Manual on Corporate Governance

Compliance with the Manual on Corporate Governance

The board approved the Fund´s Corporate Governance Manual on June 19, 2013 to monitor and assess the level of the Fund´s compliance with leading practices on good corporate governance as specified in Philippine SEC Circulars. Aside from establishing specialized committees to aid in complying with the principles of good corporate governance, the Manual also outlines specific investor´s rights and protections and enumerates particular duties expected from the Fund´s Board members, officers and employees. It also features a Disclosure System which highlights adherence to the principles of transparency, accountability and fairness. A Compliance Officer is tasked with the formulation of specific measures to determine the level of compliance with the Manual by the Fund´s Board members, officers and employees. To date, the Fund has not encountered any deviations from the Manual´s standards.

First Metro-ETF has identified the following major risks involving each of its businesses and other operations:

Risk Factors
Various risk factors can affect the market value of the assets of the Fund and cause the Fund´s Net Asset Value to vary. Consequently, there are instances where redemption prices of redeemed Shares may be less than the price at which the Shares where originally purchased or created. Investors who redeem their Shares during this time may not recover the full cost of their investment.

Market Risk
The Fund´s investments in equity securities may decline in value due to factors affecting securities markets generally, or particular countries, segments, economic sectors, industries or companies within those markets. The value of a security may decline due to general economic and market conditions which are not specifically related to a particular issuer, such as real or perceived adverse economic conditions or changes in interest or currency rates. Fluctuations in the value of securities in which the Fund invests will cause the NAV of the Fund to fluctuate. Historically, the markets have moved in cycles, and the value of the Fund´s securities and other financial instruments may fluctuate from day to day.

Stock Market Risk
In addition, investing in shares of stock is generally riskier than investing in fixed-income securities, hence investors´ money or principal may even be lost. The risks inherent to equity ETFs are related to the volatility of the stock market. Changes in prices of equity securities that compose the Fund´s investment portfolio may substantially vary in a short span of time. The performance of the companies whose shares are included in the portfolio of the Fund is very much dependent on the people behind those companies. Added to that, stock prices are sensitive to political and economic conditions that normally change from time to time.

Index Risk
The Fund is subject to the risk that the Underlying Index may underperform other segments of the equity market or the equity market as a whole.

The Fund aims to track the PSEi, which is rebalanced every six (6) months. The returns of the Fund may be affected by such rebalancing, and the Fund is subject to the risk that it may not accurately track the returns of the PSEi.

Liquidity Risk
Although the Underlying Index shall be comprised of securities included in the main index of the PSE, in certain circumstances, it may be difficult for the Fund to purchase and sell particular investments within a reasonable time at a fair price. In addition, the ability to assign an accurate daily value to certain investments may be difficult, and the Fund Manager may be required to fair value the investments.

Tracking Error Risk

Tracking error is the divergence of the Fund´s performance form that of the index it tracks. Tracking error may occur because of differences between the securities held in the Fund´s portfolio and those included in the index, pricing differences, transaction costs, the Fund´s holding of cash, differences in timing of the accrual of dividends, changes to the Underlying Index or the need to meet various new or existing regulatory requirements. This risk may be heightened during times of increased market volatility or other unusual market conditions. Tracking error also may result because the Fund incurs fees and expenses, while the index it tracks does not.

Early Closing Risk
An unanticipated early closing of the PSE may result in a shareholder´s inability to buy or sell shares of the Fund on that day.

Trading Halt Risk
Secondary market trading in the Shares of the Fund may be halted or suspended by the PSE because of market conditions or other reasons. If a trading halt or suspension occurs, a shareholder may temporarily be unable to purchase or sell Shares of the Fund.

Trading Risk
Shares may trade below their NAV. The NAV of the Shares of the Fund will fluctuate with changes in the market value of the Fund´s holdings. In addition, although the Shares of the Fund are listed on the PSE, there can be no assurance that an active trading market for Shares of the Fund will develop or be maintained.

The Philippine securities markets are substantially smaller, less liquid, and more volatile relative to major securities markets in the U.S. and other jurisdictions, and may not be as highly regulated or supervised as some of those other markets. The NAVps of the SDhares when issued, may differ significantly from the price at which the Shares will trade on the PSE.

Interest Rate Risk
Interest rate movements may have direct impact on prices of the assets of the Fund. Some assets are more sensitive to changes in interest rates while other assets may not. It is expected that interest rate movements may have negative influence of the Fund´s assets.

Inflation Risk
Inflation risk is the risk that inflation may erode the real value of an investment by the Fund.

Non-Diversification Risk
The Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of the Shares of the Fund than would occur in a diversified fund.

Passive Investment Risk
The Fund is not actively managed and the Fund Manager does not attempt to take defensive positions in declining markets. Therefore, the Fund may be subject to greater losses in a declining market compared to a fund that is actively managed.

Absence of Operating History
The Fund is a start-up company and may also be affected by risks associated with companies that do not have operating histories. However, people and companies behind the Fund have actual experience and track record in mutual funds and other financial institutions.

The investors should be aware that their investment in exchange traded funds is not guaranteed by the Philippine Deposit Insurance Corporation. The Fund Manager is also not permitted by law to guarantee any yield to the investors of the Fund.

Risk of Dilution
Because the Fund is an Open-end Investment Company, investors may effectively subscribe to any amount of Shares of the Fund. As such, investors face the risk of the percentage of their stockholding in the Fund being diluted as more investors subscribe to the Shares. The influence that the investors can exert over the control and management of the Fund decreases proportionally.

Geographic Concentration Risk
The Fund´s investments are primarily in shares of stock of publicly listed domestic corporations. Funds that are less diversified across countries or geographic regions are generally riskier than more geographically diversified funds. A fund that focuses on a single country or a specific region is more exposed to that country´s or region´s economic cycles, currency exchange rates, stock market valuations and political risks, among others, compare with a more geographically diversified fund.

Delay in Issuance of ETF Shares Risk
In the event that the authorized capital stock of the Fund has been fully subscribed, the Fund will have to apply for an increase in its authorized capital stock with the SEC in order to accommodate additional creation orders. Due to the corporation actions and regulatory approvals that have to be complied with to increase the authorized capital stock of the Fund, there may be delay in delivery of the Shares of the Fund to Authorized Participants which made such creation orders.

Securities Landing Risk
The Fund bears the risk of loss of investing cash collateral and may be required to make payments to a borrower upon return of loaned securities if invested collateral has declined in value. Furthermore, because of the risks in delay of recovery, the Fund may lose the opportunity to sell the securities at a desirable price, and it may not have the right to vote securities while they are being loaned.

Regulation and Taxation Risk
The Fund is subject to a number of national and local laws and regulations. These include industry laws and regulations relating to investment and publicly-owned companies, the PSE and applicable taxes. The Fund cannot assure prospective investors that changes in laws and regulations, including those related to investment and publicly-owned companies, the PSE and applicable taxes, will not result in the Fund or the investors in the Fund having to incur substantial additional expenditures in relation to the Fund´s investments or investments in the Fund.

Risks Relating to the Philippines
Substantially all of the Fund´s Component Securities are shares of companies based in the Philippines, which exposes the Fund to risks associated with the country, including the performance of the Philippine economy.

Factors that may adversely affect the Philippine economy include: (1) decreases in business, industrial, manufacturing or financial activities in the Philippines, the Southeast Asian region or globally; (2) scarcity of credit or other financing, resulting in lower demand for products and services provided by companies in the Philippines, the Southeast Asian region or globally; (3) exchange rate fluctuations; (4) inflation or increases in interest rates; (5) levels of employment, consumer confidence and income; (6) changes in the Philippine government´s fiscal and regulatory policies; (7) re-emergence of SARS, avian influenza (commonly known as bird flu), or H1N1, or the emergence of another similar disease in the Philippines or in other countries in Southeast Asia; (8) natural disasters, including but not limited to tsunamis, typhoons, earthquakes, floods, fires and similar events; (9) political instability, terrorism or military conflict in the Philippines, other countries in the region or globally; and (10) other social, political or economic developments in or affecting the Philippines. There can be no assurance that the Philippines will achieve strong economic fundamentals in the future. Changes in teh conditions of the Philippine economy could materially and adversely affect the performance of the Fund.

Dependence on the Services of Third Parties
The Fund relies on the services of third parties such as the Authorized Participants, Principal Distributor, Fund Manager, Custodian, Stock and Transfer Agent, and INAV Calculator, among others, to run its operations. The loss of services of any of these third parties could materially impair the Fund´s operations and performance, and the Fund may not immediately be able to replace such third party within a reasonable period of time, which could materially and adversely affect the Fund´s operations and performance.

The Fund also relies on the PDTC as the securities depository of its Shares. The PDTC may determine to discontinue providing its service with respect to the Shares at any time by giving notice to the Fund, the Fund Manager, the Custodian and the Fund Sponsor and doing its responsibilities with respect thereto under applicable law. Under such circumstances, the Fund, the Fund Manager and Principal Distributor, the Custodian and/or the Fund Sponsor shall take action either to find for the PDTC to perform its functions at a comparable cost or, if such a replacement is unavailable, too terminate the Fund.

Communication Risk for Creation/Redemption Method
Orders to create or redeem Shares of the Fund in Creation Units may be transmitted by facsimile, email or any other transmission method acceptable to the Principal Distributor, followed by a telephone call for confirmation, pursuant to procedures set forth in the "Creation Method" and "Redemption Method" in this Prospectus. Severe economic or market changes or disruptions, or other communication failure, may impede the ability of such orders to reach the Authorized Participant or the Principal Distributor.