Inform. Risk indicator (SRRI) Lower risk, Potentially lower return. This nature and the risks of. achieve an annualised. retained. account. seek.

Transcription

1 This document provides you with key investor informationn about this Fund. It is not marketing material. The information is required by law to help you understand the nature and the risks of investing in this Fund. You are advised to read it so you can make an informed decision about whether to invest. ISIN code: FR C Unit Investment Manager: ECOFI INVESTISSEMENTS - CREDIT COOPERATIF group Objectives and investment policy Classified in the Category balanced under French AMF rules, the Fund aims to achieve an annualised return in excess of the EONIA OIS O % nett of management charges with a maximum volatility of 10% over a recommended investment period of 3 years. In view of the discretionary style of portfolio management, the Fund does not seek to replicate a benchmark. Moreover, the Fund iss not managed with reference to a market index. Accordingly, no market reference is defined for the Fund. Nevertheless forr information purposes, the performance of the Fund may be compared ex-postt to the Euro Overnight Interest Average A (EONIA OIS) compounded % pa. The Fund s investment strategy of a discretionary nature rests essentially on a flexible allocation of four types of assets in response to shifts in the credit cycle: - Up to 100% maximum of Fund net assets in classic debt securities (straight bonds) with fixed, floating, index-linked interest coupon and money market instruments; - Up to 100% maximum of net assets in convertible and exchangeable e bonds or equivalent securities, that is to say hybrid instrumentss with equity, interest rate, credit and volatility characteristics. Convex price behaviour patternss of convertible bonds is an integral dimension of the investment process (equity exposure tends to increase as the value of the underlying shares increases, thereby diminishing interest rate risk, and vice versa). - Up to 25% maximum of net assets in subordinated debt securities (including subordinated notes with no set maturity or perpetuals), being understood that subordinated securities with the characteristics of contingent convertibles bonds ie CoCos are not eligible for investment; - Up to 30% of nett assets representing Fund exposure to equities. This is obtained through investment in euro denominated convertible and exchangeable bonds and/or intervention in financial contracts (ie derivative financial instruments, fixed or conditional, on equity securities and/or equity indices of the euro-zone) traded on regulated marketss in France or abroad and/or on French or foreign multilateral trading facilities and/or traded on over-the-counter (OTC) markets. Classic debt securitiess (straight bonds) ), money market securities, convertible and/ /or exchangeable bonds as well as subordinated debt must be issuedd by private-sector or public-sector related corporate entities that are located in euro- or zone countries. For ancillary purposes, fixed income instruments issuedd guaranteed by a sovereign state of the euro-zone are eligible for up to 10% % of Fund net assets. Indeed, fixed income instruments from issuers situated outside euro-zone countries but among those of the OECD are eligible for up to 10% % of net assets. Moreover, financial securities denominated in currency other than the euro are eligible for up to 10% of Fund net assets. Through investments mentioned above, the portfolio management team implements asset allocation by relying on macro-economicc anticipations as well as analysis on trends in risk premia for equities and fixed income and also on the relationship between credit spreads (yield gap between the security concerned and sovereign debt judged risk-free) and volatility. The portfolio management team undertakes fundamental analysis of each corporate issuer before any investment and proceeds to monitor their characteristics on a regular basis. Such financial appraisal rests on assessment criteria such as strategic positioning of the corporate issuer, profitability or level of indebtedness. Key Investor Inform mation Document Financial and legal characteristics are assessed regarding each bond issue retained for analysis. In particular, p technical appraisal of bondd features (implied volatility, convexity, conversion premium or degree of subordination) is taken into account. The Investment Manager assesses the quality of the security under u considerationn by retaining the rating of o the debt issue or in absence thereof that of the corporate issuer through an internal ratings policy. Such ann internal policy in terms of security selection and monitoring means that the Manager systematicallyy favours in-house credit analysis a as the basis for investment decisions in the interests of the Fund s unitholders. At all events, the Investment Manager will not have recourse either in an exclusive or non-discretionary manner to external ratings agencies but will proceed with credit analysis in security selection according to an independent in-house research process. The portfolio may be invested in all types of rated and unrated securities. The portfolio may hence hold speculative grade securities known as high yield that are rated below «BBB-» according too Standard & Poor s or Fitch Ratings scale or below «Baa3» according to Moody s scale (or equivalent rating according to the Investment Manager s internal policy). The Fund is managed within a range of «0» to «+7» in terms of modifiedd duration. As indicator of risk, r modified duration measures the decline in value of a bond for each one percentage point increase in interest rates. The Investment Manager may intervene both for hedging andd market exposuree purposes through financial contracts (ie deriv ivative financial instruments), fixed or conditional, traded on regulated markets in France or abroad and/or a on French or foreign electronic tradingg platforms and/orr traded on over-the-counter transactions are intended for the portfolio to hedge or gain exposure to equity and/or fixed income markets wheree engaged geographically or still to hedge foreign exchange risk. Nevertheless, the Fund may retain foreign currency exposuree for ancillary purposes. This set of derivative operations will be undertaken nott exceeding 100% of Fund net assetss in commitments. In order to manage short term liquidity, thee Fund is authorised to resort to cash deposits and loans up to 10% of net assets, repurchase agreements for temporary