Mr. S.U. Salvador, Jr.

June 6, 1991 Mr. S.U. Salvador, Jr. SGV & Co. 6760 Ayala Avenue Makati City S i r : This refers to your letter of May 11, 1991 requesting confirmation that the application of additional paid-in capital arising from the excess of corporate liability converted to equity over the par value of shares issued in favor of creditors, against the deficit, is in conformity with SEC existing policy. As previously ruled by this Commission, any excess of corporate liability converted to equity over the par value of shares issued in favor of creditors is properly classifiable as "additional paid-in capital". Under existing policy, this Commission allows a corporation to reduce or wipe out its deficit by applying the additional paid-in surplus against the deficit, provided that after the restructuring process has been effected, the same should be disclosed in all the subsequent financial statements of the corporation for a period of at least three (3) years. Please be advised accordingly. LexLib Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman