Philequity Fund, Inc.
PROSPECTUS
as of 3 September 2007
PHILEQUITY MANAGEMENT, INC.
Unit 2004A 20/F East Tower Philippine Stock Exchange
Centre, Exchange Road, Pasig City
 Telephone 689-8080
 Fax 706-0795
 Email info@philequity.net
www.philequity.net
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
Section
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
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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 cutoff time shall be 12 o’clock noon 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’clock noon 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.
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Philequity Fund, Inc.
Redemption charge
Term
Less than 1 year
1 year less than 2 years
2 years and above
Fee
2.0%
1.5%
0.0%
THE COMPANY
A. 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.
B. 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.
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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.
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Philequity Fund, Inc.
Philequity Fund Inc.
Directors and Officers
Valentino C. Sy
Violeta O. Luym
Vicente R. Jayme, Sr.
Gregorio T. Yu
Felipe U. Yap
Enrique P. Esteban
Ignacio B. Gimenez
Chairman / President
Director
Director
Director
Director
Director
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.
A. 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.
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B. 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:
1. The Fund shall not participate in any underwriting or selling
group in connection with public distribution of securities,
except for its own capital stock.
2. 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.
3. 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%.
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Philequity Fund, Inc.
4. 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.
5. The Fund shall not make any investment for the purpose of
exercising control of management.
6. 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
A. 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
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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 Risk is 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:
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Philequity Fund, Inc.
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 THE OPERATION 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.
A. 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
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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
Edmundo Marco P. Bunyi, Jr.
Leo McGuire Garcia
Wilson L. Sy
Washington Z. Sycip
Aurora L. Shih
Ramon Y. Sy
Antonio R. Samson
Joseph L. Ong
Chairman of the Board
President
Director/Treasurer
Director
Independent Director
Independent Director
Independent Director
Independent Director
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.
D. 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.
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Philequity Fund, Inc.
MATERIAL CONTRACTS AND AGREEMENTS
The following is a summary of the material contracts and
agreements relating to the Philequity Fund, Inc. operation.
A. 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;
1. 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;
2. Preparation and submission of such information and data
relating to economic conditions, industries, business
corporations as may be required by the company.
3. 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;
4. Preparation of list of stockholders and the number of shares
owned respectively by each;
5. Extension of necessary cooperation and assistance to the
custodian bank, auditors, transfer agents and legal counsel of
the Company;
6. Handles all correspondence, queries relative to the Fund.
B. 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.
The Custodian Bank of PEFI, Equitable-PCI Bank, performs the
services specified in the Custodial Agreement as follows:
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1. Accepts Application to Purchase PEFI’s shares directly
coursed through the PEMI by the prospective investor;
2. Prepares and transmits to the investor a custodian receipt;
3. Keeps in custody a record of securities and other evidences of
investments delivered to PEFI and prepares reports on
securities in possession;
4. Keeps PEFI’s cash assets.
INVESTMENT PROCEDURE
A. Individual Applicants
Any qualified individual may purchase PEFI shares, through its
principal distributor, or any authorized investment salesman.
An application form in triplicate must be accomplished by the
investor and must be submitted together with the payment order
payable to Philequity Fund, Inc. An official receipt will be issued to
the investor if the investment was made in cash or a provisional
receipt will be issued it payment in made in check. The investor
shall also be furnished a confirmation together with a copy of his
approved application form (white copy).
The minimum initial purchase is P5,000.00 with additional
investment at a minimum of P1,000.00.
B. Corporate Investor Requirements
The following documents must be submitted together with the
application form by the corporate investors:
1. Certified copy of the corporation’s SEC Certificate of
Registration, Articles of Incorporation and By-Laws;
2. Board resolution duly certified by the corporation’s
Secretary, authorizing the subscription to the share applied
for and specifying the authorized signatories;
3. Certification of the corporation’s Secretary indicating the
percentage of holdings by nationality of the corporation’s
stockholders.
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Philequity Fund, Inc.
C. Acceptance of Application
Application to purchase are subject to confirmation of PEMI as to
amount of shares and the applicable NAV with the final approval
by the investment manager and distributor of PEFI. Applications
should comply with the requirements set in this Prospectus and
such other rules, regulations and applicable laws.
The Fund Manager of PEFI reserves the right to accept or reduce
the number of shares indicated in the Application Form at its sole
discretion and in such manner that it may deem appropriate. In the
event the Investment Application Form is not accepted as a whole
or in part, the Fund manager will refund the corresponding
investments to the applicant, without interest within seven (7)
banking days from submission of the Application.
