*Speech delivered for the conference The Philippine Pre-Need Industry: Reforms and Prospects
held on 21 June 2005 at the AIM Conference Center, Makati
THE PHILIPPINE PRE-NEED INDUSTRY: REFORMS AND PROSPECTS
A GOVERNMENT PERSPECTIVE*
By
Fe B. Barin
Chairperson, Securities and Exchange Commission
Introduction
Ladies and gentlemen, good morning! I am here with you today to provide
the government viewpoint on how to resolve the problems faced by the pre-need
industry. At the outset, let me state my reservations whether my presentation
can fully achieve that. But I would like to share your optimism by presenting to
you the government sector’s response to the challenges facing the pre-need
industry.
Overview of the Pre-Need Industry
The pre-need industry in the Philippines has gone a long way since the
first pre-need company offered memorial plans in 1966. At its peak, the industry
had 92 companies. Over time, with some mergers and consolidations and
voluntary and involuntary closures, the number has gone down to the present 48.
Total assets of the industry amounted to P157 billion as of the end of 2004. The
total number of plans sold to-date had reached some 3.7 million.
The pre-need industry offers three types of plans or products. These are
(1) life plans or memorial plans, (2) pension plans, and (3) educational plans,
which can be broken down further into fixed value plans and open-ended or
traditional plans. There are no problems right now with life, pension and fixed
value educational plans as these constitute clear and determinable obligations.
On the other hand, it is with the open-ended educational plans that a few
companies are having financial problems.
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Legislative Response
The first pre-need plan was sold in 1966. Since then and up to now which
spans almost 40 years, there is no denying that the pre-need industry has grown
and developed, answering the Filipinos’ need for security and assurance on
things they deem important: education, retirement, and remembering departed
loved ones. But let me tell you also that despite those four decades, a specific
law to govern the industry has yet to be enacted. Could the absence of that
statute be the reason why it has significantly gained popularity among the
Filipinos? Or the absence of any governing law contributed to the difficulties now
being faced by a few companies?
Actually, the only piece of legislation directly dealing on pre-need plans is
a one-paragraph provision— Section 16 of the Securities Regulation Code which
was enacted in 2000. The paucity of provisions on pre-need plans in the Code
can be explained by the fact that there were then pending bills that seek to
establish a separate regulatory scheme for pre-need plans as well as transfer
their jurisdiction to another government agency. Nevertheless, in the interim,
section 16 of the Code mandated the SEC to prescribe rules and regulations on
the sale of pre-need plans, which were eventually issued in mid-2001.
It can be said then that a welcome outcome of the recent, or even
ongoing, heat on pre-need companies is that the enactment of a law to regulate
the pre-need industry has been put on the front burner. At least eight bills are
now pending in both the House and the Senate, seeking to establish the legal
framework for the pre-need industry.
Gleaning from what were stated on the section on “Declaration of Policy,”
the main objectives of the bills are: to place the operation of pre-need companies
on a sound, efficient and stable basis; to protect the planholders, and to create a
3
strong and effective regulator for the industry. We at the SEC which currently
oversees the operations of pre-need companies find the last objective
reassuring. Our more recent experience has seen the questioning or even
defiance by a few companies of our directives when we enforce rules and
regulations governing the operations of pre-need companies. Hopefully, with the
enactment of the pre-need code, the agency tasked to regulate the industry could
act swiftly and decisively, without being stymied by restraining court orders,
opinions of a vociferous few, and other dilatory actions.
We are also pleased to note that almost all of the rules and regulations on
the registration and sale of pre-need plans that the SEC promulgated in 2001 are
found in the House and Senate versions. For example, the minimum paid-in
capital of P100 million for a pre-need issuer was retained. The threshold was
imposed to limit the number of players to only those which have the financial
capability to me their obligations.
The SEC had also issued its own rules and regulations on the
establishment of a trust fund for each type of plan, how the fund should be
invested, the setting up of a liquidity reserve fund, and the management of the
trust fund by a trustee. These are also reflected in the House and Senate bills.
Greater disclosure and transparency provisions of the proposed bills were
drawn from current SEC requirement to pre-need firms to issue to their clients an
Information Brochure that contains all the necessary information about the plan
sold.
The proposed Pre-need Code aims to further protect the planholders’
interest. A Planholders’ Protection Fund is being envisioned to serve like the
Philippine Deposit Insurance Corporation that provides insurance to bank
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deposits. The fund shall be used for the payment of claims against a pre-need
company remaining unpaid by reason of insolvency of such company.
There is also a provision on the qualifications of directors and officers,
some kind of a “fit and proper” rule for those who run pre-need companies.
Another Senate version calls for stronger penalties consisting of fines and/or
imprisonment for specific offenses that cause harm to the interest of the
planholders or the pre-need industry as a whole.
The grounds for suspension or revocation of license were also laid down
as well as proceedings in case of conservatorship or insolvency of a pre-need
company. Indeed, our legislators are treating pre-need plans almost like bank
deposits so that a provision authorizing the regulatory agency to regularly
examine pre-need companies is also included in the bills.
The SEC, as the current regulator of pre-need companies, was invited in
the hearings deliberating on the pre-need code. On the whole, we believe that
the provisions of the bills will strengthen the regulatory framework for pre-need
plans. The legislation part to resolve the issues confronting the pre-need industry
is now being taken care of and the regulatory agency could then proceed in its
rulemaking task to support the broad directions and objectives of the pre-need
code.
Deliverance of the Industry through Laws and Rules?
A combination of thoughtful legislation and careful rulemaking does not
automatically lead to a robust and stable pre-need industry. There is no single
piece of legislation or rule that can send the signal to our people that all the
problems have been fixed, and it is now safer to get back in the market.
Moreover, compliance with laws and rules and regulation does not necessarily
mean good management or good corporate governance.
5
I agree with the findings of a global survey of financial institutions
conducted by Pricewaterhouse Coopers that any institution that views corporate
governance as merely a compliance exercise is missing the mark. They found
out that one of the reasons financial institutions are not making the grade is that
they equate effective governance with meeting the demands of legislators and
regulators. They fail to recognize that sound governance is also good for
business. In other words, they tend to look at the promulgation of new laws and
rules and regulations as another compliance exercise. The study goes on to state
that the compliance mentality is limiting these institutions' ability to achieve
strategic advantages through governance.
This is then my challenge to the pre-need industry: Look beyond laws
and rules and regulations; look to the principles upon which sound business is
based. In order to restore their trust, existing and prospective planholders must
see pre-need companies shift from constantly searching for loopholes and an
obsession with the bottom line at any cost. They must see a new respect for
honesty, integrity, transparency, and accountability. Indeed, beyond legal
requirements, boards of directors and managers of pre-need companies should
periodically test where they stand on ethical business practices. They should
ask, for example, "Are we getting by on technicalities, adhering to the letter but
not the spirit of the law? Are we compensating ourselves on the basis of our
contribution, or are we taking advantage of our positions? What would happen
to our reputation if the public gets to know about our actions?”
Those at the helm of pre-need companies will have to make a conscious
decision that ethics and integrity should be at the heart of every business
decision. They will have to decide that the limits of the law are not the only way
to determine what is right and wrong. By making this decision and
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demonstrating their commitment to good governance, they will set a tone that
will filter down through their entire organizations.
SEC Internal Reforms
But before one gets the idea that we at the SEC act only in response to
headline-grabbing problems and tell what market participants ought to do, let me
talk about some initiatives that we have tried to bring to the Commission.
When I joined SEC in September of last year, I was aware that the
Commission already gained a reputation as one of the most sincere in ridding
itself of corruption. I therefore saw an opportunity for the SEC to move to a step
beyond mere intention— to be an organization that has been rid of corruption.
We have updated our computerization system to streamline processes,
promote transparency, lessen human discretion and reduce opportunities for
corruption. September of this year is our target date to put on stream a phase of
the computerization project where reports and documents can be tracked on-line,
providing information how long papers stay in one’s table.
I believe in the positive impact of identifying potential problem areas and
dealing with them before they erupt into full-blown crises. We would like to put
more focus on encouraging good outcomes proactively rather than looking for
violations after the fact. We have sought to launch the Commission on a different
course, an approach that anticipates problems before they develop. An ounce of
prevention is indeed worth a pound of cure. Our computerization efforts will
enable our staff to analyze data and information about the financial health of preneed
companies and other corporations. This will enable us to detect “red flags”
or early warning signals so that problems can be addressed before they arise.
We are also developing a risk based capital adequacy model for pre-need
7
companies and other capital market players so to calibrate capital requirements
against their risk exposures.
We continue to have a steady diet of corporate cases and we are still
confronting problems of pre-need companies. I have been and will continue to be
firm on wrongdoers. Supporting free markets requires punishing those that abuse
the system. This therefore means strengthening our monitoring and enforcement
system.
Finally, I would like to share with you my regulatory philosophy. I am very
much aware that we regulate one of the innovative industries in the financial
sector. After all, the pre-need industry is a home-grown phenomenon. As a
regulator of such a creative market, we too must be creative and fast-moving.
We must come up with new approaches for addressing the challenges presented
by our markets. Let me take this opportunity to talk to you about what I believe
we should be taking to respond to the creativity and dynamism of the industry.
First, we must work with industry to be sure that our regulation facilitates
market innovation while it protects investors. We need to work with the industry
to address changes as they evolve, rather than merely responding after they
have happened. By working with industry as it innovates and incorporates new
technology, we can gain the information we need for effective oversight.
Second, we have to constantly review our regulations and discard what
does not work, either because the burden outweighs the benefits or because it
has become outdated and no longer meets our needs and the needs of our
stakeholders. The purpose of regulation is first and foremost to protect investors.
But we do those investors a disservice if our rules shackle industry and prevent
innovation, or lead to incomprehensible results. It is our duty to keep our
regulatory structures as simple, clear, and up-to-date as possible. Our markets
8
are changing. But we must take care not to answer every innovation with a new
regulation. As regulators, we should encourage legitimate changes and
improvements, not stifle them.
All of what we would like to do and happen within SEC rest on the
shoulders of the officers and staff. An important agenda therefore is our
capacity-building program for our staff. We cannot expect excellence and
integrity from the companies we supervise and regulate if we ourselves do not
have the professional capability and moral compass to carry out our
responsibilities, from the Commissioners down to the clerks. We ourselves
should be the mirror of fairness, accountability, transparency and consistency in
our regulatory actions. I know that this is not an easy task for a more than 350
strong organization. But we have to do it and since we have shown than we are
most sincere in eradicating corruption in our operations, the next step is to make
that happen.
Conclusion
The eventual legislation of the pre-need code would establish basic
principles and objectives, which in turn, would serve as guides of the regulatory
agency to promulgate the necessary rules and regulations. These activities,
however, should be viewed at most as drawing up the road map under which
pre-need companies operate. What matters more is what routes they take and
how they deliver the security, assurance and peace of mind they promised to the
Filipino people.
* * * * *

