It was registered on January 15, 2013 with the Securities and Exchange Commission (“SEC”) as an Open-end Investment Company under Republic Act No. 2629, otherwise known as the Investment Company Act and as an “Exchange Traded Fund” (“ETF”) under SEC Memorandum Circular No. 10, Series of 2012 otherwise known as the SEC Rules and Regulations on Exchange Traded Funds (the “SEC ETF Rules”). The Fund is engaged primarily in the business of investing, reinvesting, and trading in, and issuing and redeeming its shares of stock in Creation Units in exchange for a basket of securities representing an index. As a licensed ETF, it offers to, and through, qualified trading participants (the “Authorized Participants”), on a continuous basis, Shares in the Fund which are issuable and
redeemable in Creation Units as defined in the body of this Prospectus.
The Fund aims to provide returns which would reflect the performance of the Philippine equities market by investing in a basket of securities which are included in the PSEi of the PSE (the “Underlying Index”). The portfolio of the Fund is to be rebalanced and reconstituted every six (6) months in order to adjust to the current composition of the PSEi. See discussion of the composition of the PSEi under “Index Provider” on p. 55. Price volatility of the constituent shares of stock can affect the market value of the assets of the Fund and cause the Fund’s Net Asset Value (“NAV”) to vary.
The Shares of the Fund will be listed on the ETF Board of the PSE. The Shares of the Fund may be bought and sold on the secondary market at the quoted market price in the PSE through the Trading Participants of the PSE which may require payment of brokerage commissions, stock transaction tax and/or other fees and ges (e.g. clearing house fees). However, Shares of the Fund may be issued and redeemed only through Authorized Participants in Creation Units as described in the body of the Prospectus. Investors who are interested in creating or redeeming Shares in Creation Units may contact any one of the Authorized Participants or request his or her existing registered broker/Trading Participant to place such an order with any of the Authorized Participants. Interested investors should be aware that the Authorized Participants and the Trading Participants are required to comply with Philippine general laws, rules and regulations including any “know-your-customer” requirements under existing regulations. For more information on the creation process, please see “Creation Method” beginning on p. 26 of this Prospectus. More information on the Fund may also be found in its website: www.firstmetroetf.com.ph.
FMIC is the Fund Sponsor. As Fund Sponsor, FMIC organized the Fund and has provided the initial capital of the Fund totaling Seven Hundred Fifty Million Pesos (PhP750,000,000.00).
First Metro Asset Management, Inc. (“FAMI”) is the Fund Manager and Principal Distributor. FAMI aims to initially market the Fund and list the same in the PSE. FAMI will continue to perform all the functions of a Fund Manager with regard to the Fund as described under the SEC ETF Rules and in this Prospectus. As Principal Distributor, FAMI will market to and accept orders of the Shares of the Fund in Creation Units from the Authorized Participants as described in the body of this Prospectus.
First Metro Securities Brokerage Corporation (“FMSBC”) and IGC Securities, Inc. (“IGC”) are the Authorized Participants. A creation fee, inclusive of documentary stamp tax and other ges, of approximately eighty basis points (0.80%) of the total value of the Creation Order or a redemption fee, inclusive of other ges, of approximately eighty basis points (0.80%) of the total value of the Redemption Order is ged by an Authorized Participant to each investor who places a Creation or Redemption Order. FMSBC is also the appointed Market Maker of the Fund. There are no fees ged by and payable to the Market Maker.
The Fund appointed HSBC Securities Services (“HSBC”) as Custodian. As Custodian, HSBC shall hold in safe custody the assets of the Fund in accordance with the terms and conditions contained in the Custodian Agreement. FAMI shall subcontract HSBC to provide fund administration services, such as accounting and valuation services to the Fund in accordance with the Fund Administration Terms and Conditions executed between FAMI and HSBC. HSBC shall ge an annual safe custody fee and a fund administration fee as per the agreed Tariff Schedule between FAMI and HSBC.
