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Rating Action:

Moody's assigns Baa/MR5 ratings to the Global Convertible Bond Fund of the Julius Baer Multibond SICAV

23 Jan 2007
Moody's assigns Baa/MR5 ratings to the Global Convertible Bond Fund of the Julius Baer Multibond SICAV

First time ratings assigned to a Sub-Fund of the Julius Baer Multibond Investment Company

London, 23 January 2007 -- Moody's Investors Service assigned a bond fund credit rating of Baa and a market risk rating of MR5 to the Global Convertible Bond Fund ("GCBF") of the Julius Baer Multibond SICAV. The Fund's credit rating reflects the moderate credit risk of the portfolio's investments, the diversification of the portfolio, as well as the Fund advisor's disciplined investment process and good knowledge of the specificities of the convertible bond market. The credit rating also reflects the advisor's strong risk management capabilities, the quality of its investment tools and the strength of its trading, compliance processes and systems. The companion market risk rating of MR5 reflects the Fund's high sensitivity to movements in the equity and currency markets as well as changing interest rates.

Julius Baer Multibond is an umbrella-type open-ended Investment Company with variable capital organized under the laws of Luxembourg and operating under UCITS III regulations. The Fund is denominated in Euro and also offers a CHF-denominated currency share class to investors. It was launched on October 15th, 1993. Bank Julius Baer & Co. AG. acts as the Fund's investment advisor. Dexia Investor Services Bank S.A is the Fund's administrator and custodian.

The GCBF seeks to achieve above-average returns in the long term while observing the principle of risk diversification, by investing in convertible bonds issued or guaranteed by issuers from recognized countries. The fund manager pursues an investment strategy targeted at creating a portfolio of balanced convertible bond investments, that have neither pure bond nor pure equity characteristics. The fund manager selects convertible securities with a positive convexity to ensure risk protection through the bond floor and to benefit from the potential upside of the underlying equity. The Fund invests mainly in investment-grade securities in the Aaa to Baa3 credit rating categories although investment in high yield credits is allowed by the Fund's prospectus, up to 15% of the portfolio. Active investments in equity are not permitted and equities received out of conversions will be sold.

The basis for the Fund's credit rating is predicated on its current portfolio profile and investment strategy. The weighted average expected loss of the GCBF's portfolio is comparable to the expected loss of a fixed-income security rated Baa with a ten-year maturity.

The market risk rating of MR5 reflects the Fund net asset value's very high sensitivity to changing market conditions. Through its investments in convertible fixed income securities, the GCBF is exposed primarily to equity market volatility, foreign exchange risk and interest rate risk. As convertible bonds have both fixed income and equity characteristics their prices are subject to both interest rate as well as equity price movements. In addition, in line with the Fund's objective, the manager purchases assets outside the Fund's native currency, the Euro, and will not hedge the currency risk associated with such acquisitions.

Movements in the equity value will typically channel through to the value of a convertible security, although downside protection is implicitly offered because the convertible bond's value will decline only to the point where it behaves like a regular bond. The Fund's duration profile is the result of the manager's value decisions in the convertibles market and is relatively short, at 2.8 years, as of September 2006. Liquidity risk is mitigated by the fact that the Fund is mainly sold to retail clients and thus enjoys a well diversified investor base. Furthermore, the Fund has a T+3 settlement period, which is helpful to limiting liquidity risk that could arise from large and unexpected redemptions.

Calculated since inception, the standard deviation of the GCBF's net asset value was 6.85% at the end of September 2006, well within the boundaries of the MR5 market risk rating range.

Bank Julius Baer & Co. AG, established in 1890, had CHF 197 billion in assets under management at the end of December 2005. Julius Baer Asset Management focuses on the Swiss and European retail and institutional markets and offers a comprehensive range of investment funds (equity funds, bond funds, cash funds, strategy funds and alternative funds) to investors.

Moody's money market and bond fund ratings are opinions on the investment quality of shares in mutual funds, and similar investment vehicles that principally invest in short-term and long-term fixed income obligations, respectively. The ratings are not intended to consider the prospective performance of a fund with respect to appreciation, volatility of net asset value, or yield. Funds rated Baa are judged to be of an investment quality similar to Baa-rated fixed income obligations -- that is, they are judged to be of moderate credit risk.

Moody's market risk ratings are opinions on the relative degree of volatility of a rated fund's net asset value. Funds exhibiting the least sensitivity to market changes will receive an MR1, whilst those exhibiting the most sensitivity will be rated MR5.

London
Marina Cremonese
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

New York
Henry Shilling
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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