FUND REVIEW All data as at 31 July 2014 unless otherwise stated Eastspring Investments Funds Monthly Income Plan 1 FUND UPDATE Investment objective The investment objective of the Eastspring Investments Funds - Monthly Income Plan (the Fund ) is to seek to provide investors with regular income and capital growth by investing: (i) 30% to 70% of its assets into the Luxembourg domiciled Eastspring Investments - US High Yield Bond Fund; and (ii) 30% to 70% of its assets into the Luxembourg domiciled Eastspring Investments - Asian Bond Fund, (collectively, the Underlying Funds ). The Fund may in addition, at Eastspring Investments (Singapore) Limited s ("the Manager") absolute discretion, invest up to 20% of its assets in any other Asia Pacific investments (including real estate investment trusts, dividend yielding equities and any other sub-funds of the Eastspring Investments, subject to the prior approval of the Authority where necessary). COMMENTARY Market overview US High Yield Bond 2 In July, US high yield fixed income delivered its first month of negative performance during the year, returning -1.32% and reducing year-to-date gains to 4.24% 3. Negative performance was primarily driven by spread widening; credit spreads increased 51bps and ended the month at 404 bps above duration-matched Treasuries 4. Retail investors became more cautious during the month. Negative headlines regarding valuations and a tempered outlook for future performance contributed to investor anxiety. Asian Bond 5 - In July, the Asian USD Bond market posted another month of positive return as seen by the 0.72% gain of the JPMorgan Asia Credit Index. The resilient performance of the Asian bond market was attributed to generally tighter credit spreads and coupon accrual; although modest increases in US interest rates offset the gains somewhat. On a year-to-date basis, Asian USD Bonds has returned +6.63% in USD terms. The positive performance was driven primarily by credit spread compression and coupon accrual. Additionally, yield declines at the long end of the US Treasury curve also boosted performance of long-dated Asian USD-denominated bonds. Fund performance During the month, the Fund s Class A and Class M were both flat (0% bid-to-bid in SGD terms and both -5.0% offer-to-bid), whilst the Fund benchmark dropped 0.3% in SGD terms. Class M (RMB hedged) edged up by 0.1% (bid-to-bid) in CNH terms (-4.9% offer-to-bid), whilst the Fund benchmark declined 0.4% in CNH terms. Year-to-date, the Fund s Class A and Class M both increased 5.4% (bid-to-bid) in SGD terms (both +0.1% offer-to-bid), whilst the Fund benchmark also increased 5.4% in SGD terms. Class M (RMB hedged) rose 6.0% (bid-to-bid) in CNH terms (+0.7% offer-to-bid), whilst the Fund benchmark rose 4.9% in CNH terms. 1
Total return, CNH (%) Total return, SGD (%) Total return, SGD (%). 23 19 15 11 7 3-1 -5-9 -13 0.0-0.3-5.0-3.0 2.1 1.8 FUND PERFORMANCE CLASS A 1 month 3 months 1 year 3 years* 5 years* Since Inception* 2.1 8.4 7.5 4.2 6.0 6.0 7.2 8.3 3.7 5.1 5.6 2.3 Fund (Offer-to-bid) Fund (Bid-to-bid) 50% JP Morgan Asia Credit Ind & 50% BofA Merrill Lynch USD High Yield Constrained Ind- hedged to SGD 23 19 15 11 7 3-1 -5-9 -13 12 8 4 0-4 -8-0.3-5.0-3.1-4.9 0.0 0.1-0.4-2.7 2.0 2.4 1.8 1.4 FUND PERFORMANCE CLASS M 1 month 3 months 1 year 3 years* 5 years* Since Inception* 8.4 7.5 4.2 6.0 6.0 2.1 7.2 8.3 3.7 5.1 5.7 2.3 Fund (Offer-to-bid) Fund (Bid-to-bid) 50% JP Morgan Asia Credit Ind & 50% BofA Merrill Lynch USD High Yield Constrained Ind- hedged to SGD Source: Eastspring Investments (Singapore) Limited. S$; net income reinvested; Offer-bid includes 5% Initial Sales Charge. Performance and benchmark values are rounded off to 1 decimal place. Inception date: 01 Feb 05. *Annualised. The graphs above are included for illustrative purposes only. Past performance is not necessarily indicative of the future or likely performance of the Fund. With effect from 1 June 2012, the benchmark for the Fund was changed from the 12 month SGD Fixed Deposit Rate to 50% JP Morgan Asia Credit Index and 50% BofA Merrill Lynch US High Yield Constrained Index hedged to SGD to better reflect the investment focus and risk of the Fund. The two series are chain-linked to derive the longer period benchmark returns. 1 month 3 months FUND PERFORMANCE CLASS M (RMB HEDGED) 1 year 3 years 5 years Since Inception 10.0 9.7 Fund (Offer-to-bid) Fund (Bid-to-bid) 50% JP Morgan Asia Credit Ind & 50% BofA Merrill Lynch USD High Yield Constrained Ind - CNH hedged Source: Eastspring Investments (Singapore) Limited. CNH; Net income reinvested; Offer-bid includes 5% Initial Sales Charge; Performance and benchmark values are rounded off to 1 decimal place. Inception date: 02 Sep 13. The graphs above are included for illustrative purposes only. Past performance is not necessarily indicative of the future or likely performance of the Fund. 4.5 2
Factors affecting performance The Fund s outperformance in July was mainly contributed by the off-benchmark allocation to equities and the security selection effect of Eastspring Investments US High Yield Bond Fund 2. Year-to-date, the largest positive contributor to the Fund performance is the off-benchmark allocation to equities, which increased 13.7% in SGD terms over the same period. Security selection within Eastspring Investments Asian Bond Fund and Eastspring Investments US High Yield Bond Fund 2 also added value. Eastspring Investments US High Yield Bond Fund 2 In July, exposures to cash contributed positively. On the other hand, the overweight to Arch Coal Inc (ACI) and Alpha Natural Resources (ANR) were the primary detractors. Year-to-date the overweight to United Continental Holdings (UAL) unsecured longer dated paper and the overweight to Atlas Energy Holdings (ARP) contributed positively. However the cash position, as well as the overweight to Alpha Natural Resources (ANR) and the underweight to Energy Future Holdings (TXU) detracted value. Eastspring Investments Asian Bond Fund In July, overweight in high yield corporates and Indonesian government bonds contributed positively to performance. However, the duration overweight in investmentgrade corporates detracted from performance. Year-to-date the increased exposure to long-dated investment grade credits since April this year, and the offbenchmark exposure to Indonesian Rupiah bonds also contributed positively. The underweight in selected high yield sovereign issues, such as Pakistan, detracted from performance. Strategy & outlook The US macro data has firmed over the past quarter and inflation appears to have passed an inflection point. This has brought forward expectations on when the US Federal Reserve will pivot. Developments in the labor market are no longer consistent with zero interest rates. Trend unemployment claims are now back to levels when the US economy was last at full employment. Although the broad stock market in the United States and World Index has pushed to new all time highs, weakness in growth sensitive sectors and bond yields, might suggest some near term caution is warranted. The Fund manager continues to believe that an earlier anticipated pivot by the US Federal Reserve might contribute to a rapid and disruptive rise in US short rates (the cost of capital) and the US Dollar. The Fund maintains its preference for US high yield (target allocation: 50%) over Asian US dollar bonds (40%). The former has historically been relatively less susceptible to a rise in government bond yields. US high yield, with its higher absolute yield level, offers more carry to offset any negative impact from a rise in government bond yields. Additionally, the Fund manager continues to remain confident in the credit fundamentals of the US high yield corporates. Debt service and leverage metrics, as well as debt maturity profiles remain very healthy for the US corporates. Singapore dividend stocks and REITs continue to offer value given their attractive yields and sound fundamentals. The Fund maintains its 10% target allocation. Focus remains on investing in companies with strong balance sheets, visible and resilient recurring cashflows to support dividend payouts. The overall Fund s running yield is 5.8% as of 31 July 2014. 3
FUND DETAILS The data of bonds reflect the Fund's positions held at the Underlying Fund(s). The data reflects the Fund's position held in the Underlying Fund(s). ++ Credit ratings of securities held by Underlying Funds are by S&P/Moody's/Fitch. The data reflect the Fund s positions held at the Underlying Funds' level. ## Cash and Other Net Assets (may include "mark to market" position of derivatives) 4
Notes: 1.Lipper Leaders fund ratings do not constitute and are not intended to constitute investment advice or an offer to sell or the solicitation of an offer to buy any security of any entity in any jurisdiction. As a result, you should not make an investment decision on the basis of this information. Rather, you should use the Lipper ratings for informational purposes only. Certain information provided by Lipper may relate to securities that may not be offered sold or delivered within the United States (or any State thereof) or to, or for the account or benefit of, United States persons. Lipper is not responsible for the accuracy, reliability or completeness of the information that you obtain from Lipper. In addition, Lipper will not be liable for any loss or damage resulting from information obtained from Lipper or any of its affiliates. Thomson Reuters 2011. All rights reserved. Data as at 31 July 2014, for Class A and M only. 2.PPM America, Inc. (Investment sub-manager of Eastspring Investments US High Yield Bond Fund) 3.BofAML. Based on the MTD and YTD performance of the BofAML US High Yield Master II Index as of 31 July 2014 in USD terms. 4.BofAML. Based on the month-over-month change in OAS of the BofAML US High Yield Master II Index as of 31 July 2014. 5.Market data from Bloomberg, July 2014. CONTACT DETAILS Eastspring Investments (Singapore) Limited (UEN. 199407631H) 10 Marina Boulevard, #32-01 Marina Bay Financial Centre Tower 2, Singapore 018983 Tel: 6349 9711 Fax: 6509 5382 www.eastspring.com.sg 5
Important Information All data are from Eastspring Investments(Singapore) Limited (the Manager ) (UEN. 199407631H) unless otherwise stated. This document is solely for information only and may not be copied, published, circulated, reproduced or distributed in whole or part to any person without the prior written consent of the Manager. Whilst we have taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness. Investors should not act on it without first independently verifying its contents. The Manager and its related and affiliated corporations together with their respective directors and officers may have or may take positions in the investments mentioned in this document and may also perform or seek to perform broking and other investment services for the corporations whose securities are mentioned in this document as well as other parties. This information is not an offer or solicitation of an offer for the purchase of investment units in the Eastspring Investments Funds - Monthly Income Plan ( the Fund ) and nothing herein should be construed as a recommendation to transact in any investment product. A prospectus in relation to the Fund is available and a copy of the prospectus may be obtained from the Manager or any of its appointed distributors. All applications for units in the Fund must be made on the application forms accompanying the prospectus. Potential investors should read the prospectus before deciding whether to subscribe for or purchase units in the Fund. Units in the Fund are not available to US persons. The Underlying Funds may use derivative instruments for efficient portfolio management and hedging purposes. The value of units in the Fund and the income accruing to the units, if any, may fall or rise. Past performance of the Fund or the underlying funds or the Manager is not necessarily indicative of the future performance of the Fund or the underlying funds or the Manager. The prediction, projection or forecast on the economy, securities markets or the economic trends of the markets targeted by the Fund are not necessarily indicative of the future or likely performance of the Fund. An investment in the Fund is subject to investment risks, including the possible loss of the principal amount invested. Investments in unit trusts are not deposits or other obligations of, or guaranteed or insured by the Manager or any of its related corporations. The graphs or charts presented are included for illustrative purposes only. Any opinion or estimate contained in this document is subject to change without notice. Such opinions, forecasts and estimates are for information only and are not indicative of the future or likely performance of the Fund and should not be construed as such. Please note that any security mentioned is included for illustration purposes only. It should not be considered a recommendation to purchase or sell such security. The information contained herein does not have any regard to the specific investment objective(s), financial situation or the particular needs of any person. Potential investors may wish to seek advice from a financial adviser before making a commitment to invest in units of the Fund. In the event an investor chooses not to seek advice from a financial adviser, the investor should consider whether the Fund is a suitable investment for him. The name of the Fund, Eastspring Investments Funds - Monthly Income Plan, should not be taken as implying that monthly or regular distributions in respect of units will be made. Distribution payout shall, at the sole discretion of Eastspring Investments (Singapore) Limited, be made out of either (a) income; or (b) net capital gains; or (c) capital of the Fund or a combination of (a) and/or (b) and/or (c). There is no guarantee that any distribution will be made or that the frequency and amount of distributions as set out in the prospectus will be met. If distributions are made, such distributions are not in any way a forecast, indication or projection of the future or likely performance/distribution of the Fund. The making of any distribution shall not be taken to imply that further distributions will be made. When distributions are declared and paid out (including out of capital) with respect to the Fund, the net assets attributable to the relevant Class of Units will stand reduced by an amount equivalent to the product of the number of Units outstanding and distribution amount declared per Unit. Payout is computed based on the initial issue price of respective Classes of Units. The Manager is an ultimately wholly-owned subsidiary of Prudential plc of the United Kingdom. The Manager and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America. 6