Sale of the Equity Shares Through the Philippine Stock Exchange by Philam First Asia Equity Fund Subject to Stock Transaction Tax Rate of ½ of 1% on Gross selling Price or Gross Value in Money of the Shares of Stock Bartered, Exchanged or Otherwise Disposed Through the Facilities of the PSE

January 28, 1997 BIR RULING NO. 010-97 124-A 175 000-00 010-97 Philam Fund Banker's Centre, 6764 Ayala Avenue Makati City Attention: Mr . Jose L . Cuisia, Jr . Chairman Gentlemen : This refers to your letter dated October 29, 1996 stating that Philam Fund Management, Inc. (PFMI), a member company of the Philamlife Group of Companies, was established in 1993 to manage third party assets in the Philippines; that it currently manages an open-ended balanced fund, the Philam Fund, Inc.; that the Philam Group has ventured into mutual fund management because it firmly believes that mutual funds are a sound investment vehicle for middle to high income investors who need a long term investment vehicle with good returns and diversification and who often lack the expertise and/or time to do the investing; that with a long-term investment horizon, mutual funds effectively mobilize savings and lead to an efficient utilization of productive assets; that the business is also a logical extension for your organization since you have a proven track record in the area of financial services management; that it is unfortunate that mutual funds have not been accepted in the Philippines as in other countries; that a key step is to encourage capital market development and mobilize savings through the establishment of a vibrant mutual funds industry; that as one of the recognized leaders in the industry, PFMI is seeking to provide the market with sound investment alternatives which are aptly supported with genuine and reliable financial services; that PFMI will develop innovative products which can match those available in more sophisticated economies, thereby acting as catalyst to promote more fund inflows rather than outflows from our country's economy; that with this thrust, PFMI is set to launch Philam First Asia Equity Fund (PFAEF), a closed-ended mutual fund that will be listed at the Philippine Stock Exchange (PSE); that PFAEF will be domiciled in the Cayman Islands and shall open a representative office in the Philippines; that PFAEF will be the first investment vehicle in the market that shall offer investors a blend of both local and Asian equity investments; that the Fund will be another link between the Philippine capital market and the Regional and Global Capital Markets; that it will provide risk diversification as well as long term capital growth to both foreign and local retail and institutional shareholders a benefit not available to investors who do not have an adequate capital base, market access, or investment expertise within the region; that it is of common knowledge that closed-ended mutual funds currently trade at significant discounts to their Net Asset Values (NAV) and that this phenomenon has substantially dampened investors interest in mutual funds; that to address this problem, PFAEF will have a detachable warrant per common share; that these warrants will give shareholders the option to buy additional shares at the original initial public offering (IPO) price within five years; that the warrants will likewise be listed and traded at the PSE and shall provide to the original IPO investors an extra value which will in whole or part offset the discount value; that it is expected that the use of warrants with the closed end fund will stimulate renewed investor interest in closed-ended mutual funds; that if the closed end fund with warrants is successful, other Funds will use the same approach increasing the size of the industry and the capital market; that the returns from PFAEF will definitely flow back to its investors; and that this will certainly go a long way in revitalizing the mutual fund industry and fast tracking the development of our capital markets. cdti In connection therewith, you are requesting a ruling to the effect that (1) The sale of equity shares through the PSE by PFAEF will be subject only to a transaction tax of of 1% of the gross selling price of such shares under Section 124-A of the Tax Code, as amended; (2) The sale of the equity shares shall be subject to a documentary stamp tax of P200.00 of the par value of such shares; (3) The cash dividends from said shares shall be subject to a 15% final withholding tax. In reply thereto, please be informed that your opinion to the effect that the sale of the equity shares through the PSE by PFAEF is subject to the stock transaction tax rate of of 1% imposed under Section 124-A of the Tax Code, as amended by Republic Act No. 7717 on the gross selling price or gross value in money of the shares of stock bartered, exchanged or otherwise disposed through the facilities of the PSE is hereby confirmed. Moreover, the original issue of the certificate of stocks of PFAEF shall be subject to the documentary stamp tax of two (P2.00) on each two hundred pesos or fractional part thereof of the par value of such certificates imposed under Section 175 of the Tax Code, as amended. However, considering that PFAEF is a non-resident foreign corporation, dividends to be received by resident individual stockholders shall be subject to the tax rate of 3% to 30% under Section 21 (f) of the Tax Code, as amended, while dividends to be received by resident corporate stockholders shall be subject to the tax of 35% under Section 24 (a) of the Tax Code, as amended. cdt Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue