Philequity Fund, Inc.

Transcription

1 Philequity Fund, Inc. P R O S P E C T U S as of 3 September 2007 PHILEQUITY MANAGEMENT, INC. Unit 2004A 20/F East Tower Philippine Stock Exchange Centre, Exchange Road, Pasig City 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 27 th 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 27 th April Telephone Fax info@philequity.net

2 TABLE OF CONTENTS Section Page FUND FEATURES 1 THE COMPANY 2 A. The Fund s Incorporation 2 B. Capitalization and Ownership 2 C. s and Officers 4 INVESTMENT GUIDELINES AND STRATEGY 4 A. Fixed Income Portfolio 4 B. Equity Portfolio 5 INVESTMENT LIMITATIONS/RESTRICTIONS 5 BENEFITS DERIVED FROM INVESTING IN THE FUND 6 RISK FACTORS 7 PARTIES INVOLVED IN THE OPERATION OF THE FUND 8 A. Investment Manager and Principal Distributor 8 B. Custodian Bank 9 C. Transfer Agent 9 D. Legal Counsel 9 E. External Auditor 9 MATERIAL CONTRACTS AND AGREEMENTS 10 INVESTMENT PROCEDURE 11 A. Individual Applicants 11 B. Corporate Investor Requirements 11 C. Acceptance of Application 12 D. Delivery of Stock Certificates 12 REDEMPTIONS OF PHILEQUITY FUND SHARES 12 PHILIPPINE LAWS APPLICABLE TO THE COMPANY 13 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.

3 FUND FEATURES Type of Investment Open end mutual fund Shares Offered Common stock Offering price At Net Asset Value (NAV) per share 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 P5,000 and a minimum of P1,000 worth of shares for additional purchases, Sales Load/Fee A maximum 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. Redemption charge Term Fee Less than 1 year 2.0% 1 year less than 2 years 1.5% 2 years and above 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 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. 1 Philequity Fund, Inc. Prospectus 2

4 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 period 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 s, 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. 3 Philequity Fund, Inc. Philequity Fund Inc. s and Officers Valentino C. Sy Chairman / President Violeta O. Luym Vicente R. Jayme, Sr. Gregorio T. Yu Felipe U. Yap Enrique P. Esteban Ignacio B. Gimenez 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 s 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, Prospectus 4

5 savings or time deposits with commercial banks and approved by the Board of s of the fund management company. 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 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 5 Philequity Fund, Inc. that the asset coverage of such borrowings shall be at least 300%. 4. Operational expenses shall not exceed ten percent (10%) of its total investment fund or total net worth as shown in the previous year s 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 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 Prospectus 6

6 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 in 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: 7 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, experiences 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 in 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 Prospectus 8

7 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. s and Officers Roberto Z. Lorayes Chairman of the Board Edmundo Marco P. Bunyi, Jr. President Leo McGuire Garcia /Treasurer Wilson L. Sy Washington Z. Sycip Independent Aurora L. Shih Independent Ramon Y. Sy Independent Antonio R. Samson Independent 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. 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. 9 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 with 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: Prospectus 10

8 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, with additional investment at a minimum of P1, 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. 11 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. Prospectus 12

9 The redemption price of shares surrendered for redemption before the daily cut-off time of 12:00 o clock noon shall be the next 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 Applicable Redemption fee Less than 1 year 2.0% 1 year less than 2 years 1.5% 2 years and above 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 Income derived from doing business in the Philippines, net of allowable deductions, is subject to tax at the rate of thirty two 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. A. Corporate Income Taxes 13 Philequity Fund, Inc. Prospectus 14

10 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: Capital Gains Not over P100,000 - five percent (5%) Capital Gains Over P100,000 - 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. 15 Philequity Fund, Inc. Prospectus 16