MANAGING LIQUID FUNDSIN UNCERTAIN TIMESHeld on

January 11-13, 2012CLIMBS Training InstituteCagayan de OroConsultants/Facilitators:

Prof. Vicente R. Valdellon, Jr.

Jowell L. Tan

A joint undertaking of:

MODULES

FICCO

2010 BALANCE SHEET(in P Millions)

ASSETS

Current Assets

Cash and Cash Equivalents 686.9

Loans Receivable, net1,091.0

Other Receivables 22.8

Inventories 25.3

Funds Held by Trustees/Fund Managers 115.6

Prepayments and Other Current Assets 10.7

Total Current Assets1,952.3

Non-Current Assets

Investments in Available-for-Sale Securities 12.5

Held-to-Maturity Investments 6.1

Investments in Non-Marketable Securities 33.2

Loans Receivable, net2,383.6

Property and Equipment, net 169.8

Real and Other Properties Acquired, net 21.5

Intangible Assets, net 2.8

Other Non-Current Assets 6.3

Total Non-Current Assets2,635.8

TOTAL ASSETS4,588.1

LIABILITIES AND MEMBERS EQUITY

Current Liabilities

Deposit Liabilities2,095.9

Accounts Payable and Accrued Expenses 108.4

Bills Payable 23.1

Interest on Share Capital and Patronage Refund Payable 195.5

Unearned Income 0.1

Total Current Liabilities2,423.0

Non-Current Liabilities

Trust Fund MAF 246.7

Other Non-Current Liabilities 16.3

Retirement Liability 9.3

Total Non-Current Liabilities 272.3

Total Liabilities2,695.3

Members Equity1,892.8

TOTAL LIABILITIES AND MEMBERS EQUITY4,588.1

SAN DIONISIO CREDIT COOPERATIVE2009 Assets

(in P Millions)

Current Assets

Cash on Hand & In Banks 92.5

Loans Receivable, net266.2

Other Receivables 12.4

Unused Office Supplies 0.4

Prepaid Expenses 0.9

Short-Term Investments 8.3

Total Current Assets380.7

Non-Current Assets

Investments

Long-Term Investments Cooperatives 11.9

Long-Term Investments Others 23.3

Total Long-Term Investments 35.2

Property and Equipment, net 19.6

Other Assets107.9

Total Non-Current Assets162.7

TOTAL ASSETS543.4

2009 Profit-and-Loss Statement(in P Millions)

REVENUES

Interest Income from Loans40.3

Service Fees 7.4

Income/Interest from Investment 4.0

Rental Income 3.4

Gross Income from Sales 0.9

Fines, Penalties, Surcharges 0.5

Miscellaneous Income 0.5

Membership Fees 0.3

Total Revenues57.3

EXPENSES

Financing Costs (Deposits & Borrowings)10.1

Administrative Costs36.9

Total Expenses47.0

Gross Income10.3

Add: Project Subsidy, Gain on Sale

of Acquired Assets, Adjustments 0.8

Net Surplus11.1

LIQUID-FUND POOL

Cash inflows and outflows

are constantly happening.The pool naturally grows.

UNMANAGED

MANAGED

Manage the size of the pool.

Manage within the pool.

FIRST ISABELA COOP BANK

TREASURY YIELDS

(in P Mns)

Cash

+ Bank DepositsInterest

+ InvestmentsEarnedYield

2002 82.722.833.42%

2003 93.212.893.10%

2004 97.764.504.60%

2005144.194.222.93%

2006177.745.663.18%

2007220.655.472.48%

2008362.33 12.273.39%

(Oct)(annualized)

EXCESS LIQUID FUNDS

Liquid funds

beyond one months

cash needs:what your coop

does not need

for this months

day-to-day operations.

CLIMBS

LIQUID FUNDS PORTFOLIO(29 February 2004)

InvestmentsYields

Operational AccountsP 3.85 Mn1.000%

(1-2 months staffing and utilities)

Legal Policy Reserves 2.753.410%

(set by Insurance Commission)

Contingency Reserves 4.215.867%

(probable claims of 6-9 months)

Retirement Funds of Certain Coops 12.919.370%

Investments into Cooperatives 8.849.771%

(half sought for, half accommodations)

Funds Available for Capexes 21.567.755%

or Redeployable to Other Blocks

Total Portfolio P 54.12 Mn7.621%ave

91-Day T-Bill Rate6.435%

WHY WE NEEDTO ANTICIPATE

(some examples)

big loans will be made

in the following months

new types of loans for new markets

requiring larger amounts

will be launched

new branches/offices will be put up in the future

(both in new territories and

where we are currently present)

projects we want to get into in the next 5 years

(and members have clamored for these)

but our coop lacks funding

interest on share capital and patronage refunds

to be paid out next year

maintenance and repairs

already foreseen

HOW OTHERS

ANTICIPATE PURPOSIVELY SIDC (2004)

(for 2005)

Funds Needed for Operationsof the 18 Business Lines

Capital Expenditures

Foreseen for Business Lines

Transferrable Fundsinto Operations and/or Capital ExpendituresFICOBank (2009)

Operating Account (daily banking operations)BSP-Required Reserves

Contingency Provisions (big withdrawals/loans)Capital Expenditures for Branching & IT

Oro Integrated Coop (2011)

OperationalsContingenciesCapexes for GrowthDividends

Retirement of Employees

Investments into Federations

Redeployable Funds into any of the aboveCOVEYS QUADRANTS Quadrant 1

Urgent

and

Important

Quadrant 2

Important

but Not Yet

Urgent

Quadrant 3

Urgent

but

Not Important

Quadrant 4

Not Urgent

and

Not Important

How much?For what?

By when?

MANAGEMENT

THE MEANING

OF UNCERTAINTY

G-M-O Matrix

(a synthesis)

GoalsMovesOutcomesSetting

clearclearclearcertainty

clearclearunclearrisk

clearunclearunclearuncertainty

unclearunclearunclearambiguity

HAPPENINGSOVERSEASthe relevant

and more notable

the USA depression

the Euro mess

COUNTRYSIDEONGOINGS

universal and commercial banks

into the countryside

lending, microfinancing, buying RBs

coop growth all around(many will become billionaires)

more affordability, bankability, more knowhow

multiple branching

inter-coop competition, membership overlapping

foreign investorsbuying into rural banks (RBs)

expanding RBs microfinance portfolioFEARLESS FORECASTSImpact on Coops

fixed-income rates will stay low

not just this yearbut in the next 3 years

continuous downward pressureson lending rates

on savings and time deposit rates

bonds outlook

bright in terms of relative safety

lousy in terms of earnings yields

equities outlook

promising for those Philippine-market-oriented

(esp energy, property, telecoms)problematic for those heavily export-oriented

FEARLESS PRESCRIPTIONSHow Coops Should Movecontingency buffers

and liquid funds policies

will be neededbut dont keep

too many defensive funds

earning very low yields

liquid funds portfolio

will have to go aggressive

without becoming recklesscoops now obliged

to plan out, and engage in

high-yielding project investments

for better member care

be very clearon the whats (purposes) of liquid funds

to better determine the hows

of managing liquid fundsRATE INDICATIONS

(6th January 2012)Savings Deposit0.25%-1%Metrobank, RCBC,UCPB, Sterling,

Bank of Commerce

Time Deposit

30 days2%-4.625% various banks

1 year2.75-5.25%

SDA4.6875%

91-Day Treasury Bill1.381%ave Jul-Dec 2011

UITF Bond Funds

Intermediate-Term Funds3.19-7.08%as of 23 Dec 11

(1-5 years)

Medium-Term Funds3.38-9.07%

(5-12 years)

Long-Term Funds8.92-15.09%

(more than 12 years)

Commercial Paper

(coupon rate) 8.720%

10.000%

11.550%First Phil Holdings

Meralco

First Gen Holdings

Preferred Stock

(coupon rate)9.4578%Ayala Corp

Common Stock

5%-6%dividend

yieldPLDT, Globe, China Bank, GMA7,

Ginebra San Miguel

(around 25 other publicly-listed companies

pay dividends regularly at about 2%)

MUTUAL FUNDS

(sampling from Business World)

1-Year Returns (%)

8th Jan 095th Jan 12

Stock Funds

(invested in stocks/equities)

ATR Kim Eng Equity Opportunity Fund(35.4)(1.00)

First Metro Save and Learn Equity Fund(26.48)7.48

Philam Strategic Growth Fund, Inc(32.69)3.23

Philequity Fund, Inc(35.38)6.86

Philequity PSE Index Fund Inc(35.06)8.46

Philequity Stock Index Fund Corp(42.37)4.85

Sun Life Prosperity Equity Fund, Inc(31.69)2.95

United Fund, Inc(11.80)(2.27)

Balanced Funds

(a mix between stocks/equities

and fixed-income instruments)

First Metro Save and Learn Balanced Fund (3.68)5.99

GSIS Mutual Fund, Inc(26.55)1.38

MFCP Kabuhayan Fund(24.60)(2.11)

Optima Balanced Fund, Inc(19.84)6.25

Philam Fund, Inc(27.49)3.34

Sun Life Prosperity Balanced Fund, Inc(19.22)3.23

Bond Funds

(all into fixed-income instruments)

ALFM Peso Bond Fund, Inc4.476.36

Cocolife Fixed Income Fund Inc5.517.05

Ekklesia Mutual Fund Inc2.039.97

First Metro Save and Learn Fixed Income2.1412.86

Philam Bond Fund, Inc2.536.17

Philequity Peso Bond Fund3.198.68

Prudentialife Fixed Income Fund Inc(2.39)2.06

Sun Life Prosperity Bond Fund, Inc2.067.44

Sun Life Prosperity GS Fund1.804.89

WHAT A MANAGED

INVESTMENT PORTFOLIO

LOOKS LIKECoop ABC

(30 November 2002)

InvestmentsAve Yields

Day-to-Day OperationsP 2.361 Mn1.000 %

Regulator-Required Reserves 2.5285.590 %

Contingency Reserves 5.6795.178 %

Capital Budget Programs 3.0695.605 %

Surplus Funds Unearmarked

Trust Banking 10.463 10.640 %

Cooperatives 4.765 10.441 %

TOTAL PORTFOLIOP 28.865 Mn 7.77 %

WHAT A MANAGED

INVESTMENT PORTFOLIO

LOOKS LIKEHow Coop ABC Manages

Its Investment Portfolio(30 November 2002)

InstitutionsInstruments

Yields

Standards:Land Bank34%SAs & DDs 8% 1.000%

Union Bank25%TDs: Banks16% 5.090%

BPI Far East23%TDs: Coops20% 9.925%

EPCI Bank18%T-Bills11% 5.070%

P 10.3 MnMutual Funds 9% 7.590%

Trust Portfolio36%10.640%

Exotics:Trust Banking56% (fixed-income)

Coops (15)31%P28.9 Mn 7.77 %

Philam Asset13%

P 18.6 Mn

InvestmentTenors

Appetite

30-31-35 days12%

Liquidity 8%60 days 5%

Contingencies28%89-90-91 days14%

Growth11%180 days 4%

Profitability 53%360-365 days25%

P 28.9 Mn3 to 5 years40%

P 28.9 Mn

MANAGING LIQUID FUNDS

WHAT IT TAKES TO SET UP

YOUR INVESTMENT PORTFOLIO

OF LIQUID FUNDS

Block System

for organizing liquid funds

Risk Management System

for establishing playing fields

Operational Systemfor managing day-to-day activitiesTHE BLOCK SYSTEM(a VRV Mgt framework)

MANAGING

THE BLOCK SYSTEM

Determine the amounts of the Blocks properly

(sizing up each Block). Review quarterly.

Adjust upwards/downwards, redeploying where needed. This optimizes the portfolio.

Dont carry an excessive Block 1. [It dampens yields.]

Be careful with Block 3. [Dont overfund.]

You can be very aggressive in Block 4 and Block 5.

[The yields must be high. There are enough of

low yields in Block 1 and Block 2.]

Lets not have too much in Block 5.

[This implies we dont have enough ideas

and capital budget programs for growth.]

Maximize yields within each Block.

Shop around accrediteds; bargain proactively.

Buy the correct instruments and tenors for your needs.

THE BLOCK SYSTEM

CaveatsThis is not an allocation exercise nor

political manueuvering (pork barrel).

We are placing funds to fulfill definite purposes,

obtaining the best yields possible.

The funds will never be static.Block monies will rise or fall depending on cash flows.Vital components of the portfolio

should be reconstituted monthly (when depleted). Managing the blocks

is a constant balancing actblending safety-liquidity-profitability

in anticipation of future uses.

There is no single working formula (only competent practice)

for liquid-funds-portfolio management.[Each coop custombuilds its own portfolio!]THE CLIMBS

INVESTMENT PORTFOLIOMission

CLIMBS was in search of a systemic approach to funds management, as mandat-ed by its first 5-Year Strategic Plan (2000-2004). It needed a sound working mo-del anticipating future management decisions and implementation moves.

Early October 2000, the newly recruited Finance and Investment Manager, Ray-mond Chaves (former PCIB Branch Officer), spent 5 days in Manila with VRV Mgt to work out the coops investment portfolio.

Considerations

Unsolicited advice from Cagayan de Oro was plentiful. From the Cashier: Please see to it I dont run out of operating funds. The Actuary Consultant suggested: Watch claims payments carefully. Reserving against 3 months claims is okay, 6 months plays it safe. The Treasurer declared: Dont overlook whatever the In-surance Commission requires. And the General Manager counselled: Whatever else you do, make sure you place funds with cooperatives. Without them, we have no business.

From VRV Mgt, Mon received a mouthful. Arent you more than just a custodian of liquid funds now available? What do you do when liquid funds grow bigger than declared needs? When do you go defense, when should you go aggres-sive? Mon eagerly looked forward to after-work beers and sashimi.

Peculiarities

Coop insurance was a sales push business. It took 6-9 months to bring a non-member coop into the fold; collective decision-making was slow. Premiums flowed in monthly with little seasonality; but many coops habitually remitted premiums 2 months late.

In 1999, the Insurance Commission required CLIMBS to maintain at least P2.2 Mil-lion in government securities as funds of last resort, not to be used for day-to-day operations. Come 2001, CLIMBS expected an increase to P3 Million.

OutlookThe ambitious target was P94 Million in premiums by 2004 (+30% compounded annual growth). There would be more area offices, more marketing reps, plus recruitment of independent agents.

Expected were new big accounts, more coops joining, and many small pre-ferred stock buyers.

How would you organize CLIMBS

start-up investment portfolio?

How much money into which part

of the portfolio?How short, or how long, the tenors?

