FIRST METRO INVESTMENT CORPORATION Listing ETFs in the Philippines

July 30, 2013

AGENDA

I. ETF Milestones

II. Motivations for Listing

III. New Investment Opportunities

IV. Investment Considerations

V. Challenges

VI. Benefits

VII. Timeline

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Source: ETF Database http://etfdb.com, Bloomberg

1993 1995 1996 1998 2002 2004 2006 2009 2010

JAN’93: Debut of S&P 500

SPDR

APR’95: 2nd ETF Debuts

MAR’96: iShares debuts International

ETFs, including in Singapore

(EWS)

DEC’98: Sector SPDRs debut

JUL’02: Bond ETFs

Debut

NOV’04: Gold SPDR

Launches

JUN’06: Exchange

traded notes

enter the markets

DEC’10: ETF

Assets hit $1Trillion

mark

NOV’09: Commission

Free ETFs offered by

Schwab

ETF MILESTONES

AUM ($Bn)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CAGR

Asia Pacific

10.00

25.00 34.00 39.00 42.00 53.00 61.00 52.00

64.00

87.00 93.00

127.00 26%

Global ETFs

104.80

141.60 212.00 309.80 412.10 565.60 796.70 711.10

1,036.00

1,311.30 1,350.90

1,498.70 27%

JANUARY 2013

JULY 18

JULY 19

JULY 23

ETF MILESTONES

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ETF Rules released by the SEC.

Release of final ETF listing rules by the PSE

FMIC files with SEC

FMIC files with PSE

Q3 2013 LAUNCH OF

FIRST METRO PHILIPPINE EQUITY ETF

2013: ETFs in the Philippines

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Total Net Assets and Number of ETFs in the US Billions of dollars, year-end, 2001–2012

ASIA PACIFIC US

# of ETFs 542 1,194

ETF Assets (US$Bn)

127.0 1,337.0

Total Net Assets and Number of ETFs in the Asia Pacific Billions of dollars, year-end, 2001–2012

ETF Country Listed AUM (US$Bn)

iShares FTSE A50 China Index ETF Hong Kong 7.6

Tracker Fund of Hong Kong Hong Kong 7.34

Harvest Shanghai & Shenzhen 300 China 6.52

Huatai Pinebridge CSI 300 China 3.772

ABF Pan Asia Bond Index Fund Hong Kong 3.324

Top 5 Funds Asia ex-Japan, ranked by AUM QUICK STATS:

Asia Pacific United States

GLOBAL PERFORMANCE OF ETFs

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Expected liquidity in the market to near PHP1.382 trillion by November ‐ Money coming in from debt maturities,

SDAs, among others

Substantial amount of funds still parked in Special Deposit Accounts (SDA) ‐ SDAs as of June 2013 amount to PHP 1.79 trillion

MOTIVATIONS FOR LISTING

-

2.00

4.00

6.00

8.00

10.00

12.00

2007 2008 2009 2010 2011 2012 2013

In P

HP

bill

ion

s

Average Daily Traded Value

Foreign Local

Significant increase in average daily traded

value in the PSE and domestic volume accounting for approximately half of total trading volume ‐ YTD average daily traded value reached

PHP 11 billion, almost 50% of which pertains to domestic volume

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PSEi is the second best performing market in the Asia Pacific region. ‐ It has recovered to 6,800 levels since

the decline in June 2013.

MOTIVATIONS FOR LISTING

Stock Markets: Asia Pacific

A ready market for index and equity funds - investors of mutual funds ‐ Progressive growth of mutual

funds with an AUM as of May 2013 of PHP 215 Bn from 2012’s PHP 146 Bn.

The ETFs are expected to provide new investment opportunities to investors

0.0

50.0

100.0

150.0

200.0

250.0

2008 2009 2010 2011 2012 May 2013

In P

HP

bill

ion

s

Asset Under Management (AUM) of Mutual Funds

• Foreign ETFs have exposure to Philippine stocks

• To date, there are around 32 US-listed ETFs which have exposure to Philippine shares

• iShares MSCI has the biggest exposure to Philippine stocks, at 99%

• Apart from iShares MSCI, the ten ETFs with largest exposure to Philippine stocks have an average exposure of 4.38%

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NEW INVESTMENT OPPORTUNITIES

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%

Source: ETF database

NEW INVESTMENT OPPORTUNITIES

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iShares MSCI Philippines ETF (EPHE)

Sources: iShares Prospectus, iShares factsheet, Bloomberg

The iShares MSCI Philippines ETF aims to track the price and yield performance of the top 99% equity securities (by market capitalization) listed in the Philippine Stock Exchange.

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NEW INVESTMENT OPPORTUNITIES

Sources: Xie Shares Prospectus, Xie Shares factsheet, Bloomberg

XIE Shares Philippines (PSEi) ETF (3037) The XIE Shares Philippines ETF aims to track the PSEi. It is a synthetic ETF.

Index Name PSEi Index

Country of Risk Philippines

Bloomberg Related Index PCOMP

Index Provider Philippine Stock Exchange

No. of Index Constituents 30

Close (June 30, 2013) $10.62

Total Net Assets $21,264,401.00

Net Assets per Unit $10.6322

Listing Date 21 February 2012

Financial Year End 31 December

Total Expense Ratio 0.39% (*)

Base Currency HKD

Trading Lot Size 300

*Not equivalent to tracking error and does not include indirect costs borne by the XIE Shares Philippines

INVESTMENT CONSIDERATIONS

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Quality and Diversification of Portfolio

• With minimal initial investments in ETF shares, portfolio is exposed to different listed companies

• FMIC ETF shares to mimic the PSE Index

Transparency of Portfolio • As composition would be

shares in listed companies, the investor can easily acquire information on companies they are invested in

• Disclosure available via PSE and via the respective listed companies

Liquid

• Since the ETFs are traded much like company’s listed stock, there is liquidity for the investment

Liquidity

• ETF shares are traded like any listed company’s stock , at any time the market is open

• Pricing is continuous throughout the day

Portfolio Diversification

• ETFs provide immediate exposure to a basket of listed companies from different industries

Transparency • Underlying securities in the portfolio are shares of listed companies, therefore,

the investor is given comfort on accessibility of information on the companies invested in.

Broad Availability

• Investor may be able to purchase ETF shares from the 134 registered brokers of the PSE

Others

• Minimum premiums/ discounts to NAV. Market price of a single ETF share usually trades close to its NAV.

• You don’t have to BEAT the index, you’re BUYING the index.

Risk: As with regular stock investing, ETF investment will also be dependent on favorable market conditions and subject to market volatility.

KEY SELLING POINTS

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MUTUAL FUNDS vs ETFs

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BUYERS

SELLERS

MUTUAL FUND, through the

Fund Manager

PHILIPPINE STOCK

EXCHANGE

Mutual Funds

BUYERS

SELLERS

Authorized Participants

PHILIPPINE STOCK

EXCHANGE

ETFs

• Investors interact directly with the fund when buying and selling shares. • Each investor’s actions impact other investors of the fund.

• Investors may buy and sell ETF shares directly from the Exchange. • ETF Shares are created and redeemed by Authorized Participants and the Fund. • The cost impact of each purchase or sale of shares is limited to the single transaction and does not affect

other investors of the ETF.

Cash

ETF

Shares Securities

Capital Markets

Creation Units Basket of Securities

Cash

Investor

Brokerage Account

ETF Market Maker and

other Authorized Participants

Capital Markets

ETF Fund Manager

Custodian

Basket of Securities ETF Shares

THE ETF CREATION PROCESS

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Regulation prescribing “Corporation” structure set-up vs. more common global practice of “Trust” structure

‐ Challenging but definitely doable.

New Product – breaking through “fear of the unknown”

‐ Differentiation between mutual funds and ETFs

‐ ETF experts sharing product knowledge and global best practices to regulators and investment banks

Generating public awareness on ETFs as an investment option

Requirement for underwriters in the event of an IPO

CHALLENGES

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Total PSE market capitalization to significantly double with the introduction of ETFs in the market

Active retail and institutional inflow

Healthy mix of foreign and domestic participation

New ETF products and segments

Commodities, Fixed Income, Sector-specific index etc.

BENEFITS OF ETFs

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ACTIVITY DATE

I. Filing with the SEC/PSE July 19/23

II. Marketing & Education Campaign July 29 – August 31

III. Launch 2ND – 4TH week of September

IV. Listing Sept/Oct 2013

INDICATIVE TIMETABLE

MARKETING & EDUCATION CAMPAIGN

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Target Audience PSE Trading Participants / Brokers

General Public

Programs Weekly Brokers’ Forum (Makati, Binondo, Tektite, Cebu)

Public Education Forums (Makati, Binondo, Cebu, Davao, Pampanga)

TV Guestings

Print Ads (Primers, ETF FAQs)

Website (ETF Primer, ETF FAQs)

For the month of August, First Metro will be conducting an extensive marketing & product education campaign aiming to educate the investing public about the Exchange Traded Funds.

45/F GT Tower International

6813 Ayala Avenue corner H.V. dela Costa St.

Makati City 1227, Philippines

www.firstmetro.com.ph

Tel: (63-2) 858-7900

Fax: (63-2) 840-3706

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FIRST METRO INVESTMENT CORPORATION

Thank you!