Corporate Governance

ENTERPRISE RISK MANAGEMENT

Management regularly reviews and updates the risks faced by the Company and presents it to the Board. The Risk Management Committee met in November 5, 2013. The risk management system and governance structure is reviewed on an annual basis.

1.) Overall risk management philosophy of the company;

Section 7 of the Manual for Corporate Governance provides:

“The Risk Management Committee shall have the following powers and functions:

Oversee the formulation and establishment of an enterprise-wide risk management system.

Review, analyze and recommend the policy, framework, strategy, method and/or system of or used by the Corporation to manage risks, threats or liabilities.

Review and assess the likelihood and magnitude of the impact of material events on the Corporatiobn and/or to recommend measures, responses or solutions to avoid or reduce risks or exposures.

Perform such other duties and functions and/or assume such responsibilities as may be delegated by the Board of Directors.”

2.) Risk Policy

(a) Company

Give a general description of the company’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

Risk Exposure, Risk  Management Policy, Objective

A. Regulatory Risk –  Rockwell regularly monitors its exposures and compliance to laws and regulations to ensure the continuity of its operations To comply with all applicable laws and regulations

B. Business Interruption Risk – Rockwell continuously enhances its operations and support systems to reduce the likelihood of unscheduled interruptions and, in the case of actual interruptions, to reduce the impact to the company’s financial performance.To ensure continuity of services to its customers.

C. Interest Rate Risk – The Company’s policy is to manage its interest cost using a mix of fix and variable rate debts. To manage the exposure to floating interest rates in a cost-efficient manner.

D. Foreign Currency Risk – Rockwell monitors its exposures to foreign currency fluctuations. To manage and minimize the exposure to foreign currency risk.

E. Credit Risk – The Company trades only with recognized, creditworthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to verification procedures. Default or delinquency on the part of the buyers of condominiums units or club shares are being monitored on an ongoing basis to enable the Company to determine the appropriate action – usually, cancelling the sale and holding the units and club shares open for sale. Lease receivables are closely monitored based on aging of the accounts. Accounts determined to be uncollectible are recommended for write-off. With regard to other financial assets of the Company, these are also monitored regularly with the result that the Company’s exposure to bad debts is significant.

Trade receivables from sale of condominium units are secured with pre-completed condominium units. The legal title and ownership of these units will only be transferred to customers upon full payment of the contract price. Receivables from lease are guaranteed by security deposits. For other receivables, since the Company trades only with recognized third parties, there is no requirement for collateral. To manage the credit exposures with its customers and/or other third parties

Risk to Minority Shareholders

Article I of the Corporate By-Laws provides:

Section 5. Quorum – At all meetings of stockholders, annual or special, in order to constitute a quorum, there shall be present either in person or by proxy the holders of record of the majority of the stock issued and outstanding and entitled to vote of a greater proportion. In the absence of a quorum, the holders of record of the majority of the shares present and entitled to vote may adjourn the meeting from time to time until a quorum shall be present, and no notice of such adjourned meeting shall be required.

Section 6. Voting – Except as otherwise provided by law, each stockholder of record shall be entitled at every meeting of stockholders to one vote for each share of stock standing in his name on the stock and transfer books of the Corporation, which vote may be given personally or by power of attorney or proxy authorized in writing. The instrument authorizing a proxy to act shall be exhibited to the Secretary if so requested. In the election of Directors, each stockholder entitled to vote may cumulate and distribute his votes in accordance with the provisions of the Corporation Code.

3.) Control System Set Up

(a) Company  Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:  Risk Exposure, Risk Assessment (Monitoring and Measurement Process) Risk Management and Control (Structures, Procedures, Actions Taken)

1. Regulatory Risk Annual risk identification, evaluation, and monitoring

• Regular monitoring of changes or updates to relevant laws and regulations

• Close monitoring of the Company’s compliance to applicable legal and regulatory

• Close coordination with regulatory agencies

2. Business Interruption Risk Annual risk identification, evaluation, and monitoring

• Regular monitoring of operations

• Regular repair and maintenance of key equipment, systems and processes

• Regular review, revision and practice of Business Continuity Management plans

3. Interest Rate Risk Annual risk identification, evaluation, and monitoring

• Regular monitoring of the interest rates

• Identify, assess and enter into interest hedging, whenever necessary

4. Foreign Currency Risk Annual risk identification, evaluation, and monitoring

• Regular monitoring of the foreign currency rates

• Identify, assess and enter into derivative transactions, whenever necessary

5. Credit Risk Annual risk identification, evaluation, and monitoring

• Regular review and analysis of customer financial and credit performances

• Close coordination with customers to discuss emerging risks

6. Liquidity Risk Regular monitoring of available cash and credit facilities within maintained debt service ratio.Maintain enough cash sufficient to finance operations and obligations.

(b) Group Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:  Risk Exposure, Risk Assessment (Monitoring and Measurement Process)Risk Management and Control (Structures, Procedures, Actions Taken)

1. Regulatory Risk – Annual risk identification, evaluation, and monitoring

• Regular monitoring of changes or updates to relevant laws and regulations

• Close monitoring of the Company’s compliance to applicable legal and regulatory

• Close coordination with regulatory agencies

2. Business Interruption Risk – Annual risk identification, evaluation, and monitoring

• Regular monitoring of operations

• Regular repair and maintenance of key equipment, systems and processes

• Regular review, revision and practice of Business Continuity Management plans

3. Interest Rate Risk – Annual risk identification, evaluation, and monitoring

• Regular monitoring of the interest rates

• Identify, assess and enter into interest hedging, whenever necessary

4. Foreign Currency Risk – Annual risk identification, evaluation, and monitoring

• Regular monitoring of the foreign currency rates

• Identify, assess and enter into derivative transactions, whenever necessary

5. Credit Risk – Annual risk identification, evaluation, and monitoring

• Regular review and analysis of customer financial and credit performances

• Close coordination with customers to discuss emerging risks

6. Liquidity Risk – Regular monitoring of available cash and credit facilities within maintained debt service ratio.Maintain enough cash sufficient to finance operations and obligations.

(c) Committee Identify the committee or any other body of corporate governance in charge of laying down and supervising these control mechanisms, and give details of its functions:  Section 7 of the Manual on Corporate Governance states “The Board shall create a Risk Management Committee composed of at least three (3) members of the Board, or such other number as may be prescribed by the Board. The Chairman of the Board shall designate the Chairman of the Committee. Duties and Responsibilities The Risk Management Committee shall have the following powers and functions: a.Oversee the formulation and establishment of an enterprise-wide risk management system; b.Review, analyze and recommend the policy, framework, strategy, method and/or system of or used by the Corporation to manage risks, threats or liabilities; c.Review and assess the likelihood and magnitude of the impact of material events on the Corporation and/or to recommend measures, responses or solutions to avoid or reduce risks or exposures; and d.Perform such other duties and functions and/or assume such responsibilities as may be delegated by the Board of Directors.”