GSIS MUTUAL FUND, INC.

An Open - End Investment Company 1,000,000,000 Shares Common Stock

The Funds shares of common and voting stocks amounting to One Billion Pesos (P = 1,000,000,000.00) will be offered for sale on a continuous basis to the public based upon the net asset value per share. Philam Asset Management, Inc. (PAMI) which serves as distributor of the fund and other licensed sales agents that have signed a selling agreement with PAMI (as distributor) stand ready to sell shares and redeem shares from the public at any of its offices during regular working hours.

ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATION CONTAINED HEREIN IS TRUE AND CURRENT. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION. INVESTMENT IN SHARES OF THE FUND INVOLVES RISK (PLEASE REFER TO "RISK FACTORS").

The Fund has a total authorized capital stock of P = 1,000,000,000.00 of which P = 750,000,000.00 was subscribed to and paid by the Government Service Insurance System (GSIS). The unsubscribed portion of the authorized capital stock or P = 250,000,000.00, (250,000,000 shares) will be offered to the public. This propectus sets forth concisely the information about the Fund that you should know before investing. It should be read carefully and retained for future reference. For more information write: GSIS Mutual Fund, Inc., GSIS Headquarters, 2nd Level, Core F, Financial Center, Roxas Boulevard, Pasay City 1308 or call (02) 551-1881 or 551-5519.

Effective date: June 18, 1998 Updated: September 30, 2003

PROSPECTUS

PROSPECTUS GSIS MUTUAL FUND, INC. The GSIS Mutual Fund, Inc. (GSISMF or the Fund) is an open-end mutual fund company established in accordance with Republic Act No. 2629, otherwise known as the Investment Company Act, and duly registered with and regulated by the Securities and Exchange Commission (SEC). The Funds shares of common and voting stocks amounting to One Billion Pesos (P = 1,000,000,000.00) will be offered for sale on a continuous basis to the public based upon the net asset value per share. Philam Asset Management, Inc. (PAMI) which serves as distributor of the fund and other licensed sales agents that have signed a selling agreement with PAMI (as distributor) stand ready to sell shares and redeem shares from the public at any of its offices during regular working hours.

ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATION CONTAINED HEREIN IS TRUE AND CURRENT. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION. INVESTMENT IN SHARES OF THE FUND INVOLVES RISK (PLEASE REFER TO "RISK FACTORS").

The Fund has a total authorized capital stock of P = 1,000,000,000.00 of which P = 750,000,000.00 was subscribed to and paid by the Government Service Insurance System (GSIS). GSIS has agreed not to sell, transfer, convey, encumber or otherwise dispose of their securities within twenty four (24) months from its registration under the Investment Company Act. The unsubscribed portion of the authorized capital stock or P = 250,000,000.00, (250,000,000 shares) will be offered to the public. Initially, the Fund will offer the shares at the par value of P = 1.00 plus applicable sales fee for the first one hundred (100) days of the selling (initial selling period) commencing on the day this Prospectus is declared effective by the SEC. At the end of the initial selling period, shares of the Fund will be offered on a continuous basis at the current net asset value per share plus applicable sales fee. Shares in the Fund will be offered initially to GSIS members. GSISMF is a growth and income fund that is designed to seek total return through long-term capital appreciation and income. The Fund will invest the proceeds from the sale of its shares primarily in listed equity and fixed-income securities of Philippine companies and debt obligations of the Government of the Republic of the Philippines. It may also invest in these same types of instruments internationally (i.e., outside the Philippines). All the Funds assets, including the original subscription payments at the time of incorporation constituting the original paid-in capital and the proceeds from the sale of the Fund's shares to the public will be held by the Funds custodian bank. Dividends may be declared from the surplus profits of GSISMF at such time and in such percentage as the Board of Directors of the Fund may deem proper and in accordance with the law. This Prospectus sets forth concisely the information about the Fund that you should know before investing. It should be read carefully and retained for future reference. For more information write: GSIS Mutual Fund, Inc., GSIS Headquarters, 2nd Level, Core F, Financial Center, Roxas Boulevard, Pasay City 1308 or call (02) 551-1881 or 551-5519.

Prospectus Summary 2

The following summary is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus. The Sponsor: The Fund is managed and operated by PAMI, an investment management company organized in 1993 with the Government Service Insurance System. PAMI provides operations, management and technical services to the Fund, so that the Fund may offer a managed portfolio to GSIS members. PAMI will also serve as principal Distributor of the Funds shares. The Fund: The GSIS Mutual Fund, Inc. (the Fund) is a registered, open-end investment company. It is a diversified, growth and income portfolio that seeks long-term capital appreciation together with income for its shareholders. Shares of the Funds common stock are available through licensed sales agents that have entered into an agreement to sell shares with the Funds Principal Distributor, Philam Asset Management, Inc. (PAMI). Shares may be redeemed through licensed sales agents or directly through the Shareholder Services Unit. See Redemption of Shares. Investment Objective: The Fund is designed to seek above average return from income and long-term capital appreciation through investment in listed equity and fixed income securities of Philippine and international companies and debt obligations of the Government of the Republic of the Philippines and its instrumentalities as well as those of foreign governments. Shares of the Fund will be offered initially to GSIS members. Founding Shareholder: The shares of the Fund were offered to and subscribed for by the Government Service Insurance System, the original proponent. The authorized capital stock of the Fund is P = 1.0 Billion with P = 1.00 par value, P = 750 Million of which was subscribed and paid-up by GSIS, the original proponent of the Fund. GSIS has agreed not to sell, transfer, convey, encumber or otherwise dispose of their securities within twenty four (24) months from its registration. Continuous Offering: The shares of the Fund are offered over-the-counter (and, therefore, do not trade in the Philippine Stock Exchange) and the Fund stands ready to issue and redeem shares through licensed sales agents. Licensed sales agents are persons who have passed the licensure examination of the SEC and are duly registered therewith. Initially, and for a period of approximately one-hundred (100) days ("initial selling period"), commencing on the day this Prospectus is declared effective by the SEC, shares of the Fund will be offered at the par value of P = 1.00 per share, plus applicable sales fee. At the end of the initial selling period, shares of the Fund will be offered on a continuous basis at the current net asset value per share (NAVPS) plus any applicable sales fee. The Articles of Incorporation of the Fund, in Article Seven, clause (c), has provided for a waiver of pre-emptive rights of shareholders, viz.: 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 Corporation. Minimum Investment: The SEC has granted the GSIS Mutual Fund exemption from the P = 5,000 minimum investment requirement (as stated in the Rules and Regulations of R.A. 2629). For GSIS members the minimum initial investment has been set at one thousand pesos (P = 1,000.00), while the minimum subsequent investment is five hundred pesos (P = 500.00). See Purchase of Shares. For non-GSIS members the minimum initial investment is P = 5,000.00. Redemption of Shares: Shares may be redeemed at net asset value, less any applicable contingent redemption fee, on any business day, through the Shareholder Services Unit or through licensed sales agents. See Redemption of Shares. Shareholder Services: The Shareholder Services Unit responds to shareholder inquiries regarding, but not limited to, shareholder records and general fund information. See Shareholder Services for more information concerning each of these services. Risk Factors: There are risks in any investment and therefore there can be no assurance that the Fund will achieve its investment objectives. Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by any financial institution, and are not insured by the Philippine Deposit Insurance Corporation. Investment in shares of the Fund involves risks. For more information on the risks associated with GSISMF shares, please refer to Risk Factors. No dealer, salesperson or other individual has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the Fund covered by this prospectus. If given or made, such information or representations must not be relied upon as having been authorized by the Fund, the Fund Manager, or the Distributor. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstance, create an implication that there has not been any change in the facts set forth in this Prospectus or in the affairs of the Fund or the Fund Manager since the date hereof. However, if any material change occurs while this Prospectus is effective, this Prospectus will be supplemented or amended accordingly. CONTENTS Page 4 4 5 6 6 8 9 9 10 10 10 3

The Fund Risk Factors Investment Objectives Other Investment Practices Investment Policies and Limitations Purchase of Shares Redemption of Shares Shareholder Services The GSIS Mutual Fund, Inc. Capitalization and Ownership Founding Shareholder

Directors and Officers of the Fund The Management and Distribution Agreement Distribution Agreement and Distribution Plan Administrative Services Portfolio Transactions and Brokerage Transfer Agent Shareholder Services Unit Custodian Legal Counsel and Independent Auditors Determination of Net Asset Value Management of the Fund Philam Asset Management, Inc. Directors and Officers of the Manager Estimated Shareholder and Fund Expenses Tax Issues Additional Information Shareholders Meetings and Audit The Fund

10 11 11 12 12 12 12 12 13 13 13 13 14 15 15 16 17

The GSIS Mutual Fund, Inc. (the Fund) is a registered, open-end investment company. It is a diversified, growth and income portfolio that seeks long-term capital appreciation together with income for its shareholders. The Fund offers investors a selection of purchase arrangements designed primarily to provide the opportunity to participate in financial market investing, inside and outside the Philippines and benefit from its growth in a way previously enjoyed only by institutions and high net-worth individuals. The Funds investment objectives and policies are fundamental and can only be changed by vote of the Funds Board of Directors and a majority of the Funds outstanding shares and upon approval of the SEC. GLOSSARY BSP CALL OPTION COMMODITY COVERED CALL OPTION EQUITY SECURITIES or EQUITIES FIXED INCOME SECURITIES GSIS GSISMF or FUND ILLIQUID LIQUID MAJORITY NAVPS OPTION CONTRACT or OPTIONS PNB PSE R.A. 2629 SEC or the COMMISSION PAMI or FUND MANAGER or INVESTMENT MANAGER Bangko Sentral ng Pilipinas The right to buy 100 shares of a particular stock or stock index at a predetermined price before a preset deadline, in exchange for a premium. Bulk goods such as grains, metals, and foods traded on a commodities exchange. A call option (see Call Option) backed by the shares of the underlying stock. Ownership interest possessed by shareholders in a corporation. A security that pays a fixed rate of return. Government Service Insurance System GSIS Mutual Fund, Inc. Those assets which are not readily converted into cash. Those assets which can be readily converted into cash. 50% + 1 Net Asset Value Per Share A contract giving the right to buy or sell an item (usually a financial instrument) that is granted in exchange for an agreed upon sum. Philippine National Bank Philippine Stock Exchange Republic Act No. 2629 or The Investment Company Act Securities and Exchange Commission Philam Asset Management, Inc.

Risk Factors Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by any financial institution, and are not insured by the Philippine Deposit Insurance Corporation. Investment in shares of the Fund involves risks. The value of the Fund's investment and, consequently, its net asset value, may vary as a result of a number of factors. The market values of both Philippine and international stocks (generally referred to as equities) fluctuate in response to the activities of individual companies, and general industry, regulatory, market, economic and political conditions. Any negative developments in individual companies, or related industry, regulatory, market, economic, or political conditions may have an adverse effect on the price of equities owned by the Fund. The Investment Manager will select the stocks of companies that it believes will appreciate in value, based on its own research and forecasts. However, there is no guarantee that the strategies of the Investment Manager will work as intended. Therefore, there is a possibility that the Funds investment in a company, whether domestic or foreign, may lose a substantial part or all of its value, thereby adversely affecting the net asset value of the Fund.

The value of fixed income instruments (e.g. bonds and treasury bills) fluctuates with changes in interest rates and in the credit quality of the issuer. In general, fixed income instrument prices rise when interest rates fall, and vice versa. The Fund is being managed and operated by a professional investment manager who may use various techniques and tools to manage risk. However, there is no guarantee that the strategies will work as intended. Investments in obligations of foreign entities and securities denominated in foreign currencies involve risks not typically associated with domestic investment, including fluctuations in foreign exchange rates, future foreign political and economic developments, and the possible imposition of exchange controls. Since the Fund may invest up to 20% of its net assets in securities denominated or quoted in currencies other than the Philippine peso, changes in foreign currency exchange rates may affect the value of investments in the portfolio. In particular, because the Fund's foreign asset valuation is directly linked to the US dollar (see "Determination of Net Asset Value") the Fund's NAVPS and its computation and distribution of income in pesos, will be adversely affected by increases in the value of the peso relative to the US dollar. In addition, the computation of income will be made on the date it is recorded at the foreign exchange rate in effect on that date, thus if the value of the peso appreciates relative to the US dollar between recognition and receipt of the income, the Fund may be adversely affected. The adverse effect of the fluctuation of the peso versus the dollar on the Funds net asset value can be illustrated by the following example. Assume that the maximum amount (20%) of the Funds net asset value is invested in US dollar denominated securities. At a Fund size of P = 750 million, 20% is P = 15 million. To invest in US dollar denominated securities, the Fund must first purchase US dollars with its P = 15 million. At an assumed rate of P = 38.00 to US$1.00 the Fund will be able to purchase approximately US$394,737. Again, for simplicitys sake, we assume that the following day the prices of the securities purchased by the Fund in US dollars remain unchanged but the exchange rate between the Philippine peso and the US dollar appreciated to P = 35.00 to US$1.00. The Funds US$394,737 would therefore be worth only P = 13,815,795 (US$394,737 multiplied by P = 35.00). Therefore, in pesos, the Funds foreign investment lost (or depreciated by) P = 1,184,205. The Fund may use hedging techniques in order to minimize certain investment risks (see Other Investment Practices below). The risks associated with the hedging techniques outlined below are clear, quantifiable, and limited. Risks on Options As outlined below in Other Investment Practices, the risk involved with writing covered calls is limited to putting a ceiling on the price appreciation of the underlying stock (those shares covered by the covered call contract) for the duration of the contract. The price ceiling is equivalent to the strike price indicated in the option contract. Example: The Fund owns 100,000 shares of XYZ Corporation (a fictitious company). The Investment Manager believes the mediumand long-term prospects for XYZ are positive but that near term the stock price may be weak. XYZ shares are currently trading at P100.00/share. It writes (i.e. sells) a European-style covered call option (see Other Investment Practices below) for 50,000 shares of XYZ, with a strike price of P110.00/share, to expire in two months and is paid a premium of P3.00/share (additional income to the Fund). On the expiration date the price of XYZ is P120.00/share and the option is exercised by the option holder. The Fund is required by the call option contract to sell 50,000 of its shares at P110.00 per share. Since the current share price of XYZ is P120.00 and the Fund is required by the options contract to sell its shares at P110.00/share it foregoes the additional price appreciation of P7.00/share (P120 P110 + P3.00 [premium]). In this example, the covered call option put a ceiling of P113.00 (strike price + premium paid) on 50,000 of the Funds shares of XYZ; there is no ceiling on the other 50,000 shares of XYZ that the Fund holds because the option contract was only for 50,000 shares. The risks were limited, quantifiable and did not expose the Fund to unlimited losses. The risk involved with purchasing either a put or call option contract is limited to losing the premium paid for the option contract if it expires unexercised. Investment Objectives The Fund seeks growth and income, and will invest, under normal conditions, in both equity and fixed income securities of both domestic and foreign companies. For this purpose, the term "equity securities" includes common stock, preferred stock, and securities convertible into or exchangeable for such securities, such as convertible debentures and convertible preferred shares, or shares which carry warrants for the purchase of such securities. The Fund will also invest in corporate fixed-income securities, such as, but not restricted to, commercial papers, notes, bonds, and nonconvertible preferred shares, and in the debt obligations of either Philippine or foreign national, provincial, state, city and municipal governments. The Fund may also invest in deposits, deposit substitutes and bankers' acceptances issued by Philippine and international financial institutions. The objectives of the Fund: 1. 2. 3. The preservation of capital. Long-term capital appreciation through worldwide investment in equity securities. A steady stream of income payments through investments in a worldwide, broadly diversified portfolio of fixed income securities.

Under normal circumstances, the Fund will invest approximately 50% of its assets in equity securities and 50% in fixed income securities. However, the Manager may, at its discretion, and when in its judgment the conditions so warrant, invest a substantial amount of the Funds assets in equity securities up to the maximum allowed under prevailing Philippine laws or up to 100% in fixed income securities (i.e. liquid or semi-liquid assets), subject to any existing liquidity requirements as may be required by law. In addition, as a defensive strategy, the Manager, at its discretion, may elect to invest up to 100% of the Funds assets in cash and/or other liquid assets, again, subject to any existing liquidity requirements as may be required by law. Up to 20% of the Funds assets can be invested in non-Philippine securities. These foreign investments may include a) equities of companies listed on any national exchange around the world, provided such are able to show at least a three-year earnings record and with at least one year of dividend payment; b) securities issued by non-Philippine governments with at least an investment grade rating from either Moodys or Standard and Poors; and c) fixed income instruments issued by foreign corporations. 5

Compliance with these asset and geographic allocation guidelines will be assessed at each fiscal quarter-end. In cases of non-compliance, the Manager will have thirty (30) calendar days within which to make adjustments. There is no assurance that the Fund will achieve its investment objectives. These objectives may not be changed without the approval of the SEC as well as a majority of the Fund's outstanding voting securities and Board of Directors. As used in this prospectus, the term "majority of the Fund's outstanding voting securities" mean the lesser of either (1) 67% of the shares represented at a meeting at which at least 50% of the outstanding shares are present in person or by proxy, or (2) more than 50% of the outstanding shares. In allocating the fund's investments overseas, the investment manager will continually assess political, economic and business conditions, while trying to identify underlying trends. These conditions will include economic growth rates, business prospects for particular industries and companies, securities prices, interest rates, currency exchange rates, trade and payments balances, as well as political and/or economic developments. The latter include changes in fiscal, monetary, and regulatory policies. Other Investment Practices Short-term Investments and Repurchase Agreements: The Fund may establish and maintain cash reserves, without limitation, for temporary defensive purposes as the Manager deems advisable. The Fund's reserves may be invested in domestic as well as foreign money market instruments, including, but not limited to, governmental obligations, certificates of deposit, banker's acceptances, commercial papers, short-term corporate debt securities and repurchase agreements. A repurchase agreement arises when a buyer, such as the Fund, purchases a security and simultaneously agrees to resell it to the vendor at an agreed upon future price, at an agreed upon future date, normally a few days later. The resale price is greater than the purchase price, reflecting an agreed upon interest rate for the period in question. Such agreements permit the Fund to keep all of its assets at work while retaining overnight flexibility in pursuit of investments of a longer-term nature. The Fund's Board of Directors has established procedures which enable the Manager to monitor the credit-worthiness of the dealers with which the Fund enters into repurchase agreements. No more than 15% of the Fund's assets may be in illiquid investments, including repurchase agreements with maturities greater than seven days. Hedging: The Investment Manager has the authority to hedge against company, market, interest rate and currency risks in accordance with guidelines adopted by the Board of Directors, and subject to regulations of the regulatory commissions. The use of options contracts will be solely for bona fide hedging transactions; the Fund will not enter into options contracts for which the aggregate initial margin and premiums exceed 5% of the Fund's total assets. The ability of the Fund to engage in the options strategies described below will depend on the availability of liquid markets for such instruments. It is impossible to predict the level of trading activity that may exist in various types of options. Therefore, no assurance can be given that the Fund will be able to use these instruments effectively. Some of the risks are described below. Options on Securities: CALL WRITING: The Fund may write covered calls on its underlying portfolio securities, equity or debt in which the Fund invests, up to 50% of the assets of the Fund. Covered call writing may be used for hedging purposes and for closing long call positions, and for achieving incremental income. A call option is a contract between two parties giving one party (the option buyer) the right to purchase securities (the underlying asset) from the other party (the option writer) on or before a future date (expiration date) at a predetermined price (the strike price). In a European-style option, the right to purchase the security can be exercised by the option buyer only on the expiration date. In an American-style option, the right to purchase the security can be exercised by the option buyer at any time on or before the expiration of the contract. For this right to purchase securities the call buyer pays the call writer a fee called the premium for the option contract. If the call writer owns the underlying security the call contract is termed a covered call and the risks are limited and quantifiable. Generally, the writer of a covered call believes that for near term (for the duration of the call contract) the price of the underlying security will remain steady or slightly lower than the price at the time the option is written. By writing a call an investor puts a cap on the upside price of the underlying security because any time (up until the expiration date, in an American-style option) the price of the security exceeds the strike price, the buyer of the call option can exercise his/her right to purchase the security at the strike price. Therefore the only risk to the covered option writer is that potential price gains in the underlying security are foregone if the option is exercised. Investment Policies and Limitations Investment Policies The Fund will invest its assets worldwide in securities of companies in various industries, but may not invest more than 25% of its assets in any single industry nor may it invest more than 20% of its assets in issuers whose principal activity is outside the Philippines. In selecting industries and companies for investment, the Investment Manager considers factors such as overall growth prospects, competitive position in markets served, technology, research and development, productivity, labor costs, raw material source and costs, capital resources, profit margins, return on investment, government regulation, and quality and experience of management. Up to 20% of the Funds assets can be invested in non-Philippine securities. These foreign investments may include a) equities of companies listed on any national exchange around the world, provided such are able to show at least a three-year earnings record and with at least one year of dividend payment; b) securities issued by non-Philippine governments with at least an investment grade rating from either Moodys or Standard and Poors; and c) fixed income instruments issued by foreign corporations. 6

The Fund intends to acquire and hold equity securities primarily for long-term capital appreciation and fixed income instruments for maximum yields. However as market conditions dictate, and as limited below, the Fund may shift between debt and equity securities to meet its objectives. Legal Investment Limitations 1. Until the Commission, by order, provides otherwise, the Fund shall not invest or engage in any of the following: A. margin purchases of securities; B. commodity futures contracts; C. precious metals; D. unlimited liability investments; E. short selling of currencies; F. short selling of investments; G. other investments as the SEC shall, from time to time, prescribe The maximum investment of the Fund in any single enterprise shall not exceed an amount equivalent to ten percent (10%) of the Funds net asset value except obligations of the Philippine government or its instrumentalities. Provided, that in no case shall the total investment of the Fund exceed ten percent (10%) of the outstanding, voting securities of any one issue or investee company. For liquidity purposes, unless otherwise prescribed by the SEC, at least ten percent (10%) of the Funds net asset value shall be invested in liquid/semi-liquid assets such as: a. Treasury notes or bills, Central Bank 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. Savings or time deposits with Philippine government owned banks or Philippine commercial banks, provided that in no case shall any such savings or time deposits account be accepted or allowed under a bearer or numbered account or other similar arrangement.

2.

3.

b. 4.

The Fund shall not incur any debt or borrowing unless at the time of its occurrence or immediately thereafter there is an asset coverage of at least three hundred percent (300%) for all its borrowings. Provided, however, that in the event that such asset coverage shall at any time fall below three hundred percent (300%), the Fund shall within three (3) days thereafter, reduce the amount of its borrowings to an extent that the asset coverage of such borrowings shall be at least three hundred percent (300%). The Fund shall not purchase from or sell to any of its officers or directors or the officers or directors of its Manager, or distributors or firms of which any of them are members, any security other than the Funds own capital stock. The Fund shall not participate in an underwriting or selling group in connection with the public distribution of securities, except for its own capital stock. The operating expenses of the Fund shall not exceed 10% of its total investment fund or total Net Asset Value as shown in the Funds most recent audited financial statements.

5. 6. 7.

Internal Investment Limitations The following limitations are fundamental policies, which cannot be changed without the express approval of a majority of the Funds Board of Directors and a vote of a majority of the Funds outstanding shares. The Fund may not: 1. 2. Issue senior securities; Act as underwriter of securities of other issuers, except in connection with the purchase of securities for the Fund, or the disposition of portfolio securities or of subscription rights thereto, to the extent that it may be deemed to be an underwriter under applicable securities laws; Invest more than 25% of its assets in any single industry; Borrow money or pledge its assets, except that the Company may borrow from a bank (i) to pay any dividend required to be distributed, (ii) for temporary or emergency purposes in an amount not to exceed 10% (calculated at the lower cost or current market value) of its total assets (not including the amount borrowed). In the aggregate, the Fund borrowings under clauses (i), and (ii), may not exceed 20% of its total assets (calculated at the lower cost or current market value). In order to secure such borrowings, the Fund may pledge no more than 20% of its assets; Buy or sell real estate or interests in real estate mortgages, except that the Fund may buy or sell securities of companies which invest or deal in commodities or real estate; Make loans, except through repurchase agreements to the extent permitted by law and subject to a limitation that the total amount of all repurchase agreements having a maturity greater than seven days does not exceed 10% of its total assets; Make any investment for the purpose of exercising control or management;

3. 4.

5. 6. 7.

8. 9. 10. 11.

Make any investment which would involve the Fund in a situation of unlimited liability, such as that of general partner; Invest in securities of other investment companies; and Invest more than 20% of its assets in securities of issuers whose principal activity is outside the Philippines. Invest in options contracts if the aggregate initial margin and premiums exceed 5% of the Funds total net assets.

Purchase of Shares PAMI serves as the Principal Distributor of the Fund. Shares of the Fund will be offered continuously for sale by the Distributor and other licensed sales agents that have signed a Selling Agreement (the Selling Agreement) with the Distributor. Shares of the Fund may be purchased from these sales agents or by mailing a New Account Form or Additional Investment Form directly to the Business Relations Unit, PAMI (see address on back cover of this Prospectus). For GSIS members the minimum initial purchase for the Fund shares is one thousand pesos (P = 1,000) and the minimum subsequent purchase is five hundred pesos (P = 500). For non-GSIS members the minimum initial purchase for the Fund shares is five thousand pesos (P = 5,000) and the minimum subsequent purchase is five hundred pesos (P = 500). Applications for purchase of shares received and accepted by the Principal Distributor and other licensed sales agents prior to 12:00 noon on any business day that PAMI is open will be priced at the net asset value calculated for that day. Applications received and accepted after 12:00 noon will be deemed to have been received and accepted on the next business day that PAMI is open and will be priced at the net asset value per share on such day. All applications for purchase of shares are subject to acceptance by the Principal Distributor and it reserves the right to reject or reduce the number of shares applied for at its sole discretion. The SEC, the Fund or the Distributor may suspend the continuous offering of shares at any time in response to conditions in the securities markets or otherwise and may thereafter resume such offering from time to time. Neither the Distributor nor the eligible agents are permitted to withhold placing orders to benefit themselves by a price change. The initial public offering of the Funds shares covering a period of approximately one hundred (100) days (initial selling period) commencing on the day this Prospectus is declared effective by the SEC, shares of the Fund will be offered at the par value of P1.00 per share, plus applicable sales fee. After the end of the initial selling period, the applicable offering price for purchase orders will be based upon the net asset value per share calculated after the close of the Philippine Stock Exchange on each business day, plus the applicable sales fee. (See Determination of Net Asset Value). Sales Fee Schedule Sales Fee 2.5% 2.0% 1.5% 1.0% Negotiable

Amount of Investment (P =) 500 to 5,000 More than 5,000 to 50,000 More than 50,000 to 100,000 More than 100,000 to 1,000,000 More than 1,000,000 Voting and Preemptive Rights

Paid to Dealers 1.67% 1.33% 1.00% 0.67% Negotiable

Retained by Distributor 0.83% 0.67% 0.50% 0.33% Negotiable

All the Fund shares of stock are voting stock with voting rights equal to every other outstanding share of stock of the Fund. The Articles of Incorporation of the Fund, Article Seven (c), has provided for a waiver of pre-emptive rights of shareholders, viz.: 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 Corporation. Certificates In the interest of economy and convenience, physical stock certificates representing the Funds shares will not be issued unless requested in writing directly to the Funds Business Relations Unit. Shares are recorded on a stock register by the Transfer Agent, and shareholders who do not elect to receive stock certificates have the same rights of ownership as if certificates had been issued to them. See Redemption of Shares. The Confirmation of Purchase of Securities issued by the Funds Administrator will serve as a record of investment. Right of Accumulation Shareholders of the GSIS Mutual Fund can take advantage of lower sales fee through the Right of Accumulation. Through the Right of Accumulation a shareholder will be allowed to use the accumulated acquisition value of his/her shares in determining the applicable sales fee for new purchases. For example, if a shareholder who has accumulated P50,000 worth of the Funds shares (at acquisition cost) decides to buy an additional P = 1,000 worth of shares, the applicable sales fee for this purchase would be 1.5% instead of the normal 2.5%. Redemption of Shares Fund shares may be redeemed at net asset value, less any applicable redemption fees. Redemption proceeds will be paid within seven (7) banking days of the receipt of a redemption request that is received in good order. Shareholders may redeem shares through the Business Relations Unit or through licensed sales agents. Redemption Fee Schedule Shares held one (1) year or less 8 2%

Shares held more than one (1) year but not more than two (2) years Shares held more than two (2) years

1% None

Redemption through the Business Relations Unit. All Fund shareholders who wish to redeem shares must redeem their shares through the Business Relations Unit by mail or in person. Shareholders should mail redemption requests directly to the Business Relations Unit, PAMI (see address on back cover of this Prospectus). A redemption request, made in person or mailed, determined to be received in good order on or before the daily cutoff time of 12:00 noon will be priced at the net asset value calculated on the current business day. Redemption requests determined to be in good order after the daily cut-off time will be deemed received on the following business day and priced at the net asset value of the business day after receipt. Good order means that the request must be accompanied by the following: a letter of instruction or a redemption request form and, in the case that share certificates were issued, duly endorsed share certificates. Shareholders are responsible for ensuring that a request for redemption is received in good order. Redemption through licensed sales agents. Fund shareholders may also request redemption of shares through the agents from which their shares were purchased. Simply visit the agent and complete a redemption request form, available from the agent. The agent will forward the redemption request to the Business Relations Unit, PAMI, for processing as described above. Redemption proceeds, less any applicable redemption fee, will be mailed to the address of the registered shareholder within seven days upon receipt in good order by the Business Relations Unit. The SEC, whenever it deems necessary or appropriate in the public interest or for the protection of investors, and under the conditions set forth in Article 22 of R.A. 2629, may suspend the redemption of securities of open-end investment companies. The shareholder of the Fund is entitled to receive by way of redemption the cash equivalent of the value of his/her shares at the current net asset value, subject to existing laws and the by-laws of the Fund; provided, however, that no such redemption may be made unless the remaining unimpaired capital of the Corporation shall at least be P = 1,000,000.00 or 50% of its outstanding liabilities to the creditors of the Corporation, whichever is higher; provided, further, that redemption may be suspended during any of the periods specified under the by-laws and under any applicable laws and regulations. Shareholder Services Investment Account Each shareholder whose record is maintained at the Transfer Agent has an Investment Account and will, whenever there is activity in the account such as a purchase, redemption or dividends, receive a statement from the Shareholder Services Unit showing any reinvestments of dividends and capital gains distributions and any other activity in the account since the preceding statement. Shareholders will also receive separate confirmations for each purchase or redemption transaction other than reinvestments of dividends and capital gains distributions. A shareholder may make additions to his Investment Account at any time by mailing a check directly to the Business Relations Unit. Automatic Reinvestment of Dividends Unless a shareholder indicates to do otherwise on the New Account Form, all dividends from the Fund will be automatically reinvested, without a sales fee. Shareholders who do not wish to have dividends automatically reinvested in additional shares will receive payment of all dividends in cash. Shareholders may change this election at any time by notifying the sales agent or by calling the Business Relations Unit. Dividends will be reinvested at the net asset value by 4:30 p.m. Manila time on the payment date established for the dividend. Automatic Savings and Investment Plan Shareholders may purchase shares through an Automatic Savings and Investment Plan after establishing the initial investment account, by authorizing their bank to deposit an amount specified of at least five hundred pesos (P = 500) or more each month to the Fund from their account. In addition to providing a convenient and disciplined manner of investing, participation in the Automatic Savings and Investment Plan enables the investor to use the technique of Peso cost averaging. Under the Automatic Savings and Investment Plan, a shareholder invests the same peso amount each month. The shareholder will purchase more shares when net asset value is low and fewer shares when net asset value is high. Using this technique, a shareholders average purchase price per share over any given period will be lower than if the shareholder purchased a fixed number of shares on a monthly basis during the period. Availability of this Plan will be announced at a later date. Peso Cost Averaging in a Systematic Investment Plan Peso cost averaging is a systematic investment plan requiring strict discipline. It is a systematic method of taking the ups and downs of the market and using them to your advantage. Here is how it works: The same peso amount is invested each month, thereby purchasing more shares when the Funds net asset value is down and fewer shares when it is up. See example below:

Monthly Investment P = 500 500 500 500 P = 2,000 Average share cost:

FLUCTUATING MARKET Share Price P = 1.07 1.14 1.19 1.30 P = 4.70 P = 1.17 (P = 2,000/1711) 9

Shares Purchased 467 439 420 385 1,711

Average share price: The GSIS Mutual Fund, Inc.

P = 1.18 (P = 4.70/4)

The GSIS Mutual Fund, Inc. (the Fund) was organized in the form of a stock corporation under the Philippine Corporation Code on August 8, 1997. The Fund will engage in the sale of its shares of stock and in the investment of the proceeds from these sales into a diversified portfolio of listed equity and fixed income securities of Philippine and non-Philippine companies. The Fund will also invest in debt obligations of the Government of the Republic of the Philippines and its instrumentalities as well as those of non-Philippine governments. The Funds investment objective seeks total return through a combination of income and long-term capital appreciation. Shares of the Funds common stock are available through licensed sales agents that have entered into an agreement to sell shares with the Funds Principal Distributor, Philam Asset Management, Inc. (PAMI). Shares may be redeemed through licensed sales agents or directly through any of the PAMI office. See Redemption of Shares. Capitalization and Ownership The Funds authorized capital stock is ONE BILLION PESOS divided into ONE BILLION (1,000,000,000) shares with a par value of ONE PESO (P = 1.00) per share. The founding shareholder has earlier infused resources to bring the capital of the Fund to SEVEN HUNDRED FIFTY MILLION PESOS 750,000,000.00). Founding Shareholder The Government Service Insurance System is the founding shareholder. Lock-up Period The Founding Shareholder has agreed to a two-year (24 months) lock-up period beginning the effective date of this Prospectus. Under the rules and regulations governing the Investment Company Act, the original shareholder may not sell its shares until after this two-year period. Directors and Officers of the Fund The management of the Fund, including general supervision of the duties performed by the Manager, Distributor, Administrator, Shareholder Services Unit, Transfer Agent, and Custodian, is the responsibility of its Board of Directors. The Funds incorporators and the members of its Board of Directors, all of whom are Filipino citizens, are listed below: Mr. Winston F. Garcia Atty.Garcia is concurrently the President and General Manager and the Vice-Chairman of the Board of Trustees of the Government Service Insurance System (GSIS). He is the Chairman of the National Reinsurance Corporation and Director of Asean Social Security Association, Asean Forum G-G, Inc., San Miguel Corporation, The Manila Hotel Corporation, Philippine National Construction Corporation, Philippine Health Insurance Corporation, and New San Juan Builders Corporation. He is also the Chairman of the Committee on Good Government, Committee on Laws and Ordinances, and Executive Committee on Anti-Graft and Corrupt Practices. He earned a Bachelor of Laws at the San Beda College of Law and is a practicing lawyer since 1983. Mr. Reynaldo P. Palmiery Mr. Palmiery is concurrently a member of the Board of Trustees and Executive Vice President and Chief Operating Officer of the Government Service Insurance System (GSIS). He earned an A.B. Economics degree at the University of the Philippines and a MA (Development Economics) at the center of Development Economics, Williams College. Mr. Reynaldo R. Nograles Mr. Nograles earned his degree in Bachelor of Science Major in Physics at the FEATI University. He also earned a graduate degree in MST Physics at the Ateneo de Manila University and MS Actuarial Mathematics at the University of Michigan. Mr. Nograles is the Vice President for Corporate Finance Accounts Management Services (CFAMS) of the Government Services Insurance System (GSIS). He is responsible in evaluating the overall performance of the loans and investments portfolio managed by the department as well as formulating their short and long range goals and targets. Ms. Em L. Ang Ms. Ang is currently the President of Real Pearl Development Corporation and Treasurer of the Spotcash Lending Investors, Inc. She is also connected to various professional and civic organizations such as the Subdivision and Housing Developers Association, Inc. (SHDA), Chamber of Real Estate Builders Association, Research, Education and Concern to Help (REACH). She graduated Bachelor of Science in Nursing from the University of St. La Salle, Bacolod City and a Master of Arts in Education at the University of Negros Occidental Recoloestos and a Master in Business Administration at the University of St. La Salle, Bacolod City. Ms. Corazon Alma G. de Leon Mrs. de Leon served as the Chairman of the Civil Service Commission. She was likewise an elected member of the International Civil Service Committee of the United Nations. As a Career Executive Service Officer (Rank I) she held the positions of Secretary of the Department of Social Welfare & Development, and Chairman of the Mt. Pinatubo Commission. Ms. de Leon earned her B.A. in Social Work degree at the University of the Philippines, a Masters Degree in Social Work at the Catholic University of America, Washington D.C., USA and a Masters degree in Public Health at University of Pittsburgh, Pennsylvania, USA. (P =

10

Mr. Villamor S. Plan - Atty. Plan earned his Bachelor of Laws at the Ateneo de Manila University. He also graduated cum laude and magna cum laude in the University of Santo Tomas, Central Seminary with a degree in A.B. Philosophy, Bachelor in Philosophy, and Licentiate in Philosophy. He is a member of the Integrated Bar of the Philippines, Cagayan Chapter and a member and club secretary of the Rotary Club of Tuguegarao. Atty. Plan is associated with Sorplan Shopper Plaza as a managing partner and as a legal officer of the Department of Health Center for Health Development for Cagayan Valley. Mr. Eduardo Policarpio Mr. Policarpio is a graduate of Bachelor of Science in Civil Engineering at the Mapua Institute of Technology. He is the current President and CEO of Golden Lily River, Inc., International Recovery Group, Inc. and the Egapol Construction. He is also connected in other organizations such as the National Constructors Confederation Association of the Philippines (NACCAP), Pampanga Constructors Association (PCA) and the Kabalikat ng Malayang Pilipino (KAMPI). The Management and Distribution Agreement Investment Manager PAMI serves as the Investment Manager to the Fund and earns a Management Fee for its services. Under the terms of the Management and Distribution Agreement (the Management Agreement), the Manager makes investment decisions, prepares and makes available research and statistical data, and invests with respect to the purchase and sale of securities on behalf of the Fund, including the selection of brokers and dealers to carry out the transactions, all in accordance with the investment objective and policies, and the directions of the Funds Board of Directors. The Manager maintains records and furnishes or causes to be furnished all required reports. The Manager pays the reasonable salaries and expenses (other than travel expenses relating to attendance at meetings of the Funds Board of Directors or any committee thereof) of its directors, officers and employees who are directors and officers of the Fund. The Fund bears the travel expenses or an appropriate fraction thereof of officers and directors of the Fund who are directors, officers or employees of the Manager to the extent such expenses relate to attendance at meetings of the Funds Board of Directors or any committee thereof. For its services, the Manager receives a monthly fee of 1.0% (on an annualized basis) of the average daily net assets of the Fund. Under the Management and Distribution Agreement, the Manager is permitted to provide fund Advisory services to other clients, including clients who may invest in Philippine securities and, in providing such services, may use non-confidential information furnished by others. The Management and Distribution Agreement will initially be effective for a period of two years and continues in effect from year to year provided such continuance is specifically approved at least annually by a vote of a majority of those members of the Board of Directors who are neither parties to the Management and Distribution Agreement nor interested persons of the Manager or the Fund, cast in person at a meeting called for the purposes of voting on such approval; or by majority vote of the outstanding voting securities of such company. The Investment Management and Distributor Agreements may be terminated at any time, without payment of penalty, by the Fund or by the Manager upon 60 days written notice. Termination by the Fund may be by the vote of the Board of Directors or the vote of two thirds (2/3) of the outstanding voting securities of such company. The Management and Distribution Agreement will automatically terminate in the event of its assignment. The Management and Distribution Agreement provides that neither the Manager nor its shareholders, officers, directors, employees or agents will be subject to, and the Fund shall indemnify and hold such persons harmless from and against, any liability for any damages, expenses or losses incurred in connection with any act or omission in the course of, connected with or arising out of any services to be rendered under the Management and Distribution Agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of the Manager or its shareholders, officers, directors, employees or agents, as the case may be, in the performance of its duties, or from reckless disregard by the Manager or such other persons of its obligations and duties. Distribution Agreement and Distribution Plan PAMI serves as Principal Distributor for the Fund and will sell the securities on a best efforts basis. PAMI earns a Distribution Services Fee to directly or indirectly pay expenses associated with the distribution of shares, (the distribution expenses) in accordance with the Distribution Plan adopted by the Funds Board of Directors and a majority of the shareholders of the Fund. Pursuant to such, the Fund shall pay a distribution services fee to the Distributor at an annual rate of 0.60% of the Funds net assets. The Principal Distributor Agreement provides that the Distributor will use the distribution services fee received, in part, for payments (i) to compensate agents or other persons for providing distribution assistance, (ii) to otherwise promote the sales of shares of the Fund such as by paying for the preparation, printing and distribution of prospectuses, sales literature or other promotional activities, and (iii) to compensate agents with ongoing commissions. Distribution services fees are accrued daily and paid monthly, and are charged as expenses of the Fund as accrued. Distribution services fees received from the Fund will not be used to pay any interest expenses, carrying charges or other financial costs. In adopting the Distribution Plan, the Directors of the Fund and a majority of the shareholders determined that there was a reasonable likelihood that this would benefit the Fund and the shareholders. Information with respect to distribution programs and expenses will be presented to the Directors each year for their consideration in connection with their deliberations as to the continuance of the distribution program being used. In the review of the programs, the Directors will be asked to take into consideration expenses incurred in connection with the distribution of shares vis--vis subscriptions generated. The Plan also provides that the Distributor may enter into related servicing agreements appointing various firms to provide all or any portion of the foregoing services for their customers or clients who are shareholders of the Fund. Administrative Services and Fund Accounting

11

The Fund employs the Philam Asset Management, Inc. (PAMI) to provide administrative services under the Management and Distribution Agreement. The services provided by PAMI are subject to the supervision of the officers and directors of the Fund, and include day-to-day administration of matters related to the corporate existence of the Fund, maintenance of accounting records, daily calculation of the net asset value and preparation of portfolio reports, quarterly Board of Directors Meeting, and Annual Shareholders Meetings. Portfolio Transactions and Brokerage Subject to policies established by the Board of Directors of the Fund, the Manager is primarily responsible for the execution of the Funds portfolio transactions and the allocation of brokerage commissions. In executing such transactions, the Manager will seek to obtain the best price and execution for the Fund, taking into account such factors as price, size of order, difficulty of execution and operational capabilities of the firm involved. While the Manager will seek competitive commission rates, the Fund will not necessarily pay the lowest commission available. The allocation of orders among brokers and the commission rates paid will be reviewed periodically by the Board of Directors of the Fund. The Fund has no obligation to deal with any broker or group of brokers in executing transactions in portfolio securities. Subject to obtaining the best price and execution, brokers who provide supplemental research, market and statistical information to the Manager may receive orders for transactions of the Fund. The term research, market and statistical information includes advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities, and furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. Information received will be in addition to and not in lieu of the services required to be performed by the Manager under the Management and Distribution Agreement and the expenses of the Manager will not necessarily be reduced as a result of the receipt of such supplemental information. Portfolio Turnover The Fund intends to acquire and hold equity securities primarily for long-term capital appreciation and fixed income instruments for maximum dividend yield. However, changes may be made in the portfolio consistent with the investment objective and policies of the Fund whenever such changes are believed to be in the best interests of the Fund and its shareholders. It is anticipated that the annual portfolio turnover rate normally will not exceed 75%. The turnover rate is calculated by dividing the lesser of purchases or sales of portfolio securities by the average monthly value of the Funds portfolio securities. Transfer Agent The Fund employs the Philippine National Bank (see address on back cover of this Prospectus) to serve as its Transfer Agent. Transfer Agent services include, but are not limited to: account registration, processing of dividend and capital gains checks, periodic preparation and mailing of shareholder statements, and management reports as required. For these services the Fund pays a monthly fee at the rate of P = 10 per account or P = 240,000 per year, which ever is greater in accordance with the Transfer Agent Agreement. Shareholder Services Unit PAMI, as the Shareholder Services Unit responds to shareholder inquiries regarding, but not limited to, shareholder records and general Fund information. The Shareholder Services Unit can be contacted at the number indicated on the back of this Prospectus. Custodian Citibank N.A. (see address on the back of this Prospectus) will serve as custodian for the assets of the Fund. Selection of the custodian has been made by the Directors following a consideration of a number of factors, including, but not limited to, the reliability and financial stability of the institution, the ability of the institution to perform capable custodial services, and the reputation of the institution in the Philippines. For its services, the Custodian will be paid a quarterly fee as approved by the Funds Board of Directors in accordance with the Custodial Agreement. The summary of fees associated with the Custodian is as follows: Summary Schedule of Custodial Services Fees (Annual, unless otherwise stated) Safekeeping charges (Philippine-held assets) 0.04% of total Philippine-held assets Safekeeping charges (non-Philippine assets) varies, depending on country, from 0.02% (US, UK) to 0.45% (Greece) Transaction charge (Philippines)/transaction P500.00/transaction Transaction charge (non-Philippine)/transaction varies, depending on country, from US$30 (US, Canada) to US$140 (Greece) The proceeds from the sale of the securities, including the original subscription at the time of incorporation constituting the original paid-in capital of the fund, shall be held by a custodian bank. Legal Counsel and Independent Auditors Angara Abello Concepcion Regala & Cruz Law Offices will serve as legal counsel to the Fund; The Commission on Audit will serve as experts in auditing and accounting. Neither Angara Abello Concepcion Regala & Cruz Law Offices nor The Commission on Audit have been retained on any contingency basis. Neither party has any interest, either direct or indirect, in the registrant.

12

Determination of Net Asset Value The net asset value ("NAV") of the Fund is determined by the Administrator once daily by 4:30 PM, Manila time, on each day that the Philippine Stock Exchange ("PSE") is open for trading. The net asset value per share of the Fund is computed by dividing the value of the securities held by the Fund plus any cash or other assets (including interest and dividends accrued (but not yet received) minus all liabilities (including accrued expenses) by the total number of shares outstanding at such time, rounded to the nearest centavo. In the Philippines, portfolio securities for which market quotations are readily available are stated at the last sale price reported by the Exchange as of the Exchange's close of business. Securities for which no sales have taken place during the day are valued at the mean of the current closing bid and ask prices. All other securities and assets for which there are no such quotations are valued at their fair value as determined in good faith by the Board of Directors, although the actual calculations may be made by persons acting pursuant to the direction of the Board of Directors. The assets may also be valued on the basis of valuations provided by a pricing service approved by the Board of Directors. All expenses, including the fees payable to the Manager, Administrator, Distributor, and Custodian, among others, are accrued daily. Securities Covered by a Call Option Contract (see Other Investment Practices: Options on Securities above) As a matter of prudence, those securities which are covered under a call option contract written by the Fund will, for the duration of the contract or until it is exercised, be valued at the lower of either the current market value or the strike price of the call option contract. Foreign Securities For those securities listed or traded outside the Philippines the current day's closing price will be used for those markets that close by 2:00 PM Manila time. For those markets that close after 2:00 PM Manila time, the previous day's closing price will be used. Foreign exchange rates will correspond to the date of the closing price used to value the investment. Foreign exchange rates will be the last quoted rate of the day for each market. Foreign Exchange Since foreign exchange rates between the Philippine peso and many other currencies are not readily available such rates ("the cross rates") will be derived using the US dollar as an intermediary currency. This cross rate is calculated by dividing the Philippine peso/US dollar exchange rate (quoted in Philippine pesos per one US dollar) by the foreign currency exchange rate versus the US dollar (quoted in foreign units per one US dollar). Management of the Fund The Investment Manager The Philam Asset Management, Inc. (PAMI) serves as the Sponsor and Manager for the Fund and will supervise and monitor the services of the Distributor, Administrator and Fund Accountant, Shareholders Services Unit, Custodian and Transfer Agent. Under the terms of the Investment Management and Distribution Agreements, and at the direction of the Board of Directors, PAMI will maintain records and will furnish or cause to be furnished all required reports concerning the Fund, and other information as must be maintained by the Investment Manager, Distributor, Administrator, Shareholder Services Unit and Transfer Agent, Custodian or other agents. PAMI will serve as Investment Manager and Principal Distributor while the Administration, Shareholder Services Unit, Transfer Agent and Custodian will be contracted with outside agents to provide these services. Under the terms of the Investment Management and Distribution Agreement, PAMI also provides order placement facilities for the Fund and pays all compensation of Directors and Officers who are affiliated persons of the Manager. The Investment Management and Distribution Agreements will initially be effective for a period of two years and will continue in effect from year to year thereafter provided such continuance is specifically approved at least annually by a vote of the majority of those members of the Board of Directors who are neither parties to the Management and Distribution Agreement nor interested persons of the Investment Manager. The Philam Asset Management, Inc. Philam Asset Management, Inc. (PAMI) is the investment manager of GSISMF. As investment manager, PAMI is tasked to provide and render management and technical services to GSISMF. PAMI also functions as the principal distributor of GSISMF. As such, it takes charge of sales of the GSISMF shares to prospective investors. Through its Management and Distribution Agreement with GSISMF, the guidelines for the management of the resources and operations of GSISMF by PAMI are set. PAMI is wholly owned by The Philippine American Life and General Insurance Company (Philamlife) and an affiliate of the American International Group (AIG). Philamlife, which started in 1947, is the countrys leading life insurance company with over PHP48 Billion in assets and over PHP180 Billion in life insurance coverages in force. It is a wholly owned subsidiary of the American International Group (AIG), a US-based insurance and financial giant with assets of over 380 Billion U.S. dollars and present in 130 countries and jurisdictions. At present, PAMI manages and distributes four other investment companies, namely: Philam Bond Fund, Inc., Philam Fund, Inc., Philam Strategic Growth Fund, Inc., and Philam Dollar Bond Fund, Inc. The management fee to be charged by PAMI is 1.8% the assets under management. Furthermore, PAMI is entitled to an incentive fee equivalent to 1/10 of 1% of the increase in NAVPS in excess of 12% over a one-year period. A sales load of not more than 3% of the investment will also be charged. Directors and Officers of the Manager 13

JOSE L. CUISIA, JR. Chairman of the Board Mr. Cuisia earned his Bachelor of Arts and Bachelor of Science in Commerce at the De La Salle University and Master in Business Administration at the Wharton School, University of Pennsylvania (USA). He became President and Chief Executive Officer of Philamlife in 1993. He was then Governor and Chairman of the Monetary Board of Central Bank of the Philippines. Aside from Philam Asset Management, Inc., he also serves as Chairman of the Board and Director of Philam Care Health Systems, Inc., Philam Insurance Co., Philam Plans, Inc., Philam Savings Bank, Philam Systems, Inc., Kapatiran Realty Corp., Tri-Phil International, Inc. and Perf Realty Corp. He is also a Director of various corporations among which are, Bacnotan Consolidated Industries, Inc., Central Cement Corporation, Davao Union Cement Corp., General Milling Corporation and Hi-Cement Corporation. Mr. Cuisia is also involved in non-government organizations, namely: Asian Institute of Management, De La Salle University, and Southeast Asian Science where he serves as Trustee. TERESITA O. SALONGA Director and Treasurer Ms. Salonga has expertise in Corporate Finance specifically Cash Management and Treasury Operations. She is a graduate of the University of Chicago (Chicago, U.S.A.), Master in Business Administration major in Finance. She is presently the Senior Vice President for Finance Administration and Treasurer of The Philippine Life and General Insurance Company. MANUEL L. ORTEGA Corporate Secretary Atty. Ortega is a graduate of Bachelor of Arts in Political Science from the University of the Philippines. He is currently the Corporate Secretary of various companies like The Philippine American Life and General Insurance Company, Philam Insurance Company, Philam Care Health Systems, Inc., Philam Plans, AIG Information Systems, Inc. to mention some. He was a Senior Assistant Vice President and Executive Assistant to the President of The Philippine American Life and General Insurance Company from 1982 to 1990. EDUARDO A. GANA Director Mr. Gana is the Director for Direct Investments of the Philippine office of American International Group Investment Corporation (Asia) Ltd. He received a Bachelor of Science degree in Industrial Management Engineering from De La Salle University in 1977 and a Masters degree in Business Administration with Distinction from the Wharton School of the University of Pennsylvania, U.S.A. Mr. Gana is responsible for the private and strategic equity investments of American International Group of companies and AIG-sponsored third party funds in the Philippines, inclusive of the direct investments of The Philippine American Life and General Insurance Company, the local AIG life insurance operation. JESUS G. HOFILEA Director Mr. Hofilea is a Summa Cum Laude graduate of Bachelor of Arts in Psychology at Ateneo de Manila. He has attended various conferences, seminars and special studies in the Philippines and some parts of Asia. At present, he is the Executive Vice President and Chief Marketing Officer at The Philippine American Life and General Insurance Company. He is also Director of Philam Care Health Systems, Inc., Philam Plans, Inc. and Philam Insurance Company. EDGARDO A. GRAU Director Mr. Grau graduated with a Bachelors degree in Mechanical Engineering at De La Salle University and a Masters Degree in Business Administration at the prestigious Wharton Graduate School of Finance and Commerce, University of Pennsylvania. His wide exposure and training in banking and money market operations has made him the competent Executive Vice President and Chief Investment Officer of The Philippine American Life and General Insurance Company. He also holds key positions in other organizations like Philam Asset Management, Inc., Philam Dollar Bond Fund, Inc., Philam Fund, Inc., Philam Strategic Growth Fund, Inc., Philam Plans, Inc., Philam Properties Corporation, Philam Savings Bank, Philam Systems, Inc. among others.

REX MA. A. MENDOZA President & CEO and Director Mr. Mendoza obtained his degree in Bachelor of Science in Business Administration from the University of the Philippines and his Master in Business Management at the Asian Institute of Management where he graduated with distinction. He earned the title of Fellow with Distinction from the Life Management Institute of Atlanta, Georgia (USA). He has served Philamlife for 13 years. He joined Philamlife in 1983 as Group Marketing Officer. In 1987, he was promoted to Assistant Vice President of the Group Division, and eventually to Senior Assistant Vice President in 1990. He started his own agency in 1993 while being a career associate at Philamlifes Ponio Associates. He was a member of the Million Dollar Round Table, an elite association of the worlds top life insurance agents. Aside from PAMI, Mr. Mendoza also occupies various positions in several non-government organizations. He is Chairman and President of Rampver, Inc., Marketing and Training Consultant for IMPACT, and Philippine Intervention Network, and Professor at De La Salle University Graduate School of Business and Economics. Estimated Shareholder and Fund Expenses 14

Understanding Expenses Operating a mutual fund involves a variety of expenses for portfolio management, distribution, shareholder statements, tax reporting and other services. As an investor, you pay some of these costs directly for example, the sales fee ranges from 2.5% to 0%, depending on the size of your investment. Other expenses are paid indirectly from the Funds assets; the effect of these other expenses is factored into the quoted share price or rate of return. The following tables are intended to assist investors in understanding the transaction costs and expenses associated with investing in the Fund, and in mutual funds in general. Sales Fee Schedule Amount of Investment (P =) 500 to 5,000 More than 5,000 to 50,000 More than 50,000 to 100,000 More than 100,000 to 1,000,000 More than 1,000,000 Redemption Fee as a % of the Value of Redemption Shares held one (1) year or less Shares held more than one (1) year but not more than two (2) years Shares held more than two (2) years Operating Expenses as a % of the Daily Net Asset Value (on an annualized basis) Investment Management Fee:* Distribution Fee:** Other Expenses:*** Total Annual Operating Expenses: Sales Fee 2.5% 2.0% 1.5% 1.0% negotiable

2.0% 1.0% None

1.00% 0.60% 0.41% 2.01%

* PAMI serves as Investment Manager of the Fund and earns a Basic Fee equal to 1.00% of the average daily net asset value on an annualized basis. ** PAMI serves as Distributor of the shares and earns a fee equal to 0.60% of the average daily net asset value on an annualized basis. The Distributors fee is used, in part, to motivate additional shareholders to invest in the Fund and, in part, to provide first hand support to existing shareholders. Existing shareholders can benefit from additions to the Fund because the expense ratio is reduced as the level of assets increase. *** As the Fund has no operating history Other Expenses have been estimated and include, but are not limited to: Administration and Fund Accounting, Transfer Agent and Shareholder Services, Custodian, legal, auditing, insurance and printing costs. Legal Proceedings There are no legal proceedings pending or known to be contemplated against the Fund. Tax Issues THE FUND Corporate Income Tax Under the National Internal Revenue Code, as amended, a domestic corporation is subject to a tax of thirty-two (32%) of its taxable net income from all sources (within and outside the Philippines), except gross interest from Philippine currency bank deposits and yield from deposit substitutes and from trust funds and similar arrangements as well as royalties from sources within the Philippines which are taxed at a lower final rate of twenty percent (20%). Tax on Capital Gains Net capital gains realized during each taxable year from the sale, exchange or disposition or shares not traded through the stock exchange, unless an applicable tax treaty exempts such gains from tax, are subject to taxation as follows: First P = 100,000 In excess of P = 100,000 Tax on Transfer of Shares Listed and Traded through the PSE A sale or other disposition of shares of stock listed and traded through the stock exchange by a resident or a non-resident holder, other than a dealer in securities, is subject to a stock transaction tax at the rate of one-half of one percent (1/2 of 1.0%) of the gross selling price of the shares. 5.0% 10.0%

15

Documentary Stamp Tax The original issue of shares is subject to documentary stamp tax of P = 2.00 for each P = 200.00 or a fractional part thereof, of the par value of the shares issued. The transfer of shares is subject to a documentary stamp of P = 1.50 for each P = 200.00 or a fractional part thereof, of the par value of the shares transferred. THE SHAREHOLDER Taxes on Dividends Under current law, cash dividends received from the Philippine corporation by stockholders who are individual citizens or residents of the Philippines are subject to a final tax of (10%). Dividends received by non-resident individuals are subject to a twenty percent (20%) tax on the gross amount thereof subject to applicable preferential tax rates under tax treaties executed between the Philippines and the country of domicile of such foreign individuals. Dividends received by a domestic or a resident foreign corporation from a domestic corporation are not subject to tax. Dividends received from a Philippine corporation by non-resident corporations are subject to a final tax of fifteen percent (15%), subject to the condition that the country in which the non-resident corporation is domiciled allows a credit against the tax due from the non-resident corporation taxes deemed to have been paid in the Philippines equivalent to twenty percent (20%), nineteen percent (19%) for 1998, eighteen percent (18%) for 1999, and seventeen percent (17%) thereafter. The 15% tax rate also applies if such country of domicile does not tax the dividends received from the Philippine corporation. Pursuant to existing regulations of the Bureau of Internal Revenue, the availment of any tax exemption or preferential tax rate under a tax treaty is subject to a separate application for tax treaty relief by the non-resident concerned or its duly authorized representative in the Philippines. Tax on Capital Gains Gains realized by the stockholder upon redemption of his shares of stock in the Fund are not subject to tax. Additional Information Investments in Smaller Listed Companies While the Fund invests a substantial portion of its assets in the listed securities of established companies, the Fund may also invest in the listed securities of smaller, less seasoned companies. Investments in the securities of these less seasoned companies may present greater opportunities for growth but also involve greater risks than customarily are associated with investments in securities of more established companies. The securities of smaller, less seasoned companies may be subject to more abrupt and erratic market price movements than larger, more established companies. The Fund has not established any minimum capitalization or length of operating history for the smaller, less seasoned issuers in whose securities the Fund may invest. Additionally, these companies may have limited product lines, markets or financial resources, or they may be dependent upon a limited management group. Investments in larger companies present certain advantages in that such companies generally have greater financial resources, more extensive research and development, manufacturing, marketing and service capabilities, more stability and greater depth of management and technical personnel. Performance Information From time to time, in advertisements to prospective investors, or reports to shareholders, the Fund may compare its performance, either in terms of its total return or its yield and total return, to that of other mutual funds with similar investment objectives, and/or to the Phisix (Philippine Stock Exchange Index) which is widely used as a benchmark and the bellwether 91-day treasury bill rate. The Funds average annual total return is computed by finding the average annual compounded rates of return for the most recently completed quarter. It is based on a hypothetical one thousand peso initial payment while assuming reinvestment of all dividends and distributions, and with recognition of all recurring charges. The Fund may also utilize a total return computed in the same manner but for differing periods, without annualizing the total return. For purposes of the yield calculation, yield to maturity of each debt obligation in a portfolio is determined based on a modified market value method of amortization. In computing net investment income all recurring charges are recognized. Total return or yield information may be useful in reviewing the Funds performance and for providing a basis for comparison with other investment alternatives. However, since the performance of a Fund changes in response to fluctuations in market conditions, interest rates, and expenses, no performance quotation should be considered a representation as to the Funds performance for any future period. Shareholders Meetings and Audit General Meetings The Fund shall hold an Annual General Meeting for Shareholders within five (5) months after the end of the fiscal years at the place and time determined by the Directors. Notices of such meetings and of all other meetings shall be given in writing to the shareholders at their registered addresses at least fifteen (15) days prior to the meeting if an annual meeting, or at least ten (10) days before the date of the meeting, if a special meeting. All notices of meetings will specify the time, place and general nature of the business of the meeting. The presence of the holders of a majority of the issued and outstanding shares of the Fund having voting powers in person or by proxy who are entitled to vote shall constitute a quorum for all purposes at any general meeting of the Fund.

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Votes Attaching to Shares Each stockholder at every meeting of the stockholders is entitled to one vote, in person or by proxy for each share with voting rights held by such stockholder. There are no pre-emptive rights attached to the shares of the Fund. Annual Accounts and Reports The audited accounts will be stated in Philippine Pesos and made up to and as at December 31st in each year. The Directors confirm that the accounts of the Fund will be prepared in accordance with the applicable laws of the Republic of the Philippines and in all material respects with generally accepted accounting principles and practice. Copies of the annual reports and audited accounts (which will include a report from the Investment Manager on the investments of the Fund) will be sent to Shareholders at their registered addresses within four months from the end of each financial year. Schedule of Fees Paid by the Fund (Annual, unless otherwise stated) Investment Advisor: Administration and Fund Accounting: 1.00% of total net assets of the Fund Assets up to and including P1 billion of next P250 million of next P250 million of more than P1.5 billion 0.60% of total net assets of the Fund Fee Rate (Annual, as a % of total net assets) 0.200% 0.175% 0.150% 0.075%

Distributor:

Shareholder Services:

Number of Shareholders First 8,000 shareholders For the next 2,000 shareholders For the next 1,500 shareholders

Fee Rate (Annual) P160,000.00 8,000.00 8,000.00

Transfer Agent: Custodial Services:

P240,000/annum minimum or P10.00/account/month, whichever is greater Summary Schedule of Custodial Services Fees (Annual, unless otherwise stated) Safekeeping charges (Philippine-held 0.04% of total Philippine-held assets assets) Safekeeping charges (non-Philippine varies, depending on country, from 0.02% (US, assets) UK) to 0.45% (Greece) Transaction charge P500.00/transaction (Philippines)/transaction Transaction charge (nonvaries, depending on country, from US$30 (US, Philippine)/transaction Canada) to US$140 (Greece)

GSIS MUTUAL FUND, INC. GSIS Headquarters, Level 2, Core F, Financial Center Roxas Blvd., Pasay City, Metro Manila Telefax No. 551-1881 _________________________ 17

INVESTMENT MANAGER, PRINCIPAL DISTRIBUTOR & SHAREHOLDER SERVICING UNIT Philam Asset Management, Inc. 5F Philamlife (Salcedo) Bldg., 126 L.P. Leviste St., Salcedo Village, Makati City Telephone No. 867-3912 to 18 / Fax No. 813-6818 _________________________ CUSTODIAN BANK Citibank, NA 8741 Paseo de Roxas, Makati City 1200 _________________________ TRANSFER AGENT Philippine National Bank PNB Financial Center, Roxas Blvd., Pasay City, Metro Manila ________________________ LEGAL COUNSEL Angara Abello Concepcion, Regala & Cruz Law Offices ACCRA Bldg., 122 Gamboa St., Legaspi Village, Makati City _________________________ INDEPENDENT AUDITOR Commission on Audit Commonwealth Avenue, Quezon City

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