PRIDE STAR DEVELOPMENT BANK, INC.

REVISED COMPLIANCE PROGRAM

This Revised Compliance Program is based on the Compliance Program first adopted by the Bank on July 10, 1999. Portions of Section X180 of the Manual of Regulations for Banks, 2008 Revised Edition, have been incorporated into the relevant sections of this Revised Compliance Program.

POLICY STATEMENT

The Bank adheres to and is committed to maintaining its long tradition of ethical and responsible conduct. Every director, officer and employee is expected to adhere to this standard in his or her work and in all transactions with other directors, officers or employees of the Bank and with clients, customers, the government and the general public. Ethical and responsible conduct is not limited to avoiding violations of legal orethical requirements but is facilitated and guided by an understanding and appreciation of such requirements and of their underlying rationale. Among other consequences, failure to observe legal or ethical requirements exposes the Bank to the risk of legal or regulatory sanctions, financial loss and loss of reputation (compliance risk).

OBJECTIVES

The objectives of this Revised Compliance Program are:

- to state policies in regard to ethical and responsible conduct

- to equip the Banks directors, officers and employees with tools to be able to familiarize themselves with relevant laws, regulations and best practices

- to institute systems and define procedures and mechanisms that will facilitate ethical and responsible conduct guided by said laws, regulations and best practices

RESPONSIBILITIES

All directors, officers and employees are responsible for ensuring that their work as well as the Banks transactions with clients, customers, the government and the publicadhere to legal and ethical principles.

A more direct and specific role in the implementation of this Compliance Program pertains to the Board of Directors, the President and the Compliance Officer.Nevertheless, compliance is not the mere function of the Board of Directors, the

President or of the Compliance Officer but is a matter of concern of each manager and a personal responsibility of each staff.

BOARD OF DIRECTORS

The Board of Directors has an oversight function in the implementation of this program and in ensuring that issues that arise are resolved expeditiously. The Board shall see to it that this compliance program is reviewed at least annually and specific responsibilities for its implementation properly defined and apportioned.

PRESIDENT

At least once a year but as often as maybe necessary, the President shall submit a report to the Board of Directors on the results of the Compliance Audit, steps taken to correct violations noted and status of corrective steps taken, with appropriate recommendations.

The President shall inform in writing the heads of each department subject of the details of the violations noted and shall require the department head to correct the violations immediately and to submit written reports on the action taken on the violations noted and the status of the corrective actions taken. Whenever necessary, meetings/discussions between Compliance Officer and the department head shall be held. Such meetings shall be supported by minutes of the discussion and commitments made by the department head to correct the exceptions noted.

The President shall submit periodic reports at least quarterly to the board of Directors on violations noted by the Compliance Officer, the actions taken by the officer concerned to correct said violations and appropriate recommendations to prevent repetition thereof.

COMPLIANCE OFFICER

The Compliance Officer is a senior officer tasked with the implementation of this Compliance Program. He shall report to the President.

The Compliance Officer shall propose for approval by the Board a Compliance Program. From time to time he shall propose to the Board the necessary revisions to the program.

The Compliance Officer shall maintain a library of laws, rules and regulations relevant to the Bank and keep abreast of changes and developments. He shall see to it that the Banks directors, officers and staff familiarize themselves and comply with such laws, rules and regulations through meetings, bulletins and training programs.

The Compliance Officer shall develop a compliance monitoring and tracking system which identifies the department/office and officer affected, provides implementation guidelines, identifies compliance risks. The Compliance Officer has the right to obtain information, records or files necessary to carry out his responsibilities and to conduct investigations of possible compliance breaches.

The Compliance Officer shall maintain open and free-flowing communication within the Bank and with regulatory bodies/agencies or officials with a view to facilitating dissemination of information, consulting, and obtaining and providing clarifications in a timely and effective manner. He shall see to it that the Bank maintains a constructive relationship with regulatory bodies/agencies/officials.

The Compliance Officer shall see to it that compliance issues are brought to the attention of responsible officers as soon as possible for immediate resolution in order to minimize risks involved.

LIST OF LAWS, RULES AND REGULATIONS

The library of laws, rules and regulations relevant to the Bank shall have the following sections:

1. Banking Laws2. MORB, BSP Circulars3. PDIC issuances4. Anti Money Laundering Act, implementing rules, AMLC issuances5. Corporation Laws: Corporation Code, Securities Regulation Code and their

implementing rules; SEC Memorandum Circulars and other issuances 6. National and Local Tax Laws: National Internal Revenue Code, Revenue

Regulations; Local Government Code; BIR rulings7. Labor Laws: Labor Code and implementing rules; DOLE issuances 8. SSS law and issuances9. Other aws, rules and regulations 10.Office Orders/Memoranda

The above sections may be modified as needed. A list of banking laws, rules and regulations is given in Annex A. This list will be updated regularly.

