Dr. Nestor M. Feliciano

August 11, 1997 Dr. Nestor M. Feliciano Rural Bank of Tudela (Mis. Occ.), Inc. Tudela, Misamis Occidental S i r : This refers to your letter dated December 9, 1997, inquiring whether or not "deposits to additional subscription" shall be included in the computation of the stockholder's proportionate right to subscribe to a proposed increase of capital stock. The term capital stock or authorized capital stock is the amount fixed in the articles of incorporation to be subscribed and paid by the stockholders of the corporation. When shares are subscribed out of the authorized capital stock, that portion of the paid-in capital arising from the subscriptions becomes the legal capital of the corporation which cannot be returned to the stockholders in any form during the lifetime of the corporation unless otherwise allowed by law. In contrasts " deposits for additional subscriptions " are payments received for future issuance of stock which may or may not materialized . While deposits of this nature may be allowed for balance sheet presentation as a part of the stockholders equity account, the same cannot be considered as part of the capital of the corporation until shares are actually issued in consideration thereof . ( EAD Memo dated 7-29-97 ) Accordingly, determining the proportionate right of the stockholders to subscribe to a proposed increase of capital stock, subscription deposits are excluded. Very truly yours, (SGD.) SONIA M. BALLO Corporate & Legal Dept . Director