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PHILIPPINE STOCK EXCHANGE, INC.

FOREWORD

In its effort to educate and increase public awareness, the Philippine Stock exchange has come up with a series of

Investors Primers that will provide simplified answers to all inquiries related to the history, structure, components,

operations, and procedures of the Philippine securities industry.

Investors Primer II: The Philippine Stock Exchange is the third of a series which hopes to guide readers on the

basics of investing and participating in the Philippine stock market.

We hope that the information provided herein will result to a better understanding of the Philippine securities market

and, in turn, encourage local and foreign investors to take part in our stock market.

JOSE LUIS U. YULO JR.

President and Chief Executive Officer

Philippine Copyright 1999 by the Philippine Stock Exchange, Inc.

First Edition

Published by: PSE Training Institute and

Research and Public Information Department

Philippine Stock Exchange, Inc.

Philippine Stock Exchange Centre

Exchange Road, Ortigas Center

1605 Pasig City

Tel Nos: 636-0122 to 41 locals 805,509, 510

http://www.pse.org.ph

Printed in Manila, Philippines

SBN 971-92134-1-8

K N O W I N G T H E PH I L I PPI N E ST O C K E X CH AN G EA gu ide for I nvestors

I nvestors P rim er I I : T he P hilippine Stock E x change, I nc.

Table of Contents

What is the Philippine Stock Exchange, Inc.?1.

What is the role of the PSE?2.

How did the PSE begin?3.

How is the PSE managed?4.

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How is the PSE organized?5.

Where is the PSE located?6.

What are the business hours of the PSE?7.

How do you contact the PSE?8.

1. What is the Philippine Stock Exchange, Inc.?

The Philippine Stock Exchange, Inc. (PSE or Exchange) is a private non-profit and non-stock organizationcreated to provide and maintain a fair, efficient, transparent and orderly market for the purchase and sale ofsecurities such as stocks, warrants, bonds, options and others.

2. What is the role of the PSE?

T he PSE bri ng together com panies which aim to raise capital th rough the issue of new securities. T hrough th e listingof their share in the stock exchange, com panies can have easier access to fun ds. Raising new capital thr ough anadditional public offering is easier and less expensive when the company is already listed in the Exchange. Therefore,the PSE plays a vital role in the financing of productive enterprises that use the funds for growth and expansion ofnew jobs. It is therefo re essential to the grow th o f the Philippine econom y.

Furthermore, the PSE facilitates the selling and buying of the issued stocks and warrants. It provides a suitable marketfo r the tr ading o f securit ies to indiv iduals and organization s seeking to invest their saving or excess fund s through thepurchase of securities.A part fro m these functions, the PSE has committed itself to (a) protecti ng the i nterest of t he investing publ ic; and (b)developing and maint aini ng an effi cient, fai r, orderly and tr ansparent mark et.E fficient T his means that or ders are executed and t ransaction s are settled in the fastest p ossibl e way. Som e reformshave been instituted or are being carried out by the PSE to make the market more efficient, such as:

installation of ful ly automated t rading system;

installatio n of computer trading term inals in cities outside Metro M anila to encourage the entr y of

provincial investors; and creation of a central cleaning and depository system to mobilized stockcertificates and allow transfer of shares and funds by book entry.

Fai r This means that the PSE assures that no investor will have an undue advantage over another ,market player intrading by m anipulating prices and engaging into insider trading. I nsider tr ading is the act of buying or selling aparticular stock based on cert ain priv ileged i nf or mation which is not available to the pub lic. As such it is considered asillegal and pr ohib ited by the PSE .M ark et T ransparency Transparency proceeds from the assumption that the investor can only make informed andintelligent in for mation about the p articular sock he w ants to buy. T he PSE requires listed companies to disclosetimely, com plete and accurate m aterial inf orm ation to the E xchange and the public on a regular basis. Suchinformation would include stock price information, corporate conditions and developments which tend to affect

stock prices like dividend, mergers and joint ventures, and the like.3. H ow did the PSE begin?

T he Phi lippin e Stock E xchange began 70 years ago, on A ugust 8, 1927. Five M anila based businessmen, namely W.

E ric L ittle, G ordo n W. M ackay, John J. Russell, F rank W. Wakefi eld and W.P.G. E lliot felt that i ncreasing tradingactivity w ould stimu late the business atm osphere. They got t ogether, put their p lan into action and fo unded th e M ani la Stock E x change, the first Stock Exchange in the Philippines and one of the oldest in the Far East. It was originallylocated in downtown Manila, transferred in1970 to its own three-story building in Binondo, and then moved to Pasigin 1992.

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O n M ay 27, 1963, the M ak ati Stock E x changewas organized by five other businessmen. T hese were H erm enegildo B.Reyes, Bernard G aberman, E duardo O rt igas, Ar isteo L at and M iguel Campos. It start ed it o peration s on N ovember16, 1965 and w as located in M akati, then emerging center fo r f inance.

So, for about t hir ty years the Phil ipp ines had toe stock exchanges, the Manila Stock E xchange (M SE ) and the M akit aStock E xchange (M K SE ). A lthough the tw o exchanges remained as separate entit ies, they basically w ere tr ading thesame listed issues.

T he existence of two stock exchanges in one coun tr y caused conf usion amon g (pr ospective) investor s because the

two bourses had different policies, different members and, last but not the least, different stock prices for the samelisted stocks.

The idea to unite the two exchanges and have it managed by a professional group emerged and was attained when thePhili ppine Stock E x change, I nc. was incorporated on July 14, 1992. To further consolidate logistics and to hasten thedevelopment o f a more effi cient capital market, the leaders of bot h bourses agreed t o un if y on D ecember 23, 1993under th e PSE.

O n M arch 4, 1994 the Securi ties and Exchange Commission granted the Phil ippine Stock E xchange, I nc. its license tooperate as a securit ies exchange in the count ry stating th at a unif ied Stock E xchange is vital in developing a strongcapital m arket and a sustainable economic growth. I t simultaneously canceled t he licenses of the M SE and the

MK S E .

T he Philippine Stock Exchange is currently th e only organized exchange in t he Philipp ines licensed for trading stocksand warr ants.

4. H ow is the PSE managed?O ne of the non-broker m emb ers heads the Exchange, appo int ed by t he Board as the President and Chief E xecutive

O fficer (CEO ). T he President, along with the professional management of the PSE, executes the policydeterm inations of the Board and ensures that t he E xchange is operating efficiently. It carr ies out fo r the memb ers,listed companies and exchange system to ensure that stock market operation in the Philippines is kept within thestandards of fairness, transparency, pro fessionalism, trust and in tegrit y. Addi tio nally, it sets the rules and regulations ofthe E xchange, mo nito rs its implementation and ensures that the investing publ ic is given protection i n t he transaction

of their investments. T he E xchange also ensures that all legal requirements under the Corpo ration Code and theRevised Securi ties A ct are met.

5. H ow is the PSE organized?T he PSE S organizational structure holds f ive (5) groups, namely: L istings & D isclosure G roup, Com pliance &Surveillance G roup, O perations/ Automated Trading G roup, Finance and Investment G roup and BusinessD evelopment & I nform ation G roup along with t he O ffice of the G eneral Counsel, M embership D epartment andH uman Resources M anagement D epart ment, whi ch report s directly to th e Of fi ce of the President.T he fun ctional responsibilit ies of each depart ment are as foll ows:L istings and D isclosure G roup T his group is comp osed of the fo llow ing depart ments: L isting Pro cessing, LegalA dvi sor y and Cor po rate D isclosure. It processes and evaluates listing appl ications, conduct s legal due diligence, andmonitors compliance to continuing listing requirements including disclosure of listed companies. It also coordinatesI PO (initial public off ering) distribution .C ompliance and S urveillance G roup T his group acts as the police of t he Exchange. It is com posed of the Com plianceA udit D epart ment, Special I nvestigation D epart ment, M arket Surveillance D epart ment and L egal Section. Te groupconducts legal audit and review aside from auditing of member-brokers books and operations. It also monitors themembers compli ance to set rul es and regulations and enf orces appr opr iate sanctions to vio lators or erring memb er-brokers. It takes responsibility in the operation of the surveillance activity, to ascertain that there are no illegal postings

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and dealings made in any of the issues listed in the E xchange.O perations/ A utomated Trading G roup Placed under this group are the Computer Operations Unit, SystemsD evelopment U nit and Systems I ntegration and technical Support Un it along w ith the Tr ading & SettlementD epartment, A dministration D epartment and PSE Plaza O perations D epartment to function as one group. I t isconsidered as one of the most critical responsibility areas in the organization since it handles the operation of theautomated trading and clearing and settlement activities for stock operations.T he A utomated Trading G roup examines and controls the m onitori ng, logging and analysis of computer systemresource utilization; the m aintenance of network connections of all work stations at the trading f loor and remoteoff ices; m anaging of database of off -floor installed sites; and t he im plementation and integration of the dif ferentcomponents of the trading and o ff ice systems.O n the other hand, the Trading and Settlement D epart ment m oni tors compl iance of memb er-br okers to t he clearingand settlement requirements of the settlement banks and central depositor y. I t coord inates wit h these agencies andthe custodian banks, both local and foreign, any trading discrepancies, irregularities or settlement concerns of themember-brokers and investing publ ic.T he A dministration D epartm ent and the PSE Plaza Op erations D epartment h andles the building maintenance,security and admini stration as w ell as the procurement management and utilization of supplies and equipmentincluding the daily administrative requirements of the Exchange. It is also responsible for the daily dissemination of all

the listed companies corp orate announcements along w ith the fo reign quotation report .F inance and I nvestment G roup The group is responsible for the management of the companys financialresources. It is compo sed of the A ccounting D epartm ent, Treasury D epartm ent, Payroll and Budget Section andI nvestments M onitorin g Section which handles the m aintenance of book of accounts, p reparation of financialstatements and budget, management and placement of PSE fun ds, monito ring of accounts receivables and billi ng o faccounts.Business D evelopment and I nforma tion G roup This group is comprised of the following: Product D evelopmentD epartment, M arket D evelopment D epartment, Research and Publ ic Infor mation D epartment, Corporatecomm unications D epart ment, PSE T raining Institute and PSE Rule Book/ Task Force Q uality Unit.

T he Product D evelopment D epart ment is in charge of t he expansion , development and packaging of dom estic andfor eign financial products, equity-related securities, debt-related securities and other for ms of securities andderivatives. It coordinates with private businesses, government agencies and associations in the overall developmentand packaging o f the securit ies, derivatives and trading f acilit ies.T he Market D evelopm ent D epart ment handles the expansion, developm ent and moni tor ing of the investo r base forboth domestic and f oreign market on an individual and institutional level. I t looks at the PSE trading operationspresence and positioning in the domestic, regional, and international markets including the expansion anddevelopment of market intermediation services and facilities covering secondary, over-the-counter (OTC) and thirdmarkets.T he research and Publi c I nf or mation D epart ment is composed of the Research Ser vices Section s, In fo rm ation andPublications Section and the Public I nfo rm ation and A ssistance Center (PIAC ). I t conceptualizes, processes,consolidates and handles multi-media dissemination of statistical and analytical information and studies related to thebusiness requirements of members. I t conducts research and prov ides inf or mation suppor t to the expansion anddevelopm ent of the E xchange tr ading operations and its markets. I t also maintains, develops and disseminatesinf or mation thr ough manual or electron ic libraries and do cumentation . The depart ment pr oduces regular pub lication s

Weekly Repo rt, M ont hly Repor ts, and Fact Book th at pro vide market users with a review of the marketsperfo rm ance along wit h h istorical and curr ent data on stock t rading activities and listed com panies. The D epart mentalso acts as the liaison of the E xchange through the sharing o f data and inf orm ation with for eign individuals,organizations and institutions.U nder the Research and Public I nfo rm ation D epartm ent is PIAC which i mplement the E xchanges continual public

