PRIDE STAR DEVELOPMENT BANK, INC.

 AUDIT COMMITTEE CHARTER

PURPOSE

The Audit Committee of Pride Star Development Bank (the “Bank”) is appointed by theBoard to assist the Board in monitoring (1) the integrity of the financial statements of theBank, (2) the Bank’s financial reporting and control, and (3) the independence andperformance of the Bank’s internal and external auditors.

 APPOINTMENT, MEMBERSHIP AND QUALIFICATIONS

The Board shall appoint the members of the Audit Committee. The Audit Committeeshall be composed of members of the board of directors, at least two (2) of whom shallbe independent directors, including the Chairman,

The members of the Audit Committee shall meet the independence and experiencerequirements of the Bangko Sentral ng Pilipinas which, among other requirements,require that the members of the Audit Committee have accounting, auditing, or relatedfinancial management expertise or experience.

 AUTHORITY AND RESPONSIBILITY

The Audit Committee shall be responsible for the setting up of the internal auditdepartment and for the appointment of the internal auditor as well as the independentexternal auditor who shall both report directly to the Audit Committee. It shall monitorand evaluate the adequacy and effectiveness of the internal control system.

The audit committee shall have authority to investigate any matter within its scope, fullaccess to and cooperation by management and full discretion to invite any director or executive officer to attend its meetings, and adequate resources to enable it toeffectively discharge its functions.

FUNCTIONS

The Audit Committee shall:

1. Review the adequacy of this Charter annually and recommend any proposedchanges to the Board for approval.

2. Review the annual audited financial statements with management, including majorissues regarding accounting and auditing principles and practices as well as the

 

adequacy of internal controls, including financial, operational and compliance controls,that could significantly affect the Bank’s financial statements.

3. Review an analysis prepared by management and the independent auditor ofsignificant financial reporting issues and judgments made in connection with thepreparation of the Bank’s financial statements.

4. Review with management and the independent auditor the Bank’s quarterly financialstatements.

5. Meet periodically with management to review the Bank’s major financial risk exposureand the steps management has taken to monitor and control such exposures.

6. Review major changes to the Bank’s auditing and accounting principles and practicesas suggested by the independent auditor, internal auditors or management.

7. Recommend to the Board the appointment of the independent auditor, who isultimately accountable to the Audit Committee and the Board.

8. Approve the fees to be paid to the independent auditor.

9. Review the significant reports to management prepared by the internal auditingdepartment and management’s responses.

10. Meet with the independent auditor prior to the audit to review the planning and thestaffing of the audit.

11. Review with the independent auditor any problems or difficulties the auditor mayhave encountered and any management letter provided by the auditor and the Bank’sresponse to that letter. Such review should include:

•  Any difficulties encountered in the course of the audit work, including anyrestrictions on the scope of the activities or access to required information.

•  Any changes required in the planned scope of the independent audit.

12. Prepare the reports required by the rules of the applicable regulatory authorities.

13. Review with the Bank’s management those matters that may have a material impacton the financial statements, the Bank’s compliance policies and any material reports orinquiries received from regulators or government agencies.

14. Establish and maintain mechanisms by which officers and staff may, in confidence,raise concerns about possible improprieties or malpractices in matters of financialreporting, internal control, auditing or other issues to persons or entities that have thepower to take corrective action.

 

15. Ensure that arrangements are in place for the independent investigation,appropriate follow-up action, and subsequent resolution of complaints.

16. Meet at least annually with the Treasurer and the independent auditor. While the Audit Committee has the responsibilities and powers set forth in this Charter, it is notthe duty of the Audit Committee to plan or conduct audits or to determine that theBank’s financial statements are complete and accurate and are in accordance withgenerally accepted accounting principles. This is the responsibility of management andthe independent auditor. Nor is it the duty of the Audit Committee to conductinvestigations, to resolve disagreements, if any, between management and theindependent auditor.

REPORTING

Since the Committee consists of Board members, no additional reporting from theCommittee to the Board is required.