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4Q16 Investment Outlook

Building a Legacy based on Love, Peace and Hope

Stewardship: The careful and responsible management of something entrusted to one's care.

www.covenant-capital.com

Evening Programme

• 4Q16 Investment Outlook from CIO

• Building a Legacy based on Love, Peace and Hope – Ang Kok Chin, Financial Alliance

• Panel discussion and Q&A.

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4Q16 Investment OutlookDog Days are over …for now

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Recap: The search for income ideas The Good and the Not-so-Pretty

The Good:

• Dividend Equities: AXA (+13%), Keppel DC Reit (+12%)

• EM Debt: Indon Govt 10yrs debt (+3.6%), Pioneer Emerging Market Debt (+3.5%)

• Currency: Long USD vs SGD (+3.2%) vs Yen (+1.3%)

X The Not-so-pretty :

• Dividend Equities: DB Global Top Div Fund (-0.4%) Digital Infrastructure Fund (+1.6%)

• Government Debt: Long UST10 yrs vs Bunds (-0.5%) vs JGB (-0.5%)

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Yields (Interest rates) are rising - US

• US Yield curve parallel upwards shift.

• US rates has risen by +30bps post Brexit.

5Source: Bloomberg

US10 years increased 30bps

Yields (Interest rates) are rising - Germany• German yield curve steepen.

• Long end rates +30bps post Brexit.

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Source: Bloomberg

15 years Bunds increased 30bps

Yields (Interest rates) are rising - Japan• Japanese yield curve steepen

• Long end rates +16bps post Brexit.

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Source: Bloomberg

15 years JGB increased 16bps

Singapore rates are moving too.

• Singapore yield curve started to shift upwards in tandem with weak SGD.

• Long end rates +15bps from last month to 216bps.

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Source: Bloomberg

15 years Singapore bonds increased 15bps

Why are yields rising? Central bankers’ reticence

Central bankers reluctant to embark on more QE/Negative interest rate policy (NIRP).

Unintended consequences of QE/NIRP

• Ricardian Equivalence on future spending.

• Lowers bank profitability.

• Fuelling bubbles in other assets.

Probability of Fed hiking in December is 66%.

Expects no more rate cuts for ECB, BOE, BOJ and PBOC until early next year.

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Why are yields rising? Growth profile improving - China

China’s industrial profits improving.

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Why yields are rising? Growth profile improving - China

End of price deflation (PPI) augurs well for industrial profit and future capex.

China’s inventory adjustments too long and unsustainable.

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PPI lead profits by 3-6 months Inventory correction gone on too long

Why yields are rising? Growth profile improving - Japan

Industrial production poised to jump in 2H16.

Capex spending improving as output gap diminishes.

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-10

-7

-4

-1

2

5

8

11

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/20

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Au

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No

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14

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Au

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4

No

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15

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No

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16

May

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Au

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Japan Industrial Production

Why yields are rising? Growth profile improving - Japan

Japan economy will surprise in 2H16.

Economic forecast raised for FY16 and Fy17.

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0.4

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0.9

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Jan/2016 Feb/2016 Mar/2016 Apr/2016 May/2016 Jun/2016 Jul/2016 Aug/2016 Sep/2016 Oct/2016

Upwards revision Japan GDP

FY16 Forecast FY17 Forecast

2017 GDP upgraded since Jul

Source: Bloomberg

2016 GDP upgraded last month

Why yields are rising? Steady as she goes - Europe

Europe forward indicators remain in expansionary level throughout the year.

Germany, France and Italy are leading the charge.

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Composite PMI above 50 throughout Germany new order surging

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-14

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5

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15

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-15

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6

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Oct

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EU Manufacturiing PMI EU Services PMI

Why yields are rising? Steady as she goes - Europe

ECB’s QE is working

• Lowering cost of debt and

• Reflating demand for credit

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ECB QE is filtering to loan growthRates are lowered

Why yields are rising? Jobs and wages spurring growth - US

Initial jobless claims lowest since 2000!

US hourly wages growing by 2.5% YTD; highest in last 3 years.

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US hourly wage growth YoY

Lowest jobless claims since 2000 YTD wages growth strongest in 3years

Source: Bloomberg

Global economy back in recovery phase

GS Leading Indicator back to expansionary phase.

Risk of US recession in next 12 months abated from high of 39% in Sep to 30% now.

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Risk of US recession reducedGlobal economy back to expansion phase

Industrial activity cycle

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China, Brazil, NZ, Australia, Canada inflecting upwards. Euro Area and US extends growth trajectory. UK deteriorating rapidly.

Source: Goldman Sachs, Covenant Capital

Stronger economic growth percolating to earnings estimate

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Earnings inflecting in EM, EA and US

Source: Bloomberg Estimate

But equity market still in panic territory

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Equity market still fearful

Huge equity outflow and first since 2012

If fiscal thrusts return.

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Gov’t investment bigger bang for buck

Monetary policies like QE and NIRP are no panacea to low growth.

Fiscal policy can have a very meaningful impact where rates are so low and output gaps has narrowed.

Whose is scarier? Trump or Clinton?

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Answer: The Abominable Trump-ton

To be Trump-ed or Clin(k)ton

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• Clinton leading by a wide margin.• House controlled by Democrats unlikely according to

polls

To be Trump-ed or Clin(k)ton

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Clinton policies more friendly to growth and markets

Fiscal policy positive over her term Trump wants to clip Fed’s wings

Investment strategy: MacroRising rates good for Equities, not for Bonds

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Bonds

What if US 5yrs Treasury +100bps

Barclay Global Bonds Index -3.0US Treasury 30 years -16.1German Govt Bond 30 years -18.0Japan Govt Bond 30 years -14.6

EquitiesMSCI World Equities 7.8SPX 500 7.4Euro Stoxx 600 11.9Nikkei 225 5.0MSCI Asia Pacific ex Japan 3.6MSCI Emerging Markets 3.8

Source: Bloomberg Multi-factor regression model

Investment strategy: MacroSeasonality in on your side to buy Equities

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Source: Bloomberg

4.62%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Q1 Q2 Q3 Q4

MSCI World Equities since 1996

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-3%

-2%

-1%

0%

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3%

4%

5%

Q1 Q2 Q3 Q4

JPM Global Bond Index since 1996

Equities – 4Q highest probability of +ve returns and best quarterly return.

Bonds – 4Q only 50% probability of +ve returns. Return is 3x lower than equites.

Investment strategy: Buy Cyclical EquitiesRising rates good for Cyclicals not Defensives

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Investment strategy for Income:Not all income strategies are created equal.

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Government bonds most vulnerable to rising rates.

Source: JPM Asset Management

Investment strategy for Income Not all income strategies are created equal.

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We have little exposure to government bonds.

We have reduced Singapore REITs.

We have raised some cash.

Spread compression trades via emerging market and US high yield debt.

We have increased financials and commodities issuers via their bonds and equities.

We have increased equities as dividend surrogates.

Total portfolio duration is very short only 2 years.

Equities – Upgrade to Overweight from Neutral.

Prefer Japan, Asia followed by Europe then US.

Long Topix Index (TPX), Japanese banks (1615.JT), Long MSCI Asia Pacific and Emerging Markets ETFs

Prefer Cyclicals equities.

Prefer financials (AXA, Generali, HSBC, XLF).

Infrastructure plays: China State Construction (3311.HK), DaelimIndustrials (000210.KS).

Buy commodities manager, Impala Resources Fund.

Bonds – Downgrade to Underweight from Neutral.

Avoid government bonds.

Maintain spread compression trades due to better growth via emerging market and US high yield debt.

Increase financials and commodities bonds (Unicredit, Axa, BHP) 30

Asset Allocation –Overweight Equities, Underweight Bonds, Maintained Alternatives & Reducing Cash

FX – Return of USD hegemony.

Long USD, short JPY, EUR and SGD.

Commodities – Upgrade to Overweight from Neutral

Buy Crude Oil and Copper futures.

Buy US Drillers (XOP.US)

Alternative Investments – Strategies and managers that are not correlated to market such as quantitative trend follower, long/short managers.

Cash – Risk-on. Don’t hold cash.

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Asset Allocation –Overweight Equities, Underweight Bonds,

Increase Alternatives & Reducing Cash

Introduction to Covenant Capital Pte Ltd

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Stewardshipthe careful and responsible management of something

entrusted to one's care.

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• Covenant Capital is a Singapore based independent wealth manager committed toassist our clients to be better stewards of their assets. We are a registered fundmanagement company regulated by the Monetary Authority of Singapore.

• As a holistic wealth manager focused on long term wealth preservation andaccumulation, Covenant Capital provides tailored investment solutions as well aswealth and estate planning advice for our clients.

• The alignment of interests of clients with our wealth advisors is the fundamental tenetof our business. We ensure this long-term fiduciary symbiosis through the following:

– We earn predominantly via a fee based solely on the state of our clients’ wealth.Our clients are our only paymaster, not a bank or a broker.

– We employ an open architecture approach using the best of breeds fundmanagers, insurance and estate planning services. We are able to select the bestas well as the most efficient cost structure for our clients.

– We are not restricted to a single house view and instead have access to street-wide research to deliver the an independent and unbiased prognosis for ourclients in an increasingly challenging and changing world.

– Every member of the founding team are stake owners of the firm which meanswe are intricately linked to our clients’ well-being both financially and personally.

• We prided ourselves to be different from other wealth managers as our core team arelargely investment-focus folks with a combined of more than 80 years of investmentmanagement, private banking, trading and analysis experience.

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A comprehensive service offerings for all your wealth matters

More than 100 years of cumulative experience

Edwin Lee CFA, CAIA - CEO

o Edwin Lee has 16 years of experience in the financial industry. He started his careerwith Salmon Smith Barney (SSB) in 2000 and over the course of 12 years with SSB, histeam provided comprehensive investment advice to individual and institutionalclients. This included the development of clients’ Investment Policy Statements andAsset Allocation Strategies, investments in fixed income, equities & their relatedderivatives. As the key manager for the team’s discretionary multi-asset classportfolios, he oversaw the team’s portfolio decisions including the use of options tohedge as well as generate income. He then spent 2 years with DBS as a privatebanker, advising both HNW and UHNW individuals and families before crossing overinto the independent wealth management space. Before co-founding CovenantCapital, he was with Swaen Capital, a leading independent asset manager based inSingapore, leading the global asset allocation portfolio management team and wasinstrumental in fund raising as well.

o Edwin graduated from the Nanyang Technological University's Nanyang BusinessSchool in 2000 with a Bachelor of Business Studies (Honours - 2nd Upper) degree,majoring in Financial Analysis. He obtained the Chartered Financial Analyst (CFA)designation in 2003 and the Chartered Alternative Investment Analyst (CAIA)designation in 2007. He is a member of the CFA Institute, CFA Singapore and theCAIA Association. While in SSB, Edwin was one of the few consultants in the regionholding the Consulting Group’s Senior Investment Management Specialist title.

o In his earlier days, Edwin was an avid badminton player and ranked 3rd in theNational School’s Individual Games. He was also the captain of his school badmintonteam and he led the team to retaining their 16th consecutive title as NationalChampions. He now enjoys mountain biking, running and adventure sports in hisfree time. Edwin also serves as a board member of a local church and is currentlyholding the appointment of Officer Commanding in his military unit.

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o Edward Lim: Edward has 21 years of financial industry experience including last19 years in various investment management roles. He has been an investmentmanager for the last 15 years including more than a decade of managingabsolute return mandates. As the CIO of Covenant Capital, he is responsible forthe firm’s overall investment strategy as well as managing Covenant Asia EquityAbsolute Return Fund.

o Prior to founding Covenant Capital with Edwin, Edward was the CIO of SwaenCapital, a leading independent wealth manager based in Singapore. He washeadhunted to start up Tokai Tokyo’s first asset management firm outside ofJapan in Singapore where he also served as their CIO and was responsible forrunning their Asia ex-Japan equities absolute return fund. He was the Head ofAsia Equities in TRG, a leading global emerging markets macro hedge fund andalso led the Long/Short Strategy group in Citigroup Principal Equities Strategiesbased out in Asia. Before he joined Citigroup, Edward held dual roles as SeniorPortfolio Manager and the Head of Research for BNP Paribas Asset Managementin Asia. Edward started his investment career as an investment analyst withCitigroup Private Bank and DBS Vickers Research.

o He is a CFA charter holder since 2001 and graduated with a Magna-cum-laudeHonors, BBA from the University of Oklahoma.

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Edward Lim CFA- CIO

o Tay Kian Ngiap: Kian Ngiap has more than 10 years of financial industry experience whichentails a wide spectrum of middle and back office experience including fund administration, investment and finance accounting, day-to-day settlement and reconciliation issue resolution. As the COO of Covenant Capital, Kian Ngiap is responsible for managing the Company’s compliance and operations roles.

o Before Covenant Capital, Kian Ngiap was with a boutique hedge fund since its inception and was part of the inaugural team where he built his knowledge and experience for 5 years. He then moved on to become an Account Manager for the World’s largest fund administrator, Citco Fund Services for 4 years. His contributions in Citco included onboarding new businesses to the firm and increased profitability for his Clients. He then moved to Swaen Capital and played a key role in the establishment and oversight of the Covenant Asia Equity Absolute Return Fund operations. Additionally, he also played an instrumental role in improving workflows, tightening processes and keeping Operations and Compliance policies relevant to the market conditions.

o He was part of the pioneer batch of students from Singapore Management University and graduated with a Bachelor of Business Management, majoring in Finance and Accounting and is still participating in the school’s Alumni activities.

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Tay Kian Ngiap- COO

o Richard Lee : Richard is a veteran in the wealth management industry spending over 40 years in the finance industry. Prior to joining Covenant Capital, he was working for Citigroup as a wealth adviser since 1994. He has also overseen the strategic development and business operations of one of the key teams in the business unit.

o He joined the finance industry back in 1975 as a fund manager for Chartered Unit Trusts. From 1976 to 1994, he has held various positions with international financial institutions such as Bache Halsey Stuart Shields, Lehman Brothers and Salomon Smith Barney, providing investment services and managing investment portfolios for institutions and high net-worth private clients.

o Richard graduated from the University of Singapore in 1972 with a Bachelor of Social Science (Honours) degree majoring in Economics.

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Richard Lee –Senior VP Relationship Manager

Soon Kay Hock CFA –Senior Portfolio Manager

o Soon Kay Hock: Kay Hock has more than 30 years of experience in the investment industry.

o He started his career with Overseas Union Bank in 1986. He was an economist for the first 2 years before becoming a portfolio manager handling both institutional and private clients’ funds for the next 8 years.

o In 1995, he joined Singapore MRT Limited where he managed their investment portfolio. He was responsible for setting the investment policy, asset allocation and the execution and monitoring of the investments. Besides managing the in-house funds, he was also responsible for the selection and monitoring of external asset managers.

o In January 2001, he joined Citigroup Global Markets as a financial consultant. He held the position of Senior Vice President and Senior Investment Management Specialist. His responsibilities include prospecting, servicing, advising and managing private clients’ portfolios. A major part of his business was managing clients’ money on a discretionary basis. He continued his practice for more than 16 years until August 2016 when he left to join Covenant Capital.

o Kay Hock is a graduate of National University of Singapore with Bachelor of Arts degree and an Honors degree in Economics. He has also been a CFA charter holder since 1992.

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Shaun Fonseca –VP Relationship Manager

o Shaun Fonseca : Shaun Fonseca has 6 years of experience in the financial industry. He started his wealth management career with Morgan Stanley Smith Barney, Australia, where he won the Henry Morgan Award 2011, a Morgan Stanley Smith Barney Country Award. While in Australia, Shaun also worked at the Apeiron Global Macro Fund and the Department of Queensland Transport and Main Roads, where he assisted the team in the economic modeling and forecasting of a multi-million state government research project.

o In 2012, Shaun moved back to Singapore and joined Citigroup Global Markets Asia Limited, where he advised and provided investment solutions to HNW and UHNW individuals across multi-asset classes. While at Citigroup Global Markets Asia Limited, Shaun took the lead in collaborating with some of the biggest hedge funds in the world to educate HNW & UHNW individuals on hedge funds strategies and was instrumental in fund raising as well.

o Shaun graduated from Queensland University of Technology with a Bachelor of Business majoring in Finance and Economics and is currently pursuing a Certificate in Fintech with The Massachusetts Institute of Technology.

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o Damien Long: Damien has 20 years of financial industry experience including last 10 years in investment analysis and investment management roles focusing on value-investment and concentrating in South East Asia markets.

o In his current role, he supports the CIO as an Investment Analyst for Covenant Asia Equity Absolute Return Fund and is part of the idea generation core of the investments team.

o He had a dual role of Fund Manager and Business Development with Aegis Portfolio Managers Pte Ltd who specializes in investing in “multi-baggers” in small mid cap investments in Asia ex-Japan. Damien was responsible for generating investment ideas and conducting due diligence on companies in the Consumer and Lifestyle, Food and Beverage, Oil and Gas and Healthcare Sector.

o Before he joined Aegis, Damien was Product Manager for Investment and Insurance products at an international bank. He started his career as a Credit Analyst and Relationship Manager at a local bank.

o He is a Certified Financial Planner (“CFP”) holder since 2006 and graduated with Distinctions, BSc from Indiana University at Bloomington.

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Damien Long CFP – Investment Analyst

o Josh Le: Josh Le has 8 years of experience in financial industry spending the last 5 years in portfolio management and trading. He began his career with Bank of America Merrill Lynch in 2008 and subsequently joined Star Financials, a trading firm, and Conrad-Ottess Private Asset Management, a Singapore-based family office. He oversaw Long Short portfolio as well as Long only and Momentum portfolios in Conrad-Ottess. Alongside Edwin Lee, he co-manages the Global Anchor Portfolio in Swaen Capital.

o Josh graduated with a Master of Financial Engineering from Nanyang Technology University, Bachelor of Electrical Engineering from National University of Singapore and obtained Cert. of Computational Finance from Carnegie Mellon University. Josh is also a CFA charterholder.

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Josh Le CFA, MSc in FE

Assistant Portfolio Manager

o Christine Ho has 20 years of private and institutional client customer service and operations experience. Over the years, she served more than 15 senior financial consultants supporting them in various aspects of client engagement, trade and operational support. As the operations analyst with Covenant Capital, she supports the team’s operational & administrative needs.

o She started her financial career as a secretary with US securities brokerage firm Kidder Peabody, Hong Kong, in 1993 and an operations assistant with Paine Webber, Hong Kong, in 1995. In 1996, she followed the team to join Salomon Smith Barney Hong Kong Limited in 1996 and Citigroup Global Markets Asia Limited, Hong Kong as Senior Sales Associate in 2002. In 2003, she relocated to Singapore and settled down with her family.

o She continued her senior sales service role with Citigroup Global Markets Singapore Private Limited until Sept 2014. She worked across business , functional and regional lines to provide clients with integrated solutions that meet their needs.

o Tight follow-up and swift response are hallmarks of her work with a keen focus on understanding clients and exceeding their expectations. She is an excellent team player and effective in backing up teammates. Operational seamlessness and continuity in servicing accounts with teammates are key.

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Christine Ho – Operations Analyst

Contact us

• E-mail:

• edwinlee@covenant-capital.com

• edwardlim@covenant-capital.com

• richardlee@covenant-capital.com

• khsoon@covenant-capital.com

• sfonesca@covenant-capital.com

• damienlong@covenant-capital.com

• joshle@covenant-capital.com

• kntay@covenant-capital.com

• christineho@covenant-capital.com

• Address: 31 Club Street #03-02 Singapore 069468

• Contact : (65) 6819 0860

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Disclaimer

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Disclaimer: This is a not a marketing or offering document. Notwithstanding anything contained in this document, this document does not constitute, and no recipient of this document may treat the same as, an offer, solicitation or invitation for the sale and purchase of any securities, instruments or any other properties AND the information contained in this document shall not form the basis of any offer or contract. These materials do not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in any jurisdiction.

This document is provided for information purposes only and is specifically for accredited and qualified investors. Nothing in this document shall constitute investment advice. None of Covenant Capital Pte Ltd. or its subsidiaries nor any of their respective directors, officers, employees, agents, contractors or advisers (collectively, the “CC”) makes any representation or warranty as to the truth, accuracy or completeness of this document (including statements of opinion or expectation) or as to the achievement or reasonableness of any past performance or any future projections, estimates, prospects or returns or any of the assumptions underlying them made nor shall any of them have any liability (whether arising from negligence or otherwise) for any representations (expressed or implied) contained in, or for any omissions from, this document or for any written or oral communications transmitted to the recipient (or its advisers or representative).

No person has been authorized to give any information or make any representations other than that contained herein, and any information or representations not contained herein are not authorized by any member of the CC and must not be relied upon. The delivery of this document at any time shall not, under any circumstances, imply that there has been no change in any matters described herein since the date hereof or that the information contained herein is correct as of any time subsequent to the date hereof. In furnishing this document, CC does not undertake any obligation to provide the recipients with access to any additional information or to correct any inaccuracies in or update this document.

Composite performance results have been calculated by using time-weighted returns. Performance results are total return and include the reinvestment of all income. Performance results are Net of fees and reflect the deduction of actual management fees charged and transaction costs. Past performance does not guarantee future results and other calculation methods may produce different results. Results are based on fully discretionary accounts under management.