You are on page 1of 1


December 31, 2010

Investment Objective
To generate a steady stream of income through investing in a diversified portfolio of high-grade peso-denominated fixed income instruments.

Fund Manager's Report
Local bond yields had mixed movements this month with the short-tenors decreasing by an average of 40bps, mediumtenors falling by 10bps and long-tenors increasing by 6bps. The drop in yields were supported by the debt exchange of the government which lengthened its maturity profile by allowing investors to swap existing shorter-dated bonds to new 10- and 25-year benchmark bonds. A total of PHP199.7Bn was issued of the new benchmark bonds, effectively increasing liquidity in the longer tenors. 2010 was a good year for bonds given fiscal restraint, a benign inflationary environment, and high market liquidity. Bond yields declined by an average of 191bps for the year. Controlled government spending has brought the 11-month budget deficit to PHP268Bn which is well within the target of PHP300Bn. Philippine inflation has remained wellanchored, averaging 3.8% for the year, which is at the low end of the 3.5-5.5% BSP target due to controlled food and crude oil prices as well as the 5% peso appreciation. The market continued to remain flush with liquidity as SDA’s and RRP’s grew to PHP1.48Tn by the second week of December. The Fund continued to reduce its exposure to short-term government securities, locking in profits on 2% of the portfolio. Short-term government securities were yielding 0.775% while SDAs were yielding 4.1875%, a yield pick up of 340bps. The Fund increased its duration to a slightly overweight position thru participation in the Peso bond swap. The Fund will combine money market instruments with long-term government securities. 2011 will likely see a continuation of the low interest rate environment given that liquidity remains high, inflation is so far under control, and high optimism remains in the government's ability to improve its fiscal condition. Investors in a bond fund must be prepared to withstand volatility as higher investment value is typically achieved over the medium- to long-term.

Fund Performance
Absolute Returns 2010 2009 2008 2007 2006 Fund 9.02% 4.75% 4.21% 5.16% 13.44% 91-Day Treasury Bills 3.20% 3.65% 4.26% 2.68% 4.41%

Returns are net of fees. Past Performance is not an indication of future returns.

Fund Facts
Launch Date Structure Fund Type Base Currency Net Asset Value NAV Per Share (NAVps) Par Value Minimum Initial Investment Minimum Transaction Minimum Holding Period Initial Sales Charge Early Redemption Fee Management Fee Financial Reporting Fund Manager Receiving Banks Custodian Dealing Bloomberg Ticker

July 18, 1997 Mutual Fund Medium-Term Bond Fund Philippine Peso PHP 30.16 Billion PHP 265.21 PHP 100 PHP 50,000 PHP 10,000 180 days Waived 1.00% 1.50% p.a. Philippine Accounting Standards Bank of the Philippine Islands Bank of the Philippine Islands Branches BPI Family Savings Bank Branches HSBC Daily up to 12 noon AYLFFIF PM

Net Asset Value Per Share
270 260 250 240 230 220 210 200 190 180 170 Fund 91-Day Treasury Bills

Contribution rounded down/redemption rounded off to the nearest whole share.

Risk Characteristics
Risk Measures Duration Volatility, Past 360 Days Sharpe Ratio, Past 360 Days Dec 31, 2010 3.40 0.93% 6.28 Low 2.40 0.67% Past 12 Months High Average 3.68 2.89 0.93% 0.79%

Duration measures the sensitivity of NAVps to interest rate movements. As interest rates rise, bond prices fall. The higher the duration, the more the NAVps will fluctuate in relation to changes in interest rates. Volatility measures the fluctuations in NAVps. The higher the number, the higher the potential gain or loss. Sharpe ratio evaluates reward-to-risk efficiency. The higher the number, the higher the reward per unit of risk. Risk Disclosure The Fund is suitable for investors who take medium- to long-term views. The Fund’s yield, net asset value, and total return may fall as well as rise as a result of interest rate movements and the changes in credit quality of the investments. On redemption of shares, an investor may receive an amount less than the original amount of the investment. Risk Management In accordance with the provisions in the Prospectus, the Fund implements a risk management policy that applies the principles of Value-at-Risk (VAR). VAR is a measure of the portfolio's maximum potential loss and is computed based on price volatility and market value of the investment portfolio. The Fund's risk management policy prescribes a dynamic volatility band, such that if the volatility of the Fund's investments as reflected in the NAVps exceeds the volatility band, adjustments are made for the collective interest of the participants. The Fund may also use financial derivatives to hedge the portfolio against market and credit risks.

Asset Valuation: 47% marked-to-market and 53% at amortized cost. Allocation may change according to portfolio strategy and size. Instruments with BPI Internal Credit Risk Rating of 3 or better are considered high-grade.

Any prospective investment shall be limited to the type of investments described in the Prospectus of the Fund.

ALFM Peso Bond Fund is an open-end investment company or “mutual fund” registered with the Securities and Exchange Commission (SEC). It is not guaranteed by the Fund Manager nor by the Philippine Deposit Insurance Corporation (PDIC). As such, shares of participation of the investor, when redeemed, may be worth more or worth less than his/her initial investment/contributions. Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the mutual fund, even if invested in government securities, is for the account of the investor. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Fund Manager is not liable for losses, unless upon willful default, bad faith or gross negligence. For the purpose of lodging, clearing, settlement, and delivery of securities in the mutual fund, the Fund Manager is authorized to avail of the services of third party institutions such as but not limited to custodians which the Fund Manager may change or replace without prior notice to or approval from the investors. The Fund Manager will not be responsible for any loss or damage suffered by the Fund as a result of the third parties’ willful default, gross negligence, or evident bad faith. Investors are advised to read the Prospectus of the Fund which may be obtained from authorized distributors before deciding to invest. For inquiries, please call: BPI Capital Corporation (632) 845-5695 to 98; BPI Investment Management, Inc (632) 845-5033 to 35; BPI Securities Corporation (632) 816-9190 or (632) 816-9192 or email or

Au gN 05 ov Fe -05 b M -06 ay Au -06 gN 06 ov Fe -06 b M -07 ay Au -07 gN 07 ov Fe -07 b M -08 ay Au -08 gN 08 ov Fe -08 b M -09 ay Au -09 gN 09 ov Fe -09 b M -10 ay Au -10 gN 10 ov -1 0

Portfolio Composition
Gov't Securities Medium Term 16% Corporate Notes and Bonds 27% Money Market Instruments and Other Receivables 28%

Gov't Securities Long Term 23%

Preferred Shares Index Bond Fund 5% 1%

Top 10 Holdings
Fixed Rate Treasury Notes 8.125% 12/16/2035 Retail Treasury Bonds 7.250% 08/19/2020 Retail Treasury Bonds 6.250% 09/24/2014 Fixed Rate Treasury Notes 5.750% 02/21/2012 Fixed Rate Treasury Notes 8.750% 03/03/2013 Fixed Rate Treasury Notes 7.000% 03/31/2017 BSP Special Deposit Account 4.1875% 01/03/2011 Meralco Fixed Rate Corporate Notes 5.8327% 12/04/2017 Fixed Rate Treasury Notes 6.375% 05/13/2015 Aboitiz Equity Ventures Fixed Rate Corporate Notes 5.2258% 12/01/2015

% of Fund 6.0% 4.3% 3.7% 3.4% 3.2% 3.0% 2.8% 2.4% 2.3% 2.3%