Section 26June 18, 1954, Sec./Art. 26

Investment of Reserve Funds. All revenues of the SSS that are not needed to meet the current administrative and operational expenses incidental to the carrying out of this Act shall be accumulated in a fund to be known as the 'Reserve Fund'. Such portions of the Reserve Fund as are not needed to meet the current benefit obligations thereof shall be invested to earn an average annual income of at least nine per cent and shall be known as the 'Investment Reserve Fund' which shall be invested in any or all of the following: (As amended by Sec. 14, P.D. No. 24, S-1972; Sec. 19, P.D. No. 1636, S-1979; and Sec. 11, E.O. No. 102, S-1986)

(a) In interest-bearing bonds or securities of the Government of the Philippines, or bonds or securities for the payment of the interest and principal to which the faith and credit of the Republic of the Philippines is pledged.

(b) In interest-bearing deposits or securities in any domestic bank doing business in the Philippines: Provided, That such deposits shall not exceed at any time the unimpaired capital and surplus or total private deposits of the depository bank, whichever is smaller: Provided, further, That said bank shall first have been designated as the depository for this purpose by the Monetary Board of the Bangko Sentral ng Pilipinas: Provided, finally, That such investment in deposits or securities shall be equitably distributed to all designated banks. (As amended by Sec. 14, P.D. No. 24, S-1972)

(c) In loans or interest-bearing advances to the National Government for the construction of permanent toll bridges, toll roads or government office buildings in accordance with actuarial considerations and the conditions prescribed by law in such cases: Provided, That the tolls shall be collected by the SSS for a reasonable fee. (As amended by Sec. 14, P.D. No. 24, S-1972)

(d) In direct housing loans to covered employees and group housing projects giving priority to the low-income groups, up to a maximum of ninety per cent of the appraised value of the properties to be mortgaged by the borrowers and in loans for the construction and the maintenance of hospitals and institutions for the sick, aged and infirmed members and their families, referred to in section 4 (j) of this Act: Provided, That such investment shall not exceed thirty per cent of the Investment Reserve Fund. (As amended by Sec. 15, R.A. 2658; Sec. 14, P.D. No. 24, S-1972; Sec. 18, P.D. No. 735, S-1975; and Sec. 11, E.O. No. 102, S-1986)

(e) In short and medium term loans to covered employees such as salary, educational, calamity and emergency loans: Provided, That not more than ten per cent of the Investment Reserve Fund at any time shall be invested for this purpose. (As amended by Sec. 15, R.A. 2658; Sec. 14, P.D. No. 24, S-1972; and Sec. 11, E.O. No. 102, S-1986)

(f) In other income earning projects and investments secured by first mortgages on real estate collaterals which, in the determination of the Commission, shall redound to the benefit of the SSS, its members, as well as the public welfare: Provided, That any such investment shall be made with due diligence and prudence to earn the highest possible interest consistent with safety. (As amended by Sec. 17, R.A. 1792; Sec. 11, R.A. 4857; and Sec. 14, P.D. No. 24, S-1972)

(g) As part of its investment operations, the SSS shall act as insurer of all or part of its interests on SSS properties mortgaged to the SSS, or lives of mortgagors whose properties are mortgaged to the SSS. For this purpose, the SSS shall establish a separate account to be known as the "Mortgagors' Insurance Account." All amounts received by the SSS in connection with the aforesaid insurance operations shall be placed in the Mortgagors' Insurance Account. The assets and liabilities of the Mortgagors' Insurance Account shall at all times be clearly identifiable and distinguishable from the assets and liabilities in all other accounts of the SSS.

Notwithstanding any provision of law to the contrary, the assets held in the Mortgagors' Insurance Account shall not be chargeable with the liabilities arising out of any other business the SSS may conduct but shall be held and applied exclusively for the benefit of the owners or beneficiaries of the insurance contracts issued by the SSS under this paragraph.

(h) The SSS may insure any of its interests or part thereof with any private company or reinsurer.

The Insurer Commission or its authorized representatives shall make an examination into the financial condition and methods of transacting business of the SSS at least once in two years, but such examination shall be limited to the insurance operation of the SSS as authorized under this section and shall not embrace the other operations of the SSS; and the report of said examination shall be submitted to the Commission and a copy thereof shall be furnished the office of the President of the Philippines within a reasonable time after the close of the examination: Provided, That for each examination, the SSS shall pay to the Insurance Commission an amount equal to the actual expenses of the Insurance Commission in the conduct of the examination including the salaries of the examiners and of the actuary of the Insurance Commission who have been assigned to make such examination for the actual time spent in said examination: Provided, further, That the general law on insurance promulgated thereunder shall have suppletory application insofar as it is not in conflict with the SS Law and its rules and regulations.

(As amended by Sec. 14, P.D. No. 24, S-1972; Sec.

1, P.D. No. 65; Sec. 7, P.D.

No. 177, S-1973; and Sec. 18, P.D. No.

735, S-1975)

(i) In bonds, debentures or other evidences of indebtedness of any solvent corporation or institution created or existing under the laws of the Philippines: Provided, That the issuing, assuming or guaranteeing entity or its predecessors shall not have defaulted in the payment of interest on any of its securities and that during each of any three including the last two of the five fiscal years next preceding the date of acquisition by the SSS of such bonds, debentures, or other evidences of indebtedness, the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges, as hereinafter defined, shall have been not less than one and one-quarter times the total of its fixed charges for such year: Provided, further, That such investment shall not exceed 10 per cent of the Investment Reserve Fund.

As used in this section, the term 'net earnings available for fixed charges' shall mean net income after deducting operating and maintenance expenses, taxes other than income taxes, depreciation and depletion; but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statement of the issuing, assuming or guaranteeing institution. The Term 'fixed charges' shall include interest on funded and unfunded debt, amortization of debt discount and rentals for leased properties. (As amended by Sec. 12, E.O. No. 102, S-1986)

(j) In preferred stocks of any solvent corporation or institution created or existing under the laws of the Philippines: Provided, That the issuing, assuming, or guaranteeing entity or its predecessors has paid regular dividends upon its preferred or guaranteed stocks for a period of at least three years next preceding the date of investment in such preferred or guaranteed stocks: Provided, further, That if the stocks are guaranteed, the amount of stocks so guaranteed is not in excess of fifty percentum of the amount of the preferred or common stocks, as the case may be, of the issuing corporations: Provided, furthermore, That if the corporation or institution has not paid dividends upon its preferred stocks, the corporation or institution has sufficient retained earnings to declare dividends for at least two years on such preferred stock: Provided, finally, That such investment shall not exceed 10 per cent of the Investment Reserve Fund.

(As amended by Sec. 12, E.O. No. 102, S-1986)

(k) In common stocks of any solvent corporation or institution created or existing under the laws of the Philippines listed in the stock exchange with proven track record of profitability and payment of dividends over the last three years: Provided, That such investment shall not exceed ten per cent of the Investment Reserve Fund. (As amended by Sec. 12, E.O. No. 102, S-1986)