UBS (CH) Property Fund Direct Urban

Transcription

1 UBS (CH) Property Fund Direct Urban Investment fund under Swiss law (Category Real Estate Funds ) Prospectus with integrated fund contract May 2017 Part I Prospectus This prospectus, together with the fund contract which forms an integral part thereof, the simplified prospectus and the latest annual or semi-annual report (if published after the latest annual report), serves as the basis for all subscriptions of units of the real estate fund. Only the information contained in the prospectus, the simplified prospectus or the fund contract shall be deemed to be valid. 1 Information on the real estate fund 1.1 General information on the real estate fund UBS (CH) Property Fund Direct Urban is investment fund governed by Swiss law established under the Real estate funds category of the Swiss Collective Investment Schemes Act (CISA) of 23 June The fund contract was drawn up by the fund management company and presented to the Swiss Financial Market Supervisory Authority FINMA with the approval of the custodian bank. The fund contract was approved by FINMA for the first time in The fund contract was drawn up by UBS Fund Management (Switzerland) AG as fund management company and presented to the Swiss Financial Market Supervisory Authority FINMA with the approval of UBS AG in its capacity as custodian bank. The fund contract was approved by FINMA for the first time in The real estate fund is based upon a collective investment contract (fund contract) under which the fund management company is obliged to provide investors with a stake in the real estate fund in proportion to the fund units acquired by them and to manage this fund at its discretion and in its own name in accordance with the provisions of the law and the fund contract. The custodian bank is party to the contract in accordance with the tasks conferred upon it by law and the fund contract. In accordance with the fund contract, the fund management company is entitled to establish, liquidate or merge unit classes at any time, subject to the agreement of the custodian bank and the approval of the supervisory authority. The real estate fund is not subdivided into unit classes. 1.2 Investment objective and investment policy of the real estate fund Investment objective The investment objective of the real estate fund is principally to maintain its long-term value and to make appropriate income distributions Investment policy UBS (CH) Property Fund Direct Urban primarily invests in real estate assets in urban areas of Switzerland and in other investments as permitted under the fund contract. The real estate fund mainly owns direct property holdings. Detailed information on the investment policy and its restrictions is contained in the fund contract (cf. Part II, 7-15) Material risks The main risks of the real estate fund are its sensitivity to economic developments, changes in the Swiss real estate market, limited liquidity, interest-rate developments, environmental risks, competition and pricing Use of derivatives The fund management company does not use derivatives. 1.3 Profile of the typical investor The real estate fund is appropriate for investors with a long-term horizon who are focused on income and have moderate risk tolerance. The primary objective is to maintain the value of the units and to provide partial protection against inflation. 1.4 Tax regulations relevant for the real estate fund A real estate fund has no legal personality in Switzerland. It is subject to neither income tax nor capital gains tax. Real estate funds with direct property holdings are an exception to this rule. The income from direct property holdings is liable to tax according to the Swiss Federal Law regarding direct federal tax at the level of the fund itself and unitholders are therefore generally exempt from tax in this regard. Capital gains from direct property holdings are also taxable only at the level of the real estate fund. The fund management company may apply, on behalf of the real estate fund, for a refund of all Swiss federal withholding tax levied on the fund s domestic income. Income distributions made by the real estate fund on behalf of investors domiciled in Switzerland and abroad are liable to Swiss withholding tax (source tax) at a rate of 35%. Income distributions made with separate coupons, capital gains from direct property holdings, and capital gains from the sale of real estate companies and other assets are not subject to withholding tax. Investors domiciled outside Switzerland may reclaim Swiss withholding tax under the terms of a double taxation agreement between Switzerland and the respective investor s country of residence, provided such an agreement exists. Withholding tax cannot be reclaimed in the absence of any such agreement. The tax information stated above is based on the current legal situation and practice. This tax information is expressly subject to changes in legislation, jurisdiction and ordinances and the practices of tax authorities. Taxation and other tax implications for an investor who holds, buys or sells fund units are defined by the tax laws and regulations relevant for the investor, namely those of the investor s country of domicile. This can result in different tax consequences for the investor depending on the country involved. Potential investors are therefore advised to ask their tax advisors or fiduciaries for advice on the relevant tax consequences. Under no circumstances can the fund management company and custodian bank assume any responsibility for any particular tax consequences for the investor in connection with the buying, selling or holding of fund units. Under no circumstances can the fund management company and custodian bank assume any responsibility for any particular tax consequences for the investor in connection with the buying, selling or holding of fund units. The real estate fund has the following tax status: International automatic exchange of information on tax matters (automatic exchange of information) For the purpose of exchange of information within the meaning of the Common Reporting Standard (CRS) of the Organisation for Economic Co-operation and Development (OECD) for information on financial accounts, this real estate fund qualifies as a non-reporting financial institution. FATCA The real estate fund is registered with the tax authorities in the United States as a Registered Deemed-Compliant Financial Institution under a Model 2 IGA as provided for by Sections of the U.S. Internal Revenue Code (Foreign Account Tax Compliance Act, including related ordinances, FATCA). 