PHILEQUITY MONEY MARKET FUND, INC. (formerly "Vantage Money Market Fund, Inc.")

Transcription

1 FINAL PROSPECTUS OF PHILEQUITY MONEY MARKET FUND, INC. (formerly "Vantage Money Market Fund, Inc.") AN OPEN-END INVESTMENT COMPANY 100,000,000 Shares COMMON STOCK The number of shares to be offered inclusive of what has already been subscribed to upon incorporation is One Hundred Million (100,000,000) Shares. Twenty-Five Million (25,000,000) Shares have been subscribed at incorporation at par value of P=1.00 per share. The price at which the Seventy-Five Million (75,000,000) shares are to be offered will be based on the next computed Net Asset Value Per Share after a subscription is made. The shares to be offered are not listed in the Philippine Stock Exchange, and shall be traded through its principal distributor, Philequity Management, Inc. (PEMI). PHILEQUITY MANAGEMENT, INC. PRINCIPAL DISTRIBUTOR 1 February 2005

2 No dealer, selling agent or any other person has been authorized to give information or make any representation not contained in this Prospectus. This Prospectus does not constitute an offer of any securities other than those to which it relates, or an offer to sell or a solicitation of an offer to buy any securities other than those to which it relates in any jurisdiction or 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 Money Market Fund, Inc. unless otherwise stated. Philequity Money Market 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 Money Market 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. ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATION CONTAINED HEREIN IS TRUE AND CORRECT. 2

3 The following are the summary income statement and balance sheet of the Fund for calendar years 2002 and 2003: Income Statement 31 December December 2002 Revenue P 2,431, P 2,089, Less: Expenses and other Charges 149, , Net Investment Income P 2,282, P 2,016, Balance Sheet 31 December December 2002 Asset P 37,503, P 35,251, Liabilities 30, , Net Assets P 37,473, P 35,191,

4 TABLE OF CONTENTS PROSPECTUS SUMMARY... 6 GLOSSARY... 7 THE FUND... 8 Company Background... 8 Capitalization... 9 Right of Redemption Waiver of Pre-Emptive Rights Distribution of Dividends Restrictions on Transfer Ownership Incorporators, Board of Directors, and Officers Compensation of Directors and Executive Officers Effects of Government Regulation Properties Summary of Net Asset Value Holders Security Ownership of Certain Beneficial Owners and Management Security Ownership of Certain Record and Beneficial Owners Security Ownership of Management Legal Proceedings MANAGEMENT DISCUSSION AND ANALYSIS Mutual Fund Industry in the Philippines Top 5 Key Indicators Financial Condition INVESTMENT OBJECTIVE AND INVESTMENT POLICIES INVESTMENT RESTRICTIONS RISK FACTORS USE OF PROCEEDS INVESTMENT PROCEDURE Terms and Pricing of Securities Offering Price Sales Load Minimum Investment Subscription Procedure Investment Application Form Eligible Investors

5 Requirements for Corporate Applicants Acceptance of Investment Applications Payment Terms Refunds Delivery of Stock Certificates Periodic Fund Statement REDEMPTION OF SHARES NAV Per Share Computation Manner and Method of Redemption Redemption Price Minimum Holding Period and Redemption Charges Special Considerations Applicable Taxes COMPUTATION OF NET ASSET VALUE BENEFITS TO THE INVESTOR Professional Management and Supervision Diversification Access to Higher Interest Rates Liquidity PARTIES INVOLVED IN THE FUND Investment Manager and Principal Distributor Company Profile Duties and Responsibilities Custodian Bank Transfer Agent Legal Counsel External Auditor Significant Employee Certain Relationships and Related Transactions EXPENSES CHARGEABLE TO THE FUND MANAGEMENT FEE EXPENSES CHARGEABLE TO THE INVESTMENT MANAGER

6 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus. Issuer Philequity Money Market Fund, Inc. (formerly "Vantage Money Market Fund, Inc.") with office address at 2703A East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City. The Fund s telephone number is (63) (2) Shares Offered/Par Value Common stock with par value of One Peso (P=1.00) per share Offering Price At NAV per share for the banking day, if payment is made within the daily cut-off time, plus a sales load. Proceeds from the offering As of the filing of this Amended Prospectus, total proceeds from the issuance of the shares of stock of the Fund is P31,158, The Proceeds were invested in various short term deposits. Sales Load The sales load fee shall be a maximum of one percent (1.0%) of the value of investment. Daily Cut-Off Time 12:00 noon Minimum Investment P10,000 for initial investments and P=5,000 for additional investments. Investment shall be on cash basis only. Installment sales are prohibited. Redemption Price The redemption price of the securities surrendered within the daily cut-off time shall be the next computed NAV per share after the request for redemption is received. Securities surrendered after the daily cut-off time shall be deemed to have been received on the following banking day. Redemption Charge A redemption fee one percent (1.0%) shall be deducted from the redemption proceeds of shares redeemed in the first (1st) year from the time of purchase. A redemption fee of one half percent 6

7 (0.5%) shall be deducted from the redemption proceeds of shares if redeemed on the second year from the time of purchase, and no redemption fee shall be deducted if redeemed beyond the second year from the time of purchase. Management Fee and Expenses A management fee equivalent to one and a half percent (1.5%) per annum of the average net asset value of the Fund's assets computed on a daily basis, shall be payable by the Fund to its investment manager, Philequity Management, Inc. Certain operating expenses of the Fund are deemed covered by the management fee and shall be for the account of Philequity Management, Inc. Investment Policies and Objective The investment objective of Philequity Money Market Fund, Inc. is to generate income and achieve capital appreciation by investing in money market debt instruments with maturities of one (1) year or less. It is categorized under SEC ICA Rule 35-1 as conservative and low-risk. Risk Factors While the Fund is invested in a portfolio of low-risk money market debt instruments, various risk factors such as market conditions, general political and economic situations, performance of and development of corporations where the Fund is invested, the liquidity of the money market debt instruments, and interest rates can affect the value of the assets of the Fund and cause a fluctuation of Fund's net asset value. Consequently, there may be instances where the redemption prices of redeemed shares are less than the prices at which the shares were originally purchased. Dividend Policy Distribution of dividends is governed by Section 5, Article XII of the Fund s By-Laws. The Board of Directors by vote may declare cash dividends from the Fund s unrestricted retained earnings. No dividends were declared from the date of incorporation to the date of this report. GLOSSARY Investment Adviser Philequity Management, Inc. Principal Distributor Philequity Management, Inc. The "Fund" or the "Company" Philequity Money Market Fund, Inc. (formerly "Vantage Money Market Fund, Inc") BSP Bangko Sentral ng Pilipinas 7

8 Custodian Bank Equitable Banking Corporation Investor Any person, association or corporation who desires to invest in the shares of the Fund NAV Net Asset Value NIRC or R.A National Internal Revenue Code of 1997 Pesos or P= Philippine Peso, lawful currency of the Philippines PSE or the "Exchange" Philippine Stock Exchange, Inc. R.A Republic Act No or the Investment Company Act SEC or the "Commission" Securities and Exchange Commission "Shareholder" or "Stockholder Any natural or juridical person who has subscribed to the shares of the Fund. Transfer Agent Equitable Banking Corporation THE FUND A. Company Background Philequity Money Market Fund, Inc. (formerly "Vantage Money Market Fund, Inc.") was incorporated on 24 February The general character of the business of the Fund is an Open- End Mutual Fund established under the Investment Company Act, R.A The Fund operates as an investment company with a focus on providing interest income earned through investment in money market debt securities with maturities of one (1) year or less. The Fund issues mutual fund shares for sale to the public. Said mutual fund shares are sold through its Principal Distributor, Philequity Management, Inc. ("PEMI") in accordance with the Management and Distribution Agreement. The Fund is ready to redeem or buy back the shareholding of any investor at the applicable NAV per share. The Fund aims to provide small investors the opportunity to avail themselves of low-risk money market debt securities which ordinarily require high minimum investments, and to reap modest 8

9 but satisfactory returns on their investments through professional management and supervision of the funds. The Fund shall maintain a portfolio consisting of debt securities focusing on industries and enterprises with strong growth potentials or profitable historical financial performance. There may be concentration on certain industries at various points in time, depending on the overall condition of the financial markets. The investment objectives, policies and initial investment plans are discussed in detail under the topics Investment Objective and Investment Policies and Investment Restrictions. The Fund appointed PEMI as its investment manager and principal distributor. A detailed description of the duties of PEMI as investment manager and distributor, the investment procedure and the plan of distribution are discussed under the topic Parties Involved in the Fund and in the Management and Distribution Agreement. The Fund's securities and investments will be held by Equitable Banking Corporation, the Fund's Custodian Bank. B. Capitalization The Fund has an authorized capital stock of One Hundred Million Pesos (P=100,000,000.00) composed of One Hundred Million (100,000,000) unclassified common shares with par value of One Peso (P=1.00) per share. Out of the authorized capital stock, Twenty Five Million Pesos (P= 25,000,000.00) worth of shares have been subscribed out of which subscription Twenty Five Million Pesos (P=25,000,000.00) has been paid up. The SEC has permitted the Fund to have a paid-in capital lower than Fifty Million Pesos (P= 50,000,000.00) as the Fund is one of a group of investment companies in existence under management by one investment company manager, Philequity Management, Inc. These investment companies are: Philequity Fund, Inc., Philequity PSE Index Fund, Inc. (formerly "Vantage PSE Index Fund, Inc") and Philequity Dollar Income Fund, Inc. (formerly "Vantage Dollar Income Fund, Inc."). The Fund registered its entire authorized capital stock with the Securities and Exchange Commission under SEC Form 12-1, Registration Statement under the Securities Regulation Code. The offer will be 75,000,000 shares to be priced at a prevailing net asset value per share plus the sales load fee. Unless the applicable Philippine laws and regulations shall allow otherwise, the original promoters of the investment company who have subscribed and paid for the original capital of the Fund, shall not be allowed to sell, transfer, convey, encumber or otherwise dispose of their shares/securities within twelve (12) months from the registration of the Fund. Each share of stock of the Fund is a voting stock with voting rights equal to every other outstanding share of stock, and subject to the following: 9

10 a) Right of Redemption The holder of any shares of stock, upon the presentation to Philequity Management, Inc., the Fund's principal distributor or any of the Fund's duly authorized representatives of the Custodian Receipt(s) and the stock certificate(s) for redemption, is entitled to receive by way of redemption approximately his proportionate share of the Fund's current net assets in cash, i.e. the net current asset value per share, subject to existing laws and the By-Laws of the Fund. b) Waiver of Pre-emptive Rights The Articles of Incorporation of the Fund provide that no stockholder shall, because of his ownership of stock, have a pre-emptive or other right to purchase, subscribe for, or take any part of any stock or of any other securities convertible into or carrying options or warrants to purchase stock of the Fund. The Fund's Articles of Incorporation further provide that any part of such stock or other securities, may be disposed of by the Fund pursuant to the resolution of its Board of Directors, to such persons and upon such terms as the Board may deem proper, without first offering such stock or securities or any part thereof to existing stockholders c) Distribution of Dividends As provided under Article XII, Section 5 of the Fund's By-Laws, the Board of Directors shall by vote declare dividends and authorize the distribution of capital gains from any fund legally available therefor of the Fund whenever in their opinion, the condition of the Fund's finances will render it expedient for such dividends to be declared. The Board of Directors may make arrangements with its stockholders as it may deem desirable whereby dividends or other distributions or any part thereof may be reinvested in new shares of stock of the Fund instead of being paid in cash to the stockholders. No sales load fee shall be charged on such reinvestment. However, redemption of such reinvested shares shall be subject to redemption charges stated under the heading Redemption of Shares. No dividends were declared from the date of incorporation to the date of this report. d) Restrictions on Transfer No transfer of stock of the Fund which would reduce the stock ownership or equity interest of Filipino citizens to less than the percentage required by applicable laws or regulations shall be caused or allowed to be recorded in the books of the Fund. C. Ownership The names and address of the holders of common stock of the Fund, and the amount of securities held by each as of twenty days prior to the filing of this Registration Statement is set out below. 10

11 NAME/ADDRESS NO. OF SHARES SUBSCRIBED AMOUNT OF CAPITAL STOCK SUBSCRIBED WEALTH SECURITIES, INC. 1 21/F East Tower, PSE Centre, Exchange Road Ortigas Center, Pasig City WEALTH SECURITIES, INC. FAO BQ-01 21/F East Tower, PSE Centre, Exchange Road Ortigas Center, Pasig City ROBERTO Z. LORAYES 6F, Tower One & Exchange Plaza Ayala Ave., Makati City STRATEGIC EQUITIES CORP. RETIREMENT 6F, Tower One & Exchange Plaza Ayala Ave., Makati City GREGORIO T. YU 28/F East Tower, PSE Centre, Exchange Road Ortigas Center, Pasig City ENRIQUE P. ESTEBAN Unit 1103, Pacific Center Building, San Miguel Ave, Ortigas Center, Pasig City VICENTE R. JAYME, SR. Suite 2204/2205, Medical Plaza, Ortigas Center, Pasig City VIOLETA O. LUYM 20/F East Tower, PSE Centre, Exchange Road Ortigas Center, Pasig City A. BAYANI K. TAN 2704 East Tower, PSE Centre, Exchange Road Ortigas Center, Pasig City MARGARITO B. TEVES Unit 202 Greatwall Building, 136 Yakal Street, Makati City FELIPE U. YAP 1921 Kamias Street, Dasmarinas Village, Makati City 16,249,995 P= 16,249, ,749, , ,280,000 1,998, , , TOTAL 26,435,260 P= 31,158, Wealth Securities, Inc. is a broker and dealer in securities. Its shares of capital stock are owned by the following persons: Sy, Arsenio Go; Sy, Bian Co; Tan, Ruby Sy; Tan, Moises Ong and Sy, Valentino Go 11

12 Majority of the shares of the Fund are held by Wealth Securities, Inc. There are no corporations controlled by the Fund. The Corporations whose shares are commonly held with the Fund are the following: Philequity Dollar Income Fund, Inc. Philequity PSE Index Fund, Inc. Vantage Securities Corporation Philequity Management, Inc. D. Incorporators, Board of Directors, and Officers The names of the incorporators of the Fund are: Name Ma. Gracia M. Pulido-Tan Hosanna T. Ayson Caesar J. Poblador Ma. Louisa M. Gonzales Ma. Clarissa P. Oben As of the date of filing of this Registration Statement, the names, ages and periods of service of all incumbent Directors and Executive Officers of the Company, are as follows: Name Citizenship Position Age Periods Served Gregorio T. Yu Violeta O. Luym A. Bayani K. Tan Felipe U. Yap Margarito B. Teves Enrique P. Esteban Vicente R. Jayme, Sr. Filipino Filipino Filipino Filipino Filipino Filipino Filipino Chairman of the Board/President Director/Treasurer Director/Corporate Secretary Director Independent Director Independent Director Independent Director to present 1999 to present 2000 to present 1999 to present 1999 to present 2001 to present 2001 to present Gregorio T. Yu Mr. Yu is the President and Chairman of Philequity Money Market Fund, Inc. He was a Director and Officer in several public companies until 2001 which includes the following: (a) Belle Corporation as President and Chief Executive Officer; (b) Sinophil Corporation as President and Chief Executive Officer; and (c) APC Group, Inc. as Vice-Chairman. Until 2001, he was also President of the following companies: (a) Tagaytay Highlands International Golf Club, Inc.; (b) The Country Club at Tagaytay Highlands; (c) Tagaytay Midlands Golf Club, and (d) Pacific Online Systems Corporation. He was Chairman of Belle Jai Alai Corporation and Vice Chairman of Philippine Global Communications, Inc. He is currently a director and member of the Executive Committee and Audit Committee of The International Exchange Bank. He is also the 12

13 Chairman and President of (a) Philequity Fund, Inc., (b) Philequity Dollar Income Fund, Inc., (c) Philequity PSE Index Fund, Inc. and (d) Lucky Star Network Communications Corporation. He is a director of (a) ivantage Corporation and (b) CATS Motors, Inc. Additionally, he is a trustee of Xavier School, Inc. and Xavier School Educational and Trust Fund, Inc. Mr. Yu holds a graduate degree in Business Administration from Wharton School, University of Pennsylvania (1983) and a degree in Economics (summa cum laude) from De la Salle University (1978). Enrique P. Esteban Mr. Esteban is a Director of Philequity Money Market Fund, Inc. His present business affiliation includes: (a) Research Fellow, Center for Research and Communication Foundation, Inc.; (b) Trustee and Professor, University of Asia and the Pacific; (c) Chairman, AMEIC Working Group for HRD Development; (d) Director, Strategic Business Economics Consulting Group, Inc. BankWise, Metro Pacific Corporation, AB Capital and Investments Corporation, Mantrade Development Corporation, Inkwell Publishing Co., Inc., Philequity Fund, Inc., Philequity Dollar Income Fund, Inc. and Philequity PSE Index Fund, Inc. Mr. Esteban graduated from the University of the Philippines receiving LLB Degree in 1959 and is a member of the Philippine Bar Association. He received his MBA Degree in 1965 from Wharton School of Finance and Commerce in the University of Pennsylvania. He received his Masters in Business Economics Degree in 1975 from the Center for Research and Communication. Vicente R. Jayme, Sr. Mr. Jayme is a director of Philequity Money Market Fund, Inc. He served as executive director of the Asian Development Bank (ADB) from 1990 to He also held positions as Secretary, Department of Finance in 1987 to 1990 and as Secretary, Department of Public Works and Highways in 1986 to He has served as Chairman and/or Director, at one time or another, of around 40 business enterprises and corporations in the fields of banking and finance, shipping, insurance, consulting, chemicals, steel, construction, utilities and others. He is currently a director of Philequity Fund, Inc., Philequity Dollar Income Fund, Inc. and Philequity PSE Index Fund, Inc. He obtained his master's degree in Economics from the Ateneo Graduate School and served as a fellow to the Economic Development Institute of World Bank. Violeta O. Luym Ms. Luym is a Director and Treasurer of Philequity Money Market Fund, Inc. She is currently a Director and Treasurer of Philequity Fund, Inc., Philequity Dollar Income Fund, Inc. and Philequity PSE Index Fund, Inc. and a Director of ivantage Corporation and Banco de Oro. She holds a Masters degree in Business Administration from the University of California Los Angeles and Bachelor of Science in Business Administration from Assumption College. A. Bayani K. Tan Mr. Tan is a Director and Corporate Secretary of the Company. He is also currently a Director, Corporate Secretary, or both, of the following reporting Companies: Belle Corporation, First Abacus Financial Holdings Corporation, Sinophil Corporation, Tagaytay Highlands International Golf Club, Inc., Tagaytay Midlands Golf Club, Inc., The Country Club at Tagaytay Highlands, Inc., The Spa and Lodge at Tagaytay Highlands, Inc., Clearwater Country Club, ivantage Corporation, Destiny Financial Plans, Inc., Philequity Fund, Inc., Philequity PSE Index Fund, Inc., and Philequity Dollar Income Fund, Inc. He is the Managing Partner of Tan & Venturanza Law Offices and also a Director, Corporate Secretary, or both, of private companies such as 13

14 International Exchange Bank, Belle Bay City Corporation, Oakridge Properties, Inc. and Herway, Inc. Mr. Tan is a member of the Philippine Bar. He holds a Bachelor of Arts Degree from San Beda College, a Bachelor of Laws Degree from the University of the Philippines, College of Law and a Master of Laws Degree from the New York University, School of Law. Margarito B. Teves Mr. Teves is a Director of Philequity Money Market Fund, Inc. He is the President and Chief Executive Officer of the Land Bank of the Philippines. He also serves as director of the Bankers Association of the Philippines, Great Pacific Life Assurance Corporation, Pacific Plans, Inc., Center for Legislative Development, Inc., Philequity Fund, Inc., Philequity Dollar Income Fund, Inc. and Philequity PSE Index Fund, Inc. He is trustee of the Ayala Foundation, Inc. and a member of the Eminent Persons Group of the Export Development Council. He is a member of the House of Representatives from 1987 to 1998 and served in various congressional committees/executive and legislative councils. He authored/co-authored various congressional bills in the fields of banking and finance, capital market reforms, human resource development and social reforms, as well as tax reforms. He obtained his masters degree in Development Economics from Williams College, Massachusetts, USA. (1968) and a degree in Bachelor of Science in Business Economics from City of London College, London, England. Felipe U. Yap Mr. Yap is a Director of Philequity Money Market Fund, Inc. He is currently the Chairman of the Board and Chief Executive Officer of Lepanto Consolidated Mining Company, Lepanto Investment & Development Corporation, Diamant Board Philippines, Inc., Diamond Drilling Corporation of the Philippines, Far Southeast Gold Resources, Inc., Shipside, Inc. and Yapster e- Conglomerate. He is the Chairman of the Board of First Lepanto Taisho Insurance Corporation, Lepanto Ceramics, Inc. Pepsi Cola Products, Inc. and Prime Orion Philippines, Inc. He is the President of BA-Lepanto Condominium Corporation and Director of the following corporations namely: Cyber Bay Corporation, Manila Peninsula Hotel, Inc., Philippine Associated Smelting and Refining Corporation, Philippine Fire and Marine Insurance Corporation, South China Petroleum & Exploration, Inc., Zeus Holdings, Inc., Philequity Fund, Inc., Philequity Dollar Income Fund, Inc. and Philequity PSE Index Fund, Inc. He also holds membership in the following organizations: Management Association of the Philippines, The Conference Board, and the Makati Business Club. He holds a degree in B.S. Philosophy from University of San Carlos, Cebu City. None of the incumbent directors and officers are related to each other within the fourth civil degree either by affinity or consanguinity. The Fund has no significant employees, or persons other than the above-named directors and officers who are expected to make a significant contribution to the business of the Fund. E. Compensation of Directors and Executive Officers The directors and executive officers of the Fund have not received any form of compensation from inception up to present. Their contributed efforts to the Fund are on voluntary basis only. Also, there is no per diem, bonus, profit sharing or other compensation plan, pension or retirement plan, contract or arrangement in which any director or executive officer of the Fund will participate. 14

15 F. Effects of Government Regulation With the lowering of the threshold amount of covered transactions under the Anti-Money Laundering Act of 2001 (Republic Act No. 9160) from P4,000, to P500,000.00, the investing public would be wary of attempting to invest an amount that would place their investment in such a position that would entail a report to the AMLA Council. Moreover, investors would consider the reportorial provision of the Anti-Money Laundering Act as an invasion of their secrecy of deposit, more so if the source of such investment is legitimate. Hence, with the AMLA as a discouraging factor, the Fund expects limited capital investment by shareholders in the near future. G. Properties Operations are conducted within the premises of the fund manager. All facilities are either owned or provided by the fund manager. Being a fund, the Fund has neither properties under its fixed assets accounts nor hire employees for its operation.. H. Summary of Net Asset Value Below is the comparative tabulation of Net Asset Value of the Fund in the last three (3) years: YEAR 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter High Low High Low High Low High Low I. Holders The number of common shareholders of record as of 31 December 2004 is 11. Common shares outstanding as of 31 December 2004 stood at 26,435,260 shares. The top 20 shareholders are as follows: TOP 20 SHAREHOLDERS OF PHILEQUITY MONEY MARKET FUND, INC. AS OF 31 DECEMBER 2004 RECORD OWNER NUMBER OF SHARES % TO TOTAL 1 WEALTH SECURITIES, INC. 16,249, % 2 WEALTH SECURITIES, INC. - FAO-BQ-1 8,749, % 3 ROBERTO Z. LORAYES 1,280, % 4 STRATEGIC EQUITIES CORP. RETIREMENT 155, % 5 GREGORIO T. YU % ENRIQUE ESTEBAN % VICENTE JAYME, SR % VIOLETA O. LUYM % A. BAYANI K. TAN % MARGARITO B. TEVES % FELIPE U. YAP % 15

16 J. Security Ownership of Certain Beneficial Owners and Management 1. Security Ownership of Certain Record and Beneficial Owners The following table shows the record and beneficial owners owning more than 5% of the outstanding capital stock of the Fund as of 31 December 2004: Title of Class Common Common Name and Address of Record Owner and Relationship with issuer Wealth Securities, Inc. 21/F East Tower, PSE Centre, Exchange Road, Ortigas Center, Pasig City Wealth Securities, Inc. (FAO-BQ-01) 21/F East Tower, PSE Centre, Exchange Road, Ortigas Center, Pasig City Citizenship Filipino Filipino Number of Shares Held 16,249,995/r 7/b 8,749,998/r Percent 61.47% 33.10% Wealth Securities, Inc. is the record owner of the 94.57% of the Fund s issued shares while its beneficial ownership is only 61.47% of the issued shares as investor of the Fund. The Board of Directors of Wealth Securities, Inc. appoints from time to time its authorized representative to vote on its behalf in any of the Fund s stockholder s meeting. The Fund has no information as to the identity of the beneficial owner of the securities held by Wealth Securities, Inc. (FAO-BQ-1). 2. Security Ownership of Management The following is a tabular presentation of the shares recorded under the name of the directors and executive officers of the Company as of 31 December 2004: Title of Nationality Amount & Nature of Percent of Name of Beneficial Owner Class Beneficial Ownership Class common Gregorio T. Yu Filipino 1/r % common Violeta O. Luym Filipino 1/r % common A. Bayani K. Tan Filipino 1/r % common Felipe Yap Filipino 1/r % common Enrique P. Esteban Filipino 1/r % common Margarito B. Teves Filipino 1/r % common Vicente R. Jayme, Sr. Filipino 1/r % K. Legal Proceedings The Fund has not been involved in any litigation or disputes. The Fund does not foresee any legal dispute to be instituted either by any government agency or entity or by third persons. 16

17 MANAGEMENT DISCUSSION AND ANALYSIS A. Mutual Fund Industry in the Philippines The mutual fund industry in the Philippines recorded unprecedented heights as total assets reached P50 Billion in July Total net sales from January to July amounted to P5 Billion. There are currently a total of 23 funds, all of which are members of the Investment Company Association of the Philippines (ICAP). Of the 23 funds, four (4) are equity funds, seven (7) are balanced funds, ten (10) are bond funds, one (1) is a money market fund, and one (1) is an index fund. Asset-wise, the industry is dominated by bond funds, which account for 93.7% of total funds. The Fund s competitors are peso-based bond and money market funds such as Ayala Fixed Income Fund (P20.3 Million net assets), Cocolife Fixed Income Fund (P55.1 Million net assets), Legacy GS Fund (P14.0 Million net assets), Legacy TD Fund (P2.9 Million net assets), MAA Privilege Peso Fund (P39.4 Million net assets), Sun Life Prosperity Bond Fund (P4.6 Million net assets), Sun Life Prosperity Money Market Fund (P26.4 Million net assets). B. Top 5 Key Indicators The Fund monitors the following indicators that affect its profitability: 1. US Fed rates US Fed rates is the benchmark used by most central banks in setting their respective monetary policy. 2. Bangko Sentral ng Pilipinas (BSP) overnight rates BSP overnight rates dictates the level of domestic interest rates. Domestic interest rates influence the pricing of bonds. Increasing domestic interest rates results in falling bond prices, and vice versa. 3. Credit Ratings Credit rating agencies such as Moody s, Stanford & Poor s, and Fitch affect bond prices through changes in their ratings. Rating agencies help to evaluate the creditworthiness of bonds. Ratings also affect bond yields. Bonds with a higher rating have lower yields. 4. Peso/$ rate A depreciating peso is favorable for dollar-denominated bonds. Excessive exchange rate volatility, however, will not be favorable for both the peso and dollardenominated bonds. 5. Stock market volatility In times of stock market volatility, higher-rated bonds are considered a safe haven. So, at moments of market turbulence capital will flow from stocks into bonds, causing prices to rise. When the stock market bounces back, this capital will inevitably shift back into stock, causing bonds prices to fall. 17

18 C. Financial Condition Interim Period as of 30 September 2004 vs. CY 2003 Income generated by Philequity Money Market Fund, Inc. is principally from interest earned on short-term placements with banks and other financial institutions. The decrease in income in the interim period ending 30 September 2004 is primarily due to the shift from money market placements which are short term in nature to investments in bonds which are long-term priced at a premium. The premium on bonds are amortized against the interest earned to arrive at the effective yield. The increase of P0.048 Million or 42.84% resulted from the increase in municipal taxes paid in CY Total expenses is 6.7% and 6.04% of gross income for interim period 2004 and 2003, respectively. As the fund manager of Philequity Money Market Fund, Inc., Philequity Management, Inc has not charged any management fees since there has been no additions to the capital stock since its inception in February Cash & Cash equivalents decreased by as much as 96.41% from P37.4 Million in 31 December 2003 to only P1.34 Million by 30 September This is the result of the shift to investments with longer investment period with a higher return. Unrealized increase in value of investment is the result of the valuation of investment based on current bond indices. CY 2002 vs. CY 2003 Income generated by the Fund is principally from interests earned on short-term placements with banks and other financial institutions. The increase of P0.342 Million or 16.39% in CY 2003 is primarily due to the increase in principal amount resulting from the roll-over of investment with the interest earned. The increase of P0.076 Million or % resulted from the increase in municipal taxes paid in CY Total expenses is 6.14% and 3.48% of gross income for CYs 2003 and 2002, respectively. As the fund manager of the Fund, PEMI has not charged any management fees since there has been no addition to the capital stock since its inception in Total assets increased by P2.52 Million or 6.39% in CY This is primarily the result of the interest generated from short-term placements. Total accrued expenses decreased by 50% or P0.030 Million in CY 2003 representing the audit fee settled during the year. CY 2002 vs Total interest income decreased by P1.031 Million or 33% in CY 2002 in comparison with CY This can be attributed to the decrease in interest rates in Total expenses decreased by P0.641 Million or 89.8% from P0.714 Million in CY 2001 to P0.073 Million in CY 2002 due to the write-off of pre-operating and organization costs in 2001 following Statement of Financial Accounting Standards No. 38 (SFAS 38) There was no sale of capital stock, thus, PEMI did not initiate any charges for management fee. 18

19 INVESTMENT OBJECTIVE AND INVESTMENT POLICIES The Fund is a conservative low-risk fund with registered investments that consist solely of debt instruments such as treasury bills, commercial papers, government repos and other money market instruments with maturities of one (1) year or less. The maximum investment of the Fund in the securities of any one debt instrument issuer shall be determined by the size of the Fund, the risk profile of the debt instrument issuer, interest rates, and the yield offered by the issuer. However, the percentage of the Fund which may be invested in any one debt instrument issuer shall not exceed ten percent (10%) of the Fund's net asset value. The Fund shall not acquire more than ten percent (10%) outstanding securities of any one debt instrument issuer. For liquidity purposes, the Fund shall invest at least ten percent (10%) of its funds in liquid/semiliquid assets, such as: (a) (b) Treasury notes or bills, Bangko Sentral ng Pilipinas ("BSP") Certificates of Indebtedness which are short-term, and other government securities or bonds and such other evidences of indebtedness or obligations, the servicing and repayment of which are fully guaranteed by the Republic of the Philippines or any other government. Savings or time deposits with government-owned banks or commercial banks, provided that in no case shall any such savings or time deposit account be accepted or allowed under a "bearer", numbered account or other similar arrangement. INVESTMENT RESTRICTIONS The investments of the Fund shall be subject to the following restrictions: 1. Unless the applicable Philippine laws, rules, regulations, and orders of the Securities and Exchange Commission ("SEC") provide otherwise, the Fund shall not sell securities short nor invest in any of the following: (a) (b) (c) (d) margin purchase of securities (investments in partly paid shares are excluded) commodity futures contract precious metals unlimited liability investments 2. The Fund shall not incur any further debt or borrowing unless at the time of its incurrence or immediately thereafter there is a net asset coverage of at least three hundred percent (300%) for all its borrowing, or such net asset coverage as the applicable Philippine laws and regulations may prescribe. In the event that such asset coverage shall at any time fall below 300% or the coverage required by law, the Fund shall within three (3) days after, or such period as the applicable Philippine laws and regulations may require, reduce the 19

20 amount of borrowings to an extent that the net asset coverage shall be at least 300% or the coverage required by law. 3. Unless permitted by applicable Philippine laws, rules or regulations, the Fund shall not participate in an underwriting or selling group in connection with the public distribution of securities, except its own capital stock. 4. The Fund shall not invest in real estate properties and developments. 5. The Fund shall not invest in any company for the purposes of exercising control or management. 6. The Fund shall not issue or sell senior securities of which it is the issuer. 7. The Fund shall not extend loans to individuals. Loans or credit extensions to corporations shall be limited to commercial papers and bonds registered with the SEC, or subject of a grant of exemption therefrom, and which have been preapproved by the Board of Directors. 8. The Fund shall not invest in the securities of other investment companies. 9. The Fund shall not purchase from or sell to any of its officers or directors, or to any of the officers or directors of its investment adviser/s, manager or distributor/s or firm/s of which any of them are members, any security other than the capital stock of the Fund. 10. The total operational expenses of the Fund shall not exceed ten percent (10%) of its total investment fund; total net worth or total net asset value as shown in the previous year's audited financial statements, or such other limitations as may be prescribed by the applicable Philippine laws or regulations. 11. The Fund shall not change its investment objectives without prior approval of the majority of its stockholders. RISK FACTORS The Fund intends to invest its assets in a portfolio of debt instruments with a focus on providing interest income earned through investment in money market debt securities with maturities of one (1) year or less. As with any investment, a 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 following: (i) the Fund s sales charges, fees and expenses; and (ii) the Fund s risks and volatility Various risk factors can affect the market value of the assets of the Fund and can cause a fluctuation of 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 are as follows: 20

21 a. Liquidity - the risk that an investment may not find a ready buyer. This is negligible since the FUND only invests in liquid investments. b. Interest rate risk - refers to the volatility of bond prices that results from changes in interest rates. The risk is minimized by closely monitoring the direction of interest rates. The Fund s portfolio is adjusted in accordance to the movements in interest rates. c. Credit risk - refers to the risk that the bond issuer will default on interest and principal payments. To lessen this risk, the Fund primarily invests in sovereign and high-grade corporate bonds. The general political and economic situations of the country also influence the net asset value of the Fund. As an illustration, when the country's general political and economic situations are perceived to be in turmoil, money market investors view this situation as the time to pull out their placements and move these funds to better quality, safer, lower risk investments such as the US dollar or at the least place these funds with bigger financial institutions/banks, until such situations 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 may not be able to recover the full cost of their investment. However, historical experience has shown that a portfolio consisting of debt instruments which are guaranteed by their respective issuers are relatively low risk as compared to a portfolio which includes of equity and quasi-equity securities. Ordinary investors are given the opportunity to avail of higher interest yield that require high minimum investments at low risk. USE OF PROCEEDS The proceeds from the sale of the securities shall be held by the custodian bank. It shall be invested and reinvested by the Fund in debt instruments and other money market instruments with maturities of one (1) year or less. The Fund shall be guided by the investment policies and restrictions on its investments under the topics "Investment Objective" and "Investment Policies and Investment Restrictions." As of the filing of this Amended Prospectus, total proceeds from the issuance of the shares of stock of the Fund is P28,909, which were invested in short term deposits. INVESTMENT PROCEDURE A. Terms and Pricing of Securities 1. Offering Price The price at which the securities are to be sold is at the Net Asset Value ("NAV") per share on the day of the purchase. A sales load fee shall also be charged on the day of the purchase. The daily cut-off time for the reckoning of the date of submission of the subscription application shall be 12:00 noon. If the application is received on or before the said cut-off time, the shares 21

22 shall be valued based on the next computed net asset value (NAV) per share. For applications received after the cut-off time, it shall be deemed to have been received on the next banking day, and the NAV per share for the next banking day will be used as basis for payments. In both instances, a sales load fee shall be charged based on the total price of the application. NAV per share shall be the computed difference between total assets of the Fund and its total liabilities divided by the number of shares outstanding. The sale load fees for the amount of investment in an Investment Application shall be a maximum of one percent (1.0%). 2. Sales Load The sales load fee shall be one percent (1.0%) of the value of investment made at any one time by an investor. 3. Minimum Investment Minimum initial investment of TEN THOUSAND PESOS (P=10,000.00) and a minimum of FIVE THOUSAND PESOS (P=5,000.00), worth of shares for additional purchases. Payment shall be on cash basis only. B. Subscription Procedure 1. Investment Application Form An Investment Application Form and signature cards must be accomplished by the prospective investor in triplicate and must be submitted together with the appropriate payment to "Philequity Money Market Fund, Inc.". Once submitted, the Investment Application may not be cancelled in full or in part. An investment application, once accepted, shall constitute an agreement between the Investor and the Investment Manager/Principal Distributor for the purchase of the shares of the Fund at the time, in the manner and subject to the conditions set forth in this Prospectus and the Investment Application Form. Upon acceptance of the application, the Investor shall be furnished a copy of the approved Investment Application Form, and an official receipt will be issued to the investor if payment is made in cash. If payment is made by check, a provisional receipt shall be issued to the investor. 2. Eligible Investors The shares of the Fund may be purchased and held by any person of legal age or duly organized and existing corporations, partnerships or corporate entities regardless of nationality. The Articles of Incorporation of the Fund provides, however, that no transfer of shares of stock of the Fund which reduce the stock ownership or equity interest of Filipino citizens to less than the percentage required by applicable laws or regulations shall be caused or allowed to be recorded in the proper books of the Fund. The investor shall declare and warrant that there are no legal restrictions prohibiting the purchase of the shares applied for and that the Investor is otherwise eligible throughout the duration of the period that the Investor remains a shareholder of the Fund. 22

23 3. Requirements for Corporate Applicants For Investors other than individuals, the following documents, in addition to the Investment Application Form and the signature cards, must be accomplished and shall be considered integral parts thereof: (a) (b) Copy of the Investor's SEC Certificate of Registration, Articles of Incorporation and By-Laws; Notarized corporate secretary's certificate setting forth the resolutions of the Investor's Board of Directors or equivalent body: (a) authorizing the purchase of the shares of the Fund; (b) designating the signatories for the purpose; and (c) certifying the percentage of capital stock held by non-filipinos. 4. Acceptance of Investment Applications Applications for the number of shares and the applicable NAV are subject to acceptance and approval by the Principal Distributor. Upon acceptance of the Application, the Principal Distributor shall provide the Investor with a copy of the approved Investment Application Form and the confirmation of the acceptance. The Principal Distributor reserves the right to reject, scale-down and reallocate any application for the shares for whatever reason. Applications for which check payments are dishonored upon first presentment, as well as those which do not comply with the requirements set in this Prospectus and Investment Application Form, shall be rejected. The Principal Distributor shall inform the Investor of such reduction or rejection within seven (7) days after submission of the Investment Application. 5. Payment Terms Subscriptions shall be paid in full upon submission of a duly accomplished and executed Investment Application Form. Securities sold shall be on cash basis only. Installment sales are prohibited. Payments must be made in the form of: (a) cash; (b) personal or corporate check; or (c) a cashier's or manager's check, drawn against a bank account with a Bangko Sentral ng Pilipinas ("BSP") authorized agent bank located in Metro Manila. All such checks must be made payable to "Philequity Money Market Fund, Inc." dated as of the date of the Investment Application, and remitted directly to the Principal Distributor at its principal office. An official receipt will be issued to the Investor in case of payments made in cash and cashier's or manager's check. In the case of payments made by personal or corporate check, a provisional receipt shall be issued to the Investor, and an official receipt shall be issued only when the check clears. 6. Refunds Refunds of payments for any rejected or scaled-down applications shall be made without interest by the Principal Distributor not later than seven (7) days after submission. The respective Investor shall receive a check, crossed "Payee's Account Only," mailed and delivered at the Investor's risk to the address specified in the Investment Application Form or to the corresponding distributor or any authorized investment salesmen of the Investor. 23

24 7. Delivery of Stock Certificates Upon the request of the Investor, stock certificates representing ownership of the shares of the Fund and Custodian Receipts shall be issued by the Transfer Agent and Custodian Bank, respectively, and shall be made available to the Investor as soon as practicable at the office(s) of the Transfer Agent and Custodian Bank. Any certificate that remains unclaimed for a period of thirty (30) days shall be mailed to the address specified in the Investment Application Form at the risk of the Investor. The cost of issuance of the stock certificates shall be borne by the Fund. 8. Periodic Fund Statement The Investor shall receive a periodic Fund Statement indicating the status of the investment in the Fund. REDEMPTION OF SHARES A. NAV Per Share Computation The NAV per share shall be the computed difference between the total assets of the Fund and its total liabilities divided by the number of shares outstanding. The NAV shall be computed on a daily basis and shall be posted in the conspicuous place of the principal office of the Fund as well as in all its branches and designated redemption centers. It shall also be published in at least two (2) newspapers of general circulation in the Philippines on a daily basis. B. Manner and Method of Redemption Upon the presentation to PEMI of the securities for redemption, the holder of the shares of the Fund is entitled to receive by way of redemption approximately his proportionate share of the Fund's current net assets in cash, i.e. the net current asset value per share, subject to existing laws and the By-Laws of the Fund. Any request for redemption should always be accompanied by duly endorsed stock certificates and custodian receipt/s, if they have been issued. The redemption proceeds shall be paid within seven (7) banking days from receipt of the duly accomplished redemption application. C. Redemption Price The redemption price of the securities surrendered within the daily cut-off time shall be the next computed NAV per share after the request for redemption is received. Securities surrendered after the daily cut-off time shall be deemed to have been received on the next banking day. The daily cut-off time shall be 12:00 o'clock noon. D. Minimum Holding Period and Redemption Charges The following fees shall be deducted from the redemption proceeds depending on the retention period of the investor: 24