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BPI Premium Bond Fund As of June 30, 2011 Investment Objective Fund Facts To achieve capital appreciation and income derived from a diversified portfolio of primarily Launch Date April 4, 2005 medium-term fixed income instruments. Structure Unit Investment Trust Fund Fund Performance Fund Type Intermediate Term Bond Fund Absolute Returns Fund 91-Day Treasury Bills Client Suitability The Fund is suitable for investors with at least Year-to-date 0.84% 0.45% a moderately conservative risk profile. 2010 7.31% 3.20% Base Currency Philippine Peso 2009 3.96% 3.65% Minimum Initial Investment1 Php 10,000 2008 3.95% 4.26% Minimum Transaction1 Php 1,000 2007 6.20% 2.68% Minimum Holding Period 90 calendar days 2006 13.64% 4.41% Early Redemption Fee 0.25% 5Yr Annualized ROI 6.90% 3.56% Trust Fee2 1.50% per annum Returns are net of fees. Past Performance is not an indication of future returns. 0.37% per quarter Net Asset Value Per Unit Custodianship Fees3 0.003% External Audit Fees4 0.02% 160 Fund Special Expense5 Php 2,000 per annum 150 91-Day Treasury Bills Valuation Methodology Mark-to-Market Trustee and Fund Manager Bank of the Philippine Islands 140 Available Thru Bank of the Philippine Islands Branches Custodian HSBC 130 External Auditor Isla Lipana & Co. Dealing Daily up to 12 noon 120 Bloomberg Ticker BPIPRUI PM 1Contribution rounded down/ redemption rounded off to the nearest whole unit. 110 2Trustfees paid for the quarter as a percentage of average daily NAV for the quarter. 3Custodianship fees billed for the quarter as a percentage of average daily NAV for the quarter. 100 4External Audit fees as a percentage of end-year 2008 NAV. 5For publication expense Net Asset Value Php 5.17 Billion Portfolio Composition NAV Per Unit (NAVpu) Php 151.02 Par Value Php 100.00 Corporate Bonds 3% Deposits and Other Receivables Fund Manager's Report 60% Monthly Commentary June saw mixed movements in peso yields, though on the average, rates decreased by 10bps. The short- and the long- Government end of the yield curve increased 29bps and 9bps respectively, while the 2- to 7-year tenors decreased by 51bps. The Securities - Long short-end yields continued to increase on the back of lackluster demand for Treasury bill auctions for the month with the Term 22% Bureau of the Treasury (BTr) awarding only PHP9.8 Bn out of PHP18 Bn up for offer. The greater than 10-year tenors increased due to supply pressure as the government announced plans for its debt consolidation program wherein it is Government looking to issue new 10- and 20- year benchmark bonds. On the other hand, the 2- to 7-year bond yields decreased Securities - amidst better-than-expected inflation figures, continued fiscal consolidation and credit ratings upgrades from Fitch and Medium Term 15% Moody’s. Inflation for the month of May came out at a better-than-expected 4.5% from consensus estimates of 5.0%, while June surprised coming out at 4.6% from expectations of 4.7%. This was accompanied by a revision in April’s Top 10 Holdings inflation figures to 4.3% or 0.2% lower. The Government incurred a budget deficit of only PHP9.6 Bn for the month of May, as revenues grew 16% and expenditures shrank 11%. Fitch raised the Philippine local currency credit rating to % of Fund BBB- which is now Investment Grade, citing the improved fiscal consolidation and favorable economic prospects as BSP Special Deposit Account 4.6875% 07/21/2011 12.4% reasons for the upgrade. BSP Special Deposit Account 4.6875% 07/06/2011 8.7% BPI Premium Bond Fund The Monetary Board surprised the market when they decided to increase the reserve requirement by 1% to 20%, and BSP Special Deposit Account 4.6875 07/27/2011 8.6% retained the overnight borrowing rate at 4.50%. Market consensus was for another 25bps hike in policy rates. The BSP Special Deposit Account 4.6875% 07/13/2011 6.6% unexpected pause in policy rates coupled with buying interest ahead of the Bond Swap further drove the yields in the 2- to 7- year tenors lower. Fixed Rate Treasury Notes 9.125% 09/04/2016 5.2% BSP Special Deposit Account 4.6875% 07/11/2011 5.1% Fixed Rate Treasury Notes 7.0000% 03/31/2017 3.9% Fixed Rate Treasury Notes 7.0000% 01/27/2016 3.3% Strategy Fixed Rate Treasury Notes 7.8750% 02/19/2019 3.2% Fixed Rate Treasury Notes 6.3750% 05/13/2015 3.0% Visit us at www.bpiassetmanagement.com The Fund increased long-term government securities holdings through purchases of 5-8 year tenors in preparation for the upcoming bond swap. The Fund will participate in the BTr’s debt consolidation program, swapping less liquid, Any prospective investment shall be limited to the type of investments described in the Deed of Trust shorter-dated securities to the new longer-tenored benchmark bonds. of the Fund. Risk Disclosure Risk Characteristics Past 12 Months The Fund is suitable for investors who take short- to medium-term views. As a marked-to-market UITF, the yield, June 30, 2011 Low High Average net asset value, and total return may fall as well as rise as a result of interest rate movements and changes in the Duration 1.92 1.36 2.51 2.07 credit quality of the investments. On redemption of units, an investor may receive an amount less than the original amount of the investment. Liquidity risk also need to be taken into account. Volatility, Past 360 Days 1.07% 0.88% 1.07% 0.98% Sharpe Ratio, Past 360 Days 3.58 Risk Management Duration measures the sensitivity of NAVpu to interest rate movements. As interest rates rise, bond In accordance with the provisions in the Declaration of Trust, the Fund implements a risk management policy that prices fall. The higher the duration, the more NAVpu will fluctuate in relation to changes in interest applies the principles of Value-at-Risk (VAR). VAR is a measure of the portfolio' maximum potential loss and is s rates. Volatility measures the fluctuations in NAVpu. The higher the number, the higher the potential computed based on price volatility and market value of the investment portfolio. The Fund' risk management s gain or loss. Sharpe ratio evaluates reward-to-risk efficiency. The higher the number, the higher the policy prescribes a dynamic volatility band, such that if the volatility of the Fund' investments as reflected in the s reward per unit of risk. NAVpu exceeds the volatility band, adjustments are made for the collective interest of the participants. The Fund may also use financial derivatives to hedge the portfolio against market and credit risks. BPI Premium Bond Fund is a Unit Investment Trust Fund (UITF) and not a bank deposit product. It is not guaranteed by BPI nor by the Philippine Deposit Insurance Corporation (PDIC). As such, units of participation of the investor in the UITF, when redeemed, may be worth more or worth less than his/her initial investment/contributions. Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the UITF, even if invested in government securities, is for the account of the investor. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Trustee is not liable for losses, unless upon willful default, bad faith or gross negligence. For the purpose of lodging, clearing, settlement, and delivery of securities in the Fund, the Trustee is authorized to avail of the third parties' willfull default, gross negligence, or evident bad faith. Investors are advised to read the Declaration of Trust for the Fund, which may be obtained from the office of the Trustee, before deciding to invest. For inquiries, please call: (632) 845-5080 , (632) 845-5087 or (632) 816-9053, email firstname.lastname@example.org or visit www.bpiassetmanagement.com.
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