Director Armando L. Suratos

September 30, 1986 Director Armando L. Suratos Debt Restructing Office Central Bank of the Philippines Manila Sir : This refers to your letter dated September 24, 1986, informing this Commission that you received an application to invest in the equity of First Worldwide Development, Inc. under the Debt to Equity Conversion Program (Central Bank Circular No. 1111 dated August 4, 1986). cdlex The primary purpose clause of the articles of incorporation of the applicant corporation states: "To purchase, subscribe for, invest in, acquire, obtain an interest in, own, hold, pledge, encumber, hypothecate, create security interest in, assign, deposit, create with respect to, sell, exchange, exercise any and all rights, powers and privileges pertaining to or otherwise dispose of and generally deal in with securities every kind and description of any government, state, territory, district, municipality, or other political or governmental division or subdivision, body politic, corporation, association, partnership, firm, syndicate, or entity whatsoever located in or organized under laws of any part of the world, including (without limiting the generality of the foregoing) stocks, shares , voting trust certificates, bonds, mortgages, warrants, rights, options, scripts, commercial papers, choses in action, evidences or indebtedness, certificates of interests or other obligations or other securities of any nature howsoever evidenced for its own account and ( without in any way acting as an investment company, trust company, mutual fund, investment house, or securities dealer or broker )". (emphasis supplied) In connection with said application, you would like to request for clarification as to what category of business activity the aforequoted primary purpose clause is classified. A careful analysis of the primary purpose disclosed that the corporation is a "building company". By "holding company" is meant "one which controls another as a subsidiary or affiliate by the power to elect its management. Affiliates are those concerns which are subject to common control and operated as part of a system". (Ballantine Law on Corporations, p. 308). In other words, a holding company is one which holds stocks in other companies for purposes of control rather than for mere investment . The observation that the corporation is a "holding company" is further supported by the use of the phrase in the primary purpose clause: . . . " exercise any and all rights, powers, and privileges pertaining to . . . stocks, shares " . . . . It is worth mentioning that the rights/powers of an owner of stocks include, as an incident of ownership, the right to vote and manage the corporation of which he is a stockholder. The aforequoted phrase therefore may be interpreted that the intention of the corporation is not merely to invest in securities but to manage their subsidiaries or affiliates. Likewise, the purpose clause clearly indicates that it will not in any way act as an investment company, trust company, mutual fund, investment house or securities dealer or broker. Thus, in the light of the foregoing observations, a corporation having the aforequoted purpose clause may be treated as a "holding company". Please be advised accordingly. cdlex Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman