BNP PARIBAS HIGH QUALITY EURO BOND FUND FCP

Transcription

1 BNP PARIBAS HIGH QUALITY EURO BOND FUND FCP ANNUAL REPORT at 31/07/2018 R.C.S. Luxembourg K 637

2 The asset manager for a changing world

3 Table of contents Page Organisation 2 Information 3 Manager's report 4 Audit report 7 Financial statements at 31/07/ Key figures relating to the last 3 years 11 Securities portfolio at 31/07/ Notes to the financial statements 14 Unaudited appendix 19 No subscription can be received on the basis of the financial statements alone. Subscriptions are only valid if made on the basis of the current prospectus, accompanied by the latest annual report and the most recent semi-annual report, if published thereafter. Page 1

4 Organisation Registered office 10 Rue Edward Steichen, L-2540 Luxembourg, Grand Duchy of Luxembourg Board of Directors of the Alternative Investment Fund Manager ( AIFM ) Chairman Mr. Anthony FINAN, Chief Marketing Officer & CSR Delegate, BNP PARIBAS ASSET MANAGEMENT France, Paris (until 29 November 2017) Mr. Fabrice SILBERZAN, Deputy Chief Executive Officer, BNP PARIBAS ASSET MANAGEMENT France, Paris (since 11 January 2018) Members Ms. Sylvie BAIJOT, Deputy Chief Executive Officer, BNP PARIBAS ASSET MANAGEMENT Luxembourg, Luxembourg Mr. Stéphane BRUNET, Chief Executive Officer, BNP PARIBAS ASSET MANAGEMENT Luxembourg, Luxembourg Mr. Georges ENGEL, Independent Director, Vincennes, France Alternative Investment Fund Manager ( AIFM ) BNP PARIBAS ASSET MANAGEMENT Luxembourg, 10 Rue Edward Steichen, L-2540 Luxembourg, Grand Duchy of Luxembourg BNP PARIBAS ASSET MANAGEMENT Luxembourg is the AIFM as defined by chapter II of Directive 2011/61 and chapter 2 of the 2013 AIFM Law in accordance with the provisions of Part II of the amended 2010 Law on UCIs. Net Asset Value Calculation BNP Paribas Securities Services, Luxembourg Branch, 60 Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg Depositary, Registrar and Transfer Agent BNP Paribas Securities Services, Luxembourg Branch, 60 Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg Effective Investment Manager BNP PARIBAS ASSET MANAGEMENT France, 1 Boulevard Haussmann, F Paris, France Legal Advisor in Japan Mori Hamada & Matsumoto, Marunouchi Park Building, 6-1 Marunouchi, 2-chome, Chiyoda-ku, Tokyo Japan Distributor and Agent Company in Japan Tokai Tokyo Securities Co., Ltd, Shinkawa Chuo-ku, Tokyo, Japan , Japan Auditor PricewaterhouseCoopers, Société coopérative, 2 Rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg, Grand Duchy of Luxembourg Page 2

5 Information (the Fund ) is a Common Fund (Fonds Commun de Placement) created on 29 July 2002 as a joint and undivided co-ownership of transferable securities and other assets. The Fund is currently subject to Part II of the law of 17 December 2010, as amended governing undertakings for collective investments (the law ), as well as by the provisions of the AIFM law of 12 July The Fund has been established for an indefinite period. The Fund may be dissolved at any time by agreement between the AIFM and the Depositary. The Fund may further be dissolved in any circumstances imposed by the law. The liquidation of the Fund may not be requested by its Unitholders or by their heirs and beneficiaries. The Net Asset Value is expressed in Euro (EUR). The Fund is managed in the interest of its co-owners (hereinafter referred to as the Unitholders ) by BNP PARIBAS ASSET MANAGEMENT Luxembourg (hereinafter referred to as the AIFM ), a company incorporated under the laws of the Grand Duchy of Luxembourg and having its registered office in Luxembourg. The assets of the Fund are separate from those of the AIFM and from the assets of other funds managed by the AIFM. The investment objective of the Fund is to seek stable growth in medium to long term. The Fund shall invest mainly in investment grade bonds denominated in Euro. The sale of its Units is not promoted to the public in the EU or any part thereof. The Fund is managed by the AIFM in accordance with its Management Regulations. The Management Regulations were amended for the last time on 13 July 2017 and not yet published in the Recueil Electronique des Sociétés et Associations. Consolidated Management Regulations were filed with the Greffe du Tribunal d Arrondissement de et à Luxembourg where they may be inspected and where copies may be obtained against payment of the relevant charges. Net Asset Values and Dividends The AIFM publishes the legally required information in the Grand Duchy of Luxembourg and in all other countries where the units are publicly offered. Documents available for Consultation The Management Regulations, the Prospectus and periodic reports may be consulted at the Fund s registered office and at the establishments responsible for the Fund s financial service. Copies of the Management Regulations and the annual and interim reports are available upon request. Except for the newspaper publications required by Law, the official media to obtain any notice to unitholders from will be the website Delivery of management reports in an electronic form: The AIFM may prepare and deliver, in respect of the Units of the Fund offered in Japan, management reports (unyo hokokusho) as set forth in Article 14, Paragraph 1 of the Law concerning Investment Trusts and Investment Corporations of Japan (Law No. 198 of 1951, as amended) (the "Investment Trusts Law") in an electronic form in lieu of those in a printed form in accordance with the Investment Trusts Law and any regulation thereunder; provided that, in the case where any requests for such management reports to be delivered in a printed form are received, the AIFM shall prepare and deliver them accordingly. Page 3

6 Manager's report Over the period, the portfolio delivered a negative performance and underperformed its benchmark. The structural underweight on peripherals is the main explanation of the underperformance versus benchmark. Investment environments The European Central Bank s (ECB) key interest rates have remained unchanged since March 2016 (main refinancing rate at 0%, marginal lending rate at 0.25% and deposit facility rate at -0.40%). In October 2017, the ECB announced that the monthly net asset purchase volume would be reduced from January 2018 (from EUR 60 billion to EUR 30 billion) until September 2018 or beyond, if necessary. No longer the central focus of the ECB s message, this modest monetary policy recalibration was followed in March 2018 by the abandonment of the pessimistic bias (introduced in 2016) envisaging a potential extension or increase of asset purchases. There seemed to be some disagreement at the monetary policy meeting at the end of 2017, but it was more the question of how to end quantitative easing (QE) which made observers uneasy with the economy showing signs of a slowdown and inflation remaining fairly low. Year-on-year, core inflation has been very close to 1% since spring Following the meeting of the Governing Council on 14 June, the ECB set out a very specific road map for the forthcoming developments in its monetary policy: monthly net asset purchases will be reduced to EUR 15 billion after September and until December, while key interest rates will remain at their present levels at least through the summer of This change largely offset the announcement of the imminent end to QE. In addition, the ECB chose to highlight the growing uncertainties weighing on growth, and Mario Draghi repeated his mantra of remaining patient, prudent and persistent. The German 10-year Bund yield fluctuated considerably over the last 12 months without any real trend emerging. From the end of July 2017 to the end of July 2018, it dropped by 10 bps to end at 0.44% having reached 0.75% in mid- February (its highest since autumn 2015) and plunged to 0.26% at the end of May, its lowest point since the beginning of June The beginning of the period in question was marked by a fairly significant spike after Mario Draghi reiterated his confidence in the European economy at the end of June and stated that inflation was now more likely to return to its target level. The German 10-year yield stood at 0.60 % on 13 July. A softer tone in official comments enabled it to return to the % range for a few months, but then, in early 2018, expectations of a faster pace of normalisation and pressure on long-term US yields took it to its highest point of the year. Subsequently, fresh accommodative statements by the ECB, a slight fall in eurozone business survey results and persistent low inflation resulted in a drop in yields. The German 10-year yield quickly dropped back to 0.50% at the end of March before experiencing more turbulence. Wild fluctuations came about at the end of May when the political situation in Italy caused eurozone risk to resurface. A flight to safety then triggered a slump in the German bond yield, which dropped to less than 0.30% in just a few days, while Italian yields spiked considerably, with the 10-year BTP hitting its highest level since May At the start of June, investors temporarily abandoned the Bund amid a period of relative calm, but then renewed their interest despite the ECB s announcement that it would end its asset purchase programme in December. Investors were reassured by Mario Draghi s accommodative tone and suggestions that the ECB wanted to buy longer-term securities than those maturing upon reinvestment. Portfolio management of the Fund In term of management, we started the period by reducing the duration of the portfolio due to the market anticipating end of QE for 2018 with economic recovery in the Eurozone. We decreased our exposure to Germany by Options on German 10 years as well as the exposure on French government bonds (OAT 2023/2032). Moreover, we took profit on short end covered bonds with the very negative yield. On the second part of the period, we kept our short duration position. We increased slightly the exposure to Ireland in the bucket years by reducing the exposure to France (OAT 2023). Furthermore, we increased the exposure on both financial and corporate bonds (Sanofi, Deutsche Boerse and Daimler) via the primary market in order to get a spread pickup and diversify the portfolio. Moreover, we managed actively the duration of the portfolio by Options on German 10 years in order to protect the portfolio against an important movement in rates over the period. On the year, the performance of the portfolio (net of fees) is -1.93% and the one of the benchmark is 1.2%. Future investment policy The Fund will continue to be managed in accordance with the existing investment policy. Page 4

7 Manager's report Risk Profile MARKET RISK Leverage Limit Leverage 31/7/2018 1/8/17-31/7/18 Value at Risk (Regulatory) Volatility / Tracking Error Cat. Benchmark Ccy Fund Category Position Date Main Market Risk indicator Max Comm. Leverage Max Gross Leverage Commitment figure Notional Leverage Average Level of AIF Commitment Leverage Average Level of AIF Gross Leverage Fund VaR (Histo) Fund VaR (MC) Bench VaR (Histo) Bench VaR (MC) Ex-ante volatility (Histo) Ex-ante TE (Histo) "UCITS" / "AIF" "VaR" / "Comm" % AUM % AUM % AUM % AUM (%) (%) % AUM % AUM % AUM % AUM % % FIXED INCOME / FI-Specialty / FI-Insurance BNP PARIBAS HIGH QUALITY EURO BOND FUND 100% JPM EMU (EUR) RI EUR AIF 31/07/2018 Comm % % % 99.91% % % 2.37% 1.72% 1.89% 2.11% 3.48% 1.50% For AIF funds, commitment and leverage exposures displayed include direct assets exposure. Stress Scenarios Liquidity Risk Other stress tests Liquidity Buckets (AIFMD) Liquidity Buckets (AIFMD) Liquidity Buckets (AIFMD) Liquidity Buckets (AIFMD) Subscription / Redemption Stress Funds Ccy Fund Category Position Date EM - Asia IR (+1%) 1 day or less 2-7 days 8-30 days days days days More than 365 days Max Redemption Max Redemption Date "UCITS" / "AIF" % AUM % AUM % AUM % AUM % AUM % AUM % AUM % AUM % AUM % AUM % AUM FIXED INCOME / FI-Specialty / FI-Insurance BNP PARIBAS HIGH QUALITY EURO BOND FUND EUR AIF 31/07/ % -6.64% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% -5.43% 14/06/2017 Risk management systems Risk management is an integral part of BNP PARIBAS ASSET MANAGEMENT (BNPP AM) business model and is considered at all levels of the organisation. At BNPP AM Luxembourg the Investment risk management is an independent entity, it reports directly to the CEO and to the BNPP AM Head of Investment Risk: European and US Entities. Following the first level of risk controls conducted within the Investment Team, the Risk Team (Investment Risk and Investment Compliance) is dedicated to a second layer of internal controls, they work closely with the Investment Team to ensure that portfolios are run at acceptable levels of risk. To manage investment risks (commitment, leverage and liquidity risk) the Risk Team uses CRGE (Internal Risk Software) and RiskMetrics for VaR calculation. To manage investment compliance risks, the team uses Sentinel. A UCITS/AIF Risk Management Procedure (RMP) dated 31 January 2018 was provided to the CSSF on 28 February Page 5

8 Manager's report AIF commitment Leverage AIF commitment leverage level as at 31 July 2018: 100% Average level of AIF commitment leverage from 1 August 2017 to 31 July 2018: % The Board of Directors Luxembourg, 20 September 2018 Note: The information stated in this report is historical and not necessarily indicative of future performance. Page 6

9 J- PWC Audit report To the Unitholders of Our opinion In our opinion, the accompanying financial statements give a true and fair view of the financial position of (the Fund ) as at 31 July 2018, and of the results of its operations and changes in its net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements. I/Vhat we have audited The Fund s financial statements comprise: the statement of net assets as at 31 July 2018; the statement of operations and changes in net assets for the year then ended ; the securities portfolio as at 31 July 2018; and the notes to the financial statements, which include a summary of significant accounting policies. Basisfor opinion We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier (CSSF). Our responsibilities under those Law and standards are further described in the Responsibilities of the Réviseur d entreprises agréé for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the Fund in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit ofthe financial statements. We have fulfilled our other ethical responsibilifies under those ethical requirements. PricewaterhouseCaapers, Saciété cooperative, 2 rue Gerhard Mercator, B.P. I443, L-1014 Luxembourg T: , F : , Cabinet de révision agréé. Expert-comptable (autorisation gauvernementale n ) R_C.S. Luxembourg B TVA LU254825I8 Page 7

10 In pwc Other information The Board of Directors of the Alternative Investment Fund Manager is responsible for the other information. The other information comprises the information stated in the annual report but does not include the financial statements and our audit report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities ofthe Board ofdirectors ofthe Alternative Investment FundManagerfor thefinancial statements The Board of Directors of the Alternative Investment Fund Manager is responsible for the preparation and fair presentation of the financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements, and for such internal control as the Board of Directors of the Alternative Investment Fund Manager determines is necessary to enable the preparation offinancial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors of the Alternative Investment Fund Manager is responsible for assessing the Fund's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors of the Alternative Investment Fund Manager either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.» r» Responsibilities ofthe Réviseur d entreprises agree for the audit ofthefinancial statements The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professionaljudgment and maintain professional scepficism throughout the audit. Page 8

11 .5- pwc We also: identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Fund s internal control; evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors of the Alternative Investment Fund Manager; conclude on the appropriateness of the Board of Directors of the Alternative Investment Fund Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our audit report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our audit report. However, future events or conditions may cause the Fund to cease to continue as a going concern; evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Luxembourg, 13 November 2018 Page 9

12 Financial statements at 31/07/2018 BNP PARIBAS HIGH QUALITY EURO BOND FUND Expressed in Notes Statement of net assets Assets Securities portfolio at cost price Unrealised gain/(loss) on securities portfolio Securities portfolio at market value Options at market value 2, Cash at banks and time deposits Other assets Liabilities Other liabilities Net asset value Statement of operations and changes in net assets Income on investments and assets Management fees Depositary fees Bank interest 553 Other expenses Taxes Administrative agent fees Transaction fees Total expenses Net result from investments ( ) Net realised result on: Investments securities 2, Financial instruments 2 (8 885) Net realised result Movement on net unrealised gain/(loss) on: Investments securities 2, 13 ( ) Financial instruments Change in net assets due to operations ( ) Net subscriptions/(redemptions) ( ) Dividends paid 9 (37 549) Increase/(Decrease) in net assets during the year/period ( ) Net assets at the beginning of the financial year/period Net assets at the end of the financial year/period EUR The accompanying notes form an integral part of these financial statements Page 10

13 Key figures relating to the last 3 years BNP PARIBAS HIGH QUALITY EURO BOND FUND EUR EUR EUR Number of units 31/07/ /07/ /07/ /07/2018 Net assets Net asset value per unit Units Classic - Distribution The accompanying notes form an integral part of these financial statements Page 11

