UBS (CH) Property Fund Swiss Mixed «Sima»

Transcription

1 UBS (CH) Property Fund Swiss Mixed «Sima» Investment fund under Swiss law (Category Real Estate Funds) Prospectus with integrated fund contract April 2011 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 Swiss Mixed «Sima» is an 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 in 1950 and the fund was approved for public distribution in and from Switzerland by the Swiss Financial Market Supervisory Authority (FINMA) 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 The investment objective of the real estate fund is principally to maintain its long-term value and to make appropriate income distributions. UBS (CH) Property Fund Swiss Mixed «Sima» invests primarily in real estate assets throughout Switzerland and in other investments as permitted under the fund contract. 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. The fund management company can use derivatives in the interest of efficient management of the fund s assets. Even under extraordinary market circumstances, the use of these instruments may not alter the fund s investment goals or lead to a change in its investment profile. The fund management company may only use derivatives to hedge interest rate, currency and market risks. The following basic forms of derivatives in particular may be used: call or put options, swaps and forward transactions (futures and forwards) may be used as described in detail in the fund contract (cf. 12), provided their underlying securities are permissible investments in accordance with the investment policy. The derivatives can be traded on a stock exchange or another regulated market open to the public or concluded as over-the-counter (OTC) transactions. Besides market risk, derivatives are also subject to counterparty risk, i.e. the risk that the contracting party is unable to meet its obligations and causes a financial loss as a result. Even under extraordinary market circumstances, the use of these instruments may not result in the fund s assets being leveraged, nor may it be tantamount to a short sale. Detailed information on the real estate fund s investment objective, investment policy and its restrictions are contained in the fund contract (cf. Part II, 7 12). 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 Tax regulations relevant for the real estate fund The 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 direct federal tax with respect to the fund itself; consequently unitholders are tax-exempt in this regard. Capital gains from direct property holdings are also only taxable with respect to the real estate fund. The fund management company may apply for a refund of all Swiss federal withholding tax levied on the real estate fund s domestic income on behalf of the real estate fund. Any income and capital gains realised abroad may be subject to the relevant withholding tax deductions imposed by the country of investment. These taxes are, as far as possible, reclaimed by the fund management company on behalf of investors resident in Switzerland under the terms of double taxation treaties or other such agreements. Income distributions made by the real estate fund (to investors domiciled in Switzerland and abroad) are subject to Swiss federal withholding tax (tax at source) at a rate of 35%. Income distributions made with separate coupons, capital gains from direct property holdings and capital gains from the sale of investments and other assets are not subject to withholding tax. Investors domiciled in Switzerland may reclaim Swiss withholding tax by declaring it in their tax returns, or by submitting a separate application for a refund. Investors domiciled outside Switzerland may reclaim Swiss withholding tax under the terms of a double taxation treaty between Switzerland and the respective investor s country of residence, provided such a treaty exists. Withholding tax cannot be reclaimed if no such treaty exists. Income distributions and/or interest income realised on sale or redemption are not subject to European savings tax in Switzerland. 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. 2 Information on the fund management company 2.1 General information on the fund management company UBS Fund Management (Switzerland) AG, Basel, is the fund management company. It 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 AG. Board of Directors Thomas Rose, Chairman Managing Director, UBS AG, Basel and Zurich Reto Ketterer, Vice-Chairman Managing Director, UBS AG, Basel and Zurich Markus Steiner, Delegate Christian Eibel Executive Director, UBS AG, Basel and Zurich Markus Lesmann Executive Director, UBS AG, Basel and Zurich Executive Board Markus Steiner, Managing Director and Delegate of the Board of Directors André Valente, Deputy Managing Director Eugène Del Cioppo, Head of Business Development & Client Relationship Management Riccardo Boscardin, Head of Real Estate Funds Franz Cadalbert, Head of Finance, Controlling and Accounting André Debrunner, Head of Fund Reporting & Information Services Karsten Illy, Head of Operations Securities Funds Beat Schmidlin, Head of Legal and Tax Thomas Zimmerli, Head of Compliance and Risk Control On 31 March 2011, the fund management company managed a total of 235 securities funds and 5 real estate funds in Switzerland with assets totalling CHF billion. As at April 2011, the fund management company also provides the following services: Administration services for collective investments. 2.2 Delegation of specific tasks Property management and technical maintenance have been delegated to Wincasa AG, Winterthur, Livit AG, Zurich, EPM Swiss Property Management AG, Wallisellen, Privera AG, Berne, and Swiss Shoppingcenter Management AG SSCM, Zurich. 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 agreements of 2 February 2009 between UBS Fund Management (Switzerland) AG and Wincasa AG, of 25 November 2008 between UBS Fund Management (Switzerland) AG and Livit AG, of 6 January 2009 between UBS Fund Management (Switzerland) AG and EPM Swiss Property Management AG and of 27 August 2010 between UBS Fund Management (Switzerland) AG and Privera AG, respectively. The co-owner Lumeg Zentrum AG, Lucerne, entered into the facility management agreement with Swiss Shoppingcenter Management AG SSCM, Zurich, regarding the Pilatusmarkt Kriens on 1 December 2008.

2 2.3 Exercising 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 investors. Upon request, the fund management company shall provide investors with details concerning the exercise of membership and creditors rights. Regarding existing routine business, it is up to the fund management company whether to exercise the membership and creditors rights itself or whether 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. It may use information received from the custodian bank, the portfolio manager, the company or a third party or information that has appeared in the press. It is up to the fund management company to decide whether to waive its entitlement to exercise membership and creditors rights. 3 Information on the custodian bank UBS AG with registered offices in Basel and Zurich and head office in Switzerland acts as custodian bank. The bank was set up as a limited company in Zurich and Basel in With consolidated total assets of CHF 1,317,247 million and published capital and reserves of CHF 46,820 million as at 31 December 2010, UBS AG is financially one of the strongest banks in the world. It employs 64,617 staff members worldwide, with offices, representative offices and subsidiaries in more than 50 countries. As a universal bank, UBS AG offers a wide range of banking services in Switzerland. Internationally, it operates as an integrated merchant and investment bank. In addition, as one of the leading asset managers worldwide, it is present in all the major financial centres around the globe. The custodian bank may delegate the safekeeping of the fund s assets to third-party or collective depositaries in Switzerland or abroad. It shall exercise all due care and diligence in selecting and issuing instructions and in ensuring ongoing compliance with selection criteria. Third-party and collective depositaries mean that the fund management company no longer has sole ownership of deposited securities, but only coownership. When a third-party depositary is located outside of Switzerland, the legal provisions and practices of the place where the assets are held in custody shall apply. 4 Information on third parties 4.1 Paying agents in Switzerland The paying agents are UBS AG, Aeschenvorstadt 1, 4002 Basel, and Bahnhofstrasse 45, 8098 Zurich, and its branches 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 has appointed the following independent expert assessors with the approval of the supervisory authority: Christoph Zabarowski, Dr. oec. publ.; Marcel Scherrer, certified architect ETH; Andreas Bleisch, Dr. rer. pol., certified engineer ETH; as employees of Wüest & Partner AG, Gotthardstrasse 6, 8002 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. 5 Further information 5.1 General information Securities no ISIN CH Listing on SIX Swiss Exchange Financial year 1 January to 31 December Accounting currency Swiss franc (CHF) Units Units do not take the form of actual certificates but exist purely as book entries. 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 retained 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 only be issued in tranches. 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. 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 two months of the close of the financial year (cf. 5 prov. 4 of the fund contract). The net asset value of the real estate fund is calculated at the market value at the end of the financial year and each time 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. 88 para. 2 CISA, Art. 92 and 93 of the Collective Investment Schemes Ordinance (CISO) and the SFA guidelines governing real estate funds (link: the fund s real estate will be regularly assessed by independent experts accredited by the supervisory authorities, using dynamic earnings value methods. Valuation takes place at the price likely to be attained with a sale conducted with proper care. If properties belonging to the fund assets are acquired or sold, the market value of the properties in the fund assets must be checked by the expert assessors. 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 lead to differences in valuations. The issue price corresponds to the net asset value calculated with reference to the issue, plus the issuing commission. The issuing commission is defined under prov The redemption price corresponds to the net asset value calculated with reference to the redemption, minus the redemption commission. The redemption commission is defined under prov Incidental costs relating to the purchase and sale of investments (real estate sales taxes, notary costs, fees, brokerage commissions in line with the market, duties, etc.) incurred by the real estate fund in connection with the investment of the amount paid in or with the sale of a portion of the assets corresponding to the units redeemed will be charged to the fund s assets. The issue and redemption prices are rounded to CHF Units do not take the form of actual certificates but exist purely as book entries. The fund management company ensures the regular trading of the real estate fund units on the SIX Swiss Exchange. The fund management company shall publish the net asset value of the fund units in the fund s official publications 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% 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% This is appropriated for management purposes, asset management and distribution of the real estate fund and also to cover any costs that may be incurred. A detailed breakdown of the charges and incidental costs included in the flat fee is set out in 19 of the fund contract. The actual flat fee rate is stated in the relevant annual and semi-annual reports. The fund management company may pay reimbursements from the distribution element to the following institutional investors who hold the fund units for the financial benefit of third parties: Life insurance companies Pension funds and other pension schemes Investment foundations Swiss fund management companies Foreign fund management companies and fund companies Investment companies The fund management company may pay commissions from the distribution element to the following distributors and distribution partners: Authorised distributors Fund management companies, banks, securities dealers, Swiss Post and insurance companies Distribution partners who place fund units solely with institutional investors that have professional treasury operations Asset managers 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: 2005: 0.81% 2006: 0.88% 2007: 0.89% 2008: 0.89% 2009: 0.89% 2010: 0.89% Investments in associated collective investments No issuing and redemption commission and only a reduced management commission in accordance with 19 prov. 4 of the fund contract are charged to 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 of more than 10% of the capital or votes. 2

3 Fee-sharing agreements and soft commissions The fund management company has not concluded any fee-sharing agreements or agreements relating to soft commissions. 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, as well as the liquidation of the real estate fund shall be published by the fund management company in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt or SHAB) and 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 in the event of fire and water damage and damages that are attributable to causes under civil liability law. Shortfalls in rental income that occur as a result of fire and water damage are included in this insurance cover. However, earthquake damage and its consequences are not included in this insurance cover. 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 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 within the United States. Units of this real estate fund may not be offered, sold or delivered to US citizens, individuals domiciled in the US and/or other natural persons or legal entities whose income and/or earnings are subject to US income tax, regardless of source, as well as persons who are considered to be US persons pursuant to regulation S of the US Securities Act of 1933 and/or the US Commodity Exchange Act in its most recent version. 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. Part II Fund Contract I. Name of the fund; name and domicile of the fund management company and the 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 Swiss Mixed «Sima» in accordance with Article 25 ff. in association with Article 58 ff. of the Swiss Collective Investment Schemes Act (CISA) of 23 June UBS Fund Management (Switzerland) AG, Basel, is the fund management company. 3. UBS AG, Basel and Zurich, is the custodian bank. 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, 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 act independently and exclusively in the interests of investors. They 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. 3. The fund management company can delegate investment decisions and specific tasks, provided that this is in the interest of efficient management. It shall only delegate responsibilities to individuals who are qualified to discharge their duties properly and shall ensure that such duties are discharged correctly with regard to both the instructions provided and monitoring and control. The fund management company shall be liable for the actions of its agents as if they were its own actions. 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 can merge the real estate fund with other real estate funds pursuant to the provisions set down under 24 and can liquidate such 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 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 on any real estate assets from the real estate fund or assign any real estate assets to it. C Custodian bank 4 1. The custodian bank is responsible for the safekeeping of the fund assets, particularly unpledged mortgage notes 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. The custodian bank and its agents act in good faith and have a duty to exercise due diligence and provide information. They act independently and exclusively in the interests of investors. They 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. 3. The custodian bank may delegate the safekeeping of the fund s assets to thirdparty or collective depositaries in Switzerland or abroad. It exercises all due care and diligence in selecting and issuing instructions to third parties and in ensuring ongoing compliance with selection criteria. Information on the risks involved is set out in the prospectus. 4. 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. 5. 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. 6. The custodian bank, its agents and associated individuals and legal entities may not take on any real estate assets from the real estate fund or assign any real estate assets to it. D The investors 5 1. 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. 2. Investors are only obliged to remit payment 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. 3. 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, 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. 4. 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. 3

4 Under certain conditions, the fund management company may repay the proceeds from units redeemed during a financial year ahead of schedule (cf. 17 prov. 1). Ordinary and early unit redemptions are made within two months of the close of the financial year. 5. 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. 6. 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 provisions of this fund contract or 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 be entitled 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 classspecific income, and the net asset value per unit may therefore vary from class to class. Any class-specific costs charged shall be met by the aggregate assets of the real estate fund. 2. The creation, liquidation or merger of unit classes shall be announced in the official publications specified for the fund. 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. Commissions and costs shall only be charged 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 exist purely as book entries. The investor shall not be entitled to request the issue of a unit certificate. Where unit certificates have been issued, they should be returned with the redemption application at the latest. III. Investment policy guidelines Investment principles A Compliance with investment guidelines 7 1. In selecting individual investments and to implement the investment policy in accordance with 8, the fund management company must adhere to the principle of 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 adhere to the investment restrictions no later than two years after the expiry of the subscription period (launch). 2. If the limits are exceeded due to changes in the market, the investments must be restored to the permitted level within a reasonable period of time, taking due account of the investors interests. If limits in connection with derivatives pursuant to 12 below are exceeded through a change in the delta, the permitted levels must be restored within three bank business days at the latest, taking due account of the investors interests. B Investment policy 8 1. The fund management company shall invest the assets of this real estate fund in real estate assets throughout Switzerland, i.e., in property including accessories, but also in participating interests in and claims against real estate companies the sole purpose of which is to acquire and sell, and let and lease their own properties, provided at least two-thirds of capital and votes are incorporated in 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 ownership units and votes. 2. The following investments are permitted for this real estate fund: a) properties including accessories; Properties include a. residential properties b. properties for commercial use 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. f. properties with right to build; 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. 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 provided at least two-thirds of capital and votes are incorporated in the real estate fund; c) units in other real estate funds (including real estate investment trusts) and real estate investment companies and certificates that are traded on a stock exchange or another regulated market open to the public; d) foreign real estate assets in neighbouring countries (France, Germany, Italy, Austria and Liechtenstein) where the value can be judged to a sufficient level; e) 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. 4. 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 direct or indirect shareholding of more than 10% of the capital or votes. C Securing liabilities and available short-term liquid assets 9 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 available 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. Available short-term assets include cash, post office and bank deposits as well as claims from securities repurchase agreements at sight or on demand 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 prov 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. Investment techniques and instruments A Securities lending The fund management company may lend all types of securities which are listed on an exchange or are traded on another regulated market open to the public. However, securities that have been taken over as part of a reverse repo transaction may not be lent. 2. The fund management company may lend the securities to a borrower in its own name and for its own account ( principal transaction ), or may appoint an intermediary to make the securities available to a borrower either indirectly in a fiduciary capacity ( agent transaction ) or directly ( finder transaction ). 3. The fund management company shall enter into securities lending transactions only with first-class borrowers or agents specialising in transactions of this type, such as banks, brokers and insurance companies, as well as recognised securities clearing organisations which can guarantee the proper execution of the securities lending transactions. 4. If the fund management company must observe a period of notice (which may not exceed 10 bank business days) before it may again legally repossess the securities lent, it may not lend more than 50% of a particular security eligible for lending. However, if the borrower or the intermediary provides the fund management company with a contractual assurance that the latter may legally repossess the securities lent on the same or next bank business day, the fund management company may lend its entire holdings of a particular security eligible for lending. 5. The fund management company shall conclude an agreement with the borrower or intermediary whereby the latter shall pledge or transfer collateral in order to secure the restitution of securities in favour of the fund management company in accordance with Art. 8 of the FINMA Collective Investment Schemes Ordinance (CISO-FINMA). The value of the collateral must at all times be equal to at least 105% of the market value of the securities lent or at least 102% if the collateral comprises (i) liquid assets or (ii) fixed or variable-interest securities which have a long-term, up-to-date rating of at least AAA, Aaa or equivalent from a ratings agency recognised by FINMA. Moreover, the borrower or intermediary is responsible for ensuring the prompt, unconditional payment of any income accruing during the securities lending period, for asserting other financial rights and for reimbursement of securities of the same type, amount and quality such that the contractual terms are complied with. 6. The custodian bank shall ensure that the securities lending transactions are conducted in a secure manner and that the contractual terms are complied with. For the duration of the lending transactions it shall also be responsible for the administrative duties assigned to it under the custody account regulations and for asserting all rights pertaining to the securities lent, unless they have been assigned in line with the applicable framework agreement. B Securities repurchase agreements The fund management company may enter into securities repurchase agreements ( repos ) for the real estate fund s account. Securities repurchase agreements can be concluded as either repos or reverse repos. A repo is a legal transaction in which one party (lender) temporarily transfers ownership of securities in return for payment to another party (borrower); the borrower undertakes to reimburse securities of the same type, quantity and 4

5 quality as well as any income accrued throughout the course of the repurchase agreement to the lender upon maturity. The lender bears the price risk of the securities throughout the course of the repurchase agreement. From the perspective of the counterparty (borrower), a repo is a reverse repo. Reverse repos are an instrument used by the fund management company to invest cash, whereby it buys securities and at the same time agrees to reimburse securities of the same type, amount and quality as well any income accrued throughout the course of the repurchase agreement. 2. The fund management company may conclude repo transactions with a counterparty in its own name and for its own account ( principal transaction ) or may instruct an intermediary to conclude repo transactions with a counterparty either indirectly in a fiduciary capacity ( agent transaction ) or directly ( finder transaction ). 3. The fund management company shall conclude repo transactions only with first-class counterparties and intermediaries specialising in transactions of this type, such as banks, brokers and insurance companies or recognised securities clearing organisations, which can ensure the proper execution of the repo transactions. 4. The custodian bank shall ensure that the repo transactions are conducted in a secure manner and that the contractual terms are complied with. It shall ensure that fluctuations in the value of securities used in the repo transactions are compensated daily in cash or securities (mark-to-market). It is also responsible for the administrative duties assigned to it under the custody account regulations during the period in which repo transactions are carried out and for asserting all rights pertaining to the securities used in the repo transactions unless they have been assigned in line with the applicable framework agreement. 5. The fund management company may use all types of securities which are listed on an exchange or are traded on another regulated market open to the public. However, securities that were taken over as part of a reverse repo transaction may not be used for repos. 6. If the fund management company must observe a period of notice (which may not exceed 10 bank business days) before it may again legally repossess the securities used in the repo transaction, it may not use for repos more than 50% of its holdings of a particular security eligible for repos. However, if the counterparty or the intermediary provides the fund management company with a contractual assurance that the latter may legally repossess the securities used in the repo transaction on the same or the next bank business day, the fund management company may use its entire holdings of a particular security eligible for repo transactions. 7. Engaging in repo transactions is deemed to be taking up a loan pursuant to 13, unless the money received is used to acquire securities of the same type, quality, credit rating and maturity in conjunction with the conclusion of a reverse repo. 8. With regard to reverse repos, the fund management company may only acquire fixed or variable-interest securities issued or guaranteed by the Swiss Confederation, or by Swiss cantons or municipalities, or which have the minimum credit ratings required by the supervisory authority. 9. Claims arising from reverse repos are deemed to be liquid assets pursuant to 9 and not loan extensions pursuant to 13. C Derivatives The fund management company may only use derivatives to hedge interest rate, currency and market risks. It shall ensure that the effect of such derivatives does not alter the investment objectives as stated in this fund contract, the prospectus or simplified prospectus or the fund s investment profile even in exceptional market circumstances. 2. The use of derivatives is limited to positions that reduce exposure and has a similar economic impact to the sale of an underlying security or the reduction of a commitment (borrowing). The risk measurement approach corresponds to a modified commitment approach I, so the use of derivatives does not exert a leverage effect on the fund s assets or amount to short-selling. The fund management company must at all times be able to meet its obligations in relation to derivatives with respect to delivery and payment from the fund s assets in accordance with the legislation concerning collective investment schemes. 3. Only basic forms of derivatives may be used. These include: a) Call or put options, the expiration value of which has a linear dependence on the positive or negative difference between the market value of the underlying and the strike price and is zero if the difference is preceded by the opposite sign; b) Swaps with non-path dependent payoffs which have a linear dependence on the value of the underlying or an absolute value; c) Futures and forwards whose value has a linear dependence on the underlying. 4. a) In the case of derivatives that reduce exposure, the commitments entered into shall be covered by the securities underlying the derivatives at all times subject to sub-sections b) and d). b) In the case of derivatives that reduce exposure, assets other than the underlying securities may be used for cover if they are in the name of an index which is calculated by an external, independent body; is representative of the investments used as cover; is correlated sufficiently with these assets. c) The fund management company must have unrestricted access to these underlying securities or assets at all times. Underlying securities or assets can be used simultaneously as cover for several exposure-reducing derivatives if these positions entail a market, interest rate or currency risk and if they relate to the same underlyings. d) A delta weighting may be used for an exposure-reducing derivative to calculate the relevant underlying securities. 5. The fund management company may use both standardised and nonstandardised derivatives. It may engage in derivatives transactions on a stock exchange or other regulated market open to the public or in OTC (over-thecounter) trading. 6. a) The fund management company may only engage in OTC transactions with financial intermediaries subject to supervision which specialise in these transactions and can ensure proper execution. If the counterparty is not the custodian bank, the counterparty or guarantor must have the minimum credit ratings prescribed by the legislation concerning collective investment schemes, as more particularly set out in Art. 33 CISO-FINMA. b) An OTC derivative financial instrument must be subject to reliable and verifiable valuation and it must be possible to sell, liquidate or close out the derivative with an opposite transaction at market value at any time. c) If no market prices are available for an OTC-traded derivative, the price must be verifiable at any time using recognised and appropriate valuation models on the basis of the market value of the underlying securities. Moreover, before concluding such transactions, the fund management company must obtain specific offers from at least two potential counterparties and must accept the most favourable offer, having regard to the price, credit rating, risk distribution and the range of services offered. The transaction concluded and the price set must be clearly documented. 7. Due account must be taken of the derivatives prescribed in the legislation concerning collective investment schemes when complying with statutory and contractual investment restrictions (maximum and minimum limits). 8. The prospectus has further details on: the implications of derivatives within the investment strategy; the effect of using derivatives on the fund s risk profile; the counterparty risks associated with derivatives. D Borrowing and lending 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. Securities lending transactions according to 10 and repurchase agreements as reverse repos according to 11 are not deemed to be credit extensions within the meaning of this paragraph. 2. The fund management company may take up loans for the real estate fund s account. Repurchase agreements as repos according to 11 are deemed to be credit extensions within the meaning of this paragraph. E Encumbrance of properties The fund management company may pledge properties and transfer liens as security. 2. However, the encumbrance of all properties may not, on average, exceed 50% of their market value. Investment restrictions A Risk diversification and its limits Investments are allocated by property type, type of use, age, building structure and location. 2. The investments must be spread across at least ten properties. Developments that have been built according to the same construction standards are considered to be single properties, as are neighbouring lots. 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 limits in terms of the fund s assets as set out below: a) Building land, including demolition projects, and buildings under construction, up to 30% b) Properties with building rights, up to 20% c) Mortgage certificates and other contractual mortgage liens, up to 10% d) Units in other real estate funds and real estate investment companies, up to 25% e) Foreign real estate assets in neighbouring countries pursuant to 8, prov. 2, up to 20% f) Total investments under a) and b) above, up to 30% IV. Calculation of net asset value as well as issue and redemption of units and expert assessors A Calculation of net asset value and consultation of expert assessors The net asset value of the real estate fund is calculated at the market value in Swiss francs at the end of the financial year and each time 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 or one legal entity 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. 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 traded on a stock exchange or another regulated market open to the public, the fund management company may value them pursuant to prov. 3. 5