For Public Comments: Proposed Rules for Listing in the New Board of PSE (To Replace the Existing Second and SME Boards)

July 27, 2012 PSE MEMORANDUM NO. CN-0040-12 TO : The Investing Public SUBJECT : For Public Comments: Proposed Rules for Listing in the New Board of PSE (To Replace the Existing Second and SME Boards) Further to the directive to review the rules on listing in the Second Board and Small & Medium Enterprises ("SME") Board of the Exchange, as announced in Memorandum CN-No. 2012-0036 dated July 12, 2012, the Exchange is proposing the creation of a new Board to replace the existing Second and SME Boards. Listing under this new Board shall be governed by the following proposed rules which shall supersede Article III, Parts E (Second Board) and F (SME Board) of the Revised Listing Rules. Accordingly, the Exchange is inviting all concerned parties to give their comments to the following proposed rules: ARTICLE III Equity Securities PART E (Name to Be Announced) Board Listing SECTION 1. General Criteria for Admission to Listing A company applying for listing in the (new) Board must comply with the following requirements: (a) Minimum Capital Requirement An applicant company must have an authorized capital stock of One Hundred Million Pesos (P100,000,000.00) or more, of which a minimum of twenty-five percent (25%) must be subscribed and fully paid. (b) Track Record of Profitable Operations The company must have a cumulative pre-tax profit of at least P15 Million, excluding non-recurring and extraordinary income and/or loss, for the last three (3) fiscal years immediately preceding the application for listing, and a minimum pre-tax profit of P3 Million for each of the three (3) full fiscal years immediately preceding the application for listing. The applicant must further be engaged in materially the same business and must have a proven track record of management throughout the last three (3) years prior to the filing of the application. For this purpose, the applicant company shall submit to the Exchange audited consolidated Financial Statements for the last three (3) full fiscal years preceding the filing of the application. STaIHc (c) Exception to the P3 Million Minimum Pre-Tax Profit Requirement An applicant company that has been operating for at least ten (10) years prior to the filing of the application shall not be required to have a pre-tax profit of at least P3 Million for each of the 3 fiscal years preceding the filing of the application but shall have a cumulative pre-tax profit of at least P15 Million for the last 3 fiscal years immediately preceding the filing of the application. No net operating loss must have been registered in the fiscal year immediately preceding the filing of the application. (d) Operating History A company must have an operating history of at least three (3) years prior to its application for listing. (e) Market Capitalization At listing, the market capitalization of the company must be at least P 250 Million. (f) Full Payment of Issued and Outstanding Shares The company shall cause all its subscribed shares of the same type and class applied for listing to be paid in full. (g) Minimum Offering to the Public The minimum offering to the public shall be based on the schedule set forth in Part D, Section 4, Article III of these Rules. (h) Business Plan The applicant company shall demonstrate its stable financial condition and prospects for continuing growth. For purposes of determining prospects for continuing growth, the Company shall submit a business plan indicating the steps that have been taken and to be undertaken in order to advance its business over a period of five (5) years. As a general rule, financial projections are not required, but should there be references made in the business plan to future profits or losses, or any other item that would be construed to indicate forecasts, then the applicant company is required to include financial projections in the business plan duly reviewed by an independent accounting firm. (i) Valuation of Assets When required by the Exchange, the applicant company shall engage the services of an independent appraiser duly accredited by the Exchange and the Commission in determining the value of their assets. (j) Minimum Number of Stockholders or Security Holders Upon listing, the company shall have at least five hundred (500) stockholders. Each of these stockholders must hold at least one (1) board lot of the securities of the company. TAcSCH (k) Lock Up The applicant company shall cause its existing stockholders who beneficially own an equivalent of at least 10% of the issued and outstanding shares of the company to enter into an agreement with an Escrow Agent not to sell, assign, encumber or in any manner dispose of their securities for a period of two (2) years after the listing of such securities. If there is any issuance or transfer of shares (i.e., private placements, asset for shares swap or a similar transaction) or instruments which lead to issuance of shares (i.e., convertible bonds, warrants or a similar instrument) done and fully paid for within six (6) months prior to the start of the offering period, and the transaction price is lower than that of the offer price in the Initial Public Offering, all shares subscribed or acquired shall be subject to a lock-up period of at least one (1) year from listing of the aforesaid shares: Provided, That if the subscribing or acquiring stockholder owns at least ten percent (10%) of the issued and outstanding shares of the company, the lock-up period in the immediately preceding paragraph shall apply. SECTION 3. n Chainlisting As a general rule, a subsidiary or parent company of an existing listed issuer will not be considered suitable for listing if the assets and operations of the applicant are substantially the same as those of the existing listed issuer. In arriving at a decision, the Exchange will consider the applicant's business or commercial reasons for listing. SECTION 4. Restrictions Companies applying for listing in the (new) Board are subject to the following restrictions: (i) The Exchange shall not allow the listing of any holding, portfolio and passive income company. For purposes of this Rule, holding, portfolio and passive income company shall mean a company that confines its activities to owning stocks in, and supervising management of other companies and whose source of income are mainly dividends, equitized earnings, and interest earnings from its investments. (ii) No change in primary purpose The applicant company shall not be allowed to change its primary purpose stated in its Articles of Incorporation for a period of five (5) years following its listing. The Exchange reserves the right to delist listed companies whose objective(s) and purpose(s) as stated in its Articles of Incorporation submitted to the Exchange have been amended within the specified period. (iii) No Offering of Secondary Securities The applicant company is prohibited from offering secondary securities during the Initial Public Offering. For purposes of this rule, secondary securities shall mean securities originally held by the existing shareholders prior to IPO. cDCaTH SECTION 5. Transfer to the First Board A listed company initially listed on the (new) Board may, upon written request to the Exchange, be elevated for listing in the First Board only after five (5) years and upon a showing that it has met the requirements for listing in the First Board. SECTION 6. Full Disclosure Policy (a) The applicant company shall promptly submit a comprehensive corporate disclosure to the Exchange in the following instances: (i) Sale of the company's assets otherwise than in the ordinary course of business. The comprehensive corporate disclosure shall contain, among others, the names of the parties to the transaction, the purpose for which it was entered into, and the potential effect on the operations of the company; (ii) Imposition of fines and/or other penalties on the company or its subsidiaries by regulatory authorities and the reasons therefor; (b) The company shall submit the following disclosures within the periods specified below: (i) Quarterly Progress Report on the application of the proceeds from the IPO on or before the first fifteen (15) days of the following quarter. The Quarterly Progress Reports should be certified by the Company's Chief Financial Officer or Treasurer and external auditor; (ii) Annual summary of the application of the proceeds on or before January 31 of the following year. The Annual Summary Report should be certified by the Company's Chief Officer or Treasurer and external auditor; (iii) Approval by the Company's Board of Directors of any reallocation on the planned use of proceeds, or of any change in the Work Program. The actual disbursement or implementation of such reallocation must be disclosed by the Company at least thirty (30) days prior to the said actual disbursement or implementation. (iv) A comprehensive report on the progress of its Business Plan on or before the first fifteen (15) days of the following quarter. The quarterly and annual reports required in items (i) and (ii) above must include a detailed explanation for any material variances between the actual disbursements and the planned use of proceeds in the Work Program or IPO Prospectus, if any. The detailed explanation must state the approval of the Company's Board of Directors as required in item (iii) above. The Exchange may require disclosure of additional information as it considers appropriate and material in any particular case. If during the application, the applicant company fails to make a timely and accurate disclosure of material information or deliberately misrepresents material facts to the Exchange, the Exchange may consider said actions as evidence of the applicant company's refusal to comply with the full disclosure policy of the Exchange and on that basis, reject the application. SECTION 7. Applicability of Other Provisions The applicant company must comply with published rules and requirements which the Exchange may deem applicable. aDcEIH Please send your comments to Atty. Veronica Vicedo at [emailprotected] on or before August 10, 2012. (SGD.) HANS B. SICAT President and CEO n Note from the Publisher: Copied verbatim from the official document. Missing Section 2.