14 Securities portfolio at 31/07/2018 Expressed in EUR Quantity Denomination Quotation currency Market value Transferable securities admitted to an official stock exchange listing and/or traded on another regulated market % of net assets Bonds France AEROPORTS DE PARIS 1.500% 14-07/04/2025 EUR ARKEA HL 0.625% 15-30/09/2022 EUR BNP PARIBAS 0.750% 16-11/11/2022 EUR CIE FINANCEMENT FONCIER 0.375% 15-29/10/2020 EUR FRANCE O.A.T % 17-25/06/2039 EUR FRANCE O.A.T % 09-25/04/2041 EUR FRANCE O.A.T % 01-25/10/2032 EUR FRANCE O.A.T.I/L 0.100% 18-25/07/2036 EUR LA BANQUE POSTALE 1.875% 13-11/09/2020 EUR LVMH 0.375% 17-26/05/2022 EUR SANOFI 1.000% 18-21/03/2026 EUR SNCF RESEAU 1.000% 16-09/11/2031 EUR SOCIETE GENERALE 0.125% 16-05/10/2021 EUR UNEDIC 0.125% 17-25/05/2022 EUR Germany BUNDESREPUBLIK DEUTSCHLAND 1.000% 14-15/08/2024 EUR BUNDESREPUBLIK DEUTSCHLAND 1.500% 13-15/05/2023 EUR BUNDESREPUBLIK DEUTSCHLAND 3.250% 10-04/07/2042 EUR DEUTSCHE BOERSE 1.125% 18-26/03/2028 EUR KFW 0.125% 17-15/01/2024 EUR LAND HESSEN 0.375% 16-06/07/2026 EUR NORDRHEIN-WEST 0.000% 17-05/12/2022 EUR Spain BANCO SANTANDER 4.625% 07-04/05/2027 EUR BANKINTER SA 0.875% 15-03/08/2022 EUR CAJA RURAL NAV 0.500% 15-16/03/2022 EUR CAJA RURAL NAV 0.625% 16-01/12/2023 EUR The Netherlands ABN AMRO BANK NV 0.625% 16-31/05/2022 EUR ABN AMRO BANK NV 1.125% 17-12/01/2032 EUR AIRBUS GROUP FINANCE BV 0.875% 16-13/05/2026 EUR DAIMLER INTERNATIONAL FINANCE 1.000% 18-11/11/2025 EUR DEUTSCHE BAHN FIN 2.500% 13-12/09/2023 EUR NETHERLANDS GOVERNMENT 0.250% 15-15/07/2025 EUR NETHERLANDS GOVERNMENT 2.750% 14-15/01/2047 EUR Italy INTESA SANPAOLO 0.625% 15-20/01/2022 EUR UBI BANCA SPCA 5.250% 11-28/01/2021 EUR UNIONE DI BANCHE 0.375% 16-14/09/2026 EUR Belgium BELFIUS BANK SA 0.625% 14-14/10/2021 EUR BELGIUM GOVERNMENT 1.250% 18-22/04/2033 EUR BELGIUM GOVERNMENT 2.600% 14-22/06/2024 EUR BELGIUM GOVERNMENT 3.000% 14-22/06/2034 EUR Sweden SKANDINAVISKA ENSKILDA BANK 0.750% 16-24/08/2021 EUR SKANDINAVISKA ENSKILDA BANK 1.625% 13-04/11/2020 EUR SVENSKA HANDELSBANKEN 1.125% 15-14/12/2022 EUR Supranational EFSF 0.400% 16-31/05/2026 EUR EIB 0.000% 16-16/10/2023 EUR The accompanying notes form an integral part of these financial statements Page 12

15 Securities portfolio at 31/07/2018 Expressed in EUR Quantity Denomination Quotation currency Market value % of net assets Finland FINNISH GOVT 0.500% 16-15/04/2026 EUR FINNISH GOVT 0.500% 17-15/09/2027 EUR NORDEA BANK FINLAND 0.125% 15-17/06/2020 EUR Ireland IRISH GOVT 1.300% 18-15/05/2033 EUR IRISH GOVT 2.400% 14-15/05/2030 EUR IRISH GOVT 5.400% 09-13/03/2025 EUR Austria REPUBLIC OF AUSTRIA 0.000% 17-20/09/2022 EUR REPUBLIC OF AUSTRIA 4.150% 07-15/03/2037 EUR Floating rate bonds France BANQUE FEDERATIVE DU CREDIT MUTUEL 16-03/06/2020 FRN EUR CREDIT LOGEMENT 17-28/11/2029 FRN EUR Germany MUENCHENER RUECKVERSICHERUNG 11-26/05/2041 FRN EUR The Netherlands ALLIANZ FINANCE 11-08/07/2041 FRN EUR Total securities portfolio The accompanying notes form an integral part of these financial statements Page 13

