ANNUAL REPORT OF THE FRENCH MUTUAL FUND (FCP) CARMIGNAC EMERGENTS. (For the period ended 29 December 2017) 1 Free translation

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1 ANNUAL REPORT OF THE FRENCH MUTUAL FUND (FCP) CARMIGNAC EMERGENTS (For the period ended 29 December 2017) 1

2 Summary Statutory Auditor's Certification 3 Main features of the fund 7 Investment policy 15 Regulatory information 22 2

3 CABINET VIZZAVONA 64, boulevard Maurice Barrès Neuilly-sur Seine Tel. +33 (0) KPMG AUDIT 2, avenue Gambetta Paris La défense Tel. +33 (0) FRENCH MUTUAL FUND (FCP) CARMIGNAC EMERGENTS Statutory Auditor s Report for the financial year ended 29 December

4 Statutory auditor s report on the annual financial statements Financial year ended 29 December 2017 Dear Sir/Madam, Opinion Following our appointment by the management company, we have audited the annual financial statements of the CARMIGNAC EMERGENTS FCP for the financial year ended 29 December 2017, as they are appended to this report. In our opinion, the annual financial statements give, in accordance with French accounting rules and principles, a true and fair view of the financial position and assets and liabilities of the fund and of the results of its operations at the end of the financial year. Basis for our opinion Audit framework We conducted our audit in accordance with the professional auditing standards applicable in France. We believe that the evidence gathered is pertinent and sufficient to serve as a basis for our opinion. Our responsibilities in light of these standards are described in this report in the section entitled Responsibilities of the statutory auditor in relation to auditing the annual financial statements. Independence We carried out our audit in accordance with the independence rules applicable to us, for the period from 31 December 2016 to the date on which our report was issued. In particular, we refrained from providing the services prohibited by the code of ethics of the statutory audit industry. 4

5 Justification of the evaluations In accordance with the provisions of articles L and R of the French Commercial Code regarding the justification of our evaluations, we hereby inform you that our most important evaluations, in our professional opinion, were focused on the appropriateness of the accounting principles applied, on whether material estimates used were reasonable, and on whether all accounts were presented as per the accounting standards applicable to undertakings for collective investment with variable capital, particularly as regards financial instruments held in the portfolio. The evaluations were made in the context of the audit of the annual financial statements, taken as a whole, and the formation of the opinion expressed herein. We offer no opinion on parts of these annual financial statements taken in isolation. Verification of the management report and other documents sent to unitholders We have also carried out the specific verifications required by law in accordance with the professional auditing standards applicable in France. We have no comment as to the fair presentation and conformity with the annual financial statements of the information given in the management report and in the other documents sent to unitholders with respect to the financial position and the annual financial statements. Responsibilities of the management company regarding the annual financial statements The management company is required to prepare annual financial statements that present a true and fair image, in accordance with French accounting rules and principles, and to establish the internal control measures that it deems necessary for producing annual financial statements free of material misstatement, whether due to fraud or error. When producing the annual financial statements, it is incumbent on the management company to assess the ability of the fund to continue operating, and where appropriate to include the necessary information on business continuity, and apply the going concern accounting policy unless there are plans to liquidate the fund or cease trading. The annual financial statements were prepared by the management company. Responsibilities of the statutory auditor when auditing the annual financial statements We are required to produce a report on the annual financial statements. Our aim is to gain reasonable assurance that the annual financial statements taken as a whole are free of material misstatement. Reasonable assurance means a high level of assurance, albeit without any guarantee, that an audit carried out in accordance with industry standards could systematically detect every material misstatement. Misstatements may arise from fraud or error, and are considered to be material when one could reasonably expect them, either individually or cumulatively, to influence the financial decisions that readers make as a result. 5

6 As stipulated in article L of the French Commercial Code, our role as auditors is not to guarantee the viability or quality of management of your FCP. A statutory auditor exercises its professional judgement throughout any audit performed in accordance with professional standards applicable in France. Furthermore: It identifies and evaluates the risk that the annual financial statements may include material misstatement, whether resulting from fraud or error, defines and implements auditing procedures in response to these risks, and gathers the items it deems sufficient and appropriate as a basis for its opinion. The risk of material misstatement not being detected is considerably higher when it is the result of fraud rather than error, since fraud may involve collusion, falsification, voluntary omissions, false declarations or the circumvention of the internal control system; It assesses the internal control system that is relevant for the audit in order to define audit procedures that are appropriate in the circumstances, and not for the purpose of expressing an opinion on the internal control system; It evaluates the appropriateness of the accounting methods used and the reasonableness of the accounting estimates made by the management company, as well as the related information in the annual financial statements; It evaluates the appropriateness of the management company s application of the going concern accounting principle and, based on the information gathered, the existence or absence of significant uncertainty linked to events or circumstances likely to cast doubt on the fund s ability to continue its operations. This evaluation is based on the information gathered prior to the date of its report; however, it should be noted that subsequent circumstances or events may cast doubt on the continuity of its operations. If it concludes that there is a material uncertainty, it draws readers attention to the information provided in the annual financial statements regarding this uncertainty, or if such information is not provided or not relevant, it certifies the accounts with reservations, or refuses to certify them; It assesses the presentation of all of the annual financial statements and evaluates whether or not the annual financial statements depict the underlying operations and events fairly. Neuilly-sur-Seine, 14 March 2018 Paris La Défense, 14 March 2018 Cabinet Vizzavona KPMG SA Patrice Vizzavona Partner Isabelle Bousquié Partner 6

7 CARMIGNAC EMERGENTS 2017 ANNUAL REPORT Main features of the Fund Classification International equities. Allocation of distributable income Distributable income Acc units Dis units Allocation of net income Accumulation (dividends are recorded on an accruals basis) Distributed or carried forward as decided by the management company Allocation of net realised capital gains or losses Accumulation (dividends are recorded on an accruals basis) Distributed or carried forward as decided by the management company Countries in which the Fund is authorised for distribution A EUR Acc units: Austria, Belgium, Switzerland, Germany, Spain, France, United Kingdom, Ireland, Italy, Luxembourg, Netherlands and Sweden. A EUR Ydis units: Austria, Switzerland, Germany, Spain, France, United Kingdom, Italy, Luxembourg, Netherlands and Sweden. E EUR Acc units: Austria, Switzerland, Germany, Spain, France, Italy, Luxembourg and Netherlands. Investment objective The fund is managed on a discretionary basis with an asset allocation bias towards emerging market equities. However, it does not rule out investment in emerging market debt. The objective of the Fund is to outperform its reference indicator, the MSCI EM NR (USD), while keeping volatility below the level of this indicator. Reference indicator The reference indicator is the MSCI EM NR (USD) emerging market index, calculated with net dividends reinvested. It is calculated by MSCI in dollars, then converted into euro (Bloomberg code NDUEEGF). This index does not strictly define the investment universe but allows investors to assess the performance and risk profile that they can expect when investing in the fund. 7

8 Investment strategy STRATEGIES USED The fund is actively managed and invests primarily in emerging market equities, without excluding other transferable securities listed on emerging market stock exchanges. The investment strategy is applied without restriction in terms of allocation by geographical zone, sector, type or size of security. The allocation of the portfolio between the different asset classes and fund categories (equities, balanced, bonds, money market, etc.) based on fundamental analysis of the global macroeconomic environment and of its indicators (growth, inflation, deficits, etc.) may vary according to the manager s expectations. Stock selection is based on detailed financial analysis, meetings organised by companies, visits to these companies and daily news. Depending on the situation, the criteria used for stock selection are the value of the assets, return, growth and quality of the management, in particular. As the fund is managed on an active, discretionary basis, the asset allocation may differ substantially from that of its reference indicator. Likewise, the portfolio established in each of the asset classes on the basis of detailed financial analysis may vary considerably from the weightings of the reference indicator in terms of geographic regions, sectors, ratings and maturities. The manager may use Relative Value strategies as performance drivers, looking to take advantage of the relative value between different instruments, in particular through: Long/Short Equity strategies : these offer both long and short exposure to equity markets. Fixed Income Arbitrage strategies : these offer long and short exposure to different regions, different segments of the yield curve and/or different fixed income instruments. Long/Short Currency strategies : these offer exposure to currency appreciation and depreciation. These performance drivers will be exploited through derivatives (at least partially). Description of asset categories and financial contracts as well as their contribution to the investment objective being achieved In all cases, at least 2/3 of the equities and bonds shall be issued by companies or issuers that have their registered office or carry out a significant part of their business in the emerging countries, as defined in the reference indicator, the MSCI EM NR (USD). EQUITIES Subject to the regulatory limits, at least 60% of the assets of Carmignac Emergents is permanently exposed to equities. The net assets of the fund may be invested in small, mid and large caps from all sectors. DEBT SECURITIES AND MONEY MARKET INSTRUMENTS In order for the manager to diversify the portfolio, up to 40% of the Fund s assets may be invested in debt securities and money market instruments. The manager invests in fixed-rate bonds, money-market instruments, floating rate notes and inflation-linked bonds from emerging countries. As the fund is managed on a discretionary basis, no asset allocation constraints shall apply. There are no restrictions in terms of duration, modified duration or allocation between private and public issuers. 8

9 The weighted average rating of the bonds held directly by the fund or through investment in funds shall be at least investment grade according to at least one of the major rating agencies. The manager may invest in bonds whose rating is below investment grade. The management company will carry out its own analysis of the risk/reward profile of the securities (return, credit rating, liquidity, maturity). As a result, the decision to buy, hold or sell a security (particularly where the rating has changed) is not solely based on the rating criteria, but also reflects an internal analysis of the credit risks and market conditions carried out by the management company. UCIS AND OTHER INVESTMENT FUNDS The fund may invest up to 10% of its net assets in: - Units or shares of French or foreign UCITS; - Units or shares of French or foreign AIFs; - Foreign investment funds; provided that the foreign UCITS, AIF or investment fund meets the criteria of article R of the French Monetary and Financial Code. The fund may invest in funds managed by Carmignac Gestion or an affiliated company. The fund may use trackers, listed index funds and exchange traded funds. DERIVATIVES The fund may use the following derivatives in pursuit of its investment objective: Nature of the markets in which the fund invests: The manager invests in futures traded on regulated, organised or OTC Eurozone and international markets. Risks on which the manager wishes to take a position (either directly or using indices): - currencies, - fixed income, - equities (all caps), - ETFs, - dividends, - volatility and variance (up to 10% of the net assets), - and commodity (only through indices and for up to 20% of the net assets). Nature of the derivatives used: The derivatives available to fund managers are options (vanilla, barrier, binary), futures and forwards, swaps (including performance) and CFD (contracts for difference) on one or more underlyings. Nature of investment transactions: - Hedging - Exposure - Arbitrage STRATEGY FOR USING DERIVATIVES TO ACHIEVE THE INVESTMENT OBJECTIVE - Equity and equity index derivatives are used long and short to adjust (increase, reduce or offset) the portfolio's overall exposure to the stock markets, and its allocation between various business sectors, countries and regions. An equity derivative contract can be used to hedge exposure to an entity or to gain exposure to an entity. 9

10 - Currency derivatives are used to adjust the portfolio s currency allocation (currency risk management) by exposing the portfolio to a currency or hedging its exposure, or for general cash management. - Equity derivatives are used for implementing so-called relative value strategies, by being both long and short in the equity markets, and short only strategies by being short only. - Currency derivatives are used for implementing so-called relative value strategies, by being both long and short in the currency markets, and short only strategies by being short only. - Volatility or variance derivatives are used long and short to adjust the portfolio's exposure to volatility or variance, and its allocation between various business sectors, countries and regions. - Dividend derivatives are used long and short to manage or hedge dividend risk, dividend risk being the risk that the dividend of a share or equity index is not paid as anticipated by the market. - Interest rate derivatives are used long and short to adjust the portfolio's overall exposure to fixed income markets, and its allocation between various yield curve segments, countries and regions. - Fixed income derivatives are used for implementing so-called relative value strategies, by being both long and short in the fixed income markets, and short only strategies by being short only. Overall exposure to derivatives is controlled by combining expected leverage of 2 with the fund s VaR limit, which must not be more than double the reference indicator s (cf. section VI. Overall Risk ). Derivative transactions may be concluded with counterparties selected by the management company in accordance with its Best Execution/Best Selection policy and the approval procedure for new counterparties. The latter are major French or international counterparties, such as credit institutions, and collateral is required. SECURITIES WITH EMBEDDED DERIVATIVES The manager may invest in securities with embedded derivatives (particularly warrants, credit link notes, EMTN, subscription certificates, P-notes) traded on regulated or over-the-counter Eurozone and/or international markets. The manager may invest in Eurozone and/or international convertible bonds, including those of emerging countries in particular. The strategy for using securities with embedded derivatives is the same as that described for derivatives. The use of securities with embedded derivatives compared to the other derivative instruments referred to above is justified by the manager s decision to optimise the hedging or, where necessary, the exposure of the portfolio by reducing the cost associated with the use of these financial instruments in order to achieve the investment objective. The risk associated with this type of investment is limited to the amount invested for the purchase of the securities with embedded derivatives. The amount of this type of investment in securities with embedded derivatives, excluding contingent convertible bonds, may not exceed 20% of the net assets. 10

11 The manager may invest up to 10% of the net assets in contingent convertible bonds ( CoCos ) to maximise the return on the portfolio s debt securities. These securities often deliver a higher return (in exchange for higher risk) than conventional bonds due to their specific structure and the place they occupy in the capital structure of the issuer (subordinated debt). They are issued by banks under the oversight of a supervisory authority. They may have bond and equity features, being hybrid convertible instruments. They may have a safeguard mechanism that turns them into ordinary shares if a trigger event threatens the issuing bank. DEPOSITS AND CASH The fund may use deposits in order to optimise its cash management and to manage the various subscription or redemption settlement dates of the underlying funds. These trades are made within the limit of 20% of the net assets. This type of transaction will be made on an exceptional basis. The fund may hold cash on an ancillary basis, in particular in order to meet its redemption obligations in relation to investors. Cash lending is prohibited. CASH BORROWING The fund may borrow cash, in particular to cover investment/disinvestments and subscriptions/redemptions. As the fund is not intended to be a structural borrower of cash, these loans will be temporary and limited to 10% of the fund s net assets. TEMPORARY PURCHASE AND SALE OF SECURITIES For efficient portfolio management purposes, and without deviating from its investment objectives, the fund may allocate up to 20% of its net assets to temporary purchases/sales (securities financing transactions) of securities eligible for the fund (essentially equities and money market instruments). These trades are made to optimise the fund's income, invest its cash, adjust the portfolio to changes in the assets under management, or implement the strategies described above. The transactions consist of: - Securities repurchase and reverse repurchase agreements, - Securities lending/borrowing. The expected proportion of assets under management that may be involved in such transactions is 10% of the net assets. The counterparty to these transactions is CACEIS Bank, the fund's custodian. CACEIS Bank does not have any power over the composition or management of the fund's portfolio. Within the scope of these transactions, the fund may receive/give financial guarantees (collateral); the section entitled Collateral management contains information on how these work and on their characteristics. Additional information on fees linked to such transactions appears under the heading Fees and expenses. Contracts constituting financial guarantees Within the scope of OTC derivatives transactions and temporary purchases/sales of securities, the fund may receive or give financial assets constituting guarantees with the objective of reducing its overall counterparty risk. The financial guarantees shall primarily take the form of cash, in the case of OTC derivatives transactions, and cash and eligible government bonds, in the case of temporary purchases/sales of securities. All financial guarantees received or given are transferred with full ownership. The counterparty risk inherent in OTC derivatives transactions, combined with the risk resulting from temporary purchases/sales of securities, may not exceed 10% of the fund s net assets where the counterparty is one of the credit institutions defined in the current regulations, or 5% of its assets in other cases. In this regard, any financial guarantee (collateral) received and serving to reduce counterparty risk exposure shall comply with the following: - It shall take the form of cash or bonds or treasury bills issued or guaranteed by OECD member states, by their regional public authorities or by supranational institutions and bodies with EU, regional or worldwide scope. 11

12 - It shall be held by the Custodian of the fund or by one of its agents or a third party under its supervision or by any third-party custodian subject to prudential supervision and which is not linked in any way to the provider of the financial guarantees. - In accordance with the regulations in force, they shall at all times fulfil liquidity, valuation, issuer credit rating, correlation and diversification criteria, and exposure to any given issuer shall not exceed 20% of the net assets. - Financial guarantees received in the form of cash shall be mainly deposited with eligible entities and/or used in reverse repurchase transactions, and to a lesser extent invested in first-rate government bonds or treasury bills and short-term money market funds. Government bonds and treasury bills received as collateral are subject to a discount of between 1% and 10%. The manager agrees this contractually with each counterparty. Risk profile The fund invests in financial instruments and, where applicable, funds selected by the management company. The performance of these financial instruments and funds depends on the evolution and fluctuations of the market. The risk factors described below are not exhaustive. It is up to each investor to analyse the risk associated with such an investment and to form his/her own opinion independent of CARMIGNAC GESTION, where necessary seeking the opinion of any advisers specialised in such matters in order to ensure that this investment is appropriate in relation to his/her financial situation. Equity risk: As a minimum of 60% of the fund s assets are exposed to equities, the net asset value of the fund may decrease in the event of an equity market downturn. The net asset value of the fund may decrease when equity markets either rise or fall. As there are fewer small and mid-cap stocks listed on stock exchanges, market falls are more pronounced and rapid than in the case of large cap stocks, and may cause the net asset value to fall. Risk associated with emerging countries: The net asset value may vary substantially as a minimum of two thirds of its assets are invested in equities of issuers located in emerging markets where stock prices fluctuate significantly and where operating and supervision conditions may deviate from the standards prevailing on the large international markets. Risk of capital loss: The portfolio is managed on a discretionary basis and does not guarantee or protect the capital invested. A capital loss occurs when a unit is sold at a lower price than that paid at the time of purchase. Currency risk: Currency risk is linked to exposure through investments and the use of forward financial instruments to a currency other than the fund s valuation currency. Interest rate risk: 0% to 40% of the net assets of the fund is exposed to the interest rate risk of emerging markets through investments in financial instruments. Interest rate risk is the risk that the net asset value may fall in the event of a change in interest rates. Credit risk: credit risk is the risk that the issuer may default. Should the quality of issuers decline, for example in the event of a downgrade in their rating by the financial rating agencies, the value of the bonds may drop and lead to a fall in the fund's net asset value. Risk associated with commitments on forward financial instruments: The fund may invest in financial futures, up to the limit of 100% of its assets. As up to 200% of the fund s assets may thus be exposed to equities, this may lead to the risk of a more substantial and rapid decrease in the net asset value of the Fund than those that occur on the markets in which the Fund is invested. In the event of the occasional use of securities with embedded derivatives, the risk associated with this type of investment shall be limited to the amount invested for the purchase of the securities with embedded derivatives. Capitalisation risk: The fund may invest in small and mid-cap stocks. As there are fewer small and mid-cap stocks listed on stock exchanges, market movements are more pronounced and rapid than in the case of large 12

13 cap stocks. The net asset value of the fund may therefore assume the same behaviour. Liquidity risk: The markets in which the fund participates may be subject to temporary illiquidity. These market distortions may have an impact on the pricing conditions under which the FCP may have to liquidate, initiate or modify its positions. The net asset value of the fund may therefore decrease. Risk associated with discretionary management: Discretionary management is based on the expected evolution of the different markets (equities, bonds, etc.). The fund s performance will depend on the companies selected by the management company. There is a risk that the management company may not invest in the best performing companies. Counterparty risk: Counterparty risk measures the potential loss in the event of a counterparty defaulting on over-the-counter financial contracts or failing to meet its contractual obligations on temporary purchases or sales of securities. The fund is exposed to it through over-the-counter financial contracts agreed with various counterparties. In order to reduce the fund s exposure to counterparty risk, the management company may establish financial guarantees in favour of the fund. Risk attached to investments in China: As part of its exposure to emerging markets, the fund may invest up to 10% of its net assets directly in the Chinese domestic market. Investments in China are exposed to political and social risk (restrictive regulations that could be changed unilaterally, social unrest, etc.), economic risk due to the legal and regulatory environment being less developed than in Europe, and stock market risk (volatile and unstable market, risk of sudden suspension of trading, etc.). The fund is exposed to the risk associated with the RQFII licence and status, which was allocated to Carmignac Gestion in 2014 on behalf of funds managed by the group s management companies. Its status is subject to ongoing review by the Chinese authorities and may be revised, reduced or withdrawn at any time, which may affect the fund s NAV. The fund is also exposed to the risk associated with investments made via the Hong Kong Shanghai Connect (Stock Connect) platform, which makes it possible to invest through the Hong Kong market in more than 500 stocks listed in Shanghai. This system inherently involves higher counterparty and securities delivery risks. Volatility risk: The increase or decrease in volatility may lead to a fall in net asset value. The fund is exposed to this risk, particularly through derivative products with volatility or variance as the underlying instrument. Risks associated with investment in contingent convertible bonds (CoCos): Risk related to the trigger threshold: these securities have characteristics specific to them. The occurrence of the contingent event may result in a conversion into shares or even a temporary or definitive writing off of all or part of the debt. The level of conversion risk may vary, for example depending on the distance between the issuer's capital ratio and a threshold defined in the issuance prospectus. Risk of loss of coupon: with certain types of CoCo, payment of coupons is discretionary and may be cancelled by the issuer. Risk linked to the complexity of the instrument: as these securities are recent, their performance in periods of stress has not been established beyond doubt. Risk linked to late or non repayment: contingent convertible bonds are perpetual instruments repayable only at predetermined levels with the approval of the relevant authority. Capital structure risk: unlike with the standard capital hierarchy, investors in this type of instrument may suffer a capital loss, which holders of shares in the same issuer would not incur. Liquidity risk: as with the high yield bond market, the liquidity of contingent convertible bonds may be significantly affected in the event of market turmoil. Risks associated with temporary purchases and sales of securities: The use of these transactions and management of their collateral may carry certain specific risks, such as operational risks and custody risk. Use of these transactions may therefore have a negative effect on the fund's net asset value. Legal risk: This is the risk that contracts agreed with counterparties to temporary purchases/sales of securities, or over-the-counter forward financial instruments, may be drafted inappropriately. Risk associated with the reinvestment of collateral: The fund does not intend to reinvest collateral received, but if it does, there would be a risk of the resultant value being lower than the value initially received. Target subscribers and investor profile 13

14 Units of this fund have not been registered in accordance with the US Securities Act of They may therefore not be offered or sold, either directly or indirectly on behalf of or for the benefit of a US person, as defined in Regulation S. Furthermore, units of this fund may not be offered or sold, either directly or indirectly, to US persons and/or to any entities held by one or more US persons as defined by the US Foreign Account Tax Compliance Act (FATCA). Aside from this exception, the fund is open to all investors. As the fund is mainly invested in emerging market stocks (all caps), it is aimed at all types of investors, natural persons and legal entities wishing to diversify their investments through foreign stocks. Given the fund s exposure to the equity market, the recommended investment period is more than 5 years. The appropriate investment amount depends on the personal situation of the investor. To determine this amount, investors personal wealth, their cash requirements now and 5 years from now as well as their degree of risk aversion must all be taken into account. It is recommended that investors seek the advice of a professional in order to diversify their investments and to decide on the proportion of their financial portfolio or wealth that should be invested in this fund. It is also recommended that investments be sufficiently diversified so as to avoid exposure exclusively to the risks of this fund. 14

15 Investment policy Over 2017, Carmignac Emergents (A EUR acc units ISIN: FR ) delivered a performance of +18.8%, compared with +20.5% for its reference indicator (MSCI EM (EUR) (net dividends reinvested)). Emerging equity markets continued to enjoy particularly good conditions in The two drivers of emerging market growth foreign and domestic demand were very strong. Manufacturing indicators both tangible such as industrial production, and intangible such as purchasing manager indices continued their ascent to reach all-time highs, as reflected in the emerging market manufacturing PMI, which in December hit a post peak. This undeniable improvement in the manufacturing sector is also visible and echoed in export data. Whether measured by volume or value, emerging market exports showed a rarely observed level of robustness throughout Quarter upon quarter, they fuelled increasingly healthy current account balances in the emerging world. The internal dynamics of developing economies also improved. Despite this solid economic activity, emerging market inflation remained low. Moreover, the disinflationary trend allowed some national authorities to continue monetary easing while retaining a comfortable safety margin. The beginnings of a corporate bond rally also started to appear after several years of slowdown. The emerging world thus benefitted from two powerful growth drivers in The Carmignac Emergents fund s Asian and Latin American internet and technology stocks made considerable progress, especially in South Korea, Taiwan, China and Argentina. For example, Samsung Electronics, Taiwan Semiconductor, 58.com and Mercadolibre performed excellently, making some of the year s biggest contributions. We also benefitted from the excellent growth of our Argentinian financial stocks. These included Grupo Supervielle, a financial services company that provides consumer credit, insurance and asset management services. Grupo Supervielle is a leading player in Argentina s consumer, SME and intermediate-sized enterprise (ETI) lending segment. We think the country s low banking penetration rate currently offers an unparalleled opportunity, with private bank loans as a percentage of GDP only around 15%, one of the lowest levels in the world. The fund s underperformance was largely attributable to the weakness of some of our Indonesian (Astra International) and Brazilian (CCR) investments. We also suffered from our underexposure to energy and cyclical stocks, which rallied over the second half of the year as oil prices rose, following the extension of a framework agreement on OPEC oil production and progress with tax reforms in the United States. We think that 2018 started on a positive note for emerging markets. Global growth is still heading in the right direction, supported by multi-regional economic trends. Most of the ingredients behind emerging markets success over the past year remain in place. The weak dollar, resilience of China, strength of commodities whether fossil or mineral and health of accounting fundamentals suggest the future is bright for emerging market assets. 15

16 Table summarising the annual performance of each unit of the Carmignac Emergents portfolio over 2017 as a whole Parts ISIN Currency Annual performance 2017 Benchmark performance A EUR Ydis FR EUR 18.85% 20.59% E EUR Acc FR EUR 17.71% 20.59% A EUR Acc FR EUR 18.84% 20.59% Past performance is not an indication of future results. Main changes to the portfolio during the year Holding Movement ( Accounting currency ) Acquisitions Disposals NASPERS LTD 57,456, ,733, ASTRA INTERNATIONAL TBK 73,532, ,624, TENCENT HLDG LOT ,986, ,677, GRUPO FINANCIERO GALICIA ADR 20,944, ,650, MERCADOLIBRE 21,683, ,379, ZTO EXPRESS CAYMAN INC 22,896, ,867, HDFC BANK LTD 29,034, ,167, BHARTI AIRTEL LTD ,793, SAMSUNG ELECTRONIC ,392, CCR S.A 12,885, ,378,

17 CARMIGNAC EMERGENTS 2017 ANNUAL REPORT Efficient portfolio and financial derivative management techniques a) Exposure obtained through efficient portfolio and financial derivative management techniques Exposure obtained through efficient management techniques: o Securities lending: o Securities borrowing: o Reverse repurchase agreements: o Repurchase agreements: Exposure to underlying instruments achieved through financial derivatives: 395,392, o Forward exchange contracts: 314,045, o Futures: 81,346, o Options: o Swap: b) Identity of counterparty/counterparties to efficient portfolio and financial derivative management techniques Efficient management techniques Financial derivatives (*) BANCO SANTANDER SA GOLDMAN SACHS INTERNATIONAL LTD MORGAN STANLEY & CO INTL LONDON HSBC BANK PLC BNP PARIBAS FRANCE (*) Except listed derivatives 17

18 c) Financial guarantees received by the Fund in order to reduce counterparty risk Types of instrument Amount in portfolio currency Efficient management techniques. Term deposits. Equities. Bonds. UCITS. Cash Total Financial derivatives. Term deposits. Equities. Bonds. UCITS. Cash 4,420, Total 4,420, d) Income and operating expenses arising from efficient management techniques Income and operating expenses Amount in portfolio currency. Income (**) 1,296, Other income Total income 1,296, Direct operating expenses 129, Indirect operating expenses. Other expenses Total expenses 129, (**) Income from lending and repurchase agreements 18

19 CARMIGNAC EMERGENTS 2017 ANNUAL REPORT Transparency of securities financing transactions and the reuse of financial instruments SFTR in the fund's accounting currency (EUR) Securities lending Securities borrowing Repurchase agreements Reverse repurchase agreements TRS a) Securities and commodities lent Amount % of net assets* *% excluding cash and cash equivalents b) Assets employed in each type of securities financing transaction and TRS expressed in absolute value Amount % of net assets c) 10 main issuers of collateral received (excluding cash) for all types of financing transactions d) 10 biggest counterparties by absolute value of assets and liabilities, without netting e) Type and quality of collateral Type - Equities - Bonds - Funds - Transferable debt securities - Cash Rating Collateral currency f) Contract settlement and clearing Tripartite Central counterparty Bilateral X X 19

20 Securities lending Securities borrowing Repurchase agreements Reverse repurchase agreements TRS g) Maturity of the collateral broken down by tranche Less than 1 day 1 day to 1 week 1 week to 1 month 1 to 3 months 3 months to 1 year More than 1 year Open h) Maturity of securities financing transactions and TRS broken down by tranche Less than 1 day 1 day to 1 week 1 week to 1 month 1 to 3 months 3 months to 1 year More than 1 year Open i) Details on the reinvestment of collateral Maximum amount (%) Amount used (%) Income for the fund after reinvesting cash collateral in euro j) Details on the holding of collateral received by the fund Caceis Bank Holding Cash k) Details on the holding of collateral provided by the fund Holding Cash 20

21 Securities lending Securities borrowing Repurchase agreements Reverse repurchase agreements TRS l) Details on income and costs broken down Income - Funds 1,296, Investment manager - Third parties Costs - Funds - Investment manager - Third parties 129, e) Details on the type and quality of collateral Within the scope of securities financing transactions, the fund may receive or give financial assets as collateral with the objective of reducing its exposure to counterparty risk. The collateral shall primarily take the form of cash in the case of OTC derivatives transactions, and cash and eligible government bonds in the case of transactions involving efficient portfolio management techniques. All collateral received or given is transferred with full ownership and must meet the following criteria: - take the form of cash or bonds or treasury bills issued or guaranteed by OECD member states, by their regional public authorities or by supranational institutions and bodies with EU, regional or worldwide scope. - be held by the Custodian of the fund or by one of its agents or a third party under its supervision or by any third-party custodian subject to prudential supervision and which is not linked in any way to the provider of the collateral. - in accordance with the regulations in force, at all times fulfil liquidity, valuation, issuer credit rating, correlation and diversification criteria, and exposure to any given issuer shall not exceed 20% of the net assets. Also, debt securities must have a minimum rating of AA- or equivalent from at least one of the main rating agencies (including all those accredited by the European Union), and must not account for more than 10% of an issue. Where collateral is received, Carmignac teams apply a discount when valuing it. This discount is contractually agreed with each counterparty. i) Details on the reinvestment of collateral Carmignac s internal policies do not allow portfolio managers to reuse collateral received in securities financing transactions for the portfolios concerned. Collateral received is deposited in special, separate securities accounts and cash accounts for the relevant portfolios. k) Details on the holding of collateral provided by the fund As indicated above, all collateral received or provided is transferred with full ownership and must be held by the Custodian of the fund or by one of its agents or a third party under its supervision, or by any third-party custodian subject to prudential supervision and which is not linked in any way to the provider of the collateral. l) Details on income and costs broken down The management company or investment manager receives no payment for performing securities financing transactions. All income resulting from these transactions is returned to the fund, minus operating costs linked to the involvement of CACEIS Bank Luxembourg (or third parties ) as lending agent in securities lending/borrowing transactions. The lending agent s charges may not exceed 15% of income generated on these lending/borrowing transactions. With respect to repurchase agreements, the fund is the direct counterparty in such transactions and receives the full amount of the remuneration. 21

22 Regulatory information Policy for the selection of intermediaries In its capacity as management company, Carmignac Gestion selects service providers whose execution policy guarantees the best possible result when executing orders transmitted on behalf of its UCITS or its clients. It also selects service providers to aid in making investment decisions and to execute orders. In both cases, Carmignac Gestion has defined a policy for selecting and evaluating intermediaries according to certain criteria. You can find the updated version of this policy at You will also find a report on intermediary fees on this website. Communication on environmental, social and governance criteria (ESG) Carmignac Emergents invests with a view to generating sustainable long-term growth through a socially responsible investment approach. Details of how we apply our socially responsible investment policy are available on the following website: As part of our commitment to Principles for Responsible Investment (PRI), our portfolios are analysed by MSCI using three major factors of socially responsible investment based on environmental, social and governance (ESG) criteria. In 2017, we held companies such as Grupo Mexico, Samsung Electronics, Hyundai Motor, Baidu and Kangwon Land, which had been hit by scandals in the past. In such circumstances, though, we enter into transparent dialogue with the companies management teams. If the answers they give and measures they take seem unsatisfactory, we may decide to divest. It should also be noted that we have no exposure to the anti-personnel mine, cluster bomb, firearms or tobacco segments. In terms of these ESG criteria, our fund has a higher score than its reference indicator. In addition, more than 71% of our holdings are rated BB or above, and ratings of between A and AAA account for more than 29% of the portfolio, compared with just 24% for its reference indicator. Environmental and governance criteria allow our fund to stand out. For example, on CO2 emissions, use of natural resources and water stress criteria, the fund scores much higher than its reference indicator. Carmignac Emergents also rates better than its reference indicator in the telecom, consumer and utilities sectors. The fund received a poor ESG rating in the materials and real estate sectors. Our main position (Grupo Mexico SAB de CV), which we opened to gain exposure to copper, the long-term fundamentals of which we consider to be positive, is rated CCC by MSCI ESG, mainly due to environmental and health & safety risks linked to the nature of its operations. Indeed, the group has a disappointing track record in environmental and human rights terms. There have also been numerous cases of pollution and serious illnesses in and around its mines. We take these breaches very seriously and raise them often at meetings with the company s management. Unfortunately, these problems are common throughout the mining industry and Grupo Mexico is no exception. More specifically, the company has still not fully repaired the damage from an accident in 2014 when 40,000 tonnes of sulphuric acid were spilled into the Bacanuchi river in Mexico. With regard to employee labour rights and health & safety, the group s operations are concentrated on Mexico and Peru, which are particularly lax in regulatory terms. The company has introduced staff management and safety initiatives. However, these have had a limited impact and in our view are far from sufficient. As investors, we remain particularly alert to the problems described above. We monitor issues closely by communicating with the company, independent analysts and the local regulator. Aware of the management s mediocre performance, conflicts with local communities, safety problems in mines and the risk of corruption in this part of the world, and given the group s lack of responsiveness in looking to improve the impact of its business on its ecological and social environment, we reduced our investment significantly (to less than 1% by the end of the year). We will continue giving active consideration to these non-financial criteria in 2018, selecting companies in underpenetrated sectors and contributing to the future development of emerging countries, allowing us to factor sustainable development issues into our investment process. Our management team s strong local presence enables us to perform an in-depth analysis of the stocks in which we invest and to pay special attention to ESG criteria. 22

23 Investment strategy and transparency with regard to carbon emissions Carmignac Gestion formalised its commitment to factor climate change issues into its investment process, combining its efforts under the COP21 initiatives with adherence to the principles of article 173 of the energy transition act (L of the French Monetary and Financial Code). Carmignac Emergents has established a specific policy targeting carbon risk in its investment process, visible on our website, Investment in companies producing fossil fuels is limited by a rigorous selection procedure. The fund also restricts its exposure to the coal sector by excluding companies that generate more than 5% of their revenue from coal mining and production. MSCI - Carbon Portfolio Analytics report The Carmignac Emergents portfolio s carbon dioxide emissions (in terms of CO2 emissions per euro invested) are 37% lower than those of the reference indicator. Compared with its reference indicator, the fund has 7% fewer assets invested in companies with fossil fuel reserves. Due to its exclusion policy, the allocation to highimpact fuels (thermal coal, shale oil and gas) is very low (85% lower than that of the reference indicator). 20% of the fund s assets are invested in companies that offer clean technology solutions, compared with 31% of those of the reference indicator. Our holdings in this segment include Samsung SDI, a manufacturer of batteries for electric vehicles, and Zhengzhou Yutong Bus, the world s leading electric bus maker. Carbon emissions 1 Carbon emissions 2 Carbon intensity 3 Weighted average carbon intensity 3 Availability of carbon emissions data 4 Carmignac Emergents , % Reference indicator* , % MSCI EM Low Carbon Target index , % 1. tonnes of CO2 equivalent per million dollars invested 2. tonnes of CO2 equivalent based on an investment of 1 million dollars 3. tonnes of CO2 equivalent per million dollars of revenue 4. As percentage of market value MSCI EM (EUR) (net dividends reinvested). Source: MSCI Carbon Portfolio Analytics, Carmignac, 19/01/

24 Overall risk calculation method Overall risk is calculated using the relative Value-at-Risk method over a two-year historical horizon with a 99% confidence threshold over 20 days, with the fund s reference indicator as a benchmark portfolio. Calculated as the gross sum of nominal derivatives without netting or hedging, the expected level of leverage is 2, but it may be higher under certain market conditions (low/high volatility, low interest rates, central bank intervention, etc.). Maximum, minimum and average VaR levels over the year are shown in the table below: VaR 99%, 20 days Min Average Max Carmignac Emergents Remuneration policy Carmignac Gestion SA s remuneration policy is designed to comply with European and national remuneration and governance rules as set out in the UCITS Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 and 2014/91/EU of 23 July 2014, the ESMA guideline of 14 October 2016 (ESMA/2016/575), and the AIFM Directive 2011/61/EU of the European Parliament and of the Council. It promotes sound and effective risk management without excessive risk taking. In particular, it ties employees to the risks they take to ensure that Identified Staff are fully committed to the Company s long-term performance. The remuneration policy was approved by the Board of Directors of the management company. The principles of this policy are re-evaluated at least once a year by the remuneration and nominations committee and Board of Directors, and are adjusted to fit the changing regulatory framework. Details of the remuneration policy, including a description of how remuneration and benefits are calculated, as well as information on the remuneration and nominations committee, can be found at A printout of the remuneration policy is available free of charge upon request. Variable part: determination and appraisal Variable remuneration depends on both the individual success of the employee and the performance of the Company as a whole. The variable remuneration budget is determined on the basis of Carmignac Gestion SA s results over the previous financial year, while ensuring that capital remains at a sufficient level. It is then distributed between the various departments according to the assessment of their performance, and within each department according to employees individual performance appraisals. The amount of the variable portion allocated to each employee reflects their performance and the achievement of targets set by the Company. These targets may be quantitative and/or qualitative and are linked to the employee s position. They take into account individual behaviour to avoid short-term risk taking. They give particular consideration to the sustainability of action taken by the employee and its long-term benefits for the company, the employee s personal involvement and the completion of assigned tasks. FY 2017 In 2017, the total amount of remuneration (including fixed and deferred/non-deferred variable) paid by Carmignac Gestion to all of its staff (174 individuals) was EUR 50,878,992. This amount breaks down as follows: Total amount of fixed remuneration paid over the year: EUR 11,603,101 Total amount of deferred and non-deferred variable remuneration paid over the year: EUR 39,275,891 A limited number of fund managers receive performance fees. However, these commissions form an integral part of their variable remuneration and are subject to oversight measures, especially with regard to deferred bonuses and payments in financial instruments. The total amount of remuneration paid in 2017 breaks down as follows among the different groups of staff: 24

25 - Risk takers: EUR 35,141,190 - Non-risk takers: EUR 15,737,801 Substantial changes during the year The portfolio s prospectus was updated on 17/02/2017 to bring it in line with applicable regulatory changes (UCITS V Directive and SFTR). 25

26 CARMIGNAC EMERGENTS BALANCE SHEET ASSETS IN EUR 29/12/ /12/2016 Net fixed assets Deposits Financial instruments Equities 1,213,347, ,124,452, and similar securities 1,211,756, ,641, Traded on a regulated or similar market 1,211,756, ,641, Not traded on a regulated or similar market Bonds and similar securities 67,263, Debt securities Traded on a regulated or similar market 67,263, Not traded on a regulated or similar market 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 Retail UCITS and AIFs aimed at non-professional investors and equivalent funds of other countries Other funds aimed at non-professional investors and equivalent funds of other EU member states Professional investment funds and equivalent funds of other EU member states and listed securitisation funds Other professional investment funds and equivalent funds of other EU member states and unlisted securitisation funds Other non-european funds Temporary transactions on securities 8, ,301, Receivables on securities received under a repurchase agreement (pension) Receivables on securities lent 8, ,301, Securities borrowed Securities transferred under a repurchase agreement (pension) Other temporary transactions Forward financial instruments 1,582, , Transactions on a regulated or similar market 1,115, Other transactions 466, , Other financial instruments Receivables 327,738, ,034, Currency forward exchange contracts 314,045, ,377, Other 13,692, ,657, Financial accounts 53,121, ,991, Cash 53,121, ,991, Total assets 1,594,206, ,701,478,

27 CARMIGNAC EMERGENTS BALANCE SHEET LIABILITIES AND OWNER S EQUITY IN EUR 29/12/ /12/2016 Equity Share capital 1,156,315, ,066,130, Non-distributed prior net capital gains and losses (a) 4,666, Retained earnings (a) 10, Net capital gains and losses for the financial year (a, b) 100,299, ,924, Profit/(loss) for the financial year (a, b) 5,311, ,056, Total share capital (= Amount corresponding to the net assets) 1,266,601, ,130,111, Financial instruments 1,115, ,263, Sales of financial instruments Temporary transactions on securities 67,263, Payables on securities transferred under a repurchase agreement (pension) Payables on securities borrowed Other temporary transactions 67,263, Forward financial instruments 1,115, Transactions on a regulated or similar market 1,115, Other transactions Payables 325,043, ,988, Currency forward exchange contracts 311,586, ,327, Other 13,456, ,660, Financial accounts 1,445, , Short-term bank loans 1,445, , Borrowings Total liabilities 1,594,206, ,701,478, (a) Including accruals and deferrals (b) Less interim dividends paid for the financial year 27

28 CARMIGNAC EMERGENTS OFF-BALANCE SHEET 29/12/ /12/2016 Hedging transactions Commitment on regulated or similar markets Futures contracts NQ USA NASDAQ ,724, Commitment on OTC markets Other commitments Other transactions Commitment on regulated or similar markets Commitment on OTC markets Futures contracts BS15 CS RTS ,622, BS16 ML RTS ,632, BS16 ML RTS ,904, Other commitments 28

29 CARMIGNAC EMERGENTS INCOME STATEMENT 29/12/ /12/2016 Income from financial transactions Income from deposits and financial accounts 4, , Income from equities and similar securities 24,212, ,687, Income from bonds and similar securities Income from debt securities Income from temporary purchases and sales of securities 1,166, , Income from financial futures Other financial income Total(1) 25,384, ,238, Payables on financial transactions Payables on temporary purchases and sales of securities Payables on financial futures Payables on financial debts 315, , Other payables Total (2) 315, , Profit/(loss) on financial transactions (1-2) 25,068, ,049, Other income (3) Management fee and depreciation allowance (4) 19,607, ,880, Net profit/(loss) for the financial year (L ) ( ) 5,460, ,169, Income equalisation for the financial year (5) -149, , Interim dividends on income paid for the financial year (6) Profit/(loss) ( ) 5,311, ,056,

30 NOTES TO THE FINANCIAL STATEMENTS OF CARMIGNAC EMERGENTS Accounting methods and rules The annual financial statements are drawn up in the form required by ANC Regulation repealing CRC Regulation , as amended. The general principles of accounting apply: true and fair view, comparability, going concern, - lawfulness and fairness, - prudence, - consistency of methods from one financial year to the next. Income from fixed income securities is recorded on the basis of accrued interest. Purchases and sales of securities are recorded exclusive of costs. The accounting currency of the portfolio is the EURO. There are 12 months in the financial year. Valuation rules for the assets Financial instruments are recorded in the financial statements using the historical cost method and they are entered on the balance sheet at their current value as determined by the last-known market value or, where a market does not exist, by any external means or by using financial models. Differences between the current values used to calculate the net asset value and the historical costs of transferable securities when first included in the portfolio are recorded in valuation differentials accounts. Securities that are not denominated in the currency of the portfolio are valued in accordance with the principle described below; the valuation is then converted into the currency of the portfolio on the basis of the exchange rate prevailing on the valuation day. DEPOSITS: Deposits with a residual maturity of less than or equal to 3 months are valued using the straight-line method. EQUITIES, BONDS AND OTHER SECURITIES TRADED ON A REGULATED OR SIMILAR MARKET: For the calculation of the net asset value, equities and other securities traded on a regulated or similar market are valued on the basis of the last market price of the day. Bonds and other similar securities are valued at the closing price supplied by various financial service providers. Interest accrued on bonds and other 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 the market value and the yield, while taking account of recent prices observed for significant transactions. TRANSFERABLE DEBT SECURITIES: Transferable debt securities and similar securities that are not traded in large volumes are valued on the basis of an actuarial method, the reference rate (as defined below) being increased, where applicable, by a differential representative of the intrinsic characteristics of the issuer: Transferable debt securities with a maturity of less than or equal to 1 year: Interbank rate in euro (Euribor); transferable debt securities with a maturity exceeding 1 year: valued using rates for French treasury bills (BTAN and OAT) with similar maturity dates for the longer durations. 30

31 Transferable debt securities with a residual maturity of less than three months may be valued using the straight-line method. French treasury bills are valued on the basis of market prices, as published daily by the Bank of France. FUNDS HELD: Units or shares of UCIs shall be valued at their last known net asset value. TEMPORARY TRANSACTIONS ON SECURITIES: Securities received under repurchase agreements are recorded as an asset under the heading "Receivables on securities received under a repurchase agreement (pension)" at the contract amount, plus any accrued interest receivable. Securities transferred under a repurchase agreement are recorded as securities purchased at their current value. The payables on securities transferred under a repurchase agreement are recorded as securities sold at the value determined in the contract, plus any accrued interest payable. Securities lent are valued at their current value and are recorded as an asset under the heading "Receivables on securities lent" at their current value, plus any accrued interest receivable. Securities borrowed are recorded as an asset under the heading "Securities borrowed" at the contract amount and as a liability under the heading "Payables on securities borrowed" at the contract amount, plus any accrued interest payable. FORWARD FINANCIAL INSTRUMENTS: Forward financial instruments traded on a regulated or similar market: Forward financial instruments traded on regulated markets are valued at the settlement price of that day. Forward financial instruments not traded on a regulated or similar market: Swaps: Interest rate and/or currency swaps are valued at their market value by discounting future interest payments at the interest rate and/or currency exchange rate prevailing on the market. This price is adjusted to the issuer's risk. Index swaps are valued using an actuarial method on the basis of a reference rate provided by the counterparty. Other swaps are valued at their market value or at a value estimated according to the terms and conditions determined by the management company. Off-balance sheet commitments: Futures contracts are recorded at their market value as off-balance sheet commitments on the basis of the price used in the portfolio. Options are converted into the underlying equivalent. Swap commitments are recorded at their nominal value or, where there is no nominal value, at an equivalent amount. 31

32 Financial instruments NAME DESCRIPTION BS15 CS RTS 0318 NQ USA NASDAQ 0318 BASKET - FORWARD ON A BASKET OF EQUITIES Foreign futures Management fees Management fees are calculated on each valuation day on the basis of the net assets. These fees are recorded in the UCI s income statement. The management fees are paid in full to the Management Company responsible for all of the operating costs of the UCIs. Management fees do not include transaction fees. The rate applied to the net asset value is: A EUR Acc UNITS: 1.50% (inclusive of tax) of net assets of the day E EUR Acc UNITS: 2.25% (inclusive of tax) of net assets of the day A EUR Ydis units: 1.50% (inclusive of tax) of net assets of the day The performance fees are based on a comparison between the performance of the fund and its reference indicator over the calendar year. If the performance since the beginning of the financial year is positive and exceeds the performance of the MSCI EM NR (USD) index, a daily provision of up to 20% of this outperformance is established. In the event of underperformance in relation to this index, a daily amount corresponding to a maximum of 20% of this underperformance is deducted from the provision established since the beginning of the year. In the event of redemptions, the portion of the performance fee provision corresponding to redeemed shares is transferred to the management company under the crystallisation principle. The performance fee is paid to the management company in full at the end of the financial year. Allocation of distributable income DEFINITION OF DISTRIBUTABLE INCOME: Distributable income is made up of: NET INCOME: The net income for the financial year is equal to the amount of interest, arrears, premiums and prizes, dividends, director s fees and any other income relating to the securities constituting the portfolio, plus income generated by temporary cash holdings and minus the amount of management fees and interest charges on loans. This is increased by retained earnings, plus or minus the balance of the income equalisation accounts. CAPITAL GAINS AND LOSSES: Realised capital gains, net of fees, minus realised capital losses, net of fees, recognised during the financial year, plus net capital gains of a similar nature recognised during previous financial years and which have not been distributed or accumulated, plus or minus the balance of the capital gains equalisation account. 32

33 ALLOCATION OF DISTRIBUTABLE INCOME: Distributable income Allocation of net income Allocation of net realised capital gains or losses CARMIGNAC EMERGENTS A EUR Acc and CARMIGNAC EMERGENTS E EUR Acc Accumulation Accumulation CARMIGNAC EMERGENTS A EUR Ydis Distributed in full, or with a portion carried forward as decided by the Management Company Distributed in full, or with a portion carried forward as decided by the Management Company 33

34 CARMIGNAC EMERGENTS NET ASSET CHANGES 29/12/ /12/2016 Net assets at the beginning of the financial year 1,130,111, ,066,578, Subscriptions (including subscription fees paid to the UCI) 484,838, ,721, Redemptions (after deduction of redemption fees paid to the UCI) -561,698, ,298, Realised gains on deposits and financial instruments 157,755, ,894, Realised losses on deposits and financial instruments -78,284, ,405, Realised gains on forward financial instruments 26,340, ,169, Realised losses on forward financial instruments -24,606, ,253, Transaction fees -9,593, ,440, Foreign exchange differences -64,228, ,546, Changes in the valuation differential of deposits and financial instruments 203,205, ,357, Valuation differential for the financial year N 250,759, ,554, Valuation differential for the financial year N-1-47,554, ,911, Changes in the valuation differential of forward financial instruments -895, ,118, Valuation differential for the financial year N -649, , Valuation differential for the financial year N-1-246, ,364, Dividends paid in the previous financial year on net capital gains and losses -1,343, Dividends paid in the previous financial year on income -460, Net profit/(loss) for the financial year prior to the income equalisation account 5,460, ,169, Interim dividend(s) paid during the financial year on net capital gains and losses Interim dividend(s) paid during the financial year on income Other items Net assets at the end of the financial year 1,266,601, ,130,111,

35 BREAKDOWN OF FINANCIAL INSTRUMENTS BY LEGAL OR ECONOMIC STRUCTURE OF CARMIGNAC EMERGENTS Amount % ASSETS Bonds and similar securities TOTAL bonds and similar securities Debt securities TOTAL debt securities LIABILITIES Sales of financial instruments TOTAL sales of financial instruments OFF-BALANCE SHEET Hedging transactions Equities 63,724, TOTAL hedging transactions 63,724, Other transactions Equities 17,622, TOTAL other transactions 17,622,

36 BREAKDOWN BY INTEREST RATES OF ASSET, LIABILITY AND OFF-BALANCE SHEET ITEMS OF CARMIGNAC EMERGENTS Assets Deposits Bonds and similar securities Debt securities Temporary transactions on securities Fixed rate % Variable rate % Adjustable rate % Other % Financial accounts 53,121, Liabilities Temporary transactions on securities Financial accounts 1,445, Off-balance sheet Hedging transactions Other transactions 36

37 BREAKDOWN BY RESIDUAL MATURITY OF ASSET, LIABILITY AND OFF-BALANCE SHEET ITEMS OF CARMIGNAC EMERGENTS < 3 months % ]3 months - 1 year] % ]1-3 years] % Assets Deposits Bonds and similar securities Debt securities Temporary transactions on securities Financial accounts 53,121, Liabilities Temporary transactions on securities Financial accounts 1,445, Off-balance sheet Hedging transactions Other transactions ]3-5 years] % >5 years % Assets Deposits Bonds and similar securities Debt securities Temporary transactions on securities Financial accounts Liabilities Temporary transactions on securities Financial accounts Off-balance sheet Hedging transactions Other transactions Positions in interest rate futures are shown according to the maturity of the underlying instrument. 37

38 BREAKDOWN BY LISTING CURRENCY OR VALUATION CURRENCY OF ASSET, LIABILITY AND OFF-BALANCE SHEET ITEMS OF CARMIGNAC EMERGENTS Assets Deposits Equities and similar securities Bonds and similar securities Debt securities UCIs Temporary transactions on securities USD KRW INR Other currencies Amount % Amount % Amount % Amount % 481,631, ,711, ,563, ,975, , Receivables 32,119, ,127, Financial accounts , Liabilities Sales of financial instruments Temporary transactions on securities Payables 29,820, ,201, Financial accounts 1,445, Off-balance sheet Hedging transactions 63,724, Other transactions 17,622,

39 RECEIVABLES AND PAYABLES: BREAKDOWN BY TYPE OF CARMIGNAC EMERGENTS Nature of the debit/credit 29/12/2017 Receivables Forward currency purchases 101,082, Funds receivable on forward currency sales 212,963, Sales with deferred settlement 7,477, Subscriptions receivable 1,318, Guarantee deposits in cash 4,340, Cash dividends and coupons 555, Total receivables 327,738, Payables Forward currency sales - 209,661, Funds payable on forward currency purchases - 101,925, Purchases with deferred settlement - 1,212, Redemption price payable - 6,243, Management fees - 418, Performance fees - 580, Collateral - 4,420, Other payables - 581, Total payables - 325,043,

40 NUMBER OF CARMIGNAC EMERGENTS SECURITIES ISSUED OR REDEEMED In units In euro A EUR Acc units Units subscribed during the financial year 504, ,690, Units redeemed during the financial year -603, ,057, Net balance of subscriptions/redemptions -98, ,366, E EUR Acc units Units subscribed during the financial year 98, ,478, Units redeemed during the financial year -95, ,938, Net balance of subscriptions/redemptions 3, , A EUR Ydis units Units subscribed during the financial year 144, ,668, Units redeemed during the financial year -5, , Net balance of subscriptions/redemptions 138, ,965,

41 CARMIGNAC EMERGENTS SUBSCRIPTION AND/OR REDEMPTION FEES In euro A EUR Acc units Redemption fees paid to the Fund Subscription fees paid to the Fund Total fees paid to the Fund E EUR Acc units Redemption fees paid to the Fund Subscription fees paid to the Fund Total fees paid to the Fund A EUR Ydis units Redemption fees paid to the Fund Subscription fees paid to the Fund Total fees paid to the Fund 41

42 MANAGEMENT FEES OF CARMIGNAC EMERGENTS 29/12/2017 A EUR Acc units Guarantee fees Fixed management fees 16,979, Percentage of fixed management fees 1.50 Performance fees 572, Trailer fees E EUR Acc units Guarantee fees Fixed management fees 168, Percentage of fixed management fees 2.25 Performance fees 7, Trailer fees A EUR Ydis units Guarantee fees Fixed management fees 1,879, Percentage of fixed management fees 1.50 Performance fees Trailer fees 42

43 COMMITMENTS RECEIVED AND GIVEN BY CARMIGNAC EMERGENTS Guarantees received by the Fund None. Other commitments received and/or given: None. 43

44 MARKET VALUE OF SECURITIES SUBJECT TO A TEMPORARY PURCHASE TRANSACTION BY CARMIGNAC EMERGENTS 29/12/2017 Securities held under repurchase agreements (pension) Securities borrowed 44

45 MARKET VALUE OF SECURITIES REPRESENTING GUARANTEE DEPOSITS OF CARMIGNAC EMERGENTS 29/12/2017 Financial instruments given as a guarantee and kept as their original entry Financial instruments received as a guarantee and not entered on the balance sheet 45

46 FINANCIAL INSTRUMENTS OF THE GROUP HELD IN THE CARMIGNAC EMERGENTS PORTFOLIO ISIN code Description 29/12/2017 Equities Bonds Transferable debt securities UCIs Forward financial instruments 46

47 ALLOCATION TABLE SHOWING THE PORTION OF DISTRIBUTABLE INCOME RELATING TO THE INCOME OF CARMIGNAC EMERGENTS 29/12/ /12/2016 Amounts to be allocated Retained earnings 10, Income 5,311, ,056, Total 5,321, ,056, /12/ /12/2016 A EUR Acc units Allocation Distribution Retained earnings for the financial year Accumulation 4,739, ,607, Total 4,739, ,607, /12/ /12/2016 E EUR Acc units Allocation Distribution Retained earnings for the financial year Accumulation -38, , Total -38, , /12/ /12/2016 A EUR Ydis units Allocation Distribution 611, , Retained earnings for the financial year 8, , Accumulation Total 620, , Information concerning units eligible to receive dividends Number of units 1,054, , Dividend per unit Tax credits Tax credit related to income distribution 164, ,

48 ALLOCATION TABLE SHOWING THE PORTION OF DISTRIBUTABLE INCOME RELATING TO NET CAPITAL GAINS AND LOSSES OF CARMIGNAC EMERGENTS 29/12/ /12/2016 Amounts to be allocated Non-distributed prior net capital gains and losses 4,666, Net capital gains and losses for the financial year 100,299, ,924, Interim dividends paid on net capital gains and losses in the financial year Total 104,965, ,924, /12/ /12/2016 A EUR Acc units Allocation Distribution Non-distributed net capital gains and losses Accumulation 88,632, ,212, Total 88,632, ,212, /12/ /12/2016 E EUR Acc units Allocation Distribution Non-distributed net capital gains and losses Accumulation 620, , Total 620, , /12/ /12/2016 A EUR Ydis units Allocation Distribution 94, ,337, Non-distributed net capital gains and losses 15,617, ,051, Accumulation Total 15,712, ,388, Information concerning units eligible to receive dividends Number of units 1,054, , Dividend per unit

49 OVERVIEW OF RESULTS AND OTHER SIGNIFICANT ITEMS FOR THE LAST 5 FINANCIAL YEARS FOR CARMIGNAC EMERGENTS 31/12/ /12/ /12/ /12/ /12/2017 Total net assets in EUR 1,709,204, ,268,302, ,066,578, ,130,111, ,266,601, A EUR acc Net assets in EUR 1,643,780, ,247,109, ,807, ,020,570, ,119,564, Number of units 2,318, ,662, ,267, ,276, ,178, Net asset value per unit in EUR Accumulation per unit on net capital gains and losses in EUR Accumulation per unit in EUR on income A CHF Acc Hdg Net assets in CHF 7,477, ,258, ,667, Number of units 74, , , Net asset value per unit in CHF Accumulation per unit on net capital gains and losses in EUR Accumulation per unit in EUR on income F GBP Acc Hdg Net assets in GBP 3,711, ,100, , Number of units 40, , , Net asset value per unit in GBP Accumulation per unit on net capital gains and losses in EUR Accumulation per unit in EUR on income A USD Acc Hdg Net assets in USD 60,583, ,652, ,010, Number of units 602, , , Net asset value per unit in USD Accumulation per unit on net capital gains and losses in EUR Accumulation per unit in EUR on income

50 OVERVIEW OF RESULTS AND OTHER SIGNIFICANT ITEMS FOR THE LAST 5 FINANCIAL YEARS FOR CARMIGNAC EMERGENTS 31/12/ /12/ /12/ /12/ /12/2017 Total net assets in EUR 1,709,204, ,268,302, ,066,578, ,130,111, ,266,601, E EUR Acc Net assets in EUR 8,987, ,518, ,995, ,186, ,799, Number of units 83, , , , , Net asset value per unit in EUR Accumulation per unit on net capital gains and losses in EUR Accumulation per unit in EUR on income A EUR Ydis Net assets in EUR 1,906, ,929, ,427, ,354, ,237, Number of units 19, , , , ,054, Net asset value per unit in EUR Distributed net capital gains and losses per unit in EUR Non-distributed net capital gains and losses per unit in EUR Accumulation per unit on net capital gains and losses in EUR Accumulation per unit in EUR on income Dividend per unit in EUR on income Retained earnings per unit in EUR on income Tax credit per unit in EUR * 50

51 OVERVIEW OF RESULTS AND OTHER SIGNIFICANT ITEMS FOR THE LAST 5 FINANCIAL YEARS FOR CARMIGNAC EMERGENTS 31/12/ /12/ /12/ /12/ /12/2017 Total net assets in EUR 1,709,204, ,268,302, ,066,578, ,130,111, ,266,601, F GBP Qdis Hdg Net assets in GBP 1, Number of units Net asset value per unit in GBP Accumulation per unit on net capital gains and losses in EUR Accumulation per unit in EUR on income Dividend per unit in EUR on income Retained earnings per unit in EUR on income Tax credit per unit in EUR * The tax credit per unit shall only be determined on the distribution date in accordance with the tax provisions in force. 51

52 LIST OF SECURITIES OF CARMIGNAC EMERGENTS AT 29 DECEMBER 2017 Name of securities Currency Quantity or nominal amount Current value % of net assets Equities and similar securities Equities and similar securities traded on a regulated or similar market SOUTH AFRICA NASPERS LTD ZAR 31,144 7,229, TOTAL SOUTH AFRICA 7,229, ARGENTINA BANCO MACRO BANSUD ADR USD 156,602 15,112, GRUPO SUPERVIELLE ADR USD 1,841,293 44,958, LOMA NEGRA CIA INDUSTRIAL AR USD 809,634 15,534, TOTAL ARGENTINA 75,606, BRAZIL BB SEGURIDADE PARTICIPACOES BRL 4,167,463 29,807, TRANSMISSAO ENERGIA ELECTRICA PREF BRL 1,107,068 18,593, TRANSMISSORA ALIANCA ENERGIA UNIT BRL 6,276,265 33,625, TOTAL BRAZIL 82,026, CHINA BAIDU.COM SPONS.ADR CL.A USD 65,352 12,746, HANGZHOU HIKVI-A CNY 3,134,645 15,633, ZHENGZHOU YUT-A CNY 8,946,495 27,538, TOTAL CHINA 55,919, CURACAO MERRILL LYNCH INTL CO CV (BHARTI INFRATEL LTD) CW USD 3,271,716 16,167, TOTAL CURACAO 16,167, UNITED ARAB EMIRATES EMAAR PROPERTIES AED 16,332,547 25,700, TOTAL UNITED ARAB EMIRATES 25,700, UNITED STATES OF AMERICA FUYAO GROUP GLASS INDUSTRIES CO LTD A CNY 4,776,071 17,712, LAS VEGAS SANDS USD 476,093 27,551, MERCADOLIBRE USD 226,265 59,290, TOTAL UNITED STATES OF AMERICA 104,554, HONG KONG AIA GROUP HKD 5,662,620 40,205, TOTAL HONG KONG 40,205, CAYMAN ISLANDS BITAUTO HOLDINGS ADR USD 953,330 25,246, DALI FOODS GROUP CO LTD HKD 50,192,819 37,963, SEA LTD-ADR USD 1,568,926 17,416,

53 Name of securities Currency Quantity or nominal amount Current value % of net assets TENCENT HLDG LOT 500 HKD 852,425 36,868, YIXIN GROUP LTD HKD 19,577,223 13,076, COM INC USD 581,819 34,677, TOTAL CAYMAN ISLANDS 165,249, INDIA BHARTI INFRATEL LTD INR 3,671,683 18,144, GUJARAT AMBUJA CEMENTS INR 6,631,114 23,537, HDFC BANK LTD INR 725,805 17,901, HOUSING DEVELOPMENT FINANCE INR 865,180 19,307, TATA MOTORS INR 5,563,790 31,349, UNITED SPIRITS INR 466,367 22,324, TOTAL INDIA 132,563, INDONESIA ASTRA INTERNATIONAL TBK IDR 54,470,299 27,750, TOTAL INDONESIA 27,750, ISRAEL CHECK POINT SOFTWARE TECHNOLOGIES LTD USD 234,744 20,256, TOTAL ISRAEL 20,256, JAPAN LINE JPY 77,000 2,615, LINE ADR USD 972,290 33,189, TOTAL JAPAN 35,805, MEXICO CEMEX ADR USD 3,377,611 21,096, DEUT BANK MEXI SA INST DE B MXN 5,997,325 5,291, GRUPO FIN SANTANDER-ADR B USD 3,510,622 21,371, GRUPO FINANCIERO BANORTE SAB DE CV MXN 5,962,146 27,364, GRUPO MEXICO -B- MXN 3,776,343 10,433, TOTAL MEXICO 85,556, NETHERLANDS YANDEX USD 480,561 13,106, TOTAL NETHERLANDS 13,106, PORTUGAL JERONIMO MARTINS EUR 609,706 9,874, TOTAL PORTUGAL 9,874, REPUBLIC OF KOREA HYUNDAI MOTOR CO LTD KRW 269,010 32,644, KANGWON LAND INC KRW 1,634,476 44,246, SAMSUNG BIOLOGICS CO LTD KRW 26,599 7,676, SAMSUNG ELECTRONIC KRW 29,508 58,487, SAMSUNG ELECTRONICS CO LTD PREF KRW 13,771 22,388,

54 Name of securities Currency Quantity or nominal amount Current value % of net assets SAMSUNG SDI CO LTD KRW 95,973 15,267, TOTAL REPUBLIC OF KOREA 180,711, UNITED KINGDOM LIBERTY LILAC -A-PLC USD 353,353 5,929, TOTAL UNITED KINGDOM 5,929, RUSSIA MOSCOW EXCHANGE MICEX-RT-BRD RUB 11,608,191 18,297, TOTAL RUSSIA 18,297, SINGAPORE CLSA GLOBAL MARKETS PTE LTD (HERO HONDA MOTORS) CW USD 341,627 16,871, CLSA PNote United Spirits USD 84,943 4,066, TOTAL SINGAPORE 20,937, TAIWAN TAIWAN SEMICONDUCTOR SP ADR USD 2,333,171 77,040, TOTAL TAIWAN 77,040, TURKEY ENKA INSAAT VE SANAYI TRY 8,506,615 11,266, TOTAL TURKEY 11,266, TOTAL equities and similar securities traded on a regulated or similar market 1,211,756, TOTAL equities and similar securities 1,211,756, Guarantees on securities lent 8, Forward financial instruments Futures Futures on regulated or similar markets NQ USA NASDAQ 0318 USD ,115, TOTAL futures on regulated markets -1,115, Futures on OTC markets BS15 CS RTS 0318 USD 9, , TOTAL futures on OTC markets 466, TOTAL futures -649, TOTAL forward financial instruments -649, Margin calls C.A.Indo margin calls in USD USD 1,339, ,115, TOTAL margin calls 1,115, Receivables 327,738, Payables -325,043, Financial accounts 51,675, Net assets 1,266,601,

55 E EUR Acc EUR 55, A EUR Ydis EUR 1,054, A EUR acc EUR 1,178,

56 FURTHER INFORMATION REGARDING THE COUPON S TAX REGIME BREAKDOWN OF COUPON Income subject to non-definitive, compulsory withholding tax Net global Currency Net per unit Currency Shares eligible for rebate and subject to non-definitive, compulsory withholding tax 611, EUR 0.58 EUR Other income not eligible for rebate and subject to nondefinitive, compulsory withholding tax Non-declarable and non-taxable income Total amount distributed on capital gains and losses 94, EUR 0.09 EUR TOTAL 706, EUR 0.67 EUR 56

57 CARMIGNAC GESTION 24, place Vendôme Paris Tel: +33 (0) Fax: +33 (0) Portfolio management company (AMF authorisation no. GP of 13/03/1997). SA with capital of EUR 15 million - RCS Paris B