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Prudential Dynamic Portfolios Quarterly Update

Q1 2018

2 Prudential Dynamic Portfolios Quarterly Update

WelcomeContents

Introduction to the quarterly update for Prudential Dynamic Portfolios 3

Prudential Dynamic Portfolios 4

Risk vs Return 6

Prudential Portfolio Management Group Ltd (PPMG) – market update 7

Quarterly Portfolio Review from Morningstar 9

Dynamic 0-30 Portfolio 11





Performance 16

Glossary 18

Prudential Dynamic Portfolios Quarterly Update 3

Welcome Introduction to the quarterly update for Prudential Dynamic Portfolios

Inside you will find information including investment aims, how funds are chosen, commentary on financial markets and updates on each portfolio.

The information in this guide is as at 31 March 2018 unless otherwise stated.

Information to be aware of when reading this update

• Thisquarterlyupdatedescribestheassetallocations,fundaimsandRisk/RewardprofilesoftheOpenEndedInvestmentCompany(OEIC)versionsofthesefunds.ThisfundtypeisdistinguishedfromtheUnit-Linkedversions,thatinvestexclusivelyintheOEICfunds,bytheprefix‘LF’intheirfullnameasin‘LFPrudentialDynamic40-80Portfolio’forexample.

• IfyouinvestorholdthesefundsinaPension,LifeorInternationalpolicyyoumayhavetheUnit-Linkedversionthatdoesn’thavethe‘LF’prefix.Insteaditwillsimplysay‘Prudential’(forPensionandLifefunds)asin‘PrudentialDynamic40-80Portfolio’forexample.Internationalfundswillhavetheprefix‘PIA’intheirtitle.

• TheUnit-Linkedversionsgenerallyhaveaslightlylargerproportionoftheirholdingsincashandmayhavedifferentchargingandtaxationcosts.ThiswillmeantheirinvestmentperformancewillbedifferenttotheirOEICequivalent.Pages15and16hastherespectiveperformancefiguresforboththeOEICandUnit-Linkedversionsofthesefunds,thatisfurtherbrokendownintotheperformanceasheldasanOEICorwithinaLife,PensionorInternationalInsurancepolicy.

• Yourproductliteraturewillhelpyouidentifywhichversionofthefundyoumayhold.Oralternativelyaskyourfinancialadviserformoreinformation.


Prudential Dynamic Portfolios

• Fiveportfoliosdesignedtomeetdifferentinvestmentobjectivesandhelptargetdifferentattitudestorisk.

• EachDynamicPortfolioisa"fundoffunds",whichmeansthateachinvestsinarangeofindependentlymanagedinvestmentfunds.

• Theportfolioscontaindifferentproportionsofhighandlowerriskassetstotargetdifferentgoalsandneeds.

• TheDynamicPortfoliosbenefitfromtheassetallocationexpertiseofPrudentialPortfolioManagementGroupLtd(PPMG)andMorningstarInvestmentManagementEuropeLtd.

PPMGrecommendeachportfolio'sassetallocation.

Whenreviewingtheassetallocation,PPMGconsidertheirlongtermviewofeachtypeofassettheportfoliocanholdanddecidewhichonestouseinlinewithappropriateriskparameters.

• MorningstarInvestmentManagementEuroperesearchandregularlyreviewfunds,andmake“buy”,“hold”and“sell”recommendations.

• Whenrecommendingfundsfortheportfolios,MorningstarInvestmentManagementEuropeaimtoidentifybestofbreedfundsandconsiderthedifferentstylesofmanagerandblendthemtogethertocreateanappropriatefundholding.

Prudential Portfolio Management Group Ltd (PPMG)

• PPMGarethein-houseinvestmentstrategistsand“managerofmanagers”forPrudentialintheUK.

• TheyareindependentofthevariousunderlyingassetmanagementbusinesseswithinthePrudentialGroup.

• PPMGisateamofover80thatincludesexperiencedinvestmentprofessionalswithspecialistexpertiseincapitalmarketsresearch,managerresearch,investmentstrategydesign,liabilitymanagement,alternativeinvestmentsandportfoliomanagement.

• Theyareresponsibleforover£180billionofinvestors’money,asat31December2017.

• MorningstarInvestmentManagementEuropeLtdisawhollyownedsubsidiaryofMorningstarIncandpartofMorningstar'sglobalInvestmentManagementGroupwhichemploysover100investmentprofessionalsandhasover$196.3billionassetsunderadvisementandmanagementasof31December2017.

• MorningstarInvestmentManagementEuropeleverageadedicatedteamofmorethan100researchanalystsfromthewiderMorningstargroupandcombinethiswiththeexperienceandexpertiseoftheinvestmentmanagementteam.

Meet the experts

TheunderlyingPrudentialDynamicFocusedOEICfundsareownedbyLinkFinanceandareavailableforinvestmentasOEICfundsoraslifeandpensionfundsavailableonPrudentialandPrudentialInternationalproducts.


Prudential Dynamic Portfolios

Asset allocation process

* LinkFinancialInvestmentsLimitedcheckthatPPMGrecommendationsareinlinewithfundobjectives.

** M&GInvestmentManagementLtd,partofthePrudentialGroup,aretheinvestmentmanagersfortheDynamicPortfolios.TheymaketherelevantadjustmentstotheportfoliosbasedonPPMG'sassetallocationrecommendations.

PPMG (asset allocation specialists)• Interpretoutputfromvariousanalyticalteamsand

recommendanassetallocationstrategy*

M&G Investment Management Ltd (fund manager)**• InvestbasedonPPMG&Morningstarinput

Morningstar Investment Management Europe Ltd (independent investment research company)• Reviewandrecommendsuitablefunds


INCREASING POTENTIAL RETURN

INCREASING RISK

DECREASING POTENTIAL RETURN

DECREASING RISK

Dynamic 60-100 Portfolio





Risk vs Return

Thechartoppositeillustratesthedailyprice(percentagegrowth)andrisk(volatility)ofeachofthefundsoverthepastfiveyears.

Volatility,istherateatwhichthepriceof,forexample,afundcanmoveupordown.Ifthepriceofafundmovesupanddownrapidlyandbysignificantamountsovershorttermperiods,itcanbesaidtohaveahighvolatility.Ifthepricealmostneverchangesbysignificantamountsovershorttermperiods,ithasalowvolatility.

Source:FinancialExpress

ThesefiguresarebasedontheOEICwhichistheunderlyinginvestmentoftheLife,PensionandInternationalfundversions.Bidtobidwithnetincomereinvested.Thefiguresincludetaxandchargesapplicabletothefund.

TheLFPrudentialDynamicFocusedOEICfundsareownedbyLinkFinance(LF)andareavailableforinvestmentasanOEICorasaunitlinkedfundinalifeorpensionproduct,availableinPrudentialandPrudentialInternationalproducts.

Highervolatilitycanleadtohigherlevelsofriskandgreaterpotentiallossorgains.

Wecan’tpredictthefuture.Pastperformanceisn’taguidetofutureperformance.Thevalueofyourinvestmentcangodownaswellasupandyoumaynotgetbacktheamountyouputin.

LF Prudential Dynamic 60-100 Portfolio





3 5 7 90

12

24

36

48

60

35.96%33.17%

25.95% 27.70%22.92%

Cum

ulat

ive

Perc

enta

ge G

row

th %

Volatility – (represented by Standard Deviation, which is a measure of how much a value moves about against its own average)

(Risk)

(Return)

Collective Performance Figures 31/03/13 to 31/03/18


In this section PPMG give their thoughts on current market conditions and how this shapes their views to the portfolio asset allocations.

This commentary reflects the general views of PPMG and should not be taken as recommendation or advice as how any specific market is likely to perform.

Prudential Portfolio Management Group Ltd (PPMG) – market update

Thefirstquarterbeganstronglyformoststockmarkets;manyreachedrecordhighsbeforefallingsharply,seeminglyonconcernaboutUSinflation.TheUSFederalReserve(Fed)raisedinterestratesinlateMarchbyaquarterpointto1.75%.TheJapaneseyen,sterlingandtheeuroallstrengthenedrelativetotheUSdollar.Thepriceofoilralliedduringthequarter.

Sterling’sstrengthagainstseveralcurrenciesreducedthereturnsfromthosecountriestoUKinvestors.Demandforassetsperceivedas‘safehavens’,suchasgoldandtheJapaneseyen,increased.Improvingeconomicdataandthelikelihoodthatcentralbankerswillsoonreducetheirassetpurchasesweighedongovernmentbonds,althoughtheylaterbenefitedfrombeingseenaslessriskythancompanyshares.

Lateinthefirstquarterof2018,apotentialglobaltradewardominatedtheheadlines.PresidentTrumpimposedtariffsonvariousimportsintotheUS,andChina,themaintarget,vowedtoretaliate.Economicdatawasgenerallypositive,withmeasuresofactivityrevisedupwardsintheUS,JapanandtheEurozone.TheUKprovedanexceptionasgrowthwasreviseddownwards,albeitremainingpositive.Corporateearningsshowedhealthygrowthand,onthewhole,inflationremainsmuted.

Theeconomicpictureisstillbroadlypositiveandwecontinuetobelievethattherearelong-termopportunitiesavailableforthecarefulinvestor.

Phil Butler CFA Portfolio Manager


Views on asset typesEachoftheportfoliosismadeupofanumberofdifferenttypesofassets.Thesecanbecoveredinthreemaincategories.

Equities UKshareswereamongtheweakestduringthequarter.InvestorshadtocontendwithcontinueduncertaintyovertheUK’swithdrawalfromtheEuropeanUnionandapotentialreductioninthelevelsofeconomicactivity.Thestrongerpoundwasalsoseenasnegativeformultinationalcompanies.

USstockmarketsreachedrecordhighs.Howeverthingschangedrapidlywheninvestorsdecidedthatanincreaseinwagegrowthcouldsignalhigherinflation,promptingfasterFedinterestratehikes.Europeanstockmarketssufferedtheirworstquarterfortwoyears.SharepricesstartedthequarterstronglybeforesuccumbingtofearsabouthigherUSinterestrates,apotentialtradewarandsharpfallsinthesharepricesoftechnologygroups.

Havingreacheditshighestlevelfor26yearsinJanuary,theJapanesestockmarketfellbackverysharplyduringtherestofthequarter.Performanceofemergingmarketswasnegativeoverallduringthequarter.WhileAfrica,AsiaandtheMiddleEastdeclined,LatinAmericarallied.Brazilledtheway,helpedbytheeconomyrecoveringfromrecession.

Ourviewremainsthatequitiescanofferopportunitiesoverthelong-termandwhereappropriatetotheoverallportfolio.

Fixed income TheBankofEnglandleftUKinterestratesunchangedattheirlatestmeeting.Howevertheprospectofhigherinterestratesweighedonthepricesof5-10yearsgovernmentbonds,whichunderperformedthosewithalongertimebeforerepayment,makingthereturnsfromUKgovernmentbonds(gilts)almostflatoverthequarter.Index-linkedgiltswerealsobroadlyunchangedasUKinflationdeclinedfromthepeakhitinlate2017.

TheFederalReserveraisedUSinterestrates.Emergingmarketbondsperformedwell,whilebondsfromperipheralEurope,includingPortugalandSpain,alsoroseinprice.Asriskaversionbuiltuplaterintheperiod,governmentbondsbenefitedfromtheirsafehavenstatus,bondsissuedbyJapanandGermanyreturnedtolow,ornegative,levels.Corporatebondsunderperformedgovernmentbonds.

Overthelongterm,wecontinuetofavourcorporatebondsovergovernmentbonds.

PropertyUKcommercialpropertymadeasteadystartto2018,althoughthepaceofexpansionwassomewhatslowerthaninthefinalquarterof2017.CapitalvaluegrowthwasstrongestinIndustrials,whichwasalsotheonlysectortoseeameaningfulincreaseinrentalvalues.Meanwhile,Retailcapitalvaluegrowthlaggedthebroadermarket.Lookingahead,UKcommercialpropertyisexpectedtogenerateamid-single-digittotalreturnin2018,ofwhichrentalincomewouldrepresentasignificantproportion.Theinvestormarketremainshealthy,buoyedbyoverseasdemandfollowingthedeclineinsterling.Withinthemarket,investorsareattractedtothoseassetsthatdisplayresilience,internationalappealandtheabilitytoadapttoanevolvingeconomy.

Wecontinuetoinvestinproperty.Theassetclassofferssolidincomestreamsandagooddegreeofdiversification.

Overview

FollowingthemarketfallsinearlyFebruarythefundsmovedoverweightUSandEuropeanequities(viafutures)onthebasisthatfundamentalswerestillstrong.ThisprovedprofitableandthepositionswereclosedtowardstheendofFebruary.

Portfoliopositionsarecurrentlyneutralagainstbenchmark.Thepercentageheldineachassetclasswilldriftasmarketsmoveatadifferentpace.Theportfoliomanagersconstantlymonitorthisensuringportfoliosremainwithintherequiredparameters.


Morningstar select and recommend funds for each portfolio, based on the asset allocation PPMG has set for each portfolio to reflect the overall risk that the portfolio is willing to take (see pages 7 and 8 for the views of PPMG).

The following commentary reflects the general views of Morningstar and is subject to change at any time. The commentary should not be taken as a recommendation or advice as to how any specific market or fund is likely to perform.

Like most of 2017, 2018 has begun with investors grappling with a backdrop of trade tensions, political instability, rising interest rates, and a mature business cycle. Yet, perhaps of more importance, investors are now also questioning their own unbounded optimism and recognising that markets won’t always go up.

This development is a meaningful change, and lessons abound. Unlike 2017, which saw a synchronised bull market and unheralded returns, the first quarter of 2018 has brought sanity to the equation. Somewhat paradoxically, it may be that the threat of a trade war will be what brings the relationship between price and fundamentals back under the microscope.

Against this backdrop, the Prudential Dynamic Portfolios produced negative absolute returns in Q1, driven primarily by their equities exposure. The fixed income and alternative allocations were also negative in absolute terms with only property in positive territory.

EquitiesWhatisinterestingisthattheequitymarketsetbackinthefirstquartercameatatimewhenthefundamentalsremainedintact.Corporateearningscontinuetoriseinthemajorityofinstancesanddefaultratesremainlow.Hence,theunwindingofperformanceappearsmorecomplexthananunassumingturninthebusinesscycle–morelikelytoreflectachangeincollectivebehaviour(i.e.,thefear/greedcycle),especiallyagainstexport-orientedmarkets.

Inthisregard,fear-inducingheadlineswerenothardtospot,withDonaldTrump’sthreatofatradewarbeginningtomaterialise.Export-orientedmarketsbegantosufferalongsidetheU.S.,withmultinationalcorporationsinGermany,Japan,andtheU.K.sellingoffonthebackofthisnews.Listedpropertyalsosawsignificantpricedeclines.Evenatasectorleveltherehasbeenlittlerespite,withdeterioratingperformanceacrosstheboard.Interestingly,emergingmarketswereamongthemostresilient,presumablyduetoacombinationofcheapervaluationsandamarketcompositionthatisincreasinglyfocusedondomesticgrowth.Ratherironically,commoditypricesgenerallyrose(oilincreased8%)anditwasdefencecompaniesthattoppedthebest-performerslist.

TheUKequityfundswerealldowninabsolutetermsbutperformedmuchbetterthisquarterrelativetotheFTSEAllsharebenchmark.ArtemisIncomewasthebestperformer.

ThefundoutperformedtheFTSEAllShareindexsupportedbystrongselectionwithinthetechnologyandfinancialsectors.InvestecUKAlphaalsoprovidedmoreprotectionthantheindex,withstockselectiontheleadingcontributortorelativereturns.M&GRecoverywastheonlyfundtounderperformastoptenholdingHSBCandconsumercyclicalnamesdetracted.

ThreadneedleAmericanperformedpoorlyrelativetoitsbenchmark,asdidSchroderUSMidCapwhichalsounderperformeditsbenchmarkwithstockselectioninhealthcarenamesthebiggestdetractor.

TheManGLGJapanCoreAlphaunderperformed.TheJapanesemarketwasparticularlypolarisedoverthequarter,withcyclicals(towhichthefundisheavilyexposed)underperformingdefensivesectors.

TheAsianequityfundsagainperformedstronglyinrelativetermsthisquarter.GrowthbiasedInvestecAsiaexJapanoutperformeditsbenchmarkindexwithstockselectioninChinanotablystrongdrivenbyholdingsinAlibabaandSunnyOptical.

AberdeenEmergingMarketsEquitysignificantlyunderperformedwithintheGEMallocation.TheoverweighttoIndiawasnothelpfulbutweakstockselection,especiallyinBrazil,wasthekeydriveroftheunderperformance.

Quarterly Portfolio Review from Morningstar


Fixed IncomeAcombinationofrisinginterestratesandwideningcreditspreads(especiallyintheU.S.)haveboostedbondyieldsfromhistoricallylowlevels.Thisshiftismeaningful,asfixedincomeandequitymarketshaveshownvulnerabilitiesunderthisdevelopment.TheimpactwasfeltmostduringFebruaryandMarch,withinflation-linkedbondsandcorporatedebtfailingtoaddanyvalueovergovernmentbonds.

Atafundlevel,performanceoftheUKcorporatebondexposuresheldinthePortfoliosvaried.Twofunds(InvescoPerpetualandRoyalLondon)outperformedandthreeunderperformedsothatinaggregateperformancewasin-linewiththatoftheMarkitiBoxxGBPNon-Giltbenchmark.Thehighyieldfundsallproducednegativeabsolutereturnsandinaggregatefinishedbehindthehighyieldindex,whichperformedin-linewithUKcorporatesovertheperiod.

PropertyTheUKpropertymarketcontinuestobeinfluencedbytheriseofdigitalisation,withcontinuedstrengthinindustrialfactories(especiallyex-London)offsetbyweaknessinretailwhichisexperiencingfallingcapitalvaluesandflatrentalgrowth.Themarketcontinuestoberemarkablyresilientwhenconsideredinaggregate(especiallyinthefaceofBrexit)andisdeliveringmodesttotalreturnsyeartodate.

DuringthequartertheperformanceofthepropertyfundsheldinthePortfoliosfellmarginallybehindtheperformanceofcomparativefunds.



Investment objective of the collective fund (an Open Ended Investment Company or OEIC)

The Fund aims to achieve long-term total return (the combination of income and growth of capital) by investing mainly in collective investment schemes. No more than 30% of the Fund will be invested in schemes whose predominant exposure is to equities.

Total Fund size: £90,298,052

Theassetallocationandholdingsforthisportfoliocanchangeregularlybasedontheviewsofthefundmanager.Thesepositionscanalsobeimpactedbycashflowsinandoutoftheportfolio.

Wherethefundinvestsinacollectivefund,themanagerofthatunderlyingcollectivefundmayusederivativesoralternativeinvestmentsaspartofthemanagementofhis/herfund.

Holdings as at 31 December 2017

n UK Equity Funds 7.6%ArtemisIncomeAXAFramlingtonUKSelectOppsInvestecUKAlpha

n European Equity Funds 3.1% HendersonEuropeanSelectedOpps

n US Equity Funds 3.1%ThreadneedleAmerican

n Japan Equity Funds 1.6% SchroderTokyo

n Asian Equity Funds 3.4%FidelityAsia

n Emerging Equity Funds 1.0%M&GGlobalEmergingMarkets

n Property Funds 7.4%L&GUKPropertyM&GPropertyPortfolio

n Alternatives 3.0%PrivateEquityHedgeFundInfrastructure

n Investment Grade Corporate Bond Funds 58.3%BGFEuroCorporateBondFidelityMoneybuilderIncomeInvescoPerpetualCorporateBondKamesInvestmentGradeBondM&GStrategicCorporateBondRoyalLondonCorporateBond

n High Yield Corporate Bond Funds 5.4%KamesHighYieldBondM&GGlobalHighYieldBond

n Cash 0.3%Cash

n Money Market Funds 5.8%M&GShortDatedCorporateBond

0

20

40

60

80

100 Holdings as at 31 March 2018


n European Equity Funds 2.9% HendersonEuropeanSelectedOpps

n US Equity Funds 2.9%ThreadneedleAmerican

n Japan Equity Funds 1.2% SchroderTokyo

n Asian Equity Funds 3.0%FidelityAsia





n High Yield Corporate Bond Funds 5.3%KamesHighYieldBondM&GGlobalHighYieldBond


0

20

40

60

80

100



The Fund aims to achieve long-term total return (the combination of income and growth of capital) by investing mainly in collective investment schemes. Between 10% and 40% of the Fund will be invested in schemes whose predominant exposure is to equities.




Holdings as at 31 March 2018

n UK Equity Funds 11.3%ArtemisIncomeAXAFramlingtonUKSelectOppsInvestecUKAlphaM&GRecovery

n European Equity Funds 4.6% HendersonEuropeanSelectedOppsJupiterEuropeanSpecialSituations

n US Equity Funds 4.4%SchroderUSMidCapThreadneedleAmerican

n Japan Equity Funds 2.0% ManGLGJapanCoreAlphaSchroderTokyo

n Asian Equity Funds 4.6%FidelityAsiaInvestecAsia





n High Yield Corporate Bond Funds 5.8%KamesHighYieldBondM&GHighYieldBond

n Cash 0.1%Cash

n Money Market Funds 4.7%M&GShortDatedCorporateBondFund

0

20

40

60

80

100Holdings as at 31 December 2017




n Japan Equity Funds 2.2% ManGLGJapanCoreAlphaSchroderTokyo






n High Yield Corporate Bond Funds 5.8%KamesHighYieldBondM&GHighYieldBond

n Cash 0.2%Cash

n Money Market Funds 3.7%M&GShortDatedCorporateBondFund

0

20

40

60

80

100









0

20

40

60

80

100Holdings as at 31 March 2018




n Japan Equity Funds 3.0% ManGLGJapan–CoreAlphaSchroderTokyo


n Emerging Equity Funds 2.2%AberdeenEmergingMarketsM&GGlobalEmergingMarkets



n Investment Grade Corporate Bond Funds 31.3%BGFEuroCorporateBondFidelityMoneybuilderIncomeInvescoPerpetualCorporateBondKamesInvestmentGradeBond

n High Yield Corporate Bond Funds 5.0%KamesHighYieldBond


0

20

40

60

80












n Cash 0.2%Cash









0

20

40

60

80












n Cash 0.5%Cash

n Money Market Funds 1.5%M&GShortDatedCorporateBond0

20

40

60

80












n Cash 0.1%Cash









0

20

40

60

80



n European Equity Funds 10.0%HendersonEuropeanSelectedOppsHendersonEuropeanGrowthJupiterEuropeanSpecialSituations







n Investment Grade Corporate Bond Funds 7.2%BGFEuroCorporateBondInvescoPerpetualCorporateBond


n Cash 0.1%Cash

0

20

40

60

80



n European Equity Funds 10.0%HendersonEuropeanSelectedOppsHendersonEuropeanGrowthJupiterEuropeanSpecialSituations







n Investment Grade Corporate Bond Funds 6.9%BGFEuroCorporateBondInvescoPerpetualCorporateBond


n Cash 0.1%Cash



Performance

AllfiguressourcedfromFinancialExpress(FE).PleasenotethatallperformancefiguresforPrudentialFundsarenetofAnnualManagementCharge(AMC)andotherfundchargeswhereapplicable.Theytakenoaccountofanyproductchangesthatmayormaynotbeapplicable.Anyproductchargeswillhavetheeffectofreducingthefiguresshownbelow.

Performancefigurescanvarybetweenfundranges,duetothetaxationapplicableanddifferentfundlevelcharges.TheLife,PensionandPrudentialInternationalfundscanalsoholdanelementofcashduetotheshortdelaybetweennewinvestmentsbeingreceivedbythesefundsandbeingplacedintheunderlyingOEICportfoliofund,andthismayalsohaveanimpactontheperformanceofthesefundswhencomparedtotheunderlyingOEICfund.

OEIC Funds 31.03.17 to 31.03.18

31.03.16 to 31.03.17

31.03.15 to 31.03.16

31.03.14 to 31.03.15

31.03.13 to 31.03.14

LFPrudentialDynamic0-30Portfolio% 1.5 9.5 –1.8 7.5 3.9





ThefiguresaboveareBidtobidwithnetincomereinvested.Annualised(Incomefund).

Pension Funds 31.03.17 to 31.03.18

31.03.16 to 31.03.17

31.03.15 to 31.03.16

31.03.14 to 31.03.15

31.03.13 to 31.03.14

PruDynamic0-30Portfolio% 1.4 9.6 –1.5 7.8 4.2





ThefiguresaboveareBidtobidwithgrossincomereinvested.Annualised.SeriesAfund.


Wecan’tpredictthefuture.Pastperformanceisn’taguidetofutureperformance.Thevalueofyourinvestmentcangodownaswellasupandyoumaynotgetbacktheamountyouputin.

Life Funds 31.03.17 to 31.03.18

31.03.16 to 31.03.17

31.03.15 to 31.03.16

31.03.14 to 31.03.15

31.03.13 to 31.03.14






ThefiguresaboveareBidtobidwithnetincomereinvested.Annualised.Series2fund.

