Guidelines for Pricing Proprietary Membership Securities

June 10, 1976 GUIDELINES FOR PRICING PROPRIETARY MEMBERSHIP SECURITIES * In the sale of proprietary membership securities, the object of the sale remains the same, whether acquired at the beginning of the project or toward its completion a proportionate part of the project as completed. Any increase in prices between two points of sale, if at all, should be limited to the reasonable rate of return arrived at after considering the following factors : prcd 1) additional assets and/or additional improvements apart from those already considered in approving the initial price or that price previously approved; 2) proof of actual development of the properties which must be proportionate to the increase applied for in accordance with the work program and project study submitted to and considered by the Commission previously. The following factors are to be considered in determining a reasonable increase in prices of proprietary membership securities during the construction phase until the completion of the project: 1) Increase in the value of land; 2) Increase in the prices of construction materials; 3) Increase in all qualitative factors. An increase of not more than 20% p.a. from the price previously approved shall be allowed during the construction phase. There must be submitted the latest audited financial statements incorporating the additional assets and/or improvements. Increase exceeding 20% p.a. may be approved by the Commission only in cases where: a) there is a showing that a particular phase of development as contained in the project proposal has been completed and has been placed in serviceable use by existing members/stockholders; and b) that the proposed price increase has been approved by a majority vote of existing members or outstanding capital stock. There shall be a hearing conducted on the petition for increase of prices considering all the documents submitted to the Commission. For the information and guidance of all concerned. (SGD.) ANGEL L. LIMJOCO, JR. Chairman Securities and Exchange Commission Footnotes * Amended by the Revised Securities Act dated February 23, 1982 excluding stock and non-stock.