INVESTOR'S GUIDE TO THE PHILIPPINE CENTRAL DEPOSITORY


What is the Philippine Central Depository, Inc. (PCD)?
What is book-entry system (BES)?
What is scripless trading?
What is settlement?
What is PCD's role in the equities market?
Who are the Participants of PCD?
How do I deposit shares in PCD?
What happens to the certificates lodged in PCD? Who owns them?
Is it mandatory to lodge my shares in PCD?
When I buy shares at the PSE, can I still expect a certificate?
If I want a stock certificate, can I withdraw my shares from PCD?
What happens to my shares if PCD goes bankrupt?
Who gets the dividends and how are they distributed to the shareholders?
How about the other corporate actions?
What are the pros and cons of retaining holdings in BES vs. asking for a certificate?
How do I transfer my lodged shares from one broker to another?



What is the Philippine Central Depository, Inc. (PCD)?
PCD is a private institution established in March 1995 to improve operations in securities
transactions. PCD seeks to provide a fast, safe and highly efficient system for securities
settlement.

Regulated by the Securities and Exchange Commission, PCD is owned by various financial
institutions. Its shareholders are: Philippine Stock Exchange (31.75%), Bankers Association of the Philippines (31.75%), Financial Executives Institute of the Philippines (10%), Development Bank of the Philippines (10%), Investment House Association of the Philippines (6.5%), Social Security System (5%) and Citibank N.A. (5%).


What is book-entry system (BES)?
PCD uses book-entry system to record the ownership of shares. When a trade is done at the
Philippine Stock Exchange (PSE), securities are moved via electronic debit and credit of
Participants' securities accounts to effect settlement. There will be no need for the physical
movement of stock certificates (scrip) between buyer and seller.


What is scripless trading?
Scripless trading is a trading system where settlement is carried out via BES, rather than by the physical movement of certificates and documents.


What is settlement?
Settlement is the completion of a transaction. This is the actual exchange of securities and funds.


What is PCD's role in the equities market?
PCD is basically a provider of the depository and settlement system for securities. Trades matched at PSE are sent to PCD for settlement purposes. Settlement is electronically recorded as increases or decreases in Participants' Securities Accounts.


Who are the Participants of PCD?
Participants to PCD are all PSE-member brokers, custodian banks, institutional investors and other corporations or institutions that are active players in the Philippine equity market.


How do I deposit shares in PCD?
Called the lodgment process, a stockholder or investor can deposit stock certificates through a PCD Participant. Participants lodge physical stock certificates in exchange for book-entry credits in the records of PCD.


What happens to the certificates lodged in PCD? Who owns them?
The share certificates sent to PCD for lodgment are delivered to the appropriate stock transfer agents (TA). Upon verification, these certificates are canceled by the TA and re-registered in the name of PCD Nominee Corporation (PCNC). PCNC is a duly registered institution wholly owned by PCD. PCNC acts as trustee-nominee for all shares lodged in the PCD system. Beneficial ownership of the shares remains with the lodging stockholder. PCNC, by policy, does not vote the shares in its name.

After I lodge, how will I know my account balance? You may check your account balance with your broker. Your broker should have customer ledgers maintained in his backroom that reflects your cash and stock position and other essential facts.

After checking my account balance with my broker, can I countercheck with PCD?
PCD records display only the Participant (brokers, custodian banks and other institutional
participants) level of ownership. It will only show your account balance if your broker sponsored a PCD sub-account for you. If a sub-account has been opened for you, PCD can generate a report for you with written authorization from your broker. A sub-account is charged a monthly maintenance fee of P100 regardless of the number and quantity of securities held by the investor.


Is it mandatory to lodge my shares in PCD?
Yes and No. You have the option to lodge your shares in PCD or hold on to your stock
certificates. But when you sell your shares at the PSE, lodgment is necessary for certificated
shares because the shares will have to be in BES to be used for settlement. It is important for
the shares to be in the PCD system by the settlement cut-off time on settlement date to avoid
penalties imposed on brokers by PSE for failed trades due to delayed or non-deliveries of
securities. The penalty as well as the cancellation fee (charged by the TA) per certificate may
be passed on to you by your broker.


When I buy shares at the PSE, can I still expect a certificate?
Since settlement of all shares listed at the PSE have been converted to BES, you will not
receive a stock certificate. If you want one, you will have to specify to your broker that you
want a stock certificate for the shares that you bought.


If I want a stock certificate, can I withdraw my shares from PCD?
Yes. You may request a withdrawal of certificates at any time. Investors who opt to hold
physical stock certificates may uplift their shares in BES. Similar to lodgment, the process of
upliftment should be coursed through a Participant.

However, when these certificated shares are eventually sold at the PSE, they will have to be
re-lodged in the PCD system for settlement purposes.


UPLIFTMENT PROCESS

What happens to my shares if PCD goes bankrupt?
PCD is a separate entity from PCNC as described earlier. Should PCD go bankrupt, the sharesregistered under PCNC are not affected.


Who gets the dividends and how are they distributed to the shareholders?
Cash and stock dividend distribution is automated in the PCD system. PCNC receives the stock dividend certificate from the Issuer/TA for the shares lodged in PCD. These shares are
appropriately distributed to the Participants on payment/listing date via book-entry credits.
Participants see their due credit of shares in their securities accounts and are responsible for
distributing the credited shares to their clients' records.

Cash dividends are handled in a similar manner. PCNC receives the cash dividend check from the Issuer/TA and distributes the money to the Participants through the PCD-designated disbursing banks. Participants see their due credit on payment date in their respective bank accounts and are responsible for distributing the cash dividends to their clients based on their agreed procedures.


How about the other corporate actions?
For shareholders meeting of a listed company, a stockholder whose shares are in BES will receive the proxy materials from his broker. The stockholder will then return the accomplished proxy form to his broker, who in turn delivers the said form to the transfer agent.

As an investor, you should inform your broker that you are expecting a proxy form. Your broker should also do his part by promptly sending you the proxy form.

For rights offering, the stockholder can lodge the shares in PCD as soon as he receives the
stock certificate for the shares he purchased in relation to the said offering.


What are the pros and cons of retaining holdings in BES vs. asking for a certificate?
How do I transfer my lodged shares from one broker to another?
Simply advise your broker in writing specifying the name of the issue, the number of shares and the name of the broker where your shares will be transferred. Your broker will accomplish an "out" receipt and move the shares electronically through the PCD system to the other broker.

You will also have to advise the other broker of the transfer because he will have to prepare an "in" receipt and receive the shares electronically through the PCD system from your original broker.

Note that when you transfer brokers, your brokers will be charged P82.50 per side per stock
moved (e.g., SMC, ABA) or a total of P165 per stock. Both brokers might pass these costs to you.

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