Britanico Consunji & Sarmiento Law Offices

September 5, 1996 Britanico Consunji & Sarmiento Law Offices 2nd Flr., Asia Industries Building 2281 Pasong Tamo Extension 1231 Makati City Attention : Attys . Robeto J . Consunji, Kennedy B . Sarmiento and Je Floiran M . Clerigo Sir/Madam: This refers to your letter dated August 5, 1996 requesting for exemption from registration requirements under the Revised Securities Act of the following transaction, for and on behalf of your client, Royal Vacations Ownership Philippines, Inc. (RVOPI). As stated RVOPI, a domestic corporation, is the marketing arm of International Vacations Ownership Ltd. (IVO), a foreign corporation. It markets " Vacation Ownership " in Royal Bali Beach Club in Bali, Indonesia and Royal Goan Beach Club in Goa, India. As described therein "Vacation Ownership" means a future right to occupy holiday accommodation , the purchase price of which is at the price when the contract was executed and of which the contractual owner has the future right to use and occupy an apartment type in a resort. The Commission, on several occasions, has ruled that while " contracts for future services " are not strictly considered "investment contracts" as there is no expectation of profitable return, nevertheless it falls within the definition of " securities " as defined under the Revised Securities Act (RSA) as they are essentially contracts involving money outlay on the assumption and anticipation of " future enjoyment of a privilege ". The RSA, provides thus: (a) " Securities " shall include bonds, debentures, notes, evidences of indebtedness, shares in company, pre-organization certificates or subscriptions, investment contracts, certificates of interest or participation in a profit sharing agreement, collateral trust certificates, equipment trust certificates (including conditional sale contracts or similar interests or instruments serving the same purpose), voting trust certificates, certificates of deposit for a security, or fractional undivided interest in oil, gas or other mineral rights, or, in general, interest or instruments commonly considered to be "securities", or certificates of interests or participation in, temporary or interim certificates for, receipts for, guarantees of, or warrants or rights to subscribe to or buy or sell any of the foregoing; or commercial papers evidencing indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to another, with or without recourse, such as promissory notes, repurchase agreements, certificates of assignments, certificates of participation, trust certificates or similar instruments; or proprietary or non-proprietary membership certificate, commodity futures contracts, transferable stock options, pre-need plans, pension plans, life plans, joint venture contracts, and similar contracts and investments where there is no tangible return on investments plus profits but an appreciation of capital as well as enjoyment of particular privileges and services ." (Emphasis supplied) Accordingly, since the scheme described above involves availment of "future services" , no contracts pertaining thereto shall be offered to the public within the Philippines, unless they are first registered with and/or licensed by the Securities and Exchange pursuant to the provisions of the Revised Securities Act unless exempted by the Commission pursuant to Section 6(b) of the same Law. On whether the above-described scheme can be exempted pursuant to said Section, we regret to inform you that the reasons stated in your letter are not sufficient to justify the exemption as it fails to state the amount involved in the transaction and number of persons being offered by the product. Thus, unless it can be clearly shown that the offering of the vacation ownership contract is of limited character and the amount involved is small such that registration under the Revised Securities Act is not necessary in the public interest and for the protection of the offerees, the Commission cannot grant exemption to the above described transaction. Take note further, that it should be the " issuer corporation " which should file the request for exemption from the registration requirements, not the " marketer ". Likewise, please be advised that " salesman or marketer " of securities are also subject to registration pursuant to the following provision of the Revised Securities Act. "SECTION 19. Registration of broker, dealers and salesmen . No broker, dealer or salesman shall engage in business in the Philippines as such broker, dealer or salesman or sell any securities, including securities exempted under this Act, except in exempt transaction, unless he has been registered as a broker, dealer, or salesman pursuant to the provisions of this Section ." (Emphasis supplied) cdll Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner