BDO UNIBANK, INC. – TRUST AND INVESTMENTS GROUP BDO PESO BOND FUND KEY INFORMATION AND INVESTMENT DISCLOSURE STATEMENT Month Ended February 27, 2015 FUND FACTS Classification: Medium Term Bond Fund Trust Fee: 1.0% p.a. Launch Date: April 1, 2005 Initial NAVPU: PHP1,000.00 Minimum Investment: PHP10,000.00 Minimum Additional Investment: PHP10,000.00 Minimum Holding Period: 30 calendar days Bloomberg Ticker: BDOPBF <Index> Early Redemption Fee: 0.50% of Original Participation Amount Net Asset Value per Unit (NAVPU): Dealing Period: Up to 12:00nn of any PHP1,854.1497 banking day Total Fund NAV: PHP2.693 Billion Redemption Settlement: One (1) banking day after the notice of redemption is NAVPU Availability: Every trading day at received 7:00 p.m. FEES* Trustee Fees: 0.0778% Custodianship Fees: 0.0028% External Auditor Fees: 0.0002% Financial Information Service Fees: 0.0004% *As a percentage of average daily NAV for the month valued at PHP 2.698 Billion. BDO Trust and Investments Group Standard Chartered Bank, Citibank Punongbayan & Araullo Bloomberg, Reuters INVESTMENT OBJECTIVE AND STRATEGY The Fund aims for capital preservation and income generation by investing in short to long-term bonds and other similar fixed income securities. The Fund’s benchmark is the HSBC 1-5Yr Bond Index. CLIENT SUITABILITY A client profiling process should be performed prior to participating in the Fund to guide the prospective investor if the Fund is suited to his/her investment objectives and risk tolerance. Clients are advised to read the Declaration of Trust/Plan Rules of the Fund, which may be obtained from the Trustee, before deciding to invest. The BDO Peso Bond Fund is primarily suitable for individual and corporate investors with moderate risk appetite and who are looking for higher yields and are willing to take the attendant risks due to the nature of the Fund’s investments. Participants/trustors are recommended to stay invested in the Fund for at least three (3) years. KEY RISKS AND RISK MANAGEMENT You should not invest in this Fund if you do not understand or are not comfortable with the accompanying risks. Interest Rate Risk. This is the possibility for an investor to experience losses due to changes in interest rates. The purchase and sale of a debt instrument may result in profit or loss because the value of a debt instrument changes inversely with prevailing interest rates. Market/Price Risk. This is the possibility for an investor to experience losses due to changes in market prices of securities. It is the exposure to the uncertain market value of a portfolio due to price fluctuations. Liquidity Risk. This is the possibility for an investor to experience losses due to the inability to sell or convert assets into cash immediately or in instances where conversion to cash is possible but at a loss. Credit Risk/Default Risk. This is the possibility for an investor to experience losses due to a borrower’s failure to pay the principal and/or interest in a timely manner on instruments such as bonds, loans, or other forms of security, which the borrower issued. Reinvestment Risk. This is the risk associated with the possibility of having lower returns or earnings when maturing funds or the interest earnings of funds are reinvested. THE UIT FUND IS NOT A DEPOSIT AND IS NOT INSURED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC). RETURNS CANNOT BE GUARANTEED AND HISTORICAL NAVPU IS FOR ILLUSTRATION OF NAVPU MOVEMENTS/FLUCTUATIONS ONLY. WHEN REDEEMING, THE PROCEEDS MAY BE WORTH LESS THAN THE ORIGINAL INVESTMENT AND ANY LOSSES WILL BE SOLELY FOR THE ACCOUNT OF THE CLIENT. THE TRUSTEE IS NOT LIABLE FOR ANY LOSS UNLESS UPON WILLFUL DEFAULT, BAD FAITH OR GROSS NEGLIGENCE. For more information, visit our website at www.bdo.com.ph/trust or call (02) 840-7000 locals 4265 / 4244 / 4035 / 7032 or email us at [email protected] BDO UNIBANK, INC. – TRUST AND INVESTMENTS GROUP BDO PESO BOND FUND KEY INFORMATION AND INVESTMENT DISCLOSURE STATEMENT (Page 2) Month Ended February 27, 2015 FUND PERFORMANCE AND STATISTICS AS OF FEBRUARY 27, 2015 (Purely for reference purposes and is not a guarantee of future results) NAVPU over the past 12 months Highest PHP 1,858.2678 Lowest PHP 1,795.3925 Fund’s NAVPu vs Benchmark & Risk Free Rate Statistics Weighted Ave. Duration 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 1-Apr-05 BDO Peso Bond Fund HSBC 1-3Yr/1-5Yr Bond Index (net) 91-d T-Bill Auction Rate (net) 27-Feb-15 Cumulative Performance (%) Period BDOPBF1 Risk-Free Rate4 0.10% 0.29% 0.20% 1.04% 2.43% 6.23% 27.49% 2.45% Benchmark2/3 -0.17% 0.12% One Month Ago3 3 0.69% 0.67% Three Months Ago 3 1.34% 0.77% Year to Date 2 3.10% 2.36% One Year Ago 2 12.33% 8.75% Three Years Ago 29.02% 18.31% Five Years Ago2 Since Inception 85.41% 64.24% 5 6.33% 5.06% CAGR Since Inception 1 Past performance is not indicative of future performance. 2 The Fund's benchmark is the HSBC 1-3Yr Bond Index, commencing August 31, 2005 3 The Fund's benchmark is the HSBC 1-5Yr Bond Index, commencing October 15, 2014. 4 Refers to 91-day T-Bill rates 5 Compounded Annual Growth Rate (CAGR) measures how fast an investment would have grown over time if it grew at a steady rate instead of actual varying rates. Volatility, Past 1 Year Sharpe Ratio9 Information Ratio10 Weighted Ave.Yield (net)11 8 Volatility measures the degree to which the Fund fluctuates vis-à-vis its average return over a period of time. 9 Sharpe Ratio is used to characterize how well the return of a Fund compensates the investor for the level of risk taken. The higher the number, the better. 10 Information Ratio measures reward-to-risk efficiency of the portfolio relative to the benchmark. The higher the number, the higher the reward per unit of risk. 11 Net of taxes and trust fees Portfolio Composition Corp Bonds 30.50% Short-term deposits 0.03% GS 57.92% Corp Bonds 34.51% Top Ten Holdings (%) Coupon Rate Maturity January 2015 SDA 11.55% 6 Issue 4.26 2.27% 0.91 0.27 2.29% 8 February 2015 % of Portfolio FXTN 3.87500% 11/22/19 4.12500% 08/20/24 FXTN 7 2.50000% 03/12/15 SDA 5.00000% 08/18/18 FXTN 2.50000% 03/13/15 SDA 6.60000% 04/02/22 San Miguel Bond 2022 3.50000% 03/20/21 FXTN 8.00000% 07/19/31 FXTN 6.27310% 06/08/19 Filinvest Bond 2019 San Miguel Bond 2019 5.93000% 04/02/19 Total 6 The complete list of portfolio holdings is available upon request 7 BSP Special Deposit Account 7.50% 7.02% 6.51% 6.49% 6.34% 4.02% 4.01% 3.67% 3.38% 3.26% 52.21% SDA 12.85% Short-term deposits 1.07% GS 51.57% BDO UNIBANK, INC. – TRUST AND INVESTMENTS GROUP BDO PESO BOND FUND KEY INFORMATION AND INVESTMENT DISCLOSURE STATEMENT (Page 3) Month Ended February 27, 2015 Best Performance (Past Five Years) Inclusive Dates 02/26/2010 – 02/03/2015 Biggest Gain 29.32% No. of Days to Achieve 1,803 days Maximum Drawdown and Recovery in NAVPUs12 (Past Five Years) Maximum Drawdown Period Biggest Loss Recovery Period (days) 51 days 01/04/2011 – 02/28/2011 -2.08% 12 Maximum Drawdown is the maximum percentage loss that a fund incurs over a time period. Maximum Drawdown Period is the length of time the maximum drawdown occurs. Recovery Period is the length of time taken by a fund to surmount its maximum drawdown. OTHER DISCLOSURES INVESTMENT POLICY / PROSPECTIVE INVESTMENTS The Fund may invest in deposits in the trustee’s bank or in other banks, securities issued or guaranteed by the Philippine Government or the BSP, tradable securities issued by any supranational entity and exchange-listed fixed income securities. Subject to BSP guidelines and the Trustee's Trust Committee approval, the Fund may also avail itself of financial derivative instruments solely for the purpose of hedging risk exposures, as well as invest in other tradable outlets/categories as may be deemed suitable for the Fund. OUTLOOK AND STRATEGY January Consumer Price Index (CPI) further fell to 2.4% from the previous month's 2.7%, failing to reflect the slight increase in oil prices, which rose to $60/barrel. While other countries such as China and Indonesia began cutting rates, citing the need to monitor global trends of policy rate cuts, the BSP maintained its policy stance. Yields of government securities rose after bids for the 10yr auction was rejected, pushing the yields of securities maturing 2024 up by 13 basis points. Belly securities slightly increased up to 10 basis points, while the longer part of the curve remained stable. PBF's portfolio was further rebalanced during the month, increasing the Fund's duration. RELATED PARTY TRANSACTIONS The Fund has investments and trade transactions with BDO Unibank, Inc., its subsidiaries and related parties, as follows: BDO Unibank, Inc. SM Group SM Investments Corp. Transaction Time Deposit Placement Investment in Bonds Market Value (PHP Mln) 55.84 Investments in the said outlets were approved by the Trust Committee. Likewise, all related party transactions are conducted on an arm’s length and best execution basis and within established limits.
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