UBS (Lux) Dynamic Floor Fund


Published on

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

UBS (Lux) Dynamic Floor Fund

  1. 1. Administrative agent UBS Fund Services (Luxembourg) S.A., 291, Route d’Arlon, L-1150 Luxembourg (B.P. 91, L-2010 Luxembourg) UBS Fund Services (Luxembourg) S.A., as the administrative agent, is responsible for the general administrative duties involved in managing the Fund and prescribed by Luxembourg law. These administrative services mainly include domiciliation, calcu- lation of the net asset value per unit and the keeping of the Fund’s accounts as well as reporting. Auditors of the Fund UBS (Lux) Dynamic PricewaterhouseCoopers S.à r.l., B.P. 1443, L-1014 Luxembourg Auditors of the Management Company Floor Fund PricewaterhouseCoopers S.à r.l., B.P. 1443, L-1014 Luxembourg Paying agents Investment fund under Luxembourg law (“fonds commun de placement”) UBS (Luxembourg) S.A., 36–38, Grand-Rue, L-1660 Luxembourg (B.P. 2, L-2010 Lux- embourg) as well as other paying agents in the various countries in which Fund units are sold. February 2007 Sales agencies and distributors, listed as sales agencies in the sales prospectus UBS (Luxembourg) S.A., 36–38, Grand-Rue, L-1660 Luxembourg, (B.P. 2, L-2010 Luxembourg) as well as other sales agencies in the various countries in which Fund units are sold. Sales Prospectus Profile of the typical investor The subfunds are suitable for investors who wish to invest in a broadly diversified portfolio consisting of transferable corporate bonds and other bonds or of equities. Fund units may be acquired on the basis of this sales prospectus, the simplified prospectuses, the latest annual report and, if it has already been published, the sub- Historical performance sequent semi-annual report. The historical performance of the individual subfunds is outlined in the simplified Only the information contained in this sales prospectus and in one of the documents prospectus relating to each subfund. referred to therein will be deemed to be valid. The units of the subfunds of UBS (Lux) Dynamic Floor Fund are listed on the Luxem- Risk profile bourg Stock Exchange. The national laws of the countries concerned shall apply to the issue and redemp- Subfund investments may be subject to substantial fluctuations and no guarantee tion of units of the UBS (Lux) Dynamic Floor Fund. can be given that the value of a unit in the Fund will not fall below its value at the Units of the subfunds mentioned in this sales prospectus may not be offered, sold time of acquisition. or delivered in the US. Factors that can trigger such fluctuations or can influence their scale include but are not limited to: – company-specific changes Management and administration – changes in interest rates Management Company – changes in exchange rates UBS Dynamic Floor Fund Management Company S.A., R.C. Luxembourg B 44 182. – changes affecting economic factors such as employment, public expenditure and UBS Dynamic Floor Fund Management Company S.A. was established on 28 May indebtedness, inflation 1993 in the form of a public limited company in Luxembourg for unrestricted dura- – changes in the legal environment tion under the original name of SBC Innovator Management Company S.A. The com- – changes in the confidence of investors in certain classes of investment (e.g. eq- pany’s articles of association were published in the “Mémorial, Recueil des Sociétés uities), markets, countries, industries and sectors et Associations” (hereinafter referred to as “Mémorial”) on 8 September 1993. The – changes in the prices of raw materials name of the Management Company was changed to SBC Dynamic Floor Portfolio By diversifying investments, the portfolio management endeavours to partially re- Management Company S.A. on 19 June 1997 and to UBS Dynamic Floor Fund Man- duce the negative impact of such risks on the value of the subfunds. agement Company S.A. on 16 September 1998. The latter change of name was published in the “Mémorial” on 27 October 1998. The consolidated version of the Total Expense Ratio (TER) articles of association is held by the Commercial and Companies Register of the Dis- The TER expresses the relationship between the gross amount of Fund costs and av- trict Court of Luxembourg (“Tribunal d’Arrondissement”) for inspection. The exclu- erage net Fund assets. The TER for each subfund is set forth in the respective simpli- sive purpose of the Management Company is to manage the FCP (“Fonds Commun fied prospectus (also in the annual and semi-annual reports in the case of Switzerland). de Placement”) UBS (Lux) Dynamic Floor Fund and to handle the issue and redemp- tion of units of this Fund. The Management Company has fully paid-up equity cap- Portfolio turnover (PTO) ital of CHF 600,000. The PTO is calculated on the basis of the financial year by applying the following for- Board of Directors mula: Chairman Andreas Jacobs, Managing Director, Securities purchased = X Subscriptions for units of the subfund = S UBS AG, Basel and Zurich Securities sold = Y Redemptions of units of the subfund = T Members Dirk Spiegel, Executive Director, Total 1 = total securities Total 2 = total transactions involving UBS AG, Basel and Zurich transactions = X+Y units of the subfund = S+T Gerhard Fusenig, Managing Director, UBS AG, Basel and Zurich Average monthly total assets = M Gilbert Schintgen, Executive Director, UBS Fund Services (Luxembourg) S.A., Luxembourg Turnover = [(Total 1 – Total 2)/M]*100 Aloyse Hemmen, Executive Director, The PTO for each subfund is set forth in the respective simplified prospectus. UBS Fund Services (Luxembourg) S.A., Luxembourg Managers of The Fund Day-to-day Business Structure of the Fund Valerie Bernard, Director, UBS (Lux) Dynamic Floor Fund (hereinafter called the “Fund”) offers investors a range UBS Fund Services (Luxembourg) S.A., Luxembourg of different subfunds (umbrella construction) which invest in accordance with the Christophe Hilbert, Associate Director, investment policy described in this sales prospectus. This sales prospectus, which UBS Fund Services (Luxembourg) S.A., Luxembourg contains specific details on each subfund, will be brought up to date on the incep- Isabelle Asseray, Director, tion of each new subfund. UBS Fund Services (Luxembourg) S.A., Luxembourg So far, the following subfunds are available: Portfolio Management Subfund Currency of account UBS AG, UBS Global Asset Management, Basel and Zurich UBS (Lux) Dynamic Floor Fund Custodian bank and main paying agent – (CHF) 95% CHF UBS (Luxembourg) S.A., 36–38, Grand-Rue, L-1660 Luxembourg – (EUR) 95% EUR (B.P. 2, L-2010 Luxembourg) – (GBP) 95% GBP – (USD) 95% USD The custodian bank holds in safekeeping for the unitholders all the liquid assets and – (CHF) 100% CHF securities making up the Fund’s assets. The custodian bank performs all customary – (EUR) 100% EUR banking duties relating to the Fund’s accounts and securities as well as all routine – (USD) 100% USD administrative work that is related to the Fund’s assets and is prescribed by Luxem- bourg law. 1
  2. 2. Legal aspects In line with the investment guidelines set out below, each subfund may buy and sell futures and options, enter into swap transactions (swaps, total return swaps, cred- The UBS (Lux) Dynamic Floor Fund was established as an open-ended investment it default swaps and inflation swaps) on financial instruments as described in “In- fund without legally independent status in the form of a collective investment fund vestment principles” (1.1 g), and conduct transactions involving options on securi- (fonds commun de placement, FCP) pursuant to Part I of the Luxembourg law relat- ties other than for hedging purposes. ing to Undertakings for Collective Investment of 30 March 1988 and adapted on 13 The markets in options, futures and swaps are volatile; both the opportunity to February 2007 to conform to the Luxembourg law dated 20 December 2002 relat- achieve gains as well as the risk of suffering losses are higher than with investments ing to Undertakings for Collective Investment. It was originally established under the in securities. These market techniques and instruments will only be employed if they title SBC Dynamic Floor Portfolio in compliance with the Management Regulations are in accordance with the investment policies of the individual subfunds and do not approved by the Board of Directors of UBS Dynamic Floor Fund Management Com- adversely affect their quality. pany S.A. (formerly SBC Dynamic Floor Portfolio Management Company S.A.) on 11 Each subfund may hold liquid funds on an ancillary basis. March 1994. The title of the SBC Dynamic Floor Portfolio was converted to UBS (Lux) The subfund investments are also broadly diversified in terms of markets, sectors, Dynamic Floor Fund on 1 