subordinated and hybrid financial debts presentation of the …€¦ · subordinated and hybrid...

DOCUMENT EXCLUSIVELY INTENDED FOR RANKIA

Lazard Fund Managers is a common initiative of Lazard Asset Management LLC, its subsidiaries and Lazard Frères Gestion SAS.

Lazard Fund Managers (Ireland) Limited, Sucursal en España, is registered with the CNMV with number 18, having its registered office at Paseo de la Castellana, 140, Piso 10, letra E, Madrid

and is a branch office of Lazard Fund Managers (Ireland) Limited, incorporated in Ireland and supervised by the Central Bank of Ireland.

Subordinated and Hybrid Financial DebtsPresentation of the expertise

Lazard Credit FiLazard Subordinated Financial Debt - Hybrid Contingent

26TH NOVEMBER 2019

1 Lazard Fund Managers

I. Lazard Fund Managers

II. Subordinated and Hybrid Financial Debts Expertise

A. What? Overview of the Financial Debts Segment

B. Why? Fundamentals have improved a lot

C. Who? Team, Investment Approach, Clients

D. How? Strategies and Portfolios

E. Conclusion

Appendices

Disclaimer

Contents

Lazard Fund ManagersI

3 Lazard Frères Gestion

Over 170 Years of International Financial ExpertiseLazard

Source: Lazard.

* Assets Under Management (AUM) as of 30 September 2019

Information reserved for professional investors.

1,000+ employees

400+ investment professionals

45% of 2018 revenues

$231bn of Assets Under Management*

ASSET MANAGEMENT

Mergers & Acquisitions

FINANCIAL ADVISORY

1,400+ employees

55% of 2018 revenues

Wealth Management

Institutional Asset Management Debt & Restructuring Advisory

Government and Sovereign Advisory

US

France

UK

Argentina

Australia

Belgium

Brazil

Canada

Chile

China

Colombia

Germany

Hong Kong

India

Italy

Japan

Mexico

Middle East

Netherlands

Panama

Peru

Singapore

Spain

Sweden

Switzerland

Australia

Belgium

Canada

France

Germany

Hong Kong

Ireland

Italy

Japan

Middle East

Netherlands

Singapore

South Korea

Spain

Switzerland

UK

US

4 Lazard Frères Gestion

Asset Management ExpertiseLazard

Source: Lazard. As of 30 September 2019

Information reserved for professional investors.

EUROPE NORTH AMERICA

ASIA-PACIFICMIDDLE EAST

1848 +1000 +400 $231bnLazard brothers found Lazard

Frères

Employees worldwide Research and Portfolio

management specialists

of AUM

LAZARD ASSET MANAGEMENT & LAZARD FRÈRES GESTION

KEY FIGURES


Lazard Fund Managers offers investors a range of UCITS managed by Lazard Asset Management and Lazard Frères Gestion,

providing a single point of access to the investment expertise of two firms within the Lazard family with distinct capabilities but

shared beliefs.

Lazard Fund Managers’ UCITS fund range combines the best investment ideas of Lazard Asset Management and Lazard Frères

Gestion in developed and emerging markets.

The offering, which encompasses Equity, Fixed Income, Multi-Assets and Alternative Investment Funds managed by Lazard’s

experienced investment professionals, builds on our tradition of evolving our investment platform by developing innovative

investment solutions to meet our investors’ needs.

Throughout all market environments, our managers maintain a disciplined approach to investing with a research-driven

investment process focusing on financial productivity and valuation.

We are committed to active management and we believe there are substantial opportunities for investors to invest in companies

with healthy balance sheets and sustainable returns.

OverviewLazard Fund Managers

We Are Lazard Fund Managers


Assets under ManagementLazard Fund Managers

Asset breakdown by asset class

Assets under Management2:

USD 231 billion | EUR 212 billion | CHF 230 billion

1 Others reflect institutional & private mandates and outstanding funds in life insurance as well as private Equity.2 As of 30 September 2019. Includes those of Lazard Asset Management LLC (New York) and its affiliates as well as those of Lazard Frères Gestion

(Paris) or other asset management businesses of Lazard Ltd.

1


Investment FundsLazard Fund Managers

Emerging Markets Bond

Emerging Markets Debt Blend

Emerging Markets Local Debt

Emerging Markets Total Return Debt

EMERGING MARKETS

CONVERTIBLES

GLOBAL

Lazard Convertible Global*

FIXED INCOME

MULTI-ASSET

GLOBAL

Diversified Return Strategy

EUROPE

Lazard Credit Fi*

As of 30 September 2019 and is subject to change.

This information is for illustrative purposes only and should not be considered an offer or solicitation with respect to any product managed by Lazard.

*Funds managed by Lazard Frères Gestion

EQUITY

EMERGING MARKETS

Emerging Markets Equity

US

US Equity Concentrated

GLOBAL

Global Equity Franchise

Global Listed Infrastructure

Equity

Global Managed Volatility

EUROZONE

Lazard Actions Euro*

Lazard Dividendes Min Var*

Lazard Small Caps Euro*

NORTHERN EUROPE

Norden*

Subordinated and Hybrid Financial Debts

ExpertiseII


In our opinion, investors have three ways of achieving returns on the Fixed Income market:

Alternatives available for investors in the Fixed Income market

Source: Lazard Frères Gestion, Bloomberg.

For illustration purposes only.

Going down in the capital structure

Lengthening the maturity

Going down in terms of credit quality

DOCUMENT INTENDED FOR PROFESSIONAL INVESTORS

1

3

2


Corporate Hybrids IG 1.8% 4.4 A-

Corporate Hybrids HY 2.2% 3.5 BBB

Financial Hybrids 2.8% 3.9 A-

Yield, duration and issuer ratingAsset class features

Source: Lazard Frères Gestion, Bloomberg, as of 28 October 2019.

1. YTW in Euro

The yield is the counterparty of a capital risk. Past yields do not guarantee the capital or future performance.

Yield to Worst1 Modified Duration Average issuer rating

Sovereigns 0.1% 8.2 A+

Euro Corporates 0.4% 5.2 A-

Euro Senior Banks 0.2% 4.1 A

Indices used:

EG00: ICE BofAML Euro Government Index

ERS0: ICE BofAML Euro Corporate Senior Index

EB3A : ICE BofAML Euro Senior Banking Index

GNEC: ICE BofAML Global Hybrid Non-Financial Corporate Index

HNEC: ICE BofAML Global Hybrid Non-Financial High Yield Index

BCCGTREH: Bloomberg Barclays Global Contingent Capital Hedged Index

1

3



Source: Lazard Frères Gestion.

The above opinion was expressed as of the date of this presentation and is likely to change.

What are the advantages of hybrid debt?


Credit risk on Investment Grade issuers

Shorter maturity

An additional spread vs senior debt

What?

Overview of the Financial Debts

SegmentA


Versus similar strategiesRelative size of Financial Subordinated Debts

Source : Lazard Frères Gestion, Bloomberg, as of 31 December 2018.

Methodology: ICE BofAML Global High Yield Index (HW00) for global high yield bonds, Bloomberg Barclays Global Contingent Capital Total Return

Index Unhedged EUR (BCCGTREU) for AT1 bonds, JP EMBI Global for Emerging Sovereign Bonds.

We extract bonds issued by western European issuers from IG, HY and AT1 index to make the computations.

Data are as of 31/12/2018 in EUR.


Financial Subordinated Debts from Western European issuers compare to European High Yield

Corporates and Emerging Govies (in € billions)


AT1212

387

477

Tier 2472

0

100

200

300

400

500

600

700

Financial Subordinated European High Yield Emerging Markets - Sovereign HardCurrency

684


Why are issuers issuing hybrid debt ?

T2: Tier 2 Debt / AT1: AT1 Debt.

For illustrative purposes only.

Regulatory reasons:

Support for credit ratings

Rating agencies reason:

Tier 1 leverage ratio

AT11,5%

T22%

Equity

Cost



0%

1%

2%

3%

4%

5%

6%

7%

0% 5% 10% 15% 20%

Senior Banks Tier 2 Banks Tier 2 Insurance AT1 Equity

Sources: Lazard Frères Gestion, Bloomberg.

Spread levels as of 5 September 2019.

Indices used : JP Morgan Subordinated Security Index Senior, JP Morgan Subordinated Security Index Lower Tier 2 Banks, JP Morgan Subordinated

Security Subordinated Incos Index and Bloomberg Barclays Global Contingent Capital for AT1 / Equity : Stoxx 600 Banks.

Past performance does not guarantee future performance. Performance over less than one year is provided for illustration purposes only.

Performance data is provided for information purposes only and should be assessed over the recommended investment period.

Yield/Volatility profile

Capital structure of a

bank

Tier 2

Additional Tier 1

Equity

Senior

Credit spreads

In basis points


Investment universe

90

193

410

Yields

2.1

2.1

1.1%

2.0%

3.5%

1.8

1.8

Yield

Vol.


-100

-50

0

50

100

150

200

250

AT1 Tier 2 Senior Equity (Dividend included)

Cumulative return since 31 December 2008Performance overview

Sources : Lazard Frères Gestion, JP Morgan, Barclays and Bloomberg. As of 30 September 2019, in euro hedged.

Cumulative performance since 31/12/2008 to 30/09/2019.

Inception date Global Bloomberg Barclays 09/05/2014.

Indices used: JP Morgan Subordinated Security Index Senior, JP Morgan Subordinated Security Index Lower Tier 2 Banks and Bloomberg Barclays Global

Contingent Capital for AT1 / Stoxx 600 Bank equity.

Past performance does not guarantee future performance.

Performance data is provided for information purposes only and should be assessed over the recommended investment period. For illustrative

purpose only.


CUMULATIVE PERFORMANCE FROM 31/12/2008 TO 30/09/2019

+ 228%

+112%

+24%

+60%

Why?

Fundamentals have improved a lot and

let’s talk about the RisksB


Fundamentals

Source: Lazard.



EarningsCapital

p. 75-76

Liquidity

p. 78

Asset Quality

p. 77


Banks: AT1 vs EquityDifferent risk/return profiles

Source: Lazard Frères Gestion, Bloomberg, as of 30 September 2019.

Performance and volatility figures over 5 years.

Index: Bloomberg Barclays Global Contingent Capital (AT1: BCCGTREH) / Stoxx 600 Banks dividends reinvested (Banks equity: SX7R).

Past performance does not guarantee future performance.

Performance data is provided for information purposes only and should be assessed over the recommended investment period. For

illustrative purpose only.



AT1 Banks equity

Solvency risk

Earnings volatility risk

Solvency risk

6.4%

5.2%

-4.5%

22.5%

5Y annualised Performance

5Y annualised Volatility


Quick summary about securities features – Coupons RisksFinancial Subordinated Debts

Source : Lazard Frères Gestion, Bloomberg. For illustrative purpose only.

*5 years annualized volatility as of 30 September 2019, on a daily basis.

Indices used: JP Morgan Subordinated Security Index Lower Tier 2 Banks (JPSULTEI Index) / Bloomberg Barclays Global Contingent Capital for AT1

(BCCGTREH Index) / Stoxx Europe 600 Banks for equities (SX7R).



Tier 2 Fixed & Mandatory

Coupons1 2 3 4 5

K

10

Average rating: BBB

Volatility*: 2.5%

1 2 3 4 5

CallK

AT1Fixed & Optional

Coupons

10Average rating: BB

Volatility*: 5.2%

Cash flows

EquityVariable & Optional

Dividends

Rating: NR

Volatility*: 22.5%

12

3

4 65

1


Financials vs Corporates default rate over the long termDefault rate

Source: S&P. Data on Corporates are biased by the high weight of issuers in the HY category (60% of non-financial issuers vs. 26% for financial

issuers) all geographical areas combined as of December 2018.

Nevertheless, the cumulative overall default rates over 5 years between 1981 and 2018, all geographical areas and all sectors combined, are 0.49%

for A-rated issuers (vs. 0.30% for European financial issuers), 1.64% for BBB issuers (vs. 0.24%) and 6.78% for BB issuers (vs. 1.43%).

The above opinion was expressed as of the date of this presentation and is likely to change. For illustrative purpose only.


0

5

10

15

20

25

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

All financials All nonfinancials

Standard & Poor's publication of its annual study on Corporate Default Rates between 1981 and 2018:

10-Year Cumulative Default Rates

Average cumulative default rate over 10 years was:

4.9% for Financials Institutions

11.5% for Corporates

2


Source: Lazard Frères Gestion, JP Morgan and Bloomberg. As of 30 September 2019.

Standard Deviation on a daily basis over 260 days.

Volatility is normalised and limited


260-day trailing standard deviation trend

0

10

20

30

40

50

60

70

Stoxx 600 Europe Banks ND

Bloomberg Barclays Global Contingent Capital Total Return Index Value Hedged EUR

JPM SUSI T1 Index

JPM SUSI LT2 Index

4


Source: Lazard Frères Gestion, Bloomberg, as of 30 September 2019.

Security: Santander 6.25%, callable in March 2019.

The above opinion was expressed as of the date of this presentation and is likely to change. For illustrative purpose only.

Rising Rates impact on Capital Instruments Securities


Cash flow illustration

1 2 3 4 5 6 7 8 9 10

Coupons

Years

From year 1 to year 10:

Fixed 5% coupon Euribor 3 Months + initial Spread + step-up 100bps

=

1 to 3% coupon

Old generation

New generation

1 2 3 4 5 6 7 8 9 10

Coupons

Years


6.25% coupon5Y Euros Mid-Swaps Rates at 0.840%


5.481% coupon5Y Euros Mid-Swaps Rates at 0.071%

15

if Rates rise / decline

Coupon declinedby 12%

Coupon will rise

Coupon will decline

3 5

Securities prices declinedfrom 15 to 30%

Coupons declinedfrom 40 to 80%

Security price declinedby 1%

Who?

Team, Investment Approach, ClientsC

25 Lazard Fund ManagersSource: Lazard Asset Management and Lazard Frères Gestion, as of 30 June 2019. Include LAM expertise.

Global platformLazard Fixed Income Investment Resources

US, EM & Global Fixed Income Global, Euro & Nordic Fixed Income

New-York Frankfurt

Paris

Singapore

MONTHLY MEETING

Global Fixed Income Team

60 professionals

BI-MONTHLY MEETING

European Credit Research Team

12 professionals

€ 34 Bn in Assets Under ManagementAs of 30 June 2019

60 professionals within the Fixed Income

Franchise (Lazard Group)



Source : Lazard Frères Gestion, as of September 2019.

Our team is traditionally stable, unfortunately, we are unable to guarantee the presence of the managers listed above during the life of the product.

The information listed above is current as of the date of this presentation.

A dedicated investment team on Financial sector


2 Fund Manager / Analyst dedicated to Hybrid and Subordinated Financial Debt

23 years of experience

12 years at Lazard Frères Gestion

Lead Fund Manager/Analyst

François LAVIER, CFA Alexis LAUTRETTE

Fund Manager/Analyst

10 years of experience

2 years at Lazard Frères Gestion

Head of Fixed Income

Jean-Philippe

Quiterio

ÉléonoreBunel

Camille Suh

Benjamin Le Roux

Frédéric Penel

Lionel

Clément

Alexia Latorre, CFA

François Lavier, CFA

Alexis Lautrette

21years of experience

in financial markets on average

8 Fund Manager/Analyst

1 Money Market Fund Manager

1 Fund Manager Assistant

Lazard Frères Gestion Fixed Income Management Team

Money MarketFund Manager


A combination of Fixed Income & Equity expertiseAnalysis resources dedicated to Financial sectors

Source : Lazard Frères Gestion, as of September 2019.

LFG for Lazard Frères Gestion: François Lavier, Alexis Lautrette, Scander Bentchikou.

LAM Lazard Asset Management: Ulrich Teutsch, Agnese Melbarde, Seung-Ho Ahn, Jonathan Morris.

Our team is traditionally stable, unfortunately, we are unable to guarantee the presence of the managers listed above during the life of the product.

The information listed above is current as of the date of this presentation.


Equity

Jonathan Morris30 years of experience

11 years at LAM

Scander Bentchikou17 years of experience

9 years at LFG

Fixed Income

Alexis Lautrette10 years of experience

1 year at LFG

Agnese Melbarde11 years of experience

7 years at LAM

Seung-Ho Ahn18 years of experience

5 years at LAM

DEVELOPED

COUNTRIES

EMERGING

COUNTRIES

Ulrich Teutsch20 years of experience

9 years at LAM

François Lavier23 years of experience

11 years at LFG



For illustrative purpose only.


Investment Approach

A model of Fund Manager/Analyst

200 meetings with issuers over the last year

In-depth knowledge of the regulations (impacts on securities, clauses specific to hybrids,

covenants ...)

Seek to generate among the best risk-adjusted return for our clients

An active and unconstrained investment approach

12 years of track recordon the asset class


BOTTOM-UP

INVESTMENT

APPROACH


Source: Lazard Frères Gestion, March 2019.

The top 10 investors refer to the top 10 clients of open-funds, dedicated funds or mandates invested in Subordinated Financial Debt and managed by Lazard

Frères Gestion.

Client base


Breakdown by client type Top 10 investors

Name % of total assets

French Non-Life Insurer 18%

French Life Insurer 14%

French Corporate 11%

French Life Insurer 4%

Italian Life Insurer 4%

French Asset Manager 3%

French Pension Fund 2%

Spanish Private Bank 2%

French Asset Manager 2%

French Composite Insurer 2%

3%

8%

11%

28%

49%

0% 20% 40% 60%

Pension Funds

Asset Managers

Corporates

Private Banks / Family Offices

Insurers

30 Lazard Fund ManagersSource: Lazard Frères Gestion.

Reasons for investing in Financial Subordinated and Hybrid Debt Strategies


INSURERS

PRIVATE BANKS / FAMILY

OFFICES / ASSET

MANAGERS

CORPORATES

Asset class attractiveness

Expertise delegated to external AM

Not investing directly in AT1

Not investing directly in Tier 2 outside of

best rated entities

Not investing hugely in subordinated

debts of insurers

Not sensitive to ratings of those securities

Yield enhancement

Good quality credit of issuers

Good risk-adjusted returns

Fundamentals are improving

Visibility on fundamentals

Expertise delegated to external AM

Not investing directly in AT1

Not investing directly in Tier 2

How?

Strategies and PortfoliosD


-

500

1 000

1 500

2 000

2 500

3 000

0

500

1000

1500

2000

2500

3000

Open Funds Others (Mandates, Dedicated Funds, Dated Closed Funds) Total AUM €M (Right scale)

A track record of twelve years – Lazard Frères Gestion


Source: Lazard Frères Gestion, as of 30 September 2019.

Total AUM€ 2 449M


Source: Lazard Frères Gestion, as of 30 September 2019. GIPS Classification: Product and Strategies offering.

Does not include LAM AUM.

Asset Under Management Lazard Frères Gestion


SUBORDINATED FINANCIAL DEBT

BLEND HYBRID CONTINGENT

OPEN FUNDOPEN FUNDDEDICATED

FUND

€ 1 144M AUM

€ 913M AUM

€ 231M AUM

€ 342M AUM

€ 342M AUM

SENIOR FINANCIAL

DEBT

BUY & HOLD

€ 209M AUM

MANDATE

€ 708M AUM

DATED FUND MANDATES

€ 21M AUM

€ 687M AUM

€ 2.4 BN

Assets Under Management

€ 209M AUM

€ 2.2Bn AUM

BUY & HOLD

SUBORDINATED

CREDIT

OPEN FUND

€ 17M AUM

€ 17M AUM

Legend:

Financial Subordinated

Hybrid Financial

Hybrid Corporate


Subordinated Financial Debt Hybrid Contingent Strategy – Representative Account

GSIB: Global Systemically Important Banks (G-SIBs) Defined by the Financial Stability Board (FSB), list of banks which are large enough to put

Financial Stability at risk in case of failure of one of them. They are defined depending on the scale and the degree of influence they hold in global and

domestic financial markets.

Sources: Bloomberg and Lazard Frères Gestion, as of 30 September 2019.

For illustrative purpose only. Figures may vary over the time.

Which is making us different, or, at least, complementary?


But not

China, Russia, Turkey, Brazil… x x

Private placements x x

Credit Linked Notes x x

< €150M securities 0.1% 0.2%

< €300M securities 7.5% 6.5%

18%

6%

Insurance companies

BBB-

BB

Average rating at the security level

17%

20%

Legacy instruments

79%

71%

Non-GSIB issuers

69%

77%

Large size securities

30%

24%

Recovery stories

25%

30%

USD, GBP securities

17%

75%

AT1

But also

GSIB issuers 21% 29%

Legend:

Lazard Credit Fi

Subordinated Financial Debt Hybrid Contingent Strategy – Hybrid Contingent



As of 30 September 2019. For illustrative purpose only.

ESG integration overview

EXTERNAL INPUTS: ESG DATABASES


For issuer with a weak Global Score

ESG TEAM ANALYSIS

ESG ANALYST

Pascale Petit

INTERNAL DATABASE OUTPUTS ESG

EQUITY & FIXED INCOME TEAMS

Strategies


Lazard Credit Fi Fund Index: ICE BofAML Euro Financial Index.

Subordinated Financial Debt - Hybrid Contingent Strategy Index: Global Contingent Capital Total Return hedged in EUR, net income reinvested.

Strategy profiles

Currently focused on

Tier 2

Currently focused on Additional Tier 1

Tier 2

Additional Tier 1

Equity

Senior

Capital structure Lazard Credit Fi

Investment horizon : 3 years

Subordinated Financial Debt - Hybrid Contingent

Investment horizon : 5 years


Strategy description

The Subordinated Financial Debt – Hybrid Contingent strategy

invests primarily in subordinated debt (AT1) issued by European

financial institutions.

Investment objective

The investment objective is to outperform compounded ICE

BofAML Euro Financial Index, expressed in euros, net of charges,

over a recommended investment period of three years.


Breakdown by level of subordinationStrategies with identifiable profiles

Allocations are subject to change.


Sources: Bloomberg and Lazard Frères Gestion, as of 30 September 2019.

Excluding cash and UCITS


Legacy Tier 1

20%

Tier 2 5%

Additional Tier 175%

Additional Tier 117%

Legacy Tier 115%

Tier 257%

Senior11%

Lazard Credit Fi Subordinated Financial Debt - Hybrid Contingent


Key figuresStrategies with identifiable profiles



1. As of 30 September 2019. Yield in euro hedged, on a weekly basis.

The yield is the counterparty of a capital risk. Past yields do not guarantee the capital or future performance. Past performance is not

indicative of future performance.

YIELD1

2.3%

3Y ANNUALISED

PERFORMANCE1

5.1%

3Y VOLATILITY1

3.6%

YIELD1

4.0%

3Y ANNUALISED

PERFORMANCE1

6.6%

3Y VOLATILITY1

4.8%




Key figuresStrategies with identifiable profiles



AVERAGE SPREAD

VS. GOVERNMENT

319 BPS

MODIFIED

DURATION

4.3

SPREAD

DURATION

4.4

AVERAGE SPREAD

VS. GOVERNMENT

489 BPS

MODIFIED

DURATION

4.4

SPREAD

DURATION

4.6




Distribution of coupons paymentFor Investors looking at Income



The yield is the counterparty of a capital risk. Past yields do not guarantee the capital or future performance. Past performance is not

indicative of future performance.


4,7%

4,2%

4,7%

4,0%

4,2%

4,4%

4,6%

4,8%

2017 2018 2019

Average

Average

4,4%

3,9%

3,0%

4,1%

2,5%

2,8%

3,1%

3,4%

3,7%

4,0%

4,3%

4,6%

2016 2017 2018 2019


ConclusionsE


*in 2017.


Source: Lazard Frères Gestion, as of 30 September 2019. For illustration purposes only.

Securities are given for illustration purposes only and may not be included in our portfolio.

For more information about the fund’s other characteristics and risks, please refer to the prospectus available from the company on request or on

www.lazardfreresgestion.fr

What makes us different ?


Good compromise size

Flexibility

2019 turnover 80%

Agility

Non-GSIB 79% / 71%

Group supportLarge resources of the Lazard Group for Research

and Portfolio Management

Communication

Availability1-to-1 meeting with PM

Conference call on demand

Marketing materials

Many documentation available p.39-40-41

Expertise

Track record

Longest experience – since March 2008

Rigorous AnalysisTremendous Fundamental Analysis and

knowledge of our Universe:

no Banco Popular

no Monte dei Paschi*

Deep Expertise

Less well-known entities 79% / 71%

Important knowledge on Legacy Instruments 15% / 20%

Recovery story 30% / 24%

Focused on Western EuropeNo exposure to China, Russia, Turkey, Brazil

Legend:

Lazard Credit Fi

Subordinated Financial Debt - Hybrid Contingent

Appendices


Communication – Product focus

Product Marketing Material

Product presentation (on a quarterly basis)

Market outlook

Philosophy and Investment process

Positioning and performance

Fund profile - 4 pager (on a quarterly basis)

Market environment key points

Performance snapshot

Characteristics


6


Communication – Markets thoughts & Sales Help

Thought leadership Material

Asset Class Sales Deck

(on a yearly basis)

Financial Debt Universe snapshot

Correlation analysis

Asset classes comparison

Market Flash – Financial Debts

(Bi-monthly)

Systematic risk indicators

Primary market issuances

Financial Debt and Money Market

key indicators

Letter from the Manager

(occasional)

Views on the market

Key events and comments

Education and regulation changes


6


Communication – Reporting Material

Reporting and Performance Analysis Material

Factsheet (on a monthly basis; 2 pages)

Positioning and performance

Performance analysis (on a monthly basis; 17 pages)

Performance contribution / attribution


6


Fixed Income

Reminder of Risks for Investors

Risk of capital loss:

The strategy does not provide any guarantees or capital protection. It is

therefore possible that you may not recover the full amount of your initial

investment.

Interest rate risk:

Risk of a fall in the value of equities, and hence in the portfolio, resulting

from a change in interest rates. Because of its sensitivity range, the

value of this component of the portfolio may decrease, either in the case

of a rise in interest rates if the portfolio's sensitivity is positive, or in the

case of a fall in interest rates if the portfolio's sensitivity is negative.

Credit risk:

Credit risk is the risk that the borrower does not repay his debt or cannot

pay the coupons during the lifetime of the security. Risk of a fall in the

value of equities, and hence in the portfolio, due to a change in the credit

quality of the issuers or to the change in credit spreads. Because of its

credit sensitivity range, the value of this component of the portfolio may

decrease, either in the case of a rise in spreads, if the portfolio's credit

sensitivity is positive, or in the case of a fall in spreads if the portfolio's

credit sensitivity is negative.

Risks linked to contingent or subordinated securities:

The strategy may be exposed to contingent or subordinated securities.

Subordinated debt and contingent convertible bonds are subject to

specific risks of non-payment of coupons and capital loss in certain

circumstances. At a certain solvency threshold, referred to as the

"trigger” threshold, the issuer may or must suspend the payment of

coupons and/or reduce the nominal value of the security or convert such

bonds into shares. Notwithstanding the thresholds specified in the

issuing prospectuses, the supervisory authorities may apply these rules

preventively if the circumstances require, based on a subjective

threshold known as the "point of non-viability". These securities expose

holders to either a total or partial loss of their investment following their

conversion into shares at a predetermined price or because of the

application of a discount provided for contractually in the issuing

prospectus or applied arbitrarily by a supervisory authority. Holders of

these securities are also exposed to potentially large price fluctuations in

the event that the issuer has insufficient equity or experiences difficulties.

Currency risk:

The strategy may invest in securities and UCIs that are themselves

permitted to purchase stocks denominated in currencies other than the

euro. The value of these assets may decline in line with changes in the

exchange rates.

Liquidity risk:

This is the risk that a financial market can absorb the volumes of sell (or

buy) transactions only by significantly decreasing (or increasing) the

price of assets when trade volumes are low or when there are market

tensions, resulting in a possible decrease in the fund's net asset value.

Equity risk:

Investors are exposed to equity risk. Fluctuations in share prices may

have a negative impact on the fund’s net asset value. The fund's NAV

may decrease during periods in which equity markets are falling.

Counterparty risk:

Counterparty risk is related to the use of over-the-counter products. The

strategy is exposed to the risk of non-payment or delivery by the

counterparty with which the transaction is negotiated. This risk may

result in a decline in the fund's NAV.

Risk associated with investment in the futures markets:

The use of derivatives may cause exposure to an upward or downward

change of the fund’s net asset value.



CharacteristicsLazard Credit Fi

(1) Ongoing charges do not include: outperformance fees and transShare charges except in the case of subscription and/or redemption fees paid by the Fund when it buys or sells units in

another collective management vehicle. The data communicated, which include management and operating costs as well as transShare fees charged to the Fund, are based on the previous

exercise, ended in March 2019. These figures may vary from year to year.

For more information about the fund’s other characteristics and risks, please refer to the prospectus available from the company on request or on www.lazardfreresgestion.fr

PVC EUR PVD EUR PC EUR PD EUR PC H-USD PC H-CHF TC EUR RVC EUR RVD EUR

CH

AR

AC

TE

RIS

TIC

S

Management company Lazard Frères Gestion

Custodian Caceis Bank

Delegated agent for the centralisation of orders

from December 4th 2017Caceis Bank and Lazard Frères Banque, on behalf of clients for whom it provides custody account-keeping services

Legal form French open-end investment fund

AMF classification International bonds and debt securities

Subject to European Directive 2009/65/EC Yes Yes Yes Yes Yes Yes Yes Yes Yes

PEA eligible No No No No No No No No No

Inception date 7-Mar.-08 29-Jul.-14 14-Apr.-14 31-Jan.-14 5-Jan.-16 20-Feb.-17 31-Jan.-18 3-Jul.-09 31-Jan.-18

Currency Euro Euro Euro Euro USD CHF Euro Euro Euro

ISIN code FR0010590950 FR0012074151 FR0011844034 FR0013306743 FR0013076932 FR0013236791 FR0013305935 FR0010752543 FR0013306735

Appropriation of distributable amounts:

allocation of net incomeAccumulation Distribution Accumulation Distribution Accumulation Accumulation Accumulation Accumulation Distribution

Appropriation of distributable amounts:

allocation of net realised capital gainsAccumulation

Accumulation

and/or distribution

and/or retained

Accumulation

Accumulation

and/or distribution

and/or retained

Accumulation Accumulation Accumulation Accumulation

Accumulation

and/or distribution

and/or retained

Benchmark ICE BofAML Euro Financial Index

PL

AC

ING

OR

DE

RS

Minimum initial subscription None 1 share 500 000 euros 1 share 1 share 1 share ≥ 500 000 euros 1 share 1 share

Frequency of NAV calculation Daily Daily Daily Daily Daily Daily Daily Daily Daily

Execution of orders Based on the next NAV for orders placed before 12:00am

Subscription / redemption settlement date D (NAV date) + 2 business day / D (NAV date) +2 business days

FE

ES

Ongoing charges(1) 0.28% 0.28% 0.66% 0.66% 0.71% 0.72% 0.66% 0.95% 0.95%

Financial management fees maximum (incl.

Taxes)

0.265% of the net

asset (excluding

UCIs managed by

LFG)

0.265% of the net

asset (excluding

UCIs managed by

LFG)

0.665% of the net

asset (excluding

UCIs managed by

LFG)

0.665% of the net

asset (excluding

UCIs managed by

LFG)

0.715% of the net

asset (excluding

UCIs managed by

LFG)

0.715% of the net

asset (excluding

UCIs managed by

LFG)

0.665% of the net

asset (excluding

UCIs managed by

LFG)

0.965% of the net

asset (excluding

UCIs managed by

LFG)

0.965% of the net

asset (excluding

UCIs managed by

LFG)

Administrative fees external to the management

company maximum (incl. Taxes)0.035% of the net asset

Subscription fee maximum

(incl. Taxes)

Not retained by the

Fund4% max 4% max 4% max 4% max 4% max 4% max 4% max 4% max 4% max

Retained by the Fund None None None None None None None None None

Redemption fee maximum

(incl. Taxes)

Not retained by the

FundNone None None None None None None None None

Retained by the Fund None None None None None None None None None

Performance fees with High Water Mark

30% of the Fund's

outperformance

relative to the

index. This fee will

be capped at 2%.

Last exercise:

0.0%

30% of the Fund's

outperformance

relative to the


be capped at 2%.

Last exercise: 0,0%

None None None None None

30% of the Fund's

outperformance

relative to the


be capped at 2%.

Last exercise:

0.0%

30% of the Fund's

outperformance

relative to the


be capped at 2%.

Last exercise: 0,0%

Countries of registration



RisksLazard Credit Fi

*Exposure in the interest rate and exchange explains the UCITS ranking in this category. The

used historical data could not give a reliable indication of the future UCITS risk profile. Nothing

guarantees that the above category remains unchanged, and the ranking may evolve in the time.

The lowest category is not synonymic of risk-free investment. Capital is not guaranteed.

Equity risk: The Fund may be subject to significant fluctuations in theunderlying equities through possible investments in convertible bonds.The equity risk will remain accessory (less than 10%).

Exchange rate risk: Besides euro-denominated securities, the Fund mayinvest up to 75% of its assets in securities denominated in US dollarsand/or pounds sterling. The resulting exchange rate risk (unhedged)may not exceed 10% of the Fund's assets.

Counterparty risk: This is the risk associated with the Fund’ use offinancial futures, over-the-counter financial instruments and/ortransactions involving temporary purchases and sales of securities.These transactions, entered into with one or more eligiblecounterparties, potentially expose the Fund to a risk of failure of anysuch counterparty, which may lead to default on payment.

Derivative instrument risk: The Fund may hold up to 100% of its netasset value with a synthetic exposure to interest rate instruments and/orindex instruments. The use of derivative products on organised or over-the-counter markets may expose the net asset value to strong upward ordownward variations, through underlying which react strongly to marketfluctuations.

Risk scale* :

Risk of capital loss: It is possible that the Fund may not meet its

performance objectives. The fund is not guaranteed or protected. Therefore

investor may not recover its initial investment.

Interest rate risk: There is a risk of a fall in the value of bonds and other

fixed-income securities and instruments, and hence in the portfolio,

resulting from a change in interest rates.

Credit risk: A bond issuer may default. Thus, such a default could bring

about a fall in the Fund’ net asset value. Even where there is no issuer’s

default, market variations in credit spreads may result in negative

performance. These risks are even more important as the bond issuer’s

quality declines. The fall in net asset value may be even greater as the Fund

is invested in debt belonging to the speculative or ‘high yield’ category. This

Fund must be considered as speculative for its investment holdings in

securities with low rating. Furthermore, the use of speculative or ‘high yield’

securities may involve a risk of greater fall in net asset value.

Risks linked to contingent or subordinated securities: The Fund maybe

exposed to contingent or subordinated securities. Holders of those

securities can partially or totally lose their investments following the

conversion into equities at a pre-determined price or a contractual haircut

as defined in clauses of the issue's prospectus, or arbitrarily decided by a

Supervisor. Holders of those securities can also be exposed to significant

prices fluctuations in case of lack of solvency requirements or issuer's

difficulties.

Liquidity risk: This relates to the difficulty or impossibility of selling the

securities held in the portfolio at the appropriate time and at the portfolio’s

valuation price, on account of the reduced size of the market or the absence

of volume on the market on which these securities are usually traded.

2 3 4 5 61 7

Lower risk, returns are likely to be lower

Higher risk, returns are likely to be higher

For more information about fund’s other characteristics and risks, please refer to the prospectus available from the company on request or on www.lazardfreresgestion.fr


Lazard Subordinated Financial Debt – Hybrid ContingentGIPS Composite Information

Source: Lazard. As of 30 June 2019.

Past performance does not guarantee future performance. Performance over less than one year is provided for illustration purposes only.

These performance data are provided for information purposes only and should be assessed over the recommended investment period. Information reserved for professional investors.

Range of standard management fees takes into consideration share class charges of all portfolios contained within this composite.


Disclaimer

This is a financial promotion and is not intended to constitute investment advice.

Lazard Credit Fi is a French mutual fund (Fonds commun de placement), authorised and regulated as UCITS by the Autorité des marchés financiers and

managed by Lazard Frères Gestion SAS.

Copies of the full Prospectus, the relevant Key Investor Information Document (KIID) and the most recent Report and Accounts are available in English,

and other languages where appropriate, on request from the address below or at www.lazardfreresgestion.fr. Investors and potential investors should read

and note the risk warnings in the Prospectus and relevant KIID.

Past performance is not a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and you may not get

back the amount you invested. Any yield quoted is gross and is not guaranteed. It is subject to fees, taxation and charges within the portfolio and the

investor will receive less than the gross yield. There can be no assurance that the portfolio's objectives or performance target will be achieved. Any views

expressed herein are subject to change.

The returns from your investment may be affected by changes in the exchange rate between the portfolio's base currency, the currency of the portfolio's

investments, your share class and your home currency.

The information provided herein should not be considered a recommendation or solicitation to purchase, retain or sell any particular security. It should also

not be assumed that any investment in these securities was or will be profitable.

The contents of this document are confidential and should not be disclosed other than to the person or persons for whom it is intended.

FOR FINANCIAL PROFESSIONAL USE ONLY.



Disclaimer

Fixed income: Yields from bonds reflect in part the risk rating of the bond issuer. Investment in lower rated bonds increases the risk of default on

repayment and the risk to capital of the portfolio. High yielding assets may carry a greater risk of capital values falling or have limited prospects of capital

growth or recovery. Investment in high yield securities involves a high degree of risk to both capital and income. Yields from bonds reflect in part the risk

rating of the bond issuer. Investment in lower rated bonds increases the risk of default on repayment and the risk to capital of the portfolio.

Derivatives: The portfolio invests in financial derivative instruments ("FDIs"). While the use of FDIs can be beneficial, they also involve risks different

from, and in certain cases, greater than, the risks presented by more traditional investments. FDIs may be subject to sudden, unexpected and substantial

price movements that are not always predictable. This can increase the volatility of the portfolio’s Net Asset Value. FDIs do not always totally track the

value of the securities, rates or indices they are designed to track. The use of FDIs to gain greater exposure to securities, rates or indices than by a direct

investment, increases the possibility for profit but also increases the risk of loss. The Fund is also subject to the risk of the insolvency or default of its

counterparties to FDI investments. In such events the Fund may have limited recourse against the counterparty and may experiences losses.

S&P Credit Ratings: This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s.

Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third

party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible

for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content

providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use.

Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages,

costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs or losses caused by negligence) in connection with any use of

their content including ratings. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell

securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment

advice.

JP Morgan: Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index is

used with permission. The Index may not be copied, used or distributed without J.P. Morgan’s prior written approval. Copyright 2018, J.P. Morgan Chase

& Co. All rights reserved.




Disclaimer

This strategy is available by way of either a Fund or a segregated mandate, subject to any local regulatory restrictions or requirements.

United Kingdom, Finland, Ireland, Denmark, Norway and Sweden: The information is approved, on behalf of Lazard Fund Managers (Ireland) Limited, by

Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LL. Incorporated in England and Wales, registered number 525667. Lazard Asset

Management Limited is authorised and regulated by the Financial Conduct Authority.

Germany and Austria: Lazard Asset Management (Deutschland) GmbH, Neue Mainzer Strasse 75, 60311 Frankfurt am Main is authorized and regulated in

Germany by the BaFin.

Belgium and Luxembourg: This information is provided by the Belgian Branch of Lazard Fund Managers Ireland Limited, at Blue Tower Louise, Avenue

Louise 326, Brussels, 1050 Belgium.

France: This information is provided by Lazard Frères Gestion SAS , 25, rue de Courcelles 75 008 Paris.

Italy: This information is provided by the Italian branch of Lazard Asset Management (Deutschland) GmbH. Lazard Asset Management (Deutschland)

GmbH Milano Office, Via Dell'Orso 2 - 20121 Milan is authorized and regulated in Germany by the BaFin.

Netherlands: This information is provided by the Dutch Branch of Lazard Fund Managers (Ireland) Limited, which is registered in the Dutch register held

with the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten).

Spain and Portugal: This information is provided by the Spanish Branch of Lazard Fund Managers Ireland Limited, at Paseo de la Castellana 140, Piso 10,

Letra E, 28046 Madrid and registered with the National Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV) under

registration number 18.

Switzerland: Lazard Asset Management Schweiz AG, Usteristraße 9, CH-8001 Zurich. Authorised and regulated in Switzerland by the FINMA.



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