No Gain or Loss shall be Recognized Both to the Transferor and the Transferee Corporation on the Transfer by FP Metro Holdings, Inc. (FP Metro) of Its Shares of Stock in MPC in Exchange for Shares of Stock of the Transferee Corporation, Cypress Harbour Properties, Inc., Considering that as a Consequence of the Exchange, the Transferor Will Gain Control of the Transferee Corporation by Owning 99.9999% of Its Total Voting Stocks

July 8, 1997 BIR RULING NO. 074-97 34 (c) (2) & (6) (c) 000-00 074-97 Law Offices of Bautista Picazo Buyco Tan & Fider 8th Floor, Singapore Airlines Building 138 H.V. dela Costa Street, Salcedo Village Makati City Attention: Atty . Antonio A . Picazo Gentlemen : This refers to your letter dated April 30, 1997 requesting for a ruling that no gain or loss is recognized on the proposed transfer by FP METRO HOLDINGS, INC. (FP METRO) of its shares of stock in METRO PACIFIC CORPORATION (MPC), in favor of CYPRESS HARBOUR PROPERTIES, INC. (CYPRESS) with principal office at 8th Floor, Singapore Airlines Building, 138 H.V. dela Costa St., Salcedo Village, Makati City, in exchange for shares of stock of the latter, in accordance with Revenue Memorandum Order No. 26-92 and falling under Section 34(c)(2) and (6)(c) of the Tax Code, as amended. cdta It is represented that CYPRESS is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with an authorized capital stock of Five Hundred Thousand Pesos (P500,000.00) divided into Five Hundred Thousand (P500,000) shares with a par value of One Peso (P1.00) per share; that the incorporators of the corporation, with the corresponding number of shares subscribed and paid-up are as follows: Name No. of Shares Amount Subscribed and Paid FP Metro Holdings, Inc. 124,995 P124,995.00 Manuel V. Pangilinan 1 1.00 Ricardo S. Pascua 1 1.00 Napoleon N. Nazareno 1 1.00 Albert F. Del Rosario 1 1.00 Ernesto G. Sta. Maria 1 1.00 Total 125,000 P125,000.00 ======== ========= that CYPRESS has a pending application with the SEC for the increase of its authorized capital stock Five Hundred Thousand Pesos (P500,000.00) to One Billion Pesos (P1,000,000,000.00); that FP METRO is the absolute and registered owner of a total of One Billion Eight Hundred Eighty Four Million Eight Hundred Seventeen Thousand Four Hundred Forty Five (P1,884,817,445) fully paid and non-assessable shares of the capital stock of MPC with an aggregate par value of One Billion Eight Hundred Eighty Four Million Eight Hundred Seventeen Thousand Four Hundred Forty Five Pesos (P1,884,817,445.00); that FP METRO desires to subscribe to a total of Three Hundred Seventy Five Million (P375,000,000) shares of the capital stock of CYPRESS at the subscription price of Ten Pesos (10.00) per share, or an aggregate subscription price of Three Billion Seven Hundred Fifty Million Pesos (P3,750,000,000.00), out of the increase in the authorized capital stock of CYPRESS and will pay its subscription through the assignment by FP METRO of its shares in MPC in favor of CYPRESS; that as a result of the above transaction, FP METRO will gain control of CYPRESS by owning 99.9999% of the total voting stocks of the latter, to wit: Name No. of Shares Amount Subscribed % of ownership FP Metro Holdings, Inc. 375,124,995 P3,750,124,995.00 99.9999% Manuel V. Pangilinan 1 1.00 ) Ricardo S. Pascua 1 1.00 ) Napoleon N. Nazareno 1 1.00 ).0001% Albert F. Del Rosario 1 1.00 ) Ernesto G. Sta. Maria 1 1.00 ) Total 375,125,000 P3,750,125,000.00 100.00% ========== =============== ======= and that in support of your request, you submitted to this Office, the following documents: 1) Deed of Exchange; 2) Articles of Incorporation of FP METRO and CYPRESS; 3) List of the Subject Shares; 4) Certification by the Treasurer of FP METRO as to the original or historical cost of acquisition/adjusted cost basis of the Subject Shares; and 5) Certification by the Corporate Secretary of CYPRESS as to its present as well as resulting capitalization after the increase of its capital stock and the resulting percentage of shareholdings in CYPRESS of FP METRO after the exchange transaction. In reply thereto, please be informed that pursuant to Section 34, paragraphs (c)(2) and (6)(c) of the Tax Code, as amended by Republic Act No. 4522 and P.D. Nos. 1705 and 1773, no gain or loss shall be recognized if property is transferred to a corporation by a person, in exchange for stock in such a corporation of which as a result of such exchange, said person, alone or together with others, not exceeding four persons, gains control of said corporation. The term "control" shall mean ownership of stocks in a corporation possessing at least 51% of the total voting power of all classes of stocks entitled to vote. Control is determined by the amount of stocks received i.e., total subscribed, whether for property or for services by the transferors. In determining the 51% stock ownership, only those persons who transferred property for stocks in the same transaction may be counted up to a maximum of five. Accordingly, no gain or loss shall be recognized both to the transferor and the transferee corporation on the transfer by FP METRO of its shares of stock in MPC in exchange for shares of stock of the transferee corporation, CYPRESS, considering that as a consequence of the exchange, the transferor will gain control of the transferee corporation by owning 99.9999% of its total voting stocks. It should be emphasized, however, that Section 34(c)(2) and (6)(c) of the Tax Code merely defer recognition of the gain or loss from such transaction, for in determining the gain or loss from a subsequent transaction of the properties or of the stocks involved in the exchange, the original or historical cost of the properties or stocks is considered. Thus, if the transferor later sells or exchanges the shares of stock acquired by him in the exchange, he shall be subject to income tax on gains derived from such sale or exchange, taking into consideration that the cost basis of the shares shall be the same as the original acquisition cost or adjusted cost basis to the transferor of the property exchanged therefor; and that the cost basis to the transferee of the property exchanged for stocks shall be the same as it would be in the hands of the transferor. (Section 34(c)(5)(a) and (b) of the Tax Code, as amended by Presidential Decree No. 1773). In this connection, you are further advised that in order that the parties to the exchange can avail of the non-recognition of gains provided for in Section 34(c)(2) and (6)(c) of the Tax Code, as amended, they should comply with the requirements hereunder mentioned: a. The transferor must file with its income tax return for the taxable year in which the exchange transaction was consummated, a complete statement of all facts pertinent to the exchange, including: 1. A description of the properties transferred, or of its interest in such properties, with a statement of the original acquisition cost/adjusted cost basis or other basis thereof at the time of the transfer; 2. The kind of stocks received and preferences, if any; 3. The number of shares of each class received; and 4. The fair market value per share of each class at the date of the exchange. b. On the other hand, the transferee corporations must file with its income tax return for the taxable year in which the exchange was consummated the following: 1. A complete description of the properties received from the transferor; 2. A statement of the original acquisition cost or other basis of the properties in the hands of the transferor and the adjusted cost basis thereof at the time of the transfer; and 3. Information with respect to the capital stock of the corporation including: a. The total issued and outstanding capital stock immediately prior to and immediately after the exchange with a complete description of each class of stock; b. The classes of stocks and number of shares issued to the transferor in the exchange; and c. The fair market value as of the date of the exchange of the capital stock issued to the transferor. In addition to the foregoing requirements, permanent records in substantial form must be kept by the taxpayers participating in the exchange, showing the information listed above in order to facilitate the determination of gain or loss from a subsequent disposition of stocks/properties received in the exchange. The parties shall also cause to be annotated at the back of the Certificate of Stocks, the date the deed of exchange was executed, the original or historical cost of acquisition of the shares of stock involved, and the fact that no gain or loss was recognized as a result of such exchange. Finally, the certificates of stocks to be issued by the CYPRESS, which in all probability are original issues, are subject to the documentary stamp tax imposed by Section 175 of the Tax Code, as amended. 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 and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue