I. General Characteristics 1/ STRUCTURE OF THE UCITS Name: (the "Fund") Legal structure and Member State in which the UCITS was constituted: Mutual fund under French law. Date of creation and envisaged duration: The Fund was created on 12 March 2004 for a term of 99 years. Summary of management offer: Characteristics Units ISIN code Allocation of distributable sums Currency Subscribers concerned Minimum amount of Initial subscription R FR0010058164 Capitalisation EUR All subscribers EUR 50,000 I FR0011025188 Capitalisation EUR Subscribers with a minimum subscription amount of EUR 3,000,000 (three million euros) EUR 3,000,000 (1) (1) For the I units, it is stated that in the case of subscriptions by more than one Company belonging to the same group, within the meaning of Article L.233-3 I. of the Commercial Code, compliance with this minimum subscription shall be assessed by accumulating the subscriptions of the various companies of that group. Similarly, in the case of subscriptions by more than one UCI managed by the same Management Company, compliance with this minimum subscription shall be assessed by accumulating the different subscriptions of the UCIs of the said Management Company. The latest annual report and the latest periodic statement are available from: The latest annual and periodic documents are sent free of charge within one week, on a written request from the unit-holder to: OFI ASSET MANAGEMENT 22 rue Vernier 75017 PARIS contact@ofi-am.fr These documents are also available at www.ofi-am.fr. Further explanations are available, at any time, from the Sales Department of OFI Asset Management (Tel.: +33 (0) 1 40 68 17 17) or on request, by writing to the following e-mail address: contact@ofi-am.fr OFI ASSET MANAGEMENT Page 1 of 22
2/ ACTORS Management Company: OFI ASSET MANAGEMENT Société Anonyme à Directoire et Conseil de Surveillance 22 rue Vernier 75017 Paris Portfolio Management Company registered by the Commission des Opérations de Bourse on 15 July 1992 under no. GP 92-12 Depositary and custodian: SOCIETE GENERALE Credit establishment created on 8 May 1864 by a decree of authorisation signed by Napoleon III 29, boulevard Haussmann - 75009 Paris. Postal address of depositary function: 75886 Paris Cedex 18 (France) Auditor: CABINET APLITEC Les Patios Saint Jacques 4-14 Rue Ferrus - 75014 Paris Represented by Mr Bruno Dechance Marketer: OFI ASSET MANAGEMENT Limited Liability Company with a Board of Directors and a Supervisory Board 22 rue Vernier 75017 Paris Since the Fund is admitted for trading on Euroclear France, its units may be subscribed or redeemed with financial brokers who are not known to the Management Company. Delegates: Accounts manager: SOCIETE GENERALE 29, boulevard Haussmann - 75009 Paris. In particular, the accounts management delegation agreement entrusts SOCIETE GENERALE with updating of the accounts, calculation of the net asset value, preparation and presentation of the documents necessary for the Auditors' audit and conservation of accounts documents. OFI ASSET MANAGEMENT Page 2 of 22
Centralising Company: SOCIETE GENERALE Credit establishment created on 8 May 1864 by a decree of authorisation signed by Napoleon III - 29, boulevard Haussmann, 75009 Paris Postal address of function of centralisation of subscription/redemption orders and keeping of registers: 32, rue du Champ-de-tir 44000 Nantes (France) ; In the context of management of the Fund's liabilities, the functions of centralisation of subscription and redemption orders, and of keeping the unit issuer account are handled by the depositary (by delegation by the Management Company) in connection with the Company Euroclear France, to which the fund is admitted for trading. OFI ASSET MANAGEMENT Page 3 of 22
II. Operating and management procedure 1/ GENERAL CHARACTERISTICS Nature of the right attached to the unit category: Every unit-holder has a right of joint ownership on the assets of the Fund proportional to the number of units owned. Arrangements for holding liabilities: Registration in the custodian's register for units registered as administered. The Fund is admitted for trading on Euroclear France. Voting right: No voting right is attached to the units, decisions being made by the Management Company. However, information about changes to operation of the Fund is given to unit-holders, either individually or via the press, or by any other means in accordance with instruction 2011-19 of 21 December 2011. Structure of units: Bearer Fractional units: YES NO Number of decimal places Tenths hundredths thousandths ten thousandths Closing date: Last trading day worked in Paris in December OFI ASSET MANAGEMENT Page 4 of 22
Information about tax arrangements: The UCITS as such is not liable to taxation. However, unit-holders may bear taxation on account of the income distributed by the UCITS, where applicable, or when they sell its shares. The tax arrangements applicable to the sums distributed by the UCITS, or to the deferred capital gains or losses or those realised by the UCITS, depend on the tax provisions applicable to the investor's specific situation, his residence for tax purposes and/or the jurisdiction of investment of the UCITS. Thus, certain income distributed in France by the UCITS to non-residents may be liable, in that State, to withholding tax. Please note: depending on your tax arrangements, potential capital gains and income associated with holding units in the UCITS may be liable to taxation. We recommend that you ask your usual tax adviser for information about this. The American tax law, the Foreign Account Tax Compliance Act ("FATCA") The objective of the American law, the FATCA, signed into law on 18 March 2010, is to reinforce the prevention of tax evasion by introducing an annual declaration to the American tax administration (the IRS, Internal Revenue Service) for accounts held outside the US by American taxpayers. Sections 1471 to 1474 of the Internal Revenue Code ("FATCA") impose withholding tax of 30% on certain payments on a foreign financial institution (FFI) if the said FFI fails to comply with the FATCA. The mutual fund is an FFI and is therefore governed by the FATCA. These FATCA withholding taxes may be levied on those payments made in favour of the mutual fund, except if the mutual fund complies with the FATCA under the provisions of that act, and with the corresponding legislation and regulations, or if the mutual fund is governed by an Intergovernmental Agreement (IA) so as to improve application of international tax provisions and implementation of the FATCA. France thus signed an Intergovernmental Agreement (IA) on 14 November 2013; the mutual fund may take all measures necessary to monitor compliance, according to the terms of the IA and local implementing regulations. In order to fulfil its obligations associated with the FATCA, the mutual fund must obtain certain information from its investors, so as to establish their American tax status. If the investor is a designated US person, a non-american entity owned by an American entity, a Non-Participating Foreign Financial Institution (NPFFI), or on failure to furnish the required documents, the mutual fund may have to report information about the investor in question to the competent tax administration, provided this is permitted by law. All OFI Group partners will also have to communicate their status and identification number (GIIN: Global Intermediary Identification Number) and immediately notify all changes relating to these data. Investors are invited to consult their own tax advisers regarding the requirements of the FATCA concerning their personal situation. In particular, investors holding units through intermediaries must ensure compliance by the said intermediaries with the FATCA so as not to be subjected to any withholding tax on the returns from their investments. OFI ASSET MANAGEMENT Page 5 of 22
2/ SPECIFIC PROVISIONS Characteristics of units: ISIN code: R units: FR0010058164 I units: FR0011025188 Classification: Diversified Fund of funds: Yes No Management objective: The management objective of the Fund is to achieve performance above or equal to the EONIA over the recommended investment term, through implementation of a decorrelated strategy of the main asset classes, with volatility in the region of 5%. The AMF would like to remind potential subscribers that the performance and volatility objective, shown in the Management Objective section, is based on the occurrence of market scenarios established by the Management Company, and does not in any event constitute a guarantee of return or performance or volatility of the mutual investment fund. Benchmark: The management objective concerns the achievement of an absolute performance, reached through the use of alternative investment strategies described below. The performance of this fund is not therefore assessed according to changes in a benchmark. However, over a minimum investment horizon of 3 years, the performance of the Fund may be compared, after the event, to the Capitalised EONIA. The EONIA is the benchmark of the money market of the Eurozone. Investment strategy: The Management Company seeks to achieve the management objective by implementing alternative management strategies. Allocation of the portfolio between the different strategies and choice of instruments in order to implement those strategies, are carried out by the Management Company, based on expectations and quantitative and qualitative analyses of the relative prices of these instruments. This will depend on market conditions, and on prospects, as the Management Company assesses these at its discretion, within the framework of the processes described below. Strategy principle The strategies are implemented in developed countries, as defined by the MSCI Developed Market Index. On a secondary basis, exposure to other geographic zones is authorised on the fund. A list of countries making up the MSCI Developed Market Index is dynamic. It includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United Kingdom, USA and Greece. Investments concern all sectors and all types of capitalisation of these markets. OFI ASSET MANAGEMENT Page 6 of 22
The different strategies are grouped into 5 sub-categories: Strategies of arbitrage on mergers and acquisitions Strategies of arbitrage on conglomerate discounts Strategies of arbitrage between different unit categories Market Neutral strategies Treasury and Foreign Exchange on mergers and acquisitions Strategy principle To buy and sell shares (or other transferable securities) subjected to financial transactions in the form of a takeover bid (OPA), a public exchange offer (OPE), a public repurchase offer (OPR), mergers, etc. Such a strategy is only implemented when the transaction has been officially announced on the market. The natural direction of the transaction is to buy the stock of the target Company at a discount in relation to the implicit value of the offer and hold the shares up to issue of the offer. If the offer is made in shares of the buyer Company (or if the offer is mixed), a short position is initiated on the shares of the buyer Company to capture the discrepancy between the implicit value of the offer and the target's market price. When the probability of success of the transaction seems insufficient, the reverse position may be set in place (sale of target in the case of an OPA or sale of the target and purchase of the predator in the case of an OPE). It is also possible that the target Company will form the subject of overbids; in this case, it is possible to buy the target share at a price higher than the implicit value of the offer. Instruments used In most cases, transactions concern Company shares. However, it may happen that the transaction is extended to other types of instruments (convertible bonds, equity warrants, Contingent Value Rights. Analysis of the risk/return combination makes it possible to determine which instrument(s) will be used. The hedging put in place for the strategy will depend on the characteristics of the offer and the expectations of the management team. on conglomerate discounts Strategy principle To set up long/short positions between a holding Company (asset holding Company, control holding Company, financial holding Company) and one or more of its listed subsidiaries in order to implement a widening or narrowing of the conglomerate discount (difference between the holding Company's trading price and the value of its underlying holdings). Such a strategy is implemented when the discount varies from its historical level of balance or following a specific event concerning the Company. There are two ways of taking the position: the "natural" way, which consists of buying the stock of the holding Company and selling the shares of its subsidiaries and the "Chinese" way, which corresponds to the reverse situation. Instruments used In most cases, transactions concern Company shares. However, it may happen that the transaction is extended to other types of instruments (convertible bonds, equity warrants, Contingent Value Rights, etc.). Analysis of the risk/return combination makes it possible to determine which instrument(s) will be used. The hedging put in place for the strategy will depend on the characteristics of the offer and the expectations of the management team. OFI ASSET MANAGEMENT Page 7 of 22
Instrument Share / CFD Stock option Subscription warrants, warrants, CVG Convertible bonds, bonds redeemable in shares Options, interest rate futures or interest rate swaps Currency forwards or futures Use Interest rate risk hedging Foreign exchange risk hedging between different unit categories Strategy principle Purchase (or sale) of a Company's ordinary share and sale (or purchase) of that Company's preferential share (or priority dividend share) in order to implement a widening or narrowing of the preferential share discount. Such a strategy is implemented when the discount varies from its historical level of balance or following a specific event concerning the Company. Instruments used The hedging put in place for the strategy will depend on the characteristics of the Company and the expectations of the management team. Instrument Shares / CFD Stock option Subscription warrants, warrants, CVG Convertible bonds, bonds redeemable in shares Options, interest rate futures or interest rate swaps Currency forwards or futures Use Interest rate risk hedging Foreign exchange risk hedging Market Neutral strategies Strategy principle To identify stocks (i) whose listed price seems significantly different from the fundamental value and (ii) for which one or more specific events likely to entail correction of that discrepancy are probable (these transactions are essentially financing transactions, the announcement of a change of rating by the rating agencies, the acquisition or sale of an activity or the financial communications made by the issuer for the stock(s) concerned). The strategy consists of taking a short or long position until occurrence of the expected event or until the stock(s) has reached a target price. To protect these positions against a sector-based or general market risk, these positions may be hedged by a position in the opposite direction on an individual share or on an index. Instruments used The hedging put in place for the strategy will depend on the characteristics of the Company and the expectations of the management team. Instrument Shares / CFD Stock option Subscription warrants, warrants, CVG Convertible bonds, bonds redeemable in shares Options, interest rate futures or interest rate swaps Currency forwards or futures Use Interest rate risk hedging Foreign exchange risk hedging OFI ASSET MANAGEMENT Page 8 of 22
Treasury and Foreign Exchange Strategy principle Cash management aims to remunerate the surplus by investing on the money and bond markets. Depending on the strategies, treasury must hedge operations realised in currencies, and also sales of transferable securities. Secondarily, cash surpluses may be invested, on a one-off basis, in units of cash UCITS. Instruments used Instrument Swap fixed-rate bonds FRN (Floating Rate Notes) Negotiable Debt Securities (ECP, USCP, Deposit Certificates, Cash Notes) Foreign exchange spot / foreign exchange forward / foreign exchange swap Swaps Use Management of MT liquidities Management of MT liquidities Management of ST liquidities Hedging exposures in currencies Hedging interest rate exposures For all strategies as a whole Specific instruments used Specific instruments Convertible Bonds Warrants Contingent value rights, subscription warrants OTC stock options CFD (Contract for Difference) CDS Use, hedging against credit risk Strategies on financial contracts Share derivatives: For exposure to and as a hedge for the general share market risk, the Fund uses futures contracts or OTC contracts listed on the main international indices for shares, individual shares or any other type of share type medium. The Fund manages this exposure mainly through CFD. The CFD, the Contract For Difference, is a non-listed derivative financial product through which the seller undertakes to pay the buyer the difference between the current price of an underlying asset (share, indices, etc.) and its value on a specified date. Credit derivatives: The manager may resort to financial contracts with a view to exposing the Fund to the credit risk by the sale of protection or, on the contrary, to hedge against the credit exposures of the portfolio by the purchase of protection. Use by the manager of credit derivatives will, in particular, make it possible to manage the global credit exposure of the portfolio, the taking or hedging against individual credit risks or a basket of issuers, and realisation of relative value strategies (namely, to hedge and/or expose the portfolio regarding the risk of discrepancy in remuneration on one or more issuers). The derivative instruments used to this end include CDS, CDS indices and options on CDS indices. CDS (Credit Default Swaps) are futures contracts, the underlying asset of which is an obligation by which the buyer pays an annual premium, fixed at the start of the contract (fixed swap flow) and the seller, compensation in the case of a credit event affecting the issuer of the underlying bond (variable flow, otherwise known as conditional flow). OFI ASSET MANAGEMENT Page 9 of 22
Currency derivatives: The mutual fund may operate on the currency market through cash or futures contracts on currencies on organised and regulated markets, French or foreign (futures, options, etc.) or over-the-counter futures currencies contracts (swaps, etc.) Futures transactions shall be used to cover any foreign currency exposure of the mutual fund Interest rate derivatives: In the context of the Fund strategy and in order to manage the sensitivity of the portfolio rates, the manager shall carry out transactions for cover of the risk associated with the bonds held in the portfolio. The derivative instruments used to this end are, in particular, options, futures and interest rate swaps. Interest rate swaps ("IRS") are interest rate exchange contracts by means of which the manager exchanges the flows of a fixed or variable rate debt security for a fixed or variable rate flow. These transactions sometimes give rise to a balancing payment at the start of the contract. Commitment of the Fund on financial contracts: The method of calculation of the fund's commitment ratio is based on the absolute VaR probability method. The fund's VaR is equal to the loss possibly sustained by the fund over a given period (7 days) with a specified probability (95%), known as the confidence level. The 7-day 95% VaR is used by OFI ASSET MANAGEMENT to control the fund's market risk. OFI ASSET MANAGEMENT uses an absolute VaR calculation and will ensure that the fund's VaR does not exceed 5% of the market value of its net assets. Counterparties to transactions on financial contracts traded over-the-counter: The manager may process over-the-counter transactions with the following counterparties: Crédit Suisse, SG, UBS, JPMorgan, BNP, Goldman Sachs, Morgan Stanley and Natixis. In addition, the Management Company maintains relations with the following counterparties with whom the manager may have to deal: Banque Fédérative du Crédit Mutuel, CACIB, CIC, ABN AMRO, BBVA, Banco Santander, Dresdner Bank, Deutsche Bank, RBC, Barclays, HSBC, Bank of America Merrill Lynch, Nomura. None of these counterparties has discretionary decision-making power on the composition or management of the Fund portfolio or on the underlying assets of the financial contracts acquired by the Fund, or has to give its approval for any transaction relating to the portfolio. By means of the transactions realised with these counterparties, the Fund bears the risk of their defaulting (insolvency, bankruptcy, etc.). In such a situation, the net asset value of the Fund may fall (see definition of this risk in the "Risk profile" section below). Financial guarantees OFI ASSET MANAGEMENT has set in place financial guarantee contracts, mutually known as "collateral agreements" with the majority of its counterparties. However, some counterparties do not have such an agreement. The financial guarantees authorised by these agreements are sums of money in euros or in currencies and, for some of them, transferable securities. Taking account of the nature and number of over-the-counter derivatives transactions likely to trigger a margin call in favour of the UCITS, the UCITS does not habitually receive any financial guarantee. In this regard, the management Company does not have any policy for discount of securities received (securities collateral). However, the UCITS reserves the option of receiving collateral, depending on market conditions, in order to not exceed the regulatory limits of exposure. In the case of receipt of the financial guarantee in cash, this may be: - Placed in deposit with credit establishments with their registered office in a Member State of the OECD or a third State having equivalent prudential rules, - Invested in high quality Government bonds; - Used in a repurchase agreement; - Invested in Short-Term Monetary Mutual Funds (UCI). OFI ASSET MANAGEMENT Page 10 of 22
The risks associated with reinvestments of cash depend on the type of assets or the type of transactions and may consist of liquidity risks or counterparty risks. Sensitivity of bond instruments The sensitivity of bond instruments, which may be used in the context of the strategies listed above, may be between 0 and 10. However, the residual sensitivity of the Fund to this type of instrument shall be between 0 and 1, taking account of the sensitivity of the instruments used by the arbitrage strategies and of the sensitivity of the instruments used in the context of cash. Shares or units in other UCITS or investment funds: In order to manage the cash or access specific markets (sector-based or geographic), the Fund may invest up to 10% of its assets in units and shares in French or foreign UCITS themselves investing a maximum of 10% of their assets in units or shares in other UCITS, AIFs or investment funds, or in units and shares of other French or foreign UCIs or investment funds under foreign law which satisfy the conditions provided for in Article R. 214-13 (1) to (4) of the Monetary and Financial Code. These funds may be UCITS managed or promoted by companies in the OFI Group. Other eligible assets: The Fund may hold up to 10% of the net assets in an accumulation of money market instruments, debt securities or capital securities not traded on a regulated market complying with Article R. 214.12 of the Monetary and Financial Code. Acquisition transactions and temporary purchase and sale of securities The Fund is not designed to carry out acquisitions transactions or temporary purchase or sale of securities. Risk profile: Your money will be mainly invested in financial instruments selected by the Management Company. These instruments will experience market developments and fluctuations. The Fund is a UCITS classified as "Diversified". The investor is therefore exposed to the risks below, this list not being exhaustive. Management risks These risks may take concrete form in a drop in the net asset value. These are, in decreasing order of importance: Taking account of the investment strategy implemented, the main risk taken by the investor will be based on the capacities of the manager of the UCITS to correctly determine the intrinsic value of the companies and to anticipate events which may have a bearing on this, and to correctly assess the risk/return combination of arbitrage situations. Risk of failure of a merger-acquisition transaction Evolution of the probabilities of failure (or of success) of a merger-acquisition transaction conditions evolution of the spread on the strategy concerned. In the case of a natural strategy (risk of failure of the deal), abandoning a transaction may result in a significant drop in the target Company's share price to its pre-offer level, and possibly an increase in the shares of the predator in the case of a public offer of exchange. Failure of a merger entails, ultimately, losses for the arbitrage strategy. This risk is even greater since the premium on announcement of a takeover bid is significant and since the probabilities of non-realisation of the transaction are high. In the case of "Chinese" strategies (short position on Company targeted by an offer and possibly long on the predator), initiated on the basis of expectations of failure of the merger transaction, the risk lies in finalisation of the deal. Risk associated with the schedule for the transaction Extension of the deadline for finalisation of a public offer infers a risk on the ex-post profitability of the arbitrage strategy. The Mark-to-Market valuation of merger-acquisition arbitrage strategies depends on money market conditions. This leads to an interest rate risk. OFI ASSET MANAGEMENT Page 11 of 22
Public Offer Risk, counter-offer on the predator or overbid on a short position Intervention on the stock of target companies (long positions) and predators (short positions in the case of a public offer of exchange) entails a Public Offer risk on the hedge (short component) of the strategy. The effects of a public offer or counter-offer on the predator may lead to failure of the arbitrated transaction and/or a risk of loss on the predator (short position in the strategy). "Chinese" positions are, for their part, exposed to a risk of overbid on the level of the offer. In the case of holding Company arbitrages, the OPA risk is translated by a public offer from the holding Company on one of its subsidiaries making up the replication basket. Risk of Holding Company / Basket correlation and volatility of the Holding Company/Basket valuation discrepancy The risk of correlation (Holding Company /Basket arbitrage strategy) originates from the quality of replication of the holdings held by the Holding Company. Some positions cannot be replicated exactly, particularly as regards holdings in unlisted companies. This leads to a risk of correlation between the composition of the Holding Company and the hedge basket. Risk of correlation between Preferential and Ordinary shares The risk of correlation relating to strategies of arbitrage on unit categories originates from the divergences existing between the two unit categories: Preferential and Ordinary. Distinctions between these shares, notably in terms of collection of dividends or voting rights, are translated by movements which are sometimes "un-correlated" between ordinary and preferential shares. Risk associated with the Market Neutral strategy Positions taken in the context of the Market Neutral strategy may suffer from the fall in the stock concerned or in the market in general, notably if the expected events do not occur. Hedging risks Capital risk The UCITS does not benefit from any guarantee or protection, so that the capital originally invested might not be returned in full. Interest rate risk The evolution of rates has a bearing on the development of merger-acquisition arbitrage strategies, according to the forecast currency of the strategy initiated (notably for takeover bids having a relatively distant maturity). Dividend risk An unexpected change in dividend significantly impacts the profitability of the arbitrage strategy. Loan-Borrowing risk It must be possible for the stocks on which the fund has a short position to be borrowed at a low interest rate, in order to protect the profitability of the strategy. Foreign exchange risk The foreign exchange risk is the risk of the investment currency falling in comparison with the euro portfolio reference currency. Investments made on various currencies entail a foreign exchange risk which must be hedged, which is usually done through interventions on currency forwards. There is however a residual foreign exchange risk which may result in a drop in the NAV in the case of unfavourable evolution of the investment currencies in relation to the fund benchmark currency. Market risk The market risk originates from any residual positions in stocks not contributed to the offer and kept pending a withdrawal offer at a higher price. These positions no longer form the subject of a current offer and are, as a consequence, sensitive to a market risk. Liquidity risk The liquidity risk of the portfolio depends on the liquidity of the investment media used: this liquidity risk present in the mutual fund essentially exists on account of OTC positions and, in the case of events which may interrupt the trading of shares on the markets on which they are traded. A stock's lack of liquidity may increase the cost of liquidation of a position and hence affect the net asset value. Level of use of risk factors The aim of the strategies implemented is to isolate one or more risk factors of an instrument, for example, to isolate the market risk on a mergeracquisition arbitrage transaction. In addition to the regulatory ratios, specific limits have been set in place and are reviewed every six months. OFI ASSET MANAGEMENT Page 12 of 22
Qualitative analysis and rating of strategies For each of the strategies implemented, a rating is allocated according to identified risk criteria. This rating is revised with each new information impacting one of the risk criteria. This involves making a qualitative assessment of the risk of the transaction. Diversification constraints Investment limit per individual strategy The maximum percentage to invest on each of the individual portfolio strategies is subordinate on its belonging rating class. The higher the qualitative risk of a strategy, the lower its weighting within the portfolio. Investment limit per rating class A maximum weighting within the portfolio is given to each rating level. Investment limits by type of arbitrage A maximum investment rate is allocated to each type of arbitrage (merger-acquisitions, conglomerate discounts and unit categories and special situations). Quantitative analysis of strategies implemented Stress scenarios on merger-acquisition arbitrages For each strategy, a stress scenario corresponding to a situation of failure of the transaction is calculated, in order to determine the maximum risk incurred. These scenarios are then expressed as probabilities in order to define an average risk on any individual strategy and also in terms of the fund. Value-at-Risk on holding Company and unit category arbitrage and Market Neutral strategy So as to take into account all correlations relating to the various arbitrages on holding companies, unit categories and Market Neutral strategy, a 1-day 99% VaR is also calculated using an external tool. Risk monitoring procedure Market risks and management rules As a general rule, the manager shall endeavour to limit the market risks borne by the fund, by implementing the following rules: Specific risks: The manager envisages limiting the size of each individual position when it is set up; The manager will fix maximum levels of loss for each of the positions beyond which this will be triggered; It will also limit the size of the positions on shares which it considers not very liquid, particularly in the case of short positions which will mainly be invested in liquid shares. Market risks: Sector-based and geographic limitations: the manager will limit the size of allocation of the fund on each sector (as defined in the Dow Jones Stoxx Market Sectors nomenclature) and on each country; Checks on net exposure: the manager will continuously check the net exposure of the fund, both in the case of net long exposure and in the case of net short exposure; The manager will fix maximum levels of loss for the overall portfolio beyond which the net exposure of the portfolio will be reduced. In turbulent market conditions, it will reduce its net exposure by hedging up to the entirety of its positions, by using appropriate instruments. Scenario of risk arbitrage or merger-acquisition type strategies Risk arbitrage strategies, essentially made up in part by strategies of arbitrages on merger-acquisitions, do not come under the market risk. In fact, the behaviour of the stocks forming the subject of a takeover bid in cash (OPA) or in stocks (OPE) is impacted by the nature and probabilities of success of the transaction. OFI ASSET MANAGEMENT Page 13 of 22
In the end, the risk inherent in these positions is no longer a market risk but originates from the emergence of any new information which may affect the probabilities of success of the merger-acquisition transaction. This therefore is an event-based risk, taking material form factually by the rupture of a correlation between two stocks (OPE) or the sudden uncoupling of a stock associated with the abandoning of a cash takeover bid. Description of the methodology of calculation of risks on merger-acquisition strategies The risk factors identified on these merger-acquisition strategies are mainly of two types: Evolution of the probabilities of failure and of success of merger-acquisition transactions The risk of a maximum drop in the case of abandonment or failure of the transaction Moreover, the diversity of strategies on positions is a factor to be considered when assessing the risk on a series of merger-acquisition positions. Since the issue of risk on these strategies is different, the tools used when assessing risks on these positions are adapted to their specificity and their event-based nature. For each of the strategies implemented, a rating is allocated according to identified risk criteria. This rating is revised with each new information impacting one of the risk criteria. This involves making a qualitative assessment of the risk of the transaction. Alongside this qualitative analysis, each merger-acquisition strategy forms the subject of a quantitative analysis aimed at assessing the maximum risk inherent in the position. Thus, a stress scenario corresponding to a situation of failure of the transaction is calculated, in order to determine the maximum risk incurred. These stress scenarios are then expressed as probabilities in order to define an average risk on any individual strategy and also in terms of the merger-acquisition portfolio. Subscribers concerned and standard investor profile: The R units are aimed at all subscribers. The I units are aimed at subscribers with a minimum subscription amount of EUR 3,000,000 (three million euros). For the I units, it is stated that in the case of subscriptions by more than one Company belonging to the same group, within the meaning of Article L.233-3 I. of the Commercial Code, compliance with this minimum subscription shall be assessed by accumulating the subscriptions of the various companies of that group. Similarly, in the case of subscriptions by more than one UCI managed by the same Management Company, compliance with this minimum subscription shall be assessed by accumulating the different subscriptions of the UCIs of the said Management Company. Taking account of the complexity of the financial instruments used and the investment methodology implemented the fund Management Company would like to draw the investor's attention to the complexity of the financial instruments used. In fact, the mutual fund may present a liquidity and volatility risk, notably on account of an investment potential of up to 10% of its assets in the shares or units of foreign investment funds not presenting the same level of security, liquidity and transparency as French UCITS. This product is aimed at investors who have enough experience to be able to evaluate the merits and risks, and who do not require immediate liquidity of their investment. The Management Company and the depositary make available to subscribers, at all times, first, the detailed composition of the portfolio on the date of publication of the latest periodic report on the UCITS and the end of the six-month period in the financial year, and second, the information documents for the underlying UCIs. The recommended investment period is 36 months. OFI ASSET MANAGEMENT Page 14 of 22
Procedure for determination and allocation of income: Capitalisation fund Posting in accounts according to the cashed coupon method. The sums distributable by an UCITS are made up of: 1 The net result plus the carry forward, plus or minus the balance of the income adjustment account; 2 The capital gains made, net of costs, minus capital losses made, net of costs, established during the financial year, plus net capital gains of the same nature established during previous financial years not having formed the subject of distribution or capitalisation, and minus or plus the balance of the capital gains adjustment account. The sums mentioned in points 1 and 2 may be distributed, in full or in part, irrespective of each other. The Management Company decides on the allocation of results. Distributable sums are paid out within a maximum of five months following the end of the financial year. The mutual fund has opted for the following option: Distributable amounts relating to the net result: pure capitalisation: the distributable sums relating to the net result are capitalised in full, except those forming the subject of mandatory distribution by virtue of the law; pure distribution: the distributable sums relating to the net result are distributed in full, rounded to the nearest whole number. The Management Company may decide on the payment of exceptional part payments. the Management Company decides, each year, on allocation of the net result. The Management Company may decide on the payment of exceptional part payments. Distributable sums relating to capital gains made: pure capitalisation: distributable sums relating to capital gains made are capitalised in full; pure distribution: the distributable sums relating to capital gains made are distributed in full, rounded to the nearest whole number. The Management Company may decide on the payment of exceptional part payments. the Management Company decides, each year, on allocation of the capital gains made. The Management Company may decide on the payment of exceptional part payments. OFI ASSET MANAGEMENT Page 15 of 22
Characteristics of units: Characteristics Units ISIN code Allocation of distributable sums Currency Subscribers concerned Minimum amount of Initial subscription R FR0010058164 Capitalisation EUR All subscribers EUR 50,000 I FR0011025188 Capitalisation EUR Subscribers with a minimum subscription amount of EUR 3,000,000 (three million euros) EUR 3,000,000 (1) (1) For the I units, it is stated that in the case of subscriptions by more than one Company belonging to the same group, within the meaning of Article L.233-3 I. of the Commercial Code, compliance with this minimum subscription shall be assessed by accumulating the subscriptions of the various companies of that group. Similarly, in the case of subscriptions by more than one UCI managed by the same Management Company, compliance with this minimum subscription shall be assessed by accumulating the different subscriptions of the UCIs of the said Management Company. Subscription and redemption procedure: Subscription and redemption requests are centralised every day up to 12:00 pm with the Depositary and are executed based on the net asset value on the same day, at an unknown price. The corresponding payments are made on the second non-holiday trading day following the Net Asset Value date applied. Option of subscribing in amount or in units; redemptions are carried out only in quantity of units. Body designated for centralising subscriptions and redemptions: SOCIETE GENERALE 32, rue du Champ-de-tir 44000 Nantes (France) ; Date and frequency of calculation of the net asset value: Daily The net asset value is calculated every non-holiday trading day, and is dated that same day. The original net asset value of the I and R units is: EUR 100 The net asset value of the fund is available on simple request from: OFI ASSET MANAGEMENT 22 rue Vernier 75017 PARIS At the following e-mail address: contact@ofi-am.fr Investors intending to subscribe to units and unit-holders wishing to proceed with redemption of units are invited to make inquiries with the Company holding their account regarding the deadline for consideration of their subscription or redemption request, this deadline possibly being prior to the centralisation time mentioned above. OFI ASSET MANAGEMENT Page 16 of 22
Fees and expenses: Subscription and redemption fees for the R and I units: Subscription and redemption fees are added to the subscription price paid by the investor, or deducted from the redemption price. Commission retained by the UCITS serves to offset the costs borne by the UCITS to invest or divest the assets entrusted. Commission not retained is paid to the Management Company or to the marketers. Fees payable by the investor, collected at the time of subscriptions and redemptions. Subscription fee not retained by the UCITS Subscription fee retained by the UCITS Redemption fee not retained by the UCITS Redemption fee retained by the UCITS 1 The Company reserves the right to not deduct all or part of the subscription fee 2 The Company reserves the right to not deduct all or part of the redemption fee Management fees: Base Net asset value X number of units Net asset value X number of units Net asset value X number of units Net asset value X number of units Rate / scale 3% 1 Maximum rate Nil 1% 2 Maximum rate Nil Fees cover all costs invoiced directly to the Fund, with the exception of transactions costs. For more detail about the fees actually charged to the Fund, please refer to the Key Investor Information Document. For R Units 1 Fees charged to the Fund Base Rate/scale Management Company's internal and external management fees Net assets Fixed fee per transaction 1.35 % incl. tax Maximum rate 2 Maximum turnover fee per transaction. (1) Service provider collecting turnover fee: 100% depositary/custodian Transferable securities and monetary products Eurozone and Mature Countries Emerging Countries UCITS "Ordinary" OTC products "Complex" OTC products EUR 0 to 120 excl. tax EUR 0 to 200 excl. tax EUR 0 to 120 excl. tax EUR 0 to 50 excl. tax EUR 0 to 150 excl. tax Maximum turnover fee per transaction. Service provider collecting turnover fee: 100% Management Company Compensated derivatives Deduction on each transaction EUR 0 to 450 excl. tax Listed products: EUR 25 incl. tax Ordinary OTC: EUR 50 incl. tax Complex OTC: EUR 150 incl. tax 3 Outperformance commission Net assets 20% incl. tax of performance above the capitalised EONIA + 2% (1) For completion of its mission, the depositary, acting in its capacity as custodian of the Fund, implements fixed or flat-rate rates per transaction depending on the nature of the securities, markets and financial instruments traded. OFI ASSET MANAGEMENT Page 17 of 22
Any additional invoicing paid to an intermediary is passed on in full to the Fund and is posted as transaction costs in addition to commission collected by the depositary. Operating and management fees are directly charged to the profit and loss account of the fund on calculation of each net asset value. The fees shown above are based on a VAT rate in force Exceptional legal costs associated with potential recovery of debts are not included in the 3 blocks of fees mentioned above. For I Units 1 Fees charged to the Fund Base Rate/scale Management Company's internal and external management fees Net assets Fixed fee per transaction 0.85 % incl. tax Maximum rate 2 Maximum turnover fee per transaction. (1) Service provider collecting turnover fee: 100% depositary/custodian Transferable securities and monetary products Eurozone and Mature Countries Emerging Countries UCITS "Ordinary" OTC products "Complex" OTC products EUR 0 to 120 excl. tax EUR 0 to 200 excl. tax EUR 0 to 120 excl. tax EUR 0 to 50 excl. tax EUR 0 to 150 excl. tax Maximum turnover fee per transaction. Service provider collecting turnover fee: 100% Management Company Compensated derivatives Deduction on each transaction EUR 0 to 450 excl. tax Listed products: EUR 25 incl. tax Ordinary OTC: EUR 50 incl. tax Complex OTC: EUR 150 incl. tax 3 Outperformance commission Net assets 20% incl. tax of performance above the capitalised EONIA + 2% (1) For completion of its mission, the depositary, acting in its capacity as custodian of the Fund, implements fixed or flat-rate rates per transaction depending on the nature of the securities, markets and financial instruments traded. Any additional invoicing paid to an intermediary is passed on in full to the Fund and is posted as transaction costs in addition to commission collected by the depositary. Operating and management fees are directly charged to the profit and loss account of the fund on calculation of each net asset value. The fees shown above are based on a VAT rate in force Exceptional legal costs associated with potential recovery of debts are not included in the 3 blocks of fees mentioned above. Outperformance commission Variable fees correspond to an outperformance commission. The calculation period for the outperformance commission is the financial year of the UCITS. Each time the net asset value is established, the outperformance of the UCITS is defined as the positive difference between the net assets of the UCITS before consideration of any provision for outperformance commission, and the net assets of a notional UCITS achieving a performance corresponding to the capitalised EONIA +2% and registering the same pattern of subscriptions and redemptions as the actual UCITS. Each time the net asset value is established, the outperformance commission, then defined equal to 20% (including tax) of performance above the capitalised EONIA +2%, forms the subject of a provision, or a provision reversal limited to the existing allocation. Such a provision can only be passed on the condition that the net asset value, after consideration after any provision for outperformance commission, is higher than the net asset value at the start of the financial year. In the case of redemptions, the share of the outperformance commission corresponding to the redeemed units is collected by the Management Company. Apart from redemptions, the outperformance commission is collected by the Management Company on the end date of each calculation period. Exceptionally, the next period of calculation of variable management fees shall run from 9 August 2010 up to the end of December 2011. OFI ASSET MANAGEMENT Page 18 of 22
A description of the method used for calculation of the outperformance commission is made available to subscribers by the Management Company. Procedures for calculation and allocation of the remuneration on acquisitions and temporary purchase or sale of securities N/A Brief description of the procedure for choosing brokers: The OFI Group has introduced a procedure for selection and assessment of market brokers, which makes it possible to select, for each category of financial instruments, the best market brokers and to ensure the quality of execution of orders placed on behalf of our UCITS under management. The management teams can send their orders directly to the market brokers selected or go through the OFI Group trading desk, OIS. This service provider handles the receipt and transmission of orders, followed by execution or not, to the market brokers on the following financial instruments: Debt securities, Capital securities, UCI units or shares, Financial contracts. This service provider's expertise makes it possible to separate the selection of financial instruments (which remains the responsibility of the Management Company) from their trading, whilst ensuring the best execution of orders. A multi-criteria valuation is carried out on a six-monthly basis by the OFI Group's management teams. Depending on the circumstances, it takes into consideration several or all of the following criteria: - Monitoring volumes of transactions per market broker. - Analysis of the counterparty risk and how this develops (a distinction is made between "brokers" and "counterparties"). - The nature of the financial instrument, the execution price, where applicable the total cost, the speed of execution and the size of the order. - Feedback of operational incidents detected by the managers or the Middle Office. At the end of this valuation, the OFI Group can reduce the volumes of orders entrusted to a market broker or withdraw it temporarily or permanently from its list of authorised service providers. This valuation can be based on an analysis report provided by an independent service provider. For the execution of certain financial instruments, the Management Company resorts to commission sharing agreements (CCP or CSA), according to which a limited number of investment service providers: - provide the order execution service - collect brokerage costs relating to services of assistance with investment decisions - pay these costs back to a third party provider of these services The objective sought is to use, as far as possible, the best service providers in each speciality (execution of orders and assistance with investment/disinvestment decisions). OFI ASSET MANAGEMENT Page 19 of 22