AN OPEN-END INVESTMENT COMPANY by cex51483

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									                      FINAL PROSPECTUS

                                OF


PHILEQUITY DOLLAR INCOME FUND, INC.
  (formerly "VANTAGE DOLLAR INCOME FUND, INC.")

        AN OPEN-END INVESTMENT COMPANY


                       100,000,000 Shares
                       COMMON STOCK


  The number of shares to be offered inclusive of what has already
  been subscribed to upon incorporation is One Hundred Million
  (100,000,000) Shares. Twenty-Five Million (25,000,000) Shares
                                                         P
  have been subscribed at incorporation at par value of =1.00 per
  share. The price at which the Seventy-Five Million (75,000,000)
  shares are to be offered will be based on the next computed Net
  Asset Value Per Share after a subscription is made. The shares to
  be offered are not listed in the Philippine Stock Exchange, and
  shall be traded through its principal distributor, Philequity
  Management, Inc. (PEMI).


             PHILEQUITY MANAGEMENT, INC.
                PRINCIPAL DISTRIBUTOR


                          1 February 2005




                                                                      1
No dealer, selling agent or any other person has been authorized to give information or make any
representation not contained in this Prospectus. This Prospectus does not constitute an offer of
any securities other than those to which it relates, or an offer to sell or a solicitation of an offer to
buy any securities other than those to which it relates in any jurisdiction or to any person to whom
it is unlawful to make such an offer or solicitation in such jurisdiction. The delivery of this
Prospectus at any time does not imply that the information herein contained is correct as of any
time subsequent to this date.

The information contained in this Prospectus has been supplied by Philequity Dollar Income
Fund, Inc. unless otherwise stated. Philequity Dollar Income Fund, Inc. accepts full
responsibility for the accuracy of the information given herein, and confirms that there are no
omissions of fact which would make any statement in this Prospectus misleading. Philequity
Management, Inc., the investment manager of Philequity Dollar Income Fund, Inc., has exerted
reasonable efforts to verify the information herein and does not make any representations or
warranties as to the accuracy or completeness of the materials contained herein.


ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL
INFORMATION CONTAINED HEREIN IS TRUE AND CORRECT.




                                                                                                       2
The following are the summary income statement and balance sheet of the Fund for calendar
years 2002 and 2003:



       Income Statement
                                    31 December 2003       31 December 2002

        Revenue                          P 2,685,322.00        P 2,215,542.00
        Less: Expenses and
                 other Charges                212,445.00          1,956,199.00

        Net Investment Income            P 2,472,877.00        P 1,956,199.00




       Balance Sheet
                                    31 December 2003       31 December 2002

        Asset                           P 37,114,388.00       P 34,607,676.00
        Liabilities                            93,835.00             60,000.00

        Net Assets                      P 37,020,553.00       P 34,547,676.00




                                                                                       3
                                                  TABLE OF CONTENTS


PROSPECTUS SUMMARY ................................................................................................ 6

GLOSSARY ......................................................................................................................... 7

THE FUND ............................................................................................................................ 8
      Company Background .............................................................................................. 8
      Capitalization ...............................................................................................................9
              Right of Redemption ..................................................................................... 10
              Waiver of Pre-Emptive Rights ...................................................................... 10
              Distribution of Dividends ............................................................................. 10
              Restrictions on Transfer ................................................................................ 10
      Ownership .................................................................................................................. 10
      Incorporators, Board of Directors, and Officers ........................................................ 12
      Compensation of Directors and Executive Officers .................................................. 15
      Effects of Government Regulation ............................................................................ 15
      Properties .................................................................................................................. 15
      Summary of Net Asset Value .................................................................................... 15
      Holders ....................................................................................................................... 15
      Security Ownership of Certain Beneficial Owners and Management ...................... 16
              Security Ownership of Certain Record and Beneficial Owners .................. 16
              Security Ownership of Management ........................................................... 17
      Legal Proceedings ..................................................................................................... 17

MANAGEMENT DISCUSSION AND ANALYSIS ............................................................ 17
    Mutual Fund Industry in the Philippines .................................................................. 17
    Top 5 Key Indicators ................................................................................................ 18
    Financial Condition .................................................................................................... 18

INVESTMENT OBJECTIVE AND INVESTMENT POLICIES ......................................... 20

INVESTMENT RESTRICTIONS .......................................................................................... 20

RISK FACTORS ................................................................................................................... 21

USE OF PROCEEDS ............................................................................................................ 22

INVESTMENT PROCEDURE .............................................................................................. 23
      Terms and Pricing of Securities ................................................................................ 23
              Offering Price .............................................................................................. 23
              Sales Load .................................................................................................... 23
              Minimum Investment ................................................................................... 23
      Subscription Procedure ............................................................................................. 23

                                                                                                                                           4
                       Investment Application Form ...................................................................... 23
                       Eligible Investors .......................................................................................... 24
                       Requirements for Corporate Applicants ...................................................... 24
                       Acceptance of Investment Applications ....................................................... 24
                       Payment Terms ............................................................................................. 25
                       Refunds ......................................................................................................... 25
                       Delivery of Stock Certificates ...................................................................... 25
                       Periodic Fund Statement ............................................................................... 25

REDEMPTION OF SHARES ................................................................................................ 25
     NAV Per Share Computation ..................................................................................... 25
     Manner and Method of Redemption .......................................................................... 26
     Redemption Price ....................................................................................................... 26
     Minimum Holding Period and Redemption Charges ................................................. 26
     Special Considerations ............................................................................................... 26
     Applicable Taxes ....................................................................................................... 27

COMPUTATION OF NET ASSET VALUE ......................................................................... 27

BENEFITS TO THE INVESTOR .......................................................................................... 28
     Professional Management and Supervision ............................................................... 28
     Diversification ........................................................................................................... 28
     Access to Higher Interest Rates ................................................................................. 28
     Liquidity ..................................................................................................................... 28

PARTIES INVOLVED IN THE FUND ................................................................................. 29
      Investment Manager and Principal Distributor .......................................................... 29
              Company Profile ........................................................................................... 29
              Duties and Responsibilities ........................................................................... 30
      Custodian Bank .......................................................................................................... 31
      Transfer Agent ........................................................................................................... 31
      Legal Counsel ............................................................................................................ 32
      External Auditor ........................................................................................................ 32
      Significant Employee ................................................................................................. 32
      Certain Relationships and Related Transactions ........................................................ 32

EXPENSES CHARGEABLE TO THE FUND ...................................................................... 32

MANAGEMENT FEE ............................................................................................................ 33

EXPENSES CHARGEABLE TO THE INVESTMENT MANAGER .................................. 33




                                                                                                                                              5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus.

Issuer

Philequity Dollar Income Fund, Inc. (formerly "Vantage Dollar Income Fund, Inc.") with office
address at 2703A East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas
Center, Pasig City. The Fund’s telephone number is (63) (2) 638-9990.

Shares Offered/Par Value

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

Offering Price

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

Proceeds from the offering

As of the filing of this Amended Prospectus, total proceeds from the issuance of the shares of
stock of the Fund is P41,714,300.55. The Proceeds were invested in United States Dollar
denominated bonds.

Sales Load

The sales load fee shall be a maximum of one percent (1.0%) of the value of investment.

Daily Cut-Off Time

12:00 noon

Minimum Investment

US$2,000 for initial investments and US$1,000.00, or its Philippine Peso equivalent, for
additional investments. Investment shall be on cash basis only. Installment sales are prohibited.

Redemption Price

The redemption price of the securities surrendered within the daily cut-off time shall be the next
computed NAV per share after the request for redemption is received. Securities surrendered after
the daily cut-off time shall be deemed to have been received on the following banking day.




                                                                                                6
Redemption Charge

A redemption fee of one percent (1.0%) shall be deducted from the redemption proceeds of shares
redeemed in the first (1st) year from the time of purchase. A redemption fee of one half percent
(0.5%) shall be deducted from the redemption proceeds of shares if redeemed on the second year
from the time of purchase, and no redemption fee shall be deducted if redeemed beyond the
second year from the time of purchase.

Management Fee and Expenses

A management fee equivalent to one and a half percent (1.5%) per annum of the average net asset
value of the Fund's assets computed on a daily basis, shall be payable by the Fund to its
investment manager, Philequity Management, Inc. Certain operating expenses of the Fund are
deemed covered by the management fee and shall be for the account of Philequity Management,
Inc.

Investment Policies and Objective

The investment objective of Philequity Dollar Income Fund, Inc. is to generate income and
achieve capital appreciation by investing in dollar-denominated bonds issued by Philippine or
foreign governments or corporations. It is categorized under SEC ICA Rule 35-1 as growth-
oriented.

Risks of Investing

Various risk factors such as the liquidity of the bonds, interest rates, general political and
economic situations, performance and development of the corporations and governments which
issued the bonds, and the peso-dollar exchange rate, can affect the market value of the assets of
the Fund and can cause a fluctuation of the Fund's net asset value. Consequently, there are
instances where redemption prices of redeemed shares may be less than the prices at which the
shares were originally purchased.

Dividend Policy

Distribution of dividends is governed by Section 5, Article XII of the Fund’s By-Laws. The
Board of Directors by vote may declare cash dividends from the Fund’s unrestricted retained
earnings. No dividends were declared from the date of incorporation to the date of this report.

GLOSSARY
Investment Adviser
Philequity Management, Inc.

Principal Distributor
Philequity Management, Inc.



                                                                                               7
The "Fund" or the "Company"
Philequity Dollar Income Fund, Inc. (formerly "Vantage Dollar Income Fund, Inc.")

BSP
Bangko Sentral ng Pilipinas

Custodian Bank
Equitable Banking Corporation

Dollars or US$
US Dollars

Investor
Any person, association or corporation who desires to invest in the shares of the Fund

NAV
Net Asset Value

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

         =
Pesos or P
Philippine Peso, lawful currency of the Philippines

PSE or the "Exchange"
Philippine Stock Exchange, Inc.

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

SEC or the "Commission"
Securities and Exchange Commission

"Shareholder" or "Stockholder”
Any natural or juridical person who has subscribed to the shares of the Fund.

Transfer Agent
Equitable Banking Corporation


THE FUND
A.      Company Background

Philequity Dollar Income Fund, Inc. (formerly "Vantage Dollar Income Fund, Inc.") was
incorporated on 4 March 1999. The general character of the business of the Fund is an Open-End
Mutual Fund established under the Investment Company Act, R.A. 2629. The Fund operates as
                                                                                            8
an investment company with a focus on long-term capital appreciation via interest income earned
through investment in dollar-denominated bonds issued by Philippine or foreign governments and
corporations. The Fund issues mutual fund shares for sale to the public. Said mutual fund shares
shall be sold through its Principal Distributor, Philequity Management, Inc. ("PEMI") in
accordance with the Management and Distribution Agreement. The Fund is ready to redeem or
buy back the shareholding of any investor at the applicable NAV per share.

The Fund aims to provide small investors with the opportunity of participating in the attractive
yields offered by dollar-denominated bonds as well as to provide a foreign currency hedge against
peso devaluation via the prudent selection of bonds and debt securities and through professional
management and supervision of the Fund.

The Fund shall maintain a portfolio consisting of dollar-denominated sovereign and corporate
bonds issued by the Philippine or foreign governments and corporations with the objective of
gaining long-term capital appreciation.      The investment objectives, policies and initial
investment plans are discussed in detail under the topics Investment Objective and Investment
Policies and Investment Restrictions.

The Fund appointed PEMI as its investment manager and principal distributor. A detailed
description of the duties of PEMI as investment manager and distributor, the investment
procedure and the plan of distribution are discussed under the topic Parties Involved in the Fund
and in the Management and Distribution Agreement.

The Fund's securities and investments will be held by Equitable Banking Corporation, the Fund's
Custodian Bank.

B.      Capitalization

                                                                            =
The Fund has an authorized capital stock of One Hundred Million Pesos (P100,000,000.00)
composed of One Hundred Million (100,000,000) unclassified common shares with par value of
           =                                                                                =
One Peso (P1.00) per share. Out of the authorized capital stock, Twenty Five Million Pesos (P
25,000,000.00) worth of shares have been subscribed out of which subscription Twenty Five
               =
Million Pesos (P25,000,000.00) has been paid up.

                                                                                         =
The SEC has permitted the Fund to have a paid-in capital lower than Fifty Million Pesos (P
50,000,000.00) as the Fund is one of a group of investment companies in existence under
management by one investment company manager, Philequity Management, Inc. These
investment companies are: Philequity Fund, Inc., Philequity Money Market Fund (formerly
"Vantage Money Market Fund, Inc.") and Philequity PSE Index Fund, Inc. (formerly "Vantage
PSE Index Fund, Inc.").

The Fund registered its entire authorized capital stock with the Securities and Exchange
Commission under SEC Form 8-1, Registration Statement under the Securities Regulation Code.
The offer will be 75,000,000 shares to be priced at a prevailing net asset value per share plus the
sales load fee.

Unless the applicable Philippine laws and regulations shall allow otherwise, the original
promoters of the investment company who have subscribed and paid for the original capital of the

                                                                                                 9
Fund, shall not be allowed to sell, transfer, convey, encumber or otherwise dispose of their
shares/securities within twelve (12) months from the registration of the Fund.

Each share of stock of the Fund is a voting stock with voting rights equal to every other
outstanding share of stock, and subject to the following:

        a)      Right of Redemption

The holder of any shares of stock, upon the presentation to Philequity Management, Inc., the
Fund's principal distributor or any of the Fund's duly authorized representatives of the Custodian
Receipt(s) and the stock certificate(s) for redemption, is entitled to receive by way of redemption
approximately the dollar equivalent of his proportionate share of the Fund's current net assets in
cash, i.e. the net current asset value per share, subject to existing laws and the By-Laws of the
Fund.

        b)      Waiver of Pre-emptive Rights

The Articles of Incorporation of the Fund provide that no stockholder shall, because of his
ownership of stock, have a pre-emptive or other right to purchase, subscribe for, or take any part
of any stock or of any other securities convertible into or carrying options or warrants to purchase
stock of the Fund. The Fund's Articles of Incorporation further provide that any part of such
stock or other securities may be disposed of by the Fund pursuant to the resolution of its Board of
Directors, to such persons and upon such terms as the Board may deem proper, without first
offering such stock or securities or any part thereof to existing stockholders

        c)      Distribution of Dividends

As provided under Article XII, Section 5 of the Fund's By-Laws, the Board of Directors shall by
vote declare dividends and authorize the distribution of capital gains from any fund legally
available therefor of the Fund whenever in their opinion, the condition of the Fund's finances will
render it expedient for such dividends to be declared. The Board of Directors may make
arrangements with its stockholders as it may deem desirable whereby dividends or other
distributions or any part thereof may be reinvested in new shares of stock of the Fund instead of
being paid in cash to the stockholders. No sales load fee shall be charged on such reinvestment.
However, redemption of such reinvested shares shall be subject to redemption charges stated
under the heading Redemption of Shares.

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

        d)      Restrictions on Transfer

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

C.      Ownership

The names and address of the holders of common stock of the Fund, and the amount of securities
held by each as of twenty days prior to the filing of this Registration Statement is set out below.
                                                                                                 10
                                                                                         NO. OF                 AMOUNT OF
                           NAME/ADDRESS                                                 SHARES                 CAPITAL STOCK
                                                                                      SUBSCRIBED                SUBSCRIBED

WEALTH SECURITIES, INC.1                                                                     16,249,995             P 16,249,995.00
                                                                                                                    =
21/F East Tower, PSE Centre, Exchange Road
Ortigas Center, Pasig City

WEALTH SECURITIES, INC.- FAO-BQ-01                                                             8,749,998               13,246,621.97
21/F East Tower, PSE Centre, Exchange Road
Ortigas Center, Pasig City

MANUEL POBLADOR                                                                                6,603,902               11,282,000.00
21st Floor, Chatham House
Valero cor. Rufino St.
Salcedo Village, Makati City

A. BAYANI K. TAN AND/OR BETTY CHUA
                                                                                                 333,711                   563,250.00
2704 East Tower, PSE Centre, Exchange Road
Ortigas Center, Pasig City

A. BAYANI K. TAN AND/OR ANDREA PATRICIA TAN
                                                                                                 120,847                   204,036.58
2704 East Tower, PSE Centre, Exchange Road
Ortigas Center, Pasig City

MA. ELENA A. FERNANDEZ                                                                             97,730                  168,390.00
9 Planet St., Bel-Air
Makati City

GREGORIO T. YU                                                                                            1                            1.00
28/F East Tower, PSE Centre, Exchange Road
Ortigas Center, Pasig City

ENRIQUE P. ESTEBAN                                                                                        1                            1.00
Unit 1103, Pacific Center Building, San Miguel Ave,
Ortigas Center, Pasig City

VICENTE R. JAYME, SR.                                                                                     1                            1.00
Suite 2204/2205, Medical Plaza,
Ortigas Center, Pasig City

VIOLETA O. LUYM                                                                                           1                            1.00
20/F East Tower, PSE Centre, Exchange Road
Ortigas Center, Pasig City



              1
                Wealth Securities, Inc. is a broker and dealer in securities. Its shares of capital stock are owned by the following
    persons: Sy, Arsenio Go; Sy, Bian Co; Tan, Ruby Sy; Tan, Moises Ong and Sy, Valentino Go



                                                                                                                                       11
A. BAYANI K. TAN                                                            1                 1.00
2704 East Tower, PSE Centre, Exchange Road
Ortigas Center, Pasig City

MARGARITO B. TEVES                                                          1                 1.00
Unit 202 Greatwall Building, 136 Yakal Street, Makati City

FELIPE U. YAP                                                               1                 1.00
1921 Kamias Street, Dasmarinas Village, Makati City

                          TOTAL -                                  32,156,190     =
                                                                                  P 41,714,300.55



There are no corporations controlled by the Fund.

The Corporations whose shares are commonly held with the Fund are the following:

                 Philequity Money Market Fund, Inc.
                 Philequity PSE Index Fund, Inc.
                 Vantage Securities Corporation
                 Philequity Management, Inc.

D.       Incorporators, Board of Directors, and Officers

The names of the incorporators of the Fund are:


                                                 Name
                                     Ma. Gracia M. Pulido-Tan

                                     Hosanna T. Ayson

                                     Caesar J. Poblador

                                     Ma. Louisa M. Gonzales

                                     Ma. Clarissa P. Oben



As of the date of filing of this Registration Statement, the names, ages and periods of service of
all incumbent Directors and Executive Officers of the Company, are as follows:




                                                                                               12
         Name            Citizenship                Position              Age   Periods Served
Gregorio T. Yu           Filipino       Chairman of the Board/President   45    1999 to present
Violeta O. Luym          Filipino       Director/Treasurer                57    1999 to present
A. Bayani K. Tan         Filipino       Director/Corporate Secretary      48    2000 to present
Felipe U. Yap            Filipino       Director                          60    1999 to present
Margarito B. Teves       Filipino       Independent Director              66    1999 to present
Enrique P. Esteban       Filipino       Independent Director              66    2001 to present
Vicente R. Jayme, Sr.    Filipino       Independent Director              75    2001 to present

Gregorio T. Yu

Mr. Yu is the President and Chairman of Philequity Fund, Inc. He was a Director and Officer in
several public companies until 2001 which includes the following: (a) Belle Corporation as the
President and Chief Executive Officer; (b) Sinophil Corporation as President and Chief Executive
Officer; and (c) APC Group, Inc. as Vice-Chairman. Until 2001, he was also President of the
following companies: (a) Tagaytay Highlands International Golf Club, Inc.; (b) The Country
Club at Tagaytay Highlands; (c) Tagaytay Midlands Golf Club, and (d) Pacific Online Systems
Corporation. He was Chairman of Belle Jai Alai Corporation and Vice Chairman of Philippine
Global Communications, Inc.        He is currently a director and member of the Executive
Committee and Audit Committee of The International Exchange Bank. He is also the Chairman
and President of (a) Philequity Fund, Inc., (b) Philequity Money Market Fund, Inc., (c) Philequity
PSE Index Fund, Inc. and (d) Lucky Star Network Communications Corporation. He is director
of (a) iVantage Corporation and (b) CATS Motors, Inc. Additionally, he is a trustee of Xavier
School, Inc. and Xavier School Educational and Trust Fund, Inc. Mr. Yu holds a graduate degree
in Business Administration from Wharton School, University of Pennsylvania (1983) and a
degree in Economics (summa cum laude) from De la Salle University (1978).
.
Enrique P. Esteban

Mr. Esteban is a Director of Philequity Dollar Income Fund, Inc. His present business affiliation
includes: (a) Research Fellow, Center for Research and Communication Foundation, Inc.; (b)
Trustee and Professor, University of Asia and the Pacific; (c) Chairman, AMEIC Working Group
for HRD Development; (d) Director, Strategic Business Economics Consulting Group, Inc.
BankWise, Metro Pacific Corporation, AB Capital and Investments Corporation, Mantrade
Development Corporation, Inkwell Publishing Co., Inc., Philequity Fund, Inc., Philequity Money
Market Fund, Inc. and Philequity PSE Index Fund, Inc. Mr. Esteban graduated from the
University of the Philippines receiving LLB Degree in 1959 and is a member of the Philippine
Bar Association. He received his MBA Degree in 1965 from Wharton School of Finance and
Commerce in the University of Pennsylvania. He received his Masters in Business Economics
Degree in 1975 from the Center for Research and Communication.

Vicente R. Jayme, Sr.

Mr. Jayme is a director of Philequity Dollar Income Fund, Inc. He served as executive director of
the Asian Development Bank (ADB) from 1990 to 1997. He also held positions as Secretary,
Department of Finance in 1987 to 1990 and as Secretary, Department of Public Works and
                                                                                                  13
Highways in 1986 to 1987. He has served as Chairman and/or Director, at one time or another, of
around 40 business enterprises and corporations in the fields of banking and finance, shipping,
insurance, consulting, chemicals, steel, construction, utilities and others. He is currently a
director of Philequity Fund, Inc., Philequity Money Market Fund, Inc. and Philequity PSE Index
Fund, Inc. He obtained his master's degree in Economics from the Ateneo Graduate School and
served as a fellow to the Economic Development Institute of World Bank.

Violeta O. Luym

Ms. Luym is a Director and Treasurer of Philequity Dollar Income Fund, Inc. She is currently a
Director and Treasurer of Philequity Fund, Inc., Philequity Money Market Fund, Inc. and
Philequity PSE Index Fund, Inc. and a Director of iVantage Corporation and Banco de Oro. She
holds a Masters degree in Business Administration from the University of California Los Angeles
and Bachelor of Science in Business Administration from Assumption College.

A. Bayani K. Tan

Mr. Tan is a Director and Corporate Secretary of the Company. He is also currently a Director,
Corporate Secretary, or both, of the following reporting Companies: Belle Corporation, First
Abacus Financial Holdings Corporation, Sinophil Corporation, Tagaytay Highlands International
Golf Club, Inc., Tagaytay Midlands Golf Club, Inc., The Country Club at Tagaytay Highlands,
Inc., The Spa and Lodge at Tagaytay Highlands, Inc., Clearwater Country Club, iVantage
Corporation, Destiny Financial Plans, Inc., Philequity Fund, Inc., Philequity PSE Index Fund,
Inc., Philequity Money Market Fund, Inc. He is the Managing Partner of Tan & Venturanza Law
Offices and also a Director, Corporate Secretary, or both, of private companies such as
International Exchange Bank, Belle Bay City Corporation, Oakridge Properties, Inc. and Herway,
Inc. Mr. Tan is a member of the Philippine Bar. He holds a Bachelor of Arts Degree from San
Beda College, a Bachelor of Laws Degree from the University of the Philippines, College of Law
and a Master of Laws Degree from the New York University, School of Law.

