CODE OF CORPORATE GOVERNANCE

In accordance with the States policy to actively promote corporate governance reforms aimed to raise investor confidence, develop capital market and help achieve high sustained growth for the corporate sector and the economy, the Commission, in its Resolution No.1 !, Series of "##" dated $pril #% "##", approved the promulgation and implementation of this Code, which shall &e applica&le to corporations whose securities are registered or listed, corporations which are grantees of permits'licenses and secondary franchise from the Commission and pu&lic companies. (his Code also applies to &ranches or su&sidiaries of foreign corporations operating in the )hilippines whose securities are registered or listed I. Definitions A. Board of Directors * refers to the collegial &ody that e+ercises the corporate powers of all corporations formed under the Corporation Code. It conducts all &usiness and controls or holds all property of such corporations. B. Corporate Governance * refers to a system where&y shareholders, creditors and other stakeholders of a corporation ensure that management enhances the value of the corporation as it competes in an increasingly glo&al market place. C. Independent Director * refers to a person other than an officer or employee of the corporation, its parent or su&sidiaries, or any other individual having any relationship with the corporation, which would interfere with the e+ercise of independent ,udgment in carrying out the responsi&ilities of a director. (his means that apart from the directors fees and shareholdings, he should &e independent of management and free from any &usiness or other relationship which could materially interfere with the e+ercise of his independent ,udgment.

D. Public Company * refers to any corporation with a class of e-uity securities listed in an .+change or with assets in e+cess of /ifty Million )esos 0)!#,###,###.##1 and having two hundred 0"##1 or more stockholders each holding at least one hundred 01##1 shares of a class of its securities. E. Management * refers to the &ody given the authority to implement the policies determined &y the 2oard in directing the course'&usiness activity'ies of the corporation.

. E!ecutive Director * refers to a director who is at the same time appointed to head a department'unit within the corporate organi3ation. G. "on#e!ecutive director * refers to a 2oard mem&er with non4e+ecutive functions. $. "on#audit %ork * refers to other services offered &y the e+ternal auditor to a corporation that are not directly related and relevant to its statutory audit function. .+amples include accounting, payroll, &ookkeeping, reconciliation, computer pro,ect management, data processing or information technology outsourcing services, internal auditing, and services that may compromise the independence and o&,ectivity of the e+ternal audit. I. Internal control * refers to the process effected &y a companys 2oard of 5irectors, management and other personnel, designed to provide reasona&le assurance regarding the achievement of o&,ectives in the effectiveness and efficiency of operations, the

relia&ility of financial reporting, and compliance with applica&le 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 &usiness activity, or com&ination of risks or &usiness activities, to which the company is e+posed. '. Internal auditing * refers to an independent, o&,ective assurance and consulting activity designed to add value and improve an organi3ations operations. It helps an organi3ation accomplish its o&,ectives &y &ringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. (. Internal audit department * refers to a department, division, team of consultants, or other practitioner0s1 that provide independent, o&,ective assurance and consulting services designed to add value and improve an organi3ations operations. M. C)ief Audit E!ecutive * refers to the top position within the organi3ation responsi&le for internal audit activities. In a traditional internal audit activity, this would &e the internal audit director. In the case where internal audit activities are o&tained from outside service providers, the chief audit e+ecutive is the person responsi&le for overseeing the service contract and the overall -uality assurance of these activities, and follow4up of engagement results. (he 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 o&,ectively. *. *b+ectivity * refers to un&iased mental attitude that re-uires the person to carry out his'her work in such a manner that he'she has an honest &elief in his'her work product and that no significant -uality compromises are made. 6&,ectivity re-uires the person not to su&ordinate his'her ,udgment to that of others . P. ,tandards for t)e Professional Practice of Internal Auditing -,PPIA. * refers to the criteria &y which the operations of an internal auditing department are evaluated and measured. (hey are intended to represent the practice of internal auditing as it should &e, provide a framework for performing and promoting a &road range of value4added internal audit activities and foster improved organi3ational processes and operations .

CODE OF CORPORATE GOVERNANCE

II.

The Board Governance

(he 2oard of 5irectors 02oard1 is primarily responsi&le for the governance of the corporation. It needs to &e structured so that it provides an independent check on management. $s such, it is vitally important that a num&er of &oard mem&ers &e independent from management. 1. Composition of the 2oard

(he 2oard shall &e composed of at least five 0!1 &ut not more than fifteen 01!1 mem&ers elected &y shareholders. )u&lic companies shall have at least two 0"1 independent directors or such independent directors shall constitute at least twenty percent 0"#71 of the mem&ers of such 2oard, whichever is the lesser. $ll other companies are encouraged to have independent directors as well. (he 2oard may include a &alance of e+ecutive and non4e+ecutive directors 0including independent non4e+ecutives1, having a clear division of responsi&ilities such that no individual or small group of individuals can dominate the 2oards decision making. (he non4e+ecutive directors should &e of sufficient -ualifications, stature and num&er to carry significant weight in the 2oards decisions. Non4e+ecutive directors considered &y the 2oard to &e independent shall &e identified in the annual report. ". 8ultiple 2oard Seats (he 2oard may consider guidelines on the num&er of directorships for its mem&ers. (he optimum num&er is related to the capacity of a director to perform his duties diligently in general. (he Chief .+ecutive 6fficer and other e+ecutive directors may su&mit themselves to a low indicative limit on mem&ership in other corporate 2oards. (he same low limit may apply to independent, non4e+ecutive directors who serve as full4 time e+ecutives in other corporations. In any case, the capacity of directors to serve with diligence shall not &e compromised. . (he Chairman and the Chief .+ecutive 6fficer (he roles of the Chairman and the Chief .+ecutive 6fficer 09C.6:1 may &e separate to ensure an appropriate &alance of power, increased accounta&ility and greater capacity of the 2oard for independent decision4making. (he company shall disclose the relationship &etween the Chairman and the C.6 upon their election. ;here &oth positions of the Chairman and C.6 are unified, there is clearly one leader to provide a single vision and mission. In this instance, checks and &alances should &e clearly provided to help ensure that independent, outside views, perspectives, and ,udgments are given proper hearing in the 2oard. (he Chairmans responsi&ilities may include< a. schedule meetings to ena&le the 2oard to perform its duties responsi&ly while not interfering with the flow of the companys operations &. prepare meeting agenda in consultation with the C.6= c. e+ercise control over -uality, -uantity and timeliness of the flow of &etween 8anagement and the 2oard= and information

d. assist in ensuring compliance with companys guidelines on corporate governance. (he responsi&ilities set out in the a&ove guidelines may pertain only to the Chairmans role in respect to the 2oard proceedings. It should not &e taken as a comprehensive list of all the duties and responsi&ilities of a Chairman. %. >ualifications of 5irectors

.very director shall own at least one 011 share of the capital stock of the corporation of which he is a director, which share shall stand in his name in the &ooks of the corporation. (he 2oard may provide for additional -ualifications of a director such as, &ut not limited to, the following< a. .ducational attainment &. $de-uate competency and understanding of &usiness c. $ge re-uirement d. Integrity'pro&ity e. $ssiduousness !. 5is-ualification of 5irectors (he following shall &e grounds for the dis-ualification of a director< a. $ny person who has &een finally convicted &y a competent ,udicial or administrative &ody of the following< 0i1 any crime involving the purchase or sale of securities, e.g., proprietary or non4proprietary mem&ership certificate, commodity futures contract, or interest in a common trust fund, pre4need plan, pension plan or life plan= 0ii1 any crime arising out of the persons conduct as an underwriter, &roker, dealer, investment company, investment adviser, principal distri&utor, mutual fund dealer, futures commission merchant, commodity trading advisor, floor &roker= and 0iii1 any crime arising out of his relationship with a &ank, -uasi4&ank, trust company, investment house or as an affiliated person of any of them.

&. $ny person who, &y reason of any misconduct, after hearing or trial, is permanently or temporarily en,oined &y order, ,udgment or decree of the Commission or any court or other administrative &ody of competent ,urisdiction from< 0i1 acting as an underwriter, &roker, dealer, investment adviser, principal distri&utor, mutual fund dealer, futures commission merchant, commodity trading advisor, or a floor &roker= 0ii1 acting as a director or officer of a &ank, -uasi4&ank, trust company, investment house, investment company or an affiliated person of any of them= 0iii1 engaging in or continuing any conduct or practice in connection with any such activity or willfully violating laws governing securities, and &anking activities. Such dis-ualification shall also apply when such person is currently su&,ect to an effective order of the Commission or any court or other administrative &ody refusing, revoking or suspending any registration, license or permit issued under the Corporation Code, Securities Regulation Code, or any other law administered &y the Commission or 2angko Sentral ng )ilipinas, or under any rule or regulation promulgated &y the Commission or 2angko Sentral ng )ilipinas, or otherwise restrained to engage in any activity involving securities and &anking. Such person is also dis-ualified when he is currently su&,ect to an effective order of a self4regulatory organi3ation suspending or e+pelling him from mem&ership or participation or from associating with a mem&er or participant of the organi3ation.

c. $ny person finally convicted ,udicially or administratively of an offense involving moral turpitude, fraud, em&e33lement, theft, estafa, counterfeiting, misappropriation, forgery, &ri&ery, false oath, per,ury or other fraudulent act or transgressions. d. $ny person finally found &y the Commission or a court or other administrative &ody to have willfully violated, or willfully aided, a&etted, counseled, induced or procured the violation of, any provision of the Securities Regulation Code, the Corporation Code, or any other law administered &y the Commission or 2angko Sentral ng )ilipinas, or any rule, regulation or order of the Commission or 2angko Sentral ng )ilipinas, or who has filed a materially false or misleading application, report or registration statement re-uired &y the Commission, or any rule, regulation or order of the Commission. e. $ny person ,udicially declared to &e insolvent. f. $ny person finally found guilty &y a foreign court or e-uivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct listed in paragraphs 0a1 to 0e1 hereof.

g. $ny affiliated person who is ineligi&le, &y reason of paragraphs 0a1 to 0e1 hereof to serve or act in the capacities listed in those paragraphs. h. Conviction &y final ,udgment of an offense punisha&le &y imprisonment for a period e+ceeding si+ 0?1 years, or a violation of the Corporation Code, committed within five 0!1 years prior to the date of his election or appointment.

(he 2oard may also provide for the temporary dis-ualification of a director for the following reasons< a. Refusal to fully disclose the e+tent of his &usiness interest as re-uired under the Securities Regulation Code and its Implementing Rules and Regulations. (his dis-ualification shall &e in effect as long as his refusal persists.

&. $&sence or non4participation for whatever reason's for more than fifty percent 0!#71 of all meetings, &oth regular and special, of the 2oard of directors during his incum&ency, or any twelve 01"1 month period during said incum&ency. (his dis-ualification applies for purposes of the succeeding election. c. 5ismissal'termination from directorship in another listed corporation for cause. (his dis-ualification shall &e in effect until he has cleared himself of any involvement in the alleged irregularity. d. 2eing under preventive suspension &y the corporation. e. If the independent director &ecomes an officer or employee of the same corporation he shall &e automatically dis-ualified from &eing an independent director. f. If the &eneficial security ownership of an independent director in the company or in its related companies shall e+ceed the 1#7 limit. Conviction that has not yet &ecome final referred to in the grounds for the dis-ualification of directors.

g.

?. 5uties, /unctions and Responsi&ilities It is the 2oards responsi&ility to foster the long4term success of the corporation and secure its sustained competitiveness in a manner consistent with its fiduciary responsi&ility, which it should e+ercise in the &est interest of the corporation and its shareholders. a. @eneral Responsi&ility $ directors office is one of trust and confidence. Ae should act in the &est interest of the corporation in a manner characteri3ed &y transparency, accounta&ility and fairness. Ae should e+ercise leadership, prudence and integrity in directing the corporation towards sustained progress over the long term. $ director assumes certain responsi&ilities to different constituencies or stakeholders, who have the right to e+pect that the institution is &eing run in a prudent and sound manner. (o ensure good governance of the corporation, the 2oard should esta&lish the corporations vision and mission, strategic o&,ectives, policies and procedures that may guide and direct the activities of the company and the means to attain the same as well as the mechanism for monitoring managements performance. ;hile the management of the day4to4day affairs of the institution is the responsi&ility of the management team, the 2oard is, however, responsi&le for monitoring and overseeing management action. &. 5uties and /unctions (o insure a high standard of &est practice for the company and its stakeholders, the 2oard should conduct itself with utmost honesty and integrity in the discharge of its duties, functions and responsi&ilities which include, among others, the following< i. Install a process of selection to ensure a mi+ of competent directors, each of whom can add value and contri&ute independent ,udgment to the formulation of sound corporate strategies and policies. Select and appoint the C.6 and other senior officers, who must have the motivation, integrity, competence and professionalism at a very high level. $dopt a professional development program for employees and officers, and succession planning for senior management.

ii. 5etermine the corporations purpose and value as well as strategies and general policies to ensure that it survives and thrives despite financial crises and its assets and reputation are ade-uately protected. )rovide sound written policies and strategic guidelines to the corporation that will help decide on ma,or capital e+penditures. 5etermine important policies that &ear on the character of the corporation with a view towards ensuring its long4term via&ility and strength. It must periodically evaluate and monitor implementation of such strategies and policies, &usiness plans and operating &udgets as well as managements over4all performance to ensure optimum results. iii. .nsure that the corporation complies with all relevant codes of &est &usiness practices. iv. laws, regulations and

Identify the corporations ma,or and other stakeholders and formulate a clear policy on communicating or relating with them accurately, effectively and sufficiently. (here must &e an accounting rendered to them regularly in order to serve their legitimate interests.

Bikewise, an investor relations program that reaches out to all shareholders and fully informs them of corporate activities should &e developed. $s a &est practice, the chief financial officer or C.6 should have oversight of this program and should actively participate in pu&lic activities v. $dopt a system of internal checks and &alances, which may &e applied in the first instance to the 2oard. $ regular review of the effectiveness of such system must &e conducted so that the decision4making capa&ility and the integrity of corporate operations and reporting systems are maintained at a high level at all times. vi. .ndeavor to provide appropriate technology and systems rating to account for availa&le resources to ensure a position of a strong and meaningful competitor. Identify key risk areas and key performance indicators and monitor these factors with due diligence. vii. Constitute an $udit and Compliance Committee. viii. )roperly discharge 2oard functions &y meeting regularly. Independent views during 2oard meetings should &e given due consideration and all such meetings should &e duly minuted. i+. Ceep 2oard authority within the powers of the institution as prescri&ed in the articles of incorporation, &y4laws and in e+isting laws, rules and regulation. Conduct and maintain the affairs of the institution within the scope of its authority as prescri&ed in its charter and in e+isting laws, rules and regulations. c. Specific 5uties and Responsi&ilities of a 5irector i. To conduct fair business transactions ith the cor!oration and to ensure that !ersona" interest does not bias Board decisions. (he &asic principle to &e o&served is that a director should not use his position to make profit or to ac-uire &enefit or advantage for himself and'or his related interests. Ae should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest should arise on the part of directors or senior e+ecutives, it should &e fully disclosed and the concerned director should not participate in the decision making. $ director who has a continuing conflict of interest of a material nature should consider resigning. ii. To devote ti#e and attention necessar$ to !ro!er"$ dischar%e his duties and res!onsibi"ities. $ director should devote sufficient time to familiari3e himself with the institutions &usiness. Ae should &e constantly aware of the institutions condition and &e knowledgea&le enough to contri&ute meaningfully to the 2oards work. Ae should attend and actively participate in 2oard and committee meetings, re-uest and review meeting materials, ask -uestions, and re-uest e+planations.

iii. To act &udicious"$. 2efore deciding on any matter &rought &efore the 2oard of directors, every director should thoroughly evaluate the issues, ask -uestions and seek clarifications when necessary. iv. To e'ercise inde!endent &ud%#ent. $ director should view each pro&lem'situation o&,ectively. ;hen a disagreement with others occurs, he should carefully evaluate the situation and state his position. Ae should not &e

afraid to take a position even though it might &e unpopular. Corollarily, he should support plans and ideas that he thinks are &eneficial to the corporation. v. To have a or(in% (no "ed%e of the statutor$ and re%u"ator$ re)uire#ents affectin% the cor!oration* inc"udin% the contents of its artic"es of incor!oration and b$+"a s* the re)uire#ents of the Co##ission* and here a!!"icab"e* the re)uire#ents of other re%u"ator$ a%encies. $ director should also keep himself informed of industry developments and &usiness trends in order to safeguard the corporations competitiveness.

vi. To observe confidentia"it$. $ director should o&serve the confidentiality of non4 pu&lic information ac-uired &y reason of his position as director. Ae should not disclose any information to any other person without the authority of the 2oard. vii. To ensure the continuin% soundness* effectiveness and ade)uac$ of the co#!an$,s contro" environ#ent. d. Internal Control Responsi&ilities of the 2oard (he control environment is composed of< 0a1 the 2oard which ensures that the company is appropriately and effectively managed and controlled, 0&1 a management that actively manages and operates the company in a sound and prudent manner, 0c1 the organi3ational and procedural controls supported &y an effective management information system and risk management reporting system, and 0d1 the independent audit mechanisms to monitor the ade-uacy and effectiveness of the organi3ations governance, operations, information systems, to include relia&ility and integrity of financial and operational information, effectiveness and efficiency of operations, safeguarding of assets, and compliance with laws, rules, regulations, and contracts. i. (he minimum internal control mechanisms for the 2oards oversight responsi&ility may include< 5efining the duties and responsi&ilities of the C.6= Selecting or approving an individual with appropriate a&ility, integrity, e+perience to fill the C.6 role= Reviewing proposed senior management appointments= .nsuring the selection, appointment and retention of -ualified and competent management= Reviewing the companys personnel and human resource policies and sufficiency, conflict of interest situations, changes to the compensation plan for employees and officers and management succession plan.

ii.

(he minimum internal control mechanisms for managements operational responsi&ility would center on the C.6, &eing ultimately accounta&le for the companys organi3ational and procedural controls.

iii. (he scope and particulars of a system of effective organi3ational and procedural controls may differ among companies depending on factors such as< the nature and comple+ity of &usiness and the &usiness culture= the volume, si3e and comple+ity of transactions= the degree of risk= the degree of centrali3ation and delegation of authority= the e+tent and effectiveness of information technology= and the e+tent of regulatory compliance.

iv. .ach company may have in place an independent audit function, through which the companys 2oard, senior management, and stockholders may &e provided with reasona&le assurance that its key organi3ational and procedural controls are effective, appropriate, and complied with. (he 2oard may appoint a chief audit e+ecutive to carry out the audit function, and may re-uire the chief audit e+ecutive to report to a level within the organi3ation that allows the internal audit activity to fulfill its responsi&ilities. D. 2oard 8eetings and >uorum Re-uirement 8em&ers of the 2oard should attend regular and special meetings of the 2oard in person. In view of modern technology, however, attendance at 2oard meetings through teleconference may &e allowed. $n independent director should always &e in attendance. Aowever, the a&sence of an independent director may not affect the -uorum re-uirements if he is duly notified of the meeting &ut deli&erately and without ,ustifia&le cause fails to attend the meeting. Eustifia&le causes may only include grave illness or death of immediate family and serious accidents. (o monitor compliance with the a&ove re-uirement, corporations may, at the end of every fiscal year, provide the Commission with a sworn certification that the foregoing re-uirement has &een complied with. (he said certification may &e su&mitted with the companys current report 0S.C /orm 1D411 or on a separate filing. F. Remuneration of the 8em&ers of the 2oard and 6fficers Bevels of remuneration shall &e sufficient to attract and retain the directors, if any, and officers needed to run the company successfully. Corporations, however, should avoid paying more than what is necessary for this purpose. $ proportion of e+ecutive directors remuneration may &e structured so as to link rewards to corporate and individual performance. Corporations may esta&lish a formal and transparent procedure for developing a policy on e+ecutive remuneration and for fi+ing the remuneration packages of individual directors, if any, and officers. No director should &e involved in deciding his or her own remuneration. (he corporations annual reports, information and pro+y statements shall include a clear, concise and understanda&le disclosure of all plan and non4plan compensation awarded to, earned &y, paid to, or estimated to &e paid to, directly or indirectly to all individuals serving as the C.6 or acting in a similar capacity during the last completed fiscal year, regardless of the compensation level and the corporations four 0%1 most highly compensated e+ecutive officers other than the C.6 who were serving as e+ecutive officers at the end of the last completed year. (o protect the funds of the corporation, the Commission may regulate the payment &y the corporation to directors and officers of compensation, allowance, fees and fringe &enefits in very e+ceptional cases, e.g., when a corporation is under receivership or reha&ilitation. G. 2oard Committees

(he 2oard shall constitute Committees in aid of good corporate governance. $. (he $udit Committee shall &e composed of at least three 0 1 2oard mem&ers, prefera&ly with accounting and finance &ackground, one of whom shall &e an independent director and another should have related audit e+perience. It shall have the following specific functions< a. )rovide oversight over the senior managements activities in managing credit, market, li-uidity, operational, legal and other risks of the corporation. (his function shall include receiving from senior management periodic information on risk e+posures and risk management activities. Aowever, in consideration of the risk profile of the corporation, the 2oard may constitute a separate Risk 8anagement Committee to focus on carrying out this oversight role over risk management=

&. )rovide oversight of the corporations internal and e+ternal auditors= c. Review and approve audit scope and fre-uency, and the annual internal audit plan= 5iscuss with the e+ternal auditor &efore the audit commences the nature and scope of the audit, and ensure coordination where more than one audit firm is involved=

d.

e. Responsi&le for the setting4up of an internal audit department and consider the appointment of an internal auditor as well as an independent e+ternal auditor, the audit fee and any -uestion of resignation or dismissal= f. 8onitor and evaluate the ade-uacy and effectiveness of the corporations internal control system= Receive and review reports of internal and e+ternal auditors and regulatory agencies, where applica&le and ensure that management is taking appropriate corrective actions, in a timely manner in addressing control and compliance functions with regulatory agencies=

g.

h. Review the -uarterly, half4year and annual financial statements &efore su&mission to the 2oard, focusing particularly on< i. $ny change's in accounting policies and practices 8a,or ,udgmental areas Significant ad,ustments resulting from the audit @oing concern assumption Compliance with accounting standards Compliance with ta+, legal, and stock e+change re-uirements

Responsi&le for coordinating, monitoring and facilitating compliance with e+isting laws, rules and regulations. It may also constitute a Compliance Hnit for this purpose.

,.

.valuate and determine non4audit work &y e+ternal auditor and keep under review the non4audit fees paid to the e+ternal auditor &oth in relation to their significance to the auditor and in relation to the companys total e+penditure on consultancy. (he non4audit work should &e disclosed in the annual report.

k. .sta&lish and identify the reporting line of the chief audit e+ecutive so that the reporting level allows the internal audit activity to fulfill its responsi&ilities. (he chief audit e+ecutive shall report directly to the $udit Committee functionally. (he $udit Committee shall ensure that the internal auditors shall have free and full access to all the companys records, properties and personnel relevant to the internal audit activity and that the internal audit activity should &e free from interference in determining the scope of internal auditing e+aminations, performing work, and communicating results, and shall provide a venue for the $udit Committee to review and approve the annual internal audit plan. (he Chairman of this committee should &e an independent director. Ae should &e responsi&le for inculcating in the minds of the 2oard mem&ers the importance of management responsi&ilities in maintaining a sound system of internal control and the 2oards oversight responsi&ility. /or )hilippine &ranches or su&sidiaries of foreign corporations covered &y this Code, the local audit head for such entities should &e independent of the )hilippine operations and should report to the regional or corporate head-uarters. 2. (he 2oard may also constitute the following committees< a. (he Nomination Committee which may &e composed of at least three 0 1 mem&ers, one of whom should &e an independent director may review and evaluate the -ualifications of all persons nominated to the 2oard as well as those nominated to other positions re-uiring appointment &y the 2oard and provide assessment on the 2oards effectiveness in directing the process of renewing and replacing 2oard mem&ers. (he Compensation or Remuneration Committee may &e composed of at least three 0 1 mem&ers, one of whom should &e an independent director. It may esta&lish a formal and transparent procedure for developing a policy on e+ecutive remuneration and for fi+ing the remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the corporations culture, strategy and control environment.

&.

1#. (he Corporate Secretary (he Corporate Secretary, who must &e a /ilipino, is an officer of the corporation. )erfection in performance and no surprises are e+pected of him. Bikewise, his loyalty to the mission, vision and specific &usiness o&,ectives of the corporate entity come with his duties. Bike the C.6, he should work and deal fairly and o&,ectively with all the constituencies of the corporation, namely, the 2oard, management, stockholders and other stakeholders. $s such, he should &e someone his colleagues and these constituencies can turn to, trust and confide with on a regular &asis.

Ae should have the administrative skills of the chief administrative officer of the corporation and the interpersonal skills of the chief human resources officer. If the Corporate Secretary is not the general counsel, then he must have the legal skills of a chief legal officer. Ae must also have the financial and accounting skills of a chief financial officer, and, lastly the vision and decisiveness of the C.6. Since there are different individuals on top of various corporate activities, the Corporate Secretary should &e fully informed and &e part of the scheduling process of the different activities. $s to agendas, he should have the schedule thereof at least for the current year and should put the 2oard on notice &efore every meeting. It is a very important discipline to get the 2oard to think ahead. Ae should serve as an adviser to directors responsi&ilities and o&ligations. (he Corporate Secretary should make sure that directors have &efore them everything that they need to make an informed decision. ;hen the 2oard makes a decision, it is covered &y a &usiness ,udgment that can &e arrived at &y the mem&ers acting in good faith with the assistance of the Corporate Secretary who should review carefully the information presented to the directors at the time they are to make a decision.

-u!!"$ Infor#ation In order to fulfill their responsi&ilities, 2oard mem&ers, should &e provided with complete, ade-uate and timely information prior to 2oard meetings on an on4going &asis. 8anagement should have an o&ligation to supply the 2oard with complete, ade-uate information in a timely manner. Reliance purely on what is volunteered &y 8anagement is unlikely to &e enough in all circumstances and further in-uiries may &e re-uired if the particular director is to fulfill his or her duties properly. Aence, the 2oard may have separate and independent access to the companys senior management. (he information may include the &ackground or e+planatory information relating to matters to &e &rought &efore the 2oard, copies of disclosure documents, &udgets, forecasts and monthly internal financial statements. ;ith respect to the &udget, any variance &etween the pro,ections and actual results should also &e disclosed and e+plained. 5irectors should also have a separate and independent access to the Corporate Secretary. (he role of the Corporate Secretary should &e clearly defined and should include responsi&ility for ensuring that 2oard procedures are &eing followed and that applica&le rules and regulations are complied with. (he Corporate Secretary should attend all 2oard meetings. (he 2oard should have a procedure for directors, either individually or as a group, in the furtherance of their duties, to take independent professional advice, if necessary, at the corporations e+pense.

Accountabi"it$ and Audit 1. (he 2oard is primarily accounta&le to the shareholders and 8anagement is primarily accounta&le to the 2oard. (he 2oard should provide the shareholders with a &alanced

and understanda&le assessment of the corporations performance, position and prospects on a -uarterly &asis. (he 8anagement should provide all mem&ers of the 2oard with a &alanced and understanda&le account of the corporations performance, position and prospects on a monthly &asis. (his responsi&ility should e+tend to interim and other price sensitive pu&lic reports and reports to regulators 0if re-uired1. It should &e primarily responsi&le in making financial reporting and internal control in accordance with the following guidelines< a. )resent a &alanced and understanda&le assessment of the companys position and prospects. (he 2oards responsi&ility to present a &alanced and understanda&le assessment should e+tend to interim and other price4sensitive pu&lic reports and reports to regulators as well as to information re-uired to &e presented &y statutory re-uirements= &. .+plain their responsi&ility for preparing the accounts, for which there should &e a statement &y the auditors a&out their reporting responsi&ilities= c. Report that the &usiness is a going concern, with supporting assumptions or -ualifications, if necessary= 8aintain a sound system of internal control to safeguard stakeholders investment and the companys assets= 2ased on the approved audit plans, scope and fre-uency of audits, ensure that internal audit e+aminations cover, at least, the evaluation of ade-uacy and effectiveness of controls encompassing the organi3ations governance, operations, information systems, to include relia&ility and integrity of financial and operational information, effectiveness and efficiency of operations, safeguarding of assets, and compliance with laws, rules, regulations, and contracts. Re-uire the chief audit e+ecutive to render to the $udit Committee and senior management an annual report on the internal audit departments activity, purpose, authority, responsi&ility and performance relative to the audit plans and strategies approved &y the $udit Committee of the 2oard. Such annual report should include significant risk e+posures and control issues, corporate governance issues, and other matters needed or re-uested &y the 2oard and senior management. (he chief audit e+ecutives annual report shall likewise &e made availa&le to the stockholders of the company. Internal auditors shall report that their activities are 9conducted in accordance with the Standards for the )rofessional )ractice of Internal $uditing:. 6therwise, the chief audit e+ecutive shall disclose to the 2oard and senior management that it has not yet achieved full compliance with the standards for the professional practice of internal auditing.

d.

e.

f.

". Selection'$ppointment, Resignation, 5ismissal or Cessation of Service of an .+ternal $uditor (he 2oard, through the $udit Committee, shall recommend to the stockholders a duly accredited e+ternal auditor who shall undertake an independent audit and shall provide an o&,ective assurance on the way in which financial statements shall have &een prepared and presented. Such e+ternal auditor cannot at the same time provide the services of an internal auditor to the same client. 6ther non4audit work should not &e in conflict with the functions of the e+ternal auditor.

(he e+ternal auditor should &e rotated every five 0!1 years or earlier or the handling partner shall &e changed. (he reason's for the resignation, dismissal or cessation from service and the date thereof of an e+ternal auditor shall &e reported in the companys annual and current reports. Said report shall include a discussion of any disagreement with said former e+ternal auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of the former auditor, would have cause making reference to the su&,ect matter of the disagreement in connection with its report. If an e+ternal auditor &elieves that the statements made in an annual report, information statement or pro+y statement filed during his engagement are incorrect or incomplete, he shall also present his views in said reports. -toc(ho"ders, Ri%hts and Protection of .inorit$ -toc(ho"ders, Interests (he 2oard shall &e committed to respect the following rights of the stockholders< 1. Ioting Right Shareholders have the right to elect, remove and replace directors and vote on certain corporate acts in accordance with the Corporation Code. (he Code mandates the use of cumulative voting in the election of directors. $lthough directors may &e removed with or without cause, the Code prohi&its removal without cause if it will deny minority shareholders representation in the 2oard. Removal of directors re-uires an affirmative vote of two4thirds of the outstanding capital. ". )re4emptive Right $ll stockholders have pre4emptive rights, unless there is a specific denial of this right in the articles of incorporation or an amendment thereto. (hey shall have the right to su&scri&e to the capital stock of the corporation. (he $rticles of Incorporation may lay down the specific rights and powers of shareholders with respect to the particular shares they hold, all of which are protected &y law so long as they are not in conflict with the Corporation Code. . )ower of Inspection (he Corporation Code mandates corporations to allow shareholders to inspect corporate &ooks and records including minutes of 2oard meetings and stock registries in accordance with the Corporation Code and to provide them an annual report, including financial statements, without cost or restrictions. %. Right to Information (he Shareholders shall &e provided, upon re-uest, with periodic reports which disclose personal and professional information a&out the directors and officers and certain other matters such as their holdings of the companys shares, dealings with the company, relationships among directors and key officers, and the aggregate compensation of directors and officers. (he Information Statement')ro+y Statement where these are found must &e distri&uted to the shareholders &efore annual general

meetings and in the Registration Statement and )rospectus in case of registration of shares for pu&lic offering with the Commission. (he minority shareholders should &e granted the right to propose the holding of a meeting, and the right to propose items in the agenda of the meeting, provided the items are for legitimate &usiness purposes. (he minority shareholders should have access to any and all information relating to matters for which the management is accounta&le for and to those relating to matters for which the management should include such information and, if not included, then the minority shareholders can propose to include such matters in the agenda of stockholders meeting, &eing within the definition of 9legitimate purposes:. !. Right to 5ividends Shareholders have the right to receive dividends su&,ect to the discretion of the 2oard. Aowever, the Commission may direct the corporation to declare dividends when its retained earnings is in e+cess of 1##7 of its paid4in capital stock, e+cept< a1 when ,ustified &y definite corporate e+pansion pro,ects or programs approved &y the 2oard or &1 when the corporation is prohi&ited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its consent, and such consent has not &een secured= or c1 when it can &e clearly shown that such retention is necessary under special circumstances o&taining in the corporation, such as when there is a need for special reserve for pro&a&le contingencies. ?. $ppraisal Right (he Corporation Code allows the e+ercise of the shareholders appraisal rights under the following circumstances< a. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholders or class of shares, or of authori3ing preferences in any respect superior to those of outstanding shares of any class, or of e+tending or shortening the term of corporate e+istence= &. In case of sale, lease, e+change, transfer, mortgage, pledge or other disposition of all or su&stantially all of the corporate property and assets as provided in the Corporation Code= and c. In case of merger or consolidation. It is the duty of the directors to promote shareholder rights, remove impediments to the e+ercise of shareholders rights and allow possi&ilities to seek redress for violation of their rights. (hey shall encourage the e+ercise of shareholders voting rights and the solution of collective action pro&lems through appropriate mechanisms. (hey shall &e instrumental in removing e+cessive costs and other administrative or practical impediments to shareholders participating in meetings and'or voting in person. (he directors shall pave the way for the electronic filing and distri&ution of shareholder information necessary to make informed decisions su&,ect to legal constraints.

Eva"uation -$ste#s

(he management may esta&lish a performance evaluation system to measure the performance of the 2oard and top4level management of the corporation. (he esta&lishment of such evaluation system, including the features thereof, may &e disclosed in the companys annual report 0S.C /orm 1D4$1. VII. Disc"osure and Trans!arenc$ $ dominant theme in all issues related to corporate governance is the vital importance of disclosure. (he more transparent the internal workings of the company and cash flows, the more difficult it will &e for management and controlling shareholders to misappropriate company assets or mismanage the company. (he most &asic and all encompassing disclosure re-uirement is that all material information, i.e., any thing that could potentially affect share price, should &e pu&licly disclosed. Such information would include earnings results, ac-uisition or disposal of assets, &oard changes, related party transactions, shareholdings of directors and changes to ownership. 6ther information that should always &e disclosed includes remuneration 0including stock options1 of all directors and senior management corporate strategy, and off &alance sheet transactions. $ll disclosed information should &e released via the approved stock e+change procedure for company announcements as well as through the annual report. (he 2oard shall therefore, commit at all times to full disclosure of material information dealings. It shall cause the filing of all re-uired information for the interest of the stakeholders. VIII. Co##it#ent to Cor!orate Governance Corporations shall promulgate and adopt its corporate governance rules and principles in accordance with this Code. Said rules shall &e in manual form and availa&le as reference &y the directors. It shall &e su&mitted to the Commission, which shall evaluate the same and their compliance with this Code taking into account the si3e and nature of &usiness. (he said manual shall &e availa&le for inspection &y any stockholder of the corporation at reasona&le hours on &usiness days. (he Chairman of the 2oard shall &e specifically tasked with the responsi&ility of ensuring adherence to the corporate governance code and practices. Hnless mandated &y law, other corporations are likewise encouraged to o&serve this Circular in the a&sence of any mandated corporate governance rules adopted &y other agencies. I/. Ad#inistrative -anction /ailure to adopt a manual of corporate governance as specified therein shall su&,ect a corporation, after due notice and hearing, to a penalty of )1##,###.##. /. Transitor$ Provision $ll corporations affected &y this Code shall su&mit their manual &y Euly 1, "##" to &e effective Eanuary 1, "## . $ model manual will &e drafted &y the Commission and will &e availa&le &y 8ay 1!, "##" in the S.C we& page. /I. Effective Date (his 8emorandum Circular shall take effect after fifteen 01!1 days from pu&lication in a newspaper of general circulation.

$pril !, "##".