FIRST METRO SAVE & LEARN EQUITY FUND, INC. An Open-End Investment Company ISSUER
The number of securi ti es t o be offered, as i ncreased, i ncl usi ve of what has al ready been subscri bed t o upon i ncorporat i on i s One Bi l l i on (1, 000, 000, 000) shares whi ch i s t he aut hori zed capi t al st ock. Two Hundred Fi ft y Mi l l i on ( 250, 000, 000) shares have been subscri bed at par val ue of P1. 00 per share. The pri ce at whi ch t he Seven Hundred Fi ft y Mi l l i on ( 750, 000, 000) shares are t o be offered i s based on the net asset val ue per share comput ed on a dai l y basi s pl us a front -end sal es l oad fee. The shares t o be offered are unl i st ed and wi l l be t raded t hrough t he over-t he-count er market .
FIRST METRO ASSET MANAGEMENT, INC. I NVESTMENT COMPANY ADVI SER, FUND ADMI NI STRATOR, AND PRI NCI PAL DI STRI BUTOR
THI S PROSPECTUS I S DATED 30 J UNE 2008
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 2 of 53
The number of securi t i es t o be offered, i ncl usi ve of what has al ready been subscri bed t o upon i ncorporat i on i s One Bi l l i on ( 1, 000, 000, 000) shares. Two Hundred Fi ft y Mi l l i on ( 250, 000, 000) shares have been subscri bed at par val ue of P1. 00 per share. The pri ce at whi ch t he Seven Hundred Fi ft y Mi l l i on ( 750, 000, 000) shares are t o be offered i s based on t he NAV per share comput ed on a dai l y basi s pl us a front end sal es l oad fee. Usi ng t he Net Asset Val ue per share of P1. 6643 as of June 30, 2007 for t he 750 mi l l i on shares, t he t ot al est i mat ed gross proceeds t o be rai sed by t he offeri ng i s P1, 248, 225, 000. The gross proceeds from t he sal e of t he shares of st ock of t he regi st rant shal l be hel d by t he Issuer s Custodi an Bank whi ch i s The Hong Kong and Shanghai Banki ng Corporat i on. The shares t o be offered are unl i st ed and wi l l be t raded t hrough t he over-t he-count er market .
The Company wi l l use t he proceeds of t he sal e of Fi rst Met ro Save & Learn Equi t y Fund, Inc. t o i nvest pri mari l y i n l i st ed and non-l i st ed equi t y securi t i es. However, as a t act i cal move, a port i on of t he Fund may al so be i nvest ed i n government securi t i es, SEC-regi st ered commerci al papers, among ot her debt i nst rument s. The asset s of t he Fund shal l be st ructured based on market condi t i ons, t he l evel of i nt erest rates, and l i qui di t y needs of t he Fund. The Issuer i s a domesti c corporat i on, i ncorporat ed on May 27, 2005 as Fi rst Met ro Save & Learn Equi t y Fund, Inc. ( t he "Fund") , wi t h pri nci pal busi ness offi ce address at 18 t h Fl oor, PS Bank Tower, 777 Paseo de Roxas, corner Sedeo St . , Makat i Ci t y, Phi l i ppi nes, and Tel ephone Numbers: (632) 8912860. It was regi st ered on Sept ember 6, 2005 wi t h t he Securi t i es and Exchange Commi ssi on as an Open-End Invest ment Company or "mut ual fund". It i s engaged pri mari l y i n t he busi ness of i nvest i ng, rei nvest i ng and t radi ng i n securi t i es and t he sal e of i t s shares of st ock. As a l i censed Mut ual Fund, i t offers to t he publ i c, on a cont i nuous basi s, redeemabl e shares of st ock, at a pri ce rel at ed t o t he net asset val ue of t he Fund' s port fol i o. On March 8, 2007, t he Securi ti es and Exchange Commi ssi on ( SEC) approved t he amendment t o t he Arti cl es of Incorporat i on of Fi rst Met ro Save and Learn Equi t y Fund, Inc. , i ncreasi ng i t s aut hori zed capi t al st ock from One Hundred Mi l l i on ( 100, 000, 000) t o Two Hundred Fi ft y Mi l l i on ( 250, 000, 000) common shares. The SEC on January 29, 2008, al so approved t he addi t i onal i ncrease of Seven Hundred Fi ft y Mi l l i on ( 750, 000, 000) common shares t o i t s authori zed capi t al st ock. Sai d amendment s were approved by t he Board of Di rect ors on Apri l 26, 2006 and February 26, 2007 and rat i fi ed by t he st ockhol ders on June 21, 2006 and Apri l 13, 2007, respect i vel y. The regi st rat i on of Two Hundred fi ft y Mi l l i on shares was approved on December 14, 2007.
Vari ous ri sk fact ors (i . e. , st ock market ri sk, i nt erest rat e ri sk, i nfl at i on ri sk, and manager s ri sk) can affect t he market val ue of t he asset s of t he Fund and cause t he Fund' s net asset val ue t o vary over t i me. Consequent l y, there may be i nst ances when t he redempt i on pri ces of redeemed shares wi l l be l ess t han t he pri ces at whi ch t he shares were ori gi nal l y purchased. Invest ors who redeem t hei r shares duri ng t hi s t i me may not recover t he ful l cost of t hei r i nvest ment . Fi rst Metro Asset Management , Inc. ( FAMI) i s t he Invest ment Manager, Fund Admi ni st rat or, and Pri nci pal Di stri but or of the Fund. Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 3 of 53 The t ot al fees payabl e t o Fi rst Met ro Asset Management , Inc. ( FAMI) , i s a mont hl y fee equi val ent t o one- and-t hree-fourt hs percent ( 1. 75%) per annum of t he average net asset val ue of t he Fund' s asset s, computed on a dai l y basi s. The "net asset val ue" shal l be det ermi ned by comput i ng t he t ot al val ue of t he Fund' s asset s l ess i t s l i abi l i ti es i n accordance wi t h t he procedure used i n comput i ng t he net asset val ue of each share of t he Fund. In addi t i on, as Invest ment Manager, FAMI shal l be pai d an i ncent i ve fee equi val ent t o one-t ent h ( 1/10) of t he real i zed appreci at i on i n val ue of t he Fund' s net assets i n excess of t he "hurdl e rate" defi ned as: PSEi annual performance +6. 5%. FAMI wi l l al so recei ve from t he Fund a sal es l oad fee based on t he fol l owi ng schedul e: Investment Amount Sales Load P5,000 to less than P100,000 2.0% P100,000 to less than P500,000 1.5% P500,00 to less than P2,000,000 1.0% P2,000,000 and above 0.5%
The Fund i s aut hori zed under i t s By-Laws t o i ssue cash, propert y and st ock di vi dends out of i ts unrest ri ct ed ret ai ned earni ngs whenever t he condi t i on of t he Fund' s fi nances wi l l render i t expedi ent t o decl are sai d di vi dends. However, sai d di vi dends, shal l be automat i cal l y re-i nvest ed. No deal er, sel l i ng agent and any ot her person has been aut hori zed t o gi ve i nformat i on or make any represent at i on not cont ai ned i n t hi s Prospect us. Thi s Prospect us does not const i t ut e an offer t o sel l or a sol i ci t at i on of an offer t o sel l or a sol i ci t at i on of an offer t o buy any securi t i es i n any j uri sdi ct i on or t o any person t o whom i t i s unl awful t o make such an offer or sol i ci t at i on i n such j uri sdi ct i on. The del i very of t hi s Prospect us at any t i me does not i mpl y t hat t he i nformat i on herei n cont ai ned i s correct as of any t i me subsequent t o t hi s dat e. The i nformat i on cont ai ned i n t hi s Prospect us has been suppl i ed by Fi rst Met ro Save & Learn Equi t y Fund unl ess ot herwi se st at ed. Fi rst Met ro Save & Learn Equi t y Fund accept s ful l responsi bi l i t y for t he accuracy of t he i nf ormat i on gi ven herei n. Fi rst Met ro Asset Management , Inc. , the Fund Admi ni st rat or of Fi rst Met ro Save & Learn Equi t y Fund, has exert ed reasonabl e efforts t o veri fy t he i nformat i on herei n and does not make any represent at i ons or warrant i es as t o t he accuracy or compl et eness of t he mat eri al s cont ai ned herei n. The SEC had ori gi nal l y i ssued on Sept ember 6, 2005 an Order renderi ng effect i ve t he Regi st rat i on St at ement of t he Company coveri ng one hundred mi l l i on ( 100, 000, 000) common shares of t he aut hori zed capi t al st ock and a Cert i fi cat e of Permi t t o offer t hese securi t i es for sal e.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 4 of 53 SUMMARY OF FINANCIAL INFORMATION STATEMENTS OF ASSETS AND LIABILITIES June 30 2008 2007 2006 ASSETS Cash and Cash Equivalents (Note 5) P 177,232,194 P 51,333,554 P 48,633,244 Financial Assets at Fair Value through Profit or Loss 328,152,675 500,061,717 192,113,588 Available-for-Sale Investments 0 124,932,592 58,501,279 Loans and Receivables 68,797,357 149,013,250 1,605,137 Input Taxes 1,284,501 532,401 575,466,727 825,341,113 301,385,649 LIABILITIES Accounts Payable and Accrued Expenses 3,270,716.00 3,644,751 6,081,024 Payable to First Metro Asset Management, Inc. 871,870.00 1,139,067 411,224 Total Liabilities Excluding Net Assets Attributable to Shareholders 4,142,586 4,783,818 6,492,248 NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS P 571,324,141 P 820,557,295 P 294,893,401 Net Asset Value Per Share P 1.6643 P 2.0275 P 1.7983 December 31
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 5 of 53 STATEMENT OF INCOME & EXPENSES For t he Peri od Ended June 30, 2008 and for t he Years Ended December 31, 2007 & 2006
2008 2007 2006 (Six months) (One Year) (One Year) Trading gain - net (140,524,572) 21,669,835 54,312,144 Interest income 5,354,908 6,508,695 1,948,853 Dividend income 8,830,857 6,930,549 1,435,525 Others - - 4,725 (126,338,807) 35,109,079 57,701,247 Management fees 5,678,372 14,993,943 7,411,937 Taxes and licenses 1,087,380 3,690,410 1,030,273 Professional fees 116,700 802,582 110,000 Directors and officers fees 131,000 206,100 165,000 Custodian and clearing fees 62,036 205,949 60,000 Membership fees and dues 20,000 10,000 20,000 Miscellaneous 110,494 576,976 55,288 7,205,982 20,485,960 8,852,498 (133,544,789) 14,623,119 48,848,749 3,516,202 1,444,656 1,645,191 (137,060,991) 13,178,463 47,203,558 (0.3961) 0.0370 0.5465 PROVISION FOR FINAL TAX NET INVESTMENT INCOME Basic/Dilutive Earnings Loss Per Share INVESTMENT INCOME OPERATING EXPENSES TAX
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 6 of 53
RI SK DI SCL OSURE ST AT EMENT
I. GENERAL RISK WARNING The pri ce of securi ti es can and does fl uctuate, and any i ndi vi dual securi ty may experi ence upward or downward movement, and may even become val uel ess. There i s an i nherent ri sk that l osses maybe i ncurred rather than profi t made as a resul t of buyi ng and sel l i ng securi ti es. Past performance i s not a gui de to future performance. There i s an extra ri sk of l osi ng money when securi ti es are bought from smal l er compani es. There may be a bi g di fference between the buyi ng pri ce and the sel l i ng pri ce of these securi ti es. An i nvestor deal s i n a range of i nvestments whi ch may carry a di fferent l evel of ri sk. II. PRUDENCE REQUIRED Thi s di scl osure does not purport to di scl ose al l the ri sks and other si gni fi cant aspects of i nvesti ng i n these securi ti es. An i nvestor shoul d undertake hi s or her own research and study on the tradi ng of securi ti es before commenci ng any tradi ng acti vi ty. He/she may request i nformati on on the securi ti es and i ssuer thereof from the Commi ssi on whi ch are avai l abl e to the publ i c. III. PROFESSIONAL ADVICE An i nvestor shoul d seek professi onal advi ce i f he or she i s uncertai n of, or has not understood any aspect of the securi ti es to i nvest i n or the nature of ri sk i nvol ved i n tradi ng of securi ti es especi al l y those hi gh ri sk securi ti es.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 7 of 53
T a b l e o f Co n t e n t s Table of Contents.....7 Prospectus Summary.....9 Issuer....9 Investment Objective....9 Type of Issue....9 Shares Offered..9 Par Value..9 Offering Price...9 Sales load fee.....9 Minimum investment....9 Redemption Price......9 Daily Cut-off time.....9 Redemption Charge.10 Risks of Investing... 10 Risk Factors.....10 Stock Market Risk..................................................................................................................10 Interest Rate Risk.................................................................................................................. 10 Inflation Risk..........................................................................................................................11 Manager Risk..........................................................................................................................11 Glossary...11 The Fund........................13 Background and Purpose......................................................................................................13 Description of Securities.......................................................................................................13 Capitalization and Ownership..............................................................................................13 Properties.................................................................................................................................15 Market Information................................................................................................................15 Top twenty (20) stockholders....15 Market Price.............................................................................................................................15 Dividends.................................................................................................................................16 Affiliated Companies..............................................................................................................17 Management Discussion of Plan of Operations................................................................17 Key Performance Indicators.17 Statement of Condition as of June 30, 2006 and December 30, 2006 20 Statement of Income and Expenses with comparative figures for the period of ended June 30, 2006 and June 30, 2007 ..21 Statement of Changes in Capital Fund as of June 30, 2006 and June 30, 2007 ..22 Statement of Cash Flows for the period ended June 30, 2006 and June 30, 2007 ..23 Disclosure to Financial Statement as of June 30, 2007 ..24 Directors and Officers of the Fund.................................................................................... 26 Significant Employee...............................................................................................................29 Family Relationship.................................................................................................................29 Executive Compensation........................................................................................................29 Legal Proceedings.....................................................................................................................30 Security Ownership of Certain Record and Beneficial Owners .......................................31 Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 8 of 53 Security Ownership of Management.....................................................................................32 Certain Relationship and Related Transactions ...................................................................32 Compliance with Investment Company Act........................................................................33 Investment Policy.....................................................................................................................33 Investment Guidelines and Restrictions...............................................................................33 Use of Proceeds........................................................................................................................35 Expenses to be deducted from the Gross Proceeds...........................................................35 Plan of Distribution/ Distribution Method.........................................................................35 Competition..............................................................................................................................36 Effect of existing Governmental Regulation.......................................................................36 Subscription Procedure...........................................................................................................37 Eligible Investors......................................................................................................................37 Requirements for corporate applicants ................................................................................37 Minimum Investment..............................................................................................................37 Offering Price...........................................................................................................................38 Acceptance of Investment applications................................................................................38 Payment terms..........................................................................................................................38 Refunds......................................................................................................................................39 Delivery of Stock Certificate..................................................................................................39 Redemption of Shares.............................................................................................................39 Benefits to investors................................................................................................................40 Professional Management.......................................................................................................40 Diversification at Low Cost....................................................................................................40 Liquidity.....................................................................................................................................40 Convenience..............................................................................................................................40 Protecting Investors.................................................................................................................41 Parties Involved in the Fund..................................................................................................41 Investment Manager, Administrator and Principal Distributor .......................................41 Custodian Bank.........................................................................................................................44 Transfer Agent ..........................................................................................................................45 External Auditor.......................................................................................................................45 Material Contracts and Agreement........................................................................................45 Stock and Transfer Agent............................................................................... 46 Management and Distribution Agreement.......................................................................... 47 Custodian Bank Agreement................................................................................................... 48 Stock and Transfer Agency Agreement 48 Expenses Chargeable to the Fund/Fund Management Company.................................. 48 Compliance with Manual on Corporate Governance 49 Applicable Philippine Laws.................................................................................................... 50 Investment Company Act ................................................................................................... .50 Dividends...................................................................................................................................51 Rights of Minority Shareholders.............................................................................................51 Management...............................................................................................................................57 Accounting and Auditing.........................................................................................................57 Taxation......................................................................................................................................57 Shareholder................................................................................................................................ 57
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 9 of 53 Pr o s p e c t u s Su m m a r y The fol l owi ng summary i s qual i fi ed i n i ts enti rety by the detai l ed i nformati on appeari ng el sewhere i n thi s Prospectus. Issuer Fi rst Metro Save & Learn Equi ty Fund, Inc. Investment Obj ective The Fund i s desi gned to seek l ong-term capi tal appreci ati on by i nvesti ng pri mari l y i n careful l y sel ected l i sted and non-l i sted equi ty securi ti es. Type of Issue Open-end i nvestment company. Shares Offered Common stock. Par Val ue One Peso (Php1. 00) per share. Offering Price At Net Asset Val ue (NAV) per share for the banki ng day, i f payment i s made wi thi n the dai l y cut-off ti me, pl us a front-end sal es l oad fee. Sal es Load Fee
Investment Amount Sales Load P5,000 to less than P100,000 2.0% P100,000 to less than P500,000 1.5% P500,000 to less than P2,000,000 1.0% P2,000,000 and above 0.5%
Minimum Investment The mi ni mum i ni ti al i nvestment shal l be P5, 000. 00 and the mi ni mum addi ti onal i nvestment shal 1 be P1, 000. 00. Al l sal es shal l be on cash basi s and i nstal l ment sal es are prohi bi ted. Redemption Price The pri ce of securi ti es surrendered for redempti on wi thi n the dai l y cut-off ti me shal l be the NAV per share on the same banki ng day whi l e those surrendered after the dai l y cut-off ti me shal l be deemed to have been recei ved on the next banki ng day and wi l l be processed accordi ngl y. Payment shal l be made no l ater than seven (7) banki ng days from recei pt of redempti on request. Dail y Cut-Off Time 12: 00 Noon.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 10 of 53 Redemption Charge Retenti on Peri od Fee Less than 180 days 1. 0% 180 days and beyond none
Risks of Investing An i nvestment i n the Fund i s not i nsured or guaranteed by the Phi l i ppi ne Deposi t Insurance Corporati on or any other government agency. Al though the Fund seeks to preserve the val ue of i ts i nvestments, i t i s possi bl e to l ose money by i nvesti ng i n the Fund. The Fund s i ncome wi l l change as a resul t of movements i n the stock market and other macroeconomi c factors. No si ngl e fund i s i ntended to be a compl ete i nvestment program, but i ndi vi dual funds, such as thi s Fund, can be an i mportant part of a bal anced and di versi fi ed i nvestment program. Mutual funds have the fol l owi ng general ri sks: returns may vary, the i nvestor may l ose money, and the i nvestor cannot be certai n that the Fund wi l l achi eve i ts i nvestment obj ecti ve. Risk Factors Vari ous ri sk factors can affect the market val ue of the assets of the Fund and cause the Fund' s net asset val ue to vary. Consequentl y, there are i nstances where redempti on pri ces of redeemed shares may be l ess than the pri ces at whi ch the shares were ori gi nal l y purchased. Investors who redeem thei r shares duri ng thi s ti me may not recover the ful l cost of thei r i nvestment. The fol l owi ng are the ri sk factors i n thei r order of i mportance:
Stock market risk Investi ng i n shares of stock i s general l y ri ski er because of the vol ati l i ty of the stock market. Changes i n pri ces of equi ty securi ti es that compose the Fund s portfol i o may substanti al l y vary i n a short span of ti me. The performance of the compani es whose shares are i ncl uded i n the portfol i o of the Fund are very much dependent on the peopl e behi nd those compani es. Added to that, stock pri ces are sensi ti ve to pol i ti cal and economi c condi ti ons that normal l y change from ti me to ti me. To manage the ri sk, the stocks i ncl uded i n the portfol i o wi l l be cauti ousl y sel ected by the i nvestment manager based on thei r soundness and l ong-term profi tabi l i ty. Di versi fi cati on of the stockhol di ngs (not onl y i n terms of the number of stocks but al so i n the di fferent sectors and i ndustri es) of the portfol i o wi l l be done to reduce i ts i mpact. Interest rate risk If i nterest rates ri se, the pri ces at whi ch the assets of the Fund can be sol d may fal l . The l onger the maturi ty of the assets, the more sensi ti ve the pri ces of the assets wi l l be to changes i n i nterest rates. In other words, a l ong-term i nvestment (e. g. 5-year Retai l Treasury Bond) wi l l have hi gher i nterest rate sensi ti vi ty than a short-term i nvestment (e. g. 365-day Treasury Bi l l ). To mi ti gate the ri sks, the Fund manager wi l l di versi fy i n terms of the type of Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 11 of 53 securi ti es (such as treasury bonds, notes, bi l l s) and the ti me hori zons of the sai d securi ti es (such as one-year, 3-year, 5-year, 10-year, and above 10 years).
Infl ation risk Infl ati on ri sk i s the ri sk that i nfl ati on may erode the real val ue of an i nvestment by the Fund. One way to manage the ri sk i s to acti vel y trade i n fi xed-i ncome securi ti es, parti cul arl y government securi ti es, whi ch are val ued on a marked-to-market basi s.
Manager risk The performance of the Fund i s dependent upon the i nvestment manager s ski l l i n maki ng appropri ate i nvestments. As a resul t, the Fund may under- perform i n the market or compared to i ts peers. Al so, the Fund coul d fai l to meet i ts i nvestment obj ecti ves. The board of di rectors of the Issuer wi l l see to i t that al l the i nvestment pol i ci es and restri cti ons enumerated i n thi s prospectus are stri ctl y fol l owed. The board wi l l meet more often to conti nual l y moni tor the i nvestment manager s performance i n thi s area. Gl ossary The fol l owi ng words or expressi ons used i n thi s Prospectus, unl ess the context otherwi se requi res, shal l have the correspondi ng meani ngs: Act Investment Company Act, Republ i c Act No. 2629
BSP Bangko Sentral ng Pi l i pi nas
Cl ose-end Company An i nvestment company other than an open-end company
Custodi an Bank The Hongkong and Shanghai Banki ng Corp. Ltd.
Investment Appl i cati on Form The forms to be used by the Pri nci pal Di stri butor for i nvestors to purchase the shares of stock of the Fund i n accordance wi th the terms and condi ti ons of the Fund as descri bed i n thi s Prospectus. Investment Company Any i ssuer whi ch i s or hol ds i tsel f out as bei ng engaged pri mari l y, or proposes to engage pri mari l y, i n the busi ness of i nvesti ng, re-i nvesti ng or tradi ng i n securi ti es, as defi ned i n Secti on 4 of the Act.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 12 of 53 Issuer/Regi strant Fi rst Metro Save and Learn Equi ty Fund, Inc. Fund Manager
Fund Admi ni strator and Pri nci pal Di stri butor Fi rst Metro Asset Management, Inc. or (FAMI)
Fi rst Metro Asset Management, Inc. or (FAMI) Investor Any person, associ ati on, or corporati on wi th the i ntenti on of i nvesti ng i n the shares of the Fund.
NAV Net Asset Val ue
Open-end Company An i nvestment company whi ch i s offeri ng for sal e, or has outstandi ng, any redeemabl e securi ty, of whi ch i t i s the i ssuer.
P or Pesos Phi l i ppi ne Pesos, l awful currency of the Republ i c of the Phi l i ppi nes
PSE or Stock Exchange or the Exchange
The Phi l i ppi ne Stock Exchange, Inc. R. A. 2629 Republ i c Act No. 2629 or the Investment Company Act of 1960
SEC Securi ti es and Exchange Commi ssi on
Sharehol der or Stockhol der Any natural or j uri di cal person who has subscri bed to the shares of the Fund.
Transfer Agent Metrobank Trust Banki ng Group
VAT Val ue Added Tax Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 13 of 53 The Fund Background and Purpose Fi rst Met ro Save & Learn Equi t y Fund i s an open-end i nvest ment company, whi ch was i ncorporat ed on May 27, 2005 and subsequent l y regi st ered under R. A. 2629 on Sept ember 6, 2005. It i s pri nci pal l y engaged i n t he sal e of i t s shares of st ock and i n t he i nvest ment of t he proceeds from t hese sal es i nt o a port fol i o of qual i t y, hi gh grade equi t y securi t i es. The Fund' s mai n obj ect i ve i s t o provi de smal l i nvestors wi t h t he opport uni t y t o access t he capi t al market s and enabl e t hem t o reap sat i sfact ory ret urns on t hei r i nvestment s t hrough prudent sel ect i on of equi t y securi t i es, and t he professi onal management and supervi si on of the Fund. Descri pti on of Securi ti es Capitalization and Ownership The Fund' s aut hori zed capi t al st ock i s ONE BILLION ( 1, 000, 000, 000) common shares wi th a par val ue of Php1. 00 per share. Seven Hundred Fi ft y Mi l l i on ( 750, 000, 000) shares of whi ch represent t he recent i ncrease i n t he aut hori zed capi t al st ock and t he same are bei ng regi st ered wi t h t he Securi ti es and Exchange Commi ssi on. As of December 31, 2007, t he percent age cont ri but i ons of t he vari ous sources of i ncome are as fol l ows: Amount % Tradi ng Gai n P 21, 669, 835 61. 72 Int erest Income P 6, 508, 695 18. 54 Di vi dend P 6, 930, 549 19. 74
The Company had an i ni ti al pai d-up capi tal of TWENTY FIVE MILLION PESOS (Php25, 000, 000. 00), whi ch was subscri bed by the fol l owi ng: Name Nat i onal i t y Number of shares subscri bed Amount subscri bed (i n Php) Percent age (%) 1. Fi r st Met r o Invest ment Cor por at i on Fi l i pi no 24, 999, 991 24, 999, 991. 00 100. 00 2. Vi ct or C. Macal i ncag Fi l i pi no 1 1. 00 0 3. Ant oni o M. Ber nardo Fi l i pi no 1 1. 00 0 4. Fr anci sco G. Co Fi l i pi no 1 1. 00 0 5. Robert o Juanchi t o T. Di spo Fi l i pi no 1 1. 00 0 6. Manuel V. De Leon, FMS Fi l i pi no 1 1. 00 0 Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 14 of 53 7. Gl or i a C. Garrovi l l o Fi l i pi no 1 1. 00 0 8. Eduardo A. Mendoza Filipino 1 1.00 0 9. Ni mfa B. Past rana Filipino 1 1.00 0 10. Edwi n B. Val er oso Filipino 1 1.00 0 TOTAL 25, 000, 000 25,000,000.00 100.00
Pursuant to ICA Rul e 35-1(c)(3), the i ncorporators of the Fund agreed not to sel l , transfer, convey, encumber or otherwi se di spose of thei r shares i n the Fund wi thi n twel ve (12) months from the regi strati on date of the Fund. Each share of stock of the Fund i s a voti ng stock wi th voti ng ri ghts equal to every other outstandi ng shares of stock and subj ect to the fol l owi ng: Ri ght of Redempti on The hol der of any shares of stock of the Fund, upon presentati on to the Fund or to any of the Fund' s dul y authori zed representati ves of the Confi rmati on Recei pt or stock certi fi cate, and upon fi l i ng of the dul y accompl i shed redempti on form, shal l recei ve by way of redempti on approxi matel y hi s proporti onate share i n the Fund' s current net assets or the cash equi val ent thereof, i . e. , the net current asset val ue per share, subj ect to exi sti ng l aws and the By-Laws of the Fund.
Wai ver of Pre-empti ve Ri ghts No stockhol der shal l , because of hi s ownershi p of stock, have a pre-empti ve or other ri ght to purchase, subscri be for, or take any part of any stock or of any other securi ti es converti bl e i nto or carryi ng opti ons or warrants to purchase stock of the Fund. The Fund' s Arti cl es of Incorporati on further provi de that any part of such stock or other securi ti es may at any ti me be i ssued, aucti oned for sal e, and sol d or di sposed of by the Fund pursuant to the resol uti on of i ts Board of Di rectors, to such persons and upon such terms as the Board may deem proper, wi thout fi rst offeri ng such stock or securi ti es or any part thereof to exi sti ng stockhol ders.
Restri cti ons on Transfer No transfer of shares of the Fund, whi ch woul d reduce the stock ownershi p or equi ty i nterest of Fi l i pi no ci ti zens to l ess than the percentage requi red by appl i cabl e l aws or regul ati ons shal l be caused or al l owed to be recorded i n the books of the Fund.
Di stri buti on of Di vi dends - As provi ded for i n the Fund' s By-l aws, the Board of Di rectors may make arrangements wi th i ts stockhol ders whereby di vi dends and/or other di stri buti ons may be rei nvested i n the Fund' s securi ti es i n l i eu of cash to be pai d to the stockhol ders. The arrangement wi th sharehol ders shal l be such that the di vi dends to be Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 15 of 53 rei nvested shal l be val ued at the net asset val ue per share of the Fund at the ti me sai d di vi dends are pai d. Properties The Regi strant does not own any properti es (such as real estate, pl ant and equi pment, mi nes, patents, etc. ).
Market Information There i s no pri nci pal market where the Fund s shares wi l l be traded, not even i n the Phi l i ppi ne Stock Exchange due to i ts nature as an open-end i nvestment company. The Fund s shares shal l be sol d by Fi rst Metro Asset Management, Inc. , i ts appoi nted Pri nci pal Di stri butor.
Market Pri ce
Dividends The fund has not i ssued cash di vi dends si nce i ts i ncepti on. The Board of Di rectors of the Fund may deci de to decl are di vi dends from the unrestri cted retai ned earni ngs of the Fund at a ti me and percentage as the same Board may deem proper and i n accordance wi th l aw. Di vi dends, i f any, are automati cal l y re-i nvested. The Fund may decl are or pay di vi dends but l i mi ts those di vi dends to come from the Fund s accumul ated undi stri buted net i ncome, determi ned i n accordance wi th good accounti ng practi ce and i ncl udi ng profi ts or l osses real i zed upon the sal e of securi ti es; or from the Fund s earned surpl us so determi ned for the current or precedi ng fi scal year.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 16 of 53 Affil iated Companies The fol l owi ng fi rms are affi l i ated wi th the Fund: Fi rst Metro Investment Corporati on (FMIC) i s affi l i ated wi th the Fund, bei ng i ts maj ori ty foundi ng sharehol der. On the other hand, FMIC, CEAP and Mari st Brothers own FAMI 75%, 15% and 15%, respecti vel y.
Managements Discussion and Analysis of Financial Condition and Results of Operations
The total resources of First Metro Save & Learn Equity Fund, Inc. (SALEF) grew by 274% from P301.4 million at the end of 2006 to P825.3 million at the end of 2007. These are comprised of the shares of stocks recorded under Held for Trading securities, Available-for- Sale financial assets, which represent investments in government securities, cash and cash- equivalents, and receivables. Loans and receivables of P149.0 million pertain to accounts receivables from brokers of P 82.2 million, loans receivable amounting to P 14.7 million, unquoted debt securities classified as loans amounting to P50.0 million and accrued interest from time deposits and from investments in government securities of P2.1 million.
Total liabilities amounting to P4.8 million at the end of December 2007 decreased by 26.5% compared to P6.5 million at the beginning of the year . The decrease was mainly because there was no accrual of incentive fee.
The outstanding shares for the year closed at 250,000,000 shares, almost five times the outstanding shares compared to last year. Deposit for future subscription amounted to P154.7 million. A resolution increasing the authorized capital stock of the Fund from 250,000,000 shares to 1,000,000,000 has been unanimously approved by the members of the Board of Directors, subsequently approved by the shareholders owning at least 2/3 of the outstanding capital stock of the Fund at separate meetings held on February 26, 2007 and April 13, 2007, respectively. The Fund has submitted the amended Articles of Incorporation and was approved by SEC last January 29, 2008.
First Metro Save & Learn Equity Fund, Inc. (SALEF) ended the year with a P13.2 million net income which came primarily from trading gains on sales of investment in stocks as well as from the interest earned from bank deposits/placements and stock dividends. Due to the weakening of local market, a P23.3 million marking-to-market loss lessen the gross income by 39%. Bearish market in the 3 rd quarter of 2007 prompted the fund to unload its stock holdings to cut further losses resulting from the drop in the stock market. The market regained strength towards the end of the year resulting to a net realized gain on sale of stocks amounting to P44.9 million. Interest income from investment in government securities and time deposits amounted to P 6.5 million, an increase of 242% from the P1.9 million interest income in 2006. Likewise, dividend Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 17 of 53 income rose considerably from P1.4 million in 2006 to P 6.9 million in 2007 or an increase of 393%. Finally, the net asset value per share (NAVPS) of the Fund rose to P2.0275 per share in 2007 from P1.7983 per share at the beginning of the year giving the investors a 12.75% return on investment
Key Performance Indicators
Net Asset Value Per Share - Net Asset Value per share increased from P1.7983 at the end of December 31 2006, to P2.0275 representing an annual growth of 12.75%.
Sales for the year 2007 - The Fund had total net sales of P 807.94 million for the year 2007. This is more than 3 times higher compared to last years P 221.38 million. On the other hand, the number of accountholders grew from 521 to 1,043.
Redemptions for the year 2007 - The Fund had total redemptions of P221.87 million for the year ended December 31, 2007, which is more than 51 time higher than the P4.31 million redemption in 2006.
Net Income vs. Benchmark - The net income of the Fund declined by almost 3 times from P 47.2 million in 2006 to P 13.5million in 2007.
Market Share vs. Benchmark As of December 31, 2007, the Fund held a 5.91% share in the Equity Funds category while 0.92% share among all mutual funds in terms of net assets. On the basis of account holders, the Fund has 1,033 outstanding accounts or 3.08% of the total number of accounts in the Equity Funds category
The following basic ratios measure the financial performance of the Company for the years ended 2007 and 2006: Return on Assets 1/ 2.34% 29.59% Return on Equity 2/ 2.36% 30.20% Cost-to-Income Ratio 3/ 58.35% 13.58% Net Asset Value per Unit 4/ 2.0275 1.7983 Earnings per share 5/ 0.037 0.5672 As of Dec. 31, 2006 (Audited) PERFORMANCE I NDI CATORS As of Dec. 31, 2007 (Audited)
1/ Average assets for period ended December 31 were computed based on the average of the beginning and ending balances, over the net income for the year. 2/ Likewise, average equity for period ended December 31 was computed based on the average of the beginning and ending balances, over the net income for the year. Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 18 of 53 3/ Operating expenses for the cost-to-income ratios do not include provision for probable losses and provision for income taxes. 4/ Net asset value per unit by deducting total liabilities from total assets to come up with the Net Assets and dividing with the outstanding number of shares for the period. 5/ Net income divided by weighted average number of common shares.
Discussion and analysis of material events and/or uncertainties
The Fund Manager is not aware of any event and/or uncertainties that:
(a) will have a material impact on liquidity (b) will trigger direct or contingent obligation that is material to the Fund including any default or acceleration of obligation (c) will have an impact on all material off-balance sheet transactions, arrangement, obligations and other relationships of the Fund (d) is a significant element of income or loss that did not arise from the Funds continuing operations.
STATEMENTS OF CONDITION
DE C E M B E R 31 2007 2006 ASSETS Cash and Cash Equivalents P =51,333,554 P =48,633,244 Financial Assets at Fair Value through Profit or Loss 500,061,717 192,113,588 Available-for-Sale Investments 124,932,592 58,501,279 Loans and Receivables 149,013,250 1,605,137 Input Taxes 532,401 825,341,113 301,385,649 LIABILITIES Accounts Payable and Accrued Expenses 3,644,751 6,081,024 Payable to First Metro Asset Management, Inc.
1,139,067 411,224 Total Liabilities Excluding Net Assets Attributable to Shareholders 4,783,818 6,492,248 NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS P =820,557,295 P =294,893,401 Net Asset Value Per Share P =2.0275 P =1.7983
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 19 of 53
STATEMENTS OF I NCOME AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007
2006 I NVESTMENT I NCOME Trading gain - net P=21,669,835 P=54,312,144 Interest income 6,508,695 1,948,853 Dividend income 6,930,549 1,435,525 Others 4,725 35,109,079 57,701,247 OPERATI NG EXPENSES Management fees 14,993,943 7,411,937 Taxes and licenses 3,690,410 1,030,273 Professional fees 802,582 110,000 Directors and officers fees 206,100 165,000 Custodian and clearing fees 205,949 60,000 Membership fees and dues 10,000 20,000 Miscellaneous 576,976 55,288 20,485,960 8,852,498 I NVESTMENT I NCOME BEFORE FI NAL TAX 14,623,119 48,848,749 PROVI SI ON FOR FI NAL TAX 1,444,656 1,645,191 NET I NVESTMENT I NCOME P=13,178,463 P=47,203,558 Basic/Dilutive Earnings Per Share P=0.0370 P=0.5465
Comment on Directors and Officers Fees. The Fund did not employ personnel and officers who directly render services to the Fund and were supposed to receive periodic compensation and various benefits for those services but rather pay monthly management fee to First Metro Asset Management Inc. (FAMI). However, the Fund did present the remuneration to its Board of Directors shown as directors' and officers' fees as a separate line item above amounting to P = 206,100, P = 165,000 and P = 71,000 in 2007, 2006, and 2005 respectively.
Under PAS 1, an entity shall present additional line items, headings and subtotals in the statement of operations, when such presentation is relevant to an understanding of the entity's financial performance. Only when an item that is not sufficiently material to warrant separate presentation in these statements may warrant separate presentation in the notes.
In addition, as provided under PAS 24, the objective of the Standard is to ensure that an entitys financial statements contain the disclosures necessary to draw attention to the possibility that its Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 20 of 53 financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties.
The presentation of the amounts received by the directors' and officers' above is sufficient to necessary draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions with such parties, if any, which is the objective of PAS 24. Further, as provided under PAS 1, the presentation of the transactions as "directors and officers fee" in the statement of operations as well as the account name used to present them were sufficient to discount any intentions not to disclosed those transactions, their nature and impact to the users of financial statements. Not to mention, that the amount and nature of the transactions were considered not material to the financial statements.
Comment on Net Operating Loss Carry Over (NOLCO). The income tax calculation for the year ended December 31, 2007 is provided below:
Net income P =13,178,463 Provision for final tax 1,444,656 Income before final tax 14,623,119 Add/deduct reconciling items: Non-taxable income: Interest income subject to final tax (6,508,695) Gain on sale of shares of stock (44,948,369) Dividend income (6,930,549) Unrealized loss 23,278,534 Tax loss (NOLCO) - 2007 ( P =20,485,960)
The income tax calculation provided above shows the reconciling items between net income (reflected in the financial statements) and tax loss (NOLCO) which are reflected in the Funds Annual Income Tax Return in accordance with tax laws and regulations. As shown, a significant portion of the Companys income was subject to final tax and was deducted from net income since they were no longer subject to regular corporate income tax. However, PAS 12 does not require the disclosure of allowable deductions and expenditures, and the amount of/details of gross taxable income in the financial statements to show the Funds NOLCO.
The reconciliation of the statutory income tax to the effective income tax for the year was in accordance with the disclosure requirement under PAS 12 paragraph 81, which states that an explanation of the relationship between tax expense (income) and accounting profit should be disclosed in either or both of the following forms: (i) a numerical reconciliation between tax expense (income) and the product of accounting profit multiplied by the applicable tax rate(s), Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 21 of 53 disclosing also the basis on which the applicable tax rate(s) is (are) computed; or (ii) a numerical reconciliation between the average effective tax rate and the applicable tax rate, disclosing also the basis on which the applicable tax rate is computed.
The Fund disclosed the relationship between the tax expense and accounting profit in the form of a numerical reconciliation between the average effective tax rate and the applicable tax rate. We believe that the related disclosures in the financial statements were in accordance with the requirements of PAS 12.
STATEMENTS OF CHANGES IN CAPITAL FUNDS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007
2006
NET ASSETS ATTRI BUTABLE TO SHAREHOLDERS AT BEGI NNI NG OF PERI OD P=294,893,401 P=29,468,834
FROM OPERATI ONS
Net investment income (Note 9) 13,178,463 47,203,558 Net increase in unrealized gain (loss) on available-for-sale investments (Note 6) (1,135,195) 1,781,922 12,043,268 48,985,480 FROM TRANSACTI ONS WI TH SHAREHOLDERS Proceeds fromunit issuances - 377,363,611 shares in 2007, 139,869,552 shares in 2006 and 27,454,424 shares in 2005 807,944,551 221,276,446 Payments on units redeemed - 136,644,079 shares in 2007 and 3,338,800 shares in 2006
(294,323,925) (4,837,359) 513,620,626 216,439,087 NET I NCREASE I N NET ASSETS ATTRI BUTABLE TO SHAREHOLDERS 525,663,894 265,424,567 NET ASSETS ATTRI BUTABLE TO SHAREHOLDERS AT END OF PERI OD P=820,557,295 P=294,893,401
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 22 of 53 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 `
2007
2006 CASH FLOWS FROM OPERATI NG ACTI VI TI ES Investment income before tax P=14,623,11 P=48,848,74 Adjustments for: Unrealized trading gains (losses) 23,278,53 (28,767,65 Changes in operating assets and liabilities: Decrease (increase) in the amounts of: Financial assets at fair value through profit or loss (331,226,66 (137,448,04 Available-for-sale investments (67,566,50 (55,075,69 Loans and receivables 532,40 (1,604,91 Input tax (147,408,11 (509,50 Increase in the amounts of: Accounts payable and accrued expenses (2,436,27 5,900,43 Payable to First Metro Asset Management, Inc. 727,84 328,71 Net cash used in operations (509,475,66 (168,327,91 Income taxes paid (1,444,65 (1,645,19 Net cash used in operating activities (510,920,31 (169,973,10 CASH FLOWS FROM FI NANCI NG ACTI VI TI ES Proceeds fromunit issuances 807,944,55 221,276,44 Payments units redeemed (294,323,92 (4,837,35 Net cash generated fromfinancing activities 513,620,62 216,439,08 NET I NCREASE I N CASH AND CASH EQUI VALENTS 2,700,31 46,465,98 CASH AND CASH EQUI VALENTS AT BEGI NNI NG OF PERI OD 48,633,244 2,167,263 CASH AND CASH EQUI VALENTS AT END OF PERI OD P=51,333,55 P=48,633,24
OPERATI ONAL CASH FLOWS FROM I NTEREST AND DI VI DENDS Interest received P=5,618,68 P=786,14 Dividends received 7,372,97 993,10 P=12,991,66 P=1,779,24
Causes for Any Material Changes
Assets
The changes in cash and cash equivalents, financial assets at FVPL, available-for-sale- securities and loans receivables reflect additional investments . Funds for said investments came mostly from proceeds of subscription of mutual fund shares during the year. Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 23 of 53
Increase in cash and cash equivalents is mainly due to additional time deposit placements . On the other hand , increase in loans and receivables pertain mainly to additional investment in unquoted debt securities amounting to P 50 million, promissory notes amounting to P 14.7 million and due from brokers amounting to P 82.3 million.
Liabilities
Decrease in accounts payable and accrued expenses is mainly attributed to the payment of incentive fee due to the fund manager while Payable to FAMI represents increase in management fees which increased congruently with the increase in the net asset value of the fund.
Interim Period Ending June 30, 2008 STATEMENTS OF CONDITION
June 30 2008 2007 ASSETS Cash and Cash Equivalents (Note 5) P 177,232,194 P 51,333,554 Financial Assets at Fair Value through Profit or Loss 328,152,675 500,061,717 Available-for-Sale Investments 0 124,932,592 Loans and Receivables 68,797,357 149,013,250 Input Taxes 1,284,501 575,466,727 825,341,113 LIABILITIES Accounts Payable and Accrued Expenses 3,270,716.00 3,644,751 Payable to First Metro Asset Management, Inc. 871,870.00 1,139,067 Total Liabilities Excluding Net Assets Attributable to Shareholders 4,142,586 4,783,818 NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS P 571,324,141 P 820,557,295 Net Asset Value Per Unit P 1.6643 P 2.0275 December 31 As of
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 24 of 53 STATEMENTS OF INCOME 2008 2007 INCOME Interest Income P 5,354,908 P 2,218,397 Trading Gain - Stocks (51,849,067) 89,119,705 Trading Gain - Government Securities (100,778) 2,802 Dividend Income 8,830,857 2,843,853 Total Operating Income (Loss) (37,764,080) 94,184,758 EXPENSES Management Fees 5,678,372 5,189,284 Director's Fee - Per Diem 131,000 121,000 Professional Fee 68,700 809,643 Taxes and Licenses 1,087,380 3,478,522 Custodian & Clearing Expenses 62,036 78,749 Retainer's Fee 48,000 24,000 Membership Fees 20,000 10,000 Miscellaneous Expenses 110,494 48,377 Total Expenses 7,205,982 9,759,574 Net Income (Loss) Before Marking-to-Market (44,970,062) 84,425,184 Marking-to-Market Gain(Loss) on Stocks (88,574,727) 31,942,509 Net Income (Loss) Before Provision for Income Tax (133,544,789) 116,367,692 Provision for Income Tax - Final 3,516,202 5,246,603 NET INCOME (LOSS) P (137,060,991) P 111,121,089 Earnings (Loss) Per Share P (0.3961) P 0.4728 For the Period Ended June 30
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 25 of 53 STATEMENTS OF CHANGES IN CAPITAL FUNDS June 30, 2008 June 30, 2007 CAPITAL STOCK - P 1.00 par value Authorized - 1,000,000,000 shares Issued and outstanding - 250,000,000 shares in June 2008; 250,000,000 shares in June 2007 250,000,000 250,000,000 Outstanding shares for Future Subscription 93,097,025 165,831,831 CAPITAL PAID IN EXCESS OF PAR VALUE 303,501,480 433,059,108 RETAINED EARNINGS Balance at beginning of year 61,789,627 48,611,165 Income Withdrawals (68,945,352) Net Income/(Loss) (137,060,991) 111,121,089 Balance at end of quarter (75,271,364) 90,786,902 NET UNREALIZED LOSS ON AFS - (106,957) 571,327,141 689,570,884
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 26 of 53 STATEMENTS OF CASH FLOWS
2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES Income before Income Tax P (133,544,789) P 116,367,692 Adjustment to reconcile income before tax to net cash generated from (used) in operations: Interest Income (5,354,908) (2,218,397) Dividend Income (8,830,857) (2,843,853) Changes in operating assets and liabilities: Decrease/(Increase) in: Held for Trading Securities 171,909,042 (494,320,247) Available for sale securities 124,284,367 (3,694,705) Other assets 79,262,808 (95,855,376) Increase/(Decrease) in: Accounts Payable & accrued expenses (374,035) 56,731,188 Due to Fund Manager (267,197) (4,011,439) Other Liabilities - Net cash generated from (used in) operations 227,084,432 (429,845,137) Interest income received 7,375,939 2,854,028 Interest expense paid - - Income taxes paid (3,516,202) (4,956,365) Net cash provided by (used in) operating activities 230,944,169 (431,947,474) CASH FLOWS FROM INVESTING ACTIVITIES Net Disposals of (addition to) property & equipment - - Dividends received 6,477,409 3,286,277 Net cash provided by (used in) investing activities 6,477,409 3,286,277 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of capital stock 34,346,700 535,444,770 Payment of redemption proceeds (145,869,638) Dividends paid - - Net cash provided by (used in) financing activities (111,522,938) 535,444,770 NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS 125,898,641 106,783,573 CASH AND CASH EQUIVALENTS Beginning balance 51,333,554 48,633,244 Ending balance P 177,232,195 P 155,416,817 For the Period Ended June 30
Managements Discussion and Analysis of Financial Condition and Results of Operations
FINANCIAL CONDITION
Total resources of the Fund decreased by 30% from the P 825.3 million beginning of the year balance to P 575.5 million as of June 30, 2008 due to the net effect of the following:
Cash and Other Cash Items grew by P 126.0 million from year-ends P 51.3 million to P 177.2 million as of June 30, 2008. The savings account maintained in Metrobank amounted to P 15.0 million while Time Deposits went up from P 50.6 million at the beginning of the year to P162.0 million as of June 30, 2008. These came mostly from Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 27 of 53 proceeds of sale of stocks & fixed income investments and maturity of loans receivables.
Sale of stocks and decline in market value caused the 34% or P 171.9 decrease in Financial Assets at Fair Value Through Profit or Loss. Total cost of the Funds stocks portfolio went down by P 83.3 million or 16% while marking-to-market further pulled down its value by 18 % or P 88.6 million
Available for Sale Investments has no remaining balance as of June 30, 2008 due to the sale of the government securities in January 2008;
Accrued Interest Receivable represents interest income on time deposits in MBTC. The decline in the account is due to the collection of interest on matured loans and bonds sold;
Accounts Receivable represents receivable from brokers for the sale of stocks;
Unquoted Debt Securities Classified as Loans were all disposed of during the first half of 2008
Loans Receivable, which represented promissory notes that bear annual interest rates ranging from 3.0% to 4.5% for a period of less than one month, fully matured on April 29, 2008;
Dividend Receivable pertains to cash dividends from PCOR shares of P 745.3 thousand, RCM shares of P 853.8 thousand, FLI shares of P 716.6 thousand and AC shares of P37.8 thousand;
Accounts Payable and Accrued Expenses consists of uncollected redemption proceeds, expenses incurred on taxes and other expenses of the Company, which have remained unpaid as of the period ended June 30, 2008. The decrease in the balance is mainly due to the drop in sales load payable, redemption fees payable and withholding taxes payable.
Payable to Fund Manager declined due to lower management fees relative to the drop in the net asset value of the Fund;
Capital Stock went down by 15% as the Fund incurred net redemption of 80.7 million shares equivalent to P 111.5 million; and
Retained Earnings movement is attributed to the net loss of P 137.1 million for the six months period ended June 30, 2008.
RESULTS OF OPERATION For the period ended June 30, 2008 First Metro Save & Learn Equity Fund, Inc. incurred a net loss of P137.1 million as compared to P111.1 million net income for the same period in 2007 as the local equities market continues to decline.
The highlights of the results of operations for the period ended June 30, 2008 are as follows:
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 28 of 53 The Realized Trading Loss is associated with the decrease in the stockholdings of the Fund where it realized P 51.8 million loss due to the unloading of stocks to cut further losses resulting from the drop in the stock market index;
Interest income, which contributed P 5.4 million to the total revenue generated by the Fund for the period, was derived from bank deposits, loans and investment in government securities;
Dividend Income amounting to P 8.8 million came from the cash dividends from Aboitiz Power Corp. shares of P 2.5 million , PLDT shares of P 2.9 million, SMPH shares of P0.98 million, PCOR shares of P0.74 million, RCM shares of P 0.85 million, ALI shares of P0.08 million , FLI shares of P 0.72 million & AC shares of P 0.04 million;
Total Operating Expenses includes management fees paid to FAMI that serves as the Funds Investment Adviser, professional fees and taxes paid and accrued.
Marking-to-Market Loss on Stocks of P88.6 million is attributed to the bearish stock market condition .
Unquoted Debt Securities Classified as Loans represents investments in privately issued bonds subject to quarterly repricing and will mature on 2012;
Loans Receivable represents promissory notes that bear annual interest rates ranging from 3.0% to 4.5% for a period of less than one month;
Dividend Receivable pertains to dividends from PLDT due and collectible April 21, 2008;
Accounts Payable and Accrued Expenses consists of accounts payable to brokers for purchases of stocks, uncollected redemption proceeds, expenses incurred on taxes, licenses and other expenses of the Company, which have remained unpaid as of the period ended March 31, 2008. The increase in the balance is mainly due to payables to broker amounting to P 4.9 million and drop in uncollected redemption proceeds;
Capital Stock went down by 27% as the Fund incurred net redemption of 53 million shares equivalent to P 96.3 million; and
Retained Earnings movement is attributed to the net loss of P 137.1 million for the six months period ended June 30, 2008.
Key Performance Indicators
SALEF has identified the following as its key performance indicators -- performance vs. benchmark and competitor funds, net income and market share.
SALEF was incorporated on May 27, 2005. It was designed to seek long-term capital appreciation by investing primarily in carefully selected listed and non-listed equity securities.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 29 of 53 The Fund has appointed First Metro Asset Management, Inc. (FAMI) to serve as its Investment Company Adviser, Administrator and Principal Distributor. With the SECs approval of FAMIs license to act as such last September 6, 2005 and its procedures firmed-up at the end of the same month, active management of SALEFs assets was initiated in October 2005 with the objective to consistently outperform its benchmark, which is the PSEi, and achieve a sizable net income.
The Fund has an initial paid-up capitalization of P25,000,000.00 which translates to a minimal market share in the mutual fund industry (under the equity fund category).
SALEF has identified the following as its key performance indicators:
Net Asset Value Per Share - Net Asset Value per share dropped from P 2.0275 at the end of December 2007 to P 1.6652 at the end of June 2008, representing a negative 17.9% return on investment over a 6-month period.
Sales for the quarter ended - The Fund had total sales of P 14.0 million for the quarter ended June 2008. This is 31.4 % lower compared to the previous quarters sales of P 20.4 million. Likewise, the number of accountholders decreased from 1,038 to 1,008.
Redemptions for the quarter ended - The Fund had total redemptions of P 32.2 million for the quarter ended June 30, 2008. This is P 97.4 million or 75.2% lower from the previous quarters redemption of P 129.6 million.
Net Income vs. Benchmark - The Fund incurred a net loss of P137.1 million for the first half of 2008 as compared to a net income of P111.1 million in the same period last year.
Market Share vs. Benchmark As of June 30, 2008, the Fund garnered 5.93% share in the Equity Funds category while 0.74% share among all mutual funds in terms of net assets. On the basis of account holders, the Fund has 1,008 outstanding accounts or 2.87% of the total accounts in the Equity Funds category.
The following basic ratios measure the financial performance of the Company for the six months period ended June 30, 2008 and 2007 as well as, for the year-end of 2007:
PERFORMANCE INDICATORS
As of June 30, 2008
As of June 30, 2007
As of Dec. 31, 2007 Return on Assets 1/ (39.45%) 34.36% 2.34% Return on Equity 2/ (39.70%) 36.30% 2.36% Cost-to-Income Ratio 3/ (19.02%) 7.74% 58.35% Net Asset Vale per Unit 4/ 1.6652 2.2595 2.0275 Earnings per Share 5/ (0.3961) 0.3726 0.0370
Average assets for period ended June 30 were computed based on the average of the beginning and ending balances, whereby net income was annualized over the six-month period.
2/ Likewise, average equity for period ended June 30 was computed based on the average of the beginning and ending balances, whereby net income was annualized over the six-month period.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 30 of 53 3/ Operating expenses for the cost-to-income ratios do not include provision for probable losses and provision for income taxes.
4/ Net asset value per unit by deducting total liabilities from total assets to come up with the Net Assets and dividing with the outstanding number of shares for the period.
5/ Net income divided by weighted average number of common shares.
Discussion and analysis of material events and/or uncertainties
The Fund Manager is not aware of any event and/or uncertainties that:
(e) will have a material impact on liquidity (f) will trigger direct or contingent obligation that is material to the Fund including any default or acceleration of obligation (g) will have an impact on all material off-balance sheet transactions, arrangement, obligations and other relationships of the Fund (h) is a significant element of income or loss that did not arise from the Funds continuing operations.
Directors and Officers of the Fund As of t he dat e of t hi s Prospect us, t he Board of Di rect ors and t he offi cers of the Fund are as fol l ows: Board of Di rectors The Board of Di rect ors and t he offi cers of the Fund are as fol l ows: Atty. Antonio M. Bernardo - 54 years old, Filipino, Acting Chairman/Director. Term of office is one year and has served as director from May 2005 up to the present. He is also a Director of First Metro Save & Learn Fixed Income Fund, Inc. (from 2005 to the present) and First Metro Save & Learn Balanced Fund, Inc. (January 2007 up to the present) He is the Chairman of the Executive Committee of The Bernardo and Placido Law Offices (2007) and President of the Bernardo- Francisco & Associates Insurance Brokers, Inc.(2005-present). Among his past positions during the last five years; Commissioner of the Bureau of Customs (2002-2004); Undersecretary and Chief of Staff of both Department of Finance (2002-2002) and Department of Energy (2001); Secretary of the Commission on Appointments (2000). Atty. Bernardo has a degree in Bachelor of Science in Mathematics and a Bachelor of Laws degree (class valedictorian and Bar Exam 2 nd
Placer) both from Ateneo de Manila University. Mr. Edwin B. Valeroso - 44 years ol d, Fi l i pi no, Presi dent , Di rect or. Term of office is one year and has served as director from May 2005 up to the present. He is the President of First Metro Save & Learn Fixed Income Fund, Inc. (May 2005 - present), and First Metro Save & Learn Balanced Fund, Inc. (January 2005 - present). He i s an Associ at e Professori al Lect urer at De La Sal l e Uni versi t y-Graduat e School of Busi ness ( 2000-present ). He was a Mutual Fund St rategi st/Consul t ant at Fi rst Met ro Invest ment Corp. ( 2004-2005) ; current l y a Trust ee and Vi ce-Presi dent of Invest ment Company Associ at i on of t he Phi l i ppi nes( ICAP) ( 2006-present ) ; Mr. Val eroso fi ni shed t he requi rement s for t he degree Doct or of Busi ness Admi ni st rat i on ( Candi dat e) at De La Sal l e Uni versi t y-Mani l a. He obt ai ned a Mast er of Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 31 of 53 Sci ence degree i n Appl i ed Mat hemat i cs from Uni versi t y of t he Phi l i ppi nes and a BS Act uari al Mat hemat i cs from t he Uni versi t y of Sant o Tomas. He i s al so an al umnus of the Trust Inst i t ut e Foundat i on of t he Phi l i ppi nes. Bro. Manuel V. de Leon, FMS - 49 years ol d, Fi l i pi no, Di rect or. Term of office is one year and has served as director from May 2005 to the present. He is also a Director of First Metro Save & Learn Fixed Income Fund, Inc. (2005 - present), and First Metro Save & Learn Balanced Fund, Inc. (from January 2007 up to the present) and First Metro Asset Management (from 2005 to present). He i s t he Provi nci al Superi or of Mari st Brot hers of School s-Phi l i ppi nes ( from 2003-present ) . He i s t he Foundi ng Presi dent of SAGIP KA 2000 Foundat i on, Inc. ( 2000-present ) . He i s al so a member of t he Board of Not re Dame of Dadi angas Col l ege, Not re Dame of Ki dapawan Col l ege, Not re Dame of Cot abat o, Mari st Asi a Paci fi c, Mari st School , Assumpt i on Ant i pol o, and Assumpt i on Col l ege. He was a Di rect or of Cat hol i c Educat i onal Associ at i on of t he Phi l i ppi nes ( CEAP-NCR) , Treasurer of CEAP, Board Member of COCOPEA and accredi t or of PAASCU, and Presi dent of Mari st School - Mari ki na ( 1988-2003) and Not re Dame of Ki dapawan ( 1983-1987) . He was chosen as one of t he Ten Outst andi ng Young Men ( TOYM) i n 1992. He obt ai ned hi s mast eral and doct orat e degrees i n Educat i on from Uni versi t y of t he Phi l i ppi nes. Fr. Redentor S. Corpuz 61 years old, Filipino, Independent Director. He is an of independent director of First Metro Save and Learn Fixed Income Fund, Inc. and First Metro Save and Learn Balanced Fund, Inc. (March 10, 2008 up to the - present). He also serves as Director/Principal of St. Gregory Academy (June 1, 1980 to present). He is the Ad Interim Delegate of Bishop Tagle at Infant Jesus Academy (June 1, 2005 to present). He is the Executive Director of Our Lady of the Pillar Catholic School (June 1, 2003 to present). Superintendent of Catholic Schools, Diocese of Imus Cavite, Board Member of Philippine Catechetical Apostolate and Religious Education Foundation (ECCCE-CEAP) (September 1, 2001 to present), CEAP Retirement Plan (September 1, 1990 to present), Board Member/Secretary of Educational Capital Corporation and Treasurer of Ministry of Teaching Foundation, Inc.(MTFI) (September 1, 1994 to present). Fr. Corpuz completed his study in Theology at Loyola School of Theology. He obtained his Doctorate degree in MA School Administration at De La Salle University and earned masteral units in MS Educational Management. He is also an alumnus of Ateneo de Manila University.
Sister Lioba Tiamson - 82, Filipino, Independent Director. She is an independent director of First Metro Save and Learn Fixed Income Fund, Inc. and First Metro Save and Learn Balanced Fund, Inc. (March 10, 2008 up to the present). She also holds the following positions: Chairperson, CEAP Retirement Commission (1963 to 2003); Director/Treasurer, Educational Capital Corporation (ECC) (1995 to present). She is also a Member-Finance Technical Committee and Treasurer/Finance Officer, Benedictine Sisters of Tutzing (1975 to Present). Other Of f i cers of the Fund Mr. Dani l o G. Ol ondri z - 54 years ol d, Fi l i pi no, Chi ef Fi nanci al Offi cer. Term of office is one year and has served as such from May 2005 up to the present. He is the Chief Financial Officer of First Metro Save & Learn Fixed Income Fund, Inc. (from May 2005 to the present), First Metro Save & Learn Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 32 of 53 Balanced Fund, Inc. (from January 2007 up to the present) and First Metro Asset Management Inc. (from May 2005 up to the Present). He i s t he Seni or Vi ce Presi dent /Cont rol l er of Fi rst Met ro Investment Corp. ( 2004-present ) . He i s t he Cont rol l er of Fi rst Met ro Insurance Agency, Inc. ( 2001-present ) , and Mani l a Medi cal Servi ces, Inc 2005-present ). He was al so Treasurer/Di rect or of Pri ceSmart, Phi l i ppi nes, Inc. Pri or t o hi s st i nt wi t h FMIC, he was a Bank Exami ner at t he Bangko Sent ral ng Pi l i pi nas ( 1978- 1989) for al most a decade. He i s a product of t he At eneo Graduat e School of Busi ness and Phi l i ppi ne School of Busi ness Admi ni st rat i on where he obt ai ned hi s academi c requi rement s l eadi ng t o a Mast eral and Bachel or s degree i n Busi ness Admi ni st rat i on, respect i vel y. He i s al so a Cert i fi ed Publ i c Account ant . Atty. Nimfa B. Pastrana - 46 years old, Filipino, Corporate Secretary. Term of office is one year and has served as such from May 2005 up to the present. She is Vice President, and Asst. Corporate Secretary of First Metro Investment Corporation (2002-present). She is also the Corporate Secretary of First Metro Save & Learn Fixed Income Fund, Inc. (May 2005- present), First Metro Save & Learn Balanced Fund, Inc., (January 2007- present) and First Metro Asset Management (2005- present). First Metro Securities Brokerage Corporation (2005- present), PBC Capital Investment Corporation (2004-present), Prima Ventures Development Corporation (2004-present), and SBC Properties, Inc.(2002- present). She was a Director of Global Business Holdings (2002-2003). She graduated from the University of the Philippines with a degree of A.B. Philosophy and from San Beda College with a degree in Bachelor of Laws. Mr. Jonathan T. Tabac - 53 years ol d, Fi l i pi no, Compl i ance Offi cer. Term of offi ce i s one year and has served as such from May 2005 up t o t he present . He i s al so t he Compl i ance Offi cer of Fi rst Met ro Invest ment Corporat i on, Fi rst Met ro Securi t i es Brokerage Corporat i on, First Metro Save & Learn Fixed Income Fund, Inc., Fi rst Met ro Asset Management , Inc. (from May 2005 to the present), and Fi rst Met ro Save & Learn Bal anced Fund, Inc. He was AVP & Compl i ance Offi cer of Ci t yst at e Savi ngs Bank ( 2002-2003) , Vi ce Presi dent of Maybank Phi l i ppi nes ( formerl y PNB Republ i c Pl ant ers Bank) -1997-2001 and Chai rman of t he Board of RPB Provi dent Fund, Inc. (1997-2001) . Mr. Tabac obt ai ned hi s BSC-Account i ng from Uni versi t y of Bagui o and MBA uni t s from t he Uni versi t y of Sant o Tomas. He i s a Cert i fi ed Publ i c Account ant . Ms. Mari e Arabel l a D. Veron 47 years ol d, Fi l i pi no, Treasurer. Term of offi ce i s one year and has served as such from May 2005 up t o t he present . She i s t he Vi ce Presi dent of Fi rst Met ro Invest ment Corporat i on ( 2006-present ) , Treasurer/Di rect or of SBC Propert i es, Inc. ( 2003-present ) , Treasurer of Fi rst Met ro Save & Learn Fi xed Income Fund, Fi rst Met ro Asset Management , Inc. (from May 2005 to present), Fi rst Met ro Insurance Agency ( 2001-present ), Inc. , and Sal eage Insurance Agency ( 2001-present ) , Treasurer of PBC Capi t al Invest ment Corporat i on ( 2006-present ) . She was a manager of MBTC Domest i c Subsi di ari es, a Seni or Audi t or of Joaqui n Cunanan & Co. /Pri ce Wat erhouse ( 1980-1985) and of Phi l i ppi ne Int ernat i onal Tradi ng Corporat i on ( 1985-1990) . Ms. Veron fi ni shed her Bachel or of Sci ence Degree i n Busi ness Admi ni st rat i on, maj or i n Account i ng from Uni versi t y of t he East . She i s a Cert i fi ed Publ i c Account ant . Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 33 of 53 Si gni f i cant Empl oyee There i s no si gni fi cant empl oyee who i s expect ed by t he regi st rant t o make a si gni fi cant cont ri but i on t o t he busi ness.
Fami l y Rel ati onshi p There are no fami l y rel at i onshi ps up to t he fourt h ci vi l degree ei ther by consangui ni t y or affi ni t y among di rect ors, execut i ve offi cers or persons nomi nat ed or chosen by t he Regi st rant t o become di rectors or execut i ve offi cers.
Executi ve Compensati on Compensation of Directors and Officers 2006 2007 2008* Aggregate annual per diem of the following: 125,000.00 190,750.00 280,000.00 Edwin B. Valeroso Gloria C. Garrovillo** Danilo G. Olondriz Atty. Antonio M. Bernardo Bro. Manuel V. De Leon All other executive officers as a group unnamed 40,000.00 37,000.00 42,000.00 (except for the five directors mentioned above) * Projected ** Deceased Per Diem
Per di em of Di rect ors, Corporat e Secret ary and Offi cers of t he Fund amount i ng t o P10, 000. 00, P3, 000. 00, P2, 500. 00, respect i vel y, are gi ven duri ng t hei r Annual St ockhol ders and regul ar meeti ng. There i s no empl oyment cont ract bet ween t he Regi strant and a named execut i ve offi cer. There i s no compensat ory pl an or arrangement , i ncl udi ng payment s t o be recei ved from t he Regi st rant , wi th respect t o a named execut i ve offi cer i n t he event of resi gnat i on, ret i rement or any ot her t ermi nat i on of such offi cer s empl oyment wi t h t he Regi st rant and i t s subsi di ari es. Legal Proceedi ngs
The Regi st rant has no mat eri al pendi ng l egal proceedi ngs t o whi ch t he regi st rant or any of i ts common affi l i at es i s a part y. No member of t he Board of Di rectors i s: 1. i nvol ved i n any l egal proceedi ng i n t he past fi ve (5) years t hat are mat eri al t o an eval uat i on of t he abi l i t y or i nt egri t y of any di rect or, any nomi nee for el ect i on as di rect or, execut i ve offi cer, underwri t er, or cont rol person of t he Regi st rant ; 2. i nvol ved i n any bankrupt cy pet i t i on fi l ed by or agai nst any busi ness of whi ch such person was a general part ner or execut i ve offi cer ei t her at t he t i me of t he bankrupt cy or wi thi n t wo ( 2) years pri or t o t hat t i me; Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 34 of 53 3. i nvol ved i n or convi ct ed by fi nal j udgment i n any cri mi nal proceedi ng, domest i c or forei gn, or subj ect t o a pendi ng cri mi nal proceedi ng, forei gn or domest i c, excl udi ng t raffi c vi ol at i ons and other mi nor offenses; 4. subj ect t o any order, j udgment , or decree not subsequent l y reversed, suspended or vacat ed, of any court of compet ent j uri sdi cti on, domest i c or forei gn, permanent l y or t emporari l y enj oi ni ng, barri ng, suspendi ng, or ot herwi se l i mi t i ng hi s i nvol vement i n any t ype of busi ness, securi t i es, commodi t i es or banki ng act i vi t i es; and 5. found by a domest i c or forei gn court of compet ent j uri sdi ct i on ( i n a ci vi l act i on) , t he SEC or comparabl e forei gn body, or a domesti c or forei gn exchange or organi zed t radi ng market or sel f-regul at ory organi zat i on, t o have vi ol at ed a securi t i es or commodi ti es l aw or regul at i on and t he sai d j udgment has not been reversed, suspended or vacat ed.
Security Ownership of Certain Record and Beneficial Owners as of June 30, 2008: Ti tl e of Class Name and Address of Owner/Rel ati onship wi th the Issuer Name of Benefi ci al Owner and Relati onship w/ FMIC Ci ti zenship No. of Shares Hel d Percent to Outstanding Shares Common shares First Metro Investment Corporation Same Filipino 109,507,374 31.92% 20th Flr. GT Tower Int'l., Ayala Ave., corner HV Dela Costa St., Makati City Stockholder * The person who wi l l exerci se the vot i ng powers over t he shares of Fi rst Met ro Invest ment Corporat i on i s Mr. Franci sco C. Sebast i an.
3. The number of account hol ders of t he Fund as of June 30, 2008 i s 1, 008.
Securi ty Ownershi p of Management as of June 30, 2008 Title of Class Name of Beneficial Owners Amount and Nature of Ownership Citizenship Percent to Outstanding Shares Common shares Antonio M. Bernardo 1 Filipino 0.00000% Common shares Manuel V. De Leon 1 Filipino 0.00000% Common shares Sister Leoba Tiamson 1 Filipino 0.00000% Common shares Fr. Redentor Corpuz 1 Filipino 0.00000% Common shares Nimfa B. Pastrana 20,480 Filipino 0.00597% Common shares Edwin B. Valeroso 2,528 Filipino 0.00074%
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 35 of 53
Certai n Rel ati onshi ps and Rel ated Transacti ons There are no mat eri al t ransact i ons wi t h or i nvol vi ng t he Fund or any of i ts subsi di ari es i n whi ch a di rect or, execut i ve offi cer, or stockhol der owns t en percent ( 10%) or more of t he t ot al out st andi ng shares, and any member of t hei r i mmedi at e fami l y had or i s t o have a di rect or i ndi rect mat eri al i nterest . There are no t ransact i ons duri ng t he l ast t wo ( 2) years or proposed t ransact i ons, t o whi ch t he Regi st rant was or i s to be a part y i n whi ch any of t he Fund s di rect ors, execut i ve offi cers or st ockhol ders had or i s t o have a di rect or i ndi rect mat eri al i nt erest . There are no t ransact i ons by any securi t y hol der named i n response t o Part IV, paragraph C of t he Securi t i es Regul at i on Code. There are no t ransact i ons wi t h promot ers and t here are no t ransact i ons t hat i nvol ve t he nat ure and amount of anyt hi ng of val ue ( i ncl udi ng money, propert y, cont ract s, opt i ons or ri ght s of any ki nd) recei ved or to be recei ved by each promot er, di rect l y or i ndi rect l y, from t he Issuer and t he nat ure and amount of any asset s, servi ces or ot her consi derat i on recei ved or t o be recei ved by the Regi st rant . There are no t ransact i ons acqui red, or t o be acqui red from a promot er. Compl i ance wi th the Investment Company Act In compl i ance wi t h t he requi rement s of t he R. A. No. 2629, ot herwi se known as t he Invest ment Company Act of 1960 or ICA, t he Fund i s organi zed as a st ock corporat i on. Al l t he members of t he Board of Di rect ors of t he Fund are Fi l i pi no ci t i zens and al l shares of i t s capi t al st ock are common and vot i ng shares. The Art i cl es of Incorporat i on of t he Fund provi de for t he wai ver of pre-empt i ve ri ghts of st ockhol ders.
Investment Policy The Fund i s an open-end mut ual fund t hat seeks t o provi de as hi gh a l evel of current i ncome as i s consi st ent wi t h preservat i on of capi t al and l i qui di t y. Investment Gui del i nes and Restri cti ons The Fund i s a growt h fund whi ch seeks good ret urn t hrough l ong-t erm capi t al appreci at i on by i nvest i ng i n l i st ed and non- l i st ed equi ty securi t i es of Phi l i ppi ne and non-Phi l i ppi ne compani es. It can be cat egori zed as moderat e t o hi gh ri sk i nvest ment . ICA Rul e 35-1 provi des t hat an i nvest ment company shal l not change i t s i nvest ment obj ect i ve wi t hout pri or approval of a maj ori t y of i ts sharehol ders For t hi s purpose, t he t erm equi t y securi t i es general l y i ncl udes common st ock, preferred st ock and securi t i es convert i bl e i nt o or exchangeabl e for such equi t y securi t i es, such as convert i bl e debent ures and convert i bl e preferred shares, or shares whi ch carry warrant s to purchase such securi t i es.
The asset s of t he Fund shal l be st ruct ured based on st ock market condi t i on, the l evel of i nt erest rat es, market condi ti ons, and l i qui di t y needs of t he Fund, where i t s i nvest ments, denomi nat ed i n Phi l i ppi ne Pesos or forei gn currenci es, are t o be of above-average credi t qual i t y and mi ni mal ri sk, and t he average mat uri t y are t o t ake i nt o account any expect at i on of any changes i n i nt erest rat es.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 36 of 53 For l i qui di ty purposes, unl ess ot herwi se prescri bed by t he SEC, at l east 10% of t he fund shal l be i nvest ed i n l i qui d/semi -l i qui d asset s such as:
1. Treasury not es or bi l l s, Cert i fi cat es of Indebt edness i ssued by t he Bangko Sent ral Ng Pi l i pi nas whi ch are short t erm, and ot her government securi t i es or bonds and such ot her evi dences of i ndebt edness or obl i gat i ons, t he servi ci ng and repayment of whi ch are ful l y guarant eed by t he Republ i c of t he Phi l i ppi nes.
2. Savi ngs or t i me deposi t s wi t h government owned banks or commerci al banks, provi ded that i n no case shal l such savi ngs or t i me deposi t account s be accept ed or al l owed under a bearer, numbered account or ot her si mi l ar arrangement .
As a t act i cal or defensi ve move, t he Fund may al so i nvest i n fi xed-i ncome securi t i es such as SEC-regi st ered commerci al papers and bonds, and ot her al l owed fi xed- i ncome i nstrument s, bot h Peso and Dol l ar denomi nat ed.
Moreover- 1. The maxi mum i nvest ment of t he Fund i n any si ngl e enterpri se shal l be l i mi t ed t o t en percent ( 10%) of the Fund' s NAV, except for i nvest ment s i n securi t i es of t he Phi l i ppi ne Government or i t s i nst rument al i t i es and, i n no case, shal l t he t ot al i nvest ment of t he Fund exceed 10% of t he out st andi ng securi t i es of any one i nvest ee company;
2. Pursuant t o t he governi ng rul es and regul at i ons of t he SEC, t he Fund shal l not i nvest i n any of t he fol l owi ng: margi n purchases of securi t i es; commodi t y fut ures cont ract s; preci ous met al s; unl i mi t ed l i abi l i t y i nvest ment s; short -sel l i ng of currenci es; short -sel l i ng of i nvestment s; and, ot her i nvest ment s as t he SEC shal l , from t i me to t i me, prescri be;
3. The Fund shal l not i ncur any furt her debt or borrowi ng, unl ess at t he t i me i t i s i ncurred or i mmedi atel y t hereaft er, t here i s asset coverage of at l east t hree hundred percent ( 300%) for al l i t s borrowi ngs. In t he event t hat such asset coverage shal l at any t i me fal l bel ow 300%, t he Fund shal l wi t hi n t hree ( 3) days t hereaft er, reduce t he amount of borrowi ngs t o an ext ent t hat t he asset coverage of such borrowi ngs shal l be at l east 300%;
4. The Fund shal l not part i ci pat e i n an underwri t i ng or sel l i ng group i n connect i on wi t h t he publ i c di stri but i on of securi t i es, except for i ts own capi t al st ock;
5. The Fund shal l not i nvest i n real est at e propert i es and devel opment s;
6. The Fund shal l not i nvest i n any company for t he purpose of exerci si ng control or management ;
7. The Fund shal l not i nvest i n t he securi t i es of ot her i nvest ment compani es;
8. The Fund shal l not purchase from or sel l t o any of i t s offi cers or di rect ors or t he offi cers or di rect ors of i ts i nvest ment advi ser/s, manager or di st ri but or/s or fi rm/s of whi ch any of t hem are members, any securi t y ot her t han t he capi t al st ock of t he Fund; Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 37 of 53
9. The t ot al operat i onal expenses of t he Fund shal l not exceed t en percent ( 10%) of i t s t ot al i nvest ment fund or t ot al net wort h as shown i n t he previ ous year' s audi t ed fi nanci al st at ement s;
10. The Fund shal l focus on i ndustri es and ent erpri ses wi th st rong growt h pot ent i al s or profi t abl e hi st ori cal fi nanci al performance. There may be concent rat i on on cert ai n i ndust ri es at vari ous poi nt s i n ti me, dependi ng on t he overal l condi t i on of t he fi nanci al and capi t al market s;
11. The Fund shal l not engage i n l endi ng operat i ons wi t hout pri or approval of t he Board of Di rect ors. Such approval shal l be l i mi t ed onl y t o corporat i ons or ot her ent i t i es, publ i c or pri vat e, det ermi ned t o be fi nanci al l y sound by t he Board of Di rect ors;
12. The Fund ant i ci pat es a gradual turnover i n port fol i o wi t h t he ai m of ensuri ng the preservat i on of capi t al and l i qui di t y. Use of Proceeds The proceeds from t he sal e of t he 750, 000, 000, 000 shares wi l l be pri mari l y i nvest ed i n l i st ed and non-l i st ed equi t y securi t i es i n accordance wi t h t he pol i ci es set fort h i n t he sect i ons headed "Invest ment Pol i cy" and "Invest ment Gui del i nes and Rest ri ct i ons. "
Usi ng t he Net Asset Val ue per share of P2. 0275 as of December 31, 2007 for t he 750 mi l l i on shares, t he t ot al est i mat ed gross proceeds i s P1, 520, 625, 000 l ess an est i mat ed t ot al deduct i bl e expenses of around P29. 456 mi l l i on ( P21. 8 mi l l i on for i nvest ment management , di st ri buti on, and admi ni strat i on, P96, 000 for t ransfer agency, P P60, 000 for cust odi anshi p fee, and P7. 5 mi l l i on for document ary stamp t axes) No mat eri al amount of t he proceeds i s t o be used t o acqui re asset s or fi nance t he acqui si t i on of ot her busi ness. The proceeds wi l l not be used t o di scharge debt or rei mburse any offi cer, di rect or, empl oyee or sharehol der for servi ces rendered, asset s previ ousl y t ransferred, money l oaned or advanced or ot herwi se or any expenses. The proceeds deri ved by t he Fund from t he sal e of i t s shares i ncl udi ng t he payment s for ori gi nal subscri pt i ons duri ng i ncorporat i on shal l be deposi t ed and hel d by t he Fund' s Cust odi an Bank whi ch i s The Hong Kong and Shanghai Banki ng Corporat i on. Expenses to be deducted f rom the Gross Proceeds The fol l owi ng are expenses normal l y deducted from t he gross proceeds of shares sol d: 1. Al l owances of i ndependent di rect ors for every sharehol ders and board meet i ng hel d; 2. Audi t and l egal fees; 3. Fees of cust odi an bank; Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 38 of 53 4. cost of pri nt i ng and del i veri ng not i ces, report s, proxi es and ot her communi cat i on mat eri al for exi sti ng sharehol der; 5. Fees of t ransfer agent ; 6. Taxes, i ncl udi ng i ncome t axes, document ary st amp t axes and l i cense fees as may be requi red by l aw or by t he rul es and regul at i ons of t he SEC; and 7. Management , di st ri buti on and admi ni st rat i on fees comput ed i n accordance wi t h t he Management , Di st ri but i on and Admi ni st rat i on Agreement bet ween t he Fund and t he Invest ment Company Advi ser. Pl an of Di stri buti on/Di stri buti on method The Fund has appoi nt ed FAMI as pri nci pal di st ri but or of i t s shares of st ock and wi l l not sel l or agree t o sel l any shares of i ts capi t al st ock except t hrough FAMI. FAMI wi l l set up a market i ng net work and accredi t sub-deal ers or gents t o sel l t he shares and t hey are di rect l y l i abl e t o FAMI. FAMI shal l be compensat ed wi t h 1. 75% per annum of t he average net asset s represent i ng fees for fund management , di st ri but i on and admi ni st rat i on. FAMI i s l i censed by SEC t o act as t he Invest ment Company Advi ser/Manager, Admi ni st rat or and Pri nci pal Di st ri but or. Its l i cense was i ssued on Sept ember 7, 2005. FAMI renewal of l i cense was rel eased on January 1, 2008. There i s no arrangement whereby FAMI has t he ri ght t o desi gnat e or nomi nat e a member or members of t he board of di rect ors of t he Regi st rant . Competi ti on The compet i t i ve envi ronment for t he company s products i ncl udes not onl y t he product s and servi ces offered by t he other mut ual fund pl ayers, but al l ot her i nvest ment i nst ruments t hat t he t arget market has access t o. The Phi l i ppi ne mut ual fund i ndust ry i s sti l l a rel at i vel y young i ndustry compared t o t hose of ot her count ri es; however, i t i s growi ng at a fast rat e for t he past t en years. Current l y t he bi g pl ayers i n t hi s cat egory are Phi l am, BPI, and Sunl i fe. These compani es have bi g sal es force and t hey have l i fe i nsurance compani es as affi l i at es whi ch t hey ut i l i ze t o market t hei r mut ual funds. Two of t hese compani es have bi g mul t i nat i onal fi nanci al i nst i t ut i ons as t hei r parent compani es. They have l onger t rack records and experi ence not onl y i n t he mut ual fund i ndust ry but al so i n ot her fi nanci al product s and servi ces. The t op t hree compet i t ors subst ant i al l y capt ure t he l ocal i ndustry s market share. The Fund wi l l compet e wi t h ot her equi t y funds whi ch at present are al so few. It wi l l t arget pot ent i al cl i ent s al l over the count ry wi t h concent rat i on i n t he maj or ci t i es. The Fund bel i eves t hat compet i t i on wi l l be i n t he area of i nvest ment performance and cl i ent servi ces. The Fund wi l l be compet i ng more i n t erms of i nvest ment performance. It wi l l adopt act i ve i nvest ment st rat egi es and t act i cs. It wi l l ut i l i ze i t s present net work, dat abase, and avai l abl e t echnol ogy t o i ts advant age. The i nst i t ut i onal funds of t he t arget market ( especi al l y t he bi gger ones) evi dent l y have access t o al most al l t ypes of i nstrument s l ocal l y avai l abl e such as uni t i nvest ment t rust funds, pre-need pl ans, uni versal l i fe product s and ot her bank Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 39 of 53 product s. The ret ai l funds and smal l er i nsti t ut i onal funds, however, are l i mi t ed t o si mpl e bank product s. Appropri at el y formul at ed market i ng st rat egi es, sal es t act i cs and promot i onal act i vi t i es wi l l be empl oyed by t he Fund s pri nci pal di st ri butor as i t compet es i n t hi s i ndust ry. Effect of existing governmental regulation Mark-t o-market met hod of val uat i on, assesses bot h equi t y and debt i nst rument s based on t he current market pri ce of t hose i nvest ment i nst ruments. Therefore, t he i nt erpl ay of demand and suppl y of t hose i nst rument s and ot her macroeconomi c fact ors affect t hei r pri ces. The changes i n t he pri ces of equi ti es wi l l be refl ect ed i n t he val ue of t he net asset s of t he Fund. The Fund s net asset val ue per share ( NAVPS) i s t hus affected by t hi s mark-t o-market val uat i on. Subscri pti on Procedure Invest ments i n mut ual funds are covered by t he Ant i -Money Launderi ng Law. An Invest ment Appl i cat i on Form and si gnat ure cards must be submi t t ed t oget her wi t h t he appropri at e payment . Once submi t t ed, t he Investment Appl i cat i on may not be cancel l ed i n ful l or i n part . An Invest ment Appl i cat i on, once accept ed, shal l const i t ut e an agreement bet ween t he Invest or and t he Invest ment Manager and Pri nci pal Di st ri but or at t he t i me, i n t he manner and subj ect to t he condi t i ons set fort h i n t hi s Prospect us and t he Invest ment Appl i cat i on Form. Eligible Investors The shares of t he Fund may be purchased and hel d by any person of l egal age or dul y organi zed and exi st i ng corporat i ons, part nershi ps or corporat e ent i t i es regardl ess of nat i onal i t y. The Art i cl es of Incorporat i on of t he Company provi des, however, t hat no t ransfer of shares of st ock of t he Company whi ch woul d reduce t he st ock ownershi p or equi t y i nt erest of Fi l i pi no ci t i zens t o l ess t han t he percent age requi red by appl i cabl e l aws or regul at i ons shal l be caused or al l owed t o be recorded i n t he proper books of t he Fund. The Invest or shal l decl are and warrant t hat t here are no l egal rest ri cti ons prohi bi t i ng t he purchase of t he shares appl i ed for and t hat t he Investor i s ot herwi se el i gi bl e t hroughout t he durat i on of t he peri od that t he Invest or remai ns a st ockhol der of t he Company. Purchase of t he shares of t he Fund may be rest ri ct ed by l aw i n cert ai n j uri sdi ct i ons. Forei gn i nvest ors i nt erest ed i n subscri bi ng to t he shares shoul d get i nformat i on on t he appl i cabl e l egal requi rement s under t he l aws and regul at i ons of t he count ri es of t hei r nat i onal i t y, resi dence or domi ci l e and as t o any rel evant t ax or forei gn exchange cont rol l aws and regul at i ons affecti ng t hem personal l y.
Requirements for Corporate Applicants For Invest ors ot her t han i ndi vi dual s, t he fol l owi ng document s, i n addi t i on t o t he Invest ment Appl i cat i on Form and t he si gnat ure cards, must be accompl i shed and shal l be consi dered i nt egral part s t hereof: copy of t he Invest or' s SEC Cert i fi cat e of Regi st rat i on, Art i cl es of Incorporat i on and By-Laws; not ari zed corporat e secret ary' s cert i fi cat e set t i ng fort h t he resol ut i ons of t he Invest or' s Board of Di rect ors or equi val ent body: aut hori zi ng t he purchase of t he shares of t he Fund; desi gnat i ng t he si gnat ori es for t he purpose; and, cert i fyi ng the percent age of capi t al st ock hel d by non-Fi l i pi nos. Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 40 of 53 Minimum Investment The mi ni mum i ni ti al i nvest ment i s FIVE THOUSAND PESOS ( Php5, 000. 00) and subsequent i nvest ment s shal l be for a mi ni mum of ONE THOUSAND PESOS ( Php1, 000. 00) . Offering Price The net asset val ue comput at i on shal l be made i n accordance wi t h t he val uat i on met hod i ndi cat ed i n t he prospect us and shal l be appl i ed consi st ent l y. Any change i n t he NAVPS comput ati on or val uat i on met hod shal l be subj ect t o approval by t he Commi ssi on. Invest ment compani es shal l comput e and post t hei r NAVPS on a dai l y basi s and shal l publ i sh such dai l y pri ces i n at l east two ( 2) newspapers of general ci rcul ati on i n t he Phi l i ppi nes and shal l post them dai l y i n a conspi cuous pl ace at t he pri nci pal offi ce of t he i nvest ment company as wel l as al l i t s branches or correspondent offi ces whi ch are desi gnat ed redempt i on cent ers. The dai l y cut -off t i me for t he reckoni ng of t he dat e of submi ssi on of t he subscri pt i on appl i cat i on shal l be 12: 00 noon. If t he appl i cat i on i s recei ved on or before t he sai d cut -off t i me, t he shares shal l be val ued based on t he net asset val ue ( NAV) per share for the same banki ng day. For appl i cat i ons recei ved aft er the cut - off t i me, i t shal l be deemed t o have been recei ved t he fol l owi ng banki ng day. In bot h i nst ances, a sal es l oad fee shal l be charged based on t he t ot al pri ce of t he appl i cat i on. The NAV per share shal l be the comput ed di fference bet ween t ot al asset s of t he Fund and i t s t ot al l i abi l i t i es di vi ded by t he number of shares out st andi ng. Subscri pt i ons must be pai d i n ful l upon submi ssi on of t he appl i cat i on for subscri pt i on. Acceptance of Investment Applications Appl i cat i ons for t he number of shares and t he appl i cabl e NAV are subj ect t o accept ance and approval by t he Pri nci pal Di st ri but or. The Pri nci pal Di stri but or reserves t he ri ght t o rej ect , scal e-down and re-al l ocat e any appl i cat i on for t he shares for what ever reason. Appl i cat i ons for whi ch check payment s are di shonored upon fi rst present ment , as wel l as t hose whi ch do not compl y wi t h t he requi rement s set i n t hi s Prospect us and Invest ment Appl i cat i on Form, shal l be rej ect ed. The Pri nci pal Di st ri but or shal l i nform t he Invest or of such reduct i on or rej ect i on wi t hi n t hree ( 3) days aft er submi ssi on of t he Invest ment Appl i cat i on. Payment Terms Subscri pt i ons shal l be pai d i n ful l upon submi ssi on of a dul y accompl i shed and execut ed Invest ment Appl i cat i on Form. Payment s must be made i n t he f orm of personal or corporat e check or cashi er' s or manager' s check, drawn agai nst a bank account wi t h a BSP aut hori zed agent bank l ocat ed i n Met ro Mani l a. Al l such checks must be made payabl e t o "Fi rst Met ro Save & Learn Equi t y Fund, Inc. , " dat ed as of t he dat e of t he Invest ment Appl i cat i on, and remi t t ed di rectl y t o t he Pri nci pal Di st ri but or at i t s pri nci pal offi ce. A provi si onal recei pt wi l l be i ssued i ni t i al l y t o t he Invest or. Upon accept ance of t he Invest ment Appl i cat i on by t he Pri nci pal Di st ri but or, a Confi rmat i on Recei pt wi l l be i ssued t o confi rm t he purchase of t he shares of the Fund and t o l i kewi se serve as the Invest or' s Offi ci al Recei pt . Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 41 of 53 Refunds Refunds of payment s for any rej ect ed or scal ed-down appl i cat i ons shal l be made wi t hout i nt erest by t he Pri nci pal Di st ri but or not l at er t han fi ve ( 5) busi ness days aft er submi ssi on. The respect i ve Invest or shal l recei ve a check, crossed "Payee' s Account Onl y, " mai l ed and del i vered at t he Invest or' s ri sk t o t he address speci fi ed i n t he Investment Appl i cat i on Form or t o t he correspondi ng di stri but or or any aut hori zed i nvest ment sal esmen of t he Investor. Delivery of Stock Certificates Each st ockhol der of t he Fund i s ent i t l ed t o recei ve a st ock cert i fi cat e represent i ng ownershi p of t he shares of t he Fund. However, an Invest or has an opt i on not t o request for st ock cert i fi cat es because t he l egal requi rement s for repl aci ng l ost cert i fi cat es ent ai l cost l y and l engt hy procedures. Nevert hel ess, i f an Investor st i l l want s t o recei ve a st ock cert i fi cat e, he must i ndi cat e so i n t he Invest ment Appl i cat i on Form. St ock cert i fi cat es shal l be made avai l abl e t o t he Invest or as soon as pract i cabl e at t he offi ce of t he Transfer Agent . Any cert i fi cat e t hat remai ns uncl ai med for a peri od of t hi rt y (30) days shal l be mai l ed t o t he address speci fi ed i n t he Investment Appl i cat i on Form at t he ri sk of t he Invest or. Redempti on of Shares Invest ors i n redeemabl e securi t i es i ssued by an open-end i nvest ment company shal l have t he ri ght t o have t hei r securi t i es redeemed i n accordance wi th t he t erms of t he i ssue t hereof and t he procedures i ndi cat ed i n t hi s prospect us. The redempt i on pri ce surrendered before the dai l y cut -off t i me shal l be t he next comput ed NAVPS. Payment s for securi t i es redeemed shal l be effect ed wi thi n seven ( 7) banki ng days from recei pt of t he request for redempt i on, i n accordance t o ICA Rul e 35-1( e) ( 5) of t he Invest ment Company Act . The Commi ssi on may, whenever necessary or appropri at e i n t he publ i c i nt erest or for t he prot ect i on of i nvestors, suspend t he redempt i on of securi ti es of open-end compani es. The i nvest ment company may est abl i sh a net work of redempt i on cent ers accept abl e t o t he Commi ssi on. The hol der of any shares of st ock of t he Fund, upon hi s present at i on t o t he Fund i n i t s pri nci pal offi ce or t o any of i t s dul y aut hori zed represent at i ves of t he confi rmat i on recei pt and st ock cert i fi cat e ( i f i ssued) , and upon fi l i ng of t he redempt i on request form, i s ent i tl ed t o recei ve by way of redempti on approxi mat el y hi s proport i onat e share of t he Company' s current net asset s or the cash equi val ent t hereof, i . e. t he current NAV per share, subj ect t o t he exi sti ng l aws and By-l aws of t he Company. The NAV i s t hen di vi ded by t he number of shares outst andi ng i n order t o arri ve at t he NAV per share. For securi ti es surrendered for redempt i on before t he dai l y cut -off t i me of 12: 00 noon, t he pri ce at whi ch t he Company' s securi t i es may be redeemed shal l be comput ed based on the NAV per share on t he banki ng day fol l owi ng t he day when such request for redempt i on i s recei ved. Shoul d t he request for redempt i on be recei ved aft er t he sai d dai l y cut -off t i me, i t shal l be deemed t o have been recei ved on t he fol l owi ng banki ng day, and t he appl i cabl e NAV per share t o be used as basi s for redempt i on shal l be t hat whi ch shal l be comput ed for t he fol l owi ng banki ng day when such request for redempt i on i s deemed t o have been recei ved. There shal l be no mi ni mum hol di ng peri od, however, redempt i on fees shal l be deduct ed out of t he redempt i on proceeds dependi ng on t he ret ent i on peri od. Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 42 of 53 Payment s for redeemed shares shal l be effect ed wi t hi n seven ( 7) banki ng days from recei pt of the request for redempt i on. The Fund shal l not suspend t he ri ght of redempt i on or post pone t he dat e of payment or sat i sfacti on upon redempt i on of any redeemabl e securi t y i n accordance wi t h t he t erms appeari ng i n t hi s Prospect us, for more t han seven ( 7) banki ng days aft er t he t ender of such securi ty t o t he Corporat i on, except on t he i nst ances prescri bed by appl i cabl e Phi l i ppi ne l aws or regul at i ons. Benef i ts to the Investor Mutual funds make savi ng and i nvest i ng si mpl e, accessi bl e, and affordabl e. They offer professi onal management , di versi fi cati on, l i qui di t y, affordabi l i t y, conveni ence, and ease of recordkeepi ng, as wel l as st ri ct government regul at i on and ful l di scl osure.
Professional Management Even under t he best of market condi t i ons, i t t akes an experi enced i nvest or t o i nvest prudent l y, and a further commi t ment of t i me t o moni t or t hose i nvest ments. Wi t h mut ual funds, experi enced professi onal s manage a port fol i o ful l -t i me, and deci de where t o i nvest based on ext ensi ve research. Diversification at Low Cost Successful i nvest ors know t hat di versi fi cat i on wi l l reduce t he adverse i mpact of a si ngl e i nvest ment . Mut ual funds provi de di versi fi cat i on t o your i nvest ment port fol i o aut omat i cal l y by hol di ng a wi de vari et y of securi t i es at a fract i on of t he cost of maki ng such i nvest ment s i ndependent l y. Liquidity Li qui di t y i s t he abi l i t y t o readi l y access your i nvestment . Mut ual fund shares are l i qui d i nvest ment s t hat can be sol d on any busi ness day. Mut ual funds are requi red by l aw t o buy, or redeem, shares each busi ness day. Convenience You can purchase or sel l fund shares di rect l y t hrough a broker, bank or i nsurance agent , by mai l , over t he t el ephone, and i ncreasi ngl y by personal comput er. You can al so arrange for aut omat i c rei nvest ment or peri odi c di st ri but i on of the di vi dends and capi t al gai ns pai d by t he fund. A wi de vari et y of ot her servi ces can be provi ded, i ncl udi ng mont hl y or quart erl y account st at ement s, t ax i nformat i on, and easy access t o fund and account i nformat i on. Protecting Investors Not onl y are mut ual funds subj ect t o exact i ng i nt ernal st andards, t hey are al so hi ghl y-regul at ed by t he Securi t i es and Exchange Commi ssi on whi ch has a di rect and i ndi rect i mpact on t he envi ronment where mut ual funds operat e. Parti es Invol ved i n the Fund Investment Manager, Fund Administrator and Principal Distributor Fi rst Met ro Asset Management , Inc. , ( "FAMI") , t he Invest ment Manager, Fund Admi ni st rat or and Pri nci pal Di st ri but or of t he shares of t he Company, was i ncorporat ed on Apri l 21, 2005 wi t h an aut hori zed capi t al st ock of Fort y Mi l l i on Pesos ( Php40, 000, 000. 00) di vi ded i nt o Four hundred Thousand ( 400, 000) shares at a par val ue of One Hundred Peso (Php100. 00) per share. It has a subscri bed capi t al Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 43 of 53 of El even Mi l l i on Seven Hundred Si xt y Fi ve Pesos ( Php11, 765, 000. 00) of whi ch Ten mi l l i on Pesos ( P10, 000, 000. 00) are pai d-up. The gui del i nes for the i nvest ment management , fund admi ni strat i on and shares di stri buti on of t he Company are set i n t he Management and Di st ri but i on Agreement bet ween t he part i es. FAMI i s a corporat i on organi zed by a group of i ndi vi dual s wi t h a sol i d t rack record i n management . The fol l owi ng are t he members of t he Board of Di rect ors and offi cers of FAMI: Mr. Franci sco C. Sebasti an - 54 years ol d, Fi l i pi no, Di rect or. Mr. Sebast i an has over t wo decades of experi ence i n i nvest ment banki ng and corporat e fi nance. He i s di rect or and Presi dent /CEO of Fi rst Met ro Invest ment Corporat i on si nce October 1, 1997. Pri or t o t hi s, he was Managi ng Di rect or of Int egrat ed Fi nanci al Servi ces Li mi t ed, Deput y General Manager of Fi l i nvest Fi nance ( HK) Li mi ted, and Assi st ant Di rect or of Ayal a Fi nance ( HK) Li mi t ed. He al so si t s as Vi ce-Chai rman of Met ropol i t an Bank and Trust Company ( Met robank) and Presi dent of Gl obal Busi ness Hol di ngs, Inc. Mr. Sebast i an graduat ed Magna cum Laude from t he At eneo de Mani l a Uni versi t y wi t h a Degree i n Economi cs. Fr. Roderi ck C. Sal azar, Jr. , SVD- 61 years ol d, Fi l i pi no, Di rect or. He i s concurrent Presi dent of t he Cat hol i c Educat i onal Associ at i on of t he Phi l i ppi nes ( CEAP) and Uni versi ty of San Carl os i n Cebu Ci t y. Fr. Sal azar i s t he Chai rman of t he Board of Trust ees of Hol y Name Uni versi t y, St. Jude Cathol i c School , St . Schol ast i ca s Academy, Di vi ne Word Uni versi t y of Tacl oban, and chai rman of Cebu Archdi ocesean Commi ssi on on Educat i on. He i s a Trust ee of St . Paul Uni versi t y, St . Theresa s Col l ege, Cent er for Educat i onal Measurement , and Daught ers of Chari t y School s Vi sayas Cl ust er. He i s al so a member of Pri vat e Educat i on Advi sory Counci l , Bi shop-Busi nessmen s Conference, Cebu Archdi ocesean Presbyt eral Counci l , SVD Sout hern Provi nce Provi nci al Counci l , Search Commi t t ee for t he Konrad Ademauer Medal of Excel l ence gi ven t o t he best managed l ocal government i n t he Phi l i ppi nes ( 2003) . He i s al so a Di rect or of Peopl e s Tel evi si on Net work ( PTV 4) . Among ot her past responsi bi l i t i es, he was Presi dent of PAASCU Research Foundat i on, Inc. , Chai rman of FILIPINO, Inc. , Chai rman of Di vi ne Word Educat i onal Associ at i on. He has a Bachel or and Mast er of Art s degrees i n Phi l osophy at Di vi ne Word Semi nary, Mast er and Doct or of Art s degrees i n Mass Communi cat i on from Uni versi t y of Lei cest er ( Engl and). He al so fi ni shed courses on Fi nanci al Management and Corporat e Management i n Educat i on from Uni versi t y of Leeds ( Engl and) . Franci sco G. Co - 69 years ol d, Fi l i pi no, Di rect or. He i s one of t he pi oneer empl oyees of Met robank and has served t he Met robank Group for over four decades. He hol ds the fol l owi ng posi t i ons i n concurrent capaci t i es: Consul tant of Fi rst Met ro Invest ment Corporat i on; Chai rman/Di rect or of PBC Capi t al Invest ment Corporat i on and of Pri ma Vent ures Devel opment Corporat i on; Chai rman/Presi dent/Di rect or of SBC Propert i es, Inc. and of FMIC Equi t i es, Inc; Di rect or/Vi ce Chai rman of Fi rst Met ro Travel ex, Inc. ; Di rect or/Presi dent of Sal eage Insurance Agency, Inc. of Fi rst Met ro Insurance Agency, Inc. , of Fi rst Met ro Insurance Brokerage, Inc. , and of Fi rst Met ro Securi t i es Brokerage Corporat i on; Di rect or of Mi rant Generat i on Cebu Li mi t ed Durat i on Company; Di rect or/Vi ce Presi dent of Aurora Tower, Inc. ; and Presi dent /Di rect or of Panay Power Corporat i on, of Tol edo Power Company, of Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 44 of 53 Tol edo Hol di ngs Corporat i on, of Avon Ri ver Power Hol di ngs Corporat i on, of GBH Power Resources, Inc. , of Cl aredon Tower Hol di ngs, Inc. , of Masi nl oc Gl obal Hol di ngs Corporat i on, and of ARB Power Vent ures, Inc. He has a Bachel or s degree i n Account i ng from t he Uni versi ty of t he East . Mr. Roberto Juanchi to T. Di spo - 44 years ol d, Fi l i pi no, Vi ce Chai rman. He i s t he Execut i ve Vi ce Presi dent , Treasurer, and Di rect or of Fi rst Met ro Invest ment Corporat i on. He i s current l y Chai rman of t he Board of Fi rst Met ro Securi t i es Brokerage Corporat i on and Vi ce Chai rman of PBC Capi t al Investment Corporat i on. He i s a Di rect or of Fi rst Metro Insurance Brokerage Corporat i on, Sal eage Insurance Agency, Inc. , and FMIC Equi t i es, Inc. He i s al so t he Treasurer of ORIX-METRO Leasi ng, t he Execut i ve Vi ce Presi dent of Pri ma Vent ures Corporat i on, and t he Vi ce Presi dent of Gai nswort h Insurance Brokerage Corporat i on. Mr. Di spo i s al so t he Di rect or of Money Market Associ at i on of t he Phi l i ppi nes. He was Deput y Treasurer of t he Phi l i ppi nes, Di rect or of Publ i c Debt Management Servi ce of t he Bureau of Treasury as wel l as t he Di rect or of Pol i cy and Pl anni ng Servi ces of t he Bureau of Treasury. He was al so t he Execut i ve Di rect or of t he Board of Li qui dat ors of Cent ral Bank of t he Phi l i ppi nes. He recei ved hi s Mast er s degree i n Busi ness Admi ni st rat i on from t he Pamant asan ng Lungsod ng Mayni l a ( wi t h Di st i nct i on) . He undert ook Di pl oma Courses i n Int ernat i onal Banki ng and Fi nance from t he Economi c Inst i t ute of t he Uni versi t y of Col orado and Management Devel opment Program from Asi an Inst i t ut e of Management . Mr. Jose Paci f i co E. Marcel o - 49 years ol d, Fi l i pi no, Di rect or. Mr. Marcel o has over t went y-one years experi ence i n i nvestment banki ng/corporat e fi nance and fi ve years i n the government servi ce i n t he areas of l i vel i hood management and mi crofi nance. As Execut i ve Vi ce Presi dent , he heads t he Invest ment Banki ng Group of Fi rst Met ro Invest ment Corporat i on, a posi t i on he has hel d si nce August 2, 1999. He concurrent l y serves as Di rect or of PBC Capi t al Corporat i on and Di rect or of FMIC Equi t i es Corporat i on. He earned hi s Bachel or s degree i n Busi ness Economi cs from t he Uni versi t y of t he Phi l i ppi nes and hi s Mast er s degree i n Busi ness Management from t he Asi an Inst i tut e of Management . Mr. Dani l o G. Ol ondri z - 54 years ol d, Fi l i pi no, Chi ef Fi nanci al Offi cer. Term of office is one year and has served as such from the time of Funds incorporation up to present. He i s Fi rst Vi ce Presi dent /Cont rol l er of Fi rst Met ro Invest ment Corp. ( FMIC) . He i s t he Cont rol l er of Fi rst Met ro Insurance Agency, Inc. , and Mani l a Medi cal Servi ces, Inc. He was al so Treasurer/Di rect or of Pri ceSmart , Phi l i ppi nes, Inc. Pri or t o hi s st i nt wi t h FMIC, he was a Bank Exami ner at t he Bangko Sentral ng Pi l i pi nas for al most a decade. He i s a product of t he At eneo Graduat e School of Busi ness and Phi l i ppi ne School of Busi ness Admi ni st rat i on where he compl et ed t he academi c requi rement s l eadi ng t o a Mast er s degree and a Bachel or s degree i n Busi ness Admi ni st rat i on, respect i vel y. He i s a Certi fi ed Publ i c Account ant . Bro. Manuel V. de Leon, FMS - 50 years ol d, Fi l i pi no, Di rect or. He i s t he Provi nci al Superi or of Mari st Brot hers of School s ( Phi l i ppi nes) and a member of Mari st Int l . Commi ssi on for Educat i on ( It al y) . He i s t he Foundi ng Presi dent of SAGIP KA 2000 Foundat i on, Inc. He i s a member of the Board of Not re Dame of Dadi angas Col l ege, Not re Dame of Ki dapawan Col l ege, Not re Dame of Cot abat o, Mari st Asi a Paci fi c, Mari st School , Assumpt i on Ant i pol o, and Assumpt i on Col l ege. He was chosen Di rect or of Cat hol i c Educat i onal Associ at i on of t he Phi l i ppi nes ( CEAP-NCR) , Treasurer of CEAP, Board Member of COCOPEA and accredi t or of Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 45 of 53 PAASCU, and Presi dent of Mari st School - Mari ki na. He was awarded one of t he Ten Out st andi ng Young Men ( TOYM) i n 1992. He has a mast er s and doct orat e degrees i n Educat i on from Uni versi t y of the Phi l i ppi nes. Mr. Jose M. Santos - 67 years ol d, Fi l i pi no, Di rector. Mr. Sant os i s current l y t he Vi ce-Presi dent for Fi nance and Treasurer of At eneo de Mani l a Uni versi t y. He i s t he Di rect or/Treasurer of Mani l a Observat ory, At eneo Schol arshi p Foundat i on, Inc. and Phi l i ppi ne Inst i t ut e of Pure and Appl i ed Chemi st ry. He i s al so a Di rect or of t he Cat hol i c Educat i onal Associ at i on of t he Phi l i ppi nes Ret i rement Board. He was i nvol ved i n Syl vi a Sant os, Inc. a manufact urer of l eather goods and garment s for market i ng i n bot h domest i c and export market s. He was t he Presi dent and CEO of Phi l i ppi ne Paci fi c Capi t al Corporat i on and Head of t he Trust and Invest ment s Di vi si on of RCBC. He serve as t he head of t he Branch Banki ng Group of Phi l i ppi ne Commerci al and Indust ri al Bank, and Head of t he Invest ment Management Group of Fi rst Nati onal Ci t y Bank. Mr. Sant os i s a graduat e of At eneo de Mani l a Uni versi t y wi t h a Bachel or of Art s degree i n Economi cs and a product of t he Graduat e School of Whart on School , Uni versi t y of Pennsyl vani a. Bro. John Y. Tan, FMS - 51 years ol d, Fi l i pi no, Di rect or. He i s a member of t he Board of Trust ees of Not re Dame of Dadi angas Col l ege, Not re Dame of Ki dapawan Col l ege, Not re Dame of Marbel Uni versi t y, Mari st Devel opment Foundati on, Inc. , Mari st School Mari ki na Ci t y, Mari an Hi l l s Memori al Park, Inc. , ND Busi ness Resource Cent er Foundat i on, Inc. , Fi rst Metro Invest ment Corporat i on, and SAGIP KA 2000 Foundat i on, Inc. He i s t he Chai rman of t he Board of Trust ees of Not re Dame of Cot abat o, Inc. He i s al so t he t reasurer of Not re Dame Educat i onal Associ at i on and a member of t he Int ernat i onal Preparat ory Commi ssi on on Mi ssi on, Mari st Brothers General at e, Rome, It al y. He i s a member of t he Provi nci al Counci l and Provi nci al Econome of Mari st Brot hers of t he Phi l i ppi nes, Inc. He was a Mi ndanao Cl ust er Team Member of FORD Foundati on IP Regi onal Screeni ng Commi t t ee, Presi dent of Samahan ng mga Pari at Rel i hi yoso ng Ki dapawan ( SPARK) , Chai rman of Cot abat o Provi nce CHED Sport s Counci l , and Board of Trust ees Member of Cot abat o Pri vat e School s Associ at i on, Inc. He has a bachel or s degree i n Educat i on ( Engl i sh/Sci ence) and a master s degree i n Educat i on ( Educat i onal Admi ni st rat i on) from Not re Dame Uni versi ty. Mr. Eduardo A. Mendoza - 56 years ol d, Fi l i pi no, Di rector, Presi dent. He i s the Presi dent of Lumens Sol uti ons, Inc. , a Board member of PHINMA Property Hol di ngs Corp. and Bacnotan Industri al Park Corp. He was Seni or Vi ce Presi dent of PHINMA, Inc. and Vi ce Presi dent for Marketi ng of Uni ted Pul p & Paper Corp. Mr. Mendoza fi ni shed BS Management Engi neeri ng from Ateneo de Mani l a Uni versi ty and Master of Busi ness Admi ni strati on from Stanford Uni versi ty, USA. Mr. Edwin B. Valeroso - 44 years ol d, Fi l i pi no, Presi dent, Di rector. Term of office is one year and has served as director from May 2005 up to the present. He is the President of First Metro Save & Learn Fixed Income Fund, Inc. (May 2005 - present), and First Metro Save & Learn Balanced Fund, Inc. (January 2005 - present). He i s an Associ ate Professori al Lecturer at De La Sal l e Uni versi ty-Graduate School of Busi ness (2000-present). He was a Mutual Fund Strategi st/Consul tant at Fi rst Metro Investment Corp. (2004-2005); currentl y a Trustee and Vi ce-Presi dent of Investment Company Associ ati on of the Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 46 of 53 Phi l i ppi nes(ICAP)(2006-present); Mr. Val eroso fi ni shed the requi rements for the degree Doctor of Busi ness Admi ni strati on (Candi date) at De La Sal l e Uni versi ty-Mani l a. He obtai ned a Master of Sci ence degree i n Appl i ed Mathemati cs from Uni versi ty of the Phi l i ppi nes and a BS Actuari al Mathemati cs from the Uni versi ty of Santo Tomas. He i s al so an al umnus of the Trust Insti tute Foundati on of the Phi l i ppi nes. Mr. Dani l o G. Ol ondri z - 52 years ol d, Fi l i pi no, Chi ef Fi nanci al Offi cer. Term of office is one year and has served as such from May 2005 up to the present. He is the Chief Financial Officer of First Metro Save & Learn Fixed Income Fund, Inc. (from May 2005 to the present) and First Metro Save & Learn Balanced Fund, Inc. (from January 2007 up to the present). He i s t he Seni or Vi ce Presi dent /Cont rol l er of Fi rst Met ro Invest ment Corp. ( 2004-present ) . He i s t he Cont rol l er of Fi rst Met ro Insurance Agency, Inc. ( 2001-present ) , and Mani l a Medi cal Servi ces, Inc 2005-present ) . He was al so Treasurer/Di rect or of Pri ceSmart, Phi l i ppi nes, Inc. Pri or t o hi s st i nt wi t h FMIC, he was a Bank Exami ner at t he Bangko Sent ral ng Pi l i pi nas ( 1978-1989) for al most a decade. He i s a product of t he At eneo Graduat e School of Busi ness and Phi l i ppi ne School of Busi ness Admi ni st rat i on where he obt ai ned hi s academi c requi rement s l eadi ng t o a Mast eral and Bachel or s degree i n Busi ness Admi ni st rat i on, respect i vel y. He i s al so a Cert i fi ed Publ i c Account ant . Atty. Nimfa B. Pastrana - 45 years old, Filipino, Corporate Secretary. Term of office is one year and has served as such from May 2005 up to the present. She is Vice President, and Asst. Corporate Secretary of First Metro Investment Corporation (2002-present). She is also the Corporate Secretary of First Metro Save & Learn Fixed Income Fund, Inc. (May 2005- present), First Metro Save & Learn Balanced Fund, Inc., (January 2007- present) and First Metro Asset Management (2005- present). First Metro Securities Brokerage Corporation (2005-present), PBC Capital Investment Corporation (2004-present), Prima Ventures Development Corporation (2004-present), and SBC Properties, Inc.(2002-present). She was a Director of Global Business Holdings (2002-2003). She graduated from the University of the Philippines with a degree of A.B. Philosophy and from San Beda College with a degree in Bachelor of Laws. Mr. Jonathan T. Tabac - 54 years ol d, Fi l i pi no, Compl i ance Offi cer. Term of offi ce i s one year and has served as such from May 2005 up t o t he present . He i s al so t he Compl i ance Offi cer of Fi rst Met ro Invest ment Corporat i on, Fi rst Met ro Securi t i es Brokerage Corporat i on, First Metro Save & Learn Fixed Income Fund, Inc., Fi rst Met ro Asset Management , Inc. (from May 2005 to the present), and Fi rst Met ro Save & Learn Bal anced Fund, Inc. He was AVP & Compl i ance Offi cer of Ci t yst at e Savi ngs Bank ( 2002-2003) , Vi ce Presi dent of Maybank Phi l i ppi nes ( formerl y PNB Republ i c Pl ant ers Bank) -1997-2001 and Chai rman of t he Board of RPB Provi dent Fund, Inc. (1997-2001) . Mr. Tabac obt ai ned hi s BSC-Account i ng from Uni versi t y of Bagui o and MBA uni t s from t he Uni versi t y of Sant o Tomas. He i s a Cert i fi ed Publ i c Account ant . Ms. Mari e Arabel l a D. Veron 47 years ol d, Fi l i pi no, Treasurer. Term of offi ce i s one year and has served as such from May 2005 up t o the present . She i s t he Vi ce Presi dent of Fi rst Metro Invest ment Corporat i on ( 2006-present ) , Treasurer/Di rect or of SBC Propert i es, Inc. ( 2003-present ) , Treasurer of Fi rst Met ro Save & Learn Fi xed Income Fund, Fi rst Met ro Asset Management , Inc. (from May 2005 to present), Fi rst Met ro Insurance Agency ( 2001-present ) , Inc. , and Sal eage Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 47 of 53 Insurance Agency ( 2001-present ), Treasurer of PBC Capi t al Investment Corporat i on ( 2006-present ) . She was a manager of MBTC Domest i c Subsi di ari es, a Seni or Audi t or of Joaqui n Cunanan & Co. /Pri ce Wat erhouse ( 1980-1985) and of Phi l i ppi ne Int ernat i onal Tradi ng Corporat i on ( 1985-1990) . Ms. Veron fi ni shed her Bachel or of Sci ence Degree i n Busi ness Admi ni st rat i on, maj or i n Account i ng from Uni versi t y of t he East . She i s a Certi fi ed Publ i c Account ant . Custodian Bank The Cust odi an Bank of t he Company i s The Hongkong and Shanghai Banki ng Corporat i on Lt d ( HSBC) . The Cust odi an Bank Agreement covers t he cust odi an bank' s dut i es on recei pt of i nvest ment s, redempt i on procedures t o be used, report s and records t o be accompl i shed by t he cust odi an bank, procedures governi ng t he t ransfer of t he Company' s shares and account s of i nvest ors, custody of cert i fi cat es represent i ng i nvest ment s made by t he fund manager for t he Fund and fees of t he Cust odi an bank. Transfer Agent Met ropol i t an Bank and Trust Company- Trust Banki ng Group i s t he desi gnat ed St ock and Transfer Agent of t he Fund. External Auditor The present audi t or of FMSALEF i s Syci p, Gorres, Vel ayo and Company. The report s of sai d audi t ors on t he fi nanci al st at ement s of t he company for t he years ended December 31, 2006 and 2005 cont ai ned unqual i fi ed opi ni ons. There are no di sagreement s wi t h t he audi t ors on any mat t er of account i ng pri nci pl es or pract i ces, fi nanci al st at ement di scl osures, audi t i ng scope or procedures, whi ch di sagreement s, i f not resol ved t o t hei r sat i sfact i on, woul d have caused t he audi t ors t o make reference t heret o i n t hei r respect i ve report s on t he fi nanci al st at ement s for such years. The aggregat e fees pai d for t he professi onal servi ces rendered by SGV & Company for t he audi t of our Fi nanci al St at ement s for t he years 2006 and 2007 i s P100, 000. 00 & P110. 000. 00, respect i vel y. SGV & Co. conduct ed t he audi t i n accordance wi t h audi ti ng standards general l y accept ed i n t he Phi l i ppi nes t o obt ai n reasonabl e assurance about whet her t he fi nanci al st at ement s are free of mat eri al mi sst atement s. Thei r audi t al so i ncl udes assessi ng t he account i ng pri nci pl es used and si gni fi cant est i mat es made by t he management , as wel l as eval uat i ng t he overal l fi nanci al st at ement present at i on. There are no t ax fees pai d for the l ast 2 years for professi onal servi ces rendered by SGV & Co. for t ax account i ng compl i ance, advi ce, pl anni ng and any ot her form of t ax servi ce. There are no ot her fees pai d for t he l ast 2 years for products and servi ces provi ded by SGV & Co. ot her t han t he servi ces ment i oned above. Materi al Contracts and Agreements The fol l owi ng i s a summary of t he mat eri al cont ract s and agreement s rel at i ng t o t he Fund:
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 48 of 53 Management and Di stri buti on Agreement Under t hi s agreement , Fi rst Metro Asset Management , Inc. was appoi nt ed as t he Invest ment Manager and Pri nci pal Di st ri but or, Fund Admi ni st rat or of t he Fund. Under t he Agreement , t he servi ces of FAMI shal l i ncl ude t he fol l owi ng:
1. Coordi nat i on of t he act i vi t i es of, and ext ensi on of al l necessary cooperat i on or assi st ance t o t he Fund' s Custodi an Bank, t he Transfer Agent , t he audi t ors, and t he l egal counsel wi t hout prej udi ce t o t he di rect responsi bi l i t y of such fi rms t o t he Fund; 2. Preparat i on of such report s, ci rcul ars, not i ces and ot her i nformat i on on i nt ernal corporat e affai rs t hat may be requi red, from t i me t o t i me, by t he Fund, i t s st ockhol ders, board of di rect ors, and/or offi cers, whi ch shal l i ncl ude a mont hl y report on: a. ) Revenues and di sbursements broken-down as t o i nvest ment s and expenses; b. ) Sal es and redempt i ons; and c. ) Performance, change or st at us of t he Fund' s asset s; 3. Represent at i on wi t h Government offi ces, i nst rumental i t i es and agenci es, i ncl udi ng al l work requi red i n regi st eri ng t he Fund' s securi t i es, obt ai ni ng proper l i censes and permi t s, compl yi ng wi t h ot her l egal requi rement s i ncl udi ng t hose requi rement s rel evant t o FAMI s own operat i ons, and submi t t i ng regul ar report s t o vari ous government agenci es; 4. Account i ng, bookkeepi ng, cl eri cal and other admi ni st rat i ve servi ces i n t he ordi nary conduct of t he Fund' s act i vi t i es, ot her t han t hose servi ces provi ded by t he Custodi an Bank, t he audi t ors, and t he l egal counsel ; 5. Provi de offi ce space and ot her admi ni st rat i ve faci l i t i es; 6. Di st ri but i on of t he shares of t he Fund 7. Invest ment and rei nvest ment of t he resources of t he Fund i n accordance wi t h t he i nvest ment pol i ci es and gui del i nes set by t he Fund' s board of di rect ors i n conformi t y wi t h t he Fund' s Prospect us, t he Invest ment Company Act and ot her appl i cabl e l aws and regul ati ons; 8. Preparat i on and submi ssi on of such i nformat i on and dat a rel at i ng t o economi c condi t i ons, i ndustri es, busi ness, corporat i ons, or securi ti es as may be reasonabl y requi red by t he Fund' s Board of Di rect ors or as FAMI may deem t o be hel pful i n formul at i ng and eval uat i ng i t s i nvest ment pol i ci es or gui del i nes; 9. Transact i ons wi t h stockbrokers for t he account of the Fund i n connect i on wi t h t he i nvest ment and rei nvestment of t he Fund' s asset s;
The fees payabl e t o FAMI, i s a mont hl y fee equi val ent t o one and t hree-fourt hs percent ( 1. 75%) per annum of t he average net asset val ue of t he Fund' s assets, comput ed on a dai l y basi s. The "net asset val ue" shal l be det ermi ned by comput i ng t he t ot al val ue of t he Fund' s asset s l ess i t s l i abi l i t i es i n accordance wi t h t he procedure used i n comput i ng t he net asset val ue of t he Fund. In addi t i on, as Invest ment Manager, FAMI shal l be pai d an i ncent i ve fee whi ch i s defi ned i n t he earl i er part of t hi s prospect us. FAMI wi l l al so recei ve t he sal es l oad fee ( excl usi ve of VAT) under t he fol l owi ng schedul e: Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 49 of 53 Custodi an Bank Agreement Under t he agreement , t he Custodi an Bank shal l recei ve, safe-keep, record, and account for t he proceeds of t he sal e of the shares of st ock of t he Fund. The Cust odi an Bank shal l , l i kewi se, hol d al l t he cert i fi cat es represent i ng t he i nvest ment s made by t he Invest ment Manager i n behal f of t he Fund i n accordance wi t h t he regul at i ons of t he SEC. Stock and Transfer Agency Agreement Under t he agreement , t he St ock and Transfer Agent shal l render t he fol l owi ng servi ces: 1. Fi l e t he report s pert ai ni ng t o t he Fund as may be requi red by t he SEC and ot her government al ent i t i es; 2. Prepare t he l i st of stockhol ders for al l regul ar or speci al meet i ngs of t he Fund' s st ockhol ders; 3. Prepare and mai l out al l not i ces, report s, and ci rcul ars t o al l stockhol ders upon pri or request of t he Fund, Invest ment Manager or Admi ni st rat or; 4. Prepare and mai l di vi dend checks; 5. Prepare and i ssue st ock cert i fi cates; and, 6. Regi st er al l l i ens consti t ut ed on the shares of st ock of the Fund. Expenses Chargeabl e to the Fund and the Fund Management Company The expenses chargeabl e t o t he Fund are: 1. Compensat i ons of t he offi cers and di rect ors of t he Fund; 2. Audi t and l egal fees of t he Fund; 3. Brokerage charges and ot her cust omary fees i n connect i on wi t h t he acqui si t i on, apprai sal and di sposi t i on of t he Fund' s asset s; 4. Fees of t he Cust odi an Bank t o t he ext ent not absorbed by buyers of the Fund' s securi t i es; 5. Cost of pri nt i ng and mai l i ng not i ces, report s, proxi es and ot her communi cat i on mat eri al t o t he Fund' s st ockhol ders; 6. Fees of Transfer Agent for t he securi t i es to t he ext ent not absorbed by t he buyers of the Fund' s securi t i es; 7. Taxes, i ncl udi ng i ncome t axes, document ary st amp t axes, and l i cense fees, t o t he ext ent not absorbed by t he buyers of t he Fund' s securi t i es and as may be requi red by l aw or by the rul es and regul ati ons of t he SEC; and, 8. Invest ment Management fee, Di st ri but i on Fee and Fund Admi ni strat i on fee whi ch are comput ed i n accordance wi t h t he Management and Di st ri but i on Agreement .
The expenses chargeabl e t o FAMI are:
1. Sal ari es, bonuses, al l owances, and ot her compensat i on of t he personnel hi red by t he company t o perform t he admi ni strat i ve and di st ri but i on funct i ons and ot her servi ces as may be requi red by l aw or by t he rul es and regul at i ons of t he SEC; 2. Expenses i ncurred for t he offi ce space and ot her admi ni st rat i ve faci l i t i es; 3. Commi ssi on fees and ot her compensat i on due t o agent s and deal ers i n connect i on wi t h t he di st ri but i on of t he shares of t he Fund; 4. Transport at i on and communi cat i on charges i n rel at i on to t he di st ri but i on of t he shares; Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 50 of 53 5. Cost of sel l i ng mat eri al s such as brochures, sal es ki t s, and cost of pri nt i ng and di st ri but i ng t he Prospect us; and, 6. Adverti si ng and promot i onal expenses i ncurred i n connect i on wi t h t he sel l i ng of t he Fund' s shares,
Compl i ance wi th the Manual on Corporate Governance In l i ne wi th t he Securi t i es and Exchange Commi ssi on s Memorandum Ci rcul ar No. 2 seri es of 2002, t he Company has adopt ed i t s Manual on Corporat e Governance provi di ng for t he best pract i ces on governance. The dut i es responsi bi l i ti es and aut hori t i es of t he Board of Di rect ors as wel l as qual i fi cat i ons of a di rect or/offi cer are adopt ed and compl i ed wi t h. Board Commi t tees were creat ed, such as: t he Audi t Commi t t ee, t he maj ori t y of whi ch are i ndependent di rect ors; t he Nomi nat i ons Commi t t ee whi ch pre-qual i fi es and short l i st s t he nomi nees for i ndependent di rect ors t o be el ect ed i n t he annual st ockhol ders meet i ng and the Compensat i on Commi t t ee whi ch assi st t he Board of Di rect ors i n ensuri ng due observance of corporat e governance pri nci pl es and gui del i nes. A compl i ance offi cer has been appoi nt ed t o manage t he Compl i ance Syst em of t he Company and t o moni t or and eval uat e compl i ance wi t h t he Manual of Corporat e Governance. In general , t he Company i s i n compl i ance wi t h t he l eadi ng pract i ces i n good corporat e governance. Thi s was report ed i n a Certi fi cat i on by t he Compl i ance Offi cer fi l ed wi t h t he Commi ssi on on January 9, 2007. No di rect or or offi cer of t he Company was found i n vi ol at i on of t he Manual . The Company has adopt ed a good governance scorecard t o measure and det ermi ne t he l evel of compl i ance by t he Board of Di rect ors and top-l evel management wi t h i t s Manual of Corporat e Governance. Every end of t he current year, t he scorecard pat t erned aft er t he SEC-prescri bed Corporat e Governance Sel f-Rat i ng Form ( CG- SRF) shal l be accompl i shed by t he Compl i ance Offi cer. The resul t of t hi s eval uat i on i s submi t t ed t o t he Board t oget her wi t h t he CO s recommendat i on for any sanct i ons of non-compl i ance. On t he basi s of t hi s scorecard, t he Compl i ance Offi cer has i ssued t o SEC a cert i fi cat i on on t he Company s compl i ance wi t h i t s Manual of Corporat e Governance. Appl i cabl e Phi l i ppi ne Laws Investment Company Act of 1960 The busi ness of i nvest ment company compani es i s pri mari l y regul at ed by t he Invest ment Company Act of 1960 and the SEC rul es and regul at i ons governi ng i nvest ment compani es. Subj ect t o t he except i ons under t he l aw, an i nvest ment company i s any i ssuer whi ch i s or hol ds i tsel f out as bei ng engaged pri mari l y, or proposes t o engage pri mari l y i n t he busi ness of i nvest i ng, rei nvest i ng, or t radi ng i n securi t i es. An i nvest ment company i s ei t her, an open-end company or a cl osed-end company. On one hand, an open-end company i s an i nvest ment company t hat offers for sal e or has out st andi ng redeemabl e securi t y, of whi ch i t i s t he i ssuer. On t he ot her hand, a cl osed-end company i s any i nvestment company ot her t han an open-end company. To be i ncorporat ed as an i nvest ment company, t he fol l owi ng requi rement s shoul d be compl i ed wi t h: 1. Mi ni mum subscri bed and pai d-i n capi t al of Php50, 000, 000. 00; Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 51 of 53 2. Al l shares of st ock shoul d be common and vot i ng shares. In t he case of open- end compani es, t he art i cl es of i ncorporat i on t hereof shoul d expressl y deny t he pre-empt i ve ri ght s of st ockhol ders; . 3. Al l t he members of t he board di rect ors must be Fi l i pi no ci t i zens. The Investment Company Act , l i kewi se, requi res t he regi st rat i on of t he i nvest ment company and of t he shares of t he i nvest ment company i t sel f. Li kewi se, t he Invest ment Company Act requi res an i nvestment company t o pl ace and mai nt ai n i t s securi t i es and si mi l ar i nvest ment s i n t he cust ody of: a dul y organi zed l ocal commerci al bank of good reput e; or a company t hat i s a member of a securi t i es exchange as defi ned i n t he Securi t i es Regul at i on Code subj ect to such rul es and regul at i ons of t he Securi t i es and Exchange Commi ssi on; or such regi st ered company, but onl y i n accordance wi t h such rul es and regul at i ons or order as t he Commi ssi on may from t i me t o t i me prescri be for t he prot ect i on of i nvest ors. Di vi dends The corporat i on may pay di vi dends onl y out of i t s unrest ri ct ed ret ai ned earni ngs, t he unrest ri ct ed ret ai ned earni ngs of t he corporat i on t hat have not been al l ocat ed for any manageri al , cont ract ual , or l egal purposes and t hat are free f or di st ri buti on t o sharehol ders. The corporat i on may sat i sfy di vi dends i n cash, by t he di st ri but i on of propert y, or by t he i ssuance of shares of st ock. Di vi dends sat i sfi ed by t he i ssuance of shares may onl y be pai d wi t h t he approval of sharehol ders represent i ng at l east t wo-t hi rds ( 2/3) of t he out st andi ng capi t al st ock at a sharehol ders' meet i ng speci al l y cal l ed for that purpose. Decl arat i on of di vi dends i s general l y di scret i onary wi t h t he board of di rect ors. However, corporat i ons wi t h surpl us profi t s i n excess of 100% of t hei r pai d-i n capi t al are requi red t o decl are and di st ri but e t he amount of such excess profi t s as di vi dends, except when t he ret ent i on i s j usti fi ed by: Defi ni t e corporat e expansi on proj ect s, programs approved by t he board of di rect ors, or when consent of credi t ors i s requi red under any l oan agreement , or when i t can be cl earl y shown t hat such ret ent i on i s necessary under speci al ci rcumstances. Ri ghts of Mi nori ty Sharehol ders The ri ght of a sharehol der t o i nsti t ut e proceedi ngs on behal f of t he corporat i on i n a deri vat i ve sui t i s recogni zed by Phi l i ppi ne l aw. Deri vat i ve sui ts may be fi l ed where t he corporat i on i t sel f i s unabl e or unwi l l i ng to i nst i tut e t he necessary proceedi ngs t o redress wrong commi t t ed agai nst t he corporat i on or t o vi ndi cat e corporat e ri ght s. Deri vat i ve sui ts are fi l ed wi t h t he SEC, and the regul ar court s have t he excl usi ve and ori gi nal j uri sdi ct i on over i nt ra-corporat e di sput es. Sharehol ders have t he ri ght t o i nspect t he records of t he corporat i on. These records i ncl ude mi nut es of al l meet i ngs of t he board of di rect ors and of t he sharehol ders, and records of al l busi ness t ransact i ons of t he corporat i on. However, t he ri ght of i nspect i on may be deni ed i f t he sharehol der seeki ng t o exami ne t he corporat e records has i mproperl y used any i nformat i on secured t hrough any pri or exami nat i on of corporat e records, or was not act i ng i n good fai t h or wi t h a l egi t i mat e purpose i n maki ng hi s demand for i nspect i on. Management Corporat e powers are exerci sed, al l busi ness conducted, and al l propert i es of a corporat i on are cont rol l ed and hel d by the board of di rect ors. However, a Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 52 of 53 corporat i on may ent er i nt o a management cont ract wi t h anot her corporat i on, for a peri od not exceedi ng fi ve ( 5) years for any one t erm, subj ect t o t he approval of t he board of di rect ors and st ockhol ders owni ng at l east a maj ori t y ( or i n cert ai n i nst ances, two-t hi rds) of t he out st andi ng capi t al st ock of bot h t he managi ng and managed corporat i ons. The nat ure of an i nvest ment company' s busi ness, however, makes i t i mperat i ve for t he corporat i on t o ent er i nt o a management cont ract wi t h an i nvest ment manager/advi ser. The Invest ment Company Act l ays down t he requi rement s for such ki nd of cont ract s as fol l ows: 1. The cont ract has been approved by t he vot e of a maj ori t y of t he out st andi ng vot i ng securi t i es of t he i nvest ment company; 2. The cont ract preci sel y descri bed al l compensat i on t o be pai d t hereunder; 3. The cont ract shal l cont i nue i n effect for a peri od of more t han t wo years from t he dat e of i t s execut i on, provi ded t hat such conti nuance i s speci fi cal l y approved at l east annual l y by t he board of di rect ors or by vot e of a maj ori t y of t he out st andi ng vot i ng securi ti es of such company; 4. The cont ract provi des i n subst ance t hat i t may be t ermi nat ed at any t i me wi t hout t he payment of any penal t y by t he board of di rect ors of t he company or by vot e of t wo-t hi rds of t he out st andi ng vot i ng securi t i es of such company or not more t han si xt y days wri t t en not i ce t o t he i nvest ment advi ser; and 5. The cont ract provi des i n subst ance for t he aut omat i c t ermi nat i on i n t he event of assi gnment t hereof by t he i nvest ment advi ser/manager. Unl ess ot herwi se provi ded by t he Corporat i on Code, t he art i cl es of i ncorporat i on or By-l aws of t he corporat i on, an act of t he maj ori t y of t he di rect ors present i n a meet i ng wi t h a quorum shal l be val i d as a corporat e act . Cert ai n corporat e act s, however, may onl y be effect ed wi t h t he approval of sharehol ders represent i ng at l east t wo-thi rds ( 2/3) of t he out st andi ng capi t al st ock at a sharehol ders' meet i ng convened for t he purpose. Mat t ers requi ri ng such sharehol ders' approval i ncl ude, but are not l i mi t ed t o: t he amendment of t he art i cl es of i ncorporat i on; t he removal of di rect ors; the sal e, l ease, exchange, mort gage, pl edge, or ot her di sposi t i on of al l or a subst ant i al part of t he asset s of t he corporat i on; and i nvest ment of corporat e funds i n any ot her corporat i on, or busi ness, or for any purpose ot her t han pri mary purpose for whi ch the corporat i on was organi zed. Each member of t he board of di rect ors, who must hol d at l east one ( 1) share of t he corporat i on, i s el ect ed for a one ( 1) year t erm duri ng t he annual meet i ng of st ockhol ders of t he corporat i on. Each share of st ock i s ent i t l ed t o one vot e duri ng sharehol ders' meet i ng. However, i n t he el ect i on of di rect ors, each sharehol der i s ent i t l ed t o such number of vot es as i s equal t o t he product of t he number of shares owned by hi m and t he number of di rect ors to be el ect ed. The sharehol der may cumul at e hi s votes i n favor of one candi dat e or di st ri but e t hese vot es i n such proport i on and amount bet ween or among as many of t he candi dat es as he may t hi nk fi t. The el ecti on of di rect ors may onl y be hel d at a meet i ng convened for t hat purpose at whi ch sharehol ders represent i ng a maj ori t y of out st andi ng capi t al stock are present i n person or by proxy. However, any vacancy i n t he board, ot her t han by removal or expi rat i on of term, may be fi l l ed by t he maj ori t y of t he remai ni ng di rect ors i f st i l l consti t ut i ng a quorum.
Pr o s p e c t u s Fi r s t Me t r o Sa v e & L e a r n Eq u i t y Fu n d , I n c . Page 53 of 53 Accounti ng and Audi ti ng Corporat i ons are requi red t o fi l e copi es of thei r annual fi nanci al st at ement s wi t h t he SEC. Sharehol ders are ent i t l ed t o request copi es of t he most recent fi nanci al st at ement s of t he corporat i on whi ch shal l i ncl ude a bal ance sheet as of t he end of t he l ast t ax year and profi t and l oss st at ement approved at l east annual l y by t he board of di rect ors or by vot e of a maj ori t y of t he out st andi ng voti ng securi t i es of such company for t hat year. The board of di rectors i s requi red t o present t o sharehol ders at every annual meet i ng a fi nanci al report of t he operat i ons of t he corporat i on for t he precedi ng year. Thi s report i s requi red t o i ncl ude audi t ed fi nanci al stat ement s. Taxati on 1. Corporat e i ncome t ax on t axabl e i ncome deri ved from al l sources wi t hi n and wi t hout t he Phi l i ppi nes i s 35% effect i ve Jan. 1, 2006; 2. Fi nal wi t hhol di ng t ax of 20% on gross i nt erest from Phi l i ppi ne currency bank deposi t s and yi el d from deposi t subst i tut es, t rust funds and si mi l ar arrangement s; 3. Fi nal wi t hhol di ng t ax on sal e of shares l i st ed and t raded through t he Exchange of 1/2 of 1% of gross sel l i ng pri ce; 4. Tax on net capi t al gai n of sal e of shares not t raded t hrough t he Exchange: not over P100, 000. 00 - 5% and amount i n excess of P100, 000. 00 - 10%; 5. Document ary st amps tax at t he rat e of P1. 00 per P200. 00 ( or fract i onal part t hereof) of par val ue on ori gi nal i ssuance of shares by t he Fund.
Sharehol der
1. Tax on di vi dends recei ved from t he Fund by: domest i c corporat i ons and resi dent forei gn corporat i on: None; i ndi vi dual ci t i zen and i ndi vi dual resi dent al i en: 10% 2. Document ary st amps t ax of P0. 75 per P200. 00 ( or fract i onal part t hereof) of par val ue on subsequent sal e or transfer of shares by t he Sharehol der. 3. Tax on gai ns real i zed by t he i nvest or upon redempt i on of shares i n a mutual fund company: None. 4. Tax on net capi t al gai n of sal e of shares not t raded t hrough t he Exchange: Not over P100, 000. 00: 5%; and amount i n excess of P100, 000. 00: 10%. 5. Tax on di vi dends recei ved from domest i c corporat i ons: None. 6. Document ary st amps tax at t he rat e of P1. 00 per P200. 00 ( or fract i onal part t hereof) of par val ue on ori gi nal i ssuance of shares by t he Fund.