October 1998. The Management Regulations were de- borrowers, ratings and companies. For this purpose, the subfunds may invest up to posited with the Commercial and Companies Register of the District Court of Lux- 10% of their net assets in existing UCITS and UCI provided there is no conflict with embourg in Luxembourg on 27 May 1994. They were published in the Luxembourg the individual subfund’s investment policy. “Mémorial” on 30 June 1994 with amendments on 25 August 1994, 19 October The subfunds can also invest in collateralized bond obligations (CBO), credit default 1995, 29 June 1996, 8 July 1996, 28 April 1997, 17 March 1998, 30 September notes (CDN) and inflation linked notes (ILN). CDN are fixed-interest securities into 1998, 4 October 1999, 3 November 1999, 14 April 2001 and announced by way of which is embedded a credit derivative whose treatment is similar to that of credit a notice of deposit on 13 February 2007. default swaps (see point 4.5 of the investment principles). This derivative is subject The Fund’s Management Regulations may be changed in accordance with the pro- to the provisions and restrictions set out in section 4 of the investment principles visions of the law. Each time a revision is deposited it is announced in the “Mémo- outlined in the sales prospectus. rial”. The new Regulations come into effect on the day of signing, unless determined ILN are fixed- and variable-rate securities whose interest income is linked to an in- otherwise. The consolidated version is deposited at the Commercial and Companies flation rate. Register of the District Court in Luxembourg for inspection. The Fund has no legal personality as an investment fund. The entire net assets of Use of futures and options each subfund are the undivided property of all investors who have equal rights in proportion to the number of units which they hold. These assets are separate from While taking account of the restrictions set forth in the section entitled “Special tech- the assets of the Management Company. The securities and other assets of the Fund niques and instruments that have securities and money market instruments as the are managed by UBS Dynamic Floor Fund Management Company S.A. as in-house underlying”, the Management Company may employ, in relation to each subfund, funds in the interest and for the account of the unitholders. techniques and instruments that have securities and money market instruments as The Management Regulations give the Management Company the authority to es- the underlying in the context of the orderly management of the assets of each re- tablish different subfunds for the Fund as well as different unit classes with specific spective subfund. characteristics within these subfunds. This sales prospectus will be updated each By buying and/or selling futures on indices, the portfolio management is able to man- time a new subfund or an additional unit class is issued. age the flows of funds generated by subscriptions/redemptions as well as increase The Fund is subject to no restrictions with regard to the size of its net assets, the or decrease market exposure. number of units, number of subfunds and duration. By buying and/or selling call and put options on securities and indices, the portfolio The Fund forms a legal entity. With respect to the unitholders, however, each sub- management can increase or decrease the exposure for a corresponding security or fund is regarded as being separate from the others. The assets of a subfund can only market. be used to offset the liabilities which the subfund concerned has assumed. By buying warrants on securities, the portfolio management can increase the expo- The acquisition of Fund units implies acceptance of all the provisions of the Man- sure for a corresponding security. agement Regulations by the unitholder. Futures, swaps and options on currencies can be bought or sold by the portfolio The Management Regulations do not provide for a general meeting of the unitholders. management for the purpose of building up or securing foreign currency positions The Fund’s financial year finishes on the last day of September. for the subfunds. At no time may the liabilities resulting from such transactions ex- ceed the value of the net assets of the subfund concerned. Investment objective and investment policy of the subfunds Risks connected with the use of derivatives Investment objectives Derivative financial instruments are not in themselves investment instruments but UBS (Lux) Dynamic Floor Fund – (CHF) 95% rights whose valuation mainly derives from the price and the price fluctuations and UBS (Lux) Dynamic Floor Fund – (EUR) 95% expectations of an underlying instrument. Investments in derivatives are subject to UBS (Lux) Dynamic Floor Fund – (GBP) 95% the general market risk, management risk, credit and liquidity risk. UBS (Lux) Dynamic Floor Fund – (USD) 95% Depending on the specific characteristics of derivative financial instruments, how- Total earnings are sought in the long run which are significantly higher than those ever, the aforementioned risks may be of a different kind and may turn out to be from an investment in debentures of the currency in which the subfund trades as higher than the risks with an investment in the underlying instruments. denoted by its name. At the same time, the aim is not to allow the value of a unit Therefore, the employment of derivatives not only requires an understanding of the at the end of each one-year investment period to fall below 95% of its initial value. underlying instrument but also in-depth knowledge of the derivatives themselves. However, this must not be taken as any form of guarantee that the value of The risk of default in the case of derivatives traded on an exchange is generally low- a unit at the end of any one-year investment period cannot fall below 95% er than the risk associated with derivatives traded over-the-counter on the open mar- of its initial value. ket, because the clearing agents, which assume the function of issuer or counter- party in relation to each derivative traded on an exchange, assume a performance UBS (Lux) Dynamic Floor Fund – (CHF) 100% guarantee. To reduce the overall risk of default, this guarantee is supported by a dai- UBS (Lux) Dynamic Floor Fund – (EUR) 100% ly payment system maintained by the clearing agent, in which the assets required UBS (Lux) Dynamic Floor Fund – (USD) 100% for cover are calculated. In the case of derivatives traded over-the-counter on the Total earnings are sought in the long run which are significantly higher than those open market, there is no comparable clearing agent guarantee and in assessing the from an investment in the money market in the currency in which the subfund trades potential risk of default, the Management Company must take account of the cred- as denoted by its name. At the same time, the aim is not to allow the value of a unit itworthiness of each counterparty. at the end of each one-year investment period to fall below its initial value. There are also liquidity risks since it may be difficult to buy or sell certain instruments. However, this must not be taken as any form of guarantee that the value of When derivative transactions are particularly large, or the corresponding market is illiq- a unit at the end of any one-year investment period cannot fall below its uid (as may be the case with derivatives traded over-the-counter on the open market), initial value. under certain circumstances it may not always be possible to fully execute a transac- tion or it may only be possible to liquidate a position by incurring increased costs. Investment policy Additional risks connected with the employment of derivatives lie in the incorrect The subfunds are diversified portfolios each with a floor value fixed on the first busi- determination of prices or valuation of derivatives. There is also the possibility that ness day of each new investment period. The value of the subfunds aims to fall not derivatives do not completely correlate with their underlying assets, interest rates or below this floor value within the one-year investment period in question. These spe- indices. Many derivatives are complex and frequently valued subjectively. Inappro- cific subfund floor values are shown and explained in the investment objectives priate valuations can result in higher cash payment requirements in relation to coun- above. terparties or in a loss of value for the Fund. There is not always a direct or parallel The assets of the subfunds shall be invested following the principle of risk diversifi- relationship between a derivative and the value of the assets, interest rates or in- cation. The assets of the subfunds shall be invested internationally mainly in shares, dices from which it is derived. Therefore