MANILA, Philippines - Pre-need companies want the Securities and Exchange Commission (SEC) to relax industry rules to cut losses from old plans sold at high interest rates and avert what they claim as their impending demise.

The sector sent a call for help as early as Aug. 28, but up to now, corporate regulators have yet to act on the request.

"The proposals of the pre-need industry are still being studied by the commission’s nontraditional securities department," SEC Chairman Fe B. Barin said in a telephone interview Tuesday.

She declined to comment on the merits of the industry request and on the possible regulatory action.

"The letter acknowledges the fact that investment assumptions made when we priced our products and which have always been hit ever since the inception of the industry may no longer be hit in the future. That is a problem we want addressed and solved," Philippine Federation of Pre-Need Plan Companies President Juan Miguel M. Vazquez said in a text message.

He and other officials of the group, which wanted the regulator to keep their letter confidential, declined to be interviewed.

In separate letters sent to the commission on Aug. 28 and Sept. 24, the federation sought the relaxation of industry rules so they can cope better with the US-led economic slowdown.

The group said pre-need firms had sold a number of plans promising up to 18% yield. "Given the current economic environment, generating the high return promised by these old plans is close to impossible," executives from 13 pre-need companies told the SEC in their Aug. 28 letter.

"[In] the last few months, the trust funds of our plans registered huge unrealized erosion in value because of the economic slowdown," the group wrote the regulator in a second letter dated Sept. 24.

They said their trust funds had been reduced due to accounting standards tying assets to market prices. Unless and until the onerous yields on the old plans are addressed, "there could be no certain future for our industry," it said.

Pre-need sales in the 11 months of 2008 declined by over a fifth from year ago, as pension plans faced stiff competition from other investment products.

The sector has been selling fewer education plans since it was hit by a scandal a few years ago, when several pre-need firms failed to pay clients after tuition shot up.

The industry posted P13.97 billion in sales compared with P17.51 billion a year earlier, data from the SEC showed.

The group said hiking capital as a condition to sell would be the industry’s death knell.

The federation proposed removing unrealized losses from the computation of the trust fund deficit as a short-term solution.

It also sought five years within which to put up the additional capital for loss provisioning, pay trust fund deficits with noncash assets such as real estate and unlisted shares with good track record.

The group also said the capital required to cover paper losses should be built over five years.

For long term solutions, the group proposed the following:

* Determine which plans are commercially viable and have these managed separately from those that are not;
* Have individual pre-need companies submit their own proposals on how to they seek to manage their plans in the next 10 to 15 years;
* Allow companies to continue selling new plans, profits from which will make up for losses from old ones bearing high interest; and
* Create new ways to determine asset prices aside from tying these to market rates.

In November, the SEC allowed companies, including pre-need firms, to reclassify assets based on future prices, giving them relief from plunging market prices of their holdings due to the uncertainty unleashed by the economic turmoil in the US. — Don Gil K. Carreon

Friday, January 16, 2009 SEC cuts preneed companies some slack By Chino S. Leyco, Reporter The Securities and Exchange Commission (SEC) has decided to relax its capital rules on the preneed industry to prevent its collapse amid the global financial crisis. Jose Aquino, SEC director, said the regulator formulated the terms and conditions for the application of multi-year capital and trust fund build-up of industry players. Under the new regulation, a firm must render an acknowledgment letter for the trust fund deficiency or capital impairment based on the actuarial validation of audited financial statements for 2007. The preneed firm is required to present a five-year projected financial statement together with assumptions taken as well as a 15-year financial program. In case the company’s condition improves during the implementation of the program, the regulator has the prerogative to shorten the period. Firms with approved applications must immediately address their respective trust fund deficiencies and capital impairment within 60 days. The firms must also fund the deficiency between the trust fund and preneed reserves within 2009 and 2012. The Philippine Federation of Pre-need Plan Companies Inc. (PFPPCI) earlier said the industry is realizing huge losses due to the mark-to-market rule of the SEC. In a letter to the SEC, the PFPPCI said trust funds of member firms’ plans registered huge “unrealized” erosion in value in recent months because of the economic slowdown. The problem stemmed from plans that were approved in the past based on assumptions that were prudent at that time, but had since been eroded by the global financial crisis. “Our problem is the growing obligations on plans sold in the past, which were priced per actuarial feasibility studies that were then viable,” the group said. “These plans assumed interest yields of up to 16 percent per annum when key interest rates and Treasury bill rates were 20 percent per annum,” it said. In a separate position paper, the group said putting up capital and injecting new funds into the trust funds is no longer reasonable given the present economic environment. If SEC would be firm about the required capital boost, PFPPCI said chances are the majority of its members would refuse to do so, and opt to stop selling and just attempt to service the plans. “It will only aggravate the problem, as it will also be the death knell of the industry. We sincerely believe that the closure of the industry will not result to the protection of planholders,” the federation said. The SEC had said it is looking into the need to tweak the mark-to-market rule of booking the “fair price” of bonds and equities bought by investment houses, mutual funds and preneed firms’ trust funds amid the global financial crisis.

