Atty. Elpidio M. Gamboa, Jr.

May 23, 2002 SEC OPINION Atty. Elpidio M. Gamboa, Jr. PNOC Exploration Corporation PNOC Energy Companies Bldg., Meritt Road Fort Bonifacio, Makati City Dear Mr. Gamboa, This refers to your letter dated February 27, 2002 seeking confirmation of your opinion that PNOC Exploration Corporation (PNOC EC) is exempt from compliance with the requirements of R.A. 8799 (Securities Regulation Code) specifically, the registration, licensing, reportorial and other requirements therein and on the election of "independent directors" by reason of the peculiar circumstances of PNOC EC. In the said letter you cited Section 5 Presidential Decree No. 334 which provides as follows: (g) . . .Where the company has a controlling interest of not less than fifty-one percent (51%) of the issued and outstanding capital stock of such subsidiaries, the securities, including shares of capital stock, issued by the subsidiaries and corporation owned and/or controlled by it, as well as the sale and/or subscription to such securities and shares of capital stock shall be exempt from registration licensing or other requirements imposed under the Securities Act (C.A. 83 as amended) any other law, decree or order or regulation. PNOC EC is a subsidiary of PNOC which owns 99.78% of the outstanding capital stock of the former. Hence it is covered by the provisions of Section 5(g) of PD No. 334, which exempts from registration, licensing or other requirements imposed under the Securities Act, any other law, decree, order or regulation, the securities, including shares of capital stock, issued by it, including the sale of and/or subscription to such securities and shares of capital stock. R.A. 8799 did not repeal Section 5(g) of P.D. No. 334, as amended, based on the well-settled principle of statutory construction that a subsequent general law does not ordinarily repeal a prior special law. As to its compliance with Section 38 of R.A. 8799 on the election of independent directors, we share your view that PNOC EC may be deemed to have complied with such requirement considering its peculiar circumstances. Under the aforementioned law, "Any corporation with a class of equity securities listed for trading on an Exchange or with assets in excess of Fifty million pesos (P50,000,000.00) and having two hundred (200) or more holders, at least two hundred of which are holding at least one hundred (100) shares of a class of its equity securities or which has sold a class of equity securities to the public pursuant to an effective registration statement in compliance with Section 12 hereof shall have at least two (2) independent directors or such independent directors shall constitute at least twenty percent (20%) of the members of such board, whichever is the lesser. For this purpose, an "independent director" is defined as " a person other than an officer or employee of the corporation, its parent or subsidiaries, or any other individual having relationship with the corporation, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director ." In the case of PNOC EC, as earlier mentioned, the nine (9) directors of the company are elected on the basis of the nominations by the President of the Philippines. And except for one or two nominees, the rest of the nominees in the list who are elected to the Board are private citizens and not officers or employees of the company, its parent company or subsidiaries nor in anyway related to the company. In view of the foregoing, we hereby agree with the facts as presented in your letter and hereby confirm your opinion as stated. Very truly yours, (SGD.) JESUS ENRIQUE G. MARTINEZ Commissioner