ANNUAL REPORT AND AUDITED FINANCIAL ACCOUNTS AT 30 DECEMBER UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND FCP Mutual Fund under French law

Transcription

1 ANNUAL REPORT AND AUDITED FINANCIAL ACCOUNTS AT 30 DECEMBER 2016 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND FCP Mutual Fund under French law

2 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Subscriptions are only valid if made on the basis of the current prospectus, the Key Investor Information Document (KIID), accompanied by the latest annual report and the most recent half-yearly report, if the latter was published after the annual report. No party may provide information other than that appearing in this prospectus, or in the other documents referred to in the prospectus and which is available to the public.

3 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Contents UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Information concerning investment and management 4 Changes concerning the Fund 11 Management report 12 Regulatory information 16 Report of the statutory auditor 18 Annual Accounts Balance sheet - Assets 20 Balance sheet - Liabilities 21 Off-balance sheet 22 Profit and loss statement 23 Notes to the annual accounts 24 3

4 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Information concerning investments and management LEGAL FORM Fonds Commun de Placement (FCP) collective investment Fund under French law. CLASSIFICATION Bonds and other international debt securities. ALLOCATION OF DISTRIBUTABLE INCOME Units AC (USD) AD (USD) AHC (EUR) AHD (EUR) AHC (GBP) AHD (GBP) AHC (CHF) AHD (CHF) IC (USD) ID (USD) IHC (EUR) IHD (EUR) IHC (GBP) IHD (GBP) IHC (CHF) IHD (CHF) RC (USD) RD (USD) UC (USD) UD (USD) UHC (EUR) UHD (EUR) UHC (GBP) UHD (GBP) ZC (USD) ZD (USD) Distribution of income Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains Distribution and/or carried forward and/or accumulation of net income and net realised gains 4

5 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report MANAGEMENT OBJECTIVE The fund is a feeder fund of the Master Fund: UBAM - EM INVESTMENT GRADE CORPORATE BOND compartment of the UBAM SICAV under Luxembourg law. Reminder of the objective of the Master Fund: The objective of the Master Fund is to increase your capital by investing mainly in emerging country bonds. The performance of the Feeder Fund will be lower than that of the Master Fund due to the fact that it has its own management fees. BENCHMARK INDICATOR N/A. STRATEGIE D INVESTISSEMENT 1. Investment strategy The Fund, which is a feeder Fund, is permanently invested up to 85% or more in shares of the Master Fund, whose strategy is detailed below, and where necessary in cash. Reminder of the investment strategy of the Master Fund: The compartment is denominated in USD and invests its net assets mainly in fixed or variable rate bonds where the issue or issuer has a minimum rating of BBB- (Fitch or S&P) or Baa3 (Moody's) or a rating considered equivalent by the Manager as a result of its analysis, for the same level of seniority as the issue, issued by: - companies domiciled in emerging countries, or, - companies of any country, but where the underlying is linked directly or indirectly to emerging countries, or, - companies where the risks are linked directly or indirectly to emerging countries. The compartment will invest at least 80% in OECD currencies. For investments denominated in currencies other than the USD, the exchange rate shall be mainly hedged. In addition, the net assets of the compartment may be invested in: - Bonds issued by emerging sovereign issuers, or - Bonds issued by issuers not connected to emerging countries, or - Bonds issued or guaranteed by countries which are members of the OECD or by their local public authorities, or regional communities or global supranational organisations and institutions, and - Up to 20 % in contingent convertibles. The exposure to these markets may be direct or via the use of derivative financial instruments such as CDS and CDX. For categories of units denominated in a currency other than the USD, the Feeder Fund will intervene in the futures markets in order to hedge currency risk with respect to the base currency (the US dollar). Thus, all units of the Feeder Fund denominated in a currency other than the USD, the currency risks of the unit currency with respect to the reference currency of the Fund, will be subject to systematic hedging transactions; a residual exposure to currency risk may remain however. Given the technical difficulties in carrying out this hedging, units denominated in a currency other than the USD may possibly be exposed to an associated exchange rate risk due to the changes in the value of liabilities (subscriptions/redemptions) or assets (change in the value of assets hedged). All the costs and risks ensuing from hedging transactions on the exchange rate risk shall be at the charge of the units denominated in a currency other than the USD, respectively. 5

6 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Nevertheless, these units denominated in a currency other than the USD remain exposed to any existing currency risk on the USD unit resulting from investments denominated in a currency other than the dollar and not hedged. Range of sensitivity to interest rates within which the Fund is managed Currency of denomination of securities in which the Fund is invested and ranges of exposure Level of exchange rate risk Geographical area of issuers of securities to which the Fund is exposed and ranges of exposure Range of sensitivity to credit spreads No constraint in terms of sensitivity Up to 20% in non-oecd currencies, the balance being invested in OECD currencies. Residual Up to 100% in emerging country issuers No constraint in terms of sensitivity 2. Assets Reminder of the assets of the Master Fund: Equities: n/a. Bonds, debt securities and money market instruments: The compartment is denominated in USD and invests its net assets mainly in fixed or variable rate bonds where the issue or issuer has a minimum rating of BBB- (Fitch or S&P) or Baa3 (Moody's) or a rating considered equivalent by the Manager as a result of its analysis, for the same level of seniority as the issue, issued by: - companies domiciled in emerging countries, or, - companies of any country, but where the underlying is linked directly or indirectly to emerging countries, or, - companies where the risks are linked directly or indirectly to emerging countries. The compartment will invest at least 80% in OECD currencies. For investments denominated in currencies other than the USD, the exchange rate shall be mainly hedged. In addition, the net assets of the compartment may be invested in: - Bonds issued by emerging sovereign issuers, or, - Bonds issued by issuers not connected to emerging countries, or, - Bonds issued or guaranteed by countries which are members of the OECD or by their local public authorities, or regional communities or global supranational organisations and institutions, and, - Up to 20 % in contingent convertibles. Units or shares of other UCITS and/or AIFs: The compartment may invest in units or shares of other funds under French or foreign law, and/or AIFs under French law or established in other member states of the European Union, and/or other investment funds under foreign law. The proportion of assets invested in funds or other AIFs and investment funds under foreign law will not exceed 10%. 3. Derivative instruments The Feeder Fund will intervene on the futures markets and derivative markets in order to hedge currency risk: > Markets invested in: French and foreign regulated futures markets, over-the-counter markets. 6

7 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report > Risks to which the manager seeks exposure: foreign exchange. > Type of instruments used: currency swaps, currency futures contracts. > Usage strategy: hedging exchange rate risk. Reminder of the assets of the Master Fund: The compartment intervenes on organised regulated derivative markets and over-the-counter markets with the aim of hedging against and/or exposing the fund to interest rate, currency and credit risks. The compartment may also use derivative instruments and techniques with the aim of hedging or for efficient management, within the limits set by its investment restrictions. The compartment may in particular buy and sell put and call options on stocks or financial instruments, futures contracts on currencies or interest rates and swaps on currencies, interest rates or on any type of financial instrument, provided that these derivatives are traded on regulated markets which operate regularly. These derivative instruments may be traded overthe-counter (OTC) with leading institutions specialised in these types of operations. The instruments used may be CDS (Credit Default Swaps), CDS on indices, Options on CDS and indices of CDS. Usage strategy: - hedging interest-rate, exchange-rate and/or credit risks, - exposure to interest-rate, exchange-rate and/or credit risks. Thus the Fund may be over-exposed through the use of derivative products. However the limit of exposure is 150% of the net assets of the Fund. 4. Securities with embedded derivatives The compartment may invest in securities including derivatives such as hybrid financial bonds and contingent convertible bonds (CoCos). 5. Cash deposits The compartment may make deposits in order to optimise its treasury. 6. Cash borrowings The UBAM SICAV may borrow at the rate of 10% of the net assets of each compartment, providing that the loans are temporary; however, the obtaining of currencies through back-to-back loans shall not be considered as borrowing. 7. Sale and repurchase agreements For the better management of the portfolio, the UBAM SICAV may for each compartment undertake securities lending operations and repurchase transactions which consist of the buying and selling of securities where the clauses reserve to the seller the right to buy back from the acquirer the securities sold at a price and at a time stipulated between the two parties during the closing of the contract. Each compartment may commit up to 25% of its net assets to repos or reverse repos transactions. In accordance with the stipulations of the CSSF circular 08/356, the SICAV will lend its securities within the framework of a standardised system of lending organised by a recognised clearing house or by a leading financial institution subject to prudential surveillance rules which are considered by the CSSF as equivalent to those prescribed by EU law. Regarding these operations, the SICAV will receive, for the compartment concerned, a guarantee with a value, during the period of the loan contract, at least equal to the total value of the securities loaned, in the form of cash, blue chip equities or investment grade bonds. 7

8 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report The volume of securities loans will be maintained at an appropriate level such that the SICAV may at any time meet its commitments regarding redemption of shares by its unit holders and does not compromise the management of the assets of each compartment in accordance with its investment policy. Financial guarantees The Feeder Fund and the Master Fund follow the same rules with respect to financial guarantees. Reminder of the rules applicable to the Master Fund The Fund does not generally receive financial guarantees. Due to the standardisation of a number of OTC markets following the implementation of the Dodd-Frank regulations in the US and EMIR in Europe, margin and guarantee deposit calls will pass through a central counterparty (CCP). The collateral delivered to the clearing house shall generally be in cash. The management company may also, in certain conditions, put financial guarantee contracts, commonly referred to as 'collateral agreements' in place with the majority of its counterparties. However, some counterparties may not have such a contract. The financial guarantees authorised by these contracts are sums of cash in Euros or foreign currency as well as in some cases, financial securities. The latter may be subject to a discount depending on the quality of the issuer. RISK PROFILE Your money will be invested mainly in financial instruments selected by the Management Company. These instruments are subject to the fluctuations and risks of the market. The risk profile of the Fund is identical to the risk profile of the Master Fund. Reminder of the risk profile of the Master Fund: Capital loss risk: The Fund carries no guarantee or protection and the capital initially invested may not be returned. Capital loss occurs when a unit is sold at a price below its purchase value, in the absence of dividend distribution. Interest-rate risk: The interest rate risk is the risk of variation in interest rates which have an impact on the bond markets. As an example, the price of a bond tends to move in the opposite direction to interest rates. In the case of a rise in interest rates, the net asset value of the Fund may fall. Exchange rate risk: The Fund may invest in securities denominated in foreign currencies. These securities may decline in value if exchange rates vary, which may decrease the net asset value of your fund. Risk associated with the use of derivative instruments: Derivative instruments and other investment techniques and financial instruments are special products which require different investment techniques and risk analyses from those of equities and bonds. The use of a derivative financial instrument presupposes not only a knowledge of the underlying instrument, but also knowledge of the derivative instrument itself, without which movement in the value of the derivative cannot otherwise be monitored in all possible conditions of the market. The use and complexity of such products means that adequate control mechanisms are maintained for the monitoring of operations carried out and that the risks incurred by a compartment in relation to these products and that changes in price, interest rate or exchange rates can be evaluated. Among the other risks inherent in the use of derivative instruments and other investment techniques and financial instruments, we could mention among others the risk of diverging valuations of financial products, which results in the application of different approved valuation methods and an absence of absolute correlation (model risks) between the derivative products and the underlying stocks, interest rates, exchange rates and indices. 8

9 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Numerous derivative instruments, and particularly over-the-counter derivatives, are complex and often valued in a subjective manner. Imprecise valuations may result in higher cash settlements to the counterparty or a loss in value for a compartment. Derivative instruments do not always reflect fully or even in large measure the changes in stocks, interest rates, exchange rates or indices on which they are supposedly aligned. As a result, the use of derivatives and other particular investment techniques and financial instruments by a compartment is not necessarily an efficient means of achieving the investment objective of a compartment and may even prove counter-productive. Risk associated with overexposure: The Fund may use futures instruments (derivatives) in order to generate overexposure and thus bring the exposure of the Fund above the net assets. This overexposure may amplify both upward and downward movements and thus lead to a higher risk for investors. Liquidity risk: There are liquidity risks when a particular security is difficult to buy or sell. If operations have a large volume or if markets are partially illiquid (particularly in the case of many instruments traded individually), to execute an operation or undo a position at an advantageous price may prove impossible in some circumstances. Counterparty risk: with derivative instruments traded over-the-counter the investor runs the risk that the counterparty to a transaction is unable to fulfil its commitments and/or a contract is terminated, for example, in the case of bankruptcy, illegality a posteriori, or modification of legal rules regarding tax or the presentation of accounts compared to those in effect at the time the contract was agreed linked to derivative instruments traded over-the-counter. Risk related to subordinated bonds or contingent convertible bonds, known as «Cocos»: The use of subordinated bonds and particularly bonds termed 'Additional Tier 1' exposes the fund to the following risks: - the triggering of contingent clauses: if a capital threshold is breached, these bonds are either exchanged for equities or are subject to a reduction in capital, potentially to zero. - cancellation of coupon: the payments of coupons on this type of instrument are entirely discretionary and may be cancelled by the issuer at any time, for any reason, without time constraint. - of capital structure: in contrast to the traditional capital hierarchy, investors in this type of instrument may be subject to a loss of capital. In fact, the subordinated debtholder will be repaid after the ordinary debtholders, but before the shareholders. - of call for deferment: these instruments are issued as perpetual instruments, callable at predetermined levels only with the approval of the competent authority. - of valuation / yield: the attractive yield of these securities may be considered as a complexity premium. The realisation of any of these risks may lead to a fall in the net asset value of the fund. Risk associated with investment in emerging markets: Investor attention is drawn to the conditions of operation and supervision of these markets, which may deviate from the standards in place on the major international markets. Downward movements on these markets may therefore cause a faster and more marked fall in the net asset value. Credit risk: Credit risk is the potential risk of decline in the credit rating of the issuer which will have a negative impact on the price of the security and therefore on the net asset value of the Fund. Credit risk also results when the issuer of a bond is not able to repay the loan and to make interest payments on the dates provided for in the contract. 9

10 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report SUBSCRIBERS CONCERNED AND TYPICAL INVESTOR PROFILE Subscribers concerned: Unit category A: all subscribers. Unit category I: institutional. Unit category R: all subscribers. Unit category U: reserved to investors who indirectly purchase the units through an agent or any other financial intermediary (such as a platform) who provide fee based investment advisory services to investors under a separate agreement and which are pre-approved by UBP. These units do not give rights to any retrocession. Unit category Z: Reserved to mutual funds, AIFs, investment funds and institutional investors which have entered into a specific remuneration agreement with Union Bancaire Privée, UBP SA or any other member of the Group. The attention of subscribers is drawn to the information relating to non-authorised investors mentioned in the general characteristics. Typical investor profile: The Fund is aimed at private or institutional clients who wish to benefit from the performance of investment-grade bonds of emerging countries. The reasonable amount to invest in this Fund depends on the personal situation of each individual investor. To determine a reasonable amount, personal wealth, current needs and the recommended duration of the investment should be taken into account. It is also recommended that investments be sufficiently diversified so as not to expose them solely to the risks of a single Fund. Recommended investment horizon: Greater than or equal to 3 years. 10

11 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Changes concerning the Fund 2016 FINANCIAL YEAR The General Management of the asset management company UBI - UNION BANCAIRE GESTION INSTITUTIONNELLE (France) SAS decided to amend the prospectus of the Fund, as of the 4 th of August 2016: Change of the Fund into a feeder - please refer to the letter to investors. 11

12 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Management Report Emerging market bond markets had an excellent year in 2016, benefiting particularly from the rebound in commodities, the improvement in macroeconomic fundamentals in some emerging markets such as Brazil and Russia, and significant inflows of capital from investors attracted by the higher yields in this asset class. Emerging market investment grade bonds recorded a performance of +6.4% over the year, outstripping developed markets investment grade bonds denominated in USD. Over the period credit spreads tightened by 62 basis points to finish at 201bps. At a regional level, the best performance came from Latin America, due in particular to Brazilian issuers, who rebounded from their lows, given that the political uncertainties within the country diminished after the removal of the president Dilma Rousseff. Conversely, issuers in Asia under-performed, to the extent that credit with a high rating, already onerous, such as those issued in Hong Kong, South Korea and Taiwan, benefited from a limited tightening of spreads. In terms of sectors, commodities related companies outperformed, on the basis of the rise in oil and metals prices. Poorer performances came from the real estate and financial sectors. During the year we ended our over-weighting on Indian and Israeli issuers, finishing at a neutral position, as the valuations appeared less attractive. We also reduced our positions on Chile, Hong Kong and South Korea. Conversely, we increased our over-weighting on Russia, Kazakhstan and Indonesia, and in addition we moved from under-weight to over-weight on Brazil. Regarding sector positions, we increased our over-weighting on gas and oil companies, and moved from under-weight to over-weight on issuers in metals and the mining industry. Conversely, we became underweight on utilities and further reduced our positioning on TMT and consumption companies. During 2016, the UBAM FCP - EM Investment Grade Corporate Bond Fund recorded a performance of +5.84% (net of commissions), against +6.38% for the benchmark index. In terms of gross performance, the fund outperformed the benchmark, finishing the year at +6.57%. The main source of performance during the year came from our selection of credit and our positioning on the curve. Regarding countries, the best performances came from our over-weighting on issuers from Russia, Brazil and Kazakhstan. The fund also benefited from its under-weighting on South Korea and Qatar. Conversely, the under-weighting on Chile cost the fund, similarly to the selection of issues from Columbia. On a sector basis, the fund benefited from its selection on industry and utilities, and from its under-weighting on financials. The positive contribution of metals and mining industry companies was marginal, with the gains in the second half offsetting the losses incurred earlier in the year, while the fund suffered from its under-weighting at the time of the market rebound. It should be noted that the UBAM FCP - EM Investment Grade Corporate Bond fund became, as of , a feeder fund for the UBAM - EM Investment Grade Corporate Bond, a compartment of the UBAM UCITS under Luxembourg law. The investment strategy of the latter is the same as that of the UBAM FCP - EM Investment Grade Corporate Bond before this date. Past performances are no guarantee of future performance. 12