International Funds 31.03.17 to 31.03.18

31.03.16 to 31.03.17

31.03.15 to 31.03.16

31.03.14 to 31.03.15

31.03.13 to 31.03.14

PIADynamic0-30Portfolio% 1.4 9.8 –1.6 7.8 3.6





ThefiguresaboveareBidtobidinsterlingwithgrossincomereinvested.Annualised.SeriesBfund.


Glossary

This glossary is a high-level guide to some of the technical terminology that may appear in our Quarterly Summary. It is not intended to be a definitive reference document and you should contact your adviser for further assistance where necessary.

Alternative AssetsThesemayincludenon-traditional,complexorspecialistinvestments.Examplesincludehedgefunds,privateequityandcomplexderivativebasedstrategies.

Basic Materials SectorAcategoryofstockscoveringcompaniesinvolvedwiththediscovery,developmentandprocessingofrawmaterials.Thebasicmaterialssectorincludestheminingandrefiningofmetals,chemicalproducersandforestryproducts.

“Blue Chip” Companies Thesearelarge,reputablecompanieswhicharethoughttobefinanciallysound.

BondsSeeFixedInterestSecurities.

“Boutique Managed” FundsInvestmentfundsthatarespecialisedinsomewayeitherthroughtheexpertiseneededtomanagetheportfolioorbecauseithasanunusualthemeoracollectionoffundsunderonehouse.These“boutique”fundsaretypicallyofferedbysmaller,specialistfirmsasopposedtolargeinvestmentmanagementcompanies.

Broad Investment GradeThisisatermusedtodescribealistingofbondsandfixedincomeinstrumentsonanindex.Itisusedtomeasuretheoverallvalueofacollectivegroupofbondsandrepresentsthecharacteristicsofthesetypesofsecurities.Itisagradinglevelthatcanbeusedbycertaintypesoffundsfordeterminingassetsthataresuitableforinvestmentintoafund.

Certificates of DepositTheseareamoneymarketinvestmentsthataregenerallyissuedbybanksagainstasecurity.Acertificateofdepositusuallypaysinterest(whichcanvary)andentitlesthebearertoreceiveasetinterestrateupuntilasetmaturitydateandcanbeissuedinanycurrencyordenomination.

Closed Ended FundsThisdescribesacollectiveinvestmentschemewhichhasalimitednumberofshares(orunits).Thesharesarethentradedonanexchangeordirectlythroughthefundmanagertocreateasecondarymarketsubjecttomarketforces.

Collective Investment SchemesAwayofpoolinginvestmentwithothersaspartofasingleinvestmentfund.Thisallowsinvestorstoparticipateinawiderrangeofinvestmentsthanwouldnormallybefeasibleifinvestingindividuallyandtosharethecostsandbenefitsofdoingso.CollectiveInvestmentSchemes,OEICs,UnitTrusts,Mutualfunds,usuallyeithertargetgeographicregions(likeemergingmarketcountries)orspecificthemes(liketechnologyorproperty).

Convertible Bonds (can also be called Deferred Equity)Thesearecorporatebondsthatareexchangeableforasetnumberofanotherformofinvestment(forexample,commonshares)atapre-statedprice.Convertiblebondstypicallypayalowerincomethanisnormallyavailablefromcommonbonds.

Corporate BondsTheseareloanstocompanieswherethepurchaserofthecorporatebondlendsmoneytothecompanyinreturnforregularinterestpaymentsandthepromisethattheinitialsumwillberepaidonaspecifiedlaterdate.


Default RiskThisisthepossibilitythattheissuerofabondwillbeunabletomakepaymentswhentheyaredue.

DerivativesThesecoverproductswhicharegenerallyanarrangementtobuyorsellastandardquantityofaspecifiedassetonafixedfuturedateatapriceagreedtoday.Alsoconsideredtobeafinancialinstrumentwhosevalueisdependentuponthevalueofanunderlyingasset.

EquitiesThesearealsoknownassharesorstocksandrepresentsashareoftheownershipofacompany.Sharesgivetwopotentialbenefits–thesharepricesmayincreaseasthevalueofthecompanyincreasesandregularpayments,knownasdividends,maybemadetoshareholdersbasedonhowwellthecompanyisdoing.However,sharepricescanalsogodown,thereforetheremaynotbedividends.

EurobondsAEurobondisaninternationalbondthatisdenominatedinacurrencynotnativetothecountrywhereitisissued.Itcanbecategorizedaccordingtothecurrencyinwhichitisissued.Forexample,aBritishcompanymayissueaEurobondinGermany,denominatingitinU.S.dollars.

Exchange-Traded FundThisisaninvestmentvehicletheunitsofwhicharetradedonastockexchange.Anexchangetradedfundscanholdarangeofassetssuchasstocks,bondsorevencommodities.Mosttrackanindex,suchastheFTSE™AllshareortheS&P500.

FTSEisatrademarkjointlyownedbytheLondonStockExchangePlcandtheFinancialTimesLimitedandisusedbyFTSEInternationalLimited"FTSE"underlicence.TheFTSE100indexiscalculatedsolelybyFTSE.FTSEdoesnotsponsor,endorse,orpromotethisproductandisnotinanywayconnectedtoitanditdoesnotacceptanyliabilityinrelationtoitsissue,operationandtrading.AllcopyrightsintheindexvaluesandconstituentlistvestinFTSE.

Fixed Interest SecuritiesThesearemorecommonlyknownas“bonds”andareloansissuedbycompaniesorbygovernmentsinordertoraisemoney.Bondsissuedbycompaniesarecalledcorporatebonds,thoseissuedbytheUKgovernmentarecalledgiltsandthoseissuedbytheUSgovernmentarecalledtreasurybonds.IneffectallbondsareIOUsthatpromisetopayasumonaspecifieddateandpayafixedrateofinterestalongtheway.

Floating Rate NotesThesearebasicallyshort-termloanstofinancialorganisations,suchasbanks,underwhichtheinvestorreceivesinterestpaymentsfromthatfinancialorganisation.Attheendofanagreedperiodthefinancialorganisationhastorepaytheloan.

Theinterestpaymentratesarelinkedtoaspecified“floating”ratetypicallytheLondonInterbankOfferedRate(LIBOR).Thismeansthatinterestratepaymentsmaygoupordown.

Forwards Contract (or Forwards)Theseareagreementsbetweentwopartiestobuyorsellanassetatafixedfuturedateforapricedeterminedatthetimeofdealing.

Government BondsTheseareloanstothegovernmentwherethepurchaserofthegovernmentbondlendsmoneytothegovernmentinreturnforregularinterestpaymentsandthepromisethattheinitialsumwillberepaidonaspecifiedlaterdate.

Government Sovereign BondIsagovernmentdebtissuedinaforeigncurrency.

HedgingAstrategyemployedinordertoreduceormitigaterisk.Hedginginvolvesmakinganoffsettingtransactioninonemarketinordertoprotectagainstpossiblelossesinanother.


Hedged Back to SterlingThisisaspecificexampleofhedgingwherethetraderistryingtoprotectanexistingoranticipatedpositionfromanunwantedmoveinsterlingexchangerates.

Index-Linked SecuritiesAresimilartofixedinterestsecuritiesbutthepaymentsoutarenormallyincreasedbyapriceindexe.g.forUKgovernmentindex-linkedsecurities,paymentsoutareincreasedinlinewiththeUKRetailPriceIndex.

Investment GradeAcreditratinggiventoagovernmentorcorporatebondthatindicatesthattheagencygivingtherating(e.g.Standard&Poors)believesthattheissuerhasarelativelylowriskofdefault.BondswithcreditratingsofAAA,AA,AorBBBareconsideredinvestmentgrade.LowratedbondswithratingsofBBorbelowareoftencalledJunkBonds.

LIBOR (London Interbank Offered Rate)ThisistheinterestratethatLondonbankschargewhenlendingmoneytooneanotheroverashortperiodoftime.LIBORisoftenusedasabenchmarkwhensettingothershortterminterestrates.

Money Market InvestmentsAredefinedascashandnearcashsuchasbankdeposits,certificatesofdeposits,fixedinterestsecuritiesorfloatingratenotes,with,whereapplicable,amaturitydateofunderayear.

OEICThisisanOpenEndedInvestmentCompany,whichistheBritishversionofaEuropeanSICAV(Sociétéd'InvestissementaCapitalVariable)orIrishVCIC(VariableCapitalInvestmentCompany).LikeallopencollectiveInvestmentSchemes,anOEIChasnofixedamountofcapital.

ThetotalvalueoftheOEICisequallydividedintoshareswhichwillvaryinpriceandinthenumberissued.Eachtimethatnewmoneyisinvested,newsharesorunitsarecreatedtomatchtheprevailingshareprice;eachtimesharesareredeemed,theassetssoldmatchtheprevailingshareprice.

OptionsLegalagreementsthatgivetheholdertheright(butnottheobligation)tobuyorselltheunderlyingassetatanexpirationdate,atapricedeterminedatthetimeofdealing.

Permanent Interest Bearing Shares (usually referred to as PIBS)Thesearefixed-interestsecuritiesissuedbybuildingsocieties.Buildingsocietiesusetheminthewaypubliclimitedcompanieswouldusepreferenceshares(seebelow).Althoughsimilartobonds,PIBStypicallyexistaslongastheirissuerdoes.Theytypicallyofferbetterinterestratesthanbondsalthoughunlikebondshavenofixedredemptiondateandsoredemptionvaluewillbedeterminedbymarketvaluesatthetimeofsale.

PIBSarenotcoveredbyUKgovernmentcompensationschemes.Ifthebuildingsocietyisinfinancialdistress,amountsarepaidtoholdersofPIBSonlyafterdepositors.

Preference Shares (also called Preferred Stock or Preferred Shares)Thesearesharesinacompanywhichgivetheirholdersanentitlementtoafixeddividendpaymentandmayormaynotcarryvotingrights.Thesearea‘higherranking’stockthancommonstockandusuallyhavespecificrightsattachedtothem.

Preferencesharesmeanthattheholdermaygetpreferredtreatmentovercommonshareholders–andcarryadividendthatispaidoutpriortodividendstocommonshareholders.Intheeventofbankruptcypreferredshareholderswillbepaidoutfromassetsbeforecommonshareholdersandafterdebtholders.

Primary IndustryTheindustrialsectorofaneconomyinvolvedintheextractionandcollectionofnaturalresources,suchascopperandtimber,aswellasbyactivitiessuchasfarmingandfishing.Acompanyinaprimaryindustrycanalsobeinvolvedinturningnaturalresourcesintoproducts.Primaryindustriestendstomakeupalargerportionoftheeconomyofdevelopingcountriesthantheydofordevelopedcountries.


Qualified Investor Scheme (QIS)Aqualifiedinvestorschemeisessentiallyamixedassettypeofschemewheredifferenttypesofpermittedassetmaybeincludedaspartoftheschemeproperty,dependingontheinvestmentobjectivesandpolicyofthatschemeandwithinanyrestrictionsintherules.

RegulatedThismeanstheportfolioorfundhastoconformtotheregulationslaiddownbythefinancialauthorityofthecountryitistradingin(i.e.intheUK,theFCAprotectstheinvestorandprovidesstructurearoundtheproducts,financialservicesprovidersandmarkets).

Reverse Repurchase AgreementAReverseRepurchaseAgreementisalegalcontractwithabank,underwhichsecuritiesarepurchased(forexample,UKGovernmentBondsorGilts)fromthebank,withanagreementtosellthembacktothesamebankatahigherpriceataspecificdateinthefuture.

Secondary IndustryTheindustrialsectorofaneconomythatproducesfinished,usableproducts.Unlikeaprimaryindustry,whichcollectsandproducesrawmaterialsformanufacture,asecondaryindustrymakesproductsthataremorelikelytobeconsumedbyindividuals.Examplesofsecondaryindustrydivisionsincludeautomobilemanufacturing,steelproductionandtelecommunications.

SharesSeeEquities.

Short-Term Government BondsForthepurposesofdeterminingassetswhichthePrudentialCashFundscaninvestinthesearedefinedasgovernmentbondswitharepaymentperiodoftwelvemonthsorless.

Smaller CompaniesCompaniesquotedonarecognisedexchangethathaveamarketworthbelowthatofbluechipcompanies.IntheUK,smallercompaniesaretypicallydefinedasthoseoutwiththetop350companiesintheFTSE™AllShareIndex.

Transferable SecuritiesThisisadescriptorgiventoatypeoffinancialsecuritywhichistradedoncapitalmarkets.ThetermisprobablymostcommonlyknownandusedinassociationwithUCITSinUKandEurope(exampleswouldbeUCITS/sometypesofwarrants).

Undertakings for Collective Investment in Transferable Securities (UCITS)ThesearecollectiveinvestmentswhichcanbesoldacrossnationalborderswithintheEUhavingcompliedwithregulationsoninvestmentsandadministration.

UnregulatedThismeanstheportfolioorfunddoesnotneedtoconformtoregulations.

WarrantsAwarrantisasecuritythatentitlestheholdertobuysharesintheissuingcompanyataspecifiedpriceandwithinacertaintimeframe.

Warrantsarefreelytransferableandtradedonmajorexchanges.Theirvaluewillgoupordownasthepriceofthesharestowhichtheyrelategoesupordown.


Prudential Dynamic Portfolios are available as unit-linked funds in:

• PrudentialPensionFunds

• PrudentialLifeFunds

• PrudentialInternationalFunds

OrasanOEIC,LFPrudentialDynamicPortfolios,fromfund“platforms”suchasFidelityFundsNetwork,Cofunds,Transactetc.asinvestmentinan:

• ISA

• DiscretionaryInvestmentportfolio

Yourfinancialadviserwillbeabletodiscusstheseoptionswithyouandwhatcouldbestmeetyourneeds.

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"Prudential"isatradingnameofThePrudentialAssuranceCompanyLimitedandofPrudentialRetirementIncomeLimited.ThisnameisalsousedbyothercompanieswithinthePrudentialGroup.ThePrudentialAssuranceCompanyLimitedisregisteredinEnglandandWales.RegisteredofficeatLaurencePountneyHill,LondonEC4R0HH.Registerednumber15454.PrudentialRetirementIncomeLimitedisregisteredinScotland.RegisteredofficeatCraigforth,StirlingFK94UE.RegisterednumberSCO47842.AuthorisedbythePrudentialRegulationAuthorityandregulatedbytheFinancialConductAuthorityandthePrudentialRegulationAuthority.

The registered office of Prudential International is in Ireland at Montague House, Adelaide Road, Dublin 2. Prudential International is a marketing name of PrudentialInternationalAssuranceplc.RegistrationNo.209956.Telephonenumber+35314765000. If theCompanyshouldbecomeunabletomeet its liabilities, theFinancialServicesCompensationSchemewillprotecteligiblepolicyholdershabituallyresidentintheUKwhentheircontractstarts,witheffectfrom1December2001.Thisprotectiondoesnotextendtoexternally-linkedinvestments.PrudentialInternationalAssuranceplcisauthorisedbytheCentralBankofIrelandandissubjecttolimitedregulationbytheFinancialConductAuthorityforUKbusiness.DetailsontheextentofourregulationbytheFinancialConductAuthorityareavailablefromusonrequest.

www.pru.co.uk

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