: Kapstadtring Hamburg Commercial Register B , Amtsgericht (Local court) Hamburg Tel. (040) Fax: (040) Internet: service@hansainvest.de Subscribed and paid-in capital: EUR 10,500, Shareholders SIGNAL IDUNA Allgemeine Versicherung AG, Dortmund IDUNA Vereinigte Lebensversicherung ag für Handwerk, Handel und Gewerbe, Hamburg Management Nicholas Brinckmann Gerhard Lenschow (also: president of the administrative board of HANSAINVEST LUX S.A.) Dr. Jörg W. Stotz (also: member of the administrative board of HANSAINVEST LUX S.A. and member of the management board of SIGNAL IDUNA Private Equity Fonds GmbH, SIGNAL IDUNA Asset Management GmbH and SIGNAL IDUNA Select Invest GmbH) Lothar Tuttas Supervisory board Ulrich Leitermann (chairman), Member of the board of directors of SIGNAL IDUNA Gruppe, Hamburg (also: chairman of the supervisory board of SIGNAL IDUNA Asset Management GmbH) Michael Petmecky (vice-chairman) Member of the board of directors of SIGNAL IDUNA Gruppe, Hamburg (also: member of the supervisory board of SIGNAL IDUNA Asset Management GmbH) Thomas Gollub Chairman of the board of directors of Aramea Asset Management AG, Hamburg (also: vice-president of the administrative board of HANSAINVEST LUX S.A. ) Thomas Janta Director, NRW.BANK, Düsseldorf Dr. Thomas A. Lange Chairman of the board of directors of National-Bank AG, Essen Page 7 of 60

8 Prof. Dr. Harald Stützer Managing partner of STUETZER Real Estate Consulting GmbH, Neufahrn Deposits UniCredit Bank, AG, Munich (formerly: Bayerische Hypo- und Vereinsbank, Munich) BLZ Acct. No Custodian CACEIS Bank Deutschland GmbH Subscribed and paid-in capital EUR 5,113, Portfolio manager and initiator ARTS Asset Management GmbH Stubenring 2 A-1010 Wien Austria Commercial register, FN d Handelsgericht (commercial court) Vienna Managing directors: Gerd Alexander Schütz, Mag. Thomas Rieß, Mag. Leo Willert Distributor C-QUADRAT Kapitalanlage AG Stubenring Wien Austria Commercial register, FN x Handelsgericht (commercial court) Vienna Board of directors: Mag. Christian Jost, Mag. Thomas Rieß, Dr. Heinrich Wohlfart Auditor PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft New-York-Ring Hamburg Page 8 of 60

9 Management company C-QUADRAT Total Return Flexible is managed by HANSAINVEST. Founded on 2 April 1969, HANSAINVEST Hanseatische Investment-GmbH has its registered and administrative offices in Hamburg. It is an investment company within the meaning of InvG. Its legal form is that of a German limited company (GmbH). It was first authorized to launch funds on 24 June Since 22 November 2010, the Company has been authorized by the German Federal Financial Supervisory Authority (BaFin) to operate in Germany and manage domestic investment asset pools in the form of funds as well as investment stock corporations and third-party-managed investment stock corporations. For more information on the composition of management and the supervisory board as well as on the shareholders, the subscribed and paid-in capital of HANSAINVEST and the Custodian, please refer to the overview at the beginning of this prospectus. Custodian The InvG requires that the functions fund management and fund custody be separated. For the safe-keeping of the Fund s assets, the Company has retained the services of a financial institution as custodian (custodian). Acting on the investors behalf, the Custodian shall hold the assets in blocked (securities) accounts, as far as bank deposits are not invested in blocked accounts with other credit institutions. In particular, it shall ensure that the issue and redemption of units as well as the determination of the units value comply with the provisions of the InvG and the fund rules. Furthermore, it shall ensure that it receives the value of the transactions effected for the Fund within the customary periods of time, and that the Fund s income is used in accordance with the provisions of the InvG and the fund rules. In addition, the Custodian is required to verify that the investment of assets on blocked (securities) accounts with another credit institution, a securities company or another depository is consistent with the provisions of the InvG and the fund rules. If this is the case, it shall permit such investments. As a rule, the Custodian is responsible and liable for the loss of any assets it or another institution with its consent has in custody. However, insofar as securities are held abroad by a custodian other than Clearstream Banking AG or a foreign branch of the Custodian, the Custodian s liability is limited to carefully selecting and instructing such foreign custodian and periodically monitoring compliance with the selection criteria. The value of the Fund and the value of the units are determined by the Company and monitored by the Custodian. The function of custodian for the Fund has been assumed by CACEIS Bank Deutschland GmbH, a company with registered offices in Munich (hereinafter Custodian ). Its business address is: Lilienthalallee D München The Custodian is a credit institution subject to the laws of the Federal Republic of Germany. Its principal activities encompass custodian services within the meaning of the Securities Deposit Act, the execution of transactions involving financial instruments, services as a custodian accordig the the Investment Act as well as providing client access to clearing services. Page 9 of 60

10 Fund Designation, time of inception, term HANSAINVEST invests the monies deposited with it in the form of funds separate from its own assets, in its own name and for the investors joint account, adhering to the principle of risk diversification. The fund addressed in this prospectus is a UCITS-compliant fund launched on 8 November 2010 for an indefinite period of time. Investors are invested as co-holders by fractional shares in the respective assets of the Fund in proportion to the number of their units. At the time of the Fund s inception, the rights of depositors (investors) are certified exclusively in global certificates. The units are are bearer units and represent investors claims against HANSAINVEST. The global certificates are kept at a bank for depository of securities. Investors are not entitled to the physical delivery of individual units. Units may only be purchased to be held in a secutities account. The Company may launch various unit classes associated with different rights in terms of use of income, front-end and back-end loads, the currency of the unit value, including currency hedging transactions, management fees, minimum investment amount or any combination of these characteristics. At the Fund s inception, only a single dividend-distributing unit class was formed (Class A). With effect on 13 December 2010, a accumulating unit class was formed in addition (Class T). Both of the Fund s unit classes are denominated in EUR. The fund is not a sub-fund of an umbrella structure. The scope of rights is determined by the Investment Act (InvG) and the Fund s rules. Page 10 of 60

11 Investment objectives, principles and restrictions Investment objective C-QUADRAT ARTS Total Return Flexible is designed to achieve adequate returns and the highestpossible long-term appreciation irrespective of benchmarks. For this purpose, the Fund s management employs a technical trading program developed by ARTS Asset Management GmbH that is geared toward medium-term trends. Funds shown by the system to follow a positive trend will receive the greatest weighting within the portfolio, which is how the Fund s portfolio may be exposed to only few sectors. C-QUADRAT ARTS Total Return Flexible is not as broadly diversified as most classically managed global funds of funds. In addition, the Fund s investment strategy is not aligned with a benchmark. Instead, absolute appreciation is sought across multiple market phases. The core strength of this management approach is to lie in its combination of medium-term trend adhesion and the portfolio s on-going adjustment to the developments seen in individual markets. It is not attempted to anticipate trends. Instead, investments are not made until a positive trend has been established. The investment policy of C-QUADRAT ARTS Total Return Flexible follows a total return approach, with the Fund s management employing a technical trading program developed by ARTS Asset Management that is designed to follow trends. It is intended to gain absolute appreciation in all market phases. The Fund s assets may be fully invested in the asset class stocks in the form of both funds, ETFs, derivatives and individual stocks. During down-cycles, the share of stocks may be reduced to zero, in which case funds will be largely placed in more defensive asset classes such as bonds and money-market instruments. In addition, risks may be hedged using derivatives, and the degree of investment may be increased beyond 100 %. C-QUADRAT ARTS Total Return Flexible represents a highly active management style, and the Fund s management may draw on all instruments available under applicable law in order to achieve the investment objective. The instruments that may be purchased for the Fund include stocks and stock-equivalent securities, interestbearing securities, bank deposits, money-market instruments, shares in other investment funds, derivatives for investment and hedging purposes and other financial instruments. Investment limits for each asset class based on the value of the Fund are shown in the table below: Stocks and stock-equivalent securities max. 100 % Other securities (including certificates) max. 100 % Bank deposits and money-market instruments max. 100 % Equity funds max. 100 % Fixed-income funds max. 100 % Money-market funds max. 100 % The maximum potential market risk is 200 %. The fund s currency is EUR. Investment principles The following assets may be acquired for the Fund: 1. Stocks and stock-equivalent securities; 2. Other securities, especially bonds; 3. money-market instruments; 4. bank deposits, 5. investment units; 6. derivatives; and 7. other investment instruments. Page 11 of 60

12 Specific investment instruments Securities Securities eligible for an investment for the Fund include stocks, stock-equivalent securities, bonds, bearer bonds and promissory note bonds, provided such instruments may be assigned at least twice following their acquisition for the Fund, as well as other securitized debt and other negotiable securities provided these are not money-market instruments or derivatives. The Company may acquire, for the Fund s account, securities of domestic and foreign issuers if such instruments: 1. are admitted to trading on a stock exchange in a member state of the European Union, or in another signatory state to the agreement on the European Economic Area, or are there admitted to or included in another regulated market; 2. are admitted to trading on any of the exchanges approved by the German Financial Supervisory Authority (BaFin) or are admitted to trading on or included in another regulated market approved by the BaFin. 1 Newly issued securities may be acquired if, according to the terms of their issue, admission to or inclusion with any of the exchanges or regulated markets listed under 1. or 2. above must be requested and is granted within one year of such new issue. The above mentioned securities may only be acquired if the requirements pursuant to Sec. 47 para. 1 sentence 2 InvG are additionally met. Furthermore, securities may also be acquired in the form of stock to which the Fund is entitled in the event of an equity-financed capital increase, or by way of the exercise of subscription rights belonging to the Fund. Likewise, purchases may be made of securities that are (i) shares in closed funds meeting the criteria listed in Sec. 47 para. 1 sentence 1 no. 7 InvG, or (ii) financial instruments meeting the criteria listed in Sec. 47 para. 1 sentence 1 no. 8 InvG. Securities further include subscription rights, provided the securities to which such rights relate may be part of the Fund. Money-market instruments Money-market instruments are financial instruments normally traded on the money markets as well as interest-bearing securities which, at the time of purchase, have a maximum (residual) maturity of 397 days. In case the maturity exceeds 397 days, the interest of such instruments must be adjusted in line with market rates at regular intervals, at least once every 397 days. Money-market instruments are also instruments the risk profile of which corresponds to the risk profile of such securities. Money-market instruments may only be acquired for the Fund if they 1. are admitted to trading on a stock exchange in a member state of the European Union or in another signatory state to the agreement on the European Economic Area, or are admitted to or included in another regulated market there; 2. are admitted to trading on any of the exchanges approved by the German Financial Supervisory Authority (BaFin) or are admitted to trading on or included in another regulated market approved by the BaFin 2 ; 3. are issued or guaranteed by the European Communities, the German federal government, a special fund of the federal government, a federal state (Land) of the Federal Republic of Germany, another member state or another central, regional or local authority or the central bank of a member state of the European Union, the European Central Bank or the European Investment Bank, a non-member state or, if the non-member state is a federal state, by one of the members making up the federation, or by a public international body to which at least one Member State of the European Union belongs; 4. are issued by an enterprise whose securities are traded on the markets referred to in numbers 1 and 2; 1 The list of stock exchanges is published on the BaFin s website. 2 The list of stock exchanges is published on the BaFin s website. Page 12 of 60

13 5. are issued or guaranteed by a credit institution which is subject to a supervision in accordance with the criteria defined by European Community law or by a credit institution which is subject to and complies with supervisory provisions considered by the BaFin to be equivalent to those of European Community law; 6. are issued by other issuers and the relevant issuer qualifies as a. an enterprise with an equity capital amounting to at least 10 million Euro which prepares and publishes its annual accounts pursuant to the provisions of the Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies, as amended most recently by Article 49 of Directive 2006/43/EC of the European Parliament and the Council of 17 May 2006; or b. an entity which, within a group of companies which comprise of one or several listed companies, is dedicated to the financing of the group, or c. an entity which is dedicated to the financing of the securitisation of liabilities by using a credit facility provided by a bank. The securitisation and the credit facility provided by a bank shall be subject to Article 7 of Directive 2007/16/EC. All mentioned money-market instruments may only be acquired if they meet the requirements of Article 4 paras. 1 and 2 of Directive 2007/16/EC. Money-market instruments within the meaning of paragraph 1 nos. 1 and 2 shall be subject to Article 4 para. 3 of Directive 2007/16/EC. Sufficient deposit and investor protection must be in place for the money-market instruments mentioned under nos. 3 to 6 above e.g., in the form of an investment-grade rating and, additionally, the criteria of Article 5 para. 1 of Directive 2007/16/EC are met. Investment grade is defined as ratings of BBB or Baa or better resulting from a rating agency s credit assessment. The acquisition of money-market instruments which are issued by a regional or local territorial entity of a member state of the European Union or by a public international body within the meaning of no. 3, but are guaranteed neither by this member state nor, in case of a federal state, by one of the members making up the federation, and the acquisition of money-market instruments pursuant to nos. 4 and 6 shall be subject to Article 5 para. 2 of Directive 2007/16/EC; the acquisition of any other money-market instruments pursuant to no. 3, except for money-market instruments which have been issued or guaranteed by the European Central Bank or the central bank of a member state of the European Union, shall be subject to Article 5 para. 4 of Directive 2007/16/EC. The acquisition of money-market instruments pursuant to no. 5 shall be subject to Article 5 para. 3 and, if money-market instruments are issued or guaranteed by a credit institution which is subject to and complies with supervisory provisions considered by the BaFin as being equivalent to those of European Community law, Article 6 of Directive 2007/16/EC. Investment limits for securities and money-market instruments With respect to the Fund, the Company may invest up to 100 % of the Fund s value in stocks and equivalent securities. Likewise, it may invest up to 100 % of the Fund s value in other securities (such as interestbearing securities, bonds, certificates). The company may invest up to 100 % of the Fund s value in money-market instruments. The Company may invest up to 10 % of the Fund in securities and in money-market instruments of the same issuer (debtor). In this context, the aggregate value of securities and money-market instruments of such issuers (debtors) must not exceed 40 % of the Fund s total assets. Beyond this, only 5 % of the assets of the Fund may be invested in securities and money-market instruments of the same issuer (debtor). The Company may only invest in each case up to 35 % of the Fund s value in bonds, promissory note bonds and money-market instruments which have been issued by certain public issuers pursuant to Sec. 60 para. 2 sent 1 InvG. Page 13 of 60

14 The Company may invest up to 25 % of the Fund s value in any particular covered bond. If more than 5 % of the Fund s value are invested in such bonds of the same issuer, the aggregate value of such bonds must not exceed 80 % of the Fund s value. The Company may only invest up to 20 % of the value of the Fund in a combination of the following assets: securities or money-market instruments issued by the same institution; deposits held with such institution; amounts eligible for inclusion in the counterparty risk of transactions in derivatives, securities lending transactions and security-based repurchase agreements entered into with this institution. In case of certain public issuer within the meaning of Sec. 60 para. 2 sentence 1 InvG a combination of the assets referred to in sentence 1 must not exceed 35 % of the Fund s value. The respective individual limits remain unaffected in both cases. The amounts accounted for by securities and money-market instruments of a single issuer in connection with the above restrictions may be adjusted by short derivatives transactions based on securities or moneymarket instruments of the same issuer. This means that, for the account of the Fund, securities and moneymarket instruments of the same issuer may be purchased or invested with the same institution beyond the above limits if the increased issuer risk resulting therefrom is offset by means of hedging transactions. The Company may only invest up to 10 % of the Fund s value in: 1. securities which are not admitted to trading on an exchange or traded on or included in another regulated market, but meet the other criteria pursuant to Sec. 52 para. 1 no. 2 InvG; 2. money-market instruments of issuers not complying with the requirements of Sec. 48, provided the money-market instruments meet the requirements pursuant to Sec. 52 para. 1 no. 2 InvG; 3. newly issued securities the admission of which has been planned but not yet completed 4. promissory note bonds that can be assigned at least twice after their purchase for the Fund and were granted to: a) the German federal government, a special fund of the federal government, a Federal State (Land), the European Communities or a state that is a member of the Organization for Economic Co-operation and Development; b) another central, regional or local authority within Germany, or a regional government or local authority of another member state of the European Union, or of another signatory state to the Agreement on the European Economic Area for which a zero weighting was reported pursuant to Article 44 of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking-up and pursuit of the business of financial institutions; c) other public corporations or agencies incorporated under public law and domiciled in Germany, or in another member state of the European Union or another signatory state to the Agreement on the European Economic Area; d) companies having issued securities which are admitted to trading on a regulated market within the meaning of Sec. 2 para. 5 of the Securities Trading Act or which are admitted to or included in another regulated market which meets the material requirements for regulated markets within the meaning of the directives referred to in Sec. 52 para. 1 no. 4 lit. d) InvG; or e) other debtors, provided one of the agencies listed in letters a through c above has assumed the guarantee for interest payments and repayment. Bank deposits The Company may invest up to 100 % of the Fund s value in bank deposits, which must have a maximum term of twelve months. These deposits must be kept in blocked accounts with a credit institution domiciled in a member state of the European Union or of the Agreement on the European Economic Area. Subject to the General Fund Rules, they may also be maintained by a credit institution domiciled in a third country. Moneymarket instruments are taken into account in this investment limit. The bank deposits may also be denominated in foreign currency. Page 14 of 60

15 The Company may only invest up to 20 % of the Fund s value in bank deposits with any single financial institution. Investment units For the Fund s account, the Company may invest up to 100 % of the Fund s value in units of other funds, which, in each case according to their fund rules or articles of association, invest primarily in stocks and stock-equivalent securities (stock funds) or interest-bearing securities (fixed-income funds) or money-market instruments (money-market funds). Such other funds - according to their own fund rules - may invest no more than 10 % in the units of other funds. Units of domestic UCITS-compliant and non-ucits-compliant funds, shares of investment stock corporations as well as UCITS-compliant EC investment units and other foreign investment units may be acquired. The units must be redeemable at any time. Units of other domestic funds and investment stock corporations as well as foreign investment units, which are do not qualify as EC investment units, may only be acquired if they meet the requirements pursuant to Sec. 50 para. 1 sentence 2 InvG. Only up to 20 % of the Fund s value may be invested in units of a single investment fund. No more than a total of 30 % of the value of the Fund may be invested in non-ucits-compliant investment funds. The Company must not acquire more than 25 % of the units issued by another investment fund for the account of the Fund. Derivatives As part of the Fund s management, the Company may use derivatives and financial instruments with a derivative component. According to the nature and scope of derivatives and financial instruments with a derivative component used, it shall employ either the simple or the qualified approach within the meaning of the ordinance regarding risk management and risk measurement for funds ( DerivateV ) to determine compliance with the market-risk limit specified for derivatives in Sec. 51 para. 2 InvG. The Company applies the qualified approach within the meaning of the DerivateV for determining the Fund s exposure to market risk regarding the use of derivatives and financial instruments with a derivative component. Under no circumstances the Company may deviate from the General and Special Fund Rules or the investment principles and restrictions set out in the prospectus when making derivative transactions. When using derivatives and financial instruments with a derivative component, the Company will observe the ordinance regarding risk management and risk measurement for funds ( DerivateV ) that was issued pursuant to Sec. 51 para. 3 InvG. Derivatives qualified approach If the Company uses the qualified approach, subject to an adequate risk-management system, the Company is authorized to invest in any derivatives and financial instruments with a derivative component within the meaning of Article 10 para. 1 of the Directive 2007/16/EC, which are derived from assets that may be acquired for the Fund, or from financial indices within the meaning of Article 9 para. 1 of the Directive 2007/16/EC, interest rates, exchange rates or currencies, including but not limited to options, financial futures and swaps as well as any combination thereof. Derivatives or financial instruments with a derivative component whose underlyings are other investment instruments within the meaning of Sec. 52 nos. 1, 2 and 4 InvG must not be acquired. Page 15 of 60

16 The Company may enter into derivatives transactions for the account of the Fund for purposes of hedging, efficient portfolio management and generating additional returns, i.e. also for speculative purposes. The use of derivatives may increase the Fund s exposure to market risk. However, such exposure must not exceed a maximum of 200 % as compared to the market-risk potential of a derivative-free reference fund. Market risk is defined as the risk for the Fund resulting from unfavourable market developments. When determining the potential market risk of the derivatives using the qualified approach as set forth in the DerivateV, the risks are controlled by means of a risk-management procedure that allows the risk associated with the investment position and the respective share of the overall risk profile to be monitored and gauged at any time. Irrespective of the mandatory cap in terms of market-risk potential, it is expected that the leverage as calculated in accordance with the rules in Secs. 15 et seqq. of the DerivateV using the simple method will equal 0.0 for the use of derivative transactions. However, Sec. 15 (2) DerivateV does not apply. Any effects arising from the reinvestment of collaterals in securities lending and repurchase transactions are taken into account. However, such leverage varies depending on market conditions and the latitude available to portfolio management, to the effect that the intended level may be exceeded despite the Company s on-going monitoring efforts. The derivative-free reference fund is a virtual portfolio, the value of which always corresponds with the Fund s current value but which is not subject to increases in or hedges against market risk by means of derivatives. Otherwise, the composition of the reference fund must reflect the investment objectives and policies in effect for the Fund. Futures The Company may, to the extent permissible under the investment policies, buy and sell futures contracts on securities, money-market instruments, units of investment funds and derivatives for the account of the Fund. Futures are mutually binding agreements between two parties to buy or sell, at a specified date, the maturity date, or within a specified period, a specific quantity of a specific underlying security at a price agreed in advance. Options Subject to the investment policies the Company may participate in options trading for the account of the Fund. Options consist of granting to a third party, in exchange for a fee (option premium), the right to demand the delivery or receipt of assets or the payment of a balancing adjustment for a specific period of time or at the end of a specific time period at a price determined in advance (strike price), or to acquire the corresponding option rights. Swaps For the account of the Fund and subject to the investment policies, the Company may enter into: interest; foreign exchange; equity; and credit-default swap transactions. Swaps are exchange contracts in which the payment flows or risks underlying the transaction are exchanged between the contractual partners. Swaptions Swaptions are options on swaps. A swaption is the right, but not the obligation, to enter into swaps on predefined terms on a specific date or within a specific period of time. Page 16 of 60

17 Credit default swaps Credit default swaps are credit derivatives that permit potential credit-default amounts to be transferred to third parties. In consideration for assuming the credit-default risk, the seller of the risk pays a premium to the contracting partner. In other respects, the details for swaps apply accordingly. Securitized financial instruments The Company may also acquire the financial instruments described above if they are securitized in securities. Such transactions based on financial instruments may also only be partially securitized in this way (e.g., option loans). The statements on opportunities and risks apply to such securitized derivatives accordingly, except for the fact that the risk of loss associated with securitized derivatives is limited to the value of the security. OTC derivatives The Company may enter into derivatives contracts admitted to trading on an exchange, traded on another regulated market as well as in over-the-counter (OTC) transactions. The Company may enter into derivatives contracts that are not admitted to trading on an exchange or traded on another regulated market only with suitable credit institutions or financial-services providers on the basis of standardized framework agreements. For derivatives traded over the counter, the counterparty risk of a contract party is limited to 5 % of the value of the Fund s assets. If the counterparty is a credit institution domiciled in the European Union, the European Economic Area or a state that is a member of neither organization but has comparable levels of governmental supervision, the counterparty risk may total 10 % of the value of the Fund s assets. Derivatives transactions traded over the counter, in which the counterparty is the central clearing house of an exchange or another regulated market, are not taken into account for purposes of determining counterparty limits if the derivatives are valued daily at market prices with a daily margin settlement. The Fund s claims against an intermediary, however, are to be applied against the caps even if the derivative is traded on an exchange or another regulated market. Lending The assets held by the Fund may be transferred to third parties by way of loans against payment of a consideration in line with prevailing market rates. If the assets are transferred for an indefinite period of time, the Company shall have the right to call them in at any time. It shall be agreed by contract that assets of the same kind, quality and amount are to be retransferred to the Fund upon the expiration of the lending period. It is a prerequisite for the transfer of securities by way of a loan that the Fund is furnished with adequate collateral security. This may involve cash payments, assigning or pledging cash deposits or assigning or pledging securities or money-market instruments. Any income generated by the investment of collateral must be credited to the Fund. The borrower is also obligated to pay to the Custodian for the account of the Fund, when due, the interest accrued on the securities received by way of a loan. Securities loans granted for a limited time may not exceed 15 % of the value of the Fund s assets. All securities transferred to a single borrower may not exceed 10 % of the Fund s value. The Company must not grant cash loans to third parties on the Fund s account. Repurchase agreements The Company may, for the account of the Fund enter into repurchase agreements with a maximum term of twelve month with credit institutions and financial-services providers. Such repurchase agreements are permitted only in the form of so called "true" repurchase agreements. In transactions of this nature, the lender undertakes to return the assets at a specific time or at a time to be determined by the borrower. Page 17 of 60

18 Borrowing Short-term loans may be raised for the joint account of the investors in an amount of up to 10 % of the value of the Fund, provided the terms of the loan reflect standard market practices and the Custodian gives its consent. Valuation General asset-valuation rules Assets admitted to an exchange/traded on a regulated market Assets admitted to trading on exchanges or admitted to trading on or included in another regulated market, and subscription rights for the benefit of the Fund are valued at the most recent tradable price available that allows for a reliable valuation, unless the Special Valuation Rules below provide otherwise. Assets not listed on exchanges or not traded on regulated markets or assets lacking tradable prices Assets that are neither admitted to trading on exchanges nor admitted to or included in another regulated market, or for which no current prices are available, are valued at the current market value carefully determined and deemed appropriate on the basis of suitable valuation models and in consideration of current market conditions, unless the Special Valuation Rules below provide otherwise. Special valuation rules for individual assets Unlisted bonds and promissory note bonds The valuation of bonds not admitted to trading on an exchange or not admitted to or included in another regulated market (e.g., unlisted bonds, commercial papers and certificates of deposit), as well as the valuation of promissory note bonds shall be based on the prices agreed for comparable bonds and promissory note bonds and, if applicable, the prices of bonds of comparable issuers offering similar terms and interest adjusted to compensate for inferior saleability, where necessary. Money-market instruments For the money-market instruments contained in the Fund, interest and interest-like income as well as expenditures (e.g., management, custodian and auditing fees, publication costs, etc.) are taken into account until and including the day immediately preceding the value date. Derivatives Options and futures Option rights belonging to a fund and the liabilities related to options granted to a third party that are admitted to trading on an exchange or traded on another regulated market are valued at the most recently available tradable price that allows for a reliable valuation. Claims and liabilities under futures contracts sold for the account of the funds, which are admitted to trading on an exchange or traded on another regulated market, are valued at the prices most recently established for them, which allows for a reliable valuation. Any capital invested at the Fund s expense is added to the value of the Fund s assets by taking into accont the valuation gains and losses determined on the trading day. Bank deposits, fixed deposits, investment units, loans Bank deposits are typically valued at their nominal values, plus interest accrued. Fixed deposits are valued at the market price, provided such deposits may be withdrawn at any time and their repayment upon withdrawal is not effected at the market price plus interest. Page 18 of 60

19 Investment units are typically valued at the most recently determined redemption price or at the most recently available price that allows for a reliable valuation. If such prices are not available, investment units are valued at an appropriate current market value determined with due care based on adequate valuation models taken into account current market conditions. Redemption claims under loan transactions are valued on the basis of the respective prices of the assets transferred by way of a loan. Assets denominated in foreign currencies Assets denominated in foreign currencies are converted into EUR at the exchange rate determined on the same day by Reuters AG at 4:00 pm. Composite assets Assets combining several components (composite assets) shall be valued at the sum of the values of their components determined in accordance with the above rules. Performance The fund is a newly launched investment fund, which is why no statements are made herein about its past performance. Risk factors General information In addition to the chances of appreciation, the assets in which the Company invests for the account of the Fund also entail risks. Value may be lost as a result of the market value of the assets falling below the purchase price. If investors sell units of the Fund at a time when the prices of the Fund s assets are lower than they were at the time of purchase, they will not recover the full amount invested in the Fund. Although every fund aims to achieve steady appreciation, no such appreciation can be guaranteed. However, the investor s risk is limited to the amount invested i.e., the investor has no obligation to pay more than the invested amount. Possible range of investments Subject to the investment policies and limits imposed by the InvG and the fund rules, which provide the Fund with a broad latitude, actual investment policies may also focus on acquiring assets e.g., in only a few industries, markets or regions / countries. Such a focus on few and specific investment sectors may bring with it special opportunities, but at the same time such opportunities are subject to corresponding risks (e.g., narrow markets, significant breadth of fluctuation within specific economic cycles). The annual report provides details on investment policies for the reporting period. Market risk The prices or market developments of financial products depend largely on the development of the capital markets, which in turn is influenced by global economic trends as well as the economic and political climates of the respective countries. Price trends at exchanges and elsewhere can also be affected by irrational factors such as emotions, opinions and rumours. Country or transfer risk A country risk is incurred whenever a foreign debtor, while solvent, cannot meet its obligations, or cannot do so in a timely fashion, because the country of such debtor s domicile lacks the ability or willingness to transact transfers. As a result, payments to which the Fund is entitled may not be made at all or may be made in a currency that cannot be converted due to foreign-exchange restrictions. Page 19 of 60