SF (LUX) SICAV 1. Société d investissement à capital variable SALES PROSPECTUS. Juillet 2009

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1 DRAFT (1) KKI/JCU 12/06/2009 SF (LUX) SICAV 1 Société d investissement à capital variable SALES PROSPECTUS Juillet 2009 Distribution of this Prospectus is not authorised unless it is accompanied by a copy of the latest available annual report of SF (LUX) SICAV 1 containing the audited balance-sheet and a copy of the latest half-yearly report, if published after such annual report. The sales prospectus and the respective annual and semi-annual reports may be obtained free of charge from all paying agents and sales agencies. It is prohibited to disclose information on the Fund, which is not contained in this sales prospectus, the documents mentioned therein, the latest annual report and any subsequent semi-annual report. The English version of this sales prospectus is binding. 1

2 SF (LUX) SICAV 1 TABLE OF CONTENTS TABLE OF CONTENTS... 2 INTRODUCTION... 3 SECTION I: DESCRIPTION OF THE AVAILABLE SUBFUNDS... 4 SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund... 5 SF (LUX) SICAV 1 European Protected Active Allocation Fund (EUR) SF (LUX) SICAV 1 Global Protected Active Allocation Fund (EUR) SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund II SF (LUX) SICAV 1 Dynamic Real Estate Fund III SF (LUX) SICAV 1 BMI Protected Global Growth Fund (USD) SECTION II GENERAL PROVISIONS MANAGEMENT AND ADMINISTRATION THE FUND STRUCTURE OF THE FUND LEGAL ASPECTS INVESTMENT OBJECTIVES AND POLICY INVESTMENTS IN THE SF (LUX) SICAV NET ASSET VALUE MARKET-TIMING ISSUE AND CONVERSION OF SHARES REDEMPTION OF SHARES SUSPENSION OF THE NET ASSET VALUE CALCULATION AND OF THE ISSUE, CONVERSION AND REDEMPTION OF SHARES LIQUIDATION AND MERGING OF THE FUND AND ITS SUBFUNDS LIQUIDATION OF THE FUND TERMINATION OF A SUBFUND MERGER OF SUBFUNDS OR OF ONE SUBFUND WITH ANOTHER UCI DIVIDEND POLICY SPONSOR CUSTODIAN BANK ADMINISTRATIVE SERVICES DAILY BUSINESS PORTFOLIO MANAGERS/ INVESTMENT ADVISORS TAXATION CHARGES AND EXPENSES INFORMATION AVAILABLE TO SHAREHOLDERS INVESTMENT GUIDELINES INVESTMENT RESTRICTIONS FINANCIAL TECHNIQUES AND INSTRUMENTS

3 INTRODUCTION SF (LUX) SICAV 1 (the Fund ) is a company organised as a self-managed société d investissement à capital variable ( SICAV ) and is registered under Part I of the Luxembourg law of December 20, 2002 on collective investment undertakings (the "Law"). This registration pursuant to the Law does not require any Luxembourg authority to approve or disapprove either the adequacy of this Prospectus or the portfolio of securities held by the Fund. Any representation to the contrary is unauthorised and unlawful. This Prospectus does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not allowed. In particular, the shares of the Fund have not been registered with the Securities and Exchange Commission (SEC) of the United States of America and may therefore not be offered in the United States of America or in any state, territory or possession thereof or areas subject to its jurisdiction. The Subfunds may be registered in different distribution countries. Potential subscribers to the Fund should inform themselves on applicable laws and regulations (i.e. as to the possible tax requirements or foreign exchange control) of the countries of their citizenship, residence or domicile, and which might be relevant to the subscription, purchase, holding, conversion and redemption of shares. Any reference to EUR in this prospectus refers to the official currency of the European Monetary Union. Any reference to business day in this prospectus refers to any day upon which the banks shall be open for business in Luxembourg. This Prospectus is subject to changes concerning the addition or suppression of Subfunds as well as other modifications. Therefore it is advisable for subscribers to ask for the most recent issue of the Prospectus. Potential subscribers should note that the structure of the Prospectus is made up of Section I which contains the provisions which are specific to each available Subfund and of Section II which contains general provisions applicable to all Subfunds and the Fund as a whole. 3

4 SECTION I: DESCRIPTION OF THE AVAILABLE SUBFUNDS List of available Subfunds SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund SF (LUX) SICAV 1 European Protected Active Allocation Fund (EUR) SF (LUX) SICAV 1 Global Protected Active Allocation Fund (EUR) SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund II SF (LUX) SICAV 1 Dynamic Real Estate Fund III SF (LUX) SICAV 1 BMI Protected Global Growth Fund (USD) SF (LUX) SICAV 1 BMI Protected Global Growth Fund II (USD) Unless otherwise indicated in the descriptions below, each Subfund of SF (LUX) SICAV 1 is subject to the general provisions as set out in Section II of this Prospectus. 4

5 SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund This specific section describes the particulars of the Subfund SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund It is part of the general sales prospectus. Therefore, all information given herein should be considered in conjunction with this general prospectus. Profile of the typical investors The Subfund is suitable for retail investors who consider investments in the Subfund as a convenient way of participating in international equity and fixed income markets while having their capital guaranteed at the Maturity Date (as defined below). The investor must be able to accept negative net asset value variations prior to the Maturity Date. Investment objective The investment objective of the Subfund is capital appreciation through a dynamic exposure to a basket of collective investment schemes (the Active Asset or Fund Units ), subject to the constraint of guaranteeing the capital at the maturity date i.e. October 31, 2012 ( Maturity Date ): shareholders will receive at least 100% of their initial investment less any issuing commission paid ( Guaranteed Amount ), provided their initial investment was made before October 27, Investors purchasing shares after October 27, 2004 will only benefit at the Maturity Date from the principal protection at the highest Net Asset Value published between the launch date and October 27, 2004 irrespective of the Net Asset Value at which they purchased their shares. Investment Policy The Subfund will principally invest in equities and fixed-income securities (the Equity Portfolio ) issued by corporate entities domiciled in any OECD countries and/or listed or traded on regulated markets of an OECD countries and will enter into a performance swap agreement (the Swap Agreement ) negotiated at arm s length with a high rated institution specialised in this kind of transaction, UBS AG for the purpose of fulfilling the investment objective, all in accordance with the investment restrictions as described under section Investment Restrictions. This Subfund may hold liquid assets on an ancillary basis. The Swap Agreement will be a standardised agreement approved by the International Swap Dealers Association, Inc for equity, multi-currency, cross-border, interest rate and currency exchange transactions. The Swap Agreement will be valued on a consistent and weekly basis by the Swap Calculation Agent (UBS Limited, a 100% subsidiary of UBS AG) in accordance to the terms of the CPPT algorithm with the prevailing market parameters and valuations. The valuation methodology is based on the discounting of the future expected cash flows. UBS AG will provide a trading price at which the Subfund can increase or decrease the Swap Agreement notional amount. Such a facility will be available on any business day when requested by the Portfolio Manager. The notional amount of the Swap Agreement will be the initial assets held by the Subfund on the day following the settlement date of the initial subscription period and in case of subscription and/or redemption requests, the notional amount will be amended accordingly with the written consent of both parties i.e. UBS AG and the Subfund. 5

6 According to the Swap Agreement, and for the first time on September 30 th, 2004 and afterwards on the last Business Day of every calendar quarter until the Maturity Date: - UBS AG will pay to the Subfund an amount equal to the average weekly value of the Dynamic Portfolio multiplied by the notional amount over the preceding three months multiplied by 0.3%. - The Subfund will pay to UBS AG the income received on the Investment Portfolio and on any ancillary liquid assets. The Swap Agreement was amended such that for the first time on 5 February 2007, thereafter on the 3 rd Business Day of each month until the Maturity Date: - UBS AG will pay to the Subfund an amount which corresponds to the Management Fee plus any additional expenses incurred by the Subfund as referred to in the section "Total Expense Ratio ( TER )" below for the preceding month. - The Subfund will pay to UBS AG the income received on the Investment Portfolio and on any ancillary liquid assets for the preceding month. At the Maturity Date, the settlement value of the Swap Agreement will be determined as follows: Notional Amount x {max (PA, DPm) EPm} where, PA = Protected Amount i.e the highest Dynamic Portfolio Value published between the launch date and October 27 th, 2004 DPm = Dynamic Portfolio level at close of business on the Maturity DateEPm = Value of the Equity Portfolio Index at close of business on the Maturity Date. The Equity Portfolio Index is an indexed level that tracks the value of the Equity Portfolio through the life of the Fund. It is equal to 1 on the Start Date. If the amount is positive, then UBS AG will pay the amount to the Subfund. If this amount is negative then the Subfund will pay the amount to UBS AG. The Dynamic Portfolio represents the value of a portfolio that follows a strict algorithm developed by UBS Limited. At all times, the exposure of the Subfund will be allocated between the Active Asset (the Fund Units ) and the Reserve Asset or (the Cash Units in accordance with the algorithm (together, the Dynamic Portfolio ): The algorithm is designed to maximise the number of Fund Units in the Dynamic Portfolio, subject to ensuring the payment of the Guaranteed Amount on the Maturity Date. The constituents and valuation of the Dynamic Portfolio follow detailed and pre-determined rules. On each business day the valuation of the Dynamic Portfolio can be verified by reference to this algorithm. The Dynamic Portfolio is made up by the following components 1. Fund Units (Active Asset) 2. Cash Units (Reserve Asset) Fund Units: A Fund Unit generates an EUR denominated participation to a diversified basket of real estate sector oriented collective investment schemes; these collective investment schemes are selected from a universe of third party collective investment schemes (the Fund Universe ) (i.e. collective investment schemes managed by companies that are not members of nor affiliated with the UBS Group) investing solely in transferable securities, consistent with the requirements of the Directives 85/611/EEC and/or 2001/108/EC or listed on any European stock exchange. 6

7 At the time of the launch, the Fund Unit will consist of the following collective investment schemes Fund Name Bloomberg Code Basket Weight Oddo Immobilier-C ODDIMMC FP 10.00% Sogésector Immobilier Euro SOGESIM FP 25.00% MS European Property Fund MOREPII LX 20.00% Balzac Real Estate Index BALRESI FP 10.00% ABN Amro High Income Property Fund AAHIP NA 25.00% ABN AMRO Property Securities America AAPFAM NA 10.00% On a semi-annual basis, the Investment Advisor, Fortis Bank (Nederland) N.V., may recommend changes in the component collective investment schemes and basket weight of each scheme to the Portfolio Manager, UBS Global Asset Management. Any such change is subject to the agreement of the Swap Calculation Agent. Cash Units: A Cash Unit represents an EUR denominated exposure to an investment in an EUR zero coupon bond maturing on the Maturity Date issued by UBS AG. The exposure within the Dynamic Portfolio to both asset classes will be reviewed on each business day and will be set to maximize the exposure to the Active Asset given the prevailing risk constraints. A complete description of the CPPT algorithm is available to investors upon request at the Company s registered office. Guarantee General: The irrevocable and unconditional Guarantee will be issued on the launch date of the Subfund by UBS AG, a company incorporated under the laws of Switzerland whose registered offices are at Aeschenvorstadt 1, CH-4051 Basel, Switzerland and Bahnhofstrasse 45, CH-8098 Zurich, Switzerland, (the "Guarantor"). The Guarantor guarantees a redemption payment at the Maturity Date (October 31, 2012) being at least equal to the highest Net Asset Value published between the launch date and October 27, Applicability of the Guarantee: In the event that the Net Asset Value on the Maturity Date is below the Guaranteed Amount, the Guarantor will pay to the Subfund the difference between the Net Asset Value calculated for October 31, 2012 and the Guaranteed Amount, multiplied by the number of outstanding shares on that date, to be paid three business days following the computation of this Net Asset Value. Risk Consideration: Income risk: the Subfund is exposed to the loss of all dividends earned on the stock portfolio underlying the Swap Agreement. Counterparty Risk: the Subfund is exposed to the risk that the Swap Counterparty may default on its obligations to perform under the Swap Agreement and/or its obligations under the Guarantee, in which case the Capital Protection Feature of the Subfund would be lost. In assessing this risk, investors should recognise the protection offered by the regulatory requirement that the Swap Counterparty post collateral for the benefit of the Subfund when the exposure to the Swap Counterparty under the Swap Agreement exceeds 10% of the Net Asset Value of the Subfund. 7

8 Selling Shares Prior to the Maturity Date: the capital guarantee feature is contingent upon an investor holding his Shares until the Maturity Date. If an investor sells/redeems shares in the Subfund prior to the Maturity Date you will lose the capital guarantee feature. The value of an investment and any income from it can go down as well as up. An investor may not get back the original amount invested. What an investor will get back is dependent on investment performance and nothing is guaranteed. Use of Derivatives: the Swap Agreement is a structured derivative transaction. While the prudent use of such a derivative can be beneficial, derivatives also involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. Structured derivative transactions are complex and may involve a high degree of loss. The aim of the Swap Agreement is to deliver the Subfund s investment objective, which includes the provision of capital protection of an investor s initial investment (less any initial charge paid) at the Maturity Date. As such, the use of the Swap Agreement is not speculative in nature. Avoidance of conflict of interest: The units within the UBS AG group who are providing services to the fund operate as independent entities and in order to avoid possible conflicts of interest, all transactions between these entities and the fund are undertaken at arms length prices, always keeping in mind the best interest of the shareholders. Portfolio Manager UBS Global Asset Management (UK) Ltd. The Portfolio Manager is part of UBS Global Asset Management, a business group of UBS AG. UBS AG is one of the world s leading financial firms, which also includes the world s largest wealth manager, a premier investment bank and securities firm, and one of the world s leading asset managers. The Portfolio Manager is regulated by the UK Financial Services Authority. Investment Advisor Fortis Bank (Nederland) N.V. having its corporate seat in Amsterdam, Prins Bernardplein 200, 1097 JB has been appointed as Investment Advisor for the Subfund's assets and will in particular issue recommendations relating to the components of the Fund Units. However, the Investment Advisor will not be entitled to receive any fees from the Subfund or from the Portfolio Manager for such services. Investments in the SF (LUX) SICAV 1- Mees Pierson Dynamic Real Estate Fund General Information Reference currency: EUR. This is the currency in which the Net Asset Value of the Subfund is calculated. Investments by the Subfund will be made in those currencies which best benefit the performance of the Subfund. Allocation of income: this Subfund will pursue an accumulation policy. Valuation Day: the Net Asset Value per share will be calculated on each Thursday. Should a Thursday not be a business day in Luxembourg, the Net Asset Value will be calculated on the next following business day. Usually shares will be issued as non-certificated bearer shares. Upon request and against payment by the shareholder of all incurred expenses, share certificates may be issued in physical form. The Board of Directors reserves the right to issue share certificates in denominations of one or more shares, however fractions of shares, will not be issued in certificate form. Management Fee: this Subfund will be subject to a Management Fee of up to 0.10% per month or up to 1.20% p.a., calculated on the average total net assets of the Subfund during the month concerned (further details are given in Section II Point 12: Charges and expenses). Subscriptions Subscription fee: up to 6% in favour of the sales agent. 8

9 The shares of the Subfund may be subscribed on each Valuation Day based on the then prevailing Net Asset Value. 9

10 Redemptions The shares of the Subfund may be redeemed on each Valuation Day based on the then prevailing Net Asset Value. Redemption fee: up to 2% in favour of the sales agent if shares are redeemed before the Maturity Date. Conversions Conversions into the others Subfunds of the Fund will be prohibited. Past performance This will be inserted into the simplified prospectus one year after the launch of the Subfund. Portfolio Turnover The turnover rate of the portfolio, which will be inserted into the simplified prospectus one year after the launch of the Subfund, will be computed in compliance with the following formula: Turnover= [(Total1 Total 2)/M]*100 With: Total 1= Total of securities transactions during the relevant period = X+Y Where X = purchases of securities and Y = sale of securities Total 2 = total of transactions in shares of the Subfund during the relevant period = S+T Where S = subscriptions of shares of the Subfund and T = redemptions of shares of the Subfund M = average monthly assets of the Subfund. Total Expense Ratio ( TER ) The TER, being the ratio of the gross amount of the expenses of the Subfund to its average net assets, which will be inserted in the simplified prospectus one year after the launch of the launch of the Subfund will include the following expenses: the Management Fee, the taxe d abonnement, the costs in connection with legal registrations abroad, the external audit fees, as well as the costs carried out for extraordinary measures in the interests of the shareholders. 10

11 SF (LUX) SICAV 1 European Protected Active Allocation Fund (EUR) This specific section describes the particulars of the Subfund SF (LUX) SICAV 1 European Protected Active Allocation Fund (EUR) It is part of the general sales prospectus. Therefore, all information given herein should be considered in conjunction with this general prospectus. Profile of the typical investors The Subfund is suitable for institutional investors who consider investments in the Subfund as a convenient way of participating in European equity markets while having a minimum of 80% of their capital protected at any point during the life of the Subfund. The investor must be able to accept negative net asset value variations up to a maximum of 20% of their investment. Investment objective The investment objective of the Subfund is capital appreciation through a dynamic exposure to a basket of collective investment schemes investing mainly in the European equity markets (the Active Asset or Fund Units ), subject to the constraint of protecting 80% of the highest Net Asset Value of the Subfund at any point in time. The capital protection feature aims at ensuring that shareholders will receive at any time upon redemption and at a relevant Maturity Date as defined hereinafter redemption proceeds or liquidation proceeds (as the case may be) in an amount at least equal to 80% of the highest Net Asset Value of the Subfund prior to the relevant Valuation Day or the relevant Maturity Date (the Protected Amount ). Investors should be aware that the protection feature does not institute a formal guarantee but is expected to be achieved through the allocation technique (CPPT) employed by UBS AG (London Branch) described below. Investment Policy The Subfund will principally invest in equities and fixed-income securities issued by corporate entities domiciled in any OECD country and listed or traded on regulated markets of an OECD country (the Investment Portfolio ), and, for the purpose of meeting its investment objective, the Subfund will enter into a performance swap agreement (the Swap Agreement ) negotiated at arm s length with UBS AG (the Swap Counterparty ) to seek exposure to the Dynamic Portfolio (as defined and described below). The Swap Agreement will become effective on December 3, 2004 and be entered into for a 7 year term expiring on December 5, Thereafter it will be extended for consecutive 7 year periods, subject to the consent of the board of directors of the Fund and the Swap Counterparty at the end of each 7 year period (each such expiring date of the 7 year period being a "Maturity Date"). The Subfund is created for an undetermined period but if 3 months prior to the Maturity Date the Fund and the Swap Counterparty shall not have agreed to extend the Swap Agreement for a consecutive 7 year period, the Subfund will be liquidated at the forthcoming Maturity Date and shareholders will receive a notice to that effect. The Subfund may hold liquid assets on an ancillary basis. The Swap Agreement will incorporate the terms of and be governed by a master agreement based on the standard 1992 ISDA Master Agreement published by the International Swaps and Derivatives Association, Inc. The Swap Agreement will be valued on a consistent and daily basis by the Swap Calculation Agent (UBS Limited, a 100% subsidiary of UBS AG) in accordance with the terms of the Constant Proportion Portfolio Technique ( CPPT ) algorithm developed 11

12 by UBS AG (London Branch) with the prevailing market parameters and valuations. The Swap Counterparty will provide a trading price at which the Subfund can increase or decrease the Swap Agreement notional amount at any time to permit the necessary adjustments upon the issue and redemption of shares. The notional amount of the Swap Agreement will be the proceeds raised at the end of the initial subscription period and in the case of subsequent subscriptions and/or redemptions, the notional amount will be adjusted accordingly. According to the Swap Agreement, and for the first time on December 31 st, 2004 and thereafter on the last business day of every calendar quarter until (and including) the Maturity Date: - UBS AG will pay to the Subfund an amount which corresponds to the Management Fee plus any additional expenses incurred by the Subfund as referred to in the section "Total Expense Ratio ( TER )" below. - The Subfund will pay to UBS AG the income received on the Investment Portfolio and on any ancillary liquid assets. The Swap Agreement was amended such that for the first time on 5 February 2007, thereafter on the 3 rd Business Day of each month until the relevant Maturity Date: - UBS AG will pay to the Subfund an amount which corresponds to the Management Fee plus any additional expenses incurred by the Subfund as referred to in the section "Total Expense Ratio ( TER )" below for the preceding month. - The Subfund will pay to UBS AG the income received on the Investment Portfolio and on any ancillary liquid assets for the preceding month. At the Maturity Date, the settlement value of the Swap Agreement will be determined as follows: Notional Amount x {max (PA, DPm) IPm} where, PA = Protected Amount on the Maturity Date i.e 80% of the highest Net Asset Value between the launch date and the Maturity Date DPm = Dynamic Portfolio level at close of business on the Maturity Date IPm = Value of the Investment Portfolio at close of business on the Maturity Date If the above amount is positive, then UBS AG will pay the amount to the Subfund. If the amount is negative, then the Subfund will pay the amount to UBS AG. At all times, the exposure of the Subfund will be allocated between the Active Asset (or Fund Units ) and the Reserve Asset (or Cash Units ) (the Fund Units and the Cash Units constituting together, the "Dynamic Portfolio") in accordance with the CPPT algorithm. The CPPT algorithm is designed to maximise the number of Fund Units in the Dynamic Portfolio, subject to ensuring the payment of the Protected Amount on any Valuation Day. Fund Units: The Fund Units generate a EUR denominated participation in a diversified basket of collective investment schemes: - selected from a universe of collective investment schemes managed by BlackRock Investment Management; - which qualify as UCITS or other UCIs, as defined in sub-paragraph (1) (A) h) in Section 14. "Investment Guidelines" of the General Provisions of this Prospectus. At the time of the launch, the Fund Units will consist of the following collective investment schemes: Fund Name Bloomberg Code Basket Weight MLIIF European Value MLEUVAA LX 25.00% 12

