Atty. Norberto C. Nazareno

July 15, 1997 Atty. Norberto C. Nazareno The Philippine Banking Corporation Philbank Bldg.,Ayala Avenue 1226 Makati City S i r : This refers to your letter dated June 17, 1997, requesting comments on the proposal of Philbank to develop another classification of common shares described as follows: 1. A portion of the authorized and unsubscribed c ommon shares shall be classified as Class "C". 2. Class "C" shares shall have the same rights, privileges, or restrictions as those of Class "A" shares except that the voting rights of the proposed Class "C" shares shall be assigned to a Trustee who shall exercise all legal rights for all corporate actions. Essentially, Class "C" shares shall exercise economic and financial rights except voting rights with regard to corporate actions. 3. Class "C" common shares will be separately listed in the stock exchange and will be offered to both local and foreign investors, possibly at price lower or discounted from the price of Class "A shares. While the shares to be classified as Common Class "C" are not denied the right to vote, it has a mandatory feature that such voting rights shall be assigned to a " Trustee " which feature may be construed as a virtual denial of the voting rights. In this connection, it may be worth mentioning that under Section 6 of the Corporation Code, quoted hereunder, only "preferred shares", not "common shares" can be denied the right to vote. "SECTION 6. Classification of shares . The shares of stock of corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided ,That no shares may be deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares unless otherwise provided in this Code: . . ." Thus, inasmuch as the Class "C" shares in question fall in the classification of "COMMON" shares, it is subject to the foregoing provision. Consequently, the MANDATORY feature in the Articles of Incorporation assigning the voting rights of the shares to a trustee which is tantamount to a virtual denial of the voting rights of the holders thereof would indirectly violate the intention of the above provision of the Corporation Code. Further, the mandatory feature in the Articles of Incorporation assigning the voting rights to a Trustee would contradict the well-settled principle that transfer of right is a personal act which can only be done by the person who is entitled to exercise such right. Even assuming that the original purchasers of the stocks voluntarily agree to assign their voting rights to a trustee in accordance with the above feature, a legal question crops up because the assignment of the voting rights by the previous stockholders may not be binding to the subsequent series of purchasers of the shares brought about as a result of the listing of the shares in the stock exchange. In the light of the foregoing, we believe that the above described proposal is not legally feasible. Please be advised accordingly. Very truly yours, (SGD.) SONIA M. BALLO Corporate & Legal Dept. Director