Overview of the Swiss Tax Situation

Taxation of HELVETIA Investors in Switzerland

The tax concept underlying the ACRON HELVETIA series has been carefully tailored to the needs of investors taking all relevant tax laws into account. The core of the concept is the investment in a Swiss stock corporation that holds and operates the investment property as its sole asset. Investments through a Swiss stock corporation enable distributions to be made first by paying-out dividends that private investors must declare and pay taxes on when filing their personal tax returns, and second by paying-out reductions in the par value of shares that are regarded for tax purposes as a form of capital repayment that is not subject to tax at the time of distribution. In this regard, taxable dividends and non-taxable par value reductions each account for approximately 50 percent of the total distributions throughout the forecast holding period of the investments.

Pursuant to the investment concept in place, investors acquire shares in the respective HELVETIA company at their current par value from Zurich-based ACRON AG or a potential selling agent. The shares are then held in the investors' respective private securities accounts with their principal bankers, and any distributions by the company are made in Swiss francs through a Swiss bank as the paying agent and are credited to the account linked with the securities portfolio in question. As an alternative to holding the shares in a securities account, they may also be evidenced in the form of a certificate that the Swiss Bank holds in custody.

Because its registered office is in Switzerland, the HELVETIA company has unlimited tax liability in Switzerland. As a corporation, the HELVETIA company is a taxable entity. In simplified terms, the company must pay corporate income tax (profit tax) at the federal level in Switzerland of 8.5 percent on any net profit it generates. In addition, corporate income and net wealth taxes are also levied by the municipalities (called "communes") and the respective states (called "cantons"). Most of the Swiss cantons levy a real estate transfer tax on any gains from the sale of real estate.

The following explanations are based on the assumption that the investors are natural persons who are subject to unlimited tax liability in Switzerland and who hold the shares as part of their private assets. With a view to any tax consequences, potential investors are advised to consult their personal tax advisors before making an investment. The following explanations do not purport to be exhaustive and only reflect the main features of the tax situation of investors who are tax-resident in Switzerland. No liability can be assumed for future changes in tax laws or administrative practices.

Thanks to their status as shareholders, Swiss investors in ACRON HELVETIA companies will receive the following three different types of payments:

• dividend payments by the company,
• payments of funds derived from the reduction in the par value of the shares, and
• payments of possible gains from the sale of their shares.

In Switzerland, dividend payments by a Swiss corporation represent taxable investment income subject to income tax to be paid by the shareholder. The effective income tax liability on the dividend income at the level of the investor depends, among other things, on the respective investor's tax residence in Switzerland and his or her other taxable income. This means that no general statements regarding the effective income tax liability on the dividend income at the level of the investor can be made. Investors are therefore advised to consult their personal tax advisors to determine the amount of their effective income tax liability on the dividend income.

As a matter of course, investors who are tax-resident in Switzerland can claim full refund of the withholding tax of 35 percent to be deducted from any dividend payments by the respective ACRON HELVETIA company provided they have properly declared the dividend payments, among other things, in their private tax returns. Swiss shareholders are not liable for paying taxes on any repayment arising from the reduction in the par value of the shares.

In contrast, any distribution from a par value reduction is neither taxable nor subject to withholding tax. The liquidity required for the capital repayments made in the course of par value reductions stems from the current rental income from the property. Despite the reduction in par value, the intrinsic value that is a key factor in the selling price generated by a subsequent sale is therefore fully preserved for each individual investor. Each investor's percentage share in the company also remains wholly unaffected by reductions in par value.

As a rule, Swiss private investors are not liable for taxes on capital gains and gains derived from the sale of the shares in the respective ACRON HELVETIA company. Possible exceptions include situations in which a majority interest in a real estate company is sold; or in which investors qualify as commercial securities traders; or in which a sale qualifies as an indirect partial liquidation or a process called "transposition" where at least five percent of a corporation's capital is transferred from private assets to business assets, etc. Due to the fact that various exceptions currently exist with respect to tax-free capital gains from the sale of movable private assets, investors should consult their personal tax advisors before selling their shares in an ACRON HELVETIA company.

Subject to various exceptions, Swiss stamp duty of 0.15 percent is generally levied on any paid transfer of the ownership of shares issued by a resident for tax purposes, provided that one of the contracting parties or an intermediary is a securities broker pursuant to Art. 13(3) of the Swiss Stamp Act (StG).

The shares issued by the ACRON HELVETIA companies are subject to cantonal / communal net wealth taxes. The final calculation of the tax liability is under the purview of the respective canton.

Gratuitous transfers of the shares of the ACRON HELVETIA companies are always subject to cantonal and/or communal gift or inheritance tax in Switzerland. However, with the exception of a few cantons, inheritance or gift tax is no longer levied in Switzerland on gratuitous inter vivos or testamentary transfers to spouses and direct descendants. For example, if the donor of a gift or the testator is a tax resident in the Canton of Zurich, his or her spouse and descendants are exempt from inheritance and gift tax. This is different in the Canton of Berne where only spouses but not descendants of donors or testators are exempt from these taxes.

This summary is based on currently applicable Swiss or German federal tax law (as of September 2008) and the Conventions between the Federal Republic of Germany and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income and Capital ("DTC Germany-Switzerland"). This summary does not provide specific tax advice but is merely a general presentation of the investment-related aspects of taxation. This information is presented according to the best of our knowledge and belief. No liability can therefore be assumed for the tax treatment that will be sought by the company and the investors.

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