Margarito B. Teves

Mr. Teves is a Director of Philequity Dollar Income Fund, Inc. He is the President and Chief
Executive Officer of the Land Bank of the Philippines. He also serves as director of the Bankers
Association of the Philippines, Great Pacific Life Assurance Corporation, Pacific Plans, Inc.,
Center for Legislative Development, Inc., Philequity Fund, Inc., Philequity Money Market Fund,
Inc. and Philequity PSE Index Fund, Inc. He is trustee of the Ayala Foundation, Inc. and a
member of the Eminent Persons Group of the Export Development Council. He is a member of
the House of Representatives from 1987 to 1998 and served in various congressional
committees/executive & legislative councils. He authored/co-authored various congressional
bills in the fields of banking and finance, capital market reforms, human resource development
and social reforms, as well as tax reforms. He obtained his masters degree in Development
Economics from Williams College, Massachusetts, USA. (1968) and a degree in Bachelor of
Science in Business Economics from City of London College, London, England.

Felipe U. Yap

Mr. Yap is a Director of Philequity Dollar Income Fund, Inc. He is currently the Chairman of the
Board and Chief Executive Officer of Lepanto Consolidated Mining Company, Lepanto
Investment & Development Corporation, Diamant Board Philippines, Inc., Diamond Drilling
                                                                                             14
Corporation of the Philippines, Far Southeast Gold Resources, Inc., Shipside, Inc. and Yapster e-
Conglomerate. He is the Chairman of the Board of First Lepanto Taisho Insurance Corporation,
Lepanto Ceramics, Inc., Pepsi Cola Products, Inc. and Prime Orion Philippines, Inc. He is the
President of BA-Lepanto Condominium Corporation, and Director of the following corporations
namely: Cyber Bay Corporation, Manila Peninsula Hotel, Inc., Philippine Associated Smelting
and Refining Corporation, Philippine Fire and Marine Insurance Corporation, South China
Petroleum & Exploration, Inc., Zeus Holdings, Inc., Philequity Fund, Inc., Philequity Money
Market Fund, Inc. and Philequity PSE Index Fund, Inc. He also holds membership in the
following organizations: Management Association of the Philippines, The Conference Board,
and the Makati Business Club. He holds a degree in B.S. Philosophy from University of San
Carlos, Cebu City.

None of the incumbent directors and officers are related to each other within the fourth civil
degree either by affinity or consanguinity.

The Fund has no significant employees, or persons other than the above-named directors and
officers who are expected to make a significant contribution to the business of the Fund.

E.      Compensation of Directors and Executive Officers

The directors and executive officers of the Fund have not received any form of compensation
from inception up to present. Their contributed efforts to the Fund are on voluntary basis only.
Also, there is no per diem, bonus, profit sharing or other compensation plan, pension or
retirement plan, contract or arrangement in which any director or executive officer of the Fund
will participate.

F.      Effects of Government Regulation

With the lowering of the threshold amount of covered transactions under the Anti-Money
Laundering Act of 2001 (Republic Act No. 9160) from P4,000,000.00 to P500,000.00, the
investing public would be wary of attempting to invest an amount that would place their
investment in such a position that would entail a report to the AMLA Council. Moreover,
investors appear to consider the reportorial provision of the Anti-Money Laundering Act as an
invasion of their secrecy of deposit, more so if the source of such investment is legitimate.
Hence, with the AMLA as a discouraging factor, the Fund expects limited capital investment by
shareholders in the near future.

G.      Properties

Operations are conducted within the premises of the fund manager. All facilities are either owned
or provided by the fund manager. Being a fund, the Fund has neither properties under its fixed
assets accounts nor hire employees for its operation.

H.      Summary Net Asset Value

Below is the comparative tabulation of Net Asset Value of the Fund in the last three (3) years:




                                                                                                  15
                    1st Quarter             2nd Quarter             3rd Quarter                  4th Quarter
     YEAR
                 High          Low        High        Low         High        Low              High             Low

     2004        1.6589      1.6080      1.6652      1.6272      1.6907      1.6436        1.7221          1.6716
     2003        1.5585      1.4921      1.5396      1.4790      1.5924      1.5116        1.6171          1.5634
     2002        1.3152      1.2936      1.3265      1.2906      1.4371      1.3157        1.5007          1.4377

I.          Holders

The number of common shareholders of record as of 31 December 2004 is 13. Common shares
outstanding as of 31 December 2004 stood at 32,156,190 shares. The top 20 shareholders are as
follows:


                            TOP 20 SHAREHOLDERS OF PHILEQUITY DOLLAR INCOME FUND, INC.
                                              AS OF 31 DECEMBER 2004

                                     RECORD OWNER                           NUMBER OF SHARES             % TO TOTAL

     1      WEALTH SECURITIES, INC.                                               16,249,995                     50.5346%
     2      WEALTH SECURITIES, INC. - FAO-BQ-1                                    8,749,998                      27.2109%
     3      MANUEL POBLADOR                                                       6,603,902                      20.5370%
     4      A. BAYANI K. TAN AND/OR BETTY CHUA                                      333,711                       1.0378%
     5      A. BAYANI K. TAN AND/OR ANDREA PATRICIA TAN                             120,847                       0.3758%
     6      MA. ELENA A. FERNANDEZ                                                    97,730                      0.3039%
     7      GREGORIO T. YU                                                                1                       0.0000%
            ENRIQUE ESTEBAN                                                               1                       0.0000%
            VICENTE JAYME, SR.                                                            1                       0.0000%
            VIOLETA O. LUYM                                                               1                       0.0000%
            A. BAYANI K. TAN                                                              1                       0.0000%
            MARGARITO B. TEVES                                                            1                       0.0000%
            FELIPE U. YAP                                                                 1                       0.0000%


J.          Security Ownership of Certain Beneficial Owners and Management

            a)       Security Ownership of Certain Record and Beneficial Owners

The following table shows the record and beneficial owners owning more than 5% of the
outstanding capital stock of the Fund as of 31 December 2004:

              Title of       Name and Address of Record                      Number of                Percent
               Class           Owner and Relationship         Citizenship    Shares Held
                                     with issuer
            Common        Wealth Securities, Inc.
                                                                             16,249,995/r
                          21/F East Tower, PSE Centre,        Filipino                           50.5346%
                          Exchange Road, Ortigas Center,                              7/b
                          Pasig City




                                                                                                                16
          Common       Wealth Securities, Inc.
                       (FAO-BQ-01)                           Filipino        8,749,998/r   27.2109%
                       21/F East Tower, PSE Centre,
                       Exchange Road, Ortigas Center,
                       Pasig City
          Common       Manuel Poblador
                       21st Floor, Chatham House             Filipino        6,603,902/r   20.5370%
                       Valero cor. Rufino St.
                       Salcedo Village, Makati City

Wealth Securities, Inc. is the record owner of the 77.75% of the Fund’s issued shares while its
beneficial ownership is only 50.53% of the issued shares as investor of the Fund. The Board of
Directors of Wealth Securities, Inc. appoints from time to time its authorized representative to
vote on its behalf in any of the Fund’s stockholder’s meeting.

The Fund has no information as to the identity of the beneficial owner of the securities held by
Wealth Securities, Inc. (FAO-BQ-1).

          b)       Security Ownership of Management

The following is a tabular presentation of the shares recorded under the name of the directors and
executive officers of the Company as of 31 December 2004:

      Title of                                      Nationality         Amount & Nature of        Percent of
                    Name of Beneficial Owner
       Class                                                            Beneficial Ownership        Class
     common      Gregorio T. Yu                         Filipino                 1/r            0.00000003%
     common      Violeta O. Luym                        Filipino                 1/r            0.00000003%
     common      A. Bayani K. Tan                       Filipino             454,559/r          1.41359720%
     common      Felipe Yap                             Filipino                 1/r            0.00000003%
     common      Enrique P. Esteban                     Filipino                 1/r            0.00000003%
     common      Margarito B. Teves                     Filipino                 1/r            0.00000003%
     common      Vicente R. Jayme, Sr.                  Filipino                 1/r            0.00000003%



K.        Legal Proceedings

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


MANAGEMENT DISCUSSION AND ANALYSIS
A.        Mutual Fund Industry in the Philippines

The mutual fund industry in the Philippines recorded unprecedented heights as total assets
reached P50 Billion in July 2004. Total net sales from January to July amounted to P5 Billion.
There are currently a total of 23 funds, all of which are members of the Investment Company
Association of the Philippines (ICAP).



