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Dear all,

Our view on what has happened:

With the expectation and anticipation of US recovery evidenced by increased activity and economic output, furthered with expectations of the stimulus program being phased out, foreign investors were prompted to start realigning their placements in emerging markets and shifting them back to US-based assets.

Fortunately or unfortunately, with the Philippines being one of the better performing economies in the Asia Pacific region, we were one of the best outlets for both local and offshore portfolio money.

OUR INVESTORS SHOULD NOT BE ALARMED. This is a function of fund-shift issue rather than a crisis. The Philippine macroeconomic, fundamental and political elements are intact, and we have just been affected because of the amount of foreign funds that are holding peso-denominated portfolio money.

Moreover, with the Philippines being a small market, any movement such as this will be greatly felt in the local markets.

Our strategy moving forward:

As discussed in the recently concluded SALEF shareholders meeting earlier this May 23, investors showed great concern as to why SALEF was underperforming. Our view was that while the local stock market was on a great level, we as fund managers began to take a more conservative approach and thus kept about 25% of SALEF’s portfolio money in cash. While this proved disadvantageous to current year to date yield then compared to peer equity funds and the index itself, it was a prudent move on our part to not be overcommitted to stocks and be prepared for any major corrections that may happen.

Now that the local market has dropped, we have plenty of cash to be reinvested. Here is the status of the fund vs. the PSEi.

PSEi December 31, 2012 = 5,812.73
PSEi June 13, 2013 = 6,114.08
YTD Yield = 5.18%

SALEF December 31, 2012 = P4.8071
SALEF June 13, 2013 = P5.0447
YTD Yield = 4.94%

Our official year-end target for the PSEi still stands at 7,200.

Rest assured that we at FAMI and the First Metro Group are doing our best to continue to manage your funds with a healthy balance of risk and prudence. We hope that this commentary gives you peace of mind on recent market developments and a glimpse of our strategy moving forward.

Thank you.

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