Exhibit 1STATEMENT OF OPERATIONS

ActualProjectedBudgeted

199920002001

Insurance PremiumsP19,681,71425,307,22735,870,014

Less: Direct Considerations

Claims (Indemnities) 4,273,660 4,990,626 7,592,524

Commissions 4,706,551 7,015,084 9,858,839

Policy Reserve Increases 2,516,431 3,186,182 4,703,984

11,496,64215,191,89222,155,347

Add: Investment Income 1,743,850 1,644,929 3,139,456

Less: Operating Expenses

Staffing & Benefits 4,300,187 5,114,590 6,235,718

Utilities & Necessities 2,297,946 2,576,705 4,154,993

Managed Discretionaries 2,051,119 2,948,444 4,676,038

8,649,25210,639,73915,066,749

Net Surplus P 1,279,670 1,120,525 1,787,374

Exhibit 2STATEMENT OF FINANCIAL CONDITION

ActualProjectedBudgeted

199920002001

ASSETS

Current Assets

Cash & Near-Cash10,756,165 5,840,359 5,427,303

Receivables 2,605,848 4,383,952 5,082,527

Other Currents 1,013,734 1,145,459 1,776,881

Investments 7,971,93412,268,62723,779,441

Fixed Assets11,790,24812,127,58417,084,133

All Others 125,791 627,863 1,440,057

P 34,263,72036,393,84454,590,342

LIABILITIES & EQUITY

Current Liabilities 3,877,333 4,463,463 4,924,708

Legal Policy Reserves 9,165,11912,397,26812,620,248

Long-Term Debt 1,041,666--

Other Liabilities

Trust/Retirement Funds10,693,39612,089,53011,508,469

Various Others 3,483,302 176,573 151,192

Members Equity 6,002,904 7,267,01025,385,725

P 34,263,72036,393,84454,590,342

RISK MANAGEMENT

SYSTEM

# 1. Investment Policy

# 2. Accreditation System

(institutions and instruments)

# 3. 3-month Forward Cash Plan

(approvable by Mancom)

# 4. Monthly Reports

and Other Administratives

Do not ever change rules midstream.

Assume that the initially-worked-outInvestment Policy and Accreditation System

to be sound and appropriate during the next 6 months,

after which you can amend/revise/refine/overhaul.RISK

The essence:

deviation from expectations.The wider the swing

between realistic best and possible worst

on probable revenues, costs, investment size, returns,

the riskier the investment.

As a general rule,

the higher the returns, the higher the risks

lower-risk projects, lower returns.Some misconceptions:

no loss, no risk

big investment, big risk

its guaranteed, therefore no risk

if its not dangerous, its not risky.

Imperative:

manage the risk(s):

making sure your expectations do happen

directly controlling the risk factor(s) whenever possible

insuring against deviations: buffers, fallbacks, Plan B

proper planning beforehand

putting controls (systems)

the correct person managing

INVESTMENT POLICY

(an example)

Objectivegood, productive, profitable

usage of liquid funds

anticipating future needs as best we can

TargetOur benchmark is our coops savings deposit rate.

Our overall yield should try to beat this.

SystemsWe shall adopt and master the block system.

Liquid funds shall be placed only

into institutions and instruments we accredit.

Investment

PostureWe shall be heavy into fixed-income instruments,

for predictability and lesser risk.

We shall maintain a healthy balanced mix of:

safety (accredited institutions),

liquidity (accredited instruments),

profitability (the higher yields among them).

This Investment Policy shall be

mandatorily updatable every 6 months

by the Mancom.

ACCREDITATION SYSTEM

(an example)

We shall place excess liquid funds

only into these institutions:

the biggest 15 banks

the top 3 trust bankers

(BdO, BPI, Metrobank)

government and its agencies

selected cooperatives:

those with stong ROEs (+ 20%),

who dont need the money (but can use it),

giving yields higher than 91-day T-Bills

Our accredited instruments shall comprise:

SDs, SDAs, TDs

Treasury Bills

Trust Banking

(to include also bonds, preferred and common stock)

We shall not invest into exotics

we do not understand.

Derivatives are anathema.

At this point, let us not get involved

with mutual funds.

This Accreditation System shall be

mandatorily updatable every 6 months

by the Mancom.THE IMPORTANCE OF3-MONTH FORWARD CASH PLANSdone at the branch level,

consolidated by Investment Manager

Month 1Month 2Month 3

Cash Flow

(our suggested format)

Beginning Cash

Cash Inflows

from loan collections

from deposits

from new equity

from borrowings

from dividends elsewhere

Gross Cash Inflows

Cash Outflows

to make new loans

to service withdrawals

to fund operating expenses

to invest in new projects

to repay borrowings

to pay dividends & pat ref

to accommodate whatever

Net Cash Inflows

Ending Cash

This way, you would knowwhich branches would need funds

(how much and when)

and which branches have excess liquid funds

(how much).

WHAT IT TAKES TO MANAGEDAY-TO-DAY OPERATIONS a designated Investment Portfolio Manager (IPM)probable staffing of 2-3 by the time

the porfolio reaches P1 Billion

an Accreditation System in place

created/updated by Investment Portfolio Manager

formalized playing field for funds

no placements into non-accredited institutions

a Placement Book perpetually updated,

accrued-earnings basis

an Investment Committee for:

investment policy formulating, and amending

approving new institutions for accreditation

KIND OF WORK

THE INVESTMENT PORTFOLIO MANAGER WILL BE DOING

Strategic

determine sizes of Blocks and designing the Portfolio

creating and updating the Accreditation System

participating actively in the Investment Committee

Operational

deciding on tenors, instruments, institutions

does homework (shopping, updating)

manages day-to-day transactions

(30-50 transactions on P20-P30 Million portfolio):negotiating rates and placing funds

rolling over, pulling out, redeploying funds

maximizing yields within each block

moving funds from one Block to another

trying out newly-accredited institutionsmakes reports

attending financial cocktails and social events

Administrative

maintaining the Placement Book

safekeeping of Investment Certificates

coordinating with various units

ROLES AND

WORKING RELATIONSHIPS

Investment Portfolio Manager (IPM)

works out and recommends the script:cash organization, decision rules, accreditation system

undertakes day-to-day activities under the script

anything not in the script,

approved first by Investment Committee

Investment Committee

approves the scipt

reviews performance monthly

should not be supervising

transactions within the month

Board of Directors

receives reportsfrom either IPM or Investment Committee

as long as the script is being done and achieved,

leave the key people to do their job

troubleshooting (when the need arises)IMPORTANT REMINDERSon negotiations best rates are from Makati head offices (Branch Managers have limited authority) best time to negotiate for rates are:

towards end of month and/or towards end of quarter slant placements towards end of month socialize with key people at head offices

on transactions keep the cash you need for operations as managers, we should have foreseen

our cash needs for the next 3 months never surprise the Investment Portfolio Manager (except in serious emergencies)

on evaluatingperformance evaluate Investment Portfolio Manager performance on achievement of overall yields, not absolute income per se IPM can manage/control yields,not the ups and downs of cash levels

INVESTMENT PORTFOLIO MANAGER

WORK DESCRIPTION

(an example)

Reporting Tothe President

Coordinating WithFinancial Controller, EVP,

and Branch Managers

Work Purposeto make productive and good-yielding

all existing excess/idle funds

Principal Tasks flush out excess funds from

branches and Corporate Office

seek out, negotiate, and place funds into reliable, good-yielding instruments and institutions

manage the investment portfolio

to fund: withdrawals, capex needs, and contingencies

make funds available when/where needed by various operations

QualificationsBusiness graduate

banking experience advantageousThis person is trainable.

Skills can be quickly learned,

but it takes 3 years to master.

THE COOP

GOES SHOPPINGLiquidityEarly November 2010, this coop had P41.5 Million in cash and equivalents. It also carried P7.1 Million of equity investments into coop federations (mostly pakikisama accommodations by the Board).

Loans receivable were P130 Million, deposit liabilities P137 Million (74% as time deposits). A P3 Million staff retirement fund was intact. Come April 2011, the coop intended to pay out P7.5 Million interest on capital and patronage refund.