2 Information on the fund management company 2.1 General information on the fund management company The fund management company is UBS Fund Management (Switzerland) AG, Basel, which has been active in the fund business since its formation as a limited company in The subscribed share capital of the fund management company amounts to CHF 1 million. The share capital is divided into registered shares and is fully paid up. UBS Fund Management (Switzerland) AG is a wholly owned subsidiary of UBS Group AG. Board of Directors André Müller-Wegner, Chairman of the Board Reto Ketterer, Vice-Chairman André Valente, Delegate Managing Director, UBS Fund Management (Switzerland) AG, Basel Christian Eibel Executive Director, UBS AG, Basel and Zurich Michael Kehl Thomas Rose Executive Board André Valente, Managing Director and Delegate of the Board of Directors Karsten Illy, Deputy Managing Director and Head of Fund Operations Daniel Brüllmann, Head of Real Estate Funds André Debrunner, Head of Fund Reporting & Information Management Eugène Del Cioppo, Head of Business Development & Client Management Thomas Portmann, Head of ManCo Oversight & Risk Management Thomas Reisser, Head of Compliance Beat Schmidlin, Head of Legal Services On 31 March 2017, the fund management company managed a total of 290 securities funds and 6 real estate funds with assets totaling CHF billion. The fund management company also provides the following services in particular: Administration services for collective investments. Representation of foreign collective investments. 2.2 Delegation of specific tasks Property management and technical maintenance have been delegated to Wincasa AG, Winterthur, Livit AG, Zurich; Privera AG, Berne; and Rham & Cie S.A., Lausanne. All of the property management companies have many years of experience in the property sector. The exact nature of their duties is set out in the management and administration agreement concluded by UBS Fund Management (Switzerland) AG with the above property managers. 1

2 2.3 Exercise of membership and creditors rights The fund management company exercises the membership and creditors rights associated with the investments of the managed funds independently and exclusively in the interests of the investors. Upon request, the fund management company shall provide investors with information on the exercise of membership and creditors rights. Regarding existing routine business, the fund management company shall have discretion as to whether to exercise the membership and creditors rights itself or to delegate them to the custodian bank or a third party. For all other matters that could affect the long-term interests of investors, for example, when exercising membership and creditors rights accruing to the fund management company as shareholder or creditor of the custodian bank or any other related legal entity, the fund management company shall exercise the voting right itself or give clear instructions. In so doing, it may use information received from the custodian bank, the portfolio manager, the company, voting rights advisors or other third parties or information that has appeared in the press. The fund management company shall be free to decide whether to waive its entitlement to exercise membership and creditors rights. 3 Information on the custodian bank UBS Switzerland AG acts as custodian bank. The bank was founded in 2014 as a stock corporation with its registered office in Zurich and with effect from 14 June 2015 took over UBS AG s private and corporate banking business and wealth management business booked in Switzerland. As a universal bank, UBS Switzerland AG offers a wide range of banking services. UBS Switzerland AG is a subsidiary of UBS AG. With consolidated total assets of CHF 935,016 million and published capital and reserves of CHF 53,621 million as at 31 December 2016, UBS AG is financially one of the strongest banks in the world. It employs 60,785 staff worldwide and has an extensive network of offices. The custodian bank may delegate the safekeeping of the fund s assets to third-party or collective depositaries in Switzerland, provided this is in the interest of proper safekeeping. Financial instruments may only be transferred to a regulated third party or collective depositary subject to regulatory supervision. This requirement does not apply to compulsory custody in a place where it is not possible to transfer the financial instruments to a regulated third-party or collective depositary, notably due to binding legal constraints or the specific characteristics of an investment product. The effect of the use of third-party and collective depositaries is that the fund management company no longer has sole ownership of deposited securities, but only co-ownership. If the third-party or collective depositary is not subject to regulatory supervision, they are unlikely to meet the requirements for Swiss banks. The custodian bank shall be liable for any losses caused by the agent unless the bank is able to prove that due care was exercised in the selection, instruction and supervision of the agent. The custodian bank has been registered with the tax authorities in the United States as a Reporting Financial Institution under a model 2 IGA as provided for by Sections of the U.S. Internal Revenue Code (Foreign Account Tax Compliance Act (FATCA)), including related ordinances. 4 Information on third parties 4.1 Paying agents in Switzerland The paying agents are UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zurich, and its offices in Switzerland. 4.2 External auditors The fund assets will be audited by Ernst & Young Ltd., Basel. 4.3 Expert assessors The fund management company, with the approval of the supervisory authority, has appointed the following as independent expert assessors: Andreas Bleisch, Dr. rer. pol., dipl. Ing. ETH Marcel Scherrer, certified architect ETH Pascal Marazzi-de Lima, certified architect ETH as employees of Wüest & Partner AG, Bleicherweg 5, 8001 Zurich. Wüest Partner AG has many years of experience in valuing properties and a relevant knowledge of the market. The precise duties involved are set out in an agreement between UBS Fund Management (Switzerland) AG and the expert assessors / Wüest Partner AG. Wüest Partner AG has many years of experience in valuing properties and the requisite knowledge of the market. The exact nature of the duties is set out in an agreement between UBS Fund Management (Switzerland) AG and the expert assessors and Wüest Partner AG. 5 Further information 5.1 General information Securities no ISIN CH Listing On the SIX Swiss Exchange Financial year 1 July to 30 June Accounting currency Swiss franc (CHF) Units Units shall not take the form of actual certificates but shall exist only as book entries. The investor shall not be entitled to request the issue of a unit certificate. Appropriation of income In principle, net income will be distributed to investors within four months of the close of the financial year at no charge. As a rule, capital gains are not distributed but are held in the fund for reinvestment. 5.2 Terms for the issue and redemption of fund units and trading Units may be issued at any time. They may be issued only in tranches. The fund management company shall first offer new units to existing investors. The fund management company shall determine the planned number of new units to be issued, the subscription ratio for existing investors, the issuing terms for the subscription right and all other terms in a separate issuing prospectus. If units are issued as part of contributions in kind within the meaning of 18, existing investors are not entitled to a subscription right. Investors may redeem their units at the end of a financial year, subject to 12 months notice. Under certain conditions the fund management company may repay the proceeds from units redeemed during a financial year ahead of schedule (cf. 17 prov. 2 of the fund contract). If investors wish to have early redemption, they must provide written notice to this effect. Ordinary and early unit redemptions are made within three months of the close of the financial year (cf. 5 prov. 5 of the fund contract). The real estate fund s net asset value is calculated at the market value as of the end of the financial year and each time the units are issued. The net asset value of a unit shall be based on the market value of the fund s assets, less any liabilities of the real estate fund and any tax likely to be due should the real estate fund be liquidated, divided by the number of units in circulation. It will be rounded to CHF In accordance with Art. 64 CISA, Art. 88 para. 2 CISA, Art. 92 and 93 CISO and the SFAMA guidelines governing real estate funds (link: ch), the fund s real estate assets shall be regularly assessed by independent expert assessors accredited by the supervisory authority, using the dynamic discounted cash flow method. They will be valued at the price likely to be attained in a sale conducted with due care. The market value of the properties in the fund assets must be checked at the end of each accounting year by the expert assessors. This must also be done when properties belonging to the fund assets are acquired or sold. The market value of individual properties represents the likely price to be attained in normal transactions, assuming that the sale/purchase is conducted with proper care. In each individual case, and particularly when fund properties are bought and sold, the opportunities available will be taken in the best way possible in the interest of the fund. This may give rise to differences in valuations. The issue price is calculated as follows: the net asset value as calculated for the issue of units, plus incidental costs (real estate sales taxes, notary costs, fees, brokerage commissions in line with the market, duties, etc.) incurred by the real estate fund on average in connection with the investment of the amount paid in, plus issuing commission. The incidental costs and issuing commission are defined under prov. 5.3 below. The redemption price is calculated as follows: net asset value as calculated for the redemption of units, minus incidental costs (real estate sales taxes, notary costs, fees, duties, brokerage commissions in line with the market, etc.) incurred on average by the real estate fund in connection with the sale of that portion of the investments corresponding to the redeemed unit, minus the redemption commission. The incidental costs and issuing commission are defined under prov. 5.3 below. The issue and redemption prices are rounded to CHF Units shall not take the form of actual certificates but shall only exist purely as book entries. The fund management company ensures the regular trading of the real estate fund units on SIX Swiss Exchange. The fund management company shall publish the net asset value of the fund units in the fund s official publication at the same time as notification is provided to the bank or securities dealer responsible for ensuring the regular stock-exchange trading of the units. 5.3 Remuneration and incidental costs Remuneration and incidental costs charged to the investor (excerpt from 18 of the fund contract) Issuing commission accruing to the fund management company, custodian bank and/or distributors in Switzerland and abroad maximum of 5% Redemption commission accruing to the fund management company, custodian bank and/or distributors in Switzerland and abroad maximum of 2% Incidental costs in favour of the fund s assets that accrue to the fund from the investment of an amount paid in or the sale of investments (excerpt from 17 and 18 of the fund contract) Premium to net asset value: maximum of 5% Discount from net asset value: maximum of 5% Remuneration and incidental costs charged to the fund s assets (excerpt from 19 of the fund contract) Flat fee charged by fund management company Maximum of 1% p.a. This is used for the management of the real estate fund and the real estate companies, asset management of the real estate fund and to compensate the custodian bank for the provision of its services. Further, the fund management company s flat fee shall be used to pay for discounts pursuant to clause of the prospectus. 19 of the fund contract provides details on the remuneration and incidental costs that are not included in the flat fee. The actual flat fee rate is stated in the relevant annual and semi-annual reports Payment of retrocessions and discounts The fund management company and its agents do not pay retrocessions to third parties as compensation for the distribution activities in respect of real estate fund units in or from Switzerland. The fund management company and its agents may, upon request, pay discounts directly to investors. Discounts may serve to reduce fees or costs charged to the respective investors. Discounts are permitted provided they are 2

3 paid from the fund management company s fees and therefore do not generate any additional costs for the fund assets; granted on the basis of objective criteria granted at the same time and on equal terms to all investors who meet the objective criteria and request discounts. The objective criteria for the granting of discounts by the fund management company shall be the following: a) The minimum investment in real estate fund named UBS (CH) Property Fund ; b) The existence of a written agreement, such as a discount agreement, with UBS. The criteria set out in a) and b) must be cumulatively fulfilled. Collective investments or fund management companies that invest in these real estate funds shall not be entitled to request discounts, with the exception of collective investments of the promoter UBS. The fund management company shall disclose the amount of each discount free of charge upon request of the investor Total Expense Ratio The coefficient of the entire costs charged on an ongoing basis to the fund assets (total expense ratio or (TER)) stood at (from listing in November 2015): Financial year (TER REF ) GAV (TER REF ) NAV (TER REF ) MV (Market Value) 2015/ % 0.93% n.a Commission sharing agreements and soft commissions The fund management company has not concluded any commission sharing agreements. The fund management company has not concluded any soft commission agreements Investments in associated collective investments No issuing and redemption commission in accordance with 19 clause 6 of the fund contract shall be charged in respect of investments in collective investments that are managed directly or indirectly by the fund management company itself or by a company with which it is associated through common management or control or by a direct or indirect shareholding. 5.4 Publications of the real estate fund Further information on the real estate fund may be found in the latest annual or semi-annual report. Up-to-date information is also available on the Internet at The prospectus with integrated fund contract, the simplified prospectus as well as the annual and semi-annual reports may be obtained free of charge from the fund management company, custodian bank and all distributors. Notification of changes to the fund contract, a change of fund management company or custodian bank, or the liquidation of the real estate fund shall be published by the fund management company with Swiss Fund Data AG ( Net asset values are published for each day units are issued or redeemed. They can be viewed at any time at Swiss Fund Data AG ( and are updated annually after presentation of the audited closing statement for the year. 5.5 Insurance of properties As a general rule, the properties owned by this real estate fund are insured against fire and water damage and damage attributable to causes under civil liability law. This insurance cover includes shortfalls in rental income that occur as a result of fire and water damage, but not earthquake damage and its consequences, but not earthquake damage and its consequences. 5.6 Sales restrictions When units of this real estate fund are issued or redeemed abroad, the provisions valid in the country in question shall apply. The fund is authorised for distribution in the following countries: The real estate fund is authorised for public distribution in Liechtenstein. The representative and paying agent in Liechtenstein is Liechtensteinische Landesbank Aktiengesellschaft, Städtle 44, FL-9490 Vaduz. Notification of changes to the fund contract or prospectus, fund management company or custodian bank, as well as of the liquidation of the real estate fund shall be published by Swiss Fund Data AG ( Net asset values are published for each day units are issued or redeemed. They can be viewed at any time at Swiss Fund Data AG ( and are updated annually after presentation of the audited closing statement for the year. The prospectus with integrated fund contract, the simplified prospectus and the annual and semi-annual reports may be obtained, in German and free of charge, from the representative and paying agent in Liechtenstein. With reference to the units distributed in Liechtenstein, the place of performance and jurisdiction is Vaduz. Units of this real estate fund may not be offered, sold or delivered to investors who are US Persons. A US Person is a person who: (i) is a United States Person within the meaning of paragraph 7701(a)(30), as amended, of the US Internal Revenue Code of 1986 including the Treasury Regulations; (ii) a US Person within the meaning of Regulation S of the US Securities Act of 1933 (17 CFR (k)); (iii) is not a non-united States Person within the meaning of Rule 4.7 of the US Commodity Futures Trading Commission Regulations (17 CFR 4.7(a)(1)(iv)); (iv) resides in the United States within the meaning of Rule 202(a)(30)-1 of the US Investment Advisers Act of 1940, as amended; or (v) is a trust, a legal entity or other structure that was founded for the purpose of allowing US Persons to invest in this real estate fund. The fund management company and the custodian bank may refuse or restrict the sale, placement or transfer of units to individuals or legal entities in certain countries or areas. 5.7 Detailed regulations Further information on the real estate fund, such as the valuation of the fund s assets, a list of all incidental costs and remuneration charged to investors and the real estate fund and the appropriation of net income, is set out in detail in the fund contract. The fund management company: UBS Fund Management (Switzerland) AG, Basel The custodian bank: UBS Switzerland AG, Zürich Part II Fund contract I. Name of the fund; name and domicile of the fund management company and custodian bank 1 1. A contractually based investment fund of the type Real estate funds (the real estate fund ) has been established under the name of UBS (CH) Property Fund Direct Urban in accordance with Article 25 ff. in association with Article 58 ff. of the Swiss Collective Investment Schemes Act (CISA) of 23 June The fund management company is UBS Fund Management (Switzerland) AG, Basel. 3. The custodian bank is UBS Switzerland AG, Zurich. II. Rights and obligations of the contracting parties A Fund contract 2 The legal relationship between the investor on the one hand and the fund management company and the custodian bank on the other is governed by this fund contract and the applicable provisions of Swiss legislation concerning collective investment schemes. B Fund management company 3 1. The fund management company manages the real estate fund at its own discretion and in its own name, but for the account of the investors. In particular, it shall make all decisions relating to the issuing of units, the investments and their valuation. It calculates the net asset value, and sets the issue and redemption prices of units and also determines the distribution of income. The fund management company shall exercise all rights associated with the real estate fund. 2. The fund management company and its agents shall act in good faith and have a duty to exercise due diligence and provide information. They shall act independently and exclusively in the interests of investors. They shall take any organisational steps that may be required to ensure the proper conduct of business and shall ensure transparent accounting and the supply of appropriate information regarding this real estate fund. They shall disclose all fees and costs payable directly or indirectly by the investors and how said fees and costs have been used. They shall also provide investors with full, clear and accurate information about any compensation paid for distributing collective investments in the form of commissions, brokerage fees and other monetary benefits. 3. The fund management company can delegate investment decisions and specific tasks, provided that this is in the interest of efficient management. It shall delegate responsibilities only to individuals who are qualified to discharge their duties properly, shall give instructions concerning such duties, and shall oversee and monitor the correct discharge thereof. The fund management company shall be liable for the actions of its agents as if they were its own. The fund management company may delegate investment decisions only to asset managers that are subject to recognised supervision 4. The fund management company may, subject to the consent of the custodian bank, submit amendments to this fund contract to the supervisory authority (cf. 26). 5. The fund management company may merge the real estate fund with other real estate funds pursuant to the provisions set down under 24 and may liquidate them pursuant to the provisions set down under The fund management company is entitled to receive the remuneration stipulated in 18 and 19. It is further entitled to be released from any liabilities assumed in the proper performance of its duties and to be reimbursed for expenses incurred in connection with the fulfilment of such liabilities. 7. The fund management company is liable to investors for ensuring that the real estate companies belonging to the real estate fund comply with the provisions of the CISA and the fund contract. 8. The fund management company, its agents and associated individuals and legal entities may not take over any real estate assets from the real estate fund or assign any real estate assets to it. The supervisory authority may, in justified individual cases, approve exceptions to the ban on transactions with associated individuals and companies, provided the exception is in the interest of investors and provided that, in addition to the valuation of the real estate fund s permanent expert assessors, the market conformity of the purchase and sale price of the real estate asset and the transaction costs is confirmed by an independent expert assessor appointed by the permanent expert assessors or their employer, by the fund management company and by the custodian bank of the real estate fund. Following the execution of the transaction, the fund management company shall draw up a report containing information on the individual real estate assets acquired or transferred as well as their value on the date of acquisition or sale, the valuation report of the permanent expert assessors, and the report on market conformity of the purchase or sales price of the independent expert assessor, in accordance with Art. 32a para. 1 (c) CISO. The external auditors shall confirm in their audit that the fund management company has acted in particularly good faith when investing in real estate. The fund management company shall mention the approved transactions with associated parties in the real estate fund s annual report. 3

4 C Custodian bank 4 1. The custodian bank is responsible for the safekeeping of the fund assets, particularly unpledged mortgage notes where applicable and shares of real estate companies. The custodian bank shall be responsible for the issue and redemption of fund units as well as payments on behalf of the real estate fund. It may instruct third parties to manage accounts for the ongoing management of real estate assets. 2. In the case of transactions that relate to the real estate fund s assets, the custodian bank shall ensure that the countervalue is transferred to it within the customary periods. It shall inform the fund management company if the countervalue is not provided within the customary period and request that the counterparty replace the affected asset where this is possible. 3. The custodian bank shall manage the required records and accounts in such a way that it can differentiate between the assets of the individual funds held in safekeeping at all times. Where assets cannot be held in safekeeping, the custodian bank shall verify the fund management company s ownership and maintain corresponding records. 4. The custodian bank and its agents shall act in good faith and have a duty to exercise due diligence and provide information. They shall act independently and exclusively in the interests of investors. They shall take any organisational steps that may be required to ensure the proper conduct of business and shall ensure transparent accounting and the supply of appropriate information regarding this real estate fund. They shall disclose all fees and costs payable directly or indirectly by the investors and how said fees and costs have been used. They shall also provide investors with full, clear and accurate information about any compensation paid for distributing collective investments in the form of commissions, brokerage fees and other monetary benefits. 5. The custodian bank may delegate the safekeeping of the fund s assets to third-party or collective depositaries in Switzerland provided this is in the interest of proper safekeeping. The custodian bank shall verify and monitor the third-party and collective depositary to which the task has been delegated to ensure that it: a) has an appropriate business organization, financial guarantees and the specialist qualifications required for the type and complexity of the assets with which it has been entrusted; b) is subject to a regular external audit and thereby ensures that the financial instruments are in its possession; c) keeps the assets received from the custodian bank in safekeeping in such a way that they can be clearly identified at all times as belonging to the fund assets by means of regular reconciliation of holdings by the custodian bank; d) adheres to the regulations applicable to the custodian bank with regard to the performance of the tasks delegated to it and the avoidance of conflicts of interest. The custodian bank shall be liable for losses/damage caused by its agents where it cannot be demonstrated that it exercised due care and diligence in selecting, instructing and monitoring the agent in question. The prospectus includes information on the risks associated with the transfer of safekeeping to third-party and collective depositaries. The custodian bank may delegate the safekeeping of the fund s financial instruments only to third-party or collective depositaries subject to regulatory supervision in accordance with the above. This provision shall not apply in cases where assets have to be held in safekeeping at a location at which the transfer of the assets to third-party or collective depositaries subject to supervision is not possible, for example, due to mandatory legal provisions or the specific characteristics of an investment product in particular. The investors shall be informed in the prospectus about the safekeeping of assets by third-party or collective depositaries that are not subject to supervision. 6. The custodian bank shall ensure that the fund management company complies with the law and the fund contract. It shall check whether the calculation of net asset value, issue and redemption prices of units and investment decisions are being carried out in accordance with the law and the fund contract, and whether the net income is appropriated as stipulated in the fund contract. The custodian bank shall not be responsible for any investment selection made by the fund management company within the scope of the investment guidelines. 7. The custodian bank shall be entitled to receive the remuneration stipulated in 18 and 19. It is further entitled to be released from any liabilities assumed in the proper performance of its duties and to be reimbursed for expenses incurred in connection with such liabilities. 8. The custodian bank, its agents and associated individuals and legal entities may not take over any real estate assets from the real estate fund or assign any real estate assets to it. The supervisory authority may, in justified individual cases, approve exceptions to the ban on transactions with associated individuals and companies, provided the exception is in the interest of investors and provided that, in addition to the valuation of the real estate fund s permanent expert assessors, the market conformity of the purchase and sale price of the real estate asset and the transaction costs is confirmed by an independent expert assessor appointed by the permanent expert assessors or their employer, by the fund management company and by the custodian bank of the real estate fund. The external auditors shall confirm in their audit that the fund management company has acted in particularly good faith when investing in real estate. D The investors 5 1. There are no restrictions as regards investors. 2. Upon execution of the contract and remittance of a cash payment, investors shall acquire a claim against the fund management company for an interest in the real estate fund s assets and income. This claim is evidenced in the form of units. 3. Investors are obliged to remit payment only for the units of the real estate fund subscribed by them. Investors shall not be held personally liable in respect of the liabilities of the real estate fund. 4. Investors may at any time request that the fund management company supply them with information regarding the basis on which the net asset value per unit is calculated. The fund management company shall also supply further information regarding specific transactions it has carried out, such as the exercise of membership and creditors rights as well as regarding risk management, to any investor claiming an interest in such matters at any time. Investors shall be entitled to submit an application to the court having jurisdiction in the domicile of the fund management company for the external auditors, or another entity with appropriate expertise, to investigate and report on any facts or circumstances for which disclosure is required. 5. Investors shall be entitled to terminate the fund contract at the end of a financial year subject to twelve months notice and request that their units held in the real estate fund be redeemed in cash. Under certain conditions, the fund management company may repay the proceeds from units redeemed during a financial year ahead of schedule (cf. 17 prov. 2) Ordinary and early unit redemptions are made within three months of the close of the financial year. 6. An investor s units must be compulsorily redeemed at the prevailing redemption price by the fund management company in collaboration with the custodian bank if: a) this is required to safeguard the reputation of the financial centre, notably in relation to combating money laundering; b) the investor no longer meets the legal or contractual requirements to participate in this real estate fund. 7. In addition, an investor s units may be compulsorily redeemed at the prevailing redemption price by the fund management company in collaboration with the custodian bank if: a) the investor s participation in the real estate fund may materially affect the economic interests of the other investors, particularly if their participation may result in tax disadvantages for the real estate fund in Switzerland or abroad; b) investors have acquired or hold units in breach of the provisions of domestic or foreign legislation applicable to them or of provisions of this fund contract or of the prospectus. E Units and unit classes 6 1. The fund management company may, subject to the approval of the custodian bank and the supervisory authority, create different unit classes, or merge or liquidate unit classes at any time. All unit classes shall confer entitlement to a share in the undivided assets of the fund, which are not segmented. This share may vary due to class-specific costs charged or distributions or on account of class-specific income, and the net asset value per unit may therefore vary from class to class. Any class-specific costs charged shall be met from the aggregate assets of the real estate fund. 2. The creation, liquidation or merger of unit classes shall be announced in the official publication. Only mergers of unit classes shall be deemed to constitute an amendment to the fund contract pursuant to The various unit classes may, in particular, differ in terms of cost structure, reference currency, currency hedging, distribution or reinvestment of income, minimum investments and investor group. Remuneration and costs shall be charged only to unit classes that benefit from the services they cover. Costs which cannot be unequivocally attributed to a particular unit class shall be charged to the individual unit classes in proportion to their share of the fund s assets. 4. The real estate fund is not subdivided into unit classes. 5. Units shall not take the form of actual certificates but shall only exist purely as book entries. The investor shall not be entitled to request the issue of a unit certificate. III. Investment policy guidelines A Investment principles 7 Compliance with investment guidelines 1. In selecting individual investments and to implement the investment policy in accordance with 8, the fund management company must adhere to the following principles with regard to a balanced risk diversification and must observe the percentage limits defined below. These relate to fund assets at market values and are to be observed at all times. This real estate fund must meet the investment restrictions of If the limits are exceeded due to changes in the market, the investments must be reduced to the permitted level within a reasonable period of time, taking due account of the investors interests. 8 Investment policy 1. The fund management company invests the assets of this real estate fund in real estate assets and real estate projects in Switzerland, i.e. in properties including appurtenances. The primary focus of investments is on real estate assets in urban areas. UBS (CH) Property Fund - Direct Urban mainly owns direct property holdings. The properties are entered into the land registry in the name of the fund management company, noting the relationship with the real estate fund. Properties may be conventionally co-owned provided the fund management company can exert a controlling influence, i.e., if it controls the majority of co-ownership units and votes. 2. The following investments are permitted for this real estate fund: a) Properties including appurtenances; Properties include: a. Residential properties, i.e. properties used for residential purposes b. Commercial properties c. Buildings for mixed use d. Condominiums e. Building land (including properties for demolition) and buildings under construction; undeveloped properties must be accessible and suitable for immediate development, as well as have a valid construction permit for development. Construction work must be able to be commenced before the expiry of the relevant construction permit f. Plots with building rights (incl. buildings and building easements). b) Participating interests in and claims against real estate companies the sole purpose of which is to acquire and sell or let and lease their own properties 4

5 provided at least two-thirds of capital and votes are incorporated in the real estate fund; c) Units in other domestic real estate funds (including real estate investment trusts) and real estate investment companies and certificates in all currencies that are traded on a stock exchange or another regulated market open to the public. Subject to 19, the fund management company may acquire units of target funds managed directly or indirectly by itself or by a company with which it is affiliated through common management or control or by a significant direct or indirect shareholding. d) Mortgage notes and other contractual mortgage liens. 3. The fund management company may arrange for buildings to be constructed for the account of the fund. In such an event, it may, for the time required for preparation, construction or renovation, credit the income statement of the real estate fund with a market rate of interest for building land and buildings under construction, provided costs do not exceed the estimated market value. 9 Securing liabilities and available short-term liquid assets 1. In order to secure the liabilities, the fund management company must hold an appropriate portion of the fund s assets in short-term fixed income securities or short-term liquid assets. It may hold these securities and assets in the accounting currency of the real estate fund as well as in other currencies in which the liabilities are denominated. 2. Liabilities include loans taken up, obligations arising during the course of business as well as all obligations in connection with redeemed units. 3. Short-term fixed income securities include claims with a term or residual term to maturity of up to 12 months. 4. Short-term assets include cash as well as post office and sight and time deposits with maturities of up to twelve months and agreed credit limits with a bank of up to 10% of net fund assets. Credit limits must be taken into account in the maximum permitted pledged amount pursuant to 14 clause In order to secure planned construction projects, fixed income securities with a term or residual term to maturity of up to 24 months may be held. B Investment techniques and instruments 10 Securities lending The fund management company does not conduct any securities lending transactions. 11 Securities repurchase agreements The fund management company does not conduct any repo transactions. 12 Derivatives The fund management company does not use derivatives. 13 Borrowing and lending 1. The fund management company may not grant loans for the real estate fund s account, with the exception of claims against real estate companies belonging to the real estate fund, mortgage notes and other contractual mortgage liens. 2. The fund management company may take up loans for the real estate fund s account. 14 Encumbrance of properties 1. The fund management company may pledge properties and transfer liens as security. 2. However, the encumbrance of all properties may not, on average, exceed a third of their market value. To safeguard the level of liquidity the encumbrance may exceptionally and temporarily be increased to half of the market value, provided this does not encroach upon the interests of the investors. In this case, the external auditors must issue a statement on the conditions pursuant to Art. 96 prov. 1bis CISO as part of their audit of the real estate fund. 3. During the transition period ending on 28 February 2018, the encumbrance of all properties in existing real estate funds, and thus also in the UBS (CH) Property Fund Direct Urban, may not exceed 50% of the market value. C Investment restrictions 15 Risk diversification and its limits 1. Investments are allocated by property type, type of use, age, building structure and location. 2. The investments are to be distributed over at least ten properties. Developments that have been built according to the same construction standards and neighbouring lots are both considered to be single properties. 3. The market value of a property may not exceed 25% of the fund s assets. 4. When pursuing the investment policy as specified under 8, the fund management company shall also observe the following investment restrictions relating to the fund s assets: a. Plots with building rights, up to 30%; b. Building land, including demolition projects, and buildings under construction, up to 30%; c. Mortgage notes and other contractual mortgage liens up to a maximum of 10%; d. Units in other real estate funds (including real estate investment trusts) and real estate investment companies and the purchase of certificates that are traded on a regulated market open to the public, up to a maximum of 25%; e. The investments under a and b above together may not exceed 40%. IV. Calculation of net asset value as well as issue and redemption of units and expert assessors 16 Calculation of net asset value and consultation of expert assessors 1. The real estate fund s net asset value is calculated in Swiss francs at the market value twice a year (including at the end of the financial year) and each time the units are issued. 2. The fund management company appoints independent expert assessors to monitor the market values of the properties belonging to the real estate fund at the end of each financial year and each time units are issued. To this end, the fund management company shall appoint at least two individuals as independent expert assessors, subject to the approval of the supervisory authority. The expert assessors must visit the properties at least once every three years. Before acquiring/selling property, the fund management company shall obtain a valuation. No new valuation shall be necessary for the sale of a property if the existing valuation is no older than three months and conditions have not changed significantly. 3. Investments listed on a stock exchange or traded on another regulated market open to the public shall be valued at the current prices paid on the main market. Other investments or investments for which no current market price is available are valued at the price likely to be obtained if a sale were conducted with proper care at the time of the valuation. In such cases the fund management company shall use appropriate and recognised valuation models and principles to determine the market value. 4. Open-end collective investments are valued using their redemption price or net asset value. If they are listed on a stock exchange or regularly traded on another regulated market open to the public, the fund management company may value them pursuant to clause 3 above. 5. The value of short-term fixed income securities which are not traded on a stock exchange or another regulated market open to the public is calculated as follows: the valuation of the investments is successively adjusted to the redemption price thereof, beginning with the net acquisition price, while the investment return calculated on it is kept constant. In the event of significant changes in market conditions, the valuation basis for the individual investments is adjusted to the new market return. If no current market price is available, as a rule the valuation of money market instruments with similar features (quality and domicile of the issuer, currency of issue, maturity) is used. 6. Post office and bank deposits shall be valued using their exposure amount plus accrued interest. In the event of significant changes in market conditions or the credit rating, the valuation basis for bank deposits on demand is adjusted in line with the new conditions. 7. The valuation of properties for the real estate fund shall be conducted in line with the current SFAMA guideline for real estate funds. 8. Undeveloped properties and buildings under construction shall be valued according to the market value principle. The fund management company shall obtain end-of-financial-year valuations for buildings under construction reported at market value. 9. The net asset value of a unit shall be based on the market value of the fund s assets, less any liabilities of the real estate fund and any tax likely to be due should the real estate fund be liquidated, divided by the number of units in circulation. It will be rounded to CHF Issue and redemption and trading of units 1. Units may be issued at any time, but only via tranches. The fund management company shall first offer new units to existing investors. Units shall be redeemed and paid in accordance with 5 clause The fund management company may repay the proceeds from units redeemed during a financial year ahead of schedule if: a) the investor requests this in writing at the time notice is given; b) all requests from investors for early redemption can be met. The fund management company shall also ensure that units in the real estate fund can be traded regularly on- or off-exchange via a bank or a securities dealer. The prospectus sets out the details. 3. The issue and redemption prices of units are based on the net asset value per unit defined in 16. When units are issued, incidental costs (real estate sales taxes, fees, brokerage commissions in line with the market, duties, etc.), incurred on average by the real estate fund in connection with the investment of the amount paid in are added to the net asset value. With unit redemptions, incidental costs incurred on average by the real estate fund in connection with the sale of a portion of investments corresponding to the units redeemed are deducted from the net asset value. The incidental costs are listed in the prospectus and simplified prospectus. In addition, with unit issues, an issuing commission may be added to the net asset value, pursuant to 18. With unit redemptions, a redemption commission may be deducted from the net asset value similarly pursuant to The fund management company can suspend the issue of units at any time and can also reject applications for unit subscriptions or conversions. 5. The fund management company may temporarily and by way of exception suspend the redemption of fund units in the interest of all investors if: a) a market which is the basis for the valuation of a significant proportion of the fund s assets is closed, or if trading on such a market is limited or suspended; b) a political, economic, military, monetary or other emergency occurs; c) owing to exchange controls or restrictions on other asset transfers, the real estate fund is no longer able to transact its business; d) large-scale unit redemptions take place that could significantly affect the interests of the remaining investors. 6. The fund management company shall immediately apprise the external auditors and the supervisory authority of any decision to suspend redemptions. It shall also notify the investors in an appropriate manner. 7. No units shall be issued as long as the redemption of units is suspended for the reasons stipulated under prov. 5 a to c above. V. Remuneration and incidental costs 18 Remuneration and incidental costs charged to the investor 1. Upon the issue of units, investors may be charged an issuing commission accruing to the fund management company, the custodian bank and/or distributors in Switzerland and abroad, which in total shall not exceed 5% of the net asset value. The current maximum applicable rate is stated in the prospectus and the simplified prospectus. 2. When units are redeemed, investors may be charged a redemption commission accruing to the fund management company, the custodian bank and/ 5