LIST OF REPORTS; MONITORING TOOLS

A list of reports for submission to the BSP, including deadlines, manner of submission and BSP department to whom the report should be submitted, is found in Appendix 6 of the MORB. For Thrift Banks, see pages 37 to 70 of Appendix 6.

Monitoring tools will be developed from time to time. One such tool is the Compliance Monitoring Sheet (CMS). Sample CMS are attached as Annexes B-1 and B-2.

COMPLIANCE TESTING

The Compliance Officer in coordination with either the Internal Auditor or the President shall establish a monitoring and assessment process, e.g., a checklist of regulations, to ensure that all directors, officers and staff of the bank are familiar with the compliance program.

The internal and external auditors shall be required to inform the Compliance Officer of any violation of laws, rules and regulations noted in their audit work.

Compliance testing shall be conducted on a regular basis. Compliance testing may be outsourced provided the testing service provider is a reputable company. The service provider shall in all cases be subject to oversight by the Compliance Officer. Outsourcing shall require previous authority from the Board of Directors.

In any event, reports on the monitoring and assessment shall be prepared and submitted to the President to document findings, issues, concerns and remedial/corrective measures taken. The reports must be thoroughly reviewed and approved by the department head concerned before submission to the President and the Board of Directors.

The reports as well as the recommendations shall be submitted to the President. The compliance rating of each department shall be based among others, on the number of violations, amount involved and persistence in committing the violations. The level of risks are as follows:

Low - Possibility of losses is minimal

Moderate - Risk of losses is manageable

High - Exposure to losses are very definite and imminent

The Compliance rating shall be considered as one of the basis for promotions, awards and other incentives that may be granted by the bank as well as for disciplinary actions.

The compliance risk rating of each department shall be considered in determining the frequency and scope of the succeeding compliance review to be performed. Those exposed to high risk shall be subject to either quarterly or monthly review. Those exposed to moderate risk shall be subject to either quarterly or semestral review. Those subject to low risk shall be subject to yearly review. In cases where the rating of a department continues to be high for three consecutive audits, the President shall conduct a conference with the principal officers of the department concerned to

determine the reasons therefore and to require said officers to submit specific measures to be taken to avoid further violations.

COMPLIANCE TRAINING

The compliance officer shall provide continuing orientation and training of existing staff as well as new employees to ensure that all personnel are adequately trained and supervised and made aware of the existence of particular laws, rules and regulations and ethical standards of the bank.

Assessment of competence, future training needs and remedial action to correct inadequate performance shall be made at least annually.

REVIEW OF THE COMPLIANCE PROGRAM

The President and the Board of Directors shall review the Compliance Program at least once a year. The review should include assessment of the performance of the Compliance Officer and the efficiency of the monitoring, testing and reporting system. Appropriate revisions of the program shall be adopted to minimize losses from non-compliance risk.

ANNEX A

BANKING LAWS

P.D. 1034 Authorizing the establishment of an offshore banking system in the Philippines

R.A. 1405 Bank Secrecy LawR.A. 7400 An Act Further Amending Republic Act Numbered Three Thousand

Five Hundred Ninety-One, As Amended, Otherwise Known as the Charter of the Philippine Deposit Insurance Corporation, and for Other Purposes

R.A. 7653 The New Central Bank ActR.A. 7721 An Act Liberalizing the Entry and Scope of Operations of Foreign

Banks in the Philippines and for Other PurposesR.A. 7906 An Act providing for the regulation of the organization and operation

of Thrift Banks, and for other purposesR.A. 8791 General Banking Law of 2000, an act providing for the regulation of

the organization and operations of banks, quasi-banks, trust entities and for other purposes

R.A. 9160 Anti-Money Laundering Act of 2001R.A. 9178 An Act to promote the establishment of Barangay Micro Business

Enterprises (BMBEs), providing incentives and benefits therefor, and for other purposes

R.A. 9194 An act amending Republic Act No. 9160, otherwise known as the "Anti-Money Laundering Act of 2001"

R.A. 9194IRR

Implementing Rules and Regulations of R.A. 9194

R.A. 9238 An Act amending certain sections of the National Internal Revenue Code of 1997, as amended, by excluding several services from the coverage of the value-added tax and re-imposing the gross receipts tax on banks and non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries beginning January 01, 2004

R.A. 9294 An Act restoring the tax exemption of OBUs and FCDUs, amending for the purpose Section 27 (D) and Section 28, Paragraphs (A) (4) and (A) (7) (b) of the National Internal Revenue Code as amended.

R.A. 9302 An Act Amending Republic Act Numbered Three Thousand Five Hundred Ninety-One, as Amended, Otherwise Known as the "Charter of the Philippine Deposit Insurance Corporation" and for Other Purposes

R.A. 9505 An Act Establishing a Provident Personal Savings Plan, known as the Personal Equity and Retirement Account (PERA)

R.A. 9505 IRR Implementing Rules and Regulations of R.A. 9505