INVESTMENT COMPANIES

Pursuant to Republic Act No. 2629, otherwise known as the Investment

Company Act (“ICA”) and Republic Act No. 8799 otherwise known as the Securities
Regulation Code (“SRC”) the Commission is granted the authority to prescribe the
regulation of investment companies, and to require them to register with the Securities
and Exchange Commission (“Commission”) and to comply with certain standards
including among others, the regular public disclosure of financial condition, investment
policies and objectives, and their fund portfolios as well as their pricing and fees.

The Commission is also authorized to regulate Fund Managers and other

parties involved in the operations of investment companies.

Investment Company
A stock corporation primarily engaged or holds itself out as being engaged
primarily, or purposes to engage, in the business of investing, reinvesting and trading
in securities.

Classifications of Investment Company

An investment company may be classified by investment policy as either:

1. Equity Fund -shall refer to an investment company with the objective to invest
predominantly in or hold equity investments.
2. Bond Fund or Fixed Income Fund -shall refer to an investment company which
invest in fixed income instruments such as bonds, treasury bills, certificates of
deposit, promissory notes, bills of exchange, debentures, etc. It should not
invest in shares except redeemable preferred shares or share warrants.
3. Balanced Fund –shall refer to an investment company that invests in both
equity and fixed income instruments. The respective investments in either
equity or fixed income shall not be less than thirty five percent (35%) but not
more than sixty five percent (65%) of the NAV of the investment company.
4. Feeder Fund –shall refer to an MFC that invest at least ninety percent (90%) of
its net assets in a single CIS established by another fund manager, asset
management company of fund operator, which shall not be feeder fund.
5. Fund-of-Funds –shall refer to an MFC that invests at least fifty percent (50%)
of its net assets in more than one (1) CIS established by another fund
manager/s, asset management company/ies or fund operator/s.
6. Index Fund –shall refer to an investment company with an objective of providing
investors with a return that replicated or is linked to securities indices as
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disclosed in its prospectus.

7. Money Market Funds –shall refer to an investment company that invest in short-
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term fixed income securities with a portfolio duration of one (1) year or less.
8. Multi-asset/Asset Allocation Fund –shall refer to an MFC that invests in a fixed
or variable mix both equity and fixed income instruments as well as cash and
cash-equivalents.
 The above enumeration are not exclusive. There may be other classifications
of funds based on their investment policy that may be approved by the Securities
and Exchange Commission.

Minimum Requirement

An Investment Company applying for incorporation with the SEC shall comply with the
following requirements:

1. File documentary requirement for the registration of its Article of Incorporation

(AOI) and By-Laws (BL);
2. File SE ICA Form 7-A and pay the filing fee of P10,000.00 plus LRF;
3. The name of the corporation shall contain the word “Fund”;
4. The primary purpose clause of the AOI shall provide that the corporation shall
engage in the business of investing, reinvesting and trading in securities or
other investment assets allowed under the Act and this Rules;
5. All members of the Board of directors shall be Filipino citizen;
6. It shall have a minimum subscribed and paid up capital of Fifty Million Pesos
(50,000,000.00). The Commission may grant a request for a lower paid-in
capital requirement of the Investment Company is one of or part of a group of
investment companies to be created or already in existence to be managed or
under management by the same Fund Manager with a track record of at least
five years as such and provided that the subscribed and paid-up capital shall
not be lower than One Million Pesos (1,000,000.00)
7. All shares shall be common and voting and, in general, redeemable in
accordance with the terms and conditions prescribed and disclosed in the
Registration Statement. For MFCs that will issue units, the unitholders shall
have Registration Statement and the subscription agreement;
8. The original proponents of a newly formed Investment Company, which is not
related to an existing fund or Fund Manager with a track record of at least five
(5) dispose of their securities within twelve (12) months from the registration of
the Investment Company;
9. An Investment Company shall not be required to comply with the minimum
subscribed and paid-up capital relative to the increase in its authorized capital
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stock.
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Definition of Terms

Asset Under Management (AUM)

Shall refer to the total market value of all the financial assets of an Investment
Company managed by a Fund Manager.

Certified Investment Solicitor (CISo)

Shall refer to a natural person of legal age duly licensed by the Commission
and appointed by the Fund or the FM/MFD to solicit, sell or offer to sell the shares or
units of an Investment Company to public.

Closed-end Company
Shall refer to an Investment Company which offers for a sale a fixed number if
non-redeemable securities which are offered in an initial public offering and thereafter
traded in an organized market as determined by the Commission of Exchange.

Collective Investment Scheme (CIS)

Shall refer to an arrangement whereby funds are solicited from the investing
public for the purpose of investing, reinvesting and trading in securities or other assets
allowed under the IRR.

Credit Ratings
Shall refer to those ratings assigned to an entity that treasurers the
creditworthiness of a borrower or its capacity to fulfill its financial obligations. These
rating are derived after considering all factors, and issued by a credit rating agency
accredited by the Commission.

Custodian
Shall refer to an independent third party duly authorized or accredited by the
Banko Sentral ng Pilipinas or the Commission to engage in the business of custodial
and safekeeping of investment assets.

FM/MFD
Shall refer to a Fund Manager who aside from managing a Fund, also functions
as a distributor of the shares or units of the Investment Company and may no longer
be required to secure a separate licensed for the distribution of the shares or units of
the Investment Company

Fund Manager (FM)

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Shall refer to a registered entity with an Investment Company Adviser license

that is engaged in the business of managing the daily operations of an Investment
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Company in the investment, administration and accounting of fund assets and the
monitoring of activities of third party service providers such as custodian, transfer
agent and distributors.
Investment Assets or Eligible Assets
Shall refer to those assets in which the funds of the Investment Company may
be invested in.

Investors of the Fund

Shall refer to the shareholders or uniholders of the Investment Company who
executed a subscription agreement with the Investment Company or the Fund
Manager to subscribe to the shares.

Investment Company Adviser

Shall refer to an Investment Company Adviser licensee who regularly advises
or recommends investment decisions with regard to the securities or other portfolio of
the Investment Company pursuant to an advisory contract with the Investment
Company.

Issuer
Is the originator, maker, obligor or creator of the security.

Mutual Fund Company (MFC)

Shall refer to registered open-end Investment Company that holds itself out as
being engaged primarily, or proposes to engage primarily, in the business of investing,
reinvesting and trading in securities. It is a company that pools the funds of individuals
and institutional investors to form a massive asset base which s entrusted to a full time
professional Fund Manager who develops and maintains a diversified portfolio of
security investments. It offers for sale or has outstanding ay redeemable securities of
which it is the issuer.

Mutual Fund Distributor (MFD)

Shall refer to a juridical person duly licensed or authorized by the Commission
to distribute shares or units of an Investment Company as either principal distributor
or sub-distributor.

Net Asset Value (NAV)

Shall refer to the aggregate value of each fund, either shares or units, as
determined by the market value of its underlying securities holdings, including any
cash in the portfolio less liabilities, computed at the close of the trading of securities
for the day.

Net Asset Value per Share or NAVps

Shall refer to the computed NAV on a per share basis at the close of the day.
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It is calculated by dividing the Investment Company’s total net assets from the shares
outstanding.
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Net Asset Value per Unit or NAVpu

Shall refer to the computed NAV on a per unit basis at the close of the day. It
is calculated by dividing a MFCs total net assets by the number of its outstanding
units.
Organized Market

Shall refer to an exchange, government securities market or an over-the-

counter market that is regulated by the relevant competent regulatory authority and
where financial instruments are regularly traded. It shall be of good repute and open
to the public or a substantial number of market participants.

Sales Load

Shall refer to the change or commission on the cost of acquiring the shares or
units of an Investment Company.

Solicitation

Shall refer to the act of providing information about security or investment

product being offered for sale with the view of making another person a client or
closing or bringing in a sale or purchase of security or investment product.

Transfer Agent

Shall refer to a juridical person duly licensed by the Commission as a transfer

agent and appointed by the Investment Company, or the Fund Manager, to maintain
an accurate registry for recording the initial and subsequent transfer of securities.

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