august 19, 2003

August 19, 2003

PROPOSED DRAFT RULES FOR LISTINGREAL ESTATE INVESTMENT FUND

SECTION 1. Scope - These rules set out the requirements for the listing of real estate investment funds.

A real estate investment fund may be incorporated or established in the Philippines or in another country. If it is incorporated or established in a foreign country, the fund may be required to satisfy the Exchange that there are adequate rules governing such funds.

Both existing and newly-formed real estate investment funds may be

considered for listing in the Exchange.

SECTION 2. Real Estate Investment Fund – A Real Estate Investment Fund is an investment company formed for the purpose of owning real estate assets and real estate related securities. It may also operate such income producing real estate properties. Generally, income is generated by rents collected from those properties and the proceeds from the sale of properties.

A Real Estate Investment Fund distributes its income as dividends to the investors of the fund.

SECTION 3. Definitions –

A. Real Estate Investment Fund - means a public investment vehicle (organized as a company) that invests or proposes to invest within 24 months from the close of the first launch/offer at 35% of its total assets in real estate. An investment in real estate may be by way of direct ownership or a shareholding in an unlisted company whose sole purpose is to hold/own real estate.

B. Real estate-related assets - means listed or unlisted debt securities and listed shares of or issued by property companies, mortgaged-backed securities, other property funds, and assets incidental to the ownership of real estate (e.g. furniture).

Proposed Rules for Listing Real Estate Investment Funds of 25

C. Cash equivalent items – means instruments or investments of such high liquidity and safety that they are good as cash (e.g., government securities).

D. Total Assets – means the value of the fund’s total assets based on the latest valuations.

SECTION 4. Listing Requirements – A real estate investment fund applying to list in the Exchange must comply with the following requirements:

A. Assets under management

1. The fund must be invested in real estate and must make up at least 70% of the total assets under management;

2. All assets held by the fund must be limited to real estate assets, real estate related, cash or highly liquid cash equivalents; and

3. At least 50% of total assets must be income producing and not likely to be sold within a year.

B. Fund size

1. For a real estate investment fund denominated in Philippine Pesos:

(a) a minimum asset size of at least Php 500 million.

2. For a real estate investment fund denominated in a foreign currency:

(a) a minimum asset size of at least US$ 20 million (or its equivalent in other currencies);

(b) a spread of holders necessary for an orderly market in the shares or units of the fund.; and

(c) in the case of a fund incorporated or established in a foreign country, facilities for the transfer and registration


of securities in the Philippines (if required by the Exchange).

C. Public distribution

1. At least 25% of the fund’s share capital or units is held by at least 250 security holders; and

2. Major shareholders of the fund should hold no more than 75% of the listed shares of the real estate investment fund.

D. Income distribution – As a real estate investment fund, it is required to distribute at least 95% of its income as dividends to the fund shareholders.

Income refers to the applicable income that can be distributed as dividends to the fund’s shareholders in accordance to the provisions as promulgated by the Commission.

SECTION 5. General Investment Coverage and Restriction – A real estate investment fund that is incorporated or established in the Philippines and denominated in Philippine pesos must comply with the general provisions of the Investment Company Act governing investment funds.

A real estate investment fund that is incorporated or established in a foreign country must comply with the relevant Philippine investment laws, rules and regulations (when applicable) and with the foreign country’s investments laws, rules and regulations where it is established.

A. Permissible Investments – The real estate investment fund may only invest in the following:

1. Real estate, be it freehold, leasehold and/or joint owner, and whether in or outside the Philippines;

2. Real estate-related assets, wherever the issuers/assets securities are incorporated/located/issued/traded;

3. Listed or unlisted debt securities and listed shares of or issued by local or foreign property company;


4. Government securities of the Philippine Government or any of its agencies; and

5. Cash and cash equivalent items.

The real estate investment fund may invest in local and/or foreign assets subject to the terms and regulations of the articles of incorporation of the fund.

When investment is made to foreign real estate asset, the Property Manager must ensure compliance to the relevant rules and regulations governing the fund and the rules and regulations in the country where the asset being acquired.

When investing in leasehold properties, the Property Manager should consider the remaining term of the lease, the objectives of the fund, and the lease profile of the fund’s existing property portfolio.

When investing in real estate as a joint owner (in the case of direct ownership) or a shareholder (in the case of an unlisted company), the Property Manager should take into account whether the fun can divest its investment within a reasonable period of time and in the case of real estate, at a reasonable price as defined in this article.

A real estate investment fund may invest in locally and/or foreign registered real estate investment funds. If the investment in foreign registered real estate investment fund exceeds 10% of its assets, such foreign fund must met the following criteria:

1. The foreign property fund must be registered in a jurisdiction where the core investment and borrowing requirements for property funds are substantially the same as those prescribed in these rules; and

2. The manager of the foreign property fund must be part of the same group of companies as the Philippine Property Manger or be reputable and supervised by an acceptable regulator.

Financial derivatives may only be used for the purpose of –

1. Hedging existing positions in a property fund’s portfolio, where there is a strong correlation to the underlying investments; or


2. Tactical asset allocation or efficient portfolio management, provided that derivatives are not used to gear the overall portfolio of the fund.

B. Investment Restrictions

1. A real estate investment fund must not engage or participate in property development activities whether on its own, in a joint venture with others, or by investing in unlisted property development companies. For this purpose, property development activities do not include refurbishment, retrofitting and renovations.

2. A real estate investment fund must not investment in vacant land and mortgages (except for mortgage-backed securities). Subject to the previous provision, this prohibition does not prevent real estate investment fund from buying real estate to be built on a vacant land that has been approved for development.

3. A real estate investment fund must comply with the following restrictions and requirements:

a. Subject to provision no. 6, at least 35% of the real estate investment fund’s total assets must be invested in real estate. A new fund will be given twenty-four (24) months from the close of the first launch/offer to comply with this requirement;

b. At least 70% of the real estate investment fund’s total assets must be invested, or proposed to be invested, in real estate and real estate-related assets;

c. Investments in uncompleted1 non-residential property developments in the Philippines or uncompleted property developments outside of the Philippines must not exceed 20% of the real estate investment fund’s total assets;

d. In provision letter c, not more than 10% of the real estate investment fund’s total assets can be invested in

1 An uncompleted property is one that has not been granted an Occupation Permit or equivalent by the relevant authorities.


uncompleted property developments by a single developer;2 and

e. For investments in listed or unlisted debt securities and listed shares of or issued by property and non-property companies (local and foreign) and other locally-registered/incorporated property funds, not more than 5% of the property fund’s total assets can be invested in any one issuer’s securities or any one manager’s funds.

4. In provision no. 3, a company and its subsidiary companies are regarded as one issuer or manager.

5. The investment restriction/requirements in provision no. 3 (c), (d), and (e) are applicable at the time the transactions are entered into. A real estate investment fund is not required to divest any assets that breach the restrictions/requirements if such breaches were a result of –

a. the appreciation or depreciation of the value of the property fund’s assets;

b. any dividends/distributions made from the real estate investment fund; or

c. in respect of investments in listed shares of or issued by property and non-property companies (local and foreign) - any changes in the total issued nominal amount of securities arising from rights, bonuses or other benefits that are capital in nature.

6. Where as a result of divestment or new issue of shares by the real estate investment fund, a fund’s investments in real estate fall below 35% of its total assets, the fund must increase the proportion of its real estate investments to 35% within –

a. twelve (12) months if the real estate investments fall to a level between 20% and 35% of the property fund’s total assets; or

b. twenty-four (24) months if the real estate investments fall below 20% of the property fund’s total assets.

2 The value of the investment refers to the contracted purchase price and not the value of progress payments made to date


7. Provision no. 6 would not apply if –

a. in the case of divestment – the property fund offers to distribute at least 70% of the proceeds of the divestment in cash within twelve (12) months (in the case of provision 6 (a) and twenty-four (24) months (in the case of provision 6 (b); or

b. in the case of a new issue of shares – the real estate investment fund offers to return at least 70% of the subscription moneys received from such new issue within twelve (12) months (in the case of provision 6 (a)) and twenty-four (24) months (in the case of provision 6 (b)); or

c. in the case of either divestment or new issue of shares – the real estate investment fund is in the process of being wound up.

SECTION 6. Interested Party Transactions –

A. A real estate investment fund may, at the first launch/offer of the fund and any time after twelve (12) months from the first launch/offer of the fund –

i. acquire assets from or sell assets to interested parties; or

ii. invest in securities of or issued by interested parties3,

if the following requirements are met:

a. adequate disclosures are made in the prospectus (if it is at the first launch/offer of the real estate investment fund) or circular (if it is during the life of the real estate investment fund), stating:

1. the identity of the interested parties and their relationships;

2. the details of the assets to be acquired or sold, including a description of these assets and location of the real estate assets;

3. the prices at which these assets are to be acquired or sold;

3 Mortgaged-backed securities issued by special purpose vehicles are not covered.


4. the details of the valuations performed (including the names of the appraisers, the methods used to value those assets and the dates of the valuations) and their assessed values;

5. the current/expected rental yield (if any);

6. the minimum amount of subscriptions to be received, if the transaction(s) is/are conditional upon the real estate investment fund receiving the stated amount of subscriptions; and

7. any other matters that may be relevant to a potential investor in deciding whether or not to invest in the real estate investment fund of that may be relevant to a shareholder in deciding whether or not to approve the proposed transaction(s);

b. for transaction(s) entered into at the first launch/offer of the real estate investment fund, the fund must have entered into agreements to buy those assets at the prices specified in provision a(3) of this section from the interested parties. If the transaction(s) is/are conditional upon the real estate investment fund receiving a stated minimum amount of subscriptions, the agreements should reflect this;

c. an independent valuation of each of those real estate assets, using both the discounted cash flow analysis and comparable property analysis has been conducted in accordance to Section 7, 14, and 23. Where the appraiser uses only one of the above methods, it must explain why the other method was not used; and

d. each of those assets is acquired from the interested parties at a price not more than the assessed value under provision a(4) of this section, or sold to interested parties at a price not less than the assessed value under provision a(4) of this section.

B. In addition to sub-section A, a real estate investment fund that acquires assets from or sell assets to interested parties during the life of the fund after twelve (12) months from the launch/offer of the fund must:

a. where the transaction is equal to or greater than 3% of the real estate investment fund’s net tangible assets (“NTA”), announce/disclose the transaction immediately; or

b. where the transaction is equal to or greater than 5% of the real estate investment fund’s NTA, obtain majority vote at a shareholders’ meeting and announce/disclose the transaction immediately. A person who


has an interest whether commercial, financial or personal, in the outcome of the transaction, other than in his capacity as a shareholder, will not be allowed to vote on the resolution approving the transaction.

There must be an opinion rendered by an Independent Expert stating whether or not the transaction is on normal commercial terms and whether the transaction is prejudicial to shareholders, based on an assessment of the impact of the transaction on the real estate investment fund on an overall basis. The Independent Expert should also draw the shareholders’ attention to any possible disadvantages of the transaction.

C. For the purpose of sub-section B, the value of all transactions with the same interested party4 during the current financial year should be aggregated. If the aggregate value of all transactions with the same interested party during the current financial year I:

a. equal to or greater than 3% of the real estate investment fund’s NTA, the requirement in provision B(a) will apply to the latest transaction and all future transactions entered into with that interested party during that financial year; or

b. equal to or greater than 5% of the real estate investment fund’s NTA, the requirements in provision B(b) will apply to the latest transaction and all future transactions entered into with that interested party during that financial year.

D. For purposes of this section, the agreement(s) to buy or sell the assets must be completed:

a. where the interested party transaction is entered into at the first launch/offer of the real estate investment fund, within six (6) months of the close of the first launch/offer; or

b. where the interested party transaction is entered into after twelve (12) months from the first launch/offer and:

i. the transaction is less than 5% of the real estate investment fund’s NTA, within six (6) months of the date of agreement; or

4 Interested party would mean a company, its subsidiary companies, its associated companies, and all their directors, chief executive officers and substantial shareholders are regarded as one party.


ii. the transaction is equal to or greater than 5% of the property fund’s NTA, within six (6) months of the date of shareholders’ approval referred to in sub-section B(b); or

c. where there are more than one interested party transaction entered into during the current financial year and the latest transaction triggers the 5% threshold referred to in sub-section C(b), within six (6) months of the date of shareholders’ approval in respect of that latest transaction.

E. An Independent Expert for the purpose of this section must:

a. not be a related corporation of or have a relationship with the investment manager, property manager, adviser, or other party/parties whom the real estate investment fund is transacting with which, in the opinion of the Board of Directors, would interfere with the Independent Expert’s ability to render an independent and professional opinion on the fairness and reasonableness of the transaction(s);

b. disclose to the Board of Directors any pending business transactions, contracts under negotiation, other arrangements with the investment manager, property manager, adviser or other party/parties whom the real estate investment fund is transacting with and other factors that would interfere with the Independent Expert’s ability to render an independent and professional opinion on the fairness and reasonableness of the transaction(s). The Board of Directors shall then take such disclosure into account when deciding whether the person concerned is sufficiently independent to act the Independent Expert for the interested party transaction(s); and

c. have the necessary expertise and experience, in the opinion of the Board of Directors, to form an opinion on the fairness and reasonableness of such transactions.

F. This entire section does not prohibit a real estate investment fund from engaging an interested party as property management agent or marketing agent for the fund’s properties provided that any fees or commissions paid to the interested party are not more than market rates.

G. For the purpose of these rules, an “interested party” is defined to include –

a. the sponsor/promoter of the real estate investment fund (if different from the investment manager and property manager);


b. the investment manager of the real estate investment fund;

c. the property manager of the real estate investment fund;

d. the adviser to the real estate investment fund;

e. the directors of the real estate investment fund;

f. a director, other than an independent director, of the sponsor/promoter, investment manager, property manager, or adviser (or an associate of any such director); or

g. in respect of the sponsor/promoter, investment manager, property manager, or adviser –

i. its ultimate/immediate holding company;

ii. its subsidiary;

iii. its associated company;

iv. its fellow subsidiary;

v. where it is an associated company of another company, say, Company X – a subsidiary of Company X5;

vi. its fellow associated company;

vii. an associated company of its immediate holding company;

viii.a subsidiary of the entity in provisions (ii), (iv) or (v);

ix. an associated company of the entity in provisions (ii), (iv), or (v).

H. For sub-section G(e), an “associate of any such director” means –

a. any member of his immediately family6;

5 Where the sponsor/promoter, investment manager, property manager or adviser is an associated company of more than one company, say, Company X and Company Y, all subsidiaries of either Company or Company Y will be considered as interested parties under this sub-section.

6 This refers to his wife, child, adopted child, step-child, brother, sister and parents.


b. the trustee, acting in its capacity as trustee, of any trust of which he or his immediate family is a beneficiary or, in the case of a discretionary trust, is a discretionary object; and

c. any company in which he and his immediate family together (directly or indirectly) have an interest of 25% or more.

I. For the purpose of sub-sections A to H, provision G(g)(viii) is capable of successive application7.

SECTION 7. Valuation of properties for disposal and/or acquisition - In case of interested party transactions, a real estate investment fund must purchase or sell real estate assets at a reasonable price. A reasonable price means –

a. In the case of acquisitions, a price not more than 110% of the value assessed in a valuation report (appraiser to be commissioned by the fund) which is not more than six (6) months old; or

b. In the case of disposals, a price not less than 90% of the value assessed in a valuation report (appraiser to be commissioned by the fund) which is not more than six (6) months old.

The date of acquisition or disposal means the date of the Sale and Purchase Agreement. Where there is more than one valuation conducted by more than one appraiser for the same real estate assets, the Property Manager shall use the average of the assessed values.

Where a real estate asset is to be bought or sold at a price other than that specified in this section, prior approval must be obtained from the Board of Directors.

Valuation of the fund’s real estate assets may be conducted if the Board of Directors or Property Manager is of the opinion that it is in the best interest of shareholders to do so.

7 For example, Company A is a subsidiary of the promoter of the fund. If Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B, the Company B and Company C (and so on) will be considered as interested parties under provision G(g)(viii).


SECTION 8. Borrowing Limit – The property fund may obtain borrowings not to exceed 25% of the total assets at the time the borrowing is incurred. It may mortgage its assets to secure such borrowings.

SECTION 9. Compliance with Anti-Money Laundering Law – The parties involved in the fund must ensure the compliance to the provisions and rules and regulations of the Anti-Money Laundering Law of the Philippines.

SECTION 10. Compliance with Foreign Investments Act – The parties involved in the property fund must ensure the compliance with the provisions and rules and regulations of the Philippine Foreign Investments Act of 1991 (as amended).

SECTION 11. General Requirements –

a. Investment Company – A real estate investment fund must be incorporated in accordance with the Investment Company Act of the Philippines and duly registered under the Securities and Exchange Commission.

In case of a foreign fund, it must be registered with the concerned agency in the country where it is formed and duly registered as well as in the Commission.

b. Investment Objective – The real estate investment fund managed by an investment manager must explicitly state its investment objectives. It must define which assets and/or securities or what types of assets and/or securities it will invest in. Such objective must be adhered to strictly by the manager of the fund.

c. Investment Policy - A newly-formed real estate investment fund must not change its investment objectives and policies in the first three years unless approved by a special resolution of the shareholders in a general meeting.

d. Investment Manager - The investment management company must be reputable and has an established track record in managing investments.


Generally, the investment management company must have been in operation for at least two years.

The persons responsible for managing the investments of the investment fund must be reputable and have a track record in managing investments for at least five years. They must have satisfactory experience in managing the particular types of funds for which listing is sought.

e. Property Manager – The investment manager shall hire the services of a property manager to handle all aspects of the direct management of the real estate assets, including physical management of the real estate properties and handling rental contracts and invoices and other aspects of real estate operations.

f. Transfer Agent – The fund shall engage the services of a duly-licensed transfer agent acceptable to the Exchange and duly accredited by the Commission to maintain an accurate registry for recording initial and subsequent transfers of shares.

g. Auditor – The fund shall engage the services of an independent auditing firm acceptable to the Exchange and duly accredited by the Commission to perform independent audit of the investment fund’s financial records.

(i) Appraiser/Appraisal Company – An appraiser is the entity that conducts valuation on the real estate investment fund’s assets. The appraisal company must be acceptable to the Exchange and duly accredited by the Commission.

SECTION 12. Requirement of an Investment Manager -The investment management company must be reputable and has an established track record in managing real estate investment funds. The investment manager must -

a. have been in operation for at least two (2) years;

b. the persons responsible for managing the investments of the investment fund must be reputable; and

c. have a track record in managing investments for at least five (5) years and have satisfactory experience in managing the particular types of funds for which listing is sought.


The investment manager must also be one who can reasonably expected to –

a. conduct its affairs, in relation to the real estate investment fund, honestly, fairly, professionally and with integrity;

b. exercise due care and diligence in fulfilling its responsibilities to the real estate investment fund; and

c. have adequate safeguards against potential abuses, including those arising from conflicts of interests.

Where the investment manager has appointed an adviser, the adviser need not be independent of the manager and may act as agent in seeking out buyers/sellers or real estate or in managing the fund’s real estate assets. However, where there adviser has been appointed as the marketing agent for a property, that adviser may recommend the property fund to purchase that property only if –

a. the adviser has disclosed to the investment manager that is the marketing agent for that property; and

b. the adviser is not related to the investment manager.

Where a commission or fee is paid by the fund to the adviser in its capacity other than as adviser, such commission or fee paid must not be more than market rates.

SECTION 13. Requirement of a Property Manager – Each real estate investment fund must appoint a property manager and may be a related party to the investment manager. The property manager must -

a. have at least five (5) years of experience in managing real estate properties; or

b. employ persons who have at least five (5) years of experience in managing real estate properties;


SECTION 14 – Requirement of an Appraisal Company – The appraisal company to be employed by the investment manager for the real estate investment fund shall comply with the following requirements –

a. should not be a related corporation of or have a relationship with the investment manager, property manager, adviser or other party/parties whom the property fund is contracting with which, in the opinion of the Board of the Directors, would interfere with the appraisal company’s ability to give an independent and professional valuation of the property;

b. disclose to the real estate investment fund’s Board of Directors any pending business transactions, contracts under negotiation, other arrangements with the investment manager, property manager, adviser or other party/parties whom the property fund is contracting with and other factors that would interfere with the appraisal company’s ability to give an independent and professional valuation of the property. The Board of Directors shall then take such disclosure into account when deciding whether the person concerned is sufficiently independent to act as the appraiser for the property fund;

c. be duly licensed and authorized under any law of the Philippines and accredited by the Commission (in cases where the assets are located in the Philippines) or duly licensed and authorized under any law of the country where the valuation takes place other than the Philippines, to practice as appraiser;

d. have the necessary expertise and experience in valuing properties of the type in question and the relevant area; and

e. not value/appraise the same real estate property for more than two (2) consecutive years.

To avoid the possibility of conflict of interest, an adviser appointed by the investment manager cannot value the properties that it recommends to be bought or sold by the property fund. However, that adviser may value the property after it has been acquired by the fund.

SECTION 15. Disclosure - The applicant company shall fully disclose any and all material information relative to the issue. The Exchange may require disclosure of additional or alternative items of information as it considers appropriate and material in any particular case.


The real estate investment fund’s prospectus must include the following information in addition to the disclosure requirements under the Securities Regulation Code:

a. investment objective(s) of the real estate investment fund, including whether the primary objective is to obtain regular income and/or capital appreciation;

b. whether and how the real estate investment fund will have proper diversification of its investments. Where the property fund proposes to invest in a single real estate asset or where there is a high concentration of its real estate investments, this fact, and the risks arising from the lack of diversification, must be disclosed;

c. the real estate investment fund’s policy on divestment of assets, including whether the proceeds are to be returned to investors or to be reinvested;

d. the particulars of interested-party transactions;

e. a statement in respect of the real estate assets proposed to be bought by the fund, including the location (country or region) and type(s) of real estate (e.g. residential, commercial, industrial);

f. where it is a new real estate investment fund – a statement that the investment manager has up to twenty-four (24) months to invest at least 35% of the fund’s total assets in real estate;

g. where the real estate investment fund has identified specific real estate assets to be bought – the period within which the transaction will be completed;

h. where a new real estate investment fund specifies a minimum size of the fund, failing which subscription moneys will be returned to investors – this fact should be disclosed;

i. details of the real estate investment fund’s permissible investments, investment restrictions and borrowing limit;

j. the prohibition on investments by foreign investors where the property fund proposes to invest in real estate subject to the Philippine Foreign Investments Act of 1991 (as amended);

k. the expertise and experience of the investment manger, or its employees, in managing property funds or investing in and/or advising on real estate, respectively;


l. the expertise and experience of the adviser (if any), including a statement detailing the functions of the adviser;

m. details of all fees and commissions payable to the investment manager, property manager, adviser and interested parties (if any);

n. the frequency of valuation of the fund’s real estate assets; and

o. the risks of investing in the property fund, including:

1. the general risks associated with investing in real estate;

2. the particular risks of its proposed investments; and

3. the risk that an investor is unable to sell his investments subject to the equity market risks such as liquidity.

The applicant company must show its willingness to comply with the full

disclosure policy of the Exchange. If during the application, the applicant company fails to make a timely disclosure of material information or deliberately misrepresents material facts to the Exchange, then the Exchange may consider said actions as evidence of the applicant’s refusal to comply with the full disclosure policy of the Exchange and on the basis thereof reject the application.

SECTION 16. Minimum Number of Directors - Upon the filing of the application, the applicant company shall have and maintain a minimum of Seven (7) directors. It shall have at least two (2) independent directors.

SECTION 17. General Offering Requirements – When listing approval is granted by the Exchange and registration of the investment fund’s securities becomes effective, the investment fund shall undertake an offering for its securities. The offering, however, will not be covered by the IPO Distribution Rules.

The investment fund manager shall be given flexibility in offering the fund’s shares to the public subject to compliance of the minimum number of shareholders as required in Section 4.


SECTION 18. Listing Procedure and Process - The general procedures for listing of equity securities shall be adopted in processing listing applications for real estate investment funds.

SECTION 19. Contents of Listing Application - The listing application must contain the following information:

a. Structure and constitution of the real estate investment fund;

b. Full title or designation, and rights and privileges of the securities for which listing is sought;

c. Names of the investment manager/property manager, investment adviser, administration agent, custodian, auditor, and transfer agent of the investment fund; and

d. The financial track record of the investment manager/property manager and investment adviser and or persons employed by them to carry out their duties as investment manager or investment adviser, stating their employment history and work experience and details of all funds managed or advised by them.

The Exchange may require the applicant to provide additional information and any other documents that it requires for a proper evaluation of the application.

SECTION 20. Prospectus, Press Releases and Other Similar Documents - All prospectus, primers, subscription agreement forms, newspaper prints, advertisements, press releases and similar documents in connection with the issuance shall first be submitted to the Exchange for review and disclosure purposes.

SECTION 21. Responsibility of Directors and Officers of the Applicant company and Lead Underwriter - Directors and officers of the applicant are required to accept responsibility for the information which the listing application and all documents submitted to the Exchange contain, including its Prospectus. A statement to that effect shall be incorporated in the Prospectus. Moreover, the last page of the Prospectus or offering memorandum shall contain the following:


a. A statement that the applicant company and the lead underwriter/s have exercised due diligence in ascertaining that all material representations contained in the prospectus or offering memorandum, their amendments and supplements are true and correct and that no material information was omitted, which was necessary in order to make the statements contained in said documents not misleading; and

b. The name and signature of a majority of the members of the Board of Directors of the applicant company and the chief executive officer/chief operating officer of the applicant company and the lead underwriter/s.

SECTION 22. Continuing Listing Requirements - Without in any way limiting the applicability of the rules governing continuing listing and all the rules and regulations set forth by the Exchange, the following shall be observed at all times:

a. The minimum number of beneficial holders at any given time shall be One Hundred (100) or such other number as the Commission may from time to time prescribe.

b. The Issuer shall pay the annual maintenance fee assessed by the Exchange.

c. Simultaneously as required by the Commission, the Issuer shall furnish the Exchange certified true copies of information, documents and reports submitted to the Commission relating to the issues listed. In the case of exempt securities, the issuer shall furnish the Exchange updated information in the form and frequency that the Exchange shall prescribe.

The real estate investment fund must ensure that all necessary facilities and information are available to enable holders of its listed securities to exercise their rights. In particular, it must inform holders of the holding of meetings which they are entitled to attend, enable them to exercise their right to vote where applicable, and publish in the newspapers notices or distribute circulars giving details of the allocation and payment of interest in respect of such securities, the issue of new securities and redemption of securities.

SECTION 23. Periodic Valuation of the Real Estate Investment Fund Assets – A full valuation of each of the property fund’s real estate assets must


be conducted by an appraisal company, duly accredited by the Commission, at least once a year in accordance with the applicable rules of asset valuation prescribed by the Commission.

When the Property Manager proposes to issue new shares for subscription, a valuation of all the fund’s real estate assets must be conducted by an appraisal company unless the assets(s) has/have been valued not more than six (6) months old (based on the date of valuation report).

SECTION 24. Periodic Reporting, Disclosure Policy, and Other Requirements– The general structured and unstructured reportorial requirements shall apply to real estate investment funds under the Disclosure Rules of the Exchange.

It shall likewise comply with the following:

A. Annual Report - The annual report of an real estate investment fund must also disclose the following information:

1. details of all real estate transaction(s) entered into during the year, including the identity of the buyer(s)/seller(s), purchase/sale price(s), and their valuation(s) (including the method(s) used to value the asset(s));

2. details of all the property fund’s real estate assets, including the location of such assets, their purchase prices and latest valuations, rentals received and occupancy rates, and/or the remaining term(s) or the fund’s leasehold property(ies) (where applicable);

3. in respect of the other assets of the property fund – details of the following:

a. ten (10) most significant holdings (including the amount and percentage of fund size at market valuation); and

b. distribution of investments in dollar and percentage terms by country, asset class (e.g. equities, mortgaged-backed securities, bonds, etc.) and by credit rating of all debt securities;

4. details of the fund’s exposure to derivatives, including the amount (i.e., net total aggregate value of contract prices) and


percentage of derivatives investment of total fund size and at market valuation;

5. details of the property fund’s investment in other property funds, including the amount and percentage of total fund size invested in;

6. details of borrowings of the real estate investment fund;

7. the total operating expenses of the fund, including all fees and charges paid to the property manager, adviser and interested parties (if any), and taxation incurred in relation to the fund’s real estate assets;

8. the performance of the fund in a consistent format covering various periods of time (e.g. one year, three year, etc.). Calculation of such performance should –

a. be based on the change in the share price transacted on the stock exchange over the period8; and

b. include any dividends/distributions made assuming that they were reinvested into the property fund on the day they were paid out9. In addition, all necessary adjustments should be made in calculating the fund’s performance to take account of various distribution and capitalization issues such as bonus issues;

9. its Net Tangible Asset and Net Asset Value per share at the beginning and end of the financial year; and

10.where applicable – the share price quoted on the exchange at the exchange at the beginning and end of the financial year, the highest and lowest share price and the volume traded during the financial year.

11. An analysis of realized and unrealized surpluses; and

12.The names of the investment manager, investment adviser, property manager together with an indication of the terms and

8 This should be based on the closing price on the last day of the preceding reporting period (or in the case of a new fund, the opening price on the first day of trading) compared with the closing price on the last day of the current period.9 The price at which dividends/distributions are assumed to be reinvested shall be the closing price of the share traded on the stock exchange on the ex-dividend or ex-distribution date.


duration of their appointment and the basis for their remuneration.

B. Periodic Reports -

1. A real estate investment fund must seek shareholders' approval for any change of the investment manager/property manager.

2. If a real estate investment fund is also listed on another stock exchange, any information released to that stock exchange must also be released to the Exchange at the same time in English.

3. An real estate investment fund must also comply with the following requirements:

a. The real estate investment fund must notify the Exchange at the end of each distribution period as soon as the following are computed by the managers:

(i) The gross and net earnings per share before

charging management fee;

(ii) The net amount per share (after allowing for charges and adjustments) to be distributed, together with the gross equivalent, attributable to the distribution period;

(iii) The date of the recording of the shareholders register balances; and

(iv) The date on and from which purchases and sales of shares by the investment manager will take place ex-dividend;

b. A real estate investment fund must notify the Exchange on request of the number of shares outstanding;

c. The investment manager must state clearly, in all circulars issued in respect of the sale of shares of the fund, the terms upon which it undertakes to repurchase units. If there is no undertaking, it must state that fact; and


d. An investment fund must notify the Exchange immediately of: -

(i) any changes in the control of the managers;

(ii) any proposed change in the general character or nature of the fund management; and

(iii) any intention to renew, vary or terminate the management agreement.

SECTION 25. Cancellation of Listing – Failure to comply with the continuing listing obligations shall be grounds for suspension or delisting of securities on the Exchange, notwithstanding the provisions provided in these Rules and the other rules and regulations of the Exchange.

OTHER ITEMS

Fees


1. Processing Fee – Upon application, the investment fund shall pay a non-refundable processing fee of Fifty Thousand Pesos (P50,000.00) plus other incidental expenses.

2. Listing Fee – The real estate investment fund shall be charged same listing fee rate as equity securities.

3. Annual Maintenance Fee - The investment fund shall pay an annual listing maintenance fee of P100.00 for every P1M market capitalization of listed shares as of the last trading day of the immediately preceding year, but in no case shall it be less than P200,000.00 nor more than P500,000.00.

august 19, 2003

Economy & Finance

real estate assets

real estate properties

ownership of real estate

real estaterelated assets

real estate related

foreign real estate

investment company

fund shareholders