the use of derivatives by the Fund is not al- other certificates evidencing ownership in equity capital, such as cooperative shares, ways an effective means of attaining the Fund’s investment objective and can at dividend right certificates and participation certificates (equities and equity rights), times even have the opposite effect. short-term securities, money market instruments and warrants on securities, as well as debt securities and debt claims. Debt instruments and debt claims include bonds, Investing in the UBS (Lux) Dynamic Floor Fund notes, similar fixed-income and floating-rate securities, all types of asset backed se- Conditions for the issue and redemption of units curities, convertible bonds, convertible notes and warrant bonds. The subfunds may also invest in American Depositary Receipts (ADR), Global Deposi- Subfund units are issued and redeemed on every business day. In this context, “busi- tary Receipts (GDR) and structured products linked to equities, for example Equity ness day” refers to normal bank business days in Luxembourg (i.e. each day on which Linked Notes. the banks are open during normal business hours) with the exception of individual, Equity Linked Notes are bonds whose returns are linked to the development of a non-statutory rest days as well as days on which exchanges in the main countries in particular equity. which the subfund invests are closed or 50% or more subfund investments cannot Debt securities and claims and equity stock and rights are securities as defined in Ar- be adequately valued. “Non-statutory rest days” are days on which banks and fi- ticle 41 of the Luxembourg Fund Act of 20 December 2002 where this is required nancial institutions are closed. No issue or redemption will take place on days on under the terms of the investment restrictions detailed below. which the Management Company has decided not to calculate net asset value as The currency of account of the individual subfunds indicates solely the currency in described in the section “Suspension of the net asset value calculation and of the which the net asset value of the respective subfund is calculated and not the invest- issue, redemption and conversion of units”. In addition, the Management Compa- ment currency of the subfund concerned. Investments are made in those currencies ny is empowered to reject subscription applications at its discretion. which best benefit the performance of the subfunds. The Management Company does not permit transactions that it considers might jeopardise the interests of unitholders, such as “market timing” or “late trading”. 2
  3. 3. It is entitled to refuse any application for subscription or conversion that it consid- In extraordinary circumstances, additional valuations can be carried out over the ers to be allied to such practices. The Management Company is further entitled to course of the day. These new valuations will then be valid for subsequent issues and take any actions it deems necessary in order to protect the unitholders from such redemptions of units. practices. Subscription and redemption applications registered with the administra- Issue of units tive agent or the central processing facility of UBS Investment Bank in The issue prices of the subfund units are calculated according to the paragraph “Net Switzerland – a component of UBS AG – no later than by 16.00 (Central Eu- asset value, issue and redemption price”. After the initial issue, the issue price is ropean Time) on a business day (order date) will be processed on the fol- based on the net asset value per unit plus a maximum issuing commission of 6% of lowing business day on the basis of the net asset value calculated for that the net asset value in favour of the sales agencies. In addition to this, any taxes, com- day (valuation date). To secure punctual forwarding to the administrative mission and other fees that apply in the different countries in which units in the Fund agent or central processing facility of UBS Investment Bank in Switzerland, may be sold will also be charged. earlier cut-off times may apply for submission of applications placed with Subscriptions for Fund units are accepted at the issue price for the subfund by the sales agencies in Luxembourg or abroad. Information on this may be ob- Management Company, the administrative agent or the custodian bank as well as tained from the sales agency concerned. In the case of subscription or redemp- any other sales agency. tion applications registered with the administrative agent or the central processing In the case of subscriptions registered with the administrative agent or the central facility of UBS Investment Bank in Switzerland – part of UBS AG – after 16.00 CET processing facility of UBS Investment Bank in Switzerland – a component of UBS AG on a business day, the order date is considered to be the following business day. – after 16.00 (Central European Time) on a business day, the order date is consid- The foregoing also applies to applications to convert units of a subfund into units ered to be the following business day. of a different subfund of the UBS (Lux) Dynamic Floor Fund performed on the basis The issue price of a subfund unit is payable no later than on the third business day of the net asset values of the subfunds concerned. following the order date into the custodian bank account in favour of the subfund. This means that the net asset value for settlement purposes is not known when the The Management Company may accept full or partial subscriptions in kind at its own order is placed (forward pricing). It will be calculated on the valuation date on the discretion. In this case the capital subscribed in kind must be harmonised with the basis of the latest market prices (i.e. closing prices or if such do not reflect reason- investment policy and restrictions of the particular subfund. These investments will able market value in the opinion of the Management Company, at the last prices also be audited by the auditor assigned by the Management Company. Any associ- available at the time of valuation). The individual valuation principles applied are de- ated costs will be payable by the investor. scribed in the following section. If a physical unit certificate is requested, this certificate is delivered as quickly as possi- If the total subscriptions or redemptions affecting all the unit classes of a subfund ble after the issue price has been fixed. The normal bank delivery charges will be made. on a single trading day come to a net capital inflow or outflow, the net asset value Only bearer unit certificates in denominations of one or more whole units will be is- of the subfund may be increased or reduced accordingly. The maximum adjustment sued for each subfund. All units issued and still outstanding have the same rights. How- amounts to 1% of the net asset value. Estimated transaction costs and tax charges ever, the Management Regulations envisage the possibility of establishing within a sub- that may be incurred by the subfund as well as the estimated bid/offer spread of the fund various unit classes with specific features. Fractional units may also be issued, but assets in which the Fund invests may be taken into account. The adjustment leads no physical certificates will be issued for these fractions: they will instead be booked to an increase in net asset value if the net movements result in a rise in all units of to the securities custody account of the unitholder’s choice. These fractional units will the affected subfund. It results in a reduction of net asset value if the net movements be rounded to a maximum of three decimal places and do not give bearers the right bring about a fall in the number of units. The Board of Directors can set a threshold to vote at general meetings, although they do entitle bearers to receive an income dis- for each subfund. This may consist in the net movement on a trading day in relation tribution where applicable and part of the liquidation proceeds corresponding to the to the net fund assets or may be an absolute amount in the currency of the subfund number of units held, should the respective subfund or unit class be liquidated. concerned. The net asset value would be adjusted only if this threshold were to be passed on a trading day. Redemption of units Net asset value, issue and redemption price Redemption applications, accompanied by any certificates that may have been is- sued, are accepted by the Management Company, the administrative agent or the The net asset value and the issue and redemption price per unit of any subfund or custodian bank or another suitably authorised sales or paying agent. of any unit class are expressed in the currency of account of the subfund or unit class The next following business day shall