Mr. Jose G. Cervantes

December 7, 1989 Mr. Jose G. Cervantes Manila Stock Exchange MSE Building, Prensa St. Corner Muella De La Industria Binondo, Manila Sir : Further to our letter, dated October 18, 1989, wherein we opined that subscriptions to the increase of capital stock may be paid through stock dividend declaration, please be advised that the declaration of stock dividend amounting to P12,500,000 in payment for the subscription to the increase of capital stock of Basic Petroleum and Minerals, Inc. from P300,000,000.00 to P500,000,000.00 cannot be reapplied as payment to subsequent subscriptions of stockholders. Declaration of stock dividends involves issuance of stocks directly paid from amounts transferred from the unrestricted retained earnings to the capital account. Considering that the retained earnings of the corporation were already applied as payment to the issuance of shares covering the above-mentioned stock dividend declaration, the same can no longer be reapplied as payment to subsequent subscription rights. Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner