FREQUENTLY ASKED QUESTIONS (FAQs) ON UNIT INVESTMENT TRUST FUNDS

(UITFs)

BDO-Trust has prepared the following UITF FAQs to provide basic information on the UITFs.
The aim is to discuss the whats, hows and whys of UITF investing to enable clients to better
understand the features, rewards and risks of UITF investing.

As a brief backgrounder, the UITFs were introduced in the Philippine market after the issuance
of Bangko Sentral ng Pilipinas (BSP) Circular 447 in September 2004. This circular was
subsequently amended by several BSP Circulars. Together, these circulars govern UITFs, aiming
to align the management of these pooled funds by trust entities with international best practices
and to ensure differentiation of such pooled funds from bank deposits and other direct
liabilities. Industry standards for UITF client suitability assessment and risk disclosures are also
defined in these regulations.

As of year-end 2015, there are 24 trust entities in the Philippines offering an estimated 169
UITFs with assets under management of around Php674.88 billion (Source: www.uitf.com.ph).

1. What are Unit Investment Trust Funds (UITFs)?

Unit Investment Trust Funds (UITFs) are ready-made investments that allow the pooling of
funds from different investors with similar investment objectives. These funds are managed by
professional fund managers with the aim of meeting such objectives through investments in
various financial instruments such as money market securities, bonds and/or equities.

2. Who can invest in UITFs?

Any person, association, corporation, entity or firm who/which has the legal capacity to contract
or establish a trust may invest in the UITFs.

3. What benefits do I get from investing in a UITF?

Our wide selection of BDO UITFs allows you to choose one or a combination of UITFs that can
meet your investment needs, financial requirements and life goals. With BDO UITFs, your
common investing concerns can be addressed.

By investing in UITFs, risks are spread out across the various investments
Diversification.
held by the pooled trust fund. Regulations require that the combined exposure of the
UITF to any entity and its related parties shall not exceed 15% of the market value of the
UITF, except government securities. Another exception is for the equity funds that track
 the index, in which case, investments in particular stocks of a UITF can exceed the 15%
limit to the extent of its share in index weight.
Liquidity. While it is advisable to stay invested in the UITFs for at least the time horizon
recommended for a particular UITF, UITFs are designed to allow you to redeem units of
participation at any time. This is because the allowed investments of UITFs are limited to
bank deposits/deposit substitutes and tradable investments.
Affordability. UITFs generally have low minimum investment requirements. Additional
investments may be made in tranches as funds become available to the client.
Better earnings potential. Greater earnings potential is achieved without having to invest large
sums of money. There are opportunities for potentially higher returns due to possible
marked-to-market gains on top of accrued income or dividends from investments. UITFs
provide access to financial instruments not readily available to retail investors.
Exempt from reserve requirements. UITFs are not subject to reserve requirements imposed on
bank deposits, thus your funds are fully invested.
Professional fund management. Participating in the UITFs allows you to gain access to the
expertise and services of seasoned fund managers who are able to actively monitor the
markets for investment opportunities and manage the risks in line with the objectives and
allowed investments of a particular UITF.
Transparency. Trust entities are required to publish the UITF price at least weekly, allowing
investors to compare investment performance of various fund managers. Moreover, UITF
prices are uploaded daily for UITFs enrolled in www.uitf.com.ph.
Regulated product. The management and administration of UITFs are governed by the
BSP. Each UITF is subject to a separate annual audit by an independent auditor
acceptable to the BSP, the results of which are available to investors upon request. In
addition, each UITF is required to have a BSP accredited third party custodian, who is
tasked with safekeeping the securities of the UITF and performing independent marking-
to-market of such securities.

4. What is the minimum amount needed to invest in BDO UITFs?

Participation in the BDO UITFs may start for as low as PhP 10,000. (For more information on
the minimum participation amounts of different UITFs, click here. However, with the BDO
Easy Investment Plan (EIP), you can invest in selected UITFs for as low as P1,000 a month
contributed on a regular basis. (To know more about the EIP, click here.)

5. What are the different types of UITF?

There are four (4) general classifications of UITFs from which an interested investor can choose
from. These are listed below according to ascending levels of risk, return and recommended
investment time horizon.

1. For moderate investors who wish to be invested in short term, fixed

Money Market Funds.
income deposits and securities with a portfolio duration of no more than one (1) year.
Recommended for participants who can keep invested for at least six (6) months.
2. Bond Funds. For moderate investors who wish to be invested in a portfolio of bonds and
other fixed income securities with a portfolio duration which may exceed one (1)
 year. These may further be classified into Intermediate Funds (which limits duration up to
3 years), Medium Term Funds (which allows a duration of up to 5 years) and Long Term
Funds (where the fund mandate allows a duration of greater than 5 years). Recommended
for participants who can keep invested for at least three (3) years.
3. Balanced Funds. For balanced investors who wish to achieve a higher return by investing in a
portfolio of fixed income securities and equities. Recommended for participants who can
keep invested for more than three (3) years.
4. Equity Funds. For aggressive investors who wish to invest substantially in equities to
achieve a higher long-term appreciation of growth of capital. Recommended for
participants who can keep invested for more than three (3) years.

The following are the BDO UITFs available to you:

1. Money Market Funds

1. BDO Peso Money Market Fund
2. BDO Dollar Money Market Fund
3. BDO Institutional Cash Reserve Fund
2. Bond Funds
o BDO GS Fund
o BDO Peso Bond Fund (formerly BDO Peso Fixed Income Fund)
o BDO Dollar Bond Fund
o BDO Medium Term Dollar Bond Fund (EPCIB US Dollar Fund)
o BDO MERIT Fund
3. Balanced Fund
o BDO Peso Balanced Fund
4. Equity Funds
o BDO ESG Equity Fund
o BDO Sustainable Dividend Fund
o BDO Equity Index Fund
o BDO Equity Fund (EPCIB Equity Fund)
o BDO Institutional Equity Fund
o BDO Focused Equity Fund

UITFs may also be structured as Feeder Funds which are mandated to invest at least 90% of its
assets in another pooled investment fund or collective investment scheme. BDO Feeder Funds
are invested in dollar-denominated equity funds managed by reputable global fund managers
who have undergone the thorough screening process employed by BDO Trust. These UITFs are
recommended for aggressive investors seeking capital growth and who can keep invested for
more than three (3) years.

The following are the BDO Feeder Funds available to you:

o BDO Developed Markets Property Index Feeder Fund

o BDO Global Equity Select Feeder Fund
o BDO China Equity Feeder Fund
o BDO US Equity Feeder Fund
6. How do I know which UITF is suitable for me?

Your choice of UITF should conform to the length of time you can afford to keep your
funds invested and the degree of risk that you are willing to take in order to achieve your
desired returns for your specific financial goals. UITFs are established and managed based on a
set of investment objectives and strategies, and these have varying levels of risks and returns.

Before investing in a UITF, ask a UITF certified marketing personnel to help you assess your
investment needs and objectives through a conduct of a Client Suitability Assessment (CSA).
The CSA will help you understand the type of investor you are and will provide you a general
idea of your investment preference which will serve as the basis for the
presentation/recommendation of what UITF/s is/are suitable to you.

You may also take the CSA via the UITF Online Investing Facility. Just log-in to your BDO
Personal Online Banking account and answer the assessment online.

7. How do I invest in the UITFs?

In order to participate in any of the UITFs, you should purchase participating units in the
fund. A participating unit has a daily price which is called the Net Asset Value per Unit
(NAVPU).
After admission to the fund, participants of the UITF will receive a Confirmation of
Participation (COP), as evidence of participation. This will contain the details of your
UITF investment such as the amount of participation, NAVPU on the date of purchase
and the number of participating units. Also, at the back portion of the COP is a copy of
the Participating Trust Agreement which contains the terms and conditions governing the
client and the Trustee, subject to the provisions set forth in the Declaration of Trust
(DOT) or Plan Rules of the particular UITF.

8. How do I determine the market value and returns of my UITF investments?

On any given date, you can compute the market value of your UITF investment by multiplying
the number of units you own by the NAVPU for the day, which is available daily through
various channels like any BDO branch and this link.

Market Value Computation Example:

No. of Units Owned 100 units

NAVPU for the Day Php 1.50
Market Value of UITF Investment 100 units x Php 1.50 = Php 150

After getting the market value of your UITF investment, you can determine the returns by
comparing it with your original purchase amount. If the value of your UITF increased, there is a
gain/earning and if it decreased, there is a loss.

Returns Computation Example:

Computed Market Value of UITF Investment Php 150
Original Purchase Amount of UITF Php 100
Gain/ (Loss) Php 150 Php 100 = Php 50

Since the market value is higher than the original purchase amount in this example, you are
gaining P50 for your participation at point of computation.

For a convenient way of determining the value, earnings or loss of your UITF investment, you
may use the UITF calculator here.

9. Are the returns from investments in UITFs guaranteed?

UITFs are not deposit accounts but are investment products offered by Trust
Entities. Participants in UITFs are making an investment and not a deposit. Therefore, BDO
UITFs are not considered as obligations of BDO nor can the principal and returns be guaranteed
by BDO or its affiliates and subsidiaries. UITFs are not insured or governed by the Philippine
Deposit Insurance Corporation (PDIC).

Although not a guarantee of similar future results, historical performance would show that the
BDO UITFs have a track record of outperforming their respective benchmarks and have
rewarded their investors with returns corresponding to the risks that these investors have taken.
(Click here for the performance of the BDO UITFs)

10. How are Return On Investments (ROIs) of UITFs stated?

Following global best practices, ROIs of UITFs are based on absolute yields. Absolute yield is
the actual ROI of a particular investment product during a specific time frame.

To illustrate:

1. Cost of investment is P10,000.00. After 30 days, the total market value is P10,100.00.
The appreciation in value is P100.00. The absolute yield for 30 days is 1%
(P100.00/P10,000.00).
2. Cost of investment is P10,000.00. After 3 months or 90 days, the total market value is
P20,000.00. The appreciation value is P10,000.00. The absolute yield for 3 months is
100% (P10,000.00/P10,000.00).

11. What is difference between the absolute yield and the annualized yield?

An annualized yield is when absolute yield is converted to its per annum equivalent.

To illustrate using above examples:

1. The equivalent annualized yield is 12% p.a. (or 1% X 12 months)

2. The equivalent annualized yield is 400% p.a. (or 100% X 4 quarters)
Since UITFs use a marked-to-market valuation methodology, it is not practicable to use
annualized yields similar to that used in Time Deposit quotes.

12. What are the potential risks in investing in a UITF?

The underlying securities that a particular UITF is invested in will determine the kind of risks
you will be exposed to when you invest in the fund. These are samples of risks when it comes to
investing:

Interest Rate risk. The potential for an investor to experience losses due to changes in interest
rates;
Market/Price risk. The potential for an investor to experience losses due to changes in the
market prices of securities (e.g. bonds and equities);
Liquidity risk. The inability to sell or convert assets into cash quickly or where conversion to
cash is possible but at a loss;
Credit risk. The possibility of loss due to a borrowers or issuers failure to repay principal
and/or interest on securities issued;
Reinvestment risk. The possibility of having lower returns or earnings when maturing funds
or the interest earnings of funds are reinvested;
Hedging risk. The possibility for an investor to experience losses brought about by the
inherent risks which the underlying investment is exposed to despite the use of a hedging
instrument;
Foreign Exchange risk. The possibility for an investor to experience losses due to fluctuations
in foreign exchange rates; and
Country risk. The possibility for an investor to experience losses arising from investments in
securities issued by/in foreign countries due to the political, economic and social
structures of such countries.

