Sie sind auf Seite 1von 88

Our Vision

By 2007:

A peer among the Premier Stock Exchanges within the region.

One of the most efficient, orderly, fair, transparent centers for raising capital and trading
securities that will be beneficial to all participants in the market place.

A strong foundation for the growth of the Philippine economy by being in the forefront of
savings mobilization and investments through existing and innovative instruments.

Our Mission
The PSE is committed to:

Maximize value for shareholders with optimal service to all stakeholders.

Practice and promote good governance among listed companies and trading participants
to sustain investors’ confidence.

Develop world-class trading and settlement infrastructure and information system.

Develop new products and services.

Promote the professional and personal growth of our personnel to better serve the
investors, the listed companies, and the trading participants.

Our Corporate Values

Professionalism
Efficiency
Accountability
Transparency and fairness
Collaboration
Teamwork
Ethics
Integrity

Contents
1 Financial Highlights 36 Report of Independent Auditors
2 Chairman’s Message 37 Balance Sheets
4 President’s Message 38 Statements of Income
6 2006 Stock Market Performance 39 Statements of Changes in
12 Highlights of Operations Stockholders’ Equity
28 Board of Directors and Officers 41 Statements of Cash Flows
30 Executive Officers 42 Notes to Financial Statements
31 Department and Section Heads/OICs 70 Market Integrity Board and Committees
32 Securities Clearing Corporation of the 72 List of Companies and Issues
Philippines Board of Directors and Officers 77 List of Active Trading Participants
33 Information Required by the Securities 85 Corporate Information
Regulation Code
35 Statement of Management
Responsibility for Financial Statements

The Philippine Stock Exchange, Inc.


Financial Highlights

250 250 2 2

200 200 1.75 1.75

150 150 1.5 1.5

100 100 1.25 1.25

50 50 1 1

0 0 0 0

Annual Report 2006 01


Chairman’s Message

Dear Shareholders and Friends,

We are pleased to report that in 2006 your Exchange lived up once again to its role as being one of
the country’s dynamic engines of growth, and it did while setting new stock market records.

The year’s statistics appear to justify optimistic expectations. Net foreign buying in the stock market
The year’s statistics last year reached its highest level since the time the Exchange started keeping a tally of foreign trans-
appear to justify actions in 1998. The foreign investments flowing into the stock market represent much-needed foreign
exchange to help keep the peso, as well as prices of needed imports, at stable levels.
optimistic expectations.
Net foreign buying in Capital raised from various offerings last year hit its peak since the Securities and Exchange
Commission (SEC) granted us a license to operate as an Exchange in 1994. Proceeds from stock
the stock market last offerings have invariably been used to bankroll new and viable projects that, among other things, pro-
year reached its highest vide employment to thousands of workers and opportunities to sub-contractors and suppliers.

level since the time the In 2006 the market capitalization of listed companies reached a new all-time high of P7.17 trillion,
Exchange started which was 20.6 percent higher than its P5.95-trillion level in 2005. The total value of our stock market
increased by P1.2 trillion in a span of one year.
keeping a tally of
foreign transactions Stock prices, tracked by the PSEi, went up by 42.3 percent in 2006 to record its fastest annual
growth rate in 13 years and its fourth straight year of gain.
in 1998.
Political bickering did create some noise and a restive faction within the military spooked the market
for a while. Fortunately, the adverse impact of these events on the market was softened by the favor-
able results of government’s economic reforms. The program to plug the budget deficit and induce a
drop in inflation and interest rates contributed much to the improved milieu. The government’s fiscal
reform program is one of the biggest confidence-building measures which, it must be said, helped
boost the market’s impressive run.

The Board stood behind management in accelerating the unprecedented reform measures of your
Exchange, which have been designed to make our stock market more reassuring to investors and
conducive to growth than ever before. The Board authorized management to acquire a fully automated
surveillance system that will help discourage, if not altogether stop, deliberate or unintended stock
market infractions. These measures are hoped to nurture a culture of compliance among our market
participants and further strengthen the integrity of our market.

We implemented programs during the year to list more companies and introduce more products and
services. Our efforts to launch securities borrowing and lending (SBL) in our market paid off as our
regulators approved the relevant rules. We renewed our plans to launch the Real Estate Investment
Trust (REIT) operations in the local stock market to take advantage of the global, multi-billion-dollar,
REIT business.

I am quite cognizant of the challenges ahead and certain issues that still confront the Exchange. I am
personally grateful that the SEC has given us an extension to comply with a provision in the Securities
Regulation Code (SRC) that sets an industry limit on ownership in the Exchange. I urge all parties con-
cerned to take advantage of the reprieve and to draw up and adopt alternatives that will help PSE
comply with the SRC provision.

02 The Philippine Stock Exchange, Inc.


To be sure, there are and there will be continuing global and domestic concerns, some manageable
and some more critical than others to address. Even abrupt weather changes, like the El Niño phe-
nomenon, and the Middle East tension or volatile oil prices may affect us in no small measure.

But the outlook is not all that cloudy. The future generally looks good, the economic fundamentals,
global and domestic low inflation and strong liquidity, are still there and holding.

In closing, I am confident to state that PSE’s Board and management will carry on and strive rather
well to have an Exchange that could make a difference, an Exchange which can favorably impact on
the nation’s economy and on the life of our people.

In behalf of the Exchange, my sincere appreciation to my colleagues in the Board, the management,
staff and personnel, the trading participants, listed companies, and the investing public. To all many
others who have helped us, we are indeed grateful.

Justice Jose C. Vitug


Chairman
March 2007

Annual Report 2006 03


President’s Message

Dear Shareholders and Friends,

"Surpassing Expectations," the theme of the 2006 PSE Annual Report, captures in one phrase the bet-
ter-than-expected performance of the Philippine stock market. Challenges did confront the stock mar-
ket in 2006; and any of these adverse issues, like military restiveness, the raucous and often bitter
debate over Charter change and doubts about the U.S. economy’s direction, could have easily pulled
Last year our total down the market. But the stock market once again proved itself strong, and it just shrugged off these
value turnover concerns on its way to another stellar performance.

reached P572.63 Let me rattle off some of the impressive statistics that the market recorded in the midst of the chal-
billion, or 49.3 percent lenging business environment. Stock prices, as tracked by our PSEi, reached 2,982.54 points in 2006
from 2,096.54 in 2005. The change, which is equivalent to a 42.3-percent year-on-year hike, also rep-
bigger than the resented its highest jump in 13 years. It also marked the fourth straight year of gain of the PSEi, which
P383.52 is our renamed main market indicator. The notable performance of the main indicator helped the PSE
record the second-fastest average growth among selected Asean bourses. If it were a car race, I
billion in 2005. would say that the PSE earned last year a slot on top of the winners’ podium.
Average daily value
Another measure of the market’s robust performance could be gathered from the growth in its market
turnover last year also capitalization. Total market capitalization of all listed companies in 2006 reached an all-time high of
expanded by 48.7 P7.17 trillion, or 20.6 percent higher than P5.95 trillion in 2005. The market capitalization of listed
domestic companies hit its own historic best of P3.35 trillion or 57.4 percent more than the P 2.13-tril-
percent to P2.32 lion level in 2005.
billion from P1.56
The jump in the PSEi was not surprising, judging from the dramatic increase in trading activity, which is
billion in 2005. a good reflection of increased investor confidence. Last year our total value turnover reached P572.63
billion, or 49.3 percent bigger than the P383.52 billion in 2005. Average daily value turnover last year
also expanded by 48.7 percent to P2.32 billion from P1.56 billion in 2005.

The impressive surge in stock prices has given companies the confidence to tap the market for equity
fund. Thus, capital raised by corporations via various stock offerings and private placements reached
P57.23 billion, its biggest amount in a single year since the PSE was granted a license to operate as
an Exchange in 1994. And more foreign investors joined the action. As a result, net foreign buying
almost tripled to P68.49 billion from only P23.53 billion in 2005.

Your Exchange also benefited from the market’s overall advance as these favorable developments also
translated to more revenues for your Exchange. The consolidated net income of your Exchange
reached its own all-time high of P232.30 million, almost double — or 93.9 percent more than — its
P119.80-million level in 2005. Operating revenues went up by 47.3 percent to P565.12 million, which
is also another all-time high, from P383.60 million in 2005. Listing, membership and service fees, along
with the added income stream from our clearinghouse and wholly owned subsidiary, the Securities
Clearing Corporation of the Philippines (SCCP), contributed to the superlative income of the Exchange.
The fees of SCCP zoomed by 159.6 percent from P39.43 million in 2005 to P102.37 million in 2006.
As a listed company, your Exchange continues to set a good example for others to follow. For this rea-
son, the Board of Directors of your Exchange declared a cash dividend of P8.80 per share, along with
a 100-percent stock dividend. The market price of PSE stock in 2006 went up by 86.7 percent to
P280 per share from P150 in the previous year.

04 The Philippine Stock Exchange, Inc.


I am convinced the stock market and our Exchange benefited tremendously from ongoing reforms
being implemented by the government, especially in its program to plug a yawning budget deficit,
tame inflation and stabilize interest rates. Investors know the positive impact of these favorable gov-
ernment developments in improving the profitability of corporations. And our figures up to the third
quarter of last year did show that the combined net income of listed companies went up by 32.5 per-
cent to P167.92 billion from P126.73 billion for the same period in 2005.

But we at the PSE just do not sit around waiting for the government to prepare our path for growth.
We have implemented our own reform program to further enhance our allure to investors. For exam-
ple, we simultaneously suspended the trading of shares of seven listed firms in one trading day last
year for their failure to submit their annual reports. To properly guide the investing public, we also pub-
lished a watch list of companies whose share prices were abnormally behaving amidst consistent gen-
eral declaration of the issuers to have no known basis for the steady climb of their share prices. I
believe that, in the long run, these actions will benefit our stock market by improving investor confi-
dence in our listed companies.

The Exchange wants ordinary investors to benefit from the strides we are taking. So we continued last
year, and will continue this year, our intensified campaign to educate the public about the stock mar-
ket and about our reform agenda. These are commitments that your management has made under
our three-year LEAP-A-MILE strategic program.

I believe that your management has not only fulfilled but surpassed your expectations, as our LEAP-A-
MILE agenda reaches its third and final year of implementation, But being good in the business is not
good enough for your management, because – despite all the strides we have taken – your Exchange
still lags far behind our neighbors in terms of value turnover, market capitalization and number of trad-
ed issues. The challenge for management now is to find ways and means not only to sustain the
PSE’s performance in 2006, but to foster a growth rate that will help the Exchange catch up with, if
not surpass, our peers in the region.

But with the support of all stakeholders, management is confident it has a fighting chance to achieve
its goals for 2007 onwards. We reaffirm management’s commitment to maximize the value of your
shares and provide optimal service to all our stakeholders, while doing its best to achieve its vision to
become one of the premier stock exchanges in the region.

Once again, I would like to thank all our shareholders, our trading participants, our management and
staff, our listed companies, our underwriters, our clearing partners, the government and, more impor-
tantly, the investing public for their support. Indeed, we have proven that, together, we can make a
significant impact on the future of our market and our country.

Francisco Ed. Lim


President and CEO
March 2007

Annual Report 2006 05


03
2006 Stock Market Performance

For the Philippine stock market, 2006 was another good year as the benchmark index, now renamed
PSEi, closed at 2,982.54 points or 42.3 percent higher than its 2,096.04-point mark in 2005. It was
the best level of the bellwether index in almost 10 years, while the 42.3-percent hike last year was its
fastest annual advance in 13 years.

With this performance, the PSE once again recorded one of the best growth rates among established
exchanges in Asia. Measured in terms of rate of expansion, the PSEi surpassed its counterparts in
Hong Kong, Singapore, Malaysia, Taiwan, Korea, Japan, and Thailand. We were only outpaced by the
similarly impressive performance of the indices in China and Indonesia.

Favorable business conditions, which were evident in the country’s improved macroeconomic funda-
mentals and in the higher earnings of listed companies, helped drive the stock market forward.

The growth in the country’s gross domestic product (GDP) accelerated to 5.4 percent in 2006 from 5.0
percent the year before. GDP improved as consumption and exports increased, hand in hand with an
expansion in the service sector and a recovery in overall farm output.

Doubts about government’s ability to plug its yawning budget deficit also eased after the government
implemented the Reformed Value Added Tax (RVAT) law, a crucial revenue measure that allowed the
government to realize a substantial reduction in its fiscal deficit last year. The RVAT law expanded the
scope of affected goods and services and increased the tax rate from 10 to 12 percent, precisely to
address the country’s fiscal deficit. With fresh revenues from the new tax measure, government’s
budget shortfall for 2006 narrowed to just P62.20 billion, which was way below the P125-billion pro-
grammed level for the period and the P146.78-billion actual shortfall it suffered in 2005.

With the government’s improved fiscal position, Fitch Ratings, Inc. (Fitch), Standard & Poors (S&P), and
Moody’s Investors Service (Moody’s) raised their respective country ratings outlook on the Philippines
from "negative" to "stable."

The market also benefited from the decision of the Bangko Sentral ng Pilipinas (BSP) to keep the
overnight borrowing and lending rates at 7.5 percent and 9.75 percent, respectively. The BSP retained
the rates throughout the year, although the Federal Reserve, which is the BSP’s closely watched coun-
terpart in the U.S., jacked up interest rates four times in 2006. The BSP cited the declining inflation
rate and the appreciation of the peso as the primary factors for keeping the policy rates unchanged.
Prices of local goods and services, as tracked by the country’s inflation rate, also eased while the peso
raced to its highest level in six years. Both factors likewise helped push the market up. From a high of

06 The Philippine Stock Exchange, Inc.


For the Philippine stock
market, 2006 was
another good year as
the PSEi closed at
2,982.54 points or 42.3
percent higher than its
2,096.04-point mark in
2005.

It was the best level of


the bellwether index in
almost 10 years, while
the 42.3 percent hike
last year was its fastest
annual advance in 13
years.

Annual Report 2006 07


2006 Stock Market Performance

7.6 percent in February, the country’s headline inflation rate slowed down to 4.3 percent in December
as the rise in prices in most commodity groups likewise slowed down. This brought the average annu-
al inflation rate to 6.2 percent from 7.6 percent a year ago. Also, the local currency staged an impres-
sive rally during the year as it breached the P49:$1 threshold mainly due to the high level of foreign
exchange remittances from overseas Filipino workers and from equity investment inflows. The peso
closed the year at P49.03 against the U.S. dollar, its highest yearend level in six years.

On the corporate front, listed companies enjoyed a boost in their earnings. For the first nine months of
the year, the combined net income of PSE-listed domestic corporations reached P167.92 billion or
32.5 percent more than the P126.73 billion chalked up for the same period a year earlier. (These fig-
ures were collated from 233 out of the 237 domestic companies that submitted their interim financial
reports for the period as of 11 December 2006.)

The local market was not spared, however, from untoward developments both here and abroad. In
February critics of President Gloria Macapagal-Arroyo staged rallies and other mass actions in Metro
Manila and in other major urban centers to press for the President’s resignation. Mrs. Arroyo countered
by declaring the country under a state of emergency through Proclamation No. 1017. Issues on the
proposed Charter change and the manner by which it is being pursued also created a sense of
renewed political uncertainties before 2006 ended.

External factors, particularly the increase in U.S. interest rates and in global crude oil prices, likewise,
bothered investors during the year. The Federal Reserve tightened its monetary policies during the first
half of 2006 due to concerns on the U.S. economy’s growth and inflation risks. Its policy-making

08 Philippine Stock Exchange, Inc.


board raised Federal Funds rate four times, reaching 5.25 percent during the year or one percentage
point more than its level in 2005.

The cost of crude oil in the international market also reached record highs in 2006 as tension between
Israel and Lebanon dragged both countries to the brink of war. The price of light crude at the New
York Mercantile Exchange jumped above US$78.00 per barrel in July. But after tensions subsided, oil
prices began to taper off towards the last quarter and closed the year at US$61.05 per barrel.

The PSE welcomed five new companies to its roster of listed firms, four of which conducted an initial
public offering and one listed by way of introduction. Two listed banks, on the other hand, merged with
two other listed financial institutions during the year. The stock prices of the four new entrants rode on
the crest of the stock market’s overall advance. At the end of 2006, the stock price of First Gen
Corporation (First Gen) was up 20.2 percent from its offer price when it listed in February;
CitisecOnline.com, Inc. (CitisecOnline), was up by 311.8 percent from its listing price in July. Likewise,
the share price of Alliance Tuna International Inc. (Alliance Tuna), was ahead by 55.6 percent from its
listing price in November; and that of PNOC-Energy Development Corporation (PNOC-EDC) was up by
51.6 percent from its listing price in December. The total capital raised from these IPOs amounted to
P19.0 billion. Meanwhile, Metro Pacific Investments Corporation (MPIC) underwent listing by way of
introduction in December.

Six listed companies took advantage of auspicious market conditions to raise P29.7-billion additional
capital by conducting follow-on offerings in 2006. The six are Ayala Corporation, Chemrez
Technologies, Inc., Megaworld Corporation, Metropolitan Bank & Trust Company, Robinsons Land
Corporation, and Universal Robina Corporation.

Total capital raised in 2006 from these public offerings, including stock rights offerings and private
placements, amounted to P57.23 billion, the highest capital raised since 1994.

Annual Report 2006 09


2006 Stock Market Performance

In terms of trading, 2006 was also a testament to investors’ vote of confidence in the stock market.
Total value turnover reached a six-year high of P572.63 billion, 49.3 percent higher than the P383.52
billion registered in 2005. Consequently, average daily turnover also went up to P2.32 billion from
P1.56 billion in 2005.

Foreign investments also continued to pour into the stock market in 2006 with foreign buying amount-
ing to P348.97 billion or 68.7 percent more than the P206.88 billion recorded in 2005. This resulted in
a net foreign buying of P68.49 billion, an amount that is almost three times bigger than the net foreign
buying figure of P23.53 billion noted in the previous year. The percentage of foreign trading to total
trading also rose to 55.0 percent from 50.9 percent in 2005.

By yearend the number of companies listed in the PSE increased to 240 from 237 the previous year,
while the number of issues rose to 313 from 310 during the respective periods in comparison.
Domestic market capitalization likewise went up in 2006 to a new high of P3.35 trillion or 57.4 percent
more than the P2.13 trillion a year ago. Total market capitalization also went up by 20.6 percent to
P7.17 trillion in 2006 from P5.95 trillion a year earlier.

Each of the sector indices showed strong performance during the year. Among them, the newly creat-
ed holding firms sector posted the highest rate of increase after it closed at 1,731.27 points or 73.1
percent above its 1,000-point base at the start of 2006. The mining and oil sector recorded the sec-
ond-fastest growth rate as it jumped by 63.4 percent to 4,527.68 from 2,771.77 in 2005. Both were
followed by the property sector, which rose by 50.2 percent to 1,261.67 from 839.86 the previous
year. The services, financial, and industrial sectors also posted significant increases of 49.1 percent,
34.1 percent, and 19.7 percent, respectively. Meanwhile, the broader All Shares Index made its own
impressive performance as it reached 1,860.34 at the end of 2006 or 46.1 percent higher than its
1,273.14 closing level in 2005.

10 The Philippine Stock Exchange, Inc.


Domestic market capitalization accounted for 46.7 percent of the total market capitalization in 2006,
with the two foreign listed companies, Sunlife Financial, Inc., and Manulife Financial Corporation, com-
prising the other 53.3 percent. Across sectors, the services sector, which includes the telecommuni-
cations sector, constituted the biggest bulk of total domestic market capitalization at 26.6 percent. It
likewise led all sectors in terms of share in domestic value turnover, accounting for 26.7 percent of
total.

Annual Report 2006 11


Highlights of Operations

ROBUST 2006 MARKET REWRITES LISTING, OFFERING RECORDS


The Exchange set new records in the area of new listings and offerings as the robust performance of
the stock market boosted the confidence of companies to tap the capital market. With such a favor-
able environment, proceeds from various offerings last year reached P57.2 billion, its highest level since
1994, and 10.7 percent more than the P51.7 billion offering proceeds in 2005.

Individual offerings also made their own way to


the record books of the Exchange. First Gen
became the first pure power generation company
to list in the stock market after it concluded an
P9.1-billion initial public offering (IPO).

CitisecOnline joined the PSE record books as the


first stock brokerage firm to go public after it
completed a P149.6-million IPO in July. Alliance
Tuna emerged as the first Board of Investments
(BOI)-registered preferred enterprise to go public
pursuant to the Memorandum of Agreement
First Gen listing (MOA) the PSE entered with the BOI to encour-
age BOI-registered companies to offer their
shares to the public under the Omnibus
Investment Code.

PNOC-EDC ended a 12-year drought in IPOs


involving government-owned and –controlled cor-
porations by conducting its own successful IPO
during the latter part of 2006. PNOC-EDC is also
the first company to benefit from a MOA between
the PSE and the Bureau of Internal Revenue
(BIR), granting the privilege of “last priority in audit
and investigation.” Under the MOA, corporations
initially listing their shares with the PSE within
two years from the signing of the MOA on
CitisecOnline listing December 13, 2006 shall enjoy the said privilege
for a period of five years from the date of listing.

12 The Philippine Stock Exchange, Inc.


The market’s continued
advance allowed the
Exchange to set new
records in the area of
new listings and
offerings as the robust
performance of the
stock market boosted
the confidence of
companies to tap the
capital market.

Annual Report 2006 13


Highlights of Operations

All four companies recorded an impressive per-


formance, measured by their price gains in 2006.
First Gen and PNOC-EDC even exercised their
over-allotment option, which is a testament to the
high demand for their IPO shares.

Not to be outdone, follow-on primary and sec-


ondary public offerings worth P43.7 billion were
also widely received by the market. Property
firms raised a significant chunk of equity, amount-
PNOC-EDC listing ing to P11.0 billion, to fund various expansion
projects, like condominiums, mid-income residen-
tial subdivisions and business process outsourc-
ing hubs.

The local stock market also witnessed another


first when Ayala Corporation offered P5.8 billion in
preferred shares, whose unique features include a
fixed coupon rate that at the time of offering was
competitive with yields from five-year, fixed-rate
Treasury Notes. Metropolitan Bank & Trust
Company conducted a P6.6-billion follow-on
offering to strengthen the bank’s capital adequacy
Metrobank listing
ratio in light of the planned implementation by the
BSP of more stringent international banking standards, as prescribed under the Basel II framework. On
the other hand, Chemrez Technologies, Inc., took advantage of the strong market interest and the gov-
ernment's support for indigenous sources of fuel by offering P1.5 billion in new shares to fund its bio-
diesel project.

14 The Philippine Stock Exchange, Inc.


ELEVATING STANDARDS IN MINERAL REPORTING
The year saw the culmination of four months of discussions among regulatory agencies, professional
organizations, academe and other interested groups to formulate an exposure draft of the Philippine
Mineral Reporting Code (PMRC), which has been patterned after Australia’s Joint Ore Reserve
Committee (JORC) Code. The decision to draw up the JORC-inspired PMRC forms part of a joint effort
of the government and the private sector, including the Exchange, to attract more investments by ele-
vating to global standards the country’s own mineral reporting system.

Annual Report 2006 15


Highlights of Operations

The JORC Code, which is considered an internationally accepted standard in the mining industry, sets
out the minimum requirements, recommendations and guidelines for public reporting of exploration
results, mineral resources and ore reserves. The PMRC is envisioned to have similar features of JORC.
More importantly, with the introduction of accredited competent persons, professionals in the industry
such as geologists, mining engineers and metallurgists will enjoy increased recognition and take on
greater responsibility in their field of expertise. The PMRC exposure draft has been published for public
comments. All comments will then be reviewed and consolidated by the PMRC technical working
group. Once completed, a nationwide information and educational campaign will be launched.

The PSE is set to adopt the PMRC once it has been finalized and the list of accredited competent per-
sons completed. In line with the adoption, the Exchange will come up with guidelines and procedures,
integrating relevant provisions of the Code into PSE reporting requirements for listed companies that
are engaged in mining activities. The same requirements will apply in the future to mining firms that will
file listing applications with the Exchange. This will be done in close coordination with the SEC and the
Mines and Geosciences Bureau of the Department of Environment and Natural Resources (DENR-
MGB).

The PMRC technical working group is composed of representatives from the Philippine Mineral
Institute Development Foundation, DENR-MGB, the Exchange, Chamber of Mines, accredited profes-
sional organizations and the Philippines-Australia Business Council. The program to draw up the
PMRC enjoys a technical and financial assistance from the Board of Investments and the Australian
Agency for International Development, through its Partnership on Economic Governance Reforms
facility.

MARKET INTEGRITY
The Exchange undertook and successfully completed a Proof of Concept (POC) for the acquisition of
the Advanced Warning and Control System (AWACS), a state-of-the-art and computerized surveillance
package designed to protect the integrity of the stock market. POC is a simulation of the market moni-
toring and surveillance using real-time trading data to demonstrate key system functions and test its
ability to interface and connect with the Exchange’s trading and other systems. The outstanding fea-
tures of AWACS include circular trading detection, market replay and reconstruction, time-sliced analy-
sis of orders and trades, graphical alerts tracker, holding pattern graphs, market movement, alerts and
case management, among others. To keep abreast with market conditions, a review of parameters
was conducted and necessary revisions and enhancements were implemented.

The functions of the Floor Trading and Arbitration Committee (FTAC) were successfully transferred to
the Market Regulation Division through its Market Operations and Surveillance Department.

A Risk-Based Ratings and Supervision Approach was adopted in the conduct of the 2006 Annual
Regulatory Examination of the books and records of the 132 active trading participants (TPs) of the
Exchange. The results of said Examination showed that the number of fully compliant TPs has dra-
matically increased in 2006 from its year-ago level. Compliance has improved due in part to one-on-
one discussions that the Market Regulation Division (MRD) held with each TP. The series of dialogues
gave the MRD an opportunity to discuss the incidence of non-compliance, including MRD’s correspon-
ding recommendations on the matter, which were based on the 2005 regulatory audit. The Exchange
also noted an increasing number of TPs who have made a conscious effort to fully comply with exist-
ing rules and regulations. As part of its efforts to foster transparency and follow international best
practices, the Exchange published on its web site the monetary sanctions and penalties imposed on
broker-dealers in relation to the 2006 Annual Regulatory Examination.

16 The Philippine Stock Exchange, Inc.


To encourage a culture of compliance among trading participants, the MRD, acting under the oversight
of the Market Integrity Board, strictly enforced the rules governing trading participants. This resulted in
the imposition of sanctions and penalties amounting to P 757,000. The amount was 41 percent higher
than the penalties and fines collected in 2005 and 405 percent more than the amount in 2004.

Eighty percent of 17 investor complaints received in 2006 were resolved and/or terminated.

A dialogue was conducted with the Market Regulation Department of the SEC to discuss issues
encountered in the implementation of the Risk-Based Capital Adequacy (RBCA) Requirements and to
clarify some pertinent provisions of RBCA Rules.

Various initiatives were also launched during the year, which are now nearing completion. These
include the Market Regulation Division Rules for Trading Participants, Trading Rules, and Trading Rights
Rules, Practice Notes on Trading/Manipulative Practices, and the issuance of Certified True Copies of
Trading Rights Certificates.

COMPLIANCE WITH REVISED DISCLOSURE RULES


Companies have adopted the Philippine Financial Reporting Standards/ Philippine Accounting
Standards (PFRS/PAS) in preparing their financial statements. After PFRS/PAS became mandatory on
December 31, 2005, some listed companies encountered difficulties in submitting annual reports for
inclusion in SEC Form 17-A. The PSE originally required listed companies to submit the SEC Form 17-
A reports on or before May 2, 2006. But in consideration of the difficulties in adjusting to PFRS/PAS,
the Exchange granted a non-extendible grace period lasting up to May 31, 2006. After the non-
extendible deadline lapsed, the PSE suspended trading of seven stocks that still failed to beat the
deadline.

The Exchange intensified the enforcement of its disclosure rules in line with its program to promote a
culture of adherence to integrity and good corporate governance. As a result, fines and penalties col-
lected in 2006 from listed companies for their failure to comply with the disclosure rules reached P9.16
million or 215.2 percent more than the amount of fines and penalties collected in 2005 for the same
violation.

The amount of fines and penalties attributed to delayed filing and non-submission of structured repor-
torial requirements totaled P7.29 million. Of this amount, P7.24 million represented fines imposed on
listed companies that filed late, or failed to file altogether, annual and quarterly reports. Total fines and
penalties from violations of the unstructured reportorial requirements amounted to P1.87 million.

Annual Report 2006 17


Highlights of Operations

Best Annual Report Awards


In support of its key thrust of promoting good corporate governance, the PSE partnered with the
Management Association of the Philippines in launching the Best Annual Reports (BAR) Awards 2006.

The BAR Awards competition aims to promote Good Corporate Governance by showcasing compa-
nies that observe the principles of transparency, accountability and fairness, particularly in their report-
ing formats.

The BAR Awards tilt aims to elevate to world-class standards the disclosure practices of Philippine
companies, particularly those that are publicly listed. It gives cognizance to companies that produce
user-friendly annual reports, whose visual appearance is enticing to read.

At least 38 listed firms joined the competition that bestowed awards in three categories: Compliance
and Disclosure, Corporate Governance and User Friendliness.

RESEARCH
Shift from Full to Free Float Market Capitalization Index
The PSE shifted to the use of free float-adjusted market capitalization in computing the index in April
as part of a program to elevate our own systems and procedures to world-class standards. The shift
aims to provide investors with a more reliable gauge of trading activity and market behavior with the
use of the free float indices. Free float refers to the issued and outstanding shares of a listed company
that are deemed freely tradable to the public or are not held by strategic partners and owners. Under
the adjusted method, only free float shares are factored in to compute the Index. Before the change,
the PSE used the full market capitalization of listed stocks to compute the index.

Revised Criteria for Selecting PSEi Constituents


Simultaneous with the shift to free float market capitalization, the Exchange revised the criteria in
selecting companies that qualify for inclusion in the PSEi.

Prior to the adoption of the new criteria, the PSE used minimum liquidity and tradability as require-
ments to determine inclusion in the Index. In order to pass the liquidity criterion, a stock must have an
average daily value turnover of not less than P5 million during a period in review to be considered for
index inclusion or retention. By tradability, the Exchange means that, during any given period in review,
a stock must be traded at least 95% of the total trading days to qualify for PSEi inclusion. Companies
that hurdled both requirements were then ranked according to their full market capitalization. Those
that would occupy the top 30 spots would make up the basket of Index stocks.

Under the revised criteria, a company must satisfy a more stringent set of criteria before it can qualify
for inclusion in the PSEi. The criteria are the following:

(1) Free float level of at least 10%;


(2) Liquidity or average daily trading value of at least P5 million;
(3) Tradability of at least 95%; and
(4) Volume turnover ratio of at least 10%.

Listed firms that fail to satisfy these criteria are automatically disqualified, while those that pass the ini-
tial screening have to undergo a two-step ranking, based again on their free float-adjusted market cap-
italization. Under the first step, the PSE fills up 12 out of the 30 slots by picking two firms with the
highest free float market capitalization from each of the six sectors. The 18 other slots are then filled up
in the second stage, based on how the qualifiers ranked in terms of free float market capitalization.

18 The Philippine Stock Exchange, Inc.


Inclusion in the basket of PSEi stocks, as well as in the six sector indices, carries prestige, because
these stocks dictate the overall movement of the indices. But listed companies must, henceforth,
endeavor to remain an index stock because the PSE conducts a review of the index stocks every six
months. The periodic review benefits investors, because it provides an updated index that better
reflects more recent market behavior and encourages a listed company to widen its investor base in
order to meet the free float-pegged criteria.

Renaming of the Composite Index to PSEi


Simultaneous with the shift to the free float method, the PSE changed the name of its main indicator
from "PSE Composite Index" to "PSEi." The Exchange implemented the renaming in the midst of its
reform program. The Exchange picked the timing as part of a program to associate the ongoing
reforms with a recognizable and wholesome stock market brand.

Below is a list of the companies chosen to compose the PSEi under each review.

Annual Report 2006 19


Highlights of Operations

New Industry Classification


On January 2, 2006, the PSE revised the industry classification of listed companies by categorizing a
company according to its major source of revenue, instead of basing its classification on the primary
purpose stated in its Articles of Incorporation.

With the revised classification, the number of sectors increased to six from five, with each represented
by an index to measure the sector’s performance. Two new sectors were introduced, the Holding
Firms and Services Sector, while the old Mining Sector and Oil Sector were combined to form just one
sector. Below is a summary of the changes in the sector grouping of listed companies:

20 The Philippine Stock Exchange, Inc.


To be eligible for inclusion in the sector indices, a company has to satisfy two requirements: (1) liquidity
or average daily trading value of P1 million, and (2) tradability of at least 75 percent. There is no specif-
ic number of constituents for the sector indices and all qualifiers are included. The PSE conducts a
review of the sector indices simultaneous with the PSEi review.

Revision of PSE Market Reports


The PSE revised its weekly and monthly publications to provide more useful information to brokers,
analysts, business news writers, investors, and other stakeholders. The weekly publication is now
packed with more information through additional graphs, tables, and disclosure summaries. It also
includes the trading activity of all 30 PSEi constituent companies. To make it more appealing, the first
page of the report now presents a graph that tracks the daily movement of the PSEi over the previous
52 weeks. The report’s "Weekly Review" segment was revised for easy reading and its name changed
to "Market-Moving News."

The monthly report was also given a new look. Using the magazine-type format, the monthly report
has become more reader-friendly. It now contains more information on the performance of the stock
market indices, trading activity, corporate developments, along with fundamental economic figures,
such as GDP/GNP, inflation, interest rates, exports, and government’s fiscal deficit. Additional tables
and graphs on trading statistics, such as daily foreign transactions, regular and non-regular market
transactions, and other useful market indicators, are now provided in the reformatted publication.
There are also short articles that tackle relevant issues that may have an impact on the stock market.

Launch of ASEAN-ETF
On September 21, 2006, the FTSE/ASEAN 40 exchange-traded fund (ETF) was officially launched with
its listing at the Singapore Exchange (SGX). The ETF is designed to track the 40 largest companies
across five stock markets within the ASEAN region, namely Bursa Malaysia, Jakarta Stock Exchange,
the PSE, SGX and the Stock Exchange of Thailand. The ASEAN-ETF provides global investors a more
convenient access to the growing economies of Asia, thereby boosting the liquidity of Asian financial
markets. In effect, purchasing one unit of ETF allows investors to readily diversify their portfolio as the
ETF represents ownership in a group of the largest and most actively traded stocks in different ASEAN
exchanges.

CAPITAL MARKETS DEVELOPMENT

BUSINESS DEVELOPMENT
Securities Borrowing and Lending Program
The Exchange was finally able to secure the necessary approvals from key regulatory agencies for the
rules and regulations governing securities borrowing and lending (SBL) transactions following a series
of consultations with securities lending experts from the Pan Asia Securities Lending Association and
local market practitioners. Securities borrowing and lending is an innovation in the stock market which
will enhance trading strategies and will significantly help increase liquidity in the market.

The Bangko Sentral ng Pilipinas finalized the guidelines on the Bangko Sentral Registration Document
involving equity SBL transactions of foreign participants and PSE SBL Rules were approved by the
SEC. Moreover, the Department of Finance approved Revenue Regulations No. 10–2006 of the Bureau
of Internal Revenue, which prescribes the tax-free treatment of SBL transactions.

The PSE held the first public seminar for SBL that attracted over 150 participants from various financial
institutions. The PSE conducted the seminar to give participants an introduction to the concept and
structure of SBL and, at the same time, give them an overview of the rules and regulations of the dif-
ferent key regulatory bodies.

Annual Report 2006 21


Highlights of Operations

Bringing Real Estate Investment Trust into the Country


The PSE and the Asian Public Real Estate Association organized the first forum on Real Estate
Investment Trust (REIT). Over a hundred key players and decision-makers from the real estate and
financial services sectors, along with lawmakers and regulators, joined the REIT forum.

Experts from across Asia also participated in the


REIT gathering and shared their insights and
assessment about REIT prospects in the
Philippines.

Consequently, a REIT working group was consti-


tuted to study and propose a legal and regulatory
framework to facilitate the development of the
REIT market in the country.

REIT forum

INVESTOR EDUCATION
The Exchange continued to aggressively pursue investor awareness and education programs and proj-
ects under the LEAP-A-MILE strategic agenda. Various seminars, workshops and briefings were devot-
ed for trading participants, officials coming from listed companies and analysts as part of a continuing
program to update them of market developments.

For the year 2006, the PSE completed 191 mar-


ket education projects, including 148 workshops,
seminars, orientations, symposia and tours.

They also included two economic briefings; two


industry briefings; three expositions and exhibits;
three IPO briefings; five local roadshows; two
continuing education seminars for trading partici-
pants; and four focus group discussions.

The Exchange also conducted such special proj-


PSE Bull Run 2006
ects as the Certified PSE Securities Specialist
Course; the PSE Bull Run 2006; Stock Trading
Tournaments (two major and 10 minor ones); the
Best Thesis Competition; and the Best Business
Plan Competition. The Exchange also hosted in
Manila the executive committee conference of the
Asian Securities Analysts Federation and acted as a
co-presentor during the Best Annual Report Awards
Competition of the Management Association of the
Philippines. In partnership with the Commission on
Higher Education (CHED), the PSE also conducted
three orientation seminars related to the implementa-
tion of CHED Memorandum Order 39 (CMO 39),
which mandates the inclusion in business adminis-
tration courses of a stand-alone subject in capital
Best Thesis Competition Awards Night markets.

22 The Philippine Stock Exchange, Inc.


These various market education projects and activities reached at least 12,375 individuals, including
513 market participants, 4,394 individuals in the government and private sectors and 7,468 from the
academe.

The PSE has accomplished these projects with minimal cost on account of partnerships and various
corporate sponsorships amounting to P1.6 million.

Stand-Alone College Subject on Capital Markets


One of the PSE’s major achievements in the area of investor education for 2006 is the institutionaliza-
tion of a stand-alone subject on capital markets in business administration courses. The PSE has suc-
cessfully worked with the CHED and an appointed technical working group in pushing forward the pro-
posed Policies Standards and Guidelines (PSG) for business administration.

In June, the CHED Commission en banc approved the PSG by virtue of CHED Memorandum Order
number 39 (CMO 39), series of 2006. Since then, the PSE has actively participated in programs
preparatory to the implementation of CMO 39 in June 2007. PSE, CHED and other professional organ-
izations, such as the Personnel Management Association of the Philippines and the Financial
Executives Institute of the Philippines, spearheaded CMO 39 regional orientations. These seminars
have so far been given to deans and school heads in Northern Luzon, the National Capital Region and
in Mindanao. Similar orientations will be conducted for the Visayas area in 2007. The PSE is also play-
ing an active role in syllabus formation and in the development of instructional materials as well as in
formulating a "Training the Trainors" program.

The PSE has also started initiatives to institute the capital markets subject or a similar subject in gener-
al education for all state universities and colleges, private higher education institutions, local universities
and colleges.

PSE Securities Specialist Course


Another key initiative of the PSE for 2006 is the Certified PSE Securities Specialist Course. This new
69-hour course is envisioned to provide continuing education for market participants, while synthesiz-
ing and emulating the Chartered Financial Analyst Program, Master in Business Administration Course
and the Canadian Securities Course.

The course design puts emphasis on financial market theories, valuation techniques, ethics, regulations
and market dynamics. It was put together by the Capital Markets Development Division with the help
of a composite team of notable academicians and market practitioners who form part of the faculty
pool as well.

The PSE envisions the program to evolve into a post-graduate or terminal masteral program duly
accredited by the CHED.

IPO Briefings
The Exchange conducted briefings for local small investors to provide them with pointers on how to
participate in, and assess the prospects of, an IPO. For maximum effect, each briefing was timed
shortly before, or right after the start of, the period when an IPO was launched. Thus, IPO briefings
were held when First Gen and Alliance Tuna launched their respective IPO last year.

Continuing Education for Trading Participants


The Exchange conducted two mutual fund refresher courses on July 27 and 28, 2006, for the trading
participants. The courses, which were co-sponsored by Sun Life Asset Management Corporation,
gave trading participants a thorough review of theories, mechanics and advantages of investing in
mutual funds.

Annual Report 2006 23


Highlights of Operations

MARKETING SERVICES
The Exchange, through the Marketing Services Department (MSD), adopted different modes and
approaches, like one-on-one company calls and group briefings and seminars, to get in touch with
people connected with or related to companies that are potential candidates for an IPO or a follow-on
offering. No less than 70 company calls, along with 17 group and industry briefings and orientation
seminars, were conducted in Metro Manila and in such key cities as Baguio, Batangas, Cebu and
Davao for the purpose of explaining to the targeted audience the advantages of going public.
MSD was formed in 2005 as part of an intensified and proactive campaign to promote and develop
the local capital market.

The Exchange entered into agreements with SGV


& Co.’s Knowledge Institute and with
Punongbayan & Araullo for the conduct of paid
seminars on the mechanics of listing.

The Exchange also launched a Listing


Anniversary Celebration project to provide formal
recognition and awards to companies reaching
milestones in their history as public companies.
Under the Listing Anniversary Celebration project,
PSE-Knowledge Institute MOA signing the PSE treats listed company officials to simple
yet meaningful breakfast socials and ceremonies
at the trading floor, when their company reaches
either the 5th, 10th, 25th or 50th anniversary as a
listed entity. Seven companies were recipients of
this project in 2006. They are Asian Terminal Inc.,
Fortune Cement Corporation, Holcim Philippines,
Inc., Empire East Land Holdings, Inc., Philex
Mining Corporation, SQL* Wizard and Digital
Communications, Inc.

Philex 50th listing anniversary celebration

INFORMATION TECHNOLOGY
In response to the demand for more online storage space, the Exchange acquired a new central stor-
age system that will be used to host the various databases of the Exchange. Separate central storage
machines were installed on both offices of the Exchange for purposes of mirroring the databases.

For improved services and for ensured availability of the information system, the Exchange acquired
additional servers and installed new communication lines to be used for back-up purposes. In the
event that the operation of the primary servers is impaired, the Exchange will use the back-up servers
to provide information to stakeholders.

The Exchange modified its trading system, the Maktrade system, to allow short-selling and buyback of
securities in connection with the new securities borrowing lending (SBL) facility. A reporting system was
also developed so trading participants can report SBL transactions online and regulators can view and
monitor these transactions also online. The PSE likewise developed the SBL web pages on the PSE
web site, including a web content management facility that will allow the immediate and easy posting
of updates.

24 The Philippine Stock Exchange, Inc.


Moreover, the Maktrade system was modified to allow the shift from full to free float market capitaliza-
tion, a yardstick adopted by the Exchange in response to the global trend among stock exchanges
and index providers.

The Exchange also focused its attention on migrating the MakTrade System to a computer hardware
host with higher processing capacity. The replacement computer, which was scheduled for production
rollout on January 5, 2007, is expected to improve the processing of orders lodged into the MakTrade
System.

The PSE also put into operation an enhanced IPO allocation program, which allows its Listings
Department personnel to manage distribution of shares that will be listed. Furthermore, it also estab-
lished the Shares Update Facility to enhance the efficiency of Listings and Disclosure personnel in
updating the information on issued, outstanding, listed and free float shares of listed companies.

Premises security monitoring was likewise improved with the upgrade of the closed circuit television
system and the installation of additional cameras in strategic areas of the Exchange offices.

In partnership and coordination with the Mega Group of Computer Companies, the Exchange contin-
ued the implementation of the "Botong Pinoy" Electronic Voting System for the election of the mem-
bers of the board of the Exchange in 2006. The Botong Pinoy Electronic Voting System allowed the
Exchange to complete the election process at the shortest time possible. The same system will be set
up for the elections in 2007.

MARKET DATA BUSINESS


The market data business experienced a noticeable increase in the number of requests for the market
data products of the Exchange. Revenues from the market data business enjoyed the buoyant market,
increasing by 15 percent from P14.7 million in 2005 to P16.9 million in 2006. The number of market
data clients surpassed the previous high of 24 in 2001 to 27 in 2006.

Further, recognizing the potential of harnessing data as a revenue source, the Exchange created a unit
to focus on this business – the Market Data Business Department. Policies governing market seg-
ments, data usage and pricing were rationalized. The network design was enhanced to improve the
delivery of data to the clients.

The market data business was further streamlined with the creation of a central electronic database of
all contracts, publication of market data products in the web site and documentation of all market data
recipients, including broadcast and print media.

For the dealing terminals, the number of Marketworks subscriptions relatively remained the same with
an increase of only six terminals, from 311 in 2005 to 317 in 2006. Trading participants using the
Communications Front End (CFE) data feed, on the other hand, increased from 10 subscriptions in
2005 to 12 in 2006.

ORGANIZATIONAL DEVELOPMENT
A new organizational structure was implemented composed of six (6) divisions, namely: Capital
Markets Development, Issuer Regulation, Market Regulation, Corporate Services, Finance &
Investments and Information Technology, all reporting directly to the Office of the President.

Other units also reporting to the Office of the President are the Office of the General Counsel and the
Risk Management and Audit Office.

Annual Report 2006 25


Highlights of Operations

Training and Development


Various management training programs were provided to develop and enhance competencies in audit
and financial analysis in executing regulatory functions.

Technical training programs were undertaken in the use of technology for productivity improvement
and for better service delivery.

The PSE actively participated in various working committees of the World Federation of Exchanges
(WFE) and the Asian and Oceania Stock Exchanges Federation (AOSEF). Such exposures achieved
the objectives of effecting knowledge transfer from peer exchanges and upgrading the manpower
capability of the PSE.

To further improve the services of the Human Resources and Administration Department, the
Exchange implemented an enhanced Human Resource System which includes an automated person-
nel file (201) system and the Leave Availment System.

SOCIAL RESPONSIBILITY
The Exchange, through the PSE Foundation (Foundation), is committed to fulfill its social responsibility
activities related to the development of the capital market.

In 2006 the Foundation sponsored delegates from the Philippine Association of Securities Brokers and
Dealers, Inc. (PASBDI), to a two-week training program in Seoul, South Korea. The program provided
meaningful insights on Korean securities regulation and on the operations of the Korean Securities
Dealers Association. Likewise, the Foundation approved the funding of the professorial chair in the
Ateneo Law School for courses and lectures on capital markets, as well as on good corporate gover-
nance.

The Foundation donated funds, through the Philippine Business for Social Progress, to support liveli-
hood projects for landslide victims in Southern Leyte. Also, the Foundation, in collaboration with the
Exchange and PASBDI, raised P2.07 million from donations to provide relief goods and livelihood proj-
ects for families displaced by Typhoon “Reming” in Albay, Bicol.

SUBSIDIARY

SECURITIES CLEARING CORPORATION OF THE PHILIPPINES


The year 2006 was a banner year for the Securities Clearing Corporation of the Philippines (SCCP),
which ended the year with a net income after tax of P46.7 million that eliminated SCCP’s deficit of
P33.3 million.

It was also in 2006 when SCCP started operating its own clearing and settlement system, called the
Central Clearing and Central Settlement System (CCCS). With the implementation of the CCCS,
SCCP saved on average P2.8 million a month which it used to remit to the central depository as infra-
structure fees.

SCCP’s revenues also improved due to the increase in average daily value turnover as a result of the
bullish investment climate in 2006.

26 The Philippine Stock Exchange, Inc.


Central Clearing and Central Settlement System
SCCP migrated from trade-for-trade processing to a multilateral netting system, called Central Clearing
and Central Settlement System (CCCS), in May 2006 or roughly a month after the SEC approved the
SCCP’s revised rules and operating procedures. The implementation of the CCCS followed a series of
production simulation tests with the clearing members, the settlement banks and central depository.

In addition, SCCP has arranged for committed credit facilities from the two settlement banks –
Equitable PCI Bank and Rizal Commercial Banking Corporation. SCCP may avail itself of the credit
facilities in order to complete the settlement run, if a settlement fail occurs. For added assurance
against a settlement fail, SCCP maintains the Clearing and Trade Guaranty Fund (CTGF), which is
money started with a seed contribution from the PSE and growing with subsequent contributions from
clearing members and from the interest income of SCCP’s clearing fund. SCCP may tap the CTGF as
a tool of last resort, in case of settlement defaults.

SCCP has also worked closely with settlement banks to improve the efficiency of the settlement
process. The clearinghouse is facilitating the adoption of a real-time gross settlement payment method,
called PhilPaSS, for the settlement of the cash obligations and entitlements of trading participants.

To help minimize settlement fails and shorten the settlement period, SCCP expects two more commer-
cial banks to each perform the role of a settlement bank in 2007. The participation of two more settle-
ment banks will in turn allow investors to receive faster their cash or securities entitlements.

Risk Management and Monitoring


SCCP strictly implements the daily monitoring of the negative exposures of trading participants through
the Mark to Market Collateral Deposit System. SCCP strictly implements a policy of full collateralization,
which requires a concerned clearing member to submit as collateral for a negative exposure eligible
securities or cash, or to execute an early delivery of securities.

As part of its risk management functions, SCCP also monitors any possible concentration risks that
clearing members may incur. SCCP considers the buildup of the CTGF a priority in the light of increas-
ing activity in the trading floor of the Exchange.

SCCP and the PSE have agreed to delineate risk management and monitoring functions aimed at
eliminating redundancies and freeing up clearing members from burdensome reportorial requirements.
To achieve this end, the PSE and SCCP now share data, which they process and use to meet and ful-
fill their distinct functions and responsibilities.

ASEAN Clearing Working Group


SCCP is an active member of the ASEAN Clearing Working Group, which also counts among its mem-
bers the Singapore Exchange, Bursa Malaysia, Stock Exchange of Thailand and the Jakarta Stock
Exchange. The ASEAN Clearing Working Group had its first of a series of meetings in December 2006
to prepare the working papers in connection with an initiative to form a bilateral or multilateral clearing
facility between or among ASEAN markets. The initiative is a means of promoting and facilitating more
intra-ASEAN stock market trades.

Annual Report 2006 27


Board of Directors

First Row (Left to Right):


Justice Jose C. Vitug
Chairman

Francisco Ed. Lim


President & CEO

Alejandro T. Yu
Director & Treasurer

Second Row (Left to Right)


William L. Ang
Director

Roberto A. Atendido
Director

Third Row (Left to Right)


Anabelle L. Chua
Director

Robert Coyiuto, Jr.


Director

28 The Philippine Stock Exchange, Inc.


First Row (Left to Right):
Eddie T. Gobing
Director

Jose Luis S. Javier


Director

Amor C. Iliscupidez
Director

Second Row (Left to Right)


Cornelio T. Peralta
Director

Joseph Y. Roxas
Director

Third Row (Left to Right)


Omelita J. Tiangco
Director

Ma. Vivian Yuchengco


Director

Not in Photo:
✝ Francisco Villaroman
Director
May 3, 2006

Annual Report 2006 29


Executive Officers

From Left to Right:


Angel S. Averia, Jr. Francisco Ed. Lim
Vice President & Chief Technology Officer President and CEO
Information Technology Division
Roel A. Refran
Aissa V. Encarnacion Vice President & General Counsel
Corporate Secretary
Melchor C. Guerrero
Maria Lourdes A. de Guzman Vice President
Vice President Capital Markets Development Division
Market Regulation Division

Marietta U. Tan
Vice President
Finance and Investments Division

30 The Philippine Stock Exchange, Inc.


Department and Section Heads/OICs

First Row (Left to Right):


Virginia O. Luy
Head, Listings Department

Precilla S. Sandoval
Head, Market Data Business Department

Second Row (Left to Right):


Jo Ann G. Bautista
Assistant Head, Business Development
Department

Pedro M. Malabanan
Head, Disclosure Department

Third Row (Left to Right):


Jinky A. Alora
Head, Trading Participants
Regulation Department

Edwin G. Oliveros
Head, Market Operations and
Surveillance Department

From Left to Right:


Eliza S. Rodriguez
Head, Accounting Department

Elisa L. Benavidez
Head, Treasury Department

Juname C. de Leon
Head, Prosecution &
Enforcement Department

John Benette B. Mamañgun


OIC, Corporate Planning &
Research Section

Leonardo G. Quinitio
Head, Market Education Department

Jocelyn S. Sinajon
Head, Human Resources &
Administration Department

Carlos C. Luarte
Head, Data Center Operations

Ariel R. Lampano
Head, Computer Operations Center

Annual Report 2006 31


Securities Clearing Corporation of the Philippines
Board of Directors and Officers

Left to Right:
Justice Jose C. Vitug
Chairman

Francisco Ed. Lim


President & CEO

Alejandro T. Yu
Director & Treasurer

Left to Right:
William L. Ang
Director

Roberto A. Atendido
Director

Emmanuel O. Bautista
Director

Left to Right:
Anabelle L. Chua
Director

Eddie T. Gobing
Director

Jose Luis S. Javier


Director

Left to Right:
Cornelio T. Peralta
Director

Johnny S. Yap
Director

Renee D. Rubio
Chief Operating Officer

32 The Philippine Stock Exchange, Inc.


Information Required by the
Securities Regulation Code

General Nature and Scope of Business of Registrant and its Subsidiary


The Philippine Stock Exchange, Inc. was incorporated on July 14, 1992 as a non-stock corporation.
The Company became a stock corporation on August 3, 2001. On December 15, 2003, pursuant to
the demutualization mandate of Republic Act No. 8799, or the Securities Regulation Code, the
Company’s outstanding capital stock was listed by way of introduction. On February 18, 2004, the
Company sold 6,077,505 shares from its unissued stock to five strategic investors by way of private
placement that was approved by the Securities and Exchange Commission. The strategic investors
were the PLDT Beneficial Trust Fund, SMC Retirement Fund, Government Service Insurance System,
Kim Eng Investment Ltd., and KE Strategic Pte. Ltd.

The Company’s revenues are primarily derived from listing-related fees. The Company charges listing
fees for initial public offerings and additional listings, and for annual listing maintenance. Other sources
of revenues are membership, transaction, data feed, and miscellaneous fees, which include service
fees. Membership and transaction fees are charged to trading participants while data feed fees are
collected from data vendors.

Subsidiary and Affiliate


The Securities Clearing Corporation of the Philippines ("SCCP") handles the clearing and settlement of
trades. SCCP is now a 100%-owned subsidiary of the Company by virtue of the acquisition in 2004 of
SCCP’s entire capital stock from Rizal Commercial Banking Corporation, Equitable PCI Bank, and
Citicorp Securities International (R.P.), Inc., including the qualifying shares held in the SCCP Board by
the nominees of these selling entities.

The Company also is a shareholder of the Philippine Dealing System Holdings Corporation ("PDSHC"),
the holding company of the Philippine Dealing & Exchange Corporation ("PDEX"), otherwise known as
the Fixed Income Exchange ("FIE"); the Philippine Depository & Trust Corp. ("PDTC") and the Philippine
Securities Settlement Corporation ("PSSC").

Properties
The Company’s two principal properties are its offices at the PSE Centre in Ortigas Center, Pasig City,
and the PSE Plaza along Ayala Avenue, Makati City. In 1993, the Tektite and Ayala offices were
donated by Philippine Realty and Holdings Corporation and Ayala Land, Inc., respectively, to be used
exclusively for the Company’s stock exchange and stock trading operations for a period of at least 10
years. The titles over the Ayala and Tektite properties of the Exchange are already registered in the
name of the Company.

In addition, over a seven-year period beginning January 2005, the outstanding shares of Crescent
West Development Corporation, a subsidiary of Fort Bonifacio Development Corporation ("FBDC") and
the registered owner of a 2,182-square-meter lot in the Bonifacio Global City, will be transferred to the
Company. Under the Definitive Agreement, which was executed between the Company and FBDC,
the Company may relocate its headquarters, majority of its management offices and unified trading
operations in equities securities for the National Capital Region to the Bonifacio Global City.

Market information

Principal market where the registrant’s common equity is traded


The common stock of the Company is listed in The Philippine Stock Exchange, Inc.

Annual Report 2006 33


Information Required by the
Securities Regulation Code

Stock Prices
The high and low prices of the Company’s shares in the stock exchange for each quarter of fiscal
years 2006 and 2005 are as follows:

2006 High Low


Q1 P170.00 P126.00
Q2 P215.00 P170.00
Q3 P330.00 P210.00
Q4 P357.50 P232.00

2005 High Low


Q1 P155.00 P105.00
Q2 P152.00 P141.00
Q3 P150.00 P135.00
Q4 P150.00 P130.00

The high and low prices of the Company’s shares in January-February 2007 were P1,005.00 and
P285.00, respectively. The stock price of the Company closed at P675.00 on 15 March 2007.

Holders
The number of shareholders of record as of 9 March 2007 is 180. Total shares outstanding as of 9
March 2007 is 15,277,512 shares with a par value of P1.00.

Dividends

Dividends Per Share


P 5.00 in 2005.
P 5.76 in 2006.
P 8.80 in 2007.

Dividend Policy
Payment of dividends depends upon the earnings, cash flow and financial condition of the Company.

Recent Sale of Unregistered Securities


The Company did not sell unregistered or exempt securities and it did not issue securities constituting
exempt transactions in the last three years.

34 The Philippine Stock Exchange, Inc.


Statement of Management’s Responsibility for
Financial Statements

The management of The Philippine Stock Exchange, Inc. is responsible for all information and repre-
sentations contained in the balance sheets of The Philippine Stock Exchange, Inc. and its Subsidiary
(the Group) and of The Philippine Stock Exchange, Inc. (the Parent Company) as of December 31,
2006 and 2005, and the related statements of income, changes in stockholders’ equity and cash flows
in the 3-year period ended December 31, 2006. The financial statements have been prepared in con-
formity with generally accepted accounting principles in the Philippines and reflect amounts that are
based on the best estimates and informed judgment of management with an appropriate consideration
to materiality.

In this regard, management maintains a system of accounting and reporting which provides for the
necessary internal controls to ensure that transactions are properly authorized and recorded, assets
are safeguarded against unauthorized use or disposition, and liabilities are recognized. The current
management likewise discloses to the Audit Committee of The Philippine Stock Exchange, Inc. and to
its external auditors: (i) all significant deficiencies in the design or operation of internal controls that
could adversely affect its ability to record, process, and report financial data; (ii) material weaknesses in
the internal controls; and (iii) any fraud that involves management or other employees who exercise sig-
nificant roles in internal controls.

The Board of Directors reviews the financial statements before such statements are approved and sub-
mitted to the stockholders of The Philippine Stock Exchange, Inc.

SyCip, Gorres, Velayo & Co., the independent auditors appointed by the stockholders, have audited
the financial statements of the Exchange in accordance with generally accepted auditing standards
and have expressed their opinion on the fairness of presentation upon completion of such examination,
in its report to the Board of Directors and stockholders.

JOSE C. VITUG FRANCISCO Ed. LIM MARIETTA U. TAN


Chairman President & CEO Vice President
Finance & Investments Division
REPUBLIC OF THE PHILIPPINES)
CITY OF MAKATI)
SUBSCRIBED AND SWORN to before me this day of March 15, 2007 at Makati City affiant exhibiting
before me their respective Community Tax Certificates:

Name Community Tax Certificate Place/Date of Issue


JOSE C. VITUG 18365445 14 March 2007/Manila
FRANCISCO Ed. LIM 05847389 26 January 2007/ Mandaluyong
MARIETTA U. TAN 05879895 28 February 2007/ Mandaluyong

Doc. No. 296 Edmon R. Quizon


Page No. 60 Notary Public
Book No. 1 Until December 31, 2007
Series of 2007. Ptr No. 0341019/1/25/07 Makati City
IBP No. 705701/1/25/07 Makati City
Roll of Attorneys No. 52376
Notarial Commission No. 515
5/F Montepino Bldg., 138 Amorsolo St.
Legaspi Village, Makati City

Annual Report 2006 35


INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of Directors


The Philippine Stock Exchange, Inc.
Philippine Stock Exchange Centre
Exchange Road, Ortigas Center
Pasig City

We have audited the accompanying financial statements of The Philippine Stock Exchange, Inc. and Subsidiary (the Group) and of The
Philippine Stock Exchange, Inc. (the Parent Company), which comprise the balance sheets as of December 31, 2006 and 2005, and the
related statements of income, statements of changes in equity and statements of cash flows for each of the three years in the period ended
December 31, 2006 and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial
Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with
Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Group and of the
Parent Company as of December 31, 2006 and 2005, and their financial performance and their cash flows for each of the three years in the
period ended December 31, 2006 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Ramon D. Dizon
Partner
CPA Certificate No. 46047
SEC Accreditation No. 0077-AR-1
Tax Identification No. 102-085-577
PTR No. 0266548, January 2, 2007, Makati City

February 14, 2007

36 Philippine Stock Exchange, Inc.


THE PHILIPPINE STOCK EXCHANGE, INC. AND SUBSIDIARY
BALANCE SHEETS

Consolidated Parent Company


December 31
2006 2005 2006 2005
ASSETS
Current Assets
Cash and cash equivalents (Note 6) =
P150,646,848 =
P98,350,476 =
P82,947,056 =
P85,809,538
Short-term available-for-sale investments
(Note 7) 555,997,850 356,375,711 536,823,970 340,970,487
Accounts receivable - net (Note 8) 69,662,066 25,374,240 55,704,226 21,923,674
Other current assets (Note 9) 31,599,382 28,639,519 30,809,990 28,058,775
Total Current Assets 807,906,146 508,739,946 706,285,242 476,762,474
Long-term Available-for-Sale Investments
(Note 10) 731,010,614 750,370,716 731,010,614 750,370,716
Property and Equipment - net (Note 11) 309,995,383 310,230,917 308,284,089 307,519,111
Investment in a Subsidiary (Note 12) – – 69,545,393 69,545,393
Investments of:
Clearing and Trade Guaranty Fund (Note 13) 325,227,463 310,089,837 – –
Credit Ring Agreement Fund (Note 14) 9,989,898 10,064,145 – –
Other Assets - net (Note 15) 77,665,742 85,535,581 52,033,085 47,877,765
=P2,261,795,246 =
P1,975,031,142 =
P 1,867,158,423 =
P1,652,075,459

LIABILITIES AND EQUITY


LIABILITIES
Current Liabilities
Accounts payable, accrued expenses
and other current liabilities
(Notes 16 and 24) =
P112,827,152 =
P81,386,706 =
P103,802,272 =
P68,054,415
Dividends payable (Note 20) 3,428,782 3,428,122 3,428,782 3,428,122
Income tax payable 21,033,583 1,520,671 8,544,235 1,520,671
Deferred fees 43,138,015 27,541,689 43,138,015 27,541,689
Total Current Liabilities 180,427,532 113,877,188 158,913,304 100,544,897
Due to:
Clearing and Trade Guaranty Fund (Note 13) 325,227,463 310,089,837 – –
Credit Ring Agreement Fund (Note 14) 9,989,898 10,064,145 – –
515,644,893 434,031,170 158,913,304 100,544,897
EQUITY
Capital stock (Notes 1 and 20) 15,277,513 15,277,513 15,277,513 15,277,513
Additional paid-in capital (Note 1) 976,506,942 976,506,942 976,506,942 976,506,942
Donated capital (Note 17) 387,637,585 382,404,823 387,637,585 382,404,823
Treasury stock (1) (2) (1) (2)
Retained earnings
Appropriated (Note 20) 3,000,000 – 3,000,000 –
Unapproriated 285,577,394 144,280,308 247,674,858 155,012,375
Net unrealized gain on available-for-sale
investments (Notes 7 and 10) 78,150,920 22,530,388 78,148,222 22,328,911
1,746,150,353 1,540,999,972 1,708,245,119 1,551,530,562
=P2,261,795,246 =
P1,975,031,142 =
P 1,867,158,423 =
P1,652,075,459

See accompanying Notes to Financial Statements.

Annual Report 2006 37


THE PHILIPPINE STOCK EXCHANGE, INC. AND SUBSIDIARY
STATEMENTS OF INCOME

Consolidated Parent Company


Years Ended December 31
2006 2005 2004 2006 2005 2004
OPERATING INCOME
Listing-related:
Listing fees =P244,266,689 =
P159,246,585 =
P79,821,920 =P244,266,689 =
P159,246,585 =
P79,821,920
Processing fees 1,132,060 641,000 330,000 1,132,060 641,000 330,000
Interest (Notes 6, 7 and 10) 113,991,355 109,103,011 95,584,829 112,172,031 108,434,181 95,189,912
Membership fees (Note 24):
Transaction 45,069,262 28,477,622 18,231,942 45,069,262 28,477,622 18,231,942
Subscription 13,480,762 12,654,000 11,225,922 13,480,762 12,654,000 11,225,922
Processing 12,194,680 9,874,361 2,437,504 12,194,680 9,874,361 2,437,504
Assessment 1,648,562 1,641,170 1,659,924 1,648,562 1,641,170 1,659,924
Entrance 880,000 810,000 730,000 880,000 810,000 730,000
Service fees 102,370,005 39,430,664 2,038,971 – – –
Data feed 16,954,280 14,721,650 15,803,469 16,954,280 14,721,650 15,803,469
Miscellaneous (Notes 24 and 27) 13,131,533 7,004,049 10,228,532 12,526,350 6,622,237 10,019,027
565,119,188 383,604,112 238,093,013 460,324,676 343,122,806 235,449,620
OPERATING EXPENSES
Compensation and other
related staff costs
(Notes 18, 22 and 24) 117,145,243 112,435,687 74,942,786 110,678,146 107,767,931 72,124,295
Occupancy costs (Note 19) 36,009,435 32,389,137 30,939,619 35,122,403 32,029,137 30,627,619
Depreciation (Note 11) 21,682,055 22,491,579 32,140,156 20,585,006 21,645,903 32,078,564
Infrastructure fee 13,775,441 11,790,007 – – – –
Repairs and Maintenance 12,484,880 3,603,785 3,511,637 10,424,417 3,603,785 3,511,637
Professional fees 11,328,627 13,020,975 21,242,058 10,248,346 12,508,008 16,454,291
Foreign exchange loss (gain) - net 11,065,752 7,208,976 (1,561,003) 11,065,752 7,208,976 (1,561,003)
Provision for (recovery from) impairment
losses (Notes 8 and 10) 9,923,355 3,613,560 (13,389) 9,923,355 3,613,560 (13,389)
Trading technology, computer
maintenance and other
trading-related costs 7,202,153 7,215,114 10,324,375 7,202,153 7,215,114 10,324,375
Membership development 5,368,710 4,383,907 3,396,868 5,368,710 4,383,907 3,396,868
Amortization (Note 15) 5,205,924 5,217,228 – – – –
Taxes and licenses 4,601,607 4,109,762 8,058,452 4,068,883 4,092,536 8,041,760
Market development 3,672,932 4,176,184 2,417,381 3,672,932 4,176,184 2,417,381
Office expenses 3,297,450 3,995,009 3,036,901 3,155,815 3,381,603 2,968,045
Travel and transportation 3,001,388 2,812,588 2,809,125 2,986,835 2,793,381 2,798,782
Insurance 1,183,834 607,276 618,989 1,111,880 607,276 618,989
Conferences, meetings and seminars 661,220 425,485 533,198 574,993 386,330 504,218
Entertainment, amusement
and recreation (Note 21) 561,414 492,188 577,209 539,977 474,488 564,961
Training and development – 1,851,587 – – – –
Loss on trading error (Note 27) – – 3,748,800 – – 3,748,800
Miscellaneous 4,365,344 1,137,004 2,127,290 4,043,509 486,184 1,488,701
272,536,764 242,977,038 198,850,452 240,773,112 216,374,303 190,094,894
INCOME BEFORE INCOME TAX 292,582,424 140,627,074 39,242,561 219,551,564 126,748,503 45,354,726
PROVISION FOR INCOME TAX (Note 21) 60,286,909 20,821,819 17,091,096 35,890,652 27,014,544 16,992,070
NET INCOME FOR THE YEAR =
P232,295,515 =
P119,805,255 =
P22,151,465 =
P183,660,912 =
P99,733,959 =
P28,362,656
Attributable to:
Equity holders of the Parent Company =P232,295,515 =
P119,805,255 =
P22,596,301 =P183,660,912 =
P99,733,959 =
P28,362,656
Minority interest – – (444,836) – – –
=P232,295,515 =
P119,805,255 =
P22,151,465 =P183,660,912 =
P99,733,959 =
P28,362,656
Earnings Per Share Attributable
to Equity Holders of the Parent
Company (Note 23) =P15.21 =
P7.84 =
P1.53

See accompanying Notes to Financial Statements.

38 Philippine Stock Exchange, Inc.


THE PHILIPPINE STOCK EXCHANGE, INC. AND SUBSIDIARY
STATEMENTS OF CHANGES IN EQUITY

Consolidated

Equity Attributable to Equity Holders of the Parent Company

Net Unrealized
Retained Retained Gain on
Additional Donated Earnings, Earnings, Available-for-Sale
Capital Stock Paid-in Capital Capital Treasury Appropriated Unappropriated Investments Minority Total
(Notes 1 and 20) (Note 1) (Note 17) Stock (Note 20) (Note 2) (Notes 7 and 10) Total Interest Equity

Balance at January 1, 2006 =


P15,277,513 =
P976,506,942 =
P382,404,823 (=
P2) =
P– =
P144,280,308 =
P22,530,388 =
P1,540,999,972 =
P– =
P1,540,999,972

Net unrealized gain for the year

(Notes 7 and 10) – – – – – – 55,620,532 55,620,532 – 55,620,532

Net income for the year – – – – – 232,295,515 – 232,295,515 – 232,295,515

Total income and expenses for the year – – – – – 232,295,515 55,620,532 287,916,047 – 286,916,047

Appropriation of retained earnings – – – – 3,000,000 (3,000,000) – – – –

Issuance of treasury stock – – – 1 – – – 1 – 1

Cash dividend (Note 20) – – – – – (87,998,429) – (87,998,429) – (87,998,429)

Additional donated capital – – 5,232,762 – – – – 5,232,762 – 5,232,762

Balance at December 31, 2006 =


P15,277,513 =
P976,506,942 =
P387,637,585 (=
P1) =
P3,000,000 =
P285,577,394 =
P78,150,920 =
P1,746,150,353 =
P– =
P1,746,150,353

Balance at December 31, 2004 =


P15,277,513 =
P976,506,942 =
P377,157,404 (=
P2) =
P– =
P100,411,601 =
P– =
P1,469,353,458 =
P– =
P1,469,353,458

Cumulative effect of change in

accounting for Financial

instruments - Philippine

Accounting Standard (PAS) 39

(Notes 2 and 20) – – – – – 450,977 – 450,977 – 450,977

Balance at January 1, 2005 15,277,513 976,506,942 377,157,404 (2) – 100,862,578 – 1,469,804,435 – 1,469,804,435

Net unrealized gain for the year

(Notes 7 and 10) – – – – – – 22,530,388 22,530,388 – 22,530,388

Net income for the year – – – – – 119,805,255 – 119,805,255 – 119,805,255

Total income and expenses for the year – – – – – 119,805,255 22,530,388 142,335,643 – 142,335,643

Cash dividend (Note 20) – – – – – (76,387,525) – (76,387,525) – (76,387,525)

Additional donated capital – – 5,247,419 – – – – 5,247,419 – 5,247,419

Balance at December 31, 2005 =


P15,277,513 =
P976,506,942 =
P382,404,823 (=
P2) =
P– =
P144,280,308 =
P22,530,388 =
P1,540,999,972 =
P– =
P1,540,999,972

Balance at December 31, 2003 =


P9,200,008 =
P277,426,988 =
P377,157,404 (=
P2) =
P– =
P319,925,680 =
P– =
P983,710,078 =
P444,836 =
P984,154,914

Effect of change in accounting

for Retirement benefits - net - PAS 19 – – – – – 2,329,684 – 2,329,684 – 2,329,684

Net income for the year – – – – – 22,596,301 – 22,596,301 (444,836) 22,151,465

Total income and expenses for the year – – – – – 24,925,985 – 24,925,985 (444,836) 24,481,149

Cash dividend (Note 20) – – – – – (244,440,064) – (244,440,064) – (244,440,064)

Issuance of capital stock 6,077,505 – – – – – – 6,077,505 – 6,077,505

Additional paid-in capital on

issuance of new shares - net – 699,079,954 – – – – – 699,079,954 699,079,954

Balance at December 31, 2004 =


P15,277,513 =
P976,506,942 =
P377,157,404 (=
P2) =
P– =
P100,411,601 =
P– =
P1,469,353,458 =
P– =
P1,469,353,458

Annual Report 2006 39


-2-

Parent Company
Net Unrealized
Gain on
Retained Retained Available-
Capital Additional Donated Earnings, Earnings, for-Sale
Stock Paid-in Capital Capital Treasury Appropriated Unappropriated Investments Total
(Notes 1 and 20) (Note 1) (Note 17) Stock (Note 20) (Note 2) (Notes 7 and 10) Equity
Balance at January 1, 2006 =
P15,277,513 =
P976,506,942 =
P382,404,823 (=
P2) =
P– =
P155,012,375 =
P22,328,911 =
P1,551,530,562
Net unrealized gain for the year
(Notes 7 and 10) – – – – – – 55,819,311 55,819,311
Net income for the year – – – – – 183,660,912 – 183,660,912
Total income and expenses for the year – – – – – 183,660,912 55,819,311 239,480,223
Appropriation of retained earnings – – – – 3,000,000 (3,000,000) – –
Issuance of treasury stock – – – 1 – – – 1
Cash dividend (Note 20) – – – – – (87,998,429) – (87,998,429)
Additional donated capital – – 5,232,762 – – – – 5,232,762
Balance at December 31, 2006 =
P15,277,513 =
P976,506,942 =
P387,637,585 (=
P1) =
P3,000,000 =
P247,674,858 =
P78,148,222 =
P1,708,245,119
Balance at December 31, 2004 =
P15,277,513 =
P976,506,942 =
P377,157,404 (=
P2) =
P– =
P131,214,964 =
P– =
P1,500,156,821
Cumulative effect of change in accounting
for Financial instruments - PAS 39
(Notes 2 and 20) – – – – – 450,977 – 450,977
Balance at January 1, 2005 15,277,513 976,506,942 377,157,404 (2) – 131,665,941 – 1,500,607,798
Net unrealized gain for the year (Notes 7 and 10) – – – – – – 22,328,911 22,328,911
Net income for the year – – – – – 99,733,959 – 99,733,959
Total income and expenses for the year – – – – – 99,733,959 22,328,911 122,062,870
Cash dividend (Note 20) – – – – – (76,387,525) – (76,387,525)
Additional donated capital – – 5,247,419 – – – – 5,247,419
Balance at December 31, 2005 =
P15,277,513 =
P976,506,942 =
P382,404,823 (=
P2) =
P– =
P155,012,375 =
P22,328,911 =
P1,551,530,562
Balance at December 31, 2003 =
P9,200,008 =
P277,426,988 =
P377,157,404 (=
P2) =
P– =
P319,925,680 =
P– =
P983,710,078
Net unrealized gain – – – – – 27,366,692 – 27,366,692
Net income for the year – – – – – 28,362,656 – 28,362,656
Total income and expenses for the year – – – – – 55,729,348 – 55,729,348
Cash dividend (Note 20) – – – – – (244,440,064) – (244,440,064)
Issuance of capital stock 6,077,505 – – – – – – 6,077,505
Additional paid-in capital on
issuance of new shares - net – 699,079,954 – – – – – 699,079,954
Balance at December 31, 2004 =
P15,277,513 =
P976,506,942 =
P377,157,404 (=
P2) =
P– =
P131,214,964 =
P– =
P1,500,156,821

See accompanying Notes to Financial Statements.

40 Philippine Stock Exchange, Inc.


THE PHILIPPINE STOCK EXCHANGE, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS

Consolidated Parent Company


Years Ended December 31
2006 2005 2004 2006 2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax =
P292,582,424 =
P140,627,074 =
P39,242,561 =
P219,551,564 =
P126,748,503 =
P45,354,726
Adjustments for:
Interest income (113,991,355) (109,103,011) (95,584,829) (112,172,031) (108,434,181) (95,189,912)
Depreciation (Note 11) 21,682,055 22,491,579 32,140,156 20,585,006 21,645,903 32,078,564
Provision for (recovery from) impairment losses 9,923,355 3,613,560 (13,389) 9,923,355 3,613,560 (13,389)
Amortization (Note 15) 5,205,924 5,217,228 – – –
Gain on disposal of:
Short-term investments – – (3,611,079) – – (3,611,079)
Property and equipment – (990) (235,000) – (1) (235,000)
Operating income (loss) before working
capital changes 215,402,403 62,845,440 (28,061,580) 137,887,894 43,573,784 (21,616,090)
Changes in operating assets and liabilities:
Decrease (increase) in the amounts of:
Accounts receivable (46,411,876) (13,551,634) 10,168,312 (35,904,602) (9,920,807) 10,377,555
Other current assets 3,480,828 (4,894,949) 653,368 3,006,294 (4,325,492) 661,255
Increase in the amounts of:
Accounts payable, accrued expenses
and other current liabilities 29,792,500 23,915,767 11,913,155 40,919,146 24,553,460 10,053,379
Deferred fees 15,596,326 27,541,689 – 15,596,326 27,541,689 –
Net cash generated from (used in) operations 217,860,181 95,856,313 (5,326,745) 161,505,058 81,422,634 (523,901)
Interest received 107,550,664 108,876,339 81,464,983 106,414,522 107,911,748 81,275,616
Income taxes paid (39,126,051) (24,488,666) (20,932,363) (34,038,377) (23,862,156) (20,833,337)
Net cash provided by operating activities 286,284,794 180,243,986 55,205,875 233,881,203 165,472,226 59,918,378
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Short-term available-for-sale investments (1,035,061,078) (411,060,672) – (980,696,278) (395,856,925) –
Short-term investments – – (1,462,677,557) – – (1,462,677,557)
Long-term available-for-sale investments (560,341,044) (145,585,827) – (560,341,044) (145,585,827) –
Long-term investments – – (197,831,924) – – (197,831,924)
Proceeds from maturity of:
Short-term available-for-sale investments 838,896,919 411,458,418 – 788,499,554 411,458,418 –
Short-term investments – – 1,037,291,965 – – 1,031,291,965
Long-term available-for-sale investments 624,064,393 31,095,000 – 624,064,393 31,095,000 -
Long-term investments – – 14,414,500 – – 14,414,500
Proceeds from sale of:
Short-term available-for-sale investments – 55,749,664 – – 55,749,664 –
Short-term investments – – 69,620,444 – – 69,620,444
Investments – – 67,785,750 – – 67,785,750
Decrease in other assets 7,896,678 3,153,467 2,739,789 1,077,443 2,994,879 32,529,672
Additional investment in Securities Clearing
Corporation of the Philippines – – – – – (44,045,393)
Acquisitions of property and equipment (Note 11) (21,446,522) (7,241,310) (16,868,625) (21,349,984) (5,626,147) (14,909,474)
Proceeds from disposal of property and equipment 1 1,001 1,181,365 – 1 1,181,365
Net cash used in investing activities (145,990,653) (62,430,259) (484,344,293) (148,745,916) (45,770,937) (502,640,652)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of capital stock – – 705,157,457 – – 705,157,457
Dividend payment (87,997,769) (75,465,623) (260,333,860) (87,997,769) (75,465,623) (260,333,860)
Net cash provided by (used in) financing activities (87,997,769) (75,465,623) 444,823,597 (87,997,769) (75,465,623) 444,823,597
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 52,296,372 42,348,104 15,685,179 (2,862,482) 44,235,666 2,101,323
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 98,350,476 56,002,372 40,317,193 85,809,538 41,573,872 39,472,549
CASH AND CASH EQUIVALENTS AT
END OF YEAR (Note 6) =
P150,646,848 =
P98,350,476 =
P56,002,372 =
P82,947,056 =
P85,809,538 =
P41,573,872

See accompanying Notes to Financial Statements.

Annual Report 2006 41


THE PHILIPPINE STOCK EXCHANGE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

The Philippine Stock Exchange, Inc. (the Parent Company or the Exchange) was incorporated in the Philippines on July 14, 1992 as a
non-stock corporation primarily to provide and maintain a convenient and suitable market for the exchange, purchase, and sale of all types
of securities and other instruments.

On August 8, 2001, the Parent Company was converted from a non-stock corporation to a stock corporation (demutualization) with an
authorized capital stock of =
P36.8 million divided into 36.8 million shares at a par value of =
P1.00 per share as prescribed by Republic Act
(RA) No. 8799 entitled “Securities Regulation Code” (SRC) and pursuant to a conversion plan approved by the Securities and Exchange
Commission (SEC).

The salient features of the demutualization plan approved by the SEC on August 3, 2001 include, among others, the following:

a. Conversion of the Parent Company into a stock corporation by amending its Articles of Incorporation and by-laws;
b. Subscription of each member of 50,000 shares at = P1.00 per share. The remaining balance of the Membership Contributions account
of =
P277.4 million shall be treated as additional paid-in capital;
c. Issuance of trading rights to brokers in recognition of the existing seat ownership by the brokers;
d. Separation of ownership of shares and access to the trading facilities of the exchange. The trading rights shall be transferable without
time limitation; and
e. Imposition of a moratorium on the issuance of the new trading rights.

On December 15, 2003, the Parent Company’s shares of stock were listed by way of introduction of its outstanding shares to comply with
the requirements mandated by the SRC, particularly the conversion of the Parent Company into a stock corporation.

On January 28, 2004, the Parent Company offered 6,077,505 unissued shares to the private sector to comply with SRC’s mandate
regarding the ownership of an exchange. Gross proceeds from the private placement offering amounted to = P726.3 million, inclusive of
additional paid-in capital of =
P720.2 million representing premium over the par value of the common stock. Expenses related to the
offering amounting to =
P21.1 million were recorded as a reduction of the additional paid-in capital. As of December 31, 2006 and 2005,
the Parent Company had issued 15,277,513 shares.

Securities Clearing Corporation of the Philippines (SCCP), a wholly-owned subsidiary of the Parent Company, was given a temporary
license to operate by the SEC and started its commercial operations on January 3, 2000. On January 15, 2002, the SEC approved SCCP’s
request for a permanent license as a clearing agency subject to its compliance with the requirements of Section 42 of the SRC entitled
“Registration of Clearing Agency.”

The registered office address of the Parent Company is Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City.

The accompanying financial statements were authorized for issue by the board of directors (BOD) on February 14, 2007.

2. Accounting Policies

Basis of Preparation

The accompanying financial statements have been prepared on a historical cost basis, except for short-term and long-term available-for-
sale (AFS) investments and investments of Clearing and Trade Guaranty Fund (CTGF) and Credit Ring Agreement Fund (CRAF) that have
been measured at fair value. The financial statements are presented in Philippine pesos.

Statement of Compliance
The consolidated financial statements of the Parent Company and SCCP (the Group) and of the Parent Company have been prepared in
compliance with Philippine Financial Reporting Standards (PFRS).

42 Philippine Stock Exchange, Inc.


Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and its wholly owned subsidiary, SCCP, and
are prepared for the same reporting year as the Parent Company, using consistent accounting policies.

All significant intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are
eliminated in full in the consolidation.

Subsidiaries are consolidated from the date on which control is transferred to the Parent Company and ceased to be consolidated from the
date on which control is transferred out of the Parent Company. Control is achieved where the Parent Company has the power to govern
the financial and operating policies of an entity so as to obtain benefit from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consiledated statement of income from the date of
acquisition up to the date of disposal, as appropriate.

Minority Interest
Minority interest represents the portion of profit or loss and the net assets not held by the Group and are presented separately in the
consolidated statement of income and within equity in the consolidated balance sheet, separately from parent shareholders’ equity.
There is no minority interest as of December 31, 2006, 2005 and 2004.

Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year except as follows:

Amendments to PFRSs and Philippine Interpretations effective in 2006


The Group has adopted the following amendments to PFRS and Philippine Interpretation during the year. Adoption of these revised
standards and interpretation did not have any effect on the Group except for the additional disclosures on the financial statements.

· PAS 19, Amendment - Employee Benefits


· PAS 21, Amendment - The Effects of Changes in Foreign Exchange Rates
· PAS 39, Amendments - Financial Instruments: Recognition and Measurement
· Philippine Interpretation IFRIC-4, Determining whether an Arrangement contains a Lease

Philippine Interpretation early adopted


The Group has also early adopted Philippine Interpretation IFRIC-9, Reassessment of Embedded Derivatives.

The principal effects of these changes, if any, are as follows:

PAS 19, Employee Benefits


Amendment for actuarial gains and losses, group plans and disclosures. As of January 1, 2006 the Group adopted the amendments to
PAS 19. As a result, additional disclosures on the financial statements are made, starting in 2006, to provide information about trends in
the assets and liabilities in the defined benefit plans and the assumptions underlying the components of the defined benefit cost. This
change has no recognition nor measurement impact, as the Group chose not to apply the new option offered to recognize actuarial gains
and losses outside of the statement of income.

PAS 21, The Effects of Changes in Foreign Exchange Rates


Amendment for net investment in a foreign operation. All exchange differences arising from a monetary item that forms part of the Group’s
net investment in a foreign operation are recognized in a separate component of equity in the consolidated financial statements regardless
of the currency in which the monetary item is denominated. As the Group currently has no investment in foreign operation, the amendment
did not have an effect on the financial statements.

Annual Report 2006 43


NOTES TO FINANCIAL STATEMENTS

PAS 39, Financial Instruments: Recognition and Measurement


Amendment for financial guarantee contracts. This amended the scope of PAS 39 to require financial guarantee contracts that are not
considered to be insurance contracts to be recognized initially at fair value and to be remeasured at the higher of the amount determined
in accordance with PAS 37, Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognized less, when
appropriate, cumulative amortization recognized in accordance with PAS 18, Revenue. This amendment did not have an effect on the
financial statements.

Amendment for cash flow hedge accounting of forecast intragroup transactions. This amended PAS 39 to permit the foreign currency risk
of a highly probable intra-group forecast transaction to qualify as the hedged item in a cash flow hedge, provided that the transaction is
denominated in a currency other than the functional currency of the entity entering into that transaction and that the foreign currency risk
will affect the consolidated statement of income. As the Group currently has no such transactions, the amendment did not have an effect
on the financial statements.

Amendment for the fair value option. This amended PAS 39 to restrict the use of the option to designate any financial asset or any financial
liability to be measured at fair value through the statement of income . As the group currently has no financial asset and financial liability
at fair value through profit and loss (FVPL), this amendment has no significant impact on the Group’s financial statements.

Philippine Interpretation IFRIC–4, Determining Whether an Arrangement contains a Lease


This Interpretation provides guidance in determining whether arrangements contain a lease to which lease accounting must be applied.
This Interpretation has no impact on the financial statements.

Philippine Interpretation IFRIC–9, Reassessment of Embedded Derivatives


This Interpretation becomes effective for financial years beginning on or after June 1, 2006. It establishes that the date to assess the
existence of an embedded derivative is the date an entity first becomes a party to the contract, with reassessment only if there is a change
to the contract that significantly modifies the cash flows. The Group assessed that adoption of this interpretation has no impact on the
financial statements.

The following new and amended PFRS and Philippine Interpretations are effective for annual periods beginning on or after January 1,
2006 but are not relevant to the Group:

· PFRS 4, Amendment-Insurance Contacts


· PFRS 6, Exploration for and Evaluation of Mineral Resources
· Philippine Interpretation IFRIC-5, Rights to Interests Arising from Decommissioning Restoration and Environmental Rehabilitation
Funds
· Philippine Interpretation IFRIC-6, Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic
Equipment

Summary of Significant Accounting Policies

Foreign currency translation


The consolidated financial statements are presented in Philippine pesos, which is the functional currency of the Group and of the Parent
Company.

Transactions and balances


Transactions in foreign currencies are recorded using the exchange rate at the date of transactions. Foreign exchange gains or losses
arising from foreign currency transactions and revaluation adjustments of foreign currency assets and liabilities are credited to or charged
against current operations. Monetary assets and liabilities denominated in foreign currencies are translated using the Philippine Dealing
System closing rate prevailing at balance sheet date.

44 Philippine Stock Exchange, Inc.


Financial instruments - initial recognition and subsequent measurement

(i) Date of recognition


Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the
marketplace are recognized on the settlement date. Deposits and receivables are recognized when cash is received by the Group are
advanced to the borrower.

(ii) Initial recognition of financial instruments


All financial assets, including short-term and long-term AFS investments and accounts receivable, are initially measured at fair value.
Except for financial assets at FVPL, the initial measurement of financial assets includes transaction costs that are directly attributable to
the acquisition or issue of the financial asset. The Group classifies its financial assets in the following categories: financial assets at FVPL,
held-to-maturity (HTM) investments, AFS investments, and receivables. The classification depends on the purpose for which the investments
were acquired and whether they are quoted in an active market. Management determines the classification of its investments at initial
recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date.

As of December 31, 2006 and 2005, the Group has no outstanding financial assets at FVPL and HTM investments.

(iii) Receivables
Receivables are financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. These
are not entered into with the intention of immediate or short-term resale and are not classified as Other financial assets held for trading,
designated as AFS investments or financial assets designated at FVPL. Receivables include noninterest-bearing accounts receivable
which are due within one year, accrued interest receivable, deposit in bank, and advances to brokers related to CRAF. Receivables are
carried at amortized cost less allowance for impairment losses. The losses arising from impairment are recognized in provision for
impairment losses in the statement of income.

(iv) AFS investments


AFS investments are those which are designated as such or do not qualify to be classified as designated as FVPL, HTM or loans and
receivables. These are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market
conditions. These include equity investments, money market papers and other debt instruments.

After initial measurement, AFS investments are subsequently measured at fair value. The effective yield component of AFS debt securities,
as well as the impact of restatement on foreign currency-denominated AFS debt securities is reported in the statement of income. The
unrealized gains and losses arising from the fair valuation of AFS investments (net of any applicable tax) are excluded from reported
income and are reported as net unrealized gain on AFS investments in the equity section of the balance sheet.

Prior to January 1, 2005, short-term and long-term investments representing investments in government securities where the Group has
the positive intent and ability to hold to maturity were accounted for as investments in bonds and other debt instruments. These securities
are carried at amortized cost on a straight-line basis less permanent impairment in value, if any; realized gains and losses are included in
non-operating income in the statement of income. The cost of investments used for determining the gain or loss on sale of such investment
is determined based on the specific identification method.

The adoption of the provision of PAS 39 on the classification and related measurement of financial assets and financial liabilities of the
Group and the use of effective interest rate method in measuring amortized cost for AFS investments reduced retained earnings as of
January 1, 2005 by P0.5 million (Note 20). Also, as of December 31, 2005, the Group and the Parent Company recognized net unrealized
gain on short-term and long-term AFS investments amounting to = P22.5 million and =P22.3 million, respectively. In addition, as of
December 31, 2005, the Group’s AFS investments of CTGF and CRAF were carried at their respective fair values with the corresponding
unrealized loss of = P0.3 million and unrealized gain of =
P0.1 million, respectively, recognized under Due to CTGF and CRAF (presented
under liabilities section in the balance sheet).

Annual Report 2006 45


NOTES TO FINANCIAL STATEMENTS

Derecognition of financial assets and liabilities

(i) Financial assets


A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized where:
1. the rights to receive cash flows from the asset have expired;
2. the Group retains the right to receive cash flows from the asset, but has assumed as obligation to pay them in full without
material delay to a third party under a “pass-through” arrangement; or
3. the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks
and rewards of the asset, or (b) has neither transferred nor retained the risk and rewards of the asset but has transferred the
control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has
neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is
recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that
the Group could be required to repay.

(ii) Financial liabilities


A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in statement of income.

Determination of fair value


The fair value for financial instruments traded in active markets at the balance sheet date is based on their quoted market price or dealer
price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. When current
bid and asking prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there
has not been a significant change in economic circumstances since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation techniques.
Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist,
options pricing models, and other relevant valuation models.

Impairment of financial assets


The Group assesses at each balance sheet date whether financial asset or group of financial assets is impaired.

Assets carried at cost


If there is objective evidence that is impairment loss on receivables carried at cost has been incurred , the amount of the loss is measured
as the difference between the carrying amount of the present value of estimated future cash flows discounted at the current market rate
of return for a similar financial asset. The carrying amount of the asset is reduced through use of an allowance account. The amount of the
loss shall be recognized in the statement of income.

The Group first assesses whether objective evidence of impairment exists individually. If the Group determines that no objective evidence
of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial
assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not included in the collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is
reversed by adjusting the allowance account. The amount of the reversal is recognized in the statement of income.

46 Philippine Stock Exchange, Inc.


AFS investment
If an AFS investment is impaired, the difference between its amortized cost and its current fair value, less any impairment loss on that
financial asset previously recognized is removed from the stockholders’ equity and is recognized in the statement of income. Impairment
losses on equity instruments are not reversed through the statement of income. If, in a subsequent period, the fair value of a debt
investment classified as AFS investments increases and the increase can be objectively related to an event occurring after the impairment
loss was recognized, the impairment loss is reversed through the statement of income.

Investments of Clearing and Trade Guaranty Fund and Credit Ring Agreement Fund
CTGF and CRAF represent contributions of the Parent Company and the brokers as discussed in Notes 13 and 14, respectively, to the
financial statements. The funds are held in trust by SCCP for the account of the brokers. The fund assets of CTGF and CRAF are shown
as Investments of CTGF and CRAF with a contra account to Due to CTGF and CRAF in the balance sheet.

The assets of the funds are invested in government securities, which are held for the purpose of liquidity. As of December 31, 2006 and
2005, investments in government securities are classified as AFS investments and are carried at fair market value (see discussions under
AFS investments). The unrealized gain or loss arising from fair valuation of these investments is reported under Due to CTGF and CRAF.
Income and expenses related to the fund are credited to or charged against the fund balances. Realized gains and losses from the sale of
investments are also credited to or charged against the fund balances. The cost of investments used for determining the gain or loss on
sale of such investment is determined based on the specific identification method.

Offsetting financial instruments


Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if, and only if, there is a currently
enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle
the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are
presented gross in the balance sheet.

Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reasonably
measured. The following specific recognition criteria must also be met before revenue is recognized:

a. Listing, processing, data feed and service fees are recognized when services are rendered;
b. Membership fees are recognized on a time proportion basis;
c. Miscellaneous income is recognized on an accrual basis; and
d. Interest on AFS investments and interest-bearing placements is recognized based on accrual accounting using effective interest
method.

Cash equivalents
For purposes of reporting cash flow, cash equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash with original maturities of three months or less from dates of placements and that are subject to an insignificant risk of
changes in value.

Investment in a subsidiary
Subsidiary is an entity over which the Group has the power to govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The existence and effect of potential voting rights are currently exercisable or
convertible are considered when assessing whether the Group controls another entity.

Investment in subsidiary in the Parent Company financial statements is carried at cost, less any impairment in value.

Property and equipment


Depreciable properties including buildings, building improvements, and furniture, fixture and equipment are stated at cost less accumulated
depreciation and any impairment in value.

Annual Report 2006 47


NOTES TO FINANCIAL STATEMENTS

The initial cost of property and equipment comprises of its purchase price and any directly attributable costs of bringing the asset to its
working condition and location for its intended use. Expenditures incurred after the property and equipment have been put into operation,
such as repairs and maintenance, are charged against current operations. In situations where it can be clearly demonstrated that the
expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and
equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property and
equipment.

An item of property and equipment is derognized upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the statement of income in the year, the asset is derecognized.
Depreciation is calculated on the straight-line method over the estimated useful life of the depreciable assets. The estimated useful lives
of the depreciable assets are as follows:

Years
Buildings 25
Trading system equipment 3
Building improvements 10
Computer hardware and peripherals 3-5
Office furniture, fixtures and communication equipment 2-5
Transportation equipment 5
Utilities and others 2

The depreciation method and useful life are reviewed periodically to ensure that the method and period of depreciation are consistent with
the expected pattern of economic benefits from items of property and equipment.

Computer software
Costs that are directly associated with identifiable and unique software controlled by the Group and will generate economic benefits
exceeding costs beyond one year are recognized as intangible assets.

Research costs associated with acquiring the computer software programs are recognized as expense when incurred.

Expenditures which enhance or extend the performance of computer software programmes beyond their original specifications are recognized
as capital improvements and added to the original cost of the software. Computer software costs recognized as assets are amortized
using the straight-line method over their useful lives, but not exceeding a period of 5 years. Where an indication of impairment exists, the
carrying amount of computer software is assessed and written down immediately to its recoverable amount.

Impairment of nonfinancial assets


An impairment loss is recognized by a charge against current operations for the excess of the carrying amount of an asset over its
recoverable amount. An asset’s recoverable amount is the higher of the asset’s value in use or its net selling price. An impairment loss is
charged to operations in the year in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is
charged against the revaluation increment of the said asset.

A previously recognized impairment loss is reversed by a credit to current operations to the extent that it does not restate the asset to a
carrying amount in excess of what would have been determined (net of any accumulated depreciation) had no impairment loss been
recognized for the asset in prior years.

Deferred fees
Deferred fees represent listing and data feed fees which are billed and collected but not yet earned as of balance sheet dates. This
account is reversed and recognized as listing income when services are rendered (see discussion on Revenue recognition above).

Retirement expense
The Parent Company has a funded while SCCP has an unfunded, noncontributory retirement plan, administered by trustees, covering
their permanent employees. The Group’s retirement expense is actuarially determined using the projected unit credit method. Under

48 Philippine Stock Exchange, Inc.


this method, the current service cost is the present value of retirement benefits payable in the future with respect to services rendered
in the current year.

The defined benefit liability is the aggregate of the present value of the benefits obligation and actuarial gains or losses not recognized,
reduced by past-service cost not yet recognized and the fair value of plan assets out of which the obligations are to be settled directly.
If such aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of cumulative unrecognized net
actuarial losses and past-service cost and the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.

The defined benefit obligation is calculated annually by an independent actuary. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the
currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related retirement liabilities.
Actuarial gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses of the
plan at the end of the previous reporting year exceed 10% of the higher of the present value of the defined benefit obligation and the fair
value of plan assets at that date. The excess actuarial gains and losses are recognized over the average remaining working life of
employees participating in that plan in the statement of income.

Experience adjustments and unrecognized actuarial gains or losses are amortized over the remaining working lives of employees.
Retirement cost includes current service cost, amortization of past-service costs, experience adjustments and actuarial gains and
losses.

Past-service costs are recognized immediately in the statement of income, unless the changes to the pension plan are conditional on the
employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a
straight-line basis over the vesting period.

Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable
that an outflow of assets embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract,
the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of income, net of any reimbursement. If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessment of the time
value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to
the passage of time is recognized as an interest expense.

Contingent liabilities and contingent assets


Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of assets
embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed when an
inflow of economic benefits is virtually certain.

Income taxes
Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary
differences, carryforward of unused tax credits from excess minimum corporate income tax (MCIT) over regular corporate income tax
(RCIT) and unused net operating loss carryover (NOLCO), to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences and carryforward of unused tax credits and unused NOLCO can be utilized. Deferred income tax,
however, is not recognized when it arises from the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting income nor taxable income or loss.

Deferred tax liabilities are not provided on nontaxable temporary differences associated with investment in subsidiary.

Annual Report 2006 49


NOTES TO FINANCIAL STATEMENTS

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred
tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rate applicable to the year when the asset is realized or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Accordingly, as of
December 31, 2006 and 2005, the Parent Company’s deferred tax assets are presented net of deferred tax liability (see Note 21).

Current tax and deferred tax relating to items recognized directly in equity is also recognized in equity and not in the statement of
income.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax
liabilities and deferred taxes related to the same taxable entity and the same taxation authority. Accordingly, as of December 31, 2006
and 2005, the Parent Company’s deferred tax assets are presented net of deferred tax liability (see Note 21).

Treasury shares and contracts on own shares


Own equity instruments which are acquired (treasury shares) are deducted from equity and accounted for at weighted average cost. No
gain or loss is recognized in the statement of income on the purchase, sale, issue or cancellation of the Parent Company’s own equity
instruments.

Earnings per share


Earnings per share is determined by dividing net income for the year by the weighted average number of common shares issued and
outstanding during the year after giving retroactive effect to any stock dividend or stock split made during the year.

Dividends on common shares


Dividends on common shares are recognized as a liability and deducted from equity when approved by the respective shareholders of the
Parent Company. Dividends for the year that are approved after the balance sheet date are dealt with as an event after the balance sheet date.

Subsequent events
Any post-year-end event that provides additional information about the Group’s position at the balance sheet date (adjusting event) is
reflected in the financial statements. Post-year-end events that are not adjusting events, if any, are disclosed when material to the
financial statements.

Future Changes in Accounting Policies

The Group has not applied the following PFRS and Philippine Interpretations which are not yet effective for the year ended December
31, 2006:

PFRS 7, Financial Instruments: Disclosures, and the complementary amendment to PAS 1, Presentation of Financial Statements: Capital
Disclosures (effective for annual periods beginning on or after January 1, 2007)
PFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and
quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit
risk, liquidity risk and market risk, as well as sensitivity analysis to market risk. It replaces PAS 30, Disclosures in the Financial Statements
of Banks and Similar Financial Institutions, and the disclosure requirements in PAS 32, Financial Instruments: Disclosure and Presentation.
It is applicable to all entities that report under PFRS.

The amendment to PAS1 introduces disclosures about the level of an entity’s capital and how it manages capital. The Group is currently
assessing the impact of PFRS 7 and the amendment to PAS 1 in 2007.

PFRS 8, Operating Segments (effective for annual periods beginning on or after January 1, 2009)
This PFRS adopts a management approach to reporting segment information. PFRS 8, will replace PAS 14, Segment Reporting, and is
required to be adopted only by entities whose debt or equity instruments are publicly traded, or are in the process of filing with the SEC

50 Philippine Stock Exchange, Inc.


for purposes of issuing any class of instruments in a public market. The Group has only one reporting segment. Accordingly, this
amendment has no impact on the financial statements of the Group.

Philippine Interpretation IFRIC-7, Applying the Restatement Approach under PAS 29, Financial Reporting in Hyperinflationary Economies
(effective for annual periods beginning on or after March 1, 2006)
This Interpretation provides guidance on how to apply PAS 29 when an economy first becomes hyperinflationary, in particular the accounting
for deferred income tax. The Interpretation has no impact on the financial statements of the Group.

Philippine Interpretation IFRIC-8, Scope PFRS 2 Share Based Payment (effective for annual periods beginning on or after May 1, 2006)
This Interpretation requires PFRS 2 to be applied to any arrangements where equity instruments are issued for consideration which
appears to be less than fair value. As equity instruments are only issued to employees in accordance with the employee share scheme,
the Interpretation has no impact on the financial position of the Group.

Philippine Interpretation IFRIC-10, Interim Financial Reporting and Impairment (effective for annual periods beginning on or after November
11, 2006)
This Interpretation prohibits the reversal of impairment losses on goodwill and AFS equity investments recognized in the interim financial
reports even if impairment is no longer present at the annual balance sheet date. This Interpretation has no significant impact on the
financial statements of the Group.

Philippine Interpretation IFRIC-11, Group and Treasury Share Transactions (effective for annual periods beginning on or after March 1,
2007)
This Interpretation requires arrangements whereby an employee is granted rights to an entity’s equity instruments to be accounted for as
an equity-settled scheme by the entity even if (a) the entity chooses or is required to buy those equity instruments (e.g., treasury shares)
from another party, or (b) the shareholder(s) of the entity provide the equity instruments needed. It also provides guidance on how
subsidiaries, in their separate financial statements, account for such schemes when their employees receive rights to the equity instruments
of the Parent Company. The Group currently does not have any stock option plan and therefore, does not expect this interpretation to have
significant impact on its financial statements.

Philippine Interpretation IFRIC-12, Service Concession Arrangements (effective for annual periods beginning on or after January 1,
2008)
This Interpretation covers contractual arrangements arising from private entities and providing public services and is not relevant to the
Group’s current operations.

3. Significant Accounting Judgments and Estimates

The preparation of the financial statements in accordance with PFRS requires the Group to make estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future
events may occur which will cause the assumptions used in arriving at the estimates to change. The effects of any change in estimates
are reflected in the financial statements as they become reasonably determinable.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.

The following are the critical judgments and key assumptions that have a significant risk of material adjustment to the carrying amount of
assets and liabilities within the next financial year.

Judgments
(a) Fair value of financial instruments
The fair values of financial assets and financial liabilities recorded on the balance sheets are derived from quoted market prices.

Annual Report 2006 51


NOTES TO FINANCIAL STATEMENTS

Estimates
(a) Impairment losses of accounts receivable
The Group reviews its problem receivables at each reporting date to assess whether an allowance for impairment should be recorded
in the statement of income. In particular, judgment by management is required in the estimation of the amount and timing of future
cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors
and actual results may differ, resulting in future changes to the allowance.

As of December 31, 2006 and 2005, allowance for impairment losses on accounts receivable amounted to = P14.1 million and
=
P13.7 million, respectively for the Group and the Parent Company. As of December 31,2006 and 2005 accounts receivable are
carried at =
P69.7 million and =P25.4 million, respectively, for the Group and =
P55.7 million and =
P21.9 million, respectively, for the
Parent Company (see Note 8).

(b) Impairment of AFS equity investments


The Group treats AFS equity investments as impaired when there has been a significant or prolonged decline in the fair value below
its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires
judgment. The Group treats ‘significant’ generally as 20% or more and ‘prolonged’ greater than the period of 6 months. In addition,
the Group evaluates other factors, including normal volatility in share price for quoted equities and the future cash flows and the
discount factors for unquoted equities.

As of December 31, 2006 and 2005, allowance for impairment losses on AFS equity investments (included under Long-term AFS
Investments) amounted to = P14.2 million and =
P6.4 million, respectively. AFS equity investments are carried at =
P1.3 billion and
=
P1.1 billion as of December 31, 2006 and 2005, respectively.

(c) Recognition of deferred income taxes


Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against
which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that
can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Prior to 2005, the Group has been in a tax loss position. As of December 31, 2005, the Group believes that it is not highly probable
that certain temporary differences will be realized in the future. Accordingly, deferred tax assets arising mainly from NOLCO and MCIT
amounting to = P25.7 million, respectively, have not been recognized as of December 31, 2005.

(d) Present value of retirement obligation


The cost of defined benefit pension plan and other post employment benefits is determined using actuarial valuations. The actuarial
valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality
rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty.

The expected rate of return on assets of 10% was based on the market price prevailing on that date of applicable to the period over
which the obligation is to be settled. The assumed discount rates were determined using the market yields on Philippine government
bonds with terms consistent with the expected employee benefit payout as of balance sheet date. Refer to Note 22 for the details
of assumption used in the calculation.

As of December 31, 2006 and 2005, the present value of the retirement obligation amounted to =P13.6 million and =
P11.6 million,
respectively for the Parent Company and =
P3.3 million and =
P1.4 million, respectively for SCCP.

(e) Impairment of nonfinancial assets


Intangible assets and property and equipment are reviewed and tested whenever there is indication of impairment and at least at
each balance sheet date. As of December 31, 2006 and 2005, no impairment loss has been recognized.

(f) Estimated useful lives of property and equipment


The Group estimated the useful lives of its property and equipment based on the period over which the assets are expected to be
available for use. The group reviews annually the estimated useful lives based on factors that include asset ultilization, internal technical

52 Philippine Stock Exchange, Inc.


evaluation, technological changes, environmental and anticipated use of the assets. A reduction in the estimated useful lives of property
and equipment would increase the recorded depreciation and amortization expense and decrease assets. As of December 31, 2006 and
2005, the carrying value of property and equipment amounted to = P310.0 million and = P310.2 million, respectively, net of accumulated
depreciation and amortization of =
P547.0 million and =
P526.3 million, respectively (see Note 11).

4. Financial Risk Management Objectives and Policies

The Group’s principal financial instruments consist of cash and cash equivalents, short-term and long-term AFS investments, accounts
and other receivables and accounts payable and other liabilities. It is the Group’s policy not to engage in the trading of financial
instruments.

The main risks arising from the Group’s financial instruments are market risk, interest rate risk, liquidity risk, foreign currency risk and
credit risk.

a) Market risk
The Group’s market risk (the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the
price of a financial instrument) originates from its holdings of debt securities and equities. The value of a financial instrument may
change as a result of changes in interest rates, foreign currency exchanges rates, equity prices and other market changes.

The Treasurer is responsible for the identification of investments that provide a relatively stable rate of return and submit these
identified investments to the President or the BOD for approval. In addition, the Treasurer monitors the investment portfolio
performance and management’s performance associated with the investment portfolio.

b) Interest rate risk


The Group follows a prudent policy on managing its assets and liabilities so as to ensure that exposure to fluctuations in interest
rates are kept within acceptable limits. There are no floating rate financial assets and financial liabilities (see Notes 7 and 10). Term
deposits with banks carry fixed rates throughout the deposit period.

c) Liquidity risk
The investment mix as to maturity and yield are determined based on budgeted fund requirement and cash position.

d) Foreign currency risk


The Group’s policy is to maintain foreign currency exposure within acceptable limits and within existing regulatory guidelines. The
Group believes that its profile of foreign currency exposure on its assets and liabilities is within conservative limits for a financial
institution engaged in the type of business in which the Group is engaged.

The following table summarizes the Parent Company’s exposure to foreign currency exchange risk as of December 31, 2006 and
2005. Included in the table are the Parent Company’s foreign currency-dominated assets and liabilities at carrying amounts (in US
Dollar).

2006 2005
Assets
Cash and cash equivalents 146,023 150,295
Long-term AFS investments 2,407,933 2,109,250
Accounts receivable 224,490 266,828
Total assets 2,778,446 2,526,373
Liabilities
Deferred fees 79,500 65,857
Net Exposure 2,698,946 2,460,516

Annual Report 2006 53


NOTES TO FINANCIAL STATEMENTS

e) Credit risk
Credit risk refers to the potential loss arising from any failure by counterparties to fulfill their obligations, as and when they fall due.
The Group’s credit exposure arises mainly from clearing related services for securities transactions and from brokers’ membership
fees and listing maintenance fees of companies listed in the Exchange. The Group manages its credit risks on clearing related
services for securities transactions through the CTGF and CRAF as discussed in Notes 13 and 14, respectively. In addition, the
Parent Company has policies in place where brokers and listed companies with unpaid membership fees and maintenance fees are
not to continue their trading transactions in the Exchange.

Also, the Group manages credit risk by placing funds in government bonds and securities duly registered with the Registry of Scriptless
Securities under the name of the Exchange. For US dollar-denominated placements, the Exchange maintained a third party custodian
bank.

5. Fair Value Measurement

The methods and assumptions used by the Group in estimating the fair value of the financial instruments are:

AFS Investments
Investments in government securities - Fair values are generally based upon quoted market prices.
Investment in unquoted equity - Carried at cost less allowance for impairment losses due to unpredictable nature of future cash flows
and the lack of other suitable methods of arriving at a reliable fair value.

The carrying values of the Group's financial assets and financial liabilities represent their respective fair values as of balance sheet date.

6. Cash and Cash Equivalents

This account consists of:

Consolidated Parent Company


2006 2005 2006 2005
Cash on hand and in banks =
P105,846,848 =
P51,553,956 =
P38,147,056 =
P39,013,018
Cash equivalents 44,800,000 46,796,520 44,800,000 46,796,520
=
P150,646,848 =
P98,350,476 =
P82,947,056 =
P85,809,538

Cash equivalents represent short-term investments with original maturity of three months or less from dates of placement and earned
interest rates ranging from 4.75% to 5.88% in 2006, 5.60% to 14.50% in 2005 and 3.75% to 4.25% in 2004.

7. Short-term AFS Investments

This account consists of fixed rate treasury notes and bills with maturity of more than three months but less than one year and earned
annual interest rates ranging from 5.13% to 14.50% in 2006, 9.00% to 15.00% in 2005 and 8.23% to 13.88% in 2004.

As of December 31, 2006 and 2005, unrealized gain on short-term AFS investments amounted to = P4.8 million and =
P1.3 million,
= =
respectively for the Group and P4.8 million and P1.1 million, respectively for the Parent Company.

54 Philippine Stock Exchange, Inc.


8. Accounts Receivable

This account consists of receivables from:

Consolidated Parent Company


2006 2005 2006 2005
Brokers =
P40,355,907 =
P18,078,001 =
P26,037,971 =
P13,991,786
Listed companies 30,587,820 5,163,685 30,587,820 5,163,685
Data vendors 12,721,604 10,007,061 12,721,604 10,007,061
Others 51,318 5,842,336 411,414 6,477,985
83,716,649 39,091,083 69,758,809 35,640,517
Less allowance for impairment
losses 14,054,583 13,716,843 14,054,583 13,716,843
=
P69,662,066 =
P25,374,240 =
P55,704,226 =
P21,923,674

Under the Parent Company’s rule, all trading rights are pledged at its full value to secure the payment of debts due to the Parent Company
and other brokers of the Parent Company arising out of or in connection with the present or future brokers’ contracts. Based on the latest
transaction in 2006, the transacted price of a trading right amounted to = P5.0 million.

Changes in the allowance for impairment losses follow:

2006 2005
Balance at beginning of year =P13,716,843 =
P13,729,374
Provisions for impairment losses 2,124,050 –
Accounts written off (1,611,311) –
Reversals and other adjustments (174,999) (12,531)
Balance at end of year =P14,054,583 =
P13,716,843

9. Other Current Assets

This account consists of:

Consolidated Parent Company


2006 2005 2006 2005
Accrued interest receivable =P28,690,370 =
P22,249,679 =P28,007,188 =
P22,249,679
Prepaid expenses 371,759 2,073,571 343,030 2,042,409
Others 2,537,253 4,316,269 2,459,772 3,766,687
=P31,599,382 =
P28,639,519 =P30,809,990 =
P28,058,775

10. Long-term AFS Investments

This account includes peso-denominated treasury bonds, retail treasury bonds and fixed rate treasury notes amounting to =
P462.6 million
and =P553.5 million as of December 31, 2006 and 2005, respectively, and US dollar-denominated bonds amounting to US$2.8 million
and US$2.1 million with Philippine peso equivalent of =
P139.2 million and =
P112.0 million as of December 31, 2006 and 2005, respectively.

As of December 31, 2006 and 2005, net unrealized gain on long-term AFS investments of the Group and Parent Company amounted
to =
P73.3 million and =
P21.2 million, respectively.

Peso-denominated investments earned annual interest rates ranging from 10.13% to 11.88% in 2006, 9.00% to 12.37% in 2005

Annual Report 2006 55


NOTES TO FINANCIAL STATEMENTS

and 9.13% to 13.00% in 2004 while US dollar-denominated investments earned annual interest rates ranging from 8.00% to 9.88%
in 2006 and 2005 and 8.25% to 9.88% in 2004.

As of December 31, 2006 and 2005, AFS investments include investment in unlisted shares of stocks as follows:

2006 2005
Philippine Dealing System Holdings Corporation (PDS Holdings) =
P67,050,657 =
P67,050,657
The Manila Southwoods Golf Club (Note 15) 3,078,000 3,078,000
70,128,657 70,128,657
Less allowance for impairment losses 14,203,395 6,404,090
=
P55,925,262 =
P63,724,567

On April 1, 2004, the Parent Company and PDS Holdings signed a Deed of Exchange of the shares of Philippine Depository and Trust
Corporation (PDTC) owned by the Parent Company for 611,439 shares of PDS Holdings, representing 12.23% holdings, effective upon
the compliance of regulatory requirements. No gain or loss was recognized on such exchange of shares.

As of December 31, 2006 and 2005, the Parent Company recognized impairment loss on its investment in PDS Holdings amounting to
=
P7.8 million and =
P3.6 million, respectively, based on the unaudited financial statements of the investee Company as of the respective
dates.

11. Property and Equipment

The composition of and movements in property and equipment are as follow:

Consolidated
2006
Office Furniture, Donated
Computer Fixtures and Shares in a
Trading System Building Hardware and Communication Transportation Utilities and Condominium
Buildings Equipment Improvements Peripherals Equipment Equipment Others Corporation Total
Cost
Balance at January 1, 2006 =
P224,895,034 =
P168,720,776 =
P120,062,885 =
P102,222,021 =
P54,117,113 =
P9,160,630 =
P1,663,962 =
P155,690,154 =
P836,532,575
Additions – 293,606 185,845 18,314,290 969,903 1,349,644 333,234 – 21,446,522
Disposal – – – – – (935,000) – – (935,000)
Balance at December 31, 2006 224,895,034 169,014,382 120,248,730 120,536,311 55,087,016 9,575,274 1,997,196 155,690,154 857,044,097
Accumulated Depreciation
Balance at January 1, 2006 99,002,649 161,665,932 116,328,509 92,449,631 51,172,529 4,436,777 1,245,631 – 526,301,658
Depreciation 8,995,802 1,603,467 796,188 7,507,811 1,192,892 1,523,694 62,201 – 21,682,055
Disposal – – – – (934,999) – – (934,999)
Balance at December 31, 2006 107,998,451 163,269,399 117,124,697 99,957,442 52,365,421 5,025,472 1,307,832 – 547,048,714
Net Book Value as of December 31, 2006 =P116,896,583 =P5,744,983 =P3,124,033 =P20,578,869 =P2,721,595 =P4,549,802 =P689,364 =P155,690,154 =P309,995,383

56 Philippine Stock Exchange, Inc.


Consolidated
2005
Office Furniture, Donated
Computer Fixtures and Shares in a
Trading System Building Hardware and Communication Transportation Utilities and Condominium
Buildings Equipment Improvements Peripherals Equipment Equipment Others Corporation Total
Cost
Balance at January 1, 2005 =
P224,895,034 =
P168,185,764 =
P120,027,967 =
P98,927,673 =
P53,427,145 =
P7,961,870 =
P1,568,326 =
P155,690,154 =
P830,683,933
Additions – 535,012 34,918 3,794,016 689,968 2,091,760 95,636 – 7,241,310
Disposal – – – (499,668) – (893,000) – – (1,392,668)
Balance at December 31, 2005 224,895,034 168,720,776 120,062,885 102,222,021 54,117,113 9,160,630 1,663,962 155,690,154 836,532,575
Accumulated Depreciation
Balance at January 1, 2005 90,006,848 159,416,161 115,557,173 85,037,965 49,984,017 4,024,845 1,175,727 – 505,202,736
Depreciation 8,995,801 2,249,771 771,336 7,911,323 1,188,512 1,304,932 69,904 – 22,491,579
Disposal – – – (499,657) – (893,000) – – (1,392,657)
Balance at December 31, 2005 99,002,649 161,665,932 116,328,509 92,449,631 51,172,529 4,436,777 1,245,631 – 526,301,658
Net Book Value as of December 31, 2005 =
P125,892,385 =P7,054,844 =
P3,734,376 =
P9,772,390 =
P2,944,584 =
P4,723,853 =P418,331 =
P155,690,154 =
P310,230,917

Parent Company
2006
Office Furniture, Donated
Computer Fixtures and Shares in a
Trading System Building Hardware and Communication Transportation Utilities and Condominium
Buildings Equipment Improvements Peripherals Equipment Equipment Others Corporation Total
Cost
Balance at January 1, 2006 =
P224,895,034 =
P168,720,776 =
P116,400,445 =
P92,080,373 =
P53,398,511 =
P7,543,812 =
P1,663,964 =
P155,690,154 =
P820,393,069
Additions – 293,606 185,845 18,217,754 969,903 1,349,644 333,232 – 21,349,984
Balance at December 31, 2006 224,895,034 169,014,382 116,586,290 110,298,127 54,368,414 8,893,456 1,997,196 155,690,154 841,743,053
Accumulated Depreciation
January 1, 2006 99,002,649 161,665,932 112,692,270 84,368,568 50,453,946 3,444,960 1,245,633 – 512,873,958
Depreciation 8,995,802 1,603,467 770,000 6,573,316 1,192,892 1,387,330 62,199 – 20,585,006
Balance at December 31, 2006 107,998,451 163,269,399 113,462,270 90,941,884 51,646,838 4,832,290 1,307,832 – 533,458,964
Net Book Value as of December 31, 2006 =P116,896,583 =P5,744,983 =P3,124,020 =P19,356,243 =P2,721,576 =P4,061,166 =P689,364 =P155,690,154 =P308,284,089

Parent Company
2005
Office Furniture, Donated
Computer Fixtures and Shares in a
Trading System Building Hardware and Communication Transportation Utilities and Condominium
Buildings Equipment Improvements Peripherals Equipment Equipment Others Corporation Total
Cost
Balance at January 1, 2005 =
P224,895,034 =
P168,185,764 =
P116,400,445 =
P89,184,784 =
P52,708,543 =
P7,026,870 =
P1,568,328 =
P155,690,154 =
P815,659,922
Additions – 535,012 – 2,895,589 689,968 1,409,942 95,636 – 5,626,147
Disposal – – – – – (893,000) – – (893,000)
Balance at December 31, 2005 224,895,034 168,720,776 116,400,445 92,080,373 53,398,511 7,543,812 1,663,964 155,690,154 820,393,069
Accumulated Depreciation
Balance at January 1, 2005 90,006,848 159,416,161 111,929,664 77,237,373 49,265,434 3,089,846 1,175,729 – 492,121,055
Depreciation 8,995,801 2,249,771 762,606 7,131,195 1,188,512 1,248,114 69,904 – 21,645,903
Disposal – – – – – (893,000) – – (893,000)
Balance at December 31, 2005 99,002,649 161,665,932 112,692,270 84,368,568 50,453,946 3,444,960 1,245,633 – 512,873,958
Net Book Value as of December 31, 2005 =
P125,892,385 =P7,054,844 =
P3,708,175 =
P7,711,805 =
P2,944,565 =
P4,098,852 =
P418,331 =P155,690,154 =
P307,519,111

Buildings represent properties donated by Philippine Realty and Holdings Corporation (PRHC) and Ayala Land, Inc. (ALI) and a condominium
unit at the Philippine Stock Exchange (PSE) Centre in Pasig City purchased at =P5.2 million.

On September 29, 1993, PRHC donated the Parent Company’s offices at the PSE Centre in Pasig City, which exclusively house the
following: a) trading floors; b) board room; c) executive offices; d) training and education center; and e) research, administrative and
accounting offices, library and central files. Such offices were formally turned over to the Parent Company on December 31, 1994 at
a value of =
P139.5 million (see Note 17).

Annual Report 2006 57


NOTES TO FINANCIAL STATEMENTS

As provided in the Deed of Donation between PRHC and the Parent Company, the latter shall use the offices exclusively for its stock
exchange and stock trading operations for a period of at least 10 years from the date of its occupancy of said offices. However, should the
Parent Company fail to locate their trading floor at the donated property, this shall revert to PRHC without need of any further act or deed.
However, if within the 10-year period, the Parent Company’s stock trading activities shall be conducted off-floor, the trading floor established
in the condominium units or portions thereof may, at the Parent Company’s option and sole cost, be converted into additional offices for its
exclusive use.

On August 25, 1993, ALI donated to the Parent Company the sum of = P80.0 million (= P30.0 million of which was made through a transfer
of rights by the Makati Stock Exchange) to cover the cost of construction of the unit at the PSE Plaza in Ayala Avenue, Makati City and its
appurtenant parking slots which was booked under buildings, and = P155.7 million worth of condominium shares (see Note 17).

The Deed of Donation provides that the units at the PSE Plaza will house one of the trading floors of the Parent Company, the central
clearing and depository, and a number of parking slots. In addition, the Parent Company shall use the units for a period of at least 10
years beginning from the date the Parent Company occupied of the said units.

ALI established a stock condominium corporation, the Tower One and Exchange Plaza Condominium Corporation, for the purpose of
holding title to the parcel of land where the condominium is located and the common areas of the condominium. The Parent Company’s
share in the parcel of land where the condominium is located and the common areas of the condominium is classified under donated
shares in a condominium corporation. As of December 31, 2005, the condominium certificates of title in the donated condominium units
have been issued to the Parent Company.

Trading system equipment represents software and hardware costs. Software costs can no longer be separately classified. Since the net
book value of software costs is not significant as of balance sheet dates, the management believes that it is not cost effective to separate
the software costs from the trading system.

12. Investment in a Subsidiary

This account consists of investment in SCCP, a wholly owned subsidiary of the Parent Company amounting to =
P69.5 million as of
December 31, 2006 and 2005.

13. Investment of Clearing and Trade Guaranty Fund

This account consists of:

2006 2005
Principal contributions from:
Brokers
Balance at beginning of year =P124,383,973 =
P96,811,167
Net contributions (refund) during the year (4,771,252) 27,572,806
Balance at end of year 119,612,721 124,383,973
Parent Company 80,000,000 80,000,000
199,612,721 204,383,973
Accumulated interest income:
Balance at beginning of year 106,055,169 83,944,970
Interest income, net of management fee of
=
P322,627 in 2006 and = P308,598 in 2005 16,636,826 22,110,199
Balance at end of year 122,691,995 106,055,169
Unrealized gain (loss) on AFS investments 2,922,747 (349,305)
=
P325,227,463 =
P310,089,837

58 Philippine Stock Exchange, Inc.


The CTGF is a credit management tool designed to protect the market against settlement risks of clearing brokers. Each broker-member’s
contribution is equivalent to 1/1,000 of 1.00% of his total turnover value.

In order for SCCP to effectively implement its Fails Management and Buy-in/Sell-out functions, the CTGF must be adequate to cover any
unsettled trades of any broker on any settlement day. On December 7, 1999, the SEC directed the Parent Company to allocate a portion
of its income from operations as a trade guarantee expense to hasten the build up of the CTGF. Since the Parent Company had been
incurring losses from operations since 2001, no contribution has been made to CTGF from 2001 to 2004. In 2005, the Parent Company’s
income from operations amounted to = P28.7 million. However, no contribution or allocation has been made. The Parent Company will seek
clarification with the SEC on such directive in the light of the demutualization of the Parent Company in 2001.

As of December 31, 2006 and 2005, the assets of the CTGF (included under Investments of Clearing and Trade Guaranty Fund account
in the consolidated balance sheets) consist of:

2006 2005
Cash in bank =
P13,239,669 =P153,133
Short-term AFS investments 304,884,625 305,636,257
Accounts receivable 800,969 207,708
Accrued interest receivable 6,302,200 4,092,739
=
P325,227,463 =
P310,089,837

The CTGF is invested as follows:

a. Securities issued or guaranteed by the Republic of the Philippines; and

b. Such other investments as the SCCP’s BOD may approve taking into consideration the liquidity requirements of the clearing fund.

Any proceeds from the CTGF shall not be used for any purpose other than for:

a. Payment of the net money obligations of a defaulting buying member in order to settle a failed trade;

b. Buy-in of relevant securities due from a defaulting selling member in order to settle a failed trade;

c. The satisfaction of losses, liabilities and expenses of SCCP incidental to the operation of its clearing and settlement functions and the
management of the CTGF;

d. Payment of premium on any insurance policy taken for the CTGF; and

e. The return of contributions as may be determined by the BOD of SCCP.

On January 28, 2003, the BOD of SCCP approved the amendment of its rules on CTGF providing for the non-recourse of all CTGF
contributions to brokers.

On June 19, 2003, the BOD of SCCP approved the assessment of a management fee at 0.10% of the CTGF fund level as of the close of
the year for the management and administration of CTGF.

Annual Report 2006 59


NOTES TO FINANCIAL STATEMENTS

14. Investment of Credit Ring Agreement Fund

On January 29, 2001, the SEC approved SCCP’s request that all clearing brokers whose net negative exposure amounting to =P1.0 million
or below shall be exempted from the daily collateral collection being required by SCCP. The said request was made to improve the
efficiency of SCCP’s mark-to-market collateral deposit system. The said approval is subject to the following conditions:

a. SCCP, via a one-time contribution by the Credit Ring Agreement (CRA) participating clearing brokers or by the Parent Company on
behalf of its members who are also the CRA participating clearing brokers, shall set aside the amount of = P10.0 million for the sole
purpose of covering the aggregate net negative exposures of all clearing brokers participating in the CRA whose computed individual
exposure amounts to = P1.0 million and below;

b. A CRA, to be participated in and signed by all participating clearing brokers, shall be organized. A CRA is a scheme wherein the
participating brokers agree to pay up, pro rata, the deficit between the total net negative exposures of failing brokers and the amount
of =
P10.0 million special fund;

c. The size of the fund shall be reviewed quarterly by SCCP for resizing; and

d. SCCP shall promptly make the necessary amendments to existing rules and operating procedures to reflect the necessary changes.

In connection with the above conditions, the Parent Company advanced, on behalf of its brokers, =
P10.0 million to a special fund set up
by SCCP relative to the credit ring agreement described above. The said fund was invested by SCCP in short-term money market
placements. The interest income from said money market placements is recognized as income of the Parent Company.

As of December 31, 2006 and 2005, 63 active brokers signed the CRA.

On September 26, 2006, the SCCP BOD decided to revoke the CRA and implement full collateralization for all clearing members. Following
SCCP Rule 8.2.6, a 90-day notice to the clearing members was published by SCCP on October 17, 2006. Effective January 16, 2007,
the CRA was revoked and all concerned clearing members are required to fully collateralized their net negative exposure.

The SCCP’s BOD further resovled the dissolution of the Mark-to-Market Collateral Deposit Fund amounting to P10.0 million, which was
advanced by the Exchange for the purpose of covering calculated aggregate net negative exposures of clearing members participating in
CRA, and the return of the said amount to the Exchange upon effectivity of the dissolution of the CRA.

As of December 31, 2006 and 2005, the funds of CRA are invested mainly in government securities. These are classified as short-term
AFS investments with unrealized loss of =
P10,102 in 2006 and unrealized gain of =P64,145 in 2005.

15. Other Assets

This account consists of:

Consolidated Parent Company


2006 2005 2006 2005
Computer software - net =P25,632,657 =
P30,838,581 =P– =
P–
Deposits in bank 20,518,846 18,676,643 20,518,846 18,676,643
Other investment (Note 17) 10,480,181 5,247,419 10,480,181 5,247,419
Advances to brokers related to
CRAF (Notes 14 and 24) 10,000,000 10,000,000 10,000,000 10,000,000
Deferred tax assets - net (Note 21) 9,935,708 18,218,682 9,935,708 11,399,447
Retirement asset (Note 22) 318,612 2,411,456 318,612 2,411,456
Others 779,738 142,800 779,738 142,800
=
P77,665,742 =
P85,535,581 =
P52,033,085 =
P47,877,765

60 Philippine Stock Exchange, Inc.


Deposits in bank include matured investments with a local bank, which declared a bank holiday and was subsequently placed under
receivership amounting = P9.1 million in 2006 and =
P18.7 million in 2005. The Parent Company shall be repaid based on a repayment
plan approved by the Parent Company’s BOD on August 8, 2001. The payments received by the Parent Company were in accordance
with the foregoing plan.

As of December 31, 2006, deposits in bank also include =P11.4 million representing the aggregate security deposit for the surety bonds
posted by the Exchange in favor of the National Labor Relations Commission (NLRC) in connection with pending labor cases which are
on appeal. Under the Rules of the NLRC, the said amount may not be withdrawn by the Exchange until final disposition of the cases.

The movements in the computer software follow:

2006 2005
Cost
At January 1 =P36,055,809 =
P36,214,397
Adjustment – (158,588)
At December 31 36,055,809 36,055,809
Accumulated Amortization
At January 1 5,217,228 –
Amortization during the year 5,205,924 5,217,228
At December 31 10,423,152 5,217,228
Net Book Value as of December 31 =
P25,632,657 =
P30,838,581

16. Accounts Payable, Accrued Expenses and Other Current Liabilities

This account consists of:

Consolidated Parent Company


2006 2005 2006 2005
Accrued expenses =
P49,776,441 =
P35,804,035 =
P40,391,465 =
P29,796,737
Due to SEC 24,560,356 13,991,867 24,560,356 13,991,867
Accounts payable 18,516,669 2,789,804 18,876,765 4,028,893
Others 19,973,686 28,801,000 19,973,686 20,236,918
=
P112,827,152 =
P81,386,706 =
P103,802,272 =
P68,054,415

The amount Due to SEC represents license fees to operate an exchange imposed under Section 35 of the SRC entitled “Additional Fees of
Exchanges.”

As of December 31, 2006 and 2005, other current liabilities include funds held in trust for certain brokers amounting to =
P8.6 million and
=
P13.3 million, respectively, to cover certain expenses.

17. Donated Capital

This account consists of donations from:

2006 2005
ALI (Note 11) =
P235,690,154 =
P235,690,154
PRHC (Note 11) 139,542,000 139,542,000
FBDC (Note 15) 10,480,181 5,247,419
United States Agency International Development 1,925,250 1,925,250
=
P387,637,585 =
P382,404,823

Annual Report 2006 61


NOTES TO FINANCIAL STATEMENTS

On November 12, 2002, Fort Bonifacio Development Corporation (FBDC) and the Parent Company executed a Definitive Agreement with
the following salient terms and conditions: (i) the Parent Company agrees to relocate its headquarters, majority of its management
offices and its unified trading operations in equity securities for the National Capital Region to the Bonifacio Global City; (ii) Cresent West
Development Corporation (CWDC) shall be the corporate vehicle to which FBDC shall contribute the land as additional capital and the
shares of which shall eventually be donated to the Parent Company; and (iii) the FBDC and the Parent Company agree to develop the
land and construct the building that will house the Parent Company’s headquarters, majority of its management offices and its unified
trading operations in equity securities for the National Capital Region.

Based on such agreement, all outstanding shares of stocks of CWDC shall be donated by FBDC to the Parent Company on the following
dates:

Date of Donation %/Number of Shares to be Donated


January 7, 2005 14.32% or 5,247,419 shares
January 7, 2006 14.28% or 5,232,762 shares
January 7, 2007 14.28% or 5,232,762 shares
January 7, 2008 14.28% or 5,232,762 shares
January 7, 2009 14.28% or 5,232,762 shares
January 7, 2010 14.28% or 5,232,762 shares
January 7, 2011 14.28% or 5,232,762 shares

Following the Definitive Agreement, on January 7, 2006 and 2005, FBDC executed a Deed of Conditional Donation in favor of the Parent
Company, which covers the transfer of 5,232,762 shares and 5,247,419 shares of CWDC, respectively, for =P10.5 million, such shares
received were classified as Other Investment (see Note 15).

Pursuant to the Definitive Agreement, FBDC and the Exchange agreed on January 4, 2007 to disregard, for the third tranche, the scheduled
donation above and to cause the conveyance and donation of 5,232,762 shares in CWDC to the Exchange on June 30, 2007.

18. Compensation and Other Related Staff Costs

This account consists of:

Consolidated Parent Company


2006 2005 2004 2006 2005 2004
Salaries and wages =P76,529,053 =
P59,709,918 = P57,124,155 =P70,484,377 =
P56,306,890 = P55,055,304
Retirement and separation
expense (Note 22) 3,720,225 30,916,130 480,271 3,076,344 30,916,130 480,271
Other employee benefits 36,895,965 21,809,639 17,338,360 37,117,425 20,544,911 16,588,720
=P117,145,243 =
P112,435,687 =
P74,942,786 =P110,678,146 =
P107,767,931 =
P72,124,295

19. Occupancy Costs

This account consists of:

Consolidated Parent Company


2006 2005 2004 2006 2004 2005
Utilities =P18,683,889 =
P16,263,404 = P15,263,054 =P17,796,857 = P15,903,404 =
P14,951,054
Condominium dues 9,516,601 9,358,096 9,386,983 9,516,601 9,358,096 9,386,983
Security and janitorial services 7,808,945 6,767,637 6,289,582 7,808,945 6,767,637 6,289,582
=P36,009,435 =
P32,389,137 = P30,939,619 =P35,122,403 = P32,029,137 =
P30,627,619

62 Philippine Stock Exchange, Inc.


20. Equity

The Parent Company has an authorized capital stock of 36,800,000 shares at a par value of =P1.00 per share. As of December 31,
2006, 2005 and 2004 issued and outstanding shares amounted to = P15.3 million (equivalent to 15,277,513 shares).

In 2006, the Parent Company’s BOD appropriated portion of its retained earnings amounting to =
P3.0 million to cover cases filed against
the Parent Company, its directors and/ or officers (Note 26).

Details of the Parent Company’s dividend distribution follow:

Dividend
Date of Declaration Per Share Total Amount Record Date Payment Date
February 18, 2004 =
P16.00 =
P244,440,064 March 4, 2004 March 9, 2004
February 9, 2005 5.00 76,387,525 February 28, 2005 March 15, 2005
February 22, 2006 5.76 87,998,429 March 9, 2006 March 24, 2006

On February 14, 2007, the BOD approved the declaration of cash dividend amounting to =
P8.80 per share totaling to =
P134.4 million, to
stockholders of record as of March 1, 2007 and payable on March 15, 2007.

As discussed in Note 2, cumulative effect of change in accounting for financial instruments - PAS 39 reflected on January 1,2005
balance of retained earnings unappropriated represents:

Reversal of excess accretion of discount on short-term


investments recognized under straight-line method based in
GAAP applicable prior to January 1, 2005 =
P233,597

Reversal of excess amortization of premium on long-term


investments recognized under straight-line method based on
GAAP applicable prior to January 1, 2005 217,380
=
P450,977

21. Income Taxes

Republic Act No. 9337, An Act Amending National Internal Revenue Code, provides that effective July 1, 2005, the RCIT rate shall be 35%
until December 31, 2008. Starting January 1, 2009, the RCIT rate shall be 30%. However, such amendment was subject to restraining
order which was subsequently lifted on October 28, 2005 and was in effect starting November 1, 2005.

The provision for income tax consists of:

Consolidated Parent Company


2006 2005 2004 2006 2005 2004
Corporate =
P35,206,404 =
P– =
P– =
P17,993,248 =
P– =
P–
Final 23,432,559 21,078,427 18,286,051 23,068,693 20,944,661 18,207,068
Deferred 1,647,946 (4,271,333) (2,930,102) (5,171,289) 2,547,902 (2,930,102)
MCIT – 4,014,725 1,735,147 – 3,521,981 1,715,104
=
P60,286,909 =
P20,821,819 = P17,091,096 =
P35,890,652 = P27,014,544 = P16,992,070

Annual Report 2006 63


NOTES TO FINANCIAL STATEMENTS

The components of the net deferred tax assets (included under the Other Assets account in the balance sheets) are as follows:

Consolidated Parent Company


2006 2005 2006 2005
Deferred tax asset on:
Allowance for impairment losses =
P4,919,104 =
P4,800,895 =
P4,919,104 =
P4,800,895
Unrealized foreign exchange losses 4,857,514 1,672,861 4,857,514 1,672,861
Unamortized past-service costs 270,604 420,746 270,604 420,746
NOLCO – 11,655,403 – 5,348,955
MCIT – 512,787 – –
10,047,222 19,062,692 10,047,222 12,243,457
Deferred tax liability on retirement asset (111,514) (844,010) (111,514) (844,010)
=
P9,935,708 =
P18,218,682 =
P9,935,708 =
P11,399,447

As of December 31, 2005, the Parent Company did not recognize deferred tax assets on the following temporary differences:

NOLCO =
P57,700,263
MCIT 6,635,028
=
P64,335,291

Details of NOLCO of the Parent Company and SCCP follow:

Inception Year Amount Used Balance Expiry Date


Parent Company
2003 =
P22,730,168 (=
P22,730,168) =
P– 2006
2004 50,252,824 (50,252,824) – 2007
72,982,992 (72,982,992) –
SCCP
2003 4,911,994 (4,911,994) – 2006
2004 13,106,431 (13,106,431) – 2007
18,018,425 (18,018,425) –
=
P91,001,417 (=
P91,001,417) =
P–

Details of MCIT of the Parent Company and SCCP follow:

Inception Year Amount Used Balance Expiry Date


Parent Company
2003 =
P1,397,943 (=
P1,397,943) =
P– 2006
2004 1,715,104 (1,715,104) – 2007
2005 3,521,981 (3,521,981) – 2008
6,635,028 (6,635,028) –
SCCP
2004 20,043 (20,043) – 2007
2005 492,744 (492,744) – 2008
512,787 (512,787) –
=
P7,147,815 (=
P7,147,815) =
P–

Current tax regulations No. 10-2002 defines expenses to be classified as entertainment, amusement and recreation (EAR) expenses
and sets a limit for the amount that is deductible for tax purposes. EAR expenses are limited to 1% of net revenue for sellers of services.
EAR expenses incurred by the Parent Company amounted to = P0.6 million in 2006, =P0.5 million in 2005 and = P0.6 million in 2004,
respectively, by the Group and = P0.5 million in 2006 and 2005 and = P0.6 million in 2004, respectively, by the Parent Company.

64 Philippine Stock Exchange, Inc.


The reconciliation of the statutory income tax rate to the effective income tax rate follows:

Consolidated Parent Company


2006 2005 2004 2006 2005 2004
Statutory income tax rate 35.00% 32.50% 32.00% 35.00% 32.50% 32.00%
Tax effects of:
Nonrecognition of deferred tax
assets on NOLCO and
MCIT in prior years (9.17) – – (12.21) – –
Interest income subjected
to final tax (5.63) (12.00) (33.79) (7.37) (12.07) (33.34)
Nondeductible expense 0.71 – – 1.23 – –
Write-down of deferred
tax assets – – 50.89 – – 44.65
Others (0.30) (5.69) (5.55) (0.30) 0.88 (5.85)
Effective income tax rate 20.61% 14.81% 43.55% 16.35% 21.31% 37.46%

22. Retirement Plan

The Parent Company has a funded while SCCP has an unfunded, noncontributory defined benefit retirement plan covering all their regular
employees. The benefits are consolidated based on years of service and compensation per year of credited service. The Parent Company’s
annual contribution to the retirement plan consists of a payment covering the current service cost plus a payment toward funding the
actuarial accrued liability.

The Parent Company’s retirement fund is being managed by a local bank.

The principal actuarial assumptions used in determining retirement liability as of January 1, 2006 and 2005 are shown below:

Parent Company SCCP


2006 2005 2006 2005
Retirement age 60 60 60 60
Average remaining working life 16.2 25.4 26.0 26.0
Discount rate 12.00% 14.00% 7.20% 14.00%
Expected rate of return on assets 10.00% 12.00% – –
Future salary increases 6.00% 6.00% 10.00% 10.00%

As of December 31, 2006 and 2005, discount rates used are 7.40% and 12.00%, respectively by the Parent Company and 7.20% and
12.00%, respectively by SCCP.

The overall expected rate of return on plan assets is determined based on the market prices prevailing on that date applicable to the
period over which the obligation is to be settled.

Actuarial valuation of the Parent Company is generally made every year. The latest actuarial valuation studies of the retirement plan
was made on December 31, 2006.

Annual Report 2006 65


NOTES TO FINANCIAL STATEMENTS

The retirement asset (included under Other Assets) recognized in the balance sheets of the Parent Company as of December 31, 2006
and 2005 are as follows:

2006 2005
Present value of the obligation =
P13,582,821 =P11,559,765
Fair value of plan assets (5,580,768) (13,435,952)
Present value of unfunded obligation
(prepaid retirement asset) 8,002,053 (1,876,187)
Unrecognized actuarial losses (8,320,665) (535,269)
Net retirement asset (=
P318,612) (=
P2,411,456)

The net unfunded retirement obligation recognized in the balance sheets (included under Accounts payable, accrued expenses and
other current liabilities) of SCCP as of December 31, 2006 and 2005 are as follows:

2006 2005
Present value of the obligation =
P3,252,779 =
P1,384,460
Unrecognized actuarial losses (1,738,282) (513,844)
Net unfunded retirement obligation =
P1,514,497 P870,616

The movements in the retirement asset of the Parent Company as of December 31, 2006 and 2005 are as follows:

2006 2005
Balance, beginning of year (=
P2,411,456) (=
P2,527,586)
Retirement expense 2,092,844 1,916,130
Contributions paid – (1,800,000)
Balance, end of year (=
P318,612) (=
P2,411,456)

The movements in the unfunded retirement obligation recognized in SCCP’s balance sheets follows:

2006 2005
Balance, beginning of year =
P870,616 =
P1,678,784
Retirement expense 643,881 401,698
Benefits paid – (1,209,866)
Balance, end of year =
P1,514,497 =
P870,616

Changes in the present value of the defined benefit obligation are as follows:

Parent Company SCCP


2006 2005 2006 2005
Balance, beginning of year =
P11,559,765 =P13,947,220 =
P1,384,460 =
P1,476,504
Interest cost 1,387,172 1,952,611 166,135 206,711
Current service cost 2,049,267 2,012,347 463,308 197,172
Benefits paid (8,951,101) (6,874,893) – (1,209,866)
Actuarial loss 7,537,718 522,480 1,238,876 713,939
Balance, end of year =
P13,582,821 =P11,559,765 =
P3,252,779 =
P1,384,460

66 Philippine Stock Exchange, Inc.


The movements in the fair value of plan assets recognized by the Parent Company follow:

2006 2005
Balance, beginning of year =
P13,435,952 =P17,073,569
Expected return on plan assets 1,343,595 2,048,828
Contribution paid by employer – 1,800,000
Benefits paid (8,951,101) (6,874,893)
Actuarial loss (247,678) (611,552)
Balance, end of year =
P5,580,768 =P13,435,952

The retirement expense included in Compensation and Other Related Staff Costs in the statements of income are as follows:

Consolidated Parent Company


2006 2005 2004 2006 2005 2004
Current service cost =P2,512,575 =P2,209,519 = P1,914,474 =P2,049,267 =P2,012,347 =P1,914,474
Interest cost 1,553,307 2,159,322 1,463,436 1,387,172 1,952,611 1,463,436
Expected return on plan assets (1,343,595) (2,048,828) (1,645,527) (1,343,595) (2,048,828) (1,645,527)
Net actuarial loss
(gain) recognized 14,438 (2,185) (1,252,112) – – (1,252,112)
=
P2,736,725 =
P2,317,828 =
P480,271 =
P2,092,844 =
P1,916,130 =
P480,271

The actual return on the plan assets of the Parent Company amounted to =
P0.5 million, =
P1.6 million and =
P2.0 million in 2006, 2005 and
2004, respectively.

The major categories of the Parent Company’s plan assets as a percentage of the fair value of total plan assets as of December 31, 2006
and 2005 are as follows:

2006 2005
Debt instruments 90.55% 96.45%
Equity instruments 7.17% 1.52%
Other assets 2.28% 2.03%

Amounts for the current and previous years are as follows:

Parent Company SCCP


2006 2005 2006 2005
Present value of the obligation =
P13,582,821 = P11,559,765 =
P3,252,779 =
P1,384,460
Fair value of plan assets (5,580,768) (13,435,952) – –
Deficit (excess) of assets 8,002,053 (1,876,187) 3,252,779 1,384,460
Experience adjustment on plan liabilities 2,655,360 832,982 393,273 –
Experience adjustment on plan assets 2,750,100 (854,146) – –

On January 14, 2007, the Parent Company’s BOD approved the additional contribution to the retirement fund of =P6.8 million as
recommended by the independent actuary. This amount has been remitted to the retirement fund on February 5, 2007. The Parent
Company does not intend to further contribute to the retirement fund in 2007.

On September 12, 2005, the Parent Company’s BOD approved a special separation package to regular employees as of that date
subject to final approval of the Parent Company’s president. Accordingly, in 2006 and 2005, the Parent Company recognized retirement
and additional separation expenses (included in Compensation and Other Related Staff Costs in the statement of income) amounting to
=
P1.0 million and = P29.0 million, respectively.

Annual Report 2006 67


NOTES TO FINANCIAL STATEMENTS

23. Earnings Per Share

Basic earnings per share were computed as follows:

2006 2005 2004


a. Net income attributable to the equity holders =
P232,295,515 =
P119,805,255 =
P22,596,301
of the Parent Company
b. Weighted average number of outstanding
common shares 15,277,513 15,277,513 14,771,054
c. Earnings per share (a/b) =
P15.21 =
P7.84 =
P1.53

24. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are
subjected to common control or common significant influence. Related parties may be individuals or corporate entities. Related parties
include brokers that are stockholders of the Parent Company. The Parent Company, in its normal course of business, has transactions
with related parties. Transactions between related parties are based on terms similar to those offered to non-related parties.

The year-end balances in respect of related parties included in the balance sheets are as follows:

2006 2005
Accounts and other receivables:
Brokers - net of allowance for impairment losses of
=
P4,361,370 in 2006 and = P4,351,970 in 2005 (Note 8) =P18,848,064 =
P3,529,882
Advances to brokers related to CRAF (Notes 14 and 15) 10,000,000 10,000,000

Other related party transactions include advance payments made by the Parent Company on certain administrative expenses of SCCP
such as utilities, supplies, hardware and software maintenance, and other employee benefits, which are subsequently billed to and
collected from SCCP. As of December 31, 2006 and 2005, accounts and other receivables of the Parent Company from SCCP are
eliminated.

The income in respect of the brokers included in the statements of income follows:

2006 2005 2004


Membership fees =
P73,273,266 =
P53,457,153 =
P34,285,292
Interest income – 467,156 504,771
Miscellaneous income – – 16,000

Compensation of key management personnel (covering officer positions starting from Assistant Vice President and up) included under
Compensation and Other Related Staff Costs in the statements of income of the Parent Company follows:

Consolidated Parent Company


2006 2005 2004 2006 2005 2004
Short-term employee
benefits =P25,313,391 =
P23,239,256 =
P19,090,748 =P22,555,374 =
P20,542,308 =
P18,694,058
Separation benefits 2,675,527 5,279,398 9,277 2,031,646 4,877,700 –
Post-employment pension
and medical benefits 362,645 2,281,485 – 362,645 2,281,485 –
=
P28,351,563 =
P30,800,139 =
P19,100,025 =
P24,949,665 =
P27,701,493 =
P18,694,058

68 Philippine Stock Exchange, Inc.


Short-term employee benefits include salaries, paid annual leave, vacation and sick leave, profit sharing and bonuses, and non-
monetary benefits.

25. Segment Reporting

PAS 14, Segment Reporting, requires that a public business enterprise report financial and descriptive information about its reportable
segments. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources among operating segments. The Group has one reportable business segment
which is the equity securities market. The equity securities market provides trading, clearing, depository and information services for
the equity market. The Group also has one geographical segment and derives all its revenues from domestic operations. The financial
information about the sole business segment is presented in the financial statements.

26. Contingencies

In 2006, the Parent Company’s BOD appropriated portion of its retained earnings amounting to = P3.0 million to cover cases filed against
the Parent Company, its directors and/or officers. As of December 31, 2006, the said cases are still pending before the courts and quasi-
judicial agencies. The amount of the appropriation which is based on available relevant information as of December 31, 2006, will be
reassessed periodically to reflect material developments made known to the Exchange.

27. Other Matters

· On May 31, 2004, due to the confusion as to the opening price of shares of stock of Music Semiconductors Corporation (MUSX) as
a result of the quasi-reorganization undertaken by the said company, the Parent Company was constrained to cancel the transactions
of MUSX shares that were matched as of the time the Parent Company declared a trading halt. The Parent Company’s BOD subsequently
constituted an Ad Hoc Committee to investigate the matter and to recommend a proper course of action. After exhaustive proceedings,
the Committee concluded that in order to maintain an orderly market, the Parent Company should negotiate a settlement agreement
with the affected buyers without admission of liability on the part of the Parent Company. The BOD adopted this recommendation, and
the Parent Company’s management implemented the resulting BOD resolution. The amount paid to affected buyers as a result of the
fore going amounted to =P3.7 million.

· Operating income - Miscellaneous

This account mainly consists of trading and listing related fines and penalties such as late payment, late submission of requirements,
non-compliance and non-disclosure of listed companies.

Annual Report 2006 69


Market Integrity Board and Committees

Market Integrity Board • Performs oversight functions over financial


• Reviews, affirms, reverses or modifies management as well as management of credit,
decisions or actions of the Market Regulation market, liquidity, operational, legal and other
Division (MRD); risks of the Exchange, and crisis management;

• Exercises oversight authority over the • Develops a transparent financial management


regulatory activities of the MRD; system that will ensure the integrity of internal
control activities throughout the company
• Initiates studies to enhance rules relating to through a step-by-step procedure and policies
audit, compliance and surveillance, adaptation handbook for the entire organization;
for local conditions of best practices on
governance among trading participants and • Checks all financial reports against its
other measures necessary to strengthen the compliance with the internal financial
Self-Regulatory Organization functions of the management handbook, pertinent accounting
Exchange; standards, and regulatory requirements;

• Issues its internal rules of procedures. • Performs oversight and direct interface
functions with the internal and external
Audit Committee auditors. Passes for review and comment all
• Monitors and evaluates the adequacy and reports from internal and external auditors for
effectiveness of the Exchange’s internal control PSE as well as those from regulatory bodies
system; (e.g., SEC, BIR, etc.). Submits a summary
report to the Board;
• Ensures that a review of the effectiveness of
material internal controls including • Performs oversight functions over the
financial,operational and compliance controls compliance program and requests a report or
and risk management is conducted at least inquires from the compliance officer on any
annually. Such review can be carried out by issue which he/she has identified.
the internal and/or external auditor;

• Pre-approves all audit plans, scope and


frequency one month before the conduct of
external audit;

70 The Philippine Stock Exchange, Inc.


Floor Trading & Arbitration Committee* • Designates the amount of remuneration, which
• Enforced the trading rules; shall be in a sufficient level to attract and retain
directors and officers who are needed to run
• Oversaw the daily trading operations and the Exchange successfully;
found out ways and means to maintain a level
playing field among all trading participants • Develops a form on full business interest
through the formulation or amendment of disclosure as part of the pre-employment
policies with the Board’s approval; requirements for all incoming officers, which,
among others, compel all officers to declare,
• Recommended remedial actions as it saw fit under the penalty of perjury, all their existing
or necessary under the circumstances; business interests or shareholdings that may
Authorized to recommend the suspension of directly or indirectly conflict with the
trading activities in the event of any emergency performance of their duties once hired;
that would be detrimental to the whole trading
operations; • Disallows any director to decide his or her own
remuneration;
*Note: Functions transferred to Market Regulation Division
effective October 2006. • Provides in the Exchange’s annual reports,
information and proxy statements a clear,
Nominations & Elections Committee concise and understandable disclosure of
• Evaluates and screens all candidates, both compensation of executive officers for the
broker and non-broker, nominated to become previous fiscal year and the ensuing year;
members of the Board of Directors;
• Reviews the existing Human Resources
• Nominates endorsed candidates for Development or Personnel Handbook to
non-broker directors; strengthen provisions on conflict of interest,
salaries and benefits policies, promotion and
• Formulates and issues guidelines in the career advancement directives and compliance
determination of the appropriate number of of personnel concerned with all statutory
directorships, which a member of the Board requirements that must be periodically met in
may hold. The optimum number is related to their respective posts.
the capacity of the director to meet his/her
responsibilities diligently and effectively and to
safeguard against conflicts of interest.

Compensation and Remuneration


Committee
• Establishes a formal and transparent
procedure for developing a policy on executive
remuneration and for fixing the remuneration
packages of corporate officers and directors,
and provides oversight over remuneration of
senior management and other key personnel
ensuring that compensation is consistent with
the Exchange’s culture, strategy and control
environment;

Annual Report 2006 71


List of Companies & Issues
(As of end January 2007)

NAME OF STOCK STOCK PAR NAME OF STOCK STOCK PAR


SYMBOL VALUE SYMBOL VALUE
FINANCIAL SECTOR Trans-Asia Oil and Energy
Banks Development Corporation TA 1.00
Asiatrust Development Bank, Inc. ASIA 10.00
Banco de Oro Universal Bank BDO 10.00 Food, Beverage & Tobacco
Banco Filipino Savings & Mortgage Bank BF 100.00 Alaska Milk Corporation AMC 1.00
Bank of the Philippine Islands BPI 10.00 Bogo Medellin Milling Company BMM 10.00
China Banking Corporation CHIB 100.00 CADP Group Corporation CAC 1.00
Chinatrust (Philippines) Commercial Central Azucarera de Tarlac CAT 10.00
Bank Corporation CHTR 10.00 Cosmos Bottling Corporation CBC 1.00
Citystate Savings Bank, Inc. CSB 10.00 Ginebra San Miguel, Inc. GSMI 1.00
Export and Industry Bank, Inc. EIB 0.25 Jollibee Foods Corporation JFC 1.00
Equitable PCI Bank EPCI 10.00 Liberty Flour Mills, Inc. LFM 10.00
Metropolitan Bank & Trust Company MBT 20.00 Pancake House, Inc. PCKH 1.00
Philippine Bank of Communications PBC 100.00 San Miguel Pure Foods Company, Inc. "A" PF 10.00
Philippine National Bank PNB 40.00 San Miguel Pure Foods Company, Inc. "B" PFB 10.00
Philippine Savings Bank PSB 10.00 RFM Corporation RFM 2.00
Philippine Trust Company PTC 10.00 Roxas Holdings, Inc. ROX 1.00
Rizal Commercial Banking Corporation RCB 10.00 Swift Foods, Inc. SFI 1.00
Security Bank Corporation SECB 10.00 San Miguel Corporation "A" SMC 5.00
Union Bank of the Philippines UBP 10.00 San Miguel Corporation "B" SMCB 5.00
Tanduay Holdings, Inc. TDY 1.00
Other Financial Institutions Philippine Tobacco Flue-Curing
ATR KimEng Financial Corporation ATRK 1.00 and Redrying Corporation TFC 1.00
Bankard, Inc. BKD 1.00 Alliance Tuna International, Inc. TUNA 1.00
CitisecOnline.com, Inc. COL 1.00 Universal Robina Corporation URC 1.00
First Abacus Financial Holdings Corporation FAF 1.00 Vitarich Corporation VITA 1.00
Filipino Fund, Inc. FFI 1.00 Victorias Milling Company, Inc. VMC 10.00
First Metro Investment Corporation FMIC 10.00
Manulife Financial Corporation MFC - Construction, Infrastructure
PCI Leasing and Finance, Inc. PCIL 1.00 & Allied Services
The Philippine Stock Exchange, Inc. PSE 1.00 AGP Industrial Corporation "A" AGP 6.00
Sun Life Financial, Inc. SLF - AGP Industrial Corporation "B" AGPB 6.00
iVantage Corporation V 1.00 Concrete Aggregates Corporation "A" CA 10.00
Concrete Aggregates Corporation "B" CAB 10.00
INDUSTRIAL SECTOR Southeast Asia Cement Holdings, Inc. CMT 1.00
Electricity, Energy, Power & Water EEI Corporation EEI 1.00
PNOC-Energy Development Corporation EDC 1.00 Fortune Cement Corporation FCC 1.00
First Gen Corporation FGEN 1.00 Federal Chemicals, Inc. FED 1.00
First Philippine Holdings Corporation FPH 10.00 Holcim Philippines, Inc. HLCM 1.00
Manila Electric Company "A" MER 10.00 Mariwasa Manufacturing Corporation MMI 1.00
Manila Electric Company "B" MERB 10.00 Philippine National Construction Corporation PNC 10.00
Manila Water Company, Inc. MWC 1.00 Republic Cement Corporation RCM 1.00
Petron Corporation PCOR 1.00 Supercity Realty Development Corporation SRDC 1.00
East Asia Power Resources Corporation PWR 1.00 Sanitary Wares Manufacturing Corporation SWM 1.00
Salcon Power Corporation SPC 1.00

72 The Philippine Stock Exchange, Inc.


NAME OF STOCK STOCK PAR NAME OF STOCK STOCK PAR
SYMBOL VALUE SYMBOL VALUE
Chemicals Balabac Resources
Chemical Industries of the Philippines CIP 10.00 & Holdings Corporation, Inc. BAL 1.00
Chemrez Technologies, Inc. COAT 1.00 Bacnotan Consolidated Industrial, Inc. BCI 10.00
Euro-Med Laboratories Philippines, Inc. EURO 1.00 BHI Holdings, Inc. BH 100.00
Interphil Laboratories, Inc. "A" ILI 1.00 Benpres Holdings Corporation BPC 1.00
Interphil Laboratories, Inc. "B" ILIB 1.00 City Resources (Philippines) Corporation CRC 1.00
LMG Chemicals Corporation LMG 1.00 DMCI Holdings, Inc. DMC 1.00
Metro Alliance Holdings Fil-Estate Corporation FC 1.00
& Equities Corporation "A" MAH 1.00 Filinvest Development Corporation FDC 1.00
Metro Alliance Holdings F & J Prince Holdings Corporation "A" FJP 1.00
& Equities Corporation "B" MAHB 1.00 F & J Prince Holdings Corporation "B" FJPB 1.00
Mabuhay Vinyl Corporation MVC 1.00 Forum Pacific, Inc. FPI 1.00
Pryce Corporation PPC 1.00 Global Business Holdings, Inc. GBH 50.00
House of Investments, Inc. HI 1.50
Diversified Industrials JG Summit Holdings, Inc. JGS 1.00
Active Alliance, Inc. AAI 1.00 Jolliville Holdings Corporation JOH 1.00
Filsyn Corporation "A" FYN 5.00 Keppel Philippines Holdings, Inc. "A" KPH 1.00
Filsyn Corporation "B" FYNB 5.00 Keppel Philippines Holdings, Inc. "B" KPHB 1.00
GEOGRACE Resources Philippines, Inc. GEO 1.00 Lodestar Investment
Macondray Plastics, Inc. MRAY 1.00 Holdings Corporation "A" LIHC 1.00
Picop Resources, Inc. PCP 1.00 Lodestar Investment
Panasonic Manufacturing Holdings Corporation "B" LIHCB 1.00
Philippines Corporation PMPC 1.00 Medco Holdings, Inc. MED 1.00
Steniel Manufacturing Corporation STN 1.00 Mabuhay Holdings Corporation MHC 1.00
Magnum Holdings, Inc. MHI 1.00
HOLDING FIRMS SECTOR Multitech Investments Corporation MIC 1.00
Asia Amalgamated Holdings AAA 1.00 UEM Development Philippines, Inc. MK 1.00
Atok-Big Wedge Company, Inc. "A" AB 1.00 Pacifica, Inc. "A" PA 0.005
Atok-Big Wedge Company, Inc. "B" ABB 1.00 Pacifica, Inc. "B" PAB 0.005
Abacus Consolidated Resources Prime Orion Philippines, Inc. POPI 1.00
and Holdings, Inc. "A" ABA 0.01 Prime Media Holdings, Inc. PRIM 1.00
Abacus Consolidated Resources Republic Glass Holdings Corporation REG 1.00
and Holdings, Inc. "B" ABAB 0.01 Solid Group, Inc. SGI 1.00
Ayala Corporation AC 50.00 Sinophil Corporation SINO 1.00
Alsons Consolidated Resources, Inc. ACR 1.00 SM Investments Corporation SM 10.00
Aboitiz Equity Ventures, Inc. AEV 1.00 South China Resources, Inc. SOC 1.00
Alliance Global Group, Inc. AGI 1.00 Seafront Resources Corporation SPM 1.00
AJO.net Holdings, Inc. AJO 0.10 Unioil Resources
A. Soriano Corporation ANS 1.00 & Holdings Company, Inc. UNI 1.00
APC Group, Inc. APC 1.00 Vivant Corporation VVT 1.00
Alcorn Gold Resources Corporation APM 0.01 Wise Holdings, Inc. "A" WHI 1.00
Anglo Philippine Holdings Corporation APO 1.00 Wise Holdings, Inc. "B" WHIB 1.00
Aries Prime Resources, Inc. APR 1.00 Wellex Industries, Inc. WIN 1.00
ATN Holdings, Inc. "A" ATN 1.00 Zeus Holdings, Inc. ZHI 1.00
ATN Holdings, Inc. "B" ATNB 1.00
PAL Holdings, Inc. B 1.00

Annual Report 2006 73


List of Companies & Issues

NAME OF STOCK STOCK PAR NAME OF STOCK STOCK PAR


SYMBOL VALUE SYMBOL VALUE
PROPERTY SECTOR Zipporah Realty Holdings, Inc. ZIP 1.00
Ayala Land, Inc. ALI 1.00
Araneta Properties, Inc. ARA 1.00 SERVICES SECTOR
Belle Corporation BEL 1.00 Media
A. Brown Company, Inc. BRN 1.00 ABS-CBN Broadcasting Corporation ABS 1.00
Cityland Development Corporation CDC 1.00 Manila Bulletin Publishing Corporation MB 1.00
Crown Equities, Inc. CEI 1.00 Manila Broadcasting Company MBC 1.00
Cebu Holdings, Inc. CHI 1.00
C & P Homes, Inc. CMP 1.00 Telecommunications
Cebu Property Ventures Digital Telecommunications Phils., Inc. DGTL 1.00
& Development "A" CPV 1.00 Globe Telecom, Inc. GLO 50.00
Cebu Property Ventures Liberty Telecoms Holdings, Inc. LIB 1.00
& Development "B" CPVB 1.00 Pilipino Telephone Corporation PLTL 1.00
Cyber Bay Corporation CYBR 1.00 Philippine Telegraph
EIB Realty Development, Inc. EIBR 1.00 & Telephone Corporation PTT 1.00
Empire East Land Holdings, Inc. ELI 1.00 Philippine Long Distance
EDSA Properties Holdings, Inc. EPHI 1.00 Telephone Company "Common" TEL 5.00
Ever Gotesco Resources & Holdings, Inc. EVER 1.00
Suntrust Home Developers, Inc. SUN 1.00 Information Technology
Filinvest Land, Inc. FLI 1.00 Boulevard Holdings, Inc. BHI 0.10
Gotesco Land, Inc. "A" GO 1.00 Diversified Financial Network, Inc. DFNN 1.00
Gotesco Land, Inc. "B" GOB 1.00 Imperial Resources, Inc. "A" IMP 0.01
Highlands Prime, Inc. HP 1.00 Imperial Resources, Inc. "B" IMPB 0.01
Interport Resources Corporation "A" IRC 0.01 Ionics, Inc. ION 1.00
Interport Resources Corporation "B" IRCB 0.01 IPVG Corporation IPVG 1.00
Keppel Philippines Properties, Inc. KEP 1.00 Island Information & Technology, Inc. IS 0.01
Kuok Philippines Properties, Inc. KPP 1.00 ISM Communications Corporation ISM 0.01
City & Land Developers, Inc. LAND 1.00 Music Semiconductors Corporation MUSX 1.00
Fil-Estate Land, Inc. LND 1.00 Nextstage, Inc. NXT 1.00
Marsteel Consolidated, Inc. "A" MC 0.01 Transpacific Broadband Group
Marsteel Consolidated, Inc. "B" MCB 0.01 International, Inc. TBGI 1.00
Megaworld Corporation MEG 1.00 Philweb Corporation WEB 0.01
Metro Pacific Corporation MPC 1.00
Metro Pacific Investments Corporation MPI 1.00 Transportation Services
MRC Allied Industries, Inc. MRC 1.00 Asian Terminals, Inc. ATI 1.00
Philippine Estates Corporation PHES 1.00 Aboitiz Transport System
Primetown Property Group, Inc. PMT 1.00 (ATSC) Corporation ATS 1.00
Polar Property Holdings Corporation PO 1.00 International Container Terminal
Primex Corporation PRMX 1.00 Services, Inc. ICT 1.00
Robinsons Land Corporation RLC 1.00 Keppel Philippines Marine, Inc. KPM 1.00
Philippine Realty & Holdings Corporation RLT 1.00 Lorenzo Shipping Corporation LSC 1.00
SM Development Corporation SMDC 1.00
San Miguel Properties, Inc. SMP 10.00 Hotel & Leisure
SM Prime Holdings, Inc. SMPH 1.00 Acesite (Philippines) Hotel Corporation DHC 1.00
Universal Rightfield Property Holdings, Inc. UP 1.00 Grand Plaza Hotel Corporation GPH 10.00
Uniwide Holdings, Inc. UW 1.00 Leisure & Resorts World Corporation LR 1.00

74 The Philippine Stock Exchange, Inc.


NAME OF STOCK STOCK PAR NAME OF STOCK STOCK PAR
SYMBOL VALUE SYMBOL VALUE
Manila Jockey Club, Inc. MJC 1.00 Oriental Petroleum
Mondragon International Philippines, Inc. MON 1.00 and Mineral Corporation "B" OPMB 0.01
Premiere Entertainment Productions, Inc. PEP 1.00 The Philodrill Corporation "A" OV 0.01
Philippine Racing Club, Inc. PRC 1.00 The Philodrill Corporation "B" OVB 0.01
Waterfront Philippines, Inc. WPI 1.00 PNOC Exploration Corporation "A" PEC 1.00
PNOC Exploration Corporation "B" PECB 1.00
Education PetroEnergy Resources Corporation PERC 1.00
Centro Escolar University CEU 1.00
Far Eastern University, Inc. FEU 100.00 SMALL AND MEDIUM ENTERPRISES
iPeople, Inc. IPO 1.00 Information Capital Technology
Ventures, Inc. ICTV 1.00
Diversified Services Makati Finance Corporation MFIN 1.00
Easycall Communications Philippines, Inc. ECP 1.00 SQL*Wizard, Inc. WIZ 1.00
JTH Davies Holdings, Inc. JTH 0.50
Macroasia Corporation MAC 1.00 PREFERRED
MIC Holdings Corporation MET 100.00 Allied Banking Corporation
Paxys, Inc. PAX 1.00 15% Cumulative Convertible Pref. A ABC 1,000.00
Prime Gaming Philippines, Inc. PGPI 10.00 Aboitiz Transport System (ATSC)
Philcomsat Holdings Corporation PHC 1.00 Corporation - Preferred ATSP 1.00
Philippine Seven Corporation "Common" SEVN 1.00 Ayala Corporation
Preferred Class "B" Shares ACPR 100.00
MINING & OIL SECTOR Benguet Corporation
Mining 8% Cumulative Convertible Pref. “A” BCP 3.44
Apex Mining Company, Inc. "A" APX 1.00 Banco Filipino Savings & Mortgage Bank
Apex Mining Company, Inc. "B" APXB 1.00 15 % Cumulative Convertible Pref. BFC 100.00
Abra Mining & Industrial Corporation AR 0.01 Banco Filipino Savings & Mortgage Bank
Atlas Consolidated Mining 15 % Cumulative Non-Convertible Pref. BFNC 100.00
& Development Corporation AT 10.00 DMCI Holdings, Inc.
Benguet Corporation "A" BC 3.00 Cumulative Convertible Pref. DMCP 1.00
Benguet Corporation "B" BCB 3.00 Globe Telecom, Inc. - Preferred A GLO-PA 5.00
Dizon Copper Silver Mines, Inc. DIZ 1.00 Philippine National Bank
Lepanto Consolidated Mining Company "A" LC 0.10 Convertible Preferred PNBP 40.00
Lepanto Consolidated Mining Company "B" LCB 0.10 Swift Foods, Inc. - Convertible Pref. SFIP 1.00
Manila Mining Corporation "A" MA 0.01 PLDT 10% Cumulative Convertible
Manila Mining Corporation "B" MAB 0.01 Pref. Series A TELA 10.00
Omico Corporation OM 0.01 PLDT 10% Cumulative Convertible
Philex Mining Corporation PX 1.00 Pref. Series B TELB 10.00
Semirara Mining Corporation SCC 1.00 PLDT 10% Cumulative Convertible
United Paragon Mining Corporation UPM 1.00 Pref. Series C TELC 10.00
Vulcan Industrial & Mining Corporation VUL 1.00 PLDT 10% Cumulative Convertible
Pref. Series D TELD 10.00
Oil PLDT 10% Cumulative Convertible
Basic Consolidated, Inc. BSC 0.25 Pref. Series E TELE 10.00
Oriental Petroleum and PLDT 10% Cumulative Convertible
Mineral Corporation "A" OPM 0.01 Pref. Series F TELF 10.00

Annual Report 2006 75


List of Companies & Issues

NAME OF STOCK STOCK PAR NAME OF STOCK STOCK PAR


SYMBOL VALUE SYMBOL VALUE
PLDT 10% Cumulative Convertible PLDT 10% Cumulative Convertible
Pref. Series G TELG 10.00 Pref. Series DD TLDD 10.00
PLDT 10% Cumulative Convertible PLDT 10% Cumulative Convertible
Pref. Series H TELH 10.00 Pref. Series EE TLEE 10.00
PLDT 10% Cumulative Convertible
Pref. Series I TELI 10.00 WARRANTS, PHILIPPINE DEPOSIT
PLDT 10% Cumulative Convertible RECEIPTS, ETC.
Pref. Series J TELJ 10.00 ABS-CBN Holdings Corporation
PLDT 10% Cumulative Convertible Phil. Deposit Receipts ABSP -
Pref. Series K TELK 10.00 Metro Pacific Investments Corporation
PLDT 10% Cumulative Convertible Warrants MPIW -
Pref. Series L TELL 10.00 F & J Prince Holdings Corporation
PLDT 10% Cumulative Convertible First Tranche "A" Warrants 2007 FJPAW1 -
Pref. Series M TELM 10.00 F & J Prince Holdings Corporation
PLDT 10% Cumulative Convertible Second Tranche "A" Warrants 2008 FJPAW2 -
Pref. Series N TELN 10.00 F & J Prince Holdings Corporation
PLDT 10% Cumulative Convertible First Tranche "B" Warrants 2007 FJPBW1 -
Pref. Series O TELO 10.00 F & J Prince Holdings Corporation
PLDT 10% Cumulative Convertible Second Tranche "B" Warrants 2008 FJPBW2 -
Pref. Series P TELP 10.00
PLDT 10% Cumulative Convertible
Pref. Series Q TELQ 10.00
PLDT 10% Cumulative Convertible
Pref. Series R TELR 10.00
PLDT 10% Cumulative Convertible
Pref. Series S TELS 10.00
PLDT 10% Cumulative Convertible
Pref. Series T TELT 10.00
PLDT 10% Cumulative Convertible
Pref. Series U TELU 10.00
PLDT 10% Cumulative Convertible
Pref. Series V TELV 10.00
PLDT 10% Cumulative Convertible
Pref. Series W TELW 10.00
PLDT 10% Cumulative Convertible
Pref. Series X TELX 10.00
PLDT 10% Cumulative Convertible
Pref. Series Y TELY 10.00
PLDT 10% Cumulative Convertible
Pref. Series Z TELZ 10.00
PLDT 10% Cumulative Convertible
Pref. Series AA TLAA 10.00
PLDT 10% Cumulative Convertible
Pref. Series BB TLBB 10.00
PLDT 10% Cumulative Convertible
Pref. Series CC TLCC 10.00

76 The Philippine Stock Exchange, Inc.


List of Active Trading Participants

A & A SECURITIES, INC. ACCORD CAPITAL EQUITIES APEX PHILS. EQUITIES


1906 Ayala Ave. Condominium CORPORATION CORPORATION
6776 Ayala Ave., Makati City G/F, Unit EC-05B, PSE Centre-East 2/F, Mary Bachrach Bldg.
Office : 891-1008 to 10 Tower Exchange Rd., Ortigas Center Port Area, Manila
Exchange : 891-1008 to 10 Pasig City Office : 527-8888 loc. 219;
Office : 687-5071 527-5291
A. T. DE CASTRO SECURITIES 687-3224; 687-3733 Exchange : 891-8586
CORPORATION. Exchange : 687-0911; 687-0936
7/F, Tower One & Exchange Plaza ARMSTRONG SECURITIES, INC.
Ayala Ave. cor. Paseo de Roxas ALAKOR SECURITIES 20/F, Equitable PCI Tower I Makati Ave.
Makati City CORPORATION cor. H. V. dela Costa Streets
Office : 848-7160 to 63 5/F, Quad Alpha Centrum Makati City
Exchange : 848-7160 to 63 125 Pioneer St., Mandaluyong City Office : 878-4043
Office : 631-8173;637-4496 Exchange : 891-8534; 891-8542;
AAA SOUTHEAST EQUITIES, INC. Exchange : 634-6928 to 29 891-8563
G/F Fortune Life Bldg., 162 Legaspi St. Fax : 631-5166
Legaspi Village, Makati City ASIA PACIFIC CAPITAL EQUITIES
Office : 816-2918 ALPHA SECURITIES & SECURITIES CORPORATION
892-9841 to 49 loc. 103 CORPORATION 24/F, Galleria Corporate Center EDSA
Exchange : 891-9570 to 72 23/F, Orient Square Bldg., Emerald Ave. cor. Ortigas Ave., Quezon City
Ortigas Center, Pasig City Office : 634-5621
AB CAPITAL SECURITIES, INC. Office : 638-2388 to 93; 638-3764 Exchange : 891-9550 to 59; 891-8571
8th Floor, Phinma Plaza Exchange : 638-6692 to 93; 638-6689
39 Plaza Drive ASIASEC EQUITIES, INC.
Rockwell Center, Makati City ANGPING & ASSOCIATES 8/F, Chatham House, 116 Valero cor.
Office : 898-7555 SECURITIES, INC. Herrera Streets, Salcedo Village
Exchange : 891-9135 Suite 2003-2004, The Peak Makati City
107 L. P. Leviste St., Salcedo Village Office : 845-3421 to 26
ABACUS SECURITIES Makati City Exchange : 891-9370 to 75
CORPORATION Office : 848-2915
29/F, East Tower – PSE Centre 810-0930 ASTRA SECURITIES CORP.
Exchange Road, Ortigas Center 848-2564 12/F, Tower One & Exchange Plaza
Pasig City Exchange : 891-9115 Ayala Ave. cor. Paseo de Roxas
Office : 634-5104 Makati City
Exchange : 634-6993; 634-6842 ANSALDO, GODINEZ Office : 848-6421 to 27
& COMPANY, INC. Exchange : 891-9126 to 27
ABN AMRO ASIA SECURITIES 340 Nueva St., Binondo, Manila
(PHILIPPINES), INC. Office : 242-5124 to 25; ATC SECURITIES, INC.
19/F, The LKG Tower, 6801 Ayala Ave. 242-5127 to 31 29/F Jollibee Plaza, Emerald Ave.
Makati City Exchange : 634-5160 & 63; Ortigas Center, Pasig City
Office : 867-7800; 884-1000 634-6232 to 34; Office : 683-0204; 687-1768
Exchange : 848-7177 to 78 634-6521 to 22 687-2866; 683-0201
Exchange : 891-9337 to 38

Annual Report 2006 77


List of Active Trading Participants

ATR-KIM ENG SECURITIES, INC. BERNAD SECURITIES, INC. CLSA PHILIPPINES, INC.
17/F, Tower One & Exchange Plaza 3/F, 1033 M. H. del Pilar St. 18/F Tower 1, The Enterprise Center
Ayala Ave. cor. Paseo de Roxas Ermita, Manila 6766 Ayala Ave., Makati City
Makati City Office : 524-5326; 524-5186; Office : 860-4030
Office : 848-5298; 849-8888 524-5267 Exchange : 891-9945; 759-4073
Exchange : 891-9120; 891-9124 to 25 Exchange : 635-6756 to 60;
635-5665 COHERCO SECURITIES, INC.
AURORA SECURITIES, INC. 240 Banawe cor. Panalturan Streets
24/F, West Tower – PSE Centre, BPI SECURITIES CORPORATION Manresa, Quezon City
Exchange Road, Ortigas Center 19/F, BPI Head Office, Ayala Ave. cor. Office : 361-0828
Pasig City Paseo de Roxas, Makati City Exchange : 848-7301
Office : 634-8321 to 24 Office : 845-5735; 845-5707;
Exchange : 634-8321 to 24 845-5617 CUALOPING SECURITIES
Exchange : 891-9930; 845-5541; CORPORATION
B. H. CHUA SECURITIES 848-5543; 845-5545 Suite 1801 Tytana Centre
CORPORATION Plaza Lorenzo Ruiz, Binondo, Manila
872 G. Araneta Ave., Quezon City CAMPOS, LANUZA & CO., INC. Office : 241-0262; 309-4258
Office : 742-5850; 742-6032; 20/F, East Tower – PSE Centre Exchange : 634-5745 to 46;
412-3444 Exchange Road, Ortigas Center 634-5180; 634-5755
Exchange : 891-9771 to 73 Pasig City
Office : 634-6881 to 87; 634- DA MARKET SECURITIES, INC.
BA SECURITIES, INC. 6888; 24/F, West Tower – PSE Centre
Room 401-403, CLMC Bldg. 636-3134; 638-3510; Exchange Road, Ortigas Center
259-267 EDSA, Mandaluyong City 636-3135; 636-3138 Pasig City
Office : 727-5374; 722-0132 Exchange : 636-3001 to 05 Office : 637-3624; 637-4242
Exchange : 891-9672 to 75 Exchange : 891-9143 to 44
CENTURY SECURITIES
BDO SECURITIES CORPORATION CORPORATION DAVID GO SECURITIES
11/F The JMT Corporate Condominium Rm. 1105 Galleria Corporate Center CORPORATION
No. 27 ADB Ave., Ortigas Center EDSA cor. Ortigas Ave., Quezon City Rm. 309 Federation Center Bldg.
Pasig City Office : 633-7044 to 46 Muelle de Binondo, Binondo, Manila
Office : 667-1571 - 73 Exchange : 891-9880 to 81 Office : 242-2375 & 79; 242-2467
Exchange : 848-5836; 848-7015 Exchange : 634-5048 to 49; 634-5178
CITISECURITIES, INC.
BELSON SECURITIES, INC. 27/F, East Tower – PSE Centre DBP-DAIWA SECURITIES SMBC
4/F, Belson House, 271 EDSA Exchange Road, Ortigas Center PHILIPPINES, INC.
Mandaluyong City Pasig City 18/F, Citibank Tower
Office : 724-7586 to 90; 724-7580 Office : 635-5735 to 40 8741 Paseo de Roxas, Makati City
Exchange : 891-9860 to 68 Exchange : 634-6976 to 80 Office: 813-7344; 813-7454
Exchange: 891-9109; 891-9119
BENJAMIN CO CA &
COMPANY, INC.
Rm. 301-305, Downtown Center Bldg.
516 Q. Paredes St., Binondo, Manila
Office : 241-1261; 241-1345
Exchange : 634-5186 to 90

78 The Philippine Stock Exchange, Inc.


DEUTSCHE REGIS PARTNERS, INC. EIB SECURITIES, INC. FIRST INTEGRATED CAPITAL
23/F, Tower One & Exchange Plaza 11/F, ExportBank Plaza, Chino Roces SECURITIES, INC.
Ayala Ave. cor. Paseo de Roxas Ave. cor. Sen. Gil Puyat Ave. 12/F, Tower One & Exchange Plaza
Makati City Makati City Ayala Ave. cor. Paseo de Roxas
Office : 894-6600 Office : 878-0775; 878-0790; Makati City
Exchange : 891-9090 886-1801 to 04 Office : 759-4320 to 23;
Exchange : 848-5386; 848-5396 891-9418 to 19
DIVERSIFIED SECURITIES, INC. Exchange : 759-4320 to 23;
5/F, PDCP Bank Centre, Herrera cor. EQUITIWORLD SECURITIES, INC. 891-9418 to 19
Alfaro Streets, Salcedo Village 8/F, Tower One & Exchange Plaza
Makati City Ayala Ave. cor. Paseo de Roxas FIRST METRO SECURITIES
Office : 892-2890; 892-4330; Makati City BROKERAGE CORPORATION
753-5250 to 53 Office : 848-5401; 848-5403 to 06 15/F, Tower One & Exchange Plaza
Exchange : 636-0814; 634-6630 to 31 Ayala Ave. cor. Paseo de Roxas
EVERGREEN STOCK Makati City
E. CHUA CHIACO SECURITIES, INC. BROKERAGE & SECURITIES, INC. Office : 759-4133 to 34
113 Rentas St., Binondo, Manila 6/F, Tower One & Exchange Plaza 891-9514 to 17
Office : 242-5145; 241-9293 Ayala Ave. cor. Paseo de Roxas Exchange : 891-9514 to 17
Exchange : 891-9246 to 48 Makati City
Office : 891-9451 to 58 FIRST ORIENT SECURITIES, INC.
EAGLE EQUITIES, INC. Exchange : 891-9451 to 58 12/F, Tower One & Exchange Plaza
779 Harvard St., Mandaluyong City Ayala Ave. cor. Paseo de Roxas
Office : 724-1584; 725-2777 F. YAP SECURITIES, INC. Makati City
Exchange : 634-6684; 634-6283 23/F, East Tower – PSE Centre Office : 891-9240; 891-9243 to 44
Exchange Road, Ortigas Center Exchange : 891-9240 to 45
EASTERN SECURITIES Pasig City
DEVEVELOPMENT CORPORATION Office : 635-4125 to 30; 635-4141 FRANCISCO ORTIGAS
17/F, Tytana Building, Binondo, Manila Exchange : 634-5171; 634-6917; SECURITIES, INC.
Office : 848-5491 to 95 (Makati) 634-5390 to 91; 10th Floor, Ortigas Bldg., Ortigas Ave.
242-4006 to 09 (Binondo) 634-6217 to 18 Pasig City
Exchange : 891-9340 to 44 Office : 631-2674; 631-2733
FIDELITY SECURITIES, INC. Exchange : 634-5149 to 53
EASTWEST CAPITAL 2/F, JTKC Centre, 2155 Pasong Tamo
CORPORATION Makati City G. D. TAN & COMPANY, INC.
1331 Angono St., Makati City Office : 818-6774; 812-6267 22/F, East Tower – PSE Centre
Office : 897-6807 Exchange : 634-7110; 633-9707; Exchange Road, Ortigas Center
Exchange : 891-9801; 891-9803 633-9710; 633-9711 Pasig City
Office : 634-6255; 637-5686
Exchange : 634-6255; 634-5408;
634-6256

Annual Report 2006 79


List of Active Trading Participants

GLOBALINKS SECURITIES HK SECURITIES, INC. INVESTORS SECURITIES, INC.


& STOCKS, INC. Suite 102, Columbia Tower 6/F, Tower One & Exchange Plaza
7/F, Tower One & Exchange Plaza Ortigas Ave., Mandaluyong City Ayala Ave. cor. Paseo de Roxas
Ayala Ave. cor. Paseo de Roxas Office : 725-6356 to 57; Makati City
Makati City 724-6336; Office : 848-7032 to 33;
Office : 848-6341 to 42; 724-9967 & 69; 724-6325 891-9441 to 42
759-4136 to 37 Exchange : 891-9522 to 25 Exchange : 891-9441 to 46
Exchange : 891-9920 to 22
I. ACKERMAN & COMPANY, INC. J. M. BARCELON & COMPANY, INC.
GOLDEN TOWER SECURITIES 7/F, Tower One & Exchange Plaza Unit 34 Casa Nueva, Manga Road,
& HOLDINGS, INC. Ayala Ave. cor. Paseo de Roxas New Manila, Quezon City
4/F, Vernida I Condominium Makati City Office : 725-1004; 411-1727
120 Amorsolo St., Legaspi Village Office : 891-9070 to 72 Exchange : 635-0236
Makati City Exchange : 891-9070 to 72
Office : 813-2839; 892-1316 J. P. MORGAN SECURITIES
Exchange : 891-9680 to 82 I. B. GIMENEZ SECURITIES, INC. PHILIPPINES, INC.
No. 42 3/F New Rosario Ortigas Arcade 31/F, Philam Life Tower
GOLDSTAR SECURITIES, INC. Rosario Ortigas Extn., Pasig City 8767 Paseo de Roxas, Makati City
22/F, East Tower – PSE Centre Office : 628-0000 local 306 Office : 885-7700;
Exchange Road, Ortigas Center Exchange : 634-6260 to 61; 885-7801; 757-2101
Pasig City 634-6263 to 65; 634-5168 Exchange : 687-2364; 687-2370
Office : 636-0197; 633-7485 to 86
Exchange : 634-6765 & 69; IGC SECURITIES, INC. JAKA SECURITIES CORPORATION
634-6983 & 87 10/F, Tower One & Exchange Plaza 8/F, Tower One & Exchange Plaza
Ayala Ave. cor. Paseo de Roxas Ayala Ave. cor. Paseo de Roxas
GUILD SECURITIES, INC. Makati City Makati City
12/F, Tower One & Exchange Plaza Office : 891-9193 to 94 Office : 848-7122 to 24
Ayala Ave. cor. Paseo de Roxas Exchange : 891-9190 to 92 Exchange : 848-6413 to 15
Makati City
Office : 891-9230; 891-9234 to 35 IMPERIAL, DE GUZMAN, JSG SECURITIES, INC.
Exchange : 891-9232 to 37; 891-9230 ABALOS & CO., INC. 4/F, A & T Bldg., 244 Escolta St.
Greenfield Bldg. I 750 Shaw Blvd. Binondo, Manila
H. E. BENNETT SECURITIES, INC. Mandaluyong City Office : 241-0594; 242-9380;
Rm. 1704, World Trade Exchange Office : 633-2686; 634-5717; 242-9385
Bldg., 215 Juan Luna St., Binondo 631-8651 loc. 145 Exchange : 637-3159 to 61
Manila Exchange : 634-5161 & 66;
Office : 242-5733 634-5739; 634-5710 KING’S POWER SECURITIES, INC.
Exchange : 634-5030; 634-6235 Room 704, Federal Tower
INTRA-INVEST SECURITIES, INC. Dasmariñas St., Binondo, Manila
HDI SECURITIES, INC. 11/F, ACT Tower, 135 Sen. Gil Puyat Office : 242-3048 to 49
20th Floor, Orient Square Bldg. Ave.,Salcedo Village, Makati City Exchange : 848-5605 to 07
Emerald Ave., Ortigas Center, Pasig City Office : 813-8293 to 94
Office : 687-7955 to 57; 910-6188 Exchange : 891-9206; 891-9208
Exchange : 891-9512; 891-9619
848-0998; 848-7118

80 The Philippine Stock Exchange, Inc.


LARRGO SECURITIES MACQUARIE SECURITIES MOUNT PEAK SECURITIES, INC.
COMPANY, INC. (PHILIPPINES), INC. 748 C. K. Bldg., Juan Luna St.
2/F, Rufino Tower Bldg. 7/F, Tower One & Exchange Plaza Binondo, Manila
6784 Ayala Ave., Makati City Ayala Ave. cor. Paseo de Roxas Office : 241-7990 & 92; 241-8043;
Office : 810-1183; 810-1353 to 54 Makati City 243-1953
810-1440 & 46 Office : 857-0888 Exchange: 891-9601 to 03
Exchange : 891-9530 to 33 Exchange : 848-5213; 848-5228;
840-8480; 840-8483 NEW WORLD SECURITIES, INC.
LITONJUA SECURITIES, INC. Room 202 CNC Investment Bldg.
Room 205 DITZ Bldg. MANDARIN SECURITIES 231 Juan Luna St., Binondo, Manila
444 T. M. Kalaw St., Manila CORPORATION Office : 242-1759; 242-1767
Office : 521-1951 to 57 28/F, LKG Tower, 6801 Ayala Ave. Exchange : 634-5711 to 12;
Exchange : 634-7178; 634-5713 Makati City 634-5721
Office : 884-1271 to 85
LOPEZ, LOCSIN, LEDESMA & Exchange : 634-6517 to 20 NIEVES SANCHEZ, INC.
COMPANY, INC. Room 400 CNC Investment Bldg.
Roofdeck, Urban Bldg. MARIAN SECURITIES, INC. 231 Juan Luna St., Binondo, Manila
405 Sen. Gil Puyat Ave. (nr. MRT) Universal Family Center Bldg. Office : 241-7142; 241-6890
EDSA, Makati City 2232 Pasong Tamo Extension Exchange : 891-9306 to 08
Office : 896-0835; 848-6651 Makati City
Exchange : 891-9640 to 41 Office : 819-1134; 750-2440 OPTIMUM SECURITIES
Exchange : 891-9309; 891-9316 CORPORATION
LUCKY SECURITIES, INC. No. 11 E. O. Bldg. cor.
19/F, West Tower – PSE Centre MDR SECURITIES, INC. United & 2nd Streets, Bo. Kapitolyo
Exchange Road, Ortigas Center 18/F, Medical Plaza Ortigas Bldg. Pasig City
Pasig City San Miguel Ave., Ortigas Center Office : 631-7831 to 36;
Office : 634-6826; 634-6786; Pasig City 631-3989;
634-6747 & 60 Office : 910-3124 to 25; 638-3899 633-2629
Exchange : 634-5382 to 83; 634- 636-4788 Exchange: 891-9581 to 85
5411; 634-5707 Exchange : 891-9226 to 28
Fax : 636-4788 PAN ASIA SECURITIES
LUY’S SECURITIES COMPANY, INC. CORPORATION
28/F, LKG Tower, 6801 Ayala Ave. MERCANTILE SECURITIES. CORP. 9/F, Tower One & Exchange Plaza
Makati City 20/F, Banco de Oro Plaza Ayala Ave. cor. Paseo de Roxas
Office : 884-1271 to 85 8737 Paseo de Roxas, Makati City Makati City
Exchange : 634-5175 to 76; Office : 813-3131 Office : 848-5153 to 54
634-6523 to 24; Exchange : 891-9350 to 58 Exchange : 891-9170 to 74
634-6850 to 51
MERIDIAN SECURITIES, INC.
27/F, East Tower – PSE Centre
Exchange Road, Ortigas Center
Pasig City
Office : 635-6261 to 64
Exchange : 634-6931 to 36

Annual Report 2006 81


List of Active Trading Participants

PAPA SECURITIES CORPORATION PLATINUM SECURITIES, INC. R. COYIUTO SECURITIES, INC.


6/F, S & L Bldg., De la Rosa cor. 8/F, Antel 2000 Corporate Center 5/F, Corinthian Plaza, Paseo de Roxas
Esteban Streets, Legaspi Village 121 Valero St., Salcedo Village Legaspi Village, Makati City
Makati City Makati City Office : 811-3064 to 67; 811-3201
Office : 817-8433 & 79; 817-8454; Office : 887-1178 to 79 Exchange : 634-6203 to 07;
815-1308 Exchange : 891-9301 to 03 634-5035; 634-6697 & 69
Exchange : 891-9630 to 32
PNB SECURITIES, INC. R. NUBLA SECURITIES, INC.
PCCI SECURITIES BROKERS CORP. 3/F, PNB Financial Center Room 300, CNC Investment Bldg.
4/F, PCCI Corporate Center Roxas Boulevard, Pasay City 231 Juan Luna St., Binondo, Manila
118 L. P. Leviste St., Salcedo Village Office : 526-3510; 526-3678; Office : 242-1595 to 96; 242-1770
Makati City Exchange : 891-9841; 891-9846; Exchange : 634-6525 to 29
Office : 893-3920; 893-3923 to 891-9849
24; R. S. LIM & COMPANY, INC.
893-4341 PREMIUM SECURITIES, INC. 1509 Galvani St., Makati City
Exchange : 891-9952 to 55; 14/F, Tower One & Exchange Plaza Office : 843-4313; 844-7235;
848-6284 to 85; 840-2991 Ayala Ave. cor. Paseo de Roxas 844-2245
Makati City Exchange : 891-9660 to 66
PCIB SECURITIES, INC. Office : 848-5915 to 17
20/F, Equitable PCI Tower I Exchange : 891-9593 to 95 RCBC SECURITIES, INC.
Makati Ave. cor. H.V. dela Costa St. 7/F Yuchengco Tower, RCBC Plaza
Makati City PUBLIC SECURITIES CORPORATION 6819 Ayala Ave., Makati City
Office : 878-4559 to 60 12/F Tower One & Exchange Plaza Office : 889-6931 to 35 (Trunk line)
(Operations) Ayala Ave. cor. Paseo de Roxas Exchange : 845-2641
Exchange : 891-9008 to 09; 891-9045 Makati City
Office : 848-7373 to 74; REGINA CAPITAL
PHILIPPINE EQUITY PARTNERS, 811-4706; 811-4526 DEVELOPMENT CORP.
INC. Exchange : 891-9490 to 93 8/F, Tower One & Exchange Plaza
Unit 19C, Citibank Tower Ayala Ave. cor. Paseo de Roxas
Citibank Plaza, 8741 Paseo de Roxas QUALITY INVESTMENT & Makati City
Makati City SECURITIES CORPORATION Office : 848-5482 to 84
Office : 814-5700 Unit 1602 Tytana Plaza Exchange : 891-9413; 891-9415 to 17
Exchange : 891-9162; 891-9222; Plaza Lorenzo Ruiz, Binondo, Manila
891-9097 Office : 241-0072; 241-0486; RTG & COMPANY, INC.
241-0547 6/F, Tower One & Exchange Plaza
PHIL-PROGRESS Exchange : 891-9184 to 89 Ayala Ave. cor. Paseo de Roxas
SECURITIES CORPORATION Makati City
G/F, PPL Bldg., U. N. Ave. R & L INVESTMENTS, INC. Office : 891-9480 to 84
cor. San Marcelino St., Manila 675 Lee St., Mandaluyong City Exchange : 891-9480 to 84
Office : 526-4207; 526-4208 &10 Office : 724-5207
Exchange : 891-8579 to 80 Exchange : 891-9201 to 05

82 The Philippine Stock Exchange, Inc.


S. J. ROXAS & COMPANY, INC. STANDARD SECURITIES THING ON SECURITIES LTD.
6/F, Tower One & Exchange Plaza CORPORATION PHILIPPINES, INC.
Ayala Ave. cor. Paseo de Roxas 34 Jefferson St., West Greenhills 1136 Soler St., Binondo, Manila
Makati City San Juan, Metro Manila Office : 245-3093 to 95
Office : 848-5065 to 69 Office : 725-3905; 721-5887 Exchange : 636-5793 to 97
Exchange : 891-9708 to 09; Exchange : 891-9760 to 61;
891-9714 to 16; 891-9439 891-9764 to 65 TOWER SECURITIES, INC.
18/F, East Tower – PSE Centre
SARANGANI SECURITIES, INC. STRATEGIC EQUITIES Exchange Road, Ortigas Center
5/F, APMC Bldg., 136 Amorsolo cor. CORPORATION Pasig City
Gamboa Streets, Legaspi Village 6/F, Tower One & Exchange Plaza Office : 635-4448 to 49;
Makati City Ayala Ave. cor. Paseo de Roxas 635-4144;
Office : 817-5806; 840-4504; Makati City 634-6726
817-5834 Office : 848-5159 Exchange : 634-5146; 634-5148;
Exchange : 891-9176 to 79 Exchange : 891-9620 to 21 638-3847; 638-3850;
633-9411
SB EQUITIES, INC. SUMMIT SECURITIES, INC.
18/F, Security Bank Centre 21/F, East Tower – PSE Centre TRANS-ASIA SECURITIES, INC.
6776 Ayala Ave., Makati City Exchange Road, Ortigas Center Room 601-S State Centre Bldg.
Office : 891-1021 Pasig City 333 Juan Luna St., Binondo, Manila
Exchange: 891-9677; 891-9686 to 87 Office : 631-1032 to 37 Office : 242-2823; 242-3031;
Exchange : 631-1032 to 37 242-1031
SECURITIES SPECIALISTS, INC. Exchange : 634-5725 to 27;
Rm. 903 National Life Insurance Bldg. SUPREME STOCKBROKER, INC. 634-5752 to 54
Ayala Ave., Makati City 10/F, Tower One & Exchange Plaza
Office : 812-5905 Ayala Ave. cor. Paseo de Roxas TRI-STATE SECURITIES, INC.
Exchange : 891-9701 to 03 Makati City 10/F, Tower One & Exchange Plaza
Office : 891-9405 to 07 Ayala Ave. cor. Paseo de Roxas
SINCERE SECURITIES Exchange : 891-9401; 891-9403 Makati City
CORPORATION Office : 848-5044 to 47
12/F, East Tower – PSE Centre TANSENGCO & COMPANY, INC. Exchange : 891-9361 to 64
Exchange Road, Ortigas Center Room 208 Padilla delos Reyes Bldg.
Pasig City 232 Juan Luna St., Binondo, Manila TRITON SECURITIES CORPORATION
Office : 638-3549 to 50 Office : 241-6887 26/F, LKG Tower, 6801 Ayala Ave.
Exchange : 634-6664; 634-6668 Exchange : 634-6675 & 85; Makati City
633-1310; 634-8230 Office : 884-2081 to 83
SOLAR SECURITIES, INC. Exchange : 635-5531 to 35
30/F, East Tower – PSE Centre THE FIRST RESOURCES
Exchange Road, Ortigas Center MANAGEMENT & SECURITIES UBS SECURITIES
Pasig City CORPORATION PHILIPPINES, INC.
Office : 636-6302 8/F, Tower One & Exchange Plaza 19/F, Tower One & Exchange Plaza
Exchange : 636-6302; 634-6869; Ayala Ave. cor. Paseo de Roxas Ayala Ave. cor. Paseo de Roxas
634-6878 Makati City Makati City
Office : 848-6311 to 18 Office : 754-8888
Exchange : 848-6311 to 18 Exchange : 891-8588; 891-8589

Annual Report 2006 83


List of Active Trading Participants

UCPB SECURITIES, INC. VICSAL SECURITIES & STOCK


5/F, UCPB Bldg. Makati Ave. BROKERAGE, INC.
Makati City 658 Carlos Palanca St., Quiapo, Manila
Office : 811-9000 Office : 734-9771 to 75 loc. 114;
Exchange : 891-9735 to 37 734-9526
Exchange : 891-9710 to 13
UNICAPITAL SECURITIES, INC.
4/F, Majalco Bldg., Trasierra cor. WEALTH SECURITIES, INC.
Benavidez Streets, Legaspi Village 21/F, East Tower – PSE Centre
Makati City Exchange Road, Ortigas Center
Office : 812-2589 Pasig City
Exchange : 891-9622; 891-9624 Office : 634-5038 to 42;
637-3048 to 50
UOB-KAY HIAN SECURITIES Exchange : 634-6222; 634-6225 to 29
(PHILIPPINES), INC.
Unit 404 Locsin Bldg. WESTLINK GLOBAL EQUITIES, INC.
Ayala cor. Makati Ave., Makati City 6/F, Tower One & Exchange Plaza
Office : 887-7972 Ayala Ave. cor. Paseo de Roxas
Exchange : 891-9526 to 27 Makati City
Office : 848-6231; 848-6246
UPCC SECURITIES CORPORATION Exchange : 891-9380 to 83
12/F Tower One & Exchange Plaza
Ayala Ave. cor. Paseo de Roxas WONG SECURITIES CORPORATION
Makati City 960 Ideal St., Mandaluyong City
Office : 891-8512;891-8514; Office : 700-2105
891-8519 Exchange : 634-5735 to 37
Exchange : 891-8512;891-8514;
891-8519 YAO & ZIALCITA, INC.
CARMELITA C. YAO
VALUE QUEST SECURITIES 5H Vernida I Condominium
CORPORATION 120 Amorsolo St., Legaspi Village
100B West Tower, PSE Centre Makati City
Exchange Road, Ortigas Center Office : 813-3496; 892-5936;
Pasig City 894-0553 to 55
Office : 636-6684; 636-6686 Exchange : 634-6284; 634-6286;
Exchange : 841-0703 634-6946

VENTURE SECURITIES, INC. YU & COMPANY, INC.


7th Floor, Phil. First Bldg. 16/F, East Tower – PSE Centre
6764 Ayala Ave., Makati City Exchange Road, Ortigas Center,
Office : 848-6505; 887-8447 Pasig City
Local nos. 7011/7012/7016 Office : 634-6611 & 18; 634-7577
Exchange : 891-9420 to 22 Exchange : 634-6248 to 50

84 The Philippine Stock Exchange, Inc.


Corporate Information

Annual Meeting External Auditor


The annual meeting of stockholders will be held SyCip Gorres Velayo & Co.
on Saturday, April 21, 2007, 7:30 a.m. at the
SGV Building
Trading Floor, 2nd Floor, PSE Centre
6760 Ayala Avenue
Exchange Road, Ortigas Center, Pasig City
Makati City, Philippines
Corporate Offices
Internal Auditor
Principal Office:
Philippine Stock Exchange Centre Isla Lipana & Co.
Exchange Road, Ortigas Centre, Pasig City 29th Floor Philamlife Tower,
1605 Philippines 8767 Paseo de Roxas
Tel. No.: (632) 688-7600 P.O. Box 2288, Makati City
Fax No.: (632) 634-5113 1226, Philippines

Philippine Stock Exchange Plaza


Stock Transfer Agent
Ayala Triangle, Ayala Avenue, Makati City
1226 Philippines
Tel. No.: (632) 819-4100 Rizal Commercial Banking Corp.
Fax No.: (632) 891-9004 Trust and Investments Division
RCBC Head Office
Website: www.pse.com.ph Yuchengco Tower, RCBC Plaza
6819 Ayala Avenue
External Counsels Makati City, Philippines

Angara Abello Concepcion Regala & Cruz For inquiries, please contact:
ACCRA Building, 122 Gamboa St.
Legaspi Village, Makati City Public and Investor Relations Section
The Philippine Stock Exchange, Inc.
Zamora Poblador Vasquez and
Tel. No.: (632) 688-7600
Bretaña Law Offices
5th Floor, Montepino Building E-mail : pirs@pse.com.ph
138 Amorsolo St., Legaspi Village, Makati City

Quasha Ancheta Peña and


Nolasco Law Offices
114 Amorsolo St., Legaspi Village, Makati City

Tan Venturanza and Valdez Law Offices


2704 East Tower
Philippine Stock Exchange Centre
Exchange Road, Ortigas Center
Pasig City