EQUITY FUND. March 27, 2013

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EQUITY FUND Despite trading in negative territory for most part of the month, the PSEi was up 1.87% in March to close at 6,847.4 points, bringing YTD gains to a solid 17.8%.

1 EQUITY FUND Despite trading in negative territory for most part of the month, the PSEi was up 1.87% in March to close at 6,847.4 points, bringing YTD gains to a solid 17.8%. During the last trading day of the month, the index posted its 24th record close and biggest one-day gain for the year as it surged 2.74% or 182 pts after the Philippines bagged its very first investment grade credit rating from Fitch. The credit watchdog raised the country's rating to BBB- from BB+ with a stable outlook, owing to a resilient economy and improved fiscal management. Across the board buying was seen as investors anticipate increased foreign inflows to Philippine assets, including stocks, as a result of the upgrade. Macro-indicators remained healthy with January OFW remittances expanding 8.4% YoY to US$1.86bn. The Bangko Sentral has a 5% growth projection for remittances this year. Remittances hit $20.1 billion last year, up 7.2%. March inflation came in slower at 3.2% from 3.4% in Feb, and lower than consensus expectations of 3.4%. As a result, the BSP left benchmark policy rate unchanged at 3.5%. Likewise, the SDA rate was cut by another 50 bps to 2.5% from 3% to help temper the peso s rise. This is the second cut for the year. Despite the SDA rate cuts, SDA placements rose 2.4% MoM to P1.86tn in Feb, still up 10% from end-december. For the month, net foreign buying was at US$204mn, helped by equity placements of Ayala Land Inc. ($300M), Rizal Commercial Banking Corp. ($150m), and Century Properties Group ($40m). 5-Apr-00 Fund Size Php 12,990,791, Net Asset Value Per Share Php At current levels, the PSEi trades at 20.4x this year s earnings, much higher than its historical average of 15x. We believe that stock prices should take a temporary pause for base building in preparation for the next leg up. First quarter corporate earnings results will dictate market sentiment in the short-run. Consensus expectation is for earnings to expand 12-15% this year. Technical indicators also show that momentum has been waning as profit taking ensues near the 7,000 index level. Support levels are at 6,650 then 6,500. Top 10 Equity Holdings Company % to Total Ayala Land Inc 7.0% SM Investments Corp. 6.7% Phil Long Distance Telephone Co. 5.6% Ayala Corporation 5.3% Metropolitan Bank & Trust Company 4.7% Alliance Global Group Inc 4.1% DMCI Holdings Inc 3.9% Lafarge Republic, Inc. 3.7% Rizal Commercial Banking 3.6% Banco de Oro Universal Bank 3.5%

BALANCED FUND Despite trading in negative territory for most part of the month, the PSEi was up 1.87% in March to close at 6,847.4 points, bringing YTD gains to a solid 17.8%.

74% or 182 pts after the Philippines bagged its very first investment grade credit rating from Fitch.

2 BALANCED FUND Despite trading in negative territory for most part of the month, the PSEi was up 1.87% in March to close at 6,847.4 points, bringing YTD gains to a solid 17.8%. During the last trading day of the month, the index posted its 24th record close and biggest one-day gain for the year as it surged 2.74% or 182 pts after the Philippines bagged its very first investment grade credit rating from Fitch. The credit watchdog raised the country's rating to BBB- from BB+ with a stable outlook, owing to a resilient economy and improved fiscal management. Across the board buying was seen as investors anticipate increased foreign inflows to Philippine assets as a result of the upgrade. Likewise, peso government bonds continued its robust rally gaining 10% in MoM, mostly on the 20 and 25-yr tenors. Macro-indicators remained healthy with January OFW remittances expanding 8.4% YoY to US$1.86bn. The Bangko Sentral has a 5% growth projection for remittances this year. Remittances hit $20.1 billion last year, up 7.2%. March inflation came in slower at 3.2% from 3.4% in Feb, and lower than consensus expectations of 3.4%. As a result, the BSP left benchmark policy rate unchanged at 3.5%. Likewise, the SDA rate was cut by another 50 bps to 2.5% from 3% to help temper the peso s rise. This is the second cut for the year. Despite the SDA rate cuts, SDA placements rose 2.4% MoM to P1.86tn in Feb, still up 10% from end-december. For the month, net foreign buying was at US$204mn, helped by equity placements of Ayala Land Inc. ($300M), Rizal Commercial Banking Corp. ($150m), and Century Properties Group ($40m). At current levels, the PSEi trades at 20.4x this year s earnings, much higher than its historical average of 15x. We believe that stock prices should take a temporary pause for base building in preparation for the next leg up. First quarter corporate earnings results will dictate market sentiment in the short-run. Consensus expectation is for earnings to expand 12-15% this year. Technical indicators also show that momentum has been waning as profit taking ensues near the 7,000 index level. Support levels are at 6,650 then 6,500. On fixed income, profit taking and rotational trading could stretch on, as investors turn neutral on duration amid lack of fresh leads. Thus, any yield curve compression particularly in the long end would be mild and modest, at least in the near term. The reduction in the SDA rates has toned down the peso appreciation. Against this backdrop, further cuts to the tune of bps are on the cards in the next 9 months. While the cuts would reduce Bangko Sentral s sterilization costs, no meaningful decline in SDA deposits are seen just as OFW and BPO dollar revenues are expected to remain strong. Top 5 Equity Holdings Company % to Total SM Investments Corp. 5.4% Ayala Land Inc 5.4% Phil Long Distance Telephone Co. 4.2% Ayala Corporation 3.9% Metropolitan Bank & Trust Company 3.6% 5-Apr-00 Fund Size PHP 15,528,975, Net Asset Value Per Share Php Security Maturity Date % to Total Special Savings Account 1-Apr % Treasury Notes 29-Sep % Treasury Notes 19-Jul % Treasury Notes 16-Dec % Treasury Notes 24-Oct %

BOND FUND Peso government bonds continued its robust rally in March that was capped by a blistering finish just as Fitch raised the Philippines sovereign credit rating to investment grade on the last

3 BOND FUND Peso government bonds continued its robust rally in March that was capped by a blistering finish just as Fitch raised the Philippines sovereign credit rating to investment grade on the last trading day. Specifically, the country s foreign currency sovereign rating and the local currency rating were raised to BBB- from BB+ with stable outlooks. Remarkably, Fitch was the first of the three major international rating agencies to upgrade the Philippines to BB+ in June The latest rating action leaves Fitch s rating one notch above Moody s and S&P, both with a positive outlook. Even before the ratings upgrade, bond yields have declined following the release of the 2nd quarter auction schedule that indicated the absence of long bond issues. The 20-year bond dipped to 3.625% in the primary auction in March, some 42.5 bps lower than a similar tenor in secondary market rate. Philippine headline inflation was 3.2% y-o-y in March, down from 3.4% in February. Key price drivers were tobacco and alcohol products following the passage of the Six Tax Reform Law in January. Core inflation was flat at 3.8% amid lower food and energy prices as well as the stronger currency. In the March Monetary Board meeting, the Bangko Sentral kept its benchmark overnight borrowing rate steady at 3.5%. However, the Bangko Sentral slashed the rate on its Special Deposit Accounts (SDAs) by 50 bps to 2.5% across all tenors. In the year-to-date, total SDA rate cuts has reached bps since the first reduction in January this year. Return on investments (ROI) leaped to 16.6% y-o-y compared to 8.33% in February. Further, the NAVPS was higher at Ps from Ps for the same period. Security Maturity Date % to Total Treasury Notes 29-Nov % Treasury Notes 16-Dec % Treasury Notes 26-Jan % Treasury Notes 27-Jan % Treasury Notes 24-Apr % 5-Apr-00 Fund Size PHP 5,957,167, Net Asset Value Per Share Php The robust liquidity driven rally and risk-on sentiment rally following the Fitch rating upgrade appear to have drained away much of the value in the long-dated bonds. Profit taking and rotational trading could stretch on, as investors turn neutral on duration amid lack of fresh leads. Thus, any yield curve compression particularly in the long end would be mild and modest, at least in the near term. The reduction in the SDA rates has toned down the peso appreciation. Against this backdrop, further cuts to the tune of bps are on the cards in the next 9 months. While the cuts would reduce Bangko Sentral s sterilization costs, no meaningful decline in SDA deposits are seen just as OFW and BPO dollar revenues are expected to remain strong.

4 GS FUND Peso government bonds continued its robust rally in March that was capped by a blistering finish just as Fitch raised the Philippines sovereign credit rating to investment grade on the last trading day. Specifically, the country s foreign currency sovereign rating and the local currency rating were raised to BBB- from BB+ with stable outlooks. Remarkably, Fitch was the first of the three major international rating agencies to upgrade the Philippines to BB+ in June The latest rating action leaves Fitch s rating one notch above Moody s and S&P, both with a positive outlook. Even before the ratings upgrade, bond yields have declined following the release of the 2nd quarter auction schedule that indicated the absence of long bond issues. The 20-year bond dipped to 3.625% in the primary auction in March, some 42.5 bps lower than a similar tenor in secondary market rate. Philippine headline inflation was 3.2% y-o-y in March, down from 3.4% in February. Key price drivers were tobacco and alcohol products following the passage of the Six Tax Reform Law in January. Core inflation was flat at 3.8% amid lower food and energy prices as well as the stronger currency. In the March Monetary Board meeting, the Bangko Sentral kept its benchmark overnight borrowing rate steady at 3.5%. However, the Bangko Sentral slashed the rate on its Special Deposit Accounts (SDAs) by 50 bps to 2.5% across all tenors. In the year-to-date, total SDA rate cuts has reached bps since the first reduction in January this year. Return on investments (ROI) surged to 15.73% y-o-y from 8.35% in February. Moreover, the NAVPS jumped to Ps from Ps for the same period. Maturity Security Date % to Total Treasury Notes 29-Nov % Treasury Notes 4-Oct % Special Savings Account 1-Apr % Treasury Notes 24-Apr % Treasury Notes 29-Nov % 1-Mar-05 Fund Size Php 640,499, Net Asset Value Per Share Php The robust liquidity driven rally and risk-on sentiment rally following the Fitch rating upgrade appear to have drained away much of the value in the long-dated bonds. Profit taking and rotational trading could stretch on, as investors turn neutral on duration amid lack of fresh leads. Thus, any yield curve compression particularly in the long end would be mild and modest, at least in the near term. The reduction in the SDA rates has somehow toned down the peso appreciation. Against this backdrop, further cuts to the tune of bps are on the cards in the next 9 months. While the cuts would reduce Bangko Sentral s sterilization costs, no meaningful decline in SDA deposits are seen just as OFW and BPO dollar revenues are expected to remain strong.

5 MONEY MARKET FUND In the March Monetary Board meeting, the Bangko Sentral kept its benchmark overnight borrowing rate steady at 3.5%. However, the Bangko Sentral slashed the rate on its Special Deposit Accounts (SDAs) by 50 bps to 2.5% across all tenors. In the year-to-date, total SDA rate cuts has reached bps since the first reduction in January this year. Reductions in the SDA rates have somehow helped the Bangko Sentral in curbing the peso appreciation. Against this backdrop, further cuts to the tune of bps are on the cards in the next 9 months. While the cuts would reduce Bangko Sentral s sterilization costs, no meaningful decline in SDA deposits are seen just as OFW and BPO dollar revenues are expected to remain strong. Notably, headline inflation trekked lower than consensus to 3.2% y-o-y in March, down from 3.4% in February. Return on investment (ROI) dropped to % y-o-y from % while the NAVPS was flat at Ps Top 3 Fixed Income Holdings Security Maturity Date % to Total Special Savings Account 4-Apr % Special Savings Account 2-Apr % Special Savings Account 1-Apr % 1-Jul-04 Fund Size Php 285,433, Net Asset Value Per Share Php

DOLLAR ADVANTAGE FUND Global equities continued to post gains on the back of better than expected employment and manufacturing data in the US, and after EU officials clinched a bailout compromise

6 DOLLAR ADVANTAGE FUND Global equities continued to post gains on the back of better than expected employment and manufacturing data in the US, and after EU officials clinched a bailout compromise with Cyprus. February non-farm payrolls in the US beat expectations at 236k, bringing unemployment rate lower to 7.7% from 7.9%. This was very close to the 250k threshold which economists believe is needed for a sustained recovery in the US jobs market. Likewise, US Feb ISM non-manufacturing index hit its highest level for the past 3 years at 56%, suggesting that the US economy continues to expand. In Europe, EU officials and Cyprus agreed to levy a tax on bank account holders more than 100k euros, instead of initial plans of including small depositors. This somehow contained the bank runs and eventually calmed the markets but fears of a déjà vu in other peripheral nations still persist. By the end of the first quarter, the global equities have posted decent gains of 6% led by US (+10%) and Japan (+20%). Europe (+2%) and Asia-ex Japan (+1%) were the laggards amid weak economic date in EU and China cooling down its real estate market. Top 5 Offshore MF Holdings Fund Name % to Total Franklin U.S. Opportunities Fund 9.3% Templeton Global Bond A 9.1% Morgan Stanley U.S. Advantage Fund 9.1% Aberdeen Global Asia Pacific Equity Fund 8.7% PIMCO GIS Total Return Bond Fund 8.7% 2-Jul-02 Fund Size USD 30,976, Net Asset Value Per Share USD Interestingly, the US equity markets are now posting new all-time highs with the S&P 500 and Dow Jones Industrial Average trading near 1,600 and 15k levels, respectively. Investors will continue to flock to equities, from bonds, as central banks remain in a quantitative easing mode amid anemic economic recovery in developed markets. Focus had shifted from the Euro zone debt crisis and into improvements in unemployment and economic growth data. This can be seen on how the Japanese government and US set targets on unemployment and inflation in implementing their respective QEs Security Maturity Date % Total Special Savings Account 02-Apr % Special Savings Account 01-Apr % ROP34 23-Oct % PLDT17 06-Mar % ROP30 02-Feb %

7 DOLLAR ABUNDANCE FUND Philippine cash bonds remained hostage to US Treasury movements and traded virtually in tandem with the 10-year benchmark tenor. Speculations over an early withdrawal of monetary stimulus on the back of positive macro-economic data releases as well as soaring stock indices have put US Treasuries under price pressure. Treasuries fell, pushing yields on the 10-year note around the 2% level after better-thanexpected jobless claims. Fitch raised the Philippines sovereign credit rating to investment grade on the last trading day of March. Specifically, the country s foreign currency sovereign rating and the local currency rating were raised to BBB- from BB+ with stable outlooks. Remarkably, Fitch was the first of the three major international rating agencies to upgrade the Philippines to BB+ in June The latest rating action leaves Fitch s rating one notch above Moody s and S&P, both with a positive outlook. In Europe, the notorious Cyprus bail-in package enforced at the behest of the Troika has stoked investor concerns over the security of deposits in European banks just as monetary officials hinted that the Cyprus template could be replicated in the future. Notably, cash-strapped Slovenia increasingly appears to be the next bailout candidate. Further, Fitch Ratings slashed Italy's sovereign credit rating by one notch to BBB+ combined with a negative outlook, citing political uncertainty after the country's inconclusive election and rising debt. Fitch opined that the consequent political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amid the deep recession. Return on investments (ROI) was slightly lower at 4.36% y-o-y compared to 4.41% in February. Also, the NAVPS dropped to US$ from US$ for the same period. Security Maturity Date % to Total ROP34 23-Oct % ROP25 16-Mar % ROP30 2-Feb % ROP20 20-Jan % ROP37 13-Jan % 1-Mar-05 Fund Size USD 25,165, Net Asset Value Per Share USD ROP bond prices will continue to take its cue from US treasury trends with the benchmark 10-year UST expected to hover within the 2% level in the near term. While some Fed officials hinted that the monthly bond purchase program could end in December 2013, US economic growth has yet to gain full traction. Locally, the Fitch investment grade rating could set off a rerating by S&P and Moody s within the year. A second investment grade rating would certainly open the floodgates and allow more foreign funds to enter the Philippine financial markets. While geopolitical tensions in the Korean Peninsula continue to simmer by the day, the risk and threat of a breakout in hostilities that could cause capital flow reversal in Emerging Asia are considered remote.

EQUITY FUND. May 31, 2013

EQUITY FUND. May 31, 2013 EQUITY FUND The PSE index eased 0.69% in May to close at 7,021.95 points. Local stocks succumbed to profit-taking after the index hit an intra-day high of 7,406.65 points mid-month on concerns of steep