1. PROPOSED RETIREMENT PROGRAM

2. 2 ActuarialExponents, Inc. RETIREMENT- RELATED LAWS

3. 3 ActuarialExponents, Inc. R.A. 7641  Mandates payment of retirement benefits to employees  60 yrs old (or more but not > 65); with  At least 5 years of service  Minimum retirement benefit  One-Half Month Salary per year of service with service of more than 6 months counted as 1 year  One-Half Month Salary defined as 15 days salary, plus 1/12 of 13 th month pay plus 5 days of service incentive leaves

4. 4 ActuarialExponents, Inc. INTERPRETATION: DOLE  One-Half Month Salary equivalent to  15 working days salary, plus  1/12 of 13 th month pay, plus  5 working days of service incentive leaves  In terms of monthly salary, based on company’s salary conversion policy:  20 days salary = 20/26.08 or 76.68% monthly salary  Plus 1/12 or 8.33% of 13 th month pay  Equals around 85% of monthly salary per year of service

5. 5 ActuarialExponents, Inc. R.A. 4917: Qualification Incentives  Employee’s benefits not subject to tax provided:  At least 50 yrs old w/ 10 years of service upon separation and has not availed the tax benefits under a previous employer  Involuntarily separated  Fund’s investment earnings not subject to tax  Contributions deductible for corporate income tax purposes  100% of Normal Cost / Current Service Cost  In excess of NC/CSC, 10% for the next 10 years

6. 6 ActuarialExponents, Inc. PROPOSED RETIREMENT PROGRAM

7. 7 ActuarialExponents, Inc. GENERAL OBJECTIVES Ensure compliance with the Law Provide economic security after employment Attract / Retain employees Provide additional compensation at less cost (tax incentives, only employees that served the company for a long time will be entitled to benefits)

8. 8 ActuarialExponents, Inc. BENEFITS & ELIGIBILITY Normal Retirement Benefit –Eligibility: 60 yrs old, 5 years of service –Benefit: 150% of monthly salary per year of service –Rationale: (1) Cover requirements of the R.A. 7641 (2) Survey of multi-national and prominent domestic companies shows an average of 140% of monthly salary per year of service

9. 9 ActuarialExponents, Inc. BENEFITS & ELIGIBILITY Early Retirement Benefit –Eligibility: 50 yrs old, 10 years of service; with company approval –Benefit: Same as Normal Retirement Benefit –Purposes: Maintain a younger workforce (more productive, lower salaries) Late Retirement Benefit –Eligibility: Up to 65 yrs old, with Company consent –Benefit: Same as Normal Retirement Benefit with service beyond 60 years old counted –Purpose: Make way to keep valued employees

10. 10 ActuarialExponents, Inc. BENEFITS & ELIGIBILITY Involuntary Separation Benefits – Death, Disability, etc. –Benefit: Same as Normal (in addition to the Group Life Insurance Program Benefits) –Rationale: (1) Not employee’s desire to separate from the company; (2) The more that the employee / beneficiaries need the benefit

11. 11 ActuarialExponents, Inc. BENEFITS & ELIGIBILITY Vesting Benefit –Eligibility: Depending on Years of Service –Benefit: % of Normal Retirement Benefit YOS5101520 Percentage25%50%75%100% –Purpose: Make new / young employees appreciate the program

12. 12 ActuarialExponents, Inc. COSTS & FUNDING CONSIDERATIONS

13. 13 ActuarialExponents, Inc. LONG-TERM COST AS PERCENTAGE OF PAYROLL ProposedR.A. 7641Difference 10.58%4.36%6.22% SENSITIVITY: A one percent (1%) change in fund earnings changes the cost by 1.28% of payroll MAJOR ASSUMPTIONS USED –Salary Increase Rate: 5.0% p.a. –Fund Earnings Rate: 5.0% p.a. –Employee Turnover: Company Experience

14. 14 ActuarialExponents, Inc. IMMEDIATE COST IMPACT UNDER IAS 19 ProposedR.A. 7641Difference P 6.08MP 2.2MP 3.88M MAJOR ASSUMPTIONS USED –Salary Increase Rate: 5.0% p.a. –Discount Rate: 7.5% p.a. –Employee Turnover: Company Experience

15. 15 ActuarialExponents, Inc. EXPECTED BENEFIT PAYMENTS YearBenefitYearBenefit 20110.09M20161.84M 20120.11M201711.12M 20130.79M20182.24M 20140.49M20193.08M 20150.81M20203.93M

16. 16 ActuarialExponents, Inc. FUNDING RECOMMENDATION Normal CostP 7,587,684 Accrued LiabilityP 21,623,908 AL Amortization (16 years*)P 1,995,236 Recommended FundingP 9,852,920 *16 years is the expected average duration of benefit payment

17. 17 ActuarialExponents, Inc. WHY SET IT UP NOW? Retirement expense and liabilities are anyway recognized already under the accounting standards Avail of tax incentives early Meet general objectives early Costs are more manageable