MEDCO Holdings, Inc.: Lifting of Trading Suspension

March 14, 2013 PSE MEMORANDUM NO. DA-0138-13 TO : The Investing Public and Trading Participants SUBJECT : MEDCO Holdings, Inc. Lifting of Trading Suspension This is with reference to MEDCO Holdings, Inc.'s ("MED" or the "Company") disclosures pertaining to the following: 1. Voluntary trading suspension in relation to the then proposed sale of all of Export and Industry Bank, Inc.'s ("EIBA" or the "Bank") assets to and assumption of all of its liabilities by BDO Unibank, Inc. ("BDO"). Subsequently, the Monetary Board Resolution No. 686 dated April 26, 2012 effectively placed the Bank under the receivership of the Philippine Deposit Insurance Corporation ("PDIC"); and 2. Negative balance in the stockholders' equity account in the amount of P117,663,230.00 as of December 31, 2011 and the amount of P126,542,608.00 for the period ended September 30, 2012. Under the Implementing Guidelines on companies with negative stockholders' equity, the Company is required to submit a business plan detailing the activities it will undertake to bring its stockholders' equity from negative to positive. By way of background, the trading of the Company's shares was suspended since August 3, 2010, in view of the Company's request for a voluntary trading suspension until September 21, 2010, in order to give the investing public the opportunity to understand the impact on the Company of the then proposed sale of all of EIBA assets to and assumption of all of its liabilities by BDO. MED's investment in EIBA, through its majority-owned subsidiary, Medco Asia Investment Corporation, comprises as of June 30, 2010, 81% of the total consolidated assets of the Company. 1 Subsequently, the Company requested for the continuation of the voluntary trading suspension until final regulatory approvals of the proposed transaction with BDO. 2 However, as discussed above, the Monetary Board Resolution effectively placed EIBA under the receivership of the PDIC. 3 The Company, in a letter dated September 24, 2012, requested for the continued voluntary trading suspension until PDIC's turnover of EIBA to a potential third party investor is finalized. The Company explained that the turnover of EIBA to a potential third party investor or any court action that third parties might initiate against EIBA and its related parties may have a significant effect on the Company and may invite speculation as to its share price. Please refer to Annex "A" for a copy of the Company's comprehensive narration of events. The Exchange denied the Company's request for extension of the voluntary suspension of the trading of its securities. The Exchange deemed that the Company's justification is not based on any internal considerations affecting MED, but on a transaction involving EIBA, and cannot be invoked as the basis for the further extension of the Company's voluntary trading suspension. With respect to the Company's negative stockholders' equity, the Company, in a disclosure dated March 1, 2013, submitted its proposed recapitalization plan involving the following: xxx xxx xxx 1. Decrease in authorized capital stock from Php700 million to Php7 million through a reduction in par value per MED share from Php1.00 to Php0.01; 2. Increase in authorized capital from Php7 million to Php470 million; 3. Private placement transaction covering the issuance of new shares to its existing shareholder(s) and/or third parties involving a total subscription amount of Php117.6 million; and 4. Waiver of the requirement to conduct a rights or public offering by a majority vote of the minority stockholders present or represented during the meeting. xxx xxx xxx Please refer to Annex "B" for a copy of the Company's recapitalization plan, which was released via Circular No. 2224-2013 dated March 14, 2013. Given the foregoing, please be advised that the trading suspension on the Company's shares will be lifted on Tuesday, March 19, 2013 at 9:00 a.m. Considering that the trading of the Company's shares was suspended since August 3, 2010, the static threshold (trading band) on the price of MED shares will be lifted on the resumption of trading of the Company's shares on March 19, 2013. As provided in Article VII, Section 6 of the Revised Trading Rules of the Exchange: Section 6. Lifting of Static Threshold. The Static Threshold of a Security shall be lifted in the following cases: a. On the day of resumption of trading for Securities that have been suspended for at least one year; xxx xxx xxx For the information and guidance of the investing public. (SGD.) HANS B. SICAT President and Chief Executive Officer ANNEX A MEDCO HOLDINGS, INC. February 26, 2013 THE PHILIPPINE STOCK EXCHANGE, INC. PSE Plaza, Ayala Triangle Ayala Avenue, Makati City Attention : Ms. Janet A. Encarnacion Head, Disclosure Department Gentlemen/Ladies: We write in connection with the request of the Philippine Stock Exchange ("PSE"), which was verbally conveyed to us today, that Medco Holdings, Inc. ("MED" or the "Company") submit an update on the comprehensive narration of events which the Company submitted to the PSE on 20 November 2013 in support of its then pending requests for the continued trading suspension of MED shares and for an extension on the PSE deadline to submit its business plan. With respect to the voluntary trading suspension of the Company: On 2 August 2010, the Company requested for, and the PSE granted, a voluntary trading suspension of MED's shares starting 3 August 2010 until 21 September 2010. The Company wanted the public, as well as its existing shareholders, to have the opportunity to understand the impact on MED, and to be guided accordingly in their investment decisions in order to avoid speculative trading to the prejudice of the investing public, of the then proposed sale of all of the assets of Export and Industry Bank, Inc. ("EIBA" or "EIBB") in favor of BDO Unibank, Inc. ("BDO") in consideration of the latter's assumption of all of EIBA's liabilities, including all of EIBA's deposit liabilities, given that MED's total investment in EIBA and EIBB shares including those held by its majority-owned subsidiary Medco Asia Investment Corporation comprised, as of 30 June 2010, 81% of the total consolidated assets of MED. The PSE granted the request. On 21 September 2010, the Company requested for, and the PSE granted, an extension of the voluntary trading suspension of its shares until 27 September 2010 by reason of the continued suspension of trading of EIBA and EIBB shares until 24 September 2010. On 24 September 2010, in view of the continued suspension of trading of EIBA and EIBB shares beyond this date, the Company requested for, and the PSE granted, an extension of the voluntary trading suspension of its shares until after the approval by the Bangko Sentral ng Pilipinas ("BSP") and the Philippine Deposit Insurance Corporation ("PDIC") of the then proposed sale of all of the assets of EIBA in favor of BDO in consideration of the latter's assumption of all of EIBA's liabilities. On 26 April 2012, the Monetary Board, in its Resolution No. 686 dated 26 April 2012, decided to prohibit EIBA from doing business in the Philippines and place its assets and affairs under receivership pursuant to Section 30 of Republic Act No. 7653 (The New Central Bank Act). PDIC was designated as Receiver of EIBA and took over EIBA on 27 April 2012. In so far as the effect of EIBA's receivership to the Company's business, operations and financial condition, please note that the Company has booked a full impairment allowance on its investment in EIBA back in 2005 and its subsidiary has already booked a full impairment allowance on its investment in EIBB as at December 31, 2011. On 24 September 2012, the Company requested that it remain under voluntary trading suspension until PDIC's turnover of EIBA to a potential third party investor is finalized. With respect to submission of the business plan: On 20 June 2012, the PSE requested the Company to submit a plan detailing the activities it will undertake to bring its stockholders' equity from negative to positive. On 11 July 2012, the Company requested the PSE for an extension of the deadline to submit a recapitalization plan to bring the Company's stockholders' equity from negative to positive (the "Recapitalization Plan"). The Company requested then that it be allowed to submit its Recapitalization Plan on the sixtieth day after the PDIC has formally turned over the closed EIBA to the universal or commercial bank that it will have selected to be EIBA's white knight. To-date, EIBA is still under the receivership of PDIC and PDIC has not yet turned over EIBA to a white knight. Very truly yours, MEDCO HOLDINGS, INC. (SGD.) DIONISIO E. CARPIO, JR. President ANNEX B Medco Holdings, Inc. March 1, 2013 THE PHILIPPINE STOCK EXCHANGE, INC. PSE Plaza, Ayala Triangle Ayala Avenue, Makati City Attention : Mr. Hans B. Sicat President and CEO Gentlemen: Re : Recapitalization Plan of Medco Holdings, Inc. We respectfully submit the proposed recapitalization plan of Medco Holdings, Inc. (the "Company" or "MED") as described below. During the Company's forthcoming annual stockholders meeting, which is scheduled op 10 May, 2013 in accordance with the Company's By-Laws, we will obtain stockholders' approval on its proposed recapitalization plan involving the following: 1. Decrease in authorized capital from Php700 million to Php7 million through a reduction in par value per MED share from Php1.00 to Php0.01; 2. Increase in authorized capital from Php7 million to Php470 million; 3. Private placement transaction covering the issuance of new shares to its existing shareholder(s) and/or third parties involving a total subscription amount of Php117.6 million; and 4. Waiver of the requirement to conduct a rights or public offering by a majority vote of the minority stockholders present or represented during the meeting. Immediately thereafter, the Company will submit its respective applications to the Securities and Exchange Commission (SEC) covering the necessary amendments to its Articles of Incorporation to enable the Company to implement the foregoing transactions, including an application for a capital restructuring involving the offsetting of the Company's accumulated deficit against the additional paid-in capital created by the aforementioned reduction of the par value of MED shares. We expect that the Company would have obtained before the end of the second quarter of 2013 the SEC registration certificates covering the SEC approval on the proposed decrease in its authorized capital and on its capital restructuring. This will enable the Company to book the capital decrease and capital restructuring transactions. Then, the private placement participants will enter into subscription agreements with the Company and then remit their cash injections to the Company totaling Php117.6 million as deposits for their respective subscriptions of MED shares. Thereafter, the Company will submit the application for capital increase with the SEC. Barring any unforeseen delay, we anticipate that the Company would have obtained in the third quarter of 2013 the SEC registration certificate covering the SEC approval on the proposed increase in the authorized capital of the Company. This will allow the Company to reclassify the aforementioned subscription deposits to paid-in capital thereby completing its recapitalization and enabling the Company to attain a positive stockholders equity of approximately Php40 million. The Company will utilize the proceeds of the said recapitalization to pay-off its existing debts. Shortly thereafter, the Company will submit its application with the PSE for the listing of the newly-issued shares. We look forward with thanks to your favorable consideration of the Company's foregoing recapitalization plan. Very truly yours, MEDCO HOLDINGS, INC. (SGD.) DIONISIO E. CARPIO, JR. President Footnotes 1. Circular No. 5255-2010 dated August 2, 2010. 2. Circular Nos. 6287-2010 dated September 21, 2010 and 6385-2012 dated September 24, 2010. 3. Memorandum DA-No. 2012-100 dated May 2, 2012. <http://www.pse.com.ph/resource/memos/2013/DA_2013-0138.pdf> last visited May 14, 2013.