ASSET MANAGEMENT SEPTEMBER 2014

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ASSET MANAGEMENT SEPTEMBER 2014 This document is intended for professional investors only, as defines under the relevant laws of France and is not intended to

1 ASSET MANAGEMENT SEPTEMBER 2014 This document is intended for professional investors only, as defines under the relevant laws of France and is not intended to non-professional investors. Edmond de Rothschild Asset Management declines any liability for the use that could be made of the information indicated in this document.

2 A team of 9 asset allocation specialists covering the full asset class spectrum Benjamin Melman HEAD Marie de Leyssac Michaël Nizard Jean-Jacques Durand Romain Bordenave Developed equities Emerging equities Developed sovereign debts François de Curel DEPUTY HEAD François Raynaud Guillaume Rigeade Eliezer Ben Zimra Emerging sovereign debts Corporate debts Money markets Currencies Portfolio Manager and Co-Portfolio Manager of Edmond de Rothschild Bond Allocation 2

3 Environment LimitedimpactfromQEtapering:the most exposed assets have been those which gainedon investors searching for yield and longer-dated maturities Nextstep isthefirsthikeofshortterminterestratebythefed, probably inmid-2015 The ECB will remain accommodative Inflation: deflation risk still on ECB s radar Duration US: intermediate maturities are at risk Eurozone: limited correlation with the US on the long end of the curve but short and mediumdated maturities will be dictated by ECB action. Peripheral spreads will continue to trend lower. Credit Positive on risky fixed income assets Environment is favourable for carry trade Economic fundamentals are improving, ensuring low default rates 3

4 The Fed adopted a more qualitative forward guidance UMEPLOYMENT RATE VS PARTICIPATION RATE BULLARD* INDICATOR APPLIED TO THE US Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/2014. *Bullard indicator : a possible measure of the distance to the central bank objective presented by J. Bullard (FRB-St Louis) on June 9th

5 After tapering, the next step will be rate tightening CUMULATIVE HIKE PRICING IN FUTURES CURVES US CURVE YIELD Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

6 Outperformance compared to US in the context of an accommodative ECB 5Y5Y EUROZONE BREAK EVEN INFLATION CORRELATION US VS. EUR 10 YEAR RATE (ROLLING 6 MONTHS) Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

7 YIELD SPREAD VS GERMAN BONDS Still some potential on peripherals Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

8 COUNTRY CPI IN EUROZONE BREAK EVEN INFLATION Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

9 CDS SPREAD EVOLUTION ITRX EUR CDSI GENERIC 5Y MKIT Corp XOVER CDSI GENERIC 5Y MKIT Corp Still potential for risk premiums to narrow further Source : Bloomberg data at Data refers to previous years and are not a reliable indicator of future returns 9

EUROPEAN HIGH YIELD DEBT ISSUANCE ( BN) DEFAULT RATES STILL AT THE LOWER LEVEL : EUROPEAN DEFAULT RATE EVOLUTION SOURCE : JP MORGAN, 19/08/2014 Source

10 EUROPEAN HIGH YIELD DEBT ISSUANCE ( BN) DEFAULT RATES STILL AT THE LOWER LEVEL : EUROPEAN DEFAULT RATE EVOLUTION SOURCE : JP MORGAN, 19/08/2014 Source : Edmond de Rothschild Asset Management, SG, 30/05/2014- EdRAM 2014 Forecast Euro High Yield: a growing investment universe with a low default rate 10

US CREDIT CYCLE Volume - $Bn US M&A ACTIVITY INCREASE Better credit quality in the Euro zone while risk of rising interest rates is higher in the US Source : RBS Credit

11 US CREDIT CYCLE Volume - $Bn US M&A ACTIVITY INCREASE Better credit quality in the Euro zone while risk of rising interest rates is higher in the US Source : RBS Credit Strategy, Bloomberg data as at JPMorgan Europe Credit Research Data as of 06/06/2014, The data shown refers to past years and it is not a reliable indicator of future results 11

12 MACROECONOMICS FINANCIAL SECTOR FUNDAMENTALS Low rates in Europe driven by the ECB Low growth due to austerity measures Slow but continuous deleveraging with weak credit demand Benefits from European Banking Union Abundant liquidity, increasing solvency, recovering profitability Banks shrinking risks and balance sheet Bondholder-friendly environment Positive factors for Financials SCENARIO Continued outperformance of subordinated debt Preference for short duration bonds to mitigate interest rate risks Issues of next-generation structures with premiums and at yields closer to the long term cost of equity Source: Edmond de Rothschild Asset Management. Edmond de Rothschild Asset Management can in no way be held responsible. Past performance is not a reliable indicator of future results. 12

13 EMBI GLOBAL SPREAD VS VIX Asset Index Yield Spread (bp) Performance Last Var 1 week Var 1 Yr MtD 1 mth 3 mth YtD 1 Yr EM Hard Ccy Sov EMBI Global 5,35% ,85% 0,51% 1,52% 10,15% 14,31% EM Hard Ccy Corp CEMBI Broad 5,30% ,20% 1,02% 1,55% 7,15% 10,89% EM Local Sov GBI-EM Global Div 6,47% 0,68% -0,74% 0,20% 5,59% 8,93% EM Currencies ELMI+ 3,10% 0,25% -0,43% -0,33% 1,60% 3,91% UST 10 Yr BarCap US 10Yr 2,34% 1,71% 0,97% 1,07% 6,58% 6,37% Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

Two periods in the increase of US rates P TWO PERIODS IN THE INCREASE OF US RATES Period1, Unexpectedadjustment: the emergingdebtcorrects withus rates Period2, Gradualincrease: the US

14 Two periods in the increase of US rates P TWO PERIODS IN THE INCREASE OF US RATES Period1, Unexpectedadjustment: the emergingdebtcorrects withus rates Period2, Gradualincrease: the US growthispositive for EM ¾ of the time, negative correlation between US rates and EM spreads Investors have largely hedged duration risk EM debt keeps the most attractive relative value The first period isover, the second has begun Source: Edmond de Rothschild Asset Management, Bloomberg, S&P, 31/12/2013, The data shown refers to past years. The data shown refers to past years and it is not a reliable indicator of future results 14

15 Where are the best risk-adjusted returns? The institutional move from developed(ig) to emerging countries (IG) is causing spreads to tighten on this market segment EM HY & EM IG SPREADS (IN BP) High-yield emerging debt remains more attractive relative to the risk Source: Edmond de Rothschild Asset Management, Bloomberg, S&P, 30/04/2014, The data shown refers to past years. The data shown refers to past years and it is not a reliable indicator of future results 15

16 US MARKET: EQUITIES VS CONVERTIBLE BONDS EUROPE MARKET: EQUITIES VS CONVERTIBLE BONDS Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

17 RISK PREMIUM SPREAD BETWEEN EQUITIES AND HY CREDIT BONDS Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

18 DURATION: NEGATIVE Negative on US rates: especially on intermediate maturities Outperformance of EUR rates compared to US Flattening in the US, steepening in EUR PERIPHERALS: POSITIVE Improving fundamentals Upgrading dynamic for ratings ECB remains accommodative: probability for a European QE has increased Environment is favourable for carry trade Overweight Portugal, Ireland and Slovakia CORPORATE: NEUTRAL ON INVESTMENT GRADE ; POSITIVE ON HIGH YIELD Improving credit quality, especially in Europe Risk premium compensates for credit risk inherent to this market FINANCIAL DEBT: UPBEAT OUTLOOK ON SUBORDINATED DEBT COMPARED TO SENIOR DEBT Risk premiums likely to tighten and inflows are positive Regulatory changes are in favour of financial debt 18

19 CONVERTIBLE BONDS: CAPITALIZING ON THE EQUITY COMPONENT Maximising convexity Equity risk in the fixed income universe EMERGING DEBT: NEUTRAL TO POSITIVE WEIGHTINGS Negative impact from fed tightening is limited No contagion from geopolitical risk Favor high yield debt Favor hard currency debt INFLATION-LINKED BONDS: NEUTRAL TO POSITIVE Inflation expectations are already very low Confusion about central banks policy around future inflation path BTP Italia are attractive thanks to yield pick-up 19

20 MtD YtD 1 Yr 31-Jul Dec Aug-13 Aggregate Euro Agg Barclays EuroAgg Total Return 1,7% 8,6% 10,6% Govt Euro Agg Treasury Barclays EuroAgg Treasury 2,0% 10,1% 12,3% EMU ex Periph JPM GBI EMU ex périph 1,9% 8,8% 9,8% EMU Periph JPM GBI périph 2,3% 13,1% 17,7% Germany JPM GBI Germany 1,8% 7,5% 7,6% France JPM GBI France 2,0% 9,4% 10,8% Italy JPM GBI Italy 2,0% 12,4% 16,8% Spain JPM GBI Spain 2,8% 13,9% 18,1% Portugal JPM GBI Portugal 2,5% 18,7% 26,1% Ireland JPM GBI Ireland 1,9% 11,3% 17,2% Crédit Euro Agg Corporate Barclays EuroAgg Corporate 1,1% 6,5% 8,3% IG ML Euro Corporate 1,4% 6,4% 8,5% HY ML Euro High Yield 0,9% 5,6% 11,4% Fin ML Euro Financial Corp 1,3% 5,8% 8,2% Senior Fin ML Euro Senior Banking 1,2% 5,1% 7,0% Sub Fin ML Euro Subordinated Financial 1,4% 7,7% 12,6% Convert Convertibles Exane Europe Convertibles 1,0% 2,8% 7,5% EMB Hard Currency JPM EMBI 0,9% 10,2% 14,3% local hedged JPM GBI EM Global en USD hedgé 0,7% 3,7% 4,6% local non hedged JPM GBI EM Global en USD non hedgé 1,0% 7,2% 10,6% ILB EMU Barclays Euro ILB 1,0% 6,2% 6,0% Source: Edmond de Rothschild Asset Management Bloomberg. Data as of 28/08/

21 Market analysis and outlook The asset allocation and sovereign debt team Philosophy and investment process Performance and portfolio structure EdR Bond Allocation 21

22 A DOUBLE OBJECTIVE Outperform the composite benchmark 50% Barclays EuroAggregate Treasury TR + 50% Barclays EuroAggregate Corporate TR Generate positive returns over the investment horizon in all market conditions KEY POINTS Three levels of flexibility: Modified duration is actively managed within a wide range of -2 to +8 Allocation covers all fixed income asset classes Relative position on the yield curve Diversification A wide investment universe: covers all segments of the fixed income market Capture market opportunities Synergies between Edmond de Rothschild Asset Management s fixed income specialists Morningstar ratings are not market rankings and cannot be interpreted as recommendations to buy, sell or hold the shares or units of the above mentioned Fund. The references to market rankings or awards of these funds are not a reliable indicator of the future results of the Fund or of the Management Company. Data as at 31/03/2014 Sources: Edmond de Rothschild Asset Management.*I proforma share 22

23 Overall portfolio modified duration MODIFIED DURATION SINCE 2012 (MONTHLY DATA) 1,6 SPREADS EVOLUTION ecart 10 Y US - 10 Y GER Geographical allocation Yield curve positioning 1,1 0,6 0,1-0,4 s-10 m-11 s-11 m-12 s-12 m-13 o-13 a-14 2,2 Ecart Bund - Schatz 2,0 1,8 Fonds Benchmark Max Min 1,6 The flexible management of modified duration improves the fund s resilience in all market environments Source: Edmond de Rothschild Asset Management data as of 31/07/2014 Estimations - Data refers to past performance. Past performance and volatility is not a reliable guide to future results. In preparing this document, Edmond de Rothschild Asset Management has used the best sources but cannot guarantee that the information is complete or reliable. Edmond de Rothschild Asset Management cannot be held liable for any decisions made on the basis of this information alone. 1,4 1,2 1,0 s-10 m-11 s-11 m-12 s-12 m-13 s-13 a-14 23

24 Clear investment rules: Currency risk Currency Risk is systematically hedged High Yield & Emerging Market debt 50% maximum* Exposure to equity risk 10% maximum via convertible bonds *internal limits 24

25 EDR BOND ALLOCATION (I) SINCE Edmond de Rothschild Bond Allocation (I) 50% BarCap Euro-Aggregate Corporates + 50% BarCap Euro-Aggregate Treasury 1,5% EdR Bond Allocation (I) Benchmark 1m 0,5% 0,7% 3m 1,4% 2,5% m 4,8% 4,8% Since new investment strategy 11,2% 9,7% Volatility (52 weeks) Sharpe Ratio (52 weeks) 2,8% 1,8% 3,5 4, Tracking Error (52 weeks) 2,5 --- Source: Edmond de Rothschild Asset Management Data as of 31/07/2014. Data refers to past performance. Past performance and volatility is not a reliable guide to future results. 25

26 BREAKDOWN BY FIXED INCOME SECTOR (% OF TOTAL ASSETS) Fund data AUM 322m Yield 4,8% Modified duration 0,43 High Yield Corp Govt Bonds Sub Fin 17% 24% 22% Convertibles bonds 9% Emerging Bonds 9% Inflation Linked Bonds 7% Money Market 5% Cash 3% Corp Investment Grade 3% Credit Spread Protections -20% Data refers to past performance. Past performance and volatility is not a reliable guide to future results. Source: Edmond de Rothschild Asset Management Data as of 01/08/

27 CONTRIBUTION BY CURRENCY CONTRIBUTION BY MATURITY Currency risk is systematically hedged Source: Edmond de Rothschild Asset Management data as of 01/08/2014. Data refers to past performance. Past performance and volatility is not a reliable guide to future results. 27

28 Top 5 sovereign issues (% of total assets)* SPAIN 3.6% ITALY 3.3% Top 5 Investment Grade issuers (% of total assets)* BANQUE FED CRED MUTUEL 1,00 JPMORGAN 1.00 Top 5 High Yield issuers (% of total assets)* BPCE SA 1,44 Credit Agricole SA 1,28 PORTUGAL 5.9% BANQUE FED CRED MUTUEL 1.00 WIND ACQUISITION FIN SA 1,06 IRELAND 3.3% AXA SA 0,92 Altice SA 0,82 SLOVAKIA 1.6% CREDIT LOGEMENT SA 0,82 Societe Generale SA 0,81 Source: Edmond de Rothschild Asset Management data as of 01/08/2014 Data refers to past performance. Past performance and volatility is not a reliable guide to future results. 28

de Tel: +49 69244 330201 Fax: +49 69244 330215 Selina Piening,

29 Dr. Konstantin Mettenheimer, MBA Chairman Deutschland & Österreich Tel: Fax: Selina Piening, CEFA Executive Director Third Party Distribution Tel: Mobil /

30 Edmond de Rothschild Bond Allocation Amf classification Benchmark NAV frequency Bonds and other debt instruments denominated in Euro 50% Barclays Capital Euro Aggregate Corporate / 50% Barclays Capital Euro Aggregate Treasury Daily Share C Share D Share E Share Isin code FR FR FR Bloomberg Ticker STHOBOC FP STHOBOD FP STHOBOE FP Currency EUR EUR EUR Currency hedging Dividend policy accumulation distribution accumulation Entry fee 3% max. (not payable into the fund) 3% max. (not payable into the fund) 3% max. (not payable into the fund) Redemption charges None None None Management fees 1,00% (ATI) 1,00% (ATI) 1,20% (ATI) Performance commission 15% per year of the outperformance compared with the benchmark None Subscribers All subscribers All subscribers All subscribers Minimum subscription 1 share 1 share 1 share Inception date 30/12/ /12/ /06/2011 Share I Share J Share R Share Isin code FR FR FR Bloomberg Ticker STHBDAI FP Currency EUR EUR EUR Currency hedging Dividend policy accumulation distribution accumulation Entry fee None None 3% max. (not payable into the fund) Redemption charges None None None Management fees 0,40% (ATI) 0,40% (ATI) 0,60% (ATI) Performance commission 15% per year of the outperformance compared with the benchmark None Subscribers Institutional investors Institutional investors Institutional investors Minimum subscription 500, , ,000 Inception date 16/04/

31 CREDIT RISK: In the event of a credit occurrence (such as a significant increase in an issuer s remuneration margin compared with a Government bond of the same maturity), or a default or decline in the quality of an issuer s bond (for example a ratings downgrade), the value of the negotiable securities in whichthe fund invests could decline. The fund may invest up to 50% of the net assets in issues floated by companies rated Speculative by ratings agencies, namely Moody s (<Baa3) or Standard & Poor s (<BBB-). The fund must therefore be considered as speculative in part and is intended in particular for investors aware of the risks inherent in investments madeinsecurities with low ratings or none at all. Credit risk may lead to a decline in net asset value (NAV). INTEREST RATE RISK: An increase in interest rates could have a negative impact on performance for an indefinite period. Likewise, in the event ofthe portfolio having negative modified duration, a cut in interest rates could have a negative effect on performance for an indefinite period. The fund s modified duration may range from -2 to +8. Interest rate risk can result in a fall in NAV. CAPITAL LOSS RISK: As the fund does not benefit from any guarantee or protection it is possible that the capital initially invested may not be refunded in full. RISK ASSOCIATED WITH FINANCIAL FUTURES: The fund can make use of financial futures instruments within a limit of 100% of the assets. The fund could therefore expose up to 100% of its assets to any market, asset, index or instrument or economic and/or financial parameter. This could lead to a risk of fund NAV falling further and more rapidly than that of the markets in which the fund is invested. COUNTERPARTY RISK: Counterparty risk arises from the fund making use of financial contracts traded over the counter, and/or temporary securitiespurchase and sale transactions (repos). Such transactions potentially expose the fund to a risk of one of the counterparties defaulting. Counterparty risk may lead to a decline in NAV. EMERGING MARKET INVESTMENT RISK: This risk is associated with the operating and surveillance conditions in the emerging markets to which the fund may be exposed.these may differ from the standards prevailing on major international markets, and may be affected by various types of disruption including changes to taxation regulations, topolicy or political stability or a temporary want of liquidity in such securities. Variations in such securities could have a positive or negative impact on fund NAV. SECONDARY RISKS: Risk associated with hybrid products (convertible bonds): Since they may be converted into equities, convertible bonds add anequity risk to a bond portfolio. They also expose the portfolio to equity market volatility, which is greater than that of bond markets. Owning such instruments therefore leads toanincrease in portfolio risk, which may be mitigated, depending on market configuration, by the bond component in hybrid issues. 31

32 Written on 29/08/2014. This document is non-binding and its content is exclusively for information purpose. The synthetic indicator ranks that Fund in category 3 on a scale from 1 to 7. All potential investors must take prior measures and specialist advice in order to analyse the risks and establish his or her own opinion independent of Edmond de Rothschild Asset Management in order to determine the relevance of such an investment to his or her own financial situation. To this end, any investor shall read the key investor information document (KIID) delivered before any investment is made. Such a document is available online at or upon request for free to the registered office of Edmond de Rothschild Asset Management. ASSET MANAGEMENT 47, rue du Faubourg Saint-Honoré Paris Cedex 08 Société anonyme governed by an executive board and a supervisory board with capital of euros AMF Registration number GP R.C.S. Paris 32

ELIEZER BEN-ZIMRA PORTFOLIO MANAGER FUND EXCELLENCE CONGRESS, JUNE 2016

ASSET MANAGEMENT ELIEZER BEN-ZIMRA PORTFOLIO MANAGER FUND EXCELLENCE CONGRESS, JUNE 2016 This document is intended for professional investors only, as defines under the relevant laws of France and is not