Falcon Fund Management (Switzerland) Ltd. Fund Prospectus with integrated Fund Regulations

Transcription

1 Falcon Fund Management (Switzerland) Ltd. Falcon Gold Equity Fund Swiss Mutual Fund for International Securities in Gold Production, Processing and Marketing Fund Prospectus with integrated Fund Regulations Date: June 5, 2009 The Fund Manager: Falcon Fund Management (Switzerland) Ltd., Dübendorf The Custodian: Falcon Private Bank Ltd., Zurich 1/34

2 Part 1: Prospectus This prospectus with integrated Fund Regulations and the latest annual report and semi-annual report (if published after the last annual report) forms the basis for all subscriptions for units of the mutual fund. The latest annual report and, if its reporting date is more than eight months old, the subsequent semi-annual report are to be enclosed with the prospectus. Only information contained in the prospectus, the Fund Regulations or in one of the documents listed in the prospectus has legal force. 1 Information on the mutual fund 1.1 General description of the mutual fund Falcon Gold Equity Fund is a mutual fund subject to Swiss law in the "securities funds" category as defined by the Investment Funds Act dated March 18, The Fund Regulations had been drawn up by Falcon Fund Management (Switzerland) Ltd., Dübendorf, as Fund Manager, and Falcon Private Bank Ltd., Zurich, as Custodian, and originally approved by the Swiss Federal Banking Commission on March 31, The mutual fund is based on a collective investment agreement in which the Fund Manager undertakes to grant investors an interest in the mutual fund in proportion to the fund units purchased by them, and to manage it in accordance with the duties assigned to it by the law and the Fund Regulations. The Custodian participates in the agreement in accordance with the duties assigned to it by the law and the Fund Regulations. The mutual fund consists of non-independent segregated assets as defined by German law, such assets being created by the public issuance of units. The following classes of units exist: "Class A", where income is distributed ("distribution class") "Class T", where income is reinvested ("capital growth class") "Class A Asia", where income is distributed ("distribution class"), for investors with their registered office or place of residence in Asia "Class T Asia", where income is reinvested ("capital growth class"), for investors with their registered office or place of residence in Asia "Class A Asia" and "Class T Asia" may only be sold to investors who at the time of subscription have their registered office or place of residence in a country located in Asia. They differ from "Class A" and "Class T" by way of a higher management fee, which is due to the higher financial cost of distribution in these countries. Under the Fund Regulations, the Fund Manager is entitled to create, dissolve or merge other classes of units at any time, subject to the approval of the Custodian. The Fund Manager may administer all or part of the assets of several mutual funds together under a pooling arrangement if these mutual funds are administered by the same Fund Manager and the assets are held with the same Custodian. 1.2 Investment objective and investment policy of the mutual fund Investment objective The investment objective of the Falcon Gold Equity Fund consists chiefly in achieving an appropriate level of growth. Permitted investments The fund's assets may be invested in the following: a) Bulk issues of securities and uncertificated rights having the same function which are traded on a stock exchange or other regulated market open to the public, and which embody a participation right or claim or 2/34

3 the right to acquire such securities and uncertificated rights by way of subscription or exchange, for example warrants; b) Units of other securities funds and other mutual funds (which must be target funds as defined below and in 8 (4) of the Fund Regulations), provided (a) their fund regulations or articles of association limit investments in other mutual funds, which must also be target funds, to a total of 10% of the value of their assets; (b) these funds are subject to provisions equivalent to those pertaining to securities funds in respect of the object, organization, investment policy, investor protection, risk diversification, issuance and redemption of units, and contents of the semi-annual and annual reports and (c) these funds are authorized as mutual funds in their country of domicile where they are subject to investor protection which is equivalent to that in Switzerland, and international legal assistance is assured; c) Money market instruments, provided these are liquid, can be readily valued, and are traded on a stock exchange or other regulated market open to the public; money market instruments which are not traded on a stock exchange or other regulated market open to the public may only be acquired if the conditions set out in Art. 41 para. 2 of the Investment Funds Ordinance (IFO) are met; d) Sight or time deposits with terms to maturity not exceeding twelve months with banks domiciled in Switzerland or in a member state of the European Union or in another country provided that the bank is subject to supervision in this country which is equivalent to the supervision in Switzerland; e) Investments other than those specified in a) to d) above, in overall terms not exceeding 10% of the fund's total assets. Investment policy Falcon Gold Equity Fund is a securities fund which invests at least two-thirds of its total assets (after deduction of cash holdings) in: - Equity instruments and rights (shares, dividend-right and participation certificates, shares in co-operatives and similar instruments) worldwide of companies which are engaged mainly in the production, processing and marketing of gold, or which earn the majority of their income from such activities, or which invest in these sectors in the capacity of finance houses or holding companies; - Units of other securities funds and other mutual funds which invest their assets in accordance with the guidelines of this mutual fund, provided the Fund Manager ensures that, on a consolidated basis, at least twothirds of the fund's total assets are invested in the aforementioned investments; - Warrants and similar rights pursuant to Art. 31 para. 2 IFO on the aforementioned investments. The Fund Manager may also, subject to the other investment restrictions and after deduction of cash holdings, invest up to one-third of the fund s total assets in: - Equity instruments and rights (shares, dividend-right and participation certificates, shares in cooperatives and similar instruments) of companies which in respect of registered office and commercial activity do not fulfil the requirements of 8 (3b), first lemma, of the Fund Regulations; - Bonds (including convertible bonds, convertible notes and warrant bonds), notes and other fixed or variable-interest debt instruments and rights of private and public-sector borrowers worldwide; - Money market instruments of domestic and foreign issuers; - Warrants and similar rights pursuant to Art. 31 para. 2 IFO on the aforementioned investments; - Bank deposits up to 25% of the fund's total assets; - Units of other securities funds and other mutual funds which do not fulfil the requirements of 8 (3a), second lemma, of the Fund Regulations. The benchmark used for the Falcon Gold Equity Fund is the Financial Times Gold Mines Price Index (in USD). The benchmark serves as a performance yardstick. However, the fund is neither indexed nor does it track this index. It may also invest in securities of companies which are not constituents of this index. 3/34

