INVESTMENT REGULATIONS

Transcription

1 INVESTMENT REGULATIONS copré April 2015

2 INVESTMENT REGULATIONS / 18 TABLE OF CONTENTS Preamble 3 I General principles 3 II Investment directives 3 III Organisation Tasks of the Board of Trustees of the Foundation Tasks of the Investment Committee Tasks of the Chairman of the Investment Committee... 5 IV Exercise of the rights of the shareholder 6 V Integrity and loyalty of managers, financial advantages and conflicts of interest 6 VI Coming into force 7 APPENDIX 1 Asset valuation concept... 8 APPENDIX 2.1. Investment strategy... 9 APPENDIX 2.2. Extension of the investment rules (art. 50, al. 4 OPP2) APPENDIX 3 Rules for setting up the market fluctuation reserve APPENDIX 4 Policy for management of real estate assets APPENDIX 4.1 Method of valuation of the buildings APPENDIX 4.2 Specific examination criteria for purchase or sale decisions APPENDIX 5 System for monitoring real estate activities... 18

3 INVESTMENT REGULATIONS / 18 PREAMBLE In accordance with articles 65 and 71 of the Federal Law on Occupational, Old Age, Survivors and Disability Insurance (LPP), 48 e to 48 l and 49 to 59 of the Ordinance on Occupational, Old Age Survivors and Disability Insurance (OPP2), the Board of Trustees of the Foundation issues the following regulations on the investment of the Foundation s assets. I GENERAL PRINCIPLES The Foundation shall manage its assets in such a way as to guarantee security, the spreading of risks, an adequate return on investment and the coverage of the estimated need for liquidities, according to an active, documented and current process. In the framework of drafting the investment rules, it ensures that these do not jeopardise its obligation to fulfil its commitments at all times. As a first step the Foundation strives to ensure the security of achieving the goals of the insurance fund. To this end it carefully selects, manages and controls its investments. The security is evaluated by taking account of all the assets and liabilities, the prevailing financial situation as well as the structure and foreseeable future evolution of its insured persons. The Foundation respects the principle of an appropriate distribution of risks. The assets are split between different categories of investment as well as between several economic regions and sectors. The Board of Trustees obtains information on existing and potential risks by consulting with the specialists it deems to be the most apt to enlighten it according to the circumstances: experts, auditors, actuaries, legal advisors etc. It may at its own initiative carry out analyses of the assets/liabilities of the institution, but is not obliged to do so. The valuation of the assets is subject to the rules set out in Appendix 1. II INVESTMENT DIRECTIVES The investment of the Foundation s assets is subject to the directives set out in the present investment regulations, in the «policy for management of real estate assets» and in the «system of control of real estate activities». The responsibility for the strategic allocation of the assets as well as of the results of the management falls to the Board of Trustees. The allocation is presented in Appendix 2.1.

4 INVESTMENT REGULATIONS / 18 Unless justified by a need to cover, derivatives and futures are not authorised. The use of structured products or hedge funds is in principle not authorised. However, the Investment Committee may exceptionally authorise their use, but in no case for an amount exceeding 10% of the assets (previous month s balance) under the responsibility of the manager who makes such a request. Investments in emerging country markets are authorised. Investments in commodities are authorised, but only through companies active in this sector, investment funds or trackers. The Board of Trustees may decide to borrow from third party funds to meet cash flow requirements or to refinance real estate activities. It can make use of the possibility offered in art. 50 al. 4 OPP2 of extending the investment rules, provided that al. 1 to 3 of this same article are respected, as well as the guarantees mentioned in art. 71 al.1 LPP. If the Foundation resorts to a loan, the Investment Committee includes in its regular report to the Board (art.3 al.2. par.8) the appropriate information for a proper understanding of the opportunity and risks inherent in the situation, in relation with the other existing assets and liabilities. In the absence of an express written derogation in writing by the Board of Trustees, exposure to a single debtor must not exceed 5% of the total assets of the Foundation. This restriction must be understood as applying to all types of investment concerning the same debtor. On the explicit authorisation of the Investment Committee, the depository bank may offer securities lending. The authorisation given to the depository bank must always cover a defined period not exceeding one year. The Investment Committee pays particular attention to the percentage of the portfolio loaned to a single counterparty and to the quality of the latter. III ORGANISATION 3.1 Tasks of the Board of Trustees of the Foundation Responsibility for managing the Foundation s assets falls to the Board of Trustees, which approves the investment regulations and their modifications, and sets the strategic allocation of the fortune. The Board of Trustees shall nominate the Investment Committee, which carries out, under its responsibility, the monitoring of the ongoing management of the assets. It is composed of 3 to 5 members, of whom at least one half shall form part of the Board of Trustees. The Chairman of the Investment Committee shall be appointed by the Board of Trustees. The Board of Trustees shall decide on the delegation of the management of the movable and real estate assets to one or several asset managers.

5 INVESTMENT REGULATIONS / Tasks of the Investment Committee The members of the Investment Committee are nominated for a period of 4 years. Their mandate is renewable. The mandates of the members of the Investment Committee who also sit on the Board of Trustees shall expire on the same date for both functions. Unless otherwise explicitly decided by the Board of Trustees, the end of the mandate as member of the Board implies the end of the mandate as member of the Investment Committee. The Investment Committee: - assumes the tasks of day-to-day management of assets and real estate investments, - consults regularly on the evolution of the portfolio and checks the conformity of the management of the mandates given to the asset manager(s), especially according to the management reports of the depository bank, - meets as often as necessary, but at least twice a year, to evaluate the situation, - monitors respect of the application of the investment regulations and of the decisions of the Board of Trustees, - organises the selection process of the asset managers and the other agents involved in asset management, - proposes to the Board of Trustees revisions of the investment regulations, - proposes any modifications to the strategic allocation, - regularly provides the Board of Trustees with a report on its controls, activities, the evolution of the situation and the assets. On the basis of this report, the Board of Trustees checks the execution of the investment of the assets. - decides on the timeliness of securities lending. 3.3 Tasks of the Chairman of the Investment Committee The Chairman of the Investment Committee: - convenes the Committee each time circumstances warrant it, - is responsible for the monitoring and day-to-day management of liquidities, - ensures that the execution of the mandates given complies with the investment directives, - provides the liaison with the agents and arranges for their supervision, - ensures that minutes are taken of each committee meeting and that these are sent to the management committee as soon as approved - informs the members of the Board of Trustees on at least a quarterly basis of the results of the management by sending it a succinct report on the results per manager and globally, covering the past month and from 1 January. As far as possible, it includes the result of the reference index.

6 INVESTMENT REGULATIONS / 18 IV EXERCISE OF THE RIGHTS OF THE SHAREHOLDER The Foundation s strategy with regard to both Swiss and foreign shares is currently via indirect investments, so the exercise of voting rights is not feasible. In the event of direct holdings of shares, the Foundation shall apply the provisions of the ORAb as follows: 1. The right to vote is exercised for shares of Swiss companies held directly. 2. The Investment Committee decides on the voting behaviour and exercises the voting right directly. 3. The voting right is exercised in the interests of the insured and the beneficiaries. The sustainable prosperity of the pension institution is the primary concern. The proposals are evaluated in the long-term interests of the shareholders. 4. If the majority of the members of the Investment Committee do not reach agreement on the date of the general assembly of the company concerned, the right of vote shall be applied according to the recommendations of the Managing Board. 5. Copré s voting behaviour shall be made public on its website internet in the form of an annual report. V INTEGRITY AND LOYALTY OF MANAGERS, FINANCIAL ADVANTAGES AND CONFLICTS OF INTEREST 5.1 The Foundation shall authorise the persons who manage and administer the Fund s assets to conclude transactions on their behalf, provided they respect the rules defined in art. 48f al. 2 OPP Except by prior written authorization from the Board of Trustees, transactions carried out by third parties on their own behalf with the assets of the Foundation shall not be authorized. 5.3 The asset managers must declare to the Foundation, every year and in writing, whether they have benefited from personal advantages, due to the fact of their contractual link with the Foundation, whether these be pecuniary advantages or in kind, under reserve of art below. 5.4 The members of the bodies of the Foundation, as well as the asset managers shall be authorised to receive trifling gifts or occasional presents up to a maximum amount value of CHF 500 or the equivalent. Beyond this, they are required to inform the Board of Trustees. 5.5 Persons and institutions not required to inform shall be those to whom the law of 8 November 1934 on banks and savings funds applies. 5.6 The asset managers undertake to comply with the principles of loyalty, and to ensure that their staff also respect them. 5.7 The asset managers must provide evidence of their affiliation to the Swiss Association of Asset

7 INVESTMENT REGULATIONS / 18 Managers or to a professional association considered as equivalent by the Board of Trustees. 5.8 The real estate asset managers must provide evidence of their affiliation to a professional association which has issued rules of deontology that have been approved by the Board of Trustees. 5.9 In addition, the organs of the Foundation and the sub-contractors shall ensure that articles 48fh OPP2 are respected at all times. VI COMING INTO FORCE The present regulations cancel and replace the regulations which have applied since 1 st January Approved in the meeting of the Board of Trustees on 30 April 2015, with the inclusion and updating of all the amendments (appendices) already validated on 4 September On behalf of the Board of Trustees The Chairwoman The Vice-Chairman Carouge, 30 April 2015 Appendices: Agreed on Valid from APPENDIX 1 Concept of valuation of the assets APPENDIX 2.1 Investment strategy, asset allocation grid APPENDIX 2.2 Investment strategy, extension of investment rules APPENDIX 3 Rules for setting up the fluctuations reserve APPENDIX 4 Real estate management policy APPENDIX 4.1 Method of valuation of buildings APPENDIX 4.2 Specific examination criteria for purchasing and selling decisions APPENDIX 5 Monitoring system for real estate activities The present document is a translation from the French original text. In case of discrepancies between the English and French versions, the French version shall apply and prevail.

8 INVESTMENT REGULATIONS / 18 APPENDIX 1 ASSET VALUATION CONCEPT Listed securities: Securities listed on an official stock exchange or securities traded OTC are estimated respectively at their market value or at the last price paid on the date of the balance sheet. Unlisted securities: Securities not listed on an official stock exchange and not traded OTC are estimated at their real value. This appreciation shall take account of the possibilities of realising the value concerned by seeking recent examples or by proceeding by comparison with similar quoted securities. The Investment Committee shall determine these values. Unlisted collective investments are evaluated at the last net inventory value (NIV) known before the closing of the balance sheet. Buildings Buildings are evaluated at their capital value which is based on the capitalisation of the realisable rentals in the long term. The capitalisation rate is set by the Board of Trustees, in function of the market conditions and the nature of the objects (dwelling, business, mixed, etc.). It is reviewed every 5 years, unless there are exceptional events that might justify its earlier review. This rate is mentioned in the annual report. Foreign currencies The valuation of foreign currencies is based on the currency exchange rate at the date of closing. Transactions in foreign currencies carried out during the reference period are to be posted systematically at the rates in force between them on the date of the operation. Market fluctuation reserve The market fluctuation reserve (MFR), as specified in art. 48e LPP, is calculated according to the method set out in Appendix 3. Approved in the meeting of the Board of Trustees on 4 December 2009, it came into force on 1 January 2009, and replaces Appendix 1 approved on 20 November 2007, and in force since 1 January 2007.

9 INVESTMENT REGULATIONS / 18 APPENDIX 2.1. INVESTMENT STRATEGY GRID FOR ALLOCATION OF ASSETS (%) Limits per asset category (Margins min/max : +/- 40%) Strategy Minimum fluctuation margin Maximum fluctuation margin Liquidities (CC / CT / Pl. fid.) Bonds in CHF (deb. CH and/or foreign) 16 9,6 22,4 Bonds in foreign currencies 6 3,6 8,40 Total fixed revenue (excl. cash) 22 13,20 30,8 Shares in CHF and investment funds in shares in CHF Shares in foreign currencies and investment funds in shares in foreign currencies 14 8,40 19, ,40 19,60 Total shares 28 16,8 39,2 Real estate in Switzerland in the form of buildings or of directly held shares in property development companies Real estate foreign countries Total real estate Others (Private Equity, infrastructures, etc.) Maximum global limits Securities in companies or investment funds invested in commodities 5 % Securities in companies or investment funds invested in emerging markets 7,5 % Total exposure in foreign currencies 40 % Maximum individual limits Per real estate object in Switzerland in the form of buildings 10 % Approved in the meeting of the Board of Trustees on 30 April 2014, it comes into force on 1 January 2015, and replaces Appendix 2 approved on 4 September 2013, and in force since 1 January 2014.

10 INVESTMENT REGULATIONS / 18 APPENDIX 2.2. EXTENSION OF THE INVESTMENT RULES (ART. 50, AL. 4 OPP2) Based on the authorisation conferred on it by law, the Board of Trustees has decided on the following extensions of the rules for investment: Real estate: - Investments in the real estate sector can be made in Switzerland in the form of directly owned buildings or by shares in property companies within the limits mentioned in the allocation grid. - Investment in a single real estate object may not exceed 10% of the amount of the assets less the loans. Loans: - Loans at short, medium and long term can be contracted. The sum of the loans may not exceed 25% of the assets of the Foundation. - Loans destined to finance the cash flow may not exceed one year. - The debt guaranteed by buildings or shares in property companies may not exceed 50% of their acquisition value or balance sheet value. - The maximum debt per real estate object is set at 50%. Currencies: - 40% of the global assets can be invested in foreign currencies without covering the exchange risk. Approved in the meeting of the Board of Trustees on 4 December 2009, and in force since 1 January 2009.

11 INVESTMENT REGULATIONS / 18 APPENDIX 3 RULES FOR SETTING UP THE MARKET FLUCTUATION RESERVE In conformity with Art. 48e of the Order on the Occupational Old Age and Disability Pension Plan (OPP 2), we define here the target level of the Market Fluctuation Reserve (MFR). Price fluctuations are essentially linked to the more or less risky nature of the assets held in the portfolio, to their relative weighting within the latter, and to the co-dependencies measured between their respective developments. A risky asset is one in which the scattering of the performances is recognised to be wider than that of the other assets. Exposure to risk is quite obviously even more significant when the weighting of this asset within the portfolio of the institution is high. Finally, if the movements between the assets are strongly correlated, they will add up, but if only weakly or even negatively, the movement of certain assets will be counterbalanced by the inverse movements observed among the others. The target level of the MFR corresponds to the provision that would be necessary for the probability that the Foundation goes into under-coverage in the next three years is below 2.5%. This is a Valueat-Risk (VaR) with a level of security of 97.5% and a time horizon of three years. Approved in the meeting of the Board of Trustees on 31 January 2014, it comes into force on 1 January 2014, and replaces Appendix 3 approved on 20 November 2007 and in force since 1 January 2007.

12 INVESTMENT REGULATIONS / 18 APPENDIX 4 POLICY FOR MANAGEMENT OF REAL ESTATE ASSETS By virtue in particular of articles 71 LPP, 49a OPP2 and 3 of the Investment Regulations of the Foundation, the Board of Trustees (hereinafter referred to as BT) has established the following policy for managing real estate assets: 1. This policy sets out the conditions applicable to the acquisition, sale and holding of real estate assets. 2. The following can be considered for investment: 2.1 Buildings with residential units to let. 2.2 Mixed buildings, provided that the commercial rental revenues represent no more than 30% of the gross rental status, unless a well-founded exception has been authorised. 2.3 Shares in real estate companies holding the whole of the buildings appearing on their balance sheet, 2.4 The Foundation may participate in real estate promotions and developments, provided that these meet the criteria with respect to purchase, duration and sale, 2.5 Exceptionally, commercial buildings and shares in investment funds, including investment foundations (LLPs invested in property), 2.6 In principle, the buildings purchased are destined to remain in the portfolio. 3. The management of the real estate assets is delegated to a professional asset manager respecting article 5 of amendment n 1 to the Investment Regulations, selected by the Investment committee (COPLA) and appointed by the Board of Trustees. COPLA ensures that the parties involved in managing the real estate investments respect articles 48f-l OPP2 and 5.9 of the Investment Regulations. It ensures in particular that: - the Board of Trustees is informed of possible conflicts of interest; - the attestation specified in article 48g OPP2 is required annually; - a delegation of COPLA visits the offices of the asset manager once a year. 4. The valuation of the buildings complies with the method described in Appendix The agent submits to COPLA proposals for acquisition, development and sale. 6. Procedure with respect to acquisitions and sales 6.1 The Investment Committee analyses the purchase and sale files on the basis of a standard file presented in a succinct manner by the asset manager. Purchase files that do not meet the financial capacities of the Foundation are eliminated during this preliminary examination process.

13 INVESTMENT REGULATIONS / With respect to the files retained, the asset manager establishes a document with the information contained in appendix 4.2 and makes a duly substantiated purchase or sale recommendation. This document must contain as a minimum the essential characteristics of the building, and in the case of acquisition, the financial conditions, an operating statement according to DCF, an investment plan, and three development scenarios (optimistic, balanced and pessimistic). 6.3 The Investment Committee communicates its recommendation to the Board of Trustees for a decision. 7. In the absence of a substantiated and documented exception, the general and specific acquisition criteria are: 7.1 General criteria: - Geographical regions: 1) Western Switzerland and 2) the rest of Switzerland - Location: the characteristics of the building must be consistent with its location. - Quality: the state of maintenance of the building must be in keeping with the potential for the medium-term improvement of its rental state. 7.2 Specific criteria: The specific criteria are those mentioned in the ad hoc document. 7.3 Performance objective: The net return is defined as the result of rents received less the "current charges (recurrent and maintenance charges), less works posted as charges", reported as a % of the purchase price of the building (price + purchase fees, transfer taxes and commission). This return is calculated without taking into account a mortgage leverage. The performance objective is established taking into account the rate of 10-year government bonds (considered as a risk-free rate), increased by 450 base points (to take account of the technical interest rate, a reserve for management fees and the management fees of the manager of the real estate portfolio). A fluctuation margin of + or 100 base points may be applied taking into account the differential between the rate on government bonds of the month in which the object is proposed and the historical inflation rate of 2% over 100 years. The rate of return of 6.5% must be considered as a rate established for the long term, as it is constituted by the average rate of inflation of the last 100 years in Switzerland = about 2 % (2.31% to be precise) bp. When the rate on government is lower than 1%, the net rate of return expected from the object proposed must therefore be equal to or higher than 4.50%. When the rate on government bonds is higher than 1%, then, by increments of 0.5%, the net rate of return expected from the object proposed must be equal to or higher than 5.5%, respectively 6%, 6.5% etc. This objective will be reviewed by COPLA every year so as to validate its appropriateness.

14 INVESTMENT REGULATIONS / 18 This performance objective may not be respected in an acquisition if the asset manager demonstrates that the potential of the building makes it possible to achieve it in the medium term. The above returns are understood to be without leverage effect. 8. Sale criteria: Properties can be sold if they no longer meet the acquisition criteria, or if it is considered that these criteria cannot be re-established. They can also be sold if the sale makes it possible to achieve a substantial capital gain. 9. Monitoring organisation and decision-making powers: 9.1 The real estate asset manager submits to COPLA an investment plan covering one year for recommendation to the BT which needs to approve it. 9.2 Major works, as well as renovations, envisaged during the course of a financial year must be the object of an overall budget established by the asset manager and submitted to the Investment Committee, which will transmit it to the BT for a decision, after analysis of its validity. 9.3 Within the limits of the annual budget allocated by the BT for renovation works in the apartments, these are approved by the Managing Director and endorsed by the Secretary- General or by a member of management, when the immediate yield of the investment is equal to or greater than the rate of capitalisation of the return on the building concerned. If this objective is not achieved, approval must be given by COPLA, after written justification from the asset manager. If the annual budget proves to be insufficient, an additional amount can be authorised by the BT, on recommendation from COPLA. 9.4 Apart from the case of renovation works mentioned above, all the other budgets approved by the BT within the scope of the annual approval process of the overall budget for works must be validated by COPLA before the work begins. 9.5 In the course of the financial year, COPLA has the authority to approve the works off-budget or in excess of the budget for a total amount equivalent to 10% of the annual budget for works and renovations approved by the BT. It must inform the BT, at its next meeting, of the situation of this item. 9.6 A table for monitoring the budgets must be submitted by the asset manager to the Investment Committee at the end of January, the end of April, the end of August and the end of November. In addition, the manager shall submit an activity report to COPLA on a quarterly basis, informing it of the principal initiatives carried out in the portfolio during the past period. The Management Committee shall receive copies of the above-mentioned documents. Approved in the meeting of the Board of Trustees on 27 June 2013, it comes into force on 1 July 2013, and replaces Appendix 4 approved on 10 May 2010 and in force since 10 May 2010.

15 INVESTMENT REGULATIONS / 18 APPENDIX 4.1 METHOD OF VALUATION OF THE BUILDINGS By virtue of art. 10 of the «Policy for Managing Real Estate Assets», the valuation of properties is carried out according to the method described below: Properties are valuated at their capital value, which is based on the capitalisation of realisable rentals in the long term, more precisely on the dynamic rental status corresponding to the rental status on 1 January of the year following the closing (theoretical rent for January, annualised). The notion of dynamic means that the rent increases established on 1 January are taken into account (expected future revenues). On the other hand, the notions of collection and of vacant premises are not taken into account in the dynamic rental status. These two risks are taken into account through the discount rate. The market adjustment rate set by the Board of Trustees is 6.5%, effective since 1 January It is broken down as follows: 1. Technical rate + longevity margin 4,4% 2. Return on equity cf. 1) 3. Running expenses 1,4% 4. Maintenance costs cf. 3) 5. Stabilizing/decontamination 0,6% 6. Specific allocations 0,0% 7. Risk «vacant premises» 0,0% 8. Others: - Losses on debtors 0,1% - Costs of dynamic management - Miscellaneous In its meeting of 31 January 2012, the Board of Trustees decided to reduce the technical rate from 4% to 3.5% as of It nevertheless judged inappropriate to move the discount rate to 6%, according to the mechanism described above. Indeed it noted that this method was no longer appropriate, as it does not take account of the major renovation works carried out. It thus becomes necessary to have an approach per building with a capitalisation rate determined in line with individualised parameters. This approach was to be defined in the course of 2012 so as to be applied for the valuation of buildings for the 2012 financial year. In the meantime, the Board of Trustees decided that the discount rate for the 2011 financial year would be calculated at 6.25%. In its meeting on 5 December 2013, the Board of Trustees decided that the discount rate for the 2012 financial year and following years would also be calculated at 6.25% until a new method is approved. Approved in the meeting of the Board of Trustees on 5 December 2013, it comes into force on 31 December 2013, and cancels and replaces Appendix 4.1 of the Regulations that came into force on 31 December 2012.

16 INVESTMENT REGULATIONS / 18 APPENDIX 4.2 SPECIFIC EXAMINATION CRITERIA FOR PURCHASE OR SALE DECISIONS The criteria at the date this appendix comes into force are the following: 1. Strategy of the Foundation Restructuring of the Foundation s portfolio, liquidity requirements or liquidities available. 2. Situation and status of the real estate market Compatibility of the building s characteristics with the specificities of supply and demand. 3. Location and situation of the building Disturbances, public transport, evolution of the characteristics of the neighbourhood. 4. Architectural characteristics of the building 5. Dilapidation of the building Works to be envisaged and refurbishment costs. 6. Distribution of the building s surfaces Accommodation and commercial units (maximum 30% of the gross rental status), parking places. 7. Typology Number of accommodation units and number or rooms per unit, quality of the distribution, spaciousness, size of rooms and compatibility with the characteristics of the property market. 8. Rental status Comparing the existing rental status with a theoretical rental status (with Wüest & Partners data for example), observation of a possible rental reserve. Possible existence of vacant surfaces in the building and future rental risk. 9. Operating charges Comparing the operating charges with different benchmarks (ratio based on rental status), identification of possible future optimisation of these charges. 10. Return In the context of a decision to sell, comparison of the return of the object with the Foundation s global return on real estate, and analysis of the return on equity (target return achieved). In the context of a decision to purchase, determination of the minimum net return, i.e. the government 10-year bond rate (considered as a risk-free rate), increased by 450 base points, plus the difference with the bond rate of the day, less 2% (historical inflation).

17 INVESTMENT REGULATIONS / Other Development potential (legal or architectural) In the context of a sale, the building could have qualities inferior to those of a potential new acquisition, rendered impossible by the already full use of the allocation in the real estate investments grid. 12. Adaptation These criteria are regularly reviewed, after consultation with the asset manager or at his request, so that if necessary they can be adapted to the investment strategy of the Foundation and to the conditions of the real estate market. The present appendix was approved in the meeting of the Board of Trustees on 27 June 2013, and comes into force as of 1 July 2013.

18 INVESTMENT REGULATIONS / 18 APPENDIX 5 SYSTEM FOR MONITORING REAL ESTATE ACTIVITIES System for monitoring real estate activities By virtue of articles 49a and 50 OPP2, 3 and 5 of the Foundation s Investment Regulations, investments in real estate assets must be the object of clear procedures and appropriate monitoring. The procedures are described in the Policy for managing real estate assets, approved by the Board of Trustees (BT). The organisation of the monitoring, with respect both to the timeliness and the execution of decisions on real estate investments, is governed in the following way: Operational monitoring (monitoring the execution of decisions): The manager must accept a visit by the Foundation s auditors at any time. The auditors inspections shall cover all the aspects of the manager s activities that they judge necessary for the correct execution of their mandate, but in particular: - compliance with the contractual conditions between the manager and the Foundation within the framework of the invoicing of his services or of those of any other operative, - estimation of consistency between the work carried out and the amounts invoiced, - the evaluation of potential conflicts of interest, - the comparison between the charges paid by the Foundation and those paid on average in the market, with an equivalent perimeter of activities, - the manager shall sign the present document for agreement with the measures that are demanded of him, and these shall form an integral part of the terms of reference signed between the parties on 26 February 2008 with effect as from 1 January Approved in the meeting of the Board of Trustees on 27 June 2013, it comes into force on 1 July 2013, and replaces appendix 5 approved on 10 May 2010 and in force since 10 May 2010.