Delivering value in partnership with you Proposal to provide extemal audit services presented to the management of Public Safety Mutual Benefit Fund (PSMBFI) Incorporated for the year en¢ 31 December 2020 29 October 2020 pwc Isla Lipana & Co.bk pwe Isla Lipana & Co. Dir. Mario A. Avenido President & CEO Public Safety Mutual Benefit Fund (PSMBFI) Incorporated, No. 318 - 320 Boni Serrano Avenue Comer tst and 2nd West Streets ‘San Juan City, Philippines 29 October 2020 Proposal to provide external audit services to Public Safety Mutual Benefit Fund (PSMBFI) Incorporated for the year ending 31 December 2020 Dear Dir. Avenido, Thank you for giving us the opportunity to propose external audit services for Public Safety Mutual Benefit Fund (PSMBFI) Incorporated (hereinafter referred to as the “Association’) for the year ending 31 December 2020, We are glad to be of service to you in creating an atmosphere of cooperation to deliver the value you want We are sending this proposal, which also includes our standard Terms of Business (TOB) (Appendix 1) ‘and Data Sharing/Outsourcing Agreement (Appendix 2), to outline the complete terms of our engagement once we are formally appointed as the external auditor of the Association, We believe that our proposal provides compelling evidence as to why you should appoint PwC as your service provider for external audit services. ‘Should you have questions or concems on this proposal or other related matters, please let us know so we can discuss them with you. We look forward to working with you on this engagement. Yours truly, Ruth Ny Monch Partner ruth. f blasco@pwe. com D: +63 (2) 8459 3074 T: +63 (2) 8845 2728 ext. 3074 F: +63 (2) 8845 2806 {sla Lipana & Co., 29th Floor, Philamlife Tower, 8767 Paseo de Roxas, 1226 Makati City, Philippines T: +63 (2) 8845 2728, F: +63 (2) 8845 2808, worw.pw.com/phContents ‘ur understanding ofthe engagement Timing and fees ther matters Auditor signatory and conforme. Appendix 1 - Terms of Business Appendix 2- Data Sharing/Outsourcing Agreement Appendix 3 - Sample audit report Appendix 4 - Our intial risk assessment Appendix § - About Isla Lipana & Co.......... ‘Appendix 6 - Your PwC engagement teamOur understanding of the engagement Services and related reports ‘You have requested that we audit the financial statements of the Association, which comprise the statement of financial position at 31 December 2020, and the related statements of total comprehensive income, changes in fund balance and cash flows for the year then ending, and the notes to the financial statements prepared in accordance with Philippine Financial Reporting Standards (PFRSs). We are pleased to confirm our acceptance land our understanding of this audit engagement by means of this letter. Upon completion of our aucit, we will provide you with our audit report on the financial statements referred to above in accordance with Philippine Standards on Auditing (PSAs). Refer to the attached sample of our audit report in ‘Appendix 3. Please note, however, that the form and content of our audit reports may need to be amended in the light of our audit findings. In addition to the above services, we will also 2) Submit to you copies of the Association's audited financial statements for your filing with the Securities and Exchange Commission (SEC); b) Review the Association-prepared annual income tax return and its attachments for fling with the Bureau of Internal Revenue (BIR), but management remains ultimately responsible for the information contained therein; ©) Fumish you with copies of our Client Advisory Letter, a compilation of recent laws, regulations, and rulings issued by government regulatory bodies affecting business and the economy; and, ) Prepare a memorandum on our major recommendations to Improve the Association’s internal accounting control system arising from our audit, it any. ‘Scope of the audit ‘The objective of an audit is the expression of an opinion on the financial statements. Our audit will be conducted in accordance with PSAs. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit wll involve performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In ‘making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair resentation of the financial statements in order to design audit procedures that are appropriate in the Circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control ‘An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of ‘accounting estimates made by management, as well as evaluating the overall presentation of the financial statements, Page 1 of 27‘SEC reportorial requirements, Under Part |, Section 3.B(vil) of the Revised SRC Rule 68, part of our responsibilty is to report to the SEC any of the following matters which may have been discovered by us in the conduct of our audit of the Association's financial statements prepared in accordance with PFRSs: '2)_ Any findings of (i) vielation of Revised SRC Rule 68, (i) offering of securities without prior registration with the ‘SEC under the Revised SRC, or (i) engaging in the business of financing or lending without a secondary license; ) Any material findings involving fraud or error as defined under Part |, Section 1 8 of said Rule; c) Losses or potential losses the agaregate of which amounts to at least ten percent (10%) of the total assets of the Association: ) Any finding to the effect that the assets of the Association, on a going concem basis, are no longer adequate to cover the total claims of creditors; and, €) Material intemal control weaknesses which may lead to financial reporting problems. (ur responsibiltios shall include the following: ‘) Submit findings to the Association's management/Audit Committee or Board of Trustees and discuss the same with the said body; b) Document management's explanations and/or corrective action taken; and, ©) File a report (SEC Form Au-Rep) to the SEC if the Association fails to notify the SEC of the above within thirty (30) business days from the submission of our findings to the Association. (Our disclosure of information as required by the SEC shall not constitute a breach of confidentiality nor shal it be a {ground for civil, criminal or disciplinary proceedings against us. It is, however, understood that our responsibilty as. ‘an external auditing firm is based on matters within the normal coverage of an audit conducted in accordance with PSAs, Insurance Commission (IC) reportorial requirements. Under IC Circular Letter No. 2019-39, dated August 8, 2019, ‘Revised Framework on the Selection of External ‘Auditors’, Section 4, part of our responsibilty as an accredited auditor of the IC is to directly report any of the following cases which may have been discovered based on our audit conducted in accordance with PSAs, within fifteen calendar (15) days upon discovery ) Any material findings involving fraud or error, as defined under Sections 3.3 and 3.4 of IC Circular Letter No, 29-2009, b) Losses or potential losses the aggregate of which amounts to at least ten percent (10%) of the assets of the Association; ©) Significant doubt as to the ability of the Association to continue as a going concern, 1d) Material breach of laws or IC rules and regulations, such as but net limited to the prescribed net worth and ris based capital requirements, of the Association; 2) Material internal contro! weaknesses which may lead to financial reporting problems; and, 1) Findings on matters of corporate governance that may require urgent action by the IC. In case there are no adverse matters to report, we shall submit directly to the IC within fifteen (15) calendar days after the closing of the audit engagement a notarized certification that there is none to report. “The disclosure of information above shall not constitute a breach of confidentiality on our part nor shall it be ground. {or civil, criminal or disciplinary proceedings against us. Page 2 of 27itis understood that our accountability as external auditor is based on matters within the coverage of an audit conducted in accordance with PSAs. The financial statements, together with the supplemental report, submitted to the IC are the primary responsibilty of the Association's management and Board of Trustees. ‘The Association shall be responsible for keeping us fully informed of existing and subsequent changes to prudential regulatory and statutory requirements of the IC. The Association and the firm will comply with all the requirements of IC Circular Letter No. 2019-39, however, any additional service not included in the “Services and related reports” section of this proposal will be the subject of separate written arrangements. We shall be allowed to read-only access to the IC’s examination report of the Association and we shall treat the Contents of the examination report appropriately and confidentially in accordance with the TOB of this proposal. In case of pre-termination of our engagement contract or resignation/replacement as external auditor, we shall, directly report to the IC within fifteen (15) calendar days and state the reason(s) thereof. Requirements of the BIR ‘The Association's management is responsible for furnishing the BIR all the necessary information prepared by the ‘Association pertinent to the year-end adjustments, in accordance with Revenue Regulations No. 7-2007 (Amending Certain Provisions of Revenue Regulations No. 21-2002, Implementing Section 6(H) of the Tax Code of 1997, ‘Authorizing the Commissioner of internal Revenue to Prescribe Additional Procedural and/or Documentary Requirements in Connection with the Preparation and Submission of Financial Statements Accompanying the Tax Returns). in the event the Association is unable to fumish such information to the BIR and we are required to do 0, we shall be compelled to provide such information. Accordingly, our disclosure of information as required by the BIR shall not be a ground for civil, criminal or disciplinary proceedings against us. tatoments ‘Management's general responsibilities with respect to the finan! (Our audit wil be conducted on the basis that management acknowledges and understands that they have the responsibilty '@) For the preparation and fair presentation of the financial statements in accordance with PFRSs. )_ For the preparation of the supplementary information on taxes, duties and license fees paid or accrued during the taxable year as required by Revenue Regulations No, 15-2010 issued by the BIR ©) For the preparation of the supplementary information required by Part |, Section 4 of SRC Rule 68 (as amended) that may be applicable to the Association, 4) For such internal controls as management determines are nacessary to enable the preparation of financial statements in conformity with PFRSs that are free from material misstatement, whether due to fraud or error, ‘and for the preparation of the supplementary information and schedules as discussed in items b) to c) above ©) For assessing the Association's ability to continue as a going concem, disclosing, as applicable, matters related to going concem and using the going concern basis of accounting unless management either intends to liquidate the Association or to cease operations, or has no realistic alternative but to do so 1) To provide us with: ‘© Access to all information of which management is aware that is relevant to the preparation of the financial statements such as original accounting records, documentations and other matters: ‘+ Additional information that we may request from management for the purpose of the audit; and, ‘Unrestricted access to management and other persons within the Association from whom we determine it necessary to obtain audit evidence, Page 3 of 27As required by PSAs, we will make specific inquiries of management and others about the representations ‘embodied in the financial statements and the effectiveness of internal control over financial reporting. PSAs also require that we obtain a representation letter covering matters material to the financial statements from certain ‘members of management. The results of our audit tests, the responses to our inquiries and the written representations of management comprise the evidential matter we intend to rely upon in forming our opinion on the financial statements Indemnification against claims ‘The Association agrees to indemnify and hold harmless the firm from all thi party claims, damages, liabilties and ‘costs other than those resulting from our willful misconduct or dishonesty. If any claim, action or proceeding against Us arises with respect to which we are entitied to indemnity hereunder, we shall promptly notify the Association which shall be entitled to retain counsel (who shall be satisfactory to us) to defend such action or proceeding and, the Association shall be responsible to pay the costs, fees and disbursements of such defense. No admission of liability andlor settiement of any action, ciaim or proceeding shall be made on behalf of, or bind us without our written consent Auditor's cap on liability to the Association In no event shall the firm be liable to the Association, whether a claim be in tort, contract or otherwise for any amount in excess of the professional fees paid by the Association to us for the engagement other than for claims resulting from our wilful misconduct or dishonesty. in no event shail the firm be liable to the Association, whether the claim be in tort, contract or otherwise for any consequential, indirect, lost profit or similar damages or failure to realize expected savings, relating to our services provided under this engagement contract. Assisting firm ‘This proposal, if accepted, is between the Association and Ista Lipana & Co. only. In the course of providing the services set out in this proposal, Isla Lipana & Co. may, at its discretion, draw on the resources of another PwC member firm. Unless @ PwC member firm is contracted by you to provide any of the services which are the subject of this letter, provision of the services remains the responsibilty of Isla Lipana & Co. alone and you will not bring any claim, whether in contract, tort (including negligence) or otherwise against any PwC member firm in respect of this proposal or the services. In these circumstances any PwC member firm who deals with you in the course of providing the services does so on behalf of Ista Lipana & Co. alone. The provisions of this clause have been stipulated by Isla Lipana & Co. expressly for the benefit of PwC member firms. PwC member firms will have the right to rely on this ciause as if they were parties to the proposal and will have the right (subject tothe discretion of the Court) toa stay in proceedings if you bring any claim against any PwC member firm in breach ofthis clause. Nonetheless, any PwC member firm assisting us in the performance of our services under this proposal is similarly ‘bound by Isla Lipana & Co.'s confidentiality and data protection obligations as may be provided in Clause 10 and 11 of the TOB (Appendix 1) and the provisions of the Data Sharing/Outsourcing Agreement (Appendix 2) Use of auditor's software ‘We may develop electronic tools, including spreadsheets, databases and other automated or electronic solutions to assist us with our assignment. In some cases these aids may be provided to the Association upon request. As. these tools were developed specifically for our purposes and without consideration of any purpose for which the Association might use them, they are made available on an "as is" basis for Association use only and should not be distributed to or shared with any third party. Further, we make no representations or warranties as to the sufficiency ‘or appropriateness of these tools for any purpose for which the Association may use them. Any digital ang ‘automated software developed specifically for the Association will be covered under a separate proposal In the course of performing an audit, we may also use PC Network's and third party's digital and automated software. Further to Clause 10 of the TOB, we undertake to observe reasonable measures by which we preserve the confidentiality and security of your data that may be processed through these digital and automated software. ‘Any personal information shared with us by you including those processed by us with the use of these software shall be subject to the provisions of the Data Sharing/Outsourcing Agreement attached to this proposal Page 4 of 27‘The use of PwC Network's and third party's digital and automated software by the firm is covered by agreements which provide for the rights and obligations of the firm (as end-user) and the developer relative to confidential information, privacy, data security and personal data. Use of auditor's web-based communication tool Inthe course of the services, we may allow your authorized representatives to access some of the tools that we Use. In connection to this, you acknowledge that these systems may be accessed by your authorized representatives from any web-enabled device. You further acknowledge that you are solely responsible for: 1) providing us the necessary personal information of your duly authorized representatives for purposes of access. to our systems and ensuring that they are aware of and agree to be bound by the conditions for access; ) notifying us by email to our engagement manager when access rights should be terminated, and for periodically reviewing the access rights of your authorized representatives to ensure that it remains appropriate; and, ©) ensuring your authorized representatives will encrypt confidential information as needed before posting into our systems, Other services to be subject of separate contracts Any additional services that you may request and that we agree to provide will be the subject of separate written arrangements. Page § of 27Timing and fees ‘We present below our planned timetable to ensure that we will deliver a high-quality audit, completed and delivered, in time forthe filing of the Association's annual income tax return with the BIR which is not later than 15 April 2021. We are fully aware that financial statements must be in final form, ready for Audit Committee and Board approval in time for fling with the BIR and the SEC. oo D> i» ee a [ velatomatmosings winiey + One aust salon + Param dialed sing ot |» Conds vation f rae |" magento dacas |" rencrandin aeitneabe |" toncitisraureemn |” bagroat arg yore sncameerequrementsend | . Unggrtanabusressissves | + Peron arecanfmaionctibe | %t enerbigreads and sro cmengos win Provecnngmencctogy | + Review x cslovsions ‘expeiabons ‘anageme¢ard determine | SdepttytheAasocaon |. Devas new eases wih + Deiverau CientAststance | Sctonvequed ontey Sudtor |, present weammrendatone |” oaeas.teN Serecie setaing soporieg | — accountng anes eee Schedules ed oy te |. pecommaton af ur eee | + eve rancial states avtean Reems et Property managerert | Brocmeee arene of + Reset audtaanring i vanes aes fra wate covert manager [Daiverabies = Engager? Lar > Ait Fan Set Ups Rept > amplaion Report + Cen Assocs Sereaute + teal Cont Repo + fst Repon + Cie Satacton Suny [Benefits to you : "Germ comers | Raha oapem, + Ese atappaen = Segoe anne ‘term eases or ‘anes on your sunness + Opporunteetoeonarce | + Timely eslaton of sss petamanes 26 nee |* Eat esoktenctisswsby |” contokendtuoneee pindincon aera corer in | teste up Fone frocnesecureresppropiata | * Wepender onsen key Poa POM | se agreement ct + Razoo fasion a alenenis Geiversbes snatmaases |” Srely be i inca ksi ‘Completion of our work within the agreed timeline is subject to, among other things, appropriate cooperation from the Asscciation’s personnel including preparation of necessary schedules and timely responses to our inquiries. ‘We will advise management periodically of our progress and notify them promptly should we believe we will be unable to complete our work by the requested dates. Our fee estimates are based on the time required by the individuals assigned to the engagement. Individual hourly rates vary according to the degree of responsibilty involved and experience and skill required. We estimate our fees for this engagement to be Php848,000, inclusive of cut-oF- pocket expenses and actuarial costs, but stl exclusive of 12% value-added tax (‘VAT’). This estimate takes into account the agreed-upon level of preparation and assistance from Association's personnel. We will advise management on a timely basis should this not be Provided or should any other circumstances arise which cause actual time to exceed that estimate Bills including out-of-pocket expenses will be rendered on a regular basis as the assignment progresses. These progress billings will be deducted from our final bill which we will issue at the completion of all work. Page 6 of 27Other matters Applicable law and governing jurisdiction The contract formed by this proposal, when accepted by you, shall be governed by, and construed in accordance with the laws of the Philippines and it is hereby irrevocably agreed and accepted that the proper courts of the Philippines shall have exclusive jurisdiction to settle any claim, difference or dispute, including, without imitation, claims for set-off or counterclaims which may arise out of or in connection with such contract. Each party irrevocably waives any claim that the action has been brought in an inconvenient forum or that such courts do not have jurisdiction. Execution and Delivery ‘This Agreement shall be deemed executed by both parties when any one or more counterparts hereof or thereof, individually or taken together, bears the signatures of each of the parties. This Agreement, once executed by @ party, may be delivered to the other party by facsimile, electronic mail, or other means of electronic transmission of ‘a copy thereof bearing the signature of the party 0 delivering it Electronic signatures Each party agrees that this Agreement and any other documents to be delivered in connection herewith may be electronically signed, and that any electronic signatures appearing on this Agreement and related documents ‘entered into in connection with this agreement, are the same as handwritten signatures for the purposes of validity, enforceability, and admissibiity ‘Termination This contract may be terminated by either of us by giving written notice which will have immediate effect. Where either of us terminates the contract, you will pay us reasonable fees and expenses, taking into account the circumstances of termination, for time spent in providing the service up to the date of termination Other matters ‘This proposal, when accepted by you, reflects the entire agreement between us relating to the services covered by this letter. It replaces and supersedes any previous proposals, correspondence and understandings, whether written or oral Should any dispute arise between us, we will attempt to resolve the dispute in good faith by senior level Negotiations. Where both of us agree that it may be beneficial, we will seek to resolve the dispute through mediation using the services of an appropriate and agreed mediator to facilitate the mediation process. Ifthe dispute is not resolved through negotiation or mediation, both of us agree that the proper Philippine courts will have ‘exclusive jurisdiction in connection with the resolution of the dispute, ‘The Association agrees that Isla Lipana & Co. may use the Association's name in experience citations ‘We are pleased to have the opportunity to provide services to the Association. It is our desire to provide you at all times with 2 high-quality service to meet your needs. If at any time you would like to discuss with us how our ‘service to you could be improved or if you are dissatisfied with any aspect of our services, please raise the matter immediately with the engagement partner. If, for any reason, you would prefer to discuss these matters with ‘someone other than the engagement partner, please contact Roderick M. Danao, Assurance Managing Partner. at tel, no, 8459-3065. In this way, we are able to address your concerns carefully and promptly. Page 7 of 27Auditor signatory and conforme Ifthe services outlined herein are in accordance with your requirements and ifthe above terms are acceptable to you, please have one copy of this letter signed in the space provided below and retumed to us. if you require further information, or wish to discuss the terms of our engagement further before replying, please do not hesitate to contact Ruth F. Blasco, partner, who will lead the engagement team, at tel. no, 8459-3074. Lalor Lipamo, & Caf Conforme The terms of this engagement are accepted by Dir. Mario A. Avenido on behalf of the Association who represents that he is authorized to accept these terms on behalf of the Association. Public Safety Mutual Benefit Fund (PSMBFl) Incorporated Page 8 of 27Appendix 1 - Terms of Business Terms of Business of Isla Lipana & Co., the Philippine member firm of PwC (PricewaterhouseCoopers) global network ‘These Terms of Business apply in respec ofthe Services described inthe Aut Engagement Leter to be performed by Isa Lipana & Co, the Phiippine member fer of PwC glbal network PwC” orm” or We" o: “our” of us") for you and ofthe Company's responsibities In relation to he provision ofthe Services. These Tecms of Business, ogeer wit the Auct Engagement Leter to which ft attached, form te Conract ‘betwesn you and PwC. The Contract forms the ene agreement between you and Pw relating to the Services. “Te er uted inthe Aut Engagement Ltr have the same meaning in these Term of Business 1 Services ‘We wl roid he Servoas deserbed inthe Engagement ate. 2 Responsibility for preventing and detecting fraud and erors and non-compliance with awe. and regulations Manageme is responsible for safeguarding the Companys assets and forthe prevention and detection of fraud and enor. Management is responsi for dentiyng and ening tal the Company complies wih the laws ard regulations appiable fs atvies. ie wil design our {ua to lain reasonable, bul rol absolule, assurance of detecting enor oc aud tal would have a materi effect on the francilsiatements fs wel an oer ilegal acts having a doe and materal effect on the Enancialtatoments. Our audt wil not include a detaiad aust of ‘fensactons, such a would be necessary to desavo efor or faud that dd not cause a material misstatement ofthe nancial statements Important to recognize that there a inrentkrstaons i the audting procacs. Audis are basod on the concept of selective testing of he data Ucerhing the fandialstatement, which Invves jadgentrgardng th areas to be testd and the nar, ming, extent and results of he tests tobe pertormad. Audits are, therfore, subject tone Umtaion tat material erors, rau or other legal as having a direct and material financial statemert impact they exis, may not be detected. Because ofthe characerstes of fraud. partelaly those imalving concealment trough collusion and fasted dacumentation, an audt designed and executed in accardance with Phppine Standards on Aung (or International Standards on Auding) mahi net detect a materia fraud. Further, whe efectve intemal control reduces the tkeihoed that enor, fraud or ote legal acts wil occu and remain undetected, f 0s not eliminate that possioity. For ese reasons we cannot ensure thal ror, faud or ater segal act present. wil be detoctod. However we wil communicate 0 you any legal act material eros. or evidence that aud may exist as those are ontifed during cur audit ' Responsibility for identifying and reporting internal control weaknesses (Our aust ie not design to cenit al significant weaknesses inthe Company's syst of internal financial cools. Our review of internal financial contol ystoms is perormad ony to he extent required to express an opinion on the Company's fancal statements. Ths Consideration wil ot be suficert o enable us Yo provide assurance onthe effectiveness of intemal crtot over fnarcialreporbng, However, Wwe shal report to management in wring any sigrfeant weaknesses in the itera corre over financial repoing whch come to ou nace Shuring our poral aut werk Ary such repant may not be provided to ath party without out prot wrlen consent Such consent wil be Granted only onthe basis that such reports ae not prepared forthe use or benefit of anyone other than the Compa, ‘4 Responsibility for othor documents accompanying audited financial statements Philippine Standards on Auditing (or Intemational Standards on Aucting) require thal we read any annual report or other documents that ‘Contain ou aut report. The purpose of tis procedure to cansier whether other information nthe annual report or other cocuments, ‘Raluding the manner of ts presentation, fe male inconsistent with information appearing i the Nanda statements, We assume no ‘blgatin to perform procedures to careborate such other information as pat of ou aud ‘5 Responsibilty relating to electron cstrbution of our opinion {management intends to publish oF ethernse predic, i printed form or electronialy (2.g.on an inferet Web Ste) our report together with tha financial stalements (r otherwise make reference to our fim) ina document that contains olher infomation, management agroes to (a) rovde us with a draft Gocument fo read and (8) obtain our approval or Incusion of our report. before he documents finalized ane tibted ‘Where our aut report is reproduced in any medium, the complete financial statements, including notes, must iso be presented. 6 Third party usars of our opinion (Our aust opinion is ntonded forthe benef of thse to whom iis addressed. The aud wil not be planned nor conducted in contempaton of relance by any thea party or wi) respect to any speciic vancacion. Thretoe, tem of possible terest tata party wil not be speciicaly ‘dressed or mators may exit tal wil be ascessed ciferery by ahd party, possibly in connection witha specfc transaction. Page 9 of 277 Responsibility to seek our consent to any future use of the opinion ‘The Company may wish oinhude our report on these financial statements in an offering documertregistraion statement proposedtto be fed uncer the Secures Reguiaion Code (Republic Act 8723) orn some other secures oflering, The Company agrees that he aforementioned {crepe reference to ou fm, wl not be incuges in ary such ofenng wehou Ur pric permision or coneent. Any agreement perform workin conection wth an offering, including an agreement o provide permission or Corsent wil be a separate engagement ard subject fo @ ‘Separate engagement contract 8 Ownership of audi les ‘The working papers and fies for tis engagement created by usin the course of he aud. incuding electronic Cocumants and les are the sole property ofthe fn. 9 Communications 94 ntemet communications ‘During the engagement. we may wish to communicate olctronialy wth each other However, the elacronc transmission of irformation cannot be guararteed lo be secure or wus oreo ree and such information ould be intercepted, corupted, los, destroyed, incomplete, 0: coukl ‘amve late or otherwies be adversely afectod or unsae to us. We recognize that systems and procedures cannot be a guarentee that ‘tansmisione wil be unafleced by such hazard, bul we agree lo Use commercially reasonable procedures fo check or he then most ‘commonly brown vues before sending information elacrericaly. We shall not have any laity to you asing from orn connection with the ‘electronle communication of irfoematen te you. ‘8.2 Monitoring of communtations To the exent permits by applicable aw and ries, the Company agrees that we may monitor electronic commuricaions forthe purposes of ‘ensuing complance with 9” legal and regulatory obigabons and intemal poicies. 