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UBS Trumbull Property Fund Quarterly report

For the quarter ended June 30, 2014

UBS Trumbull Funds The featured property for the Fund’s 2014 quarterly reports is Water Tower Place, an 818,000-square-foot iconic top- tier regional mall located in the heart of Chicago. The property’s location on North Michigan Avenue is a premier retail and tourist destination surrounded by high-end retail, office buildings, hotels and world-class medical facilities. The site provides a daytime employment base of greater than 240,000 people within a one-mile radius and immediate access to high-end residential properties. This 12-story trophy asset was 96% leased as of June 30, 2014, and provides tenant sales of over USD 700 per square foot. The mall is anchored by flagship Macy’s and American Girl stores, with over 100 specialty retailers and restaurants.

The photos on this page highlight the unique location of Water Tower Place. This investment occupies an entire block on North Michigan Avenue at the heart of Chicago’s “Magnificent Mile.” The Magnificent Mile is a premier retail and tourist destination seeing approximately 40,000 pedestrians and 42,000 vehicles per day. The block fronting Water Tower Place routinely records the highest traffic counts for the entire district. This retail submarket contains 7.1 million square feet with over 450 stores and 275 restaurants, providing seemingly limitless shopping options for Chicago area residents, guests and tourists. In addition to retail offerings, the submarket contains 11.9 million square feet of office space and is home to several iconic buildings including the John Hancock Center (pictured above on the left, behind Water Tower Place). A stone’s throw from Lake Shore Drive and activities on Lake Michigan, Water Tower Place is truly in the center of downtown Chicago.

Cover and above photos: Water Tower Place, Chicago, IL Dear Investor,

This report presents the results of the UBS Trumbull Property Fund (“UBS-TPF” or the “Fund”) for the second quarter of 2014.

During the second quarter, commercial real estate performance reflected the underlying positive trend in the economy and labor markets. Improvement in Gross Domestic Product (GDP) during the second quarter has returned the economy to a pace of growth in the range of 3% to 4%, which could persist for the balance of the year. The labor market is especially strong with 760,000 new jobs added during the quarter.

Expansions in the apartment and hotel sectors remain steady, while office, industrial and retail have experienced greater recoveries in rent and occupancy rates. Appreciation return in the NFI-ODCE had been decelerating, but in the second quarter, it increased as a percentage of total return. Over the long run, it is appropriate (and expected) for income to account for the majority of total return in commercial real estate, comprising 70% to 90% of total return.

During the year ended June 2014, Real Capital Analytics reported commercial and multifamily real estate transactions totaled nearly USD 395 billion, an increase of 19% over the prior 12-month period.

Looking at the performance of UBS-TPF as of the second quarter of 2014, the Fund outperformed the NFI-ODCE benchmark for the long term, but underperformed in the short term. The Fund’s underperformance over the shorter term was due primarily to its lower leverage ratio as compared to the NFI-ODCE. As of June 30, 2014, the Fund’s 12.8% leverage ratio was 9.3 percentage points lower than the 22.1% NFI-ODCE leverage ratio.

The portfolio offers compelling mid- to long-term risk-adjusted eturns,r with a Number 1 ranking (as reported by NCREIF) for the five- and ten-year Sharpe Ratio and Standard Deviation risk/volatility measures. The Fund has a greater allocation to multifamily properties, and a lower allocation to office assets relative to the NFI-ODCE. Our allocation is in line with our proprietary Investable Universe Inventory Model1, and also reflects our above-average outlook for multifamily assets.

During the first half of the year, we committed USD 993.5 million into high quality investments for the Fund. All of the investment during the first half of the year was made into the multifamily (90%) and industrial (10%) property types, with a number of retail and office transactions in the current pipeline. The greatest investment volume by region was in the West (at 52%) and the South (at 29%). During the quarter, we continued to execute our strategy to increase our West region allocation, bringing the allocation up from 31% to 32% during the quarter.

We increased value-added investment during the quarter, bringing the Fund’s value-added allocation to over 9% at quarter end. Value-added investing is done selectively and managed within a 5% to 15% overall guideline for the Fund. We carefully evaluate and manage risk in these investments – primarily executing apartment and industrial development strategies, as well as apartment and retail repositioning strategies. Based on the projected stabilized values provided by third-party appraisers, we believe the Fund will benefit from strong appreciation gains from the value-added assets which will be stabilizing in the near term.

Continued on next page... At this time, over USD 1.4 billion of additional investments are in various stages of the acquisition process. While pricing has been extremely competitive for core investments, we maintain our disciplined underwriting process and invest only where we feel that the expected returns are in line with the anticipated risks of new investments.

We were active in financing activities during the first half of 2014, taking advantage of current favorable interest rates, and continuing to reduce UBS-TPF’s cost of debt. During the quarter, we closed three refinance transactions for a total of USD 354.0 million at an average interest rate of 4.15% for 10-year loans. These financings will save the Fund nearly USD 6 million in interest per year.

We also placed our third line of credit on the portfolio at attractive pricing of 105 basis points over LIBOR. The current total line of credit capacity of USD 600 million has allowed us to reduce the level of cash held by the Fund from a 4.6% average during 2013, down to 1.7% as of second quarter 2014, which should enhance portfolio returns.

The Fund’s consistent core strategy execution and strong relative performance over the mid- to long-term has driven significant investor interest for deposits into UBS-TPF. On July 1, 2014, after accepting deposits of USD 419 million, the Fund had a remaining registered interest list for deposits of approximately USD 1.4 billion.

Thank you for the opportunity to continue managing real estate investments on your behalf.

Kind regards,

Kevin M. Crean Stephen J. Olstein Pamela J. Thompson Managing Director Executive Director Executive Director Contents Page

Executive summary 1

Fund benchmark comparison 3

Portfolio strategy and activity 4 Mission 4 Strategy 4 Return objectives 4 Acquisitions 4 Sales 6 Asset management 6 Financing 8 Debt summary 8 Leasing summary and trends 9 Commercial lease expirations 9

Return analysis 10 Same-property net operating income 10 Realized and unrealized gains and losses (2Q14) 10

Performance analysis 11 Returns by property type 11 Returns by geographic region 11 Performance discussion 11

Market perspective 12 Economic viewpoint 12 Commercial real estate 12

The UBS (US) Trumbull Property Fund LP (“UBS-TPF” or All information furnished in this report is confidential the “Fund”) is an open-end, commingled private real and proprietary information of UBS-TPF, its general estate portfolio advised by UBS Realty Investors LLC. The and limited partners and UBS Realty Investors LLC. This REIT-based fund is structured as a limited partnership. material should not be shared with third parties without the prior written permission of UBS Realty Investors LLC. A supplemental information package containing UBS- TPF financial statements, performance by region and Sections of this report relating to future prospects that property type, and a property listing is included for are “forward-looking statements” are based upon certain clients. To request other information, call Kevin Crean assumptions. Actual results may be materially different. at 860-616 9039, Steve Olstein at 860-616 9139, Variances may include, but are not necessarily limited Pam Thompson at 860-616 9014, Peter Juliani at to, forecast versus actual revenues, market rents, lease 860-616 9219, Michael Byrne at 860-616 9363, or renewals, operating expenses, capital expenditures, your portfolio and client services representative. discount rates and capitalization rates. The material content of this report is based upon information obtained This communication is not a recommendation, an by UBS Realty Investors LLC through June 30, 2014. offer, or the solicitation of an offer to buy any security, or an offer to any person in any jurisdiction in which Any updates to the information will be made in the such offer, solicitation, purchase or sale could be next quarterly report. Unless otherwise noted, income unlawful under the law of such jurisdiction. returns, realized and unrealized gains and losses, and property level returns are presented before the deduction of advisory fees and before any contract charges that were in effect through February 29, 2008. Executive summary

Table 1 – Return summary Annualized Since inception Periods ended June 30, 2014 Quarter (%) 12 months (%) 3 years (%) 5 years (%) 10 years (%) 1/13/78 (%) Net investment income 1.30 5.17 5.19 5.82 5.88 7.76

Net realized/unrealized gain (loss) 1.16 5.06 5.08 3.38 1.84 1.14

Total, before advisory fee 2.46 10.42 10.47 9.35 7.80 8.96

Total, net of advisory fee 2.20 9.31 9.35 8.31 6.80 7.97

CPI 0.87 2.07 1.83 2.02 2.31 3.75

NFI-ODCE gross 2.93 12.75 12.45 10.00 7.14 8.52

2014 second quarter 2014 six months 2014 full year outlook1 Fund income gross return (%) 1.30 2.57 5.25 – 5.50 Fund appreciation return (%) 1.16 2.46 3.00 Fund total gross return (%) 2.46 5.06 8.25 – 8.50 Investment acquisitions (USD m) 480.5 993.5 Over 2,000 Investment sales (USD m) 1.6 1.6 300 – 500

Rates of return are time-weighted and include reinvestment of income. Past performance is not indicative of future results. CPI is not seasonally adjusted. 1 Estimates for 2014 calendar year were outlined in late 2013.

Fund highlights Table 2 – Factual summary The Fund’s total return for the second quarter was Gross assets (USD bn)1 17.1 2.46%, consisting of a 1.30% income return and a 1.16% appreciation return. The net realized and Net assets (USD bn) 14.7 unrealized gain totaled USD 167.5 million. Retail and Number of investments 193 office properties provided the majority of the Fund’s appreciation. Net investment income before fees during Number of investors2 403 the second quarter totaled USD 187.4 million. Leverage (% of gross assets) 12.8 During the quarter, we closed seven industrial Cash (% of gross assets) 1.7 investments and three multifamily investments for a Deposits (USD m)2 418.6 total commitment of USD 480.5 million. One industrial land sale closed during the quarter for total gross sales Redemptions (USD m)2 74.3 proceeds of USD 1.6 million. Income distributions (USD m)2 42.8

1 Represents the Fund’s share of gross assets. 2 Deposits, redemptions and income distributions are processed at the beginning of the following quarter. Income distributions taken by investors totaled USD 42.8 million, which represented 39% of the USD 111.0 million of net distributable cash for the quarter. Any changes in investor count will be reflected next quarter.

