Philippine Business Bank: Offering Memorandum

January 16, 2013 PSE MEMORANDUM NO. LA IPO-0015-13 TO : The Investing Public SUBJECT : Philippine Business Bank Offering Memorandum Please be informed that the Board of Directors of The Philippine Stock Exchange, Inc. ("PSE" or the "Exchange"), in its regular meeting on January 9, 2013, approved the application of PHILIPPINE BUSINESS BANK (the "Bank" or "PBB") for the initial listing of up to 343,333,400 common shares, with a par value of P10.00 per share, under the First Board of the Exchange, with the following details: a. 242,000,000 common shares, representing the total number of issued and outstanding shares of the Bank prior to the Initial Public Offering ("IPO" or "Offer") of the Bank's shares; and b. Up to 101,333,400 common shares, representing the total number of shares to be offered to the public on a primary basis at an Offer Price of up to P41.94 per share. The foregoing approval is subject to the Bank's compliance with all of the conditions and post-approval requirements of the Exchange. The summary of the Bank's IPO is provided below: Shares Applied for Listing Issued and Outstanding Shares (70%) 242,000,000 common shares Primary Shares (30%) Up to 101,333,400 common shares Total No. of Shares Applied for Listing Up to 343,333,400 common shares Par Value per Common Share P10.00 per common share Offer Price 1 Up to P41.94 per share Shares for Public Offering Primary Shares ("Offer Shares") Up to 101,333,400 common shares Up to P4,249,922,796.00 Total No. of Offer Shares Up to 101,333,400 common shares Up to P4,249,922,796.00 Market Capitalization (Post-IPO) 2 Up to P14,399,402,796.00 Distribution of the Offer Shares Underwriter's clients 70% Up to 70,930,800 common shares Up to P2,974,837,752.00 Trading Participants (TPs) 20% Up to 20,269,200 common shares Up to P850,090,248.00 Local Small Investors (LSIs) 10% Up to 10,133,400 common shares Up to P424,994,796.00 Distribution to TPs Total TP Allocation Up to 20,269,200 common shares Up to P850,090,248.00 Allocation per TP 152,400 common shares (Based on 133 active TPs as of January 16, Up to P6,391,656.00 2013 and following the minimum subscription) Estimated Public Float Level 30.00% (Post-Offer) Payment Terms The Offer Shares must be paid for in full upon submission of the Application. Payment must be made by a check drawn against a bank in Metro Manila to the order of "PBB IPO". The check must be dated as of the date of submission of the Application and crossed for deposit. Minimum Subscription Each Application must be for a minimum of 500 Offer Shares, and thereafter, in multiples of 100 Offer Shares. No Application for multiples of any other number of shares will be considered. Eligible Investors and Restrictions on The Offer Shares may be subscribed to or Ownership and Shareholdings held by any person of legal age or duly organized and existing corporations, partnerships or other juridical entities regardless of nationality, subject to the restriction by law. R.A. No. 7906 or the Thrift Banks Act of 1995, aggregate foreign ownership in the Bank cannot exceed the maximum of 60 per cent of the issued and outstanding voting stock. An individual non-Filipino individual and non-bank entity can only acquire up to 40 per cent of the issued and outstanding voting stock of the Bank. Accordingly, the Bank cannot allow the issuance of shares or record the transfer of shares to persons other than Philippine Nationals if such issuance or transfers shall exceed the above-mentioned foreign ownership limits. Refunds In the event that the number of Offer Shares to be received by an applicant, as confirmed by the Underwriter, is less than the number covered by its Application, or if an Application is rejected by the Bank, then the Joint Lead Underwriters shall refund, without interest, within five (5) Banking Days from the end of the Offer Period, all, or a portion of the payment corresponding to the number of Offer Shares wholly or partially rejected. All refunds shall be made through the Underwriter or Selling Agent with whom the applicant has filed the Application, at the latter's risk. Registration and Lodgment of Shares with All Offer Shares will be issued in scripless the PDTC form and lodged with the PDTC. The Applicant should indicate the lodgment information in the Application. The Offer Shares will be lodged with the PDTC at least two (2) trading days prior to the Listing Date. The Applicant may request for the upliftment of their shares and to receive stock certificates evidencing their investment in the Offers Shares through his/her broker after the Listing Date. Any expense to be incurred on such issuance of certificates shall be borne by the Applicant. Use of Proceeds Most of the net proceeds of the Offer or approximately [Php3,610.74 million] will be used to finance the Bank's lending activities and also, to a lesser extent, to fund the acquisition of investment securities. In addition, approximately Php400 million will be allocated to finance capital expenditure requirements in connection with its branch network expansion program, including the acquisition of new branch banking licenses, the development and implementation of IT infrastructure and applications projects. Please refer to the Bank's IPO Prospectus for details. Shares under Lock-up 3 Number of Shares Number of Shares % Shareholders Subject to the 180- Subject to the 365-Day (Post Day Lock Up Lock Up IPO) Alfredo M. Yao 22,199,910 105,713,856 37.26 Zesto Corporation 14,999,940 71,428,286 25.17 Francis T. Lee 4,200,000 20,000,000 7.05 Leticia M. Yao 714,286 0.21 Armando M. Yao 714,286 0.21 Erlinda M. Yao 714,286 0.21 Jeffrey S. Yao 714,286 0.21 Rolando R. Avante 48 0.00 Amador T. Vallejos, Jr. 476 0.00 Benjamin R. Sta. Catalina, Jr. 47 0.00 Paterno H. Dizon 47 0.00 Honorio O. Reyes-Lao 48 0.00 Peter N. Yap 48 0.00 Total 41,399,850 200,000,000 70.31 ========= ========== ====== Joint Lead Underwriters First Metro Investment Corporation and SB Capital Investment Corporation Financial Advisor and Issue Manager Asian Alliance Investment Corporation Independent Auditor Punongbayan & Araullo Legal Counsel To PBB Feria Tantoco Robeniol Law Offices To the Joint Lead Underwriters Picazo Buyco Tan Fider and Santos Stock Transfer Agent Stock Transfer Service, Inc. The Bank's timetable of IPO activities is as follows: Activity Date Price Setting/Notice of Final Offer Price February 4, 2013 Start of the Offer Period February 6, 2013 PSE TPs' Commitment Period February 6-8, 2013 Local Small Investors' Offer Period February 6-12, 2013 Underwriters' Offer Period February 6-12, 2013 End of Offer Period/Deadline of Submission February 12, 2013 of Applications and Payments Tentative Listing Date February 19, 2013 Attached as Annex "A" is a copy of the Bank's Offer Term Sheet, for further reference. For your information and guidance. (SGD.) J.V. B. ZUO III OIC, Listings Department Noted by: (SGD.) MARSHA M. RESURRECCION Head, Issuer Regulation Division A NNEX A PHILIPPINE BUSINESS BANK INITIAL PUBLIC OFFER Proposed Terms and Conditions of the Offer Offer Shares PBB, through the Joint Lead Underwriters, is offering up to 101,333,400 Offer Shares with a par value Php10.00 per share. [20,269,200] Offer Shares are being sold and offered to all the trading participants of the PSE while [10,133,400] Offer Shares are being sold to Local Small Investors. The balance of [70,930,800] Offer Shares shall be distributed to the general public through the Underwriters. Offer Price The Offer Shares are being offered at a [maximum price of Php41.94] per share. Offer Period The Offer Period shall commence on [February 6, 2013] and end at 12:00 noon of [February 12, 2013]. PBB and the Joint Lead Underwriters reserve the right to extend or terminate the Offer Period with the approval of the SEC and the PSE. Applications must be received by the Receiving Agent not later than 12:00 noon, Manila Time on [February 8, 2013] if filed through a Selling Agent or PSE Trading Participants. Applications received thereafter or without the required documents will be rejected. Applications shall be considered irrevocable upon submission to the Selling Agent or Underwriter, and shall be subject to the terms and conditions of the offer as stated in this Prospectus and in the Application. The actual subscription and/or purchase of the Offer Shares shall become effective only upon the actual listing of the Offer Shares on the PSE. Minimum Each Application must be for a minimum of [500] Offer Shares, and Subscription thereafter, in multiples of [100] Offer Shares. No Application for multiples of any other number of shares will be considered. Eligible The Offer Shares may be subscribed to or held by any person of legal Investors and age or duly organized and existing corporations, partnerships or other Restrictions on juridical entities regardless of nationality, subject to the restriction by Ownership law. and Shareholdings R.A. No. 7906 or the Thrift Banks Act of 1995, aggregate foreign ownership in the Bank cannot exceed the maximum of 60 per cent of the issued and outstanding voting stock. An individual non-Filipino individual and non-bank entity can only acquire up to 40 per cent of the issued and outstanding voting stock of the Bank. Accordingly, the Bank cannot allow the issuance of shares or record the transfer of shares to persons other than Philippine Nationals if such issuance or transfers shall exceed the above-mentioned foreign ownership limits. Unless otherwise allowed under existing laws or circulars issued by BSP, the MORB provides that (i) a Filipino and a domestic non-bank corporation may each own up to 40 per cent of the voting stock of a domestic bank, however there is no ceiling on the aggregate ownership by such individuals and corporations in a domestic bank; (ii) a natural person and a corporation or corporations (majority or wholly-owned by him) may own up to a combined 40 per cent of the voting stock of a domestic bank. Procedure for Application forms to subscribe for Offer Shares in the Offer may be Application obtained from the Selling Agents or the underwriters. All Applications shall be evidenced by the Application to Subscribe and Purchase form, duly executed in each case by an authorized signatory of the applicant and accompanied by one (1) completed signature card, which in the case of corporate and institutional applicants, should be authenticated by the corporate secretary, and the corresponding payment for the Offer Shares covered by the Application, photocopy of two (2) valid identification cards (IDs) for each signatory and all other required documents. The duly executed Application and required documents should be submitted during the Offer Period to the same office where it was obtained. If the applicant is a corporation, partnership, or trust account, the Application must be accompanied by the following documents: A certified true copy of the applicant's latest Articles of Incorporation and By-laws or Partnership and other constitutive documents (each as amended to date) duly certified by its corporate secretary; A certified true copy of the applicant's SEC certificate of registration duly certified by its corporate secretary; A duly notarized corporate secretary's certificate setting forth the resolution of the applicant's board of directors or equivalent body authorizing the purchase of the Offer Shares indicated in the application, identifying the designated signatories authorized for the purpose, including his or her specimen signature, and certifying the percentage of the applicant's capital or capital stock held by Philippine Nationals. Foreign corporate and institutional Applicants, in addition to the documents required for corporate Applicants, are required to submit, in quadruplicate, together with the Application, a representation and warranty stating that their investing in the Offer Shares being applied for will not violate the laws of their jurisdiction and that they are allowed to acquire, purchase and hold the Offer Shares. Payment Terms The Offer Shares must be paid for in full upon submission of the Application. Payment must be made by a check drawn against a bank in Metro Manila to the order of "PBB IPO". The check must be dated as of the date of submission of the Application and crossed for deposit. Acceptance/ The actual number of Offer Shares that an Applicant will be allowed to Rejection of subscribe for in the Offer is subject to the confirmation of the Applications Underwriter. Applications shall be subject to the final approval of the Bank. The Bank, through the Joint Lead Underwriters, reserves the right to accept or reject, in whole or in part, any Application. Applications where checks are dishonored upon first presentation and Applications which do not comply with the terms of the Offer shall be rejected. Any payment received pursuant to the Application does not mean approval or acceptance by the Bank of the Application. An Application, when accepted, shall constitute an agreement between the applicant and the Bank for the subscription to the Offer Shares at the time, in the manner and subject to the terms and conditions set forth in the Application and those described in this Prospectus. Notwithstanding the acceptance of any Application by the Underwriters or their duly authorized representatives, acting for or on behalf of the Bank, the actual subscription and/or purchase by the applicant of the Offer Shares will become effective only upon listing of the Offer Shares on the PSE and upon the obligations of the Underwriter and Selling Agents under the Underwriting Agreement becoming unconditional and not being suspended, terminated or cancelled, on or before the Listing Date, in accordance with the provision of the said agreement. If such conditions have not been fulfilled on or before the periods provided above, all application payments will be returned to the applicants without interest and, in the meantime, the said application payments will be held in a separate bank account with the Receiving Agent. Refunds In the event that the number of Offer Shares to be received by an applicant, as confirmed by the Underwriter, is less than the number covered by its Application, or if an Application is rejected by the Bank, then the Joint Lead Underwriters shall refund, without interest, within five (5) Banking Days from the end of the Offer Period, all, or a portion of the payment corresponding to the number of Offer Shares wholly or partially rejected. All refunds shall be made through the Underwriter or Selling Agent with whom the applicant has filed the Application, at the latter's risk. Documentary All documentary stamp taxes applicable to the original issuance of the Stamp Taxes Offer Shares by the Bank shall be for the sole account of PBB. Registration and All Offer Shares will be issued in scripless form and lodged with the Lodgment of PDTC. The Applicant should indicate the lodgment information in the Shares with Application. The Offer Shares will be lodged with the PDTC at least the PDTC two (2) trading days prior to the Listing Date. The Applicant may request for the upliftment of their shares and to receive stock certificates evidencing their investment in the Offers Shares through his/her broker