INVESTMENT PORTFOLIO MIX OF THE TRUST FUNDS OF PRE-NEED COMPANIES

To ensure the liquidity of the trust fund to guarantee the delivery
of the benefits provided for under the plan contract and likewise obtain
sufficient capital growth to meet the growing actuarial reserve
liabilities, all investments out of the trust funds of the pre-need
companies shall be limited to the following:

1.    Fixed income instruments
2.    Mutual Funds
3.    Equities
4.    Real Estate

INVESTMENT GUIDELINES:

1.         Fixed Income Instruments . — These may
be classified into short term and long-term instruments. The instrument
is short term if the maturity period is 365 days or less. This category
includes:

–        Government securities which shall not be less than 10% of the trust fund equity

–        Savings/time deposits and common trust fund with a
commercial bank with satisfactory examination rating as of the last
examination by the Bangko Sentral ng Pilipinas.

–        Commercial papers duly registered with the Securities
and Exchange Commission with a credit rating of “1” for short term and
“Aaa” for long term based on the rating scale of Philippine Rating
Corporation or its equivalent if rated by other local credit rating
agency at the time of investment. The maximum exposure to long-term
commercial papers shall not exceed fifteen percent (15%) of the total
trust fund equity while the exposure to each commercial paper issued
shall not exceed ten percent (10%) of the allocated amount.

–        Direct loans to corporations which are financially
stable, making profits for the last three years and have good track
record of paying their previous loans from the trust fund of pre-need
companies. These loans shall be fully secured by a real estate mortgage
up to the extent of 60% of the appraised value of the property at the
time the loan was granted. The property shall be covered by a Transfer
Certificate of Title registered in the name of the mortgagor and free
from liens and encumbrances. The maximum amount to be allocated for
direct loans shall not exceed 5% of the total trust fund equity while
the amount to be granted to each corporate borrower shall not exceed 10%
of the amount allocated. The maximum term of the loan is two years
only.

2.         Mutual funds duly registered with the Securities and
Exchange Commission and where funds are invested only in fixed income
instruments and blue chips subject to the limitations prescribed by law,
rules and regulations.

3.         Equities. Investments in equities shall be limited to
stocks listed in the big board of the Philippine Stock Exchange. These
investments shall include stocks issued by companies that are
financially stable, actively traded, possess good track record of growth
and have declared dividends for the past three years. The amount to be
allocated for this purpose shall not exceed 25% of the total trust fund
equity while the investment in any particular issue shall not exceed 10%
of the allocated amount. The investment shall be recorded at the
aggregate of the lower of cost or market. Existing investments which are
not in accordance herewith shall be disposed within a period of one and
a half years from the effectivity date of this Circular.

4.         Real Estate . These shall include real
estate properties located in strategic areas of cities and first class
municipalities. The Transfer Certificate of Title shall be in the name
of the seller, free from liens and encumbrances and shall be transferred
in the name of the trustee in trust for the planholders unless the
seller/transferor is the pre-need company wherein an annotation to the
TCT relative to the sale/transfer may be allowed. It shall be recorded
at acquisition cost. However, the real estate shall be appraised every
five (5) years by a licensed real estate appraiser, accredited by the
Philippine Association of Real Estate Appraisers, to reflect the
increase or decrease in the value of the property. In case the appraisal
would result to increase in value, only 50% of the appraisal increase
is allowed to be recorded in the books of the trust fund but in case of
decline in value, the entire decline shall be recorded. Appraisal
increment should not be used to cover up the required monthly
contribution to the trust fund. The total recorded value of the real
estate investment shall not exceed 25% of the total trust fund equity of
the pre-need company. In the event that the existing real estate
investment exceeds the aforesaid limit, the same shall be leveled off to
the prescribed limit within a period of two years from the effectivity
date of this circular.

RESPONSIBILITIES OF THE TRUSTEE:

The trustee is expected to exercise due diligence for the
protection of the planholders guided by sound investment principles. It
shall have the exclusive management and control over the funds and the
right at any time to sell, convert, invest, change, transfer or
otherwise change or dispose of the assets comprising the funds and shall
at all times maintain a liquid reserve investment sufficient to cover
the benefits due to planholders during the ensuing year but in no case
less than 20% of the net asset value of the trust fund. For this
purpose, the trustee shall require the trustor to submit a list of fully
paid plans payable during the year every beginning of the company’s
fiscal year.

The trustee shall not use the fund to invest in or extend any loan
or credit accommodation to the pre-need company, its directors,
officers, stockholders, and related interests as well as to persons or
enterprises controlling, owned or controlled by, or under common control
with said company, its directors, officers, stockholders and related
interest.

SEC POWERS:

The Commission may, at its discretion demand for the conversion to
cash or other near cash assets the investments made by the trustee to
protect the interest of the planholders.

REPEALING CLAUSE:

All circulars, rules and regulations, or parts inconsistent with
the provisions of this circular are repealed or modified accordingly.

EFFECTIVITY:

This Circular takes effect immediately.

Adopted: 21 June 2000

(SGD.) LILIA R. BAUTISTA
Chairman