13 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Main movements in the portfolio during the financial year Securities Movements ("Accounting currency") Purchases Sales UBAM EM INV GRD CORP BD Z C UNIT STAT OF 1.0% UNIT STAT OF 0.875% VEB FINANCE 4.224% 11/ UNIT STAT OF 1.375% KAZAKHSTAN TEMIR ZHOLY 6.375% 06/10/ ISRAEL ELECTRIC 7.25% 15/01/ KOC 5.25% ISRA ELEC COR 5.0% PTT EXPL AND PROD 4.875% PERP Transparency of securities financing transactions and the reuse of financial instruments SFTR Regulation (EU) in the fund s accounting currency (USD) The Fund did not carry out any securities financing transactions during the financial year. 13

14 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report EFFICIENT MANAGEMENT TECHNIQUES OF THE PORTFOLIO AND DERIVATIVE FINANCIAL INSTRUMENTS a) Exposure resulting from efficient management techniques of the portfolio and derivative financial instruments Exposure resulting from efficient management techniques: o Security lending: o Security borrowing: o Repurchase transactions: o Reverse repurchase transactions: Underlying exposure resulting from derivative financial instruments: o Currency forward exchange contracts: o Futures: o Options: o Swaps: b) Identity of counterparties linked to the efficient management techniques of the portfolio and derivative financial instruments Efficient management techniques Derivative financial instruments (*) CACEIS BANK (FRANCE) (*) not including listed derivatives. 14

15 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report c) Financial guarantees received by the Fund in order to reduce counterparty risk Type of instrument Amount in the portfolio currency Efficient management techniques. Term deposits. Equities. Bonds. UCITS. Cash (**) Total Derivative financial instruments. Term deposits. Equities. Bonds. UCITS. Cash Total (**) The Cash Account also includes cash resulting from repurchase agreements. d) Revenues and operating expenses linked to efficient management techniques Revenues and operating expenses Amount in the portfolio currency. Revenues (***). Other revenues Total revenues. Direct operating expenses. Indirect operating expenses. Other expenses Total expenses (***) Revenues from repurchase agreements. 15

16 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Regulatory information VOTING RIGHTS In accordance with the applicable regulations and UBP s internal directives, UBI has implemented a voting policy suited to its activities. This policy stipulates the circumstances in which we intend to exercise the voting rights that come with ownership of shares in the UCITS we manage. This policy is available upon request from the management company. UBP ASSET MANAGEMENT (France) UNION BANCAIRE GESTION INSTITUTIONNELLE (France) SAS 116 avenue des Champs Elysées PARIS. ubpamfrance@ubp.com PROCEDURE FOR SELECTING INTERMEDIARIES In accordance with Article of the AMF General Regulations, the management company has set up a best selection/best execution policy for selecting intermediaries and counterparties, which is available to investors on the website of the management company The objective of this policy is to select traders and intermediaries based on predefined criteria and whose execution policy will ensure the best execution of orders. On the same website you will find the report relating to intermediation fees. SOCIAL, ENVIRONMENTAL AND GOVERNANCE CRITERIA Information relating to the social, environmental and governance criteria (ESG) is available on REMUNERATION POLICY Information relating to the remuneration policy adopted by Union Bancaire Gestion Institutionnelle (France), including a description of the method used to calculate remuneration and benefits, personnel in charge of payments and, where appropriate, the composition of a remuneration committee, is available on A free hard copy can be obtained on request from the management company. CALCULATION METHOD OF THE GLOBAL RISK The method of calculating the overall risk ratio is the Value at Risk (VaR) method. The general level of leverage, calculated as the total sum of the notional values of the derivatives used, will be 400%. It is possible for the Fund to have a higher level of leverage. 16

17 UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Annual Report Reminder of the global risk of the Master Fund: The expected leverage shall be 300%. Depending on market conditions the leverage level may be higher. The global risk for this compartment is calculated using the absolute VaR methodology. The VaR limit (99%, 1 month) is fixed at 20 %. Fund UBAM FCP - EM INVESTMENT GRADE CORPORATE BOND Calculation method Absolute VaR VaR Average Min. Max % 12.68% 17.61% Monitoring period of the VaR From 4 January to 30 December 2016 Parameter models used Factor push / 99% confidence interval, 20 days holding period, 9 years historical period Influence Average level moyen 95.0% 17