D. Delivery of Stock Certificates
Stock certificates and Custodian Receipts evidencing ownership
of shares shall be issued by the transfer agent and custodian
bank, Equitable-PCI Bank, only upon the request of the investor.
The stock certificate shall be delivered as soon as practicable
after the application has been approved by PEMI, at the address
of the investor indicated in the Application Form to Purchase PEFI
shares, the investor will also receive a periodic Fund Statement
indicating the status of their investment in the Fund.
The cost on the issuance of stock certificates shall be borne by
the Fund.
REDEMPTIONS OF PHILEQUITY FUND SHARES
PEFI is always prepared to redeem the shares to its shareholders.
The shareholder should fill up the Redemption Request Form and
forward it to PEMI. The shareholder is also required to surrender
the Custodian Receipt, and the stock certificates to PEMI. The
Custodian bank prepares the checks for the redeemed shares
within seven (7) banking days after receipt of the Redemption
Request Form and other documents.
The redemption price of shares surrendered for redemption before
the daily cut-off time of 12:00 o’clock noon shall be the next
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computed net asset value per shares, 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.
The custodian bank’s service will cover the processing and the
issuance of the redemption check. Redemptions will be subject to
a graduated redemption fee as outlined below. Payments for
shares redeemed shall be effected within seven (7) banking days
from receipt of the request for redemption.
Placement period
Less than 1 year
1 year – less than 2 years
2 years and above
Applicable Redemption fee
2.0%
1.5%
0.0%
PEFI shall not suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption of any
redeemable security in accordance with the terms appearing in
this Prospectus, for more than five (5) banking days after the
tender of the endorsed stock certificate and request to PEFI,
except on the following conditions:
1. For any period (a) during which the Philippine Stock
Exchange is closed other than customary weekend and
holiday closings or (b) during which trading on the Stock
Exchanges are restricted;
2. For any period during which an emergency exists as a
result of which (a) disposal by the Company of securities
owned by it is not reasonably practicable or (b) it is not
reasonably practicable for the Company to determine the
value of its net assets.
PHILIPPINE LAWS APPLICABLE
TO THE COMPANY
A. Corporate Income Taxes
Income derived from doing business in the Philippines, net of
allowable deductions, is subject to tax at the rate of thirty two
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Philequity Fund, Inc.
percent (32%). In many instances, the Company’s gross income is
not subject to the corporate tax because of the effects of other
final taxes paid and other internal revenue regulations which
provide the application of alternate rates of tax, exemptions and
other different method of tax computation.
B. Withholding tax on Dividend Income
Dividends received from a domestic corporation by individual
investors who are citizens and residents of the Philippines are
subject to withholding tax of 10%. Dividends received from a
domestic corporation by domestic corporations are not subject to
income tax.
Investors are advised to consult their own professional advisers as
to the tax implications of subscribing for, purchasing, holding, and
redeeming shares of the Fund. Tax rulings and other investment
factors are subject to rapid change.
C. Withholding Tax on Interest income
Income realized from interest earned in bank deposits, bonds,
notes and other interest bearing certificates of indebtedness are
subject to tax at the rate of twenty percent (20%) thereof. The
corresponding amount is a final tax, and is withheld at source by a
debtor for subsequent transmittal to tax authorities.
D. Tax on Capital Gains on Stock Transactions
Net Capital Gains realized during each taxable year from the sale,
exchange or disposition of shares of stock that are listed and
traded through the Philippine Stock Exchange shall be
subject to tax at the rate of one half of one percent (1/2 of 1%)
based on the gross selling price of the shares. This tax is final tax
and is netted out of the proceeds to the seller of the stocks.
Net capital gains realized during each taxable year from the sale
or exchange or other disposition of shares of stock that are not
traded through a local stock exchange are taxed as follows:
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Capital Gains Not over P100,000
Capital Gains Over P100,000
-
five percent (5%)
ten percent (10%)
A documentary stamp tax is imposed on every original issuance of
stock certificates at the rate of P1.00 for every P200 (or a fraction
thereof) of par value. The Company pays the documentary stamp
on the original issuance of stock certificates covering the shares.
On any subsequent transfer of shares, a documentary stamp is
imposed at the rate of P0.50 for every P200 (or a fraction thereof)
of par value.
E. Repatriation of Foreign Investments
Foreign investments in Philippine Equities are entitled to
immediate capital repatriation and dividend and interest
remittance privileges at the prevailing exchange rate at the actual
time of remittance under existing regulations of the Bangko
Sentral ng Pilipinas (BSP), provided that the foreign investments
are funded by an inward remittance of foreign exchange
acceptable to the BSP and converted through Philippine
authorized agent and such investment is registered with the BSP.
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Philequity Fund, Inc.
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