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JOSE ANTONIO VILAREDUCATION

MBA, SBEP Program, University of Asia and the Pacific(UAAP)

B.S. Economics, Wharton School, University of Pennsylvania

WORK EXPERIENCE

CEO, Jarvis & Kassia Venture Finance Corp.

Board of Directors, Philippine National Railways

Stockbroker & technical analyst, Vickers-Ballas Securities(Singapore) & TA Securities (Malaysia)

Asst. Manager, Special Projects, Citibank, N.A.

Junior Associate, VR Business Brokers (Philadelphia, PA)

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BARING THE LISTING

PUZZLE

website: www.pse.com.phe-mail: [email protected]: (632) 688-7600

J. ANTONIO S. VILAR

Head of Marketing

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Presentation Outline Overview

Listing in the PSE: Why do companies go public? Requirements and Requisites Who went public?

Stock Market Reformsand Initiatives

Introduction

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Performance of PSEi

Stock Market Performance

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004 2005 2006 2007 2008 2009 2010

Up by 26%

Up by 15%

Up by 42%

Up by 21%

Down by 48%

Up by 50%

*Up by 4%

*as of May 21, 2010

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Sectors and Subsectors

SECTOR SUBSECTOR

Financial Banks (17) Other Financial Institutions (14)

Industrial

Electricity,Energy, Power (13)

Food, Beverage,Tobacco (23)

Construction,Infrastructure,

Allied Services (14)

Chemicals (8)Diversified

Industrials (10)Property (39)Holding Firms (40)

Services

Diversified Services (10) Media (4)

Education (3) Transportation Services (8)

Hotel and Leisure (8) Telecommunications (6)

Information Technology (10)

Mining & Oil Mining (16) Oil (5)SMEs (2)

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Performance Indicators

P/E RATIOS as of

Dec-07 Dec-08 Dec-09 Apr-10

DOMESTIC

Financials Sector 17.17 11.92 14.74 13.70Industrial Sector 10.90 9.95 11.56 10.29

Holding Firms Sector 12.51 7.49 9.79 11.04

Property Sector 26.27 10.87 20.01 19.44

Services Sector 17.05 10.22 12.63 11.53

Mining & Oil Sector 17.64 6.21 73.73 58.50

Small and Medium Enterprises 250.6 144.7 94.64 20.97

Total Domestic Market 15.14 9.87 13.08 12.35

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Performance Indicators

Rank Country Indexend-Dec

2009As of May20, 2010

YTDChange

1 Indonesia Jakarta Composite Index 2,534.36 2,694.25 6.31%2 Philippines PSE Composite Index 3,052.68 3,213.80 5.28%3 Thailand SET Index 734.54 765.54 4.22%4 Malaysia KL Composite Index 1,272.78 1,304.16 2.47%

5 Vietnam VN Index 494.77 503.55 1.77%6 Japan Topix Index 907.59 898.15 -1.04%7 India NSE Nifty 5,201.05 4,947.60 -4.87%8 Japan Nikkei 225 10,546.44 10,030.31 -4.89%9 South Korea KOSPI Index 1,682.77 1,600.18 -4.91%

10 Singapore Straits Times Index 2,897.62 2,753.51 -4.97%

11 IndiaBSE Sensex

17,464.81 16,519.68 -5.41%12 Taiwan Taiwan Taiex Index 8,188.11 7,424.43 -9.33%13 Hong Kong Hang Seng Index 21,872.50 19,545.83 -10.64%14 China Shenzhen Composite Index 1,201.34 983.88 -18.10%15 China Shanghai Composite Index 3,277.14 2,555.94 -22.01%

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Presentation

Listing in the PSE:

Why do companies go public? Requirements and Requisites

Who went public?

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Why go public?

COST EFFECTIVE way of raising capital

BANKS LOANS not needed

SAVEcash reserves

RETURNTO THE MARKET ANY TIMEto raise funds

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Advantages to Going Public

Expands access to capital

Enhanced market visibility, credibility, and

public profile

Expands business relationships

Increases employee commitment and strongerrecruiting power

Flexibility in financial planning

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Expands Access to Capital

A successful LISTING EXERCISE guaranteessubstantial proceeds into the company

Cheaper sources of funds

Publicly listed companies can easily return tothe market for additional funds

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Market Visibility

TELEVISION, RADIO, AND NEWSPAPERSprovide a continuous flow of trading activityinformation and disclosure requirements thataid shareholders in tracking their investments.

MEDIA EXPOSURE

GLOBAL MARKET reach

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Transparency

Shows a degree of maturity

Public perception of trustworthiness

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Public Profile and Credibility

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Enhances Business Relationships

VISIBILITY generated attracts investorsand potential partners

FAIR VALUATION

EASIER ASSESSMENT for M&As,

private placements, and similar vehicles

Shares of stock = collateral or better tradecredits

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Employee Commitment andRecruitment Power

Attract superior quality of employees

Stock option plans gives the employee a

chance to own part of the company

Stronger employee commitment =

increased productivity and quality ofwork

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Ease of valuation

Liquidity

Eases the burden of estate

planning

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Flexibility in PersonalFinancial Planning

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What is an IPO?

The company offers its shares tothe public for the first time.

PRIMARY shares

Private companies becomes aPublic Property

Investing Public now has achance to own the company

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Listing By Way of Introduction

1. Already listed or will list simultaneouslyin another Exchange.

2.

Non-listed companys shares aredistributed through a property dividendwhich will be issued by a listed companyto its shareholders.

3. Delist 1 or more subsidiaries in favor of aholding company.

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Listing By Way of Introduction

4. The company is mandated by law to list inan Exchange.

5. Public offering is mandated by law andthe company secures a clearance from therelevant agency stating that it does notobject to the LBWI and that the company is

not a closely held corporation as definedunder Sec. 127 of NIRC 1997

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1. An unqualified company buys majority ofa listed company.

2. Buyer must do a tender offer to purchasethe minority shareholders.

Reverse IPO or Backdoor listing

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What is a REIT?

Offers common shares to the publicand traded in an exchange

Directly invests in real estate

Manages income-producingproperties

Distribute most of its profits asdividends (90%)

Receives special tax considerations

Li i R i

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Listing Requirements

GENERAL CRITERIA

FIRST BOARD(incl. REIT)

SECOND BOARD SME BOARD

Has Been Profitable For3 Years

ORMarket Cap of P500 M

(provided it has a five-year operating history)

ORNet tangible assets of

P500 M

Potential for SuperiorGrowth by submitting aStatement of ActiveBusiness Pursuits andObjectives.

ANDAn operating history of

at least one year prior to

its listingANDUpon listing, the Market

Cap of the Companymust be at least P250 M

Management has afavorable degree ofcapability andintegrityThe Company has a

potential for growth,sustainableprojected earning

streamThe Company lacksor does not have anyexisting materialconflicts of interest

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TRACK RECORDFIRST BOARD

(incl. REIT)SECOND BOARD SME BOARD

Must have aconsolidated pretax

profit of at least P50Mand a minimum of P10Mprofit each year for threefull fiscal years.

None, but must stilldemonstrate a potential

for superior growththrough the submissionof STATEMENT OFACTIVE BUSINESSPURSUITS ANDOBJECTIVES.

Should have beenoperational for one

year with positive netoperating income.(EBITDA)


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Li i R i

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EXEMPTION FROM THE TRACK RECORDREQUIREMENT - FIRST BOARD ONLY

Operating for at least 10 years prior to the filing of the application.

Cumulative pre-tax profit of at least P50 Million .NO non-recurring and extraordinary income and/or loss for the lastThree (3) fiscal years immediately preceding the application for listing.

NEWLY FORMED HOLDING COMPANIES

1. Uses the operational track record of its subsidiary(ies).2. The COMPANY cannot divest its shareholdings in the subsidiary(ies)

for at least three (3) years from the listing of its securities.3. Prohibition DOES not apply if a divestment plan is approved by

majority of the applicant companys stockholders.


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FIRST BOARD SECOND BOARD SME BOARD REIT

AuthorizedCapital Stock

Minimum-

P400,000,000.00

Subscribed andPaid-up

Minimum-

P100,000,000.00

Authorized CapitalStock

Minimum-

P100,000,000.00


Minimum-

P25,000,000.00Condition on Paid-up: atleast 75% of the paid-upmust have already beendisbursed to the project,venture or business referredto in the business plan


Minimum-

P20,000,000.00


Minimum-

P5,000,000.00Net tangible assets ofP5,000,000 (EXCEPTinformation technologycompanies)


Minimum-

P300,000,000.00


Minimum-

P300,000,000.00

NUMERICAL CRITERIA

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FIRST BOARD SECOND BOARD SME BOARD REIT

7 Directors (ofwhich 2 are

independent)

1,000 shareholders, eachowning sharesof at least one

board lot


independent)

500 shareholders, eachowning shares ofat least one board

lot


independent)

50 shareholders, eachowning sharesof at least one

board lot

7 Directors (ofwhich 1/3 are

independent)

1,000 shareholders, eachowning of atleast 50 shares

MINIMUM NUMBER OF DIRECTORS

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LOCK-UP RULES



Existing stockholders

who own an equivalentof at least 10% of theissued and outstandingshares

A minimum period of180 days after the listingof the shares

Existing stockholders

who own an equivalentof at least 10% of theissued and outstandingshares

A minimum period of365 calendar days afterthe listing of the shares

ALL existing

stockholders whoown an equivalent ofat least 10% of theissued andoutstanding shares

A minimum periodof 2 Years after thelisting of the shares


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PROCESSING FEES



P50,000 P20,000.00


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LISTING FEES



Based on Market Capitalization

First P15 b 1/10 of 1% of marketcapitalization, but not lower thanP500,000.00.

Next P15 b Php15 Million + 1/20 of 1%.

Fixed listing fee ofP50,000.00.


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MANILA ELECTRIC COMPANY

Current Market Capitalization =

Php 185 billion (May 21, 2010)

Listed on January 8, 1992

Book Value on Listing =

Php

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Listed December 15, 2000

Book value before listing =

Php 10.32 million

Current Market Capitalization =Php 1.9 billion (as of May 21, 2010)

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IP E GAME VENTURES INC

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BOOK VALUE BEFORE LISTING =

PHP331 MILLION

Listed on February 17, 2010

CURRENT MARKET

CAPITALIZATION =

PHP1.54 billion

IP E-GAME VENTURES, INC.

P t ti

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Presentation

Stock Market Reformsand Initiatives

St k M k t R f d I iti ti

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- Agreement with BOI to implement specific provisions of E.O.

226 or the Omnibus Investments Code, requiring BOI-registered firms to list within 10 years of BOI registration

- Liberalization of listing rules for mining companies, and rulesfor listing by way of introduction

- Intensified personal selling activities and roundtable

discussions with listing applicants

Listings Campaign

Stock Market Reforms and Initiatives

St k M k t R f

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Tighter Disclosure Rules

- Blackout Rule

- Selective Disclosure Rule

- 10-Minute Rule

- Online Disclosure System- IAS-Compliant Financial Reports

Stock Market Reforms

NEW STRATEGIC AGENDA

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NEW STRATEGIC AGENDA

LE

VEL

U

P

ist more companies and securitiesxpand the investor base

alue and enhance corporate governance standards

nhance shareholder value

aunch new products and services

pgrade market infrastructure & human resources

artner with government & other stakeholders

St t i I iti ti

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Strategic Initiatives

Expand and Educate Investor Base- Approval of CMO 39, mandating the inclusion of a

stand-alone capital markets subject in businessadministration courses

- Integration of topics on Capital Markets in High-SchoolCurriculum

- Overseas Filipino Investors Program (PERA)

- Removal of Documentary Stamp Tax (DST) in secondary

trading- Investor awareness and education programs:

> PSE Certified Securities Specialist Course> Best Thesis and Best Business Plan Competitions

> Local and International Roadshows

Strategi Initiati e

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New Products and Services- Securities Borrowing and Lending- Short selling- Extended trading hours

- Exchange Traded Funds (ETFs)- Real Estate Investment Trusts- Derivatives

New Listings- Pursue the reduction of Corporate

Income Tax for listed companies

Strategic Initiatives

Enabling Legal Environment

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ENACTED Personal Equity Retirement Account Law (RA ) Credit Information System Act (RA ) Removal of Documentary Stamp Tax in Secondary

Trades (RA 9648) Real Estate Investment Trust Act (RA 9856)

PROPOSED Financial Recovery and Insolvency Act (FRIA)

Collective Investment Schemes Law

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Maraming salamat po!

website: www.pse.com.phe-mail: [email protected]

tel.no: (632) 688-7600

J. ANTONIO S. VILAR

Head of Marketing

Enabling Legal Environment - Enacted

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E a i g ega E i o e E a e

Personal Equity Retirement Account Law(RA 9505)- Must be invested in Philippine capital markets to enjoy

tax privileges

- Annual limit is Php 100,000 per individual andPhp200,000 per household, subject to increase byDepartment of Finance

- Double if Overseas Filipino Investor

- Tax Incentives

5% tax credit All income tax-exempt Employer contribution tax deductible

Enacted into Law

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Enacted into Law

Credit Information System Act (RA 9510) Designed to institutionalize gathering and

distribution of credit information to strengthenfinancial system and reduce the cost of borrowingin the Philippines

Mechanism Financial institutions (e.g., banks) mandated to share

credit information with a credit information company

Credit info company co-owned by government and

private sector Credit information can be accessed by financialinstitutions and other authorized parties

Enacted into Law

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Enacted into Law

Removal of the Documentary Stamp Taxin Secondary Trades (R.A. 9648)

Exempts from DST the sale, barter, or

exchange of shares of stock traded orlisted in the PSE.

Creates an enabling investment climatein the Philippines.

Fast-tracks economic development


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g gEnacted into Law

Real Estate Investment Trust Act (RA9856)

- Adopted the Japanese and Singapore models of REITlaws

Corporate form (Mutual fund-type) Trust form (Singapore)

- Designed to encourage investments in income

producing real estate to develop the real estateindustry and infrastructure need of the country andcapital markets.


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g gEnacted into Law: Republic Act No. 9856

Real Estate Investment Trust Act(REIT)Tax incentives- Lower income tax base - after deducting dividends

out of its distributable income as dividends to owners

of common shares and of preferred shares- Exempt from IPO tax and secondary offering

- Any sale or transfer of real property to a REIT shall besubject to 50% of the applicable DST, registration and

annotation fess and shall be exempt from creditablewithholding tax

These incentives can be availed by an unlisted REIT if itlists with an Exchange within 2 years from the initialavailment of the incentives.


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g gEnacted into Law: Republic Act No. 9856

Real Estate Investment Trust Act (REIT)- Dividend or income distribution to investors

Exempt from tax if investor is: Domestic and resident foreign corporation Overseas Filipino Investor

- Must be listed with the stock exchange- Must distribute at least 90% of net income to its

investors in the form of dividends

- Must be majority owned by the public

Passed in the Senate. Under review by the

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yHouse of Representatives

Financial Recovery and Insolvency Act(FRIA) Will replace 1909 Insolvency Act (Act No. 1956) Includes new forms of corporate recovery

Fast track court-supervised proceedings short periodfor court to approve rehabilitation plan

Out-of-court rehabilitation (without need of courtapproval) if:

Creditors holding at least 75% of unsecured debt and

Creditors holding at least 67% of secured debt agree torestructure debts of corporate debtor

Orderly liquidation of assets and liabilities if notpossible to rehabilitate.

Recognizes cross-border insolvency proceedings


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g gProposed Laws

Collective Investments Schemes Law(CISL) Designed to modernize mutual fund industry in the

Philippines

Best international practices adopted

Both corporate (mutual funds) and collectiveforms of investments (e.g., unitized collectiveinvestment funds) given statutory recognition

Uniform rules shall apply to unitized forms ofcollective investments, regardless of issuer,trustee or fund manager

Independence principle adopted, e.g., independentfund manager and trustee for funds

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