PE PSE Index - Prospectus

8/10/2019 PE PSE Index - Prospectus

1/32

P R O S P E C T U S

as of 15 October 2012

PHILEQUITY MANAGEMENT, INC.Unit 2004A 20/F East Tower Philippine Stock ExchangeCentre, Exchange Road, Pasig City

Telephone 689-8080 Fax 706-0795

[email protected]

www.philequity.net

As of May 24, 2013
mailto:[email protected]:[email protected]


2/32

No dealer, selling agent or any other person has been authorizedto give information or make any representation not contained inthis Prospectus. This Prospectus does not constitute an offer ofany securities other than those to which it relates, or an offer tosell or a solicitation of an offer to buy any securities other thanthose to which it relates in any jurisdiction or to any person towhom it is unlawful to make such an offer or solicitation in such

jurisdiction. The delivery of this Prospectus at any time does notimply that the information herein contained is correct as of anytime subsequent to this date.

The information contained in this Prospectus has been supplied

by Philequity PSE Index Fund, Inc. unless otherwise stated.Philequity PSE Index Fund, Inc. accepts full responsibility for theaccuracy of the information given herein, and confirms that thereare no omissions of fact which would make any statement in thisProspectus misleading. Philequity Management, Inc., theinvestment manager of Philequity PSE Index Fund, Inc., hasexerted reasonable efforts to verify the information herein anddoes not make any representations or warranties as to the

accuracy or completeness of the materials contained herein.


3/32

TABLE OF CONTENTS

SECTION PAGE

PROSPECTUS SUMMARY .................................................................. 1

GLOSSARY.......................................................................................... 3

THE FUND ........................................................................................... 4

A.COMPANY BACKGROUND................................................................ 4B.CAPITALIZATION............................................................................. 5C.INCORPORATORS,BOARD OF DIRECTORS,AND OFFICERS.................. 7D.COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS................ 8E.EFFECTS OF GOVERNMENT REGULATION.......................................... 8

F.PROPERTIES................................................................................... 8G.LEGAL PROCEEDINGS..................................................................... 8

INVESTMENT OBJECTIVE AND INVESTMENT POLICIES ................. 9

INVESTMENT RESTRICTIONS ...........................................................10

RISK FACTORS ..................................................................................12

USE OF PROCEEDS ...........................................................................13

INVESTMENT PROCEDURE...............................................................14A.TERMS AND PRICING OF SECURITIES...............................................14

1. Offering Price ...........................................................................142. Sales Load ..............................................................................143. Minimum Investment ................................................................14

B.SUBSCRIPTION PROCEDURE...........................................................151. Investment Application Form ....................................................152. Eligible Investors ......................................................................15

3. Requirements for Corporate Applicants ....................................154. Acceptance of Investment Applications ....................................165. Payment Terms .......................................................................166. Refunds ...................................................................................177. Delivery of Stock Certificates ...................................................178. Periodic Fund Statement ..........................................................17

REDEMPTION OF SHARES ................................................................17

A.NAVPER SHARE COMPUTATION.....................................................17B.MANNER AND METHOD OF REDEMPTION ...........................................18

C.REDEMPTION PRICE .......................................................................18D.MINIMUM HOLDING PERIOD AND REDEMPTION CHARGES...................18E.SPECIAL CONSIDERATIONS.............................................................18F.APPLICABLE TAXES........................................................................19


4/32

COMPUTATION OF NET ASSET VALUE ...........................................19

BENEFITS TO THE INVESTOR ..........................................................21

A.PROFESSIONAL MANAGEMENT AND SUPERVISION .............................21B.DIVERSIFICATION AND MATCHING THE PHISIX...................................21

C.LIQUIDITY.....................................................................................22PARTIES INVOLVED IN THE FUND ...................................................22

A.INVESTMENT MANAGER AND PRINCIPAL DISTRIBUTOR..........................22B.CUSTODIAN BANK.........................................................................24C.TRANSFER AGENT.........................................................................25D.LEGAL COUNSEL ...........................................................................25E.EXTERNAL AUDITOR......................................................................25F.SIGNIFICANT EMPLOYEE.................................................................26

G.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................26

EXPENSES CHARGEABLE TO THE FUND........................................26

MANAGEMENT FEE ...........................................................................27

EXPENSES CHARGEABLE TO THE INVESTMENT MANAGER ........27

The Securities and Exchange Commissions approval of thisProspectus, the order registering the authorized common capitalstock of the Company, and the issuance of the certificate or permitto sell are permissive only and do not constitute arecommendation or endorsement by the Securities and ExchangeCommission of the securities permitted to be sold.

The common shares of the Company are not listed or traded onthe Philippine Stock Exchange.

The reader should consult his stockbroker, legal counsel,professional accountant, or other professional adviser with respectto the acquisition, holding or disposal of the securities described inthis prospectus.


5/32

1 Philequity PSE Index Fund, Inc.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailedinformation appearing elsewhere in this Prospectus.

IssuerPhilequity PSE Index Fund, Inc. (formerly "Vantage PSE IndexFund, Inc.") with office address at 2004A East Tower, PhilippineStock Exchange Centre, Exchange Road, Ortigas Center, PasigCity. The Funds telephone number is (63) (2) 689-8080.

Shares Offered/Par Value

Common stock with par value of One Peso (P1.00) per share

Offering PriceAt NAV per share for the banking day, if payment is made withinthe daily cut-off time, plus a sales load.

Proceeds from the offeringAs of the filing of this Amended Prospectus, total proceeds from

the issuance of the shares of stock of the Fund is P25,000,000.00.The Proceeds were invested in various securities listed with thePhilippine Stock Exchange.

Sales LoadThe sales load fee shall be a maximum of five percent (5.0%) ofthe value of investment made at any one time by an investor.

Daily Cut-Off Time12:00 noon

Minimum InvestmentPHP 200,000.00 for initial investments and PHP 50,000.00 foradditional investments. Investment shall be on cash basis only.Installment sales are prohibited.

Redemption PriceThe redemption price of the securities surrendered within the dailycut-off time shall be the next computed NAV per share after therequest for redemption is received. Securities surrendered after


6/32

Prospectus 2

the daily cut-off time shall be deemed to have been received onthe following banking day.

Redemption ChargeA redemption fee of two percent (2.0%) of the redemptionproceeds will be deducted therefrom if redeemed on the first year,one and a half percent (1.5%) if redeemed on the second yearand no redemption fee shall be deducted if redeemed beyond thesecond 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 assetscomputed on a daily basis, shall be payable by the Fund to itsinvestment manager, Philequity Management, Inc. Certainoperating expenses of the Fund are deemed covered by themanagement fee and shall be for the account of PhilequityManagement, Inc.

Investment Policies and ObjectiveThe investment objective of Philequity PSE Index Fund, Inc. is togenerate income and achieve short-term capital appreciation bymatching the performance of the PSE Composite Index ("Phisix"),through investment in the proportionate amount of Index stockssuch that the performance of the Fund matches the Phisix. It iscategorized under SEC ICA Rule 35-1 as growth-oriented.

Risk FactorsAs the Fund is invested in PSE index stocks, various factors, suchas market conditions, general political and economic situations,and the performance of corporations whose stocks comprise thePhisix may affect the prices of the stocks wherein the Fund isinvested. Consequently, there may be instances when theredemption prices of redeemed shares may be less than theprices at which the shares were originally purchased.

Dividend PolicyDistribution of dividends is governed by Section 5, Article XII ofthe Funds By-Laws. The Board of Directors by vote may declarecash dividends from the Funds unrestricted retained earnings. No


7/32


dividends were declared from the date of incorporation to the dateof this report.

GLOSSARY

Investment ManagerPhilequity Management, Inc.

Principal DistributorPhilequity Management, Inc.

The "Fund" or the "Company"

Philequity PSE Index Fund, Inc. (formerly "Vantage PSE IndexFund, Inc.")

BSPBangko Sentral ng Pilipinas

Custodian BankPhilippine Depository and Trust Corp.

InvestorAny person, association or corporation who desires to invest in theshares of the Fund

NAVNet Asset Value

NIRC or R.A. 8424National Internal Revenue Code of 1997

Pesos or PPhilippine Peso, lawful currency of the Philippines

PSE or the "Exchange"

Philippine Stock Exchange, Inc.

R.A. 2629Republic Act No. 2629 or the Investment Company Act


8/32

Prospectus 4

SEC or the "Commission"Securities and Exchange Commission

"Shareholder" or "StockholderAny natural or juridical person who has subscribed to the shares

of the Fund.

Transfer AgentBanco de Oro Universal Bank

THE FUND

A. Company Background

Philequity PSE Index Fund, Inc. (formerly "Vantage PSE IndexFund, Inc.") was incorporated on 22 February 1999. The generalcharacter of the business of the Fund is an Open-End MutualFund established under the Investment Company Act, R.A. 2629.

The Fund operates as an investment company with a focus onshort-term capital appreciation through investment in the PSEComposite Index. The Fund issues mutual fund shares for sale tothe public. Said mutual fund shares are sold through its PrincipalDistributor, Philequity Management, Inc. ("PEMI") in accordancewith the Management and Distribution Agreement. The Fund isready to redeem or buy back the shareholding of any investor atthe applicable NAV per share.

The Fund aims to provide small investors with the opportunity ofthemselves accessing the stock market by investing in shares ofstock that comprise the PSE Composite Index ("Phisix") in suchproportion that the performance of the Fund matches that of thePhisix. Inasmuch as the Phisix is subject to upturns anddownturns, the Fund's focus is to capitalize on both short-term and

long-term capital appreciation.

The Fund shall maintain a portfolio of equity securities consistingsolely of stocks of companies comprising the Index stocks. Theinvestment objectives, policies and initial investment plans are


9/32


discussed in detail under the topics Investment Objective andInvestment Policies and Investment Restrictions.

The Fund appointed PEMI as its investment manager and

principal distributor. A detailed description of the duties of PEMI asinvestment manager and distributor, the investment procedureand the plan of distribution are discussed under the topic PartiesInvolved in the Fund and in the Management and DistributionAgreement.

The Fund's securities and investments will be held by PhilippineDepository and Trust Corp., the Fund's Custodian Bank.

B. Capitalization

The Fund has an authorized capital stock of One Hundred MillionPesos (P100,000,000.00) composed of One Hundred Million(100,000,000) unclassified common shares with par value of OnePeso (P1.00) per share. Out of the authorized capital stock,Twenty Five Million Pesos (P25,000,000.00) worth of shares have

been subscribed out of which subscription Twenty Five MillionPesos (P25,000,000.00) has been paid up.

The SEC has permitted the Fund to have a paid-in capital lowerthan Fifty Million Pesos (P50,000,000.00) as the Fund is one of agroup of investment companies in existence under managementby one investment company manager, Philequity Management,Inc. These investment companies are: Philequity Fund, Inc.,

Philequity Money Market Fund, Inc. (formerly "Vantage MoneyMarket Fund, Inc.") and Philequity Dollar Income Fund, Inc.(formerly "Vantage Dollar Income Fund, Inc.).

The Fund registered its entire authorized capital stock with theSecurities and Exchange Commission under SEC Form 8-1,Registration Statement under the Securities Regulation Code. Theoffer will be 75,000,000 shares to be priced at a prevailing net

asset value per share plus the sales load fee.

Unless applicable Philippine laws and regulations shall allowotherwise, the original promoters of the investment company whohave subscribed and paid for the original capital of the Fund, shall


10/32

Prospectus 6

not be allowed to sell, transfer, convey, encumber or otherwisedispose of their shares/securities within twelve (12) months fromthe registration of the Fund. Each share of stock of the Fund is a

voting stock with voting rights equal to every other outstandingshare of stock, and subject to the following:

1. Right of Redemption

The holder of any shares of stock, upon the presentation toPhilequity Management, Inc., the Fund's principal distributor orany of the Fund's duly authorized representatives of the Custodian

Receipt(s) and the stock certificate(s) for redemption, is entitled toreceive by way of redemption approximately his proportionateshare of the Fund's current net assets in cash, i.e. the net currentasset value per share, subject to existing laws and the By-Laws ofthe Fund.

2. Waiver of Pre-emptive Rights

The Articles of Incorporation of the Fund provide that nostockholder shall, because of his ownership of stock, have a pre-emptive or other right to purchase, subscribe for, or take any partof any stock or of any other securities convertible into or carryingoptions or warrants to purchase stock of the Fund. The Fund'sArticles of Incorporation further provide that any part of such stockor other securities, may be disposed of by the Fund pursuant tothe resolution of its Board of Directors, to such persons and upon

such terms as the Board may deem proper, without first offeringsuch stock or securities or any part thereof to existingstockholders.

3. 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 andauthorize the distribution of capital gains from any fund legallyavailable therefore of the Fund whenever in their opinion, thecondition of the Fund's finances will render it expedient for suchdividends to be declared. The Board of Directors may makearrangements with its stockholders as it may deem desirable


11/32


whereby dividends or other distributions or any part thereof maybe reinvested in new shares of stock of the Fund instead of beingpaid in cash to the stockholders. No sales load fee shall becharged on such reinvestment. However, redemption of such

reinvested shares shall be subject to redemption charges statedunder the heading Redemption of Shares.

No dividends were declared from the date of incorporation to thedate of this report.

4. Restrictions on Transfer

No transfer of stock of the Fund which would reduce the stockownership or equity interest of Filipino citizens to less than thepercentage required by applicable laws or regulations shall becaused or allowed to be recorded in the books of the Fund.

C. 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 December 20, 2012, the Board of Directors of the Fundconsists of the following:

Ignacio B. Gimenez Chairman / President

Fidel P. Purisima Director

Violeta O. Luym Treasurer

Valentino C. Sy DirectorFelipe U. Yap Director

Gregorio T. Yu Director

Frederick N. Tiu Director


12/32

Prospectus 8

D. 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. Theircontributed efforts to the Fund are on voluntary basis only. Also,there is no per diem, bonus, profit sharing or other compensationplan, pension or retirement plan, contract or arrangement in whichany director or executive officer of the Fund will participate.

E. Effects of Government Regulation

With the lowering of the threshold amount of covered transactionsunder the Anti-Money Laundering Act of 2001 (Republic Act No.9160) from P4,000,000.00 to P500,000.00, the investing publicwould be wary of attempting to invest an amount that would placetheir investment in such a position that would entail a report to theAMLA Council. Moreover, investors appear to consider thereportorial provision of the Anti-Money Laundering Act as aninvasion of their secrecy of deposit, more so if the source of such

investment is legitimate. Hence, with the AMLA as a discouragingfactor, the Fund expects limited capital investment byshareholders in the near future.

F. Properties

Operations are conducted within the premises of the fundmanager. All facilities are either owned or provided by the fund

manager. Being a fund, the Fund has neither properties under itsfixed assets accounts nor hire employees for its operation.

G. Legal Proceedings

The Fund has not been involved in any litigation or disputes. TheFund does not foresee any legal dispute to be instituted either byany government agency or entity or by third persons.


13/32


INVESTMENT OBJECTIVE AND INVESTMENTPOLICIES

The Fund is a growth-oriented fund. The objective of the Fund is

to track and closely match the performance of the Phisix, the mainbarometer of the stock market, by buying and selling proportionatenumber of shares of the thirty (30) stocks that compose the PhisixIndex.

The Phisix is an index composed of stocks representative of theCommercial-Industrial Sector, Property Sector, Mining Sector, andOil Sector of the Exchange. An index, on the other hand, is a

compilation of statistical data from a basket of equities thatrepresents the entire market of equities. An index may be price-weighted such as the Dow Jones Industrial Average, orcapitalization-weighted such as the Phisix. In a capitalization-weighted index such as the Phisix, the component securities areaccorded relative importance based on their market capitalization,or the product of the total number of securities issued andsubscribed multiplied by the price per share. Accordingly, eachcomponent equity's influence on the value of the Phisix is directlyproportionate to its market capitalization.

The investments of the Fund will consist solely of shares of stockof companies which comprise the Phisix ("Index stocks").Inasmuch as immediately investing the entire Fund, or largeamounts of investments, at any one time in the Index stocks may

result in an artificial increase in stock prices, a portion of the Fundshall also be invested in short-term debt securities and fixed-income securities until such time that the entire Fund can beproperly allocated among all the Index stocks.

The percentage of the Fund which will be invested in any onecompany and the percentage of voting securities of any onecompany which the Fund may acquire shall be determined by size

of the Fund, the composition of the Phisix, and the proportion thatthe market capitalization of the company bears to the aggregatemarket capitalization of the Index stocks. In general, the larger thesize of the Fund, the greater the percentage which may beinvested in any one company. However, the Fund shall not investmore than ten percent (10%) of its assets in any one investee


14/32

Prospectus 10

company and shall not acquire more than ten percent (10%) of theoutstanding securities of any one company.

The Fund shall not acquire more than ten percent (10%)outstanding securities of any one company/debt instrument issuer.

For liquidity purposes, the Fund shall invest at least ten percent(10%) of its funds in liquid/semi-liquid assets, such as:

(a) 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 ofindebtedness or obligations, the servicing and repayment of whichare fully guaranteed by the Republic of the Philippines.

(b) Savings or time deposits with government-owned banks orcommercial banks, provided that in no case shall any suchsavings 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 followingrestrictions:

1. Unless the applicable Philippine laws, rules, regulations, andorders of the Securities and Exchange Commission ("SEC")provide otherwise, the Fund shall not sell securities short norinvest in any of the following:

(a) margin purchase of securities (investments in partly paidshares are excluded)

(b) commodity futures contract

(c) precious metals

(d) unlimited liability investments


15/32


2. The Fund shall not incur any further debt or borrowing unless atthe time of its incurrence or immediately thereafter there is a netasset coverage of at least three hundred percent (300%) for all itsborrowing, or such net asset coverage as the applicable Philippine

laws and regulations may prescribe. In the event that such assetcoverage shall at any time fall below 300% or the coveragerequired by law, the Fund shall within three (3) days after, or suchperiod as the applicable Philippine laws and regulations mayrequire, reduce the amount of borrowings to an extent that the netasset coverage shall be at least 300% or the coverage required bylaw.

3. Unless permitted by applicable Philippine laws, rules orregulations, the Fund shall not participate in an underwriting orselling group in connection with the public distribution ofsecurities, except its own capital stock.

4. The Fund shall not invest in real estate properties anddevelopments.

5. The Fund shall not invest in any company for the purposes ofexercising control or management.

6. The Fund shall not issue or sell senior securities of which it isthe issuer.

7. The Fund shall not extend loans to individuals. Loans or creditextensions to corporations shall be limited to commercial papers

and bonds registered with the SEC, or subject of a grant ofexemption therefrom, and which have been preapproved by theBoard of Directors.

8. The Fund shall not invest in the securities of other investmentcompanies.

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 investmentadviser/s, manager or distributor/s or firm/s of which any of themare members, any security other than the capital stock of theFund.


16/32

Prospectus 12

10. The total operational expenses of the Fund shall not exceedten percent (10%) of its total investment fund, total net worth ortotal net asset value as shown in the previous year's audited

financial statements, or such other limitations as may beprescribed by the applicable Philippine laws or regulations.

11. The Fund shall not change its investment objectives withoutprior approval of the majority of its stockholders.

RISK FACTORS

The Fund intends to invest its assets in a portfolio of debtinstruments with a focus on providing interest income earnedthrough investment in money market debt securities withmaturities of one (1) year or less. As with any investment, a fundspast performance is no guarantee of its future success. Over thelong-term, however, the success or failure to profit in the fund willdepend on the following: (i) the Funds sales charges, fees andexpenses; and (ii) the Funds risks and volatility.

