DMC FUND A Luxembourg Mutual Fund

Transcription

1 A Luxembourg Mutual Fund managed by Dynamic Asset Management Company (Luxembourg) S.A. 15, rue du Fort Bourbon L-1249 Luxembourg R.C. Luxembourg B Nr AUDITED ANNUAL REPORT MARCH 31, 2009 Subscriptions can only be received on the basis of the prospectus accompanied by the latest annual report as well as by the latest annual report, if published after the latest annual report. Custodian Bank: Skandinaviska Enskilda Banken S.A. Administrative Agent: SEB Fund Services S.A.

2 TABLE OF CONTENTS PAGES Organisation 2 General Information 4 Reports of the Board of Directors and Schedules of investment : DMC FUND - DYNAMIC FLOORING EXPO BONDS EUROPE DF (expressed in EUR) Report of the Board of the Management Company 5 Schedule of Investments 6 DMC FUND - DYNAMIC FLOORING EXPO BONDS EURO MAS (expressed in EUR) Report of the Board of the Management Company 8 Schedule of Investments 9 DMC FUND - DYNAMIC FLOORING EXPO BONDS USD DF (expressed in USD) Report of the Board of the Management Company 11 Schedule of Investments 12 DMC FUND - DYNAMIC FLOORING EXPO BONDS USD MAS (expressed in USD) Report of the Board of the Management Company 14 Schedule of Investments 15 DMC FUND - MINIMISED VARIANCE EUROPEAN EQUITIES (expressed in EUR) Report of the Board of the Management Company 17 Combined Statement of Net Assets 18 Combined Statement of Operations 19 Combined Statement of Changes in Net Assets 20 Statistical Information 21 Notes to the Financial Statements 22 Independent Auditor`s Report 25 Notes to the "EU Savings Tax Directive" 26 1

3 DMC Fund ORGANISATION Promotors: and Co - Promotor: and Custodian Bank: Management Company: The Board of Directors of the Management Company: La Compagnie Financière AP S.A. Rue du Cendrier 15 CH-1201 GENEVA Dynagest S.A. Quai de la Poste 12 CH-1204 GENEVA Skandinaviska Enskilda Banken S.A. 6a, Circuit de la Foire Internationale L-1347 LUXEMBOURG DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. R.C. Luxembourg B Nr , rue du Fort Bourbon L-1249 LUXEMBOURG René GICQUEL Directeur de La Compagnie Financière AP S.A. Rue du Cendrier 15 CH-1201 GENEVA Chairman of the Board Alexandre KUHN Directeur de Dynagest S.A. Quai de la Poste 12 CH-1204 GENEVA Ann-Charlotte LAWYER Head of SEB Fund Services S.A. 6a, Circuit de la Foire Internationale L-1347 LUXEMBOURG (since November 20, 2008) Alain LUNARD 74, boulevard Voltaire F PARIS Ronald MEYER Customer Relationship Manager SEB Fund Services S.A. 6a, Circuit de la Foire Internationale L-1347 LUXEMBOURG (until September 1, 2008) Antoine MILHAUD Directeur de La Compagnie Financière AP S.A. Rue du Cendrier 15 CH-1201 GENEVA 2

4 DMC Fund ORGANISATION (CONTINUED) Didier NEUVECELLE Sous-Directeur de Dynagest S.A. Quai de la poste, 12 CH-1204 GENEVA Stefan RENNO Head of Corporate Development SEB AG Ulmenstrasse 30 D Frankfurt am Main Dr. René SIEBER Directeur de Dynagest S.A. Quai de la Poste 12 CH-1204 GENEVA Investment Advisor: Auditor of the Fund and the Management Company: Administrative Agent: Registered Office: Listing Agent: Dynagest S.A. Quai de la Poste 12 CH-1204 GENEVA BDO Compagnie Fiduciaire Le Dôme Espace Pétrusse 2, avenue Charles de Gaulle L-2013 Luxembourg SEB Fund Services S.A. 6a, Circuit de la Foire Internationale L-1347 LUXEMBOURG c/o DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. 15, rue du Fort Bourbon L-1249 LUXEMBOURG Fortis Banque Luxembourg S.A. 50, Avenue J. F. Kennedy L-2951 LUXEMBOURG Marketing of the Fund's units might be undertaken in some EU countries and Switzerland. 3

5 GENERAL INFORMATION DMC FUND was initially set up April 3, 1998 (under the name DYNAMIC FLOORING FUND) as an open-ended mutual fund governed by Luxembourg Law and investing in marketable transferable securities. The Fund is set up in accordance with the Management Regulations signed initially in Luxembourg on April 3, These Management Regulations were deposited with the Chief Registrar of the District Court of and in Luxembourg on April 28, 1998 and published in the Official Gazette of the Grand Duchy of Luxembourg Mémorial C nr - 375, as of May 23, The Management Regulations have been modified on October 23, 2006, deposited with the Registrar of Trade & Firms in Luxembourg on December 22, 2006 and published in the Official Gazette of the Grand Duchy of Luxembourg Mémorial C nr of December 22, DMC FUND as a Luxembourg mutual fund is governed by Part I of the Luxembourg Law on Undertakings for collective Investment of December 20, 2002 (as modified) relating to undertakings for collective investment and does not have a legal personality. Its assets are the undivided joint property of the Unitholder and are separate from the assets of the DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. There is no restriction on the amount of the Fund's assets or to the number of its units. DMC FUND is managed on behalf of the Unitholders by DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. which was incorporated on April 3, 1998 in the form of a Société Anonyme under Luxembourg Law. It has its registered office in Luxembourg at 15, rue du Fort Bourbon. The Articles of Association of the Management Company were published in the Mémorial C nr - 395, as of May 30, The Articles were lately changed by decision of the general shareholders meeting on September 15, Amendments hereto were deposited with the Registrar of Trade and Firms in Luxembourg and published in the Mémorial C. DMC FUND has been established as an umbrella fund and set up for an unlimited time. The Management Company may on behalf of the Fund issue units (the units ) related to specific pools of assets (each a Sub-Fund ). In respect of each Sub-Fund the Management Company pursues a specific investment policy. The Net Asset Value per unit is computed each Wednesday which is a Bank Business Day in Luxembourg; this day is called the Valuation Day. If such Wednesday is not a Bank Business Day in Luxembourg, the NAV calculation will take place on the next following Bank Business Day. The NAV, issue and redemption/conversion prices of each Sub- Fund and of each class of units are made public weekly in Luxembourg at the offices of the Depositary Bank and the Management Company. Financial information is published in at least one internationally circulated newspaper. Currently, publication is made in the International Herald Tribune and the Swiss newspaper Agefi. Financial Reports of the Fund are published annually and semi-annually. These reports, as well as the Prospectus and the Management Regulations, and all information concerning the Fund can be obtained at the offices of the Custodian Bank and the Management Company. This annual report reflects the NAV computed as at March 31, The following Sub-Funds are in existence as of March 31, 2009: - DMC FUND - DYNAMIC FLOORING EXPO BONDS EUROPE DF (expressed in EUR), - DMC FUND - DYNAMIC FLOORING EXPO BONDS EURO MAS (expressed in EUR), - DMC FUND - DYNAMIC FLOORING EXPO BONDS USD DF (expressed in USD), - DMC FUND - DYNAMIC FLOORING EXPO BONDS USD MAS (expressed in USD). During the reporting period the following Sub-Fund was liquidated as at May 28, 2008: - DMC FUND - MINIMISED VARIANCE EUROPEAN EQUITIES (expressed in EUR). For each Sub-Fund, the Management Company issues only capitalisation units. For the DMC-FUND - DYNAMIC FLOORING DF Sub-Funds, only one class of units is issued: Units R open to all investors. For the DMC-FUND - DYNAMIC FLOORING MAS Sub-Funds, two classes of units are issued: Units R open to all investors, with a minimum investment amount of EUR 5,000.- or equivalent. Units I reserved to institutional investors, with a minimum investment amount corresponding to the counterpart of EUR 1,000,

6 REPORT OF THE BOARD OF DIRECTORS OF DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. TO THE UNITHOLDERS OF DMC FUND DYNAMIC FLOORING FUND EXPO BONDS EUROPE DF DYNAMIC FLOORING FUND EXPO BONDS EUROPE DF was launched on June 17, At the end of the period under review, on March 31, 2009, the net asset value per unit stood at EUR 1.542,06. The initial issue price per unit was fixed at EUR 1, THE PERFORMANCE OF THE FUND In order to preserve the invested capital, the Sub-Fund s assets are managed in a way to protect a lower limit of their value, (the Floor). The initial level of the Floor per unit was set at 95% of the initial issue price. Moreover, if the NAV per unit rises, the Floor is also increased in order to limit the downside risk of the units to this given percentage, not only of the initial issue price but also of the highest Net Asset Value, which has been achieved by the Sub-Fund. The Sub-Fund s objective is to achieve an annual long-term return above the Citigroup European WGBI (World Government Bond Index) expressed in EUR. During the year under review, the Sub-Fund s net performance was 5.94% compared to 7.12 % for the benchmark. Since the launch of the Sub-Fund in June 1998, the annual net return has been 4.03% for the Sub-Fund, compared to an annual return of 4.98% for the Benchmark. As of March 31, 2009 for the year, the Sub-Fund s Floor was raised twelve times and stood at % of the initial issue price, which corresponds to 95% of the highest NAV achieved during the lifetime of the Sub-Fund. Bond markets were again very erratic over the course of the year, as reflected by the level of exposure to long dated bonds in the fund, that fluctuated from 24.4% to more than 95.5%. The average exposure to the long dated bonds was 64.9%. At the end of the period, the exposure was 70.0%. REVIEW During last year, the dramatic credit crisis that started in the middle of 2007 opened the way to a full-blown financial crisis. In the second semester the financial crisis generated a sharp recession in the US and a severe slowdown in the rest of the world. In the US, as well as in Europe, many financial institutions were bailed out via plans structured by very active central banks. Monetary policies were loose almost everywhere, even in some emerging markets. In the US, the FED adjusted its key interest rates from 4.25% at the beginning of 2008 to almost 0% at the end of the period under review. The ECB was less aggressive reducing its short-term rates from 4% to 1.50% at the end of March. Additionally, unprecedented measures were taken by major governments to restore credit mechanisms in the financial markets. Towards the end of the period, GDP growth had slowed in most developed countries while inflation pressures had receded. Government Bonds have outperformed all other asset classes over the last 12 months. Yields came down drastically towards the end of 2008 generating very important capital gains. 10-year maturity yield in the US (10-year T-Note) was close to 2%. The yield on the 10-year German market (BUND) was under 3%. Since the beginning of 2009 to date, a consolidation has taken place. Most market movements were generated on the basis of the financial crisis and on inflation figures. The yield spread between government bonds (US and BUND) and all other types of first quality bonds reached record high levels during the period under review. It is only very recently that spreads have stabilized, but at a very high level compared to historical standards. PERSPECTIVES Currently, global economic growth continues to contract despite aggressive measures taken by most OECD countries. Short-term Interest rates are quickly reaching their bottom close to zero, as inflation fears have disappeared. In this environment with a high degree of uncertainty towards the positive and negative effects of the global measures taken by governments and their short term ability to fight deflation investments in long dated government bonds through a CPPI approach still represents good diversification despite exceptional performances achieved during the period under review. April 13, 2009 THE BOARD OF DIRECTORS Note: Performances mentioned in this report are historical and are not indicative of future results. 5

7 DYNAMIC FLOORING EXPO BONDS EUROPE "DF" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % EUR ASSET A) TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTING a) BONDS Austria 2,000,000 Öbb-Infrastruktur Bau /10/20 EUR ,818, ,000,000 Öbb-Infrastruktur Bau /06/22 EUR ,038, Total Austria 3,856, Canada 1,500,000 Quebec Province /02/10 EUR ,545, Total Canada 1,545, Finnland 2,700,000 Finnish Government /07/19 EUR ,858, ,500,000 Finnish Government /02/11 EUR ,621, Total Finnland 4,480, France 2,200,000 Caisse De Ref De L'habitat /04/10 EUR ,271, ,200,000 Caisse NATL d'autoroutes /06/11 EUR ,303, ,400,000 Charbonnages de France /04/11 EUR ,592, ,000,000 Oseo Financement /04/11 EUR ,146, ,500,000 Regie Autonome /10/10 EUR ,642, ,500,000 Region Ile de France /07/10 EUR ,564, ,400,000 Reseau Ferre de France /04/10 EUR ,489, ,500,000 Reseau Ferre de France /10/20 EUR ,912, Total France 18,922, Germany 500,000 Depfa Pfandbiefbank /01/10 EUR , ,500,000 Germany T-Bill /06/09 EUR ,497, ,000,000 Kreditanstalt für Wiederaufbau /01/18 EUR ,248, ,000,000 Deutsche Ausgleichsbank /07/10 EUR ,053, ,400,000 Land Sachsen Anhalt /03/10 EUR ,490, Total Germany 7,796, Netherlands 2,000,000 Deutsche Bahn Finance BV /03/18 EUR ,058, Total Netherlands 2,058, Slovenia 2,700,000 Republic of Slovenia /03/10 EUR ,800, Total Slovenia 2,800, Supranational 2,000,000 European Investment Bank /02/18 EUR ,249, Total Supranational 2,249,

8 DYNAMIC FLOORING EXPO BONDS EUROPE "DF" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % EUR ASSET United States of America 1,200,000 Freddie Mac /09/10 EUR ,255, Total United States of America 1,255, Total Bonds 44,964, Total transferable securities admitted to 44,964, an official stock exchange listing Total Portfolio 44,964, TOTAL PORTFOLIO AT COST (EUR: 44,597,282.78) B) DERIVATIVES a) OPTIONS (Bought) Denominated in Euros Germany 40 EuroBond Call /05/09 EUR , EuroBond Call /05/09 EUR , EuroBond Put /05/09 EUR EuroBond Put /05/09 EUR , EuroBond Put /05/09 EUR , EuroBond Put /05/09 EUR , EuroBond Put /05/09 EUR , EuroBond Put /05/09 EUR , EuroBond Put /05/09 EUR , EuroBond Put /05/09 EUR , Total Germany 91, b) FUTURES (Bought) Total Options 91, Denominated in Euros Germany 140 Euro Bund Future 10 Year June , Total Germany 69, FUTURES (Sell) Denominated in Euros Germany -50 Euro Schatz Eurex 2 Year June , Total Germany 6, Total Futures 76, The accompanying notes are an integral part of these finanical statements. 7

9 REPORT OF THE BOARD OF DIRECTORS OF DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. TO THE UNITHOLDERS OF DMC FUND DYNAMIC FLOORING FUND EXPO BONDS EURO MAS DYNAMIC FLOORING FUND EXPO BONDS EURO MAS unit R (open to all investors) was launched on April 13, At the end of the period under review, on March 31, 2009, the net asset value per unit stood at EUR 1, The initial issue price per unit was fixed at EUR 1, DYNAMIC FLOORING FUND EXPO BONDS EURO MAS unit I (open to institutional investors) was launched on November 15, At the end of the period under review, on March 31, 2009, the net asset value per unit stood at EUR 1, The initial issue price per unit was fixed at EUR 1, THE PERFORMANCE OF THE FUND The Sub-Fund assets are managed with reference to a lower limit of their value (the floor). The initial level of the Floor per unit was set at 95% of the initial issue price. If the NAV per unit increases, the lower limit is also raised as for the DF Sub-Funds. In this Sub-Fund, the priority objective does not reside in preserving the floor, but in maintaining a minimum level of the assets of the Sub-Fund allocated to the risk part of the assets, and in the possibility to lower the floor by an annual pre-defined percentage to increase periodically, if necessary, the net assets allocated to the risk part. The Sub-Fund s objective is to achieve an annual long-term return above the Citigroup European WGBI (World Government Bond Index) expressed in EUR. During the period under review, the Sub-Fund s net performance was 7.36% for Unit R and 7.83% for Unit I compared to 6.86% for the benchmark. As of March 31st 2009, the Sub-Fund s reference Floor stood at % for the Unit I and % for the Unit R of the initial issue price. Since the launch of the unit R Sub-Fund in April 2005, the annual net return has been 2.87% for the Sub-Fund, compared to an annual return of 3.54% for the Benchmark. Since the launch of the unit I Sub-Fund in November 2006, the annual net return has been 4.16% for the Sub-Fund, compared to an annual return of 4.20% for the Benchmark. Bond markets were again very erratic over the course of the year, as reflected by the level of exposure to long dated bonds in the fund, that fluctuated from 37.5% to more than 100% The average exposure to the long dated bonds was 74.3%. At the end of the period, the exposure was 77.6%. REVIEW During last year, the dramatic credit crisis that started in the middle of 2007 opened the way to a full-blown financial crisis. In the second semester the financial crisis generated a sharp recession in the US and a severe slowdown in the rest of the world. In the US, as well as in Europe, many financial institutions were bailed out via plans structured by very active central banks. Monetary policies were loose almost everywhere, even in some emerging markets. In the US, the FED adjusted its key interest rates from 4.25% at the beginning of 2008 to almost 0% at the end of the period under review. The ECB was less aggressive reducing its short-term rates from 4% to 1.50% at the end of March. Additionally, unprecedented measures were taken by major governments to restore credit mechanisms in the financial markets. Towards the end of the period, GDP growth had slowed in most developed countries while inflation pressures had receded. Government Bonds have outperformed all other asset classes over the last 12 months. Yields came down drastically towards the end of 2008 generating very important capital gains. 10-year maturity yield in the US (10-year T-Note) was close to 2%. The yield on the 10-year German market (BUND) was under 3%. Since the beginning of 2009 to date, a consolidation has taken place. Most market movements were generated on the basis of the financial crisis and on inflation figures. The yield spread between government bonds (US and BUND) and all other types of first quality bonds reached record high levels during the period under review. It is only very recently that spreads have stabilized, but at a very high level compared to historical standards. PERSPECTIVES Currently, global economic growth continues to contract despite aggressive measures taken by most OECD countries. Short-term Interest rates are quickly reaching their bottom close to zero, as inflation fears have disappeared. In this environment with a high degree of uncertainty towards the positive and negative effects of the global measures taken by governments and their short term ability to fight deflation investments in long dated government bonds through a CPPI approach still represents good diversification despite exceptional performances achieved during the period under review. April 13, 2009 THE BOARD OF DIRECTORS Note: Performances mentioned in this report are historical and are not indicative of future results. 8

10 DYNAMIC FLOORING EXPO BONDS EURO "MAS" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % EUR ASSET A) TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTING a) BONDS Austria 650 Öbb-Infrastruktur Bau /10/20 EUR , Öbb-Infrastruktur Bau /06/22 EUR , Total Austria 998, Canada 900 Quebec Province /02/10 EUR , Total Canada 927, Finnland 900 Finnish Government /02/11 EUR , Total Finnland 972, France 500 Caisse De Ref De L'habitat /04/10 EUR , Caisse NATL d'autoroutes /06/11 EUR , ,000 Oseo Financement /04/11 EUR ,048, Regie Autonome /04/11 EUR , Region Ile de France /07/10 EUR , Reseau Ferre de France /04/10 EUR , Reseau Ferre de France /10/20 EUR , Total France 4,960, Germany 300 Depfa Pfandbiefbank /01/10 EUR , Germany T-Bill /06/09 EUR , Germany T-Bill /02/10 EUR , Kreditanstalt für Wiederaufbau /01/18 EUR , ,000 Deutsche Ausgleichbank /07/10 EUR ,053, Land Sachsen Anhalt /03/10 EUR , Total Germany 3,819, Slovenia 900 Republic of Slovenia /03/10 EUR , Total Slovenia 933, Supranational 650 European Investment Bank /02/18 EUR , Total Supranational 730, United Staates of America 500 Soc NATL Chemins Fer /10/10 EUR , Total United Staates of America 530, Total Bonds 13,873,

11 DYNAMIC FLOORING EXPO BONDS EURO "MAS" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % EUR ASSET Total transferable securities admitted to another regulated market 13,873, Total Portfolio 13,873, TOTAL PORTFOLIO AT COST (EUR: 13,853,982.60) B) DERIVATES a) OPTIONS (Bought) Denominated in Euros Germany 10 EuroBond Call /05/ , EuroBond Call /05/ , EuroBond Put /05/ EuroBond Put /05/ EuroBond Put /05/ EuroBond Put /05/ , EuroBond Put /05/ , EuroBond Put /05/ , EuroBond Put /05/ , EuroBond Put /05/ , Total Germany 27, b) FUTURES (Bought) Total Options 27, Denominated in Euros Germany 67 Euro Bund Future 10 Year June , Total Germany 30, FUTURES (Sell) Denominated in Euros Germany -12 Euro Schatz Eurex 2 Year June , Total Germany 1, Total Futures 32, ,907, The accompanying notes are an integral part of these financial statements. 10

12 REPORT OF THE BOARD OF DIRECTORS OF DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. TO THE UNITHOLDERS OF DMC FUND DYNAMIC FLOORING FUND EXPO BONDS USD DF Dynamic Flooring Fund Expo Bonds USD was launched on July 9, At the end of the period under review, March 31, 2009, the net asset value per unit stood at USD 1, whereas the initial issue price per unit was fixed at USD 1, THE PERFORMANCE OF THE FUND In order to preserve the invested capital, the Sub-Fund s assets are managed in a way to protect a lower limit of their value (the Floor). The initial level of the Floor per unit was set at 93% of the initial issue price. Moreover, if the NAV per unit rises, the Floor is also increased in order to limit the downside risk of the units to this given percentage, not only of the initial issue price but also of the highest net asset value, which has been achieved by the Sub-Fund. The Sub- Fund s objective is to achieve an annual long-term return above the Citigroup US WGBI (World Government Bond Index) expressed in USD. During the year under review, the Sub-Fund s net performance was 6.98% compared 7.59 % for the benchmark. Since the launch of the Sub-Fund in July 2003, the annual net return has been 3.22% for the Sub-Fund, compared to an annual return of 5.13% for the Benchmark. As of March 31, 2009 for the year, the Sub-Fund s Floor was raised seven times and stood at % of the initial issue price, which corresponds to 93% of the highest NAV achieved during the lifetime of the Sub-Fund. Bond markets were again very erratic over the course of the year, as reflected by the level of exposure to long dated bonds in the fund, that fluctuated from 14.8% to more than 85.1%. The average exposure to the long dated bonds was 44.2%. At the end of the period, the exposure was 21.6% reflecting the first quarter 2009 important market correction in the US Bond market. REVIEW During last year, the dramatic credit crisis that started in the middle of 2007 opened the way to a full-blown financial crisis. In the second semester the financial crisis generated a sharp recession in the US and a severe slowdown in the rest of the world. In the US, as well as in Europe, many financial institutions were bailed out via plans structured by very active central banks. Monetary policies were loose almost everywhere, even in some emerging markets. In the US, the FED adjusted its key interest rates from 4.25% at the beginning of 2008 to almost 0% at the end of the period under review. The ECB was less aggressive reducing its short-term rates from 4% to 1.50% at the end of March. Additionally, unprecedented measures were taken by major governments to restore credit mechanisms in the financial markets. Towards the end of the period, GDP growth had slowed in most developed countries while inflation pressures had receded. Government Bonds have outperformed all other asset classes over the last 12 months. Yields came down drastically towards the end of 2008 generating very important capital gains. 10-year maturity yield in the US (10-year T-Note) was close to 2%. The yield on the 10-year German market (BUND) was under 3%. Since the beginning of 2009 to date, a consolidation has taken place. Most market movements were generated on the basis of the financial crisis and on inflation figures. The yield spread between government bonds (US and BUND) and all other types of first quality bonds reached record high levels during the period under review. It is only very recently that spreads have stabilized, but at a very high level compared to historical standards. PERSPECTIVES Currently, global economic growth continues to contract despite aggressive measures taken by most OECD countries. Short-term Interest rates are quickly reaching their bottom close to zero, as inflation fears have disappeared. In this environment with a high degree of uncertainty towards the positive and negative effects of the global measures taken by governments and their short term ability to fight deflation investments in long dated government bonds through a CPPI approach still represents good diversification despite exceptional performances achieved during the period under review. April 13, 2009 THE BOARD OF DIRECTORS Note: Performances mentioned in this report are historical and are not indicative of future results. 11

13 DYNAMIC FLOORING EXPO BONDS USD "DF" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % USD ASSET A) TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTING a) BONDS Canada 500,000 Quebec Province /01/11 USD , Total Canada 533, Japan 1,225,000 Japan Bank International /11/09 USD ,261, ,000 Japan Finance for Municipal Enterprises /05/09 USD , Total Japan 1,512, Luxembourg 800,000 Council of Europe /01/11 USD , Total Luxembourg 860, Netherlands 300,000 Bank Nederlandse Gemeenten /04/09 USD , Total Netherlands 301, Supranational 900,000 European Investment Bank /05/09 USD , Total Supranational 905, United States of America 400,000 General Electric Capital Corp /12/10 USD , ,000,000 Inter-American Development /04/09 USD ,001, ,000 Toyota Motor Credit Corp /10/11 USD , Total United States of America 1,697, Total Bonds 5,810, Total transferable securities admitted to an official stock exchange listing 5,810, Total Portfolio 5,810, TOTAL PORTFOLIO AT COST (USD: 5,914,872.34) 6,466,

14 DYNAMIC FLOORING EXPO BONDS USD "DF" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % USD ASSET B) DERIVATIVES a) OPTIONS (Bought) Denominated in USD United States of America 5 US T- Notes Call /05/ , US T- Bond Call /05/ , US T- Notes Put /05/ , US T- Bond Put /05/ , Total United States of America 13, OPTIONS (Sell) Denominated in USD United States of America -5 US T- Notes Call /05/ , US T- Bond Put /05/ Total United States of America -3, b) FUTURES (Bought) Total Options 10, Denominated in USD United States of America 9 US Long Notes CBT 10 Year June , US Long Bond CBT 30 Year June , Total United States of America 55, Total Futures 55, The accompanying notes are an integral part of these financial statements. 13

15 REPORT OF THE BOARD OF DIRECTORS OF DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. TO THE UNITHOLDERS OF DMC FUND DYNAMIC FLOORING FUND EXPO BONDS USD MAS Dynamic Flooring Fund Expo Bonds USD MAS was launched on April 13, At the end of the period under review, March 31, 2009, the net asset value per unit R stood at USD 1, The unit I was launched on December 23, 2008 at an initial price per unit of USD 1, At the end of March, the net asset value per unit stood at USD 1, THE PERFORMANCE OF THE FUND The Sub-Fund assets are managed with reference to a lower limit of their value (the floor). The initial level of the Floor per unit was set at 93% of the initial issue price. If the NAV per unit increases, the lower limit is also raised as for the DF sub-funds. In this Sub-Fund, the priority objective does not reside in preserving the floor, but in maintaining a minimum level of the assets of the Sub-Fund allocated to the risk part of the assets, and in the possibility to lower the floor by an annual pre-defined percentage to increase periodically, if necessary, the net assets allocated to the risk part. The Sub-Fund s objective is to achieve an annual long-term return above the Citigroup US (United States) Government Bond Index expressed in USD. During the period under review, the Sub-Fund s net performance was 7.87% for Unit R compared to 7.59% for the benchmark. For Unit I, the performance since the Sub-Fund was launched is -3.85% compared to -2.13% for the benchmark. As of March 31, 2009, the Sub-Fund s reference Floor stood at % for the Unit I and % for the Unit R of the initial issue price.(usd ). Since the launch of the unit R Sub-Fund in April 2005, the annual net return has been 5.98% for the Sub-Fund, compared to an annual return of 6.62% for the Benchmark. Bond markets were again very erratic over the course of the year, as reflected by the level of exposure to long dated bonds in the fund, that fluctuated from 32.2% to more than 96.7%. The average exposure to the long dated bonds was 62.9%. At the end of the period, the exposure was 36% reflecting the first quarter 2009 important market correction in the US Bond market. REVIEW During last year, the dramatic credit crisis that started in the middle of 2007 opened the way to a full-blown financial crisis. In the second semester the financial crisis generated a sharp recession in the US and a severe slowdown in the rest of the world. In the US, as well as in Europe, many financial institutions were bailed out via plans structured by very active central banks. Monetary policies were loose almost everywhere, even in some emerging markets. In the US, the FED adjusted its key interest rates from 4.25% at the beginning of 2008 to almost 0% at the end of the period under review. The ECB was less aggressive reducing its short-term rates from 4% to 1.50% at the end of March. Additionally, unprecedented measures were taken by major governments to restore credit mechanisms in the financial markets. Towards the end of the period, GDP growth had slowed in most developed countries while inflation pressures had receded. Government Bonds have outperformed all other asset classes over the last 12 months. Yields came down drastically towards the end of 2008 generating very important capital gains. 10-year maturity yield in the US (10-year T-Note) was close to 2%. The yield on the 10-year German market (BUND) was under 3%. Since the beginning of 2009 to date, a consolidation has taken place. Most market movements were generated on the basis of the financial crisis and on inflation figures. The yield spread between government bonds (US and BUND) and all other types of first quality bonds reached record high levels during the period under review. It is only very recently that spreads have stabilized, but at a very high level compared to historical standards. PERSPECTIVES Currently, global economic growth continues to contract despite aggressive measures taken by most OECD countries. Short-term Interest rates are quickly reaching their bottom close to zero, as inflation fears have disappeared. In this environment with a high degree of uncertainty towards the positive and negative effects of the global measures taken by governments and their short term ability to fight deflation investments in long dated government bonds through a CPPI approach still represents good diversification despite exceptional performances achieved during the period under review. April 13, 2009 THE BOARD OF DIRECTORS Note: Performances mentioned in this report are historical and are not indicative of future results. 14

16 DYNAMIC FLOORING EXPO BONDS USD "MAS" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % USD ASSET A) TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTING a) BONDS Canada 1,600,000 Quebec Province /01/11 USD ,707, Total Canada 1,707, Italy 1,000,000 Italy BTPS /09/23 USD ,127, Total Italy 1,127, Japan 1,500,000 Developement Bank of Japan /11/11 USD ,666, ,000,000 Inter American Development Bank /01/10 USD ,047, ,250,000 Japan Bank International /11/09 USD ,317, ,000 Japan Finance for Municipal Enterprises /05/09 USD , Total Japan 5,532, Netherlands 1,347,000 Bank Nederlandse Gemeenten /04/09 USD ,352, Total Netherlands 1,352, Supranational 1,500,000 Council of Europe /01/11 USD ,614, ,000 European Investment Bank /05/09 USD , Total Supranational 2,519, United States of America 800,000 Fannie Mae /11/10 USD , ,000,000 General Electric Capital Corp /12/10 USD , ,000 General Electric Capital Corp /01/10 USD , ,000 Toyota Motor Credit /10/11 USD , ,500,000 Unilever Capital /11/10 USD ,606, Total United States of America 4,677, Total Bonds 16,916, Total transferable securities admitted to 16,916, an official stock exchange listing Total Portfolio 16,916, TOTAL PORTFOLIO AT COST (USD: 17,177,179.61) 9,620,

17 DYNAMIC FLOORING EXPO BONDS USD "MAS" SCHEDULE OF INVESTMENTS AS AT MARCH 31, 2009 NOMINAL VALUE INTEREST MATURITY UNIT MARKET % OF RATE PRICE VALUE NET % USD ASSET B) DERIVATIVES a) OPTIONS (Bought) Denominated in USD United States of America 15 US 10 Year T - Notes Call /05/ , US 10 Year T - Notes Put /05/ , US 10 Year T - Notes Put /05/ , US 10 Year T - Notes Put /05/ , Total United States of America 24, OPTIONS (Sell) Denominated in USD United States of America -5 US 30 Year T - Notes Put /05/ , Total United States of America -1, b) FUTURES (Bought) Total Options 22, Denominated in USD United States of America 38 US Long Bond CBT 10 Year June , US Long Bond CBT 30 Year June , Total United States of America 210, Total Futures 210, ,192, ,051, The accompanying notes are an integral part of these financial statements. 16

18 REPORT OF THE BOARD OF DIRECTORS OF DYNAMIC ASSET MANAGEMENT COMPANY (LUXEMBOURG) S.A. TO THE UNITHOLDERS OF DMC FUND MINIMISED VARIANCE EUROPEAN EQUITIES Due to the low level of total net assets the Board of Directors of the Management Company has decided to put the Sub- Fund DMC FUND - MINIMISED VARIANCE EUROPEAN EQUITIES into liquidation with effect on May 28, MINIMISED VARIANCE EUROPEAN EQUITIES - Unit I (for institutional investors) was launched on November 2, 2006 at an initial price per unit of EUR 1,000. At the beginning of the period under review, March 31, 2008, the net asset value per unit stood at EUR At the liquidation, May 28, 2008 the unit s price was EUR The unit R (open to all investors) was launched on November 15, 2006 at an initial price per unit of EUR 1, The net asset value per unit at the beginning of the period under review, March 31, 2008 was EUR respectively at the liquidation, May 28, 2008 it was EUR April 13, 2009 THE BOARD OF DIRECTORS Note: Performances mentioned in this report are historical and are not indicative of future results. 17

19 COMBINED STATEMENT OF NET ASSETS AS AT MARCH 31, DYNAMIC FLOORING DYNAMIC FLOORING DYNAMIC FLOORING EXPO BONDS EUROPE "DF" EXPO BONDS EURO "MAS" EXPO BONDS USD "DF" EUR EUR USD ASSETS Portfolio at cost 44,597, ,853, ,914, Unrealised appreciation / -depreciation 366, , , Portfolio at market value (Note 1) 44,964, ,873, ,810, Options 91, , , Net unrealised gain on financial futures (Note 5) 76, , , Cash at banks 556, , , Receivables on interest or dividends 1,079, , , Other assets 35, , TOTAL ASSETS 46,803, ,434, ,674, LIABILITIES Other liabilities -61, , , TOTAL LIABILITIES -61, , , TOTAL NET ASSETS 46,741, ,406, ,650, DYNAMIC FLOORING MINIMISED VARIANCE DMC FUND EXPO BONDS USD "MAS" EUROPEAN EQUITIES* COMBINED USD EUR EUR ASSETS Portfolio at cost 17,177, ,843, Unrealised appreciation / -depreciation -260, , Portfolio at market value (Note 1) 16,916, ,955, Options 22, , Net unrealised gain on financial futures (Note 5) 210, , Cash at banks 82, ,278, Receivables on interest or dividends 397, ,808, Other assets 2, , TOTAL ASSETS 17,632, ,546, LIABILITIES Other liabilities -63, , TOTAL LIABILITIES -63, , TOTAL NET ASSETS 17,569, ,390, * Liquidated on May 28, 2008 The accompanying notes are an integral part of these financial statements. 18

20 COMBINED STATEMENT OF OPERATIONS FOR THE YEAR / PERIOD ENDED AT MARCH 31, 2009 DYNAMIC FLOORING DYNAMIC FLOORING DYNAMIC FLOORING EXPO BONDS EUROPE "DF" EXPO BONDS EURO "MAS" EXPO BONDS USD "DF" EUR EUR USD INCOME Dividends Interest on investments, net 2,322, , , Bank interest, net 3, , Interest on time deposit 39, , , TOTAL INCOME 2,366, , , EXPENSES Management fees (Note 3) 393, , , Custodian fee 15, , , Promoter fees 12, , , Subscription tax (Note 2) 24, , , Bankoverdraft Other fees and expenses 69, , , TOTAL EXPENSES 515, , , NET INVESTMENT INCOME FOR THE YEAR 1,851, , , DYNAMIC FLOORING MINIMISED VARIANCE DMC FUND EXPO BONDS USD "MAS" EUROPEAN EQUITIES COMBINED USD EUR EUR INCOME Dividends , , Interest on investments, net 598, ,504, Bank interest, net , Interest on time deposit 21, , TOTAL INCOME 620, , ,628, EXPENSES Management fees (Note 3) 114, , , Custodian fee 4, , Promoter fees , Subscription tax (Note 2) 5, , Bankoverdraft Other fees and expenses 38, , , TOTAL EXPENSES 162, , , NET INVESTMENT INCOME FOR THE YEAR 458, , ,779, The accompanying notes are an integral part of these financial statements. 19

21 COMBINED STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR / PERIOD ENDED AT MARCH 31, 2009 DYNAMIC FLOORING DYNAMIC FLOORING DYNAMIC FLOORING EXPO BONDS EUROPE "DF" EXPO BONDS EURO "MAS" EXPO BONDS USD "DF" EUR EUR USD Net assets at the beginning of the year 47,643, ,907, ,811, Net investment income for the year 1,851, , , Net realised gains / -losses on: - sales of securities -519, , , foreign exchange futures / options transactions/ forward exchange contracts 507, , , Net gains / -losses -12, , , Change in net unrealised appreciation / -depreciation on: - investment in securities 1,238, , , futures / options transactions/ forward exchange contracts 153, , , Increase / -decrease in net assets as a result of operations 1,378, , , Proceeds on issue of units 9,529, ,727, , Payment on redemptions of units -13,661, , , Revaluation difference TOTAL NET ASSETS AT THE END OF THE YEAR 46,741, ,406, ,650, DYNAMIC FLOORING MINIMISED VARIANCE DMC FUND EXPO BONDS USD "MAS" EUROPEAN EQUITIES COMBINED USD EUR EUR Net assets at the beginning of the year 10,051, ,695, ,889, Net investment income for the year 458, , ,779, Net realised gains / -losses on: - sales of securities -95, , , foreign exchange , , futures / options transactions/ forward exchange contracts 496, ,541, Net gains / -losses 400, , , Change in net unrealised appreciation / -depreciation on: - investments in securities -345, , ,528, futures / options transactions/ forward exchange contracts 49, , , Increase / -decrease in net assets as a result of operations 105, , ,283, Proceeds on issue of units 7,957, ,267, Payment on redemptions of units -1,002, ,849, ,887, Revaluation difference ,058, TOTAL NET ASSETS AT THE END OF THE YEAR 17,569, ,390, The accompanying notes are an integral part of these financial statements. 20

22 STATISTICAL INFORMATION AS AT MARCH 31, 2009 DYNAMIC FLOORING DYNAMIC FLOORING DYNAMIC FLOORING EXPO BONDS EUROPE "DF" EXPO BONDS EURO "MAS" EXPO BONDS USD "DF" EUR EUR USD Total Net Assets as at ,741, ,406, ,650, as at ,643, ,907, ,811, as at ,787, ,506, ,153, Net Asset Value per unit as at "R" , , as at "I" - 1, as at "R" 1, , , as at "I" - 1, as at "R" 1, , , as at "I" - 1, Dividend paid NIL NIL NIL Number of units outstanding Units "R" as at , , , Units "I" as at , Total Expense Ratio *) (TER) in % 01/04/ /03/2009 "R" /04/ /03/2009 "I" Portfolio Turnover Rate **) (PTR) in % 01/04/ /03/ DYNAMIC FLOORING MINIMISED VARIANCE DMC FUND EXPO BONDS USD "MAS" EUROPEAN EQUITIES*** COMBINED USD EUR EUR Total Net Assets as at ,569, ,390, as at , as at ,051, ,695, ,889, as at ,731, ,662, ,628, Net Asset Value per unit as at "R" 1, as at "I" 1, as at "R" as at "I" as at "R" 1, as at "I" as at "R" 1, , as at "I" - 1, Dividend paid NIL NIL - Number of units outstanding Units "R" as at , Units "I" as at , Total Expense Ratio *) (TER) in % 01/04/ /03/2009 "R" /04/ /03/2009 "I" Portfolio Turnover Rate **) (PTR) in % 01/04/ /03/ *) TER is calculated by the following formula: **) PTR is calculated by the following formula: TNA = Total Net Assets Total 1 = Total of securities transactions for the year under review (purchases + sales) Total 2 = Total of subscribed and redeemed units for the year under review (purchases + sales) *** Liquidated on May 28, 2008 (Total expenses / average TNA) * 100 [(Total 1 - Total 2) / average TNA) * 100 The accompanying notes are an integral part of these financial statements. 21

23 NOTES TO THE FINANCIAL STATEMENTS AS AT MARCH 31, 2009 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Valuation of investments The valuation is done on the basis of the last stock exchange prices available at noon on the Valuation Day, which means, the prices of the day for the Far East markets and the prices of the day before for European and American markets. Securities quoted on an official Stock Exchange or any other market, are valued on the basis of the last known price, and, if there are several markets, the last known price of the Stock Exchange which is the principal market for the security in question, unless these prices are not representative. For unlisted securities and for quoted securities for which the last known price is not representative, valuation is based on the reasonable foreseeable sales price estimated prudently and in good faith by the Management Company. B. Realised profit and loss on investments The profits and losses on sales of investments are determined on the basis of average cost. C. Foreign exchange The combined financial statements of the Fund are presented in Euro (EUR). The market value of the investments and other assets and liabilities expressed in currencies other than the base currency, have been translated at the rates of exchange ruling at the year-end date. The costs of investments in currencies other than the base currency have been translated at the rates of exchange ruling at the time of purchase. Profits and losses arising on foreign exchange are taken to the result of operations. The exchange rate used at March 31*, 2009 (*refer to Note 7) were: 1 EUR = USD D. Income from investments Dividends are recognised as income on the date securities are first quoted ex-dividend, to the extent that information thereon is available to the Fund. Interest is accrued at each NAV calculation. E. Formation Expenses Formation expenses are amortised over a period of 5 years on a straight live basis. F. Valuation of future contracts The valuation of future contracts is based on the latest available price. The unrealised gains and losses on these contacts resulting from the difference between the price and the original transaction price are included in the statement of net assets. G. Valuation of forward exchange contracts Liquid assets are valued at their nominal value plus accrued interest. 22