an investment company with variable capital (société d'investissement à capital variable) - undertaking for collective investment in transferable securities (organisme de placement collectif en valeurs mobilières). Registered Office: 25A, Boulevard Royal Luxembourg Grand-Duchy of Luxembourg Luxembourg R.C.S.: B 148.991 Prospectus Dated: October 2017 BRIGHT CAP (THE "COMPANY") IS AN INVESTMENT COMPANY, WHICH OFFERS INVESTORS A CHOICE BETWEEN SEVERAL CLASSES OF SHARES (EACH A "CLASS") IN A NUMBER OF SUB-FUNDS (EACH A "SUB-FUND"). SUBSCRIPTION TO THE COMPANY S SHARES CAN ONLY BE VALIDLY MADE ON THE BASIS OF THE INFORMATION CONTAINED IN THE CURRENT PROSPECTUS ACCOMPANIED BY A COPY OF THE LATEST ANNUAL REPORT AS WELL AS THE LATEST SEMI-ANNUAL REPORT IF THIS IS PUBLISHED AFTER THE LAST ANNUAL REPORT. NO PERSON IS AUTHORISED TO GIVE TO THIRD PARTIES ANY INFORMATION OTHER THAN THAT CONTAINED IN THIS PROSPECTUS OR THE DOCUMENTS MENTIONED HEREIN. 1 VISA 2017/109728-6338-0-PC L'apposition du visa ne peut en aucun cas servir d'argument de publicité Luxembourg, le 2017-10-25 Commission de Surveillance du Secteur Financier
BRIGHT CAP Registered Office: 25A, Boulevard Royal Luxembourg Grand-Duchy of Luxembourg IMPORTANT INFORMATION If you are in any doubt about the contents of this prospectus (the "Prospectus"), you should consult your stockbroker, bank manager, lawyer, accountant or other financial advisor. No person is authorised to give any information other than that contained in this Prospectus, or any of the documents referred to herein that are available for public inspection at the registered office of BRIGHT CAP. BRIGHT CAP (the "Company") is an undertaking for collective investment in transferable securities (a "UCITS"), incorporated under the laws of the Grand Duchy of Luxembourg as an investment company with variable capital (société d'investissement à capital variable) for the purpose of the Council Directive 2009/65/CE, as amended (the UCITS Directive ). The Company is registered in the Grand Duchy of Luxembourg pursuant to Part I of the Luxembourg law of 17 December 2010 on collective investment undertakings, as amended (loi relative aux organismes de placement collectif) (the "Law of 2010"). However, such registration does not imply a positive assessment by the supervisory authority of the contents of this Prospectus or of the quality of the shares (the "Shares") offered for sale. Any representation to the contrary is unauthorised and unlawful. The Directors of the Company, whose names appear hereafter, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors accept responsibility accordingly. The Shares of the Company are offered solely on the basis of the information and representations contained in this Prospectus and any further information given or representations made by any person may not be relied upon as having been authorised by the Company or the Directors. Neither the delivery of this Prospectus nor the issue of Shares shall under any circumstances create any implication that there has been no change in the affairs of the Company since the date hereof. The Directors of the Company may decide to make an application to list the Shares on any recognised stock exchange. 2
The information contained in this Prospectus will be supplemented by the financial statements and further information contained in the latest annual and semi-annual reports of the Company, copies of which may be obtained free of charge from the registered office of the Company. The distribution of this Prospectus and the offering of Shares in certain jurisdictions may be restricted and accordingly persons into whose possession this Prospectus may come are required by the Company to inform themselves of and to observe any such restrictions. This Prospectus does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation. United States: The Shares have not been registered under the United States Securities Act of 1933 (the "Securities Act"), and the Company has not been registered under the United States Investment Company Act of 1940 (the "Investment Company Act"). The Shares may not be offered, sold, transferred or delivered, directly or indirectly, in the United States, its territories or possessions or to US Persons (as defined in Regulation S under the Securities Act) except to certain qualified US institutions in reliance on certain exemptions from the registration requirements of the Securities Act and the Investment Company Act and with the consent of the Company. Neither the Shares nor any interest therein may be beneficially owned by any other US Person. The Company's Articles restrict the sale and transfer of Shares to US Persons and the Company may repurchase Shares held by a US Person or refuse to register any transfer to a US Person as it deems appropriate to assure compliance with the Securities Act and the Investment Company Act (see under "SUBSCRIPTIONS" below). Generally: the above information is for general guidance only, and it is the responsibility of any person or persons in possession of this Prospectus and wishing to make application for Shares to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. Prospective applicants for Shares should inform themselves as to legal requirements also applying and any applicable exchange control regulations and applicable taxes in the countries of their respective citizenship, residence or domicile. If you are in any doubt about the contents of this document you should consult your stockbroker, bank manager, accountant or other professional adviser. This prospectus has been drafted in English. It may be translated into any other language the Directors may deem useful and such translations must only contain the information contained in this English version. In case of divergences between the English and the translated version, the English version shall prevail. 3
THE COMPANY DRAWS THE INVESTORS ATTENTION TO THE FACT THAT ANY INVESTOR WILL ONLY BE ABLE TO FULLY EXERCISE HIS INVESTOR RIGHTS DIRECTLY AGAINST THE COMPANY, NOTABLY THE RIGHT TO PARTICIPATE IN GENERAL SHAREHOLDERS MEETINGS IF THE INVESTOR IS REGISTERED HIMSELF AND IN HIS OWN NAME IN THE SHAREHOLDERS REGISTER OF THE COMPANY. IN CASES WHERE AN INVESTOR INVESTS IN THE COMPANY THROUGH AN INTERMEDIARY INVESTING INTO THE COMPANY IN HIS OWN NAME BUT ON BEHALF OF THE INVESTOR, IT MAY NOT ALWAYS BE POSSIBLE FOR THE INVESTOR TO EXERCISE CERTAIN SHAREHOLDER RIGHTS DIRECTLY AGAINST THE COMPANY. INVESTORS ARE ADVISED TO TAKE ADVICE ON THEIR RIGHTS. 4
DIRECTORY: 1. Registered Office BRIGHT CAP 25A, Boulevard Royal L-2449 Luxembourg Grand-Duchy of Luxembourg 2. Board of Directors NAME TITLE Christian Denizon Administrateur délégué Finexis S.A. Gerry Salucci Administrateur délégué Luxembourg Capital Partner S.A. Tom Bernardy Administrateur délégué Finexis S.A. Maciej Waloszyk Administrateur délégué Finexis S.A. Aleksander Jawień CIO IFM Global Asset Management Franck Bergeot Independent Director Jean Luc Buchalet Directeur Général Délégué Pythagore Investment BP Eric Sauzedde Directeur Général Victory Asset Management Chairman of the board of Directors Director of the Company Director of the Company Director of the Company Director of the Company Director of the Company Director of the Company Director of the Company 5
3. Management Company FINEXIS S.A. 25A, Boulevard Royal L-2449 Luxembourg Grand-Duchy of Luxembourg a. Chairman of the Management Company NAME Mr Christian Denizon TITLE Chairman of the Management Company b. Directors of the Management Company NAME Mr Tom Bernardy Mr Gerry Salucci Mrs Maud Jund Mr Maciej Waloszyk Mrs Murielle Antoine TITLE Director of the Management Company. Director of the Management Company. Director of the Management Company. Director of the Management Company. Director of the Management Company. c. Day-to-day Managers of the Management Company NAME Mr Christian Denizon Mr Tom Bernardy Mr Maciej Waloszyk Mrs. Murielle Antoine TITLE CEO CAO Head of Sales COO 4. Depositary and Paying Agent NATIXIS BANK S.A. 51, avenue J.F. Kennedy L-1855 Luxembourg Grand Duchy of Luxembourg 5. Administrative Agent and Registrar and Transfer Agent FINEXIS S.A. 25, Boulevard Royal L-1528 Luxembourg Grand Duchy of Luxembourg 6. Auditor ARTEMIS AUDIT AND ADVISORY 25 A, boulevard Royal 6
S.À R.L. L-2449 Luxembourg Grand Duchy of Luxembourg 7
CONTENTS: Page DEFINITIONS...9 INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS...14 CONFLICTS OF INTEREST...24 MANAGEMENT COMPANY...26 DEPOSITARY AND PAYING AGENT...29 ADMINISTRATION...32 AUDITOR...33 POOLING...34 SUBSCRIPTIONS...35 REDEMPTIONS...38 CONVERSIONS...40 SWING PRICING...42 MARKET TIMING AND FREQUENT TRADING POLICY AND LATE TRADING...43 DATA PROTECTION...44 NET ASSET VALUE...44 FEES AND EXPENSES...46 REPORTS AND FINANCIAL STATEMENTS...48 DIVIDEND POLICY...48 TAXATION...50 GENERAL AND STATUTORY INFORMATION...54 APPLICABLE LAW...60 ANNEX 1: BRIGHT CAP MOMENTUM COMFORT...61 ANNEX 2: BRIGHT CAP SÉLECTION V...69 ANNEX 3: BRIGHT CAP GLOBAL BALANCED...77 ANNEX 4: BRIGHT CAP EUROPE INCOME...85 ANNEX 5: BRIGHT CAP EUROPEAN SECURITIES...93 ANNEX 6: BRIGHT CAP IFM GLOBAL CAPITAL ACCUMULATION FUND...101 ANNEX 7: BRIGHT CAP IFM GLOBAL ACTIVE ALLOCATION FUND...108 ANNEX 8: BRIGHT CAP...115 SELECTION V ZEN...115 8
DEFINITIONS "Annex" "Articles" "Auditor" "Business Day" "Circular 11/512" "Circular 12/546" "Classes" "Company" CSSF An annex to this Prospectus containing information with respect to a particular Sub-Fund. The articles of incorporation of the Company as amended from time to time. ARTEMIS AUDIT AND ADVISORY S.À R.L. Any day, which is a full bank business day in Luxembourg; CSSF Circular 11/512 as of 30 May 2011 that provides an overview of the main changes to the regulatory framework relating to UCITS risk management in light of CSSF Regulation 10-4 and the publication by ESMA of a number of documents on risk management. CSSF Circular 12/546 as of 24 October 2012 that provides an overview of the Authorisation and organisation of the Luxembourg management companies subject to Chapter 15 of the Law of 17 December 2010 relating to undertakings for collective investment as well as to investment companies which have not designated a management company within the meaning of Article 27 of the Law of 17 December 2010 relating to undertakings for collective investment Pursuant to the Articles, the Directors may decide to issue, within each Sub-Fund, separate classes of Shares (hereinafter referred to as a "Class" or "Classes", as appropriate) whose assets will be commonly invested but where different currency hedging techniques and/or subscription, conversion or redemption fees and management charges and/or distribution policies, minimum subscription or holding amount or any other specific feature may be applied. If different Classes are issued within a Sub-Fund, the details of each Class are described in the relevant Sub-Fund's Annex. BRIGHT CAP. Commission de Surveillance du Secteur Financier, the Luxembourg authority for the supervision of the financial sector. 9
"Depositary" NATIXIS BANK S.A., 51, avenue J.F. Kennedy L-1855 Luxembourg, Grand Duchy of Luxembourg. "Administrative Agent" Finexis S.A., 25, Boulevard Royal, L-1528 Luxembourg, Grand Duchy of Luxembourg, acting as administrative agent "Registrar Transfer Agent" and "Directors" or Board of Directors "Directive 2009/65/EC" Domiciliary Agent Eligible Market Eligible State "EU" of the Company. Finexis S.A., 25, Boulevard Royal, L-1528 Luxembourg, Grand Duchy of Luxembourg. The members of the board of directors of the Company for the time being and any successors to such members as they may be appointed from time to time. Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), as may be amended. FINEXIS S.A., acting as domiciliary agent. A Regulated Market in an Eligible State. Any Member State or any other state in Eastern and Western Europe, Asia, Africa, Australia, North and South America and Oceania. European Union. Euro, or EUR legal currency of the European Monetary Union. High (HWM) Watermark The High Water Mark (HWM) is the reference value to which the NAV is compared in order to calculate the performance fee. As such the performance of a share class is the difference between the NAV per share of that share-class and the High Water Mark, if this difference is positive and higher than the hurdle rate, the Management Company is entitled to a percentage of the outperformance. Whenever a performance fee is paid to the Management Company the HWM is adjusted to the NAV per share as of the day at which the performance fee is paid. "Ineligible Applicant" "Investment Fund" "KIID" "Law of 2010" An ineligible applicant as described under Subscriptions. A UCITS or other UCI, including an exchange traded fund ("ETF"), in which a Sub-Fund may invest, as determined in the investment restrictions described in this Prospectus. The key investor information document. The Luxembourg law of 17 December 2010 on undertakings 10
