Overview of Board Reports and Operations at GAM

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This document provides insight into the Board Reports and Operations at GAM, covering topics such as the composition of the Executive Board, appointment of key personnel, governance structures, and risk mitigation policies. It highlights the roles and responsibilities of the Executive Director and outlines the functions of various committees. The report discusses financial and non-financial risks identified by the Board and the strategies in place to address them effectively.

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https://www.bing.com/images/search?view=detailV2&ccid=HIXPe63H&id=A5D3559A8AB1174B9A2B85DF9990https://www.bing.com/images/search?view=detailV2&ccid=HIXPe63H&id=A5D3559A8AB1174B9A2B85DF9990 F362D03E9834&thid=OIP.HIXPe63H7wtP6PzG8ajFQAHaE8&mediaurl=http%3a%2f%2fwww.riu.com%2fen%2fbin aris%2fDestino-Aruba-7_tcm55- 165579.jpg&exph=600&expw=900&q=picture+aruba+beaches&simid=607992306407441493&ck=8E5CC4CE 3E5365C330F5990BAEFA84AC&selectedIndex=0&FORM=IRPRST PRESENTATION GENERAL ASSEMBLY 2019 GAM AUGUST 28, 2020 1

AGENDA Opening & introduction Opening & introduction Approval GAM 2019 Approval GAM 2019 Report by Board Report by Board Highlights 2019 financials (Grant Thornton) Highlights 2019 financials (Grant Thornton) Actuarial Report (AC2 Actuary) Actuarial Report (AC2 Actuary) GAM AUGUST 28, 2020 2

AGENDA Discharge of the Board Discharge of the Board Events after statement & strategy Events after statement & strategy Free word Free word Closing Closing GAM AUGUST 28, 2020 3

REPORT BY BOARD The Executive Board ( Board ) consists since July 1, 2012 of 2 employer representatives and 2 participant s representatives. The composition of the Executive Board is as stated here below. Independent Chairman of the Executive Board: Mr. G.K. Farro Appointed by the employers: Mr. E.F.C. Albertus Mr. E.I.R. de Cuba Appointed by the participants: Mr. C.E. Heyliger Mrs. M.R. Croes GAM AUGUST 28, 2020 4

REPORT BY BOARD Operations The Fund has 9 permanent employees, including the Executive Director, who together with the Executive Board are responsible for all the work (pension administration, payout, investment portfolio, communication, etc.) at the Fund. The Executive Board has appointed an Executive Director for the daily management of the Fund. In July 2019, Mrs. Sanaa Baroud resigned as Executive Director of the Fund. On November 1, 2019, Mr. Marion M. Agunbero was appointed as the new Executive Director. Audit committee As part of the new governance structure of PFTSA the Board has appointed in 2020 three committees, being the Risk and Compliance Committee, the Investment Committee, and the Audit Committee. As part of its assignment the Audit Committee also has reviewed the 2019 Financial Statements and provided its comments and discussed it with the external auditors. GAM AUGUST 28, 2020 5

REPORT BY BOARD The Executive Board has expressed its policy in the Actuari le Bedrijfstechnische Nota ( ABTN ). The ABTN is revised regularly. Below is an explanation of the principal risks identified by the Executive Board and the Board's policy for mitigating those risks: Financing risks; Actuarial risks; Investment risks; Operational risks. The first three categories are financial in nature and the last one is non-financial. GAM AUGUST 28, 2020 6

REPORT BY BOARD On On- -site examination was conducted in 2019 by the Centrale Bank van Aruba , which site examination was conducted in 2019 by the Centrale Bank van Aruba , which focused on the corporate governance, investments & reporting focused on the corporate governance, investments & reporting Introduction new governance structure in 2020 based on the three lines of defense Introduction new governance structure in 2020 based on the three lines of defense Introduction of a new Investment policy & procedures Introduction of a new Investment policy & procedures Introduction of three committee: Investment, Risk & Compliance & Audit committees Introduction of three committee: Investment, Risk & Compliance & Audit committees Implementation of the new Implementation of the new Administrative and Internal Control Procedures are contained Administrative and Internal Control Procedures are contained in an AO/IC manual. in an AO/IC manual. GAM AUGUST 28, 2020 7

REPORT BY BOARD Appointment of Compliance Officer & Reporting Officer as well as Risk Officer Appointment of Compliance Officer & Reporting Officer as well as Risk Officer PFTSA moved to a new office building (May 2020) PFTSA moved to a new office building (May 2020) New PFTSA website will be launched in September 2020 New PFTSA website will be launched in September 2020 Digitalization projects: Digitalization projects: Employee annual statement uploading project. Employee annual statement uploading project. This project will be extended to the employers (upload outstanding balances) This project will be extended to the employers (upload outstanding balances) GAM AUGUST 28, 2020 8

FINANCIAL HIGHLIGHTS As of January 1, 2019, the Fund actuarial rate is 4% (2018: 4%), the mortality tables in use are GBM /GBV 2005-2010 (2018: GBM /GBV 2000-2005) and the applied age correction factor -1 in 2019 (2018: -1). The Fund kept operating expenses in 2019 within budgeted margins to maintain the Fund's financial position. The investment portfolio consisted in 2019 mainly of government bonds, secured loan facilities and real estate investment resulting in a steady flow of interest income. GAM AUGUST 28, 2020 9

FINANCIAL HIGHLIGHTS: BALANCE SHEET (In thousands AWG) (In thousands AWG) 2019 2019 2018 2018 Change Change ASSETS ASSETS - - Investments for the Risk of the Fund Investments for the Risk of the Fund 14,829 14,829 12,415 12,415 2,414 2,414 - - Investments for the risk of the participants Investments for the risk of the participants 84,517 84,517 70,763 70,763 13,754 13,754 - - Investment property for the Risk of the participants Investment property for the Risk of the participants 19,034 19,034 15,389 15,389 3,645 3,645 - - Property plant and equipment Property plant and equipment 226 226 167 167 59 59 - - Receivables and prepaid expenses Receivables and prepaid expenses 2,681 2,681 2419 2419 262 262 - - Cash and cash equivalents Cash and cash equivalents 9,707 9,707 11,995 11,995 (2,288) (2,288) TOTAL ASSETS TOTAL ASSETS 130,994 130,994 113,148 113,148 17,846 17,846 GAM AUGUST 28, 2020 10

FINANCIAL HIGHLIGHTS: BALANCE SHEET 2019 2019 2018 2018 Change Change CAPITAL AND LIABILITIES CAPITAL AND LIABILITIES - - Fund Capital Fund Capital 10,856 10,856 9,497 9,497 1,359 1,359 - - Provision for Pension liabilities for the risk of the funds and participants Provision for Pension liabilities for the risk of the funds and participants 118,892 118,892 103,161 103,161 15,731 15,731 - - Long Long- -term liabilities term liabilities 661 661 - - 661 661 - - Current liabilities Current liabilities 585 585 490 490 95 95 TOTAL CAPITAL AND LIABILITIES TOTAL CAPITAL AND LIABILITIES 130,994 130,994 113,148 113,148 17,846 17,846 PENSION LIABILITY RESERVE FUNDING RATIO PENSION LIABILITY RESERVE FUNDING RATIO - - CBA CBA 102.4% 102.4% 102.0% 102.0% GAM AUGUST 28, 2020 11

FINANCIAL HIGHLIGHTS: INCOME STATEMENT Statement of comprehensive income (In thousands AWG) 2019 2018 Change Net Income 1,397.00 1,230.00 167.00 Premium contributions 13,182.00 12,513.00 669.00 Investment Income including rental income 7,212.00 5,038.00 2,174.00 Pension administrative costs 2,270.00 1,739.00 531.00 Changes in pension provisions 15,731.00 13,790.00 1,941.00 Retirement benefits, refunds and value transfer 996.00 792.00 204.00 GAM AUGUST 28, 2020 12

2019 2019 2018 2018 % % Bonds Bonds Loans Loans Time deposits Time deposits Mortgages Mortgages Fixed income investments Fixed income investments Investment property Investment property Shares Shares Balance as of 31 December 2019 Balance as of 31 December 2019 30 23 10 32 28 5 8 9 72 16 12 100 73 15 12 100 FINANCIAL HIGHLIGHTS (INVESTMENT PORTFOLIO IN %) GAM AUGUST 28, 2020 13

FINANCIAL HIGHLIGHTS: MEMBERSHIP At the end of 2019, a total of 168 (2018: 163) companies were affiliated with the Fund of which 121 (2018: 123) are active and 47 (2018: 40) are vested. GAM AUGUST 28, 2020 14

FINANCIAL HIGHLIGHTS: MEMBERSHIP 2019 2019 Checkpoint Promotions (terminated in 2019) Checkpoint Promotions (terminated in 2019) Elsa's Elsa's Flowershop Flowershop Scott's Brats Scott's Brats Meltaway Sandwich & Cuisine Caf VBA (terminated in 2019) Meltaway Sandwich & Cuisine Caf VBA (terminated in 2019) Cathaleya Cathaleya Cosmetics & Coffee Shop (terminated in 2019) Cosmetics & Coffee Shop (terminated in 2019) GAM AUGUST 28, 2020 15

FINANCIAL HIGHLIGHTS: MEMBERSHIP NEW MEMBERS 2020: NEW MEMBERS 2020: Glitz Casino Glitz Casino Zeerovers Zeerovers Eduardo's Beach Shack Eduardo's Beach Shack Elada Elada Spa Spa Dorothy Fishing/Roberto B. Tromp Dorothy Fishing/Roberto B. Tromp Fantasy Tours Fantasy Tours GAM AUGUST 28, 2020 16

ACTUARIAL REPORT In 2019 the Fund applied the new mortality tables GBM /GBV 2005 In 2019 the Fund applied the new mortality tables GBM /GBV 2005- -2010 (2018: GBM /GBV 2000 For further details on the actuarial developments we refer to the actuarial report 2019 as issued by Actuarial For further details on the actuarial developments we refer to the actuarial report 2019 as issued by Actuarial Consultancy Caribbean (AC ) B.V. Consultancy Caribbean (AC ) B.V. 2010 (2018: GBM /GBV 2000- -2005). 2005). For For the the year year 2019 2019 the the actuarial actuarial interest interest percentage percentage was was 4 4% % ( (2018 2018: : 4 4% %) ). . The The Fund participants participants in in the with with a a deduction deduction of of 0 0. .5 5% % for Fund also also decided decided to to grant the defined defined contribution grant for contribution plan for cost cost loading loading. . for the the fiscal fiscal year plan. . For For the year 2019 the vested vested participants, participants, the 2019 an an interest interest of of 4 4% % ( (2018 the Fund 2018: : 4 4% %) ) to to the Fund granted granted an the active active interest of of 4 4% % an interest The The annual among among others annual interest, interest, however, others on on the the performance however, will performance of of the will be be evaluated evaluated each the Fund s Fund s investment each year investment. . year by by the the Executive Executive Board Board of of PFTSA PFTSA and and depends depends GAM AUGUST 28, 2020 17

Movement in active policies Movement in active policies 2019 2019 Active policies as of January 1 Active policies as of January 1 New policies from new participants from existing and new New policies from new participants from existing and new affiliated companies affiliated companies Less: Allocation to the following categories: vested policies, Less: Allocation to the following categories: vested policies, new annuitant s policies and policies related to one new annuitant s policies and policies related to one- -time payments and transfers payments and transfers Active policies as of December 31 Active policies as of December 31 5,073 672 (758) time 4,987 ACTUARIAL REPORT (POLICY MOVEMENTS) GAM AUGUST 28, 2020 18

DC policies DC policies 2019 2019 2018 2018 Active policies Active policies Vested policies Vested policies Annuitants policies Annuitants policies Partners pension policies Partners pension policies Orphan policy Orphan policy Total 4,987 5,663 336 5,073 4,859 288 15 2 16 2 11,680 10,923 FINANCIAL HIGHLIGHTS GAM AUGUST 28, 2020 19

DB policies DB policies 2019 2019 2018 2018 Active policies Active policies Vested policies Vested policies Annuitants policies Annuitants policies Partners pension policies Partners pension policies Orphan policy Orphan policy Total 214 316 139 219 318 138 8 0 9 1 677 683 FINANCIAL HIGHLIGHTS GAM AUGUST 28, 2020 20

ACTUARIAL ACTUARIAL REPORT 2019 REPORT 2019 PFTSA PFTSA

FINANCIAL POSITION Afl 1.000 end year 2019 2018 2017 2016 2015 Total assets 130,808 113,148 97,998 83,493 68,830 Other liabilities 1,148 490 626 529 440 For pensions 129,660 112,658 97,372 82,964 68,390 Accrued pensions 118,893 103,161 89,105 76,669 64,185 Surplus 10,767 9,497 8,267 6,295 4,205 Funding ratio 109.1% 109.2% 109.3% 108.2% 106.6%

Assets are enough to cover the pension liabilities Financial position is good (funding ratio > 100%) Good investment results Increase of pension capital with 4% More buffers necesarry, for extra costst and Covid-19 consequences FINANCIAL POSITION The percentage of increasing the capitals must be lowered the coming years

DISCHARGE OF THE BOARD DISCHARGE OF THE BOARD Discharge management and the Board of Directors for their management during 2019.

EVENTS AFTER STATEMENT On March 11, 2020, the World Health Organization declared the Coronavirus (COVID On March 11, 2020, the World Health Organization declared the Coronavirus (COVID- -19) outbreak a Pandemic, and on March 13, 2020 the first two positive cases were identified in Aruba. On a Pandemic, and on March 13, 2020 the first two positive cases were identified in Aruba. On March 15, 2020, the Government of Aruba announced that there would be a lockdown on all March 15, 2020, the Government of Aruba announced that there would be a lockdown on all inbound international travel commencing at midnight of 16 March 2020 and closed its border on inbound international travel commencing at midnight of 16 March 2020 and closed its border on March 31, 2020 in order to contain the spread of the virus. March 31, 2020 in order to contain the spread of the virus. 19) outbreak The Government also introduced shelter in place restrictions, which in combination with the The Government also introduced shelter in place restrictions, which in combination with the border closure had adverse impact on the tourism and tourism border closure had adverse impact on the tourism and tourism- -related businesses and indirectly negatively impacted the retail and other supporting businesses. negatively impacted the retail and other supporting businesses. related businesses and indirectly The Aruban economy is almost completely dependent upon its tourism industry. The Aruban economy is almost completely dependent upon its tourism industry. GAM AUGUST 28, 2020 26

EVENTS AFTER STATEMENT In connection herewith the Executive Board of PFTSA has performed an assessment In connection herewith the Executive Board of PFTSA has performed an assessment of the COVID of the COVID- -19 impact: 19 impact: First on its business continuity to guarantee its operations and the well First on its business continuity to guarantee its operations and the well- -being of its staff and its staff and being of secondly, its impact on the future results, cash flows and financial position of secondly, its impact on the future results, cash flows and financial position of the fund. In this regard, PFTSA performed several scenario analyses to the fund. In this regard, PFTSA performed several scenario analyses to determine the possible impact of COVID determine the possible impact of COVID- -19 on the pension fund in 2020. 19 on the pension fund in 2020. GAM AUGUST 28, 2020 27

EVENTS AFTER STATEMENT The The fund Board Board for fund management management has for discussion discussion. . The has prepared prepared an The purpose purpose of of the an elaborate elaborate action the Action Action Plan Plan was action plan was twofold twofold: : plan which which was was submitted submitted the the Executive Executive First, First, it it focused focused on on the the impact impact of of the the COVID COVID- -19 19 crisis crisis on on the the fund's fund's overall overall performance, performance, specifically specifically: : The The cash Its Its implications implications on Impact Impact on on technical Coverage Coverage ratio cash flow flow based based on on the technical provisions ratio on several several scenarios the local local & & foreign foreign investment provisions scenarios investment portfolio portfolio Secondly, Secondly, it it discussed crisis crisis. . discussed mitigating mitigating strategies strategies to to contain contain the the potential potential financial financial impact impact of of the the COVID COVID- -19 19 GAM AUGUST 28, 2020 28

29 PROPOSALS TO SAFEGUARD PFTSA FINANCIAL VIABILITY Measure Measure Description Description Proposed Timeframe Proposed Timeframe Revise mortality tables Revise mortality tables Proposal to change the current mortality tables & to adopt the mortality table 2005 - 2010 As per annual account 2019 Apply an actuarial interest of Apply an actuarial interest of 3.75% to all new pensioners, 3.75% to all new pensioners, while maintaining 4% for the while maintaining 4% for the existing pensions existing pensions Proposal to reduce the current actuarial interest ( rekenrente ) only for all new pensioners. Effective June 2020 GAM AUGUST 28, 2020

30 PROPOSALS TO SAFEGUARD PFTSA FINANCIAL VIABILITY (CONTINUE) Temporarily reduce the return on investments Temporarily reduce the return on investments allocated to the DC plan (2 options) allocated to the DC plan (2 options) to DC plan based on one the following two options: to DC plan based on one the following two options: Option 1: apply 1% Option 1: apply 1% Option 2: Apply 2% Option 2: Apply 2% Proposal is to reduce the annual allocation of the return on investment Proposal is to reduce the annual allocation of the return on investment Financial Financial years years 2020/2021 2020/2021 These options will be evaluated at the end of the financial year 2020. These options will be evaluated at the end of the financial year 2020. Cost reductions Cost reductions We are proposing several actions: 1. Reduce costs by seeking alternative allocation through outsourcing options or establish cost sharing arrangements between the pension funds to spread the costs & to train our staff in order to reduce the outsourcing costs. 2. Strict cash flow management 3. Reduction of non- essential and other costs (e.g. reduction of staff costs) 2020 GAM AUGUST 28, 2020

CHALLENGES AHEAD Key factors Key factors 1. Financial market developments Financial market developments: Growing limitations to find suitable local investment opportunities in combination of declining interest rates Increasing complexity as result of expanding regulatory requirements & scrutiny that impacts the operations in terms of increasing costs & the need for the right organizational scale 2. Regulations Regulations vis vis- - - -vis vis economic economic of of scales scales: 3. Information/data security & workflow Information/data security & workflow management management: Increasing importance of information/data security & workflow process management

CHALLENGES AHEAD Key factors Key factors 4. Evolving Evolving demographics emographics: Ongoing aging of the population/workforce (longevity risk) and service expectations among clients 5. Macroeconomic conditions: . Macroeconomic conditions: Volatile and external dependent tourism-based economy which can impact our member employers. COVID-19 clearly showed how vulnerable our economy is.

CHALLENGES AHEAD In order to cope with these challenges four company pension funds in In order to cope with these challenges four company pension funds in Aruba (including PFTSA) have initiated conversations to examine Aruba (including PFTSA) have initiated conversations to examine options for cooperation in the areas of: options for cooperation in the areas of: Creating local investments pools Creating local investments pools Share costs related to governance and compliance requirements Share costs related to governance and compliance requirements Integrate pension activities Integrate pension activities Initial discussions were held with the Centrale Bank van Aruba & it Initial discussions were held with the Centrale Bank van Aruba & it was agreed the joint pension fund Group will further work out a was agreed the joint pension fund Group will further work out a business case business case Our initial assessment shows that the current regulatory framework Our initial assessment shows that the current regulatory framework needs to be amended needs to be amended GAM AUGUST 28, 2020 33

PFTSA STRATEGIC OBJECTIVES PFTSA will pursue an approach that aims to incorporate environmental considerations, social issues and good governance factors into investment decision, to better manage risk and generate sustainable long-term returns (e.g. investment beliefs) Deliver outstanding service, accessible communication and practical education to assist members & they prepare for retirement Deliver excellent value for members by providing costs, effective strongly resourced & well-managed processes and services Services & processes embed in strong risk controls & best practices, while providing for scalability and flexible design Ensure a high-performance staff by attracting & retaining diverse taken, building organizational capacity & engaging employees.