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20 Annual accounts Balance sheet - Assets (in USD) NET FIXED ASSETS DEPOSITS FINANCIAL INSTRUMENTS Equities and similar securities Traded on a regulated or similar market Not traded on a regulated or similar market Bonds and similar securities Traded on a regulated or similar market Not traded on a regulated or similar market Debt securities Traded on a regulated or similar market Transferable debt securities Other debt securities Not traded on a regulated or similar market Undertakings for collective investment UCITS retail funds and AIFs aimed at non-professional and equivalent investors from other countries Other Funds aimed at non-professional and equivalent investors from the EU member states Professional retail and other equivalent Funds from other EU member states and listed securitization vehicles Other professional or equivalent investment funds from other EU member states and unlisted securitization vehicles Other non-european funds Repurchase agreements Receivables on securities received under a repurchase agreement Receivables on loaned securities Borrowed securities Securities transferred under a repurchase agreement Other temporary transactions Futures Transactions on a regulated or similar market Other transactions Other financial instruments RECEIVABLES Currency forward exchange contracts Other FINANCIAL ACCOUNTS Cash TOTAL ASSETS

21 Annual accounts Balance sheet - Liabilities (in USD) EQUITY CAPITAL Capital Accumulated undistributed net realized gain (loss) (a) Retained earnings (a) Net realized gain (loss) for the year (a, b) Profit or loss (a, b) TOTAL EQUITY CAPITAL * * Amount representing net assets FINANCIAL INSTRUMENTS Sales of financial instruments Repurchase agreements Payables on securities under a repurchase agreement Payables on borrowed securities Other temporary transactions Futures Transactions on a regulated or similar market Other transactions PAYABLES Currency forward exchange contracts Other FINANCIAL ACCOUNTS Current bank account overdrafts Loans TOTAL LIABILITIES (a) Including adjusted accounts (b) Reduced by interim dividends paid for the financial year 21

22 Annual accounts Off-Balance Sheet (in USD) HEDGING TRANSACTIONS Commitments on regulated or similar markets Futures contracts TY CBOT YS H6 US US TBON H OTC commitments Other commitments OTHER TRANSACTIONS Commitments on regulated or similar markets Futures contracts CBO CBOT USUL FV CBOT US H6 TU CBOT US H OTC commitments Other commitments 22

23 Annual accounts Profit and Loss Statement (in USD) Income from financial transactions Income from deposits and financial accounts Income from equities and similar securities Income from bonds and similar securities Income from debt securities Income from repurchase agreements Income from futures Other financial income TOTAL (1) Payables on financial transactions Payables on repurchase agreements Payables on futures Payables on financial debts Other financial payables TOTAL (2) PROFIT FROM FINANCIAL TRANSACTIONS (1-2) Other income (3) Management fees and depreciation provisions (4) NET PROFIT FOR THE YEAR (L ) ( ) Financial year revenue adjustments (5) Interim dividends paid for the financial year (6) PROFIT ( )

24 Notes to the annual accounts Accounting rules and methods The annual accounts are presented in accordance with the ANC Regulation as set out by the French Accounting Standards Authority which replaces the modified CRC Regulation. General accounting principles apply: - a true and fair view, comparability and operational continuity, - lawfulness, accuracy, - prudence, - consistency of methods from one financial year to the next. The accounting method used for recording fixed revenue securities income is based on interest received. Entries and disposals of securities are accounted for exclusive of charges. The reference accounting currency for the portfolio is the US DOLLARS. The financial year period is 12 months. Asset valuation rules Financial instruments are accounted for according to the historical cost method and recorded on the balance sheet at their current value, which is determined by the latest known market value or, if there is no market, by any external means, or by recourse to financial models. Differences between the current values used in calculating the net asset value and historical costs of transferable securities when they enter the portfolio are recorded in "valuation differences" accounts. Securities that are not in the portfolio currency are valued in accordance with the principle stated below, then converted into the portfolio currency based on the exchange rate on the day of valuation. Deposits: Deposits with a residual lifetime of less than or equal to three months are valued according to the straightline method. Equities, bonds and other securities traded on a regulated or similar market: For the calculation of net asset value, shares and other securities traded on a regulated market or similar are valued according to the day s closing share price. Bonds and similar securities are valued at the closing price communicated by various financial services providers. The accrued interest of bonds and similar securities is calculated up to the date of the net asset value. Equities, bonds and other securities not traded on a regulated or similar market: Securities not traded on a regulated market are valued by the management company, using methods based on goodwill value and return and taking into account the prices used during recent significant transactions. Transferable debt securities: Transferable debt securities and similar securities which are not traded in large volumes are valued on an actuarial basis using a reference rate as defined below, increased if needed by a margin representative of the intrinsic characteristics of the issuer: Transferable debt securities for which the maturity date is less than or equal to one year: interbank rate in euros (Euribor); 24

25 Transferable debt securities for which the maturity date is more than one year: BTAN rates (Bons du Trésor à Intérêts Annuels Normalisés - standard annual interest French treasury bills) or OAT rates (Obligations Assimilables du Trésor - fungible French treasury bonds) with near-term maturity for longer periods. Transferable debt securities with a residual lifetime of less than or equal to three months may be valued according to the straight-line method. Treasury bills are valued at the market rate communicated daily by the Banque de France. UCIs held: UCI units or shares are valued at the last known net asset value. Repurchase agreements: Securities received under a repurchase agreement are posted to assets in the "Receivables on securities received under a repurchase agreement" section in the amount provided for by the contract, increased by accrued interest receivable. Securities given under a repurchase agreement are posted to the buyer portfolio at their current value. The debt for securities given under a repurchase agreement is posted to the seller portfolio at the value fixed in the contract, increased by accrued interest payable. Loaned securities are valued at their current value and posted to assets in the "Loaned securities receivables" section at their current value, increased by accrued interest receivable. Borrowed securities are posted to assets in the "Borrowed securities" section in the amount provided for by the contract and to liabilities in the "Payables on borrowed securities" section in the amount provided for by the contract, increased by accrued interest payable. Futures financial instruments: Futures traded on a regulated or similar market: Futures traded on regulated markets are valued at the daily settlement price. Futures financial instruments not traded on a regulated or similar market: Swaps: Interest rate and/or currency rate swap contracts are valued at their market value according to the price calculated by updating of future interest flows to market interest and/or currency rates. This price is adjusted to the issuer s risk. Index swaps are valued actuarially on the basis of a benchmark rate provided by the counterparty. Other swaps are valued at their market value or at a value estimated according to terms set by the management company. Off-balance sheet commitments: Fixed-term contracts are recorded at their market value as off-balance-sheet commitments at the price used in the portfolio. Conditional forward transactions are converted using the underlying equivalent value. Commitments on swap contracts are presented at their nominal value or, in the absence of a nominal value, at an equivalent amount. 25

26 Management fees Management fees are calculated on the net assets on each valuation. These charges are allocated to the profit or loss account of the fund. Management fees are paid in full to the management company, which takes responsibility for all the operational expenses of the fund. Management fees do not include transaction fees. The maximum rate applied on the net assets not including UCITS: A units: 1.30% including tax, I units: 0.65% including tax, R units: 1.75% including tax, Z units: 0.20% including tax. Retroceded management fees due are accounted for at each net asset value calculation. The amount to be provisioned is equal to the portion of retrocession accrued over the period under consideration. Allocation of distributable amounts Definition of distributable amounts: Distributable amounts are constituted by: The income: The net income of the year is equal to the interest, arrears, premiums and lots, dividends, attendance fees, and all other income relating to the securities in the portfolio, plus the sums temporarily available and less the total of management fees and borrowing costs. It is increased by the balance brought down and increased or decreased by the balance of prepayments and accrued income for the year. Realised gains (losses): The realised gains, net of fees, less realised losses, net of fees, for the financial year, increased by net realised gains not distributed or accumulated from previous financial years and decreased or increased by the balance of the adjusted realised gains account. Allocation of distributable amounts: Distributable amounts AC, AHC, IC, IHC, ZC and UC units AD, AHD, ID, IHD, ZD and RD units Allocation of net income Distribution Allocation of net realized gains (losses) 26

27 Annual accounts Changes in net assets (in USD) NET ASSETS AT THE BEGINNING OF THE FINANCIAL YEAR Subscriptions (including subscription fees paid to the Fund) Redemptions (less redemption fees paid to the Fund) Gains realized on deposits and financial instruments Losses realized on deposits and financial instruments Gains realized on forward financial instruments Losses realized on deposits and financial instruments Transaction fees Foreign exchange differences Variations in the valuation difference of deposits and financial instruments Valuation difference for financial year N Valuation difference for financial year N Variations in the valuation difference of forward financial instruments Valuation difference for financial year N Valuation difference for financial year N Prior year distribution of net realized gains (losses) Prior year income distribution Net earnings for the financial year before adjustments Interim dividends paid during the year from net realized gains (losses) Interim dividends paid during the year from net income Other items ACTIF ASSETS AT THE END OF THE FINANCIAL YEAR

