UPDATED MANUAL OF CORPORATE GOVERNANCE

The Board of Trustees and the Management of the ARMED FORCES AND POLICE

MUTUAL BENEFIT ASSOCIATION, INCORPORATED (AFPMBAI) hereby commit

themselves to the principles and best practices contained in this Manual, and acknowledge that

the same shall guide the attainment of its corporate goals.

This Manual shall institutionalize the principles of good corporate governance in the

AFPMBAI in order to enhance its corporate accountability and promote the interests of its

members, their families and dependents, and other stakeholders.

The AFPMBAI is a non-stock, non-profit Association of the men and women in uniform, the

personnel and officers of military and civil defense agencies, namely the Armed Forces of the

Philippines (AFP) including the Citizen Armed Force Geographical Unit (CAFGU), the

Philippine National Police (PNP), the Bureau of Jail Management and Penology (BJMP), the

Bureau of Fire protection (BFP), the Philippine Coast Guard (PCG), the AFP and PNP

Reservists, and other related agencies or organizations.

Ownership corresponds with membership to AFPMBAI. As such, each individual member is

deemed an owner of the Association. Corporate governance shall ensure the paramount

importance of the interest of the members by strict internal and external controls. In this regard,

the Management and the Board of Trustees shall ensure its independence from conflicting

interests.

The Board Committees shall pre-screen all matters for approval and information of the Board

of Trustees to guarantee an independent and objective compliance with corporate governance

policies.

The External Auditors shall be rotated on a regular basis at intervals of not more than five

years to ensure the impartiality and reliability of the audit process.

DEFINITON OF TERMS

Board of Trustees – refers to the collegial body that exercises the corporate powers of all

corporations formed under the Corporation Code. It conducts all businesses and controls or holds

properties of such corporations.

Corporate Governance - refers to the system by which corporations are directed and controlled.

The governance structure specifies the distribution of rights and responsibilities among different

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participants in the corporation (such as the board of directors, management, shareholders,

creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for

making decisions in corporate affairs. Governance provides the structure through which the

Association sets and pursues its objectives, while reflecting the context of the social, regulatory

and market environment. Governance is a mechanism for monitoring the actions, policies and

decisions of the Association, and involves the alignment of interests among the stakeholders.

Independent Trustees – – refers to a person other than an officer or employee of the corporation,

its parent or subsidiaries, or any other individual having any relationship with the Association

which would interfere with the exercise of independent judgment in carrying out the

responsibilities of a Trustee. This means that apart from the trustees’ fees and shareholdings, he

should be independent of management and free from any business or other relationship, which

could materially interfere with the exercise of his independent judgment.

Management – refers to the body given the authority to implement the policies determined by

the Board in directing the course/business activity/ies of the Association.

Executive Trustee – refers to a trustee who is at the same time appointed to head a

department/unit within AFPMBAI, or AFPMBAI itself.

Non-Executive Trustee – refers to a Board member with non-executive functions.

Non-audit work – refers to other services offered by the external auditor to a corporation that are

not directly related and relevant to its statutory audit function. Examples include accounting,

payroll, bookkeeping, reconciliation, computer project management, data processing or

information technology outsourcing services, internal auditing, and services that may

compromise the independence and objectivity of the external audit.

Internal control – refers to the process effected by a company’s Board of Trustees, management

and other personnel, designed to provide reasonable assurance regarding the achievement of

objectives in the effectiveness and efficiency of operations, the reliability of financial reporting,

and compliance with applicable laws, regulations, and internal policies.

Internal control environment – refers to the framework under which internal controls are

developed, implemented, alone or in concert with other policies or procedures, to manage and

control a particular risk or business activity, or combination of risks or business activities, to

which the company is exposed.

Internal auditing – refers to an independent, objective assurance and consulting activity

designed to add value and improve an organization’s operations. It helps an organization

accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve

the effectiveness of risk management, control, and governance processes.

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Audit and Enterprise Risk Management Office – refers to the department, division, team of

consultants, or other practitioner(s) that provide independent, objective assurance and consulting

services designed to add value and improve AFPMBAI’s audit operations.

Chief Audit Executive – refers to the top position within the organization responsible for internal

audit activities. In a traditional internal audit activity, this would be the internal audit director. In

the case where internal audit activities are obtained from outside service providers, the chief

audit executive is the person responsible for overseeing the service contract and the overall

quality assurance of these activities, and follow-up of engagement results. The term also includes

such titles as general auditor, chief internal auditor, and inspector general.

Independence – refers to that environment which allows the person to carry out his/her work

freely and objectively.

Objectivity – refers to unbiased mental attitude that requires the person to carry out his work in

such a manner that he has an honest belief in his work product and that no significant quality

compromises are made. Objectivity requires the person not to subordinate his judgment to that of

others.

Standards for the Professional Practice of Internal Auditing (SPPIA) – refers to the criteria by

which the operations of an internal auditing department are evaluated and measured. They are

intended to represent the practice of internal auditing as it should be, provide a framework for

performing and promoting a broad range of value-added internal audit services and foster

improved organizational processes and operations.

BOARD OF TRUSTEES

Commitment to a Common Purpose for AFMPBAI

The Board of Trustees commits to serve and promote the best interest of AFPMBAI.

They shall owe their duty and responsibility to AFPMBAI and in the process promote the

long-term sustainability and success of AFPMBAI in a manner consistent with international

corporate governance best practices.

The Governance Style of the Board

The Board will govern with an emphasis on:

Outward vision rather than an internal preoccupation;

Strategic leadership more than administrative detail;

Clear distinction of board and chief executive roles;

Collective rather than individual decisions;

Future rather than past or present; and

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Proactivity rather than reactivity.

In view of the above, the Board commits to:

1. Deliberate in many voices, but govern in one.

2. Cultivate a sense of group responsibility.

The Board, not Management, will be responsible for excellence in governing. The Board

will be an initiator of policy, not merely a reactor to Management initiatives. The Board will

use the expertise of individual members to enhance the ability of the Board as a body, rather

than to substitute the individual judgments for the Board’s values.

3. Direct, control and inspire the organization through the careful establishment of broad

written policies reflecting the Board’s values and perspectives.

The Board’s major policy focus will be on the intended long-term impacts outside the

operating organization, not on the administrative or programmatic means of attaining those

effects.

4. Enforce upon it whatever discipline is needed to govern with excellence. Discipline will

apply to matters such as attendance, preparation for meetings, policymaking principles,

respect of roles, and ensuring the continuity of governance capability. Continual Board

development will include orientation of new members in the Board’s governance process

and periodic Board discussion of process improvement. The Board will allow no officer,

individual or committee of the Board to hinder or be an excuse for not fulfilling its

commitments.

5. Monitor and discuss the Board’s process and performance at each meeting.

Self-monitoring will include comparison of Board activity and discipline to policies in the

Governance Process.

Powers of the Board.

The Board of Trustee shall have the management and control of the affairs and properties of

AFPMBAI. In addition to the above general powers, the Board of Trustee shall have the

following specific powers:

1. To determine the AFPMBAI’s corporate purpose, its vision and mission and strategies to

carry out its objectives;

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2. To formulate and define the policies, guidelines and controls necessary to carry out its

corporate purposes in accordance with existing laws, rules and regulations, its Articles of

Incorporation and By-Laws, and best business practices;

3. To have overall supervision and control, including the power to hire and fire, promote and

discipline, and fix the remunerations and terms of employment, of the officers and personnel

of the AFPMBAI, and to delegate such powers to the management of AFPMBAI as may be

proper or necessary;

4. To authorize the investment of funds in securities, properties and businesses in accordance

with law;

5. To determine the organization of, and establish the governing rules and regulations for the

AFPMBAI;

6. To perform such acts and exercise such powers necessary to accomplish its corporate

purposes;

7. To adopt a system of internal checks and balances and to ensure that its actions comply with

all laws, rules and regulations, its Articles of Incorporation and By-Laws, and the business

practices;

8. To meet regularly to discharge the functions of the Board; and

9. To delegate any of its powers in accordance with law.

Composition of the Board of Trustees

AFPMBAI shall be managed and its corporate powers exercised by a Board of Trustees

which shall consist of fifteen (15) members:

1. The Chief of Staff, Armed Forces of the Philippines as Chairman of the Board;

2. The President of AFPMBAI;

3. The AFP Sergeant Major or his representative from among his deputies and the Sergeants

Major of any of the major services of the AFP;

4. One (1) representative from the Joint Staff of the Armed Forces of the Philippines;

5. One (1) representative each from every major branch of service of the Armed Forces of

the Philippines (PA, PN, PAF);

6. Two (2) representatives from the Philippine National Police (PNP);

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7. One (1) representative each from the Bureau of Fire Protection (BFP), Bureau of Jail

Management and Penology (BJMP) and Philippine Coast Guard (PCG); and

8. Three (3) Independent Trustees, one (1) of which shall be a retired member of the AFP.

All members must possess the necessary academic education and experience in business and

insurance administration or activities related to the business operations of the Association to

qualify as members of the Board.

The representatives from the Major Service Commands, the Joint Staff of the AFP, and the

PNP shall be recommended by their respective Commanding Generals/The Deputy Chief of

Staff/Chiefs of the PNP, BFP, BJMP and PCG, screened by the Nomination and Remuneration

Committee who will ensure that all fields of expertise are present in the Board, and approved by

the Board of Trustees or elected during the General Membership Meeting.

Independent Trustees are appointed/ elected to provide the Board an objective “compass” to

determine the best interests of AFPMBAI and all its stakeholders.

These Trustees should not be related to any group or Management. Furthermore, they

can/should not be instruments of one group for the purpose of pushing their own sectoral agenda.

Their independence must be perceived as such by stakeholders, the beneficiaries and the general

public.

The Independent Trustees shall meet periodically in an executive session (i.e. with no other

Trustee or Management present). Executive sessions of the independent Trustees shall be called

and chaired by the Chairman of the Governance Committee. Topics for discussion during these

executive sessions shall be determined by the Independent Trustees, but actions of the Board

generally should be taken separately during Board meetings.

Qualifications of a Trustee

Each trustee shall have the qualifications and none of the disqualifications herein provided:

Qualifications:

1. A bona fide member of AFPMBAI;

2. Possesses qualities of integrity and probity;

3. Possesses necessary skills and experience in terms of management capabilities, and

preferably in the field of insurance, legal, finance/ investment management, audit/

accounting or related disciplines;

4. Aware of his role and appreciates the crucial differences between management and

direction;

5. Possesses an understanding of the legal framework within which to operate;

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6. Possesses an understanding of the Board’s operation and how to ensure its effectiveness;

7. Should also possess, or endeavor to acquire, the following basic qualities/ competencies:

a. Strategic business direction

Being charged with determining AFPMBAI’s strategic direction, a Trustee should

know and understand the issues and processes involved in formulating, implementing and

controlling AFPMBAI’s corporate and business strategies.

All Trustees are expected to keep themselves up to date with the affairs of AFPMBAI

and the Board.

b. Basic principles of business management

A Trustee should have sound background knowledge of AFPMBAI’s operations,

asset and liability management, accounting, financial language and concepts, and relevant

financial tools and techniques.

c. Human resource direction

A trustee should be aware of the importance of employing the right people with the

right skills, encouraging their commitment, involvement and contribution, and aligning

human resource strategies with corporate goals.

d. Improving business performance

A trustee should understand the link between total quality techniques and business

results and what are the determining factors in improving the business’s performance.

e. Organizing for the Future

Charged with ensuring the company’s capabilities to meet the demands of the

corporate strategy, a trustee should know how modern companies should be organized

and structured in order to respond successfully to a changing environment.

8. For Board seats that are not positional in nature, upon appointment, preferably the

Trustee should have at least three (3) remaining years prior to retirement from the active

uniformed service; and

9. Within a month after appointment, or when the course is available, must undergo a

seminar on corporate governance principles, on relevant laws and charters applicable to

AFPMBAI and the Board, and on the various businesses of the company.

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Disqualifications:

1. Any person finally convicted judicially of an offense involving moral turpitude or

fraudulent acts or transgressions;

2. Any person finally found by the Commission or a court or other administrative body to

have willfully violated, or willfully aided, abetted, counseled, induced or procured the

violation of, any provision of the Corporation Code, or any other law administered by the

Commission or Bangko Sentral ng Pilipinas, or any rule, regulation or order of the

Commission or Bangko Sentral ng Pilipinas;

3. Any person judicially declared to be insolvent;

4. Any person finally found guilty by court or financial regulatory authority of acts,

violations or misconduct similar to any of the acts, violations or misconduct listed in the

foregoing paragraphs;

5. Any independent trustee who becomes an officer or employee of AFPMBAI; and

6. Conviction by final judgment of an offense punishable by imprisonment for a period

exceeding six (6) years, or a violation of the Corporation Code, committed within five (5)

years prior to the date of his election or appointment.

Any of the following shall be a ground for the temporary disqualification of a trustee:

1. Refusal to fully disclose the extent of his business interest as required under the

Securities Regulation Code and its Implementing Rules and Regulations. This

disqualification shall be in effect as long as his refusal persists;

2. Absence or non-participation for whatever reason for more than fifty percent (50%) of all

meetings, both regular and special, of the Board of Trustee during his incumbency, or any

twelve (12) month period during said incumbency;

3. Dismissal or termination from directorship in another corporation for cause. This

disqualification shall be in effect until he has cleared himself of any involvement in the

alleged irregularity;

4. Holding of the position of trustee, director or officer in more than four (4) other

corporations and/or in any corporation having the same business interests as AFPMBAI;

5. Being under preventive suspension by the Head of represented agencies;

6. Conviction that has not yet become final referred to in the grounds for the disqualification

of trustees.

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Term of Office

The CSAFP, the President of AFPMBAI and the AFP Sergeant Major shall have a term of

office as Trustees coterminous with their positions. If the AFP Sgt Major is represented as

provided herein, the said representative shall serve only the term of the AFP Sergeant Major

whom he represents.

The tenure of all the other members of the Board of Trustees shall be for a period of three (3)

years unless sooner terminated, reappointed or extended by the Chief of Staff, AFP as

Chairman of the Board, AFPMBAI, or retired from the active uniformed service, provided that

the representation under Paragraph (1) above shall be maintained.

In the case of the Independent Trustees, no fixed term would apply to them. Instead, their

term of office would be renewable every year, unless sooner terminated by the Chairman of the

Board, AFPMBAI.

Duties and Responsibilities of a Trustee

A trustee shall have the following duties and responsibilities:

1. To exercise his duty of care and loyalty to the AFPMBAI, to conduct fair business

transactions and ensure that personal or sectoral interest does not bias his decisions

during Board meetings;

2. To devote time and attention necessary to properly discharge his duties and

responsibilities. As much as possible, a Trustee shall be present during all Board

meetings and he shall participate productively in all discussions;

3. To act judiciously and to respect and uphold all decisions made by the Board as a

collegial body. No Trustee shall undermine a decision of the Board majority. A

mechanism for the airing of grievances or disagreement on certain Board decisions must

likewise be set in place;

4. To exercise independent judgment;

5. To have a working knowledge of the statutory and regulatory requirements affecting

AFPMBAI, including the contents of its Articles of Incorporation and By-Laws, the

requirements of the Commission, and where applicable, the requirements of other

regulatory agencies;

6. To observe confidentiality and prudence in the handling of sensitive company

information; and

7. To ensure the continuing soundness, effectiveness and adequacy of the AFPMBAI’s

control environment.

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Trustees’ Rights

1. In order to discharge their duties properly, Trustees have a right to identify the information

which they need and to receive it in a timely manner.

2. Individual Trustees have a right to obtain information necessary for them to discharge their

duties from executives employed by AFPMBAI; however, the Trustees agree that if a

question or request to an executive cannot be answered or be given without special attention

it will be put in writing and a copy sent to the Chairman and the President.

3. Outside specialist advice at AFPMBAI’s expense is advice to the Board as a whole and

should normally be arranged by the President at the request of the Board. In exceptional

circumstances, if one or more Trustees wish to obtain special advice the matter should be

raised with the Chairman who may exercise a discretion to arrange for the advice to be

obtained, or may refer the matter to the Board. If such advice is obtained it should be made

available to the Board as a whole.

4. For the responsibilities and accountability they carry, Trustees have a right to prudent

remuneration based on AFPMBAI’s remuneration policy and performance management

system.

Trustees’ Benefits

The members of the Board of Trustees shall not receive any compensation or remuneration

except for reasonable allowances, including travel and other expenses in attending to their

duties, and per diems for attendance during meetings.

1. Trustees who absent themselves during a particular Board meeting shall not be entitled to

any meeting allowance, unless their virtual presence is required to constitute a quorum. In

such cases, each Trustee is only allowed to be present virtually once per calendar year.

2. A Trustee shall not be entitled to a meeting allowance in the event he sends a

representative/proxy to attend the meeting on his behalf.

3. All provisions on the remuneration of Trustees are embodied in the Memorandum Circular

for such purpose, including all amendments thereto, and the Performance Management

System for the Board and its Trustees.

Performance Assessment of Trustees

All Trustees shall be subject to a Performance Management System (PMS), in compliance

with the requirements of the Securities and Exchange Commission on Board Assessment, and to

establish a performance feedback system. Below are the criteria for assessment of the Board, the

Board Committee Chairmen, the Trustees, the President and the Corporate Secretary:

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BOT and BOT Chairman Quantitative: Strategic Objectives 60%

Qualitative: 40%

Compliance to Board Protocol 10%

Fairness 10%

Accountability 10%

Transparency and Ethics 10%

Committee Chairmen Quantitative: 60%

Performance of Committee Roles

and Responsibilities

Qualitative: 40%

Meeting Facilitation 10%

Ethics and Professionalism 10%

Initiative 10%

Communication Role 10%

Trustees Quantitative: 40%

Attendance to BOT and

Committee Meetings

Qualitative: 60%

Meeting Participation 20%

Ethics and Professionalism 10%

Initiative 10%

Service Representation 10%

Communication Role 10%

President Quantitative: Strategic Objectives 60%

Qualitative: 40%

Board Resolution Implementation 20%

Relationship with BOT 10%

Transparency and Ethics 10%

Corporate Secretary Quantitative: 30%

Attendance to the BOT and

Committee Meetings where required

Qualitative: 70%

Meetings 30%

Ethics/Professionalism 10%

Legal Expertise 20%

Communication 10%

Performance Assessment shall be conducted at the end of each fiscal year, or by January of

the following year.

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Multiple Board Seats

The Trustees shall not hold the position of a trustee, director or officer in not more than four

(4) other corporations and/or in any corporation having the same business interests as

AFPMBAI.

Vacancies

Any vacancies occurring in the Board of Trustees other than by removal of the members or

by expiration of term may be filled by the vote of at least a majority of the remaining Trustees, if

still constituting a quorum, in a regular or special meeting called for that purpose.

BOARD MEETINGS

Board meetings shall be subject to the approved protocol (Annex A).

BOARD COMMITTEES

The Board of Trustees shall create committees as may be necessary, proper or convenient for

the interest of AFPMBAI with powers and authorities necessary to carry out their functions.

The effectiveness of the Board depends in part on the operation of these committees. The

Trustees understand that committee work can impose a considerable burden and agree to share it

as equitably as possible.

A Board committee member is first a Trustee. The AFPMBAI President cannot be a

Chairman or Vice Chairman of a committee, nor be a member of the Audit and Enterprise Risk

Management Committee. Each committee is supported administratively by a secretariat or

technical working group (TWG).

The following are the committees of the Board, which shall be exclusively composed of

Trustees. All Board Committees have their own committee Charters (see attached Annexes). The

Committees shall:

1. Function as part of and under the control of the Board, not Management;

2. Have no authority that does not come from the Board;

3. Have no authority or accountability that is also delegated to Management;

4. Not relieve the full Board of its ultimate accountability for everything;

5. Not have the authority to instruct Management;

6. Be charged to produce products (values added), not to engage in activities; and

7. Have authority to use money or support personnel only if that is granted by the Board.

Board Committee meetings shall be conducted according to the approved protocol (Annex

B). Additional committees may be created by the Board when necessary.

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Audit and Enterprise Risk Management Committee (Annex C)

The Audit and Enterprise Risk Management Committee assists the Board in fulfilling its

oversight responsibilities through review of:

• financial reporting process and system of internal control

• audit process

• process of monitoring compliance with exisiting laws and regulations and its own code of

business conduct

It ensures that a risk management system is established to minimize and control the

probability/impact of unfortunate events, or maximize the realization of opportunities.

Investment Committee (Annex D)

The Investment Committee evaluates and endorses to the Board proposed investments from

Management, ensuring that such proposals meet the requirements and guidelines it will establish

and enforce for sound investments of the Association, as embodied in the Investment Charter.

Governance Committee (Annex E)

The Governance Committee exercises oversight over AFPMBAI’s decision-making process

by setting guidelines for the Board of Trustees and its committees, executive management, and

AFPMBAI as a whole in accordance with corporate governance principles. It monitors the

performance of the Board as a collegial body and the individual Trustees, and formulates

continuing professional development programs for Trustees.

Social Services Program Committee (Annex F)

The Social Services Program Committee oversees the budget and implementation of the

AFPMBAI Social Services Program in the areas of education, health, livelihood, donations, and

corporate social responsibility programs.

Nomination and Remuneration Committee (Annex G)

The Nomination and Remuneration Committee is tasked with the ff:

• Evaluates nominees for Trustees and Committee members based on guidelines set by the

Governance Committee,

• Endorses nominees for election to the BOT and its committees,

• Monitors the participation and performance of Trustees, and

• Oversees the development and policy and implementation of Board and Committee

remuneration and rewards.

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CORPORATE OFFICERS

Unless otherwise provided by the Board of Trustees, the officers of the Association shall be a

Chairman, a Vice Chairman, a President, a Secretary, and a Treasurer. The Association shall also

have at the discretion of the Board of Trustees, such other executive officers as it shall deem

necessary. Officers, other than the Chairman and Vice Chairman of the Board, and the President,

need not be Trustees.

Chairman of the Board

The Chairman shall preside over the meetings of the Board. In his absence, the Vice

Chairman shall preside. In the absence of the Chairman and Vice Chairman, the Trustees present

may elect from among themselves an Acting Chairman for that particular meeting.

1. The Chairman shall exercise independent judgment, act objectively, and ensure (alongside

the President) that all relevant matters are included in the agenda and prioritized properly,

giving more weight to “performance duties” (i.e. strategy and policy) over “compliance

duties” (i.e. monitoring and accountability).

2. The Chairman shall ensure that all the Trustees are fully involved and informed of any

business issue on which a decision has to be taken.

3. The Chairman, with the assistance of the Corporate Secretary and the President, shall

determine the annual Board Plan/Agenda and other strategic issues.

4. The Chairman shall be responsible for the integrity of the Board process, such that decisions

made shall be explicit, timely, relevant to the AFPMBAI’s vision and strategy, and anchored

on policies, values, and ethical standards.

5. The Chairman should be guided by the following:

Wide experience, preferably at board level, in successful organizations;

Capacity for strategic thinking and ability to make quick and important decisions;

Working understanding of finance, accounts and reports systems;

Excellent leadership and communications skills;

Appropriate training in corporate governance and professional Trusteeship;

President

All Board authority delegated to Management is delegated through the President, so that all

authority and accountability of Management – as far as the Board is concerned – is considered to

be the authority and accountability of the President.

The Board will specify to the President AFPMBAI’s strategic directions and expects him to

achieve certain results based on a set of measures/milestones and targets that had been clearly

communicated and understood.

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As long as the President uses any reasonable interpretation of the Board’s directions, the

President is authorized to establish all further policies, make all decisions, take all actions,

establish all practices, and develop all initiatives.

Only decisions of the Board acting as a body are binding upon the President.

Decisions or instructions of individual Board members, officers, or committees are not

binding on the President except in rare circumstances when the Board has specifically authorized

such exercise of authority. Individual Board members must therefore refrain from participating

in the day-to-day management of AFPMBAI.

In the case of Board members or committees requesting information or assistance without

Board authorization, the President can refuse such requests that require – in the President’s

judgment – a material amount of staff time or funds, or are disruptive.

The President shall have general supervision, direction and control of the business and affairs

of the Association. He shall have the general powers and duties of Management usually vested in

the office of the President of the Association:

1. He shall call and preside over all meetings of the members (except the General Membership

Meeting, unless so required), and shall submit an annual report to the members and to the

Chairman;

2. He shall execute the resolutions of the Board, the Articles of Incorporation and By-Laws,

and the policies issued by regulatory bodies;

3. He shall exercise general supervision over all officers of the Association;

4. He shall execute on behalf of the Association all contracts and agreements which the

Association may enter into; and

5. He shall sign, endorse and deliver all checks, drafts, bills of exchange, promissory notes, and

orders of payment of sums of money, unless such acts are specifically designated to another

authorized signatory/ies as approved by the Board of Trustees.

Corporate Secretary

The Corporate Secretary shall be elected by the Board. He shall be a resident of the

Philippines, a member of the Bar, and may or may not be a member of the Association. He shall

be the primary executive that shall administer the affairs of the Board of Trustees, and he shall

have the following duties and powers:

1. Working closely with the Board Chairman or Lead Trustee, he shall help ensure that the

Board functions effectively by providing the entire Board and individual Trustees with

detailed guidance as to the nature and extent of their duties and responsibilities, and how

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such duties and responsibilities should be properly discharged in the best interest of the

AFPMBAI and its stakeholders;

2. He shall facilitate the induction of new Trustees;

3. He shall assist the Chairman and the President in determining the annual Board Plan/Agenda

and other strategic issues;

4. He shall be responsible for reporting on and noting any inconsistencies of Board actions;

5. He shall be responsible for the interpretation of all Board decisions/resolutions;

6. He shall be responsible for the integrity of Board documents;

7. He shall keep, or cause to be kept, a book of minutes of the principal office, of all meetings

of Trustees and members with the time and place of such meetings, whether regular or

special, and if special, how authorized, the notice given thereto, the name of those present or

represented at member’s meetings, and the proceeding thereof;

8. He shall keep or cause to be kept at the principal office, or at the Association’s Chapter or

Branch Office, a member’s register, or a duplicate member’s register, showing the names

and dates of certificates issued to them and such other pertinent information as may be

required by law;

9. He shall give, or cause to be given, notice of all the meetings of the members, and of the

Board, required by law or by the Articles of Incorporation and By-Laws; and shall certify all

minutes, records and proceedings of the Board, and of the members;

10. He shall keep the seal of the Association in safe custody, turn-over to its successor all

records in his custody;

11. He shall exercise such power and perform such duties as may be prescribed by the Board of

Trustees or by the Insurance Commission, the Securities and Exchange Commission, and

other regulatory bodies, including these By-Laws and this Governance Manual;

12. He shall submit to the Commission, at the end of every fiscal year, an annual certification as

to the attendance of the Trustees during Board meetings.

Treasurer

The Treasurer, duly elected by the Board of Trustees, shall have the following powers and

duties:

1. He shall have the custody of, and be responsible for, all the funds, money and other

securities of the Association;

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2. He shall keep and maintain, or cause to be kept and maintained, adequate and correct

accounts of the properties and business transactions of the Association, including accounts

of the assets, liabilities, receipts, disbursements, gains, losses, reserves and surplus;

3. He shall deposit all moneys, funds, bonds, securities, and other valuables in the name and to

the credit of the Association with such banks or other depositories as may be designated by

the Board of Trustees;

4. He shall receive and issue receipts for all moneys paid to the Association and disburse funds

as may be authorized;

5. He shall render an annual statement showing the financial condition of the Association on

the 31st day of December each year and shall render an account of his transactions as

Treasurer and of the financial condition of the Association at time, as may be deemed

necessary; and

6. He shall put up a bond as may be required by the Board of Trustees; turn-over all records

and properties under his custody to his successor; exercise such other powers and perform

such other duties may be prescribed by the Board of Trustees.

INTERNAL AUDITOR

The Association shall have in place an independent internal audit function which shall be

performed by an Internal Auditor or a group of Internal Auditors, through which its Board,

senior management, and members shall be provided with reasonable assurance that its key

organizational and procedural controls are effective, appropriate, and complied with.

The Internal Auditor shall report to the Audit and Enterprise Risk Management Committee.

The minimum internal control mechanism for management’s operational responsibility shall

center on the President, being ultimately accountable for the Association’s organizational and

procedural controls.

The scope and particulars of a system of effective organizational and procedural controls

shall be based on the following factors:

1. The nature and complexity of business and business culture;

2. The volume, size and complexity of transactions;

3. The degree of risk;

4. The degree of centralization and delegation of authority;

5. The extent and effectiveness of information technology; and

6. The extent of regulatory compliance.

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EXTERNAL AUDITOR

An external auditor shall enable an environment of good corporate governance as reflected in

the financial records and reports of the company. An external auditor shall be selected and

appointed upon recommendation of the Audit and Enterprise Risk Management Committee.

The reason/s for the resignation, dismissed or cessation from service and the date thereof of

an external auditor shall be reported in the company’s annual and current reports. Said report

shall include a discussion of any disagreement with said former external auditor on any matter of

accounting principles or practices, financial statement disclosure or auditing scope or procedure.

The external auditor of the company shall not at the same time provide the services of an

internal auditor to the same client. The Association shall ensure that other non-audit work shall

not be in conflict with the functions of the external auditor.

The Association’s external auditor shall be changed no longer than every five (5) years. If an

external auditor believes that the statements made in the company’s annual report, information

statement or proxy statement filed during his engagement is incorrect or incomplete, he shall

present his views in said reports.

MANAGEMENT ACCOUNTABILITY

To insure adherence to corporate principles and best practices, a Compliance Officer shall be

designated by the Board of Trustees. He shall have direct reporting responsibilities to the

Chairman of the Board and shall perform the following duties:

1. Monitor compliance with the provisions and requirements of this Manual and the other

requirements of regulating agencies such as the Securities and Exchange Commission, the

Insurance Commission, the Bureau of Internal Revenue, et.al;

2. Appear before these regulating agencies upon summon on matters that need to be clarified by

the said agencies;

3. Determine violations of this Manual and other regulations and recommend penalty for

violation thereof for review and approval of the Board;

4. Issue a certification every January 30th

of the year on the extent of AFPMBAI’s compliance

with this Manual for the completed year, explaining the reasons of the latter’s deviation from

the same; and

5. Identify, monitor and control compliance risks.

The appointment of the Compliance Officer shall be immediately disclosed to the Securities

and Exchange Commission. All correspondence relative to his functions as such shall be

addressed to said Officer.

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FINANCIAL REPORTING

1. The reports or disclosures required under this Manual shall be prepared and submitted to the

Commission by the responsible Committee or officer through the Association’s Compliance

Officer.

2. All materials information, i.e., anything that could potentially affect net worth, shall be

publicly disclosed. Such information shall include earnings results, acquisition or disposal of

assets, board changes, related party transactions and changes to ownership.

3. Other information that shall always be disclosed includes remuneration of all trustees and

senior management corporate strategy, and off balance sheet transactions.

4. All disclosed information shall be released via company announcements as well as through

the annual report.

5. The Board shall commit at all times to fully disclose material information dealings. It shall

cause the filing of all required information for the interest of the stakeholders.

PUBLIC ACCOUNTABILITY

1. This manual shall be available for inspection by any member of the Association at reasonable

hours on business days.

2. All trustees, executives, division and officer heads are tasked to ensure the thorough

dissemination of this Manual to all employees and related third parties, and to likewise enjoin

compliance in the process.

3. An adequate number of printed copies of this Manual must be reproduced under the

supervision of the Board Relations Office, with a minimum of at least one (1) hard copy of

the Manual per division/office.

RESPONSIBILITY FOR GOOD GOVERNANCE

Good governance shall be the main responsibility of the Board of Trustees and its

Committees:

1. Each Committee shall report regularly to the Board of Trustees.

2. The Compliance Officer shall establish an evaluation system to be conducted thereon to

determine and measure compliance with this Governance Manual. Any violation thereof shall

subject the responsible officer or employee to an investigation to determine his culpability

for possible removal as Trustee or any sanction against him.

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3. The establishment of such evaluation system, including the features thereof, shall be

disclosed in the company’s annual report or in such form of report that is applicable to the

Association. The adoption of such evaluation system must be covered by a Board resolution.

4. This Manual shall be subject to annual review every March unless the same frequency is

amended by the Board.

5. All business processes and practices being performed within any Group, Division or business

unit that are not consistent with any portion of this manual shall be revoked unless upgraded

to the compliant extent.

IMPLEMENTATION AND ENFORCEMENT

1. To strictly observe and implement the provisions of the Manual, after notice and hearing, any

violation of the provisions of the Manual by any member of the Board of Trustees shall be

sufficient cause for removal from trusteeship.

2. The Compliance Officer shall be responsible for determining any violation hereof and subject

to the requirements of due process, shall recommend to the Chairman of the Board the

investigation thereof and if warranted, the termination of the concerned trustee subject to

review and approval of the Board.

3. All other violations by the officers and staff of AFPMBAI shall be dealt with in accordance

with the AFPMBAI’s Employee Code of Conduct.

GEN GREGORIO PIO P CATAPANG JR AFP

Chief of Staff, AFP and

Chairman of the Board, AFPMBAI

References:

1. Board Resolution No 42, Series of 2014

2. AFPMBAI Manual of Corporate Governance dated May 2011

3. Approved Board Protocol

4. Approved Board Committee Charters

5. Approved Protocol for Board Meetings

6. Approved Protocol for Board Committee Meetings

7. Articles of Incorporation and By-Laws, and its proposed amendments