CHINA BANK INTERMEDIATE FIXED-INCOME FUND KEY INFORMATION AND INVESTMENT DISCLOSURE STATEMENT As of August 31, 2021 FUND FACTS Classification: Intermediate-Term Bond Fund Net Asset Value per Unit (NAVPu): 1.233650 Launch Date: May 22, 2014 Total Fund Net Asset Value (NAV): P479.8 million Minimum Investment : P5,000.00 Dealing Day: Daily up to 12:00nn Additional Investment: At least P1,000.00 Redemption Settlement: Next banking day from date of notification Minimum Holding Period: 30 calendar days Early Redemption Penalty: 1.0% of the amount redeemed FEES1 Trustee Fees: 0.0444% Custodianship Fees: 0.0013% External Auditor: 0.0009% Other Fees: None China Bank – Trust and Asset Deutsche Bank AG, Manila Branch SGV & Co. Management Group Philippine Depository & Trust Corp. 1As a percentage of average daily NAV for the month valued at P491.3 million. INVESTMENT OBJECTIVE AND STRATEGY The China Bank Intermediate Fixed-Income Fund intends to achieve income in the intermediate-term by investing in a diversified portfolio of high-grade marketable fixed-income securities comprised of deposits issued by banks and other financial institutions including tradable money market instruments, government securities and corporate bonds/notes with an average duration of not more than three (3) years, and preferred shares of stock classified as debt securities. The Fund aims to outperform its benchmark which is the Bloomberg Philippine Sovereign Bond Index 1 to 3 Year (BPHIL13 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. Before deciding to invest, clients are advised to read the Declaration of Trust, a copy of which is available at the Trustee’s principal office. The China Bank Intermediate Fixed-Income Fund is suitable only for investors who: . Have a moderate risk appetite; . Are willing to assume a certain level of risk in consideration for higher returns; and, . Have an investment horizon of between one (1) to three (3) years. KEY RISKS AND RISK MANAGEMENT The client should not invest in this Fund if the client does not understand or is not comfortable with the accompanying risks. Market/Price Risk. This is the possibility for an investor to experience losses due to changes in the market price of securities. It is the exposure to the uncertain market value of a portfolio due to price fluctuations. 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. Credit/Default Risk. This is the possibility for an investor to experience losses due to a borrower’s failure to pay principal and/or interest in a timely manner on instruments such as bonds, loans or other forms of security which the borrower issued. 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. These may be caused by different reasons such as trading in securities with small or few outstanding issues, absence of buyers, limited buy/sell activity or underdeveloped capital market. The Trustee only transacts with reputable counterparties and invests in debt securities issued by prime corporate borrowers which have undergone a rigorous accreditation and evaluation process. Regulatory exposure limits as well as the Fund's average duration are monitored regularly to ensure that exposures are managed. The Fund also employs risk management measures to monitor significant declines in the Fund's NAVPu and alert the Trustee to review current strategies and take corrective action as necessary. The Fund also undergoes an annual review to ensure that it is equipped to fund any redemption requirement in a timely manner and at a reasonable cost during times of financial stress. THE UITF 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, you may call us at (+632) 8885-5841, 8885-5853, 8885-5875 and 8885-5859, or email us at [email protected], or visit our website at www.chinabank.ph FUND PERFORMANCE AND STATISTICS AS OF AUGUST 31, 2021 (Purely for reference purposes and is not a guarantee of future results) NA VPU Graph NAVPU OVER THE PAST 12 MONTHS Highest 1.233650 Lowest 1.209740 STATISTICS Weighted Average Duration 2.05 Volatility, Past 1 year2 1.56% 3 Sharpe Ratio 0.36 4 Information Ratio -1.85 2Volatility measures the degree to which the Fund fluctuates vis-à-vis its average return over a period of time. This is computed by getting the standard deviation of the yearly returns for the past 12 mos. CUMULATIVE PERFORMANCE (%) 3 Period 1mo 3mos 6mos 1yr 3yrs Sharpe Ratio is used to characterize how well the return of a Fund compensates the investor for the level of risk Fund 0.17% 0.66% 1.17% 1.93% 13.77% taken. The higher the number, the better. This is Benchmark 0.19% 0.82% 1.43% 2.29% 15.65% computed by dividing the excess return of the fund against the risk-free rate over the fund’s volatility. PORTFOLIO COMPOSITION 4 Information Ratio measures the reward-to-risk efficiency of the portfolio relative to the benchmark. The higher the number, the higher the reward per unit of risk. This is computed by dividing the excess return of the fund against the benchmark over the fund’s volatility. TOP TEN HOLDINGS (%) RTB 03-11 17.2% RTB 03-10 15.1% FXTN 10-58 13.7% RTB 05-13 11.6% RTB 05-12 10.7% FXTN 07-58 6.4% RTB 10-04 6.4% CHIB 02-24 6.3% RTB 05-11 2.6% RLC 07-23 2.1% OTHER DISCLOSURES RELATED PARTY TRANSACTIONS The Fund has deposits with the Bank Proper, amounting to P2.06 million, which were approved by the Board of Directors/Trust Investment Committee. Likewise, all related parties transactions are conducted on an arm’s length basis. OUTLOOK AND STRATEGY The local currency bond yield curve further steepened in August following the auction results during the month. The spread between the 2 and 10y bond widened from end-July of 191 bps to 214 bps as of end-August, while the spread of the 2 and 20y bond rose from 277 bps to 300 bps for the same period. The main catalyst was when the BTr fully-awarded bids in the 20y bond offering in their 3rd auction of the month. The average yield of the FXTN 25-11 came out at 4.986%, which was 20 bps higher from its BVAL yield before the auction. The BTr awarded the Php35Bn offering in full with a bid-to-cover ratio of 1.5 times. This spooked market participants, which led to more defensive bids in the secondary market as well as in the final auction of the month. But providing some relief, the BTr rejected all tenders in the succeeding auction of the 12y FXTN 20-20 as they tried to cap rates from further rising. Had the BTr awarded the offering in full, its average yield would have risen to 4.533% or 30 bps higher from its BVAL yield pre-auction In macro news, Philippine GDP increased by 11.8% YoY in the 2Q21, but contracted by 1.3% MoM due to the lockdown imposed between April to May. Private spending rose by 7.2% YoY, which continued to account for a huge chunk of the economy at over 70%. Capital formation also saw strong YoY gains at 75.5%, while both exports and imports recovered at 27% and 37%, respectively. On the other hand, government spending declined by 4.9%. For the first half of the year, GDP increased by 3.7%. As a result, the DBCC lowered its GDP growth estimate for the Philippines for 2021 to a range of 4 to 5% from 6 to 7%. Economic managers noted that the re-imposition of tighter restrictions will weigh on recovery prospects for the year. The DBCC however retained its targets for 2022 and 2023 at 7 to 9% and 6 to 7%, respectively. The BSP supported the DBCC’s lower projection noting that the path to recovery will remain “bumpy” thereby warranting some cautious optimism. The BSP also noted that the vaccination program has been accelerating which should continue to support business and consumer confidence going forward. Also during the month, the Monetary Board decided to retain policy rates at current levels. The CHINA BANK INTERMEDIATE FIXED-INCOME FUND Key Information and Investment Disclosure Statement Page 2 of 3 overnight borrowing rate was maintained at 2%, while the reserve requirement ratio was kept 12%. Policy officials noted that easing inflation expectations, coupled with downside risks to economic growth warranted a continuation of the BSP’s accommodative policies. The BSP is forecasting inflation to end 2021 at 4.1% and 2022 at 3.1%. For the first seven months of the year, the average inflation stood at 4.4%. The country’s foreign reserves remained at adequate levels at US$106.5Bn as of end-July.