PortfolioAfter consulting with friends in financial circles, the new Investment Commit-tee agreed to organize funds in this manner:

Operating AccountP 2.1Million

(1- months opexes)

Liquidity Reserve on Deposits 8.9

(25% of savings deposits)

Staff Retirement Fund 3.0

Equities into Coop Federations 7.1

Capex Funds for Next Year17.0

(already identified)

Redeployable Funds10.5

(for replenishing, for dividends,

for whatever else)

Total PortfolioP48.6Million

Liquid funds were all in commercial banks as the Cashier saw fit: current ac-counts, savings deposits, short-term time deposits. Operating this portfolio would involve a major rejiggling of bank accounts.

PoliciesA number of decision rules were at play, though not formalized. The Invest-ment Committee viewed these as preliminary, evolving, amendable as time goes by.

#1. Beat the 91-day T-Bill rate (everybodys reference point). Overall yield of a competent investment portfolio should achieve this.

#2. Buy and cash-in, or roll over, the financial instruments. No trading of secu-rities; thats for the experts.

#3. On big placements (P10+ Mn) and longer terms (1 year or more), negotiate with head offices in Makati. Bank branches have limited discretion.

#4. Placements into cooperatives are encouraged. Because their lending rates are higher than banks, yield prospects are better.

#5. Dont directly buy into common shares of publicly-listed companies. Leave that to the financial institutions managing growth funds (if we get into these). We cannot monitor capital markets everyday; we dont know how.

#6. Every month-end, replenish any depletions of earmarked reserves. Thats what redeployable funds are for.

#7. Whatever happens, let us not lose our shirts.

It was time to go shopping. The Manager was expected to submit the first-ever Placement Plan to the Investment Committee.

What instruments and tenors

would you buy

for the investment portfolio?Exhibit 1COMMERCIAL BANKS

Savings and Time Deposits(various banks)

Savings Deposits0.5% to 1.75%

Time Deposits

(P1-P2 Mn)

30 days1.875%-2.375%

60 days2.125%-2.625%

90 days2.375%-2.875%

1 year2.625%-3.125%

Special Deposit Account

BSP product to mop up liquidity;

banks as product outlets;

no pre-terminations

Gross Interest Rate

30 days4.1875%

Exhibit 2

GOVERNMENT SECURITIES

(as of 11th November 2010)

Treasury Bills

Gross

Interest Rates

91 days3.400%

182 days3.941%

364 days4.165%

Treasury Bonds

Gross

Interest Rates

5 years6.375%

7 years5.375%

Treasury Notes

(FXTN, 5th Nov 2010)

Gross

Interest Rates

1 year4.0677%

5 years4.7788%

10 years5.8953%

20 years7.8750%

Exhibit 3

COOPERATIVES

SavingsTime

MASS-SPECC8.5%

(1 year)

NATCCO6%

(1 year)

Bansalan Coop Society5.5%7% (30 days)

to 12% (1 year)

Oro Integrated Coop4%8.5%

(1 year)

CLIMBSpreferred stock:

6%, open-ended

Exhibit 4

MUTUAL FUNDS

selected institutions,

1-year returns/yields

Latest

200720082010

Stock Funds

(invested in stocks/equities)

First Metro Save & Learn Equity Fund24.85%-33.63%75.70%

Philam Strategic Growth Fund, Inc23.04%-38.12%52.05%

Sun Life Prosperity Equity Fund, Inc20.58%-37.59%40.59%

United Fund, Inc10.46%-14.28%21.43%

Balanced Funds

(a mix between stocks/equities

and fixed-income instruments)

First Metro Save & Learn Balanced Fund25.93% -6.27%68.70%

GSIS Mutual Fund, Inc21.92%-31.50%45.44%

Philam Fund, Inc18.55%-32.52%45.94%

Sun Life Prosperity Balanced Fund, Inc17.21%-23.75%31.14%

Bond Funds

(all into fixed-income instruments)

Cocolife Fixed Income Fund Inc5.76%5.26%10.95%

First Metro Save & Learn Fixed Income Fund4.35%2.33%10.62%

Philam Bond Fund, Inc4.29%1.91% 8.02%

Sun Life Prosperity Bond Fund, Inc2.42%1.53% 9.14%

Exhibit 5

UNIT INVESTMENT

TRUST FUNDS (UITFs)

selected institutions,1-year returns/yields20072008Latest 2010

BPI

Equity Fund20.39%-42.57%44.91%

Balanced Fund11.42%-26.80%36.64%

Bond Fund 6.20% 3.95% 5.78%

BdO

Equity Fund14.86%-44.66%46.87%

Balanced Fund17.39%-39.34%36.95%

Bond Fund 4.85% 3.40% 8.96%

TRUST BANKINGyou declare your parameters;

trust banker customizes your portfolio

needs at least P4 Million to invest

10%-12% yields nowadays

depending on

debt vs equity instruments

prone to:

financial obesity trap

undisciplined discretionary spending

financial prodigality

How much of liquid funds

do we keep liquid?

How much do we program

for project investments?

How much do we prepare

for our usuals

(e.g., branching, new loans, etc)?

FAVORITE PROJECT INVESTMENTS

CONSIDERED BY COOPS

Most Predominant Projects

(from VRV Mgt consultancies) housingfuneral parlor memorial park

agri-business projects gas stations

hospitals/clinics schools and day-care centers

PLANNING

PROJECT INVESTMENTS

the best directional guide:

a good 5-Year Strategic Plan

(if any)

the need for investment criteria,

not just isolated project-investment ideas

(what are important to us? which have priority?

for what desired returns?)

classification of investment prospects,

their amounts, timing, and expected returns

(properly studied beforehand)

preferably biased towards growth

badly needed: an investment budgeting system

(not just the annual operating budget)INVESTMENT

BUDGETING(also called Capital Budgeting)

this is investment planning for growth

best done with

5-Year Strategic Plan as reference

1st step: classify investments into sets

(expanding existing business, new products/proj- ects, cost-reduction moves, urgent necessities)

2nd step: present amounts and their expected investment returns

(ROI, payback, IRR, NPV, or industry returns)

3rd step: prioritize the investment sets

and their specific projects,

referencing 5-Year Strategic Plan

4th step: ensure that the overall investment portfolio

beats cost of funds and cost of capital

(reconfigure investments as needed)

5th step: allocate available funds

from the liquid-funds portfolio

and

VRV Management

and Property Consultancy, Inc.

Coop Life Insurance and Mutual Benefit Services

MODULE #1

Liquid Funds

MODULE #5

Issues and Concerns

of the Future

ORGANIZE

and SAVE UP

for

FUTURE USE

identified

MODULE #2

Anticipate

Cash

Inflows

MODULE #3

Uncertainty

MODULE #1

Liquid Funds

MODULE #4

Manage

Anticipate!

The

end-in-mind

comes first.

The

technical

ways/means

only 2nd.

Preparasi

Organasi

Penetrasi

Planning

Organizing

Controlling

Directing

select

PARKING SLOTS

determine

AMOUNTS

and

TIMING

ORGANIZE

for

FUTURE USE

identified

o

p

t

i

m

i

z

e

Block 5no clear future use yet

ready to be redeployed

to other blocks (as and when needed)

can be catch basin

for centralized funds before redeployment

Block 4funds we reserve

(or are saving up)

for capital expenditures

Block 3funds we reserve

for contingencies

(self-imposed)

Block 2reserves required

by regulatory agencies

(if any)

Block 1cash levels we foresee we absolutely must maintain to keep operations going

planning

for

the

future

Cash

Outflows

Cash

Inflows

As your coop grows,

your liquid funds

will also grow.

Various

Ends

Transitory

Means

earn

GOOD YIELDS

Cash

Inflows

Cash

Outflows

Cash

Inflows

Cash

Outflows

Cash

Outflows

Cash

Inflows

MODULE #2

Anticipate

MODULE #3

Uncertainty

MODULE #4

Manage

MODULE #5

Issues and Concerns

of the Future