Ms. Tomasa H. Lipana

December 4, 1998 Ms. Tomasa H. Lipana Joaquin Cunanan & Co. 14th Floor, Multinational Bancorporation Centre 6805 Ayala Avenue Makati City S i r : This refers to your letter dated October 20, 1998 requesting confirmation of the following views relative to a stock option plan of a non-resident foreign company to be granted to qualified employees of its affiliate in the Philippines. 1. That the issuance of shares by a non-resident foreign corporation exclusively to qualified employees of its affiliate in the Philippines under a Global Employee Stock Option Plans (GESOP), whereby executives, consultants and employees of its offshore affiliates, branches or subsidiaries are granted options to subscribe to shares of stock of the mother company, is considered an exempt transaction pursuant to Section 6 (a-3) of the Revised Securities Act. 2. That the application for exemption of the above transaction from the registration requirements under the RSA must be filed with the SEC before the actual issuance of the foreign stock options under a GESOP, even if such issuance is manifestly an exempt transaction under Section 6 (a-3) of the RSA. prcd 3. That prior to the filing of an application for exemption from the registration requirements under the RSA, a non-resident foreign issuer can already make a valid offer of the foreign stock options, provided that no actual issuance will be made unless and until the application for exemption is granted by the SEC. As a general rule , selling or offering of shares of stock in the Philippines is subject to registration under the Revised Securities Act (Sec. 4). However, the same Act allows exemptions if the Commission finds that the registration of the transaction is not necessary for the protection of the investors by reason of the small amount or limited character of the offering . (Sec. 6-b). Thus, on the basis of said allowable exemption, the Commission, on several occasions, had treated "stock option plans" granted by foreign companies in favor of qualified employees of their Philippines subsidiaries/affiliates, as an exempt transaction. Accordingly, if it can be shown that the foreign stock option plan to be introduced is limited only to the employees of the affiliate corporation in the Philippines who are in a position to know the present affairs of the mother company and the risk of investing therein such that the registration of the shares to be offered is not necessary in the public interest and for the protection of the investors, the transaction may be exempted from the registration requirements under the Revised Securities Act, subject to the following requirements which should be filed prior to its implementation : 1. Filing of a request for exemption from the registration requirements stating the reason why it should be exempted from registration under the Revised Securities Act; 2. Payment of exemption fee amounting to one-tenth of one per centum of the maximum aggregate price or issued value of the securities as required under Section 6 (c) of the Revised Securities Act. The exemption shall likewise be subject to the condition that the issued shares shall not be subsequently sold/transferred in the Philippines in the course of repeated and successive transactions without having them first registered under the Revised Securities Act. On the issue of whether or not the offering of the stock option plan can be made prior to the granting of the exemption by the SEC, please be advised that such a situation may be allowed only if the offering is in the form of a proposal for prospectus without the acceptance of any payment or deposit on subscriptions. Very truly yours, (SGD.) SONIA M. BALLO Director Corporate and Legal Department