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assistance program by covering inf orm ation prom otion and facilitation along w ith complaints mediation in thephysical center at the principal offices of the PSE. It also manages the operation of the PSE Souvenir Shop.T he Corp orate Com mun ication s D epart ment m anages all f or ms of media and p ublic r elation t hro ugh pr ess releases,inf orm ation and educational campaigns. I t is in charge of managing and developing business pro moti onal andmarketing exposure requirements of the PSE including the production and dissemination of corporate internalbulletin and o ther for ms of info rm ation materials.T he PSE Training I nstitute is responsible for the development of programs/ curricula along with providing lectures,trainings and seminars about securities market participants. Aside from in-house seminars, it conducts road shows toinvestors in the provinces. T he I nstitute also provides logistics support to all training-related activities of thedepartm ents in the PSE. In the f uture, th e I nstitute pl ans to conduct activities such as the Certifi ed SecuritiesRepresentative (CSR) seminars and the technical and fundamental analysis seminars in the coordination with otherintuitions.T he PSE Rile Book / Task Fo rce Q uality is responsible for the codif ication and the manualization of the PSE s ru les,guidelines, p rocedures and other legislative materials coming from government agencies, in to a consolidated andcompr ehensive M anual of Ru les of the Exchange.T he PSE Rule Book consists of five (5) volumes which are: (1) Corporate Rules, (2) M embership Rules, (3) L isting

and D isclosure Rules, (4) Trading and Settlement Rules, and (5) Com pli ance and Surveillance Rules.M embership D epartment T his department manages, im plements and coo rdinates members requirements, plannedactivities and projects w ith the end in view of assisting PSE management in the expansion, consolidation anddevelopm ent of its membership. I t also processes m embership applications and various corporate changes ofmember-brokers fo r approval by the M embership Com mittee. I t is in charge of circular preparations concerningmembership, and the m onitor ing of financial statements of brokers and SE C licenses of its stock traders. I ncoordination w ith the M embership Com mitt ee, it facilitates memberships arbitr ation. Furth er, the M embershipD epart ment organizes and prepares social activi ties for all m embers.H uman R esources M anagement D epartment T his depart ment, under t he O ff ice of t he President, handles emp loyeecareer management, admin istration of employee compensation and benef its, m anagement of corporate culture and

organization development, implementation of the companys performance management system and formulation andenforcement of company policies. To ensure continuing organization and employee development, this departmentin tegrates the organizational str ucture/ processes and workf orce issues int o t he business equation and evaluates groupprocesses and dynamics to tailor-f it results wi th a corporate staff training and m anagement develop ment p rogram.O ffice of the G eneral C ounsel T he O f fi ce of th e G eneral Counsel renders corpor ate legal services and serves as thepr imary legal advisor to t he Board of G overn ors, the President, the Chief O perating O ff icer, the various depart ments,officers and employees of the Exchange. It also coordinates with the external legal consultants on matters referred bythe exchange; represents the Exchange before judicial and admin istr ative/ quasi-judicial bo dies; and, attend legislativeand admi nistrative hearings or meeting as well as draft position papers and/ or comm ents to pending legislation andadministrative issuances.6. W here is the PSE located?T he PSE has two trading centers located at th e PSE Centre in O rt igas, Pasig w here its execut ive of fi cers are situated

and at t he PSE Plaza in M akati Ci ty.7. W hat are the business hours of the PSE?E xcept Saturdays, Sundays, l egal holi days and days when the Bangko Sentr al ng Pilipin as (BSP) Clearing O ff ice isclosed, trading hours in the Philippine Stock Exchange shall be in one continuous session with the following daily

schedule:

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Playing of the National Anthem 8:45 a.m.

Pre-open Period 9:00 a.m. ~ 9:30 a.m.

Calculation of Open Price/Market Open 9:30 a.m.

Regular Trading Period 9:30 a.m. ~ 12:00 noon

Closing Time 12:00 noon

A ten (10) minute extension from closing time shall be allowed to execute orders at closing prices.

8. H ow do you contact the PSE?M ailing addr ess : Publi c I nf or matio n and Assistance Center

Ground Floor, Philippine Stock Exchange CentreExchange Road, Ortigas CenterPasig City 1605, Philippines

Telepho ne N umbers: (632) 637-8818 (hotline)

(632) 636-0122 to 41 (tr unk)Loc. 403, 410

Facsimile N umbers: (632) 634-5113; 636-0812; 636-0806

(632) 637-8813

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