13 MLIIF Euro Markets MEREMAA LX 25.00% MLIIF European MERSEEI LX 20.00% MLIIF European Opps MIGSOPI LX 20.00% MLIIF Emerging Europe MIGSEEI LX 10.00% On a quarterly basis, the Investment Advisor, BlackRock Investment Management, may recommend changes in the component collective investment schemes and basket weight of each scheme to the Portfolio Manager, UBS Global Asset Management. Any such change is subject to the agreement of the Swap Calculation Agent. Cash Units: A Cash Unit represents a EUR denominated exposure to an investment in the Merrill Lynch Institutional Liquidity Funds Plc Institutional Euro Fund (Bloomberg Code MLIMIEUA ID). Through the CPPT algorithm the exposure within the Dynamic Portfolio to both asset classes will be reviewed on each business day and will be set to maximize the exposure to the Active Asset given the prevailing risk constraints. A complete description of the CPPT algorithm is available to investors upon request at the Company s registered office. Risk Consideration: Investment risk: the Subfund is exposed to the investment risk arising from the Dynamic Portfolio investment exposure underlying the Swap Agreement. To the extent that the underlying investment portfolio may be largely constituted of investment schemes investing in the European equity markets, the Subfund is exposed to the risks inherent to investments in equity securities. The Portfolio Manager aims to limit such risks through a timely exposure to the Reserve Asset through the use of the CPPT algorithm. Nature and Consequences of the Protection Feature: Investors should be aware that the protection feature does not institute a formal guarantee but is expected to be achieved through the allocation technique (CPPT) employed by UBS AG (London Branch) described above. Investors should also be aware that the protection feature may require for the exposure to equity markets to be reduced from time to time and, accordingly, the investors may miss out on the opportunity of additional gains in rising equity markets. Dynamic Portfolio Valuation Risk: The constituents of the Dynamic Portfolio include third party collective investment schemes and their daily net asset values are published at various times. In order to execute subscriptions/redemptions on the Valuation Days the Subfund transacts in the swap with the Swap Counterparty at a "risk price". This risk price references the last available published net asset values of the third party collective investment schemes plus or minus an adjustment factor considering prevailing market parameters. The Subfund incorporates the swap risk price in the Subfund Net Asset Value calculation and monitors such risk prices against the actual net asset values (when published) for reasonableness. Counterparty Risk: the Subfund is exposed to the risk that the Swap Counterparty may default on its obligations to perform under the Swap Agreement. In assessing this risk, investors should recognise the protection offered by the regulatory requirement that the Swap Counterparty post collateral for the benefit of the Subfund when the exposure to the Swap Counterparty under the Swap Agreement exceeds 10% of the Net Asset Value of the Subfund. Use of Derivatives: the Swap Agreement is a structured derivative transaction. While the prudent use of such a derivative can be beneficial, derivatives also involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. Structured derivative transactions are complex and may involve a high degree of loss. The aim of the Swap Agreement is to deliver the Subfund s investment objective, which includes the provision of some capital protection. As such, the use of the Swap Agreement is not speculative in nature. 13

14 Avoidance of conflict of interest: The units within the UBS AG group who are providing services to the fund operate as independent entities and in order to avoid possible conflicts of interest, all transactions between these entities and the fund are undertaken at arms length prices, always keeping in mind the best interest of the shareholders. Portfolio Manager UBS Global Asset Management (UK) Ltd. The Portfolio Manager is part of UBS Global Asset Management, a business group of UBS AG. UBS AG is one of the world s leading financial firms, which also includes the world s largest wealth manager, a premier investment bank and securities firm, and one of the world s leading asset managers. The Portfolio Manager is regulated by the UK Financial Services Authority. Investment Advisor BlackRock Investment Management (UK) Limited, a company incorporated in the United Kingdom, whose registered office is at 33 King William Street, London EC4R 9AS has been appointed as Investment Advisor for the Subfund's assets and will in particular issue recommendations relating to the components of the Fund Units. However, BlackRock Investment Management (UK) Limited will not be entitled to receive any fees from the Subfund or from the Portfolio Manager for such services. Investments in the SF (LUX) SICAV 1- European Protected Active Allocation Fund (EUR) General Information Reference currency: EUR. This is the currency in which the Net Asset Value of the Subfund is calculated. Investments by the Subfund will be made in those currencies which best benefit the performance of the Subfund. Allocation of income: The Subfund will pursue an accumulation policy. Valuation Day: The Net Asset Value per share will be calculated on each business day in Luxembourg. Usually shares will be issued as non-certificated bearer shares. Upon request and against payment by the shareholder of all incurred expenses, share certificates may be issued in physical form. The Board of Directors reserves the right to issue share certificates in denominations of one or more shares, however fractions of shares, will not be issued in certificate form. Management Fee: The Subfund will be subject to a Management Fee of up to % per month or up to 1.83% p.a., calculated on the average total net assets of the Subfund during the month concerned (further details are given in Section II Point 12: Charges and expenses). Subscriptions Subscription fee: up to 6% in favour of the sales agent. The shares of the Subfund may be subscribed on each Valuation Day based on the then prevailing Net Asset Value, subject to subscription fee of up to 6% of the Net Asset Value. In order to be dealt with on a specific Valuation Day, an application for subscription must be received at the latest by 9 a.m. (CET) on the business day in Luxembourg preceding such Valuation Day. Redemptions The shares of the Subfund may be redeemed on each Valuation Day based on the then prevailing Net Asset Value. In order to be dealt with on a specific Valuation Day, an application for redemption must be received at the latest by 9 a.m. (CET) on the business day in Luxembourg preceding such Valuation Day. Redemption fee: up to 2% in favour of the sales agent if shares are redeemed before a Maturity Date. Conversions Conversions into the others Subfunds of the Fund are not permitted. 14

15 Past performance Information on past performance will be inserted into the simplified prospectus one year after the launch of the Subfund. Portfolio Turnover The turnover rate of the portfolio, which will be inserted into the simplified prospectus one year after the launch of the Subfund, will be computed in compliance with the following formula: Turnover= [(Total1 Total 2)/M]*100 With: Total 1= Total of securities transactions during the relevant period = X+Y Where X = purchases of securities and Y = sale of securities Total 2 = total of transactions in shares of the Subfund during the relevant period = S+T Where S = subscriptions of shares of the Subfund and T = redemptions of shares of the Subfund M = average monthly assets of the Subfund. Total Expense Ratio ( TER ) The TER, being the ratio of the gross amount of the expenses of the Subfund to its average net assets, will be inserted in the simplified prospectus one year after the launch of the Subfund. The TER will include the following expenses: the Management Fee, the taxe d abonnement, the costs in connection with legal registrations abroad, the external audit fees, as well as the costs carried out for extraordinary measures in the interests of the shareholders. 15

16 SF (LUX) SICAV 1 Global Protected Active Allocation Fund (EUR) This specific section describes the particulars of the Subfund SF (LUX) SICAV 1 Global Protected Active Allocation Fund (EUR) It is part of the general sales prospectus. Therefore, all information given herein should be considered in conjunction with this general prospectus. Profile of the typical investors The Subfund is suitable for institutional investors who consider investments in the Subfund as a convenient way of participating in international equity and fixed income markets while having a minimum of 80% of their capital protected at any point during the life of the Subfund. The investor must be able to accept negative net asset value variations up to a maximum of 20% of their investment. Investment objective The investment objective of the Subfund is capital appreciation through a dynamic exposure to a basket of collective investment schemes investing mainly in the international equity markets (the Active Asset or Fund Units ), subject to the constraint of protecting 80% of the highest Net Asset Value of the Subfund at any point in time. The capital protection feature aims at ensuring that shareholders will receive at any time upon redemption and at a relevant Maturity Date as defined hereinafter redemption proceeds or liquidation proceeds (as the case may be) in an amount of at least equal to 80% of the highest Net Asset Value of the Subfund prior to the relevant Valuation Day or the relevant Maturity Date (the Protected Amount ). Investors should be aware that the protection feature does not institute a formal guarantee but is expected to be achieved through the allocation technique (CPPT) employed by UBS AG (London Branch) described below. Investment Policy The Subfund will principally invest in equities and fixed-income securities issued by corporate entities domiciled in any OECD country and listed or traded on regulated markets of an OECD country (the Investment Portfolio ), and, for the purpose of meeting its investment objective, the Subfund will enter into a performance swap agreement (the Swap Agreement ) negotiated at arm s length with UBS AG (the Swap Counterparty ) to seek exposure to the Dynamic Portfolio (as defined and described below). The Swap Agreement will become effective on December 3, 2004 and be entered into for a 7 year term expiring on December 5, Thereafter it will be extended for consecutive 7 year periods, subject to the consent of the board of directors of the Fund and the Swap Counterparty at the end of each 7 year period (each such expiry date of the 7 year period being a "Maturity Date"). The Subfund is created for an undetermined period but if 3 months prior to the Maturity Date the Fund and the Swap Counterparty shall not have agreed to extend the Swap Agreement for a consecutive 7 year period, the Subfund will be liquidated at the forthcoming Maturity Date and shareholders will receive a notice to that effect. The Subfund may hold liquid assets on an ancillary basis. The Swap Agreement will incorporate the terms of and be governed by a master agreement based on the standard 1992 ISDA Master Agreement published by the International Swaps and Derivatives Association, Inc. The Swap Agreement will be valued on a consistent and daily basis by the Swap Calculation Agent (UBS Limited, a 100% subsidiary of UBS AG) in accordance with the terms of the Constant Proportion Portfolio Technique ( CPPT ) algorithm developed by UBS AG (London Branch) with the prevailing market parameters and valuations. The Swap Counterparty will provide a trading price at which the Subfund can 16

17 increase or decrease the Swap Agreement notional amount at any time to permit the necessary adjustments upon the issue and redemption of shares. The notional amount of the Swap Agreement will be the proceeds raised at the end of the initial subscription period and in the case of subsequent subscriptions and/or redemptions, the notional amount will be adjusted accordingly. According to the Swap Agreement, and for the first time on December 31 st, 2004 and thereafter on the last business day of every calendar quarter until (and including) the Maturity Date: UBS AG will pay to the Subfund an amount which corresponds to the Management Fee plus any additional expenses incurred by the Subfund as described under the section related to the Total Expense Ratio ( TER ) below. The Subfund will pay to UBS AG the income received on the Investment Portfolio and on any ancillary liquid assets. The Swap Agreement was amended such that for the first time on 5 February 2007, thereafter on the 3 rd Business Day of each month until the relevant Maturity Date: - UBS AG will pay to the Subfund an amount which corresponds to the Management Fee plus any additional expenses incurred by the Subfund as referred to in the section "Total Expense Ratio ( TER )" below for the preceding month. - The Subfund will pay to UBS AG the income received on the Investment Portfolio and on any ancillary liquid assets for the preceding month. At the Maturity Date, the settlement value of the Swap Agreement will be determined as follows: Notional Amount x {max ( PA, DPm) IPm} where, PA = Protected Amount on the Maturity Date i.e 80% of the highest Net Asset Value calculated between the launch date and the Maturity Date DPm = Dynamic Portfolio level at close of business on the Maturity Date IPm = Value of the Investment Portfolio at close of business on the Maturity Date If the above amount is positive, then UBS AG will pay the amount to the Subfund. If the amount is negative then the Subfund will pay the amount to UBS AG. At all times, the exposure of the Subfund will be allocated between the Active Asset (or Fund Units ) and the Reserve Asset (or Cash Units ) (the Fund Units and the Cash Units constituting together the Dynamic Portfolio ) in accordance with the CPPT algorithm. The CPPT algorithm is designed to maximise the number of Fund Units in the Dynamic Portfolio, subject to ensuring the payment of the Protected Amount on any Valuation Day. Fund Units: The Fund Units generate a EUR denominated participation in a diversified basket of collective investment schemes, which are: - selected from a universe of collective investment schemes managed by BlackRock Investment Management; - which qualify as UCITS or other UCIs, as defined in sub-paragraph (1) (A) h) in Section 14. Investment Guidelines of the General Provisions of the Prospectus. 17

18 At the time of the launch, the Fund Units will consist of the following collective investment schemes: Fund Name Bloomberg Code Basket Weight MLIIF Global Fund Value MLCGEP2 LX 25.00% MLIIF Global Small Cap MEREMAA LX 25.00% MLIIF Global Equity MERSEEI LX 25.00% MLIIF Global Opportunities MIGSOPI LX 25.00% On a quarterly basis, the Investment Advisor, BlackRock Investment Management, may recommend changes in the component collective investment schemes and basket weight of each scheme to the Portfolio Manager, UBS Global Asset Management. Any such change is subject to the agreement of the Swap Calculation Agent. Cash Units: A Cash Unit represents a EUR denominated exposure to an investment in the Merrill Lynch Institutional Liquidity Funds Plc Institutional Euro Fund (Bloomberg Code MLIMIEUA ID). Through the CPPT algorithm the exposure within the Dynamic Portfolio to both asset classes will be reviewed on each business day and will be set to maximize the exposure to the Active Asset given the prevailing risk constraints. A complete description of the CPPT algorithm is available to investors upon request at the Company s registered office. Risk Consideration: Investment risk: the Subfund is exposed to the investment risk arising from the investment portfolio underlying the Swap Agreement. To the extent that the underlying investment portfolio may be largely constituted of investment schemes investing in the European equity markets, the Subfund is exposed to the risks inherent to investments in equity securities. The Portfolio Manager aims to limit such risks through a timely exposure to the Reserve Asset through the use of the CPPT algorithm. Nature and Consequences of the Protection Feature: Investors should be aware that the protection feature does not institute a formal guarantee but is expected to be achieved through the allocation technique (CPPT) employed by UBS AG (London Branch) described above. Investors should also be aware that the protection feature may require for the exposure to equity markets to be reduced from time to time and, accordingly, the investors may miss out on the opportunity of additional gains in rising equity markets Dynamic Portfolio Valuation Risk: The constituents of the Dynamic Portfolio include third party collective investment schemes and their daily net asset values are published at various times. In order to execute subscriptions/redemptions on the Valuation Days the Subfund transacts in the swap with the Swap Counterparty at a "risk price". This risk price references the last available published net asset values of the third party collective investment schemes plus or minus an adjustment factor considering prevailing market parameters. The Subfund incorporates the swap risk price in the Subfund Net Asset Value calculation and monitors such risk prices against the actual net asset values (when published) for reasonableness. Counterparty Risk: the Subfund is exposed to the risk that the Swap Counterparty may default on its obligations to perform under the Swap Agreement. In assessing this risk, investors should recognise the protection offered by the regulatory requirement that the Swap Counterparty post collateral for the benefit of the Subfund when the exposure to the Swap Counterparty under the Swap Agreement exceeds 10% of the Net Asset Value of the Subfund. Use of Derivatives: the Swap Agreement is a structured derivative transaction. While the prudent use of such a derivative can be beneficial, derivatives also involve risks different from, and in certain cases, greater than, the risks presented by more traditional 18

19 investments. Structured derivative transactions are complex and may involve a high degree of loss. The aim of the Swap Agreement is to deliver the Subfund s investment objective, which includes the provision of some capital protection of an investor. As such, the use of the Swap Agreement is not speculative in nature. Avoidance of conflict of interest: The units within the UBS AG group who are providing services to the fund operate as independent entities and in order to avoid possible conflicts of interest, all transactions between these entities and the fund are undertaken at arms length prices, always keeping in mind the best interest of the shareholders. Portfolio Manager UBS Global Asset Management (UK) Ltd. The Portfolio Manager is part of UBS Global Asset Management, a business group of UBS AG. UBS AG is one of the world s leading financial firms, which also includes the world s largest wealth manager, a premier investment bank and securities firm, and one of the world s leading asset managers. The Portfolio Manager is regulated by the UK Financial Services Authority. Investment Advisor BlackRock Investment Management (UK) Limited, a company incorporated in the United Kingdom, whose registered office is at 33 King William Street, London EC4R 9AS has been appointed as Investment Advisor for the Subfund's assets and will in particular issue recommendations relating to the components of the Fund Units. However, BlackRock Investment Management (UK) Limited will not be entitled to receive any fees from the Subfund or from the Portfolio Manager for such services. Investments in the SF (LUX) SICAV 1- Global Protected Active Allocation Fund (EUR) General Information Reference currency: EUR. This is the currency in which the Net Asset Value of the Subfund is calculated. Investments by the Subfund will be made in those currencies which best benefit the performance of the Subfund. Allocation of income: The Subfund will pursue an accumulation policy. Valuation Day: The Net Asset Value per share will be calculated on each business day in Luxembourg. Usually shares will be issued as non-certificated bearer shares. Upon request and against payment by the shareholder of all incurred expenses, share certificates may be issued in physical form. The Board of Directors reserves the right to issue share certificates in denominations of one or more shares, however fractions of shares, will not be issued in certificate form. Management Fee: The Subfund will be subject to a Management Fee of up to % per month or up to 1.83% p.a., calculated on the average total net assets of the Subfund during the month concerned (further details are given in Section II Point 12: Charges and expenses). Subscriptions Subscription fee: up to 6% in favour of the sales agent. The shares of the Subfund may be subscribed on each Valuation Day based on the then prevailing Net Asset Value, subject to subscription fee of up to 6% of the Net Asset Value. In order to be dealt with on a specific Valuation Day, an application for subscription must be received at the latest by 9 a.m. (CET) on the business day in Luxembourg preceding such Valuation Day. Redemptions The shares of the Subfund may be redeemed on each Valuation Day based on the then prevailing Net Asset Value. In order to be dealt with on a specific Valuation Day, an application for redemption must be received at the latest by 9 a.m. (CET) on the business day in Luxembourg preceding such Valuation Day. 19

20 Redemption fee: up to 2% in favour of the sales agent if shares are redeemed before the Maturity Date. Conversions Conversions into the others Subfunds of the Fund are not permitted. Past performance Information on past performance will be inserted into the simplified prospectus one year after the launch of the Subfund. Portfolio Turnover The turnover rate of the portfolio, which will be inserted into the simplified prospectus one year after the launch of the Subfund, will be computed in compliance with the following formula: Turnover= [(Total1 Total 2)/M]*100 With: Total 1= Total of securities transactions during the relevant period = X+Y Where X = purchases of securities and Y = sale of securities Total 2 = total of transactions in shares of the Subfund during the relevant period = S+T Where S = subscriptions of shares of the Subfund and T = redemptions of shares of the Subfund M = average monthly assets of the Subfund. Total Expense Ratio ( TER ) The TER, being the ratio of the gross amount of the expenses of the Subfund to its average net assets will be inserted in the simplified prospectus one year after the launch of the Subfund. The TER will include the following expenses: the Management Fee, the taxe d abonnement, the costs in connection with legal registrations abroad, the external audit fees, as well as the costs carried out for extraordinary measures in the interests of the shareholders. 20

21 SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund II This specific section describes the particulars of the Subfund SF (LUX) SICAV 1 Mees Pierson Dynamic Real Estate Fund Ⅱ It is part of the general sales prospectus. Therefore, all information given herein should be considered in conjunction with this general prospectus. Profile of the typical investors The Subfund is suitable for retail investors who consider investments in the Subfund as a convenient way of participating in international equity and fixed income markets while having the value of their initial investment partly protected at the Maturity Date (as defined below). The investor must be able to accept net asset values below the protection level prior to the Maturity Date. Investment objective The investment objective of the Subfund is capital appreciation through a dynamic exposure to a basket of collective investment schemes (the Active Asset or Fund Units ), subject to the constraint of protecting part of the capital at the maturity date i.e. 31 October 2012 ( Maturity Date ): shareholders will receive at least 90% of their initial investment less any issuing commission paid, provided their initial investment was made before 18 May Investors purchasing shares after 18 May 2006 will only benefit at the Maturity Date from the principal protection at the Guaranteed Amount as determined on 18 May 2006, irrespective of the Net Asset Value at which they purchased their shares. The Guaranteed Amount will be 90% of the highest NAV reported between the Launch Date and 18 May Investment Policy The Subfund will principally invest in equities and fixed-income securities issued by corporate entities domiciled in any OECD country and listed or traded on regulated markets of an OECD country (the "Investment Portfolio"), and for the purpose of meeting its investment objective the Subfund will enter into a performance swap agreement (the Swap Agreement ) negotiated at arm s length with UBS AG (the Swap Counterparty ) to seek exposure to the Dynamic Portfolio (as defined and described below). The Subfund may hold liquid assets on an ancillary basis. The Swap Agreement will incorporate the terms of and be governed by a master agreement based on the standard 1992 ISDA Master Agreement published by the International Swaps and Derivatives Association, Inc. The Swap Agreement will be valued on a consistent and weekly basis by the Swap Calculation Agent (UBS Limited), in accordance to the terms of the pre-defined algorithm developed by UBS AG (London branch) with the prevailing market parameters and valuations. The valuation methodology is based on the discounting of the future expected cash flows. UBS AG will provide a trading price at which the Subfund can increase or decrease the Swap Agreement notional amount. Such a facility will be available on any business day when requested by the Portfolio Manager. The notional amount of the Swap Agreement will be the initial asset proceeds held by the Subfund on the day following the Payment Date and in the case of subsequent subscription and/or redemption requests, the notional amount will be adjusted accordingly. According to the Swap Agreement, and for the first time on 5 January 2006 and thereafter on the 3 rd business day of each month until the Maturity Date: 21