Inform. been decided on. Income: accumulation; Capital gains: accumulation. the for: investment decisions. research process. valuation date.

Transcription

1 This document provides you with key investor information about this Fund. It is i not marketingg material. The information is required by law to help you understand the nature and the riskss 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 Investmentt Manager: ECOFI INVESTISSEMENTS - CREDIT COOPERATIF groupp Objectives and investment policy Classified in the Category balanced under French AMF rules, the Fund aims to outperform the Exane ECI Euro index (performance measure of euro denominated convertible and exchangeable bonds, whose underlying shares are listed in a euro-zone country). The Fund specialises in investing in convertible and exchangeable bonds or equivalent securities, that is to say hybrid instruments with equity, interest rate, credit and volatility characteristics. The resulting exposure to financial markets is therefore volatile and highly variable. Convertible bonds demonstrate convex price behaviour patterns: equity exposure tendss to increase as the value of the underlying shares increases, thereby diminishing interest rate risk, and vice versa. Managing the portfolio involves using macroeconomic information to determine the appropriate level of equity and interest rate risk (risk allocation), identifying the best economic sectors to invest in (sector allocation), and then selecting eligible bond securities based on financial analysis of the underlying company and/or quoted share. Securities are chosen after reviewing the pool of eligible convertiblee and/or exchangeable bonds with regards to various technical criteria (volatility, conversion premium, credit spreads and risk of capital loss, level of o subordination of f the debt, convexity etc ). The securities are assigned too categories basedd on the dominant risk factor (equity or credit) and thenn ranked by orderr of preference. Investments are then weighted to establish whether opportune to allocate convexity and the relative or absolute levels of risk that have been decided on. The portfolio is invested up to 100% of assets in euro denominated convertible and exchangeable bonds or equivalent securities traded in one of the euro-zone countries (diversification is permitted of up to 10% % of portfolio total assets in either synthetic bonds or in non-eurozone convertibles and exchangeable bonds). The Fund is managed within a range of «0» to «8» in terms of modified duration. As indicator of risk, modified duration measures the declinee in value of a bond for each one percentage point increasee in interest rates. The Investment Manager assesses the quality off 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 in the interestss of the Fund s unitholders. At all events, the Investment Manager will not have recourse either in i an exclusive or non- discretionary manner to external ratings agencies but b will proceed with credit analysis in security selection according to an independent in-house research process. credit analysis as the basis for investment decisions The portfolio may be invested in all types of rated and unrated securities. However, in orderr to ensure suitable management of credit c risks, the portion Risk and reward profile Risk indicator (SRRI) Lower risk, Potentially lower return Higher risk, Potentially higher return Key Investor Inform mation Document of the portfolio invested in speculative grade securities known as highh 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) must at all times be less than 25% maximum of thee Fund s total assets. In case of any percentage exceeding the stated ratio limit, the securitiess concerned will be sold off either immediately or within a time frame that is compatible with achieving these operations in the interests of holders and in the best possible conditions with regardd to market opportunities. The Investment Manager may intervene both for hedging and market exposure purposes through financiall contracts (ie derivative d financial instruments), fixed or conditional, traded on regulated markets in France or abroad and/or on French F or foreign electronic trading platforms and/or traded on over-the-counter (OTC) markets. These transactions are intendedd for: - adjusting equity andd interest rate exposure upwards or downwards; - replicating the convexity of convertiblee bonds by using equity options; - ncreasing portfolio convexity; - managing foreign exchange risks (hedging transactions only). o In order to manage short s term liquidity, the Fund is authorised to use cash deposits and loans as well as repurchase agreements for temporary purchase or sale of securities. It may iinvest up to 10% maximum of total assets in units or shares of investment funds, both the UCITS and AIFM type, whether domiciled inn France or abroad. They must belong to "Short term money market," "Money market" or " Balanced" fund categories under the AMF definition in France. These fund vehicles may be promoted or managed by Ecofi Investissements or by a subsidiiary. The investment funds with AIFM status must observe the four regulatory criteria of article R of the French Monetary & Financial Code. Policy for distributable payments: Income: accumulation; Capital gains: accumulation. The recommended investment horizon iss 3 years. The net asset value of o the Fund is calculated on a daily basis (on days when markets are closed, the NAV is calculated on the day immediately before the market closure and iss dated the last day of such closure).. Subscriptions and redemptions are centralised by the custodian bank as transfer agent at 11:30 am CET and executed on a forward pricing basis (that is to say on the basis of the day's closing price). Settlement of redemptions occurs within a minimum of one business day and maximum of five days d following the valuation date. Risk category shown is not guaranteed and may shift over time. The lowest category does d not mean "risk free." The overall risk indicator (SRRI: synthetic risk and reward indicator) is based on the historical volatility of the portfolio over the past 5 years. This Fund is classified as Category 4 in view of exposure to European convertible and exchangeable bond markets. Its risk/return profile is elevated (onee of relatively high risk and potentially high returns). Historical data used to calculate the overall risk indicator may not be a reliable indicationn of the future risk profile of the Fund.. Your initial investment does not benefit from any guarantee or investment. Significant risk(s) not n included in the SRRI indicator: Credit risk: default risk (the risk for thee creditor that the debtor may not be in a position to meet its undertakings towards the creditor) and / or the risk of downgrading (lowering of the rating delivered by one of the specialist ratings agencies). Liquidity risk: difficulties in the timely and efficient sale of securities held thatt may affect the value of the Fund. 1

2 Charges The charges you pay 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 your investment. One-off fees charged before or after investment Subscription fee (entry charge) Redemption fee (exit charge Ongoing charges Performance fee 2.00% incl VAT maximum None Charges taken from the Fund over a year 1.05 % incl VAT Charges taken from the Fund under certain specific conditions None 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 30,0 20,0 10,0 6,41 3,76 28,45 21,85 5,85 2,27 14,39 18,19 11,74 9,81 3,97 3,06 10,65 6,08 4,94 0,0-10,0-20,0-10,93-9,58-0,21-30,0-40,0-29,41-21, Fund Index Index: EXANE ECI Euro (closing price). This euro-zone convertible bond benchmark is weighted by market capitalisation and is computed with interest income reinvested (Bloomberg ticker: EZCIEZCI 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 7 th June The C unit was created on 7 th June 2005 (absorption of shares of the predecessor SICAV (open-ended investment company) launched in December 1984 and continuation of portfolio management in the form of a French-registered FCP ie mutual fund). 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: DELOITTE & Associés (Office: 185 avenue Charles de Gaulle NEUILLY SUR SEINE 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/EC 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)** 15 th April 2005 Date of the Fund s launch 7 th June 2005 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 AC unit FR Income: Accumulation Net realised capital gains: Accumulation I CHF H unit FR Income: Accumulation Net realised capital gains: Accumulation *I CHF H units are hedged against foreign exchange risk Base currency Investors Divisible unit EUR Any investor One thousandth (1/1000 th ) of a unit EUR CHF (hedged)* Any investor, more specifically those marketed by GESMOB Any investor, more specifically institutional & legal entities Place for obtaining the annual report and periodic statement One ten-thousandth (1/10,000 th ) of a unit One thousandth (1/1000 th ) of a unit Minimum initial investment Initial value One unit 100 One unit 100 CHF 15,000,000 CHF1,000 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 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. 3

4 I-2 Service providers Investment Manager Custodian & Depositary Auditor 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 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 s decisions; -liquidity flow monitoring. *Autorité de Contrôle Prudentielle et de Résolution (Prudential Control & Resolution Authority, France s supervisor for banks and insurance companies) 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. DELOITTE & ASSOCIES 185 avenue Charles de Gaulle NEUILLY SUR SEINE - FRANCE Represented by Mr Gérard VINCENT-GENOD 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 -4- GESMOB 23, rue Balzac PARIS - FRANCE 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) None 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. 5

6 Decimalisation of units C units YES (in thousandths) NO AC units YES (in ten-thousandths) NO I CHF H units YES (in thousandths) NO 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. 6

7 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. 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 AC unit: FR I CHF H 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 outperform the benchmark, Exane ECI Euro.* *Exane Euro Convertible Bond Index Euro Benchmark The market reference to which the Fund s return may be compared is Exane ECI Euro (closing price). This index measures the performance of euro denominated convertible and exchangeable bonds, whose underlying constituent shares are listed in an EMU country (European Monetary and Economic Union). This benchmark is weighted by market capitalisation and is computed with interest coupons reinvested. Currently the index spans issuers from 9 euro-zone countries and 16 sector groupings. Exane ECI Euro is calculated by EXANE as the index provider. Index constituents are reviewed every quarter. An independent Technical Committee ensures criteria for selecting convertibles. Changes take effect two 7

8 weeks later. The index is available from market data vendors (eg Reuters, Fininfo, Datastream, Europerformance, Bloomberg). Bloomberg Ticker: EZCIEZCI Index. The Fund is not designed to reproduce in one way or another benchmark performance. The Investment Manager undertakes investments on the basis that may lead to a significant gap with the performance behaviour of the benchmark. Investments in company issues are made in terms of market exposure that is not a function of constituent security weights in the index. Investment policy 1. Strategies used Investment allocation The Fund implements active and discretionary portfolio management. The Fund specialises in investing in convertible and exchangeable bonds or equivalent securities, that is to say hybrid instruments simultaneously presenting equity, interest rate, credit and volatility characteristics. Convertible bonds demonstrate convex price behaviour patterns: equity exposure tends to increase as the value of the underlying shares increases, thereby diminishing interest rate risk, and vice versa. Managing the investment portfolio involves using macroeconomic information to determine the appropriate level of equity and interest rate risk (risk allocation), identifying the best economic sectors to invest in (sector allocation), and then selecting eligible bond securities based on financial analysis of the underlying company and/or quoted share. The Fund s investment allocation process between classes of security risk (eg bond-type, mixed, equity-type) is of the top-down variety. Main decisions revolve around anticipated price behaviour of financial assets that is established from a fundamental macro-economic 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. Research into issuer fundamentals of the convertible/exchangeable bonds and those of the underlying equities exerts preponderant influence within selection decisions. The focus is on the competitive situation of the corporate issuer, business development strategy, any cyclical dimension to revenues, profitability, financial strength and cash flows. Credit and technical analysis The Investment Manager assesses the credit 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 unit-holders. 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. Securities are chosen after reviewing the pool of eligible convertible and/or exchangeable bonds with regards to various technical criteria (volatility, conversion premium, credit spreads and risk of capital loss, level of subordination of the debt, convexity etc ). The securities are assigned to categories based on the dominant risk factor (equity or credit) and then ranked by order of preference. Investments are then weighted to establish whether opportune to allocate convexity and the relative or absolute levels of risk that have been decided on. Portfolio investments hence take into account the order of preference for each of the convertible bond issues. This is achieved through satisfying constraints in directional exposure between equity and interest rate risk as well as sector weightings in the portfolio. The Fund is managed within a range of «0» to «8» 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. 8

9 Minimum Maximum Modified duration range of the Fund Currency denomination of portfolio securities Currency exposure of the Fund Country exposure of the Fund* Euro zone Non euro-zone *computed as percentage of total market exposure of the Fund Euro: up to 100% of net assets Other currencies: up to 10% Maximum 10% of net assets Up to 100% of net assets Up to 10% of net assets in issuers based in other European countries only 2. Eligible assets (excluding derivatives) Bonds, negotiable debt securities and other money market instruments The Fund portfolio is invested up to 100% of net assets in euro denominated convertible/exchangeable bonds or equivalent fixed income securities, whose underlying shares are listed in a euro-zone country. Within this type of portfolio investment, synthetic convertible bonds may not exceed 10% of Fund net assets. These synthetic bonds integrate a call option (on equity stock or index of the euro-zone) whereby redemption is always undertaken in cash and never in the form of underlying shares as is generally the case for straight convertible/exchangeable bonds. Convertible/exchangeable bonds or equivalent securities issued by European companies domiciled outside the euro-zone are eligible for ancillary purposes, without exceeding more than 10% of Fund assets. Portfolio investments are not subject to formal credit rating constraints insofar as there is no regulatory stipulation for all or a majority of credit issues to be assessed by an independent ratings agency. If such external ratings do exist, they may not be below investment grade (ie no lower than «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 credit analysis policy. Likewise, absence of any external rating does not preclude intrinsic credit quality of the issuer. The portfolio may be invested in all types of rated and unrated securities. However, in order to ensure suitable management of credit risks, the portion of the portfolio invested in 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) must at all times be less than 25% maximum of the Fund s net assets. In case of any percentage exceeding the stated ratio limit, the securities concerned will be sold off either immediately or within a time frame that is compatible with achieving these operations in the interests of holders and in the best possible conditions with regard to market opportunities. 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 AIFM type, whether domiciled in France or abroad. Only funds of UCITS or AIFM status belonging to "Short term money market" or "Money market" or "Balanced" fund categories under the AMF definition in France are eligible. These funds may be promoted or managed by ECOFI INVESTISSEMENTS or by a subsidiary of the Investment Manager. 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. (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. 9

10 Equities The Fund portfolio is not designed to be invested directly in equities. Underlying exposure to this asset class stems from investment in convertible bonds. However, direct equity investments may ensue from exchange or conversion operations arising from convertible bonds into underlying common stock of the issuer that feature in the portfolio. Furthermore, indirect equity exposure may occur through use of derivative financial instruments (futures, options cf Section 3 below) for portfolio management purposes as part of the risk allocation process. There are no predefined requirements for either geographical or sector allocation. Other eligible assets The Fund may cumulatively hold up to 10% in money market securities, debt or equity securities where they do not fulfil the conditions specified mentioned in Article R Section I. of the Monetary & Financial Code. 3. 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. The purpose of such interventions facilitates achieving the investment objective through instantaneous adjustment of portfolio exposure as the Fund is empowered to hedge or gain market exposure. These transactions are intended for: -adjusting equity and interest rate exposure upwards or downwards; -replicating the convexity of convertible bonds by using equity options; -increasing portfolio convexity (responsiveness to price changes in equities); -managing foreign exchange risks (hedging transactions only). For Fund units denominated in Swiss francs (I CHF H units), this class of units is hedged against foreign exchange risk through use of fixed forward contracts on the OTC currency markets. There may arise a residual foreign exchange risk, it being understood that hedging of the Swiss currency parity drift (adjustment of currency hedging according to market fluctuations) will occur within an overall tolerance band [98 ; 102] to par value [100] against non-swiss currency exposure in the portfolio. All trading expenses linked to hedging I CHF H units against foreign exchange risk are borne by the Investment Manager within the overall management charges that are set. Accordingly, neither the holders of I CHF H units nor those of the other classes of units will be called upon to bear the costs of implementation, execution, settlement/replacement of the aforementioned currency hedge. Total commitments through use of derivative instruments may not exceed 100% of Fund assets. Monitoring of global portfolio risk is performed according to the commitment method. 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). 10

11 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. 4. Securities embedding derivatives General features It is reiterated that the Fund may invest up to 100% of net assets 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. They entail: -equity warrants used to raise portfolio exposure to equity risk up to a limit of 10% of Fund net assets; -other warrants and rights of subscription; -synthetic convertible bonds (up to 10% of Fund net assets). The set of such operations will assist in achieving the Fund s investment objective. Synthetic convertible bonds A synthetic convertible bond consists of a bond and a warrant/right separately issued yet are combined together to create an instrument with features resembling a straight convertible bond. Such packaged instruments display an initial pay-off similar to a convertible bond while yet having different dynamics and risks associated with them. For instance, they lack the modified duration mitigation effect usual with plain vanilla convertibles structures in a context of rising interest rates. Accordingly, limited recourse to synthetic convertible bonds by the Fund seeks to secure a more diversified country/sector exposure than available at any one time from the eligible universe of securities. 5. 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. 6. 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. 7. 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 portfolio with approved counterparties by the Investment Manager. 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 11

12 counterparty relations and risk management described under the preceding section (ie 3. Derivative financial instruments). 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 3. Derivative financial instruments). 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 up to 100% of its assets in convertible/exchangeable bonds or equivalent securities; this asset class has a significant proportion of securities which are not rated by an external credit agency. Moreover, the asset class presents liquidity risk. Significant risks The risks to which the investor is exposed regarding investment in the Fund are: risk of discretionary management: this risk is linked to the style of the Fund s portfolio management which rests on anticipating market evolutions. The risk exists that the Fund may not be invested at all times on markets or in securities that are the best performing. The Fund s performance relies on the ability of the portfolio manager to anticipate price movements of markets and securities. This risk may cause a fall in the Net Asset Value of the Fund and/or a capital loss for the unit-holder. 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 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). 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 as a speculative investment. It is more specifically designed for investors aware of risks inherent in investments where ratings are low or nonexistent or liquidity is reduced. Hence use of high yield (ie below «BBB-» grade or equivalent or unrated) securities may cause a significant decline in the Fund s NAV. Such securities 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. 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. equity risk: this risk of a fall 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 12

13 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. 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 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. Ancillary Risks foreign exchange risk: this risk represents the portfolio impact ensuing 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 decline 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. For units denominated in Swiss francs that are systematically hedged against the Fund s underlying euro exposure, the exchange risk is residual. Attention of such unit-holders is brought to this residual foreign exchange risk which might ensue from less than full hedging at all times (cf Investment policy section 4. Derivative financial instruments). This risk might entail a decline in the Fund s NAV. counterparty risk: the Fund may undertake from time to time operations involving temporary acquisition or sale of securities with counterparties as well as securities lending and repurchasing agreements. 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. Guarantee or protection None 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 convertible bond market with limited exposure to issuers outside the euro-zone domiciled elsewhere in Europe. AC units concern clients of the firm GESMOB (fund management company licenced by the AMF under registration # GP located 23 rue Balzac PARIS - FRANCE) which is the distributor. The amount of capital which is reasonable for investors to devote to units in this Fund depends on each subscriber s overall financial situation, individual needs, expectations and level of risk tolerance. In all cases, it is paramount for investors to diversify their assets and recommended that advice be obtained from professionals who specialise in such matters. 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; 13