Various risk factors can affect the market value of the assets ofthe Fund and can cause a fluctuation of the Fund's net assetvalue. The Fund, however, adopts steps to minimize, if noteliminate, the effect of these risks. The major risks facing the Fundare as follows:

a. Liquidity - the risk that an investment may not find a readybuyer. This is negligible since the Fund only invests in liquidinvestments.

b. Interest rate risk - refers to the volatility of bond prices thatresults from changes in interest rates. The risk is minimized byclosely monitoring the direction of interest rates. The Fundsportfolio is adjusted in accordance to the movements in interest

rates.

c. Credit risk - refers to the risk that the bond issuer will default oninterest and principal payments. To lessen this risk, the Fundprimarily invests in sovereign and high-grade corporate bonds.


17/32


The general political and economic situations of the country alsoinfluence the net asset value of the Fund. As an illustration, whenthe country's general political and economic situations areperceived to be in turmoil, money market investors view this

situation as the time to pull out their placements and move thesefunds to better quality, safer, lower risk investments such as theUS dollar or at the least place these funds with bigger financialinstitutions/banks, until such situations normalize. As aconsequence, these instances can result to the redemption pricesof redeemed shares being less than the prices at which the shareswere originally purchased. Investors who redeem their shares maynot be able to recover the full cost of their investment. However,

historical experience has shown that a portfolio consisting of debtinstruments which are guaranteed by their respective issuers arerelatively low risk as compared to a portfolio which includes ofequity and quasi-equity securities. Ordinary investors are giventhe opportunity to avail of higher interest yield that require highminimum investments at low risk.

USE OF PROCEEDS

The proceeds from the sale of the securities shall be held by thecustodian bank. It shall be invested and reinvested by the Fund instocks comprising the Phisix. The Fund shall be guided by theinvestment policies and restrictions on its investments under thetopics Investment Objective and Investment Policies andInvestment Restrictions. Inasmuch as immediately investing theentire Fund, or large amounts of investments, at any one time inthe Index stocks may result in an artificial increase in stock prices,a portion of the Fund shall also be invested in short-term debtsecurities and fixed-income securities until such time that theentire Fund can be properly allocated among all the Index stocks.

As of the filing of this Amended Prospectus, total proceeds fromthe issuance of the shares of stock of the Fund is P25,000,000.00

which were invested in various securities listed with the PhilippineStock Exchange.


18/32


19/32


PESOS (P50,000.00) 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 beaccomplished by the prospective investor in triplicate and must besubmitted together with the appropriate payment to "Philequity

PSE Index Fund, Inc." Once submitted, the Investment Applicationmay not be cancelled in full or in part. An investment application,once accepted, shall constitute an agreement between theInvestor and the Investment Manager/Principal Distributor for thepurchase of the shares of the Fund at the time, in the manner andsubject to the conditions set forth in this Prospectus and theInvestment 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 theinvestor 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 anyperson of legal age or dulyorganized and existing corporations,

partnerships or corporate entities regardless of nationality. TheArticles of Incorporation of the Fund provides, however, that notransfer of shares of stock of the Fund which reduce the stockownership or equity interest of Filipino citizens to less than thepercentage required by applicable laws or regulations shall becausedor allowed to be recorded in the proper books of the Fund.The investor shall declare and warrant that there are no legalrestrictions prohibiting the purchase of the shares applied forand

that the Investor is otherwise eligible throughout the duration ofthe period that theInvestor remains a shareholder of the Fund.

3. Requirements for Corporate Applicants


20/32

Prospectus 16

For Investors other than individuals, the following documents, inaddition to the Investment Application Form and the signaturecards, must be accomplished and shall be considered integral

parts thereof:

(a) Copy of the Investor's SEC Certificate of Registration, Articlesof Incorporation and By-Laws;

(b) Notarized corporate secretary's certificate setting forth theresolutions 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 thepercentage of capital stock held by non-Filipinos.

4. Acceptance of Investment Applications

Applications for the number of shares and the applicable NAV aresubject 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 InvestmentApplication Form and the confirmation of the acceptance.

The Principal Distributor reserves the right to reject, scale-downand reallocate any application for the shares for whatever reason.Applications for which check payments are dishonored upon firstpresentment, as well as those which do not comply with therequirements set in this Prospectus and Investment Application

Form, shall be rejected. The Principal Distributor shall inform theInvestor of such reduction or rejection within seven (7) days aftersubmission of the Investment Application.

5. Payment Terms

Subscriptions shall be paid in full upon submission of a dulyaccomplished and executed Investment Application Form.Securities sold shall be on cash basis only. Installment sales areprohibited. Payments must be made in the form of: (a) cash; (b)personal or corporate check; or (c) a cashier's or manager'scheck, drawn against a bank account with a Bangko Sentral ngPilipinas ("BSP") authorized agent bank located in Metro Manila.


21/32


All such checks must be made payable to "Philequity PSE IndexFund, Inc." dated as of the date of the Investment Application, andremitted 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 thecase of payments made by personal or corporate check, aprovisional receipt shall be issued to the Investor, and an officialreceipt 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 laterthan seven (7) days after submission. The respective Investorshall receive a check, crossed "Payee's Account Only," mailedand delivered at the Investor's risk to the address specified in theInvestment Application Form or to the corresponding distributor orany authorized investment salesmen of the Investor.

7. Delivery of Stock Certificates

Upon the request of the Investor, stock certificates representingownership of the shares of the Fund and Custodian Receipts shallbe issued by the Transfer Agent and Custodian Bank,respectively, and shall be made available to the Investor as soonas practicable at the office(s) of the Transfer Agent and CustodianBank. 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 theFund.

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


22/32

Prospectus 18

The NAV per share shall be the computed difference between thetotal assets of the Fund and its total liabilities divided by the

number of shares outstanding. The NAV shall be posted in theconspicuous place of the principal office of the Fund as well as inall its branches and designated redemption centers. It shall alsobe published in at least two (2) newspapers of general circulationin 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 wayof redemption approximately his proportionate share of the Fund'scurrent net assets or the cash equivalent thereof, i.e. the netcurrent asset value per share, subject to existing laws and the By-Laws of the Fund. Any request for redemption should always beaccompanied by duly endorsed stock certificates and custodianreceipt/s, if they have been issued. The redemption proceeds shall

be paid within seven (7) banking days from receipt of the dulyaccomplished redemption application.

C. Redemption Price

The redemption price of the securities surrendered within the dailycut-off time shall be the next computed NAV per share after therequest for redemption is received. Securities surrendered after

the daily cut-off time shall be deemed to have been received onthe next banking day. The daily cut-off time shall be 12:00 o'clocknoon.

D. Minimum Holding Period and Redemption Charges

A redemption fee of two percent (2.0%) of the redemptionproceeds shall be deducted therefrom, if redemption is made onthe first year, one and a half percent (1.5%) if redeemed on thesecond year, and no redemption fee shall be deducted ifredeemed beyond the second year from the time of purchase.

E. Special Considerations


23/32


No redemption will be allowed should any of the followingcircumstances exist:

1. The Philippine Stock Exchange is closed for reasons other thanthe customary weekend or holiday closings;

2. Trading at the Philippine Stock Exchange is suspended orrestricted;

3. There exists an emergency as a result of which disposal by theFund of securities owned by it is not reasonably practicable, or the

computation or determination of the net asset value is notpracticable;

4. The Securities and Exchange Commission, by order, permitssuspension of the right of redemption for the protection of theFund's stockholders; or

5. Such other circumstance as the applicable Philippine laws or

regulations may allow.

F. Applicable Taxes

Under the National Internal Revenue Code of 1997 ("NIRC"),gains realized by the investor upon redemption of shares of stockin a mutual fund company are excluded from the computation of ataxpayer's gross income and are thus exempt from taxation.

However, a final tax on the amount of cash and/or propertydividends received by an individual from a mutual fund companyare taxable, beginning January 1, 2000, at the rate of 10% forFilipino citizens and resident aliens, and 20% for non-residentaliens. On the other hand, cash and/or property dividendsreceived by corporations are not subject to tax, with the exceptionof dividends received by non-resident foreign corporations which,in general, shall be taxed at the rate of 15% of the amount of

dividends received.

COMPUTATION OF NET ASSET VALUE


24/32

Prospectus 20

The net asset value of each share of the capital stock of the Fund,as of the close of business of any day, shall be the quotientobtained by dividing the value, as of such closing date, of the

assets of the Fund less the liabilities (exclusive of capital stockand surplus) by the total number of shares of capital stockoutstanding at such close, all determined and computed asfollows:

(a) The assets of the Fund shall be deemed to include (i) all cashon hand, deposit in a bank, (ii) all bills and notes and accountsreceivable, (iii) all shares of stock and subscription rights and

other securities owned or contracted for by the Fund, other thanits own capital stock, (iv) all stock and cash dividends and cashdistributions to be received by the Fund and not yet received by itbut declared to stockholders of record on a date on or before thedate as of which the net asset value is being determined, (v) allinterests accrued on any interest bearing securities owned by theFund, (vi) all other property of every kind and nature includingprepaid expenses.

In determining the value of the assets of the Fund for the purposeof obtaining the net asset value for acquisition, purchase,repurchase or redemption by the Fund of shares of its capitalstock from its stockholders, each security listed in the PhilippineStock Exchange shall be valued on the basis of the averageclosing price thereon on the business day on which such net assetvalue for sale and redemption purposes is to be calculated. If

there be no transaction on particular issue listed, then the value tobe used is that of the previous day or the last day that atransaction was closed. As used herein "business day" shall meana day on which the Philippine Stock Exchange is open for tradingin securities and each business day will be at the hour and minutewhen such Exchange closes for the trading of securities for theday.

All other assets of the Fund, including real estate, prepaid andaccrued expenses and dividends receivable shall be valued bysuch standard and acceptable accounting methods as the Boardof Directors and its auditor shall deem to reflect their fair marketvalue.


25/32


(b) The liabilities of the Fund shall be deemed to include (i) all billsand notes and accounts payable, (ii) all administrative expensespayable and/or accrued (including management fees), (iii) all

contractual obligations for the payment of money or property,including the amount of any unpaid dividend declared upon theFund's stock and payable to stockholders of record on or beforethe day as of which the value of the Fund's stock is beingdetermined, (iv) all reserves authorized or approved by the Boardof Directors for taxes or contingencies, and (v) all other liabilitiesof the Fund of whatsoever kind and nature except liabilitiesrepresented by the outstanding capital stock and surplus of the

Fund.

The NAV per share shall consistently be computed in accordancewith the foregoing formula. Any change of the computation orvaluation shall be subject to the approval of the Commission.

BENEFITS TO THE INVESTOR

A. Professional Management and Supervision

Investing in the Fund affords numerous small investors serviceswhich would normally be accessible only to institutional investorsand individuals with substantial resources. The Investor is givenan opportunity to become part of a professionally managedportfolio of securities. The Investment Manager takes on the taskof analyzing the various securities and issues available in themarket, and determining the daily market capitalization of eachIndex stock and the proportion it bears to the aggregate marketcapitalization of the Phisix.

Accordingly, the Investment Manager, who has the expertise, thetime and the facilities to undertake such activities, can buy and

sell the proportionate number of stocks in order to maintain aportfolio that parallels the composition of the Phisix.

B. Diversification and Matching the Phisix


26/32

Prospectus 22

An Investor in the Fund achieves instant diversification at aminimal investment, especially as the Fund's assets shall beproportionately allocated among all Index stocks. As the objective

of the Fund is to match the performance of the PSE CompositeIndex, the Investor is given an opportunity to participate in theequities market.

C. Liquidity

A shareholder of the Fund may at any time, convert hisproportionate share of the Fund's current net assets into its cash

equivalent (i.e. the NAV per share less redemption charges, ifany). There is no need for the shareholder to find a buyer as theFund is always ready to redeem or buy back its shares, providedthat the shareholder submits all pertinent requirements as set forthin the section Redemption of Shares.

PARTIES INVOLVED IN THE FUND

A. Investment Manager and Principal Distributor

1. Company Profile

Philequity Management, Inc. (PEMI) is the investment managerand principal distributor of the Fund. It is duly licensed with theSEC as an Investment Company Adviser with Certificate ofRegistration No. 01-2004-00156 issued on 30 March 2004 andLicense Number ICA-00007. PEMI has a solid track record in fundmanagement, being the investment manager and principaldistributor of Philequity Fund, Inc. PEMI is also the investmentmanager and principal distributor of Philequity Fund, Inc.,Philequity Dollar Income Fund, Inc. and Philequity Peso BondFund, Inc.

The guidelines for the management of the resources andoperations of the Company by PEMI are set in the Managementand Distribution Agreement between the parties. The term of theManagement and Distribution Agreement is two (2) years from itsexecution and shall remain in effect from year to year provided (i)


27/32


such continuation shall be specifically approved by the Board ofDirectors of the Fund or by the vote of the majority of theoutstanding capital stock of the Fund, and (ii) PEMI shall notify theFund in writing at least sixty (60) days prior to the expiration of the

Agreement or before the third year of its intention to renew or notto renew the Agreement. The Agreement may be terminated atany time by the Board of Directors of the Fund or by the vote oftwo-thirds of the outstanding capital stock of of the Fund on notless than sixty (60) days written notice to PEMI. Furthermore, theAgreement shall automatically be terminated in the event of theassignment by PEMI of all its interests, rights or obligations in theAgreement without the written consent of the Fund.

The Board of Directors and Officers of PEMI are:

Roberto Z. Lorayes Chairman of the Board

Edmundo Marco P. Bunyi, Jr. President

Leo McGuire Garcia Director/Treasurer

Wilson L. Sy Director

Washington Z. Sycip Independent DirectorAurora L. Shih Independent Director

Ramon Y. Sy Independent Director

Antonio R. Samson Independent Director

Joseph L. Ong Treasurer

2. Duties and Responsibilities

The scope of services and facilities of the investment managerand principal distributor are to:

(a) Invest and re-invest the assets of the Fund;

(b) Prepare and submit such information and data relating toeconomic conditions, industries, business, corporation or

securities as may be required by the Fund's Board of Directors;

(c) Coordinate all activities and extend all necessary assistance tothe custodian, auditors and legal counsel of the Fund;


28/32

Prospectus 24

(d) Prepare and submit reports, notices and other informationrequired by the Fund;

(e) Provide representation with government offices,instrumentalities and agencies;

(f) Provide accounting, bookkeeping, clerical and otheradministrative services;

(g) Transact with stockbrokers for the account of the Fund;

(h) Provide office space and other administrative facilities;

(i) Distribute and sell shares of the capital stock of the Fund on abest efforts basis at a public offering price equal to the sum of (i)the net asset value per share in effect at the time of the sale ofeach share; and (ii) the sales load fee payable to the investmentmanager/principal distributor; and

(j) Follow the guidelines for the management of the resources andoperations of the Fund, as well as the distribution of Fund'ssecurities set forth in detail in the Management and DistributionAgreement.

B. Custodian Bank

Philippine Depository and Trust Corp. is the Fund's Custodian

Bank. It is responsible for the safekeeping of the Fund's Assets.Pursuant to the Custodian Bank Agreement, the Custodian Bankshall:

(a) Receive, safe keep, record, and account for the proceeds ofthe sale of the shares of stock of the Fund;

(b) Hold the certificates representing the investments made by theInvestment Manager on behalf of the Fund in accordance with therules and regulations of the SEC; and

(c) Follow such duties and responsibilities as set forth in theCustodian Bank Agreement.


29/32


C. Transfer Agent

The transfer agent of the Fund is Banco de Oro Universal Bank.

The primary responsibility of the transfer agent is the accuraterecord keeping of individual shareholdings and the issuance andcancellation of stock certificates/depository receipts. Pursuant tothe Stock and Transfer Agency Agreement, the transfer agentshall:

(a) Prepare and issue stock certificates, as well as cancelcertificates of stock presented for redemption;

(b) File the reports pertaining to the Fund as may be required bythe Securities and Exchange Commission and other governmentalentities;

(c) Prepare the list of stockholders for all regular or specialmeetings of the stockholders of the Fund and when requested bythe Investment Manager and/or Fund;

(d) Prepare and mail out all notices, reports and circulars to allstockholders upon prior request of the Fund or InvestmentManager;

(e) Prepare and mail dividend checks;

(f) Register all liens constituted on the shares of stock of the Fund;

and

(g) Replace stock certificates reported as lost, stolen or destroyed;

(h) Follow such duties and responsibilities as set forth in the Stockand Transfer Agency Agreement.

D. Legal Counsel

Tan & Venturanza Law Offices serve as legal counsel of the Fund.

E. External Auditor


30/32

Prospectus 26

The principal accountants and external auditors of the Fund is theaccounting firm of SyCip, Gorres, Velayo & Company (SGV &Co.) with address at SGV Building, 6760 Ayala Avenue, Makati

City. There have been no changes in or any disagreements withthe SGV & Co. in the last two (2) years on any accounting andfinancial disclosures.

F. Significant Employee

The Fund has no employee, significant or otherwise, as theoperation of the Fund is being made through and within the

premises of its fund manager.

G. Certain Relationships and Related Transactions

During the last two (2) years the Fund has not been a party to anytransaction or proposed transaction, in which any director orexecutive officer of the Fund or any security holder owning 5% ormore of the securities of the Fund or any member of the

immediate family of such persons, had a direct or indirect materialinterest except the Management and Distribution Agreemententered into by the Fund and its fund manager last 14 March2003, which was amended last 11 August 2004.

EXPENSES CHARGEABLE TO THE FUND

The following expenses shall be for the account of the Fund andshall be given priority in determining compliance by the Fund withany limitation on operational expenses set forth in applicablePhilippine laws, rules and regulations.

1. Compensation of the officers and directors of the Fund;

2. Audit and legal fees;

3. Brokerage charges and other customary fees and charges inconnection with the acquisition, appraisal and disposition of theFund's assets;


31/32


4. Fees of the custodian bank and auxiliary custodian banks, tothe extent not absorbed by buyers of the Fund's securities;

5. Cost of printing and mailing reports, notices, proxy forms, and

other communications to stockholders of the Fund, except thoseborne by the custodian bank;

6. Fees of transfer agents for the securities of the Fund and othertransfer fees to the extent not absorbed by buyers of the Fund'ssecurities;

7. Costs of the registration of the Fund and its securities with the

SEC; and 8. Taxes, including income taxes, license fees,documentary stamp taxes, to the extent not absorbed by buyers ofthe Fund's securities, including cost of bonding the Fund'spersonnel and officers as may be required by law or by rules andregulations of the SEC.

MANAGEMENT FEE

A management fee equivalent to one and a half percent (1.5%)per annum of the average net asset value of the Fund's assetscomputed on a daily basis, shall be payable by the Fund to itsinvestment manager, Philequity Management, Inc.

EXPENSES CHARGEABLE TO THEINVESTMENT MANAGER

The following expenses shall be deemed covered by themanagement fee of one and a half percent (1.5%) per annum ofthe average net asset value of the Company's assets paid underSection 3 of the Management and Distribution Agreement andshall therefore be for the account of PEMI, to wit:

1. Salaries, bonuses, allowances and other compensation of the

personnel hired by PEMI to perform the services in Section 1(a) ofthis Agreement, including other costs incurred by PEMI'ssalesmen, personnel and officers, in connection with the selling ofthe Fund's shares as may be required by applicable Philippine lawor by rules and regulations of the SEC;


32/32

2. Expenses of providing the office space and other administrativefacilities referred to in Section 1(b) of this Agreement, including

office rentals, cost of office equipment and supplies, cost ofutilities, such as telephone, light and water facilities; and

3. All other operating expenses of the Fund, subject to theexceptions specified above under the topic Expenses Chargeableto the Fund.

Documents

PE PSE Index - Prospectus