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1 PRUMarket Watch July Market08 7 Prudential Hong Kong Limited (A member of Prudential plc group) 8/F, Prudential Tower, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong Customer Service Hotline 8 Corporate Website

2 Market Overview The World in five bullet points The US pulled out of the nuclear deal with Iran although it remains in place with the other Big Power signatories. The US promised sanctions against any company dealing with Iran, leading to some, including Maersk and Total, to cancel agreements with Tehran. President Trump also cancelled a meeting with North Korea due to take place in mid June, although in the final days of the month, had seemingly reinstated the possibility of talks taking place. The world awaits the next tweet. The rise in the US dollar began to take its toll on some emerging markets. Argentina was arguably the worst hit and was forced to go cap in hand to the IMF for help (see Currencies section below). Indonesia also saw currency investors take flight along with those from Hungary, Poland, Greece and South Africa as a reaction to higher US interest rates and a higher dollar. Turkey, was another victim and, like others, this was mainly due to its large current account deficit, with the lira duly slumping it is now down more than % year to date despite the central bank s % rate increase in May alone. Brazil slipped into yet another political crisis with truck drivers blocking roads across the country to protest against high diesel prices: fuel ran out, deliveries were cut, and several companies had to temporarily shut operations. A temporary cut to fuel prices failed, more subsidies were proposed and this time accepted. But the strike may lead to a deterioration in the country s fiscal account, slower economic growth, higher inflation and a yet more fragile government unable to move forward with reform. And with the spectre of military intervention being whispered quietly in dark corners, Brazil suddenly looks wobbly again. Italy also tumbled into a political quagmire with two antiestablishment parties dropping a coalition plan after two months of talks after the country s President rejected its choice of a euro sceptic as the economy minister. The President then appointed an interim prime minister to prepare for snap elections but the decision sent equity and bond markets into freefall, dragging Eurozone markets down with it. Malaysia elected a new government in a surprise win for the Pakatan Harapan (PH) opposition, led by 9year old former Prime Minster Tun Dr Mahathir. Given the electoral hurdles in its way, this was a considerable achievement for PH which almost instantly began a probe into the MBD investment vehicle and questioned many proposed infrastructure projects. Maersk Total 6 % % 9 MDB Equities markets dipped into the end of the month when domestic political developments in Italy, Brazil and elsewhere combined with concerns over developing economy debt levels to send many indices lower, especially in emerging markets. Among the developed markets, the US comfortably outperformed Europe, which saw Italy fall %, dragged lower by its banking sector that is heavily invested into its domestic bond market. Greece lost 9% on concerns its banks would follow suit while Spanish markets also suffered after the Prime Minister faced a noconfidence vote. Hungary fell % and Turkey lost % as its currency woes continued. Not surprisingly, the MSCI EMEA index fared poorly in May, losing.8%. But it wasn t the worst performing region with Latin America falling %, dragged down by index heavyweight Brazil which lost more than 6% as the truckers strike began to bite. Leading fuel provider Petrobras lost 0% at one point as the government lent heavily on it to increase fuel subsidies. Meanwhile the Argentinian Merval index (not part of the MSCI family) lost 6% with investors wrath here reserved for the bond market. In contrast, Asia only just ended in the red with the MSCI Asia ex Japan index down just.%. Here, the Greater China markets markedly outperformed and ended with small gains while the beleaguered Indonesian market ended flat. But elsewhere, Asia markets followed the global trend lower. Malaysia lost 8.% with most of the losses coming in the couple of weeks post its election as investors grew nervous on the economic direction of the new government. Japan fell.0% with declines in the final week for automakers on reports the Trump administration was considering tariffs of % on imports of cars. % 9% % % MSCI EMEA.8% 6% Petrobras 0% Merval MSCI 6% MSCI.%

3 8.% % % Fixed Income Tenyear US Treasury yields dipped below % as investors sought out safe havens away from several emerging markets as well as the more risky European developed bond markets such as Italy, Spain and Greece. Italian Bond prices suffered their worst day in years at the end of the month after the President rejected a euro sceptic as economy minister and paved the way for new elections. Investors fear new elections could deliver a deeply antieuro government while domestic public finances continue to struggle. Some central banks appear to be wobbling on the easy money exit ramp: the Bank of England left interest rates on hold just weeks after it signalled a likely bps hike and the Reserve Bank of New Zealand signalled it would leave rates on hold until later into 09. But the Fed Reserve was firm indicating it remained on track to raise policy rate in coming months but it did leave interest rates unchanged at its May meeting. Several emerging market central banks hiked rates to defend their currencies. 0% 09 Currencies The US dollar was strong in May, with a combination of robust US economic data, and a sell off in the euro and some emerging market currencies stimulating a flight to quality. The yen also gained against the euro and some emerging markets but was slightly weaker against the US dollar. Weakness in sterling caused by weak economic data and Brexit uncertainty also sent cable to sixmonth lows. The euro endured a difficult month as political uncertainties in Italy caused a sell off as questions began recirculating about the future of the currency. In Italy, the antiestablishment Star Movement and the farright League proposed some changes to Italy s debt structure, an amnesty for certain tax offenders and higher pension payments for retirees, before nominating a euro sceptic as economy minister. This crossed the line in the sand as far as the president was concerned but it didn t stop the euro from selling off against the dollar with the big fear being that a second general election could become a de facto referendum on membership of the eurozone. For the month, the euro lost.% of its value and is at sixmonth lows against the dollar. Among emerging market currencies, the Turkish lira s dramatic 0% threemonth fall may not end anytime soon. Snap elections in June may see a consolidation of power by President Erdogan and he is likely to pressure the central bank to recut rates. With inflation remaining at in the doubledigit levels and forex reserves low, any reprieve from a rate cut could prove short lived. Argentina s peso fell to alltime lows against the US dollar with the currency recording a monthly 0% drop at one point. In response, its central bank announced three rate increases in less than a week and promptly approached the IMF for help. The cause is the country s % current account deficit and specifically the need for this to be financed from inflows from aboard or a weakening domestic currency. Argentina s lack of forex reserve meant the central bank had to drive down its currency, and subsequently doth its cap for an IMF bail out..% 6 0% 6 0% % Commodities Crude oil continued to maintain elevated levels helped by Saudi Arabia hinting at wanting to push oil to $80 per barrel as well as the prospect of reduced flow from Iran following the reimposition of sanctions. However, in the final week, prices dropped sharply as the Saudis reversed their message and suggested easing production cuts that have held in place since the beginning of 07 while an unexpected jump in crude inventories also put pressure on crude. Natural gas prices rose as storage deficits lingered while US gasoline prices surged on the reimposition of sanctions against Iran. Warmer weather in the US also gave support. Away from oil and gas, commodity prices struggled to gain direction under the weight of a higher US dollar. Gold drifted lower as the US dollar strengthened in the early part of the month and as bond yields also initially rose. But prices rebounded on political developments in Europe. Copper prices also came under pressure from the dollar s strength. Aluminium gained a little over the month but for the most part the metal eased back from gains in April following the initial suggestion of sanctions against Rusal. It then fell in the final week when the US came closer imposing tariffs on EU imports. Nickel prices continued to rise and had its best month in six. The Baltic Dry Index, a key indicator of the health of the commodity market, fell steadily alongside most bulk commodities and is now

4 close to year lows. The index was particularly hurt by demand for capsize vessels that typically carry coal or iron ore Economics US Personal Consumption Expenditure price index (PCE) for March hit.0%. This is significant because it now has reached the Fed s target and the accompanying comments point to a June increase of bps. Core consumer prices rose just 0.% leading some to speculate on just two more rises but for the moment, the Fed Funds rate continues to suggest three more rises this year. In other data points, jobless numbers fell to below % for the first time since 000 while wages edged up. The Eurozone economy grew more slowly than expected with the Purchasing Manager s Index for May sinking to an 8month low of., well below all forecasts although still representing growth. Eurozone inflation also fell to.% in April, also lower than expected; the combination now presents the ECB with an interesting choice when it comes to interest rate policy, especially when factoring in Italian political developments. In the UK, the Bank of England reduced its forecast for Q inflation to.% from.7% while GDP growth forecasts also fell to.%; Q GDP growth was a weak 0.%. Retail sales fell the most since 99 and as a result of this, several other weak datapoints and a struggling Brexit negotiation, the BoE kept rates on hold at its May meeting. In Asia, Japan announced a drop in quarterly GDP growth figures although faltering export demand, tepid private consumption and weak housing data early in the month flagged the soft patch. China saw its PMI rise to.9 from. in April, marking its nd month in succession above the critical 0 point level representing growth. New Orders rose to eightmonth highs aided by strong commodity prices, while the growing services PMI came in at.9, a smidge above April s print. Brazil s central bank surprisingly kept its key rate on hold rather than reducing it by bps as had been flagged last month. Although inflation remains low, recent market turbulence and the depreciation of the real caused the bank to think again, and keep its Selic rate at 6.%. The decision came before the economy was rocked by the truckers strike..0% 6 0.% 000 %. 8.%.7%.%.% 0.% % Investment involves risks. Past performance is not indicative of future performance. Please refer to the offering documents for further information including fees and charges, and risk factors. The above information is for reference only. Any opinion or information contained in this document is made on a general basis and should not to be relied upon by the reader as advice. Individual country or domicile may have restriction on specific investment instruments, reader is recommended to seek independent professional tax and/or legal advice before making any investment decision. Some of the information included in this material have been prepared with the assistance of Eastspring Investments (Hong Kong) Limited, and/or its associates. Prudential Hong Kong Limited reserves the right to make changes and corrections to its opinions expressed in this document at any time, without any notice. Any unauthorized disclosure, use or dissemination of this document, either in whole or in part, is prohibited and this document should not be reproduced, copied, or made available to others. This document is issued by Prudential Hong Kong Limited (A member of Prudential plc group). MKTX/SA00(07/8)

5 Important Notes () The investment choices are available for investmentlinked insurance plans ( Plan ), including PRUlink portfolio investment plan, PRUlink single premium investment plan, PRUlink investment plan (PRUlink investment plan was closed for new business since 0 January 0), PRUlink smart wealth builder (PRUlink smart wealth builder was closed for new business since December 0), PRUlink wealth builder (PRUlink wealth builder was closed for new business since February 00), PRUretirement extra (PRUretirement extra was closed for new business since January 0), PRUkid extra (PRUkid extra was closed for new business since January 0), PRUlink optimiser plus (PRUlink optimiser plus was closed for new business since 0 January 0), PRUlink assurance plus (PRUlink assurance plus was closed for new business since October 0), PRUlink assurance (PRUlink assurance was closed for new business since October 0), PRUlink investlife (PRUlink investlife was closed for new business since January 0), PRUflexilife (PRUflexilife was closed for new business since June 0), Investment Plus (Investment Plus was closed for new business since January 0), PRUlink maxisavings (PRUlink maxisavings was closed for new business since 6 August 007) and PRUlink protector (PRUlink protector was closed for new business since November 00) issued by Prudential Hong Kong Limited ("Prudential") only. Your investments are subject to the credit risk of Prudential () You are not investing in the reference funds of the investment choices. The premiums you pay will become part of the assets of Prudential. You do not have any rights or ownership over these underlying investments. Your recourse is against Prudential only. () The investment choices available under the Plan can have very different features and risk profiles. Some may even be of high risk. Please do not invest solely based on this document only. Please read the offering documents of the Plan and the reference funds involved for details including the risk factors. () Investment involves risks. Past performance is not indicative of future performance. Your return on investment is calculated by Prudential with reference to the performance of the reference funds of the investment choices. Return on investment under the investment linked insurance schemes will be subject to the charges of the scheme and may be lower than the return on the corresponding reference funds. () Early surrender or withdrawal of the Plan/suspension of or reduction in premium may result in a significant loss of principal and/or bonuses awarded. Poor performance of reference funds may further magnify your investment losses, while all charges are still deductible.