1 Exhibit 1 – Portfolio distribution by Exhibit 2 – Portfolio distribution by geographic region1 property type1

34% Apartments Midwest 13% 5% Hotel 9% Industrial West 32% 30% Office Retail East 40% 22%

South 15%

1 Percentage of gross market value of real estate investments 1 Percentage of gross market value of real estate investments

Table 3 – Consolidated financial highlights

USD in thousands June 30, 2014 March 31, 2014 Real estate investments, at fair value:

Properties 13,507,187 12,941,618 Investments in unconsolidated joint ventures 1,792,454 1,740,440

Mortgage investments 1,000,000 999,400

Total real estate investments, at fair value 16,299,641 15,681,458

Total real estate investments, at cost 14,476,567 14,037,646

Cash and cash equivalents 349,745 452,924

Total assets 16,752,197 16,241,854

Mortgage loans and other debt at fair value 1,633,963 1,523,624

Mortgage loans and other debt, principal balance 1,643,563 1,534,024

Total liabilities 1,940,811 1,833,473

Noncontrolling interests in consolidated joint ventures 146,525 133,755

Fund capital/net assets 14,664,861 14,274,626

Quarter ended 12 months ended June 30, 2014 June 30, 2014 Net investment income attributable to the Fund, before fees 187,395 698,435

Advisory fees 32,330 123,743

Net investment income attributable to the Fund 155,065 574,692

Net realized and unrealized gain attributable to the Fund 167,482 683,155

2 Fund benchmark comparison

Fund performance comparison Table 4 – Fund factual comparison (as of 6/30/14) The following chart provides a comparison of UBS-TPF All data as % UBS-TPF NFI-ODCE performance relative to its competitive fund benchmark, the NFI-ODCE. Leverage 12.8 22.1 Leased (with hotels)1 93.6 92.3 Exhibit 3 – Fund performance comparison Leased (excluding hotels)1 94.1 n/a Composition by property type % Total return 20 Apartments 34 25 Hotel 5 2 15 12.8 12.5 10.4 10.5 10 9.4 10.0 Industrial 9 15 7.8 7.1 5 Office 30 36 2.5 2.9 Retail 22 19 0 2Q14 1 Year 3 Years5 Years10 Years Other 0 3 UBS-TPF total returns NFI-ODCE total returns Composition by region East 40 33 Source: UBS-TPF and NCREIF as of June 30, 2014 Midwest 13 9 UBS-TPF’s second quarter 2014 total gross return of South 15 20 2.46% was 47 basis points lower than the NFI-ODCE quarterly return of 2.93%. The Fund outperformed over West 32 38 the long-term, with a ten-year outperformance of 66 1 Although we calculate the Fund’s leased percentage excluding hotels, we also provide basis points, or 9.2%. UBS-TPF underperformed over the this statistic including hotels when comparing to the NFI-ODCE (which includes hotels). short-term, due in large part to the Fund’s lower leverage. Leased percentages for hotels represent average occupancy for the quarter.

The Fund’s 12.8% leverage ratio is the lowest of the funds The composition by property type reflects the Fund’s in the NFI-ODCE, and is 9.3 percentage points lower than intentionally higher allocation to apartment properties the 22.1% NFI-ODCE average. UBS-TPF’s lower leverage as compared to the NFI-ODCE. Our apartment allocation ratio relative to NFI-ODCE continues to provide a lower level is in line with the universe of institutional investment of risk, as well as providing the opportunity to retain the properties in the US as tracked by our proprietary flexibility of investing in properties with existing mortgages Investable Universe Inventory Model1, and also reflects without compromising the Fund’s leverage ratio. our above-average performance outlook for this property type. Apartment cash flows typically have lower volatility The Fund’s leased percentage (excluding hotels) is and are less capital intensive than other property types, 94.1%, which reflects the portfolio’s focus on income providing more stable income. and maintaining occupancy. We track this statistic without hotels, as hotel-occupied percentages are not UBS-TPF has a higher allocation to the East and comparable to the other four property types (apartment, Midwest regions and a lower allocation to the West industrial, office and retail). For informational purposes, and South regions. the Fund’s 93.6% leased percentage (including hotels) is 1.3 percentage points higher than the 92.3% NFI-ODCE In keeping with the Fund’s core focus, UBS-TPF’s average. The Fund’s hotels were 80.2% occupied during value-added exposure is managed to a range of 5% to the quarter. 15%. As of June 30, 2014, approximately 9.4% of the Fund was invested in a value-added strategy, including development, renovation, lease-up and pre-development.

3 Portfolio strategy and activity

UBS Trumbull Property Fund, established in 1978, is an • Real return objective – 5% real rate of return (inflation- actively managed, core portfolio of equity real estate. adjusted return), before advisory fees, over any given Its primary focus is to invest in well-leased, income- three- to five-year period. producing properties within major US markets. To a limited extent, the Fund may take development risk or Acquisitions lease-up risk, or engage in forward commitments on We closed 10 investments during the second quarter of to-be-built properties. Investments are structured as 2014 for a total gross investment of USD 480.5 million. wholly owned properties, joint ventures or, on occasion, The acquisitions included three apartment investments as participating mortgages. While UBS-TPF investments and seven industrial investments. are generally purchased with cash, a modest amount of portfolio- and property-level leverage may be used. Apex The Fund acquired Apex Tower I, a 271-unit high-rise Mission apartment investment located in Los Angeles, CA for a To provide investors with strategic market access to high- gross purchase price of USD 153.9 million. In addition, quality private commercial real estate with the financial the Fund committed to develop Apex Tower II, a 281- objective of providing superior risk-adjusted returns across unit apartment investment adjacent to Apex Tower I. The the real estate cycles. Fund’s share of gross commitment for Tower II is USD 168.9 million. Apex is located at the highly visible corner Strategy of Figueroa and 9th Streets in Downtown Los Angeles, The Fund’s investment strategy is comprised of five elements: just two blocks from Downtown LA’s central business district and one block from L.A. Live, the region’s most • Income focus – Maximize the quality and growth of the prominent entertainment retail and sports venue. Ralph’s, Fund’s income by acquiring and aggressively managing downtown’s premier grocer, is located diagonally across high quality assets in major US metropolitan markets. the street from the site. Originally constructed as for-sale luxury condominiums, Tower I was completed in 2012 • Diversification – UBS utilizes its proprietary Investable Universe Inventory Model1 to minimize risk through diversification by property type, geographic location and economic sector.

