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PAR VALUEThe nominaldollaramount assigned to a security bythe issuer. For an equity security, par value is usually avery small amount that bears no relationship toits market price, except for preferred stock, in whichcase par value is used to calculate dividend payments.

NO-PAR VALUEMost shares issued today are classified as no-par orlow-par value stock. No-par value stock prices aredetermined by what investors are willing to pay forthem in the market.

Companies find it beneficial to issue no-par value stockas they have flexibility in setting higher prices forfuture public offerings and have less liability toshareholders in the case that their stock fallsdramatically.

PREFERRED STOCKPreferred stock is defined as equity with priority overcommon stock with respect to the payment ofdividends and the distribution of assets in a liquidation.

Preferred stock is a hybrid security which sharesfeatures with both common stock and debt.

Preferred stock is similar to common stock in that itentitles its owners to receive dividends which the firmmust pay out of after-tax income. Moreover, the use ofpreferred stock as a source of financing does notincrease the probability of bankruptcy for the firm.

However, like the coupon payments on debt, thedividends on preferred stock are generally fixed. Also,the claims of the preferred stockholders against theassets of the firm are fixed as are the claims of thedebt-holders.Preferred stock has the following features:

Par ValueThe par value represents the claim of the preferredstockholder against the value of the firm.

Preferred Dividend / Preferred Dividend RateThe preferred dividend rate is expressed as apercentage of the par value of the preferred stock.The annual preferred dividend is determined bymultiplying the preferred dividend rate times the parvalue of the preferred stock.

CORPORATION CODE

Sec. 6. Classification of shares. - The shares ofstock of stock corporations may be divided into classesor series of shares, or both, any of which classes orseries of shares may have such rights, privileges orrestrictions as may be stated in the articles ofincorporation:

Provided, That no share may be deprived of votingrights except those classified and issued as"preferred" or "redeemable" shares, unless

otherwise provided in this Code:

Provided, further, That there shall always be aclass or series of shares which have completevoting rights. Any or all of the shares or series ofshares may have a par value or have no par valueas may be provided for in the articles ofincorporation:

Provided, however, That banks, trust companies,insurance companies, public utilities, and building

and loan associations shall not be permitted toissue no-par value shares of stock.

Preferred shares of stock issued by any corporationmay be given preference in the distribution of theassets of the corporation in case of liquidation and inthe distribution of dividends, or such other preferencesas may be stated in the articles of incorporation whichare not violative of the provisions of this Code:

Provided, That preferred shares of stock may beissued only with a stated par value. The board ofdirectors, where authorized in the articles ofincorporation, may fix the terms and conditions ofpreferred shares of stock or any series thereof:

Provided, That such terms and conditions shall beeffective upon the filing of a certificate thereof withthe Securities and Exchange Commission.

Shares of capital stock issued without par value shallbe deemed fully paid and non-assessable and the

holder of such shares shall not be liable to thecorporation or to its creditors in respect thereto:

Provided; That shares without par value may notbe issued for a consideration less than the value offive (P5.00) pesos per share:

Provided, further, That the entire considerationreceived by the corporation for its no-par valueshares shall be treated as capital and shall not beavailable for distribution as dividends.

A corporation may, furthermore, classify its shares forthe purpose of insuring compliance with constitutionalor legal requirements.

Except as otherwise provided in the articles ofincorporation and stated in the certificate of stock,each share shall be equal in all respects to every othershare.

Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, theholders of such shares shall nevertheless be entitled tovote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;3. Sale, lease, exchange, mortgage, pledge orother disposition of all or substantially all of thecorporate property;4. Incurring, creating or increasing bondedindebtedness;5. Increase or decrease of capital stock;6. Merger or consolidation of the corporation withanother corporation or other corporations;7. Investment of corporate funds in anothercorporation or business in accordance with thisCode; and8. Dissolution of the corporation.