16 Notes to the financial statements Page 14

17 Notes to the financial statements at 31/07/2018 Note 1 - General Information a) Events that occurred during the financial year ended 31 July 2018 No special event occurred during this financial year. b) Sub-fund open The sub-fund whose securities portfolio is detailed in the present document is available for subscription as at 31 July Note 2 - Principal accounting methods a) Net asset value This annual report is prepared on the basis of the last net asset value as at 31 July b) Presentation of the financial statements The financial statements of the Fund are presented in accordance with the legislation in force in the Grand Duchy of Luxembourg on Undertakings for Collective Investment. The currency of the Fund is the Euro (EUR). The statement of operations and changes in net assets covers the financial year from 1 August 2017 to 31 July c) Valuation of the securities portfolio The valuation of all securities listed on a stock exchange or any other regulated market, which functions regularly, is recognised and accessible to the public, is based on the latest known closing price on the Valuation Day, and, if the securities concerned are traded on several markets, on the basis of the last known closing price on the major market on which they are traded. If this price is not a true reflection, the valuation shall be based on the probable sale price estimated by the AIFM in a prudent and bona fide manner. Unlisted securities or securities not traded on a stock market or another regulated market which functions in a regular manner, is recognized and accessible to the public, shall be valued on the basis of the probable sale price estimated in a prudent and bona fide manner by a qualified professional appointed for this purpose by the AIFM. Securities denominated in a currency other than the currency of the Fund, are converted at the exchange rate prevailing on the Valuation Day. If permitted by market practice, liquid assets, money market instruments and all other instruments may be valued at their nominal value plus accrued interest or according to the linear amortisation method. Any decision to value the assets in the portfolio using the linear amortisation method must be approved by the AIFM, which will record the reasons for such a decision. The AIFM will put in place appropriate checks and controls concerning the valuation of the instruments. d) Income Interest is recognized on an accrual basis decreased by the eventual withholding taxes. e) Valuation of options The liquidation value of options traded on stock markets is based on the closing prices published by the stock markets on which the AIFM traded the contracts in question. The liquidation value of options not traded on stock markets is determined in accordance with the rules defined by the Board of Directors, in accordance with uniform criteria for each category of contract. Page 15

18 Notes to the financial statements at 31/07/2018 f) Conversion of foreign currencies The value of all assets and liabilities denominated in a currency other than the reference currency of the relevant sub-fund is determined by taking into account the rate of exchange prevailing at the time of the determination of the Net Asset Value. The income and expenses denominated in a currency other than the reference currency of the relevant sub-fund are determined by taking into account the rate of exchange prevailing on the transaction date. Note 3 - Exchange rates As at 31 July 2018, the Fund and its sole unit class were denominated in EUR. Note 4 - Management fees (maximum per annum) The AIFM is entitled to a management fee payable monthly, out of the assets of the Fund, at an annual rate not exceeding 1.35% of the Fund s average Net Assets during the relevant month to cover the remuneration of the asset managers and also distributors in connection with the marketing of the Fund s units. The Distributor in Japan will receive, out of the management fee, a distributor fee payable monthly in arrears, at an annual rate of 0.4% of the Fund s average Net Assets during such monthly year corresponding to Units distributed by the Distributor in Japan. The Agent Company is entitled to a fee payable monthly out of the Management Fee at an annual rate of 0.1% of the Fund s average Net Assets during the relevant month. Note 5 - Depositary fees The Depositary is entitled to receive a depositary fee payable monthly at an annual rate not exceeding 0.13% and based on the Fund's average Net Assets during the relevant month. Note 6 - Administrative agent fees An administrative agent fee is payable for the NAV calculation duties. The administrative agent fee is payable monthly at an annual rate not exceeding 0.12% and based on the Fund's average Net Assets during the relevant month. Note 7 - Other expenses Other expenses are paid by the Fund and include other taxes, banking fees, legal fees and audit fees. Note 8 - Taxes At the date of the prospectus (July 2017), the Fund is not liable to any Luxembourg income tax or capital gains tax. The Fund is liable to an annual taxe d abonnement in Luxembourg representing 0.05% of the net asset value. This rate is reduced to 0.01% for: a) Funds with the exclusive objective of collective investments in money market instruments and deposits with credit institutions; b) Funds with the exclusive objective of collective investments with credit institutions; c) Classes reserved for Institutional Investors, Managers, and UCIs. Page 16

19 Notes to the financial statements at 31/07/2018 The following are exempt from this taxe d abonnement : a) The value of the assets represented by units, or shares in other UCIs, provided that these units or shares have already been subject to the taxe d abonnement ; b) Units or classes: (i) whose securities are reserved for Institutional Investors, Managers, or UCIs and (ii) whose sole object is the collective investment in money market instruments and the placing of deposits with credit institutions, and (iii) whose weighted residual portfolio maturity does not exceed 90 days, and (iv) that have obtained the highest possible rating from a recognized rating agency; c) Units or classes reserved to: (i) institutions for occupational retirement pension or similar investment vehicles, set up at the initiative of one or more employers for the benefit of their employees, and (ii) companies having one or more employers investing funds to provide pension benefits to their employees; d) Funds whose main objective is investment in microfinance institutions; e) Units or classes: (i) whose securities are listed or traded on at least one stock exchange or another regulated market operating regularly that is recognized and open to the public, and (ii) whose exclusive object is to replicate the performance of one or several indices. When due, the taxe d abonnement is payable quarterly based on the relevant net assets and calculated at the end of the quarter for which it is applicable. In addition, the Fund may be subject to foreign UCI s tax, and/or other regulators levy, in the country where the Fund is registered for distribution. The effective taxe d abonnement rate applied to the fund is 0.05% of the net asset value. Note 9 - Dividends The dividends distributed during the financial year ended 31 July 2018 are as follows: Payment date Dividend per unit EUR 25 August September October November December January February March April May June July Page 17

20 Notes to the financial statements at 31/07/2018 Note 10 - Option positions As at 31 July 2018, the following position on options was outstanding: Purchase/ Currency Quantity Description Sale EUR 4 P CALL EURO-BUND FUTURE 24/08/ Maturity date Strike Nominal (in EUR) Market value (in EUR) 24/08/ Total: 160 As at 31 July 2018, the cash margin balance in relation to futures and/or options amounted to EUR. Counterparty to the option: BNP Paribas Paris Note 11 - Transaction fees Transaction fees incurred by the Fund relating to purchase or sale of transferable securities, money market instruments, derivatives or other eligible assets are mainly composed of standard fees, sundry fees on transaction, stamp fees, brokerage fees, custody fees, VAT fees, stock exchange fees and RTO fees (Reception and Transmission of Orders). In line with bond market practice, a bid-offer spread is applied when buying and selling these securities. Consequently, in any given transaction, there will be a difference between the purchase and sale prices quoted by the broker, which represents the broker s fee. Note 12 - Changes in the composition of the securities portfolio The list of changes in the composition of the securities portfolio during the year is available free of charge at the AIFM registered office and from local agents. Note 13 - (Un)realised gain/loss on investments securities Following the AIFM Law of July 2013, the details of the realised gain/(loss) on investment securities during the financial year are: BNP PARIBAS HIGH QUALITY EURO BOND FUND Realised gain (in sub-fund currency) Realised loss (in sub-fund currency) Net realised result (in sub-fund currency) Following the AIFM Law of July 2013, the details of the unrealised gain/(loss) on investment securities during the financial year are: BNP PARIBAS HIGH QUALITY EURO BOND FUND Movement on unrealised gain (in sub-fund currency) Movement on unrealised loss (in sub-fund currency) Movement on net unrealised gain/loss (in sub-fund currency) ( ) Page 18

21 Unaudited appendix Information on the remuneration policy in effect within the AIFM Information on remuneration policy, applicable during the financial year closed as at 31 July 2018, is available on request to the AIFM BNP PARIBAS ASSET MANAGEMENT Luxembourg, 10 rue Edward Steichen, L-2540 Luxembourg. In addition, descriptive information on the remuneration policy of the management company can be found on the website Information according to regulation on transparency of securities financing transactions The FCP is not affected by SFTR instruments during the financial year ending 31 July Page 19

22 The asset manager for a changing world