purchase or sale of securities. It may invest up to 10% maximum of total assets in units or shares of investment funds, both thee UCITS and AIFM type, whether domiciled in France or abroad, belonging to "Short" term money market" or "Money market" fund categoriess under the AMF definition d in France. These fund vehicles may be b promoted or managed by Ecofi Investissements or by a subsidiary. The investment funds with AIFM status must observe the four regulatory criteria of article R of the French Monetary & Financial Code. (OTC) markets. Without recoursee to leveraging, these Policy for distributable payments: Income: accumulation; Capital gains: accumulation. The recommended investment horizon is 3 years. The nett asset value of the Fund is calculated on a daily basis (on days when markets are closed, the NAV is calculated onn the business day immediately i beforee the market closure and is dated the day of such closure). Subscriptions and redemptions are centralised by the custodiann bank as transfer agent at 11:30 am CET each trading day of the t Paris exchangee market and executed on a forward pricing basis (that is to say on the basis of the day's closing price). Settlement of redemptions occurs withinn a maximum of fivee days following the valuation date. Risk and reward profile Risk indicator (SRRI) Lower risk, Potentially lower return Higher risk, Potentially higher return Risk category shown is not guaranteed and may shift over time. The lowest category does not mean "risk free." The initial investment does not benefit from any guarantee or investment The overall risk indicator (SRRI: synthetic risk and reward indicator) is basedd on the historical volatility of the portfolioo over the past 5 years. This Fundd is classified as Category 3 in view of exposure to European convertible and exchangeable bond markets. Its risk/return profile is moderate. Historical data used to calculate the overall risk indicator may not be a reliable indication of the future risk profile of the Fund. Significant risk(s) not included in the SRRII indicator: Credit risk: r default risk (the risk for the creditor that the debtor may not be in a position to meet its undertakings towards the creditor) and/or a the risk of downgrading (lowering of the rating delivered by one of thee specialist ratings agencies). Liquidity risk: difficulties inn the timely and efficient sale of securities held that may affect the value of the Fund. 1

2 Charges The charges paid out are used to pay the costs of running the Fund, including the costs of marketing and distributing it. These charges reduce the potential growth of investment capital. One-off fees charged before or after investment Subscription fee (entry charge) Redemption fee (exit charge Ongoing charges Performance fee Charges taken from the Fund over a year Charges taken from the Fund under certain specific conditions 0.65 % incl VAT Subscription fee: the percentage shown is the maximum that may be charged on your capital before it is invested. Subscription and redemption fees indicated are maximum amounts. In some cases, you may pay less. Investors may obtain from their advisor or distributor the effective amount of entry and exit charges. The ongoing charges figure is based on expenses charged for the financial year ending in December This figure may vary from one year to the next and does not include performance fee and brokerage fees except in the case of entry/exit fees paid by the Fund when it buys or sells units in another collective investment vehicle. For more information of about charges, please refer to the section Fees and Commissions of the Fund s Prospectus which is available on the website Past performance (%) 40,0 36,34 30,0 20,0 19,02 16,94 14,40 10,0 2,46 2,32 5,25 3,81 8,66 5,71 4,01 5,86 4,38 2,30 7,48 1,24 0,0-10,0-3,33-3,00-20,0-10,67-30,0-24, Fund Index Index for ex-post comparison: EONIA OIS % pa compounded (since 17 th March 2016). The Euro OverNight Interest Average represents the average interest rate at which a panel of European banks lends one another in euros whereby the loans have a maturity of 1 day. Prior benchmark: 50% EXANE ECI Euro (weighted by market capitalisation and computed with interest income reinvested) (Bloomberg ticker: EZCIEZCI Index) + 50% iboxx Euro Corporates non-financials (weighted by market cap and interest income reinvested) (Bloomberg ticker: QW51 Index). Investment performance is not constant over time and is no guide to future performance. Performance of the Fund is computed with net dividends and interest income reinvested. Performance data presented in the above chart are net of all charges (management fees and other expenses). Inception of the Fund with its present legal status is 10 th June The Fund s reference currency is the euro. Practical information Custodian: CACEIS Bank France (Head Office: 1-3, place Valhubert PARIS - FRANCE); Fund administrator: CACEIS Fund Administration Auditor: MAZARS (Office: Exaltis - 61 rue Henri Regnault COURBEVOIE - FRANCE) Legal status: FCP (French-registered mutual fund) carrying UCITS IV status Location and means of obtaining Fund information: the prospectus, the most recent annual and periodic information documents as well as composition of Fund assets will be sent free of charge no longer than 8 business days upon simple written request to the Investment Manager: ECOFI INVESTISSEMENTS Service Clients - 22 rue Joubert PARIS FRANCE 24 - Tel: +33 (0) Fax: +33 (0) contact@ecofi.fr. Practical information regarding NAV: the net asset value (NAV) is available on the website ( Tax considerations: depending on your tax status, capital gains and/or income derived from holding units of the Fund may be subject to taxation. We recommend that you seek advice on this matter from your tax advisor. To enable holders of Fund units who wish to respond to specific requirements, for instance, to comply with regulation applicable to them, the Investment Manager will undertake within a reasonable time period to transmit, to any investor in the Fund, necessary information for observing rules of good practice as specified by the relevant regulation. The responsibility of the Investment Manager is only engaged on basis of information contained in the present document that would be misleading, inexact or inconsistent with corresponding sections of the Fund prospectus (French version deposited with the regulator). This UCITS is authorised in France and regulated by the Autorité des Marchés Financiers (AMF, ie Financial Markets Authority). ECOFI INVESTISSEMENTS is an authorised Investment Manager in France and regulated by the AMF. The key investor information provided herein is accurate and up to date on 28 th February Last update 28 th February

3 Prospectus UCITS under European Directive 2014/91/EU modifying ED 2009/65/CE I General features I-1 Type of fund Name (hereafter known as the Fund) Legal structure and member state in which the fund is established French FCP* Unincorporated mutual fund under French law with UCITS status *FCP: Fonds commun de placement Launch date and duration of the fund Approval of the Fund by the Financial Markets Authority (France)** 30 th May 1997 Date of the Fund s launch 10 th June 1997 Expected duration 99 years **French regulator is known as the AMF (Autorité des Marches Financiers) Summary of the investment offering Class ISIN code Distributable earnings C unit FR Income: Accumulation Net realised capital gains: Accumulation Units have been made divisible in thousandths from 31 st May 2013 Base currency Investors Divisible unit EUR Any investor One thousandth (1/1000 th ) of a unit Minimum initial investment Initial value One unit 1, Place for obtaining the annual report and periodic statement The most recent annual and periodic information documents as well as composition of Fund assets will be sent free of charge, no longer than 8 business days upon simple written request to the Investment Manager. ECOFI INVESTISSEMENTS - Service Clients 22 rue Joubert PARIS Tel: +33 (0) Fax: +33 (0) contact@ecofi.fr If necessary, additional information may be obtained from the Investment Manager ECOFI INVESTISSEMENTS and more specifically from our Client Service department. I-2 Service providers Investment Manager ECOFI INVESTISSEMENTS Authorised as Investment Manager under registration # GP97004 Limited liability company with supervisory and executive board Paid-up share capital of 7,111,836 Head Office: 22 rue Joubert PARIS - FRANCE 3

4 Custodian & Depositary Auditor CACEIS BANK France Limited liability company with board of directors Credit establishment licenced by the ACPR* Head Office: 1-3, place Valhubert PARIS - FRANCE Functions carried out on behalf of the Fund: -depositary institution; -transfer agent centralising all subscription and redemption orders on behalf of the Investment Manager; -custody of fund assets; -registrar (fund ledger). -compliance review of Investment Manager decisions; -liquidity flow monitoring. *Autorité de Contrôle Prudentielle et de Résolution (Prudential Control & Resolution Authority, France s supervisor for banks and insurance companies) Postal address for centralising subscription/redemption orders and fund ledger administration: 1-3, place Valhubert PARIS FRANCE Description of custody services, list of associated service providers and sub-custodians of CACEIS BANK (FRANCE) and disclosure of conflicts of interest ensuing from such outsourcing of services are all available on the custodian s website: Updated information is made accessible to investors upon simple request. MAZARS Exaltis - 61 rue Henri Regnault COURBEVOIE - FRANCE Represented by Mr Pierre MASIERI Distributor(s) -1- ECOFI INVESTISSEMENTS 22 rue Joubert PARIS - FRANCE -2- CREDIT COOPERATIF Head office: 12 boulevard Pesaro - CS NANTERRE Cedex - FRANCE Bank branches -3- BTP BANQUE 48 rue La Pérouse - CS PARIS Cedex 16 - FRANCE Bank branches The Fund being admitted for clearing and settlement by Euroclear France, units may be purchased or sold through financial intermediaries that are unknown to the Investment Manager. Securities account managers of Fund unit-holders may apply their own cut-off time prior to that stated in the prospectus as the latest permissible time, for purposes of setting a technical buffer period in terms of transmission of orders to the transfer agent. Fund Accountant CACEIS FUND ADMINISTRATION 1-3 place Valhubert PARIS - FRANCE The service level agreement (SLA) for fund accounting entrusts CACEIS FUND ADMINISTRATION with book-keeping, computing the Net Asset Value, preparing and presenting Fund valuation records to the Auditor as well as archiving all accounting documentation. Investment Advisor(s) Transfer Agent(s) CACEIS BANK France 1-3 Place Valhubert PARIS - FRANCE In terms of managing the liability side of the Fund, the functions of centralising all unit subscription and redemption orders as well as 4

5 II Operating and management procedures II-1 General characteristics Characteristics of units Nature of the right attached to units account-keeping of units issued are undertaken by the depositary institution (on behalf of the Investment Manager) in connection with the Central Securities Depositary EUROCLEAR FRANCE, to which the Fund is admitted. CREDIT COOPERATIF (12 boulevard Pesaro - CS NANTERRE Cedex - FRANCE; Bank branches) and BTP BANQUE (48 rue La Pérouse - CS PARIS - FRANCE) also intervene as cotransfer agents on behalf of their respective network clients. The attention of unit-holders is drawn to the fact that orders transmitted to their distributor or account-holding institution must observe the cutoff time which prevails between these service providers and the transfer agents as mentioned herein. Accordingly, the distributor or accountholding institution may apply their own cut-off time, prior to that stated in the prospectus as the latest permissible time, for purposes of setting a technical buffer period in terms of transmission of orders to the aforementioned establishments. Under French law, a fonds commun de placement (FCP) is a form of mutual fund with joint (non-severable) ownership of portfolio securities in which the rights of each co-owner are represented by the units they hold and in which each unit corresponds to an equal fraction of the assets belonging to the Fund. Each investor thereby enjoys co-ownership rights over the Fund assets which are proportionate to the number of units held. FCPs as other types of investment funds are overseen by France s supervisor, the Financial Markets Authority (AMF). This means that such funds are required to submit a variety of disclosures for the purpose of investor protection. They may enjoy the European passport with UCITS status that enables them to be marketed to retail investors throughout the European Union. Alternatively, they can have AIFM status by default which means that active marketing beyond the home market is generally restricted to qualified/professional investors elsewhere within the European Union. Details on administering unit ownership Units of the Fund are admitted to EUROCLEAR FRANCE and carry the status of bearer securities. The rights of the unit-holders will be represented by book-entry in the general ledger held by the Central Securities Depositary (EUROCLEAR FRANCE) as sub-domiciliary agent acting in the name of the Custodian. Voting rights In terms of indivisible ownership, no voting right is attached to any units of the Fund. Decisions relating to operating the Fund are taken by the Investment Manager. However, information on any operational changes to the Fund will be conveyed to unit-holders, either individually or by means of the press or any other mode in compliance with the AMF instruction n of 21 st December Type of units Units are issued in the form of bearer securities. Decimalisation of units YES (in thousandths) NO 5

6 Close of financial year Annual accounts are closed on the last market trading day of each month of December. Exceptionally, the first financial year has a length shorter than 12 months from the date of launch to the last trading day in December Indications on tax regime General principles Under French law, an FCP is fiscally transparent, that is to say the Fund is not subject to corporate tax. Any distribution of income paid out of the Fund or capital gains/losses recorded are taxable at the level of investors in accordance with prevailing tax laws. The following is a summary overview of the rules applying to French taxpayers: -with regards to capital gains, any capital gains realised by the Fund when selling portfolio securities are exempt from taxation. However, any capital gains or losses recorded by an investor when redeeming units in the Fund are subject to the rules in force under prevailing tax regulations. -with regards to taxation of income distributed by the Fund, the level and nature of taxation depends on the type of investment held (shares, bonds, government bills, etc). These rules do not apply to the Fund since distributable income is structured in the shape of accumulating units. As a general rule, the tax treatment applicable to the subscription, holding and redemption of units issued by the Fund is governed by the investor s own individual circumstances and/or the jurisdiction in which the Fund invests. If in doubt, the investor should seek professional advice on all matters relating to the said investor s tax situation. Information concerning US investors The Investment Manager is not registered as Investment Advisor in the United States of America (USA). The Fund is not registered as an investment vehicle in the USA. Its units are not and will not be registered in accordance with the meaning of the 1933 Securities Act. Hence, they may not be offered or sold in the USA to Restricted Persons, as defined hereafter. Restricted Persons relate to: (i) any person or entity located in US territory (including US residents); (ii) any company or other entity subject to US Federal or State law; (iii) any US military personnel or any personnel linked to a US department or government agency located outside US territory; or (iv) any other person who would be considered as a US Person within the meaning of Regulation S under the 1933 Securities Act, as updated. Foreign Account Tax Compliance Act (FATCA) The purpose of the US law voted on 18 th March 2010 known as FATCA is to strengthen the fight against tax fraud by implementing the obligation of an annual declaration to the IRS (Internal Revenue Service) on accounts held outside the USA by US taxpayers. Articles 1471 to 1474 of the Internal Revenue Code impose a 30% tax levy on certain payments to Foreign Financial Institutions (FFI) if the said FFI does not observe FATCA legislation. The Fund is an FFI and so falls under the scope of FATCA. Starting from 1 st July 2014, this tax levy applies to settlements undertaken for the benefit of the Fund comprising interest income, dividends or other types of revenue of US origin (such as dividends paid out by a US corporation); then from 1 st January 2017, extension of this levy at source spans proceeds from sale or disposal of assets giving rise to payments of dividends or interest of US origin. These tax levies under FATCA may be applied to settlements for the benefit of the Fund except where the Fund observes FATCA provisions in accordance with dispositions regarding the law, relevant texts and rules, or if the Fund is governed by an Inter-Governmental Agreement (IGA) in order to enhance application of international tax measures and enforcement of FATCA legislation. France has accordingly signed an IGA on 14 th November So the Fund can take all the necessary measures to ensure compliance in terms of the IGA and locally enforceable regulations. 6

7 In order to fulfil obligations linked to FATCA s scope, the Fund is duty-bound to obtain certain information from investors in such manner as to ascertain their US tax status. In case where the investor is a designated US Person, a non-american entity held by an American entity, a non-participating FFI (NPFFI), or unable to furnish the required documentation, the Fund may find itself having to forward the information to the competent tax authority insofar as the law permits it. If an investor or an intermediary, through whom units in the Fund are held, does not provide the Fund, its agents or authorised representatives the exact information, necessarily complete and accurate for the Fund to comply with FATCA dispositions or acts as a NPFFI, the investor may be subject to a withholding levy on sums that would have been paid out to the recipient. The Fund at its discretion may proceed to conclude any supplemental agreement without investor approval in order to adopt measures judged appropriate or necessary to observe FATCA dispositions. Partners of ECOFI INVESTISSEMENTS will also be bound to give their status and in event of registration, their registered number known as GIIN (Global Intermediary Identification Number) as well as well notify without delay all modifications linked to these details. Investors are invited to consult their own tax advisors regarding FATCA requirements that bear on their own specific circumstances. In particular, investors that hold share stocks through intermediaries must ensure that such intermediaries conform to FATCA legislation so as to avoid the tax levy at source on earnings from their investments. II-2 Specific provisions ISIN code C unit: FR Fund classification (AMF) Balanced Fund Fund of Funds YES NO (up to 10% of fund assets) Investment objective The objective of the Fund is to achieve an annualised return in excess of EONIA OIS % net of management charges with a maximum volatility of 10% over a recommended investment period of three years Benchmark The Fund does not seek to replicate a benchmark. Moreover, the Fund is not managed with reference to a market index that might entail a misleading impression on the investor s part, but will be subject to unconstrained investing. Accordingly, no market reference is defined for the Fund. Nevertheless for information purposes, the performance of the Fund may be compared ex-post to EONIA OIS % compound. Within the euro-zone, EONIA (Euro Overnight Interest Average) is the principal money market reference. The index represents the weighted average euro interest rate, computed by the European Central Bank (ECB) and published by the Banking Federation of the European Union. It is the result of the weighted average of all unsecured daily lending operations undertaken by banks that are retained for computing Euribor quotes. OIS compound refers to the calculation methodology where periodic payment of compounding interest is based on the daily return of the EONIA money market reference. Investment policy 1. Strategies used Asset allocation The Fund s investment strategy of a discretionary nature rests essentially on a flexible allocation of four types of assets adapting to shifts in the credit market cycle: 7

8 (i) Up to 100% maximum of Fund net assets in classic debt securities (straight bonds) with fixed, floating, index-linked interest coupon and money market instruments. (ii) Up to 100% maximum of net assets in convertible and exchangeable bonds or equivalent securities, that is to say hybrid instruments with equity, interest rate, credit and volatility characteristics. Convex price behaviour patterns of convertible bonds is an integral dimension of the investment process (equity exposure tends to increase as the value of the underlying shares increases, thereby diminishing interest rate risk, and vice versa). (iii) Up to 25% maximum of net assets in subordinated debt securities (including subordinated notes with no set maturity or perpetual subordinated notes), being understood that subordinated securities with the characteristics of contingent convertibles bonds ie CoCos are not eligible for investment. (iv) Up to 30% of net assets representing Fund exposure to equities. This is obtained through investment in euro denominated convertible and exchangeable bonds and/or intervention in financial contracts (ie derivative financial instruments), fixed or conditional, on equity securities and/or equity indices of the euro-zone) traded on regulated markets in France or abroad and/or on French or foreign multilateral trading facilities and/or traded on over-the-counter (OTC) markets. Portfolio management features The Fund s investment allocation process between asset classes is of the top-down variety. Main decisions revolve around anticipated price behaviour of financial assets that is established from a fundamental macroeconomic scenario. Members of the Allocation Committee that gathers portfolio managers and economists of the Investment Manager periodically set an equilibrium level for 10-year interest rates over a 6-month horizon and a target price level for equities. The levels of convertible bond exposure to interest rate and equity risk are determined out of this macro-economic scenario. The purpose is to harness investment dynamics between straight and hybrid debt that occur in various market configurations related to the credit cycle. The portfolio management team implements asset allocation through a blend of convertible bonds, corporate bonds and stock/index derivative instruments. This is achieved by relying on such macro-economic anticipations as well as analysis on trends in risk premia for equities and fixed income and also on the relationship between credit spreads (yield gap between the security concerned and sovereign debt judged risk-free) and volatility. Changes in fixed income allocation (straight versus convertible bonds) are pursued in light of an in-house set of risk indicators. The portfolio management team undertakes fundamental analysis of each corporate issuer before any investment and proceeds to monitor their characteristics on a regular basis. Such financial appraisal rests on assessment criteria such as strategic positioning of the corporate issuer, profitability and level of indebtedness. Financial and legal characteristics are assessed regarding each bond issue retained for analysis. In particular, technical appraisal of convertible bond features (implied volatility, convexity, conversion premium or degree of subordination) is taken into account. A portfolio is built focusing on corporate debt that may be rated below Investment Grade quality (ie below «BBB-» or equivalent rating) or without any official rating by an external ratings agency. For purposes of diversification, the Fund may also invest in sovereign debt to a limited extent. Likewise, fixed income securities from issuers outside euro-zone markets denominated in foreign currency are also eligible for investment not exceeding 10% of Fund net assets. 2. Eligible assets (besides derivatives) Equities The portfolio s purpose is not to be directly invested in equities. Exposure to this asset class is obtained through investment in euro denominated convertible and exchangeable bonds and/or intervention in financial contracts (ie derivative financial instruments on equity securities and/or equity indices of the euro-zone), traded on regulated markets in France or abroad and/or on French or foreign multilateral trading facilities (MTFs) and/or traded on over-the-counter (OTC) markets. However, direct equity investments may ensue from exchange or conversion operations arising from convertible bonds that feature in the portfolio. In any event, exposure to equities is restricted to 30% maximum of Fund net assets. 8

9 Bonds, negotiable debt securities and other money market instruments The Fund is invested: (i) Up to 100% maximum of Fund net assets in classic debt securities (straight bonds) with fixed, floating, index-linked interest coupon and money market instruments; (ii) Up to 100% maximum of net assets in convertible and exchangeable bonds or equivalent securities, that is to say hybrid instruments with equity, interest rate, credit and volatility characteristics. (iii) Up to 25% maximum of net assets in subordinated debt securities (including subordinated notes with no set maturity or perpetual subordinated notes), being understood that subordinated securities with the characteristics of contingent convertibles bonds ie CoCos are not eligible for investment; Debt paper is said to be subordinated when redemption depends on the initial repayment of other creditors (preferred creditors, unsecured creditors). Hence the subordinated creditor will be repaid after ordinary creditors but before shareholders. The interest rate on such type of debt will be higher than on other fixed income paper. Classic debt securities (straight bonds), money market securities, convertible and/or exchangeable bonds as well as subordinated debt must be issued by private-sector or public-sector related corporate entities that are located in euro-zone countries. For ancillary purposes, fixed income instruments issued or guaranteed by a sovereign state of the euro-zone are eligible for up to 10% of Fund net assets. Indeed, fixed income instruments from issuers situated outside euro-zone countries but among those of the OECD are eligible for up to 10% of net assets. Moreover, financial securities denominated in currency other than the euro are eligible for up to 10% of Fund net assets. The Investment Manager assesses the quality of the security under consideration by retaining the rating of the debt issue or in absence thereof that of the corporate issuer through an internal ratings policy. Such an internal policy in terms of security selection and monitoring means that the Manager systematically favours in-house credit analysis as the basis for investment decisions in the interests of the Fund s unitholders. At all events, the Investment Manager will not have recourse either in an exclusive or non-discretionary manner to external ratings agencies but will proceed with credit analysis in security selection according to an independent in-house research process. The portfolio may be invested in all types of rated and unrated securities. The portfolio may hence hold speculative grade securities known as high yield that are rated below «BBB-» according to Standard & Poor s or Fitch Ratings scale or below «Baa3» according to Moody s scale (or equivalent rating according to the Investment Manager s internal policy). The Fund is managed within a range of «0» to «+7» in terms of modified duration. As indicator of risk, modified duration measures the decline in value of a bond for each one percentage point increase in interest rates. Modified duration range within which the Fund is managed Between «0» and «+7» Euro: up to 100% of net assets Currency denomination of securities in which the Fund invests Other than euro: up to 10% of net assets in OECD country currencies Geographical area of security issuers to which the Fund is exposed Euro-zone: 100% Outside euro-zone and within OECD: 10% Foreign currency risk Maximum 10% of net assets Units or shares of UCITS and/or AIFs A portion of the Fund portfolio may be invested up to 10% maximum of total assets in units or shares of investment funds, both the UCITS and AIF type. These involve funds of UCITS or AIFM status domiciled in France belonging to "Short term money market" or "Money market" investment categories under the AMF definition. These funds may be promoted or managed by ECOFI INVESTISSEMENTS or by a subsidiary of the Investment Manager for purposes of daily liquidity management of the Fund. The eligible investment funds with AIFM status must observe the four regulatory criteria of Article R of the French Monetary & Financial Code. (i) Regulatory oversight of these AIFs is equivalent to that prevailing for UCITS. (ii) The level of protection afforded to AIF investors equates that of UCITS particularly for asset ratios, borrowing, lending and short selling of transferable securities as well as money market instruments. 9

10 (iii) Their investment activity is subject to (semi-)annual reports that enable determination of fund asset/liability position, earnings and operations over the period. (iv) The AIFs are unable through their statutes to invest more than 10% of total assets in other funds. 3. Other eligible assets The Fund may cumulatively hold up to 10% in money market securities, debt or (fixed-rate) capital securities where they do not fulfil the conditions specified mentioned in Article R Section II. of the Monetary & Financial Code. 4. Derivative financial instruments General use The Investment Manager may intervene both for hedging and market exposure purposes through financial contracts (ie derivative financial instruments), fixed or conditional, traded on regulated markets in France or abroad and/or on French or foreign electronic trading platforms and/or traded on over-the-counter (OTC) markets. Without recourse to leveraging, these transactions are intended for the portfolio to hedge or gain exposure to equity and/or fixed income markets where engaged geographically or still to hedge foreign exchange risk. Nevertheless, the Fund may retain foreign currency exposure for ancillary purposes. This set of derivative operations will be undertaken not exceeding 100% of Fund net assets in commitments. Counterparties to OTC financial contracts The Fund may undertake over-the-counter (OTC) operations with counterparties that are top-ranked credit establishments chosen and regularly reviewed in accordance with the counterparty selection and assessment process available upon simple request from the Investment Manager. It should be noted that the Investment Manager has standing relations with the following counterparties whom the portfolio manager may deal with: Société Générale, JPMorgan Chase Bank NA, Crédit Coopératif, Caceis. Not one of these counterparties exercises discretionary powers of decision on the composition or management of the Fund portfolio or underlying assets of the financial contracts acquired by the Fund. Nor is any such counterparty required to give approval for any type of transaction involving the Fund portfolio. By nature of the operations undertaken with these counterparties, the Fund bears the risk of default (insolvency, liquidation ). In such case, the Fund s Net Asset Value may fall (cf definition of this risk in the section Risk Profile below). Information on financial guarantees The Investment Manager, acting in the name of and on behalf of third-party funds under management, has a policy of establishing financial guarantee contracts, commonly known as collateral agreements with counterparties. However certain counterparties do not offer such a contract. Financial guarantees authorised by these contracts entail cash in euros or foreign currency as well as in certain cases financial securities. The Fund does not in normal circumstances obtain a financial guarantee. In this respect, the Investment Manager does not apply a policy for reinvesting cash received (cash collateral) nor one for applying a hair-cut on securities received (securities collateral). However, in exceptional cases, the Fund retains the faculty to receive collateral so as to not exceed regulatory limits on portfolio exposure. The Investment Manager is solely responsible for setting up OTC financial contracts and associated collateral agreements if the case arises as well as for their monitoring (eg margin calls). No cost or internal operating expenses of the Investment Manager are borne by the Fund in such situation. 5. Securities embedding derivatives It is reiterated that the Fund may invest in convertible/exchangeable bonds or equivalent assets according to conditions as stipulated in the present prospectus. Moreover other securities integrating derivatives may be held in the portfolio such as instruments (MTNNs ie medium-term negotiable notes, EMTNs ie Euro medium-term notes) indexed on underlying common equity in order to expose the portfolio to securities or sectors not represented in the convertible bond markets. 10

11 Use of other structured securities integrating derivatives is excluded. The Fund may yet find itself temporarily holding these in the wake of attributions. The Fund does not intend to retain them. 6. Deposits The Fund may undertake time deposits of no longer than 12 months with one or several credit establishments for liquidity management purposes amounting up to 10% of net assets. 7. Loans In the normal course of operations and in particular for liquidity management purposes, the Fund may find itself with a debit balance in the cash account. In such instance, the Fund may resort to temporary borrowing of cash up to the limit of 10% of net assets. 8. Securities borrowing and lending For purposes of managing liquidity in the Fund, recourse to temporary acquisition or sale of securities as well as securities lending and repurchasing agreements is possible for eligible assets in the Fund portfolio (up to 10% maximum of nets assets). Additional information is available under the heading Fees and Commissions on the remuneration for temporary sales and acquisitions of securities. Counterparties for temporary acquisition/sale of securities The Fund may undertake operations involving temporary acquisition or sale of securities with counterparties that are top-ranked credit establishments chosen and regularly reviewed in accordance with the counterparty selection and assessment process available upon simple request from the Investment Manager (cf counterparty relations and risk management described under the preceding section heading 4) Derivative financial instruments). Through operations undertaken with these counterparties, the Fund may face the risk of default (insolvency, bankruptcy ). In such a situation, the Fund s Net Asset Value (NAV) may decline (cf definition of such risk in the section Risk profile below). Information on financial guarantees The Investment Manager, acting in the name of and on behalf of third-party funds under management, has as a policy of establishing financial guarantee contracts, commonly known as collateral agreements with counterparties. However, certain counterparties do not offer such a contract (cf preceding section heading 4) Derivative financial instruments). Additional information is available under the heading Fees and Commissions. Risk profile Your capital will be principally invested in financial instruments selected by the Investment Manager. These financial instruments will be exposed to market changes and fluctuations. The investor s attention is drawn to the nature of the Fund s portfolio management being able to invest to a significant degree in speculative securities (ie below Investment Grade), for which credit ratings from an external agency are either low or non-existent. They may also be traded on markets whose operating practices in terms of transparency and liquidity may noticeably deviate from accepted standards on exchanges and regulated markets. Significant risks The risks to which the investor is exposed regarding investment in the Fund are: risk of capital loss: the Fund does not benefit from any guarantee or protection. It may then be the case that capital invested is not entirely recovered upon redemption of units by the holder. Among other factors, there is the possibility of such risk materialising in the event of default by one or more issuers in the portfolio (cf credit risk), or an unanticipated sharp rise in interest rates (cf rate risk). 11

12 risk of performance : the investor s attention is drawn to the fact that the Fund s performance might not be in line with the absolute return objective. Indeed, portfolio management is designed to generate a positive return regardless of market behaviour through investment in financial instruments that display sensitivity to greater price movements. risk of discretionary management: the style of the Fund s portfolio management rests on anticipating the behaviour of various financial instruments. The risk exists that the Fund may not be invested at all times in securities that are the best performing. This risk may ensue in a loss of market opportunities and a fall in the Net Asset Value of the Fund. interest rate risk: this risk of a fall in the value of fixed income instruments held and hence in the Fund s NAV is triggered by a rise in interest rates. Such risk is expressed in the form of portfolio modified duration which measures the change in value of a bond for each one percentage point variation in interest rates; this may cause a fall in the Fund s NAV. credit risk: this spans default risk (the risk for the creditor that the debtor may not be in a position to meet its undertakings contracted towards the creditor) and the risk of issuer downgrading (lowering of the rating grade on the issuer delivered by one of the ratings agencies). This risk is characteristic of high yield issuers (their rating lies in the speculative grade category which is below «BBB-» grade or equivalent) or issuers that do not have any external rating from a specialist agency. The occurrence of default or downgrading of the issuer s ratings may induce a fall in the Fund s NAV. risk linked to high yield securities: the Fund must be viewed partially as a speculative investment (ie below «BBB-» or equivalent rating). It is more specifically designed for investors aware of risks inherent in investments where ratings are low or non-existent or liquidity is reduced. Such securities classed as speculative present heightened risk of default, are likely to experience greater and more frequent fluctuation in value. They are not always sufficiently liquid to be sold at any moment for the best price. Hence use of high yield or unrated securities may cause a significant decline in the Fund s NAV. risk linked to convertible bond investments: a convertible bond is a hybrid debt instrument which integrates both a risk linked to the quality of the issuing company ( credit ) that is represented by the par value of the bond (redemption value in absence of conversion into equity stock) and risk linked to the company s underlying share performance represented by the value of the conversion right into equity. As with any option instrument on equity, the value of this right varies according to the volatility of the company s underlying share. This may lead to a fall in the value of the convertible bond in spite of a gain in the same underlying share which can entail a decline in the Fund s Net Asset Value (NAV). risk linked to subordinated debt securities: this risk is attributable to the nature of subordinated debt which entails redemption of such securities only when initial repayment of other creditors (preferred creditors, unsecured creditors) has occurred. Hence the subordinated creditor will be repaid after ordinary creditors but before shareholders. The interest rate on such type of debt will be higher than on other fixed income paper to compensate for this risk. In case of the triggering of one or more clause(s) stipulated in the issuing document of the subordinated debt paper (ie breach of covenant) and more broadly when a credit event occurs for the issuing entity, there is risk of a shortfall in NAV. equity risk: this risk of a decline in portfolio value due to deterioration of equity markets may cause a fall in the Fund s NAV. At times, markets and individual securities can be volatile and prices may change substantially. At its most basic and fundamental level, it is the financial risk incurred by the Fund when holding indirect equity exposure through derivative instruments (eg equity futures, options) or securities such as a portfolio of convertible bonds with underlying common stock issued by publicly listed companies. risk linked to fixed income leverage: strategies ensuing from portfolio over-exposure to interest rate risk through use of derivative instruments may cause for the unit-holder a likely decline in NAV that is more than proportional to one from purely a rise in interest rates on fixed income instruments held (bonds and marketable debt securities). liquidity risk: this represents difficulty in prompt disposal of assets held and in sufficient quantities under favourable market conditions (ie rapid sale, minimal loss in value, within market hours) thereby possibly affecting the Fund s value. The magnitude of exposure to such risk by the investor is significant in an investment vehicle specialising in convertible/exchangeable bonds by virtue of the occasionally small 12

13 Ancillary risks number of market intermediaries trading in a given issue. Indications of a deterioration in liquidity and hence a rise in liquidity risk are evidenced by widening bid/offer spreads for the security and lengthening period of disposal independently of market price fluctuations. counterparty risk: the Fund may undertake from time to time operations involving temporary acquisition or sale of securities with counterparties as well as and/or derivatives traded on over-the-counter (OTC) market. These operations conducted with counterparties may expose the Fund to risk of default that could cause a drop in the Fund s NAV. Nevertheless, counterparty risk may be mitigated by setting up guarantees given to the Fund in accordance with prevailing regulations. foreign exchange risk: impact on the portfolio ensues from a change in exchange rates between the euro (the Fund s reference currency for valuing assets) and foreign currencies used which may produce a drop in the Fund s NAV. Foreign currency exposure arises when the Fund invests in eligible markets beyond the euro-zone and no partial or full hedging is established to reduce or eliminate currency risk. Guarantee or protection Subscribers concerned and investor profile The Fund is available for investors of all types: private individuals, legal entities (companies, associations, institutional investors ) looking for a collective investment vehicle that enables them to take part in the evolution of the euro-zone credit and convertible bonds market. The amount of capital which is reasonable to invest in this Fund depends on your individual circumstances. To determine these, each subscriber must take into consideration the overall financial situation, individual needs now and in three years time, yet also willingness to assume risk or instead opt for a more prudent investment. It is also highly recommended to sufficiently diversify investments so as not to expose them solely to this Fund. The recommended investment period is three years. Procedures for determining and apportioning earnings Amounts distributable The net income for the financial year shall be equal to the sum of interest, arrears, dividends, premiums and bonuses, attendance fees and any other revenue earnings relating to the securities included in the Fund portfolio, plus income from any temporary available cash balances, minus management charges and the cost of borrowing. Distributable amounts of the Fund are established by: 1. Net income for the financial year, plus retained earnings, plus or minus the balance of the income equalisation account; 2. Realised capital gains, net of costs, minus realised capital losses, net of costs, established over the financial year, increased by net capital gains of the same kind carried from previous financial years not having been the object of distribution or accumulation plus or minus the balance of the capital gains equalisation account. Sums mentioned above in 1. and 2. may be distributed, in whole or part, separately from each other. The Fund has opted for the following policy of apportioning earnings: Distributable sums regarding net income Pure accumulation: distributable sums arising from net income are wholly earmarked for accumulation (reinvestment) except for those set aside for mandatory distribution by virtue of the law. 13