Issuance, Offer and Sale of Notes Qualify as a Public Issue of Bonds or Bonded Indebtedness Subject to DST

May 5, 1998 BIR RULING NO. 052-98 25 (b) (5) (A)-000-00-52-98 Quiason Makalintal Barot Torres & Ibarra 2/F Benpres Building Exchange Road Corner Meralco Avenue, Ortigas Center 1600 City of Pasig, Metro Manila Attention: Attys . Wilfredo E . Sanchez Enrique I . Quiason and Ruelito Q . Soriano Gentlemen : This refers to your letter dated August 8, 1997 stating that your client, Benpres Holdings Corporation (Benpres) , intends to offer and issue promissory notes in the principal amount of US$150,000,000 due on 2002 (Notes); that the Notes will be issued in registered form in unit denominations of US$1,000 and will be issued subject to and be entitled to the benefit of an indenture between Benpres and the trustee, Morgan Guaranty Trust Company of New York, London Office; that the Notes will not be offered and sold in the Philippines; that the Notes will be offered and sold in the United States of America (US) in principal amount of US$1,000 or an integral multiple thereof pursuant to Rule 144A of the US Securities Act; that such Notes shall be offered and sold to qualified institutional buyers (QIBs) in the United States and can only be negotiated, resold and transferred to other QIBs in the United States; that outside the US, the Notes will be offered and sold pursuant to Regulations of the US Securities Act; that the said Notes may be purchased by Non-QIBs; that Benpres has also applied for listing of the Notes on the Luxembourg Stock Exchange and to have the Notes designated as eligible for trading in the PORTAL Systems of the National Association of Securities Dealers, Inc.; that the Notes will be issued, offered and sold at 99.514% of the face value thereof and will earn interest at the rate of 7.875% per annum, payable in two equal semi-annual installments on 19 June and 19 December of each year, commencing on 19 December 1997; and that upon maturity, the Notes will be redeemed by Benpres at 100% of the face value thereof. In connection therewith, you are requesting confirmation of your opinion that "(a) The issuance, offer and sale of the Notes qualify as a public issue of bonds or bonded indebtedness; "(b) The Notes will be considered "bonds", and thus the issuance of the Notes is subject to documentary stamp taxes under Sec. 175 of the NIRC (i.e., P1.50 per P200 value of the Notes); "(c) In cases where the Notes are registered in the name of non-resident foreign corporations which are residents of treaty countries, the interest paid to said corporations are subject to a withholding tax of ten percent (10%); "(d) The interest payable on the Notes held by non-resident foreign corporations which are resident of non-treaty countries shall be subject to a withholding tax of twenty percent." In reply thereto, please be informed that your aforementioned opinions are hereby confirmed. 1) The term "bond" is a very broad term. Fundamentally, it is an obligation; a written promise to pay money. It is thus similar to, and may be said to be a form of a promissory note. (par. 25, 11 Am Jur 2d) Since, the Notes will be used in a particular registered form, indicating therein the undertaking of Benpres to pay 100% of the face value of the Notes on 2002 as well as to pay interest at the rate of 7.875% per annum, payable in two equal semi-annual installments on June 19 and December 19 of each year, commencing on December 19, 1997, the Notes is considered as a bonded indebtedness. Moreover, considering that the Notes will be offered to interested investors/buyers, subject only to the qualification that, in the United States, the investor/buyer must be an institutional buyer (investment houses, securities firms, banks, etc.) aside from the fact that the Notes will be deposited with a custodian for the Depository Trust Company and Notes issued outside the US will also be held through Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System and Cedel Bank, societe anonyme; and listed in the Luxembourg Stock Exchange, and designated as eligible for trading in the PORTAL Systems of the National Association of Securities Dealers, Inc., the Notes qualify as a public issue of bonds or bonded indebtedness. 2) The Notes which qualify as bonds or bonded indebtedness shall be subject to the documentary stamp tax imposed under Section 174 of the Tax Code, as amended; 3) Since the Notes constitute a debt item/loan of Benpres, interest income derived from the Notes by corporate residents of countries which have no tax treaty with the Philippines shall be subject to a 20% withholding tax pursuant to Section 25(b)(5)(A) of the Tax Code, as amended; 4) Interest income derived from the Notes by corporate residents of countries which have a tax treaty with the Philippines shall be subject to the tax rate provided in said treaty. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different from that as represented, then this ruling shall be considered null and void. LibLex Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue