P R O S P E C T U S
as of 3 September 2007
Philequity Management, Inc.
Unit 2004A 20/F EastTower PhilippineStock Exchange Centre, Exchange Road, Pasig City
Telephone 689-8080
Fax 706-0795
Email
No dealer, selling agent and any other person has been authorized to give information or make representation not contained in this Prospectus. This Prospectus does not constitute any offer to any securities other than those to which it relates in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The delivery of this Prospectus at any time does not imply that the information herein contained is correct as of any time subsequent to this date.
The information contained in this Prospectus has been supplied by Philequity Fund, Inc. unless otherwise stated. Philequity Fund, Inc. accepts full responsibility for the accuracy of the information given herein, and confirms that there are no omissions of fact which would make any statement in this Prospectus misleading. Philequity Management, Inc., the investment manager of Philequity Fund, Inc. has exerted reasonable efforts to verify the information herein and does not make any representations or warranties as to the accuracy or completeness of the materials contained herein.
Philequity Fund, Inc. has filed Registration Statements with the Securities and Exchange Commission in accordance with the Philippine Investment Company Act and the Revised Philippine Securities Act relating to authorized capital stock of the Company.
The Securities and Exchange Commission has issued an Order dated 27th April 1994 rendering effective the Registration Statements of the Company covering all of the common units of its authorized capital stock and a permit to offer the securities for sale dated 27th April 1994.
TABLE OF CONTENTS
SectionPage
FUND FEATURES
THE COMPANY
A.The Fund’s Incorporation
B.Capitalization and Ownership
Directors and Officers
INVESTMENT GUIDELINES AND STRATEGY
A.Fixed Income Portfolio
B.Equity Portfolio
INVESTMENT LIMITATIONS/RESTRICTIONS
BENEFITS DERIVED FROM INVESTING
IN THE FUND
RISK FACTORS
PARTIES INVOLVED IN THE OPERATION OF THE FUND
A.Investment Manager and Principal Distributor
Directors and Officers
B. Custodian Bank
C. Transfer Agent
D.Legal Counsel
E. External Auditor
MATERIAL CONTRACTS AND AGREEMENTS
INVESTMENT PROCEDURE
A.Individual Applicants
B.Corporate Investor Requirements
C.Acceptance of Application
D.Delivery of Stock Certificates
REDEMPTIONS OF PHILEQUITY FUND SHARES
PHILIPPINE LAWS APPLICABLE
TO THE COMPANY
The Securities and Exchange Commission’s approval of this Prospectus, the order registering the authorized common capital stock of the Company, and the issuance of the certificate or permit to sell are permissive only and do not constitute a recommendation or endorsement by the Securities and Exchange Commission of the securities permitted to be sold.
The common shares of the Company are not listed or traded on the Philippine Stock Exchange.
The reader should consult his stockbroker, legal counsel, professional accountant, or other professional adviser with respect to the acquisition, holding or disposal of the securities described in this prospectus.
FUND FEATURES
Type of Investment
Open end mutual fund
Shares Offered
Common stock
Offering price
At Net Asset Value (NAV) per shares for the banking day, if payment is made within the daily cut-off time, plus a sales load/fee. The NAV per share on the following banking day will be used for payment made after the daily cut-off time. The daily cut-off time shall be 12 o’clocknoon of a banking day. NAV per share is defined as the difference of the total assets of the company less its total liabilities divided by the number of shares outstanding. NAV per share is computed daily on each banking day and posted in the office of the Company. A banking day is a day when commercial banks in Metro manila are required or authorized by law to open.
Minimum Purchase
The minimum initial purchase is at P5,000 and a minimum of P1,000 worth of shares for additional purchases,
Sales Load/Fee
A sales load/fee of 3.5% is collected per investment.
Redemption Price
The redemption price of shares surrendered for redemption before the daily cut-off time 12:00 o’clocknoon shall be the next computed net asset value, i.e. the NAVPS computed at the end of the same business day. Requests for redemptions received by the fund after the said cut-off time shall be considered received the following business day and processed accordingly.
Redemption charge
Term / FeeLess than 1 year / 2.0%
1 year less than 2 years / 1.5%
2 years and above / 0.0%
THE COMPANY
- The Fund’s Incorporation
The Philequity Fund, Inc. which was incorporated in the Philippines on February 21, 1994 under the Republic Act No. 2629 or the Investment Company Act, is a diversified, open-end investment company. The Fund is engaged in the sale of its shares of stock and in the investment of the proceeds from the sale of its shares into a well-selected portfolio of securities, both debt and equity. The fund is designed to accommodate both big and small investors seeking capital appreciation to avail of the professional management of their investments at the lowest possible cost, liquidity, growth opportunity, and satisfactory returns on their investments. Upon notice, the Fund is ready to redeem the shareholdings of any investor at the applicable Net Asset Value per share.
- Capitalization and Ownership
The Fund has an authorized capital of One Billion Pesos (P1,000,000,000.00) divided into 1.0 billion shares with a par value of P1.00 per share.
The incorporators of the Fund agreed not to sell, transfer, convey, encumber or otherwise dispose of their shares of Philequity Fund, Inc. within twenty-four (24) months from the issuance by the Securities and Exchange Commission of an order authorizing the sale of Philequity Fund shares to the public.
Each share of stock of the Company is a voting stock with voting rights equal to every other outstanding shares of stock, and subject to right of redemption.
1. Right of Redemption
The holder of any share of stock of the Company, upon its presentation to the Company, or its duly authorized representatives, is entitled to receive by way of redemption approximately his proportionate share of the Company’s assets or cash equivalent thereof, i.e. the current Net Asset Value, subject to the existing laws and the by-laws of the Corporation; provided, however that no such redemption may be made unless the remaining unimpaired capital of the Corporation shall be 50% of its outstanding liabilities to its creditors of the Company. Provided, further, the redemption may be suspended during any periods specified under the by-laws and under any applicable laws and regulations.
2. Waiver of Preemptive Rights
No Stockholder shall, because of his ownership of stock, have a pre-emptive right or other right to purchase, subscribe for, or take any part of any stock or any other securities convertible into or carrying options or warrants to purchase stock of the Company. The Company’s Article of Incorporation further provided that any part of such stock or other securities may at any time be issued, optioned for sale and sold or disposed of by the Company pursuant to resolution of its Board of Directors, to such persons and upon persons and upon such terms as such Board may deem proper, without first offering such stock or securities on any part thereof to existing stockholders.
3. Restriction on Transfer
No transfer of stock of the Company which would reduce the stock ownership or equity interest of Filipino citizens to less than the percentage required by applicable laws and regulations shall be caused or allowed to be recorded in the proper books of the Company.
Philequity Fund Inc.
Directors and Officers
Valentino C. Sy / Chairman / PresidentVioleta O. Luym / Director
Vicente R. Jayme, Sr. / Director
Gregorio T. Yu / Director
FelipeU.Yap / Director
Enrique P. Esteban / Director
Ignacio B. Gimenez / Director
INVESTMENT GUIDELINES AND STRATEGY
Investment Policy
Philequity Fund, Inc. (“Fund”) is an open-end mutual fund. The Fund’s investment objective is to seek long-term capital appreciation through investment primarily in equity securities of listed Philippine companies while taking into consideration the liquidity and safety of its investments to protect the interest of its investors.
The Fund intends to invest its assets in a variety of Philippine industries to achieve diversification, but will act as such within the provision of applicable laws and regulations.
- Fixed Income Portfolio
A portion of the Fund’s investment portfolio shall be invested in short to medium term corporate debt papers registered with the Securities and Exchange Commission and had been approved by the Board of Directors of the fund management company.
The fund shall allocate at least 10% of its assets in short-term government securities, bonds or other evidences of indebtedness issued by the Philippine government or any of its instrumentalities, savings or time deposits with commercial banks and approved by the Board of Directors of the fund management company.
- Equity Portfolio
The Fund shall invest its assets in a variety of selected and listed Philippine industries. These companies must have shown a record of profit growth, dividend payment and stability. In selecting industries and companies for investment, the Investment Manager will consider factors such as overall growth prospects, competitive position in markets served, technology, research and development, productivity, labor costs, raw materials sources and costs, capital resources, profit margins, return on investments, government regulations, and experience, quality and competitiveness of management. While it is expected that the Fund will invest principally in securities of established companies, investments may also be made in securities of newly listed companies. Studies on these companies shall be considered from time to time. The Fund intends to purchase and hold securities for long-term gain, except on a case-to-case basis.
INVESTMENT LIMITATIONS/RESTRICTIONS
The following are the limitations and fundamental policies of the Company and the provisions of the Securities and Exchange Commission:
- The Fund shall not participate in any underwriting or selling group in connection with public distribution of securities, except for its own capital stock.
- The maximum investment in any single enterprise shall not exceed an amount equivalent to ten percent (10%) of the Fund’s Net Asset Value, and in no case shall be the total investment of the Fund exceed ten (10%) of the outstanding securities of any one investee company.
- The Fund shall not incur any further debt or borrowings unless at the time of its occurrence or immediately thereafter there is an asset coverage of at least three hundred percent (300%) for all its borrowings. In the event that such asset coverage shall fall below 300%, the Fund shall within three (3) days thereafter reduce the amount of its borrowings to an extent that the asset coverage of such borrowings shall be at least 300%.
- Operational expenses shall not exceed ten percent (10%) of its total investment fund or total net worth as shown in the previous years audited financial statements.
- The Fund shall not make any investment for the purpose of exercising control of management.
- The Securities and Exchange Commission, by order, unless it provides otherwise, the Fund may not engage in any of the following:
-margin purchase of securities;
-commodity futures contracts;
-precious metals;
-unlimited liability investments;
-short selling of currencies;
-short selling of investments;
-other investments as the SEC shall, from time to time, prescribe.
BENEFITS DERIVED FROM INVESTING
IN THE FUND
- Professional Management
An investor receives professional management at rock-bottom fees. No matter how small or big your investments are, professional care is given to your Fund. The managers keep track of your investments in order to achieve the highest possible returns consistent with a sound investment management and judgment.
B. Liquidity
The investor can purchase and redeem shares easily. The company redeems the shares from the investor at the applicable Net Asset Value per share, subject to the rules and regulations set by the Securities and Exchange Commission.
C. Diversification
Owning a large portfolio of stocks is a standard reason given for buying funds. There are two basic risks in owning stocks. The risk that the market will go down, and the risk that an individual company will do poorly. Diversification is more complicated than it might appear. It is not enough to own a dozen or more stocks. Proper diversification demands investments in stocks of different industries that are likely to behave the same way at the same time resulting to a long-term, appreciation of the Fund.
D. Satisfactory Return
Performance becomes an important element in the mutual fund operation. Although there is no guarantee of yield on an investment in the mutual fund, the Fund offers better opportunity for income growth compared to other fixed-income investments because of its investments in equities.
RISK FACTORS
As with any investment, the Fund’s past performance is no guarantee of its future success. Over the long-term, however, the success or failure to profit in the fund will depend on the risks and volatility inherent in the combination of shares in the fund’s portfolio.
THE FUND DOES NOT CARRY A GUARANTEED RATE OF RETURN. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR’S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Various risk factors can affect the market value of the assets of the Fund and can cause fluctuations in the Fund's net asset value. The Fund, however, adopts steps to minimize, if not eliminate, the effect of these risks. The major risks facing the Fund include the following:
1. Market Riskis the risk that the value of your mutual fund investment will be adversely affected by the fluctuations in the price level or volatility of one or more of the underlying instruments of the mutual fund. This consists of two main components:
a. Systematic Risk – is the variability in price caused by factors that affect all securities across all markets (e.g. significant economic or political events). As an illustration, when the country's general political and economic situations are perceived to be in turmoil, the stock market, in general, experience lack of trading interest that will consequently result in thin volume trading and narrow price volatility. Such situations generally will trigger a downward momentum for both the stock prices and trading volumes until the political and economic condition normalize. As a consequence, these instances can result to the redemption prices of redeemed shares being less than the prices at which the shares were originally purchased. Investors who redeem their shares during this time may not recover the full cost of their investment.
b. Unsystematic Risk – is the variability in price caused by factors which are specific to the particular issuer (corporation) of the shares of stocks. Through proper portfolio diversification, this risk can be minimized as losses on one particular stock may be off-set by gains in another.
2. Liquidity Risk is the risk that an investment may not find a ready buyer. This is minimized by the fact that the Fund only invests in listed, marketable equities.
PARTIES INVOLVED IN THEOPERATION OF THE FUND
The different entities that are directly involved in the operations of Philequity Fund, Inc. (PEFI) are: Philequity Management, Inc. (PEMI) the investment manager; Equitable-PCI Bank, the custodian bank and the transfer agent of PEFI.
- Investment Manager and Principal Distributor
Philequity Management, Inc. is the investment manager of the Fund. PEMI provides and renders professional management and technical services to corporations. PEMI also acts as the principal distributor of the Fund. It takes charge of the sales of PEFI shares. The guidelines for the management and operations of PEFI are set in the Fund Management and Distribution Agreement between PEFI and PEMI. PEMI is a corporation organized by a group of individuals who have a track record in the stock brokerage business, having successfully managed their clients’ resources.
PHILEQUITY MANAGEMENENT, INC.
Directors and Officers
Roberto Z. Lorayes / Chairman of the BoardEdmundo Marco P. Bunyi, Jr. / President
Leo McGuire Garcia / Director/Treasurer
Wilson L. Sy / Director
Washington Z. Sycip / Independent Director
Aurora L. Shih / Independent Director
Ramon Y. Sy / Independent Director
Antonio R. Samson / Independent Director
Joseph L. Ong / Treasurer
B. Custodian Bank
The Custodial Agreement covers the custodian bank’s duties on receipt of investible funds, the redemption procedure, reports and records required by the Fund and the fund manager, custody of certificates representing investments made by the fund manager for the Fund and fees of the custodian bank. The custodian bank of PEFI is Equitable-PCI Bank.
C. Transfer Agent
The transfer agent of PEFI is Equitable-PCI Bank.
- Legal Counsel
The law offices of Tan and Venturanza serve as the legal counsel for PEFI.
E. External Auditor
The accounting firm of Sycip Gorres Velayo and Company acts as the external auditor of PEFI.
MATERIAL CONTRACTS AND AGREEMENTS
The following is a summary of the material contracts and agreements relating to the Philequity Fund, Inc. operation.
- Portfolio Management and Distribution Agreement between PEFI and PEMI whereby the latter was appointed as the Fund Manager and Distributor of PEFI’s shares.
The scope of services in accordance with this agreement are as follows;
- Investment and reinvestment of the resources of PEFI in accordance with the investment policies and guidelines in conformity for PEFI’s objectives, registration statement and the rules and regulations formulated by the SEC, Investment Company Act, Revised Securities Act and other applicable laws and regulations in the Philippines;
- Preparation and submission of such information and data relating to economic conditions, industries, business corporations as may be required by the company.
- Preparation of reports, notices and other information on the business affairs of the Company from time to time as may be required by the Company;
- Preparation of list of stockholders and the number of shares owned respectively by each;
- Extension of necessary cooperation and assistance to the custodian bank, auditors, transfer agents and legal counsel of the Company;
- Handles all correspondence, queries relative to the Fund.
- Custodial Agreement
In accordance with the SEC rules and regulations, all securities owned by the Fund are required to be held by a Custodian Bank.