10 Confidentiahty 10.1 rotecton of Confidential information ‘Al data relating spesfcaty 10 the Company/s business and any other information which reasonably shouldbe understood tobe conidia 10 {he Company ae confident inormaton ofthe Company (CCanidental Information’) The fm agrees to take reasorable measures to Keep ‘onfdental the Confident nfomaion and wil use Conseil nfration ony in relation ta the provision ofthe Services provided By Us fo the Company and wil not siclose such Consent nfoematon to any third pany without the Companys prior wit conser and, wit) respect fo normation fo be sent outside Pe Pripines, without the pear approval of th designated representative ofthe President ofthe Pnippines uness they are covered by limited exteptions a provided in Presisertal Decree 1718, inte ever hat th purpose o islosure is not eavered by the exceptions, we wil undertake to cba the requied consert fom the appropriate government offce before complying wih the same, but assume no responsibity fh the event thal the authoraton fs not granted at al gf obtained witn the required period of me. ave as provided in causes 10.2 and 10.3 below, We wl ake reasonable measures to protect the confidential of fe Content information ‘and o abuse fs agers and employees ofthe confdertial nature of the Conidentalnfermetion and of the terms of is agreement. We shal not be liable to the Company for an accidental or inadvertent iscosure of Comenoalinformaton, the iscosure occurs notwithstanding our Use ofreasonabla measures fo maintain the confidetay ofthe Confidential Infomation. We wil show tis agreement o ou persone ving ‘aceese tothe Canfidential nfraaon and wil be responsible for any breach of hs agreement by ow personel 410 2 Scope of confidently obigations ‘The fm wi not be obigated to treat as confident any information disclosed by the Company whic: ()sightfily known os pir tots ‘dsclosure bythe Company; i) released bythe Company to any oor person or enty witout resticon: ii independerty developed by Us witout any use oor retance on Consent! inermation:(W) nor enters the pubic domain witout breach of ths confidentiality ‘blgaton; (vo may be lawty ebtained by us from any tia party ‘The firm's confidentiality obligations under this agreement wil ferminate three (3) years rom the date set forth inthe Engagement Letter. 10.3 Posibie isclosures of Confidential Information 10.31 In elaon to engagements and the provision of services PwC Firms (PwC Fim” means a member of he PwC global network of rns, each of which isa separate and independent legal entity) may ‘share Conde! information where necessary wih contractors, subcontractors and agents aio in ihe same PwC global nelwerk. Invohed in {he provision of services. such asin the context of ntemational assignments of aus voWing mutiple PwC Fims. For example, the Group auditor may need tobe informed about the resus ofthe aud work porformed by PwC Firme on the nancial statements of subsiiares for ‘Group reptting purposes. Sema on non aug engagements wohang mule PwC Fims Confidential information may be shared ithe Context of such engagements Page 10 of 27‘We may disclose Confsentia information, inucing information subject fo piviege,() to third paris such as professional advisers and Insurer, and (i) 10 naonal and inematinal regulatory boses, a court in enna vor other igaton orto sther hd pares as may bo ‘eqired bylaw, state, ue or equation, induding any Subpoena, discovery demand i iigaton or ther simlar frm of process professional ‘Standards and obligations, and including any foreign law, statue, le or equation as long a tts determined by us tobe eppicable to 3 PwC Fir, provided prior witten approval of the Company is obtained and, wih respect to information o be supplied ouside ofthe Pippines, the ‘or wren approval ofthe designated reprsentave of te President a the Prigpstes and consent ofthe cient is obtained. APw Frm may so share Confcental information wth ether PwC Flin for independence, risk management and quali review purposes. 10.32 For certain oer business purposes ‘PwC member fms share knowledge wit each other. Only by sharing knowledge, which may incase Confidential Information, can member ‘ums maintain and dovolop fre the breadth and dept ofits expaise. Configetal Infomation may also be wanstered for vanious business ‘purposes inducing relatonship management, accoun management. tema francialreprting,provaton of information tecmnoogy services. {incuting among es storage, nosing, marenance, support and outsourcing services, both io member fms and to service providers we ‘To the extent thatthe working relationship between the pares aso invoives the Company agcosing information hela by Rs alate or involves. isclosures by such afats of information diet to ue or any PwC Fram, tho Compary authorizes tne information sharing and eislosures as rowded in dase 10.3.1 above and confers tat thas auhorty fo act as agent forts ates. 10.4 Oth mators ‘The fm recagrizes the canfidential and proptary nature ofthe Confntal Infomation and acknowledges that. in the event Ris determined by a cout that a breach ofthe confdentisly provisions ofthe agreement has occured ois likely o occu, the Company wil suffer rreparable harm. Accordingly, the Company shal be ented to seek preiminary and permanent injunctive relief nthe event ofa breach or treatened breach of ts agreement. 2s well as all other appicable remedies a aw or equty. 11 Data protection Refer to Appendix 2 ~ Data Sharing/Outsourcng Agreement. 412.Joining a client na financial oversight role ‘some crcumstances, the acceptance of employment with an aud ler by partner o a practice staff member ofthe accounting fm wil ‘esuit in the possibity of he accaunting frm Deng prised from contruing to serve asthe auctor or some pera of time after the employments accepted For his reasan, management agrees nat 6 make ajo ofr (a) 'e any parner or pracica staf member assigned to the aust ofthis partculsr company witin a two-year petod tran accountng fr in arory that pat af the European Union or (2) fhe Danner ar practea stat member was a member ofthe audit engagement eam a any pot during the annual reporting period pri toe Commencement ofthe audit in progress for US SEC aud clentsoreiates ents theret 42 Confting terme Inthe event of ary confit between the Engagement Letter and these Terms of Susiness or any oer document which forms pat ofthe CConirac. the Terms of Business wil take precedence except to he exent amended inthe Engagement Letter by specific reference tothe ‘relevant clause of these Terms of Gusiness. Inthe event an oni tothe extent of any confi belween the Engagement Letter and any ‘referenced or atiached document ther than the Terms of Business, the Engagement Letter wil ake precedence. Page 11 of 27Appendix 2 - Data Sharing/Outsourcing Agreement ‘This Data Sharing Agreemen’Outsourcing Agreement Agreement), together with the Engagement Letter and the Terms of Business to which lis tached, are referred to asthe “Contract. The Contract forms the etre agreement between us eating tothe Series to be performed by 1s for you. You, the Cent and Pw ("im or we" er “our or us") may be collectively referred to herenafer asthe ‘PARTIES: In order to execute and implement the Engagement Letier and the Terms of Business. Personal Infomation may be collected fom te Chent and te Firm Thos. pursuant to and in complance win Republic Act No. 10173, atiawise krawn a¢ Data Privacy Act of 2012. and ts implementing regulations ‘DPA of2012 and is IRR"). ths Agreement ets forth the general dies and responsibiiis ofthe PARTIES in rolabon othe Personal Information tat may be Proceeead ‘The tors defined inthe Engagement Letter and its Terms of Business shal have the same meaning, unless otherwise proved, in this ‘Agroomert. Further, his Agroorent shall adopt al th defirions provided under the OPA of 2012 and ite IRR. Incase of confit, the defntion provged inthe OPA of 2012 and is IRR shal prove but ory othe extent of implementing this Agreemont [A Persons information obtained in elation tothe Contract shal be subject tothe folowing tems ana contions: ARTICLE | GENERAL PROVISIONS 1. Data Subject shall be as defined inthe DPA of 2072 ands IR, who is an individual whose personal, sensiive personal, or privileged infomation is processed, 2. Persona information shal mean such information as defined under the OPA of 2012 and ts IRR. 3. Personal information Control (PIC7 shall be as defined under the DPA of 2012 and its IRR, refers to person or organization who Cantal the ealeston, holding, processing or use of personal infrmatio, including & person or exganization who lntructs another parson ‘or organization to collect, nol, process, use, ans or cisclse personal information on his cr her beat. The term excludes 3) person or organization who performs such functions as instructed by another person or organization 1) Anindhcual who colects holds, processes of uses personal niormaton in conection wih the indkcual's personal, arly or hoveaold afar ‘4. Personal information Processor (PIP) shal be as defined in the DPA of2012 and ts IRR, refers to any natural juridical person qualiieg {ac a such under the DPA of 2012 ands IRR to whom a PIC may ouisource the processing of personal data pertaining to 2 cats, subject. ‘5. Processing shall be as defined inthe DPA of 2012 and its IRR which shall ice, but not ited to, the collection, recording, ‘organization scrage, updating or modification retioval,consuRaton, use, consolidation, blocking, erasure or destruction of dat 6. Data sharing shal be as defined inthe IRR of the OPA of 2012, refers tothe dsclosure or transfer toa third paty of personal data under {be custody ofa PIC of PIP. nthe case ofthe later, such dlsclosure or transfer must nave Deen upon the instruction ofthe PIC concerned. “The term excudes outsourcing oF the disclosure or transfer of personal data by aPIC 10a PIP 7. ‘The Gient and the Fe may process the Personal Infomation obtained local or Intemational 8. Te Gent, 2s @PIC and the Fim, as a PIC ora PIP, including thei respective employees andor authorized represenatve, acknowiedge {mek responsibives under the DPA of 2012 and is (RR pertaining tothe Personal information under their eustody and possession. 8, Aric I of his Agreement shat apply ifthe Chen andthe Fm both acts whore the Fim acts as a PIP PIC whe Anil Vo this Agreement shall pp in cases 10. The Cent andthe Fim afm their oigations to uphols the Hight ofthe respective employees andor authorized representatives, andor the Data Subjects to be informed, object o process, access and ect, suspend or wihdraw the Personal Infomation processed under this Contract 11. When the Client provides personal data tothe Fim about its employees, contractors, nts and other incviuals, the Cent confirms that ithas authorty te act as their agert Documents showing the authorty ofthe Client and/or consent of the employees, con aciors and ‘the indhcuals shal be furnished tothe Frm within 7 days fom thet date the Fim fas mage te request to examine sid documents ‘showing Cent's authonty and/or consent of sid employees, contactors ard or nails Inthe event the Chen as to provide the requested documeris, te Fem may defer processing any Personal nfrmation provided by the former tote later Processing of sal Personal information wil resume aoe the Client has provided te requested document othe Fem Page 12 of 2742. The Cent and the Firm afm that al provisions in the Engagement Lette and Terms of Business which are not contradictory, shall be pplicabe to his Agreement 18. Should tere be questions or conaems rlatwe tothe Personal information Processed under this Contract, the Cllent and the Frm wll rove o each other and to the Data Subjects concerned, tne name and contact detalls of thelr respective Data Protection Ofer. BPO. Rares Email address. (Ghent ‘sia Lipana & Co aif Priam Tow, 8767 Passo de Roxas, | ph_dpo@)pwe com 41228 Mata Cty, Philopines ARTICLE I A LIABILITY LIMITATION 1. The abit ofthe Fem to pay damages fr al osses, ncuaing consequontal damages, economic loss or talureto realize atcipates profs, savings or other bonefs incuTed by you asa ect eau of breach of contactor negigence or any other tort by usin connection ‘wth of arising out of his Agreement shal be lmited to that portion ony of your actual lose which was directly and slay caused by us ant Inany event our labilty shall in no Greamstances exceed the fees paid in aggragate in respect ofall such Services. 2 Notwithstanding the immediately preceding paragraph, inna ctcumstances shal we be liable o pay any damages fo you fr losses arising ‘uta orin any way connected win te provision af information tous by you im viation of your dues and abigatios as PIC under he ‘Ag. is IRR and relevent ssuances ofthe NPC. ARTICLE ll, DATA SHARING. In.cases where the Client and the Frm act as PICs, the spulations under tis Arce shal apply 4. The Clent andthe Fm confim thatthe writen consant ofeach othe's employees andlor authorized representative has been secured for ‘the purpose of processing the Data Subjects’ Personal inormation in accordance withthe OPA of 2012 and is IRR. 2. The Personal nfrmation shal be prooessad for he purpose of executing and carrying out he nt Letter are this Agreement (cg detalsof signatories. information for purposes of bling and ealecson. tals ofthe PARTIES employees) in accordence wih the DPA 02012 and ts IRR. ‘3. Provided that the prior wnten consent ofa party to this Agreement nas been secured the other shal only share Personal information to ‘those who requre access inthe perlormance of her duties, as wel a 1 Yura pares who have egal andor legitimate purpose fore ‘access ofthe infomation in elation tothe engagementprojeclservice. etc. Such third pares indude, but not bite to, the accrecied ‘endors/supplersieotractos, alles and related companies anc government reguisors and agencies authorized by aw to process personal daa, parley when is necessary io investigate, preven. or respond to suspected legal or fraudulent actives oro protect ‘he safety rights or property ofthe PARTIES, her cents or other elated persons 4. The PARTIES shat ensure that thelr employees and third pate wil comply withthe requirements of he DPA of 2012 ands IRR pertaining io any Personal information they may come across, colet, gather, record or anyother means of Processing as defined berein, Under the following croumstances 42)_Inthe performance of ther duty and work ) Those which came to nei knowledge through accident It's the respensibity of the PARTIES to ensure that Personal Information n the possession and custody of har employees and tard ‘artes shall remain conden in azcordance wit the DPA of 2012 and ts IRR, and he applicable lan ‘5. All Personal formation tha she subject of this Agreement shal be processed in the PARTIES infomation system and shal be used ‘nt: necessary forthe purposes deere in he Engagement Letter andor dis Agreement 16. The PARTIES shal ensure that appropiate secunty measures ae taken inthe course of Processing the Personal information in accordance wih the requrements of the DPA of 2012 to prevent any unaunoized access, improper use or disclosure, unauthorized ‘moatfeationo Uniawtl destruction of Personal Inermation. 7. _Allcopes of any Personal Information shal be destroyed, removed andlor returned under the folowing circumstances, whichever occurs fret 2) _Upen termination of me Engagement Letter and wih specie instruction tom the oer to destroy, remove andor retin al copes of Personal Infermation b) The Personal information is no longer required, necessary andor relevant inthe provision of servcmperformance ofthe abigation; or ©) Within ten (70) years from the end ofthe Engagement Later 8. The PARTIES shal ensure thatthe destruction of any Personal formation shall be in accordance wih the requirements of the Data Privacy Ac of 2012 and its IR to protact te confidentiality af the information. The destruction shal nude, but not miedo, physical ‘destruction by fre, shredding, deletion of soft copies, et. Page 13 of 27ARTICLE WV. DATA PROCESSING In cases where the Fim acts as a PIP, the stpulatiors under tis Arle wil apply 1. The Fim, a¢a PP, acknowledge ou obigatons under the DPA of 2012 and is IRR and shal comply thereto including the relevant Issuance of te National Privacy Commission (NPC), 2 You, a2 PIC, tee from teat, dures, coercion o fore, pve consent that we may process personal data, including sonsitive personal data ofthe data subjocs forthe purposes spectiod and dedarec under the Engagement Letter and this Agreoment 3. order fr us to comply wih ow obigations under the Engagement Letter, you hereby give us instructions to process al Personal Information tobe provided by you andlor your authorized representatve, which shal induce but not imiad to the Personal Information of Your employees, contacting partie. consutanis. an sharehoiers. The procesting of the Perea Inormation may bn conducted in ‘ante’ and method, as wel a in places where, we reasonably expect thatthe privacy and rights of he data subjects are maintained and protected, You wit provide us, in wrting, any ther special instructions fo the processing ofthe Personal Information which shal kewise form part of this Agreeren. 4. You assure us that your instructions relating tothe processing of personal data is compatible with the purpose described inthe Engagement Leter and this Agreement, and consistent wit he OPA of 2012 aris IRR. You firher cat that 8) Younave informed the data subjects, whose Personal nfrmation have Deen shared 1a us, that their Personal Information wil be shared 0 1») Younave informed the data subjects of the Personal Information tobe shared, the pure why their Personal information iso be shared, including the manner by which it wl be shared to and used by us ) You have apprased the dala subjects ofthe ights under the DPA of 2012 ands IRR; and 4) You have secure the writen consent of he data subjecs for purposes ofthe regain, ‘Should there be any instructions from you, which in our opinion. contites 26 a vokion ofthe Acts IRR or any of the issuances ofthe NPC. we wil infor you immediatay. 5. Wewil not engage anothe: processor unless otherwise instructed by you. Any such arrangement shal implement he same obligation for {aia protection as implemented une this Agreement aking i account the nature ofthe procassing, (8. We undertake to maintain at all umes the confidentiality of the personal data of he data subjects. Except in instances provided for under applcabe laws and regulations, we wil nt disclose nor share such personal data to id pares wihout your angor the data subjects or writen authority. 7. A Personal nfrmaton tha i the subject of the Engagement Leiter and his Agreement shal be Processed until nacessery forthe purpose descibed in he Engagement Letier andlor hs Agreement or dung the subsistence ofthe Contract, ‘8 Alter serving the purpose ofthe Engagement Letter andor tis Agreement, al personal data in our custody shal be returned fo you, except Upon your writen advice instructing us Io delete sald personal data. All copies of he personal data our custody shal be Gestroyed within 10 years in a secure manner io prevent ther furher processing, unauthorized access, decosure fod partes or prejudice the intrest of the data subjects The marner of destroying the document containing the personal da shoul be In soeoraance wit the standards sat ‘orth by the Act ands IRR, which include destruction by We 8. ‘We undertake fo plement reasonable organizational, pysical and technical securty measures, which in no case be of lesser quality fo whats being require by the DPA of 2012 and is IRR, to protect he personal daa out custody aganst natura dange's(.e. acoerkal loss of destruction) and human dangors (2. unlawful access, raudlert misuse, uniawil estucton, aferaton ang contamination). ‘Access tothe personal data shall be liited on to our authorized personnelepresentaives who are aware ofthe confidential nature and (tv 0th tems ofthis Contract. 10, We shall provide assistance o you. by appropriate technical and organizational measures and fo the extent possible, ul the abigation to ‘respond to requests of he data subjects relative fo the exercise of hot igh. We fuer undetska lo assist you in ensuring compliance with e OPA of 2012 ite IRR, othor issuances ofthe NPC and other relevant laws. Ins regars, we shall make avaiable o you al Information necassary fo comensrate compliance wih the obigaons lad down nthe DPA et 2072, ana allow fr an controle to auc, Including inspection, conducted by you or ancher auditor under your nevuclons. 11. We shall inform you immediately or within 48 hours upon knowledge of or when there is reasonable belt that a personal data breach equtingnoticabon nas occured. Page 14 of 27Appendix 3 - Sample audit report Independent Auditor's Report To the Board of Trustees and Members of Public Safety Mutual Benefit Fund (PSMBFl) Incorporated ‘No. 318 - $20 Boni Serrano Avenue Comer 1* and 2* West Streets ‘San Juan Gity, Philippines Report on the Audits of the Financial Statements Our Opinion In our opinion, the accompanying financial statements present fairy, in all material respects, the financial position of Public Safety Mutual Benefit Fund (PSMBFI) Incorporated (the Association”) as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with Philippine Financial Reporting ‘Standards (PFRSs). What we have audited ‘The financial statements of the Association comprise: the statements of nancial position as at December 31, 2020 and 2019; the statements of total comprehensive income for the years ended December 31, 2020 and 2019; the statements of changes in fund balance for the years ended December 31, 2020 and 2019; the statements of cash flows for the years ended December 31, 2020 and 2019; and the notes fo the financial statements, which include a summary of significant accounting policies. \We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor's Responsibilies for the Audit of the Financial Statements section of our report We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence \We are independent of the Association in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics), together with the ethical requirements that are relevant to our audit ofthe financial statements in the Philippines, and we have fulfilled our other ethical responsibiiies in accordance with these requirements and Code of Ethics. Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor's report thereon. The annual report is, expected to be made available to us after the date ofthis auditor’ report. Cur opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. 150f27Independent Auditor's Report To the Board of Trustees and Members of Public Safety Mutual Benefit Fund (PSMBFI) Incorporated Page 2 Jn connection with our auait of the financial statements, our responsibilty is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated, Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with PERS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Association's abiliy to continue as a {going concern, disclosing, as applicable, matters related to going concem and using the going concern basis of ‘accounting unless management either intends to iquidate the Association or to cease operations, or has no realistic alternative but to do so. ‘Those charged with governance are responsible for overseeing the Association's financial reporting process, Auditor's Responsibilities for the Audit of the Financial Statements (Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from ‘material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists, Misstatements can arise ftom fraud or error and are ‘considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis ofthese financial statements, ‘As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: ‘+ Identify and assess the risks of material misstatement ofthe financial statements, whether due to fraud or erro, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and ‘appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, of the override of internal control. ‘© Obtain an understanding of internal contra relevant to the audit in order to design aucit procedures that are ‘appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the ‘Association's internal contro ‘© Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ‘+ Conclude on the appropriateness of management's use of the going concem basis of accounting and, based on the ‘audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Association's ability to continue as a going concern. If we conclude that a material Uncertainty exists, we are required to draw attention in our auditors report to the related disclosures inthe financial tatements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our audhtor’s report. However, future events or conditions may cause the ‘Association to cease to continue as a going concern. Page 16 of 27Independent Auditor's Report To the Board of Trustees and Members of Public Safety Mutual Beneft Fund (PSMBFI) Incorporated Page 3 ‘+ Evaluate the overal presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves feir presentation \We communicate with those charged with govemance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identiy during our audit Report on the Bureau of Internal Revenue Requirement (Our aus were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The ‘Supplementary information in Note XX to the financial statements is presented for purposes of fling with the Bureau of intemal Revenue and is not a required part of the basic financial statements. Such supplementary information is the responsiblity of management and has been subjected to the auditing procedures applied in our aucits of the basic financial statements. In our opinion, the supplementary information is fairy stated in all material respects in relation to the basic financial statements taken as a whole. {sla Lipana & Co. [Partner's manual signature) Ruth F. Blasco Partner CPA Cert. No. XXXxX P.T.R.No. XXXXX, issued on XXXXX, Makati City ‘SEC AN. (Individual) as general auditors XXXXX Category X; effective until [date] SEC AN (firm) as general auditors XXXXX; Category X; effective until [date] TIN XOKXKIKK BIR ALN. X00 200XX, issued on [date]; effective until [date] BOAIPRG Reg, No, 0000, effective unti [date] Makati City DATE Page 17 of 27Appendix 4 - Our initial risk assessment ‘Our audit methodology is risk-based and focuses appropriate audit effort on those business areas perceived as higher risk. Every audit starts with a rigorous risk assessment. This takes into account the macro-level and business specific ‘isk drivers and their potential impact on financial reporting and audit risk. This risk assessment determines how ‘much audit evidence we require and the associated audit effort. Itis of utmost importance that our audit is focused on the right areas. Identifying and selecting the right risks make the audit safer. We focus on risks that could have a material impact on financial reporting. Our risk assessment considers the significance of the combined nature, magnitude and likelihood of each audit risk to the financial statements, resulting in @ risk classification of significant or normal. We would look into areas such as valuation of reserves and other areas of judgment, and the Association's overall compliance with PFRSs. Based on our understanding of the Association's business operations, below are our preliminary key areas of focus, which we will use for our risk assessment: Risk of fraud arising from management ‘override of controis Wis there has been no history of management ovecrse 0° inappropriate use of Journal, management override of conto: Temains @ presumptive significant risk as requied by the auditing standards, Possible areas of management override of controls include fraudulent joumals, unusual transactions or application of inappropriate ‘estates. The current remote setup might also pen up atonal opportunites for tau tobe ‘We wit conduct meetings wih concerned unis to update our understanding of policies and procedures on rau We wil lize data-enabied aueitng techniques to test the completeness of Journal entries and to identilyhigh-sk journal entes and veldate these, and ‘ther management adjustment, including significant andior unusual Itansactions that ave occurred and assess the accounting implications of these transactions. We wil aiso incorporate unpredictable procedures by including a degree of randomness to avoid our procedures being ‘predictable This wil nude varying the nature, timing and extent of procedures, ‘We wil also look a the related party transactions, suspense accounts and accounting estmates to ientiy any management bias. | Risk of fraud in revenue recognition ‘Auditing standards mandatory require the ‘consideration of fraud risk in revenue recognition as a significant audit risk for ‘companies irrespective of which industy they operate. Potential misstatement coud aise ‘om incomplete reported revenue particulary insurance premium and inlerest income and premature recogniton of premiums. ‘We will update our understanding of controls over revenue and receivables process. \We wil perform test of detas over premium transactions (based on sampling) to support completeness and accuracy of recorded revenues including review of relevant coniracts, We wil also incorporate unpredictable procedures by including a degree of randomness to avoid our procedures being ‘precictable\ ‘This wil include varying the nature, tiring and extent of procedures. We wil also perform cut-off testing to ensure that revenues are recorded in the proper pero. Risk of materal misstatement inthe ‘valuation of insurance contract liabilities ‘The determination of policy liabilities for tradtional products remains a signticant risk forthe Association mainly de tothe degree of ‘complety and judgment involved in selecting the appropriate methodologies anc _assumpions in estimating ts value. Page 18 of 27 We wil validate the methods and assumptions used in calculating the reserves and other actuarial tems to ascertain conformity with cal statutory ‘requirements and sound actuarial principles We wil test the reliably of data used by your extemal actuary in coming up withthe insurance contract lables ofthe Association (eg, clams ‘development, losses paid, loss ratios, et.) for completeness and accuracy. \We will perform a look-back analysis (estimates established vs. actual resus in previous years) to assess the reasonableness ofthe Association's Insurance contrac abies,‘Risk of material misstatement in te valuation of loans and receivables. ‘Due to the volume of transactions processed bby management, appropnate credit approval ‘and related creit review process may not be ‘complied wih consistently. Further, completes underying PFRS 9, including the impac of the COVID-19 pandemic, may resut to the level of alowance for financial instruments to be inadequate and reasonable inthe context ofthe Association's histoncal ‘and projected experience, \We wit obtain and review GL-SL reconciliation prepared by management, ‘including managements disposition of reconciing fem \We wit obtain management's expected credit loss (ECL) allowance Ccalculalon for 2020, and perform procedures to assess sufciency of ‘allowance for impairment and assess the reasonableness of macio-economic factors used by management in coming up wth the ECL allowance, including the impact ofthe collection moratorium imposed by Bayanihan * and 2 ‘Compieteness and proper recognition of ‘members contributions ‘Due to the highly manual nature of processing members contrbution (arising from inherent limitations io the Association's data processing ‘system), there is rik thatthe recorded ‘members contrbution and related interest ‘expense is not complete and not recognized in the proper accounting pend We wil update our understanding ofthe process of recording members! Ccontibution ard interest expense. \We wit obtala and review the GL. (EV ledger) -SL (Seritim lst) reconciliation prepared by management, inching management's disposition of reconciing ‘tems, \We wit perform test of details on the members’ contribution including refund ‘and additonal contrbutons and perform substantive analy for interest expenses, ‘Sufficiency and design of ternal controls ‘As the Assocation continues to grow, the ‘overall general controls environment may no longer be effecive or responsive to the new tees that the Association i facing. This also Includes an assessment of the execution of the ‘Association's controls and processes during the pandemic \We wit conduct meetings with management units to update our understanding ‘ofthe systoms policies and provedures in place, including any actual or ‘expected system improvements for 2020. \We wil aso follow through prior years internal control recommendations. Regulatory compliance ‘As a regula entty, the Associaton is subject to varus reporting requirements ofthe Insurance Commission, Secures and ‘Exchange Commission, Bureau of inernal Revenue, Data Privacy Commission and the ‘Anti-Money Laundering Council, \We wit conduct meetings withthe Association's Legal Department and other ‘concerned unis to update our understanding of functions and resconsiilties, Including a review ofthe Association controls in place, over regulatory compliance. \We wid design auct procedures o evaluate the Association's compliance wit ‘relevant laws and regulations, including relevant cisclosure requirements, as well as review management's income tax calculations. Page 19 of 27Appendix 5 - About Isla Lipana & Co. Isla Lipana & Co. is PWC in the Philippines We at Isla Lipana & Co. are working with our clients anc communities to build trust in society and solve important problems. Isla Lipana & Co. Is a Philippine member firm of the PricewaterhouseCoopers (PwC) global network, each member firm of which is a separate legal entity. ‘Among the auditing ims inthe Philippines, we have the longest afilation with a major global accounting fm that dates back to 1958, The firm has rendered professional service inthe Philipines for $8 years. Established in 1922, itbecame a member frm ofthe Price Waterhouse Worldwide Organization in 1973, On 1 July 1996, the merger of two venerable firms—Price Waterhouse and Coopers & Lybrand—created PWC. ‘At PwC, our purpose is to build trust in society and solve important problems. We're a network of fms in 157 countries with over 276,000 people who are committed to delivering quality in assurance, advisory and tax services, PWC refers to the PwC network and/or one or more ofits member firms, each of which is a separate legal entity. Please see wirw.pwe: comistructure for further details. We stick to the highest quality standards in delivering audit and assurance, tax and advisory services within and Cutside the Philippines. new job: oor ‘Figures relate tothe year ended 30 June 2019 Page 20 of 27Isla Lipana & Co. performs audit, taxation and advisory services Assurance This is the backbone of Isla Lipana & Co. Our assurance services deliver responsive audits talored to the size and nature of the client's business. Qur audit strategy is a risk-based, top-down approach that focuses on client's business objectives and risks, and those that impact on financial reporting. We apply the full rigor of our global audit methodology (PwC Audit) which provides a robust assurance process and upholds a superior and distinctive audit that is of global standards. Tax \We perform various corporate and tax related services that respond tothe needs of your business to help minimize your tax liabilities and meet tax compliance obligations, We recommend options, solutions, and relief as taxation becomes more complicated and costly; and offer advantageous and cost-effective strategies for optimizing your taxes and duties \We understand the environment in which you operate and how concems related to transfer pricing, documentation and strategy, intellectual property management. and mergers and acquisitions impact your tax planning and ‘compliance requirements Advisory Clients engage us to help solve their strategic and day-to-day problems. We do this by creating unique, value- ‘added solutions based on the combination of industry knowledge, subject matter expertise in Consuting and Deals, ‘and our collective experience from all areas of PwC. Consulting ‘We help organizations to work smarter and grow faster. We consult with our clients to build effective organisations, innovate & grow, reduce costs, manage risk & regulation and leverage talent. Our aim is to support you in designing, managing and executing lasting beneficial change. ‘Our clientside aavisory services are related to strategy advice, strategy implementation, transformation, process improvement, customer relationship management, change management, organizational design and reorganization, business process re-engineering, cost reduction, operations and supply chain, forensics and risk management Deals We help clients do better deals and create value through mergers, acquisitions, disposals and restructuring. We \Work together with them to help develop the right strategy before the deal, execute their deals seamlessly, identify Issues and points of negotiation and value, and implement changes to deliver synergies and improvements after the deal Financial due diligence review, vendor assistance, vendor due , commercial and market due dligence review, valuation consulting, structuring services, feasibility studies and market research, post deal services, M&A advisory, fundraising advice, bid support services, public-private partnership advisory, business recovery services, dispute analysis and investigations. Page 21 of 27Our people We deliver quality services to our clients through our main office in Makati City and our branch offices in Cebu City ‘and llolo City. Currently, we have over 1,600 professional and support people, including 30 partners and principals. The number represents employees on probationary, permanent, support, on overseas assignment, contractual, and trainee status. They belong to PwC Philippines, ie., Philippine member firms of the PwC network: Isla Lipana & Co,, Cabrera and Company, PricewaterhouseCoopers Consulting Services Philippines Co. Ltd., and PricewaterhouseCoopers Business Services Philippines Co. Ltd. Our diverse team of experienced professionals includes accountants, tax advisers, systems analysts, economists, human resources professionals, project development managers, industrial engineers, and investment advisors, Our people are active in various professional, public and private sector organizations and patticipate in public ‘forums involving taxation, investment incentives, and advocacy issues. We make sure we keep up with the latest developments so we can give clients informed advice on different issues that might affect their businesses. Our client portfolio ‘We provide audit, tax or advisory services to a number of clients in the Philippines. Our clients range from some of the world's largest and most intemational organizations to local entrepreneurs. We work closely with all our clients to provide them with tallored services that meet their specific needs, irrespective of their size, location and sector. In the Philippines, we have 5,653 clients that include leading corporations, both local and foreign, across different industries: ‘Consumer markets 436 720 1,218 “Financiatsevices = 1G Te /, Media, and telecommunications 238 628 867 RSS ‘Goverment and public services 145 109 254 AEE tT Private equity and sovereign investment funds 6 80 86, As at 7 September 2020 Page 22 of 27r The following summarizes our local audit clients included in BusinessWorld Top 1000 Corporations in the Philippines list (2019 edition): PMETC, le “Taha Information Equipment (@ippnes) ne. ‘+ Cheon Pipes, ne ‘Bank of ne Papp sins ‘Pippine Amerean Le and General Insurance Co, The ‘Amer Techclogy Piipines, fre. Fora Group Prgpnos ne “Toctiog Cote Pupeoes Ghewon Malerpaya LLC ‘BPLPraam Lie Assurance (Cor. (BPLAC) ‘Nee Prppines Core ‘asia Mik Com, BP Family Savings Bank. In Pilipinas Kao In ShinEtsu Magrencs Phitpines ee “PMergan Chase Bank, NA. Priipe Globl Sere, Gorter ‘Aeon Cosmet. In onesie Prigpnes, ine 1 Calgate-Patnaive Phippies, PTT Pritppnes Co. Pi. old Processing & Retring Cor 'SCAD Serves (8) Pe. Ui EDS Manufacong Ine Oie0 Fats, ne. PTT Pippin Tracing Com, Teltecn Orshere invesrmerts ev ‘Area Telesenvees, ne (osanaGold Pipers), ne ‘+ Nidec Subic Pippines Corp. 1 Philipines. ne + ON Semeenducter Phippines, + ToleTecn Customer Cae Management Priones ne + IM Dgta Pr in. * Vitoras ling Co. ne + Cigna TY, es RMS Cotes Ps, ne “Transsons Optical Piipines, tne + HSBC Electron Data # f ‘i i H SP. Technologies, re Fonte Bran Phlpoines, fre Murata Electrics Prgenes, Sarg Globe iy Properties, ine tation Prippines, te Farah Semconducer Phiippies. re. (Chevron Heldgs, ne { Cenduent Business Services Prippines, In ToyetaPasong Tamo, re CConeapoon Durabies, In LF @Pntpones re (caPhiipoines, ne. “Tupperware Brands Pritpines, Opts, re “Toyota Goa! Cay, Ie. BPIMS surance Cor ‘Automated Techrology (Phi), Lang, ne Macquare Ofshore Services, Py tid Toyeta Batangas Cty, ne AIG Shaved Servene usness Procesaing, re ‘HL Geta Fararding (Prigones “Toyota Bacoor, Cavite. ne LOvea Phpines, bo. Infor PSSC. ne Line AG Aa-Branch Dato Pie) Ine Toyota Bost Phippines corp Wil itemational Sate Cor. Merarn Prlipines. ne dapan Anes lelematenal Co te West Contact Services, he + orca Pitppnes. ne DL Payne and Clr, nc ‘Amcor Sposa Canons Rat orp ‘+ Capital Commons Corp {QBE Group Shared Serves Lia. -Pilopine Branch Fulaba Co. fhe Phitpines [Nec Praction Phippines cor, ‘+ AIG Shared Senices Cop i ! 3 ‘Shang Properties, Toya Angles Parreanoa, Braun Autumn Pitpines, fe Ali Eau Hong ne Mosoureng Pipes Ine, i i & “i ‘Sendcz Pilppnes Cor. In coming up win the Top 1000, BusinessWond ranked te companies accoring to her gross revenue or the most recent year. For purposes. of ths ranking, goss revenue iste sum of net sales and non-operaing income. Data used in computing the gross revenue and acter Information the tales were gaered trom the uded nancial statements submited tothe Secwres and Exchange Corson the C350 Of privat rms, and o the Commission on Audit for government-owned and -conrlled corporations. Only audited fnancial statements covering the fscal year ending between May anc December ofthe previous calendar yea” and belween January and Apel forthe current calendar yea, ‘were colectea The Agel year for most companies ends on 31 December eineraie. 9 spect frm s Neca year nacaled Ine end otas section ofthe publication Page 23 of 27Delivering an exceptional PwC Experience The PwC Experience is our commitment to make PwC distinctive through consistent behaviors that enable the success of our clients and people. That means. ‘+ Qurlients fee! as if PwC understands and cares about them, will deliver results to them, and can contribute to their success, They seek us out, want to be associated with the PwC brand, and ask us to become involved in an expanding number of projects. * Our people see us as a great place to work — one that offers them unparalleled opportunities for development. They believe that our culture is strong, healthy, and geared toward high performance and Innovation, and that their ideas are welcomed and their contributions are valued, ‘+ Ourfirm is widely recognized as the profession's leader and competitors regulary target their own performance against ours. Stakeholders see PwC as the firm that sets the professional standard, and on ‘matters of public policy our opinions are sought and highly regarded. Page 24 of 27t Appendix 6 - Your PwC engagement team +63 (2) 8845 2728 local 3074 Email ruthstblasco @pwc.com Page 25 of 27 Ruth F. Blasco Engagement Partner Ruth Blasco is an Assurance Partner, the Methodology Co-Lead Partner ‘and Assurance Learning and Development Partner of PwC Philippines. As the lead engagement partner, she will sign the opinion on the Association's financial statements, Ruth provides assurance and advisory services to companies in a wide variety of business lines such as in insurance, banking, capital markets, savings and loan associations, cooperatives, real estate, and retirement plans, among others. Ruth's proficiency with multiple industries and sectors stems from her over 14 years hands-on exposure (both locally and overseas) on managing ‘assurance relationships, providing advice on financial accounting and Internal controls, and delivering pragmatic financial solutions to clients, including involvement in several due diligence reviews and capital raising transactions, She also played a key role in transitioning the audits of PwC's. key insurance and banking client groups. Ruth gained extensive international exposure from her 26-month posting in, PwC Australia (2010 to 2012) where she was promoted to senior manager ‘year after the commencement of her secondment. Her stint with PwC ‘Australia allowed Ruth to further hone her expertise in the assurance line by leading a number of external and internal audit engagements for ‘muttinational companies. She also participated in PwC global engagement quality reviews conducted in PwC US, Philadelphia and Hartford offices and in PwC UAE. Ruth's technical competence comes with in-depth knowledge and application of International Financial Reporting Standards, Philippine Financial Reporting Standards, US Generally Accepted Accounting Principles and regulatory requirements. She lectures on these topics for both local and international public seminars. Ruth graduated at the top of her class (Rector's Awardee/Class Valedictorian and Magna Cum Laude) with a degree of Bachelor of ‘Science in Accountancy from the University of Santo Tomas. She placed 14th on the Certified Public Accountant Licensure Examination. For further studies, Ruth completed the Building Value Course in Ateneo Graduate ‘School of Business in June 2014, and the 89th Management Development Program in Asian Institute of Management in December 2015 with a ‘Superior Performance Award’. She is a member of Philippine Institute of Certified Public Accountants and Association of Certified Public ‘Accountants in Public Practice.‘Telephone E-mail Page 26 of 27 463 (2) 8845 2728, local 3065 rodetick danao @pwe.com Roderick M. Danao Quality Review Partner Rick is the Vice Chairman and Markets Leader of PwC Philippines since 2013, and Assurance Managing Partner since 2014. He has a solid experience in auditing large and complex companies, both domestic and ‘multinational, Rick has more than 20 years of hands-on experience in financial reporting, specifically involving International Financial Reporting ‘Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP). He is one of the most sought after public speakers in financial reporting, internal controls and auditing standards. Rick is highly ‘experienced in auditing companies reporting under the stringent regulatory watch of PCAOB in the USA. Rick has also led several financial due diligence reviews of companies involved in mergers and acquisitions. Before his appointment as Vice Chairman, he was the Audit Methodology land Leaming and Education Leader for eight (8) years. Rick has participated, as reviewer, in global quality reviews of other PwC offices in the region Rick is currently leading our audit practice in Brunei where our firm audits the country’s major institutions. Under the international assignment program of PwC, Rick worked as an audit manager in PwC offices in London (UK) and Silicon Valley (USA) from 2000 to 2003. During his secondments, he led the audits of listed telecommunications and media companies. He finished his Bachelor of Science in Accountancy at the Polytechnic University of the Philippines in April 1992, He was a student leader at the ‘Junior Philippine Institute of Accountants and the Student Council. He was likewise a Joaquin Cunanan and Co. awardee for the school year 1991- 1992 Rick is a Certified Public Accountant,Jaime Ryan V. Neeley Engagement Director Ryan is a Certified Public Accountant (CPA), Certified Internal Auditor (CIA) and Certified Financial Services Auditor (CFSA), with more than 12 years of experience. Ryan has handled and supervised the external audits of PFRS (Philippine Financial Reporting Standards) and US GAAP financial statements of leading companies in the Philippines involved in the insurance, real estate and construction, manufacturing, shared service centers and business process outsourcing (BPO) industries. Concurrent with his external audit engagements, Ryan also handled several internal audit engagements as well as information technology general controls (ITGC) aucits as part of the Philippine firm's Risk Assurance practice. He also gained actual exposure to Australian and US GAAP reporting from his previous international assignments in PwC Sydney, Australia (in 2010, ‘as experienced staff); PwC Cleveland, Ohio, USA (in 2012, as senior ‘associate) and in PwC Des Moines, lowa, USA, where he just recently ‘completed a 19-month international secondment as an Assurance in Manager (2016-2018). During these intemational assignments, he further honed his expertise in the insurance, asset management and real estate Telephone +63 (2) 88452728 "management industries. focal 3068 Ryan's technical competence comes also with hands-on knowledge and application of various financial reporting standards and regulatory E-mail __jaime,ryanneeley requirements. He is also a lecturer on these topics in both internal and @pwe.com extemal trainings and seminars Ryan also holds experience in the academe as he was a former part-time lecturer of accounting subjects at the University of Santo Tomas (2011) and at the Polytechnic University of the Philippines (2008-2011) Ryan maintains active membership in the Philippine Institute of Certified Public Accountants (PICPA) and Institute of Internal Auditors Philippines (IAP) Ryan graduated cum laude with a degree in Bachelor of Science in ‘Accountancy from the Polytechnic University of the Philippines-Sto. Tomas, Batangas Campus, Page 27 of 27www.pwe.com/ph ©2020 isla Lipana & Co. All rights reserved. PwC refers tothe Philippine member firm, and may sometimes refer to the PwC network. Each member fir is & separate legal entity. Please see www. pwe.comistructure for further details.