Mr. C. A. Patinio, Jr.

June 4, 1981 Mr. C. A. Patinio, Jr. Manager, Claims, Tax & Insurance Planters Products, Inc. Esteban St.,Legaspi Village Makati, Metro Manila Sir : This is in connection with your letter dated March 16, 1981 requesting for approval by this Commission the procedures to be taken by PPI in its proposed issuance of stock certificates direct to its so-called "farmer-end-users" of fertilizer, in order to effectively accomplish the mandate of LOI No. 178. llcd A perusal of said Letter of Instructions, specifically paragraph 5 of its guidelines, reveals that a foundation shall be organized in order to accomplish the ownership-dispersal of shares of PPI stock to the different farmers in the country; and that said foundation shall assume the portion of PPI stock not subscribed and paid-up and ultimately shall undertake the redistribution of said shares to the farmers. Concomitant to such assigned function, the foundation, not PPI, will then issue correspondingly the stock certificates to the qualified fertilizer-users. Nevertheless, in our conference on the matter, we were made to understand that the foundation as a subscriber to PPI's undistributed shares, holds the same in trust for the farmers but that because of lack of manpower the actual distribution of the shares and the issuance therefor of stock certificates cannot be undertaken by the foundation, and that considering that PPI supplies the bulk of all fertilizers consumed in the country and has the most complete facilities for nationwide distribution and marketing, the latter now would assume the task of distributing the shares and stock certificates pursuant to the procedures laid down in your letter above-mentioned. Please be informed that this Office interposes no objection to such set-up, if the same is for the interest of both the issuer company and the farmer-shareholders, and is carried out in faithful compliance with the aforesaid Letter of Instructions: and provided, however, that proper safeguards shall be adopted to protect and ensure the security of the certificates which are to be distributed and delivered to the end-users entitled to the common stocks numbering as your record shows, to about 300 million shares. Considering this staggering number of shares and the certificates that would be issued therefore the task is indeed not only formidable, but susceptible to fraud and subtle manipulation. We, therefore, suggest the following additional safeguards in the issuance of stock certificates: a. The certificates shall be signed by the President or Vice-President, countersigned by the Secretary or Assistant Secretary, and sealed with the seal of the corporation, pursuant to Section 63, Corporation Code of the Philippines. The disjunctive "or" is underlined purposely to emphasize the legal requirement that in the absence of the secretary, the assistant secretary shall assume the former's assigned function, i. e. countersigning the certificates. Perforce, it will be noted, that the same mandate applies to the president and the vice-president in said legal provision; b. The issuance must be made only on fully paid subscription (Section 64 Ibid) and shall be in such form and procedures that would be in conformity with the provisions of Article VI of your amended by-laws, as approved by the Commission on October 20, 1976; and c. Appropriate reports on the issuance and related matters shall be submitted quarterly to the Commission for its information and proper action. Please be guided accordingly. LibLex Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department