Please click this link to read through the complete Risk Disclosure Statement.

13. How do I make my contributions in a UITF?

Just visit any BDO branch nearest you or log-in to your BDO Personal Online Banking account
to invest in the UITFs. Contributions may be made in cash, BDO and managers check or debit
from your BDO account, as applicable. For information on the dealing time per UITF, please
click here.

14. How do I redeem my investments in a UITF?

For UITF investments coursed through a BDO branch, fill-out the Notice of Redemption of
Participation found at the lower portion of your COP and submit this to the same BDO Branch
where you opened your UITF.

For UITF investments done online, you need to submit your redemption request via the UITF
Online Investing Facility.
For more information on the dealing time and settlement period per UITF, please click here.

15. What are the management fees that I will pay when investing in the BDO UITFs?

As compensation for the Trustees services and to cover for the costs involved in managing the
UITF, a trust fee, which may range between 0.50% and 1.50% is charged to the fund and is
already incorporated in the daily NAVPU of the particular BDO UITF. There are no agents
commissions which is common practice for mutual or insurance funds.

16. Are investment proceeds from the UITFs subject to taxes?

Taxes, when due, are already deducted when computing the NAVPU. Thus, proceeds from
UITFs are already net of taxes.

17. Are there any penalties when investing in BDO UITFs?

Except for the BDO Peso Money Market Fund (PMMF), all other BDO UITFs are subject to a
30-day minimum holding period. Redemption of your UITF investment within the holding
period will be subject to an early redemption fee, which will be deducted from your redemption
proceeds. To know the early redemption fees of BDO UITFs, please click here.

18. How do I monitor the performance of my investment?

To monitor the performance of your UITF investments, the NAVPU of the different UITFs are
available in the following channels:

BDO Homepage (http://www.bdo.com.ph)

UITF Industry website (http://www.uitf.com.ph)
For Globe, Smart and Sun subscribers, just text SMAC NAV and send to 2966
BDO Phonebanking: (63)(2)-631-8000
BDO Personal Online Banking, please click here for the enrollment process in
Internet Banking. With BDO Personal Online Banking, you can view the status
and transaction history of all your UITF investments.

Also, a UITF Yield Calculator is available via this link. This automatically computes for the
clients gains/ losses simply by inputting the purchase and redemption dates of particular UITF
investments.

19. Where can I find information updating me about the investments and performance of
the BDO UITFs?

Regulations require that disclosures on each UITF be made available to its participants at least
every calendar quarter. These disclosures, in the form of Key Information and Investment
Disclosure Statement (KIIDS) prescribed by the BSP across the industry, include the
performance and the update of the prospective and outstanding investment outlets of each UITF.
The KIIDS aims to provide UITF participants with key information and disclosure to facilitate
better understanding and comparison of UITFs offered by trust entities. BDO Trust prepares the
KIIDS of all BDO UITFs on a monthly basis, and can be found here under the Disclosures
section.

Benefits to Investors

Our wide selection of BDO UITFs allows you to choose a fund or a combination of funds that
is/are well suited to your needs, financial requirements and life goals. With the BDO UITFs,
your common investing concerns are addressed.

Diversification. By investing in a UITFs, risks are spread out across the various investments
held by the pooled trust fund.

Liquidity. While we generally recommend that you stick to your investment time horizon
and stay invested in the UITFs for a longer period of time, UITFs are designed to allow you to
can redeem units of participation at any time.

Affordability. UITFs generally require a much lower minimum investment amount compared to
other investment alternatives.

Better earnings potential. Greater earnings potential is achieved without having to invest large
sums of money. There are opportunities for potentially higher returns due to possible marked-to-
market gains on top of accrued income from investments. UITFs provide access to financial
instruments not readily available to retail investors.

Exempt from reserve requirements. UITFs are not subject to reserve requirements imposed on
bank deposits. Thus, your funds earning potentials are maximized.

Professional fund management. Participating in the UITFs allows you to gain access to the
expertise and services of seasoned fund managers who are able to actively monitor the markets
for possible investment opportunities and managed the risks for you.

Transparency. Trust entities are required to publish the UITF price at least weekly, allowing
investors to compare investment performance of various fund managers.

Regulated product. The management and administration of UITFs by Trust entities are
governed by the Bangko Sentral ng Pilipinas (BSP). Thus, aside from the yearly triple audit
conducted to BDO Trust, each of its UITF is subject to a separate annual audit by an independent
auditor that is acceptable to the BSP. The results of such audit may be made available upon
your request. In addition, each UITF is required to have a BSP accredited third party custodian,
who is tasked with safekeeping the securities of the UITF and performing independent marking-
to-market of such securities. All these safeguards redound to the protection of the UITF
investors.
Which UITF is Best for you?

Life is full of changes. You could be going to college, starting a career, changing jobs, getting
married, having children, growing a business or planning to retire. As you progress through these
changes, you need to continuously review your financial goals and make sure you are on track on
where you want to go.

Always ask yourself what you want to achieve. It is only when you have a clear vision of your
goals that you can truly aim for them. Also, ask yourself when you want to achieve your goals.
Knowing when you want to achieve your goals will help you identify your investment time
horizon.

This is important because how much time you have to invest will determine the type of
investments that can help you achieve your goals. There are a number of investment
opportunities available to you at BDO. Remember that whatever you invest in, the key to
investing is time.

Generally, funds that are invested for longer periods achieve higher returns but because of the
tenure, such investments are exposed to the volatility of price movements and interest rates and
thus, are riskier. On the other hand, funds that are invested for shorter periods are less volatile or
risky. Therefore, you should determine the length of time you can afford to keep your funds
invested and the amount of risk that you are willing to take to achieve your desired returns.

The BDO Money Market Funds (Peso and US Dollar) are suitable for investors who have
moderate risk appetite and who value capital preservation and therefore prefer a short-term
investment horizon. The BDO GS Fund and BDO Bond Funds (Peso and US Dollar) are also
suitable for investors who are moderate and who have longer investment time horizons for
investing in bonds and fixed income securities. The BDO Peso Balanced Fund and the various
BDO equity funds are suitable for investors who have balanced and aggressive risk appetites
respectively, and who understand the potential rewards and the risks of investing in equity
markets and who are capable of staying invested for a long time.

Your fund managers invite you to review the product descriptions of the various BDO UITFs in
this website. Thereafter, we invite you to visit any of our branches where prior to investing, our
UITF marketing personnel will conduct a Client Suitability Assessment (CSA) to determine
which UITF matches your investment objectives, risk tolerance, investment time horizon,
preferences and experiences. We are certain that there will be one or more UITF/s that will
provide the solution to your investment objective/s given your circumstances in life.

FEATURES
Documentation
Confirmation of Participation (COP)
Omnibus Participating Trust Agreement

Product Type
Trust Arrangement and not a Deposit

PDIC Coverage
Not insured with PDIC

Yield/Returns
Per BSP regulations, no indicative yields shall be quoted nor guaranteed
to participants. Historical yields shall be used purely for reference only and
should not guarantee future similar results. Income or loss is for the
account of the investor.

Valuation Method
Mark-to-Market valuation

Investment Outlets
Bank deposits
Securities issued by or guaranteed by the Philippine government,
or by the Bangko Sentral ng Pilipinas
Tradable securities issued by the government of a foreign country, any
political subdivision of a foreign country or any supranational entity
Exchange-listed securities
Marketable securities traded in an organized exchange
Loans traded in an organized market
Financial derivatives instruments solely for the purpose of hedging risk
exposure of existing investments of the Fund

Investment Diversification Strategy

15% exposure limit to any entity and its related parties. This limit
does not apply to: 1) non-risk assets as defined by the BSP
(e.g. government securities) ; and 2) exchange traded equity security which
is included in an index and tracked by the UITF, the exposure limit of which
shall be its actual benchmark weighting or 15%, whichever is higher.

Safekeeping of Securities
Done by a BSP-accredited 3rd party custodian

NAVPU availability
Released every banking day at 4:00 p.m. for money market funds and
7:00 p.m. for the rest of the UITFs. May be obtained through:

1. www.bdo.com.ph
 2. Type SMAC(space)NAV and send to 2966 (Smart and Globe at P2.50/text, Sun at
P2.00/text)
3. BDO Phonebanking - dial 631-8000
4. www.uitf.com.ph
5. Also published once a week in the BusinessWorld newspaper.

Reserves, Bank SBL and DOSRI limits

Exempted

Annual Audit
Quadruple Audits: BSP Audit, External Audit, Internal Audit plus External
Audit for each UITF

WHY INVEST IN UITFs?

In recent years, the Philippine per capita gross domestic product has been growing, largely as a
result of fiscal developments and the inflow of funds from Overseas Filipinos. As our country
becomes economically developed and its populace subsequently wealthier and more
sophisticated, it will follow the trend worldwide wherein in an improving economy, there is a
noticeable interest in the money and capital markets where investors are able to share in the
growth of the economy and participate in the profits of the more established companies.

While investing in the capital markets has traditionally been only for people with large portfolios
and the expertise to manage risks and pursue higher returns, pooled funds like the Unit
Investment Trust Fund (UITFs) have enabled a wider number of people to participate in these
markets.

In view of these, we discuss herein the important reasons why an investor may want to consider
putting his money in a UITF.

There is potential for higher returns

UITFs offer investors an opportunity to potentially earn higher returns. By its nature, UITFs pool
the funds of investors to create a large fund which, under the watchful eyes of professional fund
managers, can productively harness these funds, taking advantage of economies of scale. UITFs
are thereby able to provide even smaller investors access to the financial markets for investments
which normally are just available to big investors. Due to its size, UITFs are also able to reduce
transaction costs.

Given these reasons, UITFs have historically provided investors better returns over a longer-term
horizon when compared to traditional deposit options. However, fund managers and BSP are
quick to add that historical performances of funds are not guarantees of future fund
performances. Furthermore, given the marked-to-market valuation standards used, the
investment values of UITFs may experience fluctuations in value that may be temporary but can
result in investment losses if an investor has to redeem at a time when the financial markets are
turbulent. Thus, the potential for higher returns is also accompanied by higher risks.
The UITFs allow an investor to select risks suited to him

The BDO UITF product suite offers a whole range of UITFs from which an investor can choose
one or a combination thereof, to meet his particular investment and return objectives coupled
with the level of risks that he is willing to take. There are UITFs for the conservative, the
moderate and the aggressive investor and each UITF is governed by a Declaration of Trust
(DOT) which defines its investment objectives and the investments allowed for that particular
UITF to meet such objectives.

The UITFs have built-in safeguards to protect investors

Investors can take comfort in the fact that the BSP exercises vigilant supervision over UITFs.
This product was created by BSP Circular 447, dated September 3, 2004 and was further
improved with the issuance of BSP Circular 593, dated January 8, 2008. As these circulars were
issued recently, these regulations on UITFs are updated and aligned with international best
practices. Such practices include the use of marking to market as its valuation basis, the
requirement for third party custodian to safekeep and value the securities held in its portfolio, the
separate external audit of each of the UITFs by an accredited independent external auditor as
well as limiting UITF investments in bank deposits, government securities, securities traded in
an organized exchange or approved by the BSP for UITFs and always must be done abiding by
the best execution rule. Moreover, the regulations require that marketing personnel of the UITFs
be adequately trained to ascertain that investors are properly informed of the nature and risk of
UITF investing and matched with the appropriate UITF investment. All these were promulgated
with investor protection as the ultimate aim.

Experience these benefits first hand! Review the features of each BDO UITF and allow our Trust
Marketing Personnel to guide you in choosing the UITF best suited for you to meet your
financial goals.