be deemed the order date for redemption ap- concerned and are calculated every business day by dividing the overall net assets plications received by the administrative agent or the central settling agent of UBS of the subfund assigned to each unit class by the number of units issued in the re- Investment Bank in Switzerland – a component of UBS AG – after 16.00 (Central spective unit class of this subfund. The percentage of the net asset value to be as- European Time) on a business day. signed to a subfund’s unit class is determined by the relationship between the units The countervalue for redeemed subfund units is paid three business days after the issued in each class and the total number of units issued by the subfund. This per- order date unless legal provisions, such as foreign exchange controls or restrictions centage changes in accordance with the issue and redemption of units while the net on capital movements, or other circumstances beyond the control of the custodian asset value attributable to the unit class concerned is increased or reduced by the bank, make it impossible to transfer the redemption amount to the country in which amount received or paid out. The value of the assets held by each subfund is calcu- the redemption application was submitted. lated as follows: For subfunds with several unit classes in different currencies the countervalue for re- a) Securities, derivatives and other investments listed on a stock exchange are val- deemed units may only be paid out to the unitholder in the currency of the respective ued at the last known market prices. If the same security, derivative or other in- unit class. vestment is quoted on several stock exchanges, the last available quotation on the Any taxes, commission and other fees incurred in the countries in which Fund units stock exchange that represents the major market for this investment will apply. may be sold will also be charged. In the case of securities, derivatives and other investments little traded on a stock A redemption commission of no more than 2% (of the net asset value) may be exchange and for which a secondary market among securities traders exists with charged by the sales agency. pricing in line with the market, the Management Company may value these secu- The development of the net asset value determines whether the redemption price rities, derivatives and other investments based on these prices. Securities, deriva- is higher or lower than the issue price paid by the investor. tives and other investments that are not listed on a stock exchange, but which are In the event of an excessively large volume of redemption applications, the custodi- traded on another regulated market which is recognised, open to the public and an bank and Management Company may decide to delay execution of redemption operates in orderly fashion, are valued at the last available price on this market. applications until the corresponding assets of the Fund have been sold without un- b) Securities and other investments that are not listed at a stock exchange or trad- necessary delay. Should such a measure be necessary, all redemption applications re- ed on another regulated market, and for which no appropriate price can be ob- ceived on the same day will be calculated at the same price. tained, will be valued by the Management Company according to other princi- The Management Company may offer full or partial redemptions in kind at its own ples chosen by it in good faith on the basis of the likely sales prices. discretion. These payments will be audited by the auditor assigned by the Manage- c) The valuation of derivatives which are not listed on a stock exchange (OTC de- ment Company and may not have any negative impact on the remaining unithold- rivatives) is made by reference to independent pricing sources. In the event that ers. Any associated costs will be payable by the investor. only one independent pricing source of a derivative is available, the plausibility of the valuation obtained will be verified by means of methods of calculation Conversion of units recognised by the Management Company and the Fund’s auditors, based on the market value of the underlying instrument from which the derivative is derived. The unitholder can change from one subfund to another at any time. The same pro- d) Shares of other undertakings for collective investment in securities (UCITS) and/or cedures apply to the submission of conversion applications as apply to the issue and undertakings for collective investment (UCI) will be valued at their last net asset redemption of units. value. The number of units of the subfund into which the investor would like to convert e) For money market instruments, the valuation price will be gradually adjusted to his holding is calculated using the following formula: the redemption price, based on the net acquisition price and retaining the ensu- β*χ*δ ing yield. In the event of a significant change in market conditions, the basis for α = the valuation of different investments will be brought into line with the new mar- ε ket yields. where: f) Securities, money market instruments, derivatives and other investments that are α = number of units of the new subfund into which to convert denominated in a currency other than the currency of account of the relevant β = number of units of the subfund from which to convert subfund and which are not hedged by means of currency transactions are val- χ = the net asset value of the units presented for conversion ued at the middle currency rate (midway between the bid and offer rate) ob- δ = the foreign exchange rate between the two subfunds in question If both sub- tained from external price providers. funds are denominated in the same currency, this figure will be 1 g) Time deposits and fiduciary investments are valued at their nominal value plus ε = net asset value per unit of the subfund into which the conversion is to be made accumulated interest. plus any taxes, commission or other fees h) The value of swap transactions is calculated by the swap counterparty on the ba- For the conversion, an issue commission of no more than 3% (calculated on the net sis of the net present value of all cash flows, both inflows and outflows. This val- asset value per unit of the subfund into which to convert) may be charged in favour uation method is recognised by the Management Company and checked by the of the sales agencies. auditors. Any fees, taxes and stamp duties incurred in the countries when a conversion is made The Management Company is authorised to apply other generally recognised and are payable by the unitholder. auditable valuation criteria in order to achieve an appropriate valuation of the net In the event of a conversion, the new certificates will be delivered on request and assets if, due to extraordinary circumstances, a valuation in accordance with the without unnecessary delay. The usual bank delivery fees will be charged. aforementioned regulations proves to be unfeasible or inaccurate. 3
  4. 4. Prevention of money laundering The taxable values shown are based on the most recently available data at the time The Fund’s sales agencies must observe the provisions of the Luxembourg law dat- they were calculated. ed 19 February 1973 on the sale of drugs and the fight against drug addiction and Provided that the related subfund is not subject to EU taxation of interest or unithold- the laws dated 5 April 1993 on the financial sector and 12 November 2004 on the ers are not affected by it, they are not required under current tax law to pay any in- prevention of money laundering, each as amended, as well as the provisions of the come, gift, inheritance or other tax in Luxembourg unless they are domiciled in Lux- current Management Regulations. embourg, have a residence in Luxembourg or maintain a permanent establishment Accordingly, the subscriber must provide proof of his or her identity to the sales there, or were previously domiciled in Luxembourg and hold more than 10% of the agency or distributor that accepts his or her subscription. The sales agency or dis- units in the Fund. tributor is to request the following identification documents/information from in- This only represents a summary of the tax effects and is not intended to be an ex- vestors who require subscription or redemption: for individuals – a certified copy of haustive description. It is up to the purchasers of shares to seek information on the the passport/identity card (certified by the sales agency or distributor or by the local laws and regulations governing the purchase, possession and sale of units at their administrative authority); for companies or other legal entities – a certified copy of place of residence and for people of their nationality. the articles of incorporation, a certified copy of the extract from the Commercial Register, a copy of the most recently published annual accounts and the complete Expenses paid by the Fund name of the material beneficial owner. The Fund charges each of the subfunds or unit classes a monthly all-in fee (flat rate The sales agency must ensure that the distributors adhere strictly to the aforemen- administration fee) calculated on the average net asset value of the subfund or unit tioned identification procedures. UBS Fund Services (Luxembourg) S.A. and the Man- class as shown in the table below: agement Company can, at any time, demand assurance from the sales agency that the procedures are being adhered to. UBS Fund Services (Luxembourg) S.A. will mon- Subfund Maximum All-in Fee itor compliance with the aforementioned provisions for all subscription and redemp- UBS (Lux) Dynamic Floor Fund tion applications received from sales agencies or distributors in countries that are – (CHF) 95% not members of the Financial Action Task Force on Money Laundering (hereinafter – (EUR) 95% referred to as “FATF”). – (GBP) 95% Furthermore, the sales agency and its distributors must obey all regulations to pre- – (USD) 95% 0.10% per month (1.20% p.a.) vent money laundering which are in force in the respective countries. – (CHF) 100% FATF countries are those states that adhere to the regulations of the Financial Ac- – (EUR) 100% tion Task Force. – (USD) 100% 0.08% per month (0.96% p.a.) Suspension of the net asset value calculation and of the issue, conversion and redemption of the units 1. In accordance with the table above, the Management Company charges the var- ious subfunds a monthly all-in administration commission payment calculated The Management Company may temporarily suspend calculation of the net asset on the basis of the average net assets of the subfund concerned for the servic- value and hence the issue and redemption of units for one or more subfunds and es of the Management Company, administrative agent, custodian bank, portfo- the switching between the individual subfunds when: lio manager and for the sale of the subfund and to cover the costs incurred. – one or more stock exchanges or markets in which the valuation of a major part Unitholders will also be notified of the rate of commission chargeable in the an- of the net assets is based are closed on days that are not customary holidays or nual and semi-annual reports. trading is suspended or when these stock exchanges and markets are exposed Out of the above monthly all-in commission for administration, the Fund will to limitations or severe temporary fluctuations; bear all costs incurred in connection with the management, administration, port- – events beyond the control, liability or influence of the Management Company folio management and safekeeping of the Fund assets and Fund sales, such as: make it impossible to access the net assets under normal conditions without – annual fees and expenses of licences and supervision of the Fund in Luxem- detriment to the interests of the unitholders; bourg and abroad; – disruptions in the communications network or any other reason make it impos- – other fees charged by the supervisory authorities; sible to calculate the value of a considerable part of the net assets; – printing of the Regulations, prospectuses and the annual and semi-annual – owing to restrictions on exchange and asset transfers, the Fund can no longer reports; transact its business. – price publications and publication of notices to investors; A suspension of the calculation of the net asset value, a suspension of the issue or – charges made in connection with the listing of the Fund and sales within Lux- redemption of units and a suspension of the switching between subfunds will be embourg and abroad; notified without delay to all the responsible authorities in those countries in which – commission and expenses of the custodian bank for safekeeping of the Fund’s units of the UBS (Lux) Dynamic Floor Fund are approved for sale to the public as well assets, dealing with payments and other duties required under the Luxem- as published in a Luxembourg daily newspaper and, if necessary in the official pub- bourg law of 20 December 2002; lications specified for the respective countries in which Fund units are sold. – fees and other expenses for the payment of dividends to investors; In addition the Management Company is authorised – auditor’s fees. a) to refuse, at its discretion, an application to purchase units; 2. The custodian bank, administrative agent and Management Company are nev- b) to take back at any time units which were purchased in defiance of an exclusion ertheless entitled to be reimbursed the costs of non-routine arrangements made order. by them in the interests of the investors; otherwise such expenses will be charged directly to the Fund. Distribution of income 3. The Fund will also bear all transaction expenses arising in connection with the In accordance with Article 10 of the Management Regulations, once the annual ac- administration of the Fund assets (brokerage commission in line with the mar- counts are closed the Management Company will decide whether and to what ex- ket, fees, fiscal charges, etc.). tent distributions are to be paid out by each subfund. Distributions may not be so 4. All taxes which are levied on the income and assets of the Fund, particularly the large as to cause the net assets of the Fund to fall below the minimum amount for “taxe d’abonnement”, will also be borne by the Fund. fund assets defined by law. If distributions are made, they will be paid out within All costs which can be allocated accurately to individual subfunds will be charged to four months of the end of the financial year. these subfunds. If costs pertain to several or all subfunds, these costs will be charged The Management Company is entitled to pay interim dividends and to suspend the to the subfunds concerned in proportion to their relative net asset values. payment of distributions. In the subfunds that may invest in other UCI or UCITS under the terms of their in- Entitlements to distributions and allocations not claimed within five years of falling vestment policies, charges may be incurred both at the level of the relevant invest- due shall lapse and be paid back into the concerned unit class in the respective sub- ment fund as well as at the level of the subfund. fund. If the subfund in question has already been liquidated, the distributions and In the case of investments in units of funds managed directly or indirectly by the allocations will accrue to the remaining subfunds of the Fund in proportion to their Management Company itself or another company related to it by common manage- respective net assets. The Management Company may decide, in connection with ment or control or through having more than 10% direct or indirect stake in the the appropriation of net investment income and capital gains, to issue bonus units. capital or the voting rights of such company (Associated Fund), the subfund may An income equalisation amount will be calculated so that the distribution corre- only be charged a reduced flat rate administration fee of no more than 0.25% p.a. sponds to the actual income entitlement. In addition, the Management Company may not charge the investing subfund any Distributions are made upon submission of the relevant coupons. The Management issuing or redemption commission for Associated Funds. Company determines the method of payment. In principle, there is no obligation to When the Management Company invests in the units of an Associated Fund, ac- pay distributions to unitholders. cording to the above paragraph, which applies a lower actual flat-rate administra- tion fee than the actual flat-rate administration fee of the investing subfund (see Taxes and expenses above table), the Management Company may, instead of the aforementioned re- duced actual flat-rate administration fee on the volume invested in the Associated Tax Fund, charge the difference between the actual flat-rate administration fee of the The fund is subject to Luxembourg legislation. In accordance with current legislation investing subfund on the one hand and the actual flat-rate administration fee of the in the Grand Duchy of Luxembourg, the Fund is not subject to any Luxembourg with- Associated Fund on the other, such that at all times, the total management fee holding, income, capital gains or wealth taxes. However, each subfund is subject to payable by the subfund shall not exceed the amount stated in the sales prospectus the Grand Duchy of Luxembourg’s “taxe d’abonnement” of 0.05% p.a. on total net applicable to funds that are not Associated Funds. assets, which is payable at the end of every quarter. This tax is calculated on the