Atty. Esmeraldo C. Amistad

October 17, 1994 Atty. Esmeraldo C. Amistad Sycip Salazar Hernandez & Gatmaitan 105 Paseo de Roxas, 1200 Makati Metro Manila S i r : This refers to your letter of September 1, 1994 requesting reconsideration of the SEC letter dated September 1, 1994 questioning the stock dividend declaration of Arts (Philippines), Inc. amounting to P14,519,851.00 wherein the minority stockholders of said corporation waived their rights to receive dividends, thus allocating the entire dividend to Sara Lee Corporation, the majority stockholder. As justification, you manifested that subject corporation is a wholly-owned subsidiary of Sara Lee Corporation, and therefore, the SEC ruling stating that: "Dividends either in the form of cash or stock, should be declared on the basis of the outstanding capital stock held by the stockholders , and any transfer thereof must be done only after the amount declared has been proportionately distributed to the stockholders", is not applicable. Normally, a corporation is considered a wholly-owned subsidiary only if the rest of the stockholders, other than the parent company, own one (1) share in the corporation and only for purposes of qualifying them as incorporators and/or directors. In the instant case, the following breakdown of the present outstanding capital stock of the corporation was reflected in the List of Stockholders as of February 21, 1994: Stockholders No. of shares Amount Subscribed ROLF H. SCHROEDER 17 P17 SARA LEE CORP. 77,072,066 77,072,066 DAVE BRYAN 5 5 GORDON NEWMAN 5 5 ADALBERT A. RENNER 5 5 CIRILO T. TOLOSA 1 1 WOLFGANG SCHRAMMEL 1 1 WERNER MORBACH 1 1 77,072,101 P77,072,101 ========== ============ From the foregoing, it would appear that the corporation is not a wholly-owned subsidiary inasmuch as some of the stockholders, other than Sara Lee Corp., own more than one (1) share. Accordingly, the above-mentioned SEC ruling is still applicable in the present case. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner