Prospectus Changes: What you need to know?

Carmignac Patrimoine/Carmignac Portfolio Patrimoine and Carmignac Investissement/Carmignac Portfolio Investissement are adding an additional lever to fulfil their mandate by being able to invest in unlisted companies which fully match our investment criteria and process and which are aiming to apply for listing (IPO) within 1-3 years with the following limits:

• Carmignac Investissement/Carmignac Portfolio Investissement: maximum 10% of its assets

• Carmignac Patrimoine/Carmignac Portfolio Patrimoine: maximum 5% of its assets

The decision has been made in the continuity of our investment philosophy for the following reasons:

• Adapt to market evolutions: in recent years, high growth profile companies, especially the most innovative ones, have been able to finance themselves while remaining privately-held, and hence have tended to delay their IPOs for longer. Therefore, value creation has moved at an earlier stage of the company’s development, before they go public.

• Allow for additional value creation for our clients by making available an asset class often reserved to institutional investors like we did with derivatives in 2003, mainland Chinese markets in 2014 or CLOs in 2015. All these developments happened while putting risk management at the cornerstone of our investment style and process.

• Leverage on our know-how and expertise: several members of our global equity team have in-depth experience gained at leading private equity firms globally. In addition, our proprietary research of listed companies already embeds a deep analysis of all competitors in each given sector – whether listed or unlisted– so most of the unlisted players in one of the invested theme or subsector are already part of our research and analysis.

In line with our mission to create value for our clients and positive outcomes for the society and the environment, we strive to continuously further develop our ESG capabilities. As such, along with the strengthening of our in-house ESG resources, we have been able to move one step further and increase the number of funds which are now aligned to Article 8 and Article 9 requirements.

Carmignac Portfolio Long-Short European Equities and Carmignac Portfolio Global Bond are moving from Article 6 to Article 8.

Our Article 6 minimum practices already encompass a high level of commitment to ESG integration and active stewardship to which we have complemented the following processes to categorise our funds as Article 8.

Complementary to our financial analysis, we also analyse issuers and companies on the basis of an extra-financial analysis so as to assess their environmental, social and governance behaviour. We are committed to cover at least 90% of our investment universe on that respect, as well as to a minimum reduction of their respective investment universe by 20% based on ESG criteria.

Such integration of extra-financial criteria when selecting equities and bonds is complemented by our engagement policy by which we strive to improve ESG practices of companies we invest in via active dialogue.

Carmignac Investissement, Carmignac Portfolio Investissement, Carmignac Investissement Latitude, Carmignac Emergents, Carmignac Portfolio Emergents, Carmignac Portfolio Grande Europe and Carmignac Portfolio Grandchildren are moving from Article 8 to Article 9.

Fully aligned with the acknowledgment that sustainable development is no longer an investment theme by itself but is becoming a core topic of tomorrow’s world, we have been enhancing our investment objectives and approach. All the above funds now formally aim at outperforming their respective indicators over the recommended horizon through investments in sustainable and impactful companies.

To this end, we have built an overarching outcomes framework that requires that a minimum of 50% of each of these portfolios’ AUM must include companies that derive more than 50% of their revenues from business activities aligned with 9 investable United Nations’ Sustainable Development Goals.

The European Securities and Markets Authority (ESMA) has introduced new guidelines for performance fees that will be mandatory from the 1st of January 2022. These new rules will notably prevent a Fund to charge a performance fee until it has totally recovered any underperformance over the last 5 years (usually referred as high water mark or claw back mechanism).

In the past, Carmignac had chosen a unique framework that has featured no high-water mark or claw back mechanism, but a positive condition for both absolute and relative performance as an evidence of the dual mandate of our flexible investment strategies. This unique model has now to be adapted and aligned to the new regulatory requirements.

In any case, this new framework does not question or preclude our commitment to the performance fee model. This model is part of Carmignac’s DNA and definitely the best one when it comes to alignment of interest between investors, Carmignac and Portfolio Managers. Also, our key driver for the implementation of the new scheme was that the investment approach of each fund should remain the same and the philosophy should be kept intact.

• For all Funds, we have then extended the reference period for performance fees from one to five years.

• For some funds, we have also adapted the performance fee rate as well as the reference indicators to achieve more consistency and better reflect the characteristics and historical allocations of the investment strategies.

• For the funds with an absolute return objective, like the Long-Short range, we have dropped the reference indicator and introduced a 5-year high water mark.

These evolutions will be implemented on the 1st of January 2022 and will ensure compliance with the new ESMA guidelines.

The new regulatory framework on performance fees is also an opportunity for Carmignac to bring to the market a more comprehensive and clearer range of share classes, adapted to the various investors’ profiles and preferences. For some funds we will now propose “twin” share classes, i.e. shares with and without performance fees the former being offered at a lower fixed management fee.

This new offering will notably be implemented with some pricing adaptations, share class renaming and a new suite of shares that will be launched on the 1st of January 2022.