December 2019

BCV Swiss Franc Bonds

2

3.48%3.70%

5.48%

0.11%

5.90%

2.08% 2.16%

0.61%

-0.04%

2.53%

3.19%

1.84%

5.91%

-0.55%

4.71%

0.86%1.06%

0.20%

-1.01%

2.49%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

BCV Swiss Franc Bonds SBI AAA-BBB Peer Group Lipper Schweiz

Expertise in Swiss bonds

Gross performance for the fund

Recognized experience in managing Swiss franc bonds by the 2016 & 2017 «Bester Fonds» FERI

award

Source: BCV, Bloomberg, Lipper

3

Swiss Franc Bonds universe: SBI AAA-BBB

Source: BCV, Barclays Point

SBI AAA-BBBMarket

value (%)Yield (%) Duration CHF (Bn) # Issues

Confederation 16.53 -0.24 12.67 81 23

Pfandbriefe 26.00 -0.05 7.74 127 214

Gov. related & securitized 29.30 -0.06 7.32 143 624

Corporates 28.17 0.14 4.84 138 610

Total 100.00 -0.07 7.61 488 1471

Total [1;5] [5;10] [10;+[

High Grade MV(%) 72.1 23.4 24.7 24.0

Yield (%) -0.19 -0.50 -0.31 -0.08

Corporates MV(%) 27.9 17.5 9.1 1.3

Yield (%) 0.07 -0.08 0.09 0.49

Market

value (%)Yield (%) Duration Spread

AAA & AA 77.01 -0.12 8.45 28

A-BBB 22.99 0.20 4.81 75

4

Recent rates and credit spread evolution

• After two years during which CHF 10 year yield fluctuated

between -0.20% and +0.20%, interest rates failed to hold

and dropped in 2019

• Among the global economic slowdown and trade tensions

backdrop, yields were pushed to record lows before

rebounding during last quarter thanks to an improvement in

investor sentiment

• Yield curve also significantly flattened mostly on the long

end

• The U-turn initiated by the Fed at the beginning of the

year switching from tightening to easing mode and

followed by the main central banks across the globe

created a favourable environment for credit. In this context

spreads tightened considerably. Thus “SBI BBB” rated

index performed +3.94%, close to the Swiss treasuries

performance of 4.47% but with a duration three times

lower

2019

-0.25

-0.47

-1.20

-1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

Conf. 10 ans

Source: BCV, Bloomberg

2019

147

91

70

90

110

130

150

170

190

12.2016 06.2017 12.2017 06.2018 12.2018 06.2019 12.2019

Spread CHF BBB

Spread BBB

5

5.69%

4.47%

3.15%

3.05%

2.97%

2.06%

-1.00%

1.00%

3.00%

5.00%

7.00%

9.00%

11.00%

13.00%

12.2018 01.2019 03.2019 04.2019 05.2019 06.2019 07.2019 08.2019 09.2019 10.2019 11.2019 12.2019

Swiss Fixed Income Market Performance

• All sectors recorded positive performance in 2019 thanks to both a decrease in yields and to credit spread

tightening

• Domestic utilities exhibited the best performance with 5.69% supported by an important spread tightening of the

sector and a higher carry compared to other corporate sectors

• Swiss treasuries also enjoyed a strong performance of+4.47% thanks to the fall in yields, mostly on the long-end

of the curve

Duration Rates Spread Total

SBI AAA-BBB 7.56 1.53% 1.52% 3.05%

SBI Confederation 12.54 4.47% 0.00% 4.47%

SBI Foreign Financials 4.07 -0.45% 2.51% 2.06%

SBI Domestic Industrials 5.60 0.43% 2.72% 3.15%

SBI Domestic Utilities 5.97 0.41% 5.28% 5.69%

SBI Lettres de Gage 7.69 1.56% 1.41% 2.97%

Source: BCV, Bloomberg

6

Gross performance 2019

• Short positioning in duration has been the main factor explaining the lag in performance this year

• Overweight in corporates mainly financials and domestic utilities on tenor shorter than 5 years has contributed

positively through higher carry and spread tightening mitigating in part the impact of the short duration

BCV Swiss Franc Bonds SBI AAA-BBB

2.53%

3.05%

-2.10%

-0.10%

1.90%

3.90%

5.90%

7.90%

12.2018 01.2019 03.2019 03.2019 04.2019 05.2019 06.2019 07.2019 08.2019 09.2019 10.2019 11.2019 12.2019

Differential

Performance (%) FundSBI

AAA-BBBDifference

Carry 0.14% -0.01% 0.15%

Rates 1.12% 1.99% -0.87%

Credit 1.27% 1.07% 0.20%

Total 2.53% 3.05% -0.52%

Source: BCV, Bloomberg

7

Long term performance attribution

• The carry of the fund has contributed positively each

years. Credit carry has compensated the carry forgone

by a short duration positioning

• Excluding 2014 and 2019, years in which interest

rates have fallen sharply, the impact of rates on overall

performance has been moderate

• Most of the time, Credit risk management has

contributed positively on the performance when carry

and spread change is taken together

Carry

(pb)

Rates

(pb)

Credit

(pb)

Gross

perf. (pb)

2012

Fund 158 70 321 548

Index 123 73 225 421

35 -4 96 127

2013

Fund 172 -279 118 11

Index 132 -308 46 -130

40 29 72 140

2014

Fund 150 335 104 590

Index 110 452 120 682

40 -117 -16 -92

2015

Fund 99 281 -172 208

Index 49 260 -132 177

50 21 -40 31

2016

Fund 65 137 15 216

Index 24 111 -3 132

41 26 18 84

2017

Fund 68 -42 35 61

Index 49 -47 11 13

19 5 24 48

2018

Fund 64 22 -90 -4

Index 57 43 -93 7

7 -21 3 -11

2019

Fund 14 112 127 253

Index -1 199 107 305

15 -87 20 -52

Source: BCV, Bloomberg

BCV Swiss Franc

Bonds*

SBI

AAA-BBBDifference

2011 3.70% 4.83% -1.13%

2012 5.47% 4.21% 1.26%

2013 0.11% -1.30% 1.41%

2014 5.89% 6.82% -0.93%

2015 2.09% 1.77% 0.32%

2016 2.16% 1.32% 0.84%

2017 0.60% 0.13% 0.47%

2018 -0.03% 0.07% -0.10%

2019 2.53% 3.05% -0.52%

Annualized 2.48% 2.29% 0.19%

* Gross of fees

8

Fund Characteristics

Attractive carry…

The yield of the portfolio is 0.06% compared to -0.07%

for the benchmark

72.1% of the index exhibits negative yields compared to

46% for the fund

…despite lower duration

Short positioning in duration is at -1.35 years with

respect to the benchmark and is focused on the long end

of the curve, tenor 10 years and more

Credit exposure

• Underweight on very high grade bonds rated

AAA and AA in favour of corporate bonds

which offer higher yield and lower duration

• Overweight of 14.6% in BBB rated bonds is

concentrated on tenor less than five years

• Low exposure to high yield bonds

Exposure by rating

0.0

0.0

10.2

12.8

23.9

53.1

3.2

0.5

24.8

22.6

10.5

38.4

-5.0 5.0 15.0 25.0 35.0 45.0 55.0 65.0

Cash

BB

BBB

A

AA

AAA

Fund Index

BCV Swiss

Franc Bonds

SBI

AAA-BBB

Yield (%) 0.06 -0.07

Duration 6.26 7.61

Spread 56 39

Duration Time Spread (DTS) 1.27 0.96

Positions 361 1471

Rating AA-/A+ AA/AA-

Ex-ante volatility (%) 2.81 3.28

Ex-ante beta 0.61

Source: BCV, Bloomberg

9

Relative duration (ctrb) Total ]0;5] [5;10] [10;+[

Confederation -1.95 -0.10 -0.29 -1.57

Pfandbriefe 1.36 -0.21 0.24 1.33

Gov. Related & Securitized -0.93 -0.13 -0.22 -0.58

Corporates 0.18 0.36 -0.15 -0.03

Total -1.35 -0.07 -0.42 -0.85

• Strategic overweight on corporates bonds on the front end of the credit curve

• Tactically neutral on longer tenor in credit as this bucket is more sensitive to volatility => opportunistic approach

Duration and Credit positioning

• Short positioning in duration is focused on the long end of the curve 10 years and more, on treasuries (Confederation)

and government related like cantons and cities

• The shorter duration in government related and securitized is offset by the overweight in domestic Pfanbriefe which

offer more liquidity for the yield.

Duration

Credit

Net exposure (%) [10;+[

Confederation -7.82

Pfandbriefe 8.30

Gov. Related & Securitized -4.74

Corporates -0.31

Total -4.26

Net exposure (%) Total ]0;3] [3;5.5] [5.5;10] [10;+[

High Grade -23.92 -8.71 -9.29 -1.66 -4.26

Corporates 20.74 19.64 4.19 -2.78 -0.31

Cash 3.18

Total 0.00 10.94 -5.11 -4.44 -4.57

SBI AAA-BBB

yield (%)]0;3] [3;5.5]

High Grade -0.51 -0.40

Corporates -0.08 0.02

Source: BCV, Bloomberg

10

65

0

50

100

150

200

250

bp

s

CHF Swaps 5Y30Y

CHF Swaps 5Y30Y Moyenne

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Yield (%)

Differential

-0.35

0.06

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

Yield (%)

SWISS 3.5 04/08/2033 PSHYPO 2.125 11/28/2033

Attractive yield pick-up on «Pfandbriefe» versus

Confederation

Source: BCV, Bloomberg

• Yield spread between “Securitized” stands at 40

bps for equivalent duration risk…

• ... interesting pick up in a carry environment

11

Investment themes and positioning

• Financials : Overweight focused on tenor less than five years

Favour Non Preferred Senior (NPS) versus Seniors

• Domestic utilities: Defensive sector with higher spread relative to other corporate sectors

• Real Estate : Exposure on shorter bonds less than 3 years which offer attractive on a relative basis

• Confederation : Underweight on treasuries as the entire curve including tenor 50 years is in negative

territory

Market value

(%)

Net exposure

(%)

Relative

duration [cntr] Spread Yield (%)

Total 100.00 0.00 -1.35 56 0.06

Financials 25.28 13.38 0.31 76 0.09

Industrials 12.94 0.63 -0.26 65 0.03

Utilities 6.76 4.30 0.12 93 0.68

Real Estate 3.94 2.43 0.01 66 0.05

Pfandbriefe 30.21 4.21 1.36 38 0.04

Gov. Related & Securitized 16.65 -12.65 -0.93 51 0.02

Confederation 1.05 -15.48 -1.95 0 -0.22

Cash 3.18 3.18

Source: BCV, Bloomberg

12

Positioning

Source: Bloomberg, BCV

Exposure by sector

Favour financials and domestic utilities

Exposure by country

Weight (%) FundSBI

AAA-BBBDifference

Italy 1.7 0.2 1.4

Spain 1.4 0.4 1.1

Luxembourg 1.0 0.1 0.9

United States 4.1 3.4 0.8

Russia 1.4 0.6 0.8

Poland 1.0 0.3 0.7

Austria 2.0 1.4 0.6

Mexico 0.9 0.3 0.5

South Korea 1.3 1.0 0.2

Qatar 0.3 0.1 0.2

Finland 0.6 0.5 0.0

India 0.0 0.0 0.0

United Kingdom 0.9 0.9 0.0

Ireland 0.1 0.1 0.0

Philippines 0.0 0.0 0.0

Slovakia 0.0 0.1 -0.1

Denmark 0.2 0.3 -0.1

Kazakhstan 0.0 0.1 -0.1

Norway 0.3 0.4 -0.1

France 3.4 3.7 -0.3

United Arab Emirates 0.1 0.4 -0.3

Sweden 0.1 0.6 -0.4

Liechtenstein 0.2 0.6 -0.4

New Zealand 0.1 0.6 -0.4

Germany 1.4 2.1 -0.6

Canada 0.4 1.4 -1.0

Supranational 1.8 2.8 -1.1

Netherlands 0.9 2.1 -1.2

Australia 0.1 1.3 -1.3

Switzerland 71.0 73.9 -3.0

Cash 3.2 0.0 3.2

FundSBI

AAA-BBBDifference

Domestic 70.6 74.5 -4.0

Confederation 1.1 16.5 -15.5

Gov Related 6.3 18.1 -11.8

Securitised 33.9 26.6 7.3

Corporate Financials 15.2 4.8 10.4

Corporate Industrials 7.6 6.5 1.1

Corporate Utilities 6.5 1.9 4.6

Foreign 26.3 25.5 0.8

Gov Related 3.5 7.4 -3.9

Securitised 3.2 3.1 0.0

Corporate Financials 14.0 8.6 5.4

Corporate Industrials 5.4 5.8 -0.4

Corporate Utilities 0.3 0.5 -0.3

Cash 3.2 3.2

13

Corporate bonds longer than one year

• The 10 biggest positions in corporate bonds longer than one year represent 5.9%, all shorter than five

years

Biggest corporate exposure

Net exposure by issuer

• Biggest overweight on issuers are focused

financials and utilities

• Except on Kwlili, a domestic utilities with

longer dated bonds, duration is close or lower

than 5 years

Issuer Description NominalWeight

(%)

Yield

(%)Spread Duration Rating

HYPO NOE LB NOE WIEN AG HYNOE 0.2 03/31/22 7'075'000 0.76 -0.24 51 2.24 A

BAWAG P.S.K. BAWAG 0.01 09/15/21 6'070'000 0.64 0.10 87 1.71 A

RAIFFEISEN SCHWEIZ RAIFFS 3 ⅞ 12/21/21 5'515'000 0.63 0.00 76 1.93 BBB+

BANCO SANTANDER SA SANTAN 0 ¾ 06/12/23 5'500'000 0.60 0.05 76 3.40 BBB+

GAZPROM (GAZ CAPITAL SA) GAZPRU 2 ¾ 11/30/21 5'275'000 0.59 0.03 80 1.89 BBB-

PSP SWISS PROPERTY AG PSPNSW 0 ½ 02/16/24 5'300'000 0.57 0.04 72 4.08 A-

ADUNO HOLDING AG ADUHOL 1 ⅛ 07/16/21 5'175'000 0.56 -0.23 54 1.53 A

SULZER AG SUNSW 0 ¼ 07/06/20 4'900'000 0.52 0.00 78 0.51 BBB

PARTNERS GROUP HOLDING PGHNSW 0.15 06/07/24 4'700'000 0.50 0.08 75 4.42 A

CRED SUIS GP FUN LTD CS 1 04/14/23 4'500'000 0.49 -0.02 69 3.23 BBB

IssuerWeight

(%)

Net exposure

(%)Duration

CREDIT SUISSE 1.70 1.27 2.96

ALLREAL HOLDING AG 1.23 1.02 1.72

AXPO HOLDING AG 1.13 0.98 0.77

KRAFTWERKE LINTH LIMMERN 1.39 0.92 7.11

HYPO NOE LB NOE WIEN AG 0.98 0.89 1.96

MET LIFE GLOB FUNDING I 1.05 0.86 5.18

GRANDE DIXENCE SA 0.99 0.84 4.52

FCA CAPITAL SUISSE SA 0.83 0.78 1.07

BALOISE HOLDING AG 1.03 0.73 1.85

COMMERZBANK FINANCE & CO 0.73 0.73 2.86

Source: Bloomberg, BCV

14

Investment Process

Strategy is built around three axes:

Strategic and tactical allocation

• High grade bonds versus credit bonds

• By region: Domestic versus foreign issuers

• Sector and rating

Positioning on the interest rate curve

• Outright level of portfolio duration

• Steepener / flattener

Bottom-up & credit risk

• Security selection based on strong bottom-up

approach

• Diversification of issuers

• Complete coverage of Swiss universe

15

Portfolio Management Team

Agim Xhaja joined BCV

Asset Management as head

of fixed income in 2006. He

also manages different

mandates and funds in Swiss

and International bond

portfolios. Previously he held

various positions in the credit

risk control and financial

research divisions for UBS in

Zurich and also worked in

Man Investment as financial

engineer.

He has more than 20 years

of experience in different

aspects of fixed income.

He holds a PhD in Finance

through the FAME program

(now the Swiss Financial

Institute) and the University

of Lausanne, and a Master’s

in International Economics

from the Graduate Institute of

International Studies in

Geneva. He also has a

degree in Mathematics from

the University of Tirana.

Joël Lopes joined fixed

income team in January

2014 and manages semi-

active and index-based

bond funds and

discretionary mandates

denominated in Swiss

francs.

He holds a Master's in

economics from the

University of Neuchâtel and

a Bachelor's in

management from the

Business and Economics

Faculty of the University of

Lausanne.

He has five years of

financial-market

experience.

Gaël Fichan is foreign

currency bond investment

manager responsible for

selecting securities and

building portfolios. He

brings a bottom-up

perspective to the bonds

investment committee. A

part of our team since

2013, Mr. Fichan has five

years of experience in the

financial industry.

He previously worked at

Swisscanto on the fixed

income investment team

and holds a Master's in

Banking and Finance (joint

degree program between

the: University of Zurich

and ESGF Business

School, Paris).

A member of BCV's fixed-

income investment team

since October 2015, David

Wehrli manages bond

funds and asset

management mandates in

selecting sector-specific

securities from, for

example, the non-cyclical

consumer goods and

automotive sectors.

He has a Master in

Finance and a Bachelor in

Accounting and Finance

from the University of

Neuchâtel.

Agim Xhaja Gaël Fichan Joël Lopes David Wehrli

PhD, CIO Fixed Income Investment Manager Investment Manager Investment Manager

Julien manages bonds

funds and mandates. He is

in charge of selecting

securities and building

portfolios. Julien worked for

more than 3 years at

Edmond de Rothschild as

interest rates and

currencies portfolio

manager. Prior to that, he

spent 7 seven years as a

bonds and commodities

fund manager at Diapason

Commodities

Management. He hold a

Bachelor in Management

and a Master in Financial

Engineering from HEC

Lausanne a well as a

license in Mathematics

from the Swiss Federal

Institute of Technology of

Lausanne.

Julien Marcel

Investment Manager

16

Fund Facts

Legal structure Swiss-based fund approved by FINMA, in the “Other traditional investment funds” category

Registered in Switzerland

Custodian Banque Cantonale Vaudoise (BCV), Lausanne, Switzerland

Auditor PricewaterhouseCoopers SA, Pully, Switzerland

Fund manager Gérifonds, Lausanne, Switzerland

Index SBI AAA-BBB TR

Liquidity Daily

Inception 27.04.2005

Flat fee (pa)

Class A: 0.60%

Class B: 0.30% (min. of CHF 5m)

Class C: 0.25% (min. of CHF 30m)

Base currency CHF

ISIN / TK

Class A: CH0020943954 / 2094395

Class B: CH0020944051 / 2094405

Class C: CH0020944150 / 2094415

17

Your Asset Management Advisor

021 212 31 18

Banque Cantonale Vaudoise

Asset Management

CP 300 amconseil@bcv.ch

1001 Lausanne www.bcv.ch/invest

Frédéric Gardet Urs ZieglerMichel Aubry

044 388 71 30

Banque Cantonale Vaudoise

Asset Management

Talacker 35 ramona.morel@bcv.ch

8001 Zürich www.bcv.ch/invest

Gilles Guyaz Philippe

Maeder

Martin Koenig Ulrich Lüthy Philippe Schlatter

Jürg BaltenspergerRiccardo Cutruneo Adrian Leiser

Sergio Del GottardoJulien Brasey

18

Important legal information

Waiver of liability. While we make every reasonable effort to use reliable information, we make no representation or warranty of any kind that all informationcontained in this document is accurate or complete. Only values and performance figures calculated by the custodian bank are authoritative. We disclaim all liabilityor responsibility for any loss, damage or injury that may result directly or indirectly from this information. The information and opinions contained in this document arerepresentative of the situation on the date this document was prepared and may change at any time, particularly as a result of changes in the general market trend,interest rates and exchange rates, and legislative and/or regulatory changes. We are under no obligation to update or modify this document.

No offer or recommendation. This document is for information purposes only; it does not constitute bookbuilding, an offer to buy or sell or a personalizedinvestment recommendation. Before conducting any transaction, we recommend that you contact your advisors to carry out a specific examination of your risk profileand that you seek information about the risks involved. One such source of information is the SwissBanking brochure "Special risks in securities trading" (available atBCV offices and on the BCV website www.bcv.ch). In particular, we draw your attention to the fact that prior performance must not be taken as a guarantee of currentor future performance, and does not take into account commissions or fees for the issuance/purchase or redemption/sale of units.

Interests in certain securities and relations with third parties. It is possible that BCV, companies in our Group and/or their directors, managers and employeeshold or have held interests in or positions on certain securities, which they may buy or sell at any time, or that they have acted or traded as a market maker. Theymay have or have had business relationships with the issuers of certain securities, or provide or have provided them with corporate finance services, capital marketservices or any other financial services.

Restrictions on distribution. Certain transactions and/or the distribution of this document may be prohibited or subject to restrictions for persons in jurisdictionsother than Switzerland (particularly Germany, the EU, the UK, and the USA) and for US persons. The distribution of this document is only authorized to the extentallowed by applicable law.

Trademark and copyright. The BCV logo and trademark are protected by law. This document is subject to copyright and may not be reproduced unless thereproduction mentions its author, copyright and all the legal information it contains. Prior written authorization from BCV is required to use this document for public orcommercial purposes.

Telephone. Please note that calls to BCV phone numbers may be recorded. By calling us, you tacitly agree to this practice.