North Luzon Railways Corporation (NorthRail) (1)

August 14, 2009 FIRB RESOLUTION NO. 011-09 SUBJECT MATTER : North Luzon Railways Corporation (NorthRail) (1) WHEREAS, the North Luzon Railways Corporation (NorthRail) is mandated to develop, construct, operate and manage a railroad system to serve Metro Manila, Central and Northern Luzon; WHEREAS, the NorthRail is currently implementing the NorthRail Project Phase 1 Section 1 covering the alignment of a rail line from Caloocan City to Malolos, Bulacan and Section 2 covering Malolos, Bulacan to Clark, Pampanga; WHEREAS, to effectively implement the Project, the NorthRail has contracted a loan agreement with Barclays Capital Bank, PLC of England and for which reason documentary stamp tax (DST) and gross receipts tax (GRT) are due and payable; DSAEIT WHEREAS, the FIRB pursuant to its Resolution No. 20-08 denied the request for tax subsidy by the NorthRail on said DST and GRT as these are liabilities of the concerned financial institutions; WHEREAS, Section 2.4 of the Credit Facility Agreement (CFA), states that "Any and all taxes due on the loan agreement shall be for the account of the Borrower (NorthRail)"; WHEREAS, Section 5.1 "Tax Gross-up" item (a) of the said loan agreement provides that "All sum payable by the Borrower to any Finance Party hereunder, whether of principal, interests, penalties or other sums shall be paid in full, without set-off or counterclaim, free and clear of any deductions or withholding imposed by the Republic of the Philippines or any political subdivision or taxing authority thereof, all of which deduction or withholding shall be for the account of the Borrower and paid by it when due"; WHEREAS, the Bangko Sentral ng Pilipinas (BSP) issued a Summary of Indicative Terms and Conditions of the CFA stating that the Arrangement Fee is "0.50% of the total commitment, free and clear of any taxes including GRT"; IDTcHa WHEREAS, the Department of Finance (DOF) as the Guarantor in respect of the loan, agrees that all payments to be made shall be free and clear of any present or future taxes, levies, imposts, duties, assessments or other charges of whatever nature; WHEREAS, the NorthRail does not have the financial capacity to pay the DST and the GRT arising from the CFA entered into by it and the Barclays Capital Bank, PLC of England; NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, to approve the request of the NorthRail for a reconsideration of FIRB Resolution No. 20-08 and to grant tax subsidy to the NorthRail in the amount of FIFTEEN MILLION SEVEN HUNDRED FORTY FOUR THOUSAND SIX HUNDRED FOUR AND 22/100 PESOS (P15,744,604.22) only representing the DST and the GRT due on the CFA with Barclays Capital Bank, PCL of England, broken down as follows: P14,220,410.67 representing the DST and P1,524,193.55 representing the GRT due on the US$90M CFA with Barclays Capital Bank, PCL of England per Annex A: Provided, that the grant of such subsidy shall be in accordance with the terms and conditions of Section 13 of the 2009 General Appropriations Act, subject to the availability of funds therefor, pursuant to the terms and conditions of the Rules and Regulations to Implement the Subsidy Provision under Executive Order No. 93 . ECcDAH (SGD.) GIL S. BELTRAN Undersecretary of Finance Presiding Officer FIRB Reference: Joint FIRB-Technical Committee Meeting dated August 14, 2009.