lombard odier absolute return bond strategy delivering true alpha in times of uncertainty

© All rights reserved. Lombard Odier Investment Managers

Absolute Return Bond Strategy

For professional investor use only

.

Delivering true alpha in times of uncertainty

Grant Peterkin

Senior Portfolio Manager

+41 22 709 1392

[email protected]

Emmanuel Roulin

Head of Business Dev, Asia Pacific

+852 2501 8588

[email protected]

Sheau-Yien Wang

Head of Business Dev, Southeast Asia

+65 6305 7731

[email protected]

Lombard Odier Investment Managers

INVESTORS ARE TAKING MORE RISK FOR LOWER RETURNS

The case for Absolute Return Bond investing

Source: Bloomberg

For illustrative purposes only.

Please see important information at the end of the document.

2

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

JP Morgan Global Aggregate Bond Index

12M Moving Average (Vol/YTM) - lhs YTM - rhs


Lombard Odier Absolute Return Bond strategy overview

3

Key characteristics

Absolute Return: Aim to deliver positive absolute returns agnostic to credit and interest rate cycles

Diversification: Macro and Micro books providing uncorrelated sources of Alpha

Risk Management: Dynamic management of risk allocations and formalised drawdown limits

Team: Experienced team of 5 portfolio managers with 13 years of average experience

Liquidity: Investments in highly liquid instruments and strategies

Target : Cash + 4% net returns p.a. with volatility of 5%

Performance since

inception*

Annualized net return of +2.9 % for an annualized volatility of 2.2% (Sharpe of 1.1)

Returns generated independent of the credit and interest rate cycles

Positive skew of returns

Fund details

Launch Date: 1st July 2010

Fund Structure: UCITS IV with Daily Liquidity

AuM: USD 280mn (LOF I and LOF II)**

Lombard Odier Investment Managers.

(30.09.2013)

IA EUR share class, net of fees. All performance figures reflect the reinvestment of earnings, capital gains, interest and dividends since July 2010.

**As at 03.10.2013

Past performance is not necessarily a guide to the future.



Positive skew of returns

4

Weekly Fund return distribution highlights effective management of downside risks

0

5

10

15

20

25

30

35

40

45

50

-1.4% -1.2% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4%

Weekly return frequency

Normal distribution

Source: LOIM, 27.09.2013, Weekly net returns (EUR IA Shares)

Past performance is not necessarily a guide to the future



Uncorrelated returns…

5

…from the interest-rate cycle… …and the credit cycle

y = -0.0014x + 0.054 R² = 0.0007

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

-20 -15 -10 -5 0 5 10 15 20

Wee

kly

Ch

ang

e in

LO

F T

ota

l Ret

urn

Bo

nd

* (%

)

Weekly Change in Generic US 10Y Yield (%)

y = -0.0069x + 0.0545 R² = 0.0198

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

-20 -15 -10 -5 0 5 10 15 20

Wee

kly

Ch

ang

e in

LO

F T

ota

l Ret

urn

Bo

nd

* (%

)

Weekly Change in ITRAXX Crossover 5Y (%)

Source: Bloomberg, LOIM: 01.07.2010-27.09.2013 (weekly data)

Past performance is not necessarily a guide to the future.

*Fund name will change to LO Funds – Absolute Return Bond



The Investment Team – combining solid expertise and experience

6

FEDERICO BELAK


Global FX and Rates

22 years investment experience

RON RAYCHAUDHURI

Portfolio Manager

Emerging Markets FX and Rates


SALMAN AHMED

Global Strategist

Emerging & Developed Markets Strategy


GRANT PETERKIN

Senior Portfolio Manager (co-lead PM)

Global Rates & Derivatives


HOLGER FRIEDRICH


Emerging Markets FX and Rates


PHILIPP BURCKHARDT

Analyst

Emerging & Developed Markets Research


GREGOR MACINTOSH

Head Global & EM Fixed Income (Lead PM)

Global Rates & Asset Allocation


EM Focus Global Strategy DM Focus

Average Investment Experience Average Historical Sharpe Ratio

1.74* 13y

Source: LOIM; *Partially based on external track records




Investment process

7

Macro

Micro

Dynamic allocation to systematic risk factors

(Rates / Credit / Inflation / FX)

Gregor MacIntosh & Grant Peterkin

Currencies

and Volatility

Fred Belak

Global Fixed Income

Derivatives

Grant Peterkin

EM Rates & FX

Asia & EMEA

Ron Raychaudhuri

Global Rates

and Currencies/

Asset Allocation

Gregor MacIntosh

EM Rates & FX

Africa & LATAM

Holger Friedrich

30-70% o

f Risk

Bu

dg

et

30-70% o

f Risk

Bu

dg

et

Cash +4% Return Target*

*Net of fees



Macro book flexibility example

8

Time (CET) Event Action

1700hrs Reduced Directional Risk into Binary Risk Event (June FOMC Statement) Reduced Duration to +1yr versus Cash

2000hrs Initial statement announcement: Hawkish in context of historic profile to Fed Policy Stance Aggressively Cut Duration by 3yrs to -2yrs versus Cash

2045hrs Q&A Testimony Confirms Hawkish Bias Duration cut to -4yrs versus Cash

Duration management during the FOMC meeting 19.06.2013 Duration management following the FOMC meeting 19.06.2013

-5

-4

-3

-2

-1

0

1

22.15

2.20

2.25

2.30

2.35

2.40

16:00 17:00 18:00 19:00 20:00 21:00 22:00 02:00 03:00

Mo

dif

ied

Du

rati

on

of

ove

rall

Fu

nd

(yrs

)

US

10Y

so

vere

ign

yie

ld in

vert

ed (%

)

US 10Y Sovereign Yield (lhs) Fund Modified Duration (rhs)

-4

-3

-2

-1

0

1

2

3

4

19/06/2013 20/06/2013 21/06/2013 24/06/2013

Mo

dif

ied

Du

rati

on

of

ove

rall

Fu

nd

(yr

s)

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

US

10Y

so

vere

ign

yie

ld in

vert

ed (%

)

Source: Bloomberg. Past performance is not necessarily a guide to the future. For illustrative purposes only to demonstrate investment process.

Any reference to a specific security does not constitute a recommendation to buy, sell, hold or directly invest in the securi ties.

It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document.



Diversified, uncorrelated alpha sources

9

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13

Average Correlation across Portfolio Managers

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

Ex-

ante

ris

k

Diversification Benefits from combining Macro and Micro strategies

Macro

Micro

Source: LOIM, POINT, Correlation of daily returns over a 3-month rolling window. Observation period 31.12.2011 to 30.09.2013. For illustrative purposes only.




Performance

10

LOF – TOTAL RETURN

BOND IA EUR* ITD 1Y

Annualized return 2.89% 2.50%

Annualized volatility 2.22% 2.00%

Sharpe ratio 1.1 1.2

CLASS IA EUR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD

2013 -0.42 0.38 0.06 0.28 0.57 -0.16 0.00 0.00 0.19 0.89

2012 1.79 1.18 0.40 0.07 0.14 -1.08 1.33 0.30 0.59 0.34 0.41 0.84 6.46

2011 -0.12 1.22 -0.75 0.77 0.62 -0.51 1.50 0.01 -0.91 0.06 -1.76 1.69 1.79

2010 0.46 0.65 0.23 -0.20 -0.29 -0.51 0.37

0.37%

1.79%

6.46%

0.89%

2.89%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2010 (6 Monthssince 01.07.2010)

2011 2012 YTD Annualized Return

Source: LOIM 30.08.2013; Performance of LO Funds – Total Return Bond IA (EUR) Shares, net of fees; Inception Date: 01.07.2010.



Please see important information at the end of the document


Positive return profile in contrast to fixed income universe

11

LO Funds - Total Return Bond* Global Aggregate Bonds Global Treasuries Global Corporates Emerging Market Debt Local

Currencies

Annualized Return 2.50% -7.43% -9.51% -4.02% -8.47%

Annualized Vol. 2.00% 5.78% 6.30% 5.87% 8.30%

Sharpe Ratio 1.2 -1.3 -1.5 -0.8 -1.0

Correlations with Fund 1 0.04 0.00 0.08 -0.01

88

90

92

94

96

98

100

102

104

106

108

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13

Rolling 1-year returns

LO Funds - Total Return Bond Barclays Global Agg TR Barclays Global Aggregate Treasuries TR Barclays Global Agg Corporate JPM GBI-EM Glbal Diversified Composite Unhdg

- Dynamic Duration

Management

(Currently Long)

- Short Credit

- Long Inflation - Short Duration

- Long Credit - Curve

Steepeners

- Curve

Flatteners

- Credit

Hedges - Short AUD

- Short Duration

- Long AUD IRS VS USD

- Short Periphery Credit

- Short EM

Source: Bloomberg 31.08.2012-30.09.2013. Performance of LO Funds – Total Return Bond IA (EUR) Shares, net of fees.

Past performance is not necessarily a guide to the future. Index Returns stated in EUR unhedged




Summary – Absolute Returns delivered with controlled volatility

12

Diversified investment

approach

Investment process generating returns from diversified alpha sources

Highly flexible approach to risk factor management

Experienced investment team leveraging on broad skillset

Absolute Return

Profile

Uncorrelated to interest-rate and credit cycles

Low correlation between individual portfolio managers

Risk Management Independent Risk Management with strict stop-loss discipline

Liquidity Daily liquidity in UCITS-compliant structure



Appendix


Fund snapshot as of 30th September 2013

14 Lombard Odier Investment Managers Source : LOIM, POINT, 30.09.2013; *As at 03.10.2013

Holdings and/or allocations are subject to change.

Any reference to a specific security does not constitute a recommendation to buy, sell, hold or directly invest in the securities.

MAJOR CURRENCY EXPOSURES % Net exposure

United States Dollar 3.10

European Euro 1.41

Israel Shekel -0.52

Japanese Yen -1.10

Swiss Franc -3.28

Others 0.40

MAJOR COUNTRY EXPOSURE Modified duration contribution

United States 1.98

United Kingdom 0.71

Italy 0.02

Netherlands 0.02

Germany -0.24

Other 0.21

Total 2.68

RISK METRICS AND STATISTICS

AuM (USDmm) 280.00*

1-Month % VaR (99%) 1.62%

Modified Duration (yrs) 2.68

OA Convexity (Yr^2/100) 0.57

SNAPSHOT OF RISK CONTRIBUTIONS % TEV contribution

Curve 76.00%

Inflation-Linked 15.33%

Credit Spread 3.33%

Others 3.33%

Idiosyncratic 2.00%

Total 100.00%


Consistent returns

15

Comparison of weekly returns highlights consistency of returns

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

-2.8% -2.4% -2.0% -1.6% -1.2% -0.8% -0.4% 0.0% 0.4% 0.8% 1.2% 1.6% 2.0% 2.4% 2.8%

Weekly Returns Barclays Global Aggregate

Weekly Returns LOF Total Return Bond (EUR) IA

Normal Distribution

Source: LOIM, 27.09.2013, Weekly net returns (EUR IA Shares)




2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

3

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

Australia 5y5y vs. US 10yr yield Swap Spread

1.44

1.46

1.48

1.5

1.52

1.54

1.56

1.58

1.6

1.62

1.64

Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13

GBPAUD

Micro trade examples : seeking most efficient expression of view

16

Entry Level:

@285 Bps

Long Australia 5Y5Y vs. Short US 10Y

Weakening domestic Australian economic data vs. stronger US

growth outlook. In-house view of weakening Chinese data to

weigh further on Australian economy

Unwound Australia leg of the trade after FOMC meeting in June,

keeping short US 10Y position

Entry Level:

@1.45

April 2, 2013

Profit taken:

@1.56

May 30, 2013

Long GBP vs. Short AUD

Weakening domestic Australian economic data coupled with

growth slowdown in China didn’t justify AUD strength

GBP oversold on market expectation of QE/Carney arrival

Lombard Odier Investment Managers. July 2013.

Exit Level:

@269 Bps

Source: Bloomberg, LOIM. Past performance is not necessarily a guide to the future. For illustrative purposes only.





3.5

4

4.5

5

5.5

6

1-May 8-May 15-May 22-May 29-May 5-Jun 12-Jun 19-Jun 26-Jun 3-Jul

Hungarian 5yr Swap

106

109

112

115

10yr BTP Futures

Micro trade examples

17

Entry Level:

@112.15

10y BTP Futures

Hedging part of fund’s credit exposure

Sold BTP Futures at 112.15 on19th June 2013

Looking to take profit as market positioning exacerbated sell off

Took position off at 108.75

Entry Level:

@4.5%

Profit taken:

@4.9%

Hungarian 5y Swap

Hedging part of EM risk

Paid 5y Hungarian Swaps at 4.5%

Took profit at 4.9%

Looked to re-enter at 4.6% but market liquidity premium proved

too expensive to trade


Exit Level:

@108.75

Source: Bloomberg, LOIM. Past performance is not necessarily a guide to the future. For illustrative purposes only.





1.8

2

2.2

2.4

2.6

2.8

3

31/01/2013 14/02/2013 28/02/2013 14/03/2013 28/03/2013 11/04/2013 25/04/2013 09/05/2013 23/05/2013 06/06/2013 20/06/2013 04/07/2013

Micro Trade example : mitigating downside risk

18

Entry Level:

@232 Bps

Long US 2Y2Y vs. Short Australia 2Y2Y

Australian front end was pricing in too much Central Bank easing given currency move. US should have been anchored on relative basis given

tapering may take place but less probable that rate hike takes place

Went short Australian 2Y2Y and long US 2Y2Y

Tapering shifted the whole US Curve, strategy sold off to 2% -> position cut on rally back to 2.155% on June 27th

Cost to the fund: 4 Bps


Exit Level:

@215 Bps

Source: Bloomberg, LOIM Past performance is not necessarily a guide to the future. For illustrative purposes only.





SEPARATING MARKET DRIVERS OF PORTFOLIO PERFORMANCE FROM MANAGER SKILL

An Arbitrage Pricing Theory based model can help separate the influence of market drivers from manager skill

Results show that the fund exhibits statistically insignificant sensitivity to majority of risk factors. Only exceptions are the US

dollar and EM Local debt.

Combining alpha estimate with total performance shows that out of cumulative performance of 9.57% since July 2010, around

9.26% was generated by factors unrelated to market drivers.

Multi-factor risk attribution analysis – quantifying alpha

19

Multi- Factor Risk Drivers

Risk Factor Beta p-value

DXY 0.12** 0.00

US 10-year yields 0.00 0.72

JP EM Local 0.11** 0.00

IBoxx US HY 0.01 0.78

SPX -0.02 0.27

US inflation 0.00 0.55

Slope 0.00 0.56

Alpha 5.6bp** 0.02

** Shows significance at at least 5% level

Source: LOIM, 30.08.2013. Performance of LO Funds – Total Return Bond IA (EUR) Shares, net of fees, weekly data

Past performance is not necessarily a guide to the future. Market Factors Used : US$ (proxied by DXY index), US 10yr yields, slope of the yield curve, EM local

debt, high yield credit (proxied by Iboxx US HY index) , S&P 500 and US breakeven inflation



SEPARATING MARKET DRIVERS OF PORTFOLIO PERFORMANCE FROM MANAGER SKILL

In 1976, Ross proposed a model based on the principle of valuing assets through arbitrage theory (called APT)

In portfolio performance assessment setting, the APT model can be deployed to understand the portfolio’s sensitivity to relevant

risk factors, in order to separate out the split between systematic and skill-based components.

Overall, the APT model postulates that a linear relationship exists between realised returns of the assets and the k factors

common to those assets or

𝑅𝑖𝑡 = 𝐸 𝑅𝑖 + 𝑏𝑖𝑘𝐹𝑘𝑡

𝐾

𝑘=1

+ ℰ𝑖𝑡

Where :

𝑅𝑖𝑡 = rate of return for asset i;

𝐸 𝑅𝑖 = expected return for asset i;

𝑏𝑖𝑘 = sensitivity of asset i to factor k;

𝐹𝑘𝑡 = return of factor k;

ℰ𝑖𝑡 = residual return of asset i, which is not explained by factors, with E(ℰ𝑖𝑡) = 0.

Results shown are based on estimating the above shown equation

Theory behind the multi-factor risk analysis

20 Please see important information at the end of the document.


Biographies of Investment team

GREGOR MACINTOSH

Gregor MacIntosh joined LOIM in 2010 as Head of Global Rates & Currencies.Prior to joining LOIM, Gregor was head of rates at Standard Life Investments, after joining them in 2002 to run global and European rates and FX

portfolios. During his tenure, he was presented with the Thomson Reuters Lipper award for best bond Sicav range and the Asian Investor award for best global fixed income fund. Before that, he was investment manager at

Edinburgh Fund Managers Plc, responsible for global rates, and FX and sterling corporate bond portfolios for institutional clients. He began his career producing earnings guides to the European and Japanese equity markets at the

Estimate Directory from 1995 to 1996.

Gregor earned a bachelor’s degree in economics from Heriot-Watt University in Edinburgh in 1994. He also holds a post-graduate diploma in investment analysis from Stirling University. He is an Associate of the UK Institute of

Investment Management and Research, holds the Investment Management Certificate and is a registered representative of the Securities and Futures Authority.

GRANT PETERKIN

Grant Peterkin is a Senior Portfolio Manager for the Global and Emerging Fixed Income Group within LOIM. He joined LOIM in March 2013.

Prior to joining LOIM, Grant was a senior portfolio manager in the rates team at Ignis Asset Management. Previously, he was a director in risk treasury at Citigroup from 2010 to 2011. Before that, he was an investment director in

the fixed income team at Standard Life Investments from 2004 to 2010. He began his career as an associate in the equity derivatives group at JP Morgan in 1999.

Grant earned a bachelor’s degree in European business administration and French from the Robert Gordon University in 1999. He holds the IFID, Investment Management Certificate and Securities Institute qualifications.

FEDERICO BELAK

Fred Belak joined LOIM in March 2011 as Senior Portfolio Manager focusing on FX and Rates. Prior to joining LOIM, Fred was a partner at a hedge fund. Previously,

he managed currencies in the chief investment office of JP Morgan from 2006 to 2008. Before that, he was portfolio manager in the macro hedge fund team at UBS; under his tenure, the UBS Currency Fund was nominated for

best macro fund in Europe by Eurohedge in 2001, 2002 and 2003. Prior to that, he ran the Barclays office in Singapore during the Asian crisis from 1997 to 1999. He began his career as a currency options trader at O’Connor &

Associates in 1991, and, following the merger with Swiss Bank Corporation in 1993, was a currency trader in developed and emerging markets at the merged organization.

Fred earned an MBA in 1991 and holds a bachelor’s degree in economics, both from Cornell University in New York.

HOLGER FRIEDRICH

Holger Friedrich is a Senior Portfolio Manager in the Global and Emerging Fixed Income Group within LOIM. He joined LOIM in May 2013.

Prior to joining LOIM, Holger was a partner and portfolio manager at EM Quest LLP. Previously, he was a senior portfolio manager at Sydbank A/S from 2008 to 2011. Before that, he was a senior portfolio manager at Insight

Investment. He began his career as a portfolio manager at Union Investment in 1999.

He earned a master’s degree in financial economics from the University of Frankfurt in 1998 and is a CIIA Charterholder.

RON RAYCHAUDHURI

Ron Raychaudhuri is a Portfolio Manager in the Global and Emerging Fixed Income Group within LOIM. He joined LOIM in April 2013.

Prior to joining LOIM, Ron was a portfolio manager in the emerging markets debt team at Ignis Asset Management. Previously, he was a junior portfolio manager in the global proprietary trading group at Bank of America Merrill

Lynch from 2008 to 2010. Before that, he was a technology consultant in the commodity and inflation trading teams at ABN AMRO/EDS. He began his career as a consultant at Electronic Data Systems in 2001.

Ron earned a master’s in business administration with concentrations in analytic finance, economics and international business from The University of Chicago Booth School of Business in 2008. He also holds a master’s degree in

computer science from the University of Manchester and a bachelor’s degree in engineering from Jadavpur University in India.

SALMAN AHMED

Salman Ahmed is a Strategist within LOIM’s Global and Emerging Fixed Income Group. He joined LOIM in January 2013.

Prior to joining LOIM, Salman was head of global macro at EDF Trading (trading arm of EDF Group). Before that, he was a global macro economist at Goldman Sachs International from 2006 to 2009. Previously, he was as an

active equity research associate at Barclays Global Investors from 2005 to 2006, and after completing an internship at Goldman Sachs International in 2004. He began his career as an investment analyst at Watson & Wyatt LLP in

2001. Salman earned a master’s degree in economics and finance from University of Cambridge in 2001 and holds a bachelor’s degree in economics from Lahore University of Management Sciences.

21 Please see important information at the end of the document.


LO Funds – Total Return Bond*

LEGAL STRUCTURE SICAV (Luxembourg), UCITS

CUSTODIAN BANK CACEIS Bank Luxembourg SA

NAV CALCULATING AGENCY Fastnet Luxembourg

LIQUIDITY Daily

SUBSCRIPTIONS / REDEMPTION DETAILS

NAV Calculation : T+ 1

Subscription deadline : 15.00hrs Lombard Odier Geneva (T-1)

Payment : T+ 3

Europe / Asia / Americas price : T Close

Frequency : Daily

LAUNCH DATE July 1st, 2010

REFERENCE CURRENCY EUR and available in USD Hedged, CHF Hedged and GBP Hedged

FEE / PERFORMANCE FEE Class P: mgt : 0.50 % per year, dist : 0.50 % per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class M: mgt : 0.50 % per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class R: mgt : 0.50 % per year, dist : 1.00 % per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class I: mgt : 0.50% per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class S: subject to individual fee agreement.

EUR USD CHF GBP

ISIN NUMBER PA: LU0049415788

PD: LU0049508285

MA: LU0866432353

MD: LU0866432437

RA: LU0357521292

RD: LU0357521375

IA: LU0210002480

ID: LU0210002647

SA: LU0210003025

PA: LU0564203478

PD: LU0564203551

MA: LU0866432510

MD: LU0866432601

RA: LU0564203635

RD: LU0564203718

IA: LU0564203809

ID: LU0564203981

SA: LU0564204013

PA: LU0564204104

PD: LU0564204286

MA: LU0866432783

MD: LU0866432866

RA: LU0564204369

RD: LU0564204443

IA: LU0564204526

ID: LU0564204799

SA: LU0564204872

PA: n/a

PD: n/a

MA: n/a

MD: n/a

RA: n/a

RD: n/a

IA: n/a

ID: LU0964784960

SA: n/a

22 Source: LO Funds – Total Return Bond is a Luxembourg investment company with variable capital (SICAV). The fund is authorized and regulated by the

Luxembourg Supervisory Authority of the Financial Sector (CSSF) as a UCITS within the meaning of EU Directive 2009/65/EC, as amended. *Fund name will

change to LO Funds II – Absolute Return Bond; **subject to change to 15% above cash.



LO Funds II – Total Return Bond*

LEGAL STRUCTURE SICAV (Luxembourg)

CUSTODIAN BANK CACEIS Bank Luxembourg SA

NAV CALCULATING AGENCY Fastnet Luxembourg

LIQUIDITY Daily

SUBSCRIPTIONS / REDEMPTION DETAILS

NAV Calculation : T+ 1

Subscription deadline : 15.00hrs Lombard Odier Geneva (T-1)

Payment : T+ 3

Europe / Asia / Americas price : T Close

Frequency : Daily

LAUNCH DATE July 1st, 2010

REFERENCE CURRENCY EUR and available in USD Hedged, CHF Hedged and GBP Hedged

FEE / PERFORMANCE FEE Class P: mgt : 0.50 % per year, dist : 0.50 % per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class M: mgt : 0.50 % per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class R: mgt : 0.50 % per year, dist : 1.00 % per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class I: mgt : 0.50% per year, perf : 10% above Eurozone HICP Inflation + 2%** with high watermark

Class S: subject to individual fee agreement.

EUR USD CHF GBP

ISIN NUMBER PA: LU0216692615

PD: LU0216693266

MA: LU0866290975

MD: LU0866291197

RA: n/a

RD: n/a

IA: LU0337863525

ID: LU0357396885

SA: n/a

PA: LU0778033604

PD: LU0778033786

MA: LU0866291270

MD: LU0866291353

RA: n/a

RD: n/a

IA: LU0778034081

ID: LU0778033869

SA: LU0778034164

PA: LU0538384057

PD: LU0538384214

MA: LU0866290546

MD: LU0866290892

RA: n/a

RD: n/a

IA: LU0538384990

ID: LU0538385021

SA: n/a

PA: LU0939044359

PD: LU0939044516

MA: LU0939045679

MD: LU0939045836

RA: LU0939044789

RD: LU0939044946

IA: LU0939045166

ID: LU0939045323

SA: LU0939046057

23 Source: LOF II – Total Return Bond is a Luxembourg investment company with variable capital (SICAV). The fund is authorized and regulated by the Luxembourg

Supervisory Authority of the Financial Sector (CSSF) as an “other UCI” under Part 2 of the Luxembourg law of 17 December 2010 relating to undertakings for

collective investments. *Fund name will change to LO Funds II – Absolute Return Bond; **subject to change to 15% above cash.



LOIM disclaimer & Legal Notice

This document is issued by Lombard Odier Asset Management (Europe) Limited (hereinafter LOAM). LOAM is a private

limited company incorporated in England and Wales with registered number 07099556, having its registered office at

Queensberry House, 3 Old Burlington Street, London, United Kingdom, W1S 3AB. LOAM is authorized and regulated by

the Financial Services Authority (the "FSA") and is entered on the FSA register with registration number 515393. LOAM is

part of the Lombard Odier Investment Managers Holding SA group (hereinafter LOIM).LOIM is a trade name.

The UCITS and other UCI funds mentioned in this document are only registered for public offering in certain jurisdictions.

The Luxembourg SIF, the Swiss funds and the Cayman funds will not be, nor will their shares be, registered for public

offering in any jurisdiction. The Luxembourg funds are authorized and regulated by the Luxembourg Supervisory Authority

of the Financial Sector (CSSF). The management company of the Luxembourg funds is Lombard Odier Funds (Europe)

S.A. (hereinafter the “Management Company”), a Luxembourg based public limited company (SA), having its registered

office at 5, Allée Scheffer, L-2520 Luxembourg, authorized and regulated by the CSSF as a Management Company within

the meaning of EU Directive 2009/65/EC, as amended. An investment in a SIF is restricted to well-informed investors as

described in article 2 of the Luxembourg law of 13 February 2007, as amended. This document is not a recommendation

to subscribe to and does not constitute an offer to sell or a solicitation or an offer to buy any funds’ shares nor shall there

be any sale of the funds’ shares in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Consequently, the offering of the funds’ shares may be restricted in certain jurisdictions. Prospective investors must inform

themselves of, and observe, such restrictions, including legal, tax, foreign exchange or other restrictions in their relevant

jurisdictions. Neither this document nor any part of it shall form the basis of, or be relied on in connection with, any

contract to purchase or subscription for any funds’ shares. Any such acquisition may only be made on the basis of the

official documents of each fund in their final form. The articles of association, the management regulations, the

prospectus, the simplified prospectus, the confidential memorandum, the memorandum and articles of association, the

fund contract, the subscription form and the most recent semi-annual and annual reports, as the case may be, are the

only official offering documents of the Funds’ shares (the “Offering Documents”). The Offering Documents of the funds are

available on http//:funds.lombardodier.com or can be requested free of charge at the registered office of the fund or of the

Management Company, from the distributors of the Funds or from the local representatives as mentioned below for the

relevant funds.

Austria. Supervisory Authority: Finanzmarktaufsicht (FMA), Representative: Erste Bank der österreichischen Sparkassen

AG, Graben 21, A-1010 Wien - Belgium. Supervisory Authority: Autorité des services et marchés financiers (FSMA),

Representative: Fastnet Belgium S.A.,Avenue du Port 86C, b320, 1000 Brussels - France. Supervisory Authority: Autorité

des marchés financiers (AMF), Representative: CACEIS Bank, place Valhubert 1-3, F-75013 Paris - Germany.

Supervisory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Representative: DekaBank Deutsche

Girozentrale, Mainzer Landstraße 16, D-60325 Frankfurt am Main - Italy. Supervisory Authority: Banca d’Italia (BOI),

Paying Agents: Société Générale Securities Services S.p.A., Via Benigno Crespi, 19/A - MAC 2, 20159 Milano, State

Street Bank S.p.A. Via Col Moschin 16, 20136 Milano, Banca Sella Holding S.p.A., Via Italia 2, 13900 Biella, Allfunds

Bank S.A., filiale italianaVia Santa Margherita 7, 20121 Milano, - Liechtenstein. Supervisory Authority: Finanzmarktaufsicht

Liechtenstein ("FMA"), Representative: Verwaltungs- und Privat-Bank Aktiengesellschaft, Aeulestrasse 6, LI-9490 Vaduz -

Netherlands. Supervisory Authority: Autoriteit Financiële Markten (AFM). Representative: Lombard Odier Darier Hentsch &

Cie (Nederland) N.V., Weteringschans 109, 1017 SB Amsterdam (telephone: +31 20 522 0 522) - Spain. Supervisory

Authority: Comisión Nacional del Mercado de Valores (CNMV). Representative: Allfunds Bank S.A. C/Nuria, 57 Madrid -

Switzerland. Supervisory Authority: FINMA (Autorité fédérale de surveillance des marchés financiers), Representative:

Lombard Odier Asset Management (Switzerland) SA, 6 av. des Morgines, 1213 Petit-Lancy; Paying agent: Lombard Odier

Darier Hentsch & Cie, 11 rue de la Corraterie, CH-1204 Geneva. UK. Supervisory Authority: Financial Services Authority

(FSA), Representative: Lombard Odier Asset Management (Europe) Limited, Queensberry House, 3 Old Burlington Street,

London W1S3AB, which has approved this document for issuance in the UK to professional clients or eligible

counterparties and is authorised and regulated by the Financial Services Authority.

NOTICE TO RESIDENTS OF THE UNITED KINGDOM: UCITS The Fund is a Recognised Scheme in the United Kingdom

under the Financial Services & Markets Act 2000. Potential investors in the United Kingdom are advised that none of the

protections afforded by the United Kingdom regulatory system will apply to an investment in LO Funds and that

compensation will not generally be available under the Financial Services Compensation Scheme. This document does not

itself constitute an offer to provide discretionary or non-discretionary investment management or advisory services,

otherwise than pursuant to an agreement in compliance with applicable laws, rules and regulations. An investment in the

funds mentioned herein is not suitable for all investors. Making an investment in a fund is speculative. There can be no

assurance that the fund's investment objective will be achieved or that there will be a return on capital. This document

does not contain personalized recommendations or advice and is not intended to substitute any professional advice on

investment in financial products. Before making an investment in a fund, an investor should read the entire Offering

Documents, and in particular the risk factors pertaining to an investment in the fund, consider carefully the suitability of

such investment to his/her particular circumstances and, where necessary, obtain independent professional advice in

respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property

of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part),

transmitted, modified, or used for any other purpose without the prior written permission of LOIM. It is not intended for

distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. The

contents of this document are intended for persons who are sophisticated investment professionals and who are either

authorised or regulated to operate in the financial markets or persons who have been vetted by LOIM as having the

expertise, experience and knowledge of the investment matters set out in this document and in respect of whom LOIM has

received an assurance that they are capable of making their own investment decisions and understanding the risks

involved in making investments of the type included in this document or other persons that LOIM has expressly confirmed

as being appropriate recipients of this document. If you are not a person falling within the above categories you are kindly

asked to either return this document to LOIM or to destroy it and are expressly warned that you must not rely upon its

contents or have regard to any of the matters set out in this document in relation to investment matters and must not

transmit this document to any other person.This document contains the opinions of LOIM, as at the date of issue. The

information and analysis contained herein are based on sources believed to be reliable. However, LOIM does not

guarantee the timeliness, accuracy, or completeness of the information contained in this document, nor does it accept any

liability for any loss or damage resulting from its use. All information and opinions as well as the prices indicated may

change without notice. Neither this document nor any copy thereof may be sent, taken into, or distributed in the United

States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United

States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United

States of America, partnership organized or existing in any state, territory or possession of the United States of America, a

corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or

trust that is subject to United States Federal income tax regardless of the source of its income.

24


LOIM disclaimer & Legal Notice

Past performance is not a guarantee of future results. Where the fund is denominated in a currency other than an

investor's base currency, changes in the rate of exchange may have an adverse effect on price and income. All

performance figures reflect the reinvestment of interest and dividends and do not take account the commissions and costs

incurred on the issue and redemption of shares/units; performance figures are estimated and unaudited. Net performance

shows the performance net of fees and expenses for the relevant fund/share class over the reference period. Source of

the figures: Unless otherwise stated, figures are prepared by LOIM. Any benchmarks/indices cited herein are provided for

information purposes only. No benchmark/index is directly comparable to the investment objectives, strategy or universe

of a fund. The performance of a benchmark shall not be indicative of past or future performance of any fund. It should not

be assumed that the relevant fund will invest in any specific securities that comprise any index, nor should it be

understood to mean that there is a correlation between such fund’s returns and any index returns. The portfolio

information provided in this document is for illustrative purposes only and does not purport to be recommendation of an

investment in, or a comprehensive statement of all of the factors or considerations which may be relevant to an investment

in, the referenced securities. They illustrate the investment process undertaken by the manager in respect of a certain

type of investment, but may not be representative of the Fund's past or future portfolio of investments as a whole and it

should be understood that they will not of themselves be sufficient to give a clear and balanced view of the investment

process undertaken by the manager or of the composition of the investment portfolio of the Fund. As the case my be,

further information regarding the calculation methodology and the contribution of each holding in the representative

account to the overall account’s performance can be obtained by the Fund or the Management Company.

© 2013 Lombard Odier Investment Managers – all rights reserved

25

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