                                                                                                      17
Of the 23 funds, four (4) are equity funds, seven (7) are balanced funds, ten (10) are bond funds,
one (1) is a money market fund, and one (1) is an index fund. Asset-wise, the industry is
dominated by bond funds, which account for 93.7% of total funds.

The Fund’s competitors are dollar-based bond and money market funds such as Life Prosperity
Dollar Advantage Fund (US$4.8 Million net assets), ALFM Dollar Bond Fund (US$40.5 Million
net assets), MAA Privilege Dollar Fixed Income Fund (US$2.0 Million net assets), Philam Dollar
Bond Fund (US$208.5 Million net assets).

B.      Top 5 Key Indicators

The Fund monitors the following indicators that affect its profitability:

1.      US Fed rates – US Fed rates is the benchmark used by most central banks in setting their
        respective monetary policy.

2.      Bangko Sentral ng Pilipinas (BSP) overnight rates – BSP overnight rates dictates the
        level of domestic interest rates. Domestic interest rates influence the pricing of bonds.
        Increasing domestic interest rates results in falling bond prices, and vice versa.

3.      Credit Ratings – Credit rating agencies such as Moody’s, Stanford & Poor’s, and Fitch
        affect bond prices through changes in their ratings. Rating agencies help to evaluate the
        creditworthiness of bonds. Ratings also affect bond yields. Bonds with a higher rating
        have lower yields.

4.      Peso/$ rate – A depreciating peso is favorable for dollar-denominated bonds. Excessive
        exchange rate volatility, however, will not be favorable for both the peso and dollar-
        denominated bonds.

5.      Stock market volatility – In times of stock market volatility, higher-rated bonds are
        considered a safe haven. So, at moments of market turbulence capital will flow from
        stocks into bonds, causing prices to rise. When the stock market bounces back, this
        capital will inevitably shift back into stock, causing bonds prices to fall.

C.      Financial Condition

Interim Period as of 30 September 2004 vs. CY 2003

Income generated by Philequity Dollar Income Fund, Inc. for interim period ended September 30,
2004 is principally from forex gain resulting from the maturity of BSP 04, the face value of which
is US$575,000.00 acquired in 2002 at 103.749999517 when the dollar-peso exchange rate was at
US$1 : P51.255.

The decrease in total expenses of P0.44 Million or 40.2% resulted from documentary stamp tax
paid in 2003 transfer of 8,749,998 Philequity Dollar Income Fund shares. As fund manager of
Philequity Dollar Income Fund, Inc., Philequity Management, Inc. has not charged any
management fees since there has been no additions to the capital stock since its inception in
February 1999.



                                                                                               18
Total Assets increased by P2.99 Million or 7.62% from P39.22 Million in 2003 to P42.21 Million
in 2004. This is primarily the result of the forex gain from the BSP 04 which matured on 11
August 2004. For the same reason, Investments in Dollar Bonds increased. Total accrued
expenses increased by 56% or P0.034 Million in CY 2003 as unrealized foreign exchange gain
was charged to deferred tax liabilities.

Cash & Cash Equivalents decreased from P6.3 Million in 31 December 2003 to P3.7 Million inn
30 September 2004, or a decrease of 41%. This is due to the shifting from short term loan
investment to investments with longer term. Thus, the Investment in Dollar Bonds increased by
as much as 29% from P29.7 Million in 31 December 2003 to P38.4 Million in 30 September
2004.

Accrued expenses decreased by P0.03 Million resulting from the payment of professional audit
fees of SGV & Co.

CY 2003 vs. CY 2002

Income generated by the Fund is principally from interest earned on United States Dollar
denominated short-term placements with banks and other financial institutions. The increase of
P0.304 Million or 13.92% in CY 2003 is primarily due to the increase in principal amount
resulting from the roll-over of investments with the interest earned. A foreign exchange gain was
recognized in CY 2003 due to the weakening of the Philippine Peso against the United States
Dollar.

The decrease of P0.111 Million or 42.7% resulted from the foreign exchange loss recognized in
CY 2002 of P0.191 Million. Taxes & Licenses increased in CY 2003 due to municipal taxes paid
for CY 2001-2003. Total expenses is 5.53% and 11.7% of gross revenue for CY 2003 and 2002,
respectively. The fund manager, PEMI, has not charged any management fees since there has
been no additions to the capital stock of the Fund since its inception in February 1999.

Total assets increased by P2.51 Million or 7.24 in CY 2003. This is primarily the result of the
interest generated from short-term placements. Investments in Dollar Bonds decreased due to the
amortization of bond premium charged against income. Total accrued expenses increased by
56% or P0.034 Million in CY 2003 as unrealized foreign exchange gain was charged to deferred
tax liabilities.

CY 2002 vs. 2001

Total interest income decreased by P0.586 Million or 20.9% in CY 2002 in comparison with CY
2001. This can be attributed to the decline in interest rates in 2002 as well as the shift from short-
term placements to dollar bonds BSP 04.

Total expenses decreased by P0.680 Million or 72.38% from P0.939 Million in CY 2001 to
P0.259 in CY 2002 due to the write-off of pre-operating and organization costs in 2001 following
Statement of Accounting Standards No. 38 (SFAS 38).

There was no sale of capital stock, thus, PEMI did not initiate any charges for management fees.




                                                                                                   19
INVESTMENT OBJECTIVE AND INVESTMENT POLICIES
The Fund aims to provide investors with long-term capital appreciation. The investments of the
Fund will consist of dollar-denominated bonds issued by the Philippine or foreign governments
and corporations. These bonds are bought, sold, and earn interest in dollars.

The maximum investment of the Fund in the bonds of any one bond issuer shall be determined by
the size of the Fund, the risk profile of the bond issuer, the sovereign risk of the country of the
issuer, interest rates, and the peso-dollar exchange rate. However, the percentage of the Fund
which may be invested in any one bond issuer shall not exceed ten percent (10%) of the Fund's
net asset value.

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

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

        (a)     Treasury notes or bills, Bangko Sentral ng Pilipinas ("BSP") Certificates of
                Indebtedness which are short-term, and other government securities or bonds and
                such other evidences of indebtedness or obligations, the servicing and repayment
                of which are fully guaranteed by the Republic of the Philippines or any other
                government.

        (b)     Savings or time deposits with government-owned banks or commercial banks,
                provided that in no case shall any such savings or time deposit account be
                accepted or allowed under a "bearer", numbered account or other similar
                arrangement.


INVESTMENT RESTRICTIONS
The investments of the Fund shall be subject to the following restrictions:

1.      Unless the applicable Philippine laws, rules and regulations, and orders of the Securities
        and Exchange Commission ("SEC") provide otherwise, the Fund shall not sell securities
        short nor invest in any of the following:

        (a)     margin purchase of securities (investments in partly paid shares are excluded)
        (b)     commodity futures contract
        (c)     precious metals
        (d)     unlimited liability investments

2.      The Fund shall not incur any further debt or borrowing unless at the time of its incurrence
        or immediately thereafter there is a net asset coverage of at least three hundred percent
        (300%) for all its borrowing, or such net asset coverage as the applicable Philippine laws
        and regulations may prescribe. In the event that such asset coverage shall at any time fall
        below 300% or the coverage required by law, the Fund shall within three (3) days after,
        or such period as the applicable Philippine laws and regulations may require, reduce the

                                                                                                 20
        amount of borrowings to an extent that the net asset coverage shall be at least 300% or
        the coverage required by law.

3.      Unless permitted by applicable Philippine laws, rules or regulations, the Fund shall not
        participate in an underwriting or selling group in connection with the public distribution
        of securities, except its own capital stock.

4.      The Fund shall not invest in real estate properties and developments.

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

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

7.      The Fund shall not extend loans to individuals. Loans or credit extensions to corporations
        shall be limited to commercial papers and bonds registered with the SEC, or subject of a
        grant of exemption therefrom, and which have been preapproved by the Board of
        Directors.

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

9.      The Fund shall not purchase from or sell to any of its officers or directors, or to any of the
        officers or directors of its investment adviser/s, manager or distributor/s or firm/s of
        which any of them are members, any security other than the capital stock of the Fund.

10.     The total operational expenses of the Fund shall not exceed ten percent (10%) of its total
        investment fund, total net worth or total net asset value as shown in the previous year's
        audited financial statements, or such other limitations as may be prescribed by the
        applicable Philippine laws or regulations.

11.     The Fund shall not change its investment objectives without prior approval of the
        majority of its stockholders.


RISK FACTORS

The Fund intends to invest in dollar-denominated sovereign and corporate bonds issued by the
Philippine or foreign governments and corporations with the objective of gaining long-term
capital appreciation. As with any investment, the Fund’s past performance is no guarantee of its
future success. Over the long-term, however, the success or failure of profit in the Fund will
depend on the following: (i) the Fund’s sales charges, fees and expenses; and (ii) the Fund’s risks
and volatility.

Various risk factors can affect the market value of the assets of the Fund and can cause a
fluctuation of the Fund's net asset value. The Fund, however, adopts steps to minimize, if not
eliminate, the effect of these risks. The major risks facing the Fund are as follows:



                                                                                                   21
a.      Liquidity risk - the risk that an investment may not find a ready buyer. This is negligible
        since the FUND only invests in liquid investments.

b.      Interest rate risk - refers to the volatility of bond prices that results from changes in
        interest rates. The risk is minimized by closely monitoring the direction of interest rates.
        The Fund’s portfolio is adjusted in accordance to the movements in interest rates.

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

d.      Currency risk - refers to the risk that fluctuations in the exchange rates may negatively
        affect the value of the fund’s investments. Historically, however, the Philippine peso has
        depreciated against the US dollar so the Fund actually has a higher probability of
        benefiting from the exchange rate adjustments.

The general political and economic situations of the country also influence the net asset value of
the Fund. As an illustration, when the country's general political and economic situations are
perceived to be in turmoil, the Fund's investors view these situations as the time to pull out their
placements and move these funds to more liquefiable forms such as holding the US Dollar by
themselves or move these funds for better quality, safer investments such as placing these with
multinational financial institutions until such situations normalize. As a consequence, these
instances can result to the redemption prices of redeemed shares being less than the prices at
which the shares were originally purchased. Investors who redeem their shares during this time
may not recover the full cost of their investment. However, as the purpose of the Fund is to
invest in dollar-denominated bonds with very high minimum investment requirements (e.g.
US$100,000.00 per lot), the average investor is given an opportunity to enjoy the attractive yields
of such bonds at a minimal investment. Moreover, the Fund will provide a foreign currency
hedge against a peso devaluation. However, the appreciation of the peso against the dollar will
result in a reduced return on an investment in the Fund.


USE OF PROCEEDS
The proceeds from the sale of the securities shall be held by the custodian bank. It shall be
invested and reinvested by the Fund in dollar-denominated fixed-income and debt securities,
particularly in bonds issued by Philippine or foreign governments and corporations. The Fund
shall be guided by the investment policies and restrictions on its investments under the topics
Investment Objective and Investment Policies and Investment Restrictions. For purposes of
liquidity, at least ten percent (10%) of the Fund shall also be invested in fixed-income and debt
securities.

As of the filing of this Amended Prospectus, total proceeds from the issuance of the shares of
stock of the Fund is P29,496,623.97 which were invested in United States Dollar denominated
bonds.




                                                                                                 22
INVESTMENT PROCEDURE
A.      Terms and Pricing of Securities

        1.      Offering Price

The price at which the securities are to be sold is at the Net Asset Value ("NAV") per share on the
day of the purchase. A sales load fee shall also be charged on the day of the purchase.

The daily cut-off time for the reckoning of the date of submission of the subscription application
shall be 12:00 noon. If the application is received on or before the said cut-off time, the shares
shall be valued based on the net asset value (NAV) per share for the same banking day. For
applications received after the cut-off time, it shall be deemed to have been received on the next
banking day, and the NAV per share for the next banking day will be used as basis for payments.
In both instances, a sales load fee shall be charged based on the total price of the application.

NAV per share shall be the computed difference between total assets of the Fund and its total
liabilities divided by the number of shares outstanding. The sale load fees for the amount of
investment in an Investment Application shall be a maximum of one percent (1.0%)

        2.      Sales Load

The sales load fee shall be a maximum of one percent (1.0%) of the value of investment made at
any one time by an investor.

        3.      Minimum Investment

Minimum initial investment of TWO THOUSAND US DOLLARS (US$2,000.00), or its
Philippine Peso equivalent, and a minimum of ONE THOUSAND US DOLLARS (US$1,000.00)
worth of shares, or its Philippine Peso equivalent, for additional purchases. Payment shall be on
cash basis only.

The peso equivalent of the investment shall be computed in accordance with the prevailing peso-
dollar exchange rate at the time of submission of the subscription application. The daily cut-off
time for the reckoning of the date of submission of the subscription application shall be 12:00
noon. If the application is received on or before the said cut-off time, the value of the investment
shall be computed/converted based on the peso-dollar exchange rate for the same banking day.
For applications received after the cut-off time, it shall be deemed to have been received the
following banking day, and the peso-dollar exchange rate for the following banking day will be
used as basis for conversion of the investment. In both instances, a sales load fee shall be charged
based on the total price of the application.

B.      Subscription Procedure

        1.      Investment Application Form

An Investment Application Form and signature cards must be accomplished by the prospective
investor in triplicate and must be submitted together with the appropriate payment to "Philequity

                                                                                                 23
Dollar Income Fund, Inc." Once submitted, the Investment Application may not be cancelled in
full or in part. An investment application, once accepted, shall constitute an agreement between
the Investor and the Investment Manager/Principal Distributor for the purchase of the shares of
the Fund at the time, in the manner and subject to the conditions set forth in this Prospectus and
the Investment Application Form. Upon acceptance of the application, the Investor shall be
furnished a copy of the approved Investment Application Form, and an official receipt will be
issued to the investor if payment is made in cash. If payment is made by check, a provisional
receipt shall be issued to the investor.

        2.      Eligible Investors

The shares of the Fund may be purchased and held by any person of legal age or duly organized
and existing corporations, partnerships or corporate entities regardless of nationality. The
Articles of Incorporation of the Fund provides, however, that no transfer of shares of stock of the
Fund which reduce the stock ownership or equity interest of Filipino citizens to less than the
percentage required by applicable laws or regulations shall be caused or allowed to be recorded in
the proper books of the Fund. The investor shall declare and warrant that there are no legal
restrictions prohibiting the purchase of the shares applied for and that the Investor is otherwise
eligible throughout the duration of the period that the Investor remains a shareholder of the Fund.

        3.      Requirements for Corporate Applicants

For Investors other than individuals, the following documents, in addition to the Investment
Application Form and the signature cards, must be accomplished and shall be considered integral
parts thereof:

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

        (b)     Notarized corporate secretary's certificate setting forth the resolutions of the
                Investor's Board of Directors or equivalent body: (a) authorizing the purchase of
                the shares of the Fund; (b) designating the signatories for the purpose; and (c)
                certifying the percentage of capital stock held by non-Filipinos.

        4.      Acceptance of Investment Applications

Applications for the number of shares and the applicable NAV are subject to acceptance and
approval by the Principal Distributor. Upon acceptance of the Application, the Principal
Distributor shall provide the Investor with a copy of the approved Investment Application Form
and the confirmation of the acceptance.

The Principal Distributor reserves the right to reject, scale-down and reallocate any application
for the shares for whatever reason. Applications for which check payments are dishonored upon
first presentment, as well as those which do not comply with the requirements set in this
Prospectus and Investment Application Form, shall be rejected. The Principal Distributor shall
inform the Investor of such reduction or rejection within seven (7) days after submission of the
Investment Application.


                                                                                                24
        5.      Payment Terms

Subscriptions shall be paid in full upon submission of a duly accomplished and executed
Investment Application Form. Securities sold shall be on cash basis only. Installment sales are
prohibited. Payments must be made in the form of: cash; (b) personal or corporate check; or (c)
a cashier's or manager's check, drawn against a bank account with a Bangko Sentral ng Pilipinas
("BSP") authorized agent bank located in Metro Manila. All such checks must be made payable
to "Philequity Dollar Income Fund, Inc.," dated as of the date of the Investment Application, and
remitted directly to the Principal Distributor at its principal office. An official receipt will be
issued to the Investor in case of payments made in cash and cashier's or manager's check. In the
case of payments made by personal or corporate check, a provisional receipt shall be issued to the
Investor, and an official receipt shall be issued only when the check clears.

        6.      Refunds

Refunds of payments for any rejected or scaled-down applications shall be made without interest
by the Principal Distributor not later than seven (7) days after submission. The respective
Investor shall receive a check, crossed "Payee's Account Only," mailed and delivered at the
Investor's risk to the address specified in the Investment Application Form or to the
corresponding distributor or any authorized investment salesmen of the Investor.

        7.      Delivery of Stock Certificates

Upon the request of the Investor, stock certificates representing ownership of the shares of the
Fund and Custodian Receipts shall be issued by the Transfer Agent and Custodian Bank,
respectively, and shall be made available to the Investor as soon as practicable at the office(s) of
the Transfer Agent and Custodian Bank. Any certificate that remains unclaimed for a period of
thirty (30) days shall be mailed to the address specified in the Investment Application Form at the
risk of the Investor.

The cost of issuance of the stock certificates shall be borne by the Fund.

        8.      Periodic Fund Statement

The Investor shall receive a periodic Fund Statement indicating the status of the investment in the
Fund.


REDEMPTION OF SHARES
A.      NAV Per Share Computation

The NAV per share shall be the computed difference between the total assets of the Fund and its
total liabilities divided by the number of shares outstanding. The NAV shall be computed on a
daily basis and shall be posted in the conspicuous place of the principal office of the Fund as well
as in all its branches and designated redemption centers. It shall also be published in at least two
(2) newspapers of general circulation in the Philippines on a daily basis.


                                                                                                 25
B.      Manner and Method of Redemption

Upon the presentation to PEMI of the securities for redemption, the holder of the shares of the
Fund is entitled to receive by way of redemption approximately the dollar equivalent of his
proportionate share of the Fund's current net assets or the cash equivalent thereof, i.e. the net
current asset value per share, subject to existing laws and the By-Laws of the Fund. Any request
for redemption should always be accompanied by duly endorsed stock certificates and custodian
receipt/s, if they have been issued. The redemption proceeds shall be paid within seven (7)
banking days from receipt of the duly accomplished redemption application.

C.      Redemption Price

The redemption price of the securities surrendered within the daily cut-off time shall be the next
computed NAV per share after the request for redemption is received. Securities surrendered after
the daily cut-off time shall be deemed to have been received on the following banking day. The
daily cut-off time shall be 12:00 o'clock noon.

D.      Minimum Holding Period and Redemption Charges

The following fees shall be deducted from the redemption proceeds depending on the retention
period of the investor:


                   RETENTION PERIOD                          REDEMPTION FEE

              One (1) year or less                                  1.0%

              One (1) year and one (1) day to Two (2)               0.5%
              years


              Two (2) years and one (1) day or more                  Nil


E.      Special Considerations

No redemption will be allowed should any of the following circumstances exist:

        1.      The Banks or stock exchanges wherein the bonds are sold or traded are closed for
                reasons other than the customary weekend or holiday closings;

        2.      Trading at the stock exchanges wherein the bonds are traded is suspended
                or restricted;

        3.      There exists an emergency as a result of which disposal by the Fund of securities
                owned by it is not reasonably practicable, or the computation or determination of
                the net asset value is not practicable;

        4.      The Securities and Exchange Commission, by order, permits suspension of the
                right of redemption for the protection of the Fund's stockholders; or
                                                                                               26
        5.       Such other circumstance as the applicable Philippine laws or regulations may
                 allow.

F.      Applicable Taxes

Under the National Internal Revenue Code of 1997 ("NIRC"), gains realized by the investor upon
redemption of shares of stock in a mutual fund company are excluded from the computation of a
taxpayer's gross income and are thus exempt from taxation. However, a final tax on the amount
of cash and/or property dividends received by an individual from a mutual fund company are
taxable, beginning January 1, 2000, at the rate of 10% for Filipino citizens and resident aliens,
and 20% for non-resident aliens. On the other hand, cash and/or property dividends received by
corporations are not subject to tax, with the exception of dividends received by non-resident
foreign corporations which, in general, shall be taxed at the rate of 15% of the amount of
dividends received.


COMPUTATION OF NET ASSET VALUE
The net asset value of each share of the capital stock of the Fund, as of the close of business of
any day, shall be the quotient obtained by dividing the value, as of such closing date, of the assets
of the Fund less the liabilities (exclusive of capital stock and surplus) by the total number of
shares of capital stock outstanding at such close, all determined and computed as follows:

(a)       The assets of the Fund shall be deemed to include (i) all cash on hand, deposit in a bank,
(ii) all bills and notes and accounts receivable, (iii) all shares of stock and subscription rights and
other securities owned or contracted for by the Fund, other than its own capital stock, (iv) all
stock and cash dividends and cash distributions to be received by the Fund and not yet received
by it but declared to stockholders of record on a date on or before the date as of which the net
asset value is being determined, (v) all interests accrued on any interest bearing securities owned
by the Fund, (vi) all other property of every kind and nature including prepaid expenses.

In determining the value of the assets of the Fund for the purpose of obtaining the net asset value
for acquisition, purchase, repurchase or redemption by the Fund of shares of its capital stock from
its stockholders, each security listed in the Philippine Stock Exchange shall be valued on the basis
of the average closing price thereon on the business day on which such net asset value for sale
and redemption purposes is to be calculated. If there be no transaction on particular issue listed,
then the value to be used is that of the previous day or the last day that a transaction was closed.
As used herein "business day" shall mean a day on which the Philippine Stock Exchange is open
for trading in securities and each business day will be at the hour and minute when such
Exchange closes for the trading of securities for the day.

All other assets of the Fund, including real estate, prepaid and accrued expenses and dividends
receivable shall be valued by such standard and acceptable accounting methods as the Board of
Directors and its auditor shall deem to reflect their fair market value.

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

                                                                                                    27
(iii) all contractual obligations for the payment of money or property, including the amount of any
unpaid dividend declared upon the Fund's stock and payable to stockholders of record on or
before the day as of which the value of the Fund's stock is being determined, (iv) all reserves
authorized or approved by the Board of Directors for taxes or contingencies, and (v) all other
liabilities of the Fund of whatsoever kind and nature except liabilities represented by the
outstanding capital stock and surplus of the Fund.

The NAV per share shall consistently be computed in accordance with the foregoing formula.
Any change of the computation or valuation shall be subject to the approval of the Commission.


BENEFITS TO THE INVESTOR
A.      Professional Management and Supervision

Investing in the Fund affords numerous small investors services which would normally be
accessible only to institutional investors and individuals with substantial resources. The Investor
is given an opportunity to become part of a professionally managed portfolio of securities. The
Investment Manager takes on the task of analyzing the various securities and issues available in
the market. Accordingly, the Investment Manager, who has the expertise, the time and the
facilities to undertake such activities, decides what and when to buy and sell the securities.

B.      Diversification

The Fund enables an investor to diversify his investible funds among a wide array of debt
securities by investing in the Fund. Diversification reduces the risks associated with investing in
individual securities.

C.      Access to Higher Interest Rates

As the Fund will invest solely in dollar-denominated bonds, the investor can avail of the high
interest earnings of the bonds at a minimal investment. Presently, there is no bond market in the
Philippines. Most bonds are bought directly from the issuer or their underwriters and require
large amounts of investment. Thus, the average investor does not have access to such types of
income-earning instruments. By pooling his money with those of other investors, the Investor can
avail of the returns enjoyed only by large investors, and can take advantage of economies of scale
to obtain higher returns from the Fund compared to other fixed-income investments. In addition,
the Fund gives the Investor a hedge against a devaluation of the Philippine Peso.

D.      Liquidity

A shareholder of the Fund may at any time, convert his proportionate share of the Fund's current
net assets into its cash equivalent (i.e. the NAV per share less redemption charges, if any). There
is no need for the shareholder to find a buyer as the Fund is always ready to redeem or buy back
its shares, provided that the shareholder submits all pertinent requirements as set forth out in the
section Redemption of Shares.



                                                                                                 28
PARTIES INVOLVED IN THE FUND
A.      Investment Manager and Principal Distributor

        1.      Company Profile

Philequity Management, Inc. (PEMI) is the investment manager and principal distributor of the
Fund. It is duly licensed with the SEC as an Investment Company Adviser with Certificate of
Registration No. 01-2004-00156 issued on 30 March 2004 and License Number ICA-00007.
PEMI has a solid track record in fund management, being the investment manager and principal
distributor of Philequity Fund, Inc. PEMI is also the investment manager and principal
distributor of Philequity Fund, Inc., Philequity Money Market Fund, Inc. and Philequity PSE
Index Fund, Inc.

The guidelines for the management of the resources and operations of the Company by PEMI are
set in the Management and Distribution Agreement between the parties. The term of the
Management and Distribution Agreement is two (2) years from its execution and shall remain in
effect from year to year provided (i) such continuation shall be specifically approved by the
Board of Directors of the Fund or by the vote of the majority of the outstanding capital stock of
the Fund, and (ii) PEMI shall notify the Fund in writing at least sixty (60) days prior to the
expiration of the Agreement or before the third year of its intention to renew or not to renew the
Agreement. The Agreement may be terminated at any time by the Board of Directors of the Fund
or by the vote of two-thirds of the outstanding capital stock of of the Fund on not less than sixty
(60) days written notice to PEMI. Furthermore, the Agreement shall automatically be terminated
in the event of the assignment by PEMI of all its interests, rights or obligations in the Agreement
without the written consent of the Fund.

The Board of Directors and Officers of PEMI are:

Washington Z. SyCip

Mr. SyCip is the founder of the SGV Group, an auditing and management consulting group. He is
the Chairman of the Board of Trustees and Board of Governors of the Asian Institute of
Management; the Honorary Chairman of Euro-Asia Centre, INSEAD, Fontainbleau, France; the
Chairman of the Asia Pacific Advisory Committee, New York Stock Exchange; and Vice
Chairman of the Conference Board, New York. Mr. SyCip is also a Member of the Board of
Overseers of Columbia University Graduate School of Business, New York; a Member of the
International Advisory Board, Council on Foreign Relations, New York; an Honorary Life
Trustee of the Asia Society, New York; and a Director of a number of major Philippine
corporations. Additionally, he is a Member of the International Advisory Board of the American
International Group in New York.

Wilson L. Sy

Mr. Sy is a Director of the International Exchange Bank. He is also Vice-Chairman of Asian
Alliance Holdings. Mr. Sy is a former Chairman of the Philippine Stock Exchange. He holds a
graduate degree in Bachelor of Science in Management Engineering at Ateneo de Manila (1975).


                                                                                                29
Roberto Z. Lorayes

Mr. Lorayes is the Chairman of Philequity Management, Inc. He is also the Chairman and CEO
of iVantage Corporation, the President and Director of Strategic Equities Corporation and a
Director of Pacific Asia Capital Corporation. Mr. Lorayes has both a Bachelor of Commerce and
a Bachelor of Arts degree (1966) from De La Salle University and a Masters in Business
Management from Ateneo de Manila University (1969).

Leo McGuire Garcia

Mr. Garcia is a Director and Treasurer of Philequity Management, Inc. He is also the President of
L. M. Garcia Securities Corporation, which is a Member of the Philippine Stock Exchange. Mr.
Garcia has a Bachelor of Science degree in Business Administration.

Ignacio B. Gimenez

Mr. Gimenez is a Director and President of Philequity Management, Inc. He is also the President
and COO of iVantage Corporation and the President of I.B Gimenez Securities, Inc., which is a
member of the Philippine Stock Exchange. Mr. Gimenez obtained a college degree from the
University of the Philippines and a Masteral degree at the Asian Institute of Management.

Aurora Shih

Ms. Shih is a Director of Philequity Management, Inc. She is the Treasurer of International
Copra Export Corporation and Interco Manufacturing Corporation, and the Vice-President of
Luys Securities Co., Inc., ICEC Land Corporation, and Klass Holding Corporation.

        2.      Duties and Responsibilities

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

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

        (b)     Prepare and submit such information and data relating to economic conditions,
                industries, business, corporation or securities as may be required by the Fund's
                Board of Directors;

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

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

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

        (g)     Provide accounting, bookkeeping, clerical and other administrative services;

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

        (i)     Provide office space and other administrative facilities;
                                                                                                   30
        (j)     Distribute and sell shares of the capital stock of the Fund on a best efforts basis at
                a public offering price equal to the sum of (i) the net asset value per share in
                effect at the time of the sale of each share; and (ii) the sales load fee payable to
                the investment manager/principal distributor; and

        (k)     Follow the guidelines for the management of the resources and operations of the
                Fund, as well as the distribution of Fund's securities set forth in detail in the
                Management and Distribution Agreement.

B.      Custodian Bank

Equitable Banking Corporation is the Fund's Custodian Bank. It is responsible for the safekeeping
of the Fund's Assets. Pursuant to the Custodian Bank Agreement, the Custodian Bank shall:

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

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

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

C.      Transfer Agent

The transfer agent of the Fund is Equitable Banking Corporation. The primary responsibility of
the transfer agent is the accurate record keeping of individual shareholdings and the issuance and
cancellation of stock certificates/depository receipts. Pursuant to the Stock and Transfer Agency
Agreement, the transfer agent shall:

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

        (b)     File the reports pertaining to the Fund as may be required by the Securities and
                Exchange Commission and other governmental entities;

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

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

        (e)     Prepare and mail dividend checks;

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

                                                                                                   31
        (g)     Replace stock certificates reported as lost, stolen or destroyed;

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

D.      Legal Counsel

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

E.      External Auditor

The principal accountants and external auditors of the Fund is the accounting firm of SyCip,
Gorres, Velayo & Company (“SGV & Co.”) with address at SGV Building, 6760 Ayala Avenue,
Makati City. There have been no changes in or any disagreements with the SGV & Co. in the last
two (2) years on any accounting and financial disclosures.

F.      Significant Employee

The Fund has no employee, significant or otherwise, as the operation of the Fund is being made
through and within the premises of its fund manager.

G.      Certain Relationships and Related Transactions

During the last two (2) years the Fund has not been a party to any transaction or proposed
transaction, in which any director or executive officer of the Fund or any security holder owning
5% or more of the securities of the Fund or any member of the immediate family of such persons,
had a direct or indirect material interest except the Management and Distribution Agreement
entered into by the Fund and its fund manager last 14 March 2003, which was amended last 11
August 2004.


EXPENSES CHARGEABLE TO THE FUND
The following expenses shall be for the account of the Fund and shall be given priority in
determining compliance by the Fund with any limitation on operational expenses set forth in
applicable Philippine laws, rules and regulations.

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

2.      Audit and legal fees;

3.      Brokerage charges and other customary fees and charges in connection with the
        acquisition, appraisal and disposition of the Fund's assets;

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



                                                                                              32
5.     Cost of printing and mailing reports, notices, proxy forms, and other communications to
       stockholders of the Fund, except those borne by the custodian bank;

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

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

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


MANAGEMENT FEE

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


EXPENSES CHARGEABLE TO THE INVESTMENT MANAGER
The following expenses shall be deemed covered by the management fee of one and a half
percent (1.5%) per annum of the average net asset value of the Company's assets paid under
Section 3 of the Management and Distribution Agreement and shall therefor be for the account of
PEMI, to wit:

1.     Salaries, bonuses, allowances and other compensation of the personnel hired by PEMI to
       perform the services in Section 1(a) of this Agreement, including other costs incurred by
       PEMI's salesmen, personnel and officers, in connection with the selling of the Fund's
       shares as may be required by applicable Philippine law or by rules and regulations of the
       SEC;

2.     Expenses of providing the office space and other administrative facilities referred to in
       Section 1(b) of this Agreement, including office rentals, cost of office equipment and
       supplies, cost of utilities, such as telephone, light and water facilities; and

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




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