net assets of each subfund at the end of every quarter. Information to unitholders Unitholders should be aware that the Luxembourg law of 21 June 2005 has replaced Council Directive 2003/48/EC dated 3 June 2003 concerning the taxation of interest. Regular reports and publications Since 1 July 2005 this law has provided for the imposition of a withholding tax on An annual report will be published as at 30 September and a semi-annual report as cross-border interest payments to individuals domiciled in the EU or alternatively an at 31 March for each subfund and for the Fund. automatic exchange of information. Where necessary, the sales office or distributor These reports contain a breakdown for each subfund in the relevant currency of ac- may, upon subscription, ask investors to give their tax identification number provid- count. The consolidated breakdown of the Fund’s overall assets is prepared in CHF. ed to the investor by the state in which he/she is domiciled for tax purposes. The annual report, which is published within four months of the end of the finan- It includes distributions and dividends payable by investment funds which invest cial year, contains the annual accounts audited by the independent auditors. more than 15%, and earnings from the assignment or repayment of units in invest- The annual and semi-annual reports are available to unitholders at the head office ment funds which invest more than 40% (from 1.1.2011: 25%) in debt instruments of the Management Company and the custodian bank. and claims as defined by the EU taxation of interest. 4
  5. 5. The issue and redemption price of each subfund is announced in Luxembourg at the c) securities and money market instruments acquired through new issues sub- head office of the Management Company and the custodian bank. ject to the proviso that the terms of issue must stipulate that admission to Notices to the unitholders will also be published in a Luxembourg daily newspaper listing on a stock exchange or trading on a regulated market mentioned in and, if necessary, in foreign daily newspapers. 1.1 a) or 1.1 b) must be applied for, and admission obtained within one year of the initial issue; Depositing of documents d) sight deposits or deposits at notice at credit institutions with a term of not The following documents are available from the head office of the Management more than 12 months, provided the institution concerned has its head of- Company: fice in an EU Member State, or – if the institution’s head office in located 1) the Management Regulations in a non-EU state – it is subject to supervisory regulations which the Lux- 2) the latest annual and semi-annual reports for the Fund embourg supervisory authority deems equivalent to those under EU law; The following documents are kept at the head office of the Management Compa- e) money market instruments as defined under “investment policy”, which ny, where they are available for inspection: are not traded on a regulated market, provided that the issuance or issuer 1) the articles of association of the Management Company of these instruments is already governed by rules providing protection for 2) the agreements concluded between the custodian bank and the Management investors and investments and on condition that such instruments are Company. – issued or guaranteed by a state, regional or local body of an approved The aforementioned agreements may be altered by common consent of the parties state or by international organisations with public-law character in which involved. one or more EU Member States are members; – issued by an undertaking whose securities are traded on the regulated markets mentioned in 1.1 a) and 1.1 b); Liquidation and merging of the Fund and its subfunds or unit – issued by an institution which is subject to supervision under Communi- classes ty law, or an institution subject to supervisory provisions which are Liquidation of the Fund and its subfunds deemed by the Luxembourg supervisory authority to be at least as strict as those of Community law; Unitholders, their heirs or other beneficiaries may not demand the division or liqui- – or issued by other issuers belonging to a category approved by the Luxem- dation of either the entire Fund or one or more individual subfunds. The Manage- bourg supervisory authority, provided that investor protection rules apply to ment Company is empowered, however, to liquidate the Fund or the subfunds pro- investments in such instruments which are equivalent to those of the first, vided that, taking into account the interests of the unitholders, such liquidation is second or third listed point above and provided the issuers constitute either considered reasonable or necessary for the protection of the Management Compa- a company with equity capital (“capital et reserves”) amounting to at least ny or Fund or for reasons of investment policy. 10 million euros (EUR 10,000,000), which prepares its annual accounts un- The decision to liquidate a subfund shall be published in a Luxembourg daily newspa- der the provisions of the Fourth Council Directive 78/660/EEC, or an entity per and, if necessary, in the official publications specified for the respective countries within a group encompassing one or more listed companies and responsi- in which Fund units are sold as listed in this sales prospectus. No units may be issued ble for its financing, or an entity which is to fund the underlying securities after the date of such a decision and each conversion into the subfunds concerned for obligations by the use of a credit line made available by a bank; will be suspended. The redemption of units or conversion from the subfund concerned f) shares of other undertakings for collective investment in transferable secu- will still be possible even after this decision is implemented, so that it will be ensured rities (UCITS) and/or open-ended undertakings for collective investment that any liquidation costs will be taken into account by the subfund and are thus borne (UCI). Such UCI must satisfy the requirements laid down in Directive by all investors holding units of the subfund at the time the decision to liquidate is 85/611/EC of 20 December 1985 and be domiciled in a member state of made. During liquidation, the Management Company shall realise the Fund’s assets in the European Union or a non-EU country, provided that the best interests of the unitholders and instruct the custodian bank to distribute the – such other UCI have been approved in accordance with statutory rules net proceeds from liquidation of the subfunds to the unitholders of said subfunds in subjecting them to supervision that, in the opinion of the CSSF, is equiv- proportion to their respective holdings. Any liquidation proceeds which cannot be dis- alent to that which applies under Community law, and that adequate tributed to the unitholders on completing the liquidation may be deposited with the provision exists for ensuring co-operation between authorities. This is custodian bank for a period of six months. Afterwards, they will be deposited with the currently the case with all member states of the European Union, Japan, “Caisse de Consignation” in Luxembourg until expiry of the limitation period. Hong Kong, USA, Canada, Switzerland and Norway, Liquidation of the Fund is mandatory in the cases prescribed by law and in the event – the level of protection afforded holders of shares in the other UCI is equiv- of the Management Company being liquidated. Notice of such liquidation is pub- alent to the level of protection afforded holders of shares in UCITS and, lished in at least three daily newspapers (one of them being a Luxembourg daily in particular, rules apply to the separate holding of assets, borrowing, newspaper) as well as in the “Mémorial”. The liquidation procedure is identical for lending and the short-selling of securities and money market instruments the Fund and its subfunds with the exception that, in the case of the Fund, any liq- that are equivalent to the requirements set forth in Directive 85/611/EEC, uidation proceeds which cannot be distributed to unitholders at the end of the liq- – the business operations of the other UCI are the subject of annual and semi- uidation procedure are immediately deposited with the “Caisse de Consignation”. annual reports that permit an assessment to be formed of the assets and liabilities, income and transactions arising during the reporting period, Merger of one or more subfunds with another undertaking for collective – the UCITS or other UCI in which shares are to be acquired may invest a investment (UCI) maximum 10% of its assets in the shares of other UCITS or UCI in ac- If the net assets of a subfund, for whatever reason, fall below EUR 10 million or its cordance with its formation