Y2K Readiness

December 10, 1999 PSE MEMO FOR BROKERS NO. 394-99 SUBJECT : Y2K Readiness We are pleased to inform all Member Brokers of our readiness to meet the challenges posed by the coming of the new millennium. The Exchange assures all market participants that it had implemented measures to ensure the reliability of its trading system and continued service to all its Member Brokers and the investing public even beyond the Year 2000. All the Y2K-related work has been generally completed by September 1999. A freeze on all systems modifications has been in place since 31 October 1999. The contingency plan has been completed as well, and is continuously being enhanced and tested to ensure quick response to unforeseen events. Furthermore, all of the Exchange's Y2K-related work has been reviewed and validated by an independent third-party auditor based on the procedures and standards for Year 2000 Readiness as approved by the Philippine Presidential Commission on Year 2000 Compliance. For more details on PSE's Y2K Readiness, please refer to the enclosed report. (SGD.) JOSE LUIS U. YULO, JR. President and Chief Executive Officer YEAR 2000 READINESS STATEMENT The Philippine Stock Exchange, Inc. (PSE) is pleased to disclose its readiness to meet the challenges posed by the coming of the new millennium. The PSE assures all market participants that it had implemented measures to ensure the reliability of its trading system and continued service to all its Member Brokers and the investing public even beyond the Year 2000. Y2K ACTIVITIES PSE's Y2K-related activities formally started as early as January 1998 when the Y2K Project was initiated to ensure that the Exchange's business processes and systems will not be affected during the millennium transition. The Exchange immediately proceeded to make an inventory of business systems, hardware, software, network and telecommunication facilities, and assessed these systems' criticality, impact, and readiness. As part of the Exchange's Y2K readiness audit, hardware vendors were commissioned to perform a thorough health check on all mission critical trading computer servers and key systems. Services providers were asked to evaluate the readiness of their respective systems and certifications were requested to indicate their systems' compliance to industry Y2K standards. To remedy non-compliant systems, the Exchange installed upgraded versions of software, decommissioned and replaced some equipment with newer models, and/or fixed other computer systems and software. On the other hand, the program codes of both the Automated Order Matching trading engine software and related application programs running on the client PC terminals were rewritten in accordance with the DISC PD2000 rules. After the successful intensive internal testing to check the validity of program processing for all the identified critical dates, the Y2K compliant version of the trading system software was put into production on August 3, 1998. STREET-WIDE TESTING As part of the Y2K validation process, the PSE conducted a series of integration or "street-wide testing" (SWT) with all its member-brokers, the Philippine Central Depository (PCD), the settlement banks, the custodian banks and the data vendors. This is verify whether the trading-related systems of market participants and the interfacing between these systems are all Y2K ready. To date, the Exchange has conducted 4 sets of the SWT's each consisting of 4 days of mock trading and 2 settlement days conducted in December 1998, April, August, and November 1999. During these tests, actual trading and settlement activities were simulated for the critical dates of the year 2000 transition, including January 3, 2000 which is the first trading/settlement day of the next millennium. The successful completion of the street-wide tests has confirmed that the PSE Maktrade System is Y2K-ready. CONTINGENCY PLANS In anticipation that some mission critical systems or services may still fail despite diligent and comprehensive preparations, the Exchange has developed a Y2K Contingency Plan to ensure the continuity of the organization's business processes. This contingency planning involved identifying, assessing, managing and mitigating probable Y2K risks and threats, and providing for contingencies/strategies to address system failures in the event risk mitigation efforts fail. The PSE Y2K Contingency Plan supplements the Disaster Prevention and Recovery (DPR) Program already in place, and includes measures to address specific Y2K scenarios as well as risk mitigation measures like the setting up multiple backup/recovery processes, establishing additional roll-over management procedures, and scheduling the availability of key personnel. Y2K COMPLIANCE STATUS All the Y2K-related work has been generally completed by September 1999. A freeze on all systems modifications has been in place since 31 October 1999. The contingency plan has been completed as well, and is continuously being enhanced and tested to ensure quick response to unforeseen events. Furthermore, all of the Exchange's Y2K-related work has been reviewed and validated by an independent third-party auditor based on the procedures and standards for Year 2000 Readiness as approved by the Philippine Presidential Commission on Year 2000 Compliance. Thus with all these activities in place, the Exchange is very confident of its readiness to meet the challenges of the new millennium and assures all market participants of its commitment to ensure continuous service even beyond the Year 2000.