"Management Company" "Member State" "Memorial" "Minimum Amount" "Minimum Subscription Amount" "Money Instruments" "Net Asset Value" Holding Market "Net Asset Value per Share" "OECD" "Permitted Investments" "Prospectus" for collective investment, as may be amended from time to time. FINEXIS S.A. 25A, Boulevard Royal, L-2449 Luxembourg Grand-Duchy of Luxembourg A Member State of the EU. The States that are contracting parties to the agreement creating the European Economic Area other than the Member States of the EU, within the limits set forth by this agreement and related acts, are considered as equivalent to Member States of the EU. The Mémorial C, Recueil des Sociétés et Associations. The minimum value of a holding of a Shareholder in a Sub- Fund as defined per Sub-Fund in the relevant Annex. The minimum value of the first subscription of a Shareholder in a Sub-Fund as defined per Sub-Fund in the relevant Annex. The minimum subscription amount is to be considered including any subscription or bank wire fee, as such the amount received by the respective sub-fund may be slightly lower than the minimum subscription amount. shall mean money market instruments within the meaning of the Directive 2009/65/EC and within the meaning of the EU Commission Directive 2007/16/EC implementing the EU Council Directive 85/611/EEC as regards the clarification of certain definitions (the Directive 2007/16/EC ), including in particular instruments normally dealt in on the money market which are liquid, and have a value which can be accurately determined at any time. The net asset value of the Company, a Sub-Fund or a Class, as the case may be, determined in accordance with the Articles. The Net Asset Value divided by the number of Shares in issue or deemed to be in issue in a Sub-Fund or Class. Organisation for Economic Co-operation and Development. Transferable securities, money market instruments, Investment Funds, deposits, financial derivative instruments and other investments in which the Company may invest pursuant to the 2010 Law, the Articles and the present Prospectus. The present prospectus, as may be supplemented or amended 11
"RCS" "Redemption Charge" "Redemption Price" "Regulated Market" "Share" "Shareholder" "SICAV" "Sub-Fund" "Subscription Fee" "Subscription Price" from time to time. The Luxembourg Commercial Register (Registre de Commerce et des Sociétés, Luxembourg). A charge not exceeding the percentage of the Redemption Price disclosed in the relevant Annex that may be applied to redemptions of Shares. The Net Asset Value per Share, as calculated as of the relevant Valuation Day. A market within the meaning of Article 4(1)14 of directive 2004/39/EC and any other market which is regulated, operates regularly and is recognised and open to the public. A share of no par value of any Class in the Company. A person recorded as a holder of Shares in the Company s register of shareholders. A Société d Investissement à Capital Variable. A separate portfolio of assets for which a specific investment policy applies and to which specific liabilities, income and expenditure will be applied. The assets of a Sub-Fund are exclusively available to satisfy the rights of Shareholders in relation to that Sub-Fund and the rights of creditors whose claims have arisen in connection with the creation, operation or liquidation of that Sub-Fund. A sales commission as described in the Annex for the Sub- Fund levied for the benefit of the Management Company and/or the financial intermediaries acting in the placing of the Shares. The Subscription Fee is to be considered as a maximum rate and the Directors and the Management Company may decide at their discretion to waive this charge in whole or in part. The Net Asset Value per Share, as calculated as of the relevant Valuation Day. 12
"Transferable securities" "UCITS" "Other UCI" "United States" "USD" "US Person" "Valuation Day" means: - shares in companies and other securities equivalent to shares in companies, - bonds and other forms of securitised debt, - any other negotiable securities which carry the right to acquire any such transferable securities by subscription or exchange. For the purposes of this definition, the techniques and instruments referred to in Article 42 of the Law of 17 December 2010 relating to undertakings for collective investment do not constitute transferable securities. An Undertaking for Collective Investment in Transferable Securities authorised within the meaning of Article 1 (2) of Directive 2009/65/EC. An Undertaking for Collective Investment within the meaning of Article 1 (2) points a) and b) of Directive 2009/65/EC. The United States of America (including the States and the District of Columbia) and any of its territories, possessions and other areas subject to its jurisdiction. The legal currency of the United States of America. A citizen or resident of the United States, a corporation, partnership or other entity created in or under the laws of the United States or any person falling within the definition of the term "United States Person" under Regulation S promulgated under the 1933 Act. Any day as defined per Sub-Fund in the relevant Annex. "1933 Act" As defined on page 3 above. "1940 Act" As defined on page 3 above. IN THIS PROSPECTUS ALL REFERENCES TO GBP AND " " ARE TO THE BRITISH POUND, WHICH IS THE REFERENCE CURRENCY OF THE COMPANY, ALL REFERENCES TO "EURO" AND " " ARE TO THE SINGLE EUROPEAN CURRENCY, ALL REFERENCES TO "CHF" ARE TO THE SWISS FRANC, ALL REFERENCES TO "SGD" ARE TO THE SINGAPORE DOLLAR, ALL REFERENCES TO "PLN" ARE TO THE POLISH ZLOTY, ALL REFERENCES TO "NOK" ARE TO THE NORWEGIAN KRONER AND ALL REFERENCES TO "SEK" ARE TO THE SWEDISH KRONOR. 13
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS Investment Objectives and Policies The main objective of each Sub-Fund will be to invest in sufficiently liquid transferable securities and other eligible assets in order to provide returns for investors. Under normal circumstances, the Sub-Funds will be fully invested in accordance with the investment policy set out in the relevant Annex. Part of a Sub-Fund's net assets can be held temporarily in liquidities, including money-market instruments having a residual maturity not exceeding twelve months and demand or time deposits. The Company may take any measures and carry out any operation, which it deems useful to the accomplishment and to the development of its object in the broadest sense within the context of the 2010 Law. It cannot however guarantee that it will achieve its objectives given financial market fluctuations and the other risks to which investments are exposed. Investment Restrictions The Articles provide that the Directors shall, based upon the principle of spreading of risks, have power to determine the corporate and investment policy and the course of conduct of the management and business affairs of the Company. The Directors shall also determine any restrictions, which shall from time to time be applicable to the investments of the Company. For the purpose of this Chapter, each Sub-Fund shall be regarded as a separate UCITS within the meaning of Article 40 of the 2010 Law. The following provisions shall apply to the investments made by each Sub-Fund: 1) The Sub-Funds investments may comprise only one or more of the following: a) Transferable Securities and Money Market Instruments admitted to or dealt in on a Regulated Market; b) recently issued transferable securities and money market instruments, provided that the terms of issue include an undertaking that application will be made for admission to official listing on stock exchanges or markets as per paragraph a) above and provided such admission takes place within one year of issue; c) units or shares of UCITS and UCI, whether or not established in a Member State, provided that: - these other UCI are authorized under laws which provide that they are subject to supervision considered by the supervisory authority responsible for the 14
Company, to be equivalent to that required by EU Community law and that cooperation between the supervisory authorities is sufficiently ensured, - the level of protection of shareholders of the other UCIs is equivalent to that provided for shareholders in a UCITS, and in particular that the rules on asset segregation, borrowing, lending and uncovered sales of transferable securities and money market instruments are equivalent to the requirements of Directive 2009/65/EC; - the business activities of the other UCIs are reported in semi-annual and annual reports to enable an assessment of the assets and liabilities, income and operations over the reporting period, - the UCITS or other UCIs whose units/shares are to be acquired, may not, pursuant to their management regulations or instruments of incorporation, invest more than 10% of their total net assets in units/shares of other UCITS or other UCIs; d) deposits with a credit institution which are repayable on demand or have the right to be withdrawn, and maturing in no more than 12 months, provided that the credit institution has its registered office in a Member State or, if the registered office of the credit institution is situated in a third country, provided that it is subject to prudential rules considered by the CSSF as equivalent to those laid down in EU Community law; e) financial derivative instruments, including equivalent cash-settled instruments which are dealt in on a Regulated Market and/or financial derivative instruments which are dealt in over-the-counter ( OTC Derivatives ), provided that: - the underlying consists of instruments within the meaning of Article 41, paragraph (1) of the 2010 Law, financial indices, interest rates, foreign exchange rates or currencies, in which the Company may invest according to its investment objectives, - the counterparties to OTC Derivative transactions are institutions subject to prudential supervision, and belonging to the categories approved by the CSSF, and - the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the Company s initiative; f) money market instruments other than those dealt in on a Regulated Market and which are normally traded on the money market and are liquid, and whose value can be precisely determined at any time, provided the issue or issuer of such instruments is itself regulated for the purpose of protecting investors and savings, and provided that these investments are: - issued or guaranteed by a central, regional or local authority or by a central bank of a Member State, the European Central Bank, the EU or the European Investment Bank, a non-member State or, in case of a federal State, by one of the members making up the federation, or by a public international body to which one or more Member States belong, or 15
- issued by an undertaking any securities of which are dealt in on Regulated Market, or - issued or guaranteed by an establishment subject to prudential supervision, in accordance with criteria defined by EU Community law, or issued or guaranteed by an establishment that is subject to and complies with supervisory rules considered by the supervisory authority responsible for the Company, to be at least as stringent as those required by EU Community law, or - issued by other bodies belonging to the categories approved by the supervisory authority responsible for the Company, provided that investments in such instruments are subject to investor protection equivalent to that laid down in the first, the second or the third indent of this paragraph h) and provided that the issuer is a company whose capital and reserves amount to at least ten million euro (EUR 10,000,000) and which presents and publishes its annual financial statements in accordance with the fourth Directive 78/660/EEC or is an entity, which within a group of companies comprising one or several listed companies, is dedicated to the financing of the group, or is an entity which is dedicated to the financing of securitization vehicles which benefit from a banking liquidity line. g) Each Sub-Fund (the Investing Sub-Fund ) may, subject to the conditions provided for in this Prospectus, subscribe, acquire or hold Shares to be issued or issued by another Sub-Fund (the Targeted Sub-Fund ), provided that: - the Targeted Sub-Fund does not, in turn, invest in the Investing Sub-Fund; - no more than 10% in aggregate of the assets of the Targeted Sub-Fund may, be invested in another Sub-Fund; - voting rights, if any, attached to the Shares of the Targeted Sub-Fund are suspended for as long as they are held by the Investing Sub-Fund without prejudice to the appropriate documentation in accounts and periodic reports; and - in any event, for as long as Shares are held by the Investing Sub-Fund, their value will not be taken into consideration for the calculation of the Net Asset Value for the purposes of the minimum threshold of the net assets under the Law of 2010; - management, subscription or repurchase fees are not duplicated for the Investing Sub-Fund. The Company may invest up to 100% of the net assets of any Sub-Fund, in accordance with the principle of risk spreading, in transferable securities and money market instruments issued or guaranteed by a Member State, by its local authorities or agencies, or by another member state of the OECD or the G20 or by public international bodies of which one or more Member States, provided that the Company, for the account of the relevant Sub-Fund, must hold securities from at least six different issues each of which does not account for more than 30% of the net assets of such Sub-Fund. 2) The Management Company applies a risk management process which enables it to monitor and measure at any time the risk of the investment positions and their contribution to the overall risk profile of the portfolio and a process for accurate and independent assessment of the value of OTC Derivatives. 16
Each Sub-Fund may, for the purpose of (i) hedging, (ii) efficient portfolio management and/or (iii) implementing its investment strategy, use all financial derivative instruments within the limits laid down by Part I of the 2010 Law as further detailed in section Financial Derivative Instruments below. The global exposure is calculated taking into account the current value of the underlying assets, the counterparty risk, future market movements and the time available to liquidate the positions. This shall also apply to the following subparagraphs. As part of its investment policy and within the limits laid down in section 3) paragraph e), each Sub-Fund may invest in financial derivative instruments, provided that the exposure to the underlying assets does not exceed in aggregate the investment limits laid down in section 3). If a Sub-Fund invests in index-based financial derivative instruments, these investments do not have to be combined to the limits laid down in section 3). When a transferable security or a money market instrument embeds a derivative instrument, the derivative instrument shall be taken into account when complying with the requirements of this section. The global exposure may be calculated through the commitment approach or the Valueat-Risk (VaR) methodology as specified for each Sub-Fund in in the relevant Sub- Fund s Annex. The standard commitment approach calculation converts the financial derivative position into the market value of an equivalent position in the underlying asset of that derivative. When calculating global exposure using the commitment approach, the Company may benefit from the effects of netting and hedging arrangements. Value-at- Risk provides a measure of the potential loss that could arise over a given time interval under normal market conditions, and at a given confidence level. The 2010 Law provides for a confidence level of 99% with a time horizon of one month. Unless otherwise specified in the relevant Sub-Fund s Annex, each Sub-Fund shall ensure that its global exposure to financial derivative instruments computed on a commitment basis does not exceed 100% of its total net assets or that the global exposure computed based on a Value-at-Risk method does not exceed either (i) 200% of the reference portfolio (benchmark) or (ii) 20% of the total net assets. The risk management of the Management Company supervises the compliance of these provision in accordance with the requirements of applicable circulars or regulation issued by the CSSF or any other European authority authorized to issue related regulation or technical standards. 3) a) No more than 10% of the total net assets of each Sub-Fund may be invested in transferable securities or money market instruments issued by the same issuer. In addition, the total value of transferable securities and money market instruments issued by those issuers in which a Sub-Fund invests more than 5% of its total net assets, shall not exceed 40% of the value of its total net assets. No Sub-Fund may invest more than 20% of its total net assets in deposits made with the same body. The risk exposure to a counterparty of a Sub-Fund in an OTC derivative transaction 17
and/or efficient portfolio management techniques may in aggregate not exceed the following percentages: - 10% of total net assets if the counterparty is a credit institution referred to in section 1) paragraph d), or - 5% of total net assets in other cases. b) The 40% limit specified in section 3) paragraph a) is not applicable to deposits and OTC derivative transactions made with financial institutions subject to prudential supervision. Irrespective of the limits specified in section 3) paragraph a), each Sub- Fund shall not combine, where this would lead to investing more than 20% of its total net assets in a single body, any of the following: investments in transferable securities or money market instruments issued by that body, or deposits made with that body, or exposures arising from OTC derivatives transactions undertaken with that body. c) The limit of 10% stipulated in section 3) paragraph a) is raised to a maximum of 35% if the transferable securities or money market instruments are issued or guaranteed by a Member State, by its public local authorities, by a non-member State or by public international bodies to which one or more Member States belong. d) The 10% limit stipulated in section 3) paragraph a) is raised to 25% for bonds issued by a credit institution which has its registered office in a Member State and is subject by law to special public supervision designed to protect bondholders. In particular, sums deriving from the issue of those bonds must be invested in accordance with the legal requirements in assets which, during the whole period of validity of the bonds, are capable of covering claims attaching to the bonds and which, in case of bankruptcy of the issuer, would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest. If a Sub-Fund invests more than 5% of its total net assets in bonds referred to in this paragraph which are issued by a single issuer, the total value of these investments may not exceed 80% of the Sub- Fund s total net assets. e) The transferable securities and money market instruments referred to in paragraphs c) and d) of this section 3) shall not be taken into account for the purpose of applying the limit of 40% referred to under paragraph a) of this section. The limits specified under paragraphs a), b), c) and d) shall not be combined; thus investments in transferable securities or money market instruments issued by the same issuer or in deposits or derivative instruments made with this body carried out in accordance with paragraphs a), b), c) and d) shall not exceed in total 35% of a Sub-Fund s total net assets. Companies which belong to the same group for the purposes of the preparation of consolidated financial statements in accordance with Directive 83/349/EEC as amended or restated or in accordance with internationally recognized accounting rules, shall be regarded as a single issuer for the purpose of calculating the investment limits specified in the present section 3). A Sub-Fund may cumulatively invest up to a limit of 20% of its total net assets in transferable securities and money market instruments within the same group. 18
f) The limit of 10% stipulated in section 3) paragraph a) is raised to 100% if the transferable securities and money market instruments involved are issued or guaranteed by a Member State, one or more of its local authorities, by any other state which is a member of the OECD or the G20 or by a public international body to which one or more Member States belong. In such case, the Sub-Fund concerned must hold securities or money market instruments from at least six different issues, and the securities or money market instruments of any single issue shall not exceed 30% of the Sub-Fund s total net assets. g) Without prejudice to the limits laid down in section 5), the limits laid down in the present section 3) are raised to a maximum of 20% for investments in shares and/or debt securities issued by the same body, when the aim of the Sub-Fund s investment policy is to replicate the composition of a certain stock or debt securities index which is recognized by the supervisory authority responsible for the Company, on the following basis: - the composition of the index is sufficiently diversified, - the index represents an adequate benchmark for the market to which it relates, - it is published in an appropriate manner. The aforementioned limit of 20% may be raised to a maximum of 35% where that proves to be justified by exceptional market conditions in particular in Regulated Markets where certain transferable securities or money market instruments are highly dominant. The investment up to this limit is only permitted for a single issuer. 4) The Company will not invest more than 10% of the total net assets of any Sub-Fund in units/shares of other UCITS and/or in other UCIs ( Target Funds ) pursuant to section 1) paragraph c), unless otherwise specified in the investment policy applicable to a Sub- Fund as described in in the relevant Sub-Fund s Annex. Where a higher limit as 10% is specified in the relevant Sub-Fund s Annex, the following restrictions shall apply: - No more than 20% of a Sub-Fund s total net assets may be invested in units/shares of a single UCITS or other UCI. For the purpose of application of this investment limit, each compartment of a UCITS or other UCI with multiple compartments is to be considered as a separate issuer provided that the principle of segregation of the obligations of the various compartments vis-à-vis third parties is ensured. - Investments made in units/shares of UCI other than UCITS may not in aggregate exceed 30% of the total net assets of the Sub-Fund. Where a Sub-Fund invests in units/shares of other UCITS and/or other UCI that are managed, directly or by delegation, by the same management company or by any other company with which the Company is linked by common management or control, or by a direct or indirect holding of more than 10% of the capital or votes ( Affiliated Funds ), the Company or the other company may not charge subscription or redemption fees on account of the Sub-Fund s investment in the units/shares of such Affiliated Funds. Unless specified otherwise in the relevant Sub-Fund s Annex, no management fee corresponding to the volume of these investments in 19
Affiliated Funds may be charged at the level of the respective Sub-Fund, unless the Affiliated Fund itself does not charge any management fee. Investors should note that for investments in units/shares of other UCITS and/or other UCI the same costs may generally arise both at the Sub-Fund level and at the level of the other UCITS and/or UCI itself. 5) a) The Company s assets may not be invested in securities carrying voting rights which enable the Company to exercise significant influence over the management of an issuer. b) Moreover, the Company may not acquire more than - 10% of the non-voting shares of the same issuer; - 10% of the debt securities of the same issuer; - 25% of the units/shares of the same UCITS or other UCI; - 10% of the money market instruments of single issuer. In the last three cases, the restriction shall not apply if the gross amount of bonds or money market instruments, or the net amount of the instruments in issue cannot be calculated at the time of acquisition. c) The restrictions set out under paragraphs a) and b) shall not apply to: - transferable securities and money market instruments issued or guaranteed by a Member State or its local authorities, - transferable securities and money market instruments issued or guaranteed by a non-member State of the EU, - transferable securities and money market instruments issued by public international bodies to which one or more Member States belong, - shares held by the Company in the capital of a company which is incorporated in a non-member State of the EU and which invests its assets mainly in securities of issuing bodies having their registered office in that State, where under the legislation of that State, such a holding represents the only way in which the Company can invest in the securities of issuing bodies of that State. This derogation, however, shall apply only if in its investment policy the company from the non-member State of the EU complies with the limits stipulated in section 3), paragraphs a) to e), section 4), and section 6) paragraphs a) and b). 6) The Company may not borrow any money for any Sub-Fund except for: a) the purchase of foreign currency using a back-to-back loan; b) an amount equivalent to not more than 10% of the Sub-Fund s total net assets and borrowed on a temporary basis 7) The Company may not grant loans or act as guarantor for third parties. 8) To ensure efficient portfolio management, however, each Sub-Fund may, in compliance with applicable Luxembourg regulations, enter into securities lending transactions. 20
9) The Company may not invest its assets directly in real estate, precious metals or certificates representing precious metals and goods. 10) The Company may not carry out uncovered sales of transferable securities, money market instruments or other financial instruments referred to in section 1) paragraph c), e) and f). 11) Except in relation to borrowing conducted within the limitations set out in the Prospectus, the Company may not pledge the assets of the Company or assign them as collateral. In such permitted cases and unless stipulated otherwise in the relevant Sub- Fund s Annex, not more than 10% of the assets of each Sub-Fund shall be pledged or assigned. The collateral that must normally be made available to recognized securities settlement systems or payment systems in accordance with their respective regulations for the purpose of guaranteeing settlement within these systems, and the customary margin deposits for derivatives transactions, shall not be regarded as being a pledge under the terms of this regulation. 12) The restrictions set out above shall not apply to the exercise of subscription rights. During the first six months following official authorization of a Sub-Fund in Luxembourg, the restrictions set out in section 3) and 4) above need not be complied with, provided that the principle of risk-spreading is observed. If the limits referred to above are exceeded for reasons beyond the control of the Company or as a result of the exercise of subscription rights, the Company shall as a matter of priority remedy that situation, taking due account of the interests of the Shareholders. 13) The Company is entitled to issue, at any time, further investment restrictions, in the interests of the Shareholders, if for example such restrictions are necessary to comply with the legislation and regulations in those countries in which the Company s Shares are or will be offered for sale. I) Financial Derivative Instruments 1. General As specified in above, the Company may in respect of each Sub-Fund invest in financial derivative instruments, including but not limited to financial futures contracts, options (on equities, interest rates, indices, bonds, currencies, commodity indices or other instruments), forward contracts (including foreign exchange contracts),, warrants, mortgage TBAs, and structured financial derivative instruments such as credit-linked and equity-linked securities. The use of financial derivative instruments may not cause the Company to stray from the investment objectives set out in the relevant Annexes. Each Sub-Fund may invest in financial derivative instruments within the limits laid down above, provided that the exposure to the underlying assets does not exceed in aggregate the investment limits laid down above. When a Sub-Fund invests in indexbased financial derivative instruments, these investments do not have to be combined 21
to the limits laid down above. When a transferable security or money market instrument embeds a derivative, the latter must be taken into account when complying with the requirements of this restriction. Unless otherwise specified in the investment policy of a Sub-Fund, each Sub-Fund may use the financial derivative instruments, only for the purpose of efficient portfolio management and to hedge against market and currency risks. If a Sub-Fund intends to make use of financial derivative instruments on a regular basis to meet investment goals, the investment policy of the relevant Sub-Fund will comprise detailed information on the use of these financial derivative instruments. 2. Use of financial derivative instruments for currency hedging purposes All Sub-Funds may make use of financial derivative instruments for hedging purposes. The description below illustrates the type of hedging transactions which may be entered into. The Company may enter into forward currency contracts or write call options or purchase put options on currencies to hedge currency risks. The Sub-Funds may be managed by reference to a benchmark to hedge currency risk. These benchmarks are appropriate, recognised indices or combinations thereof and would be disclosed in the relevant Annex for a specific Sub-Fund. The neutral risk position of any such Sub-Fund will be the composition of the benchmark in both its investment and currency component weightings. The Management Company may take currency positions towards or away from this index by purchasing (or selling) currencies for forward settlement by the sale (or purchase) of other currencies held in the portfolio. The Management Company may however give to such Sub-Fund a currency exposure that differs from that applicable index. When using forward currency contracts, purchases of currencies that are not a reference currency of the relevant Sub-Fund will be permitted to increase the exposure. In addition, the Company may engage in the following currency hedging techniques: (i) hedging by proxy, i.e. a technique whereby a Sub-Fund effects a hedge of the reference currency of the Sub-Fund (or benchmark or currency exposure of the assets of the Sub-Fund) against exposure in one currency by instead selling (or purchasing) another currency closely related to it, provided however that these currencies are indeed likely to fluctuate in the same manner in the manager s opinion. (ii) cross-hedging, i.e. a technique whereby a Sub-Fund sells a currency to which it is exposed and purchases more of another currency to which the Sub-Fund may also be exposed, the level of the base currency being left unchanged, provided 22
however that all such currencies are currencies of the countries which are at that time within the Sub-Fund s benchmark or investment policy and the technique is used as an efficient method to gain the desired currency and asset exposures. (iii) anticipatory hedging, i.e. a technique whereby the decision to take a position on a given currency and the decision to have some securities held in a Sub-Fund s portfolio denominated in that currency are separate, provided however that the currency which is bought in anticipation of a later purchase of underlying portfolio securities is a currency associated with those countries which are within the Sub-Fund s benchmark or investment policy. The reference to "Sub- Fund" may also include reference to Classes if the context so requires, i.e. in relation to currency hedging transactions entered into for a specific Class. The Company may sell interest rate futures contracts for the purpose of managing interest rate risk. It may also for the same purpose write call options or purchase put options on interest rates or enter into interest rate swaps by private agreement with highly rated financial institutions specialised in this type of operation. 3. Description of certain specific financial derivative instruments The Company may use bonds and interest rate options, bonds and interest rate futures, index futures contracts and MBS TBAs for the purposes of efficient portfolio management and may enter into currency, interest rate and index swaps. The Company may enter into swap contracts in which the Company and the counterparty agree to exchange payments where one or both parties pay the returns generated by a security, instrument, basket or index thereof. The payments made by the Company to the counterparty and vice versa are calculated by reference to a specific security, index, or instruments and an agreed upon notional amount. The relevant indices include, but are not limited to, currencies, interest rates, prices and total return on interest rates indices, fixed income indices and stock indices. The Company may enter into swap contracts relating to any financial instruments or index. The company may not use total return swaps. All such permitted transactions must be effected through highly rated financial institutions specialised in this type of transaction. The Company may not use credit default swaps. Additional information on the use of financial derivative instruments is available in each specific investment policy of the Sub-Funds in the relevant Annexes. 23
II) Risk Management Process The Company will employ a risk-management process which enables it with the Management Company to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of each Sub-Fund. The Company or the Management Company will employ, if applicable, a process for accurate and independent assessment of the value of any OTC derivative instruments which is communicated to the CSSF on a regular basis in accordance with the 2010 Law. Upon request of an investor, the Management Company will provide supplementary information relating to the quantitative limits that apply in the risk management of each Sub- Fund of the Company, to the method chosen to this end and to the recent evolution of the risks and yields of the main categories of instruments. III) Techniques and Instruments relating to transferable securities or money market instruments The fund will not make use of any financial instrument as mentioned and defined in circular CSSF 14/592. Should the investment policy be changed to allow such investments, the prospectus will be updated accordingly and the investors be advised in due course. As such the fund will not make use of any form of collateralisation in regards to such investments. Use of the aforesaid techniques and instruments involves certain risks, some of which are listed in the following paragraphs, and there can be no assurance that the objective sought to be obtained from such use will be achieved. IV) Excess of ceilings If the limitations set forth above are exceeded for reasons beyond the control of the Company or as a result of the exercise of subscription rights, it must adopt as a priority objective for its sales transactions the remedying of that situation, taking due account of the interests of its Shareholders. The Company may hold cash assets on an ancillary basis. For the purposes of enabling redemption requests of Shareholders to be satisfied, the Company may borrow within the limits set out in the investment restrictions. CONFLICTS OF INTEREST The Management Company may from time to time act as management company to other investment funds/clients and may act in other capacities in respect of such other investment funds or clients. It is therefore possible that the Management Company may, in the course of 24