4 Risks Investments in securities always involve risks as well as opportunities for capital growth and income. These risks can arise from fluctuations in the price of securities, and in the case of investments not denominated in the unit of account fluctuations in foreign exchange rates. Investments in equities involve greater risk than those in fixed-interest instruments of highly rated issuers. Changes in the macroeconomic situation or the climate on the stock market may result in substantial price fluctuations. In the case of fixed-interest securities and rights, any price fluctuations also depend on the maturities of the fixed-interest investments held for the fund. Fixed-interest investments with shorter maturities generally exhibit lower price risk than fixed-interest securities with longer maturities. A rise in the general level of interest-rate risk may lead to falling prices in the case of fixed-interest investments, while reductions in interest rates may result in price increases. The credit risk associated with an investment, i.e. the risk that borrowers will default, cannot be entirely ruled out even if investments are carefully selected. Investing in the subfund of an umbrella fund may involve additional risk if the umbrella fund can be held responsible for the liabilities of each subfund. This additional risk increases when investments are made in units of different subfunds of a single umbrella fund. Investments in target funds The Fund Manager may invest up to 10% of the assets of this mutual fund in units of other securities funds and other mutual funds provided the funds involved are target funds (as defined below and in 8 (4) of the Fund Regulations). With respect to distribution of the mutual fund in Germany and the associated applicability of German investment law, only units of the following investment assets may be purchased for the mutual fund: (a) (b) (c) (d) (e) Segregated-asset funds issued in Germany which fulfil the requirements of Directive 85/611 EEC; Joint-stock investment companies with variable capital established in Germany which are not "special funds" and where in particular the rules on asset segregation, borrowing, lending and short-selling of securities and money market instruments are equivalent to the requirements of Directive 85/611 EEC; and/or Other segregated-asset funds established in Germany which are not "special funds" and where in particular the rules on asset segregation, borrowing, lending and short-selling of securities and money market instruments are equivalent to the requirements of Directive 85/611 EEC; and/or Other investment assets which meet the requirements of EU Directive 85/611/EEC on undertakings for collective investment in transferable securities (UCTIS); and/or in other investment assets which fulfil these requirements and, in accordance with the regulations of German investment law on the public sale of EC investment shares in Germany; and/or Other investment assets: (i) (ii) which do not constitute special funds as defined by German investment law and which have been permitted in their domicile country in accordance with legal regulations which ensure that they are subject to effective public supervision for the protection of investors, and where the investment assets are foreign mutual funds as defined by Swiss mutual funds legislation this supervisory authority offers sufficient assurance of satisfactory co-operation with the Swiss Federal Banking Commission and where the level of protection offered to investors is equivalent to the level of protection for an investor in an investment asset which fulfils the requirements of Directive 85/611/EEC and where in particular the rules on asset segregation, borrowing, lending and short-selling of securities and money market instruments are equivalent to the requirements of Directive 85/611/EEC, and 4/34

