Law Summary
Definitions Under the Act
- Advisory Board: Provides guidance to the MIC Board.
- Board of Directors (Board): Governs the MIC.
- Divestment: Complete voluntary transfer of property rights.
- Founding Government Financial Institutions: Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP).
- Independent Director: Free from conflicts, independent judgment.
- Maharlika Investment Corporation (MIC): GOCC managing the MIF.
- Maharlika Investment Fund (MIF): The established state fund.
- Regular Director: Full-time appointed director without other public offices.
- Santiago Principles: International best practices for sovereign wealth funds.
Establishment and Purpose of Maharlika Investment Corporation
- MIC created as sole entity to mobilize and manage MIF.
- Aim: Generate optimal returns, promote job creation, poverty reduction, sustainable development.
- Governed by internationally accepted standards including Santiago Principles.
- Principal office in Metro Manila with authority to maintain branches.
Capitalization and Initial Funding Structure
- Authorized capital stock: ₱500 billion divided into 5 billion shares at ₱100 par value.
- Common shares: 3.75 billion (₱375 billion) subscribed by national government and GFIs.
- Preferred shares: 1.25 billion (₱125 billion), non-voting and non-convertible.
- Initial subscriptions include ₱50 billion from LBP, ₱25 billion from DBP, ₱50 billion from national government.
- National government funding sources: BSP dividends, PAGCOR shares, privatization proceeds, and other sources.
- Specified exclusions: certain government agencies (e.g. SSS, GSIS) barred from investing.
Capital Stock Increase and Corporate Capacities
- Board may request Congress to increase MIC capitalization.
- MIC authorized to contract, hold and dispose assets, sue and be sued.
- May compromise claims within legal limits to protect MIC interests.
Core Functions of MIC
- Build diversified investment portfolio locally and globally.
- Manage and invest fund contributions responsibly.
- Accept external mandates aligned with development goals.
- Develop expertise in finance and governance.
- Implement Santiago Principles and transparency standards.
Bond Issuance Powers
- MIC may issue bonds and securities domestically and abroad.
- Bonds secured by MIC assets, not guaranteed by the Philippine government.
- Bonds may carry fixed or floating interest rates.
MIC Administrative and Operational Costs
- Expenses may be paid from the fund, capped initially at 2% of assets under management.
- Targets to reduce expense ratio as fund size grows.
Establishment and Objective of Maharlika Investment Fund
- MIF to follow principles of good governance, transparency, accountability.
- Sourced from capital of MIC, government financial institutions, and contributions from the National Government.
- Other GFIs may invest subject to limits.
- Excluded agencies from investing to protect social security funds.
- Fund to promote socio-economic development through strategic and profitable investments.
Allowable Investments for MIF
- Cash, foreign currencies, tradeable commodities.
- Sovereign and corporate fixed income securities.
- Equities including listed, unlisted, and hybrids.
- Islamic finance instruments (e.g., Sukuk bonds).
- Joint ventures, mergers, acquisitions.
- Mutual and exchange-traded funds.
- Real estate and infrastructure aligned with government priorities.
- Socially impactful programs including health, education, and innovation.
- Loans, guarantees, and partnerships fostering economic development.
- Other sustainable investments approved by Board.
- Emphasis on sustainability and government development goals.
Joint Ventures and Co-Investment Framework
- Board to set form, terms, and conditions.
- Transparency through publication of terms and financial reports on MIC website.
Prohibited Investments
- Investments prohibited under Philippine law or international conventions are barred.
Investment Policy Framework
- Board to formulate policies balancing risk, return, and ESG principles.
- Policies to cover portfolio risk management, assessment, compliance with international best practices.
- ESG risks, climate risks, and natural capital accounted for in investment decisions.
- Policies subject to periodic review and public disclosure.
Risk Management and Public Disclosure
- Investment and risk management subject to Board guidelines.
- Full public disclosure of plans, activities, and risk management on MIC website.
- No government guarantee for MIC financial obligations without proper authority.
Fees and Charges
- Management and operational fees charged to the Fund in accordance with policies.
Governance Structure: Board of Directors
- Nine members including Secretary of Finance (chair), MIC CEO (vice-chair), LBP and DBP CEOs, two Regular Directors, and three Independent Directors.
- Regular Directors appointed for a 3-year term by the President based on Advisory Body recommendation.
- Independent Directors serve 1-year terms, renewable up to 9 years.
- Directors required to have probity, competence, expertise in finance or relevant fields.
- Stringent disqualifications and conflict of interest rules apply.
- Directors must be bonded and resign from conflicting interests prior to assumption of office.
Board Powers and Responsibilities
- Oversee MIC management, approve investment guidelines and policies.
- Approve issuance of debt instruments.
- Develop strategic investment plans.
- Consult Advisory Body and engage international and external advisors.
- Declare dividends consistent with law.
- Set organizational structure and compensation, subject to presidential approval.
- Appoint key officials, evaluate performance, and submit semiannual investment reports.
- Serve as Trustee of the Fund and establish sub-funds within the Fund.
Removal and Appointment Provisions
- President may remove Board members for disqualifications, incapacity, fraud, or illegal acts.
- Vacancies filled for unexpired terms through prescribed nomination and appointment.
Executive Officers: President/CEO and CIOO
- CEO manages operations, risk, finance, human resources, legal affairs.
- CEO appointed for three years, with specified qualifications in management and finance.
- Chief Investment and Operations Officer (CIOO) manages investment files, risk management teams, and policies.
- CIOO appointed and terminated by Board; qualifications include finance expertise.
Board Meeting and Quorum
- Board meets biweekly or as needed.
- Majority membership constitutes quorum; decisions require majority vote.
- Meetings may be held via tele/videoconferencing.
Risk Management Committee
- Comprises five members including Independent Director chair.
- Responsible for ensuring balanced risk and reward in MIC activities.
Advisory Body
- Consists of Department of Budget and Management Secretary, NEDA Secretary, and Treasurer of the Philippines.
- Advises Board on policy formulation and candidate recommendations.
- Does not engage in MIC management.
Compliance with GOCC Governance Law and Procurement Rules
- MIC subject to Republic Act No. 10149 (GOCC Governance Act).
- Procurement governed by Republic Act No. 9184, except for professional investment-related services subject to competitive selection.
Personnel Designation and Secondment
- For 5 years, Board may authorize designation or secondment of GFI personnel to MIC.
- Designated personnel retain original agency compensation plus honoraria; seconded personnel receive MIC compensation.
Financial Reporting and Auditing
- Financial statements prepared according to relevant standards.
- Internal auditor appointed by Board with independence.
- External auditor engaged for up to a 3-year term.
- Commission on Audit conducts regular and special audits.
- COA guidelines coordinated with external auditors.
Disposal of Investment Assets
- Disposal of MIC investments exempt from existing government asset disposal laws to enable mandate execution.
Congressional Oversight
- Creation of a Joint Congressional Oversight Committee consisting of House and Senate members.
- MIC submits quarterly confidential investment reports and audit documents to the committee.
Public Access to Information
- MIF and MIC documents publicly accessible to the extent permitted by law.
- Includes investment details, asset declarations of officials, and audit reports.
Record Maintenance and Disclosure
- Records secured per National Archives rules.
- Disclosure laws such as Securities Regulation Code and Corporation Code apply.
- MIC covered by Executive Order No. 2 s. 2016 on transparency.
Reporting by Government Financial Institutions
- GFIs with MIC investments to disclose performance, risk assessments, and strategies in annual reports.
Compliance with International Santiago Principles
- Audits to review adherence to Santiago Principles and recommend improvements.
Arbitration and Dispute Resolution
- Investment disputes initially resolved by negotiation; unresolved disputes settled by international arbitration systems.
- Oversight committee regularly updated on dispute status.
Offenses and Penalties
- Directors/officers holding office with disqualifications fined ₱5M–₱7M and barred from office; higher fines apply if public harmed.
- Independent auditors certifying inaccurate or fraudulent statements face fines, imprisonment, and disqualification.
- Persons acting as intermediaries in graft liable to fines, imprisonment, and disqualification.
- Directors tolerating graft face severe penalties, including fines, imprisonment, and disqualification.
- Protection and penalties for retaliation against whistleblowers.
- These criminal liabilities are separate from other laws such as the Revised Penal Code, Anti-Graft Law, and others.
- Offenses prescribed after 10 years, except for State recovery rights.
Appropriations and Funding Sources
- Capital contributions sourced from BSP dividends, gaming revenues, privatization proceeds, and royalties.
- Government capital contribution capped at 51% of authorized capital.
- Subsequent funds deposited to National Treasury for the national budget.