COMPANY PORTRAIT · CONVERTIBLES

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CONTENTS

I. Company info

Where to find us . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Basic data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Your contact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Organisational diagram . . . . . . . . . . . . . . . . . . . 5

Key points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Investment selection process . . . . . . . . . . . . 9

II. Convertibles

Happy medium . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Comparison of investment types . . . . . . .11

Performance comparison . . . . . . . . . . . . . . . .12

The different phases of convertibles . . .13

Risk-return profile . . . . . . . . . . . . . . . . . . . . . . . . .14

Purchase and sale criteria . . . . . . . . . . . . . . .15

Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

The groundbreaking

investment strategye . . . . . . . . . . . . . . . . . . . . .17

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

III. Additional services

Additional investment satellites . . . . . . . .19

Other services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

I . COMPANY INFO

WHERE TO FIND US . . .

Aeschenplatz

Theaterstr. 4

Freie Str.

Barfüsserplatz

Theater Basel

Aeschen-vorstadt 37

BaselBasel Badischer BahnhofKleinbasel

Birsfelden

Basel St. JakobHighway A3/A2 Zürich

Aeschenplatz

Theaterstr. 4

Theater Basel

Freie Str.

Münster

Barfüsserplatz

Basel Euroairport

Aeschen-vorstadt 37

SBB train station

Wettstein Bridge

Rhine

3

Madagascar

Africa

Malawi

Tanzania

Mozambique

Zimbabwe

South Africa

Madagascar (officially the République de

Madagascar), the fourth largest island in

the world, is located in the Indian Ocean

between the 12th and 26th degree of south-

ern latitude, and between the 43rd and 50th

degree of eastern longitude .

It lies off the south-eastern coast of Africa,

separated from Mozambique by 500 km .

The country’s landscape is predominantly

mountainous, with the highest elevation

being 2,886 m . It has many mesas and

volcanoes, steep in the east, and sloping

westwards in vast steps .

... or if you’d prefer to see chameleons in the wild

I . COMPANY INFO

I . COMPANY INFO

4

Legal form

Joint-stock corporation

CH-270 .3 .013 .851-8

HR Basel-Stadt

Corporate identification

number (UID): CHE-113 .405 .105

Total paid-up share capital

CHF 400’000 .–:

n 3’000 registered shares

with a nominal value of CHF 100 .00

n 100 bearer stock

with a nominal value of CHF 1’000 .00

Supervisory body/SRO

VQF, Zug member No . 12496

President of the Administrative Board

Alessandro Leo, Abtwil, CEO Sunstone

Vermögen & Treuhand AG, Zug

BASIC DATA YOUR CONTACT

CEO (managing director), portfolio

manager & market analyst with focus on

convertibles and high yield bonds .

Over 15 years of experience in portfolio

management with independent asset

managers before founding Chameleon

Asset Management .

Carlos Zanotelli

BSc Economics

and Business

Administration

COO, portfolio manager & market analyst .

Several years experience in the creation of

investment strategies for institutional cli-

ents at a global asset manager and in the

field “Products & Trade” at a renowned

Swiss private bank .

Mauro Bärtsch

Master of Arts HSG

in Banking & Finance

I . COMPANY INFO

5

Risk control & compliance (GwG)CEO Carlos Zanotelli

External auditingPwC AG (PricewaterhouseCoopers), Basel

CRM

Advisor

COO Mauro Bärtsch

(Carlos Zanotelli)

Portfolio Management Carlos Zanotelli (Mauro Bärtsch)

Board of directorsAlessandro Leo

ORGANISATIONAL DIAGRAM

CEO: Chief Executive Officer CRM: Client Relationship Manager COO: Chief Operating Officer

Customer-specific mandatesn Individual & mixed asset categories

Special mandates n Convertiblesn High Yield Bonds

I . COMPANY INFO

KEY POINTS

6

Asset management

for HNWI’s (High Net Worth Individuals)

Value maintenance

and asset accumulation

by investing in:

n convertibles

n high yield bonds

n structured products

No acceptance of any retros or kick-

backs or the immediate forwarding

of these, credit to the client .

ETHICS

TRANSPARENCY

SOCIAL SKILLS

I . COMPANY INFO

PRINCIPLES

7

n Transparency & ethics

n Investments from a corporate,

strategic perspective

n Information is the basis

of our performance

n Asset performance target:

return on investment above average

and sustainable

n Mandate target:

20 HNWIs at CHF 10 million max

per staff member

n Efficient management of other

assets

I . COMPANY INFO

CONCEPT

Asset management

Our asset management seeks to look af-

ter high-net-worth individuals, and offer

them professional and personal advice .