28 BREAKDOWN OF FINANCIAL INSTRUMENTS BY LEGAL OR ECONOMIC TYPE Amount % ASSETS BONDS AND SIMILAR SECURITIES TOTAL BONDS AND SIMILAR SECURITIES DEBT SECURITIES TOTAL DEBT SECURITIES LIABILITIES DISPOSAL TRANSACTIONS ON FINANCIAL INSTRUMENTS TOTAL DISPOSAL TRANSACTIONS ON FINANCIAL INSTRUMENTS OFF-BALANCE SHEET HEDGING TRANSACTIONS TOTAL HEDGING TRANSACTIONS OTHER TRANSACTIONS TOTAL OTHER TRANSACTIONS BREAKDOWN OF ASSET, LIABILITIES AND OFF-BALANCE SHEET ITEMS BY TYPE OF RATE Fixed rate % Variable rate % Adjustable rate % Other % Assets Deposits Bonds and similar securities Debt securities Repurchase agreements Financial accounts Liabilities Repurchase agreements Financial accounts Off-balance sheet Hedging transactions Other transactions 28

29 BREAKDOWN OF ASSET, LIABILITY AND OFF-BALANCE SHEET ITEMS BY RESIDUAL MATURITY < 3 months % 3 months 1 year % 1-3 years % 3-5 years % > 5 years % Assets Deposits Bonds and similar securities Debt securities Repurchase agreements Financial accounts Liabilities Repurchase agreements Financial accounts Off-balance sheet Hedging transactions Other transactions Forward rate positions are presented according to the maturity date of the underlying item. BREAKDOWN OF ASSET, LIABILITY AND OFF-BALANCE SHEET ITEMS BY LISTING CURRENCY OR VALUATION CURRENCY (non-euro) Currency 1 EUR % Currency 2 CHF % Currency 3 GBP % Currency N OTHER(S) % Assets Deposits Equities and similar securities Bonds and similar securities Debt securities UCI Repurchase agreements Receivables Financial accounts Liabilities Disposal transactions on financial instruments Repurchase agreements Payables Financial accounts Off-balance sheet Hedging transactions Other transactions 29

30 RECEIVABLES AND PAYABLES: BREAKDOWN BY TYPE Type of debit/credit 30/12/2016 Receivables Forward currency purchases Receivables from forward currency sales Sales with deferred settlement terms Subscriptions to be received Total receivables Payables Forward currency sales Funds to be paid on forward currency purchases Purchases with deferred settlement terms Redemptions to pay Management fees Total payables Total payables and receivables EQUITY CAPITAL Number of securities issued or redeemed In units In total AC USD units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year AD USD units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year AHC EUR units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year AHD EUR units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year

31 EQUITY CAPITAL Number of securities issued or redeemed In units In total IC USD units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year ID USD units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year IHC EUR units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year IHD EUR units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year IHD GBP units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year IHC CHF units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year IHD CHF units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year

32 EQUITY CAPITAL Number of securities issued or redeemed In units In total ZC USD units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year ZD USD units Units subscribed during the financial year Units redeemed during the financial year Balance of units at the end of the financial year SUBSCRIPTION AND REDEMPTION FEES In total AC USD units Redemption fees retained Subscription fees retained Total fees retained AD USD units Redemption fees retained Subscription fees retained Total fees retained AHC EUR units Redemption fees retained Subscription fees retained Total fees retained AHD EUR units Redemption fees retained Subscription fees retained Total fees retained 32

33 SUBSCRIPTION AND REDEMPTION FEES In total IC USD units Redemption fees retained Subscription fees retained Total fees retained ID USD units Redemption fees retained Subscription fees retained Total fees retained IHC EUR units Redemption fees retained Subscription fees retained Total fees retained IHD EUR units Redemption fees retained Subscription fees retained Total fees retained IHD GBP units Redemption fees retained Subscription fees retained Total fees retained IHC CHF units Redemption fees retained Subscription fees retained Total fees retained IHD CHF units Redemption fees retained Subscription fees retained Total fees retained 33

34 SUBSCRIPTION AND REDEMPTION FEES In total ZC USD units Redemption fees retained Subscription fees retained Total fees retained ZD USD units Redemption fees retained Subscription fees retained Total fees retained MANAGEMENT FEES 30/12/2016 AC USD units Guarantee commissions Fixed management fees Percentage of fixed management fees 1.30 Variable management fees Retroceded management fees AD USD units Guarantee commissions Fixed management fees Percentage of fixed management fees 1.30 Variable management fees Retroceded management fees AHC EUR units Guarantee commissions Fixed management fees Percentage of fixed management fees 1.30 Variable management fees Retroceded management fees 34