Basic Finance

The Philippine Stock

Exchange, Inc.

(‘PSE’ or EXCHANGE)

The Philippine Stock

Exchange, Inc.

∞ Overview

∞ Mission and Vision

∞ Trading Mechanism

∞ Investing Procedures

∞ Stocks and Bonds

∞ Classes of Stocks

(Introduction)

OThe Philippine Stock Exchange, Inc. is a private organization that provides and ensures a fair, efficient, transparent and orderly market for the buying and selling of securities.

OPSE traces its root from the country’s two former bourses: The Manila Stock Exchange (MSE) and the Makati Stock Exchange (MkSE).

It was founded in March 1927.

Regarded as the first stock

exchange in the Philippines and

one of the oldest in Asia.

It was established in May 1963. Considered as

the second bourse to

operate in the country.

MAKATI STOCK EXCHANGE

MANILA STOCK EXCHANGE

Founded in March 1927

Established in May 1963

While trading the same listed issues, MSE and MkSE remained separate entities for almost 30

years. December 23, 1992 marked a milestone for the Philippine capital market when the MSE

and MkSE were unified to become the

Philippine Stock Exchange.The idea to unite the two exchanges and have it

managed by a professional group became a compelling vision of the government headed by President Fidel V. Ramos. The idea was geared

towards the development of a more efficient capital market.

PHILIPPINE STOCK EXCHANGE

Histo

ryH

istory

19271927

MSE was established on August

MSE was established on August

8 by five businessmen, namely,

8 by five businessmen, namely,

W. Eric Little, Gordon W. Mackay,

W. Eric Little, Gordon W. Mackay,

John J. Russell, Frank W.

John J. Russell, Frank W.

Wakefield and W.P.G. Elliot

Wakefield and W.P.G. Elliot

19361936

Commonwealth Act No. 83 or the

Commonwealth Act No. 83 or the

Securities Act of 1936 was enacted

Securities Act of 1936 was enacted

on October 26. It created the

on October 26. It created the

Securities and Exchange Commission

Securities and Exchange Commission

(SEC) in response to the need for an

(SEC) in response to the need for an

agency that would safeguard public

agency that would safeguard public

interest brought about by the local

interest brought about by the local

stock market boom in 1936

stock market boom in 1936

Histo

ryH

istory

19401940

The MSE suspended operations

The MSE suspended operations

during the Japanese Occupation.

during the Japanese Occupation.

The SEC was also abolished by the

The SEC was also abolished by the

Philippine Executive Commission

Philippine Executive Commission

and later reactivated in 1945

and later reactivated in 1945

19461946

The MSE resumed trading operations

The MSE resumed trading operations

19631963

MSE was organized by

MSE was organized by

Hermegenildo B. Reyes, Bernard

Hermegenildo B. Reyes, Bernard

Gaberman, Eduardo Ortigas, Aristeo

Gaberman, Eduardo Ortigas, Aristeo

Lat and Miguel Campos on May 27

Lat and Miguel Campos on May 27

Histo

ryH

istory

19651965

MkSE started operations on

MkSE started operations on

November 16

November 16

19691969

The MSE implemented separate

The MSE implemented separate

indices for mining and oil

indices for mining and oil

19921992

The Philippine Stock Exchange, Inc.

The Philippine Stock Exchange, Inc.

was incorporated on July 14 by the

was incorporated on July 14 by the

following incorporators: Robert

following incorporators: Robert

Coyuito Jr., Victor Say Hipek, Eduardo

Coyuito Jr., Victor Say Hipek, Eduardo

C. Lim, Juan B. Francicso and Cesar

C. Lim, Juan B. Francicso and Cesar

E.A. VirataE.A. Virata

Histo

ryH

istory

19921992

On December 23, MSE and MkSE

On December 23, MSE and MkSE

forged and issued a joint

forged and issued a joint

declaration on the unification of

declaration on the unification of

the country’s two bourses under

the country’s two bourses under

the Philippine Stock Exchange,

the Philippine Stock Exchange,

Inc. to consolidate logistics and

Inc. to consolidate logistics and

hasten development of the capital

hasten development of the capital

marketmarket

19941994

The SEC granted the PSE its license to

The SEC granted the PSE its license to

operate as a securities exchange on

operate as a securities exchange on

March 4. It simultaneously cancelled

March 4. It simultaneously cancelled

the license of the MSE and MkSE

the license of the MSE and MkSE

On March 25, the one price-one market

On March 25, the one price-one market

exchange was achieve

exchange was achieve

Histo

ryH

istory

19951995

The PSE was accepted as the 37th

The PSE was accepted as the 37th

full-pledged member of the

full-pledged member of the

Federation Internationale des

Federation Internationale des

Bourses de Valeurs or International

Bourses de Valeurs or International

Federation of Stock Exchanges

Federation of Stock Exchanges

(FIBV), now known as the World

(FIBV), now known as the World

Federation of Exchanges, on

Federation of Exchanges, on

October 16October 16

19961996

The PSE introduced the Banking

The PSE introduced the Banking

and Financial Services Index to

and Financial Services Index to

reflect the financial environment

reflect the financial environment

and the All Shares Index that

and the All Shares Index that

includes all listed companies

includes all listed companies

Histo

ryH

istory

19991999

On November 15, the PSE was

On November 15, the PSE was

conferred membership in the

conferred membership in the

Association of National

Association of National

Numbering Agencies in New York,

Numbering Agencies in New York,

USA and became the Numbering

USA and became the Numbering

Agency for the Philippines

Agency for the Philippines

20062006

On January 2, the PSE revised the

On January 2, the PSE revised the

industry classification of listed

industry classification of listed

companies by categorizing

companies by categorizing

companies according to its major

companies according to its major

source of revenue.

source of revenue.

O brings together companies which aim to raise capital through the issue of new securities

O plays a vital role in the financing of productive enterprises that use the funds for growth and expansion of new jobs

O facilitates the selling and buying of the issued stocks and warrants

O provides suitable market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities

O It provides and ensures a fair, efficient, transparent and orderly market for the buying and selling of securities for investors and stakeholders

O It addresses public demand for speedy access to information on the securities market

O It offers transparency of listed companies and ensures full, fair, timely and accurate disclosure of material information from all listed companies

O It provides comprehensive market data, stock quotations, dividend declarations, trading activities, and other pertinent information on the PSE, trading participants, listed companies and other institutions

O It is a critical factor in improving settlement efficiency, increasing market liquidity and development of derivative instruments

BOARDOFDIRECTORS

Other Board Members

• Cornelio Peralta• Anabelle Chua• Alejandro Yu• Amor Iliscupidez• Eusebio Tanco

Ph.D.• Dakila Fonacier• Edgardo Lacson• Jose Pardo• Ma. Vivian

Yuchengco• Jinky Alora• Rachelle Blanch• Roel Refran• Susana Serad• Val Suarez Esq.• Marietta Tan• Enrico Trinidad

Mr. Hans Brinker Makasiar SicatChief Executive Officer

President and Independent DirectorThe Philippine Stock Exchange, Inc.

The PSE is committed to:

Practice and promote good governance within the Exchange and among listed companies and trading participants.

Operate efficiently to optimize shareholder value.

Adopt world-class systems and global best practices for an efficient, fair and orderly market.

Develop a highly motivated and professional workforce committed to serve and excel.

Offer products and services responsive to the needs of investors and other stockholders.

Provide a facility for fair, accurate, complete and timely information about listed companies, while extending market education and awareness programs to investors.

Be a prepared venue for raising capital.

A premiere exchange with world-class standards for

trading securities and raising capital that serves as a strong engine for a robust company.

Mutual respect in relating with fellow employees.

Inner strength in prioritizing the common good of the market instead of individual interest.

Corporate responsibility in promoting market growth hand in hand with community welfare.

Professionalism in delivering quality service and in meeting the highest standards of excellence.

Integrity, transparency and accountability in implementing business programs and enforcing decisions.

Teamwork in working towards a common a favorable goal for the market.

1. Choose a stockbroker. The PSE has a complete list of information about all its trading participants who are authorized and qualified to trade securities for you. This list is also available on the PSE's website and the telephone directory's Government and Business listings yellow pages under the category of stock and bond brokers. Aside from representing you in the stock market, a stockbroker can also offer you services such as access to market reports/studies, on-time delivery of important documents, and advise on your investments. It is then important that you trust your stockbroker and that you are satisfied with its services.

2. You shall be required to open an account and fill out a Customer Account Information Form and to submit identification papers for verification. The stockbroker will then assign a trader or agent to assist you in either buying or selling any listed security. There are also stockbrokers who have an online trading facility that allows you to post orders by yourself, but sufficient understanding of how the stock market works is key. If you choose to be assisted by a trader or agent, you can discuss with him/her what stocks you want to buy or sell.

3. Give the order to your trader, and then ask for the confirmation receipt. Your buy or sell orders are relayed to the stockbroker's dealer for execution. In an automated system as in PSE, the order is keyed in through a trading terminal and automatically matched. Confirmation of done trades - via phone, email or online - is made as soon as possible and subsequently, an official confirmation or invoice should be delivered to you.

4. Pay before settlement date. The delivery or payment should be made before the settlement date of T+3. For traditional stockbrokers, settlement of transactions is usually done after three (3) working days from the transaction date. This means that for transactions done on Monday, as an illustration, payment should be received by Thursday. Meanwhile for online stockbrokers, settlement of all transactions is done on the transaction date. Settlement of accounts is performed by the clearing house.

5. You shall receive from your broker either the proceeds of sale of your stocks (after 3 business days) or proofs of ownership of stocks you bought (confirmation receipt and invoice). If you wish to have a physical certificate of the stocks you bought, you can give instructions to your broker and pay the required upliftment fee.

The Philippine Stock Exchange Composite Index

(PSEi)

Top GainersAs of January 17, 2014http://www.pse.com.ph

Top LosersAs of January 17, 2014http://www.pse.com.ph

Top Active Stocks

http://www.pse.com.ph As of January 17, 2014

O Stocks are evidence of ownership in a company and a claim against a company’s assets and earnings.

O It is the legal capital of the entity divided into shares.

O Businesses obtain long term external financial capital either by obtaining equity funds or by borrowing. Equity capital may be obtained by finding new partners with financial capital to invest or through the public markets by issuing shares.

O Stockbroker – someone who deals in stocks and shares

O Stock Certificate – document showing stockholders ownership in the company

O Stock Dividend – pro rate distribution of additional shares of a corporation’s own stock to its stockholders

O Stockholder – an individual or business that owns shares in a corporation

O Stockholder’s Equity – ownership interest of stockholders in a corporation

O Stock Market – a stock exchange; the buying and selling of stocks and shares

O Common stock represents ownership shares in a corporation. Common stockholders have voting and dividend rights.

O They also have a claim on all business profits that remain after the holders of all other classes of debt and equity securities have received their coupon payments or returns.

O In the event of bankruptcy, they are paid after bondholders and preferred stockholders. There is, however, a greater chance of capital appreciation by owning common stock.

O Preferred stock is a class of capital stock that has preference to the firm’s earnings and assets over common stock.

ELEMENTS OF PREFERRED STOCK:1. Does not represent an ownership claim.2. No voting rights unless dividends are

missed.3. Par value is determined through a fixed

annual dividend.

4. Dividends:• Annual dividends are stated

either as pro amount or a percentage per value

• Received only if declared by the firm’s Board

• Are paid out after tax earnings and each flow

• Are taxable when received by shareholder

O A bond is a written promise by a company, government, or other institution to pay the face amount at the maturity date.

O It represents borrowing lending agreements. Bond holders have the legal status as creditors, not owners, of the firm.

O They have priority claims on the firm’s cash flows and assets. This means that they must receive their interest payments before the owners receives their dividends

O Bond Discount – the amount below face value at which a bond is issued

O Bond Premium – the amount in excess of face value at which a bond is issued

O Bond Dividend – a dividend paid in the issuing company’s own bonds

O Bond Indenture – agreement between a bond issue and holder covering the terms of issue

O Bond Rating – quality ratings of corporate and municipal bond issues

O Bond Redemption – a transaction in which bonds are repurchased or retired by the issues

O Bond Valuation – the process followed by an investor on determining what to pay for a bond

O Par Value (Face Value) – the amount which will be paid by the debtor or issuer upon maturity

O Maturity – the length of time that has to expire for face value of the bond to be paid by the issuer. The periods can range from 45 days Treasury-bills to 25-year T-bonds

O Bearer – bonus may be paid to the bearer or holder of the bond

O Mortgage bonds or debentures – bonds which have as security for its repayment some assets (usually real estate)

O Bond ratings assess both the collateral underlying the bonds as well as the ability of the issuer to make timely payments of internets and principal.

O The rating can range from D – highly speculation to triple A (AAA) – fast quality, least credit risk.

O Government securities are unconditional obligations of the Republic of the Philippines. It is backed by the full taxing power of the national government.

O The government issues two kinds of government securities:

1. Treasury Bills (T-bills)2. Treasury Bonds (T-bonds)

O Treasury bills are government securities which mature in less than a year. T-bills can be:

1. 91-day bills2. 182-day bills3. 364-day bills

O The government can finance its project (fiscal deficits) by:1. Borrowing from Bangko Sentral2. Borrowing from the domestic

money market3. Borrowing from abroad

The Philippine Stock Exchange

Group 5

THE END

DE LAS ALAS,KRISTILLE

PARADERO,REVIEL

RAMOS,ALDRIN

DELA VEGA,NIKKO

AFURONG,KARLO

SIANQUITA,ROBBIE

ALVAREZ,AEFRILL

???,DANISSA