Helping you to achieve your financial goals

Fund guide

Not for distribution in Hong Kong or Singapore.

Our research1 suggests that most Indian expatriates have three key financial goals; the purchase of a property, retirement planning and paying for their children’s education. Whatever your own financial planning needs – both during your time as an expatriate and also should you return to live in India – we believe that you need to be committed to saving for the long term and also carefully consider how you invest your money.

Over the following pages you can learn about some of our funds that specialise in investing in India, whether it be equities, bonds or a mixture of both. In addition you can read about the long term market returns and the views from four fund managers on the future out look for Indian investments.

These funds should not be looked at in isolation as they are just part of a broad range of funds from a selection of the world’s leading fund managers. Our range of funds covers not only India, but all of the major markets around the world.

If you want to find out about the full range of funds that we offer please look at the funds pages on our website, www.fpinternational.ae. If you are still unsure which funds or which portfolio of funds would best suit your needs please speak with your financial adviser.

1 Source: Friends Provident International 2014

2 Friends Provident International Indian fund guide

Investing in fundsWhen you invest in a fund, your money is pooled together with the money of many individual investors. Funds provide the benefit of instant diversification because, depending on the fund’s investment objective and risk profile, they can invest in different companies, asset classes or countries. This reduces the effect that any one investment can have on fund performance. All of the investment decisions are made by a team of investment experts, who will make sure that their fund is properly diversified.

Equity fundsEquities are generally more volatile than other assets but as the chart below clearly demonstrates they offer investors the possibility of higher returns over the long term. This is something you need to consider when deciding which funds to invest in to help ensure that your investments generate the growth required to achieve your financial goals.

Equity funds that invest in medium-sized companies can be more volatile than funds investing in larger companies. However, they do tend to offer the prospect of superior returns because of the greater growth potential of the companies that they invest in.

The chart below shows that medium-sized Indian companies have outperformed their larger counterparts by more than 100% since January 2001.

Bond fundsThese funds can invest in bonds issued by governments and/or companies, namely government and corporate bonds, in return for a fixed rate of interest. In this way, they aim to generate a steady return and income while preserving capital. This feature of bond funds could help to bring stability to your investment portfolio.

Although all funds carry some risk, bond funds tend to be less risky than equity funds. It’s important that you achieve a balance between risk and potential reward that you are comfortable with.

2 The Nifty Free Float Midcap 100 Index captures the movement and is a benchmark of the midcap segment of the market.

3 The IISL Nifty 50 Index covers the 50 most largest and liquid securities listed on the NSE.

31/03/201723/04/1997 Time period

Indian equities have outperformed both gold and cash over the last 19 years

Source: Morningstar, cumulative return in USD, 31/03/2017

Indian equities (represented by IISL Nifty 50 Index) – 309.7%

Gold (represented by Morningstar Gold Commodity Index) – 142.9%

Cash (represented by India OE Liquid) – 84.3%

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Time period 01/01/201701/01/2001

Since 2001 medium-sized Indian companies have outperformed their larger counterparts

Medium-sized Indian companies (represented by IISL Nifty Freefloat Midcap 100 Index 3) – 732.5%

Large Indian companies (represented by IISL Nifty 50 Index 4) – 357%

Source: Morningstar, cumulative return in USD, 01/01/2017

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Successful investingRegardless of where you are living currently, there are some key points to consider when thinking about investing.

Don’t try to time the marketIt’s very difficult to predict financial market movements and to get the exact timing of when to invest or disinvest just right. This is because financial markets rise and fall in unanticipated spurts, making it easy to ‘mistime’ and potentially lose out on any future gains.

It makes sense that investors who are patient and who invest for the long term are much better placed to participate in the financial markets’ best performing days. Missing just a few key days can have a dramatic effect on the value of your investment portfolio.

Maintaining a diversified investment portfolio with the help of a financial adviser is an excellent way to shelter your portfolio from periods of volatility. This is likely to be a much more effective approach than trying to predict the direction of the financial markets on any one day.

Making regular contributionsContributing a fixed amount on a regular basis can be an effective way of helping you to achieve your financial goals, and it may also reduce the negative impact that volatility can have on your investment portfolio.

Whenever you make a contribution, you buy units in a fund. A unit is a stake in a fund. The number of units you buy depends on the price of the units at the time of purchase. So, for a fixed contribution, the lower the unit price for the fund, the more units will be purchased. When the unit price for the fund rises, fewer units will be purchased.

Contributing on a regular basis means that you are able to take advantage of what is known as ‘unit cost averaging’. The table opposite, where USD 1,000 is invested each month into a hypothetical fund, demonstrates this approach in practice.

Value at month 6 = USD 6,875.00

(6,875 units x unit price of USD 1.00)

Despite the unit price being the same at the end of the period as at the beginning, the investment is showing a profit of USD 875.00 due to unit cost averaging.

Review your portfolio regularlyWhichever of our funds you decide to invest in, it is very important that with the help of a financial adviser you review your investment portfolio on a regular basis. This is to ensure that it continues to reflect your attitude to risk and remains on track to meet your financial goals.

Amount invested

(USD)

Fund unit price

(USD)

Units acquired

Month 1 1,000.00 1.00 1,000.00

Month 2 1,000.00 0.80 1,250.00

Month 3 1,000.00 0.50 2,000.00

Month 4 1,000.00 1.00 1,000.00

Month 5 1,000.00 1.60 625.00

Month 6 1,000.00 1.00 1,000.00

Total 6,000.00 6,875.00

The outlook for India remains positive

The views expressed above are those of the fund manager and are not the views of Friends Provident International.

Over the last couple of years, we have seen a systematic addressal of the macro economic issues facing India and we think India is now well positioned to experience a major turnaround.

GDP growth continues to remain at relatively high levels and is expected to be 7.7% in FY2018 and 7.8% in FY2019.

The Union Budget has maintained the trend of a lower fiscal deficit without compromising on investment requirements.The policy direction in India is right and the economy is making good progress on most fronts. The economy and equity markets appear to be in transition from consumption to capex. Impact of higher infra allocation and the several steps taken by government over the last two years is expected to be felt strongly from FY2017 onwards with Railways, Power Transmission and Distribution, Mining, Roads and Urban Infrastructure likely to lead growth. Demonetization, along with GST, are likely to reduce the informal economy, expand tax base and over time lead to moderate taxation.

Equity market have lagged nominal GDP growth for several years now. With a sharp fall in interest rates, improving growth outlook and signs of improving corporate profitability the outlook for equity market is positive. Any volatility in Indian equities induced by global events at a time when the Indian economy is improving on nearly all parameters will be a good opportunity for the discerning investor. Improving fundamentals of the Indian economy and attractive market cap / GDP lead to a positive outlook for the equity markets over the medium to long term.

In our opinion therefore, there is merit in increasing allocation to equities (for those with a medium to long term view) and to stay invested.

HDFC Asset Management, June 2017

Indian economy continues to improve, witnessing increase in forex reserves, declining fiscal deficit, contracting CAD and moderating inflation. Moreover, demonetisation has resulted in higher demand for financial assets. Tax collections have improved albeit marginally, this has helped the currency to appreciate in the last 2 months. High interest income along with appreciating INR has attracted over $8bn in debt in the last quarter. Fund income increased by about 40bps post MPC changed the stance on monetary policy to neutral from accommodative. Overall, RBI remains hawkish on inflation and targets to bring down headline CPI to sustainable 4% in a calibrated manner (present 3.60%). The core inflation component has started to moderate, and governments vigilance on food price inflation has yielded results in the last 2-3 years. Corporate bond spreads are expected to narrow. Over 2017-2018 RBI is expected to start monetary easing as excess liquidity and moderating inflation warrants tighter real rates. The fund maintains modified duration around 6 years, with overweight position in local rated AAA bonds to benefit from yield decline in the market. Credit markets in India hold on to opportunities of steady income, improving domestic credits and moderating inflation along with real GDP growth of over 7.0%.Invesco, June 2017

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The views expressed above are those of the fund manager and are not the views of Friends Provident International. 5

India’s macro story is impressive, perhaps the best in the region. The dynamic of falling interest rates and prices is strong, helping to support headline growth. And the immediate threat of demonetization to private spending seems to have passed. Prime minister Modi, fresh from an unexpected election triumph in key state Uttar Pradesh has the whip hand to push through reforms. Chief among these is the nationwide GST, which should help lower costs to business. The market is admittedly expensive, but then it always has been, and for good reason: return on equity is high, company choice broad and the best managements shareholder-friendly. While there are near-term risks, including stalled investment and weak public banks, provided you pick stocks carefully and invest for the long term – which is our approach – you should be rewarded. Certainly we see little reason to change our longstanding regional overweight to the country.

Hugh Young, Managing Director , Aberdeen Asset Management Asia, June 2017

Indian economy appears well primed to continue its journey towards a sustainable recovery. Victory for BJP in India’s largest state Uttar Pradesh is seen as an affirmation of the government’s policies which were viewed as a referendum on the Central government’s performance and the recent policy decisions. Improvement in consumption demand is expected to be a major theme for 2017 supported by a gradually rising rural wage level, policy reforms like demonetization, implementation of GST, lowering of interest rates and continued government spending. This simplification of tax structure along with reforms pertaining to land, labour, infrastructure sectors and modification in FDI policy could contribute to sustainable growth.

The macro fundamentals continue to remain strong, with important variables like low interest rates, moderate inflation and relatively stable currency supporting growth recovery a large part of which can be attributed to falling crude oil prices.

One of India’s most promising economic features is its large working-age population. India is slated to be the fastest growing economy in the world. This can be attributed to the fact that India reached USD 2 trillion dollars since its independence in 1947, which is expected to be a USD 4 trillion dollar economy in the next 7-8 years.

All these factors will lead to higher profit growth for corporates in India. While the current market valuations are not cheap but from a medium to long term perspective decent opportunities still exists.

Hence we believe Indian equities offer an attractive investment opportunity with many enablers in place which can allow for a sustained recovery.

Reliance India , June 2017

Year GDP Market Cap (USD)

2017 2.45 trillion 1.9 trillion

2025 4 trillion 4 trillion

6 Friends Provident International Indian fund guide

The fund range

HDFC (EIFF)† Equity Fund

• The underlying fund, which has been managed by the highly experienced fund manager Prashant Jain since 2003, is positioned to benefit from the rapid economic growth in India.

• Prashant focuses on large, growing and good quality companies, and avoids unsustainable or very expensive businesses.

• The fund is well diversified across all sectors with exposure to the leading companies in the financial, information technology, industrials, consumer discretionary, health care, materials and energy industries.

• Prashant is Executive Director and Chief Investment Officer of HDFC Asset Management. He has more than 21 years of experience in fund management and research in the investment industry.

HDFC (EIFF)† Mid Cap Opportunities Fund

• Managed by Chirag Setalvad, the underlying fund invests in medium-sized companies that offer compelling long-term growth prospects.

• Supported by an able and well-resourced investment team, Chirag focuses on quality and companies which are equipped with robust balance sheets.

• The fund manager will also invest in smaller companies provided the business offers strong growth potential.

• Though the fund offers the potential of higher returns than a fund investing predominantly in large companies, small and medium-sized companies can be more volatile than their larger counterparts.

Equity funds

Reliance Emergent India Fund

• Sunil Singhania is CIO - Equity Investments at Reliance Mutual Fund. Sunil graduated in commerce from the Bombay University and completed his Chartered Accountancy from

the ICAI, Delhi with an all India rank. He has also earned the right to use the Chartered Financial Analyst designation, conferred by CFA Institute, USA.

• Sunil has a total experience of over 21 years. Before his association with Reliance Mutual Fund, Sunil gained considerable experience on the sell side in Indian equity markets.

• He is first from India to be elected as the Director on the Global Board of Governors of CFA Institute, USA. Sunil was the Promoter of The Association of NSE Members of India; a body of stock brokers. He also sat on the Standards & Practice Council of the CFA Institute, USA, for 6 years, the first and only member so far based in India to do so. Sunil was the Founder of the Indian Association of Investment Professionals, the CFA India society and was its President for a continuous period of eight years.

• Having traveled extensively across the world, Sunil has attended many global investment conferences and seminars.

AberdeenGlobal Indian Equity Fund

• The fund is managed by a team of equity fund managers, overseen by Hugh Young.

• With more than 30 years’ experience of investing in Asia, Aberdeen has been running dedicated Indian portfolios since 1996.

• The fund aims to achieve long-term capital growth by investing in equity-related investments that are registered in India or derive their income from India.

• The investment team employs a proven process based on first-hand research to identify the most attractive opportunities in the Indian equity universe.

Here are six funds available via our fund range that invest in India: four equity-based funds, a fund that invests in bonds, and also a mixed fund that invests in both equities and bonds.

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HDFC (EIFF)† Prudence Fund

• Prashant Jain has managed the underlying fund, which invests mainly in equities but also holds 25% in fixed income assets, since June 2003.

• The equity portion of the fund is focused on good quality, larger companies, while the fixed income segment is comprised mainly of government bonds, but also highly rated corporate bonds.

• Prashant has positioned the fund to take advantage of the growth of the Indian economy by investing in good quality companies.

• Financial services are another area of the Indian stock market which Prashant likes and roughly 21% of the fund is invested in this sector.

Mixed funds Bond funds

InvescoIndia Bond Fund

• The fund will invest primarily in bonds issued and/or guaranteed by the Indian government or by Indian companies.

• The highly experienced fund management team comprising Ken Hu, chief investment officer Invesco Asia Pacific, and fund manager Jackson Leung, both of Invesco Hong Kong Limited, benefit from the regular input of Invesco Asset Management India.

• Invesco India provides non-binding investment advice, including knowledge of the local market both in terms of the Indian economy and credit analysis.

• The aim of the team is to take advantage of the attractive yields on offer in the Indian fixed income market.

A bright futureWith an improving economic environment, rising levels of disposable income, a wide range of high quality companies and the possibility of having the largest labour force in the world by 20304, the future looks bright for India. With these factors in mind, India may finally be able to cement its position as one of the world’s dominant economic powers.

Investing in India successfully is not about following the latest political or economic twists and turns – it’s about our fund managers discovering companies of different sizes that can thrive. For patient, long-term investors, we firmly believe that India represents an attractive investment opportunity.

4 Source: www.imf.org ‘MD Speech: Seizing India’s Moment’, 16/03/2015

The fund range (Continued)

†The HDFC funds cannot be directly accessed outside India, so our funds will invest in what are known as feeder funds. These feeder funds, the Emergent India Focus Funds, invest in the underlying HDFC funds.

For more information on the funds, please refer to the fund factsheets on our website. Funds that invest in individual countries may be more volatile and carry more risk than those spread across several countries.

Please note that securities held within a fund may not be denominated in the currency of that fund and, as a result, fund prices may rise and fall purely on account of exchange-rate fluctuations. You may get back less than you have paid in.

www.fpinternational.com

Visit our website to learn more about our range of flexible savings, investment and protection plans.

Speak to your financial adviser today to see how we could help you secure your investment goals.

Friends Provident International Limited: Registered and Head Office: Royal Court, Castletown, Isle of Man, British Isles, IM9 1RA. Telephone: +44 (0)1624 821212 | Fax: +44 (0)1624 824405 | Website: www.fpinternational.com. Isle of Man incorporated company number 11494C. Authorised and regulated by the Isle of Man Financial Services Authority. Provider of life assurance and investment products. Authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Singapore branch: 4 Shenton Way, #11-04/06 SGX Centre 2, Singapore 068807. Telephone: +65 6320 1088 | Fax: +65 6327 4020 | Website: www.fpinternational.sg. Registered in Singapore No. T06FC6835J. Licensed by the Monetary Authority of Singapore to conduct life insurance business in Singapore. Member of the Life Insurance Association of Singapore. Member of the Singapore Financial Dispute Resolution Scheme. Hong Kong branch: 803, 8/F., One Kowloon, No.1 Wang Yuen Street, Kowloon Bay, Hong Kong. Telephone: +852 2524 2027 | Fax: +852 2868 4983 | Website: www.fpinternational.com.hk. Authorised by the Insurance Authority of Hong Kong to conduct long-term insurance business in Hong Kong. Dubai branch: PO Box 215113, Emaar Square, Building 6, Floor 5, Dubai, United Arab Emirates. Telephone: +9714 436 2800 | Fax: +9714 438 0144 | Website: www.fpinternational.ae. Registered in the United Arab Emirates with the UAE Insurance Authority as an insurance company. Registration date, 18 April 2007 (Registration No. 76). Registered with the Ministry of Economy as a foreign company to conduct life assurance and funds accumulation operations (Registration No. 2013). Friends Provident International is a registered trademark and trading name of Friends Provident International Limited.

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About Friends Provident InternationalWe are a leading financial services provider, with a reputation of trust, commitment and integrity, offering financial solutions to customers throughout their lives.

Friends Provident International has over 35 years of international experience and our heritage dates back over 180 years.

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Please seek professional advice, taking into account your personal circumstances, before making investment decisions. We cannot accept liability for loss of any kind incurred as a result of reliance on the information or opinions provided in this document. Friends Provident International does not condone tax evasion and the company’s products and services may not be used to evade taxes.

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