5 (iii) (iv) where business operations are the subject of annual and semi-annual reports which allow a judgment to be formed on assets and liabilities, earnings and transactions within the reporting period, and where the units are offered within a limit on the number of units and investors have the right to return the units. (Referred to overall as the "target funds".) Units of venture capital and/or private equity funds may not be acquired. When investing in a target fund, the mutual fund may not purchase more than 25% of the issued units of such target fund. In the case of mutual funds consisting of several subfunds (umbrella funds), this investment limit relates to each subfund. In the case of an investment in target funds, management and custodian bank fees as well as other costs and expenses as set out in 19 of the Regulations may be incurred which are to be borne indirectly or directly by the investors in the fund. In particular, in addition to the fee payable for the management of the fund's assets the fund may be charged a management fee based on the target funds included in the fund's assets, if and to the extent a management fee is charged in the case of such target funds. In this respect, multiple charges for management and custodian bank fees and other costs and charges may thus arise. If the Fund Manager acquires units of other mutual funds which are managed directly or indirectly by the Fund Manager itself or by a company with which it is linked by way of common management or control or by way of a direct or indirect interest of more than 10% of the capital or votes ("linked target fund"), only a reduced management fee of 0.25% may be charged to the fund's assets in respect of such investments. Moreover, the Fund Manager may not charge to the fund any issuing or redemption commissions of the linked target funds. Investments in derivatives For the efficient management of the fund's assets, 12 of the Fund Regulations permits the Fund Manager to use both standardized and non-standardized (customized) derivative financial instruments. The Fund Manager will ensure that even under exceptional market conditions the economic impact of using derivative financial instruments does not change the investment characteristics of this fund as described in this prospectus and in the Fund Regulations. In particular, the investment restrictions contained in this prospectus together with the Fund Regulations must also be observed when the derivative financial instruments used are included. The Fund Manager may in particular use basic forms of derivatives such as call options, put options, futures, swaps, credit default swaps (CDS), total return swaps, forward foreign exchange transactions and forward rate agreements. In addition to these transactions, it may also use "exotic" derivatives, i.e. combinations of basic derivatives and derivative financial instruments whose effect cannot be equated with one of the basic forms of derivatives, as well as structured products. The Fund Manager may conduct such transactions on an exchange or other regulated market open to the public or directly with a bank or financial institution which is subject to supervision and specializes in such transactions acting as counterparty (OTC transactions). An OTC derivative must be subject to daily, reliable and verifiable valuation and it must be possible at all times to sell or liquidate the said or close it out by way of a countertransaction. A counterparty other than the Custodian must have at least the minimum credit ratings required by the supervisory authority. If no market prices are available for an OTC-traded derivative financial instrument, there must be a transparent means of determining the price at all times using recognized and appropriate valuation models on the basis of the market value of the underlying securities. Moreover, before concluding such transactions, the Fund Manager must obtain specific offers from at least two potential counterparties and must accept the most favourable offer, taking into account the credit rating, risk distribution and the range of services offered by the counterparties. The conclusion of the transaction and the setting of the price must be documented. Even under exceptional market conditions the use of derivative financial instruments must not produce any leverage effect on the fund's assets or be equivalent to short selling. Furthermore, the Fund Manager may manage the credit risks associated with the bond and/or money market portfolio through the use of credit derivatives. In its financial effect, the use of derivative financial instruments is similar to either a sale (positions that reduce exposure) or a purchase (positions that increase exposure) of an underlying. If the use of derivative financial 5/34

6 instruments is similar to the sale of underlyings, the commitments entered into must, subject to the provisions of the following paragraph (see 12 (8) of the Fund Regulations), at all times be covered by the assets underlying the derivative financial instrument. The Fund Manager must at all times be able to dispose of these underlyings without restriction. Furthermore, these underlyings must not be the object of a securities lending transaction or a repurchase agreement, except in the case of derivatives on an exchange rate or currency. Underlyings may be used to cover several exposure-reducing derivative positions at the same time if they are subject to a market risk, credit risk or currency risk and are based on the same underlyings. If the use of derivative financial instruments is similar to the purchase of underlyings, the securities underlying the derivative financial instrument must be permissible for investment as per 8 of the Fund Regulations and the commitments entered into must, subject to the provisions of the following paragraph (see 12 (8) of the Fund Regulations), at all times be covered by near-money assets. Near-money assets can be used as cover for several exposure-increasing derivative positions at the same time, provided these are subject to a market or credit risk and are based on the same underlyings. The Fund Manager may use a delta weighting when covering derivative positions that increase or reduce exposure. Contrary to the above paragraph, the Fund Manager may also use interest-rate derivatives which are not fully covered by the underlyings or near-money assets in order to strategically reduce or increase the duration of a bond and/or money market portfolio. The Fund Manager may manage the credit risks associated with the bond and/or money market portfolio through the use of credit derivatives. It may on the one hand use exposure-reducing credit derivatives (transfer of credit risks to a counterparty) for the purpose of hedging, and on the other accept additional credit risk through exposure-increasing credit derivative transactions. Where the Fund Manager uses credit derivatives, the reference borrower shall have outstanding equity or debt securities or rights which are traded on an exchange or other regulated market open to the public. Credit linked notes may be used as an investment if the associated credit derivative is permitted in accordance with the provisions of these Regulations. Credit derivatives, as "asymmetric derivatives", are similar to other OTC derivatives in terms of their basic concept. Besides counterparty and market risk, however, credit derivatives also entail specific risks that are attributable to the high concentration of market participants, complex valuation process for the instruments and persistent legal uncertainty. The Fund Manager endeavours to minimize such risks through appropriate measures. Nevertheless, legal disputes concerning the extent to which underlying credit risks are actually covered cannot be ruled out in individual instances. If it emerges that the risks were not actually covered, an additional loss may arise for the mutual fund. Securities lending The Fund Manager may lend to third parties all kinds of securities which are listed on a stock exchange or traded on another regulated market open to the public. However, securities which are tied to derivative financial instruments of any kind as underlyings or are acquired within the context of reverse repos may not be lent. Securities used to provide cover in respect of derivatives on an exchange rate or currency are not regarded as being linked to the said derivative. The Custodian shall ensure that settlement of securities lent is secure and in line with the contractual terms and shall monitor compliance with requirements to provide collateral. It is also responsible for the administrative actions incumbent upon it and the assertion of all rights from the securities on loan during the lending period unless such duties have been ceded under the applicable framework agreement. If the Fund Manager must observe a term of notice not exceeding 10 bank working days before the securities on loan are legally at its disposal again, it may lend no more than 50% of the eligible holdings of a particular type (Swiss security no.) of securities. In this case the actual duration of the securities loan is limited to 30 calendar days. However, if the borrower or intermediary provides the Fund Manager with a contractual assurance that the securities on loan will be legally at its disposal again on the same or the next bank working day, it can lend up to 100% of the eligible holdings of a type (Swiss security no.) of security. In this case the actual duration of the securities loan is unlimited. The Fund Manager agrees with the borrower or intermediary that the latter will pledge collateral to the Fund Manager or transfer collateral into its ownership in order to secure the entitlement to reclaim securities of the same type (Swiss security no.), quantity and quality. The value of the collateral must at all times be at least 105% of the current value of the securities on loan. The borrower or intermediary is also liable for the punctual and unrestricted payment of income arising during the loan and for assertion of other rights. Further details regarding securities lending are set out in 10 of the Fund Regulations. 6/34

7 Repurchase agreements The Fund Manager may trade all kinds of securities which are listed on a stock exchange or traded on another regulated market open to the public in the course of "repo" transactions. However, securities which are tied to derivative financial instruments of any kind as underlyings, are lent out or are acquired within the context of reverse repos cannot be sold. Securities used to provide cover in respect of derivatives on an exchange rate or currency are not regarded as being tied to the said derivative. The Fund Manager may purchase fixed or variable-rate securities in the course of a "reverse repo" which are issued or guaranteed by the Swiss Confederation or by Swiss cantons or local authorities or which have been issued by issuers with at least the minimum rating prescribed by the supervisory authorities. If the Fund Manager must observe a term of notice not exceeding 10 bank working days before the securities used in the repurchase agreement are legally at its disposal again, it may use no more than 50% of the eligible holdings of a type (Swiss security no.) of securities for repos, and the actual duration of the repo is limited to 30 calendar days. However, if the counterparty or intermediary provides the Fund Manager with a contractual assurance that the securities used in the repurchase agreement will be legally at its disposal again on the same or the next bank working day, it can use up to 100% of the eligible holdings of a particular type (Swiss security no.) of securities for repos. In this case the actual duration of the repo is unlimited. Further information can be found in 11 of the Fund Regulations. Granting and raising of loans The Fund Manager may not grant any loans for the account of the fund. The Fund Manager may raise loans to a maximum of 10% of the fund's net assets on a short-term basis on market terms and with the approval of the Custodian. Encumbering the fund's assets The fund's assets may be neither pledged nor otherwise encumbered, transferred or assigned as collateral, unless this is in connection with the raising of loans, taking into account the requirements as per 13 para. 2 or in connection with the provision of collateral to fulfil margin obligations in the context of transactions with financial derivatives as per 12 of the Fund Regulations. However, neither the Fund Manager nor the Custodian may pledge or assign as collateral more than 25% of the fund's assets. Encumbering the fund's assets with guarantees is not permitted. An exposure-increasing credit derivative is not deemed a guarantee on this definition. Bank deposits Up to 25% of the fund's total assets can be held in bank deposits. This is in addition to cash holdings pursuant to 9 of the Fund Regulations. The deposits held by the Custodian and other banks are not protected by deposit insurance. Securities with limited liquidity The fund may not acquire securities whose disposal is subject to any restrictions whatsoever by virtue of contractual agreements. Other investment restrictions In addition, in accordance with 8 (3c) of the Fund Regulations, the Fund Manager must adhere to the following investment restrictions, which refer to total fund assets after deduction of cash holdings: - The mutual fund may not invest in precious metals certificates or other commodities instruments; - No short sales may be entered into for the account of the fund; furthermore, the right to demand the delivery of assets (call option) for the account of the investment assets can only be granted to third parties where the assets which are the object of the call option form part of the investment option at the time the call option is granted. 7/34

8 - Up to 25% of the fund's assets can also be invested in securities and rights of companies engaged mainly in the production, processing and marketing of other precious metals, or which invest in these sectors in the capacity of finance houses or holding companies. Furthermore, up to 10% of the fund's assets may be invested in securities and rights of companies which produce, process or market precious stones, strategic or other metals or invest in these sectors in the capacity of finance houses or holding companies. 8 (5) of the Fund Regulations stipulates that, in the case of securities from new issues, listing on a stock exchange or another regulated market open to the public must be provided for in the terms and conditions of issue and occur within one year; otherwise the securities fund must be sold within one month or included in the restriction rule set out in 8 (2 e) of the Fund Regulations. In addition, the fund must adhere to the following risk diversification provisions as per 15 of the Fund Regulations, which must include investments as per 8 of the Fund Regulations, liquidity as per 9 of the Fund Regulations, derivative financial instruments as per 12 of the Fund Regulations (with the exception of indexbased derivatives) and claims against counterparties from OTC transactions: a) Companies which form a group in accordance with international accounting regulations are deemed to be a single issuer. b) Including derivatives, the Fund Manager may invest no more than 10% of the fund's total assets in securities and money market instruments of the same issuer. The total value of securities and money market instruments of issuers in which more than 5% of the fund's total assets are invested must not exceed 40% of the fund's total assets. c) The Fund Manager must not invest more than 20% of the fund's total assets in sight and term deposits with the same bank. Both liquidity as per 9 of the Fund Regulations and investments in bank deposits as per 8 of the Fund Regulations must be included in this limit. d) The Fund Manager must not invest more than 5% of the fund's total assets in OTC transactions with the same counterparty. If the counterparty is a bank domiciled in Switzerland or in a member state of the European Union or another country in which it is subject to supervision equivalent to that in Switzerland, this limit shall be increased to 10% of the fund's total assets. e) Investments, deposits and claims of the same issuer or borrower in accordance with the above three paragraphs b) to d) must not in overall terms exceed 20% of the fund's total assets, subject to the higher limits as per j) below. f) The fund may not acquire more than 25% of the units issued by a target fund listed under 8 para. 4 a) to e) of the Fund Regulations. In the case of target funds which consist of several subfunds (umbrella funds), this investment limit applies to one subfund. g) No equities may be acquired by the Fund Manager which account for more than 10% of the voting rights or enable material influence to be exerted on the management of an issuer. This is subject to exceptions permitted by the supervisory authority. h) The Fund Manager may not acquire more than 10% each of the non-voting equities, bonds and/or money market instruments of the same issuer. This restriction does not apply if the gross amount of bonds or money market instruments cannot be calculated on the date of acquisition. i) The limits in paras. g) and h) shall not apply to securities and money market instruments which are issued or guaranteed by a state or a public body from the OECD or by international organizations of a public nature to which Switzerland or a member state of the European Union belongs. j) The limit of 10% mentioned in paragraph a) is raised to 35% if the securities or money market instruments are issued or guaranteed by a state or a public body from the OECD or by international organizations of a public nature to which Switzerland or a member state of the European Union belongs. The aforementioned securities or money market instruments are not taken into account when applying the limit of 40% as per para. b). However, the individual limits in paragraphs b) and d) are non-cumulative with the above limit of 35%. 8/34

9 The following issuers or guarantors are permitted within the meaning of this paragraph: states belonging to the OECD, the member states of the European Union (EU), the Council of Europe, the International Bank for Reconstruction and Development (World Bank), the European Investment Bank, the Inter-American Development Bank, the Asian Development Bank and Eurofima (European Company for the Financing of Railroad Rolling Stock). 1.3 Profile of the typical investor The fund is suitable for investors with a long-term investment horizon who are primarily seeking growth in their invested capital. Investors are able to accept stronger fluctuations and a more protracted decline in the net asset value of the fund units. They are aware of the main risks involved in equity investments. The fund provides an opportunity to achieve attractive long-term growth, but requires a willingness specifically to accept the significant fluctuations in value that may arise in the short term owing to sharp increases in interest rates. The relationship between risk and return may be markedly improved by investing on a long-term basis. We recommend an average holding period of five years. 1.4 Tax regulations of relevance to the mutual fund The mutual fund is not a legal entity under Swiss law. It is not subject to either income or capital taxes. Swiss federal withholding tax deducted on income from Switzerland can be reclaimed in full for the fund by the Fund Manager. Distribution classes: "Class A" and "Class A Asia" Net income distributed by the fund to investors domiciled in Switzerland is subject to Swiss federal withholding tax at 35%. Capital gains realized on the sale of assets are not subject to withholding tax, provided they are paid on a separate coupon. Investors resident in Switzerland can reclaim the withholding tax by means of a declaration in their tax return or through separate application for repayment of withholding tax. Distributions of income to investors domiciled abroad are made without the deduction of Swiss withholding tax, provided at least 80% of income derives from foreign sources. There must be a confirmation from a bank stating that the units in question are held at the bank in the safekeeping account of an investor domiciled outside Switzerland, and that the distributions of income are credited to this investor's account (bank declaration or affidavit). It cannot be guaranteed that at least 80% of the fund's earnings will derive from foreign sources. If an investor resident abroad is charged withholding tax as a result of the absence of a bank declaration, the investor can, under Swiss law, reclaim the tax deducted directly from the Swiss Federal Tax Administration in Berne. Capital growth classes: "Class T" and "Class T Asia" Net income retained and reinvested by the fund is subject to Swiss federal withholding tax at 35%. This tax is deducted from the redemption price when the units are redeemed by the investor. However, instead of submitting the units to the fund for redemption, the investor may also sell them in over-the-counter trading at the current market price, without any deduction of withholding tax. The current market price may differ from the net asset value. Investors resident in Switzerland can reclaim the withholding tax deducted by means of a declaration in their tax return or through separate application for repayment of withholding tax. Investors resident outside Switzerland can redeem their units without deduction of Swiss withholding tax, provided at least 80% of the fund's income derives from foreign sources. There must be a confirmation from a bank that it has removed the units concerned from a safe custody account belonging to an investor resident outside Switzerland and that the bank will credit the redemption amount to the investor's account (bank declaration or affidavit). It cannot be guaranteed that at least 80% of the fund's earnings will derive from foreign sources. 9/34

10 If an investor resident abroad is charged withholding tax as a result of the absence of a bank declaration, the investor can, under Swiss law, reclaim the tax deducted directly from the Swiss Federal Tax Administration in Berne. EU interest taxation In accordance with the provisions of the directive of the Council of the European Union on the taxation of savings income and the agreement reached between Switzerland and the EU following bilateral negotiations, Switzerland is obliged to retain tax in respect of certain interest payments made by investment funds, at the time of distribution as well as on the sale or redemption of the units, to individuals domiciled for tax purposes in an EU member state. The rate of tax retention is 15% (20% from 2008 and 35% from 2011). The tax retention may, if expressly instructed to do so by the recipient of the interest, be replaced by a voluntary declaration to the tax authorities in the country of residence for tax purposes. The statements on taxation are based on the legal situation and practice as currently known. They are expressly subject to amendments in legislation, legal precedent and ordinances, and the practice of the tax authorities. Taxation and other tax consequences for investors from holding, purchasing or selling fund units depend on the tax regulations in force in the investor's country of residence. 2 Information on the Fund Manager 2.1 General particulars of the Fund Manager Falcon Fund Management (Switzerland) Ltd. is responsible for managing the fund. The Fund Manager with its registered office at Hochbordstrasse 3, CH-8600 Dübendorf has been involved in the mutual funds business since its foundation as a joint-stock company in The company is subject to Swiss law and is registered in the Commercial Register of the Canton of Zurich under No Copies of the deed of registration can be inspected at the Commercial Register Office and the company's registered office in Dübendorf. The subscribed share capital of the Fund Manager on December 31, 2007 amounted to 5 million Swiss francs. The share capital is issued in the form of registered shares and is fully paid up. The shareholders' equity of the Fund Manager on December 31, 2007 amounted to 11.4 million Swiss francs (equity capital as defined under German law). Falcon Fund Management (Switzerland) Ltd., Dübendorf, is a wholly owned subsidiary of Falcon Private Bank Ltd., Zurich. The Board of Directors of the Fund Manager comprises: - Winfried Kilp, President of the Board of Directors - Dr. Peter Spinnler, Member of the Board of Directors The executive management of the Fund Manager comprises: - Sascha Zeitz, Chairman of the Management Board - Alfred Brandner, Chief Operating Officer, Member of the Management Board - Dr. Jürg Leu, Head of Legal & Compliance, Member of the Management Board The members of the executive management of Falcon Fund Management (Switzerland) Ltd. are not employees of the Custodian. The Fund Manager manages a total of 34 funds in Switzerland, and total assets under management on December 31, 2008 amounted to CHF million. 10/34

11 2.2 Delegation of investment decisions The fund's investment decisions are delegated to Van Eck Associates Corp., New York. Van Eck Associates Corp. is a global asset management company subject to supervision by the U.S. Securities and Exchange Commission (SEC). It is specialized in immovable assets, emerging markets, gold and other precious metals. Van Eck Associates Corp. manages 14 various mutual funds in the value of more than USD 1.2 billion. The exact performance of the duties involved is stipulated in an asset management agreement concluded between Falcon Fund Management (Switzerland) Ltd., Dübendorf, and Van Eck Associates Corp., New York, on December 15, Information on the Custodian and its duties and powers 3.1 General information on the Custodian Falcon Private Bank Ltd., Zurich, acts as Custodian. Its registered office is at Pelikanstrasse 37, CH-8001 Zurich. Falcon Private Bank Ltd. was founded as a joint-stock company in Zurich in The bank's share capital amounts to 60 million Swiss francs, and as of December 31, 2007, shareholders' equity totalled million Swiss francs. Falcon Private Bank Ltd. is a wholly-owned subsidiary of Aabar Investments PJSC ( Aabar ), an investment company based in Abu Dhabi, United Arab Emirates, and listed on the Abu Dhabi Securities Exchange. The company invests directly in various sectors, including energy, infrastructure, real estate, automotive and financial services companies. Aabar is held by the International Petroleum Investment Company (IPIC), one of the world s leading sovereign wealth funds and which is owned by the government of the emirate of Abu Dhabi. The bank's main activities are in portfolio management and in mutual fund management for private and institutional investors. 3.2 Duties and powers of the Custodian The Custodian is responsible for the safekeeping of all the fund's assets in accounts or safekeeping accounts, which it may only access in accordance with the provisions of the Fund Regulations, the sales prospectus and the statutory provisions. Such accounts or safekeeping accounts carry a blocking note in favour of the Custodian. This blocking note restricts the Fund Manager's powers of disposition in favour of the Custodian. The Custodian and its authorized representatives act exclusively in the interests of the investors. However, the Custodian must carry out the instructions of the Fund Manager provided these do not violate the statutory provisions or the Fund Regulations. The Custodian may delegate safekeeping of the fund's assets to third parties. This shall not affect the Custodian's liability. Securities which are listed on a foreign stock exchange or other foreign regulated market, or other foreign securities, may be entrusted by the Custodian to a foreign bank for safekeeping. In all other respects, the Custodian may only entrust the securities to a domestic securities clearing and deposit bank or other domestic custodian for safekeeping. The Custodian ensures that the Fund Manager complies with the law and the Fund Regulations, especially with respect to investment decisions, calculation of the value of the units and appropriation of net income. The Custodian is not responsible for selecting the investments made by the Fund Manager within the scope of the investment regulations. The Custodian shall furthermore ensure that the counter-value of transactions for the collective account of the investors is deposited in its safekeeping within the usual time limit. The Custodian handles the issuance and redemption of fund units as well as payment transactions on behalf of the fund in accordance with the statutory provisions and in compliance with the enclosed Fund Regulations. Fund units may only be issued in return for full payment of the issue price (see 17 (2) of the Fund Regulations). Contributions in kind are not permitted. The issue price shall be paid to the Custodian, and shall be booked less issuing commission immediately by the latter in a blocked account set up for the fund's assets. The redemption price, less a redemption fee, shall be paid out of the blocked account to the investor. The Custodian is entitled to the commissions provided for in 18 and 19 of the Fund Regulations, to release from obligations entered into in the proper performance of the collective investment agreement, and to reimbursement of expenses incurred in meeting these obligations. The personal liability of the investor for these claims of the Custodian is precluded; the claims are met from the resources of the mutual fund. 11/34

12 The Custodian is entitled and obliged to transfer existing credit balances in the blocked accounts to blocked accounts held with other banks where the Fund Manager instructs the Custodian to do so. The Fund Manager may only invest the fund's assets in bank deposits with other banks, and take decisions about such deposits, with the approval of the Custodian. The Custodian must agree to such investment or decision if it is compatible with the statutory provisions, the sales prospectus, the Fund Regulations and the custodian agreement. The Custodian shall pay out of the blocked accounts or safekeeping accounts the purchase price for the assets acquired by the fund, transfer for the account of the fund assets sold in return for payment of the purchase price and provide the required trading margins when concluding futures contracts and making any distributions of net income to the investors. The purchase or redemption price from the sale or redemption of the fund's assets and income incurred together with other amounts of money attributable to the fund shall be booked by the Custodian in the blocked accounts set up for the fund. Where legally permissible, the Custodian is entitled and obliged in its own name to: (i) assert claims of the unitholders against the Fund Manager; (ii) lodge objections and take legal proceedings against enforcement measures if such measures are being taken in respect of a claim for which the fund's assets are not liable. The aforementioned entitlement and obligation of the Custodian do not preclude the direct assertion of claims against the Fund Manager on the part of the unitholders. Where legally permissible, the Fund Manager is entitled and obliged in its own name to assert claims of the unitholders against the Custodian. Such entitlement and obligation of the Fund Manager do not preclude the direct assertion of claims against the Custodian on the part of the unitholders. The Custodian pays the Fund Manager from the blocked accounts of the fund only the compensation laid down in the Fund Regulations. It debits the blocked accounts for the Custodian fees due to it under the Fund Regulations only with the consent of the Fund Manager. 4 Information on third parties 4.1 Subscription and paying agents for Switzerland and Germany The following banks act as paying agents: Switzerland: Germany: Falcon Private Bank Ltd. Pelikanstrasse 37 P.O. Box 1376 CH-8021 Zurich Sal. Oppenheim jr. & Cie., Kommanditgesellschaft auf Aktien, Unter Sachsenhausen 4 D Cologne The payments received by the German paying agent for the fund or the unit holders are transferred immediately and directly to the Custodian's accounts in euros with the paying agent in Germany. Applications for redemption of units can also be submitted to the paying agents. The redemption price, distributions and other payments to the unit holders can also be made at their request via the paying agent in cash and in euros. The statutory information for unit holders (prospectus, Fund Regulations, annual and semi-annual reports, issue and redemption prices) can be obtained free of charge from all paying agents, and other information and documents can be examined there. 4.2 Representative for Germany Rechtsanwalt Achim Pütz SJ Berwin LLP Karolinen Karree Karlstrasse 12 D Munich 4.3 Representative for Taiwan AIG Investments Consulting Corporation Taiwan Ltd 12/34

13 10F, 144 Minchuan E.Rd., Section 2 Taipei 104 Taiwan, R.O.C. 4.4 Distributors The following institutions have been appointed to distribute the fund: - Falcon Fund Management (Switzerland) Ltd., Dübendorf, - Falcon Private Bank Ltd., Zurich. 4.5 Auditors The following have been appointed as auditors: PricewaterhouseCoopers Ltd. Birchstrasse 160 CH-8050 Zurich 5 Further information 5.1 General data Swiss security no. "Class T": "Class A": "Class T Asia": "Class A Asia": ISIN Listing "Class T": CH "Class A": CH "Class T Asia": CH "Class A Asia": CH traded over-the-counter Accounting year January 1 to December 31 Duration Unit of account Units Application of income the mutual fund is for an unlimited period US dollar (USD) bearer securities, certificates for one or more units; printed and delivered only at client's request. A fee is payable for delivery. "Class T": no distribution; reinvested "Class A": distributed each year in April "Class T Asia": no distribution; reinvested "Class A Asia": distributed each year in April 5.2 Terms and conditions for the issuance and redemption of fund units Calculation of the Net Asset Value (NAV) of a unit The NAV of a unit of a given class is determined by the proportion of the total assets as valued at the current value attributable to the given unit class, less any of the fund's liabilities that are attributed to the given unit class, divided by the number of units of this class in circulation. The NAV is rounded to 1 cent. The current value of the investments officially listed or traded on another regulated market open to the public shall be deemed to be the current prices paid for them. Other assets, rights or investments for which no up-todate prices are available shall be valued by the Fund Manager in good faith at the price which would probably 13/34

14 have been received on judicious sale of the asset, right or investment on the date of valuation. In this case, the Fund Manager shall apply reasonable, recognized and auditable valuation models and principles for calculating the current value. Example of calculation: Current value of fund's assets (assumed) USD 74,754, Number of units in circulation 444, Net asset value of a unit (rounded to 1 cent) USD Fund units are issued and redeemed on each banking day (Monday to Friday). No issuance or redemption takes place on Swiss public holidays (Easter, Whitsuntide, Christmas, New Year, Swiss National Day, etc.) or on days when the stock exchanges of the main countries in which the fund invests are closed or if exceptional circumstances exist within the meaning of 17 (4) of the Fund Regulations. The settlement of subscription and redemption applications, which must be submitted to the Custodian by 2.30 p.m. (Zurich time) on a banking day (order date), takes place on the following banking day (valuation date) based on the NAV calculated on this day. The NAV for settlement purposes is therefore not known at the time the order is placed (forward pricing). It is calculated on the valuation date based on the closing prices for the order date. The ancillary costs of the purchase and sale of investments (brokerage at prevailing market rates, commissions, levies, etc.) incurred by the fund as a result of investing the amounts paid in or from the sale of a corresponding proportion of the fund's investments pursuant to the redemption of units are charged to the fund's assets Issuance of fund units The issue price of the units of a given class is calculated on each trading day and is based on the NAV of a unit of that class on the valuation date plus the Fund Manager's issue commission not exceeding 5% as defined in 18 (1) of the Fund Regulations. The rate actually charged is taken from the respective annual or semi-annual report. The issue price is calculated to two decimal places. Payment is made three bank working days after the valuation date (value date T + 3 days). As soon as settlement has taken place on this basis, the units of a given class are transferred with or without physical delivery to the client, as he or she prefers. Units of a given class are issued continually. Units of a given class are in principle not evidenced by certificates but by book entries. The investor can, however, require the Custodian to issue a certificate for the units. The Custodian charges the investor a fee of CHF 250 for each certificate delivered. When unit certificates are issued at the request of the investor, entitlement passes on delivery to the investor or to the custodian designated by the investor. For units of a given class which are not evidenced by certificates, entitlement passes on confirmation of payment. Example of calculation: Net asset value of a unit of a given class (assumed) USD Issue commission of 5% USD 8.40 Issue price (rounded to the nearest 1 cent) USD Through his or her payment, the investor acquires claims on the Fund Manager for a share in the assets and income of the fund Redemption of fund units The redemption price of the units of a given class is calculated on each trading day and is based on the NAV of a unit of that class on the valuation date less the Fund Manager's redemption commission of 0.5% as defined in 18 (2) of the Fund Regulations. The redemption price is calculated in the account currency to two decimal places. Payment is made three bank working days after the valuation date (value date T + 3 days). 14/34