• Modest use of third-party leverage – The Fund has historically maintained a leverage ratio significantly lower than the NFI-ODCE average. The lower leverage ratio provides for flexibility in investment structure and is often a competitive advantage in acquisitions.

• Strategic value-added sub-strategy (5-15% of Fund) – A tactical “build-to-core” strategy focused on investments involving renovation, repositioning or new development opportunities that will stabilize and remain a long-term hold for the Fund.

• Sustainability – Combining financial accountability and environmental responsibility for all of our stakeholders – investors, tenants, partners and employees.

Return objectives • Relative objective – outperform the NFI-ODCE over any given three- to five-year period.

Apex I, Los Angeles, CA (acquisition)

4 Lakeside Urban Center, Irving, TX (acquisition) and is now stabilized. Community amenities include a and population centers of Dallas and Fort Worth. The business center, movie theater, two resident lounges, apartment community is within walking distance of a online concierge system, fitness center, heated swimming newly constructed Dallas Area Rapid Transit light rail pool and spa, sun deck, dog run, pick-up dry cleaning, station, providing access to downtown Dallas and DFW car wash, and fire pit and barbecue areas. Unit amenities Airport. Unit features include stainless steel appliances, include floor-to-ceiling windows with stunning views, granite countertops, soaking tubs, walk-in closets, and smart-wiring for phone, internet and cable, washer and private patios/balconies. Community amenities feature dryer, recessed lighting, hardwood flooring, gourmet direct lakefront access, entertainment lounge and Wi-Fi storage pantries, private terraces, and spacious floor plans. café, business center, community conference room, two- story fitness center, two outdoor pools, two courtyards, Lakeside Urban Center barbecue areas, and a pet park. UBS-TPF closed on the purchase of Lakeside Urban Center, a newly constructed 317-unit Class A apartment Becknell Industrial community in Irving, TX. The Fund’s gross purchase price As part of the Becknell Industrial joint venture, the Fund for this investment was USD 53.2 million. Completed committed a total of USD 44.9 million for six 100% in 2013, the property is located in the master-planned leased investments, comprising 958,451 square feet. The community of Las Colinas between the major employment following chart provides detail on the investments.

Table 5 – Becknell acquisitions: second quarter 2014

UBS-TPF share of price (USD millions) Location SF Leased Tenants 4.4 Atlanta, GA 101,500 100% MeadWestvaco (packaging systems for healthcare, home, food & beverage industries) and Associated Materials (manufacturer and distributor of exterior residential building products) 7.6 Richmond, VA 115,956 100% MeadWestvaco (see above), Hillenbrand Inc. and Forward Air Corporation 15.8 Louisville, KY 403,961 100% Southern State Cooperative (farmers’ coop that purchases and processes farm supplies) and Filtrona Plastics (manufacturer and distributor of plastic products) 4.1 Cincinnati, OH 131,150 100% NIBCO, Inc. (manufacturer of valves, fittings and flow control products for construction) 7.5 Milwaukee, WI 105,444 100% Anixter International (global supplier of communications, security and electrical products) 5.5 Indianapolis, IN 100,440 100% Poynter Sheet Metal (general contractor and construction manager – one (to-be-built) of largest in Midwest) 44.9 958,451 100%

5 Sierra Business Park UBS-TPF committed USD 59.7 million to a joint venture to develop Sierra Business Park, a 744,642-square- foot industrial investment in Fontana, CA. Fontana is a significant hub for many national retailers occupying warehouse facilities of 500,000 square feet and larger. The property is located just north of Interstate 210, a major freeway connecting Los Angeles County with the Inland Empire. In addition, the asset is in close proximity to the 15, 10, 60 and 215 freeways. The investment enables the Fund to invest in an industrial property at a cost below current Class A stabilized asset pricing. Sierra Business Park, Fontana, CA (acquisition/rendering) Acquisitions update We continue to be very active in acquisitions in major During the quarter, a 122,445-square-foot 10-year lease markets across the US, with the flexibility to invest in all renewal was signed with Macy’s at CambridgeSide Galleria, property types. Our target for 2014 is to invest over USD a 96%-leased top-tier regional mall in Cambridge, MA. 2.0 billion in new acquisitions. With USD 993.5 million Macy’s Inc. is one of the nation’s largest retailers, operating committed to date, we continue to make progress toward the Macy’s and Bloomingdales brands with approximately this goal as we seek high quality investment opportunities. 840 stores in 45 states and 172,500 employees. The At this time, we have approximately USD 1.4 billion (gross) company’s fiscal year 2013 sales were USD 27.9 billion. in additional investments that have been approved by investment committee or are under letter of intent. A 15-year, 100,440-square-foot lease was signed with Poynter Sheet Metal at a recently acquired Becknell Sales investment located in Greenwood (Indianapolis), IN. This Year to date, one industrial land parcel asset was sold investment (as mentioned in the acquisition section) is a for USD 1.6 million. Currently, there are 10 additional build-to-suit opportunity. Poynter is Indiana’s largest full- transactions, totalling over USD 350 million, in various service sheet metal fabrication and installation company. stages in the sales process. Poynter is a division of Wilhelm Construction, Inc., a construction company based in Indianapolis, IN and with Asset management USD 497 million of annual revenue for 2013; it is one of We continue to manage the quality and growth of the largest providers of construction labor in the Midwest. the income stream at the Fund’s existing investments Upon construction completion, Poynter Sheet Metal will through aggressive leasing and tenant retention initiatives, move its headquarters from Bloomington, IN to this site. credit analysis, and lease structuring. Apartment, industrial and hotel properties have shown strong During the quarter, we signed a 58,380-square-foot five- improvement in fundamentals since the downturn and year lease renewal with Sirius XM at Freeport Business have experienced solid increases in occupancy and rents. Center III, an office property located in Dallas, TX. Sirius While fundamentals are improving for office and retail XM’s primary business is a satellite subscription radio properties with positive rent growth in both sectors, the service operating in North America. Sirius Radio was pace of improvement varies depending on the market. officially launched in 2002 and in combination with its XM Radio acquisition, has since grown to become the Leasing highlights largest radio broadcaster (based on revenue) with 25.8 During the second quarter of 2014, our Asset million subscribers. Traded publicly on the NASDAQ Stock Management team signed 78 commercial leases for over Exchange (SIRI), the company’s 2013 recorded revenue 735,000 square feet within the Fund, including 31 new was USD 3.8 billion, up 12% from 2012. This lease leases and 47 renewal leases. renewal solidifies the asset’s stability and maintains the property’s leasing at 100% through second quarter 2014.

6 Sustainability update Property spotlight: Our corporate sustainability mission consists of delivering Liberty Green-Liberty Luxe, New York, NY superior risk-adjusted investment performance by Property overview integrating sustainability considerations into our investment processes; implementing sustainable practices Two towers, 452 residential units, built in 2011, 98% leased through innovation and the sharing of best practices; 24-hour concierge service and addressing environmental impacts while enhancing Rooftop pool deck and terrace with grilling area property operations and values. As such, sustainability Fitness centers, billiards room, movie room, children's playroom, dog plays a major role in corporate-, fund- and property- grooming area level decisions. UBS is a founding member of the United High-end interior finishes, including marble countertops, bamboo Nations Environmental Program Finance Initiative and a flooring and custom Italian tile member of the United States Green Building Council. Sustainability highlights At the fund level, UBS-TPF was ranked #1 overall in the LEED Gold environmental rating 2013 Global Real Estate Sustainability Benchmark (GRESB) Solar panels provide supplementary electricity and hot water annual survey out of the 14 participating NFI-ODCE funds. The GRESB is an industry-driven organization committed Waste water filtration/recycled water utilized by cooling tower to assessing the sustainability performance of real estate Energy efficient HVAC and lighting fixtures portfolios (public, private and direct) around the globe. Charging station for electric cars The GRESB survey is comprehensive and grades a variety Programmable thermostats of sustainability measures at the asset level, including: Green cleaning products and painting materials employed energy consumption, emissions, waste disposal and water usage along with many other items.

At the property level, we have registered all of the Fund’s applicable office buildings under the EPA Energy Star program. We have also focused our property management companies, vendors and contractors on cost-effective ways to achieve energy savings and implement responsible green procedures for all five property types. Finally, we are pursuing LEED (Leadership in Energy and Environmental Design) certification wherever cost-effective. We continue to observe increased interest from tenants and investors in our sustainability initiatives. UBS-TPF has LEED designations for 23 properties, including over 10.5 million square feet of commercial space and 600 apartment units. As of June 30, 2014, 76% of the Fund’s urban office assets were LEED-certified. In addition, several apartment development assets are expected to be LEED designated upon completion.

Sustainability at Liberty Green-Liberty Luxe, New York, NY (solar panels, green roof, bike storage)

7 Other property updates Subsequent to quarter end, we closed an additional A USD 20.6 million renovation was recently completed financing transaction on the Water Tower Place mall asset at the 512-room Grand Hyatt Denver Hotel in Denver, in Chicago, IL. The Fund’s share of this new debt was USD CO. The renovation was designed to elevate rooms, 100.0 million and the debt has an interest rate of 3.9% for corridors, the lobby area and meeting space to the a 6.25-year term. Additional information on this financing current Hyatt brand standards for “Grand” hotels, and will be provided in the next quarterly report. to maintain its competitive position in the market. The guestrooms benefited from the replacement of flooring, Debt summary wall coverings, window treatments, lighting and plumbing As of June 30, 2014, the Fund had USD 2.19 billion fixtures, along with new furniture and décor. The lobby of debt, which represents 12.8% of gross assets. As area and registration desk were reconfigured and previously noted, this leverage ratio is approximately 9.3 expanded to allow for additional seating and to provide percentage points lower than the NFI-ODCE average. This a more interactive guest experience. The renovated relatively low ratio provides the Fund with the capacity to lobby bar area has experienced increased revenues post- continue to use leverage strategically in acquisitions. renovation. Meeting spaces were improved with upgraded amenities and reconfigured to improve functionality and All debt is at the property level; there is no outstanding efficiency. This investment will be the location of the portfolio level debt as the Fund’s lines of credit are upcoming October 2014 Client Advisory Council meeting. currently undrawn. Currently, 96% of existing debt is at Photographs of the completed renovation are provided on a fixed rate. The Fund’s overall weighted average interest the inside back cover of this report. rate as of the second quarter was 4.1%; a reduction of approximately 53 basis points from the 4.6% rate one Financing year ago. We also expect to further reduce the Fund’s During the quarter, UBS-TPF added a new fund-level line interest rate during the year. The weighted average loan- of credit and refinanced debt on three assets. to-value ratio on financed assets was 36%.

UBS-TPF closed a USD 200.0 million line of credit with The following exhibit highlights the schedule of upcoming Wells Fargo Bank. The new credit facility has a three- debt maturities. The USD 36.0 million of debt scheduled year term with two, one-year extensions. The facility was to mature during the remainder of 2014 will be extended closed at attractive pricing of 105 basis points over LIBOR at maturity. The USD 213.5 million expiring in 2015 will with an unused fee (the charge for the portion of the likely be repaid at maturity. We continue to pursue other line which is not drawn) of 12.5 basis points per year. The fund-level financing in 2014 at attractive interest rates. current line of credit capacity available to the Fund (now at USD 600.0 million) has allowed us to reduce the level of Exhibit 4 – Upcoming debt maturities cash held by the Fund from 4.6% (2013 average) down to 1.7% as of June 30, 2014. USD (in millions) 800 744.9 We closed three refinancing transactions during the quarter 700 665.3 at attractive interest rates, which combined will result in 600 approximately USD 5.9 million in annual interest savings to 500 400 the Fund. First, 10-year 4.15% fixed interest rate loans were 287.1 300 secured on the Galleria Dallas Mall (USD 245.5 million) and 213.5 200 166.5 the Westin Galleria Hotel (USD 70.1 million). In addition, 100 36.0 58.2 we closed a 10-year 4.19% fixed interest rate loan for USD 15.0 0 75.0 million (Fund’s share of USD 38.25 million) secured by 2014* 2015 2016 2017 2018 2019 2020 2021+ the Baltimore Waterfront Marriott Hotel. Loans maturing

During the quarter, we paid off the USD 24.5 million loan * Last two quarters of 2014. on the Lodge at Peasley Canyon Apartments at maturity, which had an interest rate of 5.65%.

8 Leasing summary and trends Commercial lease expirations The overall leased status (excluding hotels) of the portfolio Overall, portfolio leasing has remained very stable. Only 4% as of June 30, 2014 increased by 60 basis points from of the Fund’s commercial leases (office, industrial and retail 93.5% last quarter to 94.1% this quarter. Maintaining properties) will expire during the last two quarters of 2014 this stable leased status was a direct result of continued and 7% will expire in calendar year 2015. Lease expiration leasing and tenant retention efforts. exposure by property type through 2018 is provided below.

Exhibit 5 – Leasing summary and trends Exhibit 6 – Percentage of square feet expiring

% % 100 97 20 95 95 96 96 95 96 95 20 94 94 94 93 94 93 94 94 91 91 91 92 17 90 15 15 14 12 11 10 10 10 10 10 80 10 9 8 77 6 4 4 70 5 3 2 60 0 Apartments Industrial Office Retail Total 2014* 2015 2016 2017 2018 9/13 12/13 3/14 6/14 Office Industrial Retail Total

Leasing numbers exclude hotels and properties in development, redevelopment and * Last two quarters of 2014. initial lease-up. Table 6 - 2Q14 top 10 markets (% of Fund*) Apartment leasing increased from 95% to 97% during the quarter with increases at assets in New York City and New York 15.2 Washington, DC. Industrial leasing increased from 95% Chicago 11.5 to 96%, with leasing increases in the Becknell portfolio Boston 9.0 at several assets in the Midwest and Southeast. Office Los Angeles 8.4 leasing increased from 91% to 92% during the quarter. Leasing increased at office assets in Seattle, WA and Washington DC 7.8 Denver, CO. Retail property leasing decreased from 94% Denver 5.7 to 93% primarily due to a lower leased percentage at a Dallas 5.3 Mall in Stamford, CT. The leasing percentage at this mall San Francisco 4.5 decreased from 91% to 76%, as a direct result of our purchase of the former Saks-owned store (now vacant). Phoenix 3.8 This purchase will enable the Fund to control and actively Miami 3.6 re-lease this key anchor suite. * Percent of Gross Asset Value

Becknell Industrial, Milwaukee, WI (acquisition) Apex I, Los Angeles, CA (acquisition)

9 Return analysis

Same-property net operating income2 Realized and unrealized gains and losses (2Q14) The Fund’s real estate investments are generally appraised Table 7 every quarter starting with the first full quarter after Six months ended June 30 2014 (USD m) 2013 (USD m) % change the investment is made. The net realized and unrealized gain for the quarter was USD 167.5 million, providing Apartments 106.4 104.3 2.0 net appreciation of 1.16% for the Fund. The following Hotel 28.6 14.7 94.3 charts highlight the value changes by property type. The Industrial 43.6 40.5 7.5 largest aggregate value changes were recorded for the Office 124.0 123.0 0.8 retail and office property types, at USD 60.2 million and Retail 72.0 71.5 0.7 USD 46.1 million, respectively. The chart also shows the value increase for each sector, as a percentage of previous Total 374.6 354.0 5.8 carrying value. The largest increases by property type were Interest income 0.7 1.5 (54.2) recorded for retail assets (grew by 1.9%) and industrial Interest expense (47.7) (53.7) (11.3) assets (grew by 1.2%). Adjustments3 35.7 21.4 66.9 Net investment income 363.3 323.2 12.4 Exhibit 7 – Gain by property type See end notes. USD millions % For the six months ended June 30, 2014, same-property 80 1.9 2.0 net operating income (NOI) was 5.8% greater than for 70 the six months ended June 30, 2013. Fund level total NOI 60 1.5 1.2 over the same period increased by 12.4%. Same-property 50 1.1 1.1 NOI increased by 94.3% for hotels, as assets in New York, 40 1.0 NY and Denver, CO completed their renovation projects. 30 A 7.5% increase for industrial properties was driven by 20 0.5 assets in Morrisville, NC and Pleasant Prairie, WI. The 10 2.0% increase in same-property NOI for multifamily assets 0 0.0 was a result of increased NOIs from properties in New -10 (-0.3) -0.5 York, NY and San Ramon, CA. Office and retail same- Apartments Hotel Industrial Office Retail property NOI increased by 0.8% and 0.7%, respectively, due to increased NOI from properties in Pleasanton, CA Net realized/unrealized gain/(loss) (L) % Change within property type (R) and Boston, MA (office assets); as well as Burlington, MA and Pico, CA (retail assets). Table 8 - Quarterly valuation changes (most significant by property type)

Property type Property name Location Quarterly value change (USD m) Value change drivers Apartments 73 East Lake Chicago, IL 6.6 Rent increase and pricing change New Village Apartments Patchogue, NY 3.6 Pricing change Summerwalk Apartments Issaquah, WA 3.4 Rent increase Hotel Grand Hyatt Denver Denver, CO 1.5 Average Daily Rate (ADR) increase Oak Brook Marriott Oak Brook, IL -3.4 Projected capital increase Industrial Becknell Industrial Liberty, MO 3.8 Building expansion and rent increase Office 35 West Wacker Chicago, IL 19.3 Pricing change Corporate Center Pasadena Pasadena, CA 9.4 Rent increase 135 West 50th Street New York, NY -17.4 Real estate tax increase Retail CambridgeSide Galleria Cambridge, MA 21.8 Rent increase and pricing change Water Tower Place Chicago, IL 21.0 Pricing change Shops at Montebello Montebello, CA 16.0 Pricing change and occupancy increase

10 Performance analysis

Returns by property type Returns by geographic region Returns for the 12 months ended June 30, 2014 Returns for the 12 months ended June 30, 2014

% % 15 20 12.6 11.2 12 10.4 10.9 15 12.7 8.9 11.9 9 10.7 6.7 9.3 5.5 6.2 5.7 5.6 10 5.6 5.1 5.4 6.9 6 4.8 5.9 5.8 5.2 5.6 4.9 5.5 4.0 3 2.5 5 0 0 Apartments Hotel Industrial Office Retail East Midwest South West

Net investment income Net realized/unrealized gain Total Net investment income Net realized/unrealized gain Total

Apartments Hotel Industrial Office Retail East Midwest South West Number of investments 74 7 48 33 31 Number of investments 49 44 38 62 Net market value (USD m) 4,679.2 664.5 1,532.7 4,398.0 3,285.3 Net market value (USD m) 5,753.2 1,986.4 2,053.4 4,766.7

Rates of return are time-weighted, include reinvestment of income, and are before deduction of advisory fees. Past performance is not indicative of future results. Rates of return include effects of leverage; market values are net of debt.

Performance discussion (12 months) UBS-TPF’s industrial investments had the highest total return of all property types, at 12.6%, for the 12 months ended June 30, 2014. Significant contributors to the industrial return were properties in Pleasant Prairie, WI; Lacey, WA; and Hayward, CA. Retail properties provided a total return of 11.2% with contributions from properties located in Cambridge, MA and Montebello, CA. Hotel properties had the relatively weakest performance with a total return of 8.9% over the past 12 months. Relatively lower hotel performance was primarily a result of hotels located in the Baltimore Innerharbor and Oak Brook, IL.

Investments in the West outperformed properties in the other regions with a total 12-month return of 12.7%. Major contributors included a retail mall in Montebello, CA; as well as office assets in Pasadena, CA and Denver, CO. The Midwest region provided an 11.9% return, led by performance from office and multifamily assets in Chicago, IL. The lowest performance on a relative basis was provided by the East region at 9.3%, due to an office asset in Arlington, VA and a hotel in the Baltimore Innerharbor.

Lakeside Urban Center, Irving, TX (acquisition)

11 Market perspective

Economic viewpoint • The unemployment rate fell to 6.1% in June 2014, the During the second quarter, commercial real estate same rate as back in September 2008 when the Global performance reflected the underlying positive trend in the Financial Crisis intensified. economy and labor markets. • A tighter employment market generally supports • Economic growth appears to have rebounded after demand for commercial and multifamily space and a temporary slowdown during the first quarter 2014, creates opportunity for landlords to achieve higher rents. exhibit 8. • Inflation is above 2% on a year-over-year basis for the • Improvement in Gross Domestic Product (GDP) during first time since October 2012, see exhibit 10. the second quarter returns the economy to a pace of growth in the range of 3% to 4%, which could persist • A little inflation is generally positive for commercial real for the balance of the year. estate as rents tend to rise with prices.

Exhibit 8 – Real GDP growth Exhibit 10 – Inflation

% % 5.0 3.5 4.0 3.0 3.0 2.0 2.5 1.0 2.0 0 1.5 (1.0) (2.0) 1.0 (3.0) 0.5 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 - Quarterly annualized Average annual (0.5) Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 June-14 Source: Moody’s Analytics as of June 2014 Monthly Annual

Source: Moody’s Analytics as of June 2014 • The labor market is especially strong. Exhibit 9 shows 760,000 new jobs were added during the second Commercial real estate quarter of 2014. Expansions in the apartment and hotel sectors hold steady, while office, industrial and retail continue to • It is impossible to know how much of the hiring was the experience recoveries in rent and occupancy rates. labor market recovering from weakness during the prior quarter. However, the unemployment rate and initial claims • Appreciation return in the NFI-ODCE had been for unemployment insurance are down, indicating that decelerating as expected but increased as a percentage there is genuine underlying improvement in employment. of total return during the second quarter, see exhibit . It remains to be seen whether that was a quarterly • As anticipated in our 1st Quarter WebEx call, the US 11 anomaly or a longer-term phenomenon. employment market exceeded its 2008 peak level of 138.4 million during May 2014 and is again in Exhibit 11 – NFI-ODCE returns expansion, at least in the aggregate. %% Exhibit 9 – Employment growth 0.05 0.6 0.04 Thousands of jobs 0.5 800 0.03 0.4 0.3 600 0.02 0.2 400 0.01 0.1 200 0 0 - 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 (200) Appreciation return Income return Income portion of total return Sep-10 June-11 May-12 Dec-12 Sept-13 June-14 Source: NCREIF as of June 2014 Source: Moody’s Analytics as of June 2014 12 • Over the long run, it is appropriate for income to Apartments account for the majority of total return in commercial • The winter lull in apartment construction was just real estate with appreciation comprising 10% to 30% temporary, as we suggested last quarter. of total return. • Demand slightly outpaced new supply during the Exhibit 12 – Transactions second quarter, keeping vacancy steady at 4.1%.

USD billions • As apartment development increases, it is unlikely 450 the vacancy rate will decline much further. However, 400 350 demand for rental units should continue to be strong in 300 light of economic growth and robust hiring. 250 200 Hotel 150 • Revenue per Available Room has been setting new 100 50 highs since early 2013. 0 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 2Q14 • Hotel development is ramping up and will likely dampen Quarter 12-month rolling total the pace of RevPAR growth over the next two years.

Source: Real Capital Analytics www.rcanalytics.com as of June 2014 Industrial • For all types of industrial space, availability is now • During the year ended June 2014, Real Capital Analytics 10.8%. In the warehouse subsector, availability is 10.9%. reported commercial and multifamily real estate transactions were nearly USD 395 billion, an increase of • It is likely that the industrial sector will approach its 19% over the prior 12-month period. Quarterly and 20-year average availability rate of 10.4% during the annual sales volume is shown in exhibit 12. second half of 2014. Rents are continuing to recover but remain 5% below prerecession highs. • Exhibit 13 shows the change in vacancy rate by property type during the second quarter. All sectors declined, Office except for apartments where increasing supply has held • Gross office rents grew 6.1% in downtown locations and vacancy steady at a low rate. 2.7% in the suburbs during the year ended June 2014.

Exhibit 13 – Quarterly change in vacancy • Supply growth remains low in the office sector.

Basis points 0 Retail (10) • During the second quarter, shopping center vacancy (20) declined to 10.3%, which still leaves the sector 190 (30) basis points above its 20-year average of 8.4%. (40) (50) • Throughout the second quarter, retail sales grew at a (60) steady pace, in excess of 4% year-over-year. (70) Hotels Office - Office - Industrial - Retail - Apartments suburban downtown warehouse shopping The potential for growth in net operating income for centers all property types continues to be supported by positive underlying trends in the economy. Source: CBRE-Econometric Advisors and Reis as of June 2014 Note: Industrial represents the change in availability. Second quarter hotel preliminary.

13 Photos of renovated common areas

Grand Hyatt Denver Hotel, Denver, CO

(1) The Investable Universe Inventory Model as tracked by our Research team (Data provided as of December 31, 2013): a) Is an estimate of the market value of institutional-quality commercial real estate in 65 of the largest US metropolitan areas for the 4 primary property sectors: apartments, industrial, office and retail; b) Provides a larger sample size with over USD 3.9 trillion of assets, as compared to the USD 343.7 billion tracked by NPI; and c) Has historically provided superior investment returns (relative to NPI) in 28 of the past 35 years, with a lower standard deviation over the same time period. (2) Same-property net operating income includes income before debt service and advisory fees, and excludes properties that were not held in the portfolio for the comparable periods. (3) Reflects the effect of properties that were sold or acquired and were therefore not held in both periods. One-time events may have been excluded from the property-type groupings and included in adjustments to provide a more meaningful comparison of same-property net operating income.

Source for all data/charts, if not stated otherwise: UBS Global Asset Management, Global Real Estate – US.

The NCREIF Fund Index – Open-End Diversified Core Equity (“NFI-ODCE”) is a capitalization-weighted, time-weighted return fund index beginning as of the first quarter of 1978, inclusive. As of June 30, 2014, the NFI-ODCE consisted of 22 active funds with total net assets of USD 115.8 billion. The degree of leverage varies among funds included in the NFI-ODCE.

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