documents. equivalent in any other currency, or if the economic, legal or political environment Provided the particular subfund’s investment policy does not specify other- changes, the Management Company can decide to cancel units of the correspon- wise, it may invest no more than 10% of its assets in other UCITS or UCI. ding subfund and to allocate the corresponding unitholders units in another sub- g) derivative financial instruments (“derivatives”), including equivalent cash fund or another UCI under Part I of the law of 20 December 2002. In the event of instruments, which are traded at one of the stock exchanges or regular mar- such a decision by the Management Company, the merger shall be binding for all kets listed in a) and b) above, and/or derivatives which are not traded on a unitholders of the subfund concerned after expiry of a one-month period commenc- stock exchange or regulated market (“OTC derivatives”), provided that ing on the date the decision is published. – the underlying securities constitute instruments as defined in 1.1 a) and During this period, unitholders may submit their units for redemption without hav- 1.1 b) or are financial indices, e.g. macroeconomic indices, interest rates ing to pay any redemption fees or administration costs. or currencies in which subfund investment policy permits the Manage- The decision to merge subfunds or one single subfund with another UCI established ment Company to invest, in accordance with Part I of the above law will be announced in a Luxembourg dai- – in transactions concerning OTC derivatives, the counterparties are insti- ly newspaper and, if necessary, in the official publications specified for the countries tutions which are subject to constant supervision and are in categories in which Fund units are sold as listed in this sales prospectus. approved by the Luxembourg supervisory authority, – and the OTC derivatives are subject to reliable and verifiable valuation Applicable law, place of performance and authoritative language on a daily basis and can be sold, liquidated or settled at any time by means of a back-to-back transaction at the appropriate market price on The District Court of Luxembourg is the place of performance for all legal disputes the initiative of the Management Company. between the unitholders, the Management Company and the custodian bank. Lux- 1.2 In derogation of the investment restrictions set out in 1.1 above, each subfund embourg law shall apply. However, in matters concerning the claims of investors may invest up to 10% of its net assets in securities and money market instru- from the other countries, the Management Company and/or the custodian bank ments other than those named in 1.1. may elect to make themselves and the Fund subject to the jurisdiction of the coun- 1.3 The Management Company must ensure that the overall risk associated with tries in which the units were bought and sold. derivatives does not exceed the total net value of the Fund portfolio. As part The German version of this sales prospectus is the authoritative version. However, in of its investment strategy, each subfund, within the limits set out in 2.2 and the case of units sold to investors from the other countries in which Fund units can be 2.3, may invest in derivatives provided that the overall risk of the underlying bought and sold, the Management Company and the custodian bank may recognise assets does not exceed the investment limits cited in point 2 below. approved translations (i.e. approved by the Management Company and the custodi- 1.4 Each subfund may hold liquid assets on an ancillary basis. an bank) into the languages concerned as binding upon themselves and the Fund. 2 Risk diversification Investment principles 2.1 In accordance with the principle of risk diversification, the Management Com- The following conditions also apply to the investments made by each subfund: pany is not permitted to invest more than 10% of the net assets of a subfund in securities or money market instruments from just a single issuer. The Man- 1 Investment instruments agement Company may not invest more than 20% of the net asset value in Permitted investments of the Fund deposits with one and the same institution. In transactions by a subfund in OTC 1.1 Fund investments shall consist primarily of: derivatives, the risk of loss must not exceed 10% of the assets of the subfund a) securities and money market instruments which are listed or traded on a concerned if the counterparty is a credit institution as defined in 1.1 d). The regulated market in an EU Member State, as defined in Article 1 No. 13 of maximum permissible risk of loss reduces to 5% in transactions with other the Investment Services Directive; counterparties. The total value of all positions in the securities and money mar- b) securities and money market instruments which are listed or traded on a ket instruments of those institutions accounting for more than 5% of the net securities exchange or another regulated market which is recognised, open assets of a subfund may not exceed 40% of the net assets of the respective to the public and operates in an orderly fashion in a European, American, subfund. This restriction does not apply to deposits or OTC derivatives involv- Asian, African or Australasian country (hereinafter called “approved state”); ing financial institutions which are subject to supervision. 5
  6. 6. 2.2 Regardless of the maximum limits set out in 2.1, each subfund may not invest Exempt from the provisions of 3.2 and 3.3 are securities and money market in- more than 20% of its net assets in a combination of struments which, in accordance with Article 48(3) of the law relating to under- – securities and money market instruments issued by an institution takings for collective investment enacted on 20 December 2002, are issued or – deposits with this institution and/or guaranteed by an EU Member State or its local authorities or by another ap- – exposure to risks from OTC derivatives issued in relation to this institution. proved country or are issued by international organisations with public-law 2.3 Nonetheless, contrary to the above: character of which one or more EU countries are members. a) The limit of 10% mentioned in 2.1 can be raised to a maximum of 25% 3.4 short-selling securities, money market instruments or other instruments listed for various debt instruments issued by credit institutions domiciled in an EU in 1.1 f) and g); member country and subject, in that particular country, to special legisla- 3.5 acquiring precious metals or related certificates; tive supervision of public authorities that would ensure the protection of 3.6 investing in real estate and purchasing or selling commodities or commodities investors. In particular, funds originating from the issue of such debt instru- contracts; ments must, in accordance with the law, be invested in assets which pro- 3.7 taking out loans, unless vide sufficient cover for the obligations arising during the entire term of the – the borrowing is in the form of a back-to-back loan for the purchase of for- debt instruments and, in the event of insolvency of the issuer, provide a eign currency; preference right in respect of the payment of capital and interest. The to- – the loan is only temporary and does not exceed 10% of the net assets of tal value of the investments of a subfund investing more than 5% of its net the subfund in question; assets in such debt instruments issued by one and the same issuer may not 3.8 granting credits or acting as guarantor for third parties. This restriction does exceed 80% of the net assets of that subfund. not prevent the acquisition of securities, money market instruments or the oth- b) The aforementioned limit of 10% may be raised to a maximum of 35% for er instruments listed in 1.1 f) and g) if not fully paid up; securities or money market instruments that are issued or guaranteed by an EU member state or its local authorities, by another approved country, The Management Company is authorised to introduce further investment restric- or by international organisations under public law to which one or more tions at any time in the interests of the unitholders provided these are necessary to EU states belong. ensure compliance with the laws and regulations of those countries in which the Securities which come under the special ruling given in 2.3 a) and b) are not Fund’s units are offered and sold. counted when calculating the aforementioned 40% risk diversification ceiling. c) The limits set out in 2.1, 2.2, 2.3 a) and b) may not be accumulated; there- 4 Special techniques and instruments underlying securities and money fore the investments listed in said paragraphs made in securities or money market instruments market instruments of one and the same