Except as provided in the immediately preceding

paragraph, the vote necessary to approve a particularcorporate act as provided in this Code shall be deemedto refer only to stocks with voting rights.

Sec. 7. Founders' shares. - Founders' sharesclassified as such in the articles of incorporation maybe given certain rights and privileges not enjoyed bythe owners of other stocks, provided that where theexclusive right to vote and be voted for in the electionof directors is granted, it must be for a limited periodnot to exceed five (5) years subject to the approval ofthe Securities and Exchange Commission. The five-year

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period shall commence from the date of the aforesaidapproval by the Securities and Exchange Commission.

Sec. 8. Redeemable shares. - Redeemable sharesmay be issued by the corporation when expressly soprovided in the articles of incorporation. They may bepurchased or taken up by the corporation upon theexpiration of a fixed period, regardless of the existenceof unrestricted retained earnings in the books of thecorporation, and upon such other terms and conditionsas may be stated in the articles of incorporation, whichterms and conditions must also be stated in thecertificate of stock representing said shares.

Sec. 9. Treasury shares. - Treasury shares areshares of stock which have been issued and fully paidfor, but subsequently reacquired by the issuingcorporation by purchase, redemption, donation orthrough some other lawful means. Such shares mayagain be disposed of for a reasonable price fixed by theboard of directors.

Sec. 41. Power to acquire own shares. - A stock

corporation shall have the power to purchase oracquire its own shares for a legitimate corporatepurpose or purposes, including but not limited to thefollowing cases: Provided, That the corporation hasunrestricted retained earnings in its books to cover theshares to be purchased or acquired:

1. To eliminate fractional shares arising out ofstock dividends;2. To collect or compromise an indebtedness to thecorporation, arising out of unpaid subscription, in adelinquency sale, and to purchase delinquentshares sold during said sale; and3. To pay dissenting or withdrawing stockholders

entitled to payment for their shares under theprovisions of this Code. (n)

SRC REVISED IRR

SRC Rule 3 Definition of Terms Used in theRules and Regulations

1. As used in the rules and regulations adopted by theCommission under the Code, unless the contextotherwise requires:

A. Beneficial owner or beneficial ownership meansany person who, directly or indirectly, through anycontract, arrangement, understanding, relationshipor otherwise, has or shares voting power, whichincludes the power to vote, or to direct the votingof such security; and/or investment returns orpower, which includes the power to dispose of, orto direct the disposition of such security; provided,however, that a person shall be deemed to have anindirect beneficial ownership interest in anysecurity which is:

i. held by members of his immediate familysharing the same household;

ii. held by a partnership in which he is ageneral partner;iii. held by a corporation of which he is acontrolling shareholder; oriv. subject to any contract, arrangement orunderstanding which gives him voting power orinvestment power with respect to suchsecurities; provided however, that the followingpersons or institutions shall not be deemed tobe beneficial owners of securities held by themfor the benefit of third parties or in customer orfiduciary accounts in the ordinary course ofbusiness, so long as such shares were acquired

by such persons or institutions without thepurpose or effect of changing or influencingcontrol of the issuer:

a. a broker dealer;b. an investment house registered underthe Investment Houses Law;c. a bank authorized to operate as such bythe Bangko Sentral ng Pilipinas;

d. an insurance company subject to thesupervision of the Office of the InsuranceCommission;e. an investment company registeredunder the Investment Company Act;f. a pension plan subject to regulation andsupervision by the Bureau of InternalRevenue and/or the Office of the InsuranceCommission or relevant authority; andg. a group in which all of the members arepersons specified above.

All securities of the same class beneficiallyowned by a person, regardless of the form

such beneficial ownership takes, shall beaggregated in calculating the number ofshares beneficially owned by such person.A person shall be deemed to be thebeneficial owner of a security if that personhas the right to acquire beneficialownership, within thirty (30) days,including, but not limited to, any right toacquire, through the exercise of anyoption, warrant or right; through theconversion of any security; pursuant to thepower to revoke a trust, discretionaryaccount or similar arrangement; orpursuant to automatic termination of atrust, discretionary account or similararrangement.

B. Bill of Exchange is an unconditional order inwriting addressed by one person to another, signedby the person giving it, requiring the person towhom it is addressed to pay on demand or at afixed or determinable future time a sum certain inmoney to order or to bearer.

C. Code means the Securities Regulation Code.

D. Commission means the Securities andExchange Commission.

E. Control is the power to govern the financial andoperating policies of an enterprise so as to obtainbenefits from its activities. Control is presumed toexist when the parent owns, directly or indirectlythrough subsidiaries, more than one half of thevoting power of an enterprise unless, inexceptional circumstances, it can be clearlydemonstrated that such ownership does notconstitute control. Control also exists even whenthe parent owns one half or less of the votingpower of an enterprise when there is:

i. Power over more than one half of the votingrights by virtue of an agreement with other

investors;ii. Power to govern the financial and operatingpolicies of the enterprise under a statute or anagreement;iii. Power to appoint or remove the majority ofthe members of the board of directors orequivalent governing body; oriv. Power to cast the majority of votes atmeetings of the board of directors orequivalent governing body.

F. Derivative is a financial instrument whose valuechanges in response to the change in a specified

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interest rate, security price, commodity price,foreign exchange rate, index of prices or rates, acredit rating or credit index, or similar variable orunderlying factor. It requires no initial or little netinvestment relative to other types of contracts thathave similar responses to changes in marketconditions. It is settled at a future date. This termshall include, but not limited, to the following:

1. Options are contracts that give the buyer

the right, but not the obligation, to buy or sellan underlying security at a predeterminedprice, called the exercise or strike price, on orbefore a predetermined date, called the expirydate, which can only be extended by theCommission upon stockholders approval.2. Call options are rights to buy.3. Put options are rights to sell.4. Warrants are rights to subscribe orpurchase new shares or existing shares in acompany on or before a predetermined date,called the expiry date, which can only beextended in accordance with the Commissionrules and regulations and/or the Exchange

rules. Warrants generally have a longerexercise period than options and are evidencedby warrant certificates.

G. An investment contract means a contract,transaction or scheme (collectively contract)whereby a person invests his money in a commonenterprise and is led to expect profits primarilyfrom the efforts of others.

1. An investment contract is presumed to existwhenever a person seeks to use the money orproperty of others on the promise of profits.2. A common enterprise is deemed createdwhen two (2) or more investors pool their

resources, creating a common enterprise, evenif the promoter receives nothing more than abrokers commission.

H. Long term commercial paper means anevidence of indebtedness of any person with amaturity of more than three hundred sixty-five(365) days. The term shall include, but not limitedto, bonds and notes.

I. Material Fact/Information means anyfact/information that could result in a change in themarket price or value of any of the issuerssecurities, or would potentially affect theinvestment decision of an investor. See Rule 14 (1)for a non-exclusive enumeration of whatconstitutes material fact or information.

J. Member of an Exchange means any brokerdealer who has the right, pursuant to Exchangerules, to trade on that Exchange.

K. Non-proprietary share or certificate is an

evidence of interest or privilege over a certainproperty of a corporation in view of the amountpaid by the holder for the said share/certificate.While the holder is entitled to the use of theproperty, he has no right over dividends or of theassets of the company upon liquidation thereof.

L. Proprietary share or certificate is an evidence ofinterest or participation or privilege in acorporation which not only entitles the holder toenjoy the use of a specific property but also to

dividends or earnings of said company. Uponliquidation of the company, a holder of aproprietary share shall have proportionateownership right over its assets.

M. Public Company means any corporation with aclass of equity securities listed on an Exchange or

with assets in excess of Fifty Million Pesos(P50,000,000.00) and having two hundred (200) ormore holders, at least two hundred (200) of whichare holding at least one hundred (100) shares of aclass of its equity securities.

N. Public Offering means a random orindiscriminate offering of securities in general toanyone who will buy, whether solicited orunsolicited. Any solicitation or presentation ofsecurities for sale through any of the followingmodes shall be presumed to be a public offering:

i. Publication in any newspaper, magazine orprinted reading material which is distributedwithin the Philippines or any part thereof ;ii. Presentation in any public or commercialplace;iii. Advertisement or announcement in anyradio or television, or in any online or e-mailsystem; oriv. Distribution and/or making available flyers,brochures or any offering material in a publicor commercial place, or mailing the same toprospective purchasers.

O. Reporting company means a corporation whichhas sold a class of its securities pursuant to a

registration under Section 12 of the SRC, or apublic company as defined under subparagraph (M)above.

P. Rules and regulations refers to all rules andregulations adopted by the Commission pursuantto the Code, including the forms for registration,reports and accompanying instructions thereto.

Q. Section refers to a section of the Code.

R. Self-Regulatory Organization or SRO means anorganized Exchange, registered clearing agency orany organization or association registered as an

SRO under Section 39 of the Code to enforcecompliance with relevant provisions of the Codeand rules and regulations adopted thereunder, andmandated to make and enforce its own rules,which have been approved by the Commission, bytheir members and/or participants. It is anorganization that enforces fair, ethical and efficientpractices in the securities and commodity futuresindustries, including securities and commoditiesexchanges.

S. Short-term commercial paper means anevidence of indebtedness of any person with amaturity of three hundred and sixty five (365) days

or less.

T. Transfer agent means any person who engageson behalf of an issuer of securities, or itself as anissuer of securities, in:

i. countersigning stock certificates uponissuance;ii. monitoring the issuance of such securitieswith a view toward preventing unauthorizedissuance, a function commonly performed by aperson called a registrar;iii. registering the transfer of such securities;

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iv. exchanging or converting such securities;and/orv. transferring record ownership of securitiesby bookkeeping entry without physicalissuance of securities certificates.

2. Unless otherwise specifically stated, the terms usedin the rules and regulations shall have the meaningdefined in the Code.

3. A rule or regulation which defines a term withoutexpress reference to the Code or to the rules andregulations, or to a portion thereof, defines such termfor all purposes as used in the Code and in the rulesand regulations, unless the context specificallyrequires otherwise.

SRC Rule 3.6 Definition of Clearing Agency

1. Clearing agency means any person that provides afacility to a Broker dealer, salesman, associated personof a Broker dealer or another clearing agency and

whose facility performs any or all of the followingactivities:

A. makes deliveries in connection with transactionsin securities;B. reduces the number of settlements of securitiestransactions or allocates securities settlementresponsibilities; andC. provides for the central handling of securities sothat transfers, loans, pledges and similartransactions can be made by bookkeeping entry, orotherwise, to facilitate the settlement of securitiestransactions without physical delivery of securitiescertificates.

2. As used in this Rule, facility includes a clearingagencys systems, processes or services and all thetangible or intangible properties necessary to operatesuch system, processes or services, whether within orwithout its specific physical location, for purposes ofperforming any or all activities set forth in paragraph 1of this Rule.

3. A registered clearing agency may perform only theactivity or activities that the Commission haspreviously approved.

SRC Rule 3.7 Definition of Facility of anExchange

Facility of an Exchange includes systems, processes orservices, tangible or intangible property, whether ornot in a specific physical location or in an Exchange, forthe purpose of effecting transactions between buyersand sellers in a securities trading market, andconveying any information required by the participantsto effect such transactions.

SRC Rule 11 Definition of Commodity FuturesContracts

1. Commodity futures contract means a contractproviding for the making or taking delivery at aprescribed time in the future of a specific quantity andquality of a commodity or the cash value thereof,which is customarily offset prior to the delivery date,and includes standardized contracts having the indiciaof commodities futures, commodity options andcommodity leverage, or margin contracts.

2. Commodity means any goods, articles, services,rights and interests, including any group or index ofany of the foregoing, in which commodity interests

contracts are presently or in the future dealt in.

3. Forward means a contract between a buyer and aseller whereby the buyer is obligated to take deliveryand the seller is obliged to deliver a fixed amount of anunderlying commodity at a predetermined price anddate. Payment in full is due at the time of delivery.

4. Without prejudice to applicable Bangko Sentral ngPilipinas rules and circulars, the public trading ofcommodities futures contracts and pertinentCommission rules shall remain suspended until furtherordered otherwise by the Commission.

SECURITIES REGULATIONS CODE

SEC. 3. Definition of Terms. -

3.1. Securities are shares, participation or

interests in a corporation or in a commercialenterprise or profit-making venture andevidenced by a certificate, contract, instrument,whether written or electronic in character. Itincludes:

a) Shares of stock, bonds, debentures,notes, evidences of indebtedness, asset-backed securities;

b) Investment contracts, certificates ofinterest or participation in a profit sharingagreement, certificates of deposit for afuture subscription;

c) Fractional undivided interests in oil, gasor other mineral rights;

d) Derivatives like option and warrants;

e) Certificates of assignments, certificates ofparticipation, trust certificates, voting trustcertificates or similar instruments;

f) Proprietary or non proprietarymembership certificates in corporations;and

g) Other instruments as may in the futurebe determined by the Commission.

3.2 Issuer is the originator, maker, obligor, orcreator of the security.

3.3 Broker is a person engaged in the business ofbuying and selling securities for the account ofothers.

3.4 Dealer means any person who buys and sellssecurities for his/her own account in the ordinarycourse of business.

3.5. Associated person of a broker or dealer is anemployee thereof who, directly exercises controlof supervisory authority, but does not include asalesman, or an agent or a person whosefunctions are solely clerical or ministerial.

3.6. Clearing Agency is any person who acts asintermediary in making deliveries upon paymentto effect settlement in securities transactions.

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3.7. Exchange is an organized marketplace orfacility that brings together buyers and sellersand executes trades of securities and/orcommodities.

3.8. Insider means: (a) the issuer; (b) a director orofficer (or person performing similar functions)of, or a person controlling the issuer; (c) a personwhose relationship or former relationship to theissuer gives or gave him access to materialinformation about the issuer or the security thatis not generally available to the public; (d) agovernment employee, or director, or officer ofan exchange, clearing agency and/or self-regulatory organization who has access tomaterial information about an issuer or a securitythat is not generally available to the public; or (e)a person who learns such information by acommunication from any of the foregoinginsiders.

3.9. Pre-Need Plans are contracts which providefor the performance of future services or the

payment of future monetary considerations atthe time of actual need, for which planholderspay in cash or installment at stated prices, withor without interest or insurance coverage andincludes life, pension, education, interment, andother plans which the Commission may fromtime to time approve.

3.10. Promoter is a person who, acting alone orwith others, takes initiative in founding andorganizing the business or enterprise of theissuer and receives consideration therefore.

3.11. Prospectus is the document made by or onbehalf of an issuer, underwriter or dealer to sellor offer securities for sale to the public through aregistration statement filed with theCommission.

3.12. Registration statement is the application forthe registration of securities required to be filedwith the Commission.

3.13. Salesman is a natural person, employed assuch or as an agent, by a dealer, issuer or brokerto buy and sell securities.

3.14. Uncertificated security is a securityevidenced by electronic or similar records.

3.15. Underwriter is a person who guarantees on afirm commitment and/or declared best effortbasis the distribution and sale of securities of anykind by another company.

SEC. 11. Commodity Futures Contracts. - Noperson shall offer, sell or enter into commodity futurescontracts except in accordance with rules, regulationsand orders the Commission may prescribe in the publicinterest. The Commission shall promulgate rules and

regulations involving commodity futures contracts toprotect investors to ensure the development of a fairand transparent commodities market.