after the Listing Date. Any expense to be incurred on such issuance of certificates shall be borne by the Applicant. Registration of The Bangko Sentral ng Pilipinas requires that investments in shares of Foreign stock funded by inward remittance of foreign currency be registered Investments with the BSP if the foreign exchange needed to service capital repatriation or dividend remittance will be sourced from the banking system. The registration with the BSP of all foreign investments in the Offer Shares shall be the responsibility of the foreign investor. See "Foreign Exchange Regulations and Ownership." Restriction on Existing shareholders who own an equivalent of at least 10 per cent of Issuance and the issued and outstanding capital stock of the Bank after the Offer are Disposal of required, under the Revised Listing rules of the PSE applicable to Shares companies applying for listing on the PSE First Board, not to sell, assign or otherwise dispose of their common shares for a minimum period of 180 days after the Listing Date. Furthermore, pursuant to the PSE's rules on share issuances executed and fully paid for within 180 days prior to the start of the offer period with a transaction price lower than the offer price in the initial public offer, recipients of stock dividends issued by the Bank on November 16, 2012 are likewise subject to the foregoing 365-day lock-up required by the PSE. The parties and their respective shares covered by the foregoing lock- up provisions: Shareholder No. of Shares No. of Shares Subject to the Subject to the 180-Day Lock Up 365-Day Lock Up Provision Provision Alfredo M. Yao 22,199,910 105,713,856 Zest-O Corporation 14,999,940 71,428,286 Francis T. Lee 4,200,000 20,000,000 Leticia M. Yao 714,286 Armando M. Yao 714,286 Erlinda M. Yao 714,286 Jeffrey S. Yao 714,286 Rolando R. Avante 48 Amador T. Vallejos Jr. 476 Benjamin R. Sta. Catalina, Jr. 47 Paterno H. Dizon 47 Honorio O. Reyes-Lao 48 Peter N. Yap 48 Total 41,399,850 200,000,000 ========= =========== Except for the issuance of the Offer Shares pursuant to the Offer or Common Shares for distribution by way of stock dividends or in connection with an ESOP, the PSE will require the Bank, as a condition to listing of the Common Shares, not to issue new shares in its capital or grant any rights to or issue any securities convertible into or exchangeable for, or otherwise carrying rights to acquire or subscribe to, any shares in its capital or enter into any arrangement or agreement whereby any new shares or any such securities may be issued for a period of 180 days after the Listing Date. Listing and Trading The Bank's application for the listing of the Shares was approved by the PSE on [January 9, 2013]. All of the Offer Shares are expected to be listed on the PSE under the symbol "PBB" on or about [February 19, 2013]. Trading of the Common Shares that are not subject to lock-up is expected to commence on the same date. Expected Timetable The expected timetable of the Offer is tentatively scheduled as follows: Price Setting/Notice of Final [February 4, 2013] Offer Price Start of Offer Period [February 6, 2013] PSE Trading Participants' [February 6, 2013 to February 8, Commitment Period 2013] Local Small Investor Offer [February 6, 2013 to February 12, Period 2013] Underwriters' Offer Period [February 6, 2013 to February 12, 2013] End of Offer Period [February 12, 2013] Listing Date [February 19, 2013] *The dates included above are subject to market and other conditions and may be changed. CERTIFIED CORRECT: (SGD.) ALICE P. RODIL Senior Vice President-Controller Date: January 11, 2013 Footnotes 1. The Offer Price shall be determined through a book-building process and discussions between the Bank and the Joint Lead Underwriters. 2. The Bank's Market Capitalization is computed based on total number of shares applied for listing multiplied by the maximum Offer Price of P41.94 per share. 3. Article III Part D Section 7 of the Revised Listing Rules states that: The Company shall cause its existing stockholders or security holders who own an equivalent of at least 10% of the issued and outstanding shares of stock or securities of the company to enter into an agreement with the Exchange not to sell, assign or in any manner dispose of their shares or securities for a period of 180 days after the listing of the said shares. If there is any issuance of shares or securities or instruments which lead to issuance of shares or securities done and fully-paid for within 180 days prior to the start of the offering period, and the transaction price is lower than that of the offer price in the IPO, all shares or securities availed of shall be subject to a lock-up period of at 365 days from full payment. In view of the above requirement of the Exchange, the 41,399,850 shares and the 200,000,000 shares shall be held in escrow 180 days and 365 days after the listing date, respectively. The Company provided the Exchange a copy of the draft Escrow Agreement to implement this lock-up. <http://www.pse.com.ph/resource/memos/2013/LA_IPO_2013-0015.pdf> last visited May 29, 2013.