Principles for executing orders

In the text that follows, all terms printed in bold are defined in the category "Definitions".

1. Purpose

In accordance with requirements of the German Securities Trading Act (Wertpapierhandelsgesetz; WpHG), UBS Europe SE, Luxembourg Branch, («UBS») takes all sufficient steps in order to obtain the best possible results for its clients when executing or receiving and transmitting client orders. The following order execution principles describe how UBS ensures that execution of client orders will be in the best interests of its clients.

2. Scope of application and execution principles

These principles are to be applied to the execution of orders through UBS on behalf of private clients as well as professional clients.

UBS's principles for executing orders are to be applied to financial instruments if UBS:

i. receives and transmits client orders,
ii. or executes orders on behalf of clients, or
iii. provides portfolio management services

These order execution principles do not apply when financial instruments are held in custody with third-party banks and where UBS transmits the orders for execution to third-party banks. In this case, the respective execution principles of the third-party banks apply.

3. Executing orders – Attaining the best possible result

Unless you give express instructions regarding the execution of the order (see section 7), when executing orders in your name and/or when receiving and transmitting your orders, UBS will take all sufficient steps to achieve the best possible result for you taking into account the execution criteria and total consideration in accordance with section 3.1 and 3.2.

The execution criteria and total consideration and other factors in accordance with 3.1 and 3.2 will be given appropriate consideration by UBS applying its commercial judgment and experience and incorporating available market information.

3.1 Execution Criteria

Unless the client has instructed otherwise, in addition to considering the total consideration next to the other factors from 3.2, UBS considers the following criteria when executing orders:

a) financial instruments which are the subject matter of the order and

b) the execution entities or venues to which that order can be directed.

3.2 Total consideration and other factors

When executing orders, UBS uses the overall cost, or total consideration as the primary guideline, for determining the best possible result for the client. The total consideration is made up of the price of the financial instrument and all related execution costs. Furthermore, other factors for attaining the best possible result are taken into consideration only insofar if they are instrumental in delivering the best possible result. Total consideration and execution factors are in particular:

a) the price of the financial instruments which are offered by this intermediary or this venue where the order is executed; and
b) the direct and indirect costs which are connected to executing financial instruments, including:

i. all expenditures that arise, which are directly connected with executing the order;
ii. fees relating to execution venues;
iii. clearing and settlement fees; and
iv. all other fees which are paid to third parties in connection with the execution of client orders;

c) speed;
d) the likelihood of client orders being executed and settled;
e) size and nature of the order; and
f) other relevant factors (such as market effects and implicit transaction costs).
UBS will choose a different execution method, taking client interest into account, in case of extraordinary market conditions, market disruptions or other special circumstances.

4. Execution venues

The list of execution venues selected by UBS for the respective class of financial instrument is itemized in the appendix to this document. The list of execution venues is not exhaustive, nor static.

However, it also includes all places to which UBS refers to a large extent orders for execution e.g. other entities in the UBS Group. UBS reserves the right to use other execution venues if it determines, when taking the criteria and factors under section 3 into consideration, that they are appropriate venues.

UBS regularly monitors execution venues, in order to identify those places which continually enable the best possible result when executing orders. As a result, the list of execution venues will be updated with any changes when required.

If necessary, UBS takes measures with regard to the commissions it charges in order to avoid unjustified disadvantages between the venues where the orders are executed.

5. Selection of a venue where orders are executed

Unless you give express instructions regarding the execution of the order (see section 7), UBS pursues the following methodology when selecting a venue where orders are executed:

- Subject to the proper consideration of the execution factors mentioned above, another legal entity of the UBS Group can act as an execution venue where orders are executed, based on UBS's assessment, where it is deemed in the best interest of the client (and/or at the very least, will not lead to any disadvantage for the client).
- Subject to the aforementioned conditions, UBS selects an execution venue that it deems the most appropriate in order to attain the best possible result for the client, which may include execution of trades outside of a trading venue.

If a different legal entity of the UBS Group functions as an intermediary, this entity must consider all reasonably available sources of information (including RMs, MTFs, SIs, OTFs local stock exchanges, brokers and data providers) in order to attain the best possible result for the order. For certain instruments, there may be only one single trading venue or restrictions in the selection of trading venues due to regulatory requirements. For such financial instruments, UBS transfers the orders to the respective (single) venue where orders are executed, under the assumption that this will lead to the best possible result for the client.

6. Execution methods

Subject to your express instructions (see section 7), UBS executes orders in accordance with the following methods and/or combinations of methods:

– Outside of trading venue by means of:
i. a different legal entity of the UBS Group which itself, acts as an execution venue where orders are executed; and/or
ii. execution by a different broker or market maker

– directly in a regulated market or MTF or OTF , if UBS is not a direct participant in the relevant regulated market and/or MTF, with a third party, if there is an agreement for executing orders in this regulated market or MTF with this party.

Orders can be handled via various execution venues, wherein all relevant information is stated in the trade confirmation and upon request, further information is available from UBS.

7. Priority of client instructions

If you give express instructions for executing an order (e.g. instructions in regards to the trading venue), UBS will execute the order in accordance with these express instructions. If your instructions only relate to a part of the order which is not covered by your express instructions, UBS will continue to apply its principles for executing orders to the part of the order which is not covered by your express instructions.

8. Receipt and transmission of orders

Unless you give express instructions regarding the execution of the order (see section 7), UBS can transfer an order to another legal entity of the UBS Group or to a third party (e.g. an external broker) for execution if, with respect to UBS, this intermediary can prove that it has principles for executing orders which allow UBS to fulfil its obligations to trade in the best interests of its clients. At the same time, UBS must trade in the best interest of the client and adhere to the remarks in sections 3 and 4 above. After checking the principles and methods for executing orders relating to potential execution locations, UBS has reached the conclusion that the execution venues listed in the appendix best enable UBS to comply with its execution obligations. UBS reserves the right to use other intermediaries (next to the intermediaries stated in section 2) if it deems these as suitable pursuant to these practices for handling orders.

9. Execution principles with regards to portfolio management or asset management services

When executing orders under portfolio management or asset management services, UBS acts in accordance with client interests and the principles of order execution. In individual cases (for example, in the case of large order volumes), UBS selects alternative execution venues, taking client interests into account.

10. Processing orders

UBS ensures that client orders are immediately and honestly executed in relation to other client orders and the trading interests of UBS.

In the execution of orders, UBS ensures that:

a) all captured orders are immediately and correctly assigned and executed; and
b) comparable orders are executed immediately in the sequence in which they are received or forwarded to a third party for the purpose of execution

Where practical, orders which are entered via different channels are processed with the aim of handling them in the sequence in which they are entered whenever possible.

Client orders or own account transactions are not executed together with other client orders unless:

a) clients are not disadvantaged by the merging of orders and transactions (block order);
b) it will be explained to the client that in individual cases disadvantages may arise for him as a result of merging orders; and
c) the provisions for allocating orders, as listed in these principles for executing orders, have been adhered to.

However, as part of its portfolio management or asset services, UBS regularly aggregates client orders for the relevant service and executes them in compliance with the principles of order execution (block order) in order to facilitate client equality. In this regard, UBS takes particular account of the order volume and the current market liquidity.

If several client orders are executed as a block order, UBS uses the arithmetic mean of the prices of the executions when allocating them to the individual client custody accounts, in case several execution prices are available.

With reference to market and limit orders, UBS shall neither block nor cancel client orders for its own benefit or that of a third party.

11. Execution principles per asset class

Unless regulated separately for each financial instrument, UBS conducts the purchase and sale of financial instruments as commission business. For each class or part of each financial instrument, the execution venue is used, which, taking into account item 3, achieves the best possible result (so-called Smart Order Routing). When executing orders, UBS distinguishes between the following asset classes.

11.1 Equities and Equity-like Instruments

UBS will execute orders in above mentioned asset class considering execution criteria as outlined in section 3 using the trading venues listed in the annex.

11.2 Exchange Traded Funds (ETF)

UBS will execute orders in above mentioned asset class considering execution criteria as outlined in section 3 using the trading venues listed in the annex.

11.3 Fixed Income and Money Market Instruments

UBS will execute orders in above mentioned asset class considering execution criteria as outlined in section 3 using the trading venues listed in the annex. In regards to the execution costs the tradable volumes are considered if additional costs will be applied as a result of partial executions due to lack of liquidity.

11.4 Securitized Derivatives and Certificates

UBS will execute orders in above mentioned asset class considering execution criteria as outlined in section 3 using the trading venues listed in the annex. In regards to the execution costs the tradable volumes are considered if additional costs will be applied as a result of partial executions due to lack of liquidity.

11.5 Exchange Traded Derivatives (ETD / Options and Futures)

UBS executes orders in above mentioned asset class using the relevant trading venues listed in the annex. Due to the product specifications and the lack of fungibility of these products, it is necessary to specify a specific trading venue.

11.6 Non-securitized and Non-standardized Derivatives (excluding ETD)

In the above mentioned asset class, the transaction will be executed directly between client and UBS. Due to the fact that these contracts are tailor made there is per nature only one trading venue available (UBS).

11.7 Investment Fund

The execution principles cannot be applied in the above mentioned asset class as these instruments are placed directly with the registrar and transfer agent at the official NAV (Net Asset Value).

11.8 Other classes of financial instruments or financial instruments

For all other asset classes of financial instruments or financial instruments, UBS will determine the respective execution venue in accordance with the principles of order execution or obtain explicit instructions from the customer.

12. Monitoring

UBS monitor on a regular basis adherence to these principles for executing orders.

13. Review

UBS reviews the order execution principles once a year. The review also includes the use of intermediaries. In addition, UBS will review these principles if there are indications that UBS's ability to achieve the best possible results for the client is materially impaired. A material impairment exists in particular if circumstances influence order execution factors as outlined in section 3.2.

14. Effective date

These order execution principles will be valid from 3^rd of January 2018.

15. Definitions

Certificates - describes bonds whose value is derived from the value of another financial instrument (underlying).

Execution criteria - describe the criteria listed in section 3.1 of this document.

Execution factors - describe the factors listed in section 3.2. of this document.

Execution venue - describes a regulated market, a MTF, a SI, an OTF, a market maker or different liquidity provider and/or a unit which realizes a similar task to one of the aforementioned instances.

ETD - describes an standardized derivative financial instrument traded on a regulated derivative exchange.

ETF - describes an exchange-traded investment fund, which is usually operated as an index fund.

Intermediary - describes an investment service company to which UBS transmits orders to buy and sell financial instruments.

Financial instruments - include all products according to § 2 Abs. 4WpHG. These include in particular (not exhaustively):

i. equities and exchange traded investment funds (so called ETFs);
ii. fixed income and money-market instruments;
iii. securitized derivatives;
iv. non-securitized standardized forward contracts (futures) and options (ETD) traded on a regulated derivative exchange;
v. non-securitized and non-standardized derivatives traded over the counter (OTC); and
vi. shares in open investment funds.

In order to rule out misunderstandings, "Financial instruments" do not include "spot transactions" or credits, wherein, with reference to commodities, certain exceptions apply. For more details see section 11.

Total costs - is the price of the financial instrument and all costs associated with its execution.

Commission business - refers to the purchase and sale of financial instruments in their own name for the account of third parties (financial commission business)

Clients - Within the framework of the execution principles, both private clients (§67 (3) WpHG) and professional clients (§67.2 and 6 WpHG) are included. Professional clients are those clients where UBS can assume that they have the experience, knowledge and expertise to make their investment decisions and take appropriate account of the risks involved. Private clients are those clients who are not professional clients and where higher consumer protection standards apply.

Multilateral Trading Facility ("MTF") - describes a multilateral system operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments in a way that results in a contract.

Order - describes the instruction to buy or sell a financial instrument which is accepted by UBS for execution or for passing on to a third party.

Organised Trading Facility ("OTF") - means a multilateral system which is not a regulated market or an MTF and in which multiple thirdparties buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in the system in a way that results in a contract.

Regulated Market ("RM") - describes a multilateral system operated and/or administered by a market operator which consolidates or promotes the consolidation of the interests of a large number of third parties in the purchasing and selling of financial instruments within the system and according to its rules which, in such way, works properly and leads to a contract in relation to financial instruments which have been approved for trading in accordance with the rules and/or the systems of the market and which have received an approval.

Systematic Internaliser ("SI") - describes an investment firm which, on an organised, frequent systematic and substantial basis, deals on own account when executing client orders outside a regulated market, an MTF or an OTF without operating a multilateral system.

Trading Venue - describes a regulated market, a MTF or an OTF.

Execution Venues provided by UBS Europe SE, Luxembourg Branch, as of September 2017

Note that this list of Execution Venues is not exhaustive. This list will be kept under review and updated in accordance with UBS’ Order execution practices. UBS reserves the right to use other Execution Venues additional to those listed here where it deems appropriate in accordance with UBS' Order execution practices. Where UBS acts as the Execution Venue, it will consider all sources of reasonably available information, including MTFs, local exchanges, brokers and data vendors, to obtain the best possible result for the Order.