issuer or in deposits with the said In addition to the use of derivatives as set forth in 1.1 g), the Management institution or in its derivatives may not exceed 35% of the net assets of a Company may employ the following techniques and instruments for each sub- given subfund. fund provided these are employed in the interests of hedging and orderly man- d) Companies which belong to the same group of companies in that they pre- agement of the assets of the respective subfund. pare their consolidated accounts under the rules of Directive 83/349/EEC The Management Company must ensure that the overall risk associated with (1) or according to recognised international accounting principles must be derivatives does not exceed net assets. treated as a single issuer for the calculation of the investment limits set out The following are taken into account in computing risk: the market value of in this Article. the underlying instruments, the risk of default, future foreseeable market de- However, investments by a subfund in securities and money market instru- velopments and the period within which the positions are to be liquidated. This ments of a single group of companies may together make up to 20% of also applies to the following two points: the assets of the subfund concerned. – In the case of investments in derivatives that fall within the limits set forth e) The Management Company is authorised, in the interests of risk di- below, the overall risk for the underlying instruments may not exceed the versification, to invest up to 100% of the net assets of a subfund in investment limits set forth under 2. Investments in index-based derivatives securities and money market instruments from various offerings need not be taken into account in the case of the investment limits set forth that are issued or guaranteed by an EU member state or its local au- under 2. thorities, by another approved country or by international organi- – If a derivative has a security or money market instrument as the underly- sations with public-law character in which one or more EU member ing, it has to be taken into account with regard to compliance with the rules states are members. These securities or money market instruments set forth under 4. must be divided into at least six different issues, with securities or 4.1 Options on securities money market instruments from a single issue not exceeding 30% The Management Company may, in compliance with the following guidelines, of the total net assets of a subfund. buy and sell both call and put options on approved instruments for a subfund, 2.4 Investments in other UCITS or UCI are governed by the following conditions: provided they are traded on a regulated market, or buy and sell over-the-count- a) The Management Company may invest up to 20% of the net assets of a er options, provided that the counterparties of such transactions are first-class subfund in units in one and the same UCITS or UCI. For the interpretation financial institutions which specialise in such types of transaction. of this investment limit, each subfund of a UCI with several subfunds is re- garded as an independent issuer provided that each subfund bears individ- a) Purchase of options ual responsibility in respect of third parties. The sum of the premiums paid to purchase outstanding call and put op- b) Total investments in shares of other UCI as a UCITS may not exceed 30% tions, together with the total premiums paid for the purchase of outstand- of the subfund’s net assets. The assets invested in the UCITS or other UCI ing call and put options related to non-hedging transactions, may not ex- shall not be included in the calculation of the maximum limits set out in ceed 15% of the total net assets of the subfund concerned. 2.1, 2.2 and 2.3. b) Sale of options c) If a subfund acquires units of other UCITS and/or other UCI managed di- Call options may be sold for the subfund, provided that the total of the rectly, or on the basis of assignment, by the Management Company or an- strike prices of such options does not exceed 25% of the net assets of the other company with which the Management Company is related through Fund at the time of sale. This shall not apply if at the time call options are common management or control or by a significant direct or indirect share- sold, the subfund must actually own the underlying securities or offsetting holding, the Management Company or other company may make no call options or other instruments (e.g. warrants) required to adequately charge for subscribing in or redeeming units of these other UCITS and/or hedge its obligations under these contracts. In this case, the underlying se- UCI through the subfund. curities or offsetting call options or other instruments used for hedging may d) For subfunds which, in line with their investment policy, invest a significant not be sold before the call option expires. portion of their assets in units of other UCITS and/or UCI, the maximum If the subfund sells put options, then it must have sufficient assets to cov- management fees chargeable by the subfund itself and by the other UCITS er the assumed obligations arising from the option transaction throughout and/or UCI in which it invests are described in the chapter “Expenses paid the entire option period. by the Fund”. The total obligations arising from the sale of call and put options (not in- Provided the particular subfund’s investment policy does not specify otherwise, it cluding the sale of call options that have been adequately hedged by the may invest no more than 10% of its assets in other UCITS or UCI. subfund), together with the total obligations resulting from non-hedging If the limits mentioned under 1 and 2 are exceeded unintentionally or due to the ex- transactions, may not exceed at any time the total net assets of the sub- ercise of subscription rights, the Management Company must attach top priority in fund in question. In this context, the obligations arising from the sale of call its sales of securities to normalising the situation while, at the same time, consider- and put options is equivalent to the delta-adjusted total of all the strike ing the best interests of the unitholders. prices which would apply if these options were to be exercised (delta-ad- Provided that they continue to observe the principles of diversification, newly estab- justed strike price). lished subfunds may deviate from the specific risk diversification restrictions men- 4.2 Financial futures, swaps and options on financial instruments tioned above for a period of six months after being approved by the authorities. With the exception of swap transactions and OTC contracts used to hedge in- terest rate risks, futures and options on financial instruments are restricted to 3 Investment restrictions contracts traded on a regulated market. Over-the-counter (OTC) options may The Management Company is prohibited from: only be concluded if the counterparties are first-class financial institutions 3.1 acquiring securities, the subsequent sale of which is subject to any restrictions which specialise in transactions of this kind. arising from contractual agreements; a) Hedging of market risks 3.2. acquiring equities with voting rights that would enable the Management Com- To hedge against unfavourable trends on the stock markets, the Manage- pany, possibly in conjunction with other funds that it manages, to exert a sig- ment Company may, for each subfund, sell futures and call options on a nificant influence on the operational management of the issuer concerned; stock exchange index or other financial paper or indices, or buy put options 3.3. acquiring more than on a stock exchange index or conclude swap contracts that provide for pay- – 10% of the non-voting shares of a single issuer, ments by the subfund to the other party to the transaction on the basis of – 10% of the bonds of a single issuer, stock exchange indices or transactions involving other financial paper or in- – 25% of the units of a single undertaking for collective investment, dices. As such transactions serve hedging purposes, there must be an ad- – 10% of the money market instruments of one and the same issuer. equate correlation between the structure of the securities portfolio that is In the last three cases, the restrictions on acquiring securities need not be ob- to be hedged and the composition of the stock market index employed. served if the gross amount of the debt instruments or the money market in- The obligations arising from such transactions must not exceed the market struments and the net amounts of the issued shares cannot be determined at value of the securities to be hedged and/or must not fall outside the struc- the time of acquisition. ture of the securities portfolio to be hedged. 6