GROUPAMA AXIOM LEGACY 21

Capitalise on the regulatory transition

from Basel 2 to Basel 3

Draft

0,96% 0,90%

3,19% 3,10%

3,91%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

Barclays EuroAgg 500 Corporate Barclays EuroAgg 500 Corporate(sans financières)

Barclays Euro High Yield TR Index BofA Merrill Lynch Euro Non-Financial High Yield (sans

financières)

BAML Euro Financial High Yield

2

Yields in the credit universe

Investment grade universe High yield universe

Source: Bloomberg - Data at 30/03/2017

Draft 3

Why invest in legacy subordinated debt* issued by European banks

and insurance companies?

(*) legacy subordinated debt refers to bonds eligible for inclusion in regulatory capital under Basel 2, which are no longer eligible under Basel 3

Single bank supervisor (ECB),

Single Resolution Mechanism

(SRM), improvement of capital

ratios (between 2x and 4x higher

than in 2007), etc.

The financial situation of the

European banking sector

has greatly improved since

2009

A normalised and

better regulated

sector

Bank and insurance company

subordinated debt is one of the

only credit segments that still

offers attractive yields given the

level of risk taken

Groupama Axiom Legacy 21's aim is to

achieve an annualised return of between

Euribor 3 months +3% and

+5% at least, after management fees,

over the 4-year minimum recommended

investment horizon.

Attractive yields

A historic period of

regulatory transition for

investors

At the end of 2021 all new

capital requirements will be

applicable

A regulatory

opportunity

Draft 4

A normalised and better regulated sector

0

5

10

15

HSBC Barclays DeutscheBank

BNP Paribas UBS Crédit Suisse

2007 "Bâle 3" CET1 2015 CET1

› The financial situation of the European banking sector has greatly improved since 2009, particularly with

regard to capital. The CET1 ratio is 13% higher on average, in other words between 2x and 4x higher than

in 2007

› Introduction of the European Banking Union in 2014, including a Single Supervisory Mechanism (SSM) and

a Single Resolution Mechanism (SRM)

› The main banks in the Euro zone (128) have been monitored by a single bank supervisor (the ECB) since

November 2014

Within the context of Basel 3,

Common Equity Tier 1 is the most

solid form of regulatory capital, which

chiefly consists of equity and

undistributed reserves, with some

deductions compared with “book

equity” (such as deferred tax assets)

Source: Axiom Alternative Investments

CE

T1

in

re

gu

lato

ry c

ap

ita

l

5

Subordinated financial debt

Explanations and opportunities

Draft 6

What are hybrid securities?

› These are debt instruments issued by financial institutions1 that are included in regulatory capital,

instead of the usual equity, when measuring their solvency ratios

› Requirements set by the regulators must be met to allow the inclusion of debt in equity:

− Very long or perpetual maturity, but usually with an option for the issuer to redeem the debt (early redemption or call)

− Subordination to senior creditors and deposits; in the event of resolution, this implies loss absorption or conversion into

equity before senior creditors

− Coupons may not be paid in certain circumstances (usually tier 1 debt) or be deferred (tier 2 debt)

› These securities may be used by banks and insurance companies to improve their capital ratios

under reasonable financial conditions (moderate interest rates and deductible coupons)

(1) some corporate issuers have issued

hybrid securities but they have no regulatory

"value"

Legacy debt:

subordinated debt securities

eligible for inclusion in

regulatory capital under

Basel 2*.

*under solvency 1 for insurance companies.

Draft 7

Hybrid securities on a bank's balance sheet

Deposits

Privileged

debt

(privileged

due to

guarantees

or similar)

Covered bonds

Senior debt

Subordinated debt

(hybrid securities)

Debt that is

requalifiable in

the event of a

bail-in

Regulatory

capital Core Tier 1

capital

Tier 1

(perpetual, theoretical

loss absorption)

Tier 2

(dated, fixed coupons)

Reserves, issue

premiums, etc.

Common shares

Liabilities

Draft 8

The European financial subordinated

debt investment universe:

more than €570bn (28/02/2017)

Tier 2

€266bn

Pure perpetual

37

7

Tier 173

34

14

Discounted

Additional Tier 1

€140bn

Risk

Retu

rn

Fixed to fixedCalls >2022

Legacy Tier 1

€165bn

Source: Bloomberg

Draft

ADDITIONAL TIER 1

9

Hybrid securities and their treatment during the transition period

LEGACY

TIER 1/TIER 2

BASEL 2

CALLS / REDEMPTION OFFERS - EXCHANGE OFFERS

Varying rules

Incentives to pay coupons

(dividend pushers and

stoppers)

Incentives to exercise calls

(step-up consisting of an

additional margin after the

first call date)

Loss absorption clauses

that are not always efficient

Uniform rules

Discretionary coupons

Purely discretionary calls

Loss absorption and

systematic conversion

below a certain threshold

BASEL 3

Disqualification from

inclusion in regulatory

capital

&

Run-off management of the

stock of legacy debt

Transition period from 01/01/2013 to 31/12/2021

NB: for insurance companies, the transition phase between Solvency 1 and Solvency 2 is later (disqualification

in 2026) and simpler (securities are fully eligible).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Stock of

banks in 2012

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Draft 10

› A legacy stock that is losing its eligibility*

− Not compliant with the new standards imposed by the regulator and is therefore disqualified from

inclusion in regulatory capital.

› A 10% reduction in the stock of legacy securities per year

− Rules that organise the transition and provide for a gradual reduction in existing hybrid securities eligible

for inclusion in the calculation of the new ratios

› Security-by-security arbitrage for banks

− According to the:

• Regulatory eligibility specific to the security

• First early redemption date

• Incentive or otherwise to redeem (step-up)

• Cost (coupon)

• Currency

• Size of issue

• Investment pool

• New Basel 3 issues

(*) depending on the clauses in the security's

prospectus

The importance of the transition rules for

legacy securities

A transition that

creates new

opportunitiesNB: for insurance companies, the transition phase between Solvency 1 and Solvency 2 is later (disqualification

in 2026) and simpler (securities are fully eligible).

Draft 11

› As legacy securities are disqualified from inclusion in regulatory capital, this

transition period gives issuers an incentive to:

− Either exercise redemption options (calls at par)

− Or make exchange or redemption offers (with a premium on the market price)

› The complexity of the disqualification rules provides many investment opportunities,

especially by creating uncertainty about when the debt will be redeemed.

A fundamental transition period for

Groupama Axiom Legacy 21's strategy

12

Groupama Axiom Legacy 21

Investment process

Our expertise

Draft 13

Credit analysis and scoring of issuers

Analysis of the security› Fundamental analysis

Financial opportunities resulting from a poor

understanding and poor analysis by the

market

› Risk analysis

› Issue selection

Resolution risk

Coupon risk

Extension risk

An investment universe consisting of bonds issued by financial

institutions

Multiple

criteria

analysis

Risks

specific to

legacy debt

Financial

opportunities

Draft 14

Our fundamental analysis

Multiple

criteria

analysis

New credit analysis tools:

1. Each issuer must be analysed based on the stress test methodology and its ability to increase

its capital*

2. Each bond must be analysed according to a multiple criteria grid

3. A diverse market with different risks and opportunities depending on the instrument

1. Analysis grid

Analysis factor Measurement tools

Resolution risk Axiom Risk Grade, external rating, stress test

model, investment pool, seniority, issuing entity

Coupon riskAnalysis of the ADI** risk, analysis of the MDA**

risk, possibility of hedging

Quality of the

prospectus

Specific features of the prospectus: ad hoc legal

analysis

Extension riskRegulatory analysis, regulatory cascade model

during the transition period

Market risk Market analysis, valuation tools

LiquidityAnalysis of brokers’ quoted prices, frequency of

runs

InstrumentInvestment

opportunityRisks Axiom tool

Tier 2 Yield Resolution**Internal score,

stress test model

“Simple” Legacy

Tier 1Yield

Resolution and

MDA

Internal score,

stress test model,

MDA model

Other

Legacy Tier 1

Yield and capital

gain

Resolution, MDA,

extension risk**

Internal score,

stress test model,

MDA model,

regulatory

cascade

AT1Yield and capital

gain

Resolution,

conversion, MDA,

ADI, extension risk

Internal score,

stress test model,

MDA model

2. Instruments

(*) profit generation, capital increase, disposal of assets, reduction of balance sheet.

(**) see glossary on page 33

Draft 15

Our analysis of the risks specific to legacy debt*

Resolution

Has the greatest impact on a long-term investment in hybrid debt

1. Definition, for each issuer, of an internal score of between 1 and 10 solely reflecting its group's

bail-in risk

2. These internal scores are then translated into risk limits

Possibility of the coupon not being paid (assuming there is no resolution)

› The prospectus must first be analysed, as certain clauses may trigger payment of the coupon. For

other securities, the following are analysed:

The risk relating to distributable reserves

The MDA (Maximum Distributable Amount) risk

› The tools used are:

Regulatory analysis (particularly including the prospectus)

Internal MDA, CET1 and RWA (see glossary) modelling tools

Possibility that the redemption date is not the expected date

› The vast majority of Tier 1 securities are perpetual with early redemption options

› The tools used are:

Regulatory analysis (possible eligibility for inclusion in other ratios such as MREL and

TLAC)

Capital structure modelling tools in order to estimate the call dates as accurately as possible

Coupon

Extension

(*) the specific risk analysis is presented in detail in the appendices to this document

Draft 16

2021: end of the regulatory transition period

Financial

opportunities

Approaching of the deadline and loss in capital value of subordinated

securities issued before Basel 3

› As they lose eligibility, these instruments will become too expensive for their use

› Many investment opportunities remain, arising especially from the extension risk, which is often

poorly understood and poorly analysed by the market

› There are therefore many sources of opportunities for as long as the market struggles to

analyse and effectively anticipate the exit treatment of these debts by banks (exit timing and

conditions)

› Groupama Axiom Legacy 21 will mainly be invested in:

− Bank issuer debt offering a high estimated yield (in excess of a portfolio of plain vanilla Tier 1 debt or a portfolio

invested in the corporate debt of comparable issuers) and a more complex regulatory transition ending at the end of

December 2021

− The portfolio may also be invested in the debt of insurance companies

− In any case, the manager must analyse the risks for the coupon or the security's nominal value

17

Investment strategy &

Portfolio characteristics

Our added value

Draft 18

Capitalising on the transition period's complexity is central to security

selection

The yield is high and the issuer will

wish to redeem the security before the

end of the transition period

(premium relating to regulatory

disqualification)

Long calls3

Coupon and significant capital gain

relating to the timing of the call or the

redemption offer by the issuer

(before the date expected by the

market consensus)

Orphan instruments1

whose prices are discounted

High yield

Low volatility

Fixed to fixed2

With high coupons

Yield

Improving spread

Improving credit quality4

› Securities of the following type will be selected

Draft 19

› Subordinated debt that is losing its eligibility for inclusion in regulatory capital due to the

transition period and that the market is losing interest in:

− Either because the coupons are not very attractive (floating rates or low coupons) or because the

structures are complex (CMS securities)

− Or because the consensus is that the security will not be redeemed (or not for a very long time)

− Or because of the size of the issue, the currency (exotic) or the investment pool

› We are looking, first and foremost, for securities that should be redeemed before the market

consensus expects.

Security selection: discounted orphan instruments

Coupons

Capital gain when the

redemption offer is made

(before the end of 2021) The strategy involves exposure to

credit, coupon and extension risks,

whose analysis and management are

presented in detail in pages 14 and

15 of this document

1

Draft 20

› Barclays security (BACR Float

10/29/49)

− A security issued in 1989 and never

redeemed

− Coupon £3m + 100 bps

− The market consensus was not expecting a

call

Search for discounted orphan securities: example of Barclays

The central scenario was that Barclays would

act early and launch an offer rather than paying

a high price in 2021.

In September 2016, Barclays announced a

redemption offer for several of its legacy

securities, including this security, for which it

offered a 12% premium on the last quoted

price.

Source: Bloomberg

Draft 21

› Subordinated bonds included in banks' regulatory capital until the end of the Basel 2 to Basel 3

transition period (i.e. until the end of 2021)*.

› Unlike most subordinated securities, these securities retain a fixed coupon structure after the

first call date (hence the term fixed to fixed), but may be redeemed at par on each subsequent

call date (usually every quarter).

› As a result, in the current interest rate environment, these securities offer yields considered to be

very high (compared with issuers’ current spreads) on average, with a very limited volatility.

Security selection: fixed-to-fixed securities

High coupons

Very stable price (and

therefore low volatility)

Interest rate sensitivity

close to zero (short call)

*at the end of 2025, for insurance companies (transition to solvency 2).

The strategy involves exposure to

credit, coupon and extension risks,

whose analysis and management are

presented in detail in pages 14 and

15 of this document

2

Draft 22

› BPCE 6.75% (BPCEGP 6 ¾ PERP - ISIN code

FR0010279208)

− A security issued in 2006

− Coupon 6.75% in USD

− Date of 1st call: January 2012

− Trades close to par, as can be redeemed every 6

months

Search for high coupons: example of BPCE

Source: Bloomberg

Draft

The strategy involves exposure to

credit, coupon and extension risks,

whose analysis and management are

presented in detail in pages 14 and

15 of this document23

Security selection: long calls

0

200

400

600

800

1 000

1 200

1 400

1 600

Size

of

issu

e in

mill

ion

s o

f eu

ros

RBS hybrid debt call date

› Subordinated debt whose first call date falls after the end of the transition period (i.e. after

December 2021).

These securities will have lost all their regulatory value before the issuer has been able to exercise their call option

› It is not in the issuer's interests to continue to pay high coupons for a security that is not eligible for

inclusion in regulatory capital

A redemption or exchange offer with a premium on the market price.

Phase 1: the security is eligible for inclusion in

regulatory capital and it is in the bank’s interests to

retain it

Phase 2: the security is no longer eligible for inclusion in

regulatory capital and it is no longer in the bank’s

interests to pay a high coupon

High yields

(5% to 7%)

Capital gains when the

redemption offer is made

Search for long,

expensive calls

Phase 1 Phase 2

End of the transition period

3

Draft 24

› Commerzbank 8.151% (CMZB 8.151 06/30/31 - ISIN

code US26156FAA12)

− A security issued in 1999, first call in 2029

− Disqualified from inclusion in regulatory capital as from

the end of the transition period (2021)

− It is in the issuer's interests to make a redemption or

exchange offer instead of continuing to pay a high coupon

for a security not eligible for inclusion in capital

− 7% yield in USD, capital gain at the time of the offer

− Economic structure of the security, assuming there is no

bail-in, almost equivalent to that of a tier 2 security, with a

far higher yield

Search for long calls: example of Commerzbank

Source: Bloomberg

Draft 25

› Institutions whose credit quality is considered to be improving. The improvement in credit quality

may be due to:

− A restructuring plan,

− Asset disposals,

− The withholding of dividends,

− A merger,

− A capital increase.

› Searching for situations where the improvement in the credit rating will have a major impact on

subordinated debt prices

Security selection: improving credit quality

Yield

Improving spread

The strategy involves exposure to

credit, coupon and extension risks,

whose analysis and management are

presented in detail in pages 14 and

15 of this document

4

Draft 26

Seeking improving credit quality: example of Unicredit*

BACKDROP OUR ANALYSIS

An institution experiencing the same problems as

other Italian banks

A more diversified portfolio of activities that is very

significantly improving its credit risk

Pre-announcement of a strategic asset sale and

disposal plan and a capital increase: the bank

could raise between €10bn and €15bn

Capital ratio very far from the 6% threshold

Almost non-existent conversion risk

Net income of €916m vs. €522m the previous year

Improvement in revenue: +7.1% in 1 year (2016)

Q1 2017: a capital increase (€13 billion) that

improves the issuer's credit quality

(*) Analysis at the start of 2017

Draft 27

The target portfolio of Groupama Axiom Legacy 21*

Banques 80,4%

Assurances19,6%

Tier 180,0%

Tier 220,0%

2,45%

45,27%49,99%

2,29%

A BBB BB B

80 bonds/35 issuers

(*) based on the conditions of our analysis at 30/03/2017

Breakdown by seniority of debtBreakdown by issuer type

Breakdown by issue ratingGeographic breakdown

27,44%

19,55%

13,87%

9,12% 8,87% 8,71% 7,87%

4,18%

0,39%

Issuer Weight

Lloyds 7.94%

Unicredit 5.71%

Barclays 4.59%

RBS 4.35%

Crédit Agricole 4.14%

BBVA 3.76%

Commerzbank 2.91%

Groupama 2.66%

BNP 2.64%

ING 2.56%

28

Management team & Rates of return

Draft 29

Axiom Alternative Investments

› An independent company, which created its first subordinated debt fund in 2009

› Fully owned by its senior managers

› Specialist in securities issued by financial entities

› Based in Paris and London

› Approved by the AMF and the SEC and registered with the FCA

› Expertise recognised by investors and the specialist press

› Assets under management of EUR 750m (at 28/02/2017)

› Rates of return on financial securities established and recognised since 2009 with an annualised

return net of management fees of 8.55% for its main fund, Axiom Obligataire1

(1) Annualised net returns from 23/07/2009 (inception date) to 29/03/2017.

For more information, please consult the documents available on the website www.axiom-ai.com

Draft

The research and management team

› An experienced team of portfolio managers and analysts, solely dedicated to financial institutions

› More than 17 years' experience on average working for major investment banks and prestigious management

companies

› Fundamental analysis is central to the management process and the tools developed internally

Jérôme worked for 10 years at Societe

Generale as Deputy Head of Structured

Capital Finance. He previously worked at

CCF (then HSBC France) as a financial

engineer within the Research and

Innovation Department, mainly on the

quantitative measurement of risk and the

valuation of derivatives.

Jérôme is a founding shareholder in

Axiom Alternative Investments.

Jérôme is a graduate of the École

Polytechnique (X93) and the ENSAE.

Jérôme is a shareholder in Axiom

Alternative Investments.

David Benamou founded Axiom

Alternative Investments after 10 years'

experience in Structured Finance.

David was Deputy Head of Structured

Capital Finance at Societe Generale from

2000 to 2011. He previously worked at

CDC Marchés, in the bond origination

department, where his duties included

responsibility for drafting bond

prospectuses.

David Benamou has a master's degree in

business and tax law and is a graduate of

ESSEC's international business law and

management master's programme.

David is a shareholder in Axiom

Alternative Investments.

David Benamou

Chief Investment Officer

Jérôme Legras

Head of Research

16 years' experience in third-party asset

management. Adrian Paturle joined

Rothschild & Cie Gestion in 2002 as Bond

Manager. He managed around €1 billion of

insurance portfolios on a discretionary

basis, and €400m of debt funds invested in

investment grade and high yield issuers, in

the form of both physical bonds and credit

default swaps. Finally, he managed a fund

invested in catastrophe bonds, which had

assets under management of around

€100m. Adrian Paturle was previously a

quantitative debt manager at ABF Capital

Management, where he managed a

portfolio of around €200m.

Adrian Paturle is a graduate of the École

d’Actuaires in Lyon (ISFA) and has a Post-

Graduate Diploma in finance.

Adrian is a shareholder in Axiom

Alternative Investments.

Gildas was previously Lead Analyst,

Banking Sector at BNP Paribas. The team

that he led was specialised in bank equity

instruments and special situations.

He began his career in 1997 at Lazard

Frères in Paris in the Equity & Debt

Origination department. He was then an

analyst at Merrill Lynch and Citigroup,

where he more specifically focused on

subordinated debt.

Gildas is a graduate of the École

Polytechnique and the INSEAD.

Gildas is a shareholder in Axiom

Alternative Investments.

Gildas Surry

Senior Analyst

Adrian Paturle

Chief Executive Officer

30

Draft

94

96

98

100

102

104

106

Stratégie similaire à Groupama Axiom Legacy 21 Bloomberg EUR High Yield Corporate Bond Index

Bloomberg EUR Investment Grade European Corporate Bond Index

31

The team's rates of return: example of a fund managed by Axiom AI

using the same strategy

Rates of return - 30/09/2016 to 23/03/2017

Inception date: 30/09/2016

AuM (22/03/2017): €128.85m

Portfolio:

80 bonds/35 issuers

Banks: 80.4%/Insurance: 19.6%

Tier 1: 80%/Tier 2: 20%

A2,45%

BBB45,27%

BB 49,99%

B2,29%

0%

10%

20%

30%

40%

50%

60%

A BBB BB B

27,44%

19,55%

13,87%

9,12%8,87% 8,71%

7,87%

4,18%

0,39%0%

5%

10%

15%

20%

25%

30%

35%

40%

Past returns are not a reliable indicator of future returns

The strategy involves

exposure to credit,

coupon and extension

risks, whose analysis and

management are

presented in detail in

pages 14 and 15 of this

document

Similar strategy to

32

Glossary

Draft 33

› ADI (Available Distributable Items)

− ADIs are the distributable sums available for payment of an AT1 coupon. They are usually calculated for the issuing legal entity,

based on the non-consolidated accounts. They are calculated in accordance with the applicable national laws on dividend

distributions. This is therefore one of the few areas where there is no European harmonisation. The sums are calculated on an

annual basis.

› AT1 (Additional Tier 1)

− New format of subordinated debt eligible for inclusion in regulatory capital under Basel 3, both for the solvency ratio and (partially)

for the leverage ratio. Coupons are discretionary and the nominal value may be reduced either through conversion into shares

(Coco), or through a reduction in nominal value, which may subsequently be returned to its original value.

› Bail-in

− The bail-in mechanism is defined by the BRRD in opposition to a bail-out and refers to the fact that holders of bonds and

shareholders must bear losses in order to maintain a bank’s viability without triggering bankruptcy proceedings and without

needing to use taxpayers’ money.

› Basel 1, 2 and 3

− The Basel Committee is an informal committee composed of central bankers and regulators that makes banking regulation

proposals. Although its proposals are not immediately applicable, they are later transposed by national legislatures. Basel 1

(Cooke ratio) was the first international mechanism aimed at guaranteeing banks’ solvency, through a simple approach (8% ratio

and almost universal risk weightings, except for public institutions and property). Basel 2 introduced weightings based on ratings

to more effectively take actual credit risks into account. Basel 3 transformed the regulatory capital rules and made the minimum

capital requirements considerably tougher.

Glossary

Draft 34

› BRRD

− The Bank Recovery and Resolution Directive (BRRD) introduced a new set of rules governing bank failures and gives regulators

broad bank crisis management powers, especially by providing them with the bail-in mechanism.

› Call

− An option granted to the issuer to redeem a bond before its maturity date, usually, but not always, at par. These redemptions may

be carried out at specific exercise dates or be triggered by regulatory or credit events.

› CET1 (Common Equity Tier 1)

− Within the context of Basel 3, Common Equity Tier 1 is the most solid form of regulatory capital, which chiefly consists of equity

(including shares) and undistributed reserves, with some deductions compared with “book equity” (such as deferred tax assets).

The CET1 ratio represents the relationship between the Common Equity Tier 1 and the RWA. The CET 1 does not, therefore,

include subordinated debt.

› Fully loaded

− Fully loaded regulatory ratios are the final ratios calculated once all the rules relating to Basel 3 are in place. During the transition

phase, less restrictive rules are tolerated (phase-in period).

› Legacy hybrid securities

− Legacy or legacy hybrid bonds are subordinated bonds that were eligible for inclusion in regulatory capital under Basel 1 or Basel

2 and no longer are under Basel 3.

Glossary

Draft 35

› MDA (Maximum Distributable Amount)

− This is the maximum amount, in accordance with CRD IV (the 4th Capital Requirements Directive is the legal transposition of

Basel 3 within the EU), that a bank is authorised to distribute (dividends, bonuses and AT1 coupons). This cap came into force on

1/1/2016.

› RWA (Risk Weighted Assets)

− Every position that a bank is exposed to is weighted by a risk weighting, designed to reflect the real risk exposure. Under the

standard method, a system based on credit ratings provided by rating agencies is used. Under the internal method, the RWAs are

calculated using regulatory formulas, which take into account factors such as the PD for each counterparty and the loss given

default (LGD).

› Spread

− Difference between two rates

› SREP (Supervisory Review and Evaluation Process)

− The prudential supervisory process allows the supervisor (the national supervisor or the ECB under the SSM) to monitor a bank’s

activities and risks and to impose additional capital requirements or a change in the RWA calculations, processes, management,

and so on.

Glossary

36

Groupama Axiom Legacy 21

Appendices

Draft 37

Our risk analysis

Resolution

Has the greatest impact on a long-term investment in hybrid debt

1. Defining, for each issuer, of an internal score of between 1 and 10 solely reflecting its

group's bail-in risk

2. These internal scores are then translated into risk limits

Conventional tools

› Capital adequacy

› Diversification of activity

› Profitability and operational efficiency

› Macro-economic risks

› Quality of sources of financing

Internal stress test tool &

› Reproduction of the methodologies used by the

EBA; the ECB incorporates the data published by

banks and the EBA

› Objective: estimation of the bank's potential

capital shortfall if a negative macro-economic

environment arises

Financial flexibility analysis Impact measurement&

› Does the bank have access to the market or liquid

assets to make up its capital shortfall?

› What is its capital need if the risk is realised?

Which securities are likely to participate in the

recapitalisation and in what amount?

Draft 38

Our risk analysis

Coupon

Possibility of the coupon not being paid (assuming there is no resolution)

1. The prospectus must first be analysed, as certain clauses may trigger payment of the

coupon.

2. For other securities, the following are analysed:

• The risk relating to distributable reserves: a bank may not have enough distributable

sums to pay a coupon.

• The MDA (Maximum Distributable Amount) risk: this is the biggest risk. If the bank

does not meet the combined capital buffer requirement, this may restrict distributions

(dividends, coupons, and bonuses).

3. The tools used are:

• The proprietary internal database: can be used to calculate the MDA trigger threshold

for each bank, and how this threshold will change over time as the various buffers

gradually come into force.

• CET1 (Core Equity Tier 1) and RWA (Risk Weighted Assets) modelling tools, which

may change for economic or regulatory reasons.

Draft 39

Our risk analysis

Extension

Possibility that the redemption date is not the expected date

› The vast majority of Tier 1 securities are perpetual with early redemption options

Internal database

› Bank-by-bank indication of the complete stock of

hybrid securities at 1 January 2013, with the main

characteristics:

• Coupon,

• Call dates and frequency,

• Post-call spread,

• Step-up,

• Nominal value,

• Currency,

• Etc.

Central redemption scenario

› Determining of the regulatory treatment during the

transition period

› Determining of the optimum redemption profile,

reducing the bank's global financing cost

Marketing conditions

40

ISIN code Unit Subscribers

Actual

manage

ment

fees

Max.

manage

ment

fees

Calculation base Performance fee

Minimum

initial

subscription

Max.

subscription fee1

Max.

redemption

fee2

Valuation

frequency Unit type

Subscription/redemption

conditions

FR0013251881 PCReserved for institutional

investors0.70% 0.70%

Net assets

10% incl. tax above

the Euribor + 3% net

of management fees

€10,000,000

5%

1% until

31/03/2018.

N/A after this

date

Daily

Accumulation

Every day until 11:00:00,

Paris time

NAV unknown -

Settlement on D+3

FR0013259132 IC

Reserved for institutional

investors, for whom the

Groupama group and its

external distributors act as

marketers

0.90% 1.00% €100,000 Distribution

FR0013259165 JC

Reserved for institutional

investors, for whom Axiom

Alternative Investments

acts as marketer

0.90% 1.00% €100,000 Accumulation

FR0013259173 LC

Reserved for subscribers,

for whom Axiom Alternative

Investments acts as

marketer

1.40% 1.50% 1 unit Accumulation

FR0013259181 NC Open to all subscribers 1.40% 1.50% 1 unit Accumulation

(1) Fee not paid to the UCITS

(2) Fee paid to the UCITS

This document has been produced for information purposes only.

Groupama Asset Management and its subsidiaries cannot be held liable if this document's contents are altered, distorted or falsified.

Any unauthorised amendment, use or dissemination, in any way, of all or part of the document, is prohibited.

Past returns are not a reliable indicator of future returns

Investors must read the UCITS's prospectus or key investor information document before making an investment. These documents and any other

periodic documents may be obtained on request, free of charge, from:

• Groupama AM - 25 rue de la ville l’Evêque - 75008 Paris or from www.groupama-am.com

• Axiom Alternative Investments - 39 avenue Pierre 1er de Serbie - 75008 Paris or from www.axiom-ai.com

The information contained in this publication is based on sources that we believe are reliable, but we cannot guarantee that it is accurate,

complete, valid or relevant.

This non-contractual document in no way constitutes a recommendation, a solicitation of an offer, or an offer of purchase, sale or arbitrage, and

should not be construed as such under any circumstances.

The sales teams at Groupama Asset Management and its subsidiaries are available to give you a personalised recommendation.

Published by Groupama Asset Management - Registered office: 25, rue de la ville l’Evêque, 75008 Paris - Website: www.groupama-am.com

DISCLAIMER

41