Petrofields Corporation

November 19, 1998 Petrofields Corporation 7th Floor, JMT Building, ADB Avenue Ortigas Business Center, Pasig City Attention : Ms Milagros V . Reyes President Gentlemen: This refers to your letter dated October 6, 1998 seeking advice on the proper treatment of the 25,164,000 shares representing a portion of the outstanding subscriptions made under the Petrofields Stock Option Plan (PSOP) which are held by Far East Bank and Trust Company as Trustee . LibLex As stated, Petrofields Corporation wants to cancel the above-mentioned subscription as presently they have no beneficiaries so that the shares covered will again form part of the reserves for PSOP which can be awarded at a later time as may be determined by the Stock Option Committee. The corporation holds that because the shares are reverted to the Plan by reason of the cancellation of trustee's subscription, they can be treated as authorized but unissued capital stock and remain allocated for the Plan. However, the company also thinks that inasmuch as the shares subscribed by the trustee have been recorded as subscribed/issued and outstanding in the name of the trustee, the shares may be treated as issued but reacquired shares .You now would like to know which should be the proper treatment of the status of the shares. Inasmuch as the above-mentioned shares have already been recorded in the books of the corporation as subscribed and outstanding, the said shares cannot be simply cancelled. To do so will be violative of the trust fund doctrine. The investment of the subscribers in the equity of the corporation is held in trust by the corporation for the benefit of its creditors. Hence, except in case of a reduction of the corporation is authorized capital stock, the corporation cannot release any subscriber from his subscription agreement or return his investment. However, the corporation, pursuant to Section 41 of the Corporation Code, may re-acquire the shares as treasury shares, subject to the condition that the corporation has " unrestricted retained earnings " in its books to cover the reacquisition. cdll Very truly yours, (SGD.) DANILO C. CONCEPCION Associate Commissioner