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UBS (CH) Equity Fund – Gold
 

UBS (CH) Equity Fund – Gold

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    UBS (CH) Equity Fund – Gold UBS (CH) Equity Fund – Gold Document Transcript

    • In addition, this investment fund has the possibility to invest in other invest- ment funds in accordance with § 8 prov. 3 of this investment fund. In particu- lar, it does not have any further risks permitted in the “other funds” category. To implement the investment policy, the fund management company may use standardised and non-standardised (customised) derivative financial instru- ments. It may conduct such transactions on a stock exchange or another reg- ulated market open to the public, or directly with a bank or financial institu- tion specialising in these types of business as counterparty (OTC trading). Even under extraordinary market circumstances, the use of these instruments may not result in the fund’s assets being leveraged, nor may they be tanta- mount to a short sale. UBS (CH) Equity Fund Detailed information on the fund’s investment policy and its restrictions, as well as the permitted investment techniques and instruments (in particular de- rivative financial instruments and their scope) are contained in the fund regu- – Gold lations (cf. Part II, §§ 7–15). 1.3 Tax regulations relevant for the investment fund Investment fund under Swiss law Investment funds have no legal personality in Switzerland. They are subject to (Category Other Funds) neither corporate income tax nor capital gains tax. The fund management company may apply for a refund of all Swiss federal Prospectus with integrated Fund Regulations November 2005 withholding tax levied on the fund’s domestic income. Income and capital gains realised abroad may be subject to the relevant with- holding tax deductions imposed by the country of investment. These taxes will, as far as possible, be 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 from the fund made to investors domiciled in Switzer- land are subject to a Swiss withholding tax (tax at source) rate of 35%. Capi- tal gains are not subject to withholding tax, provided they are distributed with a separate coupon or listed separately in the statement sent to investors. Part I Prospectus Investors domiciled in Switzerland may reclaim the withholding tax deducted by declaring it in their tax returns, or by making a separate application for a refund to the Swiss tax authorities. Swiss withholding tax is not deducted from income distributions made to in- This prospectus, together with the fund regulations which form an integral part vestors domiciled abroad, provided a statement is received from a bank, con- thereof, and the latest annual or semi-annual report (if published after the latest firming that the respective units are being held in a securities account of an annual report), serve as the basis for all subscriptions of units of this investment investor domiciled abroad and that income will be credited to this account fund. (bank statement or affidavit). Only the information contained in the prospectus or in the fund regulations, or in If an investor domiciled abroad has withholding tax deducted as a result of one of the documents referred to in the prospectus, shall be deemed to be valid. failure to provide the bank declaration, he can request a refund directly from the Federal Tax Administration in Bern under Swiss law. 1 Information on the investment fund The tax information stated above is based on the current legal situation and practice. This tax information is expressly subject to changes in legislation, ju- 1.1 General information on the investment fund risdiction and ordinances and the practices of tax authorities. UBS (CH) Equity Fund – Gold is an investment fund under Swiss law estab- Taxation and other tax implications for investors who hold, buy or sell lished under the “Other Funds” category of the Swiss Federal Act on Invest- fund units are defined by the tax laws and regulations in the investor’s ment Funds of 18 March 1994. The fund regulations were drawn up by UBS country of domicile. Fund Management (Switzerland) AG as fund management company and UBS AG as custodian bank and were approved by the Swiss Federal Banking 2 Information on the fund management company Commission for the first time in 1988. The fund is based upon a collective investment contract whereby the fund 2.1 General information on the fund management company management company is obliged to provide the investor with a stake in the UBS Fund Management (Switzerland) AG is responsible for the management investment fund in proportion to the fund units acquired by the said investor of the fund. The fund management company, which is domiciled in Basel, has and to manage this fund in accordance with the provisions of the law and the been active in the fund business since its formation as a limited company in fund regulations. The custodian bank is party to the contract in accordance 1959. with the tasks conferred upon it by the law and the fund regulations. The subscribed share capital of the fund management company amounts to The fund issues only one class of units. CHF 1 million. The share capital is divided into registered shares and is fully In accordance with the fund regulations, the fund management company is paid up. UBS Fund Management (Switzerland) AG is a wholly owned sub- entitled to establish additional unit classes at any time. sidiary of UBS AG. On 31 October 2006, the fund management company man- aged a total of 193 securities funds and 4 real estate funds in Switzerland with 1.2 Investment objective and investment policy of the fund assets totaling CHF 110.8 billion. The investment objective of UBS (CH) Equity Fund – Gold is principally to achieve a long-term performance consistent with the development of the mar- Board of Directors ket for gold equities. Andreas Jacobs, Chairman This fund invests its assets primarily in equities of companies that are either Managing Director, UBS AG, Basel and Zurich included in the market index HSBC Global Gold (reinvested) Index (hereinafter Gerhard Fusenig, Vice Chairman HSBC Global Gold), that are principally engaged in the mining, processing and Managing Director, UBS AG, Basel and Zurich marketing of gold, that earn the majority of their income in these areas or, as Markus Steiner, Delegate financial or holding companies, mainly invest in these areas and have their Jean-Paul Gennari registered office in Europe, North or South America or in the Pacific region, Managing Director, UBS Fund Services (Luxembourg) S.A., Luxembourg according to the principle of risk diversification. Reto Ketterer The fund also invests in other investments as permitted under the fund regu- Managing Director, UBS AG, Basel and Zurich lations. Dirk Spiegel HSBC Global Gold is a market-capitalized share index, made up of publicly Executive Director, UBS AG, Basel and Zurich traded shares in the most important gold mines worldwide. As of 29 September 2006, the six largest companies by market capitalization Executive Board were weighted as follows in the HSBC Global Gold index: Markus Steiner, Managing Director and Delegate of the Board of Directors Barrick Gold 19.92%, Newmont Mining 13.51%, Anglogold 7.75%, André Valente, Deputy Managing Director, Goldcorp 7.41%, Gold Fields 6.59%, Glamis Gold 4.94%. Head of Business Development and Client Services The fund management company can invest up to a maximum of 10% of the Riccardo Boscardin, Head of Real Estate Funds assets of this investment fund in units of other investment funds managed by Franz Cadalbert, Head of Finance, Controlling and Accounting it or by an associated company. Commissions and costs may not be charged Karsten Illy, Head of Operations Securities Funds to the fund’s assets in these cases. Beat Schmidlin, Head of Legal and Tax When investing in specific industrial sectors, the following special characteris- Thomas Zimmerli, Head of Compliance and Risk Control tics should be noted: Compared to the financial sector of all industries of an individual country or a single region, the market movements may deviate more 2.2 Delegation of investment decisions in the financial market of a specific branch of industry over the short or medi- Investment decisions in respect of the fund have been delegated to UBS Glob- um term, in particular as a result of the various stages of the business cycle, al Asset Management, a business group of UBS AG, Basel and Zurich. or of specific industry-related or political crises. UBS AG has many years of experience in asset management services and a In principle, UBS (CH) Equity Fund – Gold fulfils all provisions of the Invest- broad knowledge of the investment markets of the fund. The precise duties ment Fund Act for securities funds, with the exception of the provision con- involved are set out in an asset management agreement between UBS Fund cerning the restriction of investments in securities of the same issuer (cf. § 15 Management (Switzerland) AG and UBS AG dated 14 June 2005. of the regulations for this fund). 1
    • 2.3 Delegation of other duties The redemption price corresponds to the net asset value calculated on the val- UBS Fund Management (Switzerland) AG jointly operates and utilises a fund uation day, minus the redemption commission. The redemption commission is administration platform with UBS Fund Services (Luxembourg) S.A. As part of defined under prov. 5.3 below. this collaboration, UBS Fund Services (Luxembourg) S.A. handles the particu- Transaction costs (brokerage commissions in line with the market, commis- lar task “master data processing”. The specific details of how this task is to sions, duties, etc.), incurred by the investment fund in connection with the in- be executed are governed by an agreement concluded between the parties vestment of the amount paid in or with the sale of a redeemed portion of in- on 29 July 2004. vestments corresponding to the unit, will be charged to the fund’s assets. In addition, various IT services connected with the maintenance and upkeep The issue and redemption prices are rounded to USD 0.01. Payment will be of the hardware and software components of the fund administration plat- made 3 bank business days after the order day (value date 3 bank business form (e.g. technical installations, configurations, system tests, archiving of days). data) are furnished by UBS (Luxembourg) S.A. in Luxembourg. The specific As a rule, units shall not take the form of actual certificates but shall exist scope of these services is governed by an agreement concluded between the purely as book entries. Investors may, however, demand the issue of a unit parties on 10 August 2004. certificate by the custodian bank. For each delivery the custodian bank will All other fund management tasks and monitoring of the other delegated tasks charge the investor a commission of CHF 250 plus any accrued value added are carried out in Switzerland. tax payable. If unit certificates are issued, they must be returned when the units are re- 3 Information on the custodian bank deemed. UBS AG in Basel and Zurich acts as custodian bank. 5.3 Commissions and costs With consolidated total assets of CHF 2,060,250 million and published capital For the management, asset management and distribution of the fund, and to and reserves of CHF 44,324 million as of 31 December 2005, UBS AG is fi- cover any costs incurred, the fund management company shall charge the nancially one of the strongest banks in the world. It employs 69,569 staff fund a monthly, lump-sum administration fee (“all-in fee”) of 0.15% (1.8% worldwide, with offices, representative offices and subsidiaries in more than p.a.) of the average net assets. 50 countries. The fund management company may pay reimbursements to the following UBS AG as a “universal” bank in Switzerland offers a wide range of bank serv- institutional investors who hold the fund units for the financial benefit of third ices. Internationally, it operates as an integrated merchant and investment parties: bank. In addition, as one of the leading banks offering asset management – Life insurance companies services worldwide, it is present in all the important financial centres of the – Pension funds and other retirement arrangements world. – Investment foundations – Swiss fund management companies 4 Information on third parties – Foreign fund management companies and fund companies – Investment companies 4.1 Paying agents The fund management company may pay stock commissions to the following The paying agents are UBS AG, Aeschenvorstadt 1, 4002 Basel, and Bahnhof- distributors and distribution partners: strasse 45, 8098 Zurich, and its branches in Switzerland. – Authorised distributors within the meaning of Art. 22 para. 1 IFA – Fund management companies, banks, securities traders, the Swiss post of- 4.2 Distributor fice and insurance companies – Distribution partners who place fund units solely with institutional investors UBS AG is responsible for the distribution of the investment fund. that have professional treasury operations – Asset managers 4.3 Auditors The custodian bank in Switzerland may charge a maximum issuing commis- The fund’s assets will be audited by Ernst & Young AG, Basel. sion of 2%, calculated on the net asset value of the units issued. When sub- scribing to units via a distributor in Switzerland or abroad, the maximum issu- 5 Further information ing commission is 6%. There is no charge by the custodian bank in Switzerland for redemptions. 5.1 Key data Distributors in Switzerland and abroad may charge a maximum redemption Securities number 278 869 commission of 2%. ISIN CH0002788690 Listing none; units of the fund are issued and redeemed 5.4 Publications on the fund daily. Further information on the investment fund may be found in the latest annu- Financial year 1 October until 30 September al or semi-annual report. Up-to-date information is also available on the Inter- Term to maturity unlimited net at www.ubs.com/funds. Accounting currency US dollar (USD) The prospectus with integrated fund regulations and the annual and semi-an- Units made to the bearer; in principle the units are dealt nual reports are available free of charge on the Internet at www.ubs.com/funds, with on a book-entry basis. Investors may, how- from the fund management company and the custodian bank, as well as from ever, request delivery of their units subject to a all distributors. charge (cf. Part I, prov. 5.2). Notification of changes to the fund regulations, a change of fund manage- Appropriation of income in principle, net income will be distributed to in- ment company or custodian bank, as well as the liquidation of the fund shall vestors within four months of the closing of the be published by the fund management company in the “Schweizerisches Han- financial year at no charge. delsamtsblatt” (SHAB) and “Finanz und Wirtschaft” (FuW). As a rule, capital gains are not distributed but are Prices are published each time units are issued or redeemed, and at least twice held in the investment fund for reinvestment. a month, in the “Neue Zürcher Zeitung” (NZZ), in other Swiss and foreign newspapers as well as on the Internet at www.ubs.com/funds and in other 5.2 Terms for the issue and redemption of fund units electronic media. Fund units may be issued or redeemed on every bank business day (Monday to Friday). No issue or redemption will take place on all-day public holidays at 5.5 Details regarding distribution abroad the domicile of the fund management company (Easter, Whitsun, Christmas, At present, the fund is also authorised for distribution in the following countries: New Year, the Swiss national holiday [1 August] etc.), or on days when the stock exchanges in the fund’s principal investment countries are closed, or Details regarding distribution in Liechtenstein when 50% or more of the fund’s investments cannot be valued in an ade- The investment fund is authorised for public distribution in Liechtenstein. quate manner, or under the exceptional circumstances defined under § 17 The representative and paying agent in Liechtenstein is Liechtensteinische Lan- prov. 4 of the fund regulations. The fund management company and the cus- desbank Aktiengesellschaft, Städtle 44, FL-9490 Vaduz. todian bank are entitled to reject applications for subscription at their own Notification of changes to the fund regulations or prospectus, a change of discretion. fund management company or custodian bank, as well as the liquidation of Issue and redemption orders entered at the custodian bank by 04:00 p.m. the fund shall be published in the “Liechtensteiner Volksblatt”. (cut-off time) on a bank business day (order day) will be settled on the follow- Prices are published in the “Neue Zürcher Zeitung” on each day units are is- ing bank business day (valuation day) on the basis of the net asset value cal- sued or redeemed, and at least twice a month in the “Liechtensteiner Volks- culated on this date. Earlier cut-off times may apply to the submission of or- blatt”. ders for those orders placed with distributors in Switzerland and abroad in or- The prospectus including the fund regulations and the current annual and der to ensure that these can be forwarded on to the custodian bank in time. semi-annual reports in German are available free of charge from the repre- These cut-off times may be obtained from the respective distributors. The net sentative and paying agent in Liechtenstein. asset value taken as the basis for the settlement of orders is therefore not With reference to the units distributed in Liechtenstein, the place of perform- known when the order is placed (forward pricing). It is calculated on the valu- ance and jurisdiction is Vaduz. ation day based on closing prices or, if these do not reflect appropriate mar- ket values in the fund management company’s view, at the latest available 5.6 Sales restrictions prices at the time of the valuation. The fund management company is enti- tled to apply other generally recognised and verifiable valuation criteria in or- For the issue and redemption of units of this investment fund abroad, the reg- der to make an appropriate valuation of the fund’s net assets if, due to ex- ulations valid in the country in question shall apply. traordinary circumstances, a valuation in accordance with the regulations stat- Units of this investment fund may not be offered, sold or delivered within the ed above proves to be unfeasible or inaccurate. USA. The net asset value of a unit represents the market value of the fund’s assets, less all the fund’s liabilities, divided by the number of units in circulation. It 5.7 Detailed regulations will be rounded to USD 0.01. Further details on the fund, such as the valuation of the fund’s assets, a list of The issue price corresponds to the net asset value on the valuation day, plus all costs and commissions charged to the investor and the fund and the ap- the issuing commission. The issuing commission is defined under prov. 5.3 be- propriation of net income, can be found in detail in the fund regulations. low. 2
    • Part II Fund Regulations 1. § 6 Units and unit classes The fund issues only one class of units. 2. The fund management company can establish additional unit classes at any time. This requires an amendment to the fund regulations. I. Basic principles 3. As a rule, units shall not take the form of actual certificates but shall exist § 1 Name of the fund; name and domicile of the fund management purely as book entries. Investors may request delivery of a bearer unit certifi- company and the custodian bank cate at their own expense. They are not, however, entitled to demand that fractions of units be issued in the form of certificates. 1. An investment fund of the category Other Funds has been established under the name of UBS (CH) Equity Fund – Gold (hereinafter referred to as “the in- III. Investment policy guidelines vestment fund”) within the meaning of Art. 2 in conjunction with Art. 35 of the Swiss Federal Act on Investment Funds of 18 March 1994 (IFA). A Investment principles 2. The investment fund is managed by UBS Fund Management (Switzerland) AG, § 7 Compliance with investment guidelines Basel in its capacity as fund management company. 3. The safekeeping of the fund’s assets is entrusted to UBS AG, Basel and Zurich, 1. In selecting individual investments the fund management company must ad- in its capacity as custodian bank. here to the principle of balanced risk diversification and must observe the per- centage limits defined below. These percentages relate to total fund assets at II. Rights and obligations of the parties to the contract market value and must be complied with at all times. 2. If the limits are overrun or underrun as a result of market-related changes or § 2 Collective investment contract changes in the fund’s assets, the investments must be restored to the permit- The legal relationship between the investor on the one hand, and the fund ted level within a reasonable period, taking due account of the investors’ in- management company and the custodian bank on the other, shall be gov- terests. erned by these fund regulations and the applicable legal provisions, in partic- ular those concerning collective investment contracts as laid down in Art. 6 ff. § 8 Investment objective and investment policy IFA. 1. In principle, the fund management company invests the assets of this invest- ment fund in securities issued on a large scale and in uncertificated rights with § 3 Fund management company a similar function which are traded on a stock exchange or another regulated 1. The fund management company manages the fund at its own discretion and market open to the public. in its own name, but for the account of the investors. In particular, it makes 2. The investment objective of the fund is principally to achieve a long-term per- all decisions relating to the issuing of units, investment policy and the propor- formance consistent with the development of the market for gold equities. tion of liquid assets held. It calculates the net asset value as well as the issue When managing the fund’s assets, the fund management company takes as and redemption prices of units, and also determines the distribution of in- its benchmark a reference index which is representative of the market for gold come. The fund management company exercises all rights associated with the equities; further details on this benchmark are given in the prospectus. investment fund. 3. a) Following deduction of the liquid assets, the fund management company 2. The fund management company and its agents act exclusively in the interests shall invest at least two-thirds of the total fund assets in: of the investors. – equity paper and rights (shares, dividend-right certificates, cooperative 3. The fund management company can delegate investment decisions as well as shares, participation certificates and similar instruments) issued by com- other specific tasks, provided that it is in the interests of efficient manage- panies which are either included in the benchmark index, which are chiefly ment. The fund management company shall be liable for the actions of its active in the mining, processing and marketing of gold, which earn the agents as if they were its own actions. majority of their income from such activities or invest in these sectors as 4. The fund management company and the custodian bank may jointly apply to financial or holding companies and which have their registered office in the supervisory authority for amendments to be made to these fund regula- Europe, North or South America or in the Pacific region. tions. – warrants on investments mentioned above; 5. The fund management company can merge any of the investment funds it – units in other investment funds which invest their assets according to manages pursuant to the provisions set down under § 24 and can liquidate the guidelines of this investment fund. any of the investment funds it manages pursuant to the provisions set down b) Subject to ltr. c) and following the deduction of liquid assets, the fund man- under § 25. agement company may also invest up to one-third of the total fund assets 6. The fund management company is entitled to receive the fees and commis- in: sions stipulated in §§ 18 and 19. It is further entitled to be released from the – equity paper and rights (shares, dividend-right certificates, cooperative liabilities assumed in the proper execution of the collective investment con- shares, participation certificates and similar instruments) issued by com- tract, and to be reimbursed for expenses incurred in connection with such lia- panies which do not meet the above requirements; bilities. – warrants on investments in accordance with this prov. 3b); – units in other investment funds which do not invest their assets accord- § 4 Custodian bank ing to the guidelines of this investment fund. – debt paper and rights issued by borrowers worldwide; 1. The custodian bank is responsible for the safekeeping of the fund’s assets. – convertible bonds, convertible notes and warrant issues. 2. The custodian bank and its agents act exclusively in the interests of the in- c) In addition the fund management company must comply with the invest- vestors. ment restrictions below, related to the total fund assets following deduc- 3. The custodian bank may delegate the safekeeping of the fund’s assets to third tion of liquid assets: parties in Switzerland or abroad. This is no way affects the custodian bank’s – up to a maximum of 10% in other investment funds. Should the legisla- own liability. tion applicable to the sale of the investment fund in a third country so 4. The custodian bank monitors the fund management company’s compliance require, the investment fund may not or only to the extent permitted with the law and the fund regulations, specifically with regard to investment there invest in units of domestic and foreign investment funds, other as- decisions, the calculation of the value of the units and the appropriation of sets organized under company law (investment companies) or invest- net income. The custodian bank is not responsible for the choice of invest- ment trusts. ments which the fund management company makes within the established 4. The fund management company may invest up to a total of 10% of the fund’s investment guidelines. assets in other securities and rights which do not meet the requirements pur- 5. The custodian bank handles the issue and redemption of fund units as well as suant to prov. 1 above, or in debt claims which are not money market instru- payments on behalf of the fund. ments and which have characteristics equivalent to those of securities, are 6. The custodian bank is entitled to receive the fees and commissions stipulated marketable and transferable, and whose value can be determined each time in §§ 18 and 19. It is further entitled to be released from the liabilities assumed units are issued and redeemed. in the proper execution of the collective investment contract, and to be reim- 5. In the case of securities from new issues, they must be intended for admis- bursed for expenses incurred in connection with such liabilities. sion to a stock exchange or other regulated market open to the public under the terms of issue, and they have to be listed within one year; otherwise these § 5 The investor securities must be sold within one month or included under the restrictions of 1. By remitting a payment to the fund, the investor acquires claims against the prov. 4. fund management company for a proportion of the fund’s assets and income. 6. The fund management company may invest in units of other investment funds This claim is evidenced in the form of fund units. it or an associated company manages, if the fund regulations of these funds 2. The investor is only obliged to remit payment for the units of the fund he or provide for specialization in investments in a certain geographic or economic she subscribes. The investor shall not be held personally liable for the liabili- sector. No costs or commissions pursuant to § 19 may be charged to the fund’s ties of the fund. assets within the scope of such investments. Furthermore, the target fund may 3. The investor may withdraw from the collective investment contract at any time not charge issuing and redemption commissions unless these are levied to the by requesting that his/her share in the investment fund be redeemed in cash. credit of the fund’s assets. If unit certificates were issued, they must be returned. 4. Investors may at any time request that the fund management company sup- § 9 Liquid assets ply them with information regarding the basis on which the issue and redemp- The fund management company may also hold liquid assets in an appropriate tion prices of the units are calculated. If the investor has a legitimate reason amount in the fund’s accounting currency and in any other currency in which for requesting more detailed information on specific transactions conducted investments are permitted. Liquid assets comprise bank deposits and claims in the past, the fund management company must apprise him/her thereof at from securities repurchase agreements at sight or on demand with maturities any time. of up to twelve months. 3
    • B Investment techniques and instruments § 12 Derivative financial instruments § 10 Securities lending 1. The fund management company may use derivative financial instruments for 1. The fund management company may lend all types of securities which are list- the orderly management of the fund’s assets and to hedge currency risks. It ed on an exchange or are traded on a regulated market open to the public. shall ensure that the effect of such derivative financial instruments does not However, it may not lend securities underlying derivative financial instruments alter the investment profile of the fund as stated in the present regulations or taken over in a reverse repo transaction. and the prospectus even in exceptional market circumstances. 2. The fund management company may lend the securities to a borrower (“prin- 2. The effect of using derivative financial instruments is similar to either a sale cipal transaction”, or may appoint an intermediary to make the securities avail- (positions that reduce exposure) or a purchase (positions that increase expo- able to a borrower either indirectly in a fiduciary capacity (“agent transac- sure) of an underlying security. tion”) or directly (“finder transaction”). If the use of a derivative financial instrument is similar to the sale of underly- 3. The fund management company shall enter into securities lending transac- ing securities, all liabilities subject to the provisions of prov. 8 which may arise tions only with first-class borrowers or agents specialising in transactions of must at all times be covered by the securities underlying the derivative finan- this type, such as banks, brokers and insurance companies, as well as recog- cial instrument. The fund management company must have unrestricted ac- nised securities clearing organisations, which can guarantee the proper exe- cess to these underlying securities at all times. In addition, the latter may not cution of the securities lending transactions. be the object of a securities lending transaction or a securities repurchase 4. If the fund management company must observe a period of notice (which may agreement. not exceed 10 bank business days) before it may again legally repossess the If the use of a derivative financial instrument is similar to the purchase of un- securities lent, it may not lend more than 50% of its holdings of a particular derlying securities, the securities underlying the derivative financial instrument security eligible for lending; the effective duration of the securities lending must be permitted investments under § 8 and all liabilities subject to the pro- transaction may not exceed 30 calendar days. However if the borrower or the visions of prov. 8 which may arise must at all times be covered by cash/cash intermediary provides the fund management company with a contractual as- equivalents. The sum of these derivatives transactions may not permanently surance that the latter may legally repossess the securities lent on the same or exceed 49% of the total fund assets. next bank business day, the fund management company may lend its entire 3. The investment restrictions must also be observed when the derivative finan- holdings of a particular security eligible for lending. In this case, the effective cial instruments used are included (cf. § 15 Risk diversification). Taken as a duration of the securities lending transaction shall be unlimited. whole, the use of derivative financial instruments may not result in the fund’s 5. The fund management company shall conclude an agreement with the bor- assets being leveraged, nor may they be tantamount to a short sale. rower or intermediary whereby the latter shall pledge or transfer collateral in 4. The fund management company may use both standardised and non-stan- order to secure the restitution of securities of the same type, quality and quan- dardised (customised) derivative financial instruments. It can conduct transac- tity in favour of the fund management company. The value of the collateral tions in derivative financial instruments on a stock exchange or another regu- must at all times be equal to at least 105% of the market value of the securi- lated market open to the public or in OTC (over-the-counter) trading. ties lent. Moreover, the borrower or intermediary is responsible for ensuring 5. The fund management company may conduct OTC transactions only with the prompt, unconditional payment of any income accruing during the lend- banks and financial institutions which specialise in these transactions and can ing period, as well as for asserting other rights. ensure proper execution of the transactions. If the counterparty is not the cus- 6. The custodian bank shall ensure that the securities lending transactions are todian bank, the said counterparty must have the minimum credit ratings re- conducted in a secure manner and that the contractual terms are complied quired by the supervisory authority. with. It shall in particular monitor compliance with the requirements regard- 6. If no market prices are available for an OTC-traded derivative financial instru- ing collateral. For the duration of the lending transactions it shall also be re- ment, there must be a transparent means of determining the price at the time sponsible for the administrative duties assigned to it under the custody ac- of the purchase and sale and on each valuation day, and the price must be count regulations and for asserting all rights pertaining to the securities lent. verifiable using recognised and appropriate valuation models on the basis of the market value of the underlying securities. Moreover, before concluding § 11 Securities repurchase agreements such transactions, the fund management company must obtain specific offers from at least two potential counterparties and must accept the most favourable 1. The fund management company may enter into securities repurchase agree- offer, taking into account the credit rating, risk distribution and the range of ments (“repos”) for the fund’s account. Securities repurchase agreements can services offered. The conclusion of the transaction and the setting of the price be concluded as either repos or reverse repos. are to be documented. Repos are an instrument used by the fund management company to raise 7. The fund management company may in particular use basic forms of deriva- cash, whereby it sells securities from the fund’s assets and at the same time tives such as call options, put options, forward transactions (futures), swaps, agrees to repurchase securities of the same type, amount and quality at a spec- forward exchange transactions and forward rate agreements. In addition to ified or unspecified future date. these transactions, it may also use “exotic” derivatives, i.e. combinations of From the perspective of the counterparty, a repo is a reverse repo. Reverse re- basic derivatives and derivative financial instruments whose effect cannot be pos are an instrument used by the fund management company to invest cash, equated with one of the basic forms of derivatives, as well as structured prod- whereby it buys securities and at the same time agrees to resell securities of ucts. the same type, amount and quality at a specified or unspecified future date. 8. The fund management company may use a delta weighting when covering 2. The fund management company may conclude repo transactions with a coun- derivative positions which increase or reduce exposure. Furthermore, and con- terparty (“principal transaction”) or may instruct an intermediary to conclude trary to prov. 2, the fund management company may use interest-rate deriva- repo transactions with a counterparty either indirectly in a fiduciary capacity tives which are not fully covered by means of the underlyings or by cash equiv- (“agent transaction”) or directly (“finder transaction”). alents in order to strategically reduce or increase the duration of a bond port- 3. The fund management company shall conclude repo transactions only with folio. first-class counterparties and intermediaries specialising in transactions of this type, such as banks, brokers and insurance companies or recognised securi- § 13 Taking up and extending loans ties clearing organisations, which can ensure the proper execution of the repo transactions. 1. The fund management company may not grant loans for the investment fund’s 4. The custodian bank shall ensure that the repo transactions are conducted in a account. Securities lending according to § 10 and repurchase agreements as secure manner and that the contractual terms are complied with. It shall en- reverse repos according to § 11 are not deemed to be credit extensions with- sure that fluctuations in the value of securities used in the repo transactions in the meaning of this paragraph. are compensated daily in cash or securities (mark to market). It is also respon- 2. The fund management company may temporarily borrow up to 10% of the sible for the administrative duties assigned to it under the custody account fund’s assets, provided the custodian bank approves the loan’s terms and con- regulations during the period in which repo transactions are carried out and ditions. Repurchase agreements as repos according to § 11 are deemed to be for asserting all rights pertaining to the securities used in the repo transac- borrowing within the meaning of this paragraph. tions. 5. In a repo transaction, the fund management company may sell all types of se- § 14 Encumbrance of the fund’s assets curities which are listed on an exchange or traded on a regulated market open 1. The fund’s assets must not be pledged or otherwise encumbered, or be pledged to the public. However, it may not sell securities underlying derivative finan- or assigned as security except for securing permissible loans. However, nei- cial instruments or which have been lent or have been taken over in a reverse ther the fund management company nor the custodian bank may pledge or repo transaction. cede as collateral more than 25% of the fund’s assets. 6. If the fund management company is required to observe a period of notice 2. The fund’s assets may not be encumbered with guarantees. (which may not exceed 10 bank business days) before it may again legally re- possess the securities used in a repo transaction, it may not use more than C Investment restrictions 50% of its holdings of a particular security eligible for repo transactions; fur- § 15 Risk diversification thermore, the effective duration of the repo transactions may not exceed 30 calendar days. However if the counterparty or the intermediary provides the 1. Pursuant to § 15, the following are to be included in the risk diversification fund management company with a contractual assurance that the latter may provisions: legally repossess the securities used in the repo transaction on the same or a) investments; the next bank business day, the fund management company may use its en- b) liquid assets not held at the custodian bank; tire holdings of a particular security eligible for repo transactions. In this case, c) derivative financial instruments (including warrants); the effective duration of the repo transaction shall be unlimited. d) claims against counterparties arising from business in derivative financial 7. Engaging in repo transactions is deemed to be taking up a loan pursuant to instruments, subject to any exemptions granted by the supervisory authori- § 13, unless the money received is used to acquire securities of the same type, ty. quality, credit rating and maturity in conjunction with the conclusion of a re- 2. a) Not more than 5% of the fund assets may be invested in securities of the verse repo. same issuer. 8. With regard to reverse repos, the fund management company may only ac- b) In deviating from ltr. a), when acquiring securities from an issuer which is quire fixed or variable-interest securities issued or guaranteed by the Swiss included in the benchmark index, a maximum overweight of 5% points or Confederation, or by Swiss cantons or municipalities, or which have the mini- 125% from its percentage weighting in the benchmark index is permitted. mum credit ratings required by the supervisory authority. This can lead to a concentration of the fund’s investments in only a few se- 9. Claims arising from reverse repos are deemed to be liquid assets pursuant to curities which make up the benchmark index, thereby creating an overall § 9 and not extending a loan pursuant to § 13. risk for the fund which exceeds that of the benchmark index (market risk). c) Investments must be spread over at least 12 issuers. 4
    • 3. The fund may not acquire participation rights which represent more than 10% – fees associated with any listing of the investment fund and with the regis- of the voting rights in a company or which would enable the fund manage- tration for distribution in Switzerland or in other countries; ment company to exert significant influence on an issuer’s management, sub- – costs and commissions of the custodian bank for the safekeeping of the ject to any exemptions granted by the supervisory authority. fund’s assets, the handling of the fund’s payment transactions and perform- 4. The fund management company may not acquire more than 10% of the non- ance of the other tasks listed under § 4; voting equity and debt instruments of a single issuer. This restriction does not – the distribution of annual income to the investors; apply if at the time of the acquisition the gross amount of debt instruments – fees paid to the auditors; cannot be calculated. – advertising costs. 5. The fund management company may not acquire more than 10% of the units 2. The custodian bank and the fund management company are, however, enti- of another investment fund. tled to reimbursement of the costs incurred for extraordinary actions under- taken in the interests of the investors. IV. Information on the valuation of the fund’s assets and units, as well as 3. The investment fund shall also bear all customary transactions costs incurred on the issue and redemption of units in the management of the fund’s assets (standard brokerage fees, commis- sions, taxes, etc.). § 16 Valuation of the fund’s assets and units 1. The fund’s assets are calculated in US dollar (USD) at the market value as of VI. Financial statements and audits the end of the financial year and for each day on which units are issued or re- deemed. The fund’s assets will not be valued on days when the stock ex- § 20 Financial statements changes in the fund’s main investment countries are closed (e.g. bank and 1. The fund’s accounting currency is the US dollar (USD). stock exchange holidays). 2. The financial year shall run from 1 October to 30 September. 2. Securities listed on a stock exchange or traded on another regulated market 3. The fund management company shall publish an annual report for the fund open to the public shall be valued at the current prices paid on the main mar- within four months of the close of the financial year. ket. Other securities or rights or investments for which no current market val- 4. The fund management company shall publish a semi-annual report for the ue is available shall be valued at the price which would probably be obtained fund within two months of the close of the first-half of the financial year. in a diligent sale at the time of the valuation. In such cases, the fund manage- 5. The investor’s right to obtain information under § 5 prov. 4 is reserved. ment company shall use appropriate and recognised valuation models and principles to determine the market value. § 21 Audits 3. The net asset value of a unit represents the market value of the fund’s assets, The auditors shall each year examine whether the fund management compa- less all the fund’s liabilities, divided by the number of units in circulation. It ny and the custodian bank have acted in compliance with the fund regula- will be rounded to USD 0.01. tions and the IFA. The annual report shall contain a short report by the audi- tors on the published annual financial statements. § 17 Issue and redemption of units 1. Units will be issued or redeemed on the valuation day, i.e. the bank business VII. Appropriation of net income day after the day on which the subscription or redemption order is received. 2. The issue and redemption price of units is based on the net asset value per § 22 unit calculated on the valuation day as defined under § 16. In the case of unit 1. The net income of the fund will be distributed free of charge to the investors issues, an issuing commission may be added to the net asset value pursuant annually within four months of the close of the financial year in the fund’s ac- to § 18. In the case of unit redemptions, a redemption commission may be counting currency US dollar (USD). deducted from the net asset value pursuant to § 18. The fund management company may make additional interim distributions Transaction costs (brokerage commissions in line with the market, commis- from the income. sions, duties, etc.), incurred by the investment fund in connection with the in- 2. The share of net income arising from the taxable value of bonus shares and vestment of the amount paid in or with the sale of a redeemed portion of in- 30% of the remaining net income can be carried forward from net income to vestments corresponding to the unit, will be charged to the fund’s assets. the new account. If the net income, including income carried forward from 3. The fund management company can suspend the issue of units at any time. previous years, amounts to less than USD 1 per unit, the total net income may 4. The fund management company may temporarily and by way of exception be carried forward. suspend the redemption of fund units in the interest of all investors under the 3. Capital gains realised on the sale of property and rights can be distributed by following exceptional circumstances: the fund management company or retained for the purpose of reinvestment. a) if a market which is the basis for the valuation of a significant proportion of the fund’s assets is closed, or when trading on such a market is limited VIII. Publication of official notices or suspended; b) in the event of political, economic, military, monetary or other emergen- § 23 cies; 1. Official notices regarding the fund will be published in the “Schweizerisches c) if, owing to exchange controls or restrictions on other asset transfers, the Handelsamtsblatt” (SHAB) and “Finanz und Wirtschaft” (FuW). investment fund can no longer transact its business; 2. In particular, notification of changes to the fund regulations, a change of fund d) in the case of large-scale redemptions that could significantly affect the in- management company and/or custodian bank, as well as the liquidation of terests of the remaining investors. the fund shall be published in the above publications. 5. The fund management company shall immediately apprise the independent 3. Each time units are issued or redeemed, the fund management company shall auditors and the supervisory authority of any decision to suspend redemp- publish both the issue and redemption prices or the net asset value together tions. It shall also notify the investors in a suitable manner. with the footnote “plus commission” in the “Neue Zürcher Zeitung” (NZZ). 6. No units shall be issued as long as the redemption of units is suspended for The prices will be published at least twice per month. the reasons stipulated under prov. 4 lit. a) to c). 4. The prospectus including the fund regulations and the current annual and semi-annual reports may be obtained free of charge from the fund manage- V. Commissions and costs ment company, the custodian bank and from all distributors. § 18 Costs and commissions charged to the investor IX. Merger and liquidation of investment funds 1. When subscribing fund units, the investors can be charged an issuing com- mission accruing to the fund management company, the custodian bank and/or § 24 Prerequisites and merger process distributors in Switzerland and abroad, which in total shall not exceed 6% of 1. Subject to the agreement of the custodian bank, the fund management com- the net asset value. The applicable rate is stated in the prospectus. pany can merge funds by transferring the assets and liabilities of the fund(s) 2. When redeeming fund units, the investors can be charged a redemption com- being acquired to the acquiring fund. The investors of the fund being acquired mission accruing to the fund management company, the custodian bank and/or shall receive the corresponding number of units in the acquiring fund. The distributors in Switzerland and abroad, which in total shall not exceed 2% of fund being acquired is terminated without liquidation when the merger takes the net asset value. The applicable rate is stated in the prospectus. place, and the fund regulations of the acquiring fund shall also apply for the 3. The custodian bank will charge the investor the industry-standard commis- fund being acquired. sions and fees for the delivery of unit certificates and the encashment of phys- 2. Funds may only be merged if: ical coupons. The actual costs are shown in the prospectus. a) the funds are managed by the same fund management company and their assets are held in safekeeping at the same custodian bank; § 19 Costs and commissions charged to the fund’s assets b) the funds basically pursue the same investment policy; 1. For the management, asset management and distribution of the fund, and to c) the funds are basically identical with regard to the following provisions: cover any costs incurred, the fund management company shall charge the – appropriation of the net income and capital gains from the sale of as- fund a monthly, lump-sum administration fee (“all-in fee”) not to exceed sets and rights 0.15% (1.8% p.a.) of the average net assets. – type and calculation of all remunerations payable to the fund manage- The fund management company discloses in the prospectus when it grants ment company and to the custodian bank, including the issuing and re- reimbursements to investors and/or stock commissions to distributors/distri- demption commissions as well as other commissions and the special re- bution partners. imbursement of admissible expenses The fund management company shall inform the unitholders of the actual – the official publications in which notices about the funds must be pub- commission charged in the annual and semi-annual reports. lished, and the form these notices must take In return, the fund management company shall bear all costs accruing from – the life of the funds and the period of notice for the fund management the management, administration, distribution of the fund and safekeeping of company and the custodian bank the fund’s assets such as: – the investor’s right to terminate his/her investment; – annual fees and costs for the registration and supervision of the fund in d) the valuation of the fund assets, the calculation of the exchange ratio and Switzerland and abroad; the transfer of the fund assets and liabilities must take place on the same – other fees charged by the supervisory authorities; day. – printing the regulations and prospectus, as well as the annual and semi-an- nual reports; – publishing prices and notices to investors; 5
    • 3. The fund management company must submit the proposed change to the fund regulations and the proposed merger together with the merger sched- ule to the supervisory authority for review at least one month prior to the planned date of publication. The merger schedule must contain detailed in- formation on the reasons for the merger, the investment policies of the funds involved and any differences between the acquiring fund and the fund being acquired, the calculation of the exchange ratio, any differences with regard to remunerations and any tax implications for the funds, as well as a statement from the statutory auditors. 4. The fund management company must twice publish a notice of the proposed change to the fund regulations and the proposed merger together with the merger schedule at least two months before the planned date of the merger in the official publications of the funds in question. In this notice, the fund management company must inform investors that they may lodge objections with the supervisory authority within 30 days from the final publication or re- quest redemption of their units in accordance with the provisions of the fund regulations. 5. No costs shall arise for the fund or the investors as a result of the merger. 6. The auditors must check directly that the merger is being carried out correct- ly, and shall submit a report containing its comments in this regard to the fund management company and the supervisory authority. 7. The fund management company shall publish notification of the completion of the merger, the confirmation from the auditors regarding the proper exe- cution of the merger and the exchange ratio without delay in the official pub- lications of the funds involved. 8. The fund management company must make reference to the merger in the next annual report of the acquiring fund and in the semi-annual report if pub- lished prior to the annual report. Unless the merger falls on the final day of the normal financial year, a revised closing statement must be produced for the fund being acquired. § 25 The life of the fund and grounds for liquidation by the fund management company and custodian bank 1. The fund has been established for an indefinite period. 2. Either the fund management company or the custodian bank may liquidate the fund by withdrawing from the collective investment contract subject to a period of notice of one month. The fund management company shall an- nounce the liquidation in the official publications. 3. Once the collective investment contract has been terminated, the fund man- agement company may liquidate the fund’s assets forthwith. The custodian bank is responsible for the payment of liquidation proceeds to the investors. If the liquidation proceedings are protracted, payment may be made in instal- ments. Prior to the final payment, the fund management must obtain autho- risation from the supervisory authority. X. Changes to the fund regulations, change of fund management company or custodian bank § 26 If changes are made to the present fund regulations, or if it is intended to change the fund management company or the custodian bank, the investors may lodge objections with the supervisory authority within 30 days after the last publication or request redemption of their units in cash. XI. Applicable law and place of jurisdiction § 27 1. The fund is subject to Swiss law, in particular the Swiss Federal Act on Invest- ment Funds of 18 March 1994 (IFA). The court of jurisdiction is the court at the fund management company’s reg- istered office. 2. The German version is binding for the interpretation of the present fund reg- ulations. 3. The present fund regulations replace the regulations dated 1 September 2004. 4. These regulations shall take effect on 15 November 2006. The fund management company: UBS Fund Management (Switzerland) AG, Basel The custodian bank: UBS AG, Basel and Zurich 0278869pe 6