The Passion to Serve

---

"From: edsmadrid@hotmail.com
To: pio@pnp.gov.ph
Subject: FW: PRIMANILA PLANS: THE PASSION TO SERVE CONTINUES AS WE RAISE THE BAR @20
Date: Tue, 20 Jan 2009 12:32:39 +0800


P/Chief Supt. Nicanor A. Bartolome

Dear Sir:

This is to follow up what we have emailed to your good office last March 16, 2008.

With due respect to the Primanila Planholders at PNP , we would like to communicate with you our desire to solve the predicament our company Primanila Plans is in at the moment.

We feel that proper dissemination and constant communication with the Planholders through your good office will fully uncover the real situation Primanila Plans and by knowing the root cause, we may be able to find the right solution to the concerns of the Planholders as well as our existence as a corporation.

For your favorable response and immediate action.

God bless and more power!

Very truly yours,

Eduardo S. Madrid
Chairman/CEO
Primanila Plans Inc.

Herein below is our email sent March 16, 2008

---

From: edsmadrid@hotmail.com
To: pio@pnp.gov.ph
Subject: FW: PRIMANILA PLANS: THE PASSION TO SERVE CONTINUES AS WE RAISE THE BAR @20
Date: Sun, 16 Mar 2008 06:19:06 +0800

---

From: edsmadrid@hotmail.com
To: pio@pnp.gov.ph
Subject: FW: PRIMANILA PLANS: THE PASSION TO SERVE CONTINUES AS WE RAISE THE BAR @20
Date: Thu, 28 Feb 2008 06:58:10 +0800

P/SR Nicanor A. Bartolome
PNP

Sir:

Please find herein below information explaining the status of Primanila Plans Inc. for the benefit of All Personnel & Officers of Philippine National Police who were All Primanila Planholders.

For your utmost cooperation.

Very respectfully yours,

Eduardo S. Madrid
Chairman/CEO
Primanila Plans, Inc.

---

From: edsmadrid@hotmail.com
To: mcenriquez@gmanetwork.com
Subject: PRIMANILA PLANS: THE PASSION TO SERVE CONTINUES AS WE RAISE THE BAR @20
Date: Mon, 18 Feb 2008 07:00:14 +0800


On October 17, 2008 will be our 20th Anniversary as a Pre-need Company. Therefore this year, We would like to continue our company's slogan of "The Passion to Serve" as " We Raise the Bar @ 20".

Through your timely intercession, you might bring justice to our planholders' plight and our company's existence as we are having difficulty with the closure of BANKWISE, INC. and the inability of our trustee, WISE CAPITAL INVESTMENT & TRUST COMPANY, INC. (WISECITCO) to release the trust funds intended for our planholders who have been waiting for more than fourteen(14) months as of this date.

For your favorable and immediate action.

God bless you always!


Eduardo S. Madrid
Chairman/CEO - Primanila Plans

A. Background

A.1 NATURE

The Pre-need plan is a financial service that gained popularity in the country because it suited the needs of the Filipinos. it is actually a savings mechanism for their children, pension upon their retirement and memorial service upon their demise.

A.2 History

Pacific Memorial Plans, Inc. (now Pacific Plans,Inc.) established the country's first pre-need company in 1966. It offered desired memorial service for planholders regardless of actual cost.

Later, College Assurance Plan Philippines, (CAP) Inc. introduced the traditional education plan in 1980. The original concept was for the pre-need company to cover the actual cost of tuition and other standard school fees at the time the student/beneficiary enters the school which the planholders have chosen beforehand upon the purchase of the plan.

A total of 92 pre-need companies have been registered over the past thirty years. In 2005, however, the number of pre-need companies licensed to operate is down to 32.

Throughout the years, the industry grew into a multi-billion industry. In 2004, the pre-need industry posted P157 billion in total assets, P65.6 billion or 41.78% of which pertain to the total Trust Fund maintained with the banking sector. About 66% of the Trust Fund was invested in government securities. The numbver of issued and outstanding pre-need plans as of February 2005 reached 3,740,872.

A.3 EXISTING REGULATORY FRAMEWORK: SEC REGULATION

Although the first pre-need company opened in 1966, the supervision of the SEC started only in 1978 when it issued its first "Rules on Registration and Sale of Pre-need Plans, Pension Plans, Life Plans and Similar Contracts and Investments."

With the approval of the Revised Securities Act in 1982, pre-need plans were included under the definition of securities which formally placed its regulation under the jurisdiction of SEC, being the regulator of securities.

In 1995, the shift in regulatory philosophy from merit system to full disclosure was applied to the pre-need industry. The concept requires companies to reveal all material information that will or might affect and influenced investors in their investment decisions. The system transfers to the investors the responsibility of doing his own evaluation and judgment based on the fully disclosed documents and lets him assume the risks inherent in any investment decision.

In 2000, the SEC adopted prudential measures in coming up with guidelines on where the trust fund should be invested. It also required an increase in the minimum paid-up capital of pre-need companies for which the latter were given time to comply with. The passage of the Securities Regulation Code (SRC) in July 2000, separated pre-need plans from the general category of securities and treated it as a class of its own. This justified the application of prodential regulation on the treatment of trust funds and their investments.

In 2001, the SEC commenced the implementation of the New Pre-Need Rules on Registration and Sale of Pre-need Plans under Section 16 of the SRC.

B. INDUSTRY PROBLEMS

In recent years, the country saw the downfall of several pre-need companies, including major industry players and pioneers.

The major factor that caused the failure of some companies is the issuance of traditional educational plans which consist of 21% of the total number of plans sold as of 2003. Under a traditional eduactional plan, the issuing pre-need company guarantees the payment of the actual cost of benefits or services promised regardless of the increase from the originally assumed values. The deregulation of tuition fees in 1992 resulted in the unforeseen tremendous increase in the obligations of Pre-Need Companies.

Another factor that contributed to the problem is bad management and investment decisions made by Pre-Need Companies. these actions have not been properly regulated by the SEC for a long time in view of the lack of funding and regulatory framework for the industry.

The industry problems were highlighted when the SEC implemented prudential rules for the industry, particularly the inclusion of the actuarial reserve liability in the financial statements of the company. Such inclusion of the ARL showed that some companies do not have enough assets to pay off their future obligations to the planholders.

The liquidity problems and trust fund deficiencies encountered by a number of pre-need companies as well as the filing of Petitins for Rehabilitations are the most glaring manifestations of the growing problems of the industry.

Considering the importance of the pre-need industry to the average Filipino and to the government, it should be given utmost attention. The industry should be saved from the danger of extinction brought about by problematic pre-need companies. Such importance of the Industry was emphasized by no less than the President of the Republic when she included in her 2005 State of the Nation Address her desire to speed up the passage of the Pre-Need Code.

C. PRIMANILA PLANS,INC.

Primanila Plans, Inc. was bought from the Group of Dr. Ramon Gevero by the Group of Mr. Eduardo Madrid last April, 2003. With the entry of Mr. Eduardo S. Madrid, the company is looking at a more aggressive thrust in the marketing of Primanila Pension Plans when the SEC approved an additional Two hundred Million (Php 200,000,000.00) Pesos securities for sale. By the year end 2004, Primanila Plans, Inc. landed in the Top 12,000 Philippine corporation when it registered as the 8,999th in the NEXT 5,000 CORPORATIONS Business Profiles 2005-2006 Edition published by Philippine Business Profiles and Perspectives, Inc.

Primanila Plans, Inc. was even adjudged as the GRAND SLAM WINNER as the 2004 TOP PRE-NEED COMPANY.

By the start of 2007, Primanila started feeling the heat when its Trustee Bank, Wise Capital Investment Trust Company, Inc. (wisecitco) would not release funds for the benefit of the Planholders. It was later known that Wisecitco's Mother Company, Wise Holdings, Inc. license to operate was revoked by SEC last June 2006. From hereon Primanila's problems which is more than a year now practically killed its operation to the prejudice of its Planholders, Shareholders, Employees and the Pre-Need Industry.

WHAT HAPPENED?

Sometime in November of 2006, the amount of Php 63,415,489.17 has remained in a trust fund account with Wisecitco in favor of Primanila Plans, Inc., which amount plus all interest earned therein are to guarantee the delivery of benefits to its Planholdes pursuant to Rule 16 f the Pre-Need Rules of the Securities and exchange Commission(SEC).

On November 16, 2006, the SEC en banc approved the cancellation of the trust agreement between Primanila Plans and Wisecitco, and a letter dated November 17, 2006 was sent by the Commission informing Wisecitco of the said approval and ordering the same to transfer the remaining trust fund assets to Asiatrust Bank not later than January 17, 2007.

In a letter dated April 12, 2007, the company has informed the Commission of its pending request with Wisecitco for the transfer of funds to Asiatrust Bank with its Planholders. As per said letter, Wisecitco could not allow any withdrawal from the fund because of the outstanding loans of Primanila with Bankwise Inc.


Since the reason of Wisecitco in not allowing any withdrawal from the trust fund is unjustified, if not to say irrelevant, a subsequent Order No. 11 issued by the Commission on April 25, 2007 was sent to Wisecitco directing the same to release the entire amount of liquid assets of the trust fund to Asiatrust Bank within five (5) days from receipt of the Order. In that same Order, the Commission cited the following provisions affecting Primanila's trust Fund deposit, as follows:

Paragraph 16.1 of Pre-Need Rules 16 states that:

"To guarantee the delivery of Benefits such as monetary consideration, cost of services or property delivered, deposits must be made by the issuer into a trust Fund to be established for each type of plan . . .x x x"

Moreover, Paragraph 20.2 of Pre-Need Rule 20 states that:

"The Trustee shall not use the trust Fund to invest or extend any loan or credit accomodation 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 interests."

In that same Order 11 issued by the Commission, Wisecitco was told that "Wisecitco has no right to withhold the trust fund and prejudiced the Planholders who are already entitled to claim of their matured plans. Likewise, the trust fund cannot be made as a collateral to any loan and/or credit accomodation it has granted Primanila."

On May 17, 2007 a letter was received by the Commission from Wisecitco. and a reply letter was sent to the latter on May 28, 2007, stating in part that "After a careful evaluation of the statements and/or contentions contained on said letter, we found the same devoid of merit, and therefore, this Commission affirms its previous Order of April 25, 2007."

On September 10, 2007, Mr. Eduardo S. Madrid sent a letter to Her Excellency, Madam Gloria Macapagal-Arroyo, seeking Presidential intercession on his request for the immediate release of Primanila's trust fund eith Wisecitco. On Septenber 28, 2007, the request was referred to the Hon. Nestor A. Espenilla, Jr., Deputy Governor, Banko Sentral ng Pilipinas for appropriate action/comment, consistent with existing laws, rules and regulations on the matter.

Subsequently, Mr. Madrid was informed by the Office of the Hon. Amado M. Tetangco, Jr., Governor, Banko Sentral ng Pilipinas, that Wisecitco was requested in a letter dated October 22, 2007 to communicate directly to Primanila as to their explanations and comments on Primanila's complaint, within ten (10) banking days from receipt, copy furnished the Governor's Office. Regrettably, Wisecitco has never than so after a lapse of about 20 days. So that Mr. Madrid, in a letter dated November 27, 2007, informed the BSP Governor of such inaction by Wisecitco, copy furnished the BSP Governor of such inaction by Wisecitco; copy furnished the Office of Her Excellency Madam Gloria Macapagal-Arroyo.

Last January 30, 2008, Wisecitco snubbed the mediation set by BSP. The second mediation set by BSP on February 13, 2008 was attended by Atty. Trinidad and Arnold Mapanao representing Wisecitco stating that Mr. Emmanuel Deles and Ramoncito Modesto already resigned . Another resetting is scheduled this February 27, 2008.

Majority of the Planholders were retired and in active service of the Philippine National Police.

The following general information sheets gathered lately at SEC revealed the following informations:

1. WISE HOLDINGS, INC. (AS OF JULY 21, 2003) STOCKHOLDERS/DIRECTORS

1.1 VR HOLDINGS, INC
1.2 PCD NOMINEE CORP
1.3 OTHER STOCKHOLDERS
1.4 RENATO Z. FRANCISCO
1.5 VICENTE J. CAMPA, JR.
1.6 EDUARDO L. ALINO
1.7 LAZARO LL. MADARA
1.8 RAMON L. MAPA
1.9 ANTONIO M. ORTIGAS
1.10 V. FRANCISCO VARUA
1.11 JULIANO LIM
1.12 ROLANDO K. DAVID
1.13 AUGUSTUS C. PAISO
1.14 ENRIQUE P. ESTEBAN

2. WISE CAPITAL CORPORATION (AS OF MAY 7, 2003) STOCKHOLDERS/DIRECTORS

2.1 WISE HOLDINGS,INC.
2.2 RENATO Z. FRANCISCO
2.3 VICENTE J. CAMPA JR.
2.4 LAZARO LL. MADARA
2.5 EDUARDO L. ALINO
2.6 ROLANDO K. DAVID
2.7 AUGUSTUS C. PAISO
2.8 RAMON L. MAPA

3. VR HOLDINGS CORPORATION (AS OF MARCH 31, 2006)
STOCKHOLDERS/DIRECTORS

3.1 VICENTE J. CAMPA JR.
3.2 RENATO Z. FRANCISCO
3.3 EDUARDO L. ALINO
3.4 RAMON L. MAPA
3.5 SALVACION M. MANALO

4. BANKWISE INC. (AS OF SEPT. 10, 2004) STOCKHOLDERS/DIRECTORS

4.1 WISE HOLDINGS INC.
4.2 VR HOLDINGS CORPORATION
4.3 DANTE ANG
4.4 LAZARO LL. MADARA
4.5 RENATO Z. FRANCISCO
4.6 VICENTE J. CAMPA JR.
4.7 ANTONIO M. ORTIGAS
4.8 BRETT TOLHURST

5. BMM PROPERTIES INC (AS OF JUNE 21, 2004) STOCKHOLDERS/DIRECTORS

5.1 MANUEL DE CASTRO
5.2 EMMANUEL DELES
5.3 ERLINDA DE CASTRO
5.4 LUIS CUERVO
5.5 ENRIQUE AUSTRIA

6. WISE CAPITAL INVESTMENT & TRUST COMPANY, INC. (WISECITCO)
(AS OF JULY 7, 2006) STOCKHOLDERS/DIRECTORS

6.1 WISE CAPITAL CORPORATION
6.2 WISE HOLDINGS INC.
6.3 RENATO Z. FRANCISCO
6.4 EMMANUEL T. DELES
6.5 ROLANDO K. DAVID
6.6 AUGUSTUS C. PAISO
6.7 RAMONCITO G. MODESTO

MARIO VILLAMOR was the Executive Vice President then became the President of BMM Properties Inc.

MR. EMMANUEL T. DELES & RAMONCITO MODESTO, who were the Executive Vice President & Chief Finance Officer respectively of Wisecitco and also the Credit Committe Members of Wisecitco, approved a loan to BMM Properties Inc. last November 29, 2006 despite the cancellation of the trust agreement last November 17, 2006 by SEC en banc from the Primanila's trust fund to the prejudice of Primanila's planholders.


YOU CAN VIEW OUR WEBSITE AT www.plans.primanila.com"

Hello Primanila Planholders!

This will be our latest communication venue for the meantime. Kindly observe courtesy and respect so that we can have an open communication regarding our situation.

God bless!