6 Performance Summary of Investment Choices Figures as of 9/06/08 The following investment choices are each linked to an SFC authorised fund. The performance information below are those of the reference fund corresponding to the relevant investment choice. The unit price of each investment choice on a valuation date will be the same as the quoted unit price of the corresponding reference fund on the same valuation date. Asset Class Money Market Bonds Global Developed Countries Asia Risk Level () Prudential Investment Choices Name Schroder U.S. Dollar Money Fund AB FCP I American Income Portfolio AB FCP I AB FCP I Global High Yield Portfolio AB FCP I Eastspring Investments Asian Local Bond Fund Eastspring Investments US Investment Grade Bond Fund Fidelity Global Bond Fund Fidelity US High Yield Fund Invesco Global High Income Fund Templeton Global Total Return Fund Eastspring Investments World Value Fund Investec GSF Global Strategic Fund GSF Templeton Global Income Fund Barings Europe Select Trust Eastspring Investments Japan Dynamic Fund Fidelity America Fund Fidelity European Growth Fund Franklin U.S. Opportunities Fund Invesco Pan European Fund Allianz Total Return Asian Fund Eastspring Investments Asian Fund JPMorgan ASEAN Fund Code SUD AAI AHY ALB EIB FBF FHY IHI TTR EWV IGS TGI BET EJD FAF FEG FOF IPE ATR EAE JAS Launch Date dd/mm/yy Reference Fund Name and Share Class Schroder U.S. Dollar Money Fund Acc 0/08/ AB FCP I American Income Portfolio A USD /09/ AB FCP I A AB FCP I Global High Yield Portfolio A USD /09/ AB FCP I A Eastspring Investments Asian Local Bond Fund A 07/0/08 A Eastspring Investments US Investment Grade Bond Fund A /09/ A Fidelity Funds Global Bond Fund A USD 08//0 A Fidelity Funds US High Yield Fund A USD 0/0/07 A Invesco Funds Series Invesco Global High Income Fund A SD USD /0/ A Franklin Templeton Investment Funds Templeton Global Total Return Fund A Acc USD 8/0/ A Eastspring Investments World Value Fund A 0/08/ A Investec Global Strategy Fund Global Strategic Fund F Acc USD 6/07/07 F Franklin Templeton Investment Funds Templeton Global Income Fund A Acc USD 0//0 A Barings Europe Select Trust A Acc USD 0/08/ A Eastspring Investments Japan Dynamic Fund A (hedged) USD 0/08/ A Fidelity Funds America Fund A USD 08//0 A Fidelity Funds European Growth Fund A Acc (USD hedged) 0/08/ A Franklin Templeton Investment Funds Franklin U.S. Opportunities Fund A Acc USD 0/08/ A Invesco Funds Invesco Pan European Fund A Acc (USD hedged) 0/08/ A Allianz Global Investors Fund Allianz Total Return Asian AT USD 6/07/07 AT Eastspring Investments Asian Fund A 0/08/ A JPMorgan ASEAN Fund Acc USD 0/0/09 Performance of Reference Fund year Annualised Volatility () Launch Date dd/mm/yy 09/07/9 6/0/98 /0/0 0/09/07 0/0/0 0/0/90 0/09/0 /0/9 9/08/0 09//0 /0/07 7/0/0 6// 09/09/ 0/0/90 0/0/ 0/0/00 /07/ /0/0 6/08/0 Unit Price (USD) () /07/8.00 YTD Cumulative Performance (%) % () months () year years years

7 Sector / Special Topic Greater China / China Emerging Markets Portfolio Fund JPMorgan Korea Fund Templeton Asian Growth Fund Allianz Global Agricultural Trends Fund Barings Global Resources Fund BlackRock New Energy Fund BlackRock World Gold Fund BlackRock World Healthscience Fund BlackRock World Mining Fund Invesco Asia Infrastructure Fund Investec GSF Global Energy Fund GSF Barings Hong Kong China Fund Eastspring Investments China Fund Eastspring Investments Greater China Fund First State China Focus Fund Schroder Hong Kong Fund Value Partners Classic Fund Eastspring Investments India Fund Eastspring Investments Indonesia Fund Fidelity Emerging Europe Middle East and Africa Fund Fidelity Latin America Fund JPM Emerging Markets Fund Schroder BRIC Fund Templeton Emerging Markets Fund Barings Asia Balanced Fund BlackRock Global Allocation Fund JKO TAG AAT BGR BNE BWG BWH BWM IAI IGE BHC ICE EGC FCF SHK VCF EIE IDO FEA FLA JEM SBR TEM BAB BGA 0/08/ 07/0/ 8/0/ 6/07/07 0/0/09 0/0/09 0/08/ 0/0/09 /0/07 8/0/ 6/07/07 0/09/0 0/08/ 0/09/0 8/0/ 07/0/ 0/08/ 07/0/ 07/0/08 0/0/06 0/0/09 0/09/0 0/06/0 /0/07 0/0/09 JPMorgan Korea Fund Acc USD Franklin Templeton Investment Funds Templeton Asian Growth Fund A Acc USD A Allianz Global Investors Fund Allianz Global Agricultural Trends AT USD AT Barings Global Umbrella Fund Barings Global Resources Fund A Inc USD A BlackRock Global Funds New Energy Fund A USD A BlackRock Global Funds World Gold Fund A USD A BlackRock Global Funds World Healthscience Fund A USD A BlackRock Global Funds World Mining Fund A USD A Invesco Funds Invesco Asia Infrastructure Fund A Acc USD A Investec Global Strategic Fund Global Energy Fund A Acc USD A Barings International Umbrella Fund Barings Hong Kong China Fund A Inc USD A Eastspring Investments China Fund A A Eastspring Investments Greater China Fund A A First State Global Umbrella Fund plc First State China Focus Fund I Acc USD I Schroder International Selection Fund Hong Kong A Acc USD A Value Partners Classic Fund C USD C Eastspring Investments India Fund A A Eastspring Investments Indonesia Fund A A Fidelity Funds Emerging Europe Middle East and Africa Fund A Acc USD A Fidelity Funds Latin America Fund A USD A JPMorgan Funds Emerging Markets Fund A Dist USD A Schroder International Selection Fund BRIC (Brazil, Russia, India, China) A Acc USD A Franklin Templeton Investment Funds Templeton Emerging Markets Fund A Acc USD A Barings Global Opportunities Umbrella Fund Barings Asia Balanced Fund A Acc USD A BlackRock Global Funds Global Allocation Fund A USD A // /0/ /0/ // /0/ // /0/0.000 /0/ /0/ // // /07/07.90 /0/ /0/ /0/ 7.86 /0/ /07/ /07/07.60 /06/ /0/ /0/9.700 /0/0.87 /0/ /0/ /0/ Source of investment choice information: Prudential. Source of reference fund information: Morningstar Asia Limited. Figures are based on NAVNAV basis in USD with dividends reinvested as of 9 June 08. () The risk level, in the range of to, is assigned based on the volatility of the related Prudential investment choices and the nature of investments. The () figure is provided by Prudential Hong Kong Limited which will be reviewed at least once per annum and is for reference only. Generally speaking, the higher the number, the greater the risk. () year annualised volatility is represented by the annualised standard deviation based on the monthly rates of return over the past years. The higher the () percentage (i.e. standard deviation), the greater the volatility and the greater the risk. () () Performance of reference funds with no historical data of the specified period will not be shown. () 6 () Performance of reference funds established for less than 6 months are not displayed. () Unit price refers to Net Asset Value per unit/bid or Offer price. () /

8 Asset Class Prudential Investment Choices Name Calendar Year Performance (%) Code % () Asset Class Prudential Investment Choices Name Code Calendar Year Performance (%) % () Money Market Bonds Global Developed Countries Asia Sector / Special Topic Schroder U.S. Dollar Money Fund AB FCP I American Income Portfolio AB FCP I AB FCP I Global High Yield Portfolio AB FCP I Eastspring Investments Asian Local Bond Fund Eastspring Investments US Investment Grade Bond Fund Fidelity Global Bond Fund Fidelity US High Yield Fund Invesco Global High Income Fund Templeton Global Total Return Fund Eastspring Investments World Value Fund Investec GSF Global Strategic Fund GSF Templeton Global Income Fund Barings Europe Select Trust Eastspring Investments Japan Dynamic Fund Fidelity America Fund Fidelity European Growth Fund Franklin U.S. Opportunities Fund Invesco Pan European Fund Allianz Total Return Asian Fund Eastspring Investments Asian Fund JPMorgan ASEAN Fund JPMorgan Korea Fund Templeton Asian Growth Fund Allianz Global Agricultural Trends Fund Barings Global Resources Fund BlackRock New Energy Fund BlackRock World Gold Fund SUD AAI AHY ALB EIB FBF FHY IHI TTR EWV IGS TGI BET EJD FAF FEG FOF IPE ATR EAE JAS JKO TAG AAT BGR BNE BWG # # # # Sector / Special Topic Greater China / China Emerging Markets Portfolio Fund BlackRock World Healthscience Fund BlackRock World Mining Fund Invesco Asia Infrastructure Fund Investec GSF Global Energy Fund GSF Barings Hong Kong China Fund Eastspring Investments China Fund Eastspring Investments Greater China Fund First State China Focus Fund Schroder Hong Kong Fund Value Partners Classic Fund Eastspring Investments India Fund Eastspring Investments Indonesia Fund Fidelity Emerging Europe Middle East and Africa Fund Fidelity Latin America Fund JPM Emerging Markets Fund Schroder BRIC Fund Templeton Emerging Markets Fund Barings Asia Balanced Fund BlackRock Global Allocation Fund BWH BWM IAI IGE BHC ICE EGC FCF SHK VCF EIE IDO FEA FLA JEM SBR TEM BAB BGA Source of investment choice information: Prudential. Source of reference fund information: Morningstar Asia Limited. Figures are based on NAVNAV basis in USD with dividends reinvested as of 9 June 08. If the investment choices have more than years history, the performance of reference funds are identical to the performance of the investment choices. If the investment choices have less than years history, only the performance of reference funds since the launch of investment choices are identical to the performance of the investment choices. () Performance of reference funds with no historical data of the specified period will not be shown. # Performance of reference funds is calculated since launch date of reference funds to the end of the calendar year. Investment involves risks. Past performance is not indicative of future performance. Please refer to the offering documents for further information including fees and charges, and risk factors #