Revised Manual of Rules Governing The Listing of Securities

June 1996 REVISED MANUAL OF RULES GOVERNING THE LISTING OF SECURITIES (Listing Rules) June 1996 Edition PHILIPPINE STOCK EXCHANGE DEFINITION OF TERMS For purposes of these Rules, unless the context provides otherwise, the following terms shall have the following definitions: AFFILIATE a person who directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with the person specified, through the ownership of voting shares by contract or otherwise. AFFILIATED CORPORATIONS corporations related to one another by common control of voting stock and operated as parts of a system or enterprise. APPRAISAL estimation of the value of property made by an appraiser. APPLICANT the corporation whose securities are sought to be listed in the Exchange. AVERAGE PROFITS the sum of the pre-tax profits of the subsidiary divided by the sum of the consolidated pre-tax profits of the parent company and its subsidiaries for the last two full fiscal years. BOND an unconditional promise in writing to pay the principal to the bearer or to the registered holder, at a designated date of maturity, and to pay interest at a specified rate periodically. BOOK VALUE PER SHARE the value of the share of stock of a corporation, as determined by its assets net of liabilities divided by the number of shares outstanding. CASH DIVIDENDS dividends paid in cash. COMMISSION the Securities and Exchange Commission. CUM-DIVIDEND with dividends, i.e., any person buying shares of stock of an issuer before ex-dividend date is entitled to the dividends declared on such stock. CUMULATIVE PRE-TAX PROFIT the algebraic sum of the pre-tax profits. DIRECTOR a director of a corporation whose securities are, or are sought to be, listed on the Exchange. aisadc DIVIDENDS share in the profits of a corporation, which is paid to the stockholders out of the unrestricted retained earnings, in proportion to the number of shares owned by the stockholders. EXCHANGE the Philippine Stock Exchange. EX-DIVIDEND without dividends, i.e. any person buying shares of stock of an issuer on or after ex-dividend date is not entitled to the dividends declared on such stock. EX-DIVIDEND DATE the date set by the Exchange starting from which the buyer is no longer entitled to dividends. EXPERT one who is qualified to give an opinion as to a fact which requires special study and experience. FISCAL YEAR a period of twelve months designated as the accounting period for annual reports as provided in the By-Laws of the applicant company. INFRASTRUCTURE PROJECTS Power generation, water supply, construction and maintenance of highways, seaport, airport, telecommunications projects as determined by the Exchange to be beneficial to the investing public and the national economy as a whole. INVESTMENT HOUSE a duly licensed enterprise authorized to underwrite securities of another person or enterprise, including securities of the Government and its instrumentalities. ISSUE MANAGER the person who acts as the financial adviser to the Issuer and is charged with the function of distribution and allocation of securities in any public offering and who may or may not be a part of the underwriting syndicate. ISSUER a corporation whose shares of stock are listed, sold or offered for sale to the public LEAD UNDERWRITER an underwriter authorized by the applicant company as such and who conducts due diligence review on the applicant company as required under existing regulations. cd LISTING the admission of securities for trading in the Exchange. LISTING COMMITTEE the committee constituted by the PSE Board of Governors to act on all listing applications and to effectively recommend to the Board of Governors the proper course of action on all listing applications. LISTING DEPARTMENT the department which acts on all applications for listing of securities in the Exchange, evaluates the same and makes proper recommendations to the proper body. MAJOR SHAREHOLDER A person/entity who controls or owns at least 10% of the voting stock of a corporation. MARKET CAPITALIZATION the product of total number of shares issued, subscribed and to be subscribed multiplied by the offer price per share. MARKET VALUE the price of a security based on the quotations in the Exchange. MATERIAL FACT/INFORMATION any fact/information that could result in a change in the market price or value in any of the issuer's securities, or would potentially affect the investment decision of a potential investor. OFFERING PERIOD the period within which securities will first be available for sale to the public. OPTION a privilege existing in one person for a consideration which gives him the right to buy or sell specified securities from another person, if he chooses, at any time within an agreed period, at a price which is fixed or based on a stated formula. PAID-UP CAPITAL the amount paid for subscribed capital stock. PAID-UP SURPLUS surplus arising from the sale of par value stock at a premium. PAR VALUE the value of a share of stock as stated in the company's Articles of Incorporation. PARENT/HOLDING COMPANY a company owning a controlling interest (more than fifty percent [50%] of the voting stock) in the companies whose stocks it holds. PERSON an individual, corporation, partnership, or government or political subdivision. PHILIPPINE NATIONAL natural citizens of the Philippines or corporations organized under Philippine laws with at least sixty percent (60%) Filipino equity. PRE-EMPTIVE RIGHTS right of the stockholder of the Company to subscribe to all issues or disposition of shares of any class in proportion to his share holdings, unless such right is denied by the Articles of Incorporation or an amendment thereto. PRE-TAX PROFITS profits before income tax. PRIMARY SHARES shares out of the unissued authorized capital stock of a company. PRIVATE PLACEMENT securities offered to one or several investors whether existing stockholder/s of the applicant company or otherwise, as opposed to securities that are being publicly offered. PROSPECTUS a printed statement containing all material facts concerning the applicant company and its operations, distributed or furnished to prospective investors so that they may make an informed decision as to the merit of an investment. PROXY an authority or power to represent or vote stock. PUBLIC DISTRIBUTION the sale or offer to sell new or subsequent issues of securities to the general public. PUBLIC STOCKHOLDERS all stockholders, excluding directors, controlling shareholders and their affiliates. RECORD DATE the date in which stockholders must officially own shares in order to be entitled to any shareholders rights. RED HERRING a prospectus in its latest draft filed with the Exchange which contains all material information relating to the proposed new issue of securities except for the offer price and offering period. REDEEMABLE SHARES shares of stock by a corporation which is repurchased from their holders as expressly provided for in its Articles of Incorporation and indicated on the certificates of stocks representing said shares. SECONDARY SHARES shares that have been previously issued by the company. SHARE OF STOCK a unit of equity ownership in a corporation. STOCK CERTIFICATE a document evidencing ownership by a shareholder in a corporation. STOCK DIVIDENDS dividends paid in the form of shares of stock of a company. STOCKHOLDERS stockholders of record as reflected in the books of the company. STOCK OPTION the right to purchase a specified number of shares of stock for a specified price at specified time. SUBSCRIPTION CONTRACT any contract for the acquisition of unissued stock in a corporation. SUBSIDIARY any company whose voting stock is wholly or substantially owned by a parent/holding corporation (more than fifty percent [50%] of the voting stock) or which is in some way subject to the control of the latter corporation. TRADING DAY any day when the Exchange is open for business. TREASURY SHARES shares of stock which were previously issued and fully paid, but subsequently reacquired by the issuing corporation by purchase, redemption, donation, or through some other lawful means. UNDERWRITER a duly licensed and authorized investment house or universal bank which undertakes to sell or distribute securities to the public on a firm commitment basis. UNDERWRITING the act or process of guaranteeing the distribution and sale of securities issued by another person or enterprise, including securities of the Government or its instrumentalities. VOTING SHARES shares of stock entitled to vote for election of directors, and or other matters presented to the stockholders for approval. WARRANTS rights issued/offered to investors who may exercise or use the same to purchase new/existing shares. INTRODUCTION OBJECTIVE The principal objective of the Exchange is to provide a fair, orderly, efficient and transparent market for the trading of securities and to protect the public interest at all times. cdlex PURPOSE OF THE RULES The purpose of these Rules is to define and explain the policies and requirements for the listing of securities and the manner in which these securities are to be offered. GENERAL PRINCIPLES 1. These Rules seek to establish, develop and maintain public confidence in the market. For this purpose, the Exchange shall require that: a) Applicant companies are of a certain minimum size, under an efficient and effective management, and, except for those applying for listing in the Second Board, with a proven record of profitable operations; b) The issuance and marketing of securities are conducted in a fair and orderly manner and that the distribution of securities to the public shall be widely and equitably dispersed; c) Potential investors are given adequate, fair, timely and accurate information about the applicant company and its securities to enable them to make a properly informed assessment of the securities; d) The offering of securities is in a fair, orderly and transparent manner. e) Investors and the public are kept fully, accurately and timely informed by the applicant companies of all material factors that might affect their interests and immediate and timely disclosure is made of any material information which might reasonably be expected to have an effect on the market activity and the prices of listed securities; f) Stockholders of listed securities are treated fairly and equitably; g) Directors and officers of a listed company act in the interest of its stockholders as a whole, particularly where the public represents only a minority of the stockholders or where a director or stockholder owning substantial shares has a material interest in a transaction entered into by the applicant company. 2. Companies applying to be listed shall be bound by these Rules, the relevant provisions of the Corporation Code, the Revised Securities Act, and the rules, regulations and policies promulgated by the Commission and the Exchange. cd 3. Compliance with the rules of the Exchange may not in itself ensure an applicant's suitability for listing. The Exchange retains the discretion to accept or reject applications in accordance with these General Principles. 4. All listed companies whether or not admission shall have taken place prior to these Rules being prescribed shall, by virtue of their continued listing be bound thereby and by subsequent rules and amendments of the Exchange. CHAPTER 1 INITIAL PUBLIC OFFERING General Requirements 1 The applicant company shall engage the services of a duly licensed underwriter, who, among others, shall firmly underwrite the entire issue. The underwriter may likewise act as the applicant's lead underwriter/issue manager. The applicant company may at its option, engage the services of another to act as its lead underwriter/issue manager to manage the issue. The lead underwriter shall warrant that it has exercised due diligence in ascertaining that all material representations contained in the applicant's prospectus or offering memorandum, their amendments or supplements are true and correct, and that no material information was omitted, which was necessary in order to make the statements contained in the applicant's prospectus or offering memorandum not misleading. 2. The applicant company shall engage the services of a stock transfer agent, which shall be: a) duly licensed and certified by the Commission to be in good standing; b) a member in good standing of the Philippine Association of Stock Transfer and Registry Agencies, Inc. (PASTRA); c) independent; and d) accredited by the Exchange. The applicant shall take full responsibility for all the acts of its transfer agent. The applicant shall execute and submit an Undertaking holding itself jointly and severally liable for all the acts of its transfer agent in relation to the issue. aisadc CHAPTER 2 FIRST BOARD LISTING A. BASIC GUIDELINES An applicant company's suitability for listing in the First Board shall be based on the following factors: 1. Generally, it must be in actual operation for at least three (3) full fiscal years; 2. It must have sufficient capitalization; 3. Its management and controlling stockholders possess integrity and good managerial skills; and 4. It has stability and stature in the industry or in the business community. B. GENERAL DOCUMENTARY REQUIREMENTS The applicant company shall submit One (1) original or certified true copy and Eleven (11) photocopies of the following documents together with a sworn corporate secretary's certificate stating that all photocopies are true copies of said document: 1. Listing Application and its supplements, which includes among others, the listing Agreement. (All applicable blanks in the application forms must be filled up.) 2. Articles of Incorporation and By-Laws and the Certificate of Filing of Articles of Incorporation issued by the Commission 3. Latest Amended Articles of Incorporation and Amended By-Laws, in case there are amendments to the original documents and the corresponding Certificate of Filing of Amended Articles of Incorporation and Amended By-Laws issued by the Commission. 4. Sworn Corporate Secretary's Certificate relating to an Increase in Authorized Capital Stock together with a certified true copies of the corresponding Certificate of Increase in Capital Stock issued by the Commission. 5. Registration Statement filed with the Commission. 6. Registration/Licensing Order and Certificate of Permit to Offer Securities for Sale (License/Permit to Sell) issued by the Commission. 7. Certification from the Commission that the corporation's registration of its securities and its permit to offer securities for sale are still valid, if such registration and permit are more than three hundred sixty five (365) days old, together with a certificate of good standing issued by the Commission. 8. Sworn corporate secretary's certificate relating to the company's updated total number of shares issued and outstanding. 9. Sworn corporate secretary's certificate showing separately an updated percentage of ownership of Filipino citizens and alien stockholders. 10. Sworn corporate secretary's certificate stating that the applicant company has no subscriptions receivable at the time of the filing of the application. 11. Sworn corporate secretary's certificate showing the issuances and subscriptions of shares within twelve (12) months prior to the filing of the application. 12. a) Sworn corporate secretary's certificate showing a list of holders or recipients of options, if any, and the details thereof, at the time of the filing of the application. If there is none, the applicant shall submit a sworn undertaking to the effect that, should the same be granted in the future the Exchange and the Commission shall be informed immediately upon Board approval, disclosing the nature of the option, the number of shares, its price, the manner of payment, the names and addresses of the grantees and the reason or basis of such grant. b) Board Resolution approving the grant of options, if any. Copies of the order of the Commission approving the grant of options shall likewise be submitted. 13. Sworn corporate secretary's certificate showing a list of stockholders who have fully paid their subscriptions, together with their corresponding shareholdings, percentage of ownership and the amount paid thereto. 14. Sworn corporate secretary's certificate on the history and rate of dividend and the amount paid for each class of shares during each of the three (3) fiscal years immediately preceding the application. 15. Sworn stock transfer agent's certificate to the effect that it has no backlog in the transfer and registration of shares. 16. Audited financial statements for the last three (3) full years of the applicant company and its subsidiaries prepared by an independent auditor in accordance with generally accepted accounting principles. 17. Projected financial statements reviewed and signed by an independent auditor. If the application is filed during the first three quarters of the applicant's fiscal year, the company shall submit projected financial statements for its current fiscal year. On the other hand, if the application is filed during the last quarter of the applicant's fiscal year, the company shall submit unaudited actual financial statements for the past quarters of the fiscal year, together with projected financial statements for the current and the following fiscal year. 18. Offering Prospectus prepared in compliance with the Exchange rules. 19. Affidavit of the newspaper publisher on the fact of publication as required under the Revised Securities Act and pertinent laws. 20. List of all material contracts entered into by the company and its subsidiaries during the preceding twenty four (24) months, stating the parties therein, the date, the purpose and the terms and conditions. 21. Other relevant documents as may be required by the Exchange, including but not limited to updating the documents submitted to the Exchange. C. REQUIREMENTS FOR LISTING IN THE FIRST BOARD Upon the filing of the application for initial public offering, the applicant company, issue manager and underwriter shall comply with the following requirements: 1. Listing Agreement The applicant company shall enter into an agreement with the Exchange manifesting its conformity to comply with and be bound by all the listing rules, requirements and policies of the Exchange. 2. Issue Managers' and Underwriters' Agreement The issue managers and underwriters shall enter into an agreement with the Exchange manifesting their conformity to comply with and be bound by all the applicable listing rules, requirements and policies of the Exchange in relation to the issue applied for by the applicant company. 3. Publication of Application The applicant company shall cause the publication of a notice of the fact of filing an application for listing of securities in the Exchange once a week for two (2) consecutive weeks in two (2) newspapers of general circulation. The size of said notice as published in the newspaper shall not be less than one-eighth (1/8) of a regular broadsheet or 17 x 14 square centimeters. For this purpose, the applicant company shall submit Affidavits of Publication signed by duly authorized representatives of the newspapers concerned, attesting to their publication. The publication shall be made after submission of all documentary requirements required by the Exchange. 4. Minimum Capital Requirement The applicant company must have a minimum authorized capital stock of P400 million, of which a minimum of twenty five percent (25%) must be subscribed and fully paid. 5. Full Payment of Issued and Outstanding Shares The applicant company shall cause all its subscribed shares to be paid in full. 6. Listing of Issued and Outstanding Shares All issued and outstanding common shares shall be applied for listing in the Exchange. 7. Minimum Par Value of Shares The par value of the shares of companies applying for listing shall not be less than One Peso (P1.00). 8. Track Record General Rule The applicant company shall have a proven track record of profitable operations for at least three (3) full fiscal years immediately prior to the application for listing with a cumulative consolidated pre-tax profit of at least P50 million and a minimum pre-tax profit of P10 million for each of those three (3) years. For purposes of this rule, pre-tax profit shall not include non-recurring and extraordinary income. The applicant must be engaged in materially the same businesses and must have a proven track record of management throughout the last three (3) years prior to the filing of the application. Exceptions Without prejudice to compliance with all the requirements set forth in these Rules, the following are the exceptions to the three (3)-year track record rule: a) The applicant company is principally engaged in an infrastructure project(s) which contributes to the overall economic growth of the Philippines or which is in pursuance of national economic objectives and policies of the government. In this regard, the applicant company must be a holder of a government franchise of not less than twenty (20) years with not less than eighteen (18) years still remaining, counted from the filing of the application for listing. In the absence of a government franchise, the applicant company must possess a government contract of not less than ten (10) years with not less than eight (8) years still remaining, counted from the filing of the application for listing. The applicant company must have a valid permit or license obtained from the appropriate government agency. The cost of the project shall not be less than P500 Million. A feasibility study conducted within three (3) years from the filing of the application shall be submitted reflecting an expected income stream. The company must have already disbursed at least seventy five percent (75%) of its paid-up capital into the project which in no case shall be less than twenty five percent (25%) of the total project cost. In addition, all existing stockholders' equity shall be subjected to a lock-up period of at least three hundred sixty five (365) days from the date of listing. Furthermore, the applicant company shall be allowed to offer only primary shares to the public. b) The applicant company has been operating for at least ten (10) years prior to the filing of the application. The applicant company shall have a cumulative pre-tax profit of at least P50 Million excluding non-recurring income for the last three (3) fiscal years immediately preceding the application for listing. No net operating loss must have been registered in the fiscal year immediately preceding the filing of the application. c) The applicant company is a newly formed holding company which uses the operational track record of its subsidiary/ies. 9. 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. 10. Applicable Fiscal Year The applicant company shall be prohibited from changing its fiscal year if the purpose of the change is to take advantage of exceptional or seasonal profits in order to show a better profit record. 11. Minimum Number of Directors and Stockholders of Company Upon the filing of the application, the applicant company shall have a minimum of seven (7) directors. After listing, the listed company shall, at all times, maintain at least One Thousand (1,000) stockholders owning shares equivalent to at least one board lot. (Please refer to the Board Lot Table.) 12. Lock-Up The applicant company shall cause its existing stockholders who own an equivalent of at least ten per cent (10%) of the issued and outstanding shares of stock of the company to enter into an agreement with the Exchange not to sell, assign or in any manner dispose of their shares for a minimum period of one hundred eighty (180) days after the listing of the said shares. The Exchange reserves the right to change the percentage of stockholders included in the lock-up as the circumstances may warrant, in accordance with the General Principles set forth herein. If there is any issuance of shares (i.e., private placements, asset for shares swap or a similar transaction) or instruments which lead to the issuance of shares (i.e., convertible bonds, warrants or a similar instrument) done and fully paid for within one hundred eighty (180) days 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 (IPO), all persons who availed of the shares shall be subject to a lock-up period of at least three hundred sixty five (365) days from full payment of the aforesaid shares. In order to faithfully observe the lock-up provision, the Exchange shall require the applicant company to enter into an Escrow Agreement with the Trust Department of an independent and reputable financial institution that is acceptable to the Exchange in order to have the subject shares physically delivered to the escrow agent for deposit and safekeeping during the lock-up period. The Agreement shall contain, among others, the following points: a) The applicant company shall physically deliver the stock certificates to the escrow agent for deposit and safekeeping; b) The escrow agent shall notify and seek prior approval from the Exchange before the subject shares are removed from its custody; cdt c) The escrow agent shall immediately inform the Exchange if in its sound judgment, it perceives that there is a violation of the agreement; d) The escrow agent shall make a final report to be submitted to the Exchange within seven (7) calendar days after the lapse of the period stipulated in the agreement. The applicant shall furnish the Exchange a certified true copy of the agreement at least seven (7) calendar days before the listing date. Upon the commencement of the operation of the central depository system in the trading and settlement of securities in the Exchange, the lock-up of the subject shares shall be implemented by blocking off said shares in the central depository system to prevent the sale and transfer of the same during the lock-up period. In both cases, the applicant shall cause the recording of the shares subject of the lock-up in the books of the company. The applicant company shall furnish the Exchange a sworn corporate secretary's certification stating that the subject shares are duly recorded in the applicant company's books at least seven (7) calendar days before listing date. 13. Offering Price The offering price for IPOs in the First Board shall be at the discretion of the applicant. 14. Red Herring Prospectus The applicant company shall submit its red herring prospectus to the Listing Department at least seven (7) calendar days prior to its presentation to the listing Committee. Within seven (7) calendar days from the receipt of the Notice of Approval from the Board of Governors of the application, the applicant company shall furnish all the member-brokers of the Exchange a copy of its Red Herring Prospectus. 15. Offering Prospectuses, Press Releases and Other Similar Documents All offering prospectuses, primers, subscription agreement forms, newspaper prints, advertisements, press releases and the like in connection with the IPO shall first be submitted to the Exchange for review and approval before they are printed or disseminated to the public. The newspaper prints, advertisements, press releases and the like shall contain all facts which are considered as material by the Exchange. If the newspaper prints, advertisements, press releases and the like came from an unauthorized source, the Exchange reserves the right to require the applicant to issue its own advertisement or press release either confirming, disclaiming or rectifying the same. 16. Qualifications and Responsibility of Directors and Officers No person convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of the Corporation Code committed within five (5) years prior to the date of his election or appointment, shall qualify as director, trustee or officer of any applicant. 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 is required to be incorporated in the Prospectus which will be signed by all the directors and officers of the applicant company. For purposes of this rule, the following are considered officers: (a) President; (b) Treasurer; (c) General Manager; and (d) Executive/Senior Vice President. 17. Chainlisting A subsidiary will not be considered for listing if its holding/parent company is already listed in the Exchange and it accounts for a substantial portion of the holding/parent company's average profits. Conversely, a holding/parent company will not be considered for listing if one or more of its subsidiaries are already listed in the Exchange and one or all of those listed subsidiaries accounts for a substantial portion of the holding company's average profits. For purposes of this rule, "substantial" shall be an amount in excess of fifty percent (50%). cdlex CHAPTER 3 SECOND BOARD LISTING A. RATIONALE There shall be a Second Board to enable companies which do not meet the requirements of the First Board to list in the Exchange. B. REQUIREMENTS FOR LISTING IN THE SECOND BOARD Unless inconsistent with the requirements enumerated hereunder, all the rules and requirements set forth in the First Board Listing (preceding) shall likewise apply to the Second Board. 1. Minimum Capital Requirements At the time of the filing of the application, applicants shall have a minimum authorized capital stock of P100 million, of which a minimum of twenty five percent (25%) has been subscribed and fully paid. 2. Track Record The applicant shall have a proven track record of profitable operations for at least three (3) full years immediately prior to the application for listing with a cumulative pre-tax profit of at least P30 million and a minimum pre-tax profit of P5 million for each of those three (3) years. 3. Lock Up The applicant company shall cause all its stockholders to enter into an agreement with the Exchange not to sell, assign or in any manner dispose of their shares for a minimum period of one hundred eighty (180) days after the listing of the shares. For this purpose, the Exchange shall require the applicant company to enter into an Escrow Agreement with the Trust Department of an independent and reputable financial institution that is acceptable to the Exchange in order to have the subject shares physically delivered to the escrow agent for deposit and safekeeping for the duration of the lock-up period. The Agreement shall contain, among others, the following points: a. The company shall physically deliver the stock certificates to the escrow agent for deposit and safekeeping; b. The escrow agent shall notify and seek approval from the Exchange before the subject shares are removed from its custody; c. The escrow agent shall immediately inform the Exchange if, in its sound judgment, it perceives that there is a potential violation of the agreement; d. The escrow agent shall make a final report to be submitted to the Exchange within seven (7) calendar days after the lapse of the period stipulated in the agreement. The applicant company shall furnish the Exchange a certified true copy of the agreement at least seven (7) calendar days before the listing date. Upon the commencement of the operation of the central depository system in the trading and settlement of securities in the Exchange, the lock-up of the subject shares shall be implemented by blocking off said shares in the central depository system to prevent the sale and transfer of the same during the lock-up period. In both cases, the applicant company shall cause the recording of the shares subject of the lock up in the books of the company. The applicant company shall furnish the Exchange a sworn corporate secretary's certification stating that the subject shares are duly recorded in the applicant's books at least seven (7) calendar days before the listing date. 4. Transfer to First Board Upon application and showing that it has already met the requirements for listing in the First Board, the applicant company may, upon written request be elevated for listing in the First Board. CHAPTER 4 THIRD BOARD LISTING A. RATIONALE There shall be a Third Board to enable new companies to list in the Exchange. B. BASIC GUIDELINES An applicant for the Third Board listing shall be evaluated on the basis of the following: a) the integrity and capability of the company's management and its controlling stockholders; b) the company's business prospects; c) the company's lack of existing material conflicts of interest; d) the company's prospects for further growth and profitability; and e) the viability of the business and sustainability of the projected earning stream. C. REQUIREMENTS FOR LISTING IN THE THIRD BOARD Unless inconsistent with the requirements enumerated hereunder, all the rules and requirements set forth in "First Board Listing" shall likewise apply to listing in the Third Board. 1. Minimum Capital Requirements At the time of the filing of the application, the applicant shall have a minimum authorized capital stock of P100 million, the subscribed capital stock of which a minimum of twenty five percent (25%) must be subscribed and fully paid. 2. Track Record A new start-up venture with no track record may be considered for listing if it meets the following factors: a) It needs funds to finance a projected or to develop a new product, which through extensive research is proven to be highly feasible. b) It has a management that is an expert in the industry where the new venture is operating. c) It shows a strong commitment to implement the venture. d) It provides a realistic and achievable feasibility study and work program. e) It shows that it has a potential for exceptional growth. 3. Property Appraisal Reports The applicant shall engage the services of two independent appraisers duly accredited by the Exchange in determining the value of its assets. 4. Offer Price of Shares The offer price of the shares applied for listing in the Third Board shall be equal to its par value. 5. No Offering of Secondary Shares The applicant is prohibited from offering secondary shares to the public. 6. Lock Up The applicant shall cause all its stockholders to enter into an agreement with the Exchange not to sell, assign or in any manner dispose of their shares for a minimum period of three hundred sixty five (365) days after the listing of the shares. For this purpose, the Exchange shall require the applicant to enter into an Escrow Agreement with the Trust Department of an independent and reputable financial institution that is acceptable to the Exchange in order to have the subject shares physically delivered to the escrow agent for deposit and safekeeping for the duration of the lock-up period. The Agreement shall contain, among others, the following points: a) The applicant shall physically deliver the stock certificates to the escrow agent for deposit and safekeeping; b) The escrow agent shall notify and seek prior approval from the Exchange before the subject shares are removed from its custody. c) The escrow agent shall immediately inform the Exchange if in its sound judgment, it perceives that there is a potential violation of the agreement; d) The escrow agent shall make a final report to be submitted to the Exchange within seven (7) calendar days after the lapse of the period stipulated in the agreement. The applicant shall furnish the Exchange a certified true copy of the agreement at least seven (7) calendar days before the listing date. Upon the commencement of the operation of the central depository system in the trading and settlement of securities in the Exchange, the lock-up of the subject shares shall be implemented by blocking off said shares in the central depository system to prevent the sale and transfer of the same during the lock-up period. In both cases, the applicant company shall cause the recording of the shares subject of the lock up in the books of the company. The applicant company shall furnish the Exchange a sworn corporate secretary's certification stating that the subject shares are duly recorded in the applicant's books at least seven (7) calendar days before listing date. 7. Minimum Number of Directors and Stockholders of Company Upon the filing of the application, the applicant shall have a minimum of seven (7) directors. After listing, the listed company shall, at all times, maintain at least five hundred (500) stockholders. 8. Transfer to First or Second Board Upon application and showing that it has already met the requirements for listing in the First or Second Board the applicant may, upon written request, be elevated for listing in the First or Second Board. CHAPTER 5 FOURTH BOARD LISTING (TEXT TO BE INSERTED) CHAPTER 6 ADDITIONAL DOCUMENTARY REQUIREMENTS FOR THE FOLLOWING COMPANIES The applicant company shall submit to the Exchange One (1) original or certified true copy and Eleven (11) copies of the following documents together with a sworn corporate secretary's certificate certifying that said photocopies are true copies of the document: A. MINING COMPANIES 1. Certificate from the Mines Geosciences Bureau to the effect that the applicant's properties are still valid and subsisting at the time of the application and that the said properties are being developed according to the work program of the company. 2. Exploration Concessions, Mining Claims/Leases or Operating Contracts, if any. 3. Certification from the Mines and Geosciences Bureau that the applicant company's mining claims/leases are still valid at the time of the application, with a disclosure of all liens and encumbrances. 4. Geological Report made by a Bureau geologist with respect to the mining properties of the applicant company. 5. Evaluation Report made by the Mining Engineer of the Bureau with respect to the probable positive mineral reserves. 6. Other relevant documents as may be required by the Exchange. B. OIL AND GAS COMPANIES 1. Geophysical Survey and Exploration Contract (GSEC). 2. Certification from the Office of Energy Affairs that the applicant company has a duly approved and subsisting service contract. 3. Evaluation Report made by the Department of Energy or the appropriate government agency with respect to probable oil and gas reserves. 4. Other relevant documents as may be required by the Exchange. C. REAL PROPERTY COMPANIES 1. Property appraisal report made by an independent and duly accredited appraiser containing the following information: a) Owner of the properties b) Address of the properties c) Land and/or building data d) Classification and usage of the properties e) Survey, location and vicinity plans and technical description of the properties f) Valuation methodology; and g) Current market value of the property within three hundred sixty five (365) days immediately preceding the application. 2. Certificates of Title showing all liens and encumbrances. 3. Declaration under oath on whether the property is covered by CARP, urban land reform, mining claims, exploration contracts, and adverse claim or notice of lis pendens . The company shall likewise disclose the following: (a) the presence or absence of occupants, farmers or squatters in the property/ies; and (b) whether the property is subject to litigation or claims of third parties. 4. All government licenses and/or permits that were necessary to undertake the projects of the company. 5. Other relevant documents as may be required by the Exchange. CHAPTER 7 OFFERING AND LISTING A. OFFERING PERIOD The applicant is prohibited from selling or in any manner disposing of its shares to the public, both locally and abroad, before the start of the offering period. The Exchange shall have the right to revoke the approval of the listing application if it finds that the applicant violated the aforementioned rule. The period within which to offer the shares to the public shall be determined by the applicant, which shall not be less than eight (8) trading days. B. MINIMUM OFFERING TO THE PUBLIC Unless otherwise provided by law or government regulation, the minimum offering to the public for initial listing shall be based on the following schedule: MARKET CAPITALIZATION PUBLIC OFFER not exceeding P400M 33% or P50M whichever is higher over P400M to P1B 25% or P100M whichever is higher over P1B to P5B 20% or P250M whichever is higher over P5B to P10B 15% or P750M whichever is higher over P10B 10% or P1B whichever is higher C. DISTRIBUTION SYSTEM The offered shares shall be distributed according to the following guidelines: Ten percent (10%) of the offered shares shall be allocated to small local investors. The balance of the offered shares shall be allocated to the Underwriter/s, whether local or foreign, and to the Exchange. The allocation to the Exchange shall be based on the following schedule: AMOUNT OF PUBLIC OFFERING ALLOCATION TO THE EXCHANGE less than P500 Million (M) 50% of the Offering P500 M - P999.9M P250 M or 40% whichever is higher P1 B - P1.999B P400 M or 30% whichever is higher P2 B - P2.999B P600 M or 22.5% whichever is higher P3 B - P5 B P675 M or 17.5% whichever is higher over P5 B P875 M or 15% whichever is higher The Exchange, through its operating member-brokers, shall undertake to distribute to the investing public the securities allocated to them by the applicant company on a best effort basis. The allocation to the Exchange shall be based on the total combined offer shares inclusive of the greenshoe option, stock option plan, private placement and the international offer shares, if there are any. aisadc D. DELIVERY OF SELLING KITS The applicant shall deliver to the Exchange for distribution to the brokers sufficient selling kits, which shall contain, among others, the following: 1. Five (5) copies of the Offering Prospectus and any amendment or supplement thereto if any; 2. Subscription Agreement Forms (a minimum of one hundred fifty (150) subscription forms); 3. Signature cards; 4. Computer Diskette; and 5. Instruction Sheet for use of computer diskette. The selling kits shall be delivered to the Exchange at least two (2) trading days before the start of the offering period. Failure to comply with the aforementioned requirement shall be a ground for the deferment of the offering period. E. REJECTION OR REDUCTION OF SHARES The applicant shall have the discretion to reject or reduce an application to subscribe/purchase its shares, provided that the same is exercised in accordance with the law and the rules and regulations set forth by the Exchange. However the rejection or reduction shall not in any way be used to reduce the allocation to the Exchange. In exercising the right of rejection, the applicant company shall be guided by the following: 1. It shall serve notice of rejection or reduction to the applicant/subscriber within ten (10) banking days after the end of the offering period; 2. It shall refund to the applicant the whole or part payment, as the case may be, for the rejected or reduced subscriptions/applications within the same ten (10) banking day period. F. DELIVERY OF STOCK CERTIFICATES Stock certificates shall be issued and delivered to the subscriber/purchaser not later than three (3) trading days prior to the actual date of listing. However, in case of secondary offering, stock certificates shall be delivered to the applicant/purchaser not later than one (1) trading day prior to the actual date of listing. Actual listing and trading of shares on the scheduled listing date shall take effect only after submission by the applicant company of a sworn Corporate Secretary's Certificate stating that all stock certificates had already been delivered within the prescribed period. The Exchange reserves the right to require the applicant to register its shares for IPO in the Philippine Central Depository Incorporated (PCDI). G. SUBMISSION OF LIST OF STOCKHOLDERS The applicant shall submit an undertaking committing itself to submit to the Exchange a computer diskette containing a complete and updated list of its stockholders and a copy of the top One Thousand (1,000) stockholders of the applicant company at least one (1) trading day prior to listing. H. RESERVATION OF LISTING DATE In reserving the listing date, the basis for queuing shall be the date and time when the Exchange receives the hard copy of the letter-request. The applicant company shall only be allowed to reserve one specific date. In the event that the applicant company abandons its reserved date, it shall forthwith file another letter-request which shall be subjected to the same basis for queuing. I. LISTING DATE AND FAILURE TO OFFER AND/OR LIST The offering period and formal listing of the shares shall be conducted within sixty (60) calendar days from receipt of the Notice of Approval of the listing application. If no listing was conducted within the prescribed period, the listing application shall be deemed abandoned. On the other hand, if an offering was conducted, formal listing shall be made within twenty-one (21) calendar days from the end of the offering period. If formal listing could not be made possible within the prescribed period, the application shall likewise be deemed as abandoned. The applicant company shall be required to refund all subscription payments within ten (10) banking days from the lapse of the prescribed period in both instances, the applicant company may file another application for listing but it shall be filed only after one hundred eighty (180) calendar days from the lapse of the sixty (60) day period. Except for justifiable reasons as determined by the Board, no requests for extensions shall be allowed. cdlex J. CONTINUING LISTING REQUIREMENTS Without in any way limiting the applicability of the Rules on Continuing Listing and all the rules and regulations set forth by the Exchange, the following rules shall be observed at all times: 1. The applicant shall maintain the minimum ownership reserved for the public as follows: Market Capitalization Public Ownership not exceeding P400M 33% >P 400M - P1B 25% >P 1B - P 5B 20% >P 5B - P10B 15% >P 10B 10% 2. The minimum number of stockholders shall be one thousand (1,000) for the First and Second Board and five hundred (500) for the Third Board. For purposes of this rule, only stockholders owning shares equivalent to at least one board lot (refer to the PSE Board Lot Table) shall be considered in determining the minimum number of stockholders. A list of the top One Thousand (1,000) stockholders of the applicant company shall be submitted to the Compliance and Surveillance Department of the Exchange within thirty (30) days after the end of every quarter. A computer diskette containing a complete and accurate list of all the stockholders of the applicant company shall be submitted annually to the Compliance and Surveillance Department within thirty (30) days after the end of every year. 3. The listed company shall not change the par value of its shares without prior approval from the Exchange. 4. The listed company and the issue manager and/or lead underwriter which undertook the required due diligence shall submit an explanation if its actual performance registered a negative twenty percent (-20%) deviation from the financial projection which it submitted to the Exchange and placed in its Prospectus. If the explanation is found to be unsatisfactory and unacceptable, the Exchange shall, after informing the Commission, publicly reprimand the company as well as the lead underwriter(s)/issue manager(s). The imposition of the foregoing penalty is without prejudice to further action by the Commission. 5. The listed company shall be prohibited from offering additional securities, except offerings for stock dividend and Employees Stock Option Plan (ESOPs) within One Hundred Eighty (180) calendar days from date of listing. CHAPTER 8 LISTING PROCESS FOR INITIAL PUBLIC OFFERINGS A. BASIS FOR QUEUING 1. For Listing Committee presentation, the basis for queuing shall be the date when the Commission's Registration and Licensing Order and Certificate of Permit to Offer Securities for Sale (License/Permit to Sell) were issued and delivered to the Exchange regardless of the date when the applicant submitted its listing application to the Exchange. 2. Where two or more companies secured their Registration and Licensing Order and License/Permit to Sell on the same date, the date of submission of the complete listing application to the Exchange would be the basis for the queuing. 3. Where two or more companies secured their Registration and Licensing Order and License/Permit to Sell, and submitted their complete listing applications on the same date, the queue shall be based on the date and time of submission to the Exchange of a certified true copy of the Registration and Licensing Order and the License/Permit to Sell. 4. If the Listing Committee or the Board of Governors decides not to take action on the application until a particular condition(s) has been fulfilled, the applicant company may be relegated to the end of the present queue. B. PROCESSING OF THE APPLICATION 1 The applicant company shall secure the necessary forms and file an application for listing, attaching all the necessary supporting documents and requirements. An application shall not be considered complete and thus cannot be processed unless the processing fee is paid and all documentary and other requirements shall have been submitted to the Listing Department of the Exchange. 2. The applicant company shall then make its presentation to the Listing Department. The schedule of the presentation shall be subject to the final approval of the Listing Department. 3. The Listing Department shall conduct an ocular inspection. 4. Upon submission of all the requirements, the application shall then be reviewed and processed by the Listing Department, which shall in turn, draft its report. 5. The Listing Department shall make the appropriate recommendation and shall then present its report to the Listing Committee. 6. The Listing Committee, turn, shall review the application and the recommendation of the Listing Department. 7. If the application is found to be in order, the Listing Committee shall recommend to the Board of Governors the approval of the application. 8. The Board shall take action on the application. The Exchange shall notify the applicant in writing of the status of the application. cd The processing of the application by the Listing Department shall be at least thirty (30) working days but not be more than forty five (45) working days from the submission of all documentary and other requirements. C. APPEALS 1. Decision of the Listing Department If the applicant company is found to be in violation of the Listing Rules and of the policies set forth by the Exchange, the application shall be denied and the Department shall inform the applicant of its decision as soon as practicable. The applicant company may file a request for reconsideration to the Listing Committee within ten (10) calendar days from receipt of the notice. If the applicant is not satisfied with the decision of the Listing Committee, the applicant company may file a request for reconsideration to the Board of Governors within ten (10) calendar days from receipt of notice to the applicant company of the Committee's decision. The decision of the Board shall be final. 2. Recommendation of Listing Committee If the application is found not to be in order, the Listing Committee may defer its decision to recommend its approval to the Board of Governors. The applicant company shall be notified of the Committee's decision, stating the reasons therefor. Within ten (10) calendar days from receipt of the Committee's decision, the applicant company may file a request for reconsideration to the Listing Committee. If the request for reconsideration is denied, the applicant company may file an appeal to the Board of Governors within ten (10) calendar days from receipt of notice. The decision of the Board shall be final. On the other hand, in case the Committee decides to deny or reject the application outright, the applicant, within ten (10) calendar days from receipt of the notice of rejection, may file a request for reconsideration to the Board of Governors, specifying the reason(s) for its request. Only one request for reconsideration shall be allowed. Thereafter, the decision of the board shall be final. 3. Decision of the Board of Governors If the Board reverses the favorable recommendation of the Listing Committee, the applicant company may file a request for reconsideration to the Board within ten (10) calendar days from receipt of notice, specifying the reason(s) for its request. Only one request for reconsideration shall be allowed. The decision of the Board shall be final. CHAPTER 9 APPLICATIONS FOR ADDITIONAL LISTING OF SHARES (TEXT TO BE INSERTED) CHAPTER 10 PENALTIES Except as otherwise provided in these Rules, the Exchange in its discretion shall, after proper notice and after granting an applicant the opportunity to be heard, impose any or some of the following sanctions if it finds that there is a violation of these Rules: 1. A denial of the application or revocation of the approval of the listing. 2. A fine of not less than fifty thousand pesos (P50,000.00) for the first infraction. 3. A fine of not less than one hundred thousand pesos (P100,000.00) and a reprimand to be made public for the second infraction. 4. A fine of not less than three hundred thousand pesos (P300,000.00) and a reprimand to be made public for the third infraction. The imposition of the foregoing sanctions shall be without prejudice to the filing of any action in the courts of law. CHAPTER 11 SCHEDULE OF FEES I. APPLICATION FOR INITIAL PUBLIC OFFERING A. PROCESSING FEE Upon application, the applicant company shall pay a non-refundable processing fee of P50,000.00 plus other incidental expenses. B. LISTING FEE 1. First P5 B 1/10 of 1% or P500,000.00 whichever is higher 2. Second P5 B P5 M + 1/20 of 1% of excess over P5B 3. Third P5 B P7.5 M + 1/30 of 1% of excess over P10 B 4. Fourth P5 B P 9.166666 M + 1/40 of 1% of excess over P15 B 5. Excess of P20 B P10.416666 M + 1/50 of 1% of excess over P20 B of market value of shares applied for listing based on offer price. If the exact offer price is still to be determined from a price range set by the applicant company, the maximum price in the price range shall be used as basis for the computation of the listing fees. As soon as the exact offer price is determined, the Exchange shall reimburse the excess amount within fifteen (15) days. Applicant companies shall pay the listing fee as soon as practicable which in no case shall be later the fifteen (15) days from receipt of the Notice of Approval from the Exchange. If the applicant company fails to pay within the prescribed period, the applicant company shall incur a surcharge of twenty five percent (25%) plus 1% interest (based on the listing fee) for every day of delay. (10/20/95) II. APPLICATIONS FOR TRANSFER TO THE FIRST BOARD The applicant company shall pay a non-refundable processing fee of Ten Thousand Pesos (P10,000.00). In the event the application is approved, the applicant company shall pay an additional fee of Twenty Thousand Pesos (P20,000.00). III. APPLICATIONS FOR ADDITIONAL LISTING A. PROCESSING FEE Upon application, the listed company shall pay a non-refundable processing fee of Ten Thousand Pesos (P10,000.00). B. ADDITIONAL LISTING FEE 1. Stock Dividend 1/10 of 1% based on par value of shares applied for listing 2. Stock Rights Offering 1/10 of 1% of offer price 3. Debt Equity Conversion 1/10 of 1% of conversion price 4. Private Placement 1/10 of 1% of placement price 5. Shares for Asset Swap 1/10 of 1% of transacted price 6. Shares for Property Swap 1/10 of 1% of transacted price 7. Underlying Common 1/50 of 1% Shares for Convertible of conversion/strike/exercise price Bonds, Preferred Shares, Warrants and the like 8. Availment of ESOP 1/10 of 1% of ESOP price 9. Preferred Shares 1/10 of 1% of offer price 10. Subsequent Public 1/10 of 1% of offer price Offerings Applicant shall pay the listing fee as soon as practicable which in no case shall be later than fifteen (15) banking days from receipt of notice from the Exchange approving the application for listing. If the applicant company fails to pay within the prescribed period, the applicant company shall incur a surcharge of twenty five percent (25%) plus one percent (1%) interest (based on the listing fee) for every day of delay. (10/20/95) cdt IV. ANNUAL LISTING MAINTENANCE FEE The listed company shall pay an annual listing maintenance fee of P100.00 for every P1 Million 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 P100,000.00 nor more than P500,000.00. The annual listing maintenance fee shall be paid on or before January 15 of each year, with an allowable grace period of one week. The listed company shall be assessed a fine P1,000.00 for every calendar day of delay. If the company fails to remit the maintenance fee by 15 February, of that same year, the Exchange shall discontinue assessing the company the fine but it shall automatically suspend the company from trading for two months or until 15 April. If the listed company still fails to pay the required fee after 15 April, the listed company shall be delisted without prejudice to the payment of the proportionate maintenance fees to the Exchange. V. MODE OF PAYMENT Payment for all the fees shall either be in: (a) a local clearing check issued by the company; or (b) a manager's check. cdlex All fees imposed by the Exchange are exclusive of tax.