UNITED FUND, INC. OCTOBER 2014 0 . United Fund, Inc. is a growth-oriented mutual fund, which seeks to maximize income and maintain liquidity of investments, through a diversified portfolio of listed equity issues and high grade fixed income instruments. FUND FACTS AND FIGURES Launch Date Structure Domicile Currency Minimum Initial Investment Minimum Additional Investment Sales Load Redemption Fee < 1 year from purchase date PORTFOLIO ALLOCATION 1993 Mutual Fund Fund Manager Cocolife Asset Management Co., Inc. Custodian Bank UCPB-TBD Republic of the Philippines Transfer Agent UCPB-TBD Philippine Peso Php 5,000.00 External Auditor KPMG Manabat San Agustin & Co. Preferred Shares 0.69% Investment in Loans 1.56% Php 1,000.00 2% of the NAVPS Cash 0.30% 3.5% of NAVPS FUND PERFORMANCE Common Equities 97.45% EQUITIES BY SECTOR Banks and Other Financial Institutions Electricity, Energy, Power & Water Food and Beverage Holding Firms Hotel & Leisure Mining and Oil Property Telecom Other Services NAVPS 10/31/2014 3.2590 One-year Three-year Five-year Year-to-Date Return 12.40% Annual Return Cumulative Return -1.80% 5.68% 7.72% -1.80% 18.04% 45.03% TOP 10 Issue SM Investments Corp. SM Prime Holdings Inc. Alsons Consolidated Resources Ayala Land Inc. Ayala Corporation Philippine Long Distance Tel. Co. Manila Electric Company Philippine Stock Exchange Aboitiz Power Corporation Alliance Global Inc. 12.58% 19.96% 3.83% 32.09% 1.36% 0.10% 19.65% 6.81% 1.76% 98.14% Sector % of Fund Holding Firm 10.00% Property 9.59% Electricity, Energy, Power & Water 9.52% Property 9.33% Holding Firm 9.03% Telecom 6.81% Electricity, Energy, Power & Water 5.36% Other Financial Institution 4.75% Electricity, Energy, Power & Water 4.24% Holding Firm 3.53% FUND MANAGER'S REPORT The Philippine Stock Exchange Index (PSEi) slightly weakened by 0.93% as the market closed last October 31 at 7,215.73 from September closing of 7,283.07. However, on a year-to-date basis, the index was up by 22.51%, to settle at the 7,200 territory. The local market set off October with negative news dangling over the Ebola scare as well as the democracy protests in Hong Kong and continued tensions in the Middle East. Moreover, global growth concerns further soured investors’ sentiment following the downgraded forecasts of the International Monetary Fund to 3.3% from the 3.4% announced in July. The benchmark index even plunged to 6,946.06 in October 14 closing, journeying away from the 7,000 level alongside with Asian peers on sustained worries about the health of the global economy. Moreover, the downtrend was buoyed by high valuation concerns of local issues which have been looming for quite some time. Nevertheless, the global growth uncertainty was soothed by China’s better-than-estimated GDP figure of 7.3% in the third quarter as well as the annualized US GDP print of 3.5% and the announcement of the European Central bank on its stimulus plans that would jumpstart the euro economy. In the weeks to come, the local stock market is seen to commence November trading with optimism from the release of third quarter local corporate earnings and October inflation print easing to 4.3%. Furthermore, growth forecasts of the World Bank and International Monetary Fund to the local economy which is seen to remain Southeast Asia’s growth leader until next year may temper economic woes and geopolitical tensions experienced in some parts of the globe. 0 RISK DISCLOSURE. The value of investments in mutual funds is not guaranteed and will vary from day to day depending on the market value of the individual securities in its portfolio. Factors that can affect the value of these securities include economic conditions, interest rates, government regulations and taxations, and corporate performance. RISK MANAGEMENT. Equity risk will be managed through prudent selection and avoidance of speculative and doubtful securities as well as portfolio diversification to reduce the impact of possible risks. The company shall manage interest rate risk by actively monitoring the prevailing interest rates. The fund maintains sufficient liquidity in the form of short term deposits which may be withdrawn anytime at minimal cost. Loans to private corporations will be limited only to high credit quality Philippine companies that meet the set standards. ECONOMIC AND MARKET UPDATE OCTOBER 2014 Inflation settles at 4.3% in October. Inflation rate slowed down for the second straight month in October to 4.3%, following the 4.4% in September, yet higher compared to the 2.9% in the same month last year. According to the Philippine Statistics Authority, the slowdown was supported by the “lower increments in the indices of food and alcoholic beverages, clothing and footwear, and restaurant and miscellaneous goods and services”. Year-to-date inflation averaged at 4.3%, well-within the 3-5% target of the government. Moreover, core inflation eased to 3.2% from 3.4% the previous month. BSP maintains key policy rates. The Bangko Sentral ng Pilipinas has kept its key policy rates unchanged in its Monetary Board meeting held last October 23 amid easing inflationary measures this year through 2016. Consequently, overnight borrowing and lending remained at 4% and 6%, respectively; special deposit account rates at 2.5%; and banks’ reserve requirement ratio at 2 0%. Money supply eases further to 16.2%. The country’s money supply in September accelerated by 16.2% to P7.2 trillion supported mainly by the sustained demand for credit in the domestic economy. Notably, money circulating in the economy was slower than the 18.3% in August and was the slowest pace since May 2013’s 15.8% expansion. According to the Bangko Sentral ng Pilipinas, domestic liquidity growth is anticipated to ease to moderate levels as previous monetary policy adjustments contin ue to work through the economy. WB and IMF remain optimistic on PH economy. The World Bank has kept its economic growth forecasts for the country this year at 6.4%, 6.7% in 2015 and 6.5% in 2016, all below government growth goals of 6.5 -7.5%, 7-8% and 7.5-8.5%, respectively. However, the bank noted that the country is seen to be the fastest growing among original members of the Association of Southeast Asian Nations (ASEAN), despite the lower global growth forecasts. Moreover, the International Monetary Fund expects the country to remain Southeast Asia’s growth leader until next year with growth forecasts of 6.2% this year and 6.3% in 2015 amid strong demand for exports from advanced economies. BOP surplus hits $98M in September. The country’s balance of payments (BoP) sustained a surplus for a third straight month in September to stand at $98 million, yet 79% lower than the $465 million in the same period last year. The September BoP fig ure also shrank from the $501 million and $114 million surplus recorded in July and August, respecti vely, reflecting the drag from foreign fund outflows for the month. Specifically, a net outflow of $324 million in portfolio investments was recorded in Sep tember, the first since March amid the anticipation of the policy tightening by the US Federal Reserve. Imports contract further to $5.5B. The country’s imports in August summed to $5.491 billion, 1.3% lower than the $5.564 billion in the same month last year, continuing the 4.0% and 1.4% contractions in May and June, respectively and the flat 0.2 % growth in July. Year-to-date, imports plunged by 4.0% to $42.446 billion from the $40.810 billion recorded in the same period in 2013, falling further short of the government’s full-year 9% goal. The poor performance was due to the slump in electronics imports as well as inbound shipments in mineral fuels, lubricants and related materials. August exports hasten by 10.5%. The country’s export in August accelerated by 10.5% to $5.474 billion from $4.956 billion in the same month last year, bringing year-to-date tally to $40.748 billion, a 9.2% growth surpassing the government’s 6% target for 2014. The sustained growth was supported by the increase of eight out of the top ten major commodities for the month includin g manufactured goods and the electronic products, which accounted for 80.7% and 41.6% of total export receipts, respectively. However, the August exports figure was lower than the 30.1% growth rate in the same month last year and from 12.4% in July. Remittances improve by 5.9% to $2B. Remittances in August from overseas Filipino workers notched $2.053 billion, a 5.9% jump from the $1.938 billion in the same month last year underpinned to the continued demand of Filipino workers abroad and efficient network of bank and non-bank remittance channels. For the January-August 2014 period, remittances have grown by 5.8% to reach $15.538 billion from the $14.684 billion registered in 2013. GIR stands at $80.43B in September. Gross international reserves (GIR) as of end-September stood at $80.43 billion, slightly lower by 0.54% than the end-August 2014 GIR of $80.87 billion. The decline was attributed to the “revaluation adjustments on the BSP’s gold holdings and other foreign currency-denominated reserves as well as payments for maturing foreign exchange obligations of the national government”. Gov’t incurs P5.2B budget deficit. The government has incurred P5.2 billion budget deficit in September, P13.4 billion lower from the same month last year due to improved revenue collections by the Bureau of Internal Revenue and the Bureau of Customs, yet a reversal of the P29.9 billion surplus in August. According to the Finance Department, revenue collection in September r ose by 21% to P154.6 billion while expenditures climbed by 9% to P13.8 billion. Year-to-date, budget balance was at a deficit of P31.1 billion, well-within the P235.5-billion deficit ceiling of the government for the period. FDI expands to $4B as of July. The country’s foreign direct investments (FDI) as of July amounted to $4.008 billion, 56.1% higher than the $2.568 billion in the same period last year amid the country’s sustained strong macroeconomic fundamentals. However, for July alone, net FDI inflows declined by 20.6% to $436 million from $549 million a year ago. Hot money reverses to an outflow of $324M. Foreign portfolio investments also known as hot money swung to a net outflow in September to $324.12 million after five straight months of net inflows attributed to profit taking among investors. Septem ber figure was a turnaround from the $483.45 million net inflow seen in August and the $682.73 million inflow in the same month in 2013. Year-to-date, foreign portfolio investments totaled to a net outflow of $852.62 million, a reversal of the $2.744 -billion net inflow recorded in the comparable period last year. Peso unchanged at 44.88 in end-October. For the month of October, the local currency closed at 44.88, same as September’s closing to settle within the P42-P45-per-dollar range forecast of the government for 2014. The stable peso-dollar exchange rate is supported by the country’s investment grade status attracting sustained dollar inflows as well as the continued flow of remittances. However, concerns over the conclusion of the bond-buying scheme of the Fed have induced optimism on the US economy driving demand for the greenback.