The Fund appointed Interactive Data Corporation as Indicative Net Asset Value (“INAV”) Calculator. The INAV Calculator shall provide INAV calculations every one (1) minute during the Trading Day, which shall be disclosed in the websites of the Fund and the PSE as well as the PSE´s ETF Board. The total fee payable by the Fund to FAMI is a monthly fee equivalent to fifty basis points (0.50%) per annum of the average NAV of the Fund’s assets, computed on a daily basis. The NAV of the Fund is the aggregate value of the Fund’s assets as determined by the market value of its underlying securities holdings, including any cash in the portfolio, interest receivables, dividend receivables, less liabilities such as taxes, accrued fees and expenses computed after the close of trading hours of the PSE.
An investment in the Fund is not insured or guaranteed by the Philippine Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of its investments, it is possible to lose money by investing in the Fund. The Fund’s return will change as a result of movements in the stock market and other macroeconomic factors. No single fund is intended to be a complete investment program, but individual funds, such as this Fund, can be an important part of a balanced and diversified investment program. Before making an investment decision, investors should carefully consider the risks associated with an investment in the Shares. These risks include:
Up to 30,000,000 Shares of the Fund shall be continuously offered to the public through the Authorized Participants who directly transact with the Fund for Creation Orders. The Shares of the Fund may also be bought and sold in the secondary market, in board lots, through the PSE, and investors who wish to trade the Shares of the Fund may contact his or her Trading Participant. The Fund’s investments shall be guided by investment guidelines and restrictions, which are set out in detail in the body of this Prospectus.
No dealer, selling agent, or any other person has been authorized to give information or make any representation not contained in this Prospectus. This Prospectus does not constitute an offer to sell or a solicitation of an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction or to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The delivery of this Prospectus at any time does not imply that the information herein contained is correct as of any time subsequent to this date.
The information contained in this Prospectus relating to the Fund, has been supplied by the Fund, unless otherwise stated herein. To the best of its knowledge and belief, the Fund confirms that the information contained in this Prospectus relating to it, is true, accurate and correct, and that there is no material misstatement or omission of fact which would make any statement in this Prospectus misleading, inaccurate or false in any material respect and that the Fund hereby accepts full and sole responsibility for the accuracy of the information contained in this Prospectus with respect to the same. The Principal Distributor has exerted reasonable efforts to verify the information herein and does not make any representations or warranties as to the accuracy, truthfulness or completeness of the materials contained herein. The Principal Distributor assumes no liability for any information supplied by the Fund in relation to this Prospectus. Unless otherwise indicated, all information in this Prospectus is as of the date of this Prospectus. Neither the delivery of this Prospectus nor any sale made pursuant to this Prospectus shall, under any circumstances, create any implication that the information contained herein is correct as of any date subsequent to the date hereof or that there has been no change in the affairs of the Fund since such date.
This Prospectus includes forward-looking statements. The Fund has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting its business. Words including, but not limited to, “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “expects” and similar words are intended to identify forward-looking statements. In light of the risks and uncertainties associated with forward-looking statements, investors should be aware that the forward-looking events and circumstances discussed in this prospectus might not occur. The Fund’s actual results could differ substantially from those anticipated in the Fund’s forward-looking statements.
An application for listing of the Shares of the Fund (comprising of all issued and outstanding, and unissued Shares of the Fund as of the date of this Prospectus) was approved on October 9, 2013 by the Board of Directors of the PSE, subject to the fulfillment of certain listing conditions. All issued and outstanding Shares of the Fund as of the date of this Prospectus, shall be listed on the ETF Board of the PSE, while unissued Shares of the Fund as of the date of this Prospectus, shall be subject to shelf listing in accordance with the PSE ETF Rules. The PSE assumes no responsibility for the truthfulness, accuracy and correctness of any statements made or opinions expressed in this prospectus. The PSE makes no representation as to its truthfulness, accuracy and completeness and expressly disclaims any liability whatsoever for any loss arising from any reliance on the entire or any part of this Prospectus. Such approval for listing is permissive only and does not constitute a recommendation or endorsement of the Shares by the PSE.
An application has been made to the SEC to register the Shares under the provisions of the Securities Regulation Code of the Philippines (Republic Act No. 8799) (the “SRC”).