However, we can only meet this require-

ment if we impose a self-restriction for

the number of clients to be serviced .

Investors

By investing in an efficient investment

package, we give a wide range of inves-

tors the chance to manage their money

according to the same approach .

Core area

The core area will lie in the investment

means of the convertible, according to

the chameleon, and in doing so, the

debtor quality will each time gain great

importance so as to secure and increase

mid to long-term assets under manage-

ment in such a way that the opportunity/

risk ratio is chosen in the best possible

manner, without clientele having to

renounce participation in rising share

prices .

Aim

Our aim is to not compromise our cus-

tomers’ assets in a speculative manner

through futures and options or foreign

exchange transactions .

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Social and ethical

Our asset management approach also

seeks to lead the way as a role model

in social and ethical dealings with our

whole environment, i .e . customers, staff

etc ., and operate with the greatest pos-

sible transparency and honesty .

We want to consciously renounce bank

kick-backs from brokerage fee retros or

other hidden bonuses, so as not to be

dependent on unnecessary transactions .

I . COMPANY INFO

INVESTMENT SELECTION PROCESS

Top-down approach

Assessment of macro and microeconom-

ic factors, the political environment, and

currency and interest trends .

Bottom-Up-Approach

n Systematic evaluation of individual

convertibles with a strategic focus

on sectors and markets with above-

average opportunities for growth .

n Based on fundamental analyses, we

sift out securities of companies which

demonstrate upright management

and outstanding products/processes .

n Through quantitative analyses, we

ensure all risk and evaluation pa-

rameters are constantly kept on the

radar, and, if necessary, that the as-

set allocation is adjusted (Bloomberg

data system) .

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We place great emphasis on:

n Promising underlying stock

n Debtor quality (rating)

n Floor (investment value, network)

n Delta

(Correlation between convertibles

and share)

In doing so, we work with leading con-

vertibles brokers .

I I . CONVERTIBLES

Loan/Bond Convertible Share

n Fixed interest coupon

(current yield)

n Fixed interest coupon (current yield) n Dividends

(not secured)

n Limited duration n Limited duration n Unlimited duration

n Repayment at nominal

value

n Repayment at nominal value or in shares

at the creditor’s discretion!

n No repayment obligation

n No share participation n approx . ¾ share participation upwards but

only ¼ downwards

n Full profit participation

Performancein increasingshare markets

Safety netin turbulent stock market conditions

Convertibles as the happy medium to achieving your capital investment goal

HAPPY MEDIUM

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I I . CONVERTIBLES

I I . CONVERTIBLES

Comparative table of return & risk for various types of investments

Independent long-term studies show

that convertibles generate higher

risk-adjusted returns than bonds and

shares (based on the Sharpe ratio) .

Data source: Global Convertible Investing The Gabelli Way 2002

COMPARISON OF INVESTMENT TYPES

International Convertible Markets: Bonds Equities Converts

Risk versus Return (1993-99) Return 7 .18% 6 .81% 7.38%

Table 5.10/Page 42 Risk 7 .64% 12 .77% 8.67%

European Convertibles:

Risk versus Reward (1993-99) Return 9 .23% 19 .05% 16.34%

Table 5.13/Page 43 Risk 4 .41% 15 .15% 9.69%

Historic Sharpe Ratios 0 .31 0 .48 0.54

Sharpe Ratio = Portfolio return - Risk-free rate Portfolio standard deviation

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I I . CONVERTIBLES

PERFORMANCE COMPARISON

UBS Global Convertible Bond IndexJP Morgan Global Bond IndexMSCI World Index

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350

300

250

200

150

100

50May94

May95

May96

May97

May98

May99

May00

May01

May02

May03

May04

May05

May06

May07

May08

May09

15 Year-Performance CV / SHS / Bonds

Value development in USD

I I . CONVERTIBLES

THE DIFFERENT PHASES OF CONVERTIBLES

At increasing share prices, participating

with the price increaseAt decreasing share prices you land softly,

thanks to the saftey net

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Loanreserves

Loanreserves

Conver-tible

Conver-tible

Share

Share

Sharereserves

Sharereserves

“true” convertible

“true” convertible

Shareprice

Share price

Safetynet

Conv

erti

ble

valu

e

Conv

erti

ble

valu

e

Share price risesValue depends on the share price

Share price fallsValue depends on the share price

I I . CONVERTIBLES

RISK-RETURN PROFILE

Risk-return profile of convertible bonds and shares

This graph clearly shows that

n higher returns are possible even

with reduced risk

n Even a fifty-fifty bond-share port-

folio is not convincing

n Convertibles displayed the best

of both worlds, with an excellent

opportunity/risk profile

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Risk

11%

10%

9%

8%

7%

6% 4% 6% 8% 10% 12% 14% 16%

Shares (100%)

Bonds (100%)

Graph source: Jefferies

Convertibles

Retu

rn

I I . CONVERTIBLES

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PURCHASE AND SALE CRITERIA FOR CONVERTIBLES

Purchase criteria

Balanced

n Price at par (100%) or repayment +

5% – 10%

n Delta (price participation) min . 25%

or for busted CV yield to maturity of

min . 8%

Floor (net)

n In the investment grade 90% – 95%

n In the non-investment area 80%

Premiums

n must be in a sensible ratio to the ma-

turity and volatility of the underlying

security

Sale criteria

Delta (share participation)

Underlying security falls so drastically

that no more Delta exists .

Debtor quality

Rating worsens so much that the interest

payment or repayment of the loan may

be under threat .

Substitution

New converter with better parameters

replaces a previous one .

Maturity

n Target duration 5 years

(handled flexibly)

Debtor quality (rating)

n Good diversification is desired, op-

timum ½ AAA-BBB-, ½ NON-invest-

ment grade

n Non-investment grade CVs must dis-

play a high price increase potential

Currency

n Reference currency ¤

n Foreign currency percentage

with any hedging

I I . CONVERTIBLES

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COSTS

Portfolio management mandate

Fixed 1%

Performance bonus 10%

Threshold 5%

Extended simple consultancy mandate

Strategy setup, formulation and hando-

ver to the customer, implementation by

the customer themselves .

Includes co-monitoring and recom-

mendations concerning attractive new

opportunities .

Fixed 1%

Simple consultancy mandate

Strategy setup, formulation and hando-

ver to the customer as an Excel file,

implementation by the customer them-

selves .

No long-term monitoring .

CHF 250 .00/hr, or flat fee

Custodian account fees

Negotiable depending on the value

of the custodian account .

Mostly custodian account fee

of 0 .1 to 0 .3% plus discounted

transaction costs/lump-sum .

Custodian banks

General banks

Credit Suisse, UBS

Private banks

Bank Julius Baer & Co .

I I . CONVERTIBLES

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In good stock market conditions, soar up into the sky on the back of the boom,

admire the panorama from above,

and prepare for a soft landing as the clouds come rolling in .

Performance

in rising share markets

Safety net

in turbulent stock market

conditions

CONVERTIBLES – THE GROUNDBREAKING INVESTMENT STRATEGY

I I . CONVERTIBLES

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REFERENCES

Family Office

Specific basic data on demand

Merchant & custodian bank

Chameleon Asset Management AG

ALFRED SCHWEIZER

Deputy Director

Wealth Management Switzerland

Fiduciaries & Lawyers

Baarerstrasse 14a

CH-6300 Zug

Tel +41 41 727 36 79

Bank Julius Bär & Co . Ltd .

Custodian bank

CHRISTOPH SUTTER

Executive Director

Freie Strasse 107

CH-4001 Basel

Tel +41 58 889 8262

I I I . ADDITIONAL SERVICES

ADDITIONAL INVESTMENT SATELLITES

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Short-put options

Structured products

High Yield Bonds

with share characteristics but reduced risk

a share substitute but reduced risk

I I I . ADDITIONAL SERVICES

Bonds with high interest coupons from companies

with a lower debtor quality or from aspiring growth

countries .

Structured products are investment instruments issued

publicly by an issuer, whose repayment value is derived

from the performance of one or more basic securities .

The risk profile is usually significantly lower than the

corresponding direct investment, but the maximum

performance is usually limited .

I I I . ADDITIONAL SERVICES

OTHER SERVICES

Second appraisal

The potential customer’s relationship to its previous manager

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Deposit analysis

n Risk-opportunity optimisation

n Tax optimisation

n Does the deposit allocation match

the contract?

Kick-backs/cost analysis

How much and where have external

asset managers benefited

Assessment and demonstration

of possible conflicts of interest

Illiquid securities, deposit items related

to the manager

Theaterstrasse 4CH-4051 Basel

Phone +41 (0)61 633 77 77Fax +41 (0)61 633 77 79

www .chameleon-asset .chinfo@chameleon-asset .ch

chameleonasset management ag

Member of the VQFFinancial Services Standards Association (VQF) Ju

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