Mssrs. Dominador Almeda and Renato S. Calma

November 23, 1993 Mssrs. Dominador Almeda and Renato S. Calma Bito, Lozada, Ortega and Castillo Alpap I Bldg. 140 Alfaro St.,Salcedo Village 1227 Makati Gentlemen: This refers to your letter of November 18, 1993 requesting confirmation that a Philippine corporation whose outstanding capital stock is owned 33.33% by another Philippine corporation 100% Filipino-owned; 26.67% by a Philippine National acting as trustee of the Amkor/Anam Pilipinas, Inc. Employees Retirement Benefit Plan ("The Plan"),and 40.00% by Amkor/Anam Pilipinas, Inc.,a Philippine Corporation 100% foreign-owned is a Philippine National and therefore qualified to own lands in the Philippines or acquire the entire issued stocks of a Philippine corporation which owns lands in the Philippines. In determining the nationality of a corporation with foreign equity, the Commission, on the basis of the opinion of the Department of Justice Opinion No. 18, s. 1989, dated January 19, 1989, resolved to do away with the strict application/computation of the so called "grandfather rule" (Re: Far Southeast Gold Resources, Inc. FSEGRI), and instead applied the so called "control test" method of determining corporate nationality for purposes of investment in another corporation. The method as applied in the said case states as follows: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality ,but if the percentage of Filipino ownership in the corporation or partnership is less than 60%,only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital, respectively, of which belong to Filipino citizens, all of said shares shall be recorded as owned by Filipinos. But if less than 60%,or say only 50% of the capital stock or capital of the corporation or partnership, respectively, belongs to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shares shall be recorded as belonging to aliens." (Emphasis supplied, Justice Opinion, dated January 19, 1989) This ruling is now expressly embodied under Section 3 of R.A. 7042, otherwise known as the Foreign Investment Act of 1991, quoted hereunder: a. the term " Philippine National " shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines ;or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals ...." (Emphasis supplied) Thus, for as long as the percentage of Filipino ownership of the capital stock of the investor corporation, is at least 60%, and in the case of a trustee corporation for as long as it is a Philippine National as defined above and at least 60% of the fund invested will accrue to the benefit of Philippine nationals, they are considered as Philippine nationals, provided, however, that the voting and Board membership requirements under Section 3 of R.A. 7042, quoted in part hereunder, are complied with. " ...Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the outstanding capital stocks outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of both corporations must be citizens of the Philippines ,in order that the corporation shall be considered a Philippine national." (Emphasis supplied) prcd Accordingly, if the above statutory conditions are complied with, the corporation referred to in your letter may be considered a Philippine National, and therefore, may be qualified to own lands in the Philippines or acquire the entire stocks of a Philippine Corporation which owns lands in the Philippines. However, while a corporation at least 60% of the capital stocks outstanding and entitled to vote are owned by Filipinos and at least 60% of the members of the Board of Directors are citizens of the Philippines is considered a Philippine National, it is not qualified to invest in corporations, the capital or ownership of which, under the